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THE GABELLI
CONVERTIBLE
SECURITIES
FUND, INC.
FIRST QUARTER REPORT
MARCH 31, 2001
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THE GABELLI
CONVERTIBLE
SECURITIES
FUND, INC.
Our cover icon represents the underpinnings of Gabelli. The Teton mountains in
Wyoming represent what we believe in in America -- that creativity, ingenuity,
hard work and a global uniqueness provide enduring values. They also stand out
in an increasingly complex, interconnected and interdependent economic world.
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* * * *
MORNINGSTAR RATED(TM) GABELLI CONVERTIBLE SECURITIES FUND
4 STARS OVERALL AND FOR THE TEN-YEAR PERIOD ENDED 3/31/01, AMONG
52 AND 36 CLOSED-END DOMESTIC EQUITY FUNDS, RESPECTIVELY.
THE FUND WAS RATED 5 STARS FOR THE THREE-YEAR PERIOD ENDED
3/31/01 AMONG 52 CLOSED-END DOMESTIC EQUITY FUNDS.
THE FUND WAS RATED 3 STARS FOR THE FIVE- YEAR PERIOD ENDED 3/31/01
AMONG 52 CLOSED-END DOMESTIC EQUITY FUNDS.
INVESTMENT OBJECTIVE:
The Gabelli Convertible Securities Fund, Inc. (the "Fund") is a closed-end,
diversified management investment company whose primary objective is to seek a
high level of total return through a combination of current income and capital
appreciation by investing in convertible securities.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
TO OUR SHAREHOLDERS,
As hybrid securities with equity and fixed income characteristics,
convertible security performance is impacted by stock and bond market trends. In
the first quarter of 2001, bonds rallied as equities declined in response to the
rapidly decelerating economy and widespread earnings shortfalls. Three 50 basis
point Federal Funds rate cuts in the first quarter, one again in April, and the
probability of further Federal Reserve Board ("Fed") easing in the months ahead
failed to raise equity investors' spirits, but provided an additional tailwind
for bonds. The high yields of the many "busted" convertibles in our portfolio,
or convertibles whose underlying equities were trading well below conversion
parity, helped the Fund post a solid gain and outperform both leading bond and
stock market indices.
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THE GABELLI
CONVERTIBLE
SECURITIES
FUND, INC.
INVESTMENT PERFORMANCE
For the first quarter ended March 31, 2001, the Fund's net asset value
("NAV") total return was up 3.40% after adjusting for the reinvestment of the
$0.20 per share distribution paid on March 26, 2001. The Standard & Poor's
("S&P") 500 Index and the Lipper Convertible Securities Fund Average declined
11.85% and 8.53%, respectively, over the same period. The S&P 500 Index is an
unmanaged indicator of stock market performance, while the Lipper Average
reflects the average performance of mutual funds classified in this particular
category. The Fund rose 2.06% over the trailing twelve-month period after
adjusting for the reinvestment of the $1.30 per share in distributions paid
during this period. The S&P 500 Index and Lipper Convertible Securities Fund
Average declined 21.67% and 15.31%, respectively, over the same twelve-month
period.
For the two-year period ended March 31, 2001, the Fund's total return
averaged 5.42% annually, including reinvestments of $2.33 per share in
distributions. The S&P 500 Index declined 3.88% annually, while the Lipper
Convertible Securities Fund Average rose 9.07% annually over the same two-year
period. For the five-year period ended March 31, 2001, the Fund's total return
averaged 7.78% annually, including reinvestments of $5.025 per share in
distributions, versus average annual total returns of 14.18% and 10.32% for the
S&P 500 Index and Lipper Convertible Securities Fund Average, respectively.
Since inception on July 3, 1989 through March 31, 2001, the Fund had a
cumulative total return of 180.67%, including adjustments of $11.166 per share
for distributions, which equates to an average annual total return of 9.18%.
The Fund's common shares ended the first quarter at $10.20 per share on
the New York Stock Exchange, a premium to the net asset value of 0.39% and a
total return of 13.99% for the first quarter. The Fund's common shares rose
20.51% over the trailing twelve-month period after adjusting for all
distributions.
CORPORATE GOVERNANCE - GCV TRADING AT A PREMIUM!
In past reports we have outlined several management initiatives that the
Board of Directors has taken to increase the Fund's public market price to a
level equal to or exceeding the Fund's net asset value. These initiatives
included a stock repurchase plan, a managed 8% Distribution Policy, and the
issuance of preferred stock. Additionally, when the Fund converted to closed-end
status in March 1995, we expressed our intent to have the Fund's common shares
track the Fund's net asset value.
We are happy to report to you that the public market price is now at a
premium to the net asset value. As of the writing of this shareholder letter
(May 8, 2001), the Fund's shares were trading at a premium of 1.5% to the Fund's
net asset value. This is a testament to our pro-active shareholder initiatives
and the consistency of our performance over time.
OUR OBJECTIVE
Our mandate is to preserve and enhance our shareholders' wealth through a
conservative and disciplined approach to convertible securities investing. Our
goal is to generate profitable returns in strong markets and protect principal
in weak markets by taking advantage of the unique characteristics of convertible
securities.
