Directors
and Officers
The
business and affairs of the Fund are managed under the direction of the Fund’s Board of Directors. Information pertaining
to the Directors and Officers of the Fund is set forth below. The Fund’s Statement of Additional Information includes additional
information about the Fund’s Directors and is available without charge, upon request, by calling 800-GABELLI (800-422-3554)
or by writing to The Gabelli Convertible and Income Securities Fund Inc. at One Corporate Center, Rye, NY 10580-1422.
Name,
Position(s)
Address1
and Year of Birth |
|
Term
of Office
and
Length of
Time Served2 |
|
Number
of
Funds
in Fund
Complex
Overseen
by Director |
|
Principal
Occupation(s)
During Past Five Years |
|
Other
Directorships
Held by Director3 |
| |
|
|
|
|
|
|
|
|
| INTERESTED
DIRECTORS4: |
|
|
| |
|
|
|
|
|
|
|
|
Agnes
Mullady
Director
1958 |
|
Since
2021** |
|
13 |
|
Senior
Vice President of GAMCO Investors, Inc. (2008 - 2019); Executive Vice President of Associated Capital Group, Inc. (November
2016 - 2019); President and Chief Operating Officer of the Fund Division of Gabelli Funds, LLC (2010 - 2019); Vice President
of Gabelli Funds, LLC (2006 - 2019); Chief Executive Officer of G.distributors, LLC (2011 - 2019); and an officer of all of
the Gabelli/ Teton Funds (2006 - 2019) |
|
— |
| |
|
|
|
|
|
|
|
|
Thomas
H. Dinsmore,
CFA
Director
1953 |
|
Since
2016*** |
|
1 |
|
Portfolio
Manager for Gabelli Funds, LLC; Former Chairman and Chief Executive Officer of the Bancroft Fund Ltd. and the EllsworthGrowth
and Income Fund Ltd. (1996-2015) |
|
— |
| |
|
|
|
|
|
|
| INDEPENDENT
DIRECTORS5: |
|
|
| |
|
|
|
|
|
|
|
|
John
Birch6
Director
1950 |
|
Since
2018** |
|
8 |
|
Partner,
The Cardinal Partners Global; Chief Operating Officer of Sentinel Asset Management and Chief Financial Officer and Chief Risk
Officer of Sentinel Group Funds (2005-2015) |
|
— |
| |
|
|
|
|
|
|
|
|
E.
Val Cerutti6
Director
1939 |
|
Since
1989** |
|
7 |
|
Chief
Executive Officer of Cerutti Consultants, Inc. |
|
Director
of The LGL Group, Inc. (diversified manufacturing) (1990-2009) |
| |
|
|
|
|
|
|
|
|
Anthony
S. Colavita7,8
Director
1961 |
|
Since
2018* |
|
22 |
|
Attorney,
Anthony S. Colavita, P.C., Supervisor, Town of Eastchester, NY |
|
— |
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Unaudited) (Continued)
Name,
Position(s)
Address1
and Year of Birth |
|
Term
of Office
and
Length of
Time Served2 |
|
Number
of
Funds
in Fund
Complex
Overseen
by Director |
|
Principal
Occupation(s)
During Past Five Years |
|
Other
Directorships
Held by Director3 |
| |
|
|
|
|
|
|
|
|
Vincent
D. Enright6
Director
1943 |
|
Since
2016* |
|
17 |
|
Former
Senior Vice President and Chief Financial Officer of KeySpan Corp. (public utility) (1994-1998) |
|
Director
of Echo Therapeutics, Inc. (therapeutics and diagnostics) (2008-2014); Director of The LGL Group, Inc. (diversified manufacturing)
(2011-2014) |
| |
|
|
|
|
|
|
|
|
Leslie
F. Foley8
Director
1968 |
|
Since
2017** |
|
15 |
|
Attorney;
Serves on the Boards of the Addison Gallery of American Art at Phillips Academy Andover, Vice President, Global Ethics &
Compliance and Associate General Counsel for News Corporation (2008-2010) |
|
— |
| |
|
|
|
|
|
|
|
|
Daniel
D. Harding
Director
1952 |
|
Since
2016*** |
|
3 |
|
Managing
General Partner of the Global Equity Income Fund (private investment fund); Director of Reef Consulting & Investment (private
equity firm); former Director of TRC (private asset management); former General Partner of Latitude Capital Partners, LLC
(private investment) |
|
Atlantic
Health Systems, Ocean Reef Community Foundation and Ocean Reef Medical Center Foundation |
| |
|
|
|
|
|
|
|
|
Michael
J. Melarkey
Director
1949 |
|
Since
2011** |
|
23 |
|
Of
Counsel in the law firm of McDonald Carano Wilson LLP; Partner in the law firm of Avansino, Melarkey, Knobel, Mulligan &
McKenzie (1980-2015) |
|
Chairman
of Southwest Gas Corporation (natural gas utility) |
| |
|
|
|
|
|
|
|
|
Kuni
Nakamura
Director
1968 |
|
Since
2016** |
|
36 |
|
President
of Advanced Polymer, Inc. (chemical manufacturing company); President of KEN Enterprises, Inc. (real estate); Trustee on Long
Island University Board of Trustees; Trustee on Fordham Preparatory School Board of Trustees |
|
— |
| |
|
|
|
|
|
|
|
|
Werner
J. Roeder7
Director
1940 |
|
Since
2001** |
|
20 |
|
Retired
physician; Former Vice President of Medical Affairs (Medical Director) of New York Presbyterian/Lawrence Hospital (1999-2014) |
|
— |
| |
|
|
|
|
|
|
|
|
Anthonie
C. van Ekris6
Director
1934 |
|
Since
1992** |
|
23 |
|
Chairman
and Chief Executive Officer of BALMAC International, Inc.(global import/ export company) |
|
— |
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Unaudited) (Continued)
Name,
Position(s)
Address1
and Year of Birth |
|
Term
of Office
and
Length of
Time Served2 |
|
Number
of
Funds
in Fund
Complex
Overseen
by Director |
|
Principal
Occupation(s)
During Past Five Years |
|
Other
Directorships
Held by Director3 |
| |
|
|
|
|
|
|
|
|
Salvatore
J. Zizza9
Director
1945 |
|
Since
1991* |
|
34 |
|
President
of Zizza & Associates Corp. (private holding company); Chairman of Bergen Cove Realty Inc. (residential real estate) |
|
Director
and Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals)
(2009-2018); Retired Chairman of BAM (semiconductor and aerospace manufacturing) |
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Unaudited) (Continued)
Name,
Position(s)
Address1
and Year of Birth |
|
Term
of Office
and Length of
Time Served2 |
|
Principal
Occupation(s)
During Past Five Years |
| |
|
|
|
|
| OFFICERS: |
|
|
|
|
| |
|
|
|
|
John
C. Ball
President and
Treasurer
1976 |
|
Since
2017 |
|
Officer
of registered investment companies within the Gabelli Fund Complex since 2017; Vice President and Assistant Treasurer of AMG
Funds, 2014-2017; Chief Executive Officer, G.distributors, LLC since December 2020 |
| |
|
|
|
|
Peter
Goldstein
Secretary and Vice
President
1953 |
|
Since
2020 |
|
General
Counsel, GAMCO Investors, Inc. and Chief Legal Officer, Associated Capital Group, Inc. since 2021; General Counsel and Chief
Compliance Officer, Buckingham Capital Management, Inc. (2012-2020); Chief Legal Officer and Chief Compliance Officer, The
Buckingham Research Group, Inc. (2012-2020) |
| |
|
|
|
|
Richard
J. Walz
Chief Compliance
Officer
1959 |
|
Since
2013 |
|
Chief
Compliance Officer of registered investment companies within the Fund Complex since 2013 |
| |
|
|
|
|
Laurissa
M. Martire
Vice President and
Ombudsman
1976 |
|
Since
2004 |
|
Vice
President and/or Ombudsman of closed-end funds within the Gabelli Fund Complex; Senior Vice President (since 2019) and other
positions (2003-2019) of GAMCO Investors, Inc. |
| |
|
|
|
|
Bethany
A. Uhlein
Vice President and
Ombudsman
1990 |
|
Since
2019 |
|
Vice
President and/or Ombudsman of closed-end funds within the Gabelli Fund Complex since 2017; Senior Vice President (since 2021)
of GAMCO Investors, Inc. |
| 1 | Address:
One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. |
| 2 | The
Fund’s Board of Directors is divided into three classes, each class having a term
of three years. Each year the term of office of one class expires and the successor or
successors elected to such class serve for a three year term. The three year term for
each class expires as follows: |
| * | Term
expires at the Fund’s 2023 Annual Meeting of Stockholders or until their successors
are duly elected and qualified. |
| ** | Term
expires at the Fund’s 2024 Annual Meeting of Stockholders or until their successors
are duly elected and qualified. |
| *** | Term
expires at the Fund’s 2025 Annual Meeting of Stockholders or until their successors
are duly elected and qualified. |
Each
officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected
and qualified.
| 3 | This
column includes directorships of companies required to report to the SEC under the Securities
Exchange Act of 1934, as amended, i.e., public companies, or other investment companies
registered under the 1940 Act, and other noteworthy directorships. |
| 4 | “Interested
person” of the Fund, as defined in the 1940 Act. Messrs. Gabelli and Dinsmore and
Ms. Mullady are each considered an “interested person” because of their affiliation
with Gabelli Funds, LLC, which acts as the Fund’s investment adviser. |
| 5 | Directors
who are not interested persons are considered “Independent” Directors. |
| 6 | Mr.
Cerutti is a director of The LGL Group, Mr. Enright is a director of The LGL Group, Mr.
van Ekris is an independent director of Gabelli International Ltd., Gabelli Fund LDC,
Gama Capital Opportunities Master Ltd., and GAMCO International SICAV, and Mr. Birch
is an independent director of Gabelli Merger Plus+ Trust Plc and an independent director
of the GAMCO International SICAV, all of which may be deemed to be controlled by Mario
J. Gabelli and/or affiliates and, in that event, would be deemed to be under common control
with the Fund’s Adviser. |
| 7 | This
Director is elected solely by and represents the stockholders of the preferred stock
issued by the Fund. |
| 8 | Mr.
Colavita’s father, Anthony J. Colavita, and Ms. Foley’s father, Frank J.
Fahrenkopf, Jr., serve as directors of other funds in the Fund |
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Unaudited) (Continued)
Complex.
| 9 | Mr.
Zizza is an independent director of Gabelli International Ltd., which may be deemed to
be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed
to be under common control with the Fund’s Adviser. On September 9, 2015, Mr. Zizza
entered into a settlement with the SEC to resolve an inquiry relating to an alleged violation
regarding the making of false statements or omissions to the accountants of a company
concerning a related party transaction. The company in question is not an affiliate of,
nor has any connection to, the Fund. Under the terms of the settlement, Mr. Zizza, without
admitting or denying the SEC’s findings and allegation, paid $150,000 and agreed
to cease and desist committing or causing any future violations of Rule 13b2-2 of the
Securities Exchange Act of 1934, as amended. The Board has discussed this matter and
has determined that it does not disqualify Mr. Zizza from serving as an independent director. |
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Unaudited)
SUMMARY
OF FUND EXPENSES
The
following tables are intended to assist you in understanding the various costs and expenses directly or indirectly associated
with investing in our common shares as a percentage of net assets attributable to common shares. The table is based on the capital
structure of the Fund as of December 31, 2022.
| Shareholder
Transaction Expenses |
|
|
| Sales
Load (as a percentage of offering price) |
|
—%
(a) |
Offering
Expenses Borne by the Fund
(as a percentage of offering price) |
|
—%
(a) |
Dividend
Reinvestment and Cash Purchase Plan Fees
Purchase Transaction |
|
$0.70
(b) |
| Sale
Transaction |
|
$2.50
(b) |
| Annual
Expenses |
|
Percentages
of Net Assets
Attributable to Common Shares |
| Management
Fees |
|
1.19%
(c) |
| Interest
Expense |
|
0.97%
(d) |
| Other
Expenses |
|
0.68%
(e) |
| Total
Annual Fund Operating Expenses |
|
2.84% |
| Dividends
on Preferred Shares |
|
—% |
| Total
Annual Expenses and Dividends on Preferred Shares |
|
2.84%
(e) |
| (a) | If
common shares are sold to or through underwriters or dealer managers, a prospectus or
prospectus supplement will set forth any applicable sales load and the estimated offering
expenses borne by the fund.” |
| (b) | Shareholders
participating in the Fund’s Automatic Dividend Reinvestment Plan do not incur any
additional fees. Shareholders participating in the Voluntary Cash Purchase Plan would
pay $0.75 plus their pro rata share of brokerage commissions for transactions to purchase
shares and $2.50 plus their pro rata share of brokerage commissions per transaction to
sell shares. See “Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan. |
| (c) | The
Investment Adviser’s fee is 1.00% annually of the Fund’s average daily net
assets, including the liquidation value of preferred shares. Consequently, since the
Fund has preferred shares or notes outstanding, all else being equal and assuming no
application of any voluntary fee waivers, the investment management fees and other expenses
as a percentage of net assets attributable to common shares are be higher than if the
Fund did not utilize a leveraged capital structure. See If common shares are sold to
or through underwriters or dealer managers, a prospectus or prospectus supplement will
set forth any applicable sales load and the estimated offering expenses borne by the
fund. See “Management of the Fund—General. |
| (d) | The
Series G Preferred Stock has a mandatory redemption date of June 26, 2025. Therefore,
for financial reporting purposes only, the dividends paid on the Series G Preferred Stock
are included as a component of “Interest Expense.” |
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
| (e) | “Other
Expenses” are based on the Fund’s fiscal year ended December 31, 2022. |
Example
The
following example illustrates the expenses you would pay on a $1,000 investment in common shares, assuming a 5% annual portfolio
total return.* The actual amounts in connection with any offering will be set forth in the Prospectus Supplement if applicable.
| |
1
Year |
3
Year |
5
Year |
10
Year |
| Total
Expenses Incurred |
$29 |
$88 |
$150 |
$316 |
*The
example should not be considered a representation of future expenses. The example assumes that the amounts set forth in the Annual
Expenses table are accurate and that all distributions are reinvested at net asset value. Actual expenses may be greater or less
than those assumed. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown
in the example.
The
example includes Dividends on Preferred Shares. If Dividends on Preferred Shares were not included in the example calculation,
the expenses for the 1–, 3–, 5– and 10-year periods in the table above would be as follows (based on the same
assumptions as above): $19, $59, $101 and $219.
Market
and Net Asset Value Information
The
Fund’s common shares are listed on the NYSE under the trading or “ticker” symbol “GCV.” The Fund’s
common shares have historically traded at a discount to the Fund’s net asset value. Over the past ten years, the Fund’s
common shares have traded at a premium to net asset value as high as 22.73% and a discount to net asset value as low as (18.96)%.
The
following table sets forth for the quarters indicated, the high and low sale prices on the NYSE per share of our common shares
and the net asset value and the premium or discount from net asset value per share at which the common shares were trading, expressed
as a percentage of net asset value, at each of the high and low sale prices provided.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Market
Price |
|
Corresponding
Net Asset
Value
(“NAV”) Per
Share |
|
Corresponding
Premium or
Discount as a %
of NAV |
| |
Quarter
Ended |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
| |
March
31, 2021 |
|
$6.77 |
|
$5.90 |
|
$7.47 |
|
$6.59 |
|
(9.37)% |
|
(10.47)% |
| |
June
30, 2021 |
|
$6.64 |
|
$6.12 |
|
$6.88 |
|
$6.33 |
|
(3.48)% |
|
(3.31)% |
| |
September
30, 2021 |
|
$6.64 |
|
$6.08 |
|
$7.00 |
|
$6.52 |
|
(5.14)% |
|
(6.74)% |
| |
December
31, 2021 |
|
$7.05 |
|
$6.01 |
|
$6.34 |
|
$6.47 |
|
11.19% |
|
(7.11)% |
| |
March
31, 2022 |
|
$6.85 |
|
$5.72 |
|
$6.28 |
|
$5.43 |
|
9.08% |
|
5.34% |
| |
June
30, 2022 |
|
$6.44 |
|
$5.09 |
|
$5.64 |
|
$4.33 |
|
14.18% |
|
17.55% |
| |
September
30, 2022 |
|
$5.87 |
|
$4.86 |
|
$4.92 |
|
$4.29 |
|
19.31% |
|
13.29% |
| |
December
31, 2022 |
|
$5.40 |
|
$4.73 |
|
$4.40 |
|
$4.14 |
|
22.73% |
|
14.25% |
The
last reported price for our common shares on December 31, 2022 was $4.80 per share. As of December 31, 2022, the net asset value
per share of the Fund’s common shares was $4.18. Accordingly, the Fund’s common shares traded at a premium to net
asset value of 14.83% on December 31, 2022.
Outstanding
Securities
The
following information regarding the Fund’s authorized shares is as of December 31, 2022.
| Title
of Class |
Amount
Authorized |
Amount
Held by
Fund for its Account |
Amount
Outstanding Exclusive of
Amount Held by Fund |
| |
|
|
|
| Common
Shares |
1,000,000,000 |
— |
19,193,015 |
| Series
G Cumulative Preferred Shares |
1,500,000 |
— |
1,500,000 |
Unresolved
SEC Staff Comments
The
Fund does not believe that there are any material unresolved written comments, received 180 days or more before December 31, 2022
from the Staff of the SEC regarding any of the Fund’s periodic or current reports under the Securities Exchange Act of 1934
or the Investment Company Act of 1940, or its registration statement.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Selected
data for a common share outstanding throughout each year:
| | |
Year Ended December
31, | |
| | |
2017 | | |
2016 | | |
2015 | | |
2014 | | |
2013 | |
| Operating
Performance: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net asset value,
beginning of year | |
$ | 5.30 | | |
$ | 5.30 | | |
$ | 6.09 | | |
$ | 6.49 | | |
$ | 5.62 | |
| Net investment income | |
| 0.09 | | |
| 0.12 | | |
| 0.07 | | |
| 0.07 | | |
| 0.09 | |
| Net
realized and unrealized gain/(loss) on investments, securities sold short, swap contracts, and foreign currency transactions | |
| 0.77 | | |
| 0.39 | | |
| (0.28 | ) | |
| 0.14 | | |
| 1.37 | |
| Total
from investment operations | |
| 0.86 | | |
| 0.51 | | |
| (0.21 | ) | |
| 0.21 | | |
| 1.46 | |
| Distributions
to Preferred Shareholders: (a) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment income | |
| (0.03 | ) | |
| (0.03 | ) | |
| (0.01 | ) | |
| (0.03 | ) | |
| (0.03 | ) |
| Net
realized gain | |
| (0.08 | ) | |
| (0.07 | ) | |
| (0.09 | ) | |
| (0.07 | ) | |
| (0.08 | ) |
| Total
distributions to preferred shareholders | |
| (0.11 | ) | |
| (0.10 | ) | |
| (0.10 | ) | |
| (0.10 | ) | |
| (0.11 | ) |
| Net
Increase/(Decrease) in Net Assets Attributable to Common Shareholders Resulting from Operations | |
| 0.75 | | |
| 0.41 | | |
| (0.31 | ) | |
| 0.11 | | |
| 1.35 | |
| Distributions
to Common Shareholders: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment income | |
| (0.12 | ) | |
| (0.10 | ) | |
| (0.05 | ) | |
| (0.08 | ) | |
| (0.09 | ) |
| Net realized gain | |
| (0.36 | ) | |
| (0.30 | ) | |
| (0.32 | ) | |
| (0.19 | ) | |
| (0.31 | ) |
| Return of capital | |
| — | | |
| (0.01 | ) | |
| (0.11 | ) | |
| (0.24 | ) | |
| (0.08 | ) |
| Total
distributions to common shareholders | |
| (0.48 | ) | |
| (0.41 | ) | |
| (0.48 | ) | |
| (0.51 | ) | |
| (0.48 | ) |
| Fund Share Transactions: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Decrease
in net asset value from common share transactions | |
| — | | |
| — | | |
| (0.00 | )(b) | |
| (0.00 | )(b) | |
| (0.00 | )(b) |
| Net
Asset Value Attributable to Common Shareholders, End of Year | |
$ | 5.57 | | |
$ | 5.30 | | |
$ | 5.30 | | |
$ | 6.09 | | |
$ | 6.49 | |
| NAV
total return † | |
| 14.59 | % | |
| 8.34 | % | |
| (5.39 | )% | |
| 1.75 | % | |
| 24.83 | % |
| Market value, end of
year | |
$ | 5.90 | | |
$ | 4.69 | | |
$ | 4.78 | | |
$ | 6.08 | | |
$ | 6.16 | |
| Investment
total return †† | |
| 37.53 | % | |
| 6.97 | % | |
| (14.18 | )% | |
| 7.07 | % | |
| 24.73 | % |
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Selected
data for a common share outstanding throughout each year:
| | |
| | |
| | |
| | |
| | |
| |
| | |
Year
Ended December 31, | |
| | |
2017 | | |
2016 | | |
2015 | | |
2014 | | |
2013 | |
| Ratios
to Average net assets and Supplemental Data: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
assets including liquidation value of preferred shares, end of year (in 000’s ) | |
$ | 103,445 | | |
$ | 98,733 | | |
$ | 98,742 | | |
$ | 109,219 | | |
$ | 113,795 | |
| Net assets
attributable to common shares, end of year (in 000’s) | |
$ | 79,306 | | |
$ | 74,594 | | |
$ | 74,603 | | |
$ | 85,080 | | |
$ | 89,656 | |
| Ratio of net
investment income to average net assets attributable to common shares before preferred share distributions | |
| 1.56 | % | |
| 2.37 | % | |
| 1.19 | % | |
| 1.05 | % | |
| 1.43 | % |
| Ratio of operating
expenses to average net assets attributable to common shares before fees waived | |
| 1.96 | %(c) | |
| 1.95 | %(c)(d)(e) | |
| 1.88 | %(c)(d) | |
| 1.90 | % | |
| 1.80 | % |
| Ratio of operating
expenses to average net assets attributable to common shares net of advisory fee reduction, if any | |
| 1.96 | %(c) | |
| 1.95 | %(c)(d)(e) | |
| 1.59 | %(c)(d) | |
| 1.62 | % | |
| 1.80 | % |
| Ratio of operating
expenses to average net assets including liquidation value of preferred shares before fees waived | |
| 1.50 | %(c) | |
| 1.46 | %(c)(d)(e) | |
| 1.46 | %(c)(d) | |
| 1.49 | % | |
| 1.40 | % |
| Ratio of operating
expenses to average net assets including liquidation value of preferred shares net of advisory fee reduction, if any | |
| 1.50 | %(c) | |
| 1.46 | %(c)(d)(e) | |
| 1.23 | %(c)(d) | |
| 1.27 | % | |
| 1.40 | % |
| Portfolio
turnover rate | |
| 27 | % | |
| 71 | % | |
| 24 | % | |
| 22 | % | |
| 35 | % |
| Cumulative
Preferred Stock: | |
| | | |
| | | |
| | | |
| | | |
| | |
| 6.000%
Series B Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation
value, end of year (in 000’s) | |
$ | 24,139 | | |
$ | 24,139 | | |
$ | 24,139 | | |
$ | 24,139 | | |
$ | 24,139 | |
| Total shares
outstanding (in 000’s ) | |
| 966 | | |
| 966 | | |
| 966 | | |
| 966 | | |
| 966 | |
| Liquidation preference per share | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | |
| Average market value (f) | |
$ | 26.45 | | |
$ | 26.52 | | |
$ | 25.81 | | |
$ | 25.44 | | |
$ | 25.30 | |
| Asset coverage per share | |
$ | 107.14 | | |
$ | 102.26 | | |
$ | 102.26 | | |
$ | 113.12 | | |
$ | 117.85 | |
| Asset
Coverage | |
| 429 | % | |
| 409 | % | |
| 409 | % | |
| 452 | % | |
| 471 | % |
| † | Based
on net asset value per share, adjusted for reinvestment of distributions at net asset
value on the ex-dividend date. |
| †† | Based
on market value per share, adjusted for reinvestment of distributions at prices determined
under the Fund’s dividend reinvestment plan. |
| (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) | The
Fund received credits from a designated broker who agreed to pay certain Fund operating
expenses. For the years ended December 31, 2017, 2016, and 2015, there was no impact
on the expense ratios. |
| (d) | 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. |
| (e) | 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. |
| (f) | Based
on weekly prices. |
CHANGES
OCCURRING DURING THE PRIOR FISCAL PERIOD
The
following information is a summary of certain changes during the most recent fiscal year ended December 31, 2022. This information
may not reflect all of the changes that have occurred since you purchased shares of the Fund.
During
the Fund’s most recent fiscal year, there were no material changes to the Fund’s investment objectives or policies
that have not been approved by shareholders or in the principal risk factors associated with an investment in the Fund.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
On
August 17, 2022, the Board of Directors of the Fund approved and adopted Amendment No. 2 (“Amendment No. 2”) to the
Fund’s Amended and Restated By-Laws (“By-Laws”), as filed with the Securities and Exchange Commission on August
24, 2022 as an exhibit to Post-Effective Amendment No. 1 to the Fund’s Registration Statement on Form N-2. Pursuant to Amendment
No. 2:
| ● | the
vote necessary to elect one or more directors is a majority of the shares outstanding
and entitled to vote in a Contested Election and a plurality of the shares present and
entitled to vote in all other cases. The Fund’s By-Laws generally define a “Contested
Election” as any election of directors in which the number of persons nominated
for election as directors by shares entitled to vote for such directors in accordance
with the Fund’s By-Laws exceeds the number of directors to be elected by shares
entitled to vote for such directors. |
INVESTMENT
OBJECTIVES AND POLICIES
Investment
Objectives
The
investment objective of the Fund is to seek a high level of total return on its assets. The Fund seeks to achieve its investment
objective through a combination of current income and capital appreciation. There is no assurance that this objective will be
achieved. It is, however, a fundamental policy of the Fund and cannot be changed without stockholder approval.
Under
normal circumstances the Fund will invest at least 80% of the value of its total assets (taken at current value) in “convertible
securities,” i.e., securities (bonds, debentures, notes, stocks and other similar securities) that are convertible into
common stock or other equity securities, and “income securities,” i.e., nonconvertible debt or equity securities having
a history of regular payments or accrual of income to holders. Securities received upon conversion of a convertible security will
not be included in the calculation of the percentage of Fund assets invested in convertible securities but may be retained in
the Fund’s portfolio to permit orderly disposition or to establish long-term holding periods for federal income tax purposes.
The Fund expects to continue its practice of focusing on convertible securities to the extent attractive opportunities are available.
We cannot assure you that the Fund will achieve its investment objective. The Fund may invest without limit in securities rated
below investment grade by recognized statistical rating agencies or unrated securities of comparable quality, including securities
of issuers in default, which are likely to have the lowest rating; provided, however, that not more than 50% of the Fund’s
portfolio will consist of securities rated CCC or lower by S&P or Caa or lower by Moody’s or, if unrated, are of comparable
quality as determined by the Investment Adviser, and the Fund’s investments in securities of issuers in default will be
limited to not more than 5% of the total assets of the Fund. Securities rated below investment grade, which may be preferred shares
or debt, are predominantly speculative and involve major risk exposure to adverse conditions. Securities that are rated lower
than “BBB” by S&P, or lower than “Baa” by Moody’s or unrated securities considered by the Investment
Adviser to be of comparable quality, are commonly referred to as “junk bonds” or “high yield” securities.
The
Fund may invest up to 25% of its total assets in securities of non-U.S. issuers, which are generally denominated in foreign currencies.
The Fund may also purchase sponsored American Depository Receipts (“ADRs”) or U.S. denominated securities of foreign
issuers, which will not be included in the Fund’s 25% foreign securities limitation. The Fund has no limit on the amount
of its net assets it may invest in unregistered and
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
otherwise
illiquid investments; however, the Fund currently does not intend to invest more than 15% of its total net assets in illiquid
convertible securities or income securities. The Fund may invest up to 20% of its total assets (taken at current value and subject
to any restrictions appearing elsewhere in this Registration Statement) in any combination and quantity of securities that do
not generate any income, such as common stocks that do not pay dividends. In selecting any of the foregoing securities for investment,
the factors that will be considered by the Investment Adviser include the Investment Adviser’s evaluation of the underlying
value of the assets and business of the issuers of the securities, the potential for capital appreciation, the price of the securities,
the issuer’s balance sheet characteristics and the perceived skills and integrity of the issuer’s management.
