As filed with the Securities and Exchange Commission on December 23, 2020
Securities Act File No. [ ]
Investment Company Act File No. 811-23157
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
N-2
(Check Appropriate Box or Boxes)
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REGISTRATION STATEMENT
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UNDER
THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
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Post-Effective Amendment No. [ ]
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and/or
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REGISTRATION STATEMENT
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UNDER
THE INVESTMENT COMPANY ACT OF 1940
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Amendment No. 34
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THE GABELLI MULTIMEDIA TRUST INC.
(Exact Name of Registrant as Specified in Charter)
One Corporate Center
Rye, New York 10580-1422
(Address of Principal Executive Offices)
Registrants Telephone Number, including Area Code: (800) 422-3554
Bruce N. Alpert
The
Gabelli Multimedia Trust Inc.
One Corporate Center
Rye, New York 10580-1422
(914) 921-5100
(Name and Address of Agent for Service)
Copies to:
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Peter Goldstein, Esq.
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Michael R. Rosella, Esq.
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The Gabelli Multimedia Trust Inc.
One Corporate Center
Rye,
New York 10580-1422
(914) 921-5100
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Vadim Avdeychik, Esq.
Paul Hastings LLP
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200 Park Avenue
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New York, New York 10166
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(212) 318-6800
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Approximate date of proposed offering: From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, check the following
box ☐
If any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the
Securities Act of 1933 (Securities Act), other than securities offered in connection with a dividend reinvestment plan, check the following box. ☒
If this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto, check the following box ☒
If this Form is a registration statement pursuant to General Instruction B or a post-effective amendment thereto that will become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the following box ☐
If this Form is a post-effective amendment to a
registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box ☐
It is proposed that this filing will become effective (check appropriate box):
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When declared effective pursuant to section 8(c) of the Securities Act.
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Check each box that appropriately characterizes the Registrant:
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Registered Closed-End Fund (closed-end
company that is registered under the Investment Company Act of 1940 (the Investment Company Act)).
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Business Development Company (closed-end company that intends
or has elected to be regulated as a business development company under the Investment Company Act.
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Interval Fund (Registered Closed-End Fund or a Business
Development Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act).
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A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form).
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Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act).
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Emerging Growth Company (as defined by Rule 12b-2 under the
Securities and Exchange Act of 1934).
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If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
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New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months
preceding this filing).
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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Title of Securities
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Amount Being
Registered
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Proposed
Maximum
Offering Price
Per Share
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Proposed
Maximum
Aggregate
Offering Price(1)
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Amount of
Registration Fee
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Common Shares(2)
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[●] Shares
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$[●]
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Preferred Shares(2)
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[●] Shares
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$[●]
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Subscription Rights to Purchase Common Shares(2)
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$[●]
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$[●]
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Subscription Rights to Purchase Preferred Shares(2)
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$[●]
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$[●]
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Total
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[●] Shares
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$[●]
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$400,000,000(3)
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$0(4)
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(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the registration fee. The
proposed maximum offering price per security will be determined, from time to time, by the Registrant in connection with the sale by the Registrant of the securities registered under this registration statement.
(2) Subject to Note 3 below, there is being registered hereunder an indeterminate principal amount of common stock or preferred
stock as may be sold, from time to time, including subscription rights to purchase common stock or preferred stock.
(3) In no event
will the aggregate offering price of all securities offered from time to time pursuant to this Registration Statement exceed $400 million.
(4) On [ ], the Registrant made a payment of $[ ] and claimed a credit of
$[ ] for fees attributable to $[ ] of securities previously registered and unsold under the Registrants registration statement filed on [ ] (File No.
333-[ ]) pursuant to the offset provision of Rule 457(p) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE
The information in this preliminary prospectus is not complete and may be changed. We
may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer, solicitation or sale is not permitted.
Subject to Completion
dated [ ], 2020
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
Funds 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 Funds 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 Funds 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 Funds 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
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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 December 21, 2020, the last reported sale price of our common stock was $7.94. The net asset value of the Funds common stock at the close of business on December 21, 2020 was $7.89 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 Funds 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 [ ], 2020, 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 Funds Annual and Semiannual Reports, the SAI, the table of contents of which is on page [ ] 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 Commissions
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.
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TABLE OF CONTENTS
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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 [ ], 2020 (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 December 21, 2020, the last reported sale price of our common stock was $7.94. The net asset value of the Funds common stock at the close of business on December 21, 2020 was $7.89 per share. As of September 30, 2020, the
Fund had outstanding 25,192,080 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 Funds 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.
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No assurance can be given that the Funds investment objectives will be achieved. The
investment objectives of long-term growth of capital and income are fundamental policies of the Fund. The Funds 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 Funds 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 Funds 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 Funds 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
Funds assets after payment of debts and expenses and the amounts payable to holders of the Funds preferred stock ranking senior to the shares of common stock of the Fund. As of September 30, 2020, the net assets of the Fund
attributable to its shares of common stock were $167,586,823. As of September 30, 2020, 25,192,080 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 Funds 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 September 30, 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 Funds Board (each member of the Board individually, a Director) determines that it may be advantageous to the holders of the
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Funds 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 Funds 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 Funds preferred stock exceed the Funds 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 stockholders 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 stockholders adjusted tax basis in the preferred stock, thereby increasing the stockholders
potential taxable gain or reducing the potential loss on the sale of the shares.
The distributions to the Funds preferred
stockholders for the fiscal year ended December 31, 2019, 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 Funds preferred stock.
Distributions on the Funds 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 years distributions will be based on the Funds investment activity through the end of the calendar year.
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For the fiscal year ended December 31, 2019, the Fund made distributions of $0.88 per share
of common stock, $0.0488 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 years distributions will be based on the Funds 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 Funds 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 Funds managed distribution policy. The Investment Adviser anticipates that investment of the proceeds will be made in accordance with the Funds 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
Advisers 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 Funds 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 Funds 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 Funds common stock may be affected by such factors as the Funds 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.
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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
September 30, 2020, the amount of leverage represented approximately 37% of the Funds net assets. The Funds 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
|
8
|
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 Funds 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, 2019, 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 years distributions will be based on the Funds 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 Funds 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 Funds 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
Funds common stock is not subject to redemption. The Funds 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 ConsiderationsNon-Diversified Status.
9
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 Funds 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 ConsiderationsIndustry 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 RiskInterest 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 ConsiderationsForeign 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 Funds 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
ConsiderationsDependence on Key Personnel.
10
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 Acts
asset coverage requirements could jeopardize the Funds 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. 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 Funds 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 Funds 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.
Moreover, the SEC and its staff are reportedly engaged in various initiatives and reviews that seek to improve and modernize the regulatory
structure governing investment companies. These efforts appear to be focused on risk identification and controls in various areas, including embedded 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 Funds 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.
In particular,
the U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on the Fund and on the mutual fund industry in general. The SECs 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 Fund and/or increase
overall expenses of the Fund. 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 addition, the SEC, Congress, various exchanges and regulatory and self-regulatory authorities, both
domestic and foreign, have undertaken reviews of the use of derivatives by registered investment companies, which could affect the nature and extent of instruments used by the Funds. For example, the SEC recently
re-proposed a new regulatory framework for registered investment companies use of derivatives. While the full extent of the aggregate impact of these regulations is still unclear, these regulations and
actions may adversely affect both the Fund and the instruments in which such Fund invests and its ability to execute its investment strategy. Similarly, regulatory developments in other countries may have an unpredictable and adverse impact on the
Fund.
In the aftermath of the global financial crisis, there appears to be a renewed 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 Fund and a large financial institution, a court may
similarly seek to strictly interpret terms and legal rights in favor of retail investors.
The Trump administration has called for
substantial changes to U.S. fiscal and tax policies, including comprehensive corporate and individual tax reform. In addition, the Trump administration has called for significant changes to U.S. trade, healthcare, immigration, foreign, and
government regulatory policy. In this regard, there is significant uncertainty with respect to legislation, continued operation of the U.S. government, regulation, and
11
government policy at the federal level, as well as the state and local levels. Recent events have created a climate of heightened uncertainty and introduced new and
difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications. There has been a
corresponding meaningful increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes, and fiscal and monetary policy. To the extent the U.S. Congress or Trump administration implements changes to U.S.
policy, those changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation, and other areas. Although it is
impossible to predict the impact, if any, of these changes to the Funds business, they may adversely affect the Funds business, financial condition, operating results and cash flows.
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 Funds investment adviser. The Investment Advisers fee is computed weekly and paid monthly, equal
on an annual basis to 1.00% of the Funds 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 Funds 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 stockholders 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 Funds 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, 2019, the Funds 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 Boards approval of the continuation of the investment advisory contract of the Fund is available in the Funds semiannual report to stockholders for the six months ended June 30, 2020.
Repurchase of Common Stock
The
Board has authorized the Fund to repurchase up to 1,950,000 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 Funds Board has authorized such repurchases, the Fund is not required to repurchase its common stock. In total through December 31, 2019, the Fund repurchased 1,595,468 shares Such
repurchases are subject to certain notice and other requirements under the 1940 Act. See Repurchase of Common Stock.
12
Anti-Takeover Provisions
Certain provisions of Maryland law and of the Funds 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 Funds 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 Funds 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 Funds assets pursuant to a custody agreement. Under the custody agreement, the Custodian holds the Funds 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
Funds dividend disbursing agent, as agent under the Funds 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.
13
SUMMARY OF FUND EXPENSES
The following table shows the Funds expenses, including preferred stock offering expenses, as a percentage of net assets attributable to
common stock.
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Stockholder Transaction Expenses
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|
|
|
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Sales Load (as a percentage of offering price)
|
|
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1.54%
|
(1)
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Offering Expenses (excluding Preferred Stock Offering Expenses) (as a percentage of offering
price)
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|
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0.25%
|
(1)
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Dividend Reinvestment Plan Fees
|
|
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None
|
(2)
|
Voluntary Cash Purchase Plan Purchase Transaction Fee
|
|
$
|
0.75
|
(2)
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Voluntary Cash Purchase Plan Sale Transaction Fee
|
|
$
|
2.50
|
(2)
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Preferred Stock Offering Expenses (as a percentage of net assets attributable to common
stock)
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|
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0.13%
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(3)
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Annual Expenses (as a percentage of net assets attributable to common stock)
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|
|
|
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Management Fees
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|
|
1.45%
|
(4)
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Interest Payments on Borrowed Funds
|
|
|
None
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|
Other Expenses
|
|
|
0.17%
|
(4)
|
Total Annual Expenses
|
|
|
1.62%
|
|
Dividends on Preferred Stock
|
|
|
2.26%
|
(5)
|
|
|
|
|
|
Total Annual Expenses and Dividends on Preferred Stock
|
|
|
3.88%
|
|
|
|
|
|
|
(1)
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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 $527,600 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.
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(2)
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Stockholders participating in the Funds 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.
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(3)
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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 $446.3 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.
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(4)
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The Investment Advisers fee is 1.00% annually of the Funds 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.
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(5)
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Dividends on Preferred Stock represent the aggregate of (1) the estimated annual distributions on the
existing preferred stock outstanding and (2) the distributions that would be made assuming $100 million of preferred stock is issued with a fixed dividend rate of 5.00%. There can, of course, be no guarantee that any preferred stock would
be issued or, if issued, the terms thereof.
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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.
14
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1 Year
|
|
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3 Years
|
|
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5 Years
|
|
|
10 Years
|
|
Total Expenses Incurred
|
|
$
|
54
|
|
|
$
|
132
|
|
|
$
|
212
|
|
|
$
|
419
|
|
*
|
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 Funds actual rate of return may be greater or less than the hypothetical 5% return shown in the example.
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The example includes Dividends on Preferred Stock. If Dividends on Preferred Stock were not included in the example calculation, the expenses
would be as follows (based on the same assumptions as above).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Total Expenses Incurred
|
|
$
|
32
|
|
|
$
|
66
|
|
|
$
|
102
|
|
|
$
|
204
|
|
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 Funds cost and expenses, see Management of the Fund in this Prospectus and the SAI.
15
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you under the Funds 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, 2019, and for each of the preceding four fiscal years, has been audited by PricewaterhouseCoopers LLP, the Funds independent registered
public accounting firm, whose unqualified report on such Financial Statements is incorporated by reference into the SAI. The financial information for the period ended June 30, 2020 is unaudited.
Selected data for a share of common stock outstanding throughout each year:
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|
|
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|
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|
|
|
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|
|
Six Months Ended
June 30,
2020
(Unaudited)
|
|
|
For the Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
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2014
|
|
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2013
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2012
|
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2011
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2010
|
|
Operating Performance:
|
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|
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|
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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)
|
|
|
(0.00
|
)(a)
|
|
|
0.13
|
(b)
|
|
|
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
|
|
|
(1.25
|
)
|
|
|
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
|
|
|
(1.25
|
)
|
|
|
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
|
)*(a)
|
|
|
(0.02
|
)
|
|
|
(0.00
|
)(a)
|
|
|
(0.00
|
)(a)
|
|
|
(0.00
|
)(a)
|
|
|
(0.00
|
)(a)
|
|
|
(0.00
|
)(a)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
(0.09
|
)
|
Net realized gain
|
|
|
(0.00
|
)*(a)
|
|
|
(0.13
|
)
|
|
|
(0.15
|
)
|
|
|
(0.08
|
)
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
|
(0.04
|
)
|
|
|
(0.07
|
)
|
|
|
|
|
Return of capital
|
|
|
(0.10
|
)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.00
|
)(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions to preferred shareholders
|
|
|
(0.10
|
)
|
|
|
(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
|
|
|
(1.35
|
)
|
|
|
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
|
|
|
|
|
|
|
(0.12
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
(0.06
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
(0.05
|
)
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
(0.07
|
)
|
Net realized gain
|
|
|
|
|
|
|
(0.71
|
)
|
|
|
(0.89
|
)
|
|
|
(0.73
|
)
|
|
|
(0.74
|
)
|
|
|
(0.89
|
)
|
|
|
(0.88
|
)
|
|
|
(0.87
|
)
|
|
|
(0.08
|
)
|
|
|
(0.24
|
)
|
|
|
|
|
Return of capital
|
|
|
(0.44
|
)*
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
(0.12
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
(0.65
|
)
|
|
|
(0.63
|
)
|
|
|
(0.53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions to common shareholders
|
|
|
(0.44
|
)
|
|
|
(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
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00
|
(a)
|
|
|
0.00
|
(a)
|
|
|
0.01
|
|
Increase/(decrease) in net asset value from common shares issued upon reinvestment of distributions
|
|
|
0.00
|
(a)
|
|
|
0.00
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.00
|
)(a)
|
|
|
0.00
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in net asset value from repurchase of preferred shares
|
|
|
0.00
|
(a)
|
|
|
|
|
|
|
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00
|
(a)
|
Offering expenses charged to paid-in capital
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
(0.00
|
)(a)
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
(0.00
|
)(a)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
(0.00
|
)(a)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fund share transactions
|
|
|
0.00
|
(a)
|
|
|
(0.07
|
)
|
|
|
(0.00
|
)(a)
|
|
|
0.05
|
|
|
|
|
|
|
|
(0.00
|
)(a)
|
|
|
(0.45
|
)
|
|
|
0.00
|
(a)
|
|
|
0.00
|
(a)
|
|
|
(0.79
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value Attributable to Common
Shareholders, End of Year
|
|
$
|
6.14
|
|
|
$
|
7.93
|
|
|
$
|
7.04
|
|
|
$
|
9.34
|
|
|
$
|
8.13
|
|
|
$
|
8.36
|
|
|
$
|
9.81
|
|
|
$
|
10.90
|
|
|
$
|
8.22
|
|
|
$
|
7.48
|
|
|
$
|
9.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV total return
|
|
|
(15.69
|
)%
|
|
|
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
|
|
$
|
6.50
|
|
|
$
|
8.02
|
|
|
$
|
7.06
|
|
|
$
|
9.20
|
|
|
$
|
7.24
|
|
|
$
|
7.50
|
|
|
$
|
10.01
|
|
|
$
|
12.40
|
|
|
$
|
7.85
|
|
|
$
|
6.24
|
|
|
$
|
8.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment total return
|
|
|
(12.31
|
)%
|
|
|
26.67
|
%
|
|
|
(14.93
|
)%
|
|
|
40.21
|
%
|
|
|
7.97
|
%
|
|
|
(16.33
|
)%
|
|
|
(6.63
|
)%
|
|
|
73.37
|
%
|
|
|
40.00
|
%
|
|
|
(10.35
|
)%
|
|
|
33.88
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets and Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets including liquidation value of preferred shares, end of year (in 000s)
|
|
$
|
254,011
|
|
|
$
|
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 000s)
|
|
$
|
154,088
|
|
|
$
|
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 operating expenses to net assets attributable to common shares net of advisory fee reduction, if
any
|
|
|
(0.12
|
%)(d)
|
|
|
1.62
|
%(b)
|
|
|
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
|
|
|
1.99
|
%(d)
|
|
|
1.69
|
%(g)
|
|
|
1.62
|
%
|
|
|
1.45
|
%
|
|
|
1.49
|
%(h)
|
|
|
1.45
|
%
|
|
|
1.59
|
%
|
|
|
1.55
|
%
|
|
|
1.84
|
%(c)
|
|
|
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
|
|
|
1.99
|
%(d)
|
|
|
1.69
|
%(g)
|
|
|
1.53
|
%
|
|
|
1.45
|
%
|
|
|
1.49
|
%(h)
|
|
|
1.30
|
%
|
|
|
1.29
|
%
|
|
|
1.29
|
%
|
|
|
1.48
|
%(d)
|
|
|
1.88
|
%
|
|
|
2.44
|
%
|
Portfolio turnover rate
|
|
|
5.9
|
%
|
|
|
17.5
|
%
|
|
|
20.5
|
%
|
|
|
16.8
|
%
|
|
|
10.3
|
%
|
|
|
14.0
|
%
|
|
|
16.0
|
%
|
|
|
12.7
|
%
|
|
|
7.9
|
%
|
|
|
14.4
|
%
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2020
(Unaudited)
|
|
|
For
the Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Preferred Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.00% Series B Cumulative Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end of year (in 000s)
|
|
|
|
|
|
|
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
|
$
|
19,775
|
|
Total shares outstanding (in 000s)
|
|
|
|
|
|
|
|
|
|
|
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 (e)
|
|
|
|
|
|
|
|
|
|
$
|
25.81
|
|
|
$
|
26.36
|
|
|
$
|
26.42
|
|
|
$
|
25.80
|
|
|
$
|
25.41
|
|
|
$
|
25.45
|
|
|
$
|
25.73
|
|
|
$
|
25.38
|
|
|
$
|
25.07
|
|
Asset coverage per share
|
|
|
|
|
|
|
|
|
|
$
|
86.86
|
|
|
$
|
106.21
|
|
|
$
|
167.07
|
|
|
$
|
171.13
|
|
|
$
|
196.48
|
|
|
$
|
167.07
|
|
|
$
|
131.49
|
|
|
$
|
122.20
|
|
|
$
|
114.47
|
|
Series C Auction Rate Cumulative Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end of year (in 000s)
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Total shares outstanding (in 000s)
|
|
|
0
|
(m)
|
|
|
0
|
(m)
|
|
|
0
|
(m)
|
|
|
0
|
(m)
|
|
|
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 (f)
|
|
$
|
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
|
|
$
|
49,988
|
|
|
$
|
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 000s)
|
|
$
|
49,918
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding (in 000s)
|
|
|
1,997
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation preference per share
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value (k)
|
|
$
|
25.11
|
|
|
$
|
24.88
|
|
|
$
|
23.80
|
|
|
$
|
24.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset coverage per share (l)
|
|
$
|
49.99
|
|
|
$
|
74.21
|
|
|
$
|
86.86
|
|
|
$
|
106.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.125%Series G Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end of year (in 000s)
|
|
$
|
49,755
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding (in 000s)
|
|
|
1,990
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation preference per share
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value (k)
|
|
$
|
25.09
|
|
|
$
|
25.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset coverage per share (l)
|
|
$
|
49.99
|
|
|
$
|
74.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Coverage (g)
|
|
|
254
|
%(j)
|
|
|
297
|
%
|
|
|
347
|
%
|
|
|
425
|
%
|
|
|
668
|
%
|
|
|
685
|
%
|
|
|
786
|
%
|
|
|
668
|
%
|
|
|
526
|
%
|
|
|
489
|
%
|
|
|
458
|
%
|
17
|
Based on net asset value per share, adjusted for reinvestment of distributions at the net asset value per share
on the ex-dividend dates. Total return for a period of less than one year is not annualized.
