UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-05715
The Gabelli Convertible and Income Securities Fund Inc.
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-422-3554
Date of fiscal year end: December 31
Date of reporting period: September 30, 2008
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
(THE GABELLI LOGO)
CONVERTIBLE AND
INCOME SECURITIES
FUND INC.
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
Third Quarter Report
September 30, 2008
TO OUR SHAREHOLDERS,
During the third quarter of 2008, The Gabelli Convertible and Income
Securities Fund's (the "Fund") total return fell 6.54% on a net asset value
("NAV") basis while the Standard & Poor's ("S&P") 500 Index, the Lehman Brothers
Government/ Corporate Bond Index, and the Lipper Convertible Securities Fund
Average fell 8.36%, 1.64%, and 14.62%, respectively. The Fund's market price on
September 30, 2008 was $5.80, which equated to an 8.66% discount to its NAV of
$6.35 at the end of the quarter. The Fund's market price, adjusted for
distributions, was down 16.48% during the third quarter of 2008.
Enclosed is the investment portfolio as of September 30, 2008.
COMPARATIVE RESULTS
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2008 (a)
Since
Inception
Quarter 1 Year 3 Year 5 Year 10 Year 15 Year (07/03/89)
------- ------ ------ ------ ------- ------- ----------
GABELLI CONVERTIBLE AND INCOME SECURITIES FUND
NAV TOTAL RETURN (b) .......................... (6.54)% (14.15)% 1.63% 3.42% 4.36% 5.30% 6.67%
INVESTMENT TOTAL RETURN (c) ................... (16.48) (25.17) (6.17) (1.36) 3.90 N/A(d) 4.58(d)
S&P 500 Index .................................... (8.36) (21.96) 0.22 5.17 3.06 8.39 9.30(e)
Lehman Brothers Government/Corporate Bond Index .. (1.64) 2.41 3.60 3.34 5.00 5.73 6.94(e)
Lipper Convertible Securities Fund Average ....... (14.62) (20.43) (0.96) 3.45 5.30 6.65 8.16(e)
(a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE.
WHEN SHARES ARE SOLD, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA
PRESENTED. VISIT www.gabelli.com FOR PERFORMANCE INFORMATION AS OF THE MOST
RECENT MONTH END. PERFORMANCE RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED. INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT
OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND BEFORE INVESTING. THE
S&P 500 INDEX IS AN UNMANAGED INDICATOR OF STOCK MARKET PERFORMANCE. THE
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX IS AN UNMANAGED MARKET
VALUE WEIGHTED INDEX THAT TRACKS THE TOTAL RETURN PERFORMANCE OF FIXED
RATE, PUBLICLY PLACED, DOLLAR DENOMINATED OBLIGATIONS. THE LIPPER
CONVERTIBLE SECURITIES FUND AVERAGE REFLECTS THE AVERAGE PERFORMANCE OF
OPEN-END MUTUAL FUNDS CLASSIFIED IN THIS PARTICULAR CATEGORY. DIVIDENDS AND
INTEREST INCOME ARE CONSIDERED REINVESTED. YOU CANNOT INVEST DIRECTLY IN AN
INDEX.
(b) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN THE NAV PER
SHARE, REINVESTMENT OF DISTRIBUTIONS AT NAV ON THE EX-DIVIDEND DATE, AND
ADJUSTMENTS FOR RIGHTS OFFERINGS AND ARE NET OF EXPENSES. SINCE INCEPTION
RETURN IS BASED ON AN INITIAL NAV OF $10.00.
(c) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN CLOSING MARKET
VALUES ON THE NEW YORK STOCK EXCHANGE, REINVESTMENT OF DISTRIBUTIONS, AND
ADJUSTMENTS FOR RIGHTS OFFERINGS. SINCE INCEPTION RETURN IS BASED ON AN
INITIAL OFFERING PRICE OF $11.25.
(d) THE FUND CONVERTED TO CLOSED-END STATUS ON MARCH 31, 1995 AND HAD NO
OPERATING HISTORY ON THE NEW YORK STOCK EXCHANGE PRIOR TO THAT DATE.
(e) FROM JUNE 30, 1989, THE DATE CLOSEST TO THE FUND'S INCEPTION FOR WHICH DATA
IS AVAILABLE.
