<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 1995
SECURITIES ACT FILE NO. 33-62323
INVESTMENT COMPANY ACT FILE NO. 811-4700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
/X/ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/ PRE-EFFECTIVE AMENDMENT NO. 1
/ / POST-EFFECTIVE AMENDMENT NO.
/X/ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/X/ AMENDMENT NO. 16
------------------------
THE GABELLI EQUITY 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 EQUITY 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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MAXIMUM AMOUNT OF
TITLE OF SECURITIES AGGREGATE REGISTRATION
BEING REGISTERED OFFERING PRICE FEE**
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<S> <C> <C>
Shares of Common Stock, par value $.001 per share............... $119,451,048 $41,190.02
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
* $50,823.05 previously paid.
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.
- --------------------------------------------------------------------------------
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<PAGE> 2
THE GABELLI EQUITY TRUST INC.
FORM N-2
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- ------------------------------------------ ------------------------------------------
<C> <S> <C>
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
14. Cover Page................................ Front Cover Page
15. Table of Contents......................... Front Cover Page
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
</TABLE>
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.
<PAGE> 3
PROSPECTUS
RIGHTS FOR 14,931,381 SHARES
THE GABELLI EQUITY TRUST INC.
COMMON STOCK
------------------------
The Gabelli Equity Trust Inc. (the "Fund") is issuing to its stockholders
of record ("Record Date Stockholders") as of the close of business on October
19, 1995 rights ("Rights") entitling the holders thereof to subscribe for an
aggregate of 14,931,381 shares (the "Shares") of the Fund's Common Stock (the
"Offer") at the rate of one share of Common Stock for each six 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. Fractional Shares will not be issued upon the
exercise of Rights. Accordingly, Shares may be purchased only pursuant to the
exercise of Rights in integral multiples of six. The number of Rights to be
issued to a Record Date Stockholder will be rounded up to the nearest number of
Rights evenly divisible by six. In the case of shares of Common Stock held of
record by Cede & Co., Inc. ("Cede"), as nominee for The Depository Trust
Company, or any other depository or nominee, the number of Rights issued to Cede
or such other depository or nominee will be adjusted to permit rounding up (to
the nearest number of Rights evenly divisible by six) of the Rights to be
received by beneficial owners for whom it is the holder of record only if Cede
or such other depository or nominee provides to the Fund on or before the close
of business on November 7, 1995 written representation of the number of Rights
required for such rounding. 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 $8.00.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON NOVEMBER 21, 1995
unless extended as described herein (the "Expiration Date"). Stockholder
inquiries should be directed to the Subscription Agent, State Street Bank and
Trust Company, at (800) 336-6983 or (617) 328-5000.
The Fund is a closed-end non-diversified management investment company. Its
investment objective is long-term growth of capital, primarily through a
portfolio of equity securities selected by Gabelli Funds, Inc., the investment
adviser to the Fund. 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 August 18, 1995. The net asset value per share of Common Stock
at the close of business on August 18, 1995 and October 12, 1995 was $10.45 and
$10.53, respectively, and the last reported sale price of a share of the Fund's
Common Stock on such Exchange on those dates was $9.875 and $9.375,
respectively. The Fund's Common Stock trades under the symbol "GAB" on the New
York Stock Exchange.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY SECURITIES
COMMISSION OR REGULATORY AUTHORITY IN CANADA NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY
SECURITIES COMMISSION OR REGULATORY AUTHORITY IN CANADA PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
SUBSCRIPTION PRICE SALES LOAD PROCEEDS TO FUND(1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Per Share.......................... $8.00 None $8.00
- -----------------------------------------------------------------------------------------------------------
Total.............................. $119,451,048 None $119,451,048
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deduction of offering expenses incurred by the Fund, estimated at
$574,000.
------------------------
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
$20 million. Mr. Mario J. Gabelli may also purchase additional Shares with an
aggregate Subscription Price of up to $20 million 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
October 13, 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 29 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.
------------------------
October 13, 1995
<PAGE> 4
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 Equity Trust Inc. (the "Fund") is issuing to stockholders of
record ("Record Date Stockholders") as of the close of business on October 19,
1995 (the "Record Date") rights ("Rights") to subscribe for an aggregate of
14,931,381 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 number of Rights to be issued to a
Record Date Stockholder will be rounded up to the nearest number of Rights
evenly divisible by six. Accordingly, no fractional Shares will be issued. In
the case of shares held of record by Cede & Co., Inc. ("Cede"), as nominee for
The Depository Trust Company ("DTC"), or by any other depository or nominee, the
number of Rights issued to Cede or such other depository or nominee will be
adjusted to permit rounding up (to the nearest number of Rights evenly divisible
by six) of the Rights to be received by beneficial owners for whom it is the
holder of record only if Cede or such other depository or nominee provides to
the Fund on or before the close of business on November 7, 1995 written
representation of the number of Rights required for such rounding. The Rights
entitle the holder to acquire at the Subscription Price (as hereinafter defined)
one Share for each six Rights held. Rights may be exercised at any time during
the period (the "Subscription Period"), which commences on October 19, 1995 and
ends at 5:00 p.m., New York time on November 21, 1995, unless extended by the
Fund to a date not later than December 5, 1995 (the "Expiration Date"). The
right to acquire during the Subscription Period at the Subscription Price one
additional Share for each six 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 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, nominee for DTC, 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 $8.00.
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 November 20, 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
2
<PAGE> 5
timely manner, it will use its best efforts to sell the Rights on the New York
Stock Exchange, or if a better price for the Rights can be obtained on another
market, then on such other market. 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 Rights. 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stockholders' inquiries should be directed to:
State Street Bank and Trust Company
(800) 336-6983 or (617) 328-5000
- --------------------------------------------------------------------------------
IMPORTANT DATES TO REMEMBER
<TABLE>
<CAPTION>
EVENT DATE
- ------------------------------------------------------------------------- -----------------
<S> <C>
Record Date.............................................................. October 19, 1995
Subscription Period...................................................... October 19, 1995*
through
November 21, 1995
Expiration of the Offer.................................................. November 21, 1995*
Payment for Guarantees of Delivery Due................................... November 27, 1995*
Confirmation to Participants............................................. December 6, 1995*
</TABLE>
- ---------------
* Unless the Offer is extended to a date not later than December 5, 1995.
INFORMATION REGARDING THE FUND
The Fund has been engaged in business as a closed-end non-diversified
management investment company since August 21, 1986. The Fund's investment
objective is long-term growth of capital, primarily through investment in a
portfolio of equity securities selected by Gabelli Funds, Inc., the investment
adviser to the Fund. Equity securities in which the Fund may invest consist of
common stock, preferred stock, convertible or exchangeable securities and
warrants and rights to purchase such securities. 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 year ended December 31, 1994 was 214,844
shares. As of July 31, 1995, the net assets of the Fund were approximately
$926.8 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 July 31,
1995, managed total assets of approximately $9.0 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."
3
<PAGE> 6
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
$8.00 is 23% below the Fund's then net asset value
per share, the Fund's net asset value per share
(before deduction of expenses incurred in
connection with the Offer) would be reduced by
approximately $0.35 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. Although
the Fund's shares have generally traded on the New
York Stock Exchange at a premium over the past
three years, the Fund's shares have since inception
generally traded 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 2/3%
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
4
<PAGE> 7
their shares at a premium above the prevailing
market price. See "Common Stock -- Certain
Provisions of the Articles of Incorporation and
By-Laws."
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."
Foreign Securities......... The Fund may invest up to 35% of its total assets
in foreign securities. Investing in securities of
foreign companies and foreign governments, which
generally are denominated in foreign currencies,
may involve certain risks 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.
Distributions.............. The Fund's policy is to make quarterly
distributions of $0.25 per share at the end of each
of the first three calendar quarters of each year.
The Fund's distribution in December for each
calendar year is an adjusting distribution (equal
to the sum of 2.5% of the net asset value of the
Fund as of the last day of the four preceding
calendar quarters less the aggregate distributions
of $0.75 per share made for the most recent three
calendar quarters) in order to meet the Fund's 10%
pay-out goal as well as the distribution
requirements of the Internal Revenue Code of 1986,
as amended (the "Code"). During 1995, for the
purpose of providing investors the benefit of
capital gains tax treatment for the final dividend
of the year to the fullest extent, the Directors
declared a $.50 distribution payable in the fourth
quarter to pay its long-term capital gains once for
the year, thus, in effect combining the third and
fourth quarter distributions. In connection with
the 1940 Act requirement that long-term capital
gains be distributed only once per year and the
Board of Directors' desire to pay dividends on a
quarterly basis, authority was granted for the Fund
to file an exemptive request with the Commission to
allow the Fund to distribute long-term capital
gains more frequently than once a year. If the
exemption is granted, the Directors expect to
declare quarterly distributions in 1996. Otherwise,
the Fund plans to pay a $0.25 per share
distribution in each of the first two quarters of
1996, and declare an adjusting dividend to meet the
Fund's 10% distribution policy as well as
distribution requirements under the Code. If, for
any calendar year, the total distributions exceed
net investment income and net realized capital
gains, the excess will generally be treated as a
tax-
5
<PAGE> 8
free return of capital (up to the amount of the
stockholder's tax basis in his shares) which can be
made payable by the Fund either in the form of a
cash distribution or a stock dividend. The amount
treated as a tax-free return of capital will reduce
a stockholder's adjusted basis in his shares,
thereby increasing his potential gain or reducing
his potential loss on the sale of his shares. Such
excess, however, will be treated as ordinary
dividend income up to the amount of the Fund's
current and accumulated earnings and profits. Such
distribution policy may, under certain
circumstances, have certain adverse consequences to
the Fund and its stockholders. See "Dividends and
Distributions; Automatic Dividend Reinvestment
Voluntary and Cash Purchase Plan" for a discussion
of the Fund's distribution policy and the
circumstances under which such consequences may
occur.
The Fund reserves the right, but does not currently
intend, to retain for reinvestment net long-term
capital gains in excess of net short-term capital
losses. Such amounts will be taxed to shareholders
as long-term capital gains and shareholders will be
able to claim their proportionate share of the
federal income taxes paid by the Fund on such gains
as a credit against their own federal income tax
liabilities, and will be entitled to increase the
adjusted tax basis of their Fund shares by the
difference between their undistributed capital
gains and their tax credit. See "Taxation."
6
<PAGE> 9
FEE TABLE
The following table sets forth certain fees and expenses of the Fund.
<TABLE>
<S> <C>
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 Expenses..................................................................... .3%
Total Annual Expenses................................................................ 1.3%
</TABLE>
- ---------------
* 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.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming a 5% annual return............................... $14* $41 $71 $157
</TABLE>
- ---------------
* Includes a $.75 automatic dividend reinvestment fee; without such fee,
expenses in year one would be $13.
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.
7
<PAGE> 10
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 each of the periods, other than the six-month period
ended June 30, 1995, 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 EACH PERIOD
<TABLE>
<CAPTION>
1986* 1987 1988 1989 1990 1991 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period..... $ 9.35 $ 9.40 $ 9.82 $ 11.22 $ 13.34 $ 10.49 $ 10.61
-------- -------- -------- -------- -------- -------- --------
Net investment income.................... 0.10 0.16 0.14 0.38 0.44 0.27 0.19
Net realized and unrealized gain/(loss)
on investments.......................... (0.04) 0.89 2.32+ 3.26+ (2.11) 1.37 1.21
Provision for income taxes............... -- -- (0.09) (0.21) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total from investment operations......... 0.06 1.05 2.37 3.43 (1.67) 1.64 1.40
Increase/(decrease) in net asset value
from Fund share transactions............ -- 0.01 0.02 -- -- (0.42) (0.36)
Offering expenses charged to capital
surplus................................. (0.01) -- -- -- -- (0.01) (0.01)
Distributions to stockholders from:
Net investment income................... -- (0.19) (0.21) (0.29) (0.53) (0.27) (0.19)
Distributions in excess of net
investment income..................... -- -- -- -- -- -- --
Net realized gains...................... -- (0.45) (0.78) (1.02) (0.23) (0.14) (0.38)
Distributions in excess of net realized
gains................................. -- -- -- -- -- -- --
Paid-in capital......................... -- -- -- -- (0.42) (0.68) (0.49)
-------- -------- -------- -------- -------- -------- --------
Total distributions...................... 0.00 (0.64) (0.99) (1.31) (1.18) (1.09) (1.06)
Net asset value, end of period........... $ 9.40 $ 9.82 $ 11.22 $ 13.34 $ 10.49 $ 10.61 $ 10.58
======== ======== ======== ======== ======== ======== ========
Market value, end of period.............. $ 8.625 $ 7.625 $ 9.875 $ 14.000 $ 10.500 $ 10.125 $ 10.250
======== ======== ======== ======== ======== ======== ========
Total Investment Return**+............... (13.8)% (0.9)% 37.8% 59.0% (16.7)% 10.9% 15.9%
======== ======== ======== ======== ======== ======== ========
Net Asset Value Total Return***.......... 0.5% 17.1% 21.5% 33.2% (12.7)% 16.2% 14.2%
======== ======== ======== ======== ======== ======== ========
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's)..... $413,760 $429,490 $484,792 $589,990 $479,863 $595,151 $725,263
Net investment income................... 2.89%++ 1.50% 1.36% 2.82% 3.84% 2.34% 1.88%
Operating expenses...................... 1.24%++ 1.24% 1.25% 1.18% 1.18% 1.24% 1.22%
Portfolio turnover rate.................. 58.8% 96.5% 51.5% 28.1% 15.5% 11.2% 12.5%
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1995
1993(a) 1994(a) (UNAUDITED)
-------- -------- -----------
<S> <<C> <C> <C>
Operating performance:
Net asset value, beginning of period..... $ 10.58 $ 11.23 $ 9.46
-------- -------- --------
Net investment income.................... 0.14 0.14 0.07
Net realized and unrealized gain/(loss)
on investments.......................... 2.13 (0.08) 0.89
Provision for income taxes............... -- -- --
-------- -------- --------
Total from investment operations......... 2.27 0.06 0.96
Increase/(decrease) in net asset value
from Fund share transactions............ (0.50) -- --
Offering expenses charged to capital
surplus................................. (0.01) -- --
Distributions to stockholders from:
Net investment income................... (0.11) (0.14)(b) (0.07)
Distributions in excess of net
investment income..................... -- -- (0.43)
Net realized gains...................... (0.77) (0.37) --
Distributions in excess of net realized
gains................................. (0.02) -- --
Paid-in capital......................... (0.21) (1.32)(b) --
-------- -------- --------
Total distributions...................... (1.11) (1.83) (0.50)
Net asset value, end of period........... $ 11.23 $ 9.46 $ 9.92
======== ======== ========
Market value, end of period.............. $ 12.125 $ 9.625 $ 10.000
======== ======== ========
Total Investment Return**+............... 36.5% (5.1)% 9.3%
======== ======== ========
Net Asset Value Total Return***.......... 22.4% 0.5% 10.3%
======== ======== ========
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's)..... $937,773 $825,193 $ 882,888
Net investment income................... 1.25% 1.29% 1.46%++
Operating expenses...................... 1.20% 1.19% 1.25%++
Portfolio turnover rate.................. 24.4% 22.2% 8.3%
</TABLE>
- ---------------
* The Fund commenced operations on August 21, 1986.
