The GDL Fund Shareholder Commentary June 30, 2015

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1 Shareholder Commentary June 30, 2015 Portfolio Manager Mario J. Gabelli, CFA To Our Shareholders, The goal of The GDL Fund is to earn absolute returns in excess of short term interest rates with less volatility than usually experienced in traditional equity investing. Over time, a consistent and disciplined arbitrage investment strategy seeks to produce attractive rates of return that are not correlated with the overall equity markets. Our investment strategy is a classic merger arbitrage approach. In its basic form, this entails the purchase of shares of a target acquisition company at a discount to the expected value of the shares once the merger or acquisition is completed. We aim to earn the spread between our purchase price and the offer price for the target company. For the quarter ended June 30, 2015 the net asset value ( NAV ) total return of The GDL Fund was 1.4%, compared with a total return of 0.01% for the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index. The total return for the Fund s publicly traded shares was 0.2%. The Fund s NAV per share was $12.20, while the price of the publicly traded shares closed at $10.19 on the New York Stock Exchange ( NYSE ). Comparative Results Average Annual Returns through June 30, 2015 (a) Since Inception Quarter 1 Year 3 Year 5 Year (01/31/07) GDL Fund NAV Total Return (b) % 2.19% 4.40% 4.34% 2.89% Investment Total Return (c) (0.25) Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index (a) Returns represent past performance and do not guarantee future results. Investment returns and the principal value of an investment will fluctuate. When shares are sold, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit for performance information as of the most recent month end. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month. At the end of the month, that issue is sold and rolled into the outstanding Treasury Bill that matures closest to, but not beyond three months from the re-balancing date. To qualify for selection, an issue must have settled on or before the re-balancing (month end) date. Dividends are not reinvested for the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index. You cannot invest directly in an index. (b) Total returns and average annual returns reflect changes in the NAV per share and reinvestment of distributions at NAV on the ex-dividend date and are net of expenses. Since inception return is based on an initial NAV of $ (c) Total returns and average annual returns reflect changes in closing market values on the NYSE and reinvestment of distributions. Since inception return is based on an initial offering price of $20.00.

2 Premium / Discount Discussion As a refresher for our shareholders, the NAV of any fund is the total market value of the securities and other assets held by a fund, less any liabilities. The NAV is calculated each business day and presented on a per share basis. However, the price of a closed end fund is determined in the open market by willing buyers and sellers. Shares of the Fund trade on the NYSE under the symbol GDL and may trade at a premium to (higher than) net asset value or at a discount to (lower than) net asset value. Ideally, the Fund s market price will generally track the NAV. However, the Fund s premium or discount to NAV may vary over time. It is important to remember that Mr. Market is a pendulum that swings both ways, and any number of factors can influence that swing on a day to day basis. This is also the case with our Fund, which invests in merger arbitrage deals, and therefore is not particularly correlated with the market in general. Commentary In the second quarter of 2015, global deal volumes totaled $1.4 trillion, a 63% increase from the first quarter of this year and a 40% increase over the same period last year 1. This strong quarter contributed to global deal volumes totaling $2.2 trillion for the first half of 2015, marking the strongest first half for mergers and acquisitions (M&A) since This surge was driven by sixty-two announced deals greater than $5 billion, which accounted for 50% of total volume in the first half. Additionally, the number of worldwide deals announced increased by 3% compared to the same period in 2014 and by 8% from the first quarter of Geographically, cross border M&A increased 20% over the same period last year to $760 billion, accounting for 34% of total deal volume. Domestic U.S. activity increased 60% versus the first half of 2014 and totaled $1 trillion across 4,960 deals. European M&A increased by 9.8% over 2014 to $688 billion during the first six months of In addition, Asia Pacific (ex-japan) deal volumes totaled $590 billion for the first half, a 74% increase over the first half of Japanese M&A also increased, up 9.2% over last year to $81.4 billion. On a sector specific basis, the Energy and Power sector was the most active in the quarter, likely a result of lower oil prices and valuation within the space. Energy and Power accounted for 16% of announced M&A activity, with the Healthcare and Technology sectors rounding out the top three, accounting for 15% and 11% of announced M&A value, respectively. The consistent increase in deal volume over the past few years illustrates the desire of companies to grow through M&A. With high stock prices to use as currency and low interest rates to finance these transactions, M&A activity should remain strong in the coming months. Additionally, speculation surrounding the Federal Reserve and the potential rise in interest rates persists, which should correlate positively with the spreads on deals and potentially provide better returns. The Fund should continue to benefit from the aforementioned factors and the continued increase in worldwide M&A. 1 Thomson Reuters M&A Review Second Quarter

