First Quarter Report
THE
CONVERTIBLE
SECURITIES FUND, INC.
March 31, 1995
<PAGE>
20 Broad Street
New York, NY 10005
212 656 5185
Fax 212 656 2461
Client Service
Thomas E. Veit
Vice President
NYSE
March 22, 1995 New York
Stock Exchange, Inc.
Mr. Mario J. Gabelli
Chief Executive Officer
The Gabelli Convertible Securities Fund, Inc.
One Corporate Center
Rye, NY 10580
Dear Mr. Gabelli:
I am pleased to inform you that the New York Stock
Exchange has approved your Company's securities for
listing upon notice of issuance. Trading is scheduled
to begin upon the effectiveness of the registration under
the Securities Act of 1933 and the Securities Exchange
Act of 1934.
On behalf of the Board of Directors and management of
the Exchange, I would like to invite you and a group of
your officers and directors to participate in the
original listing ceremonies.
Frederick J. Emken and Lisa T. Louie, who will jointly
handle client services for your Corporation in the
future, will contact Mr. Bruce N. Alpert to work out
the details.
We look forward to the commencement of trading of The
Gabelli Convertible Securities Fund, Inc.
Sincerely,
/s/ Thomas E. Veit
cc: Bruce N. Alpert
INVESTMENT OBJECTIVE:
The Gabelli Convertible Securities Fund, Inc. is a closed-end, diversified
management investment company whose primary objective is to seek a high level
of total return through a combination of current income and capital appreciation
by investing in convertible securities.
This report is printed on recycled paper.
<PAGE>
TO OUR SHAREHOLDERS:
Congratulations and thank you. At the Special Meeting
of Shareholders held on February 17, 1995 at the Greenwich
Public Library in Connecticut, shareholders approved
converting the Gabelli Convertible Securities Fund to [Photo of
closed-end status, effective March 31, 1995. Shares of the Mario J. Gabelli]
Fund are now trading on the New York Stock Exchange under
the symbol GCV. We believe that the closed-end status will
provide greater investment flexibility to achieve attractive
returns over the long term.
In the first quarter of 1995, the Gabelli Convertible Securities Fund,
Inc.'s ("Convertible Securities Fund") net asset value increased from $10.60 on
December 31, 1994 to $11.14 on March 31, 1995. This represents an increase of
5.10% for the quarter and compares to the Lipper Analytical Services, Inc.
Convertible Securities Fund Index's gain of 4.99%. Both a strong bond and stock
market in the U.S. helped to enhance the performance of convertible securities.
Such an environment enables us to maintain the Fund's long term profitability.
For the twelve months ended March 31, 1995, the Convertible Securities
Fund's dividend adjusted net asset value increased 4.7%. From inception on July
3, 1989 through March 31, 1995, the Fund achieved a 70.1% total return which
represents an average annual return of 9.7%.
WHAT WE DO
We do what is described as bottom up research: we read annual reports; we
visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
Our focus is on free cash flow; earnings before
interest, taxes, depreciation and amortization (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 [Graphic]
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
<PAGE>
legal, environmental and health care issues. We want to know everything and
anything that will add to or detract from our private market value estimates.
Finally, we look for a catalyst; something happening in the company's industry
or indigenous to the company itself that will surface value. In the case of the
independent telephone stocks, the catalyst is a regulatory change. In the
agricultural equipment business, it is the increasing worldwide 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.
INVESTMENT RESULTS (a)(b)
- --------------------------------------------------------------------------------
Quarter
-----------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1995: Net Asset Value ...... $11.14 --- --- --- ---
Total Return ......... 5.1% --- --- --- ---
- --------------------------------------------------------------------------------
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, 1995 (a)
- ------------------------------------------
1 Year ............. 4.7%
5 Year. ............ 9.6%
Life of Fund ....... 9.7%
- ---------------------------------------------
Dividend History
- --------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 31, 1994 $0.90 $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
(a) Total return and average annual return reflect changes in share price and
reinvestment of dividends and are net of expenses. Of course, the returns noted
represent past performance and do not guarantee future results. Investment
returns and the principal value of an investment will fluctuate. When shares are
sold they may be worth more or less than their original cost. (b) From
commencement of operations on July 3, 1989. (c) The Fund converted to closed-end
status on March 31, 1995.
2
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When 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 globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as increased focus on productivity
enhancing goods and services.
CLOSED-END STATUS
In its new closed-end format, the Convertible Securities Fund will put more
of its cash balances to work. From the time of the conversion to the time of
this writing, the Fund's cash position has been reduced to 9.2% of the
portfolio. This will allow us to take advantage of greater opportunities and
achieve higher returns for the shareholders of the Fund.
