On July 13, 2021, the Fund distributed one
transferable right for each of the 25,383,076 common shares outstanding held on that date. Four rights were required to purchase
one additional common share at the subscription price of $9.50 per share. On August 31, 2021, the Fund issued 1,912,422 common
shares receiving net proceeds of $17,693,897, after the deduction of offering expenses of $474,112. The NAV of the Fund increased
by $0.02 per share on the day the additional shares were issued due to the additional shares being issued above NAV. The fund has
an effective shelf registration authorizing an additional $381 million of common or preferred shares.
The Fund’s Articles of Incorporation
authorize the issuance of up to 4,001,000 shares of $0.001 par value Preferred Stock. The Preferred Stock is senior to the common
stock and results in the financial leveraging of the common stock. Such leveraging tends to magnify both the risks and opportunities
to common stockholders. Dividends on shares of the Preferred Stock are cumulative. The Fund is required by the 1940 Act and by
the Articles Supplementary to meet certain asset coverage tests with respect to the Preferred Stock. If the Fund fails to meet
these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Series C, Series
E, and Series G Preferred at redemption prices of $25,000, $25, and $25, respectively, per share plus an amount equal to the accumulated
and unpaid dividends whether or not declared on such shares in order to meet these requirements. Additionally, failure to meet
the foregoing asset coverage requirements could restrict the Fund’s ability to pay dividends to common stockholders and
could lead to sales of portfolio securities at inopportune times. The income received on the Fund’s assets may vary in a
manner unrelated to the fixed and variable rates, which could have either a beneficial or detrimental impact on net investment
income and gains available to common stockholders.
The Fund has the authority to purchase its
auction rate preferred shares through negotiated private transactions. The Fund is not obligated to purchase any dollar amount
or number of auction rate preferred shares, and the timing and amount of any auction rate preferred shares purchased will depend
on market conditions, share price, capital availability, and other factors. The Fund is not soliciting holders to sell these shares
nor recommending that holders offer them to the Fund. Any offers can be accepted or rejected in the Fund’s discretion.
For Series C Preferred Stock, the dividend
rates, as set by the auction process that is generally held every seven days, are expected to vary with short term interest rates.
Since February 2008, the number of shares of Series C Preferred Stock subject to bid orders by potential holders has been less
than the number of shares of Series C Preferred Stock subject to sell orders. Holders that have submitted sell orders have not
been able to sell any or all of the Series C Preferred Stock for which they have submitted sell orders. Therefore the weekly auctions
have failed, and the dividend rate has been the maximum rate, which is 175% of the “AA” Financial
Composite Commercial Paper Rate on the day
of such auction. Existing Series C stockholders may submit an order to hold, bid, or sell such shares on each auction date, or
trade their shares in the secondary market.
The Fund may redeem at any time, in whole
or in part, the Series C Preferred Stock at its redemption price. In addition, the Board has authorized the repurchase of the Series
E and Series G Preferred Stock in the open market at prices less than the $25 liquidation value per share. During the year ended
December 31, 2020, the Fund repurchased 3,300 shares of Series E and 9,799 shares of Series G Preferred Stock in the open market
at an investment of $74,758 and $223,569 and an average discount of 9.42% and 8.78% from its liquidation preference, respectively.
The Fund did not repurchase any preferred shares during the year ended December 31, 2021.
The holders of Preferred Shares generally
are entitled to one vote per share held on each matter submitted to a vote of stockholders of the Fund and will vote together with
holders of common stock as a single class. The holders of Preferred Shares voting together as a single class also have the right
currently to elect two Directors and, under certain circumstances, are entitled to elect a majority of the Board of Directors.
In addition, the affirmative vote of a majority of the votes entitled to be cast by holders of all outstanding shares of the preferred
shares, voting as a single class, will be required to approve any plan of reorganization adversely affecting the preferred stock,
and the approval of two-thirds of each class, voting separately, of the Fund’s outstanding voting stock must approve the
conversion of the Fund from a closed-end to an open-end investment company. The approval of a majority (as defined in the 1940
Act) of the outstanding preferred shares and a majority (as defined in the 1940 Act) of the Fund’s outstanding voting securities
are required to approve certain other actions, including changes in the Fund’s investment objectives or fundamental investment
policies.
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities, including the schedule of investments, of The Gabelli Multimedia Trust Inc. (the
“Fund”) as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the
statement of changes in net assets attributable to common stockholders for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December
31, 2021 (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Fund as of December 31, 2021, the results of its
operations for the year then ended, the changes in its net assets attributable to common stockholders for each of the two
years in the period ended December 31, 2021 and the financial highlights for each of the five years in the period ended
December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation
of securities owned as of December 31, 2021 by correspondence with the custodian and brokers; when replies were not received from
brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
New York, New York
February 28, 2022
We have served as the auditor of one or
more investment companies in the Gabelli/GAMCO Fund Complex since 1986.
The Gabelli Multimedia Trust
Inc.
Additional Fund Information (Unaudited)
The following includes information that is incorporated by reference
in the Fund’s Registration Statement and is also a summary of certain changes during the most recent fiscal year ended December
31, 2021. This information may not reflect all of the changes that have occurred since you purchased shares of the Fund.
During the Fund’s most recent fiscal
year, there were no material changes to the Fund’s investment objectives or policies that have not been approved by shareholders
or in the principal risk factors associated with an investment in the Fund.
SUMMARY OF FUND EXPENSES
The following table shows the Fund’s
expenses, which are borne directly or indirectly by holders of the Fund’s common shares, including preferred shares offering
expenses, as a percentage of net assets attributable to common shares. The table is based on the capital structure of the Fund
as of December 31, 2021. The purpose of the table and example below is to help you understand all fees and expenses that you, as
a holder of common shares, would bear directly or indirectly.
| Shareholder Transaction
Expenses |
|
|
|
| Sales Load (as a percentage of offering price) |
|
|
-% (a) |
| Offering Expenses Borne by the Fund (as a percentage
of offering price) |
|
|
-% (a) |
| Dividend
Reinvestment and Voluntary Cash Purchase Plan Fees |
|
|
|
| Purchase
Transactions |
|
|
$0.75(b) |
| One-time
Fee for Deposit of Share Certificates |
|
|
$2.50(b) |
| Annual
Expenses |
|
Percentages
of Net Assets
Attributable to Common Shares |
| Management Fees |
|
|
1.44% (c) |
| Interest on Borrowed Funds |
|
|
-% (d) |
| Other Expenses |
|
|
0.31%
(e) |
| Total Annual Expenses |
|
|
1.75% |
| Dividends on Preferred Shares |
|
|
2.26%
(e) |
| Total Annual Expenses and Dividends on Preferred |
|
|
4.01%
(c) |
| (a) | If
common shares are sold to or through underwriters or dealer managers, a prospectus or prospectus
supplement will set forth any applicable sales load and the estimated offering expenses borne
by the Fund. |
| (b) | Shareholders
participating in the Fund’s automatic dividend reinvestment plan do not incur any additional
fees. Shareholders participating in the voluntary cash purchase plan would pay $0.75 plus
their pro rata share of brokerage commissions per transaction to purchase shares and $2.50
plus pro rata share of brokerage commissions per transaction to sell shares. |
| (c) | The
Investment Adviser’s fee is 1.00% annually of the Fund’s average weekly net assets,
plus assets attributable to any outstanding senior securities, with no deduction for the
liquidation preference of any |
The
Gabelli Multimedia Trust Inc.
Additional
Fund Information (Continued) (Unaudited)
outstanding preferred shares
or the principal amount of any outstanding notes. Consequently, if the Fund has preferred shares or notes 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.
| (d) | The Fund has no current intention of borrowing from a lender or issuing notes during the one year
following the date of this Annual Report. |
| (e) | “Other Expenses” are based on the Fund’s fiscal year ended December 31, 2021. |
For a more complete description of the various
costs and expenses a common shareholder would bear in connection with the issuance and ongoing maintenance of any preferred shares
or notes issued by the Fund, see “Risk Factors and Special Considerations—Special Risks to Holders of Common Shares—Leverage
Risk.”
The following example illustrates the expenses
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 Year |
|
5 Year |
|
10
Year |
|
| Total Expenses Incurred |
|
$40 |
|
$122 |
|
$206 |
|
$422 |
|
| |
|
|
|
|
|
|
|
|
|
| * | The example should not be considered a representation of future expenses. The example is
based on total Annual Expenses and Dividends on Preferred Shares shown in the table above and assumes that the amounts set
forth in the table do not change and that all distributions are reinvested at net asset value. Actual expenses may be greater
or less than those assumed. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5%
return shown in the example. |
The example includes Dividends on Preferred
Shares. If Dividends on Preferred Shares were not included in the example calculation, the expenses for the 1-, 3-, 5- and 10-year
periods in the table above would be as follows (based on the same assumptions as above): $18, $55, $95, and $207.
The Fund’s common stock is listed
on the NYSE, under the trading or “ticker” symbol “GGT.” Currently, the Series E Preferred and Series G
Preferred are listed on the NYSE under the symbol “GGT PrE” and “GGT PrG” respectively. The Series C Auction
Rate Preferred is not listed on a stock exchange. Any additional series of fixed rate preferred stock would also likely be listed
on a stock exchange. The Fund’s common shares have historically traded at a discount to the Fund’s net asset value.
Over the past ten years, the Fund’s common shares have traded at a premium to net asset value as high as 22.79% and a discount
as low as (15.90)]%. Any additional series of fixed rate preferred shares or subscription rights issued in the future pursuant
to a Prospectus Supplement by the Fund would also likely be listed on the NYSE American.
The Gabelli Multimedia Trust
Inc.
Additional Fund Information
(Continued) (Unaudited)
The following table sets forth for the quarters
indicated, the high and low sale prices on the NYSE American per share of our common shares and the net asset value and the premium
or discount from net asset value per share at which the common shares were trading, expressed as a percentage of net asset value,
at each of the high and low sale prices provided.
| |
|
Common
Share
Market Price |
|
Corresponding
Net Asset
Value
(“NAV”) Per
Share |
|
Corresponding
Premium or
Discount as a %
of NAV |
|
| Quarter
Ended |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
| March 31, 2020 |
|
$ |
8.36 |
|
$ |
3.42 |
|
$ |
7.91 |
|
$ |
4.04 |
|
|
5.68 |
% |
|
(15.34 |
)% |
| June 30, 2020 |
|
$ |
7.53 |
|
$ |
4.77 |
|
$ |
6.92 |
|
$ |
4.43 |
|
|
8.81 |
% |
|
7.67 |
% |
| September 30, 2020 |
|
$ |
7.40 |
|
$ |
6.43 |
|
$ |
7.46 |
|
$ |
6.26 |
|
|
(0.80 |
)% |
|
2.71 |
% |
| December 31, 2020 |
|
$ |
8.29 |
|
$ |
6.16 |
|
$ |
7.98 |
|
$ |
6.26 |
|
|
3.88 |
% |
|
(4.34 |
)% |
| March 31, 2021 |
|
$ |
10.24 |
|
$ |
7.78 |
|
$ |
9.76 |
|
$ |
8.01 |
|
|
4.91 |
% |
|
(2.87 |
)% |
| June 30, 2021 |
|
$ |
11.19 |
|
$ |
9.65 |
|
$ |
9.31 |
|
$ |
8.85 |
|
|
20.19 |
% |
|
9.04 |
% |
| September 30, 2021 |
|
$ |
11.10 |
|
$ |
9.00 |
|
$ |
9.16 |
|
$ |
8.62 |
|
|
21.23 |
% |
|
4.40 |
% |
| December 31, 2021 |
|
$ |
9.52 |
|
$ |
8.39 |
|
$ |
8.32 |
|
$ |
7.82 |
|
|
14.42 |
% |
|
7.28 |
% |
The last reported price for our common shares
on December 31, 2021 was $8.68 per share. As of December 31, 2021, the net asset value per share of the Fund’s common shares
was $8.25. Accordingly, the Fund’s common shares traded at a premium to net asset value of 5.21% on December 31, 2021.
