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LOGO OF MOUNTAIN AND THE GABELLI OMITTED
CONVERTIBLE
SECURITIES
FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2001
[PHOTO OMITTED]
PHOTO OF MARIO J. GABELLI, OMITTED
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LOGO OF MOUNTAIN THE GABELLI CONVERTIBLE SECURITIES FUND, INC. OMITTED
TO OUR SHAREHOLDERS,
Convertible stocks and bonds are hybrid securities. Because they can be
converted into common stock, performance will be impacted by the dominant trend
in the equities market. However, due to their significantly higher yield,
performance is also influenced by the direction of the bond market. 2001's
strong bond market helped the Gabelli Convertible Securities Fund (the "Fund")
post a respectable gain in what has been another disappointing year for equities
investors.
A PROMISE KEPT
When we asked the shareholders of the Fund to vote to convert from an
open-end investment company to a closed-end fund, we expressed our intent to
have the Fund's common shares track the Fund's net asset value. Based on the
Fund's consistent and above average annualized performance since inception, we
expected that such a Fund would trade at or above net asset value. In addition,
over the past few years the Board of Directors has taken several initiatives to
maintain the Fund's public market price at a level equal to or exceeding the
Fund's net asset value. These initiatives included a stock repurchase plan, a
managed 8% Distribution Policy, and the issuance of preferred stock.
We are happy to report that the management kept its promise to
shareholders and the Fund is trading at a premium to net asset value. In fact,
the Fund began trading in January 2001 at a slight discount to net asset value
and started trading at a premium in February 2001. The Gabelli Convertible
Securities Fund has since continued to trade at a premium to net asset value
and, as of year-end, the Fund's shares were trading at a 9.9% premium. We have
been able to preserve shareholder wealth during a tough market environment. We
have been conservative during the past year and it has paid off; now is the time
to be aggressive.
PREMIUM/DISCOUNT SINCE CONVERSION TO A CLOSED-END FUND
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
Year Premium/Discount
1995 0
0.0099
-0.0761
-0.0978
-0.0334
-0.0903
-0.1056
-0.0657
-0.0701
-0.0957
-0.0263
Year 1996 -0.065
-0.1064
-0.0802
-0.1071
-0.1507
-0.0953
-0.1465
-0.146
-0.1318
-0.1497
-0.1492
-0.1652
Year 1997 -0.1399
-0.131
-0.1577
-0.1622
-0.1593
-0.1322
-0.147
-0.1538
-0.1321
-0.1557
-0.1432
-0.1017
Year 1998 -0.0956
-0.0882
-0.0733
-0.0815
-0.095
-0.062
-0.0848
-0.1485
-0.0705
-0.0372
-0.0325
-0.0175
Year 1999 -0.0315
-0.0745
-0.0275
-0.1027
-0.0909
-0.0689
-0.0991
-0.1019
-0.0842
-0.0948
-0.1525
-0.0735
Y2k -0.1207
-0.148
-0.1497
-0.1734
-0.1454
-0.1263
-0.1128
-0.123
-0.1022
-0.1553
-0.1088
-0.0893
Year 2001 -0.03
0.0096
0.0039
0.0202
0.0207
0.0337
0.0316
0.059
0.1202
0.1169
0.1167
0.1156
PREMIUM / DISCOUNT DISCUSSION
As a refresher to our shareholders, the price of a closed-end mutual fund
is determined in the open market by willing buyers and sellers. Shares of the
Fund trade on the New York Stock Exchange and may trade at a premium to (higher
than) net asset value ("NAV") (the market value of the Fund's underlying
portfolio) or a discount to (lower than) net asset value. Of the 470 closed-end
funds in the U.S., approximately 30% currently trade at premiums to NAV versus
24% five years ago and 18% ten years ago.
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INVESTMENT RESULTS (a)(c)
--------------------------------------------------------------------------------------------------
Quarter
-------------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- -----
2001: Net Asset Value ............. $10.16 $10.40 $9.82 $9.92 $9.92
Total Return ................ 3.4% 4.3% (3.7)% 3.1% 7.0%
--------------------------------------------------------------------------------------------------
2000: Net Asset Value ............. $11.32 $11.16 $10.93 $10.02 $10.02
Total Return ................ 1.3% 0.6% (0.1)% (1.8)% 0.0%
--------------------------------------------------------------------------------------------------
1999: Net Asset Value ............. $11.45 $12.13 $11.67 $11.40 $11.40
Total Return ................ 1.8% 7.8% (2.0)% 1.7% 9.4%
--------------------------------------------------------------------------------------------------
1998: Net Asset Value ............. $11.87 $11.66 $10.96 $11.45 $11.45
Total Return ................ 5.3% 0.0% (4.2)% 7.4% 8.3%
--------------------------------------------------------------------------------------------------
1997: Net Asset Value ............. $11.13 $11.38 $11.81 $11.48 $11.48
Total Return ................ 1.7% 3.5% 5.0% 2.8% 13.5%
--------------------------------------------------------------------------------------------------
1996: Net Asset Value ............. $11.28 $11.33 $11.23 $11.08 $11.08
Total Return ................ 3.6% 1.6% 0.3% 2.6% 8.4%
--------------------------------------------------------------------------------------------------
1995: Net Asset Value ............. $11.14 $11.51 $11.64 $11.01 $11.01
Total Return ................ 5.1% 5.2% 3.0% 1.1% 15.0%
--------------------------------------------------------------------------------------------------
1994: Net Asset Value ............. $11.54 $11.39 $11.60 $10.60 $10.60
Total Return ................ 0.2% (1.3)% 1.8% (0.9)% (0.2)%
--------------------------------------------------------------------------------------------------
1993: Net Asset Value ............. $12.07 $12.36 $12.75 $11.52 $11.52
Total Return ................ 5.4% 2.4% 3.2% 1.5% 13.1%
--------------------------------------------------------------------------------------------------
1992: Net Asset Value ............. $11.29 $11.52 $11.90 $11.45 $11.45
Total Return ................ 3.5% 2.0% 3.3% 3.6% 13.0%
--------------------------------------------------------------------------------------------------
1991: Net Asset Value ............. $11.06 $11.27 $11.57 $10.91 $10.91
Total Return ................ 5.6% 1.9% 2.7% 1.8% 12.5%
--------------------------------------------------------------------------------------------------
1990: Net Asset Value ............. $10.56 $10.68 $10.56 $10.47 $10.47
Total Return ................ 1.5% 2.1% (1.1)% 3.8% 6.3%
--------------------------------------------------------------------------------------------------
1989: Net Asset Value ............. -- -- $10.54 $10.51 $10.51
Total Return ................ -- -- 5.4%(b) 0.8% 6.3%(b)
--------------------------------------------------------------------------------------------------
Dividend History - Common Stock (Continued)
---------------------------------------------------
PAYMENT DATE RATE PER SHARE REINVESTMENT PRICE
------------ -------------- ------------------
December 27, 1999 $0.430 $10.38
September 27, 1999 $0.200 $10.86
June 28, 1999 $0.200 $11.38
March 29, 1999 $0.200 $11.04
---------------------------------------------------
December 28, 1998 $0.320 $11.49
September 28, 1998 $0.200 $10.52
June 26, 1998 $0.200 $11.02
March 26, 1998 $0.200 $11.10
---------------------------------------------------
December 26, 1997 $0.600 $10.49
September 26, 1997 $0.120 $10.44
June 27, 1997 $0.120 $ 9.96
March 27, 1997 $0.120 $ 9.63
---------------------------------------------------
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
------------------------------------------------------
Average Annual NAV Returns - December 31, 2001 (a)
---------------------------------------------------
1 Year .............................. 7.03%
5 Year .............................. 7.56%
10 Year ............................. 8.63%
Life of Fund (b) .................... 8.90%
------------------------------------------------------
(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
--------------------------------------------------
PAYMENT DATE RATE PER SHARE REINVESTMENT PRICE
------------ -------------- ------------------
December 24, 2001 $0.210 $10.40
September 24, 2001 $0.200 $10.31
June 25, 2001 $0.200 $10.33
March 26, 2001 $0.200 $10.10
--------------------------------------------------
December 26, 2000 $0.700 $ 9.80
September 25, 2000 $0.200 $ 9.85
June 26, 2000 $0.200 $ 9.98
March 27, 2000 $0.200 $ 9.71
2
Ideally, the Fund's market price will generally track the NAV. The Fund's
premium or discount to NAV fluctuates over time. Over our Fund's 6-year history
as a closed-end fund, the range fluctuated from a 12% premium in September 2001
to a 17% discount in April 2000. The average variance from NAV for the Fund
since converting to closed-end fund status is an 8% discount to NAV. Beginning
in early 2001, the market price of the Fund exceeded the NAV and this premium
has increased throughout the year.
"Mr. Market" often provides opportunities to invest at a discount. The
Fund has undertaken various initiatives to narrow the discount when appropriate
through distribution policies, share repurchase programs and use of leverage.
The Fund's long-term investment goal is to seek a high-level of total
return through a combination of current income and capital appreciation. We
believe that our securities selection process adds to the investment equation.
We have a successful history of investment providing shareholders average annual
returns of 9% since inception. However, it is important to remember that "Mr.
Market" is a pendulum that swings both ways. As the market moves away from
momentum investing and back to basics, we believe that an excessive premium for
the Fund is not likely to be sustainable.
INVESTMENT PERFORMANCE
For the fourth quarter ended December 31, 2001, The Gabelli Convertible
Securities Fund's (the "Fund") net asset value ("NAV") total return rose 3.06%
after adjusting for the reinvestment of the $0.21 per share distribution paid on
December 24, 2001. The Standard & Poor's ("S&P") 500 Index and the Lipper
Convertible Securities Fund Average rose 10.68% and 8.98%, respectively, over
the same period. The S&P 500 Index is an unmanaged indicator of stock market
performance, while the Lipper Average reflects the average performance of mutual
funds classified in this particular category. The Fund rose 7.03% for 2001 after
adjusting for the reinvestment of the $0.81 per share in distributions. The S&P
500 Index and Lipper Convertible Securities Fund Average declined 11.89% and
7.86%, respectively, over the same twelve-month period.