** Based on market value per share, adjusted for reinvestment of distributions
and taxes, including distribution of rights, assuming full subscription by
stockholder.
*** Based on net asset value per share, adjusted for reinvestment of
distributions and taxes, including distribution of rights, assuming full
subscription by stockholder.
+ Before provision for income taxes.
++ Annualized.
(a) Per share amounts have been calculated using the monthly average shares
outstanding method.
(b) A distribution equivalent to $0.75 per share for The Gabelli Global
Multimedia Trust Inc. spin-off from net investment income, realized
short-term gains, and paid-in capital were $0.064, $0.031 and $0.655,
respectively.
8
<PAGE> 11
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 full share of Common Stock owned on the Record Date. The Rights entitle the
holder to acquire at the Subscription Price one Share for each six Rights held.
The number of Rights to be issued to a Record Date Stockholder will be rounded
up to the nearest number of Rights evenly divisible by six. Accordingly, no
fractional Shares will be issued. In the case of shares held of record by Cede,
as nominee for DTC, or by any other depository or nominee, the number of Rights
issued to Cede or such other depository or nominee will be adjusted to permit
rounding up (to the nearest number of Rights evenly divisible by six) of the
Rights to be received by beneficial owners for whom it is the holder of record
only if Cede or such other depository or nominee provides to the Fund on or
before the close of business on November 7, 1995 written representation of the
number of Rights required for such rounding. Rights may be exercised at any time
during the Subscription Period, which commences on October 19, 1995 and ends at
5:00 p.m., New York time, on November 21, 1995, unless extended by the Fund to a
date not later than December 5, 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 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 $20 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 with an
aggregate Subscription Price of up to $20 million. Such over-subscriptions by
the Investment Adviser and Mr. Gabelli may disproportionately increase their
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
9
<PAGE> 12
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.
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 Board of Directors determined to proceed with the offer of
transferable Rights after having considered the dilutive effect of the Offer on
stockholders who are unwilling or unable to fully exercise their Rights, as well
as the alternatives of a secondary offering and the issuance of non-transferable
Rights. In arriving at such a conclusion, the Board took into account the
likelihood that the expenses of an underwritten secondary offering would be
greater than the expenses of the Offer, that there was no assurance that, as
required by the 1940 Act, the Common Stock would be sold at a price equal to or
greater than the Fund's net asset value per share in a secondary offering, that
the Fund's stockholders have previously approved rights offerings generally and
that the distribution to stockholders of transferable Rights will afford
non-subscribing stockholders the potential of receiving a cash payment upon sale
of such Rights, receipt of which may offset in part the possible dilution of
their interests in the Fund. The Board of Directors also considered the
performance of the Fund following three similar rights offerings conducted by
the Fund in the past five years as described below and the fact that such rights
offerings were over-subscribed. 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.
In October 1991, September 1992 and July 1993, the Fund issued transferable
rights to stockholders entitling the holders thereof to subscribe for an
aggregate of 7,882,562 shares, 9,563,615 shares and 11,654,962 shares,
respectively, of the Fund's Common Stock at the rate of one share of Common
Stock for each six rights held and entitling stockholders to subscribe for any
shares not acquired by exercise of primary subscription rights. The subscription
price in each of the offerings was $8.00 per share, representing a discount to
the prevailing net asset value of the Fund's Common Stock at the time of the
offer of approximately 27.5% in the 1991 offering, 22.5% in the 1992 offering
and 29.9% in the 1993 offering and a discount from market value of approximately
25.6% in each offering. Each of the rights offerings was substantially
oversubscribed, resulting in the issuance of the maximum number of shares being
offered. The Fund raised $63,060,496 in the 1991 offering, $76,508,920 in the
1992 offering and $93,239,696 in the 1993 offering, while subscriptions remitted
to the Fund totaled more than $136,000,000, $164,000,000 and $176,000,000,
respectively. As a percentage of the shares outstanding on the record dates for
the offering, more than 91% participated in the 1991 offering, more than 92%
participated in the 1992 offering and more than 93% participated in the 1993
offering. The Fund's net asset value per share immediately following the 1993
rights offering was reduced by approximately $0.52 per share. The offering,
however, also had an impact on the Fund's annualized expense ratio, decreasing
the ratio to 1.20% from 1.22%.
The Fund's Investment Adviser and The Shareholder Services Group, Inc., 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 $1,194,510 and $23,890, respectively. Two of the
10
<PAGE> 13
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. While the Fund's Board of Directors has made this determination
with respect to the Offer, the Fund's stockholders approved rights offerings
generally at the 1993 Annual Meeting of 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:
<TABLE>
<C> <C> <S>
Holder's Record Date Position
Total Record Date Position X Excess Shares Remaining of all Over-Subscribers
</TABLE>
The Fund will not offer or sell any Shares which are not subscribed for
under the Primary Subscription or the Over-Subscription Privilege.
11
<PAGE> 14
THE SUBSCRIPTION PRICE
The Subscription Price for the Shares to be issued pursuant to the Rights
will be $8.00.
The Fund announced the Offer after the close of trading on the New York
Stock Exchange on August 18, 1995. The net asset value per share of Common Stock
at the close of business on August 18, 1995 and October 12, 1995 was $10.45 and
$10.53, respectively. The last reported sale price of a share of the Fund's
Common Stock on the Exchange on those dates was $9.875 and $9.375, respectively,
representing a 5.5% discount and a 10.97% 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 November 20, 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 up to $.03 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. 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, or if a better
price can be obtained for the Rights on another market, on such other market.
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 (in a number evenly divisible by six) 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 (in a number
evenly divisible by six) 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.
12
<PAGE> 15
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 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 November 21, 1995,
unless extended by the Fund to a date not later than December 5, 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 an amount estimated to be $290,000, comprised of the fee for its
services and the reimbursement for certain 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.
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 Department at the following address:
If By Mail:
P.O. Box 9061
Boston, Massachusetts 02205-8686
If By Hand:
<TABLE>
<S> <C> <C>
225 Franklin Street or 61 Broadway
Concourse Level Concourse Level
Boston, Massachusetts 02110 New York, New York 10006
</TABLE>
13
<PAGE> 16
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 third
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; telephone number to confirm receipt is (617)
774-4511).
(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 $8.00 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. EXCEPT AS OTHERWISE SET FORTH BELOW, A PAYMENT PURSUANT TO THIS
METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A
BANK LOCATED IN THE CONTINENTAL UNITED STATES, MUST BE PAYABLE TO THE
GABELLI EQUITY 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
14
<PAGE> 17
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
third 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 continental United States of America and
payable to The Gabelli Equity Trust Inc. except that holders of Rights who are
residents of the Province of Ontario may also make payment in U.S. dollars by
money order or check drawn on a bank located in the province of Ontario.
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
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<PAGE> 18
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, subject to compliance with all applicable regulatory requirements,
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, subject to compliance with all applicable regulatory requirements,
transfer either the Rights or the Shares to be acquired upon the exercise of
such Rights (i) through a dealer registered in Ontario that effects the
transaction through the facilities of the New York Stock Exchange or (ii)
through certain other means as provided under and in compliance with Ontario
securities laws.
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 that are
subsequently exercised or disposed of, if the fair market value of the Rights on
the date of distribution is equal to 15 percent or more of the fair market value
of the Common Stock, the adjusted basis in the Rights exercised or disposed of
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 (the "General
Rule"). In these circumstances, the adjusted basis in the Shares acquired
through exercise of the Rights is the Subscription Price plus the adjusted basis
in the Rights exercised. If the fair market value of the
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<PAGE> 19
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 to apply
the General Rule, the adjusted basis in the Rights exercised or disposed of is
zero, and the adjusted basis in the newly acquired Common Stock is the
Subscription Price. An election to apply the General Rule should be made in the
form of a statement attached to the stockholder's tax 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 capital 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 by a Record Date Stockholder
to which they were issued, 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 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.
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<PAGE> 20
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 $8.00 is 23% below
the Fund's then net asset value per share, the Fund's net asset value per share
(before deduction of expenses incurred in connection with the Offer) would be
reduced by approximately $0.35 per share.
THE FUND
The Fund, incorporated in Maryland on May 20, 1986, 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
"GAB."
The Fund's primary investment objective is long-term growth of capital.
Income is a secondary objective of the Fund. The Fund seeks to achieve its
objective by investing primarily in a portfolio of equity securities consisting
of common stock, preferred stock, convertible or exchangeable securities and
warrants and rights to purchase such securities, selected by the Investment
Adviser. Under normal market conditions, the Fund will invest at least 65% of
its total assets in equity securities.
USE OF PROCEEDS
The net proceeds of the Offer, assuming all Shares offered hereby are sold,
are estimated to be approximately $118,877,048, after deducting expenses payable
by the Fund estimated at approximately $574,000. 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.
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 prospective purchaser should take
into account his investment objectives as well as his other investments when
considering the purchase of shares of the Fund.
NON-DIVERSIFIED STATUS
The Fund is classified as a "non-diversified" investment company under the
Act, which means the Fund is not limited by the 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 continue to conduct its operations
so as to qualify
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<PAGE> 21
as a "regulated investment company" for purposes of the Code, which will relieve
the Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. 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 the
Fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities of
a single issuer and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer. The Fund's investments 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.
TEMPORARY INVESTMENTS
During temporary defensive periods the Fund may invest in U.S. Government
Securities and in money market mutual funds that invest in those securities.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the Government National Mortgage Association, are supported by the "full
faith and credit" of the U.S. Government; others, such as those of the
Export-Import Bank of the U.S., are supported by the right of the issuer to
borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as those
of the Student Loan Marketing Association, are supported only by the credit of
the instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law.
REPURCHASE AGREEMENTS
During temporary defensive periods or for cash management purposes, the
Fund may engage in repurchase agreement transactions involving money market
instruments with banks, registered broker-dealers and government securities
dealers approved by the Fund's 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 any
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 the Fund's 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 Fund's 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 the Fund 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.
FOREIGN SECURITIES
The Fund may invest up to 35% of its total assets in foreign securities.
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 revaluations 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
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<PAGE> 22
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 also may 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.
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 ("S&P") or "Caa" or lower by Moody's Investors Service, Inc.
("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."
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 Policies -- 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 over the past three-year period generally 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."
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<PAGE> 23
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
The primary investment objective of the Fund is long-term growth of
capital. Income is a secondary objective of the Fund. The Fund attempts to
achieve its objectives by investing primarily in a portfolio of equity
securities consisting of common stock, preferred stock, convertible or
exchangeable securities and warrants and rights to purchase such securities,
selected by the Investment Adviser. The Investment Adviser selects investments
on the basis of fundamental value and, accordingly, the Fund typically invests
in the securities of companies that are believed by the Investment Adviser to be
priced lower than justified in relation to their underlying assets. Other
important factors in the selection of investments include favorable
price/earnings and debt/equity ratios and strong management.
The Fund's secondary investment objective is income, which the Fund seeks
to achieve, in part, by investing up to 10% of its total assets in a portfolio
consisting primarily of high-yielding, fixed-income securities, such as
corporate bonds, debentures, notes, convertible securities, preferred stocks and
domestic and foreign government obligations. Generally, debt securities
purchased by the Fund will be 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 will be nonrated 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's investment objectives of long-term growth of capital and income
are fundamental policies and may not be changed without the authorization of the
holders of a majority of the Fund's outstanding voting securities. As used in
this Prospectus, a "majority of the Fund's outstanding voting securities" means
the lesser of (i) 67% of the shares represented at a meeting at which more than
50% of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares.
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. The Fund may invest up to 35% of its total assets in
foreign securities. Among the foreign securities in which the Fund may invest
are those issued by companies located in developing countries,
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<PAGE> 24
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. See "Investment
Objectives and Policies -- Investment Practices" in the SAI.
Temporary Investments. Although under normal market conditions at least
65% of the Fund's assets will consist of equity securities, 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. During temporary defensive periods or for cash
management purposes, 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. See "Investment Objectives and Policies -- Investment Practices" in
the SAI.
