Notes to Financial Statements (Unaudited)
1. Organization. The Gabelli Multimedia Trust Inc. (the Fund) is a non-diversified
closed-end management investment company organized as a Maryland corporation on March 31, 1994 and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The Fund commenced investment operations on November 15, 1994.
The Funds investment objective is long term growth of capital. The Fund will invest at least 80% of its assets, under normal market
conditions, 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 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.
2. Significant Accounting Policies. As an investment company, the Fund follows the investment company accounting and reporting guidance,
which is part of U.S. generally accepted accounting principles (GAAP) that may require the use of management estimates and assumptions in the preparation of its financial statements. Actual results could differ from those estimates. The following is
a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation.
Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a markets
official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on
that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the Board) so determines, by
such other method as the Board shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market,
as determined by Gabelli Funds, LLC (the Adviser).
Portfolio securities primarily traded on a foreign market are generally valued at the
preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market, but prior to the close of
business on the day the securities are being valued. Debt obligations for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the securities
are valued using the closing bid price, unless the Board determines such amount does not reflect the securities fair value, in which case these securities will be fair valued as determined by the Board. Certain securities are valued
principally using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded. OTC futures and options on futures for which market quotations are
readily available will be valued by quotations received from a pricing service or, if no quotations are available from a pricing service, by quotations obtained from one or more dealers in the instrument in question by the Adviser.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation
methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a
comparison of foreign securities with the equivalent U.S.
14
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
dollar value American Depositary Receipt securities at the close of the U.S. exchange; and evaluation of any
other information that could be indicative of the value of the security.
The inputs and valuation techniques used to measure fair value of the Funds
investments are summarized into three levels as described in the hierarchy below:
|
●
|
|
Level 1 quoted prices in active markets for identical securities;
|
|
●
|
|
Level 2 other significant observable inputs (including quoted prices for similar securities, interest
rates, prepayment speeds, credit risk, etc.); and
|
|
●
|
|
Level 3 significant unobservable inputs (including the Boards determinations as to the fair value of
investments).
|
A financial instruments level within the fair value hierarchy is based on the lowest level of any
input both individually and in the aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The
summary of the Funds investments in securities by inputs used to value the Funds investments as of June 30, 2020 is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Inputs
|
|
|
|
|
|
Level 1
Quoted Prices
|
|
|
Level 2 Other Significant
Observable Inputs
|
|
|
Level 3 Significant
Unobservable Inputs(a)
|
|
|
Total Market Value
at 6/30/20
|
INVESTMENTS IN SECURITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS (Market Value):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copyright/Creativity Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer Software and Services
|
|
$
|
27,252,508
|
|
|
|
|
|
|
$
|
200
|
|
|
$
|
27,252,708
|
|
|
|
Publishing
|
|
|
2,537,317
|
|
|
$
|
70,537
|
|
|
|
3,370
|
|
|
|
2,611,224
|
|
|
|
Other Industries (b)
|
|
|
52,235,533
|
|
|
|
|
|
|
|
|
|
|
|
52,235,533
|
|
|
|
Distribution Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcasting
|
|
|
20,244,850
|
|
|
|
17,268
|
|
|
|
|
|
|
|
20,262,118
|
|
|
|
Business Services
|
|
|
4,801,605
|
|
|
|
|
|
|
|
595
|
|
|
|
4,802,200
|
|
|
|
Entertainment
|
|
|
22,725,170
|
|
|
|
119,512
|
|
|
|
|
|
|
|
22,844,682
|
|
|
|
Financial Services
|
|
|
8,464,475
|
|
|
|
|
|
|
|
2,940
|
|
|
|
8,467,415
|
|
|
|
Real Estate
|
|
|
4,515,405
|
|
|
|
|
|
|
|
186
|
|
|
|
4,515,591
|
|
|
|
Wireless Communications
|
|
|
10,432,476
|
|
|
|
|
|
|
|
27,799
|
|
|
|
10,460,275
|
|
|
|
Other Industries (b)
|
|
|
66,008,792
|
|
|
|
|
|
|
|
|
|
|
|
66,008,792
|
|
|
|
|
Total Common Stocks
|
|
|
219,218,131
|
|
|
|
207,317
|
|
|
|
35,090
|
|
|
|
219,460,538
|
|
|
|
|
Closed-End Funds
|
|
|
|
|
|
|
172,000
|
|
|
|
|
|
|
|
172,000
|
|
|
|
Preferred Stocks (b)
|
|
|
144,155
|
|
|
|
|
|
|
|
|
|
|
|
144,155
|
|
|
|
Rights (b)
|
|
|
4,872
|
|
|
|
|
|
|
|
0
|
|
|
|
4,872
|
|
|
|
Warrants (b)
|
|
|
15
|
|
|
|
1,751
|
|
|
|
|
|
|
|
1,766
|
|
|
|
Convertible Corporate Bonds (b)
|
|
|
|
|
|
|
70,336
|
|
|
|
|
|
|
|
70,336
|
|
|
|
U.S. Government Obligations
|
|
|
|
|
|
|
34,205,488
|
|
|
|
|
|
|
|
34,205,488
|
|
|
|
|
TOTAL INVESTMENTS IN SECURITIES ASSETS
|
|
$
|
219,367,173
|
|
|
$
|
34,656,892
|
|
|
$
|
35,090
|
|
|
$
|
254,059,155
|
|
|
|
|
|
(a)
|
Level 3 securities are valued by the last available closing Price/Spin-off and Merger/Acquisition Price
analysis. The inputs for these securities are not readily available and are derived based on the judgment of the Adviser according to procedures approved by the Board of Directors.