For the three-year period ended December 31, 2001, the Fund's total return
averaged 5.41% annually, including reinvestments of $3.14 per share in
distributions. The S&P 500 Index had an average annual decline of 1.03% while
the Lipper Convertible Securities Fund Average had an average annual return of
6.69%, over the same three-year period. For the five-year period ended December
31, 2001, the Fund's total return averaged 7.56% annually, including
reinvestments of $5.02 per share in distributions, versus average annual total
returns of 10.70% and 8.38% for the S&P 500 Index and Lipper Convertible
Securities Fund Average, respectively.
Since inception on July 3, 1989 through December 31, 2001, the Fund had a
cumulative total return of 190.52%, including adjustments of $11.776 per share
for distributions, which equates to an average annual total return of 8.90%.
The Fund's common shares ended the fourth quarter at $10.90 per share on
the New York Stock Exchange, a premium to the net asset value of 9.99% and a
total return of 1.00% for the fourth quarter. The Fund's common shares rose
29.14% for 2001 after adjusting for all distributions.
OUR OBJECTIVE
Our mandate is to preserve and enhance our shareholders' wealth through a
conservative and disciplined approach to convertible securities investing. Our
goal is to generate profitable returns in strong markets and protect principal
in weak markets by taking advantage of the unique characteristics of convertible
securities.
Our Fund is managed with a goal of achieving a 600-800 basis point spread
above long-term Treasury yields. We hope to generate these returns over the
long-term. This is the type of performance that our Fund has been recognized for
and we anticipate will continue in the future. Of course, there are no
guarantees.
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
3
the higher yield of fixed income instruments. Our strategy incorporates the
purchase of convertible securities that are trading at a premium above parity
with the common stock but which generally provide a higher yield and, over time,
capital appreciation. We will also seek out "busted" converts, where the
underlying common stock has dropped significantly and the values of both the
conversion privilege and the convert are down. Such securities will provide both
high yields and long-term capital appreciation potential.
CONVERTIBLE MARKET OVERVIEW
The convertible market, as measured by the Merrill Lynch All Convertible
Index, gained 7.0% during the fourth quarter reflecting the rebound in the
equity markets. This compared to a 10.7% rise in the S&P 500 Index. During 2001,
convertibles demonstrated their defensive qualities by declining only 4.4%
versus a fall of 11.9% by the S&P 500 Index. The average convertible now has a
conversion premium of 56% (up from 37% at the start of the year), a current
yield of 3.76% (versus 4.5%) and a credit rating of BBB- (versus BB+).
Ironically, current yield has fallen even as the conversion premium has risen
because of the rapid rise of zero-coupon contingent conversion convertibles.
These issues are typically investment grade, which explains why the average
credit quality of the market has also improved. Zeros now make up 31% of the
domestic convertible market versus 23% at the beginning of the year. However, as
investors seek higher yields in the current low interest rate environment and
issuers need to repair their balance sheets, we expect to see an increase of
mandatory and preferred issuance in the year ahead.
During the quarter, equity prices recovered, credit spreads tightened and
Treasury prices fell. This trend was also reflected in the convertible market.
Speculative grade convertibles outperformed investment grade convertibles
gaining 10.0% (versus 3.6%) as credit spreads tightened by over 200 basis points
in the single-B credit range.
Despite negative price performance during the year, a buoyant new issue
calendar resulted in a 41% increase in the domestic convertible market to $218
billion. The U.S. convertible market is the largest in the world constituting
45% of the total global market capitalization of $475 billion. Domestic new
issuance was up a record 74% last year to $105 billion. Numerous companies used
the product to finance their growth, utilize attractive tax benefits, or repair
their balance sheets. Meanwhile, redemptions were 38% lower at $36 billion.
Redemptions are expected to accelerate over the next twelve-months as many zeros
approach their put dates.
The best performing sectors in the convertible market during the fourth
quarter were Technology (+15.4%), Media (+11.9%), and Consumer Discretionary
(+ 9.4%). After the Enron debacle, Utilities were the worst performing
(-13.2%) followed by Telecommunications (-1.3%) and Energy (+3.0%). During the
year, the best performing sectors were Materials (+27.3%), led by the precious
metals group, Consumer Discretionary (+18.1%), and Consumer Staples (+15.4%).
The worst performing sectors were Utilities (-38.2%), Telecommunications
(-18.8%), and Energy (-11.5%). Interestingly, "busted" or high-yielding
convertibles were the year's stellar performers. Constituting 46% of the
convertible universe, these securities gained 5.3% in the fourth quarter and
10.0% for the year outperforming even High Grade (+8.4%) and High Yield (+5.5%)
straight bonds.
COMMENTARY
AMERICAN HEROES
In the months following September 11, we have been celebrating American
heroes. New York City firefighters, policemen, and emergency service workers
have been honored for their bravery and sacrifice. Political leaders such as New
York City Mayor Rudy Guiliani, President Bush, Secretary of State Colin Powell,
and Secretary of Defense Donald Rumsfeld have been applauded for their adept
handling of this crisis. We praise American servicemen who have been risking
their lives in Afghanistan to hunt down and capture the terrorists responsible
for the tragedy.
To this list of heroes, we would add the American consumer, who through
their collective courage and confidence in the American system, have helped
avert what might have become an economic catastrophe. So, let's hear it for
everyone who despite all the political and economic uncertainty resulting from
horrifying terrorist attacks, went out and bought a new home, or a car, or took
their families on vacation, or simply treated their loved ones to a good
Christmas. These courageous folks are the reason the American economy has held
up so well during these trying times and the people who will lead our economy
out of recession in the year ahead.
4
AND THEIR ALLIES
The American consumer has had two important allies. The Federal Reserve
Board responded promptly and effectively to the terrorist crisis by injecting a
massive dose of liquidity into the financial system and lowering short-term
interest rates to levels we haven't seen in forty years. The U.S. Treasury
Department announced it would cease issuing 30-year bonds, in the process,
bringing longer-term interest rates down and accelerating the home re-financing
boom that has provided much of the money consumers have been spending. We also
acknowledge the leadership of General Motors, which initiated a brilliant and
timely 0% APR financing to "Keep America Rolling." As we prepare this letter, we
have to give a demerit to the U.S Congress, which is letting partisan politics
get in the way of a second fiscal booster shot, particularly one aimed at
bolstering confidence among business leaders.
A NEW BULL MARKET?
Despite the economy's surprising resilience and the stock market's strong
fourth quarter, many investors remain wary as evidenced by the record $2.3
trillion parked in money market funds yielding about 2%. What will it take to
bring more investors off the sidelines? An official end to the recession and
better corporate earnings. We believe both are right around the corner.
Economic data released on December 31 revealed widespread improvement in
consumer confidence and housing, and even a modest increase in business
investment. Growth in unemployment insurance claims also slowed. These are all
valid indications the economy is beginning to regain its footing. At issue is
just how strong the economic recovery will be. Although inventories have been
reduced significantly and there has been a modest up-tick in sales, there is
still a great deal of excess capacity in the manufacturing sector. This will
likely restrain growth in business investment, forcing the American consumer to
continue to shoulder much of the economic load. We believe Gross Domestic
Product ("GDP") will be up 3% to 4% in 2002, well above the longer-term growth
of 2.5% to 3% we envision. The cut in taxes along with lower oil and fuel will
help consumer spending overcome the drag from the stock market's wealth effect
and rising unemployment.
Fortunately, we will not need an especially strong recovery to see
significantly better corporate earnings in 2002. Companies in virtually every
industry have been aggressively cutting costs. With the exception of pockets in
the technology and telecommunications equipment industries, the inventory
correction has largely run its course. Corporate interest expense has declined,
as have raw materials and energy prices. Corporate America wrote off everything
it could get away with in 2001 (we call this the "kitchen sink" effect), and due
to Federal Accounting Standard Board (FASB) Rule 142, the "amortization of
goodwill" will no longer penalize earnings. Consequently, a modest economic
recovery in the year ahead should be magnified in sharply higher reported
earnings. Very "easy" earnings comparisons in the first and second quarters of
2002 should help stabilize the market until investors gain confidence that
earnings will improve in the second half. In addition, the crisis in confidence
arising from "Enron" will result in auditing firms and CFO's cleaning up their
numbers (we observe that aggressive accounting will be back - but not in 2002).
THINGS THAT GO BUMP IN THE NIGHT
Our reasonably upbeat outlook for the economy and the stock market is
tempered by our usual laundry list of things to worry about. First and foremost
is the potential for another catastrophic terrorist episode (in the U.S. or
abroad) that could severely damage consumer and investor psychology.
Second on our list of concerns are oil and natural gas prices. Declining
energy prices have translated into lower gasoline, home heating, and utilities
costs for the consumer who we are counting on to lead us out of recession. The
Organization of Petroleum Exporting Countries ("OPEC") is currently cutting
production and urging other energy producing nations to follow suit. Whether
OPEC will succeed in convincing cash strapped producers such as Russia to turn
down the tap is debatable. However, the potential for further political upheaval
in the Middle East leading to the disruption of oil flow to the developed world
is certainly a risk. We hope we get our long needed energy policy.
Another issue we worry about is the economic health of the rest of the
world. The economies of our Latin American trade partners are imperiled by
declining commodity prices and in some cases, fiscal and monetary mismanagement.
Japan has fallen back into recession and European economic growth has slowed
substantially. This is a truly global economy, in which the economic health of
any one nation, including the mighty U.S. of A, is to a significant degree
dependent on the economic health
5
of the rest of the world. Along these lines, we remain puzzled by the enormous
appetites of countries, companies and citizens around the world to hold on to
the U.S. dollar despite our history of huge trade deficits.
OUR INVESTMENT SCORECARD
This year's best performing holdings came from a variety of industry
groups including: drug retailer Rite Aid; broadcaster Granite Broadcasting; auto
parts maker Standard Motor Products; and telecommunications services company
Sprint Corp.
Our worst performers also came from an eclectic group of sectors
including: wireless communications operators Nextel and U.S. Cellular; banana
king Chiquita Brands; utility Northeast Utilities; and railcar leaser GATX.
LET'S TALK CONVERTS
The following are specifics on selected holdings of our Fund. Favorable
earnings prospects do not necessarily translate into higher prices, but they do
express a positive trend that we believe will develop over time.
