<SEC-DOCUMENT>0000950123-11-005208.txt : 20110502
<SEC-HEADER>0000950123-11-005208.hdr.sgml : 20110502
<ACCEPTANCE-DATETIME>20110125171406
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-11-005208
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20110125

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GDL FUND
		CENTRAL INDEX KEY:			0001378701
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		ONE CORPORATE CENTER
		CITY:			RYE
		STATE:			NY
		ZIP:			10580
		BUSINESS PHONE:		914-921-5100

	MAIL ADDRESS:	
		STREET 1:		ONE CORPORATE CENTER
		CITY:			RYE
		STATE:			NY
		ZIP:			10580

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	Gabelli Global Deal Fund
		DATE OF NAME CHANGE:	20061019
</SEC-HEADER>
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<TYPE>CORRESP
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="FONT-variant: SMALL-CAPS">Skadden, Arps, Slate, Meagher &#038; Flom llp</FONT><BR>
FOUR TIMES SQUARE<BR>
NEW YORK 10036-6522
</DIV>

<DIV align="center">
<DIV style="font-size: 1pt; margin-top: 6pt; width: 14%; border-top: 1px solid #000000">&nbsp;</DIV>
</div>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">TEL: (212)&nbsp;735-3000<BR>
FAX: (212)&nbsp;735-2000<BR>
www.skadden.com
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;January&nbsp;25, 2011
</DIV>

<DIV align="center" style="margin-top: -85pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="67%"></TD>
    <TD width="5%"></TD>
    <TD width="27%"></TD>
</TR>
<TR></TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">FIRM/AFFILIATE OFFICES</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt">
    <TD>&nbsp;</TD>
</tr>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BOSTON</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">CHICAGO</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">HOUSTON</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">LOS ANGELES</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">PALO ALTO</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">SAN FRANCISCO</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">WASHINGTON, D.C.</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">WILMINGTON</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt">
    <TD>&nbsp;</TD>
</tr>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BEIJING</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BRUSSELS</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">FRANKFURT</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">HONG KONG</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">LONDON</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">MOSCOW</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">MUNICH</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">PARIS</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">S&#195;O PAULO</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">SHANGHAI</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">SINGAPORE</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">SYDNEY</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TOKYO</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TORONTO</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">VIENNA</TD>
</TR>
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</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Laura E. Hatch<BR>
Staff Accountant<BR>
Securities and Exchange Commission<BR>
Division of Investment Management<BR>
100 F Street, N.E.<BR>
Washington, D.C. 20549

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Re:</TD>
    <TD>&nbsp;</TD>
    <TD>The GDL Fund<br>
<U>File No.&nbsp;333-149864</U></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Ms.&nbsp;Hatch:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of The GDL Fund (the &#147;Fund&#148;), we received your oral comments on December&nbsp;17, 2010 to
Post-Effective Amendment No.&nbsp;5 to the Fund&#146;s registration statement on Form N-2 with respect to the
issuance of subscription rights (the &#147;Rights&#148;) to holders of Series&nbsp;A Cumulative Callable
Preferred Shares (the &#147;Series&nbsp;A Preferred Shares&#148;) and with respect to the Series&nbsp;B Cumulative
Puttable and Callable Preferred Shares (the &#147;Series&nbsp;B Preferred Shares&#148;) to which the Rights
relate, which was filed on November&nbsp;8, 2010 (the &#147;Registration Statement&#148;) pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940 (the &#147;1940 Act&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Fund has considered your comments and has authorized us to make on its behalf the
responses and amendments to the Registration Statement discussed below. For ease of reference, we
have included your comments below followed by our responses. The captions and page numbers we use
below generally correspond to those the Fund uses in its Registration Statement.
