As filed with the Securities and Exchange Commission on June 20, 1995
Securities Act File No. 33-
Investment Company Act File No. 811-8476
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____
Post-Effective Amendment No. ____
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 1
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
(Exact name of registrant as specified in its charter)
One Corporate Center
Rye, New York 10580
(Address of principal executive offices)
(914) 921-5070
(Registrant's telephone number, including area code)
Bruce N. Alpert
The Gabelli Global Multimedia Trust Inc.
One Corporate Center
Rye, New York 10580
(Name and address of agent for service)
With copies to:
Daniel Schloendorn, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.
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, other than securities offered in connection with a dividend reinvestment plan, check the following box. [X]
It is proposed that the filing will become effective when declared effective pursuant to Section 8(c). [ ] This Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act and the Securities Act registration statement number of the earlier effective registration statement for the same offering is ___________________.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Maximum Amount of
Title of Securities Aggregate Registration
Being Registered Offering Price* Fee
Shares of Common Stock, par value $.001
per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,442,601 $7,049.22
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* Calculated pursuant to Rule 457(c) when the Securities Act of 1933, as amended. Based on the average of the high and low sales price reported on the New York Stock Exchange on June 15, 1995.
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 that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
Form N-2
Cross-Reference Sheet
Parts A and B of Prospectus
Item No. Caption Location in Prospectus
1. Outside Front Cover . . . . . . . Front Cover Page
2. Inside Front and Outside
Back Cover Page . . . . . . . . . Front Cover Page
3. Fee Table and Synopsis . . . . . . Prospectus Summary; Fee Table
4. Financial Highlights . . . . . . . Financial Highlights
5. Plan of Distribution . . . . . . . Not Applicable
6. Selling Stockholders . . . . . . . Not Applicable
7. Use of Proceeds . . . . . . . . . Use of Proceeds
8. General Description of
the Registrant . . . . . . . . . Front Cover Page; Prospectus
Summary; The Fund; Investment
Objectives and Policies; Risk
Factors and Special Considerations;
Common Stock
9. Management . . . . . . . . . . . . Management of the Fund; Portfolio
Transactions; Custodians and
Transfer, Dividend Disbursing Agent
and Registrar
10. Capital Stock, Long-Term Debt and
Other Securities . . . . . . . . . The Offer; Common Stock; Dividends and
Distributions; Automatic Dividend
Reinvestment and Voluntary Cash
Purchase Plan; Taxation
11. Defaults and Arrears on Senior
Securities . . . . . . . . . . . . Not Applicable
12. Legal Proceedings . . . . . . . . Not Applicable
13. Table of Contents of the Statement
of Additional Information . . . . Table of Contents of the Statement of
Additional Information
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Item No. Caption Location in Statment of
Additional Information
14. Cover Page . . . . . . . . . . . . Front Cover Page
15. Table of Contents . . . . . . . . Front Cover Page
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16. General Information and History . Not Applicable
17. Investment Objectives and Policies Investment Objectives and Policies; Investment Restrictions
18. Management . . . . . . . . . . . . Management of the Fund
19. Control Persons and Principal Holders
of Securities . . . . . . . . . . Beneficial Owner
20. Investment Advisory and Other
Services . . . . . . . . . . . . Management of the Fund
21. Brokerage Allocation and Other
Practices . . . . . . . . . . . . Portfolio Transactions
22. Tax Status . . . . . . . . . . . . Taxation
23. Financial Statements . . . . . . . Financial Statements
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PART C
Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
______ Rights
for
______ Shares
The Gabelli Global Multimedia Trust Inc. Common Stock
The Gabelli Global Multimedia Trust Inc. (the "Fund") is issuing to its stockholders of record ("Record Date Stockholders") as of the close of business on ____________, 1995 rights ("Rights") entitling the holders thereof to subscribe for an aggregate of ________ shares (the "Shares") of the Fund's Common Stock (the "Offer") at the rate of one share of Common Stock for each three Rights held and entitling such Record Date Stockholder to subscribe, subject to certain limitations and subject to allotment, for any Shares not acquired by exercise of primary subscription Rights. The Rights are transferable and have been admitted for trading on the New York Stock Exchange. See "The Offer." THE SUBSCRIPTION PRICE PER SHARE (the "Subscription Price") WILL BE $________.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON _________, 1995 unless extended as described herein (the "Expiration Date"). Shareholder inquiries should be directed to the Subscription Agent, State Street Bank and Trust Company, at (800) 336-6983 or (617) 328-5000 Ex. 6406.
The Fund is a closed-end non-diversified management investment company. Its primary investment objective is long-term growth of capital, primarily through investing in common stock and other securities of foreign and domestic companies in the telecommunications, media, publishing and entertainment industries. Income is a secondary objective of the Fund. No assurances can be given that the Fund's objectives will be achieved. For a discussion of certain risk factors and special considerations with respect to owning shares of the Fund, see "Risk Factors and Special Considerations." The address of the Fund is One Corporate Center, Rye, New York 10580 and its telephone number is (914) 921-5070.
The Fund announced the Offer after the close of trading on the New York Stock Exchange on _______, 1995. The net asset value per share of Common Stock at the close of business on _______, 1995 and _________, 1995 was $________ and $_______, respectively, and the last reported sale price of a share of the Fund's Common Stock on such Exchange on those dates was $______ and $_________, respectively. The Fund's Common Stock trades under the symbol "GGT" on the New York Stock Exchange.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Subscription Price Sales Load Proceeds to Fund (1)
Per Share . . . . . . . . . . $_______ None $______
Total . . . . . . . . . . . . $_______ None $______
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(1) Before deduction of expenses incurred by the Fund, estimated at ____________.
Because the Subscription Price per share is likely to be less than the net asset value per share, the Offer is likely to result in a substantial dilution of the aggregate net asset value of the shares owned by stockholders who do not fully exercise their Rights. In addition, as a result of the terms of the Offer, stockholders who do not fully exercise their Rights should expect that they will, upon the completion of the Offer, own a smaller proportional interest in the Fund than would otherwise be the case. Gabelli Funds, Inc., the Fund's investment adviser, may purchase through the primary subscription and the over-subscription privilege Shares with an aggregate Subscription Price of up to $___ million. Mr. Mario J. Gabelli may also purchase additional Shares in such manner. See "The Offer Terms of the Offer."
This Prospectus sets forth concisely certain information about the Fund that investors should know before investing and it should be read and retained for future reference. A Statement of Additional Information dated _____,1995 (the "SAI") 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.
A copy of the SAI, the table of contents of which appears on page ____ of this
Prospectus, may be obtained without charge by contacting the Fund at
(800) GABELLI ((800) 422-3554) or (914) 921-5070. The SAI will be sent within
two business days of receipt of such request by the Fund.
____________________, 1995
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more detailed information included elsewhere in this Prospectus.
Terms of the Offer
The Gabelli Global Multimedia Trust Inc. (the "Fund") is issuing to stockholders of record ("Record Date Stockholders") as of the close of business on _________, 1995 (the "Record Date") rights ("Rights") to subscribe for an aggregate of __________ shares of Common Stock (sometimes referred to herein as the "Shares") of the Fund. Each such stockholder is being issued one Right for each full share of Common Stock owned on the Record Date. The Rights entitle the holder to acquire at the Subscription Price (as hereinafter defined) one Share for each three Rights held. Rights may be exercised at any time during the period (the "Subscription Period"), which commences on ________, 1995 and ends at 5:00 p.m., New York time on _____, 1995, unless extended by the Fund to a date not later than _____, 1995 (the "Expiration Date"). The right to acquire during the Subscription Period at the Subscription Price one additional Share for each three Rights held is hereinafter referred to as the "Primary Subscription."
In addition, any Record Date Stockholder who fully exercises all Rights initially issued to him (other than those Rights which cannot be exercised because they represent the right to acquire less than one Share) is entitled to subscribe for Shares which were not otherwise subscribed for by others on Primary Subscription (the Over-Subscription Privilege"). For purposes of determining the number of Shares a Record Date Stockholder may acquire pursuant to the Offer, broker-dealers whose shares are held of record by Cede & Co., Inc. ("Cede"), nominee for The Depository Trust Company, or by any other depository or nominee will be deemed to be the holders of the Rights that are issued to Cede or such other depository or nominee on their behalf. Shares acquired pursuant to the Over-Subscription Privilege are subject to allotment, which is more fully discussed under "The Offer Over-Subscription Privilege."
The subscription price per share (the "Subscription Price") will be $_______. Rights will be evidenced by subscription certificates ("Subscription Certificates") and may be exercised by completing a Subscription Certificate and delivering it, together with payment, either by means of a notice of guaranteed delivery or a check, to State Street Bank and Trust Company, Boston, Massachusetts (the "Subscription Agent"). Rights holders will have no right to rescind a purchase after the Subscription Agent has received payment. See "The Offer Method of Exercise of Rights" and "The Offer Payment for Shares." Shares issued pursuant to an exercise of Rights will be listed on the New York Stock Exchange, Inc. (hereinafter referred to as the "New York Stock Exchange" or the "Exchange").
The Rights are transferable until the Expiration Date and have been admitted for trading on the Exchange. Although no assurance can be given that a market for the Rights will develop, trading in the Rights on the Exchange will begin three Business Days prior to the Record Date and may be conducted until the close of trading on the last Exchange trading day prior to the Expiration Date. The value of the Rights, if any, will be reflected by the market price. Rights may be sold by individual holders or may be submitted to the Subscription Agent for sale. Any Rights submitted to the Subscription Agent for sale must be received by the Subscription Agent on or before _________, 1995, one Business Day (as defined below) prior to the Expiration Date, due to normal settlement procedures. Trading of the Rights on the Exchange will be conducted on a when issued basis until and including the date on which the Subscription Certificates are mailed to Record Date Stockholders and thereafter will be conducted on a regular way basis until and including the last Exchange trading day prior to the Expiration Date. The Common Stock will begin trading ex-Rights two Business Days prior to the Record Date. If the Subscription Agent receives Rights for sale in a timely manner, it will use its best efforts to sell the Rights on the New York Stock Exchange. The Subscription Agent will also attempt to sell any Rights a Rights holder is unable to exercise because such Rights represent the right to subscribe for less than one Share. Any commissions will be paid by the selling Rights holders. Neither the Fund nor the Subscription Agent will be responsible if Rights cannot be sold and neither has guaranteed any minimum sales price for the Right. For purposes of this Prospectus, a "Business Day" shall mean any day on which trading is conducted on the Exchange.
Stockholders are urged to obtain a recent trading price for the Rights on the New York Stock
Exchange from their broker, bank, financial advisor or the financial press.
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Stockholders' inquiries should be directed to:
State Street Bank and Trust Company
(800) 336-6983 or (617) 328-5000 Ex. 6406.
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Important Dates to Remember
Event Date
Record Date . . . . . . . . . . . . . . . ______, 1995
Subscription Period . . . . . . . . . . . ______ through ______, 1995*
Expiration of the Offer . . . . . . . . . ______, 1995*
Payment for Guarantees of Delivery Due . ______, 1995*
Confirmation to Participants . . . . . . ______, 1995*
____________________
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* Unless the Offer is extended to a date not later than _____, 1995.
Information Regarding the Fund
The Fund has been engaged in business as a closed-end non-diversified management investment company since November 15, 1994. The Fund's primary investment objective is long-term growth of capital, primarily through investment in a portfolio of common stock and other securities of foreign and domestic companies involved in the telecommunications, media, publishing and entertainment industries. Income is a secondary objective of the Fund. No assurance can be given that the Fund's investment objectives will be achieved. See Investment Objectives and Policies. The Fund's outstanding common stock, par value $.001 per share (the Common Stock ), is listed and traded on the Exchange. The average weekly trading volume of the Common Stock on the Exchange during the period from November 15, 1994 (commencement of the Fund's operations) through December 31, 1994 was 8,141 shares. As of May 31, 1995, the net assets of the Fund were approximately $67.4 million.
Information Regarding the Investment Adviser
Gabelli Funds, Inc. (the Investment Adviser ) has served as the investment adviser to the Fund since its inception. The Investment Adviser also provides certain administrative services to the Fund. Mr. Mario J. Gabelli, the Chairman of the Board, President, Chief Executive Officer, Chief Investment Officer and majority stockholder of the Investment Adviser, has been engaged in the business of providing investment advisory and portfolio management services for over 15 years and is currently affiliated with investment advisers which, as of May 31, 1995, managed total assets of approximately $8.3 billion. The Fund pays the Investment Adviser a monthly fee at the annual rate of 1.00% of the Fund's average weekly net assets. The investment advisory fee is higher than comparable fees paid by most other investment companies. See Management of the Fund -- Investment Adviser. Since the Investment Adviser's fees are based on the net assets of the Fund, the Investment Adviser will benefit from the Offer. In addition, one Director who is an interested person of the Fund could benefit indirectly from the Offer because of his interests in the Investment Adviser. See "The Offer Purpose of the Offer."
Risk Factors and Special Considerations
The following summarizes certain matters that should be considered, among others, in connection with the Offer.
Dilution . . . . . . An immediate dilution of the aggregate net asset
value of the shares owned by stockholders who do not
fully exercise their Rights is likely to be
experienced as a result of the Offer because the
Subscription Price is likely to be less than the then
net asset value per share, and the number of shares
outstanding after the Offer is likely to increase in
greater percentage than the increase in the size of
the Fund's assets. In addition, as a result of the
terms of the Offer, stockholders who do not fully
exercise their Rights should expect that they will,
at the completion of the Offer, own a smaller
proportional interest in the Fund than would
otherwise be the case. Although it is not possible
to state precisely the amount of such a decrease in
value, because it is not known at this time what the
net asset value per share will be at the Expiration
Date, such dilution could be substantial. For
example, assuming that all Rights are exercised and
that the Subscription Price of $ is % below
the Fund's then net asset value per share, the Fund's
net asset value per share would be reduced by
approximately $ per share.
Discount From
Net Asset Value . . Shares of closed-end investment companies frequently
trade at a discount from net asset value. This
characteristic of shares of a closed-end fund is a
risk separate and distinct from the risk that the
Fund's net asset value will decrease. The risk of
purchasing shares of a closed-end fund that might
trade at a discount 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.
Since inception, the Fund's shares have generally
traded in the New York Stock Exchange at a discount
to net asset value. See Common Stock.
Repurchase and
Charter Provisions . The Fund's stockholders will be free to dispose of
their Shares on the New York Stock Exchange or other
markets on which the Shares may trade, but, as a
closed-end fund, the Fund's stockholders do not have
the right to redeem their Shares. The Fund is
authorized to repurchase its shares on the open
market when the shares are trading at a discount of
10% or more from net asset value. In addition,
certain provisions of the Fund's Articles of
Incorporation and By-Laws may be regarded as anti-
takeover provisions. These provisions consist of a
system in which only one of three classes of
Directors is elected each year and the requirement
that the affirmative vote of the holders of 66 % of
the outstanding shares of the Fund is necessary to
authorize the conversion of the Fund from a closed-
end to an open-end investment company or generally to
authorize certain business transactions with the
beneficial owner of more than 5% of the outstanding
shares of the Fund. The overall effect of these
provisions is to render more difficult the
accomplishment of a merger or the assumption of
control by a principal stockholder. These provisions
may have the effect of depriving stockholders of an
opportunity to sell their shares at a premium above
the prevailing market price. See Common
Stock Certain Provisions of the Articles of
Incorporation and By-Laws.
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Non-Diversified
Status . . . . . . . As a non-diversified investment company under the
Investment Company Act of 1940, as amended (the 1940
Act ), the Fund is not limited in the proportion of
its assets that may be invested in securities of a
single issuer, and, accordingly, an investment in the
Fund may, under certain circumstances, present
greater risk to an investor than an investment in a
diversified company. See Risk Factors and Special
Considerations -- Non-Diversified Status.
Industry
Risks . . . . . . . The Fund invests a significant portion of its assets
in companies in the telecommunications, media,
publishing and entertainment industries and, as a
result, the value of the Fund's shares will be more
susceptible to factors affecting those particular
types of companies, including government regulation,
greater price volatility for the overall market,
rapid obsolescence of products and services, intense
competition and strong market reactions to
technological developments. See "Risk Factors and
Special Considerations -- Industry Risks."
Smaller
Companies . . . . . The Fund invests 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 large,
established issuers. See "Risk Factors and Special
Considerations -- Smaller Companies."
Foreign
Securities . . . . . There is no limitation on the amount of foreign
securities in which the Fund may invest. Investing
in securities of foreign companies and foreign
governments, 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 revaluation of
currencies. See "Risk Factors and Special
Considerations -- Foreign Securities."
Dependence on
Key Personnel . . . The Investment Adviser is dependent upon the
expertise of Mr. Mario J. Gabelli in providing
advisory services with respect to the Fund s
investments. There is no contract of employment
between the Investment Adviser and Mr. Gabelli. 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.
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FEE TABLE
The following table sets forth certain fees and expenses of the Fund.
Shareholder Transaction Expenses Sales Load (as a percentage of offering price) . . . . . . . . . . 0% Automatic Dividend Reinvestment and Cash Purchase Plan Fees* . . $0.75 Annual Expenses (as a percentage of net assets) Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . 1.0% Other Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .74% Total Annual Expenses . . . . . . . . . . . . . . . . . . . . . . 1.74% |
* A fee of $0.75 is charged with respect to each purchase by a participant in the Fund's Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan (the "Plan"). A fee of $2.50 is charged in connection with the sale of shares that are held in book-entry form, such as shares held by a stockholder through the Plan.
Example 1 Year 3 Years
You would pay the following
expenses on a $1,000
investment assuming a 5%
annual return . . . . . . $18 $56
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The purpose of the foregoing table and example is to assist Rights holders in understanding the various costs and expenses that an investor in the Fund bears, directly or indirectly, but should not be considered a representation of past or future expenses or rate of return. The actual expenses of the Fund may be greater or less than those shown. The figures provided under Other Expenses are based upon estimated amounts for the current fiscal year. For more complete descriptions of certain of the Fund's cost and expenses, see Management of the Fund" in the Prospectus and the SAI.
FINANCIAL HIGHLIGHTS
The table below sets forth selected financial data for a share of Common Stock outstanding throughout each period presented. The per share operating performance and ratios for the period ended December 31, 1994 has been audited by Price Waterhouse LLP, the Fund's independent accountants, as stated in their report which is incorporated by reference into the SAI. The following information should be read in conjunction with the Financial Statements and Notes thereto, which are incorporated by reference into the SAI.
