FINANCIAL STATEMENTS
The following audited financial statements included in the annual report to the Funds shareholders for the year ended
December 31, 2012, together with the report of PricewaterhouseCoopers LLP, are incorporated by reference to the Funds SAI, including: the Schedule of Investments at December 31, 2012, the Statement of Assets and Liabilities as of
December 31, 2012, the Statement of Operations for the Year Ended December 31, 2012, the Statement of Changes in Net Assets Attributable to Common Shareholders for the Year Ended December 31, 2012, and the Notes to Financial
Statements.
All other portions of the annual report to shareholders are not incorporated herein by reference and are not part
of the Funds registration statement, the SAI, the prospectus or any prospectus supplement.
S-7
Base Prospectus dated April 10, 2013
$350,000,000
GAMCO Global Gold, Natural Resources & Income Trust
by
Gabelli
Common Shares of Beneficial Interest
Preferred Shares of Beneficial Interest
Investment
Objectives.
The GAMCO Global Gold, Natural Resources & Income Trust
by Gabelli
(the Fund) is a
non-diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended. The Funds primary investment objective is to provide a high level of current income. The Funds secondary
investment objective is to seek capital appreciation consistent with the Funds strategy and its primary objective. The Funds investment adviser is Gabelli Funds, LLC (the Investment Adviser). An investment in the Fund is not
appropriate for all investors. We cannot assure you that the Funds objectives will be achieved.
Under normal market
conditions, the Fund will attempt to achieve its objectives by investing at least 80% of its assets in equity securities of companies principally engaged in the gold industry and the natural resources industries. The Fund will invest at least 25% of
its assets in the equity securities of companies principally engaged in the exploration, mining, fabrication, processing, distribution or trading of gold or the financing, managing, controlling or operating of companies engaged in
gold-related activities. In addition, the Fund will invest at least 25% of its assets in the equity securities of companies principally engaged in the exploration, production or distribution of natural resources, such as gas, oil, paper,
food and agriculture, forestry products, metals and minerals as well as related transportation companies and equipment manufacturers. The Fund may invest in the securities of companies located anywhere in the world and under normal conditions will
invest at least 40% of its assets in the securities of issuers located in at least three countries other than the United States. As part of its investment strategy, the Fund intends to generate gains through an option strategy of writing
(selling) covered call options on equity securities in its portfolio. When the Fund sells a covered call option, it generates gains in the form of the premium paid by the buyer of the call option, but the Fund forgoes the opportunity to participate
in any increase in the value of the underlying equity security above the exercise price of the option. See Investment Objectives and Policies.
We may offer, from time to time, in one or more offerings, our common shares or preferred shares, each having a par value of $0.001 per share. Shares may be offered at prices and on terms to be set forth
in one or more supplements to this Prospectus (each a Prospectus Supplement). You should read this Prospectus and the applicable Prospectus Supplement carefully before you invest in our shares.
Our shares may be offered directly to one or more purchasers, through agents designated from time to time by us, or to or through
underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents or underwriters involved in the sale of our shares, and will set forth any applicable purchase price, fee, commission or discount arrangement
between us and our agents or underwriters, or among our underwriters, or the basis upon which such amount may be calculated. The Prospectus Supplement relating to any sale of preferred shares will set forth the liquidation preference and information
about the dividend period, dividend rate, any call protection or non-call period and other matters. We may not sell any of our shares through agents, underwriters or dealers without delivery of a Prospectus Supplement describing the method and terms
of the particular offering of our shares. Our common shares are listed on the NYSE MKT (formerly known as the NYSE Amex) under the symbol GGN. Our 6.625% Series A Cumulative Preferred Shares are listed on the NYSE MKT under the
symbol GGN PrA. On April 3, 2013, the last reported sale price of our common shares was $12.03. The net asset value of the Funds common shares at the close of business on April 3, 2013 was $11.70 per share.
Shares of closed-end funds often trade at a discount from net asset value. This creates a risk of loss for an investor purchasing shares in a public offering.
Investing in the Funds shares involves risks. See Risk Factors and Special Considerations on page 26 for factors that should be considered before investing in shares of the Fund.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus may not be used to consummate sales of shares by us through agents, underwriters, or dealers unless accompanied by a Prospectus Supplement.
This prospectus sets forth concisely the information about the Fund that a prospective investor should know before investing. You should
read this prospectus, which contains important information about the Fund, before deciding whether to invest in the shares, and retain it for future reference. A Statement of Additional Information, dated April 10, 2013 containing additional
information about the Fund, has been filed with the Securities and Exchange Commission and is incorporated by reference in its entirety into this prospectus. You may request a free copy of our annual and semiannual reports, request a free copy of
the Statement of Additional Information, the table of contents of which is on page 59 of this prospectus, by calling toll-free (800) GABELLI (422-3554), by visiting the Funds website at www.gabelli.com or by writing to the Fund, or
obtain a copy (and other information regarding the Fund) from the Securities and Exchange Commissions web site (http://www.sec.gov). You may also call this toll-free number to request other information about us and make shareholder inquiries.
Our shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured
depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
You should rely only on the information contained or incorporated by reference in this prospectus. The Fund has not authorized anyone to provide you with different information. The Fund is not making
an offer to sell these securities in any state where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date of this prospectus.
TABLE OF CONTENTS
i
PROSPECTUS SUMMARY
This is only a summary. This summary may not contain all of the information that you should consider before investing in our shares.
You should review the more detailed information contained in this prospectus and the Statement of Additional Information, dated April 10, 2013 (the SAI).
The Fund
The GAMCO Global Gold, Natural Resources & Income Trust
by Gabelli
is a non-diversified, closed-end management investment company organized under the laws of the State of Delaware.
Throughout this prospectus, we refer to the GAMCO Global Gold, Natural Resources & Income Trust
by Gabelli
as the
Fund or as we. See The Fund.
The Offering
We may offer, from time to time, in one or more offerings, our common or preferred shares, $0.001 par value per share. The shares may
be offered at prices and on terms to be set forth in one or more supplements to this Prospectus (each a Prospectus Supplement). The offering price per share of our common shares will not be less than the net asset value per share of our
common shares at the time we make the offering, exclusive of any underwriting commissions or discounts. You should read this Prospectus and the applicable Prospectus Supplement carefully before you invest in our shares. Our shares may be offered
directly to one or more purchasers, through agents designated from time to time by us or to or through underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents, underwriters or dealers involved in the sale
of our shares, and will set forth any applicable purchase price, fee, commission or discount arrangement between us and our agents or underwriters, or among our underwriters, or the basis upon which such amount may be calculated. The Prospectus
Supplement relating to any sale of preferred shares will set forth the liquidation preference and information about the dividend period, dividend rate, any call protection or non-call period and other matters. We may not sell any of our shares
through agents, underwriters or dealers without delivery of a Prospectus Supplement describing the method and terms of the particular offering of our shares. Our common shares are listed on the NYSE MKT under the symbol GGN. Our 6.625%
Series A Cumulative Preferred Shares are listed on the NYSE MKT under the symbol GGN PrA. On April 3, 2013 the last reported sale price of our common shares was $12.03. The net asset value of the Funds common shares at
the close of business on April 3, 2013 was $11.70 per share.
Investment Objectives and Policies
The Funds primary investment objective is to provide a high level of current income. The Funds secondary investment objective
is to seek capital appreciation consistent with the Funds strategy and its primary objective.
Under normal market
conditions, the Fund will attempt to achieve its objectives by investing at least 80% of its assets in equity securities of companies principally engaged in the gold and natural resources industries. The Fund will invest at least 25% of its assets
in the equity securities of companies principally engaged in the exploration, mining, fabrication, processing, distribution or trading of gold or the financing, managing, controlling or operating of companies engaged in gold-related
activities (Gold Companies). In addition, the Fund will invest at least 25% of its assets in the equity securities of companies principally engaged in the exploration, production or distribution of natural resources, such as gas, oil,
paper, food and agriculture, forestry products, metals and minerals as well as related transportation companies and equipment manufacturers (Natural Resources Companies). The Fund may invest in the securities of companies located
anywhere in the world and under normal market conditions will invest at least 40% of its assets in the securities of issuers located in at least three countries other than the United States.
Principally engaged, as used in this prospectus, means a company that derives at least 50% of its revenues or earnings or devotes at least
50% of its assets to the indicated businesses. An issuer will be treated as being located outside the United States if it is either organized or headquartered outside of the United States and has a substantial portion of its operations or
sales outside the United States. Equity securities may include common stocks, preferred stocks, convertible securities, warrants, depository receipts and equity interests in trusts and
1
other entities. Other Fund investments may include investment companies, including exchange-traded funds, securities of issuers subject to reorganization, derivative instruments, debt (including
obligations of the United States Government) and money market instruments. As part of its investment strategy, the Fund intends to generate gains through an option strategy which will normally consist of writing (selling) call options on
equity securities in its portfolio (covered calls), but may, in amounts up to 15% of the Funds assets, consist of writing uncovered call options on securities not held by the Fund, indices comprised of Gold Companies or Natural
Resources Companies or exchange traded funds comprised of such issuers and put options on securities in its portfolio. When the Fund sells a call option, it generates gains in the form of the premium paid by the buyer of the call option, but the
Fund forgoes the opportunity to participate in any increase in the value of the underlying equity security above the exercise price of the option. When the Fund sells a put option, it generates gains in the form of the premium paid by the buyer of
the put option, but the Fund will have the obligation to buy the underlying security at the exercise price if the price of the security decreases below the exercise price of the option. See Investment Objectives and Policies.
There is a risk that the Fund may generate losses as a result of its option strategy. See Risk Factors and Special
ConsiderationsRisks Associated with Covered Calls and Other Option Transactions.
The Fund is not intended for
those who wish to exploit short-term swings in the stock market.
The Investment Advisers investment philosophy with
respect to selecting investments in the gold industry and the natural resources industries is to emphasize quality and value, as determined by such factors as asset quality, balance sheet leverage, management ability, reserve life, cash flow, and
commodity hedging exposure. In addition, in making stock selections, the Investment Adviser looks for securities that it believes may have a superior yield as well as capital gains potential and that allow the Fund to earn possible gains from
writing covered calls on such stocks.
Preferred Shares and Borrowings
On October 16, 2007, the Fund completed the placement of $100 million of Cumulative Preferred Shares (Preferred
Shares) consisting of 4 million shares designated as Series A and paying dividends of an annual rate equal to 6.625% of liquidation preference. On March 12, 2013, the Fund announced the partial redemption of 2,000,000 Preferred
Shares on April 11, 2013. The Preferred Shares are senior to the common shares and result in the financial leveraging of the common shares. Such leveraging tends to magnify both the risks and opportunities to common shareholders. Dividends on the
Preferred Shares are cumulative. The Fund is required by the Investment Company Act of 1940, as amended (the 1940 Act) and by the Statement of Preferences to meet certain asset coverage tests with respect to the Preferred Shares. If the
Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Preferred Shares at the redemption price of $25 per share plus an amount equal to the accumulated and unpaid
dividends whether or not declared on such shares in order to meet the requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Funds ability to pay dividends to common shareholders and could lead
to sales of portfolio securities at inopportune times. The income received on the Funds assets may vary in a manner unrelated to the fixed rate, which could have either a beneficial or detrimental impact on net investment income and gains
available to common shareholders. If the Fund has insufficient investment income and gains, all or a portion of the distributions to preferred shareholders would come from the common shareholders capital. Such distributions reduce the net
assets attributable to common shareholders since the liquidation value of the preferred shareholders is constant.
The Fund may
issue additional series of preferred shares or borrow money to leverage its investments. If the Funds Board of Trustees (the Board of Trustees, each member of the Board of Trustees individually a Trustee) determines
that it may be advantageous to the holders of the Funds common shares for the Fund to utilize such leverage, the Fund may issue additional series of preferred shares or borrow money. Any preferred shares issued by the Fund will pay
distributions either at a fixed rate or at rates that will be reset frequently based on short-term interest rates. Any borrowings may also be at fixed or floating rates. Leverage creates a greater risk of loss as well as a potential for more gains
for the common shares than if leverage were not used. See Risk
2
Factors and Special ConsiderationsLeverage Risks. The Fund may also engage in investment management techniques which will not be considered senior securities if the Fund establishes
in a segregated account cash or other liquid securities or sets aside assets on the accounting records equal to the Funds obligations in respect of such techniques.
Dividends and Distributions
The Fund intends to make regular monthly cash
distributions of all or a portion of its investment company taxable income (which includes ordinary income and realized short-term capital gains) to common shareholders. The Fund also intends to make annual distributions of its realized capital
gains (which is the excess of net long-term capital gains over net short-term capital losses).
A portion of the Funds distributions on its common shares for recent periods have included, or have been estimated to include, a return of
capital. A portion of the distributions to the preferred shareholders may also be sourced from capital attributable to the common shareholders. Any return of capital that is a component of a distribution is not sourced from realized gains of the
Fund and that portion should not be considered by investors as yield or total return on their investment in the Fund.
Various factors will affect the level of the Funds income, such as its asset mix and use of covered call strategies. To
permit the Fund to maintain more stable monthly distributions, the Fund may from time to time distribute less than the entire amount of income earned in a particular period, which would be available to supplement future distributions. As a result,
the distributions paid by the Fund for any particular monthly period may be more or less than the amount of income actually earned by the Fund during that period. Because the Funds distribution policy may be changed by the Board of Trustees at
any time and the Funds income will fluctuate, there can be no assurance that the Fund will pay dividends or distributions at a particular rate. See Dividends and Distributions.
Investment company taxable income (including dividend income) and capital gain distributions paid by the Fund are automatically reinvested
in additional shares of the Fund unless a shareholder elects to receive cash or the shareholders broker does not provide reinvestment services. See Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan.
Use of Proceeds
The
Fund will use the net proceeds from the offering to purchase portfolio securities in accordance with its investment objectives and policies as appropriate investment opportunities are identified, which is expected to substantially be completed
within three months; however, changes in market conditions could result in the Funds anticipated investment period extending to as long as six months. See Use of Proceeds.
Exchange Listing
The Funds common shares are listed on the NYSE MKT
under the trading or ticker symbol GGN. The Funds Preferred Shares are listed on the NYSE MKT under the ticker symbol GGN PrA. See Description of the Shares. Any additional series of fixed rate
preferred shares would also likely be listed on a stock exchange.
Market Price of Shares
Common shares of closed-end investment companies often trade at prices lower than their net asset value. Common shares of closed-end
investment companies may trade during some periods at prices higher than their net asset value and during other periods at prices lower than their net asset value. The Fund cannot assure you that its common shares will trade at a price higher than
or equal to net asset value. The Funds net asset value will be reduced immediately following this offering by the sales load and the amount of the offering expenses paid by the Fund. See Use of Proceeds.
In addition to net asset value, the market price of the Funds common shares may be affected by such factors as the Funds
dividend and distribution levels (which are affected by expenses) and stability, market liquidity, market supply and demand, unrealized gains, general market and economic conditions and other factors. See Risk Factors and Special
Considerations, Description of the Shares and Repurchase of Common Shares.
3
The common shares are designed primarily for long-term investors, and you should not
purchase common shares of the Fund if you intend to sell them shortly after purchase.
Fixed rate preferred shares may also
trade at premiums to or discounts from their liquidation preference for a variety of reasons, including changes in interest rates.
Risk
Factors and Special Considerations
Risk is inherent in all investing. Therefore, before investing in shares of the Fund,
you should consider the risks carefully.
Total Return Risk.
The Fund utilizes several investment
management techniques in an effort to generate positive total return. The risks of these techniques, such as option writing, leverage, concentration in certain industries, and investing in emerging markets, are described in the following paragraphs.
Taken together these and other techniques represent a risk that the Fund will experience a negative total return even in market environments that are generally positive and that the Funds returns, both positive and negative, may be more
volatile than if the Fund did not utilize these investment techniques.
Industry Risks.
The
Funds investments will be concentrated in the gold and natural resources industries. Because the Fund is concentrated in these industries, it may present more risks than if it were broadly diversified over numerous industries and sectors of
the economy. A downturn in the gold or natural resources industries would have a larger impact on the Fund than on an investment company that does not concentrate in such industries.
Under normal market conditions, the Fund will invest at least 25% of its assets in equity securities of Gold Companies. Equity securities
of Gold Companies may experience greater volatility than companies not involved in the gold industry. Investments related to gold are considered speculative and are affected by a variety of worldwide economic, financial and political factors. The
price of gold may fluctuate sharply over short periods of time due to changes in inflation or expectations regarding inflation in various countries, the availability of supplies of gold, changes in industrial and commercial demand, gold sales by
governments, central banks or international agencies, investment speculation, monetary and other economic policies of various governments and government restrictions on private ownership of gold. The Investment Advisers judgments about trends
in the prices of securities of Gold Companies may prove to be incorrect. It is possible that the performance of securities of Gold Companies may lag the performance of other industries or the broader market as a whole.
Under normal market conditions, the Fund will invest at least 25% of its assets in equity securities of Natural Resources Companies. A
downturn in the indicated natural resources industries would have a larger impact on the Fund than on an investment company that does not invest significantly in such industries. Such industries can be significantly affected by the supply of and
demand for the indicated commodities and related services, exploration and production spending, government regulations, world events and economic conditions. The oil, paper, food and agriculture, forestry products, metals and minerals industries can
be significantly affected by events relating to international political developments, the success of exploration projects, commodity prices, and tax and government regulations. The stock prices of Natural Resources Companies may also experience
greater price volatility than other types of common stocks. Securities issued by Natural Resources Companies are sensitive to changes in the prices of, and in supply and demand for, the indicated commodities. The value of securities issued by
Natural Resources Companies may be affected by changes in overall market movements, changes in interest rates, or factors affecting a particular industry or commodity, such as weather, embargoes, tariffs, policies of commodity cartels and
international economic, political and regulatory developments. The Investment Advisers judgments about trends in the prices of these securities and commodities may prove to be incorrect. It is possible that the performance of securities of
Natural Resources Companies may lag the performance of other industries or the broader market as a whole. See Risk Factors and Special ConsiderationsIndustry RisksIndustry Risks.
Supply and Demand Risk.
A decrease in the production of, or exploitation of, gold, gas, oil, paper, food and
agriculture, forestry products, metals or minerals or a decrease in the volume of such commodities available
4
for transportation, mining, processing, storage or distribution may adversely impact the financial performance of the Funds investments. Production declines and volume decreases could be
caused by various factors, including catastrophic events affecting production, depletion of resources, labor difficulties, environmental proceedings, increased regulations, equipment failures and unexpected maintenance problems, import supply
disruption, increased competition from alternative energy sources or commodity prices. Sustained declines in demand for the indicated commodities could also adversely affect the financial performance of Gold and Natural Resources Companies over the
long-term. Factors which could lead to a decline in demand include economic recession or other adverse economic conditions, higher fuel taxes or governmental regulations, increases in fuel economy, consumer shifts to the use of alternative fuel
sources, changes in commodity prices, or weather. See Risk Factors and Special ConsiderationsIndustry Risks Supply and Demand Risk.
Depletion and Exploration Risk.
Many Gold and Natural Resources Companies are either engaged in the production or exploitation of the particular commodities or are engaged in
transporting, storing, distributing and processing such commodities. To maintain or increase their revenue level, these companies or their customers need to maintain or expand their reserves through exploration of new sources of supply, through the
development of existing sources, through acquisitions, or through long-term contracts to acquire reserves. The financial performance of Gold and Natural Resources Companies may be adversely affected if they, or the companies to whom they provide
products or services, are unable to cost-effectively acquire additional products or reserves sufficient to replace the natural decline. See Risk Factors and Special ConsiderationsIndustry RisksDepletion and Exploration Risk.
Regulatory Risk.
Gold Companies and Natural Resources Companies may be subject to extensive
government regulation in virtually every aspect of their operations, including how facilities are constructed, maintained and operated, environmental and safety controls, and in some cases the prices they may charge for the products and services
they provide. Various governmental authorities have the power to enforce compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil and criminal penalties, including civil fines,
injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future, which would likely increase compliance costs and may adversely affect the financial performance of Gold Companies and Natural Resources
Companies. See Risk Factors and Special ConsiderationsIndustry RisksRegulatory Risk.
Commodity
Pricing Risk.
The operations and financial performance of Gold and Natural Resources Companies may be directly affected by the prices of the indicated commodities, especially those Gold and Natural Resources Companies for
whom the commodities they own are significant assets. Commodity prices fluctuate for several reasons, including changes in market and economic conditions, levels of domestic production, impact of governmental regulation and taxation, the
availability of transportation systems and, in the case of oil and gas companies in particular, conservation measures and the impact of weather. Volatility of commodity prices which may lead to a reduction in production or supply, may also
negatively affect the performance of Gold and Natural Resources Companies which are solely involved in the transportation, processing, storing, distribution or marketing of commodities. Volatility of commodity prices may also make it more difficult
for Gold and Natural Resources Companies to raise capital to the extent the market perceives that their performance may be directly or indirectly tied to commodity prices. See Risk Factors and Special ConsiderationsIndustry
RisksCommodity Pricing Risk.
Risks Associated with Covered Calls and Other Option
Transactions.
There are several risks associated with transactions in options on securities. For example, there are significant differences between the securities and options markets that could result in an imperfect
correlation between these markets, causing a given covered call option transaction not to achieve its objectives. A decision as to whether, when and how to use covered call options (or other options) involves the exercise of skill and judgment, and
even a well-conceived transaction may be unsuccessful because of market behavior or unexpected events. The use of options may require the Fund to sell portfolio securities at inopportune times or for prices other than current market values, may
limit the amount of appreciation the Fund can realize on an investment, or may cause the Fund to hold a security it might otherwise sell. As the writer of a covered call option, the Fund forgoes, during the options life, the opportunity to
profit from increases in the market value of the security covering the call option above the exercise price of the
5
call option, but has retained the risk of loss should the price of the underlying security decline. Although such loss would be offset in part by the option premium received, in a situation in
which the price of a particular stock on which the Fund has written a covered call option declines rapidly and materially or in which prices in general on all or a substantial portion of the stocks on which the Fund has written covered call options
decline rapidly and materially, the Fund could sustain material depreciation or loss in its net assets to the extent it does not sell the underlying securities (which may require it to terminate, offset or otherwise cover its option position as
well).
There can be no assurance that a liquid market will exist when the Fund seeks to close out an option position. If the
Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option expired without exercise. Reasons for the absence of a liquid secondary market for
exchange-traded options include the following: (i) there may be insufficient trading interest; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the trading facilities may not be adequate to handle
current trading volume; or (vi) the relevant exchange could discontinue the trading of options. In addition, the Funds ability to terminate over-the-counter options may be more limited than with exchange-traded options and may involve the
risk that counterparties participating in such transactions will not fulfill their obligations. See Risk Factors and Special ConsiderationsRisks Associated with Covered Calls and Other Option Transactions.
Limitation on Covered Call Writing Risk.
The number of covered call options the Fund can write is limited by
the number of shares of common stock the Fund holds. Furthermore, the Funds covered call options and other options transactions will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on
which such options are traded. As a result, the number of covered call options that the Fund may write or purchase may be affected by options written or purchased by it and other investment advisory clients of the Investment Adviser. See Risk
Factors and Special ConsiderationsRisks Associated with Covered Calls and Other Option TransactionsLimitation on Covered Call Writing Risk.
