UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-08476
| The Gabelli Multimedia Trust Inc. (formerly, The Gabelli Global Multimedia Trust Inc.) |
| (Exact name of registrant as specified in charter) |
| One Corporate Center |
| Rye, New York 10580-1422 |
| (Address of principal executive offices) (Zip code) |
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
| Rye, New York 10580-1422 |
| (Name and address of agent for service) |
Registrant’s telephone number, including area code: 1-800-422-3554
Date of fiscal year end: December 31
Date of reporting period: September 30, 2012
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Schedule of Investments.
The Schedule(s) of Investments is attached herewith.
The Gabelli Multimedia Trust Inc.
Third Quarter Report — September 30, 2012
To Our Shareholders,
For the quarter ended September 30, 2012, the net asset value (“NAV”) total return of The Gabelli Multimedia Trust Inc. (the “Fund”) was 9.3%, compared with a total return of 6.7% for the Morgan Stanley Capital International (“MSCI”) World Free Index. The total return for the Fund’s publicly traded shares was 16.5%. The Fund’s NAV per share was $8.06 while the price of the publicly traded shares closed at $7.87 on the New York Stock Exchange (“NYSE”). See below for additional performance information.
Enclosed is the schedule of investments as of September 30, 2012.
Comparative Results
Average Annual Returns through September 30, 2012 (a) (Unaudited)
| Quarter | 1 Year | 5 Year | 10 Year | Since Inception (11/15/94) |
||||||||||||||||
| Gabelli Multimedia Trust Inc. |
||||||||||||||||||||
| NAV Total Return (b) |
9.28% | 28.03% | (4.92)% | 7.80% | 7.49% | |||||||||||||||
| Investment Total Return (c) |
16.50 | 42.35 | (2.67) | 9.54 | 7.82 | |||||||||||||||
| Standard & Poor’s 500 Index |
6.35 | 30.20 | 1.05 | 8.01 | 8.71(d) | |||||||||||||||
| MSCI World Free Index |
6.71 | 21.59 | (2.15) | 8.04 | 6.13(d) | |||||||||||||||
| (a) | Returns represent past performance and do not guarantee future results. Investment returns and the principal value of an investment will fluctuate. When shares are sold, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit www. gabelli.com for performance information as of the most recent month end. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The Standard & Poor’s 500 and MSCI World Free Indices are unmanaged indicators of stock market performance. Dividends are considered reinvested except for the MSCI World Free Index. You cannot invest directly in an index. |
| (b) | Total returns and average annual returns reflect changes in the NAV per share, reinvestment of distributions at NAV on the ex-dividend date, and adjustments for rights offerings and are net of expenses. Since inception return is based on an initial NAV of $7.50. |
| (c) | Total returns and average annual returns reflect changes in closing market values on the NYSE, reinvestment of distributions, and adjustments for rights offerings. Since inception return is based on an initial offering price of $7.50. |
| (d) | From November 30, 1994, the date closest to the Fund’s inception for which data is available. |
The Gabelli Multimedia Trust Inc.
Schedule of Investments — September 30, 2012 (Unaudited)
See accompanying notes to schedule of investments.
2
The Gabelli Multimedia Trust Inc.
Schedule of Investments (Continued) — September 30, 2012 (Unaudited)
See accompanying notes to schedule of investments.
3
The Gabelli Multimedia Trust Inc.
Schedule of Investments (Continued) — September 30, 2012 (Unaudited)
See accompanying notes to schedule of investments.
4
The Gabelli Multimedia Trust Inc.
Schedule of Investments (Continued) — September 30, 2012 (Unaudited)
See accompanying notes to schedule of investments.
5
The Gabelli Multimedia Trust Inc.
Notes to Schedule of Investments (Unaudited)
The Fund’s schedule of investments is prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its schedule of investments.
Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the “Adviser”).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market, but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
| — | Level 1 — | quoted prices in active markets for identical securities; | ||||
| — | Level 2 — | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||||
| — | Level 3 — | significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). | ||||
6
The Gabelli Multimedia Trust Inc.