Per Share Operating Performance For a Fund Share Outstanding Throughout the Period
Period Ended
12/31/94
Operating Performance:
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . . . . $7.50
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.03
Net Realized and Unrealized Gain on Securities . . . . . . . . . . . . . . 0.03
Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . 0.06
Distributions to Stockholders from:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.03)
Distributions in excess of net investment
income and net realized gains . . . . . . . . . . . . . . . . . . . . . . . (0.01)
Paid-in-Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.01)
Total Distributions (0.05)
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . . . . $7.51
Market Value, End of Period . . . . . . . . . . . . . . . . . . . . . . . . . $7.375
Total Investment Return . . . . . . . . . . . . . . . . . . . . . . . . . . . (7.91)%(2)
Net Asset Value
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%(3)
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) . . . . . . . . . . . . . . . . . . $64,606
Ratio of Operating Expenses to Average Net Assets . . . . . . . . . . . . . . 1.74%(4)
Ratio of Net Investment Income to Average Net Assets . . . . . . . . . . . . 3.15%(4)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
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(1) Represents net asset value per share on November 15, 1994.
(2) Based on market value per share at date of issuance of $8.0625,
adjusted for reinvestment of all dividends.
(3) Based on net asset value per share, adjusted for reinvestment of all
distributions .
(4) Annualized.
THE OFFER
Terms of the Offer
The Fund is issuing to Record Date Stockholders Rights to subscribe for
the Shares. Each Record Date Stockholder is being issued one transferable
Right for each share of Common Stock owned on the Record Date. The Rights
entitle the holder to acquire at the Subscription Price one Share for each
three Rights held. No Rights will be issued for fractional shares. Rights
may be exercised at any time during the Subscription Period, which commences
on , 1995 and ends at 5:00 p.m., New York time, on _______, 1995,
unless extended by the Fund to a date not later than _________, 1995, 5:00
p.m., New York time. See "Expiration of the Offer."
In addition, any Record Date Stockholder who fully exercises all Rights initially issued to him (other than those Rights which cannot be exercised because they represent the right to acquire less than one Share) is entitled to subscribe for Shares which were not otherwise subscribed for by others on Primary Subscription. For purposes of determining the maximum number of Shares a Record Date Stockholder may acquire pursuant to the Offer, broker- dealers 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 issued to Cede or such other depository or nominee on their behalf. Shares acquired pursuant to the Over-Subscription Privilege are subject to allotment, which is more fully discussed below under "Over-Subscription Privilege."
The Investment Adviser, as a Record Date Stockholder, has advised the Fund that its board of directors has authorized it to purchase through the Primary Subscription and the Over-Subscription Privilege underlying Shares with an aggregate Subscription Price of up to $__ million to the extent such Shares become available to it in accordance with the Primary Subscription and the allotment provisions of the Over-Subscription Privilege. In addition, Mario J. Gabelli individually, as a Record Date Stockholder, may also purchase Shares through the Primary Subscription and the Over-Subscription Privilege. Such over-subscriptions by the Investment Adviser and Mr. Gabelli may disproportionately increase their already existing ownership resulting in a higher percentage ownership of outstanding shares of the Fund. Any Shares so acquired by the Investment Adviser or Mr. Gabelli, as "affiliates" of the Fund as that term is defined under the Securities Act of 1933, as amended (the "Securities Act"), may only be sold in accordance with Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act. In general, under Rule 144, as currently in effect, an "affiliate" of the Fund is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of 1% of the then outstanding shares of Common Stock or the average weekly reported trading volume of the Common Stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain restrictions on the manner of sale, to notice requirements and to the availability of current public information about the Fund. In addition, any profit resulting from the sale of Shares so acquired, if such Shares are held for a period of less than six months, will be returned to the Fund.
Rights will be evidenced by Subscription Certificates. The number of Rights issued to each holder will be stated on the Subscription Certificates delivered to such 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 Rights holder will have no right to rescind a purchase after the Subscription Agent has received payment. See "Payment for Shares" below. Shares issued pursuant to an exercise of Rights will be listed on the New York Stock Exchange.
The Rights are transferable until the Expiration Date and have been admitted for trading on the New York Stock Exchange. Assuming a market exists for the Rights, the Rights may be purchased and sold through usual brokerage channels and sold through the Subscription Agent. Although no assurance can be given that a market for the Rights will develop, trading in the Rights on the Exchange will begin three Business Days before the Record Date and may be conducted until the close of trading on the last Exchange trading day prior to the Expiration Date. Trading of the Rights on the Exchange will be conducted on a when issued basis until and including the date on which the Subscription Certificates are mailed to Record Date Stockholders and thereafter will be conducted on a regular way basis until and including the last Exchange trading day prior to the Expiration Date. The method by which Rights may be transferred is set forth below in "Method of Transferring Rights." The underlying Shares will also be admitted for trading on the New York Stock Exchange and will begin trading Ex-Rights two Business Days prior to the Record Date. Since fractional Shares will not be issued, Rights holders who receive, or who are left with, fewer than three Rights will be unable to exercise such Rights and will not be entitled to receive any cash in lieu of such fractional Shares. However, the Subscription Agent will automatically attempt to sell the number of
Rights which a Rights holder is unable to exercise for such reason after return of a completed and fully exercised Subscription Certificate, and will remit the proceeds of any such sale net of commissions to the Rights holder.
Purpose of the Offer
The Board of Directors of the Fund has determined that it would be in the best interests of the Fund and the stockholders to increase the assets of the Fund available for investment thereby permitting the Fund to be in a better position to more fully take advantage of investment opportunities that may arise. The Offer seeks to reward existing stockholders by giving them the right to purchase additional shares at a price that may be below market and/or net asset value without incurring any commission charge. The distribution to stockholders of transferable Rights which themselves may have intrinsic value will also afford non-subscribing stockholders the potential of receiving a cash payment upon sale of such Rights, receipt of which may be viewed as compensation for the possible dilution of their interests in the Fund.
The Fund's Investment Adviser and Furman Selz Incorporated, its sub- administrator (the "Sub-Administrator"), will benefit from the Offer because the Investment Adviser's fee and the Sub-Administrator's fee are based on the average net assets of the Fund. See "Management of the Fund." It is not possible to state precisely the amount of additional compensation the Investment Adviser or Sub-Administrator will receive as a result of the Offer because the proceeds of the Offer will be invested in additional portfolio securities which will fluctuate in value. However, assuming all Rights are exercised and that the Fund receives the maximum proceeds of the Offer, the annual compensation to be received by the Investment Adviser and the Sub- Administrator would be increased by approximately $_______ and $______, respectively. Two of the Fund's Directors who voted to authorize the Offer are "interested persons" of the Investment Adviser within the meaning of the 1940 Act. One of these Directors, Mario J. Gabelli, could benefit indirectly from the Offer because of his interest in the Investment Adviser. The other seven Directors are not "interested persons" of the Fund. See "Management of the Fund" in the SAI. While it was cognizant of the possible participation of the Investment Adviser and Mr. Gabelli in the Offer as stockholders, the Fund's Board of Directors nevertheless concluded that the Offer was in the best interest of stockholders, since all stockholders of the Fund are treated equally under the terms of the Offer.
The Fund may, in the future and at its discretion, choose to make additional rights offerings from time to time for a number of shares and on terms which may or may not be similar to the Offer. Any such future rights offering will be made in accordance with the 1940 Act. Under the laws of Maryland, the state in which the Fund is incorporated, the Board of Directors is authorized to approve rights offerings without obtaining stockholder approval. The staff of the Securities and Exchange Commission (the "Commission") has interpreted the 1940 Act as not requiring stockholder approval of a rights offering at a price below the then current net asset value so long as certain conditions are met, including a good faith determination by the fund's board of directors that such offering would result in a net benefit to existing stockholders.
Over-Subscription Privilege
If all of the Rights initially issued are not exercised, any Shares for which subscriptions have not been received will be offered, by means of the Over-Subscription Privilege, to Record Date Stockholders who have exercised all the Rights initially issued to them and who wish to acquire more than the number of Shares for which the Rights issued to them are exercisable. Record Date Stockholders who exercise all the Rights initially issued to them will have the opportunity to indicate on the Subscription Certificate how many Shares they are willing to acquire pursuant to the Over-Subscription Privilege. If sufficient Shares remain after the Primary Subscriptions have been exercised, all over-subscriptions will be honored in full. If sufficient Shares are not available to honor all over-subscriptions, the available Shares will be allocated among those who over-subscribe based on the number of Rights originally issued to them by the Fund. The percentage of remaining Shares each over-subscribing stockholder may acquire will be rounded down to result in delivery of whole Shares. The allocation process may involve a series of allocations in order to assure that the total number of Shares available for over-subscriptions is distributed on a pro rata basis.
The method by which Shares will be distributed and allocated pursuant to the Over-Subscription Privilege is as follows. Shares will be available for purchase pursuant to the Over-Subscription Privilege only to the extent that the maximum number of Shares is not subscribed for through the exercise of the Primary Subscription by the Expiration Date. If the Shares so available ("Excess Shares") are not sufficient to satisfy all subscriptions pursuant to the Over-Subscription Privilege, the Excess Shares will be allocated pro rata (subject to the elimination of fractional Shares) among those holders of Rights exercising the Over-Subscription privilege, in proportion, not to
the number of Shares requested pursuant to the Over-Subscription Privilege, but to the number of shares held on the Record Date; provided, however, that if such pro rata allocation results in any holder being allocated a greater number of Excess Shares than such holder subscribed for pursuant to the exercise of such holder's Over-Subscription Privilege, then such holder will be allocated only such number of Excess Shares as such holder subscribed for and the remaining Excess Shares will be allocated among all other holders exercising Over-Subscription Privileges. The formula to be used in allocating the Excess Shares is as follows:
Holder's Record Date Position
Total Record Date Position X Excess Shares
of all Over-Subscribers Remaining
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The Fund will not offer or sell any Shares which are not subscribed for under the Primary Subscription or the Over-Subscription Privilege.
The Subscription Price
The Subscription Price for the Shares to be issued pursuant to the Rights will be $____.
The Fund announced the Offer after the close of trading on the New York
Stock Exchange on ____, 1995. The net asset value per share of Common Stock
at the close of business on __________, 1995 and ______, 1995 was $______ and
$____, respectively. The last reported sale price of a share of the Fund's
Common Stock on the Exchange on those dates was $_____ and $_____,
respectively, representing a ____% [premium/discount] and a ____%
[premium/discount], respectively, in relation to the net asset value per share
of Common Stock at the close of business on such dates.
Sales by Subscription Agent
Holders of Rights who do not wish to exercise any or all of their Rights may instruct the Subscription Agent to sell any unexercised Rights. The Subscription Certificates representing the Rights to be sold by the Subscription Agent must be received on or before ____, 1995. Upon the timely receipt of appropriate instructions to sell Rights, the Subscription Agent will use its best efforts to complete the sale and will remit the proceeds of sale, net of commissions, to the holders. If the Rights can be sold, sales of such Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent on the day such Rights are sold. The selling Rights holder will pay all brokerage commissions incurred by the Subscription Agent. Such sales may be effected by the Subscription Agent through Gabelli & Company, Inc., a registered broker-dealer and an indirect majority-owned subsidiary of the Investment Adviser, for $____ per Right, provided that, if the Subscription Agent is able to negotiate a lower brokerage commission with an independent broker, the Subscription Agent will execute these sales through the broker. Gabelli & Company, Inc. may also act on behalf of its clients to purchase Rights in the open market and be compensated therefor. In addition, upon return of a completed and fully exercised Subscription Certificate, the Subscription Agent will automatically attempt to sell any Rights a Rights holder is unable to exercise because such Rights will represent the right to subscribe for less than one Share. The Subscription Agent will also attempt to sell all Rights which 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. Such sales will be made net of commissions on behalf of the nonclaiming stockholders. Proceeds from those sales will be held by State Street Bank and Trust Company, in its capacity as the Fund's transfer agent, for the account of such nonclaiming stockholder until such proceeds are either claimed or escheat. There can be no assurance that the Subscription Agent will be able to complete the sale of any such Rights and neither the Fund nor the Subscription Agent has guaranteed any minimum sales price for the Rights. All such Rights will be sold at the market price, if any, on the New York Stock Exchange.
Method of Transferring Rights
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 Subscription Agent a Subscription Certificate properly endorsed for transfer, with instructions to register such portion of the Rights evidenced thereby in the name of the transferee (and to issue a new Subscription Certificate to the transferee evidencing such transferred Rights). In such 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 allow at least three Business Days prior to the
Expiration Date for (i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) a new Subscription Certificate to 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 such new Subscription Certificates to be
exercised or sold by the recipients thereof. Neither the Fund nor the
Subscription 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 Subscription 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 such commissions, fees or expenses will be paid by the Fund or the Subscription Agent.
The Fund anticipates that the Rights will be eligible for transfer through, and that the exercise of the Primary Subscription (but not the Over- Subscription Privilege) may be effected through, the facilities of The Depository Trust Company ("DTC"; Rights exercised through DTC are referred to as "DTC Exercised Rights"). The holder of a DTC Exercised Right may exercise the Over-Subscription Privilege in respect of such DTC Exercised Right by properly executing and delivering to the Subscription Agent, at or prior to 5:00 p.m., New York time, on the Expiration Date, a DTC Participant Over- Subscription Form, together with payment of the Subscription Price for the number of Shares for which the Over-Subscription Privilege is to be exercised. Copies of the DTC Participant Over-Subscription Form may be obtained from the Subscription Agent.
Expiration of the Offer
The Offer will expire at 5:00 p.m., New York time, on ___, 1995, unless extended by the Fund to a date not later than ______, 1995, 5:00 p.m., New York time (the "Expiration Date"). Rights will expire on the Expiration Date and thereafter may not be exercised.
Subscription Agent
The Subscription Agent is State Street Bank and Trust Company, P.O. Box 8200, Boston, Massachusetts 02266-8200. The Subscription Agent will receive from the Fund a fee estimated to be $_____ (consisting of a $______ base administration fee and per service fees estimated to be in the aggregate $_______ for the processing of the exercise of Rights for the accounts of individual Rights holders) and reimbursement for all estimated out-of-pocket expenses related to the Offer. The Subscription Agent is also the Fund's dividend disbursing agent, transfer agent and registrar. Inquiries by all holders of Rights should be directed to P.O. Box 8200, Boston, Massachusetts 02266-8200 (telephone (800) 336-6983 or (617) 328-5000 Ex. 6406); holders may also consult their brokers or nominees.
Method of Exercise of Rights
Rights may be exercised by filling in and signing the reverse side of the Subscription Certificate and mailing it on the envelope provided, or otherwise delivering the completed and signed Subscription Certificate to the Subscription Agent, together with payment for the Shares as described below under "Payment for Shares." Rights may also be exercised through a Rights holder's broker, who may charge such Rights holder a servicing fee in connection with such exercise. Fractional Shares will not be issued, and Rights holders who receive, or who are left with, fewer than three Rights will not be able to exercise such Rights. The Subscription Agent will automatically attempt to sell the number of Rights which a Rights holder is unable to exercise for this reason after return of a completed and fully exercised Subscription Certificate and will remit the proceeds of such sale net of commissions to the Rights holder.
Completed Subscription Certificates must be received by the Subscription
Agent prior to 5:00 p.m., New York 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 STATE STREET BANK AND TRUST COMPANY, Attention:
Corporate Stock Transfer at the following address:
If By Mail:
P.O. Box 9061
Boston, Massachusetts 02205-8686
If By Hand:
225 Franklin Street or 61 Broadway
Concourse Level Concourse Level
Boston, Massachusetts 02110 New York, New York
10006
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If By Overnight Courier:
c/o Boston Financial Data Services, Inc.,
Corporate Stock Transfer Department
Two Heritage Drive 4th Floor
North Quincy, Massachusetts 02171
Payment of Shares
Holders of Rights who acquire Shares on Primary Subscription or pursuant to the Over-Subscription Privilege may choose between the following methods of payment:
(1) A subscription will be accepted by the Subscription Agent if, prior to 5:00 p.m., New York time, on the Expiration Date, the Subscription Agent has received a notice of guaranteed delivery by telegram or otherwise from a bank, a trust company, or a New York Stock Exchange member, guaranteeing delivery of (i) payment of the full Subscription Price for the Shares subscribed for on Primary Subscription and any additional Shares subscribed for pursuant to the Over-Subscription Privilege and (ii) a properly completed and executed Subscription Certificate. The Subscription Agent will not honor a notice of guaranteed delivery if a properly completed and executed Subscription Certificate and full payment is not received by the Subscription Agent by the close of business on the fifth Business Day after the Expiration Date. The notice of guaranteed delivery may be delivered to the Subscription Agent in the same manner as Subscription Certificates at the addresses set forth above, or may be transmitted to the Subscription Agent by facsimile transmission (telecopy number (617) 774-4519).
(2) Alternatively, a holder of Rights can send the Subscription Certificate together with payment in the form of a check for the Shares subscribed for on Primary Subscription and additional Shares subscribed for pursuant to the Over-Subscription Privilege to the Subscription Agent based on the Subscription Price of $________ per Share. To be accepted, such payment, together with the executed Subscription Certificate, must be received by the Subscription Agent at the addresses noted above prior to 5:00 p.m., New York time, on the Expiration Date. The Subscription Agent will deposit all stock purchase checks received by it prior to the final due date into a segregated interest-bearing account pending proration and distribution of Shares. The Subscription Agent will not accept cash as a means of payment for Shares. A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO THE GABELLI GLOBAL MULTIMEDIA TRUST INC., AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION CERTIFICATE TO BE ACCEPTED. If the aggregate Subscription Price paid by a Record Date Stockholder is insufficient to purchase the number of shares of Common Stock that the holder indicates are being subscribed for, or if a Record Date Stockholder does not specify the number of shares of Common Stock to be purchased, then the Record Date Stockholder will be deemed to have exercised first, the Primary Subscription Rights (if not already fully exercised) and second, the Over-Subscription Privilege to the full extent of the payment tendered. If the aggregate Subscription Price paid by a Record Date Stockholder exceeds the amount necessary to purchase the number of shares of Common Stock for which the Record Date Stockholder has indicated an intention to subscribe, then the Record Date Stockholder will be deemed to have exercised first, the Primary Subscription Rights (if not already fully subscribed) and second, the Over-Subscription Privilege to the full extent of the excess payment tendered.
