Filed Pursuant to Rule 424(b)
Registration Statement No. 333-251626
THE GABELLI MULTIMEDIA TRUST INC.
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 14, 2021)
25,383,076 Rights for 6,345,769 Shares
Subscription Rights for Shares of Common
Stock
The Gabelli Multimedia Trust Inc. (the “Fund”,
“we”, “us” or “our”) is issuing subscription rights (the “Rights”) to our common
stockholders to purchase additional shares of common stock.
The Fund is a non-diversified, closed-end
management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The
Fund’s primary investment objective is to achieve long-term growth of capital, primarily through investment in a portfolio
of common stock and other securities of foreign and domestic companies involved in the telecommunications, media, publishing, and
entertainment industries. Income is a secondary objective of the Fund. The Fund’s investment adviser is Gabelli Funds, LLC
(the “Investment Adviser”).
Shares of our common stock are traded on the New
York Stock Exchange (“NYSE”) under the symbol “GGT.” On July 9, 2021 (the last trading date prior to the common
stock trading ex-Rights), the last reported net asset value per share of the common stock was $9.26 and the last reported
sales price per share of common stock on the NYSE was $11.00.
Shares of our Series C Auction Rate Cumulative
Preferred Stock (“Series C Auction Rate Preferred”) are not listed on a stock exchange. Shares of our 5.125% Series E Cumulative
Preferred Stock (“Series E Preferred”) and shares of our 5.125% Series G Cumulative Preferred Stock (“Series G Preferred”)
are listed on the NYSE under the symbols “GGT PrE” and “GGT PrG” respectively (and together with the Series C
Auction Rate Preferred, “Preferred Stock”). On July 9, 2021, the last reported sales prices per share of Series E Preferred,
and Series G Preferred, on the NYSE were $26.10 and $26.54, respectively. As noted above, our Series C Auction Rate Preferred is not traded
on a stock exchange.
An investment in the Fund is not appropriate
for all investors. We cannot assure you that the Fund’s investment objective will be achieved. You should read this Prospectus
Supplement and the accompanying Prospectus before deciding whether to invest in shares of common stock and retain it for future
reference. The Prospectus Supplement and the accompanying Prospectus contain important information about us. Material that has
been incorporated by reference and other information about us can be obtained from us by calling 800-GABELLI (422-3554) or from
the Securities and Exchange Commission’s (“SEC”) website (http://www.sec.gov). For additional information all
holders of Rights should contact the Fund by telephone at 800-GABELLI (422-3554) or 914-921-5070, or by written request to The
Gabelli Multimedia Trust Inc., One Corporate Center, Rye, New York 10580-1422.
Investing in common stock through Rights
involves certain risks that are described in the “Special Characteristics and Risks of the Rights Offering” section
beginning on page R-17 of the Prospectus Supplement.
STOCKHOLDERS WHO DO NOT EXERCISE THEIR
RIGHTS MAY, AT THE COMPLETION OF THE RIGHTS OFFERING, OWN A SMALLER PROPORTIONAL INTEREST IN THE FUND THAN IF THEY EXERCISED THEIR
RIGHTS. AS A RESULT OF THE RIGHTS OFFERING YOU MAY EXPERIENCE DILUTION OR ACCRETION OF THE AGGREGATE NET ASSET VALUE OF YOUR SHARES
OF COMMON STOCK DEPENDING UPON WHETHER THE FUND’S NET ASSET VALUE PER SHARE OF COMMON STOCK IS ABOVE OR BELOW THE SUBSCRIPTION
PRICE ON THE EXPIRATION DATE.
ANY SHARES OF COMMON STOCK ISSUED AS
A RESULT OF THE RIGHTS OFFERING WILL NOT BE RECORD DATE SHARES FOR THE FUND’S QUARTERLY DISTRIBUTION PROJECTED TO BE PAID
IN SEPTEMBER 2021 AND WILL NOT BE ENTITLED TO RECEIVE SUCH DISTRIBUTION.
NEITHER THE SEC NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
|
|
Per
Share
|
|
|
Total
|
|
Subscription price of common stock to stockholders exercising Rights
|
|
$
|
9.50
|
|
|
$
|
60,284,806
|
|
Underwriting discounts and commissions
|
|
|
None
|
|
|
|
None
|
|
Proceeds, before expenses, to the Fund(1)
|
|
$
|
9.50
|
|
|
$
|
60,284,806
|
|
|
(1)
|
The aggregate expenses of the Rights offering are estimated to be $500,000.
|
The common stock is expected to be ready
for delivery in book-entry form through the Depository Trust Company on or about August 31, 2021.
The date of this Prospectus Supplement is
July 13, 2021
You should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus. The Fund has not authorized
anyone to provide you with different information. The Fund is not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should not assume that the information contained in this Prospectus Supplement and
the accompanying Prospectus is accurate as of any date other than the date of this Prospectus Supplement and the accompanying Prospectus,
respectively. Our business, financial condition, results of operations and prospects may have changed since those dates. In this
Prospectus Supplement and in the accompanying Prospectus, unless otherwise indicated, “Fund,” “us,” “our”
and “we” refer to The Gabelli Multimedia Trust Inc. This Prospectus Supplement also includes trademarks owned by other
persons.
TABLE OF
CONTENTS
PROSPECTUS
SUPPLEMENT
Prospectus
Cautionary
Notice Regarding Forward-Looking Statements
This Prospectus Supplement, the accompanying
Prospectus and the Statement of Additional Information (the “SAI”) contain “forward-looking statements.”
Forward-looking statements can be identified by the words “may,” “will,” “intend,” “expect,”
“estimate,” “continue,” “plan,” “anticipate,” and similar terms and the negative
of such terms. Such forward-looking statements may be contained in this Prospectus Supplement as well as in the accompanying Prospectus
and in the SAI. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ
materially from those contemplated by the forward-looking statements. Several factors that could materially affect our actual results
are the performance of the portfolio of securities we hold, the price at which our shares will trade in the public markets and
other factors discussed in our periodic filings with the SEC.
Although we believe that the expectations
expressed in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed
in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements,
are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the “Risk Factors and
Special Considerations” section of the accompanying Prospectus and “Special Characteristics and Risks of the Rights
Offering” in this Prospectus Supplement. All forward-looking statements contained or incorporated by reference in this Prospectus
Supplement or the accompanying Prospectus, or in the SAI, are made as of the date of this Prospectus Supplement or the accompanying
Prospectus, or SAI, as the case may be. Except for our ongoing obligations under the federal securities laws, we do not intend,
and we undertake no obligation, to update any forward-looking statement. The forward-looking statements contained in this Prospectus
Supplement, the accompanying Prospectus and the SAI are excluded from the safe harbor protection provided by Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”).
Currently known risk factors that could
cause actual results to differ materially from our expectations include, but are not limited to, the factors described in the “Risk
Factors and Special Considerations” section of the accompanying Prospectus as well as in the “Special Characteristics
and Risks of the Rights Offering” section of this Prospectus Supplement. We urge you to review carefully those sections for
a more detailed discussion of the risks of an investment in the shares of common stock.
Summary
of the Terms of the Rights Offering
Terms of the Offer
|
One transferable subscription right (a “Right”) will
be issued for each share of common stock of the Fund (each, a “Share of Common Stock,” and collectively, the
“Shares of Common Stock”) held on the Record Date (as defined below). Rights are expected to trade on the New York
Stock Exchange beginning on July 9, 2021. The Rights will allow common stockholders to subscribe for new Shares of Common
Stock of the Fund. 25,383,076 Shares of Common Stock of the Fund are outstanding as of July 13, 2021. Four Rights will be
required to purchase one Share of Common Stock. An over-subscription privilege will be offered, subject to the right of the
Board of Trustees of the Fund (the “Board”) to eliminate the over-subscription privilege. 6,345,769 Shares of Common
Stock of the Fund will be issued if all Rights are exercised. Additional Shares of Common Stock will be issued if the
over-subscription privilege is exercised. See “Terms of the Rights Offering.” Any Shares of Common
Stock issued as a result of the rights offering will not be record date shares for the Fund’s quarterly distribution projected
to be paid in September 2021 and will not be entitled to receive such distribution.
|
Amount Available for Primary Subscription
|
Approximately $60,284,806, before expenses. The proceeds of the Rights offering will be reduced by the expenses of the Rights offering. See “Use of Proceeds.”
|
Title
|
Subscription Rights for Shares of Common Stock.
|
Subscription Price
|
Four Rights may be exercised at a price of $9.50 per Share of Common Stock (the “Subscription Price”). See “Terms of the Offer.”
|
Record Date
|
Rights will be issued to holders of record of the Fund’s Shares of Common Stock as of the close of business on July 13, 2021 (the “Record Date”). See “Terms of the Offer.”
|
Number of Rights Issued
|
One Right will be issued in respect of each Share of Common Stock of the Fund outstanding on the Record Date. See “Terms of the Offer.”
|
Number of Rights Required to Purchase One Share of Common Stock
|
A holder of Rights may purchase a Share of Common Stock of the Fund for every four Rights exercised. The number of Rights to be issued to a stockholder on the Record Date will be rounded up to the nearest number of Rights evenly divisible by four. See “Terms of the Offer.”
|
Over-Subscription Privilege
|
Holders of Shares of Common Stock on the Record Date
(“Record Date Stockholders”) who fully exercise all Rights initially issued to them are entitled to buy those Shares
of Common Stock, referred to as “primary over-subscription stock,” that were not purchased by other Rights holders
at the same Subscription Price. If enough primary over-subscription stock is available, all such requests will be honored in full.
If the requests for primary over-subscription stock exceeds the primary over-subscription stock available, the available primary
over-subscription stock will be allocated pro rata among those fully exercising Record Date Stockholders who over-subscribe based
on the number of Rights originally issued to them by the Fund. Shares of Common Stock acquired pursuant to the over-subscription
privilege are subject to allotment. Rights acquired in the secondary market may not participate in the over-subscription privilege.
|
|
Notwithstanding the above, the Board has the right in its absolute
discretion to eliminate the over-subscription privilege with respect to either or both primary over-subscription stock and secondary
over-subscription stock if it considers it to be in the best interest of the Fund to do so. The Board may make that determination
at any time, without prior notice to Rights holders or others, up to and including the fifth day following the Expiration Date
(as defined below). See “Over-Subscription Privilege.”
In the event that the Fund’s per share net asset value at the end of the Subscription Period is greater than the subscription price (i.e., Shares of Common Stock will be issued at a price below the Fund’s then current net asset value), the over-subscription shares issued by the Fund will not result in the ratio of the Rights offering exceeding one new share for each four Rights. See “Over-Subscription Privilege.”
|
Transfer of Rights
|
The Rights will be transferable. See “Terms of the Rights Offering,” “Sales by Rights Agent” and “Method of Transferring Rights.”
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Subscription Period
|
The Rights may be exercised at any time after issuance and prior to expiration of the Rights, which will be 5:00 PM Eastern Time on, August 25, 2021 (the “Expiration Date”) (the “Subscription Period”). See “Terms of the Offer” and “Method of Exercise of Rights.”
|
Offer Expenses
|
The expenses of the Rights offer are expected to be approximately $500,000. See “Use of Proceeds.”
|
Sale of Rights
|
The Rights are transferable and will be admitted for trading
on the New York Stock Exchange under the symbol “GGT RT”. Although no assurance can be given that a market for the
Rights will develop, trading in the Rights on the New York Stock Exchange is expected to begin three Business Days prior to the
Record Date and may be conducted until the close of trading on the last New York Stock Exchange trading day prior to the Expiration
Date. For purposes of this Prospectus Supplement, a “Business Day” shall mean any day on which trading is conducted
on the New York Stock Exchange.
The value of the Rights, if any, will be reflected by the market
price on the New York Stock Exchange. Rights may be sold by individual holders or may be submitted to the Rights Agent (defined
below) for sale. Any Rights submitted to the Rights Agent for sale must be received by the Rights Agent on or before August 18,
2021, five Business Days prior to the Expiration Date (or, if the subscription period is extended, prior to 5:00 PM, Eastern Time,
on the fifth Business Day prior to the extended Expiration Date).
Rights that are sold will not confer any right to acquire any
Shares of Common Stock in any over-subscription, and any Record Date stockholder who sells any Rights will not be eligible to participate
in the over-subscription privilege, if any.
Trading of the Rights on the New York Stock Exchange will be
conducted on a when-issued basis until and including the date on which the Subscription Certificates (as defined below) are mailed
to Record Date Stockholders and thereafter will be conducted on a regular-way basis until and including the last New York Stock
Exchange trading day prior to the completion of the Subscription Period. The Shares of Common Stock are expected to begin trading
ex-Rights one Business Day prior to the Record Date.
|
|
Any commissions will be paid by the selling Rights holders.
Neither the Fund nor the Rights Agent will be responsible if Rights cannot be sold and neither has guaranteed any minimum sales
price for the Rights. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the weighted average
price received by the Rights Agent on the day such Rights are sold, less any applicable brokerage commissions, taxes and other
expenses.
Stockholders are urged to obtain a recent trading price for
the Rights on the New York Stock Exchange from their broker, bank, financial advisor or the financial press.
Banks, broker-dealers and trust companies that hold shares for
the accounts of others are advised to notify those persons that purchase Rights in the secondary market that such Rights will not
participate in any over-subscription privilege. See “Terms of the Rights Offering” and “Sales
by Rights Agent.”
|
Use of Proceeds
|
The Fund estimates the net proceeds of the Rights offer to be approximately $59,784,806. This figure is based on the Subscription Price per share of $9.50 and assumes all new Shares of Common Stock offered are sold and that the expenses related to the Rights offer estimated at approximately $500,000 are paid. The Investment Adviser anticipates that investment of the proceeds will be made in accordance with the Fund’s investment objectives and policies as appropriate investment opportunities are identified, which is expected to be substantially completed in approximately three months; however, the identification of appropriate investment opportunities pursuant to the Fund’s investment style or changes in market conditions may cause the investment period to extend as long as six months. Pending such investment, the proceeds will be held in high quality short-term debt securities and instruments. In addition, in the discretion of the Board, the proceeds of the Rights offering may be used to redeem a portion of the Fund’s outstanding preferred stock. Depending on market conditions and operations, a portion of the cash held by the Fund, including any proceeds raised from the Rights offering, may be used to pay distributions in accordance with the Fund’s distribution policy. See “Use of Proceeds.”
|
Taxation/ERISA
|
See “Employee Plan Considerations.”
|
Rights Agent
|
Computershare Trust Company, N.A. See “Rights Agent.”
|
Administration Agent
|
Morrow & Co., LLC. See “Administration Agent.”
|
Description
of the Rights Offering
Terms of the Rights Offering
The Fund is issuing to stockholders of record
as of the close of business on July 13, 2021 (“the Record Date”, and such stockholders, the “Record Date Stockholders”)
Rights to subscribe for Shares of Common Stock of the Fund. Each Record Date Stockholder is being issued one transferable Right for each
Share of Common Stock owned on the Record Date. The Rights entitle the holder to acquire for $9.50 (the “Subscription Price”)
one new Share of Common Stock for each four Rights held rounded up to the nearest number of Rights evenly divisible by four. As a result
of such rounding, the number of Rights to be issued may exceed the number of Shares of Common Stock outstanding as of the Record Date.
In the case of Shares of Common Stock held of record by Cede & Co. (“Cede”), as nominee for the Depository Trust Company
(“DTC”), or any other depository or nominee, the number of Rights issued to Cede or such other depository or nominee will
be adjusted to permit rounding up (to the nearest number of Rights evenly divisible by four) of the Rights to be received by beneficial
owners for whom it is the holder of record only if Cede or such other depository or nominee provides to the Fund on or before the close
of business on July 21, 2021, written representation of the number of Rights required
for such rounding. Rights may be exercised at any time during the period (the “Subscription
Period”) which commences on July 13, 2021, and ends at 5:00 PM Eastern Time on August 25, 2021 (the “Expiration Date”)
unless otherwise extended. The right to acquire one Share of Common Stock for each four Rights held during the Subscription Period (or
any extension thereof) at the Subscription Price will be referred to in the remainder of this Prospectus Supplement as the “Subscription.”
25,383,076 Shares of Common Stock of the Fund are outstanding as of July 13, 2021; 6,345,769 Shares of Common Stock of the Fund will be
issued if all Rights are exercised. Rights will expire on the Expiration Date and thereafter may not be exercised. Any Share of Common
Stock issued as a result of the Rights offering will not be Record Date shares for the Fund’s quarterly distribution projected
to be paid in September 2021 and will not be entitled to receive such distribution.
Rights may be evidenced by subscription
certificates (“Subscription Certificates”) or may be uncertificated and evidenced by other appropriate documentation.
The number of Rights issued to each holder will be stated on the Subscription Certificate delivered to the holder. The method by
which Rights may be exercised and Shares of Common Stock paid for is set forth below in “Method of Exercise of Rights”
and “Payment for Shares.” A Holder of Rights will have no right to rescind a purchase after Computershare Trust Company,
N.A. (the “Rights Agent”) has received payment. See “Payment for Shares” below. It is anticipated that
the Shares of Common Stock issued pursuant to an exercise of Rights will be listed on the New York Stock Exchange.
Holders of Rights who are Record Date Stockholders
are entitled to subscribe for additional Shares of Common Stock at the same Subscription Price pursuant to the over-subscription
privilege, subject to certain limitations, subject to allotment and subject to the right of the Board to eliminate the over-subscription
privilege. See “Over-Subscription Privilege” below.
For purposes of determining the maximum
number of Shares of Common Stock that may be acquired pursuant to the offer, broker-dealers, trust companies, banks or others whose
shares are held of record by Cede or by any other depository or nominee will be deemed to be the holders of the Rights that are
held by Cede or such other depository or nominee on their behalf.
The Rights are transferable and will be
admitted for trading on the New York Stock Exchange under the symbol “GGT RT”. Assuming a market exists for the Rights,
the Rights may be purchased and sold through usual brokerage channels and also sold through the Rights Agent. Although no assurance
can be given that a market for the Rights will develop, trading in the Rights on the New York Stock Exchange is expected to begin
three Business Days prior to the Record Date and may be conducted until the close of trading on the last New York Stock Exchange
trading day prior to the completion of the Subscription Period. Trading of the Rights on the New York Stock Exchange is expected
to be conducted on a when-issued basis until and including the date on which the Subscription Certificates are mailed to Record
Date Stockholders and thereafter is expected to be conducted on a regular way basis until and including the last New York Stock
Exchange trading day prior to the Expiration Date. The method by which Rights may be transferred is set forth below under “Method
of Transferring Rights.” The Shares of Common Stock are expected to begin trading ex-Rights one Business Day prior to the
Record Date as determined and announced by the New York Stock Exchange.
Nominees who hold the Fund’s Shares
of Common Stock for the account of others, such as banks, broker-dealers, trustees or depositories for securities, should notify
the respective beneficial owners of such shares as soon as possible to ascertain such beneficial owners’ intentions and to
obtain instructions with respect to the Rights. If the beneficial owner so instructs, the nominee should complete the Subscription
Certificate and submit it to the Rights Agent with proper payment. In addition, beneficial owners of the Shares of Common Stock
or Rights held through such a nominee should contact the nominee and request the nominee to effect transactions in accordance with
such beneficial owner’s instructions.
Participants in the Fund’s Automatic
Dividend Reinvestment and Voluntary Cash Purchase Plan (the “Plan”) will be issued Rights in respect of the Shares
of the Common Stock held in their accounts in the Plan. Participants wishing to exercise these Rights must exercise the Rights
in accordance with the procedures set forth below in “Method of Exercise of Rights” and “Payment for Shares.”
Important Dates to Remember
Please note that the dates in the table
below may change if the Rights offering is extended.
EVENT
|
DATE
|
Record Date
|
July 13, 2021
|
Subscription Period
|
July 13, 2021 through August 25, 2021**
|
Final Date Rights Will Trade
|
August 24, 2021**
|
Expiration Date*
|
August 25, 2021**
|
Payment for Shares and Subscription Certificate or Notice of Guaranteed of Delivery Due*
|
August 25, 2021**
|
Issuance Date
|
August 31, 2021**
|
Confirmation Date
|
September 3, 2021**
|
|
*
|
A stockholder exercising Rights must deliver by 5:00 PM Eastern Time on August 25, 2021 either (a) a Subscription Certificate
and payment for shares or (b) a notice of guaranteed delivery and payment for Shares of Common Stock.
|
|
**
|
Unless the Rights offer is extended.
|
Over-Subscription Privilege
The Board has the right in its absolute
discretion to eliminate the over-subscription privilege with respect to either or both primary over-subscription stock and secondary
over-subscription stock if it considers it to be in the best interest of the Fund to do so. The Board may make that determination
at any time, without prior notice to Rights holders or others, up to and including the tenth day following the Expiration Date.
If the primary or secondary over-subscription privilege is not eliminated, it will operate as set forth below.
Rights holders who are Record Date Stockholders
and who fully exercise their Rights are entitled to subscribe for additional Shares of Common Stock at the same Subscription Price
pursuant to the over-subscription privilege, subject to certain limitations and subject to allotment.
Record Date Stockholders who fully exercise
all Rights initially issued to them are entitled to buy those Shares of Common Stock, referred to as “primary over-subscription
stock,” that were not purchased by other Holders of Rights at the same Subscription Price. If enough primary over-subscription
stock is available, all such requests will be honored in full. If the requests for primary over-subscription stock exceeds the
primary over-subscription shares available, the available primary over-subscription stock will be allocated pro rata among those
fully exercising Record Date Stockholders who over-subscribe based on the number of Rights originally issued to them by the Fund.
Shares of Common Stock acquired pursuant to the over-subscription privilege are subject to allotment.
Record Date Stockholders who are fully exercising
their Rights during the Subscription Period should indicate, on the Subscription Certificate that they submit with respect to the
exercise of the Rights issued to them, how many Shares of Common Stock they are willing to acquire pursuant to the over-subscription
privilege. Rights acquired in the secondary market may not participate in the over subscription privilege.
To the extent sufficient Shares of Common
Stock are not available to fulfill all over-subscription requests, unsubscribed Shares of Common Stock (the “Excess Shares
of Common Stock”) will be allocated pro-rata among those Record Date Stockholders who over-subscribe based on the number
of Rights issued to them by the Fund. The allocation process may involve a series of allocations in order to assure that the total
number of Shares of Common Stock available for over-subscriptions is distributed on a pro rata basis.
The formula to be used in allocating the
Excess Shares of Common Stock is as follows:
Stockholder’s Record Date Position
|
X Excess Shares of Common Stock Remaining
|
Total Record Date Position of All Over-—Subscribers
|
Banks, broker-dealers, trustees and other
nominee holders of Rights will be required to certify to the Rights Agent, before any over-subscription privilege may be exercised
with respect to any particular beneficial owner, as to the aggregate number of Rights exercised during the Subscription Period
and the number of Shares of Common Stock subscribed for pursuant to the over-subscription privilege by such beneficial owner and
that such beneficial owner’s subscription was exercised in full. Nominee holder over-subscription forms and beneficial owner
certification forms will be distributed to banks, broker-dealers, trustees and other nominee holders of Rights with the Subscription
Certificates. Nominees should also notify holders purchasing Rights in the secondary market that such Rights may not participate
in the over-subscription privilege.
The Fund will not offer or sell any Shares
of Common Stock that are not subscribed for during the Subscription Period or pursuant to the over-subscription privilege.
The Fund has been advised that the Investment
Adviser and each of the Fund’s Directors may exercise some or all of the Rights initially issued to them, and may request
additional Shares of Common Stock pursuant to the over-subscription privilege. In addition, Mario J. Gabelli or his affiliated
entities may also purchase Shares of Common Stock during the Subscription Period and pursuant to the over-subscription privilege.
Mario J. Gabelli, a Director of the Fund
and control person of the Investment Adviser, or his affiliated entities, may exercise some or all of the Rights initially issued
to them, and may request additional Shares Common Stock pursuant to the over-subscription privilege. Mr. Gabelli, or his affiliated
entities, may also offer to sell, or otherwise transfer, some or all of the Rights initially issued to them. If Mr. Gabelli, or
his affiliated entities, sells or otherwise transfers some or all of the Rights initially issued to them, Mr. Gabelli intends to
sell or transfer such Rights in accordance with the resale and/or transfer procedures set forth in this Prospectus Supplement under
the headings “Description of the Rights Offering — Sales by Rights Agent” and “Description of the Rights
Offering — Method of Transferring Rights”. Mr. Gabelli will be the beneficial owner of 1,972,566 Rights1
and may offer to sell, or otherwise transfer, up to all of such Rights. If Mr. Gabelli determines to sell or transfer all of the
Rights that he may offer hereby, he will beneficially own no Rights after the completion of this Rights offering. Mr. Gabelli reserves
the right to sell or transfer no Rights or an amount of Rights that is otherwise less than all of the Rights set forth in this
paragraph.
Mr. Gabelli is Chairman of the Board of
Directors, a portfolio manager of the Fund and Chief Investment Officer of the Fund. Mr. Gabelli is Chairman, Chief Executive Officer,
and Chief Investment Officer — Value Portfolios of GAMCO Investors, Inc. (“GBL”), an NYSE-listed asset manager
and financial services company. He is also the Chief Investment Officer of Value Portfolios of the Investment Adviser and GAMCO
Asset Management Inc. (“GAMCO”), both of which are asset management subsidiaries of GBL. In addition, Mr. Gabelli is
Chief Executive Officer, Chief Investment Officer, a director and the controlling shareholder of GGCP, Inc. (“GGCP”),
a private company that holds a majority interest in GBL, and the Chairman of MJG Associates, Inc., which acts as an investment
manager of various investment funds and other accounts. He is also Executive Chairman of Associated Capital Group, Inc., a public
company that provides alternative investment management services, and is a majority-owned subsidiary of GGCP.
1
Mr. Gabelli will be deemed to be the direct beneficial owner of 757,455 Rights owned directly by Mr. Gabelli, 19,702 Rights owned
by a family partnership for which Mr. Gabelli serves as general partner, 26,667 Rights owned by GPJ Retirement Partners, LLC and
1,207,656 Rights owned by GAMCO Investors, Inc. or its affiliates.
Sales by Rights Agent
Holders of Rights who are unable or do not
wish to exercise any or all of their Rights may instruct the Rights Agent to sell any unexercised Rights. The Subscription Certificates
representing the Rights to be sold by the Rights Agent must be received prior to 5:00 PM, Eastern Time, on August 18, 2021, five
Business Days prior to the Expiration Date (or if the subscription period is extended, prior to 5:00 PM, Eastern Time, on the fifth
Business Day prior to the extended Expiration Date). Upon the timely receipt of the appropriate instructions to sell Rights, the
Rights Agent will use its best efforts to complete the sale and will remit the proceeds of sale, net of any commissions, to the
holders. The Rights Agent will also attempt to sell any Rights attributable to stockholders whose record addresses are outside
the United States, or who have an APO or FPO address. The selling Rights holder will pay all brokerage commissions incurred by
the Rights Agent.
The Rights Agent will automatically attempt
to sell any unexercised Rights that remain unclaimed as a result of Subscription Certificates being returned by the postal authorities
as undeliverable as of the fourth Business Day prior to the Expiration Date. These sales will be made net of commissions, taxes
and any other expenses paid on behalf of the nonclaiming holders of Rights. Proceeds from those sales will be held by Computershare
Trust Company, N.A., in its capacity as the Fund’s transfer agent, for the account of the nonclaiming holder of Rights until
the proceeds are either claimed or escheated. There can be no assurance that the Rights Agent will be able to complete the sale
of any of these Rights and neither the Fund nor the Rights Agent has guaranteed any minimum sales price for the Rights. All of
these Rights will be sold at the market price, if any, through an exchange or market trading the Rights. If the Rights can be sold,
sales of the Rights will be deemed to have been effected at the weighted average price received by the Rights Agent on the day
such Rights are sold, less any applicable brokerage commissions, taxes and other expenses.
Holders of Rights attempting to sell any
unexercised Rights in the open market through a broker-dealer should consider the commissions and fees charged by the broker-dealer
prior to selling their rights on the open market.
Stockholders are urged to obtain a recent
trading price for the Rights on the New York Stock Exchange from their broker, bank, financial advisor or the financial press.
Method of Transferring Rights
The Rights are transferable and will be
admitted for trading on the New York Stock Exchange under the symbol “GGT RT”. Although no assurance can be given that
a market for the Rights will develop, trading in the Rights on the New York Stock Exchange is expected to begin trading three Business
Days prior to the Record Date and may be conducted until the close of trading on the last New York Stock Exchange trading day prior
to the Expiration Date.
The value of the Rights, if any, will be
reflected by the market price. Rights may be sold by individual holders or may be submitted to the Rights Agent for sale. Any Rights
submitted to the Rights Agent for sale must be received by the Rights Agent prior to 5:00 PM, Eastern Time, on August 18, 2021,
five Business Days prior to the Expiration Date (or, if the subscription period is extended, prior to 5:00 PM, Eastern Time, on
the fifth Business Day prior to the extended Expiration Date).
Rights that are sold will not confer any
right to acquire any Shares of Common Stock in any primary over-subscription, and any Record Date Stockholder who sells any Rights
will not be eligible to participate in the primary over-subscription, if any.
Trading of the Rights on the New York Stock
Exchange will be conducted on a when-issued basis until and including the date on which the Subscription Certificates are mailed
to Record Date Stockholders and thereafter will be conducted on a regular-way basis until and including the last New York Stock
Exchange trading day prior to the Expiration Date. The Shares of Common Stock are expected to begin trading ex-Rights one Business
Day prior to the Record Date.
The Rights evidenced by a single Subscription
Certificate may be transferred in whole by endorsing the Subscription Certificate for transfer in accordance with the accompanying
instructions. A portion of the Rights evidenced by a single Subscription Certificate (but not fractional Rights) may be transferred
by delivering to the Rights Agent a Subscription Certificate properly endorsed for transfer, with instructions to register the
portion of the Rights evidenced thereby in the name of the transferee (and to issue a new Subscription Certificate to the transferee
evidencing the transferred Rights). In this event, a new Subscription Certificate evidencing the balance of the Rights will be
issued to the Rights holder or, if the Rights holder so instructs, to an additional transferee.
Holders wishing to transfer all or a portion
of their Rights (but not fractional Rights) should promptly transfer such Rights to ensure that: (i) the transfer instructions
will be received and processed by the Rights Agent, (ii) a new Subscription Certificate will be issued and transmitted to the transferee
or transferees with respect to transferred Rights, and to the transferor with respect to retained Rights, if any, and (iii) the
Rights evidenced by the new Subscription Certificates may be exercised or sold by the recipients thereof prior to the Expiration
Date. Neither the Fund nor the Rights Agent shall have any liability to a transferee or transferor of Rights if Subscription Certificates
are not received in time for exercise or sale prior to the Expiration Date.
Except for the fees charged by the Rights
Agent (which will be paid by the Fund as described below), all commissions, fees and other expenses (including brokerage commissions
and transfer taxes) incurred in connection with the purchase, sale or exercise of Rights will be for the account of the transferor
of the Rights, and none of these commissions, fees or expenses will be borne by the Fund or the Rights Agent.
The Fund anticipates that the Rights will
be eligible for transfer through, and that the exercise of the Rights may be effected through, the facilities of DTC (Rights exercised
through DTC are referred to as “DTC Exercised Rights”).
Rights Agent
The Rights Agent is Computershare Trust
Company, N.A. The Rights Agent will receive from the Fund an amount estimated to be $75,000, comprised of the fee for its services
and the reimbursement for certain expenses related to the Rights offering.
Inquiries
For additional information all holders of
Rights should contact the Fund by telephone at 800-GABELLI (422-3554) or 914-921-5070, or by written request to The Gabelli MultimediaTrust
Inc., One Corporate Center, Rye, New York 10580-1422.
Administration Agent
INQUIRIES BY ALL HOLDERS OF RIGHTS SHOULD BE DIRECTED
TO: THE INFORMATION AGENT, MORROW & CO., LLC, 470 WEST AVENUE, STAMFORD, CT 06902. SHAREHOLDERS PLEASE CALL TOLL-FREE AT (800) 969-2372;
BANKS AND BROKERS PLEASE CALL: (203) 658-9400; HOLDERS MAY ALSO CONSULT THEIR BROKERS OR NOMINEES.
Method of Exercise of Rights
Rights may be exercised by completing and
signing the reverse side of the Subscription Certificate and mailing it in the envelope provided, or otherwise delivering the completed
and signed Subscription Certificate to the Rights Agent, together with payment for the Shares of Common Stock as described below
under “Payment for Shares.” Rights may also be exercised through the broker of a holder of Rights, who may charge the
holder of Rights a servicing fee in connection with such exercise.
Completed Subscription Certificates must
be received by the Rights Agent prior to 5:00 PM Eastern Time, on the Expiration Date (unless payment is effected by means of a
notice of guaranteed delivery as described below under “Payment for Shares”). The Subscription Certificate and payment
should be delivered to the Rights Agent at the following address:
If By Mail:
The Gabelli Multimedia Trust Inc.
c/o Computershare Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
If By Registered, Certified or Express Mail or Overnight Courier:
The Gabelli Multimedia Trust Inc.
c/o Computershare Trust Company, N.A.
150 Royall Street, Suite V
Canton, MA 02021
Payment for Shares
Holders of Rights who acquire Shares of
Common Stock during the Subscription period may choose between the following methods of payment:
(1)
A holder of Rights can send the Subscription Certificate, together with payment in the form of a check for the Shares of
Common Stock subscribed for in the Rights offering and, if eligible, for any additional Shares of Common Stock subscribed for pursuant
to the over-subscription privilege, to the Rights Agent based on the Subscription Price of $9.50 per Share of Common Stock. To
be accepted, the payment, together with the executed Subscription Certificate, must be received by the Rights Agent at the address
noted above prior to 5:00 PM Eastern Time on the Expiration Date. The Rights Agent will deposit all share purchase checks received
by it prior to the final due date into a segregated account pending proration and distribution of Shares of Common Stock. The Rights
Agent will not accept cash as a means of payment for Shares of Common Stock.
(2)
Alternatively, a subscription will be accepted by the Rights Agent if, prior to 5:00 PM Eastern Time on the Expiration Date,
the Rights Agent has received a written notice of guaranteed delivery from a bank, trust company, or an NYSE member, guaranteeing
delivery of a properly completed and executed Subscription Certificate. In order for the notice of guarantee to be valid, full
payment for the Shares of Common Stock at the Subscription Price of $9.50 per Share of Common Stock must be received with the notice.
The Rights Agent will not honor a notice of guaranteed delivery unless a properly completed and executed Subscription Certificate
is received by the Rights Agent by the close of business on the second Business Day after the Expiration Date. The notice of guaranteed
delivery must be emailed to the Rights Agent at canoticeofguarantee@computershare.com or delivered to the Rights Agent at one of
the addresses noted above.
EXCEPT AS OTHERWISE SET FORTH BELOW, A PAYMENT
PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY CHECK DRAWN ON A BANK LOCATED IN THE CONTINENTAL UNITED STATES, MUST
BE PAYABLE TO THE GABELLI MULTIMEDIA TRUST INC. AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.
If a holder of Rights who acquires Shares
of Common Stock pursuant to the Rights offering does not make payment of all amounts due, the Fund reserves the right to take any
or all of the following actions: (i) reallocate such subscribed and unpaid-for Shares of Common Stock to Record Date Stockholders
exercising the over-subscription privilege who did not receive the full over-subscription requested; (ii) apply any payment actually
received by it toward the purchase of the greatest whole number of Shares of Common Stock which could be acquired by such holder
upon exercise of the Rights or over-subscription privilege; and (iii) exercise any and all other rights or remedies to which it
may be entitled, including, without limitation, the right to set off against payments actually received by it with respect to such
subscribed Shares of Common Stock (in other words, retain such payments) and to enforce the exercising Rights holder’s relevant
payment obligation.
Any payment required from a holder of Rights
must be received by the Rights Agent prior to 5:00 PM Eastern Time on the Expiration Date. Issuance and delivery of certificates
for the Common Shares purchased are subject to collection of checks. If sent by mail it is recommended that the certificates and
payments be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed
to ensure delivery to the Rights Agent and clearance of payment prior to 5:00 PM, Eastern Time, on the Expiration Date.
Within ten Business Days following the Expiration
Date (the “Confirmation Date”), a confirmation will be sent by the Rights Agent to each holder of Rights (or, if the
Shares of Common Stock are held by Cede or any other depository or nominee, to Cede or such other depository or nominee), showing
(i) the number of Shares of Common Stock acquired pursuant to the Subscription, (ii) the number of Shares of Common Stock, if any,
acquired pursuant to the over-subscription privilege, and (iii) the per share and total purchase price for the Shares of Common
Stock. Any payment required from a holder of Rights must be received by the Rights Agent on or prior to the Expiration Date. Any
excess payment to be refunded by the Fund to a holder of Rights, or to be paid to a holder of Rights as a result of sales of Rights
on its behalf by the Rights Agent, will be mailed by the Rights Agent to the holder within fifteen business days after the Expiration
Date.
A holder of Rights will have no right to
rescind a purchase after the Rights Agent has received payment either by means of a notice of guaranteed delivery or a check.
Holders, such as broker-dealers, trustees
or depositories for securities, who hold Shares of Common Stock for the account of others, should notify the respective beneficial
owners of the Shares of Common Stock as soon as possible to ascertain such beneficial owners’ intentions and to obtain instructions
with respect to the Rights. If the beneficial owner so instructs, the record holder of the Rights should complete Subscription
Certificates and submit them to the Rights Agent with the proper payment. In addition, beneficial owners of Shares of Common Stock
or Rights held through such a holder should contact the holder and request that the holder effect transactions in accordance with
the beneficial owner’s instructions. Banks, broker-dealers, trustees and other nominee holders that hold Shares of Common
Stock of the Fund for the accounts of others are advised to notify those persons that purchase Rights in the secondary market that
such Rights may not participate in any over-subscription privilege offered.
THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION
CERTIFICATES SHOULD BE READ CAREFULLY AND FOLLOWED IN DETAIL. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE FUND.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES
AND PAYMENT OF THE SUBSCRIPTION PRICE TO THE RIGHTS AGENT WILL BE AT THE ELECTION AND RISK OF THE RIGHTS HOLDERS, BUT IF SENT BY
MAIL IT IS RECOMMENDED THAT THE CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED,
AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE RIGHTS AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 PM
EASTERN TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE
STRONGLY URGED TO SEND YOUR PAYMENT AS SOON AS POSSIBLE.
All questions concerning the timeliness,
validity, form and eligibility of any exercise of Rights will be determined by the Fund, whose determinations will be final and
binding. The Fund in its sole discretion may waive any defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any Right. Subscriptions will not be deemed to have been
received or accepted until all irregularities have been waived or cured within such time as the Fund determines in its sole discretion.
Neither the Fund nor the Rights Agent will be under any duty to give notification of any defect or irregularity in connection with
the submission of Subscription Certificates or incur any liability for failure to give such notification.
Foreign Restrictions
Subscription Certificates will only be mailed
to Record Date Stockholders whose addresses are within the United States (other than an APO or FPO address). Because the offering
of the Rights will not be registered in any jurisdiction other than the United States, the Rights Agent will attempt to sell all
of the Rights issued to stockholder’s outside of these jurisdictions and remit the net proceeds, if any, to such stockholders.
If the Rights can be sold, sales of these Rights will be deemed to have been effected at the weighted average price received by
the Rights Agent on the day the Rights are sold, less any applicable brokerage commissions, taxes and other expenses.
Employee Benefit Plan and IRA Considerations
Holders of Rights that are employee benefit
plans subject to limitations imposed by the Internal Revenue Code of 1986, as amended (the “Code”), such as employee
plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), Keogh Plans and Individual
Retirement Accounts (“IRA”) (each a “Benefit Plan” and collectively, “Benefit Plans”), should
be aware that the use of additional contributions of cash outside of the Benefit Plan to exercise Rights may be treated as additional
contributions to the Benefit Plan. When taken together with contributions previously made, such deemed additional contributions
may be in excess of tax limitations and subject the Rights holder to excise taxes for excess or nondeductible contributions. In
the case of Benefit Plans qualified under Section 401(a) of the Code, additional contributions could cause the maximum contribution
limitations of Section 415 of the Code or other qualification rules to be violated. Benefit Plans contemplating making additional
contributions to exercise Rights should consult with their legal and tax counsel prior to making such contributions.
Benefit Plans and other tax exempt entities,
including governmental plans, should also be aware that if they borrow to finance their exercise of Rights, they may become subject
to the tax on unrelated business taxable income (“UBTI”) under Section 511 of the Code. If any portion of an IRA is
used as security for a loan, the portion so used may also be treated as distributed to the IRA depositor.
A Benefit Plan may also be subject to laws,
such as ERISA, that impose certain requirements on the Benefit Plan and on those persons who are fiduciaries with respect to the
Benefit Plans. Such requirements may include prudence and diversification requirements and require that investments be made in
accordance with the documents governing the Benefit Plan. The exercise of Rights by a fiduciary for a Benefit Plan should be considered
in light of such fiduciary requirements.
In addition, ERISA and the Code prohibit
certain transactions involving the assets of a Benefit Plan and certain persons (referred to as “parties in interest”
for purposes of ERISA and “disqualified persons” for purposes of the Code) having certain relationships to such Benefit
Plans, unless a statutory or administrative exemption is applicable to the transaction. A party in interest or disqualified person
who engages in a nonexempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA
and the Code (or with respect to certain Benefit Plans, such as IRAs, a prohibited transaction may cause the Benefit Plan to lose
its tax-exempt status). In this regard, the U.S. Department of Labor has issued prohibited transaction class exemptions (“PTCEs”)
that may apply to the exercise of the Rights and holding of the Shares of Common Stock. These class exemptions include, without
limitation, PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting
insurance company pooled separate accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting life
insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers, PTCE 84-24 governing
purchases of shares in investment companies) and PTCE 75-1 respecting sales of securities. In addition, Section 408(b)(17) of ERISA
and Section 4975(d)(20) of the Code each provides a limited exemption, commonly referred to as the “service provider exemption,”
from the prohibited transaction provisions of ERISA and Section 4975 of the Code for certain transactions between a Benefit Plan
and a person that is a party in interest and/or a disqualified person (other than a fiduciary or an affiliate that, directly or
indirectly, has or exercises any discretionary authority or control or renders any investment advice with respect to the assets
of any Benefit Plan involved in the transaction) solely by reason of providing services to the Benefit Plan or by relationship
to a service provider, provided that the Benefit Plan receives no less, nor pays no more, than adequate consideration. There can
be no assurance that all of the conditions of any such exemptions or any other exemption will be satisfied at the time that the
Rights are exercised, or thereafter while the Shares of Common Stock are held, if the facts relied upon for utilizing a prohibited
transaction exemption change.
Due to the complexity of these rules and
the penalties for noncompliance, fiduciaries of Benefit Plans should consult with their legal and tax counsel regarding the consequences
of their exercise of Rights under ERISA, the Code and other similar laws.
Table of
Fees and Expenses
The following tables are intended to assist
you in understanding the various costs and expenses directly or indirectly associated with investing in our common stock as a percentage
of net assets attributable to common stock. Amounts are for the current fiscal year after giving effect to anticipated net proceeds
of the Rights offering, assuming that we incur the estimated offering expenses, including preferred stock offering expenses.
Stockholder Transaction Expenses
|
|
|
|
Sales Load (as a percentage of offering price)
|
|
None
|
|
Offering Expenses Borne by the Fund (as a percentage of offering price)
|
|
|
0.83
|
%
|
Voluntary Cash Purchase Plan Purchase Fees
|
|
$
|
0.75
|
|
Automatic Dividend Reinvestment and Cash Purchase Plan Sales Fees
|
|
$
|
2.50
|
(1)
|
Annual Expenses (as a percentage of net assets attributable to common stock)
|
|
|
|
|
Management Fees
|
|
|
1.38
|
%
|
Interest Payments on Borrowed Funds
|
|
|
None
|
|
Other Expenses
|
|
|
0.28
|
%(2)
|
Dividends on Preferred Stock
|
|
|
1.92
|
%(3)
|
Total Annual Expenses
|
|
|
3.58
|
%(2)
|
The purpose of the table above and the examples
below is to help you understand all fees and expenses that you, as a holder of Shares of Common Stock, would bear directly or indirectly.
(1)
|
Shareholders participating in the Fund’s Automatic Dividend Reinvestment Plan do not incur any additional fees. Shareholders participating in the Voluntary Cash Purchase Plans would pay $0.75 plus their pro rata share of brokerage commissions per transaction to sell shares. See “Automatic Dividend Reinvestment and Voluntary Cash Purchase Plans” in the Prospectus.
|
(2)
|
The Investment Adviser’s fee is 1.00% annually of the Fund’s average weekly net assets. The Fund’s average weekly net assets will be deemed to be the average weekly value of the Fund’s total assets minus the sum of the Fund’s liabilities (such liabilities exclude (i) the aggregate liquidation preference of outstanding preferred shares and accumulated dividends, if any, on those shares and (ii) the liabilities for any money borrowed or notes issued). Consequently, if the Fund has preferred shares outstanding, the investment management fees and other expenses as a percentage of net assets attributable to Shares of Common Stock are higher than if the Fund does not utilize a leveraged capital structure. “Other Expenses” are based on estimated amounts for the current year assuming completion of the proposed issuance.
|
(3)
|
The Dividends on Preferred Stock represent distributions on the existing preferred shares outstanding.
|
Example
The following example illustrates the expenses
you would pay on a $1,000 investment in common stock, 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
|
|
|
3
|
|
|
5
|
|
|
10
|
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
Total Expenses Incurred
|
|
$
|
36
|
|
|
$
|
110
|
|
|
$
|
186
|
|
|
$
|
385
|
|
|
*
|
The example should not be considered a representation of future expenses. The example assumes that the amounts set forth
in the Annual Expenses table are accurate and that all distributions are reinvested at net asset value. Actual expenses may be
greater or less than those assumed. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical
5% return shown in the example.
The table above and the assumption in the example of a 5% annual return are required by the Securities and Exchange Commission
(“SEC”) regulations applicable to all management investment companies. THE EXAMPLE AND FEE TABLE SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS THAN THOSE
SHOWN. For more complete descriptions of certain of the Fund’s cost and expenses, see “Management of the Fund”
in the Prospectus and the SAI.
|
Use of Proceeds
The Fund estimates the net proceeds of the
Rights offer to be $59,784,806 based on the Subscription Price per Share of Common Stock of $9.50, assuming all new Shares of Common
Stock offered are sold and that the expenses related to the Rights offer estimated at approximately $500,000 are paid and after
deduction of the underwriting discounts and commissions.
The Fund will invest the net proceeds of
any offering in accordance with the Fund’s investment objectives and policies, and may use a portion of such proceeds, depending
on market conditions, for other general corporate purposes, including the continuation of the Fund’s managed distribution
policy. The Investment Adviser anticipates that the investment of the proceeds will be made in accordance with the Fund’s
investment objectives and policies as appropriate investment opportunities are identified, which is expected to substantially be
completed within three months; however, changes in market conditions could result in the Fund’s anticipated investment period
extending to as long as six months. Pending such investment, the proceeds of the Rights offering will be held in high quality short-term
debt securities and instruments. In addition, in the discretion of the Board, the proceeds of the Rights offering may be used to
redeem a portion of the Fund’s outstanding preferred shares. Depending on market conditions and operations, a portion of
the cash held by the Fund, including any proceeds raised from the Rights offering, may be used to pay distributions in accordance
with the Fund’s distribution policy.
