EFTA01082482.pdf

LULU).- CO Z LLI SUBJECT TO COMPLETION, DATED MAY 25, 2016 ~oz THE GABELLI UTILITY TRUST ° at LLI Filed Pursuant to Rule 497(c) CD l= Registration Statement No. 333.203475 = LULL ILI 0 PRELIMINARY PROSPECTUS SUPPLEMENT LLI r O.CO I" (To Prospectus dated April 19, 2016) Cl- ow Ca W V) ca mooo Shares al CO CO a' CO % Series C Cumulative Preferred Shares z¢1- CO (Liquidation Preference $25.00 per share) - W The Gabelli Utility Trust (the "Fund." "we." "us" or "our') is °tiering shares of %Series C Cumulative Preferred Shares, par value F Li. $0.001 per share (the "Series C Preferred Shares"). The Series C Preferred Shares will constitute a separate series of the Fund's preferred F shares. Investors in Series C Preferred Shares will be entitled to receive. when, as and if declared by. or under authority granted by. the Fund's 'LILY ° Board of Trustees. out of funds legally available therefor. cumulative cash dividends and distributions at a rate of % per annum of the CC $25.00 per share liquidation preference on the Series C Preferred Shares. Dividends and distributions on Series C Preferred Shares will be .,, payable quarterly on March 26. June 26. September 26 and December 26 in each year. commencing on September 26. 2016. o LLI The Series C Preferred Shares are redeemable at our option on or after . 2021 and are subject to mandatory redemption by us in certain Lu circumstances. See "Special Characteristics and Risks of the Series C Preferred Shares — Redemption." ° W V) r ICC LLI The Fund is a diversified, closed-end management investment company registered under the Investment Company Act of 1940. as =2 °2 amended (the "1940 Act'). The Fund's primary investment objective is long term growth of capital and income. The Fund invests at least O sac of its assets, under normal market conditions, in common stocks and other securities of foreign and domestic companies involved in 0 W W providing products. services. or equipment for (i) the generation or distribution of electricity. gas. and water and (ii) telecommunications CO CO '-' aC services or infrastructure operations (collectively, the "Utility Industry"). A company will be considered to be in the Utility Industry if it • 0 O derives at least 50% of its revenues or earnings from. or devotes at least 50% of its assets to. the indicated activities or utility-related activities. CC M < The Fund's investment adviser is Gabelli Funds. LLC (the "Investment Adviser"). Ci z Ca The Fund's outstanding common shares. par value $0.001 per share. are listed on the New York Stock Exchange (the "NYSE') under the Z 0 W symbol "GUT." On May 24. 2016. the last reported net asset value per share of our common shares was $5.54 and the last reported sales price W Ca E per share of our common shares on the NYSE was 56.54. Shares of our 5.625% Series A Cumulative Preferred Shares. par value $0.001 per share (the "Series A Preferred Shares"), are listed on the NYSE under the symbol "GUT PrA." On May 24. 2016, the last reported sales price ° per share of our Series A Preferred Shares was $25.78. Our Series B Auction Market Preferred Shares. par value $0.001 per share (the "Series 0- ca B Preferred Shares"), arc not listed on a stock exchange. The Series C Preferred Shares will rank on parity with our Series A Preferred Shares. O Series B Preferred Shares and any future series of preferred shares and will be senior to our common shares with respect to dividend and °Luca distribution rights and rights upon our liquidation. z w o at Application will be made to list the Series C Preferred Shares on the NYSE. If the application is approved, the Series C Preferred Shares are expected to commence trading on the NYSE within thirty days of the date of issuance. The Fund intends to list the Series C Preferred W>CLU ci w Shares on the NYSE under the ticker symbol "GUT PrC." CO An investment in the Fund is not appropriate for all investors. We cannot assure you that the Fund's investment objective will be achieved. Z CI You should read this prospectus supplement (the "Prospectus Supplement") and the accompanying prospectus (the "Prospectus") before deciding W 0 aC LC' whether to invest in Series C Preferred Shares and retain it for future reference. The Prospectus Supplement and the accompanying Prospectus W ▪ CO Li. O. contain important information about us. Material that has been incorporated by reference and other information about us can be obtained from us 0.w 0 by calling 800-GABELLI (422-3554) or from the Securities and Exchange Commission's ("SEC') website (http://www.sec.gov). .= Z Investing in Series C Preferred Shares involves certain risks that are described in the "Special Characteristics and Risks of the Ca CC oa Series C Preferred Shares" section of this Prospectus Supplement and the "Risk Factors and Special Considerations" section o W beginning on page 26 of the accompanying Prospectus. F CO 0 at ▪ W z NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE CL W CC SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY Calz REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. o = cc = Liw Per Share Total ct• co t 3 Public offering price $25.00 = o w Underwriting discounts and commissions $ $ = 2 raj Proceeds, before expenses. to the Fund' to $ $ W iz CC (I) The aggregate expenses of the offering (excluding underwriting discounts and commissions) are estimated to be $325.000. 