Within ten Business Days following the Expiration Date (the "Confirmation
Date"), a confirmation will be sent by the Subscription Agent to each holder
of Rights (or, if the Fund's shares are held by Cede or any other depository
or nominee, to Cede or such other depository or nominee), showing (i) the
number of Shares acquired pursuant to the Primary Subscription, (ii) the
number of Shares, if any, acquired pursuant to the Over-Subscription
Privilege, (iii) the per Share and total purchase price for the Shares and
(iv) any excess to be refunded by the Fund to such holder as a result of
payment for Shares pursuant to the Over-Subscription Privilege which the
holder is not acquiring. Any payment required from a holder of Rights must be
received by the Subscription Agent on the Expiration Date, or if the Rights
holder has elected to make payment by means of a notice of guaranteed
delivery,
on the fifth Business Day after 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 his behalf by the Subscription Agent or exercises by Record Date Stockholders of their Over-Subscription Privileges, and all interest accrued on such holder's excess payment will be mailed by the Subscription Agent to such holder within fifteen Business Days after the Expiration Date. Interest on such excess payment will accrue through the date that is one Business Day prior to the mail date of the reimbursement check. All payments by a holder of Rights must be in United States dollars by money order or check drawn on a bank located in the United States of America and payable to The Gabelli Global Multimedia Trust Inc.
Whichever of the two methods described above is used, issuance and delivery of certificates for the Shares purchased are subject to collection of checks and actual payment pursuant to any notice of guaranteed delivery.
A Rights holder will have no right to rescind a purchase after the Subscription Agent has received payment either by means of a notice of guaranteed delivery or a check.
If a holder of Rights who acquires Shares pursuant to the Primary
Subscription or the Over-Subscription Privilege does not make payment of any
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; (ii) apply any payment actually received by it toward the purchase of
the greatest whole number of Shares which could be acquired by such holder
upon exercise of the Primary Subscription or the Over-Subscription Privilege;
(iii) sell all or a portion of the Shares purchased by the holder, in the open
market, and apply the proceeds to the amounts 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 and to enforce the relevant guaranty of
payment.
Holders who hold shares of Common Stock for the account of others, such as brokers, trustees or depositaries 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 record holder of such Rights should complete Subscription Certificates and submit them to the Subscription Agent with the proper payment. In addition, beneficial owners of Common Stock or Rights held through such a holder should contact the holder and request the holder to effect transactions in accordance with the beneficial owner's instructions.
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 SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH 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 SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK CITY 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 CASHIER'S 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 Subscription 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.
Delivery of Stock Certificates
Certificates representing Shares purchased pursuant to the Primary Subscription will be delivered to subscribers as soon as practicable after the corresponding Rights have been validly exercised and full payment for such Shares has been received and cleared. Certificates representing Shares purchased pursuant to the Over-Subscription Privilege will be delivered to subscribers as soon as practicable after the Expiration Date and after all allocations have been effected. Participants in the Fund's Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan (the "Plan") will be issued Rights for the shares held in their accounts in the Plan. Participants wishing to exercise such Rights must exercise such Rights in accordance with the procedures set forth above in "Method of Exercise of Rights" and "Payment for Shares." Such Rights will not be exercised automatically by the Plan. Plan participants exercising their Rights will receive their Primary and Over- Subscription Shares via an uncertificated credit to their existing account. To request a stock certificate, participants in the Plan should check the appropriate box on the Subscription Certificate. Such Shares will remain subject to the same investment option as previously selected by the Plan participant.
Foreign Restrictions
Subscriptions Certificates will only be mailed to Record Date Stockholders whose addresses are within the United States and the Provinces of Quebec and Ontario, Canada (other than an APO or FPO address). Record Date Stockholders whose addresses are outside the United States and the Provinces of Quebec and Ontario, Canada or who have an APO or FPO address and who wish to subscribe to the Offer either partially or in full should contact the Subscription Agent, State Street Bank and Trust Company, by written instruction or recorded telephone conversation no later than three Business Days prior to the Expiration Date. If the Subscription Agent has received no instruction by such date, the Subscription Agent will attempt to sell all Rights and remit the net proceeds, if any, to such stockholders. If the Rights can be sold, sales of such Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent on the day such Rights are sold, less any applicable brokerage commissions, taxes and other expenses.
Under the securities laws of the Province of Quebec, investors residing in Quebec may only transfer either the Rights or the Shares to be acquired upon the exercise of such Rights to other subscribers of the Offer, to persons with whom they are related or to persons residing outside of Quebec in a transaction effected on an organized market.
Under the securities laws of the Province of Ontario, investors residing in Ontario may only transfer either the Rights or the Shares to be acquired upon the exercise of such Rights through a dealer registered in Ontario that effects the transaction through the facilities of the New York Stock Exchange.
Federal Income Tax Consequences
For federal income tax purposes, neither the receipt nor the exercise of the Rights by Record Date Stockholders will result in taxable income to holders of the Common Stock, and no loss will be realized if the Rights expire without exercise.
With respect to Rights issued to Record Date Stockholders, if the Rights are exercised and the fair market value of the Rights on the date of distribution is less than 15 percent of the fair market value of the Common Stock on that date, in the absence of an election, the adjusted basis in the Rights exercised is zero, and the adjusted basis in the newly acquired Common Stock is the Subscription Price. If the fair market value of the Rights on the date of distribution is 15 percent or a greater percentage of the fair market value of the Common Stock, or if the taxpayer opts to make an election on Form 1040, Schedule D, to assign cost basis to his Rights, the adjusted basis in the Rights exercised is determined by allocating the adjusted basis in the Common Stock with respect to which the distribution is made between such Rights and such Common Stock in proportion to their fair market value on the date of distribution. In these circumstances, the adjusted basis in the newly acquired Shares is the Subscription Price plus the adjusted basis in the Rights exercised. The election should be made in the form of a statement attached to the taxpayer's return for the year in which the Rights were received and must be made with respect to all Rights received in this distribution. The election, once made, is irrevocable with respect to these Rights.
With respect to Rights which are purchased, the basis in the Rights is their cost, and the basis of the newly acquired Shares issued upon exercise of such Rights is the Subscription Price for the newly acquired Shares plus
the basis in the Rights exercised. If any purchased Rights expire without exercise, the Rights holder will recognize a short-term loss.
If Rights are sold, the gain or loss will be the difference between their adjusted basis and their sale price. The gain or loss recognized upon the sale of the Rights will be capital gain or loss if the Rights were held as a capital asset at the time of sale and will be long-term capital gain or loss if the Rights are deemed to have been held at the time of sale for more than one year. The holding period for the Rights which are sold includes the holding period of the Common Stock in respect of which the Rights were distributed.
The holding period for a Share acquired upon exercise of a Right begins with the date of exercise. The gain or loss recognized upon a sale of that Share will be capital gain or loss if the Share was held as a capital asset at the time of sale and will be long-term capital gain or loss if it was held at the time of sale for more than one year.
The foregoing is a general summary of the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code") and United States Treasury regulations presently in effect, and does not cover state or local taxes. The Code and such regulations are subject to change by legislative or administrative action. Stockholders are advised to consult their own tax advisors with respect to the particular tax consequences to them with respect to exercise or transfer of Rights.
Employee Plan Considerations
Stockholders that are employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (including corporate savings and 401(k) plans), Keogh Plans of self-employed individuals and Individual Retirement Accounts (collectively, "Benefit Plans") should be aware that additional contributions of cash in order to exercise Rights would be treated as Benefit Plan contributions and, when taken together with contributions previously made, may subject a Benefit Plan to excise taxes for excess or nondeductible contributions. In the case of Benefit Plans qualified under Section 401(a) of the Code, additional cash 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 cash contributions to exercise Rights should consult with their counsel prior to making such contributions.
Benefit Plans and other tax exempt entities, including governmental plans, should also be aware that if they borrow in order 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 Individual Retirement Account ("IRA") is used as security for a loan, the portion so used is also treated as distributed to the IRA depositor.
ERISA contains prudence and diversification requirements and ERISA and the Code contain prohibited transaction rules that may impact the exercise of Rights. Among the prohibited transaction exemptions issued by the Department of Labor that may exempt a Benefit Plan's exercise of Rights are Prohibited Transaction Exemption 84-24 (governing purchases of shares in investment companies) and Prohibited Transaction Exemption 75-1 (covering shares of securities).
Due to the complexity of these rules and the penalties for noncompliance, Benefit Plans should consult with their counsel regarding the consequences of their exercise of Rights under ERISA and the Code.
Risk Factors and Special Considerations
An immediate dilution of the aggregate net asset value of the shares owned by stockholders who do not fully exercise their Rights is likely to be experienced as a result of the Offer because the Subscription Price is likely to be less than the then net asset value per share, and the number of shares outstanding after the Offer is likely to increase in greater percentage than the increase in the size of the Fund's assets. In addition, as a result of the terms of the Offer, stockholders who do not fully exercise their Rights should expect that they will, at the completion of the Offer, own a smaller proportional interest in the Fund than would otherwise be the case. Although it is not possible to state precisely the amount of such a decrease in value, because it is not known at this time what the net asset value per share will be at the Expiration Date, such dilution could be substantial. For example, assuming that all Rights are exercised and that the Subscription Price of $____ is ___% below the Fund's then net asset value per share, the Fund's net asset value per share would be reduced by approximately $___ per share.
THE FUND
The Fund, incorporated in Maryland on March 31, 1994, is a non- diversified, closed-end management investment company registered under the 1940 Act. The Fund's Common Stock is traded on the New York Stock Exchange under the symbol "GGT."
The Fund had no operations prior to November 15, 1994, other than the sale of 10,000 shares of Common Stock for $100,000 to The Gabelli Equity Trust Inc. On November 15, 1994, The Gabelli Equity Trust Inc. contributed $64,382,764 in exchange for 8,587,702 shares of the Fund and immediately thereafter distributed to its stockholders all the shares it held of the Fund. The Fund's investment operations commenced on November 15, 1994.
The Fund's primary investment objective is long-term growth of capital. The Fund seeks to achieve its objective by investing primarily in 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 of the Fund. Under normal market conditions, the Fund will invest at least 65% of its total assets in common stock and other securities of companies in the telecommunications, media, publishing and entertainment industries.
USE OF PROCEEDS
The net proceeds of the Offer, assuming all Shares offered hereby are sold, are estimated to be approximately $_____, after deducting expenses payable by the Fund estimated at approximately $______. The Investment Adviser anticipates that investment of such proceeds, in accordance with the Fund's investment objectives and policies, will be invested promptly as investment opportunities are identified, depending on market conditions and the availability of appropriate securities, but in no event will such investment take longer than six months. Pending such investment in accordance with the Fund's investment objectives and policies, the proceeds will be held in obligations of the United States Government, its agencies or instrumentalities ("U.S. Government Securities") and other short-term money market instruments.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investors should consider the following special considerations associated with an exercise of Rights and an additional investment in the Fund.
Industry Risks
The Fund invests a significant portion of its assets in particular types of companies, and, as a result, the value of the Fund's shares is more susceptible to factors affecting those particular types of companies, 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 ("FCC") on investments both in mass media companies, such as broadcasters and cable operators, as well as in common carrier companies, such as the providers of local telephone service and cellular radio.
For example, the FCC's broadcast multiple ownership rules, which apply to the radio and television industries, provide that investment advisers are deemed to have an "attributable" interest whenever the adviser has the right
to determine how more than five percent of the issued and outstanding voting stock of a broadcast company may be voted. These same broadcast rules prohibit the holding of an attributable interest in more then twenty AM and twenty FM radio broadcast stations nationally or more than twelve television stations nationally. Similar types of restrictions apply in the mass media and common carrier industries.
The attributable interest that results from the role of the Investment Adviser and its principals in connection with other funds, managed accounts and companies may limit the investments of the Fund.
Smaller Companies
While the Fund intends to focus on the securities of established suppliers of accepted products and services, the Fund may 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 large, established issuers. For example, smaller companies may have 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 price of securities of other issuers.
Long-Term Objective
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 play 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 stockholder's investment objectives as well as the stockholders' other investments when considering whether or not to participate in the Offer.
Non-Diversified Status
The Fund is classified as a "non-diversified" investment company under the 1940 Act, which means the Fund is not limited by the 1940 Act in the proportion of its assets that may be invested in the securities of a single issuer. However, the Fund has in the past conducted and intends to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Code, which will relieve it of any liability for federal income tax to the extent its earnings are distributed to stockholders. See "Taxation." To so qualify, among other requirements, the Fund will limit its investments so that, at the close of each quarter of the taxable year, (i) not more than 25% of the market value of its total assets will be invested in the securities of a single issuer, and (ii) at least 50% of the market value of its assets is 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 its assets and not greater than 10% of the outstanding voting securities of such issuer. The investments of the Fund in U.S. Government Securities are not subject to these limitations. Because the Fund, as a non- diversified investment company, may invest in the securities of individual issuers to a greater degree than a diversified investment company, an investment in the Fund may, under certain circumstances, present greater risk to an investor than an investment in a diversified company.
Lower 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 Standard & Poor's Corporation or "Caa" or lower by Moody's Investors Service, Inc., 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."
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 these securities will not appreciate.
For a further description of lower rated securities and the risks associated therewith, see "Investment Objectives and Policies -- Investment Practices" in the SAI. For a description of the ratings categories of certain recognized statistical ratings agencies, see Appendix A.
Temporary Investments
During temporary defensive periods the Fund may invest in U.S. Government Securities and in money market mutual funds not affiliated with the Investment Adviser that invest in those securities. Certain U.S. Government Securities, such as the Government National Mortgage Association, are supported by the "full faith and credit" of the U.S. Government; others, such as those of the Export-Import Bank of the U.S., are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; and still others, such as those of the Student Loan Marketing Association, are supported only by the credit of the issuing 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. For a further description of such investments, see "Investment Objectives and Policies -- Investment Practices" in the SAI.
Repurchase Agreements
The Fund may engage in repurchase agreement transactions with banks, registered broker-dealers and government securities dealers approved by the Board of Directors. The Fund bears a risk of loss in the event that the other party to a repurchase agreement defaults on its obligations and the Fund is delayed in or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period in which it seeks to assert these rights. For a further description of such transactions, see "Investment Objectives and Policies -- Certain Practices -- Repurchase Agreements."
Foreign Securities
There is no limitation on the amount of foreign securities in which the Fund may invest. Investing in securities of foreign companies and foreign governments, 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, revaluations of currencies and the restrictions on, and costs associated with, the exchange of currencies. In addition, less information may be available about foreign companies and foreign governments than about domestic companies and foreign companies and foreign governments generally are not subject to uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic companies. Foreign securities and their markets may not be as liquid as U.S. securities and their markets. Securities of some foreign companies may involve greater market risk than securities of U.S. companies. Investment in foreign securities may result in higher expenses than investing in domestic securities because of the payment of fixed brokerage commissions on foreign exchanges, which generally are higher than commissions on U.S. exchanges, and the imposition of transfer taxes or transaction charges associated with foreign exchanges. Investment in foreign securities may also be subject to local economic or political risks, including instability of some foreign governments, the possibility of currency blockage or the imposition of withholding taxes on dividend or interest payments, and the potential for expropriation, nationalization or confiscatory taxation and limitations on the use or removal of funds or other assets. There may also be greater difficulty in respect of the Fund's ability to protect and enforce its rights in certain foreign countries. For a further description of the Fund's investments in foreign securities, see "Investment Objectives and Policies -- Certain Practices -- Foreign Securities."
Futures Transactions
The Fund may enter into certain futures contracts or options on futures contracts. 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 for such transactions. For a further description, see "Investment Objectives and Policies -- Investment Practices" in the SAI.
Forward Currency Transactions
The Fund may for hedging purposes enter into forward currency contracts. The use of forward currency contracts may involve certain risks, including the failure of the counter party to perform its obligations under the contract, and that such use may not serve as a complete hedge because of an imperfect correlation between movements in the prices of the contracts and the prices of the currencies hedged or used for cover. The Fund will only enter into forward currency contracts with parties which it believes to be creditworthy institutions. For a further description of such investments, see "Investment Objectives and Polices -- Investment Practices" in the SAI.
Market Value and Net Asset Value
Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic of shares of a closed-end fund is a risk separate and distinct from the risk that the Fund's net asset
value will decrease. The risk of purchasing shares of a closed-end fund that might trade at a discount 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. Although the Fund's shares have at times traded in the market above net asset value, since the commencement of the Fund's operations the Fund's shares have generally traded in the market at a discount to net asset value. The Fund's shares are not subject to redemption. Investors desiring liquidity may, subject to applicable securities laws, trade their shares in the Fund on any exchange where such shares are then trading at current market value, which may differ from the then current net asset value. For information concerning the trading history of the Fund's shares, see "Common Stock."
Dependence on Key Personnel
The Investment Adviser is dependent upon the expertise of Mr. Mario J. Gabelli in providing advisory services with respect to the Fund s investments. There is no contract of employment between the Investment Adviser and Mr. Gabelli. 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.
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The Fund's primary investment objective is long-term growth of capital by investing primarily in the common stock and other securities of foreign and domestic companies involved in the telecommunications, media, publishing and entertainment industries. Income is the secondary investment objective. The investment objectives of long-term growth of capital and income are fundamental policies of the Fund. The Fund's policy of concentration in companies in the communications industries is also a fundamental policy of the Fund. These fundamental policies and the investment limitations described in the SAI under the caption "Investment Restrictions" cannot be changed without the approval of the holders of a majority of the Fund's outstanding voting securities. As used herein, a "majority of the Fund's outstanding voting securities" means the lesser of (i) 67% of the shares of the Fund's Common Stock represented at a meeting at which more than 50% of the outstanding shares of the Fund's Common Stock are represented, whether in person or by proxy, or (ii) more than 50% of the outstanding shares of Common Stock. No assurance can be given that the Fund's investment objectives will be achieved.
Under normal market conditions, the Fund will invest at least 65% of its total assets in common stock and other securities of companies in the telecommunications, media, publishing and entertainment industries. Such multimedia businesses are often involved in emerging technological advances in interactive services and products that are accessible to individuals in their homes or offices through consumer electronics devices such as telephones, televisions, radios and personal computers.
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 via VHF, UHF, satellite and
microwave transmission and cable television.
The entertainment, media and publishing companies in which the Fund may invest are engaged in providing the following products or services: the creation, packaging, distribution, and ownership of entertainment programming throughout the world including prerecorded 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 via VHF, UHF, 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.
Under normal circumstances the Fund will invest in securities of issuers located in at least three countries, which may include the United States. Investing in securities of foreign issuers, which generally are denominated in foreign currencies, may involve certain risk and opportunity considerations not typically associated with investing in domestic companies and could cause the Fund to be affected favorably or unfavorably by changes in currency exchange rates and revaluations of currencies. For a further discussion of the risks associated with investing in foreign securities and a description of other risks inherent in the Fund's investment objectives and policies, see "Risk Factors and Special Considerations."