We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to corporate governance regulations
stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that
the content of the portfolio manager's commentary is unrestricted. The financial
statements and investment portfolio are mailed separately from the commentary.
Both the commentary and the financial statements, including the portfolio of
investments, will be available on our website at www.gabelli.com.
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2008
(UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
CONVERTIBLE CORPORATE BONDS -- 23.4%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 5.4%
$ 6,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ............................... $ 5,745,000
------------
BROADCASTING -- 4.9%
1,400,000 Sinclair Broadcast Group Inc., Cv. (STEP),
4.875%, 07/15/18 ............................... 1,277,500
4,500,000 Sinclair Broadcast Group Inc.,
Sub. Deb. Cv.,
6.000%, 09/15/12 ............................... 3,853,125
------------
5,130,625
------------
BUSINESS SERVICES -- 0.0%
900,000 BBN Corp., Sub. Deb. Cv.,
6.000%, 04/01/12+ (a) .......................... 0
------------
CABLE AND SATELLITE -- 0.0%
400,000 Adelphia Communications Corp.,
Sub. Deb. Cv.,
3.250%, 05/01/21+ (a) .......................... 0
------------
COMMUNICATIONS EQUIPMENT -- 2.9%
3,000,000 Agere Systems Inc., Sub. Deb. Cv.,
6.500%, 12/15/09 ............................... 3,045,000
------------
DIVERSIFIED INDUSTRIAL -- 1.0%
100,000 Griffon Corp., Ser. 2ND, Sub. Deb. Cv.,
4.000%, 07/18/23 ............................... 87,125
1,400,000 Roper Industries Inc., Cv. (STEP),
1.481%, 01/15/34 ............................... 964,250
50,000 Trinity Industries Inc., Sub. Deb. Cv.,
3.875%, 06/01/36 ............................... 36,500
------------
1,087,875
------------
ELECTRONICS -- 0.2%
10,000 Artesyn Technologies Inc., Sub. Deb. Cv.,
5.500%, 08/15/10 (b) ........................... 13,691
200,000 CTS Corp., Sub. Deb. Cv.,
2.125%, 05/01/24 ............................... 198,250
------------
211,941
------------
ENERGY AND UTILITIES -- 0.3%
400,000 Unisource Energy Corp., Cv.,
4.500%, 03/01/35 (b) ........................... 365,000
------------
EQUIPMENT AND SUPPLIES -- 0.0%
10,000 Regal-Beloit Corp., Sub. Deb. Cv.,
2.750%, 03/15/24 ............................... 16,825
------------
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
FINANCIAL SERVICES -- 1.3%
$ 500,000 Conseco Inc., Cv. (STEP),
3.500%, 09/30/35 (b) ........................... $ 358,750
1,000,000 PrivateBancorp Inc., Cv.,
3.625%, 03/15/27 ............................... 988,750
------------
1,347,500
------------
HEALTH CARE -- 1.7%
Advanced Medical Optics Inc.,
Sub. Deb. Cv.,
1,000,000 2.500%, 07/15/24 ............................... 893,750
1,000,000 3.250%, 08/01/26 ............................... 657,500
100,000 Chemed Corp., Cv.,
1.875%, 05/15/14 ............................... 76,875
100,000 Millipore Corp., Cv.,
3.750%, 06/01/26 ............................... 95,125
150,000 Thoratec Corp., Sub. Deb. Cv. (STEP),
1.380%, 05/16/34 ............................... 123,563
------------
1,846,813
------------
MANUFACTURED HOUSING AND
RECREATIONAL VEHICLES -- 0.1%
100,000 Fleetwood Enterprises Inc., Sub. Deb. Cv.,
5.000%, 12/15/23 (b) ........................... 94,500
------------
REAL ESTATE -- 1.4%
2,500,000 Palm Harbor Homes Inc., Cv.,
3.250%, 05/15/24 ............................... 1,509,375
------------
RETAIL -- 2.3%
60,000 Costco Wholesale Corp., Sub. Deb. Cv.,
Zero Coupon, 08/19/17 .......................... 88,725
100,000 Pier 1 Imports Inc., Cv. (STEP),
6.375%, 02/15/36 ............................... 73,500
3,100,000 The Great Atlantic &
Pacific Tea Co. Inc., Cv.,
5.125%, 06/15/11 ............................... 2,259,125
------------
2,421,350
------------
SPECIALTY CHEMICALS -- 0.5%
500,000 Ferro Corp., Cv.,
6.500%, 08/15/13 ............................... 504,375
------------
TELECOMMUNICATIONS -- 0.1%
50,000 Commonwealth Telephone Enterprises Inc.,
Ser. A, Cv.,
3.250%, 07/15/23 (a) ........................... 52,426
------------
WIRELESS COMMUNICATIONS -- 1.3%
1,500,000 Nextel Communications Inc., Cv.,
5.250%, 01/15/10 ............................... 1,413,750
------------
TOTAL CONVERTIBLE
CORPORATE BONDS ................................ 24,792,355
------------
See accompanying notes to schedule of investments.