Unresolved SEC Staff Comments
The Fund does not believe that there are
any material unresolved written comments, received 180 days or more before December 31, 2021 from the Staff of the SEC regarding
any of the Fund’s periodic or current reports under the Securities Exchange Act of 1934 or the Investment Company Act of
1940, or its registration statement.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
The
Gabelli Multimedia Trust Inc.
Financial Highlights
Selected
data for a common share outstanding throughout each year:
| | |
For
the Year Ended December 31, | |
| | |
2016 | | |
2015 | | |
2014 | | |
2013 | | |
2012 | |
| Operating Performance: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net asset value, beginning of year | |
$ | 8.36 | | |
$ | 9.81 | | |
$ | 10.90 | | |
$ | 8.22 | | |
$ | 7.48 | |
| Net investment income | |
| 0.05 | | |
| 0.03 | | |
| 0.05 | | |
| 0.06 | | |
| 0.13 | |
| Net realized and unrealized gain/(loss) on investments and foreign
currency transactions. | |
| 0.60 | | |
| (0.49 | ) | |
| 0.42 | | |
| 3.61 | | |
| 1.48 | |
| Total from investment operations | |
| 0.65 | | |
| (0.46 | ) | |
| 0.47 | | |
| 3.67 | | |
| 1.61 | |
| Distributions to Preferred Shareholders: (a) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment income | |
| (0.00 | )(b) | |
| (0.00 | )(b) | |
| (0.00 | )(b) | |
| (0.01 | ) | |
| (0.03 | ) |
| Net realized gain | |
| (0.05 | ) | |
| (0.05 | ) | |
| (0.06 | ) | |
| (0.06 | ) | |
| (0.04 | ) |
| Total distributions to preferred shareholders | |
| (0.05 | ) | |
| (0.05 | ) | |
| (0.06 | ) | |
| (0.07 | ) | |
| (0.07 | ) |
| Net Increase/(Decrease) in
Net Assets Attributable to Common Shareholders Resulting from Operations. | |
| 0.60 | | |
| (0.51 | ) | |
| 0.41 | | |
| 3.60 | | |
| 1.54 | |
| Distributions to Common Shareholders: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment income | |
| (0.06 | ) | |
| (0.03 | ) | |
| (0.02 | ) | |
| (0.05 | ) | |
| (0.07 | ) |
| Net realized gain | |
| (0.74 | ) | |
| (0.89 | ) | |
| (0.88 | ) | |
| (0.87 | ) | |
| (0.08 | ) |
| Return of capital | |
| (0.03 | ) | |
| (0.02 | ) | |
| (0.15 | ) | |
| — | | |
| (0.65 | ) |
| Total distributions to common shareholders | |
| (0.83 | ) | |
| (0.94 | ) | |
| (1.05 | ) | |
| (0.92 | ) | |
| (0.80 | ) |
| Fund Share Transactions: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Decrease in net asset value from common shares issued in rights offering | |
| — | | |
| — | | |
| (0.44 | ) | |
| — | | |
| — | |
| Increase in net asset value from repurchase of common shares | |
| — | | |
| — | | |
| — | | |
| — | | |
| 0.00 | (b) |
| Increase in net asset value from common shares issued upon reinvestment
of distributions | |
| — | | |
| — | | |
| 0.00 | (b) | |
| 0.00 | (b) | |
| — | |
| Offering expenses charged to paid-in capital | |
| — | | |
| (0.00 | )(b) | |
| (0.01 | ) | |
| — | | |
| (0.00 | )(b) |
| Total Fund share transactions. | |
| — | | |
| (0.00 | )(b) | |
| (0.45 | ) | |
| 0.00 | (b) | |
| 0.00 | (b) |
| Net Asset Value Attributable
to Common Shareholders, End of Year | |
$ | 8.13 | | |
$ | 8.36 | | |
$ | 9.81 | | |
$ | 10.90 | | |
$ | 8.22 | |
| NAV total return † | |
| 7.59 | % | |
| (5.57 | )% | |
| 4.17 | % | |
| 45.77 | % | |
| 22.29 | % |
| Market value, end of year | |
$ | 7.24 | | |
$ | 7.50 | | |
$ | 10.01 | | |
$ | 12.40 | | |
$ | 7.85 | |
| Investment total return †† | |
| 7.97 | % | |
| (16.33 | )% | |
| (6.63 | )% | |
| 73.37 | % | |
| 40.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ratios to Average Net Assets and Supplemental Data: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net assets including
liquidation value of preferred shares, end of year (in 000’s). | |
$ | 232,399 | | |
$ | 238,049 | | |
$ | 273,307 | | |
$ | 232,399 | | |
$ | 182,899 | |
| Net assets attributable to common shares, end of year (in 000’s) | |
$ | 197,623 | | |
$ | 203,274 | | |
$ | 238,532 | | |
$ | 197,624 | | |
$ | 148,124 | |
| Ratio of net investment income/(loss) to average net assets attributable
to common shares before preferred share distributions | |
| 0.70 | % | |
| 0.33 | % | |
| 0.13 | % | |
| 0.60 | % | |
| 1.68 | % |
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
The
Gabelli Multimedia Trust Inc.
Financial Highlights (Continued)
Selected
data for a common share outstanding throughout each year:
| | |
For
the Year Ended December 31, | |
| | |
2016 | | |
2015 | | |
2014 | | |
2013 | | |
2012 | |
| Ratios to Average Net Assets and Supplemental Data
(Continued): | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ratio of
operating expenses to average net assets attributable to common shares before fees waived/fee reduction | |
| 1.49 | %(c)(d) | |
| 1.45 | %(c) | |
| 1.59 | % | |
| 1.55 | % | |
| 1.84 | %(e) |
| Ratio of operating expenses to average net assets attributable to
common shares net of advisory fee reduction, if any | |
| 1.49 | %(c)(d) | |
| 1.30 | %(c) | |
| 1.50 | % | |
| 1.55 | % | |
| 1.84 | %(e) |
| Ratio of operating expenses to average net assets including liquidation value of preferred shares before fees waived/fee reduction | |
| 1.27 | %(c)(d) | |
| 1.26 | %(c) | |
| 1.37 | % | |
| 1.29 | % | |
| 1.48 | %(f) |
| Ratio of operating expenses to average net assets including liquidation value of preferred shares net of advisory fee reduction, if any | |
| 1.27 | %(c)(d) | |
| 1.13 | %(c) | |
| 1.29 | % | |
| 1.29 | % | |
| 1.48 | %(f) |
| Portfolio turnover rate | |
| 10.3 | % | |
| 14.0 | % | |
| 16.0 | % | |
| 12.7 | % | |
| 7.9 | % |
| Preferred Stock: | |
| | | |
| | | |
| | | |
| | | |
| | |
| 6.000% Series B Cumulative Preferred Stock | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 19,775 | | |
$ | 19,775 | | |
$ | 19,775 | | |
$ | 19,775 | | |
$ | 19,775 | |
| Total shares outstanding (in 000’s) | |
| 791 | | |
| 791 | | |
| 791 | | |
| 791 | | |
| 791 | |
| Liquidation preference per share | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | |
| Average market value (g) | |
$ | 26.42 | | |
$ | 25.80 | | |
$ | 25.41 | | |
$ | 25.45 | | |
$ | 25.73 | |
| Asset coverage per share(h) | |
$ | 167.07 | | |
$ | 171.13 | | |
$ | 196.48 | | |
$ | 167.07 | | |
$ | 131.49 | |
| Series C Auction Rate Cumulative Preferred Stock | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation value, end of year (in 000’s) | |
$ | 15,000 | | |
$ | 15,000 | | |
$ | 15,000 | | |
$ | 15,000 | | |
$ | 15,000 | |
| Total shares outstanding (in 000’s) | |
| 1 | | |
| 1 | | |
| 1 | | |
| 1 | | |
| 1 | |
| Liquidation preference per share | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Liquidation value (i) | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Asset coverage per share(h) | |
$ | 167,071 | | |
$ | 171,134 | | |
$ | 196,481 | | |
$ | 167,072 | | |
$ | 131,486 | |
| Asset Coverage (j) | |
| 668 | % | |
| 685 | % | |
| 786 | % | |
| 668 | % | |
| 526 | % |
| † | For
the years ended December 31, 2016, 2015, 2014, and 2013 based on net asset value per
share, adjusted for reinvestment of distributions of net asset value on the ex-dividend
date. The year ended 2012, was based on net asset value per share, adjusted for reinvestment
of distributions at prices determined under the Fund’s dividend reinvestment plan
including the effect of shares issued pursuant to the 2014 rights offering, assuming
full subscription by shareholders. |
| †† | Based
on market value per share, adjusted for reinvestment of distributions at prices determined
under the Fund’s dividend reinvestment plan including the effect of shares issued
pursuant to the 2014 rights offering, assuming full subscription by shareholders. |
| (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 received credits from a designated broker who agreed to pay certain Fund operating
expenses. For the years ended December 31, 2016 and 2015, there was no impact on the
expense ratios. |
| (d) | During
the year ended December 31, 2016, the fund received a one time reimbursement of custody
expenses paid in prior years. Had such reimbursement been included in this period, the
annualized expenses ratios would have been 1.32% attributable to common shares before
fees waived, 1.32% attributable to common shares net of advisory fee reduction, 1.13%
including liquidation value of preferred shares before fees waived, and 1.13% including
liquidation value of preferred shares net of advisory fee reduction. |
| (e) | These
ratios do not include a reduction for insurance recovery of $300,000 and the prior period
adjustment to legal expenses of $227,762. Had these amounts been included, the ratios
for the year ended December 31, 2012 would have been 1.47%. |
| (f) | These
ratios do not include a reduction for insurance recovery of $300,000 and the prior period
adjustment to legal expenses of $227,762. Had these amounts been included, the ratios
for the year ended December 31, 2012 would have been 1.18%. |
| (g) | Based
on weekly prices. |
| (h) | Asset
coverage per share is calculated by combining all series of preferred shares. |
| (i) | Since
February 2008, the weekly auctions have failed. Holders that have submitted orders have
not been able to sell any or all of their shares in the auction. |
| (j) | Asset
coverage is calculated by combining all series of preferred shares. |
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
CHANGES
OCCURRING DURING THE PRIOR FISCAL PERIOD
The
following information is a summary of certain changes during the most recent fiscal year ended December 31, 2021. This information
may not reflect all the changes that have occurred since you purchased shares of the Fund.
During
the Fund’s most recent fiscal year, there were no material changes to the Fund’s investment objective or policies
that have not been approved by shareholders or in the principal risk factors associated with an investment in the Fund.
