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<SEC-DOCUMENT>0000950172-03-000803.txt : 20030313
<SEC-HEADER>0000950172-03-000803.hdr.sgml : 20030313
<ACCEPTANCE-DATETIME>20030313082537
ACCESSION NUMBER:		0000950172-03-000803
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		11
FILED AS OF DATE:		20030313

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GABELLI CONVERTIBLE & INCOME SECURITIES FUND INC
		CENTRAL INDEX KEY:			0000845611
		IRS NUMBER:				133523423
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-05715
		FILM NUMBER:		03601621

	BUSINESS ADDRESS:	
		STREET 1:		ONE CORPORATE CENTER
		CITY:			RYE
		STATE:			NY
		ZIP:			10580
		BUSINESS PHONE:		2123098408

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GABELLI SERIES FUNDS INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GABELLI CONVERTIBLE SECURITIES FUND INC /DE
		DATE OF NAME CHANGE:	19970507

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GABELLI CONVERTIBLE & INCOME SECURITIES FUND INC
		CENTRAL INDEX KEY:			0000845611
		IRS NUMBER:				133523423
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-102494
		FILM NUMBER:		03601622

	BUSINESS ADDRESS:	
		STREET 1:		ONE CORPORATE CENTER
		CITY:			RYE
		STATE:			NY
		ZIP:			10580
		BUSINESS PHONE:		2123098408

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GABELLI SERIES FUNDS INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GABELLI CONVERTIBLE SECURITIES FUND INC /DE
		DATE OF NAME CHANGE:	19970507
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>s449133a.txt
<DESCRIPTION>N-2/A
<TEXT>
As filed with the Securities and Exchange Commission on March 13, 2003
                                           Securities Act File No. 333-102494
                                       Investment Company Act File No. 811-05715
================================================================================


                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                           ________________________

                                   FORM N-2
                           ________________________

[X] Registration Statement under the Securities Act of 1933
[X] Pre-Effective Amendment No. 4
[ ] Post-Effective Amendment No.

                              and/or

[X] Registration Statement under the Investment
     Company Act of 1940
[X]  Amendment No. 10
                       (Check Appropriate Box or Boxes)
                           ________________________

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
              (Exact Name of Registrant as Specified in Charter)
                           ________________________

                             One Corporate Center
                           Rye, New York 10580-1434
                   (Address of Principal Executive Offices)

      Registrant's Telephone Number, Including Area Code: (800) 422-3554

                                Bruce N. Alpert
            The Gabelli Convertible and Income Securities Fund Inc.
                             One Corporate Center
                           Rye, New York 10580-1422
            (914) 921-5100 (Name and Address of Agent for Service)
                           ________________________
<table>
<caption>

                                  Copies to:

<s>                        <C>                                    <C>
 Richard T. Prins, Esq.           James McKee, Esq.                  Cynthia G. Cobden, Esq.
 Skadden, Arps, Slate,      The Gabelli Convertible and Income      Simpson Thacher & Bartlett
  Meagher & Flom LLP            Securities Fund Inc.                  425 Lexington Avenue
  Four Times Square             One Corporate Center                  New York, New York 10017
New York, New York 10036       Rye, New York 10580-1422                   (212) 455-2000
    (212) 735-3000                (914) 921-5100
</table>


                           ________________________




      Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.

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

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

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

      If appropriate, check the following box:

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

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

                           ________________________

       CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
================================================================================

<table>
<caption>

                                                            Proposed
                                           Proposed         Maximum
                                            Maximum         Aggregate             Amount of
                          Amount Being   Offering Price     Offering            Registration
Title of Securities        Registered      Per Share        Price (1)              Fee(2)
- -------------------        ----------      ---------        ---------              ------
<s>                       <c>                <c>          <c>                      <c>
Series B __% Cumulative   1,000,000 Shares   $25          $25,000,000              $0.00
Preferred Stock

Series C Auction Rate     1,000 Shares       $25,000      $25,000,000              $0.00
Preferred Stock
</table>


(1) Estimated solely for the purpose of calculating the registration fee.
(2) $4,045 previously paid.

                           ________________________

      The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said section 8(a), may determine.
<PAGE>

================================================================================
                       CROSS-REFERENCE SHEET

    N-2 Item Number                 Location in Part A (Caption)
- -------------------------------------------------------------------

PART A
1.  Outside Front Cover...........  Outside Front Cover Page

2.  Inside Front and Outside Back
      Cover Page..................  Outside Front Cover Page; Inside Front
                                    Cover Page

3.  Fee Table and Synopsis........  Not Applicable

4.  Financial Highlights..........  Financial Highlights

5.  Plan of Distribution..........  Outside Front Cover Page; Summary;
                                    Underwriting

6.  Selling Shareholders..........  Not Applicable

7.  Use of Proceeds...............  Use of Proceeds; Investment Objective and
                                    Policies

8.  General Description of the
      Registrant..................  Outside Front Cover Page; Summary; The
                                    Fund; Investment Objective and Policies;
                                    Risk Factors & Special Considerations; How
                                    the Fund Manages Risk; Description of
                                    Series B Preferred and Series C Auction
                                    Rate Preferred; Anti-takeover Provisions
                                    of the Charter and By-Laws

9.  Management....................  Outside Front Cover Page; Summary; Manage-
                                    ment of the Fund; Custodian, Transfer
                                    Agent, Auction Agent and
                                    Dividend-Disbursing Agent

10. Capital Stock, Long-Term Debt,
      and Other Securities........  Outside Front Cover Page; Summary;
                                    Investment Objective and Policies;
                                    Description of Series B Preferred and
                                    Series C Auction Rate Preferred;
                                    Description of Capital Stock and Other
                                    Securities; Taxation

11. Defaults and Arrears on Senior
      Securities..................  Not Applicable

12. Legal Proceedings.............  Not Applicable

13. Table of Contents of the
      Statement of Additional
      Information.................  Table of Contents of the Statement of
                                     Additional Information


PART B                              Location in Statement of
                                    Additional Information
- -------------------------------------------------------------------


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

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

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

17. Investment Objective and
      Policies....................  Investment Objective and Policies;
                                    Investment Restrictions

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

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

20. Investment Advisory and Other
      Services....................  Management of the Fund

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

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

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

PART C

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

<PAGE>

The information in this prospectus is not complete and may be changed.  We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective.  This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

              SUBJECT TO COMPLETION, DATED March 13, 2003

PROSPECTUS                                                  [GABELLI LOGO]
                                The Gabelli
                Convertible and Income Securities Fund Inc.

       1,000,000 Shares, Series B      % Cumulative Preferred Stock
                  (Liquidation Preference $25 per Share)

      1,000 Shares, Series C Auction Rate Cumulative Preferred Stock
                  (Liquidation Preference $25,000 per Share)
                                 ____________

           The Gabelli Convertible and Income Securities Fund Inc., or the
Fund, is a diversified, closed-end management investment company that has an
investment objective of a high level of total return on its assets. The Fund's
investments are selected by its Investment Adviser, Gabelli Funds, LLC. The
Fund seeks to achieve its investment objective through a combination of
current income and capital appreciation. Under normal circumstances the Fund
will invest at least 80% of its total assets in securities that are
convertible into or represent the right to acquire common stock, and in other
debt or equity securities that are expected to periodically accrue or generate
income for their holders.

      This prospectus describes shares of the Fund's Series B % Cumulative
Preferred Stock (the "Series B Preferred"), liquidation preference $25 per
share. Dividends on shares of Series B Preferred issued within 30 days of the
original Series B Preferred issue date are cumulative from such original issue
date at the annual rate of   % of the liquidation preference of $25 per share
and are payable quarterly on March 26, June 26, September 26 and December 26
in each year, commencing on      , 2003.

      This prospectus also describes shares of the Fund's Series C Auction
Rate Cumulative Preferred Stock (the "Series C Auction Rate Preferred"),
liquidation preference $25,000 per share. The dividend rate for the Series C
Auction Rate Preferred will vary from dividend period to dividend period. The
annual dividend rate for the initial dividend period for the Series C Auction
Rate Preferred will be    % of the liquidation preference of $25,000 per share.
The initial dividend period is from the date of issuance through , 2003. For
subsequent dividend periods, the Series C Auction Rate Preferred will pay
dividends based on a rate set at auction, usually held weekly.

      The Fund offers by this prospectus, in the aggregate, $50 million of
preferred stock of either Series B Preferred, or Series C Auction Rate
Preferred, or a combination of both series.
                                 ____________


      Investing in our Series B Preferred or Series C Auction Rate Preferred
involves risks. See "Risk Factors and Special Considerations" beginning on
page 34.
                                 ____________


      Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
                                 ____________

<table>
<caption>

                            Per Share of                    Per Share of Series
                            Series B Preferred    Total     Auction Rate Preferred    Total
                            ------------------    -----     ----------------------    -----
<s>                        <c>                   <c>        <c>                       <c>
Public Offering Price(1)    $                     $         $                         $
Underwriting Discount(2)    $                     $         $                         $
Proceeds to the Fund
(before expenses)(3)        $                     $         $                         $
</table>

  (1)  Plus accumulated dividends, if any, from            .
  (2)  The Fund and the Investment Adviser have agreed to indemnify the
       underwriters against certain liabilities, including liabilities
       under the Securities Act of 1933, as amended.
  (3)  Offering expenses payable by the Fund are estimated at $          .
                                 ____________



      The shares of Series B Preferred and/or Series C Auction Rate Preferred
being offered by this prospectus are being offered by the underwriters listed
in this prospectus, subject to prior sale, when, as and if accepted by them
and subject to certain conditions. The Fund expects that delivery of any
shares of Series B Preferred or Series C Auction Rate Preferred will be made
in book-entry form through the facilities of The Depository Trust Company on
or about , 2003.

                                 ____________
 Salomon Smith Barney




                                                       Gabelli & Company, Inc.

          , 2003

(Continued from previous page)

        Application has been made to list the Series B Preferred on the New
York Stock Exchange. If offered, trading of the Series B Preferred on the New
York Stock Exchange is expected to commence within 30 days of the date of this
prospectus. Prior to this offering, there has been no public market for the
Series B Preferred. See "Underwriting."

      The Series C Auction Rate Preferred will not be listed on an exchange.
Investors may only buy or sell Series C Auction Rate Preferred through an
order placed at an auction with or through a broker-dealer in accordance with
the procedures specified in this prospectus or in a secondary market
maintained by certain broker-dealers should those broker-dealers decide to
maintain a secondary market. Broker-dealers are not required to maintain a
secondary market in the Series C Auction Rate Preferred and a secondary market
may not provide you with liquidity.

        The net proceeds of the offering, which are expected to be      , will
be invested in accordance with the Fund's investment objective and policies. See
"Investment Objective and Polices" beginning on page 25.

      The Fund expects that dividends paid on the Series B Preferred and
Series C Auction Rate Preferred will consist of long-term capital gains
(consisting of 20% federal tax rate capital gains from the sale of assets held
longer than 12 months), ordinary income (including net investment income and
short-term capital gains), and, in certain circumstances, a return of capital.
Over the past one, three and five fiscal years ending December 31, 2002, the
distributions of taxable income by the Fund consisted of 0.00%, 31.37%, and
31.75% long-term capital gains. No assurance can be given, however, as to what
percentage, if any, of the dividends paid on the Series B Preferred or Series
C Auction Rate Preferred will consist of long-term capital gains, which are
taxed at lower rates for individuals than ordinary income.

      Neither the Series B Preferred nor the Series C Auction Rate Preferred
may be issued unless it is rated Aaa by Moody's Investors Service, Inc.
("Moody's"). In addition, the Series C Auction Rate Preferred may not be
issued unless it is also rated AAA by Fitch, Inc. ("Fitch"). In order to keep
these ratings, the Fund will be required to maintain a minimum discounted
asset coverage with respect to its outstanding Series B Preferred and Series C
Auction Rate Preferred under guidelines established by each of Moody's and
Fitch. See "Description of the Series B Preferred and Series C Auction Rate
Preferred -- Rating Agency Guidelines." The Fund is also required to maintain
a minimum asset coverage by the Investment Company Act of 1940, as amended
(the "1940 Act"). If the Fund fails to maintain any of these minimum asset
coverage requirements, the Fund can require, at its option, consistent with
its Charter and the requirements of the 1940 Act, that some or all of its
outstanding preferred stock, including the Series B Preferred or Series C
Auction Rate Preferred, be sold back to it (redeemed). Otherwise, prior to ,
2008 the Series B Preferred will be redeemable at the option of the Fund only
to the extent necessary for the Fund to continue to qualify for tax treatment
as a regulated investment company. Subject to certain notice and other
requirements (including those set forth in Section 23(c) of the 1940 Act), the
Fund, at its option, may redeem (i) the Series B Preferred beginning on , 2008
and (ii) the Series C Auction Rate Preferred following the initial dividend
period (so long as the Fund has not designated a non-call period). In the
event the Fund redeems Series B Preferred such redemption will be for cash at
a redemption price equal to $25 per share plus accumulated but unpaid
dividends (whether or not earned or declared). In the event the Fund redeems
Series C Auction Rate Preferred, such redemptions will be for cash, generally
at a redemption price equal to $25,000 per share plus accumulated but unpaid
dividends (whether or not earned or declared), though in limited circumstances
the Fund's board of directors may also declare a redemption premium.

      This prospectus concisely sets forth important information about the
Fund that you should know before deciding whether to invest in Series B
Preferred or Series C Auction Rate Preferred. You should read this prospectus
and retain it for future reference.

       The Fund has also filed with the Securities Exchange Commission a
Statement of Additional Information, dated March, 2003 (the "SAI"), which
contains additional information about the Fund. The SAI is incorporated by
reference in its entirety into this prospectus. You can review the table of
contents of the SAI on page 75 of this prospectus. You may request a free copy
of the SAI by writing to the Fund at its address at One Corporate Center, Rye,
New York 10580-1422 or calling the Fund toll-free at (800) 422-3554. You may
also obtain the SAI on the Securities and Exchange Commission's web site
(http://www.sec.gov).

      Certain persons participating in the offering of Series B Preferred, in
the event they are offered, may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Series B Preferred,
including the entry of stabilizing bids, syndicate covering transactions or
the imposition of penalty bids. For a description of these activities, see
"Underwriting."

      You should rely only on the information contained in or incorporated by
reference into this prospectus. Neither the Fund nor the underwriters have
authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. Neither the Fund nor the underwriters are making an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only.

                        ____________________

<PAGE>

                         TABLE OF CONTENTS

                                                               Page
                                                               ----
Summary ..........................................................1
Tax Attributes of Preferred Stock Dividends......................19
Financial Highlights.............................................22
Use of Proceeds..................................................24
The Fund.........................................................24
Capitalization...................................................25
Investment Objective and Policies................................25
Risk Factors and Special Considerations..........................34
How the Fund Manages Risk........................................42
Management of the Fund...........................................44
Portfolio Transactions...........................................46
Dividends and Distributions......................................46
Description of Series B Preferred and Series C Auction
Rate Preferred...................................................48
The Auction of Series C Auction Rate Preferred...................60
Description of Capital Stock and Other Securities................64
Taxation.........................................................66
Anti-takeover Provisions of the Charter and By-Laws..............69
Custodian, Transfer Agent, Auction Agent and Dividend-
Disbursing Agent.................................................70
Underwriting.....................................................71
Legal Matters....................................................73
Experts..........................................................73
Additional Information...........................................74
Special Note Regarding Forward-Looking Statements................74
Table of Contents of SAI.........................................75
Appendix A......................................................A-1

<PAGE>

                              SUMMARY

      This is only a summary. You should review the more detailed information
contained in this prospectus and the SAI.

The Fund................  The Fund is a closed-end, diversified, management
                          investment company. Prior to March 31, 1995, the
                          Fund operated as an open-end, diversified,
                          management investment company. The Fund was
                          incorporated in Maryland on December 19, 1988. The
                          Fund's outstanding shares of common stock, par value
                          $.001 per share, are listed and traded on the NYSE.
                          As of December 31, 2002, the sum of the net assets
                          of the Fund plus the liquidation value of the Fund's
                          outstanding preferred stock ($15 million) was
                          approximately $108.8 million. As of December 31,
                          2002, the Fund had outstanding 11,113,431 shares of
                          common stock and 600,000 shares of 8% Cumulative
                          Preferred Stock, liquida tion preference $25 per
                          share (the "Series A Preferred"). The Fund redeemed
                          all of its outstanding Series A Preferred on
                          February 11, 2003.

The Offering............  The Fund offers by this prospectus, in the
                          aggregate, $50 million of preferred stock of either
                          Series B Preferred or Series C Auction Rate
                          Preferred, or a combination of both such series. The
                          Series B Preferred and/or Series C Auction Rate
                          Preferred are being offered by Salomon Smith Barney
                          Inc. and Gabelli & Company, Inc. as underwriters.
                          Upon issuance, the Series B Preferred and the Series
                          C Auction Rate Preferred will have equal seniority
                          with respect to dividends and liquidation prefer
                          ence.

                          Series B Preferred. The Fund is offering 1,000,000
                          shares of  % Series B Cumulative Preferred, par value
                          $.001 per share, liquidation preference $25 per
                          share, at a purchase price of $25 per share.
                          Dividends on the shares of Series B Preferred will
                          accumulate from the date on which such shares are
                          issued; provided, however, that any shares of Series
                          B Preferred issued within 30 days of the original
                          issue date of the series will accumulate dividends
                          from the series' original date of issue. Appli
                          cation has been made to list the Series B Preferred
                          on the New York Stock Exchange.

                          Series C Auction Rate Preferred. The Fund is offering
                          1,000 shares of Series C Auction Rate Cumulative
                          Preferred, par value $.001 per share, liquidation
                          preference $25,000 per share, at a purchase price of
                          $25,000 per share plus dividends, if any, that have
                          accumulated from the commencement date of the
                          dividend period during which such Series C Auction
                          Rate Preferred is issued.

                          The Series C Auction Rate Preferred will not be
                          listed on an exchange. Instead, investors may buy or
                          sell Series C Auction Rate Preferred in an auction
                          by submitting orders to broker-dealers that have
                          entered into an agreement with the auction agent and
                          the Fund.

                          Generally, investors in Series B Preferred or Series
                          C Auction Rate Preferred will not receive
                          certificates representing ownership of their
                          shares. The securities depository (The Depository
                          Trust Company or any successor) or its nominee for
                          the account of the investor's broker-dealer will
                          maintain record ownership of the preferred stock
                          shares in book-entry form. An investor's
                          broker-dealer, in turn, will maintain records of
                          that investor's beneficial ownership of preferred
                          stock.

Investment Objective....  The investment objective of the Fund is to seek a
                          high level of total return on its assets. The Fund
                          will seek to achieve this objective through a
                          combination of current income and capital
                          appreciation by investing primarily in convertible
                          and other income producing securities. Under normal
                          circumstances the Fund will invest at least 80% of
                          the value of its total assets (taken at current
                          value) in "convertible securities," i.e., securities
                          (bonds, debentures, notes, stocks and other similar
                          securities) that are convertible into common stock
                          or other equity securities, and "income
                          securities," i.e., nonconvertible debt or equity
                          securities having a history of regular payments or
                          accrual of income to holders. No assurance can be
                          given that the Fund will achieve its investment
                          objective. See "Investment Objective and Policies."

Dividends
and Distributions.......  Series B Preferred. Dividends on the Series B
                          Preferred, at the annual rate of % of its $25 per
                          share liquidation preference, are cumulative from
                          the Series B Preferred's original issue date for any
                          shares issued within 30 days of such original issue
                          date and are payable, when, as and if declared by
                          the Board of Directors of the Fund, out of funds
                          legally available therefor, quarterly on March 26,
                          June 26, September 26 and December 26 in each year,
                          commencing on , 2003. Any Series B Preferred issued
                          later than 30 days following the original issue date
                          will accumulate dividends from the date such shares
                          are issued.

                          Series C Auction Rate Preferred. The holders of
                          Series C Auction Rate Preferred are entitled to
                          receive cash dividends stated at annual rates of its
                          $25,000 per share liquidation preference, that will
                          vary from dividend period to dividend period. The
                          table below shows the dividend rate, the dividend
                          payment date and the number of days for the initial
                          dividend period on the Series C Auction Rate
                          Preferred.

                                                     Dividend
                                         Initial  Payment Date      Number of
                                        Dividend   for Initial   Days of Initial
                                          Rate   Dividend Period Dividend Period
                          Series C        ----   --------------- ---------------
                          Auction Rate
                          Preferred.....    %       , 2003

                          For subsequent dividend periods, the Series C
                          Auction Rate Preferred will pay dividends based on a
                          rate set at auctions, normally held weekly. In most
                          instances, dividends are payable weekly, on the
                          first business day following the end of the divi-
                          dend period. If the day on which dividends otherwise
                          would be paid is not a business day, then dividends
                          will be paid on the first business day that falls
                          after the end of the dividend period. The Fund may,
                          subject to certain conditions, designate special
                          dividend periods of more (or less) than seven days.
                          The dividend payment date for any such special
                          dividend period will be set out in the notice
                          designating a special dividend period. Dividends on
                          shares of Series C Auction Rate Preferred will be
                          cumulative from the date such shares are issued and
                          will be paid out of legally available funds.

                          In no event will the dividend rate set at auction
                          for the Series C Auction Rate Preferred exceed the
                          then-maximum rate. The maximum rate means (i) in the
                          case of a dividend period of 184 days or less, the
                          applicable percentage of the "AA" Financial
                          Composite Commercial Paper Rate on the date of such
                          auction determined as set forth in the following
                          chart based on the lower of the credit ratings
                          assigned to the Series C Auction Rate Preferred by
                          Moody's and Fitch or (ii) in the case of a dividend
                          period of longer than 184 days, the applicable
                          percentage of the Treasury Index Rate.

                                 Moody's         Fitch      Applicable
                             Credit Rating  Credit Rating   Percentage
                             -------------  -------------   ----------
                             Aa3 or higher  AA- or higher      150%
                                A3 to A1       A- to A+        175%
                              Baa3 to Baa1   BBB- to BBB+      250%
                               Below Baa3     Below BBB-       275%

                          See "Description of the Series B Preferred and
                          Series C Auction Rate Preferred -- Dividends on the
                          Series C Auction Rate Preferred -- Maximum Rate."
                          For example, calculated as of September 30, 2002 and
                          December 31, 2002, respectively, the maximum rate
                          for the Series C Auction Rate Preferred (assuming a
                          rating of Aa3 or above by Moody's and AA- or above
                          by Fitch) would have been approximately 2.57% and
                          1.92%, for dividend periods of 90 days, and
                          approximately 2.90% and 2.57% for dividend periods
                          of two years.* There is no minimum applicable rate
                          with respect to any dividend period.

                          Any designation of a special dividend period will be
                          effective only if, among other things, proper notice
                          has been given, the auction immediately preceding
                          the special dividend period was not a failed auction
                          and the Fund has confirmed that it has assets with
                          an aggregate discounted value at least equal to the
                          Basic Maintenance Amount (as defined in the
                          applicable rating agency guidelines). See
                          "Description of the Series B Preferred and Series C
                          Auction Rate Preferred -- Dividends on the Series C
                          Auction Rate Preferred" and "The Auction of Series C
                          Auction Rate Preferred."

- -------------------
*    Dividend periods presented for illustrative purposes only. Actual dividend
     periods may be of greater or lesser duration.


                          Preferred Stock Dividends. Under current law, all
                          preferred stock of the Fund must have the same
                          seniority as to the payment of dividends.
                          Accordingly, no full dividend will be declared or
                          paid on any series of preferred stock of the Fund
                          for any dividend period, or part thereof, unless
                          full cumulative dividends due through the most
                          recent dividend payment dates therefor for all
                          series of outstanding preferred stock of the Fund
                          are declared and paid. If full cumulative dividends
                          due have not been declared and paid on all
                          outstanding shares of preferred stock of the Fund
                          ranking on a parity with the Series B Preferred
                          and/or Series C Auction Rate Preferred as to the
                          payment of dividends, any dividends being paid on
                          the shares of such preferred stock (including any
                          outstanding Series B Preferred and Series C Auction
                          Rate Preferred) will be paid as nearly pro rata as
                          possible in proportion to the respective amounts of
                          dividends accumulated but unpaid on each such series
                          of preferred stock on the relevant dividend payment
                          date.

                          In the event that for any calendar year the total
                          distributions on shares of the Fund's preferred
                          stock exceed the Fund's net investment income and
                          net capital gain allocable to those shares, the
                          excess distributions will generally be treated as a
                          tax-free return of capital (to the extent of the
                          stockholder's tax basis in his or her shares). The
                          amount treated as a tax-free return of capital will
                          reduce a stockholder's adjusted basis in his or her
                          shares of preferred stock, thereby increasing the
                          stockholder's potential gain or reducing his or her
                          potential loss on the sale of the shares.

                          Common Stock. In order to allow its holders of
                          common stock to realize a predictable, but not
                          assured, level of cash flow and some liquidity
                          periodically on their investment without having to
                          sell shares, the Fund has adopted a policy, which
                          may be modified at any time by its Board of
                          Directors, of paying distributions on its common
                          stock of 8% of average quarter-end net assets
                          attributable to common stock. For the fiscal year
                          ending December 31, 2002, 64% of the distributions
                          paid by the Fund with respect to its common stock
                          consisted of a return of capital. The Fund had not
                          previously returned capital as part of distributions
                          on its common stock since 1995, the year the Fund
                          began operating as a closed-end fund. The Fund's
                          Board of Directors monitors and reviews the Fund's
                          common stock distribution policy on a regular basis.
                          See "Dividends and Distributions."

Auction Procedures......  You may buy, sell or hold Series C Auction Rate
                          Preferred in the auction. The following is a brief
                          summary of the auction procedures, which are
                          described in more detail elsewhere in this
                          prospectus and in the SAI. These auction procedures
                          are complicated, and there are exceptions to these
                          procedures. Many of the terms in this section have a
                          special meaning as set forth in this prospectus or
                          the SAI.

                          The auctions determine the dividend rate for the
                          Series C Auc tion Rate Preferred, but each dividend
                          rate will not be higher than the then-maximum rate.
                          See "Description of the Series B Preferred and
                          Series C Auction Rate Preferred -- Dividends on the
                          Series C Auction Rate Preferred."

                          If you own shares of Series C Auction Rate
                          Preferred, you may instruct your broker-dealer to
                          enter one of three kinds of order in the auction
                          with respect to your shares: sell, bid and hold.

                          If you enter a sell order, you indicate that you
                          want to sell Series C Auction Rate Preferred at
                          $25,000 per share, no matter what the next dividend
                          period's rate will be.

                          If you enter a bid (or "hold at a rate") order,
                          which must specify a dividend rate, you indicate
                          that you want to sell Series C Auction Rate
                          Preferred only if the next dividend period's rate is
                          less than the rate you specify.

                          If you enter a hold order you indicate that you want
                          to continue to own Series C Auction Rate Preferred,
                          no matter what the next dividend period's rate will
                          be.

                          You may enter different types of orders for
                          different portions of your Series C Auction Rate
                          Preferred. You may also enter an order to buy
                          additional Series C Auction Rate Preferred. All
                          orders must be for whole shares. All orders you
                          submit are irrevocable. There is a fixed number of
                          Series C Auction Rate Preferred shares and the
                          dividend rate likely will vary from auction to
                          auction depending on the number of bidders, the
                          number of shares the bidders seek to buy, the rating
                          of the Series C Auction Rate Preferred and general
                          economic conditions including current interest
                          rates. If you own Series C Auction Rate Preferred
                          and submit a bid for them higher than the then-
                          maximum rate, your bid will be treated as a sell
                          order. If you do not enter an order, the
                          broker-dealer will assume that you want to continue
                          to hold Series C Auction Rate Preferred, but if you
                          fail to submit an order and the dividend period is
                          longer than 28 days, the broker-dealer will treat
                          your failure to submit a bid as a sell order.

                          If you do not then own Series C Auction Rate
                          Preferred, or want to buy more shares, you may
                          instruct a broker-dealer to enter a bid order to buy
                          shares in an auction at $25,000 per share at or
                          above the dividend rate you specify. If you bid for
                          shares you do not already own at a rate higher than
                          the then-maximum rate, your bid will not be
                          considered.

                          Broker-dealers will submit orders from existing and
                          potential holders of Series C Auction Rate Preferred
                          to the auction agent. Neither the Fund nor the
                          auction agent will be responsible for a
                          broker-dealer's failure to submit orders from
                          existing or potential holders of Series C Auction
                          Rate Preferred. A broker-dealer's failure to submit
                          orders for Series C Auction Rate Preferred held by
                          it or its customers will be treated in the same
                          manner as a holder's failure to submit an order to
                          the broker-dealer. A broker-dealer may submit orders
                          to the auction agent for its own account. The Fund
                          may not submit an order in any auction.

                          The auction agent after each auction for the Series
                          C Auction Rate Preferred will pay to each
                          broker-dealer, from funds provided by the Fund, a
                          service charge equal to, in the case of any auction
                          immediately preceding a dividend period of less than
                          one year, the product of (i) a fraction, the
                          numerator of which is the number of days in such
                          dividend period and the denominator of which is 365,
                          times (ii) 1/4 of 1%, times (iii) $25,000, times
                          (iv) the aggregate number of Series C Auction Rate
                          Preferred shares placed by such broker-dealer at
                          such auction or, in the case of any auction
                          immediately preceding a dividend period of one year
                          or longer, a percentage of the purchase price of the
                          Series C Auction Rate Preferred placed by the
                          broker-dealers at the auction agreed to by the Fund
                          and the broker-dealers.

                          If the number of Series C Auction Rate Preferred
                          shares subject to bid orders by potential holders
                          with a dividend rate equal to or lower than the
                          then-maximum rate is at least equal to the number of
                          Series C Auction Rate Preferred shares subject to
                          sell orders, then the dividend rate for the next
                          dividend period will be the lowest rate submitted
                          which, taking into account that rate and all lower
                          rates submitted in order from existing and potential
                          hold ers, would result in existing and potential
                          holders owning all the Series C Auction Rate
                          Preferred available for purchase in the auction.

                          If the number of Series C Auction Rate Preferred
                          shares subject to bid orders by potential holders
                          with a dividend rate equal to or lower than the
                          then-maximum rate is less than the number of Series
                          C Auction Rate Preferred shares subject to sell
                          orders, then the auction is considered to be a
                          failed auction, and the dividend rate will be the
                          maximum rate. In that event, existing holders that
                          have submitted sell orders (or are treated as having
                          submitted sell orders) may not be able to sell any
                          or all of the Series C Auction Rate Preferred for
                          which they submitted sell orders.

                          The auction agent will not consider a bid above the
                          then-maximum rate. The purpose of the maximum rate
                          is to place an upper limit on dividends with respect
                          to the Series C Auction Rate Preferred and in so
                          doing to help protect the earnings available to pay
                          dividends on common shares, and to serve as the
                          dividend rate in the event of a failed auction (that
                          is, an auction where there are more Series C Auction
                          Rate Preferred offered for sale than there are
                          buyers for those shares).

                          If broker-dealers submit or are deemed to submit
                          hold orders for all outstanding Series C Auction
                          Rate Preferred, the auction is considered an "all
                          hold" auction and the dividend rate for the next
                          dividend period will be the "all hold rate," which
                          is 80% of the then-current "AA" Financial Composite
                          Commercial Paper Rate.

                          The auction procedures include a pro rata allocation
                          of Series C Auction Rate Preferred shares for
                          purchase and sale. This allocation process may
                          result in an existing holder selling, or a potential
                          holder buying, fewer shares than the number of
                          Series C Auction Rate Preferred shares in its order.
                          If this happens, broker-dealers that have designated
                          themselves as existing holders or potential holders
                          in respect of customer orders will be required to
                          make appropriate pro rata allocations among their
                          respective customers.

                          Settlement of purchases and sales will be made on
                          the next business day (which also is a dividend
                          payment date) after the auction date through The
                          Depository Trust Company. Purchasers will pay for
                          their Series C Auction Rate Preferred through
                          broker-dealers in same-day funds to The Depository
                          Trust Company against delivery to the
                          broker-dealers. The Depository Trust Company will
                          make payment to the sellers' broker-dealers in
                          accordance with its normal procedures, which require
                          broker-dealers to make payment against delivery in
                          same-day funds. As used in this prospectus, a
                          business day is a day on which the NYSE is open for
                          trading, and which is not a Saturday, Sunday or any
                          other day on which banks in New York City are autho-
                          rized or obligated by law to close.

                          The first auction for Series C Auction Rate
                          Preferred will be held on , 2003, the business day
                          preceding the dividend payment date for the initial
                          dividend period. Thereafter, except during special
                          dividend periods, auctions for Series C Auction Rate
                          Preferred normally will be held every Tuesday (or
                          the next preceding business day if Tuesday is a
                          holiday), and each subsequent dividend period for
                          the Series C Auction Rate Preferred normally will
                          begin on the following Wednesday.

                          If an auction is not held because an unforeseen
                          event or unforeseen events cause a day that
                          otherwise would have been an auction date not to be
                          a business day, then the length of the then-current
                          dividend period will be extended by seven days (or a
                          multiple thereof if necessary because of such
                          unforeseen event or events), the applicable rate for
                          such period will be the applicable rate for the
                          then-current dividend period so extended and the
                          dividend payment date for such dividend period will
                          be the first business day immediately succeeding the
                          end of such period. See "The Auction of Series C
                          Auction Rate Preferred."

Potential Tax Benefit
to Certain Investors....  Most individuals pay federal income tax at a lower
                          rate on long term capital gains than on ordinary
                          income and short-term capital gains. For
                          individuals in the highest tax brackets this differ
                          ential currently can be as great as 18.6%, the
                          difference between 38.6% on ordinary income and
                          short-term capital gains and 20.0% on long-term
                          capital gains. In accordance with the current view
                          of the Internal Revenue Service, the Fund intends to
                          allocate its net long-term capital gain and ordinary
                          income (including net short-term capital gain and
                          investment income) proportionately between its
                          common stock and preferred stock. Over the past one,
                          three and five fiscal years ending December 31,
                          2002, the distributions of taxable income by the
                          Fund consisted of 0.00%, 31.37%, and 31.75%
                          long-term capital gains. If the Fund is able in
                          future years to pay a portion of its distribu tions
                          in the form of long-term capital gain distributions,
                          most individual investors will accordingly realize a
                          tax benefit and pay a lower rate of federal income
                          tax on their Series B Preferred and/or Series C
                          Auction Rate Preferred dividends than if the Fund
                          did not distribute long-term capital gains. See "Tax
                          Attributes of Preferred Stock Dividends." No
                          assurance can be given as to what, if any, portion
                          of the Fund's dividends in future years will consist
                          of long-term capital gains.

Rating and Asset
Coverage Requirements...  Series B Preferred. Before it can be issued, the
                          Series B Preferred must receive a rating of Aaa
                          from Moody's Investors Service, Inc. The Fund's
                          Articles Supplementary, setting forth the rights and
                          preferences of the Series B Preferred, contain
                          certain tests that the Fund must satisfy to obtain
                          and maintain a rating of Aaa from Moody's on the
                          Series B Preferred. See "Description of the Series B
                          Preferred and Series C Auction Rate Preferred --
                          Rating Agency Guidelines."

                          Series C Auction Rate Preferred. Before it can be
                          issued, the Series C Auction Rate Preferred must
                          receive both a rating of Aaa from Moody's and a
                          rating of AAA from Fitch. As with the Series B
                          Preferred, the Articles Supplementary of the Fund
                          setting forth the rights and preferences of the
                          Series C Auction Rate Preferred contain certain
                          tests that the Fund must satisfy to obtain and
                          maintain a rating of Aaa from Moody's and AAA from
                          Fitch. See "Description of the Series B Preferred
                          and Series C Auction Rate Preferred -- Rating Agency
                          Guidelines."

                          Asset Coverage Requirements. Under the asset
                          coverage tests to which each of the Series B
                          Preferred and/or Series C Auction Rate Preferred is
                          subject, the Fund is required to maintain (i) assets
                          having in the aggregate a discounted value greater
                          than or equal to a Basic Maintenance Amount (as
                          defined under "Description of the Series B
                          Preferred and Series C Auction Rate Preferred --
                          Rating Agency Guidelines") for each such series
                          calculated pursuant to the applicable rating agency
                          guidelines and (ii) an asset coverage of at least
                          200% (or such higher or lower percentage as may be
                          required at the time under the 1940 Act) with
                          respect to all outstanding preferred stock of the
                          Fund, including the Series B Preferred and the
                          Series C Auction Rate Preferred. See "Description of
                          the Series B Preferred and Series C Auction Rate
                          Preferred -- Asset Maintenance Requirements."

                          The Fund estimates that if the shares offered hereby
                          had been issued and sold as of February 14, 2003,
                          the asset coverage under the 1940 Act would have
                          been approximately 290% immediately following such
                          issuance and sale (after giving effect to the
                          deduction of the underwriting discounts and esti-
                          mated offering expenses for such shares of
                          $1,500,000). The asset coverage would have been
                          computed as follows:

                          value of Fund assets less liabilities not
                          constituting senior secu rities ($144,898,943) /
                          senior securities representing indebted ness plus
                          liquidation preference of each class of preferred
                          stock ($50,000,000), expressed as a percentage =
                          290%.

                          The Articles Supplementary for each of the Series B
                          Preferred and the Series C Auction Rate Preferred,
                          which contain the technical provisions of the
                          various components of the asset coverage tests, have
                          been filed as exhibits to this registration
                          statement and may be obtained through the web site
                          of the SEC (http://www.sec.gov).

Mandatory
Redemption..............  The Series B Preferred and the Series C Auction Rate
                          Preferred may be subject to mandatory redemption by
                          the Fund to the extent the Fund fails to maintain
                          the asset coverage requirements in accordance with
                          the rating agency guidelines or the 1940 Act
                          described above and does not cure such failure by
                          the applicable cure date. If the Fund redeems
                          preferred stock mandatorily, it may, but is not
                          required to, redeem a sufficient number of shares of
                          preferred stock so that after the redemption the
                          Fund exceeds the asset coverage required by each of
                          the applicable rating agency guidelines and the 1940
                          Act by 10%.

                          With respect to the Series B Preferred, any such
                          redemption will be made for cash at a redemption
                          price equal to $25 per share plus accumulated and
                          unpaid dividends (whether or not earned or declared)
                          to the redemption date.

                          With respect to the Series C Auction Rate Preferred,
                          any such redemption will be made for cash at a
                          redemption price equal to $25,000 per share, plus an
                          amount equal to accumulated but unpaid dividends
                          (whether or not earned or declared) to the date
                          fixed for redemption, plus, in the case of Series C
                          Auction Rate Preferred having a dividend period of
                          more than one year, any applicable redemption
                          premium determined by the Board of Directors. See
                          "Description of the Series B Preferred and Series C
                          Auction Rate Preferred -- Redemption -- Mandatory Re-
                          demption."

                          In the event of a mandatory redemption, such
                          redemption will be made from the Series B Preferred,
                          the Series C Auction Rate Preferred or other
                          preferred stock of the Fund in such proportions as
                          the Fund may determine, subject to the limitations
                          of the 1940 Act and Maryland law.

Optional Redemption.....  Subject to the limitations of the 1940 Act and
                          Maryland law, the Fund may, at its option, redeem
                          the Series B Preferred and/or the Series C Auction
                          Rate Preferred as follows:

                          Series B Preferred. Commencing on , 2008 and at any
                          time thereafter, the Fund at its option may redeem
                          the Series B Preferred, in whole or in part, for
                          cash at a redemption price per share equal to $25
                          plus accumulated and unpaid dividends (whether or
                          not earned or declared) to the redemption date. If
                          fewer than all of the shares of the Series B
                          Preferred are to be redeemed, any such redemption of
                          Series B Preferred shares will be made pro rata in
                          accordance with the number of such shares held.
                          Prior to , 2008 the Series B Preferred will be
                          subject to optional redemption by the Fund at the
                          redemption price only to the extent necessary for
                          the Fund to continue to qualify for tax treatment as
                          a regulated investment company. See "Description of
                          the Series B Preferred and Series C Auction Rate
                          Preferred -- Redemption -- Optional Redemption of
                          the Series B Preferred."

                          Series C Auction Rate Preferred. The Fund generally
                          may redeem Series C Auction Rate Preferred, in whole
                          or in part, at any time other than during a non-call
                          period. The Fund may declare a non-call period
                          during a dividend period of more than seven days. If
                          fewer than all of the shares of the Series C Auc-
                          tion Rate Preferred are to be redeemed, any such
                          redemption of Series C Auction Rate Preferred shares
                          will be made pro rata in accordance with the number
                          of such shares held. See "Descrip tion of the Series
                          B Preferred and Series C Auction Rate Preferred --
                          Redemption -- Optional Redemption of the Series C
                          Auction Rate Preferred."

                          The redemption price per Series C Auction Rate
                          Preferred share will equal $25,000 plus an amount
                          equal to any accumulated but unpaid dividends
                          thereon (whether or not earned or declared) to the
                          redemption date, plus, in the case of Series C
                          Auction Rate Preferred having a dividend period of
                          more than one year, any redemption premium
                          applicable during such dividend period. See
                          "Description of the Series B Preferred and Series C
                          Auction Rate Preferred -- Redemption -- Optional
                          Redemption of the Series C Auction Rate Preferred."

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

Liquidation
Preference..............  The liquidation preference of each share of Series B
                          Preferred is $25. The liquidation preference of the
                          Series C Auction Rate Preferred is $25,000 per
                          share. Upon liquidation, preferred stock
                          shareholders will be entitled to receive the
                          liquidation preference with respect to their shares
                          of preferred stock plus an amount equal to
                          accumulated but unpaid dividends with respect to
                          such shares (whether or not earned or declared) to
                          the date of distribution. See "Description of the
                          Series B Preferred and Series C Auction Rate
                          Preferred -- Liquidation Rights."

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

Listing of the Series B
Preferred...............  Prior to its being offered, there has been no public
                          market for the Series B Preferred. Following its
                          issuance (if issued), the Series B Preferred is
                          expected to be listed on the New York Stock
                          Exchange. However, during an initial period which is
                          not expected to exceed 30 days after the date of
                          its initial issuance, the Series B Preferred will
                          not be listed on any securities exchange.

Limitation on Secondary
Market Trading of the
Series C Auction Rate
Preferred...............  The Series C Auction Rate Preferred will not be
                          listed on an exchange. Broker-dealers may, but are
                          not obliged to, maintain a secondary trading market
                          in Series C Auction Rate Preferred outside of
                          auctions. There can be no assurance that a secondary
                          market will provide owners with liquidity. You may
                          transfer Series C Auction Rate Preferred outside of
                          auctions only to or through a broker-dealer that has
                          entered into an agreement with the auction agent and
                          the Fund, or other persons as the Fund permits.

Special Characteristics
and Risks...............  Risk is inherent in all investing. Therefore, before
                          investing in Series B Preferred or Series C Auction
                          Rate Preferred you should consider the risks
                          carefully.

                          Series B Preferred. Primary risks associated with an
                          investment in the Series B Preferred include:

                          The market price for the Series B Preferred will be
                          influenced by changes in interest rates, the
                          perceived credit quality of the Series B Preferred
                          and other factors.

                          During an initial period which is not expected to
                          exceed 30 days after the date of its issuance, the
                          Series B Preferred will not be listed on any
                          securities exchange. During such period, the
                          underwriters intend to make a market in the Series B
                          Preferred; however, they have no obligation to do
                          so. Consequently, the Series B Preferred may be
                          illiquid during such period. No assurances can be
                          provided that listing on any securities exchange or
                          market making by the underwriters will result in the
                          market for Series B Preferred being liquid at any
                          time.

                          Series C Auction Rate Preferred. Primary risks
                          associated with an investment in Series C Auction
                          Rate Preferred, include:

                          If an auction fails, you may not be able to sell
                          some or all of your Series C Auction Rate Preferred.
                          The Fund is not obliged to redeem your Series C
                          Auction Rate Preferred if an auction fails. The
                          underwriters are not required to make a market in
                          the Series C Auction Rate Preferred. No
                          broker-dealer is obligated to maintain a secondary
                          market for the Series C Auction Rate Preferred apart
                          from the auctions.

                          You may receive less than the price you paid for
                          your Series C Auction Rate Preferred if you sell
                          them outside of the auction, especially when market
                          interest rates are rising.

                          In connection with the sale of the Series C Auction
                          Rate Pre ferred, the Fund may enter into interest
                          rate swap or cap transactions in order to reduce
                          the impact of changes in the dividend rate of the
                          Series C Auction Rate Preferred or obtain the equiva-
                          lent of a fixed rate for the Series C Auction Rate
                          Preferred that is lower than the Fund would have to
                          pay if it issued fixed rate preferred shares. The
                          use of interest rate swaps and caps is a highly
                          specialized activity that involves investment
                          techniques and risks different from those associated
                          with ordinary portfolio security transactions. See
                          "How the Fund Manages Risk -- Interest Rate
                          Transactions."

                          Both the Series B Preferred and Series C Auction
                          Rate Pre ferred. An investment in either the Series
                          B Preferred or Series C Auction Rate Preferred also
                          includes the following primary risks:

                          A rating agency could downgrade or withdraw the
                          rating assigned to the Series B Preferred and/or
                          Series C Auction Rate Preferred, which would likely
                          have an adverse effect on the liquidity and market
                          value of these preferred shares. The present credit
                          rating does not eliminate or mitigate the risks of
                          investing in these preferred shares.

                          The Fund may mandatorily redeem your Series B
                          Preferred and/or Series C Auction Rate Preferred to
                          meet regulatory or rating agency requirements or may
                          voluntarily redeem your Series B Preferred and/or
                          Series C Auction Rate Preferred. Subject to such
                          redemptions, these preferred shares are perpetual.

                          The Fund may not meet the asset coverage
                          requirements or earn sufficient income from its
                          investments to pay dividends on the Series B
                          Preferred and/or Series C Auction Rate Preferred.

                          The Series B Preferred and/or Series C Auction Rate
                          Preferred are not obligations of the Fund. Although
                          unlikely, precipitous declines in the value of the
                          Fund's assets could result in the Fund having
                          insufficient assets to redeem all of the Series B
                          Preferred and/or Series C Auction Rate Preferred for
                          the full redemption price.

                          The value of the Fund's investment portfolio may
                          decline, reducing the asset coverage for the Series
                          B Preferred and/or Series C Auction Rate Preferred.
                          Further, if an issuer of a common stock in which the
                          Fund invests experiences financial difficulties or
                          if an issuer's preferred stock or debt security is
                          downgraded or defaults or if an issuer in which the
                          Fund invests is affected by other adverse market
                          factors, there may be a negative impact on the
                          income and/or asset value of the Fund's investment
                          portfolio.

                          The Fund invests a significant portion of its assets
                          in convertible securities. Many convertible
                          securities are not investment grade, that is, not
                          rated within the four highest categories by Moody's
                          and Standard & Poor's Ratings Services. To the
                          extent that the convertible securities and any other
                          fixed income securities owned by the Fund are rated
                          lower than investment grade, or are not rated, there
                          would be a greater risk as to the timely repayment
                          of the principal of, and timely payment of interest
                          or dividends on, those securities. Convertible debt
                          securities (which generally are rated lower than
                          investment grade) and fixed income securities that
                          are rated lower than investment grade, or not rated
                          but of similar quality, are commonly described as
                          "junk bonds." See "Risk Factors and Special
                          Considerations -- Asset Class Risks."

                          The Fund may invest up to 25% of its total assets in
                          securities of foreign issuers. The Fund may also
                          purchase sponsored American Depository Receipts or
                          U.S. denominated securities of foreign issuers,
                          which will not be included in the Fund's 25% foreign
                          securities limitation. Investing in securities of
                          foreign companies and foreign governments, which are
                          generally denominated in foreign currencies, may
                          involve certain risks and opportunities not
                          typically associated with investing in domestic
                          companies and could cause the Fund to be affected
                          favorably or unfavorably by changes in currency
                          exchange rates and revaluation of currencies. See
                          "Risk Factors and Special Consider ations -- Foreign
                          Securities."

                          The Investment Adviser (as hereinafter defined) is
                          dependent upon the expertise of Mr. Mario J. Gabelli
                          in providing advisory services with respect to the
                          Fund's investments. If the Investment Adviser were
                          to lose the services of Mr. Gabelli, its ability to
                          service the Fund could be adversely affected. There
                          can be no assurance that a suitable replacement
                          could be found for Mr. Gabelli in the event of his
                          death, resignation, retirement or inability to act
                          on behalf of the Investment Adviser. See "Risk
                          Factors and Special Considerations -- Dependence on
                          Key Personnel."

Federal Income Tax
Considerations..........  The Fund has qualified and intends to remain
                          qualified for federal income tax purposes as a
                          regulated investment company. Qualification
                          requires, among other things, compliance by the Fund
                          with certain distribution requirements. Statutory
                          limita tions on distributions on the common stock if
                          the Fund fails to satisfy the 1940 Act's asset
                          coverage requirements could jeopardize the Fund's
                          ability to meet the distribution requirements. The
                          Fund presently intends, however, to purchase or
                          redeem preferred stock to the extent necessary in
                          order to maintain compliance with such asset
                          coverage requirements. See "Taxation" for a more
                          complete discussion of these and other federal
                          income tax considerations.

Management
and Fees................  Gabelli Funds, LLC serves as the Fund's investment
                          adviser and is compensated for its services and its
                          related expenses at an annual rate of 1.00% of the
                          Fund's average weekly net assets. The Investment
                          Adviser is responsible for administration of the
                          Fund and currently utilizes and pays the fees of a
                          third party administrator. Notwithstanding the
                          foregoing, the Investment Adviser will waive the
                          portion of its investment advisory fee attributable
                          to an amount of assets of the Fund equal to the
                          aggregate stated value of the Fund's outstanding
                          Series B Pre ferred or Series C Auction Rate
                          Preferred, as the case may be, for any calendar year
                          in which the net asset value total return of the
                          Fund allocable to the common stock, including
                          distributions and the advisory fee subject to
                          potential waiver, is less than (i) in the case of
                          the Series B Preferred, the stated annual dividend
                          rate of such series and (ii) in the case of the
                          Series C Auction Rate Preferred, the dividend rate
                          for the Series C Auction Rate Preferred at the
                          beginning of such year (including the anticipated
                          cost of a swap or cap if the Fund hedges its Series
                          C Auction Rate Preferred dividend obligations), in
                          every case prorated during the year such series is
                          issued and the final year such series is
                          outstanding. See "Management of the Fund."

Repurchase of Common
Stock and Anti-takeover
Provisions..............  The Fund is authorized to repurchase up to 500,000
                          shares of its common stock in the open market when
                          the common stock is trading at a discount of 10% or
                          more (or such other percentage as the Fund's Board
                          of Directors may determine from time to time) from
                          net asset value. Such repurchases are subject to
                          certain notice and other requirements including
                          those set forth in Rule 23c-1 under the 1940 Act.
                          See "Description of Capital Stock and Other
                          Securities - Common Stock." Through December 31,
                          2002, the Fund has repurchased in the open market
                          305,200 shares of its common stock under this
                          authorization. See "Description of Capital Stock and
                          Other Securities -- Common Stock." Certain
                          provisions of the Fund's charter (the "Charter")
                          and the Fund's by-laws (the "By-Laws") may be
                          regarded as "anti-takeover" provisions. Pursuant to
                          these provisions, only one of three classes of
                          directors is elected each year, and the affirmative
                          vote of the holders of 75% of the outstanding shares
                          of the Fund and the vote of a majority (as defined
                          in the 1940 Act) of the holders of preferred shares,
                          voting as a single class, are necessary to authorize
                          the conversion of the Fund from a closed-end to an
                          open-end investment company. The overall effect of
                          these provisions is to render more difficult the
                          accomplishment of a merger with, or the assumption
                          of control by, a principal stockholder. These
                          provisions may have the effect of depriving Fund
                          stockholders of an opportunity to sell their stock
                          at a premium to the prevailing market price. See
                          "Anti-takeover Provisions of the Charter and
                          By-Laws."

Custodian, Transfer
Agent, Auction Agent
and Dividend-
Disbursing Agent........  State Street Bank and Trust Company (the
                          "Custodian"), located at 150 Royall Street, Canton,
                          MA 02021, serves as the custodian of the Fund's
                          assets pursuant to a custody agreement. Under the
                          custody agreement, the Custodian holds the Fund's
                          assets in compliance with the 1940 Act. For its
                          services, the Custodian will receive a monthly fee
                          based upon the average weekly value of the total
                          assets of the Fund, plus certain charges for
                          securities transactions.

                          EquiServe Trust Company, N.A., located at P.O. Box
                          43025, Providence, RI 02940-3025, serves as the
                          Fund's dividend disbursing agent, as agent under
                          the Fund's automatic dividend reinvestment and
                          voluntary cash purchase plan, and as transfer agent
                          and registrar with respect to the common stock of
                          the Fund.

                          Series B Preferred. EquiServe will also serve as the
                          transfer agent, registrar, dividend and paying agent
                          and redemption agent with respect to the Series B
                          Preferred.

                          Series C Auction Rate Preferred. The Bank of New
                          York will serve as the auction agent, transfer
                          agent, registrar, dividend paying agent and
                          redemption agent with respect to the Series C
                          Auction Rate Preferred.

Interest Rate
Transactions............  In connection with the sale of the Series C Auction
                          Rate Preferred, the Fund may enter into interest
                          rate swap or cap transactions in order to reduce
                          the impact of changes in the dividend rate of the
                          Series C Auction Rate Preferred or obtain the equiva-
                          lent of a fixed rate for the Series C Auction Rate
                          Preferred that is lower than the Fund would have to
                          pay if it issued fixed rate preferred shares. The
                          use of interest rate swaps and caps 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 to
                          the other party to the interest rate swap (which is
                          known as the "counterparty") periodically 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 Preferred. In an interest rate
                          cap, the Fund would pay a premium to the
                          counterparty to the interest rate cap and, to the
                          extent that a specified variable rate index exceeds
                          a predetermined fixed rate, the Fund would receive
                          from the counterparty payments of the difference
                          based on the notional amount of such cap. Interest
                          rate swap and cap 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 that point in
                          time, such a default could negatively affect the
                          Fund's ability to make dividend payments on the
                          Series C Auction Rate Preferred. In addition, at the
                          time an interest rate swap or cap 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. If this occurs, it could have
                          a negative impact on the Fund's ability to make
                          dividend payments on the Series C Auction Rate
                          Preferred. A sudden and dramatic decline in interest
                          rates may result in a significant decline in the
                          asset coverage. If the Fund fails to maintain the
                          required asset coverage on its outstanding preferred
                          stock or fails to comply with other covenants, the
                          Fund may, at its option, consistent with its Charter
                          and the requirements of the 1940 Act, and in certain
                          circumstances will be required to, mandatorily
                          redeem some or all of these shares (including the
                          Series C Auction Rate Preferred). Such redemption
                          likely would result in the Fund seeking to terminate
                          early all or a portion of any swap or cap
                          transaction. Early termination of a swap could
                          require the Fund to make a termination payment to
                          the counterparty. The Fund intends to maintain in a
                          segregated account with its custodian cash or liquid
                          securities having a value at least equal to the
                          value of the Fund's net payment obligations under
                          any swap transaction, marked to market daily. The
                          Fund does not presently intend to enter into
                          interest rate swap or cap transactions relating to
                          the Series C Auction Rate Preferred in a notional
                          amount in excess of the outstanding amount of the
                          Series C Auction Rate Preferred. The Fund will
                          monitor any such swap with a view to ensuring that
                          the Fund remains in compliance with all applicable
                          regulatory investment policy and tax requirements.
                          See "How the Fund Manages Risk -- Interest Rate
                          Transactions" for additional information.




            TAX ATTRIBUTES OF PREFERRED STOCK DIVIDENDS

      The Fund intends to distribute to its stockholders substantially all of
its net capital gains and net investment income (including short-term capital
gain). The Fund operates as a regulated investment company under the Internal
Revenue Code of 1986, as amended, (the "Code") and distributions by a
regulated investment company generally retain their character as capital gain
or ordinary income when received by individual investors who hold its
preferred or common stock. Thus, dividends paid by the Fund to holders of the
Series B Preferred or Series C Auction Rate Preferred may, for federal income
tax purposes, consist of varying proportions of long-term capital gain,
ordinary income and/or returns of capital.

      Capital gain on assets held longer than 12 months generally is currently
taxable to individuals at a maximum rate of 20.0% (or 18.0% for capital assets
that have been held for more than five years, the holding period of which
began after December 31, 2000). Net investment income, which includes short-
term capital gain of the Fund, is currently taxable to individuals at a
maximum rate of 38.6%.

      Although the Fund is not managed using a tax-focused investment strategy
and does not seek to achieve any particular distribution composition,
individual investors in the Series B Preferred or Series C Auction Rate
Preferred would, under current federal income tax law, realize a tax advantage
on their investment to the extent that distributions by the Fund to its
stockholders are composed of long-term capital gain which is taxed at a lower
rate than ordinary income. In contrast, preferred stock dividends distributed
by corporations that are not regulated investment companies are generally
taxed, for federal income tax purposes, as ordinary income.

      Over the past one, three and five fiscal years ending December 31, 2002,
the distributions of taxable income by the Fund consisted of 0.00%, 31.37%,
and 31.75% long-term capital gains. The fiscal year ending December 31, 2002
was the first year since the Fund's reorganization in 1995 as a closed-end
fund for which its distributions of taxable income failed to include a portion
of long-term capital gain. Given current market conditions, there is no
assurance that over the next several years the percentage of its taxable
distributions that consist of long-term capital gain will again approach
historical levels. An investment by an individual in the common stock or
preferred stock of a regulated investment company whose dividends consist of a
larger percentage of long-term capital gain would be expected to realize a
proportionately higher tax advantage as compared to dividends on the Series B
Preferred or Series C Auction Rate Preferred.

      Corporate taxpayers are subject to a 35% tax on capital gain and
ordinary income dividends. In addition, corporate taxpayers that are eligible
for the dividends received deduction on dividends that constitute ordinary
income will not be able to utilize that deduction with respect to Fund
dividends that constitute long-term capital gain, and so may incur a tax
disadvantage by holding stock in the Fund.

      The Bush Administration has announced a proposal to reduce or eliminate
the tax on dividends; however, many details of the proposal (including how the
proposal would apply to dividends paid by a regulated investment company) have
not been specified. Moreover, the prospects for this proposal are unclear.
Accordingly, it is not possible to evaluate how this proposal might affect the
taxation of the Fund's stockholders.

      The federal income tax characteristics of the Fund and the taxation of
its stockholders are described more fully under "Taxation."

      The following tables show examples of the pure ordinary income
equivalent yield that would be generated by the stated dividend rate on the
Series B Preferred and Series C Auction Rate Preferred, respectively, assuming
distributions for federal income tax purposes consisting of different
proportions of long-term capital gain and ordinary income (including
short-term capital gain) for an individual in the 38.6% and 30.0% federal
marginal income tax brackets. In reading these tables, you should understand
that a number of factors could affect the actual composition for federal
income tax purposes of the Fund's distributions each year. Such factors
include (i) the Fund's investment performance for any particular year, which
may result in distributions of varying proportions of long-term capital gain,
ordinary income and/or return of capital and (ii) revocation or revision of
the Internal Revenue Service revenue ruling requiring the proportionate
allocation of types of income among the holders of various classes of a
regulated investment company's capital stock.

These tables are for illustrative purposes only and cannot be taken as an
indication of the actual composition for federal income tax purposes of the
Fund's future distributions.


<table>
<caption>

                                                Series B Preferred
                                                ------------------
                                                 Series B Preferred         Series B Preferred
                                                 Illustrative Annual        Illustrative Annual
                                                   Dividend Rate               Dividend  Rate
                                                 -------------------        -------------------

                                                 5.75%           6.25%      5.75%            6.25%

  Percentage of Series B Preferred
 Stated Annual Dividend Comprised of
 -----------------------------------       Tax Equivalent Yield for an         Tax Equivalent Yield for an
       Long-Term       Ordinary              Individual in the 38.6%             Individual in the 30.0%
     Capital Gains      Income             federal Income Tax Bracket1         federal Income Tax Bracket1
     -------------      ------             ---------------------------         ---------------------------
<s>     <c>              <c>                  <c>                <c>             <c>          <c>
        33.3%            66.7%                6.33%              6.88%           6.02%        6.55%
        30.0%            70.0%                6.27%              6.82%           6.00%        6.52%
        20.0%            80.0%                6.10%              6.63%           5.91%        6.43%
        10.0%            90.0%                5.92%              6.44%           5.83%        6.34%
         0.0%           100.0%                5.75%              6.25%           5.75%        6.25%
</table>

<table>
<caption>

                                        Series C Auction Rate Preferred
                                        -------------------------------

                                          Series C Auction Rate                  Series C Auction Rate
                                      Preferred Illustrative Annual          Preferred Illustrative Annual
                                             Dividend Rate*                           Dividend Rate*
                                      -----------------------------          -----------------------------
                                         1.00%               1.50%               1.00%             1.50%

Percentage of Series C Auction Rate Pre-
ferred Share Illustrative Annual Dividend
        Comprised of
- ------------------------------------------
                                                                               Tax Equivalent Yield for
                                    Tax Equivalent Yield for an               an Individual in the 30.0%
  Long-Term        Ordinary           Individual in the 38.6%                     federal Income Tax
 Capital Gains      Income          federal Income Tax Bracket1                         Bracket1
 -------------      ------        ------------------------------              ---------------------------
<s>  <c>             <c>             <c>                 <c>                    <c>                 <c>
     33.3%           66.7%           1.10%               1.65%                  1.05%               1.57%
     30.0%           70.0%           1.09%               1.64%                  1.04%               1.56%
     20.0%           80.0%           1.06%               1.59%                  1.03%               1.54%
     10.0%           90.0%           1.03%               1.55%                  1.01%               1.52%
     0.0%           100.0%           1.00%               1.50%                  1.00%               1.50%
</table>

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

      *    Actual dividend rates for the Series C Auction Rate Preferred will
           be determined based upon the results of periodic auctions. See
           "Description of the Series B Preferred and Series C Auction Rate
           Preferred -- Dividends on the Series C Auction Rate Preferred."




      (1)  Annual taxable income levels for individuals corresponding to the
           2003 federal marginal tax brackets are as follows:


           2003 Federal
           Income Tax
             Bracket+            Single                      Joint
           ------------          ------                      -----
              38.6%             over $311,950              over $311,950
              35.0%      over $143,500 - $311,950      over $174,700 - $311,950
              30.0%       over $68,800 - $143,500      over $114,650 - $174,700
              27.0%       over $28,400 - $68,800        over $47,450 - $114,650
              15.0%        over $6,000 - $28,400        over $12,000 - $47,450
              10.0%     up to and including $6,000    up to and including $6,000


           Your federal marginal income tax rates may exceed the rates shown
           in the above tables due to the reduction, or possible elimination,
           of the personal exemption deduction for high-income taxpayers and
           an overall limit on itemized deductions. Income may be subject to
           certain state, local and foreign taxes. If you pay alternative
           minimum tax, or AMT, equivalent yields may be lower than those
           shown above. The tax rates shown above do not apply to corporate
           taxpayers.

           +    The Economic Growth and Tax Relief Reconciliation Act of 2001
                creates a new 10 percent income tax bracket and reduces the
                tax rates applicable to ordinary income over a six year
                phase-in period. Beginning in the taxable year 2006, ordinary
                income will be subject to a 35% maximum rate, with
                approximately proportionate reductions in the other ordinary
                rates.



                       FINANCIAL HIGHLIGHTS

      The selected data below sets forth the per share operating performance
and ratios for the periods presented. The financial information was derived
from and should be read in conjunction with the Financial Statements of the
Fund and Notes thereto, which are incorporated by reference into this
prospectus and the SAI. The financial information for each of the five years
ended December 31, 2002 has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose unqualified report on such Financial Statements
is incorporated by reference into the SAI.

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
Selected data for a Fund common share                     ------------------------------------------------------
 outstanding throughout each period:                      2002      2001     2000       1999       1998    1997
                                                          ------------------------------------------------------
<S>                                                       <C>      <C>       <C>       <C>       <C>      <C>
Operating performance:
   Net asset value, beginning of period.................  $9.92    $10.02    $11.40    $11.45    $11.48   $11.08
                                                          ------------------------------------------------------

   Net investment income................................   0.49      0.68      0.72      0.51      0.53     0.49
   Net realized and unrealized gain (loss) on
    investments.........................................  (0.76)     0.32     (0.52)     0.77      0.65     1.23
                                                          -----      ----     -----      ----      ----     ----
   Total from investment operations.....................  (0.27)     1.00      0.20      1.28      1.18     1.72

                                                          ------------------------------------------------------
Distributions to preferred stock shareholders:
   Net investment income................................  (0.28)    (0.18)    (0.13)    (0.11)    (0.13)   (0.08)
   Net realized gain on investments.....................     --     (0.12)    (0.17)    (0.19)    (0.17)   (0.11)
                                                          ------------------------------------------------------
   Total distributions to preferred stock
    shareholders........................................  (0.28)    (0.30)    (0.30)    (0.30)    (0.30)   (0.19)
                                                          ------------------------------------------------------
 Net increase (decrease) in net assets attributable
   to common stock shareholders resulting
   from operations......................................  (0.55)     0.70     (0.10)     0.98      0.88     1.53
                                                          ------------------------------------------------------
 Distributions to common stock shareholders:
   Net investment income................................  (0.27)    (0.48)    (0.57)    (0.39)    (0.39)   (0.40)
   Net realized gain on investments.....................     --     (0.33)    (0.73)    (0.64)    (0.53)   (0.56)
   Paid in capital......................................  (0.48)       --        --        --        --       --
                                                          ------------------------------------------------------
   Total distributions to common stock
    shareholders........................................  (0.75)    (0.81)    (1.30)    (1.03)    (0.92)   (0.96)
                                                          ------------------------------------------------------
 Capital share transactions:
   Increase in net asset value from common share
    transactions........................................   0.02      0.01      0.02        --      0.01     0.01
   Decrease in net asset value from shares issued in
    rights offering.....................................  (0.20)      --         --        --        --       --
   Preferred share offering costs charged to
    paid-in capital.....................................   0.00       --         --        --        --    (0.18)
                                                          ------------------------------------------------------
   Total capital share transactions.....................  (0.18)     0.01      0.02      0.00      0.01    (0.17)
                                                          ------------------------------------------------------
 Net asset value attributable to common stock
   shareholders, end of period..........................  $8.44     $9.92    $10.02    $11.40    $11.45   $11.48
                                                          ======================================================
   Net asset value total return(+)......................  (7.0)%     7.0%      0.0%      9.4%      8.3%    13.5%
                                                          ======================================================
   Market value, end of period..........................  $8.55    $10.90    $ 9.13     10.56    $11.25   $10.31
                                                          ------------------------------------------------------
   Total investment return(++).......................... (14.2)%    29.1%     (1.7)%     3.2%     18.4%    22.2%
                                                          ======================================================
 Ratios and supplemental data:
   Net assets including liquidation value of pre-
    ferred shares, end of period (in 000's).............  $108,774  $110,074 $108,066   $120,179   $120,726 $122,382
   Net assets attributable to common shares, end of
    period (in 000's)...................................  $ 93,774  $ 80,074 $ 78,066   $ 90,179   $ 90,726 $ 92,382
   Ratio of net investment income to average net
    assets attributable to common shares*...............     5.32%     6.58%    6.49%      4.35%      4.54%    4.23%
   Ratio of operating expenses to average net assets
    attributable to common shares* (a)..................     1.58%     1.46%    1.48%      1.80%      1.83%    1.68%
   Ratio of operating expenses to average total net
    assets including liquidation value of
      preferred shares (c)..............................     1.15%     1.07%    1.10%      1.36%      1.38%    1.39%
   Portfolio turnover rate..............................       56%       59%     169%       175%       149%     243%
 Cumulative Preferred Stock:
   8.00% Cumulative Preferred Stock Liquidation
    value, end of period (in 000's).....................  $ 15,000  $ 30,000  $ 30,000   $ 30,000   $ 30,000 $ 30,000
   Total shares outstanding (in 000's)..................       600     1,200     1,200      1,200      1,200    1,200
   Liquidation preference per share.....................  $  25.00  $  25.00  $  25.00   $  25.00   $  25.00 $  25.00
   Average market value (b).............................  $  25.83  $  25.80  $  24.31   $  25.36   $  26.84 $  25.69
   Asset coverage.......................................       725%      367%     360%       401%       402%     408%
   Asset coverage per share.............................  $ 181.29  $  91.72  $  90.05   $ 100.15   $ 100.60 $ 101.99
</TABLE>
- -------------------------------------
See footnotes on following page.

                             Year Ended December 31,
<TABLE>
<CAPTION>

                                                                        1996+         1995+        1994+        1993+
                                                                    ----------    ----------   ----------    ---------
<S>                                                                  <C>          <C>          <C>           <C>
Operating Performance:
    Net asset value, beginning of period..........................   $   11.01    $    10.60   $    11.52    $   11.45
                  ---------- ---------- ---------- ---------
    Net investment income.........................................        0.49          0.53         0.69         0.76
    Net realized and unrealized gain (loss)
       on securities..............................................        0.31          1.03        (0.71         0.74
                                                                    ----------    ----------   ----------    ---------
    Total from investment operations..............................        0.80          1.56        (0.02)        1.50
                                                                    ----------    ----------   ----------    ---------
Distributions to common stock shareholders:
    Net investment income.........................................       (0.49)        (0.53)       (0.69)       (0.76)
    Net realized gain on investments..............................       (0.24)        (0.56)       (0.21)       (0.67)
    Distributions in excess of net investment income..............        --           (0.02)        --           --
    Distributions in excess of net realized gains.................        --           (0.01)        --           --
    Paid-in capital...............................................        --           (0.03)        --           --
                                                                    ----------    ----------   ----------    ----------
    Total distributions...........................................       (0.73)        (1.15)       (0.90)       (1.43)
                                                                    ----------    ----------   ----------    ----------
    Net asset value, end of period................................  $    11.08    $    11.01   $    10.60    $   11.52
                                                                    ==========    ==========   ==========    =========
    Total Net Asset Value Return ++ (d)...........................         8.4%         15.0%        (0.2)%      13.1%
    Market value, end of period...................................  $     9.25    $    10.75         --           --
                                                                    ==========    ==========   ==========    =========
    Total Investment Return ++(e).................................        (7.3)%        12.3%        --           --
Ratios and supplemental data:
    Net assets, end of period (in thousands)......................    $ 89,659    $   89,137    $ 112,090    $ 108,674
    Ratio of operating expenses to average net assets (f).........        1.45%         1.56%        1.31%        1.38%
    Ratio of net investment income (loss) to average net assets...        4.33%         4.60%        4.77%        4.58%
    Portfolio turnover rate.......................................         114%          140%          67%          45%
</TABLE>

___________________________________________

+    Based on net asset value per share, adjusted for reinvestment of
     distributions.

++   Based on market value per share, adjusted for reinvestment of
     distributions.

+    No preferred stock outstanding during this period.

++   Total return is calculated assuming a purchase of shares on the first day
     and a sale on the last day of each period reported and includes
     reinvestment of distributions.

*    The expense ratio and net investment income ratio do not reflect the
     effect of dividend payments to preferred shareholders.

(a)  The ratio of operating expenses to average net assets attributable to
     common stock for the fiscal year ended December 31, 1997 does not include
     a reduction of expenses for custodian fee credits on cash balances
     maintained with the custodian. Including the custodian fee credit, the
     ratio of operating expenses to average net assets attributable to common
     stock for the year would have been 1.67%.

(b)  Based on weekly prices.

(c)  Amounts are attributable to both common and preferred stock assets.

(d)  Based on net asset value per share, adjusted for reinvestment of all
     distributions.

(e)  Based on net asset value per share through March 31, 1995, the date of
     conversion of the Fund to closed-end status, and market value thereafter,
     adjusted for reinvestment of all distributions.

(f) Includes, for 1995, a current period expense associated with the
     conversion of the Fund to closed-end Status. Without the conversion
     expense, this ratio would have been 1.28% in 1995.




      The following table provides information about the Fund's Series A
Preferred since its issuance in May 1997. The Fund redeemed all of its
outstanding shares of Series A Preferred on February 11, 2003. The information
has been audited by PricewaterhouseCoopers LLP, independent accountants.


                                            Involuntary
                                            Liquidation     Average
Year ended         Shares    Asset Coverage  Preference      Market
December 31,    Outstanding    Per Share     Per Share   Value Per Share
- ------------    -----------    ---------     ---------   ---------------
2002              600,000       $181.29        $25.00        $25.83
2001              1,200,000      $91.72        $25.00        $25.80
2000              1,200,000      $90.05        $25.00        $24.31
1999              1,200,000      $100.15       $25.00        $25.36
1998              1,200,000      $100.60       $25.00        $26.84
1997              1,200,000      $101.99       $25.00        $25.69

      For purposes of the foregoing table, the Asset Coverage Per Share is
calculated by dividing the total value of the Fund's assets on December 31 of
the relevant year by the number of shares of Series A Preferred outstanding on
that date. Involuntary Liquidation Preference Per Share refers to the amount
holders of Series A Preferred are entitled to receive per share in the event
of liquidation of the Fund prior to the holders of common stock being entitled
to receive any amounts in respect of the assets of the Fund. The Average
Market Value Per Share is the average of the weekly closing prices of the
Series A Preferred on the NYSE each week during the relevant year.


                          USE OF PROCEEDS

      The net proceeds of the offering are estimated at $     after deduction of
the underwriting discounts and estimated offering expenses payable by the
Fund. The Investment Adviser expects that it will initially invest the
proceeds of the offering in high quality short-term income securities in accor
dance with the Fund's investment guidelines. Thereafter, the Fund intends to
reallocate all or a portion of the offering proceeds to other long-term income
or convertible securities in accordance with the Fund's investment guidelines
as suitable investment opportunities become available.


                             THE FUND

      The Fund was incorporated in Maryland on December 19, 1988 as an
open-end, diversified, management investment company. The Fund converted to
closed-end status after receiving stockholder approval of its Charter on
February 21, 1995 and filing of the Charter in Maryland on March 31, 1995. The
Fund's common stock is traded on the New York Stock Exchange under the symbol
"GCV." The Fund's Series A Preferred, all of which was redeemed by the Fund on
February 11, 2003, previously traded on the New York Stock Exchange under the
symbol "GCV Pr."

                          CAPITALIZATION

      The following table sets forth the unaudited capitalization of the Fund
as of February 14, 2003, and its adjusted capitalization assuming the Series B
Preferred and/or Series C Auction Rate Preferred offered in this prospectus
had been issued as of that date.

<TABLE>
<CAPTION>

                                                                                      As of February 14, 2003
                                                                                    Actual           As Adjusted
                                                                                    ------           -----------
                                                                                         (Unaudited)

<S>                                                                              <C>                <C>
    Preferred stock, $0.001 par value, 1,000,000,000 shares authorized.*
       (The "Actual" column reflects the Fund's outstanding capitalization
       as of February 14, 2003; the "As Adjusted" column assumes the
       issuance of an additional 1,000,000 shares of Series B Preferred,
       liquidation preference $25 per share, and 1,000 shares of Series C
       Auction Rate Preferred, liquidation preference $25,000 per share)        $             0    $      50,000,000
    Common stock, $.001 par value per share; 1,000,000,000 shares
       authorized*, 11,113,431 shares outstanding.................                       11,113               11,113
    Paid-in surplus**.............................................                  104,240,469          102,740,469
    Undistributed net investment income...........................                      171,637              171,637
    Accumulated net realized loss from investment
       transactions...............................................                  (1,280,802)           (1,280,802)
    Net unrealized depreciation...................................                  (6,743,474)           (6,743,474)
                                                                                _______________     _________________
    Net assets applicable to common shareholders..................                  $96,398,943          $94,898,943
                                                                                _______________     _________________
    Net assets, plus liquidation preference of preferred stock....                  $96,398,943         $144,898,943
                                                                                ===============     =================

</TABLE>
______________

*     The total number of shares of capital stock of all classes authorized.
      The Board of Directors is authorized to classify or reclassify these one
      billion shares.

**    As adjusted paid-in surplus reflects a reduction for the sales load and
      estimated offering cost of the Series B Preferred and/or Series C
      Auction Rate Preferred issuance of $1,500,000.


      As used in this prospectus, unless otherwise noted, the Fund's "managed
assets" include the aggregate net asset value of the common shares plus assets
attributable to outstanding shares of its preferred stock, with no deduction
for the liquidation preference of such shares of preferred stock. For
financial reporting purposes, however, the Fund is required to deduct the
liquidation preference of its outstanding preferred stock from "managed
assets," so long as the preferred stock has redemption features that are not
solely within the control of the Fund. For all regulatory purposes, the Fund's
preferred stock will be treated as stock (rather than as indebtedness).


                 INVESTMENT OBJECTIVE AND POLICIES

      The investment objective of the Fund is to seek a high level of total
return on its assets. The Fund seeks to achieve its investment objective
through a combination of current income and capital appreciation. There is no
assurance that this objective will be achieved. It is, however, a fundamental
policy of the Fund and cannot be changed without stockholder approval. Under
normal circumstances the Fund will invest at least 80% of the value of its
total assets (taken at current value) in "convertible securities," i.e.,
securities (bonds, debentures, notes, stocks and other similar securities)
that are convertible into common stock or other equity securities, and "income
securities," i.e., nonconvertible debt or equity securities having a history
of regular payments or accrual of income to holders. Securities received upon
conversion of a convertible security will not be included in the calculation
of the percentage of Fund assets invested in convertible securities but may be
retained in the Fund's portfolio to permit orderly disposition or to establish
long-term holding periods for federal income tax purposes. The Fund expects to
continue its practice of focusing on convertible securities to the extent
attractive opportunities are available.

      The Fund may invest up to 20% of its total assets (taken at current
value and subject to any restrictions appearing elsewhere in this Registration
Statement) in any combination and quantity of securities that do not generate
any income, such as common stocks that do not pay dividends. In selecting any
of the foregoing securities for investment, the factors that will be
considered by the Investment Adviser include the Investment Adviser's
evaluation of the underlying value of the assets and business of the issuers
of the securities, the potential for capital appreciation, the price of the
securities, the issuer's balance sheet characteristics and the perceived
skills and integrity of the issuer's management.

      During periods when it is deemed necessary for temporary defensive
purposes, the Fund may invest without limit in high quality money market
instruments, including commercial paper of domestic and foreign corporations,
certificates of deposit, bankers' acceptances and other obligations of
domestic and foreign banks and obligations issued or guaranteed by the United
States government, its instrumentalities or agencies and, subject to
statutory limitations, unaffiliated money market mutual funds, unless an
exemptive order permits the Fund to invest in affiliated money market funds.
The yield on these securities will, as a general matter, tend to be lower than
the yield on other securities to be purchased by the Fund. See " -- Investment
Practices -- Temporary Defensive Investments."

Investment Methodology of the Fund

      In selecting securities for the Fund, the Investment Adviser normally
will consider the following factors, among others:

      o    the Investment Adviser's own evaluations of the private market
           value, cash flow, earnings per share and other fundamental aspects
           of the underlying assets and business of the company;

      o    the interest or dividend income generated by the securities;

      o    the potential for capital appreciation of the securities and any
           underlying common stocks;

      o    the prices of the securities relative to any underlying common
           stock;

      o    the prices of the securities relative to other comparable
           securities;

      o    whether the securities are entitled to the benefits of sinking
           funds or other protective conditions or covenants;

      o    the existence of any anti-dilution protections or guarantees of the
           security; and

      o    the diversification of the Fund's portfolio as to issuers.

      The Investment Adviser's investment philosophy with respect to debt and
equity securities seeks to identify assets that are selling in the public
market at a discount to their private market value. The Investment Adviser
defines private market value as the value informed purchasers are willing to
pay to acquire assets with similar characteristics. The Investment Adviser
also normally evaluates the issuers' free cash flow and long-term earnings
trends. Finally, the Investment Adviser looks for a catalyst, something
indigenous to the company, its industry or country that will surface
additional value.

Investment Practices

      Convertible Securities. A convertible security is a bond, debenture,
note, stock or other similar security that may be converted into or exchanged
for a prescribed amount of common stock or other equity security of the same
or a different issuer within a particular period of time at a specified price
or formula. Before conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they ordinarily provide a
stream of income with generally higher yields than those of common stock of
the same or similar issuers. Convertible securities are senior in rank to
common stock in a corporation's capital structure and, therefore, generally
entail less risk than the corporation's common stock, although the extent to
which such risk is reduced depends in large measure upon the degree to which
the convertible security sells above its value as a fixed income security.

      The Fund believes that the characteristics of convertible securities
make them appropriate investments for an investment company seeking a high
level of total return on its assets. These characteristics include the
potential for capital appreciation if the value of the underlying common stock
increases, the relatively high yield received from dividend or interest
payments as compared to common stock dividends and decreased risks of decline
in value, relative to the underlying common stock due to their fixed income
nature. As a result of the conversion feature, however, the interest rate or
dividend preference on a convertible security is generally less than would be
the case if the securities were not convertible. During periods of rising
interest rates, it is possible that the potential for capital gain on a
convertible security may be less than that of a common stock equivalent if the
yield on the convertible security is at a level that causes it to sell at a
discount.

      Every convertible security may be valued, on a theoretical basis, as if
it did not have a conversion privilege. This theoretical value is determined
by the yield it provides in comparison with the yields of other securities of
comparable character and quality that do not have a conversion privilege. This
theoretical value, which may change with prevailing interest rates, the credit
rating of the issuer and other pertinent factors, often referred to as the
"investment value," represents the security's theoretical price support level.

      "Conversion value" is the amount a convertible security would be worth
in market value if it were to be exchanged for the underlying equity security
pursuant to its conversion privilege. Conversion value fluctuates directly
with the price of the underlying equity security, usually common stock. If,
because of low prices for the common stock, the conversion value is
substantially below the investment value, the price of the convertible
security is governed principally by the factors described in the preceding
paragraph. If the conversion value rises near or above its investment value,
the price of the convertible security generally will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege. Accordingly, the conversion
value of a convertible security is subject to equity risk, that is, the risk
that the price of an equity security will fall due to general market and
economic conditions, perceptions regarding the industry in which the issuer
participates or the issuing company's particular circumstances. If the
appreciation potential of a convertible security is not realized, its
conversion value premium may not be recovered.

      In its selection of convertible securities for the Fund, the Investment
Adviser will not emphasize either investment value or conversion value, but
will consider both in light of the Fund's overall investment objective. See
"Convertible Securities" in the Statement of Additional Information. The Fund
may convert a convertible security that it holds:

      o    when necessary to permit orderly disposition of the investment when
           a convertible security approaches maturity or has been called for
           redemption;

      o    to facilitate a sale of the position;

      o    if the dividend rate on the underlying common stock increases above
           the yield on the convertible security; or

      o    whenever the Investment Adviser believes it is otherwise in the
           best interests of the Fund.

      Convertible securities are generally not investment grade, that is, not
rated within the four highest categories by S&P and Moody's. To the extent
that such convertible securities and other nonconvertible debt securities,
which are acquired by the Fund consistent with the factors considered by the
Investment Adviser as described in this prospectus, are rated lower than
investment grade or are not rated, there would be a greater risk as to the
timely repayment of the principal of, and timely payment of interest or
dividends on, those securities. It is expected that not more than 50% of the
Fund's portfolio will consist of securities rated CCC or lower by S&P or Caa
or lower by Moody's or, if unrated, are of comparable quality as determined by
the Investment Adviser. Those securities and securities rated BB or lower by
S&P or Ba or lower by Moody's are often referred to in the financial press as
"junk bonds" and may include securities of issuers in default. "Junk bonds"
are considered by the rating agencies to be predominantly speculative and may
involve major risk exposure to adverse conditions. See "Risk Factors and
Special Considerations -- Asset Class Risks." Securities rated BBB by S&P or
Baa by Moody's, in the opinion of the rating agencies, also have speculative
characteristics. Securities need not meet a minimum rating standard in order
to be acceptable for investment by the Fund. See "Appendix A -- Description of
Corporate Bond Ratings."

      The Fund's investments in securities of issuers in default will be
limited to not more than 5% of the total assets of the Fund. Further, the Fund
will invest in securities of issuers in default only when the Investment
Adviser believes that such issuers will emerge from bankruptcy and the value
of such securities will appreciate. By investing in securities of issuers in
default the Fund bears the risk that such issuers will not emerge from
bankruptcy or that the value of such securities will not appreciate.

      The Fund has no independent limit on the amount of its net assets it may
invest in unregistered and otherwise illiquid securities and other
investments. The current intention of the Investment Adviser is not to invest
in excess of 15% of the Fund's net assets in illiquid convertible securities
or income securities. Common stockholders will be notified if the Investment
Adviser changes its intention. Investments in unregistered or otherwise
illiquid securities entail certain risks related to the fact that they cannot
be sold publicly in the United States without registration under the
Securities Act. See "Risk Factors and Special Considerations -- Asset Class
Risks."

       Income Securities. Although it is the Fund's policy to invest in
convertible securities to the extent attractive opportunities are available,
the Fund may also invest in income securities other than convertible
securities that are expected to periodically accrue or generate income for
their holders. Such income securities, which as of the date of this Prospectus
constitute approximately 35% of the Fund's portfolio, include (i) fixed income
securities such as bonds, debentures, notes, stock, short-term discounted
Treasury Bills or certain securities of the U.S. government sponsored
instrumentalities, as well as money market mutual funds that invest in those
securities, which, in the absence of an applicable exemptive order, will not
be affiliated with the Investment Adviser, and (ii) common stocks of issuers
that have historically paid periodic dividends. Fixed income securities
obligate the issuer to pay to the holder of the security a specified return,
which may be either fixed or reset periodically in accordance with the terms
of the security. Fixed income securities generally are senior to an issuer's
common stock and their holders generally are entitled to receive amounts due
before any distributions are made to common stockholders. Common stocks, on
the other hand, generally do not obligate an issuer to make periodic
distributions to holders.

      The market value of fixed income securities, especially those that
provide a fixed rate of return, may be expected to rise and fall inversely
with interest rates and in general is affected by the credit rating of the
issuer, the issuer's performance and perceptions of the issuer in the market
place. The market value of callable or redeemable fixed income securities may
also be affected by the issuer's call and redemption rights. In addition, it
is possible that the issuer of fixed income securities may not be able to meet
its interest or principal obligations to holders. Further, holders of
non-convertible fixed income securities do not participate in any capital
appreciation of the issuer.

      The Fund may also invest in obligations of government sponsored
instrumentalities. Unlike non-U.S. government securities, obligations of
certain agencies and instrumentalities of the U.S. government, such as the
Government National Mortgage Association, are supported by the "full faith and
credit" of the U.S. government; others, such as those of the Export-Import
Bank of the U.S., are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; and still others, such as
those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
government would provide financial support to U.S. government sponsored
instrumentalities if it is not obligated to do so by law.

      The Fund also may invest in common stock of issuers that have
historically paid periodic dividends or otherwise made distributions to common
stockholders. Unlike fixed income securities, dividend payments generally are
not guaranteed and so may be discontinued by the issuer at its discretion or
because of the issuer's inability to satisfy its liabilities. Further, an
issuer's history of paying dividends does not guarantee that it will continue
to pay dividends in the future. In addition to dividends, under certain
circumstances the holders of common stock may benefit from the capital
appreciation of the issuer.

      Special Investment Methods.

      Options. On behalf of the Fund, the Investment Adviser may, subject to
guidelines of the Board of Directors, purchase or sell (i.e., write) options
on securities, securities indices and foreign currencies that are listed on a
national securities exchange or in the U.S. over-the-counter ("OTC") markets
as a means of achieving additional return or of hedging the value of the
Fund's portfolio. The Fund may write covered call options on common stock that
it owns or has an immediate right to acquire through conversion or exchange of
other securities in an amount not to exceed 25% of total assets or invest up
to 10% of its total assets in the purchase of put options on common stocks
that the Fund owns or may acquire through the conversion or exchange of other
securities that it owns. The Fund may not write covered call options in an
amount exceeding 25% of the value of its total assets. The Fund's investment
in OTC options is limited to 5% of its total assets.

      A call option is a contract that gives the holder of the option the
right, in return for a premium paid, to buy from the writer (seller) of the
call option the security underlying the option at a specified exercise price
at any time during the term of the option. The writer of the call option has
the obligation upon exercise of the option to deliver the underlying security
upon payment of the exercise price during the option period.

      A put option is a contract that gives the holder of the option the
right, in return for the premium paid, to sell to the writer (seller) of the
put option the underlying security at a specified price during the term of the
option. The writer of the put, who receives the premium, has the obligation to
buy the underlying security upon exercise, at the exercise price during the
option period.

      If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing
an option of the same series as the option previously written. There can be no
assurance that a closing purchase transaction can be effected when the Fund so
desires.

      An exchange traded option may be closed out only on an exchange that
provides a secondary market for an option of the same series. Although the
Fund will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option.

      The Fund will not purchase options if, as a result, the aggregate cost
of all outstanding options exceeds 10% of the Fund's total assets. See
"Investment Practices -- Derivative Instruments" in the SAI.

      Futures Contracts and Options Thereon. On behalf of the Fund, the
Investment Adviser may, subject to guidelines of the Board of Directors,
purchase and sell financial futures contracts and options thereon which are
traded on a commodities exchange or board of trade for certain hedging, yield
enhancement and risk management purposes, in accordance with regulations of
the Commodity Futures Trading Commission ("CFTC"). These futures contracts and
related options may be on debt securities, financial indices, securities
indices, U.S. government securities and foreign currencies. A financial
futures contract is an agreement to purchase or sell an agreed amount of
securities or currencies at a set price for delivery in the future.

      Under the CFTC regulations, the Investment Adviser on behalf of the Fund
(i) may purchase and sell futures contracts and options thereon for bona fide
hedging purposes, as defined under CFTC regulations, without regard to the
percentage of the Fund's assets committed to margin and option premiums, and
(ii) may enter into non-hedging transactions, provided that, immediately
thereafter, the sum of the amount of the initial margin deposits on the Fund's
existing futures positions and option premiums does not exceed 5% of the
market value of the Fund's total assets.

      Forward Currency Exchange Contracts. Subject to guidelines of the Board
of Directors, the Fund may enter into forward foreign currency exchange
contracts to protect the value of its portfolio against future changes in the
level of currency exchange rates. The Fund may enter into such contracts on a
spot, i.e., cash, basis at the rate then prevailing in the currency exchange
market or on a forward basis, by entering into a forward contract to purchase
or sell currency. A forward contract on foreign currency is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days agreed upon by the parties from the date of the contract at a
price set on the date of the contract. The Fund's dealings in forward
contracts will be limited to hedging involving either specific transactions or
portfolio positions, and the amount the Fund may invest in forward currency
contracts is limited to the amount of its aggregate investments in foreign
currencies. The Fund will only enter into forward currency contracts with
parties that it believes to be creditworthy.

      Short Sales Against the Box. The Fund may from time to time make short
sales of securities it owns or has the right to acquire through conversion or
exchange of other securities it owns. A short sale is "against the box" to the
extent that the Fund contemporaneously owns or has the right to obtain at no
added cost securities identical to those sold short. In a short sale, the Fund
does not immediately deliver the securities sold or receive the proceeds from
the sale. The Fund may not make short sales or maintain a short position if it
would cause more than 25% of the Fund's total assets, taken at market value,
to be held as collateral for such sales.

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

      The Fund may make a short sale in order to hedge against market risks
when it believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund or a security convertible into,
or exchangeable for, such security, or when the Fund does not want to sell the
security it owns. Such short sale transactions may be subject to special tax
rules, one of the effects of which may be to accelerate income to the Fund.
Additionally, the Fund may use short sales in conjunction with the purchase
of a convertible security when it is determined that a convertible security
can be bought at a small conversion premium and has a yield advantage relative
to the underlying common stock sold short.

      Repurchase Agreements. The Fund may enter into repurchase agreements
with primary government securities dealers recognized by the Federal Reserve
Bank of New York and member banks of the Federal Reserve System that furnish
collateral at least equal in value or market price to the amount of their
repurchase obligation. In a repurchase agreement, the Fund purchases a debt
security from a seller that undertakes to repurchase the security at a
specified resale price on an agreed future date. Repurchase agreements are
generally for one business day but may have a duration of up to a week.
Repurchase agreements may be seen to be loans by the Fund collateralized by
the underlying debt obligation. This arrangement results in a fixed rate of
return that is not subject to market fluctuations during the holding period.
The value of the underlying securities will be at least equal to all times to
the total amount of the repurchase obligation, including interest. The Fund
bears a risk of loss in the event that the other party to a repurchase
agreement defaults on its obligations and the Fund is delayed in or prevented
from exercising its rights to dispose of the collateral securities, including
the risk of a possible decline in the value of the underlying securities
during the period in which it seeks to assert these rights. In the event of a
default or bankruptcy by a seller, the Fund will promptly seek to liquidate
the collateral. The Board of Directors will monitor the creditworthiness of
the contra party to the repurchase agreements.

      If the financial institution that is a party to the repurchase agreement
petitions for bankruptcy or becomes subject to the United States Bankruptcy
Code, the law regarding the rights of the Fund is unsettled. As a result,
under extreme circumstances, there may be a restriction on the Fund's ability
to sell the collateral and the Fund would suffer a loss.

      Loans of Portfolio Securities. To increase income, the Fund may lend its
portfolio securities to securities broker-dealers or financial institutions if
(i) the loan is collateralized in accordance with applicable regulatory
requirements and (ii) no loan will cause the value of all loaned securities to
exceed 33% of the value of the Fund's total assets.

      If the borrower fails to maintain the requisite amount of collateral,
the loan automatically terminates and the Fund could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over the value of the collateral. As with any extension of
credit, there are risks of delay in recovery and in some cases even loss of
rights in collateral should the borrower of the securities fail financially.
While these loans of portfolio securities will be made in accordance with
guidelines approved by the Board of Directors, there can be no assurance that
borrowers will not fail financially. On termination of the loan, the borrower
is required to return the securities to the Fund, and any gain or loss in the
market price during the loan would inure to the Fund. If the other party to
the loan petitions for bankruptcy or becomes subject to the United States
Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a
result, under extreme circumstances, there may be a restriction on the Fund's
ability to sell the collateral and the Fund would suffer a loss. See "Special
Investment Methods -- Loans of Portfolio Securities" in the SAI.

      Leverage. As provided in the 1940 Act and subject to compliance with the
Fund's investment objective, policies and restrictions, the Fund is permitted
to issue additional preferred stock or debt so long as the Fund's total assets
immediately after such issuance, less certain ordinary course liabilities,
exceed 300% of the amount of the debt outstanding and exceed 200% of the sum
of the amount of preferred stock and debt outstanding. Such debt or preferred
stock may be convertible in accordance with SEC staff guidelines that may
permit the Fund to obtain leverage at attractive rates. The Fund currently has
authorized the issuance of 2,000,000 shares of preferred stock. The Fund
redeemed all of its outstanding preferred stock on February 11, 2003, and
currently has no shares of preferred stock outstanding. The Fund does not
currently intend to offer shares of preferred stock or senior securities
representing indebtedness in addition to the Series B Preferred and/or Series
C Auction Rate Preferred described by this prospectus. However, the Fund will
consider from time to time whether to do so and may issue additional such
securities were the Board of Directors to conclude that such an offering would
be consistent with the Fund's Charter and applicable law, and in the best
interest of existing common stockholders.

      Corporate Reorganizations. The Fund may invest without limit in
securities of companies for which a tender or exchange offer has been made or
announced and in securities of companies for which a merger, consolidation,
liquidation or similar reorganization proposal has been announced if, in the
judgment of the Investment Adviser, there is a reasonable prospect of capital
appreciation significantly greater than the added portfolio turnover expenses
inherent in the short term nature of such transactions. The principal risk is
that such offers or proposals may not be consummated within the time and under
the terms contemplated at the time of the investment, in which case, unless
such offers or proposals are replaced by equivalent or increased offers or
proposals that are consummated, the Fund may sustain a loss.

      Warrants and Rights. The Fund may invest without limit in warrants or
rights (other than those acquired in units or attached to other securities)
that entitle the holder to buy equity securities at a specific price for a
specific period of time but will do so only if such equity securities are
deemed appropriate by the Investment Adviser for inclusion in the Fund's
portfolio.

      Other Investment Companies. The Fund may invest up to 5% of its total
assets in no more than 3% of the securities of any one investment company
including small business investment companies and may invest up to 10% of its
total assets in the securities of other investment companies in the aggregate.
The purchase of securities in investment companies will result indirectly in
the payment of duplicative management fees by the Fund. The Fund will not
purchase the securities of affiliated investment companies.

      Foreign Securities. The Fund may invest up to 25% of its total assets in
securities of foreign issuers, which are generally denominated in foreign
currencies. See "Risk Factors and Other Considerations -- Foreign
Securities."

      The Fund may purchase sponsored American Depository Receipts ("ADRs") or
U.S. denominated securities of foreign issuers, which will not be included in
this foreign securities limitation. ADRs are receipts issued by United States
banks or trust companies in respect of securities of foreign issuers held on
deposit for use in the United States securities markets.

      When Issued, Delayed Delivery Securities and Forward Commitments. The
Fund may enter into forward commitments for the purchase of securities. Such
transactions may include purchases on a "when issued" or "delayed delivery"
basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a
merger, corporate reorganization or debt restructuring, i.e., a when, as and
if issued security. When such transactions are negotiated, the price is fixed
at the time of the commitment, with payment and delivery taking place in the
future, generally a month or more after the date of the commitment. While the
Fund will only enter into a forward commitment with the intention of actually
acquiring the security, the Fund may sell the security before the settlement
date if it is deemed advisable.

      Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will maintain a segregated account of cash or liquid
high-grade debt securities with the Fund's custodian in an aggregate amount at
least equal to the amount of its forward commitments as long as the obligation
to purchase continues.

      Temporary Defensive Investments. During temporary defensive periods and
during periods when the Fund's normal asset allocation is not optimal, the
Fund may invest more heavily in securities of U.S. government sponsored
instrumentalities and in money market mutual funds that invest in those
securities, which, in the absence of an exemptive order, are not affiliated
with the Investment Adviser. Obligations of certain agencies and
instrumentalities of the U.S. government, such as the Government National
Mortgage Association, are supported by the "full faith and credit" of the U.S.
government; others, such as those of the Export-Import Bank of the U.S., are
supported by the right of the issuer to borrow from the U.S. Treasury; others,
such as those of the Federal National Mortgage Association, are supported by
the discretionary authority of the U.S. government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. government would provide financial
support to U.S. government sponsored instrumentalities if it is not obligated
to do so by law. During temporary defensive periods, the Fund may be less
likely to achieve its investment objective.

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

      Investment Restrictions. The Fund has adopted certain investment
restrictions as fundamental policies of the Fund. Under the 1940 Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the 1940 Act. The
Fund's investment restrictions are more fully discussed under "Investment
Restrictions" in the SAI.

      Portfolio Turnover. The Fund will buy and sell securities to accomplish
its investment objective. The investment policies of the Fund may lead to
frequent changes in investments, particularly in periods of rapidly
fluctuating interest or currency exchange rates. The portfolio turnover may be
higher than that of other investment companies.

      Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in other securities. The
portfolio turnover rate is computed by dividing the lesser of the amount of
the securities purchased or securities sold by the average monthly value of
securities owned during the year (excluding securities whose maturities at
acquisition were one year or less).


              RISK FACTORS AND SPECIAL CONSIDERATIONS

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

Preferred Stock

      General. There are a number of risks associated with an investment in
the Series B Preferred or Series C Auction Rate Preferred. The market value
for the Series B Preferred and/or Series C Auction Rate Preferred will be
influenced by changes in interest rates, the perceived credit quality of the
Series B Preferred or Series C Auction Rate Preferred and other factors. The
Series B Preferred and/or Series C Auction Rate Preferred are subject to
redemption under specified circumstances and investors may not be able to
reinvest the proceeds of any such redemption in an investment providing the
same or a better rate than that of the Series B Preferred or Series C Auction
Rate Preferred. Subject to such circumstances, the Series B Preferred and/or
Series C Auction Rate Preferred are perpetual.

      The credit rating on the Series B Preferred or Series C Auction Rate
Preferred could be reduced or withdrawn while an investor holds shares, and
the credit rating does not eliminate or mitigate the risks of investing in the
Series B Preferred or Series C Auction Rate Preferred. A reduction or
withdrawal of the credit rating would likely have an adverse effect on the
market value of the Series B Preferred or Series C Auction Rate Preferred.

