Gabelli Multimedia Trust Inc. – ‘N-2/A’ on 5/23/97

As of:  Friday, 5/23/97   ·   Accession #:  950123-97-4638   ·   File #s:  333-25487, 811-08476

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Pre-Effective Amendment to Registration Statement of a Closed-End Investment Company   —   Form N-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-2/A       The Gabelli Global Multimedia Trust Inc.              77    444K 
 2: EX-99.A.2   Articles Supplementary                                45    119K 
 3: EX-99.N     Consent of Price Waterhouse LLP                        1      6K 

N-2/A   —   The Gabelli Global Multimedia Trust Inc.
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1997

                                               SECURITIES ACT FILE NO. 333-25487

                                        INVESTMENT COMPANY ACT FILE NO. 811-8476
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM N-2
------------------------

[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933                     

[X] PRE-EFFECTIVE AMENDMENT NO. 1                                               

[ ] POST-EFFECTIVE AMENDMENT NO.                                                
AND/OR

[X] REGISTRATION STATEMENT UNDER THE INVESTMENT                                 

COMPANY ACT OF 1940 AMENDMENT NO. 2                                       

(CHECK APPROPRIATE BOX OR BOXES)
------------------------

THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
------------------------

ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 422-3554

BRUCE N. ALPERT 
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434

(914) 921-5100

(NAME AND ADDRESS OF AGENT FOR SERVICE) 
------------------------

COPIES TO:

                                                                [Download Table]
                                                                              
 RICHARD T. PRINS, ESQ.     JAMES E. MCKEE, ESQ.      GARY S. SCHPERO, ESQ.   
 SKADDEN, ARPS, SLATE,       THE GABELLI GLOBAL     SIMPSON THACHER & BARTLETT
   MEAGHER & FLOM LLP      MULTIMEDIA TRUST INC.       425 LEXINGTON AVENUE   
    919 THIRD AVENUE        ONE CORPORATE CENTER     NEW YORK, NEW YORK 10017 
NEW YORK, NEW YORK 10022  RYE, NEW YORK 10580-1434        (212) 455-2000      
     (212) 735-3000            (914) 921-5100                                 

------------------------
    APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.                              

If any securities being registered on this form will be offered on a  
delayed or continuous basis in reliance on Rule 415 under the Securities Act of 
1933, as amended, other than securities offered in connection with a dividend   
reinvestment plan, check the following box.  [ ]                                

  It is proposed that this filing will become effective (check appropriate
box)                                                                            

[ ]  When declared effective pursuant to section 8(c).                

If appropriate, check the following box:                              

   [ ] This [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement].           

   [ ]  This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act         
registration statement number of the earlier effective registration statement   
for the same offering is           .                                            

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [X]                                            
------------------------

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

                                                        [Enlarge/Download Table]

============================================================================================================
                                                                               PROPOSED                     
                                                                               MAXIMUM                      
                                                              PROPOSED        AGGREGATE                     
                                           AMOUNT BEING   MAXIMUM OFFERING     OFFERING        AMOUNT OF    
  TITLE OF SECURITIES BEING REGISTERED      REGISTERED    PRICE PER SHARE      PRICE(1)     REGISTRATION FEE
------------------------------------------------------------------------------------------------------------
                                                                                                            
  % Cumulative Preferred Stock.......... 1,200,000 Shares       $25          $30,000,000       $9,091(2)    
============================================================================================================

(1) Estimated solely for the purpose of calculating the registration fee.       

(2) $909.10 previously paid.                                                    

------------------------

  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME     
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING        
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.                                   

================================================================================

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CROSS-REFERENCE SHEET 
PURSUANT TO RULE 481(a) 

                                                        [Enlarge/Download Table]

                    N-2 ITEM NUMBER                        LOCATION IN PART A (CAPTION)           
       ------------------------------------------------------------------------------------------ 
                                                                                                  
PART A                                                                                            
  1.   Outside Front Cover....................... Outside Front Cover Page                        
  2.   Inside Front and Outside Back Cover                                                        
         Page.................................... Outside Front Cover Page; Inside Front Cover    
                                                   Page                                           
  3.   Fee Table and Synopsis.................... Not Applicable                                  
  4.   Financial Highlights...................... Financial Highlights                            
  5.   Plan of Distribution...................... Outside Front Cover Page; Prospectus Summary;   
                                                   Underwriting                                   
  6.   Selling Shareholders...................... Not Applicable                                  
  7.   Use of Proceeds........................... Use of Proceeds; Investment Objectives and      
                                                   Policies                                       
  8.   General Description of the Registrant..... Outside Front Cover Page; Prospectus Summary;   
                                                   The Fund; Investment Objectives and Policies;  
                                                   Other Investments; Special Investment Methods; 
                                                   Risk Factors & Special Considerations;         
                                                   Description of Cumulative Preferred Stock      
  9.   Management................................ Outside Prospectus Summary; Management of the   
                                                   Fund; Custodian, Transfer Agent and            
                                                   Dividend-Disbursing Agent                      
 10.   Capital Stock, Long-Term Debt, and Other                                                   
         Securities.............................. Outside Front Cover Page; Prospectus Summary;   
                                                   Capitalization; Investment Objectives and      
                                                   Policies; Description of Cumulative Preferred  
                                                   Stock; Description of Capital Stock and Other  
                                                   Securities; Taxation                           
 11.   Defaults and Arrears on Senior                                                             
         Securities.............................. Not Applicable                                  
 12.   Legal Proceedings......................... Not Applicable                                  
 13.   Table of Contents of the Statement of                                                      
         Additional Information.................. Table of Contents of the Statement of Additional
                                                   Information                                    

PART B                                           LOCATION IN STATEMENT OF ADDITIONAL INFORMATION  
                                                 ------------------------------------------------ 

 14.   Cover Page................................Outside Front Cover Page                         

 15.   Table of Contents.........................Outside Front Cover Page                         

 16.   General Information and History...........The Fund                                         

 17.   Investment Objectives and Policies........Investment Objectives and Policies; Investment   
                                                  Restrictions                                    

 18.   Management................................Management of the Fund                           

 19.   Control Persons and Principal Holders of                                                   
         Securities..............................Management of the Fund; Beneficial Owner         

 20.   Investment Advisory and Other Services....The Adviser                                      

 21.   Brokerage Allocation and Other                                                             
         Practices...............................Portfolio Transactions                           

 22.   Tax Status................................Taxation                                         

 23.   Financial Statements......................Financial Statements                             

PART C                                                                          

Information required to be included in Part C is set forth under the  
appropriate Item, so numbered, in Part C to this Registration Statement.        

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A 
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
  THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
    SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
   UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.                                                    

SUBJECT TO COMPLETION, DATED MAY 23, 1997 

PROSPECTUS                                                                      

1,200,000 SHARES

THE GABELLI GLOBAL

MULTIMEDIA TRUST INC. 

  % CUMULATIVE PREFERRED STOCK

(LIQUIDATION PREFERENCE $25 PER SHARE)

                                                           [GABELLI GLOBAL LOGO]

------------------------

The   % Cumulative Preferred Stock, liquidation preference $25 per share
(the "Cumulative Preferred Stock"), to be issued by The Gabelli Global          
Multimedia Trust Inc. (the "Fund") will be senior securities of the Fund. Prior 
to this offering, there has been no public market for the Cumulative Preferred  
Stock. The Fund is a closed-end non-diversified management investment company.  
The Fund's primary investment objective is long-term growth of capital,         
primarily through investment in a portfolio of common stock and other securities
of foreign and domestic companies involved in the telecommunications, media,    
publishing and entertainment industries. Income is a secondary objective of the 
Fund. Gabelli Funds, Inc. is the Fund's investment adviser.                     

 Dividends on the Cumulative Preferred Stock offered hereby, at the annual
rate of     % of the liquidation preference of $25 per share, are cumulative    
from the Date of Original Issue thereof and are payable semi-annually on June 26
and December 26 in each year, commencing on December 26, 1997.                  

  During the Fund's last two fiscal years, distributions paid by the Fund on
its Common Stock have consisted of Ordinary Income Dividends (as defined below) 
and Capital Gain Dividends (as defined below), and under current market         
conditions it is expected that dividends paid on the Cumulative Preferred Stock 
similarly will consist of Ordinary Income Dividends and Capital Gain Dividends. 
No assurance can be given, however, as to what percentage, if any, of the       
dividends paid on the Cumulative Preferred Stock will be Capital Gain Dividends.

It is a condition to its issuance that the Cumulative Preferred Stock be
rated 'aaa' by Moody's Investors Service, Inc. ("Moody's"). In connection with  
the receipt of such rating, the composition of the Fund's portfolio must reflect
guidelines established by Moody's and the Fund will be required to maintain a   
minimum discounted asset coverage with respect to the Cumulative Preferred      
Stock. See "Description of Cumulative Preferred Stock -- Rating Agency          
Guidelines."                                                                    

  The Cumulative Preferred Stock is subject to mandatory redemption in whole
or in part by the Fund for cash at a price equal to $25 per share plus          
accumulated but unpaid dividends (whether or not earned or declared) (the       
"Redemption Price") if the Fund fails to maintain either of the minimum asset   
coverages required by Moody's and the Investment Company Act of 1940, as        
amended. Commencing June 1, 2002 and thereafter, the Fund at its option may     
redeem the Cumulative Preferred Stock in whole or in part for cash at a price   
equal to the Redemption Price. Prior to June 1, 2002, the Cumulative Preferred  
Stock will be redeemable, at the option of the Fund, for cash at a price equal  
to the Redemption Price, only to the extent necessary for the Fund to continue  
to qualify for tax treatment as a regulated investment company. See "Description
of Cumulative Preferred Stock -- Redemption."                                   

                                                        (Continued on next page)

APPLICATION HAS BEEN MADE TO LIST THE CUMULATIVE PREFERRED STOCK ON THE NEW YORK
STOCK EXCHANGE (THE "NYSE"). TRADING OF THE CUMULATIVE PREFERRED STOCK ON THE 
NYSE IS EXPECTED TO COMMENCE WITHIN 30 DAYS OF THE DATE OF THIS PROSPECTUS. SEE 
"UNDERWRITING." 

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. 

                                                        [Enlarge/Download Table]

=======================================================================================================
                                         PRICE TO        UNDERWRITING DISCOUNTS        PROCEEDS        
                                         PUBLIC(1)          OR COMMISSIONS(2)         TO FUND(3)       
-------------------------------------------------------------------------------------------------------
                                                                                                       
Per Share                                    $                      $                      $           
-------------------------------------------------------------------------------------------------------
Total(3)                                     $                      $                      $           
=======================================================================================================

(1) Plus accumulated dividends, if any, from the Date of Original Issue.        

(2) The Fund and the Adviser have agreed to indemnify the Underwriters against  
    certain liabilities, including liabilities under the Securities Act of 1933,
as amended.                                                             

(3) Before deducting offering expenses payable by the Fund, estimated at        
$439,000.                                                               

------------------------

The shares of Cumulative Preferred Stock are being offered by the       
Underwriters named herein, subject to prior sale, when, as and if accepted by   
them and subject to certain conditions. It is expected that delivery of the     
shares of Cumulative Preferred Stock will be made in book-entry form through the
facilities of The Depository Trust Company on or about June   , 1997.           

------------------------

SMITH BARNEY INC.                                        GABELLI & COMPANY, INC.

May   , 1997                                                                    

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   This Prospectus sets forth certain information about the Fund an investor
should know before investing and should be retained for future reference.       

  A Statement of Additional Information dated May   , 1997 (the "SAI") has
been filed with the Securities and Exchange Commission and is incorporated by   
reference in this Prospectus. The table of contents of the SAI appears on page  
36 of this Prospectus. A copy of the SAI may be obtained without charge by      
writing to the Fund at its address at One Corporate Center, Rye, New York       
10580-1434 or calling the Fund toll-free at (800) 422-3554.                     

   CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE CUMULATIVE 
PREFERRED STOCK OF THE FUND, INCLUDING THE ENTRY OF STABILIZING BIDS, SYNDICATE 
COVERING TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF   
THESE ACTIVITIES, SEE "UNDERWRITING."                                           

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PROSPECTUS SUMMARY

    The following information is qualified in its entirety by reference to the
more detailed information included elsewhere in this Prospectus and the SAI.    
Capitalized terms not defined in this Summary are defined in the Glossary that  
appears at the end of this Prospectus.                                          

The Fund...................  The Fund has been engaged in business as a         
                              closed-end non-diversified management investment
              company since November 15, 1994.

Investment Objectives......  The Fund's primary investment objective is         
                            long-term growth of capital, primarily through
                           investment in a portfolio of common stock and
                      other securities of foreign and domestic
                           companies involved in the telecommunications,
                             media, publishing and entertainment industries.
                             Income is a secondary objective of the Fund. No
                               assurance can be given that the Fund's investment
                          objectives will be achieved. See "Investment
                              Objectives and Policies." The Fund's outstanding
                          common stock, par value $.001 per share (the
                          "Common Stock"), is listed and traded on the
                               NYSE. As of March 31, 1997, the net assets of the
                    Fund were approximately $91.5 million.

Special Characteristics                                                         
and Risks................  The Fund invests a significant portion of its    
                            assets in companies in the telecommunications,
                            media, publishing and entertainment industries
                              and, as a result, the value of the Fund's shares
                           will be more susceptible to factors affecting
                            those particular types of companies, including
                             government regulation, greater price volatility
                           for the overall market, rapid obsolescence of
                            products and services, intense competition and
                      strong market reactions to technological
                         developments. See "Risk Factors and Special
                Considerations -- Industry Risks."

                         The Fund invests in smaller companies which may
                              benefit from the development of new products and
                           services. These smaller companies may present
                            greater opportunities for capital appreciation
                               and may also involve greater investment risk than
                               large, established issuers. See "Risk Factors and
                           Special Considerations -- Smaller Companies."

                         There is no limitation on the amount of foreign
                      securities in which the Fund may invest.
                              Investing in securities of foreign companies and
                      foreign governments, which generally are
                            denominated in foreign currencies, may involve
                             certain risk and opportunity considerations not
                             typically associated with investing in domestic
                               companies and could cause the Fund to be affected
                             favorably or unfavorably by changes in currency
                               exchange rates and revaluation of currencies. See
                      "Risk Factors and Special Considerations
       -- Foreign Securities."

                             The market price for the Cumulative Preferred Stock
                              will be influenced by changes in interest rates,
                            the perceived credit quality of the Cumulative
                             Preferred Stock and other factors. As indicated
                              above, the Cumulative Preferred Stock is subject
                          to redemption under specified circumstances.
                           Subject to such circumstances, the Cumulative
                             Preferred Stock is perpetual. The credit rating
                        on the Cumulative Preferred Stock could be
                          reduced or withdrawn while an investor holds
                              shares, and the credit rating does not eliminate
                       or mitigate the risks of investing in the
                        Cumulative Preferred Stock. A reduction or
                               withdrawal of the credit rating would likely have
                          an adverse effect on the market value of the
                        Cumulative Preferred Stock. The Cumulative

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                               Preferred Stock is not an obligation of the Fund.
                            Although unlikely, precipitous declines in the
                            value of the Fund's assets could result in the
                              Fund having insufficient assets to redeem all of
                         the Cumulative Preferred Stock for the full
Redemption Price. 

                            The Fund may also purchase or sell options, engage
                              in transactions in financial futures and options
                             thereon, engage in short sales of securities it
                          owns or has the right to acquire, enter into
                       repurchase agreements and forward foreign
                             currency exchange contracts, lend its portfolio
                        securities to securities broker-dealers or
                         financial institutions and borrow money for
                               short-term credits from banks as may be necessary
                        for temporary or emergency purposes. These
                       techniques may involve special risks. See
           "Special Investment Methods."

The Offering...............  The Fund is offering 1,200,000 shares of   %       
                             Cumulative Preferred Stock, par value $.001 per
                              share, liquidation preference $25 per share (the
                          "Cumulative Preferred Stock"), at a purchase
                      price of $25 per share (the "Offering").

Dividends..................  Dividends on the Cumulative Preferred Stock, at the
                               annual rate of   % of the liquidation preference,
                            are cumulative from the Date of Original Issue
                              and are payable, when, as and if declared by the
                          Board of Directors of the Fund, out of funds
                               legally available therefor, semi-annually on June
                         26 and December 26 in each year, commencing
                          December 26, 1997. The Fund may from time to
                       time, at its option, pay dividends on the
                             Cumulative Preferred Stock on a quarterly basis
                            at the annual rate of   %. See "Description of
                       Cumulative Preferred Stock -- Dividends."

Potential Tax Benefit to                                                        
 Certain Investors........  The Fund intends to allocate net capital gain (the
                               excess of its net long-term capital gain over its
                             net short-term capital loss) income, as well as
                          other types of income, proportionately among
                             holders of shares of Common Stock and shares of
                               Cumulative Preferred Stock in accordance with the
                              current position of the Internal Revenue Service
                            (the "IRS"). During the Fund's last two fiscal
                        years, distributions paid by the Fund have
                               consisted of dividends paid out of the Fund's net
                             investment income which includes net short-term
                            capital gain ("Ordinary Income Dividends") and
                               dividends paid out of the Fund's net capital gain
                           ("Capital Gain Dividends") and it is expected
                            that under current market conditions dividends
                         paid on the Cumulative Preferred Stock will
                      likewise consist of both Ordinary Income
                   Dividends and Capital Gain Dividends.
                              Accordingly, certain investors in the Cumulative
                              Preferred Stock may realize a tax benefit to the
                             extent that dividends paid by the Fund on those
                          shares are Capital Gain Dividends since such
                           dividends are taxed at long-term capital gain
                             rates. See "-- Ordinary Income Equivalent Yield
                        Tables." Subject to statutory limitations,
                          investors may also be entitled to offset the
                              portion of a Cumulative Preferred Stock dividend
                           which is a Capital Gain Dividend with capital
                    losses incurred by such investors. See
                             "Taxation." No assurance can be given, however,
               as to what percentage, if any, of

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                            the dividends paid on the Cumulative Preferred
                          Stock will be Capital Gain Dividends. To the
                               extent that dividends on the shares of Cumulative
                             Preferred Stock are not Capital Gain Dividends,
                             they will be Ordinary Income Dividends and will
                               be taxed at ordinary rates or treated as a return
of capital.       

Rating.....................  It is a condition to issuance that the Cumulative  
                              Preferred Stock be issued with a rating of 'aaa'
                               from Moody's. The Articles Supplementary creating
                          and fixing the rights and preferences of the
                       Cumulative Preferred Stock (the "Articles
                              Supplementary") contain certain provisions which
                            reflect guidelines established by Moody's (the
                            "Rating Agency Guidelines") in order to obtain
                              such rating on the Cumulative Preferred Stock on
                             the Date of Original Issue. See "Description of
                         Cumulative Preferred Stock -- Rating Agency
Guidelines."      

Asset Coverage.............  In order to maintain the 'aaa' rating on the       
                          Cumulative Preferred Stock, the Fund will be
                               required to maintain Adjusted Assets greater than
                         or equal to the Basic Maintenance Amount in
                             accordance with discount factors and guidelines
                           established by Moody's. In addition, the Fund
                         will be required to maintain as of the last
                             Business Day of each March, June, September and
                            December of each year, an asset coverage of at
                               least 200% (or such higher or lower percentage as
                             may be required at the time under the 1940 Act)
                               with respect to all outstanding senior securities
                        of the Fund which are stock, including the
                             Cumulative Preferred Stock. See "Description of
                         Cumulative Preferred Stock -- Rating Agency
Guidelines."      

Voting Rights..............  At all times, holders of shares of Cumulative      
                           Preferred Stock or any other Preferred Stock,
                           voting as a single class, will be entitled to
                      elect two members of the Fund's Board of
                            Directors, and holders of Cumulative Preferred
                         Stock, any other Preferred Stock and Common
                             Stock, voting as a single class, will elect the
                             remaining directors. However, upon a failure by
                         the Fund to pay dividends on the Cumulative
                             Preferred Stock or any other Preferred Stock in
                           an amount equal to two full years' dividends,
                           holders of Cumulative Preferred Stock and any
                            other Preferred Stock of the Fund, voting as a
                            single class, will have the right to elect the
                     smallest number of directors that would
                              constitute a majority of the directors until all
                             cumulative dividends have been paid or provided
                            for. Holders of Cumulative Preferred Stock and
                               any other Preferred Stock will vote separately as
                           a class on certain other matters, as required
                            under the Articles Supplementary, the 1940 Act
                             and Maryland law. Except as otherwise indicated
                             in this Prospectus and as otherwise required by
                             applicable law, holders of Cumulative Preferred
                             Stock will be entitled to one vote per share on
                             each matter submitted to a vote of shareholders
                              and will vote together with holders of shares of
                             Common Stock and any other Preferred Stock as a
                          single class. See "Description of Cumulative
                Preferred Stock -- Voting Rights."

Mandatory Redemption.......  The Cumulative Preferred Stock is subject to       
                             mandatory redemption in whole or in part by the
                               Fund in the event that the Fund fails to maintain
                          Adjusted Assets equal to or greater than the
                           Basic Maintenance Amount or fails to maintain
                              Asset Coverage and does not cure such failure by
                           the applicable cure date. Any such redemption
                               will be made for cash at a price equal to $25 per
        share plus accumulated and

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                        unpaid dividends (whether or not earned or
                               declared) to the redemption date (the "Redemption
                            Price"). The Fund may, but is not required to,
                     redeem a sufficient number of shares of
                         Cumulative Preferred Stock so that Adjusted
                           Assets of the remaining outstanding shares of
                      Cumulative Preferred Stock and any other
                            Preferred Stock after redemption is as high as
                          110% of the Basic Maintenance Amount and the
                            asset coverage, as defined in the 1940 Act, of
                            the remaining outstanding shares of Cumulative
                              Preferred Stock and any other Preferred Stock is
                             as high as 220%. See "Description of Cumulative
                        Preferred Stock -- Redemption -- Mandatory
Redemption."      

Optional Redemption........  Commencing June 1, 2002 and thereafter, the Fund at
                            its option may redeem the Cumulative Preferred
                             Stock, in whole or in part, for cash at a price
                               per share equal to the Redemption Price. Prior to
                               June 1, 2002, the Cumulative Preferred Stock will
                            be redeemable at the option of the Fund at the
                               Redemption Price only to the extent necessary for
                               the Fund to continue to qualify for tax treatment
                    as a regulated investment company. See
                  "Description of Cumulative Preferred
                          Stock -- Redemption -- Optional Redemption."

Liquidation Preference.....  The liquidation preference of each share of        
                              Cumulative Preferred Stock is $25 plus an amount
                       equal to accumulated and unpaid dividends
                             (whether or not earned or declared) to the date
                             of distribution. See "Description of Cumulative
                     Preferred Stock -- Liquidation Rights."

Use of Proceeds............  The Fund will use the net proceeds from the        
                       Offering to purchase additional portfolio
                          securities in accordance with its investment
                             objectives and policies. See "Use of Proceeds."

Listing....................  Prior to the Offering, there has been no public    
                        market for the Cumulative Preferred Stock.
                             Application has been made to list the shares of
                              Cumulative Preferred Stock on the NYSE. However,
                               during an initial period which is not expected to
                               exceed 30 days after the date of this Prospectus,
                               the Cumulative Preferred Stock will not be listed
                             on any securities exchange. During such period,
                             the Underwriters intend to make a market in the
                               Cumulative Preferred Stock; however, they have no
                              obligation to do so. Consequently, an investment
                               in the Cumulative Preferred Stock may be illiquid
 during such period.

Federal Income Tax                                                              
Considerations...........  The Fund has qualified, and intends to remain    
                              qualified, for Federal income tax purposes, as a
                         regulated investment company. 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 the
                           distribution requirements. The Fund presently
                         intends, however, to purchase or redeem the
                      Cumulative Preferred Stock to the extent
                            necessary in order to maintain compliance with
                              such asset coverage requirements. See "Taxation"
                               for a more complete discussion of these and other
                Federal income tax considerations.

Management and Fees........  Gabelli Funds, Inc. serves as the Fund's investment
                            adviser (the "Adviser") and is compensated for
                         its services and its related expenses at an
                              annual rate of 1.00% of the Fund's average daily
                              net assets. This fee is higher than that paid by
               most mutual funds. The Adviser is

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                            responsible for administration of the Fund and
                             currently utilizes and pays the fees of a third
                      party administrator. Notwithstanding the
                              foregoing, the Adviser will waive the portion of
                            its investment advisory fee attributable to an
                       amount of assets of the Fund equal to the
                      aggregate stated value of the Cumulative
                            Preferred Stock for any calendar year in which
                     the total return of the Fund, including
                           distributions and the advisory fee subject to
                             potential waiver, allocable to the Common Stock
                          is less than the stated dividend rate of the
         Cumulative Preferred Stock.

Repurchase of                                                                   
Common Stock, and                                                           
Anti-takeover                                                               
Provisions...............  The Fund is authorized, subject to maintaining   
                       required asset coverage on the Cumulative
                             Preferred Stock, to repurchase its Common Stock
                               on the open market when the shares are trading at
                      a discount of 10% or more (or such other
                      percentage as its Board of Directors may
                               determine from time to time) from their net asset
                           value. In addition, certain provisions of the
                              Fund's Articles of Incorporation (the "Charter")
                            and By-Laws may be regarded as "anti-takeover"
                            provisions. Pursuant to these provisions, only
                               one of three classes of directors is elected each
                              year, and the affirmative vote of the holders of
                             66 2/3% of the outstanding shares of each class
                             of stock of the Fund and a majority (as defined
                               in the 1940 Act) of the shares of Preferred Stock
                             is necessary to authorize the conversion of the
                              Fund from a closed-end to an open-end investment
                           company and an affirmative vote of 66 2/3% of
                            each class of its outstanding voting shares of
                            the Fund may be necessary to authorize certain
                             business transactions with any beneficial owner
                              of more than 5% of the outstanding shares of the
                             Fund. The overall effect of these provisions is
                              to render more difficult the accomplishment of a
                             merger with, or the assumption of control by, a
                              principal shareholder. These provisions may have
                             the effect of depriving Fund shareholders of an
                              opportunity to sell their shares at a premium to
                       the prevailing market price. See "Certain
                     Provisions of the Charter and By-Laws."

Custodian, Transfer and                                                         
Dividend-Disbursing Agent                                                   
and Registrar............  State Street Bank and Trust Company serves as the
                       Fund's custodian and, with respect to the
                         Cumulative Preferred Stock, as transfer and
                            dividend disbursing agent and registrar and as
                               agent to provide notice of redemption and certain
                         voting rights. See "Custodian, Transfer and
                       Dividend-Disbursing Agent and Registrar."

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ORDINARY INCOME EQUIVALENT YIELD TABLES 

  Over the Fund's last two fiscal years, distributions paid by the Fund on
its Common Stock have consisted, on average, of 42% Capital Gain Dividends which
are taxed at long-term capital gain rates, and 58% Ordinary Income Dividends    
which are taxed at ordinary income rates.(1) Cumulative Preferred Stock         
investors who are in a Federal marginal income tax bracket higher than the      
current 28.0% maximum Federal tax rate on long-term capital gain would realize a
tax advantage on their investment to the extent that distributions by the Fund  
to its shareholders continue to be partially composed of the more favorably     
taxed Capital Gain Dividends.                                                   

   The following table shows examples of the pure ordinary income equivalent
yield that would be generated by the indicated dividend rates on the Cumulative 
Preferred Stock, assuming distributions consisting of four different proportions
of Capital Gain Dividends and Ordinary Income Dividends for an investor in the  
39.6% Federal marginal tax bracket and assuming no change in the current maximum
Federal long-term capital gain tax rate of 28.0%.                               

                                                                [Download Table]

   PERCENTAGE OF CUMULATIVE PREFERRED       A CUMULATIVE PREFERRED STOCK    
      STOCK DIVIDENDS COMPOSED OF*                DIVIDEND RATE OF          
----------------------------------------  --------------------------------- 
                                          7.50%         7.75%         8.00% 
  CAPITAL GAIN           ORDINARY INCOME     IS EQUIVALENT TO A ORDINARY    
    DIVIDEND                DIVIDEND               INCOME YIELD OF          
----------------         ---------------  --------------------------------- 
                                                                            
       25%                     75%        7.86%         8.12%          8.38%
       35%                     65%        8.00%         8.27%          8.54%
       45%                     55%        8.15%         8.42%          8.69%
       55%                     45%        8.29%         8.57%          8.85%
       65%                     35%        8.44%         8.72%          9.00%
       75%                     25%        8.58%         8.87%          9.15%

---------------                                                                 

(1)                                                                             

                                                                [Download Table]

    PERCENTAGE COMPOSITION OF COMMON STOCK DISTRIBUTION    
-----------------------------------------------------------
                           CAPITAL             ORDINARY    
YEAR                    GAIN DIVIDEND       INCOME DIVIDEND
----------------------  -------------       ---------------
                                                           
1995..................        7%                  93%      
1996..................       76%                  24%      

* A number of factors could affect the composition of the Fund's distributions  
 to holders of the Cumulative Preferred Stock. Such factors include (i) active
management of the Fund's assets may result in varying proportions of Capital
Gain Dividends, Ordinary Income Dividends and/or return of capital in Fund  
distributions; and (ii) the continued effectiveness of an IRS revenue ruling
requiring the proportionate allocation of Capital Gain Dividends among      
distributions to holders of various classes of capital stock.               