Other Investments. The Fund is permitted to invest in special situations,
options and futures contracts. 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 Pohl, one of its Directors, is a
resident of Germany, and substantially all of his assets are located outside of
the United States. Mr. Pohl 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 July 31, 1995, is a
registered investment adviser to fourteen management companies with aggregate
net assets of $4.0 billion. GAMCO Investors, Inc., a subsidiary of the
Investment Adviser, acts as investment adviser for individuals, pension trusts,
profit sharing trusts and endowments, having aggregate assets in excess of $4.9
billion under its management as of July 31, 1995. Mr. Mario J. Gabelli may be
deemed a "controlling person" of the Investment Adviser 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
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<PAGE> 25
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 The Shareholder Services Group, Inc. as Sub-Administrator to provide
certain administrative services necessary for the Fund's operations other than
those performed by the Investment Adviser under its Advisory Agreement. These
services include, but are not limited to, supplying the Investment Adviser with
office facilities, statistical and research data, data processing services,
clerical, accounting and bookkeeping services, internal audit and legal
services, the preparation and distribution of materials for meeting of the
Fund's Board of Directors, compliance testing of the Fund's activities and the
preparation of stockholder reports, tax returns and other regulatory filings.
For such services by the SubAdministrator, the Investment Adviser pays the
Sub-Administrator a monthly fee based upon the aggregate average daily net
assets of certain funds advised by the Investment Adviser, including the Fund,
as follows: .10% of average daily net assets up to $1 billion, .08% of average
daily net assets between $1 billion to $1.5 billion, .03% of average daily net
assets between $1.5 billion to $3 billion and .02% of average daily assets over
$3 billion. The Investment Adviser also reimburses the Sub-Administrator for
certain out-of-pocket expenses incurred by the Sub-Administrator as a result of
its duties under the sub-administration agreement. Either the Investment Adviser
or the Sub-Administrator may terminate the sub-administration agreement on 60
days' written notice. The Sub-Administrator has its principal office located at
One Exchange Place, 53 State Street, Boston, Massachusetts 02109.
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 stockholder 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.
23
<PAGE> 26
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
10% Distribution Policy. The Fund's policy is to make quarterly
distributions of $0.25 per share at the end of each of the first three calendar
quarters of each year. The Fund's distribution in December for each calendar
year is an adjusting distribution (equal to the sum of 2.5% of the net asset
value of the Fund as of the last day of the four preceding calendar quarters
less the aggregate distributions of $0.75 per share made for the most recent
three calendar quarters) in order to meet the Fund's 10% pay-out goal as well as
the Code's distribution requirements. During 1995, for the purpose of providing
investors the benefit of capital gains tax treatment for the final dividend of
the year to the fullest extent, the Directors declared a $.50 distribution
payable in the fourth quarter to pay its long-term capital gains once for the
year, thus, in effect combining the third and fourth quarter distributions. In
connection with the 1940 Act requirement that long-term capital gains be
distributed only once per year and the Board of Directors' desire to pay
dividends on a quarterly basis, authority was granted for the Fund to file an
exemptive request with the Commission to allow the Fund to distribute long-term
capital gains more frequently than once a year. If the exemption is granted, the
Directors expect to declare quarterly distributions in 1996. Otherwise, the Fund
plans to pay a $0.25 per share distribution in each of the first two quarters of
1996, and declare an adjusting dividend to meet the Fund's 10% distribution
policy as well as distribution requirements under the Code.
The Fund reserves the right, but does not currently intend, to retain for
reinvestment and pay federal income taxes on the excess of its net realized
long-term capital gains over its net realized short-term capital losses, if any.
If, for any calendar year, the total distributions exceed net investment income
and net realized capital gains, the excess will generally be treated as a
tax-free return of capital (up to the amount of the stockholder's tax basis in
his shares) which can be made payable by the Fund either in the form of a cash
distribution or a stock dividend. The amount treated as a tax-free return of
capital will reduce a stockholder's adjusted basis in his shares, thereby
increasing his potential gain or reducing his potential loss on the sale of his
shares. Such excess, however, will be treated as ordinary dividend income up to
the amount of the Fund's current and accumulated earnings and profits.
In the event the Fund distributes amounts in excess of its net investment
income and net realized capital gains, such distributions will decrease the
Fund's total assets and, therefore, have the likely effect of increasing the
Fund's expense ratio. In addition, in order to make such distributions, the Fund
may have to sell a portion of its investment portfolio at a time when
independent investment judgment might not dictate such action. Such sales, if
they involve assets held for less than three months, could also adversely affect
the Fund's status as a regulated investment company since, in order for the Fund
to qualify as a regulated investment company, for each taxable year, less than
30% of the Fund's gross income must be derived from gains realized on the sale
or other disposition of stocks or securities held for less than three months.
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
24
<PAGE> 27
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. 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
25
<PAGE> 28
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
May 20, 1986, 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
September 30, 1995.
<TABLE>
<CAPTION>
AMOUNT HELD BY FUND FOR
AMOUNT AUTHORIZED ITS OWN ACCOUNT AMOUNT OUTSTANDING
- ------------------- ----------------------- ------------------
<S> <C> <C>
200,000,000 shares 0 shares 88,988,289 shares
</TABLE>
The Fund's shares are listed and traded on the New York Stock Exchange
under the symbol "GAB." The average weekly trading volume of the Common Stock on
the New York Stock Exchange during the year ended December 31, 1994 was 214,284
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.
<TABLE>
<CAPTION>
PREMIUM OR
NET ASSET DISCOUNT
MARKET PRICE(1) VALUE(2) AS % OF NAV
----------------- --------------- ---------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
- ----------------------------------------- ------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
March 31, 1993........................... 11.50 10.125 10.92 10.60 5.31 -4.48
June 30, 1993............................ 11.25 10.75 10.99 11.13 2.37 -3.41
September 30, 1993....................... 12.00 10.50 11.41 11.49 5.17 -8.46
December 31, 1993........................ 12.50 11.75 11.67 11.02 7.11 6.62
March 31, 1994........................... 12.25 10.50 11.44 10.22 7.08 -1.50
June 30, 1994............................ 11.375 10.375 10.84 10.54 4.94 -1.57
September 30, 1994....................... 11.75 10.875 11.00 10.72 6.82 1.45
December 31, 1994........................ 11.25 9.125 10.02 9.34 12.28 -2.30
March 31, 1995........................... 10.25 9.375 9.83 9.42 4.27 -0.48
June 30, 1995............................ 10.00 9.625 10.04 9.81 -0.40 -1.89
September 30, 1995....................... 10.125 9.75 10.07 10.70 0.55 -8.88
------ ------ ----- ----- ----- -----
</TABLE>
- ---------------
(1) As reported on the New York Stock Exchange.
(2) Based on the Fund's computations.
26
<PAGE> 29
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.
Shares repurchased by the Fund will constitute authorized shares of the
Fund available for reissuance. 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.
During the period from October 21, 1987 through November 25, 1988, the Fund
repurchased an aggregate of 800,000 shares of its Common Stock at prices per
share ranging from $6.50 to $10.00 in transactions effected on the New York
Stock Exchange pursuant to authorization by the Fund's Board of Directors. Such
repurchases were effected at the then prevailing market price, and were not
financed with any borrowings.
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 over the past three-year period generally
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 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
27
<PAGE> 30
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 2/3% 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
Boston Safe Deposit and Trust Company ("Boston Safe"), located at One
Boston Place, Boston, Massachusetts 02108, serves as the custodian of the Fund's
assets pursuant to a custody agreement. Under the custody agreement, Boston Safe
holds the Fund's assets in compliance with the 1940 Act. For its custody
services, Boston Safe 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 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 from time to time also serves as
counsel to the Investment Adviser or its affiliates. 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.
28
<PAGE> 31
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies.................................................... 2
Investment Restrictions............................................................... 7
Management of the Fund................................................................ 8
Portfolio Transactions................................................................ 13
Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan...................... 14
Taxation.............................................................................. 15
Net Asset Value....................................................................... 17
Beneficial Owner...................................................................... 18
Financial Statements.................................................................. 18
</TABLE>
29
<PAGE> 32
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-1
<PAGE> 33
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.
A-2
<PAGE> 34
- ------------------------------------------------------
- ------------------------------------------------------
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 REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR THE FUND'S INVESTMENT ADVISERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS AS SET FORTH IN THE
PROSPECTUS OR IN THE AFFAIRS OF THE FUND SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary.................... 2
Fee Table............................. 7
Financial Highlights.................. 8
The Offer............................. 9
The Fund.............................. 18
Use of Proceeds....................... 18
Risk Factors and Special
Considerations...................... 18
Investment Objectives and Policies.... 21
Management of the Fund................ 22
Portfolio Transactions................ 24
Dividends and Distributions; Automatic
Dividend Reinvestment and Voluntary
Cash Purchase Plan.................. 24
Taxation.............................. 25
Common Stock.......................... 26
Custodian and Transfer, Dividend
Disbursing Agent and Registrar...... 28
Legal Matters......................... 28
Experts............................... 28
Further Information................... 29
Table of Contents of Statement of
Additional Information.............. 29
Appendix A............................ A-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
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THE GABELLI
EQUITY TRUST INC.
14,931,381 SHARES
OF COMMON STOCK
ISSUABLE UPON EXERCISE OF RIGHTS
TO SUBSCRIBE TO SUCH SHARES
------------------------
PROSPECTUS
------------------------
OCTOBER 13, 1995
------------------------------------------------------
------------------------------------------------------
<PAGE> 35
THE GABELLI EQUITY TRUST INC.
------------------------
STATEMENT OF ADDITIONAL INFORMATION
The Gabelli Equity Trust Inc. (the "Fund") is a non-diversified, closed-end
management investment company that seeks long-term growth of capital by
investing primarily in a portfolio of equity securities selected by Gabelli
Funds, Inc., the investment adviser to the Fund. 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 equity securities.
This Statement of Additional Information ("SAI") is not a prospectus, but
should be read in conjunction with the Prospectus for the Fund dated October 13,
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
<TABLE>
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PAGE
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<S> <C>
Investment Objectives and Policies...................................................... 2
Investment Restrictions................................................................. 7
Management of the Fund.................................................................. 8
Portfolio Transactions.................................................................. 13
Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan........................ 14
Taxation................................................................................ 15
Net Asset Value......................................................................... 17
Beneficial Owner........................................................................ 18
Financial Statements.................................................................... 18
</TABLE>
------------------------
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 October 13, 1995.
<PAGE> 36
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 equity securities. See "Investment
Objectives and Policies" in the Prospectus.
INVESTMENT PRACTICES
Special Situations. Although the Fund typically invests in the securities
of companies on the basis of their fundamental value, 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 equity securities, 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,
2
<PAGE> 37
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.
Within the Fund's limitation on the purchase of fixed-income securities,
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.
Fixed-income securities, including low-rated securities and comparable
unrated securities, frequently have call or buy-back features that permit their
issuers to call or repurchase the securities from their holders, such as the
Fund. If an issuer exercises these rights during periods of declining interest
rates, the Fund may have to replace the security with a lower yielding security,
thus resulting in a decreased return to the Fund.
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.
3
<PAGE> 38
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
4
<PAGE> 39
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.
5
<PAGE> 40
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
6
<PAGE> 41
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.
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. 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 or make short sales of
securities, 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
7
<PAGE> 42
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 10% 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.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND BUSINESS ADDRESS (AGE) POSITION WITH THE FUND PAST FIVE YEARS
- --------------------------------- ---------------------- --------------------------------------
<S> <C> <C>
Paul R. Ades (54)................ Director Partner in the law firm of Murov and
272 South Wellwood Avenue Ades. Director of one other registered
P.O. Box 504 investment company advised by the
Lindenhurst, New York 11757 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 advised
Massachusetts 01230 by the Investment Adviser.
</TABLE>
8
<PAGE> 43
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND BUSINESS ADDRESS (AGE) POSITION WITH THE FUND PAST FIVE YEARS
- --------------------------------- ---------------------- --------------------------------------
<S> <C> <C>
Bill Callaghan (51).............. Director President of Bill Callaghan Associates
225 West 39th Street Ltd., an executive search company.
New York, New York 10018 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 eight 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.
*Mario J. Gabelli (52)........... Chairman of the Board, Chairman of the Board, Chief Executive
One Corporate Center President and Chief Officer and Chief Investment Officer
Rye, New York 10580-1434 Investment Officer of the Investment Adviser; Chief
Investment Officer of GAMCO Investors
Inc.; Chairman of the Board and
Director of Lynch Corporation;
Director and Adviser of Gabelli
International Ltd. Director/Trustee of
eleven other registered investment
companies advised by the Investment
Adviser.
*Karl Otto Pohl (65)............. Director Partner of Sal. Oppenheim Jr. & Cie
One Corporate Center (private investment bank); President
Rye, New York 10580-1434 of the Deutsche Bundesbank and
Chairman of its Central Bank Council
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 all other
registered investment companies
advised by the Investment Adviser.
</TABLE>
9
<PAGE> 44
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND BUSINESS ADDRESS (AGE) POSITION WITH THE FUND PAST FIVE YEARS
- --------------------------------- ---------------------- --------------------------------------
<S> <C> <C>
Anthony R. Pustorino (69)........ Director Certified Public Accountant. Professor
121 Arleigh Road of Accounting, Pace University, since
Douglaston, New York 11363 1965. Director, President and
stockholder of Pustorino, Puglisi &
Co., P.C., certified public
accountants, from 1961 to 1990.
Director/Trustee of seven other
registered investment companies
advised by the Investment Adviser.
Salvatore J. Zizza (49).......... Director President and Chief Executive Officer
The Lehigh Group, Inc. 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.