      The Series B Preferred and the Series C Auction Rate Preferred are not
obligations of the Fund. The Series B Preferred and/or Series C Auction Rate
Preferred would be junior in respect of dividends and liquidation preference
to any indebtedness incurred by the Fund. Although unlikely, precipitous
declines in the value of the Fund's assets could result in the Fund having
insufficient assets to redeem all of the Series B Preferred and/or Series C
Auction Rate Preferred for the full redemption price. In addition, the Fund
has adopted a policy (which it may modify) of distributing 8% of average
quarter-end net assets attributable to common stock. In the event investment
returns do not provide sufficient amounts to fund such distributions, the Fund
may be required to return capital as part of such distributions, which may
have the effect of decreasing the asset coverage per share with respect to the
Fund's outstanding Series B Preferred and Series C Auction Rate Preferred. For
the year ending December 31, 2002, 64% of the distributions paid by the Fund
with respect to its common stock constituted a return of capital.

      Leverage Risk. The Fund uses financial leverage for investment purposes
by issuing preferred stock. It is currently anticipated that, taking into
account the Series B Preferred and/or Series C Auction Rate Preferred being
offered in this prospectus, the amount of leverage will represent
approximately 35% of the Fund's managed assets (as defined below). The Fund's
leveraged capital structure creates special risks not associated with
unleveraged funds having similar investment objective and policies. These
include the possibility of greater loss and the likelihood of higher
volatility of the net asset value of the Fund and the Series B Preferred
and/or Series C Auction Rate Preferred's asset coverage.

      Because the fee paid to the Investment Adviser will be calculated on the
basis of the Fund's managed assets (which equal the aggregate net asset value
of the common shares plus assets attributable to outstanding shares of its
preferred stock, with no deduction for the liquidation preference of such
shares of preferred stock), when the Fund's total return at least equals the
dividend rate on the preferred stock (rather than only on the basis of net
assets attributable to the common stock) the fee may be higher when leverage
is utilized, giving the Investment Adviser an incentive to utilize leverage.

      Restrictions on Dividends and Other Distributions. Restrictions imposed
on the declaration and payment of dividends or other distributions to the
holders of the Fund's common stock and preferred stock, both by the 1940 Act
and by requirements imposed by rating agencies, might impair the Fund's
ability to maintain its qualification as a regulated investment company for
federal income tax purposes. While the Fund intends to redeem its preferred
stock (including the Series B Preferred and/or Series C Auction Rate
Preferred) to the extent necessary to enable the Fund to distribute its income
as required to maintain its qualification as a regulated investment company
under the Code, there can be no assurance that such actions can be effected in
time to meet the Code requirements. See "Taxation" in the SAI.

      Ratings and Asset Coverage Risk. While it is a condition to the closing
of the offering that Moody's assigns a rating of Aaa to the Series B Preferred
and/or Series C Auction Rate Preferred and that Fitch assigns a rating of AAA
to the Series C Auction Rate Preferred, the ratings do not eliminate or
necessarily mitigate the risks of investing in Series B Preferred or Series C
Auction Rate Preferred. The credit rating on the Series B Preferred or Series
C Auction Rate Preferred could be reduced or withdrawn while an investor holds
shares, which would likely have an adverse effect on the market value of the
Series B Preferred or Series C Auction Rate Preferred. A reduction or
withdrawal of the credit ratings on the Series C Auction Rate Preferred may
also make your Series C Auction Rate Preferred shares less liquid at an
auction or in the secondary market.

      In addition, if a rating agency rating the Series C Auction Rate
Preferred at the Fund's request downgrades the Series C Auction Rate
Preferred, the maximum rate on the Series C Auction Rate Preferred will
increase. See "Description of the Series B Preferred and Series C Auction Rate
Preferred -- Rating Agency Guidelines" for a description of the asset
maintenance tests the Fund must meet. In addition, should the rating on the
Fund's preferred stock be lowered or withdrawn by the relevant rating agency,
the Fund may also be required to redeem all or part of its outstanding
preferred stock.

Special Risks of the Series B Preferred

      Illiquidity Prior to Exchange Listing. Prior to the offering, there has
been no public market for the Series B Preferred. In the event the Series B
Preferred are issued, prior application will have been made to list the Series
B Preferred on the New York Stock Exchange. However, during an initial period,
which is not expected to exceed 30 days after the date of its initial
issuance, the Series B Preferred will not be listed on any securities
exchange. During such period, the underwriters intend to make a market in the
Series B Preferred, though, they have no obligation to do so. Consequently, an
investment in the Series B Preferred may be illiquid during such period.

Special Risks of the Series C Auction Rate Preferred

      Interest Rate Risk. In connection with the sale of the Series C Auction
Rate Preferred, the Fund may enter into interest rate swap or cap transactions
in order to reduce the impact of changes in the dividend rate of the Series C
Auction Rate Preferred or obtain the equivalent of a fixed rate for the Series
C Auction Rate Preferred that is lower than the Fund would have to pay if it
issued fixed rate preferred shares. The use of interest rate swaps and caps is
a highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio security transactions.
See "How the Fund Manages Risk -- Interest Rate Transactions."

      Auction Risk. You may not be able to sell your Series C Auction Rate
Preferred at an auction if the auction fails, i.e., if there is more Series C
Auction Rate Preferred offered for sale than there are buyers for those
shares. Also, if you place orders (place a hold order) at an auction to retain
Series C Auction Rate Preferred only at a specified rate that exceeds the rate
set at the auction, you will not retain your Series C Auction Rate Preferred.
Additionally, if you place a hold order without specifying a rate below which
you would not wish to continue to hold your shares and the auction sets a
below-market rate, you will receive a lower rate of return on your shares than
the market rate. Finally, the dividend period may be changed, subject to
certain conditions and with notice to the holders of the Series C Auction Rate
Preferred, which could also affect the liquidity of your investment. See
"Description of the Series B Preferred and Series C Auction Rate Preferred"
and "The Auction of Series C Auction Rate Preferred."

      Secondary Market Risk. If you try to sell your Series C Auction Rate
Preferred between auctions, you may not be able to sell them for $25,000 per
share or $25,000 per share plus accumulated dividends. If the Fund has
designated a special dividend period of more than seven days, changes in
interest rates could affect the price you would receive if you sold your
shares in the secondary market. Broker-dealers that maintain a secondary
trading market for the Series C Auction Rate Preferred are not required to
maintain this market, and the Fund is not required to redeem Series C Auction
Rate Preferred if either an auction or an attempted secondary market sale
fails because of a lack of buyers. The Series C Auction Rate Preferred is not
registered on a stock exchange or the NASDAQ stock market. If you sell your
Series C Auction Rate Preferred to a broker-dealer between auctions, you may
receive less than the price you paid for them, especially when market interest
rates have risen since the last auction or during a special dividend period.

Asset Class Risks

      Credit Risk for Convertible Securities and Fixed Income Securities. Many
convertible securities are not investment grade, that is, not rated within the
four highest categories by S&P and Moody's. To the extent that the Fund's
convertible securities and any other fixed income securities are rated lower
than investment grade or are not rated, there would be a greater risk as to
the timely repayment of the principal of, and timely payment of interest or
dividends on, those securities. It is expected that not more than 50% of the
Fund's portfolio will consist of securities rated CCC or lower by S&P or Caa
or lower by Moody's or, if unrated, are of comparable quality as determined by
the Investment Adviser.

      Securities rated BB or lower by S&P or Ba or lower by Moody's are often
referred to in the financial press as "junk bonds" and may include securities
of issuers in default. "Junk bonds" are considered by the rating agencies to
be predominantly speculative and may involve major risk exposures such as:

      o    greater volatility and credit risk;

      o    vulnerability to economic downturns and changes in interest rates;

      o    sensitivity to adverse economic changes and corporate developments;

      o    additional expenses to pursue recovery from issuers that default;

      o    redemption or call provisions that may be exercised at inopportune
           times;

      o    difficulty in accurately valuing or disposing of such securities;

      o    subordination to other debt of the issuer; and

      o    junk bonds are generally unsecured.

Convertible securities and other income securities need not meet a minimum
rating standard in order to be acceptable for investment by the Fund. See
"Appendix A -- Description of Corporate Bond Ratings."

      In addition, securities ratings are relative and subjective and not
absolute standards of quality. They are based largely on an issuer's
historical financial condition and the rating agency's analysis at the time of
the rating. Consequently, the rating assigned to any particular security is
not necessarily a reflection of the issuer's current financial condition.

      Dilution Risk for Convertible Securities. In the absence of adequate
anti-dilution provisions in a convertible security, dilution in the value of
the Fund's holding may occur in the event the underlying stock is subdivided,
additional equity securities are issued for below market value, a stock
dividend is declared, or the issuer enters into another type of corporate
transaction that has a similar effect.

      Illiquid Securities. The Fund has no limit on the amount of its net
assets it may invest in unregistered and otherwise illiquid investments.
Unregistered securities are securities that cannot be sold publicly in the
United States without registration under the Securities Act. Unregistered
securities generally can be resold only in privately negotiated transactions
with a limited number of purchasers or in a public offering registered under
the Securities Act. Considerable delay could be encountered in either event
and, unless otherwise contractually provided for, the Fund's proceeds upon
sale may be reduced by the costs of registration or underwriting discounts.
The difficulties and delays associated with such transactions could result in
the Fund's inability to realize a favorable price upon disposition of
unregistered securities, and at times might make disposition of such
securities impossible.

      Unregistered convertible securities or the securities obtained upon
conversion normally may be resold publicly under certain volume and other
restrictions beginning one year following the acquisition of the securities
obtained upon conversion and without any restrictions beginning two years
after the acquisition of the securities obtained upon conversion. Unregistered
securities that are freely salable among qualified institutional investors
under special rules adopted by the Securities and Exchange Commission (the
"SEC") may be treated as liquid if they satisfy institutional liquidity
standards established by the Board of Directors. The continued liquidity of
such securities is not as well assured as that of publicly traded securities,
and accordingly, the Board of Directors will monitor their liquidity.

      Interest Rate Risk for Fixed Income Securities. The primary risk
associated with fixed income securities is interest rate risk. A decrease in
interest rates will generally result in an increase in the value of a fixed
income security, while increases in interest rates will generally result in a
decline in its value. This effect is generally more pronounced for fixed rate
securities than for securities whose income rate is periodically reset. Market
interest rates recently have declined significantly below historical average
rates, which may increase the risk that these rates will rise in the future.

      Further, while longer term fixed rate securities may pay higher interest
rates than shorter term securities, longer term fixed rate securities, like
fixed rate securities, also tend to be more sensitive to interest rate changes
and, accordingly, tend to experience larger changes in value as a result of
interest rate changes.

      Distribution Risk for Equity Income Securities. In selecting equity
income securities in which the Fund will invest, the Investment Adviser will
consider the issuer's history of making regular periodic distributions (i.e.,
dividends) to its equity holders. An issuer's history of paying dividends,
however, does not guarantee that the issuer will continue to pay dividends in
the future. The dividend income stream associated with equity income
securities generally is not guaranteed and will be subordinate to payment
obligations of the issuer on its debt and other liabilities. Accordingly, in
the event the issuer does not realize sufficient income in a particular period
both to service its liabilities and to pay dividends on its equity securities,
it may forgo paying dividends on its equity securities. In addition, because
in most instances issuers are not obligated to make periodic distributions to
the holders of their equity securities, such distributions or dividends
generally may be discontinued at the issuer's discretion.

      Equity Risk. The principal risk of investing in equity securities is
equity risk. Equity risk is the risk that the price of an equity security will
fall due to general market and economic conditions, perceptions regarding the
industry in which the issuer participates or the issuing company's particular
circumstances. Common stock in which the Fund will invest or receive upon
conversion of convertible securities is subject to such equity risk. In the
case of convertible securities, it is the conversion value of a convertible
security that is subject to the equity risk; that is, if the appreciation
potential of a convert ible security is not realized, the premium paid for its
conversion value may not be recovered. See "Investment Objective and Policies
- -- Investment Practices -- Convertible Securities."

      Ratings Risk. The rating received by the Fund on its outstanding
preferred stock, or on any other senior security that it may issue, is an
assessment by the applicable rating agency of the capacity of the Fund to
satisfy its obligations on its outstanding senior securities. However, an AAA,
Aaa or similar rating on the Fund's outstanding preferred stock does not
eliminate or mitigate the risks associated with investing in the Fund's
preferred or common stock. In addition, should the rating on the Fund's
preferred stock be lowered or withdrawn by the relevant rating agency, the
Fund may also be required to redeem all or part of its outstanding preferred
stock. If the Fund were required to redeem its outstanding preferred stock (in
whole or part) as a result of the change in or withdrawal of the rating, the
common stock of the Fund will lose the benefits associated with a leveraged
capital structure.

      Prepayment Risks on Government Sponsored Mortgage-Backed Securities. The
yield and maturity characteristics of government sponsored mortgage-backed
securities differ from traditional debt securities. A major difference is that
the principal amount of the obligations may generally be prepaid at any time
because the underlying assets (i.e., loans) generally may be prepaid at any
time. Prepayment risks include the following:

      o    the relationship between prepayments and interest rates may give
           some lower grade government sponsored mortgage-backed securities
           less potential for growth in value than conventional bonds with
           comparable maturities;

      o    in addition, when interest rates fall, the rate of prepayments
           tends to increase. During such periods, the reinvestment of
           prepayment proceeds by the Fund will generally be at lower rates
           than the rates that were carried by the obligations that have been
           prepaid;

      o    because of these and other reasons, a government sponsored
           mortgage-backed security's total return and maturity may be
           difficult to predict; and

      o    to the extent that the Fund purchases government sponsored
           mortgage-backed securities at a premium, prepayments may result in
           loss of the Fund's principal investment to the extent of premium
           paid.

Long-term Objective

      The Fund is intended for investors seeking a high level of total return
over the long-term. The Fund is not meant to provide a vehicle for those who
wish to play short-term swings in the stock market. An investment in shares of
the Fund should not be considered a complete investment program. Each
shareholder should take into account the Fund's investment objective as well
as the shareholder's other investments when considering an investment in the
Fund.

Market Value and Net Asset Value

      The Fund is a diversified, closed-end management investment company.
Shares of closed-end funds are bought and sold in the securities markets and
may trade at either a premium or discount from net asset value. Listed shares
of closed-end investment companies frequently trade at a discount from net
asset value. This characteristic of stock of a closed-end fund is a risk
separate and distinct from the risk that the Fund's net asset value will
decrease. The Fund cannot predict whether its listed stock will trade at,
below or above net asset value. Stockholders desiring liquidity may, subject
to applicable securities laws, trade their stock in the Fund on the New York
Stock Exchange or other markets on which such stock may trade at the then
current market value, which may differ from the then current net asset value.
Stockholders will incur brokerage or other transaction costs to sell stock.

Foreign Securities

      Investments in the securities of foreign issuers involve certain
considerations and risks not ordinarily associated with investments in
securities of domestic issuers. Foreign companies are not generally subject to
uniform accounting, auditing and financial standards and requirements
comparable to those applicable to U.S. companies. Foreign securities
exchanges, brokers and listed companies may be subject to less government
supervision and regulation than exists in the United States. Dividend and
interest income may be subject to withholding and other foreign taxes, which
may adversely affect the net return on such investments. There may be
difficulty in obtaining or enforcing a court judgment abroad. In addition, it
may be difficult to effect repatriation of capital invested in certain
countries. In addition, with respect to certain countries, there are risks of
expropriation, confiscatory taxation, political or social instability or
diplomatic developments that could affect assets of the Fund held in foreign
countries.

      There may be less publicly available information about a foreign company
than a U.S. company. Foreign securities markets may have substantially less
volume than U.S. securities markets and some foreign company securities are
less liquid than securities of otherwise comparable U.S. companies. A
portfolio of foreign securities may also be adversely affected by fluctuations
in the rates of exchange between the currencies of different nations and by
exchange control regulations. Foreign markets also have different clearance
and settlement procedures that could cause the Fund to encounter difficulties
in purchasing and selling securities on such markets and may result in the
Fund missing attractive investment opportunities or experiencing loss. In
addition, a portfolio that includes foreign securities can expect to have a
higher expense ratio because of the increased transaction costs on non-U.S.
securities markets and the increased costs of maintaining the custody of
foreign securities. The Fund may invest up to 25% of its total assets in
securities of foreign issuers.

      The Fund may purchase sponsored American Depository Receipts ("ADRs") or
U.S. denomi nated securities of foreign issuers, which will not be included in
the 25% foreign securities limitation. ADRs are receipts issued by United
States banks or trust companies in respect of securities of foreign issuers
held on deposit for use in the United States securities markets. While ADRs
may not necessarily be denominated in the same currency as the securities into
which they may be converted, many of the risks associated with foreign
securities may also apply to ADRs.

Special Risks of Derivative Transactions

      Participation in the options or futures markets and in currency exchange
transactions involves investment risks and transaction costs to which the Fund
would not be subject absent the use of these strategies. If the Investment
Adviser's prediction of movements in the direction of the securities, foreign
currency and interest rate markets is inaccurate, the consequences to the Fund
may leave the Fund in a worse position than if it had not used such
strategies. Risks inherent in the use of options, foreign currency, futures
contracts and options on futures contracts, securities indices and foreign
currencies include:

      o    dependence on the Investment Adviser's ability to predict correctly
           movements in the direction of interest rates, securities prices and
           currency markets;

      o    imperfect correlation between the price of options and futures
           contracts and options thereon and movements in the prices of the
           securities or currencies being hedged;

      o    the fact that skills needed to use these strategies are different
           from those needed to select portfolio securities;

      o    the possible absence of a liquid secondary market for any
           particular instrument at any time;

      o    the possible need to defer closing out certain hedged positions to
           avoid adverse tax consequences;

      o    the possible inability of the Fund to purchase or sell a security
           at a time that otherwise would be favorable for it to do so, or the
           possible need for the Fund to sell a security at a disadvantageous
           time due to a need for the Fund to maintain "cover" or to segregate
           securities in connection with the hedging techniques; and

      o    the creditworthiness of counterparties.

For a further description, see "Risk Factors and Special Considerations --
Futures Transactions" and "Risk Factors and Special Considerations -- Forward
Currency Exchange Contracts."

Futures Transactions

      Futures and options on futures entail certain risks, including but not
limited to the following:

      o    no assurance that futures contracts or options on futures can be
           offset at favorable prices;

      o    possible reduction of the yield of the Fund due to the use of
           hedging;

      o    possible reduction in value of both the securities hedged and the
           hedging instrument;

      o    possible lack of liquidity due to daily limits or price
           fluctuation;

      o    imperfect correlation between the contracts and the securities
           being hedged; and

      o    losses from investing in futures transactions that are potentially
           unlimited and the segregation requirements for such transactions.

For a further description, see "Investment Objective and Policies --
Investment Practices" in the SAI.

Forward Currency Exchange Contracts

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

Dependence on Key Personnel

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

Current Market Uncertainties

      As a result of the terrorist attacks on the World Trade Center and the
Pentagon on September 11, 2001, some of the U.S. Securities Markets were
closed for a four-day period. These terrorists attacks and related events have
led to increased short-term market volatility and may have long-term effects
on U.S. and world markets. A similar disruption of financial markets could
affect interest rates, securities exchanges, auctions, secondary trading,
ratings, credit risk, inflation and other factors relating to the Series B
Preferred and/or Series C Auction Rate Preferred.


                     HOW THE FUND MANAGES RISK

Investment Limitations

      The Fund has adopted certain investment limitations designed to limit
investment risk and maintain portfolio diversification. These limitations are
fundamental and may not be changed without the approval of the holders of a
majority, as defined in the 1940 Act, of the outstanding shares of common
stock and preferred stock voting together as a single class. The Fund may
become subject to guidelines that are more limiting than the investment
restrictions set forth above in order to obtain and maintain ratings from
Moody's or Fitch on its preferred stock. See "Investment Restrictions" in the
SAI for a complete list of the fundamental and non-fundamental investment
policies of the Fund.

Interest Rate Transactions

      In order to reduce the impact of changes in the dividend rate of the
Series C Auction Rate Preferred or obtain the equivalent of a fixed rate for
the Series C Auction Rate Preferred that is lower than the Fund would have to
pay if it issued fixed rate preferred shares, the Fund may enter into interest
rate swap or cap transactions.

      The use of interest rate swaps and caps 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 to the other party to the interest rate swap (which is
known as the "counterparty") periodically 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 Preferred. In an interest rate cap,
the Fund would pay a premium to the counterparty to the interest rate cap and,
to the extent that a specified variable rate index exceeds a predetermined
fixed rate, would receive from the counterparty payments of the difference
based on the notional amount of such cap. Interest rate swap and cap
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 that point in time, such a default could negatively
affect the Fund's ability to make dividend payments on the Series C Auction
Rate Preferred. In addition, at the time an interest rate swap or cap
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. If
this occurs, it could have a negative impact on the Fund's ability to make
dividend payments on the Series C Auction Rate Preferred. To the extent there
is a decline in interest rates, the value of the interest rate swap or cap
could decline, resulting in a decline in the asset coverage for the Series C
Auction Rate Preferred. A sudden and dramatic decline in interest rates may
result in a significant decline in the asset coverage. Under the Articles
Supplementary, if the Fund fails to maintain the required asset coverage on
the outstanding preferred stock (including the Series C Auction Rate
Preferred) or fails to comply with other covenants, the Fund may be required
to redeem some or all of these shares. The Fund may also choose to redeem some
or all of the Series C Auction Rate Preferred at any time. Such redemption
would likely result in the Fund seeking to terminate early all or a portion of
any swap or cap transaction. Early termination of a swap could result in a
termination payment by the Fund to the counterparty, while early termination
of a cap could result in a termination payment to the Fund.

      The Fund will usually enter into swaps or caps on a net basis; that is,
the two payment streams will be netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or paying,
as the case may be, only the net amount of the two payments. The Fund intends
to maintain in a segregated account with its custodian cash or liquid
securities having a value at least equal to the value of the Fund's net
payment obligations under any swap transaction, marked to market daily. The
Fund does not presently intend to enter into interest rate swap or cap
transactions relating to Series C Auction Rate Preferred in a notional amount
in excess of the outstanding amount of the Series C Auction Rate Preferred.
The Fund will monitor any such swap with a view to ensuring that the Fund
remains in compliance with all applicable regulatory investment policy and tax
requirements.


                      MANAGEMENT OF THE FUND

General

      The Fund's Board of Directors (who, with its officers, are described in
the SAI) has overall responsibility for the management of the Fund. The Board
decides upon matters of general policy and reviews the actions of the
Investment Adviser, Gabelli Funds, LLC, located at One Corporate Center, Rye,
New York 10580-1434, and the Sub-Administrator (as defined below). Pursuant to
an Investment Advisory Contract with the Fund, the Investment Adviser, under
the supervision of the Fund's Board of Directors, provides a continuous
investment program for the Fund's portfolio; provides investment research and
makes and executes recommendations for the purchase and sale of securities;
and provides all facilities and personnel, including officers required for its
administrative management and pays the compensation of all officers and
directors of the Fund who are its affiliates. As compensation for its services
and the related expenses borne by the Investment Adviser, the Fund pays the
Investment Adviser a fee, computed daily and payable monthly, equal, on an
annual basis, to 1.00% of the Fund's average weekly net assets. However, the
Investment Adviser will waive the portion of its investment advisory fee
attributable to an amount of assets of the Fund equal to the aggregate stated
value of its outstanding preferred stock for any calendar year in which the
net asset value total return of the Fund allocable to the common stock,
including distributions and the advisory fee subject to potential waiver, is
less than the stated annual dividend rate of such preferred stock, prorated
during the year such preferred stock is issued and the final year it is
outstanding. For purposes of the calculation of the fees payable to the
Investment Adviser by the Fund, average weekly net assets of the Fund are
determined at the end of each month on the basis of its average net assets for
each week during the month. The assets for each weekly period are determined
by averaging the net assets at the end of a week with the net assets at the
end of the prior week.

The Investment Adviser

      Gabelli Funds, LLC acts as the Fund's Investment Adviser pursuant to an
advisory agreement with the Fund. The Investment Adviser is a New York
corporation with principal offices located at One Corporate Center, Rye, New
York 10580. The Investment Adviser was organized in 1999 and is the successor
to Gabelli Advisers, Inc., which was organized in 1980. As of December 31,
2002, the Investment Adviser acted as registered investment adviser to 18
management investment companies with aggregate net assets of $8.7 billion. The
Investment Adviser, together with other affiliated investment advisers, had
assets under management totaling $9.7 billion, as of December 31, 2002. GAMCO
Investors, Inc., an affiliate of the Investment Adviser, acts as investment
adviser for individuals, pension trusts, profit sharing trusts and endowments
and as a sub-adviser to management investment companies, having aggregate
assets of $10.0 billion under management as of December 31, 2002. Gabelli
Fixed Income LLC, an affiliate of the Investment Adviser, acts as investment
adviser for The Treasurer's Fund and separate accounts having aggregate assets
of $1.6 billion under management as of December 31, 2002.

      The Investment Adviser is a wholly-owned subsidiary of Gabelli Asset
Management Inc., a New York corporation, whose Class A Common Stock is traded
on the New York Stock Exchange under the symbol "GBL." Mr. Mario J. Gabelli
may be deemed a "controlling person" of the Investment Adviser on the basis of
his ownership of a majority of the stock of the Gabelli Group Capital
Partners, Inc., which owns a majority of the capital stock of Gabelli Asset
Management Inc.

Payment of Expenses

      The Investment Adviser is obligated to pay expenses associated with
providing the services contemplated by the Investment Advisory Agreement
between the Fund and the Investment Adviser (the "Advisory Agreement")
including compensation of and office space for its officers and employees
connected with investment and economic research, trading and investment
management and administra tion of the Fund, as well as the fees of all
directors of the Fund who are affiliated with the Investment Adviser. The Fund
pays all other expenses incurred in its operation including, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, stock certificates and stockholder reports, charges of the
custodian, any subcustodian and transfer and dividend paying agent, expenses
in connection with its respective automatic dividend reinvestment and
voluntary cash purchase plan, SEC fees, fees and expenses of unaffiliated
directors, accounting and pricing costs, including costs of calculating the
net asset value of the Fund, membership fees in trade associations, fidelity
bond coverage for its officers and employees, directors' and officers' errors
and omission insurance coverage, interest, brokerage costs, taxes, stock
exchange listing fees and expenses, expenses of qualifying its stock for sale
in various states, litigation and other extraordinary or non-recurring
expenses, and other expenses properly payable by the Fund.

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

Selection of Securities Brokers

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

Portfolio Manager

      Mario J. Gabelli is responsible for the day-to-day management of the
Fund. Mr. Gabelli has served as Chairman, President and Chief Investment
Officer of the Investment Adviser since 1980. Mr. Gabelli also serves as
Portfolio Manager for several other funds in the Gabelli fund family. Because
of the diverse nature of Mr. Gabelli's responsibilities, he will devote less
than all of his time to the day-to-day management at the Fund. Over the past
five years, Mr. Gabelli has served as Chairman of the Board and Chief
Executive Officer of Gabelli Asset Management Inc.; Chief Investment Officer
of GAMCO Investors, Inc.; Vice Chairman of the Board of Lynch Corporation, a
diversified manufacturing company, and Chairman of the Board and Chief
Executive Officer of Lynch Interactive Corporation, a multimedia and
communications services company.

Non-resident Directors

      Karl Otto Pohl and Anthonie C. van Ekris, directors of the Fund, reside
outside the United States and all or a significant portion of their assets are
located outside the United States. Neither director has an authorized agent in
the United States to receive service of process. As a result, it may not be
possible for investors to effect service of process within the United States
or to enforce against either director in United States courts judgments
predicated upon civil liability provisions of United States securities laws.
It may also not be possible to enforce against either director in foreign
courts judgments of United States courts or liabilities in original actions
predicated upon civil liability provisions of the United States securities
laws.

Sub-Administrator

      The Investment Adviser has entered into sub-administration agreement
with PFPC Inc. (the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations which do not include the investment advisory and portfolio
management services provided by the Investment Adviser. For these services and
the related expenses borne by the Sub-Administrator, the Investment Adviser
pays a prorated monthly fee at the annual rate of .0275% of the first $10.0
billion of the aggregate average net assets of the Fund and all other funds
advised by the Investment Adviser and administered by the Sub-Administrator,
..0125% of the aggregate average net assets exceeding $10 billion and .01% of
the aggregate average net assets in excess of $15 billion. The
Sub-Administrator has its principal office at 760 Moore Road, King of Prussia,
Pennsylvania 19406.


                      PORTFOLIO TRANSACTIONS

      Principal transactions are not entered into with affiliates of the Fund.
However, Gabelli & Company, Inc., an affiliate of the Investment Adviser, may
execute portfolio transactions on stock exchanges and in the over-the-counter
markets on an agency basis and receive a stated commission therefor. For a
more detailed discussion of the Fund's brokerage allocation practices, see
"Portfolio Transactions" in the SAI.


                    DIVIDENDS AND DISTRIBUTIONS

      The Fund may retain for reinvestment, and pay the resulting federal
income taxes on, its net capital gain, if any, although the Fund reserves the
authority to distribute its net capital gain in any year. The Fund has a
policy, which may be modified at any time by its Board of Directors, of paying
distributions on its common stock of 8% of average quarter-end net assets
attributable to common stock. This policy permits holders of common stock to
realize a predictable, but not assured, level of cash flow and some liquidity
periodically with respect to their common stock without having to sell shares.
To implement this policy, the Fund makes quarterly distributions of $0.20 per
share at the end of each of the first three calendar quarters of each year to
holders of its common stock. The Fund's distribution in December for each
calendar year is an adjusting distribution (equal to the sum of 2.0% of the
net asset value of the Fund as of the last day of the four preceding calendar
quarters less the aggregate distributions of $0.60 per share made for the
most recent three calendar quarters) in order to meet the Fund's 8% pay-out
goal. If, for any calendar year, the total distributions exceed net investment
income and net capital gain, the excess will generally be treated as a
tax-free return of capital up to the amount of the stockholder's tax basis in
his stock. The amount treated as a tax-free return of capital will reduce a
stockholder's tax basis in his stock, thereby increasing his potential gain or
reducing his potential loss on the sale of his stock. Any amounts distributed
to a stockholder in excess of the basis in the stock will be taxable to the
stockholder as capital gain. See "Taxation" below.

      In the event the Fund distributes amounts in excess of its net
investment income and net capital gain, such distributions will decrease the
Fund's total assets and, therefore, have the likely effect of increasing the
Fund's expense ratio. In addition, in order to make such distributions, the
Fund may have to sell a portion of its investment portfolio at a time when
independent investment judgment might not dictate such action.

      The Fund, along with other registered investment companies advised by
the Investment Adviser, has obtained an exemption from Section 19(b) of the
1940 Act and Rule 19b-1 thereunder permitting the Fund to make periodic
distributions of long-term capital gains provided that the Fund maintains
distribution policies with respect to the common stock calling for periodic
(e.g., quarterly or semi-annually, but in no event more frequently than
monthly) distributions in an amount equal to a fixed percentage of the Fund's
average net asset value over a specified period of time or market price per
share of common stock at or about the time of distribution or pay-out of a
fixed dollar amount. If the total distributions required by the proposed
periodic pay-out policy exceed the Fund's net investment income and net
capital gain, the excess will be treated as a return of capital. If the Fund's
net investment income (including net short-term capital gains) and net
long-term capital gains for any year exceed the amount required to be
distributed under the periodic pay-out policy, the Fund generally intends to
pay such excess once a year, but may, in its discretion, retain and not
distribute net long-term capital gains to the extent of such excess. The Fund
reserves the right, but does not currently intend, to retain for reinvestment
and pay the resulting U.S. federal income taxes on the excess of its net
realized long-term capital gains over its net short-term capital losses, if
any.


             DESCRIPTION OF THE SERIES B PREFERRED AND
                  SERIES C AUCTION RATE PREFERRED

      The Fund offers by this prospectus, in the aggregate, $50 million of
preferred stock of either Series B Preferred or Series C Auction Rate
Preferred, or a combination of both such series. The following is a brief
description of the terms of each of the Series B Preferred and the Series C
Auction Rate Preferred. This description does not purport to be complete and
is qualified by reference to the Fund's Charter, including the provisions of
the Articles Supplementary establishing each of the Series B Preferred and the
Series C Auction Rate Preferred. For complete terms of the Series B Preferred
or the Series C Auction Rate Preferred, including definitions of terms used in
this prospectus, please refer to the actual terms of such series, which are
set forth in the applicable Articles Supplementary.

General

      Under its Charter, the Fund is authorized to issue up to 1,995,000
shares of preferred stock as Series B Preferred and up to 5,000 shares of
preferred stock as Series C Auction Rate Preferred. No fractional shares of
either series will be issued. The Board of Directors reserves the right to
issue additional shares of preferred stock, including Series B Preferred or
Series C Auction Rate Preferred, from time to time, subject to the
restrictions in the Fund's Charter and the 1940 Act.

      If and when issued, the Series B Preferred will have a liquidation
preference of $25 per share and the Series C Auction Rate Preferred will have
a liquidation preference of $25,000 per share. Upon a liquidation, each holder
of Series B Preferred or Series C Auction Rate Preferred will be entitled to
receive out of the assets of the Fund available for distribution to
stockholders (after payment of claims of the Fund's creditors but before any
distributions with respect to the Fund's common stock or any other stock of
the Fund ranking junior to the Series B Preferred and Series C Auction Rate
Preferred as to liquidation payments) an amount per share equal to such
share's liquidation preference plus any accumulated but unpaid dividends
(whether or not earned or declared) to the date of distribution. The Series B
Preferred and the Series C Auction Rate Preferred will rank on a parity with
shares of any other series of preferred stock of the Fund as to the payment of
dividends and the distribution of assets upon liquidation. Series B Preferred
and Series C Auction Rate Preferred shares each carry one vote per share on
all matters on which such shares are entitled to vote. The Series B Preferred
and the Series C Auction Rate Preferred will, upon issuance, be fully paid and
nonassessable and will have no preemptive, exchange or conversion rights. Any
Series B Preferred or Series C Auction Rate Preferred repurchased or redeemed
by the Fund will be classified as authorized but unissued preferred stock. The
Board of Directors may by resolution classify or reclassify any authorized but
unissued capital stock of the Fund from time to time by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or terms or conditions of redemption. The Fund
will not issue any class of stock senior to the Series B Preferred and/or
Series C Auction Rate Preferred.

Rating Agency Guidelines

      Upon issuance, both the Series B Preferred and the Series C Auction Rate
Preferred will be rated Aaa by Moody's Investors Service, Inc. In addition,
the Series C Auction Rate Preferred will also be rated AAA by Fitch. The Fund
is required under Moody's and Fitch guidelines to maintain assets having in
the aggregate a discounted value at least equal to the Basic Maintenance
Amount (as defined below) for its outstanding preferred stock, including any
outstanding Series B Preferred or Series C Auction Rate Preferred, with
respect to the separate guidelines Moody's and Fitch has each established for
determining discounted value. To the extent any particular portfolio holding
does not satisfy the applicable rating agency's guidelines, all or a portion
of such holding's value will not be included in the calculation of discounted
value (as defined by such rating agency). The Moody's and Fitch guidelines
also impose certain diversification requirements and industry concentration
limitations on the Fund's overall portfolio, and apply specified discounts to
securities held by the Fund (except certain money market securities). The
"Basic Maintenance Amount" is equal to (i) the sum of (a) the aggregate
liquidation preference of the preferred stock then outstanding plus (to the
extent not included in the liquidation preference of such preferred stock) an
amount equal to the aggregate accumulated but unpaid dividends (whether or not
earned or declared) in respect of such preferred stock, (b) the total
principal of any debt (plus accrued and projected interest), (c) certain Fund
expenses and (d) certain other current liabilities (excluding any unpaid
dividends on the Fund's common stock) less (ii) the Fund's (a) cash and (b)
assets consisting of indebtedness which (x) is to mature prior to or on the
date of redemption or repurchase of the preferred stock, (y) are U.S.
Government Obligations or evidences of indebtedness rated at least Aaa, P-1,
VMIG-1 or MIG-1 by Moody's or AAA, SP-1+ or A-1+ by Standard and Poor's, and
(z) is held by the Fund for the payment of dividends or distributions, the
amounts needed to redeem or repurchase preferred stock, or the Fund's
liabilities.

      If the Fund does not timely cure a failure to maintain a discounted
value of its portfolio equal to the Basic Maintenance Amount in accordance
with the requirements of the applicable rating agency or agencies then rating
the Series B Preferred or the Series C Auction Rate Preferred at the request
of the Fund, the Fund may, and in certain circumstances will be required to,
mandatorily redeem preferred stock, including the Series B Preferred or the
Series C Auction Rate Preferred, as described below under " -- Redemption."

      The Fund may, but is not required to, adopt any modifications to the
rating agency guidelines that may hereafter be established by Moody's or
Fitch. Failure to adopt any such modifications, however, may result in a
change in the relevant rating agency's ratings or a withdrawal of such ratings
altogether. In addition, any rating agency providing a rating for the Series B
Preferred or the Series C Auction Rate Preferred at the request of the Fund
may, at any time, change or withdraw any such rating. The Board of Directors,
without further action by the stockholders, may amend, alter, add to or repeal
certain of the definitions and related provisions that have been adopted by
the Fund pursuant to the rating agency guidelines if the Board of Directors
determines that such modification is necessary to prevent a reduction in
rating of the shares of preferred stock by Moody's and/or Fitch, as the case
may be, or is in the best interests of the holders of shares of common stock
and is not adverse to the holders of preferred stock in view of advice to the
Fund by Moody's and Fitch (or such other rating agency then rating the Series
B Preferred or Series C Auction Rate Preferred at the request of the Fund)
that such modification would not adversely affect its then-current rating of
the Series B Preferred or Series C Auction Rate Preferred, as the case may be.

      In addition, with respect to the Series C Auction Rate Preferred, the
Board of Directors may amend the Articles Supplementary definition of "Maximum
Rate" (the "maximum rate" as defined below under " -- Dividends on the Series
C Auction Rate Preferred -- Maximum Rate") to increase the percentage amount
by which the "AA" Financial Composite Commercial Paper Rate or the Treasury
Index Rate, whichever is applicable, is multiplied to determine the maximum
rate without the vote or consent of the holders of Series C Auction Rate
Preferred or any other stockholder of the Fund, but only after consultation
with the broker-dealers for the Series C Auction Rate Preferred, and with
confirmation from each applicable rating agency that the Fund could meet the
Basic Maintenance Amount Test applicable to the Series C Auction Rate
Preferred immediately following any such increase. See " -- Dividends on the
Series C Auction Rate Preferred -- Maximum Rate."

      As described by Moody's and Fitch, the ratings assigned to the Series B
Preferred and the Series C Auction Rate Preferred are assessments of the
capacity and willingness of the Fund to pay the obligations of each of the
Series B Preferred and the Series C Auction Rate Preferred. The ratings on the
Series B Preferred and the Series C Auction Rate Preferred are not
recommendations to purchase, hold or sell shares of either series, inasmuch as
the ratings do not comment as to market price or suitability for a particular
investor. The rating agency guidelines also do not address the likelihood that
an owner of Series B Preferred or Series C Auction Rate Preferred will be able
to sell such shares on an exchange, in an auction or otherwise. The ratings
are based on current information furnished to Moody's and Fitch by the Fund
and the Investment Adviser and information obtained from other sources. The
ratings may be changed, suspended or withdrawn as a result of changes in, or
the unavailability of, such information.

      The rating agency guidelines will apply to the Series B Preferred or
Series C Auction Rate Preferred, as the case may be, only so long as such
rating agency is rating such shares at the request of the Fund. The Fund will
pay fees to Moody's and Fitch for rating the Series B Preferred and the Series
C Auction Rate Preferred.

Asset Maintenance Requirements

      In addition to the requirements summarized under " -- Rating Agency
Guidelines" above, the Fund must also satisfy asset maintenance requirements
under the 1940 Act with respect to its preferred stock. The 1940 Act
requirements are summarized below.

      The Fund will be required under the Articles Supplementary for each of
the Series B Preferred and/or Series C Auction Rate Preferred to determine
whether it has as of the last business day of each March, June, September and
December of each year, an "asset coverage" (as defined in the 1940 Act) of at
least 200% (or such higher or lower percentage as may be required at the time
under the 1940 Act) with respect to all outstanding senior securities of the
Fund that are stock, including any outstanding Series B Preferred and the
Series C Auction Rate Preferred. If the Fund fails to maintain the asset
coverage required under the 1940 Act on such dates and such failure is not
cured within 60 days, in the case of the Series B Preferred, or 10 days, in
the case of the Series C Auction Rate Preferred, (including the Series B
Preferred or Series C Auction Rate Preferred) the Fund may, and in certain
circumstances will be required to, mandatorily redeem shares of preferred
stock sufficient to satisfy such asset coverage. See " -- Redemption" below.

      If the shares of Series B Preferred and/or Series C Auction Rate
Preferred offered hereby had been issued and sold as of February 14, 2003, the
asset coverage required under the 1940 Act immediately following such
issuance and sale (after giving effect to the deduction of the underwriting
discounts and estimated offering expenses for such shares of $1,500,000),
would have been computed as follows:

           value of Fund assets less liabilities not constituting senior
           securities ($144,898,943) divided by senior securities representing
           indebtedness plus liquidation preference of each class of preferred
           stock ($50,000,000), expressed as a percentage = 290%.

Dividends on the Series B Preferred

      Upon issuance of the Series B Preferred (if issued), holders of shares
of Series B Preferred will be entitled to receive, when, as and if declared by
the Board of Directors of the Fund out of funds legally available therefor,
cumulative cash dividends, at the annual rate of   % (computed on the basis of a
360-day year consisting of twelve 30-day months) of the liquidation
preference of $25 per share, payable quarterly on March 26, June 26, September
26 and December 26 in each year or, if any such day is not a business day, the
immediately succeeding business day. Such dividends will commence on     , 2003,
and will be payable to the persons in whose names the shares of Series B
Preferred are registered at the close of business on the fifth preceding
business day.

      Dividends on the shares of Series B Preferred will accumulate from the
date on which such shares are issued; provided, however, that any shares of
Series B Preferred issued within 30 days of the original issue date of the
series will accumulate dividends from the series' original date of issue.

Dividends on the Series C Auction Rate Preferred

      General. Upon issuance of the Series C Auction Rate Preferred (if
issued), the holders of Series C Auction Rate Preferred will be entitled to
receive cash dividends stated at annual rates as a percentage of its $25,000
per share liquidation preference, that will vary from dividend period to
dividend period. The dividend rate for the initial dividend period for any
Series C Auction Rate Preferred offered in this prospectus will be the rate
set out on the cover of this prospectus. For subsequent dividend periods, the
Series C Auction Rate Preferred will pay dividends based on a rate set at the
auction, normally held weekly, but the rates set at the auction will not
exceed the maximum rate. Dividend periods generally will be seven days, and
the dividend periods generally will begin on the first business day after an
auction. In most instances, dividends are also paid weekly, on the business
day following the end of the dividend period. The Fund, subject to some
limitations, may change the length of the dividend periods, designating them
as "special dividend periods," as described below.

      Dividend Payments. Except as described below, the dividend payment date
will be the first business day after the dividend period ends. The dividend
payment dates for special dividend periods of more (or less) than seven days
will be set out in the notice designating a special dividend period. See " --
Designation of Special Dividend Periods" for a discussion of payment dates for
a special dividend period.

      Dividends on Series C Auction Rate Preferred will be paid on the
dividend payment date to holders of record as their names appear on the Fund's
stock ledger or stock records on the business day immediately preceding the
dividend payment date. If dividends are in arrears, they may be declared and
paid at any time to holders of record as their names appear on the Fund's
stock ledger or stock records on a date not more than 15 days before the
payment date, as the Fund's Board of Directors may fix.

      The dividend paying agent, in accordance with its current procedures, is
expected to credit in same-day funds on each dividend payment date dividends
received from the Fund to the accounts of broker-dealers who act on behalf of
holders of the Series C Auction Rate Preferred. Such broker-dealers, in turn,
are expected to distribute dividend payments to the person for whom they are
acting as agents. If a broker-dealer does not make dividends available to
Series C Auction Rate Preferred holders in same-day funds, these stockholders
will not have funds available until the next business day.

      Dividend Rate Set at Auction. The Series C Auction Rate Preferred pays
dividends based on a rate set at auction at which Series C Auction Rate
Preferred may be bought and sold. The auction usually is held weekly, but may
be held more or less frequently. The Bank of New York, the auction agent,
reviews orders from broker-dealers on behalf of existing holders who wish to
sell, hold at the auction rate, or hold only at a specified dividend rate ,
and on behalf of potential holders who wish to buy Series C Auction Rate
Preferred. The auction agent then determines the lowest dividend rate that
will result in all of the Series C Auction Rate Preferred continuing to be
held. See "The Auction of Series C Auction Rate Preferred."

      If an auction is not held because an unforeseen event, or unforeseen
events cause a day that otherwise would have been an auction date not to be a
business day, then the length of the then current dividend period will be
extended by seven days (or a multiple thereof if necessary because of such
unforeseen event or events), the applicable rate for such period will be the
applicable rate for the then-current dividend period so extended and the
dividend payment date for such dividend period will be the first business day
immediately succeeding the end of such period.

      Determination of Dividend Rates. The Fund computes the dividends per
share by multiplying the applicable rate determined at the auction by a
fraction, the numerator of which normally is the number of days in such
dividend period and the denominator of which is 360. This applicable rate is
then multiplied by $25,000 to arrive at the dividend per share.

      Maximum Rate. The dividend rate that results from an auction for the
Series C Auction Rate Preferred will not be greater than the applicable
"maximum rate." The maximum rate means (i) in the case of a dividend period of
184 days or less, the applicable percentage of the "AA" Financial Composite
Commercial Paper Rate on the date of such auction determined as set forth in
the following chart based on the lower of the credit ratings assigned to the
Series C Auction Rate Preferred by Moody's and Fitch or (ii) in the case of a
dividend period of longer than 184 days, the applicable percentage of the
Treasury Index Rate.


 Moody's Credit Rating   Fitch Credit Rating   Applicable Percentage
 ---------------------   -------------------   ---------------------

     Aa3 or higher          AA- or higher               150%
       A3 to A1                A- to A+                 175%
     Baa3 to Baa1            BBB- to BBB+               250%
      Below Baa3              Below BBB-                275%

      The "Treasury Index Rate" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities having
the same number of 30-day periods to maturity as the length of the applicable
dividend period, determined, to the extent necessary, by linear interpolation
based upon the yield for such securities having the next shorter and next
longer number of 30-day periods to maturity treating all dividend periods with
a length greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data set forth
in the most recent weekly statistical release published by the Board of
Governors of the Federal Reserve System (currently in H.15 (519)); provided,
however, that if the most recent such statistical release will not have been
published during the 15 days preceding the date of computation, the foregoing
computations will be based upon the average of comparable data as quoted to
the Fund by at least three recognized dealers in U.S. government securities
selected by the Fund.

      There is no minimum dividend rate in respect of any dividend period.

      Effect of Failure to Pay Dividends in a Timely Manner. If the Fund fails
to pay the paying agent the full amount of any dividend for the Series C
Auction Rate Preferred in a timely manner, but the Fund cures the failure and
pays any late charge before 12:00 noon, New York City time on the third
business day following the date the failure occurred, no default will be
deemed to have occurred and the dividend rate for the dividend period
immediately following the dividend with respect to which the dividend payment
default would otherwise have occurred will be the applicable rate set at the
auction for such dividend period.

      However, if the Fund does not effect a timely cure, the dividend rate
for the Series C Auction Rate Preferred for such default period, and any
subsequent dividend period for which such default is continuing, will be the
default rate. In the event the Fund fully pays all default amounts due during
a dividend period, the dividend rate for the remainder of that dividend period
will be, as the case may be, the applicable rate (for the first dividend
period following a dividend default) or the then-maximum rate (for any
subsequent dividend period for which such default is continuing).

      The default rate means 300% of the applicable "AA" Financial Composite
Commercial Paper Rate for a dividend period of 184 days or fewer and 300% of
the applicable Treasury Index Rate for a dividend period of longer than 184
days. Late charges are also calculated at the applicable default rate.

      Designation of Special Dividend Periods. The Fund may instruct the
auction agent to hold auctions and pay dividends more or less frequently than
weekly. The Fund may do this if, for example, the Fund expects that short-term
rates might increase or market conditions otherwise change, in an effort to
optimize the effect of the Fund's leverage on holders of its common shares.
The Fund does not currently expect to hold auctions and pay dividends less
frequently than weekly in the near future. If the Fund designates a special
dividend period, changes in interest rates could affect the price received if
shares of Series C Auction Rate Preferred are sold in the secondary market.

      Any designation of a special dividend period will be effective only if
(i) notice thereof will have been given as provided for in the Charter, (ii)
any failure to pay in a timely matter to the auction agent the full amount of
any dividend on, or the redemption price of, the Series C Auction Rate
Preferred will have been cured as provided for in the Charter, (iii) the
auction immediately preceding the special dividend period was not a failed
auction, (iv) if the Fund will have mailed a notice of redemption with respect
to Series C Auction Rate Preferred, the Fund will have deposited with the
paying agent all funds necessary for such redemption, and (v) the Fund has
confirmed that as of the auction date immediately preceding the first day of
such special dividend period, it has assets with an aggregate discounted value
at least equal to the Basic Maintenance Amount (as defined below), and the
Fund has consulted with the broker- dealers for the Series C Auction Rate
Preferred and has provided notice of such designation and a Basic Maintenance
Report to each rating agency then rating the Series C Auction Rate Preferred
at the request of the Fund.

      The dividend payment date for any special dividend period will be the
first business day after the end of the special dividend period. In addition,
for special dividend periods of (x) at least 91 days but not more than one
year, dividend payment dates will occur on the 91st, 181st and 271st days
within such dividend period, if applicable, and (y) more than one year,
dividend payment dates will occur on each March 26, June 26, September 26 and
December 26 during the special dividend period.

      Before the Fund designates a special dividend period: (1) at least seven
business days (or two business days in the event the duration of the dividend
period prior to such special dividend period is less than eight days) and not
more than 30 business days before the first day of the proposed special
dividend period, the Fund will issue a press release stating its intention to
designate a special dividend period and inform the auction agent of the
proposed special dividend period by telephonic or other means and confirm it
in writing promptly thereafter and (2) the Fund must inform the auction agent
of the proposed special dividend period by 3:00 p.m., New York City time on
the second business day before the first day of the proposed special dividend
period.

      See the SAI for more information.

Restrictions on Dividends and Other Distributions for the Series B Preferred
and the Series C Auction Rate Preferred

      So long as any Series B Preferred or Series C Auction Rate Preferred is
outstanding, the Fund may not pay any dividend or distribution (other than a
dividend or distribution paid in common stock or in options, warrants or
rights to subscribe for or purchase common shares) in respect of the common
stock or call for redemption, redeem, purchase or otherwise acquire for
consideration any common stock (except by conversion into or exchange for
shares of the Fund ranking junior to the Series B Preferred and/or Series C
Auction Rate Preferred as to the payment of dividends and the distribution of
assets upon liquidation), unless:

      o    the Fund has declared and paid (or provided to the relevant
           dividend paying agent) all cumulative dividends on the Fund's
           preferred stock, including the Series B Preferred and/or Series C
           Auction Rate Preferred, due on or prior to the date of such common
           stock dividend or distribution;

      o    the Fund has redeemed the full number of shares of Series B
           Preferred and/or Series C Auction Rate Preferred to be redeemed
           pursuant to any mandatory redemption provision in the Fund's
           Charter; and

      o    after paying the dividend, the Fund meets applicable asset coverage
           requirements described under " -- Rating Agency Guidelines" and "
           -- Asset Maintenance Require
           ments."

      No full dividend will be declared or paid on the Series B Preferred or
Series C Auction Rate Preferred for any dividend period, or part thereof,
unless full cumulative dividends due through the most recent dividend payment
dates therefor for all outstanding series of preferred stock of the Fund
ranking on a parity with the Series B Preferred and Series C Auction Rate
Preferred as to the payment of dividends have been or contemporaneously are
declared and paid. If full cumulative dividends due have not been paid on all
outstanding shares of preferred stock of the Fund ranking on a parity with the
Series B Preferred and/or Series C Auction Rate Preferred as to the payment of
dividends, any dividends being paid on the shares of such preferred stock
(including the Series B Preferred and/or Series C Auction Rate Preferred) will
be paid as nearly pro rata as possible in proportion to the respective amounts
of dividends accumulated but unpaid on each such series of preferred stock on
the relevant dividend payment date.

Redemption

      Mandatory Redemption Relating to Asset Coverage Requirements. The Fund
may, at its option, consistent with its Charter and the 1940 Act, and in
certain circumstances will be required to, mandatorily redeem preferred stock
(including, at its discretion, the Series B Preferred or Series C Auction Rate
Preferred) in the event that:

      o    the Fund fails to maintain the asset coverage requirements
           specified under the 1940 Act and such failure is not cured on or
           before 60 days, in the case of the Series B Preferred, or 10
           business days in the case of the Series C Auction Rate Preferred
           following such failure; or

      o    the Fund fails to maintain the asset coverage requirements as
           calculated in accordance with the applicable rating agency
           guidelines as of any monthly valuation date, and such failure is
           not cured on or before 10 business days after such valuation date.

      The redemption price for shares of each of the Series B Preferred and
Series C Auction Rate Preferred subject to mandatory redemption will be,
respectively, $25 per share and $25,000 per share, in each case plus an amount
equal to any accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption, plus (in the case of Series C
Auction Rate Preferred having a dividend period of more than one year) any
applicable redemption premium determined by the Board of Directors.

      The number of shares of preferred stock that will be redeemed in the
case of a mandatory redemption will equal the minimum number of outstanding
shares of preferred stock the redemption of which, if such redemption had
occurred immediately prior to the opening of business on the applicable cure
date, would have resulted in the relevant asset coverage requirement having
been met or, if the required asset coverage cannot be so restored, all of the
shares of preferred stock. In the event that shares of preferred stock are
redeemed due to a failure to satisfy the 1940 Act asset coverage requirements,
the Fund may, but is not required to, redeem a sufficient number of shares of
preferred stock so that the Fund's assets exceed the asset coverage
requirements under the 1940 Act after the redemption by 10% (that is, 220%
asset coverage). In the event that shares of preferred stock are redeemed due
to a failure to satisfy applicable rating agency guidelines, the Fund may, but
is not required to, redeem a sufficient number of shares of preferred stock so
that the Fund's discounted portfolio value (as determined in accordance with
the applicable rating agency guidelines) after redemption exceeds the rating
agency guidelines asset coverage requirements by up to 10% (that is, 110%
rating agency asset coverage). In addition, as discussed under " -- Optional
Redemption" below, the Fund generally may exercise its optional redemption
rights with respect to the Series C Auction Rate Preferred at any time.

      If the Fund does not have funds legally available for the redemption of,
or is otherwise unable to redeem, all the shares of preferred stock to be
redeemed on any redemption date, the Fund will redeem on such redemption date
that number of shares for which it has legally available funds, or is
otherwise able to redeem, from the holders whose shares are to be redeemed
ratably on the basis of the redemption price of such shares, and the remainder
of those shares to be redeemed will be redeemed on the earliest practicable
date on which the Fund will have funds legally available for the redemption
of, or is otherwise able to redeem, such shares upon written notice of
redemption.

      If fewer than all shares of the Fund's outstanding preferred stock are
to be redeemed, the Fund, at its discretion and subject to the limitations of
the 1940 Act and Maryland law, will select the one or more series of preferred
stock from which shares will be redeemed and the amount of preferred stock to
be redeemed from each such series. If fewer than all of the shares of a series
of preferred stock are to be redeemed, such redemption will be made as among
the holders of that series pro rata in accordance with the respective number
of shares of such series held by each such holder on the record date for such
redemption (or by such other equitable method as the Fund may determine). If
fewer than all shares of the preferred stock held by any holder are to be
redeemed, the notice of redemption mailed to such holder will specify the
number of shares to be redeemed from such holder, which may be expressed as a
percentage of shares held on the applicable record date.

      Optional Redemption of the Series B Preferred. Prior to      , 2008, the
shares of Series B Preferred are not subject to optional redemption by the
Fund unless such redemption is necessary, in the judgment of the Fund, to
maintain the Fund's status as a regulated investment company under the Code.
Commencing on , 2008 and thereafter, the Fund may at any time redeem shares of
Series B Preferred in whole or in part for cash at a redemption price per
share equal to $25 per share plus accumulated and unpaid dividends (whether or
not earned or declared) to the redemption date. Such redemptions are subject
to the notice requirements set forth under " -- Redemption Procedures" and the
limitations of the 1940 Act and Maryland law.

      Optional Redemption of the Series C Auction Rate Preferred. The Fund
may, at its option, redeem the Series C Auction Rate Preferred, in whole or in
part, at any time following the initial dividend period so long as the Fund
has not designated a non-call period. The Fund may designate a non- call
period during a dividend period of more than seven days. In the case of Series
C Auction Rate Preferred having a dividend period of one year or less, the
redemption price per share will equal $25,000 plus an amount equal to any
accumulated but unpaid dividends thereon (whether or not earned or declared)
to the redemption date, and in the case of Series C Auction Rate Preferred
having a dividend period of more than one year, for the redemption price plus
any redemption premium applicable during such dividend period. Such
redemptions are subject to the notice requirements set forth under " --
Redemption Procedures" and the limitations of the 1940 Act and Maryland law.

      Redemption Procedures. A notice of redemption with respect to an
optional redemption will be given to the holders of record of preferred stock
selected for redemption not less than 15 days, in the case of the Series B
Preferred, and not less than 7 days in the case of the Series C Auction Rate
Preferred, nor, in both cases, more than 40 days prior to the date fixed for
redemption. Preferred stockholders may receive shorter notice in the event of
a mandatory redemption. Each notice of redemption will state (i) the
redemption date, (ii) the number or percentage of shares of preferred stock to
be redeemed (which may be expressed as a percentage of such shares
outstanding), (iii) the CUSIP number(s) of such shares, (iv) the redemption
price (specifying the amount of accumulated dividends to be included therein),
(v) the place or places where such shares are to be redeemed, (vi) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date, (vii) the provision of the Articles Supplementary under which the
redemption is being made and (viii) any conditions precedent to such
redemption. No defect in the notice of redemption or in the mailing thereof
will affect the validity of the redemption proceedings, except as required by
applicable law.

      The holders of Series B Preferred or Series C Auction Rate Preferred
will not have the right to redeem their shares of the Fund at their option.

Liquidation Rights

      Upon a liquidation, dissolution or winding up of the affairs of the Fund
(whether voluntary or involuntary), holders of Series B Preferred or Series C
Auction Rate Preferred then outstanding will be entitled to receive out of the
assets of the Fund available for distribution to stockholders, after
satisfying claims of creditors but before any distribution or payment of
assets is made to holders of the common stock or any other class of stock of
the Fund ranking junior to the Series B Preferred or Series C Auction Rate
Preferred as to liquidation payments, a liquidation distribution in the amount
of $25 per share, in the case of the Series B Preferred, or $25,000 per share,
in the case of the Series C Auction Rate Preferred, in either case plus an
amount equal to all unpaid dividends accrued to and including the date fixed
for such distribution or payment (whether or not earned or declared by the
Fund but excluding interest thereon), and such holders will be entitled to no
further participation in any distribution or payment in connection with any
such liquidation, dissolution or winding up. If, upon any liquidation,
dissolution or winding up of the affairs of the Fund, whether voluntary or
involuntary, the assets of the Fund available for distribution among the
holders of all outstanding shares of preferred stock of the Fund ranking on a
parity with the Series B Preferred and/or Series C Auction Rate Preferred as
to payment upon liquidation will be insufficient to permit the payment in full
to such holders of the Series B Preferred and/or Series C Auction Rate
Preferred and other parity preferred stock of the amounts due upon liquidation
with respect to such shares, then such available assets will be distributed
among the holders of the Series B Preferred, the Series C Auction Rate
Preferred and such other parity preferred stock ratably in proportion to the
respective preferential amounts to which they are entitled. Unless and until
the liquidation payments due to holders of the Series B Preferred and/or
Series C Auction Rate Preferred and such other parity preferred stock have
been paid in full, no dividends or distributions will be made to holders of
the common stock or any other stock of the Fund ranking junior to the Series B
Preferred and/or Series C Auction Rate Preferred and other parity preferred
stock as to liquidation.

Voting Rights

      Except as otherwise stated in this prospectus, specified in the Fund's
Charter or as otherwise required by applicable law, holders of the Series B
Preferred and/or Series C Auction Rate Preferred along with holders of other
outstanding shares of series of preferred stock, will be entitled to one vote
per share held on each matter submitted to a vote of stockholders and will
vote together with holders of shares of common stock and of any other
preferred stock then outstanding as a single class.

      In connection with the election of the Fund's directors, holders of the
outstanding shares of Series B Preferred, Series C Auction Rate Preferred and
the other series of preferred stock, voting together as a single class, will
be entitled at all times to elect two of the Fund's directors, and the
remaining directors will be elected by holders of shares of common stock and
holders of the Series B Preferred, Series C Auction Rate Preferred and other
series of preferred stock, voting together as a single class. In addition, if
(i) at any time dividends on outstanding shares of the Series B Preferred,
Series C Auction Rate Preferred and/or any other preferred stock are unpaid in
an amount equal to at least two full years' dividends thereon and sufficient
cash or specified securities have not been deposited with the applicable
paying agent for the payment of such accumulated dividends or (ii) at any time
holders of any other series of preferred stock are entitled to elect a
majority of the directors of the Fund under the 1940 Act or the Articles
Supplementary creating such shares, then the number of directors constituting
the Board of Directors automatically will be increased by the smallest number
that, when added to the two directors elected exclusively by the holders of
the Series B Preferred, Series C Auction Rate Preferred and other
series of preferred stock as described above, would then constitute a majority
of the Board of Directors as so increased by such smallest number. Such
additional directors will be elected by the holders of the Series B Preferred,
Series C Auction Rate Preferred and the other series of preferred stock,
voting together as a single class, at a special meeting of stockholders which
will be called as soon as practicable and will be held not less than 10 or
more than 20 days after the mailing date of the meeting notice. If the Fund
fails to send such meeting notice or to call such a special meeting, the
meeting may be called by any preferred stockholder on like notice. The terms
of office of the persons who are directors at the time of that election will
continue. If the Fund thereafter pays or declares and sets apart for payment
in full, all dividends payable on all outstanding shares of preferred stock
for all past dividend periods or the holders of other series of preferred
stock are no longer entitled to elect such additional directors, the
additional voting rights of the holders of the preferred stock as described
above will cease, and the terms of office of all of the additional or
replacement directors elected by the holders of the preferred stock (but not
of the directors with respect to whose election the holders of shares of
common stock were entitled to vote or the two directors the holders of shares
of preferred stock have the right to elect as a separate class in any event)
will terminate at the earliest time permitted by law.

      So long as shares of Series B Preferred or Series C Auction Rate
Preferred are outstanding, the Fund will not, without the affirmative vote of
the holders of a majority (as defined in the 1940 Act) of the shares of
preferred stock outstanding at the time (including the Series B Preferred or
Series C Auction Rate Preferred, as applicable), voting separately as one
class, amend, alter or repeal the provisions of the Fund's Charter, whether by
merger, consolidation or otherwise, so as to materially adversely affect any
of the contract rights expressly set forth in the Charter with respect to such
shares of preferred stock. Also, to the extent permitted under the 1940 Act,
in the event shares of more than one series of preferred stock are
outstanding, the Fund will not approve any of the actions set forth in the
preceding sentence which materially adversely affects the contract rights
expressly set forth in the Charter with respect to such shares of a series of
preferred stock (such as the Series B Preferred or Series C Auction Rate
Preferred) differently than those of a holder of shares of any other series of
preferred stock without the affirmative vote of the holders of at least a
majority of the shares of preferred stock of each series materially adversely
affected and outstanding at such time (each such materially adversely affected
series voting separately as a class to the extent its rights are affected
differently). Unless a higher percentage is provided for under the Charter or
applicable provisions of Maryland law, the affirmative vote of a majority of
the votes entitled to be cast by holders of outstanding shares of the
preferred stock (including the Series B Preferred and/or Series C Auction Rate
Preferred), voting together as a single class, will be required to approve any
plan of reorganization adversely affecting the preferred stock 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 Objective and Policies" and "Investment Restrictions" in this
prospectus and the SAI. For purposes of the preferred stock voting rights
described in this section, except as otherwise required under the 1940 Act,
the phrase "vote of the holders of a majority of the outstanding shares of
preferred stock" (or any like phrase) means, in accordance with Section
2(a)(42) of the 1940 Act, the vote, at the annual or a special meeting of the
stockholders of the Fund duly called (i) of 67% or more of the shares of
preferred stock present at such meeting, if the holders of more than 50% of
the outstanding shares of preferred stock are present or represented by proxy
or (ii) more than 50% of the outstanding shares of preferred stock, whichever
is less. The class vote of holders of shares of the preferred stock described
above in each case will be in addition to a separate vote of the requisite
percentage of shares of common stock, Series B Preferred, Series C Auction
Rate Preferred and any other preferred stock, voting together as a single
class, that may be necessary to authorize the action in question.

      The calculation of the elements and definitions of certain terms of the
rating agency guidelines may be modified by action of the Board of Directors
without further action by the stockholders if the Board of Directors
determines that such modification is necessary to prevent a reduction in
rating of the shares of preferred stock by Moody's and/or Fitch (or any other
rating agency then rating the Series B Preferred or Series C Auction Rate
Preferred at the request of the Fund), as the case may be, or is in the best
interests of the holders of shares of common stock and is not adverse to the
holders of preferred stock in view of advice to the Fund by the relevant
rating agencies that such modification would not adversely affect its
then-current rating of the preferred stock.

      The foregoing voting provisions will not apply to any Series B Preferred
or Series C Auction Rate Preferred if, at or prior to the time when the act
with respect to which such vote otherwise would be required will be effected,
such shares will have been redeemed or called for redemption and sufficient
cash or cash equivalents provided to the applicable paying agent to effect
such redemption. The holders of Series B Preferred and/or Series C Auction
Rate Preferred will have no preemptive rights or rights to cumulative voting.

Limitation on Incurrence of Additional Indebtedness
and Issuance of Additional Preferred Stock

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

      So long as any Series B Preferred or Series C Auction Rate Preferred is
outstanding, subject to receipt of approval from Moody's and, in the case of
the Series C Auction Rate Preferred, Fitch, and subject to compliance with the
Fund's investment objective, policies and restrictions, the Fund may issue and
sell shares of one of more other series of preferred stock in addition to the
Series B Preferred or Series C Auction Rate Preferred, provided that the Fund
will, immediately after giving effect to the issuance of such additional
preferred stock and to its receipt and application of the proceeds thereof
(including, without limitation, to the redemption of preferred stock for which
notice of redemption has been given prior to such issuance) have an "asset
coverage" for all senior securities of the Fund which are stock, as defined in
the 1940 Act, of at least 200% of the sum of the liquidation preference of the
shares of preferred stock of the Fund then outstanding and all indebtedness of
the Fund constituting senior securities and no such additional preferred stock
will have any preference or priority over any other preferred stock of the
Fund upon the distribution of the assets of the Fund or in respect of the
payment of dividends.

The Fund does not currently intend to offer additional preferred shares or
senior securities representing indebtedness. However, the Fund will consider
from time to time whether to do so and may issue additional such securities
were the Board of Directors to conclude that such an offering would be
consistent with the Fund's Charter and applicable law, and in the best
interest of existing common stockholders.

Repurchase of Series B Preferred and Series C Auction Rate Preferred Shares

      The Fund is a closed-end investment company and, as such, holders of the
Series B Preferred or Series C Auction Rate Preferred do not and will not have
the right to redeem their shares of the Fund. The Fund, however, may
repurchase Series B Preferred or, outside of an auction, Series C Auction Rate
Preferred when it is deemed advisable by the Board of Directors in compliance
with the requirements of the 1940 Act and regulations thereunder and other
applicable requirements.

Book-Entry

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

      Shares of Series C Auction Rate Preferred will initially be held by the
auction agent as custodian for Cede & Co., in whose name the shares of the
Series C Auction Rate Preferred shall be registered. The Fund will treat Cede
& Co. as the holder of record of the Series C Auction Rate Preferred for all
purposes.


          THE AUCTION OF SERIES C AUCTION RATE PREFERRED

Summary of Auction Procedures

      The following is a brief summary of the auction procedures for the
Series C Auction Rate Preferred, which are described in more detail in the
SAI. These auction procedures are complicated, and there are exceptions to
these procedures. Many of the terms in this section have a special meaning.
Accordingly, this description does not purport to be complete and is
qualified, in its entirety, by reference to the Fund's Charter, including the
provisions of the Articles Supplementary establishing the Series C Auction
Rate Preferred.

       The auctions determine the dividend rate for the Series C Auction Rate
Preferred, but each dividend rate will not be higher than the maximum rate.
See "Description of the Series B Preferred and Series C Auction Rate Preferred
- -- Dividends on the Series C Auction Rate Preferred." If you own shares of
Series C Auction Rate Preferred, you may instruct your broker-dealer to enter
one of three kinds of order in the auction with respect to your shares: sell,
bid and hold.

      o    If you enter a sell order, you indicate that you want to sell
           Series C Auction Rate Preferred at $25,000 per share, no matter
           what the next dividend period's rate will be.

      o    If you enter a bid (or "hold at a rate") order, which must specify
           a dividends rate, you indicate that you want to sell Series C
           Auction Rate Preferred only if the next dividend period's rate is
           less than the rate you specify.

      o    If you enter a hold order you indicate that you want to continue to
           own Series C Auction Rate Preferred, no matter what the next
           dividend period's rate will be.

      You may enter different types of orders for different portions of your
Series C Auction Rate Preferred. You may also enter an order to buy additional
Series C Auction Rate Preferred. All orders must be for whole shares. All
orders you submit are irrevocable. There is a fixed number of Series C Auction
Rate Preferred shares, and the dividend rate likely will vary from auction to
auction depending on the number of bidders, the number of shares the bidders
seek to buy, the rating of the Series C Auction Rate Preferred and general
economic conditions including current interest rates. If you own Series C
Auction Rate Preferred and submit a bid for them higher than the then-maximum
rate, your bid will be treated as a sell order. If you do not enter an order,
the broker-dealer will assume that you want to continue to hold Series C
Auction Rate Preferred, but if you fail to submit an order and the dividend
period is longer than 28 days, the broker-dealer will treat your failure to
submit a bid as a sell order.

      If you do not then own Series C Auction Rate Preferred, or want to buy
more shares, you may instruct a broker-dealer to enter a bid order to buy
shares in an auction at $25,000 per share at or above the dividend rate you
specify. If your bid for shares you do not own specifies a rate higher than
the then- maximum rate, your bid will not be considered.

      Broker-dealers will submit orders from existing and potential holders of
Series C Auction Rate Preferred to the auction agent. Neither the Fund nor the
auction agent will be responsible for a broker-dealer's failure to submit
orders from existing or potential holders of Series C Auction Rate Preferred.
A broker-dealer's failure to submit orders for Series C Auction Rate Preferred
held by it or its customers will be treated in the same manner as a holder's
failure to submit an order to the broker-dealer. A broker- dealer may submit
orders to the auction agent for its own account. The Fund may not submit an
order in any auction.

      The auction agent after each auction for the Series C Auction Rate
Preferred will pay to each broker-dealer, from funds provided by the Fund, a
service charge equal to, in the case of any auction immediately preceding a
dividend period of less than 365 days, the product of (i) a fraction, the
numerator of which is the number of days in such dividend period and the
denominator of which is 365, times (ii) 1/4 of 1%, times (iii) $25,000, times
(iv) the aggregate number of Series C Auction Rate Preferred shares placed by
such broker-dealer at such auction or, in the case of any auction immediately
preceding a dividend period of one year or longer, a percentage of the
purchase price of the Series C Auction Rate Preferred placed by the
broker-dealers at the auction agreed to by the Fund and the broker-dealers.

      If the number of Series C Auction Rate Preferred shares subject to bid
orders by potential holders with a dividend rate equal to or lower than the
then-maximum rate is at least equal to the number of Series C Auction Rate
Preferred shares subject to sell orders, then the dividend rate for the next
dividend period will be the lowest rate submitted which, taking into account
that rate and all lower rates submitted in order from existing and potential
holders, would result in existing and potential holders owning all the Series
C Auction Rate Preferred available for purchase in the auction.

      If the number of Series C Auction Rate Preferred shares subject to bid
orders by potential holders with a dividend rate equal to or lower than the
then-maximum rate is less than the number of Series C Auction Rate Preferred
shares subject to sell orders, then the auction is considered to be a failed
auction, and the dividend rate will be the maximum rate. In that event,
existing holders that have submitted sell orders (or are treated as having
submitted sell orders) may not be able to sell any or all of the Series C
Auction Rate Preferred for which they submitted sell orders.

      The auction agent will not consider a bid above the then-maximum rate.
The purpose of the maximum rate is to place an upper limit on dividends with
respect to the Series C Auction Rate Preferred and in so doing to help protect
the earnings available to pay dividends on common shares, and to serve as the
dividend rate in the event of a failed auction (that is, an auction where
there are more Series C Auction Rate Preferred offered for sale than there are
buyers for those shares).

      If broker-dealers submit or are deemed to submit hold orders for all
outstanding Series C Auction Rate Preferred, the auction is considered an "all
hold" auction and the dividend rate for the next dividend period will be the
"all hold rate," which is 80% of the "AA" Financial Composite Commercial Paper
Rate, as determined in accordance with procedures set forth in the Articles
Supplementary establishing the Series C Auction Rate Preferred.

      The auction procedures include a pro rata allocation of Series C Auction
Rate Preferred shares for purchase and sale. This allocation process may
result in an existing holder continuing to hold or selling, or a potential
holder buying, fewer shares than the number of Series C Auction Rate Preferred
shares in its order. If this happens, broker-dealers will be required to make
appropriate pro rata allocations among their respective customers.

      Settlement of purchases and sales will be made on the next business day
(which also is a dividend payment date) after the auction date through The
Depository Trust Company. Purchasers will pay for their Series C Auction Rate
Preferred through broker-dealers in same-day funds to The Depository Trust
Company against delivery to the broker-dealers. The Depository Trust Company
will make payment to the sellers' broker-dealers in accordance with its normal
procedures, which require broker-dealers to make payment against delivery in
same-day funds. As used in this prospectus, a business day is a day on which
the New York Stock Exchange is open for trading, and which is not a Saturday,
Sunday or any other day on which banks in New York City are authorized or
obligated by law to close.

      The first auction for Series C Auction Rate Preferred will be held on    ,
2003, the business day preceding the dividend payment date for the initial
dividend period. Thereafter, except during special dividend periods, auctions
for Series C Auction Rate Preferred normally will be held every Tuesday (or
the immediately preceding business day if Tuesday is a holiday), and each
subsequent dividend period for the Series C Auction Rate Preferred normally
will begin on the following Wednes day.

      If an auction is not held because an unforeseen event or unforeseen
events cause a day that otherwise would have been an auction date not to be a
business day, then the length of the then-current dividend period will be
extended by seven days (or a multiple thereof if necessary because of such
unforeseen event or events), the applicable rate for such period will be the
applicable rate for the then current dividend period so extended and the
dividend payment date for such dividend period will be the first business day
immediately succeeding the end of such period.

      The following is a simplified example of how a typical auction works.
Assume that the Fund has 1,000 outstanding Series C Auction Rate Preferred
shares and three current holders. The three current holders and three
potential holders submit orders through broker-dealers at the auction:



Current Holder A      Owns 500 shares, wants to     Bid order at 1.6% rate for
                      sell all 500 shares if        all 500 shares
                      auction rate is less than
                      1.6%

Current Holder B      Owns 300 shares, wants        Hold order - will take the
                      to hold                       auction rate

Current Holder C      Owns 200 shares, wants to     Bid order at 1.4% rate for
                      200 shares if auction rate    all 200 shares
                      is less than 1.4%

Potential Holder D    Wants to buy 200 shares       Places order to buy at or
                                                    above 1.5%

Potential Holder E    Wants to buy 300 shares       Places order to buy at or
                                                    above 1.4%

Potential Holder F    Wants to buy 200 shares       Places order to buy at or
                                                    above 1.6%

      The lowest dividend rate that will result in all 1,000 Series C Auction
Rate Preferred shares continuing to be held is 1.5% (the offer by D).
Therefore, the dividend rate will be 1.5%. Current holders B and C will
continue to own their shares. Current holder A will sell its shares because
A's dividend rate bid was higher than the dividend rate. Potential holder D
will buy 200 shares and potential holder E will buy 300 shares because their
bid rates were at or below the dividend rate. Potential holder F will not buy
any shares because its bid rate was above the dividend rate.

Secondary Market Trading and Transfer of Series C Auction Rate Preferred

      The underwriters are not required to make a market in the Series C
Auction Rate Preferred. The broker-dealers (including the underwriters) may
maintain a secondary trading market for outside of auctions, but they are not
required to do so. There can be no assurance that a secondary trading market
for the Series C Auction Rate Preferred will develop or, if it does develop,
that it will provide owners with liquidity of investment. The Series C Auction
Rate Preferred will not be registered on any stock exchange or on the NASDAQ
market. Investors who purchase Series C Auction Rate Preferred in an auction
for a special dividend period should note that because the dividend rate on
such shares will be fixed for the length of that dividend period, the value of
such shares may fluctuate in response to the changes in interest rates, and
may be more or less than their original cost if sold on the open market in
advance of the next auction thereof, depending on market conditions.

      You may sell, transfer, or otherwise dispose of the Series C Auction
Rate Preferred only in whole shares and only pursuant to a bid or sell order
placed with the auction agent in accordance with the auction procedures, to
the Fund or its affiliates or to or through a broker-dealer that has been
selected by the Fund or to such other persons as may be permitted by the Fund.
However, if you hold your Series C Auction Rate Preferred in the name of a
broker-dealer, a sale or transfer of your Series C Auction Rate Preferred to
that broker-dealer, or to another customer of that broker-dealer, will not be
considered a sale or transfer for purposes of the foregoing if the shares
remain in the name of the broker-dealer immediately after your transaction.
In addition, in the case of all transfers other than through an auction, the
broker-dealer (or other person, if the Fund permits) receiving the transfer
must advise the auction agent of the transfer.

      Further description of the auction procedures can be found in the SAI.


         DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES

Common Stock

      The Fund is authorized to issue one billion (1,000,000,000) shares of
capital stock, par value $.001 per share, in multiple classes and series
thereof as determined from time to time by the Board of Directors of the Fund.
Of the Fund's one billion (1,000,000,000) shares of authorized capital stock,
one hundred million (100,000,000) shares have been classified by the Board of
Directors as common stock class and two million (2,000,000) shares as
preferred stock class. As of February 14, 2003, 11,113,431 shares of common
stock were outstanding. The common stock of the Fund is listed on the New York
Stock Exchange under the symbol "GCV" and began trading March 31, 1995. The
average weekly trading volume of the common stock on the NYSE for the 12
months ended February 14, 2003 was 83,921. Each share within a particular
class or series thereof has equal voting, dividend, distribution and
liquidation rights. There are no conversion or preemptive rights in connection
with any outstanding stock of the Fund. All stock, when issued in accordance
with the terms of the offering, will be fully paid and non-assessable. The
common stock is not redeemable and has no preemptive, conversion or cumulative
voting rights. The Fund has a policy, which may be modified at any time by its
Board of Directors, of paying distributions on its common stock of 8% of
average quarter-end net assets attribut able to common stock. This policy
permits holders of common stock to realize a predictable, but not assured,
level of cash flow and some liquidity periodically with respect to their
common stock without having to sell shares.

      The Fund is a closed-end, management investment company and, as such,
its stockholders do not, and will not, have the right to redeem their stock.
The Fund, however, may repurchase its common stock from time to time as and
when it deems such a repurchase advisable. The Fund's Board of Directors has
determined that such repurchase, up to 500,000 shares of common stock, may be
made when the Fund's common stock is trading at a discount of 10% or more from
net asset value. Pursuant to this authorization the Fund has repurchased in
the open market 305,200 shares through December 31, 2002, none of which stock
was repurchased during the year ended December 31, 2002. Pursuant to the 1940
Act, the Fund may repurchase its stock on a securities exchange (provided that
the Fund has informed its stockholders within the preceding six months of its
intention to repurchase such stock) or as otherwise permitted in accordance
with Rule 23c-1 under the 1940 Act. Under Rule 23c-1, certain conditions must
be met for such alternative purchases regarding, among other things,
distribution of net income for the preceding fiscal year, asset coverage with
respect to the Fund's senior debt and equity securities, identity of the
sellers, price paid, brokerage commissions, prior notice to stockholders of an
intention to purchase stock and purchasing in a manner and on a basis which
does not discriminate unfairly against the other stockholders through their
interest in the Fund. In addition, Rule 23c-1 requires the Fund to file
notices of such purchase with the SEC. Any repurchase of common stock by the
Fund will also be subject to Maryland corporate law, which requires that
immediately following such repurchase the total assets of the Fund must be
equal to or greater than the sum of the Fund's total liabilities plus the
aggregate liquidation preference of its outstanding preferred stock.

      When the Fund repurchases its common stock for a price below its net
asset value, the net asset value of the common stock that remains outstanding
will be enhanced. This does not, however, necessarily mean that the market
price of the Fund's remaining outstanding common stock will be affected,
either positively or negatively. Further, interest on any borrowings made to
finance the repurchase of common stock will reduce the net income of the Fund.

      From the commencement of the Fund's operations as a closed-end
investment company, the Fund's common stock has traded in the market for
extended periods at both a premium to and a discount from net asset value.

Preferred Stock

      Currently, two million (2,000,000) shares of the Fund's one billion
(1,000,000,000) authorized shares of capital stock have been classified by the
Board of Directors as preferred stock, par value $.001 per share. As of
February 14, 2003, there were no shares of preferred stock outstanding. The
terms of such preferred stock may be fixed by the Board of Directors and would
materially limit and/or qualify the rights of the holders of the Fund's common
stock. As of December 31, 2002, the Fund had outstanding 600,000 shares of
Series A Preferred, all of which the Fund redeemed on February 11, 2003. Prior
to its redemption, the Series A Preferred was rated AAA by S&P and was listed
and traded on the New York Stock Exchange under the symbol "GCV Pr."

      The following table shows the number of shares of (i) capital stock
authorized, (ii) its classifica tion and (iii) capital stock outstanding for
each class of authorized securities of the Fund as of February 14, 2003.


                          AMOUNT                  AMOUNT              AMOUNT
 CLASS OF STOCK         AUTHORIZED               CLASSIFIED(2)     OUTSTANDING
- ----------------       -----------               ----------        -----------

Common Stock.....    1,000,000,000(1) shares     98,000,000        11,113,431
Preferred Stock..    1,000,000,000(1) shares      4,000,000                 0(3)


(1)   The total number of shares of capital stock of all classes authorized.
      The Board of Directors is authorized to classify or reclassify these one
      billion shares.

(2)   By resolution dated February 19, 2003 the Board of Directors
      reclassified two million shares of preferred stock as common stock.

(3)   Does not include the Series B Preferred or Series C Auction Rate
      Preferred being offered pursuant to this prospectus.


                             TAXATION

      The following is a description of certain U.S. federal income tax
consequences to a stockholder of acquiring, holding and disposing of preferred
stock of the Fund. The discussion reflects applicable tax laws of the United
States as of the date of this prospectus, which tax laws may be changed or
subject to new interpretations by the courts or the Internal Revenue Service
(the "IRS") retroactively or prospectively.

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

Taxation of the Fund

      The Fund has elected to be treated and has qualified as, and intends to
continue to qualify as, a regulated investment company under Subchapter M of
the Code. Accordingly, the Fund must, among other things, (i) derive in each
taxable year at least 90% of its gross income (including tax-exempt interest)
from dividends, interest, payments with respect to certain securities loans,
and gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including but not limited to gain from options,
futures and forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (ii) diversify its
holdings so that, at the end of each quarter of each taxable year (a) at least
50% of the market value of the Fund's total assets is represented by cash and
cash items, U.S. government securities, the securities of other regulated
investment companies and other securities, with such other securities limited,
in respect of any one issuer, to an amount not greater than 5% of the value of
the Fund's total assets and not more than 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the market value of
the Fund's total assets is invested in the securities of any issuer (other
than U.S. government securities and the securities of other regulated
investment companies) or of any two or more issuers that the Fund controls and
that are determined to be engaged in the same business or similar or related
trades or businesses.

      As a regulated investment company, the Fund generally is not subject to
U.S. federal income tax on income and gains that it distributes each taxable
year to stockholders, if it distributes at least 90% of the sum of the Fund's
(i) investment company taxable income (which includes, among other items,
dividends, interest and the excess of any net short-term capital gains over
net long-term capital losses and other taxable income other than any net
capital gain (as defined below) reduced by deductible expenses) determined
without regard to the deduction for dividends paid and (ii) its net tax-exempt
interest (the excess of its gross tax-exempt interest over certain disallowed
deductions). The Fund intends to distribute at least annually substantially
all of such income.

      Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, the Fund must distribute during each
calendar year an amount at least equal to the sum of (i) 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (ii) 98% of its capital gains in excess of its capital losses (adjusted
for certain ordinary losses) for a one-year period generally ending on October
31 of the calendar year (unless an election is made to use the Fund's fiscal
year), and (iii) certain undistributed amounts from previous years on which
the Fund paid no U.S. federal income tax. While the Fund intends to distribute
any income and capital gains in the manner necessary to minimize imposition of
the 4% excise tax, there can be no assurance that sufficient amounts of the
Fund's taxable income and capital gains will be distributed to avoid entirely
the imposition of the tax. In that event, the Fund will be liable for the tax
only on the amount by which it does not meet the foregoing distribution
requirement.

      If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to stockholders, and such distributions will be taxable to the
stockholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits.

Taxation of Stockholders

      Distributions paid to you by the Fund from its ordinary income or from
an excess of net short- term capital gains over net long-term capital losses
(together referred to hereinafter as "ordinary income dividends") are taxable
to you as ordinary income to the extent of the Fund's earning and profits.
Distributions made to you from an excess of net long-term capital gains over
net short-term capital losses ("capital gain dividends"), including capital
gain dividends credited to you but retained by the Fund, are taxable to you as
long-term capital gains if they have been properly designated by the Fund,
regardless of the length of time you have owned Fund stock. Distributions in
excess of the Fund's earnings and profits will first reduce the adjusted tax
basis of your stock and, after such adjusted tax basis is reduced to zero,
will constitute capital gains to you (assuming the stock is held as a capital
asset). Generally, not later than 60 days after the close of its taxable year,
the Fund will provide you with a written notice designating the amount of any
ordinary income dividends or capital gain dividends and other distributions.

      The sale or other disposition of common stock of the Fund will generally
result in capital gain or loss to you, and will be long-term capital gain or
loss if the stock has been held for more than one year at the time of sale.
Any loss upon the sale or exchange of Fund stock held for six months or less
will be treated as long-term capital loss to the extent of any capital gain
dividends received (including amounts credited as an undistributed capital
gain dividend) by you. A loss realized on a sale or exchange of stock of the
Fund will be disallowed if other substantially identical Fund stock is
acquired (whether through the automatic reinvestment of dividends or
otherwise) within a 61-day period beginning 30 days before and ending 30 days
after the date that the stock is disposed of. In such case, the basis of the
stock acquired will be adjusted to reflect the disallowed loss. Present law
taxes both long-term and short-term capital gains of corporations at the rates
applicable to ordinary income. For non-corporate taxpayers, however,
short-term capital gains and ordinary income will currently be taxed at a
maximum rate of 38.6% while long-term capital gains generally will be taxed at
a maximum rate of 20% and 10% for taxpayers in the 15% bracket. The 20%
capital gains rate and the 10% capital rate will be reduced to 18% and 8%
respectively, for capital assets held for more than five years if the holding
period begins after December 31, 2000.

      Dividends and other taxable distributions are taxable to you even though
they are reinvested in additional stock of the Fund. If the Fund pays you a
dividend in January that was declared in the previous October, November or
December to stockholders of record on a specified date in one of such months,
then such dividend will be treated for tax purposes as being paid by the Fund
and received by you on December 31 of the year in which the dividend was
declared.

      The Fund is required in certain circumstances to backup withhold on
taxable dividends and certain other payments paid to non-corporate holders of
the Fund's stock who do not furnish the Fund with their correct taxpayer
identification number (in the case of individuals, their social security
number) and certain certifications, or who are otherwise subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
from payments made to you may be refunded or credited against your U.S.
federal income tax liability, if any, provided that the required information
is furnished to the Internal Revenue Service.

      The Bush Administration has announced a proposal to reduce or eliminate
the tax on dividends; however, many of the details of the proposal (including
how the proposal would apply to dividends paid by a regulated investment
company) have not been specified. Moreover, the prospects for this proposal
are unclear. Accordingly, it is not possible to evaluate how this proposal
might affect the tax discussion above.

      The foregoing is a general and abbreviated summary of the provisions of
the Code and the Treasury regulations in effect as they directly govern the
taxation of the Fund and its stockholders. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive. A more complete discussion of the tax rules applicable to the
Fund and its stockholders can be found in the Statement of Additional
Information that is incorporated by reference into this prospectus.
Stockholders are urged to consult their tax advisers regarding specific
questions as to U.S. federal, foreign, state, local income or other taxes.


        ANTI-TAKEOVER PROVISIONS OF THE CHARTER AND BY-LAWS

      The Fund presently has provisions in its Charter and Amended and
Restated By-Laws (together, its "Governing Documents") that could have the
effect of limiting:

      o    the ability of other entities or persons to acquire control of the
           Fund's Board of Directors;

      o    the Fund's freedom to engage in certain transactions; or

      o    the ability of the Fund's directors or stockholders to amend the
           Governing Documents or effectuate changes in the Fund's management.

These provisions of the Governing Documents of the Fund may be regarded as
"anti-takeover" provisions. The Board of Directors of the Fund is divided
into three classes, each having a term of three years. Each year the term of
one class of directors will expire. Accordingly, only those directors in one
class may be changed in any one year, and it would require two years to change
a majority of the Board of Directors. Such system of electing directors may
have the effect of maintaining the continuity of management and, thus, make it
more difficult for the stockholders of the Fund to change the majority of
directors. See "Management of the Fund." A director of the Fund may be removed
with cause by a vote of a majority of the votes entitled to be cast for the
election of directors of the Fund. A director of the Fund may not be removed
without cause. In addition, the affirmative vote of the holders of 75% of the
outstanding shares of the Fund, and the vote of a majority (as defined in the
1940 Act) of the holders of preferred shares, voting as a single class, is
required to authorize its conversion from a closed-end to an open-end
investment company, or to amend certain provisions of the Charter involving
conversion to an open-end fund.

      Further, unless a higher percentage is provided for under the Charter,
the affirmative vote of a majority (as defined in the 1940 Act) of the votes
entitled to be cast by holders of outstanding shares of the Fund's preferred
stock, voting as a separate class, will be required to approve any plan of
reorganiza tion adversely affecting such stock or any action requiring a vote
of security holders under Section 13(a) of the 1940 Act, including, among
other things, open-ending the Fund and changing the Fund's invest ment
objective or changing the investment restrictions described as fundamental
policies under "Investment Restrictions" in the SAI.

      Maryland corporations that are subject to the Securities Exchange Act of
1934 and have at least three outside directors, such as the Fund, may by board
resolution elect to become subject to certain corporate governance provisions
set forth in the Maryland corporate law, even if such provisions are
inconsistent with the corporation's charter and by-laws. Accordingly,
notwithstanding its Charter or By-Laws, under Maryland law the Fund's Board
of Directors may elect by resolution to, among other things:

      o    require that special meetings of stockholders be called only at the
           request of stockholders entitled to cast at least a majority of the
           votes entitled to be cast at such meeting;

      o    reserve for the Board the right to fix the number of Fund
           directors;

      o    provide that directors are subject to removal only by the vote of
           the holders of two-thirds of the stock entitled to vote; and

      o    retain for the Board sole authority to fill vacancies created by
           the death, removal or resignation of a director, with any director
           so appointed to serve for the balance of the unexpired term rather
           than only until the next annual meeting of stockholders.

      The Board may make any of the foregoing elections without amending the
Fund's Charter or By-Laws and without stockholder approval. Though a
corporation's charter or a resolution by its board may prohibit its directors
from making the elections set forth above, the Fund's Board currently is not
prohibited from making any such elections.

      The provisions of the Governing Documents and Maryland law described
above could have the effect of depriving the owners of stock in the Fund of
opportunities to sell their shares at a premium over prevailing market prices
by discouraging a third party from seeking to obtain control of the Fund in a
tender offer or similar transaction. The overall effect of these provisions is
to render more difficult the accomplishment of a merger or the assumption of
control by a principal stockholder.

      The Governing Documents of the Fund are on file with the SEC. For the
full text of these provisions see "Further Information."


                   CUSTODIAN, TRANSFER AGENT, AUCTION AGENT
                         AND DIVIDEND-DISBURSING AGENT

      State Street Bank and Trust Company (the "Custodian"), located at 150
Royall Street, Canton, MA 02021, serves as the custodian of the Fund's assets
pursuant to a custody agreement. Under the custody agreement, the Custodian
holds the Fund's assets in compliance with the 1940 Act. For its services, the
Custodian will receive a monthly fee based upon the average weekly value of
the total assets of the Fund, plus certain charges for securities
transactions.

      EquiServe Trust Company, N.A., located at P.O. Box 43025, Providence, RI
02940-3025, serves as the Fund's dividend disbursing agent, as agent under the
Fund's automatic dividend reinvestment and voluntary cash purchase plan and as
transfer agent and registrar for the common stock of the Fund.

       Series B Preferred. EquiServe will also serve as the Fund's transfer
agent, registrar, dividend and paying agent and redemption agent with respect
to the Series B Preferred.

      Series C Auction Rate Preferred. The Bank of New York, located at 5 Penn
Plaza, 13th Floor, New York, NY 10001, will serve as the Fund's auction agent,
transfer agent, registrar, dividend paying agent and redemption agent with
respect to the Series C Auction Rate Preferred.


                                 UNDERWRITING

      Salomon Smith Barney Inc. and Gabelli & Company, Inc. are acting as
underwriters in this offering. Subject to the terms and conditions stated in
the underwriting agreement dated the date of this prospectus, each underwriter
named below has agreed to purchase, and the Fund has agreed to sell to that
underwriter, the number of shares of Series B Preferred and Series C Auction
Rate Preferred set forth opposite the underwriter's name.

                                                            Number of Series C
                                      Number of Series      Auction Rate
Underwriter                           B Preferred Shares    Preferred Shares
- -----------                           ------------------    ------------------
Salomon Smith Barney Inc........
Gabelli & Company, Inc..........
                                      ==================    =================
      Total.....................


       The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all the Series B Preferred or Series C
Auction Rate Preferred, as applicable, if they purchase any such shares. The
Fund and the Investment Adviser have agreed to indemnify the underwriters
against certain liabilities, including liabilities arising under the
Securities Act of 1933, as amended, or to contribute to payments the
underwriters may be required to make for any of those liabilities.

Offering of Series B Preferred Shares

      The Fund has been advised by the underwriters that they propose
initially to offer some of the Series B Preferred shares directly to the
public at the public offering price set forth on the cover page of this
prospectus and some of the shares to dealers at the public offering price less
a concession not to exceed $     per share. The sales load the Fund will pay of
$    per Series B Preferred share is equal to    % of the initial offering
price. After the initial public offering, the underwriters may change the
public offering price and the concession. Investors must pay for any Series B
Preferred purchased in the initial public offering on or before      , 2003.

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

      In connection with the offering, the underwriters may purchase and sell
shares of Series B Preferred in the open market. These transactions may
include short sales and stabilizing transactions. Short sales involve
syndicate sales of shares in excess of the number of shares to be purchased by
the underwriters in the offering, which creates a syndicate short position.
Stabilizing transactions consist of bids for or purchases of shares in the
open market while the offering is in progress.

      The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
underwriters repurchase shares originally sold by that syndicate member in
order to cover syndicate short positions or make stabilizing purchases.

      Any of these activities may have the effect of preventing or retarding a
decline in the market price of the stock. They may also cause the price of the
Series B Preferred to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions on the New York Stock Exchange or in the
over-the-counter market, or otherwise. If the underwriters commence any of
these transactions, they may discontinue them at any time.

Offering of Series C Auction Rate Preferred Shares

      The Fund has been advised by the underwriters that they propose
initially to offer some of the Series C Auction Rate Preferred shares directly
to the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to dealers at the public offering price less
a concession not to exceed $      per share. The sales load the Fund will pay of
$     per Series C Auction Rate Preferred share is equal to    % of the initial
offering price. After the initial public offering, the underwriters may change
the public offering price and the concession. Investors must pay for any
Series C Auction Rate Preferred purchased in the initial public offering on or
before      , 2003.

Provision of Other Services to the Fund

      The underwriters have performed investment banking and advisory services
for the Fund from time to time for which they have received customary fees and
expenses. The underwriters and their affiliates may, from time to time, engage
in transactions with and perform services for the Fund in the ordinary course
of their business.

      The underwriters have acted in the past and the Fund anticipates that
the underwriters may continue from time to time act as brokers or dealers in
executing the Fund's portfolio transactions and that the underwriters, or
their affiliates, may act as a counterparty in connection with the interest
rate transactions described under "How the Fund Manages Risk -- Interest Rate
Transactions" after they have ceased to be underwriters. The Fund anticipates
that the underwriters or their respective affiliates may, from time to time,
act in auctions as broker-dealers and receive fees as set forth under "The
Auction of Series C Auction Rate Preferred" and in the SAI. The underwriters
are active underwriters of, and dealers in, securities and act as market
makers in a number of such securities, and therefore can be expected to engage
in portfolio transactions with, and perform services for, the Fund.

      The principal business address of Salomon Smith Barney Inc. is 388
Greenwich Street, New York, NY 10013. The principal business address of
Gabelli & Company, Inc. is One Corporate Center, Rye, New York 10580.

      Gabelli & Company, Inc. is a wholly-owned subsidiary of Gabelli
Securities, Inc., which is a majority-owned subsidiary of the parent company
of the Investment Adviser which is, in turn, indirectly majority-owned by
Mario J. Gabelli. As a result of these relationships, Mr. Gabelli, the Fund's
President and Chief Investment Officer, may be deemed to be a "controlling
person" of Gabelli & Company, Inc.


                                 LEGAL MATTERS

      Certain matters concerning the legality under Maryland law of the Series
B Preferred and Series C Auction Rate Preferred will be passed on by Miles &
Stockbridge P.C., Baltimore, Maryland. Certain legal matters will be passed on
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, special
counsel to the Fund in connection with the offering of the Series B Preferred
and/or Series C Auction Rate Preferred, and by Simpson Thacher & Bartlett, New
York, New York, counsel to the underwriters. Skadden, Arps, Slate, Meagher &
Flom LLP and Simpson Thacher & Bartlett will each rely as to matters of
Maryland law on the opinion of Miles & Stockbridge P.C.


                                   EXPERTS

      The audited financial statements of the Fund as of December 31, 2001
have been incorporated by reference into the SAI in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority
of that firm as experts in accounting and auditing. The report of
PricewaterhouseCoopers LLP is included in the SAI. PricewaterhouseCoopers LLP
is located at 1177 Avenue of the Americas, New York, New York 10036.


                            ADDITIONAL INFORMATION

      The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act and in accordance therewith
files reports and other information with the SEC. Reports, proxy statements
and other information filed by the Fund with the SEC pursuant to the
informational requirements of such Acts can be inspected and copied at the
public reference facilities maintained by the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC maintains a web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Fund, that file electronically with the
SEC.

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

      This prospectus constitutes part of a Registration Statement filed by
the Fund with the SEC under the Securities Act of 1933, as amended, and the
1940 Act. This prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Fund and the Series B Preferred and Series C Auction Rate Preferred offered
hereby. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the SEC. Each such statement is qualified in
its entirety by such reference. The complete Registration Statement may be
obtained from the SEC upon payment of the fee prescribed by its rules and
regulations or free of charge through the SEC's web site (http://www.sec.gov).