     As illustrated in the table below, the yield advantage of the lower Federal
long-term capital gain tax rate would be diminished for investors in tax        
brackets below the 39.6% rate assumed in the table above, and there would be no 
effect on the yield for an investor in a Federal marginal income tax bracket of 
28.0% or lower. Assuming Cumulative Preferred Stock dividends composed of 40%   
Capital Gain Dividends and 60% Ordinary                                         

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Income Dividends, the following table shows the ordinary income equivalent      
yields that would be generated at the indicated dividend rates for taxpayers in 
the indicated tax brackets.                                                     

                                                                [Download Table]

                                               A CUMULATIVE PREFERRED STOCK     
                                                     DIVIDEND RATE OF           
                                            ----------------------------------- 
                                            7.50%          7.75%          8.00% 
                                            IS EQUIVALENT TO AN ORDINARY INCOME 
1996 FEDERAL TAX BRACKET(1)                               YIELD OF              
------------------------------------------  ----------------------------------- 
                                                                                
39.6%.....................................  8.08%          8.35%           8.61%
36.0%.....................................  7.88%          8.14%           8.40%
31.0%.....................................  7.63%          7.88%           8.14%
28.0%.....................................  7.50%          7.75%           8.00%

---------------                                                                 
(1) Annual taxable income levels corresponding to the 1996 Federal marginal tax 
brackets are as follows:                                                

                                                                [Download Table]
                                                                             
39.6%......   over $263,750 for both single and joint returns                
36.0%......   $121,301-$263,750 for single returns, $147,701-$263,750 for    
              joint returns                                                  
31.0%......   $58,151-$121,300 for single returns, $96,901-$147,700 for joint
              returns                                                        
28.0%......   $24,001-$58,150 for single returns, $40,101-$96,900 for joint  
              returns                                                        

 An investor's marginal tax rate may exceed the rates shown in the above
table due to various factors. Income also may be subject to certain state, local
and foreign taxes. For investors who pay alternative minimum tax, equivalent    
yields may be lower than those shown above. The tax rates shown above do not    
apply to corporate taxpayers.                                                   
------------------------

The tax characteristics of the Fund are described more fully under    
"Taxation." Consult your tax adviser for further details.                       

    The charts above are for illustrative purposes only and cannot be taken as
an indication of an anticipated dividend rate on the Cumulative Preferred Stock 
or of the composition of future distributions by the Fund.                      

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FINANCIAL HIGHLIGHTS

     The selected data set forth below is for shares of Common Stock outstanding
for the periods presented. The financial information was derived from and should
be read in conjunction with the Financial Statements of the Fund incorporated by
reference into this Prospectus and the SAI. The financial information for the   
period ended December 31, 1994 and each of the two years ended December 31, 1996
has been audited by Price Waterhouse LLP, independent accountants, whose        
unqualified report on such financial statements is incorporated by reference    
into this Prospectus and the SAI.                                               

                                                        [Enlarge/Download Table]

                                                                    YEAR ENDED DECEMBER 31,      
                                                                -------------------------------  
                                                                 1996        1995        1994*   
                                                                -------     -------     -------  
                                                                                                 
OPERATING PERFORMANCE:                                                                           
  Net Asset Value, Beginning of Period........................  $  7.81     $  7.51     $  7.50  
                                                                -------     -------     -------  
  Net investment income.......................................     0.01        0.08        0.03  
  Net realized and unrealized gains on securities.............     0.63        0.98        0.03  
                                                                -------     -------     -------  
     TOTAL FROM INVESTMENT OPERATIONS.........................     0.64        1.06        0.06  
                                                                -------     -------     -------  
  Increase/(decrease) in net asset value from Multimedia Trust                                   
     share transactions.......................................     0.02       (0.46)         --  
  Offering expenses charged to capital surplus................       --       (0.05)         --  
                                                                -------     -------     -------  
LESS DISTRIBUTIONS:                                                                              
  Dividends from net investment income........................    (0.01)      (0.08)      (0.03) 
  Distributions from net realized gain on investments.........    (0.36)      (0.17)         --  
  Distributions in excess of net investment income and/or                                        
     net realized gains.......................................    (0.00)(a)   (0.00)(a)   (0.01) 
  Distributions from paid-in capital..........................       --          --       (0.01) 
                                                                -------     -------     -------  
     TOTAL DISTRIBUTIONS......................................    (0.37)      (0.25)      (0.05) 
                                                                -------     -------     -------  
  Net Asset Value, End of Period..............................  $ 8.100     $ 7.810     $ 7.510  
                                                                =======     =======     =======  
  Market Value, End of Period.................................  $ 6.875     $ 6.750     $ 7.375  
                                                                =======     =======     =======  
  Total Net Asset Value Return**..............................     9.40%      14.10%       0.80% 
  Total Investment Return***..................................     7.40%       0.40%      (7.90)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:                                                  
  Net Assets, end of period (in thousands)....................  $91,462     $89,580     $64,606  
  Ratio of Operating Expenses to Average Net Assets...........     1.87%       2.04%       1.74%+
  Ratio of Net Investment Income to Average Net Assets........     0.13%       1.24%       3.15%+
  Portfolio Turnover Rate.....................................    32.10%      86.00%       0.00% 
  Average Commission Rate Paid(b).............................  $0.0367          --          --  

---------------                                                                 
*   The Fund commenced operations on November 15, 1994.                         

**  Based on net asset value per share, adjusted for reinvestment of all        
distributions and 1995 rights offering.                                 

*** Based on market value per share, adjusted for reinvestment of all           
distributions and 1995 rights offering.                                 

+   Annualized.                                                                 

(a) Amount represents less than $0.005 per share.                               

(b) Average commission rate (per share of security) as required by amended SEC  
    disclosure requirements effective for fiscal years beginning after September
1, 1995.                                                                

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USE OF PROCEEDS 

The net proceeds of the offering are estimated at $28,616,000, after  
deduction of the underwriting discounts and estimated offering expenses payable 
by the Fund. The Fund's investment adviser expects to invest such proceeds in   
accordance with the Fund's investment objectives and policies within six months 
after the completion of the offering, depending on market conditions for the    
types of securities in which the Fund principally invests. Pending such         
investment, the proceeds will be held in high quality short-term debt securities
and instruments.                                                                

CAPITALIZATION

The following table sets forth the capitalization of the Fund as of   
December 31, 1996, and as adjusted to give effect to the Offering.              

                                                        [Enlarge/Download Table]

                                                                    ACTUAL      AS ADJUSTED(a)
                                                                  -----------   --------------
                                                                                              
Shareholders' equity:                                                                         
  Preferred Stock, $.001 par value:                                                           
     Authorized 0 shares; as adjusted 2,000,000 shares                                        
      authorized; issued and outstanding 0 shares; as adjusted,                               
      1,200,000 shares of      % Cumulative Preferred Stock                                   
      issued and outstanding..................................... $         0    $ 30,000,000 
  Common Stock, $.001 par value:                                                              
     Authorized 200,000,000 shares; as adjusted 198,000,000                                   
      authorized; issued and outstanding 11,296,548 shares.......      11,297          11,297 
     Additional paid-in capital..................................  81,230,031      79,846,031 
     Distributions in excess of net realized gain on                                          
      investments................................................     (53,535)        (53,535)
     Undistributed net investment income.........................       2,653           2,653 
     Net unrealized appreciation of investments..................  10,271,498      10,271,498 
          Net assets.............................................  91,461,944     120,077,944 
                                                                  -----------   --------------
          Net assets applicable to outstanding Common Stock...... $91,461,944    $ 90,077,944 
                                                                   ==========     =========== 

---------------                                                                 

(a) After deducting underwriting discounts and estimated costs of the Offering  
of $1,384,000.                                                          

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THE FUND

    The Fund, incorporated in Maryland on March 31, 1994, is a non-diversified
closed-end management investment company registered under the 1940 Act. The     
Fund's Common Stock is traded on the NYSE under the symbol "GGT."               

    The Fund had no operations prior to November 15, 1994, other than the sale
of 10,000 shares of Common Stock for $100,000 to The Gabelli Equity Trust Inc.  
On November 15, 1994, The Gabelli Equity Trust Inc. contributed $64,382,764 in  
exchange for 8,587,702 shares of the Fund and immediately thereafter distributed
to its shareholders all the shares it held of the Fund. The Fund's investment   
operations commenced on November 15, 1994.                                      

     The Fund's primary investment objective is long-term growth of capital. The
Fund seeks to achieve its objective by investing primarily in common stock and  
other securities of foreign and domestic companies involved in the              
telecommunications, media, publishing and entertaining industries. Income is the
secondary investment objective of the Fund. Under normal market conditions, the 
Fund will invest at least 65% of its total assets in common stock and other     
securities of companies in the telecommunications, media, publishing and        
entertainment industries.                                                       

INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT OBJECTIVES                                                           

   The Fund's primary investment objective is long-term growth of capital by
investing primarily in the common stock and other securities of foreign and     
domestic companies involved in the telecommunications, media, publishing and    
entertainment industries. Income is the secondary investment objective. The     
investment objectives of long-term growth of capital and income are fundamental 
policies of the Fund. The Fund's policy of concentration in companies in the    
communications industries is also a fundamental policy of the Fund. These       
fundamental policies and the investment limitations described in the SAI under  
the caption "Investment Restrictions" cannot be changed without the approval of 
the holders of a "majority of the Fund's outstanding voting securities". As used
herein, a "majority of the Fund's outstanding voting securities" means (i) 67%  
of the shares of the Fund's voting securities represented at a meeting at which 
more than 50% of the outstanding shares of the Fund's voting securities are     
represented, whether in person or by proxy, or (ii) more than 50% of the        
outstanding shares of the Fund's voting securities. No assurance can be given   
that the Fund's investment objectives will be achieved.                         

  Under normal market conditions, the Fund will invest at least 65% of its
total assets in common stock and other securities of companies in the           
telecommunications, media, publishing and entertainment industries. Such        
multimedia businesses are often involved in emerging technological advances in  
interactive services and products that are accessible to individuals in their   
homes or offices through consumer electronics devices such as telephone,        
televisions, radios and personal computers.                                     

   The telecommunications companies in which the Fund may invest are engaged
in the development, manufacture or sale of communications services or equipment 
throughout the world, including the following products or services: regular     
telephone service; wireless communications services and equipment, including    
cellular telephone, microwave and satellite communications, paging and other    
emerging wireless technologies; equipment and services for both data and voice  
transmission, including computer hardware and software; electronic components   
and communications equipment; video conferencing; electronic mail; local and    
wide area networking, and linkage of data and word processing systems;          
publishing and information systems; video text and teletext; emerging           
technologies combining television, telephone and computer systems; broadcasting,
including television and radio via VHF, UHF, satellite and microwave            
transmission and cable television.                                              

 The entertainment, media and publishing companies in which the Fund may
invest are engaged in providing the following products or services: the         
creation, packaging, distribution and ownership of entertainment programming    
throughout the world including prerecorded music, feature-length motion         
pictures, made-for-TV movies, television series, documentaries, animation, game 
shows, sports programming and news                                              

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programs; live events such as professional sporting events or concerts,         
theatrical exhibitions, television and radio broadcasting via VHF, UHF,         
satellite and microwave transmission, cable television systems and programming, 
broadcast and cable networks, wireless cable television and other emerging      
distribution technologies, home video, interactive and multimedia programming   
including home shopping and multiplayer games; publishing, including newspapers,
magazines and books, advertising agencies and niche advertising mediums such as 
in-store or direct mail, emerging technologies combining television, telephone  
and computer systems, computer hardware and software, and equipment used in the 
creation and distribution of entertainment programming such as that required in 
the provision of broadcast, cable or telecommunications services.               

   Under normal circumstances, the Fund will invest in securities of issuers
located in at least three countries, which may include the United States.       
Investing in securities of foreign issuers, which generally are denominated in  
foreign currencies, may involve certain risk and opportunity considerations not 
typically associated with investing in domestic companies and could cause the   
Fund to be affected favorably or unfavorably by changes in currency exchange    
rates and revaluations of currencies. For a further discussion of the risks     
associated with investing in foreign securities and a description of other risks
inherent in the Fund's investment objectives and policies, see "Risk Factors and
Special Considerations."                                                        

     The 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 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.                                                                  

INVESTMENT METHODOLOGY OF THE FUND                                              

  In selecting securities for the Fund, the Adviser normally will consider
the following factors, among others: (1) the Adviser's own evaluations of the   
private market value, cash flow, earnings per share and other fundamental       
aspects of the underlying assets and business of the company; (2) the potential 
for capital appreciation of the securities; (3) the interest or dividend income 
generated by the securities; (4) the prices of the securities relative to other 
comparable securities; (5) whether the securities are entitled to the benefits  
of call protection or other protective covenants; (6) the existence of any      
anti-dilution protections or guarantees of the security; and (7) the            
diversification of the portfolio of the Fund as to issuers. The Adviser's       
investment philosophy with respect to equity securities seeks to identify assets
that are selling in the public market at a discount to their private market     
value, which the Adviser defines as the value informed purchasers are willing to
pay to acquire assets with similar characteristics. The Adviser also normally   
evaluates the issuers' free cash flow and long-term earnings trends. Finally,   
the Adviser looks for a catalyst, something in the company's industry or        
indigenous to the company or country itself that will surface additional value. 

CERTAIN PRACTICES                                                               

Foreign Securities.  There is no limitation on the amount of foreign  
securities in which the Fund may invest. Among the foreign securities in which  
the Fund may invest are those issued by companies located in developing         
countries, which are countries in the initial stages of their industrialization 
cycles. Investing in the equity and debt markets of developing countries        
involves exposure to economic structures that are generally less diverse and    
less mature, and to political systems that can be expected to have less         
stability, than those of developed countries. The markets of developing         
countries historically have been more volatile than the markets of the more     
mature economies of developed countries, but often have provided higher rates of
return to investors. The Fund may also invest in debt securities of foreign     
governments. See "Risk Factors and Special Considerations -- Foreign            
Securities."                                                                    

  Corporate Reorganizations.  Subject to the Fund's policy of investing at
least 65% of its total assets in companies involved in the telecommunications,  
media, publishing and entertainment industries, the Fund 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 Adviser, there is a reasonable prospect of capital   

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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 the Fund may
sustain a loss. For further information on such investments, see "Other         
Investments" in the SAI.                                                        

  Temporary Investments.  Although under normal market conditions at least
65% of the Fund's total assets will consist of common stock and other securities
of foreign and domestic companies involved in the telecommunications, media,    
publishing and entertainment industries, when a temporary defensive posture is  
believed by the Adviser to be warranted ("temporary defensive periods"), the    
Fund may without limitation hold cash or invest its assets in money market      
instruments and repurchase agreements in respect of those instruments. The Fund 
may also invest up to 10% of the market value of its total assets during        
temporary defensive periods in shares of money market mutual funds that invest  
primarily in U.S. Government Securities and repurchase agreements in respect of 
those securities. The yield on these securities will, as a general matter, tend 
to be lower than the yield on other securities to be purchased by the Fund. For 
a further description of such transactions, see "Investment Objectives and      
Policies -- Investment Practices -- Temporary Investments" in the SAI.          

SPECIAL INVESTMENT METHODS

OPTIONS                                                                         

    On behalf of the Fund, the Adviser may, subject to guidelines of the Board
of Directors, 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 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.                     

    Investments in options may also be limited by the applicable Rating Agency
Guidelines. See "Description of Cumulative Preferred Stock -- Rating Agency     
Guidelines."                                                                    

FUTURES CONTRACTS AND OPTIONS THEREON                                           

    On behalf of the Fund, the Adviser may, subject to guidelines of the Board
of Directors, purchase and sell financial futures contracts and options thereon 
which are traded on a commodities exchange or board of trade                    

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for certain hedging, yield enhancement and risk management purposes, in         
accordance with regulations of the Commodity Futures Trading Commission         
("CFTC"). These futures contracts and related options may be on debt securities,
financial indices, securities indices, U.S. 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.                                                                         

    Under CFTC regulations, the Adviser on behalf of the Fund may purchase and
sell futures contracts and options thereon for bona fide hedging purposes, as   
defined under CFTC regulations, without regard to the percentage of the Fund's  
assets committed to margin and option premiums. The Fund will not enter into    
futures contracts or options on futures contracts unless (i) the aggregate      
initial margins and premiums do not exceed 5% of the fair market value of its   
assets and (ii) the aggregate market value of its outstanding futures contracts 
and the market value of the currencies and futures contracts subject to         
outstanding options written by the Fund, as the case may be, do not exceed 50%  
of the market value of its total assets. In addition, investments in futures    
contracts and related options may be limited by the applicable Rating Agency    
Guidelines. See "Description of Cumulative Preferred Stock -- Rating Agency     
Guidelines."                                                                    

FORWARD CURRENCY EXCHANGE CONTRACTS                                             

  Subject to guidelines of the Board of Directors, 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 will be limited to hedging involving either
specific transactions or portfolio positions, and the amount the Fund may invest
in forward currency contracts is limited to the amount of its aggregate         
investments in foreign currencies. The Fund will only enter into forward        
currency contracts with parties which it believes to be creditworthy.           

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 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 (1)        
dependence on the Adviser's ability to predict correctly movements in the       
direction of interest rates, securities prices and currency markets; (2)        
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; (3) the fact that skills needed to use these strategies are       
different from those needed to select portfolio securities; (4) the possible    
absence of a liquid secondary market for any particular instrument at any time; 
(5) the possible need to defer closing out certain hedged positions to avoid    
adverse tax consequences; (6) 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; and (7) the creditworthiness of         
counterparties. For a further description, see "Risk Factors and Special        
Considerations -- Futures Transactions" and "Risk Factors and Special           
Considerations -- Forward Currency Exchange Contracts."                         

SHORT SALES AGAINST THE BOX                                                     

   The Fund may from time to time make short sales of securities. The market
value of 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. 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 also make short sales                                  

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"against the box" without respect to such limitations. A short sale is "against 
the box" to the extent that the Fund contemporaneously owns or has the right to 
obtain at no added cost securities identical to those sold short. In a short    
sale, the Fund does not immediately deliver the securities sold or receive the  
proceeds from the sale.                                                         

  To secure its obligations to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with its custodian an equal amount 
to the securities sold short or securities convertible into, or exchangeable for
such securities. 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.                  

    The Fund may make a short sale 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, because, among other reasons, it wishes to defer recognition  
of gain or loss for U.S. Federal income tax purposes. Additionally, the Fund may
use short sales in conjunction with the purchase of a Convertible Security when 
it is determined that a Convertible Security can be bought at a small conversion
premium and has a yield advantage relative to the underlying common stock sold  
short.                                                                          

REPURCHASE AGREEMENTS                                                           

The Fund may enter into repurchase agreements involving money market  
instruments with banks, registered broker-dealers and government securities     
dealers approved by the Board of Directors 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 which  
undertakes to repurchase the security at a specified resale price on an agreed  
future date. Repurchase agreements are generally for one business day but may   
have longer durations. The SEC has taken the position that, in economic reality,
a repurchase agreement is a loan by the 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 principal    
risk is that, if the seller defaults, the Fund might suffer a loss to the extent
that the proceeds from the sale of the underlying securities and other          
collateral held by the Fund are less than the repurchase price. In the event of 
a default or bankruptcy by a seller, the Fund will promptly seek to liquidate   
the collateral. The Adviser, acting under the supervision of the Fund's Board of
Directors, will monitor the creditworthiness of the counterparty to the         
repurchase agreements.                                                          

   If the financial institution which 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 
these circumstances, there may be a restriction on the Fund's ability to sell   
the collateral and the Fund would suffer a loss.                                

LOANS OF PORTFOLIO SECURITIES                                                   

To increase income, the Fund may lend its portfolio securities to     
securities broker-dealers or financial institutions if (1) the loan is          
collateralized in accordance with applicable regulatory requirements and (2) no 
loan will cause the value of all loaned securities to exceed 20% of the value of
the Fund's 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 Board of Directors, 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 contra party to the loan        
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 
these                                                                           

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circumstances, there may be a restriction on the Fund's ability to sell the     
collateral and the Fund would suffer a loss. In addition, loans of portfolio    
securities may be limited by the applicable Rating Agency Guidelines. See       
"Description of Cumulative Preferred Stock -- Rating Agency Guidelines."        

LEVERAGING                                                                      

    As provided in the 1940 Act, the Fund may issue debt or preferred stock so
long as the Fund's net assets exceed 300% of the amount of the debt outstanding 
and exceed 200% of the amount of preferred stock outstanding. Such debt or      
preferred stock may be convertible in accordance with SEC staff guidelines which
may permit the Fund to obtain leverage at attractive rates. Leverage entails two
primary risks. The first risk is that the use of leverage magnifies the impact  
on the common shareholders 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. The second    
risk is that the cost of leverage will exceed the return on the securities      
acquired with the proceeds of leverage, thereby diminishing rather than         
enhancing the return to common shareholders. These two risks would generally    
make the Fund's total return to common shareholders more volatile. In addition, 
the Fund may be required to sell investments in order to meet dividend or       
interest payments on the debt or preferred stock when it may be disadvantageous 
to do so.                                                                       

   A decline in net asset value could affect the ability of the Fund to make
common stock dividend payments and such a failure to pay dividends or make      
distributions could result in the Fund ceasing to qualify as a regulated        
investment company under the Internal Revenue Code of 1986, as amended ("the    
Code"). See "Taxation". Finally, if the asset coverage for preferred stock or   
debt securities declines to less than 200% or 300%, respectively (as a result of
market fluctuations or otherwise), the Fund may be required to sell a portion of
its investments to redeem the preferred stock or repay the debt when it may be  
disadvantageous to do so.                                                       

  Further information on the investment objective and policies of the Fund
are set forth in the SAI.                                                       

PORTFOLIO TURNOVER                                                              

    The Fund buys and sells 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. While it is impossible to predict with certainty the portfolio       
turnover, the Adviser expects that the annual turnover rate of the Fund will not
exceed 200%. During the years ended December 31, 1996 and 1995, the portfolio   
turnover of the Fund was 32.1% and 86.0%, respectively.                         

   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. A high portfolio turnover   
rate may make it more difficult to qualify as a regulated investment company,   
since, in order for the Fund to so qualify each taxable year, less than 30% of  
its gross income must be derived from the sale or other disposition of stocks or
securities held for less than three months. See "Taxation" in the SAI for a more
complete discussion of this requirement. The portfolio turnover rate is computed
by dividing the lesser of the amount of the long-term 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).   

OTHER INVESTMENTS                                                               

     The Fund is permitted to invest in illiquid securities, warrants and rights
and other investment companies and to enter into forward commitments for the    
purchase or sale of securities, including on a "when issued" or "delayed        
delivery" basis. See the SAI for a discussion of these investments and          
techniques and the risks associated with them.                                  

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INVESTMENT RESTRICTIONS                                                         

The Fund has adopted various investment restrictions as fundamental   
policies requiring certification, limiting industry concentration, prohibiting  
investing for control purposes and limiting certain other policies as described 
in greater detail in the SAI.                                                   

RISK FACTORS AND SPECIAL CONSIDERATIONS 

   Investors should consider the following special considerations associated
with investing in the Fund.                                                     

PREFERRED STOCK                                                                 

 There are a number of risks associated with an investment in Cumulative
Preferred Stock. The market price for the Cumulative Preferred Stock will be    
influenced by changes in interest rates, the perceived credit quality of the    
Cumulative Preferred Stock and other factors. The Cumulative Preferred Stock is 
subject to redemption under specified circumstances. Subject to such            
circumstances, the Cumulative Preferred Stock is perpetual. The credit rating on
the Cumulative Preferred Stock could be reduced or withdrawn while an investor  
holds shares, and the credit rating does not eliminate or mitigate the risks of 
investing in the Cumulative Preferred Stock. A reduction or withdrawal of the   
credit rating would likely have an adverse effect on the market value of the    
Cumulative Preferred Stock. The Cumulative Preferred Stock is not an obligation 
of the Fund. Although unlikely, precipitous declines in the value of the Fund's 
assets could result in the Fund having insufficient assets to redeem all of the 
Cumulative Preferred Stock for the full Redemption Price.                       

INDUSTRY RISKS                                                                  

     The Fund invests a significant portion of its assets in particular types of
companies, and, as a result, the value of the Fund's shares is more susceptible 
to factors affecting those particular types of companies, including governmental
regulation, a greater price volatility than the overall market, rapid           
obsolescence of products and services, intense competition and strong market    
reactions to technological developments.                                        

Various types of ownership restrictions are imposed by the Federal    
Communications Commission ("FCC") on investments both in mass media companies,  
such as broadcasters and cable operators, as well as in common carrier          
companies, such as the providers of local telephone service and cellular radio. 

   For example, the FCC's broadcast multiple ownership rules, which apply to
the radio and television industries, provide that investment advisers are deemed
to have an "attributable" interest whenever the adviser has the right to        
determine how more than five percent of the issued and outstanding voting stock 
of a broadcast company may be voted. These same broadcast rules prohibit the    
holding of an attributable interest in more than twenty AM and twenty FM radio  
broadcast stations nationally or more than twelve television stations           
nationally. Similar types of restrictions apply in the mass media and common    
carrier industries.                                                             

     The attributable interest that results from the role of the Adviser and its
principals in connection with other funds, managed accounts and companies may   
limit the investments of the Fund in these industries.                          

SMALLER COMPANIES                                                               

    While the Fund intends to focus on the securities of established suppliers
of accepted products and services, the Fund may invest in smaller companies     
which may benefit from the development of new products and services. These      
smaller companies may present greater opportunities for capital appreciation,   
and may also involve greater investment risk than large, established issuers.   
For example, smaller companies may have 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.                  

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LONG-TERM OBJECTIVE                                                             

  The Fund is intended for investors seeking long-term capital growth. The
Fund is not meant to provide a vehicle for those who wish to play short-term    
swings in the stock market. An investment in shares of the Fund should not be   
considered a complete investment program. Each shareholder should take into     
account the investment objectives of the Fund as well as such shareholder'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 the Fund is not limited by the 1940 Act in the proportion 
of its assets that may be invested in the securities of a single issuer. Because
the Fund, as a non-diversified investment company, may invest in the securities 
of individual issuers to a greater degree than a diversified investment company,
an investment in the Fund may, under certain circumstance, present greater risk 
to an investor than an investment in a diversified investment company.          

LOWER RATED SECURITIES                                                          

The Fund may invest up to 10% of its total assets in fixed-income     
securities rated in the lower rating categories of recognized statistical rating
agencies, such as securities rated CCC or lower by Standard & Poor's Ratings    
Services ("S&P") or Caa or lower by Moody's, or non-rated securities of         
comparable quality. These debt securities are predominantly speculative and     
involve major risk exposure to adverse conditions. These securities and         
securities rated BB or lower by S&P and Ba or lower by Moody's are often        
referred to in the financial press as "junk bonds" and may include securities of
issuers in default. "Junk bonds" are considered by the rating agencies to be    
predominantly speculative and may involve major risk exposures such as: (i)     
vulnerability to economic downturns and changes in interest rates; (ii)         
sensitivity to adverse economic changes and corporate developments; (iii)       
redemption or call provisions which may be exercised at inopportune times; (iv) 
difficulty in accurately valuing or disposing of such securities; (v)           
subordination to other debt of the issuer; and (vi) junk bonds are generally    
unsecured.                                                                      

The Fund may invest in securities of issuers in default. The Fund will
invest in securities of issuers in default only when the Adviser believes that  
such issuers will honor their obligations or emerge from bankruptcy protection  
and the value of these securities will appreciate. By investing in securities of
issuers in default, the Fund bears the risk that these issuers will not continue
to honor their obligations or emerge from bankruptcy protection or that the     
value of these securities will not appreciate. Securities rated BBB by S&P or   
Baa by Moody's, in the opinion of the rating agencies, also have speculative    
characteristics.                                                                

For a further description of lower rated securities and the risks     
associated therewith, see "Investment Objectives and Policies -- Investment     
Practices -- Lower Rated Securities" in the SAI.                                

FOREIGN SECURITIES                                                              

 There is no limitation on the amount of foreign securities in which the
Fund may invest. 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 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 which could affect assets of the  
Fund held in foreign countries. Investments in debt securities of foreign       
governments involve additional risks, including that payment by the issuer with 
respect to such securities may depend on                                        

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economic and political conditions, cash flow, availability of foreign exchange  
and other relevant conditions in the country and there may be limited legal     
recourse against the issuer in the event of a default.                          

  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 which 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 which 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 may purchase sponsored American Depository Receipts ("ADRs") or
U.S. denominated securities of foreign issuers which shall not be included in   
this foreign securities limitation. 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.                                                             

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 on price fluctuations, imperfect correlation between the contracts 
and the securities being hedged, losses from investing in futures transactions  
that are potentially unlimited and the segregation requirements for such        
transactions. For a further description, see "Investment Objectives and         
Policies -- Investment Practices" in the SAI.                                   

FORWARD CURRENCY EXCHANGE CONTRACTS                                             

    The use of forward currency contracts may involve certain risks, including
the failure of the counter party to perform its obligations under the contract, 
and that such use may not serve as a complete hedge because of an imperfect     
correlation between movements in the prices of the contracts and the prices of  
the currencies hedged or used for cover. For a further description of such      
investments, see "Investment Objectives and Policies -- Investment Practices" in
the SAI.                                                                        

DEPENDENCE ON KEY PERSONNEL                                                     

The Adviser is dependent upon the expertise of Mr. Mario J. Gabelli in
providing advisory services with respect to the Fund's investments. There is no 
contract of employment between the Adviser and Mr. Gabelli. If the Adviser were 
to lose the services of Mr. Gabelli, its ability to service the Fund could be   
adversely affected. There can be no assurance that a suitable replacement could 
be found for Mr. Gabelli in the event of his death, resignation, retirement or  
inability to act on behalf of the Adviser.                                      

MANAGEMENT OF THE FUND

     The Fund's Board of Directors (who, with its officers, are described in the
SAI) has overall responsibility for the management of the Fund. The Board of    
Directors decides upon matters of general policy and reviews the actions of the 
Adviser and the Administrator (as defined below). Pursuant to an Investment     
Advisory Contract with the Fund, the Adviser, under the supervision of the      
Fund's Board of Directors, provides a continuous investment program for the     
Fund's portfolio; provides investment research and makes and executes           

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recommendations for the purchase and sale of securities; and provides all       
facilities and personnel, including officers required for its administrative    
management and pays the compensation of all officers and directors of the Fund  
who are its affiliates. As compensation for its services and the related        
expenses borne by the Adviser, the Fund pays the Adviser a fee, computed daily  
and payable monthly, equal, on an annual basis, to 1.00% of the Fund's average  
daily net assets, which is higher than that paid by most mutual funds. For the  
fiscal years ended December 31, 1994, 1995 and 1996 the Fund paid a management  
fee of $83,054, $742,302 and $947,427, respectively. Notwithstanding the        
foregoing, the Adviser will waive the portion of its investment advisory fee    
attributable to an amount of assets of the Fund equal to the aggregate stated   
value of the Cumulative Preferred Stock for any calendar year in which the total
return of the Fund, including distributions and the advisory fee subject to     
potential waiver, allocable to common stock is less than the stated dividend    
rate of the Cumulative Preferred Stock.                                         

The Adviser was formed in 1980 and acts as investment adviser to other
closed-end and open-end investment companies with total net assets in excess of 
$4.0 billion as of May 1, 1997. GAMCO Investors, Inc. ("GAMCO"), a subsidiary of
the Adviser, acts as investment adviser for individuals, pension trusts, profit 
sharing trusts and endowments. As of May 1, 1997, GAMCO had aggregate assets in 
excess of $5.1 billion under its management. Mr. Mario J. Gabelli may be deemed 
a "controlling person" of the Adviser on the basis of his ownership of stock of 
the Adviser.                                                                    

 In addition to the fees of the Adviser, the Fund is responsible for the
payment of all its other expenses incurred in the operation of the Fund, which  
include, among other things, expenses for legal and independent accountant's    
services, stock exchange listing fees, expenses relating to the Offering of     
Cumulative Preferred Stock (including rating agency fees), costs of printing    
proxies, stock certificates and shareholder reports, charges of State Street    
Bank and Trust Company ("State Street", the "Custodian," "Transfer Agent" or    
"Dividend - Disbursing Agent"), SEC fees, fees and expenses of unaffiliated     
directors, accounting and printing costs, the Fund's pro rata portion of        
membership fees in trade organizations, fidelity bond coverage for the Fund's   
officers and employees, interest brokerage costs, taxes, expenses of qualifying 
the Fund for sale in various states, expenses of personnel performing           
shareholder servicing functions, litigation and other extraordinary or          
non-recurring expenses and other expenses properly payable by the Fund.         