|
|
Based on market value per share, adjusted for reinvestment of distributions at prices determined under the
Funds dividend reinvestment plan 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)
|
Amount represents less than $0.005 per share.
|
(b)
|
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%.
|
(c)
|
Calculated based on average common shares outstanding on the record dates throughout the years.
|
(e)
|
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.
|
(f)
|
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, 2019, 2018, 2017, 2016, and 2015 would have been 1.23%, 1.25%, 1.22%, 1.23%, 1.27%, and 1.26%, respectively.
|
(g)
|
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.
|
(h)
|
During the year ended December 31, 2016, the Fund received a one time reimbursement of custody expenses
paid in prior years. Had such reimbursement been included in this period, the 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.
|
(i)
|
Ratio of operating expenses to average net assets including liquidation value of preferred shares net of
advisory fee reduction for the six months ended June 30, 2020 and the years ended December 31, 2019, 2018, 2017, 2016, and 2015 would have been 1.22%, 1.25%, 1.15%, 1.23%, 1.27%, and 1.13%, respectively.
|
(j)
|
This amount has been revised from the June 30, 2020 semi-annual financial statements to correct an error
in previously reported amount.
|
18
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, the Fund will invest the net proceeds of any offering in accordance with the
Funds 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 Funds 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
Funds 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 Funds investment style or changes in market conditions may cause the result in the Funds 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 Funds principal office is located at
One Corporate Center, Rye, New York 10580-1422.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objectives
The Funds
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 Funds 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
Funds outstanding voting securities. Such majority votes require, in each case, the lesser of (i) 67% of the Funds applicable shares represented at a meeting at which more than 50% of the Funds 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.
19
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 Funds 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 Funds investment objectives. While the Investment Adviser expects that a substantial portion of the Funds portfolio may be invested
in the securities of domestic companies, a significant portion of the Funds portfolio may also be comprised of the securities of issuers headquartered outside the United States.
No assurance can be given that the Funds 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 Advisers 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 Advisers 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 issuers 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.
20
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 Funds 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 agencys 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 Funds 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.
21
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 PoliciesInvestment 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 Funds assets committed to margin and
options premiums and (ii) non-bona fide hedging transactions, provided that the Fund does not enter into such non-bona fide hedging transactions if, immediately
thereafter, either (a) the sum of the amount of initial margin deposits on the Funds existing futures positions or swaps positions and option or swaption premiums would exceed 5% of the market value of the Funds liquidating
value, after taking into account unrealized profits and unrealized losses on any such transactions, or (b) the aggregate net notional value of the Funds commodity interest transactions would exceed 100% of the market value of the
Funds 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 Funds performance.
Futures Contracts and Options on
Futures. On behalf of the Fund, the Investment Adviser may, subject to the Funds 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
22
price set on the date of the contract. The Funds 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 Funds total assets or 5% of such issuers 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 Funds 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 Funds 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
23
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 Funds risk is primarily that, if the seller defaults, the proceeds from the disposition of the underlying securities and other collateral for the sellers 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 Funds 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 Funds 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 Funds rights is unsettled. As a result, under these circumstances, there may be a restriction on the Funds 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 Funds 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 Funds 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
24
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 Funds portfolio turnover rates for the fiscal years ended December 31, 2019 and 2018, were 17.5% and 20.5%, 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 39% of the Funds 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 June 30, 2020. The Funds 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 Funds 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 Funds
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 Funds 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 Funds 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
Funds investments would be borne entirely by the holders of common stock. Therefore, if the market value of the Funds 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 Funds 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.
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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 Funds
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 Funds common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, might impair the Funds 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 Funds 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 31% of the Funds net assets, the Funds 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 Funds net
assets attributable to common stock.
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Assumed return on portfolio (net of expenses)
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(10
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)%
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(5
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)%
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0
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%
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5
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%
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10
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%
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Corresponding return to Common Stockholder
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(17.20
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)%
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(9.96
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)%
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(2.72
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)%
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4.52
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%
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11.76
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%
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The following factors associated with leveraging could increase the investment risk and volatility of the
price of the shares of common stock:
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leveraging exaggerates any increase or decrease in the net asset value of the shares of common stock;
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the dividend requirements on the Funds shares of preferred stock may exceed the income from the portfolio
securities purchased with the proceeds from the issuance of preferred stock;
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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);
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a decline in net asset value could affect the ability of the Fund to make dividend payments on shares of common
stock;
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a failure to pay dividends or make distributions on its shares of common stock could result in the Funds
ceasing to qualify as a regulated investment company under the Code; and
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if the asset coverage for the Funds 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.
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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 Funds total assets (less all liabilities and indebtedness not represented by senior securities) to the aggregate amount of the Funds senior
securities representing indebtedness. The asset coverage ratio with respect to a senior security representing stock means the ratio of the value of the Funds total assets (less all liabilities and indebtedness not represented by senior
securities) to the aggregate amount of the Funds senior securities representing indebtedness plus the aggregate liquidation preference of the Funds outstanding shares of preferred stock.
If, as is the case with the Fund, a registered investment companys senior securities are equity securities, such securities must have an
asset coverage of at least 200% immediately following its issuance. If a registered investment companys 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
27
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 Funds preferred stock. Distributions on the Funds 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, 2016, 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 years distributions will be based on the Funds 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 Funds 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 FCCs 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.
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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 Funds 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 Funds 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 Funds investment objectives as well as the stockholders
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 Funds 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, 2019, the shares of common stock traded at a premium of 1.13%. Stockholders desiring
liquidity may, subject to
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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 & Poors, a division of The McGraw-Hill Companies, Inc. (S&P) or lower than Baa by Moodys 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 issuers 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
issuers 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 issuers 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 Funds 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.
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Subsequent to its purchase by the Fund, an issue of securities may cease to be rated or its
rating may be reduced. In addition, it is possible that statistical rating agencies 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
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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 Advisers 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 Advisers 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 PoliciesInvestment
Practices in the SAI.
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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 PoliciesInvestment 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 Funds 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 Funds 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 Funds 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
issuers 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 issuers 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 RiskInterest 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 companys 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 Funds 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 Funds Governing Documents
The Funds 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 Funds 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
Acts asset coverage requirements could jeopardize the Funds 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
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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 Funds securities uncertain and/or result in sudden and significant valuation increases or declines in the Funds 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 Funds 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 Funds 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 Funds 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 Funds 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.
Moreover, the SEC and its staff are reportedly engaged in various initiatives and reviews that seek to improve and modernize the regulatory
structure governing investment companies. These efforts appear to be focused on risk identification and controls in various areas, including embedded 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 Funds 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.
In particular, the U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on the Fund and on the
mutual fund industry in general. The SECs final rules and amendments that
35
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 Fund and/or increase overall expenses of the Fund. 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 addition,
the SEC, Congress, various exchanges and regulatory and self-regulatory authorities, both domestic and foreign, have undertaken reviews of the use of derivatives by registered investment companies, which could affect the nature and extent of
instruments used by the Funds. For example, the SEC recently re-proposed a new regulatory framework for registered investment companies use of derivatives. While the full extent of the aggregate impact
of these regulations is still unclear, these regulations and actions may adversely affect both the Fund and the instruments in which such Fund invests and its ability to execute its investment strategy. Similarly, regulatory developments in other
countries may have an unpredictable and adverse impact on the Fund.
In the aftermath of the global financial crisis, there appears to be
a renewed 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 Fund and a large financial institution, a court may similarly seek to strictly interpret terms and legal rights in favor of retail investors.
The Trump administration has called for substantial changes to U.S. fiscal and tax policies, including comprehensive corporate and individual
tax reform. In addition, the Trump administration has called for significant changes to U.S. trade, healthcare, immigration, foreign, and government regulatory policy. In this regard, there is significant uncertainty with respect to legislation,
continued operation of the U.S. government, regulation, and government policy at the federal level, as well as the state and local levels. Recent events have created a climate of heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications. There has been a corresponding
meaningful increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes, and fiscal and monetary policy. To the extent the U.S. Congress or Trump administration implements changes to U.S. policy, those
changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation, and other areas. Although it is impossible to
predict the impact, if any, of these changes to the Funds business, they may adversely affect the Funds business, financial condition, operating results and cash flows.
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 Funds 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
Funds 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 Funds 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.
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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 Moodys 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 Funds 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 Funds portfolio
securities at that point in time, such a default could negatively affect the Funds 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 Funds 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 Funds 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.
37
Management of the Fund
General
The business and
affairs of the Fund are managed under the direction of the Funds 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 Funds Board, provides a continuous investment program for
the Funds 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 $19.1 billion as of September 30, 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 $10.5 billion as of September 30, 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 $1.2 billion as of September 30,
2020; and Gabelli Fixed Income, LLC, an indirect wholly owned subsidiary of GBL, acts as investment adviser for separate accounts having assets under management of approximately $22 million as of September 30, 2020. Teton Advisors, Inc.
was spun off by GBL in March 2009 and is an affiliate of GBL by virtue of Mr. Gabellis ownership of GGCP, the principal stockholder of Teton Advisors, Inc., as of September 30, 2020. Associated Capital was spun off from GBL on
November 30, 2015, and is an affiliate of GBL by virtue of Mr. Gabellis 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 Funds pro rata portion of membership fees in trade associations, fidelity bond coverage for the Funds 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 Funds net asset value per share, including any equipment or services obtained solely for the purpose of pricing shares or valuing the Funds
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.
38
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 Funds 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 Funds business and affairs and provides, or arranges for others to provide, at the Investment Advisers expense,
certain enumerated services, including maintaining the Funds 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 Funds net asset
value, including any equipment or services obtained solely for the purpose of pricing shares of stock or valuing the Funds 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, 2019, the Fund reimbursed the Investment Adviser $45,000 in connection with the cost of computing the Funds 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 Funds 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 Funds 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 stockholders 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 Funds 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, 2019, the Funds 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 Advisers 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 Funds Board or by the holders of a majority of the Funds 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 Boards approval of the Advisory Agreement is available in the Funds semiannual report
to stockholders for the six months ended June 30, 2020.
39
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 Bachelors 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 GBLs 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 Funds operations which
40
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 Funds 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 Funds current distribution policy, which may be modified at any time by its Board of Directors, the Fund intends to pay to holders of the Funds 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 Funds
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 stockholders tax basis in the stock. The amount treated as a tax-free return of capital will reduce a
stockholders tax basis in the stock, thereby increasing such stockholders 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 2019. 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
Funds total assets and, therefore, have the likely effect of increasing the Funds 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 Funds
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 stocks terms.
If the total distributions required by a periodic payment policy exceed the
Funds 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 Funds 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,
41
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 Funds 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 stockholders 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 Funds 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 Funds 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.
42
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 Funds 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 Funds common stock and preferred stock. This description does not purport to
be complete and is qualified by reference to the Funds 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 Funds two hundred million (200,000,000) shares initially classified and designated as common stock, three million one thousand (3,001,000) 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 Funds 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 Funds assets after payment of debts and expenses and the amounts payable to holders of the Funds 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 corporations charter.
Subject to certain exceptions
43
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, 2019, 24,898,515 shares of common stock were outstanding. The average weekly trading volume of the common stock on the NYSE during the period from January 1, 2019 through December 31, 2019,
was [67,598] shares. The average weekly trading volume of the common shares from January 1, 2020 through June 30, 2020 was [54,015].
Shares of closed-end investment companies often trade on an exchange at prices lower than net asset
value. The Funds 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 Funds 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
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Period
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High
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Low
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High
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Low
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High
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Low
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Fiscal Year 2015
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Q1
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$
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10.00
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|
|
$
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9.26
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|
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$
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9.63
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|
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$
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9.69
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3.84
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(4.44
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)
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Q2
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$
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9.56
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$
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9.13
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$
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10.12
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$
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9.84
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(5.53
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)
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(7.22
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)
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Q3
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$
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9.38
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$
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7.44
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$
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9.86
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$
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8.57
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(4.87
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)
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(13.17
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)
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Q4
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$
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8.42
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$
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7.21
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$
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9.21
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$
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8.18
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(8.58
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)
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(11.86
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)
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Fiscal Year 2016
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Q1
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$
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7.46
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$
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6.17
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$
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8.19
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$
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7.28
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(8.91
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)
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(15.25
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)
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Q2
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$
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7.48
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$
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6.75
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|
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$
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8.54
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$
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7.65
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(12.41
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)
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(11.77
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)
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Q3
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$
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7.90
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|
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$
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7.06
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|
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$
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8.64
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|
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$
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8.08
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(8.57
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)
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(12.62
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)
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Q4
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$
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7.74
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|
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$
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7.18
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|
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$
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8.41
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$
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7.99
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|
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(7.97
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)
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(10.14
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)
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Fiscal Year 2017
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|
|
|
|
|
|
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
|
|
Preferred Stock
Currently, three million one-thousand (3,001,000) shares of the Funds capital stock have been
classified by the Board as preferred stock, par value $0.001 per share. The Funds 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
44
Funds common stock. As of June 30, 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 Funds 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
Funds 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 Funds
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 Funds creditors but before any distributions with respect to the Funds 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 shares 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 Funds 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 June 30, 2020.
|
|
|
|
|
|
|
|
|
Title Of Class
|
|
Amount
Authorized
|
|
|
Amount
Outstanding
|
|
Common Stock
|
|
|
196,750,000
|
|
|
|
25,104,488
|
|
Series A Preferred
|
|
|
2,000,000
|
|
|
|
0
|
|
Series C Auction Rate Preferred
|
|
|
1,000
|
|
|
|
10
|
|
Series E Preferred
|
|
|
2,000,000
|
|
|
|
1,996,700
|
|
Series G Preferred
|
|
|
2,000,000
|
|
|
|
1,990,201
|
|
As of June 30, 2020, the Fund does not hold any shares of stock for its account.
