Registrant Nos. 33-____ and 811-____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
----
PRE-EFFECTIVE AMENDMENT No. ____
POST-EFFECTIVE AMENDMENT No. ____
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT No. ____ ----
_______________________
THE GABELLI BLUE CHIP VALUE FUND
(Exact Name of Registrant as Specified in Charter)
One Corporate Center, Rye, New York 10580-1434
(Address of Principal Executive Office)
Registrant's Telephone Number (800) 422-3554
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center, Rye, New York 10580-1434
(Name and Address of Agent for Service)
_______________________
Copies to:
James E. McKee, Esq. Richard T. Prins, Esq.
Gabelli Funds, LLC Skadden, Arps, Slate, Meagher & Flom LLP
One Corporate Center 919 Third Avenue
Rye, New York 10580-1434 New York, New York 10022
_______________________
Approximate Date of proposed public offering: As soon as practicable after
the effective date of this Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has elected to register an indefinite number of shares of beneficial
interest.
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 Commission, acting
pursuant to Section 8(a), may determine.
THE GABELLI BLUE CHIP VALUE FUND
ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
HTTP://WWW.GABELLI.COM
PROSPECTUS
_______________, 1999
CLASS AAA SHARES
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND.
PLEASE READ IT BEFORE INVESTING AND KEEP IT FOR FUTURE REFERENCE.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
TABLE OF CONTENTS
PAGE
INVESTMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT AND RISK INFORMATION . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . .
PURCHASING, SELLING AND EXCHANGING SHARES . . . . . . . . . . . . . . . . .
PRICING OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . .
TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT SUMMARY
INVESTMENT OBJECTIVE:
The Gabelli Blue Chip Value Fund, a Delaware business trust (the "Fund"),
seeks to provide long-term growth of capital. Capital is the amount of
money you invest in the Fund. The Fund's secondary goal is to provide
current income.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund will primarily invest in common stocks. The Fund focuses on well
established, high quality companies that have a market capitalization of
greater than $5 billion and which the Fund's Investment Adviser, Gabelli
Funds, LLC (the "Adviser") believes are undervalued and have the potential
to achieve significant capital appreciation. In selecting investments, the
Adviser will consider, among other things, the market price of the issuer's
securities, earnings expectations, earnings and price histories, balance
sheet characteristics and perceived management skills. The Adviser will
also consider changes in economic and political outlooks as well as
individual corporate developments.
PRINCIPAL RISKS:
The Fund's share price will fluctuate with changes in the market value of
the Fund's portfolio securities. Stocks are subject to market, economic
and business risks that cause their prices to fluctuate. Investments in
foreign securities involve risks related to political, social and economic
developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. When you sell Fund shares, they may be worth less than what you
paid for them. Consequently, you can lose money by investing in the Fund.
The Fund is also subject to the risk that market values may never be
realized by the market, or that the portfolio securities' prices decline or
that value stocks as a category lose favor with investors compared to
growth stocks or because the Adviser failed to anticipate which stocks or
which industries would benefit from changing market or economic conditions.
WHO MAY WANT TO INVEST:
The Shares offered herein are offered only to investors who acquire them
directly through the Fund's distributor or through a select number of
financial intermediaries with whom the distributor has entered into selling
agreements specifically authorizing them to offer Class AAA Shares.
The Fund may appeal to you if:
o you are a long-term investor or saver
o you seek growth of capital
o you believe that the market will favor value over growth stocks
over the long term
o you wish to include a value strategy as a portion of your overall
investments
You may not want to invest in the Fund if:
o you are seeking a high level of current income
o you are conservative in your investment approach
o you seek stability of principal more than growth of capital
FEES AND EXPENSES OF THE FUND:
This table describes the fees and expenses that you may pay if you buy and
hold Class AAA shares of the Fund.
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets):
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Distribution (Rule 12b-1) Expenses . . . . . . . . . . . . . . . 0.25%
Other Expenses1 . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Total Annual Operating Expenses . . . . . . . . . . . . . . . . . 1.75%
_________________
1 Based on an estimated asset size of $30 million for the current fiscal
year.
EXPENSE EXAMPLE:
This example is intended to help you compare the cost of investing in Class
AAA shares of the Fund with the cost of investing in other mutual funds.
The example assumes (1) you invest $10,000 in the Fund for the time periods
shown, (2) you redeem your shares at the end of those periods, (3) your
investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based
on these assumptions your costs would be:
1 Year 3 Years
------ -------
$178 $551
INVESTMENT AND RISK INFORMATION
The Fund's primary investment objective is to seek long-term growth of
capital, and investments will be made based on the Adviser's perception of
their potential for capital appreciation. Current income is a secondary
objective. The investment objectives of the Fund may not be changed
without shareholder approval.
Under normal market conditions, the Fund invests at least 65% of its assets
in common stocks of well established, high quality companies that have a
market capitalization of greater than $5 billion and which the Adviser
believes are undervalued and have the potential to achieve significant
capital appreciation.
Undervaluation of the stock of an established company with good
intermediate and longer-term fundamentals can result from a variety of
factors, such as a lack of investor recognition of:
o the underlying value of a company's fixed assets,
o the value of a consumer or commercial franchise,
o changes in the economic or financial environment affecting the
company,
o new, improved or unique products or services,
o new or rapidly expanding markets,
o technological developments or advancements affecting the company
or its products, or
o changes in governmental regulations, political climate or
competitive conditions.
Additionally, undervaluation may result from:
o poor management decisions which result in a low return on the
company's assets,
o short-term earnings problems, or
o a difficult near-term operating or economic environment affecting
the company's business.
The actual events that may lead to a significant increase in the value of a
company's securities include:
o earnings surprises relative to analysts' expectations,
o the company's development of new, improved or unique products and
services,
o a change in the company's management or management policies,
o an investor's purchase of a large portion of the company's stock,
o a merger or reorganization or recapitalization of the company,
o a sale of a division of the company,
o a tender offer (an offer to purchase investors' shares),
o the spin-off to shareholders of a subsidiary, division or other
substantial assets, or
o the retirement or death of a senior officer or substantial
shareholder of the company.
In general, the Adviser seeks to take advantage of investors' tendency to
overemphasize near-term events by investing in companies which are
temporarily undervalued and which may return to a significantly higher
valuation. In selecting investments, the Adviser will consider factors
such as the market price of the issuer's securities, earnings expectations,
earnings and price histories, balance sheet characteristics and perceived
management skills. The Adviser will also consider changes in economic and
political outlooks as well as individual corporate developments. The
Adviser will sell any Fund investments which lose their perceived value
relative to other investments.
The Fund's assets will be invested primarily in a broad range of readily
marketable equity securities consisting primarily of common stocks. Many
of the common stocks the Fund will buy will not pay dividends; instead,
stocks will be bought for the potential that their prices will increase,
providing capital appreciation for the Fund. The value of common stocks
will fluctuate due to many factors, including the past and predicted
earnings of the issuer, the quality of the issuer's management, general
market conditions, the forecasts for the issuer's industry and the value of
the issuer's assets. Holders of common stocks only have rights to value
in the company after all debts have been paid, and they could lose their
entire investment in a company that encounters financial difficulty.
The Fund may also use the following investment techniques:
o FOREIGN SECURITIES. The Fund may invest up to 25% of its total
assets in securities of non-U.S. issuers (excluding American
Depository Receipts and U.S. denominated securities of foreign
issuers).
o DEFENSIVE INVESTMENTS. When opportunities for capital growth do
not appear attractive or when adverse market or economic
conditions occur, the Fund may temporarily invest all or a
portion of its assets in defensive investments. Such investments
include preferred stocks, high-grade debt securities, obligations
of the U.S. Government and its agencies and instrumentalities,
and short-term money market instruments such as high-quality
commercial paper (rated at least "A-1" by Standard & Poor's
Rating Service ("S&P") or "P-1" by Moody's Investors Service,
Inc.). When following a defensive strategy, the Fund will be
less likely to achieve its investment goal of capital growth.
The Fund may also engage in other investment practices in order to
achieve its investment goal. These are briefly discussed in the Statement
of Additional Information which may be obtained by calling 1-800-GABELLI
(1-800-422-3554). The Fund does not currently utilize the other practices
to any significant degree and does not anticipate doing so.