INVESTMENT RESULTS (a)(c)
Quarter
-----------------------------------------
1ST 2ND 3RD 4TH YEAR
----------------------------------------------------
2001: Net Asset Value ........................ $10.16 -- -- -- --
Total Return ........................... 3.4% -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
2000: Net Asset Value ........................ $11.32 $11.16 $10.93 $10.02 $10.02
Total Return ........................... 1.3% 0.6% (0.1)% (1.8)% 0.0%
--------------------------------------------------------------------------------------------------------------------------
1999: Net Asset Value ........................ $11.45 $12.13 $11.67 $11.40 $11.40
Total Return ........................... 1.8% 7.8% (2.0)% 1.7% 9.4%
--------------------------------------------------------------------------------------------------------------------------
1998: Net Asset Value ........................ $11.87 $11.66 $10.96 $11.45 $11.45
Total Return ........................... 5.3% 0.0% (4.2)% 7.4% 8.3%
--------------------------------------------------------------------------------------------------------------------------
1997: Net Asset Value ........................ $11.13 $11.38 $11.81 $11.48 $11.48
Total Return ........................... 1.7% 3.5% 5.0% 2.8% 13.5%
--------------------------------------------------------------------------------------------------------------------------
1996: Net Asset Value ........................ $11.28 $11.33 $11.23 $11.08 $11.08
Total Return ........................... 3.6% 1.6% 0.3% 2.6% 8.4%
--------------------------------------------------------------------------------------------------------------------------
1995: Net Asset Value ........................ $11.14 $11.51 $11.64 $11.01 $11.01
Total Return ........................... 5.1% 5.2% 3.0% 1.1% 15.0%
--------------------------------------------------------------------------------------------------------------------------
1994: Net Asset Value ........................ $11.54 $11.39 $11.60 $10.60 $10.60
Total Return ........................... 0.2% (1.3)% 1.8% (0.9)% (0.2)%
--------------------------------------------------------------------------------------------------------------------------
1993: Net Asset Value ........................ $12.07 $12.36 $12.75 $11.52 $11.52
Total Return ........................... 5.4% 2.4% 3.2% 1.5% 13.1%
--------------------------------------------------------------------------------------------------------------------------
1992: Net Asset Value ........................ $11.29 $11.52 $11.90 $11.45 $11.45
Total Return ........................... 3.5% 2.0% 3.3% 3.6% 13.0%
--------------------------------------------------------------------------------------------------------------------------
1991: Net Asset Value ........................ $11.06 $11.27 $11.57 $10.91 $10.91
Total Return ........................... 5.6% 1.9% 2.7% 1.8% 12.5%
--------------------------------------------------------------------------------------------------------------------------
1990: Net Asset Value ........................ $10.56 $10.68 $10.56 $10.47 $10.47
Total Return ........................... 1.5% 2.1% (1.1)% 3.8% 6.3%
--------------------------------------------------------------------------------------------------------------------------
1989: Net Asset Value ........................ -- -- $10.54 $10.51 $10.51
Total Return ........................... -- -- 5.4%(b) 0.8% 6.3%(b)
--------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS - MARCH 31, 2001 (a)
1 Year ..................................... 2.06%
5 Year ..................................... 7.78%
10 Year .................................... 8.94%
Life of Fund (b) ........................... 9.18%
(a) Total returns and average annual returns reflect changes in net asset value
and reinvestment of distributions and are net of expenses. Based on initial net
asset value of $10.00. Of course, the returns noted represent past performance
and do not guarantee future results. Investment returns and the principal value
of an investment will fluctuate. When shares are sold they may be worth more or
less than their original cost.
(b) From commencement of investment operations on July 3, 1989.
(c) The Fund converted to closed-end status on March 31, 1995.
2
Our Fund is managed with a goal of achieving a 600-800 basis point spread
above long-term Treasury yields. We hope to generate these returns over the
long-term. This is the type of performance that our Fund has been recognized for
and we anticipate will continue in the future. Of course, there are no
guarantees.
WHAT WE DO
The success of momentum investing in recent years and investors' desire
for instant gratification have combined to make value investing appear dull. At
the risk of being dull, we will once again describe the "boring" value approach
that has seen us through both good and bad markets over the last 11 years at the
Fund and for over 24 years at Gabelli Asset Management Company. In past reports,
we have tried to articulate our investment philosophy and methodology. The
following graphic further illustrates the interplay among the four components of
our valuation approach.
[GRAPHICS OMITTED]
Our focus is on free cash flow: earnings before interest, taxes,
depreciation and amortization ("EBITDA") minus the capital expenditures
necessary to grow the business. We believe free cash flow is the best barometer
of a business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of long-term earnings
uptrends. In addition, we analyze on and off balance sheet assets and
liabilities such as plant and equipment, inventories, receivables, and legal,
environmental and health care issues. We want to know everything and anything
that will add to or detract from our private market value ("PMV") estimates.
Finally, we look for a catalyst: something happening in the company's
industry or indigenous to the company itself that will surface value. In the
case of the independent telephone stocks, the catalyst is a regulatory change.
In the agricultural equipment business, it is the increasing world-wide demand
for American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division or the development of a profitable
new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well-managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
CONVERTIBLE SECURITIES ARE "HYBRIDS"
It is important to understand our stock selection discipline because price
movement in the underlying equity will generally have the greatest impact on
convertible securities pricing. The convertible securities market consists of
bonds, debentures, corporate notes, preferred stocks and warrants or other
similar securities which may be
3
converted into or exchanged for a prescribed amount of common stock or other
equity security of the same or a different issuer within a particular period of
time at a specified price or formula. Converts are "hybrid" securities that
combine the capital appreciation potential of equities with the higher yield of
fixed income instruments. Our strategy incorporates the purchase of convertible
securities that are trading at a premium above parity with the common stock but
which generally provide a higher yield and, over time, capital appreciation. We
will also seek out "busted" converts, where the underlying common stock has
dropped significantly and the values of both the conversion privilege and the
convert are down. Such securities will provide both high yields and long-term
capital appreciation potential.
CONVERTIBLE MARKET OVERVIEW
The size of the U.S. convertible market grew by $5 billion during the
quarter to $159 billion. This market now constitutes 38.1% of the $399 billion
global convertible market. The U.S. is the largest convertible market in the
world followed by Japan and Europe each with 27.2%. Net new issuance reached a
record high of $14 billion during the quarter as falling equity prices stymied
voluntary conversions.
Zero-coupon convertible structures continued to increase their overall
share of the U.S. convertible market rising to 27.9% versus 22.6% at year-end.
Demand for these issues has been strong as investors seek shelter from the
current market volatility. Zero-coupon deals tend to be issued by investment
grade credits and are the most bond-like (i.e. defensive) of all convertible
structures because of their embedded put options. Via the put option, investors
can return (i.e. put back) the convertible to the issuer at a designated time
and price. Contingent conversion and coupon features have also increased the
attractiveness of these structures for issuers who benefit from favorable tax
and accounting treatment.
In terms of performance, convertibles continued to demonstrate their
defensive qualities by falling only 6% during the quarter versus 11.9% for the
S&P 500 and 8.0% for the Dow Industrials. The best performing sectors were
Consumer Discretionary, which was up by 11.1%, and Materials, which rose by
10.8%. The poorest performing sectors continued to be Technology and
Telecommunications, which were down 13.3% and 9.5% respectively.
COMMENTARY
MONETARY POLICY + FISCAL POLICY + LEVELING OF ENERGY + ROUND OF INVENTORY
CORRECTIONS = CONSUMER LEAD ECONOMIC RECOVERY AND EARNINGS GAINS IN 2002
Federal Reserve Board ("Fed") Chairman Alan Greenspan was a superhero to
Wall Street through a decade-long economic expansion and bull market. Suddenly,
he is on the verge of becoming public enemy number one, raising interest rates
too aggressively when the economy and stock market were roaring, and failing to
reverse course fast enough as the economy flagged and the stock market went into
a tailspin. In reality, Mr. Greenspan has always been a mere mortal, and a very
smart guy who has done a good job tuning monetary policy to the natural rhythms
of the business cycle.
