[LOGO]
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
FIRST QUARTER REPORT
MARCH 31, 1999
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[LOGO]
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.
INVESTMENT OBJECTIVE:
The Gabelli Convertible Securities Fund, Inc. is a closed-end, diversified
management investment company whose primary objective is to seek a high level of
total return through a combination of current income and capital appreciation by
investing in convertible securities.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
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TO OUR SHAREHOLDERS,
As hybrids, convertible securities prices are influenced by the performance
of underlying equities and the prevailing trend in corporate bond prices. In the
first quarter of 1999, large cap stocks continued to advance. Mid and small cap
stocks also gained, but still trailed the big cap market favorites. Corporate
bonds treaded water and the Merrill Lynch Corporate Bond Index finished the
quarter with only a modest gain.
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INVESTMENT PERFORMANCE
For the first quarter ended March 31, 1999, The Gabelli Convertible
Securities Fund, Inc.'s ("Convertible Securities Fund") net asset value (NAV)
per share increased 1.8% to $11.45, after adjusting for the $0.20 per share
distribution paid on March 29, 1999. This compares to an increase of 2.6% for
the Lipper Inc. Convertible Securities Fund Index over the same period. For the
twelve months ended March 31, 1999, the Fund increased 4.7% versus a decrease of
0.7% for the Lipper Inc. Convertible Securities Fund Index over this period.
The three- and five-year average annual returns of the Convertible
Securities Fund were 9.4% and 9.2%, respectively. Since inception on July 3,
1989 through March 31, 1999, the Convertible Securities Fund achieved a 152.5%
total return which represents an average annual return of 10.0%.
The Fund's common shares on the New York Stock Exchange ended the quarter
at $11.125, up 0.7% for the quarter, up 9.8% for the past twelve months and up
42.8% from its initial price of $11.25 on March 31, 1995 after adjusting for the
reinvestment of dividends totaling $3.965 per share which were paid during this
period.
Our Fund is managed with the 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 known for and we
anticipate will continue in the future. Of course, there are no guarantees.
Over the past few months the Fund's shares have traded at an average
discount of approximately 4% to the net asset value. At these price levels, the
Fund is an ideal opportunity for investors to add to their positions. Our
monthly cash purchase program provides an easy way for registered Shareholders
to acquire additional shares at the current market price at no commission. In
addition, to underscore that "we eat our own cooking", the Adviser and its
affiliates have announced their intention to buy up to one million common shares
in the open market (569,264 of which have been acquired to date). The Fund has
also instituted a share repurchase program which we discuss later in this
report.
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INVESTMENT RESULTS (a)(c)
Quarter
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1st 2nd 3rd 4th Year
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1999: Net Asset Value $11.45 __ __ __ __
Total Return 1.8% __ __ __ __
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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%
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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%
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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%
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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%
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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)%
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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%
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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%
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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%
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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%
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1989: Net Asset Value __ __ $10.54 $10.51 $10.51
Total Return __ __ 5.4%(b) 0.8% 6.3%(b)
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Average Annual Returns - March 31, 1999 (a)
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1 Year ....................... 4.7%
5 Year ....................... 9.2%
Life of Fund (b) ............. 10.0%
(a) Total return and average annual return reflect changes in net asset value
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.
Dividend History - Common Stock
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Payment Date Rate Per Share Reinvestment Price
- ------------ -------------- ------------------
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
December 27, 1996 $0.375 $ 9.51
September 23, 1996 $0.120 $ 9.73
June 24, 1996 $0.120 $10.17
March 25, 1996 $0.120 $10.41
December 27, 1995 $0.750 $10.95
September 27, 1995 $0.200 $11.10
June 27, 1995 $0.200 $11.21
December 31, 1994 $0.900 $10.60
December 31, 1993 $1.425 $11.52
December 31, 1992 $0.876 $11.45
December 31, 1991 $0.865 $10.91
December 31, 1990 $0.490 $10.47
June 28, 1990 $0.100 $10.68
March 29, 1990 $0.100 $10.55
December 29, 1989 $0.115 $10.51
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[LOGO]
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 9 years at The
Gabelli Convertible Securities Fund and for over 21 years at Gabelli Asset
Management Company. In past reports, we have tried to articulate our investment
philosophy and methodology. The following graphic further illustrates the
interplay among the four components of our valuation approach.
Our focus is on free cash flow; earnings before interest, taxes,
depreciation and amortization (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 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.
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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 values of both the conversion privilege and the convert
are down. Such securities will provide both high yields and long-term capital
appreciation potential.
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 principal in
weak markets by taking advantage of the unique characteristics of convertible
securities.
GOOD THINGS COME TO THOSE WHO WAIT
The critical element to our success in the equities 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 work-outs) when
appropriate. We bought 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 Convertible
Securities 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 the lower risk transactions.
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, some of our convertible
securities have been called by the issuer and we either received cash or stock.
Our portfolio turnover rate reflects this activity, as well as our investments
in "event" driven situations which 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.
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COMMENTARY
Meaningful commentary on the convertible securities market demands a review
of the macroeconomic forces impacting stocks and corporate bonds.
THE ECONOMY AND THE MARKET--A REVERSAL OF FORTUNES?
In 1998, the drivers of the market were declining interest rates and
continued liquidity as opposed to corporate earnings. For the year, S&P 500
earnings rose a modest 2.0% and if calculated on a non-weighted basis, earnings
were flat. However, the 30-year Treasury bond yield dropped nearly a full
percentage point from its March 1998 high, resulting in a significant expansion
of equities' price/earnings multiples and a 28.7% annual gain for the S&P 500.