During
periods when it is deemed necessary for temporary defensive purposes, the Fund may invest without limit in high quality money
market instruments, including commercial paper of domestic and foreign corporations, certificates of deposit, bankers’ acceptances
and other obligations of domestic and foreign banks and obligations issued or guaranteed by the United States government, its
instrumentalities or agencies and, subject to statutory limitations, unaffiliated money market mutual funds, unless an exemptive
order permits the Fund to invest in affiliated money market funds. The yield on these securities will, as a general matter, tend
to be lower than the yield on other securities to be purchased by the Fund.
Investment
Methodology of the Fund
In
selecting securities for the Fund, the Investment Adviser normally considers the following factors, among others:
| ● | the
Investment Adviser’s own evaluations of the private market value (as defined below),
cash flow, earnings per share and other |
| ● | fundamental
aspects of the underlying assets and business of the company; |
| ● | the
interest or dividend income generated by the securities; |
| ● | the
potential for capital appreciation of the securities and any underlying common stocks; |
| ● | the
prices of the securities relative to comparable securities; |
| ● | whether
the securities are entitled to the benefits of call protection or other protective covenants; |
| ● | the
existence of any anti-dilution protections or guarantees of the security; and |
| ● | the
diversification of the Fund’s portfolio as to issuers. |
The
Investment Adviser’s investment philosophy with respect to debt and equity securities is to identify assets that are selling
in the public market at a discount to their private market value. The Investment Adviser defines private market value as the value
informed purchasers are willing to pay to acquire assets with similar characteristics. The Investment Adviser also normally evaluates
an issuer’s free cash flow and long-term earnings trends. Finally, the Investment Adviser looks for a catalyst, something
indigenous to the company, its industry or country that will surface additional value.
Certain
Investment Practices
Convertible
Securities. A convertible
security is a bond, debenture, corporate note, preferred stock or other security that may be exchanged or converted into a prescribed
amount of common stock or other equity security of the same or a different issuer within a particular period of time at a specified
price or formula. A convertible
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
security
may also be structured so that it is convertible at the option of the holder or the issuer, or subject to mandatory conversion.
Before conversion, convertible securities have the same overall characteristics as non-convertible debt or preferred securities
insofar as they generally provide a stable stream of income with generally higher yields than those of common stock of the same
or similar issuers. Convertible securities rank senior to common stock in an issuer’s capital structure. They are of a higher
credit quality and entail less risk than an issuer’s common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above its value as a fixed income security.
The
Fund believes that the characteristics of convertible securities make them appropriate investments for an investment company seeking
a high level of total return on its assets. These characteristics include the potential for capital appreciation if the value
of the underlying common stock increases, the relatively high yield received from dividend or interest payments as compared to
common stock dividends and decreased risks of decline in value, relative to the underlying common stock due to their fixed income
nature. As a result of the conversion feature, however, the interest rate or dividend preference on a convertible security is
generally less than would be the case if the securities were not convertible. During periods of rising interest rates, it is possible
that the potential for capital gain on a convertible security may be less than that of a common stock equivalent if the yield
on the convertible security is at a level that causes it to sell at a discount.
Every
convertible security may be valued, on a theoretical basis, as if it did not have a conversion privilege. This theoretical value
is determined by the yield it provides in comparison with the yields of other securities of comparable character and quality that
do not have a conversion privilege. This theoretical value, which may change with prevailing interest rates, the credit rating
of the issuer and other pertinent factors, often referred to as the “investment value,” represents the security’s
theoretical price support level.
“Conversion
value” is the amount a convertible security would be worth in market value if it were to be exchanged for the underlying
equity security pursuant to its conversion privilege. Conversion value fluctuates directly with the price of the underlying equity
security, usually common stock. If, because of low prices for the common stock, the conversion value is substantially below the
investment value, the price of the convertible security is governed principally by the factors described in the preceding paragraph.
If the conversion value rises near or above its investment value, the price of the convertible security generally will rise above
its investment value and, in addition, will sell at some premium over its conversion value. This premium represents the price
investors are willing to pay for the privilege of purchasing a fixed-income security with a possibility of capital appreciation
due to the conversion privilege. Accordingly, the conversion value of a convertible security is subject to equity risk, that is,
the risk that the price of an equity security will fall due to general market and economic conditions, perceptions regarding the
industry in which the issuer participates or the issuing company’s particular circumstances. If the appreciation potential
of a convertible security is not realized, its conversion value premium may not be recovered.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
In
its selection of convertible securities for the Fund, the Investment Adviser will not emphasize either investment value or conversion
value, but will consider both in light of the Fund’s overall investment objective. See “Convertible Securities”
below. The Fund may convert a convertible security that it holds:
| ● | when
necessary to permit orderly disposition of the investment when a convertible security
approaches maturity or has been called for redemption; |
| ● | to
facilitate a sale of the position; |
| ● | if
the dividend rate on the underlying common stock increases above the yield on the convertible
security; or |
| ● | whenever
the Investment Adviser believes it is otherwise in the best interests of the Fund. |
Convertible
securities are generally not investment grade, that is, not rated within the four highest categories by S&P and Moody’s.
To the extent that such convertible securities and other nonconvertible debt securities, which are acquired by the Fund consistent
with the factors considered by the Investment Adviser as described in this Annual Report, are rated lower than investment grade
or are not rated, there would be a greater risk as to the timely repayment of the principal of, and timely payment of interest
or dividends on, those securities. It is expected that not more than 50% of the Fund’s portfolio will consist of securities
rated CCC or lower by S&P or Caa or lower by Moody’s or, if unrated, are of comparable quality as determined by the
Investment Adviser. Those securities and securities rated BB or lower by S&P or Ba or lower by Moody’s are often referred
to in the financial press as “junk bonds” and may include securities of issuers in default. “Junk bonds”
are considered by the rating agencies to be predominantly speculative and may involve major risk exposure to adverse conditions.
See “Risk Factors and Special Considerations- Convertible Securities-Credit Risk.” Securities rated BBB by S&P
or Baa by Moody’s, in the opinion of the rating agencies, also have speculative characteristics. Securities need not meet
a minimum rating standard in order to be acceptable for investment by the Fund.
The
Fund’s investments in securities of issuers in default will be limited to not more than 5% of the total assets of the Fund.
Further, the Fund will invest in securities of issuers in default only when the Investment Adviser believes that such issuers
will emerge from bankruptcy and the value of such securities will appreciate. By investing in securities of issuers in default
the Fund bears the risk that such issuers will not emerge from bankruptcy or that the value of such securities will not appreciate.
The
Fund has no independent limit on the amount of its net assets it may invest in unregistered and otherwise illiquid securities
and other investments. The current intention of the Investment Adviser is not to invest in excess of 15% of the Fund’s net
assets in illiquid convertible securities or income securities. Common stockholders will be notified if the Investment Adviser
changes its intention. Investments in unregistered or otherwise illiquid securities entail certain risks related to the fact that
they cannot be sold publicly in the United States without registration under the Securities Act. See “Risk Factors and Special
Considerations—Asset Class Risks.”
Synthetic
Convertible Securities. The Fund may also invest in “synthetic” convertible securities, which, for purposes of
its investment policies, the Fund considers to be convertible securities. A “synthetic” convertible security may be
created by the Fund or by a third party by combining separate securities that possess the two principal characteristics of a traditional
convertible security: an income producing component and a convertible component. Synthetic convertible securities differ from
convertible securities whose conversion privilege may be evidenced by warrants attached to the security or acquired as part of
a unit with the security. The
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
income-producing
component is achieved by investing in non-convertible, income-producing securities such as bonds, preferred stocks and money market
instruments. The convertible component is achieved by investing in securities or instruments such as warrants or options to buy
common stock at a certain exercise price, or options on a stock index. Unlike a traditional convertible security, which is a single
security having a single market value, a synthetic convertible comprises two or more separate securities, each with its own market
value. Because the “market value” of a synthetic convertible security is the sum of the values of its income producing
component and its convertible component, the value of a synthetic convertible security may respond differently to market fluctuations
than a traditional convertible security. The Fund also may purchase synthetic convertible securities created by other parties,
including convertible structured notes. Convertible structured notes are income-producing debentures linked to equity. Convertible
structured notes have the attributes of a convertible security; however, the issuer of the convertible note (typically an investment
bank), rather than the issuer of the underlying common stock into which the note is convertible, assumes credit risk associated
with the underlying investment and the Fund in turn assumes credit risk associated with the issuer of the convertible note.
Foreign
Securities. The Fund may invest up to 25% of its total assets in securities of non-U.S. issuers, which are generally denominated
in foreign currencies.
The
Investment Adviser believes that investing in foreign securities offers both enhanced investment opportunities and additional
risks beyond those present in U.S. securities. Investing in foreign securities may provide increased diversification by adding
securities from various foreign countries (i) that offer different investment opportunities,
(ii)
that generally are affected by different economic trends and (iii) whose stock markets may not be correlated with U.S. markets.
At the same time, these opportunities and trends involve risks that may not be encountered in U.S. investments.
The
following considerations comprise both risks and opportunities not typically associated with investing in U.S. securities:
fluctuations in exchange rates of foreign currencies; possible imposition of exchange control regulations or currency
restrictions that would prevent cash from being brought back to the United States; less public information with respect to
issuers of securities; less government supervision of stock exchanges, securities brokers and issuers of securities; lack of
uniform accounting, auditing and financial reporting standards; lack of uniform settlement periods and trading practices;
less liquidity and frequently greater price volatility in foreign markets than in the United States; possible imposition of
foreign taxes; the possibility of expropriation or confiscatory taxation, seizure or nationalization of foreign bank deposits
or other assets; the adoption of foreign government restrictions and other adverse political, social or diplomatic
developments that could affect investment; difficulty in obtaining or enforcing a court judgment abroad; sometimes less
advantageous legal, operational and financial protections applicable to foreign sub-custodial arrangements; and the
historically lower level of responsiveness of foreign management to shareholder concerns (such as dividends and return on
investment).
American
Depositary Receipts. The Fund may invest in American Depositary Receipts (“ADRs”). Such investment may entail
certain risks similar to foreign securities. ADRs are certificates representing an ownership interest in a security or a pool
of securities issued by a foreign issuer and deposited with the depositary, typically a bank, and held in trust for the investor.
The economies of many of the countries in which the issuer of a security underlying an ADR principally engages in business may
not be as developed as the United States’ economy and may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
taxation,
and limitations on the removal of funds or other assets could adversely affect the value of the Fund’s investments in such
securities. The value of the securities underlying ADRs could fluctuate as exchange rates change between U.S. dollars and the
currency of the country in which the foreign company is located. In addition, foreign companies are not registered with the SEC
and are generally not subject to the regulatory controls imposed on U.S. issuers and, as a consequence, there is generally less
publicly available information about foreign companies than is available about domestic companies. Foreign companies are not subject
to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to
domestic companies.
Emerging
Market Countries. The risks described above for foreign securities, including the risks of nationalization and expropriation
of assets, are typically increased to the extent that the Fund invests in companies headquartered in developing, or emerging market,
countries. Investments in securities of companies headquartered in such countries may be considered speculative and subject to
certain special risks. The political and economic structures in many of these countries may be in their infancy and developing
rapidly, and such countries may lack the social, political and economic characteristics of more developed countries. Certain of
these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the
assets of private companies. Some countries have inhibited the conversion of their currency to another. The currencies of certain
emerging market countries have experienced devaluation relative to the U.S. dollar, and future devaluations may adversely affect
the value of the Fund’s assets denominated in such currencies. Some emerging market countries have experienced substantial
rates of inflation for many years. Continued inflation may adversely affect the economies and securities markets of such countries.
In addition, unanticipated political or social developments may affect the value of the Fund’s investments in these countries
and the availability of the Fund of additional investments in these countries. The small size, limited trading volume and relative
inexperience of the securities markets in these countries may make the Fund’s investments in such countries illiquid and
more volatile than investments in more developed countries, and the Fund may be required to establish special custodial or other
arrangements before making investments in these countries. There may be little financial or accounting information available with
respect to companies located in these countries, and it may be difficult as a result to assess the value or prospects of an investment
in such companies.
Income
Securities. Although it is the Fund’s policy to invest in convertible securities to the extent attractive opportunities
are available, the Fund may also invest in income securities other than convertible securities that are expected to periodically
accrue or generate income for their holders. Such income securities include (i) fixed income securities such as bonds, debentures,
notes, preferred stock, short-term discounted Treasury Bills or certain securities of the U.S. government sponsored instrumentalities,
as well as money market mutual funds that invest in those securities, which, in the absence of an applicable exemptive order,
will not be affiliated with the Investment Adviser, and (ii) common and preferred stocks of issuers that have historically paid
periodic dividends. Fixed income securities obligate the issuer to pay to the holder of the security a specified return, which
may be either fixed or reset periodically in accordance with the terms of the security. Fixed income securities generally are
senior to an issuer’s common stock and their holders generally are entitled to receive amounts due before any distributions
are made to common stockholders. Common stocks, on the other hand, generally do not obligate an issuer to make periodic distributions
to holders.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
The
market value of fixed income securities, especially those that provide a fixed rate of return, may be expected to rise and fall
inversely with interest rates and in general is affected by the credit rating of the issuer, the issuer’s performance and
perceptions of the issuer in the market place. The market value of callable or redeemable fixed income securities may also be
affected by the issuer’s call and redemption rights. In addition, it is possible that the issuer of fixed income securities
may not be able to meet its interest or principal obligations to holders. Further, holders of non-convertible fixed income securities
do not participate in any capital appreciation of the issuer.
The
Fund may also invest in obligations of government sponsored instrumentalities. Unlike non-U.S. government securities, obligations
of certain agencies and instrumentalities of the U.S. government, such as the Government National Mortgage Association, are supported
by the “full faith and credit” of the U.S. government; others, such as those of the Export-Import Bank of the U.S.,
are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. government to purchase the agency’s obligations; and
still others, such as those of the Student Loan Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. government would provide financial support to U.S. government sponsored instrumentalities
if it is not obligated to do so by law. Although the Fund may invest in all types of obligations of agencies and instrumentalities
of the U.S. government, the Fund currently intends to invest only in obligations that are supported by the “full faith and
credit” of the U.S. government.
The
Fund also may invest in common stock of issuers that have historically paid periodic dividends or otherwise made distributions
to common stockholders. Unlike fixed income securities, dividend payments generally are not guaranteed and so may be discontinued
by the issuer at its discretion or because of the issuer’s inability to satisfy its liabilities. Further, an issuer’s
history of paying dividends does not guarantee that it will continue to pay dividends in the future. In addition to dividends,
under certain circumstances the holders of common stock may benefit from the capital appreciation of the issuer.
Common
stocks represent the residual ownership interest in the issuer and holders of common stock are entitled to the income and increase
in the value of the assets and business of the issuer after all of its debt obligations and obligations to preferred shareholders
are satisfied. Common stocks generally have voting rights.
Common
stocks fluctuate in price in response to many factors including historical and prospective earnings of the issuer, the value of
its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
Non-Investment
Grade Securities. The Fund may invest in securities rated below investment grade by recognized rating agencies or unrated
securities of comparable quality. The prices of these lower grade securities are more sensitive to negative developments, such
as a decline in the issuer’s revenues or a general economic downturn, than are the prices of higher grade securities. Securities
of below investment grade quality—those securities rated below “Baa” by Moody’s or below “BBB”
by S&P (or unrated securities of comparable quality)— are predominantly speculative with respect to the issuer’s
capacity to pay interest and repay principal when due and therefore involve a greater risk of default. Securities rated below
investment grade commonly are referred to as “junk bonds” or “high yield” securities and generally pay
a premium above the yields of U.S.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
government
securities or securities of investment grade issuers because they are subject to greater risks than these securities. These risks,
which reflect their speculative character, include the following:
| ● | greater
volatility; |
| ● | greater
credit risk and risk of default; |
| ● | potentially
greater sensitivity to general economic or industry conditions; |
| ● | potential
lack of attractive resale opportunities (illiquidity); and |
| ● | additional
expenses to seek recovery from issuers who default. |
In
addition, the prices of these non-investment grade securities are more sensitive to negative developments, such as a decline in
the issuer’s revenues or a general economic downturn, than are the prices of higher grade securities. Non-investment grade
securities tend to be less liquid than investment grade securities. The market value of non-investment grade securities may be
more volatile than the market value of investment grade securities and generally tends to reflect the market’s perception
of the creditworthiness of the issuer and short-term market developments to a greater extent than investment grade securities,
which primarily reflect fluctuations in general levels of interest rates.
Ratings
are relative and subjective, and not absolute standards of quality. Securities ratings are based largely on the issuer’s
historical financial condition and the rating agencies’ analysis at the time of rating. Consequently, the rating assigned
to any particular security is not necessarily a reflection of the issuer’s current financial condition.
The
Fund may purchase securities of companies that are experiencing significant financial or business difficulties, including companies
involved in bankruptcy or other reorganization and liquidation proceedings. Although such investments may result in significant
financial returns to the Fund, they involve a substantial degree of risk. The level of analytical sophistication, both financial
and legal, necessary for successful investments in issuers experiencing significant business and financial difficulties is unusually
high. There can be no assurance that the Fund will correctly evaluate the value of the assets collateralizing its investments
or the prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to
a portfolio investment, the Fund may lose all or part of its investment or may be required to accept collateral with a value less
than the amount of the Fund’s initial investment.
As
a part of its investments in non-investment grade securities, the Fund may invest in the securities of issuers in default. The
Fund invests in securities of issuers in default only when the Investment Adviser believes that such issuers will honor their
obligations and emerge from bankruptcy protection and that the value of such issuers’ securities will appreciate. By investing
in the securities of issuers in default, the Fund bears the risk that these issuers will not continue to honor their obligations
or emerge from bankruptcy protection or that the value of these securities will not otherwise appreciate.
In
addition to using recognized rating agencies and other sources, the Investment Adviser will also perform its own analysis of issuers
in seeking investments that it believes to be underrated (and thus higher yielding) in light of the financial condition of the
issuer. Its analysis of issuers may include, among other things, current and anticipated cash flow and borrowing requirements,
value of assets in relation to historical cost, strength of management, responsiveness to business conditions, credit standing
and current anticipated results of
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
operations.
In selecting investments for the Fund, the Investment Adviser may also consider general business conditions, anticipated changes
in interest rates and the outlook for specific industries.
Subsequent
to its purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced. In addition, it is possible
that recognized rating agencies might change their ratings of a particular issue to reflect subsequent events on a timely basis.
Moreover, such ratings do not assess the risk of a decline in market value. None of these events will require the sale of the
securities by the Fund, although the Investment Adviser will consider these events in determining whether the Fund should continue
to hold the securities.
Income
securities, including non-investment grade securities and comparable unrated securities, frequently have call or buy-back features
that permit their issuers to call or repurchase the securities from their holders, such as the Fund. If an issuer exercises these
rights during periods of declining interest rates, the Fund may have to replace the security with a lower yielding security, thus
resulting in a decreased return for the Fund.
The
market for non-investment grade and comparable unrated securities has at various times, particularly during times of economic
recession, experienced substantial reductions in market value and liquidity. Past recessions have adversely affected the value
of such securities as well as the ability of certain issuers of such securities to repay principal and pay interest thereon or
to refinance such securities. The market for those securities could react in a similar fashion in the event of any future economic
recession.
Value
Investing. The Fund’s portfolio manager will use various value methods in managing its assets. In selecting securities
for the Fund, he evaluates the quality of a company’s balance sheet, the level of its cash flows and other measures of a
company’s financial condition and profitability. The portfolio manager may also consider other factors, such as a company’s
unrecognized asset values, its future growth prospects or its turnaround potential following an earnings disappointment or other
business difficulties. The portfolio manager then uses these factors to assess the company’s current worth, basing this
assessment on either what he believes a knowledgeable buyer might pay to acquire the entire company or what he thinks the value
of the company should be in the stock market.
The
Fund’s portfolio manager generally invests in securities of companies that are trading significantly below his estimate
of the company’s current worth in an attempt to reduce the risk of overpaying for such companies. Seeking long term growth
of capital, he also evaluates the prospects for the market price of the company’s securities to increase over a two- to
five-year period toward this estimate.
The
Investment Adviser’s value approach strives to reduce some of the other risks of investing in the securities of smaller
companies (for the Fund’s portfolio taken as a whole) by evaluating other risk factors. For example, its portfolio manager
generally attempts to lessen financial risk by buying companies with strong balance sheets and low leverage.
While
there can be no assurance that this risk-averse value approach will be successful, the Investment Adviser believes that it can
reduce some of the risks of investing.
Although
the Investment Adviser’s approach to security selection seeks to reduce downside risk to the Fund’s portfolio, especially
during periods of broad stock market declines, it may also potentially have the effect of limiting gains in strong up markets.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Risk
Arbitrage. Subject to the requirement of investing at least 80% of its assets in convertible or income securities, the
Fund may invest without limitation in securities pursuant to “risk arbitrage” strategies or in other investment funds
managed pursuant to such strategies. Risk arbitrage investments are made in securities of companies for which a tender or exchange
offer has been made or announced and in securities of companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgment of the Investment Adviser, there is a reasonable prospect of total return significantly
greater than the brokerage and other transaction expenses involved. Risk arbitrage strategies attempt to exploit merger activity
to capture the spread between current market values of securities and their values after successful completion of a merger, restructuring
or similar corporate transaction. Transactions associated with risk arbitrage strategies typically involve the purchases or sales
of securities in connection with announced corporate actions which may include, but are not limited to, mergers, consolidations,
acquisitions, transfers of assets, tender offers, exchange offers, re-capitalizations, liquidations, divestitures, spin-offs and
similar transactions. However, a merger or other restructuring or tender or exchange offer anticipated by the Fund and in which
it holds an arbitrage position may not be completed on the terms contemplated or within the time frame anticipated, resulting
in losses to the Fund.
In
general, securities which are the subject of such an offer or proposal sell at a premium to their historic market price immediately
prior to the announcement of the offer but may trade at a discount or premium to what the stated or appraised value of the security
would be if the contemplated transaction were approved or consummated.
Such
investments may be advantageous when the discount significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be replaced or superseded by an offer or proposal of greater
value. The evaluation of such contingencies requires unusually broad knowledge and experience on the part of the Investment Adviser
which must appraise not only the value of the issuer and its component businesses as well as the assets or securities to be received
as a result of the contemplated transaction but also the financial resources and business motivation behind the offer and/or the
dynamics and business climate when the offer or proposal is in process. Since such investments are ordinarily short term in nature,
they will tend to increase the turnover ratio of the Fund, thereby increasing its brokerage and other transaction expenses. Risk
arbitrage strategies may also involve short selling, options hedging and other arbitrage techniques to capture price differentials.
Forward
Foreign Currency Exchange Contracts. Subject to guidelines of our Board of Directors, the Fund may enter into forward
foreign currency exchange contracts to protect the value of its portfolio against uncertainty in the level of future currency
exchange rates between a particular foreign currency and the U.S. dollar or between foreign currencies in which its securities
are or may be denominated. The Fund may enter into such contracts on a spot (i.e., cash) basis at the rate then prevailing in
the currency exchange market or on a forward basis by entering into a forward contract to purchase or sell currency. A forward
contract on foreign currency is an obligation to purchase or sell a specific currency at a future date, which may be any fixed
number of days agreed upon by the parties from the date of the contract at a price set on the date of the contract. Forward currency
contracts (i) are traded in a market conducted directly between currency traders (typically, commercial banks or other financial
institutions) and their customers, (ii) generally have no deposit
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
requirements
and (iii) are typically consummated without payment of any commissions. The Fund, however, may enter into forward currency contracts
requiring deposits or involving the payment of commissions. The Fund expects to invest in forward currency contracts for hedging
or currency risk management purposes and not in order to speculate on currency exchange rate movements. The Fund will only enter
into forward currency contracts with parties which it believes to be creditworthy.
In
hedging a specific transaction, the Fund may enter into a forward contract with respect to either the currency in which the transaction
is denominated or another currency deemed appropriate by the Investment Adviser. The amount the Fund may invest in forward currency
contracts is limited to the amount of its aggregate investments in foreign currencies. The use of forward currency contracts may
involve certain risks, including the failure of the counterparty to perform its obligations under the contract, and such use may
not serve as a complete hedge because of an imperfect correlation between movements in the prices of the contracts and the prices
of the currencies hedged or used for cover. The Fund will only enter into forward currency contracts with parties that the Investment
Adviser believes to be creditworthy institutions.
Restricted
and Illiquid Securities. The Fund may invest without limit in securities for which there is no readily available trading
market or are otherwise illiquid; however, the Fund currently does not intend to invest more than 15% of its total net assets
in illiquid convertible securities or income securities. Illiquid securities include securities legally restricted as to resale,
such as commercial paper issued pursuant to Section 4(a)(2) of the Securities Act and securities eligible for resale pursuant
to Rule 144A thereunder. Section 4(a)(2) and Rule 144A securities may, however, be treated as liquid by the Investment Adviser
pursuant to procedures adopted by the Board, which require consideration of factors such as trading activity, availability of
market quotations and number of dealers willing to purchase the security. If the Fund invests in Rule 144A securities, the level
of portfolio illiquidity may be increased to the extent that eligible buyers become uninterested in purchasing such securities.
It
may be difficult to sell such securities at a price representing the fair value until such time as such securities may be sold
publicly. Where registration is required, a considerable period may elapse between a decision to sell the securities and the time
when it would be permitted to sell. Thus, the Fund may not be able to obtain as favorable a price as that prevailing at the time
of the decision to sell. The Fund may also acquire securities through private placements under which it may agree to contractual
restrictions on the resale of such securities. Such restrictions might prevent their sale at a time when such sale would otherwise
be desirable.
Leverage.
As provided in the 1940 Act and subject to certain exceptions, the Fund may issue senior securities (which may be additional
classes of stock, such as preferred shares, or securities representing debt) so long as its total assets, less certain ordinary
course liabilities, exceed 300% of the amount of the debt outstanding and exceed 200% of the amount of preferred shares and debt
outstanding. The use of leverage magnifies the impact of changes in net asset value, which means that, all else being equal, the
use of leverage results in outperformance on the upside and underperformance on the downside. In addition, if the cost of leverage
exceeds the return on the securities acquired with the proceeds of leverage, the use of leverage will diminish rather than enhance
the return to the Fund. The use of leverage generally increases the volatility of returns to the Fund. Such volatility may increase
the likelihood of the Fund having to sell investments in order to meet its obligations to make distributions on the preferred
shares or principal or interest payments on debt securities, or to redeem preferred shares or repay debt, when it may be disadvantageous
to do so. The Fund’s use of
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
leverage
may require it to sell portfolio investments at inopportune times in order to raise cash to redeem preferred shares or otherwise
de-leverage so as to maintain required asset coverage amounts or comply with any mandatory redemption terms of any outstanding
preferred shares. See “Risk Factors and Special Considerations—Leverage Risk.”
In
the event the Fund had both outstanding preferred shares and senior securities representing debt at the same time, the Fund’s
obligations to pay dividends or distributions and, upon liquidation of the Fund, liquidation payments in respect of its preferred
shares would be subordinate to the Fund’s obligations to make any principal and/or interest payments due and owing with
respect to its outstanding senior debt securities. Accordingly, the Fund’s issuance of senior securities representing debt
would have the effect of creating special risks for the Fund’s preferred shareholders that would not be present in a capital
structure that did not include such securities. See “Risk Factors and Special Considerations—Special Risks Related
to Preferred Securities.”