Investing in the Fund involves the following risks, listed in the
order of importance.
o EQUITY RISK. The principal risk of investing in the Fund is
equity risk. Equity risk is the risk that the prices of the
securities held by the Fund will change due to general market and
economic conditions, perceptions regarding the industries in
which the companies issuing the securities participate and the
issuer company's particular circumstances.
o FUND AND MANAGEMENT RISK. The Fund invests in stocks issued by
companies that have a market capitalization of greater than $5
billion and which are believed by the Adviser to be undervalued
and have the potential to achieve significant capital
appreciation. The Fund's price may decline because the market
favors other stocks or small capitalization stocks over stocks
mid- to large-size companies. If the Adviser is incorrect in its
assessment of the values of the securities it holds or no event
occurs which surfaces value, then the value of the Fund's shares
may decline.
o FOREIGN RISK. The Fund's investments in foreign securities may
go down because of unfavorable foreign government actions,
political instability or the absence of accurate information
about foreign issuers. Also, a decline in the value of foreign
currencies relative to the U.S. dollar will reduce the value of
securities denominated in those currencies. Foreign securities
are sometimes less liquid and harder to value than securities of
U.S. issuers.
MANAGEMENT OF THE FUND
THE ADVISER. Gabelli Funds, LLC, with principal offices located at One
Corporate Center, Rye, New York 10580-1434, serves as investment adviser to
the Fund. The Adviser makes investment decisions for the Fund and
continuously reviews and administers the Fund's investment program under
the supervision of the Fund's Board of Trustees. The Adviser also manages
several other open-end and closed-end investment companies in the Gabelli
family of funds. The Adviser is a New York limited liability company
organized in 1999 as successor to Gabelli Funds, Inc., a New York
corporation organized in 1980. The Adviser is a wholly owned subsidiary of
Gabelli Asset Management Inc. ("GAMI"), a publicly held company listed on
the New York Stock Exchange.
As compensation for its services and the related expenses the Adviser
bears, the Fund will pay the Adviser an annual fee equal to 1.00% of the
value of the Fund's average daily net assets.
THE PORTFOLIO MANAGER. Ms. Barbara G. Marcin is responsible for the day-
to-day management of the Fund. Ms. Marcin joined the Adviser in June 1999.
Prior to joining the Adviser, Ms. Marcin was the head of value investments
at Citibank Global Asset Management, managing mid- and large-cap equity
securities in value-style mutual funds and in separate accounts.
YEAR 2000. As the year 2000 approaches, an issue has emerged regarding how
the software used by the Fund's service providers can accommodate the date
"2000." Failure to adequately address this issue could result in major
systems or process failures which could disrupt the Fund's operations. The
Adviser is working with the Fund's service providers to prepare for the
year 2000. Based on information currently available, the Adviser does not
expect that the Fund will incur significant operating expenses or be
required to incur material costs to be year 2000 compliant. The Fund
cannot guarantee, however, that all year 2000 issues will be identified and
corrected by January 1, 2000 and any non-compliant computer system could
hurt key Fund operations such as shareholder servicing, pricing and
trading. In addition, the Year 2000 problem may adversely affect the
companies in which the Fund invests, particularly companies in foreign
countries. For example, these companies may incur substantial costs to
correct the Year 2000 problem, which could lower the value of such
companies' securities and negatively affect the Fund's performance.
RULE 12B-1 PLAN. The Fund has adopted a plan under Rule 12b-1 (the "Plan")
which authorizes payments by the Fund on an annual basis of .25% of the
Fund's average daily net assets attributable to Class AAA Shares to finance
distribution of the Fund's Class AAA Shares. The Fund may make payments
under the Plan for the purpose of financing any activity primarily intended
to result in the sales of Class AAA Shares of the Fund. To the extent any
activity is one which the Fund may finance without a distribution plan, the
Fund may also make payments to compensate such activity outside of the Plan
and not be subject to its limitations. Because payments under the Plan are
paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
PURCHASING, SELLING AND EXCHANGING SHARES
Information about purchasing, selling and exchanging your shares is
contained in a separate document called the Owner's Manual which has been
delivered with this Prospectus. The Owner's Manual is considered an
integral part of this Prospectus and is incorporated by reference herein.
The Owner's Manual also contains information about the Telephone Investment
Plan, Telephone Redemption Plan, Automatic Investment Plan, Systematic
Withdrawal Plan and Retirement Plans.
PRICING OF FUND SHARES
The net asset value per share of the Class AAA Shares is calculated on each
day the New York Stock Exchange ("NYSE") is open for trading. The NYSE is
open Monday through Friday, but currently is scheduled to be closed on New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas and
on the preceding Friday or subsequent Monday when a holiday falls on a
Saturday or Sunday, respectively.
The net asset value per share of the Class AAA Shares is determined as of
the close of regular trading on the NYSE, normally 4:00 p.m., New York
time. Net asset value is computed by dividing the value of the Fund's net
assets (i.e. the value of its securities and other assets less its
liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of its shares outstanding at the
time the determination is made. The Fund uses market quotations in valuing
its portfolio securities. Short-term investments that mature in 60 days or
less are valued at amortized cost, which the Trustees of the Fund believe
represents fair value.
The Fund may from time to time hold securities that are primarily listed on
foreign exchanges. Such securities may trade on days when the Fund does
not price its shares. Therefore, the value of the Class AAA Shares may
change on days when you are not able to purchase or redeem Class AAA
Shares.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to pay dividends and capital gain distributions, if any,
on an annual basis. Shareholders may have dividends or capital gains
distributions that are declared by the Fund automatically reinvested at net
asset value in additional shares of the Fund. You will make an election to
receive dividends and distributions in cash or Fund shares at the time you
purchase your shares. You may change this election by notifying the Fund
in writing at any time prior to the record date for a particular dividend
or distribution. There are no sales or other charges in connection with
the reinvestment of dividends and capital gains distributions. There is no
fixed dividend rate, and there can be no assurance that the Fund will pay
any dividends or realize any capital gains.
TAX INFORMATION
The Fund expects that its distributions will consist primarily of net
investment income and net realized capital gains. Dividends out of net
investment income and distributions of net realized short-term capital
gains are taxable to you as ordinary income. Distributions of net long-
term capital gains are taxable to you at long-term capital gain rates. The
Fund's distributions, whether paid in cash or reinvested in Fund shares,
generally will be subject to federal, state or local taxes. An exchange of
the Fund's shares for shares of another fund will be treated for tax
purposes as a sale of the Fund's shares, and any gain you realize on such a
transaction generally will be taxable. Foreign shareholders generally will
be subject to a federal withholding tax .
This summary of tax consequences is intended for general information only.
You should consult a tax adviser concerning the tax consequences of your
investment in the Fund.
THE GABELLI BLUE CHIP VALUE FUND
ADDITIONAL INFORMATION
A Statement of Additional Information dated _________, 1999 (the "SAI")
includes additional information about the Fund. The SAI is incorporated by
reference into this Prospectus and, therefore, is legally a part of this
Prospectus.
Purchase and sale information is provided in a separate document called the
Owner's Manual which is incorporated by reference into this Prospectus.
SEMI-ANNUAL REPORTS
Information about the Fund's investments will be available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its
fiscal year.
INQUIRIES
You may make inquiries about the Fund, or obtain a copy of the SAI, the
Owner's Manual or the annual or semi-annual reports without charge, by
calling 1-800-GABELLI (1-800-422-3554).
You can review and copy information about the Fund (including the SAI) at
the SEC Public Reference Room in Washington, DC (for information call 1-
800-SEC-0330). Such information is also available on the SEC's Internet
site at http://www.sec.gov. You may request documents by mail from the
SEC, upon payment of a duplicating fee, by writing to the Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009.
Investment Company Act File No. 811-_____
THE GABELLI BLUE CHIP VALUE FUND
ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
HTTP://WWW.GABELLI.COM
PROSPECTUS
_________, 1999
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND.
PLEASE READ IT BEFORE INVESTING AND KEEP IT FOR FUTURE REFERENCE.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
TABLE OF CONTENTS
Page
INVESTMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT AND RISK INFORMATION . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . .
CLASSES OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . .
EXCHANGES OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRICING OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . .
TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT SUMMARY
INVESTMENT OBJECTIVE:
The Gabelli Blue Chip Value Fund, a Delaware business trust (the "Fund"),
seeks to provide long-term growth of capital. Capital is the amount of
money you invest in the Fund. The Fund's secondary goal is to provide
current income.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund will primarily invest in common stocks. The Fund may also invest
in foreign securities. The Fund focuses on well established, high quality
companies that have a market capitalization of greater than $5 billion and
which the Fund's Investment Adviser, Gabelli Funds, LLC (the "Adviser"),
believes are undervalued and have the potential to achieve significant
capital appreciation. In selecting investments, the Adviser will consider,
among other things, the market price of the issuer's securities, earnings
expectations, earnings and price histories, balance sheet characteristics
and perceived management skills. The Adviser will also consider changes in
economic and political outlooks as well as individual corporate
developments.
PRINCIPAL RISKS:
The Fund's share price will fluctuate with changes in the market value of
the Fund's portfolio securities. Stocks are subject to market, economic
and business risks that cause their prices to fluctuate. Investments in
foreign securities involve risks related to political, social and economic
developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. When you sell Fund shares, they may be worth less than what you
paid for them. Consequently, you can lose money by investing in the Fund.