We are faced with a mirror image situation today. We believe S&P earnings
can grow in the 8.0% to 10.0% range, a terrific showing compared to 1998. If
interest rates hold relatively steady near current levels, the S&P 500's current
lofty price/earnings multiple could be sustained and the market could advance in
line with earnings gains. The less optimistic picture would be rising inflation,
materially higher interest rates, rapidly contracting equity multiples and a
meaningful correction in the S&P 500. At this stage, we think either scenario is
plausible and will leave market forecasting to the Wall Street gurus.
AMERICAN CONSUMERS: WILL THE ENGINE OF GLOBAL ECONOMIC GROWTH CONTINUE
STEAMING ALONG?
In our September 30, 1998 report, we pondered the impact of our "Four M's"
(Market, McGwire, Monica and Meriwether) on the American consumer. Would the
American consumer stop spending because of global economic turmoil, accentuated
in the U.S. and global capital markets by John Meriwether (the head of ill-fated
Long Term Capital Management), and the domestic political crisis spawned by
President Clinton's relationship with Monica Lewinsky? Or, would the consumer be
buoyed by rising capital markets resulting from a strong domestic economy along
with the heroics of baseball slugger Mark McGwire and continue to help sustain
economic momentum here and overseas. We favored the latter conclusion. In
retrospect, the American consumer continued to be the engine driving global
economic growth.
Today, we still ask the same question. Will the American consumer continue
to carry the rest of the world, or will the consumer eventually run low on
confidence and/or the resources required to nourish the global economy? Put
another way, can the U.S. continue to run enormous balance of payment deficits
that provide hope and sustenance for the other economies of the world as they
attempt to emerge from their economic malaise?
We remain focused on values and individual investment opportunities. If one
looks exclusively at the S&P 500, which is trading at more than 30 times
trailing earnings, stocks would have to be characterized as richly valued. But
in reality, the S&P 500 is a narrow gauge of the market, with the largest 25
component stocks having an enormous influence on the performance of the index.
The same can be said about the Nasdaq Composite Index, which is driven by a
relative handful of large technology stocks. However, there are many cheap
stocks available, as reflected in the much more reasonable valuations of broader
market indices. It is anyone's guess as to when the investing public will stop
chasing the high priced market favorites and begin gravitating toward more
realistically priced stocks. Nonetheless, we note that corporate buyers are out
in force, searching for business bargains. As we have repeatedly stated over the
past several years, quality companies trading at low valuations--the type of
stocks we favor--should continue to attract corporate bargain hunters and
provide a tailwind for our portfolio.
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FLOW OF FUNDS ($ BILLIONS)
Sources 1993 1994 1995 1996 1997 1998
- ------- ---- ---- ---- ---- ---- ----
U.S. Deals $ 234 $ 340 $ 511 $ 652 $ 919 $1,620
Stock Buybacks 37 46 99 176 181 207
Equity Mutual Funds Net 130 119 128 222 232 159
Dividends 158 182 205 262 275 279
--- --- --- ----- ----- -----
Total Sources: 558 688 943 1,312 1,607 2,265
--- --- --- ----- ----- -----
Uses
- ----
IPOs 103 62 82 115 118 108
U.S./International
Equity Capital Flow
U.S. Purchases of
Non-U.S. Equities (net) 63 48 50 60 41 (25)
International Purchases
of U.S. Equities (net) 21 1 17 11 64 (22)
----- ------ ------ ------ ------ ------
Net Flow: 43 47 34 49 (23) (3)
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TOTAL USES: 146 109 116 164 95 105
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NET FLOW OF FUNDS: $ 413 $ 579 $ 827 $1,148 $1,513 $2,160
===== ====== ====== ====== ====== ======
SOURCES: SECURITIES DATA CORP, INVESTMENT COMPANY INSTITUTE,
BIRINYI ASSOCIATES.
(C) 1999 GABELLI ASSET MANAGEMENT INC.
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CORPORATE BONDS
Corporate bonds finished the quarter flat. Bonds may have been restrained
to a degree by assets moving back into stocks; however, the persistently strong
economy and some renewed inflationary concern played a bigger role in curbing
bond prices. As aforementioned, we doubt bond yields will decline significantly
from current levels and certainly not return to the lows experienced in the Fall
of 1998.
CONVERTIBLE SECURITIES
With little help likely to come in the form of declining interest rates,
convertible securities performance will be primarily dependent on the price
movement of underlying equities. Our value and smaller capitalization bias leads
us to small and mid-sized companies trading at discounted valuations. We believe
there is currently less risk and greater upside potential in these securities
than in large cap stocks or convertible securities of large cap companies. We
believe the portfolio will continue to enjoy a tailwind from accelerating merger
and acquisition activity targeted at smaller, much more reasonably priced
companies.
CORPORATE GOVERNANCE
The Gabelli Convertible Securities Fund continues to consider actions that
may reduce or eliminate the market discount of its shares. How do we accomplish
this? There are several factors that historically have worked to narrow the
discounts of closed-end funds. These include distribution policies and stock
repurchase programs, both of which we have instituted.
DISTRIBUTION POLICY - Q & A
Q: WHAT IS A DISTRIBUTION POLICY?
A fund with a distribution policy is a fund which establishes a fixed
payment each year to its shareholders as a percentage of net assets or a
specific dollar amount. For example, a fund with a 10% distribution policy will
pay out 10% of its average net assets every year, either on an annual,
semi-annual or quarterly basis.