The Investment Adviser believes that at the present time investment by the Fund in the securities of companies located throughout the world presents great potential for accomplishing the Fund's investment objectives. While the Investment Adviser expects that a substantial portion of assets may be invested in the securities of domestic companies, a significant portion of the Fund's portfolio may also be comprised of the securities of issuers headquartered outside the United States.
Investment Methodology of the Fund
In selecting securities for the Fund, the Investment Adviser normally
will consider the following factors, among others: (1) the Investment
Adviser's own evaluations of the private market value, cash flow, earnings per
share and other fundamental aspects of the underlying assets and business of
the company; (2) the potential for capital appreciation of the securities;
(3) the interest or dividend income generated by the securities; (4) the
prices of the securities relative to other comparable securities; (5) whether
the securities are entitled to the benefits of call protection or other
protective covenants; (6) the existence of any anti-dilution protections or
guarantees of the security; and (7) the diversification of the portfolio of
the Fund as to issuers. The Investment Adviser's investment philosophy with
respect to equity securities seeks to identify assets that are selling in the
public market at a discount to their private market value, which the
Investment Adviser defines as the value informed purchasers are willing to pay
to acquire assets with similar characteristics. The Investment Adviser also
normally evaluates the issuers' free cash flow and long-term earnings trends.
Finally, the Investment Adviser looks for a catalyst something in the
company's industry or indigenous to the company or country itself that will
surface additional value.
Certain 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, 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 can be expected to 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 debt securities of foreign governments.
Temporary Investments. Although under normal market conditions at least 65% of the Fund's assets will consist of common stock and other securities of foreign and domestic companies involved in the telecommunications, media, publishing and entertainment industries, when a temporary defensive posture is believed by the Investment Adviser to be warranted ("temporary defensive periods"), the Fund may without limitation hold cash or invest its assets in money market instruments and repurchase agreements in respect of those instruments. The Fund may also invest up to 10% of the market value of its total assets during temporary defensive periods in shares of money market mutual funds that invest primarily in U.S. Government Securities and repurchase agreements in respect of those securities. For a further description of such transactions, see "Investment Objectives and Policies -- Investment Practices" in the SAI.
Repurchase Agreements. The Fund may engage in repurchase agreement transactions involving money market instruments with banks, registered broker- dealers and government securities dealers approved by the Board of Directors. The Fund will not enter into repurchase agreements with the Investment Adviser or any of its affiliates. Under the terms of a typical repurchase agreement, the Fund would acquire an underlying debt obligation
for a relatively short period (usually not more than one week) subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed price and time, thereby determining the yield during its holding period. Thus, repurchase agreements may be seen to be loans by the Fund collateralized by the underlying debt obligation. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the holding period. The value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including interest. The Fund bears a risk of loss in the event that the other party to a repurchase agreement defaults on its obligations and the Fund is delayed in or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period in which it seeks to assert these rights. The Investment Adviser, acting under the supervision of the Fund's Board of Directors, reviews the creditworthiness of those banks and dealers with which the Fund enters into repurchase agreements to evaluate these risks and monitors on an ongoing basis the value of the securities subject to repurchase agreements to ensure that the value is maintained at the required level.
Other Investments. The Fund is permitted to invest in special situations, options and futures contracts, engage in forward currency transactions and enter into forward commitments for the purchase or sale of securities, including on a "when issued" or "delayed delivery" basis, and the Fund may make short sales of securities. See the SAI for a discussion of these investments and techniques and the risks associated with them.
MANAGEMENT OF THE FUND
Directors and Officers
The business and affairs of the Fund are managed under the direction of the Fund s Board of Directors, and the day to day operations of the Fund are conducted through or under the direction of the officers of the Fund. Although the Fund is a Maryland corporation, Karl Otto P hl, one of its Directors, is a resident of Germany, and substantially all of his assets are located outside of the United States. Mr. P hl has not authorized an agent for service of process in the United States. Consequently, it may be difficult for investors to effect service of process upon him within the United States or to enforce, in United States courts, judgments against him obtained in such courts predicated on the civil liability provisions of the United States securities laws. In addition, there is doubt as to the enforceability in German courts of liabilities predicated solely upon the United States securities laws, whether or not such liabilities are based upon judgments of courts in the United States. For certain information regarding the Directors and officers of the Fund, see "Management of the Fund" in the SAI.
Investment Adviser
Gabelli Funds, Inc., a New York corporation, with offices at One Corporate Center, Rye, New York 10580-1434, is investment adviser to the Fund. The Investment Adviser was organized in 1980 and as of May 31, 1995, is a registered investment adviser to fourteen management companies with aggregate net assets of $3.5 billion. GAMCO Investors, Inc., a wholly owned subsidiary of the Investment Adviser, acts as investment adviser for individuals, pension trusts, profit sharing trusts and endowments, having aggregate assets in excess of $4.8 billion under its management as of May 31, 1995. Mr. Mario J. Gabelli may be deemed a "controlling person" of the Investment Adviser and each of its subsidiaries on the basis of his ownership of stock of the Investment Adviser.
The Investment Adviser has sole investment discretion for the Fund with respect to the Fund's portfolio under the supervision of the Fund's Board of Directors and in accordance with the Fund's stated policies. The Investment Adviser will select investments for the Fund and will place purchase and sale orders on behalf of the Fund. For its services, the Investment Adviser is paid a fee computed daily and paid monthly at an annual rate of 1.00% of the average weekly net assets of the Fund. For additional information regarding the Investment Adviser, see "Management of the Fund -- Investment Advisory and Administrative Arrangements" in the SAI.
Portfolio Management
Mario J. Gabelli, who is Chairman of the Board, Chief Executive Officer and Chief Investment Officer of the Investment Adviser, has managed the Fund's assets since its inception. For a more detailed description of Mr. Gabelli's business experience during the past five years, see "Management of the Fund -- Directors and Officers" in the SAI.
Sub-Administrator
The Investment Adviser has certain administrative responsibilities to the Fund under its advisory agreement with the Fund. The Investment Adviser has retained Furman Selz Incorporated as Sub-Administrator to provide certain administrative services necessary for the Fund's operations but which do not concern the investment advisory and portfolio management services provided by the Investment Adviser. These services include the preparation and distribution of materials for meetings of the Fund's Board of Directors, compliance testing of the Fund's activities and assistance in the preparation of proxy statements, reports to stockholders and other documentation. For such services and the related expenses borne by the Sub-Administrator, the Investment Adviser pays the Sub-Administrator a monthly fee at the annual rate of .10% of the average daily net assets of the Fund (with a minimum annual fee of $40,000 and subject to reduction to (i) .075% if the total aggregate assets managed by the Investment Adviser and administered by the Sub-Administrator exceed $350 million and (ii) .06% if such assets exceed $600 million) which, together with the services to be rendered, is subject to negotiation between the parties. Both parties retain the right unilaterally to terminate the arrangement on 60 days' written notice. The Sub-Administrator has its principal office at 230 Park Avenue, New York, New York 10169.
Payment of Expenses
For purposes of the calculation of the fees payable to the Investment Adviser by the Fund, average weekly net assets of the Fund are determined at the end of each month on the basis of its average net assets for each week during the month. The assets for each weekly period are determined by averaging the net assets at the end of a week with the net assets at the end of the prior week.
The Investment Adviser will be obligated to pay expenses associated with providing the services contemplated by 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 or any of its affiliates. The Fund pays all other expenses incurred in its operation including, among other things, expenses for legal and independent accountants' services, costs of printing proxies, stock certificates and shareholder reports, charges of the custodian, any subcustodian and transfer and dividend paying agent, expenses in connection with the Plan, Commission fees, fees and expenses of unaffiliated Directors, accounting and pricing costs, membership fees in trade associations, fidelity bond coverage for its officers and employees, Directors' and officers' errors and omission insurance coverage, interest, brokerage costs, taxes, stock exchange listing fees and expenses, expenses of qualifying its shares for sale in various states, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Fund.
PORTFOLIO TRANSACTIONS
Principal transactions are not entered into with affiliates of the Fund. However, Gabelli & Company, Inc., an affiliate of the Investment Adviser, may execute transactions in the over-the-counter markets on an agency basis and receive a stated commission therefrom. For a more detailed discussion of the Fund's brokerage allocation practice, see the SAI under "Portfolio Transactions."
DIVIDENDS AND DISTRIBUTIONS; AUTOMATIC DIVIDEND
REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN
The Fund distributes substantially all of its annual net investment income and capital gains to stockholders at year end. The dividend policy of the Fund may be modified from time to time by the Board of Directors. As a regulated investment company under the Code, the Fund will not be subjected to U.S. federal income tax on its investment company taxable income that it distributes to stockholders, provided that at least 90% of its taxable income for the taxable year is distributed to its stockholders.
Under the Automatic Dividend Reinvestment and Voluntary Cash Purchase
Plan adopted by the Fund, a stockholder whose Common Stock is registered in
his own name will have all distributions reinvested automatically by State
Street Bank and Trust Company ("State Street"), which is agent under the Plan,
unless the stockholder elects to receive cash and has so instructed State
Street either in writing at the address set forth below or by telephone at
(800) 336-6983. Distributions with respect to shares registered in the name
of a broker-dealer or other nominee (that is, in "street name") will be
reinvested by the broker or nominee in additional shares under the Plan,
unless the service is not provided by the broker or nominee or the stockholder elects to receive distributions in cash. Under the Plan, whenever the market price of the 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 dividend or capital gains distribution, participants in such plan 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 Common Stock. 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, State Street will, as agent for the participants, buy Fund shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts, except that State Street 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 net asset value.
Participants in the Plan have the option of making additional cash payments to State Street, semi-annually, for investment in the shares as applicable. Such payments may be made in any amount from $250 to $3,000.
There is no charge to participants for reinvesting dividends or capital gains distributions payable in either stock or cash. State Street's fees for handling the reinvestment of such dividends and capital gains distributions are paid by the Fund. There are no brokerage charges with respect to shares issued directly by the Fund, as a result of dividends or capital gains distributions payable in stock or in cash. However, each participant bears a pro rata share of brokerage commissions incurred with respect to State Street's open market purchases in connection with the reinvestment of dividends or capital gains distributions.
With respect to purchases from voluntary cash payments, State Street will charge $0.75 for each such purchase for a participant, plus a pro rata share of the brokerage commissions. A fee of $2.50 is charged in connection with the sale of shares that are held in book-entry form, such as shares of Common Stock held by a stockholder through the Plan. Commissions may also be charged on such transactions.
The automatic reinvestment of dividends and distributions will not relieve participants of any income tax which may be payable on such dividends or distributions.
All correspondence concerning the Plan should be directed to State Street at P.O. Box 8200, Boston, Massachusetts 02266-8200. For a further description of the Plan, see "Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan" in the SAI.
TAXATION
Taxation
The Fund has qualified, and intends to continue to qualify, each year as a "regulated investment company" under the Code. Accordingly, the Fund will not be liable for federal income taxes to the extent its taxable net investment income and net realized capital gain, if any, are distributed to stockholders, provided that at least 90% of its investment company taxable income (i.e., 90% of the taxable income minus the excess, if any, of its net realized long-term capital gain over its net realized short-term capital loss (including any capital loss carryovers) plus or minus certain other adjustments as specified in section 852 of the Code) for the taxable year is distributed to stockholders. The Fund will be subject to tax at regular corporate rates on any income or gains that it does not distribute. Furthermore, the Fund is subject to a 4% nondeductible federal excise tax on certain undistributed amounts of ordinary income and capital gains. The Fund intends to make such distributions as are necessary to avoid the application of this excise tax.
The Fund reserves the right, but does not currently intend, to retain for reinvestment net long-term gains in excess of net short-term capital losses and the Fund will be subject to a corporate tax (currently at a rate of 35%) on the retained amount, if any. The Fund would designate such retained amounts as undistributed capital gains. As a result, such amounts would be taxed to stockholders as long-term capital gains and stockholders would be able to claim their proportionate shares of the federal income taxes paid by the Fund on such gains as a credit against their own federal income tax liabilities, and would be entitled to increase the adjusted tax basis of their shares of the Fund by 65% of their undistributed capital gains and their tax credit. Qualified pension and profit sharing funds, certain trusts and other organizations or persons not subject to federal income tax on capital gains and certain non-resident alien individuals and foreign corporations would 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 proper tax authorities. Failure by such
entities and their sponsors or responsible fiduciaries to properly account for such refund could result in adverse federal income tax consequences.
The Fund sends its written statements and notices to its respective stockholders regarding the tax status of all dividends and distributions made during each calendar year.
Dividend and capital gain distributions may also be subject to state and local taxes. Stockholders are urged to consult their attorneys or tax advisors regarding specific questions as to federal, state or local taxes. Non-U.S. stockholders are urged to consult their own tax advisors concerning the applicability of the United States withholding tax. For a more detailed discussion of tax matters affecting the Fund and its stockholders, see "Taxation" in the SAI.
COMMON STOCK
The Fund, which was incorporated under the laws of the State of Maryland on March 31, 1994, is authorized to issue 200,000,000 shares of Common Stock, par value $.001 per share. Each share has equal voting, dividend, distribution and liquidation rights. The shares outstanding are fully paid and non-assessable. Shares of the Common Stock are not redeemable and have no preemptive, conversion or cumulative voting rights.
Set forth below is information with respect to the Fund Common Stock as of _____, 1995.
Amount Held by Fund for Amount Authorized Its Own Account Amount Outstanding
200,000,000 shares 0 shares __________ shares
The Fund's shares are listed and traded on the New York Stock Exchange under the symbol "GGT." The average weekly trading volume of the Common Stock on the New York Stock Exchange for the period from November 15, 1994 (commencement of the Fund's operations) through December 31, 1994 was 8,141 shares. The following table sets forth for the quarters indicated the high and low closing prices on the New York Stock Exchange per share of the 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 closing prices provided.
Premium or Discount as %
Market Price(1) Net Asset Value(2) of NAV
Quarter Ended High Low High Low High Low
12/31/94* . . . . . . . . $8.125 $6.875 $7.52 $7.48 8.33% -6.91%
03/31/95 . . . . . . . . $8.25 $6.875 $7.68 $7.48 6.67% -10.37%
06/30/95 . . . . . . . .
09/30/95** . . . . . . .
|
(1) As reported on the New York Stock Exchange.
(2) Based on the Fund's computations.
* The Fund commenced operations on November 15, 1994.
** Through ___________, 1995.
Repurchase of Shares
The Fund is a closed-end, management investment company and as such its stockholders do not, and will not, have the right to redeem its shares. The Fund, however, may repurchase its shares from time to time as and when it deems such a repurchase advisable. Such repurchases may be made when the Fund's shares are trading at a discount of 10% or more (or such other percentage as the Board of Directors of the Fund may determine from time to time) from the net asset value of the shares. Pursuant to the 1940 Act, the Fund may repurchase its shares on a securities exchange (provided that the Fund has informed its stockholders within the preceding six months of
its intention to repurchase such shares) 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, identity of the seller, price paid, brokerage commissions, prior notice to stockholders of an intention to purchase shares and purchasing in a manner and on a basis which does not discriminate unfairly against the other stockholders through their interest in the Fund.
The Fund may incur debt, in an amount not exceeding 10% of its total assets, to finance share repurchase transactions. See "Investment Restrictions" in the SAI. Any gain in the value of the investments of the Fund during the term of the borrowing that exceeds the interest paid on the amount borrowed would cause the net asset value of its shares to increase more rapidly than in the absence of borrowing. Conversely, any decline in the value of the investments of the Fund would cause the net asset value of its shares to decrease more rapidly than in the absence of borrowing. Borrowing money thus creates an opportunity for greater capital gain but at the same time increases exposure to capital risk.
When the Fund repurchases its shares for a price below their net asset value, the net asset value of those shares that remain outstanding will be enhanced, but this does not necessarily mean that the market price of those outstanding shares will be affected, either positively or negatively. Further, interest on borrowings to finance share repurchase transactions will reduce the net income of the Fund.
The Fund does not currently have an established tender offer program or established schedule for considering tender offers. No assurance can be given that the Board of Directors of the Fund will decide to undertake any such tender offers in the future, or, if undertaken, that they will reduce any market discount.
Although the Fund's shares have at times traded in the market above net asset value, since the commencement of the Fund s operations, the Fund's shares have generally traded in the market at a discount to net asset value.
For the net asset value per share and the reported sales price of a share of the Fund's Common Stock on the New York Stock Exchange as of a recent date, see "The Offer -- Subscription Price."
Certain Provisions of the Articles of Incorporation and Bylaws
The Fund presently has provisions in its Articles of Incorporation and By-Laws (together, in each case, its "Governing Documents") which could have the effect of limiting, in each case, (i) the ability of other entities or persons to acquire control of the Fund, (ii) the Fund's freedom to engage in certain transactions, or (iii) the ability of the Fund's Directors or stockholders to amend the Governing Documents or effectuate changes in the Fund's management. These provisions of the Governing Documents of the Fund may be regarded as "anti-takeover" provisions. The Board of Directors of the Fund is divided into three classes, each having a term of no more than three years. Each year the term of one class of Directors will expire. 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 of Directors. Such system of electing Directors 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 with or without 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 % of its outstanding shares is required to authorize the conversion of the Fund from a closed-end to an open-end investment company or generally to authorize any of the following transactions:
(i) merger or consolidation of the Fund with or into any other corporation;
(ii) issuance of any securities of the Fund to any person or entity for cash;
(iii) sale, lease or exchange of all or any substantial part of the assets of the Fund to any entity or person (except assets having an aggregate fair market value of less than $1,000,000); or
(iv) sale, lease or exchange to the Fund, in exchange for securities of the Fund, of any assets of any entity or person (except assets 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
conditions, the Board of Directors approves the transaction. Reference is made to the Governing Documents of the Fund, on file with the Commission; for the full text of these provisions, see "Further Information."
The provisions of the Governing Documents described above could have the effect of depriving the owners of shares 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 is to render more difficult the accomplishment of a merger or the assumption of control by a principal stockholder. The Board of Directors has determined that the foregoing voting requirements, which are generally greater than the minimum requirements under Maryland law and the 1940 Act, are in the best interests of the stockholders generally.
CUSTODIAN AND TRANSFER, DIVIDEND DISBURSING AGENT AND REGISTRAR
State Street, located at 225 Franklin Street, Boston, Massachusetts 02110, serves as the custodian of the Fund's assets pursuant to a custody agreement. Under the custody agreement, State Street holds the Fund's assets in compliance with the 1940 Act. For its custody services, State Street will receive a monthly fee based upon the average weekly value of the total assets of the Fund, plus certain charges for securities transactions.