The Fund is also subject to the risk that market values may never be
realized in the market, or that the price of its portfolio securities will
decline, or that value stocks as a category lose favor with investors
compared to growth stocks or because the Adviser failed to anticipate which
stocks or which industries would benefit from changing market or economic
conditions.
WHO MAY WANT TO INVEST:
The Fund may appeal to you if:
o you are a long-term investor or saver
o you seek growth of capital
o you believe that the market will favor value over growth
stocks over the long term
o you wish to include a value strategy as a portion of your
overall investments
You may not want to invest in the Fund if:
o you are seeking a high level of current income
o you are conservative in your investment approach
o you seek stability of principal more than growth of capital
FEES AND EXPENSES OF THE FUND:
These tables describe the fees and expenses that you may pay if you buy and
hold shares of the Fund.
Class A Class B Class C
Shares Shares Shares
------- ------- -------
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load) (as
a percentage of redemption price*) None 5.00%(2) 1.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets):
Management Fees 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Fees 0.25% 1.00% 1.00%
Other Expensesz(3) 0.50% 0.50% 0.50%
Total Annual Operating Expenses 1.75% 2.50% 2.50%
===== ===== =====
______________________
1 The sales charge declines as the amount invested increases.
2 The Fund imposes a sales charge upon redemption of B shares if you
sell your shares within ninety-six months after purchase. A maximum
sales charge of 1% applies to redemptions of Class C shares within
twenty-four months after purchase.
3 Based on an estimated asset size of $30 million for the current fiscal
year.
* "Redemption Price" equals the net asset value at the time of
investment or redemption, whichever is lower.
EXPENSE EXAMPLE:
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes
(1) you invest $10,000 in the Fund for the time periods shown, (2) you
redeem your shares at the end of the period, except as noted, (3) your
investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based
on these assumptions your costs would be:
1 Year 3 Years
------ -------
Class A shares $743 $1,094
Class B shares
- assuming redemption $753 $1,079
- assuming no redemption $253 $779
$779
Class C shares
- assuming redemption $353 $779
- assuming no redemption $253 $779
INVESTMENT AND RISK INFORMATION
The Fund's primary investment objective is to seek long-term growth of
capital, and investments will be made based on the Adviser's perception of
their potential for capital appreciation. Current income is a secondary
objective. The investment objectives of the Fund may not be changed
without shareholder approval.
Under normal market conditions, the Fund invests at least 65% of its assets
in common stocks of well established, high quality companies that have a
market capitalization of greater than $5 billion and which the Adviser
believes are undervalued and have the potential to achieve significant
capital appreciation.
Undervaluation of the stock of an established company with good
intermediate and longer-term fundamentals can result from a variety of
factors, such as a lack of investor recognition of:
o the underlying value of a company's fixed assets,
o the value of a consumer or commercial franchise,
o changes in the economic or financial environment affecting the
company,
o new, improved or unique products or services,
o new or rapidly expanding markets,
o technological developments or advancements affecting the company
or its products,
o changes in governmental regulations, political climate or
competitive conditions.
Additionally, undervaluation may result from:
o poor management decisions which result in a low return on the
company's assets,
o short-term earnings problems or
o a difficult near-term operating or economic environment affecting
the company's business.
The actual events that may lead to a significant increase in the value of a
company's securities include:
o earnings surprises relative to analysts' expectations,
o the company's development of new, improved or unique products and
services,
o a change in the company's management or management policies,
o an investor's purchase of a large portion of the company's stock,
o a merger or reorganization or recapitalization of the company,
o a sale of a division of the company,
o a tender offer (an offer to purchase investors' shares),
o the spin-off to shareholders of a subsidiary, division or other
substantial assets, or
o the retirement or death of a senior officer or substantial
shareholder of the company.
In general, the Adviser seeks to take advantage of investors' tendency to
overemphasize near-term events by investing in companies which are
temporarily undervalued and which may return to a significantly higher
valuation. In selecting investments, the Adviser will consider factors
such as the market price of the issuer's securities, earnings expectations,
earnings and price histories, balance sheet characteristics and perceived
management skills. The Adviser will also consider changes in economic and
political outlooks as well as individual corporate developments. The
Adviser will sell any Fund investments which lose their perceived value
relative to other investments.
The Fund's assets will be invested primarily in a broad range of readily
marketable equity securities consisting primarily of common stocks. Many
of the common stocks the Fund will buy will not pay dividends; instead,
stocks will be bought for the potential that their prices will increase,
providing capital appreciation for the Fund. The value of common stock
will fluctuate due to many factors, including the past and predicted
earnings of the issuer, the quality of the issuer's management, general
market conditions, the forecasts for the issuer's industry and the value of
the issuer's assets. Holders of common stocks only have rights to value in
the company after all debts have been paid, and they could lose their
entire investment in a company that encounters financial difficulty.
The Fund may also use the following investment techniques:
o FOREIGN SECURITIES. The Fund may invest up to 25% of its total
assets in securities of non-U.S. issuers (excluding American
Depository Receipts and U.S. denominated Securities of foreign
issuers).
o DEFENSIVE INVESTMENTS. When opportunities for capital growth do
not appear attractive or when adverse market or economic
conditions occur, the Fund may temporarily invest all or a
portion of its assets in defensive investments. Such investments
include preferred stocks, high-grade debt securities, obligations
of the U.S. Government and its agencies and instrumentalities,
and short-term money market instruments such as high-quality
commercial paper (rated at least "A-1" by Standard & Poor's
Rating Service ("S&P") or "P-1" by Moody's Investors Service,
Inc.) When following a defensive strategy, the Fund will be less
likely to achieve its investment goal of capital growth.
The Fund may also engage in other investment practices in order to achieve
its investment goal. These are briefly discussed in the Statement of
Additional Information which may be obtained by calling 1-800-GABELLI (1-
800-422-3554). The Fund does not currently utilize the other practices to
any significant degree and does not anticipate doing so.
Investing in the Fund involves the following risks, listed in the order of
importance:
o EQUITY RISK. The principal risk of investing in the Fund is
equity risk. Equity risk is the risk that the prices of the
securities held by the Fund will change due to general market and
economic conditions, perceptions regarding the industries in
which the companies issuing the securities participate and the
issuer company's particular circumstances.
o FUND AND MANAGEMENT RISK. The Fund invests in stocks issued by
companies that have a market capitalization of greater than $5
billion and which are believed by the Adviser to be undervalued
(value stocks) and have the potential to achieve significant
capital appreciation. The Fund's price may decline because the
market favors other stocks or small capitalization stocks over
stocks of larger companies. If the Adviser is incorrect in its
assessment of the values of the securities it holds or no event
occurs which surfaces value, then the value of the Fund's shares
may decline.
o FOREIGN RISK. The Fund's investments in foreign securities may
go down because of unfavorable foreign government actions,
political instability or the absence of accurate information
about foreign issuers. Also, a decline in the value of foreign
currencies relative to the U.S. dollar will reduce the value of
securities denominated in those currencies. Foreign securities
are sometimes less liquid and harder to value than securities of
U.S. issuers.
MANAGEMENT OF THE FUND
THE ADVISER. Gabelli Funds, LLC, with principal offices located at One
Corporate Center, Rye, New York 10580-1434, serves as investment adviser to
the Fund. The Adviser makes investment decisions for the Fund and
continuously reviews and administers the Fund's investment program under
the supervision of the Fund's Board of Trustees. The Adviser also manages
several other open-end and closed-end investment companies in the Gabelli
family of funds. The Adviser is a New York limited liability company
organized in 1999 as successor to Gabelli Funds, Inc., a New York
corporation organized in 1980. The Adviser is a wholly-owned subsidiary of
Gabelli Asset Management Inc. ("GAMI"), a publicly held company listed on
the New York Stock Exchange.
As compensation for its services and the related expenses borne by the
Adviser, the Fund will pay the Adviser an annual fee equal to 1.00% of the
value of the Fund's average daily net assets.
THE PORTFOLIO MANAGER. Ms. Barbara C. Marcin, is responsible for the day-
to-day management of the Fund. Ms. Marcin joined the Adviser in June 1999.
Prior to joining the Adviser, Ms. Marcin was the head of value investments
at Citibank Global Asset Management, managing mid- and large-cap equity
securities in value-style mutual funds and in separate accounts.
YEAR 2000. As the year 2000 approaches, an issue has emerged regarding how
the software used by the Fund's service providers can accommodate the date
"2000." Failure to adequately address this issue could result in major
systems or process failures which could disrupt the Fund's operations. The
Adviser is working with the Fund's service providers to prepare for the
year 2000. Based on information currently available, the Adviser does not
expect that the Fund will incur significant operating expenses or be
required to incur material costs to be year 2000 compliant. The Fund
cannot guarantee, however, that all year 2000 issues will be identified and
corrected by January 1, 2000 and any non-compliant computer system could
hurt key Fund operations, such as shareholder servicing, pricing and
trading. In addition, the Year 2000 problem may adversely affect the
companies in which the Fund invests, particularly companies in foreign
countries. For example, these companies may incur substantial costs to
correct the Year 2000 problem, which could lower the value of such
companies' securities and negatively affect the Fund's performance.