Capitalization
|
|
Actual
|
|
|
As Adjusted
|
|
Common Stock, $0.001 par value per share; unlimited shares authorized (The “Actual” column reflects the 25,264,139 shares outstanding as of December 31, 2020. The “As Adjusted” column reflects the 25,264,139 shares outstanding as of December 31, 2020, 118,937 shares issued pursuant to the dividend reinvestment program, and assumes issuance of 6,345,769 shares issued pursuant to this rights offering.)
|
|
|
25,264
|
|
|
|
31,729
|
|
Paid-in surplus*
|
|
|
144,920,971
|
|
|
|
205,850,541
|
|
Total distributable earnings
|
|
|
60,807,527
|
|
|
|
60,807,527
|
|
Net assets applicable to Common Stock
|
|
|
205,753,762
|
|
|
|
266,689,796
|
|
Liquidation preference of Preferred Stock
|
|
|
99,922,525
|
|
|
|
99,922,525
|
|
Net assets, plus the liquidation preference of Preferred Stock
|
|
|
305,676,287
|
|
|
|
366,612,321
|
|
*As adjusted paid-in surplus reflects a deduction for the estimated
offering expenses of $500,000.
Price Range
of Common Stock
The following table sets forth for the quarters
indicated, the high and low sale prices on the NYSE per share of our common stock and the net asset value and the premium or discount
from net asset value per share at which the common stock were trading, expressed as a percentage of net asset value, at each of
the high and low sale prices provided.
|
|
Market Price
|
|
|
Net Asset Value
|
|
|
Premium (Discount)
as % of NAV
|
|
Period
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Fiscal Year 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
8.68
|
|
|
$
|
7.05
|
|
|
$
|
8.22
|
|
|
$
|
7.10
|
|
|
|
5.59
|
|
|
|
(0.70
|
)
|
Q2
|
|
$
|
8.53
|
|
|
$
|
7.76
|
|
|
$
|
8.38
|
|
|
$
|
7.71
|
|
|
|
1.79
|
|
|
|
0.64
|
|
Q3
|
|
$
|
8.68
|
|
|
$
|
8.07
|
|
|
$
|
8.07
|
|
|
$
|
7.48
|
|
|
|
7.55
|
|
|
|
7.88
|
|
Q4
|
|
$
|
8.33
|
|
|
$
|
7.87
|
|
|
$
|
7.92
|
|
|
$
|
7.78
|
|
|
|
5.17
|
|
|
|
1.15
|
|
Fiscal Year 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
8.36
|
|
|
$
|
3.42
|
|
|
$
|
7.91
|
|
|
$
|
4.04
|
|
|
|
5.68
|
|
|
|
(15.34
|
)
|
Q2
|
|
$
|
7.53
|
|
|
$
|
4.77
|
|
|
$
|
6.92
|
|
|
$
|
4.43
|
|
|
|
8.81
|
|
|
|
7.67
|
|
Q3
|
|
$
|
7.40
|
|
|
$
|
6.43
|
|
|
$
|
7.46
|
|
|
$
|
6.26
|
|
|
|
(0.80
|
)
|
|
|
2.71
|
|
Q4
|
|
$
|
8.29
|
|
|
$
|
6.16
|
|
|
$
|
7.98
|
|
|
$
|
6.44
|
|
|
|
3.88
|
|
|
|
(4.34
|
)
|
Fiscal Year 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
10.24
|
|
|
$
|
7.78
|
|
|
$
|
9.76
|
|
|
$
|
8.01
|
|
|
|
4.91
|
|
|
|
(2.87
|
)
|
Q2
|
|
$
|
11.19
|
|
|
$
|
9.65
|
|
|
$
|
9.31
|
|
|
$
|
8.85
|
|
|
|
20.19
|
|
|
|
9.04
|
|
On July 9, 2021, the last reported net asset
value per share of the common stock was $9.26 and the last reported sales price per share of
common stock on the NYSE was $11.00.
Special
Characteristics and Risks of the Rights Offering
Risk is inherent in all investing. Therefore,
before investing in the common stock should consider the risks associated with such an investment carefully. See “Risk Factors
and Special Considerations” in the Prospectus. The following summarizes some of the matters that you should consider before
investing in the Fund through the Rights offer:
Dilution. As with any security, the
price of the Fund’s Shares of Common Stock fluctuates with market conditions and other factors. The Shares of Common Stock
are currently trading at a discount to their net asset value. However, shares of closed-end investment companies frequently trade
at a discount from their net asset values. This characteristic is a risk separate and distinct from the risk that the Fund’s
net asset value could decrease as a result of its investment activities and may be greater for stockholders expecting to sell their
Shares of Common Stock in a relatively short period of time following completion of this Rights offering. The net asset value of
the Shares of Common Stock will be reduced immediately following this Rights offering as a result of the payment of certain offering
costs.
If you do not exercise all of your Rights,
you may own a smaller proportional interest in the Fund when the Rights offering is over. In addition, you will experience an immediate
dilution of the aggregate net asset value per share of your Share of Common Stock if you do not participate in the Rights offering
and will experience a reduction in the net asset value per share whether or not you exercise your Rights, if the Subscription Price
is below the Fund’s net asset value per Share of Common Stock on the Expiration Date, because:
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the offered Shares of Common Stock are being sold at less than their current net asset value;
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●
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you will indirectly bear the expenses of the Rights offering; and
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●
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the number of Shares of Common Stock outstanding after the Rights offering will have increased proportionately more than the
increase in the amount of the Fund’s net assets.
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On the other hand, if the Subscription Price
is above the Fund’s net asset value per share on the Expiration Date, you may experience an immediate accretion of the aggregate
net asset value per Share of Common Stock even if you do not exercise your Rights and an immediate increase in the net asset value
per Share of Common Stock whether or not you participate in the Rights offering, because:
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the offered Shares of Common Stock are being sold at more than their current net asset value after deducting the expenses of
the Rights offering; and
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the number of Shares of Common Stock outstanding after the Rights offering will have increased proportionately less than the
increase in the amount of the Fund’s net assets.
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Furthermore, if you do not participate in
the Over-Subscription Privilege, if it is available, your percentage ownership may also be diluted. The Fund cannot state precisely
the amount of any dilution because it is not known at this time what the net asset value per share will be on the Expiration Date
or what proportion of the Rights will be exercised. The impact of the Rights offering on net asset value per share is shown by
the following examples, assuming a $9.50 Subscription Price:
Scenario 1: (assumes net asset value per share is above subscription price)(1)
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|
|
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NAV
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|
$
|
10.00
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|
Subscription Price
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$
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9.50
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Reduction in NAV($)(2)
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$
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(0.12
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)
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Reduction in NAV(%)
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|
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(1.20
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)%
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Scenario 2: (assumes net asset value per share is below subscription price)(1)
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|
|
|
|
NAV
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|
$
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9.00
|
|
Subscription Price
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$
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9.50
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|
Increase in NAV($)(2)
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$
|
0.08
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|
Increase in NAV(%)
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|
0.89
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%
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(1)
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Both examples assume the full primary subscription and secondary over-subscription privilege are exercised. Actual amounts
may vary due to rounding.
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(2)
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Assumes $500,000 in estimated offering expenses.
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If you do not wish to exercise your Rights,
you should consider selling them as set forth in this Prospectus Supplement. Any cash you receive from selling your Rights may
serve as partial compensation for any possible dilution of your interest in the Fund. The Fund cannot give assurance, however,
that a market for the Rights will develop or that the Rights will have any marketable value.
The Fund’s largest stockholders could
increase their percentage ownership in the Fund through the exercise of the primary subscription and over-subscription privilege.
Leverage. Leverage creates a greater
risk of loss, as well as a potential for more gain, for the Shares of Common Stock than if leverage were not used. Following the
completion of the Rights offer, the Fund’s amount of leverage outstanding will decrease. The leverage of the Fund as of June
30, 2021 was 30%. After the completion of the Rights offer, the leverage of the Fund is expected to decrease to 25%. The use of
leverage for investment purposes creates opportunities for greater total returns but at the same time increases risk. When leverage
is employed, the net asset value, market price of the Shares of Common Stock and the yield to holders of Shares of Common Stock
may be more volatile. Any investment income or gains earned with respect to the amounts borrowed in excess of the interest due
on the borrowing will augment the Fund’s income. Conversely, if the investment performance with respect to the amounts borrowed
fails to cover the interest on such borrowings, the value of the Fund’s Shares of Common Stock may decrease more quickly
than would otherwise be the case, and distributions on the Shares of Common Stock would be reduced or eliminated. Interest payments
and fees incurred in connection with such borrowings will reduce the amount of net income available for distribution to common
stockholders.
Because the fee paid to the Investment Adviser
is calculated on the basis of the Fund’s average weekly net assets, including the liquidation value of preferred stock, the
dollar amount of the management fee paid by the Fund to the Investment Adviser will be higher (and the Investment Adviser will
be benefited to that extent) when leverage is utilized. The Investment Adviser will utilize leverage only if it believes such action
would result in a net benefit to the Fund’s stockholders after taking into account the higher fees and expenses associated
with leverage (including higher management fees).
The Fund’s leveraging strategy may
not be successful.
Increase in Share Price Volatility; Decrease
in Share Price. The Rights offer may result in an increase in trading of the common stock, which may increase volatility in
the market price of the common stock. The Rights offer may result in an increase in the number of stockholders wishing to sell
their common stock, which would exert downward price pressure on the price of common stock.
Under-Subscription. It is possible
that the Rights offer will not be fully subscribed. Under-subscription of the Rights offer could have an impact on the net proceeds
of the Rights offer and whether the Fund achieves any benefits.
Taxation
The following is a general summary of the
U.S. federal income tax consequences of the Rights offering to Record Date Stockholders who are U.S. persons for U.S. federal income
tax purposes. The following summary supplements the discussion set forth in the accompanying Prospectus and SAI and is subject
to the qualifications and assumptions set forth therein. The discussion set forth herein does not constitute tax advice and potential
investors are urged to consult their own tax advisers to determine the tax consequences of investing in the Fund.
Please refer to the “Taxation”
sections in the Fund’s Prospectus and SAI for a description of the consequences of investing in the Shares of Common Stock
of the Fund. Special tax considerations relating to this Rights offering are summarized below:
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The value of a Right will not be includible in the income of a common stockholder at the time the subscription Right is issued.
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The basis of a Right issued to a common stockholder will be zero, and the basis of the share with respect to which the Right
was issued (the old share) will remain unchanged, unless either (a) the fair market value of the Right on the date of distribution
is at least 15% of the fair market value of the old share, or (b) such common stockholder affirmatively elects (in the manner set
out in Treasury regulations under the Code) to allocate to the Right a portion of the basis of the old share. If either (a) or
(b) applies, such common stockholder must allocate basis between the old share and the Right in proportion to their fair market
values on the date of distribution.
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The basis of a Right purchased in the market will generally be its purchase price.
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●
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The holding period of a Right issued to a common stockholder will include the holding period of the old share.
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No loss will be recognized by a common stockholder if a Right distributed to such common stockholder expires unexercised because
the basis of the old share may be allocated to a Right only if the Right is exercised. If a Right that has been purchased in the
market expires unexercised, there will be a recognized loss equal to the basis of the Right.
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Any gain or loss on the sale of a Right will be a capital gain or loss if the Right is held as a capital asset (which in the
case of a Right issued to Record Date Stockholder will depend on whether the old share is held as a capital asset), and will be
a long term capital gain or loss if the holding period is deemed to exceed one year.
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No gain or loss will be recognized by a common stockholder upon the exercise of a Right, and the basis of any Share of Common
Stock acquired upon exercise (the new Share of Common Stock) will equal the sum of the basis, if any, of the Right and the subscription
price for the new Share of Common Stock. The holding period for the new Share of Common Stock will begin on the date when the Right
is exercised (or, in the case of a Right purchased in the market, potentially the day after the date of exercise).
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The foregoing is a general and abbreviated
summary of the provisions of the Code and the Treasury regulations in effect as they directly govern the taxation of the Fund and
its common stockholders, with respect to U.S. federal income taxation only. Other tax issues such as state and local taxation may
apply. Investors are urged to consult their own tax advisers to determine the tax consequences of investing in the Fund. These
provisions are subject to change by legislative or administrative action, and any such change may be retroactive.
Legal Matters
Certain legal matters will be passed on
by Paul Hastings LLP, 200 Park Avenue, New York, New York 10022 in connection with the Rights offering of the Shares of Common
Stock.
Certain legal matters will be passed on
by Venable LLP, Baltimore, Maryland, in connection with the Rights offering of the Shares of Common Stock as Maryland counsel to
the Fund.
Financial
Statements
The audited annual financial statements
of the Fund for the fiscal year ended December 31, 2020 are incorporated by reference into this Prospectus Supplement, the
accompanying Prospectus and the SAI. Portions of the Fund’s annual report other than the financial statements and related
footnotes thereto are not incorporated into, and do not form a part of, this Prospectus Supplement, the accompanying Prospectus
or the SAI.
PROSPECTUS
$400,000,000
THE GABELLI MULTIMEDIA TRUST INC.
Common Stock
Preferred Stock
Subscription Rights to Purchase Common Stock
Subscription Rights to Purchase Preferred Stock
Beginning
on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s
annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the
reports. Instead, the reports will be made available on the Fund’s website (https://gabelli.com/), and you will be notified
by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive
shareholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive
all future reports in paper free of charge, please contact your financial intermediary, or, if you invest directly with the Fund,
you may call 800-422-3554 or send an email request to info@gabelli.com. Your election to receive reports in paper will apply to
all funds held in your account if you invest through your financial intermediary or all funds held within the fund complex if
you invest directly with the Fund.
Investment
Objectives. The Gabelli Multimedia Trust Inc. (the “Fund”) is a non-diversified, closed-end management investment
company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s primary
investment objective is long-term growth of capital, primarily through investment in a portfolio of common stock and other securities
of foreign and domestic companies involved in the telecommunications, media, publishing, and entertainment industries. Income
is a secondary objective of the Fund. Gabelli Funds, LLC (the “Investment Adviser”) serves as investment adviser to
the Fund. Under normal market conditions, the Fund will invest at least 80% of the value of its net assets, plus borrowings for
investment purposes, in common stock and other securities, including convertible securities, preferred stock, options, and warrants
of companies in the telecommunications, media, publishing, and entertainment industries (the “80% Policy”). A company
will be considered to be in these industries if it derives at least 50% of its revenues or earnings from, or devotes at least
50% of its assets to, the indicated activities or multimedia related activities. The 80% Policy may be changed without stockholder
approval. The Fund will provide stockholders with notice at least sixty days prior to the implementation of any change in the
80% Policy. The Fund was organized as a Maryland corporation on March 31, 1994 and commenced its investment operations on November
15, 1994. An investment in the Fund is not appropriate for all investors. No assurances can be given that the Fund’s objectives
will be achieved.
We
may offer, from time to time, in one or more offerings, our common stock or preferred stock, each having a par value of $0.001
per share, or our subscription rights to purchase our common stock or preferred stock. Shares may be offered at prices and on
terms to be set forth in one or more supplements to this Prospectus (each a “Prospectus Supplement”). You should read
this Prospectus and the applicable Prospectus Supplement carefully before you invest in our shares.
Our
shares may be offered directly to one or more purchasers, through agents designated from time to time by us, or to or through
underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents or underwriters involved
in the sale of our shares, and will set forth any applicable purchase price, fee, commission, or discount arrangement between
us and our agents or underwriters, or among our underwriters, or the basis upon which such amount may be calculated. The Prospectus
Supplement relating to any sale of preferred stock will set forth the liquidation preference and information about the dividend
period, dividend rate, any call protection or non-call period and other matters. We may not sell any of our shares through agents,
underwriters or dealers without delivery of a Prospectus Supplement describing the method and terms of the particular offering
of our shares. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “GGT.”
Our Series C Auction Rate Cumulative Preferred Stock (“Series C Auction Rate Preferred”) is not listed on a stock
exchange. Our 5.125% Series E Cumulative Preferred Stock (“Series E Preferred”) and 5.125% Series G Cumulative Preferred
Stock (“Series G Preferred”) is listed on the NYSE under the symbols “GGT PrE” and “GGT PrG”
respectively (and together with the Series C Auction Rate Preferred, “Preferred Stock”). On April 13, 2021, the last
reported sale price of our common stock was $10.19. The net asset value of the Fund’s common stock at the close of business
on April 13, 2021 was $9.20 per share. Shares of closed-end funds could trade at a discount from net asset value. This creates
a risk of loss for an investor purchasing shares in a public offering.
Investing
in the Fund’s shares involves risks. See “Risk Factors and Special Considerations” on page 25 for factors that
should be considered before investing in shares of the Fund.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined
if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
These
securities have not been approved or disapproved by any securities regulatory authority in Canada. This offering will not be made
in any province in Canada where it is not permitted by law.
This
Prospectus may not be used to consummate sales of shares by us through agents, underwriters, or dealers unless accompanied by
a Prospectus Supplement.
This
Prospectus sets forth concisely the information about the Fund that a prospective investor should know before investing. You should
read this Prospectus, which contains important information about the Fund, before deciding whether to invest in the shares, and
retain it for future reference. A Statement of Additional Information (the “SAI”), dated April 14, 2021, containing
additional information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated by reference
in its entirety into this Prospectus. You may request a free copy of the Fund’s Annual and Semiannual Reports, the SAI,
the table of contents of which is on page 3 of this Prospectus, request other information about us, and make stockholder inquiries
by calling (800) GABELLI (422-3554), or by writing to the Fund, or obtain a copy (and other information regarding the Fund) from
the Securities and Exchange Commission’s web site (http://www.sec.gov).
Our
shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency.
You
should rely only on the information contained or incorporated by reference in this Prospectus. The Fund has not authorized anyone
to provide you with different information. The Fund is not making an offer to sell these securities in any state where the offer
or sale is not permitted. You should not assume that the information contained in this Prospectus is accurate as of any date other
than the date of this Prospectus.
TABLE OF CONTENTS
Page
Prospectus
Summary
This
is only a summary of some of the information that is described more fully elsewhere in this Prospectus. This summary may not contain
all of the information that you should consider before investing in our shares. You should review the more detailed information
contained in this Prospectus and the Statement of Additional Information, dated April 14, 2021 (the “SAI”).
The
Fund
The
Gabelli Multimedia Trust Inc. is a non-diversified, closed-end management investment company organized as a Maryland corporation
on March 31, 1994. Throughout this Prospectus, we refer to The Gabelli Multimedia Trust Inc. as the “Fund,” or as
“we.” See “The Fund.”
The
Offering
We
may offer, from time to time, in one or more offerings, our common or preferred stock, $0.001 par value per share. The shares
may be offered at prices and on terms to be set forth in one or more supplements to this Prospectus (each a “Prospectus
Supplement”). We may also offer subscription rights to purchase our common or preferred stock. The offering price per share
of our common stock will not be less than the net asset value per share of our common stock at the time we make the offering,
exclusive of any underwriting commissions or discounts, provided that transferable rights offerings that meet certain conditions
may be offered at a price below the then current net asset value. See “Rights Offerings.” You should read this Prospectus
and the applicable Prospectus Supplement carefully before you invest in our shares. Our shares may be offered directly to one
or more purchasers, through agents designated from time to time by us, or to or through underwriters, or dealers. The Prospectus
Supplement relating to the offering will identify any agents, underwriters, or dealers involved in the sale of our shares, and
will set forth any applicable purchase price, fee, commission or discount arrangement between us and our agents or underwriters,
or among our underwriters, or the basis upon which such amount may be calculated. The Prospectus Supplement relating to any sale
of preferred stock will set forth the liquidation preference and information about the dividend period, dividend rate, any call
protection or non-call period and other matters. We may not sell any of our shares through agents, underwriters or dealers without
delivery of a Prospectus Supplement describing the method and terms of the particular offering of our shares. Our common stock
is listed on the New York Stock Exchange (“NYSE”) under the symbol “GGT.” Our Series C Auction Rate Cumulative
Preferred Stock (“Series C Auction Rate Preferred”) is not listed on a stock exchange. Our 5.125% Series E Cumulative
Preferred Stock (“Series E Preferred”) and 5.125% Series G Cumulative Preferred Stock (“Series G Preferred”)
is listed on the NYSE under the symbols “GGT PrE” and “GGT PrG” respectively (and together with the Series
C Auction Rate Preferred, “Preferred Stock”). The Fund completed its redemption of its 7.92% Tax Advantaged Cumulative
Preferred Stock (the “Series A Preferred”) on April 2, 2003. The Fund completed its redemption of its 6.00% Series
B Cumulative Preferred Stock (“Series B Preferred”) on December 26, 2019. The Series C Auction Rate Preferred, the
Series E Preferred and the Series G Preferred have the same seniority with respect to distributions and liquidation preference.
On April 13, 2021, the last reported sale price of our common stock was $10.19. The net asset value of the Fund’s common
stock at the close of business on April 13, 2021 was $9.20 per share. As of December 31, 2020, the Fund had outstanding 25,264,139
shares of common stock; 10 shares of Series C Auction Rate Preferred, 1,996,700 shares of Series E Preferred and 1,990,201 shares
of Series G Preferred.
Investment
Objectives and Policies
The
Fund’s primary investment objective is long-term growth of capital, primarily through investment in a portfolio of common
stock and other securities of foreign and domestic companies involved in the telecommunications, media, publishing, and entertainment
industries. Income is a secondary objective of the Fund. Under normal market conditions, the Fund will invest at least 80% of
the value of its net assets, plus borrowings for investment purposes, in common stock and other securities, including convertible
securities, preferred stock, options, and warrants of companies in the telecommunications, media, publishing, and entertainment
industries (the “80% Policy”). The Fund may invest in companies of any size market capitalization. The Fund may also
invest, without limitation, in foreign securities. The Fund may also invest in securities of companies located in emerging markets.
A
company will be considered to be in these industries if it derives at least 50% of its revenues or earnings from, or devotes at
least 50% of its assets to, the indicated activities or multimedia related activities. The 80% Policy may be changed without stockholder
approval. The Fund will provide stockholders with notice at least sixty days prior to the implementation of any change in the
80% Policy.
No
assurance can be given that the Fund’s investment objectives will be achieved. The investment objectives of long-term growth
of capital and income are fundamental policies of the Fund. The Fund’s policy of concentration in companies in the communications
industries is also a fundamental policy of the Fund. These fundamental policies may not be changed without the approval of the
holders of a majority if the Fund’s outstanding voting securities, as defined in the 1940 Act.
Investing
in securities of foreign issuers, which generally are denominated in foreign currencies, may involve certain risk and opportunity
considerations not typically associated with investing in domestic companies and could cause the Fund to be affected favorably
or unfavorably by changes in currency exchange rates and revaluations of currencies. See “Investment Objectives and Policies.”
Common
Stock
Currently,
196,750,000 of the Fund’s capital stock, which includes the common stock being registered with this registration statement,
have been classified by the Board of Directors of the Fund (the “Board”) or any duly authorized committee thereof
as common stock, par value $0.001 per share. Holders of the common stock are entitled to one vote per share held. Holders of the
common stock are entitled to share equally in distributions authorized by the Fund’s Board payable to the holders of such
shares and in the net assets of the Fund available on liquidation for distribution to holders of such shares. The shares of common
stock have noncumulative voting rights and no conversion, preemptive or other subscription rights, and are not redeemable. In
the event of liquidation, each share of Fund common stock is entitled to its proportion of the Fund’s assets after payment
of debts and expenses and the amounts payable to holders of the Fund’s preferred stock ranking senior to the shares of common
stock of the Fund. As of December 31, 2020, the net assets of the Fund attributable to its shares of common stock were $205,753,762.
As of December 31, 2020, 25,264,139 shares of common stock of the Fund were outstanding.
Preferred
Stock
On
December 18, 2019, the Fund completed the placement of $50,000,000 of the Series G Preferred and on September 26, 2017, the Fund
completed the placement of $50,000,000 of the Series E Preferred. On March 31, 2003, the Fund completed the placement of $25 million
of Series C Auction Rate Preferred. The Preferred Stock is senior to the common stock and results in the financial leveraging
of the common stock. Such leveraging tends to magnify both the risks and opportunities to common stockholders. Dividends on the
Preferred Stock are cumulative. The Fund is required by the 1940 Act and by the articles supplementary classifying and designating
the series of Preferred Stock (the “Articles Supplementary”) to meet certain asset coverage tests with respect to
the Preferred Stock. If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required
to redeem, in part or in full, the Preferred Stock. For the Series C Auction Rate Preferred, the redemption price is $25,000 per
share plus an amount equal to any accumulated but unpaid dividends (whether or not earned or declared) to the redemption date.
For the Series E Preferred, the redemption price is $25 per share plus an amount equal to any accumulated but unpaid dividends
(whether or not earned or declared) to the redemption date. For the Series G Preferred, the redemption price is $25 per share
plus an amount equal to any accumulated but unpaid dividends (whether or not earned or declared) to the redemption date Dividend
rates for the Series C Auction Rate Preferred are cumulative at a rate that may be reset every seven days based on the results
of an auction, or not in excess of a maximum rate. Additionally, failure to meet the foregoing asset coverage requirements could
restrict the Fund’s ability to pay dividends to common stockholders and could lead to sales of portfolio securities at inopportune
times. If the Fund has insufficient investment income and gains, all or a portion of the distributions to preferred stockholders
would come from the common stockholders’ capital. Such distributions reduce the net assets attributable to common stockholders
since the liquidation value of the preferred stockholders is constant.
As
of December 31, 2020, the Fund had 10 shares of Series C Auction Rate Preferred outstanding, 1,996,700 shares of Series E Preferred
outstanding and 1,990,201 shares of Series G Preferred outstanding.
The
Fund may issue additional series of preferred stock to leverage its investments. If the Fund’s Board (each member of the
Board individually, a “Director”) determines that it may be advantageous to the holders of the Fund’s common
stock for the Fund to utilize such leverage, the Fund may issue additional series of preferred stock. Any preferred stock issued
by the Fund will pay distributions either at a fixed rate or at rates that will be reset frequently based on short-term interest
rates. Leverage creates a greater risk of loss as well as a potential for more gains for the common stock than if leverage were
not used. See “Risk Factors and Special Considerations—Leverage Risk.” The Fund may also engage in investment
management techniques which will not be considered senior securities if the Fund establishes in a segregated account cash or other
liquid securities equal to the Fund’s obligations in respect of such techniques.
Dividends
and Distributions
Preferred
Stock Distributions. In accordance with the 1940 Act, all preferred stock of the Fund must have the same seniority with respect
to distributions. Accordingly, no full distribution will be declared or paid on any series of preferred stock of the Fund for
any dividend period, or part thereof, unless full cumulative dividends and distributions due through the most recent dividend
payment dates for all series of outstanding preferred stock of the Fund are declared and paid. If full cumulative distributions
due have not been declared and made on all outstanding preferred stock of the Fund, any distributions on such preferred stock
will be made as nearly pro rata as possible in proportion to the respective amounts of distributions accumulated but unmade on
each such series of preferred stock on the relevant dividend payment date.
In
the event that for any calendar year the total distributions on shares of the Fund’s preferred stock exceed the Fund’s
current and accumulated earnings and profits allocable to such shares, the excess distributions will generally be treated as a
tax-free return of capital (to the extent of the stockholder’s tax basis in the shares). Stockholders should not assume
that the source of a distribution from the Fund is net profit. Distributions sourced from paid-in capital should not be considered
the current yield or the total return from an investment in the Fund. The amount treated as a tax-free return of capital will
reduce a stockholder’s adjusted tax basis in the preferred stock, thereby increasing the stockholder’s potential taxable
gain or reducing the potential loss on the sale of the shares.
The
distributions to the Fund’s preferred stockholders for the fiscal year ended December 31, 2020, were comprised of net investment
income, short term capital gains and long term capital gains. The Fund did not make return of capital distributions to preferred
stockholders in 2010-2019.
Fixed
Rate Preferred Stock. Distributions on Fixed Rate Preferred Stock, at the applicable annual rate of the per share liquidation
preference, are cumulative from the original issue date and are payable, when, as and if authorized by the Board and declared
by the Fund, out of funds legally available therefor.
Auction
Rate Preferred Stock. The holders of Auction Rate Preferred Stock are entitled to receive cash distributions, stated at annual
rates of the applicable per share liquidation preference, that vary from dividend period to dividend period. Dividend rates for
the Series C Auction Rate Preferred are cumulative at a rate that may be reset every seven days based on the results of an auction,
or not in excess of a maximum rate.
Common
Stock Distributions. In order to allow its common stockholders to realize a predictable, but not assured, level of cash flow
and some liquidity periodically on their investment without having to sell shares, the Fund has adopted a managed distribution
policy, which may be changed at any time by the Board, of paying a minimum annual distribution of 10% of the average net asset
value of the Fund to common stockholders. In the event the Fund does not generate a total return from dividends and interest received
and net realized capital gains in an amount equal to or in excess of its stated distribution in a given year, the Fund may return
capital as part of such distribution, which may have the effect of decreasing the asset coverage per share with respect to the
Fund’s preferred stock. Distributions on the Fund’s common stock may contain a return of capital. Any return of capital
should not be considered by investors as yield or total return on their investment in the Fund. Distributions sourced from return
of capital should not be considered as dividend yield or the total return from an investment in the Fund. Stockholders who
periodically receive the payment of a dividend or other distribution consisting of a return of capital may be under the impression
that they are receiving net profits when they are not. Stockholders should not assume that the source of a distribution from the
Fund is net profit. The composition of each distribution is estimated based on the earnings of the Fund as of the record date
for each distribution. The actual composition of each of the current year’s distributions will be based on the Fund’s
investment activity through the end of the calendar year.
For
the fiscal year ended December 31, 2020, the Fund made distributions of $0.88 per share of common stock, $0.0281 per share of
which was deemed a return of capital. The composition of each distribution is estimated based on the earnings of the Fund as of
the record date for each distribution. The actual composition of each of the current year’s distributions will be based
on the Fund’s investment activity through the end of the calendar year.
Limitations
on Distributions. If at any time the Fund has borrowings outstanding, the Fund will be prohibited from paying any distributions
on any of its common stock (other than in additional stock), and from repurchasing any of its common stock or preferred stock,
unless, the value of its total assets, less certain ordinary course liabilities, exceed 300% of the amount of the debt outstanding
and exceed 200% of the sum of the amount of debt and preferred stock outstanding. In addition, in such circumstances the Fund
will be prohibited from paying any sister distributions on its preferred stock unless the value of its total assets, less certain
ordinary course liabilities, exceed 200% of the amount of debt outstanding. See “Dividends and Distributions.”
Use
of Proceeds
Unless
otherwise specified in a prospectus supplement, the Fund will invest the net proceeds of any offering in accordance with the Fund’s
investment objectives and policies, and may use a portion of such proceeds, depending on market conditions, for other general
corporate purposes, including the continuation of the Fund’s managed distribution policy. The Investment Adviser anticipates
that investment of the proceeds will be made in accordance with the Fund’s investment objectives and policies as appropriate
investment opportunities are identified, which is expected to be substantially completed in approximately three months; however,
the identification of appropriate investment opportunities pursuant to the Investment Adviser’s investment style or changes
in market conditions may cause the investment period to extend as long as six months. The Fund may also use net proceeds to redeem
existing series of Preferred Stock. Pending such investment, the proceeds will be held in high quality short-term debt securities
and instruments. See “Use of Proceeds.”
Exchange
Listing
The
Fund’s common stock is listed on the NYSE, under the trading or “ticker” symbol “GGT.” Currently,
the Series E Preferred and Series G Preferred are listed on the NYSE under the symbol “GGT PrE” and “GGT PrG”
respectively. The Series C Auction Rate Preferred is not listed on a stock exchange. Any additional series of fixed rate preferred
stock would also likely be listed on a stock exchange. See “Description of Capital Stock.”
Market
Price of Shares
Shares
of common stock of closed-end investment companies often trade on an exchange at prices lower than their net asset value. Shares
of common stock of closed-end investment companies may trade during some periods at prices higher than their net asset value and
during other periods at prices lower than their net asset value. The Fund cannot assure you that its common stock will trade at
a price higher than or equal to net asset value. The Fund’s net asset value will be reduced immediately following this offering
by the sales load and the amount of the offering expenses paid by the Fund. See “Use of Proceeds.”
In
addition to net asset value, the market price of the Fund’s common stock may be affected by such factors as the Fund’s
dividend and distribution levels (which are affected by expenses) and stability, market liquidity, market supply and demand, unrealized
gains, general market and economic conditions, and other factors. See “Risk Factors and Special Considerations,” “Description
of Capital Stock” and “Repurchase of Common Stock.”
The
common stock is designed primarily for long term investors, and you should not purchase shares of common stock of the Fund if
you intend to sell them shortly after purchase.
Fixed
rate preferred stock may also trade at premiums to or discounts from their liquidation preference for a variety of reasons, including
changes in interest rates.
Risk
Factors and Special Considerations
Risk
is inherent in all investing. Therefore, before investing in shares of the Fund, you should consider the following risks carefully.
Leverage
Risk. The Fund currently uses, and intends to continue to use, financial leverage for investment purposes by issuing preferred
stock. As of December 31, 2020, the amount of leverage represented approximately 33% of the Fund’s net assets. The Fund’s
leveraged capital structure creates special risks not associated with unleveraged funds having similar investment objectives 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 preferred stock. 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 stock, or to redeem preferred stock when it may be disadvantageous
to do so. The Fund may not be permitted to declare dividends or distributions with respect to common stock or preferred stock,
or purchase common stock or preferred stock unless at such time the Fund meets certain asset coverage requirements. In addition,
the Fund may not be permitted to pay distributions on common stock unless all distributions on preferred stock and/or accrued
interest on borrowings have been paid, or set aside for payment. Any preferred stock currently outstanding or that the Fund issues
in the future would subject the Fund to certain asset coverage requirements under the 1940 Act that could, under certain circumstances,
restrict the Fund from making distributions necessary to qualify as a registered investment company. If the Fund is unable to
obtain cash from other sources, the Fund may fail to qualify as a registered investment company and, thus, may be subject to income
tax as an ordinary corporation. See “Investment Objectives and Policies—Leveraging” and “Risk Factors
and Special Considerations—Leverage Risk.”
Special
Risks to Holders of Fixed Rate Preferred Stock. Prior to any offering, there will be no public market for any additional series
of fixed rate preferred stock. In the event any additional series of fixed rate preferred stock are issued, prior application
will have been made 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, although they will have no obligation to do so.
Consequently, an investment in such shares may be illiquid during such period. Shares of fixed rate preferred stock may trade
at a premium to or discount from liquidation value for various reasons, including changes in interest rates.
Special
Risks for Holders of Series C Auction Rate Preferred.
|
●
|
Auction
Risk. You may not be able to sell your Series C Auction Rate Preferred at an auction
if the auction fails, i.e., if more Series C Auction Rate Preferred is offered for sale
than there are buyers for those shares. Also, if you place an order (a hold order) at
an auction to retain Series C Auction Rate Preferred only at a specified rate that exceeds
the rate set at the auction, you will not retain your Series C Auction Rate Preferred.
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 Series C Auction Rate Preferred, which could also affect the liquidity
of your investment. Since February 2008, most auction rate preferred stock, including
our Series C Auction Rate Preferred, have had failed auctions and holders of such stock
have suffered reduced liquidity.
|
|
●
|
Secondary
Market Risk. If you try to sell your Series C Auction Rate Preferred between auctions,
you 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 Series C Auction Rate Preferred are not required to maintain this
market, and the Fund is not required to redeem Series C Auction Rate Preferred if either
an auction or an attempted secondary market sale fails because of a lack of buyers. The
Series C Auction Rate Preferred will not be registered on a stock exchange. If you sell
Series C Auction Rate Preferred 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. Since February 2008, most
auction rate preferred stock, including our Series C Auction Rate Preferred, have had
failed auctions and holders of such stock have suffered reduced liquidity, including
the inability to sell such stock in a secondary market.
|
Our
Subscription Rights. There is a risk that changes in yield or changes in the credit quality of the Fund may result in the
underlying shares of preferred stock 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. Further, if investors exercise
only a portion of the rights, the number of shares of preferred stock or shares of common stock issued may be reduced, and the
preferred stock or common stock may trade at less favorable prices than larger offerings for similar securities.
Common
Stock Distribution Policy Risk. The Fund has adopted a policy, which may be changed at any time by the Board, of paying a
minimum annual distribution of 10% of the average net asset value of the Fund to common stockholders. In the event the Fund does
not generate a total return from dividends and interest received and net realized capital gains in an amount equal to or in excess
of its stated distribution in a given year, the Fund may return capital as part of such distribution, which may have the effect
of decreasing the asset coverage per share with respect to the preferred stock. Distributions on the Fund’s common stock
may contain a return of capital. Any return of capital should not be considered by investors as yield or total return on their
investment in the Fund. For the fiscal year ended December 31, 2020, the Fund paid a return of capital. Distributions sourced
from return of capital should not be considered as dividend yield or the total return from an investment in the Fund. Stockholders
who periodically receive the payment of a dividend or other distribution consisting of a return of capital may be under the impression
that they are receiving net profits when they are not. Stockholders should not assume that the source of a distribution from the
Fund is net profit. The composition of each distribution is estimated based on the earnings of the Fund as of the record date
for each distribution. The actual composition of each of the current year’s distributions will be based on the Fund’s
investment activity through the end of the calendar year.
Coronavirus
and Global Health Events. An outbreak of infectious respiratory illness caused by a novel coronavirus known as “COVID-19”
was first detected in China in December 2019 and has now been detected globally. The current economic situation resulting from
the unprecedented measures taken around the world to combat the spread of COVID-19 may continue to contribute to severe market
disruptions, volatility and reduced economic activity. Furthermore, measures taken to battle COVID-19 may have long term negative
effects on the U.S. and worldwide financial markets and economies and may cause further economic uncertainties in the United States
and worldwide. It is difficult to predict how long the financial markets and economic activity will continue to be impacted by
these events and the effects of these or similar events in the future on the U.S. economy and financial markets. These events
could have a significant impact on the Fund’s performance, net asset value, income, operating results and ability to pay
distributions, as well as the performance, income, operating results and viability of issuers in which it invests.
Market
Loss. Shares of closed-end funds frequently trade at a market price that is less than the value of the net assets attributable
to those shares. The possibility that shares of the Fund will trade at a discount from net asset value or at premiums that are
unsustainable over the long term are risks separate and distinct from the risk that the Fund’s net assets will decrease.
The risk of purchasing shares of a closed-end fund that might trade at a discount or unsustainable premium is more pronounced
for investors who wish to sell their shares in a relatively short period of time because, for those investors, realization of
a gain or loss on their investments is likely to be more dependent upon the existence of a premium or discount than upon portfolio
performance. The Fund’s common stock is not subject to redemption. The Fund’s Series C Auction Rate Preferred, Series
E Preferred and Series G Preferred are subject to redemption only under limited circumstances. Stockholders desiring liquidity
may, subject to applicable securities law, trade their common stock, Series E Preferred and Series G Preferred in the Fund on
the NYSE or other markets on which such shares may trade at the then current market value, which may differ from the then current
net asset value. See “Risk Factors and Special Consideration—Market Value and Net Asset Value.”
Non-Diversified
Status. As a non-diversified, closed-end management investment company under the 1940 Act, the Fund may invest a greater portion
of its assets in a more limited number of issuers than may a diversified fund, and accordingly, an investment in the Fund may,
under certain circumstances, present greater risk to an investor than an investment in a diversified company. See “Risk
Factors and Special Considerations—Non-Diversified Status.”
Industry
Concentration Risk. The Fund invests a significant portion of its assets in companies in the telecommunications, media, publishing,
and entertainment industries and, as a result, the value of the Fund’s shares will be more susceptible to the factors affecting
those particular types of companies, including government regulation, greater price volatility for the overall market, rapid obsolescence
of products and services, intense competition, and strong market reactions to technological developments. See “Risk Factors
and Special Considerations—Industry Concentration Risk.”
Smaller
Companies Risk. The Fund invests in smaller companies which may benefit from the development of new products and services.
These smaller companies may involve greater investment risk than large, established issuers. See “Risk Factors and Special
Considerations—Smaller Companies.”
Interest
Rate Transactions. The Fund may enter into an interest rate swap or cap transaction with respect to all or a portion of any
series of variable rate preferred stock. Through these transactions, the Fund would seek to obtain the equivalent of a fixed rate
for a series of variable rate preferred stock that is lower than the rate the Fund would have to pay if it issued fixed rate preferred
stock. The use of interest rate swaps and caps is a highly specialized activity that involves certain risks to the Fund including,
among others, counterparty risk and early termination risk. The Fund will enter into an interest rate swap or cap transaction
only with counterparties that the Investment Adviser believes are creditworthy. Further, the Investment Adviser monitors the credit
worthiness of a counterparty in an interest rate or cap transaction on an ongoing basis. See “How the Fund Manages Risk—Interest
Rate Transactions.”
Foreign
Securities. There is no limitation on the amount of foreign securities in which the Fund may invest. Investing in securities
of foreign companies (or foreign governments), which are generally denominated in foreign currencies, may involve certain risks
and opportunities not typically associated with investing in domestic companies and could cause the Fund to be affected favorably
or unfavorably by changes in currency exchange rates and revaluation of currencies. See “Risk Factors and Special Considerations—Foreign
Securities.”
Emerging
Markets Risk. The Fund may invest in securities of issuers whose primary operations or principal trading market is in an “emerging
market.” An “emerging market” country is any country that is considered to be an emerging or developing country
by the International Bank for Reconstruction and Development (the “World Bank”). 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. 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 value 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; overburdened infrastructure and obsolete or unseasoned financial systems;
environmental problems; less developed legal systems; and less reliable securities custodial services and settlement practices.
See “Risk Factors and Special Considerations—Emerging Markets Risk.”
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. See “Risk
Factors and Special Considerations—Dependence on Key Personnel.”
Taxation.
The Fund has qualified, and intends to remain qualified, for federal income tax purposes as a regulated investment company. Qualification
requires, among other things, compliance by the Fund with certain distribution requirements. Statutory limitations on distributions
on the common stock if the Fund fails to satisfy the 1940 Act’s asset coverage requirements could jeopardize the Fund’s
ability to meet such distribution requirements. See “Taxation” for a more complete discussion of these and other federal
income tax considerations.
Regulation
and Government Intervention Risk. Global economies and financial markets are increasingly interconnected, which increases
the possibility that conditions in one country or region may adversely affect companies in a different country or region. In the
past, instability in the financial markets has led governments and regulators around the world to take a number of unprecedented
actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme
volatility, and in some cases a lack of liquidity. Governments, their regulatory agencies, or self-regulatory organizations may
take actions that affect the regulation of the instruments in which the Fund invests, or the issuers of such instruments, in ways
that are unforeseeable. Legislation or regulation may also change the way in which the Fund itself is regulated. Such legislation
or regulation could limit or preclude the Fund’s ability to achieve its investment objective.
Governments
or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions.
The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or
negative effects on the liquidity, valuation and performance of the Fund’s portfolio holdings. Furthermore, volatile financial
markets can expose the Fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held
by the Fund.
The
SEC and its staff have been engaged in various initiatives and reviews that seek to improve and modernize the regulatory structure
governing investment companies. These efforts have been focused on risk identification and controls in various areas, including
imbedded leverage through the use of derivatives and other trading practices, cybersecurity, liquidity, enhanced regulatory and
public reporting requirements and the evaluation of systemic risks. Any new rules, guidance or regulatory initiatives resulting
from these efforts could increase the Fund’s expenses and impact its returns to shareholders or, in the extreme case, impact
or limit its use of various portfolio management strategies or techniques and adversely impact the Fund.
Following
the November 3, 2020 U.S. elections and subsequent U.S. Senate runoff elections in Georgia, the Democratic Party controls the
executive and legislative branches of government. Changes in federal policy, including tax policies, and at regulatory agencies
occur over time through policy and personnel changes following elections, which lead to changes involving the level of oversight
and focus on the financial services industry or the tax rates paid by corporate entities. The nature, timing and economic and
political effects of potential changes to the current legal and regulatory framework affecting markets remain highly uncertain.
Uncertainty surrounding future changes may adversely affect the Fund’s operating environment and therefore its investment
performance.
In
addition, the U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Act”) made substantial
changes to the Code. Among those changes are a significant permanent reduction in the generally applicable corporate tax rate,
changes in the taxation of individuals and other non-corporate taxpayers that generally but not universally reduce their taxes
on a temporary basis subject to “sunset” provisions, the elimination or modification of various previously allowed
deductions (including substantial limitations on the deductibility of interest and, in the case of individuals, the deduction
for personal state and local taxes), certain additional limitations on the deduction of net operating losses, certain preferential
rates of taxation on certain dividends and certain business income derived by non-corporate taxpayers in comparison to other ordinary
income recognized by such taxpayers, and significant changes to the international tax rules. The effect of these, and the many
other changes made in the Act is highly uncertain, both in terms of their direct effect on the taxation of an investment in our
common or preferred shares and their indirect effect on the value of our assets, our common or preferred shares or market conditions
generally. Furthermore, many of the provisions of the Act will require guidance through the issuance of Treasury regulations in
order to assess their effect. There may be a substantial delay before such Treasury regulations are promulgated, increasing the
uncertainty as to the ultimate effect of the statutory amendments on us. It is also likely that there will be technical corrections
legislation proposed with respect to the Act, the effect of which cannot be predicted and may be adverse to us or our shareholders.
Actions
by governmental entities may also impact certain instruments in which the Fund invests. For example, the phase out of the London
Interbank Offered Rate (“LIBOR”) may affect Fund investments and as a result, the Fund. The Fund may invest in certain
instruments that rely in some fashion upon LIBOR. The Fund may also utilize leverage primarily based on LIBOR. LIBOR is an average
interest rate, determined by the ICE Benchmark Administration (“IBA”), that banks charge one another for the use of
short-term money. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has announced plans to phase
out the use of LIBOR by the end of 2021. In November 2020, IBA announced that it will consult on its intention to cease publication
of (i) euro, sterling, Swiss franc and yen LIBORs after December 31, 2021, (ii) one-week and two-week U.S. dollar LIBORs
after December 31, 2021 and (iii) all other tenors of U.S. dollar LIBORs after June 30, 2023. Acknowledging IBA’s announcement
regarding U.S. dollar LIBOR, the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller
of the Currency noted that extending the publication of U.S. dollar LIBOR until June 30, 2023 would allow most legacy U.S. dollar
LIBOR contracts to mature before LIBOR experiences disruptions and cautioned that banks entering into new contracts that use U.S.
dollar LIBOR as a reference rate after December 31, 2021 would create safety and soundness risks.
At
this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although the U.S. Federal
Reserve, in connection with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial
institutions, is considering replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”). Given
the inherent differences between LIBOR and SOFR, or any other alternative benchmark rate that may be established, there remains
uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. Any potential effects of the transition
away from LIBOR on the Fund or on certain instruments in which the Fund invests can be difficult to ascertain, and they may vary
depending on factors that include, but are not limited to: (i) existing fallback or termination provisions in individual contracts
and (ii) whether, how, and when industry participants develop and adopt new reference rates and fallbacks for both legacy and
new products and instruments. For example, certain of the Fund’s investments may involve individual contracts that have
no existing fallback provision or language that contemplates the discontinuation of LIBOR, and those investments could experience
increased volatility or illiquidity as a result of the transition process. In addition, interest rate provisions included in such
contracts may need to be renegotiated in contemplation of the transition away from LIBOR. The transition may also result in a
reduction in the value of certain instruments held by the Fund, including those described in this paragraph, or a reduction in
the effectiveness of related Fund transactions such as hedges. Any such effects of the transition away from LIBOR, as well as
other unforeseen effects, could result in losses to 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 objectives.