2
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2008
(UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
CONVERTIBLE PREFERRED STOCKS -- 2.3%
AGRICULTURE -- 0.1%
3,000 Archer-Daniels-Midland Co.,
6.250% Cv. Pfd. ................................ $ 89,610
------------
AUTOMOTIVE -- 0.0%
1,000 General Motors Corp.,
6.250% Cv. Pfd., Ser. C ........................ 8,000
------------
BUSINESS SERVICES -- 0.0%
15,143 Interep National Radio Sales Inc.,
4.000% Cv. Pfd., Ser. A (a)(b)(c)+ ............. 0
20,000 Key3Media Group Inc. (STEP),
5.500% Cv. Pfd., Ser. B+ (a) ................... 117
------------
117
------------
COMMUNICATIONS EQUIPMENT -- 0.2%
600 Lucent Technologies Capital Trust I,
7.750% Cv. Pfd. ................................ 234,000
------------
ENERGY AND UTILITIES -- 0.7%
6,000 AES Trust III,
6.750% Cv. Pfd. ................................ 230,100
500 El Paso Corp., 4.990% Cv. Pfd. (b) ................ 527,349
300 El Paso Energy Capital Trust I,
4.750% Cv. Pfd. ................................ 9,990
------------
767,439
------------
ENTERTAINMENT -- 0.1%
13,000 Six Flags Inc., 7.250% Cv. Pfd. ................... 72,670
------------
FINANCIAL SERVICES -- 0.1%
100 Alleghany Corp., 5.750% Cv. Pfd. .................. 33,398
40,000 Federal National Mortgage Association,
8.750%, Cv. Pfd., Ser. 08-1 .................... 97,600
------------
130,998
------------
HEALTH CARE -- 0.1%
100 Elite Pharmaceuticals Inc.,
$2.32 Cv. Pfd. Ser. C (a)(c)+ .................. 91,465
------------
TELECOMMUNICATIONS -- 0.5%
14,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B ........................ 483,700
------------
TRANSPORTATION -- 0.5%
2,500 GATX Corp., $2.50 Cv. Pfd. ........................ 521,275
------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ............................... 2,399,274
------------
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS -- 41.1%
AEROSPACE -- 1.4%
3,000 DRS Technologies Inc. ............................. $ 230,250
8,600 Kaman Corp. ....................................... 244,928
10,000 Northrop Grumman Corp. ............................ 605,400
2,000 Rockwell Automation Inc. .......................... 74,680
52,500 Rolls-Royce Group plc+ ............................ 314,078
------------
1,469,336
------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.9%
50,000 Genuine Parts Co. ................................. 2,010,500
------------
BROADCASTING -- 0.0%
14,000 Emmis Communications Corp., Cl. A+ ................ 13,580
------------
BUSINESS SERVICES -- 0.8%
318,000 Trans-Lux Corp.+ (d) .............................. 864,960
------------
CABLE AND SATELLITE -- 0.4%
493,409 Adelphia Recovery Trust+ (a) ...................... 0
15,000 Cablevision Systems Corp., Cl. A .................. 377,400
2,000 Rogers Communications Inc., Cl. B ................. 66,480
------------
443,880
------------
COMMUNICATIONS EQUIPMENT -- 0.4%
30,000 Corning Inc. ...................................... 469,200
------------
COMPUTER HARDWARE -- 1.0%
9,000 International Business Machines Corp. ............. 1,052,640
------------
COMPUTER SOFTWARE AND SERVICES -- 0.6%
6,000 Diebold Inc. ...................................... 198,660
40,000 Furmanite Corp.+ .................................. 413,600
2,000 Microsoft Corp. ................................... 53,380
------------
665,640
------------
CONSUMER PRODUCTS -- 1.4%
1,000 Avon Products Inc. ................................ 41,570
50,000 Swedish Match AB .................................. 866,576
8,000 UST Inc. .......................................... 532,320
------------
1,440,466
------------
DIVERSIFIED INDUSTRIAL -- 2.7%
50,000 General Electric Co. .............................. 1,275,000
375,803 National Patent Development Corp.+ ................ 807,976
565,545 WHX Corp.+ ........................................ 791,763
------------
2,874,739
------------
ELECTRONICS -- 0.4%
22,000 Intel Corp. ....................................... 412,060
------------
See accompanying notes to schedule of investments.