Risks Associated with Uncovered Calls.
There are special risks associated with uncovered option writing which expose the Fund to potentially significant loss. As the writer
of an uncovered call option, the Fund has no risk of loss should the price of the underlying security decline, but bears unlimited risk of loss should the price of the underlying security increase above the exercise price until the Fund covers its
exposure. As with writing uncovered calls, the risk of writing uncovered put options is substantial. The writer of an uncovered put option bears a risk of loss if the value of the underlying instrument declines below the exercise price. Such loss
could be substantial if there is a significant decline in the value of the underlying instrument. See Risk Factors and Special ConsiderationsRisks Associated with Uncovered Calls.
Equity Risk.
Investing in the Fund involves equity risk, which is the risk that the securities held by the
Fund will fall in market value due to adverse market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate and the particular circumstances and performance of particular
companies whose securities the Fund holds. An investment in the Fund represents an indirect economic stake in the securities owned by the Fund, which are for the most part traded on securities exchanges or in the over-the-counter markets. The market
value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. The net asset value of the Fund may at any point in time be worth less than the amount at the time the shareholder invested in the
Fund, even after taking into account any reinvestment of distributions. See Risk Factors and Special ConsiderationsEquity Risk.
Leverage Risk.
The use of leverage, which can be described as exposure to changes in price at a ratio greater than the amount of equity invested, either through the issuance
of preferred shares, borrowing or other forms of market exposure, magnifies both the favorable and unfavorable effects of price movements in the investments made by the Fund. To the extent that the Fund is leveraged in its investment operations, the
Fund will be subject to substantial risk of loss. The Fund cannot assure you that borrowings or the issuance of preferred shares will result in a higher yield or return to the holders of the common shares. As of December 31, 2012, the amount of
leverage represented approximately 7% of the Funds net assets.
6
Any decline in the net asset value of the Funds investments would be borne
entirely by the holders of common shares. Therefore, if the market value of the Funds portfolio declines, the leverage will result in a greater decrease in net asset value to the holders of common shares than if the Fund were not leveraged.
This greater net asset value decrease will also tend to cause a greater decline in the market price for the common shares. The Fund might be in danger of failing to maintain the required asset coverage of its borrowings or preferred shares or of
losing its ratings on its borrowings or preferred shares or, in an extreme case, the Funds current investment income might not be sufficient to meet the interest or dividend requirements on its borrowings or preferred shares. In order to
counteract such an event, the Fund might need to liquidate investments in order to fund a redemption of some or all of the preferred shares.
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Preferred Share Risk.
The issuance of preferred shares causes the net asset value and market value of the common shares
to become more volatile. If the dividend rate on the preferred shares approaches the net rate of return on the Funds investment portfolio, the benefit of leverage to the holders of the common shares would be reduced. If the dividend rate on
the preferred shares plus the management fee annual rate of 1.00% exceeds the net rate of return on the Funds portfolio, the leverage will result in a lower rate of return to the holders of common shares than if the Fund had not issued
preferred shares. If the Fund has insufficient investment income and gains, all or a portion of the distributions to preferred shareholders would come from the common shareholders capital. Such distributions reduce the net assets attributable
to common shareholders since the liquidation value of the preferred shareholders is constant.
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In addition, the Fund pays (and the holders of common shares will bear) all costs and expenses relating to the issuance
and ongoing maintenance of the preferred shares, including additional advisory fees. Holders of preferred shares may have different interests than holders of common shares and at times may have disproportionate influence over the Funds
affairs. Holders of preferred shares, voting separately as a single class, have the right to elect two members of the Board of Trustees at all times and in the event dividends become in arrears for two full years would have the right to elect a
majority of the Trustees until the arrearage is completely eliminated. In addition, preferred shareholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion of the Fund to open-end
status, and accordingly can veto any such changes.
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Portfolio Guidelines of Rating Agencies for Preferred Shares and/or Credit Facility.
In order to obtain attractive credit
quality ratings for preferred shares or borrowings, the Fund must comply with investment quality, diversification and other guidelines established by the relevant rating agencies. These guidelines could affect portfolio decisions and may be more
stringent than those imposed by the 1940 Act.
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Foreign Securities Risk.
Because
many of the worlds Gold Companies and Natural Resources Companies are located outside of the United States, the Fund may have a significant portion of its investments in securities that are traded primarily in foreign markets and that are not
subject to the requirements of the U.S. securities laws, markets and accounting requirements (Foreign Securities). Investments in Foreign Securities involve certain considerations and risks not ordinarily associated with investments
in securities of U.S. issuers. Foreign companies are not generally subject to the same accounting, auditing and financial standards and requirements as those applicable to U.S. companies. Foreign securities exchanges, brokers and listed
companies may be subject to less government supervision and regulation than exists in the United States Dividend and interest income may be subject to withholding and other foreign taxes, which may adversely affect the net return on such
investments. There may be difficulty in obtaining or enforcing a court judgment abroad, and it may be difficult to effect repatriation of capital invested in certain countries. In addition, with respect to certain countries, there are risks of
expropriation, confiscatory taxation, political or social instability or diplomatic developments that could affect assets of the Fund held in foreign countries. See Risk Factors and Special ConsiderationsForeign Securities Risk.
Emerging Markets Risk.
The Fund may invest without limit in securities of issuers whose primary
operations or principal trading market is in an emerging market. An emerging market country is any country that is considered to be an emerging or developing country by the International Bank for Reconstruction and
Development (the World Bank). Investing in securities of companies in emerging markets may entail special
7
risks relating to potential political and economic instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions on foreign investment, the lack of
hedging instruments and restrictions on repatriation of capital invested. Emerging securities markets are substantially smaller, less developed, less liquid and more volatile than the major securities markets. The limited size of emerging securities
markets and limited trading value compared to the volume of trading in U.S. securities could cause prices to be erratic for reasons apart from factors that affect the quality of the securities. For example, limited market size may cause prices
to be unduly influenced by traders who control large positions. Adverse publicity and investors perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of portfolio securities, especially in these
markets. Other risks include high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries;
overdependence on exports, including gold and natural resources exports, making these economies vulnerable to changes in commodity prices; overburdened infrastructure and obsolete or unseasoned financial systems; environmental problems; less
developed legal systems; and less reliable securities custodial services and settlement practices.
Foreign Currency
Risk.
The Fund expects to invest in companies whose securities are denominated or quoted in currencies other than U.S. dollars or have significant operations or markets outside of the United States. In such instances,
the Fund will be exposed to currency risk, including the risk of fluctuations in the exchange rate between U.S. dollars (in which the Funds shares are denominated) and such foreign currencies and the risk of currency devaluations. Certain
non-U.S. currencies, primarily in developing countries, have been devalued in the past and might face devaluation in the future. Currency devaluations generally have a significant and adverse impact on the devaluing countrys economy in
the short and intermediate term and on the financial condition and results of companies operations in that country. Currency devaluations may also be accompanied by significant declines in the values and liquidity of equity and debt securities
of affected governmental and private sector entities generally. To the extent that affected companies have obligations denominated in currencies other than the devalued currency, those companies may also have difficulty in meeting those obligations
under such circumstances, which in turn could have an adverse effect upon the value of the Funds investments in such companies. There can be no assurance that current or future developments with respect to foreign currency devaluations will
not impair the Funds investment flexibility, its ability to achieve its investment objectives or the value of certain of its foreign currency denominated investments. See Risk Factors and Special ConsiderationsForeign Currency
Risk.
Market Discount Risk.
Whether investors will realize gains or losses upon the sale
of common shares of the Fund will depend upon the market price of the shares at the time of sale, which may be less or more than the Funds net asset value per share. Since the market price of the common shares will be affected by various
factors as the Funds dividend and distribution levels (which are in turn affected by expenses) and stability, net asset value, market liquidity, the relative demand for and supply of the common shares in the market, unrealized gains, general
market and economic conditions and other factors beyond the control of the Fund, we cannot predict whether the common shares will trade at, below or above net asset value or at, below or above the public offering price. Common shares of closed-end
funds often trade at a discount from their net asset value and the Funds shares may trade at such a discount. This risk may be greater for investors expecting to sell their common shares of the Fund soon after completion of the public
offering. The common shares of the Fund are designed primarily for long-term investors, and investors in the common shares should not view the Fund as a vehicle for trading purposes. See Risk Factors and Special ConsiderationsMarket
Discount Risk.
Common Stock Risk.
Common stock of an issuer in the Funds portfolio
may decline in price for a variety of reasons including if the issuer fails to make anticipated dividend payments. Common stock in which the Fund will invest is structurally subordinated as to income and residual value to preferred stock, bonds and
other debt instruments in a companys capital structure in terms of priority to corporate income, and therefore will be subject to greater dividend risk than preferred stock or debt instruments of such issuers. In addition, while common stock
has historically generated higher average returns than fixed income securities, common stock has also experienced significantly more volatility in those returns. See Risk Factors and Special ConsiderationsCommon Stock Risk.
8
Convertible Securities Risk.
Convertible securities
generally offer lower interest or dividend yields than non-convertible securities of similar quality. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. In
the absence of adequate anti-dilution provisions in a convertible security, dilution in the value of the Funds holding may occur in the event the underlying stock is subdivided, additional equity securities are issued for below market value, a
stock dividend is declared, or the issuer enters into another type of corporate transaction that has a similar effect. See Risk Factors and Special ConsiderationsConvertible Securities Risk.
Income Risk.
The income shareholders receive from the Fund is expected to be based primarily on income the
Fund earns from its investment strategy of writing covered calls and dividends and other distributions received from its investments. If the Funds covered call strategy fails to generate sufficient income or the distribution rates or yields of
the Funds holdings decrease, shareholders income from the Fund could decline. See Risk Factors and Special ConsiderationsIncome Risk.
Distribution Risk for Equity Income Portfolio Securities.
The Fund intends to invest in the shares of issuers that pay dividends or other distributions. Such dividends or
other distributions are not guaranteed, and an issuer may forgo paying dividends or other distributions at any time and for any reason. See Risk Factors and Special ConsiderationsDistribution Risk for Equity Income Portfolio
Securities.
Special Risks Related to Preferred Securities.
Special risks associated with
investing in preferred securities include deferral of distributions or dividend payments, in some cases the right of an issuer never to pay missed dividends, subordination to debt and other liabilities, illiquidity, limited voting rights and
redemption by the issuer. Because the Fund has no limit on its investment in non-cumulative preferred securities, the amount of dividends the Fund pays may be adversely affected if an issuer of a non-cumulative preferred stock held by the Fund
determines not to pay dividends on such stock. There is no assurance that dividends or distributions on preferred stock in which the Fund invests will be declared or otherwise made payable. See Risk Factors and Special
ConsiderationsSpecial Risks Related to Preferred Securities.
Interest Rate
Risk.
Rising interest rates may adversely affect the financial performance of Gold Companies and Natural Resources Companies by increasing their costs of capital. This may reduce their ability to execute acquisitions or
expansion projects in a cost-effective manner.
During periods of declining interest rates, the issuer of a preferred stock or
fixed income security may be able to exercise an option to prepay principal earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as call or prepayment risk. During periods of rising interest rates, the
average life of certain types of securities may be extended because of slower than expected principal payments. This may prolong the length of time the security pays a below market interest rate, increase the securitys duration and reduce the
value of the security. This is known as extension risk. See Risk Factors and Special ConsiderationsInterest Rate Risk.
Inflation Risk.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As
inflation increases, the real value of the Funds shares and distributions thereon can decline. In addition, during any periods of rising inflation, dividend rates of any variable rate preferred shares or debt securities issued by the Fund
would likely increase, which would tend to further reduce returns to common shareholders. See Risk Factors and Special ConsiderationsInflation Risk.
Illiquid Investments Risk.
Although the Fund expects that its portfolio will primarily be comprised of liquid securities, the Fund may invest up to 15% of its assets in
unregistered securities and otherwise illiquid investments. Unregistered securities are securities that cannot be sold publicly in the United States without registration under the Securities Act of 1933. An illiquid investment is a security or other
investment that cannot be disposed of within seven days in the ordinary course of business at approximately the value at which the Fund has valued the investment. Unregistered securities often can be resold only in privately negotiated transactions
with a limited number of purchasers or in a public offering registered under the Securities Act of 1933. Considerable delay could be encountered in either event and, unless otherwise contractually provided for, the Funds
9
proceeds upon sale may be reduced by the costs of registration or underwriting discounts. The difficulties and delays associated with such transactions could result in the Funds inability
to realize a favorable price upon disposition of unregistered securities, and at times might make disposition of such securities impossible. In addition, the Fund may be unable to sell other illiquid investments when it desires to do so, resulting
in the Fund obtaining a lower price or being required to retain the investment. Illiquid investments generally must be valued at fair value, which is inherently less precise than utilizing market values for liquid investments, and may lead to
differences between the price a security is valued for determining the Funds net asset value and the price the Fund actually receives upon sale. See Risk Factors and Special ConsiderationsIlliquid Investments Risk.
Investment Companies.
The Fund may invest in the securities of other investment companies,
including exchange traded funds, to the extent permitted by law. To the extent the Fund invests in the common equity of investment companies, the Fund will bear its ratable share of any such investment companys expenses, including management
fees. The Fund will also remain obligated to pay management fees to the Investment Adviser with respect to the assets invested in the securities of other investment companies. In these circumstances, holders of the Funds common shares will be
in effect subject to duplicative investment expenses. See Risk Factors and Special ConsiderationsInvestment Companies.
Special Risks of Derivative Transactions.
The Fund may participate in derivative transactions. Such transactions entail certain execution, market, liquidity, hedging and tax
risks. Participation in the options or futures markets, in other derivatives transactions, or in currency exchange transactions involves investment risks and transaction costs to which the Fund would not be subject absent the use of these
strategies. If the Investment Advisers prediction of movements in the direction of the securities, foreign currency, interest rate or other referenced instruments or markets is inaccurate, the consequences to the Fund may leave the Fund in a
worse position than if it had not used such strategies. See Risk Factors and Special ConsiderationsSpecial Risks of Derivative Transactions.
Non-Investment Grade Securities Risk.
The Fund may invest up to 10% of its assets in fixed income and convertible securities rated in the lower rating categories of
recognized statistical rating agencies, such as securities rated CCC or lower by Standard & Poors Ratings Services (S&P) or Caa by Moodys Investors Service, Inc.
(Moodys), or non-rated securities of comparable quality. These high yield securities, also sometimes referred to as junk bonds, generally pay a premium above the yields of U.S. government securities or debt
securities of investment grade issuers because they are subject to greater risks than these securities. See Risk Factors and Special ConsiderationsNon-Investment Grade Securities Risk.
Special Risks to Holders of Fixed Rate Preferred Shares.
During an initial period, which is not expected to
exceed 30 days after the date of its initial issuance of any preferred shares intended to be listed on an exchange, such shares may not be listed. Consequently, an investment in such shares may be illiquid during such period. Preferred shares not
intended to be listed on an exchange may be illiquid as long as they are outstanding. Preferred shares may trade at a premium to or discount from liquidation preference for a variety of reasons, including changes in interest rates and credit quality
of the Fund.
Dependence on Key Personnel.
The Investment Adviser is dependent upon the expertise
of Mr. Mario J. Gabelli. If the Investment Adviser were to lose the services of Mr. Gabelli, it 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.
The Fund is dependent upon the
expertise of Vincent Hugonnard-Roche as the sole option strategist on the Funds portfolio management team. If the Fund were to lose the services of Mr. Roche, it could be temporarily adversely affected until a suitable replacement could
be found. See Risk Factors and Special ConsiderationsDependence on Key Personnel.
Long-Term Objective;
Not a Complete Investment Program.
The Fund is intended for investors seeking a high level of current income. The Fund is not meant to provide a vehicle for those who wish to exploit short-term swings in the stock market.
An investment in shares of the Fund should not be considered a complete investment program. Each shareholder should take into account the Funds investment objectives as well as the shareholders
10
other investments when considering an investment in the Fund. See Risk Factors and Special ConsiderationsLong-Term Objective; Not a Complete Investment Program.
Management Risk.
The Fund is subject to management risk because its portfolio is actively managed. The
Investment Adviser applies investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will produce the desired results. See Risk Factors and Special
ConsiderationsManagement Risk.
Portfolio Turnover.
The Fund may have a high turnover
ratio which may result in higher expenses and lower after-tax return to shareholders than if the Fund had a lower turnover ratio.
Non-Diversified Status.
The Fund is classified as a non-diversified investment company under the 1940 Act, which means the Fund is not limited by the 1940
Act in the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment company, the Fund may invest in the securities of individual issuers to a greater degree than a diversified investment
company. As a result, the Fund may be more vulnerable to events affecting a single issuer and therefore, subject to greater volatility than a fund that is more broadly diversified. Accordingly, an investment in the Fund may present greater risk to
an investor than an investment in a diversified company. See Risk Factors and Special ConsiderationsNon-Diversified Status.
Market Disruption and Geopolitical Risk.
Geopolitical events, such as terrorist attacks and wars, have led to, and may in the future lead to, increased short-term market
volatility and may have long-term effects on U.S. and world economies and markets. The nature, scope and duration of the war and occupation cannot be predicted with any certainty. Similar events in the future or other disruptions of financial
markets could affect interest rates, securities exchanges, auctions, secondary trading, ratings, credit risk, inflation, energy prices and other factors relating to the common shares. See Risk Factors and Special ConsiderationsMarket
Disruption and Geopolitical Risk.
Recent Economic Events.
While the U.S. and global
markets had experienced extreme volatility and disruption for an extended period of time beginning in 2007, the markets have more recently witnessed more stabilized economic activity as expectations for an economic recovery increased. However, risks
to a robust resumption of growth persist: a weak consumer weighed down by too much debt and continuing joblessness, the growing size of the federal budget deficit and national debt, and the threat of inflation. A return to unfavorable economic
conditions could impair the Funds ability to execute its investment strategies. See Risk Factors and Special ConsiderationsRecent Economic Events.
2013 U.S. Federal Budget.
The proposed U.S. federal budget for fiscal year 2013 calls for the elimination of approximately $39 billion in tax incentives widely used
by oil, gas and coal companies and the imposition of new fees on certain energy producers. The elimination of such tax incentives and imposition of such fees could adversely affect Natural Resources Companies in which the Fund invests and/or the
natural resources sector generally. See Risk Factors and Special Considerations2013 U.S. Federal Budget.
Government Intervention in Financial Markets Risk.
The recent instability in the financial markets has led
the U.S. government and foreign governments to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme volatility, and in some cases a lack of
liquidity. U.S. federal and state governments and foreign governments, their regulatory agencies or self regulatory organizations may take additional actions that affect the regulation of the securities in which the Fund invests, or the issuers
of such securities, in ways that are unforeseeable. Issuers of corporate securities might seek protection under the bankruptcy laws. Legislation or regulation may also change the way in which the Fund itself is regulated. Such legislation or
regulation could limit or preclude the Funds ability to achieve its investment objectives. The Investment Adviser will monitor developments and seek to manage the Funds portfolio in a manner consistent with achieving the Funds
investment objectives, but there can be no assurance that it will be successful in doing so. See Risk Factors and Special ConsiderationsGovernment Intervention in Financial Markets Risk.
11
Anti-Takeover Provisions.
The Funds governing
documents include provisions that could limit the ability of other entities or persons to acquire control of the Fund or convert the Fund to an open-end fund. See Risk Factors and Special ConsiderationsAnti-Takeover Provisions and
Anti-Takeover Provisions of the Funds Governing Documents.
Management and Fees
Gabelli Funds, LLC serves as the Funds Investment Adviser and is compensated for its services and its related expenses at an annual
rate of 1.00% of the Funds average weekly net assets, as defined in the Funds investment advisory agreement, with no deduction for the liquidation preference of any outstanding preferred shares. Consequently, if the Fund has preferred
shares outstanding, the management fee as a percentage of net assets attributable to the common shares will be higher. The Investment Adviser is responsible for administration of the Fund and currently utilizes and pays the fees of a third party
sub-administrator. See Management of the Fund.
Repurchase of Common Shares and Anti-Takeover Provisions
The Funds Board of Trustees has authorized the Fund (and the Fund accordingly reserves freedom of action) to repurchase its common
shares in the open market when the common shares are trading at a discount of 7.5% or more from net asset value (or such other percentage as the Board of Trustees may determine from time to time). Although the Board of Trustees has authorized such
repurchases, the Fund is not required to repurchase its common shares. The Board of Trustees has not established a limit on the number of shares that could be purchased during such period. Such repurchases are subject to certain notice and other
requirements under the 1940 Act. See Repurchase of Common Shares.
Certain provisions of the Funds
Agreement and Declaration of Trust and By-Laws (collectively, the Governing Documents) may be regarded as anti-takeover provisions. Pursuant to these provisions, only one of three classes of Trustees is elected each year, and
the affirmative vote of the holders of 75% of the outstanding shares of the Fund are necessary to authorize the conversion of the Fund from a closed-end to an open-end investment company or to authorize certain transactions between the Fund and a
beneficial owner of more than 5% of any class of the Funds capital stock. The overall effect of these provisions is to render more difficult the accomplishment of a merger with, or the assumption of control by, a principal shareholder. These
provisions may have the effect of depriving Fund common shareholders of an opportunity to sell their shares at a premium to the prevailing market price. The issuance of preferred shares could make it more difficult for the holders of common shares
to avoid the effect of these provisions. See Anti-Takeover Provisions of the Funds Governing Documents.
Custodian,
Transfer Agent and Dividend Disbursing Agent
The Bank of New York Mellon Corporation (Mellon), located at 135
Santilli Highway, Everett, Massachusetts 02149, serves as the custodian (the Custodian) of the Funds assets pursuant to a custody agreement. Under the custody agreement, the Custodian holds the Funds assets in compliance with
the 1940 Act. For its services, the Custodian will receive a monthly fee paid by the Fund based upon, among other things, the average value of the total assets of the Fund, plus certain charges for securities transactions and out-of-pocket expenses.
American Stock Transfer & Trust Company (American Stock Transfer), located at 59 Maiden Lane,
New York, New York 10038, serves as the Funds distribution disbursing agent, as agent under the Funds automatic dividend reinvestment and voluntary cash purchase plan and as transfer agent and registrar with respect to the common
and preferred shares of the Fund.