Bruce N. Alpert (43)............. Vice President and Vice President and Chief Financial and
One Corporate Center Treasurer Administrative Officer of the
Rye, New York 10580-1434 investment advisory division of the
Investment Adviser since June 1988;
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.
James E. McKee (32).............. Secretary Vice President, General Counsel and
One Corporate Center Secretary of the Investment Adviser
Rye, New York 10580-1434 (since 1995) and Vice President and
General Counsel of GAMCO Investors,
Inc. (since 1993); Secretary of the
registered investment companies
advised by the Investment Adviser;
Staff attorney from 1989-1992 and a
branch chief from 1992-1993 of the
Securities and Exchange
Commission -- Northeast Regional
Office.
Marc Diagonale (29).............. Vice President Client services representative of
One Corporate Center Gabelli & Company, Inc. since March
Rye, New York 10580-1434 1993; masters of business
administration student at New York
University from September 1990 to May
1992; Vice President of The Gabelli
Global Multimedia Trust Inc.
</TABLE>
- ---------------
* "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. Pohl 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. Pohl
as an "interested person," the Fund is currently making such designation in
order to avoid the possibility that Mr. Pohl's independence would be
questioned.
10
<PAGE> 45
The Board of Directors of the Fund are divided into three classes, with a
class having a term of 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 $10,000 per year plus $1,000 per Directors'
meeting attended, together with each Director's actual out-of-pocket expenses
relating to attendance at such meetings. The aggregate remuneration paid by the
Fund to such Directors during fiscal year 1994 amounted to $115,466.66.
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 Global Multimedia Trust Inc. His
salary of $90,000 per annum is borne by both funds, of which $80,000 is paid by
the Fund.
The following table shows certain compensation information for the
Directors of the Fund and Mr. Marc Diagonale for the fiscal year ended December
31, 1994. Other than Mr. Diagonale, none of the Fund's executive officers and
Directors who are also officers or directors of the Investment Adviser received
any compensation from the Fund for such period.
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT TOTAL COMPENSATION
NAME OF DIRECTOR COMPENSATION BENEFITS ACCRUED AS ANNUAL BENEFITS FROM FUND AND
OR EXECUTIVE OFFICER FROM FUND PART OF FUND EXPENSES UPON RETIREMENT FUND COMPLEX+
- ------------------------- ----------------- ---------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Paul R. Ades............. $14,000 0 N/A $ 14,000
Dr. Thomas E. Bratter.... $14,000 0 N/A $ 14,000
Bill Callaghan........... $14,000 0 N/A $ 28,000
Felix J. Christiana...... $15,000 0 N/A $ 64,500
James P. Conn............ $14,000 0 N/A $ 30,000
Marc Diagonale++......... $88,002 0 N/A $ 99,552
Mario J. Gabelli+++...... 0 0 0 0
Karl Otto Pohl........... $13,000 0 N/A $ 64,750
Anthony R. Pustorino..... $15,000 0 N/A $ 69,000
Salvatore J. Zizza....... $14,000 0 N/A $ 35,000
</TABLE>
- ---------------
+ 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. Mr. Diagonale is also Vice
President of The Gabelli Global Multimedia Trust Inc.
++ Includes certain bonus payments made in fiscal 1995.
+++ Mr. Gabelli's compensation is paid by the Investment Adviser.
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
except that such indemnity shall not protect any such person against any
liability to the Fund or its stockholders to which such person 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. 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
11
<PAGE> 46
in money, property or services to the extent of such money, property or
services. 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 June 27, 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
The Shareholder Services Group, Inc. 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 June 27, 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 fiscal years ended December 31, 1994, December 31, 1993 and
December 31, 1992, the Investment Adviser was paid $8,978,663, $6,221,109 and
$4,695,152, respectively, for services rendered to the Fund. Prior to June 27,
1994, the Fund had an investment advisory agreement with the Investment Adviser
pursuant to which the Investment Adviser was paid a fee computed weekly and paid
monthly at the annual rate of 0.75% of the value of the Fund's average weekly
net assets and an administration agreement (the "Administration Agreement") with
The Boston Company Advisors, Inc. ("Boston Advisers") pursuant to
12
<PAGE> 47
which Boston Advisors received an annual fee equal to 0.25% of the value of the
Fund's average weekly net assets. The Fund paid Boston Advisors $1,565,051 and
$2,073,702 for the fiscal years ended December 31, 1992 and December 31, 1993
and $1,798,576 for the fiscal period from January 1, 1994 to June 27, 1994. On
June 27, 1994, the Fund terminated the Administration Agreement and entered into
the Advisory Agreement which combined investment advisory and administration
fees and responsibilities within one agreement.
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 fiscal years ended December 31, 1994, December 31, 1993 and
December 31, 1992, the Fund paid $161,163, $356,429 and $236,576, respectively,
in brokerage commissions. Brokerage commissions in the amount of $21,616 and
$23,005 were paid by the Fund to Gabelli & Company and its affiliates for the
fiscal years ended 1993 and 1992. During fiscal year 1994, the Fund paid to
Gabelli & Company and its affiliates $16,476 in brokerage commissions,
representing 10.2% of the total of all brokerage paid during such period. Such
commissions were paid with respect to 7.1% of the total dollar value of all
transactions involving the payment of brokerage commissions effected during the
period. The difference in the percentage of brokerage commissions paid to
Gabelli & Company and the percentage of transactions effected through Gabelli &
Company is due principally to the fact that the rates for brokerage commissions
charged by brokers for
13
<PAGE> 48
executing transactions in foreign securities were typically lower, after
adjusting for conversion into dollars, than transactions in domestic securities
effected by Gabelli & Company.
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 fiscal year ended December 31,
1994 and December 31, 1993 were 22.2% and 24.4%, respectively. 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 Bank
and Trust Company ("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
14
<PAGE> 49
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
15
<PAGE> 50
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.
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. NonU.S.
stockholders are urged to consult their own tax advisors concerning the
applicability of the United States withholding tax.
16
<PAGE> 51
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.
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 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
17
<PAGE> 52
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. As of September 30, 1995, the officers and Directors of the Fund, as a
group, beneficially owned 966,970 shares of the Fund, representing 1.08% of the
Fund's outstanding shares.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended December 31, 1994 and
its unaudited Semi-Annual Report for the fiscal period ended June 30, 1995 (the
"Reports"), which either accompany this SAI or have 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 Reports, upon request to the Fund at One Corporate Center,
Rye, New York 10580 or by telephone at (914) 921-5070.
18
<PAGE> 53
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C> <C> <C>
(1) (a) Financial Statements for the fiscal year ended December 31, 1994*
(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 year ended December 31, 1994
(iv) -- Statement of Changes in Net Assets for the fiscal year ended December
31, 1994 and the fiscal year ended December 31, 1993
(v) -- Financial highlights for a share of capital stock outstanding
throughout the fiscal year ended December 31, 1994, the fiscal year
ended December 31, 1993, the fiscal year ended December 31, 1992, the
fiscal year ended December 31, 1991, the fiscal year ended December 31,
1990, the fiscal year ended December 31, 1989, the fiscal year ended
December 31, 1988, the fiscal year ended December 31, 1987 and the
fiscal period August 21, 1986 through December 31, 1986
(vi) -- Notes to Financial Statements
(vii) -- Report of Independent Accountants
(b) Financial Statements for the fiscal period ended June 30, 1995**
(i) -- Portfolio of Investments as of June 30, 1995
(ii) -- Statement of Assets and Liabilities as of June 30, 1995
(iii) -- Statement of Operations for the six months ended June 30, 1995
(iv) -- Statement of Changes in Net Assets for the six months ended June 30,
1995 and the fiscal year ended December 31, 1994
(v) -- Financial highlights for a share of capital stock outstanding
throughout the six months ended June 30, 1995, the fiscal year ended
December 31, 1994, the fiscal year ended December 31, 1993, the fiscal
year ended December 31, 1992, the fiscal year ended December 31, 1991,
the fiscal year ended December 31, 1990, the fiscal year ended December
31, 1989, the fiscal year ended December 31, 1988, the fiscal year
ended December 31, 1987 and the fiscal year ended December 31, 1986
(vi) -- Notes to Financial Statements
</TABLE>
- ---------------
* The Fund's Annual Report for 1994 was filed on March 3, 1995. See also
Exhibit (o) to the Registration Statement.
** Incorporated by reference to the Fund's Semi-Annual Report for the Period
Ended June 30, 1995, filed on August 28, 1995 (EDGAR Accession No.
0000927405-95-000062).
<TABLE>
<S> <C> <C> <C> <C>
(2) Exhibits
(a) (1) -- Articles of Incorporation (Incorporated by reference to Registrant's
Registration Statement on Form N-2, filed with the Commission on June 9,
1986, File Nos. 33-6146 and 811-4700 (the "Registration Statement"),
exhibit 1)
(2) -- Articles of Amendment (Incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 to the Registration Statement, filed with
the Commission on August 14, 1986 ("Pre-Effective Amendment No. 2"),
exhibit (1)(b))
(3) -- Articles of Amendment (Incorporated by reference to Registrant's
Amendment No. 8 to a registration statement on Form N-2, File No.
811-4700, filed with the Commission on September 13, 1991, exhibit
(1)(c))
(b) -- By-Laws (Incorporated by reference to the Registrant's Registration
Statement, exhibit 2)
(c) -- Not applicable
(d) (1) -- Specimen certificate for Common Stock, par value $.001 per share
(Incorporated by reference to Registrant's Pre-Effective Amendment No.
2, exhibit 4)
(2) -- Form of Subscription Certificate
</TABLE>
C-1
<PAGE> 54
<TABLE>
<S> <C> <C> <C> <C>
(3) -- Form of Notice of Guaranteed Delivery
(4) -- Form of DTC Participant Oversubscription Exercise Form
(5) -- Form of Nominee Holder Over-Subscription Certification
(6) -- Form of Subscription, Distribution and Escrow Agency Agreement
(e) -- Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan
(Incorporated by reference to Registrant's Pre- Effective Amendment No.
1 to a registration statement on Form N-2, File Nos. 33-63622 and
811-4700, filed with the Commission on July 8, 1993, exhibit (e))
(f) -- Not applicable
(g) -- Investment Advisory Agreement between the Fund and Gabelli Funds, Inc
(h) -- Not applicable
(i) -- Not applicable
(j) -- Custodial Contract between the Fund and Boston Safe and Deposit Trust
Company (Incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 to the Registration Statement, filed with the Commission
on July 18, 1986, exhibit 9)
(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) -- Annual Report for 1994*
(p) -- Purchase Agreement (Incorporated by reference to Registrant's
Pre-Effective Amendment No. 2, exhibit 14)
(q) -- Not applicable
(r) -- Financial Data Schedule
</TABLE>
- ---------------
* Previously filed
ITEM 25. MARKETING ARRANGEMENTS
Not applicable
C-2
<PAGE> 55
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:
<TABLE>
<S> <C>
Registration fees......................................................... $ 50,823
New York Stock Exchange listing fee....................................... 51,910
Printing (other than stock certificates).................................. 55,000
Engraving and printing stock certificates................................. 3,000
Fees and expenses of qualification under state securities laws (including
fees of counsel)........................................................ 15,000
Accounting fees and expenses.............................................. 7,500
Legal fees and expenses................................................... 100,000
Subscription Agent's fees and expenses.................................... 290,000
Miscellaneous............................................................. 767
--------
Total........................................................... $574,000
========
</TABLE>
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: 17,755 record holders as of August
25, 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).
C-3
<PAGE> 56
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 transfer agent, dividend disbursing
agent and registrar)
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(with respect to its services as custodian)
The Shareholder Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
(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 include any prospectus required by Section 10(a)(3) of the
Act;
(ii) 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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) (sec. 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; or
(iii) 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.
C-4
<PAGE> 57
(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.
C-5
<PAGE> 58
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 12th day of October,
1995.
THE GABELLI EQUITY TRUST INC.
By /s/ BRUCE N. ALPERT
------------------------------------
Bruce N. Alpert
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -----------------
<S> <C> <C>
/s/ MARIO J. GABELLI Chairman of the Board, October 12, 1995
- ------------------------------------------ President and Chief Investment
Mario J. Gabelli Officer
/s/ PAUL R. ADES Director October 12, 1995
- ------------------------------------------
Paul R. Ades
/s/ THOMAS E. BRATTER Director October 12, 1995
- ------------------------------------------
Thomas E. Bratter
/s/ BILL CALLAGHAN Director October 12, 1995
- ------------------------------------------
Bill Callaghan
/s/ FELIX J. CHRISTIANA Director October 12, 1995
- ------------------------------------------
Felix J. Christiana
/s/ JAMES P. CONN Director October 12, 1995
- ------------------------------------------
James P. Conn
/s/ KARL OTTO POHL Director October 12, 1995
- ------------------------------------------
Karl Otto Pohl
/s/ ANTHONY R. PUSTORINO Director October 12, 1995
- ------------------------------------------
Anthony R. Pustorino
/s/ SALVATORE J. ZIZZA Director October 12, 1995
- ------------------------------------------
Salvatore J. Zizza
/s/ BRUCE N. ALPERT Treasurer (Principal Financial October 12, 1995
- ------------------------------------------ and Accounting Officer)
Bruce N. Alpert
</TABLE>
C-6
<PAGE> 59
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
NUMBERING
SYSTEM
---------
<C> <C> <S> <C>
(d)(2) -- Form of Subscription Certificate.........................................
(3) -- Form of Notice of Guaranteed Delivery....................................
(4) -- Form of DTC Participant Oversubscription Exercise Form...................