The Investment Advisory Contract contains provisions relating to the  
selection of securities brokers to effect the portfolio transactions of the     
Fund. Under those provisions, the Adviser may (1) direct Fund portfolio         
brokerage to Gabelli & Company, Inc. or other broker-dealer affiliates of the   
Adviser; and (2) pay commissions to brokers other than Gabelli & Company, Inc.  
which are higher than might be charged by another qualified broker to obtain    
brokerage and/or research services considered by the Adviser to be useful or    
desirable for its investment management of the Fund and/or its other advisory   
accounts or those of any investment adviser affiliated with it. The SAI contains
further information about the Investment Advisory Contract including a more     
complete description of the advisory and expense arrangements, exculpatory and  
brokerage provisions, as well as information on the brokerage practices of the  
Fund.                                                                           

PORTFOLIO MANAGER                                                               

   Mario J. Gabelli serves as Portfolio Manager and is primarily responsible
for the day-to-day management of the Fund. Mr. Gabelli has served as the Fund's 
Portfolio Manager since its inception and has served as Chairman, President and 
Chief Investment Officer of the Adviser since 1980. Because of the diverse      
nature of Mr. Gabelli's resonsibilities, he will devote less than all of his    
time to the day-to-day management at the Fund.                                  

NON-RESIDENT DIRECTORS                                                          

   Karl Otto Pohl, a director of the Fund, resides outside the United States
and all or a significant portion of his assets are located outside the United   
States. He has no authorized agent in the United States to receive service of   
process. As a result, it may not be possible for investors to effect service of 
process within the United States or to enforce against him in United States     
courts judgments predicated upon civil liability provisions of United States    
securities laws. It may also not be possible to enforce against him in foreign  
courts judgments of                                                             

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United States courts or liabilities in original actions predicated upon civil   
liability provisions of the United States securities laws.                      

ADMINISTRATOR                                                                   

 The Adviser has entered into an Administration Contract with First Data
Investor Services ("First Data" or the "Administrator") pursuant to which the   
Administrator provides certain administrative services necessary for the Fund's 
operations which do not include the investment advisory and portfolio management
services provided by the Adviser. For these services and the related expenses   
borne by First Data, the Adviser pays a monthly fee at the annual rate of .10%  
of the first $1.0 billion of the aggregate average net assets of the Fund and   
other Funds advised by the Adviser and administered by First Data and .08% of   
the aggregate average net assets exceeding $1.0 billion and .06% of the         
aggregate average net assets in excess of $1.5 billion and .02% of the aggregate
net assets in excess of $3.0 billion (with a minimum annual fee of $30,000 per  
portfolio), which, together with the services to be rendered, is subject to     
negotiation between the parties. First Data has its principal office at 53 State
Street, Boston MA 02109-2873.                                                   

DIVIDEND AND DISTRIBUTION POLICY

The Fund intends to distribute its net capital gain each year but may 
retain for reinvestment and pay Federal income taxes on its net capital gain, if
any. In the event the Fund's shares of Common Stock are trading at a discount to
their net asset value, the Board of Directors may consider quarterly            
distributions and/or adopting a policy of distributing at least 10% per common  
share of its average net asset value per year. Any such policy would be subject 
to limitations on distribution and on repurchase of common stock of the Fund    
while any preferred stock is outstanding. If, for any calendar year, the total  
distributions by the Fund on its Common Stock and Preferred Stock exceed the sum
of its net investment income and its net capital gain, the excess will generally
be treated as a tax-free return of capital up to the amount of the shareholder's
tax basis in his shares. The amount treated as a tax-free return of capital will
reduce a shareholder's tax basis in his shares, thereby increasing his potential
gain or reducing his potential loss on the sale of his shares. Any amounts      
distributed to a shareholder in excess of the basis in the shares will be       
taxable to the shareholder as capital gain.                                     

   In the event the Fund distributes amounts in excess of the sum of its net
investment income and its net capital gain, such distributions will decrease the
Fund's total assets and, therefore, have the likely effect of increasing the    
Fund's expense ratio. In addition, in order to make such distributions, the Fund
may have to sell a portion of its investment portfolio at a time when           
independent investment judgment might not dictate such action. Such sales, if   
they involve assets held for less than three months, could also adversely affect
the Fund's status as a regulated investment company (a "RIC") since, in order   
for the Fund to so qualify, each taxable year, less than 30% of the Fund's gross
income must be derived from gains realized on the sale or other disposition of  
stocks or securities held for less than three months.                           

   At a special meeting of the Board of Directors on July 3, 1996, the Board
authorized the repurchase of up to 500,000 shares of the Fund's outstanding     
common shares. At the February 26, 1997 meeting of the Board of Directors, the  
Board voted to increase the authorized shares which may be repurchased to       
750,000 shares. The Fund would typically repurchase its shares in the open      
market when the shares are trading at a discount of 10% or more from the net    
asset value of the shares. Through March 31, 1997, 400,000 shares were          
repurchased in the open market.                                                 

DESCRIPTION OF CUMULATIVE PREFERRED STOCK 

The following is a brief description of the terms of the Cumulative   
Preferred Stock. This description does not purport to be complete and is        
qualified by reference to the Articles Supplementary, the form of which is filed
as an exhibit to the Fund's Registration Statement. Certain of the capitalized  
terms used herein are defined in the Glossary that appears at the end of this   
Prospectus.                                                                     

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GENERAL                                                                         

   Under the Articles Supplementary, the Fund will be authorized to issue up
to 1,200,000 shares of Cumulative Preferred Stock. No fractional shares of      
Cumulative Preferred Stock will be issued. As of the date of this Prospectus,   
there were no shares of Cumulative Preferred Stock or any other Preferred Stock 
of the Fund outstanding. The Board of Directors reserves the right to issue     
additional shares of Preferred Stock, including Cumulative Preferred Stock, from
time to time, subject to the restrictions in the Articles Supplementary and the 
1940 Act. The shares of Cumulative Preferred Stock will, upon issuance, be fully
paid and nonassessable and will have no preemptive, exchange or conversion      
rights. Any shares of Cumulative Preferred Stock repurchased or redeemed by the 
Fund will be classified as authorized but unissued Preferred Stock. The Board of
Directors may by resolution classify or reclassify any authorized but unissued  
Preferred Stock from time to time by setting or changing the preferences,       
rights, voting powers, restrictions, limitations or terms of redemption. The    
Fund will not issue any class of stock senior to the shares of Cumulative       
Preferred Stock.                                                                

RATING AGENCY GUIDELINES                                                        

     Moody's has established guidelines in connection with the Fund's receipt of
a rating for the Cumulative Preferred Stock on the date of original issue of    
'aaa' by Moody's. Moody's, a nationally-recognized securities rating            
organization, issues ratings for various securities reflecting the perceived    
creditworthiness of such securities. The guidelines utilized for the Cumulative 
Preferred Stock have been developed by Moody's in connection with issuances of  
asset-backed and similar securities, including debt obligations and various     
types of preferred stocks, generally on a case-by-case basis through discussions
with the issuers of these securities. The guidelines are designed to ensure that
assets underlying outstanding debt or preferred stock will be sufficiently      
varied and will be of sufficient quality and amount to justify investment-grade 
ratings. The guidelines do not have the force of law but are being adopted by   
the Fund in order to satisfy current requirements necessary for Moody's to issue
the above-described rating for the Cumulative Preferred Stock, which rating is  
generally relied upon by investors in purchasing such securities. The guidelines
provide a set of tests for portfolio composition and discounted asset coverage  
that supplement (and in some cases are more restrictive than) the applicable    
requirements of Section 18 of the 1940 Act. Moody's guidelines are included in  
the Articles Supplementary and are referred to in this Prospectus as the "Rating
Agency Guidelines."                                                             

     The Rating Agency Guidelines require that the Fund maintain Adjusted Assets
greater than or equal to the Basic Maintenance Amount. If the Fund fails to meet
such requirement and such failure is not cured by the applicable cure date, the 
Fund will be required to redeem some or all of the Cumulative Preferred Stock.  
See "Description of Cumulative Preferred Stock -- Redemption -- Mandatory       
Redemption." The Rating Agency Guidelines also exclude from the Moody's Eligible
Assets and, therefore, from Adjusted Assets, certain types of securities in     
which the Fund may invest and also may limit the Fund's acquisition of futures  
contracts or options on futures contracts, may limit reverse repurchase         
agreements, may limit the writing of options on portfolio securities and may    
limit the lending of portfolio securities to 5% of the Fund's total assets. The 
Adviser does not believe that compliance with the Rating Agency Guidelines will 
have an adverse effect on its management of the Fund's portfolio or on the      
achievement of the Fund's investment objectives. It is the Fund's present       
intention to continue to comply with the Rating Agency Guidelines.              

     The Fund may, but is not required to, adopt any modifications to the Rating
Agency Guidelines that may hereafter be established by Moody's. Failure to adopt
such modifications, however, may result in a change in Moody's rating or a      
withdrawal of a rating altogether. In addition, Moody's may, at any time, change
or withdraw such rating. However, failure to comply with the Rating Agency      
Guidelines would require the Fund to redeem all or part of the Cumulative       
Preferred Stock.                                                                

   A preferred stock rating is an assessment of the capacity and willingness
of an issuer to pay preferred stock obligations. The rating on the Cumulative   
Preferred Stock is not a recommendation to purchase, hold or sell such shares,  
inasmuch as the rating does not comment as to market price or suitability for a 
particular investor. Nor do Moody's requirements address the likelihood that a  
holder of Cumulative Preferred Stock will be able to sell such shares. The      
rating is based on current information furnished to Moody's by the Fund         

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and the Adviser and information obtained from other sources. The rating may be  
changed, suspended or withdrawn as a result of changes in, or the unavailability
of, such information.                                                           

DIVIDENDS                                                                       

Holders of shares of Cumulative Preferred Stock will be entitled to   
receive, when, as and if declared by the Board of Directors of the Fund out of  
funds legally available therefor, cumulative cash dividends, at the annual rate 
of   % of the liquidation preference of $25 per share, payable semi-annually on 
June 26, and December 26 or if any such day is not a Business Day, the next     
succeeding Business Day (the "Dividend Payment Date"), commencing on December   
26, 1997, to the persons in whose names the shares of Cumulative Preferred Stock
are registered at the close of business on the fifth preceding Business Day. The
Fund may from time to time, at its option, pay dividends on the Cumulative      
Preferred Stock on a quarterly basis at the annual rate of      %.              

    Dividends on the shares of Cumulative Preferred Stock will accumulate from
the date on which such shares are originally issued (the "Date of Original      
Issue").                                                                        

     No dividends will be declared or paid or set apart for payment on shares of
Cumulative Preferred Stock for any dividend period or part thereof unless full  
cumulative dividends have been or contemporaneously are declared and paid on all
outstanding shares of Cumulative Preferred Stock through the most recent        
Dividend Payment Date thereof. If full cumulative dividends are not paid on the 
Cumulative Preferred Stock, all dividends on the shares of Cumulative Preferred 
Stock will be paid pro rata to the holders of the shares of Cumulative Preferred
Stock. Holders of Cumulative Preferred Stock will not be entitled to any        
dividends, whether payable in cash, property or stock, in excess of full        
cumulative dividends. No interest, or sum of money in lieu of interest, will be 
payable in respect of any dividend payment that may be in arrears.              

  For so long as any shares of Cumulative Preferred Stock are outstanding,
the Fund will not declare, pay or set apart for payment any dividend or other   
distribution (other than a dividend or distribution paid in shares of, or       
options, warrants or rights to subscribe for or purchase, shares of Common Stock
or other stock, if any, ranking junior to the Cumulative Preferred Stock as to  
dividends or upon liquidation) in respect of the Common Stock or any other stock
of the Fund ranking junior to or on a parity with the Cumulative Preferred Stock
as to dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of its Common Stock or any other 
stock of the Fund ranking junior to or on a parity with the Cumulative Preferred
Stock as to dividends or upon liquidation (except by conversion into or exchange
for stock of the Fund ranking junior to or on a parity with the Cumulative      
Preferred Stock as to dividends and upon liquidation), unless, in each case, (A)
immediately after such transaction, the Fund will have Adjusted Assets greater  
than or equal to the Basic Maintenance Amount and will have the required Asset  
Coverage (see "-- Asset Maintenance" and "-- Redemption" below), (B) full       
cumulative dividends on shares of Cumulative Preferred Stock due on or prior to 
the date of the transactions have been declared and paid (or sufficient Deposit 
Assets to cover such payment have been deposited with the Dividend-Disbursing   
Agent) and (C) the Fund has redeemed the full number of shares of Cumulative    
Preferred Stock required to be redeemed by any provision for mandatory          
redemption contained in the Articles Supplementary.                             

ASSET MAINTENANCE                                                               

The Fund will be required to satisfy two separate asset maintenance   
requirements under the terms of the Articles Supplementary. These requirements  
are summarized below.                                                           

     Asset Coverage.  The Fund will be required under the Articles Supplementary
to maintain as of the last Business Day of each March, June, September and      
December of each year, an "asset coverage" (as defined in the 1940 Act) of at   
least 200% (or such higher or lower percentage as may be required at the time   
under the 1940 Act) with respect to all outstanding senior securities of the    
Fund which are stock, including the Cumulative Preferred Stock (the "Asset      
Coverage"). If the Fund fails to maintain the Asset Coverage on such dates and  
such failure is not cured within 60 days, the Fund will be required under       
certain circumstances to redeem certain of the shares of Cumulative Preferred   
Stock. See "-- Redemption" below.                                               

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    If the shares of Cumulative Preferred Stock offered hereby had been issued
and sold as of March 31, 1997, the asset coverage immediately following such    
issuance and sale (after giving effect to the deduction of the underwriting     
discounts and estimated offering expenses for such shares of $1,384,000), would 
have been computed as follows:                                                  

                                                                [Download Table]
                                                                               
          Value of Fund assets less liabilities                                
            not constituting senior securities          $120,161,995           
                                                       -------------           
                                                                      =    401%
                       ------------                    -------------      -----

Senior securities representing indebtedness plus                               
  liquidation preference of the Cumulative                                     
  Preferred Stock                                        $30,000,000           
                                                       -------------           

 Basic Maintenance Amount.  The Fund will be required under the Articles
Supplementary to maintain, as of each Valuation Date, Adjusted Assets greater   
than or equal to the Basic Maintenance Amount, which is in general the sum of   
the aggregate liquidation preference of the Cumulative Preferred Stock, any     
indebtedness for borrowed money and current liabilities and dividends. If the   
Fund fails to meet such requirement as to any Valuation Date and such failure is
not cured within 7 days after such Valuation Date, the Fund will be required to 
redeem certain of the shares of Cumulative Preferred Stock. See "-- Redemption" 
below.                                                                          

     Any security not meeting the Rating Agency Guidelines will be excluded from
the calculation of Adjusted Assets.                                             

The Moody's Discount Factors and guidelines for determining the market
value of the Fund's portfolio holdings have been based on criteria established  
in connection with the rating of the Cumulative Preferred Stock. These factors  
include, but are not limited to, the sensitivity of the market value of the     
relevant asset to changes in interest rates, the liquidity and depth of the     
market for the relevant asset, the credit quality of the relevant asset (for    
example, the lower the rating of a corporate debt obligation, the higher the    
related discount factor) and the frequency with which the relevant asset is     
marked to market. The Moody's Discount Factor relating to any asset of the Fund,
the assets eligible for inclusion in the calculation of Adjusted Assets and the 
Basic Maintenance Amount and certain definitions and methods of calculation     
relating thereto may be changed from time to time by the Board of Directors,    
provided that, among other things, such changes will not impair the rating then 
assigned to the Cumulative Preferred Stock by Moody's.                          

  On or before the fifth Business Day after each Quarterly Valuation Date,
the Fund is required to deliver to Moody's a report setting forth at least the  
Fund's Adjusted Assets and the Basic Maintenance Amount as of the relevant      
Valuation Date (the "Basic Maintenance Report"). Within ten Business Days after 
delivery of such report relating to the Quarterly Valuation Date and one or more
other occassions (as determined by Moody's) chosen at random by Fund's          
independent accountants, the Fund will deliver letters prepared by the Fund's   
independent accountants regarding the accuracy of the calculations made by the  
Fund in, and certain other matters relating to, its most recent Basic           
Maintenance Report. If any such letter prepared by the Fund's independent       
accountants shows that an error was made in the most recent Basic Maintenance   
Report, the calculation or determination made by the Fund's independent         
accountants will be conclusive and binding on the Fund.                         

REDEMPTION                                                                      

     Mandatory Redemption.  The Fund will be required to redeem, at a redemption
price equal to $25 per share plus accumulated and unpaid dividends through the  
date of redemption (whether or not earned or declared) (the "Redemption Price"),
certain of the shares of Cumulative Preferred Stock (to the extent permitted    
under the 1940 Act and Maryland law) in the event that:                         

         (i) the Fund fails to maintain the Asset Coverage and such failure is
   not cured on or before 60 days following such failure (a "Cure Date"); or

         (ii) the Fund fails to maintain Adjusted Assets greater than or equal
    to the Basic Maintenance Amount as of any Valuation Date, and such failure
  is not cured on or before the 7th day after such Valuation Date (also, a
"Cure Date").                                                         

  The amount of such mandatory redemption will equal the minimum number of
outstanding shares of Cumulative Preferred Stock the redemption of which, if    
such redemption had occurred immediately prior to                               

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the opening of business on a Cure Date, would have resulted in the Asset        
Coverage having been satisfied or the Fund having Adjusted Assets equal to or   
greater than the Basic Maintenance Amount on such Cure Date or, if the Asset    
Coverage or Adjusted Assets equal to or greater than the Basic Maintenance      
Amount, as the case may be, cannot be so restored, all of the shares of         
Cumulative Preferred Stock, at the Redemption Price. In the event that shares of
Cumulative Preferred Stock are redeemed due to the occurrence of (i) above, the 
Fund may, but is not required to, redeem a sufficient number of shares of       
Cumulative Preferred Stock so that the asset coverage (as defined in the 1940   
Act) of the remaining outstanding shares of Cumulative Preferred Stock and any  
other Preferred Stock remaining after redemption is up to 220%. In the event    
that shares of Cumulative Preferred Stock are redeemed due to the occurrence of 
(ii) above, the Fund may, but is not required to, redeem a sufficient number of 
shares of Cumulative Preferred Stock so that the Adjusted Assets of the         
remaining outstanding shares of Cumulative Preferred Stock and any other        
Preferred Stock remaining after redemption is up to 110% of the Basic           
Maintenance Amount.                                                             

     If the Fund does not have funds legally available for the redemption of, or
is otherwise unable to redeem, all the shares of Cumulative Preferred Stock to  
be redeemed on any redemption date, the Fund will redeem on such redemption date
that number of shares for which it has legally available funds, or is otherwise 
able, to redeem ratably from each holder whose shares are to be redeemed, and   
the remainder of the shares required to be redeemed will be redeemed on the     
earliest practicable date on which the Fund will have funds legally available   
for the redemption of, or is otherwise able to redeem, such shares upon written 
notice of redemption ("Notice of Redemption").                                  

    If fewer than all shares of Cumulative Preferred Stock are to be redeemed,
such redemption will be made pro rata from each holder of shares in accordance  
with the respective number of shares held by each such holder on the record date
for such redemption. If fewer than all shares of Cumulative Preferred Stock held
by any holder are to be redeemed, the Notice of Redemption mailed to such holder
will specify the number of shares to be redeemed from such holder. Unless all   
accumulated and unpaid dividends for all past dividend periods will have been or
are contemporaneously paid or declared and Deposit Assets for the payment       
thereof deposited with the Dividend-Disbursing Agent, no redemptions of         
Cumulative Preferred Stock may be made.                                         

Optional Redemption.  Prior to June 1, 2002, the shares of Cumulative 
Preferred Stock are not subject to any optional redemption by the Fund unless   
such redemption is necessary, in the judgment of the Fund, to maintain the      
Fund's status as a regulated investment company ("RIC") under the Code.         
Commencing June 1, 2002 and thereafter, the Fund may at any time redeem shares  
of Cumulative Preferred Stock in whole or in part at the Redemption Price. Such 
redemptions are subject to the limitations of the 1940 Act and Maryland law.    

     Redemption Procedures.  A Notice of Redemption will be given to the holders
of record of Cumulative Preferred Stock selected for redemption not less than 30
or more than 45 days prior to the date fixed for the redemption. Each Notice of 
Redemption will state (i) the redemption date, (ii) the number of shares of     
Cumulative Preferred Stock to be redeemed, (iii) the CUSIP number(s) of such    
shares, (iv) the Redemption Price, (v) the place or places where such shares are
to be redeemed, (vi) that dividends on the shares to be redeemed will cease to  
accrue on such redemption date and (vii) the provision of the Articles          
Supplementary under which the redemption is being made. No defect in the Notice 
of Redemption or in the mailing thereof will affect the validity of the         
redemption proceedings, except as required by applicable law.                   

LIQUIDATION RIGHTS                                                              

  Upon a liquidation, dissolution or winding up of the affairs of the Fund
(whether voluntary or involuntary), holders of shares of Cumulative Preferred   
Stock then outstanding will be entitled to receive out of the assets of the Fund
available for distribution to shareholders, after satisfying claims of creditors
but before any distribution or payment of assets is made to holders of the      
Common Stock or any other class of stock of the Fund ranking junior to the      
Cumulative Preferred Stock as to liquidation payments, a liquidation            
distribution in the amount of $25 per share, plus an amount equal to all unpaid 
dividends accrued to and including the date fixed for such distribution or      
payment (whether or not earned or declared by the Fund but excluding interest   
thereon) (the "Liquidation Payment"), and such holders will be entitled to no   
further participation in any distribution payment in connection with any such   
liquidation, dissolution or winding up. If, upon any liquidation, dissolution or
winding up of the affairs of the Fund, whether voluntary or involuntary, the    

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assets of the Fund available for distribution among the holders of all          
outstanding shares of Cumulative Preferred Stock and any other outstanding class
or series of Preferred Stock of the Fund ranking on a parity with the Cumulative
Preferred Stock as to payment upon liquidation, will be insufficient to permit  
the payment in full to such holders of Cumulative Preferred Stock of the        
Liquidation Payment and the amounts due upon liquidation with respect to such   
other Preferred Stock, then such available assets will be distributed among the 
holders of Cumulative Preferred Stock and such other Preferred Stock ratably in 
proportion to the respective preferential amounts to which they are entitled.   
Unless and until the Liquidation Payment has been paid in full to the holders of
Cumulative Preferred Stock, no dividends or distributions will be made to       
holders of the Common Stock or any other stock of the Fund ranking junior to the
Cumulative Preferred Stock as to liquidation.                                   

VOTING RIGHTS                                                                   

    Except as otherwise stated in this Prospectus and as otherwise required by
applicable law, holders of shares of Cumulative Preferred Stock will be entitled
to one vote per share on each matter submitted to a vote of shareholders and    
will vote together with holders of shares of Common Stock and of any other      
Preferred Stock then outstanding as a single class.                             

    In connection with the election of the Fund's directors, holders of shares
of Cumulative Preferred Stock and any other Preferred Stock, voting as a single 
class, will be entitled at all times to elect two of the Fund's directors, and  
the remaining directors will be elected by holders of shares of Common Stock and
holders of shares of Cumulative Preferred Stock and any other Preferred Stock,  
voting together as a single class. In addition, if at any time dividends on     
outstanding shares of Cumulative Preferred Stock and/or any other Preferred     
Stock are unpaid in an amount equal to at least two full years' dividends       
thereon or if at any time holders of any shares of Preferred Stock are only     
entitled, together with the holders of shares of Cumulative Preferred Stock, to 
elect a majority of the directors of the Fund under the 1940 Act, then the      
number of directors constituting the Board of Directors automatically will be   
increased by the smallest number that, when added to the two directors elected  
exclusively by the holders of shares of Cumulative Preferred Stock and any other
Preferred Stock as described above, would constitute a majority of the Board of 
Directors as so increased by such smallest number. Such additional directors    
will be elected by the holders of Cumulative Preferred Stock and any other      
Preferred Stock, voting as a separate class, at a special meeting of            
shareholders which will be called and held as soon as practicable, and at all   
subsequent meetings at which directors are to be elected the holders of shares  
of Cumulative Preferred Stock and any other Preferred Stock, voting as a single 
class, will be entitled to elect the smallest number of additional directors    
that, together with the two directors which such holders in any event will be   
entitled to elect, constitutes a majority of the total number of directors of   
the Fund as so increased. The terms of office of the persons who are directors  
at the time of that election will continue. If the Fund thereafter pays, or     
declares and sets apart for payment in full, all dividends payable on all       
outstanding shares of Cumulative Preferred Stock and any other Preferred Stock  
for all past dividend periods, the additional voting rights of the holders of   
shares of Cumulative Preferred Stock and any other Preferred Stock as described 
above will cease, and the terms of office of all of the additional directors    
elected by the holders of shares of Cumulative Preferred Stock and any other    
Preferred Stock (but not of the directors with respect to whose election the    
holders of shares of Common Stock were entitled to vote or the two directors the
holders of shares of Cumulative Preferred Stock and any other Preferred Stock   
have the right to elect as a separate class in any event) will terminate        
automatically. The Charter currently limits the maximum number of directors of  
the Fund to twelve. In the event that an increase in the number of directors    
elected solely by the holders of shares of Cumulative Preferred Stock and any   
other Preferred Stock would cause the total number of directors to exceed       
twelve, one or more directors, other than the two previously elected by the     
holders of shares of Cumulative Preferred Stock and Preferred Stock, voting as a
separate class, would resign.                                                   

  So long as shares of the Cumulative Preferred Stock are outstanding, the
Fund will not, without the affirmative vote of the holders of a majority of the 
shares of Preferred Stock outstanding at the time, voting separately as one     
class, amend, alter or repeal the provisions of the Charter, whether by merger, 
consolidation or otherwise, so as to materially adversely affect any of the     
contract rights expressly set forth in the Charter of                           

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holders of shares of the Cumulative Preferred Stock or any other Preferred      
Stock. To the extent permitted under the 1940 Act, in the event shares of more  
than one series of Preferred Stock are outstanding, the Fund will not approve   
any of the actions set forth in the preceding sentence which materially         
adversely affects the contract rights expressly set forth in the Charter of a   
holder of shares of a series of Preferred Stock differently than those of a     
holder of shares of any other series of Preferred Stock without the affirmative 
vote of at least a majority of votes entitled to be cast by holders of the      
Preferred Stock of each series materially adversely affected and outstanding at 
such time (each such materially adversely affected series voting separately as a
class). The affirmative vote of a majority of the votes entitled to be cast by  
holders of outstanding shares of the Cumulative Preferred Stock and any other   
Preferred Stock, voting as a separate class, will be required to approve any    
plan of reorganization adversely affecting such shares or any action requiring a
vote of security holders under Section 13(a) of the 1940 Act, including, among  
other things, changes in the Fund's investment objective or changes in the      
investment restrictions described as fundamental policies under "Investment     
Objectives and Policies." The class vote of holders of shares of the Cumulative 
Preferred Stock and any other Preferred Stock described above in each case will 
be in addition to a separate vote of the requisite percentage of shares of      
Common Stock and Cumulative Preferred Stock and any other Preferred Stock,      
voting together as a single class, necessary to authorize the action in         
question.                                                                       

    The foregoing voting provisions will not apply to any shares of Cumulative
Preferred Stock if, at or prior to the time when the act with respect to which  
such vote otherwise would be required will be effected, such shares will have   
been (i) redeemed or (ii) called for redemption and sufficient Deposit Assets   
provided to the Dividend-Disbursing Agent to effect such redemption. The holders
of Cumulative Preferred Stock will have no preemptive rights or rights to       
cumulative voting.                                                              

LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS                             
AND ISSUANCE OF ADDITIONAL PREFERRED STOCK                                      

  So long as any shares of Cumulative Preferred Stock are outstanding, the
Fund may issue and sell one or more series of a class of senior securities of   
the Fund representing indebtedness under the 1940 Act and/or otherwise create or
incur indebtedness, provided that the Fund will, immediately after giving effect
to the incurrence of such indebtedness and to its receipt and application of the
proceeds thereof, have an "asset coverage" for all senior securities of the Fund
representing indebtedness, as defined in the 1940 Act, of at least 300% of the  
amount of all indebtedness of the Fund then outstanding and no such additional  
indebtedness will have any preference or priority over any other indebtedness of
the Fund upon the distribution of the assets of the Fund or in respect of the   
payment of interest. Any possible liability resulting from lending and/or       
borrowing portfolio securities, entering into reverse repurchase agreements,    
entering into futures contracts and writing options, to the extent such         
transactions are made in accordance with the investment restrictions of the Fund
then in effect, will not be considered to be indebtedness limited by the        
Articles Supplementary.                                                         

  So long as any shares of Cumulative Preferred Stock are outstanding, the
Fund may issue and sell shares of one of more other series of Preferred Stock in
addition to the shares of Cumulative Preferred Stock, provided that the Fund    
will, immediately after giving effect to the issuance of such additional        
Preferred Stock and to its receipt and application of the proceeds thereof, have
an "asset coverage" for all senior securities of the Fund which are stock, as   
defined in the 1940 Act, of at least 200% of the sum of the liquidation         
preference of the shares of Cumulative Preferred Stock and all other Preferred  
Stock of the Fund then outstanding and all indebtedness of the Fund constituting
senior securities and no such additional Preferred Stock will have any          
preference or priority over any other Preferred Stock of the Fund upon the      
distribution of the assets of the Fund or in respect of the payment of          
dividends.                                                                      

REPURCHASE OF CUMULATIVE PREFERRED STOCK                                        

The Fund is a closed-end investment company and, as such, holders of  
Cumulative Preferred Stock do not, and will not, have the right to redeem their 
shares of the Fund. The Fund, however, may repurchase shares of the Cumulative  
Preferred Stock when it is deemed advisable by the Board of Directors in        
compliance with the requirements of the 1940 Act and the rules and regulations  
thereunder and other applicable requirements.                                   