12
SUMMARY OF FUND EXPENSES
The following table shows the Funds expenses as a percentage of net assets attributable to common shares.
|
|
|
|
|
Shareholder Transaction Expenses
|
|
|
|
|
Sales Load (as a percentage of offering price)
|
|
|
1.61
|
%(1)
|
Offering Expenses Borne by the Fund (as a percentage of offering price)
|
|
|
0.02
|
%(1)
|
Dividend Reinvestment Plan Fees
|
|
|
None
|
(2)
|
Preferred Share Offering Expenses Borne by the Fund (as a percentage of net assets attributable to common shares)
|
|
|
0.03
|
%(3)
|
|
|
|
|
|
|
|
Percentage of Net
Assets
Attributable
to Common Shares
|
|
Annual Expenses
|
|
|
|
|
Management Fees
|
|
|
1.13
|
%(4)
|
Interest on Borrowed Funds
|
|
|
None
|
|
Other Expenses
|
|
|
0.11
|
%(4)
|
Dividends on preferred shares
|
|
|
0.73
|
%(5)
|
|
|
|
|
|
Total Annual Expenses
|
|
|
1.97
|
%(4)
|
|
|
|
|
|
(1)
|
Estimated maximum amount based on offering of $250 million in common shares and $100 million in preferred shares. The actual amounts in connection with any
offering will be set forth in the Prospectus Supplement if applicable.
|
(2)
|
You will be charged a $1.00 service charge and pay brokerage charges if you direct the plan agent to sell your common shares held in a dividend reinvestment account.
|
(3)
|
Assumes issuance of $100 million in liquidation preference of fixed rate preferred shares and net assets attributable to common shares of $1.6 billion (which includes
issuance of $250 million in common shares). The actual amounts in connection with any offering will be set forth in the Prospectus Supplement if applicable.
|
(4)
|
The Investment Advisers fee is 1.00% annually of the Funds average weekly net assets, with no deduction for the liquidation preference of any outstanding
preferred shares, as defined in the Funds investment advisory agreement. Consequently, if the Fund has preferred shares outstanding, the investment management fees and other expenses as a percentage of net assets attributable to common shares
will be higher than if the Fund does not utilize a leveraged capital structure. Other Expenses are based on estimated amounts for the current year assuming completion of the proposed issuances.
|
(5)
|
The Dividends on preferred shares represent distributions on the existing preferred shares outstanding and the proposed $100 million of preferred shares at 5.00%.
|
The purpose of the table above and the example below is to help you understand all fees and expenses that you,
as a holder of common shares, would bear directly or indirectly.
The following example illustrates the expenses (including the
maximum estimated sales load of $10 and estimated offering expenses of $1 from the issuance of $250 million in common shares) you would pay on a $1,000 investment in common shares, assuming a 5% annual portfolio total return.* The actual
amounts in connection with any offering will be set forth in the Prospectus Supplement if applicable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Total Expenses Incurred
|
|
$
|
30
|
|
|
$
|
71
|
|
|
$
|
115
|
|
|
$
|
237
|
|
*
The example should not be considered a representation of future expenses.
The example assumes that the amounts set forth in the Annual
Expenses table are accurate and that all distributions are reinvested at net asset value. Actual expenses may be greater or less than those assumed. Moreover, the Funds actual rate of return may be greater or less than the hypothetical 5%
return shown in the example.
13
The example includes Dividends on Preferred Shares. If Dividends on Preferred Shares were
not included in the example calculation, the expense would be as follows (based on the same assumptions as above).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Total Expenses Incurred
|
|
$
|
23
|
|
|
$
|
49
|
|
|
$
|
78
|
|
|
$
|
158
|
|
14
FINANCIAL HIGHLIGHTS
The selected data below sets forth the per share operating performance and ratios for the periods presented. The financial information was
derived from and should be read in conjunction with the Financial Statements of the Fund and Notes thereto, which are incorporated by reference into this prospectus and the SAI. The financial information for the year ended December 31, 2012 is shown
below. The financial information for the fiscal year ended December 31, 2012 and for each of the preceding fiscal periods presented since inception, has been audited by PricewaterhouseCoopers LLP, the Funds independent registered public
accounting firm, whose unqualified report on such Financial Statements is incorporated by reference into the SAI.
Selected data for a share of beneficial interest outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Operating Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
14.70
|
|
|
$
|
18.25
|
|
|
$
|
15.91
|
|
|
$
|
10.39
|
|
|
$
|
29.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income/(loss)
|
|
|
0.11
|
|
|
|
0.11
|
|
|
|
0.17
|
|
|
|
0.12
|
|
|
|
0.10
|
|
Net realized and unrealized gain/(loss) on investments, swap contracts, written options, and foreign currency
transactions
|
|
|
(0.01
|
)
|
|
|
(2.00
|
)
|
|
|
3.61
|
|
|
|
7.06
|
|
|
|
(17.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investment operations
|
|
|
0.10
|
|
|
|
(1.89
|
)
|
|
|
3.78
|
|
|
|
7.18
|
|
|
|
(17.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Preferred Shareholders: (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.00
|
)(b)
|
|
|
(0.00
|
)(b)
|
|
|
(0.03
|
)
|
|
|
(0.11
|
)
|
|
|
(0.08
|
)
|
Net realized gain
|
|
|
(0.07
|
)
|
|
|
(0.10
|
)
|
|
|
(0.12
|
)
|
|
|
(0.18
|
)
|
|
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions to preferred shareholders
|
|
|
(0.07
|
)
|
|
|
(0.10
|
)
|
|
|
(0.15
|
)
|
|
|
(0.29
|
)
|
|
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Common Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.02
|
)
|
|
|
(0.09
|
)
|
|
|
(0.31
|
)
|
|
|
(0.26
|
)
|
|
|
(0.13
|
)
|
Net realized gain
|
|
|
(1.36
|
)
|
|
|
(1.54
|
)
|
|
|
(1.37
|
)
|
|
|
(0.45
|
)
|
|
|
(0.48
|
)
|
Return of capital
|
|
|
(0.24
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
(0.97
|
)
|
|
|
(1.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions to common shareholders
|
|
|
(1.62
|
)
|
|
|
(1.68
|
)
|
|
|
(1.68
|
)
|
|
|
(1.68
|
)
|
|
|
(1.68
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund Share Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in net asset value from common share transactions
|
|
|
0.15
|
|
|
|
0.12
|
|
|
|
0.39
|
|
|
|
0.31
|
|
|
|
0.01
|
|
Increase in net asset value from repurchases of preferred shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00
|
(b)
|
|
|
0.01
|
|
Offering costs for preferred shares charged to paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fund share transactions
|
|
|
0.15
|
|
|
|
0.12
|
|
|
|
0.39
|
|
|
|
0.31
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value, End of Period
|
|
$
|
13.26
|
|
|
$
|
14.70
|
|
|
$
|
18.25
|
|
|
$
|
15.91
|
|
|
$
|
10.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV total return
|
|
|
1.36
|
%
|
|
|
(11.00
|
)%
|
|
|
27.25
|
%
|
|
|
74.36
|
%
|
|
|
(61.59
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value, end of period
|
|
$
|
12.80
|
|
|
$
|
14.11
|
|
|
$
|
19.27
|
|
|
$
|
16.34
|
|
|
$
|
13.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment total return
|
|
|
1.82
|
%
|
|
|
(18.98
|
)%
|
|
|
30.77
|
%
|
|
|
40.14
|
%
|
|
|
(50.94
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Ratios to Average Net Assets and Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets including liquidation value of preferred shares, end of period (in 000s)
|
|
$
|
1,428,491
|
|
|
$
|
1,206,020
|
|
|
$
|
1,119,246
|
|
|
$
|
620,047
|
|
|
$
|
289,046
|
|
Net assets attributable to common shares, end of period (in 000s)
|
|
$
|
1,329,599
|
|
|
$
|
1,107,127
|
|
|
$
|
1,020,354
|
|
|
$
|
521,155
|
|
|
$
|
190,109
|
|
Ratio of net investment income/(loss) to average net assets attributable to common shares
|
|
|
0.33
|
%
|
|
|
0.16
|
%
|
|
|
0.41
|
%
|
|
|
1.44
|
%
|
|
|
0.39
|
%
|
Ratio of operating expenses to average net assets attributable to common shares (c)
|
|
|
1.22
|
%
|
|
|
1.27
|
%
|
|
|
1.33
|
%
|
|
|
1.78
|
%
|
|
|
1.69
|
%
|
Ratio of operating expenses to average net assets including liquidation value of preferred shares (c)
|
|
|
1.12
|
%
|
|
|
1.16
|
%
|
|
|
1.17
|
%
|
|
|
1.35
|
%
|
|
|
1.37
|
%
|
Portfolio turnover rate
|
|
|
47.4
|
%
|
|
|
66.4
|
%
|
|
|
51.5
|
%
|
|
|
61.0
|
%
|
|
|
41.5
|
%
|
Preferred Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.625% Series A Cumulative Preferred Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation value, end of period (in 000s)
|
|
$
|
98,892
|
|
|
$
|
98,892
|
|
|
$
|
98,892
|
|
|
$
|
98,892
|
|
|
$
|
98,937
|
|
Total shares outstanding (in 000s)
|
|
|
3,956
|
|
|
|
3,956
|
|
|
|
3,956
|
|
|
|
3,956
|
|
|
|
3,957
|
|
Liquidation preference per share
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
Average market value (d)
|
|
$
|
25.79
|
|
|
$
|
26.10
|
|
|
$
|
26.01
|
|
|
$
|
24.60
|
|
|
$
|
24.10
|
|
Asset coverage per share
|
|
$
|
361.12
|
|
|
$
|
304.88
|
|
|
$
|
282.95
|
|
|
$
|
156.75
|
|
|
$
|
73.04
|
|
Asset coverage
|
|
|
1,444
|
%
|
|
|
1,220
|
%
|
|
|
1,132
|
%
|
|
|
627
|
%
|
|
|
292
|
%
|
|
Based on net asset value per share, adjusted for reinvestment of distributions at the net asset value per share on the ex-dividend dates.
|
|
Based on market value per share, adjusted for reinvestment of distributions at prices determined under the Funds dividend reinvestment plan.
|
(a)
|
Calculated based upon average common shares outstanding on the record dates throughout the periods.
|
(b)
|
Amount represents less than $0.005 per share.
|
(c)
|
The Fund incurred interest expense during the year ended December 31, 2008. If interest expense had not been incurred, the ratio of operating expenses to average
net assets attributable to common shares would have been 1.54% for 2008, the ratio of operating expenses to average net assets including liquidation value of preferred shares would have been 1.25%. For the years ended December 31, 2012, 2011,
2010 and 2009, the effect of interest expense was minimal.
|
(d)
|
Based on weekly prices.
|
16
USE OF PROCEEDS
The Investment Adviser expects that it will initially invest the proceeds of the offering in high quality short-term debt securities and
instruments. The Investment Adviser anticipates that the investment of the proceeds will be made in accordance with the Funds investment objectives and policies as appropriate investment opportunities are identified, which is expected to
substantially be completed within three months; however, changes in market conditions could result in the Funds anticipated investment period extending to as long as six months. Depending on market conditions and operations, a portion of the
cash held by the Fund, including any proceeds raised from the offering, may be used to pay distributions in accordancy with the Funds distribution policy. The Investment Adviser may also use the proceeds to call existing preferred shares.
17
THE FUND
The Fund is a non-diversified, closed-end management investment company registered under the 1940 Act. The Fund was organized as a
Delaware statutory trust on January 4, 2005, pursuant to an Agreement and Declaration of Trust governed by the laws of the State of Delaware. The Fund commenced investment operations on March 31, 2005. The Funds principal office is
located at One Corporate Center, Rye, New York, 10580-1422 and its telephone number is (800)
422-3554.
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The Funds primary investment objective is to provide a high level of current income. The Funds secondary investment objective
is to seek capital appreciation consistent with the Funds strategy and its primary objective. Under normal market conditions, the Fund will attempt to achieve its objectives by investing at least 80% of its assets in equity securities of
companies principally engaged in the gold industry and the natural resources industries. The Fund will invest at least 25% of its assets in the equity securities of companies principally engaged in the exploration, mining, fabrication, processing,
distribution or trading of gold or the financing, managing, controlling or operating of companies engaged in gold-related activities. In addition, the Fund will invest at least 25% of its assets in the equity securities of companies
principally engaged in the exploration, production or distribution of natural resources, such as gas, oil, paper, food and agriculture, forestry products, metals and minerals as well as related transportation companies and equipment manufacturers.
The Fund may invest in the securities of companies located anywhere in the world. Under normal market conditions, the Fund will invest at least 40% of its assets in the securities of issuers located in at least three countries other than the United
States. For this purpose an issuer will be treated as located outside the United States if it is either organized or headquartered outside the United States and has a substantial portion of its operations or sales outside the United States. Equity
securities may include common stocks, preferred stocks, convertible securities, warrants, depository receipts and equity interests in trusts and other entities. Other Fund investments may include investment companies, securities of issuers subject
to reorganization or other risk arbitrage investments, certain derivative instruments, debt (including obligations of the United States Government) and money market instruments.
As part of its investment strategy, the Fund intends to generate gains through an option strategy of writing (selling) covered call
options on equity securities in its portfolio. When the Fund sells a covered call option, it generates gains in the form of the premium paid by the buyer of the call option, but the Fund forgoes the opportunity to participate in any increase in the
value of the underlying equity security above the exercise price of the option.
Investment Methodology of the Fund
In selecting securities for the Fund, the Investment Adviser normally will consider the following factors, among others:
|
|
|
the industry of the issuer of a security;
|
|
|
|
the ability of the Fund to earn possible gains from writing covered call options on such securities;
|
|
|
|
the interest or dividend income generated by the securities;
|
|
|
|
the potential for capital appreciation of the securities;
|
|
|
|
the prices of the securities relative to other comparable securities;
|
|
|
|
whether the securities are entitled to the benefits of call protection or other protective covenants;
|
|
|
|
the existence of any anti-dilution protections or guarantees of the security; and
|
|
|
|
the number and size of investments of the portfolio as to issuers.
|
The Investment Advisers investment philosophy with respect to selecting investments in the gold industry and the natural resources
industries is to emphasize quality and value, as determined by such factors as asset quality, balance sheet leverage, management ability, reserve life, cash flow, and commodity hedging exposure. In addition, in making stock selections, the
Investment Adviser looks for securities that it believes may have a superior yield as well as capital gains potential.
18
Certain Investment Practices
Gold Industry Concentration.
Under normal market conditions the Fund will invest at least 25% of its assets in the equity securities of Gold Companies. Gold
Companies are those that are principally engaged in the exploration, mining, fabrication, processing, distribution or trading of gold, or the financing, managing, controlling or operating of companies engaged in gold-related
activities. The Funds investments in Gold Companies will generally be in the common equity of Gold Companies, but the Fund may also invest in other securities of Gold Companies, such as preferred stocks, securities convertible into common
stocks, and securities such as rights and warrants that have common stock characteristics.
In selecting investments in Gold
Companies for the Fund, the Investment Adviser will focus on stocks that are undervalued, but which appear to have favorable prospects for growth. Factors considered in this determination will include capitalization per ounce of gold production,
capitalization per ounce of recoverable reserves, quality of management and ability to create shareholder wealth. Because most of the worlds gold production is outside of the United States, the Fund may have a significant portion of its
investments in Gold Companies in securities of foreign issuers, including those located in developed as well as emerging markets. The percentage of Fund assets invested in particular countries or regions will change from time to time based on the
Investment Advisers judgment. Among other things, the Investment Adviser will consider the economic stability and economic outlook of these countries and regions. See Risk Factors and Special ConsiderationsIndustry Risks.
Natural Resources Industries Concentration.
Under normal market conditions, the Fund will invest
at least 25% of its assets in equity securities of Natural Resources Companies. Natural Resources Companies are those that are principally engaged in the exploration, production or distribution of energy or natural resources, such as
gas, oil, paper, food and agriculture, forestry products, metals and minerals as well as related transportation companies and equipment manufacturers.
Principally engaged, as used in this prospectus, means a company that derives at least 50% of its revenues or earnings or devotes at least 50% of its assets to gold or natural resources related
activities, as the case may be.
Covered Calls and Other Option Transactions.
The Fund intends to
generate gains through an option strategy which will normally consist of writing (selling) call options on equity securities in its portfolio (covered calls), but may, in amounts up to 15% of the Funds assets, consist of writing
uncovered call options on additional amounts of such securities beyond the amounts held in its portfolio, on other securities not held in its portfolio, on indices comprised of Gold Companies or Natural Resources Companies or on exchange traded
funds comprised of such issuers and also may consist of writing put options on securities in its portfolio. Writing a covered call is the selling of an option contract entitling the buyer to purchase an underlying security that the Fund owns, while
writing an uncovered call is the selling of such a contract entitling the buyer to purchase a security the Fund does not own or in an amount in excess of the amount the Fund owns. When the Fund sells a call option, it generates gains in the form of
the premium paid by the buyer of the call option, but the Fund forgoes the opportunity to participate in any increase in the value of the underlying equity security above the exercise price of the option. The writer of the call option has the
obligation, upon exercise of the option, to deliver the underlying security or currency upon payment of the exercise price during the option period.
A put option is the reverse of a call option, giving the buyer the right, in return for a premium, to sell the underlying security to the writer, at a specified price, and obligating the writer to
purchase the underlying security from the holder at that price. When the Fund sells a put option, it generates gains in the form of the premium paid by the buyer of the put option, but the Fund will have the obligation to buy the underlying security
at the exercise price if the price of the security decreases below the exercise price of the option.
If the Fund has written a
call option, it may terminate its obligation by effecting a closing purchase transaction. This is accomplished by purchasing a call option with the same terms as the option previously written. However, once the Fund has been assigned an exercise
notice, the Fund will be unable to effect a closing purchase transaction. Similarly, if the Fund is the holder of an option, it may liquidate its position by effecting a closing sale transaction. This is accomplished by selling an option with the
same terms as the option previously purchased. There can be no assurance that either a closing purchase or sale transaction can be effected when the Fund so desires.
19
The Fund will realize a profit from a closing transaction if the price of the transaction is
less than the premium it received from writing the option or is more than the premium it 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 it received from
writing the option or is less than the premium it 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 of the option. 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 that provides a secondary market for an option with the same terms or in a
private transaction. Although the Fund will generally purchase or write 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, in which case 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.
When the Fund writes an
uncovered call option or put option, it will segregate liquid assets with its custodian in an amount equal to the amount, adjusted daily, by which such option is in the money or will treat the unsegregated amount as borrowings.
Although the Investment Adviser will attempt to take appropriate measures to minimize the risks relating to the Funds writing and
purchasing of put and call options, there can be no assurance that the Fund will succeed in any option-writing program it undertakes. See Risk Factors and Special ConsiderationsRisks Associated with Covered Calls and Other Options.
Foreign Securities.
Because many of the worlds Gold Companies and Natural Resources
Companies are located outside of the United States, the Fund may have a significant portion of its investments in securities of foreign issuers, which are generally denominated in foreign currencies. See Risk Factors and Special
ConsiderationsForeign Securities Risk.
The Fund may also purchase sponsored American Depository Receipts
(ADRs) or U.S. dollar denominated securities of foreign issuers. ADRs are receipts issued by U.S. banks or trust companies in respect of securities of foreign issuers held on deposit for use in the U.S. securities markets.
Emerging Markets.
The Fund may invest without limit in securities of emerging market issuers.
These securities may be U.S. dollar denominated or non-U.S. dollar denominated, including emerging market country currency denominated. An emerging market country is any country that is considered to be an emerging or
developing country by the International Bank for Reconstruction and Development (the World Bank). Emerging market countries generally include every nation in the world except the United States , Canada, Japan, Australia, New Zealand and
most countries located in Western Europe.
Registered Investment Companies.
The Fund may invest
in registered investment companies in accordance with the 1940 Act, to the extent consistent with the Funds investment objectives, including exchange traded funds that concentrate in investments in the gold or natural resources industries. The
1940 Act generally prohibits the Fund from investing more than 5% of its assets in any one other investment company or more than 10% of its assets in all other investment companies. However, many exchange-traded funds are exempt from these
limitations.
Illiquid Investments.
The Fund may invest up to 15% of its net assets in securities
for which there is no readily available trading market or that are otherwise illiquid. Illiquid securities include, among other things, securities legally restricted as to resale such as commercial paper issued pursuant to Section 4(2) of the
Securities Act, securities traded pursuant to Rule 144A of the Securities Act, written over-the-counter options, repurchase agreements with maturities in excess of seven days, certain loan participation interests, fixed time deposits which
20
are not subject to prepayment or provide for withdrawal penalties upon prepayment (other than overnight deposits), and other securities whose disposition is restricted under the federal
securities laws. Section 4(2) and Rule 144A securities may, however, be treated as liquid by the Investment Adviser pursuant to procedures adopted by the Board of Trustees, which require consideration of factors such as trading activity,
availability of market quotations and number of dealers willing to purchase the security. If the Fund invests in Rule 144A securities, the level of portfolio illiquidity may be increased to the extent that eligible buyers exhibit weak demand
for such securities.
It may be more difficult to sell unregistered securities at an attractive price should their resale
remain restricted than if such securities were in the future to become publicly traded. Where registration is desired, a considerable period may elapse between a decision to sell the securities and the time when registration is complete. Thus, the
Fund may not be able to obtain as favorable a price at the time of the decision to sell as it might achieve in the future. The Fund may also acquire securities with contractual restrictions on the resale of such securities. Such restrictions might
prevent their sale at a time when such sale would otherwise be desirable.
Income Securities.
The
Fund may invest in other equity securities that are expected to periodically accrue or generate income for their holders such as common and preferred stocks of issuers that have historically paid periodic dividends or otherwise made distributions to
stockholders. Unlike fixed income securities, dividend payments generally are not guaranteed and so may be discontinued by the issuer at its discretion or because of the issuers inability to satisfy its liabilities. Further, an issuers
history of paying dividends does not guarantee that it will continue to pay dividends in the future. In addition to dividends, under certain circumstances the holders of common stock may benefit from the capital appreciation of the issuer.
In addition, the Fund also may invest in fixed income securities such as convertible securities, bonds, debentures, notes,
stock, short-term discounted Treasury Bills or certain securities of the U.S. government sponsored instrumentalities, as well as money market mutual funds that invest in those securities, which, in the absence of an applicable exemptive order,
will not be affiliated with the Investment Adviser. Fixed income securities obligate the issuer to pay to the holder of the security a specified return, which may be either fixed or reset periodically in accordance with the terms of the security.
Fixed income securities generally are senior to an issuers common stock and their holders generally are entitled to receive amounts due before any distributions are made to common stockholders. Common stocks, on the other hand, generally do
not obligate an issuer to make periodic distributions to holders.
The Fund may also invest in obligations of government
sponsored instrumentalities. Unlike non-U.S. government securities, obligations of certain agencies and instrumentalities of the United States government, such as the Government National Mortgage Association, are supported by the full
faith and credit of the United States government; others, such as those of the Export-Import Bank of the United States, are supported by the right of the issuer to borrow from the United States Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of the United States government to purchase the agencys obligations; and still others, such as those of the Student Loan Marketing Association, are supported only by
the credit of the instrumentality. No assurance can be given that the United States government would provide financial support to United States government sponsored instrumentalities if it is not obligated to do so by law. Although the Fund may
invest in all types of obligations of agencies and instrumentalities of the United States government, the Fund currently intends to invest only in obligations of government sponsored instrumentalities that are supported by the full faith and
credit of the U.S. government.
When Issued, Delayed Delivery Securities and Forward
Commitments.
The Fund may enter into forward commitments for the purchase or sale of securities, including on a when issued or delayed delivery basis, in excess of customary settlement periods for
the type of security involved. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring (i.e., a when, as and if
issued security). When such transactions are negotiated, the price is fixed at the time of the commitment, with payment and delivery taking place in the future, generally a month or more after the date of the commitment. While it will only enter
into a forward commitment with the intention of actually acquiring the security, the Fund may sell the security before the settlement date if it is deemed advisable.