CLASSES OF SHARES
Three classes of the Fund's shares are offered in this prospectus Class A
shares, Class B shares and Class C shares. The table below summarizes the
differences among the classes of shares.
o A "front-end sales load," or sales charge, is a one-time fee
charged at the time of purchase of shares.
o A "contingent deferred sales charge" ("CDSC") is a one-time fee
charged at the time of redemption.
o A "Rule 12b-1 fee" is a recurring annual fee for distributing
shares and servicing shareholder accounts based on the Fund's
o average daily net assets attributable to the particular class of
shares.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Front-End Sales Load? Yes. The percentage declines No. No.
as the amount invested
increases.
Contingent Deferred Yes, for shares redeemed Yes, for shares redeemed Yes, for shares redeemed
Sales Charge within twenty-four months within seventy-two months within twenty-four months
after purchase as part after purchase. Declines after purchase.
of an investment greater over time.
than $2 million if no
front-end sales charge
was paid at the time of
purchase.
Rule 12b-1 Fee 0.25% 1.00% 1.00%
Convertible to Another No. Yes. Automatically converts No.
Class? to Class A shares after
approximately ninety-six
months.
Fund Expense Levels Lower annual expenses than Higher annual expenses Higher annual expenses
Class B or Class C shares. than Class A shares. than Class A shares.
</TABLE>
In selecting a class of shares in which to invest, you should consider
o the length of time you plan to hold the shares
o the amount of sales charge and Rule 12b-1 fees, recognizing that
your share of 12b-1 fees as a percentage of your investment
increases if the Fund's assets increase in value and decreases if
the Fund's assets decrease in value
o whether you qualify for a reduction or waiver of the Class A
sales charge
o that Class B shares convert to Class A shares approximately
ninety-six months after purchase
If you.... then you should consider.....
o do not qualify for a reduced purchasing Class C shares instead
or waived front-end sales load of either Class A shares or Class
and intend to hold your shares B shares
for only a few years or less
o do not qualify for a reduced purchasing Class A or Class B
or waived front-end sales load shares instead of Class C shares
and intend to hold your shares
for several years
o qualify for a significantly purchasing Class A shares no
reduced or waived front-end matter how long you intend to
sales load hold your shares
SALES CHARGE - CLASS A SHARES. The sales charge is imposed on Class A
shares in accordance with the following schedule:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Reallowance
as % of the as % of to
Amount of Investment Offering Price* Amount Invested Broker-Dealers
-------------------- --------------- --------------- --------------
<S> <C> <C> <C>
Under $50,000 5.75% 6.10% 5.00%
$50,000 but under $100,000 4.50% 4.71% 3.75%
$100,000 but under $250,000 3.50% 3.62% 2.75%
$250,000 but under $500,000 2.50% 2.56% 2.00%
$500,000 but under $1 million 2.00% 2.04% 1.75%
$1 million but under $2 million 1.00% 1.01% 1.00%
$2 million or more 0.00% 0.00% 1.00%
</TABLE>
* Front-end sales load
SALES CHARGE REDUCTIONS AND WAIVERS CLASS A SHARES
Reduced sales charges are available to (1) investors who are eligible to
combine their purchases of Class A shares to receive volume discounts and
(2) investors who sign a Letter of Intent and agree to make purchases over
time. Certain types of investors are eligible for sales charge waivers.
1. Volume Discounts. Investors eligible to receive volume discounts are
individuals and their immediate families, tax-qualified employee benefit
plans and a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account even though more than one beneficiary is
involved. You also may combine the value of Class A shares you already
hold in the Fund and other funds advised by Gabelli Funds, LLC or its
affiliates along with the value of the Class A shares being purchased to
qualify for a reduced sales charge. For example, if you own Class A shares
of the Fund that have an aggregate value of $100,000, and make an
additional investment in Class A shares of the Fund of $4,000, the sales
charge applicable to the additional investment would be 3.50%, rather than
the 5.75% normally charged on a $4,000 purchase. If you want more
information on volume discounts, call your broker.
2. Letter of Intent. If you initially invest at least $1,000 in Class A
shares of the Fund and submit a Letter of Intent to the Distributor, you
may make purchases of Class A shares of the Fund during a 13-month period
at the reduced sales charge rates applicable to the aggregate amount of the
intended purchases stated in the Letter. The Letter may apply to purchases
made up to 90 days before the date of the Letter. You will have to pay
sales charges at the higher rate if you fail to honor your letter of
intent. For more information on the Letter of Intent, call your broker.
3. Investors Eligible for Sales Charge Waivers. Class A shares of the
Fund may be offered without a sales charge to: (1) any other investment
company in connection with the combination of such company with the Fund by
merger, acquisition of assets or otherwise; (2) shareholders who have
redeemed shares in the Fund and who wish to reinvest their redemption
proceeds in the Fund, provided the reinvestment is made within 30 days of
the redemption; (3) tax-exempt organizations enumerated in Section
501(c)(3) of the Internal Revenue Code of 1986 (the "Code") and private,
charitable foundations that in each case make lump-sum purchases of
$100,000 or more; (4) qualified employee benefit plans established pursuant
to Section 457 of the Code that have established omnibus accounts with the
Fund; (5) qualified employee benefit plans having more than one hundred
eligible employees and a minimum of $1 million in plan assets invested in
the Fund (plan sponsors are encouraged to notify the Fund's distributor
when they first satisfy these requirements); (6) any unit investment trusts
registered under the Investment Company Act of 1940 (the "1940 Act") which
have shares of the Fund as a principal investment; (7) financial
institutions purchasing Class A shares of the Fund for clients
participating in a fee based asset allocation program or wrap fee program
which has been approved by the Distributor; and (8) registered investment
advisers or financial planners who place trades for their own accounts or
the accounts of their clients and who charge a management, consulting or
other fee for their services; and clients of such investment advisers or
financial planners who place trades for their own accounts if the accounts
are linked to the master account of such investment adviser or financial
planner on the books and records of a broker or agent.
Investors who qualify under the categories described above should contact
their brokerage firm.
CONTINGENT DEFERRED SALES CHARGES. You will pay a CDSC when you redeem:
o Class A shares within approximately twenty-four months of buying
them as part of an investment greater than $2 million if no
front-end sales charge was paid at the time of purchase.
o Class B shares within approximately seventy-two months of buying
them.
o Class C shares within approximately twenty-four months of buying
them.
The CDSC payable upon redemption of Class A shares and Class C shares in
the circumstances described above is 1%. The CDSC schedule for Class B
shares is set forth below. The CDSC is based on the net asset value at the
time of your investment or the net asset value at the time of redemption,
whichever is lower.
CLASS B SHARES
Years Since Purchase CDSC
-------------------- ----
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
The Distributor pays sales commissions of up to 4.00% of the purchase price
of Class B shares of the Fund to brokers at the time of sale that initiate
and are responsible for purchases of such Class B shares of the Fund.
You will not pay a CDSC to the extent that the value of the redeemed shares
represents:
o reinvestment of dividends or capital gains distributions
o capital appreciation of shares redeemed
When you redeem shares, we will assume that you are redeeming first shares
representing reinvestment of dividends and capital gains distributions,
then any appreciation on shares redeemed, and then remaining shares held by
you for the longest period of time. We will calculate the holding period
of shares acquired through an exchange of shares of another fund from the
date you acquired the original shares of the other fund. The time you hold
shares in a money market fund, however, will not count for purposes of
calculating the applicable CDSC.
We will waive the CDSC payable upon redemptions of shares for:
o redemptions and distributions from retirement plans made after
the death or disability of a shareholder
o minimum required distributions made from an IRA or other
retirement plan account after you reach age 591/2
o involuntary redemptions made by the Fund
o a distribution from a tax-deferred retirement plan after your
retirement
o returns of excess contributions to retirement plans following the
shareholder's death or disability
CONVERSION FEATURE CLASS B SHARES
o Class B shares automatically convert to Class A shares of the
Fund on the first business day of the ninety-seventh month
following the month in which you acquired such shares.
o After conversion, your shares will be subject to the lower Rule
12b-1 fees charged on Class A shares, which will increase your
investment return compared to the Class B shares.
o You will not pay any sales charge or fees when your shares
convert, nor will the transaction be subject to any tax.
o If you exchange Class B shares of one fund for Class B shares of
another fund, your holding period will be calculated from the
time of your original purchase of Class B shares. If you
exchange shares into a Gabelli money market fund, however, your
holding period will be suspended.
o The dollar value of Class A shares you receive will equal the
dollar value of the B shares converted.