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BOOK-ENTRY                                                                      

    Shares of Cumulative Preferred Stock will initially be held in the name of
Cede & Co ("Cede"), as nominee for The Depository Trust Company ("DTC"). The    
Fund will treat Cede as the holder of record of the Cumulative Preferred Stock  
for all purposes. In accordance with the procedures of DTC, however, purchasers 
of Cumulative Preferred Stock will be deemed the beneficial owners of shares    
purchased for purposes of dividends, voting and liquidation rights. Purchasers  
of Cumulative Preferred Stock may obtain registered certificates by contacting  
the Transfer Agent (as defined below).                                          

DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES 

     Common Stock.  The Fund, which was incorporated under the laws of the State
of Maryland on March 31, 1994, is authorized to issue 198,000,000 shares of     
Common Stock, par value $.001 per share. Each share has equal voting, dividend, 
distribution and liquidation rights. The shares issued and outstanding are fully
paid and non-assessable. Shares of the Common Stock are not redeemable and have 
no preemptive, conversion or cumulative voting rights. The Fund's shares are    
listed and traded on the NYSE under the symbol "GGT."                           

    Preferred Stock.  The Fund's Board of Directors has authority to cause the
Fund to issue and sell up to 2,000,000 shares of Preferred Stock, par value     
$.001 per share. The terms of such Preferred Stock would be fixed by the Board  
of Directors and would materially limit and/or qualify the rights of the holders
of the Fund's Common Stock. The Board of Directors has designated 1,200,000     
shares of Preferred Stock as the Cumulative Preferred Stock offered hereby. All 
shares of Cumulative Preferred Stock, when issued in accordance with the terms  
of the Offering, will be fully paid and nonassessable. See "Description of      
Cumulative Preferred Stock."                                                    

The following table shows the number of shares of (i) capital stock   
authorized, (ii) capital stock held by the Fund for its own account and (iii)   
capital stock outstanding for each class of authorized securities of the Fund as
of March 31, 1997 as if the Offering had been completed by such date.           

                                                                [Download Table]

                                                    AMOUNT HELD             
                                                    BY FUND FOR             
                                         AMOUNT       ITS OWN      AMOUNT   
           TITLE OF CLASS              AUTHORIZED     ACCOUNT    OUTSTANDING
-------------------------------------  -----------  -----------  -----------
                                                                            
Common Stock.........................  198,000,000    400,000     11,296,548
Preferred Stock......................    2,000,000          0      1,200,000

TAXATION

The following is a description of certain U.S. Federal income tax     
consequences to a shareholder of acquiring, holding and disposing of Cumulative 
Preferred and Common Shares of the Fund. The discussion reflects applicable tax 
laws of the United States as of the date of this Prospectus, which tax laws may 
be changed or subject to new interpretations by the courts or the Internal      
Revenue Service retroactively or prospectively.                                 

   No attempt is made to present a detailed explanation of all U.S. Federal,
state, local and foreign tax concerns affecting the Fund and its shareholders,  
and the discussions set forth here do not constitute tax advice. Investors are  
urged to consult their own tax advisers to determine the tax consequences to    
them of investing in the Fund.                                                  

TAXATION OF THE FUND                                                            

   The Fund has qualified as and intends to continue to qualify as and elect
to be a RIC under Subchapter M of the Code. If it so qualifies, the Fund will   
not be subject to U.S. Federal income tax on the portion of its net investment  
income (i.e., its investment company taxable income as defined in the Code      
without regard to the deduction for dividends paid) and its net capital gain    
(i.e., the excess of its net realized long-term capital                         

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gain over its net realized short-term capital loss) which it distributes to its 
shareholders in each taxable year, provided that it distributes to its          
shareholders at least 90% of its net investment income for such taxable year.   

 Qualification as a RIC requires, among other things, that the Fund: (a)
derive at least 90% of its gross income in each taxable year from dividends,    
interest, payments with respect to securities loans, gains from the sale or     
other disposition of stock or securities, foreign currencies or other income    
(including gains from options, futures or forward contracts) derived with       
respect to its business of investing in stock, securities or currencies; (b)    
derive less than 30% of its gross income in each taxable year from the sale or  
other disposition of any of the following held for less than three months:      
stock, securities, options, futures, certain forward contracts, or foreign      
currencies (or any options, futures or forward contracts on foreign currencies) 
but only if such currencies are not directly related to the Fund's principal    
business of investing in stock or securities (the "30% limitation"); and (c)    
diversify its holdings so that, at the end of each quarter of each taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by     
cash, cash items, U.S. government securities, securities of other RICs 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 Fund's assets and 10% of the  
outstanding voting securities of such issuer, and (ii) not more than 25% of the 
value of its assets is invested in the securities of any one issuer (other than 
U.S. government securities or the securities of other RICs).                    

If the Fund were unable to satisfy the 90% distribution requirement or
otherwise were to fail to qualify to be taxed as a RIC in any year, it would be 
subject to tax in such year on all of its taxable income, whether or not the    
Fund made any distributions. To qualify again to be taxed as a RIC in a         
subsequent year, the Fund would be required to distribute to Cumulative         
Preferred Shareholders and Common Shareholders as a dividend paid out of the    
Fund's net investment income (an "Ordinary Income Dividend"), its earnings and  
profits attributable to non-RIC years reduced by an interest charge on 50% of   
such earnings and profits payable by the Fund to the IRS. In addition, if the   
Fund failed to qualify as a RIC for a period greater than one taxable year, then
the Fund would be required to recognize and pay tax on any net built-in gains   
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if the Fund had been liquidated) in order to      
qualify as a RIC in a subsequent year. To the extent possible, the Fund intends 
to make sufficient distributions to avoid application of the corporate income   
tax.                                                                            

Under the Code, amounts not distributed by a RIC on a timely basis in 
accordance with a calendar year distribution requirement are subject to a 4%    
excise tax. To avoid the tax, the Fund must distribute during each calendar     
year, an amount equal to, at the minimum, the sum of (1) 98% of its ordinary    
income for the calendar year, (2) 98% of its capital gain net income for the one
year period ending on October 31 of such year (unless an election is made by a  
fund with a November or December year-end to use the fund's fiscal year), and   
(3) all ordinary income and capital gain net income for previous years that were
not previously distributed. While the Fund intends to distribute its ordinary   
income and capital gain net income in the manner necessary to minimize          
imposition of the 4% excise tax, there can be no assurance that sufficient      
amounts of the Fund's ordinary income and capital gain net income will be       
distributed to avoid entirely the imposition of the tax. In such event, the Fund
will be liable for the tax only on the amount by which it does not meet the     
foregoing distribution requirements.                                            

   If the Fund does not meet the asset coverage requirements of the 1940 Act
and the Articles Supplementary, the Fund will be required to suspend            
distributions to the holders of the common stock until the asset coverage is    
restored. See "Description of Cumulative Preferred Stock -- Dividends" and      
"Description of Capital Stock and Other Securities." Such a suspension of       
distributions might prevent the Fund from distributing 90% of its net investment
income, as is required in order to avoid Fund-level taxation on the Fund's      
distributions, or might prevent it from distributing enough income and capital  
gain to avoid completely the imposition of the excise tax. Upon any failure to  
meet the asset coverage requirements of the 1940 Act or the Articles            
Supplementary, the Fund may, and in certain circumstances will, be required to  
partially redeem the shares of Cumulative Preferred Stock in order to restore   
the requisite asset coverage and avoid the adverse consequences to the Fund and 
its shareholders of failing to qualify as a RIC. If asset coverage were         
restored, the Fund would again be able to pay dividends and might be able to    
avoid Fund-level taxation on the Fund's undistributed income.                   

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TAXATION OF SHAREHOLDERS                                                        

    Ordinary Income Dividends (which include the Fund's net short-term capital
gain) are taxable to shareholders as ordinary income. A portion of the Fund's   
Ordinary Income Dividends may qualify for the dividends received deduction      
available to corporations.                                                      

 At the time of a shareholder's purchase, the market price of the Fund's
Common Stock or Cumulative Preferred Stock may reflect undistributed net        
investment income or net capital gain. A subsequent distribution of these       
amounts by the Fund will be taxable to the shareholder even though the          
distribution economically is a return of part of the shareholder's investment.  
Investors should carefully consider the tax implications of acquiring shares    
just prior to a distribution, as they will receive a distribution that would be 
taxable to them.                                                                

   Distributions made from net capital gain which are designated by the Fund
as Capital Gain Dividends are taxable to shareholders as long-term capital      
gains, regardless of the length of time the shareholder has owned Fund shares.  
In general, the maximum Federal income tax rate imposed on individuals with     
respect to capital gain dividends is 28%, whereas the maximum federal income tax
rate imposed on individuals with respect to ordinary income (and short-term     
capital gains) is 39.6%. With respect to corporate taxpayers, long-term capital 
gains currently are taxed at the same Federal income tax rates as ordinary      
income and short-term capital gains.                                            

In recent years, a number of legislative proposals concerning the tax 
treatment of capital gains have been introduced in Congress. The proposals have 
ranged from eliminating the preferential treatment of capital gains to          
eliminating tax on capital gains. It cannot be predicted whether any of these   
proposals may ultimately become law, nor can the effective date of any          
legislation be anticipated. Any change in the tax treatment of capital gains,   
however, would have an effect on the tax consequences of an investment in       
Cumulative Preferred Stock. Shareholders may be entitled to offset their Capital
Gain Dividends with capital losses. There are a number of statutory provisions  
affecting when capital losses may be offset against capital gains and limiting  
the use of losses from certain investments and activities. Accordingly,         
shareholders with capital losses are urged to consult their tax advisers.       

     Dividends are taxable to shareholders whether they are paid in cash or paid
in additional shares of stock under the Fund's plan for the automatic           
reinvestment of dividends. Generally, shareholders will be taxed on dividends in
the year of receipt, however, if the Fund declares a dividend in October,       
November or December to shareholders of record on a specified date in such a    
month which is actually paid during the following January, the dividend will be 
deemed to have been paid by the Fund (and received by the shareholders) on      
December 31 of the year in which the dividend is declared. Not later than 60    
days after the close of its taxable year, the Fund will provide its shareholders
with a written notice designating the amounts of any Ordinary Income Dividends  
or Capital Gain Dividends. Distributions in excess of the Fund's earnings and   
profits will first reduce the adjusted tax basis of a holder's shares and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to    
such holder (assuming the shares are held as a capital asset).                  

     The sale, redemption or other disposition of Fund shares is a taxable event
and may result in a gain or loss. Such gain or loss will generally be a capital 
gain or loss if the shares are capital assets in the hands of the shareholder   
and will be long-term capital gain or loss if the shares have been held for more
than one year. Any loss upon the sale or exchange of Fund shares held for six   
months or less, however, will be treated as a long-term capital loss to the     
extent of any Capital Gain Dividends received by the shareholder. A loss        
realized on a sale or exchange of shares of the Fund will be disallowed if other
Fund shares of the same class are acquired within a 61-day period beginning 30  
days before and ending 30 days after the date on which the shares are disposed. 
In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.                                                                

Since the Fund may invest in foreign securities, its income from such 
securities may be subject to non-U.S. taxes. If the Fund satisfies the          
distribution requirements to be taxed as a RIC during a taxable year, and if 50%
of the Fund's total assets at the end of its taxable year consist of stock or   
securities of foreign corporations, it may elect to "pass-through" to its       
shareholders the ability to use the foreign tax deduction or credit for foreign 
taxes paid with respect to qualifying taxes. If the Fund makes such an election,
a taxpayer would be required to include in income its proportionate share of the
qualifying foreign taxes paid by the Fund                                       

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and would be allowed to either deduct the amount of such taxes from its taxable 
income or to use such taxes as a credit against its U.S. federal income tax     
liability. In general, it will be more beneficial for a taxpayer to use its     
proportionate share of such taxes paid by the Fund as a foreign tax credit. If  
the Fund elects to pass-through the benefit of the deduction or credit allowed  
for qualifying foreign taxes it has paid in a given year, it will send each     
Shareholder a written notice of the portion of the Fund's dividends that        
represents income from sources within each foreign country and the amount of    
such Shareholder's proportionate share of foreign taxes paid to each foreign    
country.                                                                        

   Designation of Capital Gain Dividends to Cumulative Preferred Stock.  The
IRS has taken the position in Revenue Ruling 89-81 that if a RIC has two classes
of shares, it may designate distributions made to each class in any year as     
consisting of no more than such class's proportionate share of particular types 
of income, such as long-term capital gain and foreign taxes paid by the RIC (if 
such taxes are subject to a "pass-through" election as described above). A      
class's proportionate share of a particular type of income is determined        
according to the percentage of total dividends paid by the RIC during such year 
that was paid to such class. Consequently, the Fund will designate distributions
made to the Common Stock and Cumulative Preferred Stock and any other Preferred 
Stock series as consisting of particular types of income in accordance with the 
classes' proportionate shares of such income. Because of this rule, the Fund is 
required to allocate a portion of its net capital gains and foreign taxes paid  
to holders of Common Stock, holders of Cumulative Preferred Stock and any other 
Preferred Stock. The amount of net capital gains, other types of income and     
foreign taxes paid allocable among holders of the Common Stock, the Cumulative  
Preferred Stock and any other Preferred Stock will depend upon the amount of    
such gains and other income realized by and taxes paid by the Fund and the total
dividends paid by the Fund on shares of Common Stock and Cumulative Preferred   
Stock and any other Preferred Stock during a taxable year.                      

The Fund believes that under current law the manner in which the Fund 
intends to allocate net capital gains, other types of income and foreign taxes  
paid between shares of Common Stock and Cumulative Preferred Stock will be      
respected for Federal income tax purposes. However, the Fund has not requested  
and will not request direct guidance from the IRS specifically addressing       
whether the Fund's method of allocation will be respected for Federal income tax
purposes, and it is possible that the IRS could disagree with the Fund and      
attempt to reallocate the Fund's net capital gains, other taxable income and    
foreign taxes paid.                                                             

WITHHOLDING AND OTHER TAXES                                                     

Ordinary Income Dividends (but not Capital Gain Dividends) paid to    
shareholders who are nonresident aliens or foreign entities will be subject to a
30% United States withholding tax under existing provisions of the Code         
applicable to foreign individuals and entities unless a reduced rate of         
withholding or a withholding exemption is provided under applicable treaty law. 
Nonresident shareholders are urged to consult their own tax advisers concerning 
the applicability of the United States withholding tax.                         

     Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on Ordinary Income Dividends, Capital Gain Dividends and    
redemption payments ("backup withholding"). A shareholder, however, may         
generally avoid becoming subject to this requirement by filing an appropriate   
form with the payor (i.e., the financial institution or brokerage firm where the
shareholder maintains his or her account), certifying under penalties of perjury
that such shareholder's taxpayer identification number is correct and that such 
shareholder has never been notified by the IRS that he or she is subject to     
backup withholding, has been notified by the IRS that he or she is no longer    
subject to backup withholding, or is exempt from backup withholding. Corporate  
shareholders and certain other shareholders are exempt from backup withholding. 
Backup withholding is not an additional tax. Any amounts withheld under the     
backup withholding rules from payments made to a shareholder may be credited    
against such shareholder's Federal income tax liability.                        

  Distributions may also be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Shareholders are   
advised to consult their own tax advisers with respect to the particular tax    
consequences to them of an investment in the Cumulative Preferred Stock.        

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THE FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE APPLICABLE  
PROVISIONS OF THE CODE AND TREASURY REGULATIONS PRESENTLY IN EFFECT. A MORE     
COMPLETE DISCUSSION OF THE TAX RULES APPLICABLE TO THE FUND CAN BE FOUND IN THE 
SAI WHICH IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. FOR THE COMPLETE   
PROVISIONS APPLICABLE TO BOTH SHAREHOLDERS AND THE FUND, REFERENCE SHOULD BE    
MADE TO THE PERTINENT CODE SECTIONS AND THE TREASURY REGULATIONS PROMULGATED    
THEREUNDER. THE CODE AND THE TREASURY REGULATIONS ARE SUBJECT TO CHANGE BY      
LEGISLATIVE, JUDICIAL OR ADMINISTRATIVE ACTION, EITHER PROSPECTIVELY OR         
RETROACTIVELY.                                                                  

CERTAIN PROVISIONS OF THE CHARTER AND BY-LAWS 

    The Fund presently has provisions in its Charter and By-Laws (together, in
each case, its "Governing Documents") which could have the effect of limiting,  
in each case, (i) the ability of other entities or persons to acquire control of
the Fund, (ii) the Fund's freedom to engage in certain transactions, or (iii)   
the ability of the Fund's Directors or shareholders to amend the Governing      
Documents or effectuate changes in the Fund's management. These provisions of   
the Governing Documents of the Fund may be regarded as "antitakeover"           
provisions. The Board of Directors of the Fund is divided into three classes,   
each having a term of no more than three years. Each year the term of one class 
of Directors will expire. Accordingly, only those Directors in one class may be 
changed in any one year, and it would require two years to change a majority of 
the Board of Directors. Such system of electing Directors may have the effect of
maintaining the continuity of management and, thus, make it more difficult for  
the shareholders of the Fund to change the majority of Directors. See           
"Management of the Fund" in the SAI. A Director of the Fund may be removed with 
or without cause by a vote of a majority of the votes entitled to be cast for   
the election of Directors of the Fund. In addition, the affirmative vote of the 
holders of 66 2/3% of each class of its outstanding voting shares is required to
authorize the conversion of the Fund from a closed-end to an open-end investment
company or generally to authorize any of the following transactions:            

  (i) merger or consolidation of the Fund with or into any other
corporation;                                                          

       (ii) issuance of any securities of the Fund to any person or entity
for cash;                                                             

       (iii) sale, lease or exchange of all or any substantial part of the
assets of the Fund to any entity or person (except assets having an   
aggregate fair market value of less than $1,000,000); or              

        (iv) sale, lease or exchange to the Fund, in exchange for securities
     of the Fund, of any assets of any entity or person (except assets having an
aggregate fair market value of less than $1,000,000);                 

if such corporation, person or entity is directly, or indirectly through        
affiliates, the beneficial owner of more than 5% of the outstanding shares of   
the Fund. However, such vote would not be required when, under certain          
conditions, the Board of Directors approves the transaction. Reference is made  
to the Governing Documents of the Fund on file with the Commission; for the full
text of these provisions, see "Additional Information."                         

  The provisions of the Governing Documents described above could have the
effect of depriving the owners of shares in the Fund of opportunities to sell   
their shares at a premium over prevailing market prices, by discouraging a third
party from seeking to obtain control of the Fund in a tender offer or similar   
transaction. The overall effect of these provisions is to render more difficult 
the accomplishment of a merger or the assumption of control by a principal      
shareholder. The Board of Directors has determined that the foregoing voting    
requirements, which are generally greater than the minimum requirements under   
Maryland law and the 1940 Act, are in the best interests of the shareholders    
generally.                                                                      

CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 

     State Street Bank and Trust Company serves as Custodian for the Fund's cash
and securities as well as the Transfer Agent and Dividend-Disbursing Agent for  
its shares. Boston EquiServe LP, an affiliate of State Street, performs the     
shareholder services on behalf of State Street and is located at 150 Royall     
Street, Canton,                                                                 

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MA 02021. State Street does not assist in and is not responsible for investment 
decisions involving assets of the Fund.                                         

UNDERWRITING

    Upon the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each Underwriter named below for whom Smith    
Barney Inc. and Gabelli & Company, Inc. are acting as the Representatives (the  
"Representatives") has severally agreed to purchase, and the Fund has agreed to 
sell to such Underwriter, the number of shares of Cumulative Preferred Stock set
forth opposite the name of such Underwriter:                                    

                                                        [Enlarge/Download Table]

                                                                                   NUMBER OF
NAME                                                                                SHARES  
----                                                                               ---------
                                                                                            
Smith Barney Inc. ................................................................          
Gabelli & Company, Inc. ..........................................................          
                                                                                   ---------

                                                                                   ---------
          Total................................................................... 1,200,000
                                                                                   =========

The Underwriting Agreement provides that the obligations of the       
Underwriters to pay for and accept delivery of the shares of Cumulative         
Preferred Stock offered hereby are subject to the approval of certain legal     
matters by counsel and to certain other conditions. The Underwriters are        
obligated to take and pay for all shares of Cumulative Preferred Stock offered  
hereby if any are taken.                                                        

The Underwriters propose to offer part of the shares of Cumulative    
Preferred Stock offered hereby directly to the public at the public offering    
price set forth on the cover page of this Prospectus and part of the shares to  
certain dealers at a price which represents a concession not in excess of $     
per share under the public offering price. The Underwriters may allow, and such 
dealers may reallow, a concession not in excess of $     per share to certain   
other dealers. After the initial offering of the shares of Cumulative Preferred 
Stock to the public, the public offering price and such concessions may be      
changed by the Underwriters. The underwriting discount of $     per share is    
equal to      % of the initial offering price. Investors must pay for any shares
of Cumulative Preferred Stock purchased on or before June, 1997.                

    The Fund and the Adviser have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the 1933 Act.                  

     The Underwriters have advised the Fund that, pursuant to Regulation M under
the 1933 Act, certain persons participating in the Offering may engage in       
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, which may have the effect of stabilizing or         
maintaining the market price of the Cumulative Preferred Stock at a level above 
that which might otherwise prevail in the open market. A "stabilizing bid" is a 
bid for or the purchase of the Cumulative Preferred Stock on behalf of the      
Underwriters for the purpose of fixing or maintaining the price of the          
Cumulative Preferred Stock. A "syndicate covering transaction" is a bid for or  
purchase of the Cumulative Preferred Stock on behalf of the Underwriters to     
reduce a short position incurred by the Underwriters in connection with the     
Offering. A "penalty bid" is an arrangement permitting the Underwriters to      
reclaim the selling concession otherwise accruing to an Underwriter or selling  
group member in connection with the Offering if any of the Cumulative Preferred 
Stock originally sold by such Underwriter or selling group member is purchased  
in a syndicate covering transaction and has therefore not been effectively      
placed by such Underwriter or selling group member. The Underwriters have       
advised the Company that such transactions may be effected on the NYSE otherwise
and, if commenced, may be discontinued at any time.                             

   The Underwriters have acted in the past and may continue to act from time
to time during and subsequent to the completion of the offering of Cumulative   
Preferred Stock hereunder as a broker or dealer in connection with the execution
of portfolio transactions for the Fund. See "Portfolio Transactions" in the SAI.

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   Prior to the Offering, there has been no public market for the Cumulative
Preferred Stock. Application has been made to list the Cumulative Preferred     
Stock on the NYSE. However, during an initial period which is not expected to   
exceed 30 days after the date of this Prospectus, the Cumulative Preferred Stock
will not be listed on any securities exchange. During such period, the          
Underwriters intend to make a market in the Cumulative Preferred Stock; however,
they have no obligation to do so. Consequently, an investment in the Cumulative 
Preferred Stock may be illiquid during such period.                             

     Gabelli & Company, Inc. is a wholly-owned subsidiary of Gabelli Securities,
Inc., which is a majority-owned subsidiary of the Adviser which is, in turn,    
owned by Mario J. Gabelli. As a result of these relationships, Mr. Gabelli, the 
Fund's President and Chief Investment Officer, may be deemed to be a            
"controlling person" of Gabelli & Company, Inc. For additional Information      
regarding these affiliations, see "Management of the Funds." The Underwriters   
have retained Financial Products Group, Inc. to provide certain services in     
connection with the Offering.                                                   

Smith Barney Inc. and Gabelli & Company, Inc. have provided investment
banking and financial advisory services to the Fund.                            

LEGAL MATTERS 

Certain matters concerning the legality under Maryland law of the     
Cumulative Preferred Stock will be passed on by Miles & Stockbridge, Baltimore, 
Maryland. Certain legal matters will be passed on by Skadden, Arps, Slate,      
Meagher & Flom LLP, New York, New York, special counsel to the Fund, and by     
Simpson Thacher & Bartlett (a partnership which includes professional           
corporations), New York, New York, counsel to the Underwriters. Skadden, Arps,  
Slate, Meagher & Flom LLP and Simpson Thacher & Bartlett will each rely as to   
matters of Maryland law on the opinion of Miles & Stockbridge.                  

EXPERTS 

Price Waterhouse LLP, independent accountants, are the independent    
accountants of the Fund. The audited financial statements of the Fund and the   
information appearing under the caption "Financial Highlights" included in this 
Prospectus have been audited by Price Waterhouse LLP for the periods indicated  
in its report with respect thereto, and are included in reliance upon such      
report and upon the authority of such firm as experts in accounting and         
auditing. Price Waterhouse LLP has an office at 1177 Avenue of the Americas, New
York, New York 10036, and also performs tax and other professional services for 
the Fund.                                                                       

ADDITIONAL INFORMATION

 The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act and in accordance therewith  
files reports and other information with the SEC. Reports, proxy statements and 
other information filed by the Fund with the SEC pursuant to the informational  
requirements of such Acts can be inspected and copied at the public reference   
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth       
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of  
the SEC: Northeast Regional Office, Seven World Trade Center, Suite 1300, New   
York, New York 10048; Pacific Regional Office, 5670 Wilshire Boulevard, 11th    
Floor, Los Angeles, California 90036-3648; and Midwest Regional Office,         
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,       
Illinois 60661-2511; and copies of such material can be obtained from the Public
Reference Section of the SEC, Judiciary Plaza, 450 Fifth Street, N.W.,          
Washington, D.C. 20549, at prescribed rates. The SEC maintains a Web site at    
http://www.sec.gov containing reports, proxy and information statements and     
other information regarding registrants, including the Fund, that file          
electronically with the SEC.                                                    

The Fund's Common Stock is listed on the NYSE, and reports, proxy     
statements and other information concerning the Fund and filed with the SEC by  
the Fund can be inspected at the offices of the New York Stock Exchange, Inc.,  
20 Broad Street, New York, New York 10005.                                      

   This Prospectus constitutes part of a Registration Statement filed by the
Fund with the SEC under the 1933 Act and the 1940 Act. This Prospectus omits    
certain of the information contained in the Registration                        

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Statement, and reference is hereby made to the Registration Statement and       
related exhibits for further information with respect to the Fund and the       
Cumulative Preferred Stock offered hereby. Any statements contained herein      
concerning the provisions of any document are not necessarily complete, and, in 
each instance, reference is made to the copy of such document filed as an       
exhibit to the Registration Statement or otherwise filed with the SEC. Each such
statement is qualified in its entirety by such reference. The complete          
Registration Statement may be obtained from the SEC upon payment of the fee     
prescribed by its rules and regulations.                                        

TABLE OF CONTENTS OF SAI

   An SAI dated May   , 1997 has been filed with the SEC and is incorporated
by reference in this Prospectus. An SAI may be obtained without charge by       
writing to the Fund at its address at One Corporate Center, Rye, New York       
10580-1434 or by calling the Fund toll-free at (800) GABELLI (422-3554). The    
Table of Contents of the SAI is as follows:                                     

TABLE OF CONTENTS 

                                                        [Enlarge/Download Table]

                                                                                      PAGE 
                                                                                      -----
                                                                                           
INVESTMENT OBJECTIVES AND POLICIES...................................................   B-2
INVESTMENT RESTRICTIONS..............................................................  B-11
MANAGEMENT OF THE FUND...............................................................  B-12
THE ADVISER..........................................................................  B-16
PORTFOLIO TRANSACTIONS...............................................................  B-18
TAXATION.............................................................................  B-19
MOODY'S DISCOUNT FACTORS.............................................................  B-23
NET ASSET VALUE......................................................................  B-26
GENERAL INFORMATION..................................................................  B-27
BENEFICIAL OWNER.....................................................................  B-28
FINANCIAL STATEMENTS.................................................................  B-28

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GLOSSARY

 "Adjusted Assets" means the aggregate Adjusted Value of all the Moody's
Eligible Assets.                                                                

"Adjusted Value" of each Moody's Eligible Asset shall be computed as  
follows:                                                                        

   (i) Cash shall be valued at 100% of the face value thereof; and

 (ii) all other Moody's Eligible Assets shall be valued at the
Discounted Value thereof; and                                         

         (iii) each asset that is not a Moody's Eligible Asset shall be valued
at zero.                                                              

   "Articles Supplementary" means the Fund's Articles Supplementary creating
and fixing the rights of the Cumulative Preferred Stock.                        

   "Asset Coverage" has the meaning set forth on page 24 of this Prospectus.