Management
and Fees
Gabelli
Funds, LLC serves as the Fund’s investment adviser. The Investment Adviser’s fee is computed weekly and paid monthly,
equal on an annual basis to 1.00% of the Fund’s average weekly net assets including the liquidation value of preferred stock.
The fee paid by the Fund may be higher when leverage in the form of preferred stock is utilized, giving the Investment Adviser
an incentive to utilize such leverage. However, the Investment Adviser has agreed to reduce the management fee on the incremental
assets attributable to the currently outstanding Series C Auction Rate Preferred Stock during the fiscal year if the total return
on the net asset value of the common stock of the Fund, including distributions and advisory fees subject to reduction for that
year, does not exceed the stated dividend rate or corresponding swap rate of each particular series of preferred stock for the
period. In other words, if the effective cost of the leverage for any series of preferred stock exceeds the total return (based
on net asset value) on the Fund’s common stock, the Investment Adviser will reduce that portion of its management fee on
the incremental assets attributable to the leverage for that series of preferred stock to mitigate the negative impact of the
leverage on the common stockholder’s total return. The Investment Adviser currently intends that the voluntary advisory
fee waiver will remain in effect for as long as the Series C Auction Rate Preferred Stock are outstanding. This fee waiver will
not apply to any preferred stock issued from this offering. The Investment Adviser, however, reserves the right to modify or terminate
the voluntary advisory fee waiver at any time. The Fund’s total return on the net asset value of the common stock is monitored
on a monthly basis to assess whether the total return on the net asset value of the common stock exceeds the stated dividend rate
or corresponding swap rate of each particular series of preferred stock for the period.
The
test to confirm the accrual of the management fee on the assets attributable to each particular series of preferred stock is annual.
The Fund will accrue for the management fee on these assets during the fiscal year if it appears probable that the Fund will incur
the management fee on those additional assets. See “Management of the Fund.”
For
the year ended December 31, 2020, the Fund’s total return on the net asset value of the common stock exceeded the stated
dividend rate of the outstanding Series C Auction Rate Preferred Stock. Thus, management fees with respect to these assets were
earned.
A
discussion regarding the basis for the Board’s approval of the continuation of the investment advisory contract of the Fund
is available in the Fund’s semiannual report to stockholders for the six months ended June 30, 2020.
Repurchase
of Common Stock
The
Board has authorized the Fund to repurchase shares of its common stock on the open market when the shares are trading at a discount
of 5% or more (or such other percentage as the Board may determine from time to time) from the net asset value of the shares.
Although the Fund’s Board has authorized such repurchases, the Fund is not required to repurchase its common stock. In total
through December 31, 2020, the Fund repurchased 2,474,160 shares. Such repurchases are subject to certain notice and other requirements
under the 1940 Act. See “Repurchase of Common Stock.”
Anti-Takeover
Provisions
Certain
provisions of Maryland law and of the Fund’s charter (the “Charter”) and the Bylaws of the Fund, as amended
from time to time (the “Bylaws” and, together with the Charter, the “Governing Documents”), may be regarded
as “anti-takeover” provisions. Pursuant to these provisions, only one of the three classes of Directors is elected
each year, and the affirmative vote or consent of the holders of 66 2/3% of the Fund’s outstanding shares of each class
(voting separately) is required to authorize the conversion of the Fund from a closed-end to an open-end investment company. The
overall effect of these provisions and other provisions applicable to principal stockholders of the Fund, if any, may render more
difficult the accomplishment of a merger with, or the assumption of control by, a principal stockholder. These provisions may
have the effect of depriving Fund stockholders of an opportunity to sell their stock at a premium to the prevailing market price.
See “Certain Provisions of the Fund’s Governing Documents and Maryland Law.”
Custodian,
Transfer Agent, Auction Agent, and Dividend Disbursing Agent
State
Street Bank and Trust Company (the “Custodian”), located at One Lincoln Street, Boston, Massachusetts 02111, serves
as the custodian of the Fund’s assets pursuant to a custody agreement. Under the custody agreement, the Custodian holds
the Fund’s assets in compliance with the 1940 Act. For its services, the Custodian will receive a monthly fee based upon
the average weekly value of the total assets of the Fund, plus certain charges for securities transactions.
Computershare
Trust Company, N.A. (“Computershare”), located at 250 Royall Street, Canton, Massachusetts 02021, serves as the Fund’s
dividend disbursing agent, as agent under the Fund’s automatic dividend reinvestment and voluntary cash purchase plan (the
“Plan”), and as transfer agent and registrar with respect to the common stock of the Fund. Computershare also serves
as the transfer agent, registrar, dividend paying agent, and redemption agent with respect to the Series E Preferred and Series
G Preferred.
The
Bank of New York Mellon, located at 101 Barclay Street, New York, New York 10286, serves as the auction agent, transfer agent,
registrar, dividend paying agent, and redemption agent with respect to the Series C Auction Rate Preferred. See “Custodian,
Transfer Agent, Auction Agent, and Dividend Disbursing Agent.”
Summary
of Fund Expenses
The
following table shows the Fund’s expenses, including preferred stock offering expenses, as a percentage of net assets attributable
to common stock.
Stockholder Transaction Expenses
|
|
|
|
Sales Load (as a percentage of offering price)
|
|
|
1.54
|
%(1)
|
Offering Expenses (excluding Preferred Stock Offering Expenses) (as a percentage of offering price)
|
|
|
0.25
|
%(1)
|
Dividend Reinvestment Plan Fees
|
|
|
None
|
(2)
|
Voluntary Cash Purchase Plan Purchase Transaction Fee
|
|
$
|
0.75
|
(2)
|
Voluntary Cash Purchase Plan Sale Transaction Fee
|
|
$
|
2.50
|
(2)
|
Preferred Stock Offering Expenses (as a percentage of net assets attributable to common stock)
|
|
|
0.13
|
%(3)
|
Annual Expenses (as a percentage of net assets attributable to common stock)
|
|
|
|
|
Management Fees
|
|
|
1.40
|
%(4)
|
Interest Payments on Borrowed Funds
|
|
|
None
|
|
Other Expenses
|
|
|
0.16
|
%(4)
|
Dividends on Preferred Stock
|
|
|
2.03
|
%
|
Total Annual Expenses
|
|
|
3.59
|
%
|
|
(1)
|
Estimated
maximum amount based on offering of $300 million in shares of common stock and $100 million
in shares of preferred stock. The estimates assume a 1% sales load on shares of common
stock and $999,000 in common offering expenses, and 3.15% sales load on shares of preferred
stock and $601,000 in preferred offering expenses. Actual sales loads and offering expenses
may be higher or lower than these estimates and will be set forth in the Prospectus Supplement
if applicable.
|
|
(2)
|
Stockholders
participating in the Fund’s Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plans 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. See “Automatic Dividend Reinvestment and Voluntary
Cash Purchase Plans.”
|
|
(3)
|
Assumes
issuance of $100 million in liquidation preference of shares of Fixed Rate Preferred
Stock, net assets attributable to shares of common stock of approximately $498 million
(which includes issuance of $300 million in shares of common stock) and $601,000 in preferred
offering expenses. The actual amounts in connection with any offering will be set forth
in the Prospectus Supplement if applicable.
|
|
(4)
|
The
Investment Adviser’s fee is 1.00% annually of the Fund’s average weekly net
assets, plus assets attributable to outstanding senior securities, with no deduction
for the liquidation preference of any outstanding preferred stock. Consequently, if the
Fund has preferred stock outstanding, the investment management fees and other expenses
as a percentage of net assets attributable to common stock will be higher than if the
Fund does not utilize a leveraged capital structure. “Other Expenses” are
based on estimated amounts for the current year assuming completion of the proposed issuances.
|
The
purpose of the table above and the example below is to help you understand all fees and expenses that you, as a holder of common
stock, would bear directly or indirectly.
The
following example illustrates the expenses (including the maximum estimated sales load on common stock of $10 and on preferred
stock of $31.50 and estimated offering expenses of $3.59 from the issuance of $300 million in common stock and $100 million in
preferred stock) you would pay on a $1,000 investment in common stock followed by the preferred stock offering 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 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Total Expenses Incurred
|
|
$
|
51
|
|
|
$
|
124
|
|
|
$
|
199
|
|
|
$
|
395
|
|
|
*
|
The
Example should not be considered a representation of future expenses. The example
is based on Total Annual Expenses and Dividends on Preferred Stock shown in the table
above and assumes that the amounts set forth in the Annual Expenses table are accurate
and that all distributions are reinvested at net asset value. Actual expenses may be
greater or less than those assumed. Moreover, the Fund’s actual rate of return
may be greater or less than the hypothetical 5% return shown in the example.
|
The
foregoing fee table and example are intended to assist investors in understanding the costs and expenses that an investor in the
Fund will bear directly or indirectly, and include the costs and expenses borne by an investor in common stock of the Fund in
connection with an offering of Preferred Stock of the Fund, in addition to the cost of servicing Preferred Stock.
The
table above and the assumption in the example of a 5% annual return are required by the Securities and Exchange Commission (“SEC”)
regulations applicable to all management investment companies. THE EXAMPLE AND FEE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS THAN THOSE SHOWN. For more
complete descriptions of certain of the Fund’s cost and expenses, see “Management of the Fund” in this Prospectus
and the SAI.
Financial
Highlights
The
following financial highlights tables are intended to help you under the Fund’s financial performance. The selected data
below sets forth the per share operating performance and ratios for the periods presented. The financial information was derived
from and should be read in conjunction with the Financial Statements of the Fund and Notes thereto, which are incorporated by
reference into this Prospectus and the SAI. The financial information for the year ended December 31, 2020, and for each of the
preceding four fiscal years, has been audited by PricewaterhouseCoopers LLP, the Fund’s independent registered public accounting
firm, whose unqualified report on such Financial Statements is incorporated by reference into the SAI.
Selected
data for a share of common stock outstanding throughout each year:
|
|
For
the Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Operating
Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of year
|
|
$
|
7.93
|
|
|
$
|
7.04
|
|
|
$
|
9.34
|
|
|
$
|
8.13
|
|
|
$
|
8.36
|
|
|
$
|
9.81
|
|
|
$
|
10.90
|
|
|
$
|
8.22
|
|
|
$
|
7.48
|
|
|
$
|
9.17
|
|
|
$
|
7.70
|
|
Net investment income/(loss)
|
|
|
0.02
|
|
|
|
0.13
|
(a)
|
|
|
0.03
|
|
|
|
0.01
|
|
|
|
0.05
|
|
|
|
0.03
|
|
|
|
0.05
|
|
|
|
0.06
|
|
|
|
0.13
|
|
|
|
0.04
|
|
|
|
(0.07
|
)
|
Net
realized and unrealized gain/(loss) on investments, swap contracts, and foreign currency transactions
|
|
|
1.27
|
|
|
|
1.86
|
|
|
|
(1.28
|
)
|
|
|
2.11
|
|
|
|
0.60
|
|
|
|
(0.49
|
)
|
|
|
0.42
|
|
|
|
3.61
|
|
|
|
1.48
|
|
|
|
0.00
|
(a)
|
|
|
2.22
|
|
Total
from investment operations
|
|
|
1.29
|
|
|
|
1.99
|
|
|
|
(1.25
|
)
|
|
|
2.12
|
|
|
|
0.65
|
|
|
|
(0.46
|
)
|
|
|
0.47
|
|
|
|
3.67
|
|
|
|
1.61
|
|
|
|
0.04
|
|
|
|
2.15
|
|
Distributions
to Preferred Shareholders: (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.00
|
)(c)
|
|
|
(0.02
|
)
|
|
|
(0.00
|
)(c)
|
|
|
(0.00
|
)(c)
|
|
|
(0.00
|
)(c)
|
|
|
(0.00
|
)(c)
|
|
|
(0.00
|
)(c)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
—
|
|
|
|
(0.09
|
)
|
Net realized gain
|
|
|
(0.20
|
)
|
|
|
(0.13
|
)
|
|
|
(0.15
|
)
|
|
|
(0.08
|
)
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
|
(0.04
|
)
|
|
|
(0.07
|
)
|
|
|
—
|
|
Total
distributions to preferred shareholders
|
|
|
(0.20
|
)
|
|
|
(0.15
|
)
|
|
|
(0.15
|
)
|
|
|
(0.08
|
)
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
|
(0.06
|
)
|
|
|
(0.07
|
)
|
|
|
(0.07
|
)
|
|
|
(0.07
|
)
|
|
|
(0.09
|
)
|
Net
Increase/(Decrease) in Net Assets Attributable to Common Shareholders Resulting from Operations
|
|
|
1.09
|
|
|
|
1.84
|
|
|
|
(1.40
|
)
|
|
|
2.04
|
|
|
|
0.60
|
|
|
|
(0.51
|
)
|
|
|
0.41
|
|
|
|
3.60
|
|
|
|
1.54
|
|
|
|
(0.03
|
)
|
|
|
2.06
|
|
Distributions
to Common Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.02
|
)
|
|
|
(0.12
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
(0.06
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
(0.05
|
)
|
|
|
(0.07
|
)
|
|
|
—
|
|
|
|
(0.07
|
)
|
Net realized gain
|
|
|
(0.83
|
)
|
|
|
(0.71
|
)
|
|
|
(0.89
|
)
|
|
|
(0.73
|
)
|
|
|
(0.74
|
)
|
|
|
(0.89
|
)
|
|
|
(0.88
|
)
|
|
|
(0.87
|
)
|
|
|
(0.08
|
)
|
|
|
(0.24
|
)
|
|
|
—
|
|
Return of capital
|
|
|
(0.03
|
)
|
|
|
(0.05
|
)
|
|
|
—
|
|
|
|
(0.12
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
(0.15
|
)
|
|
|
—
|
|
|
|
(0.65
|
)
|
|
|
(0.63
|
)
|
|
|
(0.53
|
)
|
Total
distributions to common shareholders
|
|
|
(0.88
|
)
|
|
|
(0.88
|
)
|
|
|
(0.90
|
)
|
|
|
(0.88
|
)
|
|
|
(0.83
|
)
|
|
|
(0.94
|
)
|
|
|
(1.05
|
)
|
|
|
(0.92
|
)
|
|
|
(0.80
|
)
|
|
|
(0.87
|
)
|
|
|
(0.60
|
)
|
Fund Share Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in net asset
value from common shares issued in rights offering
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.44
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.76
|
)
|
|
|
—
|
|
Increase in net asset
value from repurchase of common shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.00
|
(c)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.00
|
(c)
|
|
|
0.00
|
(c)
|
|
|
0.01
|
|
Increase/(decrease) in
net asset value from common shares issued upon reinvestment of distributions
|
|
|
0.00
|
(c)
|
|
|
0.00
|
(c)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.00
|
)(c)
|
|
|
0.00
|
(c)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Increase in net asset
value from repurchase of preferred shares
|
|
|
0.00
|
(c)
|
|
|
—
|
|
|
|
—
|
|
|
|
0.12
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.00
|
(c)
|
|
|
For
the Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Offering
expenses charged to paid- in capital
|
|
|
—
|
|
|
|
(0.07
|
)
|
|
|
(0.00
|
)(c)
|
|
|
(0.07
|
)
|
|
|
—
|
|
|
|
(0.00
|
)(c)
|
|
|
(0.01
|
)
|
|
|
—
|
|
|
|
(0.00
|
)(c)
|
|
|
(0.03
|
)
|
|
|
—
|
|
Total Fund share transactions
|
|
|
—
|
|
|
|
(0.07
|
)
|
|
|
(0.00
|
)(c)
|
|
|
0.05
|
|
|
|
—
|
|
|
|
(0.00
|
)(c)
|
|
|
(0.45
|
)
|
|
|
0.00
|
(c)
|
|
|
0.00
|
(c)
|
|
|
(0.79
|
)
|
|
|
0.01
|
|
Net
Asset Value Attributable to Common Shareholders, End of Year
|
|
$
|
8.14
|
|
|
$
|
7.93
|
|
|
$
|
7.04
|
|
|
$
|
9.34
|
|
|
$
|
8.13
|
|
|
$
|
8.36
|
|
|
$
|
9.81
|
|
|
$
|
10.90
|
|
|
$
|
8.22
|
|
|
$
|
7.48
|
|
|
$
|
9.17
|
|
NAV
total return †
|
|
|
18.58
|
%
|
|
|
25.86
|
%
|
|
|
(16.54
|
)%
|
|
|
26.50
|
%
|
|
|
7.59
|
%
|
|
|
(5.57
|
)%
|
|
|
4.17
|
%
|
|
|
45.77
|
%
|
|
|
22.29
|
%
|
|
|
(0.13
|
)%
|
|
|
28.76
|
%
|
Market value, end
of year
|
|
$
|
7.96
|
|
|
$
|
8.02
|
|
|
$
|
7.06
|
|
|
$
|
9.20
|
|
|
$
|
7.24
|
|
|
$
|
7.50
|
|
|
$
|
10.01
|
|
|
$
|
12.40
|
|
|
$
|
7.85
|
|
|
$
|
6.24
|
|
|
$
|
8.21
|
|
Investment
total return ††
|
|
|
14.15
|
%
|
|
|
26.67
|
%
|
|
|
(14.93
|
)%
|
|
|
40.21
|
%
|
|
|
7.97
|
%
|
|
|
(16.33
|
)%
|
|
|
(6.63
|
)%
|
|
|
73.37
|
%
|
|
|
40.00
|
%
|
|
|
(10.35
|
)%
|
|
|
33.88
|
%
|
Ratios
to Average Net Assets and Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets including liquidation
value of preferred shares, end of year (in 000’s)
|
|
$
|
305,676
|
|
|
$
|
297,577
|
|
|
$
|
243,309
|
|
|
$
|
297,503
|
|
|
$
|
232,399
|
|
|
$
|
238,049
|
|
|
$
|
273,307
|
|
|
$
|
232,399
|
|
|
$
|
182,899
|
|
|
$
|
169,977
|
|
|
$
|
159,232
|
|
Net assets attributable
to common shares, end of year (in 000’s)
|
|
$
|
205,754
|
|
|
$
|
197,327
|
|
|
$
|
173,284
|
|
|
$
|
227,477
|
|
|
$
|
197,623
|
|
|
$
|
203,274
|
|
|
$
|
238,532
|
|
|
$
|
197,624
|
|
|
$
|
148,124
|
|
|
$
|
135,202
|
|
|
$
|
124,457
|
|
Ratios
to Average Net Assets and Supplemental Data (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net investment
income/(loss) to average net assets attributable to common shares before preferred share distributions
|
|
|
0.23
|
%
|
|
|
1.62
|
%(a)
|
|
|
0.39
|
%
|
|
|
0.13
|
%
|
|
|
0.70
|
%
|
|
|
0.33
|
%
|
|
|
0.13
|
%
|
|
|
0.60
|
%
|
|
|
1.68
|
%
|
|
|
(0.11
|
)%
|
|
|
(0.89
|
)%
|
Ratio of operating expenses
to average net assets including liquidation value of preferred shares before fees waived/fee reduction (d)(e)
|
|
|
2.06
|
%
|
|
|
1.69
|
%(f)
|
|
|
1.62
|
%
|
|
|
1.45
|
%
|
|
|
1.49
|
%(g)
|
|
|
1.45
|
%
|
|
|
1.59
|
%
|
|
|
1.55
|
%
|
|
|
1.84
|
%(b)
|
|
|
2.59
|
%
|
|
|
3.19
|
%
|
Ratio of operating expenses
to average net assets including liquidation value of preferred shares net of advisory fee reduction, if any (d)(h)
|
|
|
2.06
|
%
|
|
|
1.69
|
%(f)
|
|
|
1.53
|
%
|
|
|
1.45
|
%
|
|
|
1.49
|
%(g)
|
|
|
1.30
|
%
|
|
|
1.29
|
%
|
|
|
1.29
|
%
|
|
|
1.48
|
%
|
|
|
1.88
|
%
|
|
|
2.44
|
%
|
Portfolio turnover rate
|
|
|
29.3
|
%
|
|
|
17.5
|
%
|
|
|
20.5
|
%
|
|
|
16.8
|
%
|
|
|
10.3
|
%
|
|
|
14.0
|
%
|
|
|
16.0
|
%
|
|
|
12.7
|
%
|
|
|
7.9
|
%
|
|
|
14.4
|
%
|
|
|
9.4
|
%
|
Preferred
Stock: 6.00% Series B Cumulative Preferred Stock (i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end
of year (in 000’s)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
Total shares outstanding
(in 000’s)
|
|
|
—
|
|
|
|
—
|
|
|
|
791
|
|
|
|
791
|
|
|
|
791
|
|
|
|
791
|
|
|
|
791
|
|
|
|
791
|
|
|
|
791
|
|
|
|
791
|
|
|
|
791
|
|
Liquidation preference per share
|
|
|
—
|
|
|
|
—
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
Average market value (j)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
25.81
|
|
|
$
|
26.36
|
|
|
$
|
26.42
|
|
|
$
|
25.80
|
|
|
$
|
25.41
|
|
|
$
|
25.45
|
|
|
$
|
25.73
|
|
|
$
|
25.38
|
|
|
$
|
25.07
|
|
Asset coverage per share (k)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
86.86
|
|
|
$
|
106.21
|
|
|
$
|
167.07
|
|
|
$
|
171.13
|
|
|
$
|
196.48
|
|
|
$
|
167.07
|
|
|
$
|
131.49
|
|
|
$
|
122.20
|
|
|
$
|
114.47
|
|
|
|
For
the Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Series
C Auction Rate Cumulative Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end
of year (in 000’s)
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Total shares outstanding
(in 000’s)
|
|
|
0
|
(l)
|
|
|
0
|
(l)
|
|
|
0
|
(l)
|
|
|
0
|
(l)
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Liquidation preference per share
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Liquidation value (m)
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Asset coverage per share (k)
|
|
$
|
76,478
|
|
|
$
|
74,209
|
|
|
$
|
86,865
|
|
|
$
|
106,212
|
|
|
$
|
167,071
|
|
|
$
|
171,134
|
|
|
$
|
196,481
|
|
|
$
|
167,072
|
|
|
$
|
131,486
|
|
|
$
|
122,197
|
|
|
$
|
114,472
|
|
5.125%Series
E Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end
of year (in 000’s)
|
|
$
|
49,918
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total shares outstanding
(in 000’s)
|
|
|
1,997
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Liquidation preference per share
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Liquidation value (j)
|
|
$
|
25.55
|
|
|
$
|
24.88
|
|
|
$
|
23.80
|
|
|
$
|
24.98
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Asset coverage per share (k)
|
|
$
|
76.48
|
|
|
$
|
74.21
|
|
|
$
|
86.86
|
|
|
$
|
106.21
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
5.125%Series
G Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end
of year (in 000’s)
|
|
$
|
49,755
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding
(in 000’s)
|
|
|
1,990
|
|
|
|
2,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Liquidation preference per share
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Liquidation value (j)
|
|
$
|
25.61
|
|
|
$
|
25.40
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Asset coverage per share (k)
|
|
$
|
76.48
|
|
|
$
|
74.21
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Asset
Cover (n)
|
|
|
306
|
%
|
|
|
297
|
%
|
|
|
347
|
%
|
|
|
425
|
%
|
|
|
668
|
%
|
|
|
685
|
%
|
|
|
786
|
%
|
|
|
668
|
%
|
|
|
526
|
%
|
|
|
489
|
%
|
|
|
458
|
%
|
|
†
|
Based
on net asset value per share, adjusted for reinvestment of distributions at the net asset
value per share on the ex-dividend dates. Total return for a period of less than one
year is not annualized.
|
|
††
|
Based
on market value per share, adjusted for reinvestment of distributions at prices determined
under the Fund’s dividend reinvestment plan and adjustments for the rights offering.
Total return for a period of less than one year is not annualized.
|
|
*
|
Based
on year to date book income. Amounts are subject to change and recharacterization at
year end.
|
|
(a)
|
Includes
income resulting from special dividends. Without these dividends, the per share income
amount would have been 0.02 and the net investment income ratio would have been 0.20%.
|
|
(b)
|
Calculated
based on average common shares outstanding on the record dates throughout the years.
|
|
(c)
|
Amount
represents less than $0.005 per share.
|
|
(d)
|
The
Fund received credits from a designated broker who agreed to pay certain Fund operating
expenses. For all periods presented there was no impact on the expense ratios.
|
|
(e)
|
Ratio
of operating expenses to average net assets including liquidation value of preferred
shares before fee waived/fee reduction for the six months ended June 30, 2020 and the
years ended December 31, 2020, 2019, 2018, 2017, and 2016 would have been 1.30%, 1.25%,
1.22%, 1.23%, and 1.27%, respectively.
|
|
(f)
|
In
2019, due to failed auctions relating to previous fiscal years, the Fund reversed accumulated
auction agent fees. For the year ended December 31, 2019, there was no impact to the
ratio of operating expenses to average net assets attributable to common shares and the
ratio of operating expenses to average net assets including the liquidation value of
preferred shares.
|
|
(g)
|
During
the year ended December 31, 2016, the Fund received a one time reimbursement of custody
expenses paid in prior years. Had such reimbursement been included in this period, the
annualized expense ratios would have been 1.32% attributable to common shares before
fees waived, 1.32% attributable to common shares net of advisory fee reduction, 1.13%
including liquidation value of preferred shares before fees waived, and 1.13% including
liquidation value of preferred shares net of advisory fee reduction.
|
|
(h)
|
Ratio
of operating expenses to average net assets including liquidation value of preferred
shares net of advisory fee reduction for December 31, 2020, 2019, 2018, 2017, and 2016
would have been 1.30%, 1.25%, 1.15%, 1.23%, and 1.27%, respectively.
|
|
(i)
|
The
Fund redeemed and retired all its outstanding Series B Preferred Shares on December 26,
2019.
|
|
(j)
|
Based
on weekly prices.
|
|
(k)
|
Asset
coverage per share is calculated by combining all series of preferred shares.
|
|
(l)
|
Actual
number of shares outstanding is 10.
|
|
(m)
|
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 auctions.
|
|
(n)
|
Asset
coverage is calculated by combining all series of preferred shares.
|
Use
of Proceeds
Unless
otherwise specified in a prospectus supplement, the Fund will invest the net proceeds of any offering in accordance with the Fund’s
investment objectives and policies, and may use a portion of such proceeds, depending on market conditions, for other general
corporate purposes, including the continuation of the Fund’s managed distribution policy. The Investment Adviser expects
that it will initially invest the proceeds of the offering in high quality short-term debt securities and instruments. The Investment
Adviser anticipates that the investment of the proceeds will be made in accordance with the Fund’s investment objectives
and policies as appropriate investment opportunities are identified, which is expected to be substantially completed within three
months; however, the identification of appropriate investment opportunities pursuant to the Fund’s investment style or changes
in market conditions may cause the result in the Fund’s anticipated investment period extending to as long as six months.
The Investment Adviser may also use the net proceeds to redeem existing series of Preferred Stock.
The
Fund
The
Fund is a non-diversified, closed-end management investment company registered under the 1940 Act. The Fund was organized as a
Maryland corporation on March 31, 1994. The Fund commenced its investment operations on November 15, 1994. The Fund’s principal
office is located at One Corporate Center, Rye, New York 10580-1422.
Investment
Objective and Policies
Investment
Objectives
The
Fund’s primary investment objective is to achieve long-term growth of capital by investing primarily in the common stock
and other securities of foreign and domestic companies involved in the telecommunications, media, publishing, and entertainment
industries. Income is the secondary investment objective. The investment objectives of long-term growth of capital and income
are fundamental policies of the Fund. The Fund’s policy of concentration in companies in the communications industries is
also a fundamental policy of the Fund. These fundamental policies and the investment limitations described in the SAI under the
caption “Investment Restrictions” cannot be changed without the approval of the holders of a majority of the Fund’s
outstanding voting securities. Such majority votes require, in each case, the lesser of (i) 67% of the Fund’s applicable
shares represented at a meeting at which more than 50% of the Fund’s applicable shares outstanding are represented, whether
in person or by proxy, or (ii) more than 50% of the outstanding shares.
Under
normal market conditions, the Fund will invest at least 80% of the value of its net assets, plus borrowings for investment purposes,
in common stock and other securities, including convertible securities, preferred stock, options, and warrants of companies in
the telecommunications, media, publishing, and entertainment industries (the “80% Policy”). The Fund may invest in
companies of any size market capitalization. The Fund may invest, without limitation, in foreign securities. The Fund may also
invest in securities of companies located in emerging markets.
A
company will be considered to be in these industries if it derives at least 50% of its revenues or earnings from, or devotes at
least 50% of its assets to, the indicated activities or multimedia related activities. The 80% Policy may be changed without stockholder
approval. The Fund will provide stockholders with notice at least sixty days prior to the implementation of any change in the
80% Policy.
The
telecommunications companies in which the Fund may invest are engaged in the development, manufacture, or sale of communications
services or equipment throughout the world, including the following products or services: regular telephone service; wireless
communications services and equipment, including cellular telephone, microwave and satellite communications, paging, and other
emerging wireless technologies; equipment and services for both data and voice transmission, including computer hardware and software;
electronic components and communications equipment; video conferencing; electronic mail; local and wide area networking, and linkage
of data and word processing systems; publishing and information systems; video text and teletext; emerging technologies combining
television, telephone and computer systems; broadcasting, including television and radio, satellite and microwave transmission
and cable television.
The
entertainment, media and publishing companies in which the Fund may invest are engaged in providing the following products or
services: the creation, packaging, distribution, and ownership of entertainment programming throughout the world, including pre-recorded
music, feature-length motion pictures, made-for-TV movies, television series, documentaries, animation, game shows, sports programming,
and news programs; live events such as professional sporting events or concerts, theatrical exhibitions, television and radio
broadcasting, satellite and microwave transmission, cable television systems and programming, broadcast and cable networks, wireless
cable television and other emerging distribution technologies; home video, interactive and multimedia programming, including home
shopping and multiplayer games; publishing, including newspapers, magazines and books, advertising agencies and niche advertising
mediums such as in-store or direct mail; emerging technologies combining television, telephone, and computer systems, computer
hardware and software; and equipment used in the creation and distribution of entertainment programming such as that required
in the provision of broadcast, cable, or telecommunications services.
Investing
in securities of foreign issuers, which generally are denominated in foreign currencies, may involve certain risk and opportunity
considerations not typically associated with investing in domestic companies and could cause the Fund to be affected favorably
or unfavorably by changes in currency exchange rates and revaluations of currencies. For a further discussion of the risks associated
with investing in foreign securities and a description of other risks inherent in the Fund’s investment objectives and policies,
see “Risk Factors and Special Considerations.”
The
Investment Adviser believes that at the present time investment by the Fund in the securities of companies located throughout
the world presents great potential for accomplishing the Fund’s investment objectives. While the Investment Adviser expects
that a substantial portion of the Fund’s portfolio may be invested in the securities of domestic companies, a significant
portion of the Fund’s portfolio may also be comprised of the securities of issuers headquartered outside the United States.
No
assurance can be given that the Fund’s investment objectives will be achieved.
Investment
Methodology of the Fund
In
selecting securities for the Fund, the Investment Adviser normally will consider 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
potential for capital appreciation of the securities;
|
|
●
|
the
interest or dividend income generated by 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;
|
|
●
|
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 securities is to identify assets that are selling in the
public market at a discount to their private market value. The Investment Adviser defines private market value as the value informed
purchasers are willing to pay to acquire assets with similar characteristics. The Investment Adviser also normally evaluates an
issuer’s free cash flow and long-term earnings trends. Finally, the Investment Adviser looks for a catalyst, something indigenous
to the company, its industry, or country that will surface additional value.
Certain
Investment Practices
Foreign
Securities. There is no limitation on the amount of foreign securities in which the Fund may invest. Among the foreign securities
in which the Fund may invest are those issued by companies located in developing countries or emerging markets, which are countries
in the initial stages of their industrialization cycles. Investing in the equity and debt markets of developing countries involves
exposure to economic structures that are generally less diverse and less mature, and to political systems that may have less stability
than those of developed countries. The markets of developing countries historically have been more volatile than the markets of
the more mature economies of developed countries, but often have provided higher rates of return to investors.
The
Fund may also invest in the debt securities of foreign governments. Although such investments are not a principal strategy of
the Fund, there is limitation on its ability to invest in the debt securities of foreign governments.
Corporate
Reorganizations. 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 similar reorganization proposal
has been announced if, in the judgment of the Investment Adviser, there is a reasonable prospect of capital appreciation significantly
greater than the added portfolio turnover expenses inherent in the short term nature of such transactions. The principal risk
is that such offers or proposals may not be consummated within the time and under the terms contemplated at the time of the investment,
in which case, unless such offers or proposals are replaced by equivalent or increased offers or proposals that are consummated,
the Fund may sustain a loss.
Temporary
Defensive Investments. Subject to the Fund’s investment restrictions, when a temporary defensive period is believed
by the Investment Adviser to be warranted (“temporary defensive periods”), the Fund may, without limitation, hold
cash or invest its assets in securities of U.S. government sponsored instrumentalities, in repurchase agreements in respect of
those instruments, and in certain high grade commercial paper instruments. During temporary defensive periods, the Fund may also
invest up to 10% of the market value of its total assets in money market mutual funds that invest primarily in securities of U.S.
government sponsored instrumentalities and repurchase agreements in respect of those instruments. Obligations of certain agencies
and instrumentalities of the U.S. government, such as the Government National Mortgage Association, are supported by the “full
faith and credit” of the U.S. government; others, such as those of the Export-Import Bank of the U.S., are supported by
the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. government to purchase the agency’s obligations; and still others,
such as those of the Student Loan Marketing Association, are supported only by the credit of the instrumentality. No assurance
can be given that the U.S. government would provide financial support to U.S. government sponsored instrumentalities if it is
not obligated to do so by law. During temporary defensive periods, the Fund may be less likely to achieve its secondary investment
objective of income.
Further
information on the investment objectives and policies of the Fund are set forth in the SAI.
Special
Investment Methods
Options.
On behalf of the Fund, and subject to guidelines of the Board, the Investment Adviser 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
U.S. over-the-counter (“OTC”) markets as a means of achieving additional return or of hedging the value of the Fund’s
portfolio. The Fund may write covered call options on common stocks that it owns or has an immediate right to acquire through
conversion or exchange of other securities in an amount not to exceed 25% of total assets or invest up to 10% of its total assets
in the purchase of put options on common stocks that the Fund owns or may acquire through the conversion or exchange of other
securities that it owns.
A
call option is a contract that gives the holder of the option the right to buy from the writer (seller) of the call option, in
return for a premium paid, the security 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 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 to sell to the writer (seller), in return for the premium,
the underlying security at a specified price during the term of the option. The writer of the put, who receives the premium, has
the obligation to buy the underlying security upon exercise, at the exercise price during the option period.
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. There can be no assurance that a closing purchase
transaction can be effected when the Fund so desires.
An
exchange traded option may be closed out only on an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an exchange will exist for any particular option. See “Investment
Objectives and Policies—Investment Practices” in the SAI.
Limitations
on the Purchase and Sale of Futures Contracts, Certain Options and Swaps. Subject to the guidelines of the Board, the Fund
may engage in “commodity interest” transactions (generally, transactions in futures, certain options, certain currency
transactions and certain types of swaps) only for bona fide hedging or other permissible transactions in accordance with the rules
and regulations of the Commodity Futures Trading Commission (“CFTC”). Pursuant to amendments by the CFTC to Rule 4.5
under the Commodity Exchange Act (“CEA”), the Investment Adviser has filed a notice of exemption from registration
as a “commodity pool operator” with respect to the Fund. The Fund and the Investment Adviser are therefore not subject
to registration or regulation as a commodity pool operator under the CEA. Due to the amendments to Rule 4.5 under the CEA, certain
trading restrictions are applicable to 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 options premiums and (ii) non-bona fide hedging
transactions, provided that the Fund does not enter into such non-bona fide hedging transactions if, immediately thereafter, either
(a) the sum of the amount of initial margin deposits on the Fund’s existing futures positions or swaps positions and option
or swaption premiums would exceed 5% of the market value of the Fund’s liquidating value, after taking into account unrealized
profits and unrealized losses on any such transactions, or (b) the aggregate net notional value of the Fund’s commodity
interest transactions would 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 swap markets. Therefore,
in order to claim the Rule 4.5 exemption, the Fund is limited in its ability to invest in commodity futures, options and certain
types of swaps (including securities futures, broad-based stock index futures and financial futures contracts). As a result, in
the future, the Fund will be more limited in its ability to use these instruments than in the past and these limitations may have
a negative impact on the ability of the Investment Adviser to manage the Fund, and on the Fund’s performance.
Futures
Contracts and Options on Futures. On behalf of the Fund, the Investment Adviser may, subject to the Fund’s investment
restrictions and guidelines of the Board, 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. These futures contracts
and related options may be on debt securities, financial indices, securities indices, United States government securities, and
foreign currencies. 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.
Forward
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 future changes in the level of 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’s dealings in forward contracts
generally will be limited to hedging involving either specific transactions or portfolio positions. The Fund does not have an
independent limitation on its investments in foreign currency futures contracts and options on foreign currency futures contracts.
Short
Sales. The Fund may from time to time make short sales of securities, including short sales “against the box.”
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. A short sale against the box occurs when the Fund contemporaneously owns, or has the right to obtain at
no added cost, securities identical to those sold short.
The
market value for the securities sold short of any one issuer will not exceed 5% of the Fund’s total assets or 5% of such
issuer’s voting securities. In addition, the Fund may not make short sales or maintain a short position if it would cause
more than 25% of the Fund’s total assets, taken at market value, to be held as collateral for such sales. The Fund may make
short sales against the box without respect to such limitations.
The
Fund may make short sales in order to hedge against market risks when it believes that the price of a security may decline, causing
a decline in the value of a security owned by the Fund or a security convertible into, or exchangeable for, such security, or
when the Fund does not want to sell the security it owns. Such short sale transactions may be subject to special tax rules, one
of the effects of which may be to accelerate income to the Fund. Additionally, the Fund may use short sales in conjunction with
the purchase of a convertible security when it is determined that the convertible security can be bought at a small conversion
premium and has a yield advantage relative to the underlying common stock sold short.
When
the Fund makes a short sale, it will often borrow the security sold short and deliver it to the broker-dealer through which it
made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. In connection with such
short sales, the Fund may pay a fee to borrow securities or maintain an arrangement with a broker to borrow securities, and is
often obligated to pay over any accrued interest and dividends on such borrowed securities. In a short sale, the Fund does not
immediately deliver the securities sold or receive the proceeds from the sale. The Fund may close out a short position by purchasing
and delivering an equal amount of the securities sold short, rather than by delivering securities already held by the Fund, because
the Fund may want to continue to receive interest and dividend payments on securities in its portfolio that are convertible into
the securities sold short.
If
the price of the security sold short increases between the time of the short sale and the time that 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, increased, by the transaction costs described above. The successful use of short selling may be adversely
affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.
To
the extent that the Fund engages in short sales, it will provide collateral to the broker-dealer and (except in the case of short
sales against the box) will maintain additional asset coverage in the form of segregated or “earmarked” assets on
the records of the Investment Adviser or with the Fund’s Custodian, consisting of cash, U.S. government securities, or other
liquid securities that is equal to the current market value of the securities sold short, or (in the case of short sales against
the box) will ensure that such positions are covered by offsetting positions, until the Fund replaces the borrowed security. The
Fund will engage in short selling to the extent permitted by the federal securities laws and rules and interpretations thereunder,
subject to the percentage limitations set forth above. To the extent the Fund engages in short selling in foreign (non-U.S.) jurisdictions,
the Fund will do so to the extent permitted by the laws and regulations of such jurisdiction.
Repurchase
Agreements. The Fund may enter into repurchase agreements with banks and non-bank dealers of U.S. government securities which
are listed as reporting dealers of the Federal Reserve Bank and which furnish collateral at least equal in value or market price
to the amount of their repurchase obligation.
In
a repurchase agreement, the Fund purchases a debt security from a seller who undertakes to repurchase the security at a specified
resale price on an agreed future date. Repurchase agreements are generally for one business day and generally will not have a
duration of longer than one week. The SEC has taken the position that, in economic reality, a repurchase agreement is a loan by
a fund to the other party to the transaction secured by securities transferred to the fund. The resale price generally exceeds
the purchase price by an amount which reflects an agreed upon market interest rate for the term of the repurchase agreement. The
Fund’s risk is primarily that, if the seller defaults, the proceeds from the disposition of the underlying securities and
other collateral for the seller’s obligation may be less than the repurchase price. If the seller becomes insolvent, the
Fund might be delayed in or prevented from selling the collateral. In the event of a default or bankruptcy by a seller, the Fund
will promptly seek to liquidate the collateral. To the extent that the proceeds from any sale of the collateral upon a default
in the obligation to repurchase are less than the repurchase price, the Fund will experience a loss. If the financial institution
that is a party to the repurchase agreement petitions for bankruptcy or becomes subject to the United States Bankruptcy Code,
the law regarding the rights of the Fund is unsettled. As a result, under extreme circumstances, there may be a restriction on
the Fund’s ability to sell the collateral and the Fund could suffer a loss.
Loans
of Portfolio Securities. To increase income, the Fund may lend its portfolio securities to securities broker-dealers or financial
institutions if: (i) the loan is collateralized in accordance with applicable regulatory requirements, and (ii) no loan will cause
the value of all loaned securities to exceed 20% of the value of its total assets.
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 fail financially. While these loans of portfolio securities will be made in accordance with
guidelines approved by the Fund’s Board, 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 counterparty to the loan petitions for bankruptcy or becomes subject to the United States
Bankruptcy Code, the law regarding the Fund’s rights is unsettled. As a result, under these circumstances, there may be
a restriction on the Fund’s ability to sell the collateral and it would suffer a loss.
Borrowing.
The Fund may borrow money in accordance with its investment restrictions, including as a temporary measure for extraordinary or
emergency purposes. It may not borrow for investment purposes.
Leveraging.
As provided in the 1940 Act, and subject to compliance with the Fund’s investment limitations, the Fund may issue senior
securities representing stock, such as preferred stock, so long as immediately following such issuance of stock, its total assets
exceed 200% of the amount of such stock. The use of leverage magnifies the impact of changes in net asset value. For example,
a fund that uses 33% leverage will show a 1.5% increase or decline in net asset value for each 1% increase or decline in the value
of its total assets. 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. The Fund currently has three series of preferred stock outstanding: the Series C Auction Rate Cumulative
Preferred Stock, the Series E Preferred, and the Series G Preferred.
Further
information on the investment objectives and policies of the Fund is set forth in the SAI.
Investment
Restrictions. The Fund has adopted certain investment restrictions as fundamental policies of the Fund. Under the 1940 Act,
a fundamental policy may not be changed without the vote of a majority, as defined in the 1940 Act, of the outstanding voting
securities of the Fund (voting together as a single class). The Fund’s investment restrictions are more fully discussed
under “Investment Restrictions” in the SAI.
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.
The portfolio turnover may be higher than that of other investment companies.
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). High portfolio turnover may also result in
the realization of substantial net short-term capital gains and any distributions resulting from such gains will be taxable at
ordinary income rates for U.S. federal income tax purposes. The Fund’s portfolio turnover rates for the fiscal years ended
December 31, 2020 and 2019, were 29.3 and 17.5%, respectively.
Risk
Factors and Special Considerations
There
are a number of risks that an investor should consider in evaluating the Fund. You should read this entire Prospectus and SAI
before you decide whether to invest in the Fund. In addition, you should consider the matters set forth below.
Leverage
Risk. The Fund uses financial leverage for investment purposes by issuing preferred stock. The amount of leverage represents
approximately 33% of the Fund’s Managed Assets (defined as the aggregate net asset value of outstanding shares of common
stock plus assets attributable to outstanding shares of preferred stock, with no deduction for the liquidation preference of such
shares of preferred stock) as of December 31, 2020. The Fund’s leveraged capital structure creates special risks not associated
with unleveraged funds having similar investment objectives 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. Such volatility may increase the likelihood
of the Fund’s having to sell investments in order to meet dividend payments on the preferred stock, or to redeem preferred
stock when it may be disadvantageous to do so. The Fund may not be permitted to declare dividends or distributions with respect
to common stock or preferred stock, or purchase common stock or preferred stock unless at such time the Fund meets certain asset
coverage requirements. In addition, the Fund may not be permitted to pay distributions on common stock unless all distributions
on preferred stock and/or accrued interest on borrowings have been paid, or set aside for payment. Any preferred stock currently
outstanding or that the Fund issues in the future would subject the Fund to certain asset coverage requirements under the 1940
Act that could, under certain circumstances, restrict the Fund from making distributions necessary to qualify as a registered
investment company. If the Fund is unable to obtain cash from other sources, the Fund may fail to qualify as a registered investment
company and, thus, may be subject to income tax as an ordinary corporation. Because the advisory fee paid to the Investment Adviser
is calculated on the basis of the Fund’s Managed Assets rather than only on the basis of net assets attributable to the
shares of common stock, the fee may be higher when leverage is utilized, giving the Investment Adviser an incentive to utilize
leverage. However, the Investment Adviser has agreed to reduce any management fee on the incremental assets attributable to the
cumulative preferred stock during the fiscal year if the total return of the net asset value of the outstanding shares of common
stock, including distributions and advisory fee subject to reduction for that year, does not exceed the stated dividend rate or
corresponding swap rate of each particular series of preferred stock. This fee waiver will not apply to any preferred stock issued
from this offering. The Investment Adviser currently intends that the voluntary advisory fee waiver will remain in effect for
as long as the Series C Auction Rate Preferred Stock, Series E Preferred and Series G Preferred are outstanding. The Investment
Adviser, however, reserves the right to modify or terminate the voluntary advisory fee waiver at any time.
Preferred
Stock Risk. The issuance of preferred stock causes the net asset value and market value of the common stock to become more
volatile. If the dividend rate on the preferred stock approaches the net rate of return on the Fund’s investment portfolio,
the benefit of leverage to the holders of the common stock would be reduced. If the dividend rate on the preferred stock plus
the management fee annual rate of 1.00% (as applicable) 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 stock than if the Fund had not issued preferred stock.
Any
decline in the net asset value of the Fund’s investments would be borne entirely by the holders of common stock. 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 stock 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 stock. The Fund might be in danger of failing to maintain the required asset
coverage of the preferred stock or of losing its ratings on the preferred stock or, in an extreme case, the Fund’s current
investment income might not be sufficient to meet the dividend requirements on the preferred stock. 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 stock.
In
addition, the Fund would pay (and the holders of common stock will bear) all costs and expenses relating to the issuance and ongoing
maintenance of the shares of the preferred stock, including the advisory fees on the incremental assets attributable to such shares.
Holders
of preferred stock may have different interests than holders of common stock and may at times have disproportionate influence
over the Fund’s affairs. Holders of preferred stock, voting separately as a single class, have the right to elect two members
of the Board at all times and in the event dividends become two full years in arrears would have the right to elect a majority
of the Directors until such arrearage is completely eliminated. In addition, preferred stockholders 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.
Restrictions
imposed on the declarations and payment of dividends or other distributions to the holders of the Fund’s common stock and
preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, might impair the Fund’s ability to
maintain its qualification as a regulated investment company for federal income tax purposes. While the Fund intends to redeem
its preferred stock to the extent necessary to enable the Fund to distribute its income as required to maintain its qualification
as a regulated investment company under the Internal Revenue Code of 1986, as amended (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 Stock. In order to obtain and maintain attractive credit quality ratings for shares
of preferred stock, the Fund must comply with investment quality, diversification, and other guidelines established by the relevant
ratings agencies. These guidelines could affect portfolio decisions and may be more stringent than those imposed by the 1940 Act.