Judging from inquires being received by our Fund representatives, some of
our shareholders still have questions regarding the change in the Fund's
structure and how they may buy or sell shares. Following are our responses to
some of the most frequently asked questions:
Q: WHAT IS THE DIFFERENCE BETWEEN AN OPEN-END AND CLOSED-END MUTUAL FUND?
A: Open-end mutual funds can issue and redeem shares on demand. Closed-end funds
have a fixed number of shares that are traded on a stock exchange just like
individual securities. Open-end funds without sales charges (no-load funds) are
bought or redeemed at net asset value. Closed-end fund shares can trade in the
market at a discount or premium to net asset value depending on the supply and
demand for those shares.
Q: HOW CAN I BUY MORE SHARES IN THE FUND?
A: Shareholders who hold their shares through State Street Bank and Trust
Company ("State Street") may participate in the Fund's Voluntary Cash Purchase
Plan, whereby, twice a year, in February and in August, they may purchase up to
$3,000 in additional shares of the Fund, without commission or fees for at least
the next two years. Shareholders who have a brokerage account would be able to
purchase additional shares through their broker. Commissions and/or service fees
may apply, just as they would for any other stock traded on a securities
exchange.
Q: HOW CAN I SELL MY FUND SHARES?
A: Shares held in book entry form at State Street may be sold by providing
instructions to State Street, either via the telephone or written instructions.
Instructions should state the number of shares to sell. State Street cannot
accept an order to sell a specific dollar amount requested to be sold.
3
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The Fund's Adviser, Gabelli Funds, has arranged
(with its brokerage affiliate, Gabelli & Company, Inc.) that for two years,
shareholders who hold their shares through State Street may sell shares at
market value without commission and the proceeds can be mailed to the address on
record or directed to a similarly registered account with another Gabelli mutual
fund.
Please be aware that sales will be submitted to Gabelli & Company, Inc. as
"market" orders and the liquidity of the market will determine how quickly the
trade will be executed. Shareholders who hold their shares at a brokerage firm
would be able to sell shares through their broker. There would, of course, be a
commission involved.
Q: WHY IS THE FUND TRADING AT A DISCOUNT TO NET ASSET VALUE?
A: Over the short run, the market price on the New York Stock Exchange has
dipped to a discount to the net asset value. Selling from shareholders who want
to redeem their shares has depressed the share price. When there are more
sellers than buyers, the share price will decline based on the adage of supply
and demand. We believe that this is a temporary phenomenon because few
investors, other than our current shareholders, are aware of the Fund's
availability on the New York Stock Exchange. We believe this provides an
excellent opportunity to acquire the Fund at prices below its intrinsic value.
In this regard, Gabelli Funds, Inc. and Mario J. Gabelli have announced
intentions to acquire up to one million shares of the Fund in the open market.
Q: WHAT IS THE DIVIDEND POLICY?
A: The Fund historically pays a single dividend annually at the end of December.
The Board of Directors is considering paying dividends on a quarterly basis and
has authorized a distribution of $.20 per share to be paid on June 27, 1995 to
shareholders of record on June 9, 1995.
Q: WHAT WAS THE ADVANTAGE TO BECOMING A CLOSED-END FUND?
A: The Fund may invest its cash balances without regard to redemptions. It may
also invest in securities where liquidity is limited. The cash balance at March
31, 1995 was 24.2% of the portfolio.
OUR INVESTMENT OBJECTIVES
Our mandate is to preserve and enhance our shareholders' wealth through a
conservative, disciplined approach to convertible securities investing. Our goal
is to generate profitable returns in strong markets and protect principle in
weak ones through the unique characteristics inherent in convertible bonds.
4
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CONVERTIBLE SECURITIES ARE "HYBRIDS"
The convertible securities market consists of bonds, debentures, corporate
notes, preferred stocks, warrants or other similar securities which may be
converted into or exchanged for a prescribed amount of common stock or other
equity security of the same or 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 which 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 value of the conversion privilege and the value of the
convert is down. Such securities will provide high yields and long-term capital
appreciation potential as well.
CONVERTIBLE BOND BEHAVIOR
Being a hybrid security, a convertible's value should be the higher of
either its straight bond value or its value as an equity. The graph below
illustrates how the price relationship between a convertible and its underlying
equity changes as the price of that equity moves up or down. Convertibles can be
categorized into four distinct groups as defined as follows:
1) Distressed Securities: The equity price has fallen to very low levels
due to financial difficulties. These convertibles trade at very low prices due
to diminishing credit quality. Nevertheless, the convertible investor still
enjoys better protection than the common equity holder because of the
convertible's superior credit ranking in the case of any liquidation. Lucrative
returns can be made from these investments because of their high current yields
but they are more risky than traditional convertible investments.
2) Bond Equivalent Securities: The equity price is depressed and trading at
levels well below its conversion price. Consequently, the convertible's embedded
call option is virtually worthless and the security will trade on its yield or
straight bond characteristics alone. These securities are often referred to as
"busted convertibles".