Notes to Schedule of Investments (Unaudited) (Continued)
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments in securities and other financial instruments by inputs used to value the Fund’s investments as of September 30, 2012 is as follows:
| Valuation Inputs | ||||||||||||||||
| Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Total Market Value at 9/30/12 |
|||||||||||||
| INVESTMENTS IN SECURITIES: |
||||||||||||||||
| ASSETS (Market Value): |
||||||||||||||||
| Common Stocks: |
||||||||||||||||
| Distribution Companies |
||||||||||||||||
| Entertainment |
$ 11,664,381 | — | $260,985 | $ 11,925,366 | ||||||||||||
| Financial Services |
897,374 | — | 969 | 898,343 | ||||||||||||
| Telecommunications: Long Distance |
2,719,767 | — | 2 | 2,719,769 | ||||||||||||
| Wireless Communications |
7,750,818 | $ 30,253 | 0 | 7,781,071 | ||||||||||||
| Other Industries (a) |
47,642,621 | — | — | 47,642,621 | ||||||||||||
| Copyright/Creativity Companies |
||||||||||||||||
| Publishing |
8,675,209 | 217,336 | — | 8,892,545 | ||||||||||||
| Other Industries (a) |
93,731,025 | — | — | 93,731,025 | ||||||||||||
| Total Common Stocks |
173,081,195 | 247,589 | 261,956 | 173,590,740 | ||||||||||||
| Rights: |
||||||||||||||||
| Consumer Services |
25,500 | — | — | 25,500 | ||||||||||||
| Diversified Industrial |
— | — | 0 | 0 | ||||||||||||
| Total Rights |
25,500 | — | 0 | 25,500 | ||||||||||||
| Warrants (a) |
1,709 | — | — | 1,709 | ||||||||||||
| U.S. Government Obligations |
— | 7,116,880 | — | 7,116,880 | ||||||||||||
| TOTAL INVESTMENTS IN SECURITIES – ASSETS |
$173,108,404 | $7,364,469 | $261,956 | $180,734,829 | ||||||||||||
| OTHER FINANCIAL INSTRUMENTS: |
||||||||||||||||
| LIABILITIES (Unrealized Depreciation):* |
||||||||||||||||
| INTEREST RATE CONTRACT: |
||||||||||||||||
| Interest Rate Swap Agreement |
$ — | $ (231,709 | ) | $ — | $ (231,709 | ) | ||||||||||
| (a) | Please refer to the Schedule of Investments (“SOI”) for the industry classifications of these portfolio holdings. |
| * | Other financial instruments are derivatives reflected in the SOI, such as futures, forwards, and swaps, which are valued at the unrealized appreciation/depreciation of the instrument. |
The Fund did not have transfers between Level 1 and Level 2 during the period ended September 30, 2012. The Fund’s policy is to recognize transfers among Levels as of the beginning of the reporting period.
Additional Information to Evaluate Quantitative Information.
General. The Fund uses recognized industry pricing services – approved by the Board and unaffiliated with the Adviser – to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities.
7
The Gabelli Multimedia Trust Inc.
Notes to Schedule of Investments (Unaudited) (Continued)
Fair Valuation. Fair valued securities may be common and preferred equities, warrants, options, rights, and fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These include back testing the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purposes of hedging or protecting its exposure to interest rate movements and movements in the securities markets, hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase, or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
The Fund’s derivative contracts held at September 30, 2012, if any, are not accounted for as hedging instruments under GAAP and are disclosed in the Schedule of Investments together with the related counterparty.