</DIV>





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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 2</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, please note that the Fund desires to be declared effective on January&nbsp;27, 2011
or as soon thereafter as practicable. As such, it is contemporaneously filing along with this
response (a)&nbsp;a post-effective amendment to the Registration Statement inclusive of the changes
discussed below and (b)&nbsp;an acceleration request letter formally requesting such effectiveness.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Comments</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>General Comments</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 1: </B>It appears that the Series&nbsp;B Preferred Shares are subject to a put option and would
therefore constitute a &#147;redeemable&#148; security under Section&nbsp;2(a)(32) of 1940 Act. Please explain
why these securities should not be considered &#147;redeemable securities.&#148;
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>Section&nbsp;2(a)(32) defines a &#147;redeemable security&#148; as &#147;any security, other
than short-term paper, under the terms of which the holder, upon its presentation to
the issuer or to a person designated by the issuer, is entitled (whether absolutely
or only out of surplus) to receive approximately his proportionate share of the
issuer&#146;s current net assets, or the cash equivalent thereof.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Series&nbsp;B Preferred Shares do not satisfy either of the two requirements for
redeemable security status embedded in that definition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">First, because the Series&nbsp;B Preferred Shares would be entitled only to a fixed
amount upon exercise of such a put and not to an amount that would vary with the
Fund&#146;s net asset value, the holders of the Series&nbsp;B Preferred Shares are not
entitled in connection with such a put to their &#147;proportionate share&#148; of the Fund&#146;s
current net assets and such shares accordingly are not redeemable securities. In a
subsequent phone call with my colleague Zev Wexler, you pointed to <I>G.A.B.E., Inc.</I>
(SEC No-Action Letter 3/15/74) and <I>Dimensional Fund Advisers </I>(SEC No-Action Letter
11/21/88) as potentially applicable precedents. However, each of these letters
involved a fact pattern where the securities involved entitled holders to receive
approximately their proportionate share of the current net assets. In <I>G.A.B.E., </I>the
securities were notes in a company that essentially had no equity and promoted
itself as paying out substantially all of its income to its noteholders. The staff
noted in its response that &#147;the debt obligations the Corporation is
issuing...&#091;include&#093; the right of the investor, at his option, to receive the value
of his contribution and a distribution of income which varies with the value of the
enterprise.&#148; In <I>Dimensional Fund Advisors</I>, the proposed fund would have two
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 3</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">classes of stock, one of which would be entitled to all of the appreciation and the
other of which would be entitled to all of the income. In this case, each class was
entitled to all of the assets allocated to it and upon redemption each share would
necessarily receive its proportionate share of the assets allocated to it. By
contrast, a traditional preferred stock, such as the Fund proposes to issue, (a)&nbsp;is
not entitled to any assets; (b)&nbsp;does not experience any benefit or detriment if the
Fund assets appreciate or depreciate; (c)&nbsp;is not entitled to payments of income
greater than or less than expenses; and (d)&nbsp;is not subject to any expenses of the
Fund (which is the reason why the advisory fee and other expenses must be expressed
in relation to net assets attributable to the common stock). Consequently, the
securities in these two letters have little in common with the proposed preferred
stock of the Fund.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In addition, several no-action letters have supported the conclusion that securities
subject to a put option which is only exercisable at periodic intervals are not
&#147;redeemable securities.&#148; In <I>California Dentists&#146; Guild Real Estate Mortgage Fund II</I>
(SEC No-Action Letter 1/4/90), the staff of the Securities and Exchange Commission
(&#147;SEC&#148;) agreed with the requestor&#146;s position that certain securities were not
&#147;redeemable&#148; under Section&nbsp;2(a)(32) in part because such securities could only be
redeemed by holders after one year. Similarly, in <I>Breen Mortgage Fund, </I>(SEC
No-Action Letter 1/18/88) and <I>Embarcadero Mortgage Fund </I>(SEC No-Action Letter
11/5/86) the staff agreed that the requestor&#146;s securities were not &#147;redeemable&#148;
securities in part because such securities could only be redeemed by holders after
three years. Similarly, because the Series&nbsp;B Preferred Shares can only be put by
holders at the end of the second and fourth year of the term of the Series&nbsp;B
Preferred Shares, such securities are not redeemable &#147;upon...presentation to the
issuer&#148; as required by the definition of &#147;redeemable security&#148; under Section