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      Certain statements in this prospectus constitute forward-looking
statements, which involve known and unknown risks, uncertainties and other
factors that may cause the actual results, levels of activity, performance or
achievements of the Fund to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, those listed
under "Risk Factors and Special Considerations" and elsewhere in this
prospectus. As a result of the foregoing and other factors, no assurance can
be given as to the future results, levels of activity or achievements, and
neither the Fund nor any other person assumes responsibility for the accuracy
and completeness of such statements.


                           TABLE OF CONTENTS OF SAI

      An SAI dated      , 2003 has been filed with the Securities and Exchange
Commission and is incorporated by reference in this prospectus. An SAI may be
obtained without charge by writing to the Fund at its address at One Corporate
Center, Rye, New York 10580-1422 or by calling the Fund toll-free at (800)
GABELLI (422-3554). The Table of Contents of the SAI is as follows:

                                                                          PAGE

INVESTMENT OBJECTIVE AND POLICIES ........................................B-3
INVESTMENT RESTRICTIONS...................................................B-17
MANAGEMENT OF THE FUND....................................................B-19
PORTFOLIO TRANSACTIONS ...................................................B-27
REPURCHASE OF COMMON STOCK................................................B-30
PORTFOLIO TURNOVER .......................................................B-30
AUTOMATIC DIVIDEND REINVESTMENT AND
  VOLUNTARY CASH PURCHASE PLAN............................................B-30
TAXATION .................................................................B-31
ADDITIONAL INFORMATION CONCERNING
   AUCTIONS FOR SERIES C AUCTION RATE PREFERRED...........................B-39
ADDITIONAL INFORMATION CONCERNING
   THE SERIES B PREFERRED AND SERIES C AUCTION RATE PREFERRED.............B-48
MOODY'S AND FITCH GUIDELINES .............................................B-56
NET ASSET VALUE...........................................................B-68
BENEFICIAL OWNERS.........................................................B-69
GENERAL INFORMATION.......................................................B-70
FINANCIAL STATEMENTS......................................................B-72
GLOSSARY..................................................................B-73



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


      No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this prospectus in connection with the offer contained herein, and, if given
or made, such other information or representations must not be relied upon as
having been authorized by the Fund, the Investment Adviser or the
underwriters. Neither the delivery of this prospectus nor any sale made
hereunder will, under any circumstances, create any implication that there has
been no change in the affairs of the Fund since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates.
This prospectus does not constitute an offer to sell or the solicitation of an
offer to buy such securities in any circumstance in which such an offer or
solicitation is unlawful.



<PAGE>

                                  APPENDIX A
                            CORPORATE BOND RATINGS


MOODY'S INVESTORS SERVICE, INC.
Aaa    Bonds that are rated Aaa are judged to be of the best quality. They
       carry the smallest degree of investment risk and are generally referred
       to as "gilt edge." Interest payments are protected by a large or
       exceptionally stable margin and principal is secure. While the various
       protective elements are likely to change, such changes as can be
       visualized are most unlikely to impair the fundamentally strong
       position of such issues.
Aa     Bonds that are rated Aa are judged to be of high quality by all
       standards. Together with the Aaa group they comprise what are generally
       known as high grade bonds. They are rated lower than the best bonds
       because margins of protection may not be as large as in Aaa securities
       or fluctuation of protective elements may be of greater amplitude or
       there may be other elements present that make the long-term risk appear
       somewhat larger than in Aaa Securities.
A      Bonds that are rated A possess many favorable investment attributes and
       are to be considered as upper-medium-grade obligations. Factors giving
       security to principal and interest are considered adequate, but
       elements may be present that suggest a susceptibility to impairment
       some time in the future.
Baa    Bonds that are rated Baa are considered as medium-grade obligations
       i.e., they are neither highly protected nor poorly secured. Interest
       payments and principal security appear adequate for the present, but
       certain protective elements may be lacking or may be characteristically
       unreliable over any great length of time. Such bonds lack outstanding
       investment characteristics and in fact have speculative characteristics
       as well.
Ba     Bonds that are rated Ba are judged to have speculative elements; their
       future cannot be considered as well assured. Often the protection of
       interest and principal payments may be very moderate and thereby not
       well safeguarded during both good and bad times over the future.
       Uncertainty of position characterizes bonds in this class.
B      Bonds that are rated B generally lack characteristics of the desirable
       investment. Assurance of interest and principal payments or of
       maintenance of other terms of the contract over any long period of time
       may be small. Moody's applies numerical modifiers (1, 2, and 3) with
       respect to the bonds rated Aa through B. The modifier 1 indicates that
       the company ranks in the higher end of its generic rating category; the
       modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
       that the company ranks in the lower end of its generic rating category.
Caa    Bonds that are rated Caa are of poor standing. These issues may be in
       default or there may be present elements of danger with respect to
       principal or interest.
Ca     Bonds that are rated Ca represent obligations that are speculative in a
       high degree. Such issues are often in default or have other marked
       shortcomings.
C      Bonds that are rated C are the lowest rated class of bonds and issues
       so rated can be regarded as having extremely poor prospects of ever
       attaining any real investment standing.


FITCH, INC.
AAA     This is the highest rating assigned by Fitch to a debt obligation and
        indicates an extremely strong capacity to pay interest and repay
        principal.
AA      Debt rated AA has a very strong capacity to pay interest and repay
        principal and differs from AAA issues only in small degree. Principal
        and interest payments on bonds in this category are regarded as safe.
A       Debt rated A has a strong capacity to pay interest and repay principal
        although they are somewhat more susceptible to the adverse effects of
        changes in circumstances and economic conditions than debt in higher
        rated categories.
BBB     This is the lowest investment grade. Debt rated BBB has an adequate
        capacity to pay interest and repay principal. Whereas it normally
        exhibits adequate protection parameters, adverse economic conditions
        or changing circumstances are more likely to lead to a weakened
        capacity to pay interest and repay principal for debt in this category
        than in higher rated categories.


Speculative Grade

      Debt rated BB, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation, and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major exposures to adverse conditions. Debt rated C1
is reserved for income bonds on which no interest is being paid and debt rated
D is in payment default.

      AA to CCC may be modified by the addition of a plus or minus sign to
show relative standing within the major categories.

      "NR" indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Fitch does not
rate a particular type of obligation as a matter of policy.


STANDARD & POOR'S RATINGS SERVICES


AAA     This is the highest rating assigned by S&P to a debt obligation and
        indicates an extremely strong capacity to pay interest and repay
        principal.
AA      Debt rated AA has a very strong capacity to pay interest and repay
        principal and differs from AAA issues only in small degree.
A       Principal and interest payments on bonds in this category are regarded
        as safe. Debt rated A has a strong capacity to pay interest and repay
        principal although they are somewhat more susceptible to the adverse
        effects of changes in circumstances and economic conditions than debt
        in higher rated categories.
BBB     This is the lowest investment grade. Debt rated BBB has an adequate
        capacity to pay interest and repay principal. Whereas it normally
        exhibits adequate protection parameters, adverse economic conditions
        or changing circumstances are more likely to lead to a weakened
        capacity to pay interest and repay principal for debt in this category
        than in higher rated categories.

Speculative Grade

      Debt rated BB, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation, and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major exposures to adverse conditions. Debt rated C
1 is reserved for income bonds on which no interest is being paid and debt
rated D is in payment default.

      In July 1994, S&P initiated an "r" symbol to its ratings. The "r" symbol
is attached to derivatives, hybrids and certain other obligations that S&P
believes may experience high variability in expected returns due to noncredit
risks created by the terms of the obligations.

      AA to CCC may be modified by the addition of a plus or minus sign to
show relative standing within the major categories.

      "NR" indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.


<PAGE>


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


                            $50,000,000
                            THE GABELLI
                          CONVERTIBLE AND
                       INCOME SECURITIES FUND
                               INC.

              1,000,000 Shares, Series B    % Cumulative
                          Preferred Stock
              (Liquidation Preference $25 per Share)

          1,000 Shares, Series C Auction Rate Cumulative
                          Preferred Stock
            (Liquidation Preference $25,000 per Share)


                          [Gabelli Logo]


                            PROSPECTUS
                                      ,  2003



                       Salomon Smith Barney
                      Gabelli & Company, Inc.


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

<PAGE>


The information in this statement of additional information is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
statement of additional information is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.

                  Subject to Completion, Dated March 13, 2003

                            THE GABELLI CONVERTIBLE
                        AND INCOME SECURITIES FUND INC.
                              ___________________

                      STATEMENT OF ADDITIONAL INFORMATION

      The Gabelli Convertible and Income Securities Fund Inc. (the "Fund") is
a diversified, closed-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund seeks a
high level of total return on its assets through a combination of current
income and capital appreciation. The Fund invests primarily in a portfolio of
convertible and income producing securities selected by Gabelli Funds, LLC,
the investment adviser to the Fund (the "Investment Adviser"). It is the
policy of the Fund, under normal market conditions, to invest at least 80% of
the value of its total assets in "Convertible Securities," i.e., debt or
equity securities (bonds, debentures, notes, stocks and other similar
securities) that are convertible into common stock or other equity securities,
and "Income Securities," i.e., securities that are expected to periodically
accrue or generate income for securities holders, including short-term
discounted Treasury Bills. The Fund expects to continue its practice of
focusing on Convertible Securities to the extent attractive opportunities are
available.

      This Statement of Additional Information ("SAI") is not a prospectus,
but should be read in conjunction with the prospectus for the Fund dated ,
2003 (the "Prospectus"). Investors should obtain and read the Prospectus prior
to purchasing the Series B Preferred or the Series C Auction Rate Preferred. A
copy of the Prospectus may be obtained without charge by calling the Fund at
1-800-GABELLI (1-800-422-3554) or (914) 921-5070. This SAI incorporates by
reference the entire Prospectus.

      Each capitalized term used but not defined in this SAI has the meaning
ascribed to it, as the case may be, in the Prospectus or in the glossary of
this SAI.

<PAGE>

                         TABLE OF CONTENTS
                                                               Page
Investment Objective and Policies...............................B-3
Investment Restrictions........................................B-17
Management of the Fund.........................................B-19
Portfolio Transactions.........................................B-27
Repurchase of Common Stock.....................................B-30
Portfolio Turnover.............................................B-30
Automatic Dividend Reinvestment and Voluntary Cash
 Purchase Plan.................................................B-30
Taxation.......................................................B-31
Additional Information Concerning
Auctions for the Series C Auction Rate Preferred...............B-39
Additional Information Concerning the
Series B Preferred and Series C Auction Rate Preferred.........B-48
Moody's and Fitch Guidelines...................................B-56
Net Asset Value................................................B-68
Beneficial Owners..............................................B-69
General Information............................................B-70
Financial Statements...........................................B-72
Glossary.......................................................B-73

      The Prospectus and this SAI omit certain of the information contained in
the registration statement filed with the Securities and Exchange Commission,
Washington, D.C. The registration statement may be obtained from the
Securities and Exchange Commission upon payment of the fee prescribed, or
inspected at the Securities and Exchange Commission's office at no charge.
This Statement of Additional Information is dated March   , 2003.



<PAGE>

                 INVESTMENT OBJECTIVE AND POLICIES

Investment Objective

      The Fund's investment objective is a high level of total return on its
assets. Under normal market conditions, the Fund will invest at least 80% of
the value of its total assets in "Convertible Securities," i.e., securities
(bonds, debentures, notes, stocks and other similar securities) that are
convertible into common stock or other equity securities, and "Income
Securities," i.e., securities that are expected to periodically accrue or
generate income for their holders, including short-term discounted Treasury
Bills. The Fund expects to continue its practice of focusing on Convertible
Securities to the extent attractive opportunities are available. See
"Investment Objective and Policies" in the Prospectus.

Investment Practices

      Convertible Securities. A Convertible Security entitles the holder to
exchange such security for a fixed number of shares of common stock or other
equity security, usually of the same company, at fixed prices within a
specified period of time and to receive the fixed income of a bond or the
dividend preference of a preferred stock until the holder elects to exercise
the conversion privilege. The fixed income or dividend component of a
Convertible Security is referred to as the security's "investment value."

      A Convertible Security's position in a company's capital structure
depends upon its particular provisions. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings are
subordinated to the claims of others and are senior to the claims of common
stockholders.

      To the degree that the price of a Convertible Security rises above its
investment value because of a rise in price of the underlying common stock,
the value of such security is influenced more by price fluctuations of the
underlying common stock and less by its investment value. The price of a
Convertible Security that is supported principally by its conversion value
will rise along with any increase in the price of the common stock, and such
price generally will decline along with any decline in the price of the common
stock except that the security will receive additional support as its price
approaches investment value. A Convertible Security purchased or held at a
time when its price is influenced by its conversion value will produce a lower
yield than nonconvertible senior securities with comparable investment values.
Convertible Securities may be purchased by the Fund at varying price levels
above their investment values and/or their conversion values in keeping with
the Fund's investment objective.

      Many Convertible Securities in which the Fund will invest have call
provisions entitling the issuer to redeem the security at a specified time and
at a specified price. This is one of the features of a Convertible Security
which affects valuation. Calls may vary from absolute calls to provisional
calls. Convertible Securities with superior call protection usually trade at a
higher premium. If long-term interest rates decline, the interest rates of new
Convertible Securities will also decline. Therefore, in a falling interest
rate environment companies may be expected to call Convertible Securities with
high coupons and the Fund would have to invest the proceeds from such called
issues in securities with lower coupons. Thus, Convertible Securities with
superior call protection will permit the Fund to maintain a higher yield than
with issues without call protection.

      Income Securities. Although it is the Fund's policy to invest in
Convertible Securities to the extent attractive opportunities are available,
the Fund may also invest in Income Securities other than Convertible
Securities that are expected to periodically accrue or generate income for
their holders. Such Income Securities include (i) fixed income securities such
as bonds, debentures, notes, stock, short-term discounted Treasury Bills or
certain securities of U.S. government sponsored instrumentalities, as well as
money market mutual funds that invest in those securities, which, in the
absence of an applicable exemptive order, will not be affiliated with the
Investment Adviser, and (ii) common stocks of issuers that have historically
paid dividends. Fixed income securities obligate the issuer to pay to the
holder of the security a specified return, which may be either fixed or reset
periodically in accordance with the terms of the security. Fixed income
securities generally are senior to an issuer's common stock and their holders
generally are entitled to receive amounts due before any distributions are
made to common stockholders. Common stocks generally do not obligate an issuer
to make periodic distributions to holders.

      The market value of fixed income securities, especially those that
provide a fixed rate of return, may be expected to rise and fall inversely
with interest rates and in general is affected by the credit rating of the
issuer, the issuer's performance and perceptions of the issuer in the market
place. The market value of callable or redeemable fixed income securities may
also be affected by the issuer's call and redemption rights. It is possible
that the issuer of fixed income securities may not be able to meet its payment
obligations on interest or principal to holders. Further, holders of
non-convertible fixed income securities do not participate in any capital
appreciation of the issuer.

      The Fund may also invest in obligations of U.S. government sponsored
instrumentalities. Unlike non-U.S. government securities, obligations of
certain agencies and instrumentalities of the U.S. government, such as the
Government National Mortgage Association, are supported by the "full faith and
credit" of the U.S. government; others, such as those of the Export-Import
Bank of the U.S., are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; and still others, such as
those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
government would provide financial support to U.S. government sponsored
instrumentalities if it is not obligated to do so by law.

      The Fund also may invest in common stock of issuers that have
historically paid dividends or otherwise made distributions to common
stockholders. Unlike payments on fixed income securities, common stock
dividend payments generally are not guaranteed and so may be discontinued by
the issuer at its discretion or because of the issuer's inability to satisfy
its liabilities. Further, an issuer's history of paying dividends does not
guarantee that it will continue to pay dividends in the future. In addition to
dividends, under certain circumstances the holders of common stock may benefit
from the capital appreciation of the issuer.

      Other Investments. The Fund may without limit invest in securities of
companies for which a tender or exchange offer has been made or announced and
in securities of companies for which a merger, consolidation, liquidation or
reorganization proposal has been announced if, in the judgement of the
Investment Adviser, there is a reasonable prospect of capital appreciation
significantly greater than the brokerage and other transaction expenses
involved.

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

      In making the investments, the Fund will not violate any of its
investment restrictions (see below, "Investment Restrictions") including the
requirement that, (i) as to 75% of its total assets, it will not invest more
than 5% of its total assets in the securities of any one issuer and (ii) it
will not invest more than 25% of its total assets in any one industry. Certain
investments are short-term in nature and will tend to increase the turnover
ratio of the Fund thereby increasing its brokerage and other transaction
expenses.

      Unregistered Convertible Securities and Other Illiquid Investments. As
set forth in the Prospectus, the Fund is not subject to an independent
limitation on the amount it may invest in unregistered securities and other
illiquid investments, including repurchase agreements having a maturity of
longer than seven days.

      The staff of the Securities and Exchange Commission (the "SEC") has
taken the position that purchased over-the-counter ("OTC") options and the
assets used as "cover" for written OTC options are illiquid. The assets used
as cover for OTC options written by the Fund will be considered illiquid
unless the OTC options are sold to qualified dealers who agree that the Fund
may repurchase any OTC option it writes at a maximum price to be calculated by
a formula set forth in the option agreement. The cover for an OTC option
written subject to this procedure will be considered illiquid only to the
extent that the maximum repurchase price under the option formula exceeds the
intrinsic value of the option.

      When Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, the Fund may purchase securities on a "when, as
and if issued" basis under which the issuance of the security depends upon the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. The commitment for the purchase of any
such security will not be recognized in the portfolio of the Fund until the
Investment Adviser determines that issuance of the security is probable. At
such time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At such time, the
Fund will also establish a segregated account with its custodian bank in which
it will maintain cash or liquid high-grade debt securities at least equal in
value to the amount of its commitments. The Investment Adviser does not
believe that the net asset value of the Fund will be adversely affected by its
purchase of securities on this basis.

      Foreign Securities. Subject to the limitations described in the
Prospectus, the Fund may invest in foreign securities which involve certain
risks not associated with domestic investments.

      Among other risks, foreign markets have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have failed to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlements could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result either in losses to the Fund
due to subsequent declines in the value of such portfolio security or, if the
Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.

      High Yield/High Risk Securities. Subject to the limitations described in
the Prospectus, the Fund may invest in high yielding, lower rated bonds,
commonly called "junk bonds." Bonds that are rated Ba or lower by Moody's or
BB or lower by S&P, or unrated bonds of comparable quality, are generally
considered to be high yield bonds. These high yield bonds are subject to
greater risks than lower yielding, higher rated debt securities.

      Lower rated securities are subject to risk factors such as: (i)
vulnerability to economic downturns and changes in interest rates; (ii)
sensitivity to adverse economic changes and corporate developments; (iii)
redemption or call provisions which may be exercised at inopportune times;
(iv) difficulty in accurately valuing or disposing of such securities; (v)
federal legislation which could affect the market for such securities; and
(vi) special adverse tax consequences associated with investments in certain
high yield, high risk bonds structured as zero coupon or pay-in-kind
securities.

      High yield bonds, like other bonds, may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest
rate market, the Fund would have to replace the security with a lower yielding
security, resulting in lower return for investors. Conversely, a high yield
bond's value will decrease in a rising interest rate market.

      The market for high yield bonds is in some cases more thinly traded than
the market for investment grade bonds, and recent market quotations may not be
available for some of these bonds. Market quotations are generally available
only from a limited number of dealers and may not represent firm bids from
such dealers or prices for actual sales. As a result, the Fund may have
greater difficulty valuing the high yield bonds in its portfolio accurately
and disposing of these bonds at the time or price desired.

      Ratings assigned by Moody's and S&P to high yield bonds, like other
bonds, attempt to evaluate the timeliness of principal and interest payments
on those bonds. However, such ratings do not assess the risk of a decline in
the market value of those bonds. In addition, ratings may fail to reflect
recent events in a timely manner and are subject to change. If a rating with
respect to a portfolio security is changed, the Investment Adviser will
determine whether the security will be retained based upon the factors the
Investment Adviser considers in acquiring or holding other securities in the
portfolio. Investment in high yield bonds may make achievement of the Fund's
investment objective more dependent on the Investment Adviser's own credit
analysis than is the case for higher rated bonds.

      Market prices for high yield bonds tend to be more sensitive than those
for higher rated securities due to many of the factors described above,
including the creditworthiness of the issuer, redemption or call provisions,
the liquidity of the secondary trading market and changes in credit ratings,
as well as interest rate movements and general economic conditions. In
addition, yields on such bonds will fluctuate over time. An economic downturn
could severely disrupt the market for high yield bonds.

      The risk of default in payment of principal and interest on high yield
bonds is significantly greater than with higher rated debt securities because
high yield bonds are generally unsecured and are often subordinated to other
obligations of the issuer, and because the issuers of high yield bonds usually
have high levels of indebtedness and are more sensitive to adverse economic
conditions, such as recession or increasing interest rates. Upon a default,
bondholders may incur additional expenses in seeking recovery.

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

      Derivative Instruments.

      Options. The Fund may, from time to time, subject to guidelines of the
Board of Directors and the limitations set forth in the Prospectus and
applicable rating agency guidelines, purchase or sell, i.e., write, options on
securities, securities indices and foreign currencies which are listed on a
national securities exchange or in the OTC market, as a means of achieving
additional return or of hedging the value of the Fund's portfolio.

      A call option is a contract that gives the holder of the option the
right to buy from the writer of the call option, in return for a premium, the
security or currency underlying the option at a specified exercise price at
any time during the term of the option. The writer of the call option has the
obligation, upon exercise of the option, to deliver the underlying security or
currency upon payment of the exercise price during the option period.

      A put option is a contract that gives the holder of the option the
right, in return for a premium, to sell to the seller the underlying security
at a specified price. The seller of the put option has the obligation to buy
the underlying security upon exercise at the exercise price.

      A call option is "covered" if the Fund owns the underlying instrument
covered by the call or has an absolute and immediate right to acquire that
instrument without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion
or exchange of other instruments held in its portfolio. A call option is also
covered if the Fund holds a call on the same instrument as the call written
where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written or (ii) greater than the exercise price of
the call written if the difference is maintained by the Fund in cash, U.S.
government securities or other liquid securities in a segregated account with
its custodian. A put option is "covered" if the Fund maintains cash or other
high grade short-term obligations with a value equal to the exercise price in
a segregated account with its custodian, or else holds a put on the same
instrument as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. The Investment
Adviser, on behalf of the Fund, has no present intention to engage in
uncovered option transactions. If the Fund has written an option, it may
terminate its obligation by effecting a closing purchase transaction. This is
accomplished by purchasing an option of the same series as the option
previously written. However, once the Fund has been assigned an exercise
notice, the Fund will be unable to effect a closing purchase transaction.
Similarly, if the Fund is the holder of an option it may liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. There
can be no assurance that either a closing purchase or sale transaction can be
effected when the Fund so desires.

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

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

      Options on Securities Indices. The Fund may purchase and sell securities
index options. One effect of such transactions may be to hedge all or part of
the Fund's securities holdings against a general decline in the securities
market or a segment of the securities market. Options on securities indices
are similar to options on stocks except that, rather than the right to take or
make delivery of stock at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the securities index upon which the option is
based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option.

      The Fund's successful use of options on indices depends upon its ability
to predict the direction of the market and is subject to various additional
risks. The correlation between movements in the index and the price of the
securities being hedged against is imperfect and the risk from imperfect
correlation increases as the composition of the Fund diverges from the
composition of the relevant index. Accordingly, a decrease in the value of
the securities being hedged against may not be wholly offset by a gain on the
exercise or sale of a securities index put option held by the Fund.

      Options on Foreign Currencies. Instead of purchasing or selling currency
futures (as described below), the Fund may attempt to accomplish similar
objectives by purchasing put or call options on currencies or by writing put
options or call options on currencies either on exchanges or in OTC markets. A
put option gives the Fund the right to sell a currency at the exercise price
until the option expires. A call option gives the Fund the right to purchase a
currency at the exercise price until the option expires. Both types of options
serve to insure against adverse currency price movements in the underlying
portfolio assets designated in a given currency. The Fund's use of options on
currencies will be subject to the same limitations as its use of options on
securities, described above and in the Prospectus.

Currency options may be subject to position limits which may limit the ability
of the Fund to fully hedge its positions by purchasing the options.

      As in the case of interest rate futures contracts and options thereon,
described below, the Fund may hedge against the risk of a decrease or increase
in the U.S. dollar value of a foreign currency denominated debt security which
the Fund owns or intends to acquire by purchasing or selling options
contracts, futures contracts or options thereon with respect to a foreign
currency other than the foreign currency in which such debt security is
denominated, where the values of such different currencies (vis-a-vis the
U.S. dollar) historically have a high degree of positive correlation.

      Futures Contracts. The Fund will enter into futures contracts only for
certain bona fide hedging, yield enhancement and risk management purposes. The
Fund may enter into futures contracts for the purchase or sale of debt
securities, financial indices, and U.S. government securities (collectively,
"interest rate futures contracts"). It may also enter into futures contracts
for the purchase or sale of foreign currencies in which securities held or to
be acquired by the Fund are denominated, or the value of which have a high
degree of positive correlation to the value of such currencies as to
constitute an appropriate vehicle for hedging. In addition, the Fund may enter
into futures contracts on stock and bond indices (collectively, "securities
indices"). The Fund may enter into such futures contracts both on U.S. and
foreign exchanges.

      A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contrac tual obligation to deliver the assets underlying the
contract at a specified price at a specified future time. A "purchase" of a
futures contract (or a "long" futures position) means the assumption of a
contractual obligation to acquire the assets underlying the contract at a
specified price at a specified future time. Certain futures contracts are
settled on a net cash payment basis rather than by the sale and delivery of
the assets underlying the futures contracts. U.S. futures contracts have been
designed by exchanges that have been designated as "contract markets" by the
Commodity Futures Trading Commission (the "CFTC"), an agency of the U.S.
government, and must be executed through a futures commission merchant, i.e.,
a brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on these contract markets and their affiliated clearing
organizations guarantee performance of the contracts as between the clearing
members of the exchange.

      At the time a futures contract is purchased or sold, the Fund must
allocate cash or securities as a deposit payment (initial margin). It is
expected that the initial margin on U.S. exchanges will vary from 0.5% to 4%
of the face value of the contract. Under certain circumstances, however, such
as during periods of high volatility, the Fund may be required by an exchange
to increase the level of its initial margin payment. Thereafter, the futures
contract is valued daily and the payment in cash of "variation margin" may be
required, a process known as "mark-to-the-market." Each day the Fund is
required to provide or is entitled to receive variation margin in an amount
equal to any change in the value of the contract since the preceding day.

      Although futures contracts by their terms may call for the actual
delivery or acquisition of underlying assets, in most cases the contractual
obligation is extinguished by offset before the expiration of the contract.

      The offsetting of a contractual obligation is accomplished by buying (to
offset an earlier sale) or selling (to offset an earlier purchase) an
identical futures contract calling for delivery in the same month. Such a
transaction cancels the obligation to make or take delivery of the underlying
commodity. When the Fund purchases or sells futures contracts, the Fund will
incur brokerage fees and related transactions costs.

      In addition, futures contracts entail risks. The ordinary spreads
between values in the cash and futures markets, due to differences in the
characters of those markets, are subject to distortions. First, all
participants in the futures market are subject to initial and variation margin
requirements. Rather than meeting additional variation margin requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the cash and futures markets.
Second, the liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced, thus producing price distortions. Third, from the
point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Increased participation by speculators in the futures market may cause
temporary price distortions. Thus, a correct forecast of interest rate trends
by the Investment Adviser may still not result in a successful transaction.

      If the Fund seeks to hedge against a decline in the value of its
portfolio securities and sells futures contracts on other securities that
historically have had a high degree of positive correlation to the value of
the portfolio securities, the value of its portfolio securities might decline
more rapidly than the value of a poorly correlated futures contract rises. In
that case, the hedge will be less effective than if the correlation had been
greater. In a similar but more extreme situation, the value of the futures
position might in fact decline while the value of the portfolio securities
holds steady or rises. This would result in a loss that would not have
occurred but for the attempt to hedge.

      Options on Futures Contracts. The Fund may also enter into options on
futures contracts for certain bona fide hedging, yield enhancement and risk
management purposes. The Fund may purchase put and call options and write put
and call options on futures contracts that are traded on U.S. and foreign
exchanges. The Investment Adviser, on behalf of the Fund, has no present
intention to engage in uncovered option transactions. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put) at a specified exercise
price at any time during the option exercise period. The writer of the option
is required upon exercise to assume a short futures position (if the option is
a call) or a long futures position (if the option is a put). Upon exercise of
the option, the assumption of offsetting futures positions by the writer and
holder of the option will be accompanied by delivery of the accumulated cash
balance in the writer's futures margin account which represents the amount by
which the market price of the futures contract at exercise, exceeds, in the
case of a call, or is less than, in the case of a put, the exercise of the
option on the futures contract.

      The Fund will be considered "covered" with respect to a call option it
writes on a futures contract if the Fund owns the asset which is deliverable
under the futures contract or an option to purchase that futures contract
having a strike price equal to or less than the strike price of the "covered"
option and having an expiration date not earlier than the expiration date of
the "covered" option, or if it segregates and maintains with its custodian for
the term of the option, cash or liquid securities equal to the fluctuating
value of the optioned futures. The Fund will be considered "covered" with
respect to a put option it writes on a futures contract if it owns an option
to sell that futures contract having a strike price equal to or greater than
the strike price of the "covered" option and having an expiration date not
earlier than the expiration date of the "covered" option, or if it segregates
and maintains with its custodian for the term of the option, cash or liquid
securities at all times equal in value to the exercise price of the put (less
any initial margin deposited by the Fund with its custodian with respect to
such put option). There is no limitation on the amount of the Fund's assets
which can be placed in the segregated account.

      Writing a put option on a futures contract serves as a partial hedge
against an increase in the value of debt securities the Fund intends to
acquire. If the futures price at expiration of the option is above the
exercise price, the Fund will retain the full amount of the option premium
which provides a partial hedge against any increase that may have occurred in
the price of the debt securities the Fund intends to acquire. If the market
price of the underlying futures contract is below the exercise price when the
option is exercised, the Fund will incur a loss, which may be wholly or
partially offset by the decrease in the value of the securities the Fund
intends to acquire.

      Writing a call option on a futures contract serves as a partial hedge
against a decrease in the value of the Fund's portfolio securities. If the
market price of the underlying futures contract at expiration of a written
call option is below the exercise price, the Fund will retain the full amount
of the option premium, thereby partially hedging against any decline that may
have occurred in the Fund's holding of debt securities. If the futures price
when the option is exercised is above the exercise price, however, the Fund
will incur a loss, which may be wholly or partially offset by the increase in
the value of the securities in the Fund's portfolio which were being hedged.

      The Fund may purchase put options on futures contracts to hedge its
portfolio against the risk of a decline in the value of the debt securities it
owns as a result of rising interest rates or fluctuating currency exchange
rates. The Fund may also purchase call options on futures contracts as a hedge
against an increase in the value of securities the Fund intends to acquire as
a result of declining interest rates or fluctuating currency exchange rates.

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

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

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

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

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

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

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

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

      Limitations on the Purchase and Sale of Futures Contracts and Options on
Futures Contracts. Subject to the guidelines of the Board of Directors, the
Fund may engage in transactions in futures contracts and options hereon only
for bona fide hedging, yield enhancement and risk management purposes, in each
case in accordance with the rules and regulations of the CFTC.

      Regulations of the CFTC applicable to the Fund permit the Fund's futures
and options on futures transactions to include (i) bona fide hedging
transactions without regard to the percentage of the Fund's assets committed
to margin and option premiums and (ii) non-hedging transactions, provided that
the Fund not enter into such non-hedging transactions if, immediately
thereafter, the sum of the amount of initial margin deposits on the Fund's
existing futures positions and option premiums would exceed 5% of the market
value of the Fund's liquidating value, after taking into account unrealized
profits and unrealized losses on any such transactions.

      In addition, investment in future contracts and related options
generally will be limited by the rating agency guidelines applicable to any of
the Fund's outstanding preferred stock.

      Forward Currency Exchange Contracts. The Fund may engage in currency
transactions other than on futures exchanges to protect against future changes
in the level of future currency exchange rates. The Fund will conduct such
currency exchange transactions either on a spot, i.e., cash, basis at the rate
then prevailing in the currency exchange market or on a forward basis, by
entering into forward contracts to purchase or sell currency. A forward
contract on foreign currency involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
agreed upon by the parties from the date of the contract, at a price set on
the date of the contract. The risk of shifting of a forward currency contract
will be substantially the same as a futures contract having similar terms. The
Fund's dealing in forward currency exchange will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward currency with respect to specific
receivables or payables of the Fund generally arising in connection with the
purchase or sale of its portfolio securities and accruals of interest
receivable and Fund expenses. Position hedging is the forward sale of currency
with respect to portfolio security positions denominated or quoted in that
currency or in a currency bearing a high degree of positive correlation to the
value of that currency.

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

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

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

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

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

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

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

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

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

      Repurchase Agreements. The Fund may engage in repurchase agreements as
set forth in the Prospectus. A repurchase agreement is an instrument under
which the purchaser, i.e., the Fund, acquires a debt security and the seller
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the
purchaser's holding period. This results in a fixed rate of return insulated
from market fluctuations during such period. The underlying securities are
ordinarily U.S. Treasury or other government obligations or high quality money
market instruments. The Fund will require that the value of such underlying
securities, together with any other collateral held by the Fund, always equals
or exceeds the amount of the repurchase obligations of the counter party. The
Fund's risk is primarily that, if the seller defaults, the proceeds from the
disposition of the underlying securities and other collateral for the seller's
obligation are less than the repurchase price. If the seller becomes
insolvent, the Fund might be delayed in or prevented from selling the
collateral. In the event of a default or bankruptcy by a seller, the Fund will
promptly seek to liquidate the collateral. To the extent that the proceeds
from any sale of such collateral upon a default in the obligation to
repurchase are less than the repurchase price, the Fund will experience a
loss.

      If the financial institution which is a party to the repurchase
agreement petitions for bankruptcy or becomes subject to the United States
Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a
result, under extreme circumstances, there may be a restriction on the Fund's
ability to sell the collateral and the Fund would suffer a loss.

      Loans of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to securities
broker-dealers or financial institutions, provided that such loans are
callable at any time by the Fund (subject to notice provisions described
below), and are at all times secured by cash or cash equivalents, which are
maintained in a segregated account pursuant to applicable regulations and that
are at least equal to the market value, determined daily, of the loaned
securities. The advantage of such loans is that the Fund continues to receive
the income on the loaned securities while at the same time earns interest on
the cash amounts deposited as collateral, which will be invested in short-
term obligations. The Fund will not lend its portfolio securities if such
loans are not permitted by the laws or regulations of any state in which its
stock is qualified for sale. The Fund's loans of portfolio securities will be
collateralized in accordance with applicable regulatory requirements and no
loan will cause the value of all loaned securities to exceed 33% of the value
of the Fund's total assets. The Fund's ability to lend portfolio securities
will be limited by the rating agency guidelines applicable to any of the
Fund's outstanding preferred stock.

      A loan may generally be terminated by the borrower on one business day
notice, or by the Fund on five business days notice. If the borrower fails to
deliver the loaned securities within five days after receipt of notice, the
Fund could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with
any extensions of credit, there are risks of delay in recovery and in some
cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. The Board of Directors will oversee the creditworthiness of the
contracting parties on an ongoing basis. Upon termination of the loan, the
borrower is required to return the securities to the Fund. Any gain or loss in
the market price during the loan period would inure to the Fund. The risks
associated with loans of portfolio securities are substantially similar to
those associated with repurchase agreements. Thus, if the counter party to the
loan petitions for bankruptcy or becomes subject to the United States
Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a
result, under extreme circumstances, there may be a restriction on the Fund's
ability to sell the collateral and the Fund would suffer a loss. When voting
or consent rights which accompany loaned securities pass to the borrower, the
Fund will follow the policy of calling the loaned securities, to be delivered
within one day after notice, to permit the exercise of such rights if the
matters involved would have a material effect on the Fund's investment in such
loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.


                      INVESTMENT RESTRICTIONS

      The investment restrictions listed below have been adopted by the Fund
as fundamental policies, except as otherwise indicated. Under the 1940 Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund and the vote of a majority of the
preferred shares, voting as a single class, as defined in the 1940 Act. Such a
majority is defined as the lesser of (i) 67% or more of the shares present at
a meeting of stockholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (ii) more than 50% of the
outstanding shares of the Fund.

      Under its investment restrictions the Fund may not:

      o    Purchase the securities of any one issuer, other than the United
           States government or any of its agencies or instrumentalities, if
           immediately after such purchase more than 5% of the value of its
           total assets would be invested in such issuer or the Fund would own
           more than 10% of the outstanding voting securities of such issuer,
           except that up to 25% of the value of the Fund's total assets may
           be invested without regard to such 5% and 10% limitations.

      o    Purchase or otherwise acquire real estate or interests therein,
           although the Fund may purchase securities of issuers which engage
           in real estate operations and securities secured by real estate or
           interests therein.

      o    Purchase or otherwise acquire or sell commodities or commodity
           contracts except that the Fund may purchase or sell financial
           futures contracts and related options thereon.

      o    Purchase oil, gas or other mineral leases, rights or royalty
           contracts, or exploration or development programs, except that the
           Fund may invest in the securities of companies which operate,
           invest in, or sponsor such programs.

      o    Purchase securities of other investment companies, except in
           connection with a merger, consolidation, reorganization or
           acquisition of assets, except that the Fund reserves the right to
           invest up to 5% of its total assets in not more than 3% of the
           securities of any one investment company including small business
           investment companies or invest up to 10% of its total assets in the
           securities of investment companies, nor make any such investments
           other than through purchases in the open market where to the best
           information of the Fund no commission or profit to a sponsor or
           dealer (other than the customary broker's commission) results from
           such purchase.

      o    Pledge its assets or assign or otherwise encumber them except to
           secure permitted borrowings. For the purpose of this restriction,
           collateral arrangements with respect to the writing of options or
           entering into financial futures transactions or forward contracts,
           or when issued or delayed delivery securities are not deemed to be
           pledges of assets and such arrangements are not deemed to be the
           issuance of a senior security as described in the immediately
           following restriction.

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

      o    Borrow money except for short-term credits from banks as may be
           necessary for the clearance of portfolio transaction and for
           temporary or emergency purposes to the extent permitted by
           applicable law.

      o    Make loans of money or securities, except: (a) that the Fund may
           engage in repurchase agreements as set forth in the Prospectus and
           (b) the Fund may lend its portfolio securities consistent with
           applicable regulatory requirements and as set forth in the
           Prospectus.

      o    Make short sales of securities or maintain a short position, unless
           at all times when a short position is open, it either owns an equal
           amount of such securities or owns securities which, without payment
           of any further consideration, are convertible into or exchangeable
           for securities of the same issue as, and equal in amount to, the
           securities sold short.

      o    Engage in the underwriting of securities, except insofar as the
           Fund may be deemed an underwriter under the Securities Act of 1933,
           as amended, in disposing of a portfolio security.

      o    Invest for the purpose of exercising control or management of any
           other issuer.

      o    Invest more than 25% of the value of its total assets in any one
           industry.

      If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.


                      MANAGEMENT OF THE FUND

Directors and Officers

      Overall responsibility for management and supervision of the Fund rests
with its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and the companies that furnish the Fund with
services, including agreements with the Investment Adviser, State Street Bank
and Trust Company, the Fund's custodian (the "Custodian"), EquiServe Trust
Company ("EquiServe"), the Fund's transfer agent and dividend disbursing agent
with respect to the Series B Preferred, and The Bank of New York, the Fund's
auction agent, paying agent and registrar with respect to the Series C Auction
Rate Preferred. The day-to-day operations of the Fund are delegated to the
Investment Adviser.

      The names and business addresses of the directors and principal officers
of the Fund are set forth in the following table, together with their
positions and their principal occupations during the past five years and, in
the case of the directors, their positions with certain other organizations
and companies.

<TABLE>
<CAPTION>

                                                    Number of
                                    Term of          Funds in
       Name (And Age),            Office and           Fund                                               Other
    Position with the Fund         Length of         Complex                Principal                 Directorships
             and                     Time          Overseen by          Occupation During                Held by
      Business Address1             Served2          Director            Past Five Years                Director
      -----------------            ----------      ------------         -----------------             --------------
INTERESTED
DIRECTORS3:
<S>                              <C>                   <C>           <C>                        <C>
Mario J. Gabelli                Since                   22         Chairman of the Board       Director of Morgan
Director, President and         1989***                            and Chief Executive         Group Holdings, Inc.
Chief Investment Officer                                           Officer of Gabelli          (holding company);
Age:  60                                                           Asset Management            Vice Chairman of
                                                                   Inc. and Chief              Lynch Corporation
                                                                   Investment Officer of       (diversified
                                                                   Gabelli Funds, LLC          manufacturing)
                                                                   and GAMCO
                                                                   Investors, Inc;
                                                                   Chairman and Chief
                                                                   Executive Officer of
                                                                   Lynch Interactive
                                                                   Corporation
                                                                   (multimedia and
                                                                   services)

Karl Otto Pohl+                 Since                   31         Member of the               Director of Gabelli
Director                        1992***                            Shareholder                 Asset Management
Age:  72                                                           Committee of Sal            Inc. (investment
                                                                   Oppenheim Jr. & Cie         management);
                                                                   (private investment         Chairman, Incentive
                                                                   bank); Former               Capital and Incentive
                                                                   President of the            Asset Management
                                                                   Deutsche Bundesbank         (Zurich); Director at
                                                                   and Chairman of its         Sal Oppenheim Jr. &
                                                                   Central Bank Council        Cie, Zurich
                                                                   (1980-1991)

NON-INTERESTED
DIRECTORS:
- --------------
E. Val Cerutti                  Since                   7          Chief Executive             Director of Lynch
Director                        1989**                             Officer of Cerutti          Corporation
Age:  62                                                           Consultants, Inc.;
                                                                   Former President and
                                                                   Chief Operating
                                                                   Officer of Stella D'oro
                                                                   Biscuit Company
                                                                   (through 1992);
                                                                   Adviser, Iona College
                                                                   School of Business

Anthony J. Colavita4            Since                   33         President and Attorney                  ___
Director                        1989*                              at Law in the law firm
Age:  66                                                           of Anthony J.
                                                                   Colavita, P.C.

Dugald A. Fletcher              Since                   2          President, Fletcher &       Director of Harris
Director                        1989**                             Company, Inc.;              and Harris Group,
Age:  72                                                           Former Director and         Inc. (venture capital)
                                                                   Chairman and Chief
                                                                   Executive Officer of
                                                                   Binnings Building
                                                                   Products, Inc. (1997)

Anthony R. Pustorino            Since                   17         Certified Public                        ___
Director                        1989**                             Accountant; Professor
Age:  76                                                           Emeritus, Pace
                                                                   University

Werner J. Roeder, MD4           Since                   26         Medical Director of                     ___
Director                        2001***                            Lawrence Hospital
Age:  61                                                           and practicing private
                                                                   physician

Anthonie C. van Ekris+          Since                   18         Managing Director of
Director                        1992*                              BALMAC
Age:  67                                                           International, Inc.

Salvatore J. Zizza              Since                   9          Chairman, Hallmark          Board Member of
Director                        1991*                              Electrical Supplies         Hollis Eden
Age:  56                                                           Corp.; Former               Pharmaceuticals
                                                                   Executive Vice
                                                                   President of FMG
                                                                   Group (OTC), a
                                                                   healthcare provider.
OFFICERS:
Bruce N. Alpert                 Since 2003             ___         Executive Vice                          ___
President                                                          President and Chief
Age:  51                                                           Operating Officer of
                                                                   Gabelli Funds, LLC
                                                                   since 1988 and an
                                                                   officer of all mutual
                                                                   funds advised by
                                                                   Gabelli Funds, LLC
                                                                   and its affiliates;
                                                                   Director and President
                                                                   of Gabelli Advisors,
                                                                   Inc.

Gus Coutsouros                  Since 2003             ___         Vice President and Chief
Vice President and                                                 Financial Officer of
Treasurer                                                          Gabelli Funds, LLC since
Age:  40                                                           1998 and an officer of all
                                                                   mutual funds advised by
                                                                   Gabelli Funds and its
                                                                   affiliates and Chief Financial
                                                                   Officer of Gabelli Advisers Inc.
                                                                   Prior to 1998, Treasurer of
                                                                   Lazard Funds.

Peter W. Latartara              Since 1998             ___         Vice President of the                   ___
Vice President                                                     Fund since 1998.
Age:  35                                                           Vice President of
                                                                   Gabelli & Company,
                                                                   Inc. from 1996

James E. McKee                  Since 1995             ___         Vice President,                         ___
Secretary                                                          General Counsel and
Age:  38                                                           Secretary of Gabelli
                                                                   Asset Management
                                                                   Inc. since 1999 and
                                                                   GAMCO Investors,
                                                                   Inc. since 1993;
                                                                   Secretary of all mutual
                                                                   funds advised by
                                                                   Gabelli Advisers, Inc.
                                                                   and Gabelli Funds,
                                                                   LLC
</TABLE>

_______________________

+    Non-resident director with no authorized agent in the United States.
1    Address:  One Corporate Center, Rye, NY 10580, unless otherwise noted.
2    The Fund's Board of Directors is divided into three classes, each class
     having a term of three  years.  Each year the term of office of one class
     expires and the successor or successors elected to such class serve for
     a three year term.  The three year term for each class expires as follows:
     *     Term expires at the Fund's 2003 Annual Meeting of Stockholders and
           until their successors are duly elected and qualified.
     **    Term expires at the Fund's 2004 Annual Meeting of Stockholders and
           until their successors are duly elected and qualified.
     ***   Term expires at the Fund's 2005 Annual Meeting of Stockholders and
           until their successors are duly elected and qualified.
3    "Interested person" of the Fund as defined in the Investment Company Act
     of 1940.  Messrs. Gabelli and Pohl are each considered an "interested
     person" because of their affiliation with Gabelli Funds LLC which acts as
     the Fund's investment adviser.
4    Represents holders of the Preferred Stock.

      The Board of Directors of the Fund are divided into three classes, with
a class having a term of three years except as described below. Each year the
term of office of one class of directors of the Fund will expire. However, to
ensure that the term of a class of the Fund's directors expires each year, one
class of the Fund's directors will serve three-year terms. The terms of
Messrs. Colavita, van Ekris and Zizza as directors of the Fund expire in 2003;
the terms of Messrs. Fletcher and Pustorino as directors of the Fund expire in
2004; and the terms of Messrs. Gabelli, Pohl, Cerutti and Dr. Roeder as
directors of the Fund expire in 2005.

Name of Director        Dollar Range of Equity   Aggregate Dollar Range of
                        Securities in the Fund   Equity Securities in all
                                                 Registered Investment
                                                 Companies Overseen by
                                                 Directors in Family of
                                                 Investment Companies

INTERESTED DIRECTORS

Mario J. Gabelli                  E                      E
Karl Otto Pohl                    A                      A

DISINTERESTED DIRECTORS


E. Val Cerutti                    C                      E
Anthony J. Colavita               E                      E
Dugald A Fletcher                 E                      E
Anthony R. Pustorino              D                      E
Werner J, Roeder, MD              A                      E
Anthonie C. van Ekris             C                      E
Salvatore J. Zizza                E                      E

- ------------------------------------------
*     KEY TO DOLLAR RANGES
A.    None
B.    $1 - $10,000
C.    $10,001 - $50,000
D.    $50,001 - $100,000
E.    Over $100,000

All stock was valued as of December 31, 2002.

      The Directors serving on the Fund's Nominating Committee are Messrs.
Anthony J. Colavita, Chairman of the committee, and Salvatore J. Zizza. The
Nominating Committee is responsible for recommending qualified candidates to
the Board in the event that a position is vacated or created. The Nominating
Committee would consider recommendations by stockholders if a vacancy were to
exist. Such recommendations should be forwarded to the Secretary of the Fund.
The Nominating Committee did not meet during the year ended December 31, 2002.
The Fund does not have a standing compensation committee.

      Messrs. Anthony R. Pustorino, Chairman, Anthony J. Colavita, and
Salvatore J. Zizza serve on the Fund's Audit Committee and these directors are
not "interested persons" of the Fund as defined in the 1940 Act. The Audit
Committee is responsible for reviewing and evaluating issues related to the
accounting and financial reporting policies and internal controls of the Fund
and the internal controls of certain service providers, overseeing the quality
and objectivity of the Fund's financial statements and the audit thereof and
to act as a liaison between the Board of Directors and the Fund's independent
accountants. During the year ended December 31, 2002, the Audit Committee met
twice.

      The economic terms of the Advisory Agreement between the Fund and its
Investment Adviser were unanimously approved by the Fund's Board of Directors
at its May 22, 2002 meeting. The Board's approval included a majority of the
Directors who are not parties to the Advisory Agreement or interested persons
of any such party (as such term is defined in the 1940 Act). In approving the
Advisory Agreement, the Board of Directors considered, among other things, the
nature and quality of services to be provided by the Investment Adviser, the
profitability to the Investment Adviser of its relationship with the Fund,
economies of scale and comparative fees and expense ratios.

      The Fund and the Investment Adviser have adopted a code of ethics (the
"Code of Ethics") under Rule 17j-1 of the 1940 Act. The Code of Ethics permits
personnel, subject to the Code of Ethics and its restrictive provisions, to
invest in securities, including securities that may be purchased or held by
the Fund. The Code of Ethics can be reviewed and copied at the United States
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
Information on the operations of the Reference Room may be obtained by calling
the Securities and Exchange Commission at (202) 942-8090. The Code of Ethics
is also available on the EDGAR database on the Securities and Exchange
Commission's Internet Site at http://www.sec.gov. Copies of the Code of Ethics
may also be obtained, after paying a duplicating fee, by electronic request at
the following e-mail address: publicinfo@sec.gov, or by writing the Securities
and Exchange Commission's Public Reference Room Section, Washington, D.C.
20549- 0102.

Remuneration of Directors and Officers

      The Fund pays each director who is not affiliated with the Investment
Adviser or its affiliates a fee of $5,000 per year plus $750 per meeting
attended, together with each director's actual out-of-pocket expenses relating
to attendance at such meetings.

       The following table shows certain compensation information for the
directors and officers of the Fund for the fiscal year ended December 31,
2002. Mr. Latartara is employed by the Fund and his compensation is evaluated
and approved by the directors. Other officers who are employed by the
Investment Adviser receive no compensation or expense reimbursement from the
Fund.


Compensation Table For the Fiscal Year Ended December 31, 2002


                                                           TOTAL
                                                        COMPENSATION
                                                        FROM THE FUND
                                                          AND FUND
                                        AGGREGATE       COMPLEX PAID
         NAME OF PERSON AND           COMPENSATION     TO DIRECTORS/
             POSITION*                FROM THE FUND       OFFICERS
MARIO J. GABELLI                     $0               $0
Chairman of the Board (22)
E. VAL CERUTTI Director (7)          $8,750           $23,250
ANTHONY J. COLAVITA Director (33)    $9,750           $152,286
DUGALD A. FLETCHER Director (2)      $9,250           $17,250
KARL OTTO POHL Director (31)         $0               $0
ANTHONY R. PUSTORINO Director (17)   $9,750           $132,286
WERNER J. ROEDER, MD Director (26)   $8,750           $97,786
ANTHONIE C. van EKRIS Director (18)  $8,750           $67,250
SALVATORE J. ZIZZA Director (9)      $10,250          $73,750
                                     -------
TOTAL**                              $65,250

*     Represents the total compensation paid to such persons during the
      calendar year ended December 31, 2002 by investment companies (including
      the Fund) or portfolios thereof from which such person receives
      compensation that are considered part of the same fund complex as the
      Fund because they have common or affiliated investment advisers. The
      number in parenthesis represents the number of such investment companies
      and portfolios.

**    Does not include $2,202 of out of pocket Director expenses, which would
      bring total Director compensation/expenses from the Fund to $67,452.

For his services as Vice President of the Fund, Mr. Latartara, received
compensation in 2002 of $97,500.

Indemnification of Directors and Officers; Limitations on Liability

      Subject to limitations imposed by the 1940 Act, the Fund's Charter
limits the liability of the Fund's directors and officers to the Fund and its
stockholders to the fullest extent permitted by Maryland law. Under Maryland
law, Maryland corporations may limit their directors' and officers' liability
for money damages to the corporation and stockholders except to the extent (i)
that it is proved that a director or officer actually received an improper
benefit or profit in money, property or services, in which case such director
or officer may be liable for the amount of the benefit or profit actually
received or (ii) that a judgment or other final adjudication adverse to a
director or officer is entered in a proceeding based on a finding that such
director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated
in the proceeding.

      The Charter also provides for the indemnification of, and expenses to be
advanced on behalf of, directors and officers, among others, to the fullest
extent permitted by Maryland law, subject to the limitations imposed by the
1940 Act. Under Maryland law, corporations may indemnify present and past
directors and officers, or officers of another corporation that serve at the
request of the indemnifying corporation, against judgments, penalties, fines,
settlements and reasonable expenses (including attorneys' fees) actually
incurred in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation in which such director or
officer is adjudicated liable to the corporation), in which they are made
parties by reason of being or having been directors or officers, unless it is
proved that (i) the act or omission of the director or officer was material to
the matter giving rise to the proceeding and was committed in bad faith or was
the result of active and deliberate dishonesty, (ii) the director or officer
actually received an improper personal benefit in money, property or services
or (iii) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. Maryland
law also provides that, unless limited by the corporation's charter, a
corporation will indemnify present and past directors and officers who are
successful, on the merits or otherwise, in the defense of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, against reasonable expenses (including
attorneys' fees) incurred in connection with such proceeding. The Fund's
Charter does not limit the extent of this indemnity.

Investment Advisory and Administrative Arrangements

      Gabelli Funds, LLC acts as the Fund's Investment Adviser pursuant to an
advisory agreement with the Fund (the "Advisory Agreement"). The Investment
Adviser is a New York corporation with principal offices located at One
Corporate Center, Rye, New York 10580. The Investment Adviser was organized in
1999 and is the successor to Gabelli Advisers, Inc., which was organized in
1980. As of December 31, 2002, the Investment Adviser acted as registered
investment advisers to 18 management investment companies with aggregate net
assets of $8.7 billion. The Investment Adviser, together with other affiliated
investment advisers, had assets under management totaling $9.7 billion, as of
December 31, 2002. GAMCO Investors, Inc., an affiliate of the Investment
Adviser, acts as investment adviser for individuals, pension trusts, profit
sharing trusts and endowments and as a sub-adviser to management investment
companies, having aggregate assets of $10.0 billion under management as of
December 31, 2002. Gabelli Fixed Income LLC, an affiliate of the Investment
Adviser, acts as investment adviser for The Treasurer's Fund and separate
accounts having aggregate assets of $1.6 billion under management as of
December 31, 2002. The Investment Adviser is a wholly-owned subsidiary of
Gabelli Asset Management Inc., a New York corporation, whose Class A Common
Stock is traded on the New York Stock Exchange under the symbol "GBL." Mr.
Mario J. Gabelli may be deemed a "controlling person" of the Investment
Adviser on the basis of his ownership of a majority of the stock of the
Gabelli Group Capital Partners, Inc., which owns a majority of the capital
stock of Gabelli Asset Management Inc.

      Under the terms of the Advisory Agreement, the Investment Adviser
manages the portfolio of the Fund in accordance with its stated investment
objective and policies, makes investment decisions for the Fund, places orders
to purchase and sell securities on behalf of the Fund and manages its other
business and affairs, all subject to the supervision and direction of the
Fund's Board of Directors. In addition, under the Advisory Agreement, the
Investment Adviser oversees the administration of all aspects of the Fund's
business and affairs and provides, or arranges for others to provide, at the
Investment Adviser's expense, certain enumerated services, including
maintaining the Fund's books and records, preparing reports to the Fund's
stockholders and supervising the calculation of the net asset value of its
stock. All expenses of computing the net asset value of the Fund, including
any equipment or services obtained solely for the purpose of pricing shares or
valuing its investment portfolio, will be an expense of the Fund under its
Advisory Agreement unless the Investment Adviser voluntarily assumes
responsibility for such expense.

      The Advisory Agreement combines investment advisory and administrative
responsibilities in one agreement. For services rendered by the Investment
Adviser on behalf of the Fund under the Advisory Agreement, the Fund pays the
Investment Adviser a fee computed daily and paid monthly at the annual rate of
1.00% of the average weekly net assets of the Fund. Notwithstanding the
foregoing, the Investment Adviser will waive the portion of its investment
advisory fee attributable to an amount of assets of the Fund equal to the
aggregate stated value of the applicable series of its preferred stock for any
calendar year in which the net asset value total return of the Fund allocable
to the common stock, including distributions and the advisory fee subject to
potential waiver, is less than the stated annual dividend rate of such series,
prorated during the year such series is issued and the final year such series
is outstanding.

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

      Pursuant to its terms, the Advisory Agreement will remain in effect with
respect to the Fund until the second anniversary of stockholder approval of
such Agreement, and from year to year thereafter if approved annually (i) by
the Fund's Board of Directors or by the holders of a majority of its
outstanding voting securities and (ii) by a majority of the directors who are
not "interested persons" (as defined in the 1940 Act) of any party to the
Advisory Agreement, by vote cast in person at a meeting called for the purpose
of voting on such approval. The Advisory Agreement was initially approved by
the Board of Directors at a meeting held on June 5, 1989 and was approved most
recently by the Board of Directors on May 22, 2002. The Advisory Agreement
terminates automatically on its assignment and may be terminated without
penalty on 60 days written notice at the option of either party thereto or by
a vote of a majority (as defined in the 1940 Act) of the Fund's outstanding
shares.

      For each of the years ended December 31, 2000, December 31, 2001, and
December 31, 2002, the Investment Adviser was paid $822,916, $750,049, and
$687,016 respectively, for advisory and administrative services rendered to
the Fund.


                            PORTFOLIO TRANSACTIONS

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

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

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

      For the fiscal years ended December 31, 2000, December 31, 2001, and
December 31, 2002, the Fund paid a total of $144,932, $42,738, and $19,349
respectively, in brokerage commissions, of which Gabelli & Company, Inc. and
its affiliates received $116,959, $34,251, and $16,332, respectively. The
amount received by Gabelli & Company, Inc. and its affiliates from the Fund in
respect of brokerage commissions for the fiscal year ended December 31, 2002
represented approximately 84.4% of the aggregate dollar amount of brokerage
commissions paid by the Fund for such period and approximately 96.7% of the
aggregate dollar amount of transactions by the Fund for such period.


                          REPURCHASE OF COMMON STOCK

      The Fund is a closed-end, diversified, management investment company and
as such its stockholders do not, and will not, have the right to redeem their
stock. The Fund, however, may repurchase its common stock from time to time as
and when it deems such a repurchase advisable. Such repurchases will be made
when the Fund's common stock is trading at a discount of 10% or more (or such
other percentage as the Board of Directors of the Fund may determine from time
to time) from net asset value. Pursuant to the 1940 Act, the Fund may
repurchase its common stock on a securities exchange (provided that the Fund
has informed its stockholders within the preceding six months of its intention
to repurchase such stock) or as otherwise permitted in accordance with Rule
23c-1 under the 1940 Act. Under that Rule, certain conditions must be met
regarding, among other things, distribution of net income for the preceding
fiscal year, status of the seller, price paid, brokerage commissions, prior
notice to stockholders of an intention to purchase stock and purchasing in a
manner and on a basis that does not discriminate unfairly against the other
stockholders through their interest in the Fund.

      When the Fund repurchases its common stock for a price below net asset
value, the net asset value of the common stock that remains outstanding will
be enhanced, but this does not necessarily mean that the market price of the
outstanding common stock will be affected, either positively or negatively.


                              PORTFOLIO TURNOVER

      The portfolio turnover rates of the Fund for the fiscal years ending
December 31, 2002, December 31, 2001 and 2000 were 56%, 59% and 169%,
respectively. Portfolio turnover rate is calculated by dividing the lesser of
an investment company's annual sales or purchases of portfolio securities by
the monthly average value of securities in its portfolio during the year,
excluding portfolio securities the maturities of which at the time of
acquisition were one year or less. A high rate of portfolio turnover involves
correspondingly greater brokerage commission expense than a lower rate, which
expense must be borne by the Fund and its stockholders, as applicable. A
higher rate of portfolio turnover may also result in taxable gains being
passed to stockholders.


                        AUTOMATIC DIVIDEND REINVESTMENT
                       AND VOLUNTARY CASH PURCHASE PLAN

      Under the Fund's Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan (the "Plan"), a stockholder whose shares of the Fund's common
stock is registered in his own name will have all distributions reinvested
automatically by EquiServe, which is agent under the Plan, unless the
stockholder elects to receive cash. Distributions with respect to shares
registered in the name of a broker-dealer or other nominee (that is, in
"street name") will be reinvested by the broker or nominee in additional
shares under the Plan, unless the service is not provided by the broker or
nominee or the stockholder elects to receive distributions in cash. Investors
who own common stock registered in street name should consult their
broker-dealers for details regarding reinvestment. All distributions to
investors who do not participate in the Plan will be paid by check mailed
directly to the record holder by EquiServe as dividend disbursing agent.

      Under the Plan, whenever the market price of the common stock is equal
to or exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividend or capital
gains distribution, participants in the Plan are issued shares of common
stock, valued at the greater of (i) the net asset value as most recently
determined or (ii) 95% of the then current market price of the common stock.
The valuation date is the dividend or distribution payment date or, if that
date is not a New York Stock Exchange trading day, the immediately preceding
trading day. If the net asset value of the common stock at the time of
valuation exceeds the market price of the common stock, participants will
receive shares from the Fund, valued at market price. If the Fund should
declare a dividend or capital gains distribution payable only in cash,
EquiServe will buy the common stock for such Plan in the open market, on the
New York Stock Exchange or elsewhere, for the participants' accounts, except
that EquiServe will endeavor to terminate purchases in the open market and
cause the Fund to issue shares at net asset value if, following the
commencement of such purchases, the market value of the common stock exceeds
net asset value.

      Participants in the Plan have the option of making additional cash
payments to EquiServe, monthly, for investment in the shares as applicable.
Such payments may be made in any amount from $250 to $10,000. EquiServe will
use all funds received from participants to purchase shares of the Fund in the
open market on or about the 15th of each month. EquiServe will charge each
stockholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that
participants send voluntary cash payments to EquiServe in a manner that
ensures that EquiServe will receive these payments approximately 10 days
before the 15th of the month. A participant may without charge withdraw a
voluntary cash payment by written notice, if the notice is received by
EquiServe at least 48 hours before such payment is to be invested.

      EquiServe maintains all stockholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including
information needed by stockholders for personal and tax records. Shares in the
account of each Plan participant will be held by EquiServe in noncertificated
form in the name of the participant. A Plan participant may send its share
certificates to EquiServe so that the shares represented by such certificates
will be held by EquiServe in the participant's stockholder account under the
Plan.

      In the case of stockholders such as banks, brokers or nominees, which
hold shares for others who are the beneficial owners, EquiServe will
administer the Plan on the basis of the number of shares certified from time
to time by the stockholder as representing the total amount registered in the
stockholder's name and held for the account of beneficial owners who
participate in the Plan.

      Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate its Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of such
Plan at least 90 days before the record date for such dividend or
distribution. The Plan also may be amended or terminated by EquiServe on at
least 90 days written notice to the participants in such Plan.

All correspondence concerning the Plan should be directed to EquiServe at P.O.
Box 43025, Providence, RI 02940-3025.

                                   TAXATION

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

Taxation of the Fund

      The Fund has qualified as and intends to continue to qualify as a
regulated investment company (a "RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). If it so qualifies, the Fund
will not be subject to U.S. federal income tax on the portion of its net
investment income (i.e., its investment company taxable income as defined in
the Code without regard to the deduction for dividends paid) and on its net
capital gain (i.e., the excess of its net realized long-term capital gain over
its net realized short-term capital loss), if any, which it distributes to its
stockholders in each taxable year, provided that an amount equal to at least
90% of the sum of its net investment income and any net tax-exempt income for
the taxable year is distributed to its stockholders.

      Qualification as a RIC requires, among other things, that the Fund: (i)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stock, securities or currencies and
(ii) diversify its holdings so that, at the end of each quarter of each
taxable year, subject to certain exceptions, (a) at least 50% of the market
value of the Fund's assets is represented by cash, cash items, U.S. government
securities, securities of other RICs and other securities with such other
securities limited, in respect of any one issuer, to an amount not greater
than 5% of the value of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its
assets is invested in the securities (other than U.S. government securities or
the securities of other RICs) of any one issuer or any two or more issuers
that the Fund controls and which are determined to be engaged in the same or
similar trades or businesses or related trades or businesses.

      If the Fund were unable to satisfy the 90% distribution requirement or
otherwise were to fail to qualify as a RIC in any year, it would be taxed in
the same manner as an ordinary corporation and distributions to the Fund's
stockholders would not be deductible by the Fund in computing its taxable
income. To qualify again to be taxed as a RIC in a subsequent year, the Fund
would be required to distribute to preferred stockholders and common
stockholders its earnings and profits attributable to non-RIC years reduced by
an interest charge on 50% of such earnings and profits payable by the Fund to
the IRS. In addition, if the Fund failed to qualify as a RIC for a period
greater than one taxable year, then the Fund would be required to recognize
and pay tax on any net built-in gains (the excess of aggregate gains,
including items of income, over aggregate losses that would have been realized
if the Fund had been liquidated) or, alternatively, to elect to be subject to
taxation on such built-in gains recognized for a period of ten years, in order
to qualify as a RIC in a subsequent year.

      The IRS has taken the position that if a regulated investment company
has two classes of stock, it may designate distributions made to each class in
any year as consisting of no more than such class's proportionate share of
particular types of income, such as long-term capital gain. A class's
proportionate share of a particular type of income is determined according to
the percentage of total dividends paid by the regulated investment company
during such year that was paid to such class. Consequently, the Fund will
designate distributions made to the common stockholders and preferred
stockholders as consisting of particular types of income in accordance with
the classes' proportionate shares of such income. Because of this rule, the
Fund is required to allocate a portion of its net capital gain, ordinary
investment income and dividends qualifying for the dividends received
deduction to common stockholders and preferred stockholders. The amount of net
capital gain and ordinary investment income and dividends qualifying for the
dividends received deduction allocable among common stockholders and the
preferred stockholders will depend upon the amount of such net capital gain
and ordinary investment income and dividends qualifying for the dividends
received deduction realized by the Fund and the total dividends paid by the
Fund on shares of common stock and the preferred stock during a taxable year.

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

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

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

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

      If the Fund invests in stock of a PFIC, the Fund may be able to elect to
treat the PFIC as a "qualified electing fund," in lieu of being taxable in the
manner described in the above paragraph, and to include annually in income its
pro rata share of the ordinary earnings and net capital gain (whether or not
distributed) of the PFIC. In order to make this election, the Fund would be
required to obtain annual information from the PFICs in which it invests,
which may be difficult to obtain. Alternatively, the Fund may elect to
mark-to-market at the end of each taxable year all shares that it hold in
PFICs. If it makes this election, the Fund would recognize as ordinary income
any increase in the value of such shares over their adjusted basis and as
ordinary loss any decrease in such value to the extent it does not exceed
prior increases.

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

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

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

Hedging Transactions

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

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

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

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

Foreign Taxes

      Since the Fund may invest in foreign securities, its income from such
securities may be subject to non-U.S. taxes. It is anticipated that the Fund
will not invest more than 25% of its total assets in foreign securities.
Accordingly, the Fund will not be eligible to elect to "pass-through" to
stockholders of the Fund the ability to use the foreign tax deduction or
foreign tax credit for foreign taxes paid with respect to qualifying taxes. In
order to make such an election, at least 50% of the Fund's total assets would
be required to be invested in foreign securities.

Taxation of Stockholders

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

       Distributions of ordinary income are taxable to a U.S. stockholder as
ordinary income, whether paid in cash or shares. Ordinary income dividends
paid by the Fund may qualify for the dividends received deduction available to
corporations, but only to the extent that the Fund's income consists of
qualified dividends received from U.S. corporations. The Fund expects to
distribute a relatively small amount of income that would be eligible for the
dividends received deduction. The amount of any dividend distribution eligible
for the dividends received deduction will be designated by the Fund in a
written notice to stockholders within 60 days of the close of the taxable
year. Distributions of net capital gain designated as capital gain dividends,
if any, are taxable to shareholders at rates applicable to long-term capital
gains, whether paid in cash or in shares, regardless of how long the
stockholder has held the Fund's shares, and are not eligible fo the dividends
received deduction. Distributions in excess of the Fund's earnings and profits
will first reduce the adjusted tax basis of a holder's shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gain to such
holder (assuming the shares are held as a capital asset). For non-corporate
taxpayers, net investment income will currently be taxed at a maximum rate of
38.6% while net capital gain generally will be taxed at a maximum rate of 20%.
For corporate taxpayers, both net investment income and net capital gain are
taxed at a maximum rate of 35%.

      Stockholders may be entitled to offset their capital gain dividends with
capital losses. There are a number of statutory provisions affecting when
capital loses may be offset against capital gains, and limiting the use of
losses from certain investments and activities. Accordingly, stockholders with
capital losses are urged to consult their tax advisers.

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

      Upon a sale or exchange of shares, a stockholder will realize a taxable
gain or loss depending upon his or her basis in the shares. Such gain or loss
will be treated as long-term capital gain or loss if the shares have been held
for more than one year. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced within a 61-day
period beginning 30 days before and ending 30 days after the date that the
shares are disposed of. In such a case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss.

      Any loss realized by a stockholder on the sale of Fund shares held by
the stockholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any capital gain dividends received by
the stockholder (or amounts credited to the stockholder as an undistributed
capital gain) with respect to such shares.

      Ordinary income dividends and capital gain dividends also may be subject
to state and local taxes. Stockholders are urged to consult their own tax
advisers regarding specific questions about the U.S. federal (including the
application of the alternative minimum tax rules), state, local or foreign tax
consequences to them of investing in the Fund.

      Ordinary income dividends (but not capital gain dividends) paid to
stockholders who are non- resident aliens or foreign entities will be subject
to a 30% United States withholding tax under existing provisions of the Code
applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty
law. Non-resident stockholders are urged to consult their own tax advisers
concerning the applicability of the United States withholding tax.

      The Bush Administration has announced a proposal to reduce or eliminate
the tax on dividends; however, many of the details of the proposal (including
how the proposal would apply to dividends paid by a regulated investment
company) have not been specified. Moreover, the prospects for this proposal
are unclear. Accordingly, it is not possible to evaluate how this proposal
might affect the tax discussion above.

Backup Withholding

      The Fund may be required to withhold federal income tax on all taxable
distributions and redemption proceeds payable to non-corporate stockholders
who fail to provide the Fund with their correct taxpayer identification number
or to make required certifications, or who have been notified by the IRS that
they are subject to backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be refunded or credited against such
stockholder's federal income tax liability, if any, provided that the required
information is furnished to the Internal Revenue Service.

      The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action, either prospectively or retroactively. Persons considering an
investment in Series B Preferred or Series C Auction Rate Preferred should
consult their own tax advisers regarding the purchase, ownership and
disposition of Series B Preferred or Series C Auction Rate Preferred.


                      ADDITIONAL INFORMATION
      CONCERNING AUCTIONS FOR SERIES C AUCTION RATE PREFERRED

 General

      The Articles Supplementary provide that the Applicable Rate for each
Dividend Period of the Series C Auction Rate Preferred will be equal to the
rate per annum that the Auction Agent advises has resulted on the Business Day
preceding the first day of a Dividend Period (an "Auction Date") from
implementation of the Auction Procedures set forth in the Articles
Supplementary, and summarized below, in which persons determine to hold or
offer to sell or, based on dividend rates bid by them, offer to purchase or
sell shares of such Series. Each periodic implementation of the Auction
Procedures is referred to herein as an "Auction." The following summary is
qualified by reference to the Auction Procedures set forth in the Articles
Supplementary.

      Auction Agency Agreement. The Fund has entered into an Auction Agency
Agreement (the "Auction Agency Agreement") with the Auction Agent (currently,
The Bank of New York), which provides, among other things, that the Auction
Agent will follow the Auction Procedures for purposes of determining the
Applicable Rate for Series C Auction Rate Preferred so long as the Applicable
Rate is to be based on the results of the Auction.

      Broker-Dealer Agreements. Each Auction requires the participation of one
or more Broker-Dealers. The Auction Agent has entered into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Fund, which provide for the participation of those Broker-
Dealers in Auctions for Series C Auction Rate Preferred. See "Broker-Dealers"
below.

      Securities Depository. The Depository Trust Company ("DTC") will act as
the Securities Depository for the Agent Members with respect to the Series C
Auction Rate Preferred. One certificate for all of the Series C Auction Rate
Preferred shares will be registered in the name of Cede & Co., as nominee of
the Securities Depository.

      Such certificate will bear a legend to the effect that such certificate
is issued subject to the provisions restricting transfers of Series C Auction
Rate Preferred contained in the Articles Supplementary. The Fund will also
issue stop-transfer instructions to the transfer agent for the Series C
Auction Rate Preferred. Prior to the commencement of the right of Holders of
the Preferred Stock to elect a majority of the Fund's directors, as described
under "Description of the Series B Preferred and Series C Auction Rate
Preferred -- Voting Rights" in the Prospectus, Cede & Co. will be the Holder
of all the Series C Auction Rate Preferred and owners of such shares will not
be entitled to receive certificates representing their ownership interest in
such shares.

      DTC, a New York chartered limited purpose trust company, performs
services for its participants (including Agent Members), some of whom (and/or
their representatives) own DTC. DTC maintains lists of its participants and
will maintain the positions (ownership interests) held by each such Agent
Member in Series C Auction Rate Preferred, whether for its own account or as a
nominee for another person.


Orders by Existing Holders and Potential Holders

      On or prior to the Submission Deadline on each Auction Date for the
Series C Auction Rate Preferred:

      (i) each Beneficial Owner of Series C Auction Rate Preferred may submit
          to its Broker-Dealer by telephone or otherwise a:

         (a) "Hold Order" - indicating the number of Outstanding Series C
             Auction Rate Preferred shares, if any, that such Beneficial Owner
             desires to continue to hold without regard to the Applicable Rate
             for such shares for the immediately succeeding Dividend Period of
             such shares;

         (b) "Bid" - indicating the number of Outstanding Series C Auction
             Rate Preferred shares, if any, that such Beneficial Owner offers
             to sell if the Applicable Rate for such Series C Auction Rate
             Preferred for the immediately succeeding Dividend Period is less
             than the rate per annum specified by such Beneficial Owner in
             such Bid; and/or

         (c) "Sell Order" - indicating the number of Outstanding Series C
             Auction Rate Preferred shares, if any, that such Beneficial Owner
             offers to sell without regard to the Applicable Rate for such
             Series C Auction Rate Preferred for the immediately succeeding
             Dividend Period; and

    (ii) Broker-Dealers will contact customers who are Potential Beneficial
         Owners by telephone or otherwise to determine whether such customers
         desire to submit Bids, in which case they will indicate the number of
         Series C Auction Rate Preferred shares that they offer to purchase if
         the Applicable Rate for Series C Auction Rate Preferred for the
         immediately succeeding Dividend Period is not less than the rate per
         annum specified in such Bids.

      The communication to a Broker-Dealer of the foregoing information is
herein referred to as an "Order" and collectively as "Orders." A Beneficial
Owner or a Potential Beneficial Owner placing an Order with its Broker-Dealer
is herein referred to as a "Bidder" and collectively as "Bidders." The
submission by a Broker-Dealer of an Order to the Auction Agent is referred to
herein as an "Order" and collectively as "Orders," and an Existing Holder or
Potential Holder who places an Order with the Auction Agent or on whose behalf
an Order is placed with the Auction Agent is referred to herein as a "Bidder"
and collectively as "Bidders."

      A Bid placed by a Beneficial Owner specifying a rate higher than the
Applicable Rate determined in the Auction will constitute an irrevocable offer
to sell the shares subject thereto. A Beneficial Owner that submits a Bid to
its Broker- Dealer having a rate higher than the Maximum Rate on the Auction
Date thereof will be treated as having submitted a Sell Order to its
Broker-Dealer. A Sell Order will constitute an irrevocable offer to sell
Series C Auction Rate Preferred subject thereto at a price per share equal to
$25,000.

      A Beneficial Owner that fails to submit to its Broker-Dealer prior to
the Submission Deadline for the Series C Auction Rate Preferred an Order or
Orders covering all the Outstanding Series C Auction Rate Preferred held by
such Beneficial Owner will be deemed to have submitted a Hold Order to its
Broker-Dealer covering the number of Outstanding Series C Auction Rate
Preferred shares held by such Beneficial Owner and not subject to Orders
submitted to its Broker-Dealer; provided, however, that if a Beneficial Owner
fails to submit to its Broker-Dealer prior to the Submission Deadline for the
Series C Auction Rate Preferred an Order or Orders covering all of the
Outstanding Series C Auction Rate Preferred held by such Beneficial Owner for
an Auction relating to a Special Dividend Period consisting of more than 28
Dividend Period days, such Beneficial Owner will be deemed to have submitted a
Sell Order to its Broker-Dealer covering the number of Outstanding Series C
Auction Rate Preferred shares held by such Beneficial Owner and not subject to
Orders submitted to its Broker-Dealer.

      A Potential Beneficial Owner of Series C Auction Rate Preferred may
submit to its Broker- Dealer Bids in which it offers to purchase Series C
Auction Rate Preferred if the Applicable Rate for the next Dividend Period is
not less than the rate specified in such Bid. A Bid placed by a Potential
Beneficial Owner specifying a rate not higher than the Maximum Rate will
constitute an irrevocable offer to purchase the number of Series C Auction
Rate Preferred shares specified in such Bid if the rate determined in the
Auction is equal to or greater than the rate specified in such Bid. A
Beneficial Owner of Series C Auction Rate Preferred that offers to become the
Beneficial Owner of additional Series C Auction Rate Preferred is, for
purposes of such offer, a Potential Beneficial Owner.

      As described more fully below under " -- Submission of Orders by
Broker-Dealers to Auction Agent," the Broker-Dealers will submit the Orders of
their respective customers who are Beneficial Owners and Potential Beneficial
Owners to the Auction Agent, designating themselves (unless otherwise
permitted by the Fund) as Existing Holders in respect of Series C Auction Rate
Preferred subject to Orders submitted or deemed submitted to them by
Beneficial Owners and as Potential Holders in respect of Series C Auction Rate
Preferred subject to Orders submitted to them by Potential Beneficial Owners.
However, neither the Fund nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with the foregoing. Any Order placed with
the Auction Agent by a Broker-Dealer as or on behalf of an Existing Holder or
a Potential Holder will be treated in the same manner as an Order placed with
a Broker-Dealer by a Beneficial Owner or a Potential Beneficial Owner, as
described above. Similarly, any failure by a Broker-Dealer to submit to the
Auction Agent an Order in respect of any Series C Auction Rate Preferred held
by it or its customers who are Beneficial Owners will be treated in the same
manner as a Beneficial Owner's failure to submit to its Broker-Dealer an Order
in respect of Series C Auction Rate Preferred held by it, as described in the
second preceding paragraph. For information concerning the priority given to
different types of Orders placed by Existing Holders, see " -- Submission of
Orders by Broker-Dealers to Auction Agent" below.

      The Fund may not submit an Order in any Auction.

      The Auction Procedures include a pro rata allocation of shares for
purchase and sale, which may result in an Existing Holder continuing to hold
or selling, or a Potential Holder purchasing, a number of Series C Auction
Rate Preferred shares that is fewer than the number of Series C Auction Rate
Preferred shares specified in its Order. See " -- Acceptance and Rejection of
Submitted Bids and Submitted Sell Orders and Allocation of Shares" below. To
the extent the allocation procedures have that result, Broker-Dealers that
have designated themselves as Existing Holders or Potential Holders in respect
of customer Orders will be required to make appropriate pro rata allocations
among their respective customers. Each purchase or sale will be made for
settlement on the Business Day immediately succeeding the Auction Date at a
price per share equal to $25,000. See " -- Notification of Results;
Settlement" below.

      As described above, any Bid specifying a rate higher than the Maximum
Rate will (i) be treated as a Sell Order if submitted by a Beneficial Owner or
an Existing Holder and (ii) not be accepted if submitted by a Potential
Beneficial Owner or a Potential Holder. Accordingly, the Auction Procedures
establish the Maximum Rate as a maximum rate per annum that can result from an
Auction up to the Maximum Rate. See " -- Determination of Sufficient Clearing
Bids, Winning Bid Rate and Applicable Rate" and " -- Acceptance and Rejection
of Submitted Bids and Submitted Sell Orders and Allocation of Shares" below.

Concerning the Auction Agent

      The Auction Agent is acting as agent for the Fund in connection with
Auctions. In the absence of willful misconduct or gross negligence on its
part, the Auction Agent will not be liable for any action taken, suffered, or
omitted or for any error of judgment made by it in the performance of its
duties under the Auction Agency Agreement and will not be liable for any error
of judgment made in good faith unless the Auction Agent will have been grossly
negligent in ascertaining the pertinent facts.

      The Auction Agent may rely upon, as evidence of the identities of the
Existing Holders of Series C Auction Rate Preferred, the Auction Agent's
registry of Existing Holders, the results of Auctions and notices from any
Broker-Dealer (or other person, if permitted by the Fund) with respect to
transfers described under "The Auction of Series C Auction Rate Preferred --
Secondary Market Trading and Transfer of Series C Auction Rate Preferred" in
the Prospectus and notices from the Fund. The Auction Agent is not required to
accept any such notice for an Auction unless it is received by the Auction
Agent by 3:00 p.m., New York City time, on the Business Day preceding such
Auction.

      The Auction Agent may terminate the Auction Agency Agreement upon
written notice to the Fund on a date no earlier than 30 days after the date of
delivery of such notice. If the Auction Agent should resign, the Fund will use
its best efforts to enter into an agreement with a successor Auction Agent
containing substantially the same terms and conditions as the Auction Agency
Agreement. The Fund may remove the Auction Agent, provided that prior to such
removal the Fund has entered into such an agreement with a successor Auction
Agent.

Broker-Dealers

      The Auction Agent after each Auction for Series C Auction Rate Preferred
will pay to each Broker-Dealer, from funds provided by the Fund, a service
charge equal to, in the case of any auction immediately preceding a dividend
period of less than 365 days, the product of (i) a fraction, the numerator of
which is the number of days in such dividend period and the denominator of
which is 365, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the
aggregate number of Series C Auction Rate Preferred shares placed by such
broker-dealer at such auction or, in the case of any auction immediately
preceding a dividend period of one year or longer, a percentage of the
purchase price of the Series C Auction Rate Preferred placed by the
broker-dealers at the auction agreed to by the Fund and the broker-dealers.
For the purposes of the preceding sentence, Series C Auction Rate Preferred
will be placed by a Broker-Dealer if such shares were (x) the subject of Hold
Orders deemed to have been submitted to the Auction Agent by the Broker-Dealer
and were acquired by such Broker-Dealer for its customers who are Beneficial
Owners or (y) the subject of an Order submitted by such Broker-Dealer that is
(a) a Submitted Bid of an Existing Holder that resulted in such Existing
Holder continuing to hold such shares as a result of the Auction, (b) a
Submitted Bid of a Potential Holder that resulted in such Potential Holder
purchasing such shares as a result of the Auction or (c) a valid Hold Order.

      The Fund may request the Auction Agent to terminate one or more
Broker-Dealer Agreements at any time, provided that at least one Broker-Dealer
Agreement is in effect after such termination.

      The Broker-Dealer Agreement provides that a Broker-Dealer (other than an
affiliate of the Fund) may submit Orders in Auctions for its own account,
unless the Fund notifies all Broker-Dealers that they may no longer do so, in
which case Broker-Dealers may continue to submit Hold Orders and Sell Orders
for their own accounts. Any Broker-Dealer that is an affiliate of the Fund may
submit Orders in Auctions, but only if such Orders are not for its own
account. If a Broker-Dealer submits an Order for its own account in any
Auction, it might have an advantage over other Bidders because it would have
knowledge of all Orders submitted by it in that Auction. Such Broker-Dealer,
however, would not have knowledge of Orders submitted by other Broker-Dealers
in that Auction.

Submission of Orders by Broker-Dealers to Auction Agent

      Prior to 1:00 p.m., New York City time, on each Auction Date, or such
other time on the Auction Date specified by the Auction Agent (i.e., the
Submission Deadline), each Broker-Dealer will submit to the Auction Agent in
writing all Orders obtained by it for the Auction to be conducted on such
Auction Date, designating itself (unless otherwise permitted by the Fund) as
the Existing Holder or Potential Holder, as the case may be, in respect of
Series C Auction Rate Preferred subject to such Orders. Any Order submitted by
a Beneficial Owner or a Potential Beneficial Owner to its Broker-Dealer, or by
a Broker-Dealer to the Auction Agent, prior to the Submission Deadline on any
Auction Date, will be irrevocable.

      If any rate specified in any Bid contains more than three figures to the
right of the decimal point, the Auction Agent will round such rate to the next
highest one-thousandth (0.001) of 1%.

      If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding Series C
Auction Rate Preferred shares subject to an Auction held by such Existing
Holder, such Orders will be considered valid in the following order of
priority:

      (i) all Hold Orders for Series C Auction Rate Preferred will be
          considered valid, but only up to and including in the aggregate the
          number of Outstanding shares of Series C Auction Rate Preferred held
          by such Existing Holder, and, if the number of Series C Auction Rate
          Preferred shares subject to such Hold Orders exceeds the number of
          Outstanding shares of Series C Auction Rate Preferred held by such
          Existing Holder, the number of shares subject to each such Hold Order
          will be reduced pro rata to cover the number of Outstanding shares
          held by such Existing Holder;

      (ii)(a)any Bid for Series C Auction Rate Preferred will be considered
              valid up to and including the excess of the number of Outstanding
             shares of Series C Auction Rate Preferred held by such Existing
             Holder over the number of Series C Auction Rate Preferred shares
             subject to any Hold Orders referred to in clause (i) above;

         (b) subject to subclause (a), if more than one Bid of an Existing
             Holder for Series C Auction Rate Preferred is submitted to the
             Auction Agent with the same rate and the number of Outstanding
             shares of Series C Auction Rate Preferred subject to such
             Bids is greater than such excess, such Bids will be considered
             valid up to and including the amount of such excess, and the
             number of shares of Series C Auction Rate Preferred subject to
             each Bid with the same rate will be reduced pro rata to cover the
             number of shares of Series C Auction Rate Preferred equal to such
             excess;

         (c) subject to subclauses (a) and (b), if more than one Bid of an
             Existing Holder for Series C Auction Rate Preferred is submitted
             to the Auction Agent with different rates, such Bids will be
             considered valid in the ascending order of their respective rates
             up to and including the amount of such excess; and

         (d) in any such event, the number, if any, of such Outstanding shares
             of Series C Auction Rate Preferred subject to any portion of Bids
             considered not valid in whole or in part under this clause (ii)
             will be treated as the subject of a Bid for Series C Auction Rate
             Preferred by or on behalf of a Potential Holder at the rate
             specified therein; and

   (iii) all Sell Orders for Series C Auction Rate Preferred will be
         considered valid up to and including the excess of the number of
         Outstanding shares of Series C Auction Rate Preferred held by such
         Existing Holder over the sum of shares subject to valid Hold Orders
         referred to in clause (i) above and valid Bids referred to in clause
         (ii) above.

If more than one Bid of a Potential Holder for Series C Auction Rate Preferred
is submitted to the Auction Agent by or on behalf of any Potential Holder,
each such Bid submitted will be a separate Bid with the rate and number of
Series C Auction Rate Preferred shares specified therein.

Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate

      Not earlier than the Submission Deadline on each Auction Date for Series
C Auction Rate Preferred, the Auction Agent will assemble all valid Orders
submitted or deemed submitted to it by the Broker-Dealers (each such Hold
Order, Bid or Sell Order as submitted or deemed submitted by a Broker-Dealer
being herein referred to as a "Submitted Hold Order," a "Submitted Bid" or a
"Submitted Sell Order," as the case may be, or as a "Submitted Order" and
collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted Sell
Orders," as the case may be, or as "Submitted Orders") and will determine the
excess of the number of Outstanding shares of Series C Auction Rate Preferred
over the number of Outstanding shares of Series C Auction Rate Preferred
subject to Submitted Hold Orders (such excess being herein referred to as the
"Available Series C Auction Rate Preferred") and whether Sufficient Clearing
Bids have been made in the Auction. "Sufficient Clearing Bids" will have been
made if the number of Outstanding shares of Series C Auction Rate Preferred
that are the subject of Submitted Bids of Potential Holders specifying rates
not higher than the Maximum Rate equals or exceeds the number of Outstanding
shares of Series C Auction Rate Preferred that are the subject of Submitted
Sell Orders (including the number of Series C Auction Rate Preferred shares
subject to Bids of Existing Holders specifying rates higher than the Maximum
Rate).

      If Sufficient Clearing Bids for Series C Auction Rate Preferred have
been made, the Auction Agent will determine the lowest rate specified in such
Submitted Bids (the Winning Bid Rate for shares of such Series) which, taking
into account the rates in the Submitted Bids of Existing Holders, would result
in Existing Holders continuing to hold an aggregate number of Outstanding
Series C Auction Rate Preferred shares which, when added to the number of
Outstanding Series C Auction Rate Preferred shares to be purchased by
Potential Holders, based on the rates in their Submitted Bids, would equal not
less than the Available Series C Auction Rate Preferred. In such event, the
Winning Bid Rate will be the Applicable Rate for the next Dividend Period for
all shares of such Series.

      If Sufficient Clearing Bids have not been made (other than because all
of the Outstanding Series C Auction Rate Preferred is subject to Submitted
Hold Orders), the Applicable Rate for the next Dividend Period for all Series
C Auction Rate Preferred will be equal to the Maximum Rate. In such a case,
Beneficial Owners that have submitted or that are deemed to have submitted
Sell Orders may not be able to sell in the Auction all Series C Auction Rate
Preferred subject to such Sell Orders but will continue to own Series C
Auction Rate Preferred for the next Dividend Period. See " -- Acceptance and
Rejection of Submitted Bids and Submitted Sell Orders and Allocation of
Shares" below.

      If all of the Outstanding Series C Auction Rate Preferred is subject to
Submitted Hold Orders, the Applicable Rate for all Series C Auction Rate
Preferred for the immediately succeeding Dividend Period will be the All Hold
Rate.

Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares

      Based on the determinations made under " -- Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate" above and, subject to the
discretion of the Auction Agent to round and allocate certain shares as
described below, Submitted Bids and Submitted Sell Orders will be accepted or
rejected in the order of priority set forth in the Auction Procedures, with
the result that Existing Holders and Potential Holders of Series C Auction
Rate Preferred will sell, continue to hold and/or purchase such shares as set
forth below. Existing Holders that submitted or were deemed to have submitted
Hold Orders (or on whose behalf Hold Orders were submitted or deemed to have
been submitted) will continue to hold the Series C Auction Rate Preferred
subject to such Hold Orders.

      If Sufficient Clearing Bids for Series C Auction Rate Preferred shares
have been made:

      (i)Each Existing Holder that placed or on whose behalf was placed a
         Submitted Sell Order or Submitted Bid specifying any rate higher than
         the Winning Bid Rate will sell the Outstanding Series C Auction Rate
         Preferred subject to such Submitted Sell Order or Submitted Bid;

     (ii)Each Existing Holder that placed or on whose behalf was placed a
         Submitted Bid specifying a rate lower than the Winning Bid Rate will
         continue to hold the Outstanding Series C Auction Rate Preferred
         subject to such Submitted Bid;

    (iii)Each Potential Holder that placed or on whose behalf was placed a
         Submitted Bid specifying a rate lower than the Winning Bid Rate will
         purchase the number of Outstanding Series C Auction Rate Preferred
         shares subject to such Submitted Bid;

     (iv)Each Existing Holder that placed or on whose behalf was placed a
         Submitted Bid specifying a rate equal to the Winning Bid Rate will
         continue to hold Series C Auction Rate Preferred subject to such
         Submitted Bid, unless the number of Outstanding Series C Auction Rate
         Preferred shares subject to all such Submitted Bids is greater than
         the number of Series C Auction Rate Preferred shares ("remaining
         shares") in excess of the Available Series C Auction Rate Preferred
         over the number of Series C Auction Rate Preferred shares accounted
         for in clauses (ii) and (iii) above, in which event each Existing
         Holder with such a Submitted Bid will continue to hold Series C
         Auction Rate Preferred subject to such Submitted Bid determined on a
         pro rata basis based on the number of Outstanding Series C Auction
         Rate Preferred shares subject to all such Submitted Bids of such
         Existing Holders; and

      (v)Each Potential Holder that placed or on whose behalf was placed a
         Submitted Bid specifying a rate equal to the Winning Bid Rate for
         Series C Auction Rate Preferred will purchase any Available Series C
         Auction Rate Preferred not accounted for in clauses (ii) through (iv)
         above on a pro rata basis based on the Outstanding Series C Auction
         Rate Preferred shares subject to all such Submitted Bids.

      If Sufficient Clearing Bids for Series C Auction Rate Preferred shares
have not been made (unless this results because all Outstanding Series C
Auction Rate Preferred shares are subject to Submitted Hold Orders):

      (i)Each Existing Holder that placed or on whose behalf was placed a
         Submitted Bid specifying a rate equal to or lower than the Maximum
         Rate will continue to hold the Series C Auction Rate Preferred
         subject to such Submitted Bid;

     (ii)Each Potential Holder that placed or on whose behalf was placed a
         Submitted Bid specifying a rate equal to or lower than the Maximum
         Rate will purchase the number of Series C Auction Rate Preferred
         shares subject to such Submitted Bid; and

    (iii)Each Existing Holder that placed or on whose behalf was placed a
         Submitted Bid specifying a rate higher than the Maximum Rate or a
         Submitted Sell Order will sell a number of Series C Auction Rate
         Preferred shares subject to such Submitted Bid or Submitted Sell
         Order determined on a pro rata basis based on the number of
         Outstanding Series C Auction Rate Preferred shares subject to all
         such Submitted Bids and Submitted Sell Orders.

      If, as a result of the pro rata allocation described in clauses (iv) or
(v) of the second preceding paragraph or clause (iii) of the immediately
preceding paragraph, any Existing Holder would be entitled or required to
sell, or any Potential Holder would be entitled or required to purchase, a
fraction of a Series C Auction Rate Preferred share, the Auction Agent will,
in such manner as, in its sole discretion, it determines, round up or down to
the nearest whole share the number of Series C Auction Rate Preferred shares
being sold or purchased on such Auction Date so that the number of Series C
Auction Rate Preferred shares sold or purchased by each Existing Holder or
Potential Holder will be whole shares of such Series. If as a result of the
pro rata allocation described in clause (v) of the second preceding paragraph,
any Potential Holder would be entitled or required to purchase less than a
whole Series C Auction Rate Preferred share, the Auction Agent will, in such
manner as, in its sole discretion, it will determine, allocate Series C
Auction Rate Preferred for purchase among Potential Holders so that only whole
Series C Auction Rate Preferred shares are purchased by any such Potential
Holder, even if such allocation results in one or more of such Potential
Holders not purchasing shares of such Series.

Notification of Results; Settlement

      The Auction Agent will be required to advise each Broker-Dealer that
submitted an Order of the Applicable Rate for the next Dividend Period and, if
the Order was a Bid or Sell Order, whether such Bid or Sell Order was accepted
or rejected, in whole or in part, by telephone by approximately 3:00 p.m., New
York City time, on each Auction Date. Each Broker-Dealer that submitted an
Order for the account of a customer will then be required to advise such
customer of the Applicable Rate for the next Dividend Period and, if such
Order was a Bid or a Sell Order, whether such Bid or Sell Order was accepted
or rejected, in whole or in part, will be required to confirm purchases and
sales with each customer purchasing or selling Series C Auction Rate Preferred
as a result of the Auction and will be required to advise each customer
purchasing or selling Series C Auction Rate Preferred as a result of the
Auction to give instructions to its Agent Member of the Securities Depository
to pay the purchase price against delivery of such shares or to deliver such
shares against payment therefor, as appropriate. The Auction Agent will be
required to record each transfer of Series C Auction Rate Preferred shares on
the registry of Existing Holders to be maintained by the Auction Agent.

      In accordance with the Securities Depository's normal procedures, on the
Business Day after the Auction Date, the transactions described above will be
executed through the Securities Depository and the accounts of the respective
Agent Members at the Securities Depository will be debited and credited and
shares delivered as necessary to effect the purchases and sales of Series C
Auction Rate Preferred as determined in the Auction. Purchasers will make
payment through their Agent Members in same-day funds to the Securities
Depository against delivery through their Agent Members; the Securities
Depository will make payment in accordance with its normal procedures, which
now provide for payment against delivery by their Agent Members in same-day
funds.

      If any Existing Holder selling Series C Auction Rate Preferred in an
Auction fails to deliver such shares, the Broker-Dealer of any person that was
to have purchased such shares in such Auction may deliver to such person a
number of whole Series C Auction Rate Preferred shares that is less than the
number of Series C Auction Rate Preferred shares that otherwise was to be
purchased by such person. In such event, the number of Series C Auction Rate
Preferred shares to be so delivered will be determined by the Broker-Dealer.
Delivery of such lesser number of Series C Auction Rate Preferred shares will
constitute good delivery.


                 ADDITIONAL INFORMATION CONCERNING
    THE SERIES B PREFERRED AND SERIES C AUCTION RATE PREFERRED

      The additional information concerning the Series B Preferred and Series
C Auction Rate Preferred contained in this SAI does not purport to be complete
a complete description of those Series and should be read in conjunction with
the description of the Series B Preferred and Series C Auction Rate Preferred
contained in the Prospectus under "Description of the Series B Preferred and
Series C Auction Rate Preferred." This description is subject to and qualified
in its entirety by reference to the Fund's Charter, including the provisions
of the Articles Supplementary establishing, respectively, the Series B
Preferred and the Series C Auction Rate Preferred. Copies of these Articles
Supplementary are filed as exhibits to the registration statement of which the
Prospectus and this SAI are a part and may be inspected, and a copy thereof
may be obtained, as described under "Additional Information" in the
Prospectus.

Dividends and Dividend Periods For the Series C Auction Rate Preferred

      Holders of Series C Auction Rate Preferred will be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, cumulative cash dividends on their shares, at the
Applicable Rate determined as described under " -- Determination of Dividend
Rate," payable as and when set forth below. Dividends so declared and payable
will be paid to the extent permitted under the Code, and to the extent
available and in preference to and priority over any dividend declared and
payable on shares of the Fund's Common Stock.

      By 12:00 noon, New York City time, on the Business Day immediately
preceding each Dividend Payment Date, the Fund is required to deposit with the
Paying Agent sufficient same-day funds for the payment of declared dividends.
The Fund does not intend to establish any reserves for the payment of
dividends.

      Each dividend will be paid by the Paying Agent to the Holder, which
Holder is expected to be the nominee of the Securities Depository. The
Securities Depository will credit the accounts of the Agent Members of the
beneficial owners in accordance with the Securities Depository's normal
procedures. The Securities Depository's current procedures provide for it to
distribute dividends in same-day funds to Agent Members who are in turn
expected to distribute such dividends to the persons for whom they are acting
as agents. The Agent Member of a beneficial owner will be responsible for
holding or disbursing such payments on the applicable Dividend Payment Date to
such beneficial owner in accordance with the instructions of such beneficial
owner.

      Holders of Series C Auction Rate Preferred will not be entitled to any
dividends, whether payable in cash, property or shares, in excess of full
cumulative dividends. No interest will be payable in respect of any dividend
payment or payments that may be in arrears. See " -- Default Period."

      The amount of dividends per Outstanding Series C Auction Rate Preferred
share payable (if declared) on each Dividend Payment Date of each Dividend
Period of less than one year (or in respect of dividends on another date in
connection with a redemption during such Dividend Period) will be computed by
multiplying the Applicable Rate (or the Default Rate) for such Dividend Period
(or a portion thereof) by a fraction, the numerator of which will be the
number of days in such Dividend Period (or portion thereof) such share was
Outstanding and for which the Applicable Rate or the Default Rate was
applicable (but in no event will the numerator exceed 360) and the denominator
of which will be 360, multiplying the amount so obtained by the $25,000, and
rounding the amount so obtained to the nearest cent. During any Dividend
Period of one year or more, the amount of dividends per Series C Auction Rate
Preferred share payable on any Dividend Payment Date (or in respect of
dividends on another date in connection with a redemption during such Dividend
Period) will be computed as described in the preceding sentence except that
the numerator, with respect to any full twelve month period, will be 360.

