The Fund held no level 3 investments at December
31, 2022 or December 31, 2021.
The Adviser reports quarterly
to the Board the results of the application of fair valuation policies and procedures. These may include backtesting the prices
realized in subsequent trades of these fair valued securities to fair values previously recognized.
Acquired Funds in
addition to the Fund’s expenses. For the year ended December 31, 2022, the Fund’s pro rata portion of the periodic
expenses charged by the Acquired Funds was less than one basis point.
Under the Fund’s
current common share distribution policy, the Fund declares and pays quarterly distributions from net investment income, capital
gains, and paid-in capital. The actual source of the distribution is determined after the end of the year. Pursuant to this policy,
distributions during the year may be made in excess of required distributions. To the extent such distributions are made from current
earnings and profits, they are considered ordinary income or long term capital gains. Distributions sourced from paid-in capital
should not be considered as dividend yield or the total return from an investment in the Fund. The Board will continue to monitor
the Fund’s distribution level, taking into consideration the Fund’s NAV and the financial market environment. The Fund’s
distribution policy is subject to modification by the Board at any time.
Distributions to
shareholders of the Fund’s Series B Auction Market Preferred Shares, Series C Auction Market Preferred Shares, Series E
Auction Rate Preferred Shares, 5.375% Series H Preferred Shares, Series J Cumulative Term Preferred Shares, and 4.250% Series
K Preferred Shares (Preferred Shares) are recorded on a daily basis and are determined as described in Note 6.
The tax character of distributions paid during
the years ended December 31, 2022 and 2021 was as follows:
substantially all
of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
At December 31, 2022, the components of accumulated
earnings/losses on a tax basis were as follows:
At December 31,
2022, the temporary differences between book basis and tax basis net unrealized appreciation were primarily due to tax basis adjustments
due to corporate actions and the deferral of losses from wash sales for tax purposes.
The Fund is required to
evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether
the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related
interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were
deemed not to meet the more-likely-than-not threshold. For the year ended December 31, 2022, the Fund did not incur any income
tax, interest, or penalties. As of December 31, 2022, the Adviser has reviewed all open tax years and concluded that there was
no impact to the Fund’s net assets or results of operations. The Fund’s federal and state tax returns for the prior
three fiscal years remain open, subject to examination. On an ongoing basis, the Adviser will monitor the Fund’s tax positions
to determine if adjustments to this conclusion are necessary.
The Adviser has agreed to reduce the management
fee on the incremental assets attributable to the Series B, Series C, and Series E Preferred Shares if the total return of the
NAV of the common shares of the Fund, including distributions and advisory fee subject to reduction, does not exceed the stated
dividend rate of each particular series of the Preferred Shares for the year. The Fund’s total return on the NAV of the
common shares is monitored on a monthly basis to assess whether the total return on the NAV of the common shares exceeds the stated
dividend rate or corresponding swap rate of each particular series of Preferred Shares for the period. During the year ended December
31, 2022, the Fund’s total return on the NAV of the common shares did not exceed the stated dividend rate on the Preferred
Shares at the time of their redemption. Thus, advisory fees with respect to the liquidation value of the Preferred Shares were
reduced by $64,999 and advisory fees were not accrued on the Series B, Series C, and Series E Preferred Shares.
During the year
ended December 31, 2022, the Fund received credits from a designated broker who agreed to pay certain Fund operating expenses.
The amount of such expenses paid through this directed brokerage arrangement during this period was $20,785.
The cost of calculating
the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. Under the
sub-administration agreement with Bank of New York Mellon, the fees paid include the cost of calculating the Fund’s NAV.
The Fund reimburses the Adviser for this service. During the year ended December 31, 2022, the Fund accrued $45,000 in accounting
fees in the Statement of Operations.
As per the approval
of the Board, the Fund compensates officers of the Fund, who are employed by the Fund and are not employed by the Adviser (although
the officers may receive incentive based variable compensation from affiliates of the Adviser). During the year ended December
31, 2022, the Fund accrued $168,789 in payroll expenses in the Statement of Operations.
The Fund pays retainer
and per meeting fees to Trustees not affiliated with the Adviser, plus specified amounts to the Lead Trustee and Audit Committee
Chairman. Trustees are also reimbursed for out of pocket expenses incurred in attending meetings. Trustees who are directors or
employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund.
The Fund has an effective
shelf registration initially authorizing the offering of additional common or preferred shares or notes.
The Fund’s Declaration
of Trust, as amended, authorizes the issuance of an unlimited number of shares of $0.001 par value Preferred Shares. The Preferred
Shares are senior to the common shares and result in the financial leveraging of the common shares. Such leveraging tends to magnify
both the risks and opportunities to common shareholders. Dividends on the Preferred Shares are cumulative. The Fund is required
by the 1940 Act and by the Statements of Preferences to meet certain asset coverage tests with respect to the Preferred Shares.
If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or
in full, the Series B, Series C, Series E, Series H, Series J, and Series K Preferred Shares at redemption prices of $25,000,
$25,000, $25,000, $25, $25,000, and $25, respectively, per share plus an amount equal to the accumulated and unpaid dividends
whether or not declared on such shares in order to meet these requirements. Additionally, failure to meet the foregoing asset
coverage requirements could restrict the Fund’s ability to pay dividends to common shareholders and could lead to sales
of portfolio securities at inopportune times. The income received on the Fund’s assets may vary in a manner unrelated to
the fixed and variable rates, which could have either a beneficial or detrimental impact on net investment income and gains available
to common shareholders.
For Series B, Series C,
and Series E Preferred Shares, the dividend rates are typically set by an auction process that is generally held every seven days,
and are typically expected to vary with short term interest rates. Since February 2008, the number of Series B, Series C, and
Series E Preferred Shares subject to bid orders by potential holders has been less than the number of shares of Series B, Series
C, and Series E Preferred Shares subject to sell orders. Holders that have submitted sell orders have not been able to sell any
or all of the Series B, Series C, and Series E Preferred Shares for which they have submitted sell orders. Therefore the weekly
auctions have failed, and the dividend rate has been the maximum rate. The current maximum rate for Series B, Series C, and Series
E Preferred Shares is 150, 150, and 250 basis points, respectively, greater than the seven day ICE LIBOR rate on the date of such
auction.
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. Since
December 31, 2021, all sterling, euro, Swiss franc and Japanese yen LIBOR settings and the 1-week and 2-month U.S. dollar LIBOR
settings have ceased to be published or are no longer representative. As a result, since December 31, 2021, the seven day ICE
LIBOR rate has ceased to be published and is no longer representative. Because the Series B, Series C, and Series E Preferred
Shares have no other effective alternative rate setting provision, a last-resort fallback of fixing this LIBOR-based reference
rate at its last published rate applies. The last published seven day ICE LIBOR rate was 0.076%, which results in a fixed maximum
rate for Series B, Series C, and Series E Preferred Shares of 2.076%, 2.076%, and 3.576%, respectively. In the absence of successful
future auctions that establish dividend rates based on prevailing short
term interest rates,
this result could lead to economic results for the Fund and holders of the Series B, Series C, and Series E Preferred Shares since
the rates payable on the Series B, Series C, and Series E Preferred Shares are no longer likely to be representative of prevailing
market rates.
On April 14, 2021
the Fund completed a tender offer (the Offer) under which holders of the Series B Auction Market Preferred Shares, Series C Auction
Rate Preferred Shares, and Series E Auction Rate Preferred Shares (the Auction Rate Preferred Shares) could exchange each Auction
Rate Preferred Share for 0.96 of each newly issued Series J Preferred Share. Shareholders tendered 2,565 Series B Auction Market
Preferred Shares, 3,190 Series C Auction Market Preferred Shares, and 356 Series E Auction Rate Preferred Shares, in exchange
for 5,804 Series J Preferred and cash in lieu of fractional shares.
Holders of Series J Preferred
Shares will be entitled to receive, when, as and if declared by, or under authority granted by, the Board, out of funds legally
available therefor, cumulative cash dividends and distributions, calculated separately for each dividend period, (i) at an annualized
dividend rate of 1.70% of the $25,000 per share liquidation preference on the Series J Preferred Shares for the quarterly dividend
periods ending on or prior to March 26, 2024 and (ii) at an annualized dividend rate of 4.50% of the $25,000 per share liquidation
preference on the Series J Preferred Shares for all remaining quarterly dividend periods until the Series J Preferred Shares’
mandatory redemption date of March 26, 2028. Dividends and distributions on Series J Preferred Shares will be payable quarterly
on March 26, June 26, September 26, and December 26 in each year commencing on June 26, 2021. The Series J Preferred Shares may
be redeemed by the Fund, subject to certain restrictions, on March 26, 2024 and are subject to mandatory redemption by the Fund
on March 26, 2028 and in certain other circumstances. Existing Series B, Series C, and Series E Preferred shareholders may submit
an order to hold, bid, or sell such shares on each auction date, or trade their shares in the secondary market. The Fund has the
authority to purchase its auction rate and auction market preferred shares through negotiated private transactions. The Fund is
not obligated to purchase any dollar amount or number of auction rate or auction market preferred shares, and the timing and amount
of any auction rate or auction market preferred shares purchased will depend on market conditions, share price, capital availability,
and other factors. The Fund is not soliciting holders to sell these shares nor recommending that holders offer them to the Fund.
Any offers can be accepted or rejected in the Fund’s discretion.
On January 31, 2022,
the Fund redeemed and retired all remaining outstanding shares of Series G Preferred at the liquidation value of $25 per share
plus accrued and unpaid dividends.
Commencing June
10, 2024 and at any time thereafter, the Fund, at its option, may redeem the 5.375% Series H Cumulative Preferred Shares, in whole
or in part at the redemption price. The Board has authorized the repurchase of Series H and Series K Preferred Shares in the open
market at prices less than the $25 liquidation value per share. During the year ended December 31, 2022, the Fund repurchased
and retired 7,200 Series H Preferred at an investment of $165,671 and an average discount of approximately 8.00% and repurchased
and retired 174,501 Series K Preferred at an investment of $3,353,453 and an average discount of approximately 23.17% from its
liquidation preference.
On October 4, 2021,
the Fund issued 6,000,000 shares of 4.25% Series K Cumulative Preferred Shares receiving $144,875,000 after the deduction of estimated
offering expenses of $400,000 and underwriting fees of $4,725,000. The Series K Preferred has a liquidation value of $25 per share
and an annual dividend rate of 4.25%. The Series K Preferred Shares are callable at the Fund’s option at any time after October
4, 2026.
The holders of Preferred
Shares generally are entitled to one vote per share held on each matter submitted to a vote of shareholders of the Fund and will
vote together with holders of common shares as a single class. The holders of Preferred Shares voting together as a single class
also have the right currently to elect two Trustees and under certain circumstances are entitled to elect a majority of the Board
of Trustees. In addition, the affirmative vote of a majority of the votes entitled to be cast by holders of all outstanding shares
of the Preferred Shares, voting as a single class, will be required to approve any plan of reorganization adversely affecting
the Preferred Shares, and the approval of two-thirds of each class, voting separately, of the Fund’s outstanding voting
stock must approve the conversion of the Fund from a closed-end to an open-end investment company. The approval of a majority
(as defined in the 1940 Act) of the outstanding Preferred Shares and a majority (as defined in the 1940 Act) of the Fund’s
outstanding voting securities are required to approve certain other actions, including changes in the Fund’s investment
objectives or fundamental investment policies.
Opinion on the Financial Statements
We
have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Dividend
& Income Trust (the “Fund”) as of December 31, 2022, the related statements of operations and cash flows for the
year ended December 31, 2022, the statement of changes in net assets attributable to common shareholders for each of the two years
in the period ended December 31, 2022, including the related notes, and the financial highlights for each of the five years in
the period ended December 31, 2022 (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2022, the results of
its operations and its cash flows for the year then ended, the changes in its net assets attributable to common shareholders for
each of the two years in the period ended December 31, 2022, and the financial highlights for each of the five years in the period
ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These
financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
Our procedures included confirmation of securities owned as of December 31, 2022, by correspondence with the custodian and brokers;
when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable
basis for our opinion.