(5) -- Form of Nominee Holder Oversubscription Certification....................
(6) -- Form of Subscription, Distribution and Escrow Agency Agreement...........
(g) -- Investment Advisory Agreement between the Fund and Gabelli Funds, Inc....
(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..........................................
(r) -- Financial Data Schedule..................................................
</TABLE>
<PAGE> 1
VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT BEFORE 5:00 P.M.
NEW YORK TIME ON THE EXPIRATION DATE
CONTROL NO.
- ---------------- MAXIMUM PRIMARY SUBSCRIPTION SHARE AVAILABLE
- ----------------
THE GABELLI EQUITY TRUST INC.
SUBSCRIPTION RIGHTS FOR COMMON STOCK
Dear Shareholder:
IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST COMPLETE BOTH SIDES OF THE TEAR
OFF CARD.
As the registered owner of the Subscription Certificate below, you are
entitled to subscribe for the number of shares of Common Stock, $.001 par value
per share, of The Gabelli Equity Trust Inc. (the "Fund"), shown above pursuant
to the Primary Subscription Right and upon the terms and conditions and at the
Subscription Price for each share of Common Stock specified in the Prospectus
relating thereto. The Rights represented hereby include the Over-Subscription
Privilege for Rights holders, as described in the Prospectus. Under the
Privilege, any number of additional shares may be purchased by a Rights holder
if such shares are available and the holders' Primary Subscription Rights have
been fully exercised to the extent possible.
Registered owners who are participants in The Gabelli Equity Trust Inc.
Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan will receive
their primary and over-subscription shares via an uncertificated share credit to
their existing accounts. To request a stock certificate, participants in the
plan must check Box D on the reverse side of the Subscription Certificate below.
Registered owners who are not participants in the plan will be automatically
issued stock certificates. Stock certificates for primary share subscriptions
will be delivered as soon as practicable after receipt of the required completed
Subscription Certificate and after full payment has been received and cleared.
Stock certificates for over-subscriptions and confirmation statements reflecting
uncertificated share credits for dividend reinvestment accounts will be
delivered as soon as practicable after the Expiration Date and after all
allocations have been effected.
THE SUBSCRIPTION RIGHT IS TRANSFERABLE
PAYMENT MUST BE IN UNITED STATES DOLLARS. ONLY MONEY ORDERS OR CHECKS DRAWN
ON A BANK LOCATED IN THE CONTINENTAL UNITED STATES (OR FOR ONTARIO RESIDENTS
ONLY, ON A BANK LOCATED IN ONTARIO) AND MADE PAYABLE TO THE GABELLI EQUITY TRUST
INC. WILL BE ACCEPTED. PLEASE REFERENCE YOUR RIGHTS CARD CONTROL NUMBER ON YOUR
CHECK, MONEY ORDER, OR NOTICE OF GUARANTEED DELIVERY.
- --------------------------------------------------------------------------------
VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT BEFORE 5:00 P.M.
NEW YORK TIME ON THE EXPIRATION DATE
CONTROL NO.
- --------------- RIGHTS REPRESENTED BY THIS SUBSCRIPTION CERTIFICATE
- ---------------------------------
CUSIP NO. 362397119 ACCOUNT NO.
- ---------------------------------
THE GABELLI EQUITY TRUST INC.
SUBSCRIPTION RIGHTS FOR COMMON STOCK
(COMPLETE APPROPRIATE SECTION ON REVERSE SIDE OF THIS FORM)
The registered owner of this Subscription Certificate named below, or
assigns, is entitled to the number of Rights to subscribe for the Common Stock,
$.001 par value, of The Gabelli Equity Trust Inc. (the "Fund") shown above, in
the ratio of one share of Common Stock for each six Rights, pursuant to the
Primary Subscription Right and upon the terms and conditions and at the price
for each share of Common Stock specified in the Prospectus relating thereto. The
Rights represented hereby include the Over-Subscription Privilege for Record
Date Stockholders only, as described in the Prospectus. Under this Privilege,
any number of additional shares may be purchased by a Record Date Stockholder if
such shares are available and the owner's Primary Subscription Rights have been
fully exercised to the extent possible and the pro rata allocation requirements
have been satisfied. Stock certificates for the shares subscribed for pursuant
to the Primary Subscription Right will be delivered as soon as practicable after
receipt of the required completed Subscription Certificate and after full
payment has been received and cleared. Stock certificates for the shares
subscribed for pursuant to the Over-Subscription Privilege will be delivered as
soon as practicable after the Expiration Date and after all allocations have
been effected. Registered owners who are participants in The Gabelli Equity
Trust Inc. Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan will
receive their primary and over-subscription shares via an uncertificated share
credit to their existing accounts. To request a stock certificate, participants
in the plan should check Box D on the reverse side of this form. Any refund in
connection with an over-subscription will be delivered as soon as practicable
after the Expiration Date and after all allocations have been effected. The
Subscription Certificate may be transferred in the same manner and with the same
effect as in the case of a negotiable instrument payable to specific persons, by
duly completing and signing the assignment on the reverse side hereof. To
subscribe pursuant to the Primary Subscription Right or the Over-Subscription
Privilege, six Rights and the Subscription Price are required for each share of
Common Stock. Payment of the $8.00 per share must accompany the Subscription
Certificate. See reverse side of forms.
THE GABELLI EQUITY TRUST INC.
By: /s/ Mario J. Gabelli
-----------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles V. Rossi
-----------------------------
<PAGE> 2
To subscribe for your primary shares please complete line "A" on the card below.
Example:
100 shares = 100 rights (100 rights will be automatically rounded up to 102
rights, the nearest number of rights divisible by six)
102 rights divided by 6 = 17 primary shares
The maximum number of primary subscription shares would be 17
A. 17 X $8.00 = $136.00
(No. of shares)
If you are not subscribing for your full Primary Subscription, check box "E"
below and we will attempt to sell any remaining unexercised Rights.
To subscribe for any over-subscription shares please complete line "B" below.
PLEASE NOTE: only Record Date Stockholders who have exercised their Primary
Subscription in full may apply for shares pursuant to the Over-Subscription
Privilege.
PAYMENT OF SHARES: Full payment for both the primary and over-subscription
shares or a notice of guaranteed delivery must accompany this subscription.
Please reference your rights card control number on your check, money order or
notice of guaranteed delivery.
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 Right (if not already fully exercised) and second, the
Over-Subscription Privilege to purchase shares of Common Stock to the full
extent of the payments 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 Right (if not already fully exercised)
and second, the Over-Subscription Privilege to the full extent of the excess
payment tendered.
Expiration Date November 21, 1995 (unless extended)
To: STATE STREET BANK AND TRUST COMPANY
Attention: CST -- Corporate Reorganization Department
By Mail:
P.O. Box 9061
Boston, MA 02205-8686
By Overnight Courier:
c/o Boston Financial Data Services, Inc.
Corporate Reorganization Department
Two Heritage Drive
North Quincy, MA 02171
<TABLE>
<S> <C> <C>
A. Primary Subscription _____________ X $8.00 = $______
(6 Rights = 1 share) (No. of Shares) (Purchase Price)
B. Over-Subscription Privilege _____________ X $8.00 = $______(1)
(Shares) (Purchase Price)
C. Amount of Check Enclosed = $______
(or amount in notice of guaranteed delivery)
</TABLE>
D. IF YOU CURRENTLY PARTICIPATE IN THE FUND'S AUTOMATIC DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN AND WISH TO RECEIVE A CERTIFICATE, CHECK HERE / /
PLEASE FILL IN ALL APPLICABLE
INFORMATION
By Facsimile:
(617) 774-4519
With the original Subscription
Certificate to be sent by mail, hand
or overnight courier. Confirm
facsimile by telephone to (617) 774-4511
By Hand:
225 Franklin Street
Concourse Level
Boston, MA 02110
61 Broadway
Concourse Level
New York, NY 10006
E. Sell any remaining Rights / /
F. Sell all of my Rights / /
(1) The Over-Subscription Privilege
can be exercised only by a
Record Date Stockholder, as
described in the Prospectus,
and only if the Rights
initially issued to him are
exercised to the fullest extent
possible.
SECTION 1. TO SUBSCRIBE: I hereby
irrevocably subscribe for the full
amount of Common Stock indicated as
the total of A and B hereto upon the
terms and conditions specified in the
Prospectus relating thereto, receipt
of which is acknowledged. I hereby
agree that if I fail to pay for the
shares of Common Stock for which I
have subscribed, the Fund may exercise
any of the remedies set forth in the
Prospectus.
TO SELL: If I have checked
either the box on line E or on line F,
I authorize the sale of Rights by the
Subscription Agent according to the
procedures described in the
Prospectus.
______________________________________
______________________________________
Signature(s) of Subscriber(s)
______________________________________
Address for delivery of Shares if
other than shown on front
If permanent change of address, check here / /
Please give your telephone number: ( ) ______________
SECTION 2. TO TRANSFER RIGHTS (except
pursuant to E or F above): For value
received _____________________________
of the Rights (in a number evenly
divisible by six) represented by the
Subscription Certificate are assigned
to:
______________________________________
(Print Full Name of Assignee)
______________________________________
(Print Full Address)
______________________________________
Signature(s) of Assignor(s)
IMPORTANT: The Signature(s) must
correspond in every
particular, without
alteration, with the
name(s) as printed on your
Subscription Certificate.
Your signature must be guaranteed by:
a) a commercial bank or trust company or
b) a member firm of a domestic stock exchange or
c) a savings bank or credit union.
Signature ___________________________
(Name of Bank or Firm)
Guaranteed
By __________________________________
(Signature of Officer and Title)
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR SHARES OF COMMON STOCK OF
THE GABELLI EQUITY TRUST INC.
SUBSCRIBED FOR UNDER PRIMARY SUBSCRIPTION
AND THE OVER-SUBSCRIPTION PRIVILEGE
As set forth in the Prospectus, this form or one substantially equivalent hereto
may be used as a means of effecting subscription and payment for all shares of
the Fund's Common Stock (the "Shares") subscribed for under the Primary
Subscription and the Over-Subscription Privilege. Such form may be delivered by
hand or sent by facsimile transmission, overnight courier or first class mail to
the Subscription Agent.
THE SUBSCRIPTION AGENT IS:
STATE STREET BANK AND TRUST COMPANY
Attention: CST -- Corporate Reorganization Department
<TABLE>
<S> <C>
BY MAIL: BY FACSIMILE:
P.O. Box 9061 (617) 774-4519
Boston, MA 02205-8686
CONFIRM BY TELEPHONE TO:
(617) 774-4511
BY OVERNIGHT COURIER: BY HAND:
c/o Boston Financial Data Services, Inc. 225 Franklin Street
Corporate Reorganization Department Concourse Level
Two Heritage Drive Boston, MA 02110
North Quincy, MA 02171 or
61 Broadway
Concourse Level
New York, NY 10006
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A
TELECOPY FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A
VALID DELIVERY
The New York Stock Exchange member firm or bank or trust company which completes
this form must communicate this guarantee and the number of Shares subscribed
for in connection with this guarantee (separately disclosed as to the Primary
Subscription and the Over-Subscription Privilege) to the Subscription Agent and
must deliver this Notice of Guaranteed Delivery of Payment, guaranteeing
delivery of (a) payment in full for all subscribed Shares and (b) a properly
completed and signed copy of the Subscription Certificate (which certificate and
full payment must then be delivered no later than the close of business of the
third business day after the Expiration Date, unless extended) to the
Subscription Agent prior to 5:00 p.m., New York time, on the Expiration Date,
unless extended. Failure to do so will result in a forfeiture of the Rights.
GUARANTEE
The undersigned, a member firm of the New York Stock Exchange or a bank or trust
company having an office or correspondent in the United States, guarantees
delivery to the Subscription Agent by no later than 5:00 p.m., New York time, on
November 27, 1995 (unless extended as described in the Prospectus) of (a) a
properly completed and executed Subscription Certificate, and (b) payment of the
full Subscription Price for Shares subscribed for on Primary Subscription and
for any additional Shares subscribed for pursuant to the Over-Subscription
Privilege, as subscription for such Shares is indicated herein or in the
Subscription Certificate.
(continued on other side)
<PAGE> 2
BROKER ASSIGNED CONTROL #
------------------
THE GABELLI EQUITY TRUST INC.
<TABLE>
<S> <C> <C> <C>
1. Primary Number of Rights Number of Primary Shares Payment to be made
Subscription to be exercised requested for which you are in connection with
guaranteeing delivery of Primary Shares
Rights and Payment
------------ Rights ------------ Shares $ ------------
(Rights / by 6)
2. Over-Subscription Number of Over-Subscription Payment to be made in
Shares requested for which connection with Over-
you are guaranteeing payment Subscription Shares
------------ Shares $ ------------
3. Totals Total Number of
Rights to be Delivered
------------ Rights $ ------------
Total payment
</TABLE>
Method of delivery (circle one)
A. Through DTC
B. Direct to State Street Bank and Trust Company, as Subscription Agent. Please
reference below the registration of the Rights to be delivered.
---------------------------------------------
---------------------------------------------
---------------------------------------------
PLEASE SIGN A UNIQUE CONTROL NUMBER FOR EACH GUARANTEE SUBMITTED. This number
needs to be referenced on any direct delivery of Rights or any delivery through
DTC. In addition, please note that if you are guaranteeing for Over-Subscription
Privilege Shares and are a DTC participant, you must also execute and forward to
State Street Bank and Trust Company a DTC Participant Over-Subscription Exercise
Form.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
Name of Firm Authorized Signature
- --------------------------------------------- ---------------------------------------------
DTC Participant Number Title
- --------------------------------------------- ---------------------------------------------
Address Name (Please Type or Print)
- --------------------------------------------- ---------------------------------------------
Zip Code Phone Number
- --------------------------------------------- ---------------------------------------------
Contact Name Date
</TABLE>
<PAGE> 1
THE GABELLI EQUITY TRUST INC.