|
|
(b)
|
Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings.
|
During the six months ended June 30, 2020, the Fund did not have transfers into or out of Level 3.
15
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
Additional Information to Evaluate Qualitative Information.
General. The Fund uses recognized industry pricing services approved by the Board and unaffiliated with the
Adviser to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity
securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds are ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices
supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a
broker/dealer that trades that security or similar securities.
Fair Valuation. Fair valued securities may be
common or preferred equities, warrants, options, rights, or fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which
current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly
traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in
Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These may include backtesting
the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
Investments in Other
Investment Companies. The Fund may invest, from time to time, in shares of other investment companies (or entities that would be considered investment companies but are excluded from the definition pursuant to certain exceptions under the
1940 Act) (the Acquired Funds) in accordance with the 1940 Act and related rules. Stockholders in the Fund would bear the pro rata portion of the periodic expenses of the Acquired Funds in addition to the Funds expenses. During the six months
ended June 30, 2020, the Funds pro rata portion of the periodic expenses charged by the Acquired Funds was approximately 1 basis point.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments,
and other assets and liabilities are translated into U.S. dollars at current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such
transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations.
Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the
difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase
trade date and subsequent sale trade date is included in realized gain/(loss) on investments.
16
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
Foreign Securities. The Fund may directly purchase securities of foreign issuers.
Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial
information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S.
issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a
portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Restricted Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted.
Restricted securities include securities whose disposition is subject to substantial legal or contractual restrictions. The sale of restricted securities often requires more time and results in higher brokerage charges or dealer discounts and other
selling expenses than the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at
a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity
standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and, accordingly, the Board will monitor their liquidity. For restricted securities the Fund held as of
June 30, 2020, refer to the Schedule of Investments.
Securities Transactions and Investment Income. Securities
transactions are accounted for on the trade date with realized gain/(loss) on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on an accrual basis.
Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities
that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
Distributions to Stockholders. Distributions to common stockholders are recorded on the
ex-dividend date. The characterization of distributions to stockholders is based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and
capital gains as determined under GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences, and differing
characterizations of distributions made by the Fund. Distributions from net investment income for federal income tax purposes include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent
in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. These reclassifications have no impact on the NAV of the Fund.
Distributions to stockholders of the Funds Series C Cumulative Preferred Stock (Series C Preferred), 5.125% Series E Cumulative Preferred
Stock (Series E Preferred) and 5.125% Series G Preferred Stock (Series G Preferred), are accrued on a daily basis and are determined as described in Note 5.
17
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
Under the Funds current distribution policy related to common shares, the Fund declares
and pays quarterly distributions from net investment income, capital gains, and paid-in capital. The actual source of the distribution is determined after the end of the calendar year. Pursuant to this policy,
distributions during the year may be made in excess of required distributions. To the extent such distributions are made from current earnings and profits, they are considered ordinary income or long term capital gains. Distributions sourced from paid-in capital should not be considered the current yield or the total return from an investment in the Fund.