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Q: WHAT IS THE BENEFIT OF A DISTRIBUTION POLICY?
Investors usually favor funds that offer a constant stream of cash, or a
predictable yield. Thus, there is more demand for funds with a distribution
policy and historically they trade at a more narrow discount than funds without
a distribution policy.
Q: WHY DID THE CONVERTIBLE SECURITIES FUND INSTITUTE AN 8% ANNUAL
DISTRIBUTION POLICY? WHAT ARE THE "MECHANICS?"
In order to accelerate our effort to drive the current discount to a
premium, the Convertible Securities Fund, at a meeting of the Board of Directors
on May 13, 1998, instituted an 8% annual distribution policy. This distribution
policy is similar in structure to the Gabelli Equity Trust, which has employed a
10% annual distribution policy since August of 1988.
To illustrate, the Gabelli Equity Trust currently pays out 10% of its
average net asset value per share. The Fund's normal policy is to make quarterly
distributions of $0.27 per share at the end of each of the first three calendar
quarters of each year. The Fund's distribution in December for each calendar
year is an adjusting distribution. The amount is equal to the greater of 10% of
the average of the net asset value per share of the Fund as of the last day of
the four preceding calendar quarters or the minimum distribution requirements of
the Internal Revenue Code.
In the case of the Gabelli Convertible Securities Fund, the Fund will pay
out a minimum annual distribution of 8% of the net asset value. The method is to
pay $0.20 per share in each of the first three quarters of the year and a
distribution in the fourth quarter of a sufficient amount to pay 8% of the
average net assets of the Fund or to satisfy the minimum distribution
requirements of the Internal Revenue Code. The Fund recently distributed $0.20
per share on March 29, 1999 in line with this 8% annual distribution policy.
STOCK REPURCHASE PLAN - Q & A
Q: WHAT IS A STOCK REPURCHASE PLAN?
A stock repurchase plan allows a company to buy back its own shares in the
open market (in our case, the New York Stock Exchange). This reduces the total
number of shares outstanding and increases the earnings per share.
Q: WHEN DID THE CONVERTIBLE SECURITIES FUND IMPLEMENT A STOCK REPURCHASE PLAN?
At a special meeting of the Board of Directors on October 27, 1997, the
Board authorized the repurchase of up to 250,000 shares of the Convertible
Securities Fund's outstanding shares. We were the first company on the New York
Stock Exchange to announce a stock repurchase program on this date when the
market declined 554.26 points, or 7.2%.
The Convertible Securities 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, 1999, 171,400 shares were repurchased in the open market since the inception
of this stock repurchase plan. Since the discount to net asset value has
narrowed and remained under 10% during the first quarter, the Fund has been
unable to purchase additional shares. In fact, the discount to net asset value
was under 10% throughout most of the last year.
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Q: WHAT IS THE BENEFIT OF A STOCK REPURCHASE PLAN?
When the Convertible Securities Fund purchases its own shares at a discount
to NAV, the Fund realizes a benefit equal to the difference between the net
asset value and the purchase price. This benefit is credited to the net assets
of the remaining shares, thus boosting the NAV. The larger the discount, the
greater the benefit on the NAV. Further, the market price is determined by
supply and demand factors. If there are more sellers than buyers the price will
decline until buyers enter the market to establish a sales price. A stock
repurchase program increases demand for the Convertible Securities Fund's shares
in the open market. This provides a willing buyer of fund shares which offsets,
at least in part, sales of fund shares.
PREFERRED STOCK - AN INVESTMENT FOR THE FUTURE
On May 16, 1997, the Fund successfully completed its offering of cumulative
preferred stock which is rated `AAA' by Standard and Poor's. The Fund issued
1,200,000 Preferred Shares at $25 per share ($30 million) with an annual
dividend rate of $2.00 per share paying quarterly. The Preferred Shares are
trading on the New York Stock Exchange under the symbol "GCV Pr" and closed at
$25.75 on March 31, 1999.
How would Preferred Shares benefit Common Shareholders? Through March 31,
1999, the Convertible Securities Fund has earned a 10.0% average annual return.
The Preferred Shares were issued with an annual dividend rate of 8.00%. The only
obligation that the Fund has to the Preferred Shareholders is to pay the stated
dividend rate. Given the current market environment, we considered this to be an
ideal opportunity to take advantage of relatively low long-term interest rates
and to earn an excess return for our Common Shareholders consistent with our
conservative investment approach. Any return earned in excess of the stated
dividend rate, which is less than the Fund's average annual return, would
directly benefit Common Shareholders; however, any shortfall from the stated
rate would impact the Common Shareholders in the opposite fashion. Therefore, by
taking advantage of the current relatively low interest rate environment and
achieving our investment objectives, the Preferred Share issuance offers what we
believe is a conservative method of potentially adding wealth for our Common
Shareholders.
Furthermore, Common Shareholders stand to receive certain tax benefits as a
result of the Preferred Stock offering. Since taxable income is allocated to the
Preferred Shareholders before Common Shareholders, taxable distributions to
Common Shareholders are not required to the extent they would be if the
Preferred Shares were not outstanding. With the completion of the preferred
offering, the Adviser has agreed to waive the management fee on the incremental
assets during any year in which the net asset value total return on the Fund
does not exceed the stated dividend rate on the Preferred Shares.