3) Hybrid Securities: This is the point at which most new convertibles are
issued. The convertible will trade at a premium to both its underlying equity
and straight bond value. In exchange for this premium the investor will receive
a higher yield than the common equity and more downside protection. Typically,
we expect to participate in two-thirds of the equity's upside movement with only
one-third of the downside.
5
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4) Equity Equivalent Securities: The equity price has moved up
substantially and the convertible fluctuates in line with the equity. Here the
convertible loses its defensive characteristics since its bond value is far
lower. Depending on call protection, and stock borrowing availability, these
securities can be cheaper than their underlying equities. Occasionally, it is
possible to buy these convertibles at a discount (rather than a premium) even
though they have a higher yield than the equity.
[The printed report contains a graphic illustrating the above]
COMMENTARY FIRST QUARTER 1995
The table below provides a quick summary for how a number of asset classes
performed during the first quarter of 1995. As the table indicates, rising bond
and equity prices in the U.S. provided for a profitable convertible environment.
In contrast, the first quarter of 1995 yielded disappointing returns for assets
in other regions. As a result, domestic convertibles successfully outperformed
international markets.
This environment will benefit some at the expense of others. Thus, we have
structured our portfolio accordingly. U.S. exporters will continue to benefit at
the expense of exporters in countries whose currencies are strong relative to
the dollar. This scenario results from the ability of domestic producers to sell
goods at prices lower than for goods denominated in strong currencies. This will
help portfolio holdings like Cooper Industries, Inc. and Magma Copper Company
which produce industrial goods and commodities for international buyers.
6
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- --------------------------------------------------------------------------------
ASSET TYPE 1/1/95 3/31/95 % CHANGE
- ---------- ------ ------- --------
BOND YIELDS
- -----------
U.S. 10 Year Treasury Note 7.78% 7.20% -7.46%
German 10 Year Treasury Note 7.59% 7.18% -5.40
Japanese 10 Year Treasury Note 2.61% 1.71% -34.48
Mexican Par Brady Bonds 6.25% 12/31/19 11.88% 13.89% +16.92
CURRENCIES
- ----------
German Mark/USD 1.55 1.37 -11.61%
Japanese Yen/USD 99.58 86.55 -13.08
Mexican Peso/USD 5.08 6.78 +33.46
COMMODITIES
- -----------
CRB $236.85 $233.90 -1.25%
Gold 385.00 394.00 +2.30
Oil 17.75 19.17 +7.40
Copper 94.50 95.50 +1.00
Cotton 89.96 98.15 +8.30
EQUITIES (LOCAL DENOMINATIONS)
- -----------------------------
U.S.A. - S&P 500 Index 459.27 500.71 +9.35%
FT World Actuaries - World Index 146.73 142.70 -2.75
FT World Actuaries - Europe Index 150.62 147.21 -2.26
FT World Actuaries - Pacific Ex-Japan 208.47 211.03 +1.23
Japan - nikkei 225 Index 19,723.00 16,140.00 -18.17
Latin America - IFC Regional Investor's
Latin American Index 692.88 483.42 -29.05%
- --------------------------------------------------------------------------------
Let's Talk Converts
The following are specifics on
selected holdings of our Fund's investments. In our last letter to you we
focused on convertibles which enjoyed the best of both worlds--a yield higher
than an equivalent maturity treasury bond but with a premium under 30 percent.
In the selection below, we will highlight convertibles which are typical of each
of the four types of convertibles we described above under the section
"Convertible Bond Behavior".
7
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FLAGSTAR COMPANIES, INC. (SUB. DEB. CV. 10.00% 11/01/14), a food service company
operating restaurants primarily in the Western and Southern United States.
Operations include "Hardee's", a fast-food hamburger chain, "Quincy's," a
steakhouse chain, "Denny's," a family restaurant and "El Pollo Loco," a fast
food chicken outlet. The company's objective is to upgrade and remodel its
restaurants and reduce debt. In 1994, Flagstar sold most of its Canteen food and
vending unit to London-based Compass Group PLC for $450 million and about 20
Denny's restaurants were upgraded in the Houston area. At a price of $72, the
convertible bonds are trading as distressed securities with a yield to maturity
of 14.29%.
M/A-COM, INC. (SUB. DEB. CV. 9.25% 5/15/06) manufactures high performance
components for wireless communications. Sales in 1994 were $341 million. On
March 10, 1995, the company announced plans to merge with AMP Inc., a leading
manufacturer of electronic interconnect products, in a stock swap valued at
about $270 million. The merger will improve M/A-Com's balance sheet and broaden
its marketing channels. After the merger, M/A-Com will be a wholly-owned
subsidiary of AMP, which had 1994 sales of $4.03 billion. Trading at a price of
$100.25, these convertible bonds offer an attractive yield to maturity of 9.21%
or 2.00% more than an equivalent U.S. treasury note.