Effects
of Leverage
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate the effect of leverage on common
stock 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. See “Risks.” The table further reflects leverage
representing 29% of the Fund’s net assets, the Fund’s current projected blended annual average leverage dividend or
interest rate of 5.06%, a management fee at an annual rate of 1.00% of the liquidation preference of any outstanding preferred
stock and estimated annual incremental expenses attributable to any outstanding preferred stock of 0.02% of the Fund’s net
assets attributable to common stock.
Assumed return on portfolio (net of expenses)
|
|
|
(10
|
)%
|
|
|
(5
|
)%
|
|
|
0
|
%
|
|
|
5
|
%
|
|
|
10
|
%
|
Corresponding return to Common Stockholder
|
|
|
(16.45
|
)%
|
|
|
(9.45
|
)%
|
|
|
(2.44
|
)%
|
|
|
4.57
|
%
|
|
|
11.58
|
%
|
The
following factors associated with leveraging could increase the investment risk and volatility of the price of the shares of common
stock:
|
●
|
leveraging
exaggerates any increase or decrease in the net asset value of the shares of common stock;
|
|
●
|
the
dividend requirements on the Fund’s shares of preferred stock may exceed the income
from the portfolio securities purchased with the proceeds from the issuance of preferred
stock;
|
|
●
|
a
decline in net asset value results if the investment performance of the additional securities
purchased fails to cover their cost to the Fund (including any dividend requirements
of preferred stock);
|
|
●
|
a
decline in net asset value could affect the ability of the Fund to make dividend payments
on shares of common stock;
|
|
●
|
a
failure to pay dividends or make distributions on its shares of common stock could result
in the Fund’s ceasing to qualify as a regulated investment company under the Code;
and
|
|
●
|
if
the asset coverage for the Fund’s shares of preferred stock declines to less than
200% (as a result of market fluctuations or otherwise), the Fund may be required to sell
a portion of its investments when it may be disadvantageous to do so.
|
Pursuant
to Section 18 of the 1940 Act, it is unlawful for the Fund, as a registered closed-end investment company, to issue any class
of senior security, or to sell any senior security that it issues, unless it can satisfy certain “asset coverage”
ratios. The asset coverage ratio with respect to a senior security representing indebtedness means the ratio of the value of the
Fund’s total assets (less all liabilities and indebtedness not represented by senior securities) to the aggregate amount
of the Fund’s senior securities representing indebtedness. The asset coverage ratio with respect to a senior security representing
stock means the ratio of the value of the Fund’s total assets (less all liabilities and indebtedness not represented by
senior securities) to the aggregate amount of the Fund’s senior securities representing indebtedness plus the aggregate
liquidation preference of the Fund’s outstanding shares of preferred stock.
If,
as is the case with the Fund, a registered investment company’s senior securities are equity securities, such securities
must have an asset coverage of at least 200% immediately following its issuance. If a registered investment company’s senior
securities represent indebtedness, such indebtedness must have an asset coverage of at least 300% immediately after their issuance.
Subject to certain exceptions, during any period following issuance that the Fund fails to satisfy these asset coverage ratios,
it will, among other things, be prohibited from declaring any dividend or declaring any other distribution in respect of its common
stock except a dividend payable in shares of common stock issued by the Fund. A registered investment company may, to the extent
permitted by the 1940 Act, segregate assets or “cover” transactions in order to avoid the creation of a class of senior
security.
Special
Risks to Holders of Fixed Rate Preferred Stock
Illiquidity
Prior to Exchange Listing. Prior to the offering, there will be no public market for any additional series of fixed rate preferred
stock. In the event any additional series of fixed rate preferred stock are issued, prior application will have been made 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. Shares of fixed rate preferred stock may trade at a premium to or discount from liquidation value for various
reasons, including changes in interest rates.
Special
Risks for Holders of Auction Rate Preferred Stock
Auction
Risk. You may not be able to sell your auction rate preferred stock at an auction if the auction fails, i.e., if more shares
of auction rate preferred stock 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 stock only at a specified rate that exceeds the rate set at the auction,
you will not retain your auction rate preferred stock. 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 stock, which could also affect the liquidity of your investment. Since
February 2008, most auction rate preferred stock, including our Series C Auction Rate Preferred, have had failed auctions and
holders of such stock have suffered reduced liquidity.
Secondary
Market Risk. If you try to sell your auction rate preferred stock between auctions, you 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 stock are not required
to maintain this market, and the Fund is not required to redeem auction rate preferred stock if either an auction or an attempted
secondary market sale fails because of a lack of buyers. The auction rate preferred stock will not be registered on a stock exchange.
If you sell your auction rate preferred stock 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. Since February
2008, most auction rate preferred stock, including our Series C Auction Rate Preferred, have had failed auctions and holders of
such stock have suffered reduced liquidity, including the inability to sell such stock in a secondary market.
Special
Risks for Holders of Subscription Rights
There
is a risk that changes in yield or changes in the credit quality of the Fund may result in the underlying preferred stock or common
stock 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. Further, if investors exercise only a portion of the rights,
the number of shares of the preferred stock issued may be reduced, and the preferred stock or common stock may trade at less favorable
prices than larger offerings for similar securities.
Common
Stock Distribution Policy Risk
The
Fund has adopted a policy, which may be changed at any time by the Board, of paying a minimum annual distribution of 10% of the
average net asset value of the Fund to common stockholders. In the event the Fund does not generate a total return from dividends
and interest received and net realized capital gains in an amount equal to or in excess of its stated distribution in a given
year, the Fund may return capital as part of such distribution, which may have the effect of decreasing the asset coverage per
share with respect to the Fund’s preferred stock. Distributions on the Fund’s common stock may contain a return of
capital. Any return of capital should not be considered by investors as yield or total return on their investment in the Fund.
For the fiscal year ended December 31, 2020, the Fund distributed a return of capital. Distributions sourced from return of capital
should not be considered as dividend yield or the total return from an investment in the Fund. Stockholders who periodically
receive the payment of a dividend or other distribution consisting of a return of capital may be under the impression that they
are receiving net profits when they are not. Stockholders should not assume that the source of a distribution from the Fund is
net profit. The composition of each distribution is estimated based on the earnings of the Fund as of the record date for
each distribution. The actual composition of each of the current year’s distributions will be based on the Fund’s
investment activity through the end of the calendar year.
Industry
Concentration Risk
The
Fund invests a significant portion of its assets in companies in the telecommunications, media, publishing, and entertainment
industries and, as a result, the value of the Fund’s shares is more susceptible to factors affecting those particular types
of companies and those industries, including governmental regulation, a greater price volatility than the overall market, rapid
obsolescence of products and services, intense competition, and strong market reactions to technological developments.
Various
types of ownership restrictions are imposed by the Federal Communications Commission, or FCC, on investment in media companies
and cellular licensees. For example, the FCC’s broadcast and cable multiple-ownership and cross ownership rules, which apply
to the radio, television, and cable industries, provide that investment advisers are deemed to have an “attributable”
interest whenever the adviser has the right to determine how five percent or more of the issued and outstanding voting stock of
a broadcast company or cable system operator may be voted. These rules limit the number of broadcast stations both locally and
nationally that a single entity is permitted to own, operate, or control and prohibit ownership of certain competitive communications
providers in the same location. The FCC also applies limited ownership restrictions on cellular licensees serving rural areas.
An attributable interest in a cellular company arises from the right to control 20% or more of its voting stock.
Attributable
interests that may result from the role of the Investment Adviser and its principals in connection with other funds, managed accounts
and companies may limit the Fund’s ability to invest in certain mass media and cellular companies. In the event that the
Investment Adviser and its affiliates may be deemed to have such an attributable interest, the Board of Directors of the Fund
may delegate, from time to time, to the Fund’s Proxy Voting Committee, voting power over certain shares of securities held
by the Fund in view of these ownership limitations to ensure compliance with certain FCC regulations.
Smaller
Companies
While
the Fund intends to focus on the securities of established suppliers of accepted products and services, the Fund may also invest
in smaller companies which may benefit from the development of new products and services. These smaller companies may present
greater opportunities for capital appreciation, and may also involve greater investment risk than larger, more established companies.
For example, smaller companies may have more limited product lines, market or financial resources, and their securities may trade
less frequently and in lower volume than the securities of larger, more established companies. As a result, the prices of the
securities of such smaller companies may fluctuate to a greater degree than the prices of securities of other issuers.
Long-Term
Objective; Not a Complete Investment Program
The
Fund is intended for investors seeking long-term capital growth. 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 investment
program. Each stockholder should take into account the Fund’s investment objectives as well as the stockholder’s other
investments when considering an investment in the Fund.
Non-Diversified
Status
The
Fund is classified as a “non-diversified” investment company under the 1940 Act, which means it is not limited by
the 1940 Act in the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment
company, the Fund may invest in the securities of individual issuers to a greater degree than a diversified investment company.
As a result, the Fund may be more vulnerable to events affecting a single issuer and therefore subject to greater volatility than
a fund that is more broadly diversified. Accordingly, an investment in the Fund may present greater risk to an investor than an
investment in a diversified company. To qualify as a “regulated investment company,” or “RIC,” for purposes
of the Code, the Fund has in the past conducted and intends to conduct its operations in a manner that will relieve it of any
liability for federal income tax to the extent its earnings are distributed to stockholders. To so qualify as a “regulated
investment company,” among other requirements, the Fund will limit its investments so that, at the close of each quarter
of the taxable year:
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not
more than 25% of the market value of its total assets will be invested in the securities
(other than U.S. government securities or the securities of other RICs) of a single issuer,
any two or more issuers in which the fund owns 20% or more of the voting securities and
which are determined to be engaged in the same, similar, or related trades or businesses
or in the securities of one or more qualified publicly traded partnerships (as defined
in the Code); and
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at
least 50% of the market value of the Fund’s assets will be represented by cash,
securities of other regulated investment companies, U.S. government securities and other
securities, with such other securities limited in respect of any one issuer to an amount
not greater than 5% of the value of the its assets and not more than 10% of the outstanding
voting securities of such issuer.
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Market
Value and Net Asset Value
The
Fund is a non-diversified, closed-end management investment company. Shares of closed-end funds are bought and sold in the securities
markets and may trade at either a premium to or discount from net asset value. Listed shares of closed-end investment companies
often trade at discounts from net asset value. This characteristic of shares of a closed-end fund is a risk separate and distinct
from the risk that its net asset value may decrease. The Fund cannot predict whether its listed stock will trade at, below, or
above net asset value. As of December 31, 2020, the shares of common stock traded at a discount of 2.21%. Stockholders desiring
liquidity may, subject to applicable securities laws, trade their Fund common stock on the NYSE or other markets on which such
shares may trade at the then-current market value, which may differ from the then-current net asset value. Stockholders will incur
brokerage or other transaction costs to sell stock.
Non-Investment
Grade Securities
The
Fund may invest up to 10% of its total assets in fixed income securities rated below investment grade by recognized statistical
rating agencies or unrated securities of comparable quality. These securities, which may be preferred stock or debt, are predominantly
speculative and involve major risk exposure to adverse conditions. Debt securities that are not rated or that are rated lower
than “BBB” by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) or
lower than “Baa” by Moody’s are referred to in the financial press as “junk bonds.”
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 securities. In addition, such securities generally present a higher 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 securities in non-investment rated categories is more volatile than that of higher quality securities,
and the markets in which such non-investment 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 response to changes in the economy or the financial markets.
Non-investment
grade securities 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 regular income streams.
As
part of its investment 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 under a plan pursuant to which the securities received by the Fund in exchange
for its defaulted securities will have a value in excess of the Fund’s investment. 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.
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 may change their ratings of a particular issue to reflect subsequent events. 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.
The
market for non-investment grade and comparable unrated securities has experienced several periods of significantly adverse price
and liquidity, particularly at or around times of economic recessions. Past market recessions have adversely affected the value
of such securities as well as the ability of certain issuers of such securities to repay principal and pay interest thereon or
to refinance such securities. The market for those securities may react in a similar fashion in the future.
Foreign
Securities
Investments
in the securities of foreign issuers involve certain considerations and risks not ordinarily associated with investments in securities
of domestic issuers. 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.
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 does not have an independent limit on the amount of its assets
that it may invest in the securities of foreign issuers.
The
Fund also may purchase sponsored American Depository Receipts (“ADRs”) or U.S. denominated securities of foreign issuers.
ADRs are receipts issued by United States banks or trust companies in respect of securities of foreign issuers held on deposit
for use in the United States 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.
Emerging
Markets Risk
The
Fund may invest in securities of issuers whose primary operations or principal trading market is in an “emerging market.”
An “emerging market” country is any country that is considered to be an emerging or developing country by the World
Bank. 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. 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 value 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; over-dependence on exports; overburdened infrastructure
and obsolete or unseasoned financial systems; environmental problems; less developed legal systems; and less reliable securities
custodial services and settlement practices.
Special
Risks of Derivative Transactions
Participation
in the options or futures markets and in currency exchange 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, and interest rate markets are inaccurate, the consequences to the Fund may
leave the Fund in a worse position than if such strategies were not used. Risks inherent in the use of options, foreign currency,
futures contracts, and options on futures contracts, securities indices, and foreign currencies include:
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dependence
on the Investment Adviser’s ability to predict correctly movements in the direction
of interest rates, securities prices, and currency markets;
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imperfect
correlation between the price of options and futures contracts and options thereon and
movements in the prices of the securities or currencies being hedged;
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the
fact that skills needed to use these strategies are different from those needed to select
portfolio securities;
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the
possible absence of a liquid secondary market for any particular instrument at any time;
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the
possible need to defer closing out certain hedged positions to avoid adverse tax consequences;
and
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the
possible inability of the Fund to purchase or sell a security at a time that otherwise
would be favorable for it to do so, or the possible need for the Fund to sell a security
at a disadvantageous time due to a need for the Fund to maintain “cover”
or to segregate securities in connection with the hedging techniques.
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Futures
Transactions
Futures
and options on futures entail certain risks, including but not limited to the following:
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no
assurance that futures contracts or options on futures can be offset at favorable prices;
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possible
reduction of the yield of the Fund due to the use of hedging;
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possible
reduction in value of both the securities hedged and the hedging instrument;
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possible
lack of liquidity due to daily limits or price fluctuations;
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imperfect
correlation between the contracts and the securities being hedged; and
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losses
from investing in futures transactions that are potentially unlimited and the segregation
requirements for such transactions.
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For
a further description, see “Investment Objectives and Policies—Investment Practices” in the SAI.
Forward
Currency Exchange Contracts
The
use of forward currency exchange contracts may involve certain risks, including the failure of the counterparty to perform its
obligations under the contract and that the use of forward contracts 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. For a
further description of such investments, see “Investment Objectives and Policies—Investment Practices” in the
SAI.
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 Risk
Certain
events have a disruptive effect on the securities markets, such as terrorist attacks, war and other geopolitical events. The Fund
cannot predict the effects of similar events in the future on the U.S. economy. Non-investment rated securities and securities
of issuers with smaller market capitalizations tend to be more volatile than higher rated securities and securities of issuers
with larger market capitalizations so that these events and any actions resulting from them may have a greater impact on the prices
and volatility of non-investment rated securities and securities of issuers with smaller market capitalizations than on higher
rated securities and securities of issuers with larger market capitalizations.
Special
Risks Related to Preferred Securities
There
are special risks associated with the Fund’s investing in preferred securities, including:
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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.
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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 stockholders. 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.
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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.
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Liquidity.
Preferred securities may be substantially less liquid than many other securities, such
as common stocks or U.S. government securities.
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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.
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Special
Redemption Rights. In certain varying circumstances, an issuer of preferred securities
may redeem the securities prior to a specified date. For instance, for certain types
of preferred securities, a redemption may be triggered by a change in federal income
tax or securities laws. A redemption by the issuer may negatively impact the return of
the security held by the Fund.
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Interest
Rate Transactions
The
Fund may enter into interest rate swap or cap transactions with respect to all or a portion of any series of auction rate preferred
stock in order to manage the impact on its portfolio of changes in the dividend rate of such stock. Through these transactions
the Fund seeks to obtain the equivalent of a fixed rate for such auction rate preferred stock that is lower than the Fund would
have to pay if it issued fixed rate preferred stock. The use of interest rate swaps and caps is a highly specialized activity
that involves certain risks to the Fund including, among others, counterparty risk and early termination risk. See “How
the Fund Manages Risk—Interest Rate Transactions.”
Investment
Companies
The
Fund may invest in the securities of other investment companies to the extent permitted by law. To the extent the Fund invests
in the common equity of investment companies, the Fund will bear its ratable share of any such investment company’s expenses,
including management fees. The Fund will also remain obligated to pay management fees to the Investment Adviser with respect to
the assets invested in the securities of other investment companies. In these circumstances holders of the Fund’s common
stock will be subject to duplicative investment expenses.
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.
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.
Anti-Takeover
Provisions of the Fund’s Governing Documents
The
Fund’s Governing Documents include provisions that could limit the ability of other entities or persons to acquire control
of the Fund or convert the Fund to an open-end fund. See “Certain Provisions of the Fund’s Governing Documents and
Maryland Law.”
Status
as a Regulated Investment Company
The
Fund has qualified, and intends to remain qualified, for federal income tax purposes as a regulated investment company under Subchapter
M of the Code. Qualification requires, among other things, compliance by the Fund with certain distribution requirements. Statutory
limitations on distributions on the common stock if the Fund fails to satisfy the 1940 Act’s asset coverage requirements
could jeopardize the Fund’s ability to meet such distribution requirements. The Fund presently intends, however, to purchase
or redeem preferred stock to the extent necessary in order to maintain compliance with such asset coverage requirements. See “Taxation”
for a more complete discussion of these and other federal income tax considerations.
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.
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 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, the Fund’s 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 and the decision to end its quantitative easing policy, may also adversely affect the value, volatility
and liquidity of dividend- and interest-paying securities. Market volatility, tariffs, rising interest rates, and/or a return
to unfavorable economic conditions could impair the Fund’s ability to achieve its investment objective. An outbreak of infectious
respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now been
detected globally. This coronavirus has resulted in travel restrictions, closed international borders, enhanced health screenings
at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines,
cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of
COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations
or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition,
the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems.
Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in
certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.
Regulation
and Government Intervention Risk
Global
economies and financial markets are increasingly interconnected, which increases the possibility that conditions in one country
or region may adversely affect companies in a different country or region. The global financial crisis has led governments and
regulators around the world to take a number of unprecedented actions designed to support certain financial institutions and segments
of the financial markets that experienced extreme volatility, and in some cases a lack of liquidity. Governments, their regulatory
agencies, or self-regulatory organizations may take actions that the regulation of the issuers in which the Fund invests. Legislation
or regulation may also change the way in which the Fund itself is regulated. Such legislation or regulation could limit or preclude
the Fund’s ability to achieve its investment objective.
Governments
or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions.
The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or
negative effects on the liquidity, valuation and performance of the Fund’s portfolio holdings. Furthermore, volatile financial
markets can expose the Fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held
by the Fund.
The
SEC and its staff have been engaged in various initiatives and reviews that seek to improve and modernize the regulatory structure
governing investment companies. These efforts have been focused on risk identification and controls in various areas, including
imbedded leverage through the use of derivatives and other trading practices, cyber-security, liquidity, enhanced regulatory and
public reporting requirements and the evaluation of systemic risks. Any new rules, guidance or regulatory initiatives resulting
from these efforts could increase the Fund’s expenses and impact its returns to stockholders or, in the extreme case, impact
or limit its use of various portfolio management strategies or techniques and adversely impact the Fund.
In
particular, the U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on the Funds
and on the mutual fund industry in general. The SEC’s final rules and amendments that modernize reporting and disclosure
and required the implementation of a liquidity risk management program, along with other potential upcoming regulations, could,
among other things, restrict the Funds’ ability to engage in transactions, impact flows into the Funds, and/or increase
overall expenses of the Funds. The Board designated and approved a liquidity committee (Liquidity Committee) to administer the
Funds’ liquidity risk management program and related procedures, various aspects of which went into effect in December 2018
and June 2019.
In
October 2020, the SEC adopted Rule 18f-4 under the 1940 Act, which regulates the ability of registered investment companies to
use derivatives and other transactions that create future payment or delivery obligations. Under the newly adopted Rule 18f-4,
funds that use derivatives will be subject to a Value at Risk leverage limit, a derivatives risk management program and testing
requirements and requirements related to board reporting. These new requirements will apply unless a fund qualifies as a “limited
derivatives user,” as defined under the rule. Collectively, these requirements may limit the Funds’ ability to use
derivatives and/or enter into certain other financial contracts.
In
response to the current economic environment, the Biden administration may call for an increased popular, political and judicial
focus on finance related consumer protection. Financial institution practices are also subject to greater scrutiny and criticism
generally. In the case of transactions between financial institutions and the general public, there may be a greater tendency
toward strict interpretation of terms and legal rights in favor of the consuming public, particularly where there is a real or
perceived disparity in risk allocation and/or where consumers are perceived as not having had an opportunity to exercise informed
consent to the transaction. In the event of conflicting interests between retail investors holding shares of an open-end investment
company such as the Funds and a large financial institution, a court may similarly seek to strictly interpret terms and legal
rights in favor of retail investors.
Following
the November 3, 2020 U.S. elections and subsequent U.S. Senate runoff elections in Georgia, the Democratic Party controls the
executive and legislative branches of government. Changes in federal policy, including tax policies, and at regulatory agencies
occur over time through policy and personnel changes following elections, which lead to changes involving the level of oversight
and focus on the financial services industry or the tax rates paid by corporate entities. The nature, timing and economic and
political effects of potential changes to the current legal and regulatory framework affecting markets remain highly uncertain.
Uncertainty surrounding future changes may adversely affect the Fund’s operating environment and therefore its investment
performance.
In
addition, the tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Act”) made substantial changes
to the Code. Among those changes were a significant permanent reduction in the generally applicable corporate tax rate, changes
in the taxation of individuals and other non-corporate taxpayers that generally but not universally reduce their taxes on a temporary
basis subject to “sunset” provisions, the elimination or modification of various previously allowed deductions (including
substantial limitations on the deductibility of interest and, in the case of individuals, the deduction for personal state and
local taxes), certain additional limitations on the deduction of net operating losses, certain preferential rates of taxation
on certain dividends and certain business income derived by non-corporate taxpayers in comparison to other ordinary income recognized
by such taxpayers, and significant changes to the international tax rules. The effect of these, and the many other changes made
in the Act is subject to developing guidance and its full effects may be highly uncertain, both in terms of their 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,
the Fund’s shares or market conditions generally. Furthermore, many of the provisions of the Act will require guidance through
the issuance of Treasury regulations in order to assess their effect. There may be a substantial delay before such Treasury regulations
are promulgated, increasing the uncertainty as to the ultimate effect of the statutory amendments on the Fund. It is also likely
that there will be technical corrections legislation proposed with respect to the Act, the effect of which cannot be predicted
and may be adverse to the Fund or the Fund’s shareholders.
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 objectives.
Special
Risks Related to Cyber Security
The
Fund and its service providers are susceptible to cyber security risks that include, among other things, theft, unauthorized monitoring,
release, misuse, loss, destruction, or corruption of confidential and highly restricted data; denial of service attacks; unauthorized
access to relevant systems, compromises to networks or devices that the Fund and its service providers use to service the Fund’s
operations; or operational disruption or failures in the physical infrastructure or operating systems that support the Fund and
its service providers. Cyber attacks against or security breakdowns of the Fund or its service providers may adversely impact
the Fund and its shareholders, potentially resulting in, among other things, financial losses; the inability of Fund shareholders
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 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.
How
the Fund Manages Risk
Investment
Restrictions
The
Fund has adopted certain investment limitations designed to limit investment risk and maintain portfolio diversification. These
limitations are fundamental and may not be changed without the approval of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of common stock and preferred stock voting together as a single class. The Fund may become subject to
guidelines that are more limiting than the investment restrictions set forth above in order to obtain and maintain ratings from
Moody’s or Fitch Ratings (“Fitch”) on its preferred stock. See “Investment Restrictions” in the
SAI for a complete list of the fundamental and non-fundamental investment policies of the Fund.
Interest
Rate Transactions
The
Fund may enter into interest rate swap or cap transactions in relation to all or a portion of any series of auction rate preferred
stock in order to manage the impact on its portfolio of changes in the dividend rate of such stock. Through these transactions,
the Fund may, for example, obtain the equivalent of a fixed rate for such auction rate preferred stock that is lower than the
Fund would have to pay if it issued fixed rate preferred stock.
The
use of interest rate swaps and caps is a highly specialized activity that involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. In an interest rate swap, the Fund would agree to pay to the other
party to the interest rate swap (which is known as the “counterparty”) periodically a fixed rate payment in exchange
for the counterparty agreeing to pay to the Fund periodically a variable rate payment that is intended to approximate the Fund’s
variable rate payment obligation on its auction rate preferred stock. In an interest rate cap, the Fund would pay a premium to
the counterparty to the interest rate cap and, to the extent that a specified variable rate index exceeds a predetermined fixed
rate, would receive from the counterparty payments of the difference based on the notional amount of such cap. Interest rate swap
and cap transactions introduce additional risk because the Fund would remain obligated to pay preferred stock dividends or distributions
when due in accordance with the Articles Supplementary of the relevant series of the auction rate preferred stock even if the
counterparty defaulted. Depending on the general state of short-term interest rates and the returns on the Fund’s portfolio
securities at that point in time, such a default could negatively affect the Fund’s ability to make dividend or distribution
payments on the auction rate preferred stock. In addition, at the time an interest rate swap or cap transaction reaches its scheduled
termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms of the
replacement will not be as favorable as on the expiring transaction. If this occurs, it could have a negative impact on the Fund’s
ability to make dividend or distribution payments on the auction rate preferred stock. To the extent there is a decline in interest
rates, the value of the interest rate swap or cap could decline, resulting in a decline in the asset coverage for the shares of
auction rate preferred stock. A sudden and dramatic decline in interest rates may result in a significant decline in the asset
coverage. Under the Articles Supplementary for each series of the preferred stock, if the Fund fails to maintain the required
asset coverage on the outstanding preferred stock or fails to comply with other covenants, the Fund may be required to redeem
some or all of these shares. The Fund generally may redeem any series of auction rate preferred stock, in whole or in part, at
its option at any time (usually on a dividend or distribution payment date), other than during a non-call period. Such redemption
would likely result in the Fund seeking to terminate early all or a portion of any swap or cap transactions. Early termination
of a swap could result in a termination payment by the Fund to the counterparty, while early termination of a cap could result
in a termination payment to the Fund.
The
Fund will usually enter into swaps or caps on a net basis; that is, the two payment streams will be netted out in a cash settlement
on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. The Fund intends to segregate cash or liquid securities having a value at least equal to the value
of the Fund’s net payment obligations under any swap transaction, marked to market daily. The Fund will monitor any such
swap with a view to ensuring that the Fund remains in compliance with all applicable regulatory investment policy and tax requirements.
Management
of the Fund
General
The
business and affairs of the Fund are managed under the direction of the Fund’s Board (who, with its officers, are described
in the SAI). The Board decides upon matters of general policy and reviews the actions of the Investment Adviser and the Sub-Administrator
(as defined below). Pursuant to an Investment Advisory Agreement with the Fund, the Investment Adviser, under the supervision
of the Fund’s Board, provides a continuous investment program for the Fund’s portfolio; provides investment research
and makes and executes recommendations for the purchase and sale of securities; and provides all facilities and personnel, including
officers required for its administrative management and pays the compensation of all officers and Directors of the Fund who are
its affiliates.
The
Investment Adviser
The
Investment Adviser, a New York limited liability company and registered investment adviser under the Investment Advisers Act of
1940, as amended, serves as an investment adviser to registered investment companies with combined aggregate net assets approximating
$20.1 billion as of December 31, 2020. The Investment Adviser is a wholly owned subsidiary of GAMCO Investors, Inc. (“GBL”),
a New York corporation, whose Class A Common Stock is traded on the NYSE under the symbol, “GBL.” Mr. Mario J. Gabelli
may be deemed a “controlling person” of the Investment Adviser on the basis of his controlling interest in GBL. Mr.
Gabelli owns a majority of the stock of GGCP, Inc. (“GGCP”), which holds a majority of the capital stock and voting
power of GBL. The Investment Adviser has several affiliates that provide investment advisory services: GAMCO Asset Management,
Inc., a wholly owned subsidiary of GBL, acts as investment adviser for individuals, pension trusts, profit sharing trusts, and
endowments, and as a sub-adviser to certain third party investment funds, which include registered investment companies, having
assets under management of approximately $12.4 billion as of December 31, 2020; Teton Advisors, Inc. and its wholly owned investment
adviser, Keeley Teton Advisers, LLC, with assets under management of approximately $1.5 billion as of September 30, 2020, acts
as investment advisers to The TETON Westwood Funds, the KEELEY Funds, and separately managed accounts; Gabelli & Company Investment
Advisers, Inc. (formerly, Gabelli Securities, Inc.), a wholly-owned subsidiary of Associated Capital Group, Inc. (“Associated
Capital”), acts as investment adviser for certain alternative investment products, consisting primarily of risk arbitrage
and merchant banking limited partnerships and offshore companies, with assets under management of approximately $1.4 billion as
of December 31, 2020; Teton Advisors, Inc. was spun off by GBL in March 2009 and is an affiliate of GBL by virtue of Mr. Gabelli’s
ownership of GGCP, the principal stockholder of Teton Advisors, Inc., as of December 31, 2020. Associated Capital was spun off
from GBL on November 30, 2015, and is an affiliate of GBL by virtue of Mr. Gabelli’s ownership of GGCP, the principal stockholder
of Associated Capital.
Payment
of Expenses
The
Investment Adviser is obligated to pay expenses associated with providing the services contemplated by the Investment Advisory
Agreement between the Fund and the Investment Adviser (the “Advisory Agreement”) including compensation of and office
space for its officers and employees connected with investment and economic research, trading and investment management and administration
of the Fund, as well as the fees of all Directors of the Fund who are affiliated with the Investment Adviser.
In
addition to the fees of the Investment Adviser, the Fund is responsible for the payment of all its other expenses incurred in
the operation of the Fund, which include, among other things, expenses for legal and independent accountants’ services,
costs of printing proxies, stock certificates and stockholder reports, charges of the custodian, any sub-custodian and transfer
and dividend payment agent, expenses in connection with the dividend reinvestment and cash purchase plans, SEC fees, fees and
expenses of unaffiliated Directors, accounting and pricing costs, the Fund’s pro rata portion of membership fees
in trade associations, fidelity bond coverage for the Fund’s officers and employees, directors’ and officers’
errors and omissions insurance coverage, interest, brokerage costs, taxes, stock exchange listing fees and expenses, all expenses
of computing the Fund’s net asset value per share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Fund’s investment portfolio, expenses of qualifying the Fund for sale in various states, litigation
and other extraordinary or non-recurring expenses and other expenses properly payable by the Fund.
Advisory
Agreement
Under
the terms of the Advisory Agreement, the Investment Adviser manages the portfolio of the Fund in accordance with its stated investment
objectives and policies, makes investment decisions for the Fund, and places orders to purchase and sell securities on behalf
of the Fund and manages the Fund’s other business and affairs, all subject to the supervision and direction of its Board.
In addition, under the Advisory Agreement, the Investment Adviser oversees the administration of all aspects of the Fund’s
business and affairs and provides, or arranges for others to provide, at the Investment Adviser’s expense, certain enumerated
services, including maintaining the Fund’s books and records, preparing reports to its stockholders and supervising the
calculation of the net asset value of its stock. All expenses of computing the Fund’s net asset value, including any equipment
or services obtained solely for the purpose of pricing shares of stock or valuing the Fund’s investment portfolio, will
be an expense of the Fund under the Advisory Agreement unless the Investment Adviser voluntarily assumes responsibility for such
expense. During the fiscal year ended December 31, 2020, the Fund reimbursed the Investment Adviser $45,000 in connection with
the cost of computing the Fund’s net asset value.
The
Advisory Agreement combines investment advisory and administrative responsibilities in one agreement. For services rendered by
the Investment Adviser on behalf of the Fund under the Advisory Agreement, the Fund pays the Investment Adviser a fee computed
weekly and paid monthly, equal on an annual basis to 1.00% of the Fund’s average weekly net assets including the liquidation
value of preferred stock. The fee paid by the Fund may be higher when leverage in the form of preferred stock is utilized, giving
the Investment Adviser an incentive to utilize such leverage. However, the Investment Adviser has agreed to reduce the management
fee on the incremental assets attributable to the currently outstanding Series C Auction Rate Preferred Stock during the fiscal
year if the total return of the net asset value of the common stock of the Fund, including distributions and advisory fees subject
to reduction for that year, does not exceed the stated dividend rate or corresponding swap rate of each particular series of preferred
stock for the period. In other words, if the effective cost of the leverage for any series of preferred stock exceeds the total
return (based on net asset value) on the Fund’s common stock, the Investment Adviser will reduce that portion of its management
fee on the incremental assets attributable to the leverage for that series of preferred stock to mitigate the negative impact
of the leverage on the common stockholder’s total return. The Investment Adviser currently intends that the voluntary advisory
fee waiver will remain in effect for as long as the Series C Auction Rate Cumulative Preferred Stock are outstanding. This fee
waiver will not apply to any preferred stock issued from this offering. The Investment Adviser, however, reserves the right to
modify or terminate the voluntary advisory fee waiver at any time. The Fund’s total return on the net asset value of the
common stock is monitored on a monthly basis to assess whether the total return on the net asset value of the common stock exceeds
the stated dividend rate or corresponding swap rate of each particular series of preferred stock for the period. The test to confirm
the accrual of the management fee on the assets attributable to each particular series of preferred stock is annual. The Fund
will accrue for the management fee on these assets during the fiscal year if it appears probable that the Fund will incur the
management fee on those additional assets. For the year ended December 31, 2020, the Fund’s total return on the net asset
value of the common stock exceeded the stated dividend rate of the outstanding preferred stock. Thus, management fees were earned
on these assets.
The
Advisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of
its obligations and duties thereunder, the Investment Adviser is not liable for any error or judgment or mistake of law or for
any loss suffered by the Fund. As part of the Advisory Agreement, the Fund has agreed that the name “Gabelli” is the
Investment Adviser’s property, and that in the event the Investment Adviser ceases to act as an investment adviser to the
Fund, the Fund will change its name to one not including “Gabelli.”
Pursuant
to its terms, the Advisory Agreement will remain in effect with respect to the Fund from year to year if approved annually: (i)
by the Fund’s Board or by the holders of a majority of the Fund’s outstanding voting securities and (ii) by a majority
of the Directors who are not “interested persons” (as defined in the 1940 Act) of any party to the Advisory Agreement,
by vote cast in person at a meeting called for the purpose of voting on such approval. A discussion regarding the basis of the
Board’s approval of the Advisory Agreement is available in the Fund’s semiannual report to stockholders for the six
months ended June 30, 2020.
Canadian
stockholders should note, to the extent applicable, that there may be difficulty enforcing any legal rights against the Investment
Adviser because it is resident outside Canada and all of its assets are situated outside Canada.
Selection
of Brokers and Dealers
The
Advisory Agreement contains provisions relating to the selection of brokers and dealers to effect the portfolio transactions of
the Fund. Under those provisions, the Investment Adviser may: (i) direct Fund portfolio brokerage to G.research, Inc. (formerly
Gabelli & Company, Inc.) (“G.research”) or other broker-dealer affiliates of the Investment Adviser and (ii) pay
commissions to brokers and dealers other than G.research that are higher than might be charged by another qualified broker and
dealer to obtain brokerage and/or research services considered by the Investment Adviser to be useful or desirable for its investment
management of the Fund and/or its other advisory accounts or those of any investment adviser affiliated with it. Additionally,
the Investment Adviser may enter into agreements on behalf of the Fund, whereby the Fund receives commission credits from certain
brokers and dealers to pay Fund operating expenses, such commission credits are based on brokerage transactions directed to those
brokers and dealers. The SAI contains further information about the Advisory Agreement, including a more complete description
of the advisory and expense arrangements, exculpatory and brokerage provisions, as well as information on the brokerage practices
of the Fund.
Portfolio
Managers
Mario
J. Gabelli, CFA, is Chairman of the Board of Directors of the Fund. Mr. Gabelli is Chief Executive Officer, and Chief Investment
Officer – Value Portfolios of GBL, a NYSE-listed asset manager and financial services company. He is the Chief Investment
Officer of Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc., each of which are asset management subsidiaries
of GBL. In addition, Mr. Gabelli is Chief Executive Officer, Chief Investment Officer, a director, and the controlling stockholder
of GGCP, a private company that holds a majority interest in GBL, and the Chairman of MJG Associates, Inc., which acts as an investment
manager of various investment funds and other accounts. He is Executive Chairman of Associated Capital, a public company that
provides alternative management and institutional research services, and is a majority-owned subsidiary of GGCP. Mr. Gabelli serves
as Overseer of the Columbia University Graduate School of Business and as a trustee of Boston College and Roger Williams University.
He serves as a director of the Winston Churchill Foundation, The E.L. Wiegand Foundation, The American-Italian Cancer Foundation,
and The Foundation for Italian Art and Culture. He is Chairman of the Gabelli Foundation, Inc., a Nevada private charitable trust.
Mr. Gabelli serves as Co-President of Field Point Park Association, Inc. Mr. Gabelli received his Bachelor’s degree from
Fordham University, M.B.A from Columbia Business School, and honorary Doctorates from Fordham University and Roger Williams University.
Christopher
J. Marangi, a Managing Director of GBL and Co-Chief Investment Officer of GBL’s Value team, became a portfolio manager of
the Fund in July 2013. Mr. Marangi joined Gabelli in 2003 as a research analyst. He currently manages several funds within the
Gabelli/GAMCO/Teton fund family (“Gabelli/GAMCO/Teton Fund Complex” or “Fund Complex”) and serves as a
portfolio manager on GAMCO Asset Management Inc.’s institutional and high net worth separate accounts team. Mr. Marangi
graduated magna cum laude and Phi Beta Kappa with a B.A. in Political Economy from Williams College and holds an M.B.A. with honors
from Columbia Business School.
The
SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio
managers and the portfolio managers’ ownership of securities in the Fund.
Sub-Administrator
BNY
Mellon Investment Servicing (US) Inc. (“BNY Mellon” or the “Sub-Administrator”), with its principal office
located at 760 Moore Road, King of Prussia, Pennsylvania 19406, serves as sub-administrator for the Fund. The Sub-Administrator
provides certain administrative services necessary for the Fund’s operations which do not include the investment and portfolio
management services provided by the Investment Adviser. For these services and the related expenses borne by the Sub-Administrator,
the Investment Adviser pays an annual fee based on the value of the aggregate average daily net assets of all funds under its
administration managed by the Investment Adviser, GAMCO and Teton Advisors, Inc. as follows: 0.0275% - first $10 billion, 0.0125%
- exceeding $10 billion but less than $15 billion, 0.01% - over $15 billion but less than $20 billion and 0.008% - over $20 billion.
Portfolio
Transactions
Principal
transactions are not entered into with affiliates of the Fund. However, G.research an affiliate of the Investment Adviser, may
execute portfolio transactions on stock exchanges and in the over-the-counter markets on an agency basis and receive a stated
commission therefrom. For a more detailed discussion of the Fund’s brokerage allocation practices, see “Portfolio
Transactions” in the SAI.
Dividends
and Distributions
The
Fund may retain for reinvestment, and pay the resulting federal income taxes on, its net capital gain, if any, although the Fund
reserves the authority to distribute its net capital gain in any year. Under the Fund’s current distribution policy, which
may be modified at any time by its Board of Directors, the Fund intends to pay to holders of the Fund’s common stock, a
minimum annual distribution of 10% of the average net asset value of the Fund within a calendar year or an amount sufficient to
satisfy the minimum distribution requirements of the Code, whichever is greater. Distributions on the Fund’s common stock
may contain a return of capital. The average net asset value of the Fund is based on the average net asset values as of the last
day of the four preceding calendar quarters during the year. Distributions of net investment income generally are taxable to stockholders
as ordinary income dividends. If, for any calendar year, the total distributions exceed net investment income and net capital
gain, the excess will generally be treated as a tax-free return of capital up to the amount of a stockholder’s tax basis
in the stock. The amount treated as a tax-free return of capital will reduce a stockholder’s tax basis in the stock, thereby
increasing such stockholder’s potential taxable gain or reducing his or her potential taxable loss on the sale of the stock.
The return of capital is not a dividend or capital gain and may reduce your investment in the Fund. Any amounts distributed to
a stockholder in excess of the basis of the stock will be taxable to the stockholder as capital gain. The Fund distributed a return
of capital in 2020. See “Taxation.”
In
the event the Fund distributes amounts in excess of its net investment income and net capital gain, such distributions will decrease
the Fund’s total assets and, therefore, have the likely effect of increasing the Fund’s expense ratio. In addition,
in order to make distributions, the Fund might have to sell a portion of its investment portfolio at a time when independent investment
judgment might not dictate such action.
The
Fund, along with other registered investment companies advised by the Investment Adviser, has obtained an exemption from Section
19(b) of the 1940 Act and Rule 19b-1 thereunder permitting the Fund to make periodic distributions of long-term capital gains
provided that any distribution policy of the Fund with respect to its common stock calls for periodic (e.g., quarterly
or semi-annually, but in no event more frequently than monthly) distributions in an amount equal to a fixed percentage of the
Fund’s average net asset value over a specified period of time or market price per share of common stock at or about the
time of distribution or payment of a fixed dollar amount. The exemption also permits the Fund to make distributions with respect
to its preferred stock in accordance with such stock’s terms.
If
the total distributions required by a periodic payment policy exceed the Fund’s net investment income and net capital gain,
the excess will be treated as a return of capital. Stockholders may periodically receive the payment of cash distributions from
the Fund, which may consist of either a distribution of net profits or a return of capital or a combination of the two. Stockholders
should not assume that the source of a distribution from the Fund is net profit. Distributions sourced from paid-in-capital should
not be considered the current yield or the total return from an investment in the Fund. If the Fund’s net investment income
(including net short-term capital gains) and net long-term capital gains for any year exceed the amount required to be distributed
under a periodic payment policy, the Fund generally intends to pay such excess once a year, but may, in its discretion, retain
and not distribute net long-term capital gains to the extent of such excess. The Fund reserves the right, but does not currently
intend, to retain for reinvestment and pay the resulting U.S. federal income taxes on the excess of its net realized long-term
capital gains over its net short-term capital losses, if any. See “Automatic Dividend Reinvestment and Voluntary Cash Purchase
Plans.”
Automatic
Dividend Reinvestment and Voluntary Cash Purchase Plans
Enrollment
in the Plan
It
is the policy of the Fund to automatically reinvest dividends payable to common stockholders. As a “registered” stockholder
you automatically become a participant in the Fund’s Automatic Dividend Reinvestment Plan (the “Plan”). The
Plan authorizes the Fund to credit shares of common stock to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net asset value. All distributions to stockholders
whose shares are registered in their own names will be automatically reinvested pursuant to the Plan in additional shares of the
Fund. Plan participants may send their stock certificates to Computershare Trust Company, N.A. (“Computershare”) to
be held in their dividend reinvestment account. Registered stockholders wishing to receive their distributions in cash must submit
this request in writing to:
The
Gabelli Multimedia Trust Inc.
c/o Computershare
P.O. Box 505000
Louisville, KY 40233
Stockholders
requesting this cash election must include the stockholder’s name and address as they appear on the share certificate. Stockholders
with additional questions regarding the Plan or requesting a copy of the terms of the Plan, may contact Computershare at (800)
336-6983.
If
your shares are held in the name of a broker, bank, or nominee, you should contact such institution. If such institution is not
participating in the Plan, your account will be credited with a cash dividend. In order to participate in the Plan through such
institution, it may be necessary for you to have your shares taken out of “street name” and re-registered in your
own name. Once registered in your own name your distributions will be automatically reinvested. Certain brokers participate in
the Plan. Stockholders holding shares in “street name” at participating institutions will have dividends automatically
reinvested. Stockholders wishing a cash dividend at such institution must contact their broker to make this change.
The
number of shares of common stock distributed to participants in the Plan in lieu of cash dividends is determined in the following
manner. Under the Plan, whenever the market price of the Fund’s common stock is equal to or exceeds net asset value at the
time shares are valued for purposes of determining the number of shares equivalent to the cash dividends or capital gains distribution,
participants are issued shares of common stock valued at the greater of (i) the net asset value as most recently determined or
(ii) 95% of the then current market price of the Fund’s common stock. The valuation date is the dividend or distribution
payment date or, if that date is not a NYSE trading day, the next trading day. If the net asset value of the common stock at the
time of valuation exceeds the market price of the common stock, participants will receive shares from the Fund valued at market
price. If the Fund should declare a dividend or capital gains distribution payable only in cash, Computershare will buy shares
of common stock in the open market, or on the NYSE or elsewhere, for the participants’ accounts, except that Computershare
will endeavor to terminate purchases in the open market and cause the Fund to issue shares at net asset value if, following the
commencement of such purchases, the market value of the common stock exceeds the then current net asset value.
The
automatic reinvestment of dividends and capital gains distributions will not relieve participants of any income tax which may
be payable on such distributions. A participant in the Plan will be treated for federal income tax purposes as having received,
on a dividend payment date, a dividend or distribution in an amount equal to the cash the participant could have received instead
of shares.
Voluntary
Cash Purchase Plan
The
Voluntary Cash Purchase Plan is yet another vehicle for our stockholders to increase their investment in the Fund. In order to
participate in the Voluntary Cash Purchase Plan, stockholders must have their shares registered in their own name.
Participants
in the Voluntary Cash Purchase Plan have the option of making additional cash payments to Computershare for investments in the
Fund’s common stock at the then current market price. Stockholders may send an amount from $250 to $10,000. Computershare
will use these funds to purchase shares in the open market on or about the 1st and 15th of each month. Computershare will charge
each stockholder who participates $0.75, plus a pro rata share of the brokerage commissions, per transaction. Brokerage
charges for such purchases are expected to be less than the usual brokerage charge for such transactions. It is suggested that
any voluntary cash payments be sent to Computershare, P.O. Box 505000, Louisville, KY 40233, such that Computershare receives
such payments approximately 10 days before the 1st and 15th of the month. Funds not received at least five days before the investment
date shall be held for investment until the next purchase date. A payment may be withdrawn without charge if notice is received
by Computershare at least 48 hours before such payment is to be invested.
Stockholders
wishing to liquidate shares held at Computershare must do so in writing or by telephone. Please submit your request to the above
mentioned address or telephone number. Include in your request your name, address, and account number. The cost to liquidate shares
is $2.50, plus a pro rata share of the brokerage commissions, per transaction. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions.
For
more information regarding the Automatic Dividend Reinvestment Plan and Voluntary Cash Purchase Plan, brochures are available
by calling (914) 921-5070 or by writing directly to the Fund.
The
Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan at least 90 days before the record date for such
dividend or distribution. The Plan also may be amended or terminated by Computershare on at least 90 days written notice to participants
in the Plan.
Description
of Capital Stock
The following is a brief description of the
terms of the Fund’s common stock and preferred stock. This description does not purport to be complete and is qualified by
reference to the Fund’s Governing Documents. For complete terms of the common stock and preferred stock, please refer to
the actual terms of such series, which are set forth in the Governing Documents.