LET'S TALK CONVERTS
The following are specifics on selected holdings of our Fund. Favorable
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
prospects do not necessarily translate into higher prices, but they do express a
positive trend which we believe will develop over time.
AIRTOUCH COMMUNICATIONS INC. (ATI) (6.00% CV. PFD., CL. B; 4.25% CV. PFD., CL.
C) based in San Francisco, is the world's largest wireless communications
provider. With more than 35 million total venture customers in 13 countries,
AirTouch and its partners serve more than ten percent of the world's wireless
subscribers. AirTouch will offer satellite communications in the future through
its interest in the Globalstar satellite system. In April 1998, the company
acquired MediaOne Group's (formerly US West Media Group) U.S. wireless interests
in a deal valued at almost $6 billion. On January 15, 1999, Britain's largest
cellular company, Vodafone Group plc (VOD - $187.75 - NYSE), signed a definitive
merger agreement with ATI whereby Vodafone would acquire ATI for $97 per ATI
share. Vodafone successfully topped Bell Atlantic's (BEL - $51.6875 - NYSE) $45
billion bid for AirTouch.
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AMERICAN BANKERS INSURANCE GROUP INC. (ABI) ($3.125 CV. PFD., SER. B), based in
Miami, is a leading provider of credit insurance and credit-related insurance
products both in the U.S. and abroad. Founded in 1949, ABI has $3.3 billion in
assets. ABI's emphasis is on contingent commission and captive reinsurance
plans, which preserves the company's margins, mitigates volatility and ensures
highly visible earnings. Because of such plans, ABI is not so much an insurer
but a distribution company servicing an insurance product. Since the termination
of its agreement to be acquired by Cendant Corp., ABI has focused on closing new
business in its pipeline. As such, top line growth is expected to improve in the
near future and return to a more normal 10% to 12% growth rate in 1999.
ATLANTIC RICHFIELD CO. (ARCO) ($2.80 CV. PFD.) is the leading gasoline marketer
on the U.S. west coast, with 1,760 retail sites spread across California,
Arizona, Nevada, Oregon and Washington. Two refineries are operated in the
region. ARCO has proven oil reserves of 2.8 billion barrels, mainly in Alaska.
The company's proven gas reserves total 9.8 trillion cubic feet, but gas
reserves of a further 15 trillion cubic feet, mainly in Southeast Asia, are
unbooked. BP Amoco (BPA - $100.9375 - NYSE) has reached an agreement to combine
with ARCO in an all-share transaction valuing ARCO at almost $27 billion. The
deal will give BP Amoco the largest oil output of any non-state company.
CITIZENS UTILITIES CO. (5.00% CV. PFD.) provides telecommunications services and
public services to approximately 1.8 million customers in 21 states. Citizens
owns 83% of Electric Lightwave (ELIX - $9.125 - Nasdaq), a CLEC serving
primarily the western U.S. A year ago, management authorized the separation of
Citizen's telecommunications businesses and public services businesses into two
stand-alone, publicly traded companies. Upon separation, which is expected to
occur in the fall, the new company's telecommunications business will include
Citizen's stake in Electric Lightwave, as well as incumbent local exchange
carrier operations with nearly one million access lines. The company's public
services businesses, consisting of natural gas distribution, electric
distribution, water distribution and wastewater treatment facilities in 10
states, will continue to trade as Citizens Utilities. The company sold its 16%
stake in Centennial Cellular Corp. for approximately $205 million. Citizens also
anticipates monetizing its ownership of Century Communications' (CTYA - $46.4375
- - Nasdaq) stock and cable operations through a sale to Adelphia Communications
for approximately $220 million.
HILTON HOTELS CORP. (SUB. DEB. CV., 5.00%, 05/15/06) is a major lodging company
engaged in the ownership, management and franchising of 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 250 hotels and
resorts in cities throughout the United States, including 65 owned and managed
hotels and 185 hotels under franchise agreements. Hilton's hotels include the
Waldorf-Astoria (New York) (owned), the Beverly Hilton (Los Angeles)
(franchise), the Chicago Hilton (franchise) and a 50% interest in Hilton
Hawaiian Village. Hilton's international hotel business is operated under the
Conrad name. (Hotels bearing the "Hilton" name outside the U.S. are properties
of the British company Ladbroke Group plc). Hilton's gaming properties were
spun-off into a new company, Park Place Entertainment (PPE - $7.5625 - NYSE).
MEDIAONE GROUP INC. (UMG) (4.50% CV. PFD., SER. D) is one of the nation's
leading broadband services companies. UMG provides more than five million
subscribers in 17 states with basic and premium cable television services and
has recently introduced high speed Internet access, telephone services and
digital television in some of its service areas. MediaOne was created from the
1996 union of telecommunications company MediaOne Group (formerly US
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West Media Group) and Continental Cablevision. Headquartered in Englewood,
Colorado, MediaOne provides high quality cable television services. The company
is conducting a national upgrade of its hybrid fiber optic/coaxial cable ("HFC")
network to broadband technology which improves traditional cable service and
enables next-generation products and services. The Group's investment interests
include 25% of Time Warner Entertainment (which includes Warner Brothers Studio
and Home Box Office), 24% of PCS Prime Co. and almost 27% of TeleWest plc. The
number three U.S. cable television company recently agreed to be acquired by
AT&T Corp. (T - $79.8125 - NYSE) for $56 billion.
SPRINT CORP. (FON) ($1.50 CV. PFD., SER. 1; $1.50 CV. PFD., SER. 2; 8.25%, CV.