2(a)(32) and accordingly would not be redeemable securities even if their put value
fluctuated with the Fund&#146;s net asset value.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 2: </B>Please explain whether the board of trustees of the Fund (the &#147;Board&#148;) has considered
whether the issuance of the Series&nbsp;B Preferred Shares benefits the Fund&#146;s common shareholders.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>The Board carefully considered the terms of issuance of the Series&nbsp;B
Preferred Shares and has concluded that such issuance benefits the Fund&#146;s common
shareholders by lowering its cost of financing. As stated in the prospectus, the
rights offering allows holders of existing Series&nbsp;A Preferred Shares to pay for
Series&nbsp;B Preferred Shares either with cash or by surrender of Series&nbsp;A Preferred
Shares. The Fund will use all payments in cash from the issuance of Series&nbsp;B
Preferred Shares to redeem existing Series&nbsp;A Preferred
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 4</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Shares. The annual dividend rate on the Series&nbsp;A Preferred Shares is 8.5%, while
the annual dividend rate on Series&nbsp;B Preferred Shares is 7% during the first year
after issuance and will be significantly lower thereafter if the current low
interest rate environment continues. Therefore, the issuance will lower the Fund&#146;s
cost of financing, which will make it easier for the Fund to earn incremental
returns for the benefit of the common shareholders.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 3: </B>Please include disclosure regarding the fact that the 7% dividend rate payable on the
Series&nbsp;B Preferred Shares is an introductory rate and that the holders of these securities may
receive significantly lower rates thereafter.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We have added a risk factor to the section entitled &#147;Special Features and
Risks of the Series&nbsp;B Preferred Shares&#148; in the prospectus supplement which states
the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B><I>Interest Rate Risk. </I></B>Shareholders of the Series&nbsp;B Preferred Shares will receive
dividends on a quarterly basis. During the first year, the annual dividend rate
will be 7%. Thereafter, the Board of Trustees, or a committee appointed by the
Board of Trustees, will have sole discretion to set the dividend rate based on the
annualized market yields for U.S. corporate bonds rated A by at least one rating
agency, provided that the annual dividend rate must be at least 3%. The dividend
reset dates occur at the end of the first, second, and fourth years of the term of
the Series&nbsp;B Preferred Shares. If the current low interest rate environment
continues, such dividend rates will be substantially less than 7%. For example, the
current rate on at least some A-rated notes that have a remaining maturity of three
years, which is the longest period to put or maturity, is as low as 4.5%.
Accordingly, after the first year holders of Series&nbsp;B Preferred Shares will likely
receive dividend payments at rates that may be substantially less than 7% and as low
as 3%.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 4: </B>Please clarify the criteria the Board will use in determining the dividend rate on the
Series&nbsp;B Preferred Shares after the first year of issuance.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>The Board, or a committee appointed by the Board, will have sole
discretion to set the dividend rate based on the annualized market yields for U.S.
corporate bonds rated A by at least one rating agency, provided that the annual
dividend rate must be at least 3%. The dividend reset dates occur at the end of the
first, second, and fourth years of the term of the Series&nbsp;B Preferred Shares. It is
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 5</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">anticipated that the rate will be reset with reference to corporate bonds maturing
at or about the time of the next put or maturity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Cover Page</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment
5: </B>Please correct the Investment Company Act File Number included on the cover page of the filing.

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response:</B><SUP style="FONT-size: 85%; vertical-align: text-top"> </SUP> We have complied with your request.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Prospectus Summary</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 6: </B>On page 2 of the Prospectus Summary, please confirm that the statement &#147;Under normal
market conditions, the Fund expects to have at least 40% of its assets invested in at least three
countries other than the United States&#148; is correct. Based upon the fund&#146;s most recent annual
report, greater than 80% of its investments are in North America.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>The Fund no longer expects to invest at least 40% of its assets in at
least three countries other than the United States, and will no longer maintain this
policy.  Given this policy change, the Fund has been renamed &#147;The GDL Fund.&#148; Other than this change,
the Fund&#146;s investment objective remains the same.