/s/PricewaterhouseCoopers
LLP
New York, New York
March
1, 2023
We
have served as the auditor of one or more investment companies in the Gabelli Fund Complex since 1986.
The Gabelli Dividend & Income Trust
Additional Fund Information (Unaudited)
Delaware Statutory Trust Act – Control
Share Acquisitions
The Fund is organized as
a Delaware statutory trust and thus is subject to the control share acquisition statute contained in Subchapter III of the Delaware
Statutory Trust Act (the DSTA Control Share Statute). The DSTA Control Share Statute applies to any closed-end investment company
organized as a Delaware statutory trust and listed on a national securities exchange, such as the Fund. The DSTA Control Share
Statute became automatically applicable to the Fund on August 1, 2022.
The DSTA Control Share Statute
defines “control beneficial interests” (referred to as “control shares” herein) by reference to a series
of voting power thresholds and provides that a holder of control shares acquired in a control share acquisition has no voting rights
under the Delaware Statutory Trust Act (DSTA) or the Fund’s Governing Documents (as used herein, “Governing Documents”
means the Fund’s Agreement and Declaration of Trust and By-Laws, together with any amendments or supplements thereto, including
any Statement of Preferences establishing a series of preferred shares) with respect to the control shares acquired in the control
share acquisition, except to the extent approved by the Fund’s shareholders by the affirmative vote of two–thirds of
all the votes entitled to be cast on the matter, excluding all interested shares (generally, shares held by the acquiring person
and their associates and shares held by Fund insiders).
The DSTA Control Share Statute
provides for a series of voting power thresholds above which shares are considered control shares. Whether one of these thresholds
of voting power is met is determined by aggregating the holdings of the acquiring person as well as those of his, her or its “associates.”
These thresholds are:
| ● | 10% or more, but less than 15% of all voting power; |
| ● | 15% or more, but less than 20% of all voting power; |
| ● | 20% or more, but less than 25% of all voting power; |
| ● | 25% or more, but less than 30% of all voting power; |
| ● | 30% or more, but less than a majority of all voting power;
or |
| ● | a majority or more of all voting power. |
Under the DSTA Control Share
Statute, once a threshold is reached, an acquirer has no voting rights with respect to shares in excess of that threshold (i.e.,
the “control shares”) until approved by a vote of shareholders, as described above, or otherwise exempted by the Fund’s
Board of Trustees. The DSTA Control Share Statute contains a statutory process for an acquiring person to request a shareholder
meeting for the purpose of considering the voting rights to be accorded control shares. An acquiring person must repeat this process
at each threshold level.
Under the DSTA Control Share
Statute, an acquiring person’s “associates” are broadly defined to include, among others, relatives of the acquiring
person, anyone in a control relationship with the acquiring person, any investment fund or other collective investment vehicle
that has the same investment adviser as the acquiring person, any investment adviser of an acquiring person that is an investment
fund or other collective investment vehicle and any other person acting or intending to act jointly or in concert with the acquiring
person.
Voting power under the DSTA
Control Share Statute is the power (whether such power is direct or indirect or through any contract, arrangement, understanding,
relationship or otherwise) to directly or indirectly exercise or direct the exercise of the voting power of shares of the Fund
in the election of the Fund’s Trustees (either
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
generally or with respect
to any subset, series or class of trustees, including any Trustees elected solely by a particular series or class of shares, such
as the preferred shares). Thus, Fund preferred shares, including the Series B, C, E, H, J and K Preferred Shares, acquired in
excess of the above thresholds would be considered control shares with respect to the preferred share class vote for two Trustees.
Any control shares of the
Fund acquired before August 1, 2022 are not subject to the DSTA Control Share Statute; however, any further acquisitions on or
after August 1, 2022 are considered control shares subject to the DSTA Control Share Statute.
The DSTA Control Share Statute
requires shareholders to disclose to the Fund any control share acquisition within 10 days of such acquisition, and also permits
the Fund to require a shareholder or an associate of such person to disclose the number of shares owned or with respect to which
such person or an associate thereof can directly or indirectly exercise voting power. Further, the DSTA Control Share Statute requires
a shareholder or an associate of such person to provide to the Fund within 10 days of receiving a request therefor from the Fund
any information that the Fund’s Trustees reasonably believe is necessary or desirable to determine whether a control share
acquisition has occurred.
The DSTA Control Share
Statute permits the Fund’s Board of Trustees, through a provision in the Fund’s Governing Documents or by Board action
alone, to eliminate the application of the DSTA Control Share Statute to the acquisition of control shares in the Fund specifically,
generally, or generally by types, as to specifically identified or unidentified existing or future beneficial owners or their
affiliates or associates or as to any series or classes of shares. The DSTA Control Share Statute does not provide that the Fund
can generally “opt out” of the application of the DSTA Control Share Statute; rather, specific acquisitions or classes
of acquisitions may be exempted by the Fund’s Board of Trustees, either in advance or retroactively, but other aspects of
the DSTA Control Share Statute, which are summarized above, would continue to apply. The DSTA Control Share Statute further provides
that the Board of Trustees is under no obligation to grant any such exemptions.
The foregoing is only a
summary of the material terms of the DSTA Control Share Statute. Shareholders should consult their own counsel with respect to
the application of the DSTA Control Share Statute to any particular circumstance.
The Gabelli Dividend & Income Trust
Additional Fund Information (Unaudited)
SUMMARY OF FUND EXPENSES
The following table shows
the Fund’s expenses, as a percentage of net assets attributable to common shares. All expenses of the Fund are borne, directly
or indirectly, by the common shareholders. The table is based on the capital structure of the Fund as of December 31, 2022. The
purpose of the table and example below is to help you understand all fees and expenses that you, as a holder of common shares,
would bear directly or indirectly.
| 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 Voluntary Cash Purchase Plan Fees |
|
| Purchase Transactions |
$0.75 (b) |
| One-time Fee for Deposit of Share Certificates |
$2.50 (b) |
| Annual Expenses | |
Percentages of Net Assets
Attributable to Common Shares |
| Management Fees | |
| 1.16 | %(c) |
| Interest Expense | |
| 0.11 | %(d) |
| Other Expenses | |
| 0.10 | %(e) |
| Total Annual Expenses | |
| 1.37 | % |
| Dividends on Preferred Shares | |
| 0.41 | %(e) |
| Total Annual Expenses and Dividends on Preferred | |
| 1.78 | %(c) |
| (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 per transaction to purchase shares and $2.50 plus their
pro rata share of brokerage commissions per transaction to sell shares. |
| (c) | The investment Adviser’s fee is 1.00%
annually of the Fund’s average weekly net assets including proceeds attributable to any outstanding preferred shares,
other than assets attributable to the certain of the Fund’s existing preferred shares when such shares are subject to
the fee reduction described in the section entitled “Management of the Fund—Investment Advisory and
Administrative Arrangements” in the Base Prospectus, and
the outstanding principal amount of any debt securities the proceeds of which were used for investment purposes. Consequently,
since the Fund has preferred shares outstanding, the investment management fees and other expenses as a percentage of net assets
attributable to common shares may be higher than if the Fund does not utilize a leveraged capital structure. |
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
| (d) | The Series J Preferred Shares have a mandatory redemption
date of March 26, 2028. Therefore, for financial reporting purposes only, the dividends paid on the Series J Preferred Shares
are included as a component of “Interest Expense.” |
| (e) | “Other Expenses” are based on estimated amounts
for the current 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 | |
$18 | |
$56 | |
$96 | |
$209 |
| * | The example should not be considered a representation of future expenses.
The example is based on total Annual Expenses and Dividends on Preferred Shares shown in the table above and assumes that the amounts
set forth in the table do not change 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): $13, $40,
$69, and $152.
The Fund’s common
shares are listed on the NYSE under the symbol “GDV” and our Series H Preferred Shares and Series K Preferred Shares
are listed on the NYSE under the symbol “GDV Pr H” and “GDV Pr K,” respectively. 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 discount to net asset value as high as (2.47)% and as low as (31.71)%. Any additional series of fixed
rate preferred shares or subscription rights issued in the future pursuant to a Prospectus Supplement by the Fund would also likely
be listed on the NYSE.
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 Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
| | |
|
| |
|
| |
|
|
| | |
Common Share
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 | |
$24.21 | |
$21.08 | |
$27.47 | |
$24.72 | |
(11.86)% | |
(14.72)% |
| June 30, 2021 | |
$26.75 | |
$24.04 | |
$29.08 | |
$27.21 | |
(8.01)% | |
(11.65)% |
| September 30, 2021 | |
$27.15 | |
$25.49 | |
$29.77 | |
$28.00 | |
(8.80)% | |
(8.96)% |
| December 31, 2021 | |
$27.57 | |
$25.50 | |
$30.37 | |
$28.03 | |
(9.22)% | |
(9.02)% |
| March 31, 2022 | |
$27.27 | |
$22.91 | |
$30.04 | |
$26.30 | |
(9.22)% | |
(12.89)% |
| June 30, 2022 | |
$24.94 | |
$19.53 | |
$28.01 | |
$22.71 | |
(10.96)% | |
(14.00)% |
| September 30, 2022 | |
$23.17 | |
$18.72 | |
$26.10 | |
$21.59 | |
(11.23)% | |
(13.29)% |
| December 31, 2022 | |
$21.93 | |
$18.65 | |
$25.41 | |
$21.73 | |
(13.70)% | |
(14.17)% |
The last reported
price for our common shares on December 31, 2022 was $20.61 per share. As of December 31, 2022, the net asset value per share of
the Fund’s common shares was $24.07. Accordingly, the Fund’s common shares traded at a discount to net asset value
of (14.37)% 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 |
Unlimited |
– |
90,188,491 |
| Series B Auction Market Cumulative Preferred Share |
4,000 |
– |
82 |
| Series C Auction Market Cumulative Preferred |
4,800 |
|
54 |
| Series E Auction Rate Cumulative Preferred |
5,400 |
|
124 |
| 5.375% Series H Cumulative Preferred Shares |
2,000,000 |
|
1,992,800 |
| Series J Cumulative Term Preferred Shares |
6,116 |
|
5,804 |
| 4.250% Series K Cumulative Preferred Shares |
6,000,000 |
|
5,825,199 |
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 Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
Selected
data for a common share of beneficial interest outstanding throughout each year:
| | |
Year Ended December 31, | |
| | |
2017 | | |
2016 | | |
2015 | | |
2014 | | |
2013 | |
| Operating Performance: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net asset value, beginning of year | |
$ | 22.30 | | |
$ | 21.07 | | |
$ | 23.57 | | |
$ | 24.18 | | |
$ | 18.58 | |
| Net investment income | |
| 0.32 | | |
| 0.36 | | |
| 0.30 | | |
| 0.41 | | |
| 0.36 | |
| Net realized and unrealized gain/(loss) on investments, securities sold short, and foreign currency transactions | |
| 4.09 | | |
| 2.45 | | |
| (1.39 | ) | |
| 1.54 | | |
| 6.45 | |
| Total from investment operations | |
| 4.41 | | |
| 2.81 | | |
| (1.09 | ) | |
| 1.95 | | |
| 6.81 | |
| Distributions to Preferred Shareholders: (a) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment income | |
| (0.06 | ) | |
| (0.05 | ) | |
| (0.06 | ) | |
| (0.03 | ) | |
| (0.05 | ) |
| Net realized gain | |
| (0.22 | ) | |
| (0.17 | ) | |
| (0.12 | ) | |
| (0.15 | ) | |
| (0.13 | ) |
| Total distributions to preferred shareholders | |
| (0.28 | ) | |
| (0.22 | ) | |
| (0.18 | ) | |
| (0.18 | ) | |
| (0.18 | ) |
| Net Increase/(Decrease) in Net Assets Attributable to Common Shareholders Resulting from Operations | |
| 4.13 | | |
| 2.59 | | |
| (1.27 | ) | |
| 1.77 | | |
| 6.63 | |
| Distributions to Common Shareholders: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment income | |
| (0.28 | ) | |