0. LLI cs = pco3 The underwriters are expected to deliver the Series C Preferred Shares in book-entry form through The Depository Trust Company on or <3= a about .2016. ›- cc ,2, = -42 Li- at I-, 0. =EEO Morgan Stanley =O en G.research, LLC LU CI 0 CC = = I- CO cC The date of this Prospectus Supplement is . 2016. EFTA01082482  You should rely only on the information contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus. Neither the Fund nor the underwriters have authorized anyone to provide you with different information. The Fund is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this Prospectus Supplement and the accompanying Prospectus is accurate as of any date other than the date of this Prospectus Supplement and the accompanying Prospectus, respectively. Our business, financial condition, results of operations and prospects may have changed since those dates. In this Prospectus Supplement and in the accompanying Prospectus, unless otherwise indicated, "Fund," "us," "our" and "we" refer to The Gabelli Utility Trust, a Delaware statutory trust. This Prospectus Supplement also includes trademarks owned by other persons. TABLE OF CONTENTS Prospectus Supplement Page CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS P-3 SUMMARY OF THE TERMS OF THE SERIES C PREFERRED SHARES P-4 DESCRIPTION OF THE SERIES C PREFERRED SHARES P-7 USE OF PROCEEDS P-8 CAPITALIZATION P-9 DESCRIPTION OF THE SECURITIES P-10 ASSET COVERAGE RATIO P-11 SPECIAL CHARACTERISTICS AND RISKS OF THE SERIES C PREFERRED SHARES P-11 U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE OFFERING P-19 CERTAIN EMPLOYEE BENEFIT PLAN AND IRA CONSIDERATIONS P-20 UNDERWRITING P-22 LEGAL MATTERS P-24 FINANCIAL STATEMENTS P-24 Prospectus Prospectus Summary 3 Summary of Fund Expenses 18 Financial Highlights 20 Use of Proceeds 25 The Fund 26 Investment Objectives and Policies 26 Risk Factors and Special Considerations 37 How the Fund Manages Risk 48 Management of the Fund 49 Portfolio Transactions 51 Dividends and Distributions 52 Issuance of Common Shares 53 Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan 53 Description of the Securities 55 Anti-Takeover Provisions of the Fund's Governing Documents 65 Closed-End Fund Structure 66 Repurchase of Common Shares 67 Rights Offerings 67 Net Asset Value 68 Limitation on Trustees' and Officers' Liability 69 Taxation 69 Custodian, Transfer Agent and Dividend Disbursing Agent 71 Plan of Distribution 72 Legal Matters 73 Independent Registered Public Accounting Firm 73 Additional Information 73 Privacy Principles of the Fund 74 Table of Contents of Statement of Additional Information 75 P-2 EFTA01082483  CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This Prospectus Supplement, the accompanying Prospectus and the Statement of Additional Information (the "SAI") contain "forward-looking statements." Forward-looking statements can be identified by the words "may." "will," "intend," "expect," "estimate," "continue," "plan," "anticipate" and similar terms and the negative of such terms. Such forward-looking statements may be contained in this Prospectus Supplement as well as in the accompanying Prospectus. By their nature, all fonvard-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect our actual results are the performance of the portfolio of securities we hold, the price at which our shares (including the Series C Preferred Shares) will trade in the public markets and other factors discussed in ow periodic filings with the SEC. Although we believe that the expectations expressed in our fonvard-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the "Risk Factors and Special Considerations" section of the accompanying Prospectus and "Special Characteristics and Risks of the Series C Preferred Shares" in this Prospectus Supplement. All forward-looking statements contained or incorporated by reference in this Prospectus Supplement or the accompanying Prospectus are made as of the date of this Prospectus Supplement or the accompanying Prospectus, as the case may be. Except for our ongoing obligations under the federal securities laws, we do not intend, and we undertake no obligation, to update any forward-looking statement. The forward-looking statements contained in this Prospectus Supplement, the accompanying Prospectus and the SAI are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"). Currently known risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the factors described in the "Risk Factors and Special Considerations" section of the accompanying Prospectus as well as in the "Special Characteristics and Risks of the Series C Preferred Shares" section of this Prospectus Supplement. We urge you to review carefully those sections for a more detailed discussion of the risks of an investment in the Series C Preferred