INVESTMENT
OBJECTIVES AND POLICIES
Investment
Objectives
The
Fund’s primary investment objective is to achieve long-term growth of capital by investing primarily in the common stock
and other securities of foreign and domestic companies involved in the telecommunications, media, publishing, and entertainment
industries. Income is the secondary investment objective. The investment objectives of long-term growth of capital and income
are fundamental policies of the Fund. The Fund’s policy of concentration in companies in the communications industries is
also a fundamental policy of the Fund.
Under
normal market conditions, the Fund will invest at least 80% of the value of its net assets, plus borrowings for investment purposes,
in common stock and other securities, including convertible securities, preferred stock, options, and warrants of companies in
the telecommunications, media, publishing, and entertainment industries (the “80% Policy”). The Fund may invest in
companies of any size market capitalization. The Fund may invest, without limitation, in foreign securities. The Fund may also
invest in securities of companies located in emerging market.
A
company will be considered to be in these industries if it derives at least 50% of its revenues or earnings from, or devotes at
least 50% of its assets to, the indicated activities or multimedia related activities. The 80% Policy may be changed without stockholder
approval. The Fund will provide stockholders with notice at least sixty days prior to the implementation of any change in the
80% Policy.
The
telecommunications companies in which the Fund may invest are engaged in the development, manufacture, or sale of communications
services or equipment throughout the world, including the following products or services: regular telephone service; wireless
communications services and equipment, including cellular telephone, microwave and satellite communications, paging, and other
emerging wireless technologies; equipment and services for both data and voice transmission, including computer hardware and software;
electronic components and communications equipment; video conferencing; electronic mail; local and wide area networking, and linkage
of data and word processing systems; publishing and information systems; video text and teletext; emerging technologies combining
television, telephone and computer systems; broadcasting, including television and radio, satellite and microwave transmission
and cable television.
The
entertainment, media and publishing companies in which the Fund may invest are engaged in providing the following products or
services: the creation, packaging, distribution, and ownership of entertainment programming throughout the world, including pre-recorded
music, feature-length motion pictures, made-for-TV
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
movies,
television series, documentaries, animation, game shows, sports programming, and news programs; live events such as professional
sporting events or concerts, theatrical exhibitions, television and radio broadcasting, satellite and microwave transmission,
cable television systems and programming, broadcast and cable networks, wireless cable television and other emerging distribution
technologies; home video, interactive and multimedia programming, including home shopping and multiplayer games; publishing, including
newspapers, magazines and books, advertising agencies and niche advertising mediums such as in-store or direct mail; emerging
technologies combining television, telephone, and computer systems, computer hardware and software; and equipment used in the
creation and distribution of entertainment programming such as that required in the provision of broadcast, cable, or telecommunications
services.
Investing
in securities of foreign issuers, which generally are denominated in foreign currencies, may involve certain risk and opportunity
considerations not typically associated with investing in domestic companies and could cause the Fund to be affected favorably
or unfavorably by changes in currency exchange rates and revaluations of currencies.
The
Investment Adviser believes that at the present time investment by the Fund in the securities of companies located throughout
the world presents great potential for accomplishing the Fund’s investment objectives.
While
the Investment Adviser expects that a substantial portion of the Fund’s portfolio may be invested in the securities of domestic
companies, a significant portion of the Fund’s portfolio may also be comprised of the securities of issuers headquartered
outside the United States.
No
assurance can be given that the Fund’s investment objectives will be achieved.
Investment
Methodology of the Fund
In
selecting securities for the Fund, the Investment Adviser normally will consider the following factors, among others:
| ● | the
Investment Adviser’s own evaluations of the private market value (as defined below),
cash flow, earnings per share, and other fundamental aspects of the underlying assets
and business of the company; |
| ● | the
potential for capital appreciation of the securities; |
| ● | the
interest or dividend income generated by the securities; |
| ● | the
prices of the securities relative to other comparable securities; |
| ● | whether
the securities are entitled to the benefits of call protection or other protective covenants; |
| ● | the
existence of any anti-dilution protections or guarantees of the security; and |
| ● | the
diversification of the portfolio of the Fund as to issuers. |
The
Investment Adviser’s investment philosophy with respect to equity securities is to identify assets that are selling in
the public market at a discount to their private market value. The Investment Adviser defines private market value as the
value informed purchasers are willing to pay to acquire assets with similar characteristics. The Investment Adviser also
normally evaluates an issuer’s free cash flow and long-term earnings trends. Finally, the Investment Adviser looks for
a catalyst, something indigenous to the company, its industry, or country that will surface additional value.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Certain
Investment Practices
Foreign
Securities. There is no limitation on the amount of foreign securities in which the Fund may invest. Among the foreign securities
in which the Fund may invest are those issued by companies located in developing countries or emerging markets, which are countries
in the initial stages of their industrialization cycles. Investing in the equity and debt markets of developing countries involves
exposure to economic structures that are generally less diverse and less mature, and to political systems that may have less stability
than those of developed countries. The markets of developing countries historically have been more volatile than the markets of
the more mature economies of developed countries, but often have provided higher rates of return to investors.
The
Fund may also invest in the debt securities of foreign governments. Although such investments are not a principal strategy of
the Fund, there is limitation on its ability to invest in the debt securities of foreign governments.
Corporate
Reorganizations. The Fund may invest without limit in securities of companies for which a tender or exchange offer has been
made or announced and in securities of companies for which a merger, consolidation, liquidation, or similar reorganization proposal
has been announced if, in the judgment of the Investment Adviser, there is a reasonable prospect of capital appreciation significantly
greater than the added portfolio turnover expenses inherent in the short term nature of such transactions. The principal risk
is that such offers or proposals may not be consummated within the time and under the terms contemplated at the time of the investment,
in which case, unless such offers or proposals are replaced by equivalent or increased offers or proposals that are consummated,
the Fund may sustain a loss.
Temporary
Defensive Investments. Subject to the Fund’s investment restrictions, when a temporary defensive period is believed
by the Investment Adviser to be warranted (“temporary defensive periods”), the Fund may, without limitation, hold
cash or invest its assets in securities of U.S. government sponsored instrumentalities, in repurchase agreements in respect of
those instruments, and in certain high grade commercial paper instruments. During temporary defensive periods, the Fund may also
invest up to 10% of the market value of its total assets in money market mutual funds that invest primarily in securities of U.S.
government sponsored instrumentalities and repurchase agreements in respect of those instruments. Obligations of certain agencies
and instrumentalities of the U.S. government, such as the Government National Mortgage Association, are supported by the “full
faith and credit” of the U.S. government; others, such as those of the Export-Import Bank of the U.S., are supported by
the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. government to purchase the agency’s obligations; and still others,
such as those of the Student Loan Marketing Association, are supported only by the credit of the instrumentality. No assurance
can be given that the U.S. government would provide financial support to U.S. government sponsored instrumentalities if it is
not obligated to do so by law. During temporary defensive periods, the Fund may be less likely to achieve its secondary investment
objective of income.
Special
Investment Methods
Options.
On behalf of the Fund, and subject to guidelines of the Board, the Investment Adviser may purchase or sell (i.e., write)
options on securities, securities indices and foreign currencies which are listed on a national securities exchange or in the
U.S. over-the-counter (“OTC”) markets as a means of achieving additional return or of hedging the value of the Fund’s
portfolio. The Fund may write covered call options on common stocks that it
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
owns
or has an immediate right to acquire through conversion or exchange of other securities in an amount not to exceed 25% of total
assets or invest up to 10% of its total assets in the purchase of put options on common stocks that the Fund owns or may acquire
through the conversion or exchange of other securities that it owns.
A
call option is a contract that gives the holder of the option the right to buy from the writer (seller) of the call option, in
return for a premium paid, the security underlying the option at a specified exercise price at any time during the term of the
option.
The
writer of the call option has the obligation upon exercise of the option to deliver the underlying security upon payment of the
exercise price during the option period.
A
put option is a contract that gives the holder of the option the right to sell to the writer (seller), in return for the premium,
the underlying security at a specified price during the term of the option. The writer of the put, who receives the premium, has
the obligation to buy the underlying security upon exercise, at the exercise price during the option period.
If
the Fund has written an option, it may terminate its obligation by effecting a closing purchase transaction. This is accomplished
by purchasing an option of the same series as the option previously written. There can be no assurance that a closing purchase
transaction can be effected when the Fund so desires.
An
exchange traded option may be closed out only on an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an exchange will exist for any particular option.
Limitations
on the Purchase and Sale of Futures Contracts, Certain Options and Swaps. Subject to the guidelines of the Board, the
Fund may engage in “commodity interest” transactions (generally, transactions in futures, certain options,
certain currency transactions and certain types of swaps) only for bona fide hedging or other permissible transactions in
accordance with the rules and regulations of the Commodity Futures Trading Commission (“CFTC”). Pursuant to
amendments by the CFTC to Rule 4.5 under the Commodity Exchange Act (“CEA”), the Investment Adviser has filed a
notice of exemption from registration as a “commodity pool operator” with respect to the Fund. The Fund and the
Investment Adviser are therefore not subject to registration or regulation as a commodity pool operator under the CEA. Due to
the amendments to Rule 4.5 under the CEA, certain trading restrictions are applicable to the Fund. These trading restrictions
permit the Fund to engage in commodity interest transactions that include(i)”bonafidehedging” transactions, as
that term is defined and interpreted by the CFTC and its staff, without regard to the percentage of the Fund’s assets
committed to margin and options premiums and (ii) non-bona fide hedging transactions, provided that the Fund does not
enter into such non-bona fide hedging transactions if, immediately thereafter, either (a) the sum of the amount of initial
margin deposits on the Fund’s existing futures positions or swaps positions and option or swaption premiums would
exceed 5% of the market value of the Fund’s liquidating value, after taking into account unrealized profits and
unrealized losses on any such transactions, or (b) the aggregate net notional value of the Fund’s commodity interest
transactions would exceed 100% of the market value of the Fund’s liquidating value, after taking into account
unrealized profits and unrealized losses on any such transactions. In addition to meeting one of the foregoing trading
limitations, the Fund may not market itself as a commodity pool or otherwise as a vehicle for trading in the futures, options
or swap markets. Therefore, in order to claim the Rule 4.5 exemption,
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
the
Fund is limited in its ability to invest in commodity futures, options and certain types of swaps (including securities futures,
broad-based stock index futures and financial futures contracts). As a result, in the future, the Fund will be more limited in
its ability to use these instruments than in the past and these limitations may have a negative impact on the ability of the Investment
Adviser to manage the Fund, and on the Fund’s performance.
Futures Contracts and Options
on Futures. On behalf of the Fund, the Investment Adviser may, subject to the Fund’s
investment restrictions and guidelines of the Board, purchase and sell financial futures contracts and options thereon which are
traded on a commodities exchange or board of trade for certain hedging, yield enhancement, and risk management purposes. These
futures contracts and related options may be on debt securities, financial indices, securities indices, United States government
securities, and foreign currencies. A financial futures contract is an agreement to purchase or sell an agreed amount of securities
or currencies at a set price for delivery in the future.