"Basic Maintenance Amount" means, as of any Valuation Date, the dollar
amount equal to (i) the sum of (A) the product, calculated separately for each  
series of Cumulative Preferred Stock, of the number of shares of Cumulative     
Preferred Stock outstanding on such Valuation Date multiplied by the liquidation
preference per share; (B) the aggregate amount of cash dividends (whether or not
earned or declared) that will have accumulated for each outstanding share of    
Cumulative Preferred Stock from the most recent Dividend Payment Date to which  
dividends have been paid or duly provided for (or, in the event the Basic       
Maintenance Amount is calculated on a date prior to the initial Dividend Payment
Date with respect to a series of the Cumulative Preferred Stock, then from the  
Date of Original Issue) through the Valuation Date plus all dividends to        
accumulate on the Preferred Stock then outstanding during the 70 days following 
such Valuation Date or, if less, during the number of days following such       
Valuation Date that shares of Preferred Stock called for redemption are         
scheduled to remain outstanding; (C) the Fund's other liabilities due and       
payable as of such Valuation Date (except that dividends and other distributions
payable by the Fund by the issuance of Common Stock will not be included as a   
liability) and such liabilities projected to become due and payable the Fund    
during the 90 days following such Valuation Date (excluding liabilities for     
investments to be purchased and for dividends and other distributions not       
declared as of such Valuation Date); (D) any current liabilities of the Fund as 
of such Valuation Date to the extent not reflected in any of (i)(A) through     
(i)(C) (including, without limitation, and immediately upon determination, any  
amounts due and payable by the Fund pursuant to reverse repurchase agreements   
and any payables for assets purchased as of such Valuation Date) less (ii) the  
Adjusted Value of any of the Fund's assets if such assets are either cash or    
evidences of indebtedness which mature prior to or on the date of redemption or 
repurchase of Preferred Stock or payment of another liability and are either    
U.S. Government Obligations or evidences of indebtedness which have a rating    
assigned by Moody's of at least Aaa, P-1, VMIG-1 or MIG-1 or by S&P of at least 
AAA, SP-1+ or A-1+, and are irrevocably held by the Fund's custodian bank in a  
segregated account or deposited by the Fund with the Dividend - Disbursing Agent
for the payment of the amounts needed to redeem or repurchase Cumulative        
Preferred Stock subject to redemption or repurchase or any of (i)(B) through    
(i)(D) and provided that in the event the Fund has repurchased Cumulative       
Preferred Stock at a price of less than the liquidation preference thereof and  
irrevocably segregated or deposited assets as described above with its custodian
bank or the Dividend - Disbursing Agent for the payment of the repurchase price 
the Fund may deduct 100% of the liquidation preference of such Cumulative       
Preferred Stock to be repurchased from (i) above.                               

 "Basic Maintenance Report" has the meaning set forth on page 25 of this
Prospectus.                                                                     

     "Business Day" means a day on which the New York Stock Exchange is open for
trading and that is neither a Saturday, Sunday nor any other day on which banks 
in the City of New York are authorized by law to close.                         

    "Charter" means the Articles of Incorporation, as amended and supplemented
(including the Articles Supplementary), of the Fund on file in the State        
Department of Assessments and Taxation of Maryland.                             

  "Common Stock" means the Common Stock, par value $.001 per share, of the
Fund.                                                                           

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    "Cumulative Preferred Stock" means the   % Cumulative Preferred Stock, par
value $.001 per share, of the Fund.                                             

"Cure Date" has the meaning set forth on page 25 of this Prospectus.  

"Date of Original Issue" has the meaning set forth on page 24 of this 
Prospectus.                                                                     

   "Deposit Assets" means cash, Short-Term Money Market Instruments and U.S.
Government Obligations. Except for determining whether the Fund has Adjusted    
Assets equal to or greater than the Basic Maintenance Amount, each Deposit Asset
will be deemed to have a value equal to its principal or face amount payable at 
maturity plus any interest payable thereon after delivery of such Deposit Asset 
but only if payable on or prior to the applicable payment date in advance of    
which the relevant deposit is made.                                             

 "Discounted Value" means, with respect to a Moody's Eligible Asset, the
quotient of (A) in the case of non-convertible fixed income instruments, the    
lower of the principal amount or liquidation preferences and the market value   
thereof or (B) in the case of any other Moody's Eligible Assets, the market     
value thereof, divided by the applicable Moody's Discount Factor.               

   "Dividend-Disbursing Agent" means State Street Bank and Trust Company and
its successors or any other paying agent appointed by the Fund.                 

"Dividend Payment Date" has the meaning set forth on page 24 of this  
Prospectus.                                                                     

"Fund" means The Gabelli Global Multimedia Trust Inc., a Maryland     
corporation.                                                                    

"Liquidation Payment" has the meaning set forth on page 26 of this    
Prospectus.                                                                     

"Moody's" means Moody's Investors Service, Inc.                       

   "Moody's Discount Factor" means, with respect to a Moody's Eligible Asset
specified below, the numbers set forth in the SAI under the heading "Moody's    
Discount Factors."                                                              

"Moody's Eligible Assets" means:                                      

     i. cash (including, for this purpose, receivables for investments sold to a
counterparty whose senior debt securities are rated at least Baa3 by Moody's or 
a counterparty approved by Moody's and payable within five Business Days        
following such Valuation Date and dividends and interest receivable within 70   
days on investments);                                                           

ii. Short-Term Money Market Instruments;                              

   iii. commercial paper that is not includible as a Short-Term Money Market
Instrument having on the Valuation Date a rating from Moody's of at least P-1   
and maturing within 270 days;                                                   

iv. preferred stocks (A) which either (1) are issued by issuers whose 
senior debt securities are rated at least Baa1 by Moody's or (2) are rated at   
least "baa3" by Moody's (or in the event an issuer's senior debt securities or  
preferred stock is not rated by Moody's, which either (1) are issued by an      
issuer whose senior debt securities are rated at least A- by S&P or (2) are     
rated at least A- by S&P and for this purpose have been assigned a Moody's      
equivalent rating of at least "baa3"), (B) of issuers which have (or, in the    
case of issuers which are special purpose corporations, whose parent companies  
have) common stock listed on the NYSE, the American Stock Exchange or the NASDAQ
National Market System, (C) which have a minimum issue size (when taken together
with other of the issuer's issues of similar tenor) of $50,000,000, (D) which   
have paid cash dividends consistently during the preceding three-year period    
(or, in the case of new issues without a dividend history, are rated at least   
"a1" by Moody's or, if not rated by Moody's, are rated at least AA- by S&P), (E)
which pay cumulative cash dividends in U.S. dollars, (F) which are not          
convertible into any other class of stock and do not have warrants attached, (G)
which are not issued by issuers in the transportation industry and (H) in the   
case of auction rate preferred stocks, which are rated at least "aa3" by        
Moody's, or if not rated by Moody's, AAA by S&P or are otherwise approved in    
writing by Moody's and have never had a failed auction; provided, however, that 
for this purpose the aggregate market                                           

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value of the Fund's holdings of any issue of preferred stock will not be less   
than $500,000 nor more than $5,000,000;                                         

v. common stocks (A) which are traded on the NYSE, the American Stock 
Exchange or through the NASDAQ system in the over-the-counter market, (B) which,
if cash dividend paying, pay cash dividends in U.S. dollars, and (C) which may  
be sold without restriction by the Fund; provided, however, that (1) common     
stock which, while a Moody's Eligible Asset owned by the Fund, ceases paying any
regular cash dividend will no longer be considered a Moody's Eligible Asset     
after 71 days following the date of the announcement of such cessation, unless  
the issuer of the common stock has senior debt securities rated at least A3 by  
Moody's and (2) the aggregate market value of the Fund's holdings of the common 
stock of any issuer in excess of 4% in the case of utility common stock and 6%  
in the case of non-utility common stock of the number of outstanding shares     
times the market value of such common stock shall not be a Moody's Eligible     
Asset;                                                                          

   vi. securities denominated in any currency other than the U.S. dollar and
securities of issuers formed under the laws of jurisdictions other than the     
United States, its states and the District of Columbia for which there are      
dollar-denominated American Depository Receipts ("ADRs") which are traded in the
United States on exchanges or over-the-counter and are issued by banks formed   
under the laws of the United States, its states or the District of Columbia;    
provided, however, that the aggregate market value of the Fund's holdings of    
securities denominated in currencies other than the U.S. dollar and ADRs in     
excess of 6% of the aggregate market value of the outstanding shares of common  
stock of such issuer or in excess of 10% of the market value of the Moody's     
Eligible Assets with respect to issuers formed under the laws of any single such
non-U.S. jurisdiction shall not be a Moody's Eligible Asset;                    

vii. U.S. Government Obligations;                                     

   viii. corporate evidences of indebtedness (A) which are rated at least B3
(Caa subordinate) by Moody's (or, in the event the security is not rated by     
Moody's, the security is rated at least BB- by S&P and which for this purpose is
assigned a Moody's equivalent rating of one full rating category lower), with   
such rating confirmed on each Valuation Date, (B) which have a minimum issue    
size of at least (x) $100,000,000 if rated at least Baa3 or (y) $50,000,000 if  
rated B or Ba3, (C) which are U.S. dollar denominated and pay interest in cash  
in U.S. dollars, (D) which are not convertible or exchangeable into equity of   
the issuing corporation and have a maturity of not more than 30 years, (E) for  
which, if rated below Baa3, the aggregate market value of the Fund's holdings do
not exceed 10% of the aggregate market value of any individual issue of         
corporate evidences of indebtedness calculated at the time of original issuance,
(F) the cash flow from which must be controlled by an indenture trustee and (G) 
which are not issued in connection with a reorganization under any bankruptcy   
law;                                                                            

     ix. convertible corporate evidences of indebtedness (A) which are issued by
issuers whose senior debt securities are rated at least B2 by Moody's (or, in   
the event an issuer's senior debt securities are not rated by Moody's, which are
issued by issuers whose senior debt securities are rated at least BB by S&P and 
which for this purpose is assigned a Moody's equivalent rating of one full      
rating category lower), (B) which are convertible into common stocks which are  
traded on the NYSE or the American Stock Exchange or are quoted on the NASDAQ   
National Market System and (C) which, if cash dividend paying, pay cash         
dividends in U.S. dollars; provided, however, that once convertible corporate   
evidences of indebtedness have been converted into common stock, the common     
stock issued upon conversion must satisfy the criteria set forth in clause (v)  
above and other relevant criteria set forth in this definition in order to be a 
Moody's Eligible Asset;                                                         

provided, however, that the Fund's investments in auction rate preferred stocks 
described in clause (iv) above shall be included in Moody's Eligible Assets only
to the extent that the aggregate market value of such stocks does not exceed 10%
of the aggregate market value of all of the Fund's investments meeting the      
criteria set forth in clauses (i) through (viii) above less the aggregate market
value of those investments excluded from Moody's Eligible Assets pursuant to the
proviso appearing after clause (x) below; and                                   

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     (x) no assets which are subject to any lien or irrevocably deposited by the
Fund for the payment of amounts needed to meet the obligations described in     
clauses (i)(A) through (i)(D) of the definition of "Basic Maintenance Amount"   
may be includible in Moody's Eligible Assets.                                   

    Notwithstanding anything to the contrary in the preceding clauses (i)-(x),
the Fund's investment in preferred stock, common stock, corporate evidences of  
indebtedness and convertible corporate evidences of indebtedness shall not be   
treated as Moody's Eligible Assets except to the extent they satisfy the        
following diversification requirements (utilizing Moody's industry and          
sub-industry categories):                                                       

ISSUER:                                                                         

                                                        [Enlarge/Download Table]

                                                               NON-UTILITY        UTILITY    
                                                             MAXIMUM SINGLE   MAXIMUM SINGLE 
                   MOODY'S RATING(1)(2)                       ISSUER(3)(4)     ISSUER(3)(4)  
-----------------------------------------------------------  ---------------  ---------------
                                                                                             
"aaa", Aaa.................................................        100%             100%     
"aa", Aa...................................................         20%              20%     
"a", A.....................................................         10%              10%     
CS/CB, "Baa", Baa(5).......................................          6%               4%     
Ba.........................................................          4%               4%     
B1/B2......................................................          3%               3%     
B3 (Caa subordinate).......................................          2%               2%     

                                                        [Enlarge/Download Table]

                                                                          UTILITY       UTILITY  
                                                         NON-UTILITY      MAXIMUM       MAXIMUM  
                                                        MAXIMUM SINGLE  SINGLE SUB-     SINGLE   
                  MOODY'S RATING(1)                      INDUSTRY(3)    INDUSTRY(3)(6)  STATE(3) 
------------------------------------------------------  --------------  ------------    -------  
                                                                                                 
"aaa", Aaa............................................       100%           100%          100%   
"aa", Aa..............................................        60%            60%           20%   
"a", A................................................        40%            50%           10%(7)
CS/CB, "baa", Baa(5)..................................        20%            50%            7%(7)
Ba....................................................        12%            12%            0%   
B1/B2.................................................         8%             8%            0%   
B3 (Caa subordinate)..................................         5%             5%            0%   

---------------                                                                 

(1) The equivalent Moody's rating must be lowered one full rating category for  
  preferred stocks, corporate bonds and convertible corporate bonds rated by
S&P but not by Moody's.                                                 

(2) Corporate bonds from issues ranging $50,000,000 to $100,000,000 are limited 
to 20% of Moody's Eligible Assets.                                      

(3) The referenced percentages represent maximum cumulative totals only for the 
related Moody's rating category and each lower Moody's rating category. 

(4) Issuers subject to common ownership of 25% or more are considered as one    
name.                                                                   

(5) CS/CB refers to common stock and convertible corporate evidences of         
indebtedness, which are diversified independently from the rating level.

(6) In the case of utility common stock, utility preferred stock, utility,      
    evidences of indebtedness and utility convertible evidences of indebtedness,
   the definition of industry refers to sub-industries (electric, water, hydro
  power, gas, diversified). Investments in other sub-industries are eligible
    only to the extent that the combined sum represents a percentage position of
  Moody's Eligible Assets less than or equal to the percentage limits in the
diversification tables above.                                           

(7) Such percentage will be 15% in the case of utilities regulated by           
California, New York and Texas.                                         

"1933 Act" means The Securities Act of 1933, as amended.              

"1940 Act" means the Investment Company Act of 1940, as amended.      

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"Notice of Redemption" has the meaning set forth on page 26 of this   
Prospectus.                                                                     

    "Preferred Stock" means the preferred stock, par value $.001 per share, of
the Fund, and includes the Cumulative Preferred Stock.                          

  "Quarterly Valuation Date" means the last Valuation Date in March, June,
September and December of each year, commencing June, 1997.                     

     "Redemption Price" has the meaning set forth on page 25 of this Prospectus.

"SEC" means the Securities and Exchange Commission.                   

"Short-Term Money Market Instruments" means the following types of    
instruments if, on the date of purchase or other acquisition thereof by the Fund
(or, in the case of an instrument specified by clauses (i) and (ii) below, on   
the Valuation Date), the remaining terms to maturity thereof are not in excess  
of 90 days:                                                                     

(i) U.S. Government Obligations;                                      

    (ii) commercial paper that is rated at the time of purchase or acquisition
and the Valuation Date at least P-1 by Moody's and is issued by an issuer (or   
guaranteed or supported by a person or entity other than the issuer) whose      
long-term unsecured debt obligations are rated at least Aa3 by Moody's;         

    (iii) demand or time deposits in or certificates of deposit of or banker's
acceptances issued by (A) a depository institution or trust company incorporated
under the laws of the United States of America or any state thereof or the      
District of Columbia or (B) a United States branch office or agency of a foreign
depository institution (provided that such branch office or agency is subject to
banking regulation under the laws of the United States, any state thereof or the
District of Columbia) if, in each case, the commercial paper, if any, and the   
long-term unsecured debt obligations (other than such obligations the ratings of
which are based on the credit of a person or entity other than such depository  
institution or trust company) of such depository institution or trust company at
the time of purchase or acquisition and the Valuation Date, have (1) credit     
ratings from Moody's of at least P-1 in the case of commercial paper and (2)    
credit ratings from Moody's of at least Aa3 in the case of long-term unsecured  
debt obligations; provided, however, that in the case of any such investment    
that matures in no more than one Business Day from the date of purchase or other
acquisition by the Fund, all of the foregoing requirements will be applicable   
except that the required long-term unsecured debt credit rating of such         
depository institution or trust company from Moody's will be at least A2; and   
provided, further, however, that the foregoing credit rating requirements will  
be deemed to be met with respect to a depository institution or trust company if
(1) such depository institution or trust company is the principal depository    
institution in a holding company system, (2) the commercial paper, if any, of   
such depository institution or trust company is not rated below P-1 by Moody's  
and (3) the holding company will meet all of the foregoing credit rating        
requirements (including the preceding proviso in the case of investments that   
mature in no more than one Business Day from the date of purchase or other      
acquisition by the Fund);                                                       

    (iv) repurchase obligations with respect to any U.S. Government Obligation
entered into with a depository institution, trust company or securities dealer  
(acting as principal) which is rated (A) at least Aa3 if the maturity is three  
months or less, (B) at least A1 if the maturity is two months or less and (C) at
least A2 if the maturity is one month or less; and                              

   (v) Eurodollar demand or time deposits in, or certificates of deposit of,
the head office or the London branch office of a depository institution or trust
company meeting the credit rating requirements of commercial paper and long-term
unsecured debt obligations specified in clause (iii) above, provided that the   
interest receivable by the Fund will be payable in U.S. dollars and will not be 
subject to any withholding or similar taxes.                                    

"S&P" means Standard & Poor's Ratings Services.                       

    "U.S. Government Obligations" means direct non-callable obligations of the
United States, provided that such direct obligations are entitled to the full   
faith and credit of the United States and that any such obligations, other than 
United States Treasury Bills and U.S. Treasury Securities Strips, provide for   
the periodic payment of interest and the full payment of principal at maturity. 

    "Valuation Date" means the day specified by the Board of Directors for the
weekly determination of net asset value of the Fund.                            

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======================================================                          

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY        
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN  
THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR 
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS      
HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY        
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE       
AFFAIRS OF THE FUND SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED     
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES   
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY        
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES  
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH     
SECURITIES IN ANY CIRCUMSTANCE IN WHICH SUCH AN OFFER OR SOLICITATION IS        
UNLAWFUL.                                                                       

------------------------

TABLE OF CONTENTS 

                                                                [Download Table]

                                        PAGE
                                        ----
                                            
Prospectus Summary....................    3 
Financial Highlights..................   10 
Use of Proceeds.......................   11 
Capitalization........................   11 
The Fund..............................   12 
Investment Objectives and Policies....   12 
Special Investment Methods............   14 
Risk Factors and Special                    
  Considerations......................   18 
Management of the Fund................   20 
Dividend and Distribution Policy......   22 
Description of Cumulative Preferred         
  Stock...............................   22 
Description of Capital Stock and Other      
  Securities..........................   29 
Taxation..............................   29 
Certain Provisions of the Charter and       
  By-laws.............................   33 
Custodian, Transfer Agent and               
  Dividend-Disbursing Agent...........   33 
Underwriting..........................   34 
Legal Matters.........................   35 
Experts...............................   35 
Additional Information................   35 
Table of Contents of SAI..............   36 
Glossary..............................   37 

======================================================                          

======================================================                          

1,200,000 SHARES

(GLOBAL MULTIMEDIA TRUST INC. LOGO) 
  % CUMULATIVE PREFERRED STOCK

------------

PROSPECTUS

MAY   , 1997

--------------- 

SMITH BARNEY INC. 

GABELLI & COMPANY, INC. 
======================================================                          

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A 
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
  THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
    SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
   UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.                                                    

SUBJECT TO COMPLETION, DATED MAY 23, 1997 

THE GABELLI GLOBAL

MULTIMEDIA TRUST INC. 

ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
TELEPHONE 1-800-GABELLI (1-800-422-3554)

STATEMENT OF ADDITIONAL INFORMATION 

MAY   , 1997

     This Statement of Additional Information (the "SAI") relates to The Gabelli
Global Multimedia Trust Inc. (the "Fund"), and is not a prospectus. This SAI    
contains additional and more detailed information and should be read in         
conjunction with the balance of the Fund's registration statement. Additional   
copies of the SAI may be obtained without charge by writing or telephoning the  
Fund at the address and telephone number set forth above.                       

TABLE OF CONTENTS 

                                                        [Enlarge/Download Table]

                                                                                       PAGE
                                                                                       ----
                                                                                           
INVESTMENT OBJECTIVES AND POLICIES....................................................  B-2
INVESTMENT RESTRICTIONS............................................................... B-11
MANAGEMENT OF THE FUND................................................................ B-12
THE ADVISER........................................................................... B-17
PORTFOLIO TRANSACTIONS................................................................ B-18
TAXATION.............................................................................. B-19
MOODY'S DISCOUNT FACTORS.............................................................. B-23
NET ASSET VALUE....................................................................... B-26
GENERAL INFORMATION................................................................... B-27
BENEFICIAL OWNER...................................................................... B-28
FINANCIAL STATEMENTS.................................................................. B-28

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INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT OBJECTIVES                                                           

 The Fund's primary investment objective is long-term growth of capital.
Income is a secondary objective. Under normal market conditions, the Fund will  
invest at least 65% of its total assets in common stock and other securities of 
companies in the telecommunications, media, publishing and entertainment        
industries. See "Investment Objectives and Policies" in the Prospectus.         

INVESTMENT PRACTICES                                                            

  CORPORATE REORGANIZATIONS.  Subject to the Fund's policy of investing at
least 65% of its total assets in companies involved in the telecommunications,  
media, publishing and entertainment industries, the Fund may without limit      
invest 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 reorganization proposal has been announced if, in 
the judgement of Gabelli Funds, Inc. (the "Adviser"), there is a reasonable     
prospect of capital appreciation significantly greater than the brokerage and   
other transaction expenses involved.                                            

   In general, securities which are the subject of such an offer or proposal
sell at a premium to their historic market price immediately prior to the       
announcement of the offer or may also discount what the stated or appraised     
value of the security would be if the contemplated transaction were approved or 
consummated. Such investments may be advantageous when: the discount            
significantly overstates the risk of the contingencies involved; the market     
significantly undervalues the securities, assets or cash to be received by      
shareholders of the prospective portfolio company as a result of the            
contemplated transaction; or the market fails adequately to recognize the       
possibility that the offer or proposal may be replaced or superseded by an offer
or proposal of greater value. The evaluation of such contingencies requires     
unusually broad knowledge and experience on the part of the Adviser which must  
appraise not only the value of the issuer and its component businesses as well  
as the assets or securities to be received as a result of the contemplated      
transaction but also the financial resources and business motivation of the     
offeror and the dynamics and business climate when the offer or proposal is in  
process.                                                                        

  TEMPORARY INVESTMENTS.  Although under normal market conditions at least
65% of the Fund's assets will consist of common stock and other securities of   
foreign and domestic companies involved in the telecommunications, media,       
publishing and entertainment industries, when a temporary defensive posture is  
believed by the Adviser to be warranted ("temporary defensive periods"), the    
Fund may hold without limitation cash or invest its assets in money market      
instruments and repurchase agreements in respect of those instruments. The money
market instruments in which the Fund may invest are obligations of the United   
States government, its agencies or instrumentalities ("U.S. Government          
Securities"); commercial paper rated A-1 or higher by Standard & Poor's Rating's
Services ("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's"); and 
certificates of deposit and bankers' acceptances issued by domestic branches of 
U.S. banks that are members of the Federal Deposit Insurance Corporation. The   
Fund may also invest up to 10% of the market value of its total assets during   
temporary defensive periods in shares of money market mutual funds that invest  
primarily in U.S. Government Securities and repurchase agreements in respect of 
those securities. Money market mutual funds are investment companies and the    
investments by the Fund in those companies are subject to certain other         
limitations. See "Investment Restrictions." As a shareholder in a mutual fund,  
the Fund will bear its ratable share of the fund's expenses, including          
management fees, and will remain subject to payment of the fees to the Adviser  
with respect to assets so invested.                                             

    LOWER RATED SECURITIES.  The Fund may invest up to 10% of its total assets
in fixed-income securities rated in the lower rating categories of recognized   
statistical rating agencies, such as securities rated CCC or lower by S&P or Caa
or lower by Moody's, or non-rated securities of comparable quality. These debt  
securities are predominantly speculative and involve major risk exposure to     
adverse conditions and are often referred to in the financial press as "junk    
bonds."                                                                         

 B-2

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     Generally, such lower rated securities and unrated securities of comparable
quality offer a higher current yield than is offered by higher rated securities,
but also (i) will likely have some quality and protective characteristics that, 
in the judgment of the rating organizations, are outweighed by large            
uncertainties or major risk exposures to adverse conditions and (ii) are        
predominantly speculative with respect to the issuer's capacity to pay interest 
and repay principal in accordance with the terms of the obligation. The market  
values of certain of these securities also tend to be more sensitive to         
individual corporate developments and changes in economic conditions than higher
quality bonds. In addition, such lower rated securities and comparable unrated  
securities generally present a higher degree of credit risk. The risk of loss   
due to default by these issuers is significantly greater because such lower     
rated securities and unrated securities of comparable quality generally are     
unsecured and frequently are subordinated to the prior payment of senior        
indebtedness. In light of these risks, the Adviser, in evaluating the           
creditworthiness of an issue, whether rated or unrated, will take various       
factors into consideration, which may include, as applicable, the issuer's      
financial resources, its sensitivity to economic conditions and trends, the     
operating history of and the community support for the facility financed by the 
issue, the ability of the issuer's management and regulatory matters.           

  In addition, the market value of securities in lower rated categories is
more volatile than that of higher quality securities, and the markets in which  
such lower rated or unrated securities are traded are more limited than those in
which higher rated securities are traded. The existence of limited markets may  
make it more difficult for the Fund to obtain accurate market quotations for    
purposes of valuing its portfolio and calculating its net asset value. Moreover,
the lack of a liquid trading market may restrict the availability of securities 
for the Fund to purchase and may also have the effect of limiting the ability of
the Fund to sell securities at their fair market value to respond to changes in 
the economy or the financial markets.                                           

Lower rated debt obligations also present risks based on payment      
expectations. If an issuer calls the obligation for redemption (often a typical 
feature of fixed income securities), the Fund may have to replace the security  
with a lower yielding security, resulting in a decreased return for investors.  
Also, as the principal value of bonds moves inversely with movements in interest
rates, in the event of rising interest rates the value of the securities held by
the Fund may decline proportionately more than a portfolio consisting of higher 
rated securities. Investments in zero coupon bonds may be more speculative and  
subject to greater fluctuations in value due to changes in interest rates than  
bonds that pay interest currently.                                              

The Fund may invest in securities of issuers in default. The Fund will
invest in securities of issuers in default only when the Adviser believes that  
such issuers will honor their obligations or emerge from bankruptcy protection  
and the value of these securities will appreciate. By investing in securities of
issuers in default, the Fund bears the risk that these issuers will not continue
to honor their obligations or emerge from bankruptcy protection or that the     
value of the securities will not appreciate.                                    

In addition to using recognized rating agencies and other sources, the
Adviser also performs its own analysis 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 Adviser may also consider general       
business conditions, anticipated changes in interest rates and the outlook for  
specific industries.                                                            

     Subsequent to its purchase by the Fund, an issue of securities may cease to
be rated or its rating may be reduced. In addition, it is possible that         
statistical rating agencies might not change their ratings of a particular issue
or reflect subsequent events on a timely basis. 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 Adviser will consider these
events in determining whether the Fund should continue to hold the securities.  

     The market for certain lower rated and comparable unrated securities has in
the past experienced a major economic recession. The recession adversely        
affected the value of such securities as well as the ability of certain issuers 
of such securities to repay principal and pay interest thereon. The market for  
those securities could react in a similar fashion in the event of any future    
economic recession.                                                             

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  As a result of all these factors, the net asset value of the Fund to the
extent it invests in high yield bonds, is expected to be more volatile than the 
net asset value of funds which invest solely in higher rated debt securities.   

    OPTIONS.  A call option is a contract that, in return for a premium, gives
the holder of the option the right to buy from the writer of the call option the
security or currency 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 or  
currency upon payment of the exercise price during the option period. A put     
option is the reverse of a call option, giving the holder the right to sell the 
security or currency to the writer and obligating the writer to purchase the    
underlying security or currency from the holder.                                

A call option is "covered" if the Fund owns the underlying instrument 
covered by the call or has an absolute and immediate right to acquire that      
instrument without additional cash consideration (or for additional cash        
consideration held in a segregated account by its custodian) upon conversion or 
exchange of other instrument held in its portfolio. A call option is also       
covered if the Fund holds a call on the same instrument as the call written     
where the exercise price of the call held is (1) equal to or less than the      
exercise price of the call written or (2) greater than the exercise price of the
call written if the difference is maintained by the Fund in cash, U.S.          
Government Securities or other high grade short-term obligations in a segregated
account held with its custodian. A put option is "covered" if the Fund maintains
cash or other high grade short-term obligations with a value equal to the       
exercise price in a segregated account held with its custodian, or else holds a 
put on the same instrument as the put written where the exercise price of the   
put held is equal to or greater than the exercise price of the put written.     

If the Fund has written an option, it may terminate its obligation by 
effecting a closing purchase transaction. This is accomplished by purchasing an 
option of the same series as the option previously written. However, once it has
been assigned an exercise notice, the Fund will be able to effect a closing     
purchase transaction. Similarly, if the Fund is the holder of an option it may  
liquidate its position by effecting a closing sale transaction. This is         
accomplished by selling an option of the same series as the option previously   
purchased. There can be no assurance that a closing purchase or sale transaction
can be effected when the Fund so desires.                                       

   The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is 
more than the premium paid to purchase the option; the Fund will realize a loss 
from a closing transaction if the price of the transaction is more than the     
premium received from writing the option or is less than the premium paid to    
purchase the option. Since call option prices generally reflect increases in the
price of the underlying security, any loss resulting from the repurchase of a   
call option may also be wholly or partially offset by unrealized appreciation of
the underlying security. Other principal factors affecting the market value of a
put or a call option include supply and demand, interest rates, the current     
market price and price volatility of the underlying security and the time       
remaining until the expiration date. Gains and losses on investments in options 
depend, in part, on the ability of the Investment Adviser to predict correctly  
the effect of these factors. The use of options cannot serve as a complete hedge
since the price movement of securities underlying the options will not          
necessarily follow the price movements of the portfolio securities subject to   
the hedge.                                                                      

   An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Fund will       
generally purchase or write only those options for which there appears to be an 
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. In such event, it might not be
possible to effect closing transactions in particular options, so that the Fund 
would have to exercise its options in order to realize any profit and would     
incur brokerage commissions upon the exercise of call options and upon the      
subsequent disposition of underlying securities for the exercise of put options.
If the Fund, as a covered call option writer, is unable to effect a closing     
purchase transaction in a secondary market, it will not be able to sell the     
underlying security until the option expires or it delivers the underlying      
security upon exercise or otherwise covers the position.                        