Shares. P-3 EFTA01082484  SUMMARY OF THE TERMS OF THE SERIES C PREFERRED SHARES This Prospectus Supplement setsforth certain terms of the Series C Preferred Shares that we are offering pursuant to this Prospectus Supplement and the accompanying Prospectus that is attached to the back of this Prospectus Supplement. This section outlines certain specific legal andfinancial terms of the Series C Preferred Shares that are more generally described under the heading "Special Characteristics and Risks of the Series C Preferred Shares" herein and in the accompanying Prospectus under the heading "Description of the Securities." Capitalized terms used in this Prospectus Supplement and not otherwise defined shall have the meanings ascribed to them in the accompanying Prospectus or in the Statement ofPreferences governing and establishing the terms of the Series C Preferred Shares. The Fund The Gabelli Utility Trust is a diversified, closed-end management investment company registered under the 1940 Act. The Fund's primary investment objective is long term growth of capital and income. The Fund invests at least 80% of its assets, under normal market conditions, in common stocks and other securities of foreign and domestic companies involved in providing products, services, or equipment for (i) the generation or distribution of electricity, gas and water and (ii) telecommunications services or infrastructure operations (collectively, the "Utility industry"). A company will be considered to be in the Utility Industry if it derives at least 50% of its revenues or earnings from, or devotes at least 50% of its assets to, the indicated activities or utility-related activities. The Fund's investment adviser is Gabelli Funds, LLC. The Fund was organized under the laws of the State of Delaware on February 25, 1999 and commenced operations on July 9, 1999. The Fund's common shares are listed on the NYSE under the symbol "GUT." Securities Offered shares of % Series C Cumulative Preferred Shares (the "Series C Preferred Shares"). The Series C Preferred Shares will constitute a separate series of preferred shares of the Fund. The Series C Preferred Shares will rank on parity with the Series A Preferred Shares, Series B Preferred Shares and any future series of preferred shares and will be senior to our common shares with respect to dividend and distribution rights and rights upon our liquidation. Dividend Rate Dividends and distributions on the Series C Preferred Shares are cumulative from their original issue date at the annual rate of of the $25.00 per share liquidation preference on the Series C Preferred Shares. Dividend Payment Date Holders of Series C Preferred Shares will be entitled to receive, when, as and if declared by, or under authority granted by, the Fund's Board of Trustees (the "Board of Trustees"), out of funds legally available therefor, cumulative cash dividends and distributions at the rate of % per annum of the $25.00 per share liquidation preference on the Series C Preferred Shares. Dividends and distributions will be paid quarterly on March 26, June 26, September 26 and December 26 in each year, commencing on September 26, 2016. Liquidation Preference $25.00 per share plus accumulated and unpaid dividends and distributions. P4 EFTA01082485 Use of Proceeds The Fund expects to use the net proceeds from the offering of the Series C Preferred Shares to purchase portfolio securities in accordance with its investment objective and policies. The Investment Adviser anticipates that the investment of the proceeds will be made in accordance with the Fund's investment objective and policies as appropriate investment opportunities are identified, which is expected to be substantially completed within approximately three months of the issue date; however, the identification of appropriate investment opportunities pursuant to the Fund's investment style or changes in market conditions may cause the investment period to extend as long as six months from the issue date. While not currently expected, the proceeds may also be used to call shares of existing series of the Fund's preferred shares. Pending such investment and/or redemption, the proceeds of the offering of the Series C Preferred Shares will be held in high quality short term debt securities and similar instruments. See "Use of Proceeds." Non-Call Period/Redemption The Series C Preferred Shares generally may not be called for redemption at the option of the Fund prior to , 2021. The Fund reserves the right, however, to redeem the Series C Preferred Shares at any time if it is necessary, in the judgment of the Board of Trustees, to maintain its status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund also may be required under certain circumstances to redeem Series C Preferred Shares, before or after , 2021, in order to meet certain regulatory or rating agency asset coverage requirements. Commencing , 2021, and thereafter, to the extent permitted by the 1940 Act and Delaware law, the Fund may at any time, upon notice of redemption, redeem the Series C Preferred Shares in whole or in