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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Gabelli Converitble and Income Securities Fund Inc | NYSE:GCV | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.09 | 2.47% | 3.74 | 3.70 | 3.65 | 3.65 | 25,697 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05715
The Gabelli Convertible and Income Securities Fund Inc.
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
(Name and address of agent for service)
Registrants telephone number, including area code: 1-800-422-3554
Date of fiscal year end: December 31
Date of reporting period: June 30, 2020
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (OMB) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. |
Reports to Stockholders. |
The Report to Shareholders is attached herewith.
The Gabelli Convertible and Income
Securities Fund Inc.
Semiannual Report June 30, 2020
(Y)our Portfolio Management Team
Mario J. Gabelli, CFA | Thomas H. Dinsmore, CFA | Jane D. OKeeffe | James A. Dinsmore, CFA | |||||||
Chief Investment Officer | Portfolio Manager | Portfolio Manager | Portfolio Manager | |||||||
BS, Wharton School, | BA, University of | BA, Cornell University | ||||||||
University of Pennsylvania | New Hampshire | MBA, Rutgers University | ||||||||
To Our Stockholders, | MA, Fairleigh Dickinson University |
For the six months ended June 30, 2020, the net asset value (NAV) total return of The Gabelli Convertible and Income Securities Fund Inc. was (0.2)%, compared with a total return of 7.5% for the Bloomberg Barclays Government/Credit Bond Index. The total return for the Funds publicly traded shares was (8.0)%. The Funds NAV per share was $5.39, while the price of the publicly traded shares closed at $5.12 on the New York Stock Exchange (NYSE). See page 2 for additional performance information.
Enclosed are the financial statements, including the schedule of investments, as of June 30, 2020.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds annual and semiannual stockholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds website (www.gabelli.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive stockholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive all future reports on paper free of charge, please contact your financial intermediary, or, if you invest directly with the Fund, you may call 800-422-3554 or send an email request to info@gabelli.com.
|
Comparative Results
Average Annual Returns through June 30, 2020 (a) (Unaudited) |
Since | |||||||||||||||||||||||||||
Inception | ||||||||||||||||||||||||||||
Year to Date |
1 Year |
5 Year |
10 Year |
15 Year |
(07/03/89) |
|||||||||||||||||||||||
Gabelli Convertible and Income Securities Fund (GCV) |
||||||||||||||||||||||||||||
NAV Total Return (b) |
(0.20 | )% | 9.23 | % | 7.23 | % | 8.46 | % | 6.36 | % | 6.94% | |||||||||||||||||
Investment Total Return (c) |
(8.03 | ) | 9.51 | 7.67 | 8.60 | 4.96 | 6.33(d) | |||||||||||||||||||||
Bloomberg Barclays Government/Credit Bond Index |
7.46 | 10.26 | 4.79 | 4.12 | 4.49 | N/A(e) | ||||||||||||||||||||||
Lipper Convertible Securities Fund Average |
10.17 | 16.93 | 8.84 | 9.94 | 7.82 | 8.50(f) | ||||||||||||||||||||||
(a) Returns represent past performance and do not guarantee future results. Investment returns and the principal value of an investment will fluctuate. The Funds use of leverage may magnify the volatility of net asset value changes versus funds that do not employ leverage. When shares are sold, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The S&P 500 Index is an unmanaged indicator of stock market performance. The Bloomberg Barclays Government/Credit Bond Index is a market value weighted index that tracks the performance of fixed rate, publicly placed, dollar denominated obligations. The Lipper Convertible Securities Fund Average reflects the average performance of open-end funds classified in this particular category. Dividends and interest income are considered reinvested. You cannot invest directly in an index.
(b) Total returns and average annual returns reflect changes in the NAV per share, reinvestment of distributions at NAV on the ex-dividend date, and adjustments for rights offerings and are net of expenses. Since inception return is based on an initial NAV of $10.00.
(c) Total returns and average annual returns reflect changes in closing market values on the NYSE, reinvestment of distributions, and adjustments for rights offerings. Since inception return is based on an initial offering price of $11.25 on March 31, 1995.
(d) Since inception return is from March 31, 1995 when the Fund converted to closed-end status; before this date, the Fund had no operating history on the NYSE.
(e) The Bloomberg Barclays Government/Credit Bond Index inception date is January 29, 1999.
(f) From June 30, 1989, the date closest to the Funds inception for which data are available.
|
2
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of total investments as of June 30, 2020:
The Gabelli Convertible and Income Securities Fund Inc.
Computer Software and Services |
25.0 | % | ||
Health Care |
16.1 | % | ||
Energy and Utilities |
8.9 | % | ||
Telecommunications |
7.0 | % | ||
U.S. Government Obligations |
5.7 | % | ||
Real Estate Investment Trusts |
5.6 | % | ||
Financial Services |
5.2 | % | ||
Communications Equipment |
3.2 | % | ||
Semiconductors |
2.8 | % | ||
Aerospace |
2.4 | % | ||
Business Services |
2.1 | % | ||
Consumer Services |
2.0 | % | ||
Diversified Industrial |
2.0 | % | ||
Wireless Communications |
1.8 | % |
Consumer Products |
1.7 | % | ||
Electronics |
1.4 | % | ||
Automotive: Parts and Accessories |
1.4 | % | ||
Cable and Satellite |
1.4 | % | ||
Transportation |
0.8 | % | ||
Retail |
0.8 | % | ||
Equipment and Supplies |
0.7 | % | ||
Airlines |
0.5 | % | ||
Broadcasting |
0.5 | % | ||
Hotels and Gaming |
0.4 | % | ||
Food and Beverage |
0.4 | % | ||
Computer Hardware |
0.2 | % | ||
|
|
|||
100.0 | % | |||
|
|
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the SEC) for the first and third quarters of each year on Form N-PORT. Stockholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Funds Form N-PORT is available on the SECs website at www.sec.gov and may also be reviewed and copied at the SECs Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. A description of the Funds proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SECs website at www.sec.gov.
Certifications
The Funds Chief Executive Officer has certified to the New York Stock Exchange (NYSE) that, as of June 5, 2020, he was not aware of any violation by the Fund of applicable NYSE corporate governance listing standards. The Fund reports to the SEC on Form N-CSR which contains certifications by the Funds principal executive officer and principal financial officer that relate to the Funds disclosure in such reports and that are required by Rule 30a-2(a) under the 1940 Act.
3
The Gabelli Convertible and Income Securities Fund Inc.