Forward
Currency Exchange Contracts. Subject to guidelines of the Board, the Fund may enter into forward foreign currency exchange
contracts to protect the value of its portfolio against future changes in the level of currency exchange rates. The Fund may enter
into such contracts on a “spot” (i.e., cash) basis at the rate then prevailing in the currency exchange market
or on a forward basis, by entering into a forward contract to purchase or sell currency. A forward contract on foreign currency
is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days agreed upon by
the parties from the date of the contract at a price set on the date of the contract. The Fund’s dealings in forward contracts
generally will be limited to hedging involving either specific transactions or portfolio positions. The Fund does not have an
independent limitation on its investments in foreign currency futures contracts and options on foreign currency futures contracts.
Short
Sales. The Fund may from time to time make short sales of securities, including short sales “against the box.”
A short sale is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that
security will decline. A short sale against the box occurs when the Fund contemporaneously owns, or has the right to obtain at
no added cost, securities identical to those sold short.
The
market value for the securities sold short of any one issuer will not exceed 5% of the Fund’s total assets or 5% of such
issuer’s voting securities. In addition, the Fund may not make short sales or maintain a short position if it would cause
more than 25% of the Fund’s total assets, taken at market value, to be held as collateral for such sales. The Fund may make
short sales against the box without respect to such limitations.
The
Fund may make short sales in order to hedge against market risks when it believes that the price of a security may decline, causing
a decline in the value of a security owned by the Fund or a security convertible into, or exchangeable for, such security, or
when the Fund does not want to sell the security it owns. Such short sale transactions may be subject to special tax rules, one
of the effects of which may be to accelerate income to the Fund. Additionally, the Fund may use short sales in conjunction with
the purchase of a convertible security when it is determined that the convertible security can be bought at a small conversion
premium and has a yield advantage relative to the underlying common stock sold short.
When
the Fund makes a short sale, it will often borrow the security sold short and deliver it to the broker-dealer through which it
made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. In connection with such
short sales, the Fund may pay a fee to borrow securities or maintain an
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
arrangement
with a broker to borrow securities, and is often obligated to pay over any accrued interest and dividends on such borrowed securities.
In a short sale, the Fund does not immediately deliver the securities sold or receive the proceeds from the sale. The Fund may
close out a short position by purchasing and delivering an equal amount of the securities sold short, rather than by delivering
securities already held by the Fund, because the Fund may want to continue to receive interest and dividend payments on securities
in its portfolio that are convertible into the securities sold short.
If
the price of the security sold short increases between the time of the short sale and the time that the Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be
decreased, and any loss, increased, by the transaction costs described above. The successful use of short selling may be adversely
affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.
To
the extent that the Fund engages in short sales, it will provide collateral to the broker-dealer and (except in the case of
short sales against the box) will maintain additional asset coverage in the form of segregated or “earmarked”
assets on the records of the Investment Adviser or with the Fund’s Custodian, consisting of cash, U.S. government
securities, or other liquid securities that is equal to the current market value of the securities sold short, or (in the
case of short sales against the box) will ensure that such positions are covered by offsetting positions, until the Fund
replaces the borrowed security. The Fund will engage in short selling to the extent permitted by the federal securities laws
and rules and interpretations thereunder, subject to the percentage limitations set forth above. To the extent the Fund
engages in short selling in foreign (non-U.S.) jurisdictions, the Fund will do so to the extent permitted by the laws and
regulations of such jurisdiction.
Repurchase
Agreements. The Fund may enter into repurchase agreements with banks and non-bank dealers of U.S. government securities which
are listed as reporting dealers of the Federal Reserve Bank and which furnish collateral at least equal in value or market price
to the amount of their repurchase obligation.
In
a repurchase agreement, the Fund purchases a debt security from a seller who undertakes to repurchase the security at a specified
resale price on an agreed future date. Repurchase agreements are generally for one business day and generally will not have a
duration of longer than one week. The SEC has taken the position that, in economic reality, a repurchase agreement is a loan by
a fund to the other party to the transaction secured by securities transferred to the fund. The resale price generally exceeds
the purchase price by an amount which reflects an agreed upon market interest rate for the term of the repurchase agreement. The
Fund’s risk is primarily that, if the seller defaults, the proceeds from the disposition of the underlying securities and
other collateral for the seller’s obligation may be less than the repurchase price. If the seller becomes insolvent, the
Fund might be delayed in or prevented from selling the collateral. In the event of a default or bankruptcy by a seller, the Fund
will promptly seek to liquidate the collateral. To the extent that the proceeds from any sale of the collateral upon a default
in the obligation to repurchase are less than the repurchase price, the Fund will experience a loss. If the financial institution
that is a party to the repurchase agreement petitions for bankruptcy or becomes subject to the United States Bankruptcy Code,
the law regarding the rights of the Fund is unsettled. As a result, under extreme circumstances, there may be a restriction on
the Fund’s ability to sell the collateral and the Fund could suffer a loss.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Loans
of Portfolio Securities. To increase income, the Fund may lend its portfolio securities to securities broker-dealers or financial
institutions if: (i) the loan is collateralized in accordance with applicable regulatory requirements, and (ii) no loan will cause
the value of all loaned securities to exceed 20% of the value of its total assets.
If
the borrower fails to maintain the requisite amount of collateral, the loan automatically terminates and the Fund could use the
collateral to replace the securities while holding the borrower liable for any excess of replacement cost over the value of the
collateral. As with any extension of credit, there are risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities fail financially. While these loans of portfolio securities will be made in accordance with
guidelines approved by the Fund’s Board, there can be no assurance that borrowers will not fail financially. On termination
of the loan, the borrower is required to return the securities to the Fund, and any gain or loss in the market price during the
loan would inure to the Fund. If the counterparty to the loan petitions for bankruptcy or becomes subject to the United States
Bankruptcy Code, the law regarding the Fund’s rights is unsettled. As a result, under these circumstances, there may be
a restriction on the Fund’s ability to sell the collateral and it would suffer a loss.
Borrowing.
The Fund may borrow money in accordance with its investment restrictions, including as a temporary measure for extraordinary
or emergency purposes. It may not borrow for investment purposes.
Leveraging.
As provided in the 1940 Act, and subject to compliance with the Fund’s investment limitations, the Fund may issue senior
securities representing stock, such as preferred stock, so long as immediately following such issuance of stock, its total assets
exceed 200% of the amount of such stock. The use of leverage magnifies the impact of changes in net asset value. For example,
a fund that uses 33% leverage will show a 1.5% increase or decline in net asset value for each 1% increase or decline in the value
of its total assets. In addition, if the cost of leverage exceeds the return on the securities acquired with the proceeds of leverage,
the use of leverage will diminish, rather than enhance, the return to the Fund. The use of leverage generally increases the volatility
of returns to the Fund. The Fund currently has three series of preferred stock outstanding: the Series C Auction Rate Cumulative
Preferred Stock, the Series E Preferred, and the Series G Preferred.
Investment
Restrictions. The Fund has adopted certain investment restrictions as fundamental policies of the Fund. Under the 1940 Act,
a fundamental policy may not be changed without the vote of a majority, as defined in the 1940 Act, of the outstanding voting
securities of the Fund (voting together as a single class).
Portfolio
Turnover. The Fund will buy and sell securities to accomplish its investment objective. The investment policies of the Fund
may lead to frequent changes in investments, particularly in periods of rapidly fluctuating interest or currency exchange rates.
The portfolio turnover may be higher than that of other investment companies.
Portfolio
turnover generally involves some expense to the Fund, including brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in other securities. The portfolio turnover rate is computed by dividing the
lesser of the amount of the securities purchased or securities sold by the average monthly value of securities owned during the
year (excluding securities whose maturities at acquisition were one year or less). High portfolio turnover may also result in
the realization of substantial net short-term capital gains and any distributions resulting from such gains will be taxable at
ordinary income rates
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
for U.S. federal income tax purposes. The Fund’s portfolio turnover rates for the fiscal years ended December 31, 2021
and 2020, were 17% and 29%, respectively.
RISK
FACTORS AND SPECIAL CONSIDERATIONS
There
are a number of risks that an investor should consider in evaluating the Fund.
Leverage
Risk. The Fund uses financial leverage for investment purposes by issuing preferred stock. The amount of leverage represents
approximately 31% of the Fund’s Managed Assets (defined as the aggregate net asset value of outstanding shares of common
stock plus assets attributable to outstanding shares of preferred stock, with no deduction for the liquidation preference of such
shares of preferred stock) as of December 31, 2021. The Fund’s leveraged capital structure creates special risks not associated
with unleveraged funds having similar investment objectives and policies. These include the possibility of greater loss and the
likelihood of higher volatility of the net asset value of the Fund and the asset coverage. Such volatility may increase the likelihood
of the Fund’s having to sell investments in order to meet dividend payments on the preferred stock, or to redeem preferred
stock when it may be disadvantageous to do so. The Fund may not be permitted to declare dividends or distributions with respect
to common stock or preferred stock, or purchase common stock or preferred stock unless at such time the Fund meets certain asset
coverage requirements. In addition, the Fund may not be permitted to pay distributions on common stock unless all distributions
on preferred stock and/or accrued interest on borrowings have been paid, or set aside for payment. Any preferred stock currently
outstanding or that the Fund issues in the future would subject the Fund to certain asset coverage requirements under the 1940
Act that could, under certain circumstances, restrict the Fund from making distributions necessary to qualify as a registered
investment company. If the Fund is unable to obtain cash from other sources, the Fund may fail to qualify as a registered investment
company and, thus, may be subject to income tax as an ordinary corporation. Because the advisory fee paid to the Investment Adviser
is calculated on the basis of the Fund’s Managed Assets rather than only on the basis of net assets attributable to the
shares of common stock, the fee may be higher when leverage is utilized, giving the Investment Adviser an incentive to utilize
leverage. However, the Investment Adviser has agreed to reduce any management fee on the incremental assets attributable to the
cumulative preferred stock during the fiscal year if the total return of the net asset value of the outstanding shares of common
stock, including distributions and advisory fee subject to reduction for that year, does not exceed the stated dividend rate or
corresponding swap rate of each particular series of preferred stock. This fee waiver will not apply to any preferred stock issued
from this offering. The Investment Adviser currently intends that the voluntary advisory fee waiver will remain in effect for
as long as the Series C Auction Rate Preferred Stock, Series E Preferred and Series G Preferred are outstanding. The Investment
Adviser, however, reserves the right to modify or terminate the voluntary advisory fee waiver at any time.
Preferred
Stock Risk. The issuance of preferred stock causes the net asset value and market value of the common stock to become more
volatile. If the dividend rate on the preferred stock approaches the net rate of return on the Fund’s investment portfolio,
the benefit of leverage to the holders of the common stock would be reduced. If the dividend rate on the preferred stock plus
the management fee annual rate of 1.00% (as applicable) exceeds the net rate of return on the Fund’s portfolio, the leverage
will result in a lower rate of return to the holders of common stock than if the Fund had not issued preferred stock.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Any
decline in the net asset value of the Fund’s investments would be borne entirely by the holders of common stock. Therefore,
if the market value of the Fund’s portfolio declines, the leverage will result in a greater decrease in net asset value
to the holders of common stock than if the Fund were not leveraged. This greater net asset value decrease will also tend to cause
a greater decline in the market price for the common stock. The Fund might be in danger of failing to maintain the required asset
coverage of the preferred stock or of losing its ratings on the preferred stock or, in an extreme case, the Fund’s current
investment income might not be sufficient to meet the dividend requirements on the preferred stock. In order to counteract such
an event, the Fund might need to liquidate investments in order to fund a redemption of some or all of the preferred stock.