3 Positions Closed in the Second Quarter of 2015 Aruba Networks Inc. is a California based provider of network access solutions for the mobile enterprise. On March 2, 2015, the company agreed to merge with Hewlett-Packard in a deal worth $3 billion, in which ARUN shareholders received $24.67 per share in cash. The transaction received all necessary approvals and closed on May 18, The Fund earned a 3.82% annualized return. Kofax Limited is an Irvine, California based software provider that caters to a variety of industries. On March 24, 2015, Lexmark International Inc. announced that it would acquire Kofax in a merger worth $1 billion or $11 cash per share. The deal closed on May 21, 2015, after receiving regulatory and shareholder approval. The Fund earned a 0.91% annualized return. Life Time Fitness Inc., based in Chanhassen, Minnesota, operates fitness and recreation centers in the U.S. and Canada. On March 16, 2015, Life Time Fitness announced that it would be taken private by an investment group led by Leonard Green & Partners and TPG Capital, along with LNK Partners and Bahram Akradi, Life Time s Chairman and CEO. The transaction was worth $4 billion and structured as a merger, in which shareholders of Life Time Fitness received $72.10 cash per share. Following regulatory and shareholder approval, the deal closed on June 10, 2015, and was one of the larger domestic leveraged buyouts of the year. The Fund earned a 6.28% annualized return. Riverbed Technology Inc. is a San Francisco, California based firm that develops and sells software to help firms improve the performance of their applications. On December 15, 2014, Thoma Bravo LLC and Ontario Teachers Pension Plan announced that they would acquire Riverbed for $21 cash per share in a $3.6 billion merger. The deal to sell the company was the culmination of a long and thorough process initiated by Elliott Management in mid The merger received all necessary approvals and closed on April 24, The Fund earned a 7.67% annualized return. Salix Pharmaceuticals Ltd., headquartered in Raleigh, North Carolina, is a leader in the growing U.S. gastrointestinal product market. On February 22, 2015, Valeant Pharmaceuticals, a multinational specialty pharmaceutical company, offered to purchase Salix in a tender offer worth $13 billion or $158 cash per share. Sixteen days later, Endo International plc overbid its rival Valeant with a proposal to acquire Salix for $15.5 billion, comprised of $45 cash and shares of Endo stock for each share of Salix. Less than a week later, Valeant countered with an all cash tender valued at $173 per share, which was worth more than the value of Endo s cash and stock offer at the time. After receiving over 50% of shares in the tender and obtaining regulatory approvals, the transaction closed on April 1, The Fund earned an annualized return of %. Talisman Energy Inc. is an international oil and gas exploration and production company based in Alberta, Canada. The company was initially approached by Repsol S.A., a Spain based international oil company focused on downstream assets, in July At that time, crude oil was approximately $100 per barrel. Despite 3

4 protracted negotiations, an offer did not materialize at that time. Following further weakness in energy prices, talks between the two companies restarted and culminated on December 16, 2014 in an $8.00 per share cash merger, valuing the whole company at over $8.0 billion. The deal was approved by shareholders and regulators and closed on May 8, The Fund earned a 24.19% annualized return. TRW Automotive Holdings Corp. is a Michigan based supplier of automotive systems and components, with a focus on active and passive safety applications. On July 10, 2014, TRW was the subject of speculation, later confirmed by the company, regarding a possible transaction with ZF Friedrichshafen AG of Germany. After months of negotiations and the divestiture of a joint venture by ZF to facilitate the transaction, a $ per share cash merger deal was announced on September 15, The deal closed on May 15, 2015 after receiving shareholder and regulatory approval. The Fund earned a 4.22% annualized return. Deals in the Pipeline at the end of the Second Quarter of 2015 For the following holdings, the share prices are listed first in United States dollars (USD) and second in the local currency, where applicable, and are presented as of June 30, Altera Corp. (ALTR $51.20 NASDAQ) is a global semiconductor company based in San Jose, California. On June 1, 2015, Intel announced that it would acquire Altera for $54 per share in an all-cash merger valued at approximately $16.7 billion. The deal will further expand Intel s presence in data centers. The transaction is expected to close in six to nine months, after receiving approval from shareholders and regulators. Catamaran Corp. (CTRX $61.08 NASDAQ) is an Illinois based provider of pharmacy benefit management services and technology solutions. On March 30, 2015, the company agreed to combine with OptumRx, UnitedHealth Group s independent pharmacy care services business. OptumRx will acquire Catamaran for $61.50 in cash per share. The acquisition requires regulatory and shareholder approval and is expected to close in the fourth quarter of Dealertrack Technologies Inc. (TRAK $62.79 NASDAQ), based in Lake Success, New York, is a web based software solutions and services company with a focus on the automotive retail industry. On June 15, 2015, Cox Automotive Inc., a provider of marketing and e-commerce solutions to the automotive industry, announced it would acquire Dealertrack for $4 billion or $63.25 per share through a tender offer. After receiving shareholder and regulatory approval, the transaction is expected to close in the third quarter of Hospira Inc. (HSP $88.71 NYSE) is the world s leading provider of injectable drugs and infusion technologies and a global leader in biosimilars, based in Lake Forest, Illinois. On February 5, 2015, the company received a $90 per share cash merger offer from Pfizer Inc., valuing Hospira at $15.2 billion. The transaction, subject to regulatory and shareholder approval, is expected to close in the second half of the year and will create a leading global injectables business. 4