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   In addition to options on securities, the Fund may also purchase and sell
call and put options on securities indices. A stock index reflects in a single  
number the market value of many different stocks. Relative values are assigned  
to the stocks included in an index and the index fluctuates with changes in the 
market values of the stocks. The options give the holder the right to receive a 
cash settlement during the term of the option based on the difference between   
the exercise price and the value of the index. By writing a put or call option  
on a securities index, the Fund is obligated, in return for the premium         
received, to make delivery of this amount. The Fund may offset its position in  
the stock index options prior to expiration by entering into a closing          
transaction on an exchange or it may let the option expire unexercised.         

     The Fund also may buy or sell and call options on foreign currencies. A put
option on a foreign currency gives the purchaser of the option the right to sell
a foreign currency at the exercise price until the option expires. A call option
on a foreign currency gives the purchaser of the option the right to purchase   
the currency at the exercise price until the option expires. Currency options   
traded on U.S. or other exchanges may be subject to position limits which may   
limit the ability of the Fund to reduce foreign currency risk using such        
options. Over-the-counter options differ from exchange-traded options in that   
they are two-party contracts with price and other terms negotiated between buyer
and seller and generally do not have as much market liquidity as exchange-traded
options. Over-the-counter options are illiquid securities.                      

   Use of options on securities indices entails the risk that trading in the
options may be interrupted if trading in certain securities included in the     
index is interrupted. The Fund will not purchase these options unless the       
Adviser is satisfied with the development, depth and liquidity of the market and
the Adviser believes the options can be closed out.                             

  Price movements in the portfolio of the Fund may not correlate precisely
with movements in the level of an index and, therefore, the use of options on   
indexes cannot serve as a complete hedge and will depend, in part, on the       
ability of the Adviser to predict correctly movements in the direction of the   
stock market generally or of a particular industry. Because options on          
securities indexes require settlement in cash, the Adviser may be forced to     
liquidate portfolio securities to meet settlement obligations.                  

     The Fund has qualified, and intends to continue to qualify, as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the    
"Code"). One requirement for such qualification is that the Fund must derive    
less than 30% of its gross income from gains from the sale or other disposition 
of securities held for less than three months. Therefore, the Fund may be       
limited in its ability to engage in options transactions.                       

    Although the Adviser will attempt to take appropriate measures to minimize
the risks relating to the Fund's writing of put and call options, there can be  
no assurance that the Fund will succeed in any option writing program it        
undertakes.                                                                     

 FUTURES CONTRACTS AND OPTIONS ON FUTURES.  The Fund will not enter into
futures contracts or options on futures contracts unless (i) the aggregate      
initial margins and premiums do not exceed 5% of the fair market value of its   
assets and (ii) the aggregate market value of its outstanding futures contracts 
and the market value of the currencies and futures contracts subject to         
outstanding options written by the Fund, as the case may be, do not exceed 50%  
of the market value of its total assets. It is anticipated that these           
investments, if any, will be made by the Fund solely for the purpose of bona    
fide hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Such investments will only be made  
if they are economically appropriate to the reduction of risks involved in the  
management of the Fund. In this regard, the Fund may enter into futures         
contracts or options on futures for the purchase or sale of securities indices  
or other financial instruments including but not limited to U.S. Government     
Securities.                                                                     

  A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contractual obligation to deliver the assets underlying the     
contract at a specified price at a specified future time. A "purchaser" of a    
futures contract (or a "long" futures position) means the assumption of a       
contractual obligation to acquire the assets underlying the contract at a       
specified future time. Certain futures contracts, including stock and bond index
futures, are settled on a net cash payment basis rather than by the sale and    
delivery of the assets underlying the futures contracts.                        

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    No consideration will be paid or received by the Fund upon the purchase or
sale of a futures contract. Initially, the Fund will be required to deposit with
the broker an amount of cash or cash equivalents equal to approximately 1% to   
10% of the contract amount (this amount is subject to change by the exchange or 
board of trade on which the contract is traded and brokers or members of such   
board of trade may charge a higher amount). This amount is known as "initial    
margin" and is in the nature of a performance bond or good faith deposit on the 
contract. Subsequent payments, known as "variation margin," to and from the     
broker will be made daily as the price of the index or security underlying the  
futures contract fluctuates. At any time prior to the expiration of a futures   
contract, the Fund may elect to close the position by taking an opposite        
position, which will operate to terminate its existing position in the contract.

  An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract at a specified 
exercise price at any time to the expiration of the option. Upon exercise of an 
option, the delivery of the futures position by the writer of the option to the 
holder of the option will be accompanied by delivery of the accumulated balance 
in the writer's futures margin account attributable to that contract, which     
represents the amount by which the market price of the futures contract exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option on the futures contract. The potential loss related to the        
purchase of an option on futures contracts is limited to the premium paid for   
the option (plus transaction costs). Because the value of the option purchased  
is fixed at the point of sale, there are no daily cash payments by the purchaser
to reflect changes in the value of the underlying contract; however, the value  
of the option does change daily and that change would be reflected in the net   
assets of the Fund.                                                             

Futures and options on futures entail certain risks, including but not
limited to the following: no assurance that futures contracts or options on     
futures can be offset at favorable prices, possible reduction of the yield of   
the Fund due to the use of hedging, possible reduction in value of both the     
securities hedged and the hedging instrument, possible lack of liquidity due to 
daily limits on price fluctuations, imperfect correlation between the contracts 
and the securities being hedged, losses from investing in futures transactions  
that are potentially unlimited and the segregation requirements described below.

In the event the Fund sells a put option or enters into long futures  
contracts, under current interpretations of the Investment Company Act of 1940, 
as amended (the "1940 Act") an amount of cash, U.S. Government Securities or    
other high grade debt securities equal to the market value of the contract must 
be deposited and maintained in a segregated account with the custodian of the   
Fund to collateralize the positions, thereby ensuring that the use of the       
contract is unleveraged. For short positions in futures contracts and sales of  
call options, the Fund may establish a segregated account (not with a futures   
commission merchant or broker) with cash, U.S. Government Securities or other   
high grade debt securities that, when added to amounts deposited with a futures 
commission merchant or a broker as margin, equal the market value of the        
instruments or currency underlying the futures contract or call options,        
respectively (but are not less than the stock price of the call option or the   
market price at which the short positions were established).                    

     Interest Rate Futures Contracts and Options Thereon.  The Fund may purchase
or sell interest rate futures contracts to take advantage of or to protect the  
Fund against fluctuations in interest rates affecting the value of debt         
securities which the Fund holds or intends to acquire. For example, if interest 
rates are expected to increase, the Fund might sell futures contracts on debt   
securities, the values of which historically have a high degree of positive     
correlation to the values of the Fund's portfolio securities. Such a sale would 
have an effect similar to selling an equivalent value of the Fund's portfolio   
securities. If interest rates increase, the value of the Fund's portfolio       
securities will decline, but the value of the futures contracts to the Fund will
increase at approximately an equivalent rate thereby keeping the net asset value
of the Fund from declining as much as it otherwise would have. The Fund could   
accomplish similar results by selling debt securities with longer maturities and
investing in debt securities with shorter maturities when interest rates are    
expected to increase. However, since the futures market may be more liquid than 
the cash market, the use of futures contracts as a risk management technique    
allows the Fund to maintain a defensive position without having to sell its     
portfolio securities.                                                           

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     Similarly, the Fund may purchase interest rate futures contracts when it is
expected that interest rates may decline. The purchase of futures contracts for 
this purpose constitutes a hedge against increases in the price of debt         
securities (caused by declining interest rates) which the Fund intends to       
acquire. Since fluctuations in the value of appropriately selected futures      
contracts should approximate that of the debt securities that will be purchased,
the Fund can take advantage of the anticipated rise in the cost of the debt     
securities without actually buying them. Subsequently, the Fund can make its    
intended purchase of the debt securities in the cash market and currently       
liquidate its futures position. To the extent the Fund enters into futures      
contracts for this purpose, it will maintain in a segregated asset account with 
the Fund's custodian, assets sufficient to cover the Fund's obligations with    
respect to such futures contracts, which will consist of cash or other liquid   
securities from its portfolio in an amount equal to the difference between the  
fluctuating market value of such futures contracts and the aggregate value of   
the initial margin deposited by the Fund with its custodian with respect to such
futures contracts.                                                              

The purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security. Depending  
on the pricing of the option compared to either the price of the futures        
contract upon which it is based or the price of the underlying debt securities, 
it may or may not be less risky than ownership of the futures contract or       
underlying debt securities. As with the purchase of futures contracts, when the 
Fund is not fully invested it may purchase a call option on a futures contract  
to hedge against a market advance due to declining interest rates.              

The purchase of a put option on a futures contract is similar to the  
purchase of protective put options on portfolio securities. The Fund will       
purchase a put option on a futures contract to hedge the Fund's portfolio       
against the risk of rising interest rates and consequent reduction in the value 
of portfolio securities.                                                        

  The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the securities which are deliverable upon     
exercise of the futures contract. If the futures price at expiration of the     
option is below the exercise price, the Fund will retain the full amount of the 
option premium which provides a partial hedge against any decline that may have 
occurred in the Fund's portfolio holdings. The writing of a put option on a     
futures contract constitutes a partial hedge against increasing prices of the   
securities which are deliverable upon exercise of the futures contract. If the  
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which provides a partial 
hedge against any increase in the price of debt securities which the Fund       
intends to purchase. If a put or call option the Fund has written is exercised, 
the Fund will incur a loss which will be reduced by the amount of the premium it
received. Depending on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its futures positions, the 
Fund's losses from options on futures it has written may to some extent be      
reduced or increased by changes in the value of its portfolio securities.       

    Currency Futures and Options Thereon.  Generally, foreign currency futures
contracts and options thereon are similar to the interest rate futures contracts
and options thereon discussed previously. By entering into currency futures and 
options thereon, the Fund will seek to establish the rate at which it will be   
entitled to exchange U.S. dollars for another currency at a future time. By     
selling currency futures, the Fund will seek to establish the number of dollars 
it will receive at delivery for a certain amount of a foreign currency. In this 
way, whenever the Fund anticipates a decline in the value of a foreign currency 
against the U.S. dollar, the Fund can attempt to "lock in" the U.S. dollar value
of some or all of the securities held in its portfolio that are denominated in  
that currency. By purchasing currency futures, the Fund can establish the number
of dollars it will be required to pay for a specified amount of a foreign       
currency in a future month. Thus, if the Fund intends to buy securities in the  
future and expects the U.S. dollar to decline against the relevant foreign      
currency during the period before the purchase is effected, the Fund can attempt
to "lock in" the price in U.S. dollars of the securities it intends to acquire. 

  The purchase of options on currency futures will allow the Fund, for the
price of the premium and related transaction costs it must pay for the option,  
to decide whether or not to buy (in the case of a call option) or to sell (in   
the case of a put option) a futures contract at a specified price at any time   
during the period before the option expires. If the Adviser, in purchasing an   
option, has been correct in its judgment concerning the direction in which the  
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exercise the option and thereby take a futures position to hedge against the    
risk it had correctly anticipated or close out the option position at a gain    
that will offset, to some extent, currency exchange losses otherwise suffered by
the Fund. If exchange rates move in a way the Fund did not anticipate, however, 
the Fund will have incurred the expense of the option without obtaining the     
expected benefit; any such movement in exchange rates may also thereby reduce   
rather than enhance the Fund's profits on its underlying securities             
transactions.                                                                   

     Securities Index Futures Contracts and Options Thereon.  Purchases or sales
of securities index futures contracts are used for hedging purposes to attempt  
to protect the Fund's current or intended investments from broad fluctuations in
stock or bond prices. For example, the Fund may sell securities index futures   
contracts in anticipation of or during a market decline to attempt to offset the
decrease in market value of the Fund's securities portfolio that might otherwise
result. If such decline occurs, the loss in value of portfolio securities may be
offset, in whole or part, by gains on the futures position. When the Fund is not
fully invested in the securities market and anticipates a significant market    
advance, it may purchase securities index futures contracts in order to gain    
rapid market exposure that may, in part or entirely, offset increases in the    
cost of securities that the Fund intends to purchase. As such purchases are     
made, the corresponding positions in securities index futures contracts will be 
closed out. The Fund may write put and call options on securities index futures 
contracts for hedging purposes.                                                 

  LIMITATIONS ON THE PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS. Subject to the guidelines of the Board of Directors, the Fund
may engage in transactions in futures contracts and options hereon only for bona
fide hedging, yield enhancement and risk management purposes, in each case in   
accordance with the rules and regulations of the CFTC, and not for speculation. 

  Regulations of the CFTC applicable to the Fund permit the Fund's futures
and options on futures transactions to include (i) bona fide hedging            
transactions without regard to the percentage of the Fund's assets committed to 
margin and option premiums, and (ii) non-hedging transactions, provided that the
Fund not enter into such non-hedging transactions if, immediately thereafter,   
the sum of the amount of initial margin deposits on the Fund's existing futures 
positions and option 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.                                                

In addition, investment in future contracts and related options may be
limited by the applicable Rating Agency Guidelines.                             

FORWARD CURRENCY EXCHANGE CONTRACTS.  The Fund may engage in currency 
transactions otherwise than on futures exchanges to protect against future      
changes in the level of future currency exchange rates. The Fund will conduct   
such currency exchange transactions either 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 forward contracts to purchase or sell currency. A forward contract
on foreign currency involves 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 risk of shifting of a forward currency contract will be           
substantially the same as a futures contract having similar terms. The Fund's   
dealing in forward currency exchange will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging is the        
purchase or sale of forward currency with respect to specific receivables or    
payables of the Fund generally arising in connection with the purchase or sale  
of its portfolio securities and accruals of interest receivable and Fund        
expenses. Position hedging is the forward sale of currency with respect to      
portfolio security positions denominated or quoted in that currency or in a     
currency bearing a high degree of positive correlation to the value of that     
currency.                                                                       

   The Fund may not position hedge with respect to a particular currency for
an amount greater than the aggregate market value (determined at the time of    
making any sale of forward currency) of the securities held in its portfolio    
denominated or quoted in, or currently convertible into, such currency. If the  
Fund enters into a position hedging transaction, the Fund's custodian or        
subcustodian will place cash or other liquid securities in a segregated account 
of the Fund in an amount equal to the value of the Fund's total assets committed
to the consummation of the given forward contract. If the value of the          
securities placed in the segregated account                                     

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declines, additional cash or securities will be placed in the account so that   
the value of the account will, at all times, equal the amount of the Fund's     
commitment with respect to the forward contract.                                

   At or before the maturity of a forward sale contract, the Fund may either
sell a portfolio security and make delivery of the currency, or retain the      
security and offset its contractual obligations to deliver the currency by      
purchasing a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency which it is obligated to         
delivery. If the Fund retains the portfolio security and engages in an          
offsetting transaction, the Fund, at the time of execution of the offsetting    
transaction, will incur a gain or a loss to the extent that movement has        
occurred in forward contract prices. Should forward prices decline during the   
period between the Fund's entering into a forward contract for the sale of a    
currency and the date it enters into an offsetting contract for the purchase of 
the currency, the Fund will realize a gain to the extent the price of the       
currency it has agreed to purchase is less than the price of the currency it has
agreed to sell. Should forward prices increase, the Fund will suffer a loss to  
the extent the price of the currency it has agreed to purchase exceeds the price
of the currency it has agreed to sell. Closing out forward purchase contracts   
involves similar offsetting transactions.                                       

The cost to the Fund of engaging in currency transactions varies with 
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward transactions in currency     
exchange are usually conducted on a principal basis, no fees or commissions are 
involved. The use of foreign currency contracts does not eliminate fluctuations 
in the underlying prices of the securities, but it does establish a rate of     
exchange that can be achieved in the future. In addition, although forward      
currency contracts limit the risk of loss due to a decline in the value of the  
hedged currency, they also limit any potential gain that might result if the    
value of the currency increases.                                                

   If a decline in any currency is generally anticipated by the Adviser, the
Fund may not be able to contract to sell the currency at a price above the level
to which the currency is anticipated to decline.                                

   SPECIAL RISK CONSIDERATIONS RELATING TO FUTURES AND OPTIONS THEREON.  The
Fund's ability to establish and close out positions in futures contracts and    
options thereon will be subject to the development and maintenance of liquid    
markets. Although the Fund generally will purchase or sell only those futures   
contracts and options thereon for which there appears to be a liquid market,    
there is no assurance that a liquid market on an exchange will exist for any    
particular futures contract or option thereon at any particular time. In the    
event no liquid market exists for a particular futures contract or option       
thereon in which the Fund maintains a position, it will not be possible to      
effect a closing transaction in that contract or to do so at a satisfactory     
price and the Fund would have to either make or take delivery under the futures 
contract or, in the case of a written option, wait to sell the underlying       
securities until the option expires or is exercised or, in the case of a        
purchased option, exercise the option. In the case of a futures contract or an  
option thereon which the Fund has written and which the Fund is unable to close,
the Fund would be required to maintain margin deposits on the futures contract  
or option thereon and to make variation margin payments until the contract is   
closed.                                                                         

Successful use of futures contracts and options thereon and forward   
contracts by the Fund is subject to the ability of the Adviser to predict       
correctly movements in the direction of interest and foreign currency rates. If 
the Adviser's expectations are not met, the Fund will be in a worse position    
than if a hedging strategy had not been pursued. For example, if the Fund has   
hedged against the possibility of an increase in interest rates which would     
adversely affect the price of securities in its portfolio and the price of such 
securities increases instead, the Fund will lose part or all of the benefit of  
the increased value of its securities because it will have offsetting losses in 
its futures positions. In addition, in such situations, if the Fund has         
insufficient cash to meet daily variation margin requirements, it may have to   
sell securities to meet the requirements. These sales may be, but will not      
necessarily be, at increased prices which reflect the rising market. The Fund   
may have to sell securities at a time when it is disadvantageous to do so.      

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    ADDITIONAL RISKS OF FOREIGN OPTIONS, FUTURES CONTRACTS, OPTIONS ON FUTURES
CONTRACTS AND FORWARD CONTRACTS.  Options, futures contracts and options thereon
and forward contracts on securities and currencies may be traded on foreign     
exchanges. Such transactions may not be regulated as effectively as similar     
transactions in the U.S., may not involve a clearing mechanism and related      
guarantees, and are subject to the risk of governmental actions affecting       
trading in, or the prices of, foreign securities. The value of such positions   
also could be adversely affected by (i) other complex foreign political, legal  
and economic factors, (ii) lesser availability than in the U.S. of data on which
to make trading decisions, (iii) delays in the Fund's ability to act upon       
economic events occurring in the foreign markets during non-business hours in   
the U.S., (iv) the imposition of different exercise and settlement terms and    
procedures and margin requirements than in the U.S. and (v) lesser trading      
volume.                                                                         

   Exchanges on which options, futures and options on futures are traded may
impose limits on the positions that the Fund may take in certain circumstances. 

    RISKS OF CURRENCY TRANSACTIONS.  Currency transactions are also subject to
risks different from those of other portfolio transactions. Because currency    
control is of great importance to the issuing governments and influences        
economic planning and policy, purchases and sales of currency and related       
instruments can be adversely affected by government exchange controls,          
limitations or restrictions on repatriation of currency, and manipulation, or   
exchange restrictions imposed by governments. These forms of governmental action
can result in losses to the Fund if it is unable to deliver or receive currency 
or monies in settlement of obligations and could also cause hedges it has       
entered into to be rendered useless, resulting in full currency exposure as well
as incurring transaction costs.                                                 

     WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS.  The Fund
may enter into forward commitments for the purchase or sale of securities,      
including on a "when issued" or "delayed delivery" basis, in excess of customary
settlement periods for the type of security involved. In some cases, a forward  
commitment may be conditioned upon the occurrence of a subsequent event, such as
approval and consummation of a merger, corporate reorganization or debt         
restructuring, i.e., a when, as and if issued security. When such transactions  
are negotiated, the price is fixed at the time of the commitment, with payment  
and delivery taking place in the future, generally a month or more after the    
date of the commitment. While it will only enter into a forward commitment with 
the intention of actually acquiring the security, the Fund may sell the security
before the settlement date if it is deemed advisable.                           

Securities purchased under a forward commitment are subject to market 
fluctuation, and no interest (or dividends) accrues to the Fund prior to the    
settlement date. The Fund will segregate with its custodian cash or liquid      
high-grade debt securities in an aggregate amount at least equal to the amount  
of its outstanding forward commitments.                                         

    SHORT SALES.  The Fund may make short sales of securities. A short sale is
a transaction in which the Fund sells a security it does not own in anticipation
that the market price of that security will decline. The market value of the    
securities sold short of any one issuer will not exceed either 5% of the Fund's 
total assets or 5% of such issuer's voting securities. The Fund will not make a 
short sale, if, after giving effect to such sale, the market value of all       
securities sold short exceeds 25% of the value of its assets or the Fund's      
aggregate short sales of a particular class of securities exceeds 25% of the    
outstanding securities of that class. The Fund may also make short sales        
"against the box" without respect to such limitations. In this type of short    
sale, at the time of the sale, the Fund owns, or has the immediate and          
unconditional right to acquire at no additional cost, the identical security.   

The Fund expects to make short sales both to obtain capital gains from
anticipated declines in securities and as a form of hedging to offset potential 
declines in long positions in the same or similar securities. The short sale of 
a security is considered a speculative investment technique.                    

  When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale in     
order to satisfy its obligation to deliver the security upon conclusion of the  
sale. The Fund may have to pay a fee to borrow particular securities and is     
often obligated to pay over any payments received on such borrowed securities.  

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   The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. Government      
Securities or other highly liquid debt securities. The Fund will also be        
required to deposit similar collateral with its custodian to the extent, if any,
necessary so that the value of both collateral deposits in the aggregate is at  
all times equal to the greater of the price at which the security is sold short 
or 100% of the current market value of the security sold short. Depending on    
arrangements made with the broker-dealer from which it borrowed the security    
regarding payment over of any payments received by the Fund on such security,   
the Fund may not receive any payments (including interest) on its collateral    
deposited with such broker-dealer. If the price of the security sold short      
increases between the time of the short sale and the time the Fund replaces the 
borrowed security, the Fund will incur a loss; conversely, if the price         
declines, the Fund will realize a capital gain. Any gain will be decreased, any 
loss increased, by the transaction costs described above. Although the Fund's   
gain is limited to the price at which it sold the security short, its potential 
loss is theoretically unlimited.                                                

  To secure its obligations to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with its custodian, State Street   
Bank and Trust Company ("State Street"), an amount at least equal to the        
securities sold short or securities convertible into, or exchangeable for, the  
securities. The Fund may close out a short position by purchasing and delivering
an equal amount of securities sold short, rather than by delivering securities  
already held by the Fund, because the Fund may want to continue to receive      
interest and dividend payments on securities in its portfolio that are          
convertible into the securities sold short.                                     

   RESTRICTED AND ILLIQUID SECURITIES.  The Fund may invest up to a total of
15% of its net assets in securities that are subject to restrictions on resale  
and securities the markets for which are illiquid, including repurchase         
agreements with more than seven days to maturity. Illiquid securities include   
securities the disposition of which is subject to substantial legal or          
contractual restrictions. The sale of illiquid securities often requires more   
time and results in higher brokerage charges or dealer discounts and other      
selling expenses than does 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. Unseasoned issuers are companies (including  
predecessors) that have operated less than three years. The continued liquidity 
of such securities is not as well assured as that of publicly traded securities,
and accordingly the Board of Directors will monitor their liquidity. The Board  
will review pertinent factors such as trading activity, reliability of price    
information and trading patterns of comparable securities in determining whether
to treat any such security as liquid for purposes of the foregoing 15% test. To 
the extent the Board treats such securities as liquid, temporary impairments to 
trading patterns of such securities may adversely affect the Fund's liquidity.  

   To the extent it can do so consistent with the foregoing limitations, the
Fund may invest in non-publicly traded securities, including securities that are
not registered under the Securities Act of 1933, as amended, but that can be    
offered and sold to qualified institutional buyers under Rule 144A under that   
Act. The Board of Directors has adopted guidelines and delegated to the Adviser,
subject to the supervision of the Board of Directors, the daily function of     
determining and monitoring the liquidity of Rule 144A securities. Rule 144A     
securities may become illiquid if qualified institutional buyers are not        
interested in acquiring the securities.                                         

INVESTMENT RESTRICTIONS 

The Fund operates under the following restrictions that constitute    
fundamental policies that cannot be changed without the affirmative vote of the 
holders of a majority of the outstanding voting securities of the Fund (as      
defined in the 1940 Act). All percentage limitations set forth below apply      
immediately after a purchase or initial investment and any subsequent change in 
any applicable percentage resulting from market fluctuations does not require   
elimination of any security from the portfolio.                                 

The Fund may not:                                                     

       1. Invest 25% or more of its total assets, taken at market value at
     the time of each investment, in the securities of issuers in any particular
industry other than the telecommunications, media, publishing and     
     entertainment industries. This restriction does not apply to investments in
U.S. Government Securities.                                           

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   2. Purchase securities of other investment companies, except in
    connection with a merger, consolidation, acquisition or reorganization, if
    more than 10% of the market value of the total assets of the Fund would be
   invested in securities of other investment companies, more than 5% of the
market value of the total assets of the Fund would be invested in the 
     securities of any one investment company or the Fund would own more than 3%
of any other investment company's securities; provided, however, this 
restriction shall not apply to securities of any investment company   
    organized by the Fund that are to be distributed pro rata as a dividend to
its shareholders.                                                     

          3. Purchase or sell commodities or commodity contracts except that the
    Fund may purchase or sell futures contracts and related options thereon if
     immediately thereafter (i) no more than 5% of its total assets are invested
in margins and premiums and (ii) the aggregate market value of its    
outstanding futures contracts and market value of the currencies and  
     futures contracts subject to outstanding options written by the Fund do not
exceed 50% of the market value of its total assets. The Fund may not  
purchase or sell real estate, provided that the Fund may invest in    
securities secured by real estate or interests therein or issued by   
companies which invest in real estate or interests therein.           

         4. Purchase any securities on margin, except that the Fund may obtain
   such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities.                                    

  5. Make loans of money, except by the purchase of a portion of
 publicly distributed debt obligations in which the Fund may invest, and
  repurchase agreements with respect to those obligations, consistent with
    its investment objectives and policies. The Fund reserves the authority to
  make loans of its portfolio securities to financial intermediaries in an
     aggregate amount not exceeding 20% of its total assets. Any such loans will
  only be made upon approval of, and subject to any conditions imposed by,
    the Board of Directors of the Fund. Because these loans would at all times
  be fully collateralized, the risk of loss in the event of default of the
borrower should be slight.                                            

         6. Borrow money, except that the Fund may borrow from banks and other
  financial institutions on an unsecured basis, in an amount not exceeding
    10% of its total assets, to finance the repurchase of its shares. The Fund
    also may borrow money on a secured basis from banks as a temporary measure
for extraordinary or emergency purposes. Temporary borrowings may not 
     exceed 5% of the value of the total assets of the Fund at the time the loan
   is made. The Fund may pledge up to 10% of the lesser of the cost or value
of its total assets to secure temporary borrowings. The Fund will not 
   borrow for investment purposes. Immediately after any borrowing, the Fund
will maintain asset coverage of not less than 300% with respect to all
  borrowings. While the borrowing of the Fund exceeds 5% of its respective
total assets, the Fund will make no further purchases of securities,  
although this limitation will not apply to repurchase transactions as 
described above.                                                      

 7. Issue senior securities, except to the extent permitted by
applicable law.                                                       

        8. Underwrite securities of other issuers except insofar as the Fund
    may be deemed an underwriter under the Securities Act of 1933, as amended,
    in selling portfolio securities; provided, however, this restriction shall
 not apply to securities of any investment company organized by the Fund
that are to be distributed pro rata as a dividend to its shareholders.