3
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2008 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES -- 8.4%
6,000 Anadarko Petroleum Corp. .......................... $ 291,060
10,000 BP plc, ADR ....................................... 501,700
2,000 Cameron International Corp.+ ...................... 77,080
4,060 CH Energy Group Inc. .............................. 176,894
14,000 Chevron Corp. ..................................... 1,154,720
5,000 ConocoPhillips .................................... 366,250
2,000 Devon Energy Corp. ................................ 182,400
18,000 Exxon Mobil Corp. ................................. 1,397,880
10,100 FPL Group Inc. .................................... 508,030
22,000 Great Plains Energy Inc. .......................... 488,840
18,000 Halliburton Co. ................................... 583,020
41,000 Mirant Corp.+ ..................................... 749,890
1,200,000 Mirant Corp., Escrow+ (a) ......................... 0
15,000 National Fuel Gas Co. ............................. 632,700
15,000 Northeast Utilities ............................... 384,750
10,000 Progress Energy Inc., CVO+ (a) .................... 3,300
2,000 Puget Energy Inc. ................................. 53,400
16,000 Royal Dutch Shell plc, Cl. A, ADR ................. 944,160
7,000 SJW Corp. ......................................... 209,790
10,000 Xcel Energy Inc. .................................. 199,900
------------
8,905,764
------------
EQUIPMENT AND SUPPLIES -- 0.1%
3,000 Mueller Industries Inc. ........................... 69,030
------------
FINANCIAL SERVICES -- 5.5%
3,000 AllianceBernstein Holding LP ...................... 111,030
34,000 American Express Co. .............................. 1,204,620
40,000 Citigroup Inc. .................................... 820,400
10,000 Marsh & McLennan Companies Inc. ................... 317,600
20,000 UnionBanCal Corp. ................................. 1,465,800
52,000 Wells Fargo & Co. ................................. 1,951,560
------------
5,871,010
------------
FOOD AND BEVERAGE -- 9.4%
20,000 Anheuser-Busch Companies Inc. ..................... 1,297,600
18,080 Cadbury plc, ADR .................................. 740,195
10,560 Dr. Pepper Snapple Group Inc.+ .................... 279,629
12,000 General Mills Inc. ................................ 824,640
210,000 Parmalat SpA, GDR (b)(c) .......................... 489,657
2,600 Pernod-Ricard SA .................................. 226,132
30,000 The Coca-Cola Co. ................................. 1,586,400
57,000 Wm. Wrigley Jr. Co. ............................... 4,525,800
------------
9,970,053
------------
HEALTH CARE -- 3.9%
5,000 Alpharma Inc., Cl. A+ ............................. 184,450
24,000 Eli Lilly & Co. ................................... 1,056,720
8,456 Elite Pharmaceuticals Inc., Cl. A+ ................ 1,438
9,500 Johnson & Johnson ................................. 658,160
MARKET
SHARES VALUE
----------- ------------
2,000 Merck & Co. Inc. .................................. $ 63,120
100,000 Pfizer Inc. ....................................... 1,844,000
13,000 UnitedHealth Group Inc. ........................... 330,070
------------
4,137,958
------------
HOTELS AND GAMING -- 0.7%
230,037 Ladbrokes plc ..................................... 762,728
------------
PUBLISHING -- 0.0%
2,000 PRIMEDIA Inc. ..................................... 4,860
------------
RETAIL -- 0.8%
8,000 Wal-Mart Stores Inc. .............................. 479,120
12,000 Walgreen Co. ...................................... 371,520
------------
850,640
------------
TELECOMMUNICATIONS -- 1.2%
509 FairPoint Communications Inc. ..................... 4,413