It took a series of six Federal Funds rate hikes to put the brakes on a
runaway economy. The Fed has already cut rates three times in the first quarter,
once again in April, and it will probably continue easing to help the economy
regain momentum. Fed rate cuts will eventually put the economy back on a growth
path, albeit not as rapidly as Wall
4
Street might like. While the stock market decline has been painful for everyone,
much if not all the excesses in the market have been eliminated, providing a
much more solid foundation to build upon.
YES VIRGINIA, THERE IS A BUSINESS CYCLE
Where are we today? Where are we headed tomorrow? Most of us with gray
hair (or no hair) have been around long enough to recognize an old-fashioned
inventory correction when we see one. During the good times, businesses expand
capacity and production to meet rising demand. When demand slackens, production
must be cut. The pipeline has to be brought into balance. Corporate earnings
suffer until demand firms and excess inventories are worked off. This is
Economics 101. The only difference in this otherwise classic inventory
correction is that it developed much quicker than most expected and had an
exaggerated impact on a grossly overvalued stock market.
AND THE QUESTION IS ...
Let us revisit what we articulated in our Gabelli Equity Trust 2000 annual
report. "OVER THE NEXT SEVERAL MONTHS, THE OVERALL MARKET NEEDS TO UNDERSTAND
WHETHER MONETARY POLICY (GREENSPAN'S RATE CUTS) MARRIED WITH FISCAL POLICY
(BUSH'S TAX CUTS) WILL PROVIDE THE BALLAST TO OVERCOME THE ECONOMIC DRAG CREATED
BY: A CONSUMER SPENDING BINGE (TIED TO THE STOCK MARKET'S WEALTH EFFECT);
OVERSPENDING ON CAPITAL EQUIPMENT; AND A TRADE DEFICIT OF GIGANTIC PROPORTIONS."
In our opinion, this inventory correction will also end faster than most
folks are anticipating. Demand appears to be flattening out, and with lower
variable rate mortgage payments, adjustments to higher gasoline prices and
higher home heating/cooling costs (but not for California residents where a
catch-up is in process), and some extra money in paychecks coupled with a
renewed belief that things will get better from lower federal income taxes
headed our way this summer, demand should begin recovering. It may take time for
inventories to get worked off, and past over-investment in capital equipment
will dampen the recovery. Yet, we believe corporate earnings should begin
rebounding in the first quarter of 2002.
THE ALPHABET DEBATE
Gone are the days of "irrational exuberance", cautioned by Fed Chairman
Alan Greenspan in December 1996. Now that the global economic slowdown is upon
us, the debate has shifted to when and how quickly the recovery will occur. Will
it be "V", "U", or "L" shaped? We do not know? However, we do know that Mr.
Market remains focused on short-term disappointments rather than long-term
fundamentals. This provides us with attractive investment opportunities. A case
in point would be Sealed Air Corporation (SEE); the New Jersey based packaging
company. The share price had been cut in half due to concerns over the effect of
higher oil prices on operating margins and the consequences of "mad cow" disease
on European sales (i.e. only 1% of total sales). With the stock at $30, our
estimate of intrinsic value was over $60 per share. The company's convertible
preferred stock, on a 6.15% current yield and 22% conversion premium, offered an
attractive investment vehicle by which to be "paid to wait" for a catalyst to
unlock this value. We were not alone in our assessment of SEE's hidden value. On
Valentine's Day, Warren Buffett revealed that he had acquired over a 5% stake in
SEE. This proved to be the catalyst that catapulted the stock price, and the
convertible, up over 13%.
5
INVESTMENT SCORECARD
The strong performance of broadcasting company convert Granite
Broadcasting, broadcaster/publisher Tribune/Times Mirror, drug retailer Rite
Aid, services conglomerate Cendant, and auto-parts manufacturers WHX Corp. and
Standard Motor Products contributed to returns.
Returns from our utility companies were mixed, with KCS Energy among our
best performers and Northeast Utilities among our worst. In general,
telecommunications companies performed poorly during the first quarter.
GOOD THINGS COME TO THOSE WHO WAIT
The critical element to our success in the equity and convertible
securities markets has been patience in both the selection process and in
waiting for the values of portfolio positions to be recognized. We will continue
to be patient and opportunistic in selecting converts for the Fund and will
invest in short-term instruments (including time sensitive workouts) when
appropriate. We purchased mostly short-term U.S. Treasury obligations in the
past. However, the U.S. financial system has improved significantly and we now
take advantage of other short-term alternatives. In this regard, the Fund at
times engages in risk arbitrage to generate returns. By risk arbitrage we mean
investing in "event" driven situations; primarily, but not exclusively, in
announced mergers, acquisitions, reorganizations and other "workout"
opportunities. In order to avoid overall market risk in these opportunities, the
Fund will concentrate on lower risk transactions.
Simply stated, risk arbitrage is investing in a merger or acquisition
target after the deal has been announced and pocketing the spread between the
trading price of the target company following the announcement and the deal
price upon closing. This spread is usually relatively narrow, offering a
somewhat modest nominal total return. However, since deals generally close in
much less than a year's time, this modest total return translates into a much
more attractive annualized return.
We borrow a quote from Warren Buffett to explain our occasional use of
risk arbitrage in the Fund: "Our subsidiaries sometimes engage in arbitrage as
an alternative to holding short-term cash equivalents. We prefer, of course, to
make major long-term commitments. But we often have more cash than good ideas.
At such times arbitrage sometimes promises much greater returns than Treasury
Bills and, equally important, cools any temptation we may have to relax our
standards for long-term investments."
In short, the high cash position in the Fund does not reflect any effort
on our part to time the convertible securities market. It is rather a
consequence of our value-oriented discipline. At the same time, a sampling of
our convertible securities has been called by their issuers and we either
received cash or stock. Our portfolio turnover rate reflects this activity, as
well as our investments in "event" driven situations that were consummated
during the year. We are always hard at work evaluating opportunities and
identifying fundamental bargains to progress to a more fully invested posture.
However, we will not stretch our fundamental parameters and introduce greater
market risk to the portfolio.
6
LET'S TALK CONVERTS
The following are specifics on selected holdings of our Fund. Favorable
earnings prospects do not necessarily translate into higher prices, but they do
express a positive trend which we believe will develop over time.