      Determination of Dividend Rate. The dividend rate for the initial
Dividend Period (i.e., the period from and including the Date of Original
Issue to and including the initial Auction Date) and the initial Auction Date
for the Series C Auction Rate Preferred is set forth in the Prospectus. See
"The Auction of Series C Auction Rate Preferred -- Summary of Auction
Procedures" in the Prospectus. For each subsequent Dividend Period, subject to
certain exceptions, the dividend rate will be the Applicable Rate that the
Auction Agent advises the Fund has resulted from an Auction.

      Dividend Periods after the initial Dividend Period will either be
Standard Dividend Periods (generally seven days) or, subject to certain
conditions and with notice to Holders, Special Dividend Periods.

      A Special Dividend Period will not be effective unless Sufficient
Clearing Bids exist at the Auction in respect of such Special Dividend Period
(that is, in general, the number of shares subject to Bids by Potential
Beneficial Owners is at least equal to the number of shares subject to Sell
Orders by Existing Holders). If Sufficient Clearing Bids do not exist at any
Auction in respect of a Special Dividend Period, the Dividend Period
commencing on the Business Day succeeding such Auction will be the Standard
Dividend Period, and the Holders of the Series C Auction Rate Preferred will
be required to continue to hold such shares for such Standard Dividend Period.
The designation of a Special Dividend Period is also subject to additional
conditions. See " -- Notification of Dividend Period" below.

      Dividends will accumulate at the Applicable Rate from the Date of
Original Issue and will be payable on each Dividend Payment Date thereafter.
Dividends will be paid through the Securities Depository on each Dividend
Payment Date. The Applicable Rate resulting from an Auction will not be
greater than the Maximum Rate. The Maximum Rate is subject to upward, but not
downward, adjustment in the discretion of the Board of Directors after
consultation with the Broker-Dealers, provided that immediately following any
such increase the Fund would be in compliance with the Series C Auction Rate
Preferred Basic Maintenance Amount.

      The Maximum Rate will apply automatically following an Auction for
Series C Auction Rate Preferred in which Sufficient Clearing Bids have not
been made (other than because all Series C Auction Rate Preferred were subject
to Submitted Hold Orders) or following the failure to hold an Auction for any
reason on the Auction Date scheduled to occur (except for (i) circumstances in
which the Dividend Rate is the Default Rate, as described below or (ii) in the
event an auction is not held because an unforeseen event or unforeseen events
cause a day that otherwise would have been an Auction Date not to be a
Business Day, in which case the length of the then current dividend period
will be extended by seven days, or a multiple thereof if necessary because of
such unforeseen event or events, the applicable rate for such period will be
the applicable rate for the then current dividend period so extended and the
dividend payment date for such dividend period will be the first business day
immediately succeeding the end of such period). The All Hold Rate will apply
automatically following an Auction in which all of the Outstanding Series C
Auction Rate Preferred shares are subject (or are deemed to be subject) to
Hold Orders.

      Prior to each Auction, Broker-Dealers will notify Holders of the term of
the immediately succeeding Dividend Period as soon as practicable after the
Broker-Dealers have been so advised by the Fund. After each Auction, on the
Auction Date, Broker-Dealers will notify Holders of the Applicable Rate for
the immediately succeeding Dividend Period and of the Auction Date of the
immediately succeeding Auction.

      Notification of Dividend Period. The Fund will designate the duration of
Dividend Periods of the Series C Auction Rate Preferred; provided, however,
that no such designation is necessary for a Standard Dividend Period and that
any designation of a Special Dividend Period will be effective only if (i)
notice thereof has been given as provided herein, (ii) any failure to pay in
the timely manner to the Auction Agent the full amount of any dividend on, or
the redemption price of, the Series C Auction Rate Preferred has been cured as
set forth under " -- Default Period," (iii) Sufficient Clearing Orders existed
in an Auction held on the Auction Date immediately preceding the first day of
such proposed Special Dividend Period, (iv) if the Fund mailed a notice of
redemption with respect to any shares, the Redemption Price with respect to
such shares has been deposited with the Paying Agent, and (v) the Fund has
confirmed that, as of the Auction Date immediately preceding the first day of
such Special Dividend Period, it has Eligible Assets with an aggregate
Discounted Value at least equal to the Series C Auction Rate Preferred Basic
Maintenance Amount and has consulted with the Broker-Dealers and has provided
notice and a Series C Auction Rate Preferred Basic Maintenance Report to each
Rating Agency which is then rating the Series C Auction Rate Preferred and so
requires.

      If the Fund proposes to designate any Special Dividend Period, not fewer
than seven Business Days (or two Business Days in the event the duration of
the Special Dividend Period is fewer than eight days) nor more than 30
Business Days prior to the first day of such Special Dividend Period, notice
will be made by press release and communicated by the Fund by telephonic or
other means to the Auction Agent and confirmed in writing promptly thereafter.
Each such notice will state (x) that the Fund proposes to exercise its option
to designate a succeeding Special Dividend Period, specifying the first and
last days thereof and (y) that the Fund will, by 3:00 p.m., New York City
time, on the second Business Day next preceding the first day of such Special
Dividend Period, notify the Auction Agent, who will promptly notify the
Broker-Dealers, of either its determination, subject to certain conditions, to
proceed with such Special Dividend Period, in which case the Fund may specify
the terms of any Specific Redemption Provisions, or its determination not to
proceed with such Special Dividend Period, in which case the succeeding
Dividend Period will be a Standard Dividend Period.

      No later than 3:00 p.m., New York City time, on the second Business Day
next preceding the first day of any proposed Special Dividend Period, the Fund
will deliver to the Auction Agent, who will promptly deliver to the Broker-
Dealers and Existing Holders, either:

      (a)a notice stating (1) that the Fund has determined to designate the
         immediately succeeding Dividend Period as a Special Dividend Period,
         specifying the first and last days thereof and (2) the terms of the
         Specific Redemption Provisions, if any; or

      (b)a notice stating that the Fund has determined not to exercise its
         option to designate a Special Dividend Period.

If the Fund fails to deliver either such notice with respect to any
designation of any proposed Special Dividend Period to the Auction Agent or is
unable to make the confirmation described above by 3:00 p.m., New York City
time, on the second Business Day next preceding the first day of such proposed
Special Dividend Period, the Fund will be deemed to have delivered a notice to
the Auction Agent with respect to such Dividend Period to the effect set forth
in clause (b) above, thereby resulting in a Standard Dividend Period.

      Default Period. A "Default Period" with respect to Series C Auction Rate
Preferred will commence on any date upon which the Fund fails to deposit
irrevocably in trust in same-day funds with the Paying Agent by 12:00 noon,
New York City time, on the Business Day immediately preceding the relevant
Dividend Payment Date or Redemption Date, as the case may be, (i) the full
amount of any declared dividend on the Series C Auction Rate Preferred payable
on such Dividend Payment Date (a "Dividend Default") or (ii) the full amount
of any redemption price (the "Redemption Price") payable on the Series C
Auction Rate Preferred being redeemed on such Redemption Date (a "Redemption
Default" and, together with a Dividend Default, a "Default").

      A Default Period with respect to a Dividend Default or a Redemption
Default will end by 12:00 noon, New York City time, on the Business Day on
which all unpaid dividends and any unpaid Redemption Price will have been
deposited irrevocably in trust in same-day funds with the Paying Agent.

      In the case of a Dividend Default, no Auction will be held during a
Default Period applicable to the Series C Auction Rate Preferred, and the
dividend rate for each Dividend Period commencing during a Default Period will
be equal to the Default Rate; provided, however, that if a Default Period is
deemed not to have occurred because the Default has been cured, then the
dividend rate for the period shall be the Applicable Rate set at the auction
for such period.

      Each subsequent Dividend Period commencing after the beginning of a
Default Period will be a Standard Dividend Period; provided, however, that the
commencement of a Default Period will not by itself cause the commencement of
a new Dividend Period. No Auction will be held during a Default Period
applicable to such Series; provided, however, that if a Default Period shall
end prior to the end of Standard Dividend Period that had commenced during the
Default Period, an Auction shall be held on the last day of such Standard
Dividend Period.

      In the event the Fund fully pays all default amounts due during a
Dividend Period, the dividend rate for the remainder of that Dividend Period
will be, as the case may be, the Applicable Rate (for the first Dividend
Period following a Dividend Default) or the Maximum Rate (for any subsequent
Dividend Period for which such Default is continuing).

      No Default Period with respect to a Dividend Default or Redemption
Default will be deemed to commence if the amount of any dividend or any
Redemption Price due (if such Default is not solely due to the willful failure
of the Fund) is deposited irrevocably in trust, in same-day funds with the
Paying Agent by 12:00 noon, New York City time, within three Business Days
after the applicable Dividend Payment Date or Redemption Date, together with
an amount equal to the Default Rate applied to the amount of such non-payment
based on the actual number of days comprising such period divided by 360. The
Default Rate will be equal to the Reference Rate multiplied by three.

Restrictions on Dividends, Redemption and Other Payments

      Under the 1940 Act, the Fund may not (i) declare any dividend (except a
dividend payable in stock of the issuer) or other distributions upon any of
its outstanding common stock, or purchase any such common stock, if at the
time of the declaration, distribution or purchase, as applicable (and after
giving effect thereto), asset coverage with respect to the Fund's outstanding
senior securities representing stock, including the Series B Preferred or
Series C Auction Rate Preferred, would be less than 200% (or such higher
percentage as may in the future be specified in or under the 1940 Act as the
minimum asset coverage for senior securities representing indebtedness of a
closed-end investment company as a condition of declaring distributions,
purchases or redemptions of its capital stock), or (ii) declare any dividend
(except a dividend payable in stock of the issuer) or other distributions upon
any of its outstanding capital stock, including the Series B Preferred or
Series C Auction Rate Preferred, or purchase any such capital stock if, at the
time of such declaration, distribution or purchase, as applicable (and after
giving effect thereto), asset coverage with respect to the senior securities
representing indebtedness would be less than 300% (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 dividends on its Preferred Stock), except
that dividends may be declared upon any Preferred Stock, including the Series
B Preferred or Series C Auction Rate Preferred, if, at the time of such
declaration (and after giving effect thereto), asset coverage with respect to
the senior securities representing indebtedness would be equal to or greater
than 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 dividends on its Preferred Stock). A declaration of a dividend or
other distribution on or purchase or redemption of Series B Preferred or
Series C Auction Rate Preferred is prohibited, unless there is no event of
default under indebtedness senior to the Series B Preferred and/or Series C
Auction Rate Preferred and, immediately after such transaction, the Fund would
have Eligible Assets with an aggregated Discounted Value at least equal to the
asset coverage requirements under indebtedness senior to its Preferred Stock
(including the Series B Preferred and/or Series C Auction Rate Preferred).

      For so long as the Series B Preferred or Series C Auction Rate Preferred
is Outstanding, except as otherwise provided in the Articles Supplementary,
the Fund will not pay any dividend or other distribution (other than a
dividend or distribution paid in shares of, or options, warrants or rights to
subscribe for or purchase, shares of Common Stock or other stock, if any,
ranking junior to the Series B Preferred and/or Series C Auction Rate
Preferred as to dividends or upon liquidation) with respect to shares of
Common Stock or any other stock of the Fund ranking junior to the Series B
Preferred and/or Series C Auction Rate Preferred as to dividends or upon
liquidation, or call for redemption, redeem, purchase or otherwise acquire for
consideration any shares of Common Stock or other stock ranking junior to the
Series B Preferred and/or Series C Auction Rate Preferred (except by
conversion into or exchange for shares of the Fund ranking junior to the
Series B Preferred and/or Series C Auction Rate Preferred as to dividends and
upon liquidation), unless, in each case, (x) immediately after such
transaction, the Fund would have Eligible Assets with an aggregate Discounted
Value at least equal to the Basic Maintenance Amount applicable to, as the
case may be, the Series B Preferred or Series C Auction Rate Preferred and the
1940 Act Asset Coverage with respect to the Fund's Outstanding Preferred
Stock, including the Series B Preferred and/or Series C Auction Rate
Preferred, would be achieved, (y) all cumulative and unpaid dividends due on
or prior to the date of the transaction have been declared and paid in full
with respect to the Preferred Stock, including the Series B Preferred and/or
Series C Auction Rate Preferred (or will have been declared and sufficient
funds for the full payment thereof will have been deposited with the Paying
Agent or the dividend-disbursement agent, as applicable) and (z) the Fund has
redeemed the full number of shares of Preferred Stock to be redeemed pursuant
to any provision for mandatory redemption contained in the Articles
Supplementary, including any Series B Preferred and/or Series C Auction Rate
Preferred required or determined to be redeemed pursuant to any such
provision.

      No full dividend will be declared or paid on the Series B Preferred or
Series C Auction Rate Preferred for any Dividend Period or part thereof,
unless full cumulative dividends due through the most recent Dividend Payment
Dates of the Outstanding Preferred Stock (including the Series B Preferred
and/or Series C Auction Rate Preferred) have been or contemporaneously are
declared and paid. If full cumulative dividends due have not been paid on all
such shares of Preferred Stock, any dividends being paid on such shares of
Preferred Stock (including the Series B Preferred and/or Series C Auction Rate
Preferred) will be paid as nearly pro rata as possible in proportion to the
respective amounts of dividends accumulated but unpaid on each such series of
Preferred Stock on the relevant Dividend Payment Date.

Asset Maintenance

      The Fund is required to satisfy two separate asset maintenance
requirements in respect of its Preferred Stock, including the Series B
Preferred and/or Series C Auction Rate Preferred: (i) the Fund must maintain
assets in its portfolio that have a value, discounted in accordance with the
Rating Agency Guidelines, at least equal to the aggregate liquidation
preference of each of the series of Preferred Stock, including Series B
Preferred and/or Series C Auction Rate Preferred, plus specified liabilities,
payment obligations and other amounts; and (ii) the Fund must maintain asset
coverage for its Outstanding Preferred Stock, including for the Series B
Preferred and/or Series C Auction Rate Preferred, of at least 200%.

      Basic Maintenance Amount. The Fund is required to maintain, as of each
Valuation Date, Eligible Assets having in the aggregate a Discounted Value at
least equal to the Basic Maintenance Amount, calculated separately for Moody's
(if Moody's is then rating the Series B Preferred or Series C Auction Rate
Preferred at the request of the Fund) and Fitch (if Fitch is then rating the
Series B Preferred or Series C Auction Rate Preferred at the request of the
Fund). For this purpose, the value of the Fund's portfolio securities will be
the Market Value. If the Fund fails to meet such requirement on any Valuation
Date and such failure is not cured by the related Cure Date, the Fund will be
required under certain circumstances to redeem some or all of the Series B
Preferred or Series C Auction Rate Preferred.

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

      The Discount Factors, the criteria used to determine whether the assets
held in the Fund's portfolio are Eligible Assets, and guidelines for
determining the market value of the Fund's portfolio holdings for purposes of
determining compliance with the Basic Maintenance Amount are based on the
criteria established in connection with rating the Series B Preferred or
Series C Auction Rate Preferred, as the case may be. These factors include,
but are not limited to, the sensitivity of the market value of the relevant
asset to changes in interest rates, the liquidity and depth of the market for
the relevant asset, the credit quality of the relevant asset (for example, the
lower the rating of a debt obligation, the higher the related discount factor)
and the frequency with which the relevant asset is marked to market. In no
event will the Discounted Value of any asset of the Fund exceed its unpaid
principal balance or face amount as of the date of calculation.

      The Discount Factor relating to any asset of the Fund, the Basic
Maintenance Amount, the assets eligible for inclusion in the calculation of
the Discounted Value of the Fund's portfolio and certain definitions and
methods of calculation relating thereto may be changed from time to time by
the Fund, without stockholder approval, but only in the event that the Fund
receives written confirmation from each Rating Agency which is then rating the
Series B Preferred or Series C Auction Rate Preferred, as the case may be, and
which so requires that any such changes would not impair an applicable Aaa
credit rating from Moody's or AAA rating from Fitch.

      A Rating Agency's Guidelines will apply to the Series B Preferred or
Series C Auction Rate Preferred only so long as such Rating Agency is rating
such shares at the request of the Fund. The Fund will pay certain fees to
Moody's and Fitch for rating, as the case may be, the Series B Preferred
and/or Series C Auction Rate Preferred. The ratings assigned to the Series B
Preferred or Series C Auction Rate Preferred are not recommendations to buy,
sell or hold Series B Preferred or Series C Auction Rate Preferred. Such
ratings may be subject to revision or withdrawal by the assigning Rating
Agency at any time. Any rating of the Series B Preferred or Series C Auction
Rate Preferred should be evaluated independently of any other rating.

      Upon any failure to maintain the required Discounted Value of the Fund's
Eligible Assets, the Fund will seek to alter the composition of its portfolio
to re-attain the Basic Maintenance Amount on or prior to the applicable Cure
Date, thereby incurring additional transaction costs and possible losses
and/or gains on dispositions of portfolio securities.

      Under certain circumstances, as described in the Articles Supplementary,
the Board of Directors without further action by the stockholders may modify
the calculation of Adjusted Value (as defined in the Articles Supplementary),
Basic Maintenance Amount and the elements of each of them and the definitions
of such terms and elements if the Board of Directors determines that such
modification is necessary to prevent a reduction in rating of the shares of
Preferred Stock by a rating agency rating such shares at the request of the
Fund or is in the best interests of the holders of common stock and is not
adverse to the holders of Preferred Stock in view of advice to the Fund by the
relevant rating agency that such modification would not adversely affect the
then-current rating of the affected Preferred Shares. In addition, subject to
compliance with applicable law, the Board of Directors may amend the
definition of Maximum Rate to increase the percentage amount by which the
Reference Rate is multiplied to determine the Maximum Rate shown therein
without the vote or consent of the Holders of shares of Preferred Stock,
including the Series C Auction Rate Preferred Shares, or any other stockholder
of the Fund, after consultation with the Broker-Dealers, and with confirmation
from each Rating Agency that immediately following any such increase the Fund
would meet the Series C Auction Rate Preferred Basic Maintenance Amount Test.

      1940 Act Series C Auction Rate Preferred Asset Coverage. As of each
Valuation Date, the Fund will determine whether the 1940 Act Asset Coverage is
met as of that date. The Fund will deliver to the Auction Agent and each
Rating Agency a 1940 Act Asset Coverage Certificate which sets forth the
determination of the preceding sentence (i) as of the Date of Original Issue
and, thereafter, (ii) as of (a) the last Business Day of each March, June,
September and December and (b) a Business Day on or before any 1940 Act Asset
Coverage Cure Date following a failure to meet 1940 Act Asset Coverage. Such
1940 Act Asset Coverage Certificate will be delivered in the case of clause
(i) on the Date of Original Issue and in the case of clause (ii) on or before
the seventh Business Day after the last Business Day of such March, June,
September and December, as the case may be, or the relevant Cure Date.

      Notices. The Fund must deliver a Basic Maintenance Report to each
applicable Rating Agency and the Auction Agent, if any, which sets forth, as
of the related Valuation Date, Eligible Assets sufficient to meet or exceed
the applicable Basic Maintenance Amount, the Market Value and Discounted Value
thereof (in a series and in the aggregate) and the applicable Basic
Maintenance Amount. Such Basic Maintenance Reports must be delivered as of the
applicable Date of Original Issue and thereafter upon the occurrence of
specified events on or before the seventh Business Day after the relevant
Valuation Date or Cure Date.

Deposit Assets Requirements Relating to the Series C Auction Rate Preferred

      The Fund is obligated to deposit in a segregated custodial account a
specified amount of Deposit Assets not later than 12:00 noon, New York City
time, on each Dividend Payment Date and each Redemption Date relating to the
Series C Auction Rate Preferred. These Deposit Assets, in all cases, will have
an initial combined value greater than or equal to the cash amounts payable on
the applicable Dividend Payment Date or Redemption Date, and will mature prior
to such date.

Restrictions on Transfer Relating to the Series C Auction Rate Preferred

      Series C Auction Rate Preferred may be transferred only (i) pursuant to
an Order placed in an Auction, (ii) to or through a Broker-Dealer, or (iii) to
the Fund or any Affiliate. Notwithstanding the foregoing, a transfer other
than pursuant to an Auction will not be effective unless the selling Existing
Holder or the Agent Member of such Existing Holder, in the case of an Existing
Holder whose shares are listed in its own name on the books of the Auction
Agent, or the Broker-Dealer or Agent Member of such Broker-Dealer, in the case
of a transfer between persons holding Series C Auction Rate Preferred through
different Broker-Dealers, advises the Auction Agent of such transfer. Any
certificates representing the Series C Auction Rate Preferred shares issued to
the Securities Depository will bear legends with respect to the restrictions
described above and stop-transfer instructions will be issued to the Transfer
Agent and/or Registrar.

                         MOODY'S AND FITCH GUIDELINES

      The descriptions of the Moody's and Fitch Guidelines contained in this
SAI do not purport to be complete and are subject to and qualified in their
entireties by reference to the applicable Articles Supplementary. Copies of
the Articles Supplementary are filed as an exhibit to the registration
statement of which the Prospectus and this SAI are a part and may be
inspected, and copies thereof may be obtained, as described under "Additional
Information" in the Prospectus.

      The composition of the Fund's portfolio reflects guidelines (referred to
herein as the "Rating Agency Guidelines") established by Moody's and Fitch,
each a Rating Agency, in connection with the Fund's receipt of a rating of Aaa
from Moody's and AAA from Fitch, respectively, for the Series C Auction Rate
Preferred and a rating of Aaa from Moody's for the Series B Preferred. These
Rating Agency Guidelines relate, among other things, to industry and credit
quality characteristics of issuers and diversification requirements and
specify various Discount Factors for different types of securities (with the
level of discount greater as the rating of a security becomes lower). Under
the Rating Agency Guidelines, certain types of securities in which the Fund
may otherwise invest consistent with its investment strategy are not eligible
for inclusion in the calculation of the Discounted Value of the Fund's
portfolio. Such instruments include, for example, private placements (other
than Rule 144A Securities) and other securities not within the Rating Agency
Guidelines. Accordingly, although the Fund reserves the right to invest in
such securities to the extent set forth herein, such securities have not and
it is anticipated that they will not constitute a significant portion of the
Fund's portfolio.

      The Rating Agency Guidelines require that the Fund maintain assets
having an aggregate Discounted Value, determined on the basis of the
Guidelines, greater than the aggregate liquidation preference of the
Outstanding shares of Series B Preferred, Series C Auction Rate Preferred and
other Preferred Stock plus specified liabilities, payment obligations and
other amounts, as of periodic Valuation Dates. The Rating Agency Guidelines
also require the Fund to maintain asset coverage for the Outstanding Shares of
Series B Preferred, Series C Auction Rate Preferred and other Preferred Stock
on a non-discounted basis of at least 200% as of the end of each month, and
the 1940 Act requires this asset coverage as a condition to paying dividends
or other distributions on Common Shares. See "Additional Information
Concerning The Series B Preferred and Series C Auction Rate Preferred - Asset
Maintenance." The effect of compliance with the Rating Agency Guidelines may
be to cause the Fund to invest in higher quality assets and/or to maintain
relatively substantial balances of highly liquid assets or to restrict the
Fund's ability to make certain investments that would otherwise be deemed
potentially desirable by the Investment Adviser, including private placements
of other than Rule 144A Securities (as defined herein). The Rating Agency
Guidelines are subject to change from time to time with the consent of the
relevant Rating Agency and would not apply if the Fund in the future elected
not to use investment leverage consisting of senior securities rated by either
Moody's or Fitch, although other similar arrangements might apply with respect
to other rated senior securities that the Fund may issue.

      The Fund intends to maintain, at specified times, a Discounted Value for
its portfolio at least equal to the amount specified by each Rating Agency
(the "Basic Maintenance Amount"), the determination of which is as set forth
under "Additional Information Concerning The Series B Preferred and Series C
Auction Rate Preferred -- Asset Maintenance." Moody's and Fitch have each
established separate guidelines for determining Discounted Value. To the
extent any particular portfolio holding does not satisfy the applicable Rating
Agency's Guidelines, all or a portion of such holding's value will not be
included in the calculation of Discounted Value (as defined by such Rating
Agency).

      Upon any failure to maintain the required Discounted Value, the Fund may
seek to alter the composition of its portfolio to reestablish required asset
coverage within the specified ten Business Day cure period, thereby incurring
additional transaction costs and possible losses and/or gains on dispositions
of portfolio securities. To the extent any such failure is not cured in a
timely manner, the holders of the Series B Preferred and Series C Auction Rate
Preferred will acquire certain rights. See "Additional Information Concerning
The Series B Preferred and Series C Auction Rate Preferred -- Asset
Maintenance."

      The Rating Agency Guidelines do not impose any limitations on the
percentage of Fund assets that may be invested in holdings not eligible for
inclusion in the calculation of the Discounted Value of the Fund's portfolio.
The amount of such assets included in the portfolio at any time may vary
depending upon the rating, diversification and other characteristics of the
assets included in the portfolio which are eligible for inclusion in the
Discounted Value of the portfolio under the Rating Agency Guidelines.

      A rating of preferred stock as Aaa (as described by Moody's) or AAA (as
described by Fitch) indicates strong asset protection, conservative balance
sheet ratios and positive indications of continued protection of preferred
dividend requirements. A Moody's or Fitch credit rating of preferred stock
does not address the likelihood that a resale mechanism (such as the Auction)
will be successful. As described respectively by Moody's and Fitch, an issue
of preferred stock which is rated Aaa or AAA is considered to be top-quality
preferred stock with good asset protection and the least risk of dividend
impairment within the universe of preferred stocks.

      Ratings are not recommendations to purchase, hold or sell Series B
Preferred or Series C Auction Rate Preferred, inasmuch as the rating does not
comment as to market price or suitability for a particular investor. The
rating is based on current information furnished to Moody's and Fitch by the
Fund and obtained by Moody's and Fitch from other sources. The rating may be
changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information.

MOODY'S GUIDELINES

      Under the Moody's guidelines, the Fund is required to maintain specified
discounted asset values for its portfolio representing the Basic Maintenance
Amount. The following Discount Factors apply to portfolio holdings as
described below, subject to diversification, issuer size and other
requirements, in order to constitute Moody's Eligible Assets includable within
the calculation of Discounted Value:


         (a) Convertible securities (including convertible preferreds):


                         DISCOUNT FACTORS (1)
   RATINGS(2)       UTILITY   INDUSTRIAL   FINANCIAL   TRANSPORTATION
- -----------------   --------  -----------  ----------  ---------------
Aaa..............     162%       256%         233%          250%
Aa...............     167%       261%         238%          265%
A................     172%       266%         243%          275%
Baa..............     188%       282%         259%          285%
Ba...............     195%       290%         265%          290%
B................     199%       293%         270%          295%
NR(3)............     300%       300%         300%          300%

(1)   Discount factors are for 7-week exposure period.
(2)   If a convertible security is unrated by Moody's but is rated by S&P, a
      rating two numeric ratings below the S&P rating will be used (e.g.,
      where the S&P rating is AAA, a Moody's rating of Aa2 will be used; where
      the S&P rating is AA+, a Moody's rating of Aa3 will be used).
(3)   Unrated fixed-income and convertible securities, which are rated by
      neither Moody's nor S&P, are limited to 10% of discounted Moody's
      Eligible Assets. If a corporate debt security is unrated by both Moody's
      and S&P, the Fund will use the percentage set forth under "Unrated" in
      this table.

         Upon conversion to common stock, the Discount Factors applicable to
common stock will apply:



  COMMON STOCKS                       UTILITY   INDUSTRIAL    FINANCIAL
- -----------------                    --------  ----------   -----------
7 week exposure period.......           170%       264%         241%


         (b) Corporate Debt Securities (non-convertible): The percentage
determined by reference to the rating on such asset with reference to the
remaining term to maturity of such asset, in accordance with the table set
forth below.

<TABLE>
<CAPTION>

                                                     MOODY'S RATING CATEGORY(1)
                                                     --------------------------
              TERMS TO MATURITY OF
            CORPORATE DEBT SECURITY                    AAA        AA         A        BAA         BA         B          UNRATED(2)
            -----------------------                    ---        --         -        ---         --         -          ----------
<C>                                                    <C>        <C>       <C>       <C>         <C>        <C>         <C>
1 year or less..................................       109%       112%      115%      118%       119%       125%           225%
2 years or less (but longer than 1 year)........       115        118       122       125        127        133            225
3 years or less (but longer than 2 years).......       120        123       127       131        133        140            225
4 years or less (but longer than 3 years).......       126        129       133       138        140        147            225
5 years or less (but longer than 4 years).......       132        135       139       144        146        154            225
7 years or less (but longer than 5 years).......       139        143       147       152        156        164            225
10 years or less (but longer than 7 years)......       145        150       155       160        164        173            225
15 years or less (but longer than 10 years).....       150        155       160       165        170        180            225
20 years or less (but longer than 15 years).....       150        155       160       165        170        190            225
30 years or less (but longer than 20 years).....       150        155       160       165        170        191            225
Greater than 30 years...........................       165        173       181       189        205        221            225
</TABLE>


(1)   If a corporate debt security is unrated by Moody's but is rated by S&P,
      a rating two numeric ratings below the S&P rating will be used (e.g.,
      where the S&P rating is AAA, a Moody's rating of Aa2 will be used; where
      the S&P rating is AA+, a Moody's rating of Aa3 will be used).
(2)   Unrated corporate debt securities, which are corporate debt securities
      rated by neither Moody's nor S&P, are limited to 10% of discounted
      Moody's Eligible Assets. If a corporate debt security is unrated by both
      Moody's and S&P, the Fund will use the percentage set forth under
      "Unrated" in this table.

         The Moody's Discount Factors presented in the immediately preceding
table will also apply to corporate debt securities that do not pay interest in
U.S. dollars or euros, provided that the Moody's Discount Factor determined
from the table shall be multiplied by a factor of 120% for purposes of
calculating the Discounted Value of such securities.

         (c) Preferred Stock: The Moody's Discount Factor for preferred stock
shall be (i) for preferred stocks issued by a utility, 146%; (ii) for
preferred stocks of industrial and financial issuers, 209%; (iii) for
preferred stocks issued by real estate related issuers, 154%; and (iv) for
auction rate preferred stocks, 350%.

         (d) U.S. Government Obligations and U.S. Treasury Strips:


<TABLE>
<CAPTION>

                                                       U.S. GOVERNMENT SECURITIES       U.S. TREASURY STRIPS
           REMAINING TERM TO MATURITY                        DISCOUNT FACTOR               DISCOUNT FACTOR
           --------------------------                  --------------------------       --------------------
<S>                                                                <C>                           <C>
1 year or less..................................                   107%                          107%
2 years or less (but longer than 1 year)........                   113                           115
3 years or less (but longer than 2 years).......                   118                           121
4 years or less (but longer than 3 years).......                   123                           128
5 years or less (but longer than 4 years).......                   128                           135
7 years or less (but longer than 5 years).......                   135                           147
10 years or less (but longer than 7 years)......                   141                           163
15 years or less (but longer than 10 years).....                   146                           191
20 years or less (but longer than 15 years).....                   154                           218
30 years or less (but longer than 20 years).....                   154                           244
</TABLE>


         (e) Short-Term Instruments and Cash: The Moody's Discount Factor
applied to short-term portfolio securities, including without limitation
short-term corporate debt securities, Short-Term Money Market Instruments and
short-term municipal debt obligations, will be (i) 100%, so long as such
portfolio securities mature or have a demand feature at par exercisable within
the Moody's Exposure Period; (ii) 115%, so long as such portfolio securities
mature or have a demand feature at par not exercisable within the Moody's
Exposure Period; and (iii) 125%, if such securities are not rated by Moody's,
so long as such portfolio securities are rated at least A-1+/AA or SP-1+/AA by
S&P and mature or have a demand feature at par exercisable within the Moody's
Exposure Period. A Moody's Discount Factor of 100% will be applied to cash.
Moody's rated Rule 2a-7 money market funds will also have a discount factor of
100%.

         (f) Rule 144A Securities: The Moody's Discount Factor applied to Rule
144A Securities for Rule 144A Securities will be 130% of the Moody's Discount
Factor which would apply were the securities registered under the Securities
Act.

"Moody's Eligible Assets" means:

           (a) cash (including interest and dividends due on assets rated (i)
Baa3 or higher by Moody's if the payment date is within five Business Days of
the Valuation Date, (ii) A2 or higher if the payment date is within thirty
days of the Valuation Date, and (iii) A1 or higher if the payment date is
within the Moody's Exposure Period) and receivables for Moody's Eligible
Assets sold if the receivable is due within five Business Days of the
Valuation Date, and if the trades which generated such receivables are (1)
settled through clearing house firms with respect to which the Fund has
received prior written authorization from Moody's or (2) (A) with
counterparties having a Moody's long-term debt rating of at least Baa3 or (B)
with counterparties having a Moody's Short-Term Money Market Instrument rating
of at least P-1;

           (b) Short-Term Money Market Instruments, so long as (i) such
securities are rated at least P-1, (ii) in the case of demand deposits, time
deposits and overnight funds, the supporting entity is rated at least A2, or
(iii) in all other cases, the supporting entity (1) is rated A2 and the
security matures within one month, (2) is rated A1 and the security matures
within three months or (3) is rated at least Aa3 and the security matures
within six months. In addition, Moody's rated Rule 2a-7 money market funds are
also eligible investments.

           (c) U.S. Government Obligations and U.S. Treasury Strips;

           (d) Rule 144A Securities;

           (e) Corporate debt securities if (i) such securities are rated B3
or higher by Moody's; (ii) such securities provide for the periodic payment of
interest in cash in U.S. dollars or euros, except that such securities that do
not pay interest in U.S. dollars or euros shall be considered Moody's Eligible
Assets if they are rated by Moody's or S&P; (iii) for debt securities rated
Ba1 and below, no more than 10% of the original amount of such issue may
constitute Moody's Eligible Assets; (iv) such securities have been registered
under the Securities Act or are restricted as to resale under federal
securities laws but are eligible for resale pursuant to Rule 144A under the
Securities Act as determined by the Fund's investment manager or portfolio
manager acting pursuant to procedures approved by the Board of Directors,
except that such securities that are not subject to U.S. federal securities
laws shall be considered Moody's Eligible Assets if they are publicly traded;
and (v) such securities are not subject to extended settlement.

           Notwithstanding the foregoing limitations, (1) corporate debt
securities not rated at least B3 by Moody's shall be considered to be Moody's
Eligible Assets only to the extent the Market Value of such corporate debt
securities does not exceed 10% of the aggregate Market Value of all Moody's
Eligible Assets; provided, however, that if the Market Value of such corporate
debt securities exceeds 10% of the aggregate Market Value of all Moody's
Eligible Assets, a portion of such corporate debt securities (selected by the
Fund) shall not be considered Moody's Eligible Assets, so that the Market
Value of such corporate debt securities (excluding such portion) does not
exceed 10% of the aggregate Market Value of all Moody's Eligible Assets; and
(2) corporate debt securities rated by neither Moody's nor S&P shall be
considered to be Moody's Eligible Assets only to the extent such securities
are issued by entities which (A) have not filed for bankruptcy within the past
three years, (B) are current on all principal and interest in their fixed
income obligations, (C) are current on all preferred stock dividends, and (D)
possess a current, unqualified auditor's report without qualified, explanatory
language.

           (f) Convertible bonds, provided that (i) the issuer of common stock
must have a Moody's senior unsecured debt of B3 or better, or an S&P rating of
BB or better, (ii) the common stocks must be traded on the NYSE, AMEX, or
NASDAQ, (iii) dividends must be paid in U.S. dollars, (iv) the portfolio of
convertible bonds must be diversified as set forth in Figure 1 below, (v) the
company shall not hold shares exceeding the average weekly trading volume
during the preceding month, (vi) synthetic convertibles are excluded from
asset eligibility.


         CONVERTIBLE BONDS DIVERSIFICATION GUIDELINES
- --------------------------------------------------------------
              MAXIMUM SINGLE    MAXIMUM SINGLE  MAXIMUM SINGLE
    TYPE      ISSUER (%)(1)     INDUSTRY (%)    STATE (%) (1)
- ------------------------------ -------------------------------
Utility......        4                50            7(2)
Other........        6                20             n/a


 (1)  Percentage represent a portion of the aggregate market value and number
      of outstanding shares of the convertible stock portfolio.
 (2)  Utility companies operating in more than one state should be diversified
      according to the state in which they generate the largest part of their
      revenues. Publicly available information on utility company revenues by
      state is available from the Uniform Statistical Report (USR) or the
      Federal Energy Regulation commission (FERC).

           (g) Preferred stocks if (i) dividends on such preferred stock are
cumulative, (ii) such securities provide for the periodic payment of dividends
thereon in cash in U.S. dollars or euros and do not provide for conversion or
exchange into, or have warrants attached entitling the holder to receive,
equity capital at any time over the respective lives of such securities, (iii)
the issuer of such a preferred stock has common stock listed on either the New
York Stock Exchange or the American Stock Exchange, (iv) the issuer of such a
preferred stock has a senior debt rating from Moody's of Baa1 or higher or a
preferred stock rating from Moody's of Baa3 or higher and (v) such preferred
stock has paid consistent cash dividends in U.S. dollars or euros over the
last three years or has a minimum rating of A1 (if the issuer of such
preferred stock has other preferred issues outstanding that have been paying
dividends consistently for the last three years, then a preferred stock
without such a dividend history would also be eligible). In addition, the
preferred stocks must have the following diversification requirements: (1) the
preferred stock issue must be greater than $50 million and (2) the minimum
holding by the Fund of each issue of preferred stock is $500,000 and the
maximum holding of preferred stock of each issue is $5 million. In addition,
preferred stocks issued by transportation companies will not be considered
Moody's Eligible Assets.

           (h) Financial contracts, as such term is defined in Section
3(c)(2)(B)(ii) of the Investment Company Act, not otherwise provided for in
this definition but only upon receipt by the Fund of a letter from Moody's
specifying any conditions on including such financial contract in Moody's
Eligible Assets and assuring the Fund that including such financial contract
in the manner so specified would not affect the credit rating assigned by
Moody's to the Series C Auction Rate Preferred.

           (i) Interest rate swaps entered into according to International
Swap Dealers Association ("ISDA") standards if (i) the counterparty to the
swap transaction has a short- term rating of not less than P-1 or, if the
counterparty does not have a short-term rating, the counterparty's senior
unsecured long-term debt rating is Aa3 or higher and (ii) the original
aggregate notional amount of the interest rate swap transaction or
transactions is not to be greater than the liquidation preference of the
Series C Auction Rate Preferred originally issued. The interest rate swap
transaction will be marked-to-market daily.

           In addition, portfolio holdings as described below must be within
the following diversification and issue size requirements in order to be
included in Moody's Eligible Assets:

<TABLE>
<CAPTION>
                                                     MAXIMUM        MAXIMUM
                                  MAXIMUM            SINGLE          SINGLE               MAXIMUM
                                  SINGLE         INDUSTRY(3)(4)    INDUSTRY (3)(4)       ISSUE SIZE
             RATINGS(1)          ISSUER(2)(3)       NON-UTILITY      UTILITY         ($ IN MILLION) (5)
- -----------------------------  --------------    ---------------  ----------------    ------------------
<S>                                <C>                <C>               <C>                  <C>
Aaa..........................      100%               100%              100%                 $100
Aa...........................       20                 60                30                   100
A............................       10                 40                25                   100
Baa..........................        6                 20                20                   100
Ba...........................        4                 12                12                  50(6)
B1-B2........................        3                  8                 8                  50(6)
B3 or below..................        2                  5                 5                  50(6)
</table>

(1)  Refers to the preferred stock and senior debt rating of the
     portfolio holding.
(2)  Companies subject to common ownership of 25% or more are considered
     as one issuer.
(3)  Percentages represent a portion of the aggregate Market Value of
     corporate debt securities.
(4)  Industries are determined according to Moody's Industry
     Classifications, as defined herein.
(5)  Except for preferred stock, which has a minimum issue size of $50
     million.
(6)  Portfolio holdings from issues ranging from $50 million to $100
     million are limited to 20% of the Fund's total assets.

FITCH GUIDELINES

      Under the Fitch guidelines, the Fund is required to maintain specified
discounted asset values for its portfolio representing the Basic Maintenance
Amount. The Fitch Discount Factor for any Fitch Eligible Asset other than the
securities set forth below will be the percentage provided in writing by
Fitch. The following Discount Factors apply to portfolio holdings as described
below, subject to diversification, issuer size and other requirements, in
order to constitute Fitch Eligible Assets includable within the calculation of
Discounted Value:

           (a) Corporate debt securities. The percentage determined by
reference to the rating of a corporate debt security in accordance with the
table set forth below.


<TABLE>
<CAPTION>
                                                                                                                          NOT
           TERM TO MATURITY OF CORPORATE                                                                               RATED OR
             DEBT SECURITY UNRATED (1)                  AAA           AA          A           BBB           BB         BELOW BB
           -----------------------------             ---------     -------    --------     --------      ========      ---------
<S>                                                   <C>          <C>         <C>          <C>           <C>             <C>
3 years or less (but longer than 1 year)............  106.38%      108.11%     109.89%      111.73%       129.87%       151.52%
5 years or less (but longer than 3 years)...........  111.11%      112.99 %    114.94%      116.96%       134.24%       151.52%
7 years or less (but longer than 5 years)...........  113.64%      115.61%     117.65%      119.76%       135.66%       151.52%
10 years or less (but longer than 7 years)..........  115.61%      117.65%     119.76%      121.95%       136.74%       151.52%
15 years or less (but longer than 10 years).........  119.76%      121.95%     124.22%      126.58%       139.05%       151.52%
More than 15 years..................................  124.22%      126.58%     129.03%      131.58%       144.55%       151.52%

</TABLE>

(1)   If a security is not rated by Fitch but is rated by two other rating
      agencies, then the lower of the ratings on the security from the two
      other rating agencies will be used to determine the Fitch Discount
      Factor (e.g., where the S&P rating is A- and the Moody's rating is Baa1,
      a Fitch rating of BBB+ will be used). If a security is not rated by
      Fitch but is rated by only one other NRSRO, then the rating on the
      security from the other NRSRO will be used to determine the Fitch
      Discount Factor (e.g., where the only rating on a security is an S&P
      rating of AAA, a Fitch rating of AAA will be used, and where the only
      rating on a security is a Moody's rating of Ba3, a Fitch rating of BB-
      will be used). If a security is not rated by any NRSRO, the Fund will
      use the percentage set forth under "Not Rated" in this table.

           (b) Convertible debt securities. The Fitch Discount Factor applied
to convertible debt securities is (i) 200% for investment grade convertibles
and (ii) 222% for below investment grade convertibles so long as such
convertible debt securities have neither (1) conversion premium greater than
100% nor (2) have a yield to maturity or yield to worst of > 15.00% above the
relevant Treasury curve.

           The Fitch Discount Factor applied to convertible debt securities
which have conversion premiums of greater than 100% is (i) 152% for investment
grade convertibles and (ii) 179% for below investment grade convertibles so
long as such convertible debt securities do not have a yield to maturity or
yield to worst of > 15.00% above the relevant Treasury curve. The Fitch
Discount Factor applied to convertible debt securities which have a yield to
maturity or yield to worst of > 15.00% above the relevant Treasury curve is
370%.

           If a security is not rated by Fitch but is rated by two other
Rating Agencies, then the lower of the ratings on the security from the two
other Rating Agencies will be used to determine the Fitch Discount Factor
(e.g., where the S&P rating is A- and the Moody's rating is Baa1, a Fitch
rating of BBB+ will be used). If a security is not rated by Fitch but is rated
by only one other NRSRO, then the rating on the security from the other NRSRO
will be used to determine the Fitch Discount Factor (e.g., where the only
rating on a security is an S&P rating of AAA, a Fitch rating of AAA will be
used, and where the only rating on a security is a Moody's rating of Ba3, a
Fitch rating of BB- will be used). If a security is not rated by any NRSRO,
the Fund will treat the security as if it were below investment grade.

            (c) Preferred securities: The percentage determined by reference
to the rating of a preferred security in accordance with the table set forth
below.


<TABLE>
<CAPTION>
                                                                                                                    NOT RATED
                                                                                                                       OR
      NOT RATED OR BELOW PREFERRED SECURITY(1)           AAA         AA          A          BBB          BB         BELOW BB
      ----------------------------------------         -------      ------     ------      ------      ------      ---------
<S>                                                    <C>          <C>         <C>        <C>         <C>          <C>
Taxable Preferred....................................  130.58%      133.19%     135.91%    138.73%     153.23%      161.08%
Dividend-Received Deduction (DRD) Preferred..........  163.40%      163.40%     163.40%    163.40%     201.21%      201.21%

(1)   If a security is not rated by Fitch but is rated by two other Rating Agencies, then the lower of
      the ratings on the security from the two other Rating Agencies will be used to determine the
      Fitch Discount Factor (e.g., where the S&P rating is A- and the Moody's rating is Baa1, a
      Fitch rating of BBB+ will be used). If a security is not rated by Fitch but is rated by only one
      other NRSRO, then the rating on the security from the other NRSRO will be used to determine
      the Fitch Discount Factor (e.g., where the only rating on a security is an S&P rating of AAA, a
      Fitch rating of AAA will be used, and where the only rating on a security is a Moody's rating
      of Ba3, a Fitch rating of BB- will be used). If a security is not rated by any NRSRO, the Fund
      will use the percentage set forth under "Not Rated" in this table.
</table>

           (d) U.S. Government Obligations and U.S. Treasury Strips:


             DISCOUNT TIME REMAINING TO MATURITY FACTOR
      1 year or less..................................... 100%
      2 years or less (but longer than 1 year)........... 103%
      3 years or less (but longer than 2 years).......... 105%
      4 years or less (but longer than 3 years).......... 107%
      5 years or less (but longer than 4 years).......... 109%
      7 years or less (but longer than 5 years).......... 112%
      10 years or less (but longer than 7 years)......... 114%
      15 years or less (but longer than 10 years)........ 122%
      20 years or less (but longer than 15 years)........ 130%
      25 years or less (but longer than 20 years)........ 146%
      Greater than 30 years.............................. 154%

           (e) Short-Term Investments and Cash: The Fitch Discount Factor
applied to short-term portfolio securities, including without limitation Debt
Securities, Short Term Money Market Instruments and municipal debt
obligations, will be (i) 100%, so long as such portfolio securities mature or
have a demand feature at par exercisable within the Fitch Exposure Period;
(ii) 115%, so long as such portfolio securities mature or have a demand
feature at par not exercisable within the Fitch Exposure Period; and (iii)
125%, so long as such portfolio securities neither mature nor have a demand
feature at par exercisable within the Fitch Exposure Period. A Fitch Discount
Factor of 100% will be applied to cash.

           (f) Rule 144A Securities: The Fitch Discount Factor applied to Rule
144A Securities will be 110% of the Fitch Discount Factor which would apply
were the securities registered under the Securities Act.

      (g) Foreign Bonds: The Fitch Discount Factor (i) for a Foreign Bond the
principal of which (if not denominated in U.S. dollars) is subject to a
currency hedging transaction will be the Fitch Discount Factor that would
otherwise apply to such Foreign Bonds in accordance with this definition and
(ii) for (1) a Foreign Bond the principal of which (if not denominated in U.S.
dollars) is not subject to a currency hedging transaction and (2) a bond
issued in a currency other than U.S. dollars by a corporation, limited
liability company or limited partnership domiciled in, or the government or
any agency, instrumentality or political subdivision of, a nation other than
an Approved Foreign Nation, will be 370%.

"Fitch Eligible Assets" means:

           (a) Cash (including interest and dividends due on assets rated (i)
BBB or higher by Fitch or the equivalent by another NRSRO if the payment date
is within five Business Days of the Valuation Date, (ii) A or higher by Fitch
or the equivalent by another NRSRO if the payment date is within thirty days
of the Valuation Date, and (iii) A+ or higher by Fitch or the equivalent by
another NRSRO if the payment date is within the Fitch Exposure Period) and
receivables for Fitch Eligible Assets sold if the receivable is due within
five Business Days of the Valuation Date, and if the trades which generated
such receivables are settled within five Business Days;

           (b) Short Term Money Market Instruments so long as (i) such
securities are rated at least F1+ by Fitch or the equivalent by another NRSRO,
(ii) in the case of demand deposits, time deposits and overnight funds, the
supporting entity is rated at least A by Fitch or the equivalent by another
NRSRO, or (iii) in all other cases, the supporting entity (1) is rated at
least A by Fitch or the equivalent by another NRSRO and the security matures
within one month, (2) is rated at least A by Fitch or the equivalent by
another NRSRO and the security matures within three months or (3) is rated at
least AA by Fitch or the equivalent by another NRSRO and the security matures
within six months;

           (c) U.S. Government Obligations and U.S. Treasury Strips;

           (d) Debt securities if such securities have been registered under
the Securities Act or are restricted as to resale under federal securities
laws but are eligible for resale pursuant to Rule 144A under the Securities
Act as determined by the Fund's investment manager or portfolio manager acting
pursuant to procedures approved by the Board of Directors of the Fund; and
such securities are issued by (i) a U.S. corporation, limited liability
company or limited partnership, (ii) a corporation, limited liability company
or limited partnership domiciled in Argentina, Australia, Brazil, Chile,
France, Germany, Italy, Japan, Korea, Mexico, Spain or the United Kingdom (the
"Approved Foreign Nations"), (iii) the government of any Approved Foreign
Nation or any of its agencies, instrumentalities or political subdivisions
(the debt securities of Approved Foreign Nation issuers being referred to
collectively as "Foreign Bonds"), (iv) a corporation, limited liability
company or limited partnership domiciled in Canada or (v) the Canadian
government or any of its agencies, instrumentalities or political subdivisions
(the debt securities of Canadian issuers being referred to collectively as
"Canadian Bonds"). Foreign Bonds held by the Fund will qualify as Fitch
Eligible Assets only up to a maximum of 20% of the aggregate Market Value of
all assets constituting Fitch Eligible Assets. Similarly, Canadian Bonds held
by the Fund will qualify as Fitch Eligible Assets only up to a maximum of 20%
of the aggregate Market Value of all assets constituting Fitch Eligible
Assets. Notwithstanding the limitations in the two preceding sentences,
Foreign Bonds and Canadian Bonds held by the Fund will qualify as Fitch
Eligible Assets only up to a maximum of 30% of the aggregate Market Value of
all assets constituting Fitch Eligible Assets. In addition, bonds which are
issued in connection with a reorganization under U.S. federal bankruptcy law
("Reorganization Bonds") will be considered debt securities constituting Fitch
Eligible Assets if (1) they provide for periodic payment of interest in cash
in U.S. dollars or euros; (2) they do not provide for conversion or exchange
into equity capital at any time over their lives; (3) they have been
registered under the Securities Act or are restricted as to resale under
federal securities laws but are eligible for trading under Rule 144A
promulgated pursuant to the Securities Act as determined by the Fund's
investment manager or portfolio manager acting pursuant to procedures approved
by the Board of Directors of the Fund; (4) they were issued by a U.S.
corporation, limited liability company or limited partnership; and (5) at the
time of purchase at least one year had elapsed since the issuer's
reorganization. Reorganization Bonds may also be considered debt securities
constituting Fitch Eligible Assets if they have been approved by Fitch, which
approval shall not be unreasonably withheld. All debt securities satisfying
the foregoing requirements and restrictions of this paragraph (d) are herein
referred to as "Debt Securities;"

           (e) Preferred stocks if (i) dividends on such preferred stock are
cumulative, (ii) such securities provide for the periodic payment of dividends
thereon in cash in U.S. dollars or euros and do not provide for conversion or
exchange into, or have warrants attached entitling the holder to receive
equity capital at any time over the respective lives of such securities, (iii)
the issuer of such a preferred stock has common stock listed on either the New
York Stock Exchange or the American Stock Exchange, (iv) the issuer of such a
preferred stock has a senior debt rating or preferred stock rating from Fitch
of BBB- or higher or the equivalent rating by another NRSRO. In addition, the
preferred stocks issue must be at least $50 million;

           (f) Asset-backed and mortgage-backed securities;

           (g) Rule 144A Securities;

           (h) Bank Loans;

           (i) Municipal debt obligation that (i) pays interest in cash (ii)
is part of an issue of municipal debt obligations of at least $5 million,
except for municipal debt obligations rated below A by Fitch or the equivalent
rating by another NRSRO, in which case the minimum issue size is $10 million;

           (j) Tradable credit baskets (e.g., Traded Custody Receipts or
TRACERS and Targeted Return Index Securities Trust or TRAINS);

           (k) Convertible debt and convertible preferred stocks;

           (l) Financial contracts, as such term is defined in Section
3(c)(2)(B)(ii) of the Investment Company Act, not otherwise provided for in
this definition may be included in Fitch Eligible Assets, but, with respect to
any financial contract, only upon receipt by the Fund of a writing from Fitch
specifying any conditions on including such financial contract in Fitch
Eligible Assets and assuring the Fund that including such financial contract
in the manner so specified would not affect the credit rating assigned by
Fitch to the Series C Auction Rate Preferred;

           (m) Interest rate swaps entered into according to International
Swap Dealers Association ("ISDA") standards if (i) the counterparty to the
swap transaction has a short- term rating of not less than F1 by Fitch or the
equivalent by another NRSRO or, if the swap counterparty does not have a
short-term rating, the counterparty's senior unsecured long-term debt rating
is AA or higher by Fitch or the equivalent by another NRSRO and (ii) the
original aggregate notional amount of the interest rate swap transaction or
transactions is not greater than the liquidation preference of the Series C
Auction Rate Preferred originally issued.

           Where the Fund sells an asset and agrees to repurchase such asset
in the future, the Discounted Value of such asset will constitute a Fitch
Eligible Asset and the amount the Fund is required to pay upon repurchase of
such asset will count as a liability for the purposes of the Preferred Shares
Basic Maintenance Amount. Where the Fund purchases an asset and agrees to sell
it to a third party in the future, cash receivable by the Fund thereby will
constitute a Fitch Eligible Asset if the long-term debt of such other party is
rated at least A- by Fitch or the equivalent by another and such agreement has
a term of 30 days or less; otherwise the Discounted Value of such purchased
asset will constitute a Fitch Eligible Asset.

           Notwithstanding the foregoing, an asset will not be considered a
Fitch Eligible Asset to the extent that it has been irrevocably deposited for
the payment of (a)(i) through (a)(iv) under the definition of Basic
Maintenance Amount or to the extent it is subject to any liens, except for (1)
liens which are being contested in good faith by appropriate proceedings and
which Fitch has indicated to the Fund will not affect the status of such asset
as a Fitch Eligible Asset, (2) liens for taxes that are not then due and
payable or that can be paid thereafter without penalty, (3) liens to secure
payment for services rendered or cash advanced to the Fund by its investment
manager or portfolio manager, the Fund's custodian, transfer agent or
registrar or the Auction Agent and (4) liens arising by virtue of any
repurchase agreement.

           Portfolio holdings as described above must be within the following
diversification and issue size requirements in order to be included in Fitch's
Eligible Assets:


                    MAXIMUM            MAXIMUM           MAXIMUM
   MINIMUM          SINGLE              SINGLE        ISSUE SIZE ($ IN
   SECURITY       ISSUER (1)       INDUSTRY (1)(2)    MILLION) (3)
- --------------  ---------------    ----------------   -------------
AAA...........       100%                100%             $100
AA-...........        20                  75               100
A-............        10                  50               100
BBB-..........         6                  25               100
BB-...........         4                  16                50
B-............         3                  12                50
CCC...........         2                  8                 50


(1)   Percentages represent a portion of the aggregate market value of
      corporate debt securities.
(2)   Industries are determined according to Fitch's Industry Classifications,
      as defined herein.
(3)   Preferred stock has a minimum issue size of $50 million.


                       NET ASSET VALUE

      The net asset value of the Fund's shares will be computed based on the
market value of the securities it holds and will generally be determined daily
as of the close of regular trading on the New York Stock Exchange.

      Portfolio instruments of the Fund which are traded in a market subject
to government regulation on which trades are reported contemporaneously
generally will be valued at the last sale price on the principal market for
such instruments as of the close of regular trading on the day the instruments
are being valued, or lacking any sales, at the average of the bid and asked
price on the principal market for such instruments on the most recent date on
which bid and asked prices are available. Initial public offering securities
are initially valued at cost, and thereafter as any other equity security.
Other readily marketable assets will be valued at the average of quotations
provided by dealers maintaining an active market in such instruments.
Short-term debt instruments that are credit impaired or mature in more than 60
days for which market quotations are available are valued at the latest
average of the bid and asked prices obtained from a dealer maintaining an
active market in that security. Short-term investments that are not credit
impaired and mature in 60 days or fewer are valued at amortized cost from
purchase price or value on the 61st day prior to maturity. Securities and
other assets for which market quotations are not readily available will be
valued at fair value as determined in good faith by or under the direction of
the Investment Adviser in accordance with guidelines adopted by the Fund. The
Fund may employ recognized pricing services from time to time for the purpose
of pricing portfolio instruments (including non-U.S. dollar denominated assets
and futures and options).

      Trading takes place in various foreign markets on days which are not
Business Days and on which therefore the Fund's net asset value per share is
not calculated. The calculation of the Fund's net asset value may not take
place contemporaneously with the determination of the prices of portfolio
securities held by the Fund. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the
close of the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Directors deems that the particular event would
materially affect the net asset value, in which case the fair value of those
securities will be determined by consideration of other factors by or under
the direction of the Board of Directors.

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

<table>
<caption>

                              BENEFICIAL OWNERS


    Name and Address of
  Beneficial/Record Owner                                    Amount of Shares and
  as of February 14, 2003                   Title of Class  Nature of Ownership      Percent of Class
  -----------------------                   --------------  ---------------------    ----------------
<s>                                         <c>              <c>                     <c>
Cede & Co.*                                    Common             7,182,489               64.63%
P.O. Box 20                                                       (record)
Bowling Green Station
New York, NY 10274

Bear Stearns Securities Corp**                 Common             1,799,857                16.20%
One Metrotech Center North, 4th Floor                             (record)
Brooklyn, NY 11201

Mario J. Gabelli and affiliates                Common             1,568,548                14.11%
One Corporate Center***                                          (beneficial)
Rye, NY 10580

Charles Schwab & Co., Inc.**                   Common               627,152                 5.64%
c/o ADP Proxy Services,                                            (record)
51 Mercedes Way
Edgewood, NY 11717

Prudential Securities Inc.                    Common                573,466                  5.16%
c/o ADP Proxy Services                                             (record)
51 Mercedes Way
Edgewood, NY 11717

*     A nominee partnership of The Depository Trust Company.
**    Shares held at The Depository Trust Company.
***   Includes 209,110 shares owned directly by Mr. Gabelli, 13,334 shares owned by a family
      partnership for which Mr. Gabelli serves as general partner, 46,016 shares held by custodial
      accounts for which Mr. Gabelli serves as Trustee, 1,089,415 shares owned by Gabelli Asset
      Management Inc. or its affiliates, 78,248shares owned by the Gabelli & Company, Inc. Profit-
      Sharing Plan, and 132,425 shares owned by discretionary accounts managed by GAMCO
      Investors, Inc., a wholly-owned subsidiary of Gabelli Asset Management Inc.  Mr. Gabelli
      disclaims beneficial ownership of the shares held by custodial accounts, the discretionary
      accounts, and by the entities named except to the extent of his interest in such entities.
</table>

      As of February 14, 2003, the Directors and Officers of the Fund as a
group beneficially owned approximately 15.25% of the outstanding shares of the
Fund's common stock.


                              GENERAL INFORMATION

Book-Entry-Only Issuance

      DTC will act as securities depository for the shares of Series B
Preferred and/or Series C Auction Rate Preferred offered pursuant to the
Prospectus. The information in this section concerning DTC and DTC's
book-entry system is based upon information obtained from DTC. The securities
offered hereby initially will be issued only as fully-registered securities
registered in the name of Cede & Co. (as nominee for DTC). One or more
fully-registered global security certificates initially will be issued,
representing in the aggregate the total number of securities, and deposited
with DTC.

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

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

      DTC has no knowledge of the actual beneficial owners of the securities
being offered pursuant to this Prospectus; DTC's records reflect only the
identity of the direct participants to whose accounts such securities are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.

      Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.

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

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

Counsel and Independent Accountants

      Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York,
New York 10036 is special counsel to the Fund in connection with the issuance
of Series B Preferred and/or Series C Auction Rate Preferred.

      PricewaterhouseCoopers LLP, independent accountants, 1177 Avenue of the
Americas, New York, New York 10036, serve as auditors of the Fund and will
annually render an opinion on the financial statements of the Fund.


                    FINANCIAL STATEMENTS

      The audited financial statements included in the Annual Report to the
Fund's Shareholders for the fiscal year ended December 31, 2002, together with
the report of PricewaterhouseCoopers LLP thereon, are also incorporated herein
by reference from the Fund's Annual Report to Shareholders. All other portions
of the Annual Report to Shareholders are not incorporated herein by reference
and are not part of the Registration Statement. A copy of the Annual Report to
Shareholders may be obtained without charge by writing to the Fund at its
address at One Corporate Center, Rye, New York 10580-1434 or by calling the
Fund toll-free at 800-GABELLI (422-3554).

                          Glossary

"AA Financial Composite Commercial Paper Rate" on any date means (i) the
interest equivalent of the 7-day rate, in the case of a Dividend Period of 7
days or shorter; for Dividend Periods greater than 7 days but fewer than or
equal to 31 days, the 30-day rate; for Dividend Periods greater than 31 days
but fewer than or equal to 61 days, the 60-day rate; for Dividend Periods
greater than 61 days but fewer than or equal to 91 days, the 90 day rate; for
Dividend Periods greater than 91 days but fewer than or equal to 270 days, the
rate described in (ii) below; for Dividend Periods greater than 270 days, the
Treasury Index Rate; on commercial paper on behalf of issuers whose corporate
bonds are rated "AA" by S&P, or the equivalent of such rating by another
nationally recognized rating agency, as announced by the Federal Reserve Bank
of New York for the close of business on the Business Day immediately
preceding such date; or (ii) if the Federal Reserve Bank of New York does not
make available such a rate, then the arithmetic average of the interest
equivalent of such rates on commercial paper placed on behalf of such issuers,
as quoted on a discount basis or otherwise by the Commercial Paper Dealers to
the Auction Agent for the close of business on the Business Day immediately
preceding such date (rounded to the next highest .001 of 1%). If any
Commercial Paper Dealer does not quote a rate required to determine the "AA"
Financial Composite Commercial Paper Rate, such rate will be determined on the
basis of the quotations (or quotation) furnished by the remaining Commercial
Paper Dealers (or Dealer), if any, or, if there are no such Commercial Paper
Dealers, by the Auction Agent pursuant to instructions from the Fund. For
purposes of this definition, (A) "Commercial Paper Dealers" will mean (1)
Salomon Smith Barney Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Goldman Sachs & Co.; (2) in lieu of any thereof, its
respective affiliate or successor; and (3) in the event that any of the
foregoing will cease to quote rates for commercial paper of issuers of the
sort described above, in substitution therefor, a nationally recognized dealer
in commercial paper of such issuers then making such quotations selected by
the Fund, and (B) "interest equivalent" of a rate stated on a discount basis
for commercial paper of a given number of days maturity will mean a number
equal to the quotient (rounded upward to the next higher one-thousandth of 1%)
of (1) such rate expressed as a decimal, divided by (2) the difference between
(x) 1.00 and (y) a fraction, the numerator of which will be the product of
such rate expressed as a decimal, multiplied by the number of days in which
such commercial paper will mature and the denominator of which will be 360.

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

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

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

      (iii)each asset that is not an Eligible Asset shall be valued at zero.

"Administrator" means the other party to the Administration Agreement with the
Fund which shall initially be Gabelli Funds, LLC.

"Affiliate" means, with respect to the Auction Agent, any person known to the
Auction Agent to be controlled by, in control of or under common control with
the Fund; provided, however, that no Broker-Dealer controlled by, in control
of or under common control with the Fund will be deemed to be an Affiliate nor
will any corporation or any Person controlled by, in control of or under
common control with such corporation one of the directors or executive
officers of which is director of the Fund be deemed to be an Affiliate solely
because such director or executive officer is also a director of the Fund.

"Agent Member" means a member of or a participant in the Securities Depository
that will act on behalf of a Bidder.

"All Hold Rate" means 80% of the "AA" Financial Composite Commercial Paper
Rate.

"Applicable Rate" means, with respect to the Series C Auction Rate Preferred,
for each Dividend Period (i) if Sufficient Clearing Bids exist for the Auction
in respect thereof, the Winning Bid Rate, (ii) if Sufficient Clearing Orders
do not exist for the Auction in respect thereof or an Auction does not take
place with respect to such Dividend Period because of the commencement of a
Default Period that ends prior to an Auction Date, the Maximum Rate and (iii)
if all Series C Auction Rate Preferred is the subject of Submitted Hold Orders
for the Auction in respect thereof, the All Hold Rate.

"Approved Foreign Nations" has the meaning ascribed to it in "Moody's and
Fitch Guidelines -- Fitch Guidelines."

"Auction" means each periodic operation of the Auction Procedures.

"Auction Agent" means The Bank of New York unless and until another commercial
bank, trust company, or other financial institution appointed by a resolution
of the Board of Directors enters into an agreement with the Fund to follow the
Auction Procedures for the purpose of determining the Applicable Rate.

"Auction Date" means the last day of the initial Dividend Period and each
seventh day after the immediately preceding Auction Date; provided, however,
that if any such seventh day is not a Business Day, such Auction Date shall be
the first preceding day that is a Business Day and the next Auction Date, if
for a Standard Dividend Period, shall (subject to the same advancement
procedure) be the seventh day after the date that the preceding Auction Date
would have been if not for the advancement procedure; provided further,
however, that the Auction Date for the Auction at the conclusion of any
Special Dividend Period shall be the last Business Day in such Special
Dividend Period and that no more than one Auction shall be held during any
Dividend Period. Notwithstanidng the foregoing, in the event an auction is not
held because an unforeseen event or unforeseen events cause a day that
otherwise would have been an Auction Date not to be a Business Day, then the
length of the then current dividend period will be extended by seven days (or
a multiple thereof if necessary because of such unforeseen event or events).

"Auction Procedures" means the procedures for conducting Auctions described in
"Additional Information Concerning the Auction for Series C Auction Rate
Preferred."

"Available Series C Auction Rate Preferred" has the meaning set forth in
"Additional Information Concerning the Auction for Series C Auction Rate
Preferred -- Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate."

"Basic Maintenance Amount" has the meaning set forth in "Additional Information
Concerning The Series B Preferred and Series C Auction Rate Preferred-- Asset
Maintenance."

"Basic Maintenance Report" means, with respect to the Series C Auction Rate
Preferred, a report prepared by the Administrator which sets forth, as of the
related Valuation Date, Moody's Eligible Assets and Fitch Eligible Assets
sufficient to meet or exceed the Basic Maintenance Amount, the Market Value
and Discounted Value thereof (seriatim and in the aggregate), and the Basic
Maintenance Amount, and shall have a correlative meaning with respect to any
other class or series of Preferred Stock.

"Beneficial Owner" with respect to Series C Auction Rate Preferred, means a
customer of a Broker-Dealer who is listed on the records of that Broker-Dealer
(or, if applicable, the Auction Agent) as a holder of such shares of such
series.

"Bid" has the meaning set forth in "Additional Information Concerning the
Auction for the Series C Auction Rate Preferred -- Submission of Orders by
Broker-Dealers to Auction Agent."

"Bidder" has the meaning set forth in "Additional Information Concerning the
Auction for Series C Auction Rate Preferred -- Submission of Orders by
Broker-Dealers to Auction Agent."

"Board of Directors" or "Board" means the Board of Directors of the Fund or
any duly authorized committee thereof as permitted by applicable law.

"Broker-Dealer" means any broker-dealer or broker-dealers, or other entity
permitted by law to perform the functions required of a Broker-Dealer by the
Auction Procedures, that has been selected by the Fund and has entered into a
Broker-Dealer Agreement that remains effective.

"Broker-Dealer Agreement" means an agreement between the Auction Agent and a
Broker-Dealer, pursuant to which such Broker-Dealer agrees to follow the
Auction Procedures.

"Business Day" means a day on which the New York Stock Exchange is open for
trading and which is not a Saturday, Sunday or other day on which banks in The
City of New York, New York are authorized or obligated by law to close.

"Canadian Bonds" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Fitch Guidelines."


"Charter" means the Articles of Amendment and Restatement of the Fund, as
amended or supplemented (including the Articles Supplementary), as filed with
the State Department of Assessments and Taxation of the State of Maryland.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means the shares of the Fund's common stock, par value $.001
per share.

"Cure Date" has the meaning set forth in paragraph 3(a)(i) of Article II of
the Articles Supplementary for the Series B Preferred and paragraph 3(a)(ii)
of Article I of the Articles Supplementary for the Series C Auction Rate
Preferred.

"Date of Original Issue" means the date on which the Series B Preferred or
Series C Auction Rate Preferred, as the case may be, is originally issued by
the Fund.

"Debt Securities" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Fitch Guidelines."

"Default Period" has the meaning set forth in "Additional Information
Concerning the Series B Preferred and Series C Auction Rate Preferred --
Dividends and Dividend Period."

"Default Rate" means the Reference Rate multiplied by three (3).

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

"Discount Factor" means (i) so long as Moody's is rating the Series B
Preferred or Series C Auction Rate Preferred at the Fund's request, the
Moody's Discount Factor, (ii) so long as Fitch is rating the Series C Auction
Rate Preferred, the Fitch Discount Factor, and/or (iii) any applicable
discount factor established by any Other Rating Agency, whichever is
applicable.

"Discounted Value" means, as applicable, (i) the quotient of the Market Value
of an Eligible Asset divided by the applicable Discount Factor, provided that
with respect to an Eligible Asset that is currently callable, Discounted Value
will be equal to the applicable quotient or product as calculated above or the
call price, whichever is lower, and that with respect to an Eligible Asset
that is prepayable, Discounted Value will be equal to the applicable quotient
or product as calculated above or the par value, whichever is lower.

"Dividend Default" has the meaning set forth in "Additional Information
Concerning the Series B Preferred and Series C Auction Rate Preferred --
Dividends and Dividend Period."

"Dividend Payment Date" means, with respect to the Series B Preferred Stock,
any date on which dividends declared by the Board of Directors thereon are
payable pursuant to the provisions of paragraph 1(a) of Article II of the
Articles Supplementary of the Series B Preferred, and, with respect to the
Series C Auction Rate Preferred, any date on which dividends declared by the
Board of Directors thereon are payable pursuant to the provisions of paragraph
2(b) of Article I of the Articles Supplementary, for the Series C Auction Rate
Preferred, and shall have a correlative meaning with respect to any other
class or series of Preferred Stock.

"Dividend Period" means, with respect to Series B Preferred, the quarterly
dividend specified in paragraph 1(a) of Article II of the Articles
Supplementary for the Series B Preferred and, with respect to Series C Auction
Rate Preferred, the initial period determined in the manner set forth under
"Designation" in the Articles Supplementary of the Series C Auction Rate
Preferred, and thereafter, the period commencing on the Business Day following
each Auction Date and ending on the next Auction Date or, if such next Auction
Date is not immediately followed by a Business Day, on the latest day prior to
the immediately succeeding Business Day.

"Eligible Assets" means Moody's Eligible Assets (if Moody's is then rating the
Series B Preferred or Series C Auction Rate Preferred at the request of the
Fund), Fitch Eligible Assets (if Fitch is then rating the Series C Auction
Rate Preferred at the request of the Fund), and/or Other Rating Agency
Eligible Assets if any Other Rating Agency is then rating the Series B
Preferred or Series C Auction Rate Preferred, whichever is applicable.

"Existing Holder" means (i) a person who beneficially owns those shares of
Series C Auction Rate Preferred listed in that person's name in the records of
the Fund or the Auction Agent or (ii) the beneficial owner of those shares of
Series C Auction Rate Preferred which are listed under such person's
Broker-Dealer's name in the records of the Auction Agent, which Broker-Dealer
will have signed a master purchaser's letter.

"Fitch" means Fitch, Inc. and its successors at law.

"Fitch Discount Factor" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Fitch Guidelines."

"Fitch Eligible Assets" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Fitch Guidelines."

"Fitch Exposure Period" means the period commencing on (and including) a given
Valuation Date and ending 49 days thereafter.

"Fitch Industry Classifications" means, for the purposes of determining Fitch
Eligible Assets, each of the following industry classifications:


                   1.         Aerospace & Defense
                   2.         Automobiles
                   3.         Banking, Finance & Real Estate
                   4.         Broadcasting & Media
                   5.         Building & Materials
                   6.         Cable
                   7.         Chemicals
                   8.         Computers & Electronics
                   9.         Consumer Products
                   10.        Energy
                   11.        Environmental Services
                   12.        Farming & Agriculture
                   13.        Food, Beverage & Tobacco
                   14.        Gaming, Lodging & Restaurants
                   15.        Healthcare & Pharmaceuticals
                   16.        Industrial/Manufacturing
                   17.        Insurance
                   18.        Leisure & Entertainment
                   19.        Metals & Mining
                   20.        Miscellaneous
                   21.        Paper & Forest Products
                   22.        Retail
                   23.        Sovereign
                   24.        Supermarkets & Drugstores
                   25.        Telecommunications
                   26.        Textiles & Furniture
                   27.        Transportation
                   28.        Utilities

"Foreign Bonds" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Fitch Guidelines."

"Hold Order" has the meaning set forth in "Additional Information Concerning
the Auction for Series C Auction Rate Preferred -- Orders By Existing Holders
and Potential Holders."

"Holder" means, with respect to the Series C Auction Rate Preferred, the
registered holder of Series C Auction Rate Preferred shares as the same
appears on the stock ledger or stock records of the Fund or records of the
Auction Agent, as the case may be.

"Industry Classification" means a six-digit industry classification in the
Standard Industry Classification system published by the United States.

"ISDA" has the meaning ascribed to it in "Moody's and Fitch Guidelines --
Fitch Guidelines."

"Liquidation Preference" means $25 per share of Series B Preferred and $25,000
per share of Series C Auction Rate Preferred Stock and will have a correlative
meaning with respect to shares of any other class or series of Preferred
Stock.

"Market Capitalization" means, with respect to any issue of common stock, as
of any date, the product of (i) the number of shares of such common stock
issued and outstanding as of the close of business on the date of
determination thereof and (ii) the Market Value per share of such common stock
as of the close of business on the date of determination thereof.

"Market Value" means the amount determined by the Fund with respect to
specific Eligible Assets in accordance with valuation policies adopted from
time to time by the Board of Directors as being in compliance with the
requirements of the 1940 Act.

      Notwithstanding the foregoing, "Market Value" may, at the option of the
Fund with respect to any of its assets, mean the amount determined with
respect to specific Eligible Assets of the Fund in the manner set forth below:

      (i)  as to any common or preferred stock which is an Eligible Asset, (a)
           if the stock is traded on a national securities exchange or quoted
           on the Nasdaq System, the last sales price reported on the
           Valuation Date or (b) if there was no reported sales price on the
           Valuation Date, the lower of two bid prices for such stock provided
           to the Administrator by two recognized securities dealers with a
           minimum capitalization of $25,000,000 (or otherwise approved for
           such purpose by Moody's and Fitch) or by one such securities dealer
           and any other source (provided that the utilization of such source
           would not adversely affect Moody's and Fitch's then-current rating
           of the Series C Auction Rate Preferred), at least one of which will
           be provided in writing or by telecopy, telex, other electronic
           transcription, computer obtained quotation reducible to written
           form or similar means, and in turn provided to the Fund by any such
           means by such administrator, or, if two bid prices cannot be
           obtained, such Eligible Asset will have a Market Value of zero;

      (ii) as to any U.S. Government Obligation, Short-Term Money Market
           Instrument (other than demand deposits, federal funds, bankers'
           acceptances and next Business Day repurchase agreements) and
           commercial paper, with a maturity of greater than 60 days, the
           product of (a) the principal amount (accreted principal to the
           extent such instrument accretes interest) of such instrument and
           (b) the lower of the bid prices for the same kind of instruments
           having, as nearly as practicable, comparable interest rates and
           maturities provided by two recognized securities dealers having
           minimum capitalization of $25,000,000 (or otherwise approved for
           such purpose by Moody's and Fitch) or by one such dealer and any
           other source (provided that the utilization of such source would
           not adversely affect Moody's and Fitch's then-current rating of the
           Series B Preferred or Series C Auction Rate Preferred, as the case
           may be,) to the administrator, at least one of which will be
           provided in writing or by telecopy, telex, other electronic
           transcrip tion, computer obtained quotation reducible to written
           form or similar means, and in turn provided to the Fund by any such
           means by such admin istrator, or, if two bid prices cannot be
           obtained, such Eligible Asset will have a Market Value of zero;

      (iii)as to cash, demand deposits, federal funds, bankers' acceptances
           and next Business Day repurchase agreements included in Short-Term
           Money Market Instruments, the face value thereof;

      (iv) as to any U.S. Government Obligation, Short-Term Money Market
           Instrument or commercial paper with a maturity of 60 days or fewer,
           amortized cost unless the board of directors determines that such
           value does not constitute fair value;

      (v)  as to any other evidence of indebtedness which is an Eligible
           Asset, (a) the product of (1) the unpaid principal balance of such
           indebtedness as of the Valuation Date and (2)(A) if such
           indebtedness is traded on a national securities exchange or quoted
           on the Nasdaq System, the last sales price reported on the
           Valuation Date or (B) if there was no reported sales price on the
           Valuation Date or if such indebtedness is not traded on a national
           securi ties exchange or quoted on the Nasdaq System, the lower of
           two bid prices for such indebtedness provided by two recognized
           dealers with a minimum capitalization of $25,000,000 (or otherwise
           approved for such purpose by Moody's and Fitch) or by one such
           dealer and any other source (provided that the utilization of such
           source would not adversely affect Moody's and Fitch's then-current
           rating of the Series B Preferred or Series C Auction Rate Preferred
           , as the case may be,) to the administrator of the Fund's assets,
           at least one of which will be provided in writing or by telecopy,
           telex, other electronic transcription, computer obtained quotation
           reducible to written form or similar means, and in turn provided to
           the Fund by any such means by such administrator, plus (b) accrued
           interest on such indebtedness.

"Maximum Rate" means, on any date on which the Applicable Rate is determined,
the applicable percentage of (i) in the case of dividend period of 184 days or
less, the "AA" Financial Composite Commercial Paper Rate on the date of such
Auction determined as set forth below based on the lower of the credit ratings
assigned to the Series C Auction Rate Preferred by Moody's and Fitch subject
to upward but not downward adjustment in the discretion of the Board of
Directors after consultation with the Broker-Dealers; provided that
immediately following any such increase the Fund would be in compliance with
the Series C Auction Rate Preferred Basic Maintenance Amount or (ii) in the
case of a dividend period of longer than 184 days, the Treasury Index Rate.


Moody's Credit Rating      Fitch Credit Rating      APPLICABLE PERCENTAGE
                           --------------------     -----------------------

Aa3 or higher      AA- or higher                     150%
A3 to A1           A- to A+                          175%
Baa3 to Baa1       BBB- to BBB+                      250%
Below Baa3         Below BBB-                        275%

"Moody's" means Moody's Investors Service, Inc. and its successors at law.

"Moody's Discount Factor" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Moody's Guidelines."

"Moody's Eligible Assets" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Moody's Guidelines."

"1940 Act" means the Investment Company Act of 1940, as amended, or any
successor statute.

"1940 Act Asset Coverage" means asset coverage, as determined in accordance
with Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Fund which are stock, including all
Outstanding shares of Series B Preferred and Series C Auction Rate Preferred
(or such other asset coverage as may in the future be specified in or under
the 1940 Act as the minimum asset coverage for senior securities which are
stock of a closed-end investment company as a condition of declaring dividends
on its common stock), determined on the basis of values calculated as of a
time within 48 hours (not including Saturdays, Sundays or holidays) next
preceding the time of such determination.

"1940 Act Asset Coverage Certificate" means the certificate required to be
delivered by the Fund pursuant to paragraph 9(a)(i)(B) of Article I of the
Articles Supplementary of the Series C Auction Rate Preferred.

"Non-Call Period" means a period determined by the Board of Directors after
consultation with the Broker-Dealers, during which the Series C Auction Rate
Preferred Stock subject to such Special Dividend Period are not subject to
redemption at the option of the Fund but only to mandatory redemption.

"NRSRO" means a Nationally Recognized Statistical Ratings Organization.

"Order" has the meaning set forth in "Additional Information Concerning the
Auction for Series C Auction Rate Preferred -- Orders By Existing Holders and
Potential Holders."

"Other Rating Agency" means any rating agency other than Moody's or Fitch then
providing a rating for the Series C Auction Rate Preferred pursuant to the
request of the Fund.

"Other Rating Agency Eligible Assets" means assets of the Fund designated by
any Other Rating Agency as eligible for inclusion in calculating the
discounted value of the Fund's assets in connection with such Other Rating
Agency's rating of the Series C Auction Rate Preferred.

"Outstanding" means, as of any date, Preferred Stock theretofore issued by the
Fund except:

      (i)  any such share of Preferred Stock theretofore cancelled by the Fund
           or deliv ered to the Fund for cancellation;

      (ii) any such share of Preferred Stock other than the Series C Auction
           Rate Preferred (or other auction market preferred stock) shares as
           to which a notice of redemption will have been given and for whose
           payment at the redemption thereof Deposit Assets in the necessary
           amount are held by the Fund on in trust for or were paid by the
           Fund to the holder of such share pursuant to the Articles
           Supplementary with respect thereto;

      (iii)in the case of shares of the Series C Auction Rate Preferred or
           other auction market preferred stock, any such shares theretofore
           delivered to the applicable auction agent for cancellation or with
           respect to which the Fund has given notice of redemption and
           irrevocably deposited with the applicable paying agent sufficient
           funds to redeem such shares; and

      (iv) any such share in exchange for or in lieu of which other shares
           have been issued and delivered.

Notwithstanding the foregoing, (x) for purposes of voting rights (including
the determination of the number of shares required to constitute a quorum),
any Preferred Stock as to which the Fund or any subsidiary is the holder or
Existing Holder, as applicable, will be disregarded and deemed not
Outstanding; (y) in connection with any auction, any auction rate Preferred
Stock as to which the Fund or any Person known to the auction agent to be an
subsidiary is the holder or Existing Holder, as applicable, will be
disregarded and not deemed Outstanding; and (z) for purposes of determining
the Basic Maintenance Amount, Series C Auction Rate Preferred held by the Fund
will be disregarded and deemed not Outstanding.

"Paying Agent" means with respect to Series C Auction Rate Preferred, The Bank
of New York unless and until another entity appointed by a resolution of the
Board of Directors enters into an agreement with the Fund to serve as paying
agent, which paying agent may be the same as the Auction Agent and, with
respect to any other class or series of preferred stock, the Person appointed
by the Fund as dividend disbursing or paying agent with respect to such class
or series.

"Person"means and includes an individual, a partnership, the Fund, a trust, a
corporation, a limited liability company, an unincorporated association, a
joint venture or other entity or a government or any agency or political
subdivision thereof.

"Potential Beneficial Owner or Holder" means (i) any Existing Holder who may
be interested in acquiring additional shares of Series C Auction Rate
Preferred or (ii) any other person who may be interested in acquiring shares
of Series C Auction Rate Preferred and who has signed a master purchaser's
letter or whose shares will be listed under such person's Broker-Dealer's name
on the records of the Auction Agent which Broker-Dealer will have executed a
master purchaser's letter.

"Preferred Stock" means the preferred stock, par value $.001 per share, of the
Fund, and includes the Series B Preferred and Series C Auction Rate Preferred.

"Premium Call Period" means a period consisting of a number of whole years as
determined by the Board of Directors after consultation with the
Broker-Dealers, during each year of which the shares subject to such Special
Dividend Period will be redeemable at the Fund's option at a price per share
equal to the Liquidation Preference plus accumulated but unpaid dividends
(whether or not earned or declared) plus a premium expressed as a percentage
or percentages of the Liquidation Preference or expressed as a formula using
specified variables as determined by the Board of Directors after consultation
with the Broker-Dealers.

"Pricing Service" means any of the following: Bloomberg Financial Service,
Bridge Information Services, Data Resources Inc., FT Interactive,
International Securities Market Association, Merrill Lynch Securities Pricing
Service, Muller Data Corp., Reuters, S&P/J.J. Kenny, Telerate, Trepp Pricing
and Wood Gundy.

"Rating Agency" means Moody's and Fitch as long as such rating agency is then
rating the Series B Preferred or Series C Auction Rate Preferred at the
request of the Fund.

"Rating Agency Guidelines" has the meaning set forth in set forth in "Moody's
and Fitch Guidelines."

"Redemption Date" means, with respect to shares of the Fund's Outstanding
Preferred Stock, the date fixed by the Fund for the redemption of such shares.

"Redemption Default" has the meaning set forth in "Additional Information
Concerning the Series B Preferred and Series C Auction Rate Preferred --
Dividends and Dividend Period."

"Redemption Price" means, with respect to the Series B Preferred, the price
set forth in paragraph 3(a) of Article II of the Articles Supplementary for
the Series B Preferred Stock and, with respect to the Article C Auction Rate
Preferred, the price set forth in paragraph 3(a)(i) of Article I of the
Articles Supplementary for the Series C Auction Rate Preferred Stock.

"Reference Rate" means, with respect to the determination of the Default Rate,
the applicable "AA" Financial Composite Commercial Paper Rate for a Dividend
Period of 184 days or fewer or the applicable Treasury Index Rate for a
Dividend Period of longer than 184 days and, with respect to the determination
of the Maximum Rate, the "AA" Financial Composite Commercial Paper Rate or the
Treasury Index Rate, as appropriate.

"Reorganization Bonds" has the meaning ascribed to it in "Moody's and Fitch
Guidelines -- Fitch Guidelines."

"S&P" means Standard & Poor's Ratings Services, or its successors at law.

"Securities Act" means The Securities Act of 1933, as amended, or any
successor statute.

"Securities Depository" means The Depository Trust Company and its successors
and assigns or any successor securities depository selected by the Fund that
agrees to follow the procedures required to be followed by such securities
depository in connection with the shares of Series B Preferred or Series C
Auction Rate Preferred.

"Sell Order" has the meaning set forth in "Additional Information Concerning
the Auction for Series C Auction Rate Preferred -- Submission of Orders by
Broker-Dealers to Auction Agent."

"Series A Preferred" means the Fund's 8% Cumulative Preferred Stock, $.001 par
value per share and liquidation preference $25 per share.

"Series B Preferred" means the Fund's Series B Cumulative Preferred Stock,
$.001 par value per share and liquidation preference $25 per share.

"Series C Auction Rate Preferred" means the Fund's Series C Auction Rate
Cumulative Preferred Stock, $.001 par value per share and liquidation
preference $25,000 per share.

"Series C Auction Rate Preferred Basic Maintenance Amount Test" means a test
which is met if the lower of the aggregate Discounted Values of the Moody's
Eligible Assets or the Fitch Eligible Assets if both Moody's and Fitch are
then rating the Series C Auction Rate Preferred at the request of the Fund, or
the Eligible Assets of whichever of Moody's or Fitch is then doing so if only
one of Moody's or Fitch is then rating the Series C Auction Rate Preferred at
the request of the Fund, meets or exceeds the Basic Maintenance Amount with
respect to the Series C Auction Rate Preferred.

"Short-Term Money Market Instrument" means the following types of instruments
if, on the date of purchase or other acquisition thereof by the Fund, the
remaining term to maturity thereof is not in excess of 180 days:

      (i)  commercial paper rated A-1 if such commercial paper matures in 30
           days or A-1+ if such commercial paper matures in over 30 days;

      (ii) demand or time deposits in, and banker's acceptances and
           certificates of deposit of (a) a depository institution or trust
           company incorporated under the laws of the United States of America
           or any state thereof or the District of Columbia or (b) a United
           States branch office or agency of a foreign depository institution
           (provided that such branch office or agency is subject to banking
           regulation under the laws of the United States, any state thereof
           or the District of Columbia);

      (iii)overnight funds; and

      (iv) U.S. Government Obligations.

"Special Dividend Period" means a Dividend Period that is not a Standard
Dividend Period.

"Specific Redemption Provisions" means, with respect to any Special Dividend
Period of more than one year, either, or any combination of (i) a Non-Call
Period and (ii) a Premium Call Period.

"Standard Dividend Period" means a Dividend Period of seven days, subject to
increase or decrease to the extent necessary for the next Auction Date and
Dividend Payment Date to each be Business Days.

"Submission Deadline" means 1:00 p.m., New York City time, on any Auction Date
or such other time on any Auction Date by which Broker-Dealers are required to
submit Orders to the Auction Agent as specified by the Auction Agent from time
to time.

"Submitted Bid" has the meaning set forth in "Additional Information
Concerning the Auction for Series C Auction Rate Preferred -- Determination of
Sufficient Clearing Bids, Winning Bids, Winning Bid Rate and Applicable Rate."

"Submitted Bid Order" has the meaning set forth in "Additional Information
Concerning the Auction for Series C Auction Rate Preferred -- Determination of
Sufficient Clearing Bids, Winning Bids, Winning Bid Rate and Applicable Rate."

"Submitted Hold Order" has the meaning set forth in "Additional Information
Concerning the Auction for Series C Auction Rate Preferred -- Determination of
Sufficient Clearing Bids, Winning Bids, Winning Bid Rate and Applicable Rate."

"Submitted Order" has the meaning set forth in "Additional Information
Concerning the Auction for Series C Auction Rate Preferred -- Determination of
Sufficient Clearing Bids, Winning Bids, Winning Bid Rate and Applicable Rate."

"Submitted Sell Order" has the meaning set forth in "Additional Information
Concerning the Auction for Series C Auction Rate Preferred -- Determination of
Sufficient Clearing Bids, Winning Bids, Winning Bid Rate and Applicable Rate."

"Sufficient Clearing Bids" has the meaning set forth in "Additional
Information Concerning the Auction for Series C Auction Rate Preferred --
Determination of Sufficient Clearing Bids, Winning Bids, Winning Bid Rate and
Applicable Rate."

"Sufficient Clearing Orders" means that all shares of Series C Auction Rate
Preferred are the subject of Submitted Hold Orders or that the number of
shares of Series C Auction Rate Preferred that are the subject of Submitted
Bids by Potential Holders specifying one or more rates equal to or less than
the Maximum Rate exceeds or equals the sum of (i) the number of shares of
Series C Auction Rate Preferred that are subject of Submitted Bids by Existing
Holders specifying one or more rates higher than the Maximum Rate and (ii) the
number of shares of Series C Auction Rate Preferred that are subject to
Submitted Sell Orders.

"Treasury Index Rate" means the average yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities having the same number
of 30-day periods to maturity as the length of the applicable Dividend Period,
determined, to the extent necessary, by linear interpolation based upon the
yield for such securities having the next shorter and next longer number of
30-day periods to maturity treating all Dividend Periods with a length greater
than the longest maturity for such securities as having a length equal to such
longest maturity, in all cases based upon data set forth in the most recent
weekly statistical release published by the Board of Governors of the Federal
Reserve System (currently in H.15 (519)); provided, however, if the most
recent such statistical release will not have been published during the 15
days preceding the date of computation, the foregoing computations will be
based upon the average of comparable data as quoted to the Fund by at least
three recognized dealers in U.S. Government Obligations selected by the Fund.

"U.S. Government Obligations" means direct obligations of the United States or
by its agencies or instrumentalities that are entitled to the full faith and
credit of the United States and that, other than United States Treasury Bills,
provide for the periodic payment of interest and the full payment of principal
at maturity or call for redemption.

"Valuation Date" means the last Business Day of each month, or such other date
as the Fund and Rating Agencies may agree to for purposes of determining the
Basic Maintenance Amount.

"Winning Bid Rate" means the lowest rate specified in the Submitted Bids which
if:

      (i)  (a)   each such Submitted Bid of Existing Holders specifying
                such lowest rate and

           (b)  all other such Submitted Bids of Existing Holders specifying
                lower rates were rejected, thus entitling such Existing
                Holders to continue to hold the shares of such series that are
                subject to such Submitted Bids; and

      (ii)      (a) each such Submitted Bid of Potential Holders specifying
                such lowest rate and

           (b)  all other such Submitted Bids of Potential Holders specifying
                lower rates were accepted;

would result in such Existing Holders described in subclause (i) above
continuing to hold an aggregate number of Outstanding Series C Auction Rate
Preferred shares which, when added to the number of Outstanding Series C
Auction Rate Preferred shares to be purchased by such Potential Holders
described in subclause (ii) above, would equal not less than the Available
Series C Auction Rate Preferred shares.




                           PART C

OTHER INFORMATION

ITEM 24.   FINANCIAL STATEMENTS AND EXHIBITS

(1)   Financial Statements

      (a)  Financial Statements (audited) for the fiscal year 2001(1)
           (i)   Portfolio of Investments as of December 31, 2001
           (ii)  Statement of Assets and Liabilities as of December 31, 2001
           (iii) Statement of Operations for the year ended December 31, 2001
           (iv)  Statement of Changes in Net Assets for the year ended
                 December 31, 2001
           (v)   Financial highlights for a share outstanding throughout the
                 periods 1992 through 2001
           (vi)  Notes to Financial Statements
           (vii) Report of Independent Accountants

(2)   Exhibits

      (a)  (i)   Articles of Amendment and Restatement(2)
           (ii)  Articles Supplementary for the 8% Cumulative Preferred Stock(3)
           (iii) Form of Articles Supplementary for the Series B % Cumulative
                 Preferred Stock(7)
           (iv)  Form of Articles Supplementary for the Series C Auction Rate
                 Cumulative Preferred Stock(7)
      (b)  Amended and Restated By-Laws of Registrant(2)
      (c)  Not applicable
      (d)  Specimen Stock Certificate:
           (i)   8% Cumulative Preferred Stock(6)
           (ii)  Series B     % Cumulative Preferred Stock (7)
           (iii) Series C Auction Rate Cumulative Preferred Stock (7)
      (e)  Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan of
           Registrant(2)
      (f)  Not applicable
      (g)  Investment Advisory Agreement between Registrant and
           Gabelli Funds, LLC(3)
      (h)  Form of Underwriting Agreement(7)
      (i)  Not applicable
      (j)  Custodian Contract between Registrant and Boston Safe
           Deposit and Trust Company(3)(8)
      (k)  (i)  Registrar, Transfer Agency and Service Agreement
                between Registrant and EquiServe Trust Company relating to the
                common stock(2)
           (ii) Form of Auction Agency Agreement(7)
           (iii)Form of Broker-Dealer Agreement(7)
           (iv) Form of DTC Agreement (7)

      (l)  Opinion and Consent of Miles & Stockbridge(7)
      (m)  Not applicable
      (n)  (i)  Consent of PricewaterhouseCoopers LLP(7)
           (ii) Powers of Attorney(4)
      (o)  Not applicable
      (p)  Not applicable
      (q)  Not applicable
      (r)  Codes of Ethics of the Fund and the Adviser(2)

___________________

(1) Incorporated by reference to the Fund's annual report filed on March 8,
    2002. To be updated prior to effectiveness.
(2) Incorporated by reference from the Registrant's Registration Statement on
    Form N-2, File No. 811-05715, as filed with the Securities and Exchange
    Commission on March 31, 1995
(3) Incorporated by reference from the Registrant's Registration Statement on
    Form N-2, File No. 333-24541 and 811-05715, as filed with the Securities
    and Exchange Commission on May 9, 1997.
(4) Incorporated by reference from the Registrant's Registration Statement on
    Form N-2, File No. 102494 and 811-05715, as filed with the Securities and
    Exchange Commission on January 13, 2003.
(5) To be filed by amendment.
(6) Incorporated by reference from the Fund's Registrant's Registration
    Statement on Form N-2, File No. 333-24541 and 811-05715, as filed with the
    Securities and Exchange Commission on April 4, 1997.
(7) Filed Herewith.
(8) Subsequently assigned to State Street Bank and Trust Company.


Item 25. Marketing Arrangements

         See Exhibit 2(h) to this Registration Statement.


Item 26. Other Expenses of Issuance and Distribution

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



SEC registration fees...................          $    4,046
New York Stock Exchange listing fee.....              14,750
Rating Agency Fees                                    50,000
Printing and engraving expenses ........             100,000
Auditing fees and expenses .............              50,000
Legal fees and expenses.................             150,000
Blue Sky fees and expenses..............              40,000
Miscellaneous...........................              53,704
      Total.............................            $462,500

Item 27. Persons Controlled by or Under Common Control with Registrant

        NONE

Item 28. Number of Holders of Securities as of December 31, 2002


                                                               Number of Record
Title of Class                                                      Holders
- --------------                                                      -------
Capital Stock, par value $.001 per share                             2,568
8.00% Cumulative Preferred Stock, par value $.001 per share           26


Item 29. Indemnification

        The response of this Item is incorporated by reference to the caption
"Limitation of Officers' and Directors Liability" in the Part B of this
Registration Statement.

        Insofar as indemnification for liability arising under the Securities
Act may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or paid
by a director, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered. Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.


Item 30. Business and Other Connections of Investment Adviser

        The Investment Adviser, a limited liability company organized under
the laws of the State of New York, acts as investment adviser to the
Registrant. The Registrant is fulfilling the requirement of this Item 30 to
provide a list of the officers and directors of the Investment Adviser,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the Investment Adviser or
those officers and directors during the past two years, by incorporating by
reference the information contained in the Form ADV of the Investment Adviser
filed with the Commission pursuant to the Investment Advisers Act of 1940
(Commission File No. 801-26202).

Item 31. Location of Accounts and Records

        The accounts and records of the Registrant are maintained in part at
the office of the Investment Adviser at One Corporate Center, Rye, New York
10580-1434, in part at the offices of the Custodian, State Street Bank and
Trust Company, 150 Royall Street, Canton, Massachusetts 02021, at the offices
of the Fund's Administrator, PFPC, Inc., 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406, and in part at the offices of EquiServe Trust Company,
N.A., P.O. Box 43025, Providence, RI 02940-3025.

Item 32. Management Services

         Not applicable.

Item 33. Undertakings

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

         2. Not applicable.

         3. Not applicable.

         4. Not applicable.

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

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

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


<PAGE>


                                  SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment
to its registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Rye, State of New York, on the 12th
day of March, 2003.

                          THE GABELLI CONVERTIBLE
                          AND INCOME SECURITIES FUND INC.


                          By: /s/ Bruce N. Alpert
                             ------------------------------------------
                          Bruce N. Alpert
                          President

      Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the following
persons in the capacities and on the dates indicated.


      Signature               Title                      Date
      ---------               -----                      ----

        *
_________________________     Director and Chief        March 12, 2003
Mario J. Gabelli              Investment Officer

        *
_________________________     Director                  March 12, 2003
Karl Otto Pohl

        *
_________________________     Director                  March 12, 2003
E. Val Cerutti

        *
_________________________     Director                  March 12, 2003
Anthony J. Colavita

        *
_________________________     Director                  March 12, 2003
Dugald A. Fletcher

        *
_________________________     Director                  March 12, 2003
Anthony R. Pustorino

        *
_________________________     Director                  March 12, 2003
Werner J. Roeder, MD

        *
_________________________     Director                  March 12, 2003
Anthonie C. van Ekris

        *
_________________________     Director                  March 12, 2003
Salvatore J. Zizza

 /s/ Bruce N. Alpert
_________________________     President                 March 12, 2003
Bruce N. Alpert
 As Attorney-in-Fact

      * Pursuant to a Power of Attorney, incorporated by reference as Exhibit
        N(ii) to the Registrant's Registration Statement filed on Form N-2, as
        filed with the Securities and Exchange Commission on January 13, 2003.