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 7: </B>On page 3 of the Prospectus Summary, the second paragraph under the section entitled
&#147;Dividends and Distributions&#148; provides that any excess distributions to preferred shareholders will
be treated as a tax-fee return of capital (to the extent of the shareholder&#146;s tax basis in his or
her shares). Please verify that the preferred shareholder&#146;s basis will be reduced, as opposed to a
reduction in the common shareholder&#146;s basis.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>This is correct- any excess distributions to preferred shareholders will
be treated as a tax-fee return of capital to the extent of the shareholder&#146;s tax
basis in his or her preferred shares. The amount treated as a tax-free return of
capital
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 6</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">will reduce a shareholder&#146;s adjusted tax basis in his or her preferred shares,
thereby causing potential gain to the shareholder upon maturity of
the preferred shares, or increasing the shareholder&#146;s potential gain or reducing his or her
potential loss on the sale of the preferred shares.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 8: </B>On page 3 of the Prospectus Summary, under the section entitled &#147;Dividends and
Distributions &#151; Common Share Distributions&#148;, please add the clause &#147;, all of which constituted a
return of capital&#148; to the end of the following statement: &#147;For the fiscal year ended December&nbsp;31,
2009, the Fund made distributions of $1.28 per common share.&#148;
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We have complied with your request. Please see above referenced section
for the revision.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 9: </B>Please revise the disclosure on pages 4 and 14 of the base prospectus under Prospectus
Summary and the section entitled &#147;Use of Proceeds,&#148; to clarify that the Fund intends to use the
proceeds of the rights offering to redeem the existing preferred shares, as described in the Use of
Proceeds section in the prospectus supplement.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We respectfully disagree with this comment. Pages 4 and 14 are part of
the base prospectus of a &#147;shelf offering&#148; registration statement. Accordingly,
these describe potential likely uses of proceeds of any future issuances under the
shelf registration statement, and are not limited to the proposed takedown of
rights. We believe the prospectus supplement, rather than the base prospectus,
should describe the intended use of proceeds of the proposed takedown. Please see
page R-11 of the prospectus supplement.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 10: </B>Please explain how the fee structure earned by the Investment Adviser qualifies as a
&#147;fulcrum&#148; fee arrangement. Based upon the disclosure, our understanding is that having a base fee
of 0.50% means that the fee can only increase. Based upon the disclosure, we think the base fee
should be 1.25%.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We believe that the Fund&#146;s fee structure is fully consistent with the
requirements of Section&nbsp;205 of the Investment Advisers Act. Section&nbsp;205(a)(1) of
the Advisers Act prohibits compensation to a registered investment adviser on the
basis of capital gains or appreciation of an advisory account. Section 205(b)
provides five exceptions from this prohibition. These are stated in the
alternative, and an advisor is permitted accordingly to rely on as many as are
applicable.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 7</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The first exception, in Section&nbsp;205(b)(1), is really interpretive in nature and
specifies that the capital gains prohibition shall not be construed to prohibit an
advisory arrangement that provides for compensation based on the total value of an
account. This exception protects the standard base management fee such as is set
forth in Section 6(a) of the Fund&#146;s advisory agreement. The second exception, in
Section&nbsp;205(b)(2), permits so-called &#147;fulcrum fees&#148; of the sort set forth in Rule
205-2(a)(1) of the Advisers Act. The third exception, in Section&nbsp;205(b)(3), permits
capital gains-based incentive compensation to investment advisers of business
development companies (&#147;BDC&#148;) in certain circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Shortly after enactment of Section&nbsp;205(b)(3), a BDC&#146;s adviser requested assurances
from the staff that it could charge both a base fee as a percentage of assets under
Section&nbsp;205(b)(1) and capital gains performance compensation under Section&nbsp;205(b)(3)
despite the fact that Section&nbsp;205(b)(3) permits an advisory contract with a BDC if
&#147;the compensation provided for in such contract does not exceed 20% of the realized
capital gains.&#148; In its response, the staff agreed that the advisor could utilize
both a Section&nbsp;205(b)(1) base fee and a Section&nbsp;205(b)(3) performance fee. See
<I>Weiss, Peck &#038; Greer</I>, SEC No-Action Letter (4/30/81) (&#147;WPG&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">There is nothing in the structure or language of Section&nbsp;205(b)(2) that suggests a
different result than in WPG. Indeed, the conclusion is even easier because Section
205(b)(2), unlike Section&nbsp;205(b)(3), does not specify any cap on compensation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Further support for our conclusion may be found in the several enforcement
proceedings in 2006 that resulted from a fulcrum fee sweep examination in (if I
recall correctly) 2004. See, e.g., <I>Dreyfus Corporation</I>, SEC Rel. No.&nbsp;IA-2549
(9/7/06), and <I>Numeric Investors LLC, </I>SEC Rel. No IA-2546 (9/11/06). The sweep
looked carefully at the fulcrum fee arrangements in effect at the time and found
fault with several of them, in particular because the portion of the fee that was
not affected by performance was not calculated over the most recent subset of the
performance period as required by a safe harbor exception in Rule&nbsp;205-2 under the
Advisers Act. See Rule&nbsp;205-2(c) of the Advisers Act. For purposes of this
response, the important thing to note about these situations is that substantially
all of them had a portion of the fee that was payable on the basis of assets under
management &#151; in effect a Section&nbsp;205(b)(1) fee &#151; in addition to the portion of the
fee that could go up or down on the basis of performance. Consequently, these funds
all had a fee structure &#151; with which the SEC had no problem &#151; that, as the staff
suggested in its comments to us, could only go up from the &#147;base fee.&#148; This is
because under Section&nbsp;205(b)(2) advisers are
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 8</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">permitted to choose &#151; with client approval &#151; the amount of fees they wish to put
at risk.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">That the Fund chose to break out the base fee from the performance fee rather than
embed it in the portion of the fees below which this performance fee cannot go is a
difference without any regulatory impact. Because the base fee is separated from
the performance fee and the Fund&#146;s total return performance is calculated based on
the average daily number of shares outstanding, there is no possibility that changes
in the number of shares outstanding will have an inappropriate impact on the Fund&#146;s
satisfaction of the performance requirement. Consequently, reliance on the safe
harbor provided in Rule&nbsp;205-2 is not necessary. Indeed, we would observe that if
the advisers caught up in the fulcrum fee sweep had structured their contracts in
this manner they probably would not have made the mistake they made of computing
their base fee over too long a period under the safe harbor rule.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 11: </B>Please explain why an index composed of three-month Treasury Bills (the &#147;Three-Month
T-Bill Index&#148;) is an appropriate index by which to measure the Fund&#146;s performance.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>The staff posed the same question during the original registration and
public offering of the Fund in late 2006 and early 2007. The Fund responded as set
forth below and believes that the staff fully considered this question at that time.