part at the liquidation preference per sham plus accumulated unpaid dividends and distributions through the date of redemption. Stock Exchange Listing Application will be made to list the Series C Preferred Shares on the NYSE. Prior to this offering, there has been no public market for Series C Preferred Shares. If the application is approved, it is anticipated that trading on the NYSE will begin within thirty days from the date of this Prospectus Supplement. Before the Series C Preferred Shares are listed on the NYSE, the underwriters may, but are not obligated to, make a market in the Series C Preferred Shares. Consequently, it is anticipated that, prior to the commencement of trading on the NYSE, an investment in the Series C Preferred Shares will be illiquid. Taxation The Fund expects that distributions made on the Series C Preferred Shares will consist of (i) long term capital gain (gain from the sale of a capital asset held longer than one year), (ii) qualified dividend income (dividend income from certain domestic and foreign corporations, provided certain holding period and other requirements arc met by both the Fund and the shareholder) and (iii) investment P-5 EFTA01082486  company taxable income (other than qualified dividend income, including interest income, short term capital gain and income from certain hedging and interest rate transactions). Distributions paid to investors by the Fund from its investment company taxable income, which includes the excess of net short term capital gains over net long term capital losses, are generally taxable to investors as ordinary income to the extent of the earnings and profits of the Fund. Such distributions (if reported by the Fund) may, however, qualify (provided holding periods and other requirements are met) (i) for the dividends received deduction in the case of corporate shareholders to the extent that the income of the Fund consists of dividend income from U.S. corporations and (ii) in the case of individual shareholders, as qualified dividend income eligible to be taxed at long term capital gains rates to the extent that the Fund receives qualified dividend income. Distributions made to investors from an excess of net long term capital gains over net short term capital losses ("capital gain dividends"), including capital gain dividends credited to investors but retained by the Fund, are taxable to investors as long term capital gains if they have been properly reported by the Fund, regardless of the length of time investors have owned shares of beneficial interest of the Fund. The maximum federal income tax rate on net long term capital gain of individuals is generally either 15% or 20% depending on whether an individual's income exceeds certain threshold amounts. In addition, certain U.S. shareholders who are individuals, estates or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surcharge on their net investment income. We cannot assure you, however, as to what percentage of future distributions made on the Series C Preferred Shares will consist of long term capital gain and qualified dividend income. See "U.S. Federal Income Tax Consequences of the Offering." ERISA See "Certain Employee Benefit Plan and IRA Considerations." Dividend Paying Agent Computershare Trust Company, M. P•6 EFTA01082487  DESCRIPTION OF THE SERIES C PREFERRED SHARES The following is a brief description of the terms of the Series C Preferred Shares. This is not a complete description and is subject to and entirely qualified by reference to the Fund's Statement of Preferences for the Series C Preferred Shares (the "Statement"). The Statement will be attached as an exhibit to post-effective amendment number 2 to the Fund's registration statement. Copies may be obtained as described under "Additional Information" in the accompanying Prospectus. Any capitalized terms in this section and the "Special Characteristics and Risks of the Series C Preferred Shares" section of this Prospectus Supplement that are not defined have the meaning assigned to them in the Statement. The Fund's declaration of trust (the "Declaration") authorizes its Board of Trustees to issue shares of beneficial interest of the Fund, $0.001 par value per share, with such designations, powers, preferences, voting, conversion and other rights, limitations, qualifications and terms and conditions as determined by the Board of Trustees and without the approval of common shareholders. The Declaration authorizes the Board of Trustees to issue an unlimited number of shares of beneficial interest classified by the Board of Trustees as preferred shares, par value $0.001 per share. The Statement authorizes the issuance of up to Series C Preferred Shares. All Series C Preferred Shares will have a liquidation preference of $25.00 per share plus accumulated and unpaid dividends. Holders of the Series C Preferred Shares shall be entitled to receive, when, as and if declared by, or under authority granted by, the Board of Trustees, out of funds legally available therefor, cumulative cash dividends and distributions at the rate of % per annum (computed