In
addition, the Fund would pay (and the holders of common stock will bear) all costs and expenses relating to the issuance and ongoing
maintenance of the shares of the preferred stock, including the advisory fees on the incremental assets attributable to such shares.
Holders
of preferred stock may have different interests than holders of common stock and may at times have disproportionate influence
over the Fund’s affairs. Holders of preferred stock, voting separately as a single class, have the right to elect two members
of the Board at all times and in the event dividends become two full years in arrears would have the right to elect a majority
of the Directors until such arrearage is completely eliminated. In addition, preferred stockholders have class voting rights on
certain matters, including changes in fundamental investment restrictions and conversion of the fund to open-end status, and accordingly
can veto any such changes.
Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of the Fund’s
common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, might impair the Fund’s
ability to maintain its qualification as a regulated investment company for federal income tax purposes. While the Fund intends
to redeem its preferred stock to the extent necessary to enable the Fund to distribute its income as required to maintain
its qualification as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”),
there can be no assurance that such actions can be effected in time to meet the Code requirements.
Portfolio
Guidelines of Rating Agencies for Preferred Stock
In
order to obtain and maintain attractive credit quality ratings for shares of preferred stock, the Fund must comply with investment
quality, diversification, and other guidelines established by the relevant ratings agencies. These guidelines could affect portfolio
decisions and may be more stringent than those imposed by the 1940 Act.
Effects
of Leverage
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate the effect of leverage on common
stock total return, assuming investment portfolio total returns (comprised of net investment income of the Fund, realized gains
or losses of the Fund and changes in the value of the securities held in the Fund’s portfolio) of -10%, -5%. 0%, 5% and
10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the investment
portfolio returns experienced or expected to be experienced by the Fund. The table further reflects leverage representing 31%
of the Fund’s net assets, the Fund’s current projected blended annual average leverage dividend or interest rate of
5.12%, a management fee at an annual rate of 1.00% of the liquidation preference of any outstanding preferred stock and estimated
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
annual
incremental expenses attributable to any outstanding preferred stock 0.03% of the Fund’s net assets attributable to common
stock.
| Assumed Return on Portfolio (Net of Expenses) | |
| (10.0 | )% | |
| (5.0 | )% | |
| 0.0 | % | |
| 5.0 | % | |
| 10.0 | % |
| Corresponding Return to Common Shareholder | |
| (17.33 | )% | |
| (10.12 | )% | |
| (2.91 | )% | |
| 4.30 | % | |
| 11.51 | % |
The
following factors associated with leveraging could increase the investment risk and volatility of the price of the shares of common
stock:
| ● | leveraging
exaggerates any increase or decrease in the net asset value of the shares of common stock; |
| ● | the
dividend requirements on the Fund’s shares of preferred stock may exceed the income
from the portfolio securities purchased with the proceeds from the issuance of preferred
stock; |
| ● | a
decline in net asset value results if the investment performance of the additional securities
purchased fails to cover their cost to the Fund (including any dividend requirements
of preferred stock); |
| ● | a
decline in net asset value could affect the ability of the Fund to make dividend payments
on shares of common stock; |
Pursuant
to Section 18 of the 1940 Act, it is unlawful for the Fund, as a registered closed-end investment company, to issue any class
of senior security, or to sell any senior security that it issues, unless it can satisfy certain “asset coverage”
ratios. The asset coverage ratio with respect to a senior security representing indebtedness means the ratio of the value of the
Fund’s total assets (less all liabilities and indebtedness not represented by senior securities) to the aggregate amount
of the Fund’s senior securities representing indebtedness. The asset coverage ratio with respect to a senior security representing
stock means the ratio of the value of the Fund’s total assets (less all liabilities and indebtedness not represented by
senior securities) to the aggregate amount of the Fund’s senior securities representing indebtedness plus the aggregate
liquidation preference of the Fund’s outstanding shares of preferred stock.
If,
as is the case with the Fund, a registered investment company’s senior securities are equity securities, such securities
must have an asset coverage of at least 200% immediately following its issuance. If a registered investment company’s senior
securities represent indebtedness, such indebtedness must have an asset coverage of at least 300% immediately after their issuance.
Subject to certain exceptions, during any period following issuance that the Fund fails to satisfy these asset coverage ratios,
it will, among other things, be prohibited from declaring any dividend or declaring any other distribution in respect of its common
stock except a dividend payable in shares of common stock issued by the Fund. A registered investment company may, to the extent
permitted by the 1940 Act, segregate assets or “cover” transactions in order to avoid the creation of a class of senior
security.
Special
Risks to Holders of Fixed Rate Preferred Stock
Illiquidity
Prior to Exchange Listing. Prior to the offering, there will be no public market for any additional series of fixed rate preferred
stock. In the event any additional series of fixed rate preferred stock are issued, prior application will have been made to list
such shares on a national securities exchange, which will likely be the
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
NYSE.
However, during an initial period, which is not expected to exceed 30 days after the date of its initial issuance, such shares
may not be listed on any securities exchange. During such period, the underwriters may make a market in such shares, though, they
will have no obligation to do so. Consequently, an investment in such shares may be illiquid during such period.
Market
Price Fluctuation. Shares of fixed rate preferred stock may trade at a premium to or discount from liquidation value for various
reasons, including changes in interest rates.
Special
Risks for Holders of Auction Rate Preferred Stock
Auction
Risk. You may not be able to sell your auction rate preferred stock at an auction if the auction fails, i.e., if more shares
of auction rate preferred stock are offered for sale than there are buyers for those shares. Also, if you place an order (a hold
order) at an auction to retain auction rate preferred stock only at a specified rate that exceeds the rate set at the auction,
you will not retain your auction rate preferred stock. Additionally, if you place a hold order without specifying a rate below
which you would not wish to continue to hold your shares and the auction sets a below market rate, you will receive a lower rate
of return on your shares than the market rate. Finally, the dividend period may be changed, subject to certain conditions and
with notice to the holders of the auction rate preferred stock, which could also affect the liquidity of your investment. Since
February 2008, most auction rate preferred stock, including our Series C Auction Rate Preferred, have had failed auctions and
holders of such stock have suffered reduced liquidity.
Secondary
Market Risk. If you try to sell your auction rate preferred stock between auctions, you may not be able to sell them for their
liquidation preference per share or such amount per share plus accumulated dividends. If the Fund has designated a special dividend
period of more than seven days, changes in interest rates could affect the price you would receive if you sold your shares in
the secondary market. Broker-dealers that maintain a secondary trading market for the auction rate preferred stock are not required
to maintain this market, and the Fund is not required to redeem auction rate preferred stock if either an auction or an attempted
secondary market sale fails because of a lack of buyers. The auction rate preferred stock will not be registered on a stock exchange.
If you sell your auction rate preferred stock to a broker-dealer between auctions, you may receive less than the price you paid
for them, especially when market interest rates have risen since the last auction or during a special dividend period. Since February
2008, most auction rate preferred stock, including our Series C Auction Rate Preferred, have had failed auctions and holders of
such stock have suffered reduced liquidity, including the inability to sell such stock in a secondary market.
Special
Risks for Holders of Subscription Rights
There
is a risk that changes in yield or changes in the credit quality of the Fund may result in the underlying preferred stock or common
stock purchasable upon exercise of the subscription rights being less attractive to investors at the conclusion of the subscription
period. This may reduce or eliminate the value of the subscription rights. Investors who receive subscription rights may find
that there is no market to sell rights they do not wish to exercise. Further, if investors exercise only a portion of the rights,
the number of shares of the preferred stock issued may be reduced, and the preferred stock or common stock may trade at less favorable
prices than larger offerings for similar securities.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Common
Stock Distribution Policy Risk
The
Fund has adopted a policy, which may be changed at any time by the Board, of paying a minimum annual distribution of 10% of the
average net asset value of the Fund to common stockholders. In the event the Fund does not generate a total return from dividends
and interest received and net realized capital gains in an amount equal to or in excess of its stated distribution in a given
year, the Fund may return capital as part of such distribution, which may have the effect of decreasing the asset coverage per
share with respect to the Fund’s preferred stock. Distributions on the Fund’s common stock may contain a return of
capital. Any return of capital should not be considered by investors as yield or total return on their investment in the Fund.
For the fiscal ended December 31, 2021, the Fund distributed a return of capital. Distributions sourced from return of capital
should not be considered as dividend yield or the total return from an investment in the Fund. Stockholders who periodically receive
the payment of a dividend or other distribution consisting of a return of capital may be under the impression that they are receiving
net profits when they are not. Stockholders should not assume that the source of a distribution from the Fund is net profit. The
composition of each distribution is estimated based on the earnings of the Fund as of the record date for each distribution. The
actual composition of each of the current year’s distributions will be based on the Fund’s investment activity through
the end of the calendar year.
Industry
Concentration Risk
The
Fund invests a significant portion of its assets in companies in the telecommunications, media, publishing, and entertainment
industries and, as a result, the value of the Fund’s shares is more susceptible to factors affecting those particular types
of companies and those industries, including governmental regulation, a greater price volatility than the overall market, rapid
obsolescence of products and services, intense competition, and strong market reactions to technological developments.
Various
types of ownership restrictions are imposed by the Federal Communications Commission, or FCC, on investment in media companies
and cellular licensees. For example, the FCC’s broadcast and cable multiple-ownership and cross ownership rules, which apply
to the radio, television, and cable industries, provide that investment advisers are deemed to have an “attributable”
interest whenever the adviser has the right to determine how five percent or more of the issued and outstanding voting stock of
a broadcast company or cable system operator may be voted. These rules limit the number of broadcast stations both locally and
nationally that a single entity is permitted to own, operate, or control and prohibit ownership of certain competitive communications
providers in the same location. The FCC also applies limited ownership restrictions on cellular licensees serving rural areas.
An attributable interest in a cellular company arises from the right to control 20% or more of its voting stock.
Attributable
interests that may result from the role of the Investment Adviser and its principals in connection with other funds, managed accounts
and companies may limit the Fund’s ability to invest in certain mass media and cellular companies. In the event that the
Investment Adviser and its affiliates may be deemed to have such an attributable interest, the Board of Directors of the Fund
may delegate, from time to time, to the Fund’s Proxy Voting Committee, voting power over certain shares of securities held
by the Fund in view of these ownership limitations to ensure compliance with certain FCC regulations.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Smaller
Companies
While
the Fund intends to focus on the securities of established suppliers of accepted products and services, the Fund may also invest
in smaller companies which may benefit from the development of new products and services. These smaller companies may present
greater opportunities for capital appreciation, and may also involve greater investment risk than larger, more established companies.
For example, smaller companies may have more limited product lines, market or financial resources, and their securities may trade
less frequently and in lower volume than the securities of larger, more established companies. As a result, the prices of the
securities of such smaller companies may fluctuate to a greater degree than the prices of securities of other issuers.
Long-Term
Objective; Not a Complete Investment Program
The
Fund is intended for investors seeking long-term capital growth. The Fund is not meant to provide a vehicle for those who wish
to exploit short-term swings in the stock market. An investment in shares of the Fund should not be considered a complete investment
program. Each stockholder should take into account the Fund’s investment objectives as well as the stockholder’s other
investments when considering an investment in the Fund.