RIGHTS OFFERING
DTC PARTICIPANT OVER-SUBSCRIPTION EXERCISE FORM
THIS FORM IS TO BE USED ONLY BY DEPOSITORY TRUST COMPANY PARTICIPANTS TO
EXERCISE THE OVER-SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO
WHICH THE PRIMARY SUBSCRIPTION WAS EXERCISED AND DELIVERED THROUGH THE
FACILITIES OF THE DEPOSITORY TRUST COMPANY. ALL OTHER EXERCISES OF
OVER-SUBSCRIPTION PRIVILEGES MUST BE EFFECTED BY THE DELIVERY OF THE
SUBSCRIPTION CERTIFICATES.
------------------------------------------
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE COMPANY'S
PROSPECTUS DATED OCTOBER 13, 1995 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN
BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE
COMPANY AND THE SUBSCRIPTION AGENT.
------------------------------------------
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT BY 5:00 PM, NEW YORK CITY TIME,
ON November 21, 1995, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
------------------------------------------
1. The undersigned hereby certifies to the Company and the Subscription Agent
that it is a participant in The Depository Trust Company ("DTC") and that it has
either (i) fully exercised its Rights under the Primary Subscription and
delivered such exercised Rights to the Subscription Agent by means of transfer
to the DTC account of the Subscription Agent or (ii) delivered to the
Subscription Agent a Notice of Guaranteed Delivery in respect of the exercise of
the Rights under the Primary Subscription and will deliver the Rights called for
in such Notice of Guaranteed Delivery to the Subscription Agent by means of
transfer to such DTC account of the Subscription Agent.
2. The undersigned hereby exercises the Over-subscription Privilege to purchase,
to the extent available, shares of Common Stock and certifies to
the Company and the Subscription Agent that such Over-subscription Privilege is
being exercised for the account or accounts of persons (which may include the
undersigned) on whose behalf all Primary Subscription Rights have been
exercised.
3. The undersigned understands that payment of the Subscription Price of $8.00
per share for each share of Common Stock subscribed for pursuant to the
Over-subscription Privilege must be received by the Subscription Agent at or
before 5:00 p.m., New York City time, on the Expiration Date and represents that
such payment, in the aggregate amount of $ , either (check
appropriate box):
/ / has been or is being delivered to the Subscription Agent pursuant to the
Notice of Guaranteed Delivery referred to above
or
/ / is being delivered to the Subscription Agent herewith
or
/ / has been delivered separately to the Subscription Agent;
(continued on other side)
<PAGE> 2
and, in the case of funds not delivered pursuant to a Notice of Guaranteed
Delivery, is or was delivered in the manner set forth below (check
appropriate box and complete information relating thereto):
/ / uncertified check
/ / certified check
/ / bank draft
______________________________________
Primary Subscription Confirmation
Number
______________________________________
DTC Participant Number
_____________________________________
Name of DTC Participant
For allocation purposes, the total number of record date shares owned by the
persons on whose behalf this over-subscription is being exercised were
- ------------------------------.
Registration into which shares, interest and/or refund checks should be issued.
Name:
________________________________________
________________________________________
Address: _____________________________________
Certified TIN: _______________________________
By: _________________________________________
Name:
Title:
Contact Name: ________________________________
Phone Number: ________________________________
Dated: , 1995
<PAGE> 1
THE GABELLI EQUITY TRUST INC.
RIGHTS OFFERING
NOMINEE HOLDER OVER-SUBSCRIPTION CERTIFICATION
PLEASE COMPLETE ALL APPLICABLE INFORMATION
<TABLE>
<S> <C> <C> <C> <C>
By Express Mail or Overnight Courier: By Mail: By Hand:
State Street Bank and Trust Company P.O. Box 9061 State Street Bank and Trust Company
c/o Boston Financial Data Services, Boston, MA 02205-8686 225 Franklin St. 61 Broadway
Inc.
Corporate Reorganization Department Concourse Level or Concourse Level
Two Heritage Drive Boston, Massachusetts 02110 New York, NY 10006
North Quincy, Massachusetts 02171
</TABLE>
THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS TO EXERCISE THE
OVER-SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO WHICH THE
PRIMARY SUBSCRIPTION PRIVILEGE WAS EXERCISED IN FULL AND DELIVERED THROUGH THE
FACILITIES OF A COMMON DEPOSITORY. ALL OTHER EXERCISES OF OVER-SUBSCRIPTION
PRIVILEGES MUST BE EFFECTED BY THE DELIVERY OF THE SUBSCRIPTION CERTIFICATES.
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE FUND'S
PROSPECTUS DATED OCTOBER 13, 1995 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN
BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE
SUBSCRIPTION AGENT.
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR WITH
A PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BEFORE 5:00 P.M., NEW YORK
CITY TIME, ON November 21, 1995, UNLESS EXTENDED BY THE FUND (THE "EXPIRATION
DATE").
1. The undersigned hereby certifies to the Subscription Agent that it is a
participant in [Name of Depository] (the "Depository") and
that it has either (i) exercised the Primary Subscription in respect of the
Rights and delivered such exercised Rights to the Subscription Agent by means of
transfer to the Depository Account of the Subscription Agent or (ii) delivered
to the Subscription Agent a Notice of Guaranteed Delivery in respect of the
exercise of the Primary Subscription Privilege and will deliver the Rights
called for in such Notice of Guaranteed Delivery to the Subscription Agent by
means of transfer to such Depository Account of Subscription Agent.
2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase, to the extent available, shares of Common Stock and
certifies to the Subscription Agent that such Over-Subscription Privilege is
being exercised for the account or accounts of persons (which may include the
undersigned) on whose behalf all Primary Subscription Rights have been
exercised.*
3. The undersigned understands that payment of the Subscription Price of
$8.00 per share for each share of Common Stock subscribed for pursuant to the
Over-Subscription Privilege must be received by the Subscription Agent before
5:00 p.m., New York City time, on the Expiration Date, unless a Notice of
Guaranteed Delivery is used, in which case, payment in full must be received by
the Subscription Agent no later than the close of business on the third business
day after the Expiration Date and represents that such payment, in the aggregate
amount of $ , either
<PAGE> 2
(check appropriate box)
/ / has been or is being delivered to the Subscription Agent pursuant to
the Notice of Guaranteed Delivery referred to above
or
/ / is being delivered to the Subscription Agent herewith
or
/ / has been delivered separately to the Subscription Agent; and, in the
case of funds not delivered pursuant to a Notice of Guaranteed
Delivery, is or was delivered in the manner set forth below (check
appropriate box and complete information relating thereto):
/ / uncertified check
/ / certified check
/ / bank draft
- --------------------------------------------------------------------------------
Primary Subscription Confirmation Number
<TABLE>
<S> <C>
-------------------------------------------------
Name of Nominee Holder
- ------------------------------------------------- -------------------------------------------------
Depository Participant Number Address
Contact Name:
City State Zip
Code
Phone Number:
By:
Name:
Dated: , 1995 Title:
</TABLE>
* PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION
OF RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF
OVER-SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER.
<PAGE> 1
STATE STREET BANK AND TRUST COMPANY
SUBSCRIPTION DISTRIBUTION AND ESCROW AGENCY AGREEMENT
This Subscription, Distribution and Escrow Agency Agreement (the "Agreement")
is made as of October 19, 1995 between The Gabelli Equity Trust Inc. (the
"Company"), a Maryland Corporation, and State Street Bank and Trust Company, a
national banking association, as subscription, distribution and escrow agent
("Agent").
WHEREAS, the Company proposes to make a subscription offer by issuing
certificates or other evidences of subscription rights, in the form designated
by the Company (the "Subscription Certificates") to shareholders of record
("Record Date Shareholders") of its Common Stock, par value $.001 per share
(the "Common Stock") as of a record date specified by the Company (the "Record
Date"), pursuant to which each Record Date Shareholder will have certain rights
(the "Rights") to subscribe to shares of the Company's Common Stock, as
described in and upon such terms as are set forth in the prospectus (the
"Prospectus") included in the Form N-2 Registration Statement initially filed
by the Company with the Securities and Exchange Commission on September 1,
1995, as amended by any amendment filed with respect thereto (the "Registration
Statement");
WHEREAS, the Company wishes the Agent to perform certain acts on behalf of the
Company and the Agent is willing to so act, in connection with the distribution
of the Subscription Certificates and the issuance and exercise of the Rights to
subscribe therein set forth, all upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements
set forth herein, the parties agree as follows:
1. Pursuant to resolutions of its Board of Directors, the Company hereby
appoints and authorizes the Agent to act on its behalf in accordance with the
provisions hereof, and the Agent hereby accepts such appointment and agrees to
so act.
2. (a) Each Subscription Certificate shall evidence the Rights of the
Record Date Shareholder therein named to purchase Common Stock upon the terms
and conditions therein and herein set forth.
(b) Upon the written advice of the Company signed by its Chairman,
President, a Vice President, its Secretary or an Assistant Secretary, as to the
Record Date, the Agent shall, from a list of the Company's Record Date
Shareholders to be prepared by the Agent in its capacity as the Company's
Transfer Agent, prepare and record Subscription Certificates in the names of
the Record Date Shareholders, setting forth the number of Rights to subscribe
to the Company's Common Stock calculated on the basis of 1 right for each share
of Common Stock recorded on the
<PAGE> 2
Company's books in the name of each such Record Date Shareholder as of the
Record Date. The number of Rights that are issued to Shareholders will be
rounded up, by the Subscription Agent, to the nearest whole number of Rights
evenly divisible by six. In the case of shares of Common Stock held of record
by Cede & Co., Inc., as nominee for The Depositary Trust Company, or by any
other depositary or nominee (each a "Nominee Holder"), the number of Rights
issued to such Nominee Holder will be adjusted, by the Subscription Agent, to
permit rounding up (to the nearest whole number of Rights evenly divisible by
six) of the number of Rights to be received by beneficial holders for whom the
Nominee Holder is the holder of record only if the Nominee Holder provides to
the Depositary Trust Company or the Subscription Agent on or before the close
of business on the tenth business day prior to the Expiration Date written
representation of the number of Rights required for such rounding. Each
Subscription Certificate shall be dated as of the Record Date and shall be
executed manually or by facsimiles signature of a duly authorized officer of
the Company. Upon the written advice, signed as aforesaid, as to the effective
date of the Registration Statement, the Agent shall as promptly as practicable
countersign and deliver the Subscription Certificates, together with a copy of
the Prospectus, to all Record Date Shareholders. No Subscription Certificate
shall be valid for any purpose unless so executed. Should any officer whose
signature has been placed upon any Subscription Certificate cease to hold such
office at any time thereafter, such event shall have no effect on the validity
of such Subscription Certificate.
3. (a) Each Subscription Certificate shall be irrevocable and fully
transferable. The Agent shall in its capacity as the Company's Transfer Agent
maintain a register of Subscription Certificates and the holders of record
thereof (each of whom shall be deemed a "Record Date Shareholder" hereunder for
purposes of determining the rights of holders of Subscription Certificates).
Each Subscription Certificate shall, subject to the provisions thereof, entitle
the Record Date Shareholder in whose name it is recorded to the following:
(1) The right (the "Basic Subscription Right") to purchase a number of
shares of Common Stock equal to one share of Common Stock for every six Basic
Subscription Rights; and
(2) The right (the "Oversubscription Right" and together with the Basic
Subscription Right, the "Subscription Rights" ) to purchase from the Company
additional shares of Common Stock, subject to the availability of such shares
and to allotment of such shares as may be available among Record Date
Shareholders who exercise Oversubscription Rights on the basis specified in the
Prospectus; provided, however, that a Record Date Shareholder who has not
exercised his Basic Subscription Rights with respect to the full number of
shares that such Record Date Shareholder is entitled to purchase by virtue of
his Basic Subscription Rights
-2-
<PAGE> 3
as of the Expiration Date, if any, shall not be entitled to any
Oversubscription Rights.
(b) A Record Date Shareholder may exercise his Subscription Rights by
delivery to the Agent at its corporate offices specified in the Prospectus of
(i) the Subscription Certificate with respect thereto, duly executed by such
Record Date Shareholder in accordance with and as provided by the terms and
conditions of the Subscription Certificate, together with (ii) the purchase
price for each share of Common Stock subscribed for by exercise of such
Subscription Rights, in United States dollars by money order or check drawn on
a bank located in the continental United States, except that holders of rights
who are residents of the Province of Ontario may also make payments in U.S.
dollars by money order or check drawn on a bank located in the Province of
Ontario payable to the order of the Company.
(c) Rights may be exercised at any time after the date of issuance of the
Subscription Certificates with respect thereto but no later than 5:00 P.M.
Eastern Daylight Time on such date as the Company shall designate to the Agent
in writing (the "Expiration Date"). For the purpose of determining the time of
the exercise of any Subscription Rights, delivery of any material to the Agent
shall be deemed to occur when such materials are received at the corporate
offices of the Agent specified in the Prospectus.
(d) Notwithstanding the provisions of Section 3(b) and 3(c) regarding
delivery of an executed Subscription Certificate to the Agent prior to 5:00
P.M. Eastern Daylight Time on the Expiration Date, if prior to such time the
Agent receives notice of guaranteed delivery by telegram or otherwise from a
bank, trust company or a New York Stock Exchange member guaranteeing delivery
of (i) full payment for shares of Common Stock purchased and subscribed for by
virtue of a Record Date Shareholder's Subscription Rights and (ii) a properly
completed and executed Record Date Shareholder's Subscription Certificate, then
such exercise of Subscription Rights shall be regarded as timely, subject,
however, to receipt of the duly executed Subscription Certificate and full
payment for the Common Stock by the Agent within three business days after the
Expiration Date.