The Board of Trustees may suspend the automatic conversion of Class B to
Class A shares for legal reasons or due to the exercise of its fiduciary
duty. If the Board determines that such suspension is likely to continue
for a substantial period of time, it will create another class of shares
into which Class B shares are convertible.
RULE 12B-1 PLAN. The Fund has adopted a plan under Rule 12b-1 (the "Plan")
for each of its classes of shares. Under the Plan, the Fund may use its
assets to finance activities relating to the sale of its shares and the
provision of certain shareholder services.
The Rule 12b-1 fees vary by class as follows:
Class A Class B Class C
------- ------- -------
Service Fees 0.25% 0.25% 0.25%
Distribution Fees None 0.75% 0.75%
These are annual rates based on the value of each Class' average daily net
assets. Because the Rule 12b-1 fees are higher for Class B and Class C
shares than Class A shares, Class B and Class C shares will have higher
annual expenses. Because Rule 12b-1 fees are paid out of the Fund's assets
on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
PURCHASE OF SHARES
You can purchase the Fund's shares on any day the New York Stock Exchange,
Inc. ("NYSE") is open for trading (a "Business Day"). You may purchase
shares through broker-dealers, banks and other intermediaries who have
selling agreements with Gabelli & Company, the Fund's distributor. The
broker-dealer, bank or other intermediary will transmit a purchase order
and payment to State Street on your behalf. Broker-dealers, banks or other
intermediaries may send you confirmations of your transactions and periodic
account statements showing your investments in the Fund.
MINIMUM INVESTMENTS. Unless your broker has a different minimum, your
minimum initial investment must be at least $1,000. See "Retirement Plans"
and "Automatic Investment Plan" regarding minimum investment amounts
applicable to such plans. There is no minimum for subsequent investments.
SHARE PRICE. The Fund sells its shares at the "net asset value" next
determined after the Fund receives your completed subscription order form
and your payment in Federal funds, subject to a sales charge in the case of
Class A shares. See "Pricing of Fund Shares" for a description of the
calculation of the net asset value and "Classes of Shares Sales Charge
Class A Shares" for a description of the sales charges.
RETIREMENT PLANS. The minimum initial investments for all retirement
plans is $250. The minimum for all subsequent investments by retirement
plans is $100. Investors with IRA plans and self-employed investors may
purchase shares of the Fund through tax-deductible contributions to their
existing IRA account or their retirement plans for self-employed persons,
known as Keogh or H.R. 10 plans. Fund shares may also be a suitable
investment for other types of qualified pension or profit-sharing plans
which are employer sponsored, including deferred compensation or salary
reduction plans known as "401(k) Plans" which give participants the right
to defer portions of their compensation for investment on a tax-deferred
basis until distributions are made from the plans.
AUTOMATIC INVESTMENT PLAN. The Fund offers an automatic monthly investment
plan. There is no minimum monthly investment for accounts establishing an
automatic investment plan. Call your broker for more details about the
plan.
GENERAL. The Fund will not issue share certificates unless requested by
you. The Fund reserves the right to (i) reject any purchase order if, in
the opinion of Fund management, it is in the Fund's best interest to do so
and (ii) suspend the offering of shares for any period of time.
REDEMPTION OF SHARES
You can redeem shares on any Business Day without a redemption fee. The
Fund may temporarily stop redeeming its shares when the NYSE is closed or
trading on the NYSE is restricted, when an emergency exists and the Fund
cannot sell its shares or accurately determine the value of its assets, or
if the Securities and Exchange Commission ("SEC") orders the Fund to
suspend redemptions.
The Fund redeems its shares at the net asset value next determined after
the Fund receives your redemption request, subject in some cases to a CDSC,
as described under "Class of Shares Contingent Deferred Sales charges"
above. See "Pricing of Fund Shares" below for a description of the
calculation of net asset value.
You may redeem shares directly from the Fund through its transfer agent or
through a broker-dealer.
o THROUGH A BROKER-DEALER. You may redeem shares through a broker-
dealer which will transmit a redemption order to State Street on
your behalf. A redemption request received from a broker-dealer
will be effected at the net asset value next determined (less any
applicable CDSC) after State Street receives the request. If you
hold share certificates, you must present the certificates to the
broker-dealer endorsed for transfer. A broker-dealer may charge
you fees for effecting redemptions for you.
o BY LETTER. You may mail a letter requesting redemption of shares
to: THE GABELLI FUNDS, P.O. BOX 8308, BOSTON, MA 02266-8308.
Your letter should state the name of the Fund and the share
class, the dollar amount or number of shares you are redeeming
and your account number. You must sign the letter in exactly the
same way the account is registered and if there is more than one
owner of shares, all must sign. A signature guarantee is
required for each signature on your redemption letter. You can
obtain a signature guarantee from financial institutions such as
commercial banks, brokers, dealers and savings associations. A
notary public cannot provide a signature guarantee.
o BY TELEPHONE. You may redeem your shares in a direct
registered account by calling 1-800-872-5365 (617-328-5000 from
outside the United States), subject to a $25,000 limitation. You
may not redeem shares held through an IRA by telephone. You may
be responsible for any fraudulent telephone order in your account
as long as State Street or the Fund follows reasonable procedures
to protect against unauthorized transactions. You may request
that redemption proceeds be mailed to you by check (if your
address has not changed in the prior 30 days), forwarded to you
by bank wire or invested in another mutual fund advised by the
Adviser (see "Exchange of Shares" below).
1. Telephone Redemption By Check. The Fund will make checks
payable to the name in which the account is registered and
normally will mail the check to the address of record within
seven days.
2. Telephone Redemption By Wire. The Fund accepts telephone
requests for wire redemption in amounts of at least $1,000.
The Fund will send a wire to either a bank designated on
your subscription order form or on a subsequent letter with
a guaranteed signature. The proceeds are normally wired on
the next Business Day.
o THROUGH THE AUTOMATIC CASH WITHDRAWAL PLAN. You may
automatically redeem shares on a monthly, quarterly or annual
basis if you have at least $10,000 in your account and if your
account is directly registered with State Street. If you redeem
Class B or Class C shares under this plan, you must pay the
applicable CDSC. Please call your broker for more information.
o THROUGH INVOLUNTARY REDEMPTION. The Fund may redeem all shares
in your account (other than an IRA account) if their value falls
below $1,000 as a result of redemptions (but not as a result of a
decline in net asset value). You will be notified in writing and
allowed 30 days to increase the value of your shares to at least
$1,000.
REDEMPTION PROCEEDS. If you request redemption proceeds by check, the Fund
will normally mail the check to you within seven days after it receives
your redemption request. If you purchased your Fund shares by check, you
may not redeem shares until the check clears, which may take up to 15 days
following purchase.
The Fund may pay to you your redemption proceeds wholly or partly in
portfolio securities. Payments would be made in portfolio securities,
however, only in the rare instance that the Fund's Board of Trustees
believes that it would be in the Fund's best interest not to pay redemption
proceeds in cash.
EXCHANGES OF SHARES
You may exchange shares of the Fund you hold for shares of the same class
of another fund managed by the Adviser or its affiliates based on their
relative net asset values. To obtain a list of the funds whose shares you
may acquire through exchange call your broker. Class B and Class C shares
will continue to age from the date of the original purchase of such shares
and will assume the CDSC rate they had at the time of exchange. You may
also exchange your shares for shares of a money market fund managed by the
Adviser or its affiliates, without imposition of any CDSC at the time of
exchange. Upon subsequent redemption from such money market funds or the
Fund (after re-exchange into the Fund), such shares will be subject to the
CDSC calculated by excluding the time such shares were held in the money
market fund.
In effecting an exchange:
o you must meet the minimum purchase requirements for the fund
whose shares you purchase through exchange.
o if you are exchanging into Class A shares of a fund with a higher
sales charge, you must pay the difference at the time of
exchange.
o you may realize a taxable gain or loss.
o you should read the prospectus of the fund whose shares you are
purchasing (call 1-800-GABELLI (1-800-422-3554) to obtain the
prospectus).
o you should be aware that brokers may charge a fee for handling an
exchange for you.
You may exchange share by telephone, by mail or through a broker-dealer.
o Exchanges by Telephone. You may give exchange instructions by
telephone by calling your broker. You may not exchange shares
by telephone if you hold share certificates.
o Exchanges by Mail. You may send a written request for exchanges
to: The Gabelli Funds, P.O. Box 8308, Boston, MA 02266-8308.
State your name, your account number, the dollar value or number
of shares you wish to exchange, the name and class of the fund
whose shares you wish to exchange, and the name of the funds
whose shares you wish to acquire.
We may modify or terminate the exchange privilege at any time. You will be
given notice 60 days prior to any material change in the exchange
privilege.