Schedule of Investments June 30, 2020 (Unaudited)
Principal Amount |
Cost |
Market Value |
||||||||||
CONVERTIBLE CORPORATE BONDS 64.6% |
|
|||||||||||
Aerospace 2.4% | ||||||||||||
$ | 1,000,000 |
Aerojet Rocketdyne Holdings Inc.,
|
$ | 1,023,838 | $ | 1,603,495 | ||||||
1,713,000 |
Kaman Corp.,
|
1,779,233 | 1,645,934 | |||||||||
|
|
|
|
|||||||||
2,803,071 | 3,249,429 | |||||||||||
|
|
|
|
|||||||||
Airlines 0.5% | ||||||||||||
570,000 |
Southwest Airlines Co.,
|
587,747 | 687,438 | |||||||||
|
|
|
|
|||||||||
Broadcasting 0.5% | ||||||||||||
588,000 |
Liberty Media Corp.-Liberty Formula One,
|
602,860 | 640,531 | |||||||||
|
|
|
|
|||||||||
Business Services 2.1% | ||||||||||||
860,000 |
2U Inc.,
|
849,110 | 1,284,377 | |||||||||
1,350,000 |
Perficient Inc.,
|
1,303,121 | 1,576,468 | |||||||||
|
|
|
|
|||||||||
2,152,231 | 2,860,845 | |||||||||||
|
|
|
|
|||||||||
Cable and Satellite 1.4% | ||||||||||||
2,000,000 |
DISH Network Corp.,
|
2,008,885 | 1,842,229 | |||||||||
|
|
|
|
|||||||||
Communications Equipment 1.6% |
|
|||||||||||
2,210,000 |
InterDigital Inc.,
|
2,202,700 | 2,197,513 | |||||||||
|
|
|
|
|||||||||
Computer Software and Services 23.6% |
|
|||||||||||
1,015,000 |
8x8 Inc.,
|
1,038,831 | 913,100 | |||||||||
500,000 |
Bandwidth Inc.,
|
504,438 | 747,600 | |||||||||
500,000 |
Blackline Inc.,
|
500,746 | 638,867 | |||||||||
425,000 |
Cloudflare Inc.,
|
425,000 | 514,250 | |||||||||
Coupa Software Inc., |
||||||||||||
705,000 |
0.125%, 06/15/25 |
723,851 | 1,285,071 | |||||||||
900,000 |
0.375%, 06/15/26(a) |
897,487 | 1,043,785 | |||||||||
1,500,000 |
CSG Systems International Inc.,
|
1,511,507 | 1,532,100 | |||||||||
745,000 |
CyberArk Software Ltd., Zero Coupon, 11/15/24(a) |
753,661 | 696,553 | |||||||||
655,000 |
Datadog Inc., 0.125%, 06/15/25(a) |
670,696 | 776,537 | |||||||||
1,025,000 |
Everbridge Inc.,
|
1,035,771 | 1,395,386 | |||||||||
1,500,000 |
Evolent Health Inc.,
|
1,367,346 | 950,625 |
Principal
|
Cost |
Market Value |
||||||||||
$ | 756,000 |
GDS Holdings Ltd.,
|
$ | 609,331 | $ | 1,219,772 | ||||||
330,000 |
HubSpot Inc.,
|
341,918 | 353,925 | |||||||||
935,000 |
i3 Verticals LLC,
|
876,391 | 893,237 | |||||||||
620,000 |
LivePerson Inc.,
|
623,569 | 770,102 | |||||||||
1,500,000 |
Match Group Financeco 3 Inc.,
|
1,504,079 | 1,947,772 | |||||||||
1,250,000 |
MercadoLibre Inc.,
|
1,225,136 | 2,863,141 | |||||||||
165,000 |
Nice Systems Inc.,
|
169,747 | 377,799 | |||||||||
1,500,000 |
Okta Inc.,
|
1,430,898 | 1,861,737 | |||||||||
1,515,000 |
Pluralsight Inc.,
|
1,371,691 | 1,345,070 | |||||||||
1,565,000 |
Proofpoint Inc.,
|
1,627,668 | 1,540,562 | |||||||||
1,000,000 |
PROS Holdings Inc.,
|
1,211,157 | 970,490 | |||||||||
1,165,000 |
Q2 Holdings Inc.,
|
1,188,051 | 1,328,713 | |||||||||
1,000,000 |
RealPage Inc.,
|
1,085,939 | 1,080,222 | |||||||||
Splunk Inc., |
||||||||||||
1,000,000 |
1.125%, 09/15/25 |
1,015,645 | 1,471,621 | |||||||||
440,000 |
1.125%, 06/15/27(a) |
444,362 | 470,956 | |||||||||
640,000 |
Varonis Systems Inc.,
|
647,244 | 748,272 | |||||||||
750,000 |
Workiva Inc.,
|
725,322 | 689,700 | |||||||||
1,335,000 |
Zscaler Inc.,
|
1,357,439 | 1,370,258 | |||||||||
|
|
|
|
|||||||||
26,884,921 | 31,797,223 | |||||||||||
|
|
|
|
|||||||||
Consumer Products 1.0% | ||||||||||||
640,000 |
Farfetch Ltd.,
|
656,586 | 870,000 | |||||||||
425,000 |
Under Armour Inc.,
|
425,000 | 483,059 | |||||||||
|
|
|
|
|||||||||
1,081,586 | 1,353,059 | |||||||||||
|
|
|
|
|||||||||
Consumer Services 2.0% | ||||||||||||
320,000 |
Callaway Golf Co.,
|
322,041 | 395,688 | |||||||||
1,500,000 |
Extra Space Storage LP,
|
1,509,311 | 1,603,471 | |||||||||
270,000 |
Royal Caribbean Cruises Ltd.,
|
306,862 | 252,450 |
See accompanying notes to financial statements.
4
The Gabelli Convertible and Income Securities Fund Inc.
Schedule of Investments (Continued) June 30, 2020 (Unaudited)
Principal Amount |
Cost |
Market Value |
||||||||||
CONVERTIBLE CORPORATE BONDS (Continued) |
|
|||||||||||
Consumer Services (Continued) |
|
|||||||||||
$ | 655,000 |
The Chefs Warehouse Inc.,
|
$ | 655,000 | $ | 476,375 | ||||||
|
|
|
|
|||||||||
2,793,214 | 2,727,984 | |||||||||||
|
|
|
|
|||||||||
Diversified Industrial 0.6% |
|
|||||||||||
600,000 |
Chart Industries Inc.,
|
601,575 | 634,025 | |||||||||
105,000 |
Sea Ltd.,
|
105,000 | 145,997 | |||||||||
|
|
|
|
|||||||||
706,575 | 780,022 | |||||||||||
|
|
|
|
|||||||||
Electronics 1.4% |
||||||||||||
1,800,000 |
Knowles Corp.,
|
1,835,498 | 1,928,340 | |||||||||
|
|
|
|
|||||||||
Energy and Utilities 2.4% |
|
|||||||||||
1,800,000 |
Cheniere Energy Inc.,
|
1,347,721 | 1,165,205 | |||||||||
2,500,000 |
SunPower Corp.,
|
2,326,909 | 2,030,923 | |||||||||
|
|
|
|
|||||||||
3,674,630 | 3,196,128 | |||||||||||
|
|
|
|
|||||||||
Financial Services 1.3% |
|
|||||||||||
535,000 |
Chimera Investment Corp.,
|
569,776 | 782,447 | |||||||||
955,000 |
GOL Equity Finance SA,
|
1,034,726 | 473,322 | |||||||||
344,000 |
LendingTree Inc.,
|
346,781 | 517,233 | |||||||||
|
|
|
|
|||||||||
1,951,283 | 1,773,002 | |||||||||||
|
|
|
|
|||||||||
Health Care 13.8% |
|
|||||||||||
635,000 |
1Life Healthcare Inc.,
|
634,794 | 681,717 | |||||||||
445,000 |
Coherus Biosciences Inc.,
|
448,856 | 498,222 | |||||||||
1,000,000 |
Collegium Pharmaceutical Inc.,
|
1,085,517 | 900,965 | |||||||||
1,000,000 |
CONMED Corp.,
|
1,015,107 | 1,051,581 | |||||||||
DexCom Inc., |
||||||||||||
495,000 |
0.750%, 12/01/23 |
494,298 | 1,229,175 | |||||||||
320,000 |
0.250%, 11/15/25(a) |
320,000 | 329,197 | |||||||||
1,635,000 |
Exact Sciences Corp.,
|
1,691,886 | 1,701,956 | |||||||||
125,000 |
Inovio Pharmaceuticals Inc.,
|
125,000 | 622,890 | |||||||||
1,500,000 |
Insulet Corp.,
|
1,495,058 | 1,645,400 | |||||||||
800,000 |
Intercept Pharmaceuticals Inc.,
|
752,568 | 581,920 |
Principal
|
Cost |
Market Value |
||||||||||
$ | 750,000 |
Invacare Corp.,
|
$ | 706,029 | $ | 641,250 | ||||||
640,000 |
Livongo Health Inc.,
|
747,515 | 764,591 | |||||||||
608,000 |
Neurocrine Biosciences Inc.,
|
622,730 | 1,017,018 | |||||||||
1,000,000 |
Pacira BioSciences Inc.,
|
1,016,678 | 1,093,705 | |||||||||
750,000 |
Paratek Pharmaceuticals Inc.,
|
707,499 | 612,550 | |||||||||
850,000 |
PetIQ Inc.,
|
850,000 | 1,141,656 | |||||||||
750,000 |
Retrophin Inc.,
|
683,751 | 626,120 | |||||||||
1,250,000 |
Supernus Pharmaceuticals Inc.,
|
1,243,557 | 1,106,333 | |||||||||
1,110,000 |
Tabula Rasa HealthCare Inc.,
|
1,165,317 | 1,141,482 | |||||||||
1,030,000 |
Teladoc Health Inc.,
|
1,044,183 | 1,143,157 | |||||||||
|
|
|
|
|||||||||
16,850,343 | 18,530,885 | |||||||||||
|
|
|
|
|||||||||
Hotels and Gaming 0.4% |
|
|||||||||||
430,000 |
NCL Corp. Ltd.,
|
442,464 | 574,643 | |||||||||
|
|
|
|
|||||||||
Real Estate Investment Trusts 1.4% |
|
|||||||||||
2,000,000 |
Arbor Realty Trust Inc.,
|
2,000,000 | 1,829,633 | |||||||||
|
|
|
|
|||||||||
Retail 0.6% |
||||||||||||
640,000 |
National Vision Holdings Inc.,
|
648,280 | 766,761 | |||||||||
|
|
|
|
|||||||||
Semiconductors 1.1% |
|
|||||||||||
105,000 |
Inphi Corp.,
|
105,000 | 126,533 | |||||||||
500,000 |
Teradyne Inc.,
|
531,528 | 1,342,726 | |||||||||
|
|
|
|
|||||||||
636,528 | 1,469,259 | |||||||||||
|
|
|
|
|||||||||
Telecommunications 5.8% |
|
|||||||||||
100,000 |
Gogo Inc.,
|
100,000 | 70,336 | |||||||||
1,500,000 |
Harmonic Inc.,
|
1,604,810 | 1,340,625 | |||||||||
1,000,000 |
Infinera Corp.,
|
960,376 | 982,555 | |||||||||
700,000 |
Liberty Latin America Ltd.,
|
700,000 | 557,813 | |||||||||
750,000 |
Lumentum Holdings Inc., Ser. QIB,
|
788,729 | 791,250 |
See accompanying notes to financial statements.
5
The Gabelli Convertible and Income Securities Fund Inc.