<PAGE>


                        EXHIBIT INDEX

EXHIBIT NUMBER       DESCRIPTION

EX-99 (a) (i)        Articles of Amendment and Restatement*

EX-99 (a) (ii)       Articles Supplementary relating to the 8% Cumulative
                     Preferred Stock*

EX-99 (a) (iii)      Form of Articles Supplementary relating to the Series B __%
                     Cumulative Preferred Stock

EX-99 (a) (iv)       Form of Articles Supplementary relating to the Series C
                     Auction Rate Cumulative Preferred Stock

EX-99 (b)            Amended and Restated By-Laws of Registrant*

EX-99 (d) (i)        Specimen Stock Certificate, 8% Cumulative Preferred Stock*

EX-99 (d) (ii)       Specimen Stock Certificate, Series B __% Cumulative
                     Preferred Stock

EX-99 (d) (iii)      Specimen Stock Certificate, Series C Auction Rate
                     Cumulative Preferred Stock

EX-99 (e)            Automatic Dividend Reinvestment and Voluntary Cash
                     Purchase Plan of Registrant*

EX-99 (g)            Investment Advisory Agreement between Registrant and
                     Gabelli Funds, LLC*

EX-99 (h)            Form of Underwriting Agreement

EX-99 (i)            Not applicable

EX-99 (j)            Custodian Contract between Registrant and Boston Safe
                     Deposit and Trust Company (subsequently assigned to State
                     Street Bank and Trust Company)*

EX-99 (k) (i)        Registrar, Transfer Agency and Service Agreement between
                     Registrant and EquiServe Trust Company relating to the
                     common stock*

EX-99 (k) (ii)       Form of Auction Agency Agreement

EX-99 (k) (iii)      Form of Broker-Dealer Agreement

EX-99 (k) (iv)       Form of DTC Agreement

EX-99 (l)            Opinion and Consent of Miles & Stockbridge

EX-99 (m)            Not applicable

EX-99 (n) (i)        Consent of PricewaterhouseCoopers LLP

EX-99 (n) (ii)       Powers of Attorney*

EX-99 (o)            Not applicable

EX-99(p)             Not applicable

EX-99(q)             Not applicable

EX-99 (r)            Code of Ethics of the Fund and the Adviser*

*     Previously filed and incorporated by reference.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>s440186.txt
<DESCRIPTION>EXHIBIT 99(A)(III)
<TEXT>
                                                             Exhibit 99(a)(iii)



                            ARTICLES SUPPLEMENTARY
                       CREATING AND FIXING THE RIGHTS OF
                 SERIES B [__]% CUMULATIVE PREFERRED STOCK OF
            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.


         The Gabelli Convertible and Income Securities Fund Inc., a Maryland
corporation, having its principal office in Baltimore City, Maryland
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of the State of Maryland that:

         FIRST: The Board of Directors of the Corporation, at a meeting duly
convened and held on February 19, 2003, pursuant to authority expressly vested
in it by Article V of the Charter of the Corporation, adopted a resolution
designating 1,995,000 authorized and unissued shares of Preferred Stock as
"Series B [__]% Cumulative Preferred Stock" (the "Series B Preferred Stock").

         SECOND: The preferences, voting powers, rights, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of shares of the Series B Preferred Stock of the Corporation as set
by the Board of Directors are as follows:


                                  ARTICLE I

                                  DEFINITIONS

         Unless the context or use indicates another or different meaning or
intent, each of the following terms when used in these Articles Supplementary
shall have the meaning ascribed to it below, whether such term is used in the
singular or plural and regardless of tense:

         "Accountant's Confirmation" means a letter from an Independent
Accountant delivered to Moody's with respect to certain Basic Maintenance
Reports substantially to the effect that:

         (a)      the Independent Accountant has read the Basic Maintenance
                  Report or Reports prepared by the Administrator during the
                  referenced calendar year that are referred to in such
                  letter;

         (b)      with respect to the issue size compliance, issuer
                  diversification and industry diversification calculations,
                  such calculations and the resulting Market Value of the
                  Moody's Eligible Assets included in the Reports and the
                  Adjusted Value of the Moody's Eligible Assets included in
                  the Reports are numerically correct;

         (c)      with respect to the excess or deficiency of the Adjusted
                  Value of the Moody's Eligible Assets included in the Reports
                  when compared to the Basic Maintenance Amount calculated for
                  Moody's, the results of the calculation set forth in the
                  Reports have been recalculated and are numerically correct;

         (d)      with respect to the Moody's and S&P ratings on corporate
                  evidences of indebtedness, convertible corporate evidences
                  of indebtedness and preferred stock listed in the Reports,
                  that information has been traced and agrees with the
                  information provided directly or indirectly by the
                  respective rating agencies (in the event such information
                  does not agree or such information is not listed in the
                  accounting records of the Corporation, the Independent
                  Accountants will inquire of the rating agencies what such
                  information is and provide a listing in their letter of such
                  differences, if any);

         (e)      with respect to issuer name and coupon or dividend rate
                  listed in the Reports, that information has been traced and
                  agrees with information listed in the accounting records of
                  the Corporation;

         (f)      with respect to issue size listed in the Reports, that
                  information has been traced and agrees with information
                  provided by a Pricing Service or such other services as
                  Moody's may authorize from time to time;

         (g)      with respect to the prices (or alternative permissible
                  factors used in calculating the Market Value as provided by
                  these Articles Supplementary) provided by the Administrator
                  of the Corporation's assets for purposes of valuing
                  securities in the portfolio, the Independent Accountant has
                  traced the price used in the Reports to the price provided
                  by such Administrator (in accordance with the procedures
                  provided in these Articles Supplementary) and verified that
                  such information agrees (in the event such information does
                  not agree, the Independent Accountants will provide a
                  listing in their letter of such differences); and

         (h)      with respect to the description of each security included in
                  the Reports, the description of Moody's Eligible Assets has
                  been compared to the definition of Moody's Eligible Assets
                  contained in these Articles Supplementary, and the
                  description as appearing in the Reports agrees with the
                  definition of Moody's Eligible Assets as described in these
                  Articles Supplementary.

         Each such letter may state that: (i) such Independent Accountant has
made no independent verification of the accuracy of the description of the
investment securities listed in the Reports or the Market Value of those
securities nor has it performed any procedures other than those specifically
outlined above for the purposes of issuing such letter; (ii) unless otherwise
stated in the letter, the procedures specified therein were limited to a
comparison of numbers or a verification of specified computations applicable
to numbers appearing in the Reports and the schedule(s) thereto; (iii) the
foregoing procedures do not constitute an examination in accordance with
generally accepted auditing standards and the Reports contained in the letter
do not extend to any of the Corporation's financial statements taken as a
whole; (iv) such Independent Accountant does not express an opinion as to
whether such procedures would enable such Independent Accountant to determine
that the methods followed in the preparation of the Reports would correctly
determine the Market Value or Discounted Value of the investment portfolio;
and (v) accordingly, such Independent Accountant expresses no opinion as to
the information set forth in the Reports or in the schedule(s) thereto and
makes no representation as to the sufficiency of the procedures performed for
the purposes of these Articles Supplementary.

         Such letter shall also state that the Independent Accountant is an
"independent accountant" with respect to the Corporation within the meaning of
the Securities Act of 1933, as amended, and the related published rules and
regulations thereunder.

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

         (a) cash shall be valued at 100% of the face value thereof; and

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

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

         "Administrator" means the other party to the Administration Agreement
with the Corporation which shall initially be Gabelli Funds, LLC.

         "ADRs" means U.S. dollar-denominated American Depository Receipts.

         "Adviser" means Gabelli Funds, LLC, a New York limited liability
company, or such other person as shall be serving as the investment adviser of
the Corporation.

         "Annual Valuation Date" means the Valuation Date each calendar year
so designated by the Corporation, commencing in the calendar year 2003.

         "Asset Coverage" means asset coverage, as determined in accordance
with Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all Outstanding shares of Series B Preferred Stock (or such other asset
coverage as may in the future be specified in or under the 1940 Act as the
minimum asset coverage for senior securities which are stock of a closed-end
investment company as a condition of declaring dividends on its common stock),
determined on the basis of values calculated as of a time within 48 hours (not
including Saturdays, Sundays or holidays) next preceding the time of such
determination.

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

         "Basic Maintenance Amount Cure Date" means, with respect to the
Series B Preferred Stock, 10 Business Days following a Valuation Date, such
date being the last day upon which the Corporation's failure to comply with
paragraph 5(a)(ii)(A) of Article II hereof could be cured, and for the
purposes of these Articles Supplementary shall have a correlative meaning with
respect to any other class or series of Preferred Stock.

         "Basic Maintenance Report" or "Report" means, with respect to the
Series B Preferred Stock, a report prepared by the Administrator which sets
forth, as of the related Valuation Date, Moody's Eligible Assets sufficient to
meet or exceed the Basic Maintenance Amount, the Market Value and Discounted
Value thereof (seriatim and in the aggregate), and the Basic Maintenance
Amount, and for the purposes of these Articles Supplementary shall have a
correlative meaning with respect to any other class or series of Preferred
Stock.

         "Board of Directors" means the Board of Directors of the Corporation
or any duly authorized committee thereof as permitted by applicable law.

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

         "Charter" means the Articles of Amendment and Restatement of the
Corporation, as amended, supplemented (including these Articles
Supplementary), as filed with the State Department of Assessments and Taxation
of the State of Maryland.

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

         "Corporation" means The Gabelli Convertible and Income Securities
Fund Inc., a Maryland corporation.

         "Cure Date" shall have the meaning set forth in paragraph 3(a)(i) of
Article II hereof.

         "Date of Original Issue" means [__], and for the purposes of these
Articles Supplementary shall have a correlative meaning with respect to any
other class or series of Preferred Stock.

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

         "Discounted Value" means, with respect to a Moody's Eligible Asset,
the quotient of (a) in the case of a non-convertible fixed income instrument,
the lower of the principal amount (accreted principal to the extent such
instrument accretes interest) or liquidation preference and the Market Value
thereof or (b) in the case of any other Moody's Eligible Assets, the Market
Value thereof, divided by the applicable Moody's Discount Factor.

         "Dividend-Disbursing Agent" means, with respect to the Series B
Preferred Stock, EquiServe Trust Company, N.A. and its successors or any other
dividend-disbursing agent appointed by the Corporation and, with respect to
any other class or series of Preferred Stock, the Person appointed by the
Corporation as dividend-disbursing or paying agent with respect to such class
or series.

         "Dividend Payment Date" means with respect to the Series B Preferred
Stock, any date on which dividends declared by the Board of Directors thereon
are payable pursuant to the provisions of paragraph 1(a) of Article II of
these Articles Supplementary and shall for the purposes of these Articles
Supplementary have a correlative meaning with respect to any other class or
series of Preferred Stock.

         "Dividend Period" shall have the meaning set forth in paragraph 1(a)
of Article II hereof, and for the purposes of these Articles Supplementary
shall have a correlative meaning with respect to any other class or series of
Preferred Stock.

         "Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is with respect to the Corporation an independent
public accountant or firm of independent public accountants under the
Securities Act of 1933, as amended.

         "Liquidation Preference" shall, with respect to the Series B
Preferred Stock, have the meaning set forth in paragraph 2(a) of Article II
hereof, and for the purposes of these Articles Supplementary shall have a
correlative meaning with respect to any other class or series of Preferred
Stock.

         "Market Value" means the amount determined by the Corporation with
respect to Moody's Eligible Assets in accordance with valuation policies
adopted from time to time by the Board of Directors as being in compliance
with the requirements of the 1940 Act.

         Notwithstanding the foregoing, "Market Value" may, at the option of
the Corporation with respect to any of its assets, mean the amount determined
with respect to specific Moody's Eligible Assets of the Corporation in the
manner set forth below:

         (a)   as to any common or preferred stock which is a Moody's Eligible
               Asset, (i) if the stock is traded on a national securities
               exchange or quoted on the Nasdaq System, the last sales price
               reported on the Valuation Date or (ii) if there was no reported
               sales price on the Valuation Date, the lower of two bid prices
               for such stock provided to the Administrator by two recognized
               securities dealers with a minimum capitalization of $25,000,000
               (or otherwise approved for such purpose by Moody's) or by one
               such securities dealer and any other source (provided that the
               utilization of such source would not adversely affect Moody's
               then-current rating of the Series B Preferred Stock), at least
               one of which shall be provided in writing or by telecopy,
               telex, other electronic transcription, computer obtained
               quotation reducible to written form or similar means, and in
               turn provided to the Corporation by any such means by such
               Administrator, or, if two bid prices cannot be obtained, such
               Moody's Eligible Asset shall have a Market Value of zero;

         (b)   as to any U.S. Government Obligation, Short Term Money Market
               Instrument (other than demand deposits, federal funds, bankers'
               acceptances and next Business Day repurchase agreements) and
               commercial paper with a maturity of greater than 60 days, the
               product of (i) the principal amount (accreted principal to the
               extent such instrument accretes interest) of such instrument,
               and (ii) the lower of the bid prices for the same kind of
               instruments having, as nearly as practicable, comparable
               interest rates and maturities provided by two recognized
               securities dealers having minimum capitalizations of
               $25,000,000 (or otherwise approved for such purpose by Moody's)
               or by one such dealer and any other source (provided that the
               utilization of such source would not adversely affect Moody's
               then-current rating of the Series B Preferred Stock) to the
               Administrator, at least one of which shall be provided in
               writing or by telecopy, telex, other electronic transcription,
               computer obtained quotation reducible to written form or
               similar means, and in turn provided to the Corporation by any
               such means by such Administrator, or, if two bid prices cannot
               be obtained, such Moody's Eligible Asset will have a Market
               Value of zero;

         (c)   as to cash, demand deposits, federal funds, bankers'
               acceptances and next Business Day repurchase agreements
               included in Short-Term Money Market Instruments, the face value
               thereof;

         (d)   as to any U.S. Government Obligation, Short-Term Money Market
               Instrument or commercial paper with a maturity of 60 days or
               fewer, amortized cost unless the Board of Directors determines
               that such value does not constitute fair value;

         (e)   as to any other evidence of indebtedness which is a Moody's
               Eligible Asset, (i) the product of (A) the unpaid principal
               balance of such indebtedness as of the Valuation Date and
               (B)(1) if such indebtedness is traded on a national securities
               exchange or quoted on the Nasdaq System, the last sales price
               reported on the Valuation Date or (2) if there was no reported
               sales price on the Valuation Date or if such indebtedness is
               not traded on a national securities exchange or quoted on the
               Nasdaq System, the lower of two bid prices for such
               indebtedness provided by two recognized dealers with a minimum
               capitalization of $25,000,000 (or otherwise approved for such
               purpose by Moody's) or by one such dealer and any other source
               (provided that the utilization of such source would not
               adversely affect Moody's then-current rating of the Series B
               Preferred Stock) to the Administrator, at least one of which
               shall be provided in writing or by telecopy, telex, other
               electronic transcription, computer obtained quotation reducible
               to written form or similar means, and in turn provided to the
               Corporation by any such means by such Administrator, plus (ii)
               accrued interest on such indebtedness.

         "Moody's" means Moody's Investors Service, Inc., or its successors at
law. In the event that Moody's is no longer rating the Series B Preferred
Stock at the request of the Corporation, "Moody's" shall be deemed to refer to
any other nationally recognized securities rating agency designated by the
Corporation.

         "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined as
follows. According to Moody's guidelines, in addition to standard monthly
reporting, the Corporation must notify Moody's if the portfolio coverage ratio
of the discounted value of Moody's Eligible Assets to liabilities is less than
130%. Computation of the rating agency asset coverage ratio requires use of
the Diversification Table prior to applying discount factors noted below and
after identifying Moody's eligible assets for purposes of completing basic
maintenance tests. The Moody's Discount Factor for any Moody's Eligible Asset
other than the securities set forth below will be the percentage provided in
writing by Moody's.

         (a)   Convertible securities (including convertible preferreds):

                              DISCOUNT FACTORS(1)

        RATINGS(2)        UTILITY     INDUSTRIAL     FINANCIAL   TRANSPORTATION
- ----------------------    -------     ----------     ---------   --------------
Aaa...................      162%         256%           233%          250%
Aa....................      167%         261%           238%          265%
A.....................      172%         266%           243%          275%
Baa...................      188%         282%           259%          285%
Ba....................      195%         290%           265%          290%
B.....................      199%         293%           270%          295%
NR(3).................      300%         300%           300%          300%


(1)      Discount factors are for 7-week exposure period.
(2)      If a convertible security is unrated by Moody's but is rated by S&P,
         a rating two numeric ratings below the S&P rating will be used (e.g.,
         where the S&P rating is AAA, a Moody's rating of Aa2 will be used;
         where the S&P rating is AA+, a Moody's rating of Aa3 will be used).
(3)      Unrated fixed-income and convertible securities, which are rated by
         neither Moody's nor S&P, are limited to 10% of discounted Moody's
         Eligible Assets. If a corporate debt security is unrated by both
         Moody's and S&P, the Corporation will use the percentage set forth
         under "Unrated" in this table.

         Upon conversion to common stock, the discount Factors applicable to
common stock will apply:

           COMMON STOCKS               UTILITY        INDUSTRIAL       FINANCIAL
           -------------               -------        ----------       --------
      7-week exposure period.....       170%            264%             241%


         (b) Corporate Debt Securities (non-convertible): The percentage
determined by reference to the rating on such asset with reference to the
remaining term to maturity of such asset, in accordance with the table set
forth below.

<TABLE>
<CAPTION>

                                         MOODY'S RATING CATEGORY(1)
                                         --------------------------

            TERMS TO MATURITY OF
          CORPORATE DEBT SECURITY                 Aaa       Aa       A       Baa       Ba        B        UNRATED(2)
          -----------------------                 ---       ---     ---      ---      ---       ---       ----------
<C>                                               <C>       <C>     <C>      <C>      <C>       <C>           <C>
1 year or less..............................      109%      112%    115%     118%     119%      125%          225%
2 years or less (but longer than 1 year)....      115       118     122      125      127       133           225
3 years or less (but longer than 2 years)...      120       123     127      131      133       140           225
4 years or less (but longer than 3 years)...      126       129     133      138      140       147           225
5 years or less (but longer than 4 years)...      132       135     139      144      146       154           225
7 years or less (but longer than 5 years)...      139       143     147      152      156       164           225
10 years or less (but longer than 7 years)..      145       150     155      160      164       173           225
15 years or less (but longer than 10 years).      150       155     160      165      170       180           225
20 years or less (but longer than 15 years).      150       155     160      165      170       190           225
30 years or less (but longer than 20 years).      150       155     160      165      170       191           225
Greater than 30 years.......................      165       173     181      189      205       221           225

</TABLE>

(1)      If a corporate debt security is unrated by Moody's but is rated by
         S&P, a rating two numeric ratings below the S&P rating will be used
         (e.g., where the S&P rating is AAA, a Moody's rating of Aa2 will be
         used; where the S&P rating is AA+, a Moody's rating of Aa3 will be
         used).
(2)      Unrated corporate debt securities, which are corporate debt
         securities rated by neither Moody's nor S&P, are limited to 10% of
         discounted Moody's Eligible Assets. If a corporate debt security is
         unrated by both Moody's and S&P, the Corporation will use the
         percentage set forth under "Unrated" in this table.

         The Moody's Discount Factors presented in the immediately preceding
table will also apply to corporate debt securities that do not pay interest in
U.S. dollars or euros, provided that the Moody's Discount Factor determined
from the table shall be multiplied by a factor of 120% for purposes of
calculating the Discounted Value of such securities.

         (c) Preferred Stock: The Moody's Discount Factor for preferred stock
shall be (i) for preferred stocks issued by a utility, 146%; (ii) for
preferred stocks of industrial and financial issuers, 209%; (iii) for
preferred stocks issued by real estate related issuers, 154%; and (iv) for
auction rate preferred stocks, 350%.

         (d) U.S. Government Obligations and U.S. Treasury Strips:

<TABLE>
<CAPTION>

                                                   U.S. GOVERNMENT OBLIGATIONS       U.S. TREASURY STRIPS
           REMAINING TERM TO MATURITY                  DISCOUNT FACTOR                DISCOUNT FACTOR
           --------------------------                  ---------------                ---------------
<C>                                                            <C>                          <C>
1 year or less..................................               107%                         107%
2 years or less (but longer than 1 year)........               113                          115
3 years or less (but longer than 2 years).......               118                          121
4 years or less (but longer than 3 years).......               123                          128
5 years or less (but longer than 4 years).......               128                          135
7 years or less (but longer than 5 years).......               135                          147
10 years or less (but longer than 7 years)......               141                          163
15 years or less (but longer than 10 years).....               146                          191
20 years or less (but longer than 15 years).....               154                          218
30 years or less (but longer than 20 years).....               154                          244
</TABLE>

         (e) Short-Term Instruments and Cash: The Moody's Discount Factor
applied to short-term portfolio securities, including without limitation
short-term corporate debt securities, Short-Term Money Market Instruments and
short-term municipal debt obligations, will be (i) 100%, so long as such
portfolio securities mature or have a demand feature at par exercisable within
the Moody's Exposure Period; (ii) 115%, so long as such portfolio securities
mature or have a demand feature at par not exercisable within the Moody's
Exposure Period; and (iii) 125%, if such securities are not rated by Moody's,
so long as such portfolio securities are rated at least A-1+/AA or SP-1+/AA by
S&P and mature or have a demand feature at par exercisable within the Moody's
Exposure Period. A Moody's Discount Factor of 100% will be applied to cash.
Moody's rated Rule 2a-7 money market funds will also have a discount factor of
100%.

         (f) Rule 144A Securities: The Moody's Discount Factor applied to Rule
144A Securities for Rule 144A Securities will be 130% of the Moody's Discount
Factor which would apply were the securities registered under the 1933 Act.

         "Moody's Eligible Assets" means (a) cash (including interest and
dividends due on assets rated (i) Baa3 or higher by Moody's if the payment
date is within five Business Days of the Valuation Date, (ii) A2 or higher if
the payment date is within thirty days of the Valuation Date, and (iii) A1 or
higher if the payment date is within the Moody's Exposure Period) and
receivables for Moody's Eligible Assets sold if the receivable is due within
five Business Days of the Valuation Date, and if the trades which generated
such receivables are (1) settled through clearing house firms with respect to
which the Corporation has received prior written authorization from Moody's or
(2) (A) with counterparties having a Moody's long-term debt rating of at least
Baa3 or (B) with counterparties having a Moody's Short-Term Money Market
Instrument rating of at least P-1;

         (b) Short-Term Money Market Instruments, so long as (i) such
securities are rated at least P-1, (ii) in the case of demand deposits, time
deposits and overnight funds, the supporting entity is rated at least A2, or
(iii) in all other cases, the supporting entity (1) is rated A2 and the
security matures within one month, (2) is rated A1 and the security matures
within three months or (3) is rated at least Aa3 and the security matures
within six months. In addition, Moody's rated Rule 2a-7 money market funds are
also eligible investments.

         (c) U.S. Government Obligations and U.S. Treasury Strips;

         (d) Rule 144A Securities;

         (e) Corporate debt securities if (i) such securities are rated B3 or
higher by Moody's; (ii) such securities provide for the periodic payment of
interest in cash in U.S. dollars or euros, except that such securities that do
not pay interest in U.S. dollars or euros shall be considered Moody's Eligible
Assets if they are rated by Moody's or S & P; (iii) for debt securities rated
Ba1 and below, no more than 10% of the original amount of such issue may
constitute Moody's Eligible Assets; (iv) such securities have been registered
under the 1933 Act or are restricted as to resale under federal securities
laws but are eligible for resale pursuant to Rule 144A under the 1933 Act as
determined by the Corporation's investment manager or portfolio manager acting
pursuant to procedures approved by the Board of Directors, except that such
securities that are not subject to U.S. federal securities laws shall be
considered Moody's Eligible Assets if they are publicly traded; and (v) such
securities are not subject to extended settlement.

         Notwithstanding the foregoing limitations, (1) corporate debt
securities not rated at least B3 by Moody's shall be considered to be Moody's
Eligible Assets only to the extent the Market Value of such corporate debt
securities does not exceed 10% of the aggregate Market Value of all Moody's
Eligible Assets; provided, however, that if the Market Value of such corporate
debt securities exceeds 10% of the aggregate Market Value of all Moody's
Eligible Assets, a portion of such corporate debt securities (selected by the
Corporation) shall not be considered Moody's Eligible Assets, so that the
Market Value of such corporate debt securities (excluding such portion) does
not exceed 10% of the aggregate Market Value of all Moody's Eligible Assets;
and (2) corporate debt securities rated by neither Moody's nor S&P shall be
considered to be Moody's Eligible Assets only to the extent such securities
are issued by entities which (A) have not filed for bankruptcy within the past
three years, (B) are current on all principal and interest in their fixed
income obligations, (C) are current on all preferred stock dividends, and (D)
possess a current, unqualified auditor's report without qualified, explanatory
language.

         (f) Convertible bonds, provided that (i) the issuer of common stock
must have a Moody's senior unsecured debt of B3 or better, or an S&P rating of
BB or better, (ii) the common stocks must be traded on the NYSE, AMEX, or
NASDAQ, (iii) dividends must be paid in U.S. dollars, (iv) the portfolio of
convertible bonds must be diversified as set forth in Figure 1 below, (v) the
company shall not hold shares exceeding the average weekly trading volume
during the preceding month, (vi) synthetic convertibles are excluded from
asset eligibility.

                 CONVERTIBLE BONDS DIVERSIFICATION GUIDELINES
- --------------------------------------------------------------------------------
          TYPE         MAXIMUM SINGLE      MAXIMUM SINGLE      MAXIMUM SINGLE
                      ISSUER (%) (1)       INDUSTRY (%)           STATE (%)(1)
- -------------------   ---------------      --------------      -----------------
Utility............         4                   50                   7(2)
Other..............         6                   20                    n/a



(1)    Percentage represent a portion of the aggregate market value and
       number of outstanding shares of the convertible stock portfolio.
(2)    Utility companies operating in more than one state should be
       diversified according to the state in which they generate the largest
       part of their revenues. Publicly available information on utility
       company revenues by state is available from the Uniform Statistical
       Report (USR) or the Federal Energy Regulation commission (FERC).

         (g) Preferred stocks if (i) dividends on such preferred stock are
cumulative, (ii) such securities provide for the periodic payment of dividends
thereon in cash in U.S. dollars or euros and do not provide for conversion or
exchange into, or have warrants attached entitling the holder to receive,
equity capital at any time over the respective lives of such securities, (iii)
the issuer of such a preferred stock has common stock listed on either the New
York Stock Exchange or the American Stock Exchange, (iv) the issuer of such a
preferred stock has a senior debt rating from Moody's of Baa1 or higher or a
preferred stock rating from Moody's of Baa3 or higher and (v) such preferred
stock has paid consistent cash dividends in U.S. dollars or euros over the
last three years or has a minimum rating of A1 (if the issuer of such
preferred stock has other preferred issues outstanding that have been paying
dividends consistently for the last three years, then a preferred stock
without such a dividend history would also be eligible). In addition, the
preferred stocks must have the following diversification requirements: (1) the
preferred stock issue must be greater than $50 million and (2) the minimum
holding by the Corporation of each issue of preferred stock is $500,000 and
the maximum holding of preferred stock of each issue is $5 million. In
addition, preferred stocks issued by transportation companies will not be
considered Moody's Eligible Assets.

         (h) Financial contracts, as such term is defined in Section
3(c)(2)(B)(ii) of the Investment Company Act, not otherwise provided for in
this definition but only upon receipt by the Corporation of a letter from
Moody's specifying any conditions on including such financial contract in
Moody's Eligible Assets and assuring the Corporation that including such
financial contract in the manner so specified would not affect the credit
rating assigned by Moody's to the shares of Series B Preferred.

         (i) Interest rate swaps entered into according to International Swap
Dealers Association ("ISDA") standards if (i) the counterparty to the swap
transaction has a short-term rating of not less than P-1 or, if the
counterparty does not have a short-term rating, the counterparty's senior
unsecured long-term debt rating is Aa3 or higher and (ii) the original
aggregate notional amount of the interest rate swap transaction or
transactions is not to be greater than the liquidation preference of the
Preferred Shares originally issued. The interest rate swap transaction will be
marked-to-market daily.

         In addition, portfolio holdings as described below must be within the
following diversification and issue size requirements in order to be included
in Moody's Eligible Assets:

<TABLE>
<CAPTION>

                                                     MAXIMUM            MAXIMUM
                                  MAXIMUM             SINGLE             SINGLE                MAXIMUM
                                   SINGLE          INDUSTRY(3)(4)     INDUSTRY (3)(4)         ISSUE SIZE
            RATINGS(1)          ISSUER(2)(3)        NON-UTILITY         UTILITY           ($ IN MILLION)(5)
- -----------------------------   ------------        -----------       ---------------     -------------------
<S>                                 <C>                <C>                <C>                     <C>
Aaa..........................       100%               100%               100%                    $100
Aa...........................        20                 60                 30                      100
A............................        10                 40                 25                      100
Baa..........................         6                 20                 20                      100
Ba...........................         4                 12                 12                        50 (6)
B1-B2........................         3                  8                  8                        50 (6)
B3 or below..................         2                  5                  5                        50 (6)
</TABLE>


(1)  Refers to the preferred stock and senior debt rating of the portfolio
     holding.

(2)  Companies subject to common ownership of 25% or more are considered as
     one issuer.

(3)  Percentages represent a portion of the aggregate Market Value of
     corporate debt securities.

(4)  Industries are determined according to Moody's Industry Classifications,
     as defined herein.

(5)  Except for preferred stock, which has a minimum issue size of $50
     million.

(6)  Portfolio holdings from issues ranging from $50 million to $100 million
     are limited to 20% of the Corporation's total assets.

         "Moody's Industry Classifications" means for the purposes
of determining Moody's Eligible Assets, each of the following industry
classifications (or such other classifications as Moody's may from time to
time approve for application to the Series B Preferred shares).

                  1.  Aerospace and Defense: Major Contractor, Subsystems,
                      Research, Aircraft Manufacturing, Arms, Ammunition.

                  2.  Automobile: Automobile Equipment, Auto-Manufacturing,
                      Auto Parts Manufacturing, Personal Use Trailers, Motor
                      Homes, Dealers.

                  3.  Banking: Bank Holding, Savings and Loans, Consumer
                      Credit, Small Loan, Agency, Factoring, Receivables.

                  4.  Beverage, Food and Tobacco: Beer and Ale, Distillers,
                      Wines and Liquors, Distributors, Soft Drink Syrup,
                      Bottlers, Bakery, Mill Sugar, Canned Foods, Corn
                      Refiners, Dairy Products, Meat Products, Poultry
                      Products, Snacks, Packaged Foods, Distributors, Candy,
                      Gum, Seafood, Frozen Food, Cigarettes, Cigars,
                      Leaf/Snuff, Vegetable Oil.

                  5.  Buildings and Real Estate: Brick, Cement, Climate
                      Controls, Contracting, Engineering, Construction,
                      Hardware, Forest Products (building-related only),
                      Plumbing, Roofing, Wallboard, Real Estate, Real Estate
                      Development, REITs, Land Development.

                  6.  Chemicals, Plastics and Rubber: Chemicals
                      (non-agricultural), Industrial Gases, Sulphur, Plastics,
                      Plastic Products, Abrasives, Coatings, Paints, Varnish,
                      Fabricating Containers.

                  7.  Packaging and Glass: Glass, Fiberglass, Containers made
                      of: Glass, Metal, Paper, Plastic, Wood or Fiberglass.

                  8.  Personal and Non-Durable Consumer Products
                      (Manufacturing Only): Soaps, Perfumes, Cosmetics,
                      Toiletries, Cleaning Supplies, School Supplies.

                  9.  Diversified/Conglomerate Manufacturing.

                  10. Diversified/Conglomerate Service.

                  11. Diversified Natural Resources, Precious Metals and
                      Minerals: Fabricating, Distribution.

                  12. Ecological: Pollution Control, Waste Removal, Waste
                      Treatment and Waste Disposal.

                  13. Electronics: Computer Hardware, Electric Equipment,
                      Components, Controllers, Motors, Household Appliances,
                      Information Service Communication Systems, Radios, TVs,
                      Tape Machines, Speakers, Printers, Drivers, Technology.

                  14. Finance: Investment Brokerage, Leasing, Syndication,
                      Securities.

                  15. Farming and Agriculture: Livestock, Grains, Produce,
                      Agriculture Chemicals, Agricultural Equipment,
                      Fertilizers.

                  16. Grocery: Grocery Stores, Convenience Food Stores.

                  17. Healthcare, Education and Childcare: Ethical Drugs,
                      Proprietary Drugs, Research, Health Care Centers,
                      Nursing Homes, HMOs, Hospitals, Hospital Supplies,
                      Medical Equipment.

                  18. Home and Office Furnishings, Housewares, and Durable
                      Consumer Products: Carpets, Floor Coverings, Furniture,
                      Cooking, Ranges.

                  19. Hotels, Motels, Inns and Gaming.

                  20. Insurance: Life, Property and Casualty, Broker, Agent,
                      Surety.

                  21. Leisure, Amusement, Motion Pictures, Entertainment:
                      Boating, Bowling, Billiards, Musical Instruments,
                      Fishing, Photo Equipment, Records, Tapes, Sports,
                      Outdoor Equipment (Camping), Tourism, Resorts, Games,
                      Toy Manufacturing, Motion Picture Production Theaters,
                      Motion Picture Distribution.

                  22. Machinery (Non-Agricultural, Non-Construction,
                      Non-Electronic): Industrial, Machine Tools, Steam
                      Generators.

                  23. Mining, Steel, Iron and Non-Precious Metals: Coal,
                      Copper, Lead, Uranium, Zinc, Aluminum, Stainless Steel,
                      Integrated Steel, Ore Production, Refractories, Steel
                      Mill Machinery, Mini-Mills, Fabricating, Distribution
                      and Sales of the foregoing.

                  24. Oil and Gas: Crude Producer, Retailer, Well Supply,
                      Service and Drilling.

                  25. Printing, Publishing, and Broadcasting: Graphic Arts,
                      Paper, Paper Products, Business Forms, Magazines, Books,
                      Periodicals, Newspapers, Textbooks, Radio, T.V., Cable
                      Broadcasting Equipment.

                  26. Cargo Transport: Rail, Shipping, Railroads, Rail-car
                      Builders, Ship Builders, Containers, Container Builders,
                      Parts, Overnight Mail, Trucking, Truck Manufacturing,
                      Trailer Manufacturing, Air Cargo, Transport.

                  27. Retail Stores: Apparel, Toy, Variety, Drugs, Department,
                      Mail Order Catalog, Showroom.

                  28. Telecommunications: Local, Long Distance, Independent,
                      Telephone, Telegraph, Satellite, Equipment, Research,
                      Cellular.

                  29. Textiles and Leather: Producer, Synthetic Fiber, Apparel
                      Manufacturer, Leather Shoes.

                  30. Personal Transportation: Air, Bus, Rail, Car Rental.

                  31. Utilities: Electric, Water, Hydro Power, Gas.

                  32. Diversified Sovereigns: Semi-sovereigns, Canadian
                      Provinces, Supra-national Agencies.

                  The Corporation will use SIC codes in determining which
 industry classification is applicable to a particular investment in
 consultation with the Independent Accountant and Moody's, to the extent the
 Corporation considers necessary.

         "1933 Act" means the Securities Act of 1933, as amended, or any
successor statute.

         "1940 Act" means the Investment Company Act of 1940, as amended, or
any successor statute.

         "Notice of Redemption" shall have the meaning set forth in paragraph
3(c)(i) of Article II hereof.

         "Outstanding" means, as of any date, Preferred Stock theretofore
issued by the Corporation except:

         (a)      any such share of Preferred Stock theretofore cancelled by
                  the Corporation or delivered to the Corporation for
                  cancellation;

         (b)      any such share of Preferred Stock other than auction rate
                  Preferred Stock as to which a notice of redemption shall
                  have been given and for whose payment at the redemption
                  thereof Deposit Assets in the necessary amount are held by
                  the Corporation in trust for or were paid by the Corporation
                  to the holder of such share pursuant to the Articles
                  Supplementary with respect thereto;

         (c)      in the case of auction rate Preferred Stock, any such shares
                  theretofore delivered to the auction agent for cancellation
                  or with respect to which the Corporation has given notice of
                  redemption and irrevocably deposited with the paying agent
                  sufficient funds to redeem such shares; and

         (d)      any such share in exchange for or in lieu of which other
                  shares have been issued and delivered.

Notwithstanding the foregoing, (i) for purposes of voting rights (including
the determination of the number of shares required to constitute a quorum),
any shares of Preferred Stock as to which any subsidiary of the Corporation is
the holder will be disregarded and deemed not Outstanding, and (ii) in
connection with any auction of shares of auction rate Preferred Stock as to
which the Corporation or any Person known to the auction agent to be a
subsidiary of the Corporation is the holder will be disregarded and not deemed
Outstanding.

         "Person" means and includes an individual, a partnership, the
Corporation, a trust, a corporation, a limited liability company, an
unincorporated association, a joint venture or other entity or a government or
any agency or political subdivision thereof.

         "Preferred Stock" means the preferred stock, par value $.001 per
share, of the Corporation, and includes the Series B Preferred Stock.

         "Pricing Service" means any of the following: Bloomberg Financial
Service, Bridge Information Services, Data Resources Inc., FT Interactive,
International Securities Market Association, Merrill Lynch Securities Pricing
Service, Muller Data Corp., Reuters, S&P/J.J. Kenny, Telerate, Trepp Pricing
and Wood Gundy.

         "Redemption Price" has the meaning set forth in paragraph 3(a) of
Article II hereof, and for the purposes of these Articles Supplementary shall
have a correlative meaning with respect to any other class or series of
Preferred Stock.

         "S&P" means Standard & Poor's Ratings Services, or its successors at
law.

         "Series B Preferred Stock" means the Series B [__]% Cumulative
Preferred Stock, par value $.001 per share, of the Corporation.

         "Series B Asset Coverage Cure Date" means, with respect to the
failure by the Corporation to maintain Asset Coverage (as required by
paragraph 5(a)(i) of Article II hereof) as of the last Business Day of each
March, June, September and December of each year, 60 days following such
Business Day.

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

         (a)      U.S. Government Obligations;

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

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

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

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

         "U.S.    Government Obligations" means direct obligations of the
                  United States or by its agencies or instrumentalities that
                  are entitled to the full faith and credit of the United
                  States and that, other than United States Treasury Bills,
                  provide for the periodic payment of interest and the full
                  payment of principal at maturity or call for redemption.

         "Valuation Date" means the last Business Day of each month, or such
other date as the Corporation and Moody's may agree to for purposes of
determining the Basic Maintenance Amount.

         "Voting Period" shall have the meaning set forth in paragraph 4(b) of
Article II hereof.


                                  ARTICLE II

                           SERIES B PREFERRED STOCK

         1.   Dividends.

         (a) Holders of shares of Series B Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, cumulative cash dividends at the rate of [__]% per
annum (computed on the basis of a 360-day year consisting of twelve 30-day
months) of the Liquidation Preference on the Series B Preferred Stock and no
more, payable quarterly on March 26th, June 26th, September 26th and December
26th in each year (each a "Dividend Payment Date") commencing [__] (or, if any
such day is not a Business Day, then on the next succeeding Business Day) to
holders of record of Series B Preferred Stock as they appear on the stock
register of the Corporation at the close of business on the fifth preceding
Business Day in preference to dividends on shares of Common Stock and any
other capital stock of the Corporation ranking junior to the Series B
Preferred Stock in payment of dividends. Dividends on shares of Series B
Preferred Stock shall accumulate from the date on which such shares are
originally issued; provided, however, that with respect to any shares of
Series B Preferred Stock issued within 30 days of the Date of Original Issue,
dividends on such shares shall accumulate from such Date of Original Issue.
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 issuance of
such shares) and ending on but excluding the next succeeding Dividend Payment
Date is referred to herein as a "Dividend Period." Dividends on account of
arrears for any past Dividend Period or in connection with the redemption of
Series B Preferred Stock may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date not
exceeding 30 days preceding the payment date thereof as shall be fixed by the
Board of Directors.

         (b) (i) No full dividends shall be declared or paid on shares of
Series B Preferred Stock for any Dividend Period or part thereof unless full
cumulative dividends due through the most recent Dividend Payment Dates
therefor for all series of Preferred Stock of the Corporation ranking on a
parity with the Series B Preferred Stock as to the payment of dividends have
been or contemporaneously are declared and paid through the most recent
Dividend Payment Dates therefor. If full cumulative dividends due have not
been paid on all Outstanding shares of such Preferred Stock, any dividends
being paid on such shares of Preferred Stock (including the Series B Preferred
Stock) will be paid as nearly pro rata as possible in proportion to the
respective amounts of dividends accumulated but unpaid on each such series of
Preferred Stock on the relevant Dividend Payment Date. No holders of shares of
Series B Preferred Stock shall be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends as provided
in this paragraph 1(b)(i) on shares of Series B Preferred Stock. No interest
or sum of money in lieu of interest shall be payable in respect of any
dividend payments on any shares of Series B Preferred Stock that may be in
arrears.

               (ii) For so long as shares of Series B Preferred Stock are
Outstanding, the Corporation shall not pay any dividend or other distribution
(other than a dividend or distribution paid in shares of, or options, warrants
or rights to subscribe for or purchase, Common Stock or other stock, if any,
ranking junior to the Series B Preferred Stock as to dividends and upon
liquidation) in respect of the Common Stock or any other stock of the
Corporation ranking junior to the Series B Preferred Stock as to dividends and
upon liquidation, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of Common Stock or any other stock of the
Corporation ranking junior to the Series B Preferred Stock as to dividends and
upon liquidation (except by conversion into or exchange for stock of the
Corporation ranking junior to the Series B Preferred Stock as to dividends and
upon liquidation), unless, in each case, (A) immediately thereafter, the
aggregate Adjusted Value of the Corporation's Moody's Eligible Assets shall
equal or exceed the Basic Maintenance Amount and the Corporation shall have
Asset Coverage, (B) all cumulative dividends on all shares of Series B
Preferred Stock due on or prior to the date of the transaction have been
declared and paid (or shall have been declared and sufficient funds for the
payment thereof deposited with the applicable Dividend-Disbursing Agent) and
(C) the Corporation has redeemed the full number of shares of Series B
Preferred Stock to be redeemed mandatorily pursuant to any provision contained
herein for mandatory redemption.

               (iii) Any dividend payment made on the shares of Series B
Preferred Stock shall first be credited against the dividends accumulated with
respect to the earliest Dividend Period for which dividends have not been
paid.

         (c) Not later than the Business Day immediately preceding each
Dividend Payment Date, the Corporation shall deposit with the
Dividend-Disbursing Agent Deposit Assets having an initial combined value
sufficient to pay the dividends that are payable on such Dividend Payment
Date, which Deposit Assets shall mature on or prior to such Dividend Payment
Date. The Corporation may direct the Dividend-Disbursing Agent with respect to
the investment of any such Deposit Assets, provided that such investment
consists exclusively of Deposit Assets and provided further that the proceeds
of any such investment will be available at the opening of business on such
Dividend Payment Date.

          2.  Liquidation Rights.

         (a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the holders of
shares of Series B Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders, after
satisfying claims of creditors but before any distribution or payment shall be
made in respect of the Common Stock or any other stock of the Corporation
ranking junior to the Series B Preferred Stock as to liquidation payments, a
liquidation distribution in the amount of $25.00 per share (the "Liquidation
Preference"), plus an amount equal to all unpaid dividends accumulated to and
including the date fixed for such distribution or payment (whether or not
earned or declared by the Corporation, but excluding interest thereon), and
such holders shall be entitled to no further participation in any distribution
or payment in connection with any such liquidation, dissolution or winding up.

         (b) If, upon any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the assets of
the Corporation available for distribution among the holders of all
Outstanding shares of Series B Preferred Stock, and any other Outstanding
shares of a class or series of Preferred Stock of the Corporation ranking on a
parity with the Series B Preferred Stock as to payment upon liquidation, shall
be insufficient to permit the payment in full to such holders of Series B
Preferred Stock of the Liquidation Preference plus accumulated and unpaid
dividends and the amounts due upon liquidation with respect to such other
Preferred Stock, then such available assets shall be distributed among the
holders of shares of Series B Preferred Stock and such other Preferred Stock
ratably in proportion to the respective preferential amounts to which they are
entitled. Unless and until the Liquidation Preference plus accumulated and
unpaid dividends has been paid in full to the holders of shares of Series B
Preferred Stock, no dividends or distributions will be made to holders of the
Common Stock or any other stock of the Corporation ranking junior to the
Series B Preferred Stock as to liquidation.

         3. Redemption.

         Shares of the Series B Preferred Stock shall be redeemed by the
Corporation as provided below:

         (a) Mandatory Redemptions.

         If the Corporation is required to redeem any shares of Preferred
Stock (which may include Series B Preferred Stock) pursuant to paragraphs 5(b)
or 5(c) of Article II hereof, then the Corporation shall, to the extent
permitted by the 1940 Act and Maryland law, by the close of business on such
Series B Asset Coverage Cure Date or Basic Maintenance Amount Cure Date
(herein collectively referred to as a "Cure Date"), as the case may be, fix a
redemption date and proceed to redeem shares as set forth in paragraph 3(c)
hereof. On such redemption date, the Corporation shall redeem, out of funds
legally available therefor, the number of shares of Preferred Stock, which, to
the extent permitted by the 1940 Act and Maryland law, at the option of the
Corporation may include any proportion of Series B Preferred Stock or any
other series of Preferred Stock, equal to the minimum number of shares the
redemption of which, if such redemption had occurred immediately prior to the
opening of business on such Cure Date, would have resulted in the Corporation
having Asset Coverage or an Adjusted Value of its Moody's Eligible Assets
equal to or greater than the Basic Maintenance Amount, as the case may be,
immediately prior to the opening of business on such Cure Date or, if Asset
Coverage or an Adjusted Value of its Eligible Assets equal to or greater than
the Basic Maintenance Amount, as the case may be, cannot be so restored, all
of the Outstanding shares of Series B Preferred Stock, at a price equal to
$25.00 per share plus accumulated but unpaid dividends (whether or not earned
or declared by the Corporation) through the date of redemption (the
"Redemption Price"). In the event that shares of Preferred Stock are redeemed
pursuant to paragraphs 5(b) or 5(c) of Article II hereof, the Corporation may,
but is not required to, redeem a sufficient number of shares of Series B
Preferred Stock pursuant to this paragraph 3(a) which, when aggregated with
other shares of Preferred Stock redeemed by the Corporation, permits the
Corporation to have with respect to the shares of Preferred Stock (including
the Series B Preferred Stock) remaining Outstanding after such redemption (i)
Asset Coverage of as much as 220% and (ii) Moody's Eligible Assets with
Adjusted Value of as great as 110% of the Basic Maintenance Amount. In the
event that all of the shares of Series B Preferred Stock then Outstanding are
required to be redeemed pursuant to paragraph 5 of Article II hereof, the
Corporation shall redeem such shares at the Redemption Price and proceed to do
so as set forth in paragraph 3(c) hereof.

         (b) Optional Redemptions.

         Prior to [__], 2008, the shares of Series B Preferred Stock are not
subject to optional redemption by the Corporation unless such redemption is
necessary, in the judgment of the Board of Directors, to maintain the
Corporation's status as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended. Commencing [__], 2008 and
thereafter, and prior thereto to the extent necessary to maintain the
Corporation's status as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended, to the extent permitted by the
1940 Act and Maryland law, the Corporation may at any time upon Notice of
Redemption redeem the Series B Preferred Stock in whole or in part at the
Redemption Price per share, which notice shall specify a redemption date of
not fewer than 15 days nor more than 40 days after the date of such notice.

         (c) Procedures for Redemption.

         (i) If the Corporation shall determine or be required to redeem
shares of Series B Preferred Stock pursuant to this paragraph 3, it shall mail
a written notice of redemption ("Notice of Redemption") with respect to such
redemption by first class mail, postage prepaid, to each holder of the shares
to be redeemed at such holder's address as the same appears on the stock books
of the Corporation on the close of business on such date as the Board of
Directors may determine, which date shall not be earlier than the second
Business Day prior to the date upon which such Notice of Redemption is mailed
to the holders of Series B Preferred Stock. Each such Notice of Redemption
shall state: (A) the redemption date as established by the Board of Directors;
(B) the number of shares of Series B Preferred Stock to be redeemed; (C) the
CUSIP number(s) of such shares; (D) the Redemption Price; (E) the place or
places where the certificate(s) for such shares (properly endorsed or assigned
for transfer, if the Board of Directors shall so require and the Notice of
Redemption shall so state) are to be surrendered for payment in respect of
such redemption; (F) that dividends on the shares to be redeemed will cease to
accrue on such redemption date; (G) the provisions of this paragraph 3 under
which such redemption is made; and (H) any conditions precedent to such
redemption. If fewer than all shares of Series B Preferred Stock held by any
holder are to be redeemed, the Notice of Redemption mailed to such holder also
shall specify the number or percentage of shares to be redeemed from such
holder. No defect in the Notice of Redemption or the mailing thereof shall
affect the validity of the redemption proceedings, except as required by
applicable law.

         (ii) If the Corporation shall give a Notice of Redemption, then by
the close of business on the Business Day preceding the redemption date
specified in the Notice of Redemption (so long as any conditions precedent to
such redemption have been met) or, if the Dividend-Disbursing Agent so agrees,
another date not later than the redemption date, the Corporation shall (A)
deposit with the Dividend-Disbursing Agent Deposit Assets that shall mature on
or prior to such redemption date having an initial combined value sufficient
to effect the redemption of the shares of Series B Preferred Stock to be
redeemed and (B) give the Dividend-Disbursing Agent irrevocable instructions
and authority to pay the Redemption Price to the holders of the shares of
Series B Preferred Stock called for redemption on the redemption date. The
Corporation may direct the Dividend-Disbursing Agent with respect to the
investment of any Deposit Assets so deposited provided that the proceeds of
any such investment will be available at the opening of business on such
redemption date. Upon the date of such deposit (unless the Corporation shall
default in making payment of the Redemption Price), all rights of the holders
of the shares of Series B Preferred Stock so called for redemption shall cease
and terminate except the right of the holders thereof to receive the
Redemption Price thereof and such shares shall no longer be deemed Outstanding
for any purpose. The Corporation shall be entitled to receive, promptly after
the date fixed for redemption any cash in excess of the aggregate Redemption
Price of the shares of Series B Preferred Stock called for redemption on such
date and any remaining Deposit Assets. Any assets so deposited that are
unclaimed at the end of two years from such redemption date shall, to the
extent permitted by law, be repaid to the Corporation, after which the holders
of the shares of Series B Preferred Stock so called for redemption shall look
only to the Corporation for payment of the Redemption Price thereof. The
Corporation shall be entitled to receive, from time to time after the date
fixed for redemption, any interest on the Deposit Assets so deposited.

             (iii) On or after the redemption date, each holder of shares of
Series B Preferred Stock that are subject to redemption shall surrender the
certificate evidencing such shares to the Corporation at the place designated
in the Notice of Redemption and shall then be entitled to receive the cash
Redemption Price, without interest.

             (iv) In the case of any redemption of less than all of the shares
of Series B Preferred Stock pursuant to these Articles Supplementary, such
redemption shall be made pro rata from each holder of shares of Series B
Preferred Stock in accordance with the respective number of shares held by
each such holder on the record date for such redemption.

             (v)  Notwithstanding the other provisions of this paragraph 3, the
Corporation shall not redeem shares of Series B Preferred Stock unless all
accumulated and unpaid dividends on all Outstanding shares of Series B
Preferred Stock and other Preferred Stock ranking on a parity with the Series
B Preferred Stock with respect to dividends for all applicable past Dividend
Periods (whether or not earned or declared by the Corporation) shall have been
or are contemporaneously paid or declared and Deposit Assets for the payment
of such dividends shall have been deposited with the Dividend-Disbursing Agent
as set forth in paragraph 1(c) of Article II hereof, provided, however, that
the foregoing shall not prevent the purchase or acquisition of outstanding
shares of Preferred Stock pursuant to the successful completion of an
otherwise lawful purchase or exchange offer made on the same terms to holders
of all Outstanding shares of Preferred Stock.

         If the Corporation shall not have funds legally available for the
redemption of, or is otherwise unable to redeem, all the shares of the Series
B Preferred Stock or other Preferred Stock designated to be redeemed on any
redemption date, the Corporation shall redeem on such redemption date the
number of shares of Series B Preferred Stock and other Preferred Stock so
designated as it shall have legally available funds, or is otherwise able, to
redeem ratably on the basis of the Redemption Price from each holder whose
shares are to be redeemed, and the remainder of the shares of the Series B
Preferred Stock and other Preferred Stock designated to be redeemed shall be
redeemed on the earliest practicable date on which the Corporation shall have
funds legally available for the redemption of, or is otherwise able to redeem,
such shares upon Notice of Redemption.

         4. Voting Rights.

         (a) General.

         Except as otherwise provided by law or as specified in the Charter,
each holder of shares of Series B Preferred Stock and any other Preferred
Stock shall be entitled to one vote for each share held on each matter
submitted to a vote of stockholders of the Corporation, and the holders of
Outstanding shares of Preferred Stock, including Series B Preferred Stock, and
of shares of Common Stock shall vote together as a single class; provided,
however, that at any meeting of the stockholders of the Corporation held for
the election of directors, the holders of Outstanding shares of Preferred
Stock, including Series B Preferred Stock, shall be entitled, as a class, to
the exclusion of the holders of all other securities and classes of capital
stock of the Corporation, to elect a number of Corporation's directors, such
that following the election of directors at the meeting of the stockholders,
the Corporation's Board of Directors shall contain two directors elected by
the holders of the Outstanding shares of Preferred Stock, including the Series
B Preferred Stock. Subject to paragraph 4(b) of Article II hereof, the holders
of outstanding shares of capital stock of the Corporation, including the
holders of Outstanding shares of Preferred Stock, including the Series B
Preferred Stock, voting as a single class, shall elect the balance of the
directors.

         (b) Right to Elect Majority of Board of Directors.

         During any period in which any one or more of the conditions
described below shall exist (such period being referred to herein as a "Voting
Period"), the number of directors constituting the Board of Directors shall be
automatically increased by the smallest number that, when added to the two
directors elected exclusively by the holders of shares of Preferred Stock
pursuant to paragraph 4(a) above, would constitute a majority of the Board of
Directors as so increased by such smallest number; and the holders of shares
of Preferred Stock shall be entitled, voting separately as one class (to the
exclusion of the holders of all other securities and classes of capital stock
of the Corporation), to elect such smallest number of additional directors,
together with the two directors that such holders are in any event entitled to
elect pursuant to paragraph 4(a) above. The Corporation and the Board of
Directors shall take all necessary action, including amending the
Corporation's by-laws, to effect an increase in the number of directors as
described in the preceding sentence. A Voting Period shall commence:

             (i) if at any time accumulated dividends (whether or not earned or
declared, and whether or not funds are then legally available in an amount
sufficient therefor) on the Outstanding shares of Series B Preferred Stock
equal to at least two full years' dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited with the
Dividend-Disbursing Agent for the payment of such accumulated dividends; or

             (ii) if at any time holders of any other shares of Preferred
Stock are entitled to elect a majority of the directors of the Corporation
under the 1940 Act or Articles Supplementary creating such shares.

         Upon the termination of a Voting Period, the voting rights described
in this paragraph 4(b) shall cease, subject always, however, to the reverting
of such voting rights in the holders of Preferred Stock upon the further
occurrence of any of the events described in this paragraph 4(b).

         (c) Right to Vote with Respect to Certain Other Matters.

         So long as any shares of Series B Preferred Stock are Outstanding,
the Corporation shall not, without the affirmative vote of the holders of a
majority (as defined in the 1940 Act) of the shares of Preferred Stock
Outstanding at the time, voting separately as one class, amend, alter or
repeal the provisions of the Charter, whether by merger, consolidation or
otherwise, so as to materially adversely affect any of the contract rights
expressly set forth in the Charter with respect to holders of shares of Series
B Preferred Stock or any other Preferred Stock. To the extent permitted under
the 1940 Act, in the event shares of more than one series of Preferred Stock
are Outstanding, the Corporation shall not effect any of the actions set forth
in the preceding sentence which materially adversely affects the contract
rights expressly set forth in the Charter with respect to a holder of shares
of a series of Preferred Stock differently than those of a holder of shares of
any other series of Preferred Stock without the affirmative vote of the
holders of at least a majority of the shares of Preferred Stock of each series
materially adversely affected and Outstanding at such time (each such
materially adversely affected series voting separately as a class to the
extent its rights are affected differently). The Corporation shall notify
Moody's ten Business Days prior to any such vote described above. Unless a
higher percentage is provided for under the Charter or applicable law, the
affirmative vote of the holders of a majority of the Outstanding shares of
Preferred Stock, including Series B Preferred Stock, voting together as a
single class, will be required to approve any plan of reorganization adversely
affecting such shares or any action requiring a vote of security holders under
Section 13(a) of the 1940 Act. For purposes of this paragraph 4(c), the phrase
"vote of the holders of a majority of the Outstanding shares of Preferred
Stock" (or any like phrase) shall mean, in accordance with Section 2(a)(42) of
the 1940 Act, the vote, at the annual or a special meeting of the stockholders
of the Corporation duly called (i) of 67 percent or more of the shares of
Preferred Stock present at such meeting, if the holders of more than 50
percent of the Outstanding shares of Preferred Stock are present or
represented by proxy; or (ii) of more than 50 percent of the Outstanding
shares of Preferred Stock, whichever is less. The class vote of holders of
shares of Preferred Stock described above will in each case be in addition to
a separate vote of the requisite percentage of shares of Common Stock and
shares of Preferred Stock, including Series B Preferred Stock, voting together
as a single class, necessary to authorize the action in question. An increase
in the number of authorized shares of Preferred Stock pursuant to the Charter
or the issuance of additional shares of any series of Preferred Stock
(including Series B Preferred Stock) pursuant to the Charter shall not in and
of itself be considered to adversely affect the contract rights of the holders
of Series B Preferred Stock. The provisions of this paragraph 4(c) are subject
to the provisions of Paragraph 6 of Article II hereof.

         (d) Voting Procedures.

         (i) As soon as practicable after the accrual of any right of the
holders of shares of Preferred Stock to elect additional directors as
described in paragraph 4(b) above, the Corporation shall call a special
meeting of such holders and instruct the Dividend-Disbursing Agent to mail a
notice of such special meeting to such holders, such meeting to be held not
less than 10 nor more than 20 days after the date of mailing of such notice.
If the Corporation fails to send such notice to the Dividend-Disbursing Agent
or if the Corporation does not call such a special meeting, it may be called
by any such holder on like notice. The record date for determining the holders
entitled to notice of and to vote at such special meeting shall be the close
of business on the day on which such notice is mailed or such other date as
the Board of Directors shall determine. At any such special meeting and at
each meeting held during a Voting Period, such holders of Preferred Stock,
voting together as a class (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), shall be entitled
to elect the number of directors prescribed in paragraph 4(b) above on a
one-vote-per-share basis. At any such meeting or adjournment thereof in the
absence of a quorum, a majority of such holders present in person or by proxy
shall have the power to adjourn the meeting without notice, other than by an
announcement at the meeting, to a date not more than 120 days after the
original record date.

             (ii) For purposes of determining any rights of the holders of
Series B Preferred Stock to vote on any matter or the number of shares
required to constitute a quorum, whether such right is created by these
Articles Supplementary, by the other provisions of the Charter, by statute or
otherwise, a share of Series B Preferred Stock which is not Outstanding shall
not be counted.

             (iii) The terms of office of all persons who are directors of the
Corporation at the time of a special meeting of holders of Preferred Stock,
including Series B Preferred Stock, to elect directors shall continue,
notwithstanding the election at such meeting by such holders of the number of
directors that they are entitled to elect, and the persons so elected by such
holders, together with the two incumbent directors elected by the holders of
Preferred Stock, including Series B Preferred Stock, and the remaining
incumbent directors elected by the holders of the Common Stock and Preferred
Stock, shall constitute the duly elected directors of the Corporation.

             (iv) Upon the expiration of a Voting Period, the terms of office of
the additional directors elected by the holders of Preferred Stock pursuant to
paragraph 4(b) above shall expire at the earliest time permitted by law, and
the remaining directors shall constitute the directors of the Corporation and
the voting rights of such holders of Preferred Stock, including Series B
Preferred Stock, to elect additional directors pursuant to paragraph 4(b)
above shall cease, subject to the provisions of the last sentence of paragraph
4(b). Upon the expiration of the terms of the directors elected by the holders
of Preferred Stock pursuant to paragraph 4(b) above, the number of directors
shall be automatically reduced to the number and composition of directors on
the Board immediately preceding such Voting Period.

         (e) Exclusive Remedy.

         Unless otherwise required by law, the holders of shares of Series B
Preferred Stock shall not have any rights or preferences other than those
specifically set forth herein. The holders of shares of Series B Preferred
Stock shall have no preemptive rights or rights to cumulative voting. In the
event that the Corporation fails to pay any dividends on the shares of Series
B Preferred Stock, the exclusive remedy of the holders shall be the right to
vote for directors pursuant to the provisions of this paragraph 4.

         (f) Notification to Moody's.

         In the event a vote of holders of Series B Preferred Stock is
required pursuant to the provisions of Section 13(a) of the 1940 Act, as long
as the Series B Preferred Stock is rated by Moody's at the Corporation's
request, the Corporation shall, not later than ten Business Days prior to the
date on which such vote is to be taken, notify Moody's that such vote is to be
taken and the nature of the action with respect to which such vote is to be
taken and, not later than ten Business Days after the date on which such vote
is taken, notify Moody's of the result of such vote.

         5. Coverage Tests.

         (a) Determination of Compliance.

         For so long as any shares of Series B Preferred Stock are
Outstanding, the Corporation shall make the following determinations:

             (i) Asset Coverage. The Corporation shall have Asset Coverage as
of the last Business Day of each March, June, September and December of each
year in which any share of Series B Preferred Stock is Outstanding.

             (ii) Basic Maintenance Amount Requirement.

                 (A) For so long as any shares of Series B Preferred Stock are
Outstanding and are rated by Moody's, the Corporation shall maintain, on each
Valuation Date, Moody's Eligible Assets having an Adjusted Value at least
equal to the Basic Maintenance Amount, each as of such Valuation Date. Upon
any failure to maintain Moody's Eligible Assets having an Adjusted Value at
least equal to the Basic Maintenance Amount, the Corporation shall use all
commercially reasonable efforts to retain Moody's Eligible Assets having an
Adjusted Value at least equal to the Basic Maintenance Amount on or prior to
the Basic Maintenance Amount Cure Date, by altering the composition of its
portfolio or otherwise.

                (B) The Administrator shall prepare a Basic Maintenance Report
relating to each Valuation Date. On or before 5:00 P.M., New York City time,
on the fifth Business Day after the first Valuation Date following the Date of
Original Issue of the Series B Preferred Stock and after each (1) Annual
Valuation Date, (2) Valuation Date on which the Corporation fails to satisfy
the requirements of paragraph 5(a)(ii)(A) above, (3) Basic Maintenance Amount
Cure Date following a Valuation Date on which the Corporation fails to satisfy
the requirements of paragraph 5(a)(ii)(A) above and (4) Valuation Date and any
immediately succeeding Business Day on which the Adjusted Value of the
Corporation's Moody's Eligible Assets exceeds the Basic Maintenance Amount by
5% or less, the Corporation shall complete and deliver to Moody's a Basic
Maintenance Report, which will be deemed to have been delivered to Moody's if
Moody's receives a copy or telecopy, telex or other electronic transcription
or transmission of the Basic Maintenance Report and on the same day the
Corporation mails to Moody's for delivery on the next Business Day the Basic
Maintenance Report. A failure by the Corporation to deliver a Basic
Maintenance Report under this paragraph 5(a)(ii)(B) shall be deemed to be
delivery of a Basic Maintenance Report indicating an Adjusted Value of the
Corporation's Moody's Eligible Assets less than the Basic Maintenance Amount,
as of the relevant Valuation Date.

                (C) Within ten Business Days after the date of delivery to
Moody's of a Basic Maintenance Report in accordance with paragraph 5(a)(ii)(B)
above relating to an Annual Valuation Date, the Corporation shall deliver to
Moody's an Accountant's Confirmation relating to such Basic Maintenance Report
that was prepared by the Corporation during the quarter ending on such Annual
Valuation Date. Also, within ten Business Days after the date of delivery to
Moody's of a Basic Maintenance Report in accordance with paragraph 5(a)(ii)(B)
above relating to a Valuation Date on which the Corporation fails to satisfy
the requirements of paragraph 5(a)(ii)(A) and any Basic Maintenance Amount
Cure Date, the Corporation shall deliver to Moody's an Accountant's
Confirmation relating to such Basic Maintenance Report.

                (D) In the event the Adjusted Value of the Corporation's
Moody's Eligible Assets shown in any Basic Maintenance Report prepared
pursuant to paragraph 5(a)(ii)(B) above is less than the applicable Basic
Maintenance Amount, the Corporation shall have until the Basic Maintenance
Amount Cure Date to achieve an Adjusted Value of the Corporation's Moody's
Eligible Assets at least equal to the Basic Maintenance Amount, and upon such
achievement (and not later than such Basic Maintenance Amount Cure Date) the
Corporation shall inform Moody's of such achievement in writing by delivery of
a revised Basic Maintenance Report showing an Adjusted Value of the
Corporation's Moody's Eligible Assets at least equal to the Basic Maintenance
Amount as of the date of such revised Basic Maintenance Report.

                (E) On or before 5:00 P.M., New York City time, on no later
than the fifth Business Day after the next Valuation Date following each date
on which the Corporation has repurchased more than 1% of its Common Stock
since the most recent date of delivery of a Basic Maintenance Report, the
Corporation shall complete and deliver to Moody's a Basic Maintenance Report.
A Basic Maintenance Report delivered as provided in paragraph 5(a)(ii)(B)
above also shall be deemed to have been delivered pursuant to this paragraph
5(a)(ii)(E).

         (b) Failure to Meet Asset Coverage.

         If the Corporation fails to have Asset Coverage as provided in
paragraph 5(a)(i) hereof and such failure is not cured as of the related
Series B Asset Coverage Cure Date, (i) the Corporation shall give a Notice of
Redemption as described in paragraph 3 of Article II hereof with respect to
the redemption of a sufficient number of shares of Preferred Stock, which at
the Corporation's determination (to the extent permitted by the 1940 Act and
Maryland law) may include any proportion of Series B Preferred Stock, to
enable it to meet the requirements of paragraph 5(a)(i) above, and, at the
Corporation's discretion, such additional number of shares of Series B
Preferred Stock or other Preferred Stock in order that the Corporation have
Asset Coverage with respect to the shares of Series B Preferred Stock and any
other Preferred Stock remaining Outstanding after such redemption as great as
220%, and (ii) deposit with the Dividend-Disbursing Agent Deposit Securities
having an initial combined value sufficient to effect the redemption of the
shares of Series B Preferred Stock or other Preferred Stock to be redeemed, as
contemplated by paragraph 3(a) of Article II hereof.

         (c) Failure to Maintain Moody's Eligible Assets having an Adjusted
Value at Least Equal to the Basic Maintenance Amount.

         If the Corporation fails to have Moody's Eligible Assets having an
Adjusted Value at least equal to the Basic Maintenance Amount as provided in
paragraph 5(a)(ii)(A) above and such failure is not cured, the Corporation
shall, on or prior to the Basic Maintenance Amount Cure Date, (i) give a
Notice of Redemption as described in paragraph 3 of Article II hereof with
respect to the redemption of a sufficient number of shares of Preferred Stock,
which at the Corporation's determination (to the extent permitted by the 1940
Act and Maryland law) may include any proportion of Series B Preferred Stock,
to enable it to meet the requirements of paragraph 5(a)(ii)(A) above, and, at
the Corporation's discretion, such additional number of shares of Series B
Preferred Stock or other Preferred Stock in order that the Corporation have
Adjusted Assets with respect to the remaining shares of Series B Preferred
Stock and any other Preferred Stock remaining Outstanding after such
redemption as great as 110% of the Basic Maintenance Amount, and (ii) deposit
with the Dividend-Disbursing Agent Deposit Assets having an initial combined
value sufficient to effect the redemption of the shares of Series B Preferred
Stock or other Preferred Stock to be redeemed, as contemplated by paragraph
3(a) of Article II hereof.

         (d) Status of Shares Called for Redemption.

         For purposes of determining whether the requirements of paragraphs
5(a)(i) and 5(a)(ii)(A) hereof are satisfied, (i) no share of the Series B
Preferred Stock shall be deemed to be Outstanding for purposes of any
computation if, prior to or concurrently with such determination, sufficient
Deposit Assets to pay the full Redemption Price for such share shall have been
deposited in trust with the Dividend-Disbursing Agent (or applicable paying
agent) and the requisite Notice of Redemption shall have been given, and (ii)
such Deposit Assets deposited with the Dividend-Disbursing Agent (or paying
agent) shall not be included.

         6. Certain Other Restrictions.

         (a) For so long as the Series B Preferred Stock is rated by Moody's
at the request of the Corporation, the Corporation will not, and will cause
the Adviser not to, (i) knowingly and willfully purchase or sell any asset for
the specific purpose of causing, and with the actual knowledge that the effect
of such purchase or sale will be to cause, the Corporation to have Moody's
Eligible Assets having an Adjusted Value as of the date of such purchase or
sale to be less than the Basic Maintenance Amount as of such date, (ii) in the
event that, as of the immediately preceding Valuation Date, the Adjusted Value
of the Corporation's Moody's Eligible Assets exceeded the Basic Maintenance
Amount by 5% or less, alter the composition of the Corporation's assets in a
manner reasonably expected to reduce the Adjusted Value of the Corporation's
Moody's Eligible Assets, unless the Corporation shall have confirmed that,
after giving effect to such alteration, the Adjusted Value of the
Corporation's Moody's Eligible Assets exceeded the Basic Maintenance Amount or
(iii) declare or pay any dividend or other distribution on any shares of
Common Stock or repurchase any shares of Common Stock, unless the Corporation
shall have confirmed that, after giving effect to such declaration, other
distribution or repurchase, the Corporation continued to satisfy the
requirements of paragraph 5(a)(ii)(A) of Article II hereof.

         (b) For so long as the Series B Preferred Stock is rated by Moody's
at the request of the Corporation, unless the Corporation shall have received
written confirmation from Moody's, the Corporation may engage in the lending
of its portfolio securities only in an amount of up to 5% of the Corporation's
total assets, provided that the Corporation receives cash collateral for such
loaned securities which is maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities and, if
invested, is invested only in Short-Term Money Market Investments or in money
market mutual funds meeting the requirements of Rule 2a-7 under the 1940 Act
that maintain a constant $1.00 per share net asset value and treat the loaned
securities rather than the collateral as the assets of the Corporation for
purposes of determining compliance with Article 5 hereof.

         (c) For so long as the Series B Preferred Stock is rated by Moody's
at the request of the Corporation, the Corporation shall not consolidate the
Corporation with, merge the Corporation into, sell or otherwise transfer all
or substantially all of the Corporation's assets to another Person or adopt a
plan of liquidation of the Corporation, in each case without providing prior
written notification to Moody's.

         7. Limitation on Incurrence of Additional Indebtedness and Issuance
of Additional Preferred Stock

         (a) So long as any shares of Series B Preferred Stock are
Outstanding, the Corporation may issue and sell one or more series of a class
of senior securities of the Corporation representing indebtedness under
Section 18 of the 1940 Act and/or otherwise create or incur indebtedness,
provided that immediately after giving effect to the incurrence of such
indebtedness and to its receipt and application of the proceeds thereof, the
Corporation shall have an "asset coverage" for all senior securities
representing indebtedness, as defined in Section 18(h) of the 1940 Act, of at
least 300% of the amount of all indebtedness of the Corporation then
Outstanding and no such additional indebtedness shall have any preference or
priority over any other indebtedness of the Corporation upon the distribution
of the assets of the Corporation or in respect of the payment of interest. Any
possible liability resulting from lending and/or borrowing portfolio
securities, entering into reverse repurchase agreements, entering into futures
contracts and writing options, to the extent such transactions are made in
accordance with the investment restrictions of the Corporation then in effect,
shall not be considered to be indebtedness limited by this paragraph 7(a).

         (b) So long as any shares of Series B Preferred Stock are
Outstanding, the Corporation may issue and sell shares of one or more other
series of Preferred Stock constituting a series of a class of senior
securities of the Corporation representing stock under Section 18 of the 1940
Act in addition to the shares of Series B Preferred Stock, provided that (i)
the Corporation shall, immediately after giving effect to the issuance of such
additional Preferred Stock and to its receipt and application of the proceeds
thereof, including, without limitation, to the redemption of Preferred Stock
for which a Redemption Notice has been mailed prior to such issuance, have an
"asset coverage" for all senior securities which are stock, as defined in
Section 18(h) of the 1940 Act, of at least 200% of the sum of the liquidation
preference of the shares of Series B Preferred Stock and all other Preferred
Stock of the Corporation then Outstanding, and (ii) no such additional
Preferred Stock shall have any preference or priority over any other Preferred
Stock of the Corporation upon the distribution of the assets of the
Corporation or in respect of the payment of dividends.


                                 ARTICLE III
      ABILITY OF BOARD OF DIRECTORS TO MODIFY THE ARTICLES SUPPLEMENTARY

         The calculation of Adjusted Value, Basic Maintenance Amount and the
elements of each of them and the definitions of such terms and elements may be
modified by action of the Board of Directors without further action by the
stockholders if the Board of Directors determines that such modification is
necessary to prevent a reduction in rating of the shares of Preferred Stock by
Moody's or is in the best interests of the holders of shares of Common Stock
and is not adverse to the holders of Preferred Stock in view of advice to the
Corporation by Moody's that such modification would not adversely affect its
then-current rating of the shares of Series B Preferred Stock. To the extent
the Corporation is unable to obtain an opinion of counsel to the effect that
operation of the foregoing sentence is enforceable in the circumstances then
obtaining, the calculation of Adjusted Value, Basic Maintenance Amount and the
elements of each of them and the definitions of such terms and the elements
thereof shall be adjusted from time to time without further action by the
Board of Directors and the stockholders only to reflect changes made thereto
independently by Moody's (if Moody's is then rating the Series B Preferred
Stock at the request of the Corporation) if Moody's has advised the
Corporation in writing separately (a) of such adjustments and (b) that the
revised calculation definition would not cause Moody's to reduce or withdraw
its then-current rating of the shares of Series B Preferred Stock. The
adjustments contemplated by the preceding sentence shall be made effective
upon the time the Corporation receives the notice from Moody's to the effect
specified in clause (b) of the preceding sentence. Any such modification may
be rescinded or further modified by action of the Board of Directors and the
stockholders.

         Notwithstanding the provisions of the preceding paragraph, to the
extent permitted by law, the Board of Directors, without the vote of the
holders of the Series B Preferred Stock or any other capital stock of the
Corporation, may amend the provisions of these Articles Supplementary to
resolve any inconsistency or ambiguity or to remedy any formal defect so long
as the amendment does not materially adversely affect any of the contract
rights of holders of shares of the Series B Preferred Stock or any other
capital stock of the Corporation or adversely affect the then-current rating
on the Series B Preferred Stock by Moody's.


<PAGE>

         IN WITNESS WHEREOF, The Gabelli Convertible and Income Securities
Fund Inc. has caused these presents to be signed in its name and on its behalf
by a duly authorized officer, and its corporate seal to be hereunto affixed
and attested by its Secretary, and the said officers of the Corporation
further acknowledge said instrument to be the corporate act of the
Corporation, and state that to the best of their knowledge, information and
belief under penalty of perjury the matters and facts herein set forth with
respect to approval are true in all material respects, all on March  , 2003.


                                                 By __________________________
                                                    Name:
                                                    Title:


Attest:

______________________
Name:
Title:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>s440195.txt
<DESCRIPTION>EXHIBIT 99(A)(IV)
<TEXT>
                                                             Exhibit 99(a)(iv)

                            ARTICLES SUPPLEMENTARY
                       CREATING AND FIXING THE RIGHTS OF
               SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK

         The Gabelli Convertible and Income Securities Fund Inc., a Maryland
corporation having its principal office in Baltimore City, Maryland (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of the State of Maryland that:

         FIRST: The Board of Directors of the Corporation, at a meeting duly
convened and held on August 21, 2002, pursuant to authority expressly vested
in the Board of Directors of the Corporation by Article V of the Charter of
the Corporation, adopted a resolution reclassifying 2,000,000 unissued shares
of the Common Stock, par value $.001 per share, of the Corporation as
Preferred Stock. At a meeting duly convened and held on February 19, 2003, the
Board of Directors of the Corporation, pursuant to authority expressly vested
in it by Article V of the Charter of the Corporation, adopted a resolution
designating 5,000 authorized and unissued shares of Preferred Stock as "Series
C Auction Rate Preferred Stock."

         SECOND: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the Series C Auction Rate Cumulative Preferred Stock, par value
$.001 per share, as set by the Board of Directors are as follows:

                                  DESIGNATION

         Series C Preferred Stock: A series of [__] preferred shares, par
value $0.001 per share, liquidation preference $25,000 per share, is hereby
designated "Series C Auction Rate Cumulative Preferred Stock" (the "Series C
Preferred Stock"). Each share of Series C Preferred Stock may be issued on a
date to be determined by the Board of Directors of the Corporation; have an
initial dividend rate per annum, an initial Dividend Period and an initial
Dividend Payment Date as shall be determined in advance of the issuance
thereof by the Board of Directors of the Corporation; and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law or set forth in the Charter applicable to Preferred
Stock of the Corporation, as are set forth in these Articles Supplementary.
The Series C Preferred Stock shall constitute a separate series of Preferred
Stock.

         As used in these Articles Supplementary, unless the context requires
otherwise, each capitalized term shall have the meaning ascribed to it in
paragraph 13 of Article I and paragraph 1 of Article II of these Articles
Supplementary.

                   Article I: Series C Preferred Stock Terms

1.      Number of Shares; Ranking.

            (a) The initial number of authorized shares constituting the
Series C Preferred Stock is [ ]. No fractional shares of Series C Preferred
Stock shall be issued.

            (b) Shares of Series C Preferred Stock which at any time have been
redeemed or purchased by the Corporation shall, after such redemption or
purchase, have the status of authorized but unissued shares of Preferred
Stock.

            (c) The Series C Preferred Stock shall rank on a parity with any
other series of Preferred Stock as to the payment of dividends to which such
stock is entitled.

            (d) No Holder of Series C Preferred Stock shall have, solely by
reason of being such a holder, any preemptive or other right to acquire,
purchase or subscribe for any shares of any Preferred Stock or Common Stock or
other securities of the Corporation which it may hereafter issue or sell.

2.      Dividends.

            (a) The Holders of Series C Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, cumulative cash dividends on their shares of
Series C Preferred Stock at the dividend rate determined by the Board of
Directors in the manner described under "Designation" above during the period
from and after the date on which such shares are originally issued and
including the last day of the initial Dividend Period and, thereafter, at the
Applicable Rate, determined as set forth in paragraph 2(c), and no more,
payable on the respective dates determined as set forth in paragraph 2(b).
Dividends on the Outstanding shares of Series C Preferred Stock shall
accumulate from the date on which such shares are originally issued.

            (b) (i) Dividends shall be payable when, as and if declared by the
Board of Directors following the initial Dividend Payment Date, subject to
paragraph 2(b)(ii), on the Series C Preferred Stock as follows:

                  (A) with respect to any Dividend Period of one year or less,
on the first Business Day following the last day of such Dividend Period;
provided, however, if the Dividend Period is more than 91 days then on the
91st, 181st and 271st days within such period, if applicable, and on the first
Business Day following the last day of such Dividend Period; and

                  (B) with respect to any Dividend Period of more than one
year, on a quarterly basis on each March 26th, June 26th, September 26th and
December 26th within such Dividend Period and on the first Business Day
following the last day of such Dividend Period.

                  (ii) If a day for payment of dividends resulting from the
application of paragraph 2(b)(i) above is not a Business Day, then the
Dividend Payment Date shall be the first Business Day following such day for
payment of dividends.

                  (iii) The Corporation shall pay to the Paying Agent not
later than 12:00 noon, New York City time, on the Business Day immediately
preceding each Dividend Payment Date for Series C Preferred Stock, an
aggregate amount of immediately available funds equal to the dividends to be
paid to all Holders of such Series C Preferred Stock on such Dividend Payment
Date. The Corporation shall not be required to establish any reserves for the
payment of dividends.

                  (iv) All moneys paid to the Paying Agent for the payment of
dividends shall be held in trust for the payment of such dividends by the
Paying Agent for the benefit of the Holders specified in paragraph 2(b)(v).
Unless instructed by the Corporation in writing the Paying Agent will hold
such moneys uninvested. Any moneys paid to the Paying Agent in accordance with
the foregoing but not applied by the Paying Agent to the payment of dividends,
including interest earned, if any, on such moneys, will, to the extent
permitted by law, be repaid to the Corporation at the end of 90 days from the
date on which such moneys were to have been so applied.

                  (v) Each dividend on Series C Preferred Stock shall be paid
on the Dividend Payment Date therefor to the Holders of Series C Preferred
Stock as their names appear on the stock ledger or stock records of the
Corporation on the Business Day immediately preceding such Dividend Payment
Date; provided, however, if dividends are in arrears, they may be declared and
paid at any time to Holders as their names appear on the stock ledger or stock
records of the Corporation on such date not exceeding 15 days preceding the
payment date thereof, as may be fixed by the Board of Directors. No interest
will be payable in respect of any dividend payment or payments which may be in
arrears.

                  (c) (i) For each Dividend Period after the initial Dividend
Period for the Outstanding shares of Series C Preferred Stock, the dividend
rate shall be equal to the rate per annum that results from an Auction (but
the rate set at the Auction will not exceed the Maximum Rate); provided,
however, that if an Auction for any subsequent Dividend Period of Series C
Preferred Stock is not held for any reason or if Sufficient Clearing Bids have
not been made in an Auction (other than as a result of all shares of Series C
Preferred Stock being the subject of Submitted Hold Orders), then the dividend
rate on each Outstanding share of Series C Preferred Stock for any such
Dividend Period shall be the Maximum Rate (except (A) during a Default Period,
when the dividend rate shall be the Default Rate as set forth in paragraph
2(c)(i) below, or (B) after a Default Period and prior to the beginning of the
next Dividend Period, when the dividend rate shall be the Maximum Rate at the
close of business on the last day of such Default Period). If an Auction is
not held because an unforeseen event or unforeseen events cause a day that
otherwise would have been an Auction Date not to be a Business Day, then the
length of the then- current Dividend Period shall be extended by seven days
(or a multiple thereof if necessary because of such unforeseen event or
events), the Applicable Rate for such period shall be the Applicable Rate for
the Dividend Period so extended and the Dividend Payment Date for such
Dividend Period shall be the first Business Day immediately succeeding the end
of such period.

                  (ii) Subject to the cure provisions in paragraph 2(c)(iii)
below, a Default Period with respect to the Outstanding shares of Series C
Preferred Stock will commence if the Corporation fails to deposit irrevocably
in trust in same- day funds, with the Paying Agent by 12:00 noon, New York
City time on the Business Day immediately preceding the relevant Dividend
Payment Date, the full amount of any declared dividend on the Outstanding
shares of Series C Preferred Stock then payable on that Dividend Payment Date
(a "Dividend Default").

            Subject to the cure provisions of paragraph 2(c)(iii) below, a
Default Period with respect to a Dividend Default or a Redemption Default
shall end on the Business Day on which, by 12:00 noon, New York City time, all
unpaid dividends and any unpaid Redemption Price in respect of such shares of
Series C Preferred Stock shall have been deposited irrevocably in trust in
same-day funds with the Paying Agent. In the case of a Dividend Default, the
following shall apply:

         1.     Each Dividend Period that commences during a Default Period
                will be a Standard Dividend Period.

         2.     The dividend rate for each Dividend Period that commences and
                concludes during a Default Period will be equal to the Default
                Rate.

         3.     In the event a Dividend Period commences during a Default
                Period and such Dividend Period continues after such Default
                Period has ended (a) the dividend rate for the portion of such
                Dividend Period that occurs during the Default Period will be
                the Default Rate and (b) the dividend rate for the portion of
                such Dividend Period that falls outside the Default Period
                will be (i) the Applicable Rate, in the case of the Dividend
                Period during which a default with respect to the previous
                period occurs, or (ii) the Maximum Rate, in the case of any
                other Dividend Period commencing during a Default Period.

         4.     The commencement of a Default Period will not by itself cause
                the commencement of a new Dividend Period.

         5.     No Auction will be held during an applicable Default Period;
                provided, however, that if a Default Period shall end prior to
                the end of a Standard Dividend Period that had commenced
                during such Default Period, an Auction will be held on the
                last day of such Standard Dividend Period.

                  (iii) No Default Period with respect to a Dividend Default
or Redemption Default shall be deemed to have commenced, unless such default
is due solely to the willful failure of the Corporation, if the amount of any
dividend or any Redemption Price due is deposited irrevocably in trust in
same-day funds with the Paying Agent by 12:00 noon, New York City time within
three Business Days after the applicable Dividend Payment Date or Redemption
Date, together with an amount in respect of such shares of Series C Preferred
Stock equal to the Default Rate applied to the amount of such non-payment
based on the actual number of days that would otherwise have comprised the
Default Period divided by 360. The "Default Rate" shall be equal to the
Reference Rate multiplied by three (3).

                  (iv) The amount of dividends per share of Series C Preferred
Stock payable (if declared) on each Dividend Payment Date of each Dividend
Period of less than one year (or in respect of dividends on another date in
connection with a redemption during such Dividend Period) shall be computed by
multiplying the relevant Applicable Rate, Default Rate or Maximum Rate, as the
case may be, for such Dividend Period (or a portion thereof) by a fraction,
the numerator of which will be the number of days in such Dividend Period (or
portion thereof) that such share of Series C Preferred Stock was Outstanding
and for which the Applicable Rate, Maximum Rate or the Default Rate was
applicable (but in no event shall the numerator exceed 360) and the
denominator of which will be 360, multiplying the amount so obtained by
$25,000, and rounding the amount so obtained to the nearest cent. During any
Dividend Period of one year or more, the amount of dividends per share of
Series C Preferred Stock payable on any Dividend Payment Date (or in respect
of dividends on another date in connection with a redemption during such
Dividend Period) will be computed as described in the preceding sentence
except that the numerator, with respect to any full twelve month period, will
be 360.

            (d) Any dividend payment made on shares of Series C Preferred
Stock shall first be credited against the earliest accumulated but unpaid
dividends due with respect to such shares.

            (e) For so long as shares of the Series C Preferred Stock are
Outstanding, except as otherwise contemplated by Article I of these Articles
Supplementary, the Corporation shall not pay any dividend or other
distribution (other than a dividend or distribution paid in shares of, or
options, warrants or rights to subscribe for or purchase, Common Stock or
other stock, if any, ranking junior to the Series C Preferred Stock as to
dividends and upon liquidation) with respect to Common Stock or any other
capital stock of the Corporation ranking junior to the Series C Preferred
Stock as to dividends or upon liquidation, or call for redemption, redeem,
purchase or otherwise acquire for consideration any Common Stock or other
capital stock ranking junior to the Series C Preferred Stock (except by
conversion into or exchange for shares of the Corporation ranking junior to
the Series C Preferred Stock as to dividends and upon liquidation), unless, in
each case, (i) immediately after such transaction, the Corporation would have
Eligible Assets with an aggregate Discounted Value at least equal to the Basic
Maintenance Amount and the Asset Coverage would be achieved, (ii) all
cumulative and unpaid dividends due on or prior to the date of the transaction
have been declared and paid in full with respect to the Corporation's
Preferred Stock, including the Series C Preferred Stock (or shall have been
declared and sufficient funds for the payment thereof deposited with the
applicable Paying Agent) and (iii) the Corporation has redeemed the full
number of shares of Preferred Stock to be redeemed mandatorily pursuant to any
provision for mandatory redemption contained herein, including, without
limitation, any such provision contained in paragraph 3(a)(ii).

            (f) No full dividends shall be declared or paid on the Series C
Preferred Stock for any Dividend Period or part thereof, unless full
cumulative dividends due through the most recent Dividend Payment Dates
therefor for all Outstanding shares of series of Preferred Stock of the
Corporation ranking on a parity with the Series C Preferred Stock as to the
payment of dividends have been or contemporaneously are declared and paid
through the most recent Dividend Payment Dates therefor. If full cumulative
dividends due have not been paid on all Outstanding shares of such Preferred
Stock, any dividends being paid on such shares of Preferred Stock (including
the Series C Preferred Stock) will be paid as nearly pro rata as possible in
proportion to the respective amounts of dividends accumulated but unpaid on
each such series of Preferred Stock then outstanding on the relevant Dividend
Payment Date.

3.  Redemption.

            (a) (i) Optional Redemption. After the initial Dividend Period,
subject to any Non-Call Period and the provisions of this paragraph 3 and to
the extent permitted under the 1940 Act and Maryland law, the Corporation may,
at its option, redeem in whole or in part out of funds legally available
therefor, shares of Series C Preferred Stock by delivering a notice of
redemption not less than 7 calendar days and not more than 40 calendar days
prior to the Redemption Date, in the case of shares herein designated as (A)
having a Dividend Period of one year or less, on the next Business Day after
the last day of such Dividend Period, at a redemption price per share equal to
$25,000, plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) to the Redemption Date ("Redemption
Price"), or (B) having a Dividend Period of more than one year, on any
Business Day prior to the end of the relevant Dividend Period, at the
Redemption Price subject to any applicable Specific Redemption Provisions.
Notwithstanding the foregoing, the Corporation shall not give a notice of or
effect any redemption pursuant to this paragraph 3(a)(i) unless, on the date
on which the Corporation gives such notice and on the Redemption Date, (x) the
Corporation has available Deposit Assets with maturity or tender dates not
later than the day preceding the applicable Redemption Date and having a value
not less than the amount (including any applicable premium) due to Holders of
the Series C Preferred Stock to be redeemed on the Redemption Date and (y) the
Corporation would have Eligible Assets with an aggregate Discounted Value at
least equal to the Basic Maintenance Amount and the Asset Coverage immediately
subsequent to such redemption, if such redemption were to occur on such date,
it being understood that the provisions of paragraph 3(d) shall be applicable
in such circumstances in the event the Corporation makes the deposit and takes
the other action required thereby.

                  (ii) Mandatory Redemption. So long as shares of Series C
Preferred Stock are Outstanding, if the Corporation fails (A) as of any
Valuation Date to meet the Basic Maintenance Test and such failure is not
cured by the Basic Maintenance Amount Cure Date or (B) as of any Valuation
Date to meet the 1940 Act Asset Coverage and such failure is not cured by the
Series C Asset Coverage Cure Date or (C) as of any valuation or measuring date
applicable to any other series of Preferred Stock to meet any applicable
maintenance amount test and such failure is not cured by the relevant cure
date (any such cure date, together with any Basic Maintenance Amount Cure Date
or Series C Asset Coverage Cure Date, a "Cure Date"), Preferred Stock, which
at the Corporation's determination may include Series C Preferred Stock, will
be subject to mandatory redemption out of funds legally available therefor.
The series and number of shares of Preferred Stock to be redeemed in such
circumstances will be determined by the Corporation, subject to the
limitations of the 1940 Act and Maryland law, from among all series of
Preferred Stock then Outstanding and may include any proportion of Series C
Preferred Stock or any other series of Preferred Stock. The amount of
Preferred Stock to be mandatorily redeemed under such circumstances shall, in
the aggregate, equal the lesser of (1) the minimum amount of Preferred Stock
(including the Series C Preferred Stock if so determined by the Corporation)
the redemption of which, if deemed to have occurred immediately prior to the
opening of business on the relevant Cure Date, would result in the Corporation
meeting, as the case may be, the Basic Maintenance Test, the Asset Coverage
and any other then applicable maintenance amount test, in each case as of the
relevant Cure Date (provided that, if there is no such minimum amount of
Preferred Stock the redemption of which would have such result, all Series C
Preferred Stock then Outstanding will be redeemed), and (2) the maximum amount
of Preferred Stock that can be redeemed out of funds expected to be available
therefor on the Mandatory Redemption Date at the Mandatory Redemption Price;
provided, that in the event that Preferred Stock is redeemed mandatorily
pursuant to this paragraph 3, the Corporation may, but is not required to,
redeem a sufficient amount of additional shares of Series C Preferred Stock,
which when aggregated with other shares of Preferred Stock redeemed by the
Corporation, permits the Corporation to have (x) Eligible Assets with Adjusted
Value with respect to the Preferred Stock remaining Outstanding of as great as
110% of the Basic Maintenance Amount and (y) Asset Coverage with respect to
the Pre ferred Stock remaining Outstanding of as much as 220%.

                  (iii) Subject to the Articles Supplementary establishing
each series of Preferred Stock, the Corporation may determine the shares and
series of Preferred Stock to be redeemed in accordance with the paragraph
3(a)(ii) above, subject to the further provisions of this paragraph 3(a)(iii).
Subject to the immediately preceding sentence, the Corporation shall effect
any mandatory redemption of Series C Preferred Stock relating to: (A) a
failure to meet the Basic Maintenance Test, no later than 30 days after the
Corporation last met the Basic Maintenance Test, (B) a failure to meet the
Asset Coverage, no later than 30 days after the Series C Asset Coverage Cure
Date or (C) a failure to meet any other then applicable maintenance amount
test in accordance with the requirements of such test (in each case the
"Mandatory Redemption Date"), except that if the Corporation does not have
funds legally available for the redemption of, or is not otherwise legally
permitted to redeem, the amount of Preferred Stock which would be required to
be redeemed by the Corporation under subparagraph 3(a)(ii) if sufficient funds
were available, or the Corporation otherwise is unable to effect such
redemption on or prior to the applicable Mandatory Redemption Date, the
Corporation shall redeem on such redemption date the number of shares of
Series C Preferred Stock and other Preferred Stock with respect to which it
has given notice of redemption as it shall have legally available funds, or is
otherwise able, to redeem ratably on the basis of Redemption Price from each
holder whose shares are to be redeemed and the remainder of the Series C
Preferred Stock and other Preferred Stock which it was unable to redeem on the
earliest practicable date on which the Corporation will have such funds
available upon notice, in the case of Series C Preferred Stock pursuant to
paragraph 3(b) to Holders of shares of Series C Preferred Stock to be
redeemed. The Corporation will deposit with the Paying Agent funds sufficient
to redeem the specified number of shares of Series C Preferred Stock subject
to a redemption required under paragraph 3(a)(ii), by 1:00 P.M., New York City
time, of the Business Day immediately preceding the Mandatory Redemption Date.
If fewer than all of the Outstanding shares of Series C Preferred Stock are to
be redeemed pursuant to this 3(a)(iii), the number of shares of Series C
Preferred Stock to be redeemed shall be redeemed pro rata from the Holders of
such shares in proportion to the number of shares of Series C Preferred Stock
held by such Holders, by lot or by such other method as the Corporation shall
deem fair and equitable, subject, however, to the terms of any applicable
Specific Redemption Provisions.

                  (b) In the event of a redemption of Series C Preferred Stock
pursuant to paragraph 3(a) above, the Corporation will have filed or will file
a notice of its intention to redeem with the Commission, in either case so as
to provide at least the minimum notice required under Rule 23c-2 under the
1940 Act or any successor provision. In addition, the Corporation shall
deliver a notice of redemption to the Auction Agent (the "Notice of
Redemption") containing the information set forth below (i) in the case of an
optional redemption pursuant to paragraph 3(a)(i) above, one Business Day
prior to the giving of notice to the Holders and (ii) in the case of a
mandatory redemption pursuant to paragraph 3(a)(ii) above, on or prior to the
7th day preceding the Mandatory Redemption Date. The Auction Agent will use
its reasonable efforts to provide telephonic, electronic or written notice to
each Holder of any shares of Series C Preferred Stock called for redemption
not later than the close of business on the Business Day immediately following
the day on which the Corporation determines the shares to be redeemed (or,
during a Default Period with respect to such shares, not later than the close
of business on the Business Day immediately following the day on which the
Auction Agent receives Notice of Redemption from the Corporation). The Auction
Agent shall confirm a telephonic notice in writing not later than the close of
business on the third Business Day preceding the date fixed for redemption by
providing the Notice of Redemption to each Holder of shares called for
redemption, the Paying Agent (if different from the Auction Agent) and the
Securities Depository. Notice of Redemption will be addressed to the Holders
of Series C Preferred Stock at their addresses appearing on the share records
of the Corporation. Such Notice of Redemption will set forth (t) the date
fixed for redemption, (u) the number or percentage of shares of Series C
Preferred Stock to be redeemed, (v) the CUSIP number(s) of such shares, (w)
the Redemption Price (specifying the amount of accumulated dividends to be
included therein), (x) the place or places where such shares are to be
redeemed, (y) that dividends on the shares to be redeemed will cease to
accumulate on such date fixed for redemption, and (z) the provision of these
Articles Supplementary under which redemption shall be made. If fewer than all
the Outstanding shares of Series C Preferred Stock held by any Holder are to
be redeemed, the Notice of Redemption mailed to such Holder shall also specify
the number or percentage of shares of Series C Preferred Stock to be redeemed
from such Holder. No defect in the Notice of Redemption or in the transmittal
or mailing thereof will affect the validity of the redemption proceedings,
except as required by applicable law.

            (c) Notwithstanding the provisions of paragraph 3(a), the
Corporation shall not redeem shares of Preferred Stock unless all accumulated
and unpaid dividends on all Outstanding shares of Series C Preferred Stock for
all applicable past Dividend Periods (whether or not earned or declared by the
Corporation) have been or are contemporaneously paid or declared and Deposit
Assets for the payment of such dividends have been deposited with the Paying
Agent; provided, however, that the foregoing shall not prevent the purchase or
acquisition of outstanding shares of Preferred Stock pursuant to the
successful completion of an otherwise lawful purchase or exchange offer made
on the same terms to holders of all Outstanding shares of Preferred Stock.

            (d) Upon the deposit of funds sufficient to redeem shares of
Series C Preferred Stock with the Paying Agent and the giving of the Notice of
Redemption to the Auction Agent under paragraph 3(b) above, dividends on such
shares shall cease to accumulate and such shares shall no longer be deemed to
be Outstanding for any purpose (including, without limitation, for purposes of
calculating whether the Corporation has met the Basic Maintenance Test or the
Asset Coverage), and all rights of the Holders of the shares of Series C
Preferred Stock so called for redemption shall cease and terminate, except the
right of such Holder to receive the Redemption Price specified herein, but
without any interest or other additional amount. Such Redemption Price shall
be paid by the Paying Agent to the nominee of the Securities Depository. The
Corporation shall be entitled to receive from the Paying Agent, promptly after
the date fixed for redemption, any cash deposited with the Paying Agent in
excess of (i) the aggregate Redemption Price of the shares of Series C
Preferred Stock called for redemption on such date and (ii) such other
amounts, if any, to which Holders of the Series C Preferred Stock called for
redemption may be entitled. Any funds so deposited that are unclaimed at the
end of two years from such redemption date shall, to the extent permitted by
law, be paid to the Corporation, after which time the Holders of shares of
Series C Preferred Stock so called for redemption may look only to the
Corporation for payment of the Redemption Price and all other amounts, if any,
to which they may be entitled; provided, however, that the Paying Agent shall
notify all Holders whose funds are unclaimed by placing a notice in The Wall
Street Journal concerning the availability of such funds for three consecutive
weeks. The Corporation shall be entitled to receive, from time to time after
the date fixed for redemption, any interest earned on the funds so deposited.

            (e) A Default Period with respect to the Outstanding shares of
Series C Preferred Stock will commence if the Corporation fails to deposit
irrevocably in trust in same-day funds, with the Paying Agent by 12:00 noon,
New York City time on the Business Day preceding the redemption date specified
in the Notice of Redemption (the "Redemption Date") or the full amount of any
Redemption Price payable on such Redemption Date (a "Redemption Default");
provided, that no Redemption Default shall be deemed to have occurred in
respect of Series C Preferred Stock when the related Redemption Notice
provides that the redemption of such Series C Preferred Stock is subject to
one or more conditions precedent and each such condition precedent shall not
have been satisfied at the time or times or in the manner specified in such
Notice of Redemption. To the extent a Redemption Default occurs with respect
to Series C Preferred Stock or that any redemption for which Notice of
Redemption has been given otherwise prohibited, such redemption shall be made
as soon as practicable to the extent such funds become legally available or
such redemption is no longer otherwise prohibited. Notwithstanding the fact
that a Redemption Default has occurred and is continuing or theat the
Corporation has otherwise failed to redeem shares of Series C Preferred Stock
for which a Notice of Redemption has been given (other than because of the
failure of a condition precedent set forth in such Notice of Redemption),
dividends may be declared and if so declared will be paid on Series C
Preferred Stock, which shall include those shares of Series C Preferred Stock
for which Notice of Redemption has been given but for which deposit of funds
has not been made.