PFD.) is the third largest long distance carrier and the second largest
independent local telephone company in the U.S. Sprint has positioned itself
globally through a joint venture called GlobalOne. Its joint venture partners,
France Telecom and Deutsche Telekom, also have a direct 20% stake in Sprint. FON
faces risks from prospective new entrants in its long distance business which
may be offset by the "ION" high bandwith network the company is developing and
by other new services.
WHX CORP. (WHX) (6.50% CV. PFD., SER. A; $3.75 CV. PFD., SER. B) is a holding
company for wholly-owned subsidiary Wheeling-Pittsburgh Steel, America's ninth
largest integrated steel producer. Wheeling-Pittsburgh develops, processes and
fabricates steel (hot/cold rolled sheets and coated products) and steel products
(roof deck, form deck, culvert, steel framing and related products). In 1998,
WHX completed its acquisition of Handy & Harman, a diversified industrial
manufacturing company, for a total consideration of $604 million including
assumption of $186 million in debt.
DIVIDENDS
The Fund recently distributed a dividend of $0.20 per share to Common
Shareholders on March 29, 1999 in line with the Fund's 8% annual distribution
policy. For the twelve months ended March 31, 1999, the Fund distributed a total
of $0.92 per share to Common Shareholders. Our Preferred Shareholders were paid
a dividend of $0.50 per share on March 29, 1999. For the twelve months ended
March 31, 1999, the Preferred Shareholders received a total distribution of
$2.00 per share, which is the annual dividend rate on the Preferred Shares.
DAILY NAVS NOW DISTRIBUTED BY NASDAQ
Since our inception, we have made the net asset value available on nightly
recordings through 1-800-GABELLI. Now, Nasdaq is also disseminating the daily
per share net asset values (NAVs) for the Gabelli Convertible Securities Fund,
which is traded on the New York Stock Exchange. The NAV ticker symbol via Nasdaq
is "XGCVX."
The NAVs are available through any stock quote lookup service and on broker
Nasdaq level one terminals. The dissemination of daily NAVs allows investors and
brokers to better track the long-term performance of the Fund's underlying
portfolio. We support Nasdaq's efforts in making closed-end funds' NAVs
available on a daily basis.
NO COMMISSION PURCHASES
When the Convertible Securities Fund converted to closed-end status on
March 31, 1995, we offered shareholders the opportunity to sell their shares at
no commission for up to two years. On March 31, 1997, this ability to sell your
convertible shares at no commission expired. However, we have extended for
another year, through December 31, 1999, our offer to shareholders to buy shares
through our Voluntary Cash Purchase Plan at no commission. This Plan is
available every month. Please see the details of this Plan at the end of this
report.
10
<PAGE>
INTERNET
You can now visit us on the Internet. Our home page 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 [email protected].
IN CONCLUSION
This quarter, convertible securities benefited more from rising stock
prices than declining interest rates. We believe this will continue with returns
closely aligned with underlying equities performance. Put in other words, if our
stocks do well, our convertible holdings will as well. Should stocks correct, we
believe convertibles' yield component will provide meaningful protection.
Sincerely,
/s/ Mario J. Gabelli
--------------------
Mario J. Gabelli
President and
Chief Investment Officer
April 30, 1999
- --------------------------------------------------------------------------------
Top Ten Convertible Holdings
March 31, 1999
--------------
Sprint ($1.50 Cv. Pfd., Ser. 1; $1.50 Cv. Pfd., Ser. 2; 8.25% Cv. Pfd.)
AirTouch Communications (6.00% Cv. Pfd., Cl. B; 4.25% Cv. Pfd., Cl. C)
American Bankers Insurance ($3.125 Cv. Pfd., Ser. B)
WHX Corp. (6.50% Cv. Pfd., Ser. A; $3.75 Cv. Pfd., Ser. B)
Hilton Hotels Corp. (Sub. Deb. Cv., 5.00%, 05/15/06)
Citizens Utilities (5.00% Cv. Pfd.)
Fieldcrest Cannon Inc. (Sub. Deb. Cv., 6.00%, 03/15/12)
MediaOne Group (4.50% Cv. Pfd., Ser. D)
Cendant Corp. (1.30% Cv. Pfd., 7.50% Cv. Pfd.)
Sequa Corp. ($5.00 Cv. Pfd.)
- --------------------------------------------------------------------------------
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.
11
<PAGE>
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS -- MARCH 31, 1999 (UNAUDITED)
================================================================================
PRINCIPAL MARKET
AMOUNT VALUE
-------- -------
CONVERTIBLE CORPORATE BONDS -- 17.88%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.25%
$ 550,000 Exide Corp. Sub. Deb. Cv.
2.90%, 12/15/05................$ 297,000
-----------
AVIATION: PARTS AND SERVICES -- 0.90%
1,104,000 Kaman Corp. Sub. Deb. Cv.
6.00%, 03/15/12................ 1,080,540
-----------
BUSINESS SERVICES -- 0.72%
900,000 BBN Corp. Sub. Deb. Cv.
6.00%, 04/01/12 (a)............ 870,021
-----------
CABLE -- 1.02%
Rogers Communications Inc.
Sub. Deb. Cv.
500,000 2.00%, 11/26/05................ 361,875
1,000,000 7.50%, 09/01/99................ 869,254
-----------
1,231,129
-----------
COMPUTER SOFTWARE AND SERVICES -- 0.04%
50,000 Platinum Technology International Inc.