on the basis of a 360-day year consisting of twelve 30-day months) of the $25.00 per share liquidation preference on the Series C Preferred Shares. Dividends and distributions on the Series C Preferred Shares will accumulate from the date of their original issue, which is expected to be , 2016. The Series C Preferred Shares, when issued by the Fund and paid for pursuant to the terms of this Prospectus Supplement and the accompanying Prospectus, will be fully paid and non-assessable and will have no preemptive, exchange or conversion rights. Any Series C Preferred Shares purchased or redeemed by the Fund will, after such purchase or redemption, have the status of authorized but unissued preferred shares. The Board of Trustees may by resolution classify or reclassify any authorized and unissued Series C Preferred Shares from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and distributions, qualifications or terms or conditions of redemption of such shares. So long as any Series C Preferred Shares are outstanding, the Fund shall not, without the affirmative vote of the holders of a majority (as defined in the 1940 Act) of the Fund's preferred shares outstanding at the time and present and voting on such matter, voting separately as one class, amend, alter or repeal the provisions of the Statement so as to in the aggregate adversely affect the rights and preferences set forth in any statement of preferences of the Fund's preferred shares, including the Series C Preferred Shares. To the extent permitted under the 1940 Act, in the event that more than one series of the Fund's preferred shares are outstanding. the Fund shall not effect any of the actions set forth in the preceding sentence which in the aggregate adversely affects the rights and preferences set forth in the statement of preferences for a series of the Fund's preferred shares differently than such rights and preferences for any other series of the Fund's preferred shares without the affirmative vote of the holders of at least a majority of the Fund's preferred shares outstanding and present and voting on such matter of each series adversely affected (each such adversely affected series voting separately as a class to the extent its rights are affected differently). The holders of the Series C Preferred Shares shall not be entitled to vote on any matter that affects the rights or interests of only one or more other series of the Fund's preferred shares. Unless a higher percentage is required under the Declaration or the Fund's by-laws (together, the "Governing Documents") or applicable provisions of the Delaware Statutory Trust Act or the 1940 Act, the affirmative vote of the holders of a majority of the Fund's outstanding preferred shares (as defined in Section 2(a)(42) of the 1940 Act), including the Series C Preferred Shares, voting together as a single class, will be required to approve any plan of reorganization adversely affecting the Fund's preferred 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" and "Investment Restrictions" in the accompanying Prospectus and the SAI. The class P-7 EFTA01082488 vote of holders of the Fund's preferred shares described above will in each case be in addition to a separate vote of the requisite percentage of the Fund's common shares and preferred shares, including the Series C Preferred Shares, voting together as a single class, necessary to authorize the action in question. An increase in the number of authorized preferred shares pursuant to the Governing Documents or the issuance of additional shares of any series of the Fund's preferred shares (including the Series C Preferred Shares) pursuant to the Governing Documents shall not in and of itself be considered to adversely affect the rights and preferences of the Fund's preferred shares. The disclosure set forth in this Description of the Series C Preferred Shares and under the heading "Special Characteristics and Risks of the Series C Preferred Shares" is intended to be a summary of the material provisions of the Series C Preferred Shares. Since this Description of the Series C Preferred Shares is only a summary, you should refer to the Statement for a complete description of the obligations of the Fund and your rights. The disclosure set forth in this Description of the Series C Preferred Shares and wider the heading "Special Characteristics and Risks of the Series C Preferred Shares" supplements the description of the preferred shares set forth under the caption "Description of the Securities — Preferred Shares" in the accompanying Prospectus, and in the event that any provision described in the disclosure set forth in this Description of the Series C Preferred Shares and under the heading "Special Characteristics and Risks of the Series C Preferred Shares" is inconsistent with any description contained in the accompanying Prospectus, the disclosure set forth in this Description of the Series C Preferred Shares and under the heading "Special Characteristics and Risks of the Series C Preferred Shares" will apply and supersede the description in the accompanying Prospectus. USE