(e) Within ten business days following the Expiration Date (the
"Confirmation Date"), the Agent shall send a confirmation to each Record Date
Shareholder (or, if shares of Common Stock on the Record Date are held by Cede
& Co. Inc. or any other depository or nominee, to Cede & Co., Inc. or such
other depository or nominee), showing (i) the number of shares of Common Stock
acquired pursuant to the Basic Subscription Rights, (ii) the number of shares
of Common Stock, if any, acquired pursuant to the Oversubscription Rights,
(iii) the per share and total purchase price for the shares of Common Stock
acquired pursuant to the exercise of Subscription Rights, (iv) any amount
payable to the shareholder pursuant to Section 9, and (v) any
-3-
<PAGE> 4
excess to be refunded by the Company to such shareholder. Any excess payment to
be refunded by the Company to a Record Date Shareholder, shall be mailed by the
Agent to the shareholder within fifteen business days after the Expiration
Date, as provided in Section 6 below.
4. If, after allocation of shares of Common Stock to persons exercising Basic
Subscription Rights, there remain unexercised rights, then the Agent shall
allot the shares issuable upon exercise of such unexercised Basic Subscription
Rights (the "Remaining Shares") to persons exercising Oversubscription Rights,
in the amounts of such oversubscriptions. If the number of shares for which
Oversubscription Rights have been exercised is greater than the Remaining
Shares, the Agent shall allot the Remaining Shares to the persons exercising
Oversubscription Rights pro rata based solely on the number of Basic
Subscription Rights exercised by each of them. The Agent shall advise the
Company immediately upon the completion of the allocation set forth above as to
the total number of shares of Common Stock subscribed and distributable.
5. The Agent will deliver (i) stock certificates representing those shares of
Common Stock purchased pursuant to exercise of Basic Subscription Rights as
soon as practicable after the corresponding rights have been validly exercised
and full payment for such shares has been received and cleared; (ii) stock
certificates representing those shares purchased pursuant to the exercise of
Oversubscription Rights as soon as practicable after the Expiration Date and
after all allocations have been effected; (iii) in the case of each Record Date
Shareholder whose rights were sold pursuant to Section 9, within fifteen
business days after the Expiration Date, proceeds of such sale (provided,
however, that proceeds of sales on behalf of Record Date Shareholders whose
Subscription Certificates are undeliverable shall be held by the Agent until
they are either claimed or escheated); (iv) in the case of each Record Date
Shareholder who subscribed, pursuant to the exercise of Oversubscription
Rights, for a greater number of shares than was allotted to such Record Date
Shareholder under Section 4, within fifteen business days after the Expiration
Date, a refund (and interest on such) in the amount of the difference between
the purchase price delivered for the shares subscribed for pursuant to the
exercise of such Oversubscription Rights and the purchase price of the shares
so allotted under Section 4 (an "Excess Payment"); (v) in the case of Record
Date Shareholders who are participants in the Company's dividend reinvestment
plan, within fifteen business days after the Expiration Date, account
statements reflecting a credit of uncertificated shares for their primary and
oversubscription
-4-
<PAGE> 5
shares unless such shareholders have elected to receive certificates.
6. (a) All proceeds received by the Agent from Record Date Shareholders in
respect of the exercise of rights shall be held by the Agent, on behalf of the
Company, in a segregated, interest-bearing escrow account (the "Escrow
Account") pending disbursement in the manner described in Section 6 (b) below.
(b) The Agent shall deliver all proceeds received in respect of the
exercise of the Rights (including interest earned thereon) to the Company as
promptly as practicable, but in no event later than fifteen business days after
the Confirmation Date. Proceeds held in respect of Excess Payments (including
interest earned thereon) shall be refunded to Record Date Shareholders entitled
to such a refund within fifteen business days after the Expiration Date.
7. The Agent shall promptly advise the Company as to the date of delivery of
Common Stock hereunder and shall supply the Company with a certified list of
the Record Date Shareholders.
8. The Agent shall account promptly to the Company with respect to
Subscription Rights exercised and concurrently account for all monies received
and returned by the Agent with respect to the purchase of shares of Common
Stock upon the exercise of Subscription Rights.
9. The Agent shall use its best efforts to sell on the New York Stock Exchange
or if a better price can be obtained for the Rights on another market, on such
other market, on the terms set forth in the Prospectus, (i) all Basic
Subscription Rights submitted to it for sale by Record Date Shareholders in
accordance with the Prospectus, provided such Basic Subscription Rights are
received by the Agent at least one day prior to the Expiration Date and (ii)
all Basic Subscription Rights of Record Date Shareholders whose Subscription
Certificates remain unclaimed as a result of being returned by postal
authorities as undeliverable as of one business day prior to the Expiration
Date. Such sales will be made through a broker or brokers selected by the
Agent, and the Agent shall deliver the proceeds of such sales to the Record
Date Shareholder net of commissions charged by such broker or brokers.
10. In the event the Agent does not receive, within three business days after
the Expiration Date, any amount due from the Record Date Shareholder as
specified in Section 3(b)or(d), then it shall take such action with respect to
such Record Date Shareholder's Subscription Rights as may be instructed in
writing by the Company, including without limitation (i) applying any payment
actually received by it toward the purchase of the greatest whole number of
shares of Common Stock which could be acquired with
-5-
<PAGE> 6
such payment, (ii) allocating the shares subject to such Subscription Rights to
one or more other Record Date Shareholders, and (iii) selling all or a portion
of the shares of Common Stock deliverable upon exercise of such Subscription
Rights on the open market, and applying the proceeds thereof to the amount
owed.
11. No Subscription Certificate shall entitle a Record Date Shareholder to vote
or receive dividends or be deemed the holder of shares of Common Stock for any
purpose, nor shall anything contained in any Subscription Certificate be
construed to confer upon any Record Date Shareholder any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to
any action by the Company (whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings or other action affecting shareholders, or receive
dividends or otherwise, until the Subscription Rights evidenced thereby shall
have been exercised and the shares of Common Stock purchasable upon the
exercise thereof shall have become deliverable as provided in this Agreement
and in the Prospectus.
12. If any Subscription Certificate is lost, stolen, mutilated, or destroyed,
the Agent may, on such terms which will indemnify the Company as the Agent may
in its discretion impose (which shall, in the case of a Subscription
Certificate include the surrender thereof), issue a new Subscription
Certificate of like denomination in substitution for the Subscription
Certificate so lost, stolen or mutilated or destroyed.
13. (a) The Company covenants that all shares of Common Stock issued upon
exercise of Subscription Rights pursuant to the terms set forth in the
Subscription Certificates will be validly issued, fully paid, nonassessable and
free of preemptive rights.
(b) The Company shall furnish to the Agent, upon request, an opinion of
counsel reasonably satisfactory to the Agent to the effect that a registration
statement under the Securities Act of 1933, as amended (the "Act"), is then in
effect with respect to its shares of Common Stock issuable upon exercise of the
Subscription Rights set forth in the Subscription Certificates. Upon written
advice to the Agent that the Securities and Exchange Commission shall have
issued or threatened to have issued any order preventing or suspending the use
of the Prospectus, or if for any reason it shall be necessary to amend or
supplement the Prospectus in order to comply with the Act, the Agent shall
cease acting hereunder until receipt of written instructions from the Company
and such assurances as it may reasonably request that it may comply with such
instruction without violations of the Act.
14. (a) Any corporation into which the Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Agent shall be a party, or any
-6-
<PAGE> 7
corporation succeeding to the corporate trust business of the Agent, shall be
the successor to the Agent hereunder without the execution or filing of any of
the parties hereto, provided that such corporation would be eligible for
appointment as a successor Agent. In case at the time such successor to the
Agent shall succeed to the agency created by this Agreement, any of the
Subscription Certificates shall have been countersigned but not delivered, any
such successor to the Agent may adopt the countersignature of the original
Agent and deliver such Subscription Certificates so countersigned, and in case
at that time any of the Subscription Certificates shall not have been
countersigned, any successor to the Agent may countersign such Subscription
Certificates either in the name of the predecessor Agent or in the name of the
successor Agent, and in all such cases such Subscription Certificates shall
have the full force provided in the Subscription Certificates and in this
Agreement.
(b) In case at any time the name of the Agent shall be changed and at such
time any of the Subscription Certificates shall have been countersigned but not
delivered, the Agent may adopt the countersignature under its prior name and
deliver Subscription Certificates so countersigned, and in case at that time
any of the Subscription Certificates shall not have been countersigned, the
Agent may countersign such Subscription Certificates either in its prior name
or in its changed name, and in all such cases such Subscription Certificates
shall have the full force provided in the Subscription Certificates and in this
Agreement.
15. The Company agrees to pay to the Agent as compensation for all services
rendered by it hereunder and for its reasonable expenses and other
disbursements incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder, the amounts set forth
in the fee schedule attached as Exhibit A hereto.
16. The Agent undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions:
(a) Whenever in the performance of its duties under this Agreement the
Agent shall deem it necessary or desirable that any fact or matter be proved or
established, prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof is herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board or the President or a Vice
President or the Secretary or an Assistant Secretary or the Treasurer of the
Company delivered to the Agent, and such certificate shall be full
authorization to the Agent for any action taken or suffered in good faith by it
under the provisions of this Agreement in reliance upon such certificate.
(b) The Agent shall not be responsible for and the Company shall indemnify
and hold the Agent harmless from and against, any
-7-
<PAGE> 8
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to all actions of the Agent or its
agents or subcontractors required to be taken pursuant to this Agreement,
provided that such actions are taken in good faith and without negligence or
willful misconduct.
(c) The Agent shall be liable hereunder only for its own negligence or
willful misconduct.
(d) Nothing herein shall preclude the Agent from acting in any other
capacity for the Company or for any other legal entity.
(e) The Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any officer of the
Company and to apply to any such officer of the Company for advice or
instructions in connection with its duties, and shall be indemnified and not be
liable for any action reasonably taken or suffered by it in good faith in
accordance with instructions of any officer.
(f) The Agent shall be indemnified and shall incur no liability for or in
respect of any action taken, suffered, or omitted by it in reliance upon any
Subscription Certificate or certificate for Common Stock, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement or other paper or document
that it reasonably believes to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons.
(g) Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement of for any
consequential damages arising out of any act or failure to act hereunder.
17. The Agent may, without the consent or concurrence of the Record Date
Shareholders in whose names Subscription Certificates are registered, by
supplemental agreement or otherwise, concur with the Company in making any
changes or corrections in a Subscription Certificate that it shall have been
advised by counsel (who may be counsel for the Company) is appropriate to cure
any ambiguity or to correct any defective or inconsistent provision or clerical
omission or mistake or manifest error therein or herein contained, and which
shall not be inconsistent with the provisions of the Subscription Certificate
except insofar as any such change may confer additional rights upon the Record
Date Shareholders.
18. Assignment
a. Except as provided in Section c below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
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<PAGE> 9
b. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
c. The Agent may, without further consent on the part of the Company,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS"), which is duly registered as a
transfer agent pursuant to Section 17(c)(1) of the Securities Exchange Act of
1934, or (ii) the current third party vendor utilized by BFDS; provided,
however, that the Agent shall be as fully responsible to the Company for the
acts and omissions of any subcontractor as it is for its own acts and
omissions.
19. All the covenants and provisions of this Agreement by or for the benefit
of the Company or the Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
20. The validity, interpretation and performance of this Agreement shall be
governed by the law of the Commonwealth of Massachusetts.
21. This Agreement may be executed in counterparts, each of which will be an
original and all of which taken together will constitute one and the same
Agreement.
STATE STREET BANK AND THE GABELLI EQUITY TRUST INC
TRUST COMPANY
By: By:
--------------------- ------------------------
Vice President Vice President
Dated: Dated:
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<PAGE> 1
INVESTMENT ADVISORY AGREEMENT
June 27, 1994
Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580-1434
Dear Sir:
The Gabelli Equity 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
- 1 -
<PAGE> 2
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.
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<PAGE> 3
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.
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<PAGE> 4
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 lease
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).
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<PAGE> 5
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 EQUITY TRUST INC.
By: /s/ Bruce Alpert
-------------------------
Agreed to and Accepted:
GABELLI FUNDS, INC.
By: /s/ Stephen G. Bondi
------------------------------------
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<PAGE> 1
REGISTRAR,
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE GABELLI EQUITY TRUST INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article 1 Terms of Appointment; Duties of the Bank . . . . . . . . . . . . . . . . . 1
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Article 3 Representations and Warranties of the Bank . . . . . . . . . . . . . . . . 4
Article 4 Representations and Warranties of the Fund . . . . . . . . . . . . . . . . 4
Article 5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Article 6 Covenants of the Fund and the Bank . . . . . . . . . . . . . . . . . . . . 8
Article 7 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 10
Article 8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Article 9 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Article 10 Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . . . . 11
Article 11 Merger of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 12th day of August, 1986, by and between THE
GABELLI EQUITY TRUST INC., a Maryland corporation, having its principal office
and place of business at 8 Sound Shore Drive, Greenwich, Connecticut, (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts corporation
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar,
transfer agent, dividend disbursing agent and agent in connection with certain
other activities and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Bank to act as, and the
Bank agrees to act as registrar, transfer agent for the Fund's authorized and
issued shares of its common stock ("Shares"), dividend disbursing agent and
agent in connection with any dividend reinvestment as set out in the prospectus
of the Fund, corresponding to the date of this Agreement.