| (0.31 | ) | |
| (0.31 | ) | |
| (0.39 | ) | |
| (0.31 | ) |
| Net realized gain | |
| (0.97 | ) | |
| (1.01 | ) | |
| (0.65 | ) | |
| (1.97 | ) | |
| (0.72 | ) |
| Return of capital | |
| (0.07 | ) | |
| — | | |
| (0.28 | ) | |
| (0.02 | ) | |
| — | |
| Total distributions to common shareholders | |
| (1.32 | ) | |
| (1.32 | ) | |
| (1.24 | ) | |
| (2.38 | ) | |
| (1.03 | ) |
| Fund Share Transactions: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Increase in net asset value from repurchase of common shares | |
| — | | |
| 0.00 | (b) | |
| 0.01 | | |
| — | | |
| 0.00 | (b) |
| Offering costs and adjustment to offering costs for preferred shares charged to paid-in capital | |
| 0.00 | (b) | |
| (0.04 | ) | |
| — | | |
| — | | |
| — | |
| Total from Fund share transactions | |
| 0.00 | (b) | |
| (0.04 | ) | |
| 0.01 | | |
| — | | |
| 0.00 | (b) |
| Net Asset Value Attributable to Common Shareholders, End of Year | |
$ | 25.11 | | |
$ | 22.30 | | |
$ | 21.07 | | |
$ | 23.57 | | |
$ | 24.18 | |
| NAV total return † | |
| 19.14 | % | |
| 12.70 | % | |
| (5.59 | )% | |
| 7.48 | % | |
| 36.47 | % |
| Market value, end of year | |
$ | 23.41 | | |
$ | 20.04 | | |
$ | 18.46 | | |
$ | 21.66 | | |
$ | 22.17 | |
| Investment total return †† | |
| 24.11 | % | |
| 16.47 | % | |
| (9.32 | )% | |
| 8.82 | % | |
| 44.38 | % |
| Ratios to Average Net Assets and Supplemental Data: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net assets including liquidation value of preferred shares, end of year (in 000’s) | |
$ | 2,629,129 | | |
$ | 2,397,663 | | |
$ | 2,198,198 | | |
$ | 2,410,290 | | |
$ | 2,460,474 | |
| Net assets attributable to common shares, end of year (in 000’s) | |
$ | 2,069,871 | | |
$ | 1,838,405 | | |
$ | 1,738,940 | | |
$ | 1,951,032 | | |
$ | 2,001,217 | |
| Ratio of net investment income to average net assets attributable to common shares before preferred share distributions | |
| 1.38 | % | |
| 1.69 | % | |
| 1.60 | % | |
| 1.71 | % | |
| 1.65 | % |
| Ratio of operating expenses to average net assets attributable to common shares before fees waived | |
| 1.38 | %(c) | |
| 1.39 | %(c) | |
| 1.33 | %(c) | |
| 1.36 | % | |
| 1.34 | % |
| Ratio of operating expenses to average net assets attributable to common shares net of advisory fee reduction, if any | |
| 1.38 | %(c) | |
| 1.39 | %(c) | |
| 1.09 | %(c) | |
| 1.36 | % | |
| 1.34 | % |
| Ratio of operating expenses to average net assets including liquidation value of preferred shares before fees waived | |
| 1.07 | %(c) | |
| 1.07 | %(c) | |
| 1.07 | %(c) | |
| 1.10 | % | |
| 1.07 | % |
| Ratio of operating expenses to average net assets including liquidation value of preferred shares net of advisory fee reduction, if any | |
| 1.07 | %(c) | |
| 1.07 | %(c) | |
| 0.88 | %(c) | |
| 1.10 | % | |
| 1.07 | % |
| Portfolio turnover rate | |
| 13.3 | % | |
| 15.6 | % | |
| 8.1 | % | |
| 18.4 | % | |
| 15.8 | % |
The Gabelli Dividend & Income
Trust
Additional Fund Information (Continued)
(Unaudited)
Selected
data for a common share of beneficial interest outstanding throughout each year:
| | |
| | |
| | |
| | |
| | |
| |
| | |
Year Ended December 31, | |
| | |
2017 | | |
2016 | | |
2015 | | |
2014 | | |
2013 | |
| Cumulative Preferred Shares: | |
| | |
| | |
| | |
| | |
| |
| 5.875% Series A Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 76,201 | | |
$ | 76,201 | | |
$ | 76,201 | | |
$ | 76,201 | | |
$ | 76,200 | |
| Total shares outstanding (in 000’s) | |
| 3,048 | | |
| 3,048 | | |
| 3,048 | | |
| 3,048 | | |
| 3,048 | |
| Liquidation preference per share | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | |
| Average market value (d) | |
$ | 26.31 | | |
$ | 26.32 | | |
$ | 25.63 | | |
$ | 25.26 | | |
$ | 25.31 | |
| Asset coverage per share(e) | |
$ | 117.53 | | |
$ | 107.18 | | |
$ | 119.66 | | |
$ | 131.21 | | |
$ | 133.94 | |
| Series B Auction Market Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 90,000 | | |
$ | 90,000 | | |
$ | 90,000 | | |
$ | 90,000 | | |
$ | 90,000 | |
| Total shares outstanding (in 000’s) | |
| 4 | | |
| 4 | | |
| 4 | | |
| 4 | | |
| 4 | |
| Liquidation preference per share | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Liquidation value (f) | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Asset coverage per share(e) | |
$ | 117,528 | | |
$ | 107,181 | | |
$ | 119,660 | | |
$ | 131,206 | | |
$ | 133,938 | |
| Series C Auction Market Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 108,000 | | |
$ | 108,000 | | |
$ | 108,000 | | |
$ | 108,000 | | |
$ | 108,000 | |
| Total shares outstanding (in 000’s) | |
| 4 | | |
| 4 | | |
| 4 | | |
| 4 | | |
| 4 | |
| Liquidation preference per share | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Liquidation value (f) | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Asset coverage per share(e) | |
$ | 117,528 | | |
$ | 107,181 | | |
$ | 119,660 | | |
$ | 131,206 | | |
$ | 133,938 | |
| 6.000% Series D Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 63,557 | | |
$ | 63,557 | | |
$ | 63,557 | | |
$ | 63,557 | | |
$ | 63,557 | |
| Total shares outstanding (in 000’s) | |
| 2,542 | | |
| 2,542 | | |
| 2,542 | | |
| 2,542 | | |
| 2,542 | |
| Liquidation preference per share | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | |
| Average market value (d) | |
$ | 26.57 | | |
$ | 26.58 | | |
$ | 25.70 | | |
$ | 25.53 | | |
$ | 26.25 | |
| Asset coverage per share(e) | |
$ | 117.53 | | |
$ | 107.18 | | |
$ | 119.66 | | |
$ | 131.21 | | |
$ | 133.94 | |
| Series E Auction Rate Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 121,500 | | |
$ | 121,500 | | |
$ | 121,500 | | |
$ | 121,500 | | |
$ | 121,500 | |
| Total shares outstanding (in 000’s) | |
| 5 | | |
| 5 | | |
| 5 | | |
| 5 | | |
| 5 | |
| Liquidation preference per share | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Liquidation value (f) | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Asset coverage per share(e) | |
$ | 117,528 | | |
$ | 107,181 | | |
$ | 119,660 | | |
$ | 131,206 | | |
$ | 133,938 | |
| 5.250% Series G Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 100,000 | | |
$ | 100,000 | | |
| — | | |
| — | | |
| — | |
| Total shares outstanding (in 000’s) | |
| 4,000 | | |
| 4,000 | | |
| — | | |
| — | | |
| — | |
| Liquidation preference per share | |
$ | 25.00 | | |
$ | 25.00 | | |
| — | | |
| — | | |
| — | |
| Average market value (d) | |
$ | 25.29 | | |
$ | 25.20 | | |
| — | | |
| — | | |
| — | |
| Asset coverage per share(e) | |
$ | 117.53 | | |
$ | 107.18 | | |
| | | |
| | | |
| | |
| Asset Coverage (g) | |
| 470 | % | |
| 429 | % | |
| 479 | % | |
| 525 | % | |
| 536 | % |
| † | Based
on net asset value per share and 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 obtained 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)
Based on weekly prices.
(e)
Asset coverage per share is calculated by combining all series of preferred shares.
| (f) | Since
February 2008, the weekly auctions have failed. Holders that have submitted orders have
not been able to sell any or all of their shares in the auction. |
| (g) | Asset
coverage is calculated by combining all series of preferred shares. |
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.
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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.
On August 17, 2022,
the Board of Trustees of the Fund approved and adopted Amendment No. 1 (“Amendment No. 1”) 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. 3 to the Fund’s Registration Statement on Form N-2. Pursuant to Amendment No. 1:
| ● | the vote necessary to elect one or more trustees 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 trustees
in which the number of persons nominated for election as trustees by shares entitled to vote for such trustees in accordance with
the Fund’s By-Laws exceeds the number of trustees to be elected by shares entitled to vote for such trustees. |
INVESTMENT
OBJECTIVES AND POLICIES
Investment Objectives and Policies
The Fund’s
investment objective is to seek a high level of total return with an emphasis on dividends and income. The Fund attempts to achieve
its objective by investing, under normal market conditions, at least 80% of its net assets in dividend paying securities (such
as common and preferred stock) or other income producing securities (such as fixed-income securities and securities that are convertible
into common stock). In addition, under normal market conditions, at least 50% of the Fund’s total assets will consist of
dividend paying equity securities. In making equity selections, Gabelli Funds, LLC, which serves as Investment Adviser to the Fund,
looks for securities that have a superior yield and capital gains potential.
The Fund may invest in the
securities of companies of any market capitalization. The Fund may invest up to 25% of its total assets in securities of issuers
in a single industry and may invest up to 35% of its total assets in securities of non-U.S. issuers (including securities of companies
in emerging markets), which are generally denominated in foreign currencies. The Fund may also invest up to 10% of its total assets
in below investment-grade securities, also known as high-yield securities. These securities, which may be preferred stock 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 debt securities of comparable quality) are referred to
in the financial press as “junk bonds” or “high-yield” securities. The average duration of the Fund’s
investments in debt securities is expected to vary and the Fund does not target any particular average duration.
The Fund’s
policy to invest at least 80% of its net assets in dividend paying securities or other income producing securities may be changed
by the Board; however, if this policy changes, the Fund will provide shareholders at least 60 days’ written notice before
implementation of the change in compliance with SEC rules.
No assurances can
be given that the Fund’s objective will be achieved. Neither the Fund’s investment objective nor, except as expressly
stated herein, any of its policies are fundamental, and each may be modified by the Board without shareholder approval. The percentage
and ratings limitations stated herein apply only at the time
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
of investment and
are not considered violated as a result of subsequent changes to the value, or downgrades to the ratings, of the Fund’s portfolio
investments.
Gabelli Funds, LLC,
a New York limited liability company, with offices at One Corporate Center, Rye, New York 10580-1422, serves as investment adviser
to 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;
the prices of the securities relative
to other comparable securities;
whether the securities are entitled
to the benefits of call protection or other protective covenants; and
the existence of any anti-dilution protections or guarantees
of the security; and
the diversification of the portfolio
of the Fund as to issuers.
The Investment Adviser’s
investment philosophy with respect to equity and debt 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. In making equity selections, the Investment Adviser looks for
securities that have a superior yield and capital gains potential. 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
Equity Securities. The
Fund invests in equity securities (such as common stock and preferred stock).
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.
Equity securities
also include preferred stock (whether or not convertible into common stock) and debt securities convertible into or exchangeable
for common or preferred stock. Preferred stock has a preference over common stock in liquidation (and generally dividends as well)
but is subordinated to the liabilities of the issuer in all respects. As a general rule the market value of preferred stock with
a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market
price of convertible
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
preferred stock generally
also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of
the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than
in a more senior debt security with similarly stated yield characteristics. The market value of preferred stock will also generally
reflect whether (and if so when) the issuer may force holders to sell their preferred stock back to the issuer and whether (and
if so when) the holders may force the issuer to buy back their preferred stock. Generally speaking, the right of the issuer to
repurchase the preferred stock tends to reduce any premium at which the preferred stock might otherwise trade due to interest
rate or credit factors, while the right of the holders to require the issuer to repurchase the preferred stock tends to reduce
any discount at which the preferred stock might otherwise trade due to interest rate or credit factors. In addition, 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 stocks, whereby the issuer does not have an obligation to make up any arrearages
to its shareholders. 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.