COOPER INDUSTRIES, INC. (SUB. DEB. CV. 7.05% 1/1/15) manufactures electrical,
industrial and automotive products. It is among the world's largest producers of
automotive brakes, non-power hand-tools, and compression, mining, and
construction equipment. The company distributes worldwide with 1994 sales of
$4.59 billion. At a price of $102.375, the Cooper convertible is a typical
"Hybrid" security offering good upside potential but with less risk than the
ordinary equity. The convertible enjoys a yield to maturity of 6.83% with only a
9.00% premium. The dividend yield on the equity is only 3.41%. These bonds were
created on January 1, 1995 when the company decided to exchange all of its $1.60
convertible preferred stock for the new debentures. Investors will benefit from
the superior credit standing of the debentures over the ordinary equity holders.
SIERRA ON-LINE INC. (SUB. DEB. CV. 6.50% 4/1/01) develops and publishes
interactive animated adventures, simulations and other microcomputer
entertainment software products. Some of the principle products include "King's
Quest," "Leisure Suit Larry","Iceman" and "Sorcerian." Sales rose 26% in 1994 to
$63 million. With 15.8 million shares outstanding, the company has a market
capitalization of over $350 million. These convertible bonds offer an attractive
alternative to the equity. At a price of $160.50, they have a premium of only
2.14% and thus trade almost one for one with the equity. At the same time, the
bonds have a current yield of 4.05% compared to no dividend on the equity.
8
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CONCLUSION
Continued strength in bond and equity prices should reward convertible
securities portfolios. The Gabelli Convertible Securities Fund, Inc. has
demonstrated its ability to deliver superior risk-adjusted returns through the
hybrid qualities of convertible securities. We thank you for your confidence in
our ability to select investments to meet our shared investment goals. We
believe that the patient investor will be rewarded over the long term.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli
President and
Chief Investment Officer
May 12, 1995
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TOP TEN CONVERTIBLE HOLDINGS
MARCH 31, 1995
--------------
Time Warner Inc. ITT Corporation
Fieldcrest Cannon, Inc. Atlantic Richfield Company
General Host Corporation GATX Corporation
Navistar International Corporation M/A-Com, Inc.
Chock Full o'Nuts Corporation GenCorp. Inc.
- --------------------------------------------------------------------------------
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THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS -- MARCH 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
Principal Market
Amount Cost Value
--------- ---- ------
CONVERTIBLE SECURITIES - 66.10%
CONVERTIBLE CORPORATE BONDS - 48.61%
AUTOMOTIVE: PARTS & ACCESSORIES - 1.26%
$1,150,000 GenCorp Inc. Sub. Deb. Cv.
8.00%, 08/01/02.........$1,146,516 $1,138,500
---------- ----------
AVIATION: PARTS AND SERVICES - 1.90%
615,000 Hudson General Corporation Sub.
Deb. Cv. 7.00%, 07/15/11 410,862 459,713
254,000 Kaman Corporation Sub. Deb. Cv.
6.50%, 03/15/12......... 157,183 193,040
1,300,000 UNC Incorporated Sub. Deb. Cv.
7.50%, 03/31/06......... 828,659 1,062,750
--------- ---------
1,396,704 1,715,503
--------- ---------
BROADCASTING - 0.07%
250,000(a)Havas SA Sub. Deb. Cv.
3.00%, 12/31/97......... 50,324 58,677
--------- ---------
BUILDING AND CONSTRUCTION - 0.33%
10,000 Hofi International Finance Ltd.
Sub. Deb. Cv.
4.50%, 08/11/08......... 12,521 13,075
300,000 Medusa Corporation Sub.
Notes Cv. 6.00%, 11/15/03 292,410 285,000
--------- ---------
304,931 298,075
--------- ---------
BUSINESS SERVICES - 0.71%
250,000 Anacomp Inc. Sub. Deb. Cv.
13.875%, 01/15/02....... 264,435 249,375
85,200(a)International Business Machines
Corporation France, Sub. Deb.
Cv. 5.75%, 01/01/98..... 16,806 21,873
359,000 Trans-Lux Corporation Sub.
Deb. Cv. 9.00%, 12/01/05 310,252 365,731
--------- ---------
591,493 636,979
--------- ---------
CABLE - 0.41%
250,000 Comcast Corporation Sub.
Deb. Cv. 3.375%, 09/09/05 244,843 206,562
400,000 Comcast Corporation Sub.
Deb. Cv. 1.125%, 04/15/07 182,690 166,000
--------- ---------
427,533 372,562
--------- ---------
COMPUTER SOFTWARE AND SERVICES - 0.25%
140,000 Sierra On-Line, Inc. Sub. Deb. Cv.