BROADWING INC. (6.75% CV. PFD., SER. B) located in Cincinnati, OH, received its
new name in 1999 when local phone provider Cincinnati Bell made a $3.2 billion
acquisition of IXC Communications and gained access to a nation-wide all optical
fiber network. Broadwing's Cincinnati-based operations include one million local
phone lines and about 480,000 wireless customers through its 80% ownership of a
wireless joint venture with AT&T Wireless Services (AWE - $14.38 - NYSE).
Broadwing also offers long distance voice and broadband data services to other
carriers and enterprise accounts on a nation-wide basis. Broadwing's incumbent
local exchange carrier's ("ILEC") operations are surrounded by SBC
Communications (SBC - $39.17 - NYSE)/Ameritech's local footprint.
CITIZENS COMMUNICATIONS CO. (5.00% CV. PFD.) will soon become the country's
largest independent local exchange carrier with about 3 million access lines
once it completes several acquisitions of over 2 million lines for $6.5 billion.
Upon completion of these transactions, accompanied by divestitures of its
utilities operations, the company will reposition itself as a pure
telecommunications company. Citizens also owns 81% of a competitive carrier,
Electric Lightwave Inc. (ELIX - $0.30 - Nasdaq), with fiber optic networks
covering the Western part of the U.S.
HILTON HOTELS CORP. (HLT) (SUB. DEB. CV., 5.00%, 05/15/06) is recognized as one
of the world's preeminent hospitality companies. Hilton develops, owns, manages
and franchises hotels, resorts and vacation ownership properties. Based on the
number of hotel rooms, Hilton is the nation's third largest lodging company.
Hilton's hotel system includes approximately 2,000 properties totaling over
330,000 rooms worldwide. The Company's hotel brands include Hilton, Hilton
Garden Inn, Doubletree, Embassy Suites Hotels, Hampton Inn, Hampton Inn &
Suites, Homewood Suites by Hilton, Conrad, and Harrison Conference Centers.
Flagship properties include the Waldorf Astoria, the Hilton Chicago, the Hilton
Hawaiian Village Beach Resort & Spa, and the Palmer House Hilton. HLT formalized
a marketing alliance with the British company Hilton Group Plc (HG.L - $3.07 -
London Stock Exchange), owner of Hilton International, in January 1997 to
reunite the Hilton name worldwide for the first time in over 30 years. Hilton's
casino gaming properties were spun-off into a new company, Park Place
Entertainment (PPE - $9.17 - NYSE), on December 31, 1998.
KAMAN CORP. (SUB. DEB. CV., 6.00%, 03/15/12), founded in 1945, is a pioneer in
the helicopter industry. Aircraft manufacturing remains the core of the
business. Kaman serves both commercial and governmental markets with helicopters
and aircraft components. The company also produces specialized, high-value niche
market products and services that tend to be technological leaders in their
markets. Kaman is a major, national distributor of original equipment, repair
and replacement products and value-added services to nearly every sector of
North American industry. The company also manufactures and distributes musical
instruments (Ovation guitars) and accessories to independent retailers.
NEXTEL COMMUNICATIONS INC. (SUB. DEB. CV., 5.25%, 01/15/10) is the last
remaining independent national wireless carrier in US, servicing over 8 million
mostly high-value business subscribers and controlling wireless licenses
covering over 235 million people. Nextel International, a wholly-owned
international subsidiary of Nextel, serves about 900,000 wireless customers in
Latin America and has licenses covering over 230 million people in Brazil,
Argentina, Mexico, Peru and Chile. Nextel's investment portfolio is currently
valued at over $1.0 billion.
6
ROBBINS & MYERS INC. (SUB. DEB. CV., 6.50%, 09/01/03) is an international
manufacturer of industrial mixing equipment, glass-lined vessels, industrial
pumps and corrosion resistant products serving the process industries such as
specialty chemicals, pharmaceuticals, water treatment, oil and gas, and food and
beverage. In August 2001, the company completed the acquisition of Romaco, a
$150 million manufacturer of packaging, printing and processing of
pharmaceutical products. Romaco provides horizontal integration to Robbins'
mixer and vessel businesses and the acquisition is expected to be accretive to
earnings. With Romaco, 40% of Robbins & Myers revenues are in the pharmaceutical
market that is generally stable, with an average 6-8% rate of growth. The
company's remaining businesses are in specialty chemical (26%), energy (20%),
water and wastewater (4%) and other industries. Management's use of its strong
cash flow to make complementary acquisitions makes Robbins & Myers an attractive
company in a consolidating industry.
SEALED AIR CORP. ($2.00 CV. PFD., SER. A) is a global manufacturer and
distributor of a wide range of protective and specialty packaging materials and
systems for industrial, food and consumer products. Sealed Air is a strong free
cash flow generator, which will be used to pay down debt, make niche
acquisitions, and buy back stock.
SEQUA CORP. ($5.00 CV. PFD.) is a diversified company with businesses in
aerospace, pre-paint metal, specialty chemical and printing and cannery
equipment. Chromalloy Gas Turbine, Sequa's aerospace business, is the largest
independent supplier of overhaul and repair to jet and industrial gas turbine
engines. We believe this business is attractive to original equipment engine
manufacturers like General Electric and Pratt & Whitney who are looking to grow
their replacement parts business. With roughly $800 million in revenues, we
estimate Chromalloy's private market value to be near the entire public value of
Sequa.
STANDARD MOTOR PRODUCTS INC. (SMP) (SUB. DEB. CV., 6.75%, 07/15/09),
headquartered in Long Island City, New York, supplies functional replacement
parts for the engine management, electrical and climate control systems of cars,
trucks and buses. The company services all makes and models, both new and old
cars, imported and domestic. SMP has two primary divisions--engine management
and temperature control--and believes it is the number one supplier to the North
American aftermarket in each of these lines.
THERMO ELECTRON CORP. (SUB. DEB. CV., 4.25%, 01/01/03) is a leading provider of
scientific instruments. It manufactures measurement instrumentation, and
provides information management software and worldwide services to markets which
include: the life sciences, clinical laboratories, healthcare,
telecommunications, food and beverage, chemical, oil and gas, and academic and
government clients. The company's products ensure the quality and safety of
materials used in manufacturing, improve industrial processes, and protect the
environment--its instruments were also used at the Winter Olympics to identify
the use of banned substances and to search for explosive materials. As part of
its strategy to become an integrated instrument business, it is spinning off
non-core businesses, most of which has been completed.
STOCK REPURCHASE PLAN
The Gabelli Convertible Securities Fund is authorized to repurchase up to
500,000 shares of the Fund's outstanding common shares. Pursuant to this stock
repurchase plan, the Fund may from time to time purchase shares of its capital
stock in the open market when the shares are trading at a discount of 10% or
more from the net asset value of the shares. In total, through December 31,
2001, 305,200 shares have been repurchased in the open market under this stock
repurchase plan.
COMMON STOCK 8% DISTRIBUTION POLICY
The Convertible Securities Fund continues to maintain its 8% Distribution
Policy whereby the Fund pays out to common stock shareholders 8% of its average
net assets each year. Pursuant to this policy, the Convertible Securities Fund
distributed $0.21 per share on December 24, 2001. The next distribution is
scheduled for March 2002.
8.00% CUMULATIVE PREFERRED STOCK - DIVIDENDS
The Convertible Securities Fund's 8.00% Cumulative Preferred Stock paid a
cash distribution on December 26, 2001 of $0.50 per share. For the twelve-months
ended December 31, 2001, Preferred Stock shareholders received distributions
totaling $2.00, the annual dividend rate per share of Preferred Stock. The next
distribution is scheduled for March 2002.
7
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management Inc., the Gabelli Mutual
Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news.
You can send us e-mail at closedend@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
WHO WHEN
--- ----
Special Chats: Mario J. Gabelli First Monday of each month
Howard Ward First Tuesday of each month
In addition, every Wednesday will feature a different portfolio manager.
The upcoming Wednesday chat schedule is as follows:
FEBRUARY MARCH APRIL
-------- ----- -----
1st Wednesday Charles Minter & Martin Weiner Henry van der Eb Susan Bryne
2nd Wednesday Ivan Arteaga Walter Walsh & Laura Linehan Lynda Calkin
3rd Wednesday Tim O'Brien Tim O'Brien Caesar Bryan
4th Wednesday Barbara Marcin Barbara Marcin Barbara Marcin
All chat sessions start at 4:15 ET. Please arrive early, as participation
is limited.
You may sign up for our HIGHLIGHTS e-mail newsletter at www.gabelli.com
and receive early notice of chat sessions, closing mutual fund prices, news
events and media sightings.
IN CONCLUSION
2001 has been a year most would like to forget. For the first time since
Pearl Harbor, America has been attacked and suffered substantial casualties. We
have been forced into what will be a long and costly war against terrorism. Many
Americans lost their jobs as the overheated economy came to an abrupt
standstill. Yet, we have survived and both the resilient economy and rebounding
stock market are pointing to a better year ahead. We wish all our shareholders a
Happy New Year, with growing confidence that 2002 will be just that.
Sincerely,
/S/MARIO J. GABELLI
MARIO J. GABELLI
President and Chief Investment Officer
February 1, 2002
---------------------------------------------------------------------------------------------------------------------------
SELECTED CONVERTIBLE HOLDINGS
DECEMBER 31, 2001
-----------------
Broadwing Inc. (6.75% Cv. Pfd., Ser. B) Robbins & Myers Inc. (Sub. Deb. Cv., 6.50%, 09/01/03)
Citizens Communications Co. (5.00% Cv. Pfd.) Sealed Air Corp. ($2.00 Cv. Pfd., Ser. A)
Hilton Hotels Corp. (Sub. Deb. Cv., 5.00%, 05/15/06) Sequa Corp. ($5.00 Cv. Pfd.)