Sub. Deb. Cv.
6.25%, 12/15/02............... 47,750
-----------
CONSUMER PRODUCTS -- 2.39%
3,500,000 Fieldcrest Cannon Inc.
Sub. Deb. Cv.
6.00%, 03/15/12............... 2,441,249
750,000 Standard Commercial Corp.
Sub. Deb. Cv.
7.25%, 03/31/07................ 438,750
-----------
2,879,999
-----------
CONSUMER SERVICES -- 0.08%
100,000 Ogden Corp. Sub. Deb. Cv.
6.00%, 06/01/02................ 96,000
-----------
ELECTRONIC EQUIPMENT -- 1.04%
ASM Lithography Holding Cv.
40,000 2.50%, 04/09/05.............. 18,910
10,000 2.50%, 04/09/05 (b).......... 4,727
1,250,000 Trans-Lux Corp. Sub. Deb. Cv.
7.50%, 12/01/06................ 1,226,563
-----------
1,250,200
-----------
ENERGY AND UTILITIES -- 0.95%
100,000 Halter Marine Group Inc.
Sub. Deb. Cv.
4.50%, 09/15/04.............. 53,500
1,100,000 Moran Energy Inc.
Sub. Deb. Cv.
8.75%, 01/15/08................ $ 995,806
100,000 Texaco Capital Inc. Cv.
3.50%, 08/05/04.............. 101,130
-----------
1,150,436
-----------
ENTERTAINMENT -- 1.10% 200,000
Kushner-Locke Co.
Sub. Deb. Cv.
8.00%, 12/15/00 (a)............ 529,914
800,000 Savoy Pictures Entertainment Inc.
Sub. Deb. Cv.
7.00%, 07/01/03................ 793,000
-----------
1,322,914
-----------
EQUIPMENT AND SUPPLIES -- 2.23%
1,285,000 Intermagnetics General Corp.
Sub. Deb. Cv.
5.75%, 09/15/03 (b)............ 1,047,275
1,136,000 Kollmorgen Corp.
Sub. Deb. Cv.
8.75%, 05/01/09................ 1,160,140
200,000 Mark IV Industries
Sub. Deb. Cv.
4.75%, 11/01/04.............. 164,000
210,000 Robbins & Myers Inc.
Sub. Deb. Cv.
6.50%, 09/01/03................ 185,850
150,000 Thermo Electron Corp.
Sub. Deb. Cv.
4.25%, 01/01/03 (b).......... 134,063
-----------
2,691,328
-----------
FOOD AND BEVERAGE -- 1.60%
110,000 Boston Chicken Inc.
Sub. Deb. Cv.
7.75%, 05/01/04+............... 5,500
100,000 Chiquita Brands
International Inc. Cv.
7.00%, 03/28/01................ 92,000
Chock Full o' Nuts Corp.
Sub. Deb. Cv.
1,000,000 7.00%, 04/01/12 973,750
865,000 8.00%, 09/15/06................ 860,675
-----------
1,931,925
-----------
HEALTH CARE -- 0.59%
750,000 Ivax Corp. Deb. Cv.
6.50%, 11/15/01................ 707,813
-----------
12
<PAGE>
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 1999 (UNAUDITED)
================================================================================
PRINCIPAL MARKET
AMOUNT VALUE
-------- -------
CONVERTIBLE CORPORATE BONDS (CONTINUED)
HOTELS AND GAMING -- 2.25%
$ 2,900,000 Hilton Hotels Corp.
Sub. Deb. Cv.
5.00%, 05/15/06................ $ 2,718,750
-----------
METALS AND MINING -- 0.25%
500,000 Coeur d'Alene Mines Corp.
Sub. Deb. Cv.
6.00%, 06/10/02................ 300,000
-----------
PAPER AND FOREST PRODUCTS -- 0.29%
200,000 Riverwood International Corp.
Sub. Deb. Cv.
6.75%, 09/15/03................ 230,800
150,000 Thermo Fibertek Inc. Cv.
4.50%, 07/15/04 (b).......... 123,938
-----------
354,738
-----------
PUBLISHING -- 0.79%
700,000 News America Holdings Inc.
Sub. Deb. Cv.
Zero Cpn., 03/31/02............ 868,000
50,000(c) United News & Media plc
Sub. Deb. Cv.
6.125%, 12/03/03............... 85,558
-----------
953,558
-----------
REAL ESTATE AND DEVELOPMENT -- 0.08%
125,000 Rockefeller Center Properties Inc.
Sub. Deb. Cv.
Zero Cpn., 12/31/00............ 97,031
-----------
RETAIL -- 0.84%
60,000 Costco Companies Inc.
Sub. Deb. Cv.
Zero Cpn., 08/19/17............ 64,500
100,000 JumboSports Inc.
Sub. Deb. Cv.
4.25%, 11/01/00+............... 5,500
1,000,000 Nine West Group Inc.
Sub. Deb. Cv.
5.50%, 07/15/03................ 947,500
-----------
1,017,500
-----------
TELECOMMUNICATIONS -- 0.08%
Amnex Inc. Sub. Deb. Cv.
30,000 8.50%, 09/25/02.............. 9,600
50,000 8.50%, 09/25/02 (b).......... 16,000
50,000 Telefonica Europe BV
Sub. Deb. Cv.
2.00%, 07/15/02.............. $ 72,750
-----------
98,350
-----------
TRANSPORTATION -- 0.39%
440,000 Greyhound Lines Inc.
Sub. Deb. Cv.