The tax
character of distributions paid during the year ended December 31, 2019 was follows:
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Preferred
|
|
Distributions paid from:
|
|
|
|
|
|
|
|
|
Ordinary income (inclusive of short term capital gains)
|
|
$
|
3,952,388
|
|
|
$
|
732,070
|
|
Long term capital gains
|
|
|
16,673,784
|
|
|
|
3,088,355
|
|
Return of capital
|
|
|
1,128,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions paid
|
|
$
|
21,755,042
|
|
|
$
|
3,820,425
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its
net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
The following
summarizes the tax cost of investments and the related net unrealized appreciation at June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Appreciation
|
|
Gross
Unrealized
Depreciation
|
|
|
Net Unrealized
Appreciation
|
Investments
|
|
$
|
226,602,913
|
|
|
$59,778,217
|
|
$
|
(32,321,975
|
)
|
|
$27,456,242
|
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the
Funds tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority. Income tax and related interest and penalties would be
recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. Except as disclosed above, for the six months ended
June 30, 2020, the Fund did not incur any income tax, interest, or penalties. As of June 30, 2020, the Adviser has reviewed all open tax years and concluded that there was no impact to the Funds net assets or results of operations.
The Funds federal and state tax returns for the prior three fiscal years remain open, subject to examination. On an ongoing basis, the Adviser will monitor the Funds tax positions to determine if adjustments to this conclusion are
necessary
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the
Advisory Agreement) with the Adviser which provides that the Fund will pay the Adviser a fee, computed weekly and paid monthly, equal on an annual basis to 1.00% of the value of the Funds average weekly net assets including the liquidation
value of preferred stock. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Funds portfolio and oversees the administration of all aspects of the Funds business and affairs.
18
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
The Adviser has agreed to reduce the management fee on the incremental assets attributable to
the Series C Preferred Stock if the total return of the NAV of the common shares of the Fund, including distributions and advisory fee subject to reduction, does not exceed the stated dividend rate on each particular series of the Preferred Stock
for the year. For the six months ended June 30, 2020, the Funds total return on the NAV of the common shares did not exceed the stated dividend rate of Series C Preferred Stock. Thus, advisory fees with respect to the liquidation value of
the Preferred Stock were reduced by $1,243.
During the six months ended June 30, 2020, the Fund paid $7,774 in brokerage commissions on
security trades to G.research, LLC, an affiliate of the Adviser.
During the six months ended June 30, 2020, the Fund received credits
from a designated broker who agreed to pay certain Fund operating expenses. The amount of such expenses paid through this directed brokerage arrangement during this period was $1,497.
The cost of calculating the Funds NAV per share is a Fund expense pursuant to the Advisory Agreement. Under the sub-administration agreement with Bank of New York Mellon, the fees paid include the cost of calculating the Funds NAV. The Fund reimburses the Adviser for this service. During the six months ended
June 30, 2020, the Fund accrued $22,500 in accounting fees in the Statement of Operations.
As per the approval of the Board, the Fund
compensates officers of the Fund, who are employed by the Fund and are not employed by the Adviser (although officers may receive incentive based variable compensation from affiliates of the Adviser). During the six months ended June 30, 2020,
the Fund accrued $6,684 in payroll expenses in the Statement of Operations.
The Fund pays each Director who is not considered an affiliated
person an annual retainer of $6,000 plus $500 for each Board meeting attended and each Director is reimbursed by the Fund for any out of pocket expenses incurred in attending meetings. All Board committee members receive $1,000 per meeting attended.
The Audit Committee Chairman receives an annual fee of $3,000, the Nominating Committee Chairman and the Lead Director each receives an annual fee of $2,000. A Director may receive a single meeting fee, allocated among the participating funds, for
participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund.
The Fund engaged in a sale transaction with a fund that has a common investment adviser. This sale transaction complied with Rule 17a-7 under the Act and amounted to $2,531,500.
4. Portfolio Securities. Purchases
and sales of securities during the six months ended June 30, 2020, other than short term securities and U.S. Government obligations, aggregated to $13,495,149 and $23,635,254, respectively.
5. Capital. The Funds Articles of Incorporation permit the Fund to issue 196,750,000 shares of common stock (par
value $0.001). The Board has authorized the repurchase of up to 1,950,000 common shares on the open market when the shares are trading at a discount of 5% or more (or such other percentage as the Board may determine from time to time) from the NAV
of the shares. During the six months ended June 30, 2020 and the year ended December 31, 2019, the Fund did not repurchase any of its common shares.