Securities
that are convertible into or exchangeable for preferred or common stock are liabilities of the issuer but are generally
subordinated to more senior elements of the issuer’s balance sheet. Although such securities also generally reflect an
element of conversion value, their market value also varies with interest rates and perceived credit risk. Many convertible
securities are not investment grade, that is, not rated “BBB” or better by S&P or “Baa” or
better by Moody’s or considered by the Investment Adviser to be of similar quality.
Preferred stocks
and convertible securities may have many of the same characteristics and risks as nonconvertible debt securities. See “Risk
Factors and Special Considerations—General Risks—Non-Investment Grade Securities.”
The Investment Adviser
believes that preferred stock and convertible securities of certain companies offer the opportunity for capital appreciation and
periodic income. This is particularly true in the case of companies that have performed below expectations. If a company’s
performance has been poor enough, its preferred stock and convertible securities may trade more like common stock than like fixed-income
securities, which may result in above average appreciation if the company’s performance improves. Even if the credit quality
of such a company is not in question, the market price of its convertible securities may reflect little or no element of conversion
value if the price of its common stock has fallen substantially below the conversion price. This can result in capital appreciation
if the price of the company’s common stock recovers.
Income
Securities. 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 open-end funds that invest in those securities, which, in the absence of an applicable exemptive order
or rule, will not be affiliated with the Investment Adviser, and (ii) common 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 shareholders.
Common stocks, on the other hand, generally do not obligate an issuer to make periodic distributions to holders.
The Gabelli Dividend & Income Trust
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.
The Fund also may
invest in common stock of issuers that have historically paid periodic dividends or otherwise made distributions to common shareholders.
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 statistical rating agencies,, also known as high-yield securities. These securities, which may be preferred stock 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 debt securities of comparable quality)
are referred to in the financial press as “junk bonds” or “high-yield” securities.
Generally, such
non-investment grade securities and unrated securities of comparable quality offer a higher current yield than is offered by higher
rated securities, but also (i) will likely have some quality and protective characteristics that, in the judgment of the rating
organizations, are outweighed by large uncertainties or major risk exposures to adverse conditions, and (ii) are predominantly
speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the
obligation. The market values of certain of these securities also tend to be more sensitive to individual corporate developments
and changes in economic conditions than higher quality bonds. In addition, such comparable unrated securities generally present
a higher
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
degree of credit
risk. The risk of loss due to default by these issuers is significantly greater because such non-investment grade securities and
unrated securities of comparable quality generally are unsecured and frequently are subordinated to the prior payment of senior
indebtedness. In light of these risks, the Investment Adviser, in evaluating the creditworthiness of an issue, whether rated or
unrated, will take various factors into consideration, which may include, as applicable, the issuer’s operating history,
financial resources and its sensitivity to economic conditions and trends, the market support for the facility financed by the
issue, the perceived ability and integrity of the issuer’s management and regulatory matters.
In addition, the
market value of non-investment grade securities is more volatile than that of higher quality securities, and the markets in which
such lower rated or unrated securities are traded are more limited than those in which higher rated securities are traded. The
existence of limited markets may make it more difficult for the Fund to obtain accurate market quotations for purposes of valuing
its portfolio and calculating its net asset value. Moreover, the lack of a liquid trading market may restrict the availability
of securities for the Fund to purchase and may also have the effect of limiting the ability of the Fund to sell securities at their
fair value in order to respond to changes in the economy or the financial markets.
Non-investment grade securities
and unrated securities of comparable quality also present risks based on payment expectations. If an issuer calls the obligation
for redemption (often a feature of fixed-income securities), the Fund may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. Also, as the principal value of nonconvertible bonds and preferred stocks moves
inversely with movements in interest rates, in the event of rising interest rates the value of the securities held by the Fund
may decline proportionately more than a portfolio consisting of higher rated securities. Investments in zero coupon bonds may
be more speculative and subject to greater fluctuations in value due to changes in interest rates than bonds that pay interest
currently. Interest rates have risen in recent months, and the risk that they may continue to do so is pronounced. Any interest
rate increases in the future could cause the value of the Fund to decrease. Recently, inflation levels have been at their highest
point in nearly 40 years and the Federal Reserve has begun an aggressive campaign to raise certain benchmark interest rates in
an effort to combat inflation. As inflation increases, the real value of the Fund’s common stock and distributions therefore
may decline.
As part of its investments
in non-investment grade securities, the Fund may invest in securities of issuers in default. The Fund will make an investment in
securities of issuers in default only when the Investment Adviser believes that such issuers will honor their obligations or emerge
from bankruptcy protection and the value of these securities will appreciate. By investing in 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 the securities will not otherwise appreciate.
In addition to using
recognized rating agencies and other sources, the Investment Adviser also performs its own analysis of issues 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 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.
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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.
Fixed 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 experienced periods of significantly adverse price and liquidity several times, particularly
at or around times of economic recession. Past market recessions have adversely affected the value of such securities and 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 may react in a similar fashion in the future.
Securities
Subject to Reorganization. The Fund may invest without limit 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 high total return significantly greater than the brokerage and other transaction expenses involved.
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 or may also trade at a discount 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 of
the prospective portfolio company 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 and the assets or securities to be received as a result of the contemplated transaction
but also the financial resources and business motivation of the offeror and 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. The Investment Adviser intends to select investments
of this type which, in its view, have a reasonable prospect of capital appreciation which is significant in relation to both risk
involved and the potential of available alternative investments.
Temporary
Defensive Investments. When a temporary
defensive posture is believed by the Investment Adviser to be warranted (“temporary defensive periods”), the Fund may
without limitation hold cash or invest all or a portion of its assets in money market instruments and repurchase agreements in
respect of those instruments. The money market instruments in which the Fund may invest are obligations of the U.S. government,
its agencies or instrumentalities; commercial paper rated “A-1” or higher by S&P or “Prime-1” by Moody’s;
and
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certificates of
deposit and bankers’ acceptances issued by domestic branches of U.S. banks that are members of the Federal Deposit Insurance
Corporation. During temporary defensive periods, the Fund may also invest to the extent permitted by applicable law in shares of
money market mutual funds. Money market mutual funds are investment companies and the investments in those companies by the Fund
are in some cases subject to certain fundamental investment restrictions and applicable law. As a shareholder in a mutual fund,
the Fund will bear its ratable share of its expenses, including management fees, and will remain subject to payment of the fees
to the Investment Adviser, with respect to assets so invested. The Fund may find it more difficult to achieve its investment objective
during temporary defensive periods.
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 over-the-counter 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 the right, in return for a premium, to sell the underlying security
to the writer, at a specified price, and obligating the writer to purchase the underlying security from the holder at that price.
The Fund may purchase call or put options as long as the aggregate initial margins and premiums, measured at the time of such investment,
do not exceed 10% of the fair market value of the Fund’s total assets. There is no limit on the amount of options the Fund
may write (sell).
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, 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. 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 realizes
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 realizes 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, and any gain resulting from the repurchase
of a call option may also be wholly or partially offset by unrealized depreciation of the underlying security. Other principal
factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price
and price volatility of the underlying security and the time remaining until the expiration date. 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.
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Additional Fund Information (Continued) (Unaudited)
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 generally purchases or writes 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 exist 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.
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 foreign currencies.
The Investment Adviser has claimed an exclusion from the definition of the term “commodity pool operator” under the
Commodity Exchange Act and therefore is not subject to registration under the Commodity Exchange Act.
Forward
Foreign Currency Exchange Contracts. Subject to guidelines of the Board, 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. 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. The Fund invests
in forward currency contracts for hedging or currency risk management purposes and not in order to speculate on currency exchange
rate movements. The Fund only enters into forward currency contracts with parties which it believes to be creditworthy.
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. 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. The Fund may make short sales of securities. A short sale is a transaction in
which the Fund sells a security it does not own in anticipation that the market price of that security will decline. The market
value of
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the securities
sold short of any one issuer will not exceed either 10% of the Fund’s total assets or 5% of such issuer’s voting securities.
The Fund also will not make a short sale, if, after giving effect to such sale, the market value of all securities sold short
exceeds 25% of the value of its assets. The Fund may also make short sales “against the box” without respect to such
limitations. In this type of short sale, at the time of the sale, the Fund owns, or has the immediate and unconditional right
to acquire at no additional cost, the identical security.
The Fund makes short
sales both to obtain capital gain from anticipated declines in securities and as a form of hedging to offset potential declines
in long positions in the same or similar securities. The short sale of a security is considered a speculative investment technique.
Short sales “against the box” may be subject to special tax rules, one of the effects of which may be to accelerate
income to the Fund.
When the Fund makes
a short sale, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale in
order to satisfy its obligation to deliver the security upon conclusion of the sale. The Fund may have to pay a fee to borrow particular
securities and is often obligated to pay over any payments received on such borrowed securities.
If the price of the security
sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss will
be increased, by the transaction costs incurred by the Fund, including the costs associated with providing collateral to the broker-dealer
(usually cash, U.S. government securities or other highly liquid debt securities) and the maintenance of collateral with its Custodian.
Although the Fund’s gain is limited to the price at which it sold the security short, its potential loss is theoretically
unlimited.
Repurchase
Agreements. Repurchase agreements
may be seen as loans by the Fund collateralized by underlying securities. Under the terms of a typical repurchase agreement, the
Fund acquires an underlying security 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 security 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 assert these rights. The Investment Adviser, acting under the supervision
of the Board, 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 does not enter into repurchase agreements with the Investment Adviser or
any of its affiliates.
Restricted
and Illiquid Securities. The Fund may invest in securities for which there is no readily
available trading market or are otherwise illiquid. Illiquid securities include securities legally restricted as to resale, such
as commercial paper issued pursuant to Section 4(a)(2) of the Securities Act of 1933 (“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
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Additional Fund Information (Continued) (Unaudited)
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.
Foreign Securities. The Fund invests
in the equity securities of companies located outside the United States.
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; 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).
The Fund may purchase
sponsored American Depository Receipts (“ADRs”) or U.S. dollar-denominated securities of foreign issuers, which will
be considered foreign securities for purposes of the Fund’s investment policies. 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. See “Risk
Factors and Special Considerations—General Risks—Foreign Securities.”
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
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Additional Fund Information (Continued) (Unaudited)
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.
Value
Investing. The Fund’s portfolio
managers will use various value methods in managing its assets. In selecting securities for the Fund, they evaluate 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 managers 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
managers then use these factors to assess the company’s current worth, basing this assessment on either what they believe
a knowledgeable buyer might pay to acquire the entire company or what they think the value of the company should be in the stock
market.
The Fund’s portfolio
managers generally invest in securities of companies that are trading significantly below their 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, they also
evaluate 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 managers generally attempt 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.
Industry
Concentration. The Fund may invest up to 25% of its total assets in securities of issuers
in a single industry. See “Risk Factors and Special Considerations—General Risks—Industry Risk.”
Leverage.
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) so long as its total assets, less certain ordinary course liabilities,
exceeds 300% of the amount of the debt outstanding and exceeds
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200% of the amount
of preferred shares and debt outstanding. Any such preferred shares may be convertible in accordance with the SEC staff guidelines,
which may permit the Fund to obtain leverage at attractive rates.
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 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—Special Risks to Holders of Common Shares—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.
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.
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Additional Fund Information (Continued) (Unaudited)
Investment
Restrictions. The Fund has adopted certain fundamental investments policies designed
to limit investment risk and maintain portfolio diversification. See “Investment Restrictions” below for a complete
list of the fundamental policies of the Fund. Fundamental policies 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 subject to class approval
rights of any preferred shares). 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.
Neither the Fund’s
investment objective nor, except as expressly listed under “Investment Restrictions” below, any of its policies (including
with respect to the interest rate transactions described under the heading “How the Fund Manages Risk—Interest Rate
Transactions”) is fundamental, and each may be modified by the Board without shareholder approval.