7,000 Philippine Long Distance
Telephone Co., ADR ............................. 394,380
27,000 Verizon Communications Inc. ....................... 866,430
------------
1,265,223
------------
TRANSPORTATION -- 0.1%
2,000 GATX Corp. ........................................ 79,140
------------
WIRELESS COMMUNICATIONS -- 0.0%
49 Winstar Communications Inc.+ (a) .................. 0
------------
TOTAL COMMON STOCKS ............................... 43,633,407
------------
PREFERRED STOCKS -- 0.0%
TELECOMMUNICATIONS -- 0.0%
3,679 PTV Inc., 10.000% Pfd., Ser. A .................... 2,391
------------
PRINCIPAL
AMOUNT
-----------
CORPORATE BONDS -- 0.4%
CONSUMER PRODUCTS -- 0.0%
$ 1,500,000 Pillowtex Corp., Sub. Deb.,
9.000%, 12/15/08+ (a) .......................... 0
------------
ELECTRONICS -- 0.3%
300,000 Stoneridge Inc.,
11.500%, 05/01/12 .............................. 303,000
------------
ENERGY AND UTILITIES -- 0.1%
100,000 Texas Competitive Electric Holdings Co. LLC,
10.250%, 11/01/15 (b) .......................... 90,750
------------
HEALTH CARE -- 0.0%
150,000 Sabratek Corp., Sub. Deb.,
6.000%, 04/15/09+ (a) .......................... 0
------------
See accompanying notes to schedule of investments.
4
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2008 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------------
CORPORATE BONDS (CONTINUED)
TELECOMMUNICATIONS -- 0.0%
AMNEX Inc., Sub. Deb.,
$ 30,000 8.500%, 09/25/49+ (a)(b) ....................... $ 0
50,000 8.500%, 09/25/49+ (a)(b)(c) .................... 0
------------
0
------------
TOTAL CORPORATE BONDS ............................. 393,750
------------
SHARES
-----------
WARRANTS -- 0.0%
CONSUMER PRODUCTS -- 0.0%
4,331 Pillowtex Corp., expire 11/24/09+ (a) ............. 0
------------
FOOD AND BEVERAGE -- 0.0%
1,300 Parmalat SpA, GDR,
expire 12/31/15+ (a)(b)(c) ..................... 815
------------
HEALTH CARE -- 0.0%
12,930 Elite Pharmaceuticals Inc.,
expire 04/24/12+ (a)(c) ........................ 1,366
------------
TOTAL WARRANTS .................................... 2,181
------------
PRINCIPAL
AMOUNT
-----------
U.S. GOVERNMENT OBLIGATIONS -- 32.8%
U.S. TREASURY BILLS -- 23.4%
$24,769,000 U.S. Treasury Bills, 1.103% to 1.924%++,
10/02/08 to 01/29/09 ........................... 24,759,402
------------
U.S. TREASURY NOTES -- 9.4%
4,490,000 4.500%, 04/30/09 ............................... 4,564,018
5,350,000 4.750%, 12/31/08 ............................... 5,401,413
------------
9,965,431
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS 34,724,833
------------
TOTAL INVESTMENTS -- 100.0%
(Cost $114,813,666) .......................................... $105,948,191
============
Aggregate book cost ............................................. $115,137,427
============
Gross unrealized appreciation ................................... $ 4,173,109
Gross unrealized depreciation ................................... (13,362,345)
------------
Net unrealized appreciation/(depreciation) ...................... $ (9,189,236)
============
----------
(a) Security fair valued under procedures established by the Board of
Directors. The procedures may include reviewing available financial
information about the company and reviewing the valuation of comparable
securities and other factors on a regular basis. At September 30, 2008, the
market value of fair valued securities amounted to $149,489 or 0.14% of
total investments.
(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 September
30, 2008, the market value of Rule 144A securities amounted to $1,940,512
or 1.83% of total investments. Except as noted in (c), these securities are
liquid.