Subject
to the requirements of Rule 18f-4 under the 1940 Act (“Rule 18f-4”), the Fund may enter into derivative transactions
including transactions that have economic leverage embedded in them. Rule 18f-4 defines “derivatives transactions”
as (1) any swap, security-based swap, futures contract, forward contract, option, any combination of the foregoing, or any similar
instrument, under which a fund is or may be required to make any payment or delivery of cash or other assets during the life of
the instrument or at maturity or early termination, whether as margin or settlement payment or otherwise; and (2) any short sale
borrowing. Derivatives transactions entered into by the Fund in compliance with Rule 18f-4 will not be considered senior securities
for purposes of computing the asset coverage requirements described above. Economic leverage exists when the Fund achieves the
right to a return on a capital base that exceeds the investment which the Fund has contributed to the instrument achieving a return.
Derivative transactions that the Fund may enter into and the risks associated with them are described elsewhere in this Annual
Report. The Fund cannot assure you that investments in derivative transactions that have economic leverage embedded in them will
result in a higher return on its common shares.
If
the Fund enters into any reverse repurchase agreement or similar financing transactions obligating the Fund to make future payments,
the Fund must either treat all such transactions as derivatives transactions for all purposes under Rule 18f-4 or otherwise comply
with the asset coverage requirements described above and combine the aggregate amount of indebtedness associated with all such
transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the Fund’s
asset coverage ratio limit requirements. The asset coverage requirements under section 18 of the 1940 Act and the limits and conditions
imposed by Rule 18f-4 may limit or restrict portfolio management.
Options.
The Fund may purchase or sell, i.e., write, options on securities, securities indices and foreign currencies which are
listed on a national securities exchange or in the OTC market as a means of achieving additional return or of hedging the value
of the Fund’s portfolio. A call option is a contract that, in return for a premium, gives the holder of the option the right
to buy from the writer of the call option the security or currency underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option has the obligation, upon exercise of the option, to deliver
the underlying security or currency upon payment of the exercise price during the option period. A put option is the reverse of
a call option, giving the holder of the option the right, in return for a premium, to sell the underlying security to the writer,
at a specified
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
price,
and obligating the writer to purchase the underlying security from the holder upon exercise of the exercise price.
If
the Fund has written an option, it may terminate its obligation by effecting a closing purchase transaction. This is accomplished
by purchasing an option of the same series as the option previously written. However, with respect to exchange-traded options,
once the Fund has been assigned an exercise notice, the Fund will be unable to effect a closing purchase transaction. Similarly,
if the Fund is the holder of an option it may liquidate its position by effecting a closing sale transaction on an exchange. This
is accomplished by selling an option of the same series as the option previously purchased. There can be no assurance that either
a closing purchase or sale transaction can be effected when the Fund so desires.
The
Fund will realize a profit from a closing transaction if the price of the transaction is less than the premium received from writing
the option or is more than the premium paid to purchase the option; the Fund will realize a loss from a closing transaction if
the price of the transaction is more than the premium received from writing the option or is less than the premium paid to purchase
the option. Since call option prices generally reflect increases in the price of the underlying security, any loss resulting from
the repurchase of a call option may also be wholly or partially offset by unrealized appreciation of the underlying security.
Other principal factors affecting the market value of a put or a call option include supply and demand, prevailing interest rates,
the current market price and price volatility of the underlying security, and the time remaining until the expiration date of
the option. Gains and losses on investments in options depend, in part, on the ability of the Investment Adviser to predict correctly
the effect of these factors. The use of options cannot serve as a complete hedge since the price movement of securities underlying
the options will not necessarily follow the price movements of the portfolio securities subject to the hedge.
An
option position may be closed out only on an exchange which provides a secondary market for an option of the same series or in
a private transaction. Although the Fund will generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on an exchange will persist for any particular option.
In such event, it might not be possible to effect closing transactions in particular options, so that the Fund would have to exercise
its options in order to realize any profit and would incur brokerage commissions upon the exercise of call options and upon the
subsequent disposition of underlying securities for the exercise of put options.
Although
the Investment Adviser will attempt to take appropriate measures to minimize the risks relating to the Fund’s writing of
put and call options, there can be no assurance that the Fund will succeed in any option-writing program it undertakes.
The
Fund will not purchase options if, as a result, the aggregate cost of all outstanding options exceed 10% of the Fund’s total
assets.
Futures
Contracts and Options on Futures. The Fund may purchase and sell financial futures contracts and options thereon which
are traded on a commodities exchange or board of trade for certain hedging, yield enhancement and risk management purposes. A
financial futures contract is an agreement to purchase or sell an agreed amount of securities or currencies at a set price for
delivery in the future. These futures contracts and related options may be on debt securities, financial indices, securities indices,
U.S. government securities and
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
foreign
currencies. The Investment Adviser has claimed an exclusion from the definition of the term “commodity pool operator”
under the Commodity Exchange Act.
When
Issued, Delayed Delivery Securities and Forward Commitments. The Fund may enter into forward commitments for the purchase
or sale of securities, including on a “when issued” or “delayed delivery” basis, in excess of customary
settlement periods for the type of security involved. In some cases, a forward commitment may be conditioned upon the occurrence
of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring (i.e., a
when, as and if issued security). When such transactions are negotiated, the price is fixed at the time of the commitment, with
payment and delivery taking place in the future, generally a month or more after the date of the commitment. While it will only
enter into a forward commitment with the intention of actually acquiring the security, the Fund may sell the security before the
settlement date if it is deemed advisable by the Investment Adviser.
Securities
purchased under a forward commitment are subject to market fluctuation, and no interest (or dividends) accrues to the Fund prior
to the settlement date.
Short
Sales Against the Box. The Fund may from time to time make short sales of securities it owns or has the right to acquire
through conversion or exchange of other securities it owns. A short sale is “against the box” to the extent that the
Fund contemporaneously owns or has the right to obtain at no added cost securities identical to those sold short. In a short sale,
the Fund does not immediately deliver the securities sold or receive the proceeds from the sale. The Fund may not make short sales
or maintain a short position if it would cause more than 25% of the Fund’s total assets, taken at market value, to be held
as collateral for such sales.
To
secure its obligations to deliver the securities sold short, the Fund will deposit in escrow in a separate account with its custodian
an equal amount to the securities sold short or securities convertible into, or exchangeable for, such securities. The Fund may
close out a short position by purchasing and delivering an equal amount of the securities sold short, rather than by delivering
securities already held by the Fund, because the Fund may want to continue to receive interest and dividend payments on securities
in its portfolio that are convertible into the securities sold short.
The
Fund may make a short sale in order to hedge against market risks when it believes that the price of a security may decline, causing
a decline in the value of a security owned by the Fund or a security convertible into, or exchangeable for, such security, or
when the Fund does not want to sell the security it owns. Such short sale transactions may be subject to special tax rules, one
of the effects of which may be to accelerate income to the Fund. Additionally, the Fund may use short sales in conjunction with
the purchase of a convertible security when it is determined that a convertible security can be bought at a small conversion premium
and has a yield advantage relative to the underlying common stock sold short.
Other
Derivative Instruments. The Fund may also utilize other types of derivative instruments, primarily for hedging or risk
management purposes. These instruments include futures, forward contracts, options on such contracts and interest rate, total
return and other kinds of swaps. For a further description of such derivative instruments, see below.
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
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
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 Investment Adviser has filed a notice of exemption
from registration as a “commodity pool operator” with respect to the Fund. The Fund and the Investment Adviser are
therefore not subject to registration or regulation as a commodity pool operator under the CEA. In addition, certain trading restrictions
are applicable to the Fund as a result of this status. These trading restrictions 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 Fund’s 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 Fund’s existing futures positions or swaps
positions and option or swaption premiums would exceed 5% of the market value of the Fund’s liquidating value, after taking
into account unrealized profits and unrealized losses on any such transactions, or (b) the aggregate net notional value of the
Fund’s commodity interest transactions would not exceed 100% of the market value of the Fund’s liquidating value,
after taking into account unrealized profits and unrealized losses on any such transactions. In addition to meeting one of the
foregoing trading limitations, the Fund may not market itself as a commodity pool or otherwise as a vehicle for trading in the
futures, options or swaps markets. 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, the Fund is 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 Investment Adviser to manage the Fund, and on the Fund’s
performance. If the Investment Adviser was required to register as a commodity pool operator with respect to the Fund, compliance
with additional registration and regulatory requirements would increase Fund expenses. Other potentially adverse regulatory initiatives
could also develop.
Risks
of Currency Transactions. Currency transactions are also subject to risks different from those of other portfolio transactions.
Because currency control is of great importance to the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be adversely affected by government exchange controls, limitations or restrictions
on repatriation of currency, and manipulation, or exchange restrictions imposed by governments. These forms of governmental action
can result in losses to the Fund if it is unable to deliver or receive currency or monies in settlement of obligations and could
also cause hedges it has entered into to be rendered useless, resulting in full currency exposure and incurring transaction costs.
Repurchase
Agreements. Repurchase agreements may be seen as loans by the Fund collateralized by underlying debt securities. Under
the terms of a typical repurchase agreement, the Fund would acquire an underlying debt obligation for a relatively short period
(usually not more than one week) subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation
at an agreed price and time. This arrangement results in a fixed rate of return to the Fund that is not subject to market fluctuations
during the holding period. The Fund bears a risk of loss in the event that the other party to a repurchase agreement defaults
on its obligations and the Fund is delayed in or prevented from exercising its rights to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying securities during the period in which it seeks to
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
assert
these rights. The Investment Adviser, acting under the supervision of the Board of Directors, reviews the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements to evaluate these risks, and monitors on an ongoing
basis the value of the securities subject to repurchase agreements to ensure that the value is maintained at the required level.
The Fund will not enter into repurchase agreements with the Investment Adviser or any of its affiliates.
Swaps.
The Fund may enter into total rate of return, credit default or other types of swaps and related derivatives for various
purposes, including to gain economic exposure to an asset or group of assets that may be difficult or impractical to acquire or
for hedging and risk management. These transactions generally provide for the transfer from one counterparty to another of certain
risks inherent in the ownership of a financial asset such as a common stock or debt instrument. Such risks include, among other
things, the risk of default and insolvency of the obligor of such asset, the risk that the credit of the obligor or the underlying
collateral will decline or the risk that the common stock of the underlying issuer will decline in value. The transfer of risk
pursuant to a derivative of this type may be complete or partial, and may be for the life of the related asset or for a shorter
period. These derivatives may be used as a risk management tool for a pool of financial assets, providing the Fund with the opportunity
to gain or reduce exposure to one or more reference securities or other financial assets (each, a “Reference Asset”)
without actually owning or selling such assets in order, for example, to increase or reduce a concentration risk or to diversify
a portfolio. Conversely, these derivatives may be used by the Fund to reduce exposure to an owned asset without selling it.
Because
the Fund would not own the Reference Assets, the Fund may not have any voting rights with respect to the Reference Assets, and
in such cases all decisions related to the obligors or issuers of the Reference Assets, including whether to exercise certain
remedies, will be controlled by the swap counterparties.
Total
rate of return swap agreements are contracts in which one party agrees to make periodic payments to another party based on the
change in market value of the assets underlying the contract, which may include a specified security, basket of securities or
securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate or
the total return from other underlying assets.
A
credit default swap consists of an agreement between two parties in which the “buyer” agrees to pay to the “seller”
a periodic stream of payments over the term of the contract and the seller agrees to pay the buyer the par value (or other agreed-upon
value) of a referenced debt obligation upon the occurrence of a credit event with respect to the issuer of the referenced debt
obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or modified restructuring. The
Fund may be either the buyer or seller in a credit default swap. As the buyer in a credit default swap, the Fund would pay to
the counterparty the periodic stream of payments. If no default occurs, the Fund would receive no benefit from the contract. As
the seller in a credit default swap, the Fund would receive the stream of payments but would be subject to exposure on the notional
amount of the swap, which it would be required to pay in the event of a credit event with respect to the issuer of the referenced
debt obligation.
The
Fund may also enter into equity contract for difference swap 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
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
of
short-term interest rates and the returns on the Fund’s 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.
Total
rate of return swaps and similar derivatives are subject to many risks, including the possibility that the market will move in
a manner or direction that would have resulted in gain for the Fund had the swap or other derivative not been utilized (in which
case it would have been better had the Fund not engaged in the hedging transactions), the risk of imperfect correlation between
the risk sought to be hedged and the derivative transactions utilized, the possible inability of the counterparty to fulfill its
obligations under the swap and potential illiquidity of the hedging instrument utilized, which may make it difficult for the Fund
to close out or unwind one or more hedging transactions.
Total
rate of return swaps and related derivatives are a relatively recent development in the financial markets. Consequently, there
are certain legal, tax and market uncertainties that present risks in entering into such arrangements.
There
is currently little or no case law or litigation characterizing total rate of return swaps or related derivatives, interpreting
their provisions, or characterizing their tax treatment. In addition, additional regulations and laws may apply to these types
of derivatives that have not previously been applied. There can be no assurance that future decisions construing similar provisions
to those in any swap agreement or other related documents or additional regulations and laws will not have an adverse effect on
the Fund that utilizes these instruments. The Fund will monitor these risks and seek to utilize these instruments in a manner
that does not lead to undue risk regarding the tax or other structural elements of the Fund. The Fund will not invest in these
types of instruments if the Reference Assets are commodities except for bona fide hedging or risk management purposes.
Significant
Holdings. The Fund may invest up to 25% of its total assets in securities of issuers in a single industry; however, the
Fund does not currently focus and has no current intent to focus on any particular industry or sector. See “Risk Factors
and Special Considerations—General Risks—Significant Holdings Risk.”
Investment
Restrictions. The Fund has adopted certain investment restrictions as fundamental policies of the Fund. Under the 1940
Act, a fundamental policy may not be changed without the vote of a majority, as defined in the 1940 Act, of the outstanding voting
securities of the Fund (voting together as a single class). In addition, pursuant to the Fund’s Series G Articles Supplementary,
a majority, as defined in the 1940 Act, of the outstanding preferred shares of the Fund (voting separately as a single class)
is also required to change a fundamental policy. The Fund may become subject to rating agency guidelines that are more limiting
than its current investment restrictions in order to obtain and maintain a desired rating on its preferred shares, if any.
The
Fund’s investment objective is a fundamental policy. Except as expressly listed under “Investment Restrictions”
herein, none of the Fund’s other policies is fundamental, and each may be modified by the Board without shareholder approval.
Temporary
Defensive Investments. When a temporary defensive posture is believed by the Investment Adviser to be warranted
(“temporary defensive periods”), the Fund may invest more heavily in securities of U.S. government sponsored
instrumentalities and in money market mutual funds that invest in those securities,
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
which,
in the absence of an exemptive order, are not affiliated with the Investment Adviser. Obligations of certain agencies and instrumentalities
of the U.S. government, such as the Government National Mortgage Association, are supported by the “full faith and credit”
of the U.S. government; others, such as those of the Export-Import Bank of the U.S., are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. government to purchase the agency’s obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. government
would provide financial support to U.S. government sponsored instrumentalities if it is not obligated to do so by law. During
temporary defensive periods, the Fund may be less likely to achieve its investment objective. See “Management of the Fund—General.”
Loans
of Portfolio Securities. To increase income, the Fund may lend its portfolio securities to securities broker-dealers or
financial institutions if the loan is collateralized in accordance with applicable regulatory requirements.
If
the borrower fails to maintain the requisite amount of collateral, the loan automatically terminates and the Fund could use the
collateral to replace the securities while holding the borrower liable for any excess of replacement cost over the value of the
collateral. As with any extension of credit, there are risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities violate the terms of the loan or fail financially. There can be no assurance that borrowers
will not fail financially. On termination of the loan, the borrower is required to return the securities to the Fund, and any
gain or loss in the market price during the loan would inure to the Fund. If the other party to the loan petitions for bankruptcy
or becomes subject to the United States Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a result, under
extreme circumstances, there may be a restriction on the Fund’s ability to sell the collateral and the Fund would suffer
a loss. See “Risk Factors and Special Considerations—Loans of Portfolio Securities” and “Additional Investment
Policies—Loans of Portfolio Securities.
Warrants
and Rights. The Fund may invest without limit in warrants or rights (other than those acquired in units or attached to
other securities) that entitle the holder to buy equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by the Investment Adviser for inclusion in the Fund’s portfolio.
RISK
FACTORS AND SPECIAL CONSIDERATIONS
Investors
should consider the following risk factors and special considerations associated with investing in the Fund:
General
Risks
Market
Risk. The market price of securities owned by the Fund may go up or down, sometimes rapidly or unpredictably. Securities
may decline in value due to factors affecting securities markets generally or particular industries represented in the securities
markets. The value of a security may decline due to general market conditions which are not specifically related to a particular
company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes
in interest or currency rates, adverse changes to credit markets or adverse investor sentiment generally. The value of a security
may
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
also
decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs
and competitive conditions within an industry. During a general downturn in the securities markets, multiple asset classes may
decline in value simultaneously. Equity securities generally have greater price volatility than fixed income securities. Credit
ratings downgrades may also negatively affect securities held by the Fund. Even when markets perform well, there is no assurance
that the investments held by the Fund will increase in value along with the broader market.
In
addition, market risk includes the risk that geopolitical and other events will disrupt the economy on a national or global level.
For instance, war, terrorism, market manipulation, government defaults, government shutdowns, political changes or diplomatic
developments, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics) and natural/environmental
disasters can all negatively impact the securities markets, which could cause the Fund to lose value. These events could reduce
consumer demand or economic output, result in market closures, travel restrictions or quarantines, and significantly adversely
impact the economy. The current contentious domestic political environment, as well as political and diplomatic events within
the United States and abroad, such as the U.S. government’s inability at times to agree on a long-term budget and deficit
reduction plan, has in the past resulted, and may in the future result, in a government shutdown, which could have an adverse
impact on the Fund’s investments and operations. Additional and/or prolonged U.S. federal government shutdowns may affect
investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a
significant degree. Governmental and quasi-governmental authorities and regulators throughout the world have previously responded
to serious economic disruptions with a variety of significant fiscal and monetary policy changes, including, but not limited to,
direct capital infusions into companies, new monetary programs and dramatically lower interest rates. An unexpected or sudden
reversal of these policies, or the ineffectiveness of these policies, could increase volatility in securities markets, which could
adversely affect the Fund’s investments. Any market disruptions could also prevent the Fund from executing advantageous
investment decisions in a timely manner. To the extent that the Fund focuses its investments in a region enduring geopolitical
market disruption, it will face higher risks of loss, although the increasing interconnectivity between global economies and financial
markets can lead to events or conditions in one country, region or financial market adversely impacting a different country, region
or financial market. Thus, investors should closely monitor current market conditions to determine whether the Fund meets their
individual financial needs and tolerance for risk.
Current
market conditions may pose heightened risks with respect to the Fund’s investment in income producing securities. Recently,
central banks such as the Federal Reserve Bank have been raising interest rates to combat the rate of inflation. There is a risk
that additional increases in interest rates or a prolonged period of rising interest rates may cause the economy to enter a recession.
Additional interest rate increases in the future could cause the value of the Fund’s assets to decrease. Recently, inflation
has reached its highest levels in decades. As such, the markets for income producing securities may experience heightened levels
of interest rate, volatility and liquidity risk.
Exchanges
and securities markets may close early, close late or issue trading halts on specific securities or generally, which may result
in, among other things, the Fund being unable to buy or sell certain securities or financial instruments at an advantageous time
or accurately price its portfolio investments.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Interest
Rate Risk Generally. The primary risk associated with dividend-and interest-paying securities is interest rate risk.
A decrease in interest rates will generally result in an increase in the investment value of such securities, while increases
in interest rates will generally result in a decline in the investment value of such securities. This effect is generally more
pronounced for fixed rate securities than for securities whose income rate is periodically reset.
General
interest rate fluctuations may have a substantial negative impact on the Fund’s investments, the value of the Fund and the
Fund’s rate of return. A reduction in the interest or dividend rates on new investments relative to interest or dividend
rates on current investments could also have an adverse impact on the Fund’s net investment income. An increase in interest
rates could decrease the value of any investments held by the Fund that earn fixed interest or dividend rates, including debt
securities, convertible securities, preferred stocks, loans and high-yield bonds, and also could increase interest or dividend
expenses, thereby decreasing net income. Interest rates have risen over the past year and the chance that they will continue to
rise is pronounced.
The
magnitude of these fluctuations in the market price of bonds and other income- or dividend-paying securities is generally
greater for those securities with longer maturities. Fluctuations in the market price of the Fund’s investments will
not affect interest income derived from instruments already owned by the Fund, but will be reflected in the Fund’s net
asset value. The Fund may lose money if short-term or long-term interest rates rise sharply in a manner not anticipated by
Fund management. To the extent the Fund invests in securities that may be prepaid at the option of the obligor, the
sensitivity of such securities to changes in interest rates may increase (to the detriment of the Fund) when interest rates
rise. Moreover, because rates on certain floating rate securities typically reset only periodically, changes in prevailing
interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the net asset
value of the Fund to the extent that it invests in floating rate securities. These basic principles of bond prices also apply
to U.S. government securities. A security backed by the “full faith and credit” of the U.S. government is
guaranteed only as to its stated interest rate and face value at maturity, not its current market price. Just like other
income- or dividend-paying securities, government-guaranteed securities will fluctuate in value when interest rates
change.
The
Fund’s use of leverage will tend to increase the Fund’s interest rate risk. The Fund may invest in variable and floating
rate instruments, which generally are less sensitive to interest rate changes than longer duration fixed rate instruments but
may decline in value in response to rising interest rates if, for example, the rates at which they pay interest do not rise as
much, or as quickly, as market interest rates in general. Conversely, variable and floating rate instruments generally will not
increase in value if interest rates decline. The Fund also may invest in inverse floating rate securities, which may decrease
in value if interest rates increase, and which also may exhibit greater price volatility than fixed rate obligations with similar
credit quality. To the extent the Fund holds variable or floating rate instruments, a decrease (or, in the case of inverse floating
rate securities, an increase) in market interest rates will adversely affect the income received from such securities, which may
adversely affect the net asset value of the Fund’s common shares.
Recently,
central banks such as the Federal Reserve Bank have been increasing interest rates in an effort to slow the rate of inflation.
There is a risk that increased interest rates may cause the economy to enter a
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
recession.
Any such recession would negatively impact the Fund and the investments held by the Fund. These impacts may include:
| ● | severe
declines in the Fund’s net asset values; |
| ● | inability
of the Fund to accurately or reliably value its portfolio; |
| ● | inability
of the Fund to pay any dividends or distributions; |
| ● | inability
of the Fund to maintain its status as a registered investment company (“RIC”)
under the Internal Revenue Code of 1986, as amended (the “Code”); |
| ● | declines
in the value of the Fund’s investments; |
| ● | increased
risk of default or bankruptcy by the companies in which the Fund invests; |
| ● | increased
risk of companies in which the Fund invests being unable to weather an extended cessation
of normal economic activity and thereby impairing their ability to continue functioning
as a going concern; and |
| ● | limited
availability of new investment opportunities. |
Inflation
Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future
as inflation decreases the value of money. Recently, inflation has increased to its highest level in decades, and the Federal
Reserve has been raising the federal funds rate in response. Inflation rates may change frequently and significantly as a result
of various factors, including unexpected shifts in the domestic or global economy and changes in economic policies, and the Fund’s
investments may not keep pace with inflation, which may result in losses to Fund shareholders. As inflation increases, the real
value of the Fund’s shares and dividends may decline. In addition, during any periods of rising inflation, interest rates
of any debt securities held by the Fund would likely increase, which would tend to further reduce returns to shareholders. This
risk is greater for fixed-income instruments with longer maturities.
Convertible
Securities Risk. Convertible securities generally offer lower interest or dividend yields than non-convertible securities
of similar quality. The market values of convertible securities tend to decline as interest rates increase and, conversely, to
increase as interest rates decline. In the absence of adequate anti-dilution provisions in a convertible security, dilution in
the value of the Fund’s holding may occur in the event the underlying stock is subdivided, additional equity securities
are issued for below market value, a stock dividend is declared or the issuer enters into another type of corporate transaction
that has a similar effect.
The
value of a convertible security is influenced by the value of the underlying equity security. Convertible debt securities and
preferred stocks may depreciate in value if the market value of the underlying equity security declines or if rates of interest
increase. In addition, although debt securities are liabilities of a corporation which the corporation is generally obligated
to repay at a specified time, debt securities, particularly convertible debt securities, are often subordinated to the claims
of some or all of the other creditors of the corporation.
Mandatory
conversion securities (securities that automatically convert into equity securities at a future date) may limit the potential
for capital appreciation and, in some instances, are subject to complete loss of invested capital. Other innovative convertibles
include “equity-linked” securities, which are securities or derivatives that may have fixed, variable, or no interest
payments prior to maturity, may convert (at the option of the holder or on a mandatory basis) into cash or a combination of cash
and common stock, and may be structured to limit
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
the
potential for capital appreciation. Equity-linked securities may be illiquid and difficult to value and may be subject to greater
credit risk than that of other convertibles. Moreover, mandatory conversion securities and equity-linked securities have increased
the sensitivity of the convertible securities market to the volatility of the equity markets and to the special risks of those
innovations, which may include risks different from, and possibly greater than, those associated with traditional convertible
securities.
Preferred
stocks are equity securities in the sense that they do not represent a liability of the corporation. In the event of liquidation
of the corporation, and after its creditors have been paid or provided for, holders of preferred stock are generally entitled
to a preference as to the assets of the corporation before any distribution may be made to the holders of common stock. Debt securities
normally do not have voting rights. Preferred stocks may have no voting rights or may have voting rights only under certain circumstances.
Credit
Risk. Credit risk is the risk that an issuer will fail to pay interest or dividends and principal in a timely manner.
Companies that issue convertible securities may be small to medium-size, and they often have low credit ratings. In addition,
the credit rating of a company’s convertible securities is generally lower than that of its conventional debt securities.
Convertible securities are normally considered “junior” securities—that is, the company usually must pay interest
on its conventional debt before it can make payments on its convertible securities. Credit risk could be high for the Fund, because
it could invest in securities with low credit quality. The lower a debt security is rated, the greater its default risk. As a
result, the Fund may incur cost and delays in enforcing its rights against the issuer.
Market
Risk. Although convertible securities do derive part of their value from that of the securities into which they are convertible,
they are not considered derivative financial instruments. However, the Fund’s mandatory convertible securities include features
which render them more sensitive to price changes of their underlying securities. Thus they expose the Fund to greater downside
risk than traditional convertible securities, but generally less than that of the underlying common stock.
Interest
Rate Risk for Convertible Securities. The
Fund may be subject to a greater risk of rising interest rates due to the current period of rising interest rates and high inflation.
The Federal Reserve has aggressively begun to raise interest rates which is likely to drive down the prices of convertible securities
held by the Fund. Convertible securities are particularly sensitive to interest rate changes when their predetermined conversion
price is much higher than the issuing company’s common stock. See “—
Fixed Income Securities Risks—Duration and Maturity Risk”
and “— General Risks—Interest
Rate Risks Generally.”
Sector
Risk. Sector risk is the risk that returns from the economic sectors in which convertible securities are concentrated will
trail returns from other economic sectors. As a group, sectors tend to go through cycles of doing better-or-worse-than the convertible
securities market in general. These periods have, in the past, lasted for as long as several years. Moreover, the sectors that
dominate this market change over time.
Dilution
Risk. In the absence of adequate anti-dilution provisions in a convertible security, dilution in the value of the Fund’s
holding may occur in the event the underlying stock is subdivided, additional equity securities are issued for below market value,
a stock dividend is declared, or the issuer enters into another type of corporate transaction that has a similar effect.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Fixed
Income Securities Risks. Fixed income securities in which the Fund may invest are generally subject to the following risks:
| ● | Interest
Rate Risk. The market value of bonds and other fixed-income or dividend-paying securities
changes in response to interest rate changes and other factors. Interest rate risk is
the risk that prices of bonds and other income-or dividend-paying securities will increase
as interest rates fall and decrease as interest rates rise. Interest
rates have risen in recent months, and the risk that they may continue to do so is pronounced.