6.50%, 04/01/01 (b)..... 137,372 224,700
--------- ---------
CONSUMER PRODUCTS - 4.94%
700,000 American Brands, Inc. Sub.
Deb. Cv. 7.625%, 03/05/01 720,965 707,000
600,000 Borden, Inc. Sub. Deb. Cv.
Zero Cpn. 05/21/02...... 390,698 372,000
100,000 Dibrell Brothers Inc. Sub. Deb.
Cv. 7.75%, 09/30/06..... 96,630 107,500
2,800,000 Fieldcrest Cannon, Inc. Sub.
Deb. Cv. 6.00%, 03/15/12 1,845,213 2,170,000
564,000 Masco Corporation Sub. Deb. Cv.
5.25%, 02/15/12......... 378,222 485,040
250,000 Roadmaster Industries Inc.
Sub. Deb. Cv. 8.00%,
08/15/03 ............... 250,200 235,000
500,000 Standard Commercial
Corporation Sub. Deb. Cv.
7.25%, 03/31/07......... 389,573 372,500
--------- ---------
4,071,501 4,449,040
--------- ---------
ENERGY - 1.60%
1,100,000 Moran Energy Inc. Sub.
Deb. Cv. 8.75%, 01/15/08 757,843 728,750
600,000 Pennzoil Company Sub. Deb. Cv.
6.50%, 01/15/03......... 600,000 708,000
--------- ---------
1,357,843 1,436,750
--------- ---------
ENTERTAINMENT - 16.38%
670,000 Savoy Pictures Entertainment
Sub. Deb. Cv. 7.00%,
07/01/03................ 636,465 529,300
400,000 Time Warner Inc. LYONS Sr.
Sub. Notes Cv. Zero Cpn.,
06/22/13................ 161,117 153,000
14,000,000 Time Warner Inc. Sub. Deb. Cv.
8.75%, 01/10/15.........14,629,102 14,070,000
---------- ----------
15,426,684 14,752,300
---------- ----------
<PAGE>
FINANCIAL SERVICES - 1.19%
550,000 Advest Group, Inc. Sub. Deb.
Cv. 9.00%, 03/15/08..... 431,817 501,188
550,000 Allegheny Corporation Sub. Deb.
Cv. 6.50%, 06/15/14..... 563,015 548,625
25,000 Guangdong Investment Limited
Sub. Deb. Cv. 4.50%,
10/07/98 ............... 25,000 25,125
---------- ----------
1,019,832 1,074,938
---------- ----------
FOOD AND BEVERAGE - 4.65%
550,000 Boston Chicken, Inc. Sub. Deb.
Cv. 4.50%, 02/01/04..... 512,894 412,500
1,050,000 Chock Full o'Nuts Corporation
Sub. Deb. Cv. 8.00%,
09/15/06 ............... 1,036,470 997,500
1,005,000 Chock Full o'Nuts Corporation
Sub. Deb. Cv. 7.00%,
04/01/12 ............... 748,337 870,581
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THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)-- MARCH 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
Principal Market
Amount Cost Value
--------- ---- ------
FOOD AND BEVERAGE (continued)
$1,300,000 Flagstar Companies, Inc. Sub.
Deb. Cv. 10.00%,
11/01/14 ...............$1,286,653 $936,000
930,000 Ingles Markets, Incorporated
Sub. Deb. Cv. 10.00%
10/15/08................ 935,325 971,850
---------- ----------
4,519,679 4,188,431
---------- ----------
HEALTH CARE - 0.12%
100,000 Benson Eyecare Corporation Sub.
Deb. Cv. 8.00%, 05/15/01 99,729 108,750
---------- ----------
INDUSTRIAL EQUIPMENT AND SUPPLIES - 7.74%
350,000 AMSCO International, Inc.
Sub. Deb. Cv. 4.50%,
10/15/02 ............... 332,324 302,313
850,000 Builders Transport, Incorporated
Sub. Deb. Cv. 6.50%,
05/01/11................ 342,552 641,750
850,000 Cooper Industries, Inc. Sub.
Deb. Cv. 7.05%, 01/01/15 771,837 870,188
500,000 Data Switch Corporation Sub.
Deb. Cv. 8.25%, 06/01/02 380,066 358,750
100,000 Ducommun Incorporated Sub.
Deb. Cv. 7.75%, 03/31/11 73,467 83,750
450,000 General Signal Corporation
Sub. Deb. Cv. 5.75%,
06/01/02 .............. 443,073 468,000
10,000 Greenwich Air Services, Inc.
Sub. Deb. Cv. 8.00%,
11/05/00 .............. 9,605 8,550
720,000 Intermagnetics General
Corporation Sub. Deb.