5 Informatica Corp. (INFA $48.47 NASDAQ) is a provider of enterprise data integration software and services based in Redwood City, California. On April 7, 2015, the company announced that it would be acquired by a company controlled by the private equity firm Permira and the Canada Pension Plan Investment Board. The merger is worth approximately $5.3 billion, and Informatica shareholders will receive $48.75 in cash per share. The transaction has received shareholder approval and is set to close in the third quarter of 2015, subject to regulatory approvals and other closing conditions. Omnicare Inc. (OCR $94.25 NYSE) is a Cincinnati, Ohio based pharmaceutical service provider. On May 21, 2015, CVS Healthcare Corporation announced that it would acquire Omnicare for $98 cash per share in a $13 billion merger. Omnicare expands CVS into the long term care pharmacy dispensing channel. The deal is subject to regulatory and shareholder approvals and expected to close by year end. Pall Corp. (PLL $ NYSE), based in Port Washington, New York, manufactures and markets filtration, separation, and purification products. On May 13, 2015, the company announced that it had been acquired by Danaher Corporation for $ per share in cash, or $13.8 billion. The transaction requires shareholder and regulatory approval and is expected to close by year end. Sigma-Aldrich Corp. (SIAL $ NASDAQ) is a leading life science and technology company that manufactures and distributes more than 230,000 chemicals, biochemicals, and other essential products to more than 1.4 million customers globally. On September 22, 2014, Merck KGaA, a German multinational pharmaceutical and chemical company, announced that it would acquire Sigma-Aldrich for $16.7 billion, or $140 cash per share. The deal already received shareholder approval, and there are currently regulatory approvals pending in the U.S. and overseas. The merger is expected to close in mid TNT Express NV (TNTE $8.48 NASDAQ TNTE.AS 7.61 Amsterdam Stock Exchange), based in the Netherlands, provides express delivery services to businesses and consumers across the world. On April 7, 2015, the company agreed to sell itself to FedEx Corp. in a tender offer for 8 cash per share, or 4.4 billion. The deal is subject to regulatory approval and a minimum shareholder vote, and it is expected to close in the first half of July 10, 2015 Pall Corp. Hospira Inc. Catamaran Corp. Sigma-Aldrich Corp. Dealertrack Technologies Top Ten Holdings June 30, 2015 DIRECTV Liberty Global plc Omnicare Inc. Advent Software Inc. Hudson City Bancorp Inc. 5

6 Note: The views expressed in this Shareholder Commentary reflect those of the Portfolio Manager only through the end of the period stated in this Shareholder Commentary. The Portfolio Manager s views are subject to change at any time based on market and other conditions. The information in this Shareholder Commentary represents the opinions of the individual Portfolio Manager and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Views expressed are those of the Portfolio Manager and may differ from those of other portfolio managers or of the Firm as a whole. This Shareholder Commentary does not constitute an offer of any transaction in any securities. Any recommendation contained herein may not be suitable for all investors. Information contained in this Shareholder Commentary has been obtained from sources we believe to be reliable, but cannot be guaranteed. Beneficial ownership of shares held in the Fund by Mr. Gabelli and various entities he is deemed to control are disclosed in the Fund s annual proxy statement. Merger Arbitrage Risk. The principal risk associated with the Fund s investment strategy is that certain of the proposed reorganizations in which the Fund invests may be renegotiated, terminated, or involve a longer time frame than originally contemplated, in which case losses may be realized. The investment policies of the Fund are expected to lead to frequent changes in investments, which increase transaction costs to the Fund, and may also result in accelerated recognition of short term capital gain, which will be taxable to shareholders when distributed by the Fund Common Share Repurchase Plan On November 8, 2006, the Board of Trustees of the Fund (the Board ) voted to authorize the repurchase of the Fund s common shares in the open market from time to time when such shares are trading at a discount of 7.5% or more from NAV. In total through June 30, 2015, the Fund has repurchased and retired 1,228,712 common shares in the open market under this share repurchase plan, 108,180 of which were purchased in the second quarter of 2015, at an average investment of $11.53 per share and an average discount of approximately 13.1% from its NAV. Quarterly Distributions The Fund paid a $0.16 per share cash distribution on June 23, 2015 to common shareholders of record on June 16, The Fund currently intends to make quarterly cash distributions of all or a portion of its investment company taxable income (which includes ordinary income and realized net short term capital gains) to common shareholders. The Fund also intends to make annual distributions of its realized net long term capital gains, if any. A portion of the distribution may be return of capital. Various factors will affect the level of the Fund s income, such as its asset mix and use of merger arbitrage strategies. To permit the Fund to maintain more stable distributions, the Fund may from time to time distribute more or less than the entire amount of income earned in a particular period. Because the Fund s current quarterly distributions are subject to modification by the Board at any time and the Fund s income will fluctuate, there can be no assurance that the Fund will pay distributions at a particular rate or frequency. 6

7 Each quarter, the Board reviews the amount of any potential distribution from the income, capital gain, or capital available. The Board will continue to monitor the Fund s distribution level, taking into consideration the Fund s net asset value and the financial market environment. In light of the Fund s income, net asset value, and the financial market environment, the Board is reviewing the quarterly cash distribution amount for future periods. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund. If the Fund does not generate sufficient earnings (dividends and interest income and realized net capital gain) equal to or in excess of the aggregate distributions paid by the Fund in a given year, then the amount distributed in excess of the Fund s earnings would be deemed a return of capital. Since this would be considered a return of a portion of a shareholder s original investment, it is generally not taxable and is treated as a reduction in the shareholder s cost basis. Under federal tax regulations, some or all of the return of capital distributed by the Fund may be taxable as ordinary income in certain circumstances. This may occur when the Fund has a capital loss carry forward, net capital gains are realized in a fiscal year, and distributions are made in excess of investment company taxable income. Short term capital gains, qualified dividend income, ordinary income, and paid-in capital, if any, will be allocated on a pro-rata basis to all distributions to common shareholders for the year. Based on the accounting records of the Fund as of June 16, 2015, the current distribution paid to common shareholders in 2015 would be deemed 100% from net capital gains on a book basis. The estimated components of each distribution are updated and provided to shareholders of record in a notice accompanying the distribution and are available on our website ( The final determination of the sources of all distributions in 2015 will be made after year end and can vary from the quarterly estimates. All shareholders with taxable accounts will receive written notification regarding the components and tax treatment for all 2015 distributions in early 2016 via Form 1099-DIV. Series B Cumulative Preferred Shares The Fund s Series B Cumulative Preferred Shares paid a $0.375 per share cash distribution on June 26, 2015 to preferred shareholders of record on June 19, The Series B Preferred Shares, which trade on the NYSE under the symbol GDL Pr B, were issued on April 15, 2011 at $50.00 per share and pay distributions quarterly. The Series B Preferred Shares had an annual dividend rate of 3.00% effective for the eight dividend periods after March 26, 2013 and ending on or prior to March 26, The Board has reaffirmed the annual dividend rate of 3.00% for all remaining dividend periods prior to the mandatory redemption date of March 26, Each reset dividend rate was determined by the Board or a committee thereof in its sole discretion at a rate not less than 3.00% per year and not greater than the annualized yield observed at or about the time of the reset process by the Fund for any issuance of debt securities issued by a U.S. corporation and rated A by at least one rating agency according to the terms of the original offering. Short term capital gains, qualified dividend income, and ordinary income, if any, will be allocated on a pro-rata basis to all distributions to preferred shareholders for the year. The next distribution is scheduled for September