Swap Agreements. The Fund may enter into interest rate swap or cap transactions for the purposes of hedging or protecting its exposure to interest rate movements and movements in the securities markets. The use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In an interest rate swap, the Fund would agree to pay periodically to the counterparty a fixed rate payment in exchange for the counterparty agreeing to pay to the Fund periodically a variable rate payment that is intended to approximate the Fund’s variable rate payment obligation on the Series C Auction Rate Cumulative Preferred Stock (“Series C Stock”). Interest rate swaps transactions introduce additional risk because the Fund would remain obligated to pay preferred stock dividends when due in accordance with the Articles Supplementary even if the counterparty defaulted. Depending on the general state of short-term interest rates and the returns on the Fund’s portfolio securities at the time a
8
The Gabelli Multimedia Trust Inc.
Notes to Schedule of Investments (Unaudited) (Continued)
swap transaction reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction.
The Fund has entered into an interest rate swap agreement with Citibank N.A. Under the agreement, the Fund receives a floating rate of interest and pays a respective fixed rate of interest on the notional value of the swap. Details of the swap at September 30, 2012 are reflected within the Schedule of Investments and further details are as follows:
| Notional Amount |
Fixed Rate |
Floating Rate* (rate reset monthly) |
Termination Date |
Net Unrealized | ||||
| $10,000,000 |
4.32000% | 0.23050% | 4/04/13 | $(231,709) |
| * | Based on LIBOR (London Interbank Offered Rate). |
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/(loss) on investments.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Restricted Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted. Restricted securities include securities the disposition of which is subject to substantial legal or contractual restrictions. The sale of restricted securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than 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. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity
9
The Gabelli Multimedia Trust Inc.
Notes to Schedule of Investments (Unaudited) (Continued)
standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. For the restricted securities the Fund held as of September 30, 2012, refer to the Schedule of Investments.
Tax Information. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.
At December 31, 2011, the Fund had net capital loss carryforwards for federal income tax purposes which are available to reduce future required distributions of net capital gains to shareholders. Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward for an unlimited period capital losses incurred in years beginning after December 22, 2010. As a result of the rule, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law. $10,774,341 of capital loss carryforwards is available through 2017.
We have separated the portfolio managers’ commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio managers’ commentary is unrestricted. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com.
10
DIRECTORS AND OFFICERS
THE GABELLI MULTIMEDIA TRUST INC.
One Corporate Center, Rye, NY 10580-1422
The Net Asset Value per share appears in the Publicly Traded Funds column, under the heading “Specialized Equity Funds,” in Monday’s The Wall Street Journal. It is also listed in Barron’s Mutual Funds/Closed End Funds section under the heading “Specialized Equity Funds.”
The Net Asset Value per share may be obtained each day by calling (914) 921-5070 or visiting www.gabelli.com.
The NASDAQ symbol for the Net Asset Value is “XGGTX”.
For general information about the Gabelli Funds, call 800-GABELLI (800-422-3554), fax us at 914-921-5118, visit Gabelli Funds’ Internet homepage at: www.gabelli.com, or e-mail us at: closedend@gabelli.com
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may, from time to time, purchase its common shares in the open market when the Fund’s shares are trading at a discount of 5% or more from the net asset value of the shares. The Fund may also, from time to time, purchase its preferred shares in the open market when the preferred shares are trading at a discount to the liquidation value.
THE GABELLI MULTIMEDIA TRUST INC.
One Corporate Center
Rye, NY 10580-1422
(914) 921-5070
www.gabelli.com
Third Quarter Report
September 30, 2012
GGT Q3/2012
Item 2. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 3. Exhibits.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) |
The Gabelli Multimedia Trust Inc. (formerly, The Gabelli Global Multimedia Trust Inc.) |
| By (Signature and Title)* |
/s/ Bruce N. Alpert | |
| Bruce N. Alpert, Principal Executive Officer |
| Date |
11/27/12 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* |
/s/ Bruce N. Alpert | |
| Bruce N. Alpert, Principal Executive Officer |
| Date |
11/27/12 |
| By (Signature and Title)* |
/s/ Agnes Mullady | |
| Agnes Mullady, Principal Financial Officer and Treasurer |
| Date |
11/27/12 |
* Print the name and title of each signing officer under his or her signature.