Cv. 5.75%, 09/15/03 (b). 720,000 590,400
1,200,000 Kollmorgen Corporation
Sub. Deb. Cv. 8.75%,
05/01/09 ............... 837,526 1,104,000
1,195,000 M/A-Com, Inc. Sub. Deb. Cv.
9.25%, 05/15/06......... 887,667 1,197,988
700,000 Pacific Scientific Company
Sub. Deb. Cv. 7.75%,
06/15/03 ............... 636,611 778,750
450,000 Sanifill, Inc. Sub. Deb.
Cv. 7.50%, 06/01/06..... 447,227 450,000
120,000 Unifi, Inc. Sub. Deb. Cv.
6.00%, 03/15/02......... 120,000 122,250
---------- ----------
6,001,955 6,976,689
---------- ----------
METALS AND MINING - 0.42%
450,000 Coeur d'Alene Mines Corporation
Sub. Deb. Cv. 6.00%,
06/10/02................ 404,158 380,250
---------- ----------
PAPER AND FOREST PRODUCTS - 0.32%
240,000 Riverwood International Corporation
Sub. Deb. Cv. 6.75%,
09/15/03................ 239,598 287,400
---------- ----------
PUBLISHING - 0.64%
700,000 News American Holdings
Incorporated Sub. Deb. Cv.
Zero Cpn., 03/31/02..... 411,098 577,500
---------- ----------
REAL ESTATE / DEVELOPMENT - 0.70%
300,000 Continental Homes Holding Corp.
Sub. Deb. Cv. 6.875%,
03/15/02................ 276,685 241,500
125,000 Rockefeller Center Properties Inc.
Sub. Deb. Cv. Zero Cpn.,
12/31/00................ 62,530 60,625
300,000 Rockefeller Center Properties Inc.
Sub. Deb. Cv.
8.00%, 12/31/00......... 289,161 295,500
30,000 Wharf Capital International Ltd.
Sub. Deb. Cv.
5.00%, 07/15/00......... 33,430 31,425
---------- ----------
661,806 629,050
---------- ----------
RETAIL - 2.76%
100,000 Farah USA, Inc. Sub. Deb. Cv.
8.50%, 02/01/04......... 100,803 50,000
350,000 Food Lion, Inc. Sub. Deb. Cv.
5.00%, 06/01/03......... 348,691 322,438
2,200,000 General Host Corporation
Sub. Deb. Cv.
8.00%, 02/15/02......... 2,171,210 1,980,000
50,000 Pier One Imports Inc. Sub.
Deb. Cv. 8.50%, 12/01/00 48,165 61,500
100,000 Sports & Recreation, Inc. Sub.
Deb. Cv. 4.25%, 11/01/00 100,000 75,375
---------- ----------
2,768,869 2,489,313
---------- ----------
<PAGE>
TRANSPORTATION - 0.52%
600,000 Greyhound Lines Inc. Sub. Deb.
Cv. 8.50%, 03/31/07..... 416,040 327,000
150,000 WorldCorp, Inc. Sub. Deb. Cv
7.00%, 05/15/04......... 114,816 142,500
---------- ----------
530,856 469,500
---------- ----------
WIRELESS COMMUNICATIONS - 1.70%
200,000 All American Communications, Inc.
Sub. Dev. Cv. 6.50%,
10/01/03 (b)............ 196,472 181,000
100,000 Cellular Communications of
Puerto Rico Inc. Sub. Deb.
Cv. 8.25%, 08/01/00..... 105,502 211,500
100,000 Cellular, Inc. Sub. Deb. Cv.
6.75%, 07/15/09......... 96,525 98,750
11
<PAGE>
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)-- MARCH 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
Principal
Amount Market
or Shares Cost Value
--------- ---- ------
WIRELESS COMMUNICATIONS (continued)
$300,000 COMCAST Cellular
Communications Inc. Ser. A
Redeemable Notes, Zero Cpn.,
03/05/00................$ 174,468 $ 213,000
400,000 LDDS Communications Inc.
Sub. Deb. Cv. 5.00%,
08/15/03................ 279,233 349,500
800,000,000(c)Softe SA Sub. Deb. Cv.
4.25%, 07/01/98........ 489,568 473,282
---------- ----------
1,341,768 1,527,032
---------- ----------
TOTAL CONVERTIBLE
CORPORATE BONDS ..........42,910,249 43,791,939
---------- ----------
CONVERTIBLE PREFERRED STOCK - 17.49%
AIRLINES - 1.99%
15,500 AMR Corporation $3.00 Cv. Pfd.
Ser. A (b).............. 773,938 693,625
15,000 Delta Air Lines, Inc. $3.50 Cv.
Pfd. Ser. C............. 799,240 798,750
3,400 UAL Corporation 6.25% Cv. Pfd.