8 The Series B Preferred Shares may be redeemed by the Fund with thirty to sixty days prior notice at the liquidation preference of $50.00 per share plus any accumulated and unpaid dividends at any time on or after March 26, The Board shares the Investment Advisor s view that the issuance of Preferred Shares is designed to benefit the common shareholders. To the extent that the Fund earns in excess of the dividend rate on the Preferred Shares, additional value will thereby be created for its common shareholders. Short term capital gains, qualified dividend income, and ordinary income, if any, will be allocated on a pro-rata basis to all distributions to preferred shareholders for the year. Based on the accounting records of the Fund as of June 16, 2015, the current distribution paid to preferred shareholders would be deemed 100% from net capital gains on a book basis. The estimated components of each distribution are updated and provided to shareholders of record in a notice accompanying the distribution and are available on our website ( The final determination of the sources of all distributions in 2015 will be made after year end and can vary from the quarterly estimates. All shareholders with taxable accounts will receive written notification regarding the components and tax treatment for all 2015 distributions in early 2016 via Form 1099-DIV. Tax Treatment of Distributions to Common and Preferred Shareholders All or part of the distributions may be treated as qualified dividend income for individuals, subject to the maximum federal income tax rate, which is currently 20% in taxable accounts for individuals. In addition, certain U.S. shareholders who are individuals, estates, or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surcharge on their net investment income, which includes dividends received from the Fund and capital gains from the sale or other disposition of shares of the Fund. The Fund expects that the component of the distribution generated by short term capital gains is predominantly not qualified income. Please visit us on the Internet. Our homepage at contains information about GAMCO Investors, Inc., the Gabelli/GAMCO Closed-End Funds and Mutual Funds, IRAs, 401(k)s, current and historical quarterly reports, closing prices, and other current news. We welcome your comments and questions via at closedend@gabelli.com. You may sign up for our alerts at and receive notice of quarterly report availability, news events, media sightings, and mutual fund prices and performance. e-delivery We are pleased to offer electronic delivery of Gabelli fund documents. Shareholders of our closed-end funds can now elect to receive announcements regarding available materials, including shareholder commentaries and Fund reports. For more information or to register for e-delivery, please visit our website at 8

9 AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLANS Enrollment in the Plan It is the policy of The GDL Fund (the Fund ) to automatically reinvest dividends payable to common shareholders. As a registered shareholder you automatically become a participant in the Fund s Automatic Dividend Reinvestment Plan (the Plan ). The Plan authorizes the Fund to credit common shares to participants upon an income dividend or a capital gains distribution regardless of whether the shares are trading at a discount or a premium to net asset value. All distributions to shareholders whose shares are registered in their own names will be automatically reinvested pursuant to the Plan in additional shares of the Fund. Plan participants may send their share certificates to American Stock Transfer ( AST ) to be held in their dividend reinvestment account. Registered shareholders wishing to receive their distributions in cash must submit this request in writing to: The GDL Fund c/o American Stock Transfer th Avenue Brooklyn, NY Shareholders requesting this cash election must include the shareholder s name and address as they appear on the share certificate. Shareholders with additional questions regarding the Plan or requesting a copy of the terms of the Plan, may contact AST at (888) If your shares are held in the name of a broker, bank, or nominee, you should contact such institution. If such institution is not participating in the Plan, your account will be credited with a cash dividend. In order to participate in the Plan through such institution, it may be necessary for you to have your shares taken out of street name and re-registered in your own name. Once registered in your own name your distributions will be automatically reinvested. Certain brokers participate in the Plan. Shareholders holding shares in street name at participating institutions will have dividends automatically reinvested. Shareholders wishing a cash dividend at such institution must contact their broker to make this change. The number of common shares distributed to participants in the Plan in lieu of cash dividends is determined in the following manner. Under the Plan, whenever the market price of the Fund s common shares 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 dividends or capital gains distribution, participants are issued common shares 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 Fund s common shares. The valuation date is the dividend or distribution payment date or, if that date is not a New York Stock Exchange ( NYSE ) trading day, the next trading day. If the net asset value of the common shares at the time of valuation exceeds the market price of the common shares, participants will receive common shares from the Fund valued at market price. If the Fund should declare a dividend or capital gains distribution payable only in cash, AST will buy common shares in the open market, or on the NYSE, or elsewhere, for the participants accounts, except that AST 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 shares exceeds the then current net asset value. The automatic reinvestment of dividends and capital gains distributions will not relieve participants of any income tax which may be payable on such distributions. A participant in the Plan will be treated for federal income tax purposes as having received, on a dividend payment date, a dividend or distribution in an amount equal to the cash the participant could have received instead of shares. 9