CITIZENS COMMUNICATIONS CO. (5.00% CV. PFD.) will soon become the country's
largest independent local exchange carrier with about 3 million access lines
once it completes several acquisitions of over 2 million lines for $6.5 billion.
Upon completion of these transactions, accompanied by divestitures of its
utilities operations, the company will reposition itself as a pure
telecommunications company. Citizens also owns 81% of a competitive carrier,
Electric Lightwave (ELIX - $3.3125 - Nasdaq), with fiber optic networks covering
the Western part of the U.S.
HILTON HOTELS CORP. (HLT) (SUB. DEB. CV., 5.00%, 05/15/06) is recognized as one
of the world's preeminent hospitality companies. Hilton develops, owns, manages
and franchises hotels, resorts and vacation ownership properties. Based on the
number of hotel rooms, Hilton is the nation's seventh largest hotel company.
Hilton has approximately 260 hotels and resorts in cities throughout the United
States, including 54 owned and/or managed hotels and 199 hotels under franchise
agreements. Flagship properties include The Waldorf-Astoria, the Hilton Chicago
& Towers, Hilton Hawaiian Village (98%-owned) and Palmer House Hilton. HLT
formalized a marketing alliance with British company Hilton Group plc (HG -
$12.14 - London Stock Exchange) (owner of Hilton International) in January 1997
to reunite the Hilton name worldwide for the first time in over 30 years.
Hilton's casino gaming properties have been spun-off into a new company, Park
Place Entertainment (PPE - $10.25 - NYSE).
KAMAN CORP. (SUB. DEB. CV., 6.00%, 03/15/12), founded in 1945, is a pioneer in
the helicopter industry. Aircraft manufacturing remains the core of the
business. Kaman serves both commercial and governmental markets with helicopters
and aircraft components. The company also produces specialized, high-value niche
market products and services that tend to be technological leaders in their
markets. Kaman is a major, national distributor of original equipment, repair
and replacement products and value-added services to nearly every sector of
North American industry. The company also manufactures and distributes musical
instruments (Ovation guitars) and accessories to independent retailers.
ROBBINS & MYERS INC. (SUB. DEB. CV., 6.50%, 09/01/03) is an international
manufacturer of industrial mixing equipment, glass-lined vessels, industrial
pumps and corrosion resistant products serving the process industries such as:
specialty chemicals, pharmaceuticals, water treatment, oil and gas, and food and
beverage. The Energy Systems business, with a $12 million backlog along with
higher sustained crude oil and natural gas prices and increased drilling
activity, should remain strong through the balance of fiscal 2001. We think that
revenues in the Process Systems segment will be down in 2001 due to weakness in
end markets, but with a backlog of almost $86 million, the segment is well
positioned for the future. The company will continue to use its strong cash flow
to make acquisitions and develop new products enhancing its growth prospects.
SEALED AIR CORP. ($2.00 CV. PFD., SER. A), located in Saddle Brook, New Jersey,
manufactures and sells packaging products to customers worldwide. The company's
share price nearly halved last year because of concerns over the effect of
higher oil prices on operating margins and fears of "Mad Cow" disease on
European sales (only 1% of total sales). With the stock price below $30, we
believed the company's intrinsic value to be over $60. We were not alone
7
in identifying this hidden value. On February 14, 2001, Warren Buffett presented
us with an unexpected Valentine's Day present by disclosing that Berkshire
Hathaway had acquired a 5.7% stake in Sealed Air. This proved to be the catalyst
that drove the stock price, and the convertible, up over 13% during the quarter.
SEQUA CORP. ($5.00 CV. PFD.) is a diversified company with businesses in
aerospace, pre-paint metal, specialty chemical and printing and cannery
equipment. Chromalloy Gas Turbine, Sequa's aerospace business, is the largest
independent supplier of overhaul and repair to jet and industrial gas turbine
engines. We believe this business is attractive to original equipment engine
manufacturers like General Electric and Pratt & Whitney who are looking to grow
their replacement parts business. With roughly $800 million in revenues, we
estimate Chromalloy's private market value to be near the entire public value of
Sequa.
STANDARD MOTOR PRODUCTS INC. (SMP) (SUB. DEB. CV., 6.75%, 07/15/09),
headquartered in Long Island City, New York, supplies functional replacement
parts for the engine management, electrical and climate control systems of cars,
trucks and buses. The company services all makes and models, both new and old
cars, imported and domestic. SMP has two primary divisions--engine management
and temperature control--and believes it is the number one supplier to the North
American aftermarket in each of these lines.
WASTE MANAGEMENT INC. (SUB. DEB. CV., 4.00%, 02/01/02) merged with USA Waste in
1998, and is now the largest solid waste company in North America. The company
provides a number of services, including collection, transfer, landfill, and
recycling services for a diverse customer base, notably the municipal,
residential, commercial, and industrial markets. Services are provided
throughout the United States as well as in Canada, Mexico, and Puerto Rico.
Internationally, the company operates in Europe, the Pacific Rim, and in South
America. In addition, Waste Management is a leading developer, operator, and
owner of waste-to-energy facilities in the U.S.
STOCK REPURCHASE PLAN
The Fund is authorized to repurchase up to 500,000 shares of the Fund's
outstanding common shares. Pursuant to this stock repurchase plan, the Fund may
from time to time purchase shares of its capital stock in the open market when
the shares are trading at a discount of 10% or more from the net asset value of
the shares. In total, through March 31, 2001, 305,200 shares have been
repurchased in the open market under this stock repurchase plan.
COMMON STOCK 8% DISTRIBUTION POLICY
The Fund continues to maintain its 8% Distribution Policy whereby the Fund
pays out to common stock shareholders 8% of its average net assets each year.
Pursuant to this policy, the Fund distributed $0.20 per share on March 26, 2001.
The next distribution is scheduled for June 2001.
8.00% CUMULATIVE PREFERRED STOCK - DIVIDENDS
The Fund's 8.00% Cumulative Preferred Stock paid a cash distribution on
March 26, 2001 of $0.50 per share. For the twelve-months ended March 31, 2001,
Preferred Stock shareholders received distributions totaling $2.00, the annual
dividend rate per share of Preferred Stock. The next distribution is scheduled
for June 2001.
8
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management Inc., the Gabelli Mutual
Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news.
You can send us e-mail at closedend@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
WHO WHEN
--- ----
Special Chats: Mario J. Gabelli First Monday of each month
Howard Ward First Tuesday of each month
In addition, every Wednesday will feature a different portfolio manager. The
Upcoming Wednesday chat schedule is as follows:
MAY JUNE JULY
--- ---- ----
1st Wednesday Ivan Arteaga Caesar Bryan July 4th - Holiday
2nd Wednesday Walter Walsh Kellie Stark Charles Minter
3rd Wednesday Jeff Fahrenbruch Ivan Arteaga Walter Walsh
4th Wednesday Tim O'Brien Barbara Marcin Barbara Marcin
All chat sessions start at 4:15 ET. Please arrive early, as participation
is limited.