OF PROCEEDS The Fund estimates the total net proceeds of the offering to be $ , based on the public offering price of $25.00 per Series C Preferred Share and after deduction of the underwriting discounts and commissions and estimated offering expenses payable by the Fund. The Investment Adviser anticipates that the investment of the proceeds will be made in accordance with the Fund's investment objective and policies as appropriate investment opportunities are identified, which is expected to be substantially completed within approximately three months of the issue date; however, the identification of appropriate investment opportunities pursuant to the Fund's investment style or changes in market conditions may cause the investment period to extend as long as six months from the issue date. While not currently expected, the proceeds may also be used to call shares of existing series of the Fund's preferred shares. Pending such investment and/or redemption, the proceeds of the offering of the Series C Preferred Shares will be held in high quality short term debt securities and similar instruments. P-8 EFTA01082489  CAPITALIZATION The following table sets forth (i) the audited capitalization of the Fund as of December 31, 2015 and (ii) the unaudited adjusted capitalization of the Fund assuming the issuance of the 2,000,000 Series C Preferred Shares offered in this Prospectus Supplement and the use of proceeds thereof. The actual size of the offering may be greater or less than what is assumed in the table below. As of December 31.2015 Actual As adjusted (audited) (unaudited) Preferred shares, $0.001 par value per share, unlimited shares authorized (The "Actual" column reflects the Fund's outstanding capitalization as of December 31, 2015; the "As adjusted" column assumes the issuance of 2,000.000 Series C Preferred Shares at $25.00 liquidation preference per share) $ 51,332.200 $101,332,200 Shareholders' equity applicable to common shares: Common shares, $0.001 par value per share (The "Actual" and "As adjusted" columns reflect the Fund's outstanding capitalization of 42,760,949 common shares as of December 31, 2015) 42.761 42,761 Paid-in surplus* 163,702.268 161,802,268 Accumulated net investment loss (15,567) (15,567) Distributions in excess of net realized gain on investments, swap contracts, and foreign currency translations (1,354,826) (1,354,826) Net unrealized appreciation on investments, swap contracts, and foreign currency translations 56,801,479 56,801,479 Net assets attributable to common shares 219,176,115 217,276,115 Liquidation preference of preferred shares 51,332,200 101,332,200 Net assets, plus the liquidation preference of preferred shares 270,508,315 318,608,315 * As adjusted paid-in surplus reflects a deduction for the estimated underwriting discounts and commissions of $1,575,000 (using an assumed underwriting discount of 3.15%) and estimated offering costs of $325,000 for the Series C Preferred Shares. For financial reporting purposes, the Fund will deduct the liquidation preference of its outstanding preferred shares from "net assets," so long as the senior securities have redemption features that are not solely within the control of the Fund. For all regulatory purposes, the Fund's preferred shares will be treated as equity (rather than debt). P-9 EFTA01082490  DESCRIPTION OF THE SECURITIES The following information regarding the Fund's authorized shares is as of the date hereof. Amount Amount Outstanding Held by Exclusive of Fund or Amount Amount for its Held by Title of Class Authorized Account Fund Common Shares Unlimited 42,760,949 Series A Preferred Shares Unlimited 1,153,288 Series B Preferred Shares Unlimited 900 Series C Preferred Shares 0 Other Series of Preferred Shares Unlimited 0 P40 EFTA01082491  ASSET COVERAGE RATIO Pursuant to the 1940 Act. the Fund generally will not be permitted to declare any dividend, or declare any other distribution, upon any outstanding common shares, or purchase any such common shares, unless, in every such case, all preferred shares issued by the Fund have at the time of declaration of any such dividend or distribution or at the time of any such purchase an asset coverage of at least 200% ("1940 Act Asset Coverage Requirement") after deducting the amount of such dividend, distribution, or purchase price, as the case may be. As of the date of this Prospectus Supplement, all of the Fund's outstanding preferred shares are expected to have asset coverage on the date of issuance of the Series C Preferred Shares of approximately 332%. In addition to the 1940 Act Asset Coverage Requirement, the Fund is subject to certain restrictions on investments imposed by guidelines of one or more rating agencies, which have issued ratings for the Series A Preferred Shares and Series B Preferred Shares and may issue a rating for the Series C Preferred Shares. See "Special Characteristics and Risks of the Series C Preferred Shares — Risks — Credit Rating Risk" in this Prospectus Supplement. As a condition of the underwriters' obligation to purchase the Series C Preferred Shares, the Series