Schedule of Investments (Continued) June 30, 2020 (Unaudited)
Shares |
Cost |
Market Value |
||||||||||
9,250 |
Dominion Energy Inc.,
|
$ | 934,006 | $ | 937,395 | |||||||
25,300 |
DTE Energy Co.,
|
1,273,005 | 1,070,696 | |||||||||
2,060 |
Essential Utilities Inc.,
|
103,000 | 116,472 | |||||||||
NextEra Energy Inc., |
||||||||||||
32,325 |
4.872%, 09/01/22 |
1,588,312 | 1,569,055 | |||||||||
17,400 |
5.279%, 03/01/23 |
848,250 | 738,630 | |||||||||
Sempra Energy, |
||||||||||||
5,163 |
6.000%, Ser. A, 01/15/21 |
526,300 | 504,580 | |||||||||
5,000 |
6.750%, Ser. B, 07/15/21 |
509,073 | 491,300 | |||||||||
16,900 |
The Southern Co.,
|
848,710 | 744,614 | |||||||||
|
|
|
|
|||||||||
9,591,703 | 8,553,471 | |||||||||||
|
|
|
|
|||||||||
Equipment and Supplies 0.7% |
|
|||||||||||
750 |
Danaher Corp.,
|
757,910 | 935,153 | |||||||||
|
|
|
|
|||||||||
Financial Services 1.2% |
|
|||||||||||
1,115 |
2020 Cash Mandatory Exchangeable Trust,
|
1,141,700 | 1,140,143 | |||||||||
430 |
2020 Mandatory Exchangeable Trust,
|
433,762 | 477,214 | |||||||||
|
|
|
|
|||||||||
1,575,462 | 1,617,357 | |||||||||||
|
|
|
|
|||||||||
Health Care 1.1% |
|
|||||||||||
12,060 |
Avantor Inc.,
|
668,605 | 692,244 | |||||||||
19,990 |
Elanco Animal Health Inc.,
|
1,091,339 | 768,416 | |||||||||
|
|
|
|
|||||||||
1,759,944 | 1,460,660 | |||||||||||
|
|
|
|
|||||||||
Real Estate Investment Trusts 1.9% |
|
|||||||||||
1,727 |
Crown Castle International Corp.,
|
1,800,421 | 2,565,096 | |||||||||
|
|
|
|
|||||||||
Semiconductors 1.7% |
|
|||||||||||
2,085 |
Broadcom Inc.,
|
2,162,593 | 2,323,420 | |||||||||
|
|
|
|
|||||||||
TOTAL MANDATORY CONVERTIBLE SECURITIES |
20,926,067 | 20,886,064 | ||||||||||
|
|
|
|
|||||||||
COMMON STOCKS 11.5% |
|
|||||||||||
Automotive: Parts and Accessories 0.2% |
|
|||||||||||
3,500 |
Genuine Parts Co. |
254,862 | 304,360 | |||||||||
|
|
|
|
See accompanying notes to financial statements.
6
The Gabelli Convertible and Income Securities Fund Inc.
Schedule of Investments (Continued) June 30, 2020 (Unaudited)
Shares |
Cost |
Market Value |
||||||||||
COMMON STOCKS (Continued) |
|
|||||||||||
Communications Equipment 1.6% |
|
|||||||||||
8,113 |
American Tower Corp., REIT |
$ | 941,239 | $ | 2,097,535 | |||||||
|
|
|
|
|||||||||
Computer Hardware 0.2% |
|
|||||||||||
1,800 |
International Business Machines Corp. |
159,709 | 217,386 | |||||||||
|
|
|
|
|||||||||
Computer Software and Services 1.4% |
|
|||||||||||
8,987 |
Alibaba Group Holding Ltd., ADR |
1,344,455 | 1,938,496 | |||||||||
|
|
|
|
|||||||||
Consumer Products 0.7% |
|
|||||||||||
14,000 |
Swedish Match AB |
298,399 | 984,096 | |||||||||
|
|
|
|
|||||||||
Energy and Utilities 0.2% |
|
|||||||||||
515,000 |
Bristow Group Inc., Escrow(c) |
0 | 0 | |||||||||
1,000 |
Chevron Corp. |
57,120 | 89,230 | |||||||||
12,000 |
The AES Corp. |
138,517 | 173,880 | |||||||||
|
|
|
|
|||||||||
195,637 | 263,110 | |||||||||||
|
|
|
|
|||||||||
Equipment and Supplies 0.0% |
|
|||||||||||
1,200 |
Mueller Industries Inc. |
40,848 | 31,896 | |||||||||
|
|
|
|
|||||||||
Financial Services 2.7% |
|
|||||||||||
2,500 |
American Express Co. |
221,594 | 238,000 | |||||||||
4,500 |
Bank of America Corp. |
126,347 | 106,875 | |||||||||
1,700 |
Citigroup Inc. |
93,772 | 86,870 | |||||||||
2,000 |
JPMorgan Chase & Co. |
88,838 | 188,120 | |||||||||
5,000 |
Julius Baer Group Ltd. |
144,028 | 209,246 | |||||||||
2,000 |
Morgan Stanley |
64,227 | 96,600 | |||||||||
9,000 |
State Street Corp. |
413,587 | 571,950 | |||||||||
20,000 |
The Bank of New York Mellon Corp. |
533,344 | 773,000 | |||||||||
9,500 |
The PNC Financial Services Group Inc. |
496,575 | 999,495 | |||||||||
14,000 |
Wells Fargo & Co. |
429,273 | 358,400 | |||||||||
|
|
|
|
|||||||||
2,611,585 | 3,628,556 | |||||||||||
|
|
|
|
|||||||||
Food and Beverage 0.4% |
|
|||||||||||
6,000 |
Maple Leaf Foods Inc. |
115,566 | 126,002 | |||||||||
1,500 |
Pernod Ricard SA |
130,352 | 236,018 | |||||||||
1,500 |
Remy Cointreau SA |
141,963 | 204,251 | |||||||||
|
|
|
|
|||||||||
387,881 | 566,271 | |||||||||||
|
|
|
|
|||||||||
Health Care 1.2% |
|
|||||||||||
2,000 |
Bristol-Myers Squibb Co |
114,260 | 117,600 | |||||||||
500,000 |
Elite Pharmaceuticals Inc. |
66,824 | 41,500 | |||||||||
1,000 |
Johnson & Johnson |
111,887 | 140,630 | |||||||||
1,500 |
Merck & Co. Inc. |
49,950 | 115,995 | |||||||||
28,500 |
Roche Holding AG, ADR |
705,354 | 1,236,330 | |||||||||
|
|
|
|
|||||||||
1,048,275 | 1,652,055 | |||||||||||
|
|
|
|
|||||||||
Retail 0.2% |
|
|||||||||||
800 |
Costco Wholesale Corp. |
34,140 | 242,568 | |||||||||
|
|
|
|
Shares |
Cost |
Market Value |
||||||||||
Telecommunications 0.8% |
|
|||||||||||
1,000 |
Swisscom AG |
$ | 366,379 | $ | 523,405 | |||||||
10,000 |
Verizon Communications Inc. |
461,829 | 551,300 | |||||||||
|
|
|
|
|||||||||
828,208 | 1,074,705 | |||||||||||
|
|
|
|
|||||||||
Transportation 0.1% |
|
|||||||||||
1,000 |
GATX Corp. |
33,964 | 60,980 | |||||||||
|
|
|
|
|||||||||
Wireless Communications 1.8% |
|
|||||||||||
22,566 |
T-Mobile US Inc. |
953,116 | 2,350,249 | |||||||||
|
|
|
|
|||||||||
TOTAL COMMON STOCKS |
9,132,318 | 15,412,263 | ||||||||||
|
|
|
|
|||||||||
RIGHTS 0.0% |
||||||||||||
Wireless Communications 0.0% |
|
|||||||||||
22,566 |
T-Mobile US Inc., expire 07/27/20 |
0 | 3,791 | |||||||||
|
|
|
|
|||||||||
Principal
|
||||||||||||
U.S. GOVERNMENT OBLIGATIONS 5.7% |
|
|||||||||||
$7,705,000 |
U.S. Treasury Bills,
|
7,703,247 | 7,703,195 | |||||||||
|
|
|
|
|||||||||
TOTAL INVESTMENTS 100.0% |
$ | 118,725,019 | 134,718,438 | |||||||||
|
|
|||||||||||
Other Assets and Liabilities (Net) |
407,475 | |||||||||||
|
PREFERRED STOCK
|
(33,760,000 | ) | |||||||||
|
|
|||||||||||
|
NET ASSETS COMMON STOCK
|
|
$ | 101,365,913 | ||||||||
|
|
|||||||||||
|
NET ASSET VALUE PER COMMON SHARE
|
|
$ | 5.39 | ||||||||
|
|
(a) |
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. |
(b) |
Mandatory convertible securities are required to be converted on the dates listed; they generally may be converted prior to these dates at the option of the holder. |
(c) |
Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy. |
|
Non-income producing security. |
|
Represents annualized yields at dates of purchase. |
ADR |
American Depositary Receipt |
REIT |
Real Estate Investment Trust |
See accompanying notes to financial statements.
7
The Gabelli Convertible and Income Securities Fund Inc.