10 Voluntary Cash Purchase Plan The Voluntary Cash Purchase Plan is yet another vehicle for our shareholders to increase their investment in the Fund. In order to participate in the Voluntary Cash Purchase Plan, shareholders must have their shares registered in their own name. Participants in the Voluntary Cash Purchase Plan have the option of making additional cash payments to AST for investments in the Fund s common shares at the then current market price. Shareholders may send an amount from $250 to $10,000. AST will use these funds to purchase shares in the open market on or about the 1st and 15th of each month. AST will charge each shareholder who participates 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 any voluntary cash payments be sent to American Stock Transfer, th Avenue, Brooklyn, NY such that AST receives such payments approximately 10 days before the investment date. Funds not received at least five days before the investment date shall be held for investment until the next purchase date. A payment may be withdrawn without charge if notice is received by AST at least 48 hours before such payment is to be invested. Shareholders wishing to liquidate shares held at AST must do so in writing or by telephone. Please submit your request to the above mentioned address or telephone number. Include in your request your name, address, and account number. The cost to liquidate shares is $1.00 per transaction as well as the brokerage commission incurred. Brokerage charges are expected to be less than the usual brokerage charge for such transactions. For more information regarding the Automatic Dividend Reinvestment Plan and Voluntary Cash Purchase Plan, brochures are available by calling (914) or by writing directly to the Fund. The Fund reserves the right to amend or terminate the 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 the Plan at least 90 days before the record date for such dividend or distribution. The Plan also may be amended or terminated by AST on at least 90 days written notice to participants in the Plan. 10

11 THE GDL FUND One Corporate Center Rye, NY Portfolio Manager Biography Mario J. Gabelli, CFA, is Chairman and Chief Executive Officer of GAMCO Investors, Inc. that he founded in 1977 and Chief Investment Officer Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University. We have separated the portfolio manager s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of We have done this to ensure that the content of the portfolio manager s commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at The Net Asset Value per share appears in the Publicly Traded Funds column, under the heading Specialized Equity Funds, in Monday s The Wall Street Journal. It is also listed in Barron s Mutual Funds/Closed End Funds section under the heading Specialized Equity Funds. The Net Asset Value per share may be obtained each day by calling (914) or visiting The NASDAQ symbol for the Net Asset Value per share is XGDLX. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may from time to time purchase its common shares in the open market when the Fund s shares are trading at a discount of 7.5% or more from the net asset value of the shares. The Fund may also from time to time purchase its preferred shares in the open market when the preferred shares are trading at a discount to the liquidation value. This report is printed on recycled paper.

12 THE GDL FUND One Corporate Center Rye, NY t 800-GABELLI ( ) f e info@gabelli.com GABELLI.COM TRUSTEES Mario J. Gabelli, CFA Chairman & Chief Executive Officer, GAMCO Investors, Inc. Anthony J. Colavita President, Anthony J. Colavita, P.C. OFFICERS Bruce N. Alpert President Andrea R. Mango Secretary & Vice President Agnes Mullady Treasurer THE GDL FUND James P. Conn Former Managing Director & Chief Investment Officer, Financial Security Assurance Holdings Ltd. Clarence A. Davis Former Chief Executive Officer, Nestor, Inc. Arthur V. Ferrara Former Chairman & Chief Executive Officer, Guardian Life Insurance Company of America Michael J. Melarkey Partner, Avansino, Melarkey, Knobel, Mulligan & McKenzie Edward T. Tokar Senior Managing Director, Beacon Trust Company Salvatore J. Zizza Chairman, Zizza & Associates Corp. Richard J. Walz Chief Compliance Officer Carter W. Austin Vice President Frank M. Yodice Assistant Vice President & Ombudsman David I. Schachter Vice President INVESTMENT ADVISER Gabelli Funds, LLC One Corporate Center Rye, New York CUSTODIAN The Bank of New York Mellon COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP TRANSFER AGENT AND REGISTRAR American Stock Transfer and Trust Company GDL Shareholder Commentary June 30, 2015 GDL Jun/2015

13 Semiannual Report June 30, 2015 To Our Shareholders, Mario J. Gabelli, CFA Portfolio Manager For the six months ended June 30, 2015, the net asset value ( NAV ) total return of The GDL Fund was 3.5%, compared with a total return of 0.01% for the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index. The total return for the Fund s publicly traded shares was 2.7%. The Fund s NAV per share was $12.20, while the price of the publicly traded shares closed at $10.19 on the New York Stock Exchange ( NYSE ). See below for additional performance information. Enclosed are the financial statements, including the schedule of investments, as of June 30, Comparative Results Average Annual Returns through June 30, 2015 (a) (Unaudited) Year to Date 1 Year 3 Year 5 Year Since Inception (01/31/07) GDL Fund NAV Total Return (b) % 2.19% 4.40% 4.34% 2.89% Investment Total Return (c) (0.25) Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index (a) Returns represent past performance and do not guarantee future results. Investment returns and the principal value of an investment will fluctuate. When shares are sold, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit for performance information as of the most recent month end. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month. At the end of the month, that issue is sold and rolled into the outstanding Treasury Bill that matures closest to, but not beyond three months from the re-balancing date. To qualify for selection, an issue must have settled on or before the re-balancing (month end) date. Dividends are not reinvested for the Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index. You cannot invest directly in an index. (b) Total returns and average annual returns reflect changes in the NAV per share and reinvestment of distributions at NAV on the ex-dividend date and are net of expenses. Since inception return is based on an initial NAV of $ (c) Total returns and average annual returns reflect changes in closing market values on the NYSE and reinvestment of distributions. Since inception return is based on an initial offering price of $20.00.