See “— General Risks—Interest Rate Risks Generally. |
| ● | Issuer
Risk. Issuer risk is the risk that the value of an income-or dividend-paying security
may decline for a number of reasons which directly relate to the issuer, such as management
performance, financial leverage, reduced demand for the issuer’s goods and services,
historical and prospective earnings of the issuer and the value of the assets of the
issuer. |
| ● | Prepayment
Risk. Prepayment
risk is the risk that during periods of declining interest rates, borrowers may exercise
their option to prepay principal earlier than scheduled. For income-or dividend-paying
securities, such payments often occur during periods of declining interest rates, forcing
the Fund to re-invest in lower yielding securities, resulting in a possible decline
in the Fund’s income and distributions to shareholders. This is known as prepayment
or “call” risk. Below investment grade securities frequently have call features
that allow the issuer to redeem the security at dates prior to its stated maturity at
a specified price (typically greater than par) only if certain prescribed conditions
are met (“call protection”). For premium bonds (bonds acquired at prices
that exceed their par or principal value) purchased by the Fund, prepayment risk may
be enhanced. |
| | | |
| ● | Duration
and Maturity Risk. The Fund has no set policy regarding portfolio maturity or duration
of the fixed-income securities it may hold. The Investment Adviser may seek to adjust
the duration or maturity of the Fund’s fixed-income holdings based on its assessment
of current and projected market conditions and all other factors that the Investment
Adviser deems relevant. In comparison to maturity (which is the date on which the issuer
of a debt instrument is obligated to repay the principal amount), duration is a measure
of the price volatility of a debt instrument as a result in changes in market rates of
interest, based on the weighted average timing of the instrument’s expected principal
and interest payments. Specifically, duration measures the anticipated percentage change
in net asset value that is expected for every percentage point change in interest rates.
The two have an inverse relationship. Duration can be a useful tool to estimate anticipated
price changes to a fixed pool of income securities associated with changes in interest
rates. For example, a duration of five years means that a 1% decrease in interest rates
will increase the net asset value of the portfolio by approximately 5%; if interest rates
increase by 1%, the net asset value will decrease by 5%. However, in a managed portfolio
of fixed income securities having differing interest or dividend rates or payment schedules,
maturities, redemption provisions, call or prepayment provisions and credit qualities,
actual price changes in response to changes in interest rates may differ significantly
from a duration-based estimate at any given time. |
Actual
price movements experienced by a portfolio of fixed income securities will be affected by how interest rates move (i.e., changes
in the relationship of long-term interest rates to short-term interest rates), the magnitude of any move in interest rates, actual
and anticipated prepayments of principal through call or redemption features, the extension of maturities through restructuring,
the sale of
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
securities
for portfolio management purposes, the reinvestment of proceeds from prepayments on and from sales of securities, and credit quality-related
considerations whether associated with financing costs to lower credit quality borrowers or otherwise, as well as other factors.
Accordingly, while duration maybe a useful tool to estimate potential price movements in relation to changes in interest rates,
investors are cautioned that duration alone will not predict actual changes in the net asset or market value of the Fund’s
shares and that actual price movements in the Fund’s portfolio may differ significantly from duration-based estimates. Duration
differs from maturity in that it takes into account a security’s yield, coupon payments and its principal payments in addition
to the amount of time until the security matures. As the value of a security changes over time, so will its duration. Prices of
securities with longer durations tend to be more sensitive to interest rate changes than securities with shorter durations. In
general, a portfolio of securities with a longer duration can be expected to be more sensitive to interest rate changes than a
portfolio with a shorter duration. Any decisions as to the targeted duration or maturity of any particular category of investments
will be made based on all pertinent market factors at any given time. The Fund may incur costs in seeking to adjust the portfolio
average duration or maturity. There can be no assurance that the Investment Adviser’s assessment of current and projected
market conditions will be correct or that any strategy to adjust duration or maturity will be successful at any given time.
Corporate
Bonds Risk. The market value of a corporate bond generally may be expected to rise and fall inversely with interest rates.
The market value of intermediate and longer term corporate bonds is generally more sensitive to changes in interest rates than
is the market value of shorter term corporate bonds. The market value of a corporate bond also may be affected by factors directly
related to the issuer, such as investors’ perceptions of the creditworthiness of the issuer, the issuer’s financial
performance, perceptions of the issuer in the market place, performance of management of the issuer, the issuer’s capital
structure and use of financial leverage and demand for the issuer’s goods and services. Certain risks associated with investments
in corporate bonds are described elsewhere in this Annual Report in further detail, including under “Risk Factors and Special
Considerations—General Risks—Interest Rate Risk Generally,” “Risk Factors and Special Considerations—General Risks—Fixed Income Securities Risks—Credit Risk,” “—Fixed Income Securities Risks—Interest
Rate Risk” and “—Fixed Income Securities Risks—Prepayment Risk.” There is a risk that the issuers
of corporate bonds may not be able to meet their obligations on interest or principal payments at the time called for by an instrument.
Corporate bonds of below investment grade quality are often high risk and have speculative characteristics and may be particularly
susceptible to adverse issuer-specific developments. Corporate bonds of below investment grade quality are subject to the risks
described herein under “—Non-Investment Grade Securities Risk.”
Non-Investment
Grade Securities Risk. The Fund may invest in securities rated below investment grade by recognized rating agencies or
unrated securities of comparable quality. The prices of these lower grade securities are more sensitive to negative developments,
such as a decline in the issuer’s revenues or a general economic downturn, than are the prices of higher grade securities.
Securities of below investment grade quality—those securities rated below “Baa” by Moody’s or below “BBB”
by S&P (or unrated securities of comparable quality)—are predominantly speculative with respect to the issuer’s
capacity to pay interest and repay principal when due and therefore involve a greater risk of default. Securities rated below
investment grade commonly are referred to as “junk bonds” or “high yield” securities and generally pay
a premium above the yields of U.S.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
government
securities or securities of investment grade issuers because they are subject to greater risks than these securities. These risks,
which reflect their speculative character, include the following:
| ● | greater
volatility; |
| ● | greater
credit risk and risk of default; |
| ● | potentially
greater sensitivity to general economic or industry conditions; |
| ● | potential
lack of attractive resale opportunities (illiquidity); and |
| ● | additional
expenses to seek recovery from issuers who default. |
In
addition, the prices of these non-investment grade securities are more sensitive to negative developments, such as a decline in
the issuer’s revenues or a general economic downturn, than are the prices of higher grade securities. Non-investment grade
securities tend to be less liquid than investment grade securities. The market value of non-investment grade securities may be
more volatile than the market value of investment grade securities and generally tends to reflect the market’s perception
of the creditworthiness of the issuer and short-term market developments to a greater extent than investment grade securities,
which primarily reflect fluctuations in general levels of interest rates.
Ratings
are relative and subjective and not absolute standards of quality. Securities ratings are based largely on the issuer’s
historical financial condition and the rating agencies’ analysis at the time of rating. Consequently, the rating assigned
to any particular security is not necessarily a reflection of the issuer’s current financial condition.
The
Fund may purchase securities of companies that are experiencing significant financial or business difficulties, including companies
involved in bankruptcy or other reorganization and liquidation proceedings. Although such investments may result in significant
financial returns to the Fund, they involve a substantial degree of risk. The level of analytical sophistication, both financial
and legal, necessary for successful investments in issuers experiencing significant business and financial difficulties is unusually
high. There can be no assurance that the Fund will correctly evaluate the value of the assets collateralizing its investments
or the prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to
a portfolio investment, the Fund may lose all or part of its investment or may be required to accept collateral with a value less
than the amount of the Fund’s initial investment.
As
a part of its investments in non-investment grade securities, the Fund may invest in the securities of issuers in default. The
Fund invests in securities of issuers in default only when the Investment Adviser believes that such issuers will honor their
obligations and emerge from bankruptcy protection and that the value of such issuers’ securities will appreciate. By investing
in the securities of issuers in default, the Fund bears the risk that these issuers will not continue to honor their obligations
or emerge from bankruptcy protection or that the value of these securities will not otherwise appreciate.
In
addition to using statistical rating agencies and other sources, the Investment Adviser will also perform its own analysis of
issuers in seeking investments that it believes to be underrated (and thus higher yielding) in light of the financial condition
of the issuer. Its analysis of issuers may include, among other things, current and anticipated cash flow and borrowing requirements,
value of assets in relation to historical cost, strength of management, responsiveness to business conditions, credit standing
and current anticipated results of
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
operations.
In selecting investments for the Fund, the Investment Adviser may also consider general business conditions, anticipated changes
in interest rates and the outlook for specific industries.
Subsequent
to its purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced. In addition, it is possible
that statistical rating agencies might change their ratings of a particular issue to reflect subsequent events on a timely basis.
Moreover, such ratings do not assess the risk of a decline in market value. None of these events will require the sale of the
securities by the Fund, although the Investment Adviser will consider these events in determining whether the Fund should continue
to hold the securities.
Income
securities, including non-investment grade securities and comparable unrated securities, frequently have call or buy-back features
that permit their issuers to call or repurchase the securities from their holders, such as the Fund. If an issuer exercises these
rights during periods of declining interest rates, the Fund may have to replace the security with a lower yielding security, thus
resulting in a decreased return for the Fund.
The
market for non-investment grade and comparable unrated securities has at various times, particularly during times of economic
recession, experienced substantial reductions in market value and liquidity. Past recessions have adversely affected the value
of such securities as well as the ability of certain issuers of such securities to repay principal and pay interest thereon or
to refinance such securities. The market for those securities could react in a similar fashion in the event of any future economic
recession.
Equity
Risk. The principal risk of investing in equity securities is equity risk. Equity risk is the risk that the price of an
equity security will fall due to general market and economic conditions, perceptions regarding the industry in which the issuer
participates or the issuing company’s particular circumstances. Common stock in which the Fund will invest or receive upon
conversion of convertible securities is subject to such equity risk. In the case of convertible securities, it is the conversion
value of a convertible security that is subject to the equity risk; that is, if the appreciation potential of a convertible security
is not realized, the premium paid for its conversion value may not be recovered. See “Investment Objective and Policies—Investment
Practices—Convertible Securities.”
Common
Stock Risk. Common stock of an issuer in the Fund’s portfolio may decline in price for a variety of reasons, including
if the issuer fails to make anticipated dividend payments because the issuer of the security experiences a decline in its financial
condition. Common stock in which the Fund invests is structurally subordinated as to income and residual value to preferred stock,
bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income, and therefore
will be subject to greater dividend risk than preferred stock or debt instruments of such issuers. In addition, while common stock
has historically generated higher average returns than fixed income securities, common stock has also experienced significantly
more volatility in generating those returns.
Distribution
Risk for Equity Income Securities. In selecting equity income securities in which the Fund will invest, the Investment
Adviser will consider the issuer’s history of making regular periodic distributions (i.e., dividends) to its equity holders.
An issuer’s history of paying dividends, however, does not guarantee that the issuer will continue to pay dividends in the
future. The dividend income stream associated with equity income securities generally is not guaranteed and will be subordinate
to payment obligations of the issuer on its debt and other liabilities. Accordingly, in the event the issuer does not realize
sufficient income in a particular period both to service its liabilities and to pay dividends on its equity securities, it may
forgo paying dividends on its equity securities. In addition, because in most instances issuers are not obligated to make periodic
distributions
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
to
the holders of their equity securities, such distributions or dividends generally may be discontinued at the issuer’s discretion.
Dividend-producing
equity income securities, in particular those whose market price is closely related to their yield, may exhibit greater sensitivity
to interest rate changes. See “Risk Factors and Special Considerations—General Risks—Interest Rate Risk Generally”
and “—Fixed Income Securities Risks—Interest Rate Risk.” The Fund’s investments in dividend-producing
equity income securities may also limit its potential for appreciation during a broad market advance.
The
prices of dividend-producing equity income securities can be highly volatile. Investors should not assume that the Fund’s
investments in these securities will necessarily reduce the volatility of the Fund’s net asset value or provide “protection,”
compared to other types of equity income securities, when markets perform poorly.
Preferred
Stock Risk. There are special risks associated with the Fund investing in preferred securities, including:
Deferral.
Preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated
period without any adverse consequences to the issuer. If the Fund owns a preferred security on which distributions are being
deferred by the issuer, the Fund may be required to report income for tax purposes although it has not yet received such deferred
distributions.
Non-Cumulative
Dividends. Some preferred stocks are non-cumulative, meaning that the dividends do not accumulate and need not ever be paid.
A portion of the portfolio may include investments in non-cumulative preferred securities, whereby the issuer does not have an
obligation to make up any arrearages to its shareholders. Should an issuer of a non-cumulative preferred stock held by the Fund
determine not to pay dividends on such stock, the Fund’s return from that security may be adversely affected. There is no
assurance that dividends or distributions on non-cumulative preferred stocks in which the Fund invests will be declared or otherwise
made payable.
Subordination.
Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure in terms
of priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than more senior
debt security instruments.
Liquidity.
Preferred securities may be substantially less liquid than many other securities, such as common stocks or U.S. Government
securities.
Limited
Voting Rights. Generally, preferred security holders (such as the Fund) have no voting rights with respect to the issuing
company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security
holders may be entitled to elect a number of directors to the issuer’s board. Generally, once all the arrearages have been
paid, the preferred security holders no longer have voting rights.
Special
Redemption Rights. In certain varying circumstances, an issuer of preferred securities may redeem the securities prior to
a specified date. For instance, for certain types of preferred securities, a redemption may be triggered by a change in federal
income tax or securities laws. As with call provisions, a redemption by the issuer may negatively impact the return of the security
held by the Fund.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Computer
Software/Services Companies Risk. Computer software/services companies can be significantly affected by competitive pressures,
aggressive pricing, technological developments, changing domestic demand, the ability to attract and retain skilled employees
and availability and price of components. The market for products produced by computer software/services companies is characterized
by rapidly changing technology, rapid product obsolescence, cyclical market patterns, evolving industry standards and frequent
new product introductions. The success of computer software/services companies depends in substantial part on the timely and successful
introduction of new products and the ability to service such products. An unexpected change in one or more of the technologies
affecting an issuer’s products or in the market for products based on a particular technology could have a material adverse
effect on a participant’s operating results.
Many
computer software/services companies rely on a combination of patents, copyrights, trademarks and trade secret laws to establish
and protect their proprietary rights in their products and technologies. There can be no assurance that the steps taken by computer
software/services companies to protect their proprietary rights will be adequate to prevent misappropriation of their technology
or that competitors will not independently develop technologies that are substantially equivalent or superior to such companies’
technology.
U.S.
Government Securities and Credit Rating Downgrade Risk. The Fund may invest in direct obligations of the government of
the United States or its agencies. Obligations issued or guaranteed by the U.S. government, its agencies, authorities and instrumentalities
and backed by the full faith and credit of the U.S. guarantee only that principal and interest will be timely paid to holders
of the securities. These entities do not guarantee that the value of such obligations will increase, and, in fact, the market
values of such obligations may fluctuate. In addition, not all U.S. government securities are backed by the full faith and credit
of the United States; some are the obligation solely of the entity through which they are issued. There is no guarantee that the
U.S. government would provide financial support to its agencies and instrumentalities if not required to do so by law.
In
2011, S&P lowered its long-term sovereign credit rating on the U.S. to “AA+” from “AAA.” The downgrade
by S&P increased volatility in both stock and bond markets, resulting in higher interest rates and higher Treasury yields,
and increased the costs of all kinds of debt. Repeat occurrences of similar events could have significant adverse effects on the
U.S. economy generally and could result in significant adverse impacts on issuers of securities held by the Fund itself. The Investment
Adviser cannot predict the effects of similar events in the future on the U.S. economy and securities markets or on the Fund’s
portfolio. The Investment Adviser monitors developments and seeks to manage the Fund’s portfolio in a manner consistent
with achieving the Fund’s investment objective, but there can be no assurance that it will be successful in doing so and
the Investment Adviser may not timely anticipate or manage existing, new or additional risks, contingencies or developments.
Significant
Holdings Risk. The Fund may invest up to 25% of its total assets in securities of a single industry; however, the Fund
does not currently focus and has no current intent to focus on any particular industry or sector. In the event the Fund should
choose to take significant positions in any particular industry or sector, the net asset value of the Fund will be more susceptible
to factors affecting those particular types of companies, which, depending on the particular industry, may include, among others:
governmental regulation; inflation; cost increases in raw materials, fuel and other operating expenses; technological innovations
that may render existing products and equipment obsolete; and increasing interest rates resulting in high interest costs on borrowings
needed for capital investment, including costs associated with compliance with environmental and
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
other
regulations. In such circumstances the Fund’s investments may be subject to greater risk and market fluctuation than a fund
that had securities representing a broader range of industries.
Value
Investing Risk. The Fund focuses its investments on the securities of companies that the Investment Adviser believes are
undervalued or inexpensive relative to other investments. These types of securities may present risks in addition to the general
risks associated with investing in common and preferred stocks. These securities generally are selected on the basis of an issuer’s
fundamentals relative to current market price. Such securities are subject to the risk of mis-estimation of certain fundamental
factors. In addition, during certain time periods market dynamics may strongly favor “growth” stocks of issuers that
do not display strong fundamentals relative to market price based upon positive price momentum and other factors. Disciplined
adherence to a “value” investment mandate during such periods can result in significant underperformance relative
to overall market indices and other managed investment vehicles that pursue growth style investments and/or flexible equity style
mandates.
Selection
Risk. Different types of stocks tend to shift into and out of favor with stock market investors, depending on market and
economic conditions. The performance of funds that invest in value-style stocks may at times be better or worse than the performance
of stock funds that focus on other types of stocks or that have a broader investment style.
Merger
Arbitrage Risk. The Fund may invest in securities of companies for which a tender or exchange offer has been made or announced,
and in securities of companies for which a merger, consolidation, liquidation or reorganization proposal has been announced. The
principal risk of such investments is that certain of such proposed transactions may be renegotiated, terminated or involve a
longer time frame than originally contemplated, in which case the Fund may realize losses. Such risk is sometimes referred to
as “merger arbitrage risk.” Among the factors that affect the level of risk with respect to the completion of the
transaction are the deal spread and number of bidders, the friendliness of the buyer and seller, the strategic rationale behind
the transaction, the existence of regulatory hurdles, the level of due diligence completed on the target company and the ability
of the buyer to finance the transaction. If the spread between the purchase price and the current price of the seller’s
stock is small, the risk that the transaction will not be completed may outweigh the potential return.
If
there is very little interest by other potential buyers in the target company, the risk of loss may be higher than where there
are back-up buyers that would allow the arbitrageur to realize a similar return if the current deal falls through. Unfriendly
management of the target company or change in friendly management in the middle of a deal increases the risk that the deal will
not be completed even if the target company’s board has approved the transaction and may involve the risk of litigation
expense if the target company pursues litigation in an attempt to prevent the deal from occurring. The underlying strategy behind
the deal is also a risk consideration because the less a target company will benefit from a merger or acquisition, the greater
the risk. There is also a risk that an acquiring company may back out of an announced deal if, in the process of completing its
due diligence of the target company, it discovers something undesirable about such company. In addition, merger transactions are
also subject to regulatory risk because a merger transaction often must be approved by a regulatory body or pass governmental
antitrust review. All of these factors affect the timing and likelihood that the transaction will close. Even if the Investment
Adviser selects announced deals with the goal of mitigating the risks that the transaction will fail to close, such risks may
still delay the closing of such transaction to a date later than the Fund originally anticipated, reducing the level of desired
return to the Fund.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Merger
arbitrage positions are also subject to the risk of overall market movements. To the extent that a general increase or decline
in equity values affects the stocks involved in a merger arbitrage position differently, the position may be exposed to loss.
Finally,
merger arbitrage strategies depend for success on the overall volume of global merger activity, which has historically been cyclical
in nature. During periods when merger activity is low, it may be difficult or impossible to identify opportunities for profit
or to identify a sufficient number of such opportunities to provide balance among potential merger transactions. To the extent
that the number of announced deals and corporate reorganizations decreases or the number of investors in such transactions increases,
it is possible that merger arbitrage spreads will tighten, causing the profitability of investing in such transactions to diminish,
which will in turn decrease the returns to the Fund from such investment activity.
Foreign
Securities Risk. Investments in the securities of foreign issuers involve certain considerations and risks not ordinarily
associated with investments in securities of domestic issuers and such securities may be more volatile than those of issuers located
in the United States. Foreign companies are not generally subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to U.S. companies. Foreign securities exchanges, brokers and listed companies may
be subject to less government supervision and regulation than exists in the United States. Dividend and interest income may be
subject to withholding and other foreign taxes, which may adversely affect the net return on such investments. There may be difficulty
in obtaining or enforcing a court judgment abroad. In addition, it may be difficult to effect repatriation of capital invested
in certain countries. In addition, with respect to certain countries, there are risks of expropriation, confiscatory taxation,
political or social instability or diplomatic developments that could affect assets of the Fund held in foreign countries. Dividend
income the Fund receives from foreign securities may not be eligible for the special tax treatment applicable to qualified dividend
income. Moreover, certain equity investments in foreign issuers classified as passive foreign investment companies may be subject
to additional taxation risk.
There
may be less publicly available information about a foreign company than a U.S. company, and foreign companies may not be subject
to accounting, auditing, and financial reporting standards and requirements comparable to or as uniform as those of U.S. companies.
Foreign securities markets may have substantially less volume than U.S. securities markets and some foreign company securities
are less liquid and their prices more volatile than securities of otherwise comparable U.S. companies. A portfolio of foreign
securities may also be adversely affected by fluctuations in the rates of exchange between the currencies of different nations
and by exchange control regulations, as there is generally less government supervision and regulation of exchanges, brokers, and
issuers than there is in the U.S. The Fund might have greater difficulty taking appropriate legal action in non-U.S. courts and
there may be less developed bankruptcy laws. Non-U.S. markets also have different clearance and settlement procedures which in
some markets have at times failed to keep pace with the volume of transactions, thereby creating substantial delays and settlement
failures that could adversely affect the Fund’s performance. Foreign markets also have different clearance and settlement
procedures that could cause the Fund to encounter difficulties in purchasing and selling securities on such markets and may result
in the Fund missing attractive investment opportunities or experiencing loss. In addition, a portfolio that includes foreign securities
can expect to have a higher expense ratio because of the increased transaction costs on non-U.S. securities markets and the increased
costs of maintaining the custody of foreign securities.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Investments
in foreign securities will expose the Fund to the direct or indirect consequences of political, social or economic changes in
the countries that issue the securities or in which the issuers are located. Certain countries in which the Fund may invest have
historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations,
large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Many of these
countries are also characterized by political uncertainty and instability. The cost of servicing external debt will generally
be adversely affected by rising international interest rates because many external debt obligations bear interest at rates which
are adjusted based upon international interest rates.
The
Fund also may purchase ADRs or U.S. dollar-denominated securities of foreign issuers. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for use in the U.S. securities markets. While ADRs
may not necessarily be denominated in the same currency as the securities into which they may be converted, many of the risks
associated with foreign securities may also apply to ADRs. In addition, the underlying issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications
to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities.
The
following provides more detail on certain pronounced risks with foreign investing:
Certain
non-U.S. currencies, primarily in developing countries, have been devalued in the past and might face devaluation in the future.
Currency devaluations generally have a significant and adverse impact on the devaluing country’s economy in the short and
intermediate term and on the financial condition and results of companies’ operations in that country. Currency devaluations
may also be accompanied by significant declines in the values and liquidity of equity and debt securities of affected governmental
and private sector entities generally. To the extent that affected companies have obligations denominated in currencies other
than the devalued currency, those companies may also have difficulty in meeting those obligations under such circumstances, which
in turn could have an adverse effect upon the value of the Fund’s investments in such companies. There can be no assurance
that current or future developments with respect to foreign currency devaluations will not impair the Fund’s investment
flexibility, its ability to achieve its investment objective or the value of certain of its foreign currency-denominated investments.
Tax
Consequences of Foreign Investing. The Fund’s transactions in foreign currencies, foreign currency-denominated debt
obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
This treatment could increase or decrease the Fund’s ordinary income distributions to you, and may cause some or all of
the Fund’s previously distributed income to be classified as a return of capital. In certain cases, the Fund may make an
election to treat gain or loss attributable to certain investments as capital gain or loss.
EMU
and Redenomination Risk. As the European debt crisis progressed, the possibility of one or more Eurozone countries exiting
the European Monetary Union (“EMU”), or even the collapse of the Euro as a common currency arose, creating significant
volatility at times in currency and financial markets. The effects of the collapse of the Euro or of the exit of one or more countries
from the EMU, on the U.S. and global economies and securities
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
markets
are impossible to predict, and any such events could have a significant adverse impact on the value and risk profile of the Fund’s
portfolio. Any partial or complete dissolution of the EMU could have significant adverse effects on currency and financial markets,
and on the values of the Fund’s portfolio investments. If one or more EMU countries were to stop using the Euro as its primary
currency, the Fund’s investments in such countries may be redenominated into a different or newly adopted currency. As a
result, the value of those investments could decline significantly and unpredictably. In addition, securities or other investments
that are redenominated may be subject to foreign currency risk, liquidity risk and valuation risk to a greater extent than similar
investments currently denominated in Euros. To the extent a currency used for redenomination purposes is not specified in respect
of certain EMU-related investments, or should the Euro cease to be used entirely, the currency in which such investments are denominated
may be unclear, making such investments particularly difficult to value or dispose of. The Fund may incur additional expenses
to the extent it is required to seek judicial or other clarification of the denomination or value of such securities.
Emerging
Markets Risk. The considerations noted above in “Foreign Securities Risk” are generally intensified for investments
in emerging market countries, including countries that may be considered “frontier” markets. Emerging market countries
typically have economic and political systems that are less fully developed, and can be expected to be less stable than those
of more developed countries. Investing in securities of companies in emerging markets may entail special risks relating to potential
political and economic instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment, the lack of hedging instruments and restrictions on repatriation of capital invested. Economies of such
countries can be subject to rapid and unpredictable rates of inflation or deflation. Emerging securities markets are substantially
smaller, less developed, less liquid and more volatile than the major securities markets. The limited size of emerging securities
markets and limited trading volume compared to the volume of trading in U.S. securities could cause prices to be erratic for reasons
apart from factors that affect the quality of the securities. For example, limited market size may cause prices to be unduly influenced
by traders who control large positions.
Adverse
publicity and investors’ perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity
of portfolio securities, especially in these markets. Other risks include high concentration of market capitalization and trading
volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors
and financial intermediaries; overdependence on exports, including gold and natural resources exports, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and obsolete or unseasoned financial systems; environmental
problems; less developed legal systems; and less reliable securities custodial services and settlement practices. Certain emerging
markets may also face other significant internal or external risks, including the risk of war and civil unrest. For all of these
reasons, investments in emerging markets may be considered speculative.
Eurozone
Risk. A number of countries in the EU have experienced, and may continue to experience, severe economic and financial difficulties,
increasing the risk of investing in the European markets. In particular, many EU nations are susceptible to economic risks associated
with high levels of debt, notably due to investments in sovereign debt of countries such as Greece, Italy, Spain, Portugal, and
Ireland. As a result, financial markets in the EU have been subject to increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms,
may not work, may result in social unrest, and may limit future growth and economic recovery or
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
have
other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset valuations around the world. Greece, Ireland, and Portugal have already
received one or more “bailouts” from other Eurozone member states, and it is unclear how much additional funding they
will require or if additional Eurozone member states will require bailouts in the future. One or more other countries may also
abandon the euro and/or withdraw from the EU, placing its currency and banking system in jeopardy. The impact of these actions,
especially if they occur in a disorderly fashion, is not clear, but could be significant and far-reaching.
Brexit
Risk. On January 31, 2020, the United Kingdom officially withdrew from the EU, commonly referred to as “Brexit.”
Following a transition period, the United Kingdom and the EU signed a Trade and Cooperation Agreement (“UK/EU Trade Agreement”),
which came into full force on May 1, 2021 and set out the foundation of the economic and legal framework for trade between the
United Kingdom and the EU. As the UK/EU Trade Agreement is a new legal framework, the implementation of the UK/EU Trade Agreement
may result in uncertainty in its application and periods of volatility in both the United Kingdom and wider European markets.