            (f) All moneys paid to the Paying Agent for payment of the
Redemption Price of shares of Series C Preferred Stock called for redemption
shall be held in trust by the Paying Agent for the benefit of Holders of the
Series C Preferred Stock so to be redeemed. A Redemption Default will occur on
account of the Corporation's failure to timely deposit any required Redemption
Price with the Paying Agent and any resulting Default Period will end in
accordance with paragraph 2(c).

            (g) So long as the Series C Preferred Stock is held of record by
the nominee of the Securities Depository, the Redemption Price for such shares
will be paid on the date fixed for redemption to the nominee of the Securities
Depository for distribution to Agent Members for distribution to the Persons
for whom they are acting as agent.

            (h) Except for the provisions described above, nothing contained
in these Articles Supplementary limits any right of the Corporation to
purchase or otherwise acquire Series C Preferred Stock outside of an Auction
at any price, whether higher or lower than the price that would be paid in
connection with an optional or mandatory redemption, so long as, at the time
of any such purchase, there is no arrearage in the payment of dividends on, or
the mandatory or optional Redemption Price with respect to, any shares of
Series C Preferred Stock for which Notice of Redemption has been given and the
Corporation meets the Asset Coverage and the Basic Maintenance Test after
giving effect to such purchase or acquisition on the date thereof. Any shares
of Series C Preferred Stock which are purchased, redeemed or otherwise
acquired by the Corporation shall have no voting rights. If fewer than all the
Outstanding shares of Series C Preferred Stock are redeemed or otherwise
acquired by the Corporation, the Corporation shall give notice of such
transaction to the Auction Agent, in accordance with the procedures agreed
upon by the Board of Directors.

            (i) In the case of any redemption pursuant to this paragraph 3,
only whole shares of Series C Preferred Stock shall be redeemed, and in the
event that any provision of the Charter would require redemption of a
fractional share, the Auction Agent shall be authorized to round up so that
only whole shares are redeemed.

            (j) Notwithstanding anything herein to the contrary, the Board of
Directors may authorize, create or issue other series of Preferred Stock
ranking on a parity with the Series C Preferred Stock with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Corporation, to the extent
permitted by the 1940 Act, if upon issuance of any such series, either (i) the
net proceeds from the sale of such stock (or such portion thereof needed to
redeem or repurchase the Outstanding shares of Series C Preferred Stock) are
deposited with the Auction Agent, Notice of Redemption as contemplated by
paragraph 3(b) has been delivered prior thereto or is sent promptly
thereafter, and such proceeds are used to redeem all Outstanding shares of
Series C Preferred Stock or (ii) the Corporation would meet the Asset
Coverage, the Basic Maintenance Test and the requirements of paragraph 9.

4. Designation of Dividend Period.

            (a) The initial Dividend Period for the Series C Preferred Stock
shall be as determined in the manner under "Designation" above. The
Corporation shall designate the duration of subsequent Dividend Periods of the
Series C Preferred Stock; provided, however, that no such designation shall be
necessary for a Standard Dividend Period and, provided further, that any
designation of a Special Dividend Period for the Series C Preferred shall be
effective only if (i) notice thereof shall have been given as provided herein,
(ii) any failure to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the Redemption Price of, the Series C Preferred
Stock shall have been cured as provided for herein, (iii) Sufficient Clearing
Orders shall have existed in an Auction held for the Series C Preferred Stock
on the Auction Date immediately preceding the first day of such proposed
Special Dividend Period, (iv) if the Corporation shall have mailed a Notice of
Redemption with respect to any shares of Series C Preferred Stock, the
Redemption Price with respect to such shares shall have been deposited with
the Paying Agent and (v) the Corporation has confirmed that as of the Auction
Date next preceding the first day of such Special Dividend Period, it has
Eligible Assets with an aggregate Discounted Value at least equal to the Basic
Maintenance Amount, and the Corporation has consulted with the Broker-Dealers
and has provided notice of such designation and a Basic Maintenance Report to
each Rating Agency.

            (b) If the Corporation proposes to designate any Special Dividend
Period, not fewer than seven Business Days (or two Business Days in the event
the duration of the Dividend Period prior to such Special Dividend Period is
fewer than eight days) nor more than 30 Business Days prior to the first day
of such Special Dividend Period, notice shall be (i) made by press release and
(ii) communicated by the Corporation by telephonic or other means to the
Auction Agent and confirmed in writing promptly thereafter. Each such notice
shall state (x) that the Corporation proposes to exercise its option to
designate a succeeding Special Dividend Period, specifying the first and last
days thereof and (y) that the Corporation will by 3:00 P.M., New York City
time, on the second Business Day next preceding the first day of such Special
Dividend Period, notify the Auction Agent, who will promptly notify the
Broker-Dealers, of either (A) its determination, subject to certain
conditions, to proceed with such Special Dividend Period, subject to the terms
of any Specific Redemption Provisions, or (B) its determination not to proceed
with such Special Dividend Period, in which latter event the succeeding
Dividend Period shall be a Standard Dividend Period. No later than 3:00 P.M.,
New York City time, on the second Business Day next preceding the first day of
any proposed Special Dividend Period, the Corporation shall deliver to the
Auction Agent, who will promptly deliver to the Broker-Dealers and Existing
Holders, either:

                  (1) a notice stating (a) that the Corporation has determined
to designate the next succeeding Dividend Period as a Special Dividend Period,
(b) the first and last days thereof and (c) the terms of any Specific
Redemption Provisions; or


                  (2) a notice stating that the Corporation has determined not
to exercise its option to designate a Special Dividend Period.

         If the Corporation fails to deliver either such notice with respect
to the designation of any proposed Special Dividend Period to the Auction
Agent or is unable to make the confirmation provided in paragraph 4(a)(v) by
3:00 P.M., New York City time, on the second Business Day next preceding the
first day of such proposed Special Dividend Period, the Corporation shall be
deemed to have delivered a notice to the Auction Agent with respect to such
Dividend Period to the effect set forth in clause (2) above, thereby resulting
in a Standard Dividend Period.


5. Restrictions on Transfer.

         Series C Preferred Stock may be transferred only (a) pursuant to an
Order placed in an Auction, (b) to or through a Broker-Dealer or (c) to the
Corporation or any Affiliate. Notwithstanding the foregoing, a transfer other
than pursuant to an Auction will not be effective unless the selling Existing
Holder or the Agent Member of such Existing Holder (in the case of an Existing
Holder whose shares are listed in its own name on the books of the Auction
Agent), or the Broker-Dealer or Agent Member of such Broker-Dealer (in the
case of a transfer between persons holding shares of any Series C Preferred
Stock through different Broker-Dealers), advises the Auction Agent of such
transfer. Any certificates representing Series C Preferred Stock issued to the
Securities Depository will bear legends with respect to the restrictions
described above and stop-transfer instructions will be issued to the Transfer
Agent and/or Registrar.

6. Voting Rights.

         (a) General.

         Except as otherwise provided by law or as specified in the Charter,
each Holder of Series C Preferred Stock and any other Preferred Stock shall be
entitled to one vote for each share held on each matter submitted to a vote of
stockholders of the Corporation, and the Holders of Outstanding shares of
Preferred Stock and Common Stock shall vote together as a single class;
provided, however, that at any meeting of the stockholders of the Corporation
held for the election of directors, the Holders of Outstanding shares of
Preferred Stock, including the Series C Preferred Stock, shall be entitled, as
a class, to the exclusion of the Holders of all other securities and classes
of capital stock of the Corporation, to elect a number of Corporation's
directors, such that following the election of directors at the meeting of the
stockholders, the Corporation's Board of Directors shall contain two directors
elected by the Holders of the Outstanding shares of Preferred Stock as a
class. Subject to paragraph 6(b), the Holders of outstanding shares of capital
stock of the Corporation, including the Holders of Outstanding shares of
Preferred Stock, includ ing Series C Preferred Stock, voting as a single
class, shall elect the balance of the directors.

         (b) Right to Elect Majority of Board of Directors.

         During any period in which any one or more of the conditions
described below shall exist (such period being referred to herein as a "Voting
Period"), the number of directors constituting the Board of Directors shall be
automatically increased by the smallest number of additional directors that,
when added to the two directors elected exclusively by the Holders of shares
of Preferred Stock pursuant to paragraph 6(a) above, would constitute a
majority of the Board of Directors as so increased by such smallest number;
and the Holders of shares of Pre ferred Stock shall be entitled, voting
separately as one class (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), to elect such
smallest number of additional directors, together with the two directors that
such Holders are in any event entitled to elect pursuant to paragraph 6(a)
above. The Corporation and the Board of Directors shall take all necessary
action, including amending the Corporation's by-laws, to effect an increase in
the number of directors as described in the preceding sentence. A Voting
Period shall commence:

                  (i) if at any time accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally available in an
amount sufficient therefor) on the Outstanding Series C Preferred Stock equal
to at least two full years' dividends shall have become due and unpaid and
sufficient cash or specified securities shall not have been deposited with the
Paying Agent for the payment in full of such accumulated dividends; or

                  (ii) if at any time holders of any other shares of Preferred
Stock are entitled to elect a majority of the directors of the Corporation
under the 1940 Act or the Articles Supplementary creating such shares.

         Upon the termination of a Voting Period, the voting rights described
in this paragraph 6(b) shall cease, subject always, however, to the reverting
of such voting rights in the holders of Preferred Stock upon the further
occurrence of any of the events described in this paragraph 6(b).

            (c) Right to Vote with Respect to Certain Other Matters.

            So long as the Series C Preferred Stock is Outstanding, the
Corporation shall not, without the affirmative vote of the holders of a
majority of the shares of Preferred Stock Outstanding at the time, voting
separately as one class, amend, alter or repeal the provisions of the Charter,
whether by merger, consolida tion or otherwise, so as to materially adversely
affect any of the contract rights expressly set forth in the Charter of
Holders of Series C Preferred Stock or any other Preferred Stock. To the
extent permitted under the 1940 Act, in the event shares of more than one
series of Preferred Stock are Outstanding, the Corporation shall not effect
any of the actions set forth in the preceding sentence which materially
adverse ly affects the contract rights expressly set forth in the Charter of a
Holder of shares of a series of Preferred Stock differently than those of a
Holder of shares of any other series of Preferred Stock without the
affirmative vote of the Holders of at least a majority of the shares of
Preferred Stock of each series materially adversely affected and Outstanding
at such time (each such materially adversely affected series voting separately
as a class to the extent its rights are affected differently). The Corporation
shall notify each Rating Agency ten Business Days prior to any such vote
described above. Unless a higher percentage is provided for under the Charter
or applicable provisions of the Maryland General Corporation Law, the
affirmative vote of the Holders of a majority of the Outstanding shares of
Preferred Stock, including the Series C Preferred Stock, voting together as a
single class, will be required to approve any plan of reorganization adversely
affecting such shares or any action requiring a vote of security holders under
Section 13(a) of the 1940 Act. For purposes of this paragraph 6(c), the phrase
"vote of the Holders of a majority of the Outstanding shares of Preferred
Stock" shall mean, in accordance with Section 2(a)(42) of the 1940 Act, the
vote, at the annual or a special meeting of the stockholders of the
Corporation duly called (A) of 67 percent or more of the shares of Preferred
Stock present at such meeting, if the Holders of more than 50 percent of the
Outstanding shares of Preferred Stock are present or represented by proxy; or
(B) of more than 50 percent of the Outstanding shares of Preferred Stock,
whichever is less. The class vote of Holders of shares of Preferred Stock
described above will in each case be in addition to a separate vote of the
requisite percentage of shares of Common Stock and shares of Preferred Stock,
including the Series C Preferred Stock, voting together as a single class,
necessary to authorize the action in question. An increase in the number of
authorized shares of Preferred Stock pursuant to the Charter or the issuance
of additional shares of any series of Preferred Stock (including the Series C
Preferred Stock) pursuant to the Charter shall not in and of itself be
considered to adversely affect the contract rights of the Holders of Preferred
Stock. The provisions of this paragraph 6(c) are subject to the provisions of
paragraph 10.

         (d) Voting Procedures.

                  (i) As soon as practicable after the accrual of any right of
the Holders of shares of Preferred Stock, including the Series C Preferred
Stock, to elect additional directors as described in paragraph 6(b), the
Corporation shall call a special meeting of such Holders and instruct the
Auction Agent to mail a notice of such special meeting to the Holders of
Series C Preferred Stock, such meeting to be held not less than 10 nor more
than 20 days after the date of mailing of such notice. If the Corporation
fails to send such notice to the Auction Agent or if the Corporation does not
call such a special meeting, it may be called by any such Holder on like
notice. The record date for determining the Holders entitled to notice of and
to vote at such special meeting shall be the close of business on the day on
which such notice is mailed or such other day as the Board of Directors shall
determine. At any such special meeting and at each meeting held during a
Voting Period, such Holders of Preferred Stock, voting together as a class (to
the exclusion of the holders of all other securities and classes of capital
stock of the Corporation), shall be entitled to elect the number of directors
prescribed in paragraph 6(b) on a one-vote-per-share basis. At any such
meeting or adjournment thereof in the absence of a quorum, a majority of the
Holders of shares of Preferred Stock, including the Series C Preferred Stock,
present in person or by proxy shall have the power to adjourn the meeting
without notice, other than an announcement at the meeting, until a date not
more than 120 days after the original record date.

                  (ii) For purposes of determining any rights of the Holders
of the shares of Preferred Stock, including the Series C Preferred Stock, to
vote on any matter, whether such right is created by these Articles
Supplementary, by the other provisions of the Charter, by statute or
otherwise, a share of Series C Preferred Stock which is not Outstanding shall
not be counted.

                  (iii) The terms of office of all persons who are directors
of the Corporation at the time of a special meeting of Holders of Preferred
Stock, including the Series C Preferred Stock, to elect directors shall
continue, notwithstanding the election at such meeting by such Holders of the
number of directors that they are entitled to elect, and the persons so
elected by such Holders, together with the two incumbent directors elected by
the Holders of Preferred Stock, including the Series C Preferred Stock, and
the remaining incumbent directors elected by the holders of the Common Stock
and Preferred Stock, shall constitute the duly elected directors of the
Corporation.

                  (iv) Upon the expiration of a Voting Period, the terms of
office of the additional directors elected by the Holders of Preferred Stock,
including the Series C Preferred Stock, pursuant to paragraph 6(b) above shall
expire, and the remaining directors shall constitute the directors of the
Corporation and the voting rights of such Holders of Preferred Stock,
including Series C Preferred Stock, to elect additional directors pursuant to
paragraph 6(b) above shall cease, subject to the provisions of the last
sentence of paragraph 6(b). Upon the expiration of the terms of the directors
elected by the holders of Preferred Stock pursuant to paragraph 6(b) above,
the number of directors shall be automatically reduced to the number and
composition of directors on the Board immediately preceding such Voting
Period.

         (e) Exclusive Remedy.

         Unless otherwise required by law, the Holders of Series C Preferred
Stock shall not have any rights or preferences other than those specifically
set forth herein. The Holders of Series C Preferred Stock shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the Series C Preferred Stock, the
exclusive remedy of the Holders shall be the right to vote for directors
pursuant to the provisions of this paragraph 6.

         (f) Notification to Rating Agency.

         In the event a vote of Holders of Preferred Stock is required
pursuant to the provisions of Section 13(a) of the 1940 Act, as long as the
Series C Preferred Stock is rated by a Rating Agency at the request of the
Corporation, the Corporation shall, not later than ten Business Days prior to
the date on which such vote is to be taken, notify each Rating Agency that
such vote is to be taken and the nature of the action with respect to which
such vote is to be taken and, not later than ten Business Days after the date
on which such vote is taken, notify each Rating Agency of the result of such
vote.

7.  Liquidation Rights.

         (a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the Holders of
Series C Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to stockholders, after claims of
creditors but before any distribution or payment shall be made in respect of
the Common Stock or any other stock of the Corporation ranking junior to the
Series C Preferred Stock as to liquidation payments, a liquidation
distribution in the amount of $25,000.00 per share (the "Liquidation
Preference"), plus an amount equal to all unpaid dividends accumulated to and
including the date fixed for such distribution or payment (whether or not
earned or declared by the Corporation, but excluding interest there on), and
such Holders shall be entitled to no further participation in any distribution
or payment in connection with any such liquidation, dissolution or winding up.

         (b) If, upon any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the assets of
the Corporation available for distribution among the Holders of all
Outstanding shares of Series C Preferred Stock, and any other Outstanding
class or series of Preferred Stock ranking on a parity with the Series C
Preferred Stock as to payment upon liquidation, shall be insufficient to
permit the payment in full to such Holders of Series C Preferred Stock of the
Liquidation Preference plus accumulated and unpaid dividends and the amounts
due upon liquidation with respect to such other Preferred Stock, then such
available assets shall be distributed among the Holders of Series C Preferred
Stock and such other Preferred Stock ratably in proportion to the respective
preferential amounts to which they are entitled. Unless and until the
Liquidation Preference plus accumulated and unpaid dividends has been paid in
full to the Hold ers of shares of Series C Preferred Stock, no dividends or
distributions will be made to holders of shares of the Common Stock or any
other stock of the Corporation ranking junior to the Series C Preferred Stock
as to liquidation.

8.  Auction Agent.

         For so long as shares of the Series C Preferred Stock are
Outstanding, the Auction Agent, duly appointed by the Corporation to so act,
shall be in each case a commercial bank, trust company or other financial
institution independent of the Corporation and its Affiliates (which, however,
may engage or have engaged in business transactions with the Corporation or
its Affiliates) and at no time shall the Corporation or any of its Affiliates
act as the Auction Agent in connection with the Auction Procedures. If the
Auction Agent resigns or for any reason its appointment is terminated during
any period that any shares of Series C Preferred Stock are Outstanding, the
Corporation shall use its best efforts promptly thereafter to appoint another
qualified commercial bank, trust company or financial institution to act as
the Auction Agent.

9. Coverage Tests.

         (a) Determination of Compliance.

         For so long as shares of the Series C Preferred Stock are
Outstanding, the Corporation shall make the following determinations:

             (i) Asset Coverage as follows:

                 (A) As of each Valuation Date, the Corporation shall determine
whether the Asset Coverage is met as of that date.

                 (B) The Corporation shall deliver to each Rating Agency an
"Asset Coverage Certificate" which sets forth the determination of paragraph
9(a)(i)(A) above (1) as of the Date of Original Issue and, thereafter, (2) as
of (x) the last Business Day of each March, June, September and December and
(y) a Business Day on or before any Series C Asset Coverage Cure Date
following a failure to meet Asset Coverage. Such Asset Coverage Certificate
shall be delivered in the case of clause (1) on the Date of Original Issue and
in the case of clause (2) on or before the seventh Business Day after the last
Business Day of such March, June, September and December, as the case may be,
or the relevant Cure Date.

            (ii) Basic Maintenance Amount as follows:

                 (A) For so long as the Series C Preferred Stock is rated by
Moody's and/or Fitch at the Corporation's request, the Corporation shall
maintain, on each Valuation Date, Eligible Assets having an Adjusted Value at
least equal to the Basic Maintenance Amount, as of such Valuation Date. Upon
any failure to main tain Eligible Assets having an Adjusted Value at least
equal to the Basic Maintenance Amount, the Corporation shall use all
commercially reasonable efforts to re-attain Eligible Assets having an
Adjusted Value at least equal to the Basic Maintenance Amount on or prior to
the Basic Maintenance Amount Cure Date, by altering the composition of its
portfolio or otherwise.

                 (B) On or before 5:00 P.M., New York City time, on the fifth
Business Day after a Valuation Date on which the Corporation fails to satisfy
the Basic Maintenance Amount, and on the fifth Business Day after the Basic
Maintenance Amount Cure Date with respect to such Valuation Date, the
Corporation shall complete and deliver to each Rating Agency a Basic
Maintenance Report as of the date of such failure or such Basic Maintenance
Amount Cure Date, as the case may be, which will be deemed to have been
delivered to such Rating Agency, as the case may be, if such Rating Agency
receives a copy or facsimile or other electronic transcription or transmission
thereof and on the same day the Corporation mails or sends to such Rating
Agency for delivery on the next Business Day the full Basic Maintenance
Report. The Corporation shall also deliver a Basic Maintenance Report to each
Rating Agency as of any Annual Valuation Date, in each case on or before the
fifth Business Day after such day. A failure by the Corporation to deliver a
Basic Maintenance Report pursuant to the preceding sentence shall be deemed to
be delivery of a Basic Maintenance Report indicating the Discounted Value for
all assets of the Corporation is less than the Basic Maintenance Amount, as of
the relevant Valuation Date.

                 (C) Within ten Business Days after the date of delivery of a
Basic Maintenance Report in accordance with paragraph 9(a)(ii)(B) relating to
any Annual Valuation Date, the Corporation shall cause the Independent
Accountant to send an Accountant's Confirmation to each Rating Agency with
respect to such Basic Maintenance Report.

                 (D) Within ten Business Days after the date of delivery of a
Basic Maintenance Report in accordance with paragraph 9(a)(ii)(B) relating to
each, if any, Valuation Date on which the Corporation failed to satisfy the
Basic Maintenance Amount and the Basic Maintenance Amount Cure Date with
respect to such failure to satisfy the Basic Maintenance Amount, the
Corporation shall cause the Independent Accountant to provide to each Rating
Agency an Accountant's Confirmation as to such Basic Maintenance Report.

                 (E) If any Accountant's Confirmation delivered pursuant to
paragraph (C) or (D) of this paragraph 9(a)(ii) does not agree with the
Corporation's calculation of the Basic Maintenance Report for a particular
Valuation Date for which such Accountant's Confirmation was required to be
delivered, or shows that a lower aggregate Discounted Value for the aggregate
Eligible Assets in respect of any Rating Agency than was determined by the
Corporation, the calculation or determination made by such Independent
Accountant shall be final and conclusive and shall be binding on the
Corporation, and the Corporation shall accordingly amend and deliver the Basic
Maintenance Report to the relevant Rating Agency promptly following receipt by
the Corporation of such Accountant's Confirmation.

                 (F) On or before 5:00 p.m., New York City time, on the fifth
Business Day after the Date of Original Issue of Series C Preferred Stock, the
Corporation shall complete and deliver to each Rating Agency a Basic
Maintenance Report as of the close of business on such Date of Original Issue.

                 (G) On or before 5:00 p.m., New York City time, on the fifth
Business Day after either (1) the Corporation shall have redeemed Series C
Preferred Stock or (2) the ratio of the Discounted Value of Eligible Assets in
respect of any Rating Agency to the Basic Maintenance Amount is less than or
equal to 110%, the Corporation shall complete and deliver to, in the case of
clause (1), each Rating Agency, or, in the case of clause (2), any relevant
Rating Agency, a Basic Maintenance Report as of the date of either such event.

         (b) Failure to Meet Asset Coverage Requirements.

         If the Corporation fails to have Asset Coverage as provided in
paragraph 9(a)(i) or to have Eligible Assets having an Adjusted Value at least
equal to the Basic Maintenance Amount as provided in paragraph 9(a)(ii)(A) and
such failure is not cured by the applicable Cure Date, Preferred Stock, which
at the Corporation's determination may include any proportion of Series C
Preferred Stock, will be subject to mandatory redemption as set forth in
paragraph 3.

         (c) Status of Series C Preferred Stock Called for Redemption.

         For purposes of determining whether the requirements of paragraphs
9(a)(i) and 9(a)(ii)(A) hereof are satisfied, (i) no share of the Series C
Preferred Stock or other Preferred Stock shall be deemed to be Outstanding for
purposes of any computation if, prior to or concurrently with such
determination, sufficient Deposit Assets to pay the full Redemption Price for
such share shall have been deposited in trust with the Paying Agent (or
applicable dividend-disbursing agent) and the requisite Notice of Redemption
shall have been given, and (ii) such Deposit Assets deposited with the Paying
Agent (or dividend-disbursing agent) shall not be included.

10. Certain Other Restrictions.

         (a) For so long as the shares of Series C Preferred are rated by a
Rating Agency at the Corporation's request, the Corporation will not, and will
cause the Adviser not to, (i) knowingly and willfully purchase or sell any
asset for the specific purpose of causing, and with the actual knowledge that
the effect of such purchase or sale will be to cause, the Corporation to have
Eligible Assets having an Adjusted Value as of the date of such purchase or
sale to be less than the Basic Maintenance Amount as of such date, (ii) in the
event that, as of the immediately preceding Valuation Date, the Adjusted Value
of the Corporation's Eligible Assets exceeded the Basic Maintenance Amount by
5% or less, alter the composition of the Corporation's assets in a manner
reasonably expected to reduce the Adjusted Value of the Corporation's Eligible
Assets, unless the Corporation shall have confirmed that, after giving effect
to such alteration, the Adjusted Value of the Corporation's Eligible Assets
exceeded the Basic Maintenance Amount or (iii) declare or pay any dividend or
other distribution on any Common Stock or repurchase any Common Stock, unless
the Corporation shall have confirmed that, after giving effect to such
declaration, other distribution or repurchase, the Corporation continued to
satisfy the requirements of paragraph 9(a)(ii).

         (b) For so long as the shares of Series C Preferred Stock are rated
by any Rating Agency at the Corporation's request, unless the Corporation
shall have received written confirmation from each such Rating Agency, the
Corporation may engage in the lending of its portfolio securities only in an
amount of up to 5% of the Corporation's total assets, provided that the
Corporation receives cash collateral for such loaned securities that is
maintained at all times in an amount equal to at least 100% of the then
current market value of the loaned securities and, if invested, is invested
only in Short-Term Money Market Instruments or in money market mutual funds
meeting the requirements of Rule 2a-7 under the 1940 Act that maintain a
constant $1.00 per share net asset value and treat the loaned securities
rather than the collateral as the assets of the Corporation for purposes of
determining compliance with paragraph 9.

         (c) For so long as the shares of Series C Preferred Stock are rated
by Rating Agency at the Corporation's request, the Corporation shall not
consolidate with, merge into, sell or otherwise transfer all or substantially
all of its assets to another Person or adopt a plan of liquidation of the
Corporation, in each case without providing prior written notification to each
Rating Agency.

11.  Limitation on Incurrence of Additional Indebtedness, Certain Transactions
and Issuance of Additional Preferred Stock

         (a) So long as the shares of Series C Preferred Stock are Out
standing, the Corporation may issue and sell one or more series of a class of
senior securities of the Corporation representing indebtedness under Section
18 of the 1940 Act and/or otherwise create or incur indebtedness, provided
that immediately after giving effect to the incurrence of such indebtedness
and to its receipt and application of the proceeds thereof, the Corporation
shall have an "asset coverage" for all senior securities representing
indebtedness, as defined in Section 18(h) of the 1940 Act, of at least 300% of
the amount of all indebtedness of the Corporation then Outstanding and no such
additional indebtedness shall have any preference or priority over any other
indebtedness of the Corporation upon the distribution of the assets of the
Corporation or in respect of the payment of interest. Any possible liability
resulting from lending and/or borrowing portfolio securities, entering into
reverse repurchase agreements, entering into futures contracts and writing
options, to the extent such transactions are made in accordance with the
investment restrictions of the Corporation then in effect, shall not be
considered to be indebtedness limited by this paragraph 11(a).

         (b) So long as the shares Series C Preferred Stock are Out standing,
the Corporation may issue and sell shares of one or more other series of
Preferred Stock constituting a series of a class of senior securities of the
Corporation representing stock under Section 18 of the 1940 Act in addition to
the shares of Series C Preferred Stock and other Preferred Stock then
Outstanding, provided that (i) the Corporation shall, immediately after giving
effect to the issuance of such addi tional shares of Preferred Stock and to
its receipt and application of the proceeds thereof including, without
limitation, to the Redemption of Preferred Stock for which a Redemption Notice
has been mailed prior to such issuance, have an "asset cover age" for all
senior securities which are stock, as defined in Section 18(h) of the 1940
Act, of at least 200% of the shares of Series C Preferred Stock and all other
Preferred Stock of the Corporation then Outstanding, and (ii) no such
additional Preferred Stock (including any additional Series C Preferred Stock)
shall have any preference or priority over any other Preferred Stock of the
Corporation upon the distribution of the assets of the Corporation or in
respect of the payment of dividends.

12.      Termination.

         In the event that no shares of Series C Preferred Stock are
Outstanding, all rights and preferences of such shares established and
designated hereunder shall cease and terminate, and all obligations of the
Corporation under these Articles Supplementary shall terminate.

13.  Definitions.

         Unless the context or use indicates another or different meaning or
intent, each of the following terms when used in these Articles Supplementary
shall have the meaning ascribed to it below, whether such term is used in the
singular or plural and regardless of tense:

         "'AA' Financial Composite Commercial Paper Rate" on any date means

                           (i) the interest equivalent of the 7-day rate, in
                  the case of a Dividend Period of seven days or shorter; for
                  Dividend Periods greater than 7 days but fewer than or equal
                  to 31 days, the 30-day rate; for Dividend Periods greater
                  than 31 days but fewer than or equal to 61 days, the 60-day
                  rate; for Dividend Periods greater than 61 days but fewer
                  than or equal to 91 days, the 90 day rate; for Dividend
                  Periods greater than 91 days but fewer than or equal to 270
                  days, the rate described in (ii) below; for Dividend Periods
                  greater than 270 days, the Treasury Index Rate; on
                  commercial paper on behalf of issuers whose corporate bonds
                  are rated "AA" by S&P, or the equivalent of such rating by
                  another nationally recognized rating agency, as announced by
                  the Federal Reserve Bank of New York for the close of
                  business on the Business Day immediately preceding such
                  date; or (ii) if the Federal Reserve Bank of New York does
                  not make available such a rate, then the arithmetic average
                  of the interest equivalent of such rates on commercial paper
                  placed on behalf of such issuers, as quoted on a discount
                  basis or otherwise by the Commercial Paper Dealers to the
                  Auction Agent for the close of business on the Business Day
                  immediately preceding such date (rounded to the next highest
                  .001 of 1%). If any Commercial Paper Dealer does not quote a
                  rate required to determine the "AA" Financial Composite
                  Commercial Paper Rate, such rate shall be determined on the
                  basis of the quotations (or quotation) furnished by the
                  remaining Commercial Paper Dealers (or Dealer), if any, or,
                  if there are no such Commercial Paper Dealers, by the
                  Auction Agent pursuant to instructions from the Corporation.
                  For purposes of this definition, (A) "Commercial Paper
                  Dealers" shall mean (1) Salomon Smith Barney Inc., Lehman
                  Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated and Goldman Sachs & Co.; (2) in lieu of any
                  thereof, its respective Affiliate or successor; and (3) in
                  the event that any of the foregoing shall cease to quote
                  rates for commercial paper of issuers of the sort described
                  above, in substitution therefor, a nationally recognized
                  dealer in commercial paper of such issuers then making such
                  quotations selected by the Corporation, and (B) "interest
                  equivalent" of a rate stated on a discount basis for
                  commercial paper of a given number of days' maturity shall
                  mean a number equal to the quotient (rounded upward to the
                  next higher one-thousandth of 1%) of (1) such rate expressed
                  as a decimal, divided by (2) the difference between (x) 1.00
                  and (y) a fraction, the numerator of which shall be the
                  product of such rate expressed as a decimal, multiplied by
                  the number of days in which such commercial paper shall
                  mature and the denominator of which shall be 360.

         "Accountant's Confirmation" means a letter from an Independent
Accountant delivered to each Rating Agency with respect to certain Basic
Maintenance Reports substantially to the effect that:

         (a) the Independent Accountant has read the Basic Maintenance Report
or Reports prepared by the Administrator during the referenced calendar year
that are referred to in such letter;

         (b) with respect to the issue size compliance, issuer diversification
and industry diversification calculations, such calculations and the resulting
Market Value of the relevant Eligible Assets included in the Reports and the
Adjusted Value of the such Eligible Assets included in the Reports are
numerically correct;

         (c) with respect to the excess or deficiency of the Adjusted Value of
the relevant Eligible Assets included in the Reports when compared to the
Basic Maintenance Amount calculated for such Rating Agency the results of the
calculation set forth in the Reports have been recalculated and are
numerically correct;

         (d) with respect to the Rating Agency ratings on corporate evidences
of indebtedness, convertible corporate evidences of indebtedness and preferred
stock listed in the Reports, that information has been traced and agrees with
the information provided directly or indirectly by the respective Rating
Agencies (in the event such information does not agree or such information is
not listed in the accounting records of the Corporation, the Independent
Accountants will inquire of the Rating Agencies what such information is and
provide a listing in their letter of such differences, if any);

         (e) with respect to issuer name and coupon or dividend rate listed in
the Reports, that information has been traced and agrees with information
listed in the accounting records of the Corporation;

         (f) with respect to issue size listed in the Reports, that
information has been traced and agrees with information provided by a Pricing
Service or such other services as the relevant Rating Agency may authorize
from time to time;

         (g) with respect to the prices (or alternative permissible factors
used in calculating the Market Value as provided by these Articles
Supplementary) provided by the Administrator of the Corporation's assets for
purposes of valuing securities in the portfolio, the Independent Accountant
has traced the price used in the Reports to the price provided by such
Administrator (in accordance with the procedures provided in these Articles
Supplementary) and verified that such information agrees (in the event such
information does not agree, the Independent Accountants will provide a listing
in their letter of such differences); and

         (h) with respect to the description of each security included in the
Reports, the description of the relevant Eligible Assets has been compared to
the definition of such Rating Agency's Eligible Assets contained in these
Articles Supplementary, and the description as appearing in the Reports agrees
with the definition of such Rating Agency's Eligible Assets as described in
these Articles Supplementary.

         Each such letter may state that: (i) such Independent Accountant has
made no independent verification of the accuracy of the description of the
investment securities listed in the Reports or the Market Value of those
securities nor has it performed any procedures other than those specifically
outlined above for the purposes of issuing such letter; (ii) unless otherwise
stated in the letter, the procedures specified therein were limited to a
comparison of numbers or a verification of specified computations applicable
to numbers appearing in the Reports and the schedule(s) thereto; (iii) the
foregoing procedures do not constitute an examination in accordance with
generally accepted auditing standards and the Reports contained in the letter
do not extend to any of the Corporation's financial statements taken as a
whole; (iv) such Independent Accountant does not express an opinion as to
whether such procedures would enable such Independent Accountant to determine
that the methods followed in the preparation of the Reports would correctly
determine the Market Value or Discounted Value of the investment portfolio;
and (v) accordingly, such Independent Accountant expresses no opinion as to
the information set forth in the Reports or in the schedule(s) thereto and
makes no representation as to the sufficiency of the procedures performed for
the purposes of these Articles Supplementary; and such other statements as are
acceptable to the Rating Agencies.

         Such letter shall also state that the Independent Accountant is an
"independent accountant" with respect to the Corporation within the meaning of
the 1933 Act and the related published rules and regulations thereunder.

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

         (a) cash shall be valued at 100% of the face value thereof; and

         (b) all other Eligible Assets shall be valued at the applicable
Discounted Value thereof; and

         (c) each asset that is not an Eligible Asset shall be valued at zero.

         "Administrator" means the other party to the Administration Agreement
with the Corporation which shall initially be Gabelli Funds, LLC.

         "ADRs" means U.S. dollar-denominated American Depository Receipts.

         "Adviser" means Gabelli Funds, LLC, a New York limited liability
company, or such other Person that is then serving as the investment adviser
of the Corporation.

         "Affiliate" means, with respect to the Auction Agent, any person
known to the Auction Agent to be controlled by, in control of or under common
control with the Corporation; provided, however, that no Broker-Dealer
controlled by, in control of or under common control with the Corporation
shall be deemed to be an Affiliate nor shall any corporation or any Person
controlled by, in control of or under common control with such corporation,
one of the directors or executive officers of which is a director of the
Corporation be deemed to be an Affiliate solely because such director or
executive officer is also a director of the Corporation.

         "All Hold Rate" means 80% of the "AA" Financial Composite Commercial
Paper Rate.

         "Annual Valuation Date" means the Valuation Date each calendar year
so designated by the Corporation, commencing in the calendar year 2003.

         "Applicable Rate" means, with respect to the Series C Preferred
Stock, for each Dividend Period (i) if Sufficient Clearing Bids exist for the
Auction in respect thereof, the Winning Bid Rate, (ii) if Sufficient Clearing
Orders do not exist for the Auction in respect thereof, or an Auction does not
take place with respect to such Dividend Period because of the commencement of
a Default Period, the Maximum Rate and (iii) if all shares of Series C
Preferred Stock are the subject of Submitted Hold Orders for the Auction in
respect thereof, the All Hold Rate.

         "Asset Coverage" means asset coverage, as determined in accordance
with Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all shares of Outstanding shares of Series C Preferred Stock (or such other
asset coverage as may in the future be specified in or under the 1940 Act as
the minimum asset coverage for senior securities which are stock of a
closed-end investment company as a condition of declaring dividends on its
common stock), determined on the basis of values calculated as of a time
within 48 hours (not including Saturdays, Sundays or holidays) next preceding
the time of such determination.

         "Asset Coverage Certificate" means the certificate required to be
delivered by the Corporation pursuant to paragraph 9(a)(i)(B) of Article I of
these Articles Supplementary.

         "Auction" means each periodic operation of the Auction Procedures.

         "Auction Agent" means The Bank of New York unless and until another
commercial bank, trust company, or other financial institution appointed by a
resolution of the Board of Directors enters into an agreement with the
Corporation to follow the Auction Procedures for the purpose of determining
the Applicable Rate.

         "Auction Date" means the last day of the initial Dividend Period and
each seventh day after the immediately preceding Auction Date; provided,
however, that if any such seventh day is not a Business Day, such Auction Date
shall be the first preceding day that is a Business Day and the next Auction
Date, if for a Standard Dividend Period, shall (subject to the same
advancement procedure) be the seventh day after the date that the preceding
Auction Date would have been if not for the advancement procedure; provided
further, however, that the Auction Date for the Auction at the conclusion of
any Special Dividend Period shall be the last Business Day in such Special
Dividend Period and that no more than one Auction shall be held during any
Dividend Period; provided further, however, that the Auction Date following a
Default Period shall be the last Business Day in the Standard Dividend Period
that commenced during such Default Period. Notwithstanding the foregoing, in
the event an auction is not held because an unforeseen event or unforeseen
events cause a day that otherwise would have been an Auction Date not to be a
Business Day, then the length of the then current dividend period will be
extended by seven days (or a multiple thereof if necessary because of such
unforeseen event or events).

         "Auction Procedures" means the procedures for conducting Auctions as
set forth in Article II of these Articles Supplementary.

         "Basic Maintenance Amount" means, with respect to the shares of
Series C Preferred Stock, as of any Valuation Date, the dollar amount equal to
(a) the sum of (i) the product of the number of shares of each class or series
of Preferred Stock Out standing on such Valuation Date multiplied, in the case
of each such series or class, by the per share Liquidation Preference
applicable to each such series or class; (ii) to the extent not included in
(i) the aggregate amount of cash dividends (whether or not earned or declared)
that will have accumulated for each Outstanding share of Preferred Stock from
the most recent applicable dividend payment date to which dividends have been
paid or duly provided for (or, in the event the Basic Maintenance Amount is
calculated on a date prior to the initial Dividend Payment Date with respect
to a class or series of the Preferred Stock, then from the Date of Original
Issue of such shares) through the Valuation Date plus all dividends to
accumulate on the shares of Preferred Stock then Outstanding during the 70
days fol lowing such Valuation Date or, if less, during the number of days
following such Valuation Date that shares of Preferred Stock called for
redemption are scheduled to remain Outstanding at the applicable rate or
default rate then in effect with respect to such shares; (iii) the
Corporation's other liabilities due and payable as of such Valuation Date
(except that dividends and other distributions payable by the Corporation on
Common Stock shall not be included as a liability) and such liabilities
projected to become due and payable by the Corporation during the 90 days
following such Valuation Date (excluding liabilities for investments to be
purchased and for dividends and other distributions not declared as of such
Valuation Date); and (iv) any current liabilities of the Corporation as of
such Valuation Date to the extent not reflected in (or specifically excluded
by) any of (a)(i) through (a)(iii) (including, without limitation, and
immediately upon determination, any amounts due and payable by the Corporation
pursuant to reverse repurchase agreements and any payables for assets
purchased as of such Valuation Date) less (b) (i) the Adjusted Value of any of
the Corporation's assets or (ii) the face value of any of the Corporation's
assets if, in the case of both (b)(i) and (b)(ii), such assets are either cash
or evidences of indebtedness which mature prior to or on the date of
redemption or repurchase of shares of Preferred Stock or payment of another
liability and are either U.S. Government Obligations or evidences of
indebtedness which have a rating assigned by Moody's of at least Aaa, P-1,
VMIG-1 or MIG-1 or by S&P of at least AAA, SP-1+ or A-1+, and are irrevocably
held by the Corporation's custodian bank in a March 12, 2003 ated account or
deposited by the Corporation with the dividend-disbursing agent or Paying
Agent, as the case may be, for the payment of the amounts needed to redeem or
repurchase Preferred Stock subject to redemption or repurchase or any of
(a)(ii) through (a)(iv); and provided that in the event the Corporation has
repurchased Preferred Stock and irrevocably segregated or deposited assets as
described above with its custodian bank, the dividend-disbursing agent or
Paying Agent for the payment of the repurchase price the Corporation may
deduct 100% of the Liquidation Preference of such Preferred Stock to be
repurchased from (a) above. Basic Maintenance Amount shall, for the purposes
of these Articles Supplementary, have a correlative meaning with respect to
any other class or series of Preferred Stock.

         "Basic Maintenance Amount Cure Date" means, with respect to the
shares of Series C Preferred Stock, 10 Business Days following a Valuation
Date, such date being the last day upon which the Corporation's failure to
comply with paragraph 9(a)(ii)(A) of Article I of these Articles Supplementary
could be cured, and shall, for the purposes of these Articles Supplementary,
have a correlative meaning with respect to any other class or series of
Preferred Stock.

         "Basic Maintenance Test" means, with respect to the shares of Series C
Preferred Stock, a test which is met if the lower of the aggregate
Discounted Values of the Moody's Eligible Assets or the Fitch Eligible Assets
if both Moody's and Fitch are then rating the shares of Series C Preferred
Stock at the request of the Corporation, or the Eligible Assets of whichever
of Moody's or Fitch is then doing so if only one of Moody's or Fitch is then
rating the Series C Preferred Stock at the request of the Corporation, meets
or exceeds the Basic Maintenance Amount.

         "Basic Maintenance Report" or "Report" means, with respect to the
shares of Series C Preferred Stock, a report prepared by the Administrator
which sets forth, as of the related Valuation Date, Moody's Eligible Assets
and Fitch Eligible Assets sufficient to meet or exceed the Basic Maintenance
Amount, the Market Value and Discounted Value thereof (seriatim and in the
aggregate), and the Basic Maintenance Amount, and shall, for the purposes of
these Articles Supplementary, have a correlative meaning with respect to any
other class or series of Preferred Stock.

         "Beneficial Owner," with respect to the shares of Series C Preferred
Stock, means a customer of a Broker-Dealer who is listed on the records of
that Broker- Dealer (or, if applicable, the Auction Agent) as a holder of
Series C Preferred Stock.

         "Bid" has the meaning set forth in paragraph 2(a) of Article II of
these Articles Supplementary.

         "Bidder" has the meaning set forth in paragraph 2(a) of Article II of
these Articles Supplementary, provided however that neither the Corporation
nor any Affiliate shall be permitted to be Bidder in an Auction.

         "Board of Directors" or "Board" means the Board of Directors of the
Corporation or any duly authorized committee thereof as permitted by
applicable law.

         "Broker-Dealer" means any broker-dealer or broker-dealers, or other
entity permitted by law to perform the functions required of a Broker-Dealer
by the Auction Procedures, that has been selected by the Corporation and has
entered into a Broker- Dealer Agreement that remains effective.

         "Broker-Dealer Agreement" means an agreement between the Auction
Agent and a Broker-Dealer, pursuant to which such Broker-Dealer agrees to
follow the Auction Procedures.

         "Business Day" means a day on which the New York Stock Exchange is
open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York, New York are authorized or obligated by law to
close.

         "Charter" means the Articles of Amendment and Restatement of the
Corporation, as amended or supplemented (including these Articles
Supplementary), as filed with the State Department of Assessments and Taxation
of the State of Maryland.

         "Commission" means the Securities and Exchange Commission.

         "Common Stock" means the shares of the Corporation's common stock,
par value $.001 per share.

         "Corporation" means The Gabelli Convertible and Income Securities Fund
Inc., a Maryland corporation.

         "Cure Date" has the meaning set forth in paragraph 3(a)(ii) of
Article I of these Articles Supplementary.

         "Date of Original Issue" means [__] and, for the purposes of these
Articles Supplementary, shall have a correlative meaning with respect to any
other class or series of Preferred Stock.

         "Default" has the meaning set forth in paragraph 2(c)(ii) of Article
I of these Articles Supplementary.

         "Default Period" means a Dividend Default or a Redemption Default.

         "Default Rate" has the meaning set forth in paragraph 2(c)(iii) of
Article I of these Articles Supplementary.

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

         "Discount Factor" means (a) so long as Moody's is rating the shares
of the shares of the Series C Preferred Stock at the Corporation's request,
the Moody's Discount Factor, (b) so long as Fitch is rating the Series C
Preferred Stock at the Corporation's request, the Fitch Discount Factor,
and/or (c) any applicable discount factor established by any Other Rating
Agency, whichever is applicable.

         "Discounted Value" means, as applicable, (a) the quotient of the
Market Value of an Eligible Asset divided by the applicable Discount Factor or
(b) such other formula for determining the discounted value of an Eligible
Asset as may be established by an applicable Rating Agency, provided, in
either case that with respect to an Eligible Asset that is currently callable,
Discounted Value will be equal to the applicable quotient or product as
calculated above or the call price, whichever is lower, and that with respect
to an Eligible Asset that is prepayable, Discounted Value will be equal to the
applicable quotient or product as calculated above or the par value, whichever
is lower.

         "Dividend Default" has the meaning set forth in paragraph 2(c)(ii) of
Article I of these Articles Supplementary.

         "Dividend Payment Date" means with respect to the Series C Auction
Rate Preferred, any date on which dividends declared by the Board of Directors
thereon are payable pursuant to the provisions of paragraph 2(b) of Article I
of these Articles Supplementary and shall for the purposes of these Articles
Supplementary have a correlative meaning with respect to any other class or
series of Preferred Stock.

         "Dividend Period" means, with respect to Series C Preferred Stock,
the initial period determined in the manner set forth under "Designation"
above, and thereafter, the period commencing on the Business Day following
each Auction Date and ending on the next Auction Date or, if such next Auction
Date is not immediately followed by a Business Day, on the latest day prior to
the next succeeding Business Day, and shall, for the purposes of these
Articles Supplementary, have a correlative meaning with respect to any other
class or series of Preferred Stock.

         "Eligible Assets" means Moody's Eligible Assets (if Moody's is then
rating the Series C Preferred Stock at the request of the Corporation), Fitch
Eligible Assets (if Fitch is then rating the Series C Preferred Stock at the
request of the Corporation), and/or Other Rating Agency Eligible Assets,
whichever is applicable.

         "Fitch" means Fitch Ratings.

         "Fitch Discount Factor" means, for the purposes of determining the
Discounted Value of any Fitch Eligible Asset, the percentage determined as
follows. The Fitch Discount Factor for any Fitch Eligible Asset other than the
securities set forth below will be the percentage provided in writing by
Fitch.

                  (a) Corporate debt securities. The percentage determined by
reference to the rating of a corporate debt security in accordance with the
table set forth below.

<TABLE>
<CAPTION>
                                                                                                                      NOT
                                                                                                                     RATED
                                                                                                                      OR
           TERM TO MATURITY OF CORPORATE                                                                             BELOW
             DEBT SECURITY UNRATED (1)                 AAA          AA          A           BBB          BB           BB
             -------------------------                ------       ------     ------       ------       ------       ------
<C>                                                   <C>          <C>        <C>          <C>          <C>          <C>
3 years or less (but longer than 1 year)...........   106.38%      108.11%    109.89%      111.73%      129.87%      151.52%
5 years or less (but longer than 3 years)...........  111.11       112.99     114.94       116.96       134.24       151.52
7 years or less (but longer than 5 years)...........  113.64       115.61     117.65       119.76       135.66       151.52
10 years or less (but longer than 7 years)..........  115.61       117.65     119.76       121.95       136.74       151.52
15 years or less (but longer than 10 years).........  119.76       121.95     124.22       126.58       139.05       151.52
More than 15 years..................................  124.22       126.58     129.03       131.58       144.55       151.52

</TABLE>

(1)      If a security is not rated by Fitch but is rated by two other Rating
         Agencies, then the lower of the ratings on the security from the two
         other Rating Agencies will be used to determine the Fitch Discount
         Factor (e.g., where the S&P rating is A- and the Moody's rating is
         Baa1, a Fitch rating of BBB+ will be used). If a security is not
         rated by Fitch but is rated by only one other Rating Agency, then the
         rating on the security from the other Rating Agency will be used to
         determine the Fitch Discount Factor (e.g., where the only rating on a
         security is an S&P rating of AAA, a Fitch rating of AAA will be used,
         and where the only rating on a security is a Moody's rating of Ba3, a
         Fitch rating of BB- will be used). If a security is not rated by any
         Rating Agency, the Corporation will use the percentage set forth
         under "Unrated" in this table.

         (b) Convertible debt securities. The Fitch Discount Factor applied to
convertible debt securities is (i) 200% for investment grade convertibles and
(ii) 222% for below investment grade convertibles so long as such convertible
debt securities have neither (1) conversion premium greater than 100% nor (2)
have a yield to maturity or yield to worst of >15.00% above the relevant
Treasury curve.

         The Fitch Discount Factor applied to convertible debt securities
which have conversion premiums of greater than 100% is (i) 152% for investment
grade convertibles and (ii) 179% for below investment grade convertibles so
long as such convertible debt securities do not have a yield to maturity or
yield to worst of > 15.00% above the relevant Treasury curve. The Fitch
Discount Factor applied to convertible debt securities which have a yield to
maturity or yield to worst of > 15.00% above the relevant Treasury curve is
370%.

         If a security is not rated by Fitch but is rated by two other Rating
Agencies, then the lower of the ratings on the security from the two other
Rating Agencies will be used to determine the Fitch Discount Factor (e.g.,
where the S&P rating is A- and the Moody's rating is Baa1, a Fitch rating of
BBB+ will be used). If a security is not rated by Fitch but is rated by only
one other Rating Agency, then the rating on the security from the other Rating
Agency will be used to determine the Fitch Discount Factor (e.g., where the
only rating on a security is an S&P rating of AAA, a Fitch rating of AAA will
be used, and where the only rating on a security is a Moody's rating of Ba3, a
Fitch rating of BB- will be used). If a security is not rated by any Rating
Agency, the Corporation will treat the security as if it were below investment
grade.

         (c) Preferred securities: The percentage determined by reference to
the rating of a preferred security in accordance with the table set forth
below.

<TABLE>
<CAPTION>
                                                                                                                          NOT
                                                                                                                         RATED
                                                                                                                          OR
                                                                                                                         BELOW
  NOT RATED OR BELOW PREFERRED SECURITY(1)               AAA           AA          A             BBB         BB           BB
  ----------------------------------------              -----        -------     -------        ------      -------     -------
<S>                                                    <C>            <C>        <C>            <C>         <C>         <C>
Taxable Preferred....................................  130.58%        133.19%    135.91%        138.73%     153.23%     161.08%
Dividend-Received Deduction (DRD) Preferred..........  163.40%        163.40%    163.40%        163.40%     201.21%     201.21%

</TABLE>

(1)      If a security is not rated by Fitch but is rated by two other Rating
         Agencies, then the lower of the ratings on the security from the two
         other Rating Agencies will be used to determine the Fitch Discount
         Factor (e.g., where the S&P rating is A- and the Moody's rating is
         Baa1, a Fitch rating of BBB+ will be used). If a security is not
         rated by Fitch but is rated by only one other Rating Agency, then the
         rating on the security from the other Rating Agency will be used to
         determine the Fitch Discount Factor (e.g., where the only rating on a
         security is an S&P rating of AAA, a Fitch rating of AAA will be used,
         and where the only rating on a security is a Moody's rating of Ba3, a
         Fitch rating of BB- will be used). If a security is not rated by any
         Rating Agency, the Corporation will use the percentage set forth
         under "Unrated" in this table.

         (d) U.S. Government Obligations and U.S. Treasury Strips:


                  DISCOUNT TIME REMAINING TO MATURITY FACTOR

1 year or less........................................................... 100%
2 years or less (but longer than 1 year)................................. 103%
3 years or less (but longer than 2 years)................................ 105%
4 years or less (but longer than 3 years)................................ 107%
5 years or less (but longer than 4 years)................................ 109%
7 years or less (but longer than 5 years)................................ 112%
10 years or less (but longer than 7 years)............................... 114%
15 years or less (but longer than 10 years).............................. 122%
20 years or less (but longer than 15 years).............................. 130%
25 years or less (but longer than 20 years).............................. 146%
Greater than 30 years.................................................... 154%

         (e) Short-Term Investments and Cash: The Fitch Discount Factor
applied to short-term portfolio securities, including without limitation Debt
Securities, Short-Term Money Market Instruments and municipal debt
obligations, will be (i) 100%, so long as such portfolio securities mature or
have a demand feature at par exercisable within the Fitch Exposure Period;
(ii) 115%, so long as such portfolio securities mature or have a demand
feature at par not exercisable within the Fitch Exposure Period; and (iii)
125%, so long as such portfolio securities neither mature nor have a demand
feature at par exercisable within the Fitch Exposure Period. A Fitch Discount
Factor of 100% will be applied to cash.

         (f) Rule 144A Securities: The Fitch Discount Factor applied to Rule
144A Securities will be 110% of the Fitch Discount Factor which would apply
were the securities registered under the 1933 Act.

         (g) Foreign Bonds: The Fitch Discount Factor (i) for a Foreign Bond
the principal of which (if not denominated in U.S. dollars) is subject to a
currency hedging transaction will be the Fitch Discount Factor that would
otherwise apply to such Foreign Bonds in accordance with this definition and
(ii) for (1) a Foreign Bond the principal of which (if not denominated in U.S.
dollars) is not subject to a currency hedging transaction and (2) a bond
issued in a currency other than U.S. dollars by a corporation, limited
liability company or limited partnership domiciled in, or the government or
any agency, instrumentality or political subdivision of, a nation other than
an Approved Foreign Nation, will be 370%.

       "Fitch Eligible Assets" means:

               (a) cash (including interest and dividends due on assets rated
(i) BBB or higher by Fitch or the equivalent by another Rating Agency if the
payment date is within five Business Days of the Valuation Date, (ii) A or
higher by Fitch or the equivalent by another Rating Agency if the payment date
is within thirty days of the Valuation Date, and (iii) A+ or higher by Fitch
or the equivalent by another Rating Agency if the payment date is within the
Fitch Exposure Period) and receivables for Fitch Eligible Assets sold if the
receivable is due within five Business Days of the Valuation Date, and if the
trades which generated such receivables are settled within five Business Days;

               (b) Short-Term Money Market Instruments so long as (i) such
securities are rated at least F1+ by Fitch or the equivalent by another Rating
Agency, (ii) in the case of demand deposits, time deposits and overnight
funds, the supporting entity is rated at least A by Fitch or the equivalent by
another Rating Agency, or (iii) in all other cases, the supporting entity (1)
is rated at least A by Fitch or the equivalent by another Rating Agency and
the security matures within one month, (2) is rated at least A by Fitch or the
equivalent by another Rating Agency and the security matures within three
months or (3) is rated at least AA by Fitch or the equivalent by another
Rating Agency and the security matures within six months;

               (c) U.S. Government Obligations and U.S. Treasury Strips;

               (d) debt securities if such securities have been registered
under the 1933 Act or are restricted as to resale under federal securities
laws but are eligible for resale pursuant to Rule 144A under the 1933 Act as
determined by the Corporation's investment manager or portfolio manager acting
pursuant to procedures approved by the Board of Directors of the Corporation;
and such securities are issued by (i) a U.S. corporation, limited liability
company or limited partnership, (ii) a corporation, limited liability company
or limited partnership domiciled in Argentina, Australia, Brazil, Chile,
France, Germany, Italy, Japan, Korea, Mexico, Spain or the United Kingdom (the
"Approved Foreign Nations"), (iii) the government of any Approved Foreign
Nation or any of its agencies, instrumentalities or political subdivisions
(the debt securities of Approved Foreign Nation issuers being referred to
collectively as "Foreign Bonds"), (iv) a corporation, limited liability
company or limited partnership domiciled in Canada or (v) the Canadian
government or any of its agencies, instrumentalities or political subdivisions
(the debt securities of Canadian issuers being referred to collectively as
"Canadian Bonds"). Foreign Bonds held by the Corporation will qualify as Fitch
Eligible Assets only up to a maximum of 20% of the aggregate Market Value of
all assets constituting Fitch Eligible Assets. Similarly, Canadian Bonds held
by the Corporation will qualify as Fitch Eligible Assets only up to a maximum
of 20% of the aggregate Market Value of all assets constituting Fitch Eligible
Assets. Notwithstanding the limitations in the two preceding sentences,
Foreign Bonds and Canadian Bonds held by the Corporation will qualify as Fitch
Eligible Assets only up to a maximum of 30% of the aggregate Market Value of
all assets constituting Fitch Eligible Assets. In addition, bonds which are
issued in connection with a reorganization under U.S. federal bankruptcy law
("Reorganization Bonds") will be considered debt securities constituting Fitch
Eligible Assets if (1) they provide for periodic payment of interest in cash
in U.S. dollars or Euros; (2) they do not provide for conversion or exchange
into equity capital at any time over their lives; (3) they have been
registered under the 1933 Act or are restricted as to resale under federal
securities laws but are eligible for trading under Rule 144A promulgated
pursuant to the 1933 Act as determined by the Corporation's investment manager
or portfolio manager acting pursuant to procedures approved by the Board of
Directors of the Corporation; (4) they were issued by a U.S. corporation,
limited liability company or limited partnership; and (5) at the time of
purchase at least one year had elapsed since the issuer's reorganization.
Reorganization Bonds may also be considered debt securities constituting Fitch
Eligible Assets if they have been approved by Fitch, which approval shall not
be unreasonably withheld. All debt securities satisfying the foregoing
requirements and restrictions of this paragraph (d) are herein referred to as
"Debt Securities."

               (e) Preferred stocks if (i) dividends on such preferred stock
are cumulative, (ii) such securities provide for the periodic payment of
dividends thereon in cash in U.S. dollars or euros and do not provide for
conversion or exchange into, or have warrants attached entitling the holder to
receive equity capital at any time over the respective lives of such
securities, (iii) the issuer of such a preferred stock has common stock listed
on either the New York Stock Exchange or the American Stock Exchange, (iv) the
issuer of such a preferred stock has a senior debt rating or preferred stock
rating from Fitch of BBB- or higher or the equivalent rating by another Rating
Agency. In addition, the preferred stocks issue must be at least $50 million;

               (f) Asset-backed and mortgage-backed securities;

               (g) Rule 144A Securities;

               (h) Bank Loans;

               (i) Municipal debt obligation that (i) pays interest in cash
(ii) is part of an issue of municipal debt obligations of at least $5 million,
except for municipal debt obligations rated below A by Fitch or the equivalent
rating by another Rating Agency, in which case the minimum issue size is $10
million;

               (j) Tradable credit baskets (e.g., Traded Custody Receipts or
TRACERS and Targeted Return Index Securities Trust or TRAINS);

               (k) Convertible debt and convertible preferred stocks;

               (l) Financial contracts, as such term is defined in Section
3(c)(2)(B)(ii) of the Investment Company Act, not otherwise provided for in
this definition may be included in Fitch Eligible Assets, but, with respect to
any financial contract, only upon receipt by the Corporation of a writing from
Fitch specifying any conditions on including such financial contract in Fitch
Eligible Assets and assuring the Corporation that including such financial
contract in the manner so specified would not affect the credit rating
assigned by Fitch to the Series C Auction Rate Preferred;

               (m) Interest rate swaps entered into according to International
Swap Dealers Association ("ISDA") standards if (i) the counterparty to the
swap transaction has a short-term rating of not less than F1 by Fitch or the
equivalent by another, Nationally Recognized Statistical Ratings Organization
("NRSRO"), or, if the swap counterparty does not have a short-term rating, the
counterparty's senior unsecured long-term debt rating is AA or higher by Fitch
or the equivalent by another NRSRO and (ii) the original aggregate notional
amount of the interest rate swap transaction or transactions is not greater
than the liquidation preference of the shares of Series C Auction Rate
Preferred originally issued.

         Where the Corporation sells an asset and agrees to repurchase such
asset in the future, the Discounted Value of such asset will constitute a
Fitch Eligible Asset and the amount the Corporation is required to pay upon
repurchase of such asset will count as a liability for the purposes of the
Preferred Shares Basic Maintenance Amount. Where the Corporation purchases an
asset and agrees to sell it to a third party in the future, cash receivable by
the Corporation thereby will constitute a Fitch Eligible Asset if the
long-term debt of such other party is rated at least A- by Fitch or the
equivalent by another Rating Agency and such agreement has a term of 30 days
or less; otherwise the Discounted Value of such purchased asset will
constitute a Fitch Eligible Asset.

         Notwithstanding the foregoing, an asset will not be considered a
Fitch Eligible Asset to the extent that it has been irrevocably deposited for
the payment of (a)(i) through (a)(iv) under the definition of Basic
Maintenance Amount or to the extent it is subject to any liens, except for (1)
liens which are being contested in good faith by appropriate proceedings and
which Fitch has indicated to the Corporation will not affect the status of
such asset as a Fitch Eligible Asset, (2) liens for taxes that are not then
due and payable or that can be paid thereafter without penalty, (3) liens to
secure payment for services rendered or cash advanced to the Corporation by
its investment manager or portfolio manager, the Corporation's custodian,
transfer agent or registrar or the Auction Agent and (4) liens arising by
virtue of any repurchase agreement.

         Portfolio holdings as described above must be within the following
diversification and issue size requirements in order to be included in Fitch's
Eligible Assets:

                          MAXIMUM           MAXIMUM                 MAXIMUM
        MINIMUM            SINGLE           SINGLE             ISSUE SIZE ($ IN
        SECURITY         ISSUER (1)      INDUSTRY (1)(2)          MILLION) (3)
- ----------------------   ----------      ---------------       ----------------
AAA...................      100%             100%                    $100
AA-...................       20               75                      100
A-....................       10               50                      100
BBB-..................        6               25                      100
BB-...................        4               16                       50
B-....................        3               12                       50
CCC...................        2                8                       50


(1)  Percentages represent a portion of the aggregate market value of corporate
     debt securities.
(2)  Industries are determined according to Fitch's Industry Classifications,
     as defined herein.
(3)  Preferred stock has a minimum issue size of $50 million.


         "Fitch Exposure Period" means the period commencing on (and
including) a given Valuation Date and ending 49 days thereafter.

         "Fitch Hedging Transactions" means purchases or sales of
exchange-traded financial futures contracts based on any index approved by
Fitch or Treasury Bonds, and purchases, writings or sales of exchange-traded
put options on such futures contracts, any index approved by Fitch or Treasury
Bonds and purchases, writings or sales of exchange-traded call options on such
financial futures contracts, any index approved by Fitch or Treasury bonds
("Fitch Hedging Transactions"), subject to the following limitations:

               (a) The Corporation may not engage in any Fitch Hedging
Transaction based on any index approved by Fitch (other than transactions that
terminate a futures contract or option held by the Corporation by the
Corporation's taking the opposite position thereto ("closing transactions"))
that would cause the Corporation at the time of such transaction to own or
have sold outstanding financial futures contracts based on such index
exceeding in number 10% of the average number of daily traded financial
futures contracts based on such index in the 30 days preceding the time of
effecting such transaction as reported by The Wall Street Journal.

               (b) The Corporation will not engage in any Fitch Hedging
Transaction based on Treasury Bonds (other than closing transactions) that
would cause the Corporation at the time of such transaction to own or have
sold:

                           (i) Outstanding financial futures contracts based
                  on Treasury Bonds with such contracts having an aggregate
                  market value exceeding 20% of the aggregate market value of
                  Fitch Eligible Assets owned by the Corporation and rated AA
                  by Fitch (or, if not rated by Fitch Ratings, rated Aa by
                  Moody's; or, if not rated by Moody's, rated AAA by S&P) or

                           (ii) Outstanding financial futures contracts based
                  on Treasury Bonds with such contracts having an aggregate
                  market value exceeding 40% of the aggregate market value of
                  all Fitch Eligible Assets owned by the Corporation (other
                  than Fitch Eligible Assets already subject to a Fitch
                  Hedging Transaction) and rated A or BBB by Fitch (or, if not
                  rated by Fitch Ratings, rated Baa by Moody's; or, if not
                  rated by Moody's, rated A or AA by S&P) (for purposes of the
                  foregoing clauses (a) and (b), the Corporation shall be
                  deemed to own futures contracts that underlie any
                  outstanding options written by the Corporation);

               (c) The Corporation may engage in closing transactions to close
out any outstanding financial futures contract based on any index approved by
Fitch if the amount of open interest in such index as reported by The Wall
Street Journal is less than an amount to be mutually determined by Fitch and
the Corporation.

               (d) The Corporation may not enter into an option or futures
transaction unless, after giving effect thereto, the Corporation would
continue to have Fitch Eligible Assets with an aggregate Discounted Value
equal to or greater than the Preferred Shares Basic Maintenance Amount.

         "Fitch Industry Classifications" means, for the purposes of
determining Fitch Eligible Assets, each of the following industry
classifications:

           1.     Aerospace & Defense
           2.     Automobiles
           3.     Banking, Finance & Real Estate
           4.     Broadcasting & Media
           5.     Building & Materials
           6.     Cable
           7.     Chemicals
           8.     Computers & Electronics
           9.     Consumer Products
          10.     Energy
          11.     Environmental Services
          12.     Farming & Agriculture
          13.     Food, Beverage & Tobacco
          14.     Gaming, Lodging & Restaurants
          15.     Healthcare & Pharmaceuticals
          16.     Industrial/Manufacturing
          17.     Insurance
          18.     Leisure & Entertainment
          19.     Metals & Mining
          20.     Miscellaneous
          21.     Paper & Forest Products
          22.     Retail
          23.     Sovereign
          24.     Supermarkets & Drugstores
          25.     Telecommunications
          26.     Textiles & Furniture
          27.     Transportation
          28.     Utilities

         "Holder" means, with respect to shares of the Preferred Stock,
including shares of the Series C Preferred Stock, the registered holder of
such shares as the same appears on the stock ledger or stock records of the
Corporation or records of the Auction Agent, as the case may be.

         "Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is with respect to the Corporation an independent
public accountant or firm of independent public accountants under the 1933
Act.

         "Industry Classification" means a six-digit industry classification
in the Standard Industry Classification system published by the United States.

         "Liquidation Preference" shall, with respect to each share of Series C
Preferred Stock, have the meaning set forth in paragraph 7(a) of Article I
of these Articles Supplementary and shall, for the purposes of these Articles
Supplementary, have a correlative meaning with respect to any other class or
series of Preferred Stock.

         "Mandatory Redemption Date" has the meaning set forth in paragraph
3(a)(iii) of Article I of these Articles Supplementary.

         "Mandatory Redemption Price" means the Redemption Price plus (in the
case of a Dividend Period of one year or more only) a redemption premium, if
any, determined by the Board of Directors after consultation with the
Broker-Dealers and set forth in the notice describing any applicable Specific
Redemption Provisions.

         "Market Value" means the amount determined by the Corporation with
respect to specific Eligible Assets in accordance with valuation policies
adopted from time to time by the Board of Directors as being in compliance
with the requirements of the 1940 Act.

         Notwithstanding the foregoing, "Market Value" may, at the option of
the Corporation with respect to any of its assets, mean the amount determined
with respect to specific Eligible Assets of the Corporation in the manner set
forth below:

               (a) as to any common or preferred stock which is an Eligible
Asset, (i) if the stock is traded on a national securities exchange or quoted
on the Nasdaq System, the last sales price reported on the Valuation Date or
(ii) if there was no reported sales price on the Valuation Date, the lower of
two bid prices for such stock provided to the Administrator by two recognized
securities dealers with a minimum capitalization of $25,000,000 (or otherwise
approved for such purpose by Moody's and Fitch) or by one such securities
dealer and any other source (provided that the utilization of such source
would not adversely affect Moody's and Fitch's then-current rating of the
Series C Preferred Stock), at least one of which shall be provided in writing
or by telecopy, telex, other electronic transcription, computer obtained quota
tion reducible to written form or similar means, and in turn provided to the
Corporation by any such means by such Administrator, or, if two bid prices
cannot be obtained, such Eligible Asset shall have a Market Value of zero;

               (b) as to any U.S. Government Obligation, Short-Term Money
Market Instrument (other than demand deposits, federal funds, bankers'
acceptances and next Business Day repurchase agreements) and commercial paper,
with a maturity of greater than 60 days, the product of (i) the principal
amount (accreted principal to the extent such instrument accretes interest) of
such instrument, and (ii) the lower of the bid prices for the same kind of
instruments having, as nearly as practicable, compa rable interest rates and
maturities provided by two recognized securities dealers having minimum
capitalization of $25,000,000 (or otherwise approved for such purpose by
Moody's and Fitch) or by one such dealer and any other source (provided that
the utilization of such source would not adversely affect Moody's and Fitch's
then-current rating of the Series C Preferred Stock) to the Administrator, at
least one of which shall be provided in writing or by telecopy, telex, other
electronic transcrip tion, computer obtained quotation reducible to written
form or similar means, and in turn provided to the Corporation by any such
means by such Administrator, or, if two bid prices cannot be obtained, such
Eligible Asset will have a Market Value of zero;

               (c) as to cash, demand deposits, federal funds, bankers'
acceptances and next Business Day repurchase agreements included in Short-Term
Money Market Instruments, the face value thereof;

               (d) as to any U.S. Government Obligation, Short-Term Money
Market Instrument or commercial paper with a maturity of 60 days or fewer,
amortized cost unless the Board of Directors determines that such value does
not constitute fair value;

               (e) as to any other evidence of indebtedness which is an
Eligible Asset, (i) the product of (A) the unpaid principal balance of such
indebtedness as of the Valuation Date and (B)(1) if such indebtedness is
traded on a national securities exchange or quoted on the Nasdaq System, the
last sales price reported on the Valuation Date or (2) if there was no
reported sales price on the Valuation Date or if such indebtedness is not
traded on a national securities exchange or quoted on the Nasdaq System, the
lower of two bid prices for such indebtedness provided by two recognized
dealers with a minimum capitalization of $25,000,000 (or otherwise approved
for such purpose by Moody's and Fitch) or by one such dealer and any other
source (provided that the utilization of such source would not adversely
affect Moody's and Fitch's then-current rating of the Series C Preferred
Stock) to the Administrator, at least one of which shall be provided in
writing or by telecopy, telex, other electronic transcription, computer
obtained quotation reducible to written form or similar means, and in turn
provided to the Corporation by any such means by such Administrator, plus (ii)
accrued interest on such indebtedness.

               "Maximum Rate" means, on any date on which the Applicable Rate
is determined, the applicable percentage of (i) in the case of a dividend
period of 184 days or less, the "AA" Financial Composite Commercial Paper Rate
on the date of such Auction determined as set forth below based on the lower
of the credit ratings assigned to the Series C Preferred by Moody's and Fitch
subject to upward but not downward adjustment in the discretion of the Board
of Directors after consultation with the Broker-Dealers; provided that
immediately following any such increase the Corporation would be in compliance
with the Basic Maintenance Amount or (ii) in the case of a dividend period of
longer than 184 days, the Treasury Index Rate.

Moody's Credit Rating       Fitch Credit Rating        Applicable Percentage
- ---------------------       ---------------------      ---------------------
Aa3 or higher               AA- or higher                    150%
A3 to A1                    A- to A+                         175%
Baa3 to Baa1                BBB- to BBB+                     250%
Below Baa3                  Below BBB-                       275%

         "Moody's" means Moody's Investors Service, Inc. and its successors at
law.

         "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined as
follows. According to Moody's guidelines, in addition to standard monthly
reporting, the Corporation must notify Moody's if the portfolio coverage ratio
of the discounted value of Moody's Eligible Assets to liabilities is less than
130%. Computation of rating agency asset coverage ratio requires use of the
Diversification Table prior to applying discount factors noted below and after
identifying Moody's eligible assets for purposes of completing basic
maintenance tests. The Moody's Discount Factor for any Moody's Eligible Asset
other than the securities set forth below will be the percentage provided in
writing by Moody's.

             (a) Convertible securities (including convertible preferreds):

                             DISCOUNT FACTORS (1)

   RATINGS(2)          UTILITY    INDUSTRIAL    FINANCIAL      TRANSPORTATION
- ------------------    --------    ----------    ---------      --------------
Aaa...............      162%          256%        233%              250%
Aa................      167%          261%        238%              265%
A.................      172%          266%        243%              275%
Baa...............      188%          282%        259%              285%
Ba................      195%          290%        265%              290%
B.................      199%          293%        270%              295%
NR(3).............      300%          300%        300%              300%

(1)      Discount factors are for 7-week exposure period.
(2)      If a convertible security is unrated by Moody's but is rated by S&P,
         a rating two numeric ratings below the S&P rating will be used (e.g.,
         where the S&P rating is AAA, a Moody's rating of Aa2 will be used;
         where the S&P rating is AA+, a Moody's rating of Aa3 will be used).
(3)      Unrated fixed-income and convertible securities, which are rated by
         neither Moody's nor S&P, are limited to 10% of discounted Moody's
         Eligible Assets. If a corporate debt security is unrated by both
         Moody's and S&P, the Corporation will use the percentage set forth
         under "Unrated" in this table.


            Upon conversion to common stock, the discount Factors
applicable to common stock will apply:


        COMMON STOCKS              UTILITY     INDUSTRIAL      FINANCIAL
- -----------------------------    ----------   ------------    ------------
7-week exposure period.......       170%          264%            241%


               (b) Corporate Debt Securities (non-convertible): The percentage
determined by reference to the rating on such asset with reference to the
remaining term to maturity of such asset, in accordance with the table set
forth below.

<TABLE>
<CAPTION>

                                                     MOODY'S RATING CATEGORY(1)
              TERMS TO MATURITY OF
            CORPORATE DEBT SECURITY                    Aaa        Aa         A       Baa       Ba        B       UNRATED(2)
- ------------------------------------------------       ----      ----      ----     ----      ----      ----     ---------
<C>                                                    <C>       <C>       <C>      <C>       <C>       <C>         <C>
1 year or less..................................       109%      112%      115%     118%      119%      125%        225%
2 years or less (but longer than 1 year)........       115        118       122      125      127       133         225
3 years or less (but longer than 2 years).......       120        123       127      131      133       140         225
4 years or less (but longer than 3 years).......       126        129       133      138      140       147         225
5 years or less (but longer than 4 years).......       132        135       139      144      146       154         225
7 years or less (but longer than 5 years).......       139        143       147      152      156       164         225
10 years or less (but longer than 7 years)......       145        150       155      160      164       173         225
15 years or less (but longer than 10 years).....       150        155       160      165      170       180         225
20 years or less (but longer than 15 years).....       150        155       160      165      170       190         225
30 years or less (but longer than 20 years).....       150        155       160      165      170       191         225
Greater than 30 years...........................       165        173       181      189      205       221         225

</TABLE>

(1)      If a corporate debt security is unrated by Moody's but is rated by
         S&P, a rating two numeric ratings below the S&P rating will be used
         (e.g., where the S&P rating is AAA, a Moody's rating of Aa2 will be
         used; where the S&P rating is AA+, a Moody's rating of Aa3 will be
         used).
(2)      Unrated corporate debt securities, which are corporate debt
         securities rated by neither Moody's nor S&P, are limited to 10% of
         discounted Moody's Eligible Assets. If a corporate debt security is
         unrated by both Moody's and S&P, the Corporation will use the
         percentage set forth under "Unrated" in this table.

         The Moody's Discount Factors presented in the immediately preceding
table will also apply to corporate debt securities that do not pay interest in
U.S. dollars or euros, provided that the Moody's Discount Factor determined
from the table shall be multiplied by a factor of 120% for purposes of
calculating the Discounted Value of such securities.

               (c) Preferred Stock: The Moody's Discount Factor for preferred
stock shall be (i) for preferred stocks issued by a utility, 146%; (ii) for
preferred stocks of industrial and financial issuers, 209%; (iii) for
preferred stocks issued by real estate related issuers, 154%; and (iv) for
auction rate preferred stocks, 350%.

               (d) U.S. Government Obligations and U.S. Treasury Strips:

<TABLE>
<CAPTION>

                                                      U.S. GOVERNMENT                U.S.
                                                       SECURITIES              TREASURY STRIPS
           REMAINING TERM TO MATURITY                 DISCOUNT FACTOR          DISCOUNT FACTOR
           --------------------------                 ---------------          ---------------
<C>                                                        <C>                      <C>
1 year or less..................................           107%                     107%
2 years or less (but longer than 1 year)........            113                      115
3 years or less (but longer than 2 years).......            118                      121
4 years or less (but longer than 3 years).......            123                      128
5 years or less (but longer than 4 years).......            128                      135
7 years or less (but longer than 5 years).......            135                      147
10 years or less (but longer than 7 years)......            141                      163
15 years or less (but longer than 10 years).....            146                      191
20 years or less (but longer than 15 years).....            154                      218
30 years or less (but longer than 20 years).....            154                      244

</TABLE>

               (e) Short-Term Instruments and Cash: The Moody's Discount
Factor applied to short-term portfolio securities, including without
limitation short-term corporate debt securities, Short-Term Money Market
Instruments and short-term municipal debt obligations, will be (i) 100%, so
long as such portfolio securities mature or have a demand feature at par
exercisable within the Moody's Exposure Period; (ii) 115%, so long as such
portfolio securities mature or have a demand feature at par not exercisable
within the Moody's Exposure Period; and (iii) 125%, if such securities are not
rated by Moody's, so long as such portfolio securities are rated at least
A-1+/AA or SP-1+/AA by S&P and mature or have a demand feature at par
exercisable within the Moody's Exposure Period. A Moody's Discount Factor of
100% will be applied to cash. Moody's rated Rule 2a-7 money market funds will
also have a discount factor of 100%.

               (f) Rule 144A Securities: The Moody's Discount Factor applied
to Rule 144A Securities for Rule 144A Securities will be 130% of the Moody's
Discount Factor which would apply were the securities registered under the
1933 Act.

         "Moody's Eligible Assets" means:

               (a) cash (including interest and dividends due on assets rated
(i) Baa3 or higher by Moody's if the payment date is within five Business Days
of the Valuation Date, (ii) A2 or higher if the payment date is within thirty
days of the Valuation Date, and (iii) A1 or higher if the payment date is
within the Moody's Exposure Period) and receivables for Moody's Eligible
Assets sold if the receivable is due within five Business Days of the
Valuation Date, and if the trades which generated such receivables are (1)
settled through clearing house firms with respect to which the Corporation has
received prior written authorization from Moody's or (2) (A) with
counterparties having a Moody's long-term debt rating of at least Baa3 or (B)
with counterparties having a Moody's Short-Term Money Market Instrument rating
of at least P-1;

               (b) Short-Term Money Market Instruments, so long as (i) such
securities are rated at least P-1, (ii) in the case of demand deposits, time
deposits and overnight funds, the supporting entity is rated at least A2, or
(iii) in all other cases, the supporting entity (1) is rated A2 and the
security matures within one month, (2) is rated A1 and the security matures
within three months or (3) is rated at least Aa3 and the security matures
within six months. In addition, Moody's rated Rule 2a-7 money market funds are
also eligible investments.

               (c) U.S. Government Obligations and U.S. Treasury Strips;

               (d) Rule 144A Securities;

               (e) Corporate debt securities if (i) such securities are rated
B3 or higher by Moody's; (ii) such securities provide for the periodic payment
of interest in cash in U.S. dollars or euros, except that such securities that
do not pay interest in U.S. dollars or euros shall be considered Moody's
Eligible Assets if they are rated by Moody's or S&P; (iii) for debt securities
rated Ba1 and below, no more than 10% of the original amount of such issue may
constitute Moody's Eligible Assets; (iv) such securities have been registered
under the 1933 Act or are restricted as to resale under federal securities
laws but are eligible for resale pursuant to Rule 144A under the 1933 Act as
determined by the Corporation's investment manager or portfolio manager acting
pursuant to procedures approved by the Board of Directors, except that such
securities that are not subject to U.S. federal securities laws shall be
considered Moody's Eligible Assets if they are publicly traded; and (v) such
securities are not subject to extended settlement.

                  Notwithstanding the foregoing limitations, (1) corporate
debt securities not rated at least B3 by Moody's shall be considered to be
Moody's Eligible Assets only to the extent the Market Value of such corporate
debt securities does not exceed 10% of the aggregate Market Value of all
Moody's Eligible Assets; provided, however, that if the Market Value of such
corporate debt securities exceeds 10% of the aggregate Market Value of all
Moody's Eligible Assets, a portion of such corporate debt securities (selected
by the Corporation) shall not be considered Moody's Eligible Assets, so that
the Market Value of such corporate debt securities (excluding such portion)
does not exceed 10% of the aggregate Market Value of all Moody's Eligible
Assets; and (2) corporate debt securities rated by neither Moody's nor S&P
shall be considered to be Moody's Eligible Assets only to the extent such
securities are issued by entities which (A) have not filed for bankruptcy
within the past three years, (B) are current on all principal and interest in
their fixed income obligations, (C) are current on all preferred stock
dividends, and (D) possess a current, unqualified auditor's report without
qualified, explanatory language.

               (f) Convertible bonds, provided that (i) the issuer of common
stock must have a Moody's senior unsecured debt of B3 or better, or an S&P
rating of BB or better, (ii) the common stocks must be traded on the NYSE,
AMEX, or NASDAQ, (iii) dividends must be paid in U.S. dollars, (iv) the
portfolio of convertible bonds must be diversified as set forth in Figure 1
below, (v) the company shall not hold shares exceeding the average weekly
trading volume during the preceding month, (vi) synthetic convertibles are
excluded from asset eligibility.

                 CONVERTIBLE BONDS DIVERSIFICATION GUIDELINES
- --------------------------------------------------------------------------------
                      MAXIMUM SINGLE       MAXIMUM SINGLE        MAXIMUM SINGLE
        TYPE          ISSUER (%) (1)        INDUSTRY (%)          STATE (%) (1)
- ------------------  -----------------     ----------------     -----------------
Utility...........           4                   50                   7(2)
Other.............           6                   20                    n/a


(1)      Percentage represent a portion of the aggregate market value and
         number of outstanding shares of the convertible stock portfolio.
(2)      Utility companies operating in more than one state should be
         diversified according to the state in which they generate the largest
         part of their revenues. Publicly available information on utility
         company revenues by state is available from the Uniform Statistical
         Report (USR) or the Federal Energy Regulation commission (FERC).

               (g) Preferred stocks if (i) dividends on such preferred stock
are cumulative, (ii) such securities provide for the periodic payment of
dividends thereon in cash in U.S. dollars or euros and do not provide for
conversion or exchange into, or have warrants attached entitling the holder to
receive, equity capital at any time over the respective lives of such
securities, (iii) the issuer of such a preferred stock has common stock listed
on either the New York Stock Exchange or the American Stock Exchange, (iv) the
issuer of such a preferred stock has a senior debt rating from Moody's of Baa1
or higher or a preferred stock rating from Moody's of Baa3 or higher and (v)
such preferred stock has paid consistent cash dividends in U.S. dollars or
euros over the last three years or has a minimum rating of A1 (if the issuer
of such preferred stock has other preferred issues outstanding that have been
paying dividends consistently for the last three years, then a preferred stock
without such a dividend history would also be eligible). In addition, the
preferred stocks must have the following diversification requirements: (1) the
preferred stock issue must be greater than $50 million and (2) the minimum
holding by the Corporation of each issue of preferred stock is $500,000 and
the maximum holding of preferred stock of each issue is $5 million. In
addition, preferred stocks issued by transportation companies will not be
considered Moody's Eligible Assets.

               (h) Financial contracts, as such term is defined in Section
3(c)(2)(B)(ii) of the Investment Company Act, not otherwise provided for in
this definition but only upon receipt by the Corporation of a letter from
Moody's specifying any conditions on including such financial contract in
Moody's Eligible Assets and assuring the Corporation that including such
financial contract in the manner so specified would not affect the credit
rating assigned by Moody's to the shares of Series C Auction Rate Preferred.

               (i) Interest rate swaps entered into according to International
Swap Dealers Association ("ISDA") standards if (i) the counterparty to the
swap transaction has a short-term rating of not less than P-1 or, if the
counterparty does not have a short-term rating, the counterparty's senior
unsecured long-term debt rating is Aa3 or higher and (ii) the original
aggregate notional amount of the interest rate swap transaction or
transactions is not to be greater than the liquidation preference of the
shares of Preferred Shares originally issued. The interest rate swap
transaction will be marked-to-market daily.

               In addition, portfolio holdings as described below must be
within the following diversification and issue size requirements in order to
be included in Moody's Eligible Assets:

<TABLE>
<CAPTION>
                                                 MAXIMUM            MAXIMUM
                               MAXIMUM            SINGLE             SINGLE            MAXIMUM
                               SINGLE         INDUSTRY(3)(4)    INDUSTRY (3)(4)       ISSUE SIZE
             RATINGS(1)      ISSUER(2)(3)       NON-UTILITY          UTILITY       ($ IN MILLION) (5)
- --------------------------- -------------    ---------------   ----------------    ------------------
<S>                             <C>                <C>                <C>                <C>
Aaa........................     100%               100%               100%               $100
Aa.........................      20                 60                 30                 100
A..........................      10                 40                 25                 100
Baa........................       6                 20                 20                 100
Ba.........................       4                 12                 12                  50 (6)
B1-B2......................       3                  8                  8                  50 (6)
B3 or below................       2                  5                  5                  50 (6)

</TABLE>

(1)  Refers to the preferred stock and senior debt rating of the portfolio
     holding.
(2)  Companies subject to common ownership of 25% or more are considered as
     one issuer.
(3)  Percentages represent a portion of the aggregate Market Value of
     corporate debt securities.
(4)  Industries are determined according to Moody's Industry Classifications,
     as defined herein.
(5)  Except for preferred stock, which has a minimum issue size of $50 million.
(6)  Portfolio holdings from issues ranging from $50 million to $100 million
     are limited to 20% of the Corporation's total assets.


         "Moody's Hedging Transactions" means purchases or sales of exchange-
traded financial futures contracts based on any index approved by Moody's or
Treasury Bonds, and purchases, writings or sales of exchange-traded put
options on such financial futures contracts, any index approved by Moody's or
Treasury Bonds, and purchases, writings or sales of exchange-traded call
options on such financial futures contracts, any index approved by Moody's or
Treasury Bonds, subject to the following limitations:

                  (a) the Corporation will not engage in any Moody's Hedging
Transaction based on any index approved by Moody's (other than Closing
Transactions) that would cause the Corporation at the time of such transaction
to own or have sold:

                            (i) Outstanding financial futures contracts based
                  on such index exceeding in number 10% of the average number
                  of daily traded financial futures contracts based on such
                  index in the 30 days preceding the time of effecting such
                  transaction as reported by The Wall Street Journal; or

                           (ii) Outstanding financial futures contracts based
                  on any index approved by Moody's having a Market Value
                  exceeding 50% of the Market Value of all portfolio
                  securities of the Corporation constituting Moody's Eligible
                  Assets owned by the Corporation;

                  (b) The Corporation will not engage in any Moody's Hedging
Transaction based on Treasury Bonds (other than Closing Transactions) that
would cause the Corporation at the time of such transaction to own or have
sold:

                           (i) Outstanding financial futures contracts based
                  on Treasury Bonds with such contracts having an aggregate
                  Market Value exceeding 20% of the aggregate Market Value of
                  Moody's Eligible Assets owned by the Corporation and rated
                  Aa by Moody's (or, if not rated by Moody's but rated by S&P,
                  rated AAA by S & P); or

                           (ii) Outstanding financial futures contracts based
                  on Treasury Bonds with such contracts having an aggregate
                  Market Value exceeding 50% of the aggregate Market Value of
                  all portfolio securities of the Corporation constituting
                  Moody's Eligible Assets owned by the Corporation (other than
                  Moody's Eligible Assets already subject to a Moody's Hedging
                  Transaction) and rated Baa or A by Moody's (or, if not rated
                  by Moody's but rated by S&P, rated A or AA by S&P);

                  (c) The Corporation will engage in Closing Transactions to
close out any outstanding financial futures contract based on any index
approved by Moody's if the amount of open interest in such index as reported
by The Wall Street Journal is less than an amount to be mutually determined by
Moody's and the Corporation;

                  (d) The Corporation will engage in a Closing Transaction to
close out any outstanding financial futures contract by no later than the
fifth Business Day of the month in which such contract expires and will engage
in a Closing Transaction to close out any outstanding option on a financial
futures contract by no later than the first Business Day of the month in which
such option expires;

                  (e) The Corporation will engage in Moody's Hedging
Transactions only with respect to financial futures contracts or options
thereon having the next settlement date or the settlement date immediately
thereafter;

                  (f) The Corporation (i) will not engage in options and
futures transactions for leveraging or speculative purposes, except that an
option or futures transaction shall not for these purposes be considered a
leveraged position or speculative and (ii) will not write any call options or
sell any financial futures contracts for the purpose of hedging the
anticipated purchase of an asset prior to completion of such purchase; and

                  (g) The Corporation will not enter into an option or futures
transaction unless, after giving effect thereto, the Corporation would
continue to have Moody's Eligible Assets with an aggregate Discounted Value
equal to or greater than the Preferred Shares Basic Maintenance Amount.

         "Moody's Industry Classifications" means, for the purposes of
determining Moody's Eligible Assets, each of the following industry
classifications (or such other classifications as Moody's may from time to
time approve for application to the Series C Auction Rate Preferred shares).

                  1.       Aerospace and Defense: Major Contractor,
                           Subsystems, Research, Aircraft Manufacturing, Arms,
                           Ammunition.

                  2.       Automobile: Automobile Equipment,
                           Auto-Manufacturing, Auto Parts Manufacturing,
                           Personal Use Trailers, Motor Homes, Dealers.

                  3.       Banking: Bank Holding, Savings and Loans, Consumer
                           Credit, Small Loan, Agency, Factoring, Receivables.

                  4.       Beverage, Food and Tobacco: Beer and Ale,
                           Distillers, Wines and Liquors, Distributors, Soft
                           Drink Syrup, Bottlers, Bakery, Mill Sugar, Canned
                           Foods, Corn Refiners, Dairy Products, Meat
                           Products, Poultry Products, Snacks, Packaged Foods,
                           Distributors, Candy, Gum, Seafood, Frozen Food,
                           Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil.

                  5.       Buildings and Real Estate: Brick, Cement, Climate
                           Controls, Contracting, Engineering, Construction,
                           Hardware, Forest Products (building-related only),
                           Plumbing, Roofing, Wallboard, Real Estate, Real
                           Estate Development, REITs, Land Development.

                  6.       Chemicals, Plastics and Rubber: Chemicals
                           (non-agricultural), Industrial Gases, Sulphur,
                           Plastics, Plastic Products, Abrasives, Coatings,
                           Paints, Varnish, Fabricating Containers.

                  7.       Packaging and Glass: Glass, Fiberglass, Containers
                           made of: Glass, Metal, Paper, Plastic, Wood or
                           Fiberglass.

                  8.       Personal and Non-Durable Consumer Products
                           (Manufacturing Only): Soaps, Perfumes, Cosmetics,
                           Toiletries, Cleaning Supplies, School Supplies.

                  9.       Diversified/Conglomerate Manufacturing.

                  10.      Diversified/Conglomerate Service.

                  11.      Diversified Natural Resources, Precious Metals and
                           Minerals: Fabricating, Distribution.

                  12.      Ecological: Pollution Control, Waste Removal, Waste
                           Treatment and Waste Disposal.

                  13.      Electronics: Computer Hardware, Electric Equipment,
                           Components, Controllers, Motors, Household
                           Appliances, Information Service Communication
                           Systems, Radios, TVs, Tape Machines, Speakers,
                           Printers, Drivers, Technology.

                  14.      Finance: Investment Brokerage, Leasing,
                           Syndication, Securities.

                  15.      Farming and Agriculture: Livestock, Grains,
                           Produce, Agriculture Chemicals, Agricultural
                           Equipment, Fertilizers.

                  16.      Grocery: Grocery Stores, Convenience Food Stores.

                  17.      Healthcare, Education and Childcare: Ethical Drugs,
                           Proprietary Drugs, Research, Health Care Centers,
                           Nursing Homes, HMOs, Hospitals, Hospital Supplies,
                           Medical Equipment.

                  18.      Home and Office Furnishings, Housewares, and
                           Durable Consumer Products: Carpets, Floor
                           Coverings, Furniture, Cooking, Ranges.

                  19.      Hotels, Motels, Inns and Gaming.

                  20.      Insurance: Life, Property and Casualty, Broker,
                           Agent, Surety.

                  21.      Leisure, Amusement, Motion Pictures, Entertainment:
                           Boating, Bowling, Billiards, Musical Instruments,
                           Fishing, Photo Equipment, Records, Tapes, Sports,
                           Outdoor Equipment (Camping), Tourism, Resorts,
                           Games, Toy Manufacturing, Motion Picture Production
                           Theaters, Motion Picture Distribution.

                  22.      Machinery (Non-Agricultural, Non-Construction, Non-
                           Electronic): Industrial, Machine Tools, Steam
                           Generators.

                  23.      Mining, Steel, Iron and Non-Precious Metals: Coal,
                           Copper, Lead, Uranium, Zinc, Aluminum, Stainless
                           Steel, Integrated Steel, Ore Production,
                           Refractories, Steel Mill Machinery, Mini-Mills,
                           Fabricating, Distribution and Sales of the
                           foregoing.

                  24.      Oil and Gas: Crude Producer, Retailer, Well Supply,
                           Service and Drilling.

                  25.      Printing, Publishing, and Broadcasting: Graphic
                           Arts, Paper, Paper Products, Business Forms,
                           Magazines, Books, Periodicals, Newspapers,
                           Textbooks, Radio, T.V., Cable Broadcasting
                           Equipment.

                  26.      Cargo Transport: Rail, Shipping, Railroads,
                           Rail-car Builders, Ship Builders, Containers,
                           Container Builders, Parts, Overnight Mail,
                           Trucking, Truck Manufacturing, Trailer
                           Manufacturing, Air Cargo, Transport.

                  27.      Retail Stores: Apparel, Toy, Variety, Drugs,
                           Department, Mail Order Catalog, Showroom.

                  28.      Telecommunications: Local, Long Distance,
                           Independent, Telephone, Telegraph, Satellite,
                           Equipment, Research, Cellular.

                  29.      Textiles and Leather: Producer, Synthetic Fiber,
                           Apparel Manufacturer, Leather Shoes.

                  30.      Personal Transportation: Air, Bus, Rail, Car
                           Rental.

                  31.      Utilities: Electric, Water, Hydro Power, Gas.

                  32.      Diversified Sovereigns: Semi-sovereigns, Canadian
                           Provinces, Supra-national Agencies.

         The Corporation will use SIC codes in determining which industry
classification is applicable to a particular investment in consultation with
the Independent Accountant and Moody's, to the extent the Corporation
considers necessary.

         "1933 Act" means the Securities Act of 1933, as amended, or any
successor statute.

         "1940 Act" means the Investment Company Act of 1940, as amended, or
any successor statute.

         "Non-Call Period" means a period determined by the Board of Directors
after consultation with the Broker-Dealers, during which the Series C
Preferred Stock subject to such Special Dividend Period is not subject to
redemption at the option of the Corporation but only to mandatory redemption.

         "Notice of Redemption" means any notice with respect to the
redemption of Series C Preferred Stock pursuant to paragraph 3 of Article I of
these Articles Supplementary.

         "Other Rating Agency" means any rating agency other than Moody's or
Fitch then providing a rating for the Series C Preferred Stock at the request
of the Corporation.

         "Other Rating Agency Eligible Assets" means assets of the Corporation
designated by any Other Rating Agency as eligible for inclusion in calculating
the discounted value of the Corporation's assets in connection with such Other
Rating Agency's rating of the Series C Preferred Stock.

         "Outstanding" means, as of any date, shares of Preferred Stock
theretofore issued by the Corporation except:

                  (a) any such share of Preferred Stock theretofore cancelled
                  by the Corporation or delivered to the Corporation for
                  cancellation;

                  (b) any such share of Preferred Stock other than shares of
                  auction rate Preferred Stock as to which a notice of
                  redemption shall have been given and for whose payment at
                  the redemption thereof Deposit Assets in the necessary
                  amount are held by the Corporation in trust for or were paid
                  by the Corporation to the holder of such share pursuant to
                  the Articles Supplementary with respect thereto;

                  (c) in the case of shares auction rate Preferred Stock,
                  including shares of the Series C Preferred Stock, any such
                  shares theretofore delivered to the applicable auction agent
                  for cancellation or with respect to which the Corporation
                  has given notice of redemption and irrevocably deposited
                  with the applicable paying agent sufficient funds to redeem
                  such shares; and

                  (d) any such share in exchange for or in lieu of which other
                  shares have been issued and delivered.

         Notwithstanding the foregoing, (i) for purposes of voting rights
(including the determination of the number of shares required to constitute a
quorum), any Preferred Stock as to which any subsidiary of the Corporation is
the holder or Existing Holder, as applicable, will be disregarded and deemed
not Outstanding and (ii) in connection with any auction, any auction rate
Preferred Stock as to which any Person known to the auction agent to be a
subsidiary of the Corporation is the holder or Existing Holder, as applicable,
will be disregarded and not deemed Outstanding.

         "Paying Agent" means The Bank of New York unless and until another
entity appointed by a resolution of the Board of Directors enters into an
agreement with the Corporation to serve as paying agent, which paying agent
may be the same as the Auction Agent and, with respect to any other class or
series of Preferred Stock, the Person appointed by the Corporation as
dividend-disbursing or paying agent with respect to such class or series.

         "Person" means and includes an individual, a partnership, the
Corporation, a trust, a corporation, a limited liability company, an
unincorporated association, a joint venture or other entity or a government or
any agency or political subdivision thereof.

         "Preferred Stock" means the preferred stock, par value $.001 per
share, of the Corporation, and includes the shares of Series C Preferred
Stock.

         "Premium Call Period" means a period consisting of a number of whole
years as determined by the Board of Directors after consultation with the
Broker- Dealers, during each year of which the shares subject to such Special
Dividend Period will be redeemable at the Corporation's option at a price per
share equal to the Liquidation Preference plus accumulated but unpaid
dividends (whether or not earned or declared) plus a premium expressed as a
percentage or percentages of the Liquidation Preference or expressed as a
formula using specified variables as determined by the Board of Directors
after consultation with the Broker-Dealers.

         "Pricing Service" means any of the following: Bloomberg Financial
Service, Bridge Information Services, Data Resources Inc., FT Interactive,
International Securities Market Association, Merrill Lynch Securities Pricing
Service, Muller Data Corp., Reuters, S&P/J.J. Kenny, Telerate, Trepp Pricing
and Wood Gundy.

         "Rating Agency" means Moody's and Fitch as long as such rating agency
is then rating the Series C Preferred Stock at the Corporation's request or
any other rating agency then rating the Series C Preferred Stock at the
Corporation's request.

         "Redemption Date" has the meaning set forth in paragraph 3(e) of
Article I of these Articles Supplementary.

         "Redemption Default" has the meaning set forth in paragraph 3(e) of
Article I of these Articles Supplementary.

         "Redemption Price" has the meaning set forth in paragraph 3(a)(i) of
Article I of these Articles Supplementary, and shall, for the purposes of
these Articles Supplementary, have a correlative meaning with respect to any
other class or series of Preferred Stock.

         "Reference Rate" means, with respect to the determination of the
Default Rate, the applicable "AA" Financial Composite Commercial Paper Rate
for a Dividend Period of 184 days or fewer or the applicable Treasury Index
Rate for a Dividend Period of longer than 184 days and, with respect to the
determination of the Maximum Rate, the "AA" Financial Composite Commercial
Paper Rate or the Treasury Index Rate, as appropriate.