8.50%, 03/31/07................ 451,000
140,000 WorldCorp Inc.
Sub. Deb. Cv.
7.00%, 05/15/04+............... 21,525
-----------
472,525
-----------
TOTAL CONVERTIBLE
CORPORATE BONDS ................ 21,569,507
-----------
SHARES
------
CONVERTIBLE PREFERRED STOCKS -- 31.19%
AVIATION: PARTS AND SERVICES -- 1.52%
Coltec Capital Trust
25,000 5.25% Cv. Pfd............... 1,093,750
17,000 5.25% Cv. Pfd. (b).......... 743,750
-----------
1,837,500
-----------
BROADCASTING -- 0.25%
9,200 Granite Broadcasting Corp.
$1.938 Cv. Pfd................ 304,750
-----------
CABLE -- 2.66% 3,500 CSC Holdings Inc.
8.50% Cv. Pfd. Ser. 1......... 390,250
18,000 MediaOne Group
4.50% Cv. Pfd. Ser. D......... 2,314,125
1,500 TCI Pacific Communications Inc.
5.00% Cv. Pfd................. 504,000
-----------
3,208,375
-----------
CONSUMER SERVICES -- 1.88%
Cendant Corp.
90,000 1.30% Cv. Pfd................ 2,064,374
5,000 7.50% Cv. Pfd................ 144,063
18,000 Loewen Group Inc.
6.00% Cv. Pfd. Ser. C.......... 57,113
-----------
2,265,550
-----------
DIVERSIFIED INDUSTRIAL -- 0.19%
1,400 GATX Corp.
$2.50 Cv. Pfd.................. 233,800
-----------
13
<PAGE>
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 1999 (UNAUDITED)
================================================================================
MARKET
SHARES VALUE
-------- -------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
ENERGY AND UTILITIES -- 1.71%
6,000 Atlantic Richfield Co.
$2.80 Cv. Pfd.................. $ 2,064,000
-----------
ENTERTAINMENT -- 0.10%
4,500 Metromedia International Group Inc.
7.25% Cv. Pfd.................. 120,375
-----------
EQUIPMENT AND SUPPLIES -- 1.91% 2,000
Case Corp.
$4.50 Cv. Pfd. Ser. A.......... 120,500
25,000 Sequa Corp.
$5.00 Cv. Pfd.................. 2,187,500
-----------
2,308,000
-----------
FINANCIAL SERVICES -- 3.04%
34,500 American Bankers Insurance
$3.125 Cv. Pfd. Ser. B......... 3,639,750
1,000 Merrill Lynch & Co.
6.25% Cv. Pfd................ 22,500
-----------
3,662,250
-----------
HOTELS AND GAMING -- 0.12%
3,000 Station Casinos Inc.
7.00% Cv. Pfd.................. 145,500
-----------
IRON/STEEL -- 2.67% WHX Corp.
46,000 $3.75 Cv. Pfd. Ser. B.......... 1,656,000
45,000 6.50% Cv. Pfd. Ser. A ......... 1,560,938
-----------
3,216,938
-----------
PAPER AND FOREST PRODUCTS -- 1.64%
40,000 Sealed Air Corp.
$2.00 Cv. Pfd. Ser. A.......... 1,980,000
-----------
PUBLISHING -- 0.37%
15,000 Reader's Digest
$1.9336 Cv. Pfd................ 451,875
-----------
RETAIL -- 0.20% 2,500 CVS Corp.
6.00% Cv. Pfd.................. 213,750
2,000 Republic Industries Inc.
6.50% Cv. Pfd................ 29,000
-----------
242,750
-----------
SPECIALTY CHEMICALS -- 0.08%
2,000 Monsanto Co.
6.50% Cv. Pfd.................. 93,000
-----------
TELECOMMUNICATIONS -- 8.56%
65,000 Citizens Utilities Co.
5.00% Cv. Pfd.................. 2,616,250
8,000 Philippine Long Distance
$3.50 Cv. Pfd. Ser. III........ $ 380,000
Sprint Corp.
3,000 $1.50 Cv. Pfd. Ser. 1.......... 1,095,000
2,200 $1.50 Cv. Pfd. Ser. 2 ......... 825,000
74,000 8.25% Cv. Pfd................. 5,401,999
-----------
10,318,249
-----------
WIRELESS COMMUNICATIONS -- 4.29%
AirTouch Communications Inc.
12,000 4.25% Cv. Pfd. Cl. C......... 1,614,000
42,000 6.00% Cv. Pfd. Cl. B ........ 3,307,500
8,000 Omnipoint Corp.