Kaman Corp. (Sub. Deb. Cv., 6.00%, 03/15/12) Standard Motor Products Inc. (Sub. Deb. Cv., 6.75%, 07/15/09)
Nextel Communications Inc. (Sub. Deb. Cv., 5.25%, 01/15/10) Thermo Electron Corp. (Sub. Deb. Cv., 4.25%, 01/01/03)
---------------------------------------------------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
8
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2001
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ------ ---------
CONVERTIBLE CORPORATE BONDS -- 44.8%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 6.1%
$ 800,000 Exide Corp., Sub. Deb. Cv.,
2.900%, 12/15/05 (b) $ 581,825 $ 60,000
9,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ... 7,119,020 6,705,000
---------- ----------
7,700,845 6,765,000
---------- ----------
AVIATION: PARTS AND SERVICES -- 4.1%
4,711,000 Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 ... 4,475,291 4,499,005
---------- ----------
BROADCASTING -- 0.0%
15,000 Granite Broadcasting Corp.,
Sub. Deb. Cv.,
8.875%, 05/15/08 ... 7,386 12,075
---------- ----------
BUILDING AND CONSTRUCTION -- 0.0%
20,000 Foster Wheeler Ltd., Cv.,
6.500%, 06/01/07 ... 12,403 12,025
40,000 Foster Wheeler Ltd.,
Sub. Deb.Cv.,
6.500%, 06/01/07 (b) 34,673 28,213
---------- ----------
47,076 40,238
---------- ----------
BUSINESS SERVICES -- 2.2%
900,000 BBN Corp., Sub. Deb. Cv.,
6.000%, 04/01/12 (a) 882,599 870,750
10,000 First Data Corp.,
Sub. Deb. Cv.,
2.000%, 03/01/08 ... 9,944 11,650
1,800,000 Trans-Lux Corp.,
Sub. Deb. Cv.,
7.500%, 12/01/06 ... 1,739,715 1,557,000
---------- ----------
2,632,258 2,439,400
---------- ----------
CABLE -- 0.8%
1,000,000 Charter Communications Inc., Cv.,
4.750%, 06/01/06 ... 801,798 917,500
---------- ----------
COMPUTER SOFTWARE AND SERVICES -- 0.3%
300,000 Exodus Communications Inc.,
Sub. Deb. Cv.,
5.250%, 02/15/08+ (e) 163,037 6,750
350,000 QuadraMed Corp.,
Sub. Deb. Cv.,
5.250%, 05/01/05 ... 251,671 274,312
---------- ----------
414,708 281,062
---------- ----------
CONSUMER PRODUCTS -- 0.6%
1,500,000 Pillowtex Corp.,
Sub. Deb. Cv.,
6.000%, 03/15/12+ (e) 120,955 0
700,000 Standard Commercial Corp.,
Sub. Deb. Cv.,
7.250%, 03/31/07 ... 606,819 637,875
---------- ----------
727,774 637,875
---------- ----------
CONSUMER SERVICES -- 4.4%
4,000,000 CUC International Inc.,
Sub. Deb. Cv.,
3.000%, 02/15/02 ... 3,987,178 4,025,000
1,100,000 Ogden Corp.,
Sub. Deb. Cv.,
6.000%, 06/01/02 ... 1,075,052 783,750
---------- ----------
5,062,230 4,808,750
---------- ----------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ------ ---------
ELECTRONICS -- 2.8%
ASM Lithography
Holding, Cv.,
$ 40,000 2.500%, 04/09/05(d) $ 31,690 $ 20,091
10,000 2.500%, 04/09/05(b)(d) 3,521 2,232
700,000 Oak Industries Inc.,
Sub. Deb. Cv.,
4.875%, 03/01/08 ... 641,036 626,500
100,000 Solectron Corp. Sub. Deb. Cv.,
Zero Coupon, 05/08/20 52,152 53,375
2,400,000 Thermo Electron Corp.,
Sub. Deb. Cv.,
4.250%, 01/01/03 (b) 2,357,052 2,388,000
---------- ----------
3,085,451 3,090,198
---------- ----------
ENERGY AND UTILITIES -- 2.2%
200,000 Devon Energy Corp.,
Sub. Deb. Cv.,
4.950%, 08/15/08 ... 194,181 202,500
200,000 Friede Goldman Halter Inc.,
Sub. Deb. Cv.,
4.500%, 09/15/04+(e) 129,732 43,000
1,500,000 Mirant Corp.,
Sub. Deb. Cv.,
2.500%, 06/15/21 ... 1,122,670 1,132,500
1,100,000 Moran Energy Inc.,
Sub. Deb. Cv.,
8.750%, 01/15/08 ... 796,672 1,031,250
---------- ----------
2,243,255 2,409,250
---------- ----------
ENTERTAINMENT -- 0.7%
800,000 USA Networks Inc.,
Sub. Deb. Cv.,
7.000%, 07/01/03 ... 777,951 796,000
---------- ----------
ENVIRONMENTAL SERVICES -- 6.8%
7,500,000 Waste Management Inc.,
Sub. Deb. Cv.,
4.000%, 02/01/02 ... 7,478,232 7,490,625
---------- ----------
EQUIPMENT AND SUPPLIES -- 1.6%
1,700,000 Robbins & Myers Inc.,
Sub. Deb. Cv.,
6.500%, 09/01/03 ... 1,682,311 1,712,750
---------- ----------
FOOD AND BEVERAGE -- 0.0%
100,000 Chiquita Brands International
Inc., Cv.,
7.000%, 03/28/01+ (a)(f) 100,000 47,000
---------- ----------
HEALTH CARE -- 0.1%
50,000 Apogent Technologies Inc.,
2.250%, 10/15/21(b) 52,345 53,625
10,000 Inhale Therapeutic Systems,
Sub. Deb. Cv.,
6.750%, 10/13/06 (b) 10,364 12,175
10,000 Invitrogen Corp.,
Sub. Deb. Cv.,
5.500%, 03/01/07 ... 10,100 10,112
150,000 Sabratek Corp.,
Sub. Deb. Cv.,
6.000%, 04/15/05+ (e) 84,763 0
---------- ----------
157,572 75,912
---------- ----------
See accompanying notes to financial statements.
9
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2001
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ------ ---------
CONVERTIBLE CORPORATE BONDS -- (CONTINUED)
HOTELS AND GAMING -- 4.4%
$5,500,000 Hilton Hotels Corp.,
Sub. Deb. Cv.,
5.000%, 05/15/06 ... $4,933,481 $ 4,895,000
---------- ----------
PAPER AND FOREST PRODUCTS -- 1.4%
200,000 Riverwood International Corp.,
Sub. Deb. Cv.,
6.750%, 09/15/03 ... 199,871 230,890
1,400,000 Thermo Fibertek Inc., Cv.,
4.500%, 07/15/04 (b) 1,259,806 1,330,000
---------- ----------
1,459,677 1,560,890
---------- ----------
PUBLISHING -- 1.0%
650,000 News America Holdings Inc.,
Sub. Deb. Cv.,
Zero Coupon, 03/31/02 643,364 900,640
200,000 Times Mirror Ltd.,
Sub. Deb. Cv.,
Zero Coupon, 04/15/17 106,402 115,750
50,000 United News & Media plc,
Sub. Deb. Cv.,
6.125%, 12/03/03 (c) 84,692 72,712
---------- ----------
834,458 1,089,102
---------- ----------
RETAIL -- 1.4%
60,000 Costco Companies Inc.,
Sub. Deb. Cv.,
Zero Coupon, 08/19/17 43,522 61,800
300,000 Rite Aid Corp.,
Sub. Deb Cv.,
5.250%, 09/15/02 ... 213,616 292,500
1,200,000 Thermo Instrument Systems Inc.,
Sub. Deb. Cv.,
4.500%, 10/15/03 (b) 1,168,996 1,182,000
---------- ----------
1,426,134 1,536,300
---------- ----------
SPECIALTY CHEMICALS -- 1.0%
IVAX Corp.
Sub. Deb. Cv.,
750,000 5.500%, 05/15/07 ... 695,253 752,813
400,000 4.500%, 05/15/08 ... 318,548 335,000
---------- ----------
1,013,801 1,087,813
---------- ----------
TELECOMMUNICATIONS -- 0.9%
80,000 Amnex Inc., Sub. Deb. Cv.,
8.500%, 09/25/02+ (b)(e) 71,772 0
Bell Atlantic Corp., Cv.,
210,000 4.250%, 09/15/05 (b) 206,506 210,000
90,000 4.250%, 09/15/05 ... 96,535 90,225
1,300,000 NTL Inc., Sub. Deb. Cv.,
5.750%, 12/15/09 ... 578,914 146,250
500,000 Rogers Communications Inc.,
Sub. Deb. Cv.,
2.000%, 11/26/05 ... 390,925 406,250
400,000 Williams Communications
Group Inc.,
10.875%, 10/01/09 .. 156,126 166,000
200,000 XO Communications Inc.,
Sub. Deb. Cv.,
5.750%, 01/15/09 (b) 115,924 3,000
---------- ----------
1,616,702 1,021,725
---------- ----------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ------ ---------
WIRELESS COMMUNICATIONS -- 1.9%
$ 700,000 Nextel Communications
Inc., Cv.,
6.000%, 06/01/11 (b) $ 547,100 $ 521,500
Nextel Communications Inc.,
Sub. Deb. Cv.,
1,700,000 5.250%, 01/15/10 ... 1,104,748 1,034,875
100,000 4.750%, 07/01/07 ... 65,582 76,500
1,100,000 United States Cellular Corp.,
Sub. Deb. Cv.,
Zero Coupon, 06/15/15 726,683 470,250
---------- ----------
2,444,113 2,103,125
---------- ----------
TOTAL CONVERTIBLE
CORPORATE BONDS ..... 51,122,504 49,316,595
---------- ----------
SHARES
------
CONVERTIBLE PREFERRED STOCKS -- 15.7%
AEROSPACE -- 1.2%
10,800 Northrop Grumman Corp.,
7.000% Cv. Pfd.,
Ser. B ............. 1,258,416 1,339,200
---------- ----------
AVIATION: PARTS AND SERVICES -- 1.8%
Coltec Capital Trust,
37,000 5.250% Cv. Pfd. .... 1,479,875 1,311,206
17,000 5.250% Cv. Pfd. (b) 802,500 613,559
---------- ----------
2,282,375 1,924,765
---------- ----------
BROADCASTING -- 0.7%
2,000 Granite Broadcasting Corp.,
12.750% Cv. Pfd. ... 820,000 800,000
---------- ----------
BUSINESS SERVICES -- 0.5%
20,000 Key3Media Group,
5.500% Cv. Pfd.(a) . 500,000 500,000
---------- ----------
CABLE -- 0.7%
15,000 CVC Equity Securities Trust I,
6.500% Cv. Pfd. .... 540,750 667,500
1,000 MediaOne Group Inc.,
9.500% Cv. Pfd., Ser. D 26,800 25,350
15,000 UnitedGlobalCom Inc.,
7.000% Cv. Pfd.., Ser. C 317,000 118,125
---------- ----------
884,550 810,975
---------- ----------
DIVERSIFIED INDUSTRIAL -- 0.4%
2,000 GATX Corp.,
$2.50 Cv. Pfd. ..... 259,050 328,000
WHX Corp.,
8,000 $3.75 Cv. Pfd., Ser. B 37,889 28,800
25,000 6.500% Cv. Pfd., Ser. A 202,512 117,500
---------- ----------
499,451 474,300
---------- ----------
ENERGY AND UTILITIES -- 0.2%
500 Cinergy Corp.,
9.500% Cv. Pfd. .... 25,025 27,600
200 KCS Energy Inc.,
5.000% Cv. Pfd.,
Ser. A(a) .......... 200,000 208,000
4,000 Semco Capital Trust II,
11.000% Cv. Pfd. ... 43,400 36,600
---------- ----------
268,425 272,200
---------- ----------
See accompanying notes to financial statements.