(c) At September 30, 2008, the Fund held investments in restricted and illiquid
securities amounting to $583,303 or 0.55% of total investments, which were
valued under methods approved by the Board of Directors as follows:
ACQUISITION
SHARES/ 09/30/2008
PRINCIPAL ACQUISITION ACQUISITION CARRYING VALUE
AMOUNT ISSUER DATE COST PER UNIT
----------- ------ ----------- ----------- --------------
$ 50,000 Amnex Inc., Sub. Deb., Cv.,
8.500%, 09/25/49 .............. 09/15/97 $ 48,801 --
100 Elite Pharmaceuticals Inc.,
$2.32 Cv. Pfd. Ser C ..... 04/25/07 91,465 $914.6500
12,930 Elite Pharmaceuticals Inc.
Warrants expire 04/24/12 ...... 04/25/07 8,535 0.1056
15,143 Interep National Radio Sales Inc.,
4.000% Cv. Pfd., Ser. A ....... 05/03/02 1,347,18 --
210,000 Parmalat SpA, GDR ................ 04/10/03 897,621 2.3317
1,300 Parmalat SpA, GDR,
Warrants expire 12/31/15 ...... 11/09/05 -- 0.6269
(d) Security considered an affiliated holding because the Fund owns at least 5%
of its outstanding shares.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depositary Receipt
CVO Contingent Value Obligation
GDR Global Depositary Receipt
STEP Step coupon bond. The rate disclosed is that in effect at September 30,
2008.
See accompanying notes to schedule of investments.
5
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO SCHEDULE OF INVESTMENTS (UNAUDITED)
1. SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board so determines, by such other method as the Board shall determine in good
faith to reflect its fair market value. Portfolio securities traded on more than
one national securities exchange or market are valued according to the broadest
and most representative market, as determined by Gabelli Funds, LLC, the
Adviser.
Portfolio securities primarily traded on a foreign market are generally valued
at the preceding closing values of such securities on the relevant market, but
may be fair valued pursuant to procedures established by the Board if market
conditions change significantly after the close of the foreign market but prior
to the close of business on the day the securities are being valued. Debt
instruments with remaining maturities of 60 days or less that are not credit
impaired are valued at amortized cost, unless the Board determines such amount
does not reflect the securities' fair value, in which case these securities will
be fair valued as determined by the Board. Debt instruments having a maturity
greater than 60 days for which market quotations are readily available are
valued at the average of the latest bid and asked prices. If there were no asked
prices quoted on such day, the security is valued using the closing bid price.
Futures contracts are valued at the closing settlement price of the exchange or
board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are
fair valued as determined by the Board.
On January 1, 2008, the Fund adopted Statement of Financial Accounting Standard
No. 157, "Fair Value Measurements" ("SFAS 157") that clarifies the definition of
fair value for financial reporting, establishes a framework for measuring fair
value, and requires additional disclosures about the use of fair value
measurements. The three levels of the fair value hierarchy under SFAS 157 are
described below:
- Level 1 - quoted prices in active markets for identical securities;
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit
risk, etc.); and
- Level 3 - significant unobservable inputs (including the Fund's
determinations as to the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. The
summary of inputs used to value the Fund's net assets as of September 30, 2008
is as follows:
OTHER FINANCIAL
INVESTMENTS IN INSTRUMENTS
SECURITIES (UNREALIZED
VALUATION INPUTS (MARKET VALUE) DEPRECIATION)*
---------------- -------------- ---------------
Level 1 - Quoted Prices $ 51,685,189 --
Level 2 - Other Significant Observable Inputs 54,168,119 $(42,106)
Level 3 - Significant Unobservable Inputs 94,883 --
------------ --------
Total $105,948,191 $(42,106)
============ ========
----------
* Other financial instruments are derivative instruments not reflected in the
Schedule of Investments, such as futures, forwards, and swaps, which are
valued at the unrealized appreciation/depreciation on the investment.