PRICING OF FUND SHARES
The Fund's net asset value per share is calculated on each Business Day.
The NYSE is currently scheduled to be closed on New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas and on the
preceding Friday or subsequent Monday when a holiday falls on a Saturday or
Sunday, respectively.
The Fund's net asset value is calculated separately for each class. It is
determined as of the close of regular trading on the NYSE, normally 4:00
p.m., New York time. Net asset value is computed by dividing the value of
the Fund's net assets (i.e. the value of its securities and other assets
less its liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the total number of its shares outstanding at
the time the determination is made. The Fund uses market quotations in
valuing its portfolio securities. Short-term investments that mature in 60
days or less are valued at amortized cost, which the Trustees of the Fund
believes represents fair value.
The Fund may from time to time hold securities that are primarily listed on
foreign exchanges. Such securities may trade on days when the Fund does
not price its shares. Therefore, the Fund's value may change on days when
you are not able to purchase or redeem Fund shares.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions may differ for different classes of shares.
Dividends from net investment income and distributions of net realized
capital gains, if any, will be paid at least annually. Shareholders may
have dividends or capital gains distributions that are declared by the Fund
automatically reinvested at net asset value in additional shares of the
Fund. You will make an election to receive dividends and distributions in
cash or Fund shares at the time you purchase your shares. You may change
this election by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution. There are no sales
or other charges in connection with the reinvestment of dividends and
capital gains distributions. There is no fixed dividend rate, and there
can be no assurance that the Fund will pay any dividends or realize any
capital gains.
TAX INFORMATION
The Fund expects that its distributions will consist primarily of net
investment income and net realized capital gains. Dividends out of net
investment income and distributions of net realized short-term capital
gains are taxable to you as ordinary income. Distributions of net long-
term capital gains are taxable to you at long-term capital gain rates. The
Fund's distributions, whether paid in cash or reinvested in Fund shares,
generally will be subject to federal, state or local taxes. An exchange of
the Fund's shares for shares of another fund will be treated for tax
purposes as a sale of the Fund's shares, and any gain you realize on such a
transaction generally will be taxable. Foreign shareholders generally will
be subject to a federal withholding tax.
This summary of tax consequences is intended for general information only.
You should consult a tax adviser concerning the tax consequences of your
investment in the Fund.
FINANCIAL HIGHLIGHTS
The Class A, Class B and Class C shares of the Fund have not previously
been offered and therefore do not have previous financial history.
THE GABELLI BLUE CHIP VALUE FUND
ADDITIONAL INFORMATION.
A Statement of Additional Information dated ________, 1999 (the "SAI")
includes additional information about the Fund. The SAI is incorporated by
reference into this Prospectus and, therefore, is legally a part of this
Prospectus.
SEMI-ANNUAL REPORTS.
Information about the Fund's investments will be available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its
fiscal year.
INQUIRIES.
You may make inquiries about the Fund, or obtain a copy of the SAI or of
the annual or semi-annual reports without charge, by calling your broker or
1-800-GABELLI (1-800-422-3554).
You can review and copy information about the Fund (including the SAI) at
the SEC Public Reference Room in Washington, DC (for information call 1-
800-SEC-0330). Such information is also available on the SEC's Internet
site at http://www.sec.gov. You may request documents by mail from the
SEC, upon payment of a duplicating fee, by writing to the Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009.
Investment Company Act File No. 811-____
THE GABELLI BLUE CHIP VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
______________, 1999
This Statement of Additional Information (the "SAI"), which is not a
prospectus, describes the Gabelli Blue Chip Value Fund. The SAI should be
read in conjunction with the Fund's Prospectuses for Class A Shares, Class
B Shares, Class C Shares and Class AAA Shares dated __________, 1999. For
a free copy of the Prospectuses, please contact the Fund at the address,
telephone number or Internet Web site printed below.
One Corporate Center
Rye, New York 10580-1434
Telephone 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT STRATEGIES AND RISKS . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . .
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . .
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . .
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPUTATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . .
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF THE FUND'S SHARES . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX-1
GENERAL INFORMATION
The Fund is a diversified, open-end, management investment company.
The Fund was organized as a business trust under the laws of the State of
Delaware on May 13, 1999.
INVESTMENT STRATEGIES AND RISKS
The Prospectus discusses the investment objective of the Fund and the
principal strategies to be employed to achieve that objective. This
section contains supplemental information concerning certain types of
securities and other instruments in which the Fund may invest, additional
strategies that the Fund may utilize and certain risks associated with such
investments and strategies.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities when it appears to the
Adviser that it may not be prudent to be fully invested in common stocks.
In evaluating a convertible security, the Adviser places primary emphasis
on the attractiveness of the underlying common stock and the potential for
capital appreciation through conversion. The Fund will normally purchase
only investment grade, convertible debt securities having a rating of, or
equivalent to, at least "BBB" (which securities may have speculative
characteristics) by Standard & Poor's Rating Service ("S&P") or, if
unrated, judged by the Adviser to be of comparable quality. However, the
Fund may also invest up to 25% of its assets in more speculative
convertible debt securities.
Convertible securities may include corporate notes or preferred stock
but are ordinarily a long-term debt obligation of the issuer convertible at
a stated exchange rate into common stock of the issuer. As with all debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates
decline. Convertible securities generally offer lower interest or dividend
yields than non-convertible securities of similar quality. However, when
the market price of the common stock underlying a convertible security
exceeds the conversion price, the price of the convertible security tends
to reflect the value of the underlying common stock. As the market price
of the underlying common stock declines, the convertible security tends to
trade increasingly on a yield basis, and thus may not depreciate to the
same extent as the underlying common stock. Convertible securities rank
senior to common stocks on an issuer's capital structure and are
consequently of higher quality and entail less risk than the issuer'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.
In selecting convertible securities for the Fund, the Adviser relies
primarily on its own evaluation of the issuer and the potential for capital
appreciation through conversion. It does not rely on the rating of the
security or sell because of a change in rating absent a change in its own
evaluation of the underlying common stock and the ability of the issuer to
pay principal and interest or dividends when due without disrupting its
business goals. Interest or dividend yield is a factor only to the extent
it is reasonably consistent with prevailing rates for securities of similar
quality and thereby provides a support level for the market price of the
security. The Fund will purchase the convertible securities of highly
leveraged issuers only when, in the judgment of the Adviser, the risk of
default is outweighed by the potential for capital appreciation.
The issuers of debt obligations having speculative characteristics may
experience difficulty in paying principal and interest when due in the
event of a downturn in the economy or unanticipated corporate developments.
The market prices of such securities may become increasingly volatile in
periods of economic uncertainty. Moreover, adverse publicity or the
perceptions of investors over which the Adviser has no control, whether or
not based on fundamental analysis, may decrease the market price and
liquidity of such investments. Although the Adviser will attempt to avoid
exposing the Fund to such risks, there is no assurance that it will be
successful or that a liquid secondary market will continue to be available
for the disposition of such securities.
DEBT SECURITIES
The Fund may invest up to 25% of its assets in low rated and unrated
corporate debt securities (often referred to as "junk bonds"), although the
Fund does not expect to invest more than 10% of its assets in such
securities. Corporate debt securities which are either unrated or have a
predominantly speculative rating may present opportunities for significant
long-term capital appreciation if the ability of the issuer to repay
principal and interest when due is underestimated by the market or the
rating organizations. Because of its perceived credit weakness, the issuer
is generally required to pay a higher interest rate and/or its debt
securities may be selling at a significantly lower market price than the
debt securities of issuers actually having similar strengths. When the
inherent value of such securities is recognized, the market value of such
securities may appreciate significantly. The Adviser believes that its
research on the credit and balance sheet strength of certain issuers may
enable it to select a limited number of corporate debt securities which, in
certain markets, will better serve the objective of capital appreciation
than alternative investments in common stocks. Of course, there can be no
assurance that the Adviser will be successful. In its evaluation, the
Adviser will not rely exclusively on ratings and the receipt of income is
only an incidental consideration.
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Rating Service generally represent the opinions of those organizations as
to the quality of the securities that they rate. Such ratings, however,
are relative and subjective, are not absolute standards of quality and do
not evaluate the market risk of the securities. Although the Adviser uses
these ratings as a criterion for the selection of securities for the Fund,
the Adviser also relies on its independent analysis to evaluate potential
investments for the Fund. See Appendix A "Description of Corporate Bond
Ratings."
As in the case of the convertible debt securities discussed above, low
rated and unrated corporate debt securities are generally considered to be
more subject to default and therefore significantly more speculative than
those having an investment grade rating. They also are more subject to
market price volatility based on increased sensitivity to changes in
interest rates and economic conditions or the liquidity of their secondary
trading market. The Fund does not intend to purchase debt securities for
which a liquid trading market does not exist but there can be no assurance
that such a market will exist for the sale of such securities.