Non-Diversified
Status
The
Fund is classified as a “non-diversified” investment company under the 1940 Act, which means it is not limited by
the 1940 Act in the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment
company, the Fund may invest in the securities of individual issuers to a greater degree than a diversified investment company.
As a result, the Fund may be more vulnerable to events affecting a single issuer and therefore subject to greater volatility than
a fund that is more broadly diversified. Accordingly, an investment in the Fund may present greater risk to an investor than an
investment in a diversified company. To qualify as a “regulated investment company,” or “RIC,” for purposes
of the Code, the Fund has in the past conducted and intends to conduct its operations in a manner that will relieve it of any
liability for federal income tax to the extent its earnings are distributed to stockholders. To so qualify as a “regulated
investment company,” among other requirements, the Fund will limit its investments so that, at the close of each quarter
of the taxable year:
| ● | not
more than 25% of the market value of its total assets will be invested in the securities
(other than U.S. government securities or the securities of other RICs) of a single issuer,
any two or more issuers in which the fund owns 20% or more of the voting securities and
which are determined to be engaged in the same, similar, or related trades or businesses
or in the securities of one or more qualified publicly traded partnerships (as defined
in the Code); and |
| ● | at
least 50% of the market value of the Fund’s assets will be represented by cash,
securities of other regulated investment companies, U.S. government securities and other
securities, with such other securities limited in respect of any one issuer to an amount
not greater than 5% of the value of the its assets and not more than 10% of the outstanding
voting securities of such issuer. |
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Market
Value and Net Asset Value
The
Fund is a non-diversified, closed-end management investment company. Shares of closed-end funds are bought and sold in the securities
markets and may trade at either a premium to or discount from net asset value. Listed shares of closed-end investment companies
often trade at discounts from net asset value. This characteristic of shares of a closed-end fund is a risk separate and distinct
from the risk that its net asset value may decrease. The Fund cannot predict whether its listed stock will trade at, below, or
above net asset value. As of December 31, 2021, the shares of common stock traded at a premium of 5.2%. Stockholders desiring
liquidity may, subject to applicable securities laws, trade their Fund common stock on the NYSE or other markets on which such
shares may trade at the then-current market value, which may differ from the then-current net asset value. Stockholders will incur
brokerage or other transaction costs to sell stock.
Non-Investment
Grade Securities
The
Fund may invest up to 10% of its total assets in fixed income securities rated below investment grade by recognized
statistical rating agencies or unrated securities of comparable quality. These securities, which may be preferred stock or
debt, are predominantly speculative and involve major risk exposure to adverse conditions. Debt securities that are not rated
or that are rated lower than “BBB” by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.
(“S&P”) or lower than “Baa” by Moody’s are referred to in the financial press as
“junk bonds.”
Generally,
such non-investment grade securities and unrated securities of comparable quality offer a higher current yield than is
offered by higher rated securities, but also: (i) will likely have some quality and protective characteristics that, in the
judgment of the rating organizations, are outweighed by large uncertainties or major risk exposures to adverse conditions,
and (ii) are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in
accordance with the terms of the obligation. The market values of certain of these securities also tend to be more sensitive
to individual corporate developments and changes in economic conditions than higher quality securities. In addition, such
securities generally present a higher degree of credit risk. The risk of loss due to default by these issuers is
significantly greater because such non-investment grade securities and unrated securities of comparable quality generally are
unsecured and frequently are subordinated to the prior payment of senior indebtedness. In light of these risks, the
Investment Adviser, in evaluating the creditworthiness of an issue, whether rated or unrated, will take various factors into
consideration, which may include, as applicable, the issuer’s operating history, financial resources and its
sensitivity to economic conditions and trends, the market support for the facility financed by the issue, the perceived
ability and integrity of the issuer’s management, and regulatory matters.
In
addition, the market value of securities in non-investment rated categories is more volatile than that of higher quality securities,
and the markets in which such non-investment rated or unrated securities are traded are more limited than those in which higher
rated securities are traded. The existence of limited markets may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing its portfolio and calculating its net asset value. Moreover, the lack of a liquid trading market
may restrict the availability of securities for the Fund to purchase and may also have the effect of limiting the ability of the
Fund to sell securities at their fair value in response to changes in the economy or the financial markets.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Non-investment
grade securities also present risks based on payment expectations. If an issuer calls the obligation for redemption (often a feature
of fixed income securities), the Fund may have to replace the security with a lower yielding security, resulting in a decreased
return for investors. Also, as the principal value of nonconvertible bonds and preferred stocks moves inversely with movements
in interest rates, in the event of rising interest rates, the value of the securities held by the Fund may decline proportionately
more than a portfolio consisting of higher rated securities. Investments in zero coupon bonds may be more speculative and subject
to greater fluctuations in value due to changes in interest rates than bonds that pay regular income streams.
As
part of its investment in non-investment grade securities, the Fund may invest in securities of issuers in default. The Fund will
make an investment in securities of issuers in default only when the Investment Adviser believes that such issuers will honor
their obligations or emerge from bankruptcy protection under a plan pursuant to which the securities received by the Fund in exchange
for its defaulted securities will have a value in excess of the Fund’s investment. By investing in securities of issuers
in default, the Fund bears the risk that these issuers will not continue to honor their obligations or emerge from bankruptcy
protection or that the value of the securities will not otherwise appreciate.
In
addition to using recognized rating agencies and other sources, the Investment Adviser also performs its own analysis of issues
in seeking investments that it believes to be underrated (and thus higher yielding) in light of the financial condition of the
issuer. Its analysis of issuers may include, among other things, current and anticipated cash flow and borrowing requirements,
value of assets in relation to historical cost, strength of management, responsiveness to business conditions, credit standing,
and current anticipated results of operations. In selecting investments for the Fund, the Investment Adviser may also consider
general business conditions, anticipated changes in interest rates, and the outlook for specific industries.
Subsequent
to its purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced. In addition, it is possible
that statistical rating agencies may change their ratings of a particular issue to reflect subsequent events. Moreover, such ratings
do not assess the risk of a decline in market value. None of these events will require the sale of the securities by the Fund,
although the Investment Adviser will consider these events in determining whether the Fund should continue to hold the securities.
The
market for non-investment grade and comparable unrated securities has experienced several periods of significantly adverse price
and liquidity, particularly at or around times of economic recessions. Past market recessions have adversely affected the value
of such securities as well as the ability of certain issuers of such securities to repay principal and pay interest thereon or
to refinance such securities. The market for those securities may react in a similar fashion in the future.
Foreign
Securities
Investments
in the securities of foreign issuers involve certain considerations and risks not ordinarily associated with investments in
securities of domestic issuers. Foreign companies are not generally subject to uniform accounting, auditing, and financial
standards and requirements comparable to those applicable to U.S. companies. Foreign securities exchanges, brokers and listed
companies may be subject to less government supervision and regulation than exists in the United States. Dividend and
interest income may be subject to withholding and other foreign taxes, which may adversely affect the net return on such
investments. There may be difficulty
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
in
obtaining or enforcing a court judgment abroad. In addition, it may be difficult to effect repatriation of capital invested in
certain countries. In addition, with respect to certain countries, there are risks of expropriation, confiscatory taxation, political
or social instability, or diplomatic developments that could affect assets of the Fund held in foreign countries.
There may be less publicly available information about a foreign company than a U.S. company. Foreign securities markets may
have substantially less volume than U.S. securities markets and some foreign company securities are less liquid than securities
of otherwise comparable U.S. companies. A portfolio of foreign securities may also be adversely affected by fluctuations in
the rates of exchange between the currencies of different nations and by exchange control regulations. Foreign markets also
have different clearance and settlement procedures that could cause the Fund to encounter difficulties in purchasing and selling
securities on such markets and may result in the Fund missing attractive investment opportunities or experiencing loss. In
addition, a portfolio that includes foreign securities can expect to have a higher expense ratio because of the increased
transaction costs on non-U.S. securities markets and the increased costs of maintaining the custody of foreign securities.
The Fund does not have an independent limit on the amount of its assets that it may invest in the securities of foreign issuers.
The
Fund also may purchase sponsored American Depository Receipts (“ADRs”) or U.S. denominated securities of foreign issuers.
ADRs are receipts issued by United States banks or trust companies in respect of securities of foreign issuers held on deposit
for use in the United States securities markets. While ADRs may not necessarily be denominated in the same currency as the securities
into which they may be converted, many of the risks associated with foreign securities may also apply to ADRs.
Emerging
Markets Risk
The
Fund may invest in securities of issuers whose primary operations or principal trading market is in an”emerging
market.” An “emerging market” country is any country that is considered to be an emerging or developing
country by the World Bank. Investing in securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation, nationalization, confiscation or the imposition
of restrictions on foreign investment, the lack of hedging instruments and restrictions on repatriation of capital invested.
Emerging securities markets are substantially smaller, less developed, less liquid and more volatile than the major
securities markets. The limited size of emerging securities markets and limited trading value compared to the volume of
trading in U.S. securities could cause prices to be erratic for reasons apart from factors that affect the quality of the
securities. For example, limited market size may cause prices to be unduly influenced by traders who control large positions.
Adverse publicity and investors’ perceptions, whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. Other risks include high concentration of market
capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high
concentration of investors and financial intermediaries; over-dependence on exports; overburdened infrastructure and obsolete
or unseasoned financial systems; environmental problems; less developed legal systems; and less reliable securities custodial
services and settlement practices.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Special
Risks of Derivative Transactions
Participation
in the options or futures markets and in currency exchange transactions involves investment risks and transaction costs to which
the Fund would not be subject absent the use of these strategies. If the Investment Adviser’s prediction of movements in
the direction of the securities, foreign currency, and interest rate markets are inaccurate, the consequences to the Fund may
leave the Fund in a worse position than if such strategies were not used. Risks inherent in the use of options, foreign currency,
futures contracts, and options on futures contracts, securities indices, and foreign currencies include:
| ● | dependence
on the Investment Adviser’s ability to predict correctly movements in the direction
of interest rates, securities prices, and currency markets; |
| ● | imperfect
correlation between the price of options and futures contracts and options thereon and
movements in the prices of the securities or currencies being hedged; |
| ● | the
fact that skills needed to use these strategies are different from those needed to select
portfolio securities; |
| ● | the
possible absence of a liquid secondary market for any particular instrument at any time; |
| ● | the
possible need to defer closing out certain hedged positions to avoid adverse tax consequences;
and |
| ● | the
possible inability of the Fund to purchase or sell a security at a time that otherwise
would be favorable for it to do so, or the possible need for the Fund to sell a security
at a disadvantageous time due to a need for the Fund to maintain “cover”
or to segregate securities in connection with the hedging techniques. |
Futures
Transactions
Futures
and options on futures entail certain risks, including but not limited to the following:
| ● | no
assurance that futures contracts or options on futures can be offset at favorable prices; |
| ● | possible
reduction of the yield of the Fund due to the use of hedging; |
| ● | possible
reduction in value of both the securities hedged and the hedging instrument; |
| ● | possible
lack of liquidity due to daily limits or price fluctuations; |
| ● | imperfect
correlation between the contracts and the securities being hedged; and |
| ● | losses
from investing in futures transactions that are potentially unlimited and the segregation
requirements for such transactions. |
Forward
Currency Exchange Contracts
The
use of forward currency exchange contracts may involve certain risks, including the failure of the counterparty to perform its
obligations under the contract and that the use of forward contracts may not serve as a complete hedge because of an imperfect
correlation between movements in the prices of the contracts and the prices of the currencies hedged or used for cover.