The United Kingdom’s exit from the EU is expected to result in additional trade costs and disruptions in this trading relationship.
Furthermore, there is the possibility that either party may impose tariffs on trade in the future in the event that regulatory
standards between the EU and the UK diverge. The terms of the future relationship may cause continued uncertainty in the global
financial markets, and adversely affect the Fund.
In
particular, currency volatility may mean that our returns and the returns of our portfolio companies will be adversely affected
by market movements and may make it more difficult, or more expensive, for us to implement appropriate currency hedging. Potential
declines in the value of the British Pound and/or the euro against other currencies, along with the potential downgrading of the
United Kingdom’s sovereign credit rating, may also have an impact on the performance of any of our portfolio companies located
in the United Kingdom or Europe.
In
addition, certain European countries have recently experienced negative interest rates on certain fixed-income instruments. A
negative interest rate policy is an unconventional central bank monetary policy tool where nominal target interest rates are set
with a negative value (i.e., below zero percent) intended to help create self-sustaining growth in the local economy. Negative
interest rates may result in heightened market volatility and may detract from the Fund’s performance to the extent the
Fund is exposed to such interest rates. Among other things, these developments have adversely affected the value and exchange
rate of the euro and pound sterling, and may continue to significantly affect the economies of all EU countries, which in turn
may have a material adverse effect on the Fund’s investments in such countries, other countries that depend on EU countries
for significant amounts of trade or investment, or issuers with exposure to debt issued by certain EU countries.
To
the extent the Fund has exposure to European markets or to transactions tied to the value of the euro, these events could negatively
affect the value and liquidity of the Fund’s investments. All of these developments may continue to significantly affect
the economies of all EU countries, which in turn may have a material adverse effect on the Fund’s investments in such countries,
other countries that depend on EU countries for significant amounts of trade or investment, or issuers with exposure to debt issued
by certain EU countries.
Smaller
Companies Investment Risk. The Fund may invest in the securities of smaller, less seasoned companies. Smaller companies
offer investment opportunities and additional risks. They may not be well known
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
to
the investing public, may not be significantly owned by institutional investors and may not have steady earnings growth. These
companies may have limited product lines and markets, as well as shorter operating histories, less experienced management and
more limited financial resources than larger companies. In addition, the securities of such companies may be more vulnerable to
adverse general market or economic developments, more volatile in price, have wider spreads between their bid and ask prices and
have significantly lower trading volumes than the securities of larger capitalization companies. As such, securities of these
smaller companies may be less liquid than those of larger companies, and may experience greater price fluctuations than larger
companies. In addition, small-cap or mid-cap company securities may not be widely followed by investors, which may result in reduced
demand.
As
a result, the purchase or sale of more than a limited number of shares of the securities of a smaller company may affect its market
price. The Investment Adviser may need a considerable amount of time to purchase or sell its positions in these securities, particularly
when other Investment Adviser-managed accounts or other investors are also seeking to purchase or sell them.
The
securities of smaller capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable
price changes than larger capitalization securities or the market as a whole. In addition, smaller capitalization securities may
be particularly sensitive to changes in interest rates, borrowing costs and earnings. Investing in smaller capitalization securities
requires a longer-term view.
Securities
of emerging companies may lack an active secondary market and may be subject to more abrupt or erratic price movements than securities
of larger, more established companies or stock market averages in general. Competitors of certain companies, which may or may
not be in the same industry, may have substantially greater financial resources than the companies in which the Fund may invest.
Investment
Companies. The Fund may invest in the securities of other investment companies to the extent permitted by law. To the
extent the Fund invests in the common equity of investment companies, the Fund will bear its ratable share of any such investment
company’s expenses, including management fees. The Fund will also remain obligated to pay management fees to the Investment
Adviser with respect to the assets invested in the securities of other investment companies. In these circumstances holders of
the Fund’s common shares will be subject to duplicative investment expenses. The Fund will not purchase the securities of
affiliated investment companies.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
major
difference is that the principal amount of the obligations may generally be prepaid at any time because the underlying assets
(i.e., loans) generally may be prepaid at any time. Prepayment risks include the following:
| ● | mortgage-backed
securities less potential for growth in value than conventional bonds with comparable
maturities; |
| ● | in
addition, when interest rates fall, the rate of prepayments tends to increase. During
such periods, the reinvestment of prepayment proceeds by the Fund will generally be at
lower rates than the rates that were carried by the obligations that have been prepaid; |
| ● | because
of these and other reasons, a government sponsored mortgage-backed security’s total
return and maturity may be difficult to predict; and |
| ● | to
the extent that the Fund purchases government sponsored mortgage-backed securities at
a premium, prepayments may result in loss of the Fund’s principal investment to
the extent of premium paid. |
Restricted
and Illiquid Securities. Unregistered securities are securities that cannot be sold publicly in the United States without
registration under the Securities Act. An illiquid investment is a security or other investment that cannot be disposed of within
seven days in the ordinary course of business at approximately the value at which the Fund has valued the investment. Unregistered
securities often can be resold only in privately negotiated transactions with a limited number of purchasers or in a public offering
registered under the Securities Act. Considerable delay could be encountered in either event and, unless otherwise contractually
provided for, the Fund’s proceeds upon sale may be reduced by the costs of registration or underwriting discounts. The difficulties
and delays associated with such transactions could result in the Fund’s inability to realize a favorable price upon disposition
of unregistered securities, and at times might make disposition of such securities impossible. The Fund may be unable to sell
illiquid investments when it desires to do so, resulting in the Fund obtaining a lower price or being required to retain the investment.
Illiquid investments generally must be valued at fair value, which is inherently less precise than utilizing market values for
liquid investments, and may lead to differences between the price at which a security is valued for determining the Fund’s
net asset value and the price the Fund actually receives upon sale.
Long-Term
Objective; Not a Complete Investment Program. The Fund is intended for investors seeking a high level of total return
over the long-term. The Fund is not meant to provide a vehicle for those who wish to play short-term swings in the stock market.
An investment in shares of the Fund should not be considered a complete investment program. Each shareholder should take into
account the Fund’s investment objective as well as the shareholder’s other investments when considering an investment
in the Fund.
Management
Risk. The Fund is subject to management risk because it is an actively managed portfolio. The Investment Adviser will
apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that
these will produce the desired results.
Decision-Making
Authority Risk. Investors have no authority to make decisions or to exercise business discretion on behalf of the Fund,
except as set forth in the Fund’s governing documents. The authority for all such decisions is generally delegated to the
Board, who in turn, has delegated the day-to-day management of the Fund’s investment activities to the Investment Adviser,
subject to oversight by the Board.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Dependence
on Key Personnel. The Investment Adviser is dependent upon the expertise of Mr. Mario J. Gabelli in providing advisory
services with respect to the Fund’s investments. If the Investment Adviser were to lose the services of Mr. Gabelli, its
ability to service the Fund could be adversely affected. There can be no assurance that a suitable replacement could be found
for Mr. Gabelli in the event of his death, resignation, retirement or inability to act on behalf of the Investment Adviser.
Market
Disruption and Geopolitical Risk. General economic and market conditions, such as interest rates, availability of credit,
inflation rates, economic uncertainty, supply chain disruptions, labor shortages, energy and other resource shortages, changes
in laws, trade barriers, currency exchange controls and national and international political circumstances (including governmental
responses to public health crises or the spread of infectious diseases), may have long-term negative effects on the U.S. and worldwide
financial markets and economy. These conditions have resulted in, and in many cases continue to result in, greater price volatility,
less liquidity, widening credit spreads and a lack of price transparency, with many securities remaining illiquid and of uncertain
value. Such market conditions may adversely affect the Company, including by making valuation of some of the Fund’s securities
uncertain and/or result in sudden and significant valuation increases or declines in the Fund’s holdings.
Risks
resulting from any future debt or other economic crisis could also have a detrimental impact on the global economy, the financial
condition of financial institutions and the Fund’s business, financial condition and results of operation. Market and economic
disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels
of incurrence and default on consumer debt and home prices, among other factors. To the extent uncertainty regarding the U.S.
or global economy negatively impacts consumer confidence and consumer credit factors, the Fund could be significantly and adversely
affected. Downgrades to the credit ratings of major banks could result in increased borrowing costs for such banks and negatively
affect the broader economy. Moreover, Federal Reserve policy, including with respect to certain interest rates, may also adversely
affect the value, volatility and liquidity of dividend- and interest-paying securities. Market volatility, rising interest rates
and/or a return to unfavorable economic conditions could impair the Fund’s ability to achieve its investment objectives.
The
occurrence of events similar to those in recent years, such as localized wars, instability, new and ongoing pandemics (such as
COVID-19), epidemics or outbreaks of infectious diseases in certain parts of the world, and catastrophic events such as fires,
floods, earthquakes, tornadoes, hurricanes and global health epidemics, terrorist attacks in the U.S. and around the world, social
and political discord, debt crises sovereign debt downgrades, increasingly strained relations between the U.S. and a number of
foreign countries, new and continued political unrest in various countries, the exit or potential exit of one or more countries
from the EU or the EMU, continued changes in the balance of political power among and within the branches of the U.S. government,
government shutdowns, among others, may result in market volatility, may have long-term effects on the U.S. and worldwide financial
markets, and may cause further economic uncertainties in the U.S. and worldwide.
In
particular, the consequences of the Russian military invasion of Ukraine, the impact on inflation and increased disruption to
supply chains and energy resources may impact the Fund’s portfolio companies, result in an economic downturn or recession
either globally or locally in the U.S. or other economies, reduce business activity, spawn additional conflicts (whether in the
form of traditional military action, reignited “cold” wars or in the
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
form
of virtual warfare such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact
on the Fund’s returns and net asset values. In response to the conflict between Russia and Ukraine, the U.S. and other countries
have imposed sanctions or other restrictive actions against Russia, Russian-backed separatist regions in Ukraine, and certain
banks, companies, government officials and other individuals in Russia and Belarus. Any of the above factors, including sanctions,
export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Fund. The Fund
has no way to predict the duration or outcome of the situation, as the conflict and government reactions are rapidly developing
and beyond the Fund’s control. Prolonged unrest, military activities, or broad-based sanctions could have a material adverse
effect on companies in which the Fund invests. Such consequences also may increase such companies’ funding costs or limit
their access to the capital markets.
The
current political climate has intensified concerns about a potential trade war between China and the U.S., as each country has
imposed tariffs on the other country’s products. These actions may trigger a significant reduction in international trade,
the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies
and/or large segments of China’s export industry, which could have a negative impact on the Fund’s performance. U.S.
companies that source material and goods from China and those that make large amounts of sales in China would be particularly
vulnerable to an escalation of trade tensions. Uncertainty regarding the outcome of the trade tensions and the potential for a
trade war could cause the U.S. dollar to decline against safe haven currencies, such as the Japanese yen and the euro. Events
such as these and their consequences are difficult to predict and it is unclear whether further tariffs may be imposed or other
escalating actions may be taken in the future. Any of these effects could have a material adverse effect on the Fund.
Risks
resulting from any future debt or other economic crisis could also have a detrimental impact on the global economic recovery,
the financial condition of financial institutions and our business, financial condition and results of operation. Market and economic
disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels
of incurrence and default on consumer debt and home prices, among other factors. To the extent uncertainty regarding the U.S.
or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results
of operations could be significantly and adversely affected. Downgrades to the credit ratings of major banks could result in increased
borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with respect
to certain interest rates, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities.
Market volatility, rising interest rates and/or a return to unfavorable economic conditions could impair the Fund’s ability
to achieve its investment objectives.
Regulation
and Government Intervention Risk. Changes enacted by the current presidential administration could significantly impact
the regulation of financial markets in the U.S. Areas subject to potential change, amendment or repeal include trade and foreign
policy, corporate tax rates, energy and infrastructure policies, the environment and sustainability, criminal and social justice
initiatives, immigration, healthcare and the oversight of certain federal financial regulatory agencies and the Federal Reserve.
Certain of these changes can, and have, been effectuated through executive order. For example, the current administration has
taken steps to rejoin the Paris climate accord of 2015 and incentivize certain clean energy technologies, cancel the Keystone
XL pipeline, provide military support to Ukraine and change immigration enforcement priorities. Other
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
potential
changes that could be pursued by the current presidential administration could include an increase in the corporate income tax
rate; changes to regulatory enforcement priorities; and spending on clean energy and infrastructure. It is not possible to predict
which, if any, of these actions will be taken or, if taken, their effect on the economy, securities markets or the financial stability
of the U.S. The Fund may be affected by governmental action in ways that are not foreseeable, and there is a possibility that
such actions could have a significant adverse effect on the Fund and the Fund’s ability to achieve its investment objectives.
Additional
risks arising from the differences in expressed policy preferences among the various constituencies in the branches of the U.S.
government has led in the past, and may lead in the future, to short-term or prolonged policy impasses, which could, and has,
resulted in shutdowns of the U.S. federal government. U.S. federal government shutdowns, especially prolonged shutdowns, could
have a significant adverse impact on the economy in general and could impair the ability of issuers to raise capital in the securities
markets. Any of these effects could have a material adverse effect on the Fund’s net asset value.
In
addition, the rules dealing with the U.S. federal income taxation are constantly under review by persons involved in the legislative
process and by the IRS and the U.S. Treasury Department. The Tax Cuts and Jobs Act made substantial changes to the Code. Among
those changes were a significant permanent reduction in the generally applicable corporate tax rate, changes in the taxation of
individuals and other non-corporate taxpayers that generally but not universally reduce their taxes on a temporary basis subject
to “sunset” provisions, the elimination or modification of various previously allowed deductions (including substantial
limitations on the deductibility of interest and, in the case of individuals, the deduction for personal state and local taxes),
certain additional limitations on the deduction of net operating losses, certain preferential rates of taxation on certain dividends
and certain business income derived by non-corporate taxpayers in comparison to other ordinary income recognized by such taxpayers,
and significant changes to the international tax rules. In addition, on August 16, 2022, the Biden administration signed into
law the Inflation Reduction Act, which modifies key aspects of the Code, including by creating an alternative minimum tax on certain
corporations and an excise tax on stock repurchases by certain corporations. The effect of these and other changes is uncertain,
both in terms of the direct effect on the taxation of an investment in the Fund’s shares and their indirect effect on the
value of the Fund’s assets, Fund shares or market conditions generally.
In
addition, the U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on the Fund
and on the closed-end fund industry in general. The SEC’s final rules and amendments that modernize reporting and disclosure,
along with other potential upcoming regulations, including in respect of investment company names and other matters, could, among
other things, restrict the Fund’s ability to engage in transactions, and/or increase overall expenses of the Fund.
The
Fund may be affected by governmental action in ways that are not foreseeable, and there is a possibility that such actions could
have a significant adverse effect on the Fund and its ability to achieve its investment objective(s).
Deflation
Risk. Deflation risk is the risk that prices throughout the economy decline over time, which may have an adverse effect
on the market valuation of companies, their assets and their revenues. In addition, deflation may have an adverse effect on the
creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Fund’s
portfolio.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Loans
of Portfolio Securities. Consistent with applicable regulatory requirements and the Fund’s investment restrictions,
the Fund may lend its portfolio securities to securities broker-dealers or financial institutions, provided that such loans are
callable at any time by the Fund (subject to notice provisions), and are at all times collateralized in accordance with applicable
regulatory requirements. The advantage of such loans is that the Fund continues to receive the income on the loaned securities
while at the same time earning interest on the cash amounts deposited as collateral, which will be invested in short-term obligations.
The Fund will not lend its portfolio securities if such loans are not permitted by the laws or regulations of any state in which
its shares are qualified for sale.
Portfolio
Turnover Risk. The Fund’s annual portfolio turnover rate may vary greatly from year to year, as well as within a
given year. Portfolio turnover rate is not considered a limiting factor in the execution of investment decisions for the Fund.
A higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional expenses that
are borne by the Fund. High portfolio turnover may result in an increased realization of net short-term capital gains by the Fund
which, when distributed to common shareholders, will be taxable as ordinary income. Additionally, in a declining market, portfolio
turnover may create realized capital losses. For the fiscal years ended December 31, 2021 and 2022, the portfolio turnover rate
of the Fund was 35% and 49%, respectively. The Fund anticipates that its portfolio turnover rate will generally not exceed 100%.
Legal,
Tax and Regulatory Risks. Legal, tax and regulatory changes could occur that may have material adverse effects on the
Fund. For example, the regulatory and tax environment for derivative instruments in which the Fund may participate is evolving,
and such changes in the regulation or taxation of derivative instruments may have material adverse effects on the value of derivative
instruments held by the Fund and the ability of the Fund to pursue its investment strategies. Similarly, on August 16, 2022, the
Biden administration signed into law the Inflation Reduction Act, which modifies key aspects of the Code, including by creating
an alternative minimum tax on certain corporations and an excise tax on stock repurchases by certain corporations. Changes to
the U.S. federal tax laws and interpretations thereof could adversely affect an investment in the Fund.
We
cannot assure you what percentage of the distributions paid on the Fund’s shares, if any, will consist of tax-advantaged
qualified dividend income or long-term capital gains or what the tax rates on various types of income will be in future years.
To
qualify for the favorable U.S. federal income tax treatment generally accorded to RICs under the Code, the Fund must, among other
things, derive in each taxable year at least 90% of its gross income from certain prescribed sources and distribute for each taxable
year at least 90% of its “investment company taxable income.” Statutory limitations on distributions on the common
shares if the Fund fails to satisfy the 1940 Act’s asset coverage requirements could jeopardize the Fund’s ability
to meet such distribution requirements. While the Fund presently intends to purchase or redeem notes or preferred shares, if any,
to the extent necessary in order to maintain compliance with such asset coverage requirements, there can be no assurance that
such actions can be effected in time to meet the Code requirements. If for any taxable year the Fund does not qualify as a RIC,
all of its taxable income for that year (including its net capital gain) would be subject to tax at regular corporate rates without
any deduction for distributions to shareholders, and such distributions would be taxable as ordinary dividends to the extent of
the Fund’s current and accumulated earnings and profits.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
LIBOR
Risk. The Fund may be exposed to financial instruments that are tied to the London Interbank Offered Rate (“LIBOR”)
to determine payment obligations, financing terms, hedging strategies or investment value. The Fund’s investments may pay
interest at floating rates based on LIBOR or may be subject to interest caps or floors based on LIBOR. The Fund may also obtain
financing at floating rates based on LIBOR. Derivative instruments utilized by the Fund may also reference LIBOR.
In
July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the
end of 2021. LIBOR can no longer be used to calculate new deals as of December 31, 2021. Since December 31, 2021, all sterling,
euro, Swiss franc and Japanese yen LIBOR settings and the one-week and two-month U.S. dollar LIBOR settings have ceased to be
published or are no longer representative, and after June 30, 2023, the overnight, one-month, three-month, six-month and 12-month
U.S. dollar LIBOR settings will cease to be published or will no longer be representative. Various financial industry groups have
begun planning for the transition away from LIBOR, but there are challenges to converting certain securities and transactions
to a new reference rate. Neither the effect of the LIBOR transition process nor its ultimate success can yet be known.
As
an alternative to LIBOR, the Financial Reporting Council, in conjunction with the Alternative Reference Rates Committee, a
steering committee comprised of large U.S. financial institutions recommended replacing U.S. dollar LIBOR with the Secured
Overnight Financing Rate (“SOFR”), a new index calculated by reference to short-term repurchase agreements,
backed by Treasury securities. Abandonment of, or modifications to, LIBOR could have adverse impacts on newly issued
financial instruments and any of our existing financial instruments which reference LIBOR. Given the inherent differences
between LIBOR and SOFR, or any other alternative benchmark rate that may be established, there are many uncertainties
regarding a transition from LIBOR, including, but not limited to, the need to amend all contracts with LIBOR as the
referenced rate and how this will impact the cost of variable rate debt and certain derivative financial instruments. In
addition, SOFR or other replacement rates may fail to gain market acceptance. Any failure of SOFR or alternative reference
rates to gain market acceptance could adversely affect the return on, value of and market for securities linked to such
rates.
Neither
the effect of the LIBOR transition process nor its ultimate success can yet be known. The transition process might lead to increased
volatility and illiquidity in markets for, and reduce the effectiveness of, new hedges placed against, instruments whose terms
currently include LIBOR. While some existing LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available
by providing for an alternative rate-setting methodology, there may be significant uncertainty regarding the effectiveness of
any such alternative methodologies to replicate LIBOR. Not all existing LIBOR-based instruments may have alternative rate-setting
provisions and there remains uncertainty regarding the willingness and ability of issuers to add alternative rate-setting provisions
in certain existing instruments. Moreover, these alternative rate-setting provisions may not be designed for regular use in an
environment where LIBOR ceases to be published, and may be an ineffective fallback following the discontinuation of LIBOR.
On
March 15, 2022, President Biden signed into law the Consolidated Appropriations Act of 2022, which among other things, provides
for the use of interest rates based on SOFR in certain contracts currently based on LIBOR and a safe harbor from liability for
utilizing SOFR-based interest rates as a replacement for LIBOR. The elimination of LIBOR could have an adverse impact on the market
value of and/or transferability of any LIBOR-
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
linked
securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition
or results of operations.
Legislation
Risk. At any time after the date of this Annual Report, legislation may be enacted that could negatively affect the assets
of the Fund. Legislation or regulation may change the way in which the Fund itself is regulated. The Investment Adviser cannot
predict the effects of any new governmental regulation that may be implemented and there can be no assurance that any new governmental
regulation will not adversely affect the Fund’s ability to achieve its investment objective.
Reliance
on Service Providers Risk. The Fund must rely upon the performance of service providers to perform certain functions,
which may include functions that are integral to the Fund’s operations and financial performance. Failure by any service
provider to carry out its obligations to the Fund in accordance with the terms of its appointment, to exercise due care and skill
or to perform its obligations to the Fund at all as a result of insolvency, bankruptcy or other causes could have a material adverse
effect on the Fund’s performance and returns to shareholders. The termination of the Fund’s relationship with any
service provider, or any delay in appointing a replacement for such service provider, could materially disrupt the business of
the Fund and could have a material adverse effect on the Fund’s performance and returns to shareholders.
Cyber
Security Risk. The Fund and its service providers are susceptible to cyber security risks that include, among other things,
theft, unauthorized monitoring, release, misuse, loss, destruction or corruption of confidential and highly restricted data; denial
of service attacks; unauthorized access to relevant systems, compromises to networks or devices that the Fund and its service
providers use to service the Fund’s operations; or operational disruption or failures in the physical infrastructure or
operating systems that support the Fund and its service providers. Cyber attacks are becoming increasingly common and more sophisticated,
and may be perpetrated by computer hackers, cyber-terrorists or others engaged in corporate espionage. Cyber attacks against or
security breakdowns of the Fund or its service providers may adversely impact the Fund and its stockholders, potentially resulting
in, among other things, financial losses; the inability of Fund stockholders to transact business and the Fund to process transactions;
inability to calculate the Fund’s NAV; violations of applicable privacy and other laws; regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs; and/or additional compliance costs. The Fund may incur additional costs for
cyber security risk management and remediation purposes. In addition, cyber security risks may also impact issuers of securities
in which the Fund invests, which may cause the Fund’s investment in such issuers to lose value. There have been a number
of recent highly publicized cases of companies reporting the unauthorized disclosure of client or customer information, as well
as cyberattacks involving the dissemination, theft and destruction of corporate information or other assets, as a result of failure
to follow procedures by employees or contractors or as a result of actions by third parties, including actions by terrorist organizations
and hostile foreign governments. Although service providers typically have policies and procedures, business continuity plans
and/or risk management systems intended to identify and mitigate cyber incidents, there are inherent limitations in such plans
and systems including the possibility that certain risks have not been identified. Furthermore, the Fund cannot control the cyber
security policies, plans and systems put in place by its service providers or any other third parties whose operations may affect
the Fund or its shareholders. There can be no assurance that the Fund or its service providers will not suffer losses relating
to cyber attacks or other information security breaches in the future.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Because
technology is consistently changing, new ways to carry out cyber attacks are always developing. Therefore, there is a chance that
some risks have not been identified or prepared for, or that an attack may not be detected, which puts limitations on the Fund’s
ability to plan for or respond to a cyber attack. In addition to deliberate cyber attacks, unintentional cyber incidents can occur,
such as the inadvertent release of confidential information by the Fund or its service providers. Like other funds and business
enterprises, the Fund and its service providers are subject to the risk of cyber incidents occurring from time to time.
Misconduct
of Employees and of Service Providers Risk. Misconduct or misrepresentations by employees of the Investment Adviser or
the Fund’s service providers could cause significant losses to the Fund. Employee misconduct may include binding the Fund
to transactions that exceed authorized limits or present unacceptable risks and unauthorized trading activities, concealing unsuccessful
trading activities (which, in any case, may result in unknown and unmanaged risks or losses) or making misrepresentations regarding
any of the foregoing. Losses could also result from actions by the Fund’s service providers, including, without limitation,
failing to recognize trades and misappropriating assets. In addition, employees and service providers may improperly use or disclose
confidential information, which could result in litigation or serious financial harm, including limiting the Fund’s business
prospects or future marketing activities. Despite the Investment Adviser’s due diligence efforts, misconduct and intentional
misrepresentations may be undetected or not fully comprehended, thereby potentially undermining the Investment Adviser’s
due diligence efforts. As a result, no assurances can be given that the due diligence performed by the Investment Adviser will
identify or prevent any such misconduct.
Anti-Takeover
Provisions. The Charter and By-Laws of the Fund include provisions that could limit the ability of other entities or persons
to acquire control of the Fund or convert the Fund to an open-end fund. See “Certain Provisions of the Maryland General
Corporation Law and Our Charter and By-Laws.”
Special
Risks Related to Investment in Derivative Transactions. The Fund may participate in derivative transactions. Such transactions
entail certain execution, market, liquidity, counterparty, correlation, volatility, hedging and tax risks. Participation in the
options or futures markets, in currency exchange transactions and in other derivatives transactions involves investment risks
and transaction costs to which the Fund would not be subject absent the use of these strategies. If the Investment Adviser’s
prediction of movements in the direction of the securities, foreign currency, interest rate or other referenced instruments or
markets is inaccurate, the consequences to the Fund may leave the Fund in a worse position than if it had not used such strategies.
Risks
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
inherent
in the use of options, swaps, foreign currency, futures contracts and options on futures contracts, securities indices and foreign
currencies include:
| ● | dependence
on the Investment Adviser’s ability to predict correctly movements in the direction
of the relevant measure; |
| ● | imperfect
correlation between the price of the derivative instrument and movements in the prices
of the referenced assets; |
| ● | the
fact that skills needed to use these strategies are different from those needed to select
portfolio securities; |
| ● | the
possible absence of a liquid secondary market for any particular instrument at any time; |
| ● | the
possible need to defer closing out certain hedged positions to avoid adverse tax consequences; |
| ● | the
possible inability of the Fund to purchase or sell a security or instrument at a time
that otherwise would be favorable for it to do so, or the possible need for the Fund
to sell a security or instrument at a disadvantageous time due to a need for the Fund
to maintain “cover” or to segregate securities in connection with the hedging
techniques; and |
| ● | the
creditworthiness of counterparties. |
Options,
futures contracts, swaps contracts, and options thereon and forward contracts on securities and currencies may be traded on foreign
exchanges. Such transactions may not be regulated as effectively as similar transactions in the United States, may not involve
a clearing mechanism and related guarantees, and are subject to the risk of governmental actions affecting trading in, or the
prices of, foreign securities. The value of such positions also could be adversely affected by (i) other complex foreign political,
legal and economic factors, (ii) lesser availability than in the United States of data on which to make trading decisions, (iii)
delays in the ability of the Fund to act upon economic events occurring in the foreign markets during non-business hours in the
United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) less trading volume. Exchanges on which options, futures, swaps and options on futures or swaps are traded
may impose limits on the positions that the Fund may take in certain circumstances.