In addition, pursuant to
the respective Statement of Preferences of the Fund’s Series B Preferred Shares, Series C Preferred Shares, Series E Preferred
Shares, Series H Preferred Shares, Series J Preferred Shares and Series K Preferred Shares, 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. See “Investment Restrictions” below.
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—General Risks—Loans of Portfolio Securities.”
Portfolio
Turnover. The Fund will buy and sell securities to accomplish its investment objective.
The investment policies of the Fund may lead to frequent changes in investments, particularly in periods of rapidly fluctuating
interest or currency exchange rates.
Portfolio turnover generally
involves some expense to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. The portfolio turnover rate is computed by dividing the lesser of the amount of
the securities purchased or securities sold by the average monthly value of securities owned during the year (excluding securities
whose maturities at acquisition were one year or less). Higher portfolio turnover may decrease the after-tax return to individual
investors in the Fund to the extent it results in a decrease of the long-term capital gains portion of distributions to shareholders.
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Additional Fund Information (Continued) (Unaudited)
For the fiscal years ended December 31, 2020,
2021 and 2022, the portfolio turnover rate of the Fund was 16%, 12% and 10%, respectively. The Fund anticipates that its portfolio
turnover rate will generally not exceed 100%.
Further information on the investment objective and policies of the Fund is set
forth below.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investors should consider the following risk
factors and special considerations associated with investing in the Fund, each of which is noted as either a “principal”
risk or a “non-principal” risk:
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 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
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Additional Fund Information (Continued) (Unaudited)
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 to decrease. In addition, inflation has recently 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.
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.
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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 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.
Equity
Risk. Investing in the Fund involves equity risk, which is the risk that the securities
held by the Fund will fall in market value due to adverse market and economic conditions, perceptions regarding the industries
in which the issuers of securities held by the Fund participate and the particular circumstances and performance of particular
companies whose securities the Fund holds. An investment in the Fund represents an indirect economic stake in the securities owned
by the Fund, which are for the most part traded on securities exchanges
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Additional Fund Information (Continued) (Unaudited)
or in the OTC markets. The
market value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. The
net asset value of the Fund may at any point in time be worth less than the amount at the time the shareholder invested in the
Fund, even after taking into account any reinvestment of distributions.
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, among other reasons,
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 those returns.
Preferred
Stock Risk. There are special risks associated with the Fund’s investing in
preferred securities, including:
| ● | Deferral. Preferred securities may include provisions
that permit the issuer, at its discretion, to defer dividends or distributions for a stated period without any adverse consequences
to the issuer. If the Fund owns a preferred security that is deferring its dividends or distributions, the Fund may be required
to report income for tax purposes although it has not yet received such income. |
| ● | Non-Cumulative Dividends. Some preferred securities
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 security held by the Fund determine not to pay dividends or distributions
on such security, the Fund’s return from that security may be adversely affected. There is no assurance that dividends or
distributions on non-cumulative preferred securities in which the Fund invests will be declared or otherwise made payable. |
| ● | Subordination. Preferred securities are subordinated
to bonds and other debt instruments in an issuer’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 U.S. federal income tax or securities laws. A redemption
by the issuer may negatively impact the return of the security held by the Fund. |
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
Convertible
Securities Risk. A convertible security is a bond, debenture, corporate note, preferred stock or other securities 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. Before conversion, convertible securities have the same overall
characteristics as non-convertible debt securities insofar as they generally provide a stable stream of income with generally higher
yields than those of equity securities 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.
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.
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
The Gabelli
Dividend & Income Trust
Additional
Fund Information (Continued) (Unaudited)
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.
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.
Recapitalization Risk.
In recapitalizations, a corporation may restructure its balance sheet by selling specific assets, significantly leveraging
other assets and creating new classes of equity securities to be distributed, together with a substantial payment in cash or in
debt securities, to existing shareholders. In connection with such transactions, there is a risk that the value of the cash and
new securities distributed will not be as high as the cost of the Fund’s original investment or that no such distribution
will ultimately be made and the value of the Fund’s investment will decline. To the extent an investment in a company that
has undertaken a recapitalization is retained by the Fund, the Fund’s risks will generally be comparable to those associated
with investments in highly leveraged companies, generally including higher than average sensitivity to (i) short-term interest
rate fluctuations, (ii) downturns in the general economy or within a particular industry or (iii) adverse developments within the
company itself.
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 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 “—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 Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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.
Value Investing
Risk. The Fund focuses its investments on the securities of companies that the Investment Adviser believes to be 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.
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. |
| ● | Credit Risk. Credit risk is the risk that one or more
income-or dividend-paying securities in the Fund’s portfolio will decline in price or fail to pay interest/distributions
or principal when due because the issuer of the security experiences a decline in its financial status. Credit risk is increased
when a portfolio security is downgraded or the perceived creditworthiness of the issuer deteriorates. To the extent the Fund
invests in below investment grade securities, it will be exposed to a greater amount of credit risk than a fund which only invests
in investment grade securities. See “—Non-Investment Grade Securities.” In addition, to the extent the Fund
uses credit derivatives, such use will expose it to additional risk in the event that the bonds underlying the derivatives default.
The degree of credit risk depends on the issuer’s financial condition and on the terms of the securities. |
| ● | 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”). |
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
For premium bonds (bonds acquired at
prices that exceed their par or principal value) purchased by the Fund, prepayment risk may be enhanced.
| ● | Reinvestment Risk. Reinvestment risk is the risk that
income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed income
securities at market interest rates that are below the Fund portfolio’s current earnings rate. |
| ● | 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 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
The Gabelli Dividend & Income Trust
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. This could lead, in some circumstances,
and has led with respect to the rate setting mechanisms for the Series B Preferred Shares, Series C Preferred Shares and Series
E Preferred Shares, to circumstances where a last-resort fallback of fixing any LIBOR-based reference rate at the last published
LIBOR rate will apply. Such a result could lead, and has led, to divergent and unexpected economic results for the Fund and holders
of any such affected instruments, including holders of the Series B Preferred Shares, Series C Preferred Shares and Series E Preferred
Shares, and has resulted in the current
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
interest rate environment in the rates payable
on any such instruments, particularly the Series B Preferred Shares, Series C Preferred Shares and Series E Preferred Shares,
not representing prevailing market rates, all of which could have a material adverse effect on the Fund, holders of such instruments,
including holders of Series B Preferred Shares, Series C Preferred Shares and Series E Preferred Shares, or both.
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-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. 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 “—Fixed Income Securities Risks—Credit Risk,” “—Fixed Income
Securities Risks— Interest Rate Risk,” “—Fixed Income Securities Risks—Prepayment Risk,” “—General
Risks—Inflation Risk” and “—General Risks—Interest Rate Risk Generally” 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.”
| ● | the relationship between prepayments and interest rates
may give some lower grade government sponsored 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. |
Non-Investment Grade Securities.
The Fund may invest in below investment-grade securities, also known as high-yield securities or “junk” bonds.
These securities, which may be preferred stock or debt, are predominantly
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Additional Fund Information (Continued) (Unaudited)
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 debt securities of comparable quality) are referred to in the financial press as “junk bonds”
or “high yield” securities and generally pay a premium above the yields of U.S. government securities or debt 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 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.
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.
Small
and Mid-Cap Company Risk. The FFund
may invest in the equity securities of small-cap and/or mid-cap companies.
Small and mid-cap
companies offer investment opportunities and additional risks. They may not be well known 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 or business
lines and markets, as well as shorter operating histories, less experienced management and more limited financial resources than
larger companies. Changes in any one line of business, therefore, may have a greater impact on a small or mid-cap company’s
stock price than is the case for a larger company. 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 small and mid-cap companies
may be less liquid than those of larger
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Additional Fund Information (Continued) (Unaudited)
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 small or mid-cap 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
small and mid-cap 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, small and mid-cap securities may be particularly sensitive
to changes in interest rates, borrowing costs and earnings. Investing in small and mid-cap securities requires a longer-term view.
Small and mid-cap
companies, due to the size and kinds of markets that they serve, may be less susceptible than large-cap companies to intervention
from the U.S. federal government by means of price controls, regulations or litigation.
Financial
Services Sector Risk. The Fund has
in the past invested, and may in the future invest, a significant portion of its total assets in securities issued by financial
services companies. Financial services are generally involved in banking, mortgage finance, consumer finance, specialized finance,
investment banking and brokerage, asset management and custody, corporate lending, insurance, financial investments, or real estate.
The profitability
of many types of financial services companies may be adversely affected in certain market cycles, including periods of rising interest
rates, which may restrict the availability and increase the cost of capital, and declining economic conditions, which may cause
credit losses due to financial difficulties of borrowers. Financial services companies are also subject to extensive government
regulation, including policy and legislative changes in the United States and other countries.
Additional risks
include the effects of changes in interest rates on the profitability of financial services companies, the rate of corporate and
consumer debt defaults, price competition, governmental limitations on a company’s loans, other financial commitments, product
lines and other operations, and recent ongoing changes in financial services companies (including consolidations, development of
new products and changes to such companies’ regulatory framework). Some financial services companies have recently experienced
significant losses in value and the possible recapitalization of such companies may present greater risks of loss. Insurance companies
have additional risks, such as heavy price competition, claims activity and marketing competition, and can be particularly sensitive
to specific events such as man-made and natural disasters (including weather catastrophes), terrorism, mortality risks and morbidity
rates.
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
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Additional Fund Information (Continued) (Unaudited)
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.
| ● | the relationship between prepayments and interest rates
may give some lower grade government sponsored 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. |
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.
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Additional Fund Information (Continued) (Unaudited)
There may be less
publicly available information about a foreign company than a U.S. company. Foreign securities markets may have substantially less
volume than U.S. securities markets and some foreign company securities are less liquid 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. 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 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:
| ● | Foreign Currency Risk. The Fund may invest in companies
whose securities are denominated or quoted in currencies other than U.S. dollars or have significant operations or markets outside
of the United States. In such instances, the Fund will be exposed to currency risk, including the risk of fluctuations in the
exchange rate between U.S. dollars (in which the Fund’s shares are denominated) and such foreign currencies, the risk of
currency devaluations and the risks of non-exchangeability and blockage. As non-U.S. securities may be purchased with and payable
in currencies of countries other than the U.S. dollar, the value of these assets measured in U.S. dollars may be affected favorably
or unfavorably by changes in currency rates and exchange control regulations. Fluctuations in currency rates may adversely affect
the ability of the Investment Adviser to acquire such securities at advantageous prices and may also adversely affect the performance
of such assets. |
| | | |
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 |
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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 generally. 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 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; envi- |
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Additional Fund Information (Continued) (Unaudited)
ronmental 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.
| ● | 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 cash flows of mutual funds investing in these markets could significantly affect
local stock prices and, therefore, the net asset value of Fund’s shares. These factors make investing in frontier countries
significantly riskier than in other countries and any one of them could cause the net asset value of a 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.
| ● | 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 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 |
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Additional Fund Information (Continued) (Unaudited)
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 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.
| ● | Russia. As a result of Russia’s military
invasion of Ukraine in February 2022, the United States and other countries imposed broad-reaching political and economic sanctions
on Russia, certain Russian allies believed to be providing them military or financial support, on private and public companies
domiciled in Russia, including public issuers and banking and financial institutions, and on a variety of individuals. These sanctions,
combined with equivalent measures taken by foreign businesses ceasing operations in Russia, continue to adversely impact global
financial markets, disrupt global supply chains, and impair the value and liquidity of issuers and funds that continue to maintain
exposure to Russia and its allies, Russian investments, and sectors that can be impacted by restrictions on Russian imports and
exports, such as the oil and gas industry |
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Additional Fund Information (Continued) (Unaudited)
It is not possible
to predict the duration or extent of longer-term consequences of this conflict, which could include further sanctions, retaliatory
measures taken by Russia, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions,
security conditions, currency exchange rates, and financial markets around the globe. Any of the foregoing consequences, including
those we cannot yet predict, may negatively impact the Fund’s performance and the value of an investment in the Fund, even
if the Fund does not have direct exposure to Russian issuers or issuers in other countries impacted by the invasion. In general
terms, the overall negative impact to the Fund will depend on the extent to which the Fund is prohibited from selling or otherwise
transacting in their investments at any given time and whether a fair market valuation can be readily obtained, particularly for
any Russian currency-denominated investments and investments in US dollar-denominated American Depositary Receipts representing
securities of Russian issuers.