Common Stock
The Fund is currently authorized to issue two
hundred million (200,000,000) shares, all of which were initially classified and designated as common stock, par value $0.001 per
share. The Board has the authority to classify and reclassify any authorized but unissued shares of stock from time to time. Of
the Fund’s two hundred million (200,000,000) shares initially classified and designated as common stock, 12,001,000 have
been reclassified as preferred stock. Each share within a particular class or series thereof has equal voting, dividend, distribution
and liquidation rights. There are no conversion or preemptive rights in connection with any outstanding stock of the Fund. The
common stock of the Fund is not redeemable and has no preemptive, conversion or cumulative voting rights. In addition, shares of
the Fund’s common stock will, when issued, be fully paid and non-assessable. In the event of liquidation, each share of Fund
common stock is entitled to its proportion of the Fund’s assets after payment of debts and expenses and the amounts payable
to holders of the Fund’s preferred stock ranking senior to the shares of common stock of the Fund as described below.
Under Maryland law, a Maryland corporation generally
cannot dissolve, amend its charter, merge, convert, sell all or substantially all of its assets, engage in a share exchange or
engage in similar transactions outside the ordinary course of business unless approved by the affirmative vote of stockholders
entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than
a majority of all the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Subject to certain
exceptions summarized below, the charter generally provides for approval of charter amendments and extraordinary transactions by
the stockholders entitled to cast at least a majority of the votes entitled to be cast on the matter.
The common stock of the Fund is listed on the
NYSE under the symbol “GGT” and began trading November 14, 1994. As of December 31, 2020, 25,264,139 shares of common
stock were outstanding. The average weekly trading volume of the common stock on the NYSE during the period from January 1, 2020
through December 31, 2020, was 406,573 shares.
Shares of closed-end investment companies often
trade on an exchange at prices lower than net asset value. The Fund’s common stock has traded in the market at both premiums
to and discounts from net asset value.
The following table sets forth for the quarters
indicated, the high and low closing prices on the NYSE per share of the Fund’s common stock and the net asset value and the
premium or discount from net asset value at which the common stock was trading, expressed as a percentage of net asset value, at
each of the high and low NYSE closing prices provided.
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Market Price
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Net Asset Value
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|
|
Premium (Discount) as
% of NAV
|
|
Period
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Fiscal Year 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
10.00
|
|
|
$
|
9.26
|
|
|
$
|
9.63
|
|
|
$
|
9.69
|
|
|
|
3.84
|
|
|
|
(4.44
|
)
|
Q2
|
|
$
|
9.56
|
|
|
$
|
9.13
|
|
|
$
|
10.12
|
|
|
$
|
9.84
|
|
|
|
(5.53
|
)
|
|
|
(7.22
|
)
|
Q3
|
|
$
|
9.38
|
|
|
$
|
7.44
|
|
|
$
|
9.86
|
|
|
$
|
8.57
|
|
|
|
(4.87
|
)
|
|
|
(13.17
|
)
|
Q4
|
|
$
|
8.42
|
|
|
$
|
7.21
|
|
|
$
|
9.21
|
|
|
$
|
8.18
|
|
|
|
(8.58
|
)
|
|
|
(11.86
|
)
|
Fiscal Year 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
7.46
|
|
|
$
|
6.17
|
|
|
$
|
8.19
|
|
|
$
|
7.28
|
|
|
|
(8.91
|
)
|
|
|
(15.25
|
)
|
Q2
|
|
$
|
7.48
|
|
|
$
|
6.75
|
|
|
$
|
8.54
|
|
|
$
|
7.65
|
|
|
|
(12.41
|
)
|
|
|
(11.77
|
)
|
Q3
|
|
$
|
7.90
|
|
|
$
|
7.06
|
|
|
$
|
8.64
|
|
|
$
|
8.08
|
|
|
|
(8.57
|
)
|
|
|
(12.62
|
)
|
Q4
|
|
$
|
7.74
|
|
|
$
|
7.18
|
|
|
$
|
8.41
|
|
|
$
|
7.99
|
|
|
|
(7.97
|
)
|
|
|
(10.14
|
)
|
Fiscal Year 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
8.09
|
|
|
$
|
7.34
|
|
|
$
|
8.88
|
|
|
$
|
8.33
|
|
|
|
(8.89
|
)
|
|
|
(11.88
|
)
|
Q2
|
|
$
|
9.25
|
|
|
$
|
8.04
|
|
|
$
|
9.21
|
|
|
$
|
8.86
|
|
|
|
0.43
|
|
|
|
(9.25
|
)
|
Q3
|
|
$
|
9.71
|
|
|
$
|
8.95
|
|
|
$
|
9.10
|
|
|
$
|
9.11
|
|
|
|
6.70
|
|
|
|
(1.75
|
)
|
Q4
|
|
$
|
9.74
|
|
|
$
|
8.50
|
|
|
$
|
9.33
|
|
|
$
|
9.21
|
|
|
|
4.39
|
|
|
|
(7.70
|
)
|
Fiscal Year 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
9.98
|
|
|
$
|
9.07
|
|
|
$
|
9.61
|
|
|
$
|
8.81
|
|
|
|
3.85
|
|
|
|
2.95
|
|
Q2
|
|
$
|
9.77
|
|
|
$
|
9.23
|
|
|
$
|
9.19
|
|
|
$
|
8.68
|
|
|
|
6.31
|
|
|
|
6.33
|
|
Q3
|
|
$
|
9.27
|
|
|
$
|
8.70
|
|
|
$
|
8.98
|
|
|
$
|
8.84
|
|
|
|
3.22
|
|
|
|
(1.58
|
)
|
Q4
|
|
$
|
9.14
|
|
|
$
|
6.95
|
|
|
$
|
8.93
|
|
|
$
|
6.62
|
|
|
|
2.35
|
|
|
|
4.98
|
|
Fiscal Year 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
8.68
|
|
|
$
|
7.05
|
|
|
$
|
8.22
|
|
|
$
|
7.10
|
|
|
|
5.59
|
|
|
|
(0.70
|
)
|
Q2
|
|
$
|
8.53
|
|
|
$
|
7.76
|
|
|
$
|
8.38
|
|
|
$
|
7.71
|
|
|
|
1.79
|
|
|
|
0.64
|
|
Q3
|
|
$
|
8.68
|
|
|
$
|
8.07
|
|
|
$
|
8.07
|
|
|
$
|
7.48
|
|
|
|
7.55
|
|
|
|
7.89
|
|
Q4
|
|
$
|
8.33
|
|
|
$
|
7.87
|
|
|
$
|
7.92
|
|
|
$
|
7.78
|
|
|
|
5.18
|
|
|
|
1.16
|
|
Fiscal Year 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
$
|
8.36
|
|
|
$
|
3.42
|
|
|
$
|
7.91
|
|
|
$
|
4.04
|
|
|
|
5.69
|
|
|
|
(15.35
|
)
|
Q2
|
|
$
|
7.53
|
|
|
$
|
4.77
|
|
|
$
|
6.92
|
|
|
$
|
4.43
|
|
|
|
8.82
|
|
|
|
7.67
|
|
Q3
|
|
$
|
7.40
|
|
|
$
|
6.43
|
|
|
$
|
7.46
|
|
|
$
|
6.26
|
|
|
|
(0.80
|
)
|
|
|
2.72
|
|
Q4
|
|
$
|
8.29
|
|
|
$
|
6.16
|
|
|
$
|
7.98
|
|
|
$
|
6.44
|
|
|
|
3.88
|
|
|
|
(4.34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
Currently, 12,001,000 shares of the Fund’s
capital stock have been classified by the Board as preferred stock, par value $0.001 per share. The Fund’s Board may reclassify
authorized and unissued common stock of the Fund, as preferred stock prior to the completion of any offering. The terms of each
series of preferred stock may be fixed by the Board and may materially limit and/or qualify the rights of the holders of the Fund’s
common stock. As of December 31, 2020, the Fund had outstanding 10 shares of preferred stock designated as Series C Auction Rate
Preferred, 1,996,700 shares of preferred stock designated as Series E Preferred, and 1,990,201 shares of preferred stock designated
as Series G Preferred.
Dividends on the Series C Auction Rate Preferred
accumulate at a variable rate, usually set at a weekly auction. The liquidation preference of the Series C Auction Rate Preferred
is $25,000 per share. The Fund generally may redeem the outstanding Series C Auction Rate Preferred, in whole or in part, at any
time other than during a non-call period. Under limited circumstances, redemption of the Series C Auction Rate Preferred is mandatory.
The Series C Auction Rate Preferred is not traded on any stock exchange.
Dividends on the Series E Preferred accumulate
at an annual rate of 5.125% of the liquidation preference of $25 per share, are cumulative from the date of original issuance thereof,
and are payable quarterly on March 26, June 26, September 26, and December 26 of each year. The Fund’s outstanding Series
E Preferred is redeemable at the liquidation preference plus accumulated but unpaid dividends (whether or not earned or declared)
at the option of the Fund. Under limited circumstances, redemption by the Fund of Series E Preferred is mandatory. The Series E
Preferred is listed and traded on the NYSE under the symbol “GGT PrE.”
Dividends on the Series G Preferred accumulate
at an annual rate of 5.125% of the liquidation preference of $25 per share, are cumulative from the date of original issuance thereof,
and are payable quarterly on March 26, June 26, September 26, and December 26 of each year. The Fund’s outstanding Series
E Preferred is redeemable at the liquidation preference plus accumulated but unpaid dividends (whether or not earned or declared)
at the option of the Fund. Under limited circumstances, redemption by the Fund of Series E Preferred is mandatory. The Series G
Preferred is listed and traded on the NYSE under the symbol “GGT PrE.”
If the Fund issues any additional series of preferred
stock, it will pay dividends to the holders at either a fixed rate or a rate that will be reset frequently based on short-term
interest rates, as described in the Prospectus Supplement accompanying each preferred stock offering. The Board may by resolution
classify or reclassify any authorized but unissued shares of stock of the Fund from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms or conditions
of redemption. The Fund may not issue any class of stock senior to the existing preferred stock.
Upon a liquidation, dissolution, or winding up
of the affairs of the Fund (whether voluntary or involuntary), holders of the Fund’s preferred stock will be entitled to
receive out of the assets of the Fund available for distribution to stockholders (after payment of claims of the Fund’s creditors
but before any distributions with respect to the Fund’s common stock or any other class of capital stock of the Fund ranking
junior to the preferred stock as to liquidation payments) an amount per share equal to such share’s liquidation preference
plus any accumulated but unpaid distributions (whether or not earned or declared, excluding interest thereon) to the date of distribution,
and such stockholders shall be entitled to no further participation in any distribution or payment in connection with such liquidation.
Each series of preferred stock ranks on a parity with any other series of preferred stock of the Fund as to the payment of distributions
and the distribution of assets upon liquidation, and is junior to the Fund’s obligations with respect to any outstanding
senior securities representing debt. The preferred stock carries one vote per share on all matters on which the common stock is
entitled to vote and have additional voting rights pursuant to the 1940 Act and the Charter. The shares of preferred stock are
fully paid, non-assessable and have no preemptive, exchange, or conversion rights. The following table shows: (i) the classes of
stock authorized, (ii) the number of shares authorized in each class, and (iii) the number of shares outstanding in each class
as of December 31, 2020.
Title Of Class
|
|
Amount
Authorized
|
|
|
Amount
Outstanding
|
|
Common Stock
|
|
|
196,750,000
|
|
|
|
25,264,139
|
|
Series C Auction Rate Preferred
|
|
|
1,000
|
|
|
|
10
|
|
Series E Preferred
|
|
|
4,500,000
|
|
|
|
1,996,700
|
|
Series G Preferred
|
|
|
4,500,000
|
|
|
|
1,990,201
|
|
As of December 31, 2020, the Fund does not hold
any shares of stock for its account.
Restrictions on Dividends and Other Distributions for the Preferred
Stock
So long as any preferred stock is outstanding,
the Fund may not pay any dividend or distribution (other than a dividend or distribution paid in common stock or in options, warrants,
or rights to subscribe for or purchase common stock) in respect of the common stock or call for redemption, redeem, purchase or
otherwise acquire for consideration any common stock (except by conversion into or exchange for shares of the Fund ranking junior
to the preferred stock as to the payment of dividends or distributions and the distribution of assets upon liquidation), unless:
|
●
|
the Fund has declared and paid (or provided to the relevant dividend paying agent) all cumulative distributions on the Fund’s
outstanding preferred stock due on or prior to the date of such common stock dividend or distribution;
|
|
●
|
the Fund has redeemed the full number of shares of preferred stock to be redeemed pursuant to any mandatory redemption provision
in the Fund’s Governing Documents; and
|
|
●
|
after making the distribution, the Fund meets applicable asset coverage requirements.
|
No full distribution will be declared or made
on any series of preferred stock for any dividend period, or part thereof, unless full cumulative distributions due through the
most recent dividend payment dates therefor for all outstanding series of preferred stock of the Fund ranking on a parity with
such series as to distributions have been or contemporaneously are declared and made. If full cumulative distributions due have
not been made on all outstanding preferred stock of the Fund ranking on a parity with such series of preferred stock as to the
payment of distributions, any distributions being paid on the preferred stock will be paid as nearly pro rata as possible
in proportion to the respective amounts of distributions accumulated but unmade on each such series of preferred stock on the relevant
dividend payment date. The Fund’s obligation to make distributions on the preferred stock will be subordinate to its obligations
to pay interest and principal, when due, on any senior securities representing debt.
Voting Rights
Except as otherwise stated in this Prospectus,
any prospectus supplement, specified in the Fund’s Charter or resolved by the Board or as otherwise required by applicable
law, holders of preferred stock shall be entitled to one vote per share held on each matter submitted to a vote of the stockholders
of the Fund and will vote together with holders of common stock and of any other preferred stock then outstanding as a single class.
In connection with the election of the Fund’s
Directors, holders of the outstanding shares of preferred stock, voting together as a single class, will be entitled at all times
to elect two of the Fund’s Directors, and the remaining Directors will be elected by holders of common stock and holders
of preferred stock, voting together as a single class. In addition, if: (i) at any time dividends and distributions on outstanding
shares of preferred stock are unpaid in an amount equal to at least two full years’ dividends and distributions thereon and
sufficient cash or specified securities have not been deposited with the applicable paying agent for the payment of such accumulated
dividends and distributions, or (ii) at any time holders of any other series of preferred stock are entitled to elect a majority
of the Directors of the Fund under the 1940 Act, or the applicable Articles Supplementary creating such shares, then the number
of Directors constituting the Board automatically will be increased by the smallest number that, when added to the two Directors
elected exclusively by the holders of preferred stock as described above, would then constitute a simple majority of the Board
as so increased by such smallest number. Such additional Directors will be elected by the holders of the outstanding shares of
preferred stock, voting together as a single class, at a special meeting of stockholders which will be called as soon as practicable
and will be held not less than ten nor more than twenty days after the mailing date of the meeting notice. If the Fund fails to
send such meeting notice or to call such a special meeting, the meeting may be called by any preferred stockholder on like notice.
The terms of office of the persons who are Directors at the time of that election will continue. If the Fund thereafter pays, or
declares and sets apart for payment in full, all dividends and distributions payable on all outstanding shares of preferred stock
for all past dividend periods, or the holders of other series of preferred stock are no longer entitled to elect such additional
Directors, the additional voting rights of the holders of the preferred stock as described above will cease, and the terms of office
of all of the additional Directors elected by the holders of the preferred stock (but not of the Directors with respect to whose
election the holders of common stock were entitled to vote or the two Directors the holders of preferred stock have the right to
elect as a separate class in any event) will terminate at the earliest time permitted by law.
So long as shares of preferred stock are outstanding,
the Fund will not, without the affirmative vote of the holders of a majority (as defined in the 1940 Act) of the shares of preferred
stock outstanding at the time, voting separately as one class, amend, alter or repeal the provisions of the Fund’s Charter
whether by merger, consolidation or otherwise, so as to materially adversely affect any of the rights, preferences or powers expressly
set forth in the Charter with respect to such shares of preferred stock. Also, to the extent permitted under the 1940 Act, in the
event shares of more than one series of preferred stock are outstanding, the Fund will not effect any of the actions set forth
in the preceding sentence which materially adversely affect the rights, preferences, or powers expressly set forth in the Charter
with respect to such shares of a series of preferred stock differently than those of a holder of shares of any other series of
preferred stock without the affirmative vote of the holders of at least a majority of the shares of preferred stock of each series
materially adversely affected and outstanding at such time (each such materially adversely affected series voting separately as
a class to the extent its rights are affected differently).
Unless a higher percentage is provided under
the Charter or Maryland law, the affirmative vote of the holders of a majority (as defined in the 1940 Act) of the outstanding
shares of preferred stock, voting as a separate class, will be required to approve any plan of reorganization adversely affecting
the preferred stock. The affirmative vote of the holders of 66 2/3% of each class of the outstanding voting shares of the Fund,
voting as separate classes, and the vote of a majority (as defined in the 1940 Act) of the holders of shares of preferred stock,
voting as a single class, is required to authorize the conversion of the Fund from a closed-end to an open-end investment company.
Further, unless a higher percentage is provided for under the Charter, the affirmative vote of a majority (as defined in the 1940
Act) of the votes entitled to be cast by holders of outstanding shares of the Fund’s preferred stock, voting together as
a single class, will be required to approve any action requiring a vote of security holders under Section 13(a) of the 1940 Act
(other than a conversion of the Fund from a closed-end to an open-end investment company), including, among other things, changes
in the Fund’s investment objectives or changes in the investment restrictions described as fundamental policies under “Investment
Objectives and Policies” in this Prospectus and the SAI, “How the Fund Manages Risk—Investment Restrictions”
in this Prospectus and “Investment Restrictions” in the SAI.
For purposes of this section, except as otherwise
required under the 1940 Act, the vote of the holders of a “majority” of the outstanding shares of preferred stock means,
in accordance with Section 2(a)(42) of the 1940 Act, the vote, at the annual or a special meeting of the stockholders of the Fund
duly called (i) of 67% or more of the shares of preferred stock present at such meeting, if the holders of more than 50% of the
outstanding shares of preferred stock are present or represented by proxy, or (ii) of more than 50% of the outstanding shares of
preferred stock, whichever is less. The class vote of holders of preferred stock described above in each case will be in addition
to a separate vote of the requisite percentage of common stock, and any other preferred stock, voting together as a single class,
that may be necessary to authorize the action in question.
The calculation of the elements and definitions
of certain terms of the rating agency guidelines may be modified by action of the Board without further action by the stockholders
if the Board determines that such modification is necessary to prevent a reduction in rating of the shares of preferred stock by
Moody’s and/or Fitch (or such other rating agency then rating the preferred stock at the request of the Fund), as the case
may be, or is in the best interest of the holders of common stock and is not adverse to the holders of preferred stock in view
of advice to the Fund by the relevant rating agencies that such modification would not adversely affect its then-current rating
of the preferred stock.
The foregoing voting provisions will not apply
to any series of preferred stock if, at or prior to the time when the act with respect to which such vote otherwise would be required
will be effected, such stock will have been redeemed or called for redemption and sufficient cash or cash equivalents provided
to the applicable paying agent to effect such redemption. The holders of preferred stock will have no preemptive rights or rights
to cumulative voting.
Certain
Provisions of the Fund’s Governing Documents and Maryland Laws
The Fund presently has provisions in its Governing
Documents that could have the effect of limiting:
|
●
|
the ability of other entities or persons to acquire control of the Fund’s Board;
|
|
●
|
the Fund’s freedom to engage in certain transactions; or
|
|
●
|
the ability of the Fund’s Directors or stockholders to amend the Governing Documents or effectuate changes in the Fund’s
management.
|
These provisions of the Governing Documents of
the Fund may be regarded as “anti-takeover” provisions. The Board is divided into three classes, each having a term
of three years. Each year the term of one class of Directors will expire. Each Director serves for a three year term and until
his or her successor is elected and qualified. Accordingly, only those Directors in one class may be changed in any one year, and
it would require two years to change a majority of the Board. The affirmative vote of a majority of the shares present at a meeting
of stockholders duly called and at which a quorum is present is required to elect a Director. A classified Board may have the effect
of maintaining the continuity of management and, thus, make it more difficult for the stockholders of the Fund to change the majority
of Directors. See “Management of the Fund” in the SAI. A Director of the Fund may be removed only for cause by a vote
of a majority of the votes entitled to be cast for the election of Directors of the Fund. In addition, the affirmative vote of
the holders of 66 2/3% of each class of the outstanding voting shares of the Fund, voting as separate classes, is generally required
to authorize any of the following transactions:
|
●
|
merger or consolidation of the Fund with or into any other entity;
|
|
●
|
issuance of any securities of the Fund to any person or entity for cash;
|
|
●
|
sale, lease or exchange of all or any substantial part of the assets of the Fund to any entity or person (except assets generally
having an aggregate fair market value of less than $1,000,000); or
|
|
●
|
sale, lease, or exchange to the Fund, in exchange for securities of the Fund, of any assets of any entity or person (except
assets generally having an aggregate fair market value of less than $1,000,000);
|
if such corporation, person or entity is directly,
or indirectly through affiliates, the beneficial owner of more than 5% of the outstanding shares of the Fund. However, such vote
would not be required when, under certain circumstances, the Board approves the transaction or when each class of voting securities
of the corporation that is the other party to any of the above listed transactions is (directly or indirectly) majority owned by
the Fund.
In addition to the foregoing, the Charter provides
that the affirmative vote of the holders of 66 2/3% of each class of the outstanding voting shares of the Fund, voting as separate
classes, is required to authorize the conversion of the Fund from a closed-end to an open-end investment company.
The Fund’s Bylaws provide that the affirmative
vote of two-thirds of the entire Board of Directors shall be required to approve or declare advisable:
(1) Any amendment to the Charter to make the Fund’s common stock a “redeemable security” or to convert the
Fund, whether by merger or otherwise, from a “closed-end company” to an “open-end company” (as defined
in the 1940 Act);
(2) The liquidation or dissolution of the Fund and any amendment to the Charter to effect any such liquidation or dissolution;
or
(3) Any merger, consolidation, share exchange, or sale or exchange of all or substantially all of the assets of the Fund that
Maryland law requires be approved by the stockholders of the Fund.
Further, unless a higher percentage is provided
for under the Charter, the affirmative vote of the holders of a majority (as defined in the 1940 Act) of the outstanding shares
of the Fund’s preferred stock, voting as a separate class, will be required to approve any plan of reorganization adversely
affecting such stock or any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other
things, open-ending the Fund and changing the Fund’s investment objectives or changing the investment restrictions described
as fundamental policies under “Investment Restrictions” in the SAI.
Maryland corporations that are subject to the
Securities Exchange Act of 1934 (the “1934 Act”) and have at least three outside directors, such as the Fund, may by
board resolution elect to become subject to certain corporate governance provisions set forth in the Maryland General Corporation
Law, even if such provisions are inconsistent with the corporation’s charter and bylaws. Accordingly, notwithstanding its
Governing Documents, under Maryland law, the Fund’s Board may elect by resolution to, among other things:
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require that special meetings of stockholders be called only at the request of stockholders entitled to cast at least a majority
of the votes entitled to be cast at such meeting;
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provide that the number of Directors shall be fixed by only the Board;
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provide that Directors are subject to removal only by the vote of the stockholders entitled to cast two-thirds of the votes
entitled to be cast generally in the election of Directors; and
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vest in the Board the sole power to fill any vacancies on the Board, with any Director so elected to serve for the balance
of the unexpired term rather than only until the next annual meeting of stockholders.
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The Governing Documents of the Fund presently:
(i) require holders of not less than a majority of the votes entitled to be cast to call a special meeting of stockholders; and
(ii) provide that the Board shall fix the number of Fund Directors. On November 22, 2010, in accordance with Maryland law, the
Fund’s Board elected by resolution and approved Articles Supplementary to vest in the Board the sole power to fill any vacancies
on the Board, with any Director so elected to serve for the full term of the directorship in which the vacancy occurred and until
his or her successor is duly elected and qualifies.
Under the Maryland General Corporation Law, if
the directors have been divided into classes, unless the charter provides otherwise (which the Charter does not), a director may
be removed only for cause by the affirmative vote of a majority of all the votes entitled to be cast generally for the election
of directors. The Board could elect in the future to be subject to the provision of Maryland law that would increase the vote required
to remove a Director to two-thirds of all the votes entitled to be cast.
The Fund’s Bylaws provide that, with respect
to an annual meeting of stockholders, nominations or persons for election to the Board of Directors and the proposal of business
to be considered by stockholders may be made only (1) by or at the direction of the Board of Directors or (2) by a stockholder
who was a stockholder of record at the time of providing notice required by the Fund’s Bylaws and at the time of the meeting,
who is entitled to vote at the meeting and who has complied with the advance notice procedures of the Bylaws. With respect to special
meetings of stockholders, only the business specified in the Fund’s notice of the meeting may be brought before the meeting.
Nominations of persons for election to the Board of Directors at a special meeting may be made only (1) by or at the direction
of the Board of Directors or (2) provided that a special meeting has been called for the purpose of electing directors, by a stockholder
who was a stockholder of record at the time of providing notice required by the Fund’s Bylaws and at the time of the meeting,
who is entitled to vote at the meeting and who has complied with the advance notice provisions of the Bylaws.
The Fund’s Bylaws provide that special
meetings of stockholders may be called by the Board of Directors and certain of the Fund’s officers. Additionally, the Fund’s
Bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting
the meeting, a special meeting of stockholders will be called by the secretary of the Fund upon the written request of stockholders
entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.
The provisions of the Governing Documents and
Maryland law described above could have the effect of depriving the owners of stock in the Fund of opportunities to sell their
shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund in a
tender offer or similar transaction. The overall effect of these provisions may render more difficult the accomplishment of a merger
or the assumption of control by a principal stockholder.
The Governing Documents of the Fund are on file
with the SEC.
Closed-End
Fund Structure
The Fund is a non-diversified, closed-end management
investment company (commonly referred to as a closed-end fund). Closed-end funds differ from open-end funds (which are generally
referred to as mutual funds) in that closed-end funds generally list their shares for trading on a stock exchange and do not redeem
their shares at the request of the stockholder. This means that if you wish to sell your shares of a closed-end fund you must trade
them on the market like any other stock at the prevailing market price at that time. In a mutual fund, if the stockholder wishes
to sell shares of the Fund, the mutual fund will redeem or buy back the shares at “net asset value.” Also, mutual funds
generally offer new shares on a continuous basis to new and existing investors, and closed-end funds generally do not. The continuous
inflows and outflows of assets in a mutual fund can make it difficult to manage the Fund’s investments. By comparison, closed-end
funds are generally able to stay more fully invested in securities that are consistent with their investment objective, to have
greater flexibility to make certain types of investments and to use certain investment strategies such as financial leverage and
investments in illiquid securities.
Shares of closed-end funds often trade at a discount
to their net asset value. Because of this possibility and the recognition that any such discount may not be in the interest of
stockholders, the Fund’s Board might consider from time to time engaging in open-market repurchases, tender offers for shares,
or other programs intended to reduce a discount. In accordance with determinations made by the Board, the Fund may repurchase its
common stock from time to time when it deems such a repurchase advisable. No guarantee or assurance can be made that any of these
actions will be undertaken. Nor is there any guarantee or assurance that such actions, if undertaken, would result in the shares
trading at a price equal or close to net asset value per share. The Board might also consider converting the Fund to an open-end
mutual fund, which would also require a supermajority vote of the stockholders of the Fund and a separate vote of any outstanding
shares of preferred stock. We cannot assure you that the Fund’s common stock will not trade at a discount.
Repurchase
of Common Stock
The Fund is a closed-end, non-diversified, management
investment company and, as such, its stockholders do not, and will not, have the right to redeem their stock. The Fund, however,
may repurchase its common stock from time to time as and when it deems such a repurchase advisable. The Fund’s Board has
determined that the repurchase of shares of common stock in the open market may be made, from time to time, when such shares are
trading at a discount of 5% (or such other percentage as the Board may determine from time to time) or more from net asset value.
Pursuant to this authorization the Fund has repurchased and retired in the open market 2,474,160 shares through December 31, 2020.
Pursuant to the 1940 Act, the Fund may repurchase
its stock on a securities exchange (provided that the Fund has informed its stockholders within the preceding six months of its
intention to repurchase such stock), or as otherwise permitted in accordance with Rule 23c-1 under the 1940 Act. Under Rule 23c-1,
certain conditions must be met for such repurchases of its stock regarding, among other things, distribution of net income for
the preceding fiscal year, asset coverage with respect to the Fund’s senior debt and equity securities, identity of the sellers,
price paid, brokerage commissions, prior notice to stockholders of an intention to purchase stock and repurchasings in a manner
and on a basis which does not discriminate unfairly against the other stockholders through their interest in the Fund. In addition,
Rule 23c-1 requires the Fund to file notices of such purchase with the SEC. Any repurchase of common stock by the Fund will also
be subject to the provisions of the Maryland General Corporation Law, which generally requires that immediately following such
repurchase, the total assets of the Fund must be equal to or greater than the sum of the Fund’s total liabilities plus, in
certain instances, the aggregate liquidation preference of its outstanding preferred stock and the Fund must be able to pay its
debts as they become due in the usual course of business.
When the Fund repurchases its shares of common
stock for a price below its net asset value, the net asset value of the common stock that remains outstanding will be enhanced.
This does not, however, necessarily mean that the market price of the Fund’s remaining outstanding common stock will be affected,
either positively or negatively. Further, interest on any borrowings made to finance the repurchase of common stock will reduce
the net income of the Fund.
Rights Offering
The Fund may in the future, and at its discretion,
choose to make offerings of subscription rights to purchase its common stock or preferred stock. Any such future rights offering
will be made in accordance with the 1940 Act. Under the laws of Maryland, the Board is authorized to approve rights offerings without
obtaining stockholder approval. The staff of the SEC has interpreted the 1940 Act as not requiring stockholder approval of a transferable
rights offering at a price below the then current net asset value so long as certain conditions are met, including: (i) a good
faith determination by a fund’s Board that such offering would result in a net benefit to existing stockholders; (ii) the
offering fully protects stockholders’ preemptive rights and does not discriminate among stockholders (except for the possible
effect of not offering fractional rights); (iii) management uses its best efforts to ensure an adequate trading market in the rights
for use by stockholders who do not exercise such rights; and (iv) the ratio of a transferable rights offering does not exceed one
new share for each three rights held.
Net Asset
Value
For purposes of determining the Fund’s
net asset value per share, portfolio securities listed or traded on a nationally recognized securities exchange or traded in the
U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s
official closing price as of the close of business on the day the securities are being valued. If there were no sales such day,
the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day,
then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security
is valued at the most recently available price or, if the Board so determines, by such other method as the Board shall determine
in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market
are valued according to the broadest and most representative market, as determined by the Investment Adviser.
Portfolio securities primarily traded on a foreign
market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant
to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior
to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of 60 days or less
that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’
fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater
than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices.
If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations
with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported
sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally
using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which
the applicable contract is traded.
Securities and assets for which market quotations
are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include,
but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons
with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent
U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative
of the value of the security.
Taxation
The following discussion is a brief summary of
certain U.S. federal income tax considerations affecting the Fund and its stockholders. This discussion reflects applicable tax
laws of the United States as of the date of this Prospectus, which tax laws may be changed or subject to new interpretations by
the courts or the Internal Revenue Service (the “IRS”) retroactively or prospectively. No attempt is made to present
a detailed explanation of all U.S. federal, state, local and foreign tax concerns affecting the Fund and its stockholders (including
stockholders owning a large position in the Fund), and the discussions set forth herein do not constitute tax advice. Investors
are urged to consult their own tax advisers to determine the tax consequences to them of investing in the Fund.
Taxation of the Fund
The Fund has elected to be treated and has qualified,
and intends to continue to qualify, as a regulated investment company under Subchapter M of the Code. Accordingly, the Fund must,
among other things, meet the following requirements regarding the source of its income and the diversification of its assets:
The Fund must derive in each taxable year at
least 90% of its gross income from the following sources, which are referred to herein as “Qualifying Income”: (a)
dividends, interest (including tax exempt interest), payments with respect to certain securities loans, and gains from the sale
or other disposition of stock, securities, or foreign currencies, or other income (including but not limited to gain from options,
futures, and forward contracts) derived with respect to its business of investing in such stock, securities, or foreign currencies;
and (b) interests in publicly traded partnerships that (i) are treated as partnerships for U.S. federal income tax purposes, (ii)
are traded on an established securities market or that are readily tradable on a secondary market (or the substantial equivalent
thereof), and (iii) that derive less than 90% of their gross income from the items described in (a) above (each a “Qualified
Publicly Traded Partnership”).
The Fund must diversify its holdings so that,
at the end of each quarter of each taxable year (a) at least 50% of the market value of the Fund’s total assets is represented
by cash and cash items (including receivables), U.S. government securities, the securities of other regulated investment companies,
and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Fund’s total assets and not more than 10% of the outstanding voting securities of such issuer and (b) not more
than 25% of the market value of the Fund’s total assets is invested in the securities (other than U.S. government securities
and the securities of other regulated investment companies) of (I) any one issuer, (II) any two or more issuers of which the Fund
holds 20% or more of the voting stock and that are determined to be engaged in the same business or similar or related trades or
businesses, or (III) any one or more Qualified Publicly Traded Partnerships.
The Fund may be able to cure a failure to derive
90% of its income from the sources specified above or a failure to diversify its holdings in the manner described above by paying
a tax, disposing of certain assets, or both. If, in any taxable year, the Fund fails one of these tests and does not timely cure
the failure, the Fund will be taxed in the same manner as an ordinary corporation and distributions to its shareholders will not
be deductible by the Fund in computing its taxable income. In such a case, the Fund may then attempt to requalify as a regulated
investment company.
As a regulated investment company, the Fund generally
will not be subject to U.S. federal income tax on income and gains that the Fund distributes to its stockholders, provided that
it distributes each taxable year at least the sum of (i) 90% of the Fund’s investment company taxable income (which includes,
among other items, dividends, interest, and the excess of any net short-term capital gain over net long-term capital loss and other
taxable income, other than any net long-term capital gain, reduced by deductible expenses) determined without regard to the deduction
for dividends paid, (ii) 90% of the Fund’s net tax exempt interest (the excess of its gross tax exempt interest over certain
disallowed deductions), and (iii) all ordinary income and capital gains income for previous years that were not previously distributed.
The Fund intends to distribute substantially all of such income at least annually. The Fund will be subject to income tax at regular
corporation rates on any taxable income or gains that it does not distribute to its stockholders.
The Code imposes a 4% nondeductible excise tax
on the Fund to the extent the Fund does not distribute by the end of any calendar year an amount at least equal to the sum of (i)
98% of its ordinary income (not taking into account any capital gain or loss) for the calendar year and (ii) 98.2% of its capital
gain in excess of its capital loss (adjusted for certain ordinary losses) for a one year period generally ending on October 31
of the calendar year (unless an election is made to use the Fund’s fiscal year). In addition, the minimum amounts that must
be distributed in any year to avoid the excise tax will be increased or decreased to reflect any under-distribution or over-distribution,
as the case may be, from the previous year. While the Fund intends to distribute any income and capital gain in the manner necessary
to minimize imposition of the 4% excise tax, there can be no assurance that sufficient amounts of the Fund’s taxable income
and capital gain will be distributed to entirely avoid the imposition of the excise tax or other taxes. In that event, the Fund
will be liable for the excise tax only on the amount by which it does not meet the foregoing distribution requirement.
If for any taxable year the Fund does not qualify
as a regulated investment company, all of its taxable income (including its net capital gain) will be subject to tax at regular
corporate rates without any deduction for dividends paid to stockholders.
Taxation of Stockholders
Distributions paid to you by the Fund from its
net realized long-term capital gains, if any, that the Fund reports as capital gains dividends (“capital gain dividends”)
are taxable as long-term capital gains, whether paid in cash or in shares of the Fund and regardless of how long you have held
your shares. All other dividends paid to you by the Fund (including dividends from short-term capital gains) from its current or
accumulated earnings and profits (“ordinary income dividends”) are generally subject to tax as ordinary income.
Special rules apply, however, to ordinary income
dividends paid to individuals. If you are an individual, ordinary income dividend that you receive from the Fund generally will
be eligible for taxation at the federal rates applicable to long-term capital gains (currently at a maximum rate of 20%) to the
extent that (i) the ordinary income dividend is attributable to “qualified dividend income” (i.e., generally
dividends paid by U.S. corporations and certain foreign corporations) received by the Fund, (ii) the Fund satisfies certain holding
period and other requirements with respect to the stock on which such qualified dividend income was paid, and (iii) you satisfy
certain holding period and other requirements with respect to your shares. There can be no assurance as to what portion of the
Fund’s ordinary income dividends will constitute qualified dividend income.
Any distributions you receive that are in excess
of the Fund’s current or accumulated earnings and profits will be treated as a tax-free return of capital to the extent of
your adjusted tax basis in your shares, and thereafter as capital gain from the sale of shares (as long as you hold your shares
of the Fund as capital assets). The amount of any Fund distribution that is treated as a tax-free return of capital will reduce
your adjusted tax basis in your shares, thereby increasing your potential gain or reducing your potential loss on any subsequent
sale or other taxable disposition of your shares. Dividends and other taxable distributions are taxable to you even if they are
reinvested in additional common stock of the Fund. Dividends and other distributions paid by the Fund are generally treated under
the Code as received by you at the time the dividend or distribution is made. If, however, the Fund pays you a dividend in January
that was declared in the previous October, November, or December and you were the stockholder of record on a specified date in
one of such months, then such dividend will be treated for tax purposes as being paid by the Fund and received by you on December
31 of the year in which the dividend was declared.
Stockholders in the upper income brackets are
subject to a federal tax at the rate of 3.8% on net investment income, generally including dividends, capital gain distributions
from the Fund, and gain from dispositions of Fund shares by stockholders.
Distributions from the Fund may also be subject
to state and local taxation, in addition to federal taxation.
The Fund will send you information after the
end of each year setting forth the amount and tax status of any distributions paid to you by the Fund.
The sale or other disposition of shares of the
Fund will generally result in capital gain or loss to you equal to the difference between the amount realized and your basis in
the shares, and will be long-term capital gain or loss if you have held such shares for more than one year at the time of sale.
A redemption of shares by the Fund will be treated as a sale for this purpose. Any loss upon the sale or exchange of shares held
for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends received (including
amounts credited as an undistributed capital gain dividend) by you with respect to such shares. Any loss you realize on a sale
or exchange of shares will be disallowed if you acquire other shares (whether through the automatic reinvestment of dividends or
otherwise) within a sixty-one day period beginning thirty days before and ending 30 days after your sale or exchange of the shares.
In such case, your tax basis in the shares acquired will be increased to reflect the disallowed loss.
The Fund may be required to withhold, for U.S.
federal backup withholding tax purposes, a portion of the dividends, distributions, and redemption proceeds payable to stockholders
who fail to provide the Fund (or its agent) with their correct taxpayer identification number (in the case of individuals, generally,
their social security number) or to make required certifications, or who have been notified by the IRS that they are subject to
backup withholding. Certain stockholders are exempt from backup withholding. Backup withholding is not an additional tax and any
amount withheld may be refunded or credited against your U.S. federal income tax liability, if any, provided that you furnish the
required information to the IRS.
Taxation of Subscription Rights for Preferred Stockholders
As more fully described below, upon receipt of
a subscription right, a preferred stockholder generally will be treated as receiving a taxable distribution in an amount equal
to the fair market value of the subscription right the preferred stockholder receives.
To the extent that the distribution is made out
of the Fund’s earnings and profits, the subscription right will be a taxable dividend to the preferred stockholder. If the
amount of the distribution received by the preferred stockholder exceeds such stockholder’s proportionate share of the Fund’s
earnings and profits, the excess will reduce the preferred stockholder’s tax basis in the shares of preferred stock with
respect to which the subscription right was issued (the old share). To the extent that the excess is greater than the preferred
stockholder’s tax basis in the old shares, such excess will be treated as gain from the sale of the old shares. If the preferred
stockholder held the old shares for more than one year, such gain will be treated as long-term capital gain.
A preferred stockholder’s tax basis in
the subscription rights received will equal the fair market value of the subscription rights on the date of the distribution.
A preferred stockholder who allows the subscription
rights received to expire generally will recognize a short-term capital loss. Capital losses are deductible only to the extent
of capital gains (subject to an exception for individuals under which $3,000 of capital losses may be offset against ordinary income).
A preferred stockholder who sells the subscription
rights will recognize a gain or loss equal to the difference between the amount realized on the sale and the preferred stockholder’s
tax basis in the subscription rights as described above.
A preferred stockholder will not recognize any
gain or loss upon the exercise of the subscription rights received in the rights offering. The tax basis of the shares acquired
through exercise of the subscription rights (the new shares) will equal the sum of the subscription price for the new shares and
the preferred stockholder’s tax basis in the subscription rights as described above. The holding period for the new shares
acquired through exercise of the subscription rights will begin on the date on which the subscription rights are exercised.
Taxation of Subscription Rights for Common Stockholders
The value of a subscription right will not be
includible in the income of a common stockholder at the time the subscription right is issued.
The basis of a subscription right issued to a
common stockholder will be zero, and the basis of the share with respect to which the subscription right was issued (the old share)
will remain unchanged, unless either (a) the fair market value of the subscription right on the date of distribution is at least
15% of the fair market value of the old share, or (b) such stockholder affirmatively elects (in the manner set out in Treasury
regulations under the Code) to allocate to the subscription right a portion of the basis of the old share. If either (a) or (b)
applies, such stockholder must allocate basis between the old share and the subscription right in proportion to their fair market
values on the date of distribution.
The basis of a subscription right purchased in
the market will generally be its purchase price.
The holding period of a subscription right issued
to a common stockholder will include the holding period of the old share. No gain or loss will be recognized by a common stockholder
upon the exercise of a subscription right.
No loss will be recognized by a common stockholder
if a subscription right distributed to such common stockholder expires unexercised because the basis of the old share may be allocated
to a subscription right only if the subscription right is exercised. If a subscription right that has been purchased in the market
expires unexercised, there will be a recognized loss equal to the basis of the subscription right.
Any gain or loss on the sale of a subscription
right will be a capital gain or loss if the subscription right is held as a capital asset (which in the case of subscription rights
issued to common stockholders will depend on whether the old share of common stock is held as a capital asset), and will be a long-term
capital gain or loss if the holding period is deemed to exceed one year.
Conclusion
The foregoing is a general summary of the provisions
of the Code and the Treasury regulations in effect as they directly govern the taxation of the Fund and its stockholders. These
provisions are subject to change by legislative or administrative action, and any such change may be retroactive. State, local
and foreign taxes may apply. The Fund may make taxable distributions to stockholders even during periods in which the value of
the Fund’s shares has declined. The Fund does not consider tax consequences to be the primary consideration in making investment
decisions. Stockholders should consult their own tax advisers and review the “Taxation” section in the Statement of
Additional Information.
Custodian,
Transfer Agent, Auction Agent, and Dividend Disbursing Agent
State Street Bank and Trust Company, located
at One Lincoln Street, Boston, Massachusetts 02111, serves as the custodian of the Fund’s assets pursuant to a custody agreement.
Under the custody agreement, the Custodian holds the Fund’s assets in compliance with the 1940 Act. For its services, the
Custodian receives a monthly fee based upon the average weekly value of the total assets of the Fund, plus certain charges for
securities transactions.
Computershare Trust Company, N.A., located at
250 Royall Street, Canton, Massachusetts 02021, serves as the Fund’s dividend disbursing agent, as agent under the Fund’s
automatic dividend reinvestment and voluntary cash purchase plan and as transfer agent and registrar for shares of common stock
of the Fund.
Computershare Trust Company, N.A. also serves
as the transfer agent, registrar, dividend paying agent and redemption agent with respect to the Series E Preferred and Series
G Preferred.
The Bank of New York Mellon, located at 101 Barclay
Street, New York, NY 10286, serves as the Fund’s auction agent, transfer agent, registrar, dividend paying agent and redemption
agent with respect to the Series C Auction Rate Preferred.
Plan of
Distribution
We may sell shares through underwriters or dealers,
directly to one or more purchasers, through agents, to or through underwriters or dealers, or through a combination of any such
methods of sale. The applicable Prospectus Supplement will identify any underwriter or agent involved in the offer and sale of
our shares, any sales loads, discounts, commissions, fees, or other compensation paid to any underwriter, dealer or agent, the
offering price, net proceeds, and use of proceeds and the terms of any sale.
The distribution of our shares may be effected
from time to time in one or more transactions at a fixed price or prices, which may be changed, at prevailing market prices at
the time of sale, at prices related to such prevailing market prices, or at negotiated prices, provided, however, that the offering
price per share in the case of common stock, must equal or exceed the net asset value per share, plus any underwriting commissions
or discounts, on our common stock.
We may sell our shares directly to, and solicit
offers from, institutional investors or others who may be deemed to be underwriters as defined in the Securities Act of 1933 (the
“1933 Act”) for any resales of the securities. In this case, no underwriters or agents would be involved. We may use
electronic media, including the Internet, to sell offered securities directly.
In connection with the sale of our shares, underwriters
or agents may receive compensation from us in the form of discounts, concessions, or commissions. Underwriters may sell our shares
to or through dealers, and such dealers may receive compensation in the form of discounts, concessions, or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers, and agents that participate
in the distribution of our shares may be deemed to be underwriters under the 1933 Act, and any discounts and commissions they receive
from us and any profit realized by them on the resale of our shares may be deemed to be underwriting discounts and commissions
under the 1933 Act. Any such underwriter or agent will be identified and any such compensation received from us will be described
in the applicable Prospectus Supplement. The maximum commission or discount to be received by any FINRA member or independent broker-dealer
will not exceed eight percent. We will not pay any compensation to any underwriter or agent in the form of warrants, options, consulting,
or structuring fees or similar arrangements.
If a Prospectus Supplement so indicates, we may
grant the underwriters an option to purchase additional shares at the public offering price, less the underwriting discounts and
commissions, within forty-five days from the date of the Prospectus Supplement, to cover any overallotments.
Under agreements into which we may enter, underwriters,
dealers, and agents who participate in the distribution of our shares may be entitled to indemnification by us against certain
liabilities, including liabilities under the 1933 Act. Underwriters, dealers, and agents may engage in transactions with us, or
perform services for us, in the ordinary course of business.
If so indicated in the applicable Prospectus
Supplement, we will ourselves, or will authorize underwriters or other persons acting as our agents to solicit offers by certain
institutions to purchase our shares from us pursuant to contracts providing for payment and delivery on a future date. Institutions
with which such contacts may be made include commercial and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions, and others, but in all cases such institutions must be approved by us. The obligation
of any purchaser under any such contract will be subject to the condition that the purchase of the shares shall not at the time
of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other
agents will not have any responsibility in respect of the validity or performance of such contracts. Such contracts will be subject
only to those conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.
To the extent permitted under the 1940 Act and
the rules and regulations promulgated thereunder, the underwriters may from time to time act as brokers or dealers and receive
fees in connection with the execution of our portfolio transactions after the underwriters have ceased to be underwriters and,
subject to certain restrictions, each may act as a broker while it is an underwriter.
A Prospectus and accompanying Prospectus Supplement
in electronic form may be made available on the websites maintained by underwriters. The underwriters may agree to allocate a number
of securities for sale to their online brokerage account holders. Such allocations of securities for Internet distributions will
be made on the same basis as other allocations. In addition, securities may be sold by the underwriters to securities dealers who
resell securities to online brokerage account holders.
In order to comply with the securities laws of
certain states, if applicable, our shares offered hereby will be sold in such jurisdictions only through registered or licensed
brokers or dealers.
Legal Matters
Certain legal matters will be passed on by Paul
Hastings LLP, 200 Park Avenue, New York, New York 10166, in connection with the offering of the shares of common and preferred
stock.