14 Summary of Portfolio Holdings (Unaudited) The following table presents portfolio holdings as a percent of total investments as of June 30, 2015: The GDL Fund Long Positions U.S. Government Obligations % Health Care % Computer Software and Services % Diversified Industrial % Cable and Satellite % Energy and Utilities % Telecommunications % Financial Services % Retail % Semiconductors % Transportation % Metals and Mining % Electronics % Food and Beverage % Business Services % Specialty Chemicals % Automotive: Parts and Accessories % Entertainment % Wireless Communications % Machinery % Building and Construction % Hotels and Gaming % Consumer Products and Services % Equipment and Supplies % Publishing % Real Estate %* Aerospace and Defense %* Computer Hardware %* Educational Services %* 100.0% Short Positions Telecommunications... (2.3)% Metals and Mining... (1.1)% Energy and Utilities... (0.6)% Cable and Satellite... (0.2)% Health Care... (0.1)% Retail... (0.0)%* (4.3)% * Amount represents less than 0.05%. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the SEC ) for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain this information at or by calling the Fund at 800-GABELLI ( ).The Fund s Form N-Q is available on the SEC s website at and may also be reviewed and copied at the SEC s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC Proxy Voting The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. A description of the Fund s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI ( ); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY ; or (iii) visiting the SEC s website at 2

15 Schedule of Investments June 30, 2015 (Unaudited) Shares Cost Market Value COMMON STOCKS 76.1% Aerospace and Defense 0.0% 4,000 Kratos Defense & Security Solutions Inc.... $ 34,776 $ 25,200 Automotive: Parts and Accessories 0.7% 200,000 The Pep Boys - Manny, Moe & Jack... 2,415,808 2,454,000 Building and Construction 0.3% 23,000 Fortune Brands Home & Security Inc ,741 1,053,860 3,303 Norbord Inc ,446 69, ,187 1,123,162 Business Services 1.0% 27,108 Blackhawk Network Holdings Inc ,159 1,116,850 92,138 Clear Channel Outdoor Holdings Inc., Cl. A... 80, ,358 3,000 Funespana SA... 27,182 24, ,000 GrainCorp Ltd., Cl. A... 2,172,257 1,251,919 21,853 R. R. Donnelley & Sons Co , , Towers Watson & Co., Cl. A... 27,067 25,160 3,364,447 3,732,605 Cable and Satellite 7.9% 9,000 AMC Networks Inc., Cl. A , ,650 30,000 Cablevision Systems Corp., Cl. A. 499, , ,000 DIRECTV... 13,181,877 13,454,550 27,628 Liberty Global plc, Cl. A... 1,162,171 1,493,846 60,000 Liberty Global plc, Cl. C... 2,473,672 3,037, ,900 Sky Deutschland AG... 3,383,394 2,933, ,000 Sky plc... 2,223,582 3,258,752 4,700 Societe d Edition de Canal ,682 39,823 20,000 Time Warner Cable Inc... 3,225,426 3,563,400 4,000 Time Warner Inc , ,640 26,865,108 29,586,322 Computer Hardware 0.0% 500 Data Modul AG... 15,606 18,646 Computer Software and Services 9.0% 200,000 Advent Software Inc.... 8,826,820 8,842,000 10,000 Anite plc... 20,165 19, ,600 BMC Software Stub , ,000 ClickSoftware Technologies Ltd.. 1,292,266 1,294,710 19,905 Covisint Corp ,321 65, ,500 Dealertrack Technologies Inc ,226,217 15,226,575 50,000 IGATE Corp.... 2,379,099 2,384,500 63,000 Informatica Corp.... 3,015,979 3,053, InterXion Holding NV... 6,505 5,530 53,000 Rally Software Development Corp.... 1,030,739 1,030,850 1,700 Rocket Fuel Inc ,472 13,940 Shares Cost Market Value 40,000 Yahoo! Inc.... $ 588,909 $ 1,571,600 32,452,492 33,519,589 Consumer Products and Services 0.2% 100,000 Avon Products Inc.(a)... 1,349, ,000 8,000 Blyth Inc ,802 50,800 10,000 Orbitz Worldwide Inc , ,200 1 Reynolds American Inc ,551, ,003 Diversified Industrial 8.5% 15,000 ITT Corp , ,600 45,000 Myers Industries Inc , , ,000 Pall Corp ,919,258 24,890,000 90,000 Polypore International Inc.... 5,355,191 5,389,200 31,103,202 31,761,800 Educational Services 0.0% 44,000 Corinthian Colleges Inc , Electronics 1.4% 190,000 Alliance Semiconductor Corp , ,500 85,900 Axis Communications AB... 3,441,367 3,421,555 76,000 Bel Fuse Inc., Cl. A... 1,999,055 1,570,160 6,375,260 5,134,215 Energy and Utilities 6.6% 170,000 Alvopetro Energy Ltd ,166 53,082 3,300 Baker Hughes Inc , ,610 51,700 BG Group plc , , ,800 Cleco Corp.... 8,286,138 8,282,130 60,000 Dragon Oil plc , ,432 98,000 Dresser-Rand Group Inc. (a)... 8,032,856 8,347,640 72,000 Endesa SA... 1,799,401 1,377, ,000 Gulf Coast Ultra Deep Royalty Trust , ,000 2,000 Hawaiian Electric Industries Inc... 64,862 59,460 10,000 NRG Energy Inc , ,800 50,000 Pepco Holdings Inc... 1,338,180 1,347,000 97,000 Rosetta Resources Inc.... 2,314,725 2,244,580 6,000 UIL Holdings Corp , ,920 13,064 WEC Energy Group Inc.(a) , ,488 50,000 WesternZagros Resources Ltd ,491 9,207 25,663,405 24,882,837 Entertainment 0.6% 140,254 Media General Inc.... 2,444,057 2,316,996 2,000 SFX Entertainment Inc.... 8,719 8,980 2,452,776 2,325,976 Equipment and Supplies 0.2% 100,000 GrafTech International Ltd , ,000 2,500 The Middleby Corp , , , ,575 See accompanying notes to financial statements. 3