19
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
Transactions in common stock were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2020
(Unaudited)
|
|
|
Year Ended
December 31,
2019
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Net increase in net assets from common shares issued upon reinvestment of distributions
|
|
|
205,973
|
|
|
$
|
1,126,513
|
|
|
|
280,650
|
|
|
$
|
2,236,670
|
|
The Fund has an effective shelf registration authorizing the offering of an additional $400 million of
common or preferred shares. As of June 30, 2020, the Fund has approximately $300 million available for issuance under the current shelf registration.
The Funds Articles of Incorporation authorize the issuance of up to 3,001,000 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 Funds ability to pay dividends to common stockholders and could lead to sales of portfolio securities at inopportune
times. The income received on the Funds assets may vary in a manner unrelated to the fixed 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 Funds 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 six months ended June 30, 2020, the Fund repurchased 3,300 shares of Series E and 9,799 shares of
Series G Preferred Stock. During the
20
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
year ended December 31, 2019, the Fund did not repurchase or redeem any shares of Series E
or Series G Preferred Stock. During the year ended December 31, 2019, the Fund redeemed and retired all of the remaining shares of Series B Preferred Stock.
On December 20, 2019, the Fund issued 2,000,000 shares of Series G Preferred receiving $48,148,000, after the deduction of estimated offering
expenses of $277,000 and underwriting fees of $1,575,000. The Series G Preferred has an annual dividend rate of 5.125%, is perpetual, noncallable for five years, and has a liquidation preference of $25 per share. Distributions are to be paid
quarterly beginning on March 26, 2020.
The following table summarizes Cumulative Preferred Stock information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
|
|
Issue Date
|
|
|
Authorized
|
|
|
Number of Shares
Outstanding at
06/30/20
|
|
|
Net Proceeds
|
|
|
2020 Dividend
Rate Range
|
|
Dividend
Rate at
06/30/20
|
|
|
Accrued
Dividends at
06/30/20
|
|
C Auction Rate
|
|
|
March 31, 2003
|
|
|
|
1,000
|
|
|
|
10
|
|
|
|
$24,547,465
|
|
|
0.088% to 2.783%
|
|
|
0.175%
|
|
|
|
8
|
|
E 5.125%
|
|
|
September 26, 2017
|
|
|
|
2,000,000
|
|
|
|
1,996,700
|
|
|
|
48,192,240
|
|
|
Fixed Rate
|
|
|
5.125%
|
|
|
|
35,532
|
|
G 5.125%
|
|
|
December 20, 2019
|
|
|
|
2,000,000
|
|
|
|
1,990,201
|
|
|
|
48,148,000
|
|
|
Fixed Rate
|
|
|
5.125%
|
|
|
|
35,416
|
|
The holders of Preferred Stock 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 Stock 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. In addition, the affirmative vote of a majority of the votes entitled to be cast by holders of all outstanding shares of the preferred stock, 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 Funds 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 stock
and a majority (as defined in the 1940 Act) of the Funds outstanding voting securities are required to approve certain other actions, including changes in the Funds investment objectives or fundamental investment policies.
6. Industry Concentration. Because the Fund primarily invests in common stocks and other securities of foreign and domestic
companies in the telecommunications, media, publishing, and entertainment industries, its portfolio may be subject to greater risk and market fluctuations than a portfolio of securities representing a broad range of investments.
7. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Funds maximum
exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds existing contracts and expects the risk of loss to be remote.
8. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring through the date
the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
21
The Gabelli Multimedia Trust Inc.
Notes to Financial Statements (Unaudited) (Continued)
Stockholder
Meeting May 11, 2020 Final Results
The Funds Annual Meeting of Stockholders was held virtually on May 11,
2020. At that meeting, common and preferred stockholders, voting together as a single class, re-elected Frank J. Fahrenkopf, Jr., Werner J. Roeder, Salvatore J. Zizza, and Daniel E. Zucchi as Directors of the
Fund, with 21,874,449 votes, 21,918,008 votes, 21,946,939 votes, and 21,957,616 votes cast in favor of these Directors, and 966,884 votes, 923,325 votes, 894,394 votes, and 883,717 votes withheld for these Directors, respectively.
Mario J. Gabelli, John Birch, Anthony J. Colavita, James P. Conn, Christopher J. Marangi, and Kuni Nakamura continue to serve in their capacities
as Directors of the Fund.
We thank you for your participation and appreciate your continued support.
22
The Gabelli Multimedia Trust Inc.