21
Securities purchased under a forward commitment are subject to market fluctuation, and no
interest (or dividends) accrues to the Fund prior to the settlement date. The Fund will segregate with its custodian cash or liquid securities in an aggregate amount at least equal to the amount of its outstanding forward commitments.
Short Sales.
The Fund may make short sales as a form of hedging to offset potential declines in long
positions in the same or similar securities, including short sales against the box. The short sale of a security is considered a speculative investment technique. At the time of the sale, the Fund will own, or have the immediate and unconditional
right to acquire at no additional cost, identical or similar securities or establish a hedge against a security of the same issuer which may involve additional cost, such as an in the money warrant.
Short sales against the box are subject to special tax rules, one of the effects of which may be to accelerate the recognition
of income by the Fund. Other than with respect to short sales against the box, the Fund will limit short sales of securities to not more than 5% of the Funds assets. When the Fund makes a short sale, it must deliver the security to the
broker-dealer through which it made the short sale in order to satisfy its obligation to deliver the security upon conclusion of the sale.
Repurchase Agreements.
Repurchase agreements may be seen as loans by the Fund collateralized by underlying debt securities. Under the terms of a typical repurchase agreement,
the Fund would acquire an underlying debt obligation for a relatively short period (usually not more than one week) subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed price and time. This
arrangement results in a fixed rate of return to the Fund that is not subject to market fluctuations during the holding period. The Fund bears a risk of loss in the event that the other party to a repurchase agreement defaults on its obligations and
the Fund is delayed in or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period in which it seeks to assert these rights.
The Investment Adviser, acting under the supervision of the Board of Trustees, reviews the creditworthiness of those banks and dealers with which the Fund enters into repurchase agreements to evaluate these risks and monitors on an ongoing basis the
value of the securities subject to repurchase agreements to ensure that the value is maintained at the required level. The Fund will not enter into repurchase agreements with the Investment Adviser or any of its affiliates.
Convertible Securities.
A convertible security is a bond, debenture, note, stock or other similar security
that may be converted into or exchanged for a prescribed amount of common stock or other equity security of the same or a different issuer within a particular period of time at a specified price or formula. Before conversion, convertible securities
have characteristics similar to non-convertible debt securities in that they ordinarily provide a stream of income with generally higher yields than those of common stock of the same or similar issuers. Convertible securities are senior in rank to
common stock in a corporations capital structure and, therefore, generally entail less risk than the corporations common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income security. See Risk Factors and Special ConsiderationsConvertible Securities Risk.
Non-Investment Grade Securities.
The Fund may invest up to 10% of its net assets in fixed income and convertible securities rated in the lower rating categories of recognized
statistical rating agencies, such as securities rated CCC or lower by Standard & Poors Ratings Services (S&P) or Caa by Moodys Investors Service, Inc. (Moodys), or
non-rated securities of comparable quality as determined by the Investment Adviser. These securities are predominantly speculative with respect to the issuers capacity to pay interest and repay principal, and involve major risk exposure to
adverse conditions. Debt securities that are not rated or rated lower than BBB by S&P or lower than Baa by Moodys (or unrated securities of comparable quality) are referred to in the financial press as junk
bonds.
Generally, such lower grade securities and unrated securities of comparable quality offer a higher current yield
than is offered by higher rated securities, but also (i) will likely have some quality and protective characteristics that, in the judgment of the rating organizations, are outweighed by large uncertainties or major risk exposures to adverse
conditions and (ii) are predominantly speculative with respect to the issuers capacity to pay interest and repay principal in accordance with the terms of the obligation. The market values of certain of these securities also tend to be
more sensitive to individual corporate developments and changes in economic conditions than higher quality bonds. In addition, such lower grade 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
22
greater because such lower grade securities and unrated securities of comparable quality generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. In
light of these risks, the Investment Adviser, in evaluating the creditworthiness of an issue, whether rated or unrated, will take various factors into consideration, which may include, as applicable, the issuers operating history, financial
resources and its sensitivity to economic conditions and trends, the market support for the facility financed by the issue, the perceived ability and integrity of the issuers management and regulatory matters.
In addition, the market value of securities in lower grade categories is more volatile than that of higher quality securities, and the
markets in which such lower grade 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 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. Interest rates are at
historical lows and, therefore, it is likely that they will rise in the future.
As part of its investments in lower grade
securities, the Fund may invest without limit in securities of issuers in default. The Fund will make an investment in securities of issuers in default only when the Investment Adviser believes that such issuers will honor their obligations or
emerge from bankruptcy protection and the value of these securities will appreciate. By investing in securities of issuers in default, the Fund bears the risk that these issuers will not continue to honor their obligations or emerge from bankruptcy
protection or that the value of the securities will not appreciate.
In addition to using recognized statistical 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 change their ratings of a particular issue to reflect subsequent events on a timely basis. Moreover, such ratings do not assess the risk of a decline in market value. None of these events will require
the sale of the securities by the Fund, although the Investment Adviser will consider these events in determining whether the Fund should continue to hold the securities.
Fixed income securities, including lower grade securities and comparable unrated securities, frequently have call or buy-back features that permit their issuers to call or repurchase the securities from
their holders, such as the Fund. If an issuer exercises these rights during periods of declining interest rates, the Fund may have to replace the security with a lower yielding security, thus resulting in a decreased return for the Fund.
The market for lower grade and comparable unrated securities has at various times, particularly during times of economic recession,
experienced substantial reductions in market value and liquidity. Past recessions have adversely affected 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.
Other Derivative Instruments.
The
Fund may also utilize other types of derivative instruments, primarily for hedging or risk management purposes. These instruments include futures, forward contracts, options on such contracts and interest rate, total return and other kinds of swaps.
These investment management techniques
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generally will not be considered senior securities if the Fund establishes in a segregated account cash or other liquid securities or sets aside assets on the accounting records equal to the
Funds obligations in respect of such techniques. For a further description of such derivative instruments, see Investment Objectives and PoliciesDerivative Instruments in the SAI.
Leveraging.
As provided in the 1940 Act and subject to certain exceptions, the Fund may issue senior
securities (which may be additional classes of stock, such as preferred shares, or securities representing debt) so long as its total assets, less certain ordinary course liabilities, exceed 300% of the amount of the debt outstanding and exceed 200%
of the amount of preferred shares and debt outstanding. The use of leverage magnifies the impact of changes in net asset value. For example, a fund that uses 33% leverage will show a 1.5% increase or decline in net asset value for each 1% increase
or decline in the value of its total assets. In addition, if the cost of leverage exceeds the return on the securities acquired with the proceeds of leverage, the use of leverage will diminish rather than enhance the return to the Fund. The use of
leverage generally increases the volatility of returns to the Fund. See Risk Factors and Special ConsiderationsLeverage Risk.
In the event the Fund had both outstanding preferred shares and senior securities representing debt at the same time, the Funds obligations to pay dividends or distributions and, upon liquidation of
the Fund, liquidation payments in respect of its preferred shares would be subordinate to the Funds obligations to make any principal and/or interest payments due and owing with respect to its outstanding senior debt securities. Accordingly,
the Funds issuance of senior securities representing debt would have the effect of creating special risks for the Funds preferred shareholders that would not be present in a capital structure that did not include such securities. See
Risk Factors and Special ConsiderationsSpecial Risks Related to Preferred Securities.
Temporary Defensive
Investments.
Although under normal market conditions the Fund intends to invest at least 80% of its assets in equity securities of companies principally engaged in the gold industry and the natural resources industries,
when a temporary defensive posture is believed by the Investment Adviser to be warranted (temporary defensive periods), the Fund may without limitation hold cash or invest its assets in money market instruments and repurchase agreements
in respect of those instruments. The money market instruments in which the Fund may invest are obligations of the U.S. government, its agencies or instrumentalities; commercial paper rated A-1 or higher by S&P or Prime-1 by Moodys;
and certificates of deposit and bankers acceptances issued by domestic branches of U.S. banks that are members of the Federal Deposit Insurance Corporation. During temporary defensive periods, the Fund may also invest to the extent
permitted by applicable law in shares of money market mutual funds. Money market mutual funds are investment companies and the investments in those companies by the Fund are in some cases subject to applicable law. See Investment
Restrictions in the SAI. The Fund may find it more difficult to achieve the long-term growth of capital component of its investment objectives during temporary defensive periods.
Portfolio Turnover.
The Fund will buy and sell securities to accomplish its investment objectives. The
investment policies of the Fund, including its strategy of writing covered call options on securities in its portfolio, are expected to result in portfolio turnover that is higher than that of many investment companies, and may be higher than 100%.
For the year ending December 31, 2012, the portfolio turnover rate was 47.4%. For the years ending December 31, 2010 and 2011, the portfolio turnover rates were 51.5% and 66.4%, respectively.
Portfolio turnover generally involves expense to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and reinvestment in other securities. The portfolio turnover rate is computed by dividing the lesser of the amount of the securities purchased or securities sold by the average monthly value of securities owned during the
year (excluding securities whose maturities at acquisition were one year or less). Higher portfolio turnover may decrease the after-tax return to individual investors in the Fund to the extent it results in a decrease in the portion of the
Funds distributions that is attributable to long-term capital gain.
Interest Rate Transactions
If the Fund borrows money or issues variable rate preferred shares, the Fund may enter into interest rate swap or cap transactions in
relation to all or a portion of such borrowings or shares in order to manage the impact on its portfolio of changes in the interest or dividend rate of such borrowings or shares. Through these
24
transactions the Fund may, for example, obtain the equivalent of a fixed rate for such variable rate preferred shares that is lower than the Fund would have to pay if it issued fixed rate
preferred shares.
The use of interest rate swaps and caps is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio security transactions. In an interest rate swap, the Fund would agree to pay to the other party to the interest rate swap (which is known as the counterparty) periodically
a fixed rate payment in exchange for the counterparty agreeing to pay to the fund periodically a variable rate payment that is intended to approximate the Funds variable rate payment obligation on its borrowings or variable rate preferred
shares. In an interest rate cap, the Fund would pay a premium to the counterparty to the interest rate cap and, to the extent that a specified variable rate index exceeds a predetermined fixed rate, would receive from the counterparty payments of
the difference based on the notional amount of such cap. Interest rate swap and cap transactions introduce additional risk because the Fund would remain obligated to pay interest or preferred shares dividends when due even if the counterparty
defaulted. Depending on the general state of short-term interest rates and the returns on the Funds portfolio securities at that point in time, such a default could negatively affect the Funds ability to make interest payments or
dividend payments on the preferred shares. In addition, at the time an interest rate swap or cap transaction reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms
of the replacement will not be as favorable as on the expiring transaction. If this occurs, it could have a negative impact on the Funds ability to make interest payments or dividend payments on the preferred shares. To the extent there is a
decline in interest rates, the value of the interest rate swap or cap could decline, resulting in a decline in the asset coverage for the borrowings or preferred shares. A sudden and dramatic decline in interest rates may result in a significant
decline in the asset coverage. If the Fund fails to maintain the required asset coverage on any outstanding preferred shares or fails to comply with other covenants, the Fund may be required to redeem some or all of these shares. Any redemption
would likely result in the Fund seeking to terminate early all or a portion of any swap or cap transactions. Early termination of a swap could result in a termination payment by the Fund to the counterparty, while early termination of a cap could
result in a termination payment to the Fund.
The Fund will usually enter into swaps or caps on a net basis; that is, the two
payment streams will be netted out in a cash settlement on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. The Fund intends to segregate cash or
liquid securities having a value at least equal to the value of the Funds net payment obligations under any swap transaction, marked to market daily. The Fund will monitor any such swap with a view to ensuring that the Fund remains in
compliance with all applicable regulatory, investment policy and tax requirements.
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RISK FACTORS AND SPECIAL CONSIDERATIONS
Investors should consider the following risk factors and special considerations associated with investing in the Fund:
Total Return Risk
The
Fund utilizes several investment management techniques in an effort to generate positive total return. The risks of these techniques, such as option writing, leverage, concentration in certain industries, and investing in emerging markets, are
described in the following paragraphs. Taken together these and other techniques represent a risk that the Fund will experience a negative total return even in market environments that are generally positive and that the Funds returns, both
positive and negative, may be more volatile than if the Fund did not utilize these investment techniques.
Industry Risks
Industry Risks.
The Funds investments will be concentrated in the gold and natural resources
industries. Because the Fund is concentrated in these industries, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. A downturn in the gold or natural resources industries would have a
larger impact on the Fund than on an investment company that does not concentrate in such industries.
Under normal market
conditions the Fund will invest at least 25% of its assets in equity securities of Gold Companies. Equity securities of Gold Companies may experience greater volatility than companies not involved in the gold industry. Investments related to gold
are considered speculative and are affected by a variety of worldwide economic, financial and political factors. The price of gold, which has experienced substantial increases in recent periods, may fluctuate sharply, including substantial
decreases, over short periods of time due to changes in inflation or expectations regarding inflation in various countries, the availability of supplies of gold, changes in industrial and commercial demand, gold sales by governments, central banks
or international agencies, investment speculation, monetary and other economic policies of various governments and government restrictions on private ownership of gold. In times of significant inflation or great economic uncertainty, Gold Companies
have historically outperformed securities markets generally. However, in times of stable economic growth, traditional equity and debt investments could offer greater appreciation potential and the value of gold and the prices of equity securities of
Gold Companies may be adversely affected, which could in turn affect the Funds returns. Some Gold Companies hedge, to varying degrees, their exposure to declines in the price of gold. Such hedging limits a Gold Companys ability to
benefit from future rises in the price of gold. The Investment Advisers judgments about trends in the prices of securities of Gold Companies may prove to be incorrect. It is possible that the performance of securities of Gold Companies may lag
the performance of other industries or the broader market as a whole.
Under normal market conditions the Fund will invest at
least 25% of its assets in equity securities of Natural Resources Companies. A downturn in the indicated natural resources industries would have a larger impact on the Fund than on an investment company that does not invest significantly in such
industries. Such industries can be significantly affected by the supply of and demand for the indicated commodities and related services, exploration and production spending, government regulations, world events and economic conditions. The oil,
gas, paper, food and agriculture, forestry products, metals and minerals industries can be significantly affected by events relating to international political developments, the success of exploration projects, commodity prices, and tax and
government regulations. The stock prices of Natural Resources Companies, some of which have experienced substantial price increases in recent periods, may also experience greater price volatility than other types of common stocks. Securities issued
by Natural Resources Companies are sensitive to changes in the prices of, and in supply and demand for, the indicated commodities. The value of securities issued by Natural Resources Companies may be affected by changes in overall market movements,
changes in interest rates, or factors affecting a particular industry or commodity, such as weather, embargoes, tariffs, policies of commodity cartels and international economic, political and regulatory developments. The Investment Advisers
judgments about trends in the prices of these securities and commodities may prove to be incorrect. It is possible that the performance of securities of Natural Resources Companies may lag the performance of other industries or the broader market as
a whole.
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Supply and Demand Risk.
A decrease in the production of or
exploitation of, gold, gas, oil, paper, food and agriculture, forestry products, metals or minerals or a decrease in the volume of such commodities available for transportation, mining, processing, storage or distribution may adversely impact the
financial performance of the Funds investments. Production declines and volume decreases could be caused by various factors, including catastrophic events affecting production, depletion of resources, labor difficulties, environmental
proceedings, increased regulations, equipment failures and unexpected maintenance problems, import supply disruption, increased competition from alternative energy sources or commodity prices.
Sustained declines in demand for the indicated commodities could also adversely affect the financial performance of Gold and Natural
Resources Companies over the long-term. Factors which could lead to a decline in demand include economic recession or other adverse economic conditions, higher fuel taxes or governmental regulations, increases in fuel economy, consumer shifts to the
use of alternative fuel sources, changes in commodity prices, or weather.
Depletion and Exploration
Risk.
Many Gold and Natural Resources Companies are either engaged in the production or exploitation of the particular commodities or are engaged in transporting, storing, distributing and processing such commodities. To
maintain or increase their revenue level, these companies or their customers need to maintain or expand their reserves through exploration of new sources of supply, through the development of existing sources, acquisitions, or long-term contracts to
acquire reserves. The financial performance of Gold and Natural Resources Companies may be adversely affected if they, or the companies to whom they provide products or services, are unable to cost-effectively acquire additional products or reserves
sufficient to replace the natural decline.
Regulatory Risk.
Gold Companies and Natural Resources
Companies may be subject to extensive government regulation in virtually every aspect of their operations, including how facilities are constructed, maintained and operated, environmental and safety controls, and in some cases the prices they may
charge for the products and services they provide. Various governmental authorities have the power to enforce compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil and criminal
penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future, which would likely increase compliance costs and may adversely affect the financial performance of Gold
Companies and Natural Resources Companies.
Commodity Pricing Risk.
The operations and financial
performance of Gold and Natural Resources Companies may be directly affected by the prices of the indicated commodities, especially those Gold and Natural Resources Companies for whom the commodities they own are significant assets. Commodity prices
fluctuate for several reasons, including changes in market and economic conditions, levels of domestic production, impact of governmental regulation and taxation, the availability of transportation systems and, in the case of oil and gas companies
in particular, conservation measures and the impact of weather. Volatility of commodity prices, which may lead to a reduction in production or supply, may also negatively affect the performance of Gold and Natural Resources Companies which are
solely involved in the transportation, processing, storing, distribution or marketing of commodities. Volatility of commodity prices may also make it more difficult for Gold and Natural Resources Companies to raise capital to the extent the market
perceives that their performance may be directly or indirectly tied to commodity prices.
Risks Associated with Covered Calls and Other
Option Transactions
There are several risks associated with transactions in options on securities. For example, there are
significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given covered call option transaction not to achieve its objectives. A decision as to whether, when and
how to use covered calls (or other options) involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful because of market behavior or unexpected events. The use of options may require the Fund to sell
portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the Fund can realize on an investment, or may cause the Fund to hold a security it might otherwise sell. As the writer of
a covered call option, the Fund forgoes, during the options life, the opportunity to profit from increases in the market value of the security covering the call option above the exercise price of the call option, but has retained the risk of
loss should the price of the underlying security decline. Although such loss would be offset in part by the option premium received, in a situation in which the price of a particular
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stock on which the Fund has written a covered call option declines rapidly and materially or in which prices in general on all or a substantial portion of the stocks on which the Fund has written
covered call options decline rapidly and materially, the Fund could sustain material depreciation or loss in its net assets to the extent it does not sell the underlying securities (which may require it to terminate, offset or otherwise cover its
option position as well). The writer of an option has no control over the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must deliver the underlying security at the exercise price.
There can be no assurance that a liquid market will exist when the Fund seeks to close out an option position. Reasons for the absence of a liquid secondary market for exchange-traded options include the
following: (i) there may be insufficient trading interest; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the trading facilities of an exchange or the Options Clearing Corporation (the
OCC) may not be adequate to handle current trading volume; or (vi) the relevant exchange could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class
or series of options). If trading were discontinued, the secondary market on that exchange (or in that class or series of options) would cease to exist. However, outstanding options on that exchange that had been issued by the OCC as a result of
trades on that exchange would continue to be exercisable in accordance with their terms. The Funds ability to terminate over-the-counter options may be more limited than with exchange-traded options and may involve the risk that counterparties
participating in such transactions will not fulfill their obligations. If the Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option expired
without exercise.
The hours of trading for options may not conform to the hours during which the underlying securities are
traded. To the extent that the options markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying markets that cannot be reflected in the options markets. Call options are
marked to market daily and their value will be affected by changes in the value of and dividend rates of the underlying common stocks, an increase in interest rates, changes in the actual or perceived volatility of the stock market and the
underlying common stocks and the remaining time to the options expiration. Additionally, the exercise price of an option may be adjusted downward before the options expiration as a result of the occurrence of certain corporate events
affecting the underlying equity security, such as extraordinary dividends, stock splits, merger or other extraordinary distributions or events. A reduction in the exercise price of an option would reduce the Funds capital appreciation
potential on the underlying security.
Limitation on Covered Call Writing Risk.
The number of
covered call options the Fund can write is limited by the number of shares of common stock the Fund holds. Furthermore, the Funds covered call options and other options transactions will be subject to limitations established by each of the
exchanges, boards of trade or other trading facilities on which such options are traded. These limitations govern the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in
concert, regardless of whether the options are written or purchased on the same or different exchanges, boards of trade or other trading facilities or are held or written in one or more accounts or through one or more brokers. As a result, the
number of covered call options that the Fund may write or purchase may be affected by options written or purchased by it and other investment advisory clients of the Investment Adviser. An exchange, board of trade or other trading facility may order
the liquidation of positions found to be in excess of these limits, and it may impose certain other sanctions.
Risks Associated with
Uncovered Calls
There are special risks associated with uncovered option writing which expose the Fund to potentially
significant loss. As the writer of an uncovered call option, the Fund has no risk of loss should the price of the underlying security decline, but bears unlimited risk of loss should the price of the underlying security increase above the exercise
price until the Fund covers its exposure. As with writing uncovered calls, the risk of writing uncovered put options is substantial. The writer of an uncovered put option bears a risk of loss if the value of the underlying instrument declines below
the exercise price. Such loss could be substantial if there is a significant decline in the value of the underlying instrument.
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For combination writing, where the Fund writes both a put and a call on the same underlying
instrument, the potential risk is unlimited. If a secondary market in options were to become unavailable, the Fund could not engage in losing transactions and would remain obligated until expiration or assignment.
Equity Risk
Investing
in the Fund involves equity risk, which is the risk that the securities held by the Fund will fall in market value due to adverse market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the
Fund participate and the particular circumstances and performance of particular companies whose securities the Fund holds. An investment in the Fund represents an indirect economic stake in the securities owned by the Fund, which are for the most
part traded on securities exchanges or in the over-the-counter markets. The market value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. The net asset value of the Fund may at any point
in time be worth less than the amount at the time the shareholder invested in the Fund, even after taking into account any reinvestment of distribution.
Leverage Risk
The Fund currently uses financial leverage for investment
purposes by issuing preferred shares. As of December 31, 2012, the amount of leverage represented approximately 7% of the Funds net assets. The Funds leveraged capital structure creates special risks not associated with unleveraged funds
that have a similar investment objective and policies. These include the possibility of greater loss and the likelihood of higher volatility of the net asset value of the Fund and the asset coverage for the preferred shares. Such volatility may
increase the likelihood of the Fund having to sell investments in order to meet its obligations to make distributions on the preferred shares or principal or interest payments on debt securities, or to redeem preferred shares or repay debt, when it
may be disadvantageous to do so. The use of leverage magnifies both the favorable and unfavorable effects of price movements in the investments made by the Fund. To the extent the Fund is leveraged in its investment operations, the Fund will be
subject to substantial risk of loss. The Fund cannot assure that borrowings or the issuance of preferred shares will result in a higher yield or return to the holders of the common shares. Also, if the Fund is utilizing leverage, a decline in net
asset value could affect the ability of the Fund to make common share distributions and such a failure to make distributions could result in the Fund ceasing to qualify as a regulated investment company under the Internal Revenue Code of 1986, as
amended (the Code). See Taxation.