We are not aware of any developments since that time that would provide a basis for
revisiting this question.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In the Fund&#146;s response letter to Ms.&nbsp;Laura Hatch dated December&nbsp;18, 2006, we wrote:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In accordance with SEC Release No.&nbsp;IC-7113 (4/6/72) (the &#147;Release&#148;), the Trustees of
the Fund, at least 75% of whom are not &#147;interested persons&#148; of the Fund&#146;s Investment
Adviser as defined by the 1940 Act, considered the Release&#146;s cited factors regarding
the selection of an appropriate index. They have determined that the Three-Month
T-Bill Index was the most appropriate benchmark by which to gauge the Investment
Adviser&#146;s success in meeting the Fund&#146;s strategy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Fund is a merger arbitrage fund. While it invests primarily in equity
securities, it does not seek to earn a return commensurate with an investment in
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 9</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">equity securities, which in recent years has been extremely volatile. Rather, the
Fund seeks to earn an absolute or positive return without excessive risk regardless
of the direction of securities markets. Consequently, it is clear that an equity
index would be inappropriate. In fact, the returns of merger arbitrage funds have
not been correlated with equity market returns over any statistically significant
period. The Fund reviewed disclosures by and evaluations of various private merger
arbitrage funds and other investors who regularly deploy merger arbitrage strategies
in considering what would be an appropriate index. Based on its findings, the Fund
concluded that the success or failure of merger arbitrage activity is usually
measured by whether the strategy earns a return in excess of a risk free investment
return, for which the return on the Three-Month T-Bill Index is the acknowledged
standard.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Financial Highlights</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 12: </B>The offering costs appear to be amortized in the financial highlights table and
embedded in the line item &#147;Net investment income/(loss)&#148;, instead of being expensed and noted as a
separate line item &#147;Offering Costs&#148; under a subsection called &#147;Preferred Share Transactions.&#148;
Please justify this treatment of offering costs, or revise if done in error.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response:</B><SUP style="FONT-size: 85%; vertical-align: text-top"> </SUP> The Fund believes that because the shelf registration is valid
for 3&nbsp;years, it is appropriate to amortize the offering costs over the term of the
registration. Moreover, considering the small amount of the anticipated offering
costs, the Fund&#146;s auditors concurred with the disclosure which combined the offering
costs with interest expenses as a single line item. As a further justification for
a consolidated line item, both the dividends (which are treated as interest expense)
and amortization of the offering costs are expenses incurred by the common
shareholders. However, in the Fund&#146;s future filings the offering costs will be
itemized on a separate line per your suggestion.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 13: </B>Please revise &#147;&#091;r&#093;atio of operating expenses including interest, custodian fee credits
and offering costs to average net assets attributable to common shares&#148; and footnote (a)&nbsp;to the
financial highlights table to reflect the requirements of Regulations S-X 6-07(g) (i.e., the
expense ratios based on expenses that are not reduced by custodian fee credits should be presented
in the table, rather than in footnote (a)).