1.02 The Bank agrees that it will perform the following
services:
<PAGE> 4
(a) In accordance with procedures established from time to
time by agreement between the Fund and the Bank, the Bank shall:
(i) issue and record the appropriate
number of Shares and hold such Shares
in the appropriate Shareholder
account;
(ii) effect transfers of Shares by the
registered owners thereof upon receipt
of appropriate documentation;
(iii) prepare and transmit payments for
dividends and distributions
declared by the Fund; and
(iv) act as agent for Shareholders pursuant
to the dividend reinvestment and cash
purchase plan as amended from time to
time in accordance with the terms of
the agreement to be entered into
between the Shareholders and the Bank
in substantially the form attached as
Exhibit A hereto.
(b) In addition to and not in lieu of the services set
forth in the above paragraph (a), the Bank shall: (i) perform all of the
customary services of a registrar, transfer agent, dividend disbursing agent
and agent of the dividend reinvestment and cash purchase plan as described in
Article 1 consistent with those regulations in effect as at the date of
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<PAGE> 5
this Agreement. The detailed definition, frequency, limitations and associated
costs (if any) set out in the attached fee schedule, include but not limited
to: maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, receiving and tabulating proxies and mailing Shareholder
reports to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts were applicable, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all registered
Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all confirmable transactions in Shareholder
accounts, and providing Shareholder account information.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee as set out
in the initial fee schedule attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 2.02 below may be changed from
time to time subject to mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above,
the Fund agrees to reimburse the Bank for out-of-pocket expenses or advances
incurred by the Bank for the items set out in the fee schedule attached
hereto. In addition, any other
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<PAGE> 6
expenses incurred by the Bank at the request or with the consent of the Fund,
will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable
expenses within five days following the mailing of the respective billing
notice. Postage and the cost of materials for mailing of dividends, proxies,
Fund reports and other mailings to all Shareholder accounts shall be advanced
to the Bank by the Fund at least seven (7) days prior to the mailing date of
such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in
good standing under the laws of .
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<PAGE> 7
4.02 It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is a closed-end, diversified investment company
registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of
1933 is currently effective and appropriate state securities law filings have
been made with respect to all Shares of the Fund being offered for sale;
information to the contrary will result in immediate notification to the Bank.
4.06 It shall make all required filings under federal and
state securities laws.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Fund
shall indemnify and hold the Bank harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
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<PAGE> 8
(b) The Fund's refusal or failure to comply with the terms
of this Agreement, or which arise out of the Fund's lack of good faith,
negligence or willful misconduct or which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records and documents which (i) are received by
the Bank or its agents or subcontractors and furnished to it by or on behalf of
the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund's
representative.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered in such state
or in violation of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer or sale of such Shares in
such state.
5.02 The Bank shall indemnify and hold the Fund harmless
from and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to any action
or failure or omission to act by the Bank as a result of the Bank's lack of
good faith, negligence or willful misconduct.
-6-
<PAGE> 9
5.03 At any time the Bank may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such counsel.
The Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided the Bank or its agents or subcontractors by telephone, in person,
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage
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<PAGE> 10
reasonably beyond its control, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained
in this Article 5 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion, and shall keep the
other party advised with respect to all developments concerning such claim.
The party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
Article 6 Covenants of the Fund and the Bank
6.01 The Fund shall promptly furnish to the Bank the
following:
(a) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of the Bank and the execution
and delivery of this Agreement.
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<PAGE> 11
(b) A copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto.
6.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.03 The Bank shall keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed by
the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund on and in accordance with its request.
6.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection
of the Shareholder records of the Fund, the Bank will
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<PAGE> 12
endeavor to notify the Fund and to secure instructions from an authorized
officer of the Fund as to such inspection. The Bank reserves the right,
however, to exhibit the Shareholder records to any person whenever it is
advised by its counsel that it may be held liable for the failure to exhibit
the Shareholder records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon
one hundred twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material
will be borne by the Fund. Additionally, the Bank reserves the right to charge
for any other reasonable expenses associated with such termination and/or a
charge equivalent to the average of three (3) month's fees.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
8.03 The Bank may, without further consent on the part of
the Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation
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<PAGE> 13
("BFDS") which is duly registered as a transfer agent pursuant to Section
17A(c)(1) of the Securities Exchange Act of 1934 ("Section 17A(c)(1)"), or (ii)
a BFDS subsidiary duly registered as a transfer agent pursuant to Section
17A(c)(1); provided, however, that the Bank shall be as fully responsible to
the Fund for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Directors of the Fund.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
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<PAGE> 14
Article 11 Merger of Agreement
11.01 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under their seals
by and through their duly authorized officers, as of the day and year first
above written.
THE GABELLI EQUITY TRUST INC.
BY: /s/ Nicholas E.E. DeStefano
---------------------------
ATTEST:
/s/ Edward A. Leskowicz, Jr.
- ----------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Joseph L. Hooley
---------------------------
ATTEST:
/s/ P.H. Larsen
- ----------------------------
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<PAGE> 1
STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT AND REGISTRAR SERVICES
FEE AGREEMENT
FOR
ALL GABELLI CLOSED-END FUNDS
ONGOING TRANSFER AGENT FEES
$6.00 per shareholder account per annum for open accounts and $4.00 per closed
shareholder account per annum. Includes the issuance and registration of the
first 1,500 credit certificates in a calendar year, per fund. Excess credits
beyond 1,500 to be billed at $1.25 each within a calendar year.
For each dividend reinvestment per participant $.75
For each optional cash infusion $.75
ACCOUNT MAINTENANCE SERVICES
- - Establishing new accounts
- - Preparing and mailing of W-9 solicitation to new accounts without
T.I.N.'s
- - Address changes
- - Processing T.I.N. changes
- - Processing routine and non-routine transfers of ownership
- - Issuance of credit certificates (see limits)
- - Posting debit and credit transactions
- - Providing a daily transfer journal of ownership changes
- - Responding to written shareholder communications
- - Responding to shareholder telephone inquiries; toll-free number
- - Placing and releasing stop transfers
- - Replacing lost certificates
- - Registration of credit certificates (see limits)
<PAGE> 2
Fee Agreement
Page 2
DIVIDEND DISBURSEMENT SERVICES
- - Generate and mail twelve dividend checks per annum with one enclosure
- - Replace lost dividend checks
- - Processing of backup withholding and remittance
- - Processing of non-resident alien withholding and remittance
- - Preparation and filing of Federal Tax Forms 1099 and 1042
- - Preparation and filing of State Tax information as directed
DIVIDEND REINVESTMENT SERVICES PROVIDED
- - Processing optional cash investments and acknowledging same
- - The reinvestment of dividend proceeds for participants
- - Participant withdrawal or sell requests
- - Preparation, mailing and filing of Federal Tax Form 1099B for sales
- - Preparation and mailing of reinvestment statements
ANNUAL MEETING SERVICES
- - Coordination of mailing of proxies, proxy statement, annual report and
business reply envelope (all out-of-pocket expenses, including
printing of proxy cards, postage, and envelope costs will be billed as
incurred)
- - Providing one set of labels of banks, brokers and nominees for broker
search
- - Providing an Annual Meeting Record Date list
- - Tabulation of returned proxies
- - Daily reporting of tabulation results
- - Interface support during solicitation effort
<PAGE> 3
Fee Agreement
Page 3
- - Providing one Inspector of Election at Annual Meeting (out-of-pocket
travel expenses billed as cost as incurred)
- - Providing an Annual Meeting Final Voter list
ADDRESSING AND MAILING SERVICES
- - Preparation for the mailing of three (3) quarterly reports
INFORMATIONAL SERVICES PROVIDED
- - One complete statistical report annually
- Shareholders by state
- Shareholders by classification code
- Shareholders by share grouping
- - Geographical Analysis monthly
TERMS OF FEE AGREEMENT
- - Minimum $1,000 per month
MISCELLANEOUS
- - All out-of-pocket expenses such as postage, stationery, etc. will be
billed as incurred.
ADDITIONAL SERVICES
- - Services over and above this Fee Schedule will be invoiced in
accordance with our current Schedule of Services or priced by
appraisal.
<PAGE> 4
STATE STREET BANK AND TRUST COMPANY
STOCK TRANSFER AGENT FEE AGREEMENT
FOR
ALL GABELLI CLOSED-END FUNDS
FEE AGREEMENT EFFECTIVE DATE: 4/1/95
REQUIRED SIGNATURES:
/s/ Charles V. Rossi 4/11/95
- ------------------------------ -------------------------
State Street Bank and Trust Date
Company
Name: Charles V. Rossi
Title: Vice President
/s/ Bruce Alpert 4/7/95
- ------------------------------ -------------------------
Gabelli Funds, Inc. Date
Name:
Title:
<PAGE> 1
[WILLKIE FARR & GALLAGHER LETTERHEAD]
October 13, 1995
The Gabelli Equity Trust Inc.
One Corporate Center
Rye, New York 10580-1434
Ladies and Gentlemen:
We have acted as counsel to The Gabelli Equity Trust Inc. (the "Fund"), a
corporation organized under the laws of the State of Maryland, in connection
with the issuance of up to 14,931,381 shares (the "Shares") of its common
stock, par value of $.001 per share (the "Common Stock"), pursuant to the
exercise of rights (the "Rights") to purchase common Stock to be distributed to
shareholders of the Fund in accordance with the Fund's Registration Statement
on Form N-2 (File Nos. 33-62323; 811-4700) under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended (the
"Registration Statement").
We have examined copies of the Articles of Incorporation and By-Laws of the
Fund, the Registration Statement, all resolutions adopted by the Fund's Board
of Directors and the Pricing Committee of the Board of Directors and other
records and documents that we have deemed necessary for the purpose of this
opinion. We have also examined such other documents, papers, statutes and
authorities as we have deemed necessary to form a basis for the opinion
hereinafter expressed.
We have assumed that the Fund has no "Principal Shareholder" as such term is
defined in Article VIII of the Fund's Articles of Incorporation and have relied
upon a certificate of the Secretary of the Fund to the effect that the Fund has
no knowledge of any such Principal Shareholder.
In our examination, we have assumed the genuineness of all signatures and the
conformity to original documents of all copies submitted to us. As to various
questions of fact material to our opinion, we have relied upon statements and
certificates of officers and representatives of the Fund and others. As to
matters governed by the laws of the State of Maryland, we have relied upon the
opinion of
<PAGE> 2
The Gabelli Equity Trust Inc.
October 13, 1995
Page 2
Messrs. Venable, Baetjer and Howard that is attached to this opinion.
Based on the foregoing, we are of the opinion that the Shares to be issued upon
exercise of the Rights have been duly authorized and when the Shares have
been sold, issued and paid for as contemplated by the Registration Statement,
the Shares will have been validly and legally issued and will be fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus included as part of the Registration Statement.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE> 1
[VENABLE, BAETJER AND HOWARD, LLP LETTERHEAD]
October 13, 1995
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Re: The Gabelli Equity Trust Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel for The Gabelli Equity Trust
Inc., a Maryland corporation (the "Fund"), in connection with the issuance of
up to 14,931,381 shares (the "Shares") of its common stock, $.001 par value per
share (the "Common Stock") pursuant to the exercise of rights (the "Rights") to
purchase Common Stock to be distributed to the Fund's stockholders in
accordance with the Fund's Registration Statement on Form N-2 (File Nos.
33-62323; 811-4700) (the "Registration Statement").
As special Maryland counsel for the Fund, we are familiar with its
Charter and Bylaws. We have examined the Registration Statement for the
Shares, substantially in the form in which it is to become effective, and the
form of subscription certificate for exercise of the Rights. We have examined
and relied upon a certificate of the Maryland State Department of Assessments
and Taxation to the effect that the Fund is duly incorporated and existing under
the laws of the State of Maryland and is in good standing and duly authorized
to transact business in the State of Maryland. We have further examined and
relied upon a certificate of the Secretary of the Fund with respect to the
Fund's Charter and Bylaws and certain action taken by its Board of Directors
and the Pricing Committee of the Board of Directors, among other matters
addressed in the certificate. We have examined and relied upon such corporate
records of the Fund and other documents and certificates as to factual matters
as we have deemed necessary to render the opinion expressed herein.
We have assumed that the Fund has no "Principal Shareholder" as
defined in Article VIII of the Fund's Charter and have relied upon a
certificate of the Secretary of the Fund to the effect that the Fund has no
knowledge of any such Principal Shareholder.
<PAGE> 2
Willkie Farr & Gallagher
October 13, 1995
Page 2
We have also assumed, without independent verification, the authenticity of all
documents submitted to us as originals, the conformity with originals of all
documents submitted to us as copies, and the genuineness of all signatures.
Based on such examination, we are of the opinion and so advise you
that the Shares to be issued upon exercise of the Rights have been duly
authorized and when the Shares have been sold, issued and paid for as
contemplated by the Registration Statement, the Shares will have been validly
and legally issued and will be fully paid and nonassessable.
This letter expresses our opinion with respect to the Maryland General
Corporation Law governing matters such as the authorization and issuance of
stock. It does not extend to the securities laws or "Blue Sky" laws of
Maryland, to federal securities laws, or to other federal or state laws.
You may rely upon our foregoing opinion in rendering your opinion to
the Fund that is to be filed as an exhibit to the Registration Statement. We
consent to the filing of this opinion as an exhibit to the Registration
Statement. We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to us under the caption "Legal
Matters" in the Prospectus. We do not thereby admit that we are "experts" as
that term is used in the Securities Act of 1933 and the regulations thereunder.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
<PAGE> 1
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 Equity 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
October 4, 1995
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