Ser. A (b).............. 339,400 301,325
---------- ----------
1,912,578 1,793,700
---------- ----------
AUTOMOBILE MANUFACTURERS - 0.97%
5,000 Ford Motor Company $4.20 Cv.
Pfd. Ser. A............. 451,100 441,250
7,500 General Motors Corporation
$3.25 Cv. Pfd. Ser. C... 376,375 431,250
---------- ----------
827,475 872,500
---------- ----------
AVIATION: PARTS AND SERVICES - 0.45%
9,000 Kaman Corporation 6.50% Cv. Pfd.
Ser. 2 ................. 296,011 405,000
---------- ----------
CONSUMER PRODUCTS - 0.56%
25,500 Kerr Group, Inc. Cl. B $1.70 Cv.
Pfd. Ser. D............. 464,875 506,813
---------- ----------
DIVERSIFIED INDUSTRIAL - 3.32%
20,000 GATX Corporation $3.875 Cv.
Pfd..................... 824,662 1,090,000
1,000 GATX Corporation $2.50 Cv.
Pfd. ................... 65,400 112,500
14,000 ITT Corporation $2.25 Cv.
Pfd. Ser. N............ 1,104,937 1,788,500
---------- ----------
1,994,999 2,991,000
---------- ----------
ENERGY - 0.28%
8,000 McDermott International, Inc.
Pfd. A.................. 233,875 253,000
---------- ----------
FOOD AND BEVERAGE - 0.48%
24,000 Flagstar Companies, Inc.
$2.25 Cv. Pfd. Ser. A. . 623,495 432,000
---------- ----------
INDUSTRIAL EQUIPMENT AND SUPPLIES - 3.68%
36,000 Navistar International
Corporation $6.00 Cv. Pfd.
Ser. G.................. 1,700,294 1,885,500
26,000 NYCOR, Inc. $1.70 Cv. Pfd. 355,850 338,000
17,000 Sequa Corporation
$5.00 Cv. Pfd. ......... 1,374,217 1,088,000
---------- ----------
3,430,361 3,311,500
---------- ----------
METALS AND MINING - 1.99%
11,500 Echo Bay Finance Corporation
$1.75 Cv. Pfd. Ser. A... 327,825 370,875
24,000 Freeport-McMoRan Copper &
Gold, Inc. 7.00% Cv. Pfd. 693,325 603,000
13,000 Magma Copper Company
5.625% Cv. Pfd. Ser. D.. 656,075 820,625
---------- ----------
1,677,225 1,794,500
---------- ----------
REAL ESTATE / DEVELOPMENT - 0.40%
7,500 Catellus Development Corporation
$3.75 Cv. Pfd. Ser. A... 424,438 359,063
---------- ----------
SPECIALTY CHEMICALS - 1.89%
6,200 Atlantic Richfield Company
$2.80 Cv. Pfd........... 1,654,248 1,698,800
---------- ----------
<PAGE>
TELECOMMUNICATIONS - 1.48%
10,000 BCE Inc. $0.65 Cv. Pfd.
Ser. O ................. 327,337 297,747
200 GTE Corporation 5.00%
Cv. Pfd. ............... 18,125 17,825
3,000 LCI International, Inc.
5.00% Cv. Pfd........... 75,000 102,000
1,400 Sprint Corporation $1.50
Cv. Pfd. Ser. 1......... 144,220 129,500
1,600 Sprint Corporation $1.50
Cv. Pfd. Ser. 2......... 136,905 124,000
20,000 Sprint Corporation 8.25%
Cv. Pfd................. 637,500 667,500
---------- ----------
1,339,087 1,338,572
---------- ----------
TOTAL CONVERTIBLE
PREFERRED STOCKS .........14,878,667 15,756,448
---------- ----------
COMMON STOCKS - 9.47%
BROADCASTING - 2.18%
65,217 Park Communications, Inc.+ 1,272,634 1,964,662
---------- ----------
COMPUTER SOFTWARE AND SERVICES - 0.00%
193 Wang Laboratories Inc.+... 0 2,500
---------- ----------
12
<PAGE>
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)-- MARCH 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
Principal
Amount Market
or Shares Cost Value
--------- ---- ------
ENERGY - 0.52%
4,000 Exxon Corporation.........$ 237,758 $ 267,000
3,000 Texaco Inc................ 183,213 199,500
---------- ----------
420,971 466,500
---------- ----------
HEALTH CARE - 1.65%
60,000 Marion Merrell Dow Inc.... 1,500,852 1,485,000
---------- ----------
INDUSTRIAL EQUIPMENT
AND SUPPLIES - 1.69%
3,500 Giddings & Lewis, Inc..... 38,155 59,508
10,000 Hughes Supply, Inc........ 174,890 203,780
50,000 Mark IV Industries Inc.... 718,500 1,025,000
5,000 Tenneco Inc............... 206,713 235,625
---------- ----------
1,138,258 1,523,913
---------- ----------
TRANSPORTATION - 2.93%
75,900 Chicago & North Western
Holdings Corporation+... 2,628,995 2,637,525
---------- ----------
WIRELESS COMMUNICATIONS - 0.50%
15,000 Century Telephone
Enterprises Inc......... 378,000 455,625
---------- ----------
TOTAL COMMON STOCKS ...... 7,339,710 8,535,725
---------- ----------
CORPORATE BONDS - 0.47%
WIRELESS COMMUNICATIONS - 0.47%
$600,000 COMCAST Cellular
Communications Inc. Ser. B
Redeemable Notes, Zero Cpn.,
03/05/00................ 393,958 426,000
---------- ----------
TOTAL CORPORATE BONDS .... 393,958 426,000
---------- ----------
U.S. GOVERNMENT OBLIGATIONS - 24.17%
$21,950,000 U.S. Treasury Bills, 5.36% to
5.65%, Due 04/06/95 to
8/24/95............... 21,782,000 21,772,140
----------- -----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS ............ 21,782,000 21,772,140
----------- -----------
TOTAL
INVESTMENTS - 100.21% ..$87,304,584 90,282,252
===========
Liabilities, in excess of Other
