By Amy Calistri, The Daily Paycheck

I have many reasons to like Gabelli Multimedia Trust (GGT), which specializes in media and entertainment. For one thing, the fund is still relatively cheap -- it currently trades at a 12% discount to its net asset value (NAV).

This means you are getting the equivalent of a dollar's worth of assets for just 88 cents. Better yet, you are getting the assets of one of the better positioned sectors in the economy.

Roughly 57% of Gabelli's assets are made up of media distribution companies such as Discovery Holdings (DISCA) and CBS Corporation (CBS). These companies are seeing very strong advertising growth.

It also owns shares of specialty providers such as the Madison Square Garden Company (MSG), a stock that is surging on the popularity of the New York Knicks new star, Jeremy Lin.

Roughly 20% of the portfolio is comprised of cable companies such as Comcast (CMCSA) and wireless providers such as Verizon (VZ). You'll even find shares of technology powerhouse Google (GOOG) and Apple (AAPL).

The fund also has a dividend policy whereby it distributes 10% of the fund's net asset value within each calendar year. That's one reason why Gabelli bumped its December dividend to $0.27 per share, up from $0.20 per share.

Investors should note that roughly 60% of the distributions are paid as return of capital. Return of capital distributions are not taxed at the time of distribution. Instead, they offset shareholders' cost basis.

When you sell your shares, any benefit from return of capital is treated as a long-term capital gain. This special tax-friendly feature is the main reason why GGT should be held in a taxable brokerage account, rather than a tax-deferred account.

The one drawback of Gabelli Multimedia is its high fees. The expense ratio is 3.19%, far higher than what you will pay for most closed-end funds. But you also get a lot for your fee.

I routinely review numerous fund reports, but few rival GGT's. Its management provides a thorough review of the industries it covers. It also drills down on its winners and losers alike. After reading one of its reports, I have little doubt that management watches over each holding like a hawk.

A risk to consider is that from time to time, GGT participates in secondary share offerings to raise capital. These offerings are generally priced below the prevailing market price and can temporarily depress the GGT's share price.             

Overall, I think Gabelli is a well-managed fund in a promising sector. Its deep discount and double-digit yield are just more icing on the cake.

It is an equity fund, and therefore is more volatile than many of the debt securities in my portfolio. I continue to recommend it to new buyers who have some risk tolerance.

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