10
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2001
MARKET
SHARES COST VALUE
------ --------- --------
CONVERTIBLE PREFERRED STOCKS -- (CONTINUED)
ENTERTAINMENT -- 0.9%
2,000 Metromedia International
Group Inc.,
7.250% Cv. Pfd. .... $ 47,381 $ 15,000
30,000 Rainbow Equity Securities
Trust II,
6.250% Cv. Pfd. .... 675,000 705,600
10,000 Six Flags Inc.,
7.250% Cv. Pfd. .... 237,785 240,000
---------- ----------
960,166 960,600
---------- ----------
EQUIPMENT AND SUPPLIES -- 2.3%
31,000 Sequa Corp.,
$5.00 Cv. Pfd. ..... 2,394,242 2,483,100
---------- ----------
PAPER AND FOREST PRODUCTS -- 2.3%
62,000 Sealed Air Corp.,
$2.00 Cv. Pfd., Ser. A 2,343,143 2,569,900
---------- ----------
TELECOMMUNICATIONS -- 4.7%
37,000 Broadwing Inc.,
6.750% Cv. Pfd.,
Ser. B ............. 1,229,894 1,258,000
76,000 Citizens Communications Co.,
5.000% Cv. Pfd. .... 3,790,426 3,382,000
13,000 Philippine Long Distance
Telephone Co.,
$3.50 Cv. Pfd., Ser. III 523,024 256,750
1,500 TCI Pacific
Communications Inc.,
5.000% Cv. Pfd. .... 134,837 211,500
---------- ----------
5,678,181 5,108,250
---------- ----------
WIRELESS COMMUNICATIONS -- 0.0%
3,000 Loral Space &
Communications Ltd.,
6.000% Cv. Pfd., Ser. D 54,750 39,000
---------- ----------
TOTAL CONVERTIBLE
PREFERRED STOCKS .... 17,943,699 17,282,290
---------- ----------
COMMON STOCKS -- 3.9%
AVIATION: PARTS AND SERVICES -- 0.3%
18,000 Kaman Corp., Cl. A ... 181,321 280,800
---------- ----------
BROADCASTING -- 0.1%
38,500 Granite Broadcasting Corp.+ 40,906 79,310
---------- ----------
ENERGY AND UTILITIES -- 2.5%
8,900 AGL Resources Inc. ... 157,738 204,878
7,000 BP plc, ADR .......... 237,270 325,570
18,000 CH Energy Group Inc. . 648,256 782,460
10,000 Conectiv Inc. ........ 221,812 244,900
756 KCS Energy Inc.+ ..... 4,438 2,359
10,000 NiSource Inc.+ ....... 20,000 23,200
40,000 Northeast Utilities .. 784,670 705,200
10,000 Progress Energy Inc. . 5,200 4,400
8,000 RGS Energy Group Inc. 291,440 300,800
2,200 SJW Corp. ............ 213,919 187,638
---------- ----------
2,584,743 2,781,405
---------- ----------
EQUIPMENT AND SUPPLIES -- 0.1%
50,000 Fedders Corp., Cl. A . 310,916 140,000
---------- ----------
FINANCIAL SERVICES -- 0.5%
28,000 Argonaut Group Inc. .. 641,921 547,960
---------- ----------
MARKET
SHARES COST VALUE
------ --------- --------
TELECOMMUNICATIONS -- 0.2%
1,000 Philippine Long Distance
Telephone Co., ADR $ 12,470 $ 8,240
10,000 Sprint Corp. - FON Group 104,330 200,800
------------ ------------
116,800 209,040
------------ ------------
WIRELESS COMMUNICATIONS -- 0.2%
10,000 Sprint Corp. - PCS Group+ 99,537 244,100
49 Winstar
Communications Inc.+ 438 1
------------ ------------
99,975 244,101
------------ ------------
TOTAL
COMMON STOCKS ....... 3,976,582 4,282,616
------------ ------------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS -- 34.4%
$37,958,000 U.S. Treasury Bills,
1.645% to 1.790%++,
01/03/02 to 03/28/02 37,882,768 37,883,028
------------ ------------
TOTAL INVESTMENTS -- 98.8% ...... $110,925,553 108,764,529
============
OTHER ASSETS, LIABILITIES AND
LIQUIDATION VALUE OF
CUMULATIVE PREFERRED STOCK -- (26.1)% ...... (28,690,150)
------------
NET ASSETS -- COMMON STOCK -- 72.7%
(8,074,717 common shares outstanding) ...... 80,074,379
------------
NET ASSETS -- PREFERRED STOCK -- 27.3%
(1,200,000 preferred shares outstanding) ... 30,000,000
------------
TOTAL NET ASSETS-- 100.0% .................... $110,074,379
============
NET ASSET VALUE PER COMMON SHARE
($80,074,379 / 8,074,717 shares outstanding) ..... $ 9.92
=======
MARKET
SHARES PROCEEDS VALUE
------ -------- ------------
SECURITIES SOLD SHORT
KCS Energy Inc. .......... 50,000 $ 476,483 $ 156,000
============
--------------
For Federal tax purposes:
Aggregate cost of investments .... $112,816,667
============
Gross unrealized appreciation .... $ 1,572,982
Gross unrealized depreciation .... (5,625,120)
------------
Net unrealized depreciation ...... $ (4,052,138)
============
-------------
(a) Security fair valued under procedures established by the Board of Directors.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2001, the market value of Rule 144A securities amounted to $ 6,404,304 or
5.82% of total net assets.
(c) Principal amount denoted in British Pounds.
(d) Principal amount denoted in Euros.
(e) Bond in default.
(f) Bond in default and subject to restructure.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
11
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
ASSETS:
Investments, at value (Cost $110,925,553) $108,764,529
Cash .................................... 2,321
Dividends and interest receivable ....... 1,205,173
Receivable for investments sold ......... 476,483
Other assets ............................ 2,337
------------
TOTAL ASSETS 110,450,843
------------
LIABILITIES:
Securities sold short (proceeds $476,483) 156,000
Dividends payable ....................... 40,000
Payable for investment advisory fee ..... 59,213
Payable to custodian .................... 6,100
Payable for legal and audit ............. 36,381
Payable for shareholder
communications expense ................ 25,164
Accrued expenses and other liabilities .. 53,606
------------
TOTAL LIABILITIES ....................... 376,464
------------
NET ASSETS .............................. $110,074,379
============
NET ASSETS CONSIST OF:
Cumulative Preferred Stock (8.00%, $25.00
liquidation value, $0.001 par
value, 2,000,000 shares authorized
with 1,200,000 shares issued and
outstanding) .......................... $30,000,000
Capital stock, at par value ............. 8,075
Additional paid-in capital .............. 83,780,973
Accumulated undistributed net investment
income ................................ 314,002
Accumulated distributions in excess of net
realized gain on investments and
foreign currency transactions ......... (2,188,145)
Net unrealized depreciation on investments,
securities sold short and
foreign currency transactions ......... (1,840,526)
------------
TOTAL NET ASSETS ........................ $110,074,379
============
NET ASSET VALUE PER COMMON SHARE
($80,074,379 / 8,074,717 shares outstanding;
100,000,000 shares authorized of
$0.001 par value) ..................... $9.92
=====
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
INVESTMENT INCOME:
Dividends (net of foreign taxes of $10,115) $1,111,322
Interest ................................... 5,386,993
----------
TOTAL INVESTMENT INCOME .................... 6,498,315
----------
EXPENSES:
Investment advisory fees ................... 750,049
Shareholder services fees .................. 90,252
Payroll .................................... 113,000
Shareholder communications expenses ........ 30,590
Directors' fees ............................ 59,340
Legal and audit fees ....................... 49,183
Custodian fees ............................. 30,422
Miscellaneous expenses ..................... 57,614
----------
TOTAL EXPENSES ............................. 1,180,450
----------
NET INVESTMENT INCOME ...................... 5,317,865
----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on investments and
foreign currency transactions ........... 1,598,603
Net change in unrealized depreciation on
investments, securities sold short and
foreign currency transactions ........... 932,372
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ........ 2,530,975
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .......................... $7,848,840
==========
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2001 2000
------------ ------------
OPERATIONS:
Net investment income ............................................................... $ 5,317,865 $ 5,649,243
Net realized gain on investments and foreign currency transactions .................. 1,598,603 7,129,769
Net change in unrealized appreciation/depreciation of investments
securities sold short and foreign currency transactions ........................... 932,372 (11,116,303)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ 7,848,840 1,662,709
------------ ------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ............................................................... (3,753,230) (4,434,112)
Net realized short-term gain on investments and foreign currency transactions ....... (546,918) --
Net realized long-term gain on investments and foreign currency transactions ........ (2,093,023) (5,741,388)
------------ ------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS .................................... (6,393,171) (10,175,500)
------------ ------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ............................................................... (1,417,106) (1,042,230)
Net realized short-term gain on investments and foreign currency transactions ....... (176,060) --
Net realized long-term gain on investments and foreign currency transactions ........ (806,834) (1,357,770)
------------ ------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS ................................. (2,400,000) (2,400,000)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon
reinvestment of dividends and distributions ....................................... 2,952,833 --
Net decrease from repurchase of common stock ........................................ -- (1,200,514)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS .................. 2,952,833 (1,200,514)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ............................................... 2,008,502 (12,113,305)
NET ASSETS:
Beginning of period ................................................................. 108,065,877 120,179,182
------------ ------------
End of period (including undistributed net investment income
of $314,002 and $158,341, respectively) ........................................... $110,074,379 $108,065,877
============ ============
See accompanying notes to financial statements.