6
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO SCHEDULE OF INVESTMENTS (CONTINUED) (UNAUDITED)
The following is a reconciliation of Level 3 investments for which significant
unobservable inputs were used to determine fair value:
INVESTMENTS IN
SECURITIES
(MARKET VALUE)
--------------
BALANCE AS OF 12/31/07 $ 437,162
Accrued discounts/(premiums) 16,987
Realized gain/(loss) --
Change in unrealized appreciation/(depreciation) 127,034
Net purchases/(sales) (486,300)
Transfers in and/or out of Level 3 --
---------
BALANCE AS OF 09/30/08 $ 94,883
=========
In March 2008, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("SFAS 161") that is effective
for fiscal years beginning after November 15, 2008. SFAS 161 is intended to
improve financial reporting for derivative instruments by requiring enhanced
disclosure that enables investors to understand how and why an entity uses
derivatives, how derivatives are accounted for, and how derivative instruments
affect an entity's results of operations and financial position. Management is
currently evaluating the implications of SFAS 161 on the Fund's financial
statement disclosures.
2. SWAP AGREEMENTS. The Fund may enter into equity and contract for difference
swap transactions. The use of swaps and caps is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio transactions. In a swap, a set of future cash flows are
exchanged between two counterparties. One of these cash flow streams will
typically be based on a reference interest rate combined with the performance of
a notional value of shares of a stock. The other will be based on the
performance of the shares of a stock. There is no assurance that the swap
contract counterparties will be able to meet their obligations pursuant to a
swap contract or that, in the event of default, the Fund will succeed in
pursuing contractual remedies. The Fund thus assumes the risk that it may be
delayed in or prevented from obtaining payments owed to it pursuant to a swap
contract. The creditworthiness of the swap contract counterparties is closely
monitored in order to minimize this risk. Depending on the general state of
short-term interest rates and the returns on the Fund's portfolio securities at
that point in time, such a default could negatively affect the Fund's ability to
make dividend payments. In addition, at the time the a swap transaction reaches
its scheduled termination date, there is a risk that the Fund will not be able
to obtain a replacement transaction or that the terms of the replacement will
not be as favorable as on the expiring transaction. If this occurs, it could
have a negative impact on the Fund's ability to make dividend payments.
The use of derivative instruments involves, to varying degrees, elements of
market and counterparty risk in excess of the amount recognized below.
The Fund has entered into a contract for difference swap agreement with Bear,
Stearns International Limited. Details of the swap at September 30, 2008 are as
follows:
NOTIONAL EQUITY SECURITY INTEREST RATE/ TERMINATION NET UNREALIZED
AMOUNT RECEIVED EQUITY SECURITY PAID DATE DEPRECIATION
------------------------ --------------------- ------------------------ ----------- --------------
Overnight LIBOR plus
Market Value 40 bps plus Market Value
Appreciation on: Depreciation on:
$325,707 (47,500 Shares) Rolls-Royce Group plc Rolls-Royce Group plc 12/15/08 $(42,106)
7
AUTOMATIC DIVIDEND REINVESTMENT AND
VOLUNTARY CASH PURCHASE PLANS
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Convertible and Income Securities Fund Inc.
(the "Fund") to automatically reinvest dividends payable to common shareholders.
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 credit shares of common stock 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.
Plan participants may send their stock certificates to Computershare Trust
Company, N.A. ("Computershare") to be held in their dividend reinvestment
account. Registered shareholders wishing to receive their distributions in cash
must submit this request in writing to:
The Gabelli Convertible and Income Securities Fund Inc.
c/o Computershare
P.O. Box 43010
Providence, RI 02940-3010
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 Computershare at (800) 336-6983.
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 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 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 ("NYSE") 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 Fund valued at
market price. If the Fund should declare a dividend or capital gains
distribution payable only in cash, Computershare will buy common stock in the
open market, or on the NYSE or elsewhere, for the participants' accounts, except
that Computershare 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 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.
8
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.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to Computershare for investments in the Fund's shares
at the then current market price. Shareholders may send an amount from $250 to
$10,000. Computershare will use these funds to purchase shares in the open
market on or about the 1st and 15th of each month. Computershare 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 Computershare, P.O. Box 43010, Providence, RI
02940-3010 such that Computershare receives such payments approximately 10 days
before the 1st and 15th of the month. Funds not received at least five days
before the investment date shall be held for investment until the next purchase
date. A payment may be withdrawn without charge if notice is received by
Computershare at least 48 hours before such payment is to be invested.
SHAREHOLDERS WISHING TO LIQUIDATE SHARES HELD AT COMPUTERSHARE 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.
For more information regarding the Automatic Dividend Reinvestment Plan and
Voluntary Cash Purchase Plan, brochures are available by calling (914) 921-5070
or by writing directly to the Fund.