Many
OTC derivatives are valued on the basis of dealers’ pricing of these instruments. However, the price at which dealers value
a particular derivative and the price which the same dealers would actually be willing to pay for such derivative should the Fund
wish or be forced to sell such position may be materially different. Such differences can result in an overstatement of the Fund’s
net asset value and may materially adversely affect the Fund in situations in which the Fund is required to sell derivative instruments.
Exchange-traded derivatives and OTC derivative transactions submitted for clearing through a central counterparty have become
subject to minimum initial and variation margin requirements set by the relevant clearinghouse, as well as possible margin requirements
mandated by the SEC or the CFTC. These regulators also have broad discretion to impose margin requirements on non-cleared OTC
derivatives. These margin requirements will increase the overall costs for the Fund.
While
hedging transactions can reduce or eliminate losses, they can also reduce or eliminate gains. Hedges are sometimes subject to
imperfect matching between the derivative and the underlying instrument, and there can be no assurance that the Fund’s hedging
transactions will be effective. Derivatives may also give rise to a form
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
of
leverage and may expose the Fund to greater risk and increase its costs. Future CFTC or SEC rulemakings could potentially further
limit or completely restrict the Fund’s ability to use these instruments as a part of the Fund’s investment strategy,
increase the costs of using these instruments or make them less effective. Limits or restrictions applicable to the counterparties
with which the Fund engages in derivative transactions could also prevent the Fund from using these instruments or affect the
pricing or other factors relating to these instruments or may change the availability of certain investments. New regulation may
make derivatives more costly, may limit the availability of derivatives, or may otherwise adversely affect the value or performance
of derivatives. Counterparty Risk. The Fund will be subject to credit risk with respect to the counterparties to the derivative
contracts purchased by the Fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative
contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative
contract in bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery
in such circumstances.
The
counterparty risk for cleared derivatives is generally lower than for uncleared OTC derivative transactions since generally a
clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the
parties’ performance under the contract as each party to a trade looks only to the clearing organization for performance
of financial obligations under the derivative contract. However, there can be no assurance that a clearing organization, or its
members, will satisfy its obligations to the Fund, or that the Fund would be able to recover the full amount of assets deposited
on its behalf with the clearing organization in the event of the default by the clearing organization or the Fund’s clearing
broker. In addition, cleared derivative transactions benefit from daily marking-to-market and settlement, and segregation and
minimum capital requirements applicable to intermediaries. Uncleared OTC derivative transactions generally do not benefit from
such protections. This exposes the Fund to the risk that a counterparty will not settle a transaction in accordance with its terms
and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity
problem, thus causing the Fund to suffer a loss. Such “counterparty risk” is accentuated for contracts with longer
maturities where events may intervene to prevent settlement, or where the Fund has concentrated its transactions with a single
or small group of counterparties.
Failure
of Futures Commission Merchants and Clearing Organizations Risk. Counterparty Risk. The Fund will be subject to credit
risk with respect to the counterparties to the derivative contracts purchased by the Fund. If a counterparty becomes bankrupt
or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience
significant delays in obtaining any recovery under the derivative contract in bankruptcy or other reorganization proceeding. The
Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.
The
counterparty risk for cleared derivatives is generally lower than for uncleared OTC derivative transactions since generally a
clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the
parties’ performance under the contract as each party to a trade looks only to the clearing organization for performance
of financial obligations under the derivative contract. However, there can be no assurance that a clearing organization, or its
members, will satisfy its obligations to the Fund, or that the Fund would be able to recover the full amount of assets deposited
on its behalf with the clearing organization in the event of the default by the clearing organization or the Fund’s clearing
broker. In addition, cleared derivative transactions benefit from daily marking-to-market and settlement, and segregation and
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
minimum
capital requirements applicable to intermediaries. Uncleared OTC derivative transactions generally do not benefit from such protections.
This exposes the Fund to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions
because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus
causing the Fund to suffer a loss. Such “counterparty risk” is accentuated for contracts with longer maturities where
events may intervene to prevent settlement, or where the Fund has concentrated its transactions with a single or small group of
counterparties.
Swaps
Risk. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from
a few weeks to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns
to be exchanged or “swapped” between the parties are calculated with respect to a “notional amount,” i.e.,
the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign
currency, or in a “basket” of securities representing a particular index. The “notional amount” of the
swap agreement is only a fictive basis on which to calculate the obligations that the parties to a swap agreement have agreed
to exchange.
Historically,
swap transactions have been individually negotiated non-standardized transactions entered into in the OTC markets and have not
been subject to the same type of government regulation as exchange-traded instruments. However, in the U.S., the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) has made broad changes to the derivatives
market, granted significant new authority to the CFTC and the SEC to regulate derivatives (swaps and security-based swaps) and
participants in these markets. The Dodd-Frank Act is intended to regulate the derivatives market by requiring many derivative
transactions to be cleared and traded on an exchange, expanding entity registration requirements, imposing business conduct requirements
on dealers and requiring banks to move some derivatives trading units to a non-guaranteed affiliate separate from the deposit-taking
bank or divest them altogether. See “Risk Factors and Special Considerations—General Risks – Derivatives Regulation
Risk.”
Swap
agreements will tend to shift the Fund’s investment exposure from one type of investment to another. For example, if the
Fund agreed to pay fixed rates in exchange for floating rates while holding fixed-rate bonds, the swap would tend to decrease
the Fund’s exposure to long-term interest rates. Caps and floors have an effect similar to buying or writing options. Depending
on how they are used, swap agreements may increase or decrease the overall volatility of the Fund’s investments and its
share price and yield. The most significant factor in the performance of swap agreements is the change in the specific interest
rate, currency, or other factors that determine the amounts of payments due to and from the Fund. If a swap agreement calls for
payments by the Fund, the Fund must be prepared to make such payments when due.
The
Fund may enter into swap agreements that would calculate the obligations of the parties to the agreements on a “net”
basis. Consequently, the Fund’s obligations (or rights) under a swap agreement will generally be equal only to the net amount
to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the
“net amount”). The Fund’s obligations under a swap agreement will be accrued daily (offset against any amounts
owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of liquid
assets in accordance with SEC staff positions on the subject.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
The
Fund’s use of swap agreements may not be successful in furthering its investment objective, as the Investment Adviser may
not accurately predict whether certain types of investments are likely to produce greater returns than other investments. Moreover,
swap agreements involve the risk that the party with whom a Fund has entered into the swap will default on its obligation to pay
a Fund and the risk that a Fund will not be able to meet its obligations to pay the other party to the agreement. The Fund may
be able to eliminate its exposure under a swap agreement either by assignment or other disposition, or by entering into an offsetting
swap agreement with the same party or a similarly creditworthy party.
Forward
Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts to protect the
value of its portfolio against uncertainty in the level of future currency exchange rates between a particular foreign currency
and the U.S. dollar or between foreign currencies in which its securities are or may be denominated. The Fund may enter into such
contracts on a spot (i.e., cash) basis at the rate then prevailing in the currency exchange market or on a forward basis, by entering
into a forward contract to purchase or sell currency. A forward contract on foreign currency is an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days agreed upon by the parties from the date of the contract
at a price set on the date of the contract. Forward currency contracts (i) are traded in a market conducted directly between currency
traders (typically, commercial banks or other financial institutions) and their customers, (ii) generally have no deposit requirements
and (iii) are typically consummated without payment of any commissions. The Fund, however, may enter into forward currency contracts
requiring deposits or involving the payment of commissions.
The
dealings of the Fund in forward foreign exchange are limited to hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of one forward foreign currency for another currency with respect to specific receivables
or payables of the Fund accruing in connection with the purchase and sale of its portfolio securities or its payment of distributions.
Position hedging is the purchase or sale of one forward foreign currency for another currency with respect to portfolio security
positions denominated or quoted in the foreign currency to offset the effect of an anticipated substantial appreciation or depreciation,
respectively, in the value of the currency relative to the U.S. dollar. In this situation, the Fund also may, for example, enter
into a forward contract to sell or purchase a different foreign currency for a fixed U.S. dollar amount where it is believed that
the U.S. dollar value of the currency to be sold or bought pursuant to the forward contract will fall or rise, as the case may
be, whenever there is a decline or increase, respectively, in the U.S. dollar value of the currency in which its portfolio securities
are denominated (this practice being referred to as a “cross-hedge”).
In
hedging a specific transaction, the Fund may enter into a forward contract with respect to either the currency in which the transaction
is denominated or another currency deemed appropriate by the Investment Adviser. The amount the Fund may invest in forward currency
contracts is limited to the amount of its aggregate investments in foreign currencies.
The
use of forward currency contracts may involve certain risks, including the failure of the counterparty to perform its obligations
under the contract, and such use may not serve as a complete hedge because of an imperfect correlation between movements in the
prices of the contracts and the prices of the currencies hedged or used for cover. The Fund will only enter into forward currency
contracts with parties which the Investment Adviser believes to be creditworthy institutions.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Futures
Contracts and Options on Futures. Futures and options on futures entail certain risks, including, but not limited to,
the following: no assurance that futures contracts or options on futures can be offset at favorable prices; possible reduction
of the yield of the Fund due to the use of hedging; possible reduction in value of both the securities hedged and the hedging
instrument; possible lack of liquidity due to daily limits on price fluctuations; imperfect correlation between the contracts
and the securities being hedged; and losses from investing in futures transactions that are potentially unlimited.
Options
Risk. To the extent that the Fund purchases options pursuant to a hedging strategy, the Fund will be subject to the following
additional risks. If a put or call option purchased by the Fund is not sold when it has remaining value, and if the market price
of the underlying security remains equal to or greater than the exercise price (in the case of a put), or remains less than or
equal to the exercise price (in the case of a call), the Fund will lose its entire investment in the option.
Where
a put or call option on a particular security is purchased to hedge against price movements in that or a related security, the
price of the put or call option may move more or less than the price of the security. If restrictions on exercise are imposed,
the Fund may be unable to exercise an option it has purchased. If the Fund is unable to close out an option that it has purchased
on a security, it will have to exercise the option in order to realize any profit or the option may expire worthless.
Derivatives
Regulation Risk. The Dodd-Frank Act has made broad changes to the derivatives market, granted significant new
authority to the CFTC and the SEC to regulate derivatives (swaps and security-based swaps) and participants in these markets.
The Dodd-Frank Act is intended to regulate the derivatives market by requiring many derivative transactions to be cleared and
traded on an exchange, expanding entity registration requirements, imposing business conduct requirements on dealers and
requiring banks to move some derivatives trading units to a non-guaranteed affiliate separate from the deposit-taking bank or
divest them altogether. The CFTC has implemented mandatory clearing and exchange-trading of certain derivatives contracts
including many standardized interest rate swaps and credit default index swaps. The CFTC continues to approve contracts for
central clearing. Exchange-trading and central clearing are expected to reduce counterparty credit risk by substituting the
clearinghouse as the counterparty to a swap and increase liquidity, but exchange-trading and central clearing do not make
swap transactions risk-free. Uncleared swaps, such as non-deliverable foreign currency forwards, are subject to certain
margin requirements that mandate the posting and collection of minimum margin amounts. This requirement may result in the
Fund and its counterparties posting higher margin amounts for uncleared swaps than would otherwise be the case. Certain rules
require centralized reporting of detailed information about many types of cleared and uncleared swaps. Reporting of swap data
may result in greater market transparency, but may subject the Fund to additional administrative burdens, and the safeguards
established to protect trader anonymity may not function as expected.
In
addition, on October 28, 2020, the SEC adopted new regulations governing the use of derivatives by closed-end funds, which the
Fund was required to comply with as of August 19, 2022. As a result, the Fund is required to implement and comply with the Rule
18f-4 limits described previously under “Special Risks Related to Investment in Derivatives” on the amount of derivatives
the Fund can enter into, eliminate the asset segregation framework previously used to comply with Section 18 of the 1940 Act,
treat derivatives as senior securities so that a failure to comply with the limits would result in a statutory violation and require
the Fund, if the Fund’s use of derivatives is more than a limited specified exposure amount (10% of net assets), to establish
and
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
maintain
a comprehensive derivatives risk management program and appoint a derivatives risk manager. These requirements may limit the ability
of the Fund to invest in derivatives, engage in securities lending activities, short sales, reverse repurchase agreements and
similar financing transactions. Additionally, Rule 18f-4 and the SEC’s corresponding recission and withdrawal of prior guidance
and relief related to asset segregation and asset coverage requirements under section 18 of the 1940 Act may affect the Fund’s
ability to implement its investment strategy, pursue its investment objectives and may increase the cost of the Fund’s investments.
Special
Risks to Holders of Notes
An
investment in our notes is subject to special risks. Our notes are not likely to be listed on an exchange or automated quotation
system. We cannot assure you that any market will exist for our notes or if a market does exist, whether it will provide holders
with liquidity. Broker-dealers that maintain a secondary trading market for the notes are not required to maintain this market,
and the Fund is not required to redeem notes if an attempted secondary market sale fails because of a lack of buyers. To the extent
that our notes trade, they may trade at a price either higher or lower than their principal amount depending on interest rates,
the rating (if any) on such notes and other factors.
Special
Risks to Holders of Preferred Shares
Illiquidity
Prior to Exchange Listing. Prior to the offering of any additional series of preferred shares, there will be no public
market for such shares. In the event any preferred shares are issued, prior application will have been made to list such shares
on the NYSE. However, during an initial period, which is not expected to exceed 30 days after the date of initial issuance, such
shares may not be listed on any securities exchange. During such period, the underwriters may make a market in such shares, though,
they will have no obligation to do so. Consequently, an investment in such shares may be illiquid during such period.
Market
Price Fluctuation. Preferred shares may trade at a premium to or discount from liquidation preference for a variety of
reasons, including changes in interest rates.
Special
Risks to Holders of Notes and Preferred Shares
Common
Share Repurchases. Repurchases of common shares by the Fund may reduce the net asset coverage of the notes and preferred
shares, which could adversely affect their liquidity or market prices.
Common
Share Distribution Policy. In the event the Fund does not generate a total return from dividends and interest received
and net realized capital gains in an amount at least equal to the greater of its stated distribution policy or the minimum distribution
requirements of the Code in a given year, the Fund expects that it would return capital as part of its distribution. This would
decrease the asset coverage per share with respect to the Fund’s notes or preferred shares, which could adversely affect
their liquidity or market prices.
For
the fiscal year ended December 31, 2022, the Fund made distributions of $0.48 per common share, of which $0.0048 per share was
deemed a return of capital. The composition of each distribution is estimated based on the earnings of the Fund as of the record
date for each distribution. The actual composition of each of the current year’s distributions will be based on the Fund’s
investment activity through the end of the calendar year.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Credit
Quality Ratings. The Fund may obtain credit quality ratings for its preferred shares or notes; however, it is not required
to do so and may issue preferred shares or notes without any rating. If rated, the Fund does not impose any minimum rating necessary
to issue such preferred shares or notes. In order to obtain and maintain attractive credit quality ratings for preferred shares
or borrowings, if desired, the Fund’s portfolio must satisfy over-collateralization tests established by the relevant rating
agencies. These tests are more difficult to satisfy to the extent the Fund’s portfolio securities are of lower credit quality,
longer maturity or not diversified by issuer and industry. These guidelines could affect portfolio decisions and may be more stringent
than those imposed by the 1940 Act. With respect to ratings (if any) of the notes or preferred shares, a rating by a ratings agency
does not eliminate or necessarily mitigate the risks of investing in our preferred shares or notes, and a rating may not fully
or accurately reflect all of the securities’ credit risks. A rating does not address the liquidity or any other market risks
of the securities being rated. A rating agency could downgrade the rating of our notes or preferred shares, which may make such
securities less liquid in the secondary market. If a rating agency downgrades the rating assigned to our preferred shares or notes,
we may alter our portfolio or redeem the preferred shares or notes under certain circumstances.
Special
Risks of Notes to Holders of Preferred Shares
As
provided in the 1940 Act, and subject to compliance with the Fund’s investment limitations, the Fund may issue notes. In
the event the Fund were to issue such securities, the Fund’s obligations to pay dividends or make distributions and, upon
liquidation of the Fund, liquidation payments in respect of its preferred shares would be subordinate to the Fund’s obligations
to make any principal and interest payments due and owing with respect to its outstanding notes. Accordingly, the Fund’s
issuance of notes would have the effect of creating special risks for the Fund’s preferred shareholders that would not be
present in a capital structure that did not include such securities.
Special
Risks to Holders of Common Shares
Dilution
Risk. If the Fund determines to conduct a rights offering to subscribe for common shares, holders of common shares
may experience dilution or accretion of the aggregate net asset value of their common shares. Such dilution or accretion will
depend upon whether (i) such shareholders participate in the rights offering and (ii) the Fund’s net asset value per
common share is above or below the subscription price on the expiration date of the rights offering.
Shareholders
who do not exercise their subscription rights may, at the completion of such an offering, own a smaller proportional interest
in the Fund than if they exercised their subscription rights. As a result of such an offering, a shareholder may experience dilution
in net asset value per share if the subscription price per share is below the net asset value per share on the expiration date.
If the subscription price per share is below the net asset value per share of the Fund’s shares on the expiration date,
a shareholder will experience an immediate dilution of the aggregate net asset value of such shareholder’s shares if the
shareholder does not participate in such an offering and the shareholder will experience a reduction in the net asset value per
share of such shareholder’s shares whether or not the shareholder participates in such an offering. The Fund cannot state
precisely the extent of this dilution (if any) if the shareholder does not exercise such shareholder’s subscription rights
because the Fund does not know what the net asset value per share will be when the offer expires or what proportion of the subscription
rights will be exercised.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
There
is also a risk that the Fund’s largest shareholders, record date shareholders of more than 5% of the outstanding shares
of common stock of the Fund, may increase their percentage ownership of the Fund through the exercise of the primary subscription
and over-subscription privilege.
Leverage
Risk. The Fund currently uses financial leverage for investment purposes by issuing preferred shares and is also permitted
to use other types of financial leverage, such as through the issuance of debt securities or additional preferred shares and borrowing
from financial institutions. As provided in the 1940 Act and subject to certain exceptions, the Fund may issue additional senior
securities (which may be stock, such as preferred shares, and/or securities representing debt) only if immediately after such
issuance the value of the Fund’s total assets, less certain ordinary course liabilities, exceeds 300% of the amount of the
debt outstanding and exceeds 200% of the amount of preferred shares and debt outstanding. As of December 31, 2022, the amount
of leverage represented approximately 16% of the Fund’s assets.
The
Fund’s leveraged capital structure creates special risks not associated with unleveraged funds having a similar investment
objective and policies. These include the possibility of greater loss and the likelihood of higher volatility of the net asset
value of the Fund and the asset coverage for the preferred shares. Such volatility may increase the likelihood of the Fund having
to sell investments in order to meet its obligations to make distributions on the preferred shares or principal or interest payments
on debt securities, or to redeem preferred shares or repay debt, when it may be disadvantageous to do so. The Fund’s use
of leverage may require it to sell portfolio investments at inopportune times in order to raise cash to redeem preferred shares
or otherwise de-leverage so as to maintain required asset coverage amounts or comply with the mandatory redemption terms of any
outstanding preferred shares. The use of leverage magnifies both the favorable and unfavorable effects of price movements in the
investments made by the Fund. To the extent that the Fund employs leverage in its investment operations, the Fund is subject to
substantial risk of loss. The Fund cannot assure you that borrowings or the issuance of preferred shares will result in a higher
yield or return to the holders of the common shares. Also, since the Fund utilizes leverage, a decline in net asset value could
affect the ability of the Fund to make common share distributions and such a failure to make distributions could result in the
Fund ceasing to qualify as a RIC under the Code.
Any
decline in the net asset value of the Fund’s investments would be borne entirely by the holders of common shares. Therefore,
if the market value of the Fund’s portfolio declines, the leverage will result in a greater decrease in net asset value
to the holders of common shares than if the Fund were not leveraged. This greater net asset value decrease will also tend to cause
a greater decline in the market price for the common shares. The Fund might be in danger of failing to maintain the required asset
coverage of its borrowings, notes or preferred shares or of losing its ratings on its notes or preferred shares or notes or, in
an extreme case, the Fund’s current investment income might not be sufficient to meet the distribution or interest requirements
on the borrowings, preferred shares or notes. In order to counteract such an event, the Fund might need to liquidate investments
in order to fund a redemption or repayment of some or all of the borrowings, preferred shares or notes.
Preferred
Share and Note Risk. The issuance of preferred shares or notes causes the net asset value and market value of the common
shares to become more volatile. If the dividend rate on the preferred shares or the interest rate on the notes approaches the
net rate of return on the Fund’s investment portfolio, the benefit of leverage to the holders of the common shares would
be reduced. If the dividend rate on the preferred shares
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
or
the interest rate on the notes plus the management fee rate of 1.00% exceeds the net rate of return on the Fund’s portfolio,
the leverage will result in a lower rate of return to the holders of common shares than if the Fund had not issued preferred shares
or notes. If the Fund has insufficient investment income and gains, all or a portion of the distributions to preferred shareholders
or interest payments to note holders would come from the common shareholders’ capital. Such distributions and interest payments
reduce the net assets attributable to common shareholders and do not reduce the principal due to noteholders on maturity or the
liquidation preference to which preferred shareholders are entitled. The Prospectus Supplement relating to any sale of preferred
shares will set forth dividend rate on such preferred shares.
In
addition, the Fund would pay (and the holders of common shares will bear) all costs and expenses relating to the issuance and
ongoing maintenance of the preferred shares or notes, including the advisory fees on the incremental assets attributable to the
preferred shares or notes.
Holders
of preferred shares and notes may have different interests than holders of common shares and may at times have disproportionate
influence over the Fund’s affairs. As provided in the 1940 Act and subject to certain exceptions, the Fund may issue senior
securities (which may be stock, such as preferred shares, and/or securities representing debt, such as notes) only if immediately
after the issuance the value of the Fund’s total assets, less certain ordinary course liabilities, exceeds 300% of the amount
of the debt outstanding (i.e., for every dollar of indebtedness outstanding, the Fund is required to have at least three dollars
of assets) and exceeds 200% of the amount of preferred shares and debt outstanding (i.e., for every dollar in liquidation preference
of preferred stock outstanding, the Fund is required to have two dollars of assets), which is referred to as the “asset
coverage” required by the 1940 Act. In the event the Fund fails to maintain an asset coverage of 100% for any notes outstanding
for certain periods of time, the 1940 Act requires that either an event of default be declared or that the holders of such notes
have the right to elect a majority of the Fund’s Directors until asset coverage recovers to 110%. In addition, holders of
preferred shares, voting separately as a single class, have the right (subject to the rights of noteholders) to elect two members
of the Board at all times and in the event dividends become two full years in arrears would have the right to elect a majority
of the Directors until such arrearage is completely eliminated. In addition, preferred shareholders have class voting rights on
certain matters, including changes in fundamental investment restrictions and conversion of the Fund to open-end status, and accordingly
can veto any such changes. Further, interest on notes will be payable when due as described in a Prospectus Supplement and if
the Fund does not pay interest when due, it will trigger an event of default and the Fund expects to be restricted from declaring
dividends and making other distributions with respect to common shares and preferred shares. Upon the occurrence and continuance
of an event of default, the holders of a majority in principal amount of a series of outstanding notes or the trustee will be
able to declare the principal amount of that series of notes immediately due and payable upon written notice to the Fund. The
1940 Act also generally restricts the Fund from declaring distributions on, or repurchasing, common or preferred shares unless
notes have an asset coverage of 300% (200% in the case of declaring distributions on preferred shares). The Fund’s common
shares are structurally subordinated as to income and residual value to any preferred shares or notes in the Fund’s capital
structure, in terms of priority to income and payment in liquidation.
Restrictions
imposed on the declarations and payment of dividends or other distributions to the holders of the Fund’s common shares and
preferred shares, both by the 1940 Act and by requirements imposed by rating agencies, might impair the Fund’s ability to
maintain its qualification as a RIC for U.S. federal income tax
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
purposes.
While the Fund intends to redeem its preferred shares or notes to the extent necessary to enable the Fund to distribute its income
as required to maintain its qualification as a RIC under the Code, there can be no assurance that such actions can be effected
in time to meet the Code requirements.
Portfolio
Guidelines of Rating Agencies for Preferred Shares and/or Credit Facility. In order to obtain and maintain attractive
credit quality ratings for preferred shares or borrowings, the Fund must comply with investment quality, diversification and other
guidelines established by the relevant rating agencies. These guidelines could affect portfolio decisions and may be more stringent
than those imposed by the 1940 Act. In the event that a rating on the Fund’s preferred shares or notes is lowered or withdrawn
by the relevant rating agency, the Fund may also be required to redeem all or part of its outstanding preferred shares or notes,
and the common shares of the Fund will lose the potential benefits associated with a leveraged capital structure.
Impact
on Common Shares. Assuming that leverage will (1) be equal in amount to approximately 16% of the Fund’s total net
assets (the Fund’s amount of outstanding financial leverage as of December 31, 2022), and (2) charge interest or involve
dividend payments at a projected blended annual average leverage dividend or interest rate of 5.20%, (the average dividend rate
on the Fund’s outstanding financial leverage as of December 31, 2022) then the total return generated by the Fund’s
portfolio (net of estimated expenses) must exceed approximately 0.82% of the Fund’s total net assets in order to cover such
interest or dividend payments and other expenses specifically related to leverage. Of course, these numbers are merely estimates,
used for illustration. Actual dividend rates, interest or payment rates may vary frequently and may be significantly higher or
lower than the rate estimated above. The following table is furnished in response to requirements of the SEC. It is designed to
illustrate the effect of leverage on common share total return, assuming investment portfolio total returns (comprised of net
investment income of the Fund, realized gains or losses of the Fund and changes in the value of the securities held in the Fund’s
portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily
indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. The table further reflects
leverage representing 16% of the Fund’s net assets (the Fund’s amount of outstanding financial leverage as of December
31, 2022), the Fund’s current projected blended annual average leverage dividend or interest rate of 5.20% (the average
dividend rate on the Fund’s outstanding financial leverage as of December 31, 2022), a base management fee at an annual
rate of 1.00% of the liquidation preference of any outstanding preferred shares and estimated annual incremental expenses attributable
to any outstanding preferred shares of 0.01% of the Fund’s net assets attributable to common shares.
| Assumed
Return on Portfolio (Net of Expenses) |
(10)% |
(5)% |
0% |
5% |
10% |
| Corresponding
Return to Common Shareholder |
(13.03)% |
(7.09)% |
(1.16)% |
4.78% |
10.71% |
Common
share total return is composed of two elements—the common share distributions paid by the Fund (the amount of which is largely
determined by the taxable income of the Fund (including realized gains or losses) after paying interest on any debt and/or dividends
on any preferred shares) and unrealized gains or losses on the value of the securities the Fund owns. As required by SEC rules,
the table assumes that the Fund is more likely to suffer capital losses than to enjoy total return. For example, to assume a total
return of 0% the
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Fund
must assume that the income it receives on its investments is entirely offset by expenses and losses in the value of those investments.
Market
Discount Risk. As described above in “—General Risks—Market Discount Risk,” common shares of closed-end
funds often trade at a discount to their net asset values and the Fund’s common shares may trade at such a discount. This
risk may be greater for investors expecting to sell their common shares of the Fund soon after completion of a public offering.
The common shares of the Fund are de-signed primarily for long-term investors and investors in the shares should not view the
Fund as a vehicle for trading purposes.
Special
Risk to Holders of Subscription Rights
There
is a risk that changes in market conditions may result in the underlying common or preferred shares purchasable upon exercise
of the subscription rights being less attractive to investors at the conclusion of the subscription period. This may reduce or
eliminate the value of the subscription rights. Investors who receive subscription rights may find that there is no market to
sell rights they do not wish to exercise. If investors exercise only a portion of the rights, the number of common or preferred
shares issued may be reduced, and the common or preferred shares may trade at less favorable prices than larger offerings for
similar securities.