Dependence
on Key Personnel
The
Investment Adviser is dependent upon the expertise of Mr. Mario J. Gabelli in providing advisory services with respect to the
Fund’s investments. If the Investment Adviser were to lose the services of Mr. Gabelli, its ability to service the Fund
could be adversely affected. There can be no assurance that a suitable replacement
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
could
be found for Mr. Gabelli in the event of his death, resignation, retirement, or inability to act on behalf of the Investment Adviser.
Market
Disruption Risk
Certain
events have a disruptive effect on the securities markets, such as terrorist attacks, war and other geopolitical events. The Fund
cannot predict the effects of similar events in the future on the U.S. economy. Non-investment rated securities and securities
of issuers with smaller market capitalizations tend to be more volatile than higher rated securities and securities of issuers
with larger market capitalizations so that these events and any actions resulting from them may have a greater impact on the prices
and volatility of non-investment rated securities and securities of issuers with smaller market capitalizations than on higher
rated securities and securities of issuers with larger market capitalizations.
Special
Risks Related to Preferred Securities
There
are special risks associated with the Fund’s investing in preferred securities, including:
| ● | Deferral.
Preferred securities may include provisions that permit the issuer, at its discretion,
to defer dividends or distributions for a stated period without any adverse consequences
to the issuer. If the Fund owns a preferred security that is deferring its dividends
or distributions, the Fund may be required to report income for tax purposes although
it has not yet received such income. |
| ● | Non-Cumulative
Dividends. Some preferred securities are non-cumulative, meaning that the dividends
do not accumulate and need not ever be paid. A portion of the portfolio may include investments
in non-cumulative preferred securities, whereby the issuer does not have an obligation
to make up any arrearages to its stockholders. Should an issuer of a non-cumulative preferred
security held by the Fund determine not to pay dividends or distributions on such security,
the Fund’s return from that security may be adversely affected. There is no assurance
that dividends or distributions on non-cumulative preferred securities in which the Fund
invests will be declared or otherwise made payable. |
| ● | Subordination.
Preferred securities are subordinated to bonds and other debt instruments in an issuer’s
capital structure in terms of priority to corporate income and liquidation payments,
and therefore will be subject to greater credit risk than more senior debt security instruments. |
| ● | 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 directors to the issuer’s 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. A redemption by the issuer may negatively impact the return of
the security held by the Fund. |
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Interest
Rate Transactions
The
Fund may enter into interest rate swap or cap transactions with respect to all or a portion of any series of auction rate preferred
stock in order to manage the impact on its portfolio of changes in the dividend rate of such stock. Through these transactions
the Fund seeks to obtain the equivalent of a fixed rate for such auction rate preferred stock that is lower than the Fund would
have to pay if it issued fixed rate preferred stock. The use of interest rate swaps and caps is a highly specialized activity
that involves certain risks to the Fund including, among others, counterparty risk and early termination risk.
Investment
Companies
The
Fund may invest in the securities of other investment companies to the extent permitted by law. To the extent the Fund invests
in the common equity of investment companies, the Fund will bear its ratable share of any such investment company’s expenses,
including management fees. The Fund will also remain obligated to pay management fees to the Investment Adviser with respect to
the assets invested in the securities of other investment companies. In these circumstances holders of the Fund’s common
stock will be subject to duplicative investment expenses.
Counterparty
Risk
The
Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased by the Fund.
If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to
financial difficulties,the Fund may experience significant delays in obtaining any recovery under the derivative contract in
bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in
such circumstances.
Management
Risk
The
Fund is subject to management risk because it is an actively managed portfolio. The Investment Adviser will apply investment techniques
and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will produce the desired
results.
Anti-Takeover
Provisions of the Fund’s Governing Documents
The
Fund’s Governing Documents include provisions that could limit the ability of other entities or persons to acquire control
of the Fund or convert the Fund to an open-end fund.
Status
as a Regulated Investment Company
The
Fund has qualified, and intends to remain qualified, for federal income tax purposes as a regulated investment company under Subchapter
M of the Code. Qualification requires, among other things, compliance by the Fund with certain distribution requirements. Statutory
limitations on distributions on the common stock if the Fund fails to satisfy the 1940 Act’s asset coverage requirements
could jeopardize the Fund’s ability to meet such distribution requirements. The Fund presently intends, however, to purchase
or redeem preferred stock to the extent necessary in order to maintain compliance with such asset coverage requirements.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Economic
Events and Market Risk
Periods
of market volatility remain, and may continue to occur in the future, in response to various political, social and economic events
both within and outside of the United States. These conditions have resulted in, and in many cases continue to result in, greater
price volatility, less liquidity, widening credit spreads and a lack of price transparency, with many securities remaining illiquid
and of uncertain value. Such market conditions may adversely affect the Fund, including by making valuation of some of the Fund’s
securities uncertain and/or result in sudden and significant valuation increases or declines in the Fund’s holdings.
Risks resulting from any future debt or other economic crisis could also have a detrimental impact on the global economy,
the financial condition of financial institutions and our business, financial condition, and results of operation. Market
and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy
rates, levels of incurrence and default on consumer debt and home prices, among other factors. To the extent uncertainty regarding
the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, the Fund’s business,
financial condition, and results of operations could be significantly and adversely affected. Downgrades to the credit ratings
of major banks could result in increased borrowing costs for such banks and negatively affect the broader economy. Moreover,
Federal Reserve policy, including with respect to certain interest rates and the decision to end its quantitative easing policy,
may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. Market volatility,
tariffs, rising interest rates, and/or a return to unfavorable economic conditions could impair the Fund’s ability to
achieve its investment objective.
There is an outbreak of a highly contagious form of a novel coronavirus known as “COVID-19.” COVID-19 has been
declared a pandemic by the World Health Organization and, in response to the outbreak, the U.S. Health and Human Services
Secretary has declared a public health emergency in the United States. COVID-19 had a devastating impact on the global economy,
including the U.S. economy, and resulted in a global economic recession. Many states issued orders requiring the closure of
non-essential businesses and/or requiring residents to stay at home. The COVID-19 pandemic and preventative measures taken
to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and
travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions,
supply chain interruptions and overall economic and financial market instability both globally and in the United States. Such
effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. While several
countries, as well as certain states, counties, and cities in the United States, began to relax the early public health restrictions
with a view to partially or fully reopening their economies, many cities, both globally and in the United States, continue
to experience, from time to time, surges in the reported number of cases and hospitalizations related to the COVID-19 pandemic.
Increases in cases can and has led to the re-introduction of restrictions and business shutdowns in certain states, counties,
and cities in the United States and globally and could continue to lead to the re-introduction of such restrictions elsewhere.
Additionally, vaccines produced by Moderna and Johnson & Johnson are currently authorized for emergency use, and in August
2021, the U.S. Food and Drug Administration (“FDA”) granted full approval to the vaccines produced by Pfizer-BioNTech,
which will now be marketed as Comirnaty. However, it remains unclear how quickly the vaccines will be distributed nationwide
and globally or when “herd immunity” will be achieved and the restrictions that were imposed to slow the spread
of the virus will be lifted entirely. The delay in distributing
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
the vaccines could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a
prolonged period of time. Even after the COVID-19 pandemic subsides, the U.S. economy and most other major global economies
may continue to experience a substantial economic downturn or recession, and our business and operations, as well as the business
and operations of our portfolio companies, could be materially adversely affected by a prolonged economic downturn or recession
in the United States and other major markets. Despite actions of the U.S. federal government and foreign governments, the
uncertainty surrounding the COVID-19 pandemic and other factors has contributed to significant volatility and declines in
the global public equity markets and global debt capital markets, including the net asset value of the Fund’s shares.
These events could have, and/or have had, a significant impact on the Fund’s performance, net asset value, income, operating
results and ability to pay distributions, as well as the performance, income, operating results and viability of issuers in
which it invests. It is virtually impossible to determine the ultimate impact of COVID-19 at this time. Further, the extent
and strength of any economic recovery after the COVID-19 pandemic abates, including following any “second wave,”
“third wave” or other intensifying of the pandemic, is uncertain and subject to various factors and conditions.
Accordingly, an investment in the Fund is subject to an elevated degree of risk as compared to other market environments.
Regulation
and Government Intervention Risk
Global economies and financial markets are increasingly interconnected, which increases the possibility that conditions in
one country or region may adversely affect companies in a different country or region. The global financial crisis has led
governments and regulators around the world to take a number of unprecedented actions designed to support certain financial
institutions and segments of the financial markets that experienced extreme volatility, and in some cases a lack of liquidity.
Governments, their regulatory agencies, or self-regulatory organizations may take actions that the regulation of the issuers
in which the Fund invests. Legislation or regulation may also change the way in which the Fund itself is regulated. Such legislation
or regulation could limit or preclude the Fund’s ability to achieve its investment objective.
Governments
or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions.
The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or
negative effects on the liquidity, valuation and performance of the Fund’s portfolio holdings. Furthermore, volatile financial
markets can expose the Fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held
by the Fund.
The
SEC and its staff have been engaged in various initiatives and reviews that seek to improve and modernize the regulatory structure
governing investment companies. These efforts have been focused on risk identification and controls in various areas, including
imbedded leverage through the use of derivatives and other trading practices, cyber-security, liquidity, enhanced regulatory and
public reporting requirements and the evaluation of systemic risks. Any new rules, guidance or regulatory initiatives resulting
from these efforts could increase the Fund’s expenses and impact its returns to stockholders or, in the extreme case, impact
or limit its use of various portfolio management strategies or techniques and adversely impact the Fund.
In
particular, the U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on the Funds
and on the mutual fund industry in general. The SEC’s final rules and amendments that modernize reporting and disclosure
and required the implementation of a liquidity risk management program,
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
along with other potential upcoming regulations, could, among other things, restrict the Funds’ ability to engage in
transactions, impact flows into the Funds, and/or increase overall expenses of the Funds. The Board designated and approved
a liquidity committee (Liquidity Committee) to administer the Funds’ liquidity risk management program and related procedures,
various aspects of which went into effect in December 2018 and June 2019.
The
regulation of the derivatives markets has increased over the past several years, and additional future regulation of the derivatives
markets may make derivatives more costly, may limit the availability or reduce the liquidity of derivatives or may otherwise adversely
affect the value or performance of derivatives. For instance, in October 2020, the SEC adopted Rule 18f-4 under the 1940 Act providing
for the regulation of a registered investment company’s use of derivatives, short sales, reverse repurchase agreements,
and certain other instruments. Under Rule 18f-4, a fund’s derivatives exposure is limited through a value-at-risk test and
requires the adoption and implementation of a derivatives risk management program for certain derivatives users. However, subject
to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users (as definedin Rule
18f-4) and would not be subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC
also eliminated the asset segregation and cover framework arising from prior SEC guidance for covering derivatives and certain
financial instruments, as discussed herein, effective at the time that the Fund complies with Rule 18f-4. Rule 18f-4 could limit
the Fund’s ability to engage in certain derivatives and other transactions and/or increase the costs of such transactions,
which could adversely affect the value or performance of the Fund. Compliance with Rule 18f-4 will be required in August 2022.