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 Computershare on at least 90 days written
notice to participants in the Plan.
9
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
AND YOUR PERSONAL PRIVACY
WHO ARE WE?
The Gabelli Convertible and Income Securities Fund Inc. (the "Fund") is a
closed-end management investment company registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. We are managed by
Gabelli Funds, LLC, which is affiliated with GAMCO Investors, Inc. GAMCO
Investors, Inc. is a publicly held company that has subsidiaries that provide
investment advisory or brokerage services for a variety of clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
SHAREHOLDER?
When you purchase shares of the Fund on the New York Stock Exchange, you have
the option of registering directly with our transfer agent in order, for
example, to participate in our dividend reinvestment plan.
- INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your
name, address, telephone number, social security number, bank account
number, and other information.
- INFORMATION ABOUT YOUR TRANSACTIONS WITH US. This would include information
about the shares that you buy or sell; it may also include information
about whether you sell or exercise rights that we have issued from time to
time. If we hire someone else to provide services--like a transfer
agent--we will also have information about the transactions that you
conduct through them.
WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT?
We do not disclose any non-public personal information about our customers or
former customers to anyone other than our affiliates, our service providers who
need to know such information, and as otherwise permitted by law. If you want to
find out what the law permits, you can read the privacy rules adopted by the
Securities and Exchange Commission. They are in volume 17 of the Code of Federal
Regulations, Part 248. The Commission often posts information about its
regulations on its website, www.sec.gov.
WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION?
We restrict access to non-public personal information about you to the people
who need to know that information in order to provide services to you or the
Fund and to ensure that we are complying with the laws governing the securities
business. We maintain physical, electronic, and procedural safeguards to keep
your personal information confidential.
DIRECTORS AND OFFICERS
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF EXECUTIVE OFFICER,
GAMCO INVESTORS, INC.
E. Val Cerutti
CHIEF EXECUTIVE OFFICER,
CERUTTI CONSULTANTS, INC.
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
Dugald A. Fletcher
PRESIDENT, FLETCHER & COMPANY, INC.
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Werner J. Roeder, MD
MEDICAL DIRECTOR,
LAWRENCE HOSPITAL
Anthonie C. van Ekris
CHAIRMAN, BALMAC INTERNATIONAL, INC.
Salvatore J. Zizza
CHAIRMAN, ZIZZA & CO., LTD.
OFFICERS
Bruce N. Alpert
PRESIDENT
Peter D. Goldstein
CHIEF COMPLIANCE OFFICER
Laurissa M. Martire
VICE PRESIDENT & OMBUDSMAN
Agnes Mullady
TREASURER AND SECRETARY
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
State Street Bank and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
STOCK EXCHANGE LISTING
6.00%
Common Preferred
---------- ---------
NYSE-Symbol: GCV GCV PrB
Shares Outstanding: 12,786,964 990,700
The Net Asset Value per share appears in the Publicly Traded Funds column, under
the heading "Convertible Securities Funds," 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 per share may be obtained each day by calling (914) 921-5070
or visiting www.gabelli.com.
For general information about the Gabelli Funds, call 800-GABELLI
(800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: www.gabelli.com, or e-mail us at: closedend@gabelli.com
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may, from time to time, purchase
shares of its common stock in the open market when the Fund's shares are trading
at a discount of 10% or more from the net asset value of the shares. The Fund
may also, from time to time, purchase shares of its preferred stock in the open
market when the preferred shares are trading at a discount to the liquidation
value.
THE GABELLI CONVERTIBLE AND
INCOME SECURITIES FUND INC.
ONE CORPORATE CENTER
RYE, NY 10580-1422
(914) 921-5070
www.gabelli.com
THIRD QUARTER REPORT
SEPTEMBER 30, 2008
GCV Q3/2008
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded
that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940,
as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective,
as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph, based on their
evaluation of these controls and procedures required by Rule
30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules
13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934,
as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Gabelli Convertible and Income Securities Fund Inc.
--------------------------------------------------------------------
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date November 24, 2008
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date November 24, 2008
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Agnes Mullady
-------------------------------------------------------
Agnes Mullady,
Principal Financial Officer and Treasurer
Date November 24, 2008
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.