45
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 Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds 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
46
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 Funds
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 Funds 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 Funds 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 RiskInvestment 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 Moodys 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.
47
Certain Provisions of the Funds Governing Documents and
Maryland Law
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 Funds Board;
|
|
|
the Funds freedom to engage in certain transactions; or
|
|
|
the ability of the Funds Directors or stockholders to amend the Governing Documents or effectuate changes
in the Funds 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 Funds 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 Funds 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 Funds 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 Funds investment objectives or changing the investment restrictions described as fundamental policies under Investment
Restrictions in the SAI.
48
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 corporations charter and bylaws. Accordingly, notwithstanding its Governing Documents, under Maryland law, the Funds Board may elect by resolution to, among other things:
|
|
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;
|
|
|
provide that the number of Directors shall be fixed by only the Board;
|
|
|
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
|
|
|
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.
|
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 Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds Bylaws provide that special meetings of stockholders may be called by the Board of Directors and certain of the Funds
officers. Additionally, the Funds 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.
49
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 Funds 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 Funds 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
Funds 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 Funds
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 1,567,558 shares through December 31, 2016.
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
Funds 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 Funds 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.
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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 Funds 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 funds 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 Funds 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
markets 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
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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:
(i)
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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).
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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 Funds 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 Funds 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 Funds 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.
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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 Funds 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 Funds
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 Funds 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-
52
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 Funds 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 Funds ordinary income dividends will constitute
qualified dividend income.
Any distributions you receive that are in excess of the Funds 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.
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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 Funds 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
stockholders proportionate share of the Funds earnings and profits, the excess will reduce the preferred stockholders 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 stockholders 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 stockholders 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 stockholders 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 stockholders 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.
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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 Funds 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 Funds
assets pursuant to a custody agreement. Under the custody agreement, the Custodian holds the Funds 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 Funds dividend disbursing agent, as agent under the Funds 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 Funds 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.
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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.
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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 6, 2020;
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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; and
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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.oxfordlanecapital.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,
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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 Funds 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 Funds 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.
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Table of Contents of Statement of Additional
Information
An SAI dated as of [ ], 2020, 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:
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 Funds 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.
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$400,000,000
The Gabelli Multimedia Trust Inc.
Common Stock
Preferred
Stock
Subscription Rights to Purchase Common Stock
Subscription Rights to Purchase Preferred Stock
PROSPECTUS
[ ], 2020
Filed Pursuant to Rule 497(c)
Registration Statement No. 333-218771
The information in this
preliminary prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any state where the offer, solicitation or sale is not permitted.
PROSPECTUS SUPPLEMENT
(To Prospectus dated
[ ])
The Gabelli Multimedia Trust Inc.
Common Stock
We are
offering for sale [ ] shares of our common stock. Our common stock is 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. The last reported sale price for
our common stock on [ ] was $[ ] per share. The net asset value of the Funds common stock at the close of business on
[ ], [ ] was $[ ] per share.
You should review the information set forth under Risk Factors and Special Considerations on page [ ] of the
accompanying Prospectus before investing in our common stock or preferred stock.
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|
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|
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Per
Share of
Common
Stock
|
|
|
Total(1)
|
|
Public Offering Price
|
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$
|
[ ]
|
|
|
$
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[ ]
|
|
Underwriting discounts and commissions
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Proceeds, before expenses, to us
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
(1)
|
The aggregate expenses of the offering are estimated to be $[ ], which represents
approximately $[ ] per share.
|
The underwriters may also purchase up to an additional
[ ] shares of common stock from us at the public offering price, less underwriting discounts and commissions, to cover over-allotments, if any, within thirty days after the date of this Prospectus Supplement. If the
over-allotment option is exercised in full, the total proceeds, before expenses, to the Fund would be $[ ] and the total underwriting discounts and commissions would be $[ ]. The common stock will be
ready for delivery on or about [ , ].
You should read this Prospectus Supplement and the accompanying Prospectus before
deciding whether to invest in our 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 SEC website (http://www.sec.gov).
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.
1
You should rely only on the information contained or incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making
an offer to sell these securities in any jurisdiction in which the offer or sale is not permitted.
2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
3
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 offering, assuming that we incur the estimated offering
expenses, including preferred stock offering expenses.
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Stockholder Transaction Expenses
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|
Sales Load (as a percentage of offering price)
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|
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[ %]
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|
Offering Expenses Borne by the Fund (as a percentage of offering price)
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|
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[ %]
|
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Voluntary Cash Purchase Plan Purchase Fees
|
|
$
|
[ ]
|
|
Automatic Dividend Reinvestment and Cash Purchase Plan Sales Fees
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$
|
[ ]
|
|
Annual Expenses (as a percentage of net assets attributable to common
stock)
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|
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Management Fees
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[ ]
|
|
Interest Payments on Borrowed Funds
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[None]
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Other Expenses
|
|
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[ %]
|
|
|
|
|
|
|
Total Annual Expenses
|
|
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[ %]
|
|
Dividends on Preferred Stock
|
|
|
[ %]
|
|
|
|
|
|
|
Total Annual Expenses and Dividends on Preferred Stock
|
|
|
[ %]
|
|
|
|
|
|
|
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 of $[ ] and estimated offering expenses of $[ ] from the issuance of $[ ] million in common stock) 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.
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1
Year
|
|
3
Years
|
|
5
Years
|
|
10
Years
|
Total Expenses Incurred
|
|
$
|
|
$
|
|
$
|
|
$
|
*
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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 Funds actual rate of return may be greater or less than
the hypothetical 5% return shown in the example.
|
USE OF PROCEEDS
We estimate the net proceeds of the offering to be $[ ] ($[ ] if the over-allotment options is exercised in full) based on the public offering
price of $[ ] per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
Unless
otherwise specified in a prospectus supplement, the Fund will invest the net proceeds of any offering in accordance with the Funds 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 Funds managed distribution policy. The Investment Adviser anticipates that the investment of the proceeds will be made in accordance with the Funds 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 Funds anticipated investment period extending
to as long as six months. Pending such investment, the proceeds of the offering will be held in high quality short-term debt securities and instruments
.
FINANCIAL HIGHLIGHTS
[To be provided.]
4
PRICE RANGE OF COMMON STOCK
[To be provided.]
PLAN OF DISTRIBUTION
[To be provided.]
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 stock.
Certain legal matters will be passed on by Venable LLP, Baltimore, Maryland, in connection with the
offering of the shares of common stock as Maryland counsel to the Fund.
5
The Gabelli Multimedia Trust Inc.
[ ] Shares of Common Stock
PROSPECTUS SUPPLEMENT
[ ]
Until, [ ] (25 days after the date of this prospectus), all
dealers that buy, sell or trade the Common Stock, whether or not participating in this offering, may be required to deliver a Prospectus. This is in addition to each dealers obligation to deliver a prospectus when acting as an underwriter and
with respect to its unsold allotments or subscriptions.
6
Filed Pursuant to Rule 497(c)
Registration Statement No. 333-218771
The information in this Prospectus is not complete and may be changed. The Fund may not sell these securities until
the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any state where the offer or sale is not
permitted.
PROSPECTUS SUPPLEMENT
(To
Prospectus dated [ ], [ ])
The Gabelli Multimedia
Trust Inc.
Series [ ] Preferred Stock
We are offering for sale [ ] shares of our preferred stock. Our common stock is 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. The last reported sale price for our common stock on [ ],[ ] was $[ ] per share. The net asset value of the Funds common
stock at the close of business on [ ], [ ] was $[ ] per share.
You should review the information set forth under Risk Factors and Special Considerations on page [ ] of the accompanying
Prospectus before investing in our common stock or preferred stock.
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|
|
|
|
|
|
|
|
|
|
Per
Share of
Common
Stock
|
|
|
Total(1)
|
|
Public Offering Price
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Underwriting discounts and commissions
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Proceeds, before expenses, to us
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
(1)
|
The aggregate expenses of the offering are estimated to be $[ ], which represents approximately $[ ] per share.
|
The underwriters may also purchase up to an additional [ ] shares of preferred stock from us at the public offering
price, less underwriting discounts and commissions, to cover over-allotments, if any, within thirty days after the date of this Prospectus Supplement. If the over-allotment option is exercised in full, the total proceeds, before expenses, to the
Fund would be $[ ] and the total underwriting discounts and commissions would be $[ ]. The preferred stock should be ready for delivery on or about [ ].
You should read this Prospectus Supplement and the accompanying Prospectus before deciding whether to invest in our preferred 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 SEC website (http://www.sec.gov).
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.
You should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction in which the offer or sale is not permitted.
1
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
2
TERMS OF THE SERIES [ ] PREFERRED STOCK
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Dividend Rate
|
|
The annual dividend rate will be [ ]%.
|
Dividend Payment Date
|
|
[Dividends will be paid when, as and if declared on [ ], [ ], [ ] and [ ], commencing.] The payment date for the initial dividend period will be [ ].]
|
[Regular Dividend Period]
|
|
[Regular dividend periods will be [ ] days.]
|
Liquidation Preference
|
|
$[ ] per share.
|
[Non-Call Period/Redemption]
|
|
The shares generally may not be called for redemption at the option of the Fund prior to [ ]. The Fund reserves the right, however, to
redeem the Series [ ] Preferred Stock at any time if it is necessary, in the judgment of the Board of Directors, to meet tax, regulatory or rating agency asset coverage requirements.
[Commencing [ ], and thereafter, to the extent permitted by the 1940 Act and Maryland law, the Fund may at any
time, upon notice of redemption, redeem the Series [ ] Preferred Stock in whole or in part at the liquidation preference per share plus accumulated unpaid dividends through the date of
redemption.]
|
[Stock Exchange Listing]
|
|
Application will be made to list the Series [ ] Preferred Stock on the [ ]. Prior to the offering, there has been no public market for Series [ ] Preferred Stock. It is anticipated that trading on the [ ] will begin within [
] days from the date of this Prospectus Supplement. During such period, the underwriters do not intend to make a market in Series [ ] Preferred Stock. Consequently, it is anticipated that, prior to the commencement of trading on the [ ], an
investment in Series [ ] Preferred Stock will be illiquid.
|
USE OF PROCEEDS
We estimate the net proceeds of the offering to be $[ ] based on the public offering price of $[ ] per share and after deducting underwriting
discounts and commissions and estimated offering expenses payable by us.
The Investment Adviser anticipates that the investment of the
proceeds will be made in accordance with the Funds 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 Funds anticipated investment period extending to as long as six months. Pending such investment, the proceeds of the offering will be held in high quality short-term debt securities and instruments.
CAPITALIZATION
[To be provided]
ASSET COVERAGE RATIO
Pursuant to the 1940 Act, the Fund generally will not be permitted to declare any dividend, or declare any
other distribution, upon any outstanding shares of common stock, or purchase any such shares of common stock, unless, in every such case, all shares of preferred stock issued by the Fund have at the time of declaration of any such dividend or
distribution or at the time of any such purchase an asset coverage of at least 200% (1940 Act Asset Coverage Requirement) after deducting the amount of such dividend, distribution, or purchase price, as the case may be. As of the
date of this Prospectus Supplement, all of the Funds outstanding shares of preferred stock are expected to have asset coverage on the date of issuance of the Series [ ] Preferred Stock of approximately [ ]%.
In addition to the 1940 Act Asset Coverage Requirement, the Fund is subject to certain restrictions on investments imposed by guidelines
of one or more rating agencies, which have issued ratings for certain of the shares of preferred stock and may issue a rating for the Series [ ] Preferred Stock.
3
SPECIAL CHARACTERISTICS AND RISKS OF THE SERIES [ ] PREFERRED
STOCK
Dividends
Holders of
Series [ ] Preferred Stock shall be entitled to receive cumulative cash dividends and distributions at the rate of [ ]% per annum (computed on the basis of a 360-day year consisting of twelve 30-day months) of the $[ ] liquidation preference on the Series [ ] Preferred Stock. Dividends and distributions on Series [ ] Preferred Stock will accumulate from the date of their original issue, which
is [ ].
Dividends and distributions will be payable quarterly on [ ] (each a Dividend Payment Date) commencing on [ ] (or, if
any such day is not a business day, then on the next succeeding business day) to holders of record of Series [ ] Preferred Stock as they appear on the stockholder register of the Fund at the close of business on the fifth preceding business day.
Dividends and distributions on Series [ ] Preferred Stock shall accumulate from the date on which the shares are originally issued. Each period beginning on and including a Dividend Payment Date (or the date of original issue, in the case of the
first dividend period after issuance of the Series [ ] Preferred Stock) and ending on but excluding the next succeeding Dividend Payment Date is referred to herein as a Dividend Period. Dividends and distributions on account of arrears
for any past Dividend Period or in connection with the redemption of Series [ ] Preferred Stock may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date as shall be fixed by the Board of
Directors.
No full dividends or distributions will be declared or paid on Series [ ] Preferred Stock for any Dividend Period or part
thereof unless full cumulative dividends and distributions due through the most recent Dividend Payment Dates therefor for all series of preferred stock of the Fund ranking on a parity with the Series [ ] Preferred Stock as to the payment of
dividends and distributions have been or contemporaneously are declared and paid through the most recent Dividend Payment Dates therefor. If full cumulative dividends and distributions due have not been paid on all outstanding shares of preferred
stock of the Fund, any dividends and distributions being paid on such shares of preferred stock (including the Series [ ] Preferred Stock) will be paid as nearly pro rata as possible in proportion to the respective amounts of dividends and
distributions accumulated but unpaid on each such series of preferred stock on the relevant Dividend Payment Date.
Restrictions on
Dividend, Redemption and Other Payments
Under the 1940 Act, the Fund is not permitted to issue shares of preferred stock (such as
the Series [ ] Preferred Stock) unless immediately after such issuance the Fund will have an asset coverage of at least 200% (or such other percentage as may in the future be specified in or under the 1940 Act as the minimum asset coverage
for senior securities representing shares of a closed-end investment company as a condition of declaring distributions, purchases or redemptions of its shares). In general, the term asset coverage
for this purpose means the ratio the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness of the Fund plus the
aggregate of the involuntary liquidation preference of the preferred stock. The involuntary liquidation preference refers to the amount to which the preferred stock would be entitled on the involuntary liquidation of the Fund in preference to a
security junior to them. The Fund also is not permitted to declare any cash dividend or other distribution on its shares of common stock or purchase its shares of common stock unless, at the time of such declaration or purchase, the Fund satisfies
this 200% asset coverage requirement after deducting the amount of the distribution or purchase price, as applicable.
In addition,
the Fund may be limited in its ability to declare any cash distribution on its shares of stock (including the Series [ ] Preferred Stock) or purchase its shares of stock (including the Series [ ] Preferred Stock) unless, at the time of such
declaration or purchase, the Fund has an asset coverage on its indebtedness, if any, of at least 300% after deducting the amount of such distribution or purchase price, as applicable. The 1940 Act contains an exception, however, that
permits dividends to be declared upon any shares of preferred stock issued by the Fund (including the Series [ ] Preferred Stock) if the Funds indebtedness has an asset coverage of at least 200% at the time of declaration after deducting
the amount of the dividend. In general, the term asset coverage for this purpose means the ratio which the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the
aggregate amount of senior securities representing indebtedness of the Fund.
4
The term senior security does not include any promissory note or other evidence of
indebtedness in any case where such a loan is for temporary purposes only and in an amount not exceeding 5% of the value of the total assets of the Fund at the time when the loan is made. A loan is presumed under the 1940 Act to be for
temporary purposes if it is repaid within 60 days and is not extended or renewed; otherwise it is presumed not to be for temporary purposes. For purposes of determining whether the 200% and 300% asset coverage requirements
described above apply in connection with dividends or distributions on or purchases or redemptions of Series [ ] Preferred Stock, the asset coverage may be calculated on the basis of values calculated as of a time within 48 hours (not including
Sundays or holidays) next preceding the time of the applicable determination.