Any decline in the net asset value of the Funds investments
would be borne entirely by the holders of common shares. Therefore, if the market value of the Funds portfolio declines, the leverage will result in a greater decrease in net asset value to the holders of common shares than if the Fund were
not leveraged. This greater net asset value decrease will also tend to cause a greater decline in the market price for the common shares. In such a case, the Fund might be in danger of failing to maintain the required asset coverage of its
borrowings or preferred shares or of losing its ratings on its borrowings or preferred shares or, in an extreme case, the Funds current investment income might not be sufficient to meet the interest or dividend requirements on its borrowings
or preferred shares. In order to counteract such an event, the Fund might need to liquidate investments in order to fund a redemption of some or all of the preferred shares.
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Preferred Share Risk.
The issuance of preferred shares causes the net asset value and market value of the common shares
to become more volatile. If the dividend rate on the preferred shares approaches the net rate of return on the Funds investment portfolio, the benefit of leverage to the holders of the common shares would be reduced. If the dividend rate on
the preferred shares plus the management fee annual rate of 1.00% exceeds the net rate of return on the Funds portfolio, the leverage will result in a lower rate of return to the holders of common shares than if the Fund had not issued
preferred shares. If the Fund has insufficient investment income and gains, all or a portion of the distributions to preferred shareholders would come from the common shareholders capital. Such distributions reduce the net assets attributable
to common shareholders since the liquidation value of the preferred shareholders is constant.
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In addition,
the Fund would pay (and the holders of common shares will bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred shares, including the advisory fees on the incremental assets attributable to such shares.
29
Holders of preferred shares may have different interests than holders of common shares and
may at times have disproportionate influence over the Funds affairs. Holders of preferred shares, voting separately as a single class, would have the right to elect two members of the Board of Trustees at all times and in the event dividends
become two full years in arrears would have the right to elect a majority of the Trustees until such arrearage is completely eliminated. In addition, preferred shareholders have class voting rights on certain matters, including changes in
fundamental investment restrictions and conversion of the fund to open-end status, and accordingly can veto any such changes.
Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of the Funds common shares
and preferred shares, both by the 1940 Act and by requirements imposed by rating agencies, might impair the Funds ability to maintain its qualification as a regulated investment company for federal income tax purposes. While the Fund intends
to redeem its preferred shares to the extent necessary to enable the Fund to distribute its income as required to maintain its qualification as a regulated investment company under the Code, there can be no assurance that such actions can be
effected in time to meet the Code requirements.
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Portfolio Guidelines of Rating Agencies for Preferred Shares and/or Credit Facility
. In order to obtain and maintain
attractive credit quality ratings for preferred shares or borrowings, the Fund must comply with investment quality, diversification and other guidelines established by the relevant rating agencies. These guidelines could affect portfolio decisions
and may be more stringent than those imposed by the 1940 Act.
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Impact on Common Shares.
The following table is furnished in response to requirements of the SEC. It is designed to
illustrate the effect of leverage on common share total return, assuming investment portfolio total returns (comprised of net investment income of the Fund, realized gains or losses of the Fund and changes in the value of the securities held in the
Funds portfolio) of −10%, −5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or
expected to be experienced by the Fund. The table further reflects leverage representing 7% of the Funds net assets, the Funds current projected blended annual average leverage dividend or interest rate of 6.625%, a management fee at an
annual rate of 1.00% of the liquidation preference of any outstanding preferred shares and estimated annual incremental expenses attributable to any outstanding preferred shares of 0.01% of the Funds net assets attributable to common shares.
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|
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|
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|
|
|
|
|
|
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|
|
|
|
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|
Assumed Portfolio Total Return (Net of Expenses)
|
|
|
(10
|
)%
|
|
|
(5
|
)%
|
|
|
0
|
%
|
|
|
5
|
%
|
|
|
10
|
%
|
Common Share Total Return
|
|
|
(11.32
|
)%
|
|
|
(5.95
|
)%
|
|
|
(0.57
|
)%
|
|
|
4.81
|
%
|
|
|
10.18
|
%
|
Common share total return is composed of two elementsthe common share distributions paid by the Fund
(the amount of which is largely determined by the taxable income of the Fund (including realized gains or losses) after paying interest on any debt and/or dividends on any preferred shares) and unrealized gains or losses on the value of the
securities the Fund owns. As required by SEC rules, the table assumes that the Fund is more likely to suffer capital losses than to enjoy total return. For example, to assume a total return of 0% the Fund must assume that the income it receives on
its investments is entirely offset by expenses and losses in the value of those investments.
Foreign Securities Risk
Because many of the worlds Gold Companies and Natural Resources Companies are located outside of the United States, the Fund may
have a significant portion of its investments in securities that are traded in foreign markets and that are not subject to the requirements of the U.S. securities laws, markets and accounting requirements (Foreign Securities).
Investments in the securities of foreign issuers involve certain considerations and risks not ordinarily associated with investments in securities of U.S. issuers. Foreign companies are not generally subject to the same accounting, auditing and
financial standards and requirements as those applicable to U.S. companies. Foreign securities exchanges, brokers and listed companies may be subject to less government supervision and regulation than exists in the United States. Dividend
and interest income may be subject to withholding and other foreign taxes, which may adversely affect the net return on such investments. There may be difficulty in obtaining or enforcing a court judgment abroad, and it may be difficult to effect
repatriation of
30
capital invested in certain countries. In addition, with respect to certain countries, there are risks of expropriation, confiscatory taxation, political or social instability or diplomatic
developments that could affect assets of the Fund held in foreign countries.
There may be less publicly available information
about a foreign company than a U.S. company. Foreign Securities markets may have substantially less volume than U.S. securities markets and some foreign company securities are less liquid than securities of otherwise comparable
U.S. companies. A portfolio of Foreign Securities may also be adversely affected by fluctuations in the rates of exchange between the currencies of different nations and by exchange control regulations. Foreign markets also have different
clearance and settlement procedures that could cause the Fund to encounter difficulties in purchasing and selling securities on such markets and may result in the Fund missing attractive investment opportunities or experiencing loss. In addition, a
portfolio that includes Foreign Securities can expect to have a higher expense ratio because of the increased transaction costs on non-U.S. securities markets and the increased costs of maintaining the custody of Foreign Securities.
Investments in Foreign Securities will expose the Fund to the direct or indirect consequences of political, social or economic changes in
the countries that issue the securities or in which the issuers are located. Certain countries in which the Fund may invest have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate
fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Many of these countries are also characterized by political uncertainty and instability. The cost of servicing external
debt will generally be adversely affected by rising international interest rates because many external debt obligations bear interest at rates which are adjusted based upon international interest rates.
The Fund also may purchase sponsored ADRs or U.S. dollar-denominated securities of foreign issuers. ADRs are receipts issued by
U.S. banks or trust companies in respect of securities of foreign issuers held on deposit for use in the U.S. securities markets. While ADRs may not necessarily be denominated in the same currency as the securities into which they may be
converted, many of the risks associated with Foreign Securities may also apply to ADRs. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to
distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities.
Emerging Markets Risk
The Fund may invest without limit in securities of
issuers whose primary operations or principal trading market are located in an emerging market. An emerging market country is any country that is considered to be an emerging or developing country by the World Bank. Investing
in securities of companies in emerging markets may entail special risks relating to potential political and economic instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions on foreign investment,
the lack of hedging instruments and restrictions on repatriation of capital invested. Emerging securities markets are substantially smaller, less developed, less liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value compared to the volume of trading in U.S. securities could cause prices to be erratic for reasons apart from factors that affect the quality of the securities. For example, limited market
size may cause prices to be unduly influenced by traders who control large positions. Adverse publicity and investors perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of portfolio securities,
especially in these markets. Other risks include high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial
intermediaries; over-dependence on exports, including gold and natural resources exports, making these economies vulnerable to changes in commodity prices; overburdened infrastructure and obsolete or unseasoned financial systems; environmental
problems; less developed legal systems; and less reliable securities custodial services and settlement practices.
Foreign Currency Risk
The Fund expects to invest in companies whose securities are denominated or quoted in currencies other than
U.S. dollars or have significant operations or markets outside of the United States. In such instances, the Fund will be exposed to currency risk, including the risk of fluctuations in the exchange rate between U.S. dollars
31
(in which the Funds shares are denominated) and such foreign currencies, the risk of currency devaluations and the risks of non-exchangeability and blockage. As non-U.S. securities may
be purchased with and payable in currencies of countries other than the U.S. dollar, the value of these assets measured in U.S. dollars may be affected favorably or unfavorably by changes in currency rates and exchange control regulations.
Fluctuations in currency rates may adversely affect the ability of the Investment Adviser to acquire such securities at advantageous prices and may also adversely affect the performance of such assets.
Certain non-U.S. currencies, primarily in developing countries, have been devalued in the past and might face devaluation in the
future. Currency devaluations generally have a significant and adverse impact on the devaluing countrys economy in the short and intermediate term and on the financial condition and results of companies operations in that country.
Currency devaluations may also be accompanied by significant declines in the values and liquidity of equity and debt securities of affected governmental and private sector entities generally. To the extent that affected companies have obligations
denominated in currencies other than the devalued currency, those companies may also have difficulty in meeting those obligations under such circumstances, which in turn could have an adverse effect upon the value of the Funds investments in
such companies. There can be no assurance that current or future developments with respect to foreign currency devaluations will not impair the Funds investment flexibility, its ability to achieve its investment objectives or the value of
certain of its foreign currency denominated investments.
Market Discount Risk
Whether investors will realize gains or losses upon the sale of common shares of the Fund will depend upon the market price of the shares
at the time of sale, which may be less or more than the Funds net asset value per share. Since the market price of the common shares will be affected by such factors as the Funds dividend and distribution levels (which are in turn
affected by expenses), dividend and distribution stability, net asset value, market liquidity, the relative demand for and supply of the shares in the market, general market and economic conditions and other factors beyond the control of the Fund,
we cannot predict whether the common shares will trade at, below or above net asset value or at, below or above the public offering price. Common shares of closed-end funds often trade at a discount to their net asset values and the Funds
common shares may trade at such a discount. This risk may be greater for investors expecting to sell their common shares of the Fund soon after completion of the public offering. The common shares of the Fund are designed primarily for long-term
investors, and investors in the shares should not view the Fund as a vehicle for trading purposes.
Common Stock Risk
Common stock of an issuer in the Funds portfolio may decline in price for a variety of reasons, including if the issuer fails to
make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition. Common stock in which the Fund will invest is structurally subordinated as to income and residual value to
preferred stock, bonds and other debt instruments in a companys capital structure, in terms of priority to corporate income, and therefore will be subject to greater dividend risk than preferred stock or debt instruments of such issuers. In
addition, while common stock has historically generated higher average returns than fixed income securities, common stock has also experienced significantly more volatility in those returns.
Convertible Securities Risk
Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar quality. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. In the absence of adequate
anti-dilution provisions in a convertible security, dilution in the value of the Funds holding may occur in the event the underlying stock is subdivided, additional equity securities are issued for below market value, a stock dividend is
declared or the issuer enters into another type of corporate transaction that has a similar effect.
Income Risk
The income shareholders receive from the Fund is expected to be based primarily on income the Fund earns from its investment strategy of
writing covered calls and dividends and other distributions received from its
32
investments. If the Funds covered call strategy fails to generate sufficient income or the distribution rates or yields of the Funds holdings decrease, shareholders income from
the Fund could decline.
Distribution Risk for Equity Income Portfolio Securities
In selecting equity income securities in which the Fund will invest, the Investment Adviser will consider the issuers history of
making regular periodic distributions (i.e., dividends) to its equity holders. An issuers history of paying dividends or other distributions, however, does not guarantee that the issuer will continue to pay dividends or other distributions in
the future. The dividend income stream associated with equity income securities generally is not guaranteed and will be subordinate to payment obligations of the issuer on its debt and other liabilities. Accordingly, an issuer may forgo paying
dividends on its equity securities. In addition, because in most instances issuers are not obligated to make periodic distributions to the holders of their equity securities, such distributions or dividends generally may be discontinued at the
issuers discretion.
Special Risks Related to Preferred Securities
There are special risks associated with investing in preferred securities, including:
Deferral.
Preferred securities may include provisions that permit the issuer, at its
discretion, to defer distributions for a stated period without any adverse consequences to the issuer. If the Fund owns a preferred security on which distributions are being deferred by the issuer, the Fund may be required to report income for tax
purposes although it has not yet received such deferred distributions.
Non-Cumulative
Dividends.
Some preferred stocks are non-cumulative, meaning that the dividends do not accumulate and need not ever be paid. A portion of the portfolio may include investments in non-cumulative preferred securities,
whereby the issuer does not have an obligation to make up any arrearages to its shareholders. Should an issuer of a non-cumulative preferred stock held by the Fund determine not to pay dividends on such stock, the Funds return from that
security may be adversely affected. There is no assurance that dividends or distributions on non-cumulative preferred stocks in which the Fund invests will be declared or otherwise made payable.
Subordination.
Preferred securities are subordinated to bonds and other debt instruments in
a companys capital structure in terms of priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than more senior debt security instruments.
Liquidity.
Preferred securities may be substantially less liquid than many other securities,
such as common stocks or U.S. Government securities.
Limited Voting
Rights.
Generally, preferred security holders (such as the Fund) have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time
the preferred security holders may be entitled to elect a number of Trustees to the issuers board. Generally, once all the arrearages have been paid, the preferred security holders no longer have voting rights.
Special Redemption Rights.
In certain varying circumstances, an issuer of preferred
securities may redeem the securities prior to a specified date. For instance, for certain types of preferred securities, a redemption may be triggered by a change in federal income tax or securities laws. As with call provisions, a redemption by the
issuer may negatively impact the return of the security held by the Fund.
Interest Rate Risk
Rising interest rates may adversely affect the financial performance of Gold Companies and Natural Resources Companies by increasing their
costs of capital. This may reduce their ability to execute acquisitions or expansion projects in a cost-effective manner.
During periods of declining interest rates, the issuer of a preferred stock or fixed income security may be able to exercise an option to
prepay principal earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as call or prepayment risk. Preferred stock and debt securities frequently have call features that allow the issuer to redeem the
securities prior to their stated maturities. An issuer may redeem such a security if the
33
issuer can refinance it at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer. During periods of rising interest rates, the average life of
certain types of securities may be extended because of slower than expected principal payments. This may prolong the length of time the security pays a below market interest rate, increase the securitys duration and reduce the value of the
security. This is known as extension risk.
Inflation Risk
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the
Funds shares and distributions thereon can decline. In addition, during any periods of rising inflation, dividend rates of any variable rate preferred stock or debt securities issued by the Fund would likely increase, which would tend to
further reduce returns to common shareholders.
Illiquid Investments Risk
Although the Fund expects that its portfolio will primarily be comprised of liquid securities, the Fund may invest up to 15% of its assets
in unregistered securities and otherwise illiquid investments. Unregistered securities are securities that cannot be sold publicly in the United States without registration under the Securities Act of 1933. An illiquid investment is a security or
other investment that cannot be disposed of within seven days in the ordinary course of business at approximately the value at which the Fund has valued the investment. Unregistered securities often can be resold only in privately negotiated
transactions with a limited number of purchasers or in a public offering registered under the Securities Act of 1933. Considerable delay could be encountered in either event and, unless otherwise contractually provided for, the Funds proceeds
upon sale may be reduced by the costs of registration or underwriting discounts. The difficulties and delays associated with such transactions could result in the Funds inability to realize a favorable price upon disposition of unregistered
securities, and at times might make disposition of such securities impossible. In addition, the Fund may be unable to sell other illiquid investments when it desires to do so, resulting in the Fund obtaining a lower price or being required to retain
the investment. Illiquid investments generally must be valued at fair value, which is inherently less precise than utilizing market values for it desires to do so, resulting in the Fund obtaining a lower price or being required to retain the
investment. liquid investments, and may lead to differences between the price a security is valued for determining the Funds net asset value and the price the Fund actually receives upon sale.
Investment Companies
The Fund may invest in the securities of other investment companies, including exchange traded funds, to the extent permitted by law. To
the extent the Fund invests in the common equity of investment companies, the Fund will bear its ratable share of any such investment companys expenses, including management fees. The Fund will also remain obligated to pay management fees to
the Investment Adviser with respect to the assets invested in the securities of other investment companies. In these circumstances holders of the Funds common shares will be in effect subject to duplicative investment expenses.
Special Risks of Derivative Transactions
The Fund may participate in derivative transactions. Such transactions entail certain execution, market, liquidity, hedging and tax risks. Participation in the options or futures markets, in currency
exchange transactions and in other derivatives transactions involves investment risks and transaction costs to which the Fund would not be subject absent the use of these strategies. If the Investment Advisers prediction of movements in the
direction of the securities, foreign currency, interest rate or other referenced instruments or markets is inaccurate, the consequences to the Fund may leave the Fund in a worse position than if it had not used such strategies. Risks inherent in the
use of options, foreign currency, futures contracts and options on futures contracts, securities indices and foreign currencies include:
|
|
|
dependence on the Investment Advisers ability to predict correctly movements in the direction of the relevant measure;
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|
imperfect correlation between the price of the derivative instrument and movements in the prices of the referenced assets;
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34
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the fact that skills needed to use these strategies are different from those needed to select portfolio securities;
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the possible absence of a liquid secondary market for any particular instrument at any time;
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the possible need to defer closing out certain hedged positions to avoid adverse tax consequences;
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|
the possible inability of the Fund to purchase or sell a security or instrument at a time that otherwise would be favorable for it to do so, or the
possible need for the Fund to sell a security or instrument at a disadvantageous time due to a need for the Fund to maintain cover or to segregate securities in connection with the hedging techniques; and
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|
|
|
the creditworthiness of counterparties.
|
Forward Currency Exchange Contracts.
There is no independent limit on the Funds ability to invest in foreign currency exchange contracts. 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 the use of forward contracts may not serve as a complete hedge because of an imperfect correlation between
movements in the prices of the contracts and the prices of the currencies hedged or used for cover.
Counterparty
Risk.
The Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased by the Fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a
derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or
may obtain no recovery in such circumstances.
For a further description of the risks associated with the Funds
derivative transactions, see Investment Objectives and PoliciesDerivative Instruments in the SAI.
Non-Investment Grade
Securities
The Fund may invest up to 10% of its assets in fixed income and convertible securities rated in the lower
rating categories of recognized statistical rating agencies, such as securities rate CCC or lower by S&P or Caa by Moodys, or non-rated securities of comparable quality. These high yield securities, also sometimes
referred to as junk bonds, generally pay a premium above the yields of U.S. government securities or debt securities of investment grade issuers because they are subject to greater risks than these securities. These risks, which
reflect their speculative character, include the following:
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greater credit risk and risk of default;
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potentially greater sensitivity to general economic or industry conditions;
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potential lack of attractive resale opportunities (illiquidity); and
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additional expenses to seek recovery from issuers who default.
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In addition, the prices of these lower grade securities are more sensitive to negative developments, such as a decline in the
issuers revenues or a general economic downturn, than are the prices of higher grade securities. Lower grade securities tend to be less liquid than investment grade securities. The market value of lower grade securities may be more volatile
than the market value of investment grade securities and generally tends to reflect the markets perception of the creditworthiness of the issuer and short-term market developments to a greater extent than investment grade securities, which
primarily reflect fluctuations in general levels of interest rates.
Ratings are relative, subjective and not absolute
standards of quality. Securities ratings are based largely on the issuers historical financial condition and the rating agencies analysis at the time of rating. Consequently, the rating assigned to any particular security is not
necessarily a reflection of the issuers current financial condition.
As a part of its investments in lower grade
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, emerge from bankruptcy protection
and the value of these securities will
35
appreciate. By investing in the securities of issuers in default, the Fund bears the risk that these issuers will not continue to honor their obligations or emerge from bankruptcy protection or
that the value of these securities will not otherwise appreciate.
Special Risks to Holders of Preferred Shares
Illiquidity Prior to Exchange Listing.
In the event any additional series of preferred shares are issued and
such shares are intended to be listed on an exchange, prior application will have been made to list such shares on an exchange. However, during an initial period, which is not expected to exceed 30 days after the date of its initial issuance of
any preferred shares to be listed on an exchange, such shares may not be listed. During such period, the underwriters in the offering may make a market in such shares, though they will have no obligation to do so. Consequently, an investment in such
shares may be illiquid during such period. Preferred shares not intended to be listed on an exchange may be illiquid as long as they are outstanding.
Market Price Fluctuation.
Preferred shares may trade at a premium to or discount from liquidation preference for a variety of reasons, including changes in interest rates and
credit quality of the Fund.
Dependence on Key Personnel
The Investment Adviser is dependent upon the expertise of Mr. Mario J. Gabelli. If the Investment Adviser were to lose the services of Mr. Gabelli, it 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.
The Fund is dependent upon the expertise of Vincent Hugonnard-Roche as the sole option strategist on the Funds portfolio management
team. If the Fund were to lose the services of Mr. Roche, it could be temporarily adversely affected until a suitable replacement could be found.
Long-Term Objective; Not a Complete Investment Program
The Fund is
intended for investors seeking a high level of current income. The Fund is not meant to provide a vehicle for those who wish to exploit short-term swings in the stock market. An investment in shares of the Fund should not be considered a complete
investment program. Each shareholder should take into account the Funds investment objectives as well as the shareholders other investments when considering an investment in the Fund.
Management Risk
The
Fund is subject to management risk because its portfolio will be actively managed. The Investment Adviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will
produce the desired results.
Portfolio Turnover
The Fund may have a high turnover ratio which may result in higher expenses and lower after-tax return to shareholders than if the Fund had a lower turnover ratio.
Non-Diversified Status
The Fund is classified as a non-diversified investment company under the 1940 Act, which means the Fund is not limited by the
1940 Act in the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment company, the Fund may invest in the securities of individual issuers to a greater degree than a diversified
investment company. As a result, the Fund may be more vulnerable to events affecting a single issuer and therefore, subject to greater volatility than a fund that is more broadly diversified. Accordingly, an investment in the Fund may present
greater risk to an investor than an investment in a diversified company.
36
Recent Economic Events
The debt and equity capital markets in the United States have been negatively impacted by significant write-offs in the financial services sector relating to subprime mortgages and the repricing of credit
risk in the broadly syndicated market, among other things. These events, along with the downgrade to the United States credit rating, deterioration of the housing market, the failure of major financial institutions and the resulting
United States federal government actions have led to worsening general economic conditions, which have materially and adversely impacted the broader financial and credit markets and have reduced the availability of debt and equity capital for
the market as a whole and financial firms in particular. These events have been adversely affecting the willingness of some lenders to extend credit, in general, which may make it more difficult for issuers of debt securities to obtain financings or
refinancings for their investment or lending activities or operations. There is a risk that such issuers will be unable to successfully complete such financings or refinancings. In particular, because of the current conditions in the credit markets,
issuers of debt securities may be subject to increased cost for debt, tightening underwriting standards and reduced liquidity for loans they make, securities they purchase and securities they issue. These events may increase the volatility of the
value of securities owned by the Fund and/or result in sudden and significant valuation increases or declines in its portfolio. These events also may make it more difficult for the Fund to accurately value its securities or to sell its securities on
a timely basis. In addition, illiquidity and volatility in the credit markets may directly and adversely affect the setting of dividend rates on the common shares. These events have adversely affected the broader economy, and may continue to do so,
which in turn may adversely affect the ability of issuers of securities owned by the Fund to make payments of principal and interest when due, lead to lower credit ratings and increase defaults. There is also a risk that developments in sectors of
the credit markets in which the Fund does not invest may adversely affect the liquidity and the value of securities in sectors of the credit markets in which the Fund does invest, including securities owned by Fund.