12
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION. The Gabelli Convertible Securities Fund, Inc. (the "Fund") is a
closed-end diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), whose investment
objective is to seek a high level of total return through a combination of
current income and capital appreciation by investing in convertible securities.
The Fund was incorporated in Maryland on December 19, 1988 as an open-end
diversified management investment company and commenced investment operations on
July 3, 1989. The Board of Directors, upon approval at a special meeting of
shareholders held on February 17, 1995, voted to approve the conversion of the
Fund to closed-end status, effective March 31, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange 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 except for open short positions, which are
valued at the last asked price). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. If there were no asked prices quoted
on that day, then the security is valued at the closing bid price. 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
foreign markets are generally valued at the preceding closing values of such
securities on their respective exchanges. Securities and assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Board of Directors. Short term debt securities with remaining
maturities of 60 days or less are valued at amortized cost, unless the Board of
Directors determines such does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Board of Directors. Debt instruments having a maturity greater than 60 days are
valued at the highest bid price obtained from a dealer maintaining an active
market in those securities. Options are valued at the last sale price on the
exchange on which they are listed. If no sales of such options have taken place
that day, they will be valued at the mean between their closing bid and asked
prices.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Bank of
New York, with member banks of the Federal Reserve System or with other brokers
or dealers that meet credit guidelines established by the Adviser and reviewed
by the Board of Directors. Under the terms of a typical repurchase agreement,
the Fund takes possession of an underlying debt obligation subject to an
obligation of the seller to repurchase, and the Fund to resell, the obligation
at an agreed-upon price and time, thereby determining the yield during the
Fund's holding period. The Fund will always receive and maintain securities as
collateral whose market value, including accrued interest, will be at least
equal to 100% of the dollar amount invested by the Fund in each agreement. The
Fund will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer of the collateral to the account of the
custodian. To the extent that any repurchase transaction exceeds one business
day, the value of the collateral is marked-to-market on a daily basis to
maintain the adequacy of the collateral. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the
purpose of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase. Such investments will only be
made if they are economically appropriate to the reduction of risks involved in
the management of the Fund's investments. Upon entering into a futures contract,
the Fund is required to deposit with the broker an amount of cash or cash
equivalents equal to a certain percentage of the contract amount. This is known
as the "initial margin." Subsequent payments ("variation margin") are made or
received by the Fund each day, depending on the daily fluctuation of the value
of the contract. The daily changes in the contract are included in unrealized
appreciation/depreciation on investments and futures contracts. The Fund
recognizes a realized gain or loss when the contract is closed. At December 31,
2001, there were no open futures contracts.
13
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency transactions. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate
fluctuations in the underlying prices of the Fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign exchange contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain/(loss) that
might result should the value of the currency increase. In addition, the Fund
could be exposed to risks if the counterparties to the contracts are unable to
meet the terms of their contracts. At December 31, 2001, the Fund held no
forward foreign exchange contracts.
SECURITIES SOLD SHORT. A short sale involves selling a security which the
Fund does not own. The proceeds received for short sales are recorded as
liabilities and the Fund records an unrealized gain or loss to the extent of the
difference between the proceeds received and the value of the open short
position on the day of determination. The Fund records a realized gain or loss
when the short position is closed out. By entering into a short sale, the Fund
bears the market risk of an unfavorable change in the price of the security sold
short. Dividends on short sales are recorded as an expense by the Fund on the
ex-dividend date and interest expense is recorded on the accrual basis.
FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are
maintained in United States (U.S.) dollars. Foreign currencies, investments and
other assets and liabilities are translated into U.S. dollars at the exchange
rates prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments and foreign currency transactions. Net realized foreign currency
gains and losses resulting from changes in exchange rates include foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency transactions and the difference
between the amounts of interest and dividends recorded on the books of the Fund
and the amounts actually received. The portion of foreign currency gains and
losses related to fluctuation in exchange rates between the initial trade date
and subsequent sale trade date is included in realized gain/(loss) on
investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders
are recorded on the ex-dividend date. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Fund, timing differences and differing characterization
of distributions made by the Fund. Distributions to shareholders of the Fund's
8.00% Cumulative Preferred Stock ("Cumulative Preferred Stock") are accrued on a
daily basis and are determined as described in Note 5.
For the year ended December 31, 2001, reclassifications were made to
increase accumulated undistributed net investment income for $8,132 and decrease
distributions in excess of net realized gain on investments, securities sold
short and foreign currency transactions for $6,178 with an offsetting adjustment
to additional paid-in capital.
14
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the fiscal year ended December 31, 2001, the tax character of
distributions paid on a tax basis does not materially differ from accounting
principles generally accepted in the United States.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a result, a Federal income tax provision is not required.
As of December 31, 2001, the components of accumulated earnings/(losses)
on a tax basis were as follows:
Undistributed ordinary income
(inclusive of short term capital gains) ......... $ 59,400
Net unrealized depreciation ........................ (3,774,069)
-----------
Total accumulated losses ........................... $(3,714,669)
===========
Differences between amounts reported on a tax basis and those reported on
a GAAP basis are primarily due to timing of recognition of capital gains on
investments held by the Fund.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Fund has entered into an
investment advisory agreement (the "Advisory Agreement") with the Adviser which
provides that the Fund will pay the Adviser a fee, computed daily and paid
monthly, equal on an annual basis to 1.00% of the value of the Fund's average
daily net assets. In accordance with the Advisory Agreement, the Adviser
provides a continuous investment program for the Fund's portfolio and oversees
the administration of all aspects of the Fund's business and affairs. The
Adviser has agreed to reduce the management fee on the incremental assets
attributable to the Cumulative Preferred Stock if the total return of the net
asset value of the common shares of the Fund, including distributions and
advisory fee subject to reduction, does not exceed the stated dividend rate of
the Cumulative Preferred Stock. For the year ended December 31, 2001, the Fund's
total return on the net asset value of the common shares did not exceed the
stated dividend rate of the Cumulative Preferred Stock. Thus, such management
fees were not earned on the incremental assets.
During the year ended December 31, 2001, Gabelli & Company, Inc. and its
affiliates received $34,251 in brokerage commissions as a result of executing
agency transactions in portfolio securities on behalf of the Fund.
4. PORTFOLIO SECURITIES. Costs of purchases and proceeds from sales of
securities, other than short-term securities, for the year ended December 31,
2001 aggregated $56,274,660 and $38,546,176, respectively.
5. CAPITAL. The Articles of Incorporation, dated December 19, 1988, permit the
Fund to issue 100,000,000 shares of common stock (par value $0.001).
Transactions in common stock were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------------- -----------------------
Shares Amount Shares Amount
------- ----------- -------- -----------
Shares issued upon reinvestment
of dividends and distributions ....................... 286,972 $2,952,833 ---- ----
Net decrease from repurchase of common shares .......... ---- ---- (124,900) $(1,200,514)
------- ---------- -------- -----------
Net increase ........................................... 286,972 $2,952,833 (124,900) $(1,200,514)
======= ========== ======== ===========
The Adviser has been authorized to repurchase on behalf of the Fund up to
500,000 shares of Common Stock of the Fund in the open market, whenever the
shares are trading at a discount of 10% or more from the net asset value of the
shares. For the year ended December 31, 2001, the Fund did not repurchase any
shares of Common Stock. All shares of Common Stock repurchased have been
retired.
In addition, the Fund has been authorized to issue up to 2,000,000 shares
of Preferred Stock of which 1,200,000 shares has been designated as $0.001 par
value 8% Cumulative Preferred Stock. Dividends on shares of the Cumulative
Preferred Stock are cumulative. The Fund is required to meet certain asset
coverage tests with respect to the Cumulative Preferred Stock as required by the
1940 Act and by the Shares' Articles Supplementary. If the Fund fails to meet
these requirements and does not correct such failure, the Fund may be required
to redeem, in part or in full, the Cumulative Preferred Stock at a redemption
price of $25.00 per share plus an amount equal to the accumulated and unpaid
dividends whether or not declared on such shares in order to meet these
requirements. Additionally, failure to meet the foregoing asset requirement
could restrict the Fund's ability to pay dividends to Common Shareholders and
could
15
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
lead to sales of portfolio securities at inopportune times. The Preferred Stock
is callable at the redemption price at the option of the Fund after May 15,
2002. This Cumulative Preferred Stock introduced leverage into the capital
structure of the Fund. This leverage tends to magnify both the risks and
opportunities to Common Shareholders. At December 31, 2001, the 1,200,000 shares
of 8% Cumulative Preferred Stock outstanding accrued dividends in the amount of
$40,000. The income received on the Fund's assets may vary in a manner unrelated
to the fixed rate, which could have either a beneficial or detrimental impact on
net investment income and gains available to Common Shareholders.
The Fund shall not declare dividends or make other distributions on
1,200,000 shares of Common Stock or purchase any such shares if at the time of
the declaration, distribution or purchase, asset coverage with respect to the
outstanding Preferred Stock would be less than 200%.
The holders of Cumulative Preferred Stock have voting rights equivalent to
those of the holders of Common Stock (one vote per share) and will vote together
with holders of shares of Common Stock as a single class. In addition, the 1940
Act requires that along with approval of the holders of a majority of the
holders of Common Stock, approval of a majority of the holders of any
outstanding shares of Cumulative Preferred Stock, voting separately as a class,
would be required to (a) adopt any plan of reorganization that would adversely
affect the Cumulative Preferred Stock, and (b) take any action requiring a vote
of security holders, including, among other things, changes in the Fund's
subclassification as a closed-end investment company or changes in its
fundamental investment restrictions.