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
Section 15(c) of the Investment Company Act of 1940, as amended (the 1940 Act), contemplates that the Board of Directors (the Board) of The
Gabelli Multimedia Trust Inc. (the Fund), including a majority of the Directors who have no direct or indirect interest in the investment advisory agreement and are not interested persons of the Fund, as defined in the 1940 Act (the
Independent Board Members), are required to annually review and re-approve the terms of the Funds existing investment advisory agreement and approve any newly proposed terms therein. In this regard, the
Board reviewed and re-approved, during the most recent six month period covered by this report, the Advisory Agreement (the Advisory Agreement) with Gabelli Funds, LLC (the Adviser) for the Fund.
More specifically, at a meeting held on May 12, 2020, the Board, including the Independent Board Members meeting in executive session with
their counsel, considered the factors and reached the conclusions described below relating to the selection of the Adviser and the re-approval of the Advisory Agreement.
1) The nature, extent and quality of services provided by the Adviser.
The Board Members reviewed in detail the nature and extent of the services provided by the Adviser under the Advisory Agreement and the quality of
those services over the past year. The Board Members noted that these services included managing the investment program of the Fund, including the purchase and sale of portfolio securities, as well as the provision of general corporate services. The
Board Members considered that the Adviser also provided, at its expense, office facilities for use by the Fund and supervisory personnel responsible for supervising the performance of administrative, accounting, and related services for the Fund,
including monitoring to assure compliance with stated investment policies and restrictions under the 1940 Act and related securities regulation. The Board Members noted that, in addition to managing the investment program for the Fund, the Adviser
provided certain non-advisory and compliance services, including services for the Funds Rule 38a-1 compliance program.
The Board noted that the Adviser had engaged, at its expense, BNY Mellon to assist it in performing certain of its administrative functions. The
Board Members concluded that the nature and extent of the services provided was reasonable and appropriate in relation to the advisory fee, that the level of services provided by the Adviser, either directly or through BNY Mellon, had not diminished
over the past year, and that the quality of service continued to be high.
The Board Members reviewed the personnel responsible for providing
services to the Fund and concluded, based on their experience and interaction with the Adviser, that (i) the Adviser was able to retain quality personnel, (ii) the Adviser and its agents exhibited a high level of diligence and attention to
detail in carrying out its advisory and administrative responsibilities under the Advisory Agreement, (iii) the Adviser was responsive to requests of the Board, (iv) the scope and depth of the Advisers resources was adequate, and
(v) the Adviser had kept the Board apprised of developments relating to the Fund and the industry in general. The Board Members also focused on the Advisers reputation and long standing relationship with the Fund. The Board Members also
believed that the Adviser had devoted substantial resources and made substantial commitments to address new regulatory compliance requirements applicable to the Fund.
2) The performance of the Fund and the Adviser.
The Board Members reviewed the investment performance of the Fund, on an absolute basis, as compared with its Broadridge peer group of other SEC
registered open-end and closed-end funds. The Board Members
23
The Gabelli Multimedia Trust Inc.
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited) (Continued)
considered the Funds one, three, five, and ten year average annual total return for the periods ended March 31, 2020, but placed
greater emphasis on the Funds longer term performance. The peer group considered by the Board Members was developed by Gabelli and was comprised of other selected closed-end core, growth, and value
equity funds (the Performance Peer Group). The Board Members considered these comparisons helpful in their assessment as to whether the Adviser was obtaining for the Funds stockholders the total return performance that was available in the
marketplace, given the Funds objectives, strategies, limitations, and restrictions. In reviewing the performance of the Fund, the Board Members noted that the Funds performance was below the median for the one year, three year, five
year, and ten year periods. The Board Members concluded that the Funds performance was reasonable in comparison with that of the Performance Peer Group.
In connection with its assessment of the performance of the Adviser, the Board Members considered the Advisers financial condition and
whether it had the resources necessary to continue to carry out its functions under the Advisory Agreement. The Board Members concluded that the Adviser had the financial resources necessary to continue to perform its obligations under the Advisory
Agreement and to continue to provide the high quality services that it has provided to the Fund to date.
3) The cost of the advisory
services and the profits to the Adviser and its affiliates from the relationship with the Fund.