While the extreme volatility and disruption that U.S. and global markets experienced for an extended period of time beginning in 2007 and
2008 has generally subsided, uncertainty and periods of volatility remain, and risks to a robust resumption of growth persist. In 2010, several European Union (EU) countries, including Greece, Ireland, Italy, Spain, and Portugal, began
to face budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal
and wage policy among European Economic and Monetary Union member countries. Moreover, as the European debt crisis has progressed the possibility of one or more eurozone countries exiting the European Economic and Monetary Union, or even the
collapse of the Euro as a common currency, has arisen. The effects of the collapse of the Euro, or of the exit of one or more countries from the Economic and Monetary Union, on the U.S. and global economy and securities markets are impossible to
predict and any such events could have a significant adverse impact on the value and risk profile of the Funds portfolio. Moreover, recent downgrades to the credit ratings of major banks could result in increased borrowing costs for such banks
and negatively affect the broader economy. A return to unfavorable economic conditions could impair the Funds ability to achieve its investment objectives.
General market uncertainty and consequent repricing of risk have led to market imbalances of sellers and buyers, which in turn have resulted in significant valuation uncertainties in a variety of debt
securities and significant and rapid value decline in certain instances. These conditions resulted in, and in many cases continue to result in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with
many debt securities remaining illiquid and of uncertain value. Such market conditions may make valuation of some of the Funds securities uncertain and/or result in sudden and significant valuation increases or declines in its holdings. If
there is a significant decline in the value of the Funds portfolio, this may impact the asset coverage levels for the Funds outstanding leverage.
Government Intervention in Financial Markets Risk
The recent instability
in the financial markets discussed above has led the U.S. government and certain foreign governments to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have
experienced extreme volatility, and in some cases a lack of liquidity, including through direct purchases of equity and debt securities. Federal, state, and other governments, their regulatory agencies or self-regulatory organizations may take
actions that affect the regulation of the issuers
37
in which the Fund invests, or the issuers of such securities, in ways that are unforeseeable. Legislation or regulation may also change the way in which the Fund is regulated. Such legislation or
regulation could limit or preclude the Funds ability to achieve its investment objectives.
Congress has enacted sweeping
financial legislation, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), signed into law by President Obama on July 21, 2010, regarding the operation of banks, private fund managers and other
financial institutions, which includes provisions regarding the regulation of derivatives. Many provisions of the Dodd-Frank Act will be implemented through regulatory rulemakings and similar processes over a period of time. The impact of the
Dodd-Frank Act, and of follow-on regulation, on trading strategies and operations is impossible to predict, and may be adverse. Practices and areas of operation subject to significant change based on the impact, direct or indirect, of the
Dodd-Frank Act and follow-on regulation, may change in manners that are unforeseeable, with uncertain effects. By way of example and not limitation, direct and indirect changes from the Dodd-Frank Act and follow-on regulation may occur to a
significant degree with regard to, among other areas, financial consumer protection, bank ownership of and involvement with private funds, proprietary trading, registration of investment advisers, and the trading and use of many derivative
instruments, including swaps. There can be no assurance that such legislation or regulation will not have a material adverse effect on the Trust. In addition, Congress may address tax policy, which also could have uncertain direct and indirect
impact on trading and operations, as well as, potentially, operations and structure of the Fund.
Further, the Dodd-Frank Act
created the Financial Stability Oversight Council (FSOC), an interagency body charged with identifying and monitoring systemic risks to financial markets. The FSOC has the authority to require that non-bank financial companies that are
predominantly engaged in financial activities, such as the Fund and the Investment Adviser, whose failure it determines would pose systemic risk, be placed under the supervision of the Board of Governors of the Federal Reserve System
(Federal Reserve). The FSOC has the authority to recommend that the Federal Reserve adopt more stringent prudential standards and reporting and disclosure requirements for non-bank financial companies supervised by the Federal Reserve.
The FSOC also has the authority to make recommendations to the Federal Reserve on various other matters that may affect the Trust, including requiring financial firms to submit resolution plans, mandating credit exposure reports, establishing
concentration limits, and limiting short-term debt. The FSOC may also recommend that other federal financial regulators impose more stringent regulation upon, or ban altogether, financial activities of any financial firm that poses what it
determines are significant risks to the financial system. In the event that the FSOC designates the Fund as a systemic risk to be placed under the Federal Reserves supervision, the Fund could face stricter prudential standards, including
risk-based capital requirements, leverage limits, liquidity requirements, concentration requirements, and overall risk management requirements, among other restrictions. Such requirements could hinder the Funds ability to meet its investment
objectives and may place the Fund at a disadvantage with respect to its competitors.
The implementation of the Dodd-Frank Act
could also adversely affect the Investment Adviser and the Fund by increasing transaction and/or regulatory compliance costs. In addition, greater regulatory scrutiny and the implementation of enhanced and new regulatory requirements may increase
the Investment Advisers and the Funds exposure to potential liabilities, and in particular liabilities arising from violating any such enhanced and/or new regulatory requirements. Increased regulatory oversight could also impose
administrative burdens on the Investment Adviser and the Fund, including, without limitation, responding to investigations and implementing new policies and procedures. The ultimate impact of the Dodd-Frank Act, and any resulting regulation, is not
yet certain and the Investment Adviser and the Fund may be affected by the new legislation and regulation in ways that are currently unforeseeable.
On February 9, 2012, the CFTC adopted certain amendments to the regulations governing commodity pools, commodity pool operators, and commodity trading advisors (the CPO-CTA Rulemaking). As
part of the CPO-CTA Rulemaking, the CFTC amended Rule 4.5 under the Commodity Exchange Act (the CEA) to impose additional restrictions on the use of futures, options and swaps by registered investment companies, such as the Fund. These
amendments limit the ability of the Fund to use futures, options and swaps without the Fund, its advisors and operators being subject to full CFTC regulation, which would impose substantial additional regulatory and compliance burdens on the
Investment Adviser (who would have to register as commodity pool operators and/or commodity trading advisers) and the Fund. The ultimate effect these amendments may have on the Investment Adviser and the Fund is thus uncertain; however, it is
possible that they may adversely affect the Funds ability to manage its portfolio and may impair the Funds ability to achieve its investment objectives.
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The CPO-CTA Rulemaking also imposed additional reporting and disclosure obligations on
commodity pool operators and this may too adversely affect the Funds ability to manage its portfolio and impair the Funds ability to achieve its investment objectives. The CPO-CTA Rulemaking may substantially increase regulatory
compliance costs for the Fund and the Investment Adviser and could have effects on the management of the Funds portfolio that are currently unforeseeable, that could reduce returns to investors and that could impair the Funds ability to
achieve its investment objectives.
In the aftermath of the recent financial crisis, there appears to be a renewed popular,
political and judicial focus on finance related consumer protection. Financial institution practices are also subject to greater scrutiny and criticism generally. In the case of transactions between financial institutions and the general public,
there may be a greater tendency toward strict interpretation of terms and legal rights in favor of the consuming public, particularly where there is a real or perceived disparity in risk allocation and/or where consumers are perceived as not having
had an opportunity to exercise informed consent to the transaction. In the event of conflicting interests between retail investors holding common shares of a closed-end investment company such as the Fund and a large financial institution, a court
may similarly seek to strictly interpret terms and legal rights in favor of retail investors.
Market Disruption and Geopolitical Risk
Geopolitical events such as terrorist attacks and wars, have led to, and may in the future lead to, increased short-term
market volatility and may have long-term effects on U.S. and world economies and markets. The nature, scope and duration of the war and occupation cannot be predicted with any certainty. Similar events in the future or other disruptions of
financial markets could affect interest rates, securities exchanges, auctions, secondary trading, ratings, credit risk, inflation, energy prices and other factors relating to the common shares.
2013 U.S. Federal Budget
The proposed U.S. federal budget for fiscal year 2013 calls for the elimination of approximately $39 billion in tax incentives widely used
by oil, gas and coal companies and the imposition of new fees on certain energy producers. The elimination of such tax incentives and imposition of such fees could adversely affect Natural Resources Companies in which the Fund invests and/or the
natural resources sector generally.
Anti-Takeover Provisions
The Funds governing documents include provisions that could limit the ability of other entities or persons to acquire control of the Fund or convert the Fund to an open-end fund. See
Anti-Takeover Provisions of the Funds Governing Documents.
Investment Restrictions
The Fund has adopted certain investment limitations designed to limit investment risk and maintain portfolio diversification. These
limitations are fundamental and may not be changed without the approval of the holders of a majority, as defined in the 1940 Act, of the outstanding shares and preferred shares, if any, voting together as a single class. See Investment
Restrictions in the SAI for a complete list of the fundamental investment policies of the Fund. Should the Fund decide to issue additional series of preferred shares in the future, it may become subject to rating agency guidelines that are
more limiting than its fundamental investment restrictions in order to obtain and maintain a desired rating on its preferred shares.
Regulated Investment Company Status Risk
Securities issued by certain issuers in which the Fund invests which are or become pass-through entities (such as Canadian Royalty Trusts, which may be grantor trusts for U.S. federal income tax purposes)
may not produce qualified income for purposes of determining the Funds compliance with the tax rules applicable to regulated investment companies. To the extent that the Fund holds such securities indirectly through investments in
a taxable subsidiary formed by the Fund, those securities may produce qualified income. However, the net return to the Fund on such investments would be reduced to the extent that the subsidiary is subject to corporate income taxes. The
Fund shall monitor its investments with the objective of maintaining its continued qualification as a regulated investment company. If for any taxable year the Fund does not qualify as a regulated
39
investment company, all of its taxable income will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable to
the shareholders as ordinary dividends to the extent of the Funds current or accumulated earnings and profits.
MANAGEMENT OF THE FUND
General
The Funds Board of Trustees (who, with its officers, are described in the SAI) has overall responsibility for the management of the Fund. The Board of Trustees decides upon matters of general policy
and reviews the actions of the Investment Adviser, Gabelli Funds, LLC, and the Sub-Administrator (as defined below). Pursuant to an investment advisory agreement between the Fund and the Investment Adviser (the Investment Advisory
Agreement), the Investment Adviser, under the supervision of the Funds Board of Trustees, provides a continuous investment program for the Funds portfolio; provides investment research and makes and executes recommendations for the
purchase and sale of securities; and provides all facilities and personnel, including officers required for its administrative management, and pays the compensation of Trustees of the Fund who are officers or employees of the Investment Adviser or
its affiliates. As compensation for its services and the related expenses borne by the Investment Adviser, the Fund pays the Investment Adviser a fee, computed weekly and payable monthly, equal, on an annual basis, to 1.00% of the Funds
average weekly net assets, with no deduction for the liquidation preference of any outstanding preferred shares. The Funds average weekly net assets will be deemed to be the average weekly value of the Funds total assets minus the sum of
the Funds liabilities (such liabilities exclude the aggregate liquidation preference of outstanding preferred shares and accumulated dividends, if any, on those shares and the outstanding principal amount of any debt securities the proceeds of
which were used for investment purposes, plus accrued and unpaid interest thereon). 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. A discussion regarding
the basis for the most recent approval of the Investment Advisory Agreement by the Board of Trustees of the Fund is available in the Funds semiannual report to shareholders for the period ending June 30, 2012.
The Investment Adviser
The Investment Adviser is a New York limited liability company which serves as an investment adviser to 16 open-end and 10 closed-end
registered management investment companies and a Luxembourg SICAV with combined aggregate net assets in excess of $20.5 billion as of December 31, 2012. The Investment Adviser is a registered adviser under the Investment Advisers Act of 1940, as
amended. Mr. Mario J. Gabelli may be deemed a controlling person of the Investment Adviser on the basis of his controlling interest in GAMCO Investors, Inc. (GBL), the parent company of the Investment Adviser. The Investment
Adviser has several affiliates that provide investment advisory services: GAMCO Asset Management, Inc., a wholly owned subsidiary of GBL, acts as investment adviser for individuals, pension trusts, profit sharing trusts and endowments, and as
sub-adviser to certain third party investment funds, which include registered investment companies, and had assets under management of approximately $15.0 billion as of December 31, 2012; Teton Advisors, Inc., an affiliate of the Investment Adviser
with assets under management of approximately $1.3 billion as of December 31, 2012, acts as investment adviser to The TETON Westwood Funds; Gabelli Securities, Inc., a majority owned subsidiary of GBL, acts as investment adviser to certain
alternative investment products, consisting primarily of risk arbitrage and merchant banking limited partnerships and offshore companies, with assets under management of approximately $920 million as of December 31, 2012; and Gabelli Fixed Income
LLC, an indirect wholly owned subsidiary of GBL, acts as investment adviser for separate accounts having assets under management of approximately $60 million as of December 31, 2012. Teton Advisors, Inc. was spun off by GBL in March 2009 and is an
affiliate of GBL by virtue of Mr. Gabellis ownership of GGCP, Inc., the principal shareholder of Teton Advisors, Inc. as of December 31, 2012.
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The Investment Adviser is a wholly-owned subsidiary of GAMCO Investors, Inc., a New York
corporation, whose Class A Common Stock is traded on the New York Stock Exchange (the NYSE) under the symbol GBL. Mr. Mario J. Gabelli may be deemed a controlling person of the Investment Adviser on the
basis of his ownership of a majority of the stock of GGCP, Inc., which owns a majority of the capital stock of GAMCO Investors, Inc.
Payment of Expenses
The
Investment Adviser is obligated to pay expenses associated with providing the services contemplated by the Investment 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 (but excluding costs associated with the calculation of the net asset value and allocated costs of the chief compliance officer function and officers of the Fund who are
employed by the Fund and are not employed by the Investment Adviser although such officers may receive incentive-based variable compensation from affiliates of the Investment Adviser), as well as the fees of all Trustees of the Fund who are officers
or employees of the Investment Adviser or its affiliates.
In addition to the fees of the Investment Adviser, the Fund is
responsible for the payment of all its other expenses incurred in the operation of the Fund, which include, among other things, expenses for legal and the Independent Registered Public Accounting Firms services, stock exchange listing fees,
costs of printing proxies, share certificates and shareholder reports, charges of the Funds custodian, charges of the transfer agent and distribution disbursing agent, SEC fees, fees and expenses of Trustees who are not officers or employees
of the Investment Adviser or its affiliates, accounting and printing costs, the Funds pro rata portion of membership fees in trade organizations, the Funds pro rata portion of the Chief Compliance Officers compensation, fidelity
bond coverage for the Funds officers and employees, Trustees and officers liability policy, interest, brokerage costs, taxes, expenses of qualifying the Fund for sale in various states, expenses of personnel performing shareholder servicing
functions, litigation and other extraordinary or non-recurring expenses and other expenses properly payable by the Fund.
Selection of
Securities Brokers
The Investment Advisory Agreement contains provisions relating to the selection of securities brokers
to effect the portfolio transactions of the Fund. Under those provisions, the Investment Adviser may (i) direct Fund portfolio brokerage to G.research, Inc. (G.research) (formerly Gabelli & Company, Inc.) or other
broker-dealer affiliates of the Investment Adviser and (ii) pay commissions to brokers other than G.research that are higher than might be charged by another qualified broker to obtain brokerage and/or research services considered by the
Investment Adviser to be useful or desirable for its investment management of the Fund and/or its other investment advisory accounts or those of any investment adviser affiliated with it. The SAI contains further information about the Investment
Advisory Agreement, including a more complete description of the investment advisory and expense arrangements, exculpatory and brokerage provisions, as well as information on the brokerage practices of the Fund.
Portfolio Management
As
Chairman and Chief Executive Officer of GAMCO Investors, Inc., Mr. Gabelli ultimately has oversight over the investment professionals responsible for the day-to-day management of the Fund. Mr. Gabelli has served as Chairman and Chief
Executive Officer of GAMCO Investors, Inc. and its predecessors since 1976. Mr. Gabelli is the Chief Investment OfficerValue Products for the Investment Adviser and GAMCO Asset Management Inc. Mr. Gabelli serves as Portfolio Manager
for several funds in the GAMCO/Gabelli fund family and is a director/trustee of most of the funds in the family. Mr. Gabelli is also a director and the Chief Executive Officer of GGCP, Inc., a private company which controls GAMCO Investors,
Inc.
Vincent Hugonnard-Roche serves as a Co-Lead Portfolio Manager for the Fund and is primarily responsible for the
day-to-day management of the Funds option strategy. Mr. Roche has served as Co-Lead Portfolio Manager for the GAMCO Natural Resources, Gold & Income Trust by Gabelli, a registered closed-end investment company, since 2011.
Mr. Roche joined GAMCO Investors, Inc. in 2000 as Director of Quantitative Strategies and Head of Risk Management. Prior thereto, Mr. Roche worked at Credit Lyonnais in New York as a proprietary equity analyst focused on Risk Arbitrage.
41
Caesar M.P. Bryan serves as a Co-Lead Portfolio Manager for the Fund and is primarily
responsible for the day-to-day management of the Gold Companies portion of the Funds portfolio. Mr. Bryan joined GAMCO Investors, Inc. in 1994 and has been primarily responsible for the day-to-day investment management of the Gabelli Gold
Fund, Inc., a registered open-end investment company, since its inception in 1994. Mr. Bryan has been Portfolio Manager of the GAMCO International Growth Fund, Inc., a registered open-end investment company, since 1995, and Co-Portfolio Manager
of The GAMCO Global Opportunity Fund, a registered open-end investment company, since 1998. Mr. Bryan is also a Portfolio Manager for The GAMCO Global Growth Fund, a registered open-end investment company, and Co-Lead Portfolio Manager for The
GAMCO Natural Resources, Gold & Income Trust by Gabelli, a registered closed-end investment company, since 2011.
Barbara
G. Marcin serves as a Co-Lead Portfolio Manager for the Fund and is primarily responsible for the day-to-day management of the Natural Resources Companies portion of the Funds portfolio. Ms. Marcin joined GAMCO Investors, Inc. in 1999 to
manage larger capitalization value style portfolios. Ms. Marcin currently serves as the Portfolio Manager for The Gabelli Dividend Growth Fund and The TETON Westwood Income Fund, registered open-end investment companies, and as a Portfolio
Manager for The Gabelli Dividend & Income Trust, a registered closed-end investment company. Prior thereto, she worked at Citibank Global Asset Management where she was head of value investments and was a member of the Global Investment
Policy Committee and co-Chair of the U.S. Equity Policy Committee.
The Statement of Additional Information provides
additional information about the Portfolio Managers compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers ownership of securities of the Fund.
Non-Resident Trustees
Messrs. dUrso and van Ekris are not
U.S. residents and substantially all of each of their assets may be located outside of the United States. Messrs. dUrso and van Ekris do not have agents for service of process in the United States. As a result, it may be difficult for
U.S. investors to effect service of process upon Messrs. dUrso or van Ekris within the United States or to realize judgments of courts of the United States predicated upon civil liabilities under the federal securities laws of the United
States. In addition, it is not certain that civil liabilities predicated upon the federal securities laws on which a valid judgment of a court in the United States is obtained would be enforceable in the courts of the jurisdictions in which Messrs.
dUrso or van Ekris reside.
Sub-Administrator
The Investment Adviser has entered into a sub-administration agreement with BNY Mellon Investment Servicing (US) Inc. (the Sub-Administrator) pursuant to which the Sub-Administrator provides
certain administrative services necessary for the Funds operations that do not include the investment and portfolio management services provided by the Investment Adviser. For these services and the related expenses borne by the
Sub-Administrator, the Investment Adviser pays a prorated monthly fee at the annual rate of 0.0275% of the first $10 billion of the aggregate average net assets of the Fund and all other funds advised by the Investment Adviser and Teton
Advisors, Inc. and administered by the Sub-Administrator, 0.0125% of the aggregate average net assets exceeding $10 billion and 0.01% of the aggregate average net assets in excess of $15 billion. The Sub-Administrator has its principal
office at 760 Moore Road, King of Prussia, Pennsylvania 19406.
Regulatory Matters
On April 24, 2008, the Investment Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent
trading in shares of the GAMCO Global Growth Fund (the Global Growth Fund) by one investor who was banned from the Global Growth Fund in August 2002. Under the terms of the settlement, the Investment Adviser, without admitting or denying
the SECs findings and allegations, paid $16 million (which included a $5 million civil monetary penalty). On the same day, the SEC filed a civil action in the U.S. District Court for the Southern District of New York against the
Executive Vice President and Chief Operating Officer of the Investment Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer, who is also an officer of the Global Growth Fund and other funds in the
Gabelli/GAMCO complex, including this Fund, denies the allegations and is continuing in his positions with the Investment
42
Adviser and the funds. The settlement by the Investment Adviser did not have , and the resolution of the action against the officer is not expected to have, a material adverse impact on the
Investment Adviser or its ability to fulfill its obligations under the Investment Advisory Agreement.
PORTFOLIO TRANSACTIONS
Principal transactions are not entered into with affiliates of the Fund. However, G.research,
an affiliate of the Investment Adviser, may execute portfolio transactions on stock exchanges and in the over-the-counter markets on an agency basis and may be paid commissions. For a more detailed discussion of the Funds brokerage allocation
practices, see Portfolio Transactions in the SAI.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to make regular monthly cash distributions of all or a portion of its investment company taxable income
(which includes ordinary income and realized short-term capital gains) to common shareholders. The Fund also intends to make annual distributions of its realized capital gains (which is the excess of net long-term capital gains over net short-term
capital losses).
A portion of the Funds distributions on its common shares for recent periods have included, or have been estimated to include, a return of capital. A portion of the distributions to the preferred shareholders may also be
sourced from capital attributable to the common shareholders. Any return of capital that is a component of a distribution is not sourced from realized gains of the Fund and that portion should not be considered by investors as yield or total return
on their
investment in the Fund.
The Fund will pay common shareholders annually all, or at least 90%, of its investment company taxable income. Various factors will affect the level of the Funds income, such as its asset mix and use
of option strategies. To permit the Fund to maintain more stable monthly distributions, the Fund may from time to time distribute less than the entire amount of income earned in a particular period, which would be available to supplement future
distributions. As a result, the distributions paid by the Fund for any particular monthly period may be more or less than the amount of income actually earned by the Fund during that period. However, as the Fund is covered by an exemption from the
1940 Act which allows the Board of Trustees to implement a managed distribution policy, the Board of Trustees in the future may determine to cause the Fund to distribute a fixed percentage of the Funds average net asset value or market price
per common share over a specified period of time at or about the time of distribution or to distribute a fixed dollar amount. The Board of Trustees has no present intention to implement such a policy. Because the Funds distribution policy may
be changed by the Board of Trustees at any time and the Funds income will fluctuate, there can be no assurance that the Fund will pay dividends or distributions at a particular rate. See Dividends and Distributions in the SAI.
Shareholders will automatically have all dividends and distributions reinvested in common shares of the Fund issued by the
Fund or purchased in the open market in accordance with the Funds dividend reinvestment plan unless an election is made to receive cash. See Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan.