         "Registrar" means The Bank of New York, unless and until another
entity appointed by a resolution of the Board of Directors enters into an
agreement with the Corporation to serve as registrar.

         "S&P" means Standard & Poor's Ratings Services, or its successors at
law.

         "Securities Depository" means The Depository Trust Company and its
successors and assigns or any successor securities depository selected by the
Corporation that agrees to follow the procedures required to be followed by
such securities depository in connection with shares of the Series C Preferred
Stock.

         "Series C Asset Coverage Cure Date" means, with respect to the
failure by the Corporation to maintain Asset Coverage (as required by
paragraph 9(a)(i) of Article I of these Articles Supplementary) as of the last
Business Day of each March, June, September and December of each year, 10 days
following such Business Day.

         "Series C Preferred Stock" means shares of the Corporation's Series C
Auction Rate Cumulative Preferred Stock, par value $.001 per share,
liquidation preference $25,000 per share.

         "Short-Term Money Market Instrument" means the following types of
instruments if, on the date of purchase or other acquisition thereof by the
Corporation, the remaining term to maturity thereof is not in excess of 180
days:

                  (i) commercial paper rated A-1 if such commercial paper
     matures in 30 days or A-1+ if such commercial paper matures in over 30
     days;

                  (ii)demand or time deposits in, and banker's acceptances and
     certificates of deposit of (A) a depository institution or trust company
     incorporated under the laws of the United States of America or any state
     thereof or the District of Columbia or (B) a United States branch office
     or agency of a foreign depository institution (provided that such branch
     office or agency is subject to banking regulation under the laws of the
     United States, any state thereof or the District of Columbia);

                  (iii) overnight funds; and

                  (iv) U.S. Government Obligations.

         "Special Dividend Period" means a Dividend Period that is not a
Standard Dividend Period.

         "Specific Redemption Provisions" means, with respect to any Special
Dividend Period of more than one year, either, or any combination of (i) a
Non-Call Period and (ii) a Premium Call Period.

         "Standard Dividend Period" means a Dividend Period of seven days,
subject to increase or decrease to the extent necessary for the next Auction
Date and Dividend Payment Date to each be Business Days.

         "Submission Deadline" means 1:00 p.m., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Auction Agent as specified by the Auction
Agent from time to time.

         "Transfer Agent" means The Bank of New York, unless and until another
entity appointed by a resolution of the Board of Directors enters into an
agreement with the Corporation to serve as transfer agent.

         "Treasury Index Rate" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities having
the same number of 30-day periods to maturity as the length of the applicable
Dividend Period, determined, to the extent necessary, by linear interpolation
based upon the yield for such securities having the next shorter and next
longer number of 30-day periods to maturity treating all Dividend Periods with
a length greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data set forth
in the most recent weekly statistical release published by the Board of
Governors of the Federal Reserve System (currently in H.15 (519)); provided,
however, if the most recent such statistical release shall not have been
published during the 15 days preceding the date of computation, the foregoing
computations shall be based upon the average of comparable data as quoted to
the Corporation by at least three recognized dealers in U.S. Government
Obligations selected by the Corporation.

         "U.S. Government Obligations" means direct obligations of the United
States or by its agencies or instrumentalities that are entitled to the full
faith and credit of the United States and that, other than United States
Treasury Bills, provide for the periodic payment of interest and the full
payment of principal at maturity or call for redemption.

         "Valuation Date" means the last Business Day of each month, or such
other date as the Corporation and Rating Agencies may agree to for purposes of
determining the Basic Maintenance Amount.

         "Voting Period" has the meaning set forth in paragraph 6(b) of
Article I of these Articles Supplementary.

         14. Interpretation. References to sections, subsections, clauses,
sub-clauses, paragraphs and subparagraphs that do not reference a specific
Article of these Articles Supplementary or another document shall refer to the
Article of these Articles Supplementary in which the reference occurs, unless
the context otherwise requires.

                        Article II: Auction Procedures

            1. Certain Definitions. Unless the context or use indicates
another or different meaning or intent, each of the following terms when used
in these Articles Supplementary shall have the meaning ascribed to it below,
whether such term is used in the singular or plural and regardless of tense:

         "Agent Member" means a member of or participant in the Securities
Depository that will act on behalf of a Bidder.

         "Available Preferred Shares" has the meaning set forth in paragraph
4(a)(i) of Article II of these Articles Supplementary.

         "Existing Holder" means (a) a Person who beneficially owns those
shares of Preferred Stock, including Series C Preferred Stock, listed in that
Person's name in the records of the Corporation or Auction Agent, as the case
may be, or (b) the beneficial owner of those shares of Series C Preferred
Stock which are listed under such person's Broker-Dealer's name in the records
of the Auction Agent, which Broker-Dealer shall have signed a Master
Purchaser's Letter.

         "Hold Order" has the meaning set forth in paragraph 2(a) of Article II
of these Articles Supplementary.

         "Master Purchaser's Letter" means the letter which is required to be
executed by each prospective purchaser of Series C Preferred Stock or by the
Broker- Dealer through whom the shares will be held.

         "Order" has the meaning set forth in paragraph 2(a) of Article II of
these Articles Supplementary.

         "Potential Holder" means (a) any Existing Holder who may be
interested in acquiring additional Series C Preferred Stock or (b) any other
Person who may be interested in acquiring Series C Preferred Stock and who has
signed a Master Purchaser's Letter or whose shares will be listed under such
person's Broker-Dealer's name on the records of the Auction Agent which
Broker-Dealer shall have executed a Master Purchaser's Letter.

         "Sell Order" has the meaning set forth in paragraph 2(a) of Article II
of these Articles Supplementary.

         "Submitted Bid" has the meaning set forth in paragraph 4(a) of
Article II of these Articles Supplementary.

         "Submitted Hold Order" has the meaning set forth in paragraph 4(a) of
Article II of these Articles Supplementary.

         "Submitted Order" has the meaning set forth in paragraph 4(a) of
Article II of these Articles Supplementary.

         "Submitted Sell Order" has the meaning set forth in paragraph 4(a) of
Article II of these Articles Supplementary.

         "Sufficient Clearing Bids" has the meaning set forth in paragraph
4(a)(ii) of Article II of these Articles Supplementary.

         "Sufficient Clearing Orders" means that all shares of Series C
Preferred Stock are the subject of Submitted Hold Orders or that the number of
shares of Series C Preferred Stock that are the subject of Submitted Bids by
Potential Holders specifying one or more rates equal to or less than the
Maximum Rate exceeds or equals the sum of (a) the number of shares of Series C
Preferred Stock that are subject of Submitted Bids by Existing Holders
specifying one or more rates higher than the Maximum Rate and (b) the number
of shares of Series C Preferred Stock that are subject to Submitted Sell
Orders.

         "Winning Bid Rate" means the lowest rate specified in the Submitted
Bids which if:

         (a)      (i)      each such Submitted Bid of Existing Holders
                           specifying such lowest rate and

                  (ii)     all other such Submitted Bids of Existing Holders
                           specifying lower rates were rejected, thus
                           entitling such Existing Holders to continue to hold
                           the shares of such series that are subject to such
                           Submitted Bids; and

         (b)      (i)      each such Submitted Bid of Potential Holders
                           specifying such lowest rate and

                  (ii)     all other such Submitted Bids of Potential Holders
                           specifying lower rates were accepted;

would result in such Existing Holders described in subclause (a) above
continuing to hold an aggregate number of Outstanding shares of Series C
Preferred Stock which, when added to the number of Outstanding shares of
Series C Preferred Stock to be purchased by such Potential Holders described
in subclause (b) above, would equal not less than the Available Preferred
Shares.

         2. Orders.

            (a) On or prior to the Submission Deadline on each Auction Date for
shares of Series C Preferred Stock:

                (i) each Beneficial Owner of shares of Series C Preferred
     Stock may submit to its Broker-Dealer by telephone or otherwise
     information as to:

                      (A) the number of Outstanding shares of Series C
          Preferred Stock, if any, held by such Beneficial Owner which such
          Beneficial Owner desires to continue to hold without regard to the
          Applicable Rate for the next succeeding Dividend Period;

                      (B) the number of Outstanding shares of Series C
          Preferred Stock, if any, held by such Beneficial Owner which such
          Beneficial Owner offers to sell if the Applicable Rate for the next
          succeeding Dividend Period shall be less than the rate per annum
          specified by such Beneficial Owner; and/or

                      (C) the number of Outstanding shares of Series C
          Preferred Stock, if any, held by such Beneficial Owner which such
          Beneficial Owner offers to sell without regard to the Applicable
          Rate for the next succeeding Dividend Period; and

                (ii) each Broker-Dealer, using lists of potential Beneficial
     Owners, shall in good faith for the purpose of conducting a competitive
     Auction in a commercially reasonable manner, contact potential Beneficial
     Owners (by telephone or otherwise), including Persons that are not
     Beneficial Owners, on such lists to determine the number of shares of
     Series C Preferred Stock, if any, that each such potential Beneficial
     Owner offers to purchase if the Applicable Rate for the next succeeding
     Dividend Period shall not be less than the rate per annum specified by
     such potential Beneficial Owner.

For the purposes hereof, the communication by a Beneficial Owner or potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, of information referred to in clauses (a)(i) or (a)(ii) of this
paragraph (2) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with
the Auction Agent, is hereinafter referred to as a "Bidder" and collectively
as "Bidders;" an Order containing the information referred to in clause
(a)(i)(A) of this paragraph (2) is hereinafter referred to as a "Hold Order"
and collectively as "Hold Orders;" an Order containing the information
referred to in clauses (a)(i)(B) or (a)(ii) of this paragraph (2) is
hereinafter referred to as a "Bid" and collectively as "Bids;" and an Order
containing the information referred to in clause (a)(i)(C) of this paragraph
(2) is hereinafter referred to as a "Sell Order" and collectively as "Sell
Orders."

                (b) (i) A Bid by a Beneficial Owner or an Existing Holder of
     shares of Series C Preferred Stock subject to an Auction on any Auction
     Date shall constitute an irrevocable offer to sell if:

                      (A) the number of Outstanding shares of Series C
          Preferred Stock specified in such Bid if the Applicable Rate
          determined on such Auction Date shall be less than the rate
          specified therein;

                      (B) such number or a lesser number of Outstanding shares
          of Series C Preferred Stock to be determined as set forth in
          paragraph 5(a)(iv) if the Applicable Rate for Series C Preferred
          Stock determined on such Auction Date shall be equal to the rate
          specified therein; or

                      (C) the number of Outstanding shares of Series C
          Preferred Stock specified in such Bid if the rate specified therein
          shall be higher than the Maximum Rate, or such number or a lesser
          number of Outstanding shares of Series C Preferred Stock to be
          determined as set forth in paragraph 5(b)(iii) if the rate specified
          therein shall be higher than the Maximum Rate and Sufficient
          Clearing Bids do not exist.

                (ii) A Sell Order by a Beneficial Owner or an Existing Holder
     of Series C Preferred Stock subject to an Auction on any Auction Date
     shall constitute an irrevocable offer to sell:

                      (A) the number of Outstanding shares of Series C
          Preferred Stock specified in such Sell Order; or

                      (B) such number or a lesser number of Outstanding shares
          of Series C Preferred Stock as set forth in paragraph 5(b)(iii) if
          Sufficient Clearing Bids do not exist; provided, however, that a
          Broker-Dealer that is an Existing Holder with respect to shares of
          Series C Preferred Stock shall not be liable to any Person for
          failing to sell such shares pursuant to a Sell Order described in
          the proviso to paragraph 3(c) if (1) such shares were transferred by
          the Beneficial Owner thereof without compliance by such Beneficial
          Owner or its transferee Broker-Dealer (or other transferee Person,
          if permitted by the Corporation) with the provisions of paragraph 6
          or (2) such Broker-Dealer has informed the Auction Agent pursuant to
          the terms of its Broker-Dealer Agreement that, according to such
          Broker-Dealer's records, such Broker-Dealer believes it is not the
          Existing Holder of such shares.

                (iii) A Bid by a Potential Holder of shares of Series C
     Preferred Stock subject to an Auction on any Auction Date shall
     constitute an irrevocable offer to purchase if:

                      (A) the number of Outstanding shares of Series C
          Preferred Stock specified in such Bid if the Applicable Rate
          determined on such Auction Date shall be higher than the rate
          specified therein; or

                      (B) such number or a lesser number of Outstanding shares
          of Series C Preferred Stock as set forth in paragraph 5(a)(v) if the
          Applicable Rate determined on such Auction Date shall be equal to
          the rate specified therein.

            (c) No Order for any number of shares of Series C Preferred Stock
other than whole shares shall be valid.

         3. Submission of Orders by Broker-Dealers to Auction Agent.

            (a) Each Broker-Dealer shall submit in writing to the Auction
Agent prior to the Submission Deadline on each Auction Date all Orders for
Series C Preferred Stock subject to an Auction on such Auction Date obtained
by such Broker-Dealer, designating itself (unless otherwise permitted by the
Corporation) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a Potential
Holder in respect of shares subject to Orders submitted to it by potential
Beneficial Owners, and shall specify with respect to each Order for such
shares:

                (i) the name of the Bidder placing such Order (which shall be
     the Broker-Dealer unless otherwise permitted by the Corporation);

                (ii)the aggregate number of shares of Series C Preferred Stock
     that are the subject of such Order;

                (iii) to the extent that such Bidder is an Existing Holder of
     shares of Series C Preferred Stock:

                      (A) the number of shares of Series C Preferred Stock, if
          any, subject to any Hold Order of such Existing Holder;

                      (B) the number of shares of Series C Preferred Stock, if
          any, subject to any Bid of such Existing Holder and the rate
          specified in such Bid; and

                      (C) the number of shares of Series C Preferred Stock, if
          any, subject to any Sell Order of such Existing Holder; and

                (iv) to the extent such Bidder is a Potential Holder of Series
     C Preferred Stock, the rate and number of shares of Series C Preferred
     Stock specified in such Potential Holder's Bid.

               (b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one thousandth (.001) of 1%.

               (c) If an Order or Orders covering all of the Outstanding
shares of Series C Preferred Stock held by any Existing Holder is not
submitted to the Auction Agent prior to the Submission Deadline, the Auction
Agent shall deem a Hold Order to have been submitted by or on behalf of such
Existing Holder covering the number of Outstanding shares of Series C
Preferred Stock held by such Existing Holder and not subject to Orders
submitted to the Auction Agent; provided, however, that if an Order or Orders
covering all of the Outstanding Series C Preferred Stock held by any Existing
Holder is not submitted to the Auction Agent prior to the Submission Deadline
for an Auction relating to a Special Dividend Period consisting of more than
28 calendar days, the Auction Agent shall deem a Sell Order to have been
submitted by or on behalf of such Existing Holder covering the number of
Outstanding shares of Series C Preferred Stock held by such Existing Holder
and not subject to Orders submitted to the Auction Agent.

                           (d) If one or more Orders of an Existing Holder is
submitted
to the Auction Agent covering in the aggregate more than the number of
Outstanding shares of Series C Preferred Stock subject to an Auction held by
such Existing Holder, such Orders shall be considered valid in the following
order of priority:

                (i) all Hold Orders shall be considered valid, but only up to
     and including in the aggregate the number of Outstanding shares of Series
     C Preferred Stock held by such Existing Holder, and if the number of
     shares subject to such Hold Orders exceeds the number of Outstanding
     shares of Series C Preferred Stock held by such Existing Holder, the
     number of shares subject to each such Hold Order shall be reduced pro
     rata to cover the number of Outstanding shares of Series C Preferred
     Stock held by such Existing Holder;

                (ii)  (A) any Bid for Series C Preferred Stock shall be
     considered valid up to and including the excess of the number of
     Outstanding shares of Series C Preferred Stock held by such Existing
     Holder over the number of shares of Series C Preferred Stock subject to
     any Hold Orders referred to in clause (d)(i) above;

                      (B) subject to subclause (d)(ii)(A), if more than one
          Bid of an Existing Holder for shares of Series C Preferred Stock is
          submitted to the Auction Agent with the same rate and the number of
          Outstanding shares of Series C Preferred Stock subject to such Bids
          is greater than such excess, such Bids shall be considered valid up
          to and including the amount of such excess, and the number of shares
          of Series C Preferred Stock subject to each Bid with the same rate
          shall be reduced pro rata to cover the number of shares equal to
          such excess;

                      (C) subject to subclauses (d)(ii)(A) and (B), if more
          than one Bid of an Existing Holder for shares of Series C Preferred
          Stock is submitted to the Auction Agent with different rates, such
          Bids shall be considered valid in the ascending order of their
          respective rates up to and including the amount of such excess; and

                      (D) in any such event, the number, if any, of such
          Outstanding shares of Series C Preferred Stock subject to any
          portion of Bids considered not valid in whole or in part under this
          paragraph 3(d)(ii) shall be treated as the subject of a Bid by or on
          behalf of a Potential Holder at the rate specified therein; and

                (iii) all Sell Orders for shares of Series C Preferred Stock
     shall be considered valid up to and including the excess of the number of
     Outstanding shares of Series C Preferred Stock held by such Existing
     Holder over the sum of Outstanding shares of Series C Preferred Stock
     subject to valid Hold Orders referred to in paragraph 3(d)(i) above and
     valid Bids referred to in paragraph 3(d)(ii) above.

                           (e) If more than one Bid for shares of Series C
Preferred
Stock is submitted to the Auction Agent by or on behalf of any Potential Holder,
each such Bid submitted shall be a separate Bid with the rate and number of
shares therein specified.

                           (f) Any Order submitted by a Beneficial Owner or a
potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.

                  4. Determination of Sufficient Clearing Bids, Winning Bid
Rate and Applicable Rate.

                           (a) Not earlier than the Submission Deadline on
each
Auction Date for shares of Series C Preferred Stock, the Auction Agent shall
assemble all valid Orders submitted or deemed submitted to it by the
Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or
as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted
Orders") and shall determine:

                (i) the excess of the number of Outstanding shares of Series C
     Preferred Stock over the number of Outstanding shares of Series C
     Preferred Stock subject to Submitted Hold Orders (such excess being
     hereinafter referred to as the "Available Preferred Shares");

                (ii)from the Submitted Orders for shares of Series C Preferred
     Stock whether:

                      (A) the number of Outstanding shares of Series C
          Preferred Stock subject to Submitted Bids of Potential Holders
          specifying one or more rates equal to or lower than the Maximum Rate
          exceeds or is equal to the sum of

                      (B) the number of Outstanding shares of Series C
          Preferred Stock subject to Submitted Bids of Existing Holders
          specifying one or more rates higher than the Maximum Rate; and

                      (C) the number of Outstanding shares of Series C
          Preferred Stock subject to Submitted Sell Orders (in the event such
          excess or such equality exists (other than because the number of
          shares of Series C Preferred Stock in clauses (a)(ii)(A) and (B)
          above is zero because all of the Outstanding shares of Series C
          Preferred Stock are subject to Submitted Hold Orders), such
          Submitted Bids in clause (a)(ii)(A) above being hereinafter referred
          to collectively as "Sufficient Clearing Bids"); and

                (iii) if Sufficient Clearing Bids exist, the Winning Bid Rate.

               (b) Not later than 9:30 A.M., New York City time, on each
Auction Date, the Auction Agent shall advise the Corporation of the Maximum
Rate for shares of Series C Preferred Stock for which an Auction is being held
on the Auction Date and, based on such determination, promptly after the
Auction Agent has made the determinations pursuant to paragraph 4(a), the
Auction Agent shall advise the Corporation of the Applicable Rate for the next
succeeding Dividend Period thereof as follows:

                (i) if Sufficient Clearing Bids exist, that the Applicable
     Rate for the next succeeding Dividend Period thereof shall be equal to
     the Winning Bid Rate so determined;

                (ii)if Sufficient Clearing Bids do not exist (other than
     because all of the Outstanding shares of such series are subject to
     Submitted Hold Orders), that the Applicable Rate for the next succeeding
     Dividend Period thereof shall be equal to the Maximum Rate; or

                (iii) if all of the Outstanding shares of Series C Preferred
     Stock are subject to Submitted Hold Orders, that the Applicable Rate for
     the next succeeding Dividend Period thereof shall be the All Hold Rate.

     5. Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation.

         Existing Holders shall continue to hold the shares of Series C
Preferred Stock that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to paragraph 4(a), the Submitted Bids and
Submitted Sell Orders shall be accepted or rejected by the Auction Agent and
the Auction Agent shall take such other action as set forth below:

               (a) If Sufficient Clearing Bids for shares of Series C
Preferred Stock have been made, all Submitted Sell Orders shall be accepted
and, subject to the provisions of paragraphs 5(d) and 5(e), Submitted Bids
shall be accepted or rejected as follows in the following order of priority
and all other Submitted Bids shall be rejected:

                (i) Existing Holders' Submitted Bids for shares of Series C
     Preferred Stock specifying any rate that is higher than the Winning Bid
     Rate shall be accepted, thus requiring each such Existing Holder to sell
     the Series C Preferred Stock subject to such Submitted Bids;

                (ii)Existing Holders' Submitted Bids for shares Series C
     Preferred Stock specifying any rate that is lower than the Winning Bid
     Rate shall be rejected, thus entitling each such Existing Holder to
     continue to hold the Series C Preferred Stock subject to such Submitted
     Bids;

                (iii) Potential Holders' Submitted Bids for shares of Series C
     Preferred Stock specifying any rate that is lower than the Winning Bid
     Rate shall be accepted;

                (iv) each Existing Holder's Submitted Bid for shares of Series
     C Preferred Stock specifying a rate that is equal to the Winning Bid Rate
     shall be rejected, thus entitling such Existing Holder to continue to
     hold the shares of Series C Preferred Stock subject to such Submitted
     Bid, unless the number of Outstanding shares of Series C Preferred Stock
     subject to all such Submitted Bids shall be greater than the number of
     shares of Series C Preferred Stock ("remaining shares") in the excess of
     the Available Preferred Shares over the number of shares of Series C
     Preferred Stock subject to Submitted Bids described in paragraphs
     5(a)(ii) and 5(a)(iii), in which event such Submitted Bid of such
     Existing Holder shall be rejected in part, and such Existing Holder shall
     be entitled to continue to hold shares of Series C Preferred Stock
     subject to such Submitted Bid, but only in an amount equal to the shares
     of Series C Preferred Stock obtained by multiplying the number of
     remaining shares by a fraction, the numerator of which shall be the
     number of Outstanding shares of Series C Preferred Stock held by such
     Existing Holder subject to such Submitted Bid and the denominator of
     which shall be the aggregate number of Outstanding shares of Series C
     Preferred Stock subject to such Submitted Bids made by all such Existing
     Holders that specified a rate equal to the Winning Bid Rate;

         and

                (v) each Potential Holder's Submitted Bid for shares of Series
     C Preferred Stock specifying a rate that is equal to the Winning Bid Rate
     shall be accepted but only in an amount equal to the number of shares
     obtained by multiplying the number of shares of Series C Preferred Stock
     in the excess of the Available Preferred Shares over the number of shares
     of Series C Preferred Stock subject to Submitted Bids described in
     paragraph 5(a)(ii) through (iv) by a fraction, the numerator of which
     shall be the number of Outstanding shares of Series C Preferred Stock
     subject to such Submitted Bid and the denominator of which shall be the
     aggregate number of Outstanding shares of Series C Preferred Stock
     subject to such Submitted Bids made by all such Potential Holders that
     specified a rate equal to the Winning Bid Rate.

               (b) If Sufficient Clearing Bids for shares of Series C
Preferred Stock have not been made (other than because all of the Outstanding
shares are subject to Submitted Hold Orders), subject to the provisions of
paragraph 5(d), Submitted Orders shall be accepted or rejected as follows in
the following order of priority and all other Submitted Bids for shares of
Series C Preferred Stock shall be rejected:

                (i) Existing Holders' Submitted Bids for shares of Series C
     Preferred Stock specifying any rate that is equal to or lower than the
     Maximum Rate shall be rejected, thus entitling such Existing Holders to
     continue to hold the shares of Series C Preferred Stock subject to such
     Submitted Bids;

                (ii)Potential Holders' Submitted Bids for shares of Series C
     Preferred Stock specifying any rate that is equal to or lower than the
     Maximum Rate shall be accepted; and

                (iii) Each Existing Holder's Submitted Bid for shares of
     Series C Preferred Stock specifying any rate that is higher than the
     Maximum Rate and the Submitted Sell Orders of each Existing Holder shall
     be accepted, thus entitling each Existing Holder that submitted or on
     whose behalf was submitted any such Submitted Bid or Submitted Sell Order
     to sell shares of Series C Preferred Stock subject to such Submitted Bid
     or Submitted Sell Order, but in both cases only in an amount equal to the
     number of shares of Series C Preferred Stock obtained by multiplying the
     number of shares of Series C Preferred Stock subject to Submitted Bids
     described in paragraph 5(b)(ii) by a fraction, the numerator of which
     shall be the number of Outstanding shares of Series C Preferred Stock
     held by such Existing Holder subject to such Submitted Bid or Submitted
     Sell Order and the denominator of which shall be the aggregate number of
     Outstanding shares of Series C Preferred Stock subject to all such
     Submitted Bids and Submitted Sell Orders.

               (c) If all of the Outstanding shares of Series C Preferred
Stock are subject to Submitted Hold Orders, all Submitted Bids for such shares
shall be rejected.

               (d) If, as a result of the procedures described in paragraph
5(a)(iv) or (v) or paragraph 5(b)(iii), any Existing Holder would be entitled
or required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of Series C Preferred Stock on any Auction
Date, the Auction Agent shall, in such manner as it shall determine in its
sole discretion, round up or down the number of shares of Series C Preferred
Stock to be purchased or sold by any Existing Holder or Potential Holder on
such Auction Date as a result of such procedures so that the number of shares
so purchased or sold by each Existing Holder or Potential Holder on such
Auction Date shall be whole shares.

               (e) If, as a result of the procedures described in paragraph
5(a)(v) any Potential Holder would be entitled or required to purchase less
than a whole share of Series C Preferred Stock on any Auction Date, the
Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate shares of Series C Preferred Shares for purchase among
Potential Holders so that only whole shares are purchased on such Auction Date
as a result of such procedures by any Potential Holder, even if such
allocation results in one or more Potential Holders not purchasing Series C
Preferred Stock on such Auction Date.

               (f) Based on the results of each Auction for shares of Series C
Preferred Stock, the Auction Agent shall determine the aggregate number of
such shares to be purchased and the aggregate number of such shares to be sold
by Potential Holders and Existing Holders and, with respect to each Potential
Holder and Existing Holder, to the extent that such aggregate number of shares
to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, Series C Preferred Stock. Notwithstanding
any provision of the Auction Procedures to the contrary, in the event an
Existing Holder or Beneficial Owner of shares of Series C Preferred Stock with
respect to whom a Broker-Dealer submitted a Bid to the Auction Agent for such
shares that was accepted in whole or in part, or submitted or is deemed to
have submitted a Sell Order for such shares that was accepted in whole or in
part, fails to instruct its Agent Member to deliver such shares against
payment therefor, partial deliveries of shares of Series C Preferred Stock
that have been made in respect of Potential Holders' or Potential Beneficial
Owners' Submitted Bids for shares of Series C Preferred Stock that have been
accepted in whole or in part shall constitute good delivery to such Potential
Holders and Potential Beneficial Owners.

               (g) Neither the Corporation nor the Auction Agent nor any
affiliate of either shall have any responsibility or liability with respect to
the failure of an Existing Holder, a Potential Holder, a Beneficial Owner, a
Potential Beneficial Owner or its respective Agent Member to deliver shares of
Series C Preferred Stock or to pay for shares of Series C Preferred Stock sold
or purchased pursuant to the Auction Procedures or otherwise.

     6. Transfer of Series C Preferred Stock.

        Unless otherwise permitted by the Corporation, a Beneficial
Owner or an Existing Holder may sell, transfer or otherwise dispose of shares
of Series C Preferred Stock only in whole shares and only pursuant to a Bid or
Sell Order placed with the Auction Agent in accordance with the procedures
described in this Article II or to a Broker-Dealer; provided, however, that
(a) a sale, transfer or other disposition of shares of Series C Preferred
Stock from a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer as the Holder of such shares to that Broker-Dealer or another
customer of that Broker-Dealer shall not be deemed to be a sale, transfer or
other disposition for purposes of this paragraph 6 if such Broker- Dealer
remains the Existing Holder of the shares so sold, transferred or disposed of
immediately after such sale, transfer or disposition and (b) in the case of
all transfers other than pursuant to Auctions, the Broker-Dealer (or other
Person, if permitted by the Corporation) to whom such transfer is made shall
advise the Auction Agent of such transfer.


                                  ARTICLE III

             ABILITY OF BOARD OF DIRECTORS TO MODIFY THE ARTICLES
                                 SUPPLEMENTARY

         The calculation of Adjusted Value, Basic Maintenance Amount and the
elements of each of them and the definitions of such terms and elements may be
modified by action of the Board of Directors without further action by the
stockholders if the Board of Directors determines that such modification is
necessary to prevent a reduction in rating of the shares of Preferred Stock by
the Rating Agencies rating such shares at the request of the Corporation or is
in the best interests of the holders of shares of Common Stock and is not
adverse to the Holders of shares of Preferred Stock in view of advice to the
Corporation by the relevant Rating Agencies that such modification would not
adversely affect the then-current rating of the shares of Series C Preferred
Stock. To the extent the Corporation is unable to obtain an opinion of counsel
to the effect that operation of the foregoing sentence is enforceable in the
circumstances then obtaining, the calculation of Adjusted Value, Basic
Maintenance Amount and the elements of each of them and the definitions of
such terms and the elements thereof shall be adjusted from time to time
without further action by the Board of Directors and the stockholders only to
reflect changes made thereto independently by a Rating Agency then rating
Preferred Stock at the request of the Corporation if such Rating Agency has
advised the Corpo ration in writing separately (a) of such adjustments and (b)
that the revised calcula tion definition would not cause such Rating Agency to
reduce or withdraw its then-current rating of the shares of Preferred Stock or
any other Rating Agency then rating Preferred Stock at the request of the
Corporation to reduce or withdraw its then-current rating. The adjustments
contemplated by the preceding sentence shall be made effective upon the time
the Corporation receives the notice from such Rating Agency to the effect
specified in clause (b) of the preceding sentence. Any such modification may
be rescinded or further modified by action of the Board of Directors and
stockholders.

         In addition, subject to compliance with applicable law, the Board of
Directors may amend the definition of Maximum Rate to increase the applicable
percentage by which the Reference Rate is multiplied to determine the Maximum
Rate shown therein without the vote or consent of the Holders of shares of
Preferred Stock, including shares of the Series C Preferred Stock, or any
other stockholder of the Corporation, after consultation with the
Broker-Dealers, and with confirmation from each Rating Agency that immediately
following any such increase the Corporation would meet the Basic Maintenance
Test.

         Notwithstanding the provisions of the preceding paragraph, to the
extent permitted by law, the Board of Directors, without the vote of the
Holders of the shares of Series C Preferred Stock or any other capital stock
of the Corporation, may amend the provisions of these Articles Supplementary
to resolve any inconsistency or ambiguity or to remedy any formal defect so
long as the amendment does not materially adversely affect any of the contract
rights of holders of shares of the Series C Preferred Stock or any other
capital stock of the Corporation or adversely affect the then current rating
on the Series C Preferred Stock by any Rating Agency.

<PAGE>

         IN WITNESS WHEREOF, The Gabelli Convertible and Income Securities
Fund Inc. has caused these presents to be signed in its name and on its behalf
by a duly authorized officer, and its corporate seal to be hereunto affixed
and attested by its Secretary, and the said officers of the Corporation
further acknowledge said instrument to be the corporate act of the
Corporation, and state that to the best of their knowledge, information and
belief under penalty of perjury the matters and facts herein set forth with
respect to approval are true in all material respects, all on March 12, 2003.





                                       By ______________________________
                                          Name:   Bruce N. Alpert
                                          Title:  President


Attest:

________________________________
Name:    James E. McKee
Title:   Secretary






                           [Articles Supplementary]

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>s448060.txt
<DESCRIPTION>EX 99 (D)(II) -- SPECIMEN B CERTIF.
<TEXT>
                                                                    EX-99(d)(ii)


CERTIFICATE NUMBER                                           NUMBER OF SHARES

      1
                      THE GABELLI CONVERTIBLE AND INCOME
                             SECURITIES FUND INC.
                            a Maryland corporation
                   Series B [__]% Cumulative Preferred Stock
                           $.001 Par Value Per Share
                    $25.00 Liquidation Preference Per Share

                              Cusip No. 36240B307

         This certifies that Cede & Co. is the owner of 1,000,000 fully paid
and non-assessable Shares of Series B [__]% Cumulative Preferred Stock, par
value $.001 per share, liquidation preference $25.00 per share, of The Gabelli
Convertible and Income Securities Fund Inc. (the "Fund") transferable only on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid unless countersigned by the transfer agent and
registrar.

   Upon request, and without charge, the Fund will furnish a full statement of
the designations and any preferences, conversion and other rights, voting
powers, restrictions, limitation as to dividends, qualifications, and terms
and conditions of redemption of the securities represented by this
Certificate.

         IN WITNESS WHEREOF, the Fund has caused this Certificate to be signed
by its duly authorized officers and its Seal to be hereunto affixed this day
of March 2003.


____________________________,
As Transfer Agent and Registrar             THE GABELLI CONVERTIBLE AND
                                            INCOME SECURITIES FUND INC.


By:___________________________              By:_________________________
   Authorized Signature                     Name:  Bruce Alpert
                                            Title: Treasurer and Vice President


                                            Attest:_____________________
                                            Name:  James McKee
                                            Title: Secretary




THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OF STOCK AUTHORIZED TO BE ISSUED
AND, WITH RESPECT TO THE CLASSES OF STOCK WHICH MAY BE ISSUED INA SERIES, THE
VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH
SUCH SERIES, SO FAR AS THE SAME HAVE BEEN FIXED AND DETERMINED, AND THE
AUTHORITY OF THE BOARD OF DIRECTORS TO FIX AND DETERMINE THE RELATIVE RIGHTS
AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY BE MADE TO THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.


THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MASSACHUSETTS AND NEW YORK, NEW
YORK




                                 TRANSFER FORM


         FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns and transfers _______ Shares of Series B Cumulative Preferred Stock
represented by this Certificate unto _______________ , and does hereby
irrevocably constitute and appoint ___________________________ attorney to
transfer said Shares on the books of the within named Fund with full power of
substitution in the premises.


Dated: _____________________, _______


In presence of:


_______________                       _______________



         Shares of Series B Cumulative Preferred Stock evidenced by this
Certificate may be sold, transferred or otherwise disposed of only pursuant to
the provisions of the Fund's Articles Supplementary Creating and Fixing the
Rights of the Series B Cumulative Preferred Stock, a copy of which may be
obtained at the office of the State Department of Assessments and Taxation of
Maryland.

         The Fund will furnish information about the restrictions on
transferability to any stockholder upon request and without charge. Any such
request should be addressed to the Secretary of the Fund.

         The Fund will furnish to any stockholder on request and without
charge a full statement of the designations, and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class authorized to be issued, the differences in the relative rights and
preferences between shares of any series of any authorized preferred or
special class to the extent they have been set, and the authority of the Board
of Directors to classify unissued shares and to set the relative rights and
preference thereof and of any subsequent series of such preferred or special
classes. Any such request should be addressed to the Secretary of the Fund.

         Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Fund or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>6
<FILENAME>s448063.txt
<DESCRIPTION>EX 99 (D)(III) -- SPECIMEN C CERTIF.
<TEXT>
                                                                 EX-99(d)(iii)

CERTIFICATE NUMBER                                          NUMBER OF SHARES

      1
                      THE GABELLI CONVERTIBLE AND INCOME
                             SECURITIES FUND INC.
                            a Maryland corporation
               Series C Auction Rate Cumulative Preferred Stock
                           $.001 Par Value Per Share
                   $25,000 Liquidation Preference Per Share

                              Cusip No. 36240B406

       This certifies that Cede & Co. is the owner of 51,000 fully paid and
non-assessable Shares of Series C Auction Rate Cumulative Preferred Stock, par
value $.001 per share, liquidation preference $25,000 per share, of The
Gabelli Convertible and Income Securities Fund Inc. (the "Fund") transferable
only on the books of the Fund by the holder thereof in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid unless countersigned by the transfer agent and
registrar.

   Upon request, and without charge, the Fund will furnish a full statement of
the designations and any preferences, conversion and other rights, voting
powers, restrictions, limitation as to dividends, qualifications, and terms
and conditions of redemption of the securities represented by this
Certificate.

         IN WITNESS WHEREOF, the Fund has caused this Certificate to be signed
by its duly authorized officers and its Seal to be hereunto affixed this day
of March 2003.


____________________________,
As Transfer Agent and Registrar            THE GABELLI CONVERTIBLE AND
                                           INCOME SECURITIES FUND INC.

                                           By:________________________________
By:___________________________             Name:  Bruce Alpert
   Authorized Signature                    Title: Treasurer and Vice President

                                           Attest:____________________________
                                           Name:  James McKee
                                           Title: Secretary




THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OF STOCK AUTHORIZED TO BE ISSUED
AND, WITH RESPECT TO THE CLASSES OF STOCK WHICH MAY BE ISSUED INA SERIES, THE
VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH
SUCH SERIES, SO FAR AS THE SAME HAVE BEEN FIXED AND DETERMINED, AND THE
AUTHORITY OF THE BOARD OF DIRECTORS TO FIX AND DETERMINE THE RELATIVE RIGHTS
AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY BE MADE TO THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.


SERIES C AUCTION RATE CUMULATIVE PREFERRED SHARES MAY BE TRANSFERRED ONLY (A)
PURSUANT TO AN ORDER PLACED IN AN AUCTION, (B) TO OR THROUGH A BROKER-DEALER
OR (C) TO THE FUND OR ANY AFFILIATE. NOTWITHSTANDING THE FOREGOING, A TRANSFER
OTHER THAN PURSUANT TO AN AUCTION WILL NOT BE EFFECTIVE UNLESS THE SELLING
EXISTING HOLDER OR THE AGENT MEMBER OF SUCH EXISTING HOLDER (IN THE CASE OF AN
EXISTING HOLDER WHOSE SHARES ARE LISTED IN ITS OWN NAME ON THE BOOKS OF THE
AUCTION AGENT), OR THE BROKER-DEALER OR AGENT MEMBER OF SUCH BROKER-DEALER (IN
THE CASE OF A TRANSFER BETWEEN PERSONS HOLDING SHARES THROUGH DIFFERENT
BROKER-DEALERS), ADVISES THE AUCTION AGENT OF SUCH TRANSFER.




                                 TRANSFER FORM


         FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns and transfers _______ Shares of Series C Auction Rate Cumulative
Preferred Stock represented by this Certificate unto _______________ , and
does hereby irrevocably constitute and appoint ___________________________
attorney to transfer said Shares on the books of the within named Fund with
full power of substitution in the premises.


Dated: _____________________, _______


In presence of:


_______________                       _______________



         Shares of Series C Auction Rate Cumulative Preferred Stock evidenced
by this Certificate may be sold, transferred or otherwise disposed of only
pursuant to the provisions of the Fund's Articles Supplementary Creating and
Fixing the Rights of the Series C Auction Rate Cumulative Preferred Stock, a
copy of which may be obtained at the office of the State Department of
Assessments and Taxation of Maryland.

         The Fund will furnish information about the restrictions on
transferability to any stockholder upon request and without charge. Any such
request should be addressed to the Secretary of the Fund.

         The Fund will furnish to any stockholder on request and without
charge a full statement of the designations, and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class authorized to be issued, the differences in the relative rights and
preferences between shares of any series of any authorized preferred or
special class to the extent they have been set, and the authority of the Board
of Directors to classify unissued shares and to set the relative rights and
preference thereof and of any subsequent series of such preferred or special
classes. Any such request should be addressed to the Secretary of the Fund.

         Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Fund or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>7
<FILENAME>underag.txt
<DESCRIPTION>EXHIBIT 99(H)
<TEXT>
                                                                 Exhibit 99(h)


            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.

          1,000,000 Shares Series B [ ]% Cumulative Preferred Stock,
                     Liquidation Preference $25 Per Share

         1,000 Shares Series C Auction Rate Cumulative Preferred Stock
                   Liquidation Preference $25,000 Per Share

                            UNDERWRITING AGREEMENT
                            ----------------------

                                                               March [ ], 2003

SALOMON SMITH BARNEY INC.
GABELLI & COMPANY, INC.

c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Dear Ladies and Gentleman:

            The Gabelli Convertible and Income Securities Fund Inc., a
Maryland corporation (the "Fund"), proposes, upon the terms and conditions set
forth herein, to issue and sell an aggregate of 1,000,000 shares (the "Series
B Shares") of its Series B [ ]% Cumulative Preferred Stock, liquidation
preference $25 per share, $0.001 par value per share (the "Series B
Preferred") and an aggregate of 1,000 shares (the "Series C Shares" and
together with the Series B Shares, the "Shares") of its Series C Auction Rate
Cumulative Preferred Stock, liquidation preference $25,000 per share, $0.001
par value per share (the "Series C Auction Rate Preferred"), to the several
Underwriters named in Schedule I hereto (the "Underwriters"). The Shares will
be authorized by, and subject to the terms and conditions of, the Articles
Supplementary of each of the Series B Shares and Series C Shares to be adopted
in connection with the issuance of the Shares (collectively, the "Articles
Supplementary").

            The Fund and its investment adviser, Gabelli Funds, LLC, a New
York limited liability company (the "Adviser"), wish to confirm as follows
their agreement with you in connection with the several purchases of the
Shares by the Underwriters.

            The Fund has entered into an investment advisory agreement with
the Adviser, a custodian agreement with State Street Bank and Trust Company, a
registrar, transfer agency and dividend reinvestment plan with Equiserve Trust
Company, N.A., and an auction agency agreement with The Bank of New York. Such
agreements are hereinafter referred to as the "Investment Advisory Agreement",
the "Custodian Agreement", the "Transfer Agency Agreement" and the "Auction
Agency Agreement", respectively. Collectively, the Investment Advisory
Agreement, the Custodian Agreement, the Transfer Agency Agreement and the
Auction Agency Agreement are hereinafter referred to as the "Fund Agreements".
This Underwriting Agreement is hereinafter referred to as the "Agreement".

            1. Registration Statement and Prospectus. The Fund has prepared in
conformity with the provisions of the Securities Act of 1933, as amended (the
"1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act")
and the rules and regulations of the Securities and Exchange Commission (the
"Commission") promulgated under the 1933 Act (the "1933 Act Rules and
Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and,
together with the 1933 Act Rules and Regulations, the "Rules and Regulations")
a registration statement on Form N-2 (File Nos. 333-102494 and 811-05715)
under the 1933 Act and the 1940 Act (the "registration statement"), including
a prospectus relating to the Shares, and has filed the registration statement
and prospectus in accordance with the 1933 Act and the 1940 Act. The Fund also
has filed a notification of registration of the Fund as an investment company
under the 1940 Act on Form N-8A (the "1940 Act Notification"). The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective under the 1933 Act or, if the registration statement
became effective under the 1933 Act prior to the execution of this Agreement,
as amended or supplemented at the time it became effective, prior to the
execution of this Agreement. If it is contemplated, at the time this Agreement
is executed, that a post-effective amendment to the registration statement
will be filed under the 1933 Act and must be declared effective before the
offering of the Shares may commence, the term "Registration Statement" as used
in this Agreement means the registration statement as amended by said
post-effective amendment. If the Fund has filed an abbreviated registration
statement to register an additional amount of Shares pursuant to Rule 462(b)
under the 1933 Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall include such Rule 462
Registration Statement. The term "Prospectus" as used in this Agreement means
the prospectus and statement of additional information in the forms included
in the Registration Statement or, if the prospectus and statement of
additional information included in the Registration Statement omits
information in reliance on Rule 430A under the 1933 Act Rules and Regulations
and such information is included in a prospectus and statement of additional
information filed with the Commission pursuant to Rule 497(h) under the 1933
Act Rules and Regulations, the term "Prospectus" as used in this Agreement
means the prospectus and statement of additional information in the form
included in the Registration Statement as supplemented by the addition of the
information contained in the prospectus filed with the Commission pursuant to
Rule 497(h). The term "Prepricing Prospectus" as used in this Agreement means
the prospectus and statement of additional information subject to completion
in the form included in the registration statement at the time of filing of
amendment No. [ ] to the registration statement with the Commission on March [
], 2003 and as such prospectus and statement of additional information shall
have been amended from time to time prior to the date of the Prospectus,
together with any other prospectus and statement of additional information
relating to the Fund other than the Prospectus, approved in writing by or
directly or indirectly prepared by the Fund or the Adviser; it being
understood that the definition of Prepricing Prospectus above shall not
include any Prepricing Prospectus prepared by any Underwriter unless approved
in writing by the Fund or Adviser. The terms "Registration Statement",
"Prospectus" and "Prepricing Prospectus" shall also include any financial
statements incorporated by reference therein.

            The Fund has furnished you with copies of such Registration
Statement, each amendment to such Registration Statement filed with the
Commission and each Prepricing Prospectus.

            2. Agreements to Sell and Purchase. The Fund hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Fund and the Adviser herein contained and subject to all the
terms and conditions set forth herein, each Underwriter agrees, severally and
not jointly, to purchase from the Fund, at a purchase price of $[ ] per Series
B Share and a purchase price of $[ ] per Series C Share, the number of Shares
set forth opposite the name of such Underwriter in Schedule I hereto.

            3. Terms of Public Offering. The Fund and the Adviser have been
advised by you that the Underwriters propose to make a public offering of
their respective portions of the Shares as soon after the Registration
Statement and this Agreement have become effective as in your judgment is
advisable and initially to offer the Shares upon the terms set forth in the
Prospectus.

            4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Shares shall be made at the office of
Salomon Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, at
10:00 A.M., New York City time, on March [ ], 2003 (the "Closing Date"). The
place of closing for the Shares and the Closing Date may be varied by
agreement between you and the Fund.

            Certificates for the Shares shall be registered in such names and
in such denominations as you shall request prior to 9:30 A.M., New York City
time, on the second business day preceding the Closing Date. Such certificates
shall be made available to you in New York City for inspection and packaging
not later than 9:30 A.M., New York City time, on the business day next
preceding the Closing Date. The certificates evidencing the Shares shall be
delivered to you on the Closing Date against payment of the purchase price
therefor in immediately available funds.

            5. Agreements of the Fund and the Adviser. The Fund and the
Adviser, jointly and severally, agree with the several Underwriters as
follows:

            (a) If, at the time this Agreement is executed and delivered, it
is necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective under the 1933 Act before the offering of the
Shares may commence, the Fund will endeavor to cause the Registration
Statement or such post-effective amendment to become effective under the 1933
Act as soon as possible and will advise you promptly and, if requested by you,
will confirm such advice in writing when the Registration Statement or such
post-effective amendment has become effective.

            (b) The Fund will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request made by the Commission
for amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus (or any amendment or supplement to any of the
foregoing) or for additional information, (ii) of the issuance by the
Commission, the National Association of Securities Dealers, Inc. (the "NASD"),
any state securities commission, any national securities exchange, any
arbitrator, any court or any other governmental, regulatory, self-regulatory
or administrative agency or any official of any order suspending the
effectiveness of the Registration Statement, prohibiting or suspending the use
of the Prospectus, any Prepricing Prospectus or any sales material (as
hereinafter defined), of any notice pursuant to Section 8(e) of the 1940 Act,
of the suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation or contemplated initiation of any proceeding
for any such purposes, (iii) of receipt by the Fund, the Adviser, any
affiliate of the Fund or the Adviser or any representative or attorney of the
Fund or the Adviser of any other material communication from the Commission,
the NASD, any state securities commission, any national securities exchange,
any arbitrator, any court or any other governmental, regulatory,
self-regulatory or administrative agency or any official relating to the Fund
(if such communication relating to the Fund is received by such person within
three years after the date of this Agreement), the Registration Statement, the
1940 Act Notification, the Prospectus, any Prepricing Prospectus, any sales
material (as hereinafter defined) (or any amendment or supplement to any of
the foregoing), this Agreement or any of the Fund Agreements and (iv) within
the period of time referred to in paragraph (f) below, of any material adverse
change in the condition (financial or other), business, prospects, properties,
net assets or results of operations of the Fund or the Adviser or of the
happening of any event which makes any statement of a material fact made in
the Registration Statement, the Prospectus, any Prepricing Prospectus or any
sales material (as hereinafter defined) (or any amendment or supplement to any
of the foregoing) untrue or which requires the making of any additions to or
changes in the Registration Statement, the Prospectus, any Prepricing
Prospectus or any sales materials (as herein defined) (or any amendment or
supplement to any of the foregoing) in order to state a material fact required
by the 1933 Act, the 1940 Act or the Rules and Regulations to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or of the necessity
to amend or supplement the Registration Statement, the Prospectus, any
Prepricing Prospectus or any sales material (as herein defined) (or any
amendment or supplement to any of the foregoing) to comply with the 1933 Act,
the 1940 Act, the Rules and Regulations or any other law or order of any court
or regulatory body. If at any time the Commission, the NASD, any state
securities commission, any national securities exchange, any arbitrator, any
court or any other governmental, regulatory, self-regulatory or administrative
agency or any official shall issue any order suspending the effectiveness of
the Registration Statement, prohibiting or suspending the use of the
Prospectus or any sales material (as hereinafter defined) (or any amendment or
supplement to any of the foregoing) or suspending the qualification of the
Shares for offering or sale in any jurisdiction, the Fund will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.

            (c) The Fund will furnish to you, without charge, three signed
copies of the registration statement and the 1940 Act Notification as
originally filed with the Commission and of each amendment thereto, including
financial statements and all exhibits thereto and will also furnish to you,
without charge, such number of additional copies of the registration statement
and of each amendment thereto, but without exhibits, as you may request.

            (d) The Fund will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus, any
Prepricing Prospectus or any sales material (as hereinafter defined) of which
you shall not previously have been advised or to which you shall object after
being so advised or (ii) so long as, in the opinion of counsel for the
Underwriters, a Prospectus is required by the 1933 Act to be delivered in
connection with sales by any Underwriter or dealer, file any information,
documents or reports pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"), without delivering a copy of such information,
documents or reports to you prior to or concurrently with such filing.

            (e) Prior to the execution and delivery of this Agreement, the
Fund has delivered to you, without charge, in such quantities as you have
requested, copies of the form of the Prepricing Prospectus. The Fund consents
to the use, in accordance with the provisions of the 1933 Act and with the
state securities or blue sky laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, prior to the date of the
Prospectus, of each Prepricing Prospectus so furnished by the Fund.

            (f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the 1933 Act to be
delivered in connection with sales by any Underwriter or dealer, the Fund will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendments or supplements thereto)
as you may request. The Fund consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the 1933
Act and with the state securities or blue sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
law to be delivered in connection with sales by any Underwriter or dealer. If
during such period of time any event shall occur that in the judgment of the
Fund or in the opinion of counsel for the Underwriters is required to be set
forth in the Registration Statement or the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Registration
Statement or the Prospectus to comply with the 1933 Act, the 1940 Act, the
Rules and Regulations or any other federal law, rule or regulation, or any
state securities or blue sky disclosure laws, rules or regulations, the Fund
will forthwith prepare and, subject to the provisions of paragraph (d) above,
promptly file with the Commission an appropriate supplement or amendment
thereto, and will expeditiously furnish to the Underwriters and dealers,
without charge, a reasonable number of copies thereof. In the event that the
Fund and you agree that the Registration Statement or the Prospectus is to be
amended or supplemented, the Fund, if requested by you, will promptly issue a
press release announcing or disclosing the matters to be covered by the
proposed amendment or supplement.

            (g) The Fund and the Adviser will cooperate with you and with
counsel for the Underwriters in connection with the registration or
qualification, if necessary, of the Shares for offering and sale by the
several Underwriters and by dealers under the securities or blue sky laws of
such jurisdictions as you may designate and will file such consents to service
of process or other documents, if any, necessary or appropriate in order to
effect such registration or qualification.

            (h) The Fund will make generally available to its security holders
an earnings statement, which need not be audited, covering a twelve-month
period ending not later than 15 months after the effective date of the
Registration Statement, as soon as practicable after the end of such period,
which earnings statement shall satisfy the provisions of Section 11(a) of the
1933 Act and Rule 158 of the 1933 Act Rules and Regulations.

            (i) During the period of five years hereafter, the Fund will
furnish to you (i) as soon as available, a copy of each report of the Fund
mailed to stockholders or filed with the Commission or furnished to the New
York Stock Exchange (the "NYSE") other than reports on Form N-SAR, and (ii)
from time to time such other information concerning the Fund as you may
request.

            (j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 11 hereof or by notice given by you terminating
this Agreement pursuant to Section 11 or Section 12 hereof) or if this
Agreement shall be terminated by the Underwriters because of any failure or
refusal on the part of the Fund or the Adviser to comply with the terms or
fulfill any of the conditions of this Agreement required to be complied with
or fulfilled by them, the Fund or, in the case of a failure or refusal by the
Fund, the Adviser, agrees to reimburse you for all out-of-pocket expenses
(including fees and expenses of counsel for the Underwriters) incurred by you
in connection herewith.

            (k) The Fund will apply the net proceeds from the sale of the
Shares in accordance with the description set forth in the Prospectus and in
such a manner as to comply with the investment objectives, policies and
restrictions of the Fund as described in the Prospectus.

            (l) The Fund will timely file the requisite copies of the
Prospectus with the Commission pursuant to Rule 497(c) or Rule 497(h) of the
1933 Act Rules and Regulations, whichever is applicable or, if applicable,
will timely file the certification permitted by Rule 497(j) of the 1933 Act
Rules and Regulations and will advise you of the time and manner of such
filing.

            (m) Except as provided in this Agreement and except to the extent
any hedging activities disclosed in the Prospectus may be considered senior
securities, the Fund will not sell, contract to sell, or otherwise dispose of
any senior securities of the Fund, or grant any options or warrants to
purchase senior securities of the Fund, for a period of 180 days after the
date of the Prospectus, without the prior written consent of Salomon Smith
Barney Inc.

            (n) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, neither the Fund nor the Adviser has taken, nor
will it take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of any securities issued by the Fund to facilitate the sale or
resale of the Shares; it being understood that the Underwriters include
certain affiliates of the Adviser and that stabilization or other activity by
you on behalf of the Underwriters shall not be deemed to be violative of this
representation.

            (o) The Fund will use its best efforts to cause the Series B
Preferred, prior to the Closing Date, to be assigned a rating of Aaa by
Moody's Investors Service, Inc. ("Moody's") and the Series C Auction Rate
Preferred, prior to the Closing Date, to be assigned a rating of Aaa by
Moody's and a rating of AAA by Fitch, Inc. ("Fitch", and together with
Moody's, the "Rating Agencies").

            (p) The Fund will use its best efforts to have the Series B Shares
listed, subject to notice of issuance, on the NYSE on or before [ ], 2003.

            (q) The Fund's registration statement on Form 8-A, under the 1934
Act, has become effective.

            (r) The Fund and the Adviser will use their best efforts to
perform all of the agreements required of them and discharge all conditions to
closing as set forth in this Agreement.

            (s) The Fund will furnish to you, on the date on which delivery is
made to the Rating Agencies, the Accountant's Confirmation (as defined in the
Articles Supplementary) corresponding to the Basic Maintenance Report (as
defined in the Articles Supplementary) for the first Valuation Date (as
defined in the Articles Supplementary) following the Closing Date.

            6. Representations and Warranties of the Fund and the Adviser. The
Fund and the Adviser, jointly and severally, represent and warrant to each
Underwriter that:

            (a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 497 of the 1933 Act Rules and
Regulations, complied when so filed in all material respects with the
provisions of the 1933 Act, the 1940 Act and the Rules and Regulations. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.

            (b) The Registration Statement in the form in which it became or
becomes effective and also in such form as it may be when any post-effective
amendment thereto shall become effective and the Prospectus and any amendment
or supplement thereto when filed with the Commission under Rule 497 of the
1933 Act Rules and Regulations and the 1940 Act Notification when originally
filed with the Commission and any amendment or supplement thereto when filed
with the Commission, complied or will comply in all material respects with the
provisions of the 1933 Act, the 1940 Act and the Rules and Regulations and did
not or will not at any such times contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement or the Prospectus (or any amendment or supplement
thereto) made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Fund in writing by or on behalf of any
Underwriter through you expressly for use therein.

            (c) All the outstanding shares of capital stock of the Fund have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or similar rights; the Shares have been duly
authorized and, when issued and delivered to the Underwriters against payment
therefor in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable and free of any preemptive or similar rights and will
conform to the description thereof in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them). The capital
stock of the Fund conforms to the description thereof in the Registration
Statement and the Prospectus (and any amendment or supplement to either of
them).

            (d) The Fund is a corporation duly organized and validly existing
in good standing under the laws of the State of Maryland, with full corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Registration Statement and the Prospectus
(and any amendment or supplement to either of them), and is duly registered
and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, prospects, properties, net assets or
results of operations of the Fund. The Fund has no subsidiaries.

            (e) There are no legal or governmental proceedings pending or
threatened, against the Fund, or to which the Fund or any of its properties is
subject, that are required to be described in the Registration Statement or
the Prospectus (and any amendment or supplement to either of them) but are not
described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectus (and any amendment or supplement to
either of them) or to be filed as an exhibit to the Registration Statement
that are not described or filed as required by the 1933 Act, the 1940 Act or
the Rules and Regulations.

            (f) The Fund is not in violation of its articles of incorporation
or by-laws, or other organizational documents, or of any law, ordinance,
administrative or governmental rule or regulation applicable to the Fund or of
any decree of the Commission, the NASD, any state securities commission, any
national securities exchange, any arbitrator, any court or governmental
agency, body or official having jurisdiction over the Fund, or in default in
any material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any contract required to be included as an exhibit to the
Registration Statement (each, a "Material Fund Agreement").

            (g) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement or any of the Fund Agreements by the
Fund, nor the consummation by the Fund of the transactions contemplated hereby
or thereby (A) requires any consent, approval, authorization or other order of
or registration or filing with, the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may have been obtained prior to the date hereof and
such as may be required for compliance with the state securities or blue sky
laws of various jurisdictions which have been or will be effected in
accordance with this Agreement) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the articles
of incorporation, including the Articles Supplementary, or by-laws, or other
organizational documents, of the Fund or (B) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, any
agreement, indenture, lease or other instrument to which the Fund is a party
or by which it or any of its properties may be bound, or violates or will
violate any statute, law, regulation or filing or judgment, injunction, order
or decree applicable to the Fund or any of its properties, or will result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Fund pursuant to the terms of any agreement or
instrument to which it is a party or by which it may be bound or to which any
of its property or assets is subject. The Fund is not subject to any order of
any court or of any arbitrator, governmental authority or administrative
agency.

            (h) The accountants, PricewaterhouseCoopers LLP, who have audited
and certified or shall audit and certify the financial statements included or
incorporated by reference in the Registration Statement and the Prospectus (or
any amendment or supplement to either of them) are independent public
accountants as required by the 1933 Act, the 1940 Act and the Rules and
Regulations.

            (i) The financial statements, together with related schedules and
notes, included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement to either of them), present
fairly the financial position, results of operations and changes in financial
position of the Fund on the basis stated or incorporated by reference in the
Registration Statement and the Prospectus at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information and
data included in the Registration Statement and the Prospectus (and any
amendment or supplement to either of them) are accurately presented and
prepared on a basis consistent with such financial statements and the books
and records of the Fund.

            (j) The execution and delivery of, and the performance by the Fund
of its obligations under, this Agreement and the Fund Agreements have been
duly and validly authorized by the Fund, and this Agreement and the Fund
Agreements have been duly executed and delivered by the Fund and constitute
the valid and legally binding agreements of the Fund, enforceable against the
Fund in accordance with their terms, except as rights to indemnity and
contribution hereunder and thereunder may be limited by federal or state
securities laws.

            (k) Except as disclosed in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them), subsequent to
the respective dates as of which such information is given in the Registration
Statement and the Prospectus (and any amendment or supplement to either of
them), the Fund has not incurred any liability or obligation, direct or
contingent, or entered into any transaction, not in the ordinary course of
business, that is material to the Fund, and there has not been any change in
the capital stock, or material increase in the short-term debt or long-term
debt, of the Fund, or any material adverse change, or any development
involving or which may reasonably be expected to involve, a prospective
material adverse change, in the condition (financial or other), business,
prospects, properties, net assets or results of operations of the Fund,
whether or not arising in the ordinary course of business, it being understood
that a change of up to 15% of the aggregate market value of the Fund's assets
shall not cause this representation to be untrue.

            (l) The Fund has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Shares,
will not distribute any offering material in connection with the offering and
sale of the Shares other than the Registration Statement, the Prepricing
Prospectus, the Prospectus or other materials, if any, permitted by the 1933
Act, the 1940 Act or the Rules and Regulations.

            (m) The Fund has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits") as are
necessary to own its properties and to conduct its business in the manner
described in the Prospectus (and any amendment or supplement thereto), subject
to such qualifications as may be set forth in the Prospectus; the Fund has
fulfilled and performed all its material obligations with respect to such
permits and no event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the Fund under any such permit, subject
in each case to such qualification as may be set forth in the Prospectus (and
any amendment or supplement thereto); and, except as described in the
Prospectus (and any amendment or supplement thereto), none of such permits
contains any restriction that is materially burdensome to the Fund.

            (n) The Fund maintains and will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization and with the investment policies and restrictions of the Fund
and with the applicable requirements of the 1940 Act, the 1940 Act Rules and
Regulations and the Internal Revenue Code of 1986, as amended (the "Code");
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles, to
calculate net asset value, and to maintain accountability for assets and to
maintain compliance with the books and records requirements under the 1940 Act
and the 1940 Act Rules and Regulations; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.

            (o) To the Fund's knowledge, except as disclosed in the
Prospectus, neither the Fund nor any employee or agent of the Fund has made
any payment of funds of the Fund or received or retained any funds, which
payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.

            (p) The Fund has filed all tax returns required to be filed, which
returns are complete and correct, and the Fund is not in material default in
the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.

            (q) No holder of any security of the Fund has any right to require
registration of any shares of capital stock or any other security of the Fund
because of the filing of the Registration Statement or consummation of the
transactions contemplated by this Agreement.

            (r) The Fund, subject to the Registration Statement having been
declared effective and the filing of the Prospectus under Rule 497 under the
Rules and Regulations, has taken all required action under the 1933 Act, the
1940 Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares as contemplated by this Agreement.

            (s) The conduct by the Fund of its business (as described in the
Prospectus) does not require it to be the owner, possessor or licensee of any
patents, patent licenses, trademarks, service marks or trade names which it
does not own, possess or license.

            (t) The Fund is duly registered under the 1940 Act as a closed-end
diversified management investment company and the 1940 Act Notification has
been duly filed with the Commission and, at the time of filing thereof and any
amendment or supplement thereto, conformed in all material respects with all
applicable provisions of the 1940 Act and the Rules and Regulations. The Fund
is, and at all times through the completion of the transactions contemplated
hereby, will be, in compliance in all material respects with the terms and
conditions of the 1933 Act and the 1940 Act. No person is serving or acting as
an officer, director or investment adviser of the Fund except in accordance
with the provisions of the 1940 Act and the 1940 Act Rules and Regulations and
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the
rules and regulations of the Commission promulgated under the Advisers Act
(the "Advisers Act Rules and Regulations").

            (u) Except as stated in this Agreement and in the Prospectus (and
any amendment or supplement thereto), the Fund has not taken, nor will it
take, directly or indirectly, any action designed to or which might reasonably
be expected to cause or result in stabilization or manipulation of the price
of any securities issued by the Fund to facilitate the sale or resale of the
Shares, and the Fund is not aware of any such action taken or to be taken by
any affiliates of the Fund.

            (v) The Fund has filed in a timely manner each document or report
required to be filed by it pursuant to the 1934 Act and the rules and
regulations of Commission promulgated thereunder (the "1934 Act Rules and
Regulations"); each such document or report at the time it was filed conformed
to the requirements of the 1934 Act and the 1934 Act Rules and Regulations;
and none of such documents or reports contained an untrue statement of any
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.

            (w) All advertising, sales literature or other promotional
material (including "prospectus wrappers," "broker kits," "road show slides"
and "road show scripts"), whether in printed or electronic form, authorized in
writing by or prepared by the Fund or the Adviser for use in connection with
the offering and sale of the Shares (collectively, "sales material") complied
and comply in all material respects with the applicable requirements of the
1933 Act, the 1940 Act, the Rules and Regulations and the rules and
interpretations of the NASD and no such sales material contained or contains
an untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

            (x) Each of the Fund Agreements and the Fund's and the Adviser's
obligations under this Agreement and each of the Fund Agreements comply in all
material respects with all applicable provisions of the 1940 Act, the 1940 Act
Rules and Regulations, the Advisers Act the Advisers Act Rules and
Regulations.

            (y) At all times since its inception, as required by Subchapter M
of the Code, the Fund has complied with the requirements to qualify as a
regulated investment company under the Code.

            (z) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement to either of them), no director of
the Fund is an "interested person" (as defined in the 1940 Act) of the Fund or
an "affiliated person" (as defined in the 1940 Act) of any Underwriter.

            7. Representations and Warranties of the Adviser. The Adviser
represents and warrants to each Underwriter as follows:

            (a) The Adviser is a limited liability company duly organized and
validly existing in good standing under the laws of the State of New York,
with full limited liability company power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or supplement to
either of them), and is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or to qualify does not
have a material adverse effect on the condition (financial or other),
business, prospects, properties, net assets or results of operations of the
Adviser and its subsidiaries, taken as a whole, or on the ability of the
Adviser to perform its obligations under this Agreement and the Investment
Advisory Agreement.

            (b) The Adviser is duly registered with the Commission as an
investment adviser under the Advisers Act and is not prohibited by the
Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940
Act Rules and Regulations from acting under the Investment Advisory Agreement
for the Fund as contemplated by the Prospectus (or any amendment or supplement
thereto). There does not exist any proceeding or any facts or circumstances
the existence of which could lead to any proceeding which might adversely
affect the registration of the Adviser with the Commission.

            (c) There are no legal or governmental proceedings pending or, to
the knowledge of the Adviser, threatened against the Adviser, or to which the
Adviser or any of its properties is subject, that are required to be described
in the Registration Statement or the Prospectus (or any amendment or
supplement to either of them) but are not described as required or that may
reasonably be expected to involve a prospective material adverse change, in
the condition (financial or other), business, prospects, properties, net
assets or results of operations of the Adviser and its subsidiaries, taken as
a whole, or on the ability of the Adviser to perform its obligations under
this Agreement and the Investment Advisory Agreement.

            (d) Neither the execution, delivery or performance of this
Agreement or the Investment Advisory Agreement by the Adviser, nor the
consummation by the Adviser of the transactions contemplated hereby or thereby
(A) requires the Adviser to obtain any consent, approval, authorization or
other order of or registration or filing with, the Commission, the NASD, any
state securities commission, any national securities exchange, any arbitrator,
any court, regulatory body, administrative agency or other governmental body,
agency or official or conflicts or will conflict with or constitutes or will
constitute a breach of or a default under the certificate of incorporation or
by-laws, or other organizational documents of the Adviser or (B) conflicts or
will conflict with or constitutes or will constitute a breach of or a default
under, any agreement, indenture, lease or other instrument to which the
Adviser is a party or by which it or any of its properties may be bound, or
violates or will violate any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Adviser or any of its properties
or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Adviser pursuant to the terms
of any agreement or instrument to which it is a party or by which it may be
bound or to which any of the property or assets of the Adviser is subject. The
Adviser is not subject to any order of any court or of any arbitrator,
governmental authority or administrative agency except for (a) an Order of the
Securities and Exchange Commission, dated August 17, 1988 and (b) an Order of
the Federal Communications Commission, dated August 21, 1992.

            (e) The execution and delivery of, and the performance by the
Adviser of its obligations under, this Agreement and the Investment Advisory
Agreement have been duly and validly authorized by the Adviser, and this
Agreement and the Investment Advisory Agreement have been duly executed and
delivered by the Adviser and each constitutes the valid and legally binding
agreement of the Adviser, enforceable against the Adviser in accordance with
its terms except as rights to indemnity and contribution hereunder may be
limited by federal or state securities laws.

            (f) The Adviser has the financial resources available to it
necessary for the performance of its services and obligations as contemplated
in the Prospectus (or any amendment or supplement thereto) and under this
Agreement and the Investment Advisory Agreement.

            (g) The description of the Adviser in the Registration Statement
and the Prospectus (and any amendment or supplement thereto) complied and
comply in all material respects with the provisions the 1933 Act, the 1940
Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules
and Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.

            (h) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement to either of them), subsequent to
the respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement to either of
them), the Adviser has not incurred any liability or obligation, direct or
contingent, or entered into any transaction, not in the ordinary course of
business, that is material to the Adviser and its subsidiaries, taken as a
whole, and that is required to be disclosed in the Registration Statement or
in the Prospectus and there has not been any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, prospects, properties, net assets or results of operations of the
Adviser and its subsidiaries, taken as a whole, whether or not arising in the
ordinary course of business, or which, in each case, could have a material
adverse effect on the ability of the Adviser to perform its obligations under
this Agreement and the Investment Advisory Agreement.

            (i) The Adviser has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits") as are
necessary to own its properties and to conduct its business in the manner
described in the Prospectus (and any amendment or supplement thereto); the
Adviser has fulfilled and performed all its material obligations with respect
to such permits and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results in any
other material impairment of the rights of the Adviser under any such permit;
and, except as described in the Prospectus (and any amendment or supplement
thereto), none of such permits contains any restriction that is materially
burdensome to the Adviser.

            (j) Except as stated in this Agreement and in the Prospectus (and
in any amendment or supplement thereto), the Adviser has not taken, nor will
it take, directly or indirectly, any action designed to or which might
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities issued by the Fund to facilitate the sale or
resale of the Shares, and the Adviser is not aware of any such action taken or
to be taken by any affiliates of the Adviser; it being understood that the
Underwriters include certain affiliates of the Adviser and that stabilization
or other activity by you shall not be deemed to be violative of this
representation.

            (k) Mario J. Gabelli is the validly appointed Chief Investment
Officer of the Adviser and the portfolio manager of the Fund; Mr. Gabelli has
not given notice nor made known an intention to give notice of termination of
his employment and the Adviser knows of no reason why Mr. Gabelli should be
unable to serve as portfolio manager to the Fund.

            (l) In the event that the Fund or the Adviser makes available any
promotional materials intended for use only by qualified broker-dealers and
registered representatives thereof by means of a proprietary Internet web site
administered by such party or similar electronic means, the Fund or the
Adviser will install and maintain pre-qualification and password- protection
or similar procedures which are reasonably designed to restrict access to such
promotional materials by persons other than qualified broker-dealers and
representatives thereof.

            8. Indemnification and Contribution.

            (a) The Fund and the Adviser, jointly and severally, agree to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs
of investigation), joint or several, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any Prepricing Prospectus, any sales
material (or any amendment or supplement to any of the foregoing), or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Underwriter furnished in writing to the Fund by
or on behalf of any Underwriter through you expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to any Prepricing Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Shares by such Underwriter to any person if a
copy of the Prospectus shall not have been delivered or sent to such person
within the time required by the 1933 Act and the 1933 Act Rules and
Regulations, and the untrue statement or alleged untrue statement or omission
or alleged omission of a material fact contained in such Prepricing Prospectus
was corrected in the Prospectus, provided that the Fund has delivered the
Prospectus to the several Underwriters in requisite quantity on a timely basis
to permit such delivery or sending. The foregoing indemnity agreement shall be
in addition to any liability that the Fund or the Adviser may otherwise have.

            (b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Fund or the Adviser, such Underwriter or
such controlling person shall promptly notify the Fund or the Adviser, and the
Fund or the Adviser shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter
or such controlling person unless (i) the Fund or the Adviser has agreed in
writing to pay such fees and expenses, (ii) the Fund and the Adviser have
failed to assume the defense and employ counsel, or (iii) the named parties to
any such action, suit or proceeding (including any impleaded parties) include
both such Underwriter or such controlling person and the Fund or the Adviser
and such Underwriter or such controlling person shall have been advised by its
counsel that representation of such indemnified party and the Fund or the
Adviser by the same counsel would be inappropriate under applicable standards
of professional conduct (whether or not such representation by the same
counsel has been proposed) due to actual or potential differing interests
between them (in which case the Fund and the Adviser shall not have the right
to assume the defense of such action, suit or proceeding on behalf of such
Underwriter or such controlling person). It is understood, however, that the
Fund and the Adviser shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of only one separate firm of attorneys (in addition to any local counsel) at
any time for all such Underwriters and controlling persons not having actual
or potential differing interests with you or among themselves, which firm
shall be designated in writing by Salomon Smith Barney Inc., and that all such
fees and expenses shall be reimbursed as they are incurred. The Fund and the
Adviser shall not be liable for any settlement of any such action, suit or
proceeding effected without its written consent, but if settled with such
written consent, or if there be a final judgment for the plaintiff in any such
action, suit or proceeding, the Fund and the Adviser agree to indemnify and
hold harmless any Underwriter, to the extent provided in the preceding
paragraph, and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.

            (c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Fund and the Adviser, their directors, any
officers who sign the Registration Statement, and any person who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, to the same extent as the foregoing indemnity from
the Fund and the Adviser to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing by or on behalf
of such Underwriter through you expressly for use in the Registration
Statement, the Prospectus or any Prepricing Prospectus, or any amendment or
supplement thereto. If any action, suit or proceeding shall be brought against
the Fund or the Adviser, any of their directors, any such officer, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect
of which indemnity may be sought against any Underwriter pursuant to this
paragraph (c), such Underwriter shall have the rights and duties given to the
Fund and the Adviser by paragraph (b) above (except that if the Fund or the
Adviser shall have assumed the defense thereof such Underwriter shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at
such Underwriter's expense), and the Fund and the Adviser, their directors,
any such officer, and any such controlling person shall have the rights and
duties given to the Underwriters by paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability that the
Underwriters may otherwise have.

            (d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Fund and the Adviser on the one hand (treated jointly for this purpose
as one person) and the Underwriters on the other hand from the offering of the
Shares, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Fund and the Adviser on the one hand (treated jointly
for this purpose as one person) and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Fund and the
Adviser on the one hand (treated jointly for this purpose as one person) and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received
by the Fund bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault of the Fund and the Adviser on the one
hand (treated jointly for this purpose as one person) and the Underwriters on
the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Fund and the Adviser on the one hand (treated jointly for this
purpose as one person) or by the Underwriters on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

            (e) The Fund, the Adviser and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 8 were
determined by a pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 8 are several in proportion to the respective numbers of Shares
set forth opposite their names in Schedule I hereto and not joint.

            (f) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.

            (g) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Fund and the Adviser set forth in this
Agreement shall remain operative and in full force and effect, regardless of
(i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Fund, the Adviser, their directors or
officers, or any person controlling the Fund or the Adviser, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of
this Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Fund, the Adviser, their directors or officers, or any
person controlling the Fund or the Adviser, shall be entitled to the benefits
of the indemnity, contribution, and reimbursement agreements contained in this
Section 8.

            9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Shares hereunder are subject
to the following conditions:

            (a) If, at the time this Agreement is executed and delivered, it
is necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may
commence, the Registration Statement or such post-effective amendment shall
have become effective not later than 5:30 P.M., New York City time, on the
date hereof, or at such later date and time as shall be consented to in
writing by you, and all filings, if any, required by Rules 497 and 430A under
the 1933 Act and the 1933 Act Rules and Regulations shall have been timely
made; no stop order suspending the effectiveness of the Registration Statement
or order pursuant to Section 8(e) of the 1940 Act shall have been issued and
no proceeding for those purposes shall have been instituted or, to the
knowledge of the Fund, the Adviser or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to
be included in the Registration Statement or the prospectus or otherwise)
shall have been complied with to your satisfaction.

            (b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change (other than a change of up to 15% of
the aggregate market value of the Fund's assets) or any development involving
a prospective change, in or affecting the condition (financial or other),
business, prospects, properties, net assets, or results of operations of the
Fund or the Adviser and its subsidiaries, taken as a whole, not contemplated
by the Prospectus, which in your opinion would materially, adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Fund or the Adviser or any officer or director of the Fund or
the Adviser which makes any statement made in the Prospectus untrue or which,
in the opinion of the Fund and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the 1933 Act, the 1940 Act or the
Rules and Regulations or any other law to be stated therein or necessary in
order to make the statements therein not misleading, if amending or
supplementing the Prospectus to reflect such event or development would, in
your opinion materially adversely affect the market for the Shares.

            (c) The Fund shall have furnished to you a report showing
compliance with the asset coverage requirements of the 1940 Act and a Basic
Maintenance Report (as defined in the Articles Supplementary), each dated the
Closing Date and in form and substance satisfactory to you. Each such report
may use portfolio holdings and valuations as of the close of business of any
day not more than the six business days preceding the Closing Date; provided,
however, that the Fund represents in such report that its total net assets as
of the Closing Date have not declined by 5% or more from such valuation date.

            (d) You shall have received on the Closing Date, opinions of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Fund, dated the
Closing Date and addressed to you, to the effect that:

                  (i) The Fund is duly registered and qualified to conduct its
     business and is in good standing in the State of New York (which is the
     only jurisdiction identified by management of the Fund to such counsel in
     which the Fund owns property, has operations or conducts business);

                  (ii) The authorized and outstanding capital stock of the
     Fund is as set forth under the caption "Capitalization" in the
     Prospectus; and the authorized capital stock of the Fund (including the
     Series B Preferred and the Series C Auction Rate Preferred) conforms in
     all material respects as to legal matters to the description thereof
     contained in the Prospectus under the captions "Description of Capital
     Stock and Other Securities", "Description of Series B Preferred and
     Series C Auction Rate Preferred" and "The Auction of Series C Auction
     Rate Preferred";

                  (iii) Such counsel has been orally advised that the
     Registration Statement has become effective under the 1933 Act and, to
     the best knowledge of such counsel after reasonable inquiry, no stop
     order suspending the effectiveness of the Registration Statement or order
     pursuant to Section 8(e) of the 1940 Act has been issued and no
     proceedings for that purpose are pending before or contemplated by the
     Commission; and any required filing of the Prospectus pursuant to Rule
     497 has been made in accordance with Rule 497;

                  (iv) Each of this Agreement and the Fund Agreements has been
     duly executed and delivered by the Fund and is a valid, legal and binding
     agreement of the Fund, enforceable against the Fund in accordance with
     its terms, except to the extent that (A) enforcement hereof and thereof
     may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
     or other similar laws now or hereafter in effect relating to creditors'
     rights generally, or (ii) general principles of equity (regardless of
     whether enforceability is considered in a proceeding at law or in equity)
     and (B) enforcement of rights to indemnity and contribution hereunder and
     thereunder may be limited by Federal or state securities laws or
     principles of public policy;

                  (v) Neither the offer, sale or delivery of the Shares, the
     execution, delivery or performance of this Agreement and the Fund
     Agreements by the Fund, compliance by the Fund with the provisions hereof
     or thereof nor consummation by the Fund of the transactions contemplated
     hereby or thereby conflicts or will conflict with or constitutes or will
     constitute a breach of, or a default under any Material Fund Agreement,
     or will result in the creation or imposition of any lien, charge or
     encumbrance upon any property or assets of the Fund under any Material
     Fund Agreement, nor will any such action result in any violation of (a)
     any provision of the New York Business Corporation Law and those laws,
     rules and regulations of the State of New York and the United States of
     America that, in the experience of such counsel, are normally applicable
     to entities such as the Fund and transactions of the type contemplated by
     this Agreement, but without having made any special investigation
     concerning any other laws, rules or regulations (collectively,
     "Applicable Fund Laws"); provided, that the term "Applicable Fund Laws"
     does not include (1) the rules and regulations of the NASD, (2) any
     federal or state securities or blue sky laws, (3) any antifraud laws or
     (4) any law, rule or regulation that may have become applicable to the
     Fund as a result of the Underwriters' involvement with the transactions
     contemplated hereby or because of any facts specifically pertaining to
     the Underwriters, or (b) any judgment, order or decree of any New York or
     federal executive, legislative, judicial, administrative or regulatory
     body under Applicable Fund Laws and the NYSE (each, a "Governmental Fund
     Authority") identified in an officer's certificate;

                  (vi) No consent, approval, license, authorization, order or
     validation of, or filing, recording or registration with, any
     Governmental Fund Authority pursuant to Applicable Fund Laws (each, a
     "Governmental Fund Approval") is required for the valid issuance and sale
     of the Shares to the Underwriters or the execution, delivery and
     performance by the Fund of this Agreement and the Fund Agreements or the
     consummation of the transactions contemplated hereby and thereby except
     such Governmental Fund Approvals as have been obtained;

                  (vii) The 1940 Act Notification, the Registration Statement,
     the Prospectus and the Fund's Registration Statement on Form 8-A under
     the 1934 Act and any supplements or amendments thereto (except for the
     financial statements and the notes thereto and the schedules and other
     financial and statistical data included therein, as to which such counsel
     need not express any opinion) comply as to form in all material respects
     with the requirements of the 1933 Act, the 1940 Act, the Rules and
     Regulations, the 1934 Act and the rules and regulations promulgated
     thereunder;

                  (viii) To the actual knowledge of such counsel after
     reasonable inquiry, other than as described or contemplated in the
     Registration Statement or Prospectus (or any supplement thereto), there
     are (A) no legal or governmental proceedings in the State of New York or,
     to the actual knowledge of such counsel, any other state, pending or
     threatened against the Fund, or to which the Fund or any of its
     properties is subject, which are required to be described in the
     Registration Statement or Prospectus (or any amendment or supplement to
     either of them) that are not described as required and (B) no agreements,
     contracts, indentures, leases or other instruments that are required to
     be described in the Registration Statement or the Prospectus (or any
     amendment or supplement to either of them) or to be filed as an exhibit
     to the Registration Statement, that are not described or filed as
     required, as the case may be;

                  (ix) The statements in the Registration Statement,
     Prospectus and statement of additional information under the caption
     "Taxation", insofar as they refer to statements of law or legal
     conclusions, are accurate and present fairly the information required to
     be shown;

                  (x) Each of the Fund Agreements and the Fund's and the
     Adviser's obligations under each of this Agreement and the Fund
     Agreements comply as to form in all material respects with all applicable
     provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and
     Regulations and the Advisers Act Rules and Regulations;

                  (xi) The Fund is duly registered with the Commission under
     the 1940 Act as a closed-end diversified management investment company;
     and the provisions of the Fund's articles of incorporation, including the
     Articles Supplementary, and by-laws, and the investment policies and
     restrictions described in the Registration Statement and the Prospectus
     under the captions "The Fund", "Investment Objective and Policies", "Risk
     Factors and Special Considerations" and "Investment Restrictions" (in the
     statement of additional information) comply in all material respects with
     the requirements of the 1940 Act, and all action has been taken by the
     Fund as is required of the Fund by the 1933 Act and the 1940 Act and the
     Rules and Regulations in connection with the issuance and sale of the
     Shares to make the public offering and consummate the sale of the Shares
     as contemplated by this Agreement;

                  (xii) The Fund has all necessary governmental
     authorizations, approvals, orders, licenses, certificates, franchises and
     permits of and from all governmental regulatory officials and bodies
     required under Applicable Fund Law (except where the failure so to have
     any such authorizations, approvals, orders, licenses, certificates,
     franchises or permits, individually or in the aggregate, would not have a
     material adverse effect on the business, properties, operations or
     financial condition of the Fund), to own its properties and to conduct
     business, as described in the Prospectus;

                  (xiii) To the actual knowledge of such counsel after
     reasonable inquiry, except as described in the Prospectus, there is no
     holder of any security of the Fund or any other person who has the right,
     contractual or otherwise pursuant to any Material Fund Agreement, to
     cause the Fund to sell or otherwise issue to them, or to permit them to
     underwrite the sale of, the Shares or the right to have any securities of
     the Fund included in the registration statement or the right, as a result
     of the filing of the registration statement, to require registration
     under the 1933 Act of any securities of the Fund;

                  (xiv) If the Fund operates as described in the Prospectus,
     the Fund will qualify as a regulated investment company under the Code;
     and

                  (xv) Such counsel shall also state that they have
     participated in conferences with officers and employees of the Fund,
     representatives of the independent accountants for the Fund, Maryland
     counsel to the Fund, the Underwriters and counsel for the Underwriters at
     which the contents of the Registration Statement and the Prospectus and
     related matters were discussed and, although they are not passing upon,
     and do not assume any responsibility for, the accuracy, completeness or
     fairness of the statements contained in the Registration Statement or the
     Prospectus except to the limited extent otherwise covered by paragraphs
     (ii), (ix), (x) and (xii), and have made no independent check or
     verification thereof, on the basis of the foregoing, no facts have come
     to their attention that would have led them to believe that the
     Registration Statement or any amendment or supplement thereto, at the
     time it became effective, contained an untrue statement of a material
     fact or omitted to state any material fact required to be stated therein
     or necessary to make the statements contained therein not misleading or
     that the Prospectus or any amendment or supplement thereto, as of its
     issue date and as of the Closing Date, contained or contains an untrue
     statement of a material fact or omitted or omits to state a material fact
     required to be stated therein or necessary to make the statements
     contained therein, in light of the circumstances under which they were
     made, not misleading, except that they express no belief with respect to
     the financial statements, schedules and other financial information and
     statistical data included therein or excluded therefrom or the exhibits
     to the Registration Statement.

            (e) You shall have received on the Closing Date, an opinion of
Miles & Stockbridge P.C., Maryland counsel for the Fund, dated the Closing
Date and addressed to you, to the effect that:

                  (i) The Fund is a corporation duly incorporated, validly
     existing and in good standing under the laws of the State of Maryland
     with full corporate power to own, lease and operate its properties and to
     conduct its business as described in the Registration Statement and the
     Prospectus (and any amendment or supplement to either of them);

                  (ii) The authorized capital stock of the Fund is as set
     forth under the caption "Capitalization" in the Prospectus; and the
     authorized capital stock of the Fund conforms in all material respects as
     to legal matters to the description thereof contained in the Prospectus
     under the caption "Description of Capital Stock and Other Securities";

                  (iii) The Shares have been duly authorized and, when issued
     and delivered to the Underwriters against payment therefor in accordance
     with the terms hereof, will be validly issued, fully paid and
     nonassessable. The issuance of the Shares will not be subject to
     preemptive or other similar rights entitling any person to purchase or
     acquire any of the Shares upon the issuance thereof by the Fund which
     arise by operation of the laws of the State of Maryland or under the
     articles of incorporation or by-laws of the Fund;

                  (iv) The Shares conform in all material respects to the
     description thereof contained in the Prospectus under the caption
     "Description of Series B Preferred and Series C Auction Rate Preferred"
     and "The Auction of Series C Auction Rate Preferred";

                  (v) The form of certificates for the Shares conforms to the
     requirements of the Maryland General Corporation Law;

                  (vi) The Fund has the requisite corporate power and
     authority to enter into and execute and deliver this Agreement and the
     Auction Agency Agreement and to issue, sell and deliver the Shares to the
     Underwriters as provided for herein;

                  (vii) Each of this Agreement and the Auction Agency
     Agreement has been duly authorized by the Fund. Neither the offer, sale
     or delivery of the Shares, the execution, delivery or performance of this
     Agreement and the Auction Agency Agreement by the Fund, compliance by the
     Fund with the provisions hereof or thereof nor consummation by the Fund
     of the transactions contemplated hereby conflicts or will conflict with
     or constitutes or will constitute a breach of, or a default under, the
     articles of incorporation, including the Articles Supplementary, or
     by-laws of the Fund;

                  (viii) The Fund has full corporate power and to the
     knowledge of such counsel, all governmental authorizations, approvals,
     orders, licenses, certificates, franchises and permits necessary or
     required under the laws of the State of Maryland for the Fund to own its
     properties and to conduct its business as it now is being conducted as
     described in the Prospectus (except in cases where the failure so to have
     any such authorizations, approvals, orders, licenses, certificates,
     franchises or permits, individually or in the aggregate, would not have a
     material adverse effect on the business, properties, operations or
     financial conditions of the Fund); and

                  (ix) No consent, approval, authorization or other order of,
     or registration or filing with, any securities commission, court,
     regulatory body, administrative agency or other governmental body,
     agency, or official of the State of Maryland is required on the part of
     the Fund for the valid issuance and sale of the Shares to the
     Underwriters as contemplated by this Agreement, the execution and
     delivery by the Fund of this Agreement and the performance by the Fund of
     its obligations hereunder or the consummation of the transactions
     contemplated hereby by the Fund, except those as may be required under
     the securities or blue sky laws of the State of Maryland; it being
     understood that such counsel do not express any opinion as to any such
     consent, approval, authorization or other order of, or registration or
     filing, which may be required as a result of the involvement of any other
     parties to this Agreement.

            (f) You shall have received on the Closing Date an opinion of
James E. McKee, general counsel for the Adviser, dated the Closing Date and
addressed to you, to the effect that:

                  (i) The Fund is not in violation of its articles of
     incorporation, including the Articles Supplementary, or by-laws and, to
     the actual knowledge of such counsel after reasonable inquiry, is not in
     default in the performance of any material obligation, agreement or
     condition in any bond, debenture, note or other evidence of indebtedness,
     except as may be disclosed in the Prospectus;

                  (ii) The Fund is not in violation of any Material Fund
     Agreement; and

                  (iii) To the actual knowledge of such counsel after
     reasonable inquiry, the Fund is not in violation of (A) any provision of
     the New York Business Corporation Law and those laws, rules and
     regulations of the State of New York and the United States of America
     that, in the experience of such counsel, are normally applicable to
     entities such as the Fund and transactions of the type contemplated by
     this Agreement, but without having made any special investigation
     concerning any other laws, rules or regulations; provided, that such
     laws, rules and regulations do not include (1) the rules and regulations
     of the NASD, (2) any federal or state securities or blue sky laws other
     than the 1933 Act, the 1934 Act and the 1940 Act and the rules and
     regulations thereunder to the extent not excluded by item (3) below, (3)
     any antifraud laws under the 1933 Act or the 1934 Act as they apply to
     the Prospectus and the Registration Statement or (4) any law, rule or
     regulation that may have become applicable to the Fund as a result of the
     Underwriters' involvement with the transactions contemplated by this
     Agreement or because of any facts specifically pertaining to the
     Underwriters or (B) any order, judgment or decree of any New York or
     federal executive, legislative, judicial, administrative or regulatory
     body under the laws, rules and regulations referred to in clause (A) of
     this paragraph and the NYSE.

            (g) You shall have received on the Closing Date an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Adviser,
dated the Closing Date and addressed to you, to the effect that:

                  (i) The Adviser is a limited liability company duly
     organized and validly existing in good standing under the laws of the
     State of New York with full limited liability company power and authority
     to own, lease and operate its properties and to conduct its business as
     described in the Registration Statement and the Prospectus (and any
     amendment or supplement to either of them), it being understood that the
     opinion with respect to good standing is based solely upon such counsel's
     review of a certificate of the Secretary of State and a telephonic
     confirmation;

                  (ii) The Adviser is duly registered with the Commission as
     an investment adviser under the Advisers Act and is not prohibited by the
     Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the
     1940 Act Rules and Regulations from acting under the Investment Advisory
     Agreement for the Fund as contemplated by the Prospectus (or any
     amendment or supplement thereto).

                  (iii) The Adviser has limited liability company power and
     authority to enter into this Agreement and the Investment Advisory
     Agreement, and this Agreement and the Investment Advisory Agreement have
     been duly authorized, executed and delivered by the Adviser and each is a
     valid, legal and binding agreement of the Adviser, enforceable against
     the Adviser in accordance with its terms except to the extent that (A)
     enforcement hereof and thereof may be limited by (i) bankruptcy,
     insolvency, reorganization, moratorium or other similar laws now or
     hereafter in effect relating to creditors' rights generally, or (ii)
     general principles of equity (regardless of whether enforceability is
     considered in a proceeding at law or in equity) and (B) enforcement of
     rights to indemnity and contribution hereunder and thereunder may be
     limited by Federal or state securities laws or principles of public
     policy;

                  (iv) Neither the execution, delivery or performance of this
     Agreement or the Investment Advisory Agreement by the Adviser, compliance
     by the Adviser with the provisions hereof or thereof nor consummation by
     the Adviser of the transactions contemplated hereby or thereby conflicts
     or will conflict with, or constitutes or will constitute a breach of or
     default under, the certificate of incorporation or by-laws, or other
     organizational documents, of the Adviser or any contract or agreement to
     which the Adviser is a party which has been identified to such counsel by
     the Adviser as material or as one which could have an effect on the types
     of transactions contemplated by this Agreement (each, an "Material
     Adviser Agreement"), or will result in the creation or imposition of any
     lien, charge or encumbrance upon any property or assets of the Adviser
     under any Material Adviser Agreement, nor will any such action result in
     any violation of any provision of the New York Business Corporation Law
     and those laws, rules and regulations of the State of New York and the
     United States of America that, in the experience of such counsel, are
     normally applicable to entities such as the Adviser and transactions of
     the type contemplated by this Agreement, but without having made any
     special investigation concerning any other laws, rules or regulations
     (collectively, "Applicable Adviser Laws"); provided, that the term
     "Applicable Adviser Laws" does not include (1) the rules and regulations
     of the NASD, (2) any federal or state securities or blue sky laws, (3)
     any antifraud laws or (4) any law, rule or regulation that may have
     become applicable to the Adviser as a result of the Underwriters'
     involvement with the transactions contemplated hereby or because of any
     facts specifically pertaining to the Underwriters;

                  (v) No consent, approval, license, authorization or
     validation of, or filing, recording or registration with, any New York or
     federal executive, legislative, judicial, administrative or regulatory
     body under Applicable Adviser Laws (each, a "Governmental Adviser
     Approval") is required on the part of the Adviser for the execution,
     delivery and performance by it of this Agreement and the Investment
     Advisory Agreement to which it is a party or the consummation by it of
     the transactions contemplated hereby and thereby except such Governmental
     Adviser Approvals as have been obtained;

                  (vi) To the actual knowledge of such counsel after
     reasonable inquiry, there are no legal or governmental proceedings
     pending or threatened against the Adviser or to which the Adviser or any
     of its properties is subject, which are required to be described in the
     Registration Statement or the Prospectus (or any amendment or supplement
     to either of them) but are not described as required or which could
     reasonably be expected to adversely affect the ability of the Adviser to
     perform its obligations under this Agreement or the Investment Advisory
     Agreement;

                  (vii) The obligations of the Adviser under this Agreement
     and the Investment Advisory Agreement comply in all material respects
     with all applicable provisions of the 1940 Act, the 1940 Act Rules and
     Regulations, the Advisers Act and the Advisers Act Rules and Regulations;

                  (viii) The Adviser has full limited liability company power
     and authority, and all necessary governmental authorizations, approvals,
     orders, licenses, certificates, franchises and permits of and from all
     governmental regulatory officials and bodies required under Applicable
     Adviser Law (except where the failure so to have any such authorizations,
     approvals, orders, licenses, certificates, franchises or permits,
     individually or in the aggregate, would not have a material adverse
     effect on the business, properties, operations or financial condition of
     the Adviser and its subsidiaries), to own its properties and to conduct
     its business, including specifically its business of acting as investment
     adviser to registered investment companies and as otherwise described in
     the Prospectus, and to perform its obligations under the Investment
     Advisory Agreement;

                  (ix) Such counsel shall also state that such counsel has
     been advised by the Adviser that it is not registered or qualified to
     conduct its business as a foreign corporation in any jurisdiction and
     that it believes there is no such jurisdiction where the nature of its
     properties or the conduct of its business requires such registration or
     qualification and where the failure to register or qualify would have a
     material adverse effect on the operations of the Adviser or on the
     ability of the Adviser to perform its obligations under this Agreement or
     the Investment Advisory Agreement; and

                  (x) Such counsel shall also state that they have
     participated in conferences with officers and employees of the Adviser
     and the Fund, representatives of the independent accountants for the
     Adviser and the Fund and the Underwriters and counsel for the
     Underwriters at which the contents of the Registration Statement and the
     Prospectus and related matters were discussed and, although they are not
     passing upon, and do not assume any responsibility for, the accuracy,
     completeness or fairness of the statements contained in the Registration
     Statement or the Prospectus and have made no independent check or
     verification thereof, on the basis of the foregoing, no facts have come
     to their attention that would have led them to believe that the
     Registration Statement or any amendment or supplement thereto, at the
     time it became effective, contained an untrue statement of a material
     fact or omitted to state any material fact required to be stated therein
     or necessary to make the statements contained therein not misleading or
     that the Prospectus or any amendment or supplement thereto, as of its
     issue date and as of the Closing Date, contained or contains an untrue
     statement of a material fact or omitted or omits to state a material fact
     required to be stated therein or necessary to make the statements
     contained therein, in light of the circumstances under which they were
     made, not misleading, except that they express no belief with respect to
     the financial statements, schedules and other financial information and
     statistical data included therein or excluded therefrom or the exhibits
     to the Registration Statement.

            (h) You shall have received on the Closing Date an opinion of
Simpson Thacher & Bartlett, counsel for the Underwriters, dated the Closing
Date and addressed to you, with respect to such matters as you may reasonably
request.

            (i) You shall have received at the time of the execution of this
Agreement, a letter dated such date from PricewaterhouseCoopers LLP, in form
and substance satisfactory to you, containing statements and information to
the effect that:

                  (i) They are independent certified public accountants with
     respect to the Fund within the meaning of the 1933 Act and 1940 Act, and
     the applicable rules and regulations thereunder adopted by the
     Commission;

                  (ii) In their opinion, the financial statements of the Fund
     audited by them and included in the Registration Statement comply as to
     form in all material respects with the applicable accounting requirements
     of the 1933 Act and 1940 Act and the related rules and regulations
     adopted by the Commission;

                  (iii) They will perform the procedures (but not an audit in
     accordance with generally accepted auditing standards) consisting of:

                         (A) Reading the minutes of meetings of the Board of
          Directors of the Fund as set forth in the minute books through a
          specified date not more than three business days prior to the date
          of delivery of such letter;

                         (B) Making inquiries of certain officials of the Fund
          who have responsibility for financial and accounting matters
          regarding changes in the capital stock, net assets or long-term
          liabilities of the Fund as compared with the amounts shown in the
          latest balance sheet included in the Registration Statement or for
          the period from the date of the latest income statement included in
          the Registration Statement to a specified date not more than three
          business days prior to the delivery of such letter.

                  (iv) The letter shall also state that the information set
     forth under the captions "Financial Highlights", "Capitalization",
     "Ratings and Asset Coverage" and "Asset Maintenance Requirements" which
     is expressed in dollars (or percentages derived from such dollar amounts)
     and has been obtained from accounting records which are subject to
     controls over financial reporting or which has been derived directly from
     such accounting records by analysis or computation, is in agreement with
     such records or computations made therefrom, and such other procedures as
     the Underwriters may request and PricewaterhouseCoopers LLP are willing
     to perform and report upon.

            (j) On the Closing Date, you shall have received from
PricewaterhouseCoopers LLP a letter, dated as of the Closing Date, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (i) of this Section 9, except that the specified date referred
to shall be a date not more than three business days prior to Closing Date.

            (k) (i) No order suspending the effectiveness of the Registration
Statement or prohibiting or suspending the use of the Prospectus (or any
amendment or supplement thereto) or any Prepricing Prospectus or any sales
material shall have been issued and no proceedings for such purpose or for the
purpose of commencing an enforcement action against the Fund, the Adviser or,
with respect to the transactions contemplated by the Prospectus (or any
amendment or supplement thereto) and this Agreement, any Underwriter, may be
pending before or, to the knowledge of the Fund, the Adviser or any
Underwriter or in the reasonable view of counsel to the Underwriters, shall be
threatened or contemplated by the Commission at or prior to the Closing Date
and that any request for additional information on the part of the Commission
(to be included in the Registration Statement, the Prospectus or otherwise) be
complied with to your satisfaction; (ii) there shall not have been any change
in the capital stock of the Fund nor any material increase in the short-term
or long-term debt of the Fund (other than in the ordinary course of business)
from that set forth or contemplated in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); (iii) there shall not
have been, subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus (or any amendment or
supplement thereto), except as may otherwise be stated in the Registration
Statement and Prospectus (or any amendment or supplement thereto), any
material adverse change in the condition (financial or other), business,
prospects, properties, net assets or results of operations of the Fund or the
Adviser; (iv) the Fund shall not have any liabilities or obligations, direct
or contingent (whether or not in the ordinary course of business), that are
material to the Fund, other than those reflected in the Registration Statement
or the Prospectus (or any amendment or supplement to either of them) and other
than liabilities for payment for securities in accordance with the Fund's
investment objective and policies; and (v) all the representations and
warranties of the Fund and the Adviser contained in this Agreement shall be
true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of each of the Fund and the Adviser (or such
other officers as are acceptable to you), to the effect set forth in this
Section 9(k) and in Section 9(l) hereof.