In connection with the Board
Members consideration of the cost of the advisory services and the profits to the Adviser and its affiliates from the relationship with the Fund, the Board Members considered a number of factors. First, the Board Members compared the level of
the advisory fee for the Fund against a comparative Gabelli expense peer group comprised of other selected closed-end core, growth, and value equity funds (Expense Peer Group). The Board Members also
considered comparative non-management fee expenses and comparative total fund expenses of the Fund and the Expense Peer Group. The Board Members considered this information as useful in assessing whether the
Adviser was providing services at a cost that was competitive with other similar funds. In assessing this information, the Board Members considered the comparative contract rates. The Board Members noted that the Funds advisory fee and total
expense ratios were higher than average when compared with those of the Expense Peer Group.
The Board Members also reviewed the fees charged
by the Adviser to provide similar advisory services to other RICs or accounts with similar investment objectives, noting that in some cases the fees charged by the Adviser were the same, or lower, than the fees charged to the Fund.
The Board Members also considered an analysis prepared by the Adviser of the estimated profitability to the Adviser of its relationship with the
Fund and reviewed with the Adviser its cost allocation methodology in connection with its profitability. In this regard, the Board Members reviewed Pro-forma Income Statements of the Adviser for the year ended
December 31, 2019. The Board Members considered one analysis for the Adviser as a whole, and a second analysis for the Adviser with respect to the Fund. With respect to the Fund analysis, the Board Members received an analysis based on the
Funds average net assets during the period as well as a pro-forma analysis of profitability at higher and lower asset levels. The Board Members concluded that the profitability of the Fund to the Adviser
under either analysis was not excessive.
24
The Gabelli Multimedia Trust Inc.
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited) (Continued)
4) The extent to which economies of scale will be realized as the Fund grows and whether fee levels reflect those economies of scale.
With respect to the Board Members consideration of economies of scale, the Board Members discussed whether economies of scale would be
realized by the Fund at higher asset levels. The Board Members also reviewed data from the Expense Peer Group to assess whether the Expense Peer Group funds had advisory fee breakpoints and, if so, at what asset levels. The Board Members also
assessed whether certain of the Advisers costs would increase if asset levels rise. The Board Members noted the Funds current size and concluded that under foreseeable conditions, they were unable to assess at this time whether economies
of scale would be realized by the Fund if it were to experience significant asset growth. In the event there were to be significant asset growth in the Fund, the Board Members determined to reassess whether the advisory fee appropriately took into
account any economies of scale that had been realized as a result of that growth.
5) Other Factors
In addition to the above factors, the Board Members also discussed other benefits received by the Adviser from its management of the Fund. The
Board Members considered that the Adviser does use soft dollars in connection with its management of the Fund.
Based on a consideration of
all these factors in their totality, the Board Members, including all of the Independent Board Members, determined that the Funds advisory fee was fair and reasonable with respect to the quality of services provided and in light of other
factors described above that the Board deemed relevant. Accordingly, the Board determined to approve the continuation of the Funds Advisory Agreement. The Board Members based their decision on the evaluation of all these factors and did not
consider any one factor as all important or controlling.
25
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLANS
Under the Funds Automatic Dividend Reinvestment Plan and Voluntary Cash Purchase Plan (the Plan), a stockholder
whose shares of common stock are registered in his or her own name will have all distributions reinvested automatically by Computershare Trust Company, N.A. (Computershare), which is an agent under the Plan, unless the stockholder elects
to receive cash. Distributions with respect to shares registered in the name of a broker-dealer or other nominee (that is, in street name) will be reinvested by the broker or nominee in additional shares under the Plan, unless the
service is not provided by the broker or nominee or the stockholder elects to receive distributions in cash. Investors who own shares of common stock registered in street name should consult their broker-dealers for details regarding reinvestment.
All distributions to investors who do not participate in the Plan will be paid by check mailed directly to the record holder by Computershare as dividend-disbursing agent.
Enrollment in the Plan
It is
the policy of The Gabelli Multimedia Trust Inc. (the Fund) to automatically reinvest dividends payable to common stockholders. As a registered stockholder you automatically become a participant in the Funds Automatic
Dividend Reinvestment Plan (the Plan). The Plan authorizes the Fund to credit shares of common stock to participants upon an income dividend or a capital gains distribution regardless of whether the shares are trading at a discount or a
premium to net asset value. All distributions to stockholders whose shares are registered in their own names will be automatically reinvested pursuant to the Plan in additional shares of the Fund. Plan participants may send their stock certificates
to Computershare Trust Company, N.A. (Computershare) to be held in their dividend reinvestment account. Registered stockholders wishing to receive their distributions in cash may submit this request through the Internet, by telephone or
in writing to:
The Gabelli Multimedia Trust Inc.
c/o Computershare
P.O. Box 505000
Louisville, KY 40233-5000
Telephone:
(800) 336-698
Website: www.coputershare.com/investor
Stockholders requesting this cash election must include the stockholders name and address as they appear on the Funds
records. Stockholders with additional questions regarding the Plan or requesting a copy of the terms of the Plan may contact Computershare at the website or telephone number above.