INVESTMENT
POLICIES
Additional
Investment Policies
Unregistered
Convertible Securities and Other Illiquid Investments. As set forth in the Prospectus, the Fund is not subject to an independent
limitation on the amount it may invest in unregistered securities and other illiquid investments, including repurchase agreements
having a maturity of longer than seven days.
The
staff of the SEC has taken the position that purchased OTC options and the assets used as “cover” for written OTC
options are illiquid. The assets used as cover for OTC options written by the Fund will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Fund may repurchase any OTC option it writes at a maximum price to be
calculated by a formula set forth in the option agreement. The cover for an OTC option written subject to this procedure will
be considered illiquid only to the extent that the maximum repurchase price under the option formula exceeds the intrinsic value
of the option.
When
Issued and Delayed Delivery Securities and Forward Commitments. As discussed in the Prospectus, the Fund may purchase
securities on a “when, as and if issued” basis under which the issuance of the security depends upon the occurrence
of a subsequent event, such as approval of a merger, corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until the Investment Adviser determines that issuance
of the security is probable. At such time, the Fund will record the transaction and, in determining its net asset value, will
reflect the value of the security daily. The Investment Adviser does not believe that the net asset value of the Fund will be
adversely affected by its purchase of securities on this basis.
Foreign
Securities. Subject to the limitations described in this Annual Report, the Fund may invest in securities of non-U.S.
issuers, which involve certain risks not associated with domestic investments.
Among
other risks, foreign markets have different clearance and settlement procedures, and in certain markets there have been times
when settlements have failed to keep pace with the volume of securities transactions,
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
making
it difficult to conduct such transactions. Delays in settlements could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make intended security purchases due to settlement problems
could cause the Fund to miss attractive investment opportunities. Inability to dispose of a portfolio security due to settlement
problems could result either in losses to the Fund due to subsequent declines in the value of such portfolio security or, if the
Fund has entered into a contract to sell the security, could result in possible liability to the purchaser.
Frontier
Markets Risk. Frontier countries generally have smaller economies or less developed capital markets than traditional emerging
markets, and, as a result, the risks of investing in emerging market countries are magnified in frontier countries. The economies
of frontier countries are less correlated to global economic cycles than those of their more developed counterparts and their
markets have low trading volumes and the potential for extreme price volatility and illiquidity. This volatility may be further
heightened by the actions of a few major investors. For example, a substantial increase or decrease in the cash flows of mutual
funds investing in these markets could significantly affect local stock prices and, therefore, the NAV of Fund’s common
stock. These factors make investing in frontier countries significantly riskier than in other countries and any one of them could
cause the NAV of the Fund’s shares to decline.
Governments
of many frontier countries in which the Fund may invest may exercise substantial influence over many aspects of the private sector.
In some cases, the governments of such frontier countries may own or control certain companies. Accordingly, government actions
could have a significant effect on economic conditions in a frontier country and on market conditions, prices and yields of securities
in the Fund’s portfolio. Moreover, the economies of frontier countries may be heavily dependent upon international trade
and, accordingly, have been and may continue to be, adversely affected by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade.
Options.
The Fund may purchase or write call or put options on securities or indices. In the case of call options, the exercise
prices are referred to as “in-the-money,” “at-the-money,” and “out-of-the-money,” respectively.
The Fund may write (a) in-the-money call options when Gabelli Funds, LLC (the “Investment Adviser”) expects that the
price of the underlying security will remain stable or decline during the option period, (b) at-the-money call options when the
Investment Adviser expects that the price of the underlying security will remain stable, decline, or advance moderately during
the option period, and (c) out-of-the-money call options when the Investment Adviser expects that the premiums received from writing
the call option will be greater than the appreciation in the price of the underlying security above the exercise price. By writing
a call option, the Fund limits its opportunity to profit from any increase in the market value of the underlying security above
the exercise price of the option. Out-of-the-money, at-the-money, and in-the-money put options (the reverse of call options as
to the relation of exercise price to market price) may be utilized in the same market environments that such call options are
used in equivalent transactions.
Options
on Securities Indices. The Fund may purchase and sell securities index options. One effect of such transactions may be
to hedge all or part of the Fund’s securities holdings against a general decline in the securities market or a segment of
the securities market. Options on securities indices are similar to options on stocks except that, rather than the right to take
or make delivery of stock at a specified price, an option on
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
a
securities index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the case of a call option, or less than, in the case of
a put option, the exercise price of the option.
The
Fund’s successful use of options on indices depends upon its ability to predict the direction of the market and is subject
to various additional risks. The correlation between movements in the index and the price of the securities being hedged against
is imperfect and the risk from imperfect correlation increases as the composition of the Fund diverges from the composition of
the relevant index. Accordingly, a decrease in the value of the securities being hedged against may not be wholly offset by a
gain on the exercise or sale of a securities index put option held by the Fund.
Options
on Foreign Currencies. Instead of purchasing or selling currency futures (as described below), the Fund may attempt to
accomplish similar objectives by purchasing put or call options on currencies or by writing put options or call options on currencies
either on exchanges or in OTC markets. A put option gives the Fund the right to sell a currency at the exercise price until the
option expires. A call option gives the Fund the right to purchase a currency at the exercise price until the option expires.
Both types of options serve to insure against adverse currency price movements in the underlying portfolio assets designated in
a given currency. The Fund’s use of options on currencies will be subject to the same limitations as its use of options
on securities, described above and in the Prospectus. Currency options may be subject to position limits which may limit the ability
of the Fund to fully hedge its positions by purchasing the options.
As
in the case of interest rate futures contracts and options thereon, described below, the Fund may hedge against the risk of a
decrease or increase in the U.S. dollar value of a foreign currency denominated debt security which the Fund owns or intends to
acquire by purchasing or selling options contracts, futures contracts or options thereon with respect to a foreign currency other
than the foreign currency in which such debt security is denominated, where the values of such different currencies (vis-à-vis
the U.S. dollar) historically have a high degree of positive correlation.
Futures
Contracts and Options on Futures. The Fund may purchase and sell financial futures contracts and options thereon which
are traded on a commodities exchange or board of trade for certain hedging and risk management purposes. A financial futures contract
is an agreement to purchase or sell an agreed amount of securities or currencies at a set price for delivery in the future. These
futures contracts and related options may be on debt securities, financial indices, securities indices, U.S. government securities
and foreign currencies.
A
“sale” of a futures contract (or a “short” futures position) means the assumption of a contractual obligation
to deliver the securities underlying the contract at a specified price at a specified future time. A “purchase” of
a futures contract (or a “long” futures position) means the assumption of a contractual obligation to acquire the
securities underlying the contract at a specified price at a specified future time. Certain futures contracts, including stock
and bond index futures, are settled on a net cash payment basis rather than by the sale and delivery of the securities underlying
the futures contracts.
No
consideration will be paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the Fund will be
required to deposit with the broker an amount of cash or cash equivalents equal to approximately 1% to 10% of the contract amount
(this amount is subject to change by the exchange or board of trade on which the contract is traded and brokers or members of
such board of trade may charge a higher amount). This
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
amount
is known as the “initial margin” and is in the nature of a performance bond or good faith deposit on the contract.
Subsequent payments, known as “variation margin,” to and from the broker will be made daily as the price of the index
or security underlying the futures contract fluctuates. At any time prior to the expiration of the futures contract, the Fund
may elect to close the position by taking an opposite position, which will operate to terminate its existing position in the contract.
An
option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time prior to the expiration of the option. Upon exercise of an option, the delivery
of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated
balance in the writer’s futures margin account attributable to that contract, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call option, or is less than, in the case of a put option, the exercise
price of the option on the futures contract. The potential loss related to the purchase of an option on a futures contract is
limited to the premium paid for the option (plus transaction costs). Because the value of the option purchased is fixed at the
point of sale, there are no daily cash payments by the purchaser to reflect changes in the value of the underlying contract; however,
the value of the option does change daily and that change would be reflected in the net assets of the Fund.
Futures
and options on futures entail certain risks, including, but not limited to, the following: no assurance that futures contracts
or options on futures can be offset at favorable prices, possible reduction of the yield of the Fund due to the use of hedging,
possible reduction in value of both the securities hedged and the hedging instrument, possible lack of liquidity due to daily
limits on price fluctuations, imperfect correlation between the contracts and the securities being hedged and losses from investing
in futures transactions that are potentially unlimited.
Contingent
Convertible Securities. One type of convertible security in which the Fund may invest is contingent convertible securities,
sometimes referred to as “CoCos.” CoCos are a form of hybrid debt security issued by banking institutions that are
intended to either automatically convert into equity or have their principal written down upon the occurrence of certain “trigger
events,” which may include a decline in the issuer’s capital below a specified threshold level, increase in the issuer’s
risk weighted assets, the share price of the issuer falling to a particular level for a certain period of time and certain regulatory
events. CoCos’ unique equity conversion or principal write-down features are tailored to the issuing banking institution
and its regulatory requirements.
CoCos
are a newer form of instrument and the regulatory environment for these instruments continues to evolve. Because the market for
such securities is evolving, it is uncertain how the larger market for CoCos would react to a trigger event, coupon cancellation,
write-down of par value or coupon suspension (as described below) applicable to a single issuer. Following conversion of a CoCo,
because the common stock of the issuer may not pay a dividend, investors in such securities could experience reduced yields or
no yields at all.
Loss
Absorption Risk. CoCos have fully discretionary coupons. This means coupons can potentially be cancelled at the banking institution’s
discretion or at the request of the relevant regulatory authority in order to help the bank absorb losses. The liquidation value
of a CoCo may be adjusted downward to below the original par value or written off entirely under certain circumstances. The write-down
of the security’s par value may occur automatically and would not entitle holders to institute bankruptcy proceedings against
the issuer. In addition, an automatic write-down could result in a reduced income rate if the dividend or interest payment associated
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
with
the security is based on the security’s par value. Coupon payments may also be subject to approval by the issuer’s
regulator and may be suspended in the event there are insufficient distributable reserves. Due to uncertainty surrounding coupon
payments, CoCos may be volatile and their price may decline rapidly in the event that coupon payments are suspended.
Subordinated
Instruments. CoCos will, in the majority of circumstances, be issued in the form of subordinated debt instruments in order
to provide the appropriate regulatory capital treatment prior to a conversion. Accordingly, in the event of liquidation, dissolution
or winding-up of an issuer prior to a conversion having occurred, the rights and claims of the holders of the CoCos, such as the
Fund, against the issuer in respect of or arising under the terms of the CoCos shall generally rank junior to the claims of all
holders of unsubordinated obligations of the issuer. In addition, if the CoCos are converted into the issuer’s underlying
equity securities following a conversion event (i.e., a “trigger”), each holder will be subordinated due to their
conversion from being the holder of a debt instrument to being the holder of an equity instrument. Such conversion may be automatic.
Unpredictable
Market Value Fluctuate. The value of CoCos is unpredictable and will be influenced by many factors including, without limitation:
(i) the creditworthiness of the issuer and/or fluctuations in such issuer’s applicable capital ratios; (ii) supply and demand
for the CoCos; (iii) general market conditions and available liquidity; and (iv) economic, financial and political events that
affect the issuer, its particular market or the financial markets in general.
Interest
Rate Futures Contracts and Options Thereon. The Fund may purchase or sell interest rate futures contracts to take advantage
of or to protect the Fund against fluctuations in interest rates affecting the value of debt securities which the Fund holds or
intends to acquire. For example, if interest rates are expected to increase, the Fund might sell futures contracts on debt securities,
the values of which historically have a high degree of positive correlation to the values of the Fund’s portfolio securities.
Such a sale would have an effect similar to selling an equivalent value of the Fund’s portfolio securities. If interest
rates increase, the value of the Fund’s portfolio securities will decline, but the value of the futures contracts to the
Fund will increase at approximately an equivalent rate thereby keeping the net asset value of the Fund from declining as much
as it otherwise would have. The Fund could accomplish similar results by selling debt securities with longer maturities and investing
in debt securities with shorter maturities when interest rates are expected to increase. However, since the futures market may
be more liquid than the cash market, the use of futures contracts as a risk management technique allows the Fund to maintain a
defensive position without having to sell its portfolio securities.
Similarly,
the Fund may purchase interest rate futures contracts when it is expected that interest rates may decline. The purchase of futures
contracts for this purpose constitutes a hedge against increases in the price of debt securities (caused by declining interest
rates) which the Fund intends to acquire. Since fluctuations in the value of appropriately selected futures contracts should approximate
that of the debt securities that will be purchased, the Fund can take advantage of the anticipated rise in the cost of the debt
securities without actually buying them. Subsequently, the Fund can make its intended purchase of the debt securities in the cash
market and liquidate its futures position.
The
purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
than
ownership of the futures contract or underlying debt securities. As with the purchase of futures contracts, when the Fund is not
fully invested it may purchase a call option on a futures contract to hedge against a market advance due to declining interest
rates.
The
purchase of a put option on a futures contract is similar to the purchase of protective put options on portfolio securities. The
Fund will purchase a put option on a futures contract to hedge the Fund’s portfolio against the risk of rising interest
rates and a consequent reduction in the value of portfolio securities.
The
writing of a call option on a futures contract constitutes a partial hedge against declining prices of the securities which are
deliverable upon exercise of the futures contract. If the futures price at expiration of the option is below the exercise price,
the Fund will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred
in the Fund’s portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against
increasing prices of the securities that are deliverable upon exercise of the futures contract. If the futures price at expiration
of the option is higher than the exercise price, the Fund will retain the full amount of the option premium, which provides a
partial hedge against any increase in the price of debt securities that the Fund intends to purchase. If a put or call option
the Fund has written is exercised, the Fund will incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its
futures positions, the Fund’s losses from options on futures it has written may to some extent be reduced or increased by
changes in the value of its portfolio securities.
Currency
Futures and Options Thereon. Generally, foreign currency futures contracts and options thereon are similar to the interest
rate futures contracts and options thereon discussed previously. By entering into currency futures and options thereon, the Fund
will seek to establish the rate at which it will be entitled to exchange U.S. dollars for another currency at a future time. By
selling currency futures, the Fund will seek to establish the number of dollars it will receive at delivery for a certain amount
of a foreign currency. In this way, whenever the Fund anticipates a decline in the value of a foreign currency against the U.S.
dollar, the Fund can attempt to “lock in” the U.S. dollar value of some or all of the securities held in its portfolio
that are denominated in that currency. By purchasing currency futures, the Fund can establish the number of dollars it will be
required to pay for a specified amount of a foreign currency in a future month. Thus, if the Fund intends to buy securities in
the future and expects the U.S. dollar to decline against the relevant foreign currency during the period before the purchase
is effected, the Fund can attempt to “lock in” the price in U.S. dollars of the securities it intends to acquire.
The
purchase of options on currency futures will allow the Fund, for the price of the premium and related transaction costs it must
pay for the option, to decide whether or not to buy (in the case of a call option) or to sell (in the case of a put option) a
futures contract at a specified price at any time during the period before the option expires. If the Investment Adviser, in purchasing
an option, has been correct in its judgment concerning the direction in which the price of a foreign currency would move against
the U.S. dollar, the Fund may exercise the option and thereby take a futures position to hedge against the risk it had correctly
anticipated or close out the option position at a gain that will offset, to some extent, currency exchange losses otherwise suffered
by the Fund. If exchange rates move in a way the Fund did not anticipate, however, the Fund will have incurred the expense of
the option without obtaining the expected benefit; any such movement in exchange rates may also thereby reduce rather than enhance
the Fund’s profits on its underlying securities transactions.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
Securities
Index Futures Contracts and Options Thereon. Purchases or sales of securities index futures contracts are used for hedging
purposes to attempt to protect the Fund’s current or intended investments from broad fluctuations in stock or bond prices.
For example, the Fund may sell securities index futures contracts in anticipation of or during a market decline to attempt to
offset the decrease in market value of the Fund’s securities portfolio that might otherwise result. If such decline occurs,
the loss in value of portfolio securities may be offset, in whole or part, by gains on the futures position. When the Fund is
not fully invested in the securities market and anticipates a significant market advance, it may purchase securities index futures
contracts in order to gain rapid market exposure that may, in part or entirely, offset increases in the cost of securities that
the Fund intends to purchase. As such purchases are made, the corresponding positions in securities index futures contracts will
be closed out. The Fund may write put and call options on securities index futures contracts for hedging purposes.
Loans
of Portfolio Securities. Consistent with applicable regulatory requirements and the Fund’s investment restrictions,
the Fund may lend its portfolio securities to securities broker-dealers or financial institutions, provided that such loans are
callable at any time by the Fund (subject to notice provisions described below), and are at all times collateralized by cash or
cash equivalents, which are to be maintained at all times in an amount equal to at least 100% of the market value, determined
daily, of the loaned securities. The advantage of such loans is that the Fund continues to receive the income on the loaned securities
while at the same time earning interest on the cash amounts deposited as collateral, which will be invested in short-term highly
liquid obligations. The Fund will not lend its portfolio securities if such loans are not permitted by the laws or regulations
of any state in which its shares are qualified for sale. The Fund’s loans of portfolio securities will be collateralized
in accordance with applicable regulatory requirements, which means that “cash equivalents” accepted as collateral
will be limited to securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities or irrevocable
letters of credit issued by a bank (other than the Fund’s bank lending agent, if any, or a borrower of the Fund’s
portfolio securities or any affiliate of such bank or borrower) which qualifies as a custodian bank for an investment company
under the 1940 Act, and no loan will cause the value of all loaned securities to exceed 20% of the value of the Fund’s total
assets. The Fund’s ability to lend portfolio securities may be limited by rating agency guidelines (if any).
A
loan may generally be terminated by the borrower on one business day’s notice, or by the Fund at any time thereby requiring
the borrower to redeliver the borrowed securities within the normal and customary settlement time for securities transactions.
If the borrower fails to deliver the loaned securities within the normal and customary settlement time for securities transactions,
the Fund could use the collateral to replace the securities while holding the borrower liable for any excess of replacement cost
over the value of the collateral pledged by the borrower. As with any extensions of credit, there are risks of delay in recovery
and in some cases even loss of rights in the collateral should the borrower of the securities violate the terms of the loan or
fail financially.
However,
these loans of portfolio securities will only be made to firms deemed by the Investment Adviser to be creditworthy and when the
income which can be earned from such loans justifies the attendant risks. The Board will oversee the creditworthiness of the contracting
parties on an ongoing basis. Upon termination of the loan, the borrower is required to return the securities to the Fund. Any
gain or loss in the market price during the loan period would inure to the Fund.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
The
risks associated with loans of portfolio securities are substantially similar to those associated with repurchase agreements.
Thus, if the counter party to the loan petitions for bankruptcy or becomes subject to the United States Bankruptcy Code, the law
regarding the rights of the Fund is unsettled. As a result, under extreme circumstances, there may be a restriction on the Fund’s
ability to sell the collateral and the Fund would suffer a loss. Moreover, because the Fund will reinvest any cash collateral
it receives, as described above, the Fund is subject to the risk that the value of the investments it makes will decline and result
in losses to the Fund. These losses, in extreme circumstances such as the 2007-2009 financial crisis, could be substantial and
have a significant adverse impact on the Fund and its shareholders.
When
voting or consent rights which accompany loaned securities pass to the borrower, the Fund will follow the policy of calling the
loaned securities, to be delivered within one day after notice, to permit the exercise of such rights if the matters involved
would have a material effect on the Fund’s investment in such loaned securities. The Fund will pay reasonable finder’s,
administrative and custodial fees in connection with a loan of its securities, and may also pay fees to one or more securities
lending agents and/or pay other fees or rebates to borrowers.
Additional
Risks of Foreign Options, Futures Contracts, Options on Futures Contracts and Forward Contracts. Options, futures
contracts and options thereon and forward contracts on securities and currencies may be traded on foreign exchanges. Such
transactions may not be regulated as effectively as similar transactions in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental actions affecting trading in, or the prices of,
foreign securities. The value of such positions also could be adversely affected by (i) other complex foreign political,
legal and economic factors, (ii) lesser availability than in the U.S. of data on which to make trading decisions, (iii)
delays in the Fund’s ability to act upon economic events occurring in the foreign markets during non-business hours in
the United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than
in the United States and (v) lesser trading volume.
Exchanges
on which options, futures and options on futures are traded may impose limits on the positions that the Fund may take in certain
circumstances.
Repurchase
Agreements. The Fund may enter into repurchase agreements as set forth in the Prospectus. A repurchase agreement is an
instrument under which the purchaser, i.e., the Fund, acquires a debt security and the seller agrees, at the time of the sale,
to repurchase the obligation at a mutually agreed-upon time and price, thereby determining the yield during the purchaser’s
holding period. This results in a fixed rate of return insulated from market fluctuations during such period. The underlying securities
are ordinarily U.S. Treasury or other government obligations or high quality money market instruments. The Fund will require that
the value of such underlying securities, together with any other collateral held by the Fund, always equals or exceeds the amount
of the repurchase obligations of the counter party. The Fund’s risk is primarily that, if the seller defaults, the proceeds
from the disposition of the underlying securities and other collateral for the seller’s obligation are less than the repurchase
price. If the seller becomes insolvent, the Fund might be delayed in or prevented from selling the collateral. In the event of
a default or bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral. To the extent that the proceeds
from any sale of such collateral upon a default in the obligation to repurchase are less than the repurchase price, the Fund will
experience a loss.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
If
the financial institution which is a party to the repurchase agreement petitions for bankruptcy or becomes subject to the United
States Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a result, under extreme circumstances, there
may be a restriction on the Fund’s ability to sell the collateral and the Fund would suffer a loss.
Additional
Risk Relating to Derivative Investments
Special
Risk Considerations Relating to Futures and Options Thereon. The Fund’s ability to establish and close out positions
in futures contracts and options thereon will be subject to the development and maintenance of liquid markets. Although the Fund
generally will purchase or sell only those futures contracts and options thereon for which there appears to be a liquid market,
there is no assurance that a liquid market on an exchange will exist for any particular futures contract or option thereon at
any particular time. In the event no liquid market exists for a particular futures contract or option thereon in which the Fund
maintains a position, it will not be possible to effect a closing transaction in that contract or to do so at a satisfactory price
and the Fund would have to either make or take delivery under the futures contract or, in the case of a written option, wait to
sell the underlying securities until the option expires or is exercised or, in the case of a purchased option, exercise the option.
In the case of a futures contract or an option thereon which the Fund has written and which the Fund is unable to close, the Fund
would be required to maintain margin deposits on the futures contract or option thereon and to make variation margin payments
until the contract is closed.
Successful
use of futures contracts and options thereon and forward contracts by the Fund is subject to the ability of the Investment Adviser
to predict correctly movements in the direction of interest and foreign currency rates. If the Investment Adviser’s expectations
are not met, the Fund will be in a worse position than if a hedging strategy had not been pursued. For example, if the Fund has
hedged against the possibility of an increase in interest rates that would adversely affect the price of securities in its portfolio
and the price of such securities increases instead, the Fund will lose part or all of the benefit of the increased value of its
securities because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient
cash to meet daily variation margin requirements, it may have to sell securities to meet the requirements. These sales may be,
but will not necessarily be, at increased prices which reflect the rising market. The Fund may have to sell securities at a time
when it is disadvantageous to do so.
INVESTMENT
RESTRICTIONS
Fundamental
Restrictions and Policies
The
Fund operates under the following restrictions that constitute fundamental policies under the 1940 Act and that, except as otherwise
noted, cannot be changed without the affirmative vote of the holders of a majority of the outstanding voting securities of the
Fund voting together as a single class (which for this purpose and under the 1940 Act means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding
shares). In addition, pursuant to the Fund’s Series G Preferred Articles Supplementary, the affirmative vote of the holders
of a majority of the outstanding preferred shares of the Fund voting as a separate class (which for this purpose and under the
1940 Act means the lesser of (i) 67% of the preferred shares, as a single class, represented at a meeting at which more than 50%
of the Fund’s outstanding preferred shares are represented or (ii) more than 50% of the outstanding preferred shares), is
also required to change a fundamental policy. Except as otherwise noted,
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
all
percentage limitations set forth below apply immediately after a purchase or initial investment and any subsequent change in any
applicable percentage resulting from market fluctuations does not require any action. The Fund may not:
| ● | purchase
the securities of any one issuer, other than the United States government or any of its
agencies or instrumentalities, if immediately after such purchase more than 5% of the
value of its total assets would be invested in such issuer or the Fund would own more
than 10% of the outstanding voting securities of such issuer, except that up to 25%
of the value of the Fund’s total assets may be invested without regard to such
5% and 10% limitations; |
| ● | purchase
or otherwise acquire real estate or interests therein, although the Fund may purchase
securities of issuers which engage in real estate operations and securities secured
by real estate or interests therein; |
| ● | purchase
or otherwise acquire or sell commodities or commodity contracts except that the Fund
may purchase or sell financial futures contracts and related options thereon; |
| ● | purchase
oil, gas or other mineral leases, rights or royalty contracts, or exploration or development
programs, except that the Fund may invest in the securities of companies which operate,
invest in, or sponsor such programs; |
| ● | purchase
securities of other investment companies, except in connection with a merger, consolidation,
reorganization or acquisition of assets, except that the Fund reserves the right to invest
up to 5% of its total assets in not more than 3% of the securities of any one investment
company including small business investment companies or invest up to 10% of its total
assets in the securities of investment companies, nor make any such investments other
than through purchases in the open market where to the best information of the Fund
no commission or profit to a sponsor or dealer (other than the customary broker’s
commission) results from such purchase; |
| ● | borrow
money, except to the extent permitted by applicable law; |
| ● | issue
senior securities except to the extent permitted by applicable law; |
| ● | make
loans of money or securities, except: (a) that the Fund may engage in repurchase agreements
as set forth in the Prospectus and (b) the Fund may lend its portfolio securities consistent
with applicable regulatory requirements and as set forth in the Prospectus; |
| ● | make
short sales of securities or maintain a short position, unless at all times when a short
position is open, it either owns an equal amount of such securities or owns securities
which, without payment of any further consideration, are convertible into or exchangeable
for securities of the same issue as, and equal in amount to, the securities sold short; |
| ● | engage
in the underwriting of securities, except insofar as the Fund may be deemed an underwriter
under the Securities Act of 1933, as amended, in disposing of a portfolio security; |
| ● | invest
for the purpose of exercising control or management of any other issuer; or |
| ● | invest
more than 25% of the value of its total assets in any one industry. |
If
a percentage restriction is adhered to at the time of investment, a later increase or decrease in percentage resulting from a
change in values of portfolio securities or amount of total or net assets will not be considered a violation of any of the foregoing
restrictions.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
The
Fund may become subject to rating agency guidelines that are more limiting than its current investment restrictions in order to
obtain and maintain a desired rating on its preferred shares, if any.
The
Fund’s investment objective is a fundamental policy. Except as expressly stated above, none of the Fund’s other policies
is fundamental, and each may be modified by the Board without shareholder approval.
The
1940 Act permits the Fund to borrow money in amounts of up to one-third of the Fund’s total assets from banks for any purpose,
and to borrow up to 5% of the Fund’s total assets from banks or other lenders for temporary purposes. The Fund’s total
assets include the amounts being borrowed. To limit the risks attendant to borrowing, the 1940 Act requires the Fund to maintain
at all times an “asset coverage” of at least 300% of the amount of its borrowings. Asset coverage means the ratio
that the value of the Fund’s total assets (including amounts borrowed), minus liabilities other than borrowings, bears to
the aggregate amount of all borrowings. Borrowing money to increase portfolio holdings is known as “leveraging.” The
investment restriction regarding borrowing money, described above, will be interpreted to permit the Fund to (a) engage in securities
lending in accordance with the SEC staff guidance and interpretations and (b) settle securities transactions within the ordinary
settlement cycle for such transactions.
The
1940 Act permits the Fund to issue senior securities (which may be stock, such as preferred shares, and/or securities representing
debt, such as notes) only if immediately after such issuance the value of the Fund’s total assets, less certain ordinary
course liabilities, exceeds 300% of the amount of the debt outstanding and exceeds 200% of the amount of preferred shares (measured
by liquidation value) and debt outstanding, which is referred to as the “asset coverage” required by the 1940 Act.