            (l) That neither the Fund nor the Adviser shall have failed at or
prior to the Closing Date to have performed or complied with any of its
agreements herein contained and required to be performed or complied with by
it hereunder at or prior to the Closing Date.

            (m) The Fund shall have delivered and you shall have received
evidence satisfactory to you that the Series B Shares are rated at least Aaa
by Moody's and the Series C Shares are rated at least Aaa by Moody's and rated
at least AAA by Fitch as of the Closing Date, and there shall not have been
given any notice of any intended or potential downgrading, or of any review
for a potential downgrading, in the rating accorded to the Shares by either
Rating Agency.

            (n) The Fund and the Adviser shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
requested.

            All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are satisfactory in
form and substance to you and your counsel.

            Any certificate or document signed by any officer of the Fund or
the Adviser and delivered to you or to counsel for the Underwriters, shall be
deemed a representation and warranty by the Fund or the Adviser to each
Underwriter as to the statements made therein.

            10. Expenses. The Fund agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the Registration Statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the 1940 Act
Notification, the Prospectus and each amendment or supplement to any of them
(including, without limitation, the filing fees prescribed by the 1933 Act,
the 1940 Act and the Rules and Regulations); (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the Registration Statement, each
Prepricing Prospectus, the Prospectus, any sales material and all amendments
or supplements to any of them as may be reasonably requested for use in
connection with the offering and sale of the Shares; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the
Shares, including any stamp taxes in connection with the original issuance and
sale of the Shares; (iv) the printing (or reproduction) and delivery of this
Agreement, any dealer agreements, the preliminary and supplemental blue sky
memoranda and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Shares; (v) the registration
of the Shares under the Exchange Act and the listing of the Series B Shares on
the New York Stock Exchange; (vi) the qualification of the Shares for offer
and sale under the state securities or blue sky laws of the several states
(including the reasonable fees, expenses and disbursements of counsel for the
Underwriters relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental blue sky memoranda and such
registration and qualification); (vii) fees paid to the Rating Agencies;
(viii) the transportation and other expenses incurred by or on behalf of Fund
representatives in connection with presentations to prospective purchasers of
the Shares; and (ix) the fees and expenses of the Fund's accountants and the
fees and expenses of counsel (including local and special counsel) for the
Fund and of the transfer agent.

            Except as provided in this Section 10, the Underwriters agree to
pay their own costs and expenses of the underwriting, including the fees and
expenses of their counsel. 11. Effective Date of Agreement. This Agreement
shall become effective: (i) upon the execution and delivery hereof by the
parties hereto; or (ii) if, at the time this Agreement is executed and
delivered, it is necessary for the registration statement or a post-effective
amendment thereto to be declared effective before the offering of the Shares
may commence, when notification of the effectiveness of the registration
statement or such post-effective amendment has been released by the
Commission. Until such time as this Agreement shall have become effective, it
may be terminated by the Fund, by notifying you, or by you, by notifying the
Fund.

            If any one or more of the Underwriters shall fail or refuse to
purchase the Shares which it or they are obligated to purchase hereunder on
the Closing Date, and the aggregate number of the Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is
not more than one-tenth of the aggregate number of Shares which the
Underwriters are obligated to purchase on the Closing Date, each
non-defaulting Underwriter shall be obligated, severally, in the proportion
which the number of Shares set forth opposite its name in Schedule I hereto
bears to the aggregate number of such Shares set forth opposite the names of
all non-defaulting Underwriters or in such other proportion as you may specify
in accordance with Section 20 of the Master Agreement Among Underwriters of
Salomon Smith Barney Inc., to purchase the Shares which such defaulting
Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If
any one or more of the Underwriters shall fail or refuse to purchase the
Shares which it or they are obligated to purchase on the Closing Date and the
aggregate number of Shares with respect to which such default occurs is more
than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date and arrangements satisfactory to you
and the Fund for the purchase of such Shares by one or more non-defaulting
Underwriters or other party or parties approved by you and the Fund are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Fund. In any
such case which does not result in a termination of this Agreement either you
or the Fund shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any such
default of any such Underwriter under this Agreement. The term "Underwriter"
as used in this Agreement includes, for all purposes of this Agreement, any
party not listed in Schedule I hereto who, with your approval and the approval
of the Fund, purchases Shares which a defaulting Underwriter is obligated, but
fails or refuses, to purchase.

            Any notice under this Section 11 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.

            12. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Fund or the Adviser, by notice to the Fund or the Adviser,
if at any time prior to the Closing Date (i) trading in any Fund's securities
shall have been suspended by the Commission or the NYSE or trading in
securities generally on the NYSE, the American Stock Exchange or the Nasdaq
National Market shall have been suspended or limited or minimum prices shall
have been established on the NYSE, (ii) a banking moratorium shall have been
declared either by Federal or New York State authorities, or (iii) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war, or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on financial markets is such as to make it, in
your judgment, impracticable or inadvisable to commence or continue the
offering of the Shares at the offering price to the public set forth on the
cover page of the Prospectus or to enforce contracts for the resale of the
Shares by the Underwriters. Notice of such termination may be given to the
Fund by telegram, telecopy or telephone and shall be subsequently confirmed by
letter.

            13. Information Furnished by the Underwriters. The statements set
forth in the last paragraph of the cover page, the stabilization legend on the
inside cover page and the statements in the first, third, eighth and ninth
paragraphs under the caption "Underwriting" in any Prepricing Prospectus and
in the Prospectus, constitute the only information furnished by or on behalf
of the Underwriters through you as such information is referred to in Sections
6(b) and 8 hereof.

            14. Miscellaneous. Except as otherwise provided in Sections 5, 11
and 12 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Fund or the Adviser, at the
office of the Fund at One Corporate Center, Rye, New York 10580-1422,
Attention: Bruce N. Alpert; or (ii) if to you, care of Salomon Smith Barney
Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager,
Investment Banking Division.

            This Agreement has been and is made solely for the benefit of the
several Underwriters, the Fund, the Adviser, their directors and officers, and
the other controlling persons referred to in Section 8 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from any Underwriter of any of the
Shares in his status as such purchaser.

            15. Applicable Law; Counterparts. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York.

            This Agreement may be signed in various counterparts that together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.


            Please confirm that the foregoing correctly sets forth the
agreement among the Fund and the Adviser and the several Underwriters.

<PAGE>

                                     Very truly yours,

                                     THE GABELLI CONVERTIBLE AND INCOME
                                     SECURITIES FUND INC.



                                     By:_____________________________
                                         Name:
                                         Title:




                                     GABELLI FUNDS, LLC



                                     By:_____________________________
                                         Name:
                                         Title:

Name: above written on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.

SALOMON SMITH BARNEY INC.
GABELLI & COMPANY, INC.

By  SALOMON SMITH BARNEY INC.



By: _______________________________
    Name:   Robert F. Bush, Jr.
    Title:  Director

<PAGE>


                                  SCHEDULE I

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.

- --------------------------------- -------------------------- -------------------
Underwriter                              Number of               Number of
                                      Series B Shares         Series C Shares
- --------------------------------- -------------------------- -------------------
Salomon Smith Barney Inc.
- --------------------------------- -------------------------- -------------------
Gabelli & Company, Inc.
- --------------------------------- -------------------------- -------------------


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>8
<FILENAME>s440919.txt
<DESCRIPTION>EX 99 (K)(II) -- FORM OF AUCTION AGENCY
<TEXT>
                                                              EX-99(k)(ii)

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                _______________________________________________

                           AUCTION AGENCY AGREEMENT

                          dated as of March __, 2003

                                  Relating to

               Series C Auction Rate Cumulative Preferred Stock

                                      of

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                ______________________________________________

                             The Bank of New York,
                               as Auction Agent

                           AUCTION AGENCY AGREEMENT

           This Auction Agency Agreement (this "Agreement"), dated as of March
__, 2003, is between The Gabelli Convertible and Income Securities Fund Inc.
(the "Corporation") and The Bank of New York, a New York banking corporation,
as Auction Agent (as defined below).

           The Corporation proposes to issue an aggregate of 1,000 preferred
shares, par value $0.001 per share, liquidation preference $25,000 per share,
designated as Series C Auction Rate Cumulative Preferred Shares (the
"Preferred Shares"), pursuant to the Articles Supplementary (as defined
below).

           The Corporation desires that the Auction Agent perform certain
duties as agent in connection with each Auction (as defined below) (in such
capacity, the "Auction Agent"), and as the transfer agent, registrar, dividend
paying agent and redemption price disbursing agent with respect to the
Preferred Shares (in such capacity, the "Paying Agent"), upon the terms and
conditions of this Agreement, and the Corporation hereby appoints The Bank of
New York as said Auction Agent.

           NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Corporation and the Auction Agent agree as
follows:

1. Definitions and Rules of Construction.

           1.1 Terms Defined By Reference to Articles Supplementary.

           Capitalized terms not defined herein shall have the respective
meanings specified in the Articles Supplementary.

           1.2 Terms Defined Herein.

           As used herein and in the Settlement Procedures, each of the
following terms shall have the meaning ascribed to it below, unless the
context otherwise requires:

               (a) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depository that will act on behalf of a Bidder.

               (b) "Agreement" shall mean this Agreement.

               (c) "Articles Supplementary" shall mean the Articles
Supplementary Creating and Fixing the Rights of the Series C Auction Rate
Cumulative Preferred Stock.

               (d) "Auction" shall have the meaning specified in Section 2.1
hereof.

               (e) "Auction Procedures" shall mean the auction procedures
  constituting Article II of the Articles Supplementary as of the filing
  thereof.

               (f) "Authorized Officer" of the Auction Agent shall mean each
Vice President, Assistant Vice President and Assistant Treasurer of the
Auction Agent assigned to the Dealing and Trading Group of its Corporate Trust
Department and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes hereof in a written communication to
the Corporation.

               (g) "Broker-Dealer Agreement" shall mean each agreement between
the Auction Agent and a Broker-Dealer substantially in the form attached
hereto as Exhibit A.

               (h) "Commercial Paper Dealers" shall mean (i) Salomon Smith
Barney Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Goldman Sachs & Co.; (ii) in lieu of any thereof, its
respective affiliate or successor; and (iii) in the event that any of the
foregoing shall cease to quote rates for commercial paper of issuers of the
sort described above, in substitution therefor, a nationally recognized dealer
in commercial paper of such issuers then making such quotations selected by
the Corporation

               (i) "Corporate Officer" shall mean the Chairman and Chief
Executive Officer, the President, each Vice President (whether or not
designated by a number or word or words added before or after the title "Vice
President"), the Secretary, the Treasurer, each Assistant Vice President, each
Assistant Secretary and each Assistant Treasurer of the Corporation and every
other officer or employee of the Corporation designated as a "Corporate
Officer" for purposes hereof in a notice to the Auction Agent.

               (j) "Preferred Shares" shall mean the preferred shares, par
value $.001 per share, of the Corporation designated as its "Series C Auction
Rate Cumulative Preferred Shares" and bearing such further designation as to
series as the Board of Directors, as the case may be, of the Corporation or
any committee thereof shall specify.

               (k) "Rate Multiple" has the meaning provided in Section 2.6.

               (l) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit B.

               (m) "U.S. Government Securities Dealers" has the meaning
provided in Section 2.6(a)(v).

           1.3 Rules of Construction.

           Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of the Agreement:

               (a) Words importing the singular number shall include the plural
number and vice versa.

               (b) The captions and headings herein are solely for convenience
of reference and shall not constitute a part of the Agreement nor shall they
affect its meaning, construction or effect.

               (c) The words "hereof", "herein", "hereto" and other words of
similar import refer to the Agreement as a whole.

               (d) All references herein to a particular time of day shall be
to New York City time.

2. The Auction.

           2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.

               (a) The Board of Directors of the Corporation has adopted a
resolution appointing The Bank of New York as Auction Agent for purposes of
the Auction Procedures. The Auction Agent hereby accepts such appointment and
agrees that, on each Auction Date, it shall follow the procedures set forth in
this Section 2 and the Auction Procedures for the purpose of determining the
Applicable Rate of the Preferred Shares for any Dividend Period after the
initial Dividend Period. Each periodic operation of such procedures is
hereinafter referred to as an "Auction."

               (b) All of the provisions contained in the Auction Procedures
and the Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if such
provisions were fully set forth herein.

           2.2 Preparation for Each Auction; Maintenance of Registry of
Beneficial Owners.

               (a) Not later than seven days prior to the first Auction Date
for the Preferred Shares subject to an Auction, the Corporation shall provide
the Auction Agent with a list of the Broker-Dealers. Not later than seven days
prior to any Auction Date for the Preferred Shares for which any change in
such list of Broker- Dealers is to be effective, the Corporation will notify
the Auction Agent in writing of such change and, if any such change involves
the addition of a Broker-Dealer to such list, shall cause to be delivered to
the Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement
in the form of Exhibit A signed by such Broker- Dealer; provided, however,
that if the Corporation proposes to designate any Special Dividend Period of
the Preferred Shares pursuant to Section 4 of Article I of the Articles
Supplementary, not later than 11:00 A.M. on the Business Day immediately
preceding the last Auction Date prior to the first day of such Dividend Period
or by such later time or date, or both, as may be agreed to by the Auction
Agent, the Corporation shall provide the Auction Agent with a list of the
Broker-Dealers for the Preferred Shares and a manually signed copy of each
Broker-Dealer Agreement or a new Schedule A to a Broker-Dealer Agreement
(which Schedule A shall replace and supersede any previous Schedule A to such
Broker-Dealer Agreement) with each Broker-Dealer. The Auction Agent, as Agent
of the Corporation, shall have entered into a Broker-Dealer Agreement with
each Broker-Dealer prior to the participation of any such Broker-Dealer in any
Auction.

               (b) In the event that any Auction Date for the Preferred Shares
shall be changed after the Auction Agent shall have given the notice referred
to in clause (vii) of paragraph (a) of the Settlement Procedures, the Auction
Agent, by such means as the Auction Agent deems practicable, shall give notice
of such change to the Broker-Dealers not later than the earlier of 9:15 A.M.
on the new Auction Date or 9:15 A.M. on the old Auction Date.

               (c)(i) The Auction Agent shall maintain a registry of Persons
      that are Broker-Dealers, compiled initially on the date hereof, and that
      hold Preferred Shares for purposes of Auctions. The Auction Agent shall
      indicate thereon the identity of the Broker-Dealer that submitted the
      most recent Order in any Auction which resulted in such Existing Holder
      continuing to hold or purchasing the Preferred Shares. The Auction Agent
      shall keep such registry current and accurate based on the information
      provided to it from time to time by the Broker-Dealer. The Corporation
      shall provide or cause to be provided to the Auction Agent at or prior
      to the Date of Original Issue of the Preferred Shares a list of the
      initial Existing Holders of the Preferred Shares, the number of shares
      purchased by each such Existing Holder and the respective Broker-Dealer
      of each such Existing Holder or the affiliate thereof through which each
      such Existing Holder purchased such shares. The Auction Agent may rely
      upon, as conclusive evidence of the identities of the Existing Holders
      of Preferred Shares (A) such list, (B) a list of Holders as a result of
      Auctions, (C) notices from any Broker-Dealer as described in the first
      sentence of Section 2.2(c)(iii) hereof and (D) the results of any
      procedures approved by the Corporation that have been devised for the
      purpose of determining the identities of Existing Holders in situations
      where Preferred Shares may have been transferred without compliance with
      any restriction on the transfer thereof set forth in the Auction
      Procedures.

                  (ii) In the event of any partial redemption of the Preferred
      Shares and the Auction Agent's receipt of written notice of such partial
      redemption thereof, the Auction Agent shall, at least two Business Days
      prior to the next Auction, request each Broker-Dealer to provide the
      Auction Agent with a list of Persons who such Broker-Dealer believes
      should remain Existing Holders after such redemption based upon
      inquiries of those Persons such Broker-Dealer believes are Beneficial
      Owners as a result of the most recent Auction and with respect to each
      such Person, the number of Preferred Shares such Broker-Dealer believes
      are owned by such Person after such redemption. In the absence of
      receiving any such information from any Broker-Dealer, the Auction Agent
      may continue to treat the Existing Holders listed in its registry as the
      beneficial owners of the number of Preferred Shares shown in such
      registry.

               (iii) The Auction Agent shall be required to register a transfer
      of Preferred Shares from an Existing Holder of such Preferred Shares
      only if such transfer is to another Existing Holder, or other Person if
      permitted by the Corporation, and only if such transfer is made (A)
      pursuant to an Auction, (B) the Auction Agent has been notified in
      writing (1) in a notice substantially in the form of Exhibit B to the
      Broker-Dealer Agreements by a Broker-Dealer of such transfer or (2) in a
      notice substantially in the form of Exhibit C to the Broker-Dealer
      Agreements by the Broker-Dealer of any Existing Holder, or other Person
      if permitted by the Corporation, that purchased or sold such Preferred
      Shares in an Auction of the failure of such Preferred Shares to be
      transferred as a result of such Auction or (C) pursuant to procedures
      approved by the Corporation that have been devised for the purpose of
      determining the identities of Existing Holders in situations where
      Preferred Shares may have been transferred without compliance with any
      restriction on the transfer thereof set forth in the Auction Procedures.
      The Auction Agent is not required to accept any such notice for an
      Auction unless it is received by the Auction Agent by 3:00 P.M. on the
      Business Day preceding such Auction.

               (d) The Auction Agent may, but shall have no obligation to,
request the Broker-Dealers, as set forth in the Broker-Dealer Agreements, to
provide the Auction Agent with a list of Persons who such Broker-Dealer
believes should be Existing Holders based upon inquiries of those Persons such
Broker-Dealer believes are Beneficial Owners as a result of the most recent
Auction and with respect to each such Person, the number of Preferred Shares
such Broker-Dealer believes to be owned by such Person. The Auction Agent
shall keep confidential such registry of Existing Holders and shall not
disclose the identities of the Existing Holders of such Preferred Shares to
any Person other than the Corporation and the Broker-Dealer that provided such
information; provided, however, that the Auction Agent reserves the right and
is authorized to disclose any such information if (a) it is ordered to do so
by a court of competent jurisdiction or a regulatory body, judicial or
quasi-judicial agency or authority having the authority to compel such
disclosure, (b) it is advised by its counsel that its failure to do so would
be unlawful or (c) failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received indemnity or
security satisfactory to it.

           2.3 Auction Schedule.

           The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Auction Agent
with the consent of the Corporation, which consent shall not be unreasonably
withheld. The Auction Agent shall give written notice of any such change to
each Broker- Dealer. Such notice shall be given prior to the close of business
on the Business Day immediately preceding the first Auction Date on which any
such change shall be effective.


Time                           Event
- ----                           -----

By 9:30 A.M.                   Auction Agent advises the Corporation
                               and Broker-Dealers of (i) the
                               applicable Maximum Rate and (ii)
                               when applicable, the Reference Rate or
                               the Treasury Index Rate, used in
                               determining such Maximum Rate as set
                               forth in Section 2.6(b)(i) hereof.

9:30 A.M. - 1:00 P.M.          Auction Agent assembles information
                               communicated to it by Broker-Dealers
                               as provided in Section 2(a) of the
                               Auction Procedures.  Submission
                               Deadline is 1:00 P.M.

Not earlier than 1:00 P.M.     Auction Agent makes determinations pursuant
                               to Section 4(a) of the Auction Procedures.

By approximately 3:30 P.M.     Auction Agent advises Corporation of
                               results of Auction as provided in
                               Section 4(b) of the Auction Procedures.
                               Submitted Bids and Submitted Sell
                               Orders are accepted and rejected in
                               whole or in part and Preferred Shares
                               allocated as provided in Section 5 of the
                               Auction Procedures.  Auction Agent
                               gives notice of Auction results as set
                               forth in paragraph (a) of the Settlement
                               Procedures.

The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.

           2.4 Notice of Auction Results.

           The Auction Agent will advise each Broker-Dealer who submitted a
Bid or Sell Order in an Auction whether such Bid or Sell Order was accepted or
rejected in whole or in part and of the Applicable Rate for the next Dividend
Period for the related Preferred Shares by telephone or through its auction
processing system as set forth in paragraph (a) of the Settlement Procedures.

           2.5 Broker-Dealers.

               (a) No later than 12:00 noon on each Auction Date for Preferred
Shares, the Corporation shall pay to the Auction Agent an amount in cash equal
to the aggregate fees payable to the Broker-Dealers pursuant to Section 2.8 of
the Broker-Dealer Agreements. The Auction Agent shall apply such moneys as set
forth in Section 2.8 of each such Broker-Dealer Agreement.

               (b) The Corporation shall obtain the consent of the Auction
Agent prior to selecting any Person to act as a Broker-Dealer, which consent
shall not be unreasonably withheld.

               (c) The Auction Agent shall terminate any Broker-Dealer
Agreement as set forth therein if so directed by the Corporation, provided
that at least one Broker-Dealer Agreement would be in effect for the Preferred
Shares after such termination.

               (d) Subject to the Auction Agent's having consented to the
selection of the relevant Broker-Dealer pursuant to Section 2.5(b) hereof, the
Auction Agent shall from time to time enter into such Broker-Dealer Agreements
in the form attached hereto as Exhibit A with one or more Broker-Dealers as
the Corporation shall request, and shall enter into such schedules to any such
Broker-Dealer Agreements as the Corporation shall request.

           2.6 Information Concerning Rates.

               (a) If there is any change in the credit rating of Preferred
Shares by the rating agency (or substitute or successor rating agencies),
referred to in the definition of "Maximum Rate," that results in any change in
the applicable percentage of the "AA" Financial Composite Commercial Paper
Rate used to determine the Maximum Rate for Preferred Shares (the "Rate
Multiple"), the Corporation shall notify the Auction Agent in writing of such
change in the Rate Multiple prior to 12:00 noon on the Business Day prior to
the next Auction Date succeeding such change. On the date hereof the Rate
Multiple is 150%. If the Corporation designates all or a portion of any
dividend on Preferred Shares to consist of net capital gains or other income
taxable for Federal income tax purposes, it will indicate, in a notice in the
form of Exhibit H hereto to the Auction Agent pursuant to Section 2.6 hereof,
the Rate Multiple to be in effect for the Auction Date on which the dividend
rate for such dividend is to be fixed. In determining the Maximum Rate on any
Auction Date, the Auction Agent shall be entitled to rely on the last Rate
Multiple for Preferred Shares of which it has most recently received notice
from the Corporation (or, in the absence of such notice, the percentage
determined by reference to the definition of Rate Multiple), except that if
the Corporation shall have notified the Auction Agent of a Rate Multiple to be
in effect for an Auction Date in accordance with the preceding sentence, the
Rate Multiple in effect for the next succeeding Auction Date shall be, unless
the Corporation notifies the Auction Agent of a change in the Rate Multiple
for such succeeding Auction Date pursuant to this Section 2.6(a), the Rate
Multiple that was in effect on the first preceding Auction Date for Preferred
Shares with respect to which the dividend, the rate for which was fixed on
such Auction Date, did not include any net capital gain or other income
taxable for Federal income tax purposes.

      On each Auction Date, the Auction Agent shall determine the Maximum
Rate. Not later than 9:30 A.M. on each Auction Date the Auction Agent shall
notify the Corporation and the Broker-Dealers of the Maximum Rate and the "AA"
Financial Composite Commercial Paper Rate and Treasury Index Rate, as the case
may be, used to make such determination.

           2.7 Designation of Special Dividend Period.

               (a) No designation is necessary for a Standard Dividend Period,
which shall last seven calendar days.

               (b) Pursuant to the Articles Supplementary, the Corporation may,
at its option, designate a Special Dividend Period for the Preferred Shares in
the manner described in Section 4 of Article I of the Articles Supplementary.

                  (i) If the Board of Directors proposes to designate any
      Dividend Period as a Special Dividend Period, (A) the Corporation shall
      deliver to the Auction Agent a notice of such proposed Special Dividend
      Period in the form of Exhibit C hereto not less than seven Business Days
      (or two Business Days in the event the duration of the Dividend Period
      prior to the Special Dividend Period is less than eight Business Days)
      nor more than 30 Business Days prior to the first day of the Special
      Dividend Period and (B) the Auction Agent on behalf of the Corporation
      shall deliver such notice by first-class mail, postage prepaid, to each
      Existing Holder of Preferred Shares at the address set forth for such
      Existing Holder in the records of the Auction Agent and to the
      Broker-Dealers as promptly as practicable after its receipt of such
      notice from the Corporation.

                  (ii) If the Corporation determines to designate such Dividend
      Period as a Special Dividend Period, (A) the Corporation shall deliver
      to the Auction Agent a notice of such determination in the form of
      Exhibit D hereto not later than 3:00 P.M. on the second Business Day
      immediately preceding the first day of such proposed Special Dividend
      Period and (B) the Auction Agent shall deliver such notice to the
      Broker- Dealers promptly on such second Business Day.

                  (iii) If the Corporation shall deliver to the Auction Agent a
      notice not later than 3:00 P.M. on the second Business Day immediately
      preceding the first day of such proposed Special Dividend Period stating
      that the Corporation has determined not to exercise its option to
      designate such Dividend Period as a Special Dividend Period, in the form
      of Exhibit E hereto, or shall fail to timely deliver either such notice
      or a notice in the form of Exhibit D hereto, the Auction Agent shall
      deliver a notice in the form of Exhibit E hereto to the Broker-Dealers
      promptly on such second Business Day. If the Corporation fails to
      deliver either such notice provided in this Section 2.7(b) hereof by
      3:00 P.M., the Corporation shall be deemed to have delivered a notice to
      the Auction Agent with respect to such Dividend Period to the effect set
      forth in this Section 2.7(b)(iii), thereby resulting in a Standard
      Dividend Period.

           Such change in the length of any Dividend Period shall not occur if
(1) an Auction for Preferred Shares shall not be held on such Auction Date for
any reason or (2) an Auction for Preferred Shares shall be held on such
Auction Date but Sufficient Clearing Bids for Preferred Shares shall not exist
in such Auction.

           2.8 Default.

           In the event the Fund fails to deliver amounts to the Auction Agent
in accordance with the Articles Supplementary, which failure, but for the Fund
delivering such amounts plus all applicable late charges to the Auction Agent
by the applicable Cure Date, would result in a Default (a "Potential
Default"), (a) all amounts payable by the Fund to the holders of Preferred
Shares with respect to such Potential Default or Default, (b) the dividend
rate or dividend rates applicable to the Dividend Period or Dividend Periods
with respect to which such Potential Default or Default occurs, and (c) the
dividend rate for the Dividend Period immediately following the Dividend
Period during which all amounts payable by the Fund (including, without
limitation, any Dividend Rate applicable to such period that is not determined
at Auction, and applicable late charges, together, the "Late Charge") with
respect to such Potential Default or Default are delivered by the Fund to the
Auction Agent, shall be as set forth in the Articles Supplementary.

           2.9 Ownership of Shares of Preferred Shares.

           Neither the Corporation nor any affiliate of the Corporation shall
submit any Order in any Auction for Preferred Shares, except as set forth in
the next sentence. Any Broker-Dealer that is an affiliate of the Corporation
may submit Orders in Auctions, but only if such Orders are not for its own
account. For purposes of this Section 2.9, a Broker-Dealer shall not be deemed
to be an affiliate of the Corporation solely because one or more of the
directors or executive officers of such Broker-Dealer or of any Person
controlled by, in control of or under common control with such Broker-Dealer
is also a director of the Corporation. The Auction Agent shall have no duty or
liability with respect to the enforcement or otherwise of this Section 2.9.

           2.10 Intentionally Omitted.

           2.11 Access to and Maintenance of Auction Records.

           The Auction Agent shall afford to the Corporation, its agents,
independent public accountants and counsel and the Broker-Dealers, access at
reasonable times during normal business hours to review and make extracts or
copies of all books, records, documents and other information concerning the
conduct and results of Auctions (at no cost to the Auction Agent), provided
that any such agent, accountant, counsel or Broker-Dealer shall furnish the
Auction Agent with a letter from the Corporation requesting that the Auction
Agent afford such person access. The Auction Agent shall maintain records
relating to any Auction for a period of six years after such Auction, and such
records shall, in reasonable detail, accurately and fairly reflect the actions
taken by the Auction Agent hereunder.

3. The Auction Agent as Dividend and Redemption Price Disbursing Agent.

           The Auction Agent, as dividend and redemption price disbursing
agent, shall pay to the Holders of Preferred Shares (i) on each Dividend
Payment Date, dividends on the Preferred Shares, (ii) on any date fixed for
redemption of Preferred Shares, the Redemption Price of the Preferred Shares
called for redemption and (iii) any late charge related to any payment of
dividends or Redemption Price, in each case after receipt of the necessary
funds from the Corporation with which to pay such dividends, Redemption Price
or late charge. The amount of dividends for any Dividend Period to be paid by
the Auction Agent to the Holders of Preferred Shares will be determined by the
Corporation as set forth in Section 2 of Article I of the Articles
Supplementary. The Redemption Price of any shares to be paid by the Auction
Agent to the Holders will be determined by the Corporation as set forth in
Section 3 of Article I of the Articles Supplementary. The Corporation shall
notify the Auction Agent in writing of a decision to redeem Preferred Shares
at least one Business Day prior to the date a notice of redemption is required
to be mailed to the Holders of the shares to be redeemed by paragraph (b) of
Section 3 of Article I of the Articles Supplementary and shall notify the
Auction Agent in writing on or prior to the 10th day preceding a Mandatory
Redemption Date. Such notice by the Corporation to the Auction Agent shall
contain the information required by paragraph (b) of Section 3 of Article I of
the Articles Supplementary to be stated in the notice of redemption required
to be mailed by the Corporation to such Holders.

4. The Auction Agent as Transfer Agent and Registrar.

           4.1 Issue of Stock or Shares Certificates.

           Upon the Date of Original Issue of Preferred Shares, one or more
certificates representing all of the Preferred Shares issued on such date
shall be issued by the Corporation and, at the request of the Corporation,
registered in the name of Cede & Co. and countersigned by the Auction Agent.

           4.2 Registration of Transfer of Shares.

           Preferred Shares shall be registered solely in the name of the
Securities Depository or its nominee.

           4.3 Removal of Legend on Restricted Shares.

           All requests for removal of legends on Preferred Shares indicating
restrictions on transfer shall be accompanied by an opinion of counsel stating
that such legends may be removed and such shares freely transferred, such
opinion to be delivered under cover of a letter from a Corporate Officer
authorizing the Auction Agent to remove the legend on the basis of said
opinion.

           4.4 Lost Stock or Share Certificates.

           The Auction Agent shall issue and register replacement certificates
for certificates represented to have been lost, stolen or destroyed upon the
fulfillment of such requirements as shall be deemed appropriate by the
Corporation and the Auction Agent, subject at all times to provisions of law,
the By-Laws of the Corporation governing such matters and resolutions adopted
by the Corporation with respect to lost securities. The Auction Agent shall
not have any liability for loss incurred by the Corporation or by any other
person as a result of the receipt or acceptance of fraudulent, forged or
invalid certificates or securities (or certificates or securities which are
otherwise not freely transferable or deliverable without encumbrance in any
relevant market). The Auction Agent may issue new certificates in exchange for
and upon the cancellation of mutilated certificates. Any request by the
Corporation to the Auction Agent to issue a replacement or new certificate
pursuant to this Section 4.4 shall be deemed to be a representation and
warranty by the Corporation to the Auction Agent that such issuance will
comply with such provisions of law and the By-Laws and resolutions of the
Corporation.

           4.5 Disposition of Cancelled Certificates; Record Retention.

           The Auction Agent shall retain all stock or share certificates
which have been cancelled in transfer or exchange and all accompanying
documentation in accordance with applicable rules and regulations of the
Securities and Exchange Commission for two calendar years. The Corporation
shall also undertake to furnish to the Securities and Exchange Commission and
to the Board of Governors of the Federal Reserve System, upon demand, at
either the principal office or at any regional office, complete, correct and
current hard copies of any and all such records.

           4.6 Stock or Record Books.

           For so long as the Auction Agent is acting as the transfer agent
for Preferred Shares pursuant to this Agreement, it shall maintain a stock or
record book containing a list of the Holders of the Preferred Shares. In case
of any request or demand for the inspection of the stock or record books of
the Corporation or any other books in the possession of the Auction Agent, the
Auction Agent will notify the Corporation and secure instructions as to
permitting or refusing such inspection; provided, however, the Auction Agent
shall allow inspection of such books and records in its possession without the
consent of the Corporation by its lawyers, accountants, regulators, auditors
and other parties the Auction Agent deems necessary in order to carry out the
normal operation of its business. The Auction Agent reserves the right,
however, to exhibit the stock or record books or other books to any Person if
(a) it is ordered to do so by a court of competent jurisdiction or a
regulatory body, judicial or quasi-judicial agency or authority having the
authority to compel such disclosure, (b) it is advised by its counsel that its
failure to do so would be unlawful or (c) failure to do so would expose the
Auction Agent to loss, liability, claim, damage or expense for which it has
not received indemnity or security satisfactory to it.

           4.7 Return of Funds.

           Any funds deposited with the Auction Agent hereunder by the
Corporation for any reason, including but not limited to redemption of
Preferred Shares, that remain unpaid after ninety days shall be repaid to the
Corporation upon the written request of the Corporation.

5. Representations and Warranties.

           5.1 Representations and Warranties of the Corporation

           The Corporation represents and warrants to the Auction Agent that:

               (a) the Corporation is duly organized and existing business
Corporation in good standing under the laws of the State of its incorporation
and has full corporate power or all requisite power to execute and deliver the
Agreement and to authorize, create and issue the Preferred Shares, and the
Preferred Shares when issued, will be duly authorized, validly issued, fully
paid and nonassessable;

               (b )the Agreement has been duly and validly authorized, executed
and delivered by the Corporation and constitutes the legal, valid and binding
obligation of the Corporation;

               (c) the form of the certificate evidencing the Preferred Shares
complies or will comply with all applicable laws of the State of its
incorporation;

               (d) when issued, the Preferred Shares will have been duly
registered under the Securities Act of 1933, as amended, and no further action
by or before any governmental body or authority of the United States or of any
state thereof is required in connection with the execution and delivery of
this Agreement or will have been required in connection with the issuance of
Preferred Shares;

               (e) the execution and delivery of this Agreement and the
issuance and delivery of the Preferred Shares do not and will not conflict
with, violate or result in a breach of, the terms, conditions or provisions
of, or constitute a default under, the Articles of Amendment and Restatement
(as amended) or the By- Laws of the Corporation, any law or regulation, any
order or decree of any court or public authority having jurisdiction, or any
mortgage, indenture, contract, agreement or undertaking to which the
Corporation is a party or by which it is bound the effect of which conflict,
violation, default or breach would be material to the Corporation or the
Corporation and its subsidiaries taken as a whole; and

               (f) no taxes are payable upon or in respect of the execution of
 this Agreement or the issuance of the Preferred Shares.

           5.2 Representations and Warranties of the Auction Agent.

           The Auction Agent represents and warrants to the Corporation that:

               (a) The Auction Agent is duly organized and is validly existing
as a banking corporation in good standing under the laws of the State of New
York and has the corporate power to enter into and perform its obligations
under this Agreement; and

               (b) this Agreement has been duly and validly authorized,
executed and delivered by the Auction Agent and constitutes the legal, valid
and binding obligation of the Auction Agent, enforceable against the Auction
Agent in accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equitable principles.

6. The Auction Agent.

           6.1 Duties and Responsibilities.

               (a) The Auction Agent is acting solely as agent for the
Corporation hereunder and owes no fiduciary duties to any Person except if
provided by this Agreement.

               (b) The Auction Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.

               (c) In the absence of gross negligence or willful misconduct on
its part, the Auction Agent shall not be liable for any action taken,
suffered, or omitted or for any error of judgment made by it in the
performance of its duties under the Agreement. The Auction Agent shall not be
liable for any error of judgment resulting from the use or reliance on a
source of information used in good faith unless the Auction Agent shall have
been grossly negligent in the determination, calculation or declaration
thereunder. The Auction Agent shall not be liable for any error of judgment
made in good faith unless the Auction Agent shall have been grossly negligent
in ascertaining (or failing to ascertain) the pertinent facts.

           6.2 Rights of the Auction Agent.

               (a) The Auction Agent may conclusively rely and shall be fully
protected in acting or refraining from acting upon any communication
authorized hereby and upon any written instruction, notice, request,
direction, consent, report, certificate, share certificate or other
instrument, paper or document believed in good faith by it to be genuine. The
Auction Agent shall not be liable for acting upon any telephone communication
authorized hereby which the Auction Agent believes in good faith to have been
given by the Corporation or by a Broker-Dealer. The Auction Agent may record
telephone communications with the Corporation or with the Broker-Dealers or
both.

               (b) The Auction Agent may consult with counsel of its choice and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.

               (c) The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.

               (d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys and
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed by it with due care hereunder.

               (e) The Auction Agent shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, including without limitation strikes, work stoppages, acts
of war or terrorism, insurrection, revolution, nuclear or natural catastrophes
or acts of God, and interruptions, loss or malfunctions or utilities,
communications or computer (software and hardware) services, it being
understood that the Auction Agent shall use reasonable efforts which are
consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.

               (f) The Auction Agent shall not be: (i) required to, and does
not, make any representations or have any responsibilities as to the validity,
accuracy, value or genuineness of any signatures or endorsements, other than
its own; (ii) obligated to take any legal action hereunder that might, in its
judgment, involve any expense or liability, unless it has been furnished with
indemnity satisfactory to the Auction Agent; and (iii) responsible for or
liable in any respect on account of the identity, Corporation or rights of any
Person (other than itself and its agents and attorneys) executing or
delivering or purporting to execute or deliver any document under this
Agreement or any Broker-Dealer Agreement.

           6.3 Compensation, Expenses and Indemnification.

               (a) The Corporation shall pay the Auction Agent an annual fee as
compensation for all services rendered by it under this Agreement and the
Broker- Dealer Agreements as the Corporation and the Auction Agent have agreed
to from time to time.

               (b) The Corporation shall reimburse the Auction Agent upon its
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by the Auction Agent in accordance with any provision of this
Agreement and the Broker-Dealer Agreements (including the compensation and the
reasonable expenses and disbursements of its agents and counsel), except any
expense or disbursement attributable to its gross negligence or willful
misconduct. In no event shall the Auction Agent be responsible or liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including, but not limited to, loss of profit), even if the Auction Agent has
been advised of the likelihood of such loss or damage and regardless of the
form of action.

               (c) To the extent, if any, that a court of competent
jurisdiction would enforce such agreement as not contrary to law or public
policy, the Corporation hereby agrees to keep fully indemnified, on an
after-tax basis, the Auction Agent (in its capacity as Auction Agent and, if
applicable, in its capacity as transfer agent, registrar, dividend paying
agent and redemption price disbursing agent and any other capacity
contemplated by this Agreement) and its officers, directors, employees and
agents for and hold them harmless against any loss, liability or expense
incurred without gross negligence or willful misconduct on their part, arising
out of or in connection with this Agreement and any Broker-Dealer Agreements,
including the costs and expenses of defending itself against any such claim or
liability in connection with its exercise or performance of any of its rights
or duties hereunder and thereunder (which costs and expenses include the costs
and expenses of the enforcement of this provision).

               (d) The Auction Agent, in any of its various capacities, shall
hold funds uninvested unless otherwise directed by the Corporation.

           6.4 Auction Agent's Disclaimer.

           The Auction Agent makes no representation as to the validity or
adequacy of the Agreement, the Broker-Dealer Agreements or the Preferred
Shares except that the Auction Agent hereby represents that this Agreement has
been duly authorized, executed and delivered by the Auction Agent and
constitutes a legal and binding obligation of the Auction Agent.

7. Miscellaneous.

           7.1 Term of Agreement.

               (a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Corporation may terminate this
Agreement at any time by so notifying the Auction Agent, provided that the
Corporation has entered into an agreement in substantially the form of the
Agreement with a successor Auction Agent. The Auction Agent may terminate this
Agreement upon written notice to the Corporation on the date specified in such
notice, which date shall be no earlier than 30 days after the date of delivery
of such notice.

               (b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Corporation and the Auction Agent under
this Agreement with respect to the Preferred Shares shall cease upon
termination of the Agreement. The Corporation's representations, warranties,
covenants and obligations to the Auction Agent under Sections 5 and 6.3 hereof
shall survive the termination of the Agreement. Upon termination of this
Agreement, the Auction Agent shall, at the Corporation's request, promptly
deliver to the Corporation copies of all books and records maintained by it
with respect to Preferred Shares in connection with its duties hereunder.

           7.2 Communications.

           Except for (a) communications authorized to be by telephone
pursuant to this Agreement or the Auction Procedures and (b) communications in
connection with Auctions (other than those expressly required to be in
writing), all notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and
shall be given to such party, addressed to it, at its address or telecopy
number set forth below:

If to the Corporation,    The Gabelli Convertible and Income Securities
                            Fund Inc.
                          One Corporate Center
                          Rye, New York 10580-1422
                          Attention:  Bruce N. Alpert
                          Telephone No.: 212-921-5158
                          Telecopier No.: 914-921-5100

If to the Auction Agent,  The Bank of New York
                          100 Church Street, 8th Floor
                          New York, New York 10286
                          Telephone:  212-437-6166
                          Telecopier:  212-437-6155

           Each such notice, request or communication shall be effective when
delivered at the address specified herein. Communications shall be given on
behalf of the Corporation by a Corporate Officer and on behalf of the Auction
Agent by telephone (confirmed by telecopy or in writing) by an Authorized
Officer.

           7.3 Entire Agreement.

           This Agreement contains the entire agreement between the parties
relating to, and superseding any prior agreement between the parties relating
to, the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or
implied, between the parties relating to the subject matter hereof except for
agreements relating to the compensation of the Auction Agent.

           7.4 Benefits.

           Nothing herein, express or implied, shall give to any Person, other
than the Corporation, the Auction Agent and their respective successors and
assigns, any benefit of any legal or equitable right, remedy or claim
hereunder.

           7.5 Amendment; Waiver.

               (a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the
party to be charged.

               (b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.

           7.6 Successors and Assigns.

           This Agreement shall be binding upon, inure to the benefit of, and
be enforceable by, the respective successors and assigns of each of the
Corporation and the Auction Agent.

           7.7 Severability.

           If any clause, provision or section hereof shall be ruled invalid
or unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.

           7.8 Disclosure of Information.

           The Auction Agent agrees that it will not disclose or use any "non-
public personal information" about the Corporation's shareholders other than
such uses or disclosures as are permitted by Regulation S-P under Section 504
of the Gramm Leach Biley Act ("Regulation S-P"). "Nonpublic personal
information" about a shareholder shall mean: (a) personally identifiable
financial information; (b) any list, description, or other grouping of
consumers that is derived from using any personally identifiable information
that is not publically available; and (c) any other information that a
customer or the Transfer Agent is prohibited from using or disclosing pursuant
to Regulation S-P.

           7.9 Governing Law; Jurisdiction; and Waiver of Trial by Jury.

           This Agreement shall be governed by, and interpreted and construed
in accordance with, the substantive law of the State of New York. The parties
agree that all actions and proceedings arising out of this Agreement or any
transactions contemplated hereby shall be brought in the State of New York
and, in connection with any such action or proceeding, submit to the
jurisdiction of, and venue in, such State. Each of the parties hereto also
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim arising out of this agreement or the transaction contemplated
hereby.


                             THE GABELLI CONVERTIBLE AND
                             INCOME SECURITIES FUND INC.



                              ________________________________
                              By:  Name
                                   Title

                             THE BANK OF NEW YORK



                              ________________________________
                              By:  Name
                                   Title







                          [Auction Agency Agreement]


<PAGE>


                                                                     EXHIBIT A

                                    FORM OF
                            BROKER-DEALER AGREEMENT





<PAGE>

                                                                     EXHIBIT B

                             SETTLEMENT PROCEDURES

      The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the Auction Agency Agreement and each
Broker- Dealer Agreement. Nothing contained in this Exhibit B constitutes a
representation by the Corporation that in each Auction each party referred to
herein will actually perform the procedures described herein to be performed
by such party.

               (a) By approximately 3:00 p.m., New York City time, on each
Auction Date, the Auction Agent shall notify by telephone or through its
auction processing system the Broker-Dealers that participated in the Auction
held on such Auction Date and submitted an order on behalf of any Existing
Holder or Potential Holder of:

                  (i) the Applicable Rate fixed for the next succeeding
      Dividend Period;

                  (ii) whether Sufficient Clearing Bids existed for
      the determination of the Applicable Rate;

                  (iii) if such Broker-Dealer (a "Seller's Broker- Dealer")
      submitted a Bid or Sell Order on behalf of an Existing Holder, the
      number of shares, if any, of Preferred Shares to be sold by such
      Existing Holder;

                  (iv) if such Broker-Dealer (a "Buyer's Broker- Dealer")
      submitted a Bid on behalf of a Potential Holder, the number of shares,
      if any, of Preferred Shares to be purchased by such Potential Holder;

                  (v) if the aggregate number of Preferred Shares to be sold
      by all Existing Holders on whose behalf such Broker-Dealer submitted a
      Bid or a Sell Order exceeds the aggregate number of Preferred Shares to
      be purchased by all Potential Holders on whose behalf such Broker-Dealer
      submitted a Bid, the name or names of one or more Buyer's Broker-Dealers
      (and the name of the Agent Member with the Securities Depository, if
      any, of each such Buyer's Broker- Dealer) acting for one or more
      purchasers of such excess number of Preferred Shares and the number of
      such shares to be purchased from one or more Existing Holders on whose
      behalf such Broker-Dealer acted by one or more Potential Holders on
      whose behalf each of such Buyer's Broker-Dealers acted;

                  (vi) if the aggregate number of Preferred Shares to be
      purchased by all Potential Holders on whose behalf such Broker- Dealer
      submitted a Bid exceeds the aggregate number of Preferred Shares to be
      sold by all Existing Holders on whose behalf such Broker-Dealer
      submitted a Bid or a Sell Order, the name or names of one or more
      Seller's Broker Dealers (and the name of the Agent Member, if any, of
      each such Seller's Broker-Dealer) acting for one or more sellers of such
      excess number of Preferred Shares and the number of such shares to be
      sold to one or more Potential Holders on whose behalf such Broker-Dealer
      acted by one or more Existing Holders on whose behalf each of such
      Seller's Broker-Dealers acted; and

                  (vii) the Auction Date of the next succeeding Auction with
      respect to the Preferred Shares.

               (b) On each Auction Date, each Broker-Dealer that submitted an
Order on behalf of any Existing Holder or Potential Holder shall:

                  (i) in the case of a Broker-Dealer that is a Buyer's
      Broker-Dealer, instruct each Potential Holder on whose behalf such
      Broker-Dealer submitted a Bid that was accepted, in whole or in part, to
      instruct such Potential Holder's Agent Member to pay to such
      Broker-Dealer (or its Agent Member) through the Securities Depository
      the amount necessary to purchase the number of Preferred Shares to be
      purchased pursuant to such Bid against receipt of such shares and advise
      such Potential Holder of the Applicable Rate for the next succeeding
      Dividend Period;

                  (ii) in the case of a Broker-Dealer that is a Seller's
      Broker-Dealer, instruct each Existing Holder on whose behalf such
      Broker-Dealer submitted a Sell Order that was accepted, in whole or in
      part, to instruct such Existing Holder's Agent Member to deliver to such
      Broker-Dealer (or its Agent Member) through the Securities
      Depository the number of Preferred Shares to be sold pursuant to such
      Order against payment therefor and advise any such Existing Holder that
      will continue to hold Preferred Shares of the Applicable Rate for the
      next succeeding Dividend Period;

                  (iii) advise each Existing Holder on whose behalf such
      Broker-Dealer submitted a Hold Order of the Applicable Rate for the next
      succeeding Dividend Period;

                  (iv) advise each Existing Holder on whose behalf such
      Broker-Dealer submitted an Order of the Auction Date for the next
      succeeding Auction; and

                  (v) advise each Potential Holder on whose behalf such
      Broker-Dealer submitted a Bid that was accepted, in whole or in part, of
      the Auction Date for the next succeeding Auction.

               (c) On the basis of the information provided to it pursuant to
(a) above, each Broker-Dealer that submitted a Bid or a Sell Order on behalf
of a Potential Holder or an Existing Holder shall, in such manner and at such
time or times as in its sole discretion it may determine, allocated any funds
received by it pursuant to (b)(i) above and any Preferred Shares received by
it pursuant to (b)(ii) above among the Potential Holders, if any, on whose
behalf such Broker-Dealer submitted Bids, the Existing Holders, if any, on
whose behalf such Broker-Dealer submitted Bids that were accepted or Sell
Orders, and any Broker-Dealer or Broker- Dealers identified to it by the
Auction Agent pursuant to (a)(v) or (a)(vi) above.

               (d) On each Auction Date:

                  (i) each Potential Holder and Existing Holder shall instruct
      its Agent Member as provided in (b)(i) or (ii) above, as the case may
      be;

                  (ii) each Seller's Broker-Dealer which is not an Agent Member
      of the Securities Depository shall instruct its Agent Member to (A) pay
      through the Securities Depository to the Agent Member of the Existing
      Holder delivering shares to such Broker- Dealer pursuant to (b)(ii)
      above the amount necessary to purchase such shares against receipt of
      such shares, and (B) deliver such shares through the Securities
      Depository to a Buyer's Broker-Dealer (or its Agent Member) identified
      to such Seller's Broker-Dealer pursuant to (a)(v) above against payment
      therefor; and

                  (iii) each Buyer's Broker-Dealer which is not an Agent Member
      of the Securities Depository shall instruct its Agent Member to (A) pay
      through the Securities Depository to a Seller's Broker-Dealer (or its
      Agent Member) identified pursuant to (a) (vi) above the amount necessary
      to purchase the shares to be purchased pursuant to (b) (i) above against
      receipt of such shares, and (B) deliver such shares through the
      Securities Depository to the Agent Member of the purchaser thereof
      against payment therefor.

               (e) On the day after the Auction Date:

                  (i) each Bidder's Agent Member referred to in (d) (i) above
      shall instruct the Securities Depository to execute the transactions
      described under (b) (i) or (ii) above, and the Securities Depository
      shall execute such transactions;

                  (ii) each Seller's Broker-Dealer or its Agent Member shall
      instruct the Securities Depository to execute the transactions described
      in (d) (ii) above, and the Securities Depository shall execute such
      transactions; and

                  (iii) each Buyer's Broker-Dealer or its Agent Member shall
      instruct the Securities Depository to execute the transactions described
      in (d) (iii) above, and the Securities Depository shall execute such
      transactions.

               (f) If an Existing Holder selling Preferred Shares in an Auction
fails to deliver such shares (by authorized book-entry), a Broker-Dealer may
deliver to the Potential Holder on behalf of which it submitted a Bid that was
accepted a number of whole Preferred Shares that is less than the number of
shares that otherwise was to be purchased by such Potential Holder. In such
event, the number of Preferred Shares to be so delivered shall be determined
solely by such Broker- Dealer. Delivery of such lesser number of shares shall
constitute good delivery. Notwithstanding the foregoing terms of this
paragraph (f), any delivery or non- delivery of shares which shall represent
any departure from the results of an Auction, as determined by the Auction
Agent, shall be of no effect unless and until the Auction Agent shall have
been notified of such delivery or non-delivery in accordance with the
provisions of the Auction Agency Agreement and the Broker- Dealer Agreements.


<PAGE>

                                                                      EXHIBIT C

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                         NOTICE OF PROPOSED CHANGE OF
                         LENGTH OF DIVIDEND PERIOD OF
               SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK
                             ("Preferred Shares")

           The Gabelli Convertible and Income Securities Fund Inc. (the
"Corporation") may exercise its option to designate the Dividend Period of its
Preferred Shares commencing [the first day of the Special Dividend Period] as
a Special Dividend Period.

           By 3:00 P.M., New York City time, on the second Business Day
preceding the first day of such proposed Special Dividend Period, the
Corporation will notify ___________________ of either (a) its determination to
exercise such option, designating the length of such Special Dividend Period
or (b) its determination not to exercise such option.

                             THE GABELLI CONVERTIBLE AND
                             INCOME SECURITIES FUND INC.


                             _________________________________


Dated:  __________, 20__


<PAGE>


                                                                  EXHIBIT D

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                 NOTICE OF CHANGE OF LENGTH OF DIVIDEND PERIOD
               SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK
                             ("Preferred Shares")

           NOTICE IS HEREBY GIVEN that (the "Corporation") has determined to
designate the Dividend Period of its Preferred Shares commencing on [the first
day of the Special Dividend Period] as a Special Dividend Period.

           Capitalized terms not defined herein shall have the respective
meanings specified in the Articles Supplementary or Auction Agency Agreement,
as the case may be.

           The Special Dividend Period will be __________ calendar days.

           The Auction Date for the Special Dividend Period is the Business
Day immediately preceding the first day of such Special Dividend Period.

           As a result of the Special Dividend Period designation, the amount
of dividends payable on Preferred Shares during the Special Dividend Period
will be based on a 360-day year.

           The Special Dividend Period shall not commence if (a) an Auction
for Preferred Shares shall not be held on such Auction Date for any reason or
(b) an Auction for Preferred Shares shall be held on such Auction Date but
Sufficient Clearing Bids for such shares shall not exist in such Auction.

           The scheduled Dividend Payment Dates for the Preferred Shares
during such Special Dividend Period will be _________________________.

                    [Special Redemption Provisions, if any]

                             THE GABELLI CONVERTIBLE AND
                             INCOME SECURITIES FUND INC.


                             _________________________________

Dated:  __________, 20__


<PAGE>


                                                                     EXHIBIT E

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                     NOTICE OF DETERMINATION NOT TO CHANGE
                         LENGTH OF DIVIDEND PERIOD OF
               SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK
                             ("Preferred Shares")

           NOTICE IS HEREBY GIVEN that The Gabelli Convertible and Income
Securities Fund Inc. (the "Corporation") has determined not to exercise its
option to designate a Special Dividend Period of its Preferred Shares and the
next succeeding Dividend Period will be a Standard Dividend Period of seven
calendar days.

                             THE GABELLI CONVERTIBLE AND
                             INCOME SECURITIES FUND INC.


                             ______________________________


Dated:  __________, 20___


<PAGE>

                                                                    EXHIBIT F

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                         NOTICE OF CURE OF DEFAULT ON
               SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK
                             ("Preferred Shares")

           NOTICE IS HEREBY GIVEN that The Gabelli Convertible and Income
Securities Fund Inc. (the "Corporation") has cured its Potential Default and
paid the applicable late charge with respect to its Preferred Shares. The next
Auction Date for the Preferred Shares is scheduled to be on _________________,
20___.

                             THE GABELLI CONVERTIBLE AND
                             INCOME SECURITIES FUND INC.


                             ______________________________

Dated:  __________, 20___


<PAGE>



                                                                    EXHIBIT G

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                         NOTICE OF CURE OF DEFAULT ON
               SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK
                             ("Preferred Shares")

           NOTICE IS HEREBY GIVEN that The Gabelli Convertible and Income
Securities Fund Inc. (the "Corporation") has cured its Default and paid the
applicable late charge with respect to its Preferred Shares. The next Auction
Date for the Preferred Shares is scheduled to be on _________________, 20___.

                             THE GABELLI CONVERTIBLE AND
                             INCOME SECURITIES FUND INC.


                             ______________________________

Dated:  __________, 20___



<PAGE>

                                                                     EXHIBIT H

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
                                   NOTICE OF
              [CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME](1)
                                 DIVIDEND FOR
               SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK
                             ("Preferred Shares")

           NOTICE IS HEREBY GIVEN that the amount of the dividend payable on
________________, 20____ for The Gabelli Convertible and Income Securities
Fund's Preferred Shares will be determined by the Auction to be held on
_______________, 20___. Up to [$ A ](2) [$ B ](3) per share of the dividend
payable on such date as determined by such Auction will consist of [capital
gains](2) [ordinary income taxable for Federal income tax purposes](3). If the
dividend amount payable on such date as determined by such Auction is less
than [$ A ](2) [$ B ](3) per share, the entire amount of the dividend will
consist of [capital gains](2) [ordinary income taxable for Federal income tax
purposes](3). [To the extent such dividend amount exceeds [$ A ] per share,
any excess up to [$ B ] per share will consist of ordinary income taxable for
Federal income tax purposes.](4) Accordingly, the aforementioned composition
of the dividend payable on _______________, 20___ should be considered in
determining Orders to be submitted with respect to the Auction to be held on
________________, 20__. The Rate Multiple in effect for such Auction will be
____%.

                                  THE GABELLI CONVERTIBLE AND
                                  INCOME SECURITIES FUND INC.


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

           (1) Include language with respect to capital gains, taxable
ordinary income or both, depending on the character of the designation to be
made with respect to the dividend(s).

           (2) Include bracketed material if a portion of the dividend will be
designated capital gains.

           (3) Include bracketed material if a portion of the dividend will be
designated ordinary income taxable for Federal income tax purposes and no
portion of the dividend will be designated capital gains.

           (4) Include bracketed material if a portion of the dividend will be
designated capital gains and a portion will be designated ordinary income
taxable for Federal income tax purposes.

A = the maximum amount of capital gains allocated to the Preferred Shares to
be included in such dividend, divided by the number of Preferred Shares.

B = the maximum amount of ordinary income taxable for Federal income tax
purposes allocated to the Preferred Shares to be included in such dividend,
divided by the number of preferred shares.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>9
<FILENAME>s446708.txt
<DESCRIPTION>EX 99 (K)(III) -- FORM OF BD
<TEXT>
                                                                   EX-99(k)(iii)



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


                            BROKER-DEALER AGREEMENT

                                    between

                             THE BANK OF NEW YORK
                               as Auction Agent
                                      and
                         ____________________________
                               as Broker-Dealer


                               Dated as of [__]


                                  Relating to

              SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK OF
            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.



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

<PAGE>

      BROKER-DEALER AGREEMENT dated as of ________ (this "Agreement"), among
(i) The Bank of New York, a New York banking corporation, as auction agent
(the "Auction Agent") (not in its individual capacity but solely as agent)
pursuant to authority granted to it in the Auction Agency Agreement, dated as
of February __, 2003, (the "Auction Agency Agreement") between the The Gabelli
Convertible and Income Securities Fund Inc., (the "Corporation") and the
Auction Agent and (ii) each broker-dealer whose name appears on the signature
page hereof, as broker-dealer (together with its successors and assigns as
such hereinafter referred to as "BD").

      The Corporation intends to issue shares of Series C Auction Rate
Cumulative Preferred Stock, par value $0.001 per share, liquidation preference
$25,000 per share (the "Preferred Shares") pursuant to the Corporation's
Articles Supplementary, as defined below. The shares of Preferred Shares shall
be issued in book-entry form through the facilities of the Securities
Depository. References to "Preferred Shares" in this Agreement shall refer
only to the beneficial interests in the Preferred Shares unless the context
otherwise requires.

      The Auction Procedures require the participation of a Broker-Dealer.

      NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Auction Agent and BD agree as
follows:

         1. Definitions and Rules of Construction

         1.1 Terms Defined by Articles Supplementary. Capitalized terms not
defined herein shall have the respective meanings specified in the Articles
Supplementary.

         1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures, the following terms shall have the following meanings, unless the
context otherwise requires:

             (a) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depositary that will act on behalf of a Bidder.

             (b) "Agreement" with respect to the Corporation shall mean this
Agreement as may be amended in writing with written consent of the
Corporation.

             (c) "Articles Supplementary" shall mean the Articles
Supplementary Creating and Fixing the Rights of the Series C Auction Rate
Cumulative Preferred Stock, as the same may be amended, supplemented or
modified from time to time.

             (d) "Auction" shall have the meaning specified in Section 2.1
hereof.

             (e) "Auction Procedures" shall mean the auction procedures
constituting Article II of the form of Articles Supplementary as of the filing
thereof.

             (f) "Authorized Officer" of the Auction Agent shall mean each
Vice President, Assistant Vice President and Assistant Treasurer of the
Auction Agent assigned to the Dealing and Trading Group of its Corporate Trust
Department and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes hereof in a written communication to
the Corporation.

             (g) "Corporate Officer" shall mean the Chairman and Chief
Executive Officer, the President, each Vice President (whether or not
designated by a number or word or words added before or after the title "Vice
President"), the Secretary, the Treasurer, each Assistant Vice President, each
Assistant Secretary and each Assistant Treasurer of the Corporation and every
other officer or employee of the Corporation designated as a "Corporate
Officer" for purposes hereof in a notice to the Auction Agent.

             (h) "Late Charge" has the meaning given in Section 2.7(a).

             (i) "Preferred Shares" shall mean the preferred shares, par value
$.001 per share, of the Corporation designated as its "Series C Auction Rate
Cumulative Preferred Stock" and bearing such further designation as to series
as the Board of Directors, as the case may be, of the Corporation or any
committee thereof shall specify.

             (j) "Settlement Procedures" shall mean the Settlement Procedures
attached to the Auction Agency Agreement as Exhibit B.

         1.3 Rules of Construction. Unless the context or use indicates
another or different meaning or intent, the following rules shall apply to the
construction of this Agreement:

             (a) Words importing the singular number shall include the plural
number and vice versa.

             (b) The captions and headings herein are solely for convenience
of reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.

             (c) The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.

             (d) All references herein to a particular time of day shall be to
New York City time.

             (e) Section 1 and 2 hereof shall be read in conjunction with the
Articles Supplementary and in the event of any conflict with the Articles
Supplementary, the Articles Supplementary shall take precedence.

         1.4 Warranties of BD. BD hereby represents and warrants as follows.

             (a) This Broker-Dealer Agreement has been duly authorized,
executed and delivered by BD and that, assuming the due authorization,
execution and delivery hereof by the Auction Agent, this Broker-Dealer
Agreement constitutes a valid and binding agreement of BD, enforceable against
it in accordance with its terms. BD's representations and warranties in this
Section 1.4 shall survive the termination of this Agreement.

             (b) BD has policies and procedures in place that are reasonably
designed to comply with its obligations under the provisions of the USA
Patriot Act, the Bank Secrecy Act ("BSA") and any other anti-money laundering
law, rule or regulation applicable to broker dealers under the BSA, or
otherwise.

         2. The Auctions

         2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.

             (a) On each Auction Date, the provisions of the Auction
Procedures will be followed by the Auction Agent for the purpose of
determining the Applicable Rate for the Preferred Shares for the next Dividend
Period. Each periodic implementation of such procedures is hereinafter
referred to as an "Auction."

             (b) All of the provisions contained in the Auction Procedures and
the Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part of this Agreement to the same extent
as if such provisions were fully set forth herein.

             (c) BD agrees to act as, and assumes the obligations of and
limitations and restrictions placed upon, a Broker-Dealer under this
Agreement. BD understands that other Persons meeting the requirements
specified in the definition of "Broker-Dealer" contained in Section 13 of Part
I of the Articles Supplementary may execute a Broker-Dealer Agreement and
participate as Broker-Dealers in Auctions.

             (d) BD acknowledges and agrees that each provision of the Auction
Procedures that requires BD to perform an obligation or procedure is hereby
incorporated herein by reference and that this Agreement shall constitute the
Corporation's instruction, and BD hereby agrees, to perform such obligations
and procedures without further request by or instructions from the
Corporation.

             (e) BD may participate in Auctions for its own account if it is
not an affiliate of the Corporation, unless the Corporation notifies all
Broker-Dealers that they may no longer do so, in which case BD may continue to
submit Hold Orders or Sell Orders for its own account. If BD is an affiliate
of the Corporation, it may participate in Auctions, but not for its own
account. The Auction Agent shall have no duty to monitor whether or not the BD
has complied with the provisions of this Section 2.1(e).

         2.2 Preparation for Each Auction.

             (a) Not later than 9:30 a.m. on each Auction Date for the
Preferred Shares, the Auction Agent shall advise BD by telephone or other
electronic means, and shall promptly confirm such advice in writing, of (i)
the Maximum Rate and (ii) when applicable, the Reference Rate.

             (b) BD shall cause the Maximum Rate to be communicated as
promptly as practicable to its customers who hold or may be interested in
acquiring Preferred Shares.

             (c) As promptly as practicable after determining each Auction
Date, but not later than 9:15 a.m. on the Business Day preceding such Auction
Date, the Auction Agent shall notify BD, by such means as the Auction Agent
deems practicable, of the scheduled date of such Auction Date. If the Auction
Date for any Auction shall be changed after the Auction Agent has given such
notice or the notice referred to in clause (vii) of paragraph (a) of the
Settlement Procedures, the Auction Agent, by such means as the Auction Agent
deems practicable, shall give notice of such change to BD not later than the
earlier of (x) 9:15 a.m. on the new Auction Date, and (y) 9:15 a.m. on the
original Auction Date. Thereafter, BD shall promptly notify customers of BD
that are Existing Holders of such change in the Auction Date.

             (d) If required by applicable law, or requested by the Auction
Agent, BD shall provide a list of Existing Holders based upon inquiries of
those Persons such Broker-Dealer believes are Beneficial Owners as a result of
the most recent Auction to the Auction Agent promptly after any date so
requested by the Auction Agent. The Auction Agent shall keep confidential any
such information, including information received as to the identity of Bidders
in any Auction, and shall not disclose any such information so provided to any
Person other than the other parties hereto, provided that the Auction Agent
reserves the right to disclose any such information if (a) it is ordered to do
so by a court of competent jurisdiction or a regulatory body, judicial or
quasi-judicial agency or authority having the authority to compel such
disclosure, (b) it is advised by its counsel that its failure to do so would
be unlawful or (c) failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received indemnity
satisfactory to it.

             (e) BD agrees to maintain a list of customers relating to the
Preferred Shares and to use its best efforts, subject to existing laws and
regulations, to contact the customers on such list whom BD believes may be
interested in participating in the Auction on each Auction Date, as a
Potential Holder, for the purposes set forth in the Auction Procedures.
Nothing herein shall require BD to submit an Order for any customer in any
Auction.

             (f) The Auction Agent's registry of Existing Holders of Preferred
Shares shall be conclusive and binding on BD. BD may inquire of the Auction
Agent between 3:00 p.m. on the Business Day preceding an Auction for Preferred
Shares and 9:30 a.m. on the Auction Date for such Auction to ascertain the
number of Preferred Shares in respect of which the Auction Agent has
determined BD to be an Existing Holder. If BD believes it is the Existing
Holder of fewer Preferred Shares than specified by the Auction Agent in
response to BD's inquiry, BD may so inform the Auction Agent of that belief.
BD shall not, in its capacity as Existing Holder of Preferred Shares, submit
Orders in such Auction in respect of Preferred Shares covering in the
aggregate more than the number of Preferred Shares specified by the Auction
Agent in response to BD's inquiry.

         2.3 Auction Schedule; Method of Submission of Orders.

             (a) The Auction Agent shall conduct Auctions in accordance with
the schedule set forth below. Such schedule may be changed at any time by the
Auction Agent with the consent of the Corporation, which consent shall not be
unreasonably withheld. The Auction Agent shall give written notice of any such
change to BD which shall have the right to review such change. Such notice
shall be received prior to the close of business on the Business Day
immediately preceding the first Auction Date on which any such change shall be
effective.



Time                           Event
- ----                           -----

By 9:30 a.m.                    Auction Agent advises the
                                Corporation and the
                                Broker-Dealer of (i) the
                                applicable Maximum Rate and
                                (ii) when applicable, the
                                Reference Rate or the
                                Treasury Index Rate as set
                                forth in Section 2.2(a)
                                hereof.

9:30 a.m. - 1:00 p.m.           Auction Agent assembles
                                information communicated to
                                it by Broker-Dealer as
                                provided in Section 2(a) of
                                the Auction Procedures.
                                Submission Deadline is 1:00
                                p.m.

Not earlier than                Auction Agent makes
1:00 p.m.                       determinations pursuant to
                                4(a) of the Auction Procedures.

By approximately                Auction Agent advises the
3:30 p.m.                       Corporation of results of
                                Auction as provided in
                                Section 4(b) of the Auction
                                Procedures. Submitted Bids
                                and Submitted Sell Orders
                                are accepted and rejected in
                                whole or in part and Preferred
                                Shares are allocated as provided
                                in Section 5 of the Auction
                                Procedures. Auction Agent gives
                                notice of Auction results as set
                                forth in paragraph (a) of the
                                Settlement Procedures.



             (b) BD may designate one or more individuals in its organization
who will coordinate its procedures in connection with Auctions and purchases
and sales of Preferred Shares.

             (c) BD agrees to handle its customers' orders in accordance with
its duties under applicable securities laws and rules.

             (d) To the extent that pursuant to Section 5 of the Auction
Procedures of the Corporation, BD continues to hold, sell or purchase a number
of shares that is fewer than the number of shares in an Order submitted by BD
to the Auction Agent in which BD designated itself as an Existing Holder or
Potential Holder in respect of customer Orders, BD shall make appropriate pro
rata allocations among its customers for which it submitted Orders of similar
tenor. If as a result of such allocations, any Existing Holder would be
entitled or required to sell, or any Existing Holder would be entitled or
required to purchase, a fraction of a Preferred Share on any Auction Date, BD
shall, in such manner as it shall determine in its sole discretion, round up
or down the number of Preferred Shares to be purchased or sold on such Auction
Date by any Existing Holder or Potential Holder on whose behalf BD submitted
an Order so that the number of shares so purchased or sold by each such
Existing Holder or Potential Holder on such Auction Date shall be whole
shares.

             (e) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit A prior to 1:00 p.m. on each
Auction Date. BD shall submit separate Orders to the Auction Agent for each
Potential Holder or Existing Holder on whose behalf BD is submitting an Order
and shall not net or aggregate the Orders of Potential Holders or Existing
Holders on whose behalf BD is submitting Orders. Any Order submitted by BD to
the Auction Agent prior to the Submission Deadline on any Auction Date shall
be irrevocable.

             (f) BD shall deliver to the Auction Agent a written notice,
substantially in the form attached hereto as Exhibit B, of transfers of
Preferred Shares made through BD by an Existing Holder to another Person other
than pursuant to an Auction and a written notice, substantially in the form
attached hereto as Exhibit C, of the failure of any Preferred Shares to be
transferred to or by any Person that purchased or sold Preferred Shares
through BD pursuant to an Auction. The Auction Agent is not required to accept
any notice delivered pursuant to the terms of the foregoing sentence with
respect to an Auction unless it is received by the Auction Agent by 3:00 p.m.
on the Business Day immediately preceding the applicable Auction Date.

         2.4 Notices.

             (a) On each Auction Date, the Auction Agent shall notify BD by
telephone or facsimile (or other electronic means acceptable to both parties)
of the results of the Auction as set forth in paragraph (a) of the Settlement
Procedures. By approximately 11:30 a.m. on the Business Day immediately
succeeding such Auction Date, the Auction Agent shall notify BD in writing of
the disposition of all Orders submitted by BD in the Auction held on such
Auction Date.

             (b) BD shall notify each Existing Holder or Potential Holder on
whose behalf BD has submitted an Order as set forth in paragraph (b) of the
Settlement Procedures and take such other action as is required of BD pursuant
to the Settlement Procedures.

         2.5 Designation of Special Dividend Period.

             (a) If the Corporation delivers to its Auction Agent a notice of
the Auction Date for the Preferred Shares of the Corporation for a Dividend
Period thereof that next succeeds a Special Dividend Period, the Auction Agent
shall deliver such notice to BD as promptly as practicable after its receipt
of such notice from the Corporation.

             (b) If the Board of Directors of the Corporation proposes to
designate any Dividend Period as a Special Dividend Period and the Corporation
delivers to its Auction Agent a notice of such proposed Special Dividend
Period in the form of Exhibit C to the Auction Agency Agreement, such Auction
Agent shall deliver such notice to BD as promptly as practicable after its
receipt of such notice from the Corporation.

             (c) If the Board of Directors of the Corporation determines to
designate such Dividend Period as a Special Dividend Period, and the
Corporation delivers to its Auction Agent a notice of such Special Dividend
Period in the form of Exhibit D to the Auction Agency Agreement not later than
3:00 p.m. on the second Business Day next preceding the first day of such
Dividend Period, such Auction Agent shall deliver such notice to BD promptly
after being notified by the Corporation on such second Business Day.

             (d) If the Corporation shall deliver to its Auction Agent a
notice not later than 3:00 p.m. on the second Business Day next preceding the
first day of a proposed Special Dividend Period stating that the Corporation
has determined not to exercise its option to designate such Dividend Period as
a Special Dividend Period, in the form of Exhibit E to the Auction Agency
Agreement, or shall fail to timely deliver either such notice or a notice in
the form of Exhibit D to the Auction Agency Agreement, such Auction Agent
shall deliver a notice in the form of Exhibit E to the Auction Agency
Agreement to BD promptly after being notified by the Corporation on such
second Business Day.

         2.6 Intentionally Omitted.

         2.7 Default.

             (a) If: (i) any Default shall have occurred with respect to
Preferred Shares of the Corporation during any Dividend Period thereof, but,
prior to 12:00 noon, New York City time, on the third Business Day next
succeeding the date on which such Default occurred, such Default shall have
been cured in accordance with Section 2.8 of the Auction Agency Agreement and
the Corporation shall have paid to the Auction Agent the late charge (the
"Late Charge") as described in Section 2.8 of the Auction Agency Agreement,
then such Auction Agent shall deliver a notice in the form of Exhibit F to the
Auction Agency Agreement by first-class mail, postage prepaid, to BD not later
than one Business Day after its receipt of the payment from the Corporation
curing such Default and such Late Charge[; provided, however that no delivery
of notice in the form of Exhibit F shall be required if, prior to one Business
Day after its receipt of the payment from the Corporation, the Auction Agent
has otherwise informed BD of its receipt of payment from the Corporation.]

             (b) If any Default shall have occurred with respect to Preferred
Shares of the Corporation during any Dividend Period thereof, and, prior to
12:00 noon, New York City time, on the third Business Day next succeeding the
date on which such Default occurred, such Default shall not have been cured as
described in Section 2.8 of the Auction Agency Agreement or the Corporation
shall not have paid to the Auction Agent the applicable Late Charge described
in Section 2.8 of the Auction Agency Agreement; then such Auction Agent shall
deliver a notice in the form of Exhibit G to the Auction Agency Agreement to
the Broker-Dealers not later than one Business Day after the receipt of the
payment from the Corporation curing such Default and Late Charge.

         2.8 Service Charge to Be Paid to BD.

             (a) No later than 12:00 noon on each Dividend Payment Date, the
Auction Agent after each Auction will pay a service charge from funds provided
by the Corporation to each Broker-Dealer on the basis of the purchase price of
Preferred Shares placed by such Broker-Dealer at such Auction. The service
charge shall be (i) in the case of any Dividend Period of less than 365 days,
the product of (A) a fraction, the numerator of which is the number of days in
such Dividend Period and the denominator of which is 365, times (B) 1/4 of 1%,
times (C) $25,000 times (D) the aggregate number of Preferred Shares placed by
such Broker-Dealer at such Auction and (ii) in the case of any Dividend Period
of 365 days or more, the amount determined by mutual consent of the
Corporation and any such Broker-Dealers and shall be based upon a selling
concession that would be applicable to an underwriting of fixed or variable
rate Preferred Shares with a similar final maturity or variable rate dividend
period, respectively, at the commencement of the Dividend Period with respect
to such Auction. For the purpose of this Section 2.8(a), Preferred Shares will
be considered "placed" by a Broker-Dealer if such shares were (I) the subject
of Hold Orders deemed to have been submitted to the Auction Agent by the
Broker-Dealer and were acquired by such Broker-Dealer for its customers who
are Beneficial Owners or (II) the subject of an order submitted by such
Broker-Dealer that is (A) a Submitted Bid of an Existing Holder that resulted
in such Existing Holder continuing to hold such shares as a result of the
Auction, (B) a Submitted Bid of a Potential Holder that resulted in such
Potential Holder purchasing such shares as a result of the Auction or (C) a
valid Hold Order.

             (b) If the Corporation determines to change the rate at which the
Broker-Dealer Fee accrues, the Corporation shall mail to the Auction Agent a
notice thereof within two Business Days of such change. Any change in the
Broker-Dealer fee rate shall be effective on the Auction Date next succeeding
the Auction Agent's receipt of notice of such change.

         2.9 Settlement.

             (a) If any Existing Holder selling Preferred Shares in an Auction
fails to deliver such Preferred Shares (by authorized book-entry), the BD of
any Person that was to have purchased Preferred Shares in such Auction may
deliver to such Person a number of Preferred Shares that is less than the
number of Preferred Shares that otherwise were to be purchased by such Person.
In such event, the number of Preferred Shares to be so delivered shall be
determined by BD. Delivery of such lesser number of Preferred Shares shall
constitute good delivery. Upon the occurrence of any such failure to deliver
Preferred Shares, BD shall deliver to the Auction Agent the notice required by
Section 2.3(f) hereof. Notwithstanding the foregoing provisions of this
Section 2.9(a), any delivery or non-delivery of Preferred Shares which
represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall
have been notified of such delivery or non-delivery in accordance with the
terms of Section 2.3(f) hereof. The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 2.9(a).

             (b) Neither the Auction Agent nor the Corporation shall have any
responsibility or liability with respect to the failure of an Existing Holder,
a Potential Holder or an Agent Member or any of them to deliver Preferred
Shares or to pay for Preferred Shares sold or purchased pursuant to the
Auction Procedures or otherwise.

             (c) Notwithstanding any provision of the Auction Procedures or
the Settlement Procedures to the contrary, in the event BD is an Existing
Holder with respect to Preferred Shares and the Auction Procedures provide
that BD shall be deemed to have submitted a Sell Order in an Auction with
respect to such shares if BD fails to submit an Order in that Auction with
respect to such shares, BD shall have no liability to any Person for failing
to sell such shares pursuant to such a deemed Sell Order if (i) such shares
were transferred by the beneficial owner thereof without notification of such
transfer in compliance with the Auction Procedures or (ii) BD has indicated to
the Auction Agent pursuant to Section 2.2(f) of this Agreement that, according
to BD's records, BD is not the Existing Holder of such shares.

             (d) Notwithstanding any provision of the Auction Procedures or
the Settlement Procedures to the contrary, in the event an Existing Holder of
Preferred Shares with respect to whom a Broker-Dealer submitted a Bid to the
Auction Agent for such shares that was accepted in whole or in part, or
submitted or is deemed to have submitted a Sell Order for such shares that was
accepted in whole or in part, fails to instruct its Agent Member to deliver
such shares against payment therefore, partial deliveries of Preferred Shares
that have been made in respect of Potential Holders' Submitted Bids for
Preferred Shares that have been accepted in whole or in part shall constitute
good delivery to such Potential Holders.

         3. The Auction Agent

         3.1 Duties and Responsibilities.

             (a) The Auction Agent is acting solely as agent for the
Corporation hereunder and owes no duties, fiduciary or otherwise, to any
Person other than by reason of the Auction Agency Agreement.

             (b) The Auction Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement and the Auction
Agency Agreement, and no implied covenants or obligations shall be read into
this Agreement, the Auction Agency Agreement, Auction Procedures or the
Settlement Procedures against the Auction Agent.

             (c) In the absence of gross negligence or willful misconduct on
its part, the Auction Agent shall not be liable for any action taken,
suffered, or omitted or for any error of judgment made by it in the
performance of its duties under the Agreement. The Auction Agent shall not be
liable for any error of judgment resulting from the use or reliance on a
source of information used in good faith unless the Auction Agent shall have
been grossly negligent in the determination, calculation or declaration
thereunder. The Auction Agent shall not be liable for any error of judgment
made in good faith unless the Auction Agent shall have been grossly negligent
in ascertaining (or failing to ascertain) the pertinent facts.

             (d) The Auction Agent shall not be: (i) required to, and does
not, make any representations or have any responsibilities as to the validity,
accuracy, value or genuineness of any signatures or endorsements, other than
its own; (ii) obligated to take any legal action hereunder that might, in its
judgment, involve any expense or liability, unless it has been furnished with
indemnity satisfactory to the Auction Agent; and (iii) responsible for or
liable in any respect on account of the identity, trust or rights of any
Person (other than itself and its agents and attorneys) executing or
delivering or purporting to execute or deliver any document under this
Agreement or any Broker-Dealer Agreement.

             (e) The Auction Agent shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.

         3.2 Rights of the Auction Agent.

             (a) The Auction Agent may conclusively rely and shall be fully
protected in acting or refraining from acting upon any communication
authorized by this Agreement and upon any written instruction, notice,
request, direction, consent, report, certificate, share certificate or other
instrument, paper or document believed by it to be genuine. The Auction Agent
shall not be liable for acting upon any communication authorized by this
Agreement (including, but not limited to, any made by telephone, telecopier or
other means of electronic communication acceptable to the parties hereto)
which the Auction Agent believes in good faith to have been given by the
Corporation or by BD. The Auction Agent may record telephone communications
with BD.

             (b) The Auction Agent may consult with counsel of its own choice,
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.

             (c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.

             (d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys and
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed by it with due care.

             (e) The Auction Agent shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.

             (f) The Auction Agent shall in no event be responsible or liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including, but not limited to, loss of profit), even if the Auction Agent has
been advised of the likelihood of such loss or damage and regardless of the
form of action.

         3.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to, and shall have no liability with respect to, the
correctness of the recitals in, or the validity, adequacy or accuracy of, this
Agreement, the Auction Agency Agreement, the Auction Procedures, the offering
material used in connection with the offer and sale of the Preferred Shares or
any other agreement or instrument executed in connection with the transactions
contemplated herein or in any thereof.

         4. Duties and Responsibilities of BD

             (a) BD undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement, the Auction Agency Agreement or
Settlement Procedures against BD.

             (b) In the absence of gross negligence or willful misconduct on
its part, BD shall not be liable for any action taken, suffered, or omitted or
for any error of judgment made by it in the performance of its duties under
this Agreement. BD shall not be liable for any error of judgment resulting
from the use or reliance on a source of information used in good faith and
without gross negligence to make any determination, calculation or declaration
hereunder. BD shall not be liable for any error of judgment made in good faith
unless BD shall have been grossly negligent in ascertaining or failing to
ascertain the pertinent facts.

             (c) BD shall not be: (i) required to, and does not, make any
representations or have any responsibilities as to the validity, accuracy,
value or genuineness of any signatures or endorsements, other than its own;
(ii) obligated to take any legal action hereunder that might, in its judgment,
involve any expense or liability, unless it has been furnished with indemnity
satisfactory to BD; and (iii) responsible for or liable in any respect on
account of the identity, trust or rights of any Person (other than itself and
its agents and attorneys) executing or delivering or purporting to execute or
deliver any document under this Agreement or any Broker-Dealer Agreement.

             (d) BD shall not be responsible or liable for any failure or
delay in the performance of its obligations under this Agreement arising out
of or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes; fires;
floods; wars; civil or military disturbances; sabotage; epidemics; riots;
interruptions, loss or malfunctions of utilities, Internet or communications
services; acts of civil or military authority; or governmental actions; it
being understood that BD shall use reasonable efforts which are consistent
with accepted practices in the banking industry to resume performance as soon
as practicable under the circumstances.

         5. Miscellaneous

         5.1 Termination. (a) Any party may terminate this Agreement at any
time upon five (5) days written notice to the other parties, which notice may
be given by facsimile as provided in Section 5.3 hereof. This Agreement shall
automatically terminate upon the redemption of all outstanding Preferred
Shares or upon termination of the Auction Agency Agreement.

             (b) BD represents that it (or if BD does not act as Agent Member,
one of its affiliates) shall make all dividend payments on the Preferred
Shares available in same-day funds on each Dividend Payment Date to customers
that use BD or affiliate as Agent Member.

         5.2 Agent Member. BD is, and shall remain for the term of this
Agreement, a member of, or participant in, the Securities Depository (or an
affiliate of such a member or participant).

         5.3 Communications. Except for (i) communications authorized to be by
telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (for the purposes of this Agreement,
telecopy or other means of electronic communication acceptable to the parties
shall be deemed to be in writing) and shall be given to such party, addressed
to it, at its address, telecopy number set forth below and, where appropriate
reference the particular Auction to which such notice relates:

If to BD,            __________________________
addressed:           __________________________
                     __________________________
                     __________________________
                     Attention:__________________
                     Telephone No.: _____________
                     Facsimile No.: ______________

If to the Auction    The Bank of New York
Agent, addressed:    100 Church Street, 8th Floor
                     New York, New York 10286
                     Attention: Dealing and Trading Group - Auction Desk
                     Telephone No.: 212-437-6166
                     Facsimile No.: 212-437-6155

If to the            The Gabelli Convertible and Income
Corporation,         Securities Fund Inc.
addressed:           One Corporate Center
                     Rye, New York 10580-1422
                     Attention:  Bruce N. Alpert
                     Telephone No.: 212-921-5158
                     Facsimile No.: 914-921-5100

or such other address or facsimile number as such party may hereafter specify
for such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified
herein. Communications shall be given on behalf of BD by a BD Officer, on
behalf of the Auction Agent by an Authorized Officer and on behalf of the
Corporation by a Corporate Officer. Telephone communications may be recorded.

         5.4 Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.

         5.5 Benefits. Nothing in this Agreement, express or implied, shall
give to any person, other than the Auction Agent, the Corporation and BD and
their respective successors and permitted assigns, any benefit of any legal or
equitable right, remedy or claim under this Agreement.

         5.6 Amendment; Waiver.

             (a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of each of
the parties hereto.

             (b) Failure of any party to this Agreement to exercise any right
or remedy hereunder in the event of a breach of this Agreement by any other
party shall not constitute a waiver of any such right or remedy with respect
to any subsequent breach.

         5.7 Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of the parties hereto. This Agreement may not be
assigned by any party hereto absent the prior written consent of the other
parties.

         5.8 Severability. If any clause, provision or section of this
Agreement shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any remaining clause, provision or section hereof.

         5.9 Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.

         5.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW, OTHER THAN SECTION 5-1401
OF THE GENERAL OBLIGATIONS LAW OF NEW YORK). THE PARTIES AGREE THAT ALL
ACTIONS AND PROCEEDINGS ARISING OUT OF THIS BROKER-DEALER AGREEMENT OR ANY
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE COURTS LOCATED IN THE
BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE OF NEW YORK. EACH PARTY WAIVES
ANY OBJECTION THAT IT MAY HAVE THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
THE COURTS LOCATED IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK AND STATE OF
NEW YORK WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME. EACH OF THE PARTIES HERETO ALSO IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.


      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.

                             THE BANK OF NEW YORK
                               as Auction Agent

                             By:______________________________
                             Name:  Joseph Panepinto
                             Title:    Vice President



                             _________________________________
                                 as Broker-Dealer

                             By:______________________________
                                  Name:
                                  Title:




                           [Broker-Dealer Agreement]

<PAGE>

                                                                      Exhibit A
                                                               To BROKER-DEALER
                                                                      AGREEMENT

                               AUCTION BID FORM

                (Submit only one Order on this Order Form) THE
              GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
     Series C Auction Rate Cumulative Preferred Stock ("Preferred Shares")

To:  The Bank of New York                                Date of Auction
     100 Church Street, 8th Floor                        ______________
     New York, New York 10286
     Attention: Dealing and Trading Group -
     Auction Desk
     Telephone No.: 212-437-6166
     Telecopier No.: 212-437-6155

The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:

           Name of Bidder: __________________________________

           Bidder placed the Order listed below covering the number of shares
           indicated (complete only one blank):

           _________________   number of Preferred Shares now held by

           Bidder (an Existing Holder), and the Order is a (check one):

           |_|  Hold Order; or

           |_|  Bid at a rate of ____%; or

           |_|  Sell Order;

- -- or -

           _________________   number of Preferred Shares not now held
           by Bidder (a Potential Holder), and the Order is
           a Bid at a rate of ______%

Notes:

(1)   If submitting more than one Bid for one Bidder, use additional Order
      Forms.

(2)   If one or more Bids covering in the aggregate more than the outstanding
      number of Preferred Shares held by any Existing Holder are submitted,
      such Bids shall be considered valid in the order of priority set forth
      in the Auction Procedures.

(3)   A Hold or Sell Order may be placed only by an Existing Holder covering a
      number of Preferred Shares not greater than the number of Preferred
      Shares currently held by such Existing Holder.

(4)   Potential Holders may make Bids only, each of which must specify a rate.
      If more than one Bid is submitted on behalf of any Potential Holder,
      each Bid submitted shall be a separate Bid with the rate specified.

(5)   Bids may contain no more than three figures to the right of the decimal
      point (.001 of 1%).

(6)   An Order must be submitted in whole Preferred Shares with an aggregate
      liquidation preference of $25,000.

                               Name of Broker-Dealer: __________________________
                               By: _________________________________


<PAGE>


                                                                     Exhibit B
                                                              To BROKER-DEALER
                                                                     AGREEMENT

                (To be used only for transfers made other than
                            pursuant to an Auction)

                                 TRANSFER FORM

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
     Series C Auction Rate Cumulative Preferred Stock ("Preferred Shares")

We are (check one):

           |_|  the Existing Holder named below; or

           |_|  the Broker-Dealer for such Existing Holder; or

           |_|  the Agent Member for such Existing Holder.

           We hereby notify you that such Existing Holder will transfer ___
Preferred Shares to ____________________.


                            | GABELLI CONVERTIBLE AND
                            | INCOME SECURITIES FUND INC.
- ----------------------------|--------------------------------
                            |  By:
                            |     ---------------------------
                            |      Name:
                            |      Title:
                            |
- ----------------------------|--------------------------------
                            | (Name of Existing Holder)
- ----------------------------|--------------------------------
                            | (Name of Broker-Dealer)
- ----------------------------|--------------------------------
                            | (Name of Agent Member)
- ----------------------------|--------------------------------
                            |  By:
                            |     ---------------------------
                            |      Name:
                            |      Title:



<PAGE>

                                                                      Exhibit C
                                                               To BROKER-DEALER
                                                                      AGREEMENT

                   (To be used only for failures to deliver
                 Preferred Shares sold pursuant to an Auction)

                        NOTICE OF A FAILURE TO DELIVER

            THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
     Series C Auction Rate Cumulative Preferred Stock ("Preferred Shares")


      Complete either I. or II.

      I.   We are a Broker-Dealer for ______________ (the "Purchaser"), which
           purchased ____ Preferred Shares in the Auction held on
           __________________ from the seller of such Preferred Shares.

      II.  We are a Broker-Dealer for _____________ (the "Seller"), which sold
           ____ Preferred Shares in the Auction held on ____________________
           to the purchaser of such Preferred Shares.

      We hereby notify you that (check one):

      __________the Seller failed to deliver such Preferred Shares to the
                     Purchaser; or

      __________     the Purchaser failed to make payment to the Seller upon
                delivery of such Preferred Shares.


                                |  Name:
                                |       -----------------------------
                                |        (Name of Broker-Dealer)
                                |
                                |
                                |
- --------------------------------|------------------------------------
                                |  By:
                                |     -------------------------------
                                |      Printed Name:
                                |      Title:





      Capitalized terms used in this letter, unless otherwise defined herein,
shall have the meanings set forth in the Articles Supplementary Creating and
Fixing the Rights of the Series C Auction Rate Cumulative Preferred Stock, as
the same may be amended, supplemented or modified from time to time.

                                   (Name of Purchaser)


                                    By: ___________________________
                                        Name:
                                        Title:

                                    Address: ______________________

                                    _______________________________

                                    _______________________________

Dated:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>10
<FILENAME>s446443.txt
<DESCRIPTION>EX 99 (K)(IV) -- FORM OF DTC
<TEXT>
                                                                   EX-99(k)(iv)

                   The Depository Trust Company
    A subsidiary of The Depository Trust & Clearing Corporation


             BLANKET ISSUER LETTER OF REPRESENTATIONS
                    [To be Completed by Issuer]

      The Gabelli Convertible and Income Securities Fund Inc.
                         [Name of Issuer]


                                                   February 28, 2003
                                                 --------------------
                                                         [Date]

The Depository Trust Company
General Counsel's Office; 49th Floor
55 Water Street
New York, NY 10041-0099

Ladies and Gentlemen:

      This letter sets forth our understanding with respect to all issues (the
"Securities") that Issuer shall request be made eligible for deposit by The
Depository Trust Company ("DTC").

      To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with DTC's Rules with respect to the Securities,
Issuer represents to DTC that Issuer will comply with the requirements stated
in DTC's Operational Arrangements, as they may be amended from time to time.

<table>
<caption>

Note:                                       Very truly yours,
- ----
<s>                                        <C>
Schedule A contains statements              The Gabelli Convertible and Income Securities Fund Inc.
that DTC believes accurately                -------------------------------------------------------
describe DTC, the method of                                       (Issuer)
effecting book-entry transfers of
securities distributed through DTC,         By:
and certain related matters.                   ----------------------------------------------------
                                                        (Authorized Officer's Signature)

Received and Accepted:
THE DEPOSITORY TRUST COMPANY                Bruce N. Alpert
                                            -------------------------------------------------------
                                                                 (Print Name)
By:
   --------------------------------
                                            One Corporate Center
                                            -------------------------------------------------------
                                                                 (Street Address)

                                            Rye, New York                                10580-1422
                                            -------------------------------------------------------
                                            (City) (State) (Country)                      (Zip Code)

                                            (914) 921-5100
                                            -------------------------------------------------------
                                                                  (Phone Number)

                                            Balpert@gabelli.com
                                            -------------------------------------------------------
                                                                  (E-mail Address)
</table>


<PAGE>


                                                                    SCHEDULE A

                                   (To Blanket Issuer Letter of Representations)

                   SAMPLE OFFERING DOCUMENT LANGUAGE
                  DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
                  -----------------------------------
(Prepared by DTC-bracketed material may be applicable only to certain issues)

      1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate
will be issued for [each issue of] the Securities, [each] in the aggregate
principal amount of such issue, and will be deposited with DTC. [If, however,
the aggregate principal amount of [any] issue exceeds $500 million, one
certificate will be issued with respect to each $500 million of principal
amount, and an additional certificate will be issued with respect to any
remaining principal amount of such issue.]

      2. DTC, the world's largest depository, is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
and provides asset servicing for over 2 million issues of U.S. and non-U.S.
equity issues, corporate and municipal debt issues, and money market
instruments from over 85 countries that DTC's participants ("Direct
Participants") deposit with DTC. DTC also facilitates the post-trade
settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized
book-entry transfers and pledges between Direct Participants' accounts. This
eliminates the need for physical movement of securities certificates. Direct
Participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct
Participants of DTC and Members of the National Securities Clearing
Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC,
and EMCC, also subsidiaries of DTCC), as well as by the New York Stock
Exchange, Inc., the American Stock Exchange LLC, and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others such as both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, and clearing corpora tions that clear through or maintain a
custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). DTC has Standard & Poor's highest
rating: AAA. The DTC Rules applicable to its Participants are on file with the
Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com.

      3. Purchases of Securities under the DTC system must be made by or
through Direct Partici pants, which will receive a credit for the Securities
on DTC's records. The ownership interest of each actual purchaser of each
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase. Beneficial Owners are, however,
expected to receive written confirmations providing details of the transac
tion, as well as periodic statements of their holdings, from the Direct or
Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Securities are to be
accomplished by entries made on the books of Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Securities, except in
the event that use of the book-entry system for the Securities is
discontinued.

      4. To facilitate subsequent transfers, all Securities deposited by
Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect
any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Securities; DTC's records reflect only the identity
of the Direct Participants to whose accounts such Securities are credited,
which may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.

      5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. [Beneficial Owners of
Securities may wish to take certain steps to augment the transmission to them
of notices of significant events with respect to the Securities, such as
redemptions, tenders, defaults, and proposed amendments to the Security
documents. For example, Beneficial Owners of Securities may wish to ascertain
that the nominee holding the Securities for their benefit has agreed to obtain
and transmit notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the registrar and
request that copies of notices be provided directly to them.]

      [6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTCs practice is to determine
by lot the amount of the interest of each Direct Participant in such issue to
be redeemed.]

      7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent
or vote with respect to Securities unless authorized by a Direct Participant
in accordance with DTC's Procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).

      8. Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTCs practice is to credit
Direct Participants' accounts upon DTCs receipt of funds and corresponding
detail information from Issuer or Agent, on payable date in accordance with
their respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such Participant and not of DTC [nor its nominee], Agent, or Issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is the responsibility of Issuer or Agent,
disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners will be the responsibility of Direct and Indirect Participants.

      [9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Ten der/Remarketing] Agent. The requirement for physical delivery of
Securities in connection with an optional tender or a mandatory purchase will
be deemed satisfied when the ownership rights in the Securities are
transferred by Direct Participants on DTC's records and followed by a
book-entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC
account.]

      10. DTC may discontinue providing its services as depository with
respect to the Securities at any time by giving reasonable notice to Issuer or
Agent. Under such circumstances, in the event that a successor depository is
not obtained, Security certificates are required to be printed and delivered.

      11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.

      12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>11
<FILENAME>msopinion.txt
<DESCRIPTION>EX 99(L) -- M&S OPINION
<TEXT>
                                                                  EX-99(l)

[Letterhead of Miles & Stockbridge P.C.]




March 12, 2003



The Gabelli Convertible and Income Securities Fund Inc.
One Corporate Center
Rye, New York 10580-1422


Ladies and Gentlemen:

We have acted as special Maryland counsel to The Gabelli Convertible and
Income Securities Fund Inc., a Maryland corporation (the "Company"), in
connection with the registration of (i) 1,000,000 shares of the Company's
Series B Cumulative Preferred Stock, liquidation preference $25.00 per share,
$0.001 par value per share (the "Series B Preferred") and (ii) 1,000 shares of
the Company's Series C Auction Rate Cumulative Preferred Stock, liquidation
preference $25,000 per share, $0.001 par value per share (the "Series C
Auction Rate Preferred") on its Registration Statement on Form N-2, (the
"Registration Statement") filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933 and the Investment
Company Act of 1940.

We have examined the Registration Statement, including the exhibits thereto,
and such other documents, corporate records, laws and regulations, as we have
deemed necessary for the purposes of giving the opinions set forth in this
opinion letter. We have relied as to certain factual matters on information
obtained from public officials, officers of the Company and other sources
believed by us to be responsible. Based upon that examination and subject to
the assumptions and qualifications set forth herein, we are of the opinion
that:

1. The Company is a duly incorporated and validly existing under the laws of
the State of Maryland.

2. The Series B Preferred and the Series C Auction Rate Preferred have been
duly authorized by the Company's Board of Directors, and when the Shares have
been issued and sold as contemplated by the Registration Statement and
consideration therefor received by the Company, such shares will be legally
issued, fully paid and nonassessable.

We express no opinion with respect to the laws of, or the effect or
applicability of the laws of, any jurisdiction other than the laws of the
State of Maryland.


<PAGE>

The Gabelli Convertible Income Securities Fund Inc.
March 12, 2003
Page 2



We hereby consent to the filing of this opinion letter with the Registration
Statement as Exhibit 99 (l) thereto. In giving our consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder. The opinion expressed herein is
limited to the matters set forth in this letter and no other opinion should be
inferred beyond the matters expressly stated.

                                    Very truly yours,

                                    Miles & Stockbridge P.C.


                                    By: /s/ John B. Frisch
                                       ---------------------------
                                       Principal

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>12
<FILENAME>s450508a.txt
<DESCRIPTION>EX 99 (N)(I) -- CONSENT OF PWC
<TEXT>
                      CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in this Registration
Statement on Form N-2 of our report dated February 13, 2003, relating to the
financial statements and financial highlights of The Gabelli Convertible and
Income Securities Fund Inc. which appears in the December 31, 2002 Annual
Report to Shareholders of The Gabelli Convertible and Income Securities Fund
Inc. which are also incorporated by reference into the Registration Statement.
We also consent to the references to us under the headings "Financial
Highlights", "Experts", "Counsel and Independent Accountants" and "Financial
Statements" in the Prospectus and Statement of Additional Information
incorporated by reference in such Registration Statement.


/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, New York
March 12, 2003

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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