Assets - (0.21)% ....... (191,279)
-----------
NET ASSETS - 100.00%
(8,083,586 shares
outstanding) ....... $90,090,973
===========
Net Asset Value Per Share $11.14
======
- ----------------
+ -None-income producing security.
(a) -Principal amount denoted in French Francs.
(b) -Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31, 1995,
Rule 144A securities amounted to $1,991,050 or 2.2% of net assets.
(c) -Principal amount denoted in Italian Lira.
13
<PAGE>
AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Convertible Securities Fund, Inc. (the
"Fund") to automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Fund's Automatic Dividend Reinvestment
Plan (the "Plan"). The Plan authorizes the 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 Fund. 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 may contact State Street Bank and Trust
Company at 1 (800) 336-6983.
Shareholders wishing to liquidate reinvested shares held at State Street
Bank and Trust Company may do so in writing or by telephone. Please submit your
request to the above mentioned address. 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. The
Fund's Adviser, Gabelli Funds, has arranged (with its brokerage affiliate,
Gabelli & Company, Inc.) that for two years, shares may be sold through State
Street at market value without commission.
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 such institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institutions 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 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 dividend 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 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 preceding 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 Fund valued at
market price. If the Fund should declare a dividend or capital gains
distribution payable only in cash, State Street will buy Common Stock in the
14
<PAGE>
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 Fund to issue shares at net asset
value if, following the commencement of such purchases, the market value of the
Common Stock exceeds 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 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 Fund. In order to participate
in the Voluntary Cash Purchase Plan, shareholders must have their shares
registered in their own name and participate in the Dividend Reinvestment Plan.
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 Fund's shares at the then current market price. Shareholders may send an
amount from $250 to $3,000. State Street Bank and Trust Company will use these
funds to purchase shares in the open market on or about February 15 and August
15 of each year. 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 The Gabelli Convertible Securities Fund, c/o
State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200
approximately 10 days before February 15 or August 15. 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 Fund.
15
<PAGE>
OFFICERS AND DIRECTORS
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
One Corporate Center, Rye, NY 10580-1434
Directors
Mario J. Gabelli, CFA
President and Chief
Investment Officer
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, Chief
Executive Officer
The Lehigh Group, Inc.
Officers and Portfolio Managers
Mario J. Gabelli, CFA
President and Chief
Investment Officer
J. Hamilton Crawford, Jr.
Secretary
Bruce N. Alpert
Vice President and Treasurer
A. Hartswell Woodson, III
Associate Portfolio Manager
Investment Advisor
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434
Custodian, Transfer Agent and Registrar
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
Stock Exchange Listing
NYSE--Symbol: GCV
Shares Outstanding: 8,083,586
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "Convertible Securities Funds," in Saturday's The New York Times and
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 or, visit our internet
homepage at:
http://networth.gait.com/gabelli
- ----------------------------------------------
- --------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940, as amended, that the Fund may from
time to time purchase shares of its capital stock in the open market
when the Fund shares are trading at a discount of 10% or more from the
net asset value of the shares.
- -------------------------------------------------------------------------------
<PAGE>
-----------------
THE GABELLI CONVERTIBLE SECURITIES FUND, INC. FIRST CLASS MAIL
One Corporate Center U.S. POSTAGE
Rye, NY 10580-1434 PAID
(914) 921-5070 RYE, NY
PERMIT NO. 109
-----------------
First Quarter Report
March 31, 1995
03/95