Voting Rights
Except as otherwise provided in the Funds governing documents or a resolution of the Board of Directors or its delegatee, or as required
by applicable law, holders of Series [ ] Preferred Stock shall have no power to vote on any matter except matters submitted to a vote of the Funds shares of common stock. In any matter submitted to a vote of the holders of the shares of common
stock, each holder of Series [ ] Preferred Stock shall be entitled to one vote for each share of Series [ ] Preferred Stock held and the holders of all outstanding shares of preferred stock, including Series [ ] Preferred Stock, and the shares of
common stock shall vote together as a single class; provided, however, that at any meeting of the stockholders of the Fund held for the election of Directors, the holders of the outstanding shares of preferred stock, including Series [ ] Preferred
Stock, shall be entitled, as a class, to the exclusion of the holders of all other classes of shares of stock of the Fund, to elect a number of Fund directors, such that following the election of directors at the meeting of the stockholders, the
Funds Board of Directors shall contain two directors elected by the holders of the outstanding shares of preferred stock, including the Series [ ] Preferred Stock.
During any period in which any one or more of the conditions described below shall exist (such period being referred to herein as a
Voting Period), the number of directors constituting the Board of Directors shall be increased by the smallest number of additional directors that, when added to the two directors elected exclusively by the holders of outstanding shares
of preferred stock, would constitute a simple majority of the Board of Directors as so increased by such smallest number, and the holders of outstanding shares of preferred stock, including the Series [ ] Preferred Stock, voting separately as one
class (to the exclusion of the holders of all other classes of shares of stock of the Fund) shall be entitled to elect such smallest number of additional directors. The Fund and the Board of Directors shall take all necessary actions, including
amending the Funds governing documents, to effect an increase in the number of directors as described in the preceding sentence. A Voting Period shall commence:
|
(i)
|
if at any time accumulated dividends and distributions on the outstanding shares of Series [ ] Preferred Stock
equal to at least two full years dividends and distributions shall be due and unpaid; or
|
|
(ii)
|
if at any time holders of any other shares of preferred stock are entitled to elect a majority of the Directors
of the Fund under the 1940 Act or Statement or other instrument creating such shares.
|
Redemption
Mandatory Redemption. Under certain circumstances, the Series [ ] Preferred Stock will be subject to mandatory redemption by the Fund
out of funds legally available therefor in accordance with the Statement and applicable law.
If the Fund fails to have asset coverage, as
determined in accordance with Section 18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior securities of the Fund which are shares, including all outstanding Series [ ] Preferred Stock (or such other asset
coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are shares of a closed-end investment company as a condition of declaring
dividends on its shares of common stock), and such failure is not cured as of the cure date specified in the Statement, (i) the Fund shall give a notice of redemption with respect to the redemption of a sufficient number of shares of preferred
stock, which at the Funds determination (to the extent permitted by the 1940 Act and Maryland law) may include any proportion of Series [ ] Preferred Stock, to enable it to meet the
5
asset coverage requirements, and, at the Funds discretion, such additional number of shares of Series [ ] Preferred Stock or other shares of preferred stock in order for the Fund to have
asset coverage with respect to the Series [ ] Preferred Stock and any other shares of preferred stock remaining outstanding after such redemption as great as 210%, and (ii) deposit an amount with Computershare Trust Company, N.A., and its
successors or any other dividend-disbursing agent appointed by the Fund, having an initial combined value sufficient to effect the redemption of the Series [ ] Preferred Stock or other shares of preferred stock to be redeemed.
On such cure date, the Fund shall redeem, out of funds legally available therefor, the number of shares of preferred stock, which, to the
extent permitted by the 1940 Act and Maryland law, at the option of the Fund may include any proportion of Series [ ] Preferred Stock or any other series of shares of preferred stock, equal to the minimum number of shares the redemption of
which, if such redemption had occurred immediately prior to the opening of business on such cure date, would have resulted in the Fund having asset coverage immediately prior to the opening of business on such cure date in compliance with
the 1940 Act or, if asset coverage cannot be so restored, all of the outstanding Series [ ] Preferred Stock, at a price equal to $[ ] per share plus accumulated but unpaid dividends and distributions (whether or not earned or declared by the
Fund) through the date of redemption.
Optional Redemption. Prior to [ ], the Series [ ] Preferred Stock is not subject to optional
redemption by the Fund unless the redemption is necessary, in the judgment of the Board of Directors, to maintain the Funds status as a regulated investment company under Subchapter M of the Internal Revenue Code. Commencing [ ] and
thereafter, to the extent permitted by the 1940 Act and Maryland law, the Fund may at any time upon notice redeem the Series [ ] Preferred Stock in whole or in part at a price equal to the liquidation preference per share plus accumulated but
unpaid dividends through the date of redemption.
Liquidation
In the event of any liquidation, dissolution or winding up of the affairs of the Fund, whether voluntary or involuntary, the holders of Series
[ ] Preferred Stock shall be entitled to receive out of the assets of the Fund available for distribution to stockholders, after satisfying claims of creditors but before any distribution or payment shall be made in respect of the Funds shares
of common stock or any other shares of the Fund ranking junior to the Series [ ] Preferred Stock as to liquidation payments, a liquidation distribution in the amount of $[ ] per share (the Liquidation Preference), plus an amount equal to
all unpaid dividends and distributions accumulated to and including the date fixed for such distribution or payment (whether or not earned or declared by the Fund, but excluding interest thereon), and such holders shall be entitled to no further
participation in any distribution or payment in connection with any such liquidation, dissolution or winding up of the Fund.
If, upon any
liquidation, dissolution or winding up of the affairs of the Fund, whether voluntary or involuntary, the assets of the Fund available for distribution among the holders of all outstanding shares of Series [ ] Preferred Stock, and any other
outstanding shares of a class or series of the Funds shares of preferred stock ranking on a parity with the Series [ ] Preferred Stock as to payment upon liquidation, shall be insufficient to permit the payment in full to such holders of
Series [ ] Preferred Stock of the Liquidation Preference plus accumulated and unpaid dividends and distributions and the amounts due upon liquidation with respect to such other shares of preferred stock of the Fund, then such available assets shall
be distributed among the holders of Series [ ] Preferred Stock and such other shares of preferred stock of the Fund ratably in proportion to the respective preferential liquidation amounts to which they are entitled. Unless and until the Liquidation
Preference plus accumulated and unpaid dividends and distributions has been paid in full to the holders of Series [ ] Preferred Stock, no dividends or distributions will be made to holders of the Funds shares of common stock or any other
shares of the Fund ranking junior to the Series [ ] Preferred Stock as to liquidation.
Stock Exchange Listing
Application has been made to list the Series [ ] Preferred Stock on the [ ]. The shares of Series [ ] Preferred Stock are expected to commence
trading on the [ ] within [ ] days of the date of issuance.
6
Risks
Risk is inherent in all investing. Therefore, before investing in the Series [ ] Preferred Stock you should consider the risks carefully. See
Risk Factors and Special Considerations in the Prospectus. Primary risks associated with an investment in the Series [ ] Preferred Stock include:
Market Price Risk. The market price for the Series [ ] Preferred Stock will be influenced by changes in interest rates, the perceived
credit quality of the Series [ ] Preferred Stock and other factors, and may be higher or lower than the liquidation preference of the Series [ ] Preferred Stock. There is currently no market for the Series [ ] Preferred Stock.
Liquidity Risk. Currently, there is no public market for the Series [ ] Preferred Stock. As noted above, an application has been made
to list the Series [ ] Stock on the [ ]. However, during an initial period which is not expected to exceed [ ] days after the date of its issuance, the Series [ ] Preferred Stock will not be listed on any securities exchange. During such
period, the underwriters do not intend to make a market in the Series [ ] Preferred Stock. No assurances can be provided that listing on any securities exchange or market making by the underwriters will result in the market for Series [ ] Preferred
Stock being liquid at any time.
Redemption Risk. The Fund may at any time redeem Series [ ] Preferred Stock to the extent
necessary to meet regulatory asset coverage requirements or requirements imposed by credit rating agencies. For example, if the value of the Funds investment portfolio declines, thereby reducing the asset coverage for the Series [ ] Preferred
Stock, the Fund may be obligated under the terms of the Series [ ] Preferred Stock to redeem some or all of the Series [ ] Preferred Stock. In addition, commencing [ ], the Fund will be able to call the Series [ ] Preferred Stock at the option of
the Fund. Investors may not be able to reinvest the proceeds of any redemption in an investment providing the same or a higher dividend rate than that of the Series [ ] Preferred Stock.
The Series [ ] Preferred Stock are not a debt obligation of the Fund. The Series [ ] Preferred Stock are junior in respect of distributions
and liquidation preference to any indebtedness incurred by the Fund, and are of the same ranking as the distributions and liquidation preference of the Series [ ] Preferred Stock. Although unlikely, precipitous declines in the value of the
Funds assets could result in the Fund having insufficient assets to redeem all of the Series [ ] Preferred Stock for the full redemption price.
[Credit Rating Risk. The Fund is seeking a credit rating on the Series [ ] Preferred Stock. Any credit rating that is issued on the
Series [ ] Preferred Stock could be reduced or withdrawn while an investor holds Series [ ] Preferred Stock. A reduction or withdrawal of the credit rating would likely have an adverse effect on the market value of the Series [ ] Preferred Stock. In
addition, a credit rating does not eliminate or mitigate the risks of investing in the Series [ ] Preferred Stock.]
Distribution
Risk. The Fund may not meet the asset coverage requirements or earn sufficient income from its investments to make distributions on the Series [ ] Preferred Stock.
DESCRIPTION OF THE SERIES [ ] PREFERRED STOCK
[To be provided]
TAXATION
[To be provided]
EMPLOYEE BENEFIT PLAN AND IRA CONSIDERATIONS
[To be provided]
UNDERWRITING
[To be provided]
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 preferred stock.
Certain legal matters will be passed on by Venable LLP, Baltimore, Maryland, in connection with the
offering of the shares of preferred stock as Maryland counsel to the Fund.
7
The Gabelli Multimedia Trust Inc.
[ ]Shares
[ ]% Series [ ] [ ]
Preferred Stock
(Liquidation Preference $[ ] per share)
PROSPECTUS SUPPLEMENT
[ ],
[ ]
Until,
[ ] (25 days after the date of this prospectus), all dealers that buy, sell or trade the Preferred Stock, whether or not participating in this offering, may be
required to deliver a Prospectus. This is in addition to each dealers obligation to deliver a prospectus when acting as an underwriter and with respect to its unsold allotments or subscriptions.
8
Filed Pursuant to Rule 497(c)
Registration Statement No. 333-218771
The information in this Prospectus Supplement is not complete and may be changed. The Fund may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS SUPPLEMENT
(To Prospectus dated [ ])
[ ] Rights for [ ] Shares
Subscription Rights for 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 Funds
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 Funds 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,
[ ] (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 $ and the last reported sales price per share of Common Stock on the NYSE was $.
An investment in the Fund is not appropriate
for all investors. We cannot assure you that the Funds investment objective will be achieved. You should read this Prospectus Supplement and the accompanying Prospectus before deciding whether to invest in shares of common stock and retain it
for future reference. The Prospectus Supplement and the accompanying Prospectus contain important information about us. Material that has been incorporated by reference and other information about us can be obtained from us by calling 800-GABELLI (422-3554) or from the Securities and Exchange Commissions (SEC) website (http://www.sec.gov). For additional information all
holders of rights should contact the Information Agent, [ ], toll-free at [ ] or please send written request to: [ ].
Investing in common stock through Rights involves certain risks that are described in the Special Characteristics and Risks of the
Rights Offering section beginning on page R-[15] of the Prospectus Supplement.
STOCKHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS MAY, AT THE COMPLETION OF THE OFFERING, OWN A SMALLER PROPORTIONAL INTEREST IN THE FUND THAN
IF THEY EXERCISED THEIR RIGHTS. AS A RESULT OF THE OFFERING YOU MAY EXPERIENCE DILUTION OR ACCRETION OF THE AGGREGATE NET ASSET VALUE OF YOUR SHARES OF COMMON STOCK DEPENDING UPON WHETHER THE FUNDS NET ASSET VALUE PER SHARE OF COMMON STOCK IS
ABOVE OR BELOW THE SUBSCRIPTION PRICE ON THE EXPIRATION DATE.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
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Per
Share
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Total
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Subscription price of Common Stock to stockholders exercising Rights
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$
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$
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Underwriting discounts and commissions
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[ ]
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[ ]
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Proceeds, before expenses, to the Fund
(1)
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$
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$
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(1)
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The aggregate expenses of the offering are estimated to be $[ ].
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The common stock is expected to be ready for delivery in book-entry form through the Depository Trust Company on or about
[ ]. If the offer is extended, the common stock is expected to be ready for delivery in book-entry form through the Depository Trust Company on or about,
[ ].
The date of this Prospectus Supplement is,
[ ]
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.
2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
3
4
SUMMARY OF THE TERMS OF THE RIGHTS OFFERING
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Terms of the Offer
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[ ] 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. Rights are expected to trade on the [ ]]. The Rights will allow common stockholders to subscribe for new Shares of Common Stock of the Fund. [ ] Shares of Common
Stock of the Fund are outstanding as of [ ], [ ]. [ ] 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.]] [ ] 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 Funds quarterly distribution to be paid on [ ], [ ] and will not be entitled to receive
such dividend.
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Amount Available for Primary Subscription
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Approximately $[ ], before expenses.
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Title
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Subscription Rights for Common Stock
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Subscription Price
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Rights may be exercised at a price of $ per share of Common Stock (the Subscription Price). See Terms of the Offer.
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Record Date
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Rights will be issued to holders of record of the Funds Common Stock on, [ ] (the Record Date). See Terms of the
Offer.
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Number of Rights Issued
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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.
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Number of Rights Required to Purchase One Share of Common Stock
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A holder of Rights may purchase share of Common Stock of the Fund for every 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. See Terms of the Offer.
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Over-Subscription Privilege
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[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.
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[In addition, in the event that the Funds per share net asset value at the end of the Subscription Period (described below) is equal to or less than the Subscription Price, the Fund, in its sole discretion, may determine to
issue additional Shares of Common Stock in an amount of up to [ ]% of the shares issued pursuant to the primary subscription, referred to as secondary over-subscription stock. Should the Fund determine to issue
some or all of the secondary over-subscription stock, they will be allocated only among Record Date Stockholders who submitted over-subscription requests. Secondary over-subscription
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5
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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. Rights acquired in the secondary market may not
participate in the over-subscription privilege.]
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[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.]
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Transfer of Rights
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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
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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, [ ] (the
Expiration Date) (the Subscription Period). See Terms of the Offer and Method of Exercise of Rights.
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Offer Expenses
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The expenses of the Offer are expected to be approximately $[ ]. See Use of Proceeds.
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[Solicitation Fee
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$[ ] per Common Share to broker-dealers that have executed and delivered a soliciting dealer agreement and have solicited the exercise of Rights. See Underwriting.]
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Sale of Rights
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The Rights are transferable until the completion of the Subscription Period and will be admitted for trading on the [ ]. Although no assurance can be given that a market for the Rights will develop, trading
in the Rights on the [ ] is expected to begin three Business Days prior to the Record Date and may be conducted until the close of trading on the last [ ] trading day prior to the completion of the
Subscription Period. For purposes of this Prospectus, a Business Day shall mean any day on which trading is conducted on the [ ].
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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 (defined below) for sale. Any Rights submitted to the Rights Agent for sale
must be received by the Rights Agent on or before [ ], [ ], three Business Days prior to the completion of the Subscription Period, due to normal
settlement procedures.
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Rights that are sold will not confer any right to acquire any Shares of Common Stock in any [primary or secondary] over-subscription, and any Record Date stockholder who sells any Rights will not be eligible to participate in the
[primary or secondary] over-subscription privilege, if any.
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Trading of the Rights on the [ ] 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 [ ] trading day prior to the completion of the Subscription Period. The shares are expected to begin
trading ex-Rights [ ] Business Days prior to the Record Date.
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If the Rights Agent receives Rights for sale in a timely manner, it will use its best efforts to sell the Rights on the [ ]. The Rights Agent will also attempt to sell any Rights (i) a Rights holder is
unable to exercise because the Rights represent the right to subscribe for less than one
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6
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new Share of Common Stock or (ii) attributable to stockholders whose record addresses are outside the United States [and Canada], or who have an APO or FPO address. See Foreign
Restrictions.
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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.
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Stockholders are urged to obtain a recent trading price for the Rights on the [ ] from their broker, bank, financial advisor or the financial press.
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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.
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Use of Proceeds
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The Fund estimates the net proceeds of the Offer to be approximately $[ ]. This figure is based on the Subscription Price per share of $ and assumes all new shares of Common Stock offered are sold and that
the expenses related to the Offer estimated at approximately $[ ] are paid. The Investment Adviser anticipates that investment of the proceeds will be made in accordance with the Funds 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 Funds 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. See Use of
Proceeds.
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Taxation/ERISA
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See Employee Plan Considerations.
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Rights Agent
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[To be provided.]