State Street also serves as the Fund's dividend disbursing agent, as agent under the Fund's Plan and as transfer agent and registrar for shares of the Fund.
LEGAL MATTERS
With respect to matters of United States law, the validity of the shares offered hereby will be passed on for the Fund by Willkie Farr & Gallagher, New York, New York. Willkie Farr & Gallagher also serves as counsel to the Investment Adviser. Counsel for the Fund will rely, as to matters of Maryland law, on Venable Baetjer and Howard, LLP, Baltimore, Maryland.
EXPERTS
The financial statements of the Fund as of December 31, 1994 have been incorporated by reference into the SAI in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. Price Waterhouse LLP is located at 1177 Avenue of the Americas, New York, New York 10036.
FURTHER INFORMATION
The Fund is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information filed by the Fund can be inspected and copied at public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10048; and 500 West Madison Street, Chicago, Illinois 60661. The Fund's Common Stock is listed on the New York Stock Exchange. Reports, proxy statements and other information concerning the Fund can be inspected and copied at the Library of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form N-
2 (together with the SAI and all the exhibits and the appendix thereto, the
"Registration Statement") filed by the Fund with the Commission under the
Securities Act and the 1940 Act. This Prospectus and the SAI do not contain
all of the information set forth in the Registration Statement. Reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to the Fund and the Shares offered hereby.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the applicable document filed with
the Commission.
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
Page
Investment Objectives and Policies . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . . .
Automatic Dividend Reinvestment
and Voluntary Cash Purchase Plan . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . .
Net Asset Value . . . . . . . . . . . . . . . . . . .
Beneficial Owner . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . .
APPENDIX A
CORPORATE BOND RATINGS
Moody's Investors Service, Inc.
Aaa Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than in Aaa Securities.
A Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.
Baa Bonds that are rated Baa are considered as medium-grade obligations i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba Bonds that are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B Bonds that are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Moody's applies numerical modifiers (1, 2, and 3) with respect to the bonds rated "Aa" through "B." The modifier 1 indicates that the company ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the company ranks in the lower end of its generic rating category.
Caa Bonds that are rated Caa are of poor standing. These issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca Bonds that are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C Bonds that are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Standard & Poor's Ratings Group
AAA This is the highest rating assigned by S&P to a debt obligation and indicates an extremely strong capacity to pay interest and repay principal.
AA Debt rated AA has a very strong capacity to pay interest and repay principal and differs from AAA issues only in small degree.
A Principal and interest payments on bonds in this category are regarded as safe. Debt rated A has a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB This is the lowest investment grade. Debt rated BBB has an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.
Speculative Grade
Debt rated BB, CCC, CC and C are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation, and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated C1 is reserved for income bonds on which no interest is being paid and debt rated D is in payment default.
In July 1994, S&P initiated an "r" symbol to its ratings. The "r" symbol is attached to derivatives, hybrids and certain other obligations that S&P believes may experience high variability in expected returns due to non-credit risks created by the terms of the obligations.
"AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major categories.
"NR" indicates that no public rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.
No dealer, salesman, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus. If given or made, such information or The Gabelli Global Multimedia representation must not be Trust Inc. relied upon as having been authorized by the Fund or the Fund's investment advisers. This Prospectus does not _____ Shares of Common Stock constitute an offer to sell or Issuable Upon Exercise of the solicitation of an offer Rights to buy any security other than to Subscribe to Such Shares the shares of Common 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 |
TABLE OF CONTENTS ______________
Dividends and Distributions;
Automatic Dividend
Reinvestment and Voluntary
Cash Purchase Plan . . .
Taxation . . . . . . . .
Common Stock . . . . . .
Custodian and Transfer,
Dividend Disbursing Agent
and Registrar . . . .
Legal Matters . . . . .
Experts . . . . . . . .
Further Information . .
Table of Contents of
Statement of Additional
Information . . . . .
Appendix A . . . . . . .
________, 1995
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
STATEMENT OF ADDITIONAL INFORMATION
The Gabelli Global Multimedia Trust Inc. (the "Fund") is a non-diversified, closed-end management investment company that seeks long-term growth of capital by investing primarily in 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. It is the policy of the Fund, under normal market conditions, to invest at least 65% of its total assets in common stock and other securities of companies in the telecommunications, media, publishing and entertainment industries.
This Statement of Additional Information ("SAI") is not a prospectus, but should be read in conjunction with the Prospectus for the Fund dated , 1995 (the "Prospectus"). This SAI does not include all information that a prospective investor should consider before purchasing shares of the Fund, and investors should obtain and read the Prospectus prior to purchasing shares. A copy of the Prospectus may be obtained without charge, by calling the Fund at (800) GABELLI ((800)-422-3554) or (914) 921- 5070. This SAI incorporates by reference the entire Prospectus.
TABLE OF CONTENTS
Page
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . 1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 12
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 21
Automatic Dividend Reinvestment
and Voluntary Cash Purchase Plan . . . . . . . . . . . . . . . . . . . 22
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Beneficial Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
|
The Prospectus and this SAI omit certain of the information contained in the registration statement filed with the Securities and Exchange Commission, Washington, D.C. The registration statement may be obtained from the Securities and Exchange Commission upon payment of the fee prescribed, or inspected at the Securities and Exchange Commission's office at no charge.
This Statement of Additional Information is dated , 1995.
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The Fund's primary investment objective is long-term growth of capital. Income is a secondary objective. Under normal market conditions, the Fund will invest at least 65% of its total assets in common stock and other securities of companies in the telecommunications, media, publishing and entertainment industries. See "Investment Objectives and Policies" in the Prospectus.
Investment Practices
Special Situations. Subject to the Fund's policy of investing at least 65% of its total assets in companies involved in the telecommunications, media, publishing and entertainment industries, the Fund from time to time may invest in companies that are determined by Gabelli Funds, Inc. (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 Investments. Although under normal market conditions at least 65% of the Fund's assets will consist of common stock and other securities of foreign and domestic companies involved in the telecommunications, media, publishing and entertainment industries, when a temporary defensive posture is believed by the Investment Adviser to be warranted ("temporary defensive periods"), the Fund may hold without limitation cash or invest its assets in money market instruments and repurchase agreements in respect of those instruments. The money market instruments in which the Fund may invest are obligations of the United States government, its agencies or instrumentalities ("U.S. Government Securities"); commercial paper rated A-1 or higher by Standard & Poor's Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's"); and certificates of deposit and bankers' acceptances issued by domestic branches of U.S. banks that are members of the Federal Deposit Insurance Corporation. For a description of such ratings, see Appendix A to the Prospectus. The Fund may also invest up to 10% of the market value of its total assets during temporary defensive periods in shares of money market mutual funds that invest primarily in U.S. Government Securities
and repurchase agreements in respect of those securities. Money market mutual funds are investment companies and the investments by the Fund in those companies are subject to certain other limitations. See "Investment Restrictions." As a stockholder in a mutual fund, the Fund will bear its ratable share of the fund's expenses, including management fees, and will remain subject to payment of the fees to the Investment Adviser with respect to assets so invested.
Lower Rated Securities. The Fund may invest up to 10% of its total assets in fixed-income securities rated in the lower rating categories of recognized statistical rating agencies, such as securities rated "CCC" or lower by S&P or "Caa" or lower by Moody's, or non-rated securities of comparable quality. These debt securities are predominantly speculative and involve major risk exposure to adverse conditions and are often referred to in the financial press as "junk bonds."
Generally, such lower rated securities and unrated securities of comparable quality offer a higher current yield than is offered by higher rated securities, but also (i) will likely have some quality and protective characteristics that, in the judgment of the rating organizations, are outweighed by large uncertainties or major risk exposures to adverse conditions and (ii) are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. The market values of certain of these securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher quality bonds. In addition, such lower 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 lower rated securities and unrated securities of comparable quality generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. In light of these risks, the Investment Adviser, in evaluating the creditworthiness of an issue, whether rated or unrated, will take various factors into consideration, which may include, as applicable, the issuer's financial resources, its sensitivity to economic conditions and trends, the operating history of and the community support for the facility financed by the issue, the ability of the issuer's management and regulatory matters.
In addition, the market value of securities in lower rated categories is more volatile than that of higher quality securities, and the markets in which such lower rated or unrated securities are traded are more limited than those in which higher rated securities are traded. The existence of limited markets may
make it more difficult for the Fund to obtain accurate market quotations for purposes of valuing its portfolio and calculating its net asset value. Moreover, the lack of a liquid trading market may restrict the availability of securities for the Fund to purchase and may also have the effect of limiting the ability of the Fund to sell securities at their fair value to respond to changes in the economy or the financial markets.
Lower rated debt obligations also present risks based on payment expectations. If an issuer calls the obligation for redemption (often a typical 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 of issues in seeking investments that it believes to be underrated (and thus higher-yielding) in light of the financial condition of the issuer. Its analysis of issuers may include, among other things, current and anticipated cash flow and borrowing requirements, value of assets in relation to historical cost, strength of management, responsiveness to business conditions, credit standing and current anticipated results of operations. In selecting investments for the Fund, the Investment Adviser may also consider general business conditions, anticipated changes in interest rates and the outlook for specific industries.
Subsequent to its purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced. In addition, it is possible that statistical rating agencies might not change their ratings of a particular issue or reflect subsequent events on a timely basis. None of these events will require the sale of the securities by the Fund, although the Investment Adviser
will consider these events in determining whether the Fund should continue to hold the securities.
The market for certain lower 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. A call option is a contract that, in return for a premium, gives the holder of the option the right to buy from the writer of the call option the security underlying the option at a specified exercise price at any time during the term of the option. The writer of the call option has the obligation, upon exercise of the option, to deliver the underlying security upon payment of the exercise price during the option period. A put option is the reverse of a call option, giving the holder the right to sell the security to the writer and obligating the writer to purchase the underlying security from the holder.
A call option is "covered" if the Fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio. A call option is also covered if the Fund holds a call on the same security as the call written where the exercise price of the call held is (1) equal to or less than the exercise price of the call written or (2) greater than the exercise price of the call written if the difference is maintained by the Fund in cash, U.S. Government Securities or other high grade short-term obligations in a segregated account held 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 held with its custodian, or else holds a put on the same security 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 it 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 a closing purchase or sale transaction can be effected when the Fund so desires.
The Fund will realize a profit from a closing transaction if the price of the transaction is less than the premium received from writing the option or is more than the premium paid to purchase the option; the Fund will realize a loss from a closing transaction if the price of the transaction is more than the premium received from writing the option or is less than the premium paid to purchase the option. Since call option prices generally reflect increases in the price of the underlying security, any loss resulting from the repurchase of a call option may also be wholly or partially offset by unrealized appreciation of the underlying security. Other principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price and price volatility of the underlying security and the time remaining until the expiration date. Gains and losses on investments in options depend, in part, on the ability of the Investment Adviser to predict correctly the effect of these factors. The use of options cannot serve as a complete hedge since the price movement of securities underlying the options will not necessarily follow the price movements of the portfolio securities subject to the hedge.
An option position may be closed out only on an exchange which provides a secondary market for an option of the same series. 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 that the Fund would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of call options and upon the subsequent disposition of underlying securities for the exercise of put options. If the Fund, as a covered call option writer, is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise or otherwise covers the position.
In addition to options on securities, the Fund may also purchase and sell call and put options on securities indexes. 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 stock index options prior to expiration by entering into a closing transaction on an exchange or it may let the option expire unexercised.
The Fund also may 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 illiquid securities.
Use of options on securities indexes 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 movements in the level of an index and, therefore, the use of options on indexes 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 indexes require settlement in cash, the Investment Adviser may be forced to liquidate portfolio securities to meet settlement obligations.
The Fund has qualified, and intends to continue to qualify, as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). One requirement for such qualification is that the Fund must derive less than 30% of its gross income from gains from the sale or other disposition of securities held for less than three months. Therefore, the Fund may be limited in its ability to engage in options transactions.
Although the Investment Adviser will attempt to take appropriate measures to minimize the risks relating to the Fund's writing of put and call options, there can be no assurance that the Fund will succeed in any option- writing program it undertakes.
Futures Contracts and Options on Futures. The Fund will not enter into futures contracts or options on futures contracts unless (i) the aggregate initial margins and premiums do not exceed 5% of the fair market value of its assets and (ii) the aggregate market value of its outstanding futures contracts and the market value of the currencies and futures contracts subject to outstanding options written by the Fund, as the case may be, do not exceed 50% of the market value of its total assets. It is anticipated that these investments, if any, will be made by the Fund solely for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Such investments will only be made if they are economically appropriate to the reduction of risks involved in the management of the Fund. In this regard, the Fund may enter into futures contracts or options on futures for the purchase or sale of securities indices or other financial instruments including but not limited to U.S. Government Securities.
A "sale" of a futures contract (or a "short" futures position) means the assumption of a contractual obligation to deliver the securities underlying the contract at a specified price at a specified future time. A "purchaser" of a futures contract (or a "long" futures position) means the assumption of a contractual obligation to acquire the securities underlying the contract at a specified future time. Certain futures contracts, including stock and bond index futures, are settled on a net cash payment basis rather than by the sale and delivery of the securities underlying the futures contracts.
No consideration will be paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the Fund will be required to deposit with the broker an amount of cash or cash equivalents equal to approximately 1% to 10% of the contract amount (this amount is subject to change by the exchange or board of trade on which the contract is traded and brokers or members of such board of trade may charge a higher amount). This amount is known as "initial margin" and is in the nature of a performance bond or good faith deposit on the contract. Subsequent payments, known as "variation margin," to and from the broker will be made daily as the price of the index or security underlying the futures contract fluctuates. At any time prior to the expiration of a futures contract, the Fund may elect to close the position by taking an opposite position, which will operate to terminate its existing position in the contract.
An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract at a specified exercise price at any time prior to the expiration of the option. Upon exercise of an option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account attributable to that contract, which represents the amount by which the market price of the futures contract exceeds, in the case of a call, 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 Investment Company Act of 1940, as amended (the "1940 Act") an amount of cash, U.S. Government Securities or other high grade debt securities equal to the market value of the contract must be deposited and maintained in a segregated account with the custodian of the Fund to collateralize the positions, thereby ensuring that the use of the contract is unleveraged. For short positions in futures contracts and sales of call options, the Fund may establish a segregated account (not with a futures commission merchant or broker) with cash, U.S. Government Securities or other high grade debt 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 contracts or call options, respectively (but are not less than the stock price of the call option or the market price at which the short positions were established).
Forward Currency Transactions. The Fund may hold currencies to meet settlement requirements for foreign securities and may engage in currency exchange transactions to protect against uncertainty in the level of future exchange rates between a particular foreign currency and the U.S. dollar or between foreign currencies in which its securities are or may be denominated. Forward currency contracts are agreements to exchange one currency for another at a future date. The date (which may be any agreed-upon fixed number of days in the future), the amount of currency to be exchanged and the price at which the exchange takes place will be negotiated and fixed for the term of the contract at the time that the Fund enters into the contract. Forward currency contracts (1) are traded in a market conducted directly between currency traders (typically, commercial banks or other financial institutions) and their customers, (2) generally have no deposit requirements and (3) are typically consummated without payment of any commissions. The Fund, however, may enter into forward currency contracts requiring deposits or involving the payment of commissions. To assure that its forward currency contracts are not used to achieve investment leverage, the Fund will segregate liquid assets consisting of cash, U.S. Government Securities or other liquid high grade debt obligations with its custodian, or a designated sub-custodian, in an amount at all times equal to or exceeding its commitment with respect to the contracts.
The dealings of the Fund in forward foreign exchange is limited to hedging involving either specific transactions or portfolio positions. Transaction hedging is the purchase or sale of one forward foreign currency for another currency with respect to specific receivables or payables of the Fund accruing in connection with the purchase and sale of its portfolio securities or its payment of dividends and distributions. Position hedging is the purchase or sale of one forward foreign currency for another currency with respect to portfolio security positions denominated or quoted in the foreign currency to offset the effect of an anticipated substantial appreciation or depreciation, respectively, in the value of the currency relative to the U.S. dollar. In this situation, the Fund also may, for example, enter into a forward contract to sell or purchase a different foreign currency for a fixed U.S. dollar amount where it is believed that the U.S. dollar value of the currency to be sold or bought pursuant to the forward contract will fall or rise, as the case may be, whenever there is a decline or increase, respectively, in the U.S. dollar value of the currency in which its portfolio securities are denominated (this practice being referred to as a "cross- hedge").
In hedging a specific transaction, the Fund may enter into a forward contract with respect to either the currency in
which the transaction is denominated or another currency deemed appropriate by the Investment Adviser. The amount the Fund may invest in forward currency contracts is limited to the amount of its aggregate investments in foreign currencies.
The use of forward currency contracts may involve certain risks, including the failure of the counterparty to perform its obligations under the contract, and that such use may not serve as a complete hedge because of an imperfect correlation between movements in the prices of the contracts and the prices of the currencies hedged or used for cover. The Fund will only enter into forward currency contracts with parties which it believes to be creditworthy institutions.
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 high-grade debt 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. A short sale is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that security will decline. The market value of the securities sold short of any one issuer will not exceed either 5% of the Fund's total assets or 5% of such issuer's voting securities. The Fund will not make a short sale, if, after giving effect to such sale, the market value of all securities sold short exceeds 25% of the value of its assets or the Fund's aggregate short sales of a particular class of securities exceeds 25% of the outstanding securities of that class. The Fund may also make short sales "against the box" without respect to such limitations. In this
type of short sale, at the time of the sale, the Fund owns, or has the immediate and unconditional right to acquire at no additional cost, the identical security.
The Fund 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.
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's obligation to replace the borrowed security will be secured by collateral deposited with the broker-dealer, usually cash, U.S. Government Securities or other highly liquid debt securities. The Fund will also be required to deposit similar collateral with its custodian to the extent, if any, necessary so that the value of both collateral deposits in the aggregate is at all times equal to the greater of the price at which the security is sold short or 100% of the current market value of the security sold short. Depending on arrangements made with the broker-dealer from which it borrowed the security regarding payment over of any payments received by the Fund on such security, the Fund may not receive any payments (including interest) on its collateral deposited with such broker-dealer. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, any loss increased, by the transaction costs described above. Although the Fund's gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited.
To secure its obligations to deliver the securities sold short, the Fund will deposit in escrow in a separate account with its custodian, State Street Bank and Trust Company ("State Street"), an amount at least equal to the securities sold short or securities convertible into, or exchangeable for, the 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.