C Preferred Shares must be rated at a minimum level by a rating agency that is a Nationally Recognized Statistical Rating Organization. SPECIAL CHARACTERISTICS AND RISKS OF THE SERIES C PREFERRED SHARES Dividends Holders of Series C Preferred Shares shall be entitled to receive, when, as and if declared by, or under authority granted by, the Board of Trustees, out of funds legally available therefor. cumulative cash dividends and distributions at the rate of % per annum (computed on the basis of a 360-day year consisting of twelve 30•day months) of the $25.00 per share liquidation preference on the Series C Preferred Shares. Dividends and distributions on Series C Preferred Shares will accumulate from the date of their original issue, which is expected to be , 2016. Dividends and distributions will be payable quarterly on March 26, June 26, September 26 and December 26 in each year (each a "Dividend Payment Date") commencing on September 26, 2016 (or, if any such day is not a business day, then on the next succeeding business day) to holders of record of Series C Preferred Shares as they appear on the share register of the Fund at the close of business on the fifth preceding business day. Dividends and distributions on Series C Preferred Shares shall accumulate from the date on which the Series C Preferred Shares are originally issued. Each period beginning on and including a Dividend Payment Date (or the date of original issue, in the case of the first dividend period after the first issuance of the Series C Preferred Shares) and ending on but excluding the next succeeding Dividend Payment Date is referred to herein as a "Dividend Period." Dividends and distributions on account of arrears for any past Dividend Period or in connection with the redemption of Series C Preferred Shares may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date as shall be fixed by the Board of Trustees that is not more than 30 days before the Dividend Payment Date. No full dividends or distributions will be declared or paid on Series C Preferred Shares for any Dividend Period or part thereof unless full cumulative dividends and distributions due through the most recent Dividend Payment Dates therefor on all outstanding shares of any series of preferred shares of the Fund ranking on a parity with the Series C Preferred Shares as to the payment of dividends and distributions have been or contemporaneously are declared and paid through the most recent Dividend Payment Dates therefor. If full cumulative dividends and distributions due have not been paid on all of the Fund's outstanding preferred shares, any dividends and distributions being paid on such preferred shares (including the Series C Preferred Shares) will be paid as nearly pro rata as possible in proportion to the respective amounts of dividends and distributions accumulated but unpaid on each such series of preferred shares on the relevant Dividend Payment Date. P-11 EFTA01082492 Restrictions on Dividend, Redemption and Other Payments Under the 1940 Act, the Fund is not permitted to issue preferred shares (such as the Series C Preferred Shares) unless immediately after such issuance the Fund will have an asset coverage of at least 200% (or such other percentage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities representing stock of a closed•end investment company as a condition of declaring distributions, purchases or redemptions of its stock). In general, the term "asset coverage" for this purpose means the ratio which the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness of the Fund plus the aggregate of the involuntary liquidation preference of the preferred shares. The involuntary liquidation preference refers to the amount to which the preferred shares would be entitled on the involuntary liquidation of the Fund in preference to a security junior to them. The Fund also is not permitted to declare any cash dividend or other distribution on its common shares or purchase its common shares unless, at the time of such declaration or purchase, the Fund satisfies this 200% asset coverage requirement after deducting the amount of the distribution or purchase price, as applicable. In addition, the Fund may be limited in its ability to declare any cash distribution on its shares of beneficial interest (including the Series C Preferred Shares) or purchase its shares of beneficial interest (including the Series C Preferred Shares) unless, at the time of such declaration or purchase, the Fund has an asset coverage on its indebtedness, if any, of at least 300% after deducting the amount of such distribution or purchase price, as applicable. The 1940 Act contains an exception, however, that permits dividends to be declared upon any preferred shares issued by the Fund (including the Series C Preferred Shares) if the Fund's indebtedness has an asset coverage of at least 200% at the time of declaration after deducting the amount of the dividend. In general, the term "asset coverage" for this purpose means the ratio which the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities represent