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 a security is valued for determining the Fund’s net asset
value and the price the Fund actually receives upon sale.
Special Risks Related to
Investment in Derivatives. The Fund may participate in derivative transactions. Such
transactions entail certain execution, market, liquidity, 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
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Additional Fund Information (Continued) (Unaudited)
a worse position than if it had not used such
strategies. Risks inherent in the use of options, 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 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 comply with Rule 18f-4; 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 Commodity Futures Trading Commission (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 of leverage and may expose the Fund to greater risk and increase its costs.
Future CFTC or SEC rulemakings
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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.
Short
Sales Risk. Short-selling involves selling securities which may or may not be owned
and borrowing the same securities for delivery to the purchaser, with an obligation to replace the borrowed securities at a later
date. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be
decreased, and any loss will be increased, by the transaction costs incurred by the Fund, including the costs associated with providing
collateral to the broker-dealer (usually cash and liquid securities). Although the Fund’s gain is limited to the price at
which it sold the security short, its potential loss is theoretically unlimited.
Short-selling necessarily
involves certain additional risks. However, if the short seller does not own the securities sold short (an uncovered short sale),
the borrowed securities must be replaced by securities purchased at market prices in order to close out the short position, and
any appreciation in the price of the borrowed securities would result in a loss. Uncovered short sales expose the Fund to the risk
of uncapped losses until a position can be closed out due to the lack of an upper limit on the price to which a security may rise.
Purchasing securities to close out the short position can itself cause the price of the securities to rise further, thereby exacerbating
the loss. There is the risk that the securities borrowed by the Fund in connection with a short-sale must be returned to the securities
lender on short notice. If a request for return of borrowed securities occurs at a time when other short-sellers of the security
are receiving similar requests, a “short squeeze” can occur, and the Fund may be compelled to replace borrowed securities
previously sold short with purchases on the open market at the most disadvantageous time, possibly at prices significantly in excess
of the proceeds received at the time the securities were originally sold short.
In September 2008,
in response to spreading turmoil in the financial markets, the SEC temporarily banned short selling in the stocks of numerous financial
services companies, and also promulgated new disclosure requirements with respect to short positions held by investment managers.
The SEC’s temporary ban on short selling of such stocks has since expired, but should similar restrictions and/or additional
disclosure requirements be promulgated, especially if market turmoil occurs, the Fund may be forced to cover short positions more
quickly than otherwise intended and may suffer losses as a result. Such restrictions may also adversely affect the ability of the
Fund to execute its investment strategies generally. Similar emergency orders were also instituted in non-U.S. markets in response
to increased volatility. The Fund’s ability to engage in short sales is also restricted by various regulatory requirements
relating to short sales.
Industry
Risk. The Fund may invest up to 25% of its total assets in securities of a single industry.
Should the Fund choose to do so, 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
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on borrowings needed
for capital investment, including costs associated with compliance with environmental and 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.
Leverage Risk.
The Fund currently uses financial leverage for investment purposes by issuing preferred
shares. As of December 31, 2022, the amount of leverage represented approximately 14% of the Fund’s net assets. The Fund’s
leveraged capital structure creates special risks not associated with unleveraged funds that have 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 any preferred shares or debt outstanding. 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 the Fund is leveraged in its investment operations, the Fund will be subject
to substantial risk of loss. The Fund cannot assure that borrowings or the issuance of preferred shares or notes will result in
a higher yield or return to the holders of the common shares. Also, to the extent 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 Subchapter M of the Code. For more information regarding the risks of a leverage
capital structure to holders of the Fund’s common shares, see “Special Risks to Holders of Common Shares—Leverage
Risk.”
Market
Discount Risk. The Fund is a diversified, closed-end management investment company.
Whether investors will realize gains or losses upon the sale of additional securities of the Fund will depend upon the market
price of the securities at the time of sale, which may be less or more than the Fund’s net asset value per share or the
liquidation value of any Fund preferred shares issued. Since the market price of any additional securities the Fund may issue
will be affected by such factors as the Fund’s dividend and distribution levels (which are in turn affected by expenses),
dividend and distribution stability, net asset value, market liquidity, the relative demand for and supply of such securities
in the market, general market and economic conditions and other factors beyond the control of the Fund, we cannot predict whether
any such securities will trade at, below or above net asset value or at, below or above their public offering price or at, below
or above their liquidation value, as applicable. For example, 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 securities of the Fund soon after the completion of a public offering for such securities. The risk of a market
price discount from net asset value is separate and in addition to the risk that net asset value itself may decline. The Fund’s
securities are designed primarily for long-term investors, and investors in the shares should not view the Fund as a vehicle for
trading purposes.
Long
Term Objective; Not a Complete Investment Program. The Fund is intended for investors
seeking long-term growth of capital. The Fund is not meant to provide a vehicle for those who wish to exploit short-term swings
in the stock market. An investment in shares of the Fund should not be considered a complete
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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.
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
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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 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.
Economic Events
and Market Risk. Periods of market volatility remain, and may continue to occur in the future, in response to various
political, social and economic events both within and outside of the United States. 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
Fund, 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. If there is a significant decline in the value of the
Fund’s portfolio, this may impact the asset coverage levels for the Fund’s outstanding leverage.
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Additional Fund Information (Continued) (Unaudited)
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 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
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Additional Fund Information (Continued) (Unaudited)
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.
Loans
of Portfolio Securities Risk. 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 herein), 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.
Legal,
Tax and Regulatory Risks. Legal, tax and regulatory changes could occur that may have
material adverse effects on the Fund or its shareholders. 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.
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Additional Fund Information (Continued) (Unaudited)
To qualify for
the favorable U.S. federal income tax treatment generally accorded to RICs under the Code, the Fund must, among other things,
meet certain asset diversification tests, 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 resulting corporate taxes would
materially reduce the Fund’s net assets and the amount of cash available for distribution to shareholders. For a more complete
discussion of these and other U.S. federal income tax considerations.
Investment
Dilution Risk. The Fund’s investors do not have preemptive rights to any shares
the Fund may issue in the future. The Fund’s Declaration of Trust authorizes it to issue an unlimited number of shares.
The Board may make certain amendments to the Declaration of Trust. After an investor purchases shares, the Fund may sell additional
shares or other classes of shares in the future or issue equity interests in private offerings. To the extent the Fund issues
additional equity interests after an investor purchases its shares, such investor’s percentage ownership interest in the
Fund will be diluted.
Anti-Takeover
Provisions. The Agreement and Declaration of Trust 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 also – “Delaware
Statutory Trust Act – Control Share Acquisitions.”
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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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.
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.
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Additional Fund Information (Continued) (Unaudited)
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 Fixed Rate Preferred
Shares
Illiquidity
Prior to Exchange Listing. Prior
to an offering, there will be no public market for any series of fixed rate preferred shares. In the event any additional series
of fixed rate preferred shares are issued, we expect to apply to list such shares on a national securities exchange, which will
likely be the NYSE. However, during an initial period, which is not expected to exceed 30 days after the date of its 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. Fixed rate preferred
shares may trade at a premium to or discount from liquidation value for various reasons, including changes in interest rates, perceived
credit quality and other factors.
Special Risks for Holders of Auction Rate
Preferred Shares Auction Risk. Holders of auction rate preferred shares may not be able to sell their auction rate
preferred shares at an auction if the auction fails, i.e., if more auction rate preferred shares are offered for sale than there
are buyers for those shares. Also, if you place an order (a hold order) at an auction to retain auction rate preferred shares
only at a specified rate that exceeds the rate set at the auction, you will not retain your auction rate preferred shares. Additionally,
if you place a hold order without specifying a rate below which you would not wish to continue to hold your shares and the auction
sets a below-market rate, you will receive a lower rate of return on your shares than the market rate. Finally, the dividend period
may be changed, subject to certain conditions and with notice to the holders of the auction rate preferred shares, which could
also affect the liquidity of your investment. Due to prolonged market disruption, most auction rate preferred share auctions have
been unable to hold successful auctions and holders of such shares have suffered reduced liquidity. Since February 2008, all of
the auctions of our Series B Preferred Shares , Series C Preferred Shares and Series E Preferred Shares have failed. Holders of
our auction rate preferred have continued to receive their dividends on the auction rate preferred shares at the maximum rate
determined by reference to short-term rates, rather than at a price set by auction. At present, the maximum rate for Series B
Preferred Shares and Series C Preferred Shares is equal to the greater of (a) 150% of or (b) 150 bps over the 7-day LIBOR, and
equal to the greater of (a) 250% of or (b) 250 bps over the 7-day LIBOR for Series E Preferred Shares. A failed auction is not
a default and the Fund has no obligation to redeem its auction rate preferred shares because the auctions continue to fail. There
can be no assurance that liquidity will improve. See “— General Risks—LIBOR Risk.”
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Additional Fund Information (Continued) (Unaudited)
Secondary Market Risk.
Holders of auction rate preferred shares who try to sell their auction rate preferred shares between auctions may not be able to
sell them for their liquidation preference per share or such amount per share plus accumulated dividends. If the Fund has designated
a special dividend period of more than seven days, changes in interest rates could affect the price you would receive if you sold
your shares in the secondary market. Broker-dealers that maintain a secondary trading market for the auction rate preferred shares
are not required to maintain this market, and the Fund is not required to redeem auction rate preferred shares if either an auction
or an attempted secondary market sale fails because of a lack of buyers. The auction rate preferred shares are and will not be
registered on a stock exchange. If you sell your auction rate preferred shares to a broker-dealer between auctions, you may receive
less than the price you paid for them, especially when market interest rates have risen since the last auction or during a special
dividend period.
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 its distributions for 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 $1.41 per common share, none of which constituted a return of capital. The composition
of each distribution is estimated based on earnings as of the record date for the distribution. The actual composition of each
distribution may change based on the Fund’s investment activity through the end of the calendar year.
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 notes, 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. A rating (if any) by a rating 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 (if any) does not address 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 notes or preferred shares, we may alter
our portfolio or redeem the preferred securities or notes under certain circumstances.
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Additional Fund Information (Continued) (Unaudited)
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 Risk 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 of the aggregate net asset value of their common shares. Such dilution 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.
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 14% 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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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 or notes 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, in an extreme case, the Fund’s current
investment income might not be sufficient to meet the distribution or interest requirements on the preferred shares or notes. In
order to counteract such an event, the Fund might need to liquidate investments in order to fund a redemption of some or all of
the 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 or the interest rate on the notes plus the management fee annual 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 such 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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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 Trustees 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 Trustees
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 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 14% 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 3.26%, then the total
return generated by the Fund’s portfolio (net of estimated expenses) must exceed approximately 0.45% 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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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 14% of the Fund’s net assets (the Fund’s average amount
of outstanding financial leverage during the fiscal year ended December 31, 2022), the Fund’s current projected blended annual
average leverage dividend or interest rate of 3.26% (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% and estimated annual incremental expenses attributable
to any outstanding preferred shares of approximately 0.01% of the Fund’s net assets attributable to common shares. 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.
| Assumed
Return on Portfolio (Net of Expenses) |
(10)% |
(5)% |
0% |
5% |
10% |
| Corresponding
Return to Common Shareholder |
(12.28)% |
(6.48)% |
(0.68)% |
5.12% |
10.92% |
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
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 designed 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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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
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 over-the-counter (“OTC”) market, as a means of achieving additional return or of hedging
the value of the Fund’s portfolio. The Fund may purchase call or put options as long as the aggregate initial margins and
premiums, measured at the time of such investment, do not exceed 10% of the fair market value of the Fund’s total assets.