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
Assets: |
||||
Investments, at value (cost $118,725,019) |
$ | 134,718,438 | ||
Foreign currency, at value (cost $596) |
601 | |||
Cash |
2,797 | |||
Deposit at brokers |
50 | |||
Dividends and interest receivable |
500,998 | |||
Deferred offering expense |
238,934 | |||
Prepaid expenses |
1,674 | |||
|
|
|||
Total Assets |
135,463,492 | |||
|
|
|||
Liabilities: |
||||
Distributions payable |
18,756 | |||
Payable for investment advisory fees |
110,933 | |||
Payable for payroll expenses |
21,700 | |||
Payable for accounting fees |
11,250 | |||
Series E Cumulative Preferred Stock (4.00%, $100 liquidation value, $0.001 par value, 350,000 shares authorized with 337,600 shares issued and outstanding) (See Notes 2 and 5) |
33,760,000 | |||
Other accrued expenses |
174,940 | |||
|
|
|||
Total Liabilities |
34,097,579 | |||
|
|
|||
Net Assets Attributable to Common Stockholders |
$ | 101,365,913 | ||
|
|
|||
Net Assets Attributable to Common Stockholders Consist of: |
||||
Paid-in capital |
$ | 85,702,247 | ||
Total distributable earnings |
15,663,666 | |||
|
|
|||
Net Assets |
$ | 101,365,913 | ||
|
|
|||
Net Asset Value per Common Share: |
||||
($101,365,913 ÷ 18,821,385 shares outstanding at $0.001 par value; 998,000,000 shares authorized) |
$5.39 |
Statement of Operations
For the Six Months Ended June 30, 2020 (Unaudited)
Investment Income: |
||||
Dividends (net of foreign withholding taxes of $14,972) |
$ | 905,915 | ||
Interest |
729,495 | |||
|
|
|||
Total Investment Income |
1,635,410 | |||
|
|
|||
Expenses: |
||||
Investment advisory fees |
667,217 | |||
Interest expense on preferred stock |
694,076 | |||
Stockholder communications expenses |
47,106 | |||
Directors fees |
40,528 | |||
Payroll expenses |
38,477 | |||
Legal and audit fees |
35,123 | |||
Stockholder services fees |
28,559 | |||
Accounting fees |
22,500 | |||
Shelf registration expense |
16,169 | |||
Custodian fees |
7,726 | |||
Interest expense |
106 | |||
Miscellaneous expenses |
44,627 | |||
|
|
|||
Total Expenses |
1,642,214 | |||
|
|
|||
Less: |
||||
Expenses paid indirectly by broker (See Note 3) |
(1,012 | ) | ||
|
|
|||
Net Expenses |
1,641,202 | |||
|
|
|||
Net Investment Loss |
(5,792 | ) | ||
|
|
|||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency: |
||||
Net realized gain on investments |
4,920,245 | |||
Net realized gain on foreign currency transactions |
236 | |||
|
|
|||
Net realized gain on investments and foreign currency transactions |
4,920,481 | |||
|
|
|||
Net change in unrealized appreciation/depreciation: |
||||
on investments |
(5,878,545 | ) | ||
on foreign currency translations |
181 | |||
|
|
|||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations |
(5,878,364 | ) | ||
|
|
|||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency |
(957,883 | ) | ||
|
|
|||
Net Decrease in Net Assets Attributable to Common Stockholders Resulting from Operations |
$ | (963,675 | ) | |
|
|
See accompanying notes to financial statements.
8
The Gabelli Convertible and Income Securities Fund Inc.
Statement of Changes in Net Assets Attributable to Common Stockholders
Six Months Ended
June 30, 2020 (Unaudited) |
Year
Ended
December 31, 2019 |
|||||||||
Operations: |
||||||||||
Net investment income/(loss) |
$ | (5,792 | ) | $ | 1,188,946 | |||||
Net realized gain on investments and foreign currency transactions |
4,920,481 | 8,528,052 | ||||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations |
(5,878,364 | ) | 16,444,591 | |||||||
|
|
|
|
|||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations |
(963,675 | ) | 26,161,589 | |||||||
|
|
|
|
|||||||
Distributions to Preferred Stockholders |
| (1,275,360 | ) | |||||||
|
|
|
|
|||||||
Net Increase/(Decrease) in Net Assets Attributable to Common Stockholders Resulting from Operations |
(963,675 | ) | 24,886,229 | |||||||
|
|
|
|
|||||||
Distributions to Common Stockholders: |
||||||||||
Accumulated earnings |
(4,517,132 | )* | (8,396,913 | ) | ||||||
Return of capital |
| (606,699 | ) | |||||||
|
|
|
|
|||||||
Total Distributions to Common Stockholders |
(4,517,132 | ) | (9,003,612 | ) | ||||||
|
|
|
|
|||||||
Fund Share Transactions: |
||||||||||
Net increase in net assets from common shares issued upon reinvestment of distributions |
| 360,817 | ||||||||
Offering costs for common shares charged to paid-in capital |
| 58,236 | ||||||||
|
|
|
|
|||||||
Net Increase in Net Assets from Fund Share Transactions |
| 419,053 | ||||||||
|
|
|
|
|||||||
Net Increase/(Decrease) in Net Assets Attributable to Common Stockholders |
(5,480,807 | ) | 16,301,670 | |||||||
Net Assets Attributable to Common Stockholders: |
||||||||||
Beginning of year |
106,846,720 | 90,545,050 | ||||||||
|
|
|
|
|||||||
End of period |
$ | 101,365,913 | $ | 106,846,720 | ||||||
|
|
|
|
* |
Based on year to date book income. Amounts are subject to change and recharacterization at year end. |
See accompanying notes to financial statements.
9
The Gabelli Convertible and Income Securities Fund Inc.
Statement of Cash Flows
For the Six Months Ended June 30, 2020 (Unaudited)
See accompanying notes to financial statements.
10
The Gabelli Convertible and Income Securities Fund Inc.
Financial Highlights
Selected data for a common share outstanding throughout each period:
Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2020 | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
Operating Performance: |
||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of year |
$ | 5.68 | $ | 4.83 | $ | 5.57 | $ | 5.30 | $ | 5.30 | $ | 6.09 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Net investment income |
0.03 | 0.06 | 0.09 | 0.09 | 0.12 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain/(loss) on investments, securities sold short, swap contracts, and foreign currency transactions |
0.16 | 1.34 | (0.22 | ) | 0.77 | 0.39 | (0.28 | ) | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Total from investment operations |
0.19 | 1.40 | (0.13 | ) | 0.86 | 0.51 | (0.21 | ) | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Distributions to Preferred Stockholders: (a) |
||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income |
| (0.01 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | (0.01 | ) | |||||||||||||||||||||||||||||||||||||
Net realized gain |
| (0.06 | ) | (0.07 | ) | (0.08 | ) | (0.07 | ) | (0.09 | ) | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Total distributions to preferred stockholders |
| (0.07 | ) | (0.09 | ) | (0.11 | ) | (0.10 | ) | (0.10 | ) | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Net Increase/(Decrease) in Net Assets Attributable to Common Stockholders Resulting from Operations |
0.19 | 1.33 | (0.22 | ) | 0.75 | 0.41 | (0.31 | ) | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Distributions to Common Stockholders: |
||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income |
(0.05 | )* | (0.08 | ) | (0.10 | ) | (0.12 | ) | (0.10 | ) | (0.05 | ) | ||||||||||||||||||||||||||||||||||||
Net realized gain |
(0.43 | )* | (0.37 | ) | (0.38 | ) | (0.36 | ) | (0.30 | ) | (0.32 | ) | ||||||||||||||||||||||||||||||||||||
Return of capital |
| (0.03 | ) | | | (0.01 | ) | (0.11 | ) | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Total distributions to common stockholders |
(0.48 | ) | (0.48 | ) | (0.48 | ) | (0.48 | ) | (0.41 | ) | (0.48 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Fund Share Transactions: |
||||||||||||||||||||||||||||||||||||||||||||||||
Decrease in net asset value from common share transactions |
| | | | | (0.00 | )(b) | |||||||||||||||||||||||||||||||||||||||||
Decrease in net asset value from common shares issued in rights offering |
| | (0.02 | ) | | | | |||||||||||||||||||||||||||||||||||||||||
Increase in net asset value from common shares issued upon reinvestment of distributions |
| | 0.00 | (b) | | | | |||||||||||||||||||||||||||||||||||||||||
Offering costs for common shares charged to paid-in capital |
| 0.00 | (b) | (0.02 | ) | | | | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Total Fund share transactions |
| 0.00 | (b) | (0.04 | ) | | | (0.00 | )(b) | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Net Asset Value Attributable to Common Stockholders, End of Period |
$ | 5.39 | $ | 5.68 | $ | 4.83 | $ | 5.57 | $ | 5.30 | $ | 5.30 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
NAV total return |
(0.20 | )% | 28.40 | % | (5.08 | )% | 14.59 | % | 8.34 | % | (5.39 | )% | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Market value, end of period |
$ | 5.12 | $ | 5.85 | $ | 4.39 | $ | 5.90 | $ | 4.69 | $ | 4.78 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Investment total return |
(8.03 | )% | 45.68 | % | (14.12 | )% | 37.53 | % | 6.97 | % | (14.18 | )% | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
11
The Gabelli Convertible and Income Securities Fund Inc.