If your shares are held in the name of a broker, bank, or nominee, you should contact such institution. If such institution is
not participating in the Plan, your account will be credited with a cash dividend. In order to participate in the Plan through such institution, it may be necessary for you to have your shares taken out of street name and re-registered in your own name. Once registered in your own name your distributions will be automatically reinvested. Certain brokers participate in the Plan. Stockholders holding shares in street name
at participating institutions will have dividends automatically reinvested. Stockholders wishing a cash dividend at such institution must contact their broker to make this change.
The number of shares of common stock distributed to participants in the Plan in lieu of cash dividends is determined in the
following manner. Under the Plan, whenever the market price of the Funds common stock is equal to or exceeds net asset value at the time shares are valued for purposes of determining the number of shares equivalent to the cash dividends or
capital gains distribution, participants are issued shares of common stock valued at the greater of (i) the net asset value as most recently determined or (ii) 95% of the then current market price of the Funds common stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New York Stock Exchange (NYSE) trading day, the next trading day. If the net asset value of the common stock at the time of valuation exceeds the market price of
the common stock, participants will receive shares from the Fund valued at market price. If the Fund should declare a dividend or capital gains distribution payable only in cash, Computershare will buy shares of common stock in the open market, or
on the NYSE or elsewhere, for the participants accounts, except that Computershare will endeavor to terminate purchases in the open market and cause the Fund to issue shares at net asset value if, following the commencement of such purchases,
the market value of the common stock exceeds the then current net asset value.
The automatic reinvestment of dividends and
capital gains distributions will not relieve participants of any income tax which may be payable on such distributions. A participant in the Plan will be treated for federal income tax purposes as having received, on a dividend payment date, a
dividend or distribution in an amount equal to the cash the participant could have received instead of shares.
Voluntary Cash Purchase Plan
The Voluntary Cash Purchase Plan is yet another vehicle for our stockholders to increase their investment in the Fund. In order
to participate in the Voluntary Cash Purchase Plan, stockholders must have their shares registered in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making additional cash payments to Computershare for
investments in the Funds shares at the then current market price. Stockholders may send an amount from $250 to $10,000. Computershare will use these funds to purchase shares in the open market on or about the 1st and 15th of each month.
Computershare will charge each stockholder who participates $0.75, plus a per share fee (currently $0.02 per share). Per share fees include any applicable brokerage commissions Computershare is required to pay and fees for such purchases are
expected to be less than the usual fees for such transactions. It is suggested that any voluntary cash payments be sent to Computershare, P.O. Box 6006, Carol Stream, IL 60197-6006 such that Computershare receives such payments approximately two
business days before the 1st and 15th of the month. Funds not received at least two business days before the investment date shall be held for investment
26
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLANS
(Continued)
until the next
purchase date. A payment may be withdrawn without charge if notice is received by Computershare at least two business days before such payment is to be invested.
Stockholders wishing to liquidate shares held at Computershare may do so through the Internet, in writing or by telephone to the
above-mentioned website, address or telephone number. Include in your request your name, address, and account number. Computershare will sell such shares through a broker-dealer selected by Computershare within 5 business days of receipt of the
request. The sale price will equal the weighted average price of all shares sold through the Plan on the day of the sale, less applicable fees . Participants should note that Computershare is unable to accept instructions to sell on a specific date
or at a specific price. The cost to liquidate shares is $2.50 per transaction as well as the per share fee (currently $0.10 per share) Per share fees include any applicable brokerage commissions Computershare is required to pay and are expected to
be less than the usual fees for such transactions.
For more information regarding the Automatic Dividend Reinvestment Plan
and Voluntary Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by writing directly to the Fund.
The Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any dividend or
distribution paid subsequent to written notice of the change sent to the members of the Plan at least 30 days before the record date for such dividend or distribution. The Plan also may be amended or terminated by Computershare on at least 30 days
written notice to participants in the Plan.
27
THE GABELLI MULTIMEDIA TRUST INC.
AND YOUR PERSONAL PRIVACY
Who are we?