You may sign up for our HIGHLIGHTS email newsletter at www.gabelli.com and
receive early notice of chat sessions, closing mutual fund prices, news events
and media sightings.
DIVIDEND HISTORY - COMMON STOCK
---------------------------------------------------
PAYMENT DATE RATE PER SHARE REINVESTMENT PRICE
March 26, 2001 $0.200 $10.15
---------------------------------------------------
December 26, 2000 $0.700 $ 9.80
September 25, 2000 $0.200 $ 9.85
June 26, 2000 $0.200 $ 9.98
March 27, 2000 $0.200 $ 9.71
December 27, 1999 $0.430 $10.38
September 27, 1999 $0.200 $10.86
June 28, 1999 $0.200 $11.38
March 29, 1999 $0.200 $11.04
---------------------------------------------------
December 28, 1998 $0.320 $11.49
September 28, 1998 $0.200 $10.52
June 26, 1998 $0.200 $11.02
March 26, 1998 $0.200 $11.10
---------------------------------------------------
December 26, 1997 $0.600 $10.49
September 26, 1997 $0.120 $10.44
June 27, 1997 $0.120 $ 9.96
March 27, 1997 $0.120 $ 9.63
DIVIDEND HISTORY - COMMON STOCK
---------------------------------------------------
PAYMENT DATE RATE PER SHARE REINVESTMENT PRICE
December 27, 1996 $0.375 $ 9.51
September 23, 1996 $0.120 $ 9.73
June 24, 1996 $0.120 $10.17
March 25, 1996 $0.120 $10.41
---------------------------------------------------
December 27, 1995 $0.750 $10.95
September 27, 1995 $0.200 $11.10
June 27, 1995 $0.200 $11.21
---------------------------------------------------
December 31, 1994 $0.900 $10.60
December 31, 1993 $1.425 $11.52
December 31, 1992 $0.876 $11.45
December 31, 1991 $0.865 $10.91
December 31, 1990 $0.490 $10.47
June 28, 1990 $0.100 $10.68
March 29, 1990 $0.100 $10.55
December 29, 1989 $0.115 $10.51
9
IN CONCLUSION
High yields helped support convertible securities prices as underlying
common stocks declined sharply in the first quarter of 2001. The Fund also
benefited from the strong relative performance of convertible securities
investments in multimedia companies and beaten down manufacturers in a variety
of industries. Looking ahead, we believe yield will continue to provide downside
support in this volatile stock market environment. If the stock market recovers
in the second half, the equity-oriented performance characteristics of
convertibles should make more of a contribution.
Sincerely,
/s/ MARIO J. GABELLI
MARIO J. GABELLI
President and Chief Investment Officer
May 8, 2001
TOP TEN CONVERTIBLE HOLDINGS
MARCH 31, 2001
--------------
Waste Management Inc. (Sub. Deb. Cv., 4.00%, 02/01/02)
Standard Motor Products (Sub. Deb. Cv., 6.75%, 07/15/09)
Hilton Hotels Corp. (Sub. Deb. Cv., 5.00%, 05/15/06)
Citizens Communications Co. (5.00% Cv. Pfd.)
Kaman Corp. (Sub. Deb. Cv., 6.00%, 03/15/12)
Sealed Air Corp. ($2.00 Cv. Pfd., Ser. A)
Sequa Corp. ($5.00 Cv. Pfd.)
Coltec Capital Trust (5.25% Cv. Pfd.)
Robbins & Myers Inc. (Sub. Deb. Cv., 6.50%, 09/01/03)
Thermo Electron Corp. (Sub. Deb. Cv., 4.25%, 01/01/03)
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
10
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS
MARCH 31, 2001 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 32.1%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 5.3%
$ 700,000 Exide Corp. Sub. Deb. Cv.
2.90%, 12/15/05 (b) ............... $ 294,000
350,000 Pep Boys - Manny, Moe & Jack
Sub. Deb. Cv.
Zero Cpn., 09/20/11 ............... 217,000
9,000,000 Standard Motor Products Inc.
Sub. Deb. Cv.
6.75%, 07/15/09 ................... 5,310,000
------------
5,821,000
------------
AVIATION: PARTS AND SERVICES -- 3.7%
4,711,000 Kaman Corp. Sub. Deb. Cv.
6.00%, 03/15/12 ................... 4,057,349
------------
BROADCASTING -- 0.0%
15,000 Granite Broadcasting Corp.
Sub. Deb. Cv.
8.88%, 05/15/08 ................... 10,125
------------
BUSINESS SERVICES -- 2.1%
900,000 BBN Corp. Sub. Deb. Cv.
6.00%, 04/01/12 (a) ............... 870,750
10,000 First Data Corp. Sub. Deb. Cv.
2.00%, 03/01/08 ................... 10,150
1,800,000 Trans-Lux Corp. Sub. Deb. Cv.
7.50%, 12/01/06 ................... 1,388,250
------------
2,269,150
------------
COMPUTER SOFTWARE AND SERVICES -- 0.3%
220,000 Exodus Communications Inc.
Sub. Deb. Cv.
5.25%, 02/15/08 ................... 145,200
400,000 QuadraMed Corp. Sub. Deb. Cv.
5.25%, 05/01/05 ................... 154,000
------------
299,200
------------
CONSUMER PRODUCTS -- 0.6%
1,500,000 Pillowtex Corp. Sub. Deb. Cv.
6.00%, 03/15/12+ .................. 469
750,000 Standard Commercial Corp. Sub. Deb. Cv.
7.25%, 03/31/07 ................... 590,625
------------
591,094
------------
CONSUMER SERVICES -- 1.1%
200,000 CUC International Inc. Sub. Deb. Cv.
3.00%, 02/15/02 ................... 193,250
1,100,000 Ogden Corp. Sub. Deb. Cv.
6.00%, 06/01/02 ................... 1,028,500
------------
1,221,750
------------
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------
ELECTRONIC EQUIPMENT -- 0.0%
ASM Lithography Holding Cv.
$ 40,000 2.50%, 04/09/05 (d) ............... $ 21,322
10,000 2.50%, 04/09/05 (b) (d) ........... 5,331
------------
26,653
------------
ENERGY AND UTILITIES -- 1.2%
200,000 Devon Energy Corp. Sub. Deb. Cv.