Certain legal matters will be passed on by Venable
LLP, Baltimore, Maryland, in connection with the offering of the shares of common and preferred stock as Maryland counsel to the
Fund.
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers LLP serves as the Independent
Registered Public Accounting Firm of the Fund and audits the financial statements of the Fund. PricewaterhouseCoopers LLP is located
at 300 Madison Avenue, New York, New York 10017.
Incorporation
of Certain Information by Reference
This prospectus is part of a registration statement
that we have filed with the SEC. On or after August 1, 2020, pursuant to rules issued by the SEC on April 8, 2020 as a part of
the Securities Offering Reform for Closed-End Investment Companies, we will be allowed to “incorporate by reference”
the information that we file with the SEC, which means that we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of this prospectus, and later information that we
file with the SEC will automatically update and supersede this information.
Effective on or after August 1, 2020, we will
incorporate by reference the documents listed below, and any reports and other documents we subsequently file with the SEC pursuant
to Section 30(b)(2) of the 1940 Act and Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the
offering until all of the securities covered by this prospectus have been sold or we otherwise terminate the offering of these
securities, will also be incorporated by reference into this prospectus and deemed to be part of this prospectus from the date
of the filing of such reports and documents; provided, however, that information “furnished” under Item 2.02 or Item
7.01 of Form 8-K, if any, or other information “furnished” to the SEC, which is not deemed filed is not and will not
be incorporated by reference:
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our Annual Report on Form N-CSR, filed on March 8, 2021;
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our Proxy Statement on Form DEF 14A, filed on March 26, 2020;
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the description of our Common Stock referenced in our Registration Statement on Form 8-A, as filed with the SEC on May 23,
1997, including any amendment or report filed for the purpose of updating such description prior to the termination of the offering
of the common stock registered hereby;
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the description of our Series E Preferred Stock referenced in our Registration Statement on Form 8-A, as filed with the
SEC on September 25 2017, including any amendment or report filed for the purpose of updating such description prior to the termination
of the offering of the preferred stock registered hereby;
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the description of our Series G Preferred referenced in our Registration Statement on Form 8-A, as filed with the SEC on
December 20, 2019, including any amendment or report filed for the purpose of updating such description prior to the termination
of the offering of the preferred stock registered hereby.
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Our periodic reports filed pursuant to Section
30(b)(2) of the 1940 Act and Sections 13 or 15(d) of the Exchange Act, as well as this prospectus are available on our website
at www.gabelli.com. Information contained on our website is not incorporated into this prospectus and you should not consider
information contained on our website to be part of this prospectus. You may also request a copy of these filings (other than exhibits,
unless the exhibits are specifically incorporated by reference into these documents) at no cost by writing or calling Investor
Relations at the following address and telephone number:
The Gabelli Multimedia Trust Inc.
One Corporate Center
Rye, New York 10580-1422
(914) 921-5100
You should rely only on the information incorporated
by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with different
or additional information, and you should not rely on such information if you receive it. We are not making an offer of or soliciting
an offer to buy, any securities in any state or other jurisdiction where such offer or sale is not permitted. You should not assume
that the information in this prospectus or in the documents incorporated by reference herein is accurate as of any date other than
the date on the front of this prospectus or those documents.
Additional
Information
The Fund is subject to the informational requirements
of the 1934 Act and the 1940 Act and in accordance therewith files, or will file, reports and other information with the SEC. Reports,
proxy statements, and other information filed by the Fund with the SEC pursuant to the informational requirements of the 1934 Act
and the 1940 Act can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Washington,
DC 20549. The SEC maintains a web site at http://www.sec.gov containing reports, proxy and information statements and other
information regarding registrants, including the Fund, that file electronically with the SEC.
The Fund’s shares of common stock are listed
on the NYSE. Reports, proxy statements, and other information concerning the Fund and filed with the SEC by the Fund will be available
for inspection at the NYSE, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes part of a Registration
Statement filed by the Fund with the SEC under the 1933 Act and the 1940 Act. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the Registration Statement and related exhibits for further
information with respect to the Fund and the shares offered hereby. Any statements contained herein concerning the provisions of
any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such reference.
Privacy
Principles of the Fund
The Fund is committed to maintaining the privacy
of its stockholders and to safeguarding their non-public personal information. The following information is provided to help you
understand what personal information the Fund collects, how the Fund protects that information and why, in certain cases, the Fund
may share information with select other parties.
Generally, the Fund does not receive any non-public
personal information relating to its stockholders, although certain non-public personal information of its stockholders may become
available to the Fund. The Fund does not disclose any non-public personal information about its stockholders or former stockholders
to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent
or third party administrator).
The Fund restricts access to non-public personal
information about its stockholders to employees of the Fund’s Investment Adviser and its affiliates with a legitimate business
need for the information. The Fund maintains physical, electronic, and procedural safeguards designed to protect the non-public
personal information of its stockholders.
Table of
Contents of Statement of Additional Information
An SAI dated as of April 14, 2021, has been filed
with the SEC and is incorporated by reference in this Prospectus. An SAI may be obtained without charge by writing to the Fund
at its address at One Corporate Center, Rye, New York 10580-1422 or by calling the Fund toll-free at (800) GABELLI (422-3554).
The Table of Contents of the SAI is as follows:
Page
No dealer, salesperson, or other person has been authorized to give any information or to make any representations
not contained in this Prospectus. If given or made, such information or representation must not be relief upon as having been authorized
by the Fund or the Fund’s Investment Adviser. This Prospectus does not constitute an offer to sell or the solicitation of
an offer to buy any security other than the shares of common and preferred stock offered by this Prospectus, nor does it constitute
an offer to sell or the solicitation of an offer to buy shares of common stock by anyone in any jurisdiction in which such offer
or solicitation would be unlawful.
THE GABELLI MULTIMEDIA TRUST INC.
STATEMENT OF ADDITIONAL INFORMATION
The Gabelli Multimedia Trust Inc. (the “Fund”)
is a non-diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended
(the “1940 Act”). The Fund’s primary investment objective is long-term growth of capital, primarily through investment
in a portfolio of common stock and other securities of foreign and domestic companies involved in the telecommunications, media,
publishing and entertainment industries. Income is a secondary objective of the Fund. The Fund commenced investment operations
on November 15, 1994. Gabelli Funds, LLC (the “Investment Adviser”) serves as investment adviser to the Fund.
This Statement of Additional Information (the
“SAI”) does not constitute a prospectus, but should be read in conjunction with the Fund’s Prospectus relating
thereto dated April 14, 2021, and as it may be supplemented. This SAI does not include all information that a prospective investor
should consider before investing in the Fund’s shares, and investors should obtain and read the Fund’s Prospectus prior
to purchasing such shares. A copy of the Fund’s Registration Statement, including the prospectus and any supplement, may
be obtained from the Securities and Exchange Commission (the “SEC”) upon payment of the fee prescribed, or inspected
at the SEC’s office or via its website (www.sec.gov) at no charge.
TABLE OF CONTENTS
The Prospectus and this SAI omit certain information
contained in the registration statement filed with the SEC. The registration statement may be obtained from the SEC upon payment
of the fee prescribed, or inspected at the SEC’s office at no charge.
THE FUND
The Fund was incorporated in Maryland on March
31, 1994, and is a non-diversified, closed-end management investment company registered under the 1940 Act. The common stock of
the Fund is listed and traded on the New York Stock Exchange (the “NYSE”) under the symbol “GGT.” Our 5.125%
Series E Cumulative Preferred Stock (“Series E Preferred”) is traded on the NYSE under the symbol “GGT PrE”
and our 5.125% Series G Cumulative Preferred Shares (“Series G Preferred”) is traded on the NYSE under the symbol “GGT
PrG.” Our Series C Auction Rate Cumulative Preferred Stock (“Series C Auction Rate Preferred Stock,” and together
with Series E Preferred and Series G Preferred, “Preferred Stock”) is not traded on a stock exchange.
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The Fund’s primary investment objective
is long-term growth of capital. Income is a secondary objective. Under normal market conditions, the Fund will invest at least
80% of the value of its net assets, plus borrowings for investment purposes, in common stock and other securities, including convertible
securities, preferred stock, options, and warrants of companies in the telecommunications, media, publishing, and entertainment
industries. See “Investment Objectives and Policies” in the Prospectus.
Investment Practices
Special Situations. Subject to the Fund’s
policy of investing at least 80% of the value of its net assets, plus borrowings for investment purposes, in common stock and other
securities, including convertible securities, preferred stock, options, and warrants of companies in the telecommunications, media,
publishing, and entertainment industries, the Fund from time to time may, as a non-principal investment strategy, invest in companies
that are determined by the Investment Adviser to possess “special situation” characteristics. In general, a special
situation company is a company whose securities are expected to increase in value solely by reason of a development particularly
or uniquely applicable to the company. Developments that may create special situations include, among others, a liquidation, reorganization,
recapitalization or merger, material litigation, technological breakthrough, or new management or management policies. The principal
risk associated with investments in special situation companies is that the anticipated development thought to create the special
situation may not occur and the investment therefore may not appreciate in value or may decline in value.
Temporary Defensive Investments. Subject
to the Fund’s investment restrictions, when a temporary defensive period is believed by the Investment Adviser to be warranted
(“temporary defensive periods”), the Fund may, without limitation, hold cash or invest its assets in securities of
United States government sponsored instrumentalities, in repurchase agreements in respect of those instruments, and in certain
high grade commercial paper instruments. During temporary defensive periods, the Fund may also invest up to 10% of the market value
of its total assets in money market mutual funds that invest primarily in securities of United States government sponsored instrumentalities
and repurchase agreements in respect of those instruments. Obligations of certain agencies and instrumentalities of the United
States government, such as the Government National Mortgage Association, are supported by the “full faith and credit”
of the United States government; others, such as those of the Export-Import Bank of the United States, are supported by the right
of the issuer to borrow from the United States Treasury; others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the United States 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 United States government would provide financial support to United States government sponsored instrumentalities
if it is not obligated to do so by law. During temporary defensive periods, the Fund may be less likely to achieve its secondary
investment objective of income.
Non-Investment Rated Securities. The Fund
may invest up to 10% of its total assets in fixed income securities rated in the lower rating categories of recognized statistical
rating agencies, such as securities rated “CCC” or lower by S&P or “Caa” or lower by Moody’s,
or non-rated securities of comparable quality. These debt securities are predominantly speculative and involve major risk exposure
to adverse conditions and are often referred to in the financial press as “junk bonds.”
Generally, such non-investment rated 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 non-investment rated securities and comparable unrated securities generally present
a higher degree of credit risk. The risk of loss due to default by these issuers is significantly greater because such non-investment
rated 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 securities in
non-investment rated categories is more volatile than that of higher quality securities, and the markets in which such non-investment
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 market
value to respond to changes in the economy or the financial markets.
Non-investment rated debt obligations 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 bonds 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.
The Fund may invest in securities of issuers
in default. The Fund will invest 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 appreciate.
In addition to using recognized rating agencies
and other sources, the Investment Adviser also performs its own analysis 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.
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 not change their ratings of a particular issue or 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.
The market for certain non-investment rated and
comparable unrated securities has in the past experienced a major economic recession. The recession adversely affected the value
of such securities as well as the ability of certain issuers of such securities to repay principal and pay interest thereon. The
market for those securities could react in a similar fashion in the event of any future economic recession.
Options. The Fund may, subject to guidelines
of the Board of Directors (the “Board”), 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 United States over-the-counter (“OTC”)
markets as a means of achieving additional return or of hedging the value of the Fund’s portfolio.
A call option is a contract that gives the holder
of the option the right to buy from the writer (seller) of the call option, in return for a premium paid, 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 or currency to the writer, at a specified
price, and obligating the writer to purchase the underlying security or currency from the holder at that price. The writer of the
put, who receives the premium, has the obligation to buy the underlying security or currency upon exercise, at the exercise price
during the option period.
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. There can be no assurance that a closing purchase transaction can be effected when the Fund so desires.
An exchange traded option may be closed out only
on an exchange that provides a secondary market for an option of the same series. Although the Fund will generally purchase or
write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option.
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 upon conversion or exchange of another instrument held in its portfolio (or for additional cash consideration
held in a segregated account by its custodian). 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, direct obligations
of the United States or by its agencies or instrumentalities that are entitled to the full faith and credit of the United States
and that, other than United States Treasury Bills, provide for the periodic payment of interest and the full payment of principal
at maturity or call for redemption 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. 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 will realize a profit from a closing
transaction if the price of the transaction is less than the premium received from writing the option or is more than the premium
paid to purchase the option; the Fund will realize a loss from a closing transaction if the price of the transaction is more than
the premium received from writing the option or is less than the premium paid to purchase the option. Since call option prices
generally reflect increases in the price of the underlying security, any loss resulting from the repurchase of a call option may
also be wholly or partially offset by unrealized appreciation of the underlying security. Other principal factors affecting the
market value of a put or 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 on an exchange
that provides a secondary market for an option of the same series or in a private transaction. Although the Fund will generally
purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option. In such event, it might not be possible to effect closing
transactions in particular options, so 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 until the Fund delivers the underlying
security upon exercise or otherwise covers the position.
In addition to options on securities, the Fund
may also purchase and sell call and put options on securities indices. A stock index reflects in a single number the market value
of many different stocks.
Relative values are assigned to the stocks included
in an index and the index fluctuates with changes in the market values of the stocks. The options give the holder the right to
receive a cash settlement during the term of the option based on the difference between the exercise price and the value of the
index. By writing a put or call option on a securities index, the Fund is obligated, in return for the premium received, to make
delivery of this amount. The Fund may offset its position in the stock index options prior to expiration by entering into a closing
transaction on an exchange, or it may let the option expire unexercised.
Use of options on securities indices entails
the risk that trading in the options may be interrupted if trading in certain securities included in the index is interrupted.
The Fund will not purchase these options unless the Investment Adviser is satisfied with the development, depth and liquidity of
the market and the Investment Adviser believes the options can be closed out.
Price movements in the portfolio of the Fund
may not correlate precisely with the movements in the level of an index and, therefore, the use of options on indices cannot serve
as a complete hedge and will depend, in part, on the ability of the Investment Adviser to predict correctly movements in the direction
of the stock market generally or of a particular industry. Because options on securities indices require settlement in cash, the
Fund may be forced to liquidate portfolio securities to meet settlement obligations.
The Fund may also buy or sell put and call options
on foreign currencies. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency
at the exercise price until the option expires. A call option on a foreign currency gives the purchaser of the option the right
to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may
be subject to position limits which may limit the ability of the Fund to reduce foreign currency risk using such options. Over-the-counter
options differ from exchange traded options in that they are two party contracts with price and other terms negotiated between
buyer and seller and generally do not have as much market liquidity as exchange traded options. Over-the-counter options are considered
illiquid securities.
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.
Limitations on the Purchase and Sale of Futures
Contracts, Certain Options and Swaps. Subject to the guidelines of the Board, the Fund may engage in “commodity interest”
transactions (generally, transactions in futures, certain options, certain currency transactions and certain types of swaps) only
for bona fide hedging or other permissible transactions in accordance with the rules and regulations of the Commodity Futures Trading
Commission (“CFTC”). Pursuant to amendments by the CFTC to Rule 4.5 under the Commodity Exchange Act (“CEA”),
the Investment Adviser has filed a notice of exemption from registration as a “commodity pool operator” with respect
to the Fund. The Fund and the Investment Adviser are therefore not subject to registration or regulation as a commodity pool operator
under the CEA. Due to the amendments to Rule 4.5 under the CEA, certain trading restrictions are applicable to 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 options premiums and (ii) non-bona fide hedging transactions, provided that the Fund does not enter
into such non-bona fide hedging transactions if, immediately thereafter, either (a) the sum of the amount of initial margin deposits
on the Fund’s existing futures positions or swaps positions and option or swaption premiums would exceed 5% of the market
value of the Fund’s liquidating value, after taking into account unrealized profits and unrealized losses on any such transactions,
or (b) the aggregate net notional value of the Fund’s commodity interest transactions would 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 swap markets. Therefore, in order to claim the Rule 4.5 exemption, the Fund
is limited in its ability to invest in commodity futures, options and certain types of swaps (including securities futures, broad-based
stock index futures and financial futures contracts). As a result, in the future, the Fund will be more limited in its ability
to use these instruments than in the past and these limitations may have a negative impact on the ability of the Investment Adviser
to manage the Fund, and on the Fund’s performance.
Futures Contracts and Options on Futures.
A “sale” of a futures contract (or a “short” futures position) means the assumption of a contractual obligation
to deliver the assets 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 assets 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 assets 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 “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 contracts fluctuates. At any time prior to the
expiration of a futures contract, the Fund may close the position by taking an opposite position, which will operate to terminate
its existing position in the contract.
An option on a futures contract gives the purchaser
the right, in return for the premium paid, to assume a position in a futures contract at a specified exercise price at any time
prior to the expiration of the option. Upon exercise of an option, the delivery of the futures positions 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, losses from investing in futures transactions that are potentially unlimited
and the segregation requirements described below.
In the event the Fund sells a put option or enters
into long futures contracts, under current interpretations of the 1940 Act, an amount of cash, obligations of the U.S. government
and its agencies and instrumentalities, or other liquid securities equal to the market value of the contract must be “earmarked”
on the records of the Investment Adviser or deposited and maintained in a segregated account with the custodian of the Fund to
collateralize the positions, thereby ensuring that the use of the contract is unleveraged. For short positions in futures contracts
and sales of call options, the Fund may establish a segregated custodial account (not with a futures commission merchant or broker)
with cash or liquid securities that, when added to amounts deposited with a futures commission merchant or a broker as margin,
equal the market value of the instruments or currency underlying the futures contract or call option or the market price at which
the short positions were established.
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 concurrently liquidate
its futures position. To the extent the Fund enters into futures contracts for this purpose, it will maintain, in a segregated
asset account with the Fund’s custodian or “earmark” on the records of the Investment Adviser, assets sufficient
to cover the Fund’s obligations with respect to such futures contracts, which will consist of cash or other liquid securities
from its portfolio in an amount equal to the difference between the fluctuating market value of such futures contracts and the
aggregate value of the initial margin deposited by the Fund with its custodian with respect to such futures contracts.
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 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 its 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 that 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 its 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 it 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 in anticipation of or during a market decline to attempt to offset the decrease in market value of the its 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 it 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.
Forward Currency Exchange Contracts. The
Fund may engage in currency transactions other than on futures exchanges to protect against future changes in the level of future
currency exchange rates. The Fund will conduct such currency exchange transactions either 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 forward contracts to
purchase or sell currency. A forward contract on foreign currency involves 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. Dealing in forward currency exchange will be limited to hedging involving either specific transactions
or portfolio positions. Transaction hedging is the purchase or sale of forward currency with respect to specific receivables or
payables of the Fund generally arising in connection with the purchase or sale of its portfolio securities and accruals of interest
receivable and Fund expenses. Position hedging is the forward sale of currency with respect to portfolio security positions denominated
or quoted in that currency or in a currency bearing a high degree of positive correlation to the value of that currency.
The Fund may not position hedge with respect
to a particular currency for an amount greater than the aggregate market value (determined at the time of making any sale of forward
currency) of the securities held in its portfolio denominated or quoted in, or currently convertible into, such currency. If the
Fund enters into a position hedging transaction, the Fund’s custodian or subcustodian will place cash or other liquid securities
in a segregated account of the Fund in an amount equal to the value of the Fund’s total assets committed to the consummation
of the given forward contract. If the value of the securities placed in the segregated account declines, additional cash or securities
will be placed in the account so that the value of the account will, at all times, equal the amount of the Fund’s commitment
with respect to the forward contract.
At or before the maturity of a forward sale contract,
the Fund may either sell a portfolio security and make delivery of the currency, or retain the security and offset its contractual
obligations to deliver the currency by purchasing a second contract pursuant to which the Fund will obtain, on the same maturity
date, the same amount of the currency which it is obligated to deliver. If the Fund retains the portfolio security and engages
in an offsetting transaction, the Fund, at the time of execution of the offsetting transaction, will incur a gain or a loss to
the extent that movement has occurred in forward contract prices. Should forward prices decline during the period between the Fund’s
entering into a forward contract for the sale of a currency and the date it enters into an offsetting contract for the purchase
of the currency, the Fund will realize a gain to the extent the price of the currency it has agreed to purchase is less than the
price of the currency it has agreed to sell. Should forward prices increase, the Fund will suffer a loss to the extent the price
of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. Closing out forward purchase
contracts involves similar offsetting transactions.
The cost to the Fund of engaging in currency
transactions varies with factors such as the currency involved, the length of the contract period, and the market conditions then
prevailing. Because forward transactions in currency exchange are usually conducted on a principal basis, no fees or commissions
are involved. The use of foreign currency contracts does not eliminate fluctuations in the underlying prices of the securities,
but it does establish a rate of exchange that can be achieved in the future. In addition, although forward currency contracts limit
the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result if
the value of the currency increases.
If a decline in any currency is generally anticipated
by the Investment Adviser, the Fund may not be able to contract to sell the currency at a price above the level to which the currency
is anticipated to decline.
Special Risk Considerations Relating to Futures
and Options Thereon. The ability to establish and close out positions in futures contracts and options thereon will be subject
to the development and maintenance of liquid markets. Although the Fund generally will purchase or sell only those futures contracts
and options thereon for which there appears to be a liquid market, there is no assurance that a liquid market on an exchange will
exist for any particular futures contract or option thereon at any particular time.
In the event no liquid market exists for a particular
futures contract or option thereon in which the Fund maintains a position, it will not be possible to effect a closing transaction
in that contract or to do so at a satisfactory price and the Fund would have to either make or take delivery under the futures
contract or, in the case of a written option, wait to sell the underlying securities until the option expires or is exercised or,
in the case of a purchased option, exercise the option. In the case of a futures contract or an option thereon which the Fund has
written and which the Fund is unable to close, the Fund would be required to maintain margin deposits on the futures contract or
option thereon and to make variation margin payments until the contract is closed.
Successful use of futures contracts and options
thereon and forward contracts by the Fund is subject to the ability of the Investment Adviser to predict correctly movements in
the direction of interest and foreign currency rates. If the Investment Adviser’s expectations are not met, the Fund will
be in a worse position than if a hedging strategy had not been pursued. For example, if the Fund has hedged against the possibility
of an increase in interest rates that would adversely affect the price of securities in its portfolio and the price of such securities
increases instead, the Fund will lose part or all of the benefit of the increased value of its securities because it will have
offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash to meet daily variation
margin requirements, it may have to sell securities to meet the requirements. These sales may be, but will not necessarily be,
at increased prices which reflect the rising market. The Fund may have to sell securities at a time when it is disadvantageous
to do so.
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 U.S., may not involve a clearing mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities. The value of such positions also could be adversely affected
by (i) other complex foreign political, legal and economic factors, (ii) lesser availability than in the U.S. of data on which
to make trading decisions, (iii) delays in the Fund’s ability to act upon economic events occurring in the foreign markets
during non-business hours in the U.S., (iv) the imposition of different exercise and settlement terms and procedures and margin
requirements than in the U.S. 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 as well as incurring transaction costs.
Regulation of Certain Options, Currency Transactions
and Other Derivative Transactions as Swaps or Security-Based Swaps. Title VII of the Dodd-Frank Act, enacted in July 2010,
the “Derivatives Title,” includes provisions that comprehensively regulate the over-the-counter (i.e., not exchange-traded)
derivatives markets for the first time. This regulation requires that certain of the options, currency transactions and other derivative
transactions entered into by the Fund are regulated as swaps by the CFTC or regulated as security-based swaps by the SEC (collectively,
“swaps”).
The SEC, other U.S. regulators, and to a lesser
extent the CFTC (the “Regulators”) still are in the process of adopting regulations to implement the Derivatives Title,
though certain aspects of the new regulatory structure are substantially complete. Until the Regulators complete their rulemaking
efforts, the full extent to which the Derivatives Title and the rules adopted thereunder will impact the Fund is unclear. It is
possible that the continued development of this new regulatory structure for swaps may jeopardize certain trades and/or trading
strategies that may be employed by the Adviser, or at least make them more costly.
Current regulations require the mandatory central
clearing and mandatory exchange trading of particular types of interest rate swaps and index credit default swaps (together, “Covered
Swaps”). Together, these regulatory requirements change the Fund’s trading of Covered Swaps. With respect to mandatory
central clearing, the Fund is now required to clear its Covered Swaps through a clearing broker, which requires, among other things,
posting initial margin and variation margin to the Fund’s clearing broker in order to enter into and maintain positions in
Covered Swaps. With respect to mandatory exchange trading, the Adviser may be required to become a participant of a new type of
execution platform called a swap execution facility (“SEF”) or may be required to access the SEF through an intermediary
(such as an executing broker) in order to be able to trade Covered Swaps for the Fund. In either scenario, the Adviser and/or the
Fund may incur additional legal and compliance costs and transaction fees. Just as with the other regulatory changes imposed as
a result of the implementation of the Derivatives Title, the increased costs and fees associated with trading Covered Swaps may
jeopardize certain trades and/or trading strategies that may be employed by the Adviser, or at least make them more costly.
Additionally, the Regulators have finalized regulations
with a phased implementation that may require swap dealers to collect from the Fund’s initial margin and variation margin
for uncleared derivatives transactions in certain circumstances. The Regulators also plan to finalize proposed regulations that
would impose upon swap dealers certain new capital requirements. These requirements, when finalized and implemented, may make certain
types of trades and/or trading strategies more costly or impermissible. The Derivatives Title also requires swap dealers and major
swap participants to register with the SEC and/or the CFTC, as appropriate. Swap dealers and major swap participants are subject
to a panoply of new regulations, including among others, capital and margin requirements and business conduct standards. Additionally,
it is expected that swap dealers will transfer at least some of their compliance costs to counterparties in the form of higher
fees or less favorable marks on swap transactions. This means that the Fund could face increased transaction costs when entering
into swaps with a swap dealer.
These requirements of the Derivatives Title may
also increase the cost of certain hedging and other derivatives transactions. Until the Regulators complete the rulemaking process
for the Derivatives Title, it is unknown the extent to which such risks may materialize. There can be no assurance that these developments
will not adversely affect the business and investment activities of the Adviser and 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 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 secured by cash or cash equivalents, which are maintained in a segregated account
pursuant to applicable regulations and that are at least equal to 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 earns
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 stock is qualified
for sale. The Fund’s loans of portfolio securities will be collateralized in accordance with applicable regulatory requirements
and no loan will cause the value of all loaned securities to exceed 20% of the value of the Fund’s total assets. The Fund’s
ability to lend portfolio securities will be limited by the rating agency guidelines applicable to any of the Fund’s outstanding
preferred stock.
A loan may generally be terminated by the borrower
on one business day notice, or by the Fund on five business days’ notice. If the borrower fails to deliver the loaned securities
within five days after receipt of notice, the Fund could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. 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 fail financially. However, these
loans of portfolio securities will only be made to firms deemed by the Fund’s management 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. 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.
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. The Fund will
segregate with its custodian cash or liquid securities in an aggregate amount at least equal to the amount of its outstanding forward
commitments.
Short Sales. The Fund may make short sales
of securities, including short sales “against the box.” 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. A short sale against the box occurs when,
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 expects to make short sales both to obtain capital gains 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.
For short sales, the market value of the securities
sold short of any one issuer will not exceed either 5% of the Fund’s total assets or 5% of such issuer’s voting securities.
The Fund 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 or the Fund’s aggregate short sales of a particular class of securities exceeds 25% of the
outstanding securities of that class. The Fund may make short sales against the box without respect to such limitations.
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. The Fund may close out a short position by purchasing
and delivering an equal amount of securities sold short, rather than by delivering securities already held by the Fund, because
the Fund may want to continue to receive interest and dividend payments on securities in its portfolio that are convertible into
the securities sold short.
To the extent that the Fund engages in short
sales, it will provide collateral to the broker-dealer and (except in the case of short sales against the box) will maintain additional
asset coverage in the form of segregated or “earmarked” assets on the records of the Investment Adviser or with the
Fund’s Custodian, consisting of cash, U.S. government securities or other liquid securities that are equal to the current
market value of the securities sold short, or (in the case of short sales against the box) will ensure that such positions are
covered by offsetting positions, until the Fund replaces the borrowed security. Depending on arrangements made with the broker-dealer
from which it borrowed the security regarding payment over of any payments received by the Fund on such security, the Fund may
not receive any payments (including interest) on its collateral deposited with such broker-dealer. 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, any loss increased,
by the transaction costs described above. Although the Fund’s gain is limited to the price at which it sold the security
short, its potential loss is theoretically unlimited.
Restricted and Illiquid Securities. The
Fund may invest up to a total of 15% of its net assets in securities that are subject to restrictions on resale and securities
the markets for which are illiquid, including repurchase agreements with more than seven days to maturity. Illiquid securities
include securities the disposition of which is subject to substantial legal or contractual restrictions. The sale of illiquid securities
often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale
of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may
sell at a price lower than similar securities that are not subject to restrictions on resale. Unseasoned issuers are companies
(including predecessors) that have operated less than three years. The continued liquidity of such securities may not be as well
assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. The Board will review pertinent
factors such as trading activity, reliability of price information and trading patterns of comparable securities in determining
whether to treat any such security as liquid for purposes of the foregoing 15% test. To the extent the Board treats such securities
as liquid, temporary impairments to trading patterns of such securities may adversely affect the Fund’s liquidity.
In accordance with pronouncements of the SEC,
the Fund may invest in restricted securities that can be traded among qualified institutional buyers under Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”), without registration and may treat them as liquid for purposes
of the foregoing 15% test if such securities are found to be liquid. The Board has adopted guidelines and delegated to the Investment
Adviser, subject to the supervision of the Board, the function of determining and monitoring the liquidity of particular Rule 144A
securities.
INVESTMENT RESTRICTIONS
The Fund operates under the following restrictions
that constitute fundamental policies that cannot be changed without the affirmative vote of the holders of a majority of the outstanding
voting securities of the Fund (as defined in the 1940 Act). Such a majority is defined as the lesser of (i) 67% or more of the
shares present at a meeting of stockholders, if the holders of 50% of the outstanding shares of the Fund are present or represented
by proxy or (ii) more than 50% of the outstanding shares of the Fund. 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 elimination of any security from the portfolio. The Fund may not:
1. Invest 25% or more of its total assets, taken at market value at the time of each investment, in the securities of issuers
in any particular industry other than the telecommunications, media, publishing, and entertainment industries. This restriction
does not apply to investments in U.S. government securities.
2. Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization,
if more than 10% of the market value of the total assets of the Fund would be invested in securities of other investment companies,
more than 5% of the market value of the total assets of the Fund would be invested in the securities of any one investment company
or the Fund would own more than 3% of any other investment company’s securities; provided, however, this restriction will
not apply to securities of any investment company organized by the Fund that are to be distributed pro rata as a dividend to its
stockholders.
3. Purchase or sell commodities or commodity contracts except that the Fund may purchase or sell futures contracts and related
options thereon if immediately thereafter (i) no more than 5% of its total assets are invested in margins and premiums and (ii)
the aggregate market value of its outstanding futures contracts and market value of the currencies and futures contracts subject
to outstanding options written by the Fund do not exceed 50% of the market value of its total assets. The Fund may not purchase
or sell real estate, provided that the Fund may invest in securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
4. Purchase any securities on margin, except that the Fund may obtain such short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities.
5. Make loans of money, except by the purchase of a portion of publicly distributed debt obligations in which the Fund may
invest, and repurchase agreements with respect to those obligations, consistent with its investment objectives and policies. The
Fund reserves the authority to make loans of its portfolio securities to financial intermediaries in an aggregate amount not exceeding
20% of its total assets. Any such loans will only be made upon approval of, and subject to any conditions imposed by, the Board.
Because these loans would at all times be fully collateralized, the risk of loss in the event of default of the borrower should
be slight.
6. Borrow money, except that the Fund may borrow from banks and other financial institutions on an unsecured basis, in an amount
not exceeding 10% of its total assets, to finance the repurchase of its shares. The Fund also may borrow money on a secured basis
from banks as a temporary measure for extraordinary or emergency purposes. Temporary borrowings may not exceed 5% of the value
of the total assets of the Fund at the time the loan is made. The Fund may pledge up to 10% of the lesser of the cost or value
of its total assets to secure temporary borrowings. The Fund will not borrow for investment purposes. Immediately after any borrowing,
the Fund will maintain asset coverage of not less than 300% with respect to all borrowings. While the borrowing of the Fund exceeds
5% of its respective total assets, the Fund will make no further purchases of securities, although this limitation will not apply
to repurchase transactions as described above.
7. Underwrite securities of other issuers except insofar as the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended, in selling portfolio securities; provided, however, this restriction will not apply to securities of any investment
company organized by the Fund that are to be distributed pro rata as a dividend to its stockholders.
8. Invest more than 15% of its total assets in illiquid securities, such as repurchase agreements with maturities in excess
of seven days, or securities that at the time of purchase have legal or contractual restrictions on resale.
9. Issue senior securities, except to the extent permitted by applicable law.
With respect to (1) above, the Fund invests 25%
or more of its total assets in the securities of issuers in the telecommunications, media, publishing and entertainment industries.
MANAGEMENT OF THE FUND
Directors and Officers
The business and affairs of the Fund are managed
under the direction of its Board, and the day to day operations are conducted through or under the direction of its officers.
The names and business addresses of the Directors
and principal officers of the Fund are set forth in the following table, together with their positions and their principal occupations
during the past five years, and, in the case of the Directors, their other directorships during the past five years. Directors
who are “interested persons” of the Fund, as defined by the 1940 Act, are listed under the caption “Interested
Directors.”
Name, Position with the Fund, Age and Business Address(1)
|
Term of Office and Length of Time
Served(2)
|
Principal Occupation(s) During Past
Five Years
|
Other Directorships Held by Director
During Past Five Years
|
Number of Portfolios in Fund Complex
Overseen by Director(3)
|
INTERESTED DIRECTORS:(4)
|
|
|
|
|
Mario J. Gabelli
Chairman and Chief Investment Officer
Age: 77
|
Since 1994**
|
Chairman, Chief Executive Officer, and Chief Investment Officer –
Value Portfolios of GAMCO Investors, Inc. and Chief Investment Officer – Value Portfolios of Gabelli Funds, LLC and GAMCO Asset
Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies within the Gabelli/GAMCO Complex;
Chief Executive Officer of GGCP, Inc.; Executive Chairman of Associated Capital Group, Inc.
|
Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications); Director of ICTC Group Inc. (communications) (2013-2018); Director of RLJ Acquisition, Inc. blank check company) (2011-2012)
|
33
|
Christopher J. Marangi
Director
Age: 45
|
Since 2013**
|
Managing Director and Co-Chief Investment Officer for the Value team of GAMCO Investors, Inc.; Portfolio Manager for Gabelli Funds, LLC and GAMCO Asset Management Inc.
|
—
|
1
|
Name, Position with the Fund, Age and Business Address(1)
|
Term of Office and Length of Time
Served(2)
|
Principal Occupation(s) During Past
Five Years
|
Other Directorships Held by Director
During Past Five Years
|
Number of Portfolios in Fund Complex
Overseen by Director(3)
|
INDEPENDENT DIRECTORS(5):
|
|
|
|
|
John Birch(7)
Director
Age: 77
|
Since 2019*
|
Partner, The Cardinal Partners Global; Chief Operating Officer of Sentinel
Asset Management and Chief Financial Officer and Chief Risk Officer of Sentinel Group Funds (2005- 2015)
|
|
4
|
Anthony J. Colavita(6)(7)
Director
Age: 83
|
Since 2001**
|
President of the law firm of Anthony J. Colavita, P.C.
|
—
|
20
|
|
|
|
|
|
James P. Conn(6)
Director
Age: 81
|
Since 1994*
|
Former Managing Director and Chief Investment Officer of Financial Security
Assurance Holdings Ltd. (1992-1998)
|
—
|
23
|
Frank J. Fahrenkopf, Jr.(7)
Director
Age: 80
|
Since 1999**
|
Co-Chairman of the Commission on Presidential Debates; Former President
and Chief Executive Officer of the American Gaming Association (1995-2013); Former Chairman of the Republican National Committee (1983-1989)
|
Director of First Republic Bank (banking)
|
12
|
Name, Position with the Fund, Age and Business Address(1)
|
Term of Office and Length of Time
Served(2)
|
Principal Occupation(s) During Past
Five Years
|
Other Directorships Held by Director
During Past Five Years
|
Number of Portfolios in Fund Complex
Overseen by Director(3)
|
Kuni Nakamura
Director
Age: 51
|
Since 2012*
|
President of Advanced Polymer, Inc. (chemical manufacturing company); President
of KEN Enterprises, Inc. (real estate)
|
—
|
32
|
Werner J. Roeder
Director
Age: 79
|
Since 1999***
|
Retired physician; Former Vice President of Medical Affairs (Medical Director)
of New York Presbyterian/Lawrence Hospital (1999-2014)
|
—
|
19
|
Salvatore J. Zizza(7)(8)
Director
Age: 73
|
Since 1994***
|
President of Zizza & Associates Corp. (private holding company); Chairman
of Harbor Diversified, Inc. (pharmaceuticals) ; Chairman of BAM (semiconductor and aerospace manufacturing); Chairman of Bergen Cove Realty
Inc.; Chairman of Metropolitan Paper Recycling Inc. (recycling) (2005-2014)
|
Director and Vice Chairman of TransLux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals); Director, Chairman, and CEO of General Employment Enterprises (staffing services) (2009-2012)
|
30
|
Daniel E. Zucchi
Director
Age: 79
|
Since 2019***
|
President of Zucchi, Inc. (general business consulting); Senior Vice President of Hearst Corp. (1984-1995)
|
Cypress Care LLC (health care) (2001-2009)
|
3
|
OFFICERS:
|
|
|
|
|
|
Name, Position with the Fund, Age
and Business Address1
|
Length of Time
Served(9)
|
Principal Occupation(s) During Past
Five Years
|
Bruce N. Alpert
President
Age: 68
|
Since 2003
|
Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of registered investment companies within the Gabelli/GAMCO Complex; Senior Vice President of GAMCO Investors, Inc. since 2008
|
|
|
|
John C. Ball
Treasurer and Principal Financial and Accounting Officer
Age: 44
|
Since 2017
|
Treasurer of registered investment companies within the Gabelli/GAMCO Fund Complex since 2017; Vice President and Assistant Treasurer of AMG Funds, 2014-2017
|
|
|
|
Peter Goldstein
Secretary
Age: 67
|
Since 2020
|
General Counsel, Gabelli Funds, LLC since July 2020; General Counsel and Chief Compliance Officer, Buckingham Capital Management, Inc. (2012-2020); Chief Legal Officer and Chief Compliance Officer, The Buckingham Research Group, Inc. (2012-2020)
|
|
|
|
Richard J. Walz
Chief Compliance Officer
Age: 60
|
Since 2013
|
Chief Compliance Officer of all of the registered investment companies within the Gabelli/GAMCO/Teton Fund Complex since 2013; Chief Compliance Officer of AEGON USA Investment Management 2011-2013; Chief Compliance Officer of Cutwater Asset Management 2004-2011
|
|
|
|
Carter W. Austin
Vice President and Ombudsman
Age: 53
|
Since 2010
|
Vice President and/or Ombudsman of closed-end funds within the Gabelli/GAMCO/Teton
Fund Complex; Senior Vice President (since 2015) and Vice President (1996-2015) of Gabelli Funds,
LLC
|
|
|
|
Laurissa M. Martire
Vice President
Age: 43
|
Since 2019
|
Ms. Laurissa M. Martire serves as Vice President of the Company.
She is Vice President and/or Ombudsman of closed-end funds within the Gabelli/GAMCO
Fund Complex; Senior Vice President (since 2019) and other positions (2003-2019) of GAMCO Investors, Inc.
|
|
1
|
Address: One Corporate Center, Rye, NY 10580-1422.
|
|
2
|
The Fund’s Board of Directors is divided into three classes, each class having a term of three years. Each year the term of
office of one class expires and the successor or successors elected to such class serve for a three year term. The three year term for
each class expires as follows:
|
|
3
|
The “Fund Complex” or the “Gabelli/GAMCO/Teton Fund Complex” includes all the U.S. registered investment companies
that are considered part of the same fund complex as the Fund because they have common or affiliated investment advisers.
|
|
4
|
“Interested person” of the Fund as defined in the 1940 Act. Messrs. Gabelli and Marangi are each considered to be an “interested
person” of the Fund because of their affiliation with the Fund’s Investment Adviser.
|
|
5
|
Directors who are not considered to be “interested persons” of the Fund, as defined in the 1940 Act, are considered to
be “Independent” Directors. None of the Independent Directors (with the possible exceptions as described in this registration
statement) nor their family members had any interest in the Investment Adviser or any person directly or indirectly controlling, controlled
by, or under common control with the Investment Adviser as of December 31, 2020.
|
|
6
|
Director elected solely by holders of the Fund’s Preferred Stock.
|
|
7
|
Mr. Colavita’s son, Anthony S. Colavita, and Mr. Fahrenkopf’s daughter, Leslie F. Foley, serve as directors of other funds
in the Gabelli/GAMCO/Teton Fund Complex. Mr. Zizza is an independent director of Gabelli International Ltd., which may be deemed to be
controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Investment
Adviser.
|
|
8
|
On September 9, 2015, Mr. Zizza entered into a settlement with the Securities and Exchange Commission (the “SEC”) to resolve
an inquiry relating to an alleged violation regarding the making of false statements or omissions to the accountants of a company concerning
a related party transaction. The company in question is not affiliate of, nor has any connection to, the Fund. Under the terms of the
settlement, Mr. Zizza, without admitting or denying the SEC’s findings and allegation, paid $150,000 and agreed to cease and desist
committing or cause any future violations of Rule 13b2-2 of the Securities and Exchange Act of 1934, as amended (the “1934 Act”).
|
|
9
|
Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is
elected and qualified.
|
|
*
|
Term continues until the Fund’s 2021 Annual Meeting of Stockholders and until his successor is duly elected and qualified.
|
|
**
|
Term continues until the Fund’s 2022 Annual Meeting of Stockholders and until his successor is duly elected and qualified.
|
|
***
|
Term continues until the Fund’s 2023 Annual Meeting of Stockholders and until his successor is duly elected and qualified.
|
The Board believes that each Director’s
experience, qualifications, attributes or skills on an individual basis and in combination with those of other Directors lead to
the conclusion that each Director should serve in such capacity. Among the attributes or skills common to all Directors are their
ability to review critically and to evaluate, question and discuss information provided to them, to interact effectively with the
other Directors, the Investment
Adviser, the sub-administrator, other service providers, counsel,
and the Fund’s independent registered public accounting firm, and to exercise effective and independent business judgment
in the performance of their duties as Directors. Each Director’s ability to perform his duties effectively has been attained
in large part through the Director’s business, consulting, or public service positions and through experience from service
as a member of the Board and one or more of the other funds in the Fund Complex, public companies, or non-profit entities or other
organizations as set forth above and below. Each Director’s ability to perform his duties effectively also has been enhanced
by his education, professional training, and other experience.
Interested Directors
Mario J. Gabelli, CFA. Mr. Gabelli is
Chairman of the Board of Directors and Chief Investment Officer of the Fund. Mr. Gabelli is Chairman, Chief Executive Officer,
and Chief Investment Officer-Value Portfolios of GAMCO Investors, Inc. (“GBL”), a New York Stock Exchange (“NYSE”)-listed
asset manager and financial services company. He is also the Chief Investment Officer of Value Portfolios of Gabelli Funds, LLC
and GAMCO Asset Management, Inc. (“GAMCO”), each of which are asset management subsidiaries of GBL. In addition, Mr.
Gabelli is Chief Executive Officer, Chief Investment Officer, a director, and the controlling stockholder of GGCP, Inc. (“GGCP”),
a private company that holds a majority interest in GBL, and the Chairman of MJG Associates, Inc., which acts as an investment
manager of various investment funds and other accounts. He is also Executive Chairman of Associated Capital Group, Inc. (“Associated
Capital”), a public company that provides alternative management and institutional research services, and is a majority-owned
subsidiary of GGCP. Mr. Gabelli serves as Overseer of the Columbia University Graduate School of Business and as a trustee of Boston
College and Roger Williams University. He also serves as a director of the Winston Churchill Foundation, The E.L. Wiegand Foundation,
The American-Italian Cancer Foundation, and The Foundation for Italian Art and Culture. He is Chairman of the Gabelli Foundation,
Inc., a Nevada private charitable trust. Mr. Gabelli serves as Co-President of Field Point Park Association, Inc. Mr. Gabelli received
his Bachelor’s degree from Fordham University, M.B.A. from Columbia Business School, and honorary Doctorates from Fordham
University and Roger Williams University.
Christopher J. Marangi. Mr. Marangi is
a Managing Director and Co-Chief Investment Officer for the Value team of GBL. In addition to the Fund, he is a portfolio manager
on GAMCO’s institutional and high net worth separate accounts team and for several other open- and closed-end funds in the
Gabelli/GAMCO Complex. He joined GBL in 2003 as a research analyst covering companies in the cable, satellite, and entertainment
sectors. He began his career as an investment banking analyst with J.P. Morgan &Company and later joined the private equity
firm, Wellspring Capital Management. Mr. Marangi serves as President of the Resurrection School Foundation. Mr. Marangi graduated
magna cum laude and Phi Beta Kappa with a Bachelor’s degree in Political Economy from Williams College and holds an M.B.A.
with honors from the Columbia Business School.
Independent Directors
John Birch. Mr. Birch is a Partner of
The Cardinal Partners Global, a strategic advisory firm, providing strategic advice and distribution support to international investment
managers. He serves on the boards of other funds in the Gabelli/GAMCO Complex and as a director of the GAMCO International SICAV
and the Gabelli Merger Plus+ Trust Plc. From 2005 to 2015, Mr. Birch served as the Chief Operating Officer of Sentinel Asset Management
and Chief Financial Officer, and Chief Risk Officer of the Sentinel Group Funds. His other experience includes Vice President of
Transfer Agency at State Street Bank in Luxembourg; Chief Operating Officer and Senior Vice President of American Skandia Investment
Services, Inc.; Chief Operating Officer and Executive Vice President (Partner) of International Fund Administration, Ltd.; Chief
Administrative Officer and Senior Vice President - Mutual Funds Division and Managing Director of Gabelli Funds, Inc.; and senior
roles at Kansallis Banking Group and Privatbanken A/5. Mr. Birch received his Master of Tax from Metropolitan University College
(Copenhagen) and attended the Program for Management Development at the Harvard Graduate School of Business.
Anthony J. Colavita, Esq. Mr. Colavita
is a practicing attorney with over fifty-five years of experience. He is a member of the Fund’s Nominating and ad hoc Proxy
Voting Committees. Mr. Colavita serves on comparable or other board committees with respect to other funds in the Fund Complex on whose
boards he sits. He served as a Commissioner of the New York State Thruway Authority and as a Commissioner of the New York State Bridge
Authority, where his duties included reviewing financial documents of these agencies. He served for eleven years as the elected Supervisor
of the Town of Eastchester, New York, responsible for ten annual municipal budgets. Mr. Colavita also served as Special Counsel to the
New York State Assembly for five years and as a Senior Attorney with the New York State Insurance Department. He is the former Chairman
of the New York State Republican Party, the Westchester County Republican Party, and the Eastchester Republican Town Committee. Mr. Colavita
received his Bachelor’s degree from Fairfield University and Juris Doctor from Fordham University School of Law.