Financial Highlights (Continued)
Selected data for a common share outstanding throughout each period:
Six Months Ended | ||||||||||||||||||||||||
June 30, 2020 | Year Ended December 31, | |||||||||||||||||||||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Ratios to Average net assets and Supplemental Data: |
||||||||||||||||||||||||
Net assets including liquidation value of preferred shares, end of period (in 000s) |
$135,126 | $141,847 | $114,684 | $103,445 | $98,733 | $98,742 | ||||||||||||||||||
Net assets attributable to common shares, end of period (in 000s) |
$101,366 | $106,847 | $90,545 | $ 79,306 | $74,594 | $74,603 | ||||||||||||||||||
Ratio of net investment income (loss) to average net assets attributable to common shares before preferred share distributions |
(0.01 | )%(c) | 1.17 | % | 1.37 | % | 1.56 | % | 2.37 | % | 1.19 | % | ||||||||||||
Ratio of operating expenses to average net assets attributable to common shares before fees waived (d)(e) |
3.32 | %(c)(f) | 2.06 | %(f) | 1.89 | % | 1.96 | % | 1.95 | %(g)(h) | 1.88 | %(g) | ||||||||||||
Ratio of operating expenses to average net assets attributable to common shares net of advisory fee reduction, if any (d)(i) |
3.32 | %(c)(f) | 2.06 | %(f) | 1.60 | % | 1.96 | % | 1.95 | %(g)(h) | 1.59 | %(g) | ||||||||||||
Portfolio turnover rate |
26 | % | 45 | % | 42 | % | 27 | % | 71 | % | 24 | % | ||||||||||||
Cumulative Preferred Stock: |
||||||||||||||||||||||||
6.000% Series B Preferred |
||||||||||||||||||||||||
Liquidation value, end of period (in 000s) |
| | $ 24,139 | $ 24,139 | $24,139 | $24,139 | ||||||||||||||||||
Total shares outstanding (in 000s) |
| | 966 | 966 | 966 | 966 | ||||||||||||||||||
Liquidation preference per share |
| | $ 25.00 | $ 25.00 | $ 25.00 | $ 25.00 | ||||||||||||||||||
Average market value (j) |
| | $ 25.91 | $ 26.45 | $ 26.52 | $ 25.81 | ||||||||||||||||||
Asset coverage per share |
| | $ 118.78 | $ 107.14 | $102.26 | $102.26 | ||||||||||||||||||
4.000% Series E Preferred |
||||||||||||||||||||||||
Liquidation value, end of period (in 000s) |
$ 33,760 | $ 35,000 | | | | | ||||||||||||||||||
Total shares outstanding (in 000s) |
338 | 350 | | | | | ||||||||||||||||||
Liquidation preference per share |
$ 100.00 | $ 100.00 | | | | | ||||||||||||||||||
Average market value (k) |
$ 100.00 | $ 100.00 | | | | | ||||||||||||||||||
Asset coverage per share |
$ 400.25 | $ 405.28 | | | | | ||||||||||||||||||
Asset Coverage |
400 | % | 405 | % | 475 | % | 429 | % | 409 | % | 409 | % |
|
Based on net asset value per share, adjusted for reinvestment of distributions at the net asset value per share on the ex-dividend dates. Total return for a period of less than one year is not annualized. |
|
Based on market value per share, adjusted for reinvestment of distributions at prices determined under the Funds dividend reinvestment plan. Total return for a period of less than one year is not annualized. |
* |
Based on year to date book income. Amounts are subject to change and recharacterization at year end. |
(a) |
Calculated based on average common shares outstanding on the record dates throughout the years. |
(b) |
Amount represents less than $0.005 per share. |
(c) |
Annualized. |
(d) |
The Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. For all periods presented there was no impact on the expense ratios. |
(e) |
Ratio of operating expenses to average net assets including liquidation value of preferred shares before fee waived for the six months ended June 30, 2020 and years ended December 31, 2019, 2018, 2017, 2016, and 2015 would have been 2.46%, 1.61%, 1.47%, 1.50%, 1.46%, and 1.46%, respectively. |
(f) |
The Fund incurred interest expense on the Series E Preferred Shares issued October 16, 2019. (see Footnotes 2 and 5). |
(g) |
The Fund incurred dividend expenses on securities sold short. If this expense had not been incurred, the expense ratios for the year ended December 31, 2015 would have been 1.87% attributable to common shares before fees waived, 1.57% attributable to common shares net of advisory fee reduction, 1.44% including liquidation value of preferred shares before fees waived, and 1.22% including liquidation value of preferred shares net of advisory fee reduction. For the year ended December 31, 2016, the impact was minimal. |
(h) |
During the year ended December 31, 2016, the Fund received a one time reimbursement of custody expenses paid in prior years. Had such reimbursement been included in this period, the expenses ratios would have been 1.69% attributable to common shares before fees waived, 1.69% attributable to common shares net of advisory fee reduction, 1.26% including liquidation value of preferred shares before fees waived, and 1.26% including liquidation value of preferred shares net of advisory fee reduction. |
See accompanying notes to financial statements.
12
The Gabelli Convertible and Income Securities Fund Inc.
Financial Highlights (Continued)
Selected data for a common share outstanding throughout each period:
(i) |
Ratio of operating expenses to average net assets including liquidation value of preferred shares net of advisory fee reduction for the six months ended June 30, 2020 and years ended December 31, 2019, 2018, 2017, 2016, and 2015 would have been 2.46%, 1.61%, 1.24%, 1.50%, 1.46%, and 1.23%, respectively. |
(j) |
Based on weekly prices. |
(k) |
The Series E Preferred is a private placement and is not listed on an exchange, nor does the Fund expect a secondary market to develop. The average market price shown is the $100 liquidation preference of the Series E Preferred. |
See accompanying notes to financial statements.
13
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited)
1. Organization. The Gabelli Convertible and Income Securities Fund Inc. is a diversified closed-end 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 a diversified open-end management investment company and commenced investment operations on July 3, 1989 as The Gabelli Convertible Securities Fund, Inc. At a special meeting of stockholders held on February 17, 1995, the Board of Directors (the Board) voted to approve the conversion of the Fund to closed-end status, effective March 31, 1995.
2. Significant Accounting Policies. As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (GAAP) that may require the use of management estimates and assumptions in the preparation of its 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 or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a markets official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the Adviser).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market, but prior to the close of business on the day the securities are being valued. Debt obligations for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the securities are valued using the closing bid price, unless the Board determines such amount does not reflect the securities fair value, in which case these securities will be fair valued as determined by the Board. Certain securities are valued principally using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded. OTC futures and options on futures for which market quotations are readily available will be valued by quotations received from a pricing service or, if no quotations are available from a pricing service, by quotations obtained from one or more dealers in the instrument in question by the Adviser.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S.
14
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
dollar value American Depositary Receipt securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
The inputs and valuation techniques used to measure fair value of the Funds investments are summarized into three levels as described in the hierarchy below:
● |
Level 1 quoted prices in active markets for identical securities; |
● |
Level 2 other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and |
● |
Level 3 significant unobservable inputs (including the Boards determinations as to the fair value of investments). |
A financial instruments level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Funds investments in securities by inputs used to value the Funds investments as of June 30, 2020 is as follows:
Valuation Inputs | ||||||||||||||||
Level 1
Quoted Prices |
Level 2 Other Significant
Observable Inputs |
Level 3 Significant
Unobservable Inputs |
Total Market Value
at 6/30/20 |
|||||||||||||
INVESTMENTS IN SECURITIES: |
||||||||||||||||
ASSETS (Market Value): |
||||||||||||||||
Convertible Corporate Bonds (a) |
| $ | 87,056,772 | | $ | 87,056,772 | ||||||||||
Convertible Preferred Stocks (a) |
$ | 3,656,353 | | | 3,656,353 | |||||||||||
Mandatory Convertible Securities (a) |
19,268,707 | 1,617,357 | | 20,886,064 | ||||||||||||
Common Stocks: |
||||||||||||||||
Energy and Utilities |
263,110 | | $ | 0 | 263,110 | |||||||||||
Other Industries (a) |
15,149,153 | | | 15,149,153 | ||||||||||||
Total Common Stock |
15,412,263 | | 0 | 15,412,263 | ||||||||||||
Rights (a) |
3,791 | | | 3,791 | ||||||||||||
U.S. Government Obligations |
| 7,703,195 | | 7,703,195 | ||||||||||||
TOTAL INVESTMENTS IN SECURITIES ASSETS |
$ | 38,341,114 | $ | 96,377,324 | $ | 0 | $ | 134,718,438 |
(a) |
Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings. |
During the six months ended June 30, 2020, the Fund did not have material transfers into or out of Level 3.
15
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
Additional Information to Evaluate Qualitative Information.
General. The Fund uses recognized industry pricing services approved by the Board and unaffiliated with the Adviser to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds are ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities.