16
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A FUND COMMON SHARE
OUTSTANDING THROUGHOUT EACH PERIOD: YEAR ENDED DECEMBER 31,
-------------------------------------------------------
OPERATING PERFORMANCE: 2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Net asset value, beginning of period .................. $ 10.02 $ 11.40 $ 11.45 $ 11.48 $ 11.08
-------- -------- -------- -------- --------
Net investment income ................................. 0.68 0.72 0.51 0.53 0.49
Net realized and unrealized gain (loss)
on investments ...................................... 0.32 (0.52) 0.77 0.65 1.23
-------- -------- -------- -------- --------
Total from investment operations ...................... 1.00 0.20 1.28 1.18 1.72
-------- -------- -------- -------- --------
CHANGE IN NET ASSET VALUE FROM CAPITAL STOCK TRANSACTIONS:
Increase in net asset value from capital share
transactions ........................................ 0.01 0.02 -- 0.01 0.01
Offering expenses charged to capital surplus .......... -- -- -- -- (0.18)
-------- -------- -------- -------- --------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ................................. (0.48) (0.57) (0.39) (0.39) (0.40)
Net realized gain on investments ...................... (0.33) (0.73) (0.64) (0.53) (0.56)
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ................................. (0.18) (0.13) (0.11) (0.13) (0.08)
Net realized gain on investments ...................... (0.12) (0.17) (0.19) (0.17) (0.11)
-------- -------- -------- -------- --------
Total distributions ................................... (1.11) (1.60) (1.33) (1.22) (1.15)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ........................ $ 9.92 $ 10.02 $ 11.40 $ 11.45 $ 11.48
======== ======== ======== ======== ========
Net asset value total return + ........................ 7.0% 0.0% 9.4% 8.3% 13.5%
======== ======== ======== ======== ========
Market value, end of period ........................... $ 10.90 $ 9.13 $ 10.56 $ 11.25 $ 10.31
======== ======== ======== ======== ========
Total investment return ++ ............................ 29.1% (1.7)% 3.2% 18.4% 22.2%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON
STOCK SHAREHOLDERS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................. $110,074 $108,066 $120,179 $120,726 $122,382
Net assets attributable to common shares,
end of period (in 000's) ............................ $ 80,074 $ 78,066 $ 90,179 $ 90,726 $ 92,382
Ratio of net investment income to average
net assets attributable to common stock ............. 6.58% 6.49% 4.35% 4.54% 4.23%
Ratio of operating expenses to average
net assets attributable to common stock (b) ......... 1.46% 1.48% 1.80% 1.83% 1.68%
Ratio of operating expenses to average
total net assets (d) ................................ 1.07% 1.10% 1.36% 1.38% 1.39%
Portfolio turnover rate ............................... 59% 169% 175% 149% 243%
PREFERRED STOCK:
Liquidation value, end of period (in 000's) ........... $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000
Total shares outstanding (in 000's) ................... 1,200 1,200 1,200 1,200 1,200
Asset coverage ........................................ 367% 360% 401% 402% 408%
Asset coverage per share .............................. $ 91.72 $ 90.05 $ 100.15 $ 100.60 $ 101.99
Liquidation preference per share ...................... $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (c) .............................. $ 25.80 $ 24.31 $ 25.36 $ 26.84 $ 25.69
------------------------------
+ Based on net asset value per share, adjusted for reinvestment of
distributions.
++ Based on market value per share, adjusted for reinvestment of distributions.
(a) Amount represents less than $0.005 per share.
(b) The ratio of operating expenses to average net assets attributable to common
stock for the fiscal year ended December 31, 1997 does not include a
reduction of expenses for custodian fee credits on cash balances maintained
with the custodian. Including the custodian fee credit, the ratio of
operating expenses to average net assets attributable to common stock for
the year would have been 1.67%.
(c) Based on weekly prices.
(d) Amounts are attributable to both common and preferred stock assets.
See accompanying notes to financial statements.
17
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Gabelli Convertible Securities Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Convertible Securities
Fund, Inc. (the "Fund") at December 31, 2001, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2001 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
/S/ PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
February 15, 2002
18
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ADDITIONAL FUND INFORMATION (UNAUDITED)
The business and affairs of the Fund are managed under the direction of
the Fund's Board of Directors. Information pertaining to the Directors and
officers of the Fund is set forth below. The Fund's Statement of Additional
Information includes additional information about The Gabelli Convertible
Securities Fund, Inc. Directors and is available, without charge, upon request,
by calling 1-800-GABELLI (1-800-422-3554) or by writing to The Gabelli
Convertible Securities Fund, Inc. at One Corporate Center, Rye, NY 10580.
TERM OF NUMBER OF
OFFICE AND FUNDS IN FUND
NAME, POSITION(S) LENGTH OF COMPLEX
ADDRESS(1) TIME OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE SERVED(2) DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR
---------------- ----------- ------------- ----------------------- -------------------
INTERESTED DIRECTORS(3):
-----------------------
MARIO J. GABELLI Since 1989*** 21 Chairman of the Board and Chief Executive Director of Morgan Group
Director, President and Officer of Gabelli Asset Management Inc. and Holdings, Inc. (transportation
Chief Investment Officer Chief Investment Officer of Gabelli Funds, services); Vice Chairman
Age: 59 LLC and GAMCO Investors, Inc.; of Lynch Corporation
Chairman and Chief Executive Officer of (diversified manufacturing)
Lynch Interactive Corporation (multimedia
and services)
KARL OTTO POHL Since 1992*** 30 Member of the Shareholder Committee of Director of Gabelli Asset
Director Sal Oppenheim Jr. & Cie (private invest- Management Inc. (investment
Age: 72 ment bank); Former President of the management); Chairman,
Deutsche Bundesbank and Chairman of its Incentive Capital and Incentive
Central Bank Council (1980-1991) Asset Management (Zurich);
Director at Sal Oppenheim, Jr.
& Cie, Zurich
NON-INTERESTED DIRECTORS:
------------------------
E. VAL CERUTTI Since 1989** 7 Chief Executive Officer of Cerutti Director of Lynch Corporation
Director Consultants, Inc.; Former President and
Age: 62 Chief Operating Officer of Stella D'oro
Biscuit Company (through 1992);
Adviser, Iona College School of Business
ANTHONY J. COLAVITA(4) Since 1989* 32 President and Attorney at Law in the law firm --
Director of Anthony J. Colavita, P.C.
Age: 66
DUGALD A. FLETCHER Since 1989** 2 President, Fletcher & Company, Inc.; Director of Harris and Harris
Director Former Director and Chairman and Group, Inc. (venture capital)
Age: 72 Chief Executive Officer of Binnings
Building Products, Inc. (1997)
ANTHONY R. PUSTORINO Since 1989** 16 Certified Public Accountant; Professor --
Director Emeritus, Pace University
Age: 76
WERNER J. ROEDER, MD(4) Since 2001*** 26 Medical Director of Lawrence Hospital --
Director and practicing private physician
Age: 61
ANTHONIE C. VAN EKRIS Since 1992* 17 Managing Director of BALMAC Director of Spinnaker
Director International, Inc. Industries, Inc.
Age: 67
SALVATORE J. ZIZZA Since 1991* 8 Chairman, Hallmark Electrical Supplies Corp.; Board Member of Hollis Eden
Director Former Executive Vice President of FMG Pharmaceuticals,
Age: 56 Group (OTC), a healthcare provider; Former Bion Environmental
President and Chief Executive Officer of the Technologies Inc.
Lehigh Group Inc., (electrical supply and The Credit Store Inc.
wholesaler); an interior construction company,
through 1997
19
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED)
TERM OF NUMBER OF
OFFICE AND FUNDS IN FUND
NAME, POSITION(S) LENGTH OF COMPLEX
ADDRESS(1) TIME OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE SERVED(2) DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR
---------------- ----------- ------------- ----------------------- -------------------
OFFICERS:
---------
BRUCE N. ALPERT SINCE 1989 -- Executive Vice President and Chief Operating --
Vice President and Officer of Gabelli Funds, LLC since 1988 and
Treasurer an officer of all mutual funds advised by
Age: 50 Gabelli Funds, LLC and its affiliates
Director and President of the Gabelli Advisors,
Inc.
PETER W. LATARTARA SINCE 1998 -- Vice President of the Fund since 1998. Vice --
Vice President President of Gabelli & Company, Inc.
Age: 34 from 1996.
JAMES E. MCKEE SINCE 1995 -- Vice President, General Counsel and Secretary --
Secretary of Gabelli Asset Management Inc. since 1999
Age: 38 and GAMCO Investors, Inc. since 1993; Secretary
of all mutual funds advised by Gabelli Advisers,
Inc. and Gabelli Funds, LLC.
---------------------------
1 Address: One Corporate Center, Rye, NY 10580, unless otherwise noted.
2 The Fund's Board of Directors is divided into three classes, each class
having a term of three years. Each year the term of office of one class
expires and the successor or successors elected to such class serve for a
three year term. The three year term for each class expires as follows:
* - Term expires at the Fund's 2002 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
** - Term expires at the Fund's 2003 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
*** - Term expires at the Fund's 2004 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
3 "Interested person" of the Fund as defined in the Investment Company Act of
1940. Messrs. Gabelli and Pohl are each considered an "interested person"
because of their affiliation with Gabelli Funds LLC which acts as the
Trust's investment adviser.
4 Represents holders of the Fund's 8.00% Cumulative Preferred Stock.
20
--------------------------------------------------------------------------------
GABELLI CONVERTIBLE SECURITIES FUND, INC.
AND YOUR PERSONAL PRIVACY
WHO ARE WE?
The Gabelli Convertible Securities Fund, Inc. (the "Fund") is a closed-end
investment company registered with the Securities and Exchange Commission
under the Investment Company Act of 1940. We are managed by Gabelli Funds
LLC, which is affiliated with Gabelli Asset Management Inc. Gabelli Asset
Management is a publicly-held company that has subsidiaries that provide
investment advisory or brokerage services for a variety of clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
GABELLI CUSTOMER?
When you purchase shares of the Fund on the New York Stock Exchange, you
have the option of registering directly with our transfer agent in order,
for example, to participate in our dividend reinvestment plan.
o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include
your name, address, telephone number, social security number, bank
account number, and other information.
o INFORMATION ABOUT YOUR TRANSACTIONS WITH US. This would include
information about the shares that you buy or sell, it may also include
information about whether you sell or exercise rights that we have
issued from time to time. If we hire someone else to provide
services--like a transfer agent--we will also have information about the
transactions that you conduct through them.
WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT?
We do not disclose any non-public personal information about our customers
or former customers to anyone, other than our affiliates, our service
providers who need to know such information and as otherwise permitted by
law. If you want to find out what the law permits, you can read the privacy
rules adopted by the Securities and Exchange Commission. They are in volume
17 of the Code of Federal Regulations, Part 248. The Commission often posts
information about its regulations on its web site, WWW.SEC.GOV.
WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION?
We restrict access to non-public personal information about you to the
people who need to know that information in order to perform their jobs or
provide services to you and to ensure that we are complying with the laws
governing the securities business. We maintain physical, electronic, and
procedural safeguards to keep your personal information confidential.
--------------------------------------------------------------------------------
21
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
INCOME TAX INFORMATION
DECEMBER 31, 2001
CASH DIVIDENDS AND DISTRIBUTIONS
TOTAL AMOUNT ORDINARY LONG-TERM DIVIDEND
PAYABLE RECORD PAID INVESTMENT CAPITAL REINVESTMENT
DATE DATE PER SHARE INCOME GAINS PRICE
-------- --------- ------------ ---------- ---------- ------------
COMMON SHARES
03/26/01 03/16/01 $0.2000 $0.1400 $0.0600 $10.1000
06/25/01 06/15/01 0.2000 0.1328 0.0672 10.3300
09/24/01 09/14/01 0.2000 0.1328 0.0672 10.3100
12/24/01 12/14/01 0.2100 0.1394 0.0706 10.4000
------- ------- -------
Total Common Stock $0.8100 $0.5450 $0.2650
PREFERRED SHARES
03/26/01 03/19/01 $0.5000 $0.3319 $0.1681
06/25/01 06/18/01 0.5000 0.3319 0.1681
09/26/01 09/19/01 0.5000 0.3319 0.1681
12/26/01 12/18/01 0.5000 0.3319 0.1681
------- ------- -------
Total Preferred Stock $2.0000 $1.3276 $0.6724
A Form 1099-DIV has been mailed to all shareholders of record for the
distributions mentioned above, setting forth specific amounts to be included in
the 2001 tax returns. Ordinary income distributions include net investment
income and realized net short-term capital gains. 43.042% of the long-term
capital gains paid by the Gabelli Convertible Securities Fund in 2001 was
classified as "20% Rate Gains" subject to a maximum tax rate of 20% (or 10%
depending on an individual's tax bracket). Capital gain distributions are
reported in box 2a of Form 1099-DIV. 56.958% of the long-term capital gains paid
by the Gabelli Convertible Securities Fund in 2001 was classified as "Qualified
5-Year Gains" and reported in box 2c of Form 1099-DIV.
RETURN OF CAPITAL
The amount received as a non-taxable (return of capital) distribution should
be applied to reduce the tax cost of shares. There was no return of capital in
2001.
CORPORATE DIVIDENDS RECEIVED DEDUCTION AND U.S. TREASURY SECURITIES INCOME
The Fund paid to common and preferred shareholders ordinary income dividends
of $0.5450 and $1.3276 per share, respectively, in 2001. For 2001, 18.77% of the
ordinary income dividend qualifies for the dividend received deduction available
to corporations. The percentage of ordinary income dividends paid by the Fund
during 2001 derived from U.S. Treasury Securities was 25.73%. However, it should
be noted that the Convertible Securities Fund did not hold more than 50% of its
assets in U.S. Treasury Securities at the end of each calendar quarter during
2001.
HISTORICAL DISTRIBUTION SUMMARY -- COMMON STOCK
SHORT-TERM LONG-TERM ADJUSTMENT
INVESTMENT CAPITAL CAPITAL RETURN OF TOTAL TO
INCOME (A) GAINS (A) GAINS CAPITAL (B) DISTRIBUTIONS COST BASIS
------------ ----------- ---------- ------------ ------------- -----------
2001 .......... $0.4755 $0.0695 $0.2650 -- $0.8100 --
2000 .......... 0.5661 0.3267 0.4072 -- 1.3000 --
1999 .......... 0.3899 0.4459 0.1942 -- 1.0300 --
1998 .......... 0.3866 0.2413 0.2921 -- 0.9200 --
1997 .......... 0.3969 0.2285 0.3346 -- 0.9600 --
1996 .......... 0.4900 0.1416 0.1034 -- 0.7350 --
1995 .......... 0.5574 0.2041 0.3595 $0.0290 1.1500 $0.0290 (c)
1994 .......... 0.5730 0.1150 0.2120 -- 0.9000 --
1993 .......... 0.5610 0.2000 0.6640 -- 1.4250 --
1992 .......... 0.6540 0.0900 0.1320 -- 0.8760 --
1991 .......... 0.7060 0.1120 0.0470 -- 0.8650 --
1990 .......... 0.6900 -- -- -- 0.6900 --
1989 .......... 0.1150 -- -- -- 0.1150 --
HISTORICAL DISTRIBUTION SUMMARY -- PREFERRED STOCK
2001 .......... $1.1808 $0.1468 $0.6724 -- $2.0000 --
2000 .......... 0.8685 0.5041 0.6274 -- 2.0000 --
1999 .......... 0.7571 0.8657 0.3772 -- 2.0000 --
1998 .......... 0.8405 0.5246 0.6349 -- 2.0000 --
1997 .......... 0.5082 0.2926 0.4270 -- 1.2278 --
--------------------------
(a) Taxable as ordinary income for Federal tax purposes.
(b) Non-taxable.
(c) Decrease in cost basis.
22
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 EquiServe Trust Company ("EquiServe") to be held in their
dividend reinvestment account. Registered shareholders wishing to receive their
distribution in cash must submit this request in writing to:
The Gabelli Convertible Securities Fund, Inc.
c/o EquiServe
P.O. Box 43011
Providence, RI 02940-3011
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan or requesting a copy of the terms of the
Plan may contact EquiServe at 1 (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe must do
so in writing or by telephone. Please submit your request to the above mentioned
address or telephone number. Include in your request your name, address and
account number. The cost to liquidate shares is $2.50 per transaction as well as
the brokerage commission incurred. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions. If your shares are held
in the name of a broker, bank or nominee, you should contact such institution.
If such institution is not participating in the Plan, your account will be
credited with a cash dividend. In order to participate in the Plan through such
institution, it may be necessary for you to have your shares taken out of
"street name" and re-registered in your own name. Once registered in your own
name your dividends will be automatically reinvested. Certain brokers
participate in the Plan. Shareholders holding shares in "street name" at
participating institutions will have dividends automatically reinvested.
Shareholders wishing a cash dividend at such institution must contact their
broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Convertible 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,
EquiServe will buy Common Stock in the open market, or on the New York Stock
Exchange or elsewhere, for the participants' accounts, except that EquiServe
will endeavor to terminate purchases in the open market and cause the
Convertible 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.
23
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 EquiServe for investments in the Convertible
Securities Fund shares at the then current market price. Shareholders may send
an amount from $250 to $10,000. EquiServe will use these funds to purchase
shares in the open market on or about the 1st and 15th of each month. EquiServe
will charge each shareholder who participates $0.75, plus a pro rata share of
the brokerage commissions. Brokerage charges for such purchases are expected to
be less than the usual brokerage charge for such transactions. It is suggested
that any voluntary cash payments be sent to EquiServe, P.O. Box 43011,
Providence, RI 02940-3011 such that EquiServe receives such payments
approximately 10 days before the investment date. Funds not received at least
five days before the investment date shall be held for investment until the next
purchase date. A payment may be withdrawn without charge if notice is received
by EquiServe at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Convertible Securities Fund.
--------------------------------------------------------------------------------
The Annual Meeting of the Convertible Securities Fund, Inc.'s
stockholders will be held at 8:30 A.M. on Monday, May 20, 2002,
at The Bruce Museum, One Museum Drive, in Greenwich, Connecticut.
--------------------------------------------------------------------------------
24
DIRECTORS AND OFFICERS
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
E. Val Cerutti
CHIEF EXECUTIVE OFFICER,
CERUTTI CONSULTANTS, INC.
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
Dugald A. Fletcher
PRESIDENT, FLETCHER & COMPANY, INC.
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Werner J. Roeder, MD
MEDICAL DIRECTOR,
LAWRENCE HOSPITAL
Anthonie C. van Ekris
MANAGING DIRECTOR,
BALMAC INTERNATIONAL, INC.
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES 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 10580-1422
CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
STOCK EXCHANGE LISTING
Common 8.00% Preferred
-------- ---------------
NYSE-Symbol: GCV GCV Pr
Shares Outstanding: 8,074,717 1,200,000
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "Convertible Securities Funds," in Sunday's The New York Times and in
Monday's The Wall Street Journal. It is also listed in Barron's Mutual
Funds/Closed End Funds section under the heading "Convertible Securities Funds."
The Net Asset Value may be obtained each day by calling (914) 921-5071.
--------------------------------------------------------------------------------
For general information about the Gabelli Funds, call
1-800-GABELLI (1-800-422-3554), fax us at 914-921-5118, visit
Gabelli Funds' Internet homepage at: http://www.gabelli.com, or
e-mail us at: closedend@gabelli.com
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Convertible Securities Fund may from
time to time purchase shares of its common stock in the open market when the
Convertible Securities Fund shares are trading at a discount of 10% or more from
the net asset value of the shares. The Convertible Securities Fund may also,
from time to time, purchase shares of its Cumulative Preferred Stock in the open
market when the shares are trading at a discount to the Liquidation Value of
$25.00.
--------------------------------------------------------------------------------
[LOGO OMITTED]
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
PHONE: 1-800-GABELLI (1-800-422-3554)
FAX: 1-914-921-5118 INTERNET: WWW.GABELLI.COM
E-MAIL: CLOSEDEND@GABELLI.COM
GBFCS-AR-12/01
[LOGO OMITTED]
[LOGO OF MOUNTAIN THE GABELLI CONVERTIBLE SECURITIES FUND, INC. OMITTED]
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.
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
GRAPHIC OF FOUR STARS OMITTED
MORNINGSTAR RATED(TRADEMARK) GABELLI CONVERTIBLE SECURITIES FUND 4 STARS OVERALL
AND FOR THE THREE AND FIVE-YEAR PERIOD ENDED 12/31/01 AMONG 51 AND 50
CLOSED-END DOMESTIC EQUITY FUNDS, RESPECTIVELY.
THE FUND WAS RATED 3 STARS FOR THE TEN-YEAR PERIOD ENDED
12/31/01 AMONG 35 CLOSED-END DOMESTIC EQUITY FUNDS.
--------------------------------------------------------------------------------
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.