16 Schedule of Investments (Continued) June 30, 2015 (Unaudited) Shares Cost Market Value COMMON STOCKS (Continued) Financial Services 4.3% 10,126 BB&T Corp... $ 418,406 $ 408,179 1,000 City National Corp ,227 90,390 55,000 First Niagara Financial Group Inc.. 766, ,200 8,000 HCC Insurance Holdings Inc , ,720 10,000 Hilltop Holdings Inc , , Home Loan Servicing Solutions Ltd ,000 Hudson City Bancorp Inc.... 9,344,946 8,743, Montpelier Re Holdings Ltd.... 7,848 7, ,449 National Interstate Corp... 3,260,600 2,990,147 60,000 Navient Corp ,152 1,092,600 7,000 PartnerRe Ltd , ,500 60,000 SLM Corp , ,200 16,651,152 16,199,881 Food and Beverage 1.2% 1,310,000 Parmalat SpA... 4,593,967 3,420,388 3,200,000 Yashili International Holdings Ltd.... 1,445, ,513 6,039,678 4,402,901 Health Care 18.2% 3,000 AbbVie Inc , ,592 5,000 Alere Inc , ,750 1 Alexion Pharmaceuticals Inc ,000 ArthroCare Corp. Stub ,500 34,000 AstraZeneca plc, ADR... 2,689,557 2,166,140 15,000 Audika Groupe , , ,000 Catamaran Corp ,390,157 15,575, ,000 Hospira Inc ,563,839 17,742,000 1,000 ICU Medical Inc ,368 95,660 4,000 Illumina Inc , ,440 52,000 KYTHERA Biopharmaceuticals Inc.... 3,909,400 3,916,120 1,000 Laboratory Corp. of America Holdings , ,220 2,000 Mylan NV , , ,000 Omnicare Inc... 9,589,800 9,425, Perrigo Co. plc... 98,011 92,415 20,000 Rhoen Klinikum AG , , ,500 Sigma-Aldrich Corp... 15,006,059 15,258,825 15,000 Smith & Nephew plc , ,127 7,500 Smith & Nephew plc, ADR , ,625 1,000 Synergy Health plc... 29,114 27,010 13,000 WuXi PharmaTech Cayman Inc., ADR , ,380 66,555,637 67,974,913 Hotels and Gaming 0.2% 28,000 Belmond Ltd., Cl. A , ,720 Shares Cost Market Value 30,000 International Game Technology plc... $ 568,500 $ 532,800 1,000 MGM Resorts International... 2,620 18, , ,770 Machinery 0.4% 3,000 CNH Industrial NV... 26,836 27,358 42,000 Xylem Inc.... 1,202,465 1,556,940 1,229,301 1,584,298 Metals and Mining 1.9% 160,000 AuRico Gold Inc.... 1,272, ,400 3,000 Osisko Gold Royalties Ltd... 41,105 37, ,000 RTI International Metals Inc.... 5,152,583 4,192,160 16,500 Vulcan Materials Co ,862 1,384,845 31,000 Whiting Petroleum Corp.... 1,498,089 1,041,600 8,603,224 7,110,763 Publishing 0.2% 136,000 SCMP Group Ltd ,079 33,072 25,880 The E.W. Scripps Co., Cl. A , , , ,430 Real Estate 0.0% 1,000 Associated Estates Realty Corp... 28,470 28,630 3,000 Conwert Immobilien Invest SE... 38,874 38,028 67,344 66,658 Retail 2.5% 13,000 Family Dollar Stores Inc.... 1,038,749 1,024,530 12,000 Office Depot Inc , ,920 33,500 World Duty Free SpA , , ,557 Zale Corp.... 7,961,908 7,991,697 9,479,243 9,495,490 Semiconductors 2.4% 95,000 Altera Corp.... 4,922,016 4,864,000 71,000 Broadcom Corp., Cl. A... 3,813,045 3,655,790 20,000 Integrated Silicon Solution Inc , ,800 9,137,535 8,962,590 Specialty Chemicals 0.7% 2,000 Ashland Inc , ,800 68,793 OM Group Inc.... 2,306,053 2,311,445 7,200 SGL Carbon SE , ,230 2,511,273 2,671,475 Telecommunications 5.3% 690,000 Asia Satellite Telecommunications Holdings Ltd.... 1,533,382 2,750, ,000 Colt Group SA , ,357 1 Harris Corp ,000 Jazztel plc... 7,120,682 6,496, ,000 Koninklijke KPN NV , ,789 See accompanying notes to financial statements. 4