       9. Invest more than 15% of its total assets in illiquid securities,
   such as repurchase agreements with maturities in excess of seven days, or
securities that at the time of purchase have legal or contractual     
restrictions on resale.                                               

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS                                                          

 Overall responsibility for management and supervision of the Fund rests
with its Board of Directors. The Board of Directors approves all significant    
agreements between the Fund and the companies that furnish the Fund with        
services, including agreements with the Adviser, the Fund's custodian and the   
Fund's transfer agent. The day-to-day operations of the Fund are delegated to   
the Adviser.                                                                    

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    The names and business addresses of the Directors and Officers of the Fund
are set forth in the following table, together with their positions with the    
Fund and their principal business occupations during the past five years and    
their affiliations, if any, with the Adviser or the Administrator. Directors who
are "interested persons" of the Fund, as defined by the 1940 Act, are indicated 
by an asterisk.                                                                 

As of April 30, 1997 the Directors and Officers of the Fund as a group
beneficially owned 200,773 shares of the Fund equaling 1.78% of the Fund's      
outstanding shares.                                                             

                                                        [Enlarge/Download Table]

                                          POSITION WITH            PRINCIPAL OCCUPATION DURING    
NAME AND BUSINESS ADDRESS                   THE FUND                  PAST FIVE YEARS; AGE        
----------------------------------  -------------------------  -----------------------------------
                                                                                                  
Dr. Thomas E. Bratter.............  Director                   Director, President and Founder,   
  One Corporate Center                                         The John Dewey Academy (residential
  Rye, New York 10580-1434                                     college preparatory therapeutic    
                                                               high school). Director of one other
                                                               registered investment company      
                                                               advised by the Adviser. Dr. Bratter
                                                               is 56 years old. (10)              
Bill Callaghan....................  Director                   President of Bill Callaghan        
  One Corporate Center                                         Associates Ltd., an executive      
  Rye, New York 10580-1434                                     search company. Director of two    
                                                               other registered investment        
                                                               companies advised by the Adviser.  
                                                               Mr. Callaghan is 53 years old.     
                                                               (3)(10)                            
Felix J. Christiana...............  Director                   Retired; formerly Senior Vice      
  One Corporate Center                                         President of Dollar Dry Dock       
  Rye, New York 10580-1434                                     Savings Bank. Director/ Trustee of 
                                                               seven other registered investment  
                                                               companies advised by the Adviser or
                                                               its affiliates. Mr. Christiana is  
                                                               71 years old.(1)(2)                
                                                               (3)(4)(5)(8)(10)(13)               
James P. Conn.....................  Director                   Managing Director of Financial     
  One Corporate Center                                         Security Assurance since 1992;     
  Rye, New York 10580-1434                                     Director of Santa Anita Realty     
                                                               Enterprises, Inc. since 1995;      
                                                               Director of Santa Anita Operating  
                                                               Company since 1995; President and  
                                                               Chief Executive Officer of Bay     
                                                               Meadows Operating Company from 1988
                                                               through 1992. Director/ Trustee of 
                                                               four other registered investment   
                                                               companies advised by the Adviser.  
                                                               Mr. Conn is 59 years old.          
                                                               (1)(2)(10)(14)                     

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                                          POSITION WITH            PRINCIPAL OCCUPATION DURING    
NAME AND BUSINESS ADDRESS                   THE FUND                  PAST FIVE YEARS; AGE        
----------------------------------  -------------------------  -----------------------------------
                                                                                                  
Mario J. Gabelli*.................  Chairman of the Board,     Chairman of the Board; President   
  One Corporate Center              President and Chief In-    and Chief Investment Officer of the
  Rye, New York 10580-1434          vestment Officer           Adviser; Chairman of the Board and 
                                                               Chief Executive Officer of GAMCO   
                                                               Investors, Inc.; Chairman of the   
                                                               Board and Chief Executive Officer  
                                                               of Lynch Corporation; Director and 
                                                               Adviser of Gabelli International   
                                                               Ltd.; Director/Trustee of ten other
                                                               registered investment companies    
                                                               advised by the Adviser or its      
                                                               affiliates. Mr. Gabelli is 54 years
                                                               old. (1)(2)(3)(4)(5)(6)(7)         
                                                               (8)(9)(10)(11)(12)                 
Karl Otto Pohl*...................  Director                   Partner of Sal Oppenheim Jr. & Cie 
  One Corporate Center                                         (private investment bank);         
  Rye, New York 10580-1434                                     President of the Deutsche          
                                                               Bundesbank and Chairman of its     
                                                               Central Bank Council from 1980     
                                                               through 1991; Currently Board      
                                                               Member of Zurich Versicherungs-    
                                                               Gesellschaft (Insurance); the      
                                                               International Council for JP Morgan
                                                               & Co.; Supervisory Board Member of 
                                                               Royal Dutch; ROBECo/o Group; and   
                                                               Advisory Director of Unilever N.V. 
                                                               and Unilever Deutschland; German   
                                                               Governor of The International      
                                                               Monetary Fund (1980-1991); Board   
                                                               Member, Bank for International     
                                                               Settlements (1980-1991); and       
                                                               Chairman of the European Economic  
                                                               Community Central Bank Governors   
                                                               (1990-1991); Director/Trustee of   
                                                               twelve other registered investment 
                                                               companies advised by the Adviser.  
                                                               Mr. Pohl is 67 years old.(1)       
                                                               (2)(3)(4)(5)(6)(7)(8)(9)(10)(11)   
                                                               (12)                               
Anthony R. Pustorino..............  Director                   Certified Public Accountant.       
  One Corporate Center                                         Professor of Accounting, Pace      
  Rye, New York 10580-1434                                     University since 1965; Director,   
                                                               President and shareholder of       
                                                               Pustorino, Puglisi & Co., P.C.,    
                                                               certified public accountants, from 
                                                               1961 to 1990; Director/Trustee of  
                                                               eight other registered investment  
                                                               companies advised by the Adviser.  
                                                               Mr. Pustorino is 71 years          
                                                               old.(1)(2)(3)(4)(5)(10) (11)(12)   

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                                          POSITION WITH            PRINCIPAL OCCUPATION DURING    
NAME AND BUSINESS ADDRESS                   THE FUND                  PAST FIVE YEARS; AGE        
----------------------------------  -------------------------  -----------------------------------
                                                                                                  
Salvatore J. Zizza*...............  Director                   President and Chief Executive      
  The Lehigh Group, Inc.                                       Officer of The Lehigh Group, Inc.  
  810 Seventh Avenue, 27th Floor                               (an electrical supply wholesaler); 
  New York, New York 10019                                     Chairman of the Executive Committee
                                                               and Director of Binnings Buildings 
                                                               Products, Inc.; Director/Trustee of
                                                               three other registered investment  
                                                               companies advised by the Adviser.  
                                                               Mr. Zizza is 49 years old.         
                                                               (1)(4)(10)                         
Bruce N. Alpert...................  Vice President and         Vice President and Chief Financial 
  One Corporate Center              Treasurer                  and Administrative Officer of the  
  Rye, New York 10580-1434                                     investment advisory division of the
                                                               Adviser since June 1988; Chief     
                                                               Operating Officer, Vice President  
                                                               and Treasurer of The Gabelli Value 
                                                               Fund Inc. since September 1989;    
                                                               President and Treasurer of The     
                                                               Gabelli Asset Fund and The Gabelli 
                                                               Growth Fund; Vice President and    
                                                               Treasurer of all other registered  
                                                               investment companies advised by the
                                                               Adviser. Mr. Alpert is 45 years    
                                                               old.                               
James E. McKee....................  Secretary                  Vice President and General Counsel 
  One Corporate Center                                         of the Adviser; General Counsel of 
  Rye, New York 10580-1434                                     Gamco Investors, Inc.; Secretary of
                                                               all Funds advised by the Adviser   
                                                               and Teton Advisers LLC; Branch     
                                                               Chief U.S. Securities and Exchange 
                                                               Commission - Northeast Regional    
                                                               Office, 1992-1993; Staff Attorney, 
                                                               U.S. Securities and Exchange       
                                                               Commission -- Northeast Regional   
                                                               Office, 1989-1992. Mr. McKee is 34 
                                                               years old.                         

---------------                                                                 

  *  "Interested person" of the Fund, as defined in the 1940 Act. Mr. Gabelli is
an "interested person" of the Fund as a result of his employment as an
officer of the Fund and the Adviser. Mr. Gabelli is also a registered 
    representative of an affiliated broker-dealer. Mr. Pohl receives fees from
   the Adviser but has no obligation to provide any services to it. Although
    this relationship does not appear to require designation of Mr. Pohl as an
     "interested person," the Fund is currently making such designation in order
    to avoid the possibility that Mr. Pohl's independence would be questioned.
     Mr. Zizza may be an "interested person" as a result of his association with
 Binnings Building Products, Inc., an entity controlled by GLI, Inc., an
affiliate of the Adviser.                                             

(1) Trustee of The Gabelli Asset Fund                                         

(2) Trustee of The Gabelli Growth Fund                                        

(3) Director of The Gabelli Value Fund Inc.                                   

(4) Director of The Gabelli Convertible Securities Fund, Inc.                 

(5) Director of Gabelli Equity Series Funds, Inc.                             

(6) Trustee of The Gabelli Money Market Funds                                 

(7) Director of Gabelli Investor Funds, Inc.                                  

(8) Director of Gabelli Global Series Funds, Inc.                             

(9) Director of Gabelli Gold Fund, Inc.                                       

(10) Director of The Gabelli Equity Trust Inc.                                  

(11) Director of Gabelli Capital Series Funds                                   

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(12) Director of Gabelli International Growth Fund, Inc.                        

(13) Trustee of The Treasurer's Fund, Inc.                                      

(14) Trustee of the Westwood Funds                                              

   The Board of Directors of the fund are divided into three classes, with a
class having a term of no more than three years. Each year the term of office of
one class of directors expires. See "Certain Provisions of the Charter and      
By-Laws" in the Prospectus.                                                     

REMUNERATION OF DIRECTORS AND OFFICERS                                          

The Fund pays each Director who is not affiliated with the Investment 
Adviser or its affiliates a fee of $3,000 per year plus $500 per Directors'     
meeting attended, together with each Director's actual out-of-pocket expenses   
relating to attendance at such meetings. In addition, if net assets of the Fund 
equal or exceed $500 million, each such non-interested Director will receive a  
fee of $500 per committee meeting attended and a fee of $500 per annum if the   
Director serves as chair of a committee of the Fund's Board of Directors. The   
aggregate remuneration accrued by the Fund during the year ended December 31,   
1996 amounted to $37,354 (includes a prorated payment to Paul R. Ades, who      
served as a director from January 1996 to May 1996).                            

The following table shows certain compensation information for the    
Directors of the Fund for the year ended December 31, 1996. None of the Fund's  
executive officers and Directors who are also officers or directors of the      
Adviser received any compensation from the Fund for such period. No executive   
officer or person affiliated with the Fund received compensation from the Fund  
in excess of $60,000.                                                           

                                                        [Enlarge/Download Table]

                                                                 AGGREGATE          TOTAL      
                                                                COMPENSATION  COMPENSATION FROM
                                                                 FROM FUND      FUND AND FUND  
                                                                  (FISCAL      COMPLEX PAID TO 
                       NAME OF DIRECTOR                            YEAR)         DIRECTORS*    
--------------------------------------------------------------  ------------  -----------------
                                                                                               
Mario J. Gabelli..............................................     $    0          $     0     
Dr. Thomas E. Bratter.........................................     $5,000          $20,500(2)  
Bill Callaghan................................................     $5,000          $34,500(3)  
Felix J. Christiana...........................................     $5,000          $74,000(11) 
James P. Conn.................................................     $5,000          $36,500(5)  
Karl Otto Pohl................................................     $4,500          $77,750(16) 
Anthony R. Pustorino..........................................     $5,000          $84,500(9)  
Salvatore J. Zizza............................................     $5,000          $42,500(5)  

---------------                                                                 

* Represents the total compensation paid to such persons during the calendar    
  year ended December 31, 1996 by investment companies (including the Fund) from
which such person receives compensation that are considered part of the same
fund complex as the Fund because they have common or affiliated investment  
advisers. The parenthetical number represents the number of such investment 
companies from which such person received compensation.                     

LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY                                

    The By-Laws of the Fund provide that the Fund will indemnify its Directors
and officers and may indemnify its employees or agents against liabilities and  
expenses incurred in connection with litigation in which they may be involved   
because of their offices with the Fund, to the fullest extent permitted by law. 
In addition, the Articles of Incorporation of the Fund provide that the Fund's  
Directors and officers will not be liable to shareholders for money damages,    
except in limited instances. However, nothing in the Articles of Incorporation  
or the By-Laws protects or indemnifies a Director, officer, employee or agent of
the Fund against any liability to which such person would otherwise be subject  
in the event of such person's active or deliberate dishonesty which is material 
to the cause of action or to the extent that the person received an improper    
benefit or profit in money, property or services to the extent of such money,   
property or services. In addition, indemnification is not permitted for any act 
or omission committed in bad faith which is material to the cause of action or, 
with respect to any criminal proceeding, if the person had reasonable cause to  
believe                                                                         

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that the act or omission was unlawful. In addition, indemnification may not be  
provided in respect of any proceeding in which the person had been adjudged to  
be liable to the Fund.                                                          

THE ADVISER 

     The Adviser is a New York corporation with principal offices located at One
Corporate Center, Rye, New York 10580-1434. The Adviser also serves as adviser  
to other closed-end and open-end investment companies with net assets in excess 
of $4.0 billion as of May 1, 1997.                                              

   Pursuant to an Advisory Agreement (the "Advisory Agreement"), the Adviser
manages the portfolio of the Fund in accordance with its stated investment      
objectives and policies, makes investment decisions for the Fund, places orders 
to purchase and sell securities on behalf of the Fund and manages its other     
business and affairs, all subject to the supervision and direction of the Fund's
Board of Directors. In addition, under the Advisory Agreement, the Investment   
Adviser oversees the administration of all aspects of the Fund's business and   
affairs and provides, or arranges for others to provide, at the Adviser's       
expense, certain enumerated services, including maintaining the Fund's books and
records, preparing reports to the Fund's shareholders and supervising the       
calculation of the net asset value of its shares. All expenses of computing the 
net asset value of the Fund, including any equipment or services obtained solely
for the purpose of pricing shares or valuing its investment portfolio, will be  
an expense of the Fund under its Advisory Agreement. The expenses of computing  
the net asset value of the Fund are anticipated to be approximately $50,000 per 
year.                                                                           

The Advisory Agreement combines investment advisory and administrative
responsibilities in one agreement. The Adviser has in turn retained First Data  
Investor Services, 53 State Street, Boston, MA 02109-2873, to act as            
sub-administrator to the Fund. See "Management of the Fund -- Administrator" in 
the Prospectus.                                                                 

For services rendered by the Adviser on behalf of the Fund under the  
Advisory Agreement, the Fund pays the Adviser a fee computed daily and paid     
monthly at the annual rate of 1.00% of the average weekly net assets of the     
Fund. The fees payable under the Advisory Agreement are higher than the fees    
payable by most registered investment companies. Notwithstanding the foregoing, 
the Adviser will waive the portion of its investment advisory fee attributable  
to an amount of assets of the Fund equal to the aggregate stated value of the   
Cumulative Preferred Stock for any calendar year in which the total return of   
the Fund, including distributions and the advisory fee subject to potential     
waiver, allocable to common stock is less than the stated dividend rate of the  
Cumulative Preferred Stock.                                                     

     The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations and duties
thereunder, the Adviser is not liable for any error or judgment or mistake of   
law or for any loss suffered by the Fund. As part of the Advisory Agreement, the
Fund has agreed that the name "Gabelli" is the Adviser's property, and that in  
the event the Adviser ceases to act as an investment adviser to the Fund, the   
Fund will change its name to one not including the word "Gabelli."              

The Advisory Agreement was approved by the Board of Directors on at a 
meeting held on April 6, 1994 and was approved most recently by the Board of    
Directors on May 14, 1997. The Advisory Agreement is terminable without penalty 
by the Fund on not more than sixty days' written notice when authorized by the  
Board of Directors of the Fund, by the holders of a majority of the outstanding 
voting securities of the Fund, as defined in the 1940 Act, or by the Adviser.   
The Advisory Agreement will automatically terminate in the event of its         
assignment, as defined in the 1940 Act. The Advisory Agreement provides that,   
unless terminated, it will remain in effect so long as continuance of the       
Advisory Agreement is approved annually by the Board of Directors of the Fund,  
or the shareholders of the Fund and in either case, by a majority vote of the   
Directors who are not parties to the Advisory Contract or "interested persons"  
as defined in the 1940 Act of any such person cast in person at a meeting called
specifically for the purpose of voting on the continuance of the Advisory       
Agreement.                                                                      

For each of the years ended December 31, 1994, December 31, 1995 and  
December 31, 1996, the Adviser was paid $83,054, $742,302 and $947,427,         
respectively, for advisory and administrative services rendered to the Fund.    

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FOREIGN CUSTODIAL ARRANGEMENTS                                                  

  Rules adopted under the 1940 Act permit the Fund to maintain its foreign
securities in the custody of certain eligible foreign banks and securities      
depositories. Pursuant to those rules, any foreign securities in the portfolio  
of the Fund may be held by subcustodians approved by the Directors of the Fund  
in accordance with the regulations of the Commission.                           

  Selection of any such subcustodians will be made by the Directors of the
Fund following a consideration of a number of factors, including but not limited
to the reliability and financial stability of the institution, the ability of   
the institution to perform capably custodial services for the Fund, the         
reputation of the institution in its national market, the political and economic
stability of the country or countries in which the subcustodians are located,   
and risks of potential nationalization or expropriation of assets of the Fund.  
In addition, the 1940 Act requires that certain foreign subcustodians, among    
other things, have shareholders' equity in excess of $200 million, have no lien 
on the Fund's assets and maintain adequate and accessible records.              

PORTFOLIO TRANSACTIONS

    Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is responsible for placing purchase and sale orders and the  
allocation of brokerage on behalf of the Fund. Transactions in equity securities
are in most cases effected on U.S. stock exchanges and involve the payment of   
negotiated brokerage commissions. In general, there may be no stated commission 
in the case of certain debt securities and securities traded in over-the-counter
markets, but the prices of those securities may include undisclosed commissions 
or mark-ups. Principal transactions are not entered into with affiliates of the 
Fund. However, Gabelli & Company, Inc. ("Gabelli & Company") may execute        
transactions in the over-the-counter markets on an agency basis and receive a   
stated commission therefrom. To the extent consistent with applicable provisions
of the 1940 Act and the rules and exemptions adopted by the Commission          
thereunder, as well as other regulatory requirements, the Fund's Board of       
Directors have determined that portfolio transactions may be executed through   
Gabelli & Company and its broker-dealer affiliates if, in the judgment of the   
Investment Adviser, the use of those broker-dealers is likely to result in price
and execution at least as favorable as those of other qualified broker-dealers, 
and if, in particular transactions, those broker-dealers charge the Fund a rate 
consistent with that charged to comparable unaffiliated customers in similar    
transactions. The Fund has no obligation to deal with any broker or group of    
brokers in executing transactions in portfolio securities. In executing         
transactions, the Investment Adviser seeks to obtain the best price and         
execution for the Fund, taking into account such factors as the price, size of  
order, difficulty of execution and operational facilities of the firm involved  
and the firm's risk in positioning a block of securities. While the Investment  
Adviser generally seeks reasonably competitive commission rates, the Fund does  
not necessarily pay the lowest commission available.                            

For the fiscal years ended December 31, 1994, December 31, 1995 and   
December 31, 1996, the Fund paid a total of $17,027, $109,262, $64,107,         
respectively, in brokerage commissions, of which Gabelli & Company received     
$2,595, $13,690 and $17,653, respectively, and of which Keeley Investment Corp.,
an affiliate of Gabelli & Company, received $0, $0 and $75, respectively. The   
amount received by Gabelli & Company, Inc. and Keeley Investment Corp. from the 
Fund in respect of brokerage commissions for the fiscal year ended December 31, 
1996 represented 27.4% and 0.12%, respectively, of the aggregate dollar amount  
of brokerage commissions paid by the Fund for such period. In addition, for the 
fiscal year ended December 31, 1996, the Fund paid brokerage commissions to     
Gabelli & Company, Inc. and Keeley Investment Corp. with respect to 28.3% and   
0.17%, respectively, of the aggregate dollar amount of transactions by the Fund.

Subject to obtaining the best price and execution, brokers who provide
supplemental research, market and statistical information to the Investment     
Adviser or its affiliates may receive orders for transactions by the Fund. The  
term "research, market and statistical information" includes advice as to the   
value of securities, and advisability of investing in, purchasing or selling    
securities, and the availability of securities or purchasers or sellers of      
securities, and furnishing analyses and reports concerning issues, industries,  
securities, economic factors and trends, portfolio strategy and the performance 
of accounts. Information so received will be in addition to and not in lieu of  
the services required to be performed by the Investment Adviser under the       
Advisory Agreement and the expenses of the Investment Adviser will not          
necessarily be reduced as a result of the receipt of such supplemental          

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information. Such information may be useful to the Investment Adviser and its   
affiliates in providing services to clients other than the Fund, and not all    
such information is used by the Investment Adviser in connection with the Fund. 
Conversely, such information provided to the Investment Adviser and its         
affiliates by brokers and dealers through whom other clients of the Investment  
Adviser and its affiliates effect securities transactions may be useful to the  
Investment Adviser in providing services to the Fund.                           

Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Investment Adviser and its           
affiliates, investments of the kind made by the Fund may also be made by those  
other accounts. When the same securities are purchased for or sold by the Fund  
and any of such other accounts, it is the policy of the Investment Adviser and  
its affiliates to allocate such purchases and sales in the manner deemed fair   
and equitable to all of the accounts, including the Fund.                       

PORTFOLIO TURNOVER                                                              

    The Fund's portfolio turnover rate for the fiscal years ended December 31,
1995 and December 31, 1996 was 86.0% and 32.1%, respectively. Portfolio turnover
rate is calculated by dividing the lesser of the Fund's annual sales or         
purchases of portfolio securities by the monthly average value of securities in 
its portfolio during the year, excluding portfolio securities the maturities of 
which at the time of acquisition were one year or less. The ability of the Fund 
to enter into certain short-term transactions will be limited by the requirement
that certain gains on securities may not exceed 30% of its annual gross income  
for federal income tax purposes. However, portfolio turnover will not otherwise 
be a limiting factor in making investment decisions for the Fund. A high rate of
portfolio turnover involves correspondingly greater brokerage commission expense
than a lower rate, which expense must be borne by the Fund and its shareholders.

TAXATION

The following discussion is a brief summary of certain additional tax 
considerations affecting the Fund and its shareholders. No attempt is made to   
present a detailed explanation of all U.S. Federal, state, local and foreign tax
concerns, and the discussions set forth here and in the Prospectus do not       
constitute tax advice. Investors are urged to consult their own tax advisers    
with any specific questions relating to federal, state, local and foreign taxes.
The discussion reflects applicable tax laws of the United States as of the date 
of this SAI, which tax laws may be changed or subject to new interpretations by 
the courts or the Internal Revenue Service retroactively or prospectively.      

GENERAL                                                                         

   The Fund has qualified as and intends to continue to qualify as and elect
to be a regulated investment company (a "RIC") under Subchapter M of the Code.  
If it so qualifies, the Fund will not be subject to U.S. Federal income tax on  
the portion of its net investment income (i.e., its investment company taxable  
income as defined in the Code) and its net capital gain (i.e., the excess of its
net realized long-term capital gains over its net realized short-term capital   
losses) which it distributes to its shareholders in each taxable year., provided
that it distributes to its shareholders at least 90% of its net investment      
income for such taxable year.                                                   

 Qualification as a RIC requires, among other things, that the Fund: (a)
derive at least 90% of its gross income in each taxable year from dividends,    
interest, payments with respect to securities loans, gains from the sale or     
other disposition of stock or securities, foreign currencies or other income    
(including gains from options, futures or forward contracts) derived with       
respect to its business of investing in stock, securities or currencies; (b)    
derive less than 30% of its gross income in each taxable year from the sale or  
other disposition of any of the following held for less than three months:      
stock, securities, options, futures, certain forward contracts, or foreign      
currencies (or any options, futures or forward contracts on foreign currencies) 
but only if such currencies are not directly related to the Fund's principal    
business of investing in stock or securities (the "30% limitation"); and (c)    
diversify its holdings so that, at the end of each quarter of each taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by     
cash, cash items, U.S. government securities, securities of other RICs and other
securities with such other securities limited, in respect of any one            

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issuer, to an amount not greater than 5% of the value of the Fund's assets and  
10% of the outstanding voting securities of such issuer, and (ii) not more than 
25% of the value of its assets is invested in the securities of any one issuer  
(other than U.S. government securities or the securities of other RICs).        

TAXATION OF THE FUND                                                            

If the Fund were unable to satisfy the 90% distribution requirement or
otherwise were to fail to qualify to be taxed as a RIC in any year, it would be 
subject to tax in such year on all of its taxable income, whether or not the    
Fund made any distributions. To qualify again to be taxed as a RIC in a         
subsequent year, the Fund would be required to distribute to Cumulative         
Preferred Shareholders and Common Shareholders as an net investment income      
dividend, its earnings and profits attributable to non-RIC years reduced by an  
interest charge on 50% of such earnings and profits payable by the Fund to the  
IRS. In addition, if the Fund failed to qualify as a RIC for a period greater   
than one taxable year, then the Fund would be required to recognize and pay tax 
on any net built-in gains (the excess of aggregate gains, including items of    
income, over aggregate losses that would have been realized if the Fund had been
liquidated) in order to qualify as a RIC in a subsequent year.                  

Under the Code, amounts not distributed by a RIC on a timely basis in 
accordance with a calendar year distribution requirement are subject to a 4%    
excise tax. To avoid the tax, the Fund must distribute during each calendar     
year, an amount equal to, at the minimum, the sum of (1) 98% of its net         
investment income for the calendar year, (2) 98% of its capital gain net income 
for the one year period ending on October 31 of such year (unless an election is
made by a fund with a November or December year-end to use the fund's fiscal    
year), and (3) all ordinary income and capital gain net income for previous     
years that were not previously distributed. A distribution will be treated as   
paid during the calendar year if it is paid during the calendar year or declared
by the Fund in October, November or December of the year, payable to            
shareholders of record on a date during such month and paid by the Fund during  
January of the following year. Any such distributions paid during January of the
following year will be deemed to be received on December 31 of the year the     
distributions are declared, rather than when the distributions are received.    
While the Fund intends to distribute its ordinary income and capital gain net   
income in the manner necessary to minimize imposition of the 4% excise tax,     
there can be no assurance that sufficient amounts of the Fund's ordinary income 
and capital gain net income will be distributed to avoid entirely the imposition
of the tax. In such event, the Fund will be liable for the tax only on the      
amount by which it does not meet the foregoing distribution requirements.       

Gain or loss on the sales of securities by the Fund will be long-term 
capital gain or loss if the securities have been held by the Fund for more than 
twelve months. Gain or loss on the sale of securities held for twelve months or 
less will be short-term capital gain or loss.                                   

Foreign currency gain or loss on non-U.S. dollar denominated bonds and
other similar debt instruments and on any non-U.S. dollar denominated futures   
contracts, options and forward contracts that are not section 1256 contracts (as
defined below) generally will be treated as net investment income and loss.     

If the Fund invests in stock of a passive foreign investment company  
("PFIC"), the Fund may be subject to Federal income tax on a portion of any     
"excess distribution" with respect to, or gain from the disposition of, such    
stock. The tax would be determined by allocating such distribution or gain      
ratably to each day of the Fund's holding period for the stock. The amount so   
allocated to any taxable year of the Fund prior to the taxable year in which the
excess distribution or disposition occurs would be taxed to the Fund at the     
highest marginal income tax rate in effect for the year to which it was         
allocated, and the tax would be further increased by an interest charge. The    
amount allocated to the taxable year of the distribution or disposition would be
included in the Fund's net investment income and, accordingly, would not be     
taxable to the Fund to the extent distributed by the Fund as Ordinary Income    
Dividend to shareholders.                                                       

     If the Fund invests in stock of a PFIC, the Fund may be able to elect to be
a "qualified electing fund," in lieu of being taxable in the manner described in
the above paragraph and to include annually in income its pro rata share of the 
ordinary earnings and net capital gain (whether or not distributed) of the PFIC.
In order to make this election, the Fund would be required to obtain annual     
information from the PFICs in which it invests, which may be difficult to       
obtain. Alternatively, under proposed regulations not currently in effect, the  

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Fund may be able to elect to mark to market its PFIC stock, resulting in the    
stock being treated as sold at fair market value on the last business day of    
each taxable year. Any resulting gain would be reported as net investment       
income, and any resulting loss would not be recognized.                         

     The Fund may invest in securities purchased at a discount and may therefore
cause the Fund to accrue income before amounts due under the obligation are     
paid. The Fund may invest in securities rated in the medium to lower rating     
categories of nationally recognized rating organizations, and in unrated        
securities ("high yield securities"). A portion of the interest payments on such
high yield securities may be treated as dividends for Federal income tax        
purposes.                                                                       

 As a result of investing in stock of PFICs or securities purchased at a
discount or any other investment that produces income that is not matched by a  
corresponding cash distribution to the Fund, the Fund could be required to      
include in current income, income it has not yet received. Any such income would
be treated as income earned by the Fund and therefore would be subject to the   
distribution requirements of the Code. This might prevent the Fund from         
distributing 90% of its net investment income, as is required in order to avoid 
Fund-level taxation on the Fund's distributions, or might prevent it from       
distributing enough ordinary income and capital gain net income to avoid        
completely the imposition of the excise tax. To avoid this result, the Fund may 
be required to borrow money or dispose of other securities to be able to make   
distributions to its investors. The extent to which the Fund may liquidate      
securities at a gain may be limited by the 30% limitation (discussed above).    

   If the Fund does not meet the asset coverage requirements of the 1940 Act
and the Articles Supplementary, the Fund will be required to suspend            
distributions to the holders of the common stock until the asset coverage is    
restored. See "Description of Cumulative Preferred Stock -- Dividends" and      
"Description of Capital Stock and Other Securities." Such a suspension of       
distributions might prevent the Fund from distributing 90% of its net investment
income, as is required in order to avoid Fund-level taxation on the Fund's      
distributions, or might prevent it from distributing enough income and capital  
gain to avoid completely imposition of the excise tax. Upon any failure to meet 
the asset coverage requirements of the 1940 Act or the Articles Supplementary,  
the Fund may, and in certain circumstances will, be required to partially redeem
the shares of Cumulative Preferred Stock in order to restore the requisite asset
coverage and avoid the adverse consequences to the Fund and its shareholders of 
failing to qualify as a RIC. If asset coverage were restored, the Fund would    
again be able to pay dividends and might be able to avoid Fund-level taxation on
the Fund's undistributed income.                                                

HEDGING TRANSACTIONS                                                            

 Certain options, futures contracts and options on futures contracts are
"section 1256 contracts". Any gains or losses on section 1256 contracts are     
generally considered 60% long-term and 40% short-term capital gains or losses   
("60/40"). Also, section 1256 contracts held by the Fund at the end of each     
taxable year are "marked-to-the-market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss  
is treated as 60/40 gain or loss.                                               

   Hedging transactions undertaken by the Fund may result in "straddles" for
U.S. Federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Fund. In addition, losses realized by the Fund
on positions that are part of a straddle may be deferred under the straddle     
rules, rather than being taken into account in calculating the taxable income   
for the taxable year in which such losses are realized. Further, the Fund may be
required to capitalize, rather than deduct currently, any interest expense on   
indebtedness incurred or continued to purchase or carry any positions that are  
part of a straddle.                                                             

 The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the  
amount, character and timing of the recognition of gains or losses from the     
affected straddle positions will be determined under rules that vary according  
to the election(s) made. The rules applicable under certain of the elections    
accelerate the recognition of gain or loss from the affected straddle positions.

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Because application of the straddle rules may affect the character and
timing of the Fund's gains, losses and deductions, the amount which must be     
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.            

     The 30% limitation (discussed above) may limit the Fund's ability to engage
in transactions in options, spreads, straddles, hedging transactions, forward or
futures contracts and options on any of these positions because these           
transactions (1) are often consummated in less than three months, (2) may       
require the sale of portfolio securities held less than three months, and (3)   
may reduce the holding periods of certain securities within the Fund.           