7.00% Cv. Pfd................ 259,000
-----------
5,180,500
-----------
TOTAL CONVERTIBLE
PREFERRED STOCKS ................ 37,633,412
-----------
COMMON STOCKS -- 19.91%
AUTOMOTIVE: PARTS AND ACCESSORIES-- 1.17%
396 Borg-Warner Automotive Inc....... 18,934
30,000 LucasVarity plc, ADR............. 1,387,500
-----------
1,406,434
-----------
AVIATION: PARTS AND SERVICES -- 0.19%
18,000 Kaman Corp....................... 230,625
-----------
BUILDING AND CONSTRUCTION -- 0.02%
17 Holderbank Financiere Glarus AG.. 19,008
-----------
DIVERSIFIED INDUSTRIAL -- 0.41%
15,000 GATX Corp........................ 494,063
-----------
ENERGY AND UTILITIES -- 4.44%
10,000 AGL Resources Inc................ 175,625
9,000 Central Hudson Gas and
Electric Corp. 322,313
16,500 Cilcorp Inc...................... 991,031
8,000 Commonwealth Energy System....... 308,000
4,000 New England Electric System...... 194,000
30,000 Orange & Rockland Utilities...... 1,723,125
60,000 Southwest Gas Corp............... 1,650,000
-----------
5,364,094
-----------
EQUIPMENT AND SUPPLIES -- 3.71%
30,000 Aeroquip-Vickers Inc............. 1,719,375
50,000 Fedders Corp. Cl. A.............. 231,250
20,000 Reltec Corp.+.................... 588,750
20,000 U.S. Filter Corp.+............... 612,500
36,000 Xylan Corp.+..................... 1,325,250
-----------
4,477,125
-----------
14
<PAGE>
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 1999 (UNAUDITED)
================================================================================
MARKET
SHARES VALUE
-------- -------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES -- 5.43%
38,000 American Bankers Insurance Group. $ 1,976,000
20,000 Argonaut Group Inc............... 513,750
200,000 BA Merchant Services Inc.+....... 4,074,999
-----------
6,564,749
-----------
HEALTH CARE -- 1.10%
15,000 Genentech Inc.+.................. 1,329,375
-----------
RETAIL -- 0.30%
40,000 Food Lion Inc. Cl. A............. 368,125
-----------
SATELLITE -- 0.09%
6,000 U.S. Satellite Broadcasting Co.+. 102,750
-----------
SPECIALTY CHEMICALS -- 3.05%
100,000 Morton International Inc......... 3,675,000
-----------
TOTAL COMMON STOCKS ............. 24,031,348
-----------
PREFERRED STOCKS -- 0.02%
CABLE -- 0.02%
1,000 MediaOne Financing Trust II Pfd.. 26,188
-----------
PRINCIPAL
AMOUNT
--------
CORPORATE BONDS -- 0.08%
ENTERTAINMENT-- 0.08%
$ 100,000 Viacom Inc.
8.00%, 07/07/06............. 102,500
-----------
U.S. GOVERNMENT OBLIGATIONS -- 33.46%
40,466,000 U.S. Treasury Bills, 4.26%
to 4.78% ++,
due 04/01/99 to 06/17/99....... 40,369,313
-----------
TOTAL INVESTMENTS -- 102.54%
(Cost $113,567,176)....................... 123,732,268
-----------
OTHER ASSETS, LIABILITIES AND
LIQUIDATION VALUE
OF CUMULATIVE PREFERRED STOCK -- (27.40)% . (33,069,739)
-----------
NET ASSETS -- COMMON STOCK -- 75.14%
(7,921,545 common shares outstanding)....... 90,662,529
-----------
NET ASSETS - CUMULATIVE PREFERRED
STOCK -- 24.86%
(1,200,000 preferred shares outstanding).... 30,000,000
-----------
TOTAL NET ASSETS -- 100.00% ................ .$120,662,529
============
NET ASSET VALUE PER COMMON SHARE
($90,662,529 / 7,921,545 shares outstanding). $11.45
======
MARKET
SHARES VALUE
-------- -------
SHORT POSITIONS
COMMON STOCKS
12,000 Airtouch Communications Inc......$ 1,159,500
4,188 Kushner-Locke Co................. 64,914
--------------
$ 1,224,414
==============
NET
PRINCIPAL SETTLEMENT UNREALIZED
AMOUNT DATE APPRECIATION
-------- -------- -----------
FORWARD FOREIGN CURRENCY EXCHANGE
864,000 (c) Sell British Pounds
in exchange for
USD 1,395,740....... 04/15/99 $2,329
- ----------------
(a) Security fair valued as determined 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, 1999, Rule 144A securities amounted to $2,069,753 or 1.72% of net
assets.
(c) Principal amount denoted in British Pounds. + Non-income producing security.
++ Yields represent the effective yield to maturity on the date of purchase.
USD - U.S. Dollars.
ADR - American Depositary Receipt.
15
<PAGE>
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 15th of each month. Beginning June 1, 1999, purchases will be made 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. However, the
Fund's Adviser, Gabelli Funds, LLC, has arranged that these purchases will be
executed at no commission through December 31, 1999. 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 15th of the month. Funds not received at least
five days before the investment date shall be held for investment in the
following month. 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.
16
<PAGE>
DIRECTORS AND OFFICERS
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
One Corporate Center, Rye, NY 10580-1434
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN
E. Val Cerutti
CHIEF EXECUTIVE OFFICER
CERUTTI CONSULTANTS, INC.
Felix J. Christiana
FORMER SENIOR VICE PRESIDENT
DOLLAR DRY DOCK SAVINGS BANK
Anthony J. Colavita, P.C.
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
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Stock Exchange Listing
Common 8.00% Preferred
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NYSE-Symbol: GCV GCV Pr
Shares Outstanding: 7,921,545 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.
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For general information about the Gabelli Funds, call 1-800-GABELLI
(1-800-422-3554), fax us at 914-921-5118, visit our Internet homepage at:
http://www.gabelli.com, or e-mail us at: [email protected]
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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 capital 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
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<PAGE>
FIRST QUARTER REPORT
MARCH 31, 1999
FIRST QUARTER REPORT
MARCH 31, 1999
GCV 03/99
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ONE CORPORATE CENTER
RYE, NY 10580-1434
(914) 921-5070
http://www.gabelli.com