James P. Conn. Mr. Conn is the Lead Independent
Director of the Fund, and a member of the Fund’s ad hoc Proxy Voting and ad hoc Pricing Committees. Mr. Conn
serves on comparable or other board committees with respect to other funds in the Fund Complex on whose boards he sits. He was
a senior business executive of Transamerica Corp., an insurance holding company, for much of his career including service as Chief
Investment Officer. Mr. Conn has been a director of several public companies in banking and other industries, and was lead director
and/or chair of various committees. He received his Bachelor’s degree in Business Administration from Santa Clara University.
Frank J. Fahrenkopf, Jr. Mr. Fahrenkopf
is the Co-Chairman of the Commission on Presidential Debates, which is responsible for the widely-viewed Presidential debates during
the quadrennial election cycle. Additionally, he serves as a board member of the International Republican Institute, which he founded
in 1984. He also served as Chairman of the Republican National Committee for six years during Ronald Reagan’s presidency.
Mr. Fahrenkopf serves on the boards of other funds in the Gabelli/GAMCO Complex. Mr. Fahrenkopf is the former President and Chief
Executive Officer of the American Gaming Association (“AGA”), the trade group for the hotel-casino industry. He served
for many years as Chairman of the Pacific Democrat Union and Vice Chairman of the International Democrat Union, a worldwide association
of political parties from the United States, Great Britain, France, Germany, Canada, Japan, Australia, and twenty other nations.
Prior to becoming the AGA’s first chief executive in 1995, Mr. Fahrenkopf was a partner in the law firm of Hogan & Hartson,
where he chaired the International Trade Practice Group and specialized in regulatory, legislative, and corporate matters for multinational,
foreign, and domestic clients. Mr. Fahrenkopf is the former Chairman of the Finance Committee of the Culinary Institute of America
and remains a member of the board. For over 30 years, Mr. Fahrenkopf has served on the Board of First Republic Bank and as Chairman
of the Corporate Governance and Nominating Committee and as a member of the Audit Committee. He also serves as a member of the
Board of Eldorado Resorts, Inc., which owns and operates nineteen casinos in ten states. Mr. Fahrenkopf received his Bachelor’s
degree from the University of Nevada, Reno and Juris Doctor from Boalt Hall School of Law, U.C. Berkeley.
Kuni Nakamura. Mr. Nakamura is the president
of Advanced Polymer, Inc., a chemical manufacturing company, and president of KEN Enterprises, Inc., a real estate company. He
is Chairman of the Fund’s Audit and Nominating Committees, a member of the Fund’s ad hoc Pricing Committees,
and has been designated the Fund’s Audit Committee Financial Expert. Mr. Nakamura serves on comparable or other board committees
with respect to other funds in the Fund Complex on whose boards he sits. Mr. Nakamura was previously a board member of The LGL
Group, Inc., a diversified manufacturing company. Mr. Nakamura serves on the Board of Trustees of Mercy College in Dobbs Ferry,
NY. He chairs the Endowment Management Committee and is a member of the Audit Committee. He is also involved in various capacities
with The University of Pennsylvania and The Guiding Eyes for the Blind. Mr. Nakamura is a graduate of the University of Pennsylvania
- The Wharton School with a Bachelor’s degree in Economics and Multinational Management.
Werner J. Roeder, M.D. Dr. Roeder is a
retired private physician with over forty-five years of experience and former Vice President of Medical Affairs (Medical Director)
of New York Presbyterian/Lawrence Hospital in Bronxville, New York. As Vice President of Medical Affairs at New York Presbyterian/Lawrence
Hospital, he was actively involved in personnel and financial matters concerning the hospital’s $140 million budget. He is
a member of the Fund’s Audit Committee and both multi-fund ad hoc Compensation Committees. He serves on comparable
or other board committees with respect to other funds in the Fund Complex on whose boards he sits. Dr. Roeder is board certified
as a surgeon by The American Board of Surgery and previously served in a consulting capacity to Empire Blue Cross/Blue Shield.
He obtained his Doctorate in Medicine from New York Medical College.
Salvatore J. Zizza. Mr. Zizza is the President
of Zizza & Associates Corp., a private holding company that invests in various industries. He also serves as Chairman to other
companies involved in manufacturing, recycling, real estate, technology, and pharmaceuticals. He is a member of the Fund’s
Audit, Nominating, and ad hoc Pricing Committees, and a member of both multi-fund ad hoc Compensation Committees.
Mr. Zizza serves on comparable or other board committees with respect to other funds in the Fund Complex on whose boards he sits.
In addition to serving on the boards of other funds in the Fund Complex, he is currently and has previously been a director of
other public companies. He was also the President, Chief Executive Officer, and Chief Financial Officer of a large NYSE-listed
construction company. Mr. Zizza received his Bachelor’s degree and M.B.A. in Finance from St. John’s University, which
awarded him an Honorary Doctorate in Commercial Sciences.
Daniel E. Zucchi. Mr. Zucchi is President
of Zucchi Inc., a marketing and communications consulting firm. He serves on the boards of other funds in the Gabelli/GAMCO Complex.
Mr. Zucchi served as a board member and an investor in Anduro Holdings Inc., a manufacturer of consumer packaging. He served as
a board member and was one of the initial investors in Cypress Care LLC, a pharmacy benefit management company. In addition, Mr.
Zucchi was a Senior Executive at Time Warner and the Hearst Corporation for over thirty years. In the public sector, Mr. Zucchi
has served as a locally-elected government official, most recently since 2009 as a member of the Westchester County Executive’s
task force. Mr. Zucchi is a graduate of the University of Connecticut and attended the Harvard AAAA program during his tenure at
Time Warner. He resides in Jupiter, Florida.
Leadership Structure and Oversight Responsibilities
Overall responsibility for general oversight
of the Fund rests with the Board. The Board has appointed Mr. Conn as the Lead Independent Director. The Lead Independent Director
presides over executive sessions of the Board of Directors and also serves between meetings of the Board as a liaison with service
providers, officers, counsel, and other Directors on a wide variety of matters including scheduling agenda items for Board meetings.
Designation as such does not impose on the Lead Independent Director any obligations or standards greater than or different from
other Directors. The Board has established a Nominating Committee and an Audit Committee to assist the Board in the oversight of
the management and affairs of the Fund. The Board also has an ad hoc Proxy Voting Committee that exercises beneficial ownership
responsibilities on behalf of the Fund in selected situations. From time to time the Board establishes additional committees or
informal working groups, such as ad hoc Pricing Committee related to securities offerings by the Fund, to address specific
matters or assigns one of its members to work with directors or trustees of other funds in the Fund Complex on special committees
or working groups that address complex-wide matters, such as the multi-fund ad hoc Compensation Committee relating to the
compensation of the Chief Compliance Officer for all the funds in the Fund Complex and a separate multi fund ad hoc Compensation
Committee relating to the compensation of certain other officers of the closed-end funds in the Fund Complex.
All of the Fund’s Directors, other than
Messrs. Mario J. Gabelli and Christopher J. Marangi, are Independent Directors, and the Board believes it is able to provide effective
oversight of the Fund’s service providers. In addition to providing feedback and direction during Board meetings, the Independent
Directors meet regularly in executive session and chair all committees of the Board. The Fund’s operations entail a variety
of risks including investment, administration, valuation and a range of compliance matters. Although the Investment Adviser, the
sub-administrator and the officers of the Fund are responsible for managing these risks on a day-to-day basis within the framework
of their established risk management functions, the Board also addresses risk management of the Fund through its meetings and those
of the committees and working groups. As part of its general oversight, the Board reviews with the Investment Adviser at Board
meetings the levels and types of risks, including options risk, being undertaken by the Fund, and the Audit Committee discusses
the Fund’s risk management and controls with the independent registered public accounting firm engaged by the Fund. The Board
reviews valuation policies and procedures and the valuations of specific illiquid securities. The Board also receives periodic
reports from the Fund’s Chief Compliance Officer regarding compliance matters relating to the Fund and its major service
providers, including results of the implementation and testing of the Fund’s and such providers’ compliance programs.
The Board’s oversight function is facilitated by management reporting processes designed to provide visibility to the Board
regarding the identification, assessment and management of critical risks, and the controls and policies and procedures used, to
mitigate those risks. The Board reviews its role in supervising the Fund’s risk management from time to time and may make
changes at its discretion at any time.
The Board has determined that its leadership
structure is appropriate for the Fund because it enables the Board to exercise informed and independent judgment over matters under
its purview, allocates responsibility among committees in a manner that fosters effective oversight, and allows the Board to devote
appropriate resources to specific issues in a flexible manner as they arise. The Board periodically reviews its leadership structure
as well as its overall structure, composition, and functioning and may make changes in its discretion at any time.
Standing Committees of the Board of Directors
Audit Committee. The Audit Committee is
composed of three of the Fund’s Independent Directors, namely Messrs. Nakamura (Chairman), Zizza, and Dr. Roeder. The Audit
Committee is generally responsible for reviewing and evaluating issues related to the accounting and financial reporting policies
and internal controls of the Fund and, as appropriate, the internal controls of certain service providers, overseeing the quality
and objectivity of the Fund’s financial statements and the audit thereof and to act as a liaison between the Board and the
Fund’s independent registered public accounting firm. The Audit Committee met two times during the fiscal year ended December
31, 2020.
Nominating Committee. The Board of Directors
has a Nominating Committee composed of two Independent Directors, namely Messrs. Nakamura (Chairman) and Zizza. The Nominating
Committee is responsible for recommending qualified candidates to the Board in the event that a position is vacated or created.
The Nominating Committee will consider recommendations by stockholders if a vacancy were to exist. Such recommendations should
be forwarded to the Secretary of the Fund. The Nominating Committee met two times during the fiscal year ended December 31, 2020.
The Fund does not have a standing compensation
committee. For a discussion of experiences, qualifications, attributes, or skills supporting the appropriateness of each Director’s
service on the Fund’s Board, see the biographical information of the Directors below in the section entitled “Qualification
of Board of Directors.
Beneficial Ownership of Shares Held in the Fund and the Family
of Investment Companies for Each Director
Set forth in the table below is the dollar range
of equity securities in the Fund beneficially owned by each Director and the aggregate dollar range of equity securities in the
Fund Complex beneficially owned by each Director.
Name of Director
|
Dollar Range
of
Equity Securities
Held in the Fund*(1)
|
Aggregate
Dollar Range of Equity Securities Held in all Registered Investment Companies in the Family of Investment Companies*(1)(2)
|
Interested Directors
|
|
|
Mario J. Gabelli
|
E
|
E
|
Christopher J. Marangi
|
B
|
E
|
|
|
|
Independent Directors
|
|
|
John Birch(3)
|
A
|
E
|
Anthony J. Colavita
|
C
|
E
|
James P. Conn
|
B
|
E
|
Frank J. Fahrenkopf, Jr.
|
A
|
E
|
Kuni Nakamura
|
D
|
E
|
Anthony R. Pustorino (deceased)
|
C
|
E
|
Werner J. Roeder
|
A
|
E
|
Salvatore J. Zizza
|
C
|
E
|
Daniel E. Zucchi
|
A
|
E
|
A. None
B. $1-$10,000
C. $10,001-$50,000
D. $50,001-$100,000
E. Over $100,000
All Shares are valued as of December 31, 2020.
|
(1)
|
This information has been furnished by each Director as of December 31, 2020. “Beneficial Ownership” is determined
in accordance with Rule 16a-1(a)(2) of the 1934 Act.
|
|
(2)
|
The term “Family of Investment Companies” includes two or more, registered funds that share the same investment
adviser or principal underwriter and hold themselves out to investors as related companies for purposes of investment and investor
services. Currently, the registered funds that comprise the “Fund Complex” are identical to those that comprise the
“Family of Investment Companies.”
|
Set forth in the table below is the amount of
interests beneficially owned by each Independent Director, or his or her family member, as applicable, in a person, other than
a registered investment company, that may be deemed to be controlled by the Fund’s Investment Adviser and/or affiliates (including
Mario J. Gabelli) and in that event would be deemed to be under common control with the Fund’s Investment Adviser.
Name of Independent Director
|
|
Name of Owner and Relationships to Director/ Nominee
|
|
Company
|
|
Title of Class
|
|
Value of Interests(1)
|
|
Percent of Class(2)
|
Anthony J. Colavita
|
|
Same
|
|
The LGL Group, Inc.
|
|
Common Stock
|
|
$
|
14,238
|
|
|
|
*
|
|
Anthony J. Colavita
|
|
Family
|
|
Gabelli Associates Fund
|
|
Membership Interests
|
|
$
|
1,004,858
|
|
|
|
*
|
|
Frank J. Fahrenkopf Jr.
|
|
Same
|
|
Gabelli Associates Limited II E
|
|
Membership Interests
|
|
$
|
1,248,346
|
|
|
|
1.36
|
%
|
Kuni Nakamura
|
|
Same
|
|
The LGL Group, Inc.
|
|
Common Stock
|
|
$
|
10,590
|
|
|
|
*
|
|
Salvatore J. Zizza
|
|
Same
|
|
Gabelli Performance Partnership L.P.
|
|
Limited Partner Interests
|
|
$
|
302,307
|
|
|
|
*
|
|
Salvatore J. Zizza
|
|
Same
|
|
Gabelli Associates Fund
|
|
Membership Interests
|
|
$
|
2,407,180
|
|
|
|
1.18
|
%
|
|
(1)
|
This information has been furnished as of December 31, 2020.
|
|
(2)
|
An asterisk indicates that the ownership amount constitutes less than 1% of the total interests outstanding.
|
Remuneration of Directors and Officers
The Fund pays each Independent Director an annual
retainer of $6,000 plus $500 for each Board meeting attended and each Independent Director is reimbursed by the Fund for any out
of pocket expenses incurred in attending meetings. All Board committee members receive $1,000 per meeting attended, the Audit Committee
Chairman receives an annual fee of $3,000, the Nominating Committee Chairman, and the Lead Independent Director each receive an
annual fee of $2,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in
certain meetings on behalf of multiple funds. The aggregate remuneration (excluding out of pocket expenses) paid by the Fund to
such Directors during the fiscal year ended December 31, 2020 amounted to $82,000. During the fiscal year ended December 31, 2020,
the Directors of the Fund met four times, all of which were regular quarterly Board meetings. Each Director then serving in such
capacity attended at least 75% of the meetings of Directors and of any Committee of which he is a member.
Directors who are directors or employees of the
Investment Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund.
The following table sets forth certain information
regarding the compensation of the Directors by the Fund and officers, if any, who were compensated by the Fund rather than the
Investment Adviser, for the fiscal year ended December 31, 2020.
Compensation Table for the Fiscal Year Ended
December 31, 2020
Name of Person and Position
|
|
Aggregate
Compensation
From the
Fund
|
|
|
Aggregate
Compensation
From the
Fund and
Fund Complex
Paid to
Directors*
|
|
Interested Directors:
|
|
|
|
|
|
|
|
|
Mario J. Gabelli
Chairman of the Board and Chief Investment Officer
|
|
$
|
0
|
|
|
$
|
0
|
|
Christopher J. Marangi
Director
|
|
$
|
0
|
|
|
$
|
0
|
|
Independent Directors:
|
|
|
|
|
|
|
|
|
John Birch
Director
|
|
$
|
9,000
|
|
|
$
|
38,000
|
(4)
|
Anthony J. Colavita***
Director
|
|
$
|
8,500
|
|
|
$
|
221,000
|
(20)
|
James P. Conn
Director
|
|
$
|
11,000
|
|
|
$
|
279,750
|
(4)
|
Frank J. Fahrenkopf, Jr.
Director
|
|
$
|
8,000
|
|
|
$
|
172,500
|
(12)
|
Kuni Nakamura
Director
|
|
$
|
16,500
|
|
|
$
|
360,000
|
(33)
|
Name of Person and Position
|
|
Aggregate
Compensation
From the
Fund
|
|
|
Aggregate
Compensation
From the
Fund and
Fund Complex
Paid to
Directors*
|
|
Werner J. Roeder
Director
|
|
$
|
10,000
|
|
|
$
|
154,500
|
(20)
|
Salvatore J. Zizza
Director
|
|
$
|
11,000
|
|
|
$
|
320,000
|
(31)
|
Daniel E. Zucchi
Director
|
|
$
|
8,000
|
|
|
$
|
32,000
|
(3)
|
|
*
|
Represents the total compensation paid to such persons during the year ended December 31, 2020 by investment companies (including
the Fund) or portfolios that are part of the same Fund Complex. The number in parentheses represents the number of such investment
companies and portfolios.
|
The Investment Adviser
The Investment Adviser, a New York limited liability
company and registered investment adviser under the Investment Advisers Act of 1940, as amended, serves as an investment adviser
to registered investment companies with combined aggregate net assets approximating $20.1 billion as of December 31, 2020. The
Investment Adviser is a wholly owned subsidiary of GAMCO Investors, Inc. (“GBL”), a New York corporation, whose Class
A Common Stock is traded on the NYSE under the symbol, “GBL.” Mr. Mario J. Gabelli may be deemed a “controlling
person” of the Investment Adviser on the basis of his controlling interest in GBL. Mr. Gabelli owns a majority of the stock
of GGCP, Inc. (“GGCP”), which holds a majority of the capital stock and voting power of GBL. The Investment Adviser
has several affiliates that provide investment advisory services: GAMCO Asset Management, Inc., a wholly owned subsidiary of GBL,
acts as investment adviser for individuals, pension trusts, profit sharing trusts, and endowments, and as a sub-adviser to certain
third party investment funds, which include registered investment companies, having assets under management of approximately $12.4
billion as of December 31, 2020; Teton Advisors, Inc. and its wholly owned investment adviser, Keeley Teton Advisers, LLC, with
assets under management of approximately $1.5 billion as of September 30, 2020, acts as investment advisers to The TETON Westwood
Funds, the KEELEY Funds, and separately managed accounts; Gabelli & Company Investment Advisers, Inc. (formerly, Gabelli Securities,
Inc.), a wholly-owned subsidiary of Associated Capital Group, Inc. (“Associated Capital”), acts as investment adviser
for certain alternative investment products, consisting primarily of risk arbitrage and merchant banking limited partnerships and
offshore companies, with assets under management of approximately $1.4 billion as of December 31, 2020. Teton Advisors, Inc. was
spun off by GBL in March 2009 and is an affiliate of GBL by virtue of Mr. Gabelli’s ownership of GGCP, the principal stockholder
of Teton Advisors, Inc., as of December 31, 2020. Associated Capital was spun off from GBL on November 30, 2015, and is an affiliate
of GBL by virtue of Mr. Gabelli’s ownership of GGCP, the principal stockholder of Associated Capital.
Investment Advisory Agreement
Affiliates of the Investment Adviser may, in
the ordinary course of their business, acquire for their own account or for the accounts of their advisory clients, significant
(and possibly controlling) positions in the securities of companies that may also be suitable for investment by the Fund. The securities
in which the Fund might invest may thereby be limited to some extent. For instance, many companies in the past several years have
adopted so-called “poison pill” or other defensive measures designed to discourage or prevent the completion of non-negotiated
offers for control of the company. Such defensive measures may have the effect of limiting the shares of the company that might
otherwise be acquired by the Fund if the affiliates of the Investment Adviser or their advisory accounts have or acquire a significant
position in the same securities. However, the Investment Adviser does not believe that the investment activities of its affiliates
will have a material adverse effect upon each the Fund in seeking to achieve its investment objectives. Securities purchased or
sold pursuant to contemporaneous orders entered on behalf of the investment company accounts of the Investment Adviser or the advisory
accounts managed by its affiliates for their unaffiliated clients are allocated pursuant to principles believed to be fair and
not disadvantageous to any such accounts. In addition, all such orders are accorded priority of execution over orders entered on
behalf of accounts in which the Investment Adviser or its affiliates have a substantial pecuniary interest. The Investment Adviser
may on occasion give advice or take action with respect to other clients that differs from the actions taken with respect to the
Fund. The Fund may invest in the securities of companies that are investment management clients of GAMCO Asset Management Inc.
In addition, portfolio companies or their officers or directors may be minority stockholders of the Investment Adviser or its affiliates.
Under the terms of the Advisory Agreement, the
Investment Adviser manages the portfolio of the Fund in accordance with its stated investment objectives and policies, makes investment
decisions for the Fund, places orders to purchase and sell securities on behalf of the Fund and manages its other business and
affairs, all subject to the supervision and direction of the Fund’s Board. In addition, under the Advisory Agreement, the
Investment Adviser oversees the administration of all aspects of the Fund’s business and affairs and provides, or arranges
for others to provide, at the Investment Adviser’s expense, certain enumerated services, including maintaining the Fund’s
books and records, preparing reports to the Fund’s stockholders and supervising the calculation of the net asset value of
its shares. All expenses of computing the net asset value of the Fund, including any equipment or services obtained solely for
the purpose of pricing shares or valuing its investment portfolio, will be an expense of the Fund under its Advisory Agreement
unless the Investment Adviser voluntarily assumes responsibility for such expense. During fiscal year 2018, the Fund paid or accrued
$45,000 to the Investment Adviser in connection with the cost of computing the Fund’s net asset value.
The Advisory Agreement combines investment advisory
and administrative responsibilities in one agreement. For services rendered by the Investment Adviser on behalf of the Fund under
the Advisory Agreement, the Fund pays the Investment Adviser a fee computed weekly and paid monthly, equal on an annual basis to
1.00% of the Fund’s average weekly net assets including the liquidation value of preferred stock. The fee paid by the Fund
may be higher when leverage in the form of preferred stock is utilized, giving the Investment Adviser an incentive to utilize such
leverage. However, the Investment Adviser has agreed to reduce the management fee on the incremental assets attributable to the
preferred stock during the fiscal year if the total return of the net asset value of the common stock of the Fund, including distributions
and advisory fees subject to reduction for that year, does not exceed the stated dividend rate or corresponding swap rate of each
particular series of preferred stock for the period. In other words, if the effective cost of the leverage for any series of preferred
stock exceeds the total return (based on net asset value) on the Fund’s common stock, the Investment Adviser will reduce
that portion of its management fee on the incremental assets attributable to the leverage for that series of preferred stock to
mitigate the negative impact of the leverage on the common stockholder’s total return. The Investment Adviser currently intends
that the voluntary advisory fee waiver will remain in effect for as long as the Series C Auction Rate Cumulative Preferred Stock
are outstanding. This fee waiver will not apply to any preferred stock issued from this offering. The Investment Adviser, however,
reserves the right to modify or terminate the voluntary advisory fee waiver at any time. The Fund’s total return on the net
asset value of the common stock is monitored on a monthly basis to assess whether the total return on the net asset value of the
common stock exceeds the stated dividend rate or corresponding swap rate of each particular series of preferred stock for the period.
The test to confirm the accrual of the management fee on the assets attributable to each particular series of preferred stock is
annual. The Fund will accrue for the management fee on these assets during the fiscal year if it appears probable that the Fund
will incur the management fee on those additional assets.
The Advisory Agreement provides that in the absence
of willful misfeasance, bad faith, gross negligence, or reckless disregard for its obligations and duties thereunder, the Investment
Adviser is not liable for any error or judgment or mistake of law or for any loss suffered by the Fund. As part of the Advisory
Agreement, the Fund has agreed that the name “Gabelli” is the Investment Adviser’s property, and that in the
event the Investment Adviser ceases to act as an investment adviser to the Fund, the Fund will change its name to one not including
“Gabelli.”
Pursuant to its terms, the Advisory Agreement
will remain in effect with respect to the Fund until the second anniversary of stockholder approval of such Agreement, and from
year to year thereafter if approved annually (i) by the Fund’s Board or by the holders of a majority of its outstanding voting
securities and (ii) by a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of
any party to the Advisory Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement was initially approved by the Board at a meeting held on April 6, 1994, and was approved most recently by the
Board on May 12, 2020. The Advisory Agreement terminates automatically on its assignment and may be terminated without penalty
on sixty days’ written notice at the option of either party thereto or by a vote of a majority (as defined in the 1940 Act)
of the Fund’s outstanding shares.
A discussion regarding the basis of the Board’s
approval of the Advisory Agreement for the Fund is available in the semiannual report to stockholders for the six months ended
June 30, 2020.
For the fiscal years ended December 31, 2020,
2019, and 2018, the Fund paid for advisory and administrative services rendered to the Fund, and the Investment Adviser waived
fees and/or reimbursed expenses of the Fund under the Advisory Agreement as follows:
|
Fees Paid (After
Waivers)
|
Reductions
|
Reimbursements
|
December 31, 2020
|
$ 2,685,387
|
None
|
None
|
December 31, 2019
|
$ 2,668,688
|
None
|
None
|
December 31, 2018
|
$ 2,861,708
|
$ 200,254
|
None
|
Portfolio Managers Information
Other Accounts Managed
The information below lists other accounts for
which each portfolio manager was primarily responsible for the day to day management during the year ended December 31, 2020, for
Messrs. Gabelli and Marangi.
Name of Portfolio Managers*
|
Type of Accounts
|
Total Number of Accounts
Managed
|
Total Assets
|
Number of Accounts
Managed with Advisory Fee Based on Performance
|
Total Assets With
Advisory Fee Based on Performance
|
Mario J. Gabelli
|
Registered Investment Companies:
|
23
|
$ 17.8B
|
4
|
$ 5.1 billion
|
|
Other Pooled Investment Vehicles:
|
11
|
$ 1.1B
|
8
|
$ 849.6 million
|
|
Other Accounts:
|
938
|
$ 6.9B
|
0
|
$ 0
|
Christopher J. Marangi
|
Registered Investment Companies:
|
7
|
$ 7.2B
|
2
|
$ 4.6B
|
|
Other Pooled Investment Vehicles:
|
1
|
$ 14.6M
|
0
|
$ 0
|
|
Other Accounts:
|
302
|
$ 1.7B
|
0
|
$ 0
|
|
*
|
For the Portfolio Managers, the above chart represents the portion of the assets for which the Portfolio Manager has primary
responsibility in the accounts indicated. Certain assets included under “Other Accounts” may be invested in Registered
Investment Companies or Other Pooled Investment Vehicles primarily managed by the Portfolio Manager and therefore may be duplicated.
|
Potential Conflicts of Interest
Actual or apparent conflicts of interest may
arise when the portfolio managers also have day-to-day management responsibilities with respect to one or more other accounts.
These potential conflicts include:
Allocation of Limited Time and Attention.
Because the portfolio managers may manage more than one account, they may not be able to formulate as complete a strategy or identify
equally attractive investment opportunities for each of those accounts as if they were to devote substantially more attention to
the management of only one account.
Allocation of Limited Investment Opportunities.
If the portfolio managers identify an investment opportunity that may be suitable for multiple accounts, the Fund may not be able
to take full advantage of that opportunity because the opportunity may need to be allocated among these accounts or other accounts
managed primarily by other portfolio managers of the Investment Adviser and its affiliates.
Pursuit of Differing Strategies. At times,
the portfolio managers may determine that an investment opportunity may be appropriate for only some of the accounts for which
they exercise investment responsibility, or may decide that certain of these accounts should take differing positions with respect
to a particular security. In these cases, the portfolio managers may execute differing or opposite transactions for one or more
accounts which may affect the market price of the security or the execution of the transactions, or both, to the detriment of one
or more other accounts.
Selection of Broker/Dealers. A portfolio
manager may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions
for the Fund or accounts that they supervise. In addition to providing execution of trades, some brokers and dealers provide portfolio
managers with brokerage and research services which may result in the payment of higher brokerage fees than might otherwise be
available. These services may be more beneficial to certain funds or accounts of the Investment Adviser and its affiliates than
to others. Although the payment of brokerage commissions is subject to the requirement that the Investment Adviser determine in
good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the
Fund, a portfolio manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits
among the Fund or other accounts that the Investment Adviser and its affiliates manage. In addition, with respect to certain types
of accounts (such as pooled investment vehicles and other accounts managed for organizations and individuals), the Investment Adviser
may be limited by the client concerning the selection of brokers or may be instructed to direct trades to particular brokers. In
these cases, the Investment Adviser or its affiliates may place separate, non-simultaneous transactions in the same security for
the Fund and another account that may temporarily affect the market price of the security or the execution of the transaction,
or both, to the detriment of the Fund or the other accounts. Additionally, the Investment Adviser may enter into agreements on
behalf of the Fund, whereby the Fund receives commission credits from certain brokers and dealers to pay Fund operating expenses,
such commission credits are based on brokerage transactions directed to those brokers and dealers.
Variation in Compensation. A conflict
of interest may arise where the financial or other benefits available to a portfolio manager differ among the accounts that they
manage. If the structure of the Investment Adviser’s management fee or the portfolio manager’s compensation differs
among accounts (such as where certain accounts pay higher management fees or performance based management fees), the portfolio
managers may be motivated to favor certain accounts over others. The portfolio managers also may be motivated to favor accounts
in which they have investment interests or in which the Investment Adviser or its affiliates have investment interests. Similarly,
the desire to maintain assets under management or to enhance a portfolio manager’s performance record or to derive other
rewards, financial or otherwise, could influence the portfolio managers in affording preferential treatment to those accounts that
could most significantly benefit the portfolio managers.
The Investment Adviser and the Fund have adopted
compliance policies and procedures that are designed to address the various conflicts of interest that may arise for the Investment
Adviser and its staff members. However, there is no guarantee that such policies and procedures will be able to detect and address
every situation in which an actual or potential conflict may arise.
Portfolio
Manager Compensation
Mr.
Gabelli receives incentive-based variable compensation based on a percentage of net revenues received by the Investment Adviser
for managing the Fund. Net revenues are determined by deducting from gross investment management fees the firm’s expenses
(other than Mr. Gabelli’s compensation) allocable to the Fund. Additionally, he receives similar incentive-based variable
compensation for managing other accounts within GBL. This method of compensation is based on the premise that superior long term
performance in managing a portfolio should be rewarded with higher compensation as a result of growth of assets through appreciation
and net investment activity. The level of compensation is not determined with specific reference to the performance of any account
against any specific benchmark. One of the other registered investment companies managed by Mr. Gabelli has a performance (fulcrum)
fee arrangement for which his compensation is adjusted up or down based on the performance of the investment company relative
to an index. Five closed-end registered investment companies managed by Mr. Gabelli have arrangements whereby the Investment Adviser
will only receive its investment advisory fee attributable to the liquidation value of outstanding preferred stock (and Mr. Gabelli
would only receive his percentage of such advisory fee) if certain performance levels are met. Mr. Gabelli manages other accounts
with performance fees.
Compensation
for managing these accounts has two components. One component of his compensation is based on a percentage of net revenues received
by the investment adviser for managing the account. The second component is based on absolute performance of the account, with
respect to which a percentage of such performance fee is paid to Mr. Gabelli. As an executive officer of the Investment Adviser’s
parent company, GBL, Mr. Gabelli also receives ten percent of the net operating profits of the parent company. Additionally, Mr.
Gabelli receives a percentage of net management fees as a relationship manager for accounts managed by affiliates. He receives
no base salary, no annual bonus, and no stock options. Mr. Gabelli may enter into and has arrangements to defer or waive his compensation.
The
compensation of the other portfolio managers of the Fund is structured to enable the Investment Adviser to attract and retain
highly qualified professionals in a competitive environment. The portfolio managers receive a compensation package that includes
a minimum draw or base salary, equity based incentive compensation via awards of stock options and restricted stock, and incentive
based variable compensation based on a percentage of net revenue received by the Investment Adviser for managing the Fund to the
extent that the amount exceeds a minimum level of compensation. Net revenues are determined by deducting from gross investment
management fees certain of the firm’s expenses (other than the respective portfolio manager’s compensation) allocable
to the Fund (the incentive based variable compensation for managing other accounts is also based on a percentage of net revenues
to the investment adviser for managing the account). The portfolio managers receive similar incentive based variable compensation
based on gross revenue for managing other accounts for GAMCO Asset Management Inc. the compensation for managing accounts that
have a performance based fee will have two components. One component is based on a percentage of net revenues received by the
investment adviser for managing the account. The second component is based on absolute performance of the account, with respect
to which a percentage of the net performance fee is paid to the portfolio manager. These methods of compensation are based on
the premise that superior long term performance in managing a portfolio should be rewarded with higher compensation as a result
of growth of assets through appreciation and net investment activity. The level of equity based incentive and incentive based
variable compensation is based on an evaluation by the Investment Adviser’s parent, GBL, of quantitative and qualitative
performance evaluation criteria.
Ownership
of Shares in the Fund
As
of December 31, 2020, the portfolio managers of the Fund own the following amounts of equity securities of the Fund.
Name
of Portfolio Manager
|
Dollar
Range of Equity Securities in the Fund
|
Mario
J. Gabelli
|
Over
$1,000,000
|
Christopher
J. Marangi
|
$1-$10,000
|
Portfolio
Holdings Information
Employees
of the Investment Adviser and its affiliates will often have access to information concerning the portfolio holdings of the Fund.
The Fund and the Investment Adviser have adopted policies and procedures that require all employees to safeguard proprietary information
of the Fund, which includes information relating to the Fund’s portfolio holdings as well as portfolio trading activity
of the Investment Adviser with respect to the Fund (collectively, “Portfolio Holdings Information”). In addition,
the Fund and the Investment Adviser have adopted policies and procedures providing that Portfolio Holdings Information may not
be disclosed except to the extent that it is (a) made available to the general public by posting on the Fund’s website or
filed as a part of a required filing on Form N-PORT, N-CEN or N-CSR or (b) provided to a third party for legitimate business purposes
or regulatory purposes, that has agreed to keep such data confidential under forms approved by the Investment Adviser’s
legal department or outside counsel, as described below. The Investment Adviser will examine each situation under (b) with a view
to determine that release of the information is in the best interest of the Fund and its stockholders and, if a potential conflict
between the Investment Adviser’s interests and the Fund’s interests arises, to have such conflict resolved by the
Chief Compliance Officer or the independent Board. These policies further provide that no officer of the Fund or employee of the
Investment Adviser shall communicate with the media about the Fund without obtaining the advance consent of the Chief Executive
Officer, Chief Operating Officer, or General Counsel of the Investment Adviser.
Under
the foregoing policies, the Fund currently may disclose Portfolio Holdings Information in the circumstances outlined below. Disclosure
generally may be either on a monthly or quarterly basis with no time lag in some cases and with a time lag of up to sixty days
in other cases (with the exception of proxy voting services which require a regular download of data):
(1) To regulatory authorities in response to requests for such information and with the approval of the Chief Compliance Officer of
the Fund;
(2) To mutual fund rating and statistical agencies and to persons performing similar functions where there is a legitimate business
purpose for such disclosure and such entity has agreed to keep such data confidential at least until it has been made public by
the Investment Adviser;
(3) To service providers of the Fund, as necessary for the performance of their services to the Fund and to the Board; the Fund’s
anticipated service providers are its administrator, transfer agent, custodian, independent registered public accounting firm,
and legal counsel;
(4) To firms providing proxy voting and other proxy services, provided such entity has agreed to keep such data confidential until
at least it has been made public by the Investment Adviser;
(5) To certain broker-dealers, investment advisers, and other financial intermediaries for purposes of their performing due diligence
on the Fund and not for dissemination of this information to their clients or use of this information to conduct trading for their
clients. Disclosure of Portfolio Holdings Information in these circumstances requires the broker, dealer, investment adviser,
or financial intermediary to agree to keep such information confidential and is further subject to prior approval of the Chief
Compliance Officer of the Fund and to reporting to the Board at the next quarterly meeting; and
(6) To consultants for purposes of performing analysis of the Fund, which analysis (but not the Portfolio Holdings Information) may
be used by the consultant with its clients or disseminated to the public, provided that such entity shall have agreed to keep
such information confidential until at least it has been made public by the Investment Adviser.
Disclosures
made pursuant to a confidentiality agreement are subject to periodic confirmation by the Chief Compliance Officer of the Fund
that the recipient has utilized such information solely in accordance with the terms of the agreement. Neither the Fund nor the
Investment Adviser, nor any of the Investment Adviser’s affiliates will accept on behalf of itself, its affiliates, or the
Fund any compensation or other consideration in connection with the disclosure of portfolio holdings of the Fund. The Board will
review such arrangements annually with the Fund’s Chief Compliance Officer.
AUCTIONS
FOR AUCTION RATE PREFERRED STOCK
The
Fund’s Series C Auction Rate Preferred are a type of preferred stock that pays dividends that vary over time. Since February
2008, the auctions have failed and have continued to fail. “Failure” means that more shares of the preferred stock
are offered for sale in the auction that there are bids to buy shares. During this period while auctions have continued to fail,
holders of the Fund’s Series C Auction Rate Preferred have received dividends at a “maximum” rate determined
by reference to short term rates, rather than at a price set by auction. If auctions were to resume functioning, they would operate
in accordance with the procedures described below.
Summary
of Auction Procedures
The
following is a brief summary of the auction procedures for shares of preferred stock that are auction rate preferred stock. These
auction procedures are complicated, and there are exceptions to these procedures. Many of the terms in this section have a special
meaning. Accordingly, this description does not purport to be complete and is qualified, in its entirety, by reference to the
Fund’s Charter, including the provisions of the Articles Supplementary establishing any series of auction rate preferred
stock.
The
auctions determine the dividend rate for auction rate preferred stock, but each dividend rate will not be higher than the maximum
rate. If you own auction rate preferred stock, you may instruct your broker-dealer to enter one of three kinds of orders in the
auction with respect to your stock: sell, bid, and hold.
|
●
|
If
you enter a sell order, you indicate that you want to sell auction rate preferred stock
at their liquidation preference per share, no matter what the next dividend period’s
rate will be.
|
|
●
|
If
you enter a bid (or “hold at a rate”) order, which must specify a dividend
rate, you indicate that you want to sell auction rate preferred stock only if the next
dividend period’s rate is less than the rate you specify.
|
|
●
|
If
you enter a hold order you indicate that you want to continue to own auction rate preferred
stock, no matter what the next dividend period’s rate will be.
|
You
may enter different types of orders for different portions of your auction rate preferred stock. You may also enter an order to
buy additional auction rate preferred stock. All orders must be for whole shares of stock. All orders you submit are irrevocable.
There is a fixed number of auction rate preferred stock, and the dividend rate likely will vary from auction to auction depending
on the number of bidders, the number of shares the bidders seek to buy, the rating of the auction rate preferred stock and general
economic conditions including current interest rates. If you own auction rate preferred stock and submit a bid for them higher
than the then-maximum rate, your bid will be treated as a sell order. If you do not enter an order, the broker-dealer will assume
that you want to continue to hold auction rate preferred stock, but if you fail to submit an order and the dividend period is
longer than 28 days, the broker-dealer will treat your failure to submit a bid as a sell order.
If
you do not then own auction rate preferred stock, or want to buy more shares, you may instruct a broker-dealer to enter a bid
order to buy shares in an auction at the liquidation preference per share at or above the dividend rate you specify. If your bid
for shares you do not own specifies a rate higher than the then-maximum rate, your bid will not be considered.
Broker-dealers
will submit orders from existing and potential holders of auction rate preferred stock to the auction agent. Neither the Fund
nor the auction agent will be responsible for a broker-dealer’s failure to submit orders from existing or potential holders
of auction rate preferred stock. A broker-dealer’s failure to submit orders for auction rate preferred stock held by it
or its customers will be treated in the same manner as a holder’s failure to submit an order to the broker-dealer. A broker-dealer
may submit orders to the auction agent for its own account. The Fund may not submit an order in any auction.
After
each auction for the auction rate preferred stock, the auction agent will pay to each broker-dealer, from funds provided by the
Fund, a service charge equal to, in the case shares of any auction immediately preceding a dividend period of less than 365 days,
the product of (i) a fraction, the numerator of which is the number of days in such dividend period and the denominator of which
is 365, times (ii) 1/4 of 1%, times (iii) the liquidation preference per share, times (iv) the aggregate number of shares of auction
rate preferred stock placed by such broker-dealer at such auction or, in the case of any auction immediately preceding a dividend
period of one year or longer, a percentage of the purchase price of the shares of auction rate preferred stock placed by the broker-dealer
at the auction agreed to by the Fund and the broker-dealers.
If
the number of shares of auction rate preferred stock subject to bid orders by potential holders with a dividend rate equal to
or lower than the then-maximum rate is at least equal to the number of shares of auction rate preferred stock subject to sell
orders, then the dividend rate for the next dividend period will be the lowest rate submitted which, taking into account that
rate and all lower rates submitted in order from existing and potential holders, would result in existing and potential holders
owning all the auction rate preferred stock available for purchase in the auction.
If
the number of auction rate preferred stock subject to bid orders by potential holders with a dividend rate equal to or lower than
the then-maximum rate is less than the number of auction rate preferred stock subject to sell orders, then the auction is considered
to be a failed auction, and the dividend rate will be the maximum rate. In that event, existing holders that have submitted sell
orders (or are treated as having submitted sell orders) may not be able to sell any or all of the auction rate preferred stock
offered for sale than there are buyers for those shares.
If
broker-dealers submit or are deemed to submit hold orders for all outstanding auction rate preferred stock, the auction is considered
an “all hold” auction and the dividend rate for the next dividend period will be the “all hold rate,”
which is 80% of the “AA” Financial Composite Commercial Paper Rate, as determined in accordance with procedures set
forth in the Articles Supplementary establishing the auction rate preferred stock.
The
auction procedures include a pro rata allocation of auction rate preferred stock for purchase and sale. This allocation process
may result in an existing holder continuing to hold or selling, or a potential holder buying, fewer shares than the number of
shares of auction rate preferred stock in its order. If this happens, broker-dealers will be required to make appropriate pro
rata allocations among their respective customers.
Settlement
of purchases and sales will be made on the next business day (which also is a dividend payment date) after the auction date through
DTC. Purchasers will pay for their auction rate preferred stock through broker-dealers in same-day funds to DTC against delivery
to the broker-dealers. DTC will make payment to the sellers’ broker-dealers in accordance with its normal procedures, which
require broker-dealers to make payment against delivery in same-day funds. As used in this SAI, a business day is a day on which
the NYSE is open for trading, and which is not a Saturday, Sunday, or any other day on which banks in New York City are authorized
or obligated by law to close.
The
first auction for a series of auction rate preferred stock will be held on the date specified in the Prospectus Supplement for
such series, which will be the business day preceding the dividend payment date for the initial dividend period. Thereafter, except
during special dividend periods, auctions for such series auction rate preferred stock normally will be held within the frequency
specified in the Prospectus Supplement for such series, and each subsequent dividend period for such series auction rate preferred
stock normally will begin on the following day.
If
an auction is not held because an unforeseen event or unforeseen events cause a day that otherwise would have been an auction
date not to be a business day, then the length of the then-current dividend period will be extended by seven days (or a multiple
thereof if necessary because of such unforeseen event or events), the applicable rate for such period will be the applicable rate
for the then-current dividend period so extended and the dividend payment date for such dividend period will be the first business
day immediately succeeding the end of such period.
The
following is a simplified example of how a typical auction works. Assume that the Fund has 1,000 outstanding shares of auction
rate preferred stock and three current holders. The three current holders and three potential holders submit orders through broker-dealers
at the auction.
Current
Holder A
|
Owns
500 shares, wants to sell all 500 shares if auction rate is less than 4.6%
|
Bid
order at 4.6% rate for all 500 shares
|
Current
Holder B
|
Owns
300 shares, wants to hold
|
Hold
order will take the auction rate
|
Current
Holder C
|
Owns
200 shares, wants to sell all 200 shares if auction rate is less than 4.4%
|
Bid
order at 4.4% rate for all 200 shares
|
Potential
Holder D
|
Wants
to buy 200 shares
|
Places
order to buy at or above 4.5%
|
Potential
Holder E
|
Wants
to buy 300 shares
|
Places
order to buy at or above 4.4%
|
Potential
Holder F
|
Wants
to buy 200 shares
|
Places
order to buy at or above 4.6%
|
|
|
|
The
lowest dividend rate that will result in all 1,000 shares of auction rate preferred stock continuing to be held is 4.5% (the offer
by D). Therefore, the dividend rate will be 4.5%. Current holders B and C will continue to own their shares. Current holder A
will sell its shares because A’s dividend rate bid was higher than the dividend rate: Potential holder D will buy 200 shares
and potential holder E will buy 300 shares because their bid rates were at or below the dividend rate. Potential holder F will
not buy any shares because its bid rate was above the dividend rate.
Secondary
Market Trading and Transfer of Auction Rate Preferred Stock
The
underwriters shall not be required to make a market in the auction rate preferred stock. The broker-dealers (including the underwriters)
may maintain a secondary trading market for outside of auctions, but they are not required to do so. There can be no assurance
that a secondary trading market for the auction rate preferred stock will develop or, if it does develop, that it will provide
owners with liquidity of investment. The auction rate preferred stock will not be registered on any stock exchange. Investors
who purchase auction rate preferred stock in an auction for a special dividend period should note that because the dividend rate
on such shares will be fixed for the length of that dividend period, the value of such shares may fluctuate in response to the
changes in interest rates and may be more or less than their original cost if sold on the open market in advance of the next auction
thereof, depending on market conditions.
You
may sell, transfer, or otherwise dispose of the auction rate preferred stock in the auction process only in whole shares and only
pursuant to a bid or sell order placed with the auction agent in accordance with the auction procedures, to the Fund or its affiliates
or to or through a broker-dealer that has been selected by the Fund or to such other persons as may be permitted by the Fund.
However, if you hold your auction rate preferred stock in the name of a broker-dealer, a sale or transfer of your auction rate
preferred stock to that broker dealer, or to another customer of that broker-dealer, will not be considered a sale or transfer
for purposes of the foregoing if the shares remain in the name of the broker-dealer immediately after your transaction. In addition,
in the case of all transfers other than through an auction, the broker-dealer (or other person, if the Fund permits) receiving
the transfer must advise the auction agent of the transfer. These procedures would not limit a holder’s ability to sell
its auction rate preferred stock in a secondary market transaction.
Due
to recent market turmoil most auction rate preferred stock, including our Series C Auction Rate Preferred, has been unable to
hold successful auctions and holders of such stock have suffered reduced liquidity. If the number of Series C Auction Rate Preferred
subject to bid orders by potential holders is less than the number of Series C Auction Rate Preferred subject to sell orders,
then the auction is considered to be a failed auction, and the dividend rate will be the maximum rate. In that event, holders
that have submitted sell orders may not be able to sell any or all of Series C Auction Rate Preferred for which they have submitted
sell orders. The current maximum rate is 175% of the “AA” Financial Composite Commercial Paper Rate on the date of
such auction. These failed auctions have been an industry wide problem and may continue to occur in the future. Any current or
potential holder of auction rate preferred stock faces the risk that auctions will continue to fail, or will fail again at some
point in the future, and that he or she may not be able to sell his or her stock through the auction process.
PORTFOLIO
TRANSACTIONS
Subject
to policies established by the Board, the Investment Adviser is responsible for placing purchase and sale orders and the allocation
of brokerage on behalf of the Fund. Transactions in equity securities are in most cases effected on U.S. stock exchanges and involve
the payment of negotiated brokerage commissions. In general, there may be no stated commission in the case of securities traded
in over-the-counter markets, but the prices of those securities may include undisclosed commissions or mark-ups. Principal transactions
are not entered into with affiliates of the Fund. However, G.research may execute transactions in the over-the-counter markets
on an agency basis and receive a stated commission therefrom. To the extent consistent with applicable provisions of the 1940
Act and the rules and exemptions adopted by the SEC thereunder, as well as other regulatory requirements, the Fund’s Board
has determined that portfolio transactions may be executed through G.research and its broker-dealer affiliates if, in the judgment
of the Investment Adviser, the use of those broker-dealers is likely to result in price and execution at least as favorable as
those of other qualified broker-dealers, and if, in particular transactions, the affiliated broker-dealers charge the Fund a rate
consistent with that charged to comparable unaffiliated customers in similar transactions. The Fund has no obligations to deal
with any broker or group of brokers in executing transactions in portfolio securities. In executing transactions, the Investment
Adviser seeks to obtain the best price and execution for the Fund, taking into account such factors as price, size of order, difficulty
of execution, and operational facilities of the firm involved and the firm’s risk in positioning a block of securities.