ISSUANCE OF COMMON STOCK
During the year ended December 31, 2012, the Fund issued 24,262,186 shares of beneficial interest through various at the market offerings. The net proceeds received from these various
offerings were $342,349,325 (net of sales manager commissions of $3,022,059 and offering expenses of $114,456). The net proceeds received from the various offerings exceeded the NAV of the issued shares by $12,795,059.
During the year ended December 31, 2011, the Fund issued 18,712,456 shares of beneficial interest through various at the market
offerings . The net proceeds received from these various offerings were $317,451,924 (net of sales manager commissions of $3,206,585 and offering expenses of $336,311). The net proceeds received from the various offerings exceeded the NAV of
the shares by $7,892,843.
G.research, an affiliate of Gabelli Funds, LLC, the Funds Investment Adviser, acted as sales
manager for all of the offerings.
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AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE
PLAN
Under the Funds Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan (the Plan), a
shareholder whose common shares are registered in his or her own name will have all distributions reinvested automatically by the transfer agent, which is agent under the Plan, unless the shareholder 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 shareholder elects to receive distributions in cash. Investors who own common shares 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 the transfer agent as dividend disbursing agent. A participant in the Plan may elect to receive all dividends in cash by contacting the Plan agent in writing at
the address specified below or by calling the Plan agent at (800) 937-5449.
Under the Plan, whenever the market price of
the common shares 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 distribution, participants in the Plan will receive newly issued common shares. The number
of shares to be issued will be computed at a per share rate equal to the greater of (i) the net asset value as most recently determined or (ii) 95% of the then-current market price of the common shares. The valuation date is the
distribution payment date or, if that date is not an NYSE MKT trading day, the next trading day. If the net asset value of the common shares at the time of valuation exceeds the market price of the common shares, participants will receive shares
purchased by the Plan agent in the open market. If the Fund should declare a distribution payable only in cash, the Plan agent will buy the common shares for such Plan in the open market, on the NYSE MKT or elsewhere, for the participants
accounts, except that the Plan agent will terminate purchases in the open market and instead the Fund will distribute newly issued shares at a per share rate equal to the greater of net asset value or 95% of market value if, following the
commencement of such purchases, the market value of the common shares plus estimated brokerage commissions exceeds net asset value.
Participants in the Plan have the option of making additional cash payments to the Plan agent, semi-monthly, for investment in the shares as applicable. Such payments may be made in any amount from $250
to $10,000. The Plan agent will use all funds received from participants to purchase shares of the Fund in the open market on or about the 15th of each month. The Plan agent will charge each shareholder who participates $0.75, plus a pro rata
share of the brokerage commissions. Brokerage charges for such purchases are expected to be less than the usual brokerage charge for such transactions. It is suggested that participants send voluntary cash payments to the Plan agent in a manner that
ensures that the Plan agent will receive these payments approximately ten days (10) before the 15th of each month. A participant may without charge withdraw a voluntary cash payment by written notice, if the notice is received by the Plan agent at
least 48 hours before such payment is to be invested.
The Plan agent maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in the account, including information needed by shareholders for personal and tax records. Shares in the account of each Plan participant will be held by the Plan agent in noncertificated form in
the name of the participant. A Plan participant may send its share certificates to the Plan agent so that the shares represented by such certificates will be held by the Plan agent in the participants shareholder account under the Plan.
In the case of shareholders such as banks, brokers or nominees, that hold shares for others who are the beneficial owners, the
Plan agent will administer the Plan on the basis of the number of shares certified from time to time by the shareholder as representing the total amount registered in the shareholders name and held for the account of beneficial owners who
participate in the Plan.
The automatic reinvestment of dividends and other distributions will not relieve participants of any
U.S. federal, state or local income tax that may be payable (or required to be withheld) on such dividends or other distributions.
A Plan participant may terminate his or her account under the Plan by notifying the Plan agent in writing to the address specified below or by telephone at (800) 937-5449. A termination will be
effective immediately if notice is received by the Plan agent not less than ten (10) days prior to any dividend or distribution record date. If
44
such notice is received less than ten (10) days prior to any dividend or distribution record date, then such termination shall be immediately effective with respect to all shares then held
in such Plan participants shareholder account except that shares to be received pursuant to the reinvestment of dividends or distributions shall be sold by the Plan agent on the first trading day after such shares have been posted to such
terminating Plan participants shareholder account. If the Plan participant elects by written notice to the Plan agent in advance of such termination to have the Plan agent sell part or all of such Plan participants shares and remit the
proceeds to him or her, the Plan agent is authorized to deduct $2.50 per transaction plus brokerage commissions for this transaction from the proceeds.
The Fund reserves the right to amend or terminate its Plan as applied to any voluntary cash payments made and any distribution paid with at least 90 days written notice to the participants in such
Plan. The Plan also may be amended or terminated by the Plan agent, with the Funds prior written consent, on at least 90 days written notice to the participants in such Plan. All correspondence concerning the Plan should be directed to
the transfer agent.
For more information about the Plan you may contact the Plan agent in writing at Gabelli Funds, C/O
American Stock Transfer & Trust Company, 59 Maiden Lane, New York, New York 10038, or by calling the Plan agent at (800) 937-5449.
DESCRIPTION OF THE SHARES
The following is
a brief description of the terms of the Funds shares. This description does not purport to be complete and is qualified by reference to the Funds Agreement and Declaration of Trust and its By-Laws. For complete terms of the shares,
please refer to the actual terms of each series, which are set forth in the Agreement and Declaration of Trust.
Common Shares
The Fund is an unincorporated statutory trust organized under the laws of Delaware pursuant to a Certificate of Trust
dated as of January 4, 2005. The Fund is authorized to issue an unlimited number of common shares of beneficial interest, par value $0.001 per share. Each common share of beneficial interest has one vote and, when issued and paid for in
accordance with the terms of this offering, will be fully paid and non-assessable. Though the Fund expects to pay distributions monthly on the common shares of beneficial interest, it is not obligated to do so. All common shares of beneficial
interest are equal as to distributions, assets and voting privileges and have no conversion, preemptive or other subscription rights. The Fund will send annual and semiannual reports, including financial statements, to all holders of its shares.
Offerings of shares require approval by the Funds Board of Trustees. Any additional offering of common shares of
beneficial interest will be subject to the requirements of the 1940 Act, which provides that common stock may not be issued at a price below the then current net asset value, exclusive of sales load, except in connection with an offering to existing
holders of common shares or with the consent of a majority of the Funds outstanding voting securities.
The Funds
common shares of beneficial interest are listed on the NYSE MKT under the symbol GGN.
The Funds net asset
value per share will be reduced immediately following the offering of common shares by the amount of the offering expenses paid by the Fund. See Use of Proceeds. Unlike open-end funds, closed-end funds like the Fund do not continuously
offer shares and do not provide daily redemptions. Rather, if a shareholder determines to buy additional common shares or sell shares already held, the shareholder may do so by trading through a broker on the NYSE MKT or otherwise.
Shares of closed-end investment companies often trade on an exchange at prices lower than net asset value. Because the market value of the
common shares may be influenced by such factors as dividend and distribution levels (which are in turn affected by expenses), dividend and distribution stability, net asset value, market liquidity, relative demand for and supply of such shares in
the market, unrealized gains, general market and economic conditions and other factors beyond the control of the Fund, the Fund cannot assure you that common shares will trade at a price equal to or higher than net asset value in the future. The
common shares are designed primarily for long-term investors and you should not purchase the common shares if you intend to sell them soon after purchase.
45
Subject to the rights of the outstanding preferred shares, the Funds common shares
vote as a single class on election of Trustees and on additional matters with respect to which the 1940 Act, the Funds Declaration of Trust, By-Laws or resolutions adopted by the Trustees provide for a vote of the Funds common shares.
See Anti-Takeover Provisions of the Funds Governing Documents.
Book Entry
The common shares sold through this offering will initially be held in the name of Cede & Co. as nominee for the Depository
Trust Company (DTC). The Fund will treat Cede & Co. as the holder of record of the common shares for all purposes. In accordance with the procedures of DTC, however, purchasers of common shares will be deemed the beneficial
owners of shares purchased for purposes of distributions, voting and liquidation rights. Purchasers of common shares may obtain registered certificates by contacting the transfer agent.
Preferred Shares
Currently, an unlimited number of the Funds shares
have been classified by the Board of Trustees as preferred shares, par value $0.001 per share. The terms of such preferred shares may be fixed by the Board of Trustees and would materially limit and/or qualify the rights of the holders of the
Funds common shares.
On October 16, 2007, the Fund completed the placement of $100 million of preferred shares
consisting of 4 million shares designated as Series A (the Series A Preferred Shares) and paying dividends of an annual rate equal to 6.625% of liquidation preference. On March 12, 2013, the Fund announced the partial
redemption of 2,000,000 Preferred Shares on April 11, 2013. The Series A Preferred Shares are senior to the common shares and result in the financial leveraging of the common shares. Such leveraging tends to magnify both the risks and
opportunities to common shareholders. Dividends on the preferred shares are cumulative. The Fund is required by the 1940 Act and by the Statement of Preferences to meet certain asset coverage tests with respect to the Series A Preferred Shares.
If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Series A Preferred Shares at the redemption price of $25 per share plus an amount equal to the
accumulated and unpaid dividends whether or not declared on such shares in order to meet the requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Funds ability to pay dividends to common
shareholders or repurchase common shares and could lead to sales of portfolio securities at inopportune times. The income received on the Funds assets may vary in a manner unrelated to the fixed rate, which could have either a beneficial or
detrimental impact on net investment income and gains available to common shareholders.
The Series A Preferred Shares are
listed on the NYSE MKT under the ticker symbol GGN PrA.
Upon a liquidation, each holder of the preferred shares
will be entitled to receive out of the assets of the Fund available for distribution to shareholders (after payment of claims of the Funds creditors but before any distributions with respect to the Funds common shares or any other shares
of the Fund ranking junior to the preferred shares as to liquidation payments) an amount per share equal to such shares liquidation preference plus any accumulated but unpaid distributions (whether or not earned or declared, excluding interest
thereon) to the date of distribution, and such shareholders shall be entitled to no further participation in any distribution or payment in connection with such liquidation. Each series of the preferred shares will rank on a parity with any other
series of preferred shares of the Fund as to the payment of distributions and the distribution of assets upon liquidation, and will be junior to the Funds obligations with respect to any outstanding senior securities representing debt. If the
Fund has insufficient investment income and gains, all or a portion of the distributions to preferred shareholders would come from the common shareholders capital. Such distributions reduce the net assets attributable to common shareholders
since the liquidation preference of the preferred shareholders is constant. The preferred shares carry one vote per share on all matters on which such shares are entitled to vote. The preferred shares will, upon issuance, be fully paid and
nonassessable and will have no preemptive, exchange or conversion rights. The Board of Trustees may by resolution classify or reclassify any authorized but unissued capital shares of the Fund from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to distributions or terms or conditions of redemption. The Fund will not issue any class of shares senior to the preferred shares.
46
Rating Agency Guidelines.
Upon issuance, the preferred shares
may be rated by one or more of the nationally recognized statistical rating organizations. Such ratings may require asset coverage tests that are more difficult to satisfy than the 200% test in the 1940 Act and may also impose diversification,
industry concentration and other limitations.
Any such ratings assigned to a series of the preferred shares are assessments of
the capacity and willingness of the Fund to pay the obligations of each of the preferred shares. Such ratings are not recommendations to purchase, hold or sell shares of either series, inasmuch as the ratings do not comment as to market price or
suitability for a particular investor. The rating agency guidelines also do not address the likelihood that an owner of preferred shares will be able to sell such shares on an exchange, in an auction or otherwise. The ratings are based on current
information furnished to the rating agencies by the Fund and the Investment Adviser and information obtained from other sources. The ratings may be changed, suspended or withdrawn as a result of changes in, or the unavailability of, such
information.
The rating agency guidelines will apply to the preferred shares, as the case may be, only so long as such rating
agency is rating such shares at the request of the Fund. The Fund will pay fees to the rating agencies for rating any series of the preferred shares.
Asset Maintenance Requirements.
In addition to the requirements summarized under Rating Agency Guidelines above, the Fund must also satisfy asset
maintenance requirements under the 1940 Act with respect to its preferred shares. Under the 1940 Act, such debt or preferred shares may be issued only if immediately after such issuance the value of the Funds total assets (less ordinary course
liabilities) is at least 300% of the amount of any debt outstanding and at least 200% of the amount of any preferred stock and debt outstanding.
The Fund will be required under the preferred shares Statement of Preferences (the Statement of Preferences) to determine whether it has, as of the last business day of each March, June,
September and December of each year, an asset coverage (as defined in the 1940 Act) of at least 200% (or such higher or lower percentage as may be required at the time under the 1940 Act) with respect to all outstanding senior securities
of the Fund that are debt or stock, including any outstanding preferred shares. If the Fund fails to maintain the asset coverage required under the 1940 Act on such dates and such failure is not cured within 60 calendar days, the Fund may, and
in certain circumstances will be required to, mandatorily redeem the number of preferred shares sufficient to satisfy such asset coverage. See Redemption below.
Distributions.
In connection with the offering of one or more series of preferred shares, an accompanying
Prospectus Supplement will specify whether dividends on such preferred shares will be based on a fixed or variable rate. If such Prospectus Supplement specifies that dividends will be paid at a fixed rate (Fixed Rate Preferred Shares),
holders of such preferred shares will be entitled to receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor, cumulative cash distributions, at an annual rate set forth in the applicable Prospectus
Supplement, payable with such frequency as set forth in the applicable Prospectus Supplement. Such distributions will accumulate from the date on which such shares are issued.
In the alternative, the Prospectus Supplement may state that the holders of one or more series of the preferred shares are entitled to receive cash distributions at annual rates stated as a percentage of
liquidation preference, that will vary from dividend period to dividend period (Variable Rate Preferred Shares). The liquidation preference per share, the dividend rate for the initial dividend period for any such series of preferred
shares, and the terms on which dividends will vary from period to period will be set out in the Prospectus Supplement for such series.
47
Restrictions on Dividends and Other Distributions for the Preferred Shares
So long as any preferred shares are outstanding, the Fund may not pay any dividend or distribution (other than a dividend or distribution
paid in common shares or in options, warrants or rights to subscribe for or purchase common shares) in respect of the common shares or call for redemption, redeem, purchase or otherwise acquire for consideration any common shares (except by
conversion into or exchange for shares of the Fund ranking junior to the preferred shares as to the payment of dividends and the distribution of assets upon liquidation), unless:
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the Fund has declared and paid (or provided to the relevant dividend paying agent) all cumulative distributions on the Funds outstanding
preferred shares due on or prior to the date of such common share dividend or distribution;
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the Fund has redeemed the full number of preferred shares to be redeemed pursuant to any mandatory redemption provision in the Funds governing
documents; and
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after making the distribution, the Fund meets applicable asset coverage requirements described under Rating Agency Guidelines and
Asset Maintenance Requirements.
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No full distribution will be declared or made on any
series of the preferred shares for any dividend period, or part thereof, unless full cumulative distributions due through the most recent dividend payment dates therefor for all outstanding series of preferred shares of the Fund ranking on a parity
with such series as to distributions have been or contemporaneously are declared and made. If full cumulative distributions due have not been made on all outstanding preferred shares of the Fund ranking on a parity with such series of preferred
shares as to the payment of distributions, any distributions being paid on the preferred shares will be paid as nearly pro rata as possible in proportion to the respective amounts of distributions accumulated but unmade on each such series of
preferred shares on the relevant dividend payment date. The Funds obligation to make distributions on the preferred shares will be subordinate to its obligations to pay interest and principal, when due, on any of the Funds senior
securities representing debt.
Redemption
Mandatory Redemption Relating to Asset Coverage Requirements.
The Fund may, at its option, consistent with its Governing Documents and the 1940 Act, and in certain
circumstances will be required to, mandatorily redeem preferred shares in the event that:
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the Fund fails to maintain the asset coverage requirements specified under the 1940 Act on a quarterly valuation date and such failure is not cured on
or before a stated period, following such failure; or
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the Fund fails to maintain the asset coverage requirements as calculated in accordance with the applicable rating agency guidelines as of any monthly
valuation date, and such failure is not cured on or before a stated period after such valuation date.
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The
redemption price for preferred shares subject to mandatory redemption will be the liquidation preference, as stated in the Prospectus Supplement accompanying the issuance of such preferred shares, plus an amount equal to any accumulated but unpaid
distributions (whether or not earned or declared) to the date fixed for redemption, plus any applicable redemption premium determined by the Board of Trustees and included in the Statement of Preferences.
The number of preferred shares that will be redeemed in the case of a mandatory redemption will equal (and may, if the applicable
Statement of Preferences so provides, exceed) the minimum number of outstanding preferred shares, the redemption of which, if such redemption had occurred immediately prior to the opening of business on the applicable cure date, would have resulted
in the relevant asset coverage requirement having been met or, if the required asset coverage cannot be so restored, all of the preferred shares.
If the Fund does not have funds legally available for the redemption of, or is otherwise unable to redeem, all the preferred shares to be redeemed on any redemption date, the Fund will redeem on such
redemption date that number of shares for which it has legally available funds, or is otherwise able to redeem, from the holders whose shares are to be redeemed ratably on the basis of the redemption price of such shares, and the remainder of those
48
shares to be redeemed will be redeemed on the earliest practicable date on which the Fund will have funds legally available for the redemption of, or is otherwise able to redeem, such shares upon
written notice of redemption.
If fewer than all of the Funds outstanding preferred shares are to be redeemed, the Fund,
at its discretion and subject to the limitations of its Governing Documents and the 1940 Act, will select the one or more series of preferred shares from which shares will be redeemed and the amount of preferred shares to be redeemed from each such
series. If less than all preferred shares of a series are to be redeemed, such redemption will be made as among the holders of that series pro rata in accordance with the respective number of shares of such series held by each such holder on the
record date for such redemption (or by such other equitable method as the Fund may determine). If fewer than all the preferred shares held by any holder are to be redeemed, the notice of redemption mailed to such holder will specify the number of
shares to be redeemed from such holder, which may be expressed as a percentage of shares held on the applicable record date.
Optional Redemption of Fixed Rate Preferred Shares.
Fixed Rate Preferred Shares will not be subject to
optional redemption by the Fund until the date, if any, specified in the applicable Prospectus Supplement, unless such redemption is necessary, in the judgment of the Fund, to maintain the Funds status as a regulated investment company under
the Code or as otherwise provided in the applicable Statement of Preferences. Commencing on such date and thereafter, the Trust may at any time redeem such Fixed Rate Preferred Shares in whole or in part for cash at a redemption price per share
equal to the initial liquidation preference per share plus accumulated and unpaid distributions (whether or not earned or declared) to the redemption date plus, if applicable, any redemption premium. Such redemptions are subject to the notice
requirements set forth under Redemption Procedures and the limitations of the Governing Documents and 1940 Act. The foregoing requirements may be modified in the case of any particular series of preferred shares.
Optional Redemption of Variable Rate Preferred Shares.
The Fund generally may redeem Variable Rate Preferred
Shares, if issued, in whole or in part, at its option at any time (usually on a dividend or distribution payment date), other than during a non-call period. The redemption price per share will equal the initial liquidation preference plus an amount
equal to any accumulated but unpaid distributions thereon (whether or not earned or declared) to the redemption date, plus, if applicable, any redemption premium. Such redemptions are subject to the notice requirements set forth under
Redemption Procedures and the limitations of the Governing Documents and 1940 Act.
Redemption Procedures.
A notice of redemption with respect to an optional redemption will be given to
the holders of record of preferred shares selected for redemption not less than 15 days (subject to NYSE MKT requirements), in the case of Fixed Rate Preferred Shares, and not less than seven days in the case of Variable Rate Preferred Shares,
nor, in both cases, more than 40 days prior to the date fixed for redemption. Preferred shareholders may receive shorter notice in the event of a mandatory redemption. Each notice of redemption will state (i) the redemption date,
(ii) the number or percentage of preferred shares to be redeemed (which may be expressed as a percentage of such shares outstanding), (iii) the CUSIP number(s) of such shares, (iv) the redemption price (specifying the amount of
accumulated distributions to be included therein), (v) the place or places where such shares are to be redeemed, (vi) that distributions on the shares to be redeemed will cease to accumulate on such redemption date, (vii) the
provision of the Statement of Preferences, as applicable, under which the redemption is being made and (viii) any conditions precedent to such redemption. No defect in the notice of redemption or in the mailing thereof will affect the validity
of the redemption proceedings, except as required by applicable law.
The holders of any preferred shares, whether subject to a
variable or fixed rate, will not have the right to redeem any of their shares at their option.
Liquidation
Preference.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Fund, the holders of preferred shares will be entitled to receive a preferential liquidating
distribution, which is expected to equal the original purchase price per preferred share plus accumulated and unpaid dividends, whether or not declared, before any distribution of assets is made to holders of common shares. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders of preferred shares will not be entitled to any further participation in any distribution of assets by the Fund.
49
Voting Rights.
The 1940 Act requires that the holders of any
preferred shares, voting separately as a single class, have the right to elect at least two Trustees at all times. The remaining Trustees will be elected by holders of common shares and preferred shares, voting together as a single class. In
addition, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, the holders of any preferred shares have the right to elect a majority of the Trustees at any time two years dividends on any
preferred shares are unpaid. The 1940 Act also requires that, in addition to any approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares, voting separately as a class,
would be required to (i) adopt any plan of reorganization that would adversely affect the preferred shares, and (ii) take any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other
things, changes in the Funds subclassification as a closed-end investment company to an open-end company or changes in its fundamental investment restrictions. As a result of these voting rights, the Funds ability to take any such
actions may be impeded to the extent that there are any preferred shares outstanding. The Board of Trustees presently intends that, except as otherwise indicated in this prospectus and except as otherwise required by applicable law, holders of
preferred shares will have equal voting rights with holders of common shares (one vote per share, unless otherwise required by the 1940 Act) and will vote together with holders of common shares as a single class.
The affirmative vote of the holders of a majority of the outstanding preferred shares, voting as a separate class, will be required to
amend, alter or repeal any of the preferences, rights or powers of holders of preferred shares so as to affect materially and adversely such preferences, rights or powers, or to increase or decrease the authorized number of preferred shares. The
class vote of holders of preferred shares described above will in each case be in addition to any other vote required to authorize the action in question.
The foregoing voting provisions will not apply to any preferred shares if, at or prior to the time when the act with respect to which such vote otherwise would be required will be effected, such shares
will have been redeemed or called for redemption and sufficient cash or cash equivalents provided to the applicable paying agent to effect such redemption.
Book Entry.
Fixed Rate Preferred Shares will initially be held in the name of Cede & Co. as nominee for DTC. The Fund will treat Cede & Co. as the holder of
record of preferred shares for all purposes. In accordance with the procedures of DTC, however, purchasers of Fixed Rate Preferred Shares will be deemed the beneficial owners of stock purchased for purposes of dividends, voting and liquidation
rights.
Variable Rate Preferred Shares will initially be held by the auction agent as custodian for Cede & Co., in
whose name the Variable Rate Preferred Shares will be registered. The Fund will treat Cede & Co. as the holder of record of the Variable Rate Preferred Shares for all purposes.
Outstanding Securities
The following information regarding the Funds
authorized shares is as of December 31, 2012.