The 1940 Act also generally restricts the Fund from declaring cash distributions on, or repurchasing, common or preferred shares
unless outstanding debt securities have an asset coverage of 300% (200% in the case of declaring distributions on preferred shares),
or from declaring cash distributions on, or repurchasing, common shares unless preferred shares have an asset coverage of 200%
(in each case, after giving effect to such distribution or repurchase).
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
General
The
Fund’s Board has overall responsibility for the management of the Fund. The Board decides upon matters of general policy
and reviews the actions of the Investment Adviser, Gabelli Funds, LLC, One Corporate Center, Rye, New York 10580-1422, and the
Sub-Administrator (as defined below). Pursuant to an investment advisory agreement with the Fund, the Investment Adviser, under
the supervision of the Fund’s Board, provides a continuous investment program for the Fund’s portfolio; provides investment
research and makes and executes recommendations for the purchase and sale of securities; and provides all facilities and personnel,
including officers required for its administrative management and pays the compensation of all officers and directors of the Fund
who are officers or employees of the Investment Adviser or its affiliates. As compensation for its services rendered and the related
expenses borne by the Investment Adviser, the Fund pays the Investment Adviser a fee, computed daily and payable monthly, equal,
on an annual basis, to 1.00% of the Fund’s average daily net assets including the liquidation value of preferred shares.
Net assets does not include amounts attributable to liabilities constituting indebtedness.
Because
the investment advisory fees are based on a percentage of total assets, which includes assets attributable to the Fund’s
use of leverage and assets from derivative transactions, the Investment Adviser may have a conflict of interest in the input it
provides to the Board regarding whether to use or increase the Fund’s use of leverage and/or derivative transactions. The
Board bases its decision, with input from the Investment Adviser, regarding whether and how much leverage to use for the Fund
on its assessment of whether such use of leverage is in the best interest of the Fund. The Board seeks to manage the Investment
Adviser’s potential conflict of interest by retaining the final decision on these matters and by periodically reviewing
the Fund’s performance and use of leverage.
The
Investment Adviser
The
Investment Adviser is a New York limited liability company which serves as an investment adviser to registered investment companies
with combined aggregate net assets of approximately $18.5 billion as of December 31, 2022. The Investment Adviser is a registered
investment adviser under the Investment Advisers Act of 1940, as amended, and is a wholly owned subsidiary of GAMCO Investors,
Inc. (“GAMI”). Mr. Gabelli owns a majority of the stock of GGCP, Inc. (“GGCP”) which holds a majority
of the capital stock and voting power of GAMI. The Investment Adviser has several affiliates that provide investment advisory
services: GAMCO Asset Management Inc., a wholly owned subsidiary of GAMI, acts as investment adviser for individuals, pension
trusts, profit sharing trusts, and endowments, and as a sub-adviser to certain third-party investment funds, which include registered
investment companies, having assets under management of approximately of $10.7 billion as of December 31, 2022; Teton Advisors,
LLC (previously Teton Advisors, Inc.), and its wholly owned investment adviser, Keeley Teton Advisers, LLC, with assets under
management of approximately $1.4 billion as of December 31, 2022, acts as investment adviser to The TETON Westwood Funds, the
KEELEY Funds, and separately managed accounts; and Gabelli & Company Investment Advisers, Inc. (formerly, Gabelli Securities,
Inc.), a wholly owned subsidiary of Associated Capital Group, Inc. (“Associated Capital”), acts as investment adviser
for certain alternative investment products, consisting primarily of risk arbitrage and merchant banking limited partnerships
and offshore companies, with assets under management of approximately $1.8 billion as of December 31, 2022. Teton Advisors, Inc.,
was spun off by GAMI in March 2009 and is an affiliate of GAMI by virtue of Mr. Gabelli’s ownership of GGCP, the principal
shareholder of Teton Advisors, Inc., as of December 31,
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
2022.
Effective December 31, 2021, Teton Advisors, Inc. completed a reorganization by transferring its entire business operations and
personnel to a new wholly-owned subsidiary, Teton Advisors, LLC. Associated Capital was spun off from GAMI on November 30, 2015,
and is an affiliate of GAMI by virtue of Mr. Gabelli’s ownership of GGCP, the principal shareholder of Associated Capital.
A
discussion regarding the basis for the Fund’s Board approval of the Investment Advisory Agreement with the Investment Adviser
will be available in the Fund’s semiannual report for the period ended June 30, 2022.
Payment
of Expenses
The
Investment Adviser is obligated to pay expenses associated with providing the services contemplated by the Investment Advisory
Agreement including compensation of and office space for its officers and employees connected with investment and economic research,
trading and investment management and administration of the Fund (but excluding costs associated with the calculation of the net
asset value and allocated costs of the chief compliance officer function and officers of the Fund who are employed by the Fund
and are not employed by the Investment Adviser although such officers may receive incentive-based variable compensation from affiliates
of the Investment Adviser), as well as the fees of all Directors of the Fund who are officers or employees of the Investment Adviser
or its affiliates.
In
addition to the fees of the Investment Adviser, the Fund, and indirectly the holders of its common shares, is responsible for
the payment of all its other expenses incurred in the operation of the Fund, which include, among other things, underwriting compensation
and reimbursements in connection with sales of the Fund’s securities, expenses for legal and the Fund’s independent
registered public accounting firm’s services, stock exchange listing fees and expenses, costs of printing proxies, share
certificates and shareholder reports, charges of the Fund’s Custodian, any sub-custodian and any transfer agent and distribution
disbursing agent, expenses in connection with the Automatic Dividend Reinvestment Plan and the Voluntary Cash Purchase Plan, SEC
fees and preparation of filings with the SEC, fees and expenses of Directors who are not officers or employees of the Investment
Adviser or its affiliates, accounting and printing costs, the Fund’s pro rata portion of membership fees in trade organizations,
compensation and other expenses of officers and employees of the Fund (including, but not limited to, the Chief Compliance Officer,
Vice President and Ombudsman) as approved by the Fund’s Directors, fidelity bond coverage for the Fund’s officers
and employees, Directors’ and officers’ errors and omissions insurance coverage, interest, brokerage costs, taxes,
expenses of qualifying the Fund’s shares for sale in various states, expenses of personnel performing shareholder servicing
functions, rating agency fees, organizational expenses, litigation and other extraordinary or non-recurring expenses and other
expenses properly payable by the Fund.
Selection
of Securities Brokers
The
Investment Advisory Agreement contains provisions relating to the selection of securities brokers to effect the portfolio transactions
of the Fund. Under those provisions, the Investment Adviser may (i) direct Fund portfolio brokerage to G.research, LLC (“G.research”),
an affiliate of the Investment Adviser, or to other broker-dealer affiliates of the Investment Adviser and (ii) pay commissions
to brokers other than G.research that are higher than might be charged by another qualified broker to obtain brokerage and/or
research services considered by the Investment Adviser to be useful or desirable for its investment management of the Fund and/or its other investment advisory accounts or those of any investment adviser affiliated with it. The SAI contains
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
further
information about the Investment Advisory Agreement, including a more complete description of the investment advisory and expense
arrangements, exculpatory and brokerage provisions, as well as information on the brokerage practices of the Fund.
Portfolio
Managers
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 M.B.A. 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 Gabelli/GAMCO Funds Complex. Mr. Dinsmore received a B.A. in Economics from Cornell University and an
M.B.A. 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 Gabelli/GAMCO Funds Complex. From 1996 to 2015, 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 B.S. in Economics from the Wharton School of Business and an M.A. in Economics from Fairleigh Dickinson
University.
Non-Resident
Directors
Anthonie
C. van Ekris and John Birch, Directors of the Fund, reside outside of the United States and all or a significant portion of their
assets are located outside the United States. Messrs. van Ekris and Birch do not have an authorized agent in the United States
to receive service of process. As a result, it may not be possible for investors to effect service of process within the United
States or to enforce against either of them in U.S. court judgments predicated upon the civil liability provisions of U.S. securities
laws. It may also not be possible to enforce against Messrs. van Ekris and Birch in foreign courts judgments of U.S. courts or
liabilities in original actions predicated upon civil liability provisions of the United States. Further, it is not certain that
such courts would enforce, in an original action, liabilities against Messrs. van Ekris and Birch predicated solely on U.S. federal
securities laws.
Sub-Administrator
The
Investment Adviser has entered into a sub-administration agreement with The Bank of New York Mellon (the “Sub-Administrator”)
pursuant to which the Sub-Administrator provides certain administrative services necessary for the Fund’s operations which
do not include the investment and portfolio management services provided by the Investment Adviser. For these services and the
related expenses borne by the Sub-Administrator, the Investment Adviser pays an annual fee based on the value of the aggregate
average daily net assets of all funds under its administration managed by the Investment Adviser, GAMCO and Teton Advisors, LLC
as follows: 0.0275%—first $10 billion, 0.0125%—exceeding $10 billion but less than $15 billion, 0.01%—over $15
billion but less than $20 billion and 0.008% over $20 billion. The Sub-Administrator has its principal office at 301 Bellevue
Parkway, Wilmington, Delaware, 19809.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
NET
ASSET VALUE
The
net asset value of the Fund’s shares is computed based on the market value of the securities it holds and is determined
daily as of the close of the regular trading day on the NYSE. For purposes of determining the Fund’s net asset value per
share, portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter
market for which market quotations are readily available are valued at the last quoted sale price or a market’s official
closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security
is valued at the mean 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 ask prices are quoted on such day, the security will be valued based
on written or standing instructions from the Investment Adviser, which has been appointed Valuation Designee pursuant to Rule
2a-5 under the 1940 Act (“Rule 2a-5”) by the Board. 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 the Valuation Designee.
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 by the Valuation Designee under procedures adopted pursuant to Rule 2a-5 if market conditions
change significantly after the close of the foreign market but prior to the close of business on the day the securities are being
valued. Debt instruments with remaining maturities of 60 days or less that are not credit impaired are valued at amortized cost,
unless the Valuation Designee determines such amount does not reflect the securities’ fair value, in which case these securities
will be fair valued as determined by the Valuation Designee. Debt instruments having a maturity greater than 60 days for which
market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices
quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement
price of the exchange or board of trade on which the applicable contract is traded.
Options
are valued using market quotations. When market quotations are not readily available, options are valued from broker quotes. In
limited circumstances when neither market quotations nor broker quotes are readily available, options are valued using a Black
Scholes model.
Securities
and assets for which market quotations are not readily available are fair valued as determined by the Valuation Designee. 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 to the valuation and changes in valuation of similar securities, including a comparison
of foreign securities to the equivalent U.S. dollar value ADR 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
Fund obtains valuations on the basis of prices provided by a pricing service monitored by the Valuation Designee. All other investment
assets, including restricted and not readily marketable securities, are valued in good faith at fair value by the Valuation Designee
under procedures adopted pursuant to Rule 2a-5.
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
In
addition, whenever developments in one or more securities markets after the close of the principal markets for one or more portfolio
securities and before the time as of which the Fund determines its net asset value would, if such developments had been reflected
in such principal markets, likely have more than a minimal effect on the Fund’s net asset value per share, the Valuation
Designee may fair value such portfolio securities based on available market information as of the time the Fund determines its
net asset value.
NYSE
Closings. The holidays (as observed) on which the NYSE is closed, and therefore days upon which shareholders will not be able
to purchase or sell common shares currently are: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day, and on the preceding Friday
or subsequent Monday when a holiday falls on a Saturday or Sunday, respectively.
Control
Share Acquisitions
On
February 16, 2023 the Fund elected, by resolution unanimously adopted by the Board of Directors of the Fund in accordance with
Section 3-702(c)(4) of the MGCL, to be subject to the Maryland Control Share Acquisition Act (the “Control Share Act”),
effective immediately. The Control Share Act only applies to acquisitions of Fund shares on or after February 16, 2023.
Under
the MGCL, the Control Share Act provides that a holder of control shares of a Maryland corporation acquired in a control share
acquisition has no voting rights with respect to those shares except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter. Shares owned by the acquiror, by officers or by directors who are employees of the corporation
are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all
other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of
voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors
within one of the following ranges of voting power:
| ● | one-tenth
or more but less than one-third; |
| ● | one-third
or more but less than a majority; or |
| ● | a
majority or more of all voting power. |
The
requisite shareholder approval must be obtained each time an acquiror crosses one of the thresholds of voting power set forth
above. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained
shareholder approval. A control share acquisition means the acquisition of issued and outstanding control shares, subject to certain
exceptions.
A
person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call
a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the shares. The right to
compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay
the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any shareholders
meeting.
If
voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required
by the statute, then the corporation may redeem for fair value any or all of the control shares, except those for which voting
rights have previously been approved. The right of the corporation to
The
Gabelli Convertible and Income Securities Fund Inc.
Additional
Fund Information (Continued) (Unaudited)
redeem
control shares is subject to certain conditions and limitations, including, compliance with the 1940 Act. Fair value is determined,
without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by
the acquiror or of any meeting of shareholders at which the voting rights of the shares are considered and not approved. If voting
rights for control shares are approved at a shareholders meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other shareholders may exercise appraisal rights. The fair value of the shares as determined for purposes
of appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.
The
Control Share Act does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party
to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. In connection with
the Fund’s election to be subject to the Control Share Act, the Fund’s Board of Directors amended the Fund’s
bylaws to exempt the Fund’s preferred stock from the Control Share Act. This exemption applies to the Fund’s outstanding
preferred stock and to any preferred stock it may issue in the future.
AUTOMATIC
DIVIDEND REINVESTMENT
AND
VOLUNTARY CASH PURCHASE PLANS
Under
the Fund’s Automatic Dividend Reinvestment Plan and Voluntary Cash Purchase Plan (the “Plan”), a shareholder
whose shares of common s tock are registered in his or her own name will have all distributions reinvested automatically by
Computershare Trust Company, N.A. (“Computershare”),
which is an agent under the Plan, unless the shareholder elects to receive cash. Distributions with respect to shares registered
in the name of a broker-dealer or other nominee (that is, in “street name”) will be reinvested by the broker or nominee
in additional shares under the Plan, unless the service is not provided by the broker or nominee or the shareholder elects to
receive distributions in cash. Investors who own shares of common stock registered in street name should consult their broker-dealers
for details regarding reinvestment. All distributions to investors who do not participate in the Plan will be paid by check mailed
directly to the record holder by Computershare
as dividend-disbursing agent.
Enrollment
in the Plan
It
is the policy of The Gabelli Convertible
and Income Securities Fund (the
“Fund”) to automatically reinvest dividends payable to common shareholders. As a “registered” shareholder
you automatically become a participant in the Fund’s Automatic Dividend Reinvestment Plan (the “Plan”). The
Plan authorizes the Fund to credit common shares to participants upon an income dividend or a capital gains distribution regardless
of whether the shares are trading at a discount or a premium to net asset value. All distributions to shareholders whose shares
are registered in their own names will be automatically reinvested pursuant to the Plan in additional shares of the Fund. Plan
participants may send their common shares certificates to Computershare
Trust Company, N.A. (“Computershare”) to
be held in their dividend reinvestment account. Registered shareholders wishing to receive their distributions in cash may submit
this request through the Internet,
by telephone or in writing to:
The
Gabelli Convertible and Income Securities Fund
c/o
Computershare
P.O.
Box 505000
Louisville,
KY 40233-5000
Telephone:
(800) 336-6983
Website:
www.computershare.com/investor
Shareholders
requesting this cash election must include the shareholder’s name and address as they appear on the Fund’s records.
Shareholders with additional questions regarding the Plan or requesting a copy of the terms of the Plan, may contact Computershare
at the website or telephone number above.
If
your shares are held in the name of a broker, bank, or nominee, you should contact such institution. If such institution is not
participating in the Plan, your account will be credited with a cash dividend. In order to participate in the Plan through such
institution, it may be necessary for you to have your shares taken out of “street name” and re-registered in your
own name. Once registered in your own name your distributions will be automatically reinvested. Certain brokers participate in
the Plan. Shareholders holding shares in “street name” at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must contact their broker to make this change.
The
number of shares of common stocks
distributed to participants in
the Plan in lieu of cash dividends is determined in the following manner. Under the Plan, whenever the market price of the Fund’s
common shares is equal to or exceeds net asset value at the time shares are valued for purposes of determining the number of shares
equivalent to the cash dividends or capital gains distribution, participants are issued shares of common stocks
valued at the greater of (i) the
net asset value as most recently determined or (ii) 95% of the then current market price of the Fund’s common stocks
The valuation date is the dividend
or distribution payment date or, if that date is not a New York Stock Exchange (“NYSE”) trading day, the next trading
day. If the net asset value of the common stocks
at the time of valuation exceeds
the market price of the common stocks,
participants will receive shares from the Fund valued at market price. If the Fund should declare a dividend or capital gains
distribution payable only in cash, Computershare
will buy shares of common stocks
in the open market, or on the NYSE
or elsewhere, for the participants’ accounts, except that Computershare
will endeavor to terminate purchases
in the open market and cause the Fund to issue shares at net asset value if, following the commencement of such purchases, the
market value of the common stocks
exceeds the then current net asset
value.
The
automatic reinvestment of dividends and capital gains distributions will not relieve participants of any income tax which may
be payable on such distributions. A participant in the Plan will be treated for federal income tax purposes as having received,
on a dividend payment date, a dividend or distribution in an amount equal to the cash the participant could have received instead
of shares.
AUTOMATIC
DIVIDEND REINVESTMENT
AND
VOLUNTARY CASH PURCHASE PLANS
(Continued)
Voluntary
Cash Purchase Plan
The
Voluntary Cash Purchase Plan is yet another vehicle for our shareholders to increase their investment in the Fund. In order to
participate in the Voluntary Cash Purchase Plan, shareholders must have their shares registered in their own name.
Participants
in the Voluntary Cash Purchase Plan have the option of making additional cash payments to Computershare
for investments in the Fund’s
shares at the then current market price. shareholders may send an amount from $250 to $10,000. Computershare
will use these funds to purchase
shares in the open market on or about the 1st and 15th of each month. Computershare
will charge each shareholder who
participates $0.75, plus a per share fee (currently $0.02 per share). Per share fees include any applicable brokerage commissions
Computershare is required to pay and fees for such purchases are expected to be less than the usual fees for such transactions.
It is suggested that any voluntary cash payments be sent to Computershare, P.O. Box 6006, Carol Stream, IL 60197-6006 such that
Computershare receives
such payments approximately two business days before the 1st and 15th of the month. Funds not received at least two business days
before the investment date shall be held for investment until the next purchase date. A payment may be withdrawn without charge
if notice is received by Computershare
at least two business days before
such payment is to be invested.
Shareholders
wishing to liquidate shares held at Computershare
may do so through the Internet,
in writing or by telephone to the above-mentioned website, address or telephone number. Include in your request your name, address,
and account number. Computershare will sell such shares through a broker-dealer selected by Computershare within 5 business days
of receipt of the request. The sale price will equal the weighted average price of all shares sold through the Plan on the day
of the sale, less applicable fees. Participants should note that Computershare is unable to accept instructions to sell on a specific
date or at a specific price. The cost to liquidate shares is $2.50 per transaction as well as the per share fee (currently $0.10
per share) Per share fees include any applicable brokerage commissions Computershare is required to pay and are expected to be
less than the usual fees for such transactions.
More
information regarding the Automatic Dividend Reinvestment Plan and Voluntary Cash Purchase Plan is available by calling (914)
921-5070 or by writing directly to the Fund.
The
Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan at least 30 days before the record date for such
dividend or distribution. The Plan also may be amended or terminated by Computershare on at least 30 days written notice to participants
in the Plan.
This
page was intentionally left blank.
This
page was intentionally left blank.
This
page was intentionally left blank.
THE
GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
INCOME
TAX INFORMATION (Unaudited)
December
31, 2022
Cash
Dividends and Distributions
| | |
Payable
Date | | |
Record
Date | | |
Ordinary
Investment
Income (a) | | |
Long Term
Capital
Gains | | |
Return of
Capital
(b) | | |
Total Amount
Paid
Per Share (c) | | |
Dividend
Reinvestment
Price | |
| Common Stock | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| 03/24/22 | | |
| 03/17/22 | | |
| $0.04616 | | |
| $0.07262 | | |
| $0.00122 | | |
| $0.12000 | | |
| $5.91850 | |
| | |
| 06/23/22 | | |
| 06/15/22 | | |
| 0.01750 | | |
| 0.10130 | | |
| 0.00120 | | |
| 0.12000 | | |
| 5.23450 | |
| | |
| 09/23/22 | | |
| 09/16/22 | | |
| 0.01750 | | |
| 0.10130 | | |
| 0.00120 | | |
| 0.12000 | | |
| 4.61700 | |
| | |
| 12/16/22 | | |
| 12/09/22 | | |
| 0.01750 | | |
| 0.10130 | | |
| 0.00120 | | |
| 0.12000 | | |
| 5.24000 | |
| | |
| | | |
| | | |
| $0.09866 | | |
| $0.37652 | | |
| $0.00482 | | |
| $0.48000 | | |
| | |
| 4.000% Series E Cumulative Preferred
Stock | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| 03/28/22 | | |
| 03/21/22 | | |
| $0.3861000 | | |
| $0.6139000 | | |
| — | | |
| $1.0000000 | | |
| | |
| | |
| 06/27/22 | | |
| 06/17/22 | | |
| 0.1471000 | | |
| 0.8529000 | | |
| — | | |
| 1.0000000 | | |
| | |
| | |
| 09/26/22 | | |
| 09/19/22 | | |
| 0.1471000 | | |
| 0.8529000 | | |
| — | | |
| 1.0000000 | | |
| | |
| | |
| 12/01/22 | | |
| 12/01/22 | | |
| 0.1062240 | | |
| 0.6159980 | | |
| — | | |
| 0.7222220 | | |
| | |
| | |
| | | |
| | | |
| $0.7865240 | | |
| $2.9356980 | | |
| — | | |
| $3.7222220 | | |
| | |
A
Form 1099-DIV has been mailed to all shareholders of record for the distributions mentioned above, setting forth specific amounts
to be included in the 2022 tax returns. Ordinary income distributions include net investment income and net realized short term
capital gains, if any. Ordinary income is reported in box 1a of Form 1099-DIV. Capital gain distributions are reported in box
2a of Form 1099-DIV. The long term gain distributions for the year ended December 31, 2022 were $8,152,245 or the maximum allowable.
Corporate
Dividends Received Deduction, Qualified Dividend Income, and U.S. Government Securities Income
The
Fund paid to common and 4.000% Series E Cumulative Preferred shareholders ordinary income dividends of $0.09866 and $0.786524
per share, respectively, in 2022. For the year ended December 31, 2022, 38.47% of the ordinary dividend qualified for the dividends
received deduction available to corporations, 47.24% of the ordinary income distribution was qualified dividend income, 40.56%
of the ordinary income distribution was qualified interest income, and 100% of ordinary income distribution was qualified short
term capital gain. The percentage of ordinary income dividends paid by the Fund during 2022 derived from U.S. Treasury securities
was 3.58%. Such income is exempt from state and local tax in all states. However, many states, including New York and California,
allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the
end of each quarter of the Fund’s fiscal year in U.S. Government securities. The Fund did not meet this strict requirement
in 2022. The percentage of U.S. Government securities held as of December 31, 2022 was 17.1%. Due to the diversity in state and
local tax law, it is recommended that you consult your personal tax adviser as to the applicability of the information provided
to your specific situation.
THE
GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
INCOME
TAX INFORMATION (Unaudited) (Continued)
December
31, 2022
| Historical Distribution Summary |
| | | |
| Investment
Income (a) | | |
| Short
Term
Capital
Gains (a) | | |
| Long
Term
Capital
Gains | | |
| Return
of
Capital
(b) | | |
| Total
Distributions
(c) | | |
| Adjustment
to
Cost
Basis
(d) | |
| Common
Shares | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| 2022 | | |
| $0.08963 | | |
| $0.00903 | | |
| $0.37652 | | |
| $0.00482 | | |
| $0.48000 | | |
| $0.00482 | |
| 2021 | | |
| 0.05400 | | |
| 0.02870 | | |
| 0.47730 | | |
| — | | |
| 0.56000 | | |
| — | |
| 2020 | | |
| 0.08000 | | |
| 0.08920 | | |
| 0.31080 | | |
| — | | |
| 0.48000 | | |
| — | |
| 2019 | | |
| 0.08920 | | |
| 0.04320 | | |
| 0.31400 | | |
| 0.03360 | | |
| 0.48000 | | |
| 0.03360 | |
| 2018 | | |
| 0.10340 | | |
| 0.02260 | | |
| 0.35400 | | |
| — | | |
| 0.48000 | | |
| — | |
| 2017 | | |
| 0.12160 | | |
| 0.02320 | | |
| 0.33520 | | |
| — | | |
| 0.48000 | | |
| — | |
| 2016 | | |
| 0.10490 | | |
| — | | |
| 0.28430 | | |
| 0.02080 | | |
| 0.41000 | | |
| 0.02080 | |
| 2015 | | |
| 0.05456 | | |
| 0.11576 | | |
| 0.19872 | | |
| 0.11096 | | |
| 0.48000 | | |
| 0.11096 | |
| 2014 | | |
| 0.04693 | | |
| 0.04547 | | |
| 0.17693 | | |
| 0.24067 | | |
| 0.51000 | | |
| 0.24067 | |
| 2013 | | |
| 0.09120 | | |
| 0.31320 | | |
| — | | |
| 0.07560 | | |
| 0.48000 | | |
| 0.07560 | |
| 6.00% Series B Cumulative Preferred Stock | | |
| | | |
| | | |
| | | |
| | |
| 2019 | | |
| $0.26840 | | |
| $0.13000 | | |
| $0.94330 | | |
| — | | |
| $1.34170 | | |
| — | |
| 2018 | | |
| 0.32170 | | |
| 0.07080 | | |
| 1.10750 | | |
| — | | |
| 1.50000 | | |
| — | |
| 2017 | | |
| 0.37960 | | |
| 0.07280 | | |
| 1.04760 | | |
| — | | |
| 1.50000 | | |
| — | |
| 2016 | | |
| 0.40400 | | |
| — | | |
| 1.09600 | | |
| — | | |
| 1.50000 | | |
| — | |
| 2015 | | |
| 0.22180 | | |
| 0.07280 | | |
| 0.80772 | | |
| — | | |
| 1.50000 | | |
| — | |
| 2014 | | |
| 0.26144 | | |
| 0.25316 | | |
| 0.98540 | | |
| — | | |
| 1.50000 | | |
| — | |
| 2013 | | |
| 0.33800 | | |
| 1.16200 | | |
| — | | |
| — | | |
| 1.50000 | | |
| — | |
| 4.000% Series E Cumulative Preferred Stock | | |
| | | |
| | | |
| | | |
| | |
| 2021 | | |
| $0.38290 | | |
| $0.20320 | | |
| $3.41390 | | |
| — | | |
| $4.00000 | | |
| — | |
| 2020 | | |
| 0.76360 | | |
| 0.84960 | | |
| 2.96460 | | |
| — | | |
| 4.57780 | | |
| — | |
| 2019 | | |
| 0.15570 | | |
| 0.07540 | | |
| 0.54670 | | |
| — | | |
| 0.77780 | | |
| — | |
| (a) | Taxable
as ordinary income for Federal tax purposes. |
| (b) | Non-taxable. |
| (c) | Total
amounts may differ due to rounding. |
| (d) | Decrease
in cost basis. |
All
designations are based on financial information available as of the date of this annual report and, accordingly, are subject to
change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code
and the regulations thereunder.
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.
The
Net Asset Value per share appears in the Publicly Traded Funds column, under the heading “Convertible Securities Funds,”
in Monday’s The Wall Street Journal. It is also listed in Barron’s Mutual Funds/Closed-End Funds section under the
heading “Convertible Securities Funds.”
The
Net Asset Value per share may be obtained each day by calling (914) 921-5070 or visiting www.gabelli.com.
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 Fund’s shares are trading at a discount of 10%
or more from the net asset value of the shares. |