While the Investment Adviser generally seeks reasonably competitive commission rates, the Fund does not necessarily pay the lowest
commission available.
Subject
to obtaining the best price and execution, brokers who provide supplemental research, market, and statistical information, or
other services (e.g., wire services) to the Investment Adviser or its affiliates may receive orders for transactions by
the Fund. The term “research, market, and statistical information” includes advice as to the value of securities,
and advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers
of securities, and furnishing analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio
strategy, and the performance of accounts. Information so received will be in addition to and not in lieu of the services required
to be performed by the Investment Adviser under the Advisory Agreement, and the expenses of the Investment Adviser will not necessarily
be reduced as a result of the receipt of such supplemental information. Such information may be useful to the Investment Adviser
and its affiliates in providing services to clients other than the Fund, and not all such information is used by the Investment
Adviser in connection with the Fund. Conversely, such information provided to the Investment Adviser and its affiliates by brokers
and dealers through whom other clients of the Investment Adviser and its affiliates effect securities transactions may be useful
to the Investment Adviser in providing services to the Fund.
Although
investment decisions for the Fund are made independently from those of the other accounts managed by the Investment Adviser and
its affiliates, investments of the kind made by the Fund may also be made for those other accounts. When the same securities are
purchased for or sold by the Fund and any of such other accounts, it is the policy of the Investment Adviser and its affiliates
to allocate such purchases and sales in a manner deemed fair and equitable over time to all of the accounts, including the Fund.
For
the fiscal years ended December 31, 2018, 2019, and 2020 the Fund paid a total of $60,813, $73,698 and $69,149 respectively, in
brokerage commissions, of which G.research and its affiliates received, $9,522, $27,048, and $18,235 respectively. The amount
received by G.research and its affiliates from the Fund in respect of brokerage commissions for the fiscal year ended December
31, 2020 represented approximately 37% of the aggregate dollar amount of brokerage commissions paid by the Fund for such period
and approximately 39% of the aggregate dollar amount of transactions by the Fund for such period.
REPURCHASE
OF COMMON STOCK
The
Fund is a closed-end, non-diversified, management investment company and as such its stockholders do not, and will not, have the
right to redeem their stock. The Fund, however, may repurchase its common stock from time to time as and when it deems such a
repurchase advisable. Such repurchases will be made when the Fund’s common stock is trading at a discount of 5% (or such
other percentage as the Board may determine from time to time) or more from net asset value. Pursuant to the 1940 Act, the Fund
may repurchase its common stock on a securities exchange (provided that the Fund has informed its stockholders within the preceding
six months of its intention to repurchase such stock) or as otherwise permitted in accordance with Rule 23c-1 under the 1940 Act.
Under that Rule, certain conditions must be met regarding, among other things, distribution of net income for the preceding fiscal
year, status of the seller, price paid, brokerage commissions, prior notice to stockholders of an intention to purchase stock
and purchasing in a manner and on a basis that does not discriminate unfairly against the other stockholders through their interest
in the Fund.
When
the Fund repurchases its common stock for a price below net asset value, the net asset value of the common stock that remains
outstanding will be enhanced, but this does not necessarily mean that the market price of the outstanding common stock will be
affected, either positively or negatively.
Shares
repurchased are retired.
PORTFOLIO
TURNOVER
The
portfolio turnover rates of the Fund for the fiscal years ending December 31, 2020 and December 31, 2019 were 29.3% and 17.5%
respectively. The portfolio turnover rate is calculated by dividing the lesser of an investment company’s annual sales or
purchases of portfolio securities by the monthly average value of securities in its portfolio during the year, excluding portfolio
securities the maturities of which at the time of acquisition were one year or less. A high rate of portfolio turnover involves
correspondingly greater brokerage commission expense than a lower rate, which expense must be borne by the Fund and its stockholders,
as applicable. A higher rate of portfolio turnover may also result in taxable gains being passed to stockholders.
TAXATION
The
following discussion is a brief summary of certain U.S. federal income tax considerations affecting the Fund and its stockholders.
This discussion reflects applicable tax laws of the United States as of the date of this SAI, which tax laws may be changed or
subject to new interpretations by the courts or the Internal Revenue Service (the “IRS) retroactively or prospectively.
This does not constitute a detailed explanation of all U.S. federal, state, local and foreign tax concerns affecting the Fund
and its stockholders (including stockholders owning a large position in the Fund), and the discussions set forth herein do not
constitute tax advice. Investors are urged to consult their own tax advisers to determine the tax consequences to them of investing
in the Fund.
Taxation
of the Fund
The
Fund has qualified and intends to continue to qualify, as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the “Code”) (a “RIC”). Accordingly, the Fund will, among other things, (i) derive
in each taxable year at least 90% of its gross income from (a) dividends, interest (including tax-exempt interest), payments with
respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies,
or other income (including but not limited to gain from options, futures and forward contracts) derived with respect to its business
of investing in such stock, securities or currencies and (b) net income derived from interests in certain publicly traded partnerships
that (1) are treated as partnerships for U.S. federal income tax purposes, (2) are traded on an established securities market
or that are readily tradable on a secondary market (or the substantial equivalent thereof) and (3) that derive less than 90% of
their gross income from the items described in (a) above (each a “Qualified Publicly Traded Partnership”); and (ii)
diversify its holdings so that, at the end of each quarter of each taxable year (a) at least 50% of the value of its total assets
is represented by cash and cash items (including receivables), U.S. government securities, the securities of other regulated investment
companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund’s total assets and not more than 10% of the outstanding voting securities of such issuer and
(b) not more than 25% of the value of the Fund’s total assets is invested in the securities of (I) any one issuer (other
than U.S. government securities and the securities of other RICs), (II) any two or more issuers in which the Fund owns more than
20% or more of the voting stock and that are determined to be engaged in the same business or similar or related trades or businesses
or (III) any one or more Qualified Publicly Traded Partnerships.
The
investments of the Fund in partnerships, including Qualified Publicly Traded Partnerships, may result in the Fund being subject
to state, local, or foreign income, and franchise or withholding tax liabilities.
As
a RIC, the Fund generally is not or will not be, as the case may be, subject to U.S. federal income tax on income and gains that
it distributes each taxable year to stockholders, if it distributes at least 90% of the sum of the Fund’s (i) investment
company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gain
over net long-term capital loss and other taxable income, other than any net long-term capital gain, reduced by deductible expenses)
determined without regard to the deduction for dividends paid and (ii) its net tax-exempt interest (the excess of its gross tax-exempt
interest over certain disallowed deductions). The Fund intends to distribute at least annually substantially all of such income.
The Fund will be subject to income tax at regular corporation rates on any taxable income or gains that it does not distribute
to its stockholders.
The
Fund may be able to cure a failure to derive 90% of its income from the sources specified above or a failure to diversify its
holdings in the manner described above by paying a tax, disposing of certain assets, or both. If, in any taxable year, the Fund
fails one of these tests and does not timely cure the failure, the Fund will be taxed in the same manner as an ordinary corporation
and distributions to its shareholders will not be deductible by the Fund in computing its taxable income.
Amounts
not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax at the Fund level. To avoid the tax, the Fund must distribute during each calendar year an amount at least equal to
the sum of (i) 98% of its ordinary income (not taking into account any capital gain or loss) for the calendar year, (ii) 98.2%
of its capital gain in excess of its capital loss (adjusted for certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year (unless an election is made to use the fund’s fiscal year), and (iii) certain undistributed
amounts from previous years on which a fund paid no federal income tax. While the Fund intends to distribute any income and capital
gain in the manner necessary to minimize imposition of the 4% excise tax, there can be no assurance that sufficient amounts of
the Fund’s taxable income and capital gain will be distributed to avoid entirely the imposition of the tax. In that event,
the Fund will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirement.
A
distribution will be treated as paid during the calendar year if it is paid during the calendar year or declared by the Fund in
October, November or December of the year, payable to stockholders of record on a date during such a month and paid by the Fund
during January of the following year. Any such distributions paid during January of the following year will be deemed to be received
no later than December 31 of the year the distributions are declared, rather than when the distributions are received.
If
the Fund were unable to satisfy the 90% distribution requirement or otherwise were to fail to qualify as a RIC in any year, it
would be taxed in the same manner as an ordinary corporation and distributions to the Fund’s stockholders would not be deductible
by the Fund in computing its taxable income. To qualify again to be taxed as a RIC in a subsequent year, the Fund would be required
to distribute to its stockholders its earnings and profits attributable to non-RIC years. In addition, if the Fund failed to qualify
as a RIC for a period greater than two taxable years, then the Fund would be required to elect to recognize and pay tax on any
net built-in gain with respect to certain of its assets (the excess of aggregate gain, including items of income, over aggregate
loss that would have been realized with respect to such assets if the Fund had been liquidated) or, alternatively, be subject
to taxation on such built-in gain recognized for a period of ten years, in order to qualify as a RIC in a subsequent year.
Gain
or loss on the sales of securities by the Fund will generally be long-term capital gain or loss if the securities have been held
by the Fund for more than one year. Gain or loss on the sale of securities held for one year or less will be short-term capital
gain or loss.
Foreign
currency gain or loss on non-U.S. dollar-denominated securities and on any non-U.S. dollar-denominated futures contracts, options
and forward contracts that are not section 1256 contracts (as defined below) generally will be treated as ordinary income and
loss.
Investments
by the Fund in certain “passive foreign investment companies” (“PFICs”), as defined in the Code, could
subject the Fund to federal income tax (including interest charges) on certain distributions or dispositions with respect to those
investments which cannot be eliminated by making distributions to stockholders. Elections may be available to the Fund to mitigate
the effect of this tax provided that the PFIC complies with certain reporting requirements, but such elections generally accelerate
the recognition of income without the receipt of cash. Dividends paid by PFICs will not qualify for the reduced tax rates discussed
below under “Taxation of Stockholders.”
As
a result of investing in stock of PFICs or securities purchased at a discount or any other investment that produces income that
is not matched by a corresponding cash distribution to the Fund, the Fund could be required to include in current income, income
it has not yet received. Any such income would be treated as income earned by the Fund and therefore would be subject to the distribution
requirements of the Code. This might prevent the Fund from distributing 90% of its investment company taxable income as is required
in order to avoid Fund-level federal income taxation on all of its income, or might prevent the Fund from distributing enough
ordinary income and capital gain net income to avoid completely the imposition of the excise tax. To avoid this result, the Fund
may be required to borrow money or dispose of securities to be able to make distributions to its stockholders.
The
Fund may invest in debt obligations purchased at a discount with the result that the Fund may be required to accrue income for
U.S. federal income tax purposes before amounts due under the obligations are paid. The Fund may also invest in securities rated
in the medium to lower rating categories of nationally recognized rating organizations, and in unrated securities (“high
yield securities”). A portion of the interest payments on such high yield securities may be treated as dividends for certain
U.S. federal income tax purposes.
If
the Fund does not meet the asset coverage requirements of the 1940 Act and the Articles Supplementary, the Fund will be required
to suspend distributions to the holders of common stock until the asset coverage is restored. Such a suspension of distributions
might prevent the Fund from distributing 90% of its investment company taxable income as is required in order to avoid fund-level
federal income taxation on all of its income, or might prevent the fund from distributing enough income and capital gain net income
to avoid completely imposition of the excise tax.
Certain
of the Fund’s investment practices are subject to special and complex U.S. federal income tax provisions that may, among
other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert lower taxed
long-term capital gains into higher taxed short-term capital gains or ordinary income, (iii) convert ordinary loss or a deduction
into capital loss (the deductibility of which is more limited), (iv) cause a fund to recognize income or gain without a corresponding
receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely
alter the characterization of certain complex financial transactions and (vii) produce income that will not qualify as good income
for purposes of the 90% annual gross income requirement described above. The Fund will monitor its transactions and may make certain
tax elections to mitigate the effect of these rules and prevent disqualification of the fund as a regulated investment company.
Foreign
Taxes
Since
the Fund may invest in foreign securities, income from such securities may be subject to non-U.S. taxes. The Fund expects to invest
less than 35% of its total assets in foreign securities. As long as the Fund continues to invest less than 35% of its assets in
foreign securities it will not be eligible to elect to “pass-through” to stockholders of a fund the ability to use
the foreign tax deduction or foreign tax credit for foreign taxes paid with respect to qualifying taxes.
Taxation
of Stockholders
The
Fund will determine either to distribute or to retain for reinvestment all or part of its net capital gain. If any such gain is
retained, the Fund will be subject to a federal corporate income tax of 21% of such amount. In that event, the Fund expects to
designate the retained amount as undistributed capital gain in a notice to its stockholders, each of whom (i) will be required
to include in income for tax purposes as long-term capital gain its share of such undistributed amounts, (ii) will be entitled
to credit its proportionate share of the tax paid by the Fund against its federal income tax liability and to claim refunds to
the extent that the credit exceeds such liability and (iii) will increase its basis in its shares of the Fund by an amount equal
to 79% of the amount of undistributed capital gain included in such stockholder’s gross income. Organizations or persons
not subject to U.S. federal income tax on such capital gain will be entitled to a refund of their pro rata share of such taxes
paid by the Fund upon filing appropriate returns or claims for refund with the IRS.
Distributions
paid by the Fund from its investment company taxable income, which includes net short-term capital gain, generally are taxable
as ordinary income to the extent of the Fund’s earnings and profits. Such distributions, if reported by the Fund, may, however,
qualify (provided holding period and other requirements are met by the Fund and its stockholders) (i) for the dividends received
deduction available to corporations, but only to the extent that the Fund’s income consists of dividend income from U.S.
corporations and (ii) as qualified dividend income eligible for the reduced maximum federal tax rate to individuals of 20% to
the extent that the Fund receives qualified dividend income. Qualified dividend income is, in general, dividend income from taxable
domestic corporations and certain qualified foreign corporations (e.g., generally, foreign corporations incorporated in
a possession of the United States or in certain countries with a qualifying comprehensive tax treaty with the United States, or
whose shares with respect to which such dividend is paid is readily tradable on an established securities market in the United
States). A qualified foreign corporation does not include a foreign corporation which for the taxable year of the corporation
in which the dividend was paid, or the preceding taxable year, is a PFIC. If the Fund engages in certain securities lending transactions,
the amount received by the Fund that is the equivalent of the dividends paid by the issuer on the securities loaned will not be
eligible for qualified dividend income treatment. Distributions of net capital gain reported as capital gain distributions, if
any, are taxable to stockholders at rates applicable to long-term capital gain, whether paid in cash or in shares, and regardless
of how long the stockholder has held the Fund’s shares. Capital gain distributions are not eligible for the dividends received
deduction. The maximum federal tax rate on net long-term capital gain of individuals is currently 20%. Distributions in excess
of the Fund’s earnings and profits will first reduce the adjusted tax basis of a holder’s shares and, after such adjusted
tax basis is reduced to zero, will constitute capital gain to such holder (assuming the shares are held as a capital asset). Investment
company taxable income (other than qualified dividend income) will currently be taxed at a maximum federal rate of 37%. For corporate
taxpayers, both investment company taxable income and net capital gain are taxed at a maximum federal rate of 21%. State and local
taxes may also apply.
If
an individual receives a dividend that is eligible for qualified dividend income treatment, and such dividend constitutes an “extraordinary
dividend,” any loss on the sale or exchange of shares in respect of which the extraordinary dividend was paid, then the
loss will be long-term capital loss to the extent of such extraordinary dividend. An “extraordinary dividend” for
this purpose is generally a dividend (i) in an amount greater than or equal to 5% of the taxpayer’s tax basis (or trading
value) in a share of preferred stock (or 10% of the taxpayer’s tax basis (or trading value) in a share of common stock),
aggregating dividends with ex-dividend dates within an 85-day period or (ii) in an amount greater than 20% of the taxpayer’s
tax basis (or trading value) in a share of stock, aggregating dividends with ex-dividend dates within a 365-day period.
The
IRS currently requires that a registered investment company that has two or more classes of stock allocate to each such class
proportionate amounts of each type of its income (such as ordinary income, capital gains, dividends qualifying for the dividends
received deduction (“DRD”) and qualified dividend income) based upon the percentage of total dividends paid out of
current or accumulated earnings and profits to each class for the tax year. Accordingly, the Fund intends each year to allocate
capital gain dividends, dividends qualifying for the DRD and dividends that constitute qualified dividend income, if any, between
its common stock and preferred stock in proportion to the total dividends paid out of current or accumulated earnings and profits
to each class with respect to such tax year. Distributions in excess of the Fund’s current and accumulated earnings and
profits, if any, however, will not be allocated proportionately among the common stock and preferred stock. Since the Fund’s
current and accumulated earnings and profits will first be used to pay dividends on its preferred stock, distributions in excess
of such earnings and profits, if any, will be made disproportionately to holders of common stock.
Stockholders
may be entitled to offset their capital gain distributions (but not distributions eligible for qualified dividend income treatment)
with capital loss. There are a number of statutory provisions affecting when capital loss may be offset against capital gain,
and limiting the use of loss from certain investments and activities. Accordingly, stockholders with capital loss are urged to
consult their tax advisers.
The
price of stock purchased at any time may reflect the amount of a forthcoming distribution. Those purchasing stock just prior to
a distribution will receive a distribution which will be taxable to them even though it represents in part a return of invested
capital.
Certain
types of income received by the Fund from real estate investment trusts (“REITs”), real estate mortgage investment
conduits (“REMICs”), taxable mortgage pools or other investments may cause the Fund to designate some or all of its
distributions as “excess inclusion income.” To Fund stockholders such excess inclusion income may (1) constitute taxable
income, as “unrelated business taxable income” (“UBTI”) for those stockholders
The
Foreign Account Tax Compliance Act (“FATCA”)
A
30% withholding tax on your Fund’s distributions, including capital gains distributions, and on gross proceeds from the
sale or other disposition of shares of the Fund generally applies if paid to a foreign entity unless: (i) if the foreign entity
is a “foreign financial institution,” it undertakes certain due diligence, reporting, withholding and certification
obligations, (ii) if the foreign entity is not a “foreign financial institution,” it identifies certain of its U.S.
investors or (iii) the foreign entity is otherwise excepted under FATCA. If required under the rules above and subject to the
applicability of any intergovernmental agreements between the United States and the relevant foreign country, withholding under
FATCA applies: (i) with respect to certain distributions from your Fund; and (ii) with respect to certain capital gains distributions
and gross proceeds from a sale or disposition of Fund shares that occur on or after January 1, 2019. If withholding is required
under FATCA on a payment related to your shares, investors that otherwise would not be subject to withholding (or that otherwise
would be entitled to a reduced rate of withholding) on such payment generally will be required to seek a refund or credit from
the IRS to obtain the benefits of such exemption or reduction. The Fund will not pay any additional amounts in respect to amounts
withheld under FATCA. You should consult your tax advisor regarding the effect of FATCA based on your individual circumstances.
Backup
Withholding
The
Fund may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable to non-corporate
stockholders who fail to provide the Fund with their correct taxpayer identification number or to make required certifications,
or who have been notified by the IRS that they are subject to backup withholding. The current backup withholding rate is 24%.
Backup withholding is not an additional tax. Any amounts withheld may be refunded or credited against such stockholder’s
U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.
The
foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury regulations presently in
effect. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury regulations promulgated
thereunder. The Code and the Treasury regulations are subject to change by legislative, judicial, or administrative action, either
prospectively or retroactively. Persons considering an investment in shares of the Fund should consult their own tax advisers
regarding the purchase, ownership and disposition of shares of the Fund.
BENEFICIAL
OWNERS
The
following table sets forth the beneficial ownership of each person (including any group) known to the Fund to be deemed the beneficial
owner of more than 5% of the outstanding shares of common stock of the Fund as of December 30, 2020:
Name and Address
of Beneficial Owner(s)
|
Title of Class
|
Amount of Shares
and Nature of Ownership
|
Percent of Class
|
First Trust Portfolios LP, Suite 400, 120 East Liberty Drive, Wheaton, IL 60187
|
Common
|
1,802,257 (beneficial)
|
7.1%
|
Mario J. Gabelli and affiliates, One Corporate Center, Rye, NY 10580-1422
|
Common
|
1,963,134 (beneficial)*
|
7.7%
|
|
*
|
Comprised of 757,455 shares of Common Stock owned directly by Mr. Gabelli, 19,702 shares of Common Stock owned by a family partnership
for which Mr. Gabelli serves as general partner, 26,667 shares of Common Stock owned by GPJ Retirement Partners, LLC., 13,334 shares of
Common Stock owned by Gabelli Foundation, 846,496 shares of Common Stock owned by GAMCO Investors, Inc. or its affiliates, and 319,910
shares of Common Stock owned by Associated Capital Group, Inc. and 2,335 shares of Common Stock owned by Gabelli & Company Investment
Advisers, Inc.
|
As
of December 31, 2020, there were no persons known to the Fund to be beneficial owners of more than 5% of the Fund’s outstanding
shares of Preferred Stock.
As
of December 31, 2020 the Directors and Officers of the Fund as a group, excluding Mario J. Gabelli, beneficially owned less than
1% of the outstanding shares of the Fund’s common stock and less than 1% of the outstanding shares of the Fund’s Preferred
Stock.
GENERAL
INFORMATION
Book-Entry-Only
Issuance
The
Depository Trust Company (“DTC”) will act as securities depository for the securities offered pursuant to the Prospectus.
The information in this section concerning DTC and DTC’s book entry system is based upon information obtained from DTC.
The securities offered hereby initially will be issued only as fully registered securities registered in the name of Cede &
Co. (as nominee for DTC). One or more fully registered global security certificates initially will be issued, representing in
the aggregate the total number of securities, and deposited with DTC.
DTC
is a limited purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning
of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of
the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds securities that its participants deposit with DTC. DTC also facilitates the
settlement among participants of securities transactions, such as transfers and pledges, in deposited securities through electronic
computerized book entry changes in participants’ accounts, thereby eliminating the need for physical movement of securities
certificates. Direct DTC participants include brokers and dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to the DTC system is also available to others such as brokers and dealers, banks, and trust companies that
clear through or maintain a custodial relationship with a direct participant, either directly or indirectly through other entities.
Purchases
of securities within the DTC system must be made by or through direct participants, which will receive a credit for the securities
on DTC’s records. The ownership interest of each actual purchaser of a security, a beneficial owner, is in turn to be recorded
on the direct or indirect participants’ records. Beneficial owners will not receive written confirmation from DTC of their
purchases, but beneficial owners are expected to receive written confirmations providing details of the transactions, as well
as periodic statements of their holdings, from the direct or indirect participants through which the beneficial owners purchased
securities. Transfers of ownership interests in securities are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive certificates representing their ownership interests
in securities, except as provided herein.
DTC
has no knowledge of the actual beneficial owners of the securities being offered pursuant to the prospectus; DTC’s records
reflect only the identity of the direct participants to whose accounts such securities are credited, which may or may not be the
beneficial owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance
of notices and other communications by DTC to direct participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
Payments
on the securities will be made to DTC. DTC’s practice is to credit direct participants’ accounts on the relevant payment
date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not
receive payments on such payment date. Payments by participants to beneficial owners will be governed by standing instructions
and customary practices and will be the responsibility of such participant and not of DTC or the Fund, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of the
Fund, disbursement of such payments to direct participants is the responsibility of DTC, and disbursement of such payments to
the beneficial owners is the responsibility of direct and indirect participants. Furthermore each beneficial owner must rely on
the procedures of DTC to exercise any rights under the securities.
DTC
may discontinue providing its services as securities depository with respect to the securities at any time by giving reasonable
notice to the Fund. Under such circumstances, in the event that a successor securities depository is not obtained, certificates
representing the securities will be printed and delivered.
Proxy
Voting Procedures
The
Fund has adopted the proxy voting procedures of the Investment Adviser and has directed the Investment Adviser to vote all proxies
relating to the Fund’s voting securities in accordance with such procedures. A copy of the Fund’s proxy voting policies
and procedures is attached as Appendix A.
Information
regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30
is available without charge, upon request, by calling (800) 422-3554 or on the SEC’s website at http://www.sec.gov.
Code
of Ethics
The
Fund and the Investment Adviser have adopted a code of ethics (the “Code of Ethics”) under Rule 17j-1 under the 1940
Act. The Code of Ethics permits personnel, subject to the Code of Ethics and its restrictive provisions, to invest in securities,
including securities that may be purchased or held by the Fund. The Code of Ethics can be reviewed and copied at the SEC’s
Public Reference Room in Washington, D.C. Information on the operations of the Reference Room may be obtained by calling the SEC
at 202-551-8090. The Code of Ethics is also available on the EDGAR database on the SEC’s Internet web site at http://www.sec.gov.
Copies of the Code of Ethics may also be obtained, after paying a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Room, Washington, D.C. 20549-0102.
Financial
Statements
The
audited financial statements included in the annual report to the Fund’s stockholders for the year ended December
31, 2020, together with the report of PricewaterhouseCoopers LLP are incorporated herein by reference to the Fund’s annual
report. All other portions of the annual report are not incorporated herein by reference and are not part of the registration
statement.
Custodian,
Transfer Agent, Auction Agent, and Dividend Disbursing Agent
State
Street Bank and Trust Company, located at One Lincoln Street, Boston, Massachusetts 02111 (the “Custodian”), serves
as the custodian of the Fund’s assets pursuant to a custody agreement. Under the custody agreement, the Custodian holds
the Fund’s assets in compliance with the 1940 Act. For its services, the Custodian receives a monthly fee based upon the
average weekly value of the total assets of the Fund, plus certain charges for securities transactions.
Computershare
Trust Company, N.A. (“Computershare”), located at 250 Royall Street, Canton, Massachusetts 02021, serves as the Fund’s
dividend disbursing agent, as agent under the Fund’s automatic dividend reinvestment and voluntary cash purchase plans and
as transfer agent and registrar for shares of common stock of the Fund.
Computershare
also serves as the transfer agent, registrar, dividend paying agent, and redemption agent with respect to the Series E Preferred
and Series G Preferred.
The
Bank of New York Mellon, located at 101 Barclay Street, New York, NY 10286, serves as the Fund’s auction agent, transfer
agent, registrar, dividend paying agent and redemption agent with respect to the Series C Auction Rate Preferred.
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers
LLP serves as the Independent Registered Public Accounting Firm of the Fund and audits the financial statements of the Fund. PricewaterhouseCoopers
LLP is located at 300 Madison Avenue, New York, New York 10017.
APPENDIX
A
The
Voting of Proxies on Behalf of Clients
Rules
204(4)-2 and 204-2 under the Investment Advisers Act of 1940 and Rule 30b1-4 under the Investment Company Act of 1940 require
investment advisers to adopt written policies and procedures governing the voting of proxies on behalf of their clients.
These
procedures will be used by GAMCO Asset Management Inc., Gabelli Funds, LLC, Gabelli Securities, Inc., and Teton Advisors, Inc.
(collectively, the “Advisers”) to determine how to vote proxies relating to portfolio securities held by their clients,
including the procedures that the Advisers use when a vote presents a conflict between the interests of the shareholders of an
investment company managed by one of the Advisers, on the one hand, and those of the Advisers; the principal underwriter; or any
affiliated person of the investment company, the Advisers, or the principal underwriter. These procedures will not apply where
the Advisers do not have voting discretion or where the Advisers have agreed to with a client to vote the client’s proxies
in accordance with specific guidelines or procedures supplied by the client (to the extent permitted by ERISA).
|
I.
|
Proxy
Voting Committee
|
The
Proxy Voting Committee was originally formed in April 1989 for the purpose of formulating guidelines and reviewing proxy statements
within the parameters set by the substantive proxy voting guidelines originally published in 1988 and updated periodically, a
copy of which are appended as Exhibit A. The Committee will include representatives of Research, Administration, Legal, and the
Advisers. Additional or replacement members of the Committee will be nominated by the Chairman and voted upon by the entire Committee.
Meetings
are held on an as needed basis to form views on the manner in which the Advisers should vote proxies on behalf of their clients.
In
general, the Director of Proxy Voting Services, using the Proxy Guidelines, recommendations of Institutional Shareholder Services
Inc. (“ISS”), Glass Lewis &Co., LLC (“Glass Lewis”), other third-party services and the analysts of
G.research, Inc., will determine how to vote on each issue. For non-controversial matters, the Director of Proxy Voting Services
may vote the proxy if the vote is: (1) consistent with the recommendations of the issuer’s Board of Directors and not contrary
to the Proxy Guidelines; (2) consistent with the recommendations of the issuer’s Board of Directors and is a non-controversial
issue not covered by the Proxy Guidelines; or (3) the vote is contrary to the recommendations of the Board of Directors but is
consistent with the Proxy Guidelines. In those instances, the Director of Proxy Voting Services or the Chairman of the Committee
may sign and date the proxy statement indicating how each issue will be voted.
All
matters identified by the Chairman of the Committee, the Director of Proxy Voting Services or the Legal Department as controversial,
taking into account the recommendations of ISS, Glass Lewis, or other third party services and the analysts of G.research, Inc.,
will be presented to the Proxy Voting Committee. If the Chairman of the Committee, the Director of Proxy Voting Services or the
Legal Department has identified the matter as one that (1) is controversial; (2) would benefit from deliberation by the Proxy
Voting Committee; or (3) may give rise to a conflict of interest between the Advisers and their clients, the Chairman of the Committee
will initially determine what vote to recommend that the Advisers should cast and the matter will go before the Committee.
|
A.
|
Conflicts
of Interest.
|
The
Advisers have implemented these proxy voting procedures in order to prevent conflicts of interest from influencing their proxy
voting decisions. By following the Proxy Guidelines, as well as the recommendations of ISS, Glass Lewis, other third-party services
and the analysts of G.research, the Advisers are able to avoid, wherever possible, the influence of potential conflicts of interest.
Nevertheless, circumstances may arise in which one or more of the Advisers are faced with a conflict of interest or the appearance
of a conflict of interest in connection with its vote. In general, a conflict of interest may arise when an Adviser knowingly
does business with an issuer, and may appear to have a material conflict between its own interests and the interests of the shareholders
of an investment company managed by one of the Advisers regarding how the proxy is to be voted. A conflict also may exist when
an Adviser has actual knowledge of a material business arrangement between an issuer and an affiliate of the Adviser.
In
practical terms, a conflict of interest may arise, for example, when a proxy is voted for a company that is a client of one of
the Advisers, such as GAMCO Asset Management Inc. A conflict also may arise when a client of one of the Advisers has made a shareholder
proposal in a proxy to be voted upon by one or more of the Advisers. The Director of Proxy Voting Services, together with the
Legal Department, will scrutinize all proxies for these or other situations that may give rise to a conflict of interest with
respect to the voting of proxies.
|
B.
|
Operation
of Proxy Voting Committee
|
For
matters submitted to the Committee, each member of the Committee will receive, prior to the meeting, a copy of the proxy statement,
any relevant third party research, a summary of any views provided by the Chief Investment Officer and any recommendations by
G.research, Inc. analysts. The Chief Investment Officer or the G.research, Inc. analysts may be invited to present their viewpoints.
If the Director of Proxy Voting Services or the Legal Department believe that the matter before the committee is one with respect
to which a conflict of interest may exist between the Advisers and their clients, counsel will provide an opinion to the Committee
concerning the conflict. If the matter is one in which the interests of the clients of one or more of the Advisers may diverge,
counsel will so advise and the Committee may make different recommendations as to different clients. For any matters where the
recommendation may trigger appraisal rights, counsel will provide an opinion concerning the likely risks and merits of such an
appraisal action.
Each
matter submitted to the Committee will be determined by the vote of a majority of the members present at the meeting. Should the
vote concerning one or more recommendations be tied in a vote of the Committee, the Chairman of the Committee will cast the deciding
vote. The Committee will notify the proxy department of its decisions and the proxies will be voted accordingly.
Although
the Proxy Guidelines express the normal preferences for the voting of any shares not covered by a contrary investment guideline
provided by the client, the Committee is not bound by the preferences set forth in the Proxy Guidelines and will review each matter
on its own merits. The Advisers subscribe to ISS and Glass Lewis, which supply current information on companies, matters being
voted on, regulations, trends in proxy voting and information on corporate governance issues.
If
the vote cast either by the analyst or as a result of the deliberations of the Proxy Voting Committee runs contrary to the recommendation
of the Board of Directors of the issuer, the matter will be referred to legal counsel to determine whether an amendment to the
most recently filed Schedule 13D is appropriate.
|
II.
|
Social
Issues and Other Client Guidelines
|
If
a client has provided special instructions relating to the voting of proxies, they should be noted in the client’s account
file and forwarded to the proxy department. This is the responsibility of the investment professional or sales assistant for the
client. In accordance with Department of Labor guidelines, the Advisers’ policy is to vote on behalf of ERISA accounts in
the best interest of the plan participants with regard to social issues that carry an economic impact. Where an account is not
governed by ERISA, the Advisers will vote shares held on behalf of the client in a manner consistent with any individual investment/voting
guidelines provided by the client. Otherwise the Advisers may abstain with respect to those shares.
Specific
to the Gabelli ESG Fund, the Proxy Voting Committee will rely on the advice of the portfolio managers of the Gabelli ESG Fund
to provide voting recommendations on the securities held in the portfolio.
|
III.
|
Client
Retention of Voting Rights
|
If
a client chooses to retain the right to vote proxies or if there is any change in voting authority, the following should be notified
by the investment professional or sales assistant for the client.
|
-
|
Investment
professional assigned to the account
|
In
the event that the Board of Directors (or a Committee thereof) of one or more of the investment companies managed by one of the
Advisers has retained direct voting control over any security, the Proxy Voting Department will provide each Board Member (or
Committee member) with a copy of the proxy statement together with any other relevant information including recommendations of
ISS or other third-party services.
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IV.
|
Proxies
of Certain Non-U.S. Issuers
|
Proxy
voting in certain countries requires “share-blocking.” Shareholders wishing to vote their proxies must deposit their
shares shortly before the date of the meeting with a designated depository. During the period in which the shares are held with
a depository, shares that will be voted at the meeting cannot be sold until the meeting has taken place and the shares are returned
to the clients’ custodian. Absent a compelling reason to the contrary, the Advisers believe that the benefit to the client
of exercising the vote is outweighed by the cost of voting and therefore, the Advisers will not typically vote the securities
of non-U.S. issuers that require share-blocking.
In
addition, voting proxies of issuers in non-US markets may also give rise to a number of administrative issues to prevent the Advisers
from voting such proxies. For example, the Advisers may receive the notices for shareholder meetings without adequate time to
consider the proposals in the proxy or after the cut-off date for voting. In these cases the Advisers will look to Glass Lewis
or other third party service for recommendations on how to vote. Other markets require the Advisers to provide local agents with
power of attorney prior to implementing their respective voting instructions on the proxy. Although it is the Advisers’
policies to vote the proxies for its clients for which they have proxy voting authority, in the case of issuers in non-US markets,
we vote client proxies on a best efforts basis.
The
Proxy Voting Department will retain a record of matters voted upon by the Advisers for their clients. The Advisers will supply
information on how they voted a client’s proxy upon request from the client.
The
complete voting records for each registered investment company (the “Fund”) that is managed by the Advisers will be
filed on Form N-PX for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s
proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge,
upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to Gabelli Funds, LLC at One Corporate Center, Rye, NY 10580-1422;
or (iii) visiting the SEC’s website at www.sec.gov.
The
Advisers’ proxy voting records will be retained in compliance with Rule 204-2 under the Investment Advisers Act.
|
1.
|
Custodian
banks, outside brokerage firms and clearing firms are responsible for forwarding proxies
directly to the Advisers.
|
Proxies
are received in one of two forms:
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●
|
Shareholder
Vote Instruction Forms (“VIFs”) - Issued by Broadridge Financial Solutions,
Inc. (“Broadridge”). Broadridge is an outside service contracted by the various
institutions to issue proxy materials.
|
|
●
|
Proxy
cards which may be voted directly.
|
|
2.
|
Upon
receipt of the proxy, the number of shares each form represents is logged into the proxy
system, electronically or manually, according to security.
|
|
3.
|
Upon
receipt of instructions from the proxy committee, the votes are cast and recorded for
each account.
|
Records
have been maintained on the ProxyEdge system.
ProxyEdge
records include:
Security
Name and Cusip Number
Date and Type of Meeting (Annual, Special, Contest)
Client Name
Adviser or Fund Account Number
Directors’ Recommendation
How the Adviser voted for the client on item
|
4.
|
VIFs
are kept alphabetically by security. Records for the current proxy season are located
in the Proxy Voting Department office. In preparation for the upcoming season, files
are transferred to an offsite storage facility during January/February.
|
|
5.
|
If
a proxy card or VIF is received too late to be voted in the conventional matter, every
attempt is made to vote including:
|
|
●
|
When
a solicitor has been retained, the solicitor is called. At the solicitor’s direction,
the proxy is faxed or sent electronically.
|
|
●
|
In
some circumstances VIFs can be faxed or sent electronically to Broadridge up until the
time of the meeting.
|
|
6.
|
In
the case of a proxy contest, records are maintained for each opposing entity.
|
|
a)
|
At
times it may be necessary to vote the shares in person. In this case, a “legal
proxy” is obtained in the following manner:
|
|
●
|
Banks
and brokerage firms using the services at Broadridge:
|
Broadridge
is notified that we wish to vote in person. Broadridge issues individual legal proxies and sends them back via email or overnight
(or the Adviser can pay messenger charges). A lead-time of at least two weeks prior to the meeting is needed to do this. Alternatively,
the procedures detailed below for banks not using Broadridge may be implemented.
|
●
|
Banks
and brokerage firms issuing proxies directly:
|
The
bank is called and/or faxed and a legal proxy is requested.
All
legal proxies should appoint:
“Representative
of [Adviser name] with full power of substitution.”
|
b)
|
The
legal proxies are given to the person attending the meeting along with the limited power
of attorney.
|
Exhibit
A
Proxy Guidelines
PROXY
VOTING GUIDELINES
General
Policy Statement
It
is the policy of GAMCO Investors, Inc, and its affiliated advisers (collectively “the Advisers”) to vote in the best
economic interests of our clients. As we state in our Magna Carta of Shareholders Rights, established in May 1988, we are neither
for nor against management. We are for shareholders.
At
our first proxy committee meeting in 1989, it was decided that each proxy statement should be evaluated on its own merits within
the framework first established by our Magna Carta of Shareholders Rights. The attached guidelines serve to enhance that broad
framework.
We
do not consider any issue routine. We take into consideration all of our research on the company, its directors, and their short
and long-term goals for the company. In cases where issues that we generally do not approve of are combined with other issues,
the negative aspects of the issues will be factored into the evaluation of the overall proposals but will not necessitate a vote
in opposition to the overall proposals.
Board
of Directors
We
do not consider the election of the Board of Directors a routine issue. Each slate of directors is evaluated on a case-by-case
basis.
Factors
taken into consideration include:
|
●
|
Historical
responsiveness to shareholders
|
This
may include such areas as:
- Paying
greenmail
- Failure
to adopt shareholder resolutions receiving a majority of shareholder votes
|
●
|
Nominating
committee in place
|
|
●
|
Number
of outside directors on the board
|
Selection
of Auditors
In
general, we support the Board of Directors’ recommendation for auditors.
Blank
Check Preferred Stock
We
oppose the issuance of blank check preferred stock.
Blank
check preferred stock allows the company to issue stock and establish dividends, voting rights, etc. without further shareholder
approval.
Classified
Board
A
classified board is one where the directors are divided into classes with overlapping terms. A different class is elected at each
annual meeting.
While
a classified board promotes continuity of directors facilitating long range planning, we feel directors should be accountable
to shareholders on an annual basis. We will look at this proposal on a case-by-case basis taking into consideration the board’s
historical responsiveness to the rights of shareholders.
Where
a classified board is in place we will generally not support attempts to change to an annually elected board.
When
an annually elected board is in place, we generally will not support attempts to classify the board.
Increase
Authorized Common Stock
The
request to increase the amount of outstanding shares is considered on a case-by-case basis.
Factors
taken into consideration include:
|
●
|
Future
use of additional shares
|
- Stock
split
- Stock
option or other executive compensation plan
- Finance
growth of company/strengthen balance sheet
- Aid
in restructuring
- mprove
credit rating
- Implement
a poison pill or other takeover defense
|
●
|
Amount
of stock currently authorized but not yet issued or reserved for stock option plans
|
|
●
|
Amount
of additional stock to be authorized and its dilutive effect
|
We
will support this proposal if a detailed and verifiable plan for the use of the additional shares is contained in the proxy statement.
Confidential
Ballot
We
support the idea that a shareholder’s identity and vote should be treated with confidentiality.
However,
we look at this issue on a case-by-case basis.
In
order to promote confidentiality in the voting process, we endorse the use of independent Inspectors of Election.
Cumulative
Voting
In
general, we support cumulative voting.
Cumulative
voting is a process by which a shareholder may multiply the number of directors being elected by the number of shares held on
record date and cast the total number for one candidate or allocate the voting among two or more candidates.
Where
cumulative voting is in place, we will vote against any proposal to rescind this shareholder right.
Cumulative
voting may result in a minority block of stock gaining representation on the board. When a proposal is made to institute cumulative
voting, the proposal will be reviewed on a case-by-case basis. While we feel that each board member should represent all shareholders,
cumulative voting provides minority shareholders an opportunity to have their views represented.
Director
Liability and Indemnification
We
support efforts to attract the best possible directors by limiting the liability and increasing the indemnification of directors,
except in the case of insider dealing.
Equal
Access to the Proxy
The
SEC’s rules provide for shareholder resolutions. However, the resolutions are limited in scope and there is a 500 word limit
on proponents’ written arguments. Management has no such limitations. While we support equal access to the proxy, we would
look at such variables as length of time required to respond, percentage of ownership, etc.
Fair
Price Provisions
Charter
provisions requiring a bidder to pay all shareholders a fair price are intended to prevent two-tier tender offers that may be
abusive. Typically, these provisions do not apply to board-approved transactions.
We
support fair price provisions because we feel all shareholders should be entitled to receive the same benefits.
Reviewed
on a case-by-case basis.
Golden
Parachutes
Golden
parachutes are severance payments to top executives who are terminated or demoted after a takeover.
We
support any proposal that would assure management of its own welfare so that they may continue to make decisions in the best interest
of the company and shareholders even if the decision results in them losing their job. We do not, however, support excessive golden
parachutes. Therefore, each proposal will be decided on a case-by- case basis.
Anti-Greenmail
Proposals
We
do not support greenmail. An offer extended to one shareholder should be extended to all shareholders equally across the board.
Limit
Shareholders’ Rights to Call Special Meetings
We
support the right of shareholders to call a special meeting.
Reviewed
on a case-by-case basis.
Consideration
of Nonfinancial Effects of a Merger
This
proposal releases the directors from only looking at the financial effects of a merger and allows them the opportunity to consider
the merger’s effects on employees, the community, and consumers.
As
a fiduciary, we are obligated to vote in the best economic interests of our clients. In general, this proposal does not allow
us to do that. Therefore, we generally cannot support this proposal.
Reviewed
on a case-by-case basis.
Mergers,
Buyouts, Spin-Offs, Restructurings
Each
of the above is considered on a case-by-case basis. According to the Department of Labor, we are not required to vote for a proposal
simply because the offering price is at a premium to the current market price. We may take into consideration the long term interests
of the shareholders.
Military
Issues
Shareholder
proposals regarding military production must be evaluated on a purely economic set of criteria for our ERISA clients. As such,
decisions will be made on a case-by-case basis.
In
voting on this proposal for our non-ERISA clients, we will vote according to the client’s direction when applicable. Where
no direction has been given, we will vote in the best economic interests of our clients. It is not our duty to impose our social
judgment on others.
Northern
Ireland
Shareholder
proposals requesting the signing of the MacBride principles for the purpose of countering the discrimination of Catholics in hiring
practices must be evaluated on a purely economic set of criteria for our ERISA clients. As such, decisions will be made on a case-by-case
basis.
In
voting on this proposal for our non-ERISA clients, we will vote according to client direction when applicable. Where no direction
has been given, we will vote in the best economic interests of our clients. It is not our duty to impose our social judgment on
others.
Opt
Out of State Anti-Takeover Law
This
shareholder proposal requests that a company opt out of the coverage of the state’s takeover statutes. Example: Delaware
law requires that a buyer must acquire at least 85% of the company’s stock before the buyer can exercise control unless
the board approves.
We
consider this on a case-by-case basis. Our decision will be based on the following:
|
●
|
Management
history of responsiveness to shareholders
|
|
●
|
Other
mitigating factors
|
Poison
Pill
In
general, we do not endorse poison pills.
In
certain cases where management has a history of being responsive to the needs of shareholders and the stock is very liquid, we
will reconsider this position.
Reincorporation
Generally,
we support reincorporation for well-defined business reasons. We oppose reincorporation if proposed solely for the purpose of
reincorporating in a state with more stringent anti-takeover statutes that may negatively impact the value of the stock.
Stock
Incentive Plans
Director
and Employee Stock incentive plans are an excellent way to attract, hold and motivate directors and employees. However, each incentive
plan must be evaluated on its own merits, taking into consideration the following:
|
●
|
Dilution
of voting power or earnings per share by more than 10%.
|
|
●
|
Kind
of stock to be awarded, to whom, when and how much.
|
|
●
|
Amount
of stock already authorized but not yet issued under existing stock plans.
|
|
●
|
The
successful steps taken by management to maximize shareholder value.
|
Supermajority
Vote Requirements
Supermajority
vote requirements in a company’s charter or bylaws require a level of voting approval in excess of a simple majority of
the outstanding shares. In general, we oppose supermajority-voting requirements. Supermajority requirements often exceed the average
level of shareholder participation. We support proposals’ approvals by a simple majority of the shares voting.
Reviewed
on a case-by-case basis.
Limit
Shareholders Right to Act by Written Consent
Written
consent allows shareholders to initiate and carry on a shareholder action without having to wait until the next annual meeting
or to call a special meeting. It permits action to be taken by the written consent of the same percentage of the shares that would
be required to effect proposed action at a shareholder meeting.
Reviewed
on a case-by-case basis.
“Say-on-Pay”
/ “Say-When-on-Pay” / “Say-on-Golden-Parachutes”
Required
under the Dodd-Frank Act; these proposals are non-binding advisory votes on executive compensation. We will generally vote with
the Board of Directors’ recommendation(s) on advisory votes on executive compensation (“Say-on-Pay”), advisory
votes on the frequency of voting on executive compensation (“Say-When-on-Pay”) and advisory votes relating to extraordinary
transaction executive compensation (“Say-on-Golden-Parachutes”). In those instances when we believe that it is in
our clients’ best interest, we may abstain or vote against executive compensation and/or the frequency of votes on executive
compensation and/or extraordinary transaction executive compensation advisory votes.
Proxy
Access
We
generally believe that proxy access is a useful tool to promote board accountability by requiring that a company’s proxy
materials contain not only the names of management nominees, but also any candidates nominated by long-term shareholders holding
at least a certain stake in the company. We will review proposals regarding proxy access on a case by case basis taking into account
the provisions of the proposal, the company’s current governance structure, the successful steps taken by management to
maximize shareholder value, as well as other applicable factors.
Gabelli Multimedia (NYSE:GGT-E)
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Gabelli Multimedia (NYSE:GGT-E)
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