In
response to the current economic environment, the Biden administration may call for an increased popular, political and
judicial focus on finance related consumer protection. Financial institution practices are also subject to greater scrutiny
and criticism generally. In the case of transactions between financial institutions and the general public, there may be a
greater tendency toward strict interpretation of terms and legal rights in favor of the consuming public, particularly where
there is a real or perceived disparity in risk allocation and/or where consumers are perceived as not having had an
opportunity to exercise informed consent to the transaction. In the event of conflicting between retail investors holding
shares of an open-end investment company such as the Funds and a large financial institution, a court may similarly seek to
strictly interpret terms and legal rights in favor of retail investors.
Following
the November 3, 2020 U.S. elections and subsequent U.S. Senate runoff elections in Georgia, the Democratic Party controls the
executive and legislative branches of government. Changes in federal policy, including tax policies, and at regulatory agencies
occur over time through policy and personnel changes following elections, which lead to changes involving the level of oversight
and focus on the financial services industry or the tax rates paid by corporate entities. The nature, timing and economic and
political effects of potential changes to the current legal and regulatory framework affecting markets remain highly uncertain.
Uncertainty surrounding future changes may adversely affect the Fund’s operating environment and therefore its investment
performance.
In
addition, the tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Act”) made substantial
changes to the Code. Among those changes were significant permanent reduction in the generally applicable corporate tax rate,
changes in the taxation of individuals and other non-corporate taxpayers that generally but not universally reduce their
taxes on a temporary basis subject to “sunset” provisions, the elimination or modification of various previously
allowed deductions (including substantial limitations on the deductibility of
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
interest
and, in the case of individuals, the deduction for personal state and local taxes), certain additional limitations on
the deduction of net operating losses, certain preferential rates of taxation on certain dividends and certain business
income derived by non-corporate taxpayers in comparison to other ordinary income recognized by such taxpayers,and significant
changes to the international tax rules. The effect of these, and the many other changes made in the Act is subject to
developing guidance and its full effects may be highly uncertain, both in terms of their direct effect on the taxation of an
investment in the Fund’s shares and their indirect effect on the value of the Fund’s assets, the Fund’s
shares or market conditions generally. Furthermore, many of the provisions of the Act will require guidance through the
issuance of Treasury regulations in order to assess their effect. There may be a substantial delay before such Treasury
regulations are promulgated, increasing the uncertainty as to the ultimate effect of the statutory amendments on the Fund. It
is also likely that there will be technical corrections legislation proposed with respect to the Act, the effect of which
cannot be predicted and may be adverse to the Fund or the Fund’s shareholders.
The
Fund may be affected by governmental action in ways that are not foreseeable, and there is a possibility that such actions could
have a significant adverse effect on the Fund and its ability to achieve its investment objectives.
Special
Risks Related to Cybersecurity
The Fund and its service providers are susceptible to cybersecurity risks that include, among other things, theft, unauthorized
monitoring, release, misuse, loss, destruction, or corruption of confidential and highly restricted data; denial of service
attacks; unauthorized access to relevant systems, compromises to networks or devices that the Fund and its service providers
use to service the Fund’s operations; or operational disruption or failures in the physical infrastructure or operating
systems that support the Fund and its service providers. Cyberattacks against or security breakdowns of the Fund or its service
providers may adversely impact the Fund and its shareholders, potentially resulting in, among other things, financial losses;
the inability of Fund shareholders to transact business and the Fund to process transactions; inability to calculate the Fund’s
NAV; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage, reimbursement, or
other compensation costs; and/or additional compliance costs. The Fund may incur additional costs for cyber security risk
management and remediation purposes. In addition, cybersecurity risks may also impact issuers of securities in which the Fund
invests, which may cause the Fund’s investment in such issuers to lose value. There can be no assurance that the Fund
or its service providers will not suffer losses relating to cyberattacks or other information security breaches in the future.
HOW
THE FUND MANAGES RISK
Investment Restrictions
The
Fund has adopted certain investment limitations designed to limit investment risk and maintain portfolio diversification. These
limitations are fundamental and may not be changed without the approval of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of common stock and preferred stock voting together as a single class. The Fund may become subject to
guidelines that are more limiting than the investment restrictions set forth above in order to obtain and maintain ratings from
Moody’s or Fitch Ratings (“Fitch”) on its preferred stock.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
Interest
Rate Transactions
The
Fund may enter into interest rate swap or cap transactions in relation to all or a portion of any series of auction rate preferred
stock in order to manage the impact on its portfolio of changes in the dividend rate of such stock. Through these transactions,
the Fund may, for example, obtain the equivalent of a fixed rate for such auction rate preferred stock that is lower than the
Fund would have to pay if it issued fixed rate preferred stock.
The
use of interest rate swaps and caps is a highly specialized activity that involves investment techniques and risks different
from those associated with ordinary portfolio security transactions. In an interest rate swap, the Fund would agree to pay to
the other party to the interest rate swap (which is known as the “counterparty”) periodically a fixed rate
payment in exchange for the counterparty agreeing to pay to the Fund periodically a variable rate payment that is intended to
approximate the Fund’s variable rate payment obligation on its auction rate preferred stock. In an interest rate cap,
the Fund would pay a premium to the counterparty to the interest rate cap and, to the extent that a specified variable rate
index exceeds a predetermined fixed rate, would receive from the counterparty payments of the difference based on the
notional amount of such cap. Interest rate swap and cap transactions introduce additional risk because the Fund would remain
obligated to pay preferred stock dividends or distributions when due in accordance with the Articles Supplementary of the
relevant series of the auction rate preferred stock even if the counterparty defaulted. Depending on the general state of
short-term interest rates and the returns on the Fund’s portfolio securities at that point in time, such a default
could negatively affect the Fund’s ability to make dividend or distribution payments on the auction rate preferred
stock. In addition, at the time an interest rate swap or cap transaction reaches its scheduled termination date, there is a
risk that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as
favorable as on the expiring transaction. If this occurs, it could have a negative impact on the Fund’s ability to make
dividend or distribution payments on the auction rate preferred stock. To the extent there is a decline in interest rates,
the value of the interest rate swap or cap could decline, resulting in a decline in the asset coverage for the shares
of auction rate preferred stock. A sudden and dramatic decline in interest rates decline may result in in the asset
significant coverage. Under the Articles Supplementary for each series of the preferred stock, if the Fund fails to maintain
the required asset coverage on the outstanding preferred stock or fails to comply with other covenants, the Fund may be
required to redeem some or all of these shares. The Fund generally may redeem any series of auction rate preferred stock, in
whole or in part, at its option at any time (usually on a dividend or distribution payment date), other than during a
non-call period. Such redemption would likely result in the Fund seeking to terminate early all or a portion of any swap or
cap transactions. Early termination of a swap could result in a termination payment by the Fund to the counterparty, while
early termination of a cap could result in a termination payment to the Fund.
The
Fund will usually enter into swaps or caps on a net basis; that is, the two payment streams will be netted out in a cash settlement
on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. The Fund intends to segregate cash or liquid securities having a value at least equal to the value
of the Fund’s net payment obligations under any swap transaction, marked to market daily. The Fund will monitor any such
swap with a view to ensuring that the Fund remains in compliance with all applicable regulatory investment policy and tax requirements.
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
INVESTMENT
RESTRICTIONS
The
Fund operates under the following restrictions that constitute fundamental policies that cannot be changed without the affirmative
vote of the holders of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act). Such a majority
is defined as the lesser of (i) 67% or more of the shares present at a meeting of stockholders, if the holders of 50% of the outstanding
shares of the Fund are present or represented by proxy or (ii) more than 50% of the outstanding shares of the Fund. All percentage
limitations set forth below apply immediately after a purchase or initial investment and any subsequent change in any applicable
percentage resulting from market fluctuations does not require elimination of any security from the portfolio. The Fund may not:
1.
Invest 25% or more of its total assets, taken at market value at the time of each investment, in the securities of issuers in
any particular industry other than the telecommunications, media, publishing, and entertainment industries. This restriction does
not apply to investments in U.S. government securities.
2.
Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization,
if more than 10% of the market value of the total assets of the Fund would be invested in securities of other investment companies,
more than 5% of the market value of the total assets of the Fund would be invested in the securities of any one investment company
or the Fund would own more than 3% of any other investment company’s securities; provided, however, this restriction will
not apply to securities of any investment company organized by the Fund that are to be distributed pro rata as a dividend to its
stockholders.
3.
Purchase or sell commodities or commodity contracts except that the Fund may purchase or sell futures contracts and related options
thereon if immediately thereafter (i) no more than 5% of its total assets are invested in margins and premiums and (ii) the aggregate
market value of its outstanding futures contracts and market value of the currencies and futures contracts subject to outstanding
options written by the Fund do not exceed 50% of the market value of its total assets. The Fund may not purchase or sell real
estate, provided that the Fund may invest in securities secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
4.
Purchase any securities on margin, except that the Fund may obtain such short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities.
5.
Make loans of money, except by the purchase of a portion of publicly distributed debt obligations in which the Fund may invest,
and repurchase agreements with respect to those obligations, consistent with its investment objectives and policies. The Fund
reserves the authority to make loans of its portfolio securities to financial intermediaries in an aggregate amount not exceeding
20% of its total assets. Any such loans will only be made upon approval of, and subject to any conditions imposed by, the Board.
Because these loans would at all times be fully collateralized, the risk of loss in the event of default of the borrower should
be slight.
6.
Borrow money, except that the Fund may borrow from banks and other financial institutions on an unsecured basis, in an amount
not exceeding 10% of its total assets, to finance the repurchase of its shares. The Fund also may borrow money on a secured basis
from banks as a temporary measure for extraordinary or emergency
The
Gabelli Multimedia Trust Inc.
Additional Fund Information (Continued) (Unaudited)
purposes.
Temporary borrowings may not exceed 5% of the value of the total assets of the Fund at the time the loan is made. The Fund may
pledge up to 10% of the lesser of the cost or value of its total assets to secure temporary borrowings. The Fund will not borrow
for investment purposes. Immediately after any borrowing, the Fund will maintain asset coverage of not less than 300% with respect
to all borrowings. While the borrowing of the Fund exceeds 5% of its respective total assets, the Fund will make no further purchases
of securities, although this limitation will not apply to repurchase transactions as described above.
7.
Underwrite securities of other issuers except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, in selling portfolio securities; provided, however, this restriction will not apply to securities of any investment
company organized by the Fund that are to be distributed pro rata as a dividend to its stockholders.
8.
Invest more than 15% of its total assets in illiquid securities, such as repurchase agreements with maturities in excess of seven
days, or securities that at the time of purchase have legal or contractual restrictions on resale.
| 9. | Issue
senior securities, except to the extent permitted by applicable law. |
With
respect to (1) above, the Fund invests 25% or more of its total assets in the securities of issuers in the telecommunications,
media, publishing and entertainment industries.
The
Gabelli Multimedia Trust Inc.
Additional
Fund Information (Continued) (Unaudited)
MANAGEMENT
OF THE FUND