A call option is
a contract that gives the holder of the option the right to buy from the writer of the call option, in return for a premium, 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
a contract that gives the holder of the option the right, in return for a premium, to sell to the seller the underlying security
at a specified price. The seller of the put option has the obligation to buy the underlying security upon exercise at the exercise
price.
A call option is “covered”
if the Fund owns the underlying instrument covered by the call or has an absolute and immediate right to acquire that instrument
without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon
conversion or exchange of other instruments held in its portfolio. A call option is also covered if the Fund holds a call on the
same instrument as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of
the call written or (ii) greater than the exercise price of the call written if the difference is maintained by the Fund in cash,
U.S. government securities or other high-grade short-term obligations in a segregated account with its custodian. A put option
is “covered” if the Fund maintains cash or other high-grade short-term obligations with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the same instrument as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put written.
A call option is “covered”
if the Fund owns the underlying instrument covered by the call or has an absolute and immediate right to acquire that instrument
without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon
conversion or exchange of other instruments held in its portfolio. A call option is also covered if the Fund holds a call on the
same instrument as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of
the call written or (ii) greater than the exercise price of the call written if the difference is maintained by the Fund in cash,
U.S. government securities or other high-grade short-term obligations in a segregated account with its custodian. A put option
is “covered” if the Fund maintains cash or other high-grade short-term obligations with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the same instrument as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put written.
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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, 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. 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 realizes
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 realizes 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, interest rates, the current market price and price volatility
of the underlying security and the time remaining until the expiration date. 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 generally purchases or writes 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 exist 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. If the Fund, as a covered call option writer, is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise or otherwise covers the position.
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 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, or less than, in the case of a put, 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.
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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. 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, without limit, enter into futures contracts or options on futures contracts. It is anticipated that these investments, if
any, will be made by the Fund primarily for the purpose of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase. Such investments will only be made if they are economically appropriate to the
reduction of risks involved in the management of the Fund. In this regard, the Fund may enter into futures contracts or options
on futures for the purchase or sale of securities indices or other financial instruments including, but not limited to, U.S. government
securities.
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
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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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, or is less than, in the case of a put, the exercise
price of the option on the futures contract. The potential loss related to the purchase of an option on futures contracts 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.
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 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 Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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 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 as 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.
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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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.
Traditional
Preferred Securities. Traditional preferred securities generally pay fixed or adjustable
rate dividends to investors and generally have a “preference” over common stock in the payment of dividends and the
liquidation of a company’s assets. This means that a company must pay dividends on preferred stock before paying any dividends
on its common stock. In order to be payable, distributions on such preferred securities must be declared by the issuer’s
board of directors. Income payments on typical preferred securities currently outstanding are cumulative, causing dividends and
distributions to accumulate even if not declared by the board of directors or otherwise made payable. In such a case all accumulated
dividends must be paid before any dividend on the common stock can be paid. However, some traditional preferred stocks are non-cumulative,
in which case 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 amount of dividends the
Fund pays may be adversely affected. There is no assurance that dividends or distributions on the preferred securities in which
the Fund invests will be declared or otherwise made payable.
Preferred shareholders usually
have no right to vote for corporate directors or on other matters. Shares of preferred stock have a liquidation value that generally
equals the original purchase price at the date of issuance.
The market value
of preferred securities may be affected by favorable and unfavorable changes impacting companies in which the Fund invests and
by actual and anticipated changes in tax laws, such as changes in corporate income tax rates or the “Dividends Received Deduction.”
Because the claim on an issuer’s earnings represented by preferred securities may become onerous when interest rates fall
below the rate payable on such securities, the issuer may redeem the securities. Thus, in declining interest rate environments
in particular, the Fund’s holdings, if any, of higher rate-paying fixed rate preferred securities may be reduced and the
Fund may be unable to acquire securities of comparable credit quality paying comparable rates with the redemption proceeds.
Trust
Preferred Securities. The Fund may
invest in trust preferred securities. Trust preferred securities are typically issued by corporations, generally in the form of
interest bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally
in the form of beneficial interests in subordinated debentures or similarly structured securities. The trust preferred securities
market consists of both fixed and adjustable coupon rate securities that are either perpetual in nature or have stated maturity
dates.
Trust preferred
securities are typically junior and fully subordinated liabilities of an issuer and benefit from a guarantee that is junior and
fully subordinated to the other liabilities of the guarantor. In addition, trust preferred
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securities typically
permit an issuer to defer the payment of income for five years or more without triggering an event of default. Because of their
subordinated position in the capital structure of an issuer, the ability to defer payments for extended periods of time without
default consequences to the issuer, and certain other features (such as restrictions on common dividend payments by the issuer
or ultimate guarantor when full cumulative payments on the trust preferred securities have not been made), these trust preferred
securities are often treated as close substitutes for traditional preferred securities, both by issuers and investors. Trust preferred
securities have many of the key characteristics of equity due to their subordinated position in an issuer’s capital structure
and because their quality and value are heavily dependent on the profitability of the issuer rather than on any legal claims to
specific assets or cash flows.
Trust preferred
securities include but are not limited to trust originated preferred securities (“TOPRS®”); monthly income preferred
securities (“MIPS®”); quarterly income bond securities (“QUIBS®”); quarterly income debt securities
(“QUIDS®”); quarterly income preferred securities (“QUIPSSM”); corporate trust securities (“CORTS®”);
public income notes (“PINES®”); and other trust preferred securities.
Trust preferred securities
are typically issued with a final maturity date, although some are perpetual in nature. In certain instances, a final maturity
date may be extended and/or the final payment of principal may be deferred at the issuer’s option for a specified time without
default. No redemption can typically take place unless all cumulative payment obligations have been met, although issuers may be
able to engage in open-market repurchases without regard to whether all payments have been paid.
Trust preferred securities
are typically issued with a final maturity date, although some are perpetual in nature. In certain instances, a final maturity
date may be extended and/or the final payment of principal may be deferred at the issuer’s option for a specified time without
default. No redemption can typically take place unless all cumulative payment obligations have been met, although issuers may be
able to engage in open-market repurchases without regard to whether all payments have been paid.
Many trust preferred
securities are issued by trusts or other special purpose entities established by operating companies and are not a direct obligation
of an operating company. At the time the trust or special purpose entity sells such preferred securities to investors, it purchases
debt of the operating company (with terms comparable to those of the trust or special purpose entity securities), which enables
the operating company to deduct for tax purposes the interest paid on the debt held by the trust or special purpose entity. The
trust or special purpose entity is generally required to be treated as transparent for Federal income tax purposes such that the
holders of the trust preferred securities are treated as owning beneficial interests in the underlying debt of the operating company.
Accordingly, payments on the trust preferred securities are treated as interest rather than dividends for Federal income tax purposes.
The trust or special purpose entity in turn would be a holder of the operating company’s debt and would have priority with
respect to the operating company’s earnings and profits over the operating company’s common shareholders, but would
typically be subordinated to other classes of the operating company’s debt. Typically a preferred share has a rating that
is slightly below that of its corresponding operating company’s senior debt securities.
Convertible
Securities. A convertible security
entitles the holder to exchange such security for a fixed number of shares of common stock or other equity security, usually of
the same company, at fixed prices within a specified period of time and to receive the fixed income of a bond or the dividend preference
of a preferred
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Additional Fund Information (Continued) (Unaudited)
stock until the holder elects
to exercise the conversion privilege. The fixed income or dividend component of a convertible security is referred to as the security’s
“investment value.”
A convertible security’s
position in a company’s capital structure depends upon its particular provisions. In the case of subordinated convertible
debentures, the holder’s claims on assets and earnings are subordinated to the claims of others and are senior to the claims
of common stockholders.
To the degree that the price
of a convertible security rises above its investment value because of a rise in price of the underlying common stock, the value
of such security is influenced more by price fluctuations of the underlying common stock and less by its investment value. The
price of a convertible security that is supported principally by its conversion value will rise along with any increase in the
price of the common stock, and such price generally will decline along with any decline in the price of the common stock except
that the security will receive additional support as its price approaches investment value. A convertible security purchased or
held at a time when its price is influenced by its conversion value will produce a lower yield than nonconvertible senior securities
with comparable investment values. Convertible securities may be purchased by the Fund at varying price levels above their investment
values and/or their conversion values in keeping with the Fund’s investment objective.
Many convertible securities
in which the Fund will invest have call provisions entitling the issuer to redeem the security at a specified time and at a specified
price. This is one of the features of a convertible security which affects valuation. Calls may vary from absolute calls to provisional
calls. Convertible securities with superior call protection usually trade at a higher premium. If long-term interest rates decline,
the interest rates of new convertible securities will also decline. Therefore, in a falling interest rate environment, companies
may be expected to call convertible securities with high coupons and the Fund would have to invest the proceeds from such called
issues in securities with lower coupons. Thus, convertible securities with superior call protection will permit the Fund to maintain
a higher yield than with issues without call protection.
Small-
and Mid-Capitalization Company Risk. In addition to the risks described earlier in this
Annual Report, investments in small-and mid-cap company stocks may be subject to the following risks.
| ● | Small- and Mid-Cap Stock Risk. Small- and mid-cap
company stocks can be more volatile than, and perform differently from, larger company stocks. There may be less trading in a
small- or mid-cap company’s stock, which means that buy and sell transactions in that stock could have a larger impact
on the stock’s price than is the case with larger company stocks. Small- and mid-cap company stocks may be particularly
sensitive to changes in interest rates, borrowing costs and earnings. Small- and mid-cap companies may have fewer business lines;
changes in any one line of business, therefore, may have a greater impact on a small- and mid-cap company’s stock price
than is the case for a larger company. As a result, the purchase or sale of more than a limited number of shares of a small- and
mid-cap company may affect its market price. The Fund may need a considerable amount of time to purchase or sell its positions
in these securities. In addition, small- and mid-cap company stocks may not be well known to the investing public. |
| ● | Unseasoned Companies Investment Risk. The Fund
may invest in the securities of smaller, less seasoned companies. These investments may present greater opportunities for growth
but also involve greater risks than customarily are associated with investments in securities of more established compa- |
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
nies. Some of
the companies in which the Fund may invest will be start-up companies which may have insubstantial operational or earnings history
or may have limited products, markets, financial resources or management depth. Some may also be emerging companies at the research
and development stage with no products or technologies to market or approved for marketing. In addition, it is more difficult
to get information on smaller companies, which tend to be less well known, have shorter operating histories, do not have significant
ownership by large investors and are followed by relatively few securities analysts. 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 many of the companies in which the Fund may invest.
| ● | Small-Cap and Emerging Growth Companies Investment
Risk. Investment in smaller or emerging growth companies involves greater risk than is customarily associated with investments
in more established companies. The securities of smaller or emerging growth companies may be subject to more abrupt or erratic
market movements than larger, more established companies or the market average in general. These companies may have limited product
lines, markets or financial resources, or they may be dependent on a limited management group. |
While small-cap
or emerging growth company issuers may offer greater opportunities for capital appreciation than large-cap issuers, investments
in smaller or emerging growth companies may involve greater risks and thus may be considered speculative. Fund management believes
that properly selected companies of this type have the potential to increase their earnings or market valuation at a rate substantially
in excess of the general growth of the economy. Full development of these companies and trends frequently takes time.
Small-cap and
emerging growth securities will often be traded only in the OTC market or on a regional securities exchange and may not be traded
every day or in the volume typical of trading on a national securities exchange. As a result, the disposition by the Fund of portfolio
securities may require the Fund to make many small sales over a lengthy period of time, or to sell these securities at a discount
from market prices or during periods when, in Fund management’s judgment, such disposition is not desirable.
The process of selection
and continuous supervision by Fund management does not, of course, guarantee successful investment results; however, it does provide
access to an asset class not available to the average individual due to the time and cost involved. Careful initial selection is
particularly important in this area as many new enterprises have promise but lack certain fundamental factors necessary to prosper.
Investing in small-cap and emerging growth companies requires specialized research and analysis. In addition, many investors cannot
invest sufficient assets in such companies to provide wide diversification.