FOREIGN TAXES                                                                   

Since the Fund may invest in foreign securities, its income from such 
securities may be subject to non-U.S. taxes. If the Fund satisfies the          
distribution requirements to be taxed as a RIC during a taxable year, and if 50%
of the Fund's total assets at the end of its taxable year consist of stock or   
securities of foreign corporations, it may elect to "pass-through" to its       
shareholders the ability to use the foreign tax deduction or credit for foreign 
taxes paid with respect to qualifying taxes. If the Fund makes such an election,
a taxpayer would be required to include in income its proportionate share of the
qualifying foreign taxes paid by the Fund and would be allowed to either deduct 
the amount of such taxes from its taxable income or to use such taxes as a      
credit against its U.S. federal income tax liability. In general, it will be    
more beneficial for a taxpayer to use its proportionate share of such taxes paid
by the Fund as a foreign tax credit. If the Fund elects to pass-through the     
benefit of the deduction or credit allowed for qualifying foreign taxes it has  
paid in a given year, it will send each Shareholder a written notice of the     
portion of the Fund's dividends that represents income from sources within each 
foreign country and the amount of such Shareholder's proportionate share of     
foreign taxes paid to each foreign country.                                     

TAXATION OF SHAREHOLDERS                                                        

    The Fund will determine either to distribute or to retain for reinvestment
all or part of its net capital gain. If any such gains are retained, the Fund   
will be subject to a tax of 35% of such amount. In that event, the Fund expects 
to designate the retained amount as undistributed capital gains in a notice to  
its shareholders, each of whom (1) will be required to include in income for tax
purposes as long-term capital gains its share of such undistributed amount, (2) 
will be entitled to credit its proportionate share of the tax paid by the Fund  
against its Federal income tax liability and to claim refunds to the extent that
the credit exceeds such liability, and (3) will increase its basis in its shares
of the Fund by an amount equal to 65% of the amount of undistributed capital    
gains included in such shareholder's gross income.                              

Distributions of Ordinary Income Dividends are taxable to a U.S.      
shareholder as ordinary income, whether paid in cash or shares. Ordinary Income 
Dividends paid by the Fund may qualify for the dividends received deduction     
available to corporations, but only to the extent that the Fund's income        
consists of qualified dividends received from U.S. corporations. The amount of  
any dividend distribution eligible for the dividends received deduction will be 
designated by the Fund in a written notice to shareholders within 60 days of the
close of the taxable year. Distributions of net capital gains designated as     
capital gain dividends ("Capital Gain Dividends"), if any, are taxable as       
long-term capital gains, whether paid in cash or in shares, regardless of how   
long the shareholder has held the Fund's shares, and are not eligible for the   
dividends received deduction.                                                   

 Shareholders receiving distributions in the form of newly issued shares
will have a basis in such shares of the Fund equal to the fair market value of  
such shares on the distribution date. If the net asset value of shares is       
reduced below a shareholder's cost as a result of a distribution by the Fund,   
such distribution will be taxable even though it represents a return of invested
capital. The price of shares purchased at any time may reflect the amount of a  
forthcoming distribution. Those purchasing shares just prior to a distribution  
will receive a distribution which will be taxable to them, even though it       
represents in part a return of invested capital.                                

 Upon a sale or exchange of shares, a shareholder will realize a taxable
gain or loss depending upon his or her basis in the shares. Such gain or loss   
will be treated as capital gain or loss if the shares have been held for        

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more than one year. Any loss realized on a sale or exchange will be disallowed  
to the extent the shares disposed of are replaced within a 61-day period        
beginning 30 days before and ending 30 days after the day that the shares are   
disposed of. In such a case, the basis of the shares acquired will be adjusted  
to reflect the disallowed loss.                                                 

   Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated for tax purposes as a        
long-term capital loss to the extent of any Capital Gain Dividends received by  
the shareholder with respect to such shares.                                    

   Ordinary Income Dividends and Capital Gains Dividends also may be subject
to state and local taxes. Shareholders are urged to consult their own tax       
advisers regarding specific questions about the U.S. Federal, state, local or   
foreign tax consequences to them of investing in the Fund.                      

BACKUP WITHHOLDING                                                              

     The Fund may be required to withhold Federal income tax at a rate of 31% on
all taxable distributions payable to shareholders who fail to provide the Fund  
with their correct taxpayer identification number or to make required           
certifications, or who have been notified by the Internal Revenue Service that  
they are subject to backup withholding. Backup withholding is not an additional 
tax. Any amounts withheld may be credited against the shareholder's Federal     
income tax liability.                                                           

THE FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE APPLICABLE  
PROVISIONS OF THE CODE AND TREASURY REGULATIONS PRESENTLY IN EFFECT. FOR THE    
COMPLETE PROVISIONS, REFERENCE SHOULD BE MADE TO THE PERTINENT CODE SECTIONS AND
THE TREASURY REGULATIONS PROMULGATED THEREUNDER. THE CODE AND THE TREASURY      
REGULATIONS ARE SUBJECT TO CHANGE BY LEGISLATIVE, JUDICIAL OR ADMINISTRATIVE    
ACTION, EITHER PROSPECTIVELY OR RETROACTIVELY.                                  

MOODY'S DISCOUNT FACTORS

The following table identifies the Moody's Discount Factors used to   
discount particular Moody's Eligible Assets, as defined in the Prospectus, for a
range of exposure periods.                                                      

                                                        [Enlarge/Download Table]

                                                                                    MOODY'S     
TYPE OF MOODY'S ELIGIBLE ASSET:                                                 DISCOUNT FACTOR:
------------------------------------------------------------------------------  ----------------
                                                                                                
Short Term Money Market Instruments (other than U.S. Government Obligations                     
  set forth below) and other commercial paper:                                                  
  Demand or time deposits, certificates of deposit and bankers' acceptances                     
     includible in the Rating Agency Short Term Money Market Instruments......        1.00      
  Commercial paper rated P-1 by the Rating Agency maturing in 30 days or                        
     less.....................................................................        1.00      
  Commercial paper rated P-1 by the Rating Agency maturing in more than 30                      
     days but in 270 days or less.............................................        1.15      
  Commercial paper rated A-1+ by S&P maturing in 270 days or less.............        1.25      
  Repurchase obligations includible in the Rating Agency Short Term Money                       
     Market Instruments if term is less than 30 days and counterparty is rated                  
     at least A2..............................................................        1.00      
  Other repurchase obligations................................................                  
  Other issuers...............................................................        3.00      
Common stocks:                                                                                  
  Transportation issuers......................................................        3.00      
  Other issuers...............................................................        3.00      
Preferred stocks:                                                                               
  Auction rate preferred stocks...............................................        3.50      
  Other preferred stocks issued by issuers in the financial and industrial                      
     industries...............................................................        2.35      
  Other preferred stocks issued by issuers in the utilities industry..........        1.60      

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                                                        [Enlarge/Download Table]

                                                                                    MOODY'S     
TYPE OF MOODY'S ELIGIBLE ASSET:                                                 DISCOUNT FACTOR:
------------------------------------------------------------------------------  ----------------
                                                                                                
U.S. Government Obligations (other than U.S. Treasury Securities Strips set                     
  forth below) with remaining terms to maturity of:                                             
     1 year or less...........................................................        1.08      
     2 years or less..........................................................        1.15      
     3 years or less..........................................................        1.20      
     4 years or less..........................................................        1.26      
     5 years or less..........................................................        1.31      
     7 years of less..........................................................        1.40      
     10 years or less.........................................................        1.48      
     15 years or less.........................................................        1.54      
     20 years or less.........................................................        1.61      
     30 years or less.........................................................        1.63      
  U.S. Treasury Securities Strips with remaining terms to maturity of:                          
     1 year or less...........................................................        1.08      
     2 years or less..........................................................        1.16      
     3 years or less..........................................................        1.23      
     4 years or less..........................................................        1.30      
     5 years or less..........................................................        1.37      
     7 years or less..........................................................        1.51      
     10 years or less.........................................................        1.69      
     15 years or less.........................................................        1.99      
     20 years or less.........................................................        2.28      
     30 years or less.........................................................        2.56      

Corporate evidences of indebtedness:                                                            
  Corporate evidences of indebtedness rated Aaa with remaining terms to                         
     maturity of:                                                                               
     1 year or less...........................................................        1.14      
     2 years or less..........................................................        1.21      
     3 years or less..........................................................        1.26      
     4 years or less..........................................................        1.32      
     5 years or less..........................................................        1.38      
     7 years or less..........................................................        1.47      
     10 years or less.........................................................        1.55      
     15 years or less.........................................................        1.62      
     20 years or less.........................................................        1.69      
     30 years or less.........................................................        1.71      
  Corporate evidences of indebtedness rated Aa with remaining terms to                          
     maturity of:                                                                               
     1 year or less...........................................................        1.19      
     2 years of less..........................................................        1.26      
     3 years or less..........................................................        1.32      
     4 years or less..........................................................        1.38      
     5 years or less..........................................................        1.44      
     7 years or less..........................................................        1.54      
     10 years or less.........................................................        1.63      
     15 years or less.........................................................        1.69      
     20 years or less.........................................................        1.77      

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                                                        [Enlarge/Download Table]

                                                                                    MOODY'S     
TYPE OF MOODY'S ELIGIBLE ASSET:                                                 DISCOUNT FACTOR:
------------------------------------------------------------------------------  ----------------
                                                                                                
     30 years or less.........................................................        1.79      
  Corporate evidences of indebtedness rated A with remaining terms to maturity                  
     of:                                                                                        
     1 year or less...........................................................        1.24      
     2 years or less..........................................................        1.32      
     3 years or less..........................................................        1.38      
     4 years or less..........................................................        1.45      
     5 years or less..........................................................        1.51      
     7 years or less..........................................................        1.61      
     10 years or less.........................................................        1.70      
     15 years or less.........................................................        1.77      
     20 years or less.........................................................        1.85      
     30 years or less.........................................................        1.87      
  Corporate evidences of indebtedness rated at least Baa with remaining terms                   
     of maturity of:                                                                            
     1 year or less...........................................................        1.30      
     2 years or less..........................................................        1.38      
     3 years or less..........................................................        1.44      
     4 years or less..........................................................        1.51      
     5 years or less..........................................................        1.57      
     7 years or less..........................................................        1.63      
     10 years or less.........................................................        1.77      
     15 years or less.........................................................        1.85      
     20 years or less.........................................................        1.94      
     30 years or less.........................................................        1.95      
  Corporate evidences of indebtedness rated at least Ba with remaining terms                    
     of maturity of:                                                                            
     1 year or less...........................................................        1.41      
     2 years or less..........................................................        1.49      
     3 years or less..........................................................        1.56      
     4 years or less..........................................................        1.63      
     5 years or less..........................................................        1.70      
     7 years or less..........................................................        1.82      
     10 years or less.........................................................        1.92      
     15 years or less.........................................................        2.00      
     20 years or less.........................................................        2.10      
     30 years or less.........................................................        2.11      
  Corporate evidences of indebtedness rated at least B1 and B2 with remaining                   
     terms of maturity of:                                                                      
     1 year or less...........................................................        1.51      
     2 years or less..........................................................        1.61      
     3 years or less..........................................................        1.63      

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                                                                                    MOODY'S     
TYPE OF MOODY'S ELIGIBLE ASSET:                                                 DISCOUNT FACTOR:
------------------------------------------------------------------------------  ----------------
                                                                                                
     4 years or less..........................................................        1.76      
     5 years or less..........................................................        1.84      
     7 years or less..........................................................        1.96      
     10 years or less.........................................................        2.07      
     15 years or less.........................................................        2.16      
     20 years or less.........................................................        2.26      
     30 years or less.........................................................        2.28      
  Convertible corporate evidences of indebtedness with senior debt securities                   
     rated Aa issued by the following type of issuers:                                          
     Utility..................................................................        1.80      
     Industrial...............................................................        2.97      
     Financial................................................................        2.92      
     Transportation...........................................................        4.27      
  Convertible corporate evidences of indebtedness with senior debt securities                   
     rated A issued by the following type of issuers:                                           
     Utility..................................................................        1.85      
     Industrial...............................................................        3.02      
     Financial................................................................        2.97      
     Transportation...........................................................        4.32      
  Convertible corporate evidences of indebtedness with senior debt securities                   
     rated Baa issued by the following type of issuers:                                         
     Utility..................................................................        2.01      
     Industrial...............................................................        3.18      
     Financial................................................................        3.13      
     Transportation...........................................................        4.48      
  Convertible corporate bonds with senior debt securities rated Ba issued by                    
     the following type of issuers:                                                             
     Utility..................................................................        2.02      
     Industrial...............................................................        3.19      
     Financial................................................................        3.14      
     Transportation...........................................................        4.49      
  Convertible corporate bonds with senior debt securities rated B1 or B2                        
     issued by the following type of issuers:                                                   
     Utility..................................................................        2.12      
     Industrial...............................................................        3.29      
     Financial................................................................        3.24      
     Transportation...........................................................       4.59]      

NET ASSET VALUE 

  The net asset value of the Fund's shares is computed based on the market
value of the securities it holds and determined daily as of the close of regular
trading on the New York Stock Exchange and reported in financial newspapers of  
general circulation as of the last day of each week.                            

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     Portfolio securities which are traded only on stock exchanges are valued at
the last sale price as of the close of regular trading on the day the securities
are being valued, or lacking any sales, at the mean between closing bid and     
asked prices. Securities traded in the over-the-counter market which are Nasdaq 
National Market securities are valued at the last sale price as of the close of 
regular trading on the day the securities are being valued. Other               
over-the-counter securities are valued at the most recent bid prices as obtained
from one or more dealers that make markets in the securities. Portfolio         
securities which are traded both in the over-the-counter market and on a stock  
exchange are valued according to the broadest and most representative market, as
determined by the Investment Adviser. Securities traded primarily on foreign    
exchanges are valued at the closing values of such securities on their          
respective exchanges as of the day the securities are being valued. Securities  
and assets for which market quotations are not readily available are valued at  
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund. Short-term investments that mature in 60 days or less are
valued at amortized cost, unless the Board of Directors of the Fund determines  
that such valuation does not constitute fair value.                             

Net asset value per share is calculated by dividing the value of the  
securities held plus any cash or other assets minus all liabilities, including  
accrued expenses, and less the liquidation value of any preferred stock         
outstanding by the total number of shares outstanding at such time.             

GENERAL INFORMATION 

BOOK-ENTRY-ONLY ISSUANCE                                                        

    The Depository Trust Company ("DTC") will act as securities depository for
the shares of cumulative preferred stock offered pursuant to the Prospectus (the
"Securities"). The information in this section concerning DTC and DTC's         
book-entry system is based upon information obtained from DTC. The Securities   
offered hereby initially will be issued only as fully-registered securities     
registered in the name of Cede & Co. (as nominee for DTC). One or more          
fully-registered global Security certificates initially will be issued,         
representing in the aggregate the total number of Securities, and deposited with
DTC.                                                                            

     DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a 
member of the Federal Reserve System, a "clearing corporation" within the       
meaning of the New York Uniform Commercial Code and a "clearing agency"         
registered pursuant to the provisions of Section 17A of the Securities Exchange 
Act of 1934, as amended. DTC holds securities that its participants             
("Participants") deposit with DTC. DTC also facilities the settlement among     
Participants of securities transactions, such as transfers and pledges, in      
deposited securities through electronic computerized book-entry changes in      
Participants' accounts, thereby eliminating the need for physical movement of   
securities certificates. Direct Participants include securities brokers and     
dealers, banks, trust companies, clearing corporations and certain other        
organizations ("Direct Participants"). Access to the DTC system is also         
available to others such as securities brokers and dealers, banks and trust     
companies that clear through or maintain a custodial relationship with a Direct 
Participant, either directly or indirectly ("Indirect Participants").           

  Purchases of Securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's    
records. The ownership interest of each actual purchaser of a security          
("Beneficial Owner") is in turn to be recorded on the Direct or Indirect        
Participants' records. Beneficial Owners will not receive written confirmation  
from DTC of their purchases, but Beneficial Owners are expected to receive      
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through  
which the Beneficial Owners purchased Securities. Transfers of ownership        
interests in Securities are to be accomplished by entries made on the books of  
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not  
receive certificates representing their ownership interests in Securities,      
except as provided herein.                                                      

 DTC has no knowledge of the actual Beneficial Owners of the Securities;
DTC's records reflect only the identity of the Direct Participants to whose     
accounts such Securities are credited, which may or may not be                  

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the Beneficial Owners. The Participants will remain responsible for keeping     
account of their holdings on behalf of their customers.                         

Conveyance of notices and other communications by DTC to Direct       
Participants, by Direct Participants to Indirect Participants, and by Direct    
Participants and Indirect Participants to Beneficial Owners will be governed by 
arrangements among them, subject to any statutory or regulatory requirements as 
may be in effect from time to time.                                             

     Payments on the Securities will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with   
their respective holdings shown on DTC's records unless DTC has reason to       
believe that it will not receive payments on such payment date. Payments by     
Participants to Beneficial Owners will be governed by standing instructions and 
customary practices and will be the responsibility of such Participant and not  
of DTC or the Fund, subject to any statutory or regulatory requirements as may  
be in effect from time to time. Payment of dividends to DTC is the              
responsibility of the Fund, disbursement of such payments to Direct Participants
is the responsibility of DTC, and disbursement of such payments to the          
Beneficial Owners is the responsibility of Direct and indirect Participants.    
Furthermore each Beneficial Owner must rely on the procedures of DTC to exercise
any rights under the Securities.                                                

  Beneficial Owners may obtain certificates representing the Securities by
contacting State Street Bank and Trust Company, which acts as transfer agent for
the Fund's shares.                                                              

  DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the Fund.  
Under such circumstances, in the event that a successor securities depository is
not obtained, certificates representing the Securities will be printed and      
delivered.                                                                      

COUNSEL AND INDEPENDENT ACCOUNTANTS                                             

   Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022 is counsel to the Fund.                                              

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 
10036, has been selected as independent accountants for the Fund.               

BENEFICIAL OWNER

    There are no persons known to the Fund who may be deemed beneficial owners
of 5% or more of shares of the Fund's Common Stock because they possessed or    
shared voting or investment power with respect to shares of the Fund's Common   
Stock. As of April 30, 1997, the Directors and Officers of the Fund as a group  
beneficially owned approximately 1.78% of the outstanding shares of the Fund's  
Common Stock.                                                                   

FINANCIAL STATEMENTS

The audited financial statements included in the Annual Report to the 
Fund's Shareholders for the fiscal year ended December 31, 1996, together with  
the report of Price Waterhouse LLP thereon, are incorporated herein by reference
from the Fund's Annual Report to Shareholders filed with the Securities and     
Exchange Commission on March   , 1997. All other portions of the Annual Report  
to Shareholders are not incorporated herein by reference and are not part of the
Registration Statement. A copy of the Annual Report to Shareholders may be      
obtained without charge by writing to the Fund at its address at One Corporate  
Center, Rye, New York 10580-1434 or by calling the Fund toll-free at 800-GABELLI
(422-3554).                                                                     

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PART C

OTHER INFORMATION 

ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS                                     

                                                                [Download Table]
                                                                               
 (1)  Financial Statements(1)                                                  
 (2)   (a)  (1) Articles of Incorporation(2)                                   
            (2) Articles Supplementary(5)                                      
       (b)  Amended and Restated By-Laws(3)                                    
       (c)  Not Applicable                                                     
       (d)  Specimen Stock Certificate(4)                                      
       (e)  Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan(2)
       (f)  Not Applicable                                                     
       (g)  Investment Advisory Agreement(2)                                   
       (h)  (1) Form of Underwriting Agreement(6)                              
            (2) Form of Master Agreement Among Underwriters(6)                 
       (i)  Not Applicable                                                     
       (j)  Custodian Agreement(3)                                             
       (k)  Not Applicable                                                     
       (l)  Opinion and Consent of Counsel(6)                                  
       (m)  Not Applicable                                                     
       (n)  Consent of Price Waterhouse LLP(5)                                 
       (o)  Not Applicable                                                     
       (p)  Not Applicable                                                     
       (q)  Not Applicable                                                     
       (r)  Financial Data Schedule(4)                                         

---------------                                                                 
(1) Incorporated by reference from Registrant's Annual Report for the year ended
December 31, 1996, File No. 811-8476, as filed with the Securities and  
Exchange Commission on March 18, 1997.                                  

(2) Incorporated by reference from the Registrant's Registration Statement on   
   Form N-2, File Nos. 33-60407 and 811-8476, as filed with the Securities and
Exchange Commission on June 20, 1995.                                   

(3) Incorporated by reference from Amendment No. 1 to the Registrant's          
Registration Statement on Form N-2, File Nos. 33-60407 and 811-8476, as 
filed with the Securities and Exchange Commission on August 7, 1995.    

(4) Incorporated by reference from the Registrant's Registration Statement on   
    Form N-2, File Nos. 333-25487 and 811-8476, as filed with the Securities and
Exchange Commission on April 18, 1997.                                  

(5) Filed herein.                                                               

(6) To be filed by amendment.                                                   

ITEM 25.  MARKETING ARRANGEMENTS                                                

See Exhibit 2(h) to this Registration Statement.                      

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ITEM 26.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION                           

 The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:          

                                                                [Download Table]
                                                                            
SEC Registration fees.............................................  $  9,091
New York Stock Exchange listing fee...............................    17,700
Rating Agency fee.................................................    20,000
Printing and engraving expenses...................................   100,000
Auditing fees and expenses........................................    50,000
Legal fees and expenses...........................................   110,000
Blue Sky fees and expenses........................................    20,000
Consulting fees...................................................   100,000
Miscellaneous.....................................................    12,209
                                                                    --------
          Total...................................................  $439,000
                                                                    ========

ITEM 27.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT         

   Insofar as the following have substantially identical boards of directors
or trustees they may be deemed with Registrant to be under common control: The  
Gabelli Asset Fund, The Gabelli Growth Fund and The Westwood Funds, each a      
Massachusetts Business Trust, The Gabelli Money Market Funds, The Gabelli Equity
Trust Inc., The Gabelli Value Fund Inc., The Gabelli Investor Fund, Inc.,       
Gabelli Capital Series Funds, Inc., The Gabelli Global Series Funds, Inc., The  
Gabelli Convertible Securities Fund, Inc., Gabelli International Growth Fund,   
Inc., Gabelli Gold Fund Inc. and Gabelli Equity Series Funds, Inc., each a      
Maryland corporation.                                                           

ITEM 28.  NUMBER OF HOLDERS OF SECURITIES AS OF APRIL 30, 1997                  

                                                                [Download Table]

                                                   NUMBER OF   
                TITLE OF CLASS                   RECORD HOLDERS
-----------------------------------------------  --------------
                                                               
Capital Stock, par value $.001 per share.......      14,014    

ITEM 29.  INDEMNIFICATION                                                       

Under the Fund's Articles of Incorporation and Amended and Restated   
By-Laws, the directors and officers of the Company and Fund will be indemnified 
to the fullest extent allowed and in the manner provided by Maryland law and    
applicable provisions of the Investment Company Act of 1940, as amended,        
including advancing of expenses incurred in connection therewith.               
Indemnification shall not be provided however to any officer or director against
any liability to the Registrant or its security-holders to which he or she would
otherwise be subject by reasons of willful misfeasance, bad faith, gross        
negligence or reckless disregard of the duties involved in the conduct of his or
her office.                                                                     

     Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to the directors and officers, the Registrant has been advised 
that in the opinion of the Securities and Exchange Commission such              
indemnification is against public policy as expressed in such Act and is        
therefore unenforceable. If a claim for indemnification against such liabilities
under the Securities Act of 1933 (other than for expenses incurred in a         
successful defense) is asserted against the Company by the directors or officers
in connection with the Shares, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court 
of appropriate jurisdiction the question of whether such indemnification by it  
is against public policy as expressed in such Act and will be governed by the   
final adjudication of such issue.                                               

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ITEM 30.  BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER                  

     For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and partners of Gabelli Funds, Inc., 
reference is made to the Adviser's current Form ADV filed under the Investment  
Advisers Act of 1940, incorporated herein by reference.                         

ITEM 31.  LOCATION OF ACCOUNTS AND RECORDS                                      

  The accounts and records of the Registrant are maintained in part at the
office of the Advisor at One Corporate Center, Rye, New York 10580-1434, in part
at the offices of the Custodian, State Street Bank & Trust Company, with offices
at 1776 Heritage Drive, North Quincy, MA 02171, at the offices of the Fund's    
Administrator, First Data Investor Services, One Exchange Place, Boston, MA     
02109, and in part at the offices of Boston EquiServe, 150 Royall Street, Mail  
Stop 45-02-62, Canton, MA 02021.                                                

ITEM 32.  MANAGEMENT SERVICES                                                   

Not applicable.                                                       

ITEM 33.  UNDERTAKINGS                                                          

1. Registrant undertakes to suspend the offering of shares until the  
prospectus is amended, if subsequent to the effective date of this registration 
statement, its net asset value declines more than ten percent from its net asset
value, as of the effective date of the registration statement or its net asset  
value increases to an amount greater than its net proceeds as stated in the     
prospectus.                                                                     

2. Not applicable.                                                    

3. Not applicable.                                                    

4. Not applicable.                                                    

     5. Registrant undertakes that, for the purpose of determining any liability
under the Securities Act, the information omitted from the form of prospectus   
filed as part of the Registration Statement in reliance upon Rule 430A and      
contained in the form of prospectus filed by the Registrant pursuant to Rule    
497(h) will be deemed to be a part of the Registration Statement as of the time 
it was declared effective.                                                      

  Registrant undertakes that, for the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of 
prospectus will be deemed to be a new Registration Statement relating to the    
securities offered therein, and the offering of such securities at that time    
will be deemed to be the initial bona fide offering thereof.                    

6. Registrant undertakes to send by first class mail or other means   
designed to ensure equally prompt delivery, within two business days of receipt 
of a written or oral request, any Statement of Additional Information           
constituting Part B of this Registration Statement.                             

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SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933 and Investment
Company Act of 1940, the Registrant has duly caused this amendment to its       
Registration Statement to be signed on its behalf by the undersigned, thereunto 
duly authorized, in the City of Rye, State of New York, on the 23rd day of May, 
1997.                                                                           

                                    THE GABELLI GLOBAL MULTIMEDIA TRUST INC.

                           By:         /s/ BRUCE N. ALPERT
                                         ---------------------------------------
                                         Bruce N. Alpert
                                        Vice President and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this      
Registration Statement has been signed below by the following persons in the    
capacities and on the dates indicated:                                          

                                                        [Enlarge/Download Table]

                  NAME                                      TITLE                       DATE  
----------------------------------------  ------------------------------------------  --------
                                                                                              

          /s/ MARIO J. GABELLI            Chairman of the Board and President         5/23/97 
----------------------------------------                                                      
            Mario J. Gabelli                                                                  

       /s/ DR. THOMAS E. BRATTER          Director                                    5/23/97 
----------------------------------------                                                      
         Dr. Thomas E. Bratter                                                                

           /s/ BILL CALLAGHAN             Director                                    5/23/97 
----------------------------------------                                                      
             Bill Callaghan                                                                   

        /s/ FELIX J. CHRISTIANA           Director                                    5/23/97 
----------------------------------------                                                      
          Felix J. Christiana                                                                 

           /s/ JAMES P. CONN              Director                                    5/23/97 
----------------------------------------                                                      
             James P. Conn                                                                    

           /s/ KARL OTTO POHL             Director                                    5/23/97 
----------------------------------------                                                      
             Karl Otto Pohl                                                                   

        /s/ ANTHONY R. PUSTORINO          Director                                    5/23/97 
----------------------------------------                                                      
          Anthony R. Pustorino                                                                

         /s/ SALVATORE J. ZIZZA           Director                                    5/23/97 
----------------------------------------                                                      
           Salvatore J. Zizza                                                                 

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SCHEDULE OF EXHIBITS TO FORM N-2

                                                        [Enlarge/Download Table]

 EXHIBIT                                                                                PAGE 
  NUMBER                                     EXHIBIT                                   NUMBER
----------  -------------------------------------------------------------------------  ------
                                                                                             
Exhibit A   (1) Articles of Incorporation*...........................................        
            (2) Articles Supplementary...............................................        
Exhibit B   Amended and Restated By-Laws*............................................        
Exhibit C   Not Applicable...........................................................        
Exhibit D   Specimen Stock Certificate*..............................................        
Exhibit E   Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan*........        
Exhibit F   Not Applicable...........................................................        
Exhibit G   Investment Advisory Agreement*...........................................        
Exhibit H   (1) Form of Underwriting Agreement+......................................        
            (2) Form of Master Agreement Among Underwriters+.........................        
Exhibit I   Not Applicable...........................................................        
Exhibit J   Custodian Agreement*.....................................................        
Exhibit K   Not Applicable...........................................................        
Exhibit L   Opinion and Consent of Counsel+..........................................        
Exhibit M   Not Applicable...........................................................        
Exhibit N   Consent of Price Waterhouse LLP..........................................        
Exhibit O   Not Applicable...........................................................        
Exhibit P   Not Applicable...........................................................        
Exhibit Q   Not Applicable...........................................................        
Exhibit R   Financial Data Schedule*.................................................        

---------------                                                                 
* Previously filed.                                                             

+ To be filed by amendment.                                                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘N-2/A’ Filing		Date		First		Last			Other Filings
		6/1/02		3		28
		12/26/97		3		26
		5/27/97
Filed on:		5/23/97		1		45			8-A12B
		5/14/97		61
		5/1/97		23		61
		4/30/97		57		74
		4/18/97		73					N-2
		3/31/97		5		31			N-30B-2
		3/18/97		73					N-30D
		2/26/97		24
		12/31/96		12		73			N-30D,  NSAR-B
		7/3/96		24
		12/31/95		19		63			N-30D,  NSAR-B
		9/1/95		12
		8/7/95		73					N-2/A
		6/20/95		73					N-2
		12/31/94		12		62			N-30B-2,  NSAR-B
		11/15/94		5		14
		4/6/94		61
		3/31/94		14		31
									List all Filings

5 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/15/24  Gabelli Multimedia Trust Inc.     N-2/A                 13:1.5M                                   Qes, LLC/FA
 2/21/24  Gabelli Multimedia Trust Inc.     N-2                    8:1M                                     Empire Filings/FA
 7/13/21  Gabelli Multimedia Trust Inc.     POS EX      7/13/21    7:1.2M                                   Quality EDGAR So… LLC/FA
 4/15/21  Gabelli Multimedia Trust Inc.     N-2/A¶      4/15/21    5:1.5M                                   Quality EDGAR So… LLC/FA
12/23/20  Gabelli Multimedia Trust Inc.     N-2¶       12/23/20    4:1.4M                                   Donnelley … Solutions/FA