Fair Valuation. Fair valued securities may be common or preferred equities, warrants, options, rights, or fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These may include backtesting the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in derivative financial instruments for the purposes of increasing the income of the Fund, hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase, or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Advisers prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Funds ability to pay distributions.
Collateral requirements differ by type of derivative. Collateral requirements are set by the broker or exchange clearing house for exchange traded derivatives, while collateral terms are contract specific for derivatives traded over-the-counter. Securities pledged to cover obligations of the Fund under derivative contracts are noted in
16
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
the Schedule of Investments. Cash collateral, if any, pledged for the same purpose will be reported separately in the Statement of Assets and Liabilities.
The Funds policy with respect to offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the master agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.
The Funds derivative contracts held at June 30, 2020, if any, are not accounted for as hedging instruments under GAAP and are disclosed in the Schedule of Investments together with the related counterparty.
Swap Agreements. The Fund may enter into equity contract for difference swap transactions for the purpose of increasing the income of the Fund. The use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In an equity contract for difference swap, a set of future cash flows is exchanged between two counterparties. One of these cash flow streams will typically be based on a reference interest rate combined with the performance of a notional value of shares of a stock. The other will be based on the performance of the shares of a stock. Depending on the general state of short term interest rates and the returns on the Funds portfolio securities at the time an equity contract for difference swap transaction reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction.
Unrealized gains related to swaps are reported as an asset and unrealized losses are reported as a liability in the Statement of Assets and Liabilities. The change in value of swaps, including the accrual of periodic amounts of interest to be received or paid on swaps, is reported as unrealized gain or loss in the Statement of Operations. A realized gain or loss is recorded upon receipt or payment of a periodic payment or termination of swap agreements. During the six months ended June 30, 2020, the Fund held no investments in equity contract for difference swap agreements.
Limitations on the Purchase and Sale of Futures Contracts, Certain Options, and Swaps. Subject to the guidelines of the Board, the Fund may engage in commodity interest transactions (generally, transactions in futures, certain options, certain currency transactions, and certain types of swaps) only for bona fide hedging or other permissible transactions in accordance with the rules and regulations of the Commodity Futures Trading Commission (CFTC). Pursuant to amendments by the CFTC to Rule 4.5 under the Commodity Exchange Act (CEA), the Adviser has filed a notice of exemption from registration as a commodity pool operator with respect to the Fund. The Fund and the Adviser are therefore not subject to registration or regulation as a commodity pool operator under the CEA. In addition, certain trading restrictions are now applicable to the Fund which permit the Fund to engage in commodity interest transactions that include (i) bona fide hedging transactions, as that term is defined and interpreted by the CFTC and its staff, without regard to the percentage of the Funds assets committed to margin and options premiums and (ii) non-bona fide hedging transactions, provided that the Fund does not enter into such non-bona fide hedging transactions if, immediately thereafter, either (a) the sum of the amount of initial margin deposits on the Funds existing futures positions or swaps positions and option or swaption premiums would exceed 5% of the market value of the Funds liquidating value, after taking into account unrealized profits and unrealized losses on any such transactions, or (b) the aggregate net notional value of the Funds commodity interest transactions would not exceed 100% of the market value of the Funds
17
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
liquidating value, after taking into account unrealized profits and unrealized losses on any such transactions. Therefore, in order to claim the Rule 4.5 exemption, the Fund is limited in its ability to invest in commodity futures, options, and certain types of swaps (including securities futures, broad based stock index futures, and financial futures contracts). As a result, in the future the Fund will be more limited in its ability to use these instruments than in the past, and these limitations may have a negative impact on the ability of the Adviser to manage the Fund, and on the Funds performance.
Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from 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 an 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. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. At June 30, 2020, there were no short sales outstanding.
Series E Cumulative Preferred Stock. For financial reporting purposes only, the liquidation value of preferred stock that has a mandatory call date is classified as a liability within the Statement of Assets and Liabilities and the dividends paid on this preferred stock are included as a component of Interest expense on preferred stock within the Statement of Operations. Offering costs are amortized over the life of the preferred stock.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at current exchange rates. 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 that 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 translations. 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 purchase trade date and subsequent sale trade date is included in realized gain/(loss) on investments.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
18
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
Restricted Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted. Restricted securities include securities whose disposition is subject to substantial legal or contractual restrictions. The sale of restricted securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and, accordingly, the Board will monitor their liquidity. As of June 30, 2020, the Fund did not hold restricted securities.
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain/(loss) on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on an accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
Custodian Fee Credits. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as Custodian fee credits.
Distributions to Stockholders. Distributions to common stockholders are recorded on the ex-dividend date. Distributions to stockholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Distributions from net investment income for federal income tax purposes include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. These reclassifications have no impact on the NAV of the Fund.
Distributions to stockholders of the Funds 4.000% Series E Cumulative Preferred Stock (Series E Preferred) are recorded on a daily basis and are determined as described in Note 5.
The Fund declares and pays quarterly distributions from net investment income, capital gains, and paid-in capital. The actual source of the distribution is determined after the end of the year. Distributions during the year may be made in excess of required distributions. To the extent such distributions are made from current earnings and profits, they are considered ordinary income or long term capital gains. Distributions sourced from paid-in capital should not be considered as dividend yield or the total return from an investment in the Fund. The Board will continue to monitor the Funds distribution level, taking into consideration the Funds NAV and the financial market environment. The Funds distribution policy is subject to modification by the Board at any time.
19
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Common | Preferred | |||||||
Distributions paid from: |
||||||||
Ordinary income (inclusive of short term capital gains) |
$ | 2,326,549 | $ | 353,366 | ||||
Net long term capital gains. |
6,070,364 | 921,994 | ||||||
Return of capital |
606,699 | | ||||||
|
|
|
|
|||||
Total distributions paid |
$ | 9,003,612 | $ | 1,275,360 | ||||
|
|
|
|
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 (the Code). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
The following summarizes the tax cost of investments and the related net unrealized appreciation at June 30, 2020:
Cost |
Gross
Unrealized Appreciation |
Gross
Unrealized Depreciation |
Net
Unrealized Appreciation |
|||||
Investments |
$118,801,082 | $21,640,477 | $(5,723,121) | $15,917,356 |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Funds tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. During the six months ended June 30, 2020, the Fund did not incur any income tax, interest, or penalties. As of June 30, 2020, the Adviser has reviewed all open tax years and concluded that there was no impact to the Funds net assets or results of operations. The Funds federal and state tax returns for the prior three years remain open, subject to examination. On an ongoing basis, the Adviser will monitor the Funds tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. 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 its average daily net assets including the liquidation value of preferred stock. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Funds portfolio and oversees the administration of all aspects of the Funds business and affairs.
During the six months ended June 30, 2020, the Fund paid $3,119 in brokerage commissions on security trades to G.research, LLC, an affiliate of the Adviser.
During the six months ended June 30, 2020, the Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. The amount of such expenses paid through this directed brokerage arrangement during this period was $1,012.
The cost of calculating the Funds NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. Under the sub-administration agreement with Bank of New York Mellon,
20
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
the fees paid include the cost of calculating the Funds NAV. The Fund reimburses the Adviser for this service. During the six months ended June 30, 2020, the Fund accrued $22,500 in accounting fees in the Statement of Operations.
As per the approval of the Board, the Fund compensates officers of the Fund, who are employed by the Fund and are not employed by the Adviser (although the officers may receive incentive based variable compensation from affiliates of the Adviser). During the six months ended June 30, 2020, the Fund accrued $38,477 in payroll expenses in the Statement of Operations.
The Fund pays each Director who is not considered an affiliated person an annual retainer of $3,000 plus $750 for each Board meeting attended. Each Director is reimbursed by the Fund for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended, the Audit Committee Chairman receives an annual fee of $3,000, the Nominating Committee Chairman receives an annual fee of $2,000, and the Lead Director receives an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund.
4. Portfolio Securities. Purchases and sales of securities during the six months ended June 30, 2020, other than short term securities and U.S. Government obligations, aggregated $32,763,873 and $35,390,756, respectively. Purchases and sales of U.S. Government Obligations during the six months ended June 30, 2020, aggregated $28,601,679 and $32,043,767, respectively.
5. Capital. The charter permits the Fund to issue 998,000,000 shares of common stock (par value $0.001). The Board has authorized the repurchase of up to 500,000 common shares on the open market when the shares are trading at a discount of 10% or more (or such other percentage as the Board may determine from time to time) from the NAV of the shares. During the six months ended June 30, 2020 and year ended December 31, 2019, the Fund did not repurchase any shares of its common stock in the open market.
For the six months ended June 30, 2020 and year ended December 31, 2019, transactions in common stock were as follows:
Six Months Ended
June 30, 2020 (Unaudited) |
Year Ended
December 31, 2019 |
|||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Net increase from common shares issued upon reinvestment of distributions |
| | 63,861 | $ | 360,817 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase. |
| | 63,861 | $ | 360,817 | |||||||||||
|
|
|
|
|
|
|
|
The Funds Articles of Incorporation authorize the issuance of up to 1,995,000 shares of $0.001 par value Preferred Stock. The Preferred Stock is senior to the common stock and results in the financial leveraging of the common stock. Such leveraging tends to magnify both the risks and opportunities to common stockholders. Dividends on shares of the Preferred Stock are cumulative. The Fund is required by the 1940 Act and by the Funds Articles Supplementary to meet certain asset coverage tests with respect to the Preferred Stock. 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 Series E Preferred at a redemption price of $100 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.