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7
DESCRIPTION OF THE RIGHTS OFFERING
Terms of the Rights Offering
The
Fund is issuing to stockholders of record as of [ ], [ ] (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
[ ] transferable Right for each Share of Common Stock owned on the Record Date. The Rights entitle the holder to acquire for $[ ] (the Subscription Price) one new Share of Common Stock for
each [ ] Rights held rounded up to the nearest number of Rights evenly divisible by [ ]. Fractional shares will not be issued upon the exercise of the Rights. Accordingly, Shares of Common Stock may be
purchased only pursuant to the exercise of Rights in integral multiples of [ ]. 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 [ ]) 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 [ ],
[ ] 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 [ ], [ ], and ends at [5:00] PM Eastern Time on [ ],
[ ] (the Expiration Date). The right to acquire one Share of Common Stock for each [ ] 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. 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 Funds quarterly dividend to be paid on [ ], [ ] and
will not be entitled to receive such dividend.
Rights may be evidenced by subscription certificates or may be uncertificated and
evidenced by other appropriate documentation (Subscription Certificates). 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 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 [ ] (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 [ ].
[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 until the completion of the Subscription Period and will be admitted for trading on the
[ ]. 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 [ ] is expected to begin three Business Days prior to the Record Date and may be conducted until the close of trading on the last [ ] trading day prior to the
completion of the Subscription Period. Trading of the Rights on the [ ] 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 [ ] trading day prior to the completion of the Subscription Period. 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 two Business Days prior to the Record Date as determined and announced by the
NYSE.
8
Nominees who hold the Funds 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 owners instructions.
[Participants in the Funds 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 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.]
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EVENT
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DATE
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Record Date
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[ ], [ ]
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Subscription Period
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[ ], [ ] through [ ], [
]
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Expiration Date*
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[ ], [ ]
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Payment for Guarantees of Delivery Due*
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[ ], [ ]
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Confirmation Date
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[ ], [ ]
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*
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A stockholder exercising Rights must deliver by [5:00 PM] Eastern Time on [ ],
[ ] either (a) a Subscription Certificate and payment for shares or (b) a notice of guaranteed delivery and payment for shares.
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[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.
[In addition, in the event that the Funds per share net asset value at the end of the Subscription Period is equal to or less than the
Subscription Price, the Fund, in its sole discretion, may determine to issue additional Shares of Common Stock in an amount of up to [ ]% of the shares issued pursuant to the primary subscription, referred to as
secondary over-subscription stock. Should the Fund determine to issue some or all of the secondary over-subscription stock, they will be allocated only among Record Date Stockholders who submitted over-subscription requests. Secondary
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. Rights acquired in the secondary market may not
participate in the over-subscription privilege.]
9
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:
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Stockholders Record Date Position
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X Excess Shares of Common Stock Remaining
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Total Record Date Position of All Over- Subscribers
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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 owners 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 Funds 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.]
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 on or before [ ], [ ]. 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 [and Canada], or who have an APO or FPO address. The selling Rights holder will pay all brokerage commissions incurred by the Rights Agent, G. research, Inc.
(the Dealer Manager), a registered broker-dealer, may also act on behalf of its clients to purchase or sell Rights in the open market and be compensated for its services at a commission of up to $[ ] per Right,
provided that, if the Rights trade at a value of $0.01 or less at the time of such sale, then no commission will be charged. 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 Funds 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.
10
Holders of Rights attempting to sell any unexercised Rights in the open market through a
broker-dealer other than the Dealer Manager 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 [ ] from their broker, bank, financial
advisor or the financial press.
Method of Transferring Rights
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 on or before [ ], [ ], three Business
Days prior to the completion of the Subscription Period, due to normal settlement procedures.
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.
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[ ]. The Rights Agent will receive from the Fund an amount estimated to be
$[ ], comprised of the fee for its services and the reimbursement for certain expenses related to the Rights offering.
Information Agent
INQUIRIES BY
ALL HOLDERS OF RIGHTS SHOULD BE DIRECTED TO: THE INFORMATION AGENT, [[ ]]; HOLDERS MAY ALSO CONSULT THEIR BROKERS OR NOMINEES.
11
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.
[ ]
If By
Overnight Courier:
The Gabelli Multimedia Trust Inc.
[ ]
Payment for Shares
Holders of
Rights who acquire Shares of Common Stock in the Subscription 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
$[ ] 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 a NYSE member, guaranteeing delivery of (i) payment of the full
Subscription Price 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, and (ii) a properly completed and
executed Subscription Certificate. The Rights Agent will not honor a notice of guaranteed delivery if a properly completed and executed Subscription Certificate is not received by the Rights Agent by the close of business on the third Business Day
after the Expiration Date and the full payment is not received by the Expiration Date. The notice of guaranteed delivery may be delivered to the Rights Agent in the same manner as Subscription Certificates at the addresses set forth above, or may be
transmitted to the Rights Agent by facsimile transmission (fax number 617-360-6810; telephone number to confirm receipt 781-575-2332).
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 (OR FOR ELIGIBLE CANADIAN RESIDENTS, A BANK LOCATED IN CANADA), 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) find other purchasers for such subscribed-for and unpaid-for Shares of Common Stock; (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 any over-subscription privilege; (iii) sell all or a portion of the Shares of Common Stock purchased by the holder, in the open market, and apply the proceeds to the amounts
12
owed; and (iv) 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 and to enforce the relevant guarantee of payment.
Issuance and delivery of certificates
from the shares of common stock purchased are subject to collection of checks. 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.
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 owners 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 PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A CERTIFIED OR CASHIERS CHECK OR MONEY ORDER.
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.
13
Foreign Restrictions
Subscription Certificates will only be mailed to Record Date Stockholders whose addresses are within the United States [and Canada] (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 [and Canada], the Rights Agent will attempt to sell all of the Rights issued to stockholders 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.
14
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 offering, assuming that we incur the estimated offering
expenses, including preferred stock offering expenses.
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Stockholder Transaction Expenses
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Sales Load (as a percentage of offering price)
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[ %]
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Offering Expenses Borne by the Fund (as a percentage of offering price)
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[ %]
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Voluntary Cash Purchase Plan Purchase Fees
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$ [ ]
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Automatic Dividend Reinvestment and Cash Purchase Plan Sales Fees
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$ [ ]
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Annual Expenses (as a percentage of net assets attributable to common
stock)
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Management Fees
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[ ]
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Interest Payments on Borrowed Funds
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[None]
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Other Expenses
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[ %]
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Total Annual Expenses
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[ %]
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Dividends on Preferred Stock
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[ %]
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Total Annual Expenses and Dividends on Preferred Stock
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[ %]
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Example
The following example illustrates the expenses (including the maximum estimated sales load of $[ ] and estimated
offering expenses of $[ ] from the issuance of $[ ] million in common stock) 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.
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1
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3
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5
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10
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Year
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Years
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Years
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Years
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Total Expenses Incurred
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*
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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 Funds actual rate of return may be greater or
less than the hypothetical 5% return shown in the example.
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USE OF PROCEEDS
The Fund estimates the net proceeds of the Offer to be $[ ], based on the Subscription Price per share of
$[ ], assuming all new shares of Common Stock offered are sold and that the expenses related to the Offer estimated at approximately $[ ] are paid and after deduction of the underwriting discounts and
commissions.
Unless otherwise specified in a prospectus supplement, the Fund will invest the net proceeds of any offering in accordance
with the Funds 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 Funds managed distribution policy. The
Investment Adviser anticipates that the investment of the proceeds will be made in accordance with the Funds 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 Funds anticipated investment period extending to as long as six months. Pending such investment, the proceeds of the offering will be held in high quality
short-term debt securities and instruments.
15
FINANCIAL HIGHLIGHTS
[To be provided.]
CAPITALIZATION
[To be provided.]
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.
[To be provided.]
On,
[ ], the last reported net asset value per share of the Common Stock was $ and the last reported sales price per share of Common Stock on the NYSE
was $ .
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 Offer:
Dilution. As with any security, the price of the Funds Shares of Common Stock fluctuates with market conditions and other
factors. [The Shares of Common Stock are currently trading at a [discount/premium] 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 Funds 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 Funds 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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you will indirectly bear 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
more than the increase in the amount of the Funds net assets.
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On the other hand, if the Subscription Price is
above the Funds 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 Offer, 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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16
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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 Funds 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 $[ ] Subscription Price:
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Scenario 1: (assumes net asset value per share is above
subscription price)(1)
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NAV
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$
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[ ]
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Subscription Price
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$
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[ ]
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Reduction in NAV($)(2)
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$
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[ ]
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Reduction in NAV(%)
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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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[ ]
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Subscription Price
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$
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[ ]
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Increase in NAV($)(2)
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$
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[ ]
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Increase in NAV(%)
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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 $[ ] 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 Funds 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 Common Stock than if leverage were not used. Following the completion of the Offer, the Funds amount of leverage outstanding will decrease. The leverage of the Fund as of [] was []%. After the completion of
the Offer, the leverage of the Fund is expected to decrease to []%. 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 Common Stock and the yield to holders 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
Funds income. Conversely, if the investment performance with respect to the amounts borrowed fails to cover the interest on such borrowings, the value of the Funds Common Stock may decrease more quickly than would otherwise be the case,
and distributions on the 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 Funds 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 Funds stockholders after taking into account the higher fees and expenses associated with leverage (including higher management fees).
The Funds leveraging strategy may not be successful.
17
Increase in Share Price Volatility; Decrease in Share Price. The 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 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 Offer will not be fully subscribed.
Under-subscription of the Offer could have an impact on the net proceeds of the Offer and whether the Fund achieves any benefits.
TAXATION
[To be provided.]
UNDERWRITING
[G.research, Inc., which is a broker-dealer and member of the Financial Industry Regulatory Authority, will act as Dealer Manager for the
Rights offering. Under the terms and subject to the conditions contained in the Dealer Manager Agreement among the Fund, the Investment Adviser, and the Dealer Manager (the Dealer Manager Agreement), the Dealer Manager will provide
financial structuring services and marketing services in connection with the offering and will solicit the exercise of Rights and participation in the over-subscription privilege. The Fund will not pay the Dealer Manager a fee for its financial
structuring, marketing and soliciting services. The Fund and the Investment Adviser have each agreed to indemnify the Dealer Manager or contribute to losses arising out of certain liabilities, including liabilities under the Securities Act. The
Dealer Manager Agreement also provides that the Dealer Manager will not be subject to any liability to the Fund in rendering the services contemplated by the Dealer Manager Agreement except for any act of bad faith, willful misconduct or gross
negligence of the Dealer Manager or reckless disregard by the Dealer Manager of its obligations and duties under the Dealer Manager Agreement.
Prior to the expiration of the Rights offering, the Dealer Manager may independently offer for sale Rights or Shares of Common Stock to be
acquired by it through purchasing and exercising Rights, at prices it sets. Gains or losses may be realized by the Dealer Manager through the purchase and exercise of Rights or purchase and sale of Shares of Common Stock.
In the ordinary course of their businesses, the Dealer Manager and/or its affiliates may engage in investment banking or financial
transactions with the Fund, the Investment Adviser and their affiliates.
The principal business address of G.research, Inc. is One
Corporate Center, Rye, New York 10580-1422.
G.research, Inc. is a wholly-owned subsidiary of Gabelli Securities, Inc., which is a
majority-owned subsidiary of the parent company of the Investment Adviser, which is, in turn, indirectly majority-owned by Mario J. Gabelli. As a result of these relationships, Mr. Gabelli is a controlling person of G.research,
Inc.]
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 offering
of the shares of common stock.
Certain legal matters will be passed on by Venable LLP, Baltimore, Maryland, in connection with the
offering of the shares of common stock as Maryland counsel to the Fund.
18
The Gabelli Multimedia Trust Inc.
Shares of Common Stock
Issuable Upon Exercise of Rights to
Subscribe to Such Shares of Common Stock
PROSPECTUS SUPPLEMENT
[ ], [ ]
Until, [ ] (25 days after the date of this prospectus), all
dealers that buy, sell or trade these securities, whether or not participating in this offering, may be required to deliver a Prospectus. This is in addition to each dealers obligation to deliver a prospectus when acting as an underwriter and
with respect to its unsold allotments or subscriptions.
19
Filed Pursuant to Rule 497(c)
Registration Statement No. 333-218771
The information in this Prospectus Supplement is not complete and may be changed. The Fund may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS SUPPLEMENT
(To Prospectus dated [ ], [ ])
[ ] Rights for [ ] Shares
Subscription Rights for [ ]% Series [ ] [ ] Preferred Stock
The Gabelli Multimedia Trust Inc. (the Fund, we, us or our) is issuing subscription rights
(the Rights) to our [common] [preferred] stockholders to purchase shares of [ ]% Series [ ] [ ] Preferred Stock (the Series [ ] Preferred
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 Funds 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 investment objective of the Fund. The Funds 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, [ ] (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 $ and the last reported sales price per share of Common Stock on the NYSE was $.
An investment in the Fund is not appropriate for all investors. We cannot assure you that the Funds investment objective will be
achieved. You should read this Prospectus Supplement and the accompanying Prospectus before deciding whether to invest in shares of common stock and retain it for future reference. The Prospectus Supplement and the accompanying Prospectus contain
important information about us. Material that has been incorporated by reference and other information about us can be obtained from us by calling 800-GABELLI
(422-3554) or from the Securities and Exchange Commissions (SEC) website (http://www.sec.gov). For additional information all holders of rights should contact the Information Agent,
[ ], toll-free at [ ] or please send written request to: [ ].
Investing in preferred stock through Rights involves certain risks that are described in the Special Characteristics and Risks of the
Rights Offering section beginning on page PR-[8] of the Prospectus Supplement.
NEITHER
THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Per
Share
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Total
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Subscription price of Common Stock to stockholders exercising Rights
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$
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$
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Underwriting discounts and commissions
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[ ]
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[ ]
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Proceeds, before expenses, to the Fund
(1)
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$
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$
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(1)
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The aggregate expenses of the offering are estimated to be $[ ].
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1
The preferred stock is expected to be ready for delivery in book-entry form through the
Depository Trust Company on or about, [ ]. If the offer is extended, the preferred stock is expected to be ready for delivery in book-entry form through the Depository
Trust Company on or about, [ ].
The date of this Prospectus
Supplement is, [ ]
You should rely only on the
information contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus. The Fund has not authorized anyone to provide you with different information. The Fund is not making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this Prospectus Supplement and the accompanying Prospectus is accurate as of any date other than the date of this
Prospectus Supplement and the accompanying Prospectus, respectively. Our business, financial condition, results of operations and prospects may have changed since those dates. In this Prospectus Supplement and in the accompanying Prospectus, unless
otherwise indicated, Fund, us, our and we refer to The Gabelli Multimedia Trust Inc. This Prospectus Supplement also includes trademarks owned by other persons.
2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
3
SUMMARY OF THE TERMS OF THE RIGHTS OFFERING
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Terms of the Offer
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[To be provided.]
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Amount Available for
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$[ ]
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Primary Subscription
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Title
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Subscription Rights for Series [ ] Preferred Stock
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Exercise Price
|
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Rights may be exercised at a price of $ per share of Preferred Stock (the Subscription Price). See Terms of the Offer.
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Record Date
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Rights will be issued to holders of record of the Funds [Common or Preferred] Stock on, [ ] (the Record Date). See Terms of
the Offer.
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Number of Rights Issued
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Right will be issued in respect of each share of [Common or Preferred] Stock of the Fund outstanding on the Record Date. See Terms of the Offer.
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Number of Rights Required to Purchase One Share of Preferred Stock
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A holder of Rights may purchase share of Preferred Stock of the Fund for every 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. See Terms of the Offer.
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Over-Subscription Privilege
|
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[To be provided.]
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Transfer of Rights
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[To be provided.]
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Exercise Period
|
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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, [ ] (the
Expiration Date) (the Subscription Period). See Terms of the Offer and Method of Exercise of Rights.
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Offer Expenses
|
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The expenses of the Offer are expected to be approximately $[ ]. See Use of Proceeds.
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Sale of Rights
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[To be provided.]
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Use of Proceeds
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The Fund estimates the net proceeds of the Offer to be approximately $[ ]. This figure is based on the Exercise Price per share of $ and assumes all new shares of Series [ ] Preferred
Stock offered are sold and that the expenses related to the Offer estimated at approximately $[ ] are paid.
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The Investment Adviser anticipates that investment of the proceeds will be made in accordance with the Funds investment objectives and policies as appropriate investment opportunities are identified, which is expected to be
substantially completed in approximately three months; however, the identification of appropriate investment opportunities pursuant to the Funds investment style or changes in market conditions may cause the investment period to extend as long
as six months. Pending such investment, the proceeds will be held in high quality short-term debt securities and instruments. See Use of Proceeds.
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Taxation/ERISA
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See Employee Plan Considerations.
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Rights Agent
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[To be provided.]
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TERMS OF THE SERIES PREFERRED STOCK
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Dividend Rate
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Dividends and distributions on Shares of Series [ ] Preferred Stock are cumulative from their original issue date at the annual rate of [ ]%.