4.95%, 08/15/08 ................... 198,500
200,000 Friede Goldman Halter Inc.
Sub. Deb. Cv.
4.50%, 09/15/04 ................... 62,000
1,100,000 Moran Energy Inc. Sub. Deb. Cv.
8.75%, 01/15/08 ................... 1,039,500
------------
1,300,000
------------
ENTERTAINMENT -- 0.8%
800,000 USA Networks Inc. Sub. Deb. Cv.
7.00%, 07/01/03 ................... 835,000
------------
ENVIRONMENTAL SERVICES -- 4.9%
5,500,000 Waste Management Inc. Sub. Deb. Cv.
4.00%, 02/01/02 ................... 5,335,000
------------
EQUIPMENT AND SUPPLIES -- 1.8%
1,950,000 Robbins & Myers Inc.
Sub. Deb. Cv.
6.50%, 09/01/03 ................... 2,008,500
------------
FOOD AND BEVERAGE -- 0.0%
110,000 Boston Chicken Inc.
Sub. Deb. Cv.
7.75%, 05/01/04+ .................. 687
150,000 Chiquita Brands International Inc. Cv.
7.00%, 03/28/01 (e) ............... 29,250
------------
29,937
------------
HEALTH CARE -- 0.0%
10,000 Inhale Therapeutic Systems,
Sub. Deb. Cv.
6.75%, 10/13/06 (b) ............... 13,600
150,000 Sabratek Corp.
Sub. Deb. Cv.
Zero Cpn., 04/15/05+ .............. 765
------------
14,365
------------
HOTELS AND GAMING -- 4.2%
5,300,000 Hilton Hotels Corp. Sub. Deb. Cv.
5.00%, 05/15/06 ................... 4,577,875
------------
11
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2001 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS (CONTINUED)
PAPER AND FOREST PRODUCTS -- 1.2%
$ 200,000 Riverwood International Corp.
Sub. Deb. Cv.
6.75%, 09/15/03 ................... $ 230,890
1,200,000 Thermo Fibertek Inc. Cv.
4.50%, 07/15/04 (b) ............... 1,074,000
------------
1,304,890
------------
PUBLISHING -- 1.0%
650,000 News America Holdings Inc.
Sub. Deb. Cv.
Zero Cpn., 03/31/02 ............... 895,375
200,000 Times Mirror Ltd., Sub. Deb. Cv.
Zero Cpn., 04/15/17 ............... 125,000
50,000 United News & Media plc
Sub. Deb. Cv.
6.13%, 12/03/03 (c) ............... 74,107
------------
1,094,482
------------
REAL ESTATE -- 0.1%
125,000 Rockfeller Center Property Trust
7.44%, 12/31/07 ................... 120,679
------------
RETAIL -- 0.3%
60,000 Costco Companies Inc.
Sub. Deb. Cv.
Zero Cpn., 08/19/17 ............... 56,325
300,000 Rite Aid Corp. Sub. Deb Cv.
5.25%, 09/15/02 ................... 271,500
------------
327,825
------------
SPECIALTY CHEMICALS -- 0.9%
900,000 IVAX Corp. Sub. Deb. Cv.
5.50%, 05/15/07 (b) ............... 981,000
------------
TECHNOLOGY -- 1.3%
1,500,000 Thermo Electron Corp.
Sub. Deb. Cv.
4.25%, 01/01/03 (b) ............... 1,456,875
------------
TELECOMMUNICATIONS -- 0.5%
80,000 Amnex Inc. Sub. Deb. Cv.
8.50%, 09/25/02 (b) ............... 3,592
Bell Atlantic Corp. Cv.
90,000 4.25%, 09/15/05 ................... 90,875
10,000 4.25%, 09/15/05 (b) ............... 10,100
500,000 Rogers Communications Inc.
Sub. Deb. Cv.
2.00%, 11/26/05 ................... 373,125
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------
$ 150,000 XO Communications Inc.
Sub. Deb. Cv.
5.75%, 01/15/09 (b) ............... $ 69,750
------------
547,442
------------
WIRELESS COMMUNICATIONS -- 0.8%
500,000 Nextel Communications,
Sub. Deb. Cv.
5.25%, 01/15/10 ................... 323,125
900,000 U.S. Cellular Corp.
Sub. Deb. Cv.
Zero Cpn., 06/15/15 ............... 528,750
------------
851,875
------------
TOTAL CONVERTIBLE
CORPORATE BONDS ................... 35,082,066
------------
SHARES
CONVERTIBLE PREFERRED STOCKS -- 12.9%
AVIATION: PARTS AND SERVICES -- 1.9%
Coltec Capital Trust
25,000 5.25% Cv. Pfd. .................... 1,103,125
21,000 5.25% Cv. Pfd. (b) ................ 931,875
------------
2,035,000
------------
CABLE -- 0.3%
1,000 MediaOne Group Inc.
4.50% Cv. Pfd., Ser. D ............ 25,550
UnitedGlobalCom Inc.
2,000 7.00% Cv. Pfd. (b) ................ 41,750
10,500 7.00% Cv. Pfd., Ser. C ............ 219,187
------------
286,487
------------
DIVERSIFIED INDUSTRIAL -- 0.5%
2,000 GATX Corp.
$2.50 Cv. Pfd. .................... 430,000
WHX Corp.
9,000 6.50% Cv. Pfd., Ser. A ............ 43,200
4,000 $3.75 Cv. Pfd., Ser. B ............ 21,200
------------
494,400
------------
ENERGY AND UTILITIES -- 0.3%
200 KCS Energy Inc.
5.00% Cv. Pfd., Ser. A ............ 342,000
1,000 Semco Capital Trust II,
11.00% Cv. Pfd. ................... 11,980
------------
353,980
------------
ENTERTAINMENT -- 0.1%
2,500 Metromedia International Group Inc.
7.25% Cv. Pfd. .................... 46,500
12
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
ENTERTAINMENT (CONTINUED)
500 Six Flags Inc.
7.25% Cv. Pfd. .................... $ 14,695
------------
61,195
------------
EQUIPMENT AND SUPPLIES -- 1.9%
28,000 Sequa Corp.
$5.00 Cv. Pfd. .................... 2,098,600
------------
PAPER AND FOREST PRODUCTS -- 2.2%
65,000 Sealed Air Corp.
$2.00 Cv. Pfd., Ser. A ............ 2,392,000
------------
PUBLISHING -- 0.1%
5,000 Tribune Co.