21
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
Additionally, failure to meet the foregoing asset coverage requirements could restrict the Funds ability to pay dividends to common stockholders and could lead to sales of portfolio securities at inopportune times. The income received on the Funds assets may vary in a manner unrelated to the fixed and variable rates, which could have either a beneficial or detrimental impact on net investment income and gains available to common stockholders.
On March 18, 2003, the Fund received net proceeds of $23,994,241 after underwriting discounts of $787,500 and offering expenses of $218,259 from the public offering of 1,000,000 shares of Series B Preferred. On November 18, 2019, the Fund redeemed and retired all of the remaining outstanding shares of Series B Preferred.
On October 16, 2019, the Fund issued 350,000 shares of Series E 4.00% Cumulative Preferred Stock (Series E Preferred), receiving $34,900,000 after the deduction of estimated offering expenses of $100,000. The Series E has a liquidation value of $100 per share and an annual dividend rate of 4.00%. The Series E Preferred is subject to mandatory redemption by the Fund on October 16, 2023. At June 30, 2020, 337,600 shares of Series E Preferred were outstanding and accrued dividends amounted to $18,756.
From April 16, 2020 to October 15, 2020 (the First Put Period), the Fund will accept for redemption, in aggregate, up to 10% of the outstanding Series E Preferred. From October 16, 2020 to October 15, 2021 (the Second Put Period), the Fund will accept for redemption, in aggregate, up to 20% of the outstanding Series E Preferred, with the number of outstanding Series E Preferred determined as of October 16, 2020. A Series E Preferred stockholder may, after notice to the Fund 30 days prior to the respective put period, submit one redemption request for part or all of such holdings in each put period, subject to the respective foregoing percentage limitations. The Fund will redeem such Shares at the liquidation preference plus any accumulated and unpaid dividends. If the capacity limitations for the First Put Period or the Second Put Period are exceeded, the Fund will redeem the Series E Preferred on a pro rata basis.
During the period from October 16, 2021 to October 15, 2022 (the Third Put Period), a Series E Preferred stockholder may, with notice 45 days prior to the Fund, submit part or all of such Shares without limitation for redemption at the liquidation preference plus any accumulated and unpaid dividends.
On October 16, 2023, the Fund will redeem any Series E Preferred not previously liquidated at the liquidation preference plus any accumulated and unpaid dividends.
The proceeds from the issuance of the Series E Preferred were used to redeem all of the 965,548 remaining 6.000% Series B Preferred Shares on November 18, 2019 at the liquidation value of $24,138,700, or $25 per share plus accrued and unpaid dividends.
On May 17, 2020, 12,400 of the Series E were put back to the Fund at their liquidation value of $100 per share plus accrued and unpaid dividends.
The Fund has an effective shelf registration authorizing an additional $100 million of common or preferred stock.
The holders of Preferred Stock generally are entitled to one vote per share held on each matter submitted to a vote of stockholders of the Fund and will vote together with holders of common stock as a single class. The holders of Preferred Stock voting together as a single class also have the right currently to elect two Directors
22
The Gabelli Convertible and Income Securities Fund Inc.
Notes to Financial Statements (Unaudited) (Continued)
and, under certain circumstances, are entitled to elect a majority of the Board. In addition, the affirmative vote of a majority of the votes entitled to be cast by holders of all outstanding shares of the preferred stock, voting as a single class, will be required to approve any plan of reorganization adversely affecting the preferred stock, and the approval of two-thirds of each class, voting separately, of the Funds outstanding voting stock must approve the conversion of the Fund from a closed-end to an open-end investment company. The approval of a majority (as defined in the 1940 Act) of the outstanding preferred stock and a majority (as defined in the 1940 Act) of the Funds outstanding voting securities are required to approve certain other actions, including changes in the Funds investment objectives or fundamental investment policies.
6. Convertible Securities Concentration. The Fund will invest at least 80% of its net assets, under normal market conditions, in a combination of convertible securities and income producing securities (the 80% Policy). The Fund expects to continue its practice of focusing on convertible securities to the extent attractive opportunities are available. The 80% Policy may be changed without stockholder approval. However, the Fund has adopted a policy to provide stockholders with notice at least 60 days prior to the implementation of any change in the 80% Policy.
7. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Funds maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds existing contracts and expects the risk of loss to be remote.
8. Subsequent Events. Management has evaluated the impact of all subsequent events occurring through the date the financial statements were issued and has determined that there were no other subsequent events requiring recognition or disclosure in the financial statements.
Stockholder Meeting May 11, 2020 Final Results
The Funds Annual Meeting of Stockholders was held virtually on May 11, 2020. At that meeting, common and preferred stockholders, voting together as a single class, re-elected Vincent D. Enright, Anthonie C. van Ekris, and Salvatore J. Zizza as Directors of the Fund, with 14,039,123 votes, 13,994,946 votes, and 13,986,314 votes cast in favor of these Directors, and 457,522 votes, 501,698 votes, and 510,330 votes withheld for these Directors, respectively.
In addition, preferred stockholders, voting as a separate class, re-elected Anthony S. Colavita as a Director of the Fund, with 62,200 votes cast in favor of this Director and no votes withheld for this Director.
Mario J. Gabelli, John Birch, E. Val Cerutti, Thomas H, Dinsmore, Leslie F. Foley, Daniel D. Harding, Michael J. Melarkey, Kuni Nakamura, and Werner J. Roeder continue to serve in their capacities as Directors of the Fund.
We thank you for your participation and appreciate your continued support.
23
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
Board Consideration and Re-Approval of Investment Advisory Contract (Unaudited)
At its meeting on May 13, 2020, the Board of Directors (Board) of the Fund approved the continuation of the investment advisory contract with the Adviser for the Fund on the basis of the recommendation by the directors who are not interested persons of the Fund (the Independent Board Members). The following paragraphs summarize the material information and factors considered by the Independent Board Members as well as their conclusions relative to such factors.
Nature, Extent and Quality of Services. The Independent Board Members considered information regarding the portfolio managers, the depth of the analyst pool available to the Adviser and the portfolio managers, the scope of supervisory, administrative, stockholder, and other services supervised or provided by the Adviser and the absence of significant service problems reported to the Board. The Independent Board Members noted the experience, length of service, and reputation of the portfolio managers.
Investment Performance. The Independent Board Members reviewed the performance of the Fund for the one, three, five, and ten year periods ended March 31, 2020 against a peer group of convertible and total return income oriented funds selected by the Adviser (the Adviser Peer Group) and against a peer group consisting of funds in the Funds Lipper category (the Lipper Peer Group). The Independent Board Members noted that the Funds performance for these periods generally ranked above or near the median relative to the Adviser Peer Group, but above the median relative to the Lipper Peer Group for the one year, three year, and five year periods, but below the median for the ten year period.
Profitability. The Independent Board Members reviewed summary data regarding the profitability of the Fund to the Adviser both with an administrative overhead charge and without such charge. The Board also reviewed materials showing that a portion of the Funds portfolio transactions was executed by the Advisers affiliated broker, resulting in incremental profits to the broker.
Economies of Scale. The Independent Board Members considered the major elements of the Advisers cost structure and the relationship of those elements to potential economies of scale. The Independent Board Members noted that the Fund was a closed-end fund and unlikely to realize any economies of scale potentially available through growth in the absence of additional offerings.
Sharing of Economies of Scale. The Independent Board Members noted that the investment advisory fee schedule for the Fund does not take into account any potential economies of scale.
Service and Cost Comparisons. The Independent Board Members compared the expense ratios of the investment advisory fee, other expenses, and total expenses of the Fund with similar expense ratios of the Adviser Peer Group and the Lipper Peer Group and noted that the advisory fee includes substantially all administrative services of the Fund as well as investment advisory services of the Adviser. The Independent Board Members noted that the Funds expense ratios were above average and the Funds size was below average within the applicable peer groups. The Independent Board Members noted that the advisory fee reflected by Lipper is the aggregate fee paid by a fund (including fees attributable to both common and preferred shares) as a percentage of the assets attributable to common shares, which results in the calculation of a higher advisory fee percentage than the stated contractual fee for any funds employing leverage. The Independent Board Members were presented with information comparing the advisory fee to the fee for other types of accounts managed by the Adviser.
Conclusions. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services, and an acceptable performance record within its relatively conservative
24
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
Board Consideration and Re-Approval of Investment Advisory Contract (Unaudited) (Continued)
stance. The Independent Board Members also concluded that the Funds expense ratios were acceptable in light of the Funds size, and that, in part due to the Funds structure as a closed-end fund, economies of scale were not a significant factor in their thinking. The Independent Board Members concluded that the Funds performance and advisory fees were broadly in line with peer funds. The Independent Board Members did not view the potential profitability of ancillary services as material to their decision. On the basis of the foregoing and without assigning particular weight to any single conclusion, the Independent Board Members determined to recommend continuation of the Advisory Agreement to the full Board.