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). All percentage limitations set forth below apply immediately after a purchase or initial investment and any subsequent change in any applicable percentage resulting from market fluctuations does not require elimination of any security from the portfolio. The Fund may not:
1. Invest 25% or more of its total assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry other than the telecommunications, media, publishing and entertainment industries. This restriction does not apply to investments in U.S. Government Securities.
2. Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization, if more than 10% of the market value of the total assets of the Fund would be invested in securities of other investment companies, more than 5% of the market value of the total assets of the Fund would be invested in the securities of any one investment company or the Fund would own more than 3% of any other investment company's securities; provided, however, this restriction shall not apply to securities of any investment company organized by the Fund that are to be distributed pro rata as a dividend to its 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 of Directors of the Fund. 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. See "Common Stock -- Repurchase of Shares" in the Prospectus. 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. Issue senior securities, as defined in the 1940 Act, or mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities it owns or holds except as may be necessary in connection with borrowings mentioned in (6) above, and then such mortgaging, pledging or hypothecating may not exceed 10% of the total assets of the Fund taken at the lesser of cost or market value and except that collateral arrangements with respect to the writing of options or
any other hedging activity shall not be deemed a pledge of assets or the issuance of a senior security.
8. 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 shall not apply to securities of any investment company organized by the Fund that are to be distributed pro rata as a dividend to its stockholders.
9. 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.
MANAGEMENT OF THE FUND
Directors and Officers
Overall responsibility for management and supervision of the Fund rests with its Board of Directors. The Board of Directors approves all significant agreements between the Fund and the companies that furnish the Fund with services, including agreements with the Investment Adviser, the Fund's custodian and the Fund's transfer agent. The day-to-day operations of the Fund are delegated to the Investment Adviser.
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 positions with certain other organizations and companies. Directors who are "interested persons" of the Fund, as defined by the 1940 Act, are indicated by an asterisk.
Principal Occupation During Past
Name and Business Address (Age) Position with the Fund Five Years
Paul R. Ades (54) Director Partner in the law firm of Murov and
272 South Wellwood Avenue Ades. Director of one other
P.O. Box 504 registered investment company
Lindenhurst, New York 11757 advised by the Investment Adviser.
Dr. Thomas E. Bratter (55) Director Director, President and Founder, The
The John Dewey Academy John Dewey Academy (residential
Searles Castle college preparatory therapeutic high
Main Street school). Director of one other
Great Barrington, registered investment company
Massachusetts 01230 advised by the Investment Adviser.
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Bill Callaghan (51) Director President of Bill Callaghan
225 West 39th Street Associates Ltd., an executive search
New York, New York 10018 company. Director of two other
registered investment companies
advised by the Investment Adviser.
Felix J. Christiana (70) Director Retired; formerly Senior Vice
45 Pondfield Parkway President of Dollar Dry Dock Savings
Mt. Vernon, New York 10552 Bank. Director/Trustee of seven
other registered investment
companies advised by the Investment
Adviser.
James P. Conn (57) Director Managing Director of Financial
One Corporate Center Security Assurance since 1992;
Rye, New York 10580-1434 President and Chief Executive
Officer of Bay Meadows Operating
Company from 1988 through 1992.
Director/Trustee of three other
registered investment companies
advised by the Investment Adviser.
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Chairman of the Board, Chairman of the Board, Chief
President and Chief Executive Officer and Chief
*Mario J. Gabelli (52) Investment Officer Investment Officer of the Investment
One Corporate Center Adviser; Chairman of the Board and
Rye, New York 10580-1434 Chief Executive Officer of GAMCO
Investors Inc.; Chairman of the
Board and Director of Lynch
Corporation; Director and Adviser of
Gabelli International Ltd.
Director/Trustee of ten other
registered investment companies
advised by the Investment Adviser.
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Director Partner of Sal. Oppenheim Jr. & Cie
(private investment bank); President
*Karl Otto Pohl (65) of the Deutsche Bundesbank and
One Corporate Center Chairman of its Central Bank Council
Rye, New York 10580-1434 from 1980 through 1991; Currently
Board Member of Zurich
Versicherungs-Gesellschaft
(Insurance); the International
Council for JP Morgan & Co.;
Supervisory Board Member of Royal
Dutch; ROBECo/o Group; and Advisory
Director of Unilever N.V. and
Unilever Deutschland; German
Governor of The International
Monetary Fund (1980-1991); Board
Member, Bank for International
Settlements (1980-1991); and
Chairman of the European Economic
Community Central Bank Governors
(1990-1991). Director/Trustee of ten
other registered investment
companies advised by the Investment
Adviser.
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Director Certified Public Accountant.
Professor of Accounting, Pace
Anthony R. Pustorino (69) University, since 1965. Director,
121 Arleigh Road President and stockholder of
Douglaston, New York 11363 Pustorino, Puglisi & Co., P.C.,
certified public accountants, from
1961 to 1990. Director/Trustee of
six other registered investment
companies advised by the Investment
Adviser.
Salvatore J. Zizza (49) Director President and Chief Executive
The Lehigh Group, Inc. Officer of The Lehigh Group, Inc. (an
810 Seventh Avenue, 27th Floor electrical supply wholesaler).
New York, New York 10019 Director/Trustee of four other
registered investment companies
advised by the Investment Adviser.
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Vice President and Vice President and Chief Financial
Treasurer and Administrative Officer of the
Bruce N. Alpert (43) investment advisory division of the
One Corporate Center Investment Adviser since June 1988;
Rye, New York 10580-1434 Chief Operating Officer, Vice
President and Treasurer of The
Gabelli Value Fund Inc. since
September 1989; President and
Treasurer of The Gabelli Asset Fund
and The Gabelli Growth Fund; Vice
President and Treasurer of all other
registered investment companies
advised by the Investment Adviser.
J. Hamilton Crawford, Jr. (65) Secretary Senior Vice President and General
One Corporate Center Counsel of the investment advisory
Rye, New York 10580-1434 division of the Investment Adviser;
Secretary of the registered
investment companies advised by the
Investment Adviser. Attorney in
private practice from 1990-1992;
Executive Vice President and General
Counsel of Prudential Mutual Fund
Management, Inc. from 1988-1990.
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Vice President Client services representative of
Gabelli & Company, Inc. since March
Marc Diagonale (28) 1993; masters of business
One Corporate Center administration student at New York
Rye, New York 10580-1434 University from September 1990 to
May 1992; Vice President of The
Gabelli Equity Trust Inc.
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* "Interested person" of the Fund, as defined in the 1940 Act. Mr. Gabelli is an "interested person" of the Fund as a result of his employment as an officer of the Fund and the Investment Adviser. Mr. Gabelli is also a registered representative of an affiliated broker-dealer. Mr. P hl receives fees from the Investment Adviser but has no obligation to provide any services to it. Although this relationship does not appear to require designation of Mr. P hl as an "interested person," the Fund is currently making such designation in order to avoid the possibility that Mr. P hl's independence would be questioned.
The Board of Directors of the Fund are divided into three classes, with a class having a term of no more than three years. Each year the term of office of one class of directors expires. See "Common Stock -- Certain Provisions of the Articles of Incorporation and By-Laws of the Fund" in the Prospectus.
Remuneration of Directors and Officers
The Fund pays each Director who is not affiliated with the Investment Adviser or its affiliates a fee of $3,000 per year plus $500 per Directors' meeting attended, together with each Director's actual out-of-pocket expenses relating to attendance at such meetings. In addition, if net assets of the Fund equal or exceed $500 million, each such non-interested Director will receive a fee of $500 per committee meeting attended and a fee of $500 per annum if the Director serves as chair of a committee of the Fund's Board of Directors. The aggregate remuneration paid by the Fund to such Directors during the period from November 15, 1994 (commencement of the Fund's operations) though December 31, 1994 amounted to $2,043.
Mr. Marc Diagonale, Vice President of the Fund, has performed stockholder services on behalf of the Fund since it commenced operations. Mr. Diagonale also performs similar services for The Gabelli Equity Trust Inc. His salary of $90,000 per annum is borne by both funds on the basis of their relative net assets.
The following table shows certain compensation information for the Directors of the Fund for the current year ending December 31, 1995. None of the Fund's executive officers and Directors who are also officers or directors of the Investment Adviser will receive any compensation from the Fund for such period.
Total Estimated
Compensation From
Estimated Aggregate Pension or Retirement Estimated Annual Fund and Fund
Compensation from Benefits Accrued as Benefits Upon Complex Paid to
Name of Director Fund Part of Fund Expenses Retirement Directors
* *
Paul R. Ades $5,000 0 0 $19,000
Dr. Thomas E. Bratter $5,000 0 0 $19,000
Bill Callaghan $5,000 0 0 $33,000
Felix J. Christiana $5,500 0 0 $73,500
James P. Conn $5,000 0 0 $35,000
Karl Otto Pohl $4,500 0 0 $72,250
Anthony R. Pustorino $5,500 0 0 $80,750
Salvatore J. Zizza $5,000 0 0 $40,000
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* Includes future payments estimated to be paid to the Directors during fiscal 1995.
See "Principal Occupation During Past Five Years" in previous table for the number of Boards of other registered investment companies advised by the Investment Adviser on which such Director serves.
Limitation of Officers' and Directors' Liability
The By-Laws of the Fund provide that the Fund will indemnify its Directors and officers and may indemnify its employees or agents against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Fund, to the fullest extent permitted by law. In addition, the Articles of Incorporation of the Fund provide that the Fund's Directors and officers will not be liable to stockholders for money damages, except in limited instances. However, nothing in the Articles of Incorporation or the By-Laws
protects or indemnifies a Director, officer, employee or agent of the Fund against any liability to which such person would otherwise be subject in the event of such person's active or deliberate dishonesty which is material to the cause of action or to the extent that the person received an improper benefit or profit in money, property or services to the extent of such money, property or services. In addition, indemnification is not permitted for any act or omission committed in bad faith which is material to the cause of action or, with respect to any criminal proceeding, if the person had reasonable cause to believe that the act or omission was unlawful. In addition, indemnification may not be provided in respect of any proceeding in which the person had been adjudged to be liable to the Fund.
Investment Advisory and Administrative Arrangements
Gabelli Funds, Inc. acts as the Fund's investment adviser pursuant to an advisory agreement with the Fund (the "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, places orders to purchase and sell securities on behalf of the Fund and manages its other business and affairs, all subject to the supervision and direction of the Fund's Board of Directors. In addition, under the Advisory Agreement, the Investment Adviser oversees the administration of all aspects of the Fund's business and affairs and provides, or arranges for others to provide, at the Investment Adviser's expense, certain enumerated services, including maintaining the Fund's books and records, preparing reports to the Fund's stockholders and supervising the calculation of the net asset value of its shares. All expenses of computing the net asset value of the Fund, including any equipment or services obtained solely for the purpose of pricing shares or valuing its investment portfolio, will be an expense of the Fund under its Advisory Agreement. Notwithstanding the foregoing sentence, the Investment Adviser does not currently intend for the Fund to incur such expenses and, accordingly, until October 3, 1996 (a period of two years from the date of the Advisory Agreement), the Investment Adviser will assume any expenses of computing the Fund's net asset value payable under its Advisory Agreement. The expenses of computing the net asset value of the Fund are anticipated to be approximately $50,000 per year.
The Advisory Agreement combines investment advisory and administrative responsibilities in one agreement. The Investment Adviser has in turn retained Furman Selz Incorporated to act as sub-administrator to the Fund. See "Management of the Fund -- Sub-Administrator" in the Prospectus.
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 daily and paid monthly at the annual rate of 1.00% of the average weekly net assets of the Fund. The fees payable under the Advisory Agreement are higher than the fees payable by most registered investment companies.
The Advisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard for its obligations and duties thereunder, the Investment Adviser is not liable for any error or judgment or mistake of law or for any loss suffered by the Fund. As part of the Advisory Agreement, the Fund has agreed that the name "Gabelli" is the Investment Adviser's property, and that in the event the Investment Adviser ceases to act as an investment adviser to the Fund, the Fund will change its name to one not including the word "Gabelli."
Pursuant to its terms, the Advisory Agreement will remain in effect with
respect to the Fund until October 3, 1996, and from year to year thereafter if
approved annually (i) by the Fund's Board of Directors or by the holders of a
majority of its outstanding voting securities (as defined in the 1940 Act) 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 terminates automatically on its assignment and may be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the vote of the holders of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act).
For the period from November 15, 1994 (commencement of the Fund's operations) to December 31, 1994, the Investment Adviser was paid $83,054 for advisory and administrative services rendered to the Fund.
Foreign Custodial Arrangements
Rules adopted under the 1940 Act permit the Fund to maintain its foreign securities in the custody of certain eligible foreign banks and securities depositories. Pursuant to those rules, any foreign securities in the portfolio of the Fund may be held by subcustodians approved by the Directors of the Fund in accordance with the regulations of the Commission.
Selection of any such subcustodians will be made by the Directors of the Fund following a consideration of a number of factors, including but not limited to the reliability and financial stability of the institution, the ability of the institution to perform capably custodial services for the Fund, the reputation of
the institution in its national market, the political and economic stability of the country or countries in which the subcustodians are located, and risks of potential nationalization or expropriation of assets of the Fund. In addition, the 1940 Act requires that certain foreign subcustodians, among other things, have stockholders' equity in excess of $200 million, have no lien on the Fund's assets and maintain adequate and accessible records.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors of the Fund, the Investment Adviser is responsible for placing purchase and sale orders and the allocation of brokerage on behalf of the Fund. Transactions in equity securities are in most cases effected on U.S. stock exchanges and involve the payment of negotiated brokerage commissions. In general, there may be no stated commission in the case of securities traded in over-the-counter markets, but the prices of those securities may include undisclosed commissions or mark-ups. Principal transactions are not entered into with affiliates of the Fund. However, Gabelli & Company, Inc. ("Gabelli & Company") 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 Commission thereunder, as well as other regulatory requirements, the Fund's Board of Directors have determined that portfolio transactions may be executed through Gabelli & Company 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, those broker-dealers charge the Fund a rate consistent with that charged to comparable unaffiliated customers in similar transactions. The Fund has no obligation to deal with any broker or group of brokers in executing transactions in portfolio securities. In executing transactions, the Investment Adviser seeks to obtain the best price and execution for the Fund, taking into account such factors as price, size of order, difficulty of execution and operational facilities of the firm involved and the firm's risk in positioning a block of securities. While the Investment Adviser generally seeks reasonably competitive commission rates, the Fund does not necessarily pay the lowest commission available.
During the period from November 15, 1994 (commencement of the Fund's operations) through December 31, 1994, the Fund paid $17,027 in brokerage commissions. During the same period, the Fund paid to Gabelli & Company $2,595 in brokerage commissions, representing
15.2% of the total of all brokerage paid during such period. Such commissions were paid with respect to 17.2% of the total dollar value of all transactions involving the payment of brokerage commissions effected during the period.
Subject to obtaining the best price and execution, brokers who provide supplemental research, market and statistical information to the Investment Adviser or its affiliates may receive orders for transactions by the Fund. The term "research, market and statistical information" includes advice as to the value of securities, and advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities, and furnishing analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. Information so received will be in addition to and not in lieu of the services required to be performed by the Investment Adviser under the Advisory Agreement and the expenses of the Investment Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. Such information may be useful to the Investment Adviser and its affiliates in providing services to clients other than the Fund, and not all such information is used by the Investment Adviser in connection with the Fund. Conversely, such information provided to the Investment Adviser and its affiliates by brokers and dealers through whom other clients of the Investment Adviser and its affiliates effect securities transactions may be useful to the Investment Adviser in providing services to the Fund.
Although investment decisions for the Fund are made independently from those of the other accounts managed by the Investment Adviser and its affiliates, investments of the kind made by the Fund may also be made by 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 the manner deemed fair and equitable to all of the accounts, including the Fund.
Portfolio Turnover
The Fund's portfolio turnover rate for the period from November 15, 1994 (commencement of the Fund's operations) through December 31, 1994 was 0%. Portfolio turnover rate is calculated by dividing the lesser of the Fund's annual sales or purchases of portfolio securities by the monthly average value of securities in its portfolio during the year, excluding portfolio securities the maturities of which at the time of acquisition were one year or less. The ability of the Fund to enter into certain short-term
transactions will be limited by the requirement that certain gains on securities may not exceed 30% of its annual gross income for federal income tax purposes. However, portfolio turnover will not otherwise be a limiting factor in making investment decisions for the Fund. 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.
AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN
Under the Fund's Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan (the "Plan"), a stockholder whose shares of the Fund's common stock, par value $.001 per share (the "Common Stock") is registered in his own name will have all distributions reinvested automatically by State Street, which is agent under the Plan, unless the stockholder elects to receive cash. Distributions with respect to shares registered in the name of a broker-dealer or other nominee (that is, in "street name") will be reinvested by the broker or nominee in additional shares under the Plan, unless the service is not provided by the broker or nominee or the stockholder elects to receive distributions in cash. Investors who own Common Stock registered in street name should consult their broker-dealers for details regarding reinvestment. All distributions to investors who do not participate in the Plan will be paid by check mailed directly to the record holder by State Street as dividend disbursing agent.
Under the Plan, whenever the market price of the 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 dividend or capital gains distribution, participants in the Plan 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 Common Stock. The valuation date is the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next preceding 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, State Street will buy the Common Stock for such Plan in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts, except that State Street 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 net asset value.
Participants in the Plan have the option of making additional cash payments to State Street, semi-annually, for investment in the shares as applicable. Such payments may be made in any amount from $250 to $3,000. State Street will use all funds received from participants to purchase shares of the Fund in the open market on or about February 15 and August 15 of each year. Any voluntary cash payments received more than 30 days prior to these dates will be returned by State Street, and interest will not be paid on any uninvested cash payments. To avoid unnecessary cash accumulations, and also to allow ample time for receipt and processing by State Street, it is suggested that participants send voluntary cash payments to State Street in a manner that ensures that State Street will receive these payments approximately 10 days before February 15 or August 15, as the case may be. A participant may without charge withdraw a voluntary cash payment by written notice, if the notice is received by State Street at least 48 hours before such payment is to be invested.
State Street maintains all stockholder accounts in the Plan and furnishes written confirmations of all transactions in the account, including information needed by stockholders for personal and tax records. Shares in the account of each Plan participant will be held by State Street in noncertificated form in the name of the participant. A Plan participant may send its share certificates to State Street so that the shares represented by such certificates will be held by State Street in the participant's stockholder account under the Plan.
In the case of stockholders such as banks, brokers or nominees, which hold shares for others who are the beneficial owners, State Street will administer the Plan on the basis of the number of shares certified from time to time by the stockholder as representing the total amount registered in the stockholder's name and held for the account of beneficial owners who participate in the Plan.