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Title of Class
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Amount
Authorized
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Amount Held
by Fund
or
for its Account
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Amount
Outstanding
Exclusive of
Amount Held
by Fund
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Common Shares
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Unlimited
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None
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100,299,101
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6.625% Series A Cumulative Preferred Shares
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Unlimited
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None
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3,955,687
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50
ANTI-TAKEOVER PROVISIONS OF THE FUNDS GOVERNING DOCUMENTS
The Fund presently has provisions in 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 Funds freedom to engage in certain transactions or (iii) the ability of the Funds Trustees or shareholders to amend the Governing
Documents or effectuate changes in the Funds management. These provisions of the Governing Documents of the Fund may be regarded as anti-takeover provisions. The Board of Trustees of the Fund is divided into three classes, each
having a term of no more than three years (except, to ensure that the term of a class of the Funds Trustees expires each year, one class of the Funds Trustees will serve an initial one-year term and three-year terms thereafter and
another class of its Trustees will serve an initial two-year term and three-year terms thereafter). Each year the term of one class of Trustees will expire. Accordingly, only those Trustees in one class may be changed in any one year, and it would
require a minimum of two years to change a majority of the Board of Trustees. Such system of electing Trustees may have the effect of maintaining the continuity of management and, thus, make it more difficult for the shareholders of the Fund to
change the majority of Trustees. See Management of the FundTrustees and Officers in the SAI. A Trustee of the Fund may be removed with cause by a majority of the remaining Trustees and, without cause, by two-thirds of the remaining
Trustees or by no less than two-thirds of the aggregate number of votes entitled to be cast for the election of such Trustee. Under the Funds By-Laws, advance notice to the Fund of any shareholder proposal is required, potential nominees to
the Board of Trustees must satisfy a series of requirements relating to, among other things, potential conflicts of interest or relationships and fitness to be a Trustee of a closed-end fund in order to be nominated or elected as a Trustee and any
shareholder proposing the nomination or election of a person as a Trustee must supply significant amounts of information designed to enable verification of whether such person satisfies such qualifications. Special voting requirements of 75% of the
outstanding voting shares (in addition to any required class votes) apply to certain mergers or a sale of all or substantially all of the Funds assets, liquidation, conversion of the Fund into an open-end fund or interval fund and amendments
to several provisions of the Declaration of Trust, including the foregoing provisions. In addition, after completion of the offering, 80% of the holders of the outstanding voting securities of the Fund voting as a class is generally required in
order to authorize any of the following transactions:
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merger or consolidation of the Fund with or into any other entity;
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issuance of any securities of the Fund to any person or entity for cash, other than pursuant to the Dividend and Reinvestment Plan or any offering if
such person or entity acquires no greater percentage of the securities offered than the percentage beneficially owned by such person or entity immediately prior to such offering or, in the case of a class or series not then beneficially owned by
such person or entity, the percentage of common shares beneficially owned by such person or entity immediately prior to such offering;
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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 $5,000,000);
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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 $5,000,000); or
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the purchase of the Funds common shares by the Fund from any person or entity other than pursuant to a tender offer equally available to other
shareholders in which such person or entity tenders no greater percentage of common shares than are tendered by all other shareholders; if such person or entity is directly, or indirectly through affiliates, the beneficial owner of more than 5% of
the outstanding shares of the Fund.
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However, such vote would not be required when, under certain conditions,
the Board of Trustees approves the transaction.
In addition, shareholders have no authority to adopt, amend or repeal By-Laws.
The Board of Trustees has authority to adopt, amend and repeal By-Laws consistent with the Declaration of Trust (including to require approval by the holders of a majority of the outstanding shares for the election of Trustees).
51
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 shareholder.
The Governing Documents of the Fund are on file with the SEC. For access to the full text of these provisions, see Additional Information.
CLOSED-END FUND STRUCTURE
The Fund is a non-diversified, closed-end management investment company (commonly referred to as a closed-end fund). Closed-end funds differ from open-end funds (which are generally referred to as mutual
funds) in that closed-end funds generally list their shares for trading on a stock exchange and do not redeem their shares at the request of the shareholder. This means that if you wish to sell your shares of a closed-end fund you must trade them on
the market like any other stock at the prevailing market price at that time. In a mutual fund, if the shareholder wishes to sell shares of the fund, the mutual fund will redeem or buy back the shares at net asset value. Also, mutual
funds generally offer new shares on a continuous basis to new investors, and closed-end funds generally do not. The continuous inflows and outflows of assets in a mutual fund can make it difficult to manage the funds investments. By
comparison, closed-end funds are generally able to stay more fully invested in securities that are consistent with their investment objectives, to have greater flexibility to make certain types of investments and to use certain investment strategies
such as financial leverage and investments in illiquid securities.
Shares of closed-end funds often trade at a discount to
their net asset value. Because of this possibility and the recognition that any such discount may not be in the interest of shareholders, the Funds Board of Trustees might consider from time to time engaging in open-market repurchases, tender
offers for shares or other programs intended to reduce a discount. We cannot guarantee or assure, however, that the Funds Board of Trustees will decide to engage in any of these actions. Nor is there any guarantee or assurance that such
actions, if undertaken, would result in the shares trading at a price equal or close to net asset value per share. The Board of Trustees might also consider converting the Fund to an open-end mutual fund, which would also require a supermajority
vote of the shareholders of the Fund and a separate vote of any outstanding preferred shares. We cannot assure you that the Funds common shares will not trade at a discount.
REPURCHASE OF COMMON SHARES
The Fund is a non-diversified, closed-end management investment company and as such its shareholders do not, and will not, have the right to require the Fund to repurchase their shares. The Fund, however,
may repurchase its common shares from time to time as and when it deems such a repurchase advisable. The Board of Trustees has authorized such repurchases to be made when the Funds common shares are trading at a discount from net asset value
of 7.5% or more (or such other percentage as the Board of Trustees of the Fund may determine from time to time). Although the Board of Trustees has authorized such repurchases, the Fund is not required to repurchase its common shares. The Board of
Trustees has not established a limit on the number of shares that could be purchased during such period. Pursuant to the 1940 Act, the Fund may repurchase its common shares on a securities exchange (provided that the Fund has informed its
shareholders within the preceding six months of its intention to repurchase such shares) or pursuant to tenders and may also repurchase shares privately if the Fund meets certain conditions regarding, among other things, distribution of net income
for the preceding fiscal year, status of the seller, price paid, brokerage commissions, prior notice to shareholders of an intention to purchase shares and purchasing in a manner and on a basis that does not discriminate unfairly against the other
shareholders through their interest in the Fund.
When the Fund repurchases its common shares for a price below net asset
value, the net asset value of the common shares that remain outstanding shares will be enhanced, but this does not necessarily mean that the market price of the outstanding common shares will be affected, either positively or negatively. The
repurchase of common shares will reduce the total assets of the Fund available for investment and may increase the Funds expense ratio.
52
NET ASSET VALUE
The net asset value of the Funds shares is computed based on the market value of the securities it holds and is determined daily as
of the close of the regular trading day on the NYSE MKT. For purposes of determining the Funds net asset value per share, portfolio securities listed or traded on a nationally recognized securities exchange or traded in the
U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a markets official closing price as of the close of business on the day the securities are being valued. If there
were no sales that day, the security is valued at the average of the closing bid and asked prices, or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are
quoted on such day, the security is valued at the most recently available price or if the Board of Trustees so determines, by such other method as the Board of Trustees shall determine in good faith to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by the Investment Adviser.
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the
relevant market, but may be fair valued pursuant to procedures established by the Board of Trustees if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are
being valued. Debt instruments with remaining maturities of 60 days or less that are not credit impaired are valued at amortized cost, unless the Board of Trustees determines such amount does not reflect the securities fair value, in
which case these securities will be fair valued as determined by the Board of Trustees. Debt instruments having a maturity greater than 60 days for which market quotations are readily available are valued at the average of the latest bid and
asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is
traded.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board
of Trustees. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons to the valuation and changes in valuation of
similar securities, including a comparison of foreign securities to the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the
security.
The Fund obtains valuations on the basis of prices provided by a pricing service approved by the Board of Trustees.
All other investment assets, including restricted and not readily marketable securities, are valued in good faith at fair value under procedures established by and under the general supervision and responsibility of the Funds Board of
Trustees.
In addition, whenever developments in one or more securities markets after the close of the principal markets for
one or more portfolio securities and before the time as of which the Fund determines its net asset value would, if such developments had been reflected in such principal markets, likely have more than a minimal effect on the Funds net asset
value per share, the Fund may fair value such portfolio securities based on available market information as of the time the Fund determines its net asset value.
NYSE MKT Closings.
The holidays (as observed) on which the NYSE MKT is closed, and therefore days upon which shareholders cannot purchase or sell shares, currently are: New
Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and on the preceding Friday or subsequent Monday when a holiday falls on a Saturday
or Sunday, respectively.
53
LIMITATION ON TRUSTEES AND OFFICERS LIABILITY
The Governing Documents provide that the Fund will indemnify its Trustees 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 positions with the Fund, to the fullest extent permitted by applicable law. However, nothing in the Governing Documents protects or
indemnifies a Trustee, officer, employee or agent of the Fund against any liability to which such person would otherwise be subject in the event of such persons willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her position.
TAXATION
The following discussion is a brief summary of certain U.S. federal income tax considerations affecting the Fund and the purchase,
ownership and disposition of the Funds shares. A more complete discussion of the tax rules applicable to the Fund and its shareholders can be found in the SAI that is incorporated by reference into this prospectus. This discussion assumes you
are a U.S. person (as defined for U.S. federal income tax purposes) and that you hold your shares as capital assets (generally assets held for investment purposes). This discussion is based upon current provisions of the Code, the regulations
promulgated thereunder and judicial and administrative authorities, all of which are subject to change or differing interpretations by the courts or the Internal Revenue Service (the IRS), possibly with retroactive effect. No ruling has
been or will be sought from the IRS regarding any matter discussed herein. Counsel to the Fund has not rendered and will not render any legal opinion regarding any tax consequences relating to the Fund or an investment in the Fund. No attempt is
made to present a detailed explanation of all U.S. federal tax concerns affecting the Fund and its shareholders (including shareholders owning large positions in the Fund or shareholders who are subject to special rules under the Code).
The discussion set forth herein does not constitute tax advice and potential investors are urged to consult their own tax
advisers to determine the tax consequences to them of investing in the Fund.
Taxation of the Fund
The Fund has elected to be treated and has qualified, and intends to continue to qualify annually, as a regulated investment company under
Subchapter M of the Code. Accordingly, the Fund must, among other things, meet the following requirements regarding the source of its income and the diversification of its assets:
(i) The Fund must derive in each taxable year at least 90% of its gross income from the following sources,
which are referred to herein as Qualifying Income: (a) dividends, interest (including tax-exempt interest), payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or
foreign currencies, or other income (including but not limited to gain from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or foreign currencies; and (b) net income derived
from interests in publicly traded partnerships that are treated as partnerships for U.S. federal income tax purposes and that derive less than 90% of their gross income from the items described in clause (a) above (each a
Qualified Publicly Traded Partnership).
(ii) The Fund must diversify its holdings so
that, at the end of each quarter of each taxable year (a) at least 50% of the market value of the Funds total assets is represented by cash and cash items (including receivables), U.S. government securities, the securities of other
regulated investment companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Funds total assets and not more than 10% of the outstanding voting
securities of such issuer and (b) not more than 25% of the market value of the Funds total assets is invested in the securities of (I) any one issuer (other than U.S. government securities and the securities of other regulated
investment companies), (II) any two or more issuers (other than regulated investment companies) that the Fund controls and that are determined to be engaged in the same business or similar or related trades or businesses or (III) any one
or more Qualified Publicly Traded Partnerships.
54
Income from the Funds investments in grantor trusts and equity interest of MLPs that
are not Qualified Publicly Traded Partnerships (if any) will be Qualifying Income to the extent it is attributable to items of income of such trust or MLP that would be Qualifying Income if earned directly by the Fund.
Although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated
investment company with respect to items attributable to an interest in a Qualified Publicly Traded Partnership. The Funds investments in partnerships, including in Qualified Publicly Traded Partnerships, may result in the Fund being subject
to state, local or foreign income, franchise or withholding tax liabilities.
As a regulated investment company, the Fund
generally will not be subject to U.S. federal income tax on income and gains that the Fund distributes to its shareholders, provided that it distributes each taxable year at least the sum of (i) 90% of the Funds investment company
taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gain over net long-term capital loss and other taxable income, other than any net long-term capital gain (as defined below), reduced
by deductible expenses) determined without regard to the deduction for dividends paid and (ii) 90% of the Funds net tax-exempt interest income (the excess of its gross tax-exempt interest over certain disallowed deductions). The Fund
intends to distribute substantially all of such income at least annually. The Fund will be subject to income tax at regular corporate rates on any taxable income or gains that it does not distribute to its shareholders.
The Code imposes a 4% nondeductible federal excise tax on the Fund to the extent the Fund does not distribute by the end of any calendar
year an amount at least equal to the sum of (i) 98% of its ordinary income (not taking into account any capital gain or loss) for the calendar year, (ii) 98.2% of its capital gain in excess of its capital loss (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31 of the calendar year (unless an election is made to use the Funds fiscal year), and (iii) certain undistributed amounts from previous years on which the Fund paid no
U.S. federal income tax. In addition, the minimum amounts that must be distributed in any year to avoid the federal excise tax will be increased or decreased to reflect any under-distribution or over-distribution, as the case may be, from the
previous year. While the Fund intends to distribute any income and capital gain in the manner necessary to minimize imposition of the 4% federal excise tax, there can be no assurance that sufficient amounts of the Funds taxable income and
capital gain will be distributed to entirely avoid the imposition of the federal excise tax. In that event, the Fund will be liable for the federal excise tax only on the amount by which it does not meet the foregoing distribution requirement.
If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its
net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders.
Taxation of
Shareholders
Distributions paid to you by the Fund from its net realized long-term capital gains, if any, that the Fund
reports as capital gains dividends (capital gain dividends) are taxable at rates applicable to long-term capital gain, regardless of how long you have held your common shares. All other dividends paid to you by the Fund (including
dividends from short-term capital gains) from its current or accumulated earnings and profits (ordinary income dividends) are generally subject to tax as ordinary income.
Any distributions you receive that are in excess of the Funds current or accumulated earnings and profits will be treated as a
tax-free return of capital to the extent of your adjusted tax basis in your common shares, and thereafter as capital gain from the sale of common shares. The amount of any Fund distribution that is treated as a tax-free return of capital will reduce
your adjusted tax basis in your common shares, thereby increasing your potential gain or reducing your potential loss on any subsequent sale or other disposition of your common shares.
Dividends and other taxable distributions are taxable to you even though they are reinvested in additional common shares of the Fund.
Dividends and other distributions paid by the Fund are generally treated under the Code as received by you at the time the dividend or distribution is made. If, however, the Fund pays you a dividend in January that was declared in the previous
October, November or December and you were the shareholder of record on a specified date in one of such months, then such dividend will be treated for tax purposes as being paid by the Fund and received by you on December 31 of the year in which the
dividend was declared.
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The Fund will send you information after the end of each year setting forth the amount and
tax status of any distributions paid to you by the Fund.
The sale or other disposition of common shares of the Fund will
generally result in capital gain or loss to you, and will be long-term capital gain or loss if you have held such common shares for more than one year at the time of sale. Any loss upon the sale or exchange of common shares held for six months or
less will be treated as long-term capital loss to the extent of any capital gain dividends received (including amounts credited as an undistributed capital gain dividend) by you with respect to such common shares. Any loss you realize on a sale or
exchange of common shares will be disallowed if you acquire other common shares (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after your sale or
exchange of the common shares. In such a case, your tax basis in the common shares acquired will be adjusted to reflect the disallowed loss.
The Fund may be required to withhold, for U.S. federal backup withholding tax purposes, a portion of the dividends, distributions and redemption proceeds payable to shareholders who fail to provide
the Fund (or its agent) with their correct taxpayer identification number (in the case of individuals, generally, their social security number) or to make required certifications, or who have been notified by the IRS that they are subject to backup
withholding. Certain shareholders are exempt from backup withholding. Backup withholding is not an additional tax and any amount withheld may be refunded or credited against your U.S. federal income tax liability, if any, provided that you
timely furnish the required information to the IRS.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Mellon, located at 135 Santilli Highway, Everett, Massachusetts 02149, serves as the Custodian of the
Funds assets pursuant to a custody agreement. Under the custody agreement, the Custodian holds the Funds assets in compliance with the 1940 Act. For its services, the Custodian will receive a monthly fee paid by the Fund based upon,
among other things, the average value of the total assets of the Fund, plus certain charges for securities transactions and out-of-pocket expenses.
American Stock Transfer, located at 59 Maiden Lane, New York, New York 10038, serves as the Funds dividend disbursing agent, as agent under the Funds Plan and as transfer agent and registrar
for the common shares of the Fund.
PLAN OF DISTRIBUTION
We may sell the shares, being offered hereby in one or more of the following ways from time to time:
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to underwriters or dealers for resale to the public or to institutional investors;
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directly to institutional investors;
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directly to a limited number of purchasers or to a single purchaser;
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through agents to the public or to institutional investors; or
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through a combination of any of these methods of sale.
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The Prospectus Supplement with respect to each series of securities will state the terms of the offering of the securities, including:
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the offering terms, including the name or names of any underwriters, dealers or agents;
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the purchase price of the securities and the net proceeds to be received by us from the sale;
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any underwriting discounts or agency fees and other items constituting underwriters or agents compensation, which compensation for any sale
will in no event exceed 8% of the sales price;
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any initial public offering price;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any securities exchange on which the securities may be listed.
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If we use underwriters or dealers in the sale, the securities will be acquired by the underwriters or dealers for their own account and
may be resold from time to time in one or more transactions, including;
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negotiated transactions;
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at a fixed public offering price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to prevailing market prices; or
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Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale of any securities, the securities may be either offered to the public through underwriting syndicates
represented by managing underwriters, or directly by underwriters. Generally, the underwriters obligations to purchase the securities will be subject to certain conditions precedent. The underwriters will be obligated to purchase all of the
securities if they purchase any of the securities.
If indicated in an applicable Prospectus Supplement, we may sell the
securities through agents from time to time. The applicable Prospectus Supplement will name any agent involved in the offer or sale of the securities and any commissions we pay to them. In compliance with the guidelines of the Financial Industry
Regulatory Authority, Inc., the maximum compensation to any agent in connection with the sale of our securities pursuant to this prospectus and any accompanying Prospectus Supplement may not exceed 8% of the aggregate offering price of the
securities as set forth on the cover page of the supplement to this prospectus. Generally, any agent will be acting on a best efforts basis for the period of its appointment. We may authorize underwriters, dealers or agents to solicit offers by
certain purchasers to purchase the securities from us at the public offering price set forth in the applicable Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. The
delayed delivery contracts will be subject only to those conditions set forth in the applicable Prospectus Supplement, and the applicable Prospectus Supplement will set forth any commissions we pay for solicitation of these delayed delivery
contracts.
Offered securities may also be offered and sold, if so indicated in the applicable Prospectus Supplement, in
connection with a remarketing upon their purchase, in accordance with a redemption or repayment pursuant to their terms, or otherwise, by one or more remarketing firms, acting as principals for their own accounts or as agents for us. Any remarketing
firm will be identified and the terms of its agreements, if any, with us and its compensation will be described in the applicable Prospectus Supplement.
Agents, underwriters and other third parties described above may be entitled to indemnification by us against certain civil liabilities under the Securities Act, or to contribution with respect to
payments which the agents or underwriters may be required to make in respect thereof. Agents, underwriters and such other third parties may be customers of, engage in transactions with, or perform services for us in the ordinary course of business.
Each series of securities will be a new issue of securities and will have no established trading market other than our common
shares and Preferred Shares, which are listed on the NYSE MKT. Any common shares sold will be listed on NYSE MKT, upon official notice of issuance. The securities, other than the common shares, may or may not be listed on a national securities
exchange. Any underwriters to whom securities are sold by us for public offering and sale may make a market in the securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice.
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LEGAL MATTERS
Certain legal matters will be passed on by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Fund in connection with the
offering of the Funds shares.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP serves as the independent registered public accounting firm of the Fund and audits the
financial statements of the Fund. PricewaterhouseCoopers LLP is located at 300 Madison Ave, New
York, NY 10017.
ADDITIONAL INFORMATION
The Fund is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act, and in
accordance therewith files reports and other information with the SEC. Reports, proxy statements and other information filed by the Fund with the SEC pursuant to the informational requirements of such Acts can be inspected and copied at the public
reference facilities maintained by the SEC, 100 F Street, N.E., Washington, D.C. 20549. The SEC maintains a web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding
registrants, including the Fund, that file electronically with the SEC.
The common shares are listed on the NYSE MKT under the
symbol GGN. The Preferred Shares are listed on the NYSE MKT under the symbol GGN PrA. Reports, proxy statements and other information concerning the Fund and filed with the SEC by the Fund will be available for inspection at
the NYSE MKT, 11 Wall Street, New York, New York, 10005.
This prospectus constitutes part of a Registration Statement filed by
the Fund with the SEC under the Securities Act of 1933 and the 1940 Act. This prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement and related exhibits for
further information with respect to the Fund and the common shares offered hereby. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such reference. The complete Registration Statement may be obtained from the SEC upon payment of the fee
prescribed by its rules and regulations or free of charge through the SECs web site (http://www.sec.gov).
PRIVACY PRINCIPLES OF THE FUND
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding their non-public personal information. The following information is provided to help you understand what personal information the Fund collects, how the Fund protects that information and why, in certain cases, the Fund may share
information with select other parties.
Generally, the Fund does not receive any non-public personal information relating to
its shareholders, although certain non-public personal information of its shareholders may become available to the Fund. The Fund does not disclose any non-public personal information about its shareholders or former shareholders to anyone, except
as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third party administrator).
The Fund restricts access to non-public personal information about its shareholders to employees of the Fund, the Investment Adviser, and its affiliates with a legitimate business need for the
information. The Fund maintains physical, electronic and procedural safeguards designed to protect the non-public personal information of its shareholders.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
An SAI dated as of April 10, 2013 has been filed with the SEC and is incorporated by reference in this prospectus. An SAI
may be obtained without charge by writing to the Fund at its address at One Corporate Center, Rye, New York 10580-1422 or by calling the Fund toll-free at (800) GABELLI (422-3554).
The Table of Contents of the SAI is as follows:
No dealer, sales person or other person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in this Prospectus in connection with the offer contained herein, and, if given or made, such other information or representations must not be relied upon as having been
authorized by the Fund, the Investment Adviser or the underwriters. Neither the delivery of this Prospectus nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the Fund
since the date hereof or that the information contained herein is correct as of any time subsequent to its date. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the securities to
which it relates. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy such securities in any circumstance in which such an offer or solicitation is unlawful.
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GAMCO Global Gold, Natural
Resources &
Income Trust
by Gabelli
Up to 10,000,000 Common Shares of Beneficial
Interest
PROSPECTUS SUPPLEMENT
April 12, 2013
GAMCO Global Gold Natura... (AMEX:GGN)
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From Aug 2024 to Sep 2024
GAMCO Global Gold Natura... (AMEX:GGN)
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From Sep 2023 to Sep 2024