The Gabelli Multimedia Trust Inc. (the Fund) is a closed-end
management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, which is affiliated with GAMCO Investors, Inc., a publicly held company that has
subsidiaries that provide investment advisory services for a variety of clients.
What kind of non-public information do we collect about you if you become a Fund stockholder?
When you purchase shares of the Fund on the New York Stock Exchange, you have the option of registering directly
with our transfer agent in order, for example, to participate in our dividend reinvestment plan.
|
|
|
Information you give us on your application form. This could include your name, address, telephone number,
social security number, bank account number, and other information.
|
|
|
|
|
Information about your transactions with us. This would include information about the shares that you buy
or sell; it may also include information about whether you sell or exercise rights that we have issued from time to time. If we hire someone else to provide services like a transfer agent we will also have information about the
transactions that you conduct through them.
|
|
What information do we disclose and to whom do we disclose it?
We do not disclose any non-public personal information about our
customers or former customers to anyone other than our affiliates, our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by
the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What do we do to protect your personal information?
We restrict access to non-public personal
information about you to the people who need to know that information in order to provide services to you or the Fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and
procedural safeguards to keep your personal information confidential.
This page was intentionally left blank.
This page was intentionally left blank.
THE GABELLI MULTIMEDIA TRUST INC.
One Corporate Center
Rye, NY
10580-1422
Portfolio Management Team Biographies
Mario J. Gabelli, CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer - Value Portfolios of GAMCO Investors, Inc. that
he founded in 1977, and Chief Investment Officer - Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Executive Chairman of Associated Capital Group, Inc. Mr. Gabelli is a summa cum laude graduate of Fordham
University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.
Christopher J. Marangi joined Gabelli in 2003 as a research analyst. Currently he is a Managing Director and
Co-Chief Investment Officer for GAMCO Investors, Inc.s Value team. In addition, he serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Fund Complex. Mr. Marangi
graduated magna cum laude and Phi Beta Kappa with a BA in Political Economy from Williams College and holds an MBA degree with honors from Columbia Business School.
We have separated the portfolio managers commentary from the financial statements and
investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio managers commentary is unrestricted. Both the commentary and the financial
statements, including the portfolio of investments, will be available on our website at www.gabelli.com.
The Net Asset Value per share
appears in the Publicly Traded Funds column, under the heading Specialized Equity Funds, in Mondays The Wall Street Journal. It is also listed in Barrons Mutual Funds/Closed End Funds section under the heading
Specialized Equity Funds.
The Net Asset Value per share may be obtained each day by calling (914)
921-5070 or visiting www.gabelli.com.
The NASDAQ symbol for the Net Asset Value is XGGTX.
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of
1940, as amended, that the Fund may from time to time, purchase its common shares in the open market when the Funds shares are trading at a discount of 5% or more from the net asset value of the shares. The Fund may also, from time to time,
purchase its preferred shares in the open market when the preferred shares are trading at a discount to the liquidation value.
THE GABELLI MULTIMEDIA TRUST INC.
One Corporate Center
Rye, New York 10580-1422
|
t
|
800-GABELLI
(800-422-3554)
|
DIRECTORS
Mario J. Gabelli, CFA
Chairman &
Chief Executive Officer,
GAMCO Investors, Inc.
Executive Chairman,
Associated Capital Group Inc.
John Birch
Partner,
The Cardinal Partners Global
Anthony J. Colavita
President,
Anthony J. Colavita, P.C.
James P. Conn
Former Managing Director &
Chief Investment Officer,
Financial Security Assurance
Holdings Ltd.
Frank J. Fahrenkopf, Jr.
Former President &
Chief Executive Officer,
American Gaming Association
Christopher J. Marangi
Managing Director,
GAMCO Investors, Inc.
Kuni Nakamura
President,
Advanced Polymer, Inc.
Werner J. Roeder
Former Medical Director,
Lawrence Hospital
Salvatore J. Zizza
Chairman,
Zizza & Associates Corp.
Daniel E. Zucchi
President,
Daniel E. Zucchi Associates
OFFICERS
Bruce N. Alpert
President
John C. Ball
Treasurer
Andrea R. Mango
Secretary & Vice President
Richard J. Walz
Chief Compliance Officer
Carter W. Austin
Vice President & Ombudsman
Laurissa M. Martire
Vice President
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
State Street Bank and Trust
Company
COUNSEL
Paul Hastings LLP
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
GGT Q2/2020