Small-cap companies
are generally little known to most individual investors although some may be dominant in their respective industries. The Fund
may invest in securities of small issuers in the relatively early stages of business development that have a new technology, a
unique or proprietary product or service, or a favorable market position. Such companies may not develop into major industrial
companies or provide the level of returns anticipated.
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
Equity securities of specific
small-cap issuers may present different opportunities for long-term capital appreciation during varying portions of economic or
securities market cycles, as well as during varying stages of their business development. The market valuation of small-cap issuers
tends to fluctuate during economic or market cycles, presenting attractive investment opportunities at various points during these
cycles.
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.
Securities of
Investment Companies. To the extent permitted by law, the Fund may invest in investment company securities, including
preferred shares and the common equity of such companies. Investments in the common equity of investment companies will cause
the Fund to bear a ratable share of any such investment company’s
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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 any securities of another investment company. In these circumstances, holders of the Fund’s common shares will be subject
to duplicative investment expenses.
Warrants
and Rights. The Fund may invest in
warrants and rights (including those acquired in units or attached to other securities) which entitle the holder to buy equity
securities at a specific price for or at the end of a specific period of time. The Fund will do so only if the underlying equity
securities are deemed appropriate by the Investment Adviser for inclusion in the Fund’s portfolio.
Investing in rights
and warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security, and thus
can be a riskier investment. The value of a right or warrant may decline because of a decline in the value of the underlying security,
the passage of time, changes in interest rates or in the dividend or other policies of the Fund whose equity underlies the warrant,
a change in the perception as to the future price of the underlying security, or any combination thereof. Rights and warrants generally
pay no dividends and confer no voting or other rights other than the right to purchase the underlying security.
Asset-Backed
and Mortgage-Backed Securities. The Fund may invest in asset-backed and
mortgage-backed securities, although investments in asset-or mortgage-backed securities do not constitute a substantial part
of the Fund’s investment portfolio.
Mortgage-backed
securities are securities that indirectly represent a participation in, or are secured by and payable from, a pool of mortgage
loans secured by real property. Aggregate principal and interest payments received from the pool are used to pay principal and
interest on a mortgage-backed security. Mortgage-backed securities may be more volatile than other fixed income securities and
are subject to prepayment risk which can result in the Fund failing to recoup all of its investment or achieving lower than expected
returns.
Asset-backed securities
are securities, which through the use of trusts and special purpose vehicles, are securitized with various types of assets such
as automobile receivables, credit card receivables, home equity loans, leases or royalties in pass-through structures similar to
mortgage-backed securities. In general, the collateral supporting asset-backed securities is of shorter maturity than the collateral
supporting mortgage loans and is less likely to experience substantial prepayments. However, asset-backed securities are not backed
by any governmental agency.
Prepayments of principal
generally may be made at any time without penalty on residential mortgages and these prepayments are passed through to holders
of one or more of the classes of mortgage-backed securities. Prepayment rates may change rapidly and greatly, thereby affecting
yield to maturity, reinvestment risk, and market value of the mortgage backed securities. As a result, the high credit quality
of many of these securities may provide little or no protection against loss in market value, and there have been periods during
which many mortgage backed securities have experienced substantial losses in market value. The Investment Adviser believes that,
under certain circumstances, many of these securities may trade at prices below their inherent value on a risk-adjusted basis
and believes that selective purchases by a Fund may provide high yield and total return in relation to risk levels.
Prepayments of principal
may be made at any time on the obligations underlying asset-and mortgage-backed securities and are passed on to the holders of
the asset- and mortgage-backed securities. As a result, if the
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Additional Fund Information (Continued) (Unaudited)
Fund purchases such
a security at a premium, faster than expected prepayments will reduce and slower than expected prepayments will increase yield
to maturity. Conversely, if the Fund purchases these securities at a discount, faster than expected prepayments will increase and
slower than expected prepayments will reduce yield to maturity.
Sovereign
Government and Supranational Debt. The Fund may invest in all types of debt securities
of governmental issuers in all countries, including emerging market countries. These sovereign debt securities may include: debt
securities issued or guaranteed by governments, governmental agencies or instrumentalities and political subdivisions located in
emerging market countries; debt securities issued by government owned, controlled or sponsored entities located in emerging market
countries; interests in entities organized and operated for the purpose of restructuring the investment characteristics of instruments
issued by any of the above issuers; or debt securities issued by supranational entities such as the World Bank. A supranational
entity is a bank, commission or company established or financially supported by the national governments of one or more countries
to promote reconstruction or development.
Sovereign government and
supranational debt involve all the risks described in this Annual Report regarding foreign and emerging markets investments as
well as the risk of debt moratorium, repudiation or renegotiation. In addition, investments in sovereign debt involve special risks.
Foreign governmental issuers of debt or the governmental authorities that control the repayment of the debt may be unable or unwilling
to repay principal or pay interest when due. In the event of default, there may be limited or no legal recourse in that, generally,
remedies for defaults must be pursued in the courts of the defaulting party. Political conditions, especially a sovereign entity’s
willingness to meet the terms of its debt obligations, are of considerable significance. The ability of a foreign sovereign issuer,
especially an emerging market country, to make timely payments on its debt obligations will also be strongly influenced by the
sovereign issuer’s balance of payments, including export performance, its access to international credit facilities and investments,
fluctuations of interest rates and the extent of its foreign reserves. The cost of servicing external debt will also generally
be adversely affected by rising international interest rates, as many external debt obligations bear interest at rates which are
adjusted based upon international interest rates. Also, there can be no assurance that the holders of commercial bank loans to
the same sovereign entity may not contest payments to the holders of sovereign debt in the event of default under commercial bank
loan agreements. In addition, there is no bankruptcy proceeding with respect to sovereign debt on which a sovereign has defaulted
and the Fund may be unable to collect all or any part of its investment in a particular issue. Foreign investment in certain sovereign
debt is restricted or controlled to varying degrees, including requiring governmental approval for the repatriation of income,
capital or proceeds of sales by foreign investors. These restrictions or controls may at times limit or preclude foreign investment
in certain sovereign debt and increase the costs and expenses of the Fund.
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 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
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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. 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 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 Relating to Derivative Investments
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 Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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. The Fund may deposit funds required to margin open positions in the
derivative instruments subject to the CEA with a clearing broker registered as a “futures commission merchant”
(“FCM”). The CEA requires an FCM to segregate all funds received from customers with respect to any orders for
the purchase or sale of U.S. domestic futures contracts and cleared swaps from the FCM’s proprietary assets. Similarly,
the CEA requires each FCM to hold in a separate secure account all funds received from customers with respect to any orders
for the purchase or sale of foreign futures contracts and segregate any such funds from the funds received with respect to
domestic futures contracts. However, all funds and other property received by a clearing broker from its customers are held
by the clearing broker on a commingled basis in an omnibus account and may be invested by the clearing broker in certain
instruments permitted under the applicable regulation. There is a risk that assets deposited by the Fund with any swaps or
futures clearing broker as margin for futures contracts may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing broker. In addition, the assets of the Fund may not be fully protected in the event of
the clearing broker’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available
funds segregated on behalf of the clearing broker’s combined domestic customer accounts.
Similarly, the CEA
requires a clearing organization approved by the Commodity Futures Trading Commission (the “CFTC”) as a derivatives
clearing organization to segregate all funds and other property received from a clearing member’s clients in connection with
domestic futures, swaps and options contracts from any funds held at the clearing organization to support the clearing member’s
proprietary trading. Nevertheless, with respect to futures and options contracts, a clearing organization may use assets of a non-defaulting
customer held in an omnibus account at the clearing organization to satisfy payment obligations of a defaulting customer of the
clearing member to the clearing organization. As a result, in the event of a default or the clearing broker’s other clients
or the clearing broker’s failure to extend own funds in connection with any such default, the Fund would not be able to recover
the full amount of assets deposited by the clearing broker on its behalf with the clearing organization.
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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 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.
Legal
and Regulatory Risk. At any time after the date hereof, legislation or additional
regulations may be enacted that could negatively affect the assets of the Fund. Changing approaches to regulation may have a negative
impact on the securities in which the Fund invests. Legislation or regulation may also change the way in which the Fund itself
is regulated. There can be no assurances that future legislation, regulation or deregulation will not have a material adverse
effect on the Fund or will not impair the ability of the Fund to achieve its investment objective. In addition, as new rules and
regulations resulting from the passage of the Dodd-Frank Act are implemented and new international capital and liquidity requirements
are introduced under the Basel III Accords, the market may not react the way the Investment Adviser expects. Whether the Fund
achieves its investment objective may depend on, among other things, whether the Investment Adviser correctly forecasts market
reactions to this and other legislation. In the event the Investment Adviser incorrectly forecasts market reaction, the Fund may
not achieve its investment objective.
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
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 purchases or sells 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.
Limitations
on the Purchase and Sale of Futures Contracts and Options on Futures Contracts. Subject
to the guidelines of the Board, the Fund may engage in “commodity interest” transactions (generally, transactions
in futures, certain options, certain currency transactions and certain types of swaps) only for bona fide hedging, yield enhancement
and risk management purposes, in each case in accordance with the rules and regulations of the CFTC. CFTC Rule 4.5, upon which
the Fund relies to avoid having its adviser register with the CFTC as a “commodity pool operator,” imposes certain
commodity interest trading restrictions on the Fund. 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 option premiums and (ii) non-bona
fide hedging transactions, provided that the Fund 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 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.
If the Investment Adviser was required to register as a commodity pool operator with respect to the Fund, compliance with additional
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
registration and
regulatory requirements would increase Fund expenses. Other potentially adverse regulatory initiatives could also develop.
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 United States 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.
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.
INVESTMENT RESTRICTIONS
The Fund operates
under the following restrictions that constitute fundamental policies under the 1940 Act that, except as otherwise noted, cannot
be changed without the affirmative vote of a majority, as defined in the 1940 Act, of the outstanding voting securities (voting
together as a single class) of the Fund. The Fund has issued preferred shares and may in the future issue additional series of
preferred shares. Accordingly, the affirmative vote of the holders of a majority, as defined in the 1940 Act, of the outstanding
preferred shares of the Fund voting as a separate class would also be required to change a fundamental policy. Except as otherwise
noted, 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:
| ● | invest more than 25% of its total assets, taken at market
value at the time of each investment, in the securities of issuers in any particular industry. This restriction does not apply
to investments in U.S. government securities; |
| ● | purchase commodities or commodity contracts if such purchase
would result in regulation of the Fund as a commodity pool operator; |
| ● | make loans of money or other property, except that (i)
the Fund may acquire debt obligations of any type (including through extensions of credit), enter into repurchase agreements and
lend portfolio assets and |
The Gabelli Dividend & Income Trust
Additional Fund Information (Continued) (Unaudited)
(ii) the Fund may lend money or other
property to other investment companies advised by the Investment Adviser pursuant to a common lending program to the extent permitted
by applicable law;
| ● | borrow money, except to the extent permitted by applicable
law; |
| ● | issue senior securities, except to the extent permitted
by applicable law; or |
| ● | underwrite securities of other issuers, except insofar
as the Fund may be deemed an underwriter under applicable law in selling portfolio securities; provided, however, this restriction
shall not apply to securities of any investment company organized by the Fund that are to be distributed pro rata as a dividend
to its shareholders. |
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. Neither the Fund’s investment objective nor, except as expressly stated above, any
of its policies are fundamental, and each may be modified by the Board without shareholder approval.
With respect to investment
restriction (2), the Fund may only sell commodities or commodity contracts to the extent consistent with maintaining its or the
Investment Adviser’s exclusion from “commodity pool operator” status under CFTC Rule 4.5. See “Investment
Policies—Additional Risks Relating to Derivative Investments— Limitations on the Purchase and Sale of Futures Contracts
and Options on Futures Contracts.”
With respect to investment
restriction (5), 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 in (5) above will be interpreted to permit the Fund to (a) engage in in
securities lending in accordance with SEC staff guidance and interpretations and (b) settle securities transactions within the
ordinary settlement cycle for such transactions.
With respect to investment
restriction (6), under the 1940 Act, 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 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 Dividend & Income Trust
Additional Fund Information (Unaudited) (Continued)
MANAGEMENT
OF THE FUND