6.25% Cv. Pfd. .................... 104,000
------------
RETAIL -- 0.3%
4,000 CVS Corp.
6.00% Cv. Pfd. .................... 380,000
------------
SPECIALTY CHEMICALS -- 0.0%
3,000 Merrill Lynch & Co. (IMC Global)
6.25% Cv. Pfd. .................... 38,700
------------
TELECOMMUNICATIONS -- 4.5%
6,000 BroadWing Inc.
6.75% Cv. Pfd., Ser. B ............ 282,000
74,500 Citizens Communications Co.
5.00% Cv. Pfd. .................... 4,074,032
10,000 Philippine Long Distance Telephone Co.
$3.50 Cv. Pfd., Ser. III .......... 325,000
RSL Communications Ltd.
2,000 7.50% Cv. Pfd. 750
1,000 7.50% Cv. Pfd. (b) 375
1,500 TCI Pacific Communications Inc.
5.00% Cv. Pfd. .................... 221,250
------------
4,903,407
------------
WIRELESS COMMUNICATIONS -- 0.8%
3,000 Loral Space & Communications Ltd.
6.00% Cv. Pfd., Ser. D ............ 37,500
6,500 VoiceStream Wireless Corp.
7.00% Cv. Pfd. .................... 879,938
500 Winstar Communications Inc.
7.00% Cv. Pfd. .................... 2,125
------------
919,563
------------
TOTAL CONVERTIBLE
PREFERRED STOCKS .................. 14,067,332
------------
MARKET
SHARES VALUE
------------------------------------------------------------------
COMMON STOCKS -- 14.4%
AGRICULTURE -- 0.3%
6,000 Agribrands International Inc.+ ...... $ 323,880
------------
AVIATION: PARTS AND SERVICES -- 0.3%
18,000 Kaman Corp. Cl. A ................... 294,750
------------
BROADCASTING -- 0.1%
38,500 Granite Broadcasting Corp.+ ......... 56,547
------------
BUSINESS SERVICES -- 1.5%
100,000 Cendant Corp.+ ...................... 1,459,000
3,767 Vivendi Universal SA, ADR ........... 228,468
------------
1,687,468
------------
ENERGY AND UTILITIES -- 3.1%
20,000 AGL Resources Inc. .................. 438,200
23,000 BP Amoco plc, ADR ................... 1,141,260
18,000 CH Energy Group Inc. ................ 796,500
10,000 NiSource Inc.+ ...................... 27,600
20,000 Northeast Utilities ................. 347,600
10,000 Progress Energy Inc. ................ 4,450
10,000 RGS Energy Group Inc. ............... 370,000
3,500 SJW Corp. ........................... 279,125
------------
3,404,735
------------
EQUIPMENT AND SUPPLIES -- 7.6%
50,000 Fedders Corp., Cl. A ................ 230,000
100,000 Litton Industries Inc.+ ............. 8,033,000
------------
8,263,000
------------
FINANCIAL SERVICES -- 0.3%
24,000 Argonaut Group Inc. ................. 381,000
------------
PUBLISHING -- 0.3%
10,000 Reader's Digest Association
Inc., Cl. A ....................... 274,800
------------
REAL ESTATE -- 0.4%
30,000 Westfield America Inc. .............. 486,900
------------
RETAIL -- 0.1%
6,000 Delhaize America Inc., Cl. A ........ 122,700
------------
TELECOMMUNICATIONS -- 0.2%
10,000 Sprint Corp.+ ....................... 219,900
------------
WIRELESS COMMUNICATIONS -- 0.2%
10,000 Sprint Corp. (PCS Group)+ ........... 190,000
49 Winstar Communications Inc.+ ........ 106
------------
190,106
------------
TOTAL COMMON STOCKS ................. 15,705,786
------------
13
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2001 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 41.8%
$45,689,000 U.S. Treasury Bills, 4.79% to 5.26%++,
due 04/12/01 to 05/10/01 .......... $ 45,560,245
------------
TOTAL INVESTMENTS -- 101.2%
(Cost $112,013,308) ............................ 110,415,429
============
OTHER ASSETS, LIABILITIES
AND LIQUIDATION
VALUE OF CUMULATIVE
PREFERRED STOCK -- (28.7)% ...................... (31,291,126)
------------
NET ASSETS - COMMON STOCK -- 72.5%
(7,787,745 common shares outstanding) .......... 79,124,303
------------
NET ASSETS - PREFERRED STOCK -- 27.5%
(1,200,000 preferred shares outstanding) ....... 30,000,000
------------
TOTAL NET ASSETS -- 100.0% ........................ $109,124,303
============
NET ASSET VALUE PER COMMON SHARE
($79,124,303 / 7,787,745 common shares
outstanding) ................................... $10.16
======
--------------------
For Federal tax purposes:
Aggregate cost ............................... $112,013,308
============
Gross unrealized appreciation ................ $ 3,570,484
Gross unrealized depreciation ................ (5,168,363)
------------
Net unrealized depreciation .................. $ (1,597,879)
============
--------------------
(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
March 31, 2001, the market value of Rule 144A securities amounted to
$4,882,248 or 4.5% of total net assets.
(c) Principal amount denoted in British Pounds.
(d) Principal amount denoted in Euros.
(e) Bond in default.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt
14
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the Policy of The Gabelli Convertible Securities Fund, Inc.
("Convertible Securities Fund") to automatically reinvest dividends. As a
"registered" shareholder you automatically become a participant in the
Convertible Securities Fund's Automatic Dividend Reinvestment Plan (the "Plan").
The Plan authorizes the Convertible Securities Fund to issue shares to
participants upon an income dividend or a capital gains distribution regardless
of whether the shares are trading at a discount or a premium to net asset value.
All distributions to shareholders whose shares are registered in their own names
will be automatically reinvested pursuant to the Plan in additional shares of
the Convertible Securities Fund. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("State Street") to be held
in their dividend reinvestment account. Registered shareholders wishing to
receive their distribution in cash must submit this request in writing to:
The Gabelli Convertible Securities Fund, Inc.
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan or requesting a copy of the terms of the
Plan may contact State Street at 1 (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at State Street Bank
must do so in writing or by telephone. Please submit your request to the above
mentioned address or telephone number. Include in your request your name,
address and account number. The cost to liquidate shares is $2.50 per
transaction as well as the brokerage commission incurred. Brokerage charges are
expected to be less than the usual brokerage charge for such transactions. If
your shares are held in the name of a broker, bank or nominee, you should
contact such institution.