Based on a consideration of all these factors in their totality, the Board Members, including all of the Independent Board Members, determined that the Funds advisory fee was appropriate in light of the quality of services provided and in light of the other factors described above that the Board deemed relevant. Accordingly, the Board Members determined to approve the continuation of the Funds Advisory Agreement. The Board Members based their decision on evaluations of all these factors as a whole and did not consider any one factor as all important or controlling.
25
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC. AND YOUR PERSONAL PRIVACY
Who are we?
The Gabelli Convertible and Income Securities Fund Inc. is a closed-end management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, which is affiliated with GAMCO Investors, Inc., a publicly held company that has subsidiaries that provide investment advisory services for a variety of clients.
What kind of non-public information do we collect about you if you become a Fund stockholder?
When you purchase shares of the Fund on the New York Stock Exchange, you have the option of registering directly with our transfer agent in order, for example, to participate in our dividend reinvestment plan.
● Information you give us on your application form. This could include your name, address, telephone number, social security number, bank account number, and other information.
● Information about your transactions with us. This would include information about the shares that you buy or sell; it may also include information about whether you sell or exercise rights that we have issued from time to time. If we hire someone else to provide services like a transfer agent we will also have information about the transactions that you conduct through them.
What information do we disclose and to whom do we disclose it?
We do not disclose any non-public personal information about our customers or former customers to anyone other than our affiliates, our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What do we do to protect your personal information?
We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the Fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential.
|
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
One Corporate Center
Rye, NY 10580-1422
Portfolio Management Team Biographies
Mario J. Gabelli, CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer - Value Portfolios of GAMCO Investors, Inc. that he founded in 1977, and Chief Investment Officer - Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Executive Chairman of Associated Capital Group, Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.
James A. Dinsmore, CFA, joined Gabelli Funds, LLC in 2015. He currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Fund Complex. Mr. Dinsmore received a BA in Economics from Cornell University and an MBA degree from Rutgers University.
Thomas H. Dinsmore, CFA, joined Gabelli Funds, LLC in 2015. He currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Fund Complex. Previously Mr. Dinsmore was Chairman and CEO of Dinsmore Capital Management; CEO and Portfolio Manager of Bancroft Fund Ltd; and CEO, Portfolio Manager, and co-founder of Ellsworth Growth and Income Fund Ltd. He received a BS in Economics from the Wharton School of Business and an MA degree in Economics from Fairleigh Dickinson University.
Jane D. OKeeffe joined Gabelli Funds, LLC in 2015. She currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Fund Complex. Previously Ms. OKeeffe was President and Director of Dinsmore Capital Management where she was also a Portfolio Manager of Bancroft Fund Ltd. and Ellsworth Growth and Income Fund Ltd. Prior to joining Dinsmore Capital Management, Ms. OKeeffe held positions of increasing responsibilities at IDS Progressive Fund, Soros Fund Management Company, Simms Capital Management, and Fiduciary Trust International. She earned a BA from the University of New Hampshire and attended the Lubin Graduate School of Business at Pace University.
We have separated the portfolio managers commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio managers commentary is unrestricted. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com.
The Net Asset Value per share appears in the Publicly Traded Funds column, under the heading Convertible Securities Funds, in Mondays The Wall Street Journal. It is also listed in Barrons Mutual Funds/Closed-End Funds section under the heading Convertible Securities Funds.
The Net Asset Value per share may be obtained each day by calling (914) 921-5070 or visiting www.gabelli.com.
The NASDAQ symbol for the Net Asset Value is XGCVX.
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may, from time to time, purchase its common shares in the open market when the Funds shares are trading at a discount of 10% or more from the net asset value of the shares.
THE GABELLI CONVERTIBLE AND
INCOME SECURITIES FUND INC.
One Corporate Center
Rye, NY 10580-1422
t 800-GABELLI (800-422-3554)
f 914-921-5118
e info@gabelli.com
GABELLI.COM
DIRECTORS
Mario J. Gabelli, CFA Chairman and Chief Executive Officer, GAMCO Investors, Inc. Executive Chairman, Associated Capital Group, Inc.
John Birch Partner, The Cardinal Partners Global
E. Val Cerutti Chief Executive Officer, Cerutti Consultants, Inc.
Anthony S. Colavita President, Anthony S. Colavita, P.C.
Thomas H. Dinsmore, CFA Portfolio Manager, Gabelli Funds LLC
Vincent D. Enright Former Senior Vice President and Chief Financial Officer, KeySpan Corp.
Leslie F. Foley Attorney
Daniel D. Harding Managing General Director, Global Equity Income Fund
Michael J. Melarkey Of Counsel, McDonald Carano Wilson LLP
Kuni Nakamura President, Advanced Polymer, Inc.
Werner J. Roeder Former Medical Director, Lawrence Hospital
|
Anthonie C. van Ekris Chairman, BALMAC International, Inc.
Salvatore J. Zizza Chairman, Zizza & Associates Corp.
OFFICERS
Bruce N. Alpert President
John C. Ball Treasurer
Andrea R. Mango Secretary & Vice President
Richard J. Walz Chief Compliance Officer
Laurissa M. Martire Vice President & Ombudsman
Bethany A. Uhlein Vice President & Ombudsman
INVESTMENT ADVISER
Gabelli Funds, LLC One Corporate Center Rye, New York 10580-1422
CUSTODIAN
State Street Bank and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A. |
|
GCV Q2/2020 |
Item 2. |
Code of Ethics. |
Not applicable.
Item 3. |
Audit Committee Financial Expert. |
Not applicable.
Item 4. |
Principal Accountant Fees and Services. |
Not applicable.
Item 5. |
Audit Committee of Listed Registrants. |
Not applicable.
Item 6. |
Investments. |
(a) |
Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) |
Not applicable. |
Item 7. |
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. |
Portfolio Managers of Closed-End Management Investment Companies. |
There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in the registrants most recently filed annual report on Form N-CSR.
Item 9. |
Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
REGISTRANT PURCHASES OF EQUITY SECURITIES
Period
|
(a) Total Number of Shares (or Units) Purchased
|
(b) Average Price Paid per Share (or Unit)
|
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
|
(d) Maximum Number (or
|
||||
Month #1
|
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common 18,821,385
Preferred Series E 350,000 |
Month #2
|
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common 18,821,385
Preferred Series E 350,000 |
||||
Month #3
|
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common 18,821,385
Preferred Series E 350,000 |
||||
Month #4
|
Common N/A
|
Common N/A
|
Common N/A
|
Common 18,821,385
|
||||
Month #5
|
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common 18,821,385
Preferred Series E 337,600 |
||||
Month #6
|
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common N/A
Preferred Series E N/A |
Common 18,821,385
Preferred Series E 337,600 |
||||
Total |
Common N/A
|
Common N/A
|
Common N/A
|
N/A
|
Footnote columns (c) and (d) of the table, by disclosing the following information in the aggregate for all plans or programs publicly announced:
a. |
The date each plan or program was announced The notice of the potential repurchase of common and preferred shares occurs semiannually in the Funds reports to shareholders in accordance with Section 23(c) of the Investment Company Act of 1940, as amended. |
b. |
The dollar amount (or share or unit amount) approved Any or all common shares outstanding may be repurchased when the Funds common shares are trading at a discount of 10% or more from the net asset value of the shares. |
Any or all preferred shares outstanding may be repurchased when the Funds preferred shares are trading at a discount to the liquidation value of $100.00. |
c. |
The expiration date (if any) of each plan or program The Funds repurchase plans are ongoing. |
d. |
Each plan or program that has expired during the period covered by the table The Funds repurchase plans are ongoing. |
e. |
Each plan or program the registrant has determined to terminate prior to expiration, or under which the registrant does not intend to make further purchases. The Funds repurchase plans are ongoing. |
Item 10. |
Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrants Board of Directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. |
Controls and Procedures. |
(a) |
The registrants principal executive and principal financial officers, or persons performing similar functions have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the 1940 Act)) are effective as of a date within 90 days of the filing of this report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended. |
(b) |
The registrants certifying officers are not aware of any changes in the registrants internal control over financial reporting (as defined in rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
Item 12. |
Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. |
Exhibits. |
(a)(1) | Not applicable. | |
(a)(2) | ||
(a)(3) |
Not applicable. |
|
(a)(4) |
Not applicable. |
|
(b) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) |
The Gabelli Convertible and Income Securities Fund Inc. |
By (Signature and Title)* |
/s/ Bruce N. Alpert |
|
Bruce N. Alpert, Principal Executive Officer |
Date |
September 4, 2020 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* |
/s/ Bruce N. Alpert |
|
Bruce N. Alpert, Principal Executive Officer |
Date |
September 4, 2020 |
By (Signature and Title)* |
/s/ John C. Ball |
|
John C. Ball, Principal Financial Officer and Treasurer |
Date |
September 4, 2020 |
* Print the name and title of each signing officer under his or her signature.
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