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We have complied with your request. Please see requested disclosure in
the &#147;Financial Highlights&#148; section of the base prospectus.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 10</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Risk Factors and Special Considerations</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 14: </B>Please add a risk factor regarding the Board&#146;s level of control in determining the
dividend rate of the Series&nbsp;B Preferred Shares, and address the fact that Mario Gabelli and the
other Board members hold more than 50% of the preferred securities.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We have added a risk factor to the section entitled &#147;Special Features and
Risks of the Series&nbsp;B Preferred Shares&#148; in the prospectus supplement which states
the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B><I>The Investment Adviser and Mr.&nbsp;Gabelli have Certain Conflicts of Interest Relating
to the Preferred Shares</I></B>. As of December&nbsp;31, 2010, Mario Gabelli was the beneficial
owner of 646,916 Series&nbsp;A Preferred Shares, representing 33.69% of the Fund&#146;s
outstanding Series&nbsp;A Preferred Shares. The other Trustees collectively own less
than 1% of the Series&nbsp;A Preferred Shares. Mr.&nbsp;Gabelli has advised the Fund that he
may participate in the rights offering to purchase Series&nbsp;B Preferred Shares. The
Trustees, or a committee thereof, determine the dividend rate on the Series&nbsp;B
Preferred Shares at such times and in such manner as is specified in this
Registration Statement. Because of the possible perception of a conflict of
interest, Mr.&nbsp;Gabelli has agreed to recuse himself from all discussions by the Board
of Trustees or committee thereof related to the determination of the dividend rate
for the Series&nbsp;B Preferred Shares for any period following initial issuance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Investment Adviser receives advisory compensation in respect of the total assets
of the Fund, including assets representing the liquidation preference of the Series
B Preferred Shares, without regard to whether the Fund earns an incremental return
from such assets for the benefit of the common shareholders. In addition, Mr.
Gabelli receives incentive-based variable compensation based on a percentage of net
revenues received by the Investment Adviser for managing the Fund, which will be
greater to the extent that the Fund has preferred shares outstanding. Consequently,
both the Investment Adviser, which is controlled by Mr.&nbsp;Gabelli, and Mr.&nbsp;Gabelli
himself have a conflict of interest with respect to the Series&nbsp;B Preferred Shares
inasmuch as each stands to benefit from the issuance of such shares whether or not
such issuance benefits holders of the common shares.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 11</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Management of the Fund</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 15: </B>Please explain whether the Fund would adjust the management fee downward in the event
that the common shareholders do not benefit from the use of leverage (e.g. via the issuance of the
Series&nbsp;B Preferred Shares).
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>The Fund and its Investment Adviser have not entered into an agreement
providing for the waiver or a reduction of the management fees in the event that the
use of leverage does not benefit the common shareholders.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 16: </B>Please explain the difference in the estimated proceeds of the offering from
$240,000,000 to $143,000,000.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: $</B>240,000,000 refers to the maximum amount of proceeds the Fund can receive
under the Registration Statement in accordance with Rule&nbsp;462(b), which allows
issuers to register an additional number of securities not exceeding 20% of those
previously registered. $143,000,000 refers to the maximum amount of proceeds from
the sale of securities under the shelf offering that have not yet been &#147;taken down,&#148;
after taking such 20% upsizing into account.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Statement of Additional Information</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 17: </B>The table setting forth the dollar range of equity securities held by the Trustees is
missing footnotes (1)&nbsp;and (2). Please insert those footnotes as appropriate.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We have complied with your request. Please see the &#147;Management of the
Fund&#148; section in the Statement of Additional Information for the revision.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 18: </B>Please revise the table setting forth the dollar range of equity securities held by
the Trustees to disclose the amount each Trustee holds in common and preferred shares of the Fund.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We have complied with your request. Please see the &#147;Management of the
Fund&#148; section in the Statement of Additional Information for the revision.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The GDL Fund<BR>
January&nbsp;25, 2011<BR>
Page 12</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comment 19: </B>Please include the enhanced proxy statement disclosure regarding the Board&#146;s
leadership structure and the qualifications of the Trustees to serve on the board.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Response: </B>We have complied with your request. Please see requested disclosure in
the &#147;Management of the Fund&#148; section of the Statement of Additional Information.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you have any questions or comments or require any additional information in connection with
the above, please telephone me at (212)&nbsp;735-2775 or my colleague Richard Prins at (212)&nbsp;735-2790.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
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    <TD width="48%">&nbsp;</TD>
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    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Sincerely,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Zev Wexler
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
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</DIV>




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