If such institution is not participating in the Plan, your account will be
credited with a cash dividend. In order to participate in the Plan through such
institution, it may be necessary for you to have your shares taken out of
"street name" and re-registered in your own name. Once registered in your own
name your dividends will be automatically reinvested. Certain brokers
participate in the Plan. Shareholders holding shares in "street name" at
participating institutions will have dividends automatically reinvested.
Shareholders wishing a cash dividend at such institution must contact their
broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Convertible Securities Fund's Common Stock is
equal to or exceeds net asset value at the time shares are valued for purposes
of determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Convertible Securities Fund's Common Stock.
The valuation date is the dividend or distribution payment date or, if that date
is not a New York Stock Exchange trading day, the next trading day. If the net
asset value of the Common Stock at the time of valuation exceeds the market
price of the Common Stock, participants will receive shares from the Convertible
Securities Fund valued at market price. If the Convertible Securities Fund
should declare a dividend or capital gains distribution payable only in cash,
State Street will buy Common Stock in the open market, or on the New York Stock
Exchange or elsewhere, for the participants' accounts, except that State Street
will endeavor to terminate purchases in the open market and cause the
Convertible Securities Fund to issue shares at net asset value if, following the
commencement of such purchases, the market value of the Common Stock exceeds the
then current net asset value.
The automatic reinvestment of dividends and capital gains distributions will
not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Convertible Securities Fund reserves the right to amend or terminate the
Plan as applied to any voluntary cash payments made and any dividend or
distribution paid subsequent to written notice of the change sent to the members
of the Plan at least 90 days before the record date for such dividend or
distribution. The Plan also may be amended or terminated by State Street on at
least 90 days' written notice to participants in the Plan.
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our shareholders
to increase their investment in the Convertible Securities Fund. In order to
participate in the Voluntary Cash Purchase Plan, shareholders must have their
shares registered in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to State Street Bank and Trust Company for investments
in the Convertible Securities Fund shares at the then current market price.
Shareholders may send an amount from $250 to $10,000. State Street Bank and
Trust Company will use these funds to purchase shares in the open market on or
about the 1st and 15th of each month. State Street Bank and Trust Company will
charge each shareholder who participates $0.75, plus a pro rata share of the
brokerage commissions. Brokerage charges for such purchases are expected to be
less than the usual brokerage charge for such transactions. It is suggested that
any voluntary cash payments be sent to State Street Bank and Trust Company, P.O.
Box 8200, Boston, MA 02266-8200 such that State Street receives such payments
approximately 10 days before the investment date. Funds not received at least
five days before the investment date shall be held for investment until the next
purchase date. A payment may be withdrawn without charge if notice is received
by State Street Bank and Trust Company at least 48 hours before such payment is
to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Convertible Securities Fund.
15
GABELLI CONVERTIBLE SECURITIES FUND, INC.
AND YOUR PERSONAL PRIVACY
WHO ARE WE?
The Gabelli Convertible Securities Fund, Inc. (the "Fund") is a closed-end
investment company registered with the Securities and Exchange Commission
under the Investment Company Act of 1940. We are managed by Gabelli Funds
LLC, which is affiliated with Gabelli Asset Management Inc. Gabelli Asset
Management is a publicly-held company that has subsidiaries that provide
investment advisory or brokerage services for a variety of clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
GABELLI CUSTOMER?
When you purchase shares of the Fund on the New York Stock Exchange, you
have the option of registering directly with our transfer agent in order,
for example, to participate in our dividend reinvestment plan.
o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your
name, address, telephone number, social security number, bank account
number, and other information.
o INFORMATION ABOUT YOUR TRANSACTIONS WITH US. This would include
information about the shares that you buy or sell, it may also include
information about whether you sell or exercise rights that we have issued
from time to time. If we hire someone else to provide services--like a
transfer agent--we will also have information about the transactions that
you conduct through them.
WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT?
We do not disclose any non-public personal information about our customers
or former customers to anyone, other than our affiliates, our service
providers who need to know such information and as otherwise permitted by
law. If you want to find out what the law permits, you can read the privacy
rules adopted by the Securities and Exchange Commission. They are in volume
17 of the Code of Federal Regulations, Part 248. The Commission often posts
information about its regulations on its web site, WWW.SEC.GOV.
WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION?
We restrict access to non-public personal information about you to the
people who need to know that information in order to perform their jobs or
provide services to you and to ensure that we are complying with the laws
governing the securities business. We maintain physical, electronic, and
procedural safeguards to keep your personal information confidential.
16
DIRECTORS AND OFFICERS
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ONE CORPORATE CENTER, RYE, NY 10580-1434
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
E. Val Cerutti
CHIEF EXECUTIVE OFFICER,
CERUTTI CONSULTANTS, INC.
Felix J. Christiana
FORMER SENIOR VICE PRESIDENT,
DOLLAR DRY DOCK SAVINGS BANK
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, PACE UNIVERSITY
Anthonie C. van Ekris
MANAGING DIRECTOR,
BALMAC INTERNATIONAL, INC.
Salvatore J. Zizza
CHAIRMAN, THE BETHLEHEM CORP.
OFFICERS AND PORTFOLIO MANAGERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
Peter W. Latartara
VICE PRESIDENT
A. Hartswell Woodson, III
ASSOCIATE PORTFOLIO MANAGER
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1434
CUSTODIAN, TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
STOCK EXCHANGE LISTING
Common 8.00% Preferred
-------- ---------------
NYSE-Symbol: GCV GCV Pr
Shares Outstanding: 7,787,745 1,200,000
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "Convertible Securities Funds," in Sunday's The New York Times and in
Monday's The Wall Street Journal. It is also listed in Barron's Mutual
Funds/Closed End Funds section under the heading "Convertible Securities Funds."
The Net Asset Value may be obtained each day by calling (914) 921-5071.
For general information about the Gabelli Funds,
call 1-800-GABELLI (1-800-422-3554), fax us at
914-921-5118, visit Gabelli Funds' Internet homepage at:
HTTP://WWW.GABELLI.COM, or e-mail us at: closedend@gabelli.com
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Convertible Securities Fund may from
time to time purchase shares of its common stock in the open market when the
Convertible Securities Fund shares are trading at a discount of 10% or more from
the net asset value of the shares. The Convertible Securities Fund may also,
from time to time, purchase shares of its Cumulative Preferred Stock in the open
market when the shares are trading at a discount to the Liquidation Value of
$25.00.
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ONE CORPORATE CENTER
RYE, NY 10580-1434
(914) 921-5070
HTTP://WWW.GABELLI.COM
FIRST QUARTER REPORT
MARCH 31, 2001
GBFCS 03/01