Experience under the Plan may indicate that changes are desirable. Accordingly, 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 Plan members at least 90 days before the record date for such dividend or distribution. The Plan also may be amended or terminated by State Street on at least 90 days' written notice to the Plan participants. All correspondence concerning the Plan should be directed to State Street at P.O. Box 8200, Boston, Massachusetts 02266-8200.
TAXATION
The following is a summary of certain material United States federal income tax considerations regarding the purchase, ownership and disposition of shares in the Fund. Each prospective stockholder is urged to consult his own tax adviser with respect to the specific federal, state and local tax consequences of investing in the Fund. The summary is based on the laws in effect on the date of this SAI, which are subject to change.
The Fund has qualified and intends to continue to qualify and elect to be treated as a regulated investment company for each taxable year under the Code. To so qualify, the Fund must, among other things: (a) derive at least 90% of its gross income in each taxable year from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of stock or securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (b) derive less than 30% of its gross income in each taxable year from the sale or other disposition of (i) stock or securities held for less than three months, (ii) options, futures or forward contracts (other than options, futures or forward contracts on foreign currencies) held for less than three months and (iii) foreign currencies (or options, futures or forward contracts on such foreign currencies) held for less than three months but only if such currencies (or options, futures or forward contracts) are not directly related to the Fund's principal business of investing in stock or securities (or options or futures with respect to stock or securities); and (c) diversify its holdings so that, at the end of each quarter of the Fund's taxable year, (i) at least 50% of the market value of the Fund's assets is 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 Fund's assets and not greater than 10% of the outstanding voting securities of such issuer and (ii) not more than 25% of the value of its assets is invested in the securities (other than U.S. Government Securities or securities of other regulated investment companies) of any one issuer or any two or more issuers that the Fund controls and are determined to be engaged in the same or similar trades or businesses or related trades or businesses. The Fund expects that all of its foreign currency gains will be directly related to its principal business of investing in stocks and securities.
Legislation that would repeal the 30% limitation on a regulated investment company's ability to make short-term investments is currently being considered by Congress.
As a regulated investment company, the Fund will not be subject to United States federal income tax on its net investment income (i.e., income other than its net realized long- and short-term capital gains) and its net realized long- and short-term capital gains, if any, that it distributes to its stockholders, provided that an amount equal to at least 90% of its investment company taxable income (i.e., 90% of its taxable income minus the excess, if any, of its net realized long-term capital gains over its net realized short- term capital losses (including any capital loss carryovers), plus or minus certain other adjustments as specified in section 852 of the Code) for the taxable year is distributed, but will be subject to tax at regular corporate rates on any income or gains that it does not distribute. Furthermore, the Fund will be subject to a United States corporate income tax with respect to such distributed amounts in any year that it fails to qualify as a regulated investment company or fails to meet this distribution requirement. Any dividend declared by the Fund in October, November or December of any calendar year and payable to stockholders of record on a specified date in such a month shall be deemed to have been received by each stockholder on December 31 of such calendar year and to have been paid by the Fund not later than such December 31, provided that such dividend is actually paid by the Fund during January of the following calendar year.
Dividends paid from net investment income are taxable to stockholders as ordinary income whether or not reinvested in shares of the Fund. Distributions by the Fund of the excess, if any, of net long-term capital gains over net short-term capital losses will be taxable to stockholders as long-term capital gains regardless of how long stockholders have held shares of the Fund and will not be eligible for the dividends-received deduction for corporations. As a general rule, gain or loss on a sale of shares held for more than one year will be a long-term capital gain or loss, and gain or loss on a sale of shares held for one year or less will be a short-term capital gain or loss.
If the Fund is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends are included
in the Fund's gross income not as of the date received but as of the later of
(i) the date such stock became ex-dividend with respect to such dividends
(i.e., the date on which a buyer of the stock would not be entitled to receive
the declared, but unpaid, dividends) or (ii) the date the Fund acquired such
stock.
Capital Gain Distributions
If a stockholder receives a distribution taxable as long-term capital gain with respect to shares of the Fund and such shares are sold within six months of their acquisition, any loss on the sale will be treated as a long- term capital loss to the extent of such prior capital gain distributions with respect to such shares.
The Fund reserves the right, but does not currently intend, to retain for reinvestment net long-term gains in excess of net short-term capital losses and the Fund will be subject to a corporate tax (currently at a rate of 35%) on the retained amount, if any. The Fund would designate such retained amounts as undistributed capital gains. As a result, such amounts would be taxed to stockholders as long-term capital gains and stockholders would be able to claim their proportionate shares of the federal income taxes paid by the Fund on such gains as a credit against their own federal income tax liabilities, and would be entitled to increase the adjusted tax basis of their shares of the Fund by 65% of their undistributed capital gains and their tax credit. Qualified pension and profit sharing funds, certain trusts and other organizations or persons not subject to federal income tax on capital gains and certain non-resident alien individuals and foreign corporations would 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 proper tax authorities. Failure by such entities and their sponsors or responsible fiduciaries to properly account for such refund could result in adverse federal income tax consequences.
Backup Withholding
If a stockholder fails to furnish a correct taxpayer identification number, fails to report fully dividend or interest income, or fails to certify that he has provided a correct taxpayer identification number and that he is not subject to backup withholding, then the stockholder may be subject to a 31% backup withholding tax with respect to (i) any taxable dividends and distributions and (ii) any proceeds of any redemption or exchange of portfolio shares. An individual's taxpayer identification number is his social security number. The 31% backup withholding tax is not an additional tax and may be credited against a taxpayer's regular federal income tax liability.
Dividends received by corporate stockholders from the Fund will generally qualify for the federal dividends-received deduction for domestic corporate stockholders to the extent the dividends do not exceed the aggregate amount of dividends received by the Fund from qualified domestic corporations. If securities held by the Fund are considered to be "debt-financed" (generally, acquired with
borrowed funds), are held by the Fund for less than 46 days (91 days in the case of certain preferred stock), or are subject to certain forms of hedges, the portion of the dividends paid by the Fund that corresponds to the dividends paid with respect to the securities will not be eligible for the corporate dividends-received deduction.
The Fund sends written statements and notices to its stockholders regarding the tax status of all dividends and distributions made during each calendar year.
Dividend and capital gain distributions may also be subject to state and local taxes. Stockholders are urged to consult their attorneys or tax advisors regarding specific questions as to federal, state or local taxes. Non-U.S. stockholders are urged to consult their own tax advisors concerning the applicability of the United States withholding tax.
Other Tax Consequences
In addition to the federal income tax consequences described above, which are applicable to an investment in the Fund, there may be other federal, state or local tax considerations applicable to the circumstances of a particular investor. The foregoing discussion is based upon the Code, judicial decisions and administrative regulations, rulings and practices, all of which are subject to change and which, if changed, may be applied retroactively to the Fund, its stockholders and/or its assets. No rulings have been sought from the Internal Revenue Service with respect to any of the tax matters discussed above.
NET ASSET VALUE
The net asset value of the Fund's shares is computed based on the market value of the securities it holds and determined daily as of the close of regular trading on the New York Stock Exchange and reported in financial newspapers of general circulation as of the last day of each week.
Portfolio securities which are traded only on stock exchanges are valued at the last sale price as of the close of regular trading on the day the securities are being valued, or lacking any sales, at the mean between closing bid and asked prices. Securities traded in the over-the-counter market which are Nasdaq National Market securities are valued at the last sale price as of the close of regular trading on the day the securities are being valued. Other over-the-counter securities are valued at the most recent bid prices as obtained from one or more dealers that make markets in
the securities. Portfolio securities which are traded both in the over-the- counter market and on a stock exchange are valued according to the broadest and most representative market, as determined by the Investment Adviser. Securities traded primarily on foreign exchanges are valued at the closing values of such securities on their respective exchanges as of the day the securities are being valued. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Directors of the Fund. Short-term investments that mature in 60 days or less are valued at amortized cost, unless the Board of Directors of the Fund determines that such valuation does not constitute fair value.
Net asset value per share is calculated by dividing the value of the securities held plus any cash or other assets minus all liabilities, including accrued expenses, by the total number of shares outstanding at such time.
BENEFICIAL OWNER
There are no persons known to the Fund who may be deemed beneficial owners of 5% or more of shares of the Fund's Common Stock because they possessed or shared voting or investment power with respect to shares of the Fund's Common Stock. The officers and Directors of the Fund, in the aggregate, own less than 1% of the outstanding shares of the Fund's Common Stock.
FINANCIAL STATEMENTS
The Fund's Annual Report for the period from November 15, 1994 (commencement of the Fund's operations) through December 31, 1994 (the "Report"), which either accompanies this SAI or has previously been provided to the person to whom the Prospectus is being sent, are incorporated herein by reference with respect to all information other than the information set forth in the Letter to Stockholders included therein. The Fund will furnish, without charge, a copy of its Report, upon request to the Fund at One Corporate Center, Rye, New York 10580 or by telephone at (914) 921-5070.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements
(i) -- Portfolio of Investments as of December 31, 1994*
(ii) -- Statement of Assets and Liabilities as of December
31, 1994*
(iii) -- Statement of Operations for the period November 15,
1994 through December 31, 1994*
(iv) -- Statement of Changes in Net Assets -- November 15,
1994 through December 31, 1994
(v) -- Financial highlights for a share of capital stock
outstanding throughout the period November 15, 1994
through December 31, 1994*
(vi) -- Notes to Financial Statements*
(vii) -- Report of Independent Accountants*
* Incorporated by reference to the Fund's Annual Report for 1994, filed on March 1, 1995 (EDGAR Accession No. 000950123-95-000553).
(2) Exhibits
(a) -- Articles of Incorporation
(b) -- Amended and Restated By-Laws**
(c) -- Not applicable
(d) (1) -- Specimen certificate for Common Stock, par value
$.001 per share (incorporated by reference to
the Fund's Registration Statement on Form N-2,
Exhibit 2(d), filed on July 8, 1994)*
(2) -- Form of Subscription Certificate**
(3) -- Form of Notice of Guaranteed Delivery**
(4) -- DTC Participant Oversubscription Exercise Form**
(5) -- Form of Subscription, Distribution and Escrow
Agency Agreement**
(e) -- Automatic Dividend Reinvestment and Voluntary
Cash Purchase Plan (incorporated by reference to
the Fund's Registration Statement on Form N-2,
Exhibit 2(e), filed on July 8, 1994)*
(f) -- Not applicable
(g) -- Investment Advisory Agreement between the Fund
and Gabelli Funds, Inc.
(h) -- Not applicable
(i) -- Not applicable
(j) (1) -- Custodial Contract between the Fund and State
Street Bank and Trust Company**
(2) -- Form of Custodial Fee Schedule between the Fund
and State Street Bank and Trust Company**
(k) (1) -- Registrar, Transfer Agency and Service Agreement
between the Fund and State Street Bank and Trust
Company**
(2) -- Transfer Agent and Registrar Services Fee
Agreement between the Fund and State Street Bank
and Trust Company**
(l) (1) -- Opinion and consent of Willkie Farr &
Gallagher**
(2) -- Opinion and consent of Venable, Baetjer and
Howard, LLP**
(m) -- Not applicable
(n) -- Consent of Price Waterhouse LLP
(o) -- Not applicable
(p) -- Purchase Agreement between the Fund and The
Gabelli Equity Trust Inc.
(q) -- Not applicable
(r) -- Financial Data Schedule **
* This Registration Statement was filed under File No. 811-8476. ** To be filed by amendment
Item 25. Marketing Arrangements
Not applicable
Item 26. Other Expenses of Issuance
The following table sets forth the estimated expenses to be incurred in connection with the Offer described in this Registration Statement:
$
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,049
New York Stock Exchange
listing fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Printing (other than stock
certificates) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Engraving and printing
stock certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Fees and expenses of
qualification under state securities laws (including fees of counsel) . . . *
Auditing fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Subscription Agent's fees
and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,000
Postage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000*
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Total $ *
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* To be supplied by amendment.
Item 27. Persons Controlled by or Under Common Control with Registrant
None.
Item 28. Number of Holders of Securities
Common Stock, par value $.001 per share: 17,058 record holders as of June 16, 1995.
Item 29. Indemnification
The response of this Item is incorporated by reference to the caption "Common Stock -- Limitation of Officers' and Directors' Liability" set forth in the Prospectus.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to Directors, officers and controlling persons of the Fund, pursuant to the foregoing provisions or otherwise, the Fund has been advised that in the opinion of the Securities and Exchange Commission (the "SEC") 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 Fund of expenses incurred or paid by a Director, officer or controlling person of the Fund 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 Fund 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 Act and will be governed by the final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser
Registrant is fulfilling the requirement of this Item 30 to provide a list of the officers and directors of its investment adviser, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by that entity or those of its officers and directors during the past two years, by incorporating by reference the information contained in the Form ADV filed with the SEC pursuant to the Investment Advisers Act of 1940 by Gabelli Funds, Inc. (SEC File No. 801-26202).
Item 31. Location of Accounts and Records
Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580
(with respect to its services as Investment Adviser)
State Street Bank and Trust Company
Two Heritage Drive
North Quincy, Massachusetts 02171
(with respect to its services as custodian, transfer agent, dividend disbursing agent and registrar)
Furman Selz Incorporated
230 Park Avenue
New York, New York 10169
(with respect to its services as Sub-Administrator)
Item 32. Management Services
Not applicable.
Item 33. Undertakings
(a) Registrant undertakes to suspend offering its shares until it amends its prospectus contained herein if (1) subsequent to the effective date of its Registration Statement, the net asset value per share declines more than 10 percent from its net asset value per share as of the effective date of this Registration Statement, or (2) the net asset value per share increases to an amount greater than its net proceeds as stated in the prospectus contained herein.
(b) Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to reflect in the prospectus any facts or events arising 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; or
(ii) 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.
(2) that, for the purpose of determining any liability under the 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 such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) 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.
(c) Registrant hereby 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, a Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rye, State of New York, on the 19th day of June, 1995.
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
By /s/ Bruce N. Alpert
Bruce N. Alpert
Treasurer
|
Each person whose signature appears below hereby constitutes and appoints Bruce N. Alpert and Mario J. Gabelli and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated.
Signature Title Date
Chairman of the
Board, President
Mario J. Gabelli and Chief
Investment Officer
Director
Paul R. Ades
/s/ Thomas E. Bratter Director June 19, 1995
Thomas E. Bratter
/s/ Bill Callaghan Director June 19, 1995
Bill Callaghan
/s/ Felix J. Christiana Director June 19, 1995
Felix J. Christiana
Director
James P. Conn
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Director
Karl Otto Pohl
/s/ Anthony R. Pustorino Director June 19, 1995
Anthony R. Pustorino
/s/ Salvatore J. Zizza Director June 19, 1995
Salvatore J. Zizza
/s/ Bruce N. Alpert Treasurer June 19, 1995
Bruce N. Alpert (Principal Financial
and Accounting
Officer)
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EXHIBIT INDEX
Page in
Sequential
Numbering
System
(a) -- Articles of Incorporation
(b) -- Amended and Restated By-Laws*
(d) (2) -- Form of Subscription Certificate*
(3) -- Form of Notice of Guaranteed Delivery*
(4) -- DTC Participant Oversubscription Exercise Form*
(5) -- Form of Subscription, Distribution and Escrow Agency
Agreement*
(g) -- Investment Advisory Agreement between the Fund and Gabelli
Funds, Inc.
(j) (1) -- Custodial Contract between the Fund and State Street Bank
and Trust Company*
(2) -- Form of Custodial Fee Schedule between the Fund and State
Street Bank and Trust Company*
(k) (1) -- Registrar, Transfer Agency and Service Agreement between the
Fund and State Street Bank and Trust Company*
(2) -- Transfer Agent and Registrar Services Fee Agreement between
the Fund and State Street Bank and Trust Company*
(l) (1) -- Opinion and consent of Willkie Farr & Gallagher*
(2) -- Opinion and consent of Venable, Baetjer and Howard, LLP*
(n) -- Consent of Price Waterhouse LLP
(p) -- Purchase Agreement between the Fund and The Gabelli Equity
Trust Inc.
(r) -- Financial Data Schedule*
* To be filed by amendment
EXHIBIT (a)
ARTICLES OF INCORPORATION
OF
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
ARTICLE I
THE UNDERSIGNED, David K. Boston, whose post office address is c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022, being at least eighteen years of age, does hereby act as an incorporator and form a corporation under and by virtue of the Maryland General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is THE GABELLI GLOBAL MULTIMEDIA TRUST
INC.
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed to conduct and carry on the business of a closed-end investment company registered under the Investment Company Act of 1940, as amended.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the State of Maryland is c/o The Corporation Trust Company Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the resident agent of the Corporation in the State of Maryland is The Corporation Trust Company Incorporated. The post office address of the resident agent is 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation shall have authority to issue is two hundred million (200,000,000) shares, of the par value of one tenth of one cent ($.001) per share and of the aggregate par value of two hundred thousand dollars ($200,000), all of which two hundred million (200,000,000) shares are initially designated Common Stock.
(2) The Corporation may issue fractional shares. Any fractional share shall carry proportionately the rights of a whole share including, without limitation, the right to vote and the right to receive dividends. A fractional share shall not, however, have the right to receive a certificate evidencing it.
(3) All persons who shall acquire stock in the Corporation shall acquire the same subject to the provisions of these Articles of Incorporation and the Bylaws of the Corporation, as from time to time amended.
(4) No holder of stock of the Corporation by virtue of being such a holder shall have any right to purchase or subscribe for any shares of the Corporation's capital stock or any other security that the Corporation may issue or sell other than a right that the Board of Directors in its discretion may determine to grant.
(5) The Board of Directors shall have authority by resolution to classify and reclassify any authorized but unissued shares of capital stock from time to time by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of the capital stock.
(6) Notwithstanding any provision of law requiring any action to be taken or authorized by the affirmative vote of the holders of a greater proportion of the votes of all classes or of any class of stock of the Corporation, such action shall be effective and valid if taken or authorized by the affirmative vote of a majority of the total number of votes entitled to be cast thereon, except as otherwise provided in these Articles of Incorporation.
ARTICLE VI
BOARD OF DIRECTORS
(1) The initial number of directors of the Corporation shall be one
(1). The number of directors of the Corporation may be changed by the Bylaws
or by the Board of Directors pursuant to the Bylaws. The number of Directors
shall in no event be greater than twelve (12). The name of the director who
shall act until the first annual meeting of stockholders or until his
successor is duly chosen and qualified is:
J. Hamilton Crawford, Jr.
(2) In furtherance, and not in limitation, of the powers conferred by the laws of the State of Maryland, the Board of Directors is expressly authorized:
(i) To make, alter or repeal the Bylaws of the Corporation, except as otherwise required by the Investment Company Act of 1940, as amended.