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Dividend Payment Rate
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Holders of Shares of Series [ ] Preferred Stock shall be entitled to receive, when, as and if declared by, or under authority granted by, the Board of Trustees, out of funds legally available therefor,
cumulative cash dividends and distributions. Dividends and distributions will be paid [ ], commencing on [ ].
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Liquidation Preference
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$ per share
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[Non-Call Period
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[The Shares of Series [ ] Preferred Stock generally may not be called for redemption at the option of the Fund prior to [ ]. The Fund reserves the right, however, to redeem the Shares
of Series [ ] Preferred Stock at any time if it is necessary, in the judgment of the Board of Trustees, to meet tax, regulatory or rating agency asset coverage
requirements.
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4
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Commencing [ ], and thereafter, to the extent permitted by the 1940 Act and Delaware law, the Fund may at any time, upon notice of redemption, redeem the Shares of Series [ ]
Preferred Stock in whole or in part at the liquidation preference per share plus accumulated unpaid dividends through the date of redemption.]
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[Stock Exchange Listing]
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Application will be made to list the Shares of Series [ ] Preferred Stock on the [ ]. Prior to the offering, there has been no public market for Shares of Series
[ ] Preferred Stock. It is anticipated that trading on the [ ] will begin within [ ] days from the date of this Prospectus Supplement. During such period, the underwriters do
not intend to make a market in Shares of Series [ ] Preferred Stock. Consequently, it is anticipated that, prior to the commencement of trading on the [ ], an investment in Shares of Series
[ ] Preferred Stock will be illiquid.
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DESCRIPTION OF THE RIGHTS OFFERING
[To be provided]
USE OF PROCEEDS
The Fund estimates the net proceeds of the Offer to be $[ ], based on the Subscription Price
per share of $[ ], assuming all new shares of Series [ ] Preferred Stock offered are sold and that the expenses related to the Offer estimated at approximately $[ ] are paid and
after deduction of the underwriting discounts and commissions.
Unless otherwise specified in a prospectus supplement, the Fund will
invest the net proceeds of any offering in accordance with the Funds 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 Funds managed distribution policy. The Investment Adviser anticipates that the investment of the proceeds will be made in accordance with the Funds 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 Funds anticipated investment period extending to as long as six months. Pending such investment, the
proceeds of the offering will be held in high quality short-term debt securities and instruments.
CAPITALIZATION
[To be provided.]
ASSET COVERAGE RATIO
Pursuant to the 1940 Act, the Fund generally will not be permitted to declare any dividend, or declare any
other distribution, upon any outstanding shares of common stock, or purchase any such shares of common stock, unless, in every such case, all shares of preferred stock issued by the Fund have at the time of declaration of any such dividend or
distribution or at the time of any such purchase an asset coverage of at least 200% (1940 Act Asset Coverage Requirement) after deducting the amount of such dividend, distribution, or purchase price, as the case may be. As of the
date of this Prospectus Supplement, all of the Funds outstanding shares of preferred stock are expected to have asset coverage on the date of issuance of the Series [ ] Preferred Stock of approximately
[ ]%.
In addition to the 1940 Act Asset Coverage Requirement, the Fund is subject to certain restrictions on
investments imposed by guidelines of one or more rating agencies, which have issued ratings for certain of the shares of preferred stock and may issue a rating for the Series [ ] Preferred Stock.
SPECIAL CHARACTERISTICS AND RISKS OF THE SERIES [ ] PREFERRED STOCK
Dividends
Holders of Series
[ ] Preferred Stock shall be entitled to receive cumulative cash dividends and distributions at the rate of [ ]% per annum (computed on the basis of a 360-day
year consisting of twelve 30-day months) of the $[ ] liquidation preference on the Series [ ] Preferred Stock. Dividends and distributions on Series
[ ] Preferred Stock will accumulate from the date of their original issue, which is [ ].
5
Dividends and distributions will be payable quarterly on [ ] (each a
Dividend Payment Date) commencing on [ ] (or, if any such day is not a business day, then on the next succeeding business day) to holders of record of Series [ ] Preferred Stock as they
appear on the stockholder register of the Fund at the close of business on the fifth preceding business day. Dividends and distributions on Series [ ] Preferred Stock shall accumulate from the date on which the shares are
originally issued. Each period beginning on and including a Dividend Payment Date (or the date of original issue, in the case of the first dividend period after issuance of the Series [ ] Preferred Stock) and ending on but
excluding the next succeeding Dividend Payment Date is referred to herein as a Dividend Period. Dividends and distributions on account of arrears for any past Dividend Period or in connection with the redemption of Series
[ ] Preferred Stock may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date as shall be fixed by the Board of Directors.
No full dividends or distributions will be declared or paid on Series [ ] Preferred Stock for any Dividend Period or
part thereof unless full cumulative dividends and distributions due through the most recent Dividend Payment Dates therefor for all series of preferred stock of the Fund ranking on a parity with the Series [ ] Preferred Stock
as to the payment of dividends and distributions have been or contemporaneously are declared and paid through the most recent Dividend Payment Dates therefor. If full cumulative dividends and distributions due have not been paid on all outstanding
shares of preferred stock of the Fund, any dividends and distributions being paid on such shares of preferred stock (including the Series [ ] Preferred Stock) will be paid as nearly pro rata as possible in proportion to the
respective amounts of dividends and distributions accumulated but unpaid on each such series of shares of preferred stock on the relevant Dividend Payment Date.
Restrictions on Dividend, Redemption and Other Payments
Under the 1940 Act, the Fund is not permitted to issue shares of preferred stock (such as the Series [ ] Preferred
Stock) unless immediately after such issuance the Fund will have an asset coverage of at least 200% (or such other percentage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities
representing shares of a closed-end investment company as a condition of declaring distributions, purchases or redemptions of its shares). In general, the term asset coverage for this purpose means
the ratio the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness of the Fund plus the aggregate of the
involuntary liquidation preference of the shares of preferred stock. The involuntary liquidation preference refers to the amount to which the shares of preferred stock would be entitled on the involuntary liquidation of the Fund in preference to a
security junior to them. The Fund also is not permitted to declare any cash dividend or other distribution on its shares of common stock or purchase its shares of common stock unless, at the time of such declaration or purchase, the Fund satisfies
this 200% asset coverage requirement after deducting the amount of the distribution or purchase price, as applicable.
In addition,
the Fund may be limited in its ability to declare any cash distribution on its shares of stock (including the Series [ ] Preferred Stock) or purchase its shares of stock (including the Series [ ]
Preferred Stock) unless, at the time of such declaration or purchase, the Fund has an asset coverage on its indebtedness, if any, of at least 300% after deducting the amount of such distribution or purchase price, as applicable. The 1940
Act contains an exception, however, that permits dividends to be declared upon any shares of preferred stock issued by the Fund (including the Series [ ] Preferred Stock) if the Funds indebtedness has an asset coverage
of at least 200% at the time of declaration after deducting the amount of the dividend. In general, the term asset coverage for this purpose means the ratio which the value of the total assets of the Fund, less all liabilities and
indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness of the Fund.
The term senior security does not include any promissory note or other evidence of indebtedness in any case where such a loan is
for temporary purposes only and in an amount not exceeding 5% of the value of the total assets of the Fund at the time when the loan is made. A loan is presumed under the 1940 Act to be for temporary purposes if it is repaid
within 60 days and is not extended or renewed; otherwise it is presumed not to be for temporary purposes. For purposes of determining whether the 200% and 300% asset coverage requirements
6
described above apply in connection with dividends or distributions on or purchases or redemptions of Series [ ] Preferred Stock, the asset coverage may be calculated on
the basis of values calculated as of a time within 48 hours (not including Sundays or holidays) next preceding the time of the applicable determination.
Voting Rights
Except as
otherwise provided in the Funds governing documents or a resolution of the Board of Directors or its delegatee, or as required by applicable law, holders of Series [ ] Preferred Stock shall have no power to vote on any
matter except matters submitted to a vote of the Funds shares of common stock. In any matter submitted to a vote of the holders of the shares of common stock, each holder of Series [ ] Preferred Stock shall be entitled
to one vote for each share of Series [ ] Preferred Stock held and the holders of all outstanding shares of preferred stock, including Series [ ] Preferred Stock, and the shares of common stock shall vote
together as a single class; provided, however, that at any meeting of the stockholders of the Fund held for the election of Directors, the holders of the outstanding shares of preferred stock, including Series [ ] Preferred
Stock, shall be entitled, as a class, to the exclusion of the holders of all other classes of shares of stock of the Fund, to elect a number of Fund directors, such that following the election of directors at the meeting of the stockholders, the
Funds Board of Directors shall contain two directors elected by the holders of the outstanding shares of preferred stock, including the Series [ ] Preferred Stock.
During any period in which any one or more of the conditions described below shall exist (such period being referred to herein as a
Voting Period), the number of directors constituting the Board of Directors shall be increased by the smallest number of additional directors that, when added to the two directors elected exclusively by the holders of outstanding shares
of preferred stock, would constitute a simple majority of the Board of Directors as so increased by such smallest number, and the holders of outstanding shares of preferred stock, including the Series [ ] Preferred Stock,
voting separately as one class (to the exclusion of the holders of all other classes of shares of stock of the Fund) shall be entitled to elect such smallest number of additional directors. The Fund and the Board of Directors shall take all
necessary actions, including amending the Funds governing documents, to effect an increase in the number of directors as described in the preceding sentence. A Voting Period shall commence:
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(i)
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if at any time accumulated dividends and distributions on the outstanding shares of Series
[ ] Preferred Stock equal to at least two full years dividends and distributions shall be due and unpaid; or
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(ii)
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if at any time holders of any other shares of preferred stock are entitled to elect a majority of the Directors
of the Fund under the 1940 Act or Statement or other instrument creating such shares.
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Redemption
Mandatory Redemption. Under certain circumstances, the Series [ ] Preferred Stock will be subject to mandatory
redemption by the Fund out of funds legally available therefor in accordance with the Statement and applicable law.
If the Fund fails to
have asset coverage, as determined in accordance with Section 18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior securities of the Fund which are shares, including all outstanding Series
[ ] Preferred Stock (or such other asset coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are shares of a
closed-end investment company as a condition of declaring dividends on its shares of common stock), and such failure is not cured as of the cure date specified in the Statement, (i) the Fund shall give a
notice of redemption with respect to the redemption of a sufficient number of shares of preferred stock, which at the Funds determination (to the extent permitted by the 1940 Act and Maryland law) may include any proportion of Series
[ ] Preferred Stock, to enable it to meet the asset coverage requirements, and, at the Funds discretion, such additional number of shares of Series [ ] Preferred Stock or other shares of preferred
stock in order for the Fund to have asset coverage with respect to the Series [ ] Preferred Stock and any other shares of preferred stock remaining outstanding after such redemption as great as 210%, and (ii) deposit
an amount with Computershare Trust Company, N.A., and its successors or any other dividend-disbursing agent appointed by the Fund, having an initial combined value sufficient to effect the redemption of the Series [ ]
Preferred Stock or other shares of preferred stock to be redeemed.
7
On such cure date, the Fund shall redeem, out of funds legally available therefor, the number of
shares of preferred stock, which, to the extent permitted by the 1940 Act and Maryland law, at the option of the Fund may include any proportion of Series [ ] Preferred Stock or any other series of shares of preferred
stock, equal to the minimum number of shares the redemption of which, if such redemption had occurred immediately prior to the opening of business on such cure date, would have resulted in the Fund having asset coverage immediately prior to the
opening of business on such cure date in compliance with the 1940 Act or, if asset coverage cannot be so restored, all of the outstanding Series [ ] Preferred Stock, at a price equal to $[ ] per
share plus accumulated but unpaid dividends and distributions (whether or not earned or declared by the Fund) through the date of redemption.
Optional Redemption. Prior to [ ], the Series [ ] Preferred Stock is not subject to
optional redemption by the Fund unless the redemption is necessary, in the judgment of the Board of Directors, to maintain the Funds status as a regulated investment company under Subchapter M of the Internal Revenue Code. Commencing
[ ] and thereafter, to the extent permitted by the 1940 Act and Maryland law, the Fund may at any time upon notice redeem the Series [ ] Preferred Stock in whole or in part at a price equal to the
liquidation preference per share plus accumulated but unpaid dividends through the date of redemption.
Liquidation
In the event of any liquidation, dissolution or winding up of the affairs of the Fund, whether voluntary or involuntary, the holders of Series
[ ] Preferred Stock shall be entitled to receive out of the assets of the Fund available for distribution to stockholders, after satisfying claims of creditors but before any distribution or payment shall be made in respect of
the Funds shares of common stock or any other shares of the Fund ranking junior to the Series [ ] Preferred Stock as to liquidation payments, a liquidation distribution in the amount of $[ ] per
share (the Liquidation Preference), plus an amount equal to all unpaid dividends and distributions accumulated to and including the date fixed for such distribution or payment (whether or not earned or declared by the Fund, but excluding
interest thereon), and such holders shall be entitled to no further participation in any distribution or payment in connection with any such liquidation, dissolution or winding up of the Fund.
If, upon any liquidation, dissolution or winding up of the affairs of the Fund, whether voluntary or involuntary, the assets of the Fund
available for distribution among the holders of all outstanding shares of Series [ ] Preferred Stock, and any other outstanding shares of a class or series of the Funds shares of preferred stock ranking on a parity with
the Series [ ] Preferred Stock as to payment upon liquidation, shall be insufficient to permit the payment in full to such holders of Series [ ] Preferred Stock of the Liquidation Preference plus
accumulated and unpaid dividends and distributions and the amounts due upon liquidation with respect to such other shares of preferred stock of the Fund, then such available assets shall be distributed among the holders of Series
[ ] Preferred Stock and such other shares of preferred stock of the Fund ratably in proportion to the respective preferential liquidation amounts to which they are entitled. Unless and until the Liquidation Preference plus
accumulated and unpaid dividends and distributions has been paid in full to the holders of Series [ ] Preferred Stock, no dividends or distributions will be made to holders of the Funds shares of common stock or any
other shares of the Fund ranking junior to the Series [ ] Preferred Stock as to liquidation.
Stock Exchange Listing
Application has been made to list the Series [ ] Preferred Stock on the [ ]. The shares of
Series [ ] Preferred Stock are expected to commence trading on the [ ] within [ ] days of the date of issuance.
Risks
Risk is inherent in all
investing. Therefore, before investing in the Series [ ] Preferred Stock you should consider the risks carefully. See Risk Factors and Special Considerations in the Prospectus. Primary risks associated with an
investment in the Series [ ] Preferred Stock include:
Market Price Risk. The market price for the Series
[ ] Preferred Stock will be influenced by changes in interest rates, the perceived credit quality of the Series [ ] Preferred Stock and other factors, and may be higher or lower than the liquidation
preference of the Series [ ] Preferred Stock. There is currently no market for the Series [ ] Preferred Stock.
8
Liquidity Risk. Currently, there is no public market for the Series
[ ] Preferred Stock. As noted above, an application has been made to list the Series [ ] Stock on the [ ]. However, during an initial period which is not expected to exceed
[ ] days after the date of its issuance, the Series [ ] Preferred Stock will not be listed on any securities exchange. During such period, the underwriters do not intend to make a market in the
Series [ ] Preferred Stock. No assurances can be provided that listing on any securities exchange or market making by the underwriters will result in the market for Series [ ] Preferred Stock being
liquid at any time.
Redemption Risk. The Fund may at any time redeem Series [ ] Preferred Stock to the
extent necessary to meet regulatory asset coverage requirements or requirements imposed by credit rating agencies. For example, if the value of the Funds investment portfolio declines, thereby reducing the asset coverage for the Series
[ ] Preferred Stock, the Fund may be obligated under the terms of the Series [ ] Preferred Stock to redeem some or all of the Series [ ] Preferred Stock. In addition, commencing
[ ], the Fund will be able to call the Series [ ] Preferred Stock at the option of the Fund. Investors may not be able to reinvest the proceeds of any redemption in an investment providing the same or a
higher dividend rate than that of the Series [ ] Preferred Stock.
The Series [ ] Preferred
Stock are not a debt obligation of the Fund. The Series [ ] Preferred Stock are junior in respect of distributions and liquidation preference to any indebtedness incurred by the Fund, and are of the same ranking as the
distributions and liquidation preference of the Series [ ] Preferred Stock. Although unlikely, precipitous declines in the value of the Funds assets could result in the Fund having insufficient assets to redeem all of
the Series [ ] Preferred Stock for the full redemption price.
[Credit Rating Risk. The Fund is seeking a
credit rating on the Series [ ] Preferred Stock. Any credit rating that is issued on the Series [ ] Preferred Stock could be reduced or withdrawn while an investor holds Series [ ]
Preferred Stock. A reduction or withdrawal of the credit rating would likely have an adverse effect on the market value of the Series [ ] Preferred Stock. In addition, a credit rating does not eliminate or mitigate the risks
of investing in the Series [ ] Preferred Stock.]