17 Schedule of Investments (Continued) June 30, 2015 (Unaudited) Shares Cost Market Value COMMON STOCKS (Continued) Telecommunications (Continued) 1,000 Loral Space & Communications Inc.... $ 73,215 $ 63,120 58,926 Sprint Corp , , ,000 Telenet Group Holding NV... 6,810,999 8,159,045 67,914 Transmode AB , ,600 17,725,111 19,779,009 Transportation 2.1% 2,000 Norbert Dentressangle SA , , ,050 TNT Express NV... 8,210,132 7,227,865 8,694,694 7,712,937 Wireless Communications 0.3% 25,000 T-Mobile US Inc , ,250 TOTAL COMMON STOCKS ,805, ,587,603 RIGHTS 0.5% Energy and Utilities 0.0% 1,000,000 Fortune Oil plc, CVR Health Care 0.2% 187,200 Adolor Corp., CPR, expire 07/01/ ,344 79,391 Ambit Biosciences Corp., CVR , ,600 American Medical Alert Corp ,016 18,000 Chelsea Therapeutics International Ltd., CVR... 1,980 1, ,000 Durata Therapeutics Inc., CVR ,200 3,800 Furiex Pharmaceuticals Inc., CVR... 36,942 37, Omthera Pharmaceuticals Inc., expire 12/31/ ,620 Prosensa Holding, CVR , , ,322 Teva Pharmaceutical Industries Ltd., CPR, expire 02/20/ , , ,000 Trius Therapeutics, CVR , , ,536 Retail 0.0% 400,000 Safeway Casa Ley, CVR, expire 01/30/ , , ,000 Safeway PDC, CVR, expire 01/30/ ,407 19,520 74, ,520 Wireless Communications 0.3% 470,000 Leap Wireless International Inc., CVR, expire 03/14/ ,102,230 1,184,400 TOTAL RIGHTS... 1,595,248 2,046,456 Shares Cost Market Value WARRANTS 0.0% Energy and Utilities 0.0% 35,000 Kinder Morgan Inc., expire 05/25/17... $ 66,675 $ 94,500 Metals and Mining 0.0% 850 HudBay Minerals Inc., expire 07/20/ TOTAL WARRANTS... 67,637 95,276 Principal Amount U.S. GOVERNMENT OBLIGATIONS 23.4% $87,408,000 U.S. Treasury Bills, 0.000% to 0.095%, 07/23/15 to 12/24/15(b)... 87,390,607 87,403,157 TOTAL INVESTMENTS 100.0%... $370,858, ,132,492 Unrealized Settlement Date Appreciation/ Depreciation FORWARD FOREIGN EXCHANGE CONTRACTS 2,500,000(c)Deliver British Pounds in exchange for United States Dollars 3,921,415(d)... 07/24/15 (6,064) 27,500,000(e)Deliver Euros in exchange for United States Dollars 30,794,390(d)... 07/24/15 126,164 29,000,000(f) Deliver Swedish Kronor in exchange for United States Dollars 3,515,391(d)... 07/24/15 15,411 TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS ,511 Notional Amount Termination Date EQUITY CONTRACT FOR DIFFERENCE SWAP AGREEMENTS Unrealized Appreciation $ 36,862 Gulf Keystone Petroleum Ltd.(g)... 06/28/16 $ 3,833 (70,000 Shares) See accompanying notes to financial statements. 5

18 Schedule of Investments (Continued) June 30, 2015 (Unaudited) Market Value SECURITIES SOLD SHORT (4.3)% (Proceeds received $16,936,333)... $(15,994,021) Other Assets and Liabilities (Net)... 17,988,999 PREFERRED STOCK (2,624,025 preferred shares outstanding)... (131,201,250) NET ASSETS COMMON STOCK (20,082,398 common shares outstanding)...$245,065,564 NET ASSET VALUE PER COMMON SHARE ($245,065,564 20,082,398 shares outstanding)...$ Shares Proceeds Market Value SECURITIES SOLD SHORT (4.3)% Cable and Satellite (0.2)% 4,562 Charter Communications Inc., Cl.A... $ 816,614 $ 781,243 Energy and Utilities (0.6)% 1,000 Halliburton Co ,369 43, NextEra Energy Inc ,281 47,250 46,612 Noble Energy Inc.... 2,072,376 1,989,400 2,177,026 2,079,720 Health Care (0.1)% 3,000 AbbVie Inc , ,570 Metals and Mining (1.1)% 376,589 Alcoa Inc.... 5,197,082 4,198,967 Retail (0.0)% 2,625 Staples Inc ,571 40,189 Telecommunications (2.3)% 225,844 AT&T Inc.... 7,840,359 8,021,979 31,952 Infinera Corp , ,353 8,489,117 8,692,332 TOTAL SECURITIES SOLD SHORT... $ 16,936,333 $ 15,994,021 (a) At June 30, 2015, securities, or a portion thereof, with a value of $9,166,748 were reserved and/or pledged for collateral with the custodian for securities sold short, equity contract for difference swap agreements, and forward foreign exchange contracts. (b) At June 30, 2015, $51,000,000 of the principal amount was pledged as collateral for securities sold short, equity contract for difference swap agreements, and forward foreign exchange contracts. (c) Principal amount denoted in British Pounds. (d) At June 30, 2015, the Fund had entered into forward foreign exchange contracts with State Street Bank and Trust Co. (e) Principal amount denoted in Euros. (f) Principal amount denoted in Swedish Kronor. (g) At June 30, 2015, the Fund had entered into equity contract for difference swap agreements with The Goldman Sachs Group, Inc. Non-income producing security. Represents annualized yield at date of purchase. ADR American Depositary Receipt CVR Contingent Value Right CPR Contingent Payment Right Geographic Diversification %of Market Value Market Value Long Positions North America % $316,292,092 Europe ,015,503 Latin America ,572,977 Asia/Pacific ,251,920 Total Investments % $374,132,492 Short Positions North America... (4.3)% $ (15,994,021) Total Investments... (4.3)% $ (15,994,021) See accompanying notes to financial statements. 6