INVESTMENTS IN WARRANTS AND RIGHTS
Warrants basically are options to purchase equity securities at a
specified price valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and
warrants have no voting rights, receive no dividends and have no rights
with respect to the assets of the issuer.
The Fund may invest in warrants and rights (other than those acquired
in units or attached to other securities) but will do so only if the
underlying equity securities are deemed appropriate by the Adviser for
inclusion in the Fund's portfolio.
Investing in rights and warrants can provide a greater potential for
profit or loss than an equivalent investment in the underlying security,
and thus can be a speculative investment. The value of a right or warrant
may decline because of a decline in the value of the underlying security,
the passage of time, changes in interest rates or in the dividend or other
policies of the Fund whose equity underlies the warrant or a change in the
perception as to the future price of the underlying security, or any
combination thereof. Rights and warrants generally pay no dividends and
confer no voting or other rights other than to purchase the underlying
security.
INVESTMENT IN ILLIQUID SECURITIES
The Fund will not invest, in the aggregate, more than 15% of its net
assets in illiquid securities. These securities include securities which
are restricted for public sale, securities for which market quotations are
not readily available, and repurchase agreements maturing or terminable in
more than seven days. Securities freely salable among qualified
institutional investors pursuant to Rule 144A under the Securities Act of
1933, as amended, and as adopted by the SEC, may be treated as liquid if
they satisfy liquidity standards established by the Board of Trustees. The
continued liquidity of such securities is not as well assured as that of
publicly traded securities, and accordingly, the Board of Trustees will
monitor their liquidity.
CORPORATE REORGANIZATIONS
In general, securities of companies engaged in reorganization
transactions sell at a premium to their historic market price immediately
prior to the announcement of the tender offer or reorganization proposal.
However, the increased market price of such securities 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; significantly undervalues the securities,
assets or cash to be received by shareholders of the prospective portfolio
company as a result of the contemplated transaction; or 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 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 as well as the
dynamic of the business climate when the offer or proposal is in progress.
In making such investments, the Fund will not violate any of its
diversification requirements or investment restrictions (see below,
"Investment Restrictions") including the requirements that, except for the
investment of up to 25% of its assets in any one company or industry, not
more than 5% of its assets may be invested in the securities of any issuer.
Since such investments are ordinarily short term in nature, they will tend
to increase the Fund's portfolio turnover ratio thereby increasing its
brokerage and other transaction expenses. The Adviser intends to select
investments of the type described which, in its view, have a reasonable
prospect of capital appreciation which is significant in relation to both
the risk involved and the potential of available alternate investments.
WHEN ISSUED, DELAYED DELIVERY SECURITIES & FORWARD COMMITMENTS
The Fund is authorized to buy and sell when issued securities as an
additional investment strategy in furtherance of its investment objectives.
In utilizing this strategy, the Fund may enter into forward
commitments for the purchase or sale of securities, including on a "when
issued" or "delayed delivery" basis in excess of customary settlement
periods for the type of securities involved. 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 segregate cash or liquid securities with
its custodian in an aggregate amount at least equal to the amount of its
outstanding forward commitments.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with "primary dealers"
in U.S. Government securities and member banks of the Federal Reserve
System which furnish collateral at least equal in value or market price to
the amount of their repurchase obligation. In a repurchase agreement, an
investor (e.g., the Fund) purchases a debt security from a seller which
undertakes to repurchase the security at a specified resale price on an
agreed future date (ordinarily a week or less). The resale price generally
exceeds the purchase price by an amount which reflects an agreed-upon
market interest rate for the term of the repurchase agreement.
The Fund's risk is primarily that, if the seller defaults, the
proceeds from the disposition of underlying securities and other collateral
for the seller's obligation are less than the repurchase price. If the
seller becomes bankrupt, the Fund might be delayed in selling the
collateral. Under the Investment Company Act of 1940, as amended (the
"1940 Act"), repurchase agreements are considered loans. Repurchase
agreements usually are for short periods, such as one week or less, but
could be longer. Except for repurchase agreements for a period of a week
or less in respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, not more than 15% of the
Fund's total assets may be invested in repurchase agreements. In
addition, the Fund will not enter into repurchase agreements of a duration
of more than seven days if, taken together with restricted securities and
other securities for which there are no readily available quotations, more
than 15% of its total assets would be so invested. These percentage
limitations are fundamental and may not be changed without shareholder
approval.
BORROWING
The Fund may borrow money (1) for short-term credits from banks as may
be necessary for the clearance of portfolio transactions, and (2) from
banks for temporary or emergency purposes, including the meeting of
redemption requests. Borrowing for any purpose (including redemptions) may
not, in the aggregate, exceed 15% of the value of the Fund's total assets.
Borrowing for purposes other than meeting redemptions may not exceed 5% of
the value of the Fund's total assets at the time the borrowing is made.
The Fund will not purchase any portfolio securities at any time its
borrowings exceed 5% of its assets. Not more than 20% of the total assets
of the Fund may be used as collateral in connection with the borrowings
described above.
SHORT SALES
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. 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 the sales. However, short sales "against the box" are not
subject to any limitation.
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 security
convertible into, or exchangeable for, the security.
To secure its obligations to deliver the securities sold short, the
Fund will deposit in escrow in a separate account with the Fund's
custodian, State Street Bank and Trust Company ("State Street"), an amount
at least equal to the securities sold short or securities convertible into,
or exchangeable for, the securities. The Fund may close out a short
position by purchasing and delivering an equal amount of 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.
OPTIONS
The Fund may, from time to time, purchase or sell (that is, write)
listed call or put options on securities as a means of achieving additional
return or of hedging the value of the Fund's portfolio. The Fund may write
covered call options in an amount not to exceed 25% of total assets. 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. A call option
is a contract that, in return for a premium, gives the holder of the option
the right to buy from the writer 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 the reverse of a call
option, giving the holder the right to sell the security to the writer and
obligating the writer to purchase the underlying security from the holder.
A call option is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon
conversion or exchange of other securities held in its portfolio. A call
option is also covered if the Fund holds a call on the same security as the
call written where the exercise price of the call held is (1) equal to or
less than the exercise price of the call written or (2) 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 high grade short-term
obligations in a segregated account held with its custodian. A put option
is "covered" if the Fund maintains cash or other liquid portfolio
securities with a value equal to the exercise price in a segregated account
held with its custodian, or else holds a put on the same security 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.
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.
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.
In addition to options on securities, the Fund may also purchase and
sell call and put options on securities indexes. A stock index reflects in
a single number the market value of many different stocks. Relative values
are assigned to the stocks included in an index and the index fluctuates
with changes in the market values of the stocks. The options give the
holder the right to receive a cash settlement during the term of the option
based on the difference between the exercise price and the value of the
index. By writing a put or call option on a securities index, the Fund is
obligated, in return for the premium received, to make delivery of this
amount. The Fund may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or it may
let the option expire unexercised.
The Fund may write put and call options on stock indexes for the
purposes of increasing its gross income and protecting its portfolio
against declines in the value of the securities it owns or increases in the
value of securities to be acquired. In addition, the Fund may purchase put
and call options on stock indexes in order to hedge its investments against
a decline in value or to attempt to reduce the risk of missing a market or
industry segment advance. Options or stock indexes are similar to options
on specific securities. However, because options on stock indexes do not
involve the delivery of an underlying security, the option represents the
holder's right to obtain from the writer cash in an amount equal to a fixed
multiple of the amount by which the exercise price exceeds (in the case of
a put) or is less than (in the case of a call) the closing value of the
underlying stock index on the exercise date. Therefore, while one purpose
of writing such options is to generate additional income for the Fund, the
Fund recognizes that it may be required to deliver an amount of cash in
excess of the market value of a stock index at such time as an option
written by the Fund is exercised by the holder. The writing and purchasing
of options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts
for hedging purposes depends in part on the Adviser's ability to predict
future price fluctuations and the degree of correlation between the options
and securities markets.
Use of options on securities indexes entails the risk that trading in
the options may be interrupted if trading in certain securities included in
the index is interrupted. The Fund will not purchase these options unless
the Adviser is satisfied with the development, depth and liquidity of the
market and the Adviser believes the options can be closed out.
Price movements in the Fund's portfolio may not correlate precisely
with movements in the level of an index and, therefore, the use of options
on indexes cannot serve as a complete hedge and will depend, in part, on
the ability of the Adviser to predict correctly movements in the direction
of the stock market generally or of a particular industry. Because options
on securities indexes require settlement in cash, the Adviser may be forced
to liquidate portfolio securities to meet settlement obligations.