Distribution Risk. The Fund may not meet the asset
coverage requirements or earn sufficient income from its investments to make distributions on the Series [ ] Preferred Stock.
TAXATION
[To be provided.]
UNDERWRITING
[To be provided.]
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 stock.
Certain legal matters will be passed on by Venable LLP, Baltimore, Maryland, in connection with the
offering of the shares of preferred stock as Maryland counsel to the Fund.
9
The Gabelli Multimedia Trust Inc.
Shares
% Series
[ ] [ ] Preferred Stock
(Liquidation Preference $ per share)
PROSPECTUS SUPPLEMENT
[ ], [ ]
Until, [ ] (25 days after the date of this prospectus), all
dealers that buy, sell or trade the Preferred Stock, whether or not participating in this offering, may be required to deliver a Prospectus. This is in addition to each dealers obligation to deliver a prospectus when acting as an underwriter
and with respect to its unsold allotments or subscription
10
The information in this Statement of Additional Information is not
complete and may be changed. The Fund may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities
and is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion dated [ ], 2017
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 Funds 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
Funds Prospectus relating thereto dated September 26, 2019, and as it may be supplemented. This SAI does not include all information that a prospective investor should consider before investing in the Funds shares, and investors
should obtain and read the Funds Prospectus prior to purchasing such shares. A copy of the Funds 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 SECs office or via its website (www.sec.gov) at no charge.
1
TABLE OF CONTENTS
2
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 SECs 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
Funds 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 Funds 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 Funds 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 agencys 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.
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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
Moodys, 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 issuers 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 issuers 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 issuers 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.
4
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 Funds 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
5
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 Funds 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
6
(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 Funds assets committed to
margin and options premiums and (ii) non-bona fide hedging transactions, provided that the Fund does not enter into such non-bona fide hedging transactions if,
immediately thereafter, either (a) the sum of the amount of initial margin deposits on the Funds existing futures positions or swaps positions and option or swaption premiums would exceed 5% of the market value of the Funds
liquidating value, after taking into account unrealized profits and unrealized losses on any such transactions, or (b) the aggregate net notional value of the Funds commodity interest transactions would exceed 100% of the market
value of the Funds 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 Funds 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 writers 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,
7
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 Funds portfolio securities. Such
a sale would have an effect similar to selling an equivalent value of the Funds portfolio securities. If interest rates increase, the value of the Funds 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 Funds custodian or earmark on the records of the Investment Adviser, assets sufficient to cover the Funds 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 Funds 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.
8
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 Funds 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 Funds 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 Funds 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 Funds 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 Funds commitment with respect to the forward contract.
9
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 Funds 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 Advisers 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 Funds 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.
10
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 Funds 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 Funds 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
Funds 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.
11
Loans of Portfolio Securities. Consistent with applicable regulatory requirements and
the Funds 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 Funds 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 Funds total assets. The Funds ability to lend portfolio securities will be limited by the rating agency guidelines applicable to any of the
Funds 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 Funds 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 Funds 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 Funds
investment in such loaned securities. The Fund will pay reasonable finders, 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.
12
For short sales, the market value of the securities sold short of any one issuer will not exceed
either 5% of the Funds total assets or 5% of such issuers 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 Funds 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 Funds 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 Funds 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 Funds 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:
13
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 companys 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.
14
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.
|
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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)
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33
|
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|
|
|
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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.
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|
|
|
1
|
INDEPENDENT
DIRECTORS(5):
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|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
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)
|
John Birch(7)
Director
Age: 77
|
|
Since 2019*
|
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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.
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|
|
|
20
|
|
|
|
|
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James P. Conn(6)
Director
Age: 81
|
|
Since 1994*
|
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Former Managing Director and Chief Investment Officer of Financial Security Assurance Holdings Ltd. (1992-1998)
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23
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|
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Frank J. Fahrenkopf, Jr.(7)
Director
Age: 80
|
|
Since 1999**
|
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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)
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Director of First Republic Bank (banking)
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12
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Kuni Nakamura
Director
Age: 51
|
|
Since 2012*
|
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President of Advanced Polymer, Inc. (chemical manufacturing company); President of KEN Enterprises, Inc. (real estate)
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32
|
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|
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Werner J. Roeder
Director
Age: 79
|
|
Since 1999***
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Retired physician; Former Vice President of Medical Affairs (Medical Director) of New York Presbyterian/Lawrence Hospital (1999-2014)
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|
19
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16
|
|
|
|
|
|
|
|
|
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)
|
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 Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals); Director, Chairman, and CEO of General Employment
Enterprises (staffing services) (2009-2012)
|
|
30
|
|
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Daniel E. Zucchi
Director
Age: 79
|
|
Since 2019***
|
|
President of Zucchi, Inc. (general business consulting); Senior Vice President of Hearst Corp. (1984-1995)
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Cypress Care LLC (health care) (2001-2009)
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3
|
|
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|
OFFICERS:
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|
|
|
|
Name, Position with the
Fund, Age and Business
Address1
|
|
Length of Time
Served(9)
|
|
Principal Occupation(s) During Past Five
Years
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Bruce N. Alpert
President
Age: 68
|
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Since 2003
|
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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
|
|
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|
John C. Ball
Treasurer and Principal
Financial and Accounting
Officer
Age: 44
|
|
Since 2017
|
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Treasurer of registered investment companies within the Gabelli/GAMCO Fund Complex since 2017; Vice President and Assistant Treasurer of AMG Funds, 2014-2017
|
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Peter Goldstein
Secretary
Age: 67
|
|
Since 2020
|
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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)
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17
|
|
|
|
|
OFFICERS:
|
|
|
|
|
|
|
|
Name, Position with the
Fund, Age and Business
Address1
|
|
Length of Time
Served(9)
|
|
Principal Occupation(s) During Past Five
Years
|
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
|
|
|
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Carter W. Austin
Vice President and
Ombudsman
Age: 53
|
|
Since 2010
|
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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
|
|
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|
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.
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1
|
Address: One Corporate Center, Rye, NY 10580-1422.
|
2
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The Funds 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 Funds Investment Adviser.
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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, 2016.
|
6
|
Director elected solely by holders of the Funds Preferred Stock.
|
7
|
Mr. Colavitas son, Anthony S. Colavita, and Mr. Fahrenkopfs 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 Funds Investment Adviser.
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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 SECs 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).
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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 Funds 2021 Annual Meeting of Stockholders and until his successor is duly
elected and qualified.
|
**
|
Term continues until the Funds 2022 Annual Meeting of Stockholders and until his successor is duly
elected and qualified.
|
***
|
Term continues until the Funds 2023 Annual Meeting of Stockholders and until his successor is duly
elected and qualified.
|
The Board believes that each Directors 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
18
Adviser, the sub-administrator, other service providers, counsel, and the Funds independent registered public accounting firm, and to exercise
effective and independent business judgment in the performance of their duties as Directors. Each Directors ability to perform his duties effectively has been attained in large part through the Directors 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 Directors 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 a member of the Funds ad hoc Pricing Committee. 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 Bachelors 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 GAMCOs 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 Bachelors 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 Funds 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
19
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 Bachelors 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 Funds 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 Bachelors 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 Reagans 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 AGAs 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 Bachelors 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 Funds Audit and Nominating Committees, a member of the Funds ad hoc Pricing Committees, and has been designated the Funds 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 Bachelors 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 hospitals $140 million budget. He is a member of the Funds 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 Funds 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
20
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 Bachelors degree and M.B.A. in Finance from St. Johns 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 Executives 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 Funds 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 Funds 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 Funds 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 Funds 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
Funds Chief Compliance Officer regarding compliance matters relating to the Fund and its major service providers, including results of the implementation and testing of the Funds and such providers compliance programs. The
Boards 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 Funds 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.
21
Standing Committees of the Board of Directors
Audit Committee. The Audit Committee is composed of three of the Funds 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 Funds financial statements and the audit thereof and to act as a liaison between the Board and the Funds independent registered public accounting firm.
The Audit Committee met two times during the fiscal year ended December 31, 2019.
Nominating Committee.
The Board of Directors has a Nominating Committee composed of three Independent Directors, namely Messrs. Nakamura (Chairman), Colavita, 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, 2019.
The Fund does not have a standing compensation committee.
For a discussion of experiences, qualifications, attributes, or skills supporting the appropriateness of each Directors service on the Funds 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
|
|
22
All Shares are valued as of December 31, 2019.
(1)
|
This information has been furnished by each Director as of December 31, 2019. 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 Funds Investment Adviser and/or affiliates
(including Mario J. Gabelli) and in that event would be deemed to be under common control with the Funds 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, 2019.
|
(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, 2019 amounted to $71,370. During the fiscal year ended December 31, 2019, 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.
23
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, 2019.
Compensation Table for the Fiscal Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
3,185
|
|
|
$
|
32,685 (3)
|
|
|
|
|
|
Anthony J. Colavita
Director
|
|
$
|
8,500
|
|
|
$
|
219,000
|
|
|
|
(20
|
)
|
James P. Conn
Director
|
|
$
|
10,000
|
|
|
$
|
275,000
|
|
|
|
(26
|
)
|
Frank J. Fahrenkopf, Jr.
Director
|
|
$
|
8,000
|
|
|
$
|
169,500
|
|
|
|
(14
|
)
|
Kuni Nakamura
Director
|
|
$
|
13,000
|
|
|
$
|
356,000
|
|
|
|
(37
|
)
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Werner J. Roeder
Director
|
|
$
|
10,000
|
|
|
$
|
171,024
|
|
|
|
(243
|
)
|
Salvatore J. Zizza
Director
|
|
$
|
10,500
|
|
|
$
|
319,000
|
|
|
|
(32
|
)
|
Daniel E. Zucchi
Director
|
|
$
|
3,185
|
|
|
$
|
27,185
|
|
|
|
(2
|
)
|
*
|
Represents the total compensation paid to such persons during the year ended December 31, 2019 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 $19.1 billion as of September 30, 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 $10.5 billion as of
24
September 30, 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 $1.2 billion as of September 30, 2020; and Gabelli Fixed Income, LLC, an indirect wholly owned subsidiary of GBL, acts as investment adviser for separate accounts having assets under management of
approximately $22 million as of September 30, 2020. Teton Advisors, Inc. was spun off by GBL in March 2009 and is an affiliate of GBL by virtue of Mr. Gabellis ownership of GGCP, the principal stockholder of Teton Advisors,
Inc., as of September 30, 2020. Associated Capital was spun off from GBL on November 30, 2015, and is an affiliate of GBL by virtue of Mr. Gabellis 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
Funds Board. In addition, under the Advisory Agreement, the Investment Adviser oversees the administration of all aspects of the Funds business and affairs and provides, or arranges for others to provide, at the Investment Advisers
expense, certain enumerated services, including maintaining the Funds books and records, preparing reports to the Funds 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 Funds 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 Funds 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
25
net asset value) on the Funds 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 stockholders 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 Funds 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 Advisers 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 Funds 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 14, 2019. 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 Funds outstanding shares.
A discussion regarding the basis of the Boards approval of the Advisory Agreement for the Fund is available in the semiannual report to
stockholders for the six months ended June 30, 2019.
For the fiscal years ended December 31, 2018, 2017, and 2016, 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, 2019
|
|
$
|
2,668,688
|
|
|
None
|
|
None
|
December 31, 2018
|
|
$
|
2,861,708
|
|
|
$ 200,254
|
|
None
|
December 31, 2017
|
|
$
|
2,609,653
|
|
|
None
|
|
None
|
26
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, 2019, 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:
|
|
|
24
|
|
|
$
|
19.5B
|
|
|
|
4
|
|
|
$
|
5.3B
|
|
|
|
Other Pooled Investment Vehicles:
|
|
|
11
|
|
|
$
|
1.1B
|
|
|
|
8
|
|
|
$
|
904.3M
|
|
|
|
Other Accounts:
|
|
|
985
|
|
|
$
|
8.1B
|
|
|
|
1
|
|
|
$
|
238.5M
|
|
Christopher J. Marangi
|
|
Registered Investment Companies:
|
|
|
7
|
|
|
$
|
7.4B
|
|
|
|
2
|
|
|
$
|
4.6B
|
|
|
|
Other Pooled Investment Vehicles:
|
|
|
1
|
|
|
$
|
56.3M
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
Other Accounts:
|
|
|
301
|
|
|
$
|
1.6B
|
|
|
|
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 managers
decision as to the selection of brokers and dealers
27
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 Advisers management fee or the portfolio managers 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 managers 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 firms expenses (other than Mr. Gabellis 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 Advisers 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
28
minimum level of compensation. Net revenues are determined by deducting from gross investment management fees certain of the firms expenses (other than the respective portfolio
managers 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 Advisers parent, GBL, of quantitative and qualitative performance evaluation criteria.
Ownership of Shares in the Fund
As of December 31, 2019, the portfolio managers of the Fund own the following amounts of equity securities of the Fund.
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Name of Portfolio Manager
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Dollar Range of Equity Securities in the
Fund
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Mario J. Gabelli
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Over $1,000,000
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Christopher J. Marangi
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$10,001 -
$50,000
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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 Funds 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 Funds 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 Advisers 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 Advisers interests and the Funds 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):
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(1)
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To regulatory authorities in response to requests for such information and with the approval of the Chief
Compliance Officer of the Fund;
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29
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(2)
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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;
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(3)
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To service providers of the Fund, as necessary for the performance of their services to the Fund and to the
Board; the Funds anticipated service providers are its administrator, transfer agent, custodian, independent registered public accounting firm, and legal counsel;
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(4)
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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;
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(5)
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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
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(6)
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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.
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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 Advisers 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 Funds Chief Compliance Officer.
AUCTIONS FOR AUCTION RATE PREFERRED STOCK
The Funds 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 Funds 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
Funds 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.
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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 periods rate will be.
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30
●
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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 periods rate is less than the rate you specify.
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●
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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 periods rate will be.
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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-dealers failure to submit orders from existing or potential holders of auction rate preferred stock. A broker-dealers failure to submit orders for auction rate preferred stock held
by it or its customers will be treated in the same manner as a holders 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.
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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.
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Current Holder A
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Owns 500 shares, wants to sell all 500 shares if auction rate is less than 4.6%
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Bid order at 4.6% rate for all 500 shares
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Current Holder B
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Owns 300 shares, wants to hold
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|
Hold order will take the auction rate
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Current Holder C
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Owns 200 shares, wants to sell all 200 shares if auction rate is less than 4.4%
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|
Bid order at 4.4% rate for all 200 shares
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Potential Holder D
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Wants to buy 200 shares
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|
Places order to buy at or above 4.5%
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Potential Holder E
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Wants to buy 300 shares
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|
Places order to buy at or above 4.4%
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Potential Holder F
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|
Wants to buy 200 shares
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|
Places order to buy at or above 4.6%
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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 As 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
32
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 holders 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 withaffiliates 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 Funds 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 firms 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
33
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, 2017, 2018, and 2019, 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, $11,836, $9,522, and $27,048 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, 2019 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 Funds 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, 2019 and December 31, 2018 were 17.5% and 20.5%,
respectively. The portfolio turnover rate is calculated by dividing the lesser of an investment companys 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,
34
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 Funds 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 Funds 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 Funds (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 funds 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 Funds
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.
35
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 Funds 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.
36
Certain of the Funds 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 stockholders 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 Funds 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 Funds 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 Funds 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 Funds
earnings and profits will first reduce the adjusted tax basis of a holders 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.
37
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 taxpayers tax basis (or trading value) in a share of preferred stock (or 10% of the
taxpayers 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 taxpayers 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 Funds current and
accumulated earnings and profits, if any, however, will not be allocated proportionately among the common stock and preferred stock. Since the Funds 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 Funds 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 stockholders U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.
38
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 November 30, 2020:
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|
|
|
|
|
|
Name and Address of Beneficial Owner(s)
|
|
Title of Class
|
|
Amount of
Shares
and Nature
of
Ownership
|
|
Percent
of Class
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First Trust Portfolios LP, Suite 400, 120 East Liberty Drive, Wheaton,
IL 60187
|
|
Common
|
|
1,802,257
(beneficial)
|
|
7.1%
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Mario J. Gabelli and affiliates, One Corporate Center, Rye,
NY 10580-1422
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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, 826,065 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.
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As of November 30, 2020, there were no persons known to the Fund to be beneficial owners of more than 5% of the Funds
outstanding shares of Preferred Stock.
As of November 30, 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 Funds common stock and less than 1% of the outstanding shares of the Funds 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 DTCs 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
39
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 DTCs 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; DTCs 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. DTCs practice is to credit direct participants accounts on the relevant payment
date in accordance with their respective holdings shown on DTCs 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 Funds voting securities in accordance with such procedures. A copy of the Funds 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 SECs 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 SECs 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 SECs 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
SECs Public Reference Room, Washington, D.C. 20549-0102.