(ii) From time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the books and accounts of the Corporation, or any of them other than the stock ledger, shall be open to the inspection of the stockholders. No stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by law or authorized by resolution of the Board of Directors.
(iii) Without the assent or vote of the stockholders, to authorize the issuance from time to time of shares of the stock of any class of the Corporation, whether now or hereafter authorized, and securities convertible into shares of stock of the Corporation of any class or classes, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable.
(iv) Without the assent or vote of the stockholders, to authorize and issue obligations of the Corporation, secured and unsecured, as the Board of Directors may determine, and to authorize and cause to be executed mortgages and liens upon the real or personal property of the Corporation.
(v) Notwithstanding anything in these Articles of Incorporation to the contrary, to establish in its absolute discretion the basis or method for determining the value of the assets belonging to any class, the value of the liabilities
belonging to any class and the net asset value of each share of any class of the Corporation's stock.
(vi) To determine in accordance with generally accepted accounting principles and practices what constitutes net profits, earnings, surplus or net assets in excess of capital, and to determine what accounting periods shall be used by the Corporation for any purpose; to set apart out of any funds of the Corporation reserves for such purposes as it shall determine and to abolish the same; to declare and pay any dividends and distributions in cash, securities or other property from surplus or any funds legally available therefor, at such intervals as it shall determine; to declare dividends or distributions by means of a formula or other method of determination, at meetings held less frequently than the frequency of the effectiveness of such declarations; to establish payment dates for dividends or any other distributions on any basis, including dates occurring less frequently than the effectiveness of declarations thereof; and to provide for the payment of declared dividends on a date earlier or later than the specified payment date in the case of stockholders of the Corporation redeeming their entire ownership of shares of any class of the Corporation.
(vii) In addition to the powers and authorities granted herein and by statute expressly conferred upon it, the Board of Directors is authorized to exercise all powers and do all acts that may be exercised or done by the Corporation pursuant to the provisions of the laws of the State of Maryland, these Articles of Incorporation and the Bylaws of the Corporation.
(3) Any determination made in good faith by or pursuant to the direction of the Board of Directors, with respect to the amount of assets, obligations or liabilities of the Corporation, as to the amount of net income of the Corporation from dividends and interest for any period or amounts at any time legally available for the payment of dividends, as to the amount of any reserves or charges set up and the propriety thereof, as to the time of or purpose for creating reserves or as to the use, alteration or cancellation of any reserves or charges (whether or not any obligation or liability for which the reserves or charges have been created has been paid or discharged or is then or thereafter required to be paid or discharged), as to the value of any security owned by the Corporation, the determination of the net asset value of shares of any class of the Corporation's capital stock, or as to any other matters relating to the issuance, sale, redemption or other acquisition or disposition of securities or shares of capital stock of the Corporation, and any reasonable determination made in good faith by the Board of
Directors whether any transaction constitutes a purchase of securities on
"margin," a sale of securities "short," or an underwriting of the sale of, or
a participation in any underwriting or selling group in connection with the
public distribution of, any securities, shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its capital stock,
past, present and future, and shares of the capital stock of the Corporation
are issued and sold on the condition and understanding, evidenced by the
purchase of shares of capital stock or acceptance of share certificates, that
any and all such determinations shall be binding as aforesaid. No provision
of these Articles of Incorporation of the Corporation shall be effective to
(i) require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the Investment Company Act of 1940, as amended, or of any
valid rule, regulation or order of the Securities and Exchange Commission
under those Acts or (ii) protect or purport to protect any director or officer
of the Corporation against any liability to the Corporation or its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE VII
CHANGE OF STRUCTURE
Notwithstanding any other provision of these Articles of Incorporation, the conversion of the Corporation from a "closed-end company" to an "open-end company," as those terms are defined in Sections 5(a)(2) and 5(a)(1), respectively, of the Investment Company Act of 1940 as in effect on December 31, 1993, shall require the affirmative vote or consent of the holders of sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of each class of stock of the Corporation normally entitled to vote in elections of directors voting for the purposes of this Article as separate classes. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the stock of the Corporation otherwise required by law or by the terms of any class or series of preferred stock, whether now or hereafter authorized, or any agreement between the Corporation and any national securities exchange.
ARTICLE VIII
CERTAIN TRANSACTIONS
(1) Notwithstanding any other provision of these Articles of Incorporation, and subject to the exceptions provided in Paragraph (4) of this Article, the types of transactions described in Paragraph (3) of this Article shall require the affirmative vote or consent of the holders of sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of each class of stock of the Corporation normally entitled to vote in elections of directors voting for the purposes of this Article as separate classes, when a Principal Shareholder (as defined in Paragraph (2) of this Article) is a party to the transaction. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the stock of the Corporation otherwise required by law or by the terms of any class or series of preferred stock, whether now or hereafter authorized, or any agreement between the Corporation and any national securities exchange.
(2) The term "Principal Shareholder" shall mean any corporation, person or other entity which is the beneficial owner, directly or indirectly, of more than five percent (5%) of the outstanding shares of any class of stock of the Corporation and shall include any affiliate or associate, as such terms are defined in clause (ii) below, of a Principal Shareholder. For the purposes of this Article, in addition to the shares of stock which a corporation, person or other entity beneficially owns directly, (a) any corporation, person or other entity shall be deemed to be the beneficial owner of any shares of stock of the Corporation (i) which it has the right to acquire pursuant to any agreement or upon exercise of conversion rights or warrants, or otherwise (but excluding stock options granted by the Corporation) or (ii) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (i) above), by any other corporation, person or entity with which it or its "affiliate" or "associate" (as defined below) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of stock of the Corporation, or which is its "affiliate", or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on December 31, 1993, and (b) the outstanding shares of any class of stock of the Corporation shall include shares deemed owned through application of clauses (i) and (ii) above but shall not include any other shares which may be issuable pursuant to
any agreement, or upon exercise of conversion rights or warrants, or otherwise.
(3) This Article shall apply to the following transactions:
(i) The merger or consolidation of the Corporation or any subsidiary of the Corporation with or into any Principal Shareholder.
(ii) The issuance of any securities of the Corporation to any Principal Shareholder for cash.
(iii) The sale, lease or exchange of all or any substantial part of the assets of the Corporation to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
(iv) The sale, lease or exchange to the Corporation or any subsidiary thereof, in exchange for securities of the Corporation, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
(4) The provisions of this Article shall not be applicable to (i) any of the transactions described in Paragraph (3) of this Article if the Board of Directors of the Corporation shall by resolution have approved a memorandum of understanding with such Principal Shareholder with respect to and substantially consistent with such transaction, or (ii) any such transaction with any corporation of which a majority of the outstanding shares of all classes of stock normally entitled to vote in elections of directors is owned of record or beneficially by the Corporation and its subsidiaries.
(5) The Board of Directors shall have the power and duty to determine for the purposes of this Article on the basis of information known to the Corporation, whether (i) a corporation, person or entity beneficially owns more than five percent (5%) of the outstanding shares of any class of stock of the Corporation, (ii) a corporation, person or entity is an
"affiliate" or "associate" (as defined above) of another, (iii) the assets being acquired or leased to or by the Corporation, or any subsidiary thereof, constitute a substantial part of the assets of the Corporation and have an aggregate fair market value of less than $1,000,000 and (iv) the memorandum of understanding referred to in Paragraph (4) hereof is substantially consistent with the transaction covered thereby. Any such determination shall be conclusive and binding for all purposes of this Article.
ARTICLE IX
MONETARY LIABILITY OF DIRECTORS AND OFFICERS
To the fullest extent permitted by Maryland General Corporation Law, as amended from time to time, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for money damages, except to the extent such exemption from liability or limitation thereof is not permitted by the Investment Company Act of 1940, as amended from time to time. No amendment to these Articles of Incorporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision with respect to any act or omission which occurred prior to such amendment or repeal.
ARTICLE X
AMENDMENTS
(1) The Corporation reserves the right from time to time to make any amendment to its Charter, now or hereafter authorized by law, including any amendment that alters the contract rights, as expressly set forth in its Charter, of any outstanding stock.
(2) Notwithstanding Paragraph (1) of this Article or any other provision of these Articles of Incorporation, no amendment to these Articles of Incorporation shall amend, alter, change or repeal any of the provisions of Articles VII, VIII or X unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote or consent of sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of each class of stock of the Corporation normally entitled to vote in elections of directors, voting for the purposes of this Article as separate classes. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the stock of the Corporation otherwise required by law or by the terms of any class or series of preferred stock, whether now or
hereafter authorized, or any agreement between the Corporation and any national securities exchange.
IN WITNESS WHEREOF, I have adopted and signed these Articles of Incorporation and do hereby acknowledge that the adoption and signing are my act.
Dated the 31st day of March, 1994.
/s/ David K. Boston
David K. Boston,
Incorporator
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EXHIBIT (g)
INVESTMENT ADVISORY AGREEMENT
October 3, 1994
Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580-1434
Dear Sir:
The Gabelli Global Multimedia Trust Inc. (the "Trust"), a corporation organized under the laws of the State of Maryland, confirms its investment advisory agreement with Gabelli Funds, Inc., (the "Advisor") as follows:
1. Investment Description; Appointment
The Trust desires to employ its capital by investing and reinvesting in investments of the kind and in accordance with the limitations specified in its Articles of Incorporation, as amended from time to time (the "Articles of Incorporation"), and in its Registration Statement on Form N-2 under the Investment Company Act of 1940, as amended (the "1940 Act") as from time to time in effect (the "Registration Statement") and in such manner and to such extent as may from time to time be approved by the Trust's Board of Directors. Copies of the Articles of Incorporation and the Registration Statement have been submitted to the Advisor. The Trust desires to employ and hereby appoints the Advisor to act as its investment advisor and to oversee the administration of all aspects of the Trust's business and affairs and provide, or arrange for others whom it believes to be competent to provide, certain services as specified in subparagraph (b) below. The Advisor accepts the appointment and agrees to furnish the services set forth below for the compensation set forth below. Nothing contained herein shall be construed to restrict the Trust's right to hire its own employees or to contract for administrative services to be performed by third parties, including but not limited to, the calculation of the net asset value of the Trust's shares.
2. Services
(a) Investment Advice. Subject to the supervision and direction of the Trust's Board of Directors, the Advisor will (i) act in strict conformity with the Articles of Incorporation, the 1940 Act and the Investment Advisers Act of 1940, as the same may from time to time be amended, (ii) manage the Trust's assets in
accordance with the Trust's investment objective and policies as stated in the Registration Statement, (iii) make investment decisions for the Trust and (iv) place purchase and sale orders on behalf of the Trust. In rendering those services, the Advisor will provide investment research and supervision of the Trust's investments and conduct a continual program of investment, evaluation and, if appropriate, sale and reinvestment of the Trust's assets. In addition, the Advisor will furnish the Trust with whatever statistical information the Trust may reasonably request with respect to the securities that the Trust may hold or contemplate purchasing.
(b) Administration. The specific services to be provided or arranged
for by the Advisor for the Trust are (i) maintaining the Trust's books and
records, such as journals, ledger accounts and other records in accordance
with applicable laws and regulations to the extent not maintained by the
Trust's custodian, transfer agent or dividend disbursing agent; (ii)
initiating all money transfers to the Trust's custodian and from the Trust's
custodian for the payment of the Trust's expenses, investments, and dividends;
(iii) reconciling account information and balances among the Trust's
custodian, transfer agent, dividend disbursing agent and the Advisor; (iv)
providing the Trust, upon request, with such office space and facilities,
utilities and office equipment as are adequate for the Trust's needs; (v)
preparing, but not paying for, all reports by the Trust to its shareholders
and all reports and filings required to maintain registration and
qualification of the Trust's shares under federal and state law including the
updating of the Trust's Registration Statement, when necessary; (vi)
supervising the calculation of net asset value of the Trust's shares; and
(vii) preparing notices and agendas for meetings of the Trust's shareholders
and the Trust's Board of Directors as well as minutes of such meetings in all
matters required by applicable law to be acted upon by the Board of Directors.
3. Brokerage
In executing transactions for the Trust and selecting brokers or dealers, the Advisor will use its best efforts to seek the best overall terms available. In assessing the best overall terms available for any transaction on behalf of the Trust, the Advisor will consider all factors it deems relevant including, but not limited to, the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer and the reasonableness of any commission for the specific transaction and on a continuing basis. In selecting brokers or dealers to execute a particular transaction and in evaluating the best overall terms available, the Advisor may consider the brokerage and research services provided to the Trust
and/or other accounts over which the Advisor or an affiliate of the Advisor exercises investment discretion.
4. Information Provided to the Trust
The Advisor will keep the Trust informed of developments materially affecting the Trust, and will, on its own initiative, furnish the Trust from time to time with whatever information the Advisor believes is appropriate for this purpose.
5. Standard of Care
The Advisor shall exercise its best judgment in rendering the services described in paragraphs 2 and 3 above. The Advisor shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters of which this Agreement relates, provided that nothing in this paragraph shall be deemed to protect or purport to protect the Advisor against any liability to the Trust or to its shareholders to which the Advisor would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the Advisor's reckless disregard of its obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement, the Trust will pay the Advisor on the first business day of each month a fee for the previous month at the annual rate of 1.00% of the Trust's average weekly net assets. Upon any termination of this Agreement before the end of a month, the fee for such part of that month shall be prorated according to the proportion that such period bears to the full monthly period and shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Advisor, the value of the Trust's net assets shall be computed at the times and in the manner specified in the Registration Statement.
7. Expenses
The Advisor will bear all expenses in connection with the performance of its services under this Agreement. The Trust will bear certain other expenses to be incurred in its operation, including: expenses for legal and independent accountants' services, costs of printing proxies, stock certificates and shareholder reports, charges of the custodian, any sub- custodian and transfer and dividend paying agent, expenses in connection with the Dividend Reinvestment and Cash Purchase Plan, Securities and
Exchange Commission fees, fees and expenses of unaffiliated directors, accounting and pricing costs, membership fees in trade associations, fidelity bond coverage for the Trust's officers and employees, directors' and officers' errors and omissions insurance coverage, interest, brokerage costs, taxes, stock exchange listing fees and expenses, all expenses of computing the Trust's net asset value per share, including any equipment or services obtained solely for the purpose of pricing shares or valuing the Trust's investment portfolios, expenses of qualifying the Trust's shares for sale in various states, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Trust.
8. Services to Other Companies or Accounts
The Trust understands that the Advisor now acts and will continue to act as investment advisor to other investment companies and may act in the future as investment advisor to other investment companies or portfolios, and the Trust has no objection to the Advisor so acting, provided that whenever the Trust and one or more other portfolios of or investment companies advised by the Advisor have available funds for investment, investments suitable and appropriate for each will be allocated in a manner believed to be equitable to each entity. The Trust recognizes that in some cases this procedure may adversely affect the size of the position obtainable for the Trust. In addition, the Trust understands that the persons employed by the Advisor to assist in the performance of the Advisor's duties under this Agreement will not devote their full time to such service and nothing contained herein shall be deemed to limit or restrict the right of the Advisor or any affiliate of the Advisor to engage in and devote time and attention to other businesses or to render services of whatever kind or nature.
9. Use of the Word "Gabelli"
It is understood and agreed that the word "Gabelli" is the Advisor's property for copyright and other purposes. The Trust further agrees that the word "Gabelli" in its name is derived from the name of Mario J. Gabelli and such name may freely be used by the Advisor for other investment companies, entities or products. The Trust further agrees that, in the event that the Advisor shall cease to act as an investment advisor to the Trust, the Trust shall promptly take all necessary and appropriate action to change its name to one that does not include the word "Gabelli"; provided, however, that the Trust may continue to use such name if the Advisor consents in writing to such use.
10. Term of Agreement
This Agreement shall become effective on the date hereof and shall continue in effect for two years and thereafter shall continue for successive annual periods, provided such continuance is specifically approved at least annually by (i) the Trust's Board of Directors or (ii) a vote of a "majority"" (as defined in the 1940 Act) of the Trust's outstanding voting securities, provided that in either event the continuance is also approved by a majority of the Board of Directors who are not "interested persons" (as defined in the 1940 act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. This Agreement is terminable, without penalty, on 60 days' written notice, by the Trust's Board of Directors, by vote of holders of a majority of the Trust's shares, or by the Advisor. This Agreement will also terminate automatically in the event of its assignment (as defined in the 1940 Act and the rules thereunder).
If the foregoing is in accordance with your understanding, kindly indicate your acceptance of this Agreement by signing and returning the enclosed copy.
Very truly yours,
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
By:/s/ Bruce Alpert Name: Bruce N. Alpert Title: Treasurer |
Agreed to and Accepted:
GABELLI FUNDS, INC.
By:/s/ Stephen Bondi
Name: Stephen Bondi
Title: Vice President
of Finance
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EXHIBIT (n)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of this registration statement on Form N-2 (the "Registration Statement") of our report dated February 9, 1995, relating to the financial statements and financial highlights appearing in the December 31, 1994 Annual Report to Shareholders of The Gabelli Global Multimedia Trust Inc., which is also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Experts" in the prospectus.
/s/ Price Waterhouse LLP Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 June 19, 1995 |
EXHIBIT (p)
PURCHASE AGREEMENT
The Gabelli Global Multimedia Trust Inc., a corporation organized under the laws of the State of Maryland (the "Fund"), and The Gabelli Equity Trust Inc. (the "Equity Trust"), a corporation organized under the laws of the State of Maryland, hereby agree as follows:
1. The Fund offers to the Equity Trust and the Equity Trust hereby purchases from the Fund 10,000 shares of common stock, par value $.001 per share, of the Fund (the "Shares") at a price of $10 per Share. The Equity Trust hereby acknowledges that it has been advised that the Shares, which are not represented by certificates, have been recorded for the account of the Equity Trust in the records of the Fund's transfer agent and the Fund hereby acknowledges receipt from the Equity Trust of $100,000 in full payment for the Shares.
2. The Equity Trust represents and warrants to the Fund that the Shares are being acquired for investment purposes and not for the purpose of distribution.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 7th day of April 1994.
THE GABELLI GLOBAL MULTIMEDIA
TRUST INC.
Attest: By: /s/ Bruce Alpert
Name: Bruce N. Alpert
/s/ Lisa Cafaro Title: Treasurer
Attest: THE GABELLI EQUITY TRUST INC.
/s/ Ludmila Pompadur
By: /s/ Joshua Fenton
Name: Joshua Fenton
Title: Vice President
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