40
Financial Statements
The audited financial statements included in the annual report to the Funds stockholders for the year ended December 31, 2019,
together with the report of PricewaterhouseCoopers LLP are incorporated herein by reference to the Funds 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 Funds assets pursuant to a custody agreement. Under the custody agreement, the Custodian holds the Funds 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 Funds dividend disbursing agent, as agent under the Funds 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 Funds 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.
41
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 clients proxies in accordance with specific guidelines or procedures supplied by the client (to the
extent permitted by ERISA).
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I.
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Proxy Voting Committee
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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 issuers Board of Directors and not contrary to the Proxy
Guidelines; (2) consistent with the recommendations of the issuers 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.
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A.
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Conflicts of Interest.
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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
A-1
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.
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B.
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Operation of Proxy Voting Committee
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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.
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II.
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Social Issues and Other Client Guidelines
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If a client has provided special instructions relating to the voting of proxies, they should be noted in the clients
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.
A-2
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III.
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Client Retention of Voting Rights
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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.
- Operations
- Proxy Department
- 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.
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Proxies of Certain Non-U.S. Issuers
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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 clients 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
Funds proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to Gabelli Funds, LLC at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SECs 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:
A-3
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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.
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Proxy cards which may be voted directly.
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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:
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When a solicitor has been retained, the solicitor is called. At the solicitors direction, the proxy is
faxed or sent electronically.
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In some circumstances VIFs can be faxed or sent electronically to Broadridge up until the time of the meeting.
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6. In the case of a proxy contest, records are maintained for each opposing entity.
7. Voting in Person
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:
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Banks and brokerage firms using the services at Broadridge:
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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.
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Banks and brokerage firms issuing proxies directly:
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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.
A-4
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:
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Historical responsiveness to shareholders
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This may include such areas as:
-Paying greenmail
-Failure
to adopt shareholder resolutions receiving a majority of shareholder votes
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Nominating committee in place
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Number of outside directors on the board
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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.
A-5
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 boards 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:
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Future use of additional shares
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-Stock split
- Stock option
or other executive compensation plan
- Finance growth of company/strengthen balance sheet
- Aid in restructuring
-Improve credit rating
-
Implement a poison pill or other takeover defense
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Amount of stock currently authorized but not yet issued or reserved for stock option plans
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Amount of additional stock to be authorized and its dilutive effect
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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 shareholders 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.
A-6
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 SECs 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 mergers
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.
A-7
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 clients
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 states takeover statutes. Example: Delaware law
requires that a buyer must acquire at least 85% of the companys 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:
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Management history of responsiveness to shareholders
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Other mitigating factors
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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.
A-8
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:
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Dilution of voting power or earnings per share by more than 10%.
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Kind of stock to be awarded, to whom, when and how much.
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Amount of stock already authorized but not yet issued under existing stock plans.
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The successful steps taken by management to maximize shareholder value.
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Supermajority Vote Requirements
Supermajority vote requirements in a companys 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 companys 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 companys current governance structure, the successful steps taken by management to maximize shareholder value, as well as other applicable factors.
A-9
PART C
OTHER INFORMATION
ITEM 25.
FINANCIAL STATEMENTS AND EXHIBITS
1.
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Financial Statements(1)
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Incorporated by reference to Registrants most recent
Certified Shareholder Report on Form N-CSR, filed March 6, 2020 (File No. 811-08476)
Report of Independent Registered Public
Accounting Firm
Schedule of Investments as of December 31, 2019.
Fair Valuation Summary as of December 31, 2019.
Statement of Assets and Liabilities as of December 31, 2019.
Statement of Operations for the fiscal period ended December 31, 2019.
Statement of Change in Net Assets for the fiscal period ended December 31, 2019.
Notes to Financial Statements for the fiscal period ended December 31, 2019.
Financial Highlights during the fiscal period ended December 31, 2019.
Incorporated by reference to Registrants most recent
Certified Shareholder Report on Form N-CSRS, filed September 4, 2020 (File No. 811-08476)
Schedule of Investments as of
June 30, 2020.
Fair Valuation Summary as of June 30, 2020.
Statement of Assets and Liabilities as of June 30, 2020.
Statement of Operations for the six-months ended June 30, 2020.
Statement of Change in Net Assets for the six-months ended June 30, 2020.
Notes to Financial Statements for the six-months ended June 30, 2020.
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(d)
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(i) Specimen Stock Certificate:
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(a) Amendment No.
1 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (15)
(b) Amendment No.
2 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (15)
(c) Amendment No.
3 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (15)
(d) Amendment No.
4 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (15)
(e) Amendment No.
5 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (15)
(f) Amendment No.
6 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (17)
(g) Amendment No.
7 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (17)
(h) Amendment No.
8 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (17)
(i) Amendment No.
9 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (17)
(j) Amendment No.
10 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (17)
(k) Amendment No.
11 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (9)
(l) Amendment
No. 12 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (9)
(m) Amendment No.
13 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (9)
(n) Amendment No.
14 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (9)
(o) Amendment No.
15 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (9)
(p) Amendment No.
16 to Transfer Agency and Service Agreement among Registrant, Computershare Trust Company, N.A. and Computershare Inc. (9)
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(ii)
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Opinion and Consent of Local Counsel (13)
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(1)
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Incorporated by reference from the Registrants annual report filed March 7, 2019 on Form N-CSR (File No. 811- 8476).
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(2)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File Nos. 333-60407
and 811-8476, as filed with the Securities and Exchange Commission on June 20, 1995.
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(3)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-60407
and 811-8476, as filed with the Securities and Exchange Commission on May 23, 1997.
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(4)
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Incorporated by reference from Amendment No. 1 to the Registrants Registration Statement on Form N-2, File Nos. 33-60407 and 811-8476, as filed with the Securities and Exchange Commission on August 7, 1995.
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(5)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-33514
and 811-8476, as filed with the Securities and Exchange Commission on June 2, 2000.
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(6)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-102755
and 811-8476, as filed with the Securities and Exchange Commission on March 21, 2003.
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(7)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-173800
and 811-8476, as filed with the Securities and Exchange Commission on April 29, 2011.
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(8)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-195186
and 811-8476, as filed with the Securities and Exchange Commission on April 10, 2014.
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(9)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-218771 and 811-8476, as filed with the Securities and Exchange Commission on December 20, 2019.
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(10)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-172191
and 811-8476, as filed with the Securities and Exchange Commission on February 11, 2011.
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(11)
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Incorporated by reference from the Registrants Current Report on Form 8-K, File. No. 811- 8476, as filed with the Securities and
Exchange Commission on November 29, 2010.
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(12)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-25487
and 811-8476, as filed with the Securities and Exchange Commission on April 18, 1997.
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(13)
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To be filed by amendment.
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(14)
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Incorporated by reference to the Registrants Pre-Effective Amendment No. 1 to the Registrants Registration Statement on Form N-2
(File Nos. 333-195186 and 811-8476) as filed with the Securities and Exchange Commission on May 21, 2014.
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(15)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-195186
and 811-8476, as filed with the Securities and Exchange Commission on April 19, 2016.
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(16)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-195186
and 811-8476, as filed with the Securities and Exchange Commission on April 4, 2017.
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(17)
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Incorporated by reference from the Registrants Registration Statement on Form N-2, File No. 333-218771
and 811-8476, as filed with the Securities and Exchange Commission on August 23, 2017.
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(18)
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Incorporated by reference from the Registrants semiannual report on Form N-CSRS, File No. 811-8476. As filed with the Securities and
Exchange Commission on September 4, 2020.
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*
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Filed herewith
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ITEM 26. Marketing Arrangements
The information contained under the heading Plan of Distribution in the Prospectus is incorporated by reference, and any
information concerning any underwriters will be contained in the accompanying Prospectus Supplement, if any.
ITEM 27. Other Expenses
of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in connection with the offering
described in this Registration Statement:
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SEC registration fees
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43,640
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New York Stock Exchange listing fee
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40,000
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Rating Agency fees
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100,000
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Printing expenses
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500,000
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Accounting fees
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120,000
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Legal fees
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605,000
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Blue Sky fees
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0
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Miscellaneous
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191,360
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Total
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1,600,000
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ITEM 28. Persons Controlled by or Under Common Control with Registrant
None.
ITEM 29. Number of
Holders of Securities as of November 30, 2020
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Title of Class
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Number
of
Record
Holders
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Common Stock
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3,978
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Series C Auction Rate Cumulative Preferred Stock
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1
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5.125% Series E Cumulative Preferred Stock
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1
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5.125% Series G Cumulative Preferred Stock
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1
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ITEM 30. Indemnification
Subject to limitations imposed by the 1940 Act, the Registrants charter limits the liability of the Registrants directors and
officers to the Registrant and its stockholders to the fullest extent permitted by Maryland law. Under Maryland law, Maryland corporations may limit their directors and officers liability for money damages to the corporation and its
stockholders except to the extent (i) that it is proved that a director or officer actually received an improper benefit or profit in money, property or services or (ii) that a judgment or other final adjudication adverse to a director or
officer is entered in a proceeding based on a finding that such directors or officers action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.
The Registrants Bylaws require the indemnification of, and expenses to be advanced on behalf of, directors and officers, among
others, to the fullest extent permitted by Maryland law, subject to the limitations imposed by the 1940 Act. Under Maryland law, a corporation may indemnify a present or former director or officer or any person, who while a director or officer
of the corporation, serves or has served another entity as a director, officer, partner or trustee of such entity, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceedings
to which they may be made, or threatened to be made, a party by reason of their service in such capacity, unless it is proved that (i) the act or omission of the director or officer was material to the matter giving rise to the proceeding and
(a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (ii) the director or officer actually received an improper personal benefit in money, property, or services or (iii) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. Maryland law requires a corporation (unless its charter provides
otherwise, which the Registrants charter does not) to indemnify present and past directors and officers who are successful, on the merits or otherwise, in the defense of any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, against reasonable expenses (including attorneys fees) incurred in connection with such proceeding. In addition, Maryland law permits a corporation to advance reasonable expenses to a director
or officer upon the corporations receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and
(b) a written undertaking by him or her on his or her behalf to repay the amount paid or reimbursed by the corporation if it shall ultimately be determined that the standard of conduct was not met. The Registrants Bylaws also permit the
indemnification and advance of expenses to the Registrants employees and agents to the extent approved by the Board of Directors and permitted by Maryland law and the 1940 Act.
Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (Securities Act), may be
permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
ITEM 31. Business and Other Connections of Investment Adviser
The Investment Adviser, a limited liability company organized under the laws of the State of New York, acts as investment adviser to the
Registrant. The Registrant is fulfilling the requirement of this Item 31 to provide a list of the officers and directors of the Investment Adviser, together with information as to any other business, profession, vocation or employment of a
substantial nature engaged in by the Investment Adviser or those officers and directors during the past two years, by incorporating by reference the information contained in the Form ADV of the Investment Adviser filed with the commission
pursuant to the Investment Advisers Act of 1940 (Commission File No. 801-26202).
ITEM 32. Location of Accounts and Records
The accounts and records of the Registrant are maintained in part at the office of the Investment Adviser at One Corporate Center, Rye, New
York 10580-1422, in part at the offices of the Custodian, State Street Bank and Trust Company, 1776 Heritage Drive North Quincy Massachusetts 02171 at the offices of the Funds
sub-administrator, BNY Mellon Investment Servicing (US) Inc., 760 Moore Road, King of Prussia, Pennsylvania 19406, and in part at the offices of Computershare Trust Company, N.A., 250 Royall Street,
Canton, Massachusetts 02021.
ITEM 33. Management Services
Not applicable.
ITEM 34.
Undertakings
1. Not applicable.
2. Not applicable.
3. Registrant undertakes:
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(a)
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to file, during any period in which offers or sales are being made, a post-effective amendment to this
Registration Statement:
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(1)
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to include any prospectus required by Section 10(a)(3) of the Securities Act;
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(2)
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to reflect in the prospectus any facts or events after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with
the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective
registration statement; and
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(3)
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to include any material information with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the Registration Statement.
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(4)
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if (i) it determines to conduct one or more offerings of the Funds common shares (including rights
to purchase its common shares) at a price below its net asset value per common share at the date the offering is commenced, and (ii) such offering or offerings will result in greater than a 15% dilution to the Funds net asset value per
common share.
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(b)
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that, for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof;
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(c)
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to remove from registration by means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering; and
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(d)
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that, for the purpose of determining liability under the Securities Act to any purchaser:
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(1)
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if the Registrant is relying on Rule 430B:
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(A)
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Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
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(B)
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Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (x), or (xi) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and
included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in
Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which
that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to
such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
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(2)
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if the Registrant is relying on Rule 430C: each prospectus filed pursuant to Rule 424(b) under the
Securities Act as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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(e)
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that for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in
the initial distribution of securities:
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The undersigned Registrant undertakes that in a primary offering of securities
of the undersigned Registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:
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(1)
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any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be
filed pursuant to Rule 424 under the Securities Act;
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(2)
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free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used
or referred to by the undersigned Registrants;
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(3)
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the portion of any other free writing prospectus or advertisement pursuant to Rule 482 under the Securities Act
relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
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(4)
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any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
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4. Registrant undertakes:
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(a)
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that, for the purpose of determining any liability under the Securities Act the information omitted from the
form of prospectus filed as part of the Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 424(b)(1) under the Securities Act will be deemed to be a part of the Registration
Statement as of the time it was declared effective.
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(b)
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that, for the purpose of determining any liability under the Securities Act, each post-effective amendment that
contains a form of prospectus will be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of the securities at that time will be deemed to be the initial bona fide offering thereof.
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5. Not applicable.
6. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
7. Registrant undertakes to send by first class mail or other
means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any prospectus or Statement of Additional Information constituting Part B of this Registration Statement.
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(3)
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to include any material information with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the Registration Statement; and
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(4)
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if (i) it determines to conduct one or more offerings of the Funds common stock (including rights to
purchase its common stock) at a price below its net asset value per share of common stock at the date the offering is commenced, and (ii) such offering or offerings will result in greater than a 15% dilution to the Funds net assets value
per share of common stock.
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(b)
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that for the purpose of determining any liability under the Securities Act, each post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
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(c)
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to remove from registration by means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering; and
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(d)
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that, for the purpose of determining liability under the Securities Act to any purchaser, if the Registrant is
subject to Rule 430C: Each prospectus filed pursuant to Rule 497(b), (c), (d) or (e) under the Securities Act as part of a registration statement relating to an offering, other than prospectuses filed in reliance on Rule 430A under the
Securities Act shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
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Provided, however, that no statement made in a registration statement or prospectus that is part of the registration or made in a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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(e)
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that for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in
the initial distribution of securities:
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The undersigned Registrant undertakes that in a primary offering of securities
of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:
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(1)
|
any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be
filed pursuant to Rule 497 under the Securities Act.
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(2)
|
the portion of any advertisement pursuant to Rule 482 under the Securities Act relating to the offering
containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
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(3)
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any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
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5.
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Registrant undertakes:
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(a)
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that, for the purpose of determining any liability under the Securities Act the information omitted from the
form of prospectus filed as part of the Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 497(h) will be deemed to be a part of the Registration Statement as of the
time it was declared effective.
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(b)
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that, for the purpose of determining any liability under the Securities Act, each post-effective amendment that
contains a form of prospectus will be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof.
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6. Registrant undertakes to send by first
class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information constituting Part B of this Registration Statement.
SIGNATURES
As required by the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration
Statement on Form N-2 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rye, State of New York, on the 23rd day of December, 2020.
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THE GABELLI MULTIMEDIA TRUST INC.
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By:
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/s/ Bruce N. Alpert
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Name: Bruce N. Alpert
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Title: President
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As required by the Securities Act of 1933, as amended, this Form N-2 has been
signed below by the following persons in the capacities set forth below on the 23rd day of December, 2020.
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NAME
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TITLE
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*
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Mario J. Gabelli
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Chairman, Director and Chief Investment Officer
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/s/ Bruce N. Alpert
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Bruce N. Alpert
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President
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/s/ John C. Ball
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John C. Ball
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Treasurer
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*
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John Birch
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Director
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*
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Anthony J. Colavita
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Director
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*
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James P. Conn
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Director
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*
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Frank J. Fahrenkopf, Jr.
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Director
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*
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Christopher J. Marangi
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Director
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*
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Kuni Nakamura
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Director
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*
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Werner J. Roeder
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Director
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*
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Salvatore J. Zizza
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Director
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*
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Daniel E. Zucchi
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Director
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/s/ Bruce N. Alpert
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Bruce N. Alpert
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Attorney-in-Fact
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*
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Pursuant to a Power of Attorney
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Exhibit Index
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Exhibit
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Caption
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(l)(i)
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Consent of Paul Hastings LLP
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(n)(i)
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Consent of Independent Registered Public Accounting Firm
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