Although the Adviser will attempt to take appropriate measures to
minimize the risks relating to the Fund's writing of put and call options,
there can be no assurance that the Fund will succeed in any option-writing
program it undertakes.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities to broker-dealers or
financial institutions provided that the loans are callable at any time by
the Fund. Loans by the Fund, if and when made, (1) will be collateralized
in accordance with applicable regulatory requirements and (2) will be
limited so that the value of all loaned securities does not exceed 33% of
the value of the Fund's total assets. The Fund, however, currently intends
to limit the value of all loaned securities to no more than 5% of the
Fund's total assets.
The Fund lends its portfolio securities in order to generate revenue
to defray certain operating expenses. The advantage of this practice 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.
A loan may generally be terminated by the borrower on one business
day's 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, loans of
portfolio securities will only be made to firms deemed by the Fund's
management to be creditworthy and when the income that can be earned from
the loans justifies the attendant risks. The Board of Trustees 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 party to whom the loan was made
petitions for bankruptcy or becomes subject to the U.S. 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 could suffer a loss.
When voting or consent rights that 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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
The Fund has authorized the Adviser to enter into futures contracts
that are traded on a U.S. exchange or board of trade, provided, however,
that the Fund will not enter into futures contacts for which the aggregate
initial margins and premiums would exceed 5% of the fair market value of
the Fund's assets. Although the Fund has no current intention of using
options on futures contracts, the Fund may at some future date authorize
the Adviser to enter into options on futures contracts, subject to the
limitations stated in the preceding sentence. These investments will be
made by the Fund solely for the purpose of hedging against changes in the
value of its portfolio securities and in the value of securities it intends
to purchase. Such investments will only be made if they are economically
appropriate to the reduction of risks involved in the management of the
Fund. In this regard, the Fund may enter into futures contracts or options
on futures for the purchase or sale of securities indices or other
financial instruments including but not limited to U.S. Government
securities. Futures exchanges and trading in the United States are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission.
A "sale" of a futures contract (or a "short" futures position) means
the assumption of a contractual obligation to deliver the securities
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 securities underlying
the contract at a specified price at a specified future time. Certain
futures contracts, including stock and bond index futures, are settled on a
net cash payment basis rather than by the sale and delivery of the
securities underlying the futures contracts.
No consideration will be paid or received by the Fund upon the
purchase or sale of a futures contract. Initially, the Fund will be
required to deposit with the broker an amount of cash or cash equivalents
equal to approximately 1% to 10% of the contract amount (this amount is
subject to change by the exchange or board of trade on which the contract
is traded and brokers or members of such board of trade may charge a higher
amount). This amount is known as "initial margin" and is in the nature of
a performance bond or good faith deposit on the contract. Subsequent
payments, known as "variation margin," to and from the broker will be made
daily as the price of the index or security underlying the futures contract
fluctuates. At any time prior to the expiration of a futures contract, the
portfolio may elect to close the position by taking an opposite position,
which will operate to terminate the Fund's existing position in the
contract.
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 at
a specified exercise price at any time prior to the expiration of the
option. Upon exercise of an option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied
by delivery of the accumulated balance in the writer's futures margin
account attributable to that contract, which represents the amount by which
the market price of the futures contract exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option
on futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option purchased is fixed at
the point of sale, there are no daily cash payments by the purchaser to
reflect changes in the value of the underlying contract; however, the value
of the option does change daily and that change would be reflected in the
net asset value of the portfolio.
As noted above, the Fund may authorize the Adviser to use such
instruments depending upon market conditions prevailing at such time and
the perceived investment needs of the Fund. However, in no event may the
Fund enter into futures contracts or options on futures contracts if,
immediately thereafter, the sum of the amount of margin deposits on the
Fund's existing futures contracts and premiums paid for options would
exceed 5% of the value of the Fund's total assets after taking into account
unrealized profits and losses on any existing contracts. In the event the
Fund enters into long futures contracts or purchases call options, an
amount of cash, obligations of the U.S. Government and its agencies and
instrumentalities or other high grade debt securities equal to the market
value of the contract will be deposited and maintained in a segregated
account with the Fund's custodian to collateralize the positions, thereby
insuring that the use of the contract is unleveraged.
The success of hedging depends on the Adviser's ability to predict
movements in the prices of the hedged securities and market fluctuations.
The Adviser may not be able to perfectly correlate changes in the market
value of securities and the prices of the corresponding options or futures.
The Adviser may have difficulty selling or buying futures contracts and
options when it chooses and there may be certain restrictions on trading
futures contracts and options. The Fund is not obligated to pursue any
hedging strategy. While hedging can reduce or eliminate losses, it can
also reduce or eliminate gains. In addition, hedging practices may not be
available, may be too costly to be used effectively or may be unable to be
used for other reasons.
INVESTMENT RESTRICTIONS
The Fund's investment objectives and the following investment
restrictions are fundamental and may not be changed without the approval of
a majority of the Fund's shareholders, defined as the lesser of (1) 67% of
the Fund's shares present at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy, or (2) more than
50% of the Fund's outstanding shares. All other investment policies or
practices are considered by the Fund not to be fundamental and accordingly
may be changed without shareholder approval. If a percentage restriction
on investment or the use of assets set forth below is adhered to at the
time the transaction is effected, later changes in percentage resulting
from changing market values or total assets of the Fund will not be
considered a deviation from policy. Under such restrictions, the Fund may
not:
(1) 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;
(2) Invest more than 25% of the value of its total assets in any
particular industry (this restriction does not apply to obligations issued
or guaranteed by the U.S. Government or its agencies or its
instrumentalities;
(3) Make loans of its assets except for: (a) purchasing debt
obligations, (b) engaging in repurchase agreements as set forth in the
Prospectus, and (c) lending its portfolio securities consistent with
applicable regulatory requirements and as set forth in the Prospectus;
(4) Purchase securities on margin, but it may obtain such short-term
credits from banks as may be necessary for the clearance of purchase and
sales of securities;
(5) Issue senior securities, except that the Fund may borrow money
subject to the restrictions set forth in the Prospectus;
(6) Mortgage, pledge or hypothecate any of its assets except that, in
connection with permissible borrowings mentioned in restriction (5) above,
not more than 30% of the assets of the Fund (not including amounts
borrowed) may be used as collateral and except for collateral arrangements
with respect to options, futures, hedging transactions, short sales, when-
issued and forward commitment transactions and similar investment
strategies;
(7) 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;
(8) Purchase or sell commodities or commodity contracts except for
bona fide hedging, yield enhancement and risk management purposes or invest
in any oil, gas or mineral interests;
(9) Purchase real estate or interests therein, other than mortgage-
backed securities and securities of companies that invest in real estate or
interests therein; or
(10) Invest for the purpose of exercising control over management of
any company (the Fund does not view efforts to affect management or
business decisions of portfolio companies as investing for the purpose of
exercising control).
TRUSTEES AND OFFICERS
Under Delaware law, the Fund's Board of Trustees is responsible for
establishing the Fund's policies and for overseeing the management of the
Fund. The Board also elects the Fund's officers who conduct the daily
business of the Fund. The Trustees and principal officers of the Fund,
their ages and their principal occupations for the past five years, are
listed below. Unless otherwise specified, the address of each such person
is One Corporate Center, Rye, New York 10580-1434. Trustees deemed to be
"interested persons" of the Fund for purposes of the 1940 Act are indicated
by an asterisk.
Name, Address, Age and
Position(s) with Fund Principal Occupations During Past Five Years
---------------------- --------------------------------------------
Mario J. Gabelli,* 56 Chairman of the Board, Chief Executive
Trustee Officer and Chief Investment Officer of
Gabelli Asset Management Inc., (since 1999)
and Gabelli Funds, LLC, Director or Trustee
and Officer of various other investment
companies advised by Gabelli Funds, LLC and
its affiliates; Chairman of the Board and
Chief Executive Officer of Lynch Corporation
(diversified manufacturing and
communications services company) and
Director of East/West Communications Inc.
Anthony J. Colavita, 64 President and Attorney at Law in the law
Trustee firm of Anthony J. Colavita, P.C. since
1961; Director or Trustee of various other
mutual funds advised by Gabelli Funds, LLC
and its affiliates.
Vincent D. Enright, 56 Former Senior Vice President and Chief
Trustee Financial Officer of KeySpan Energy
Corporation; Director or Trustee of various
other investment companies managed by
Gabelli Funds, LLC and its affiliates
Werner J. Roeder, M.D., 58 Director of Surgery, Lawrence Hospital, and
Trustee practicing private physician. Director or
Trustee of various other mutual funds
advised by Gabelli Funds, LLC and its
affiliates.
Karl Otto Poehl,*+69 Member of the Shareholder Committee of Sal
Trustee Oppenheim Jr. & Cie (private investment
bank); Director of Gabelli Asset Management
Inc., (investment management), Zurich Allied
(insurance), and TrizecHahn Corp.; Former
President of the Deutsche Bundesbank and
Chairman of its Central Bank Council from
1980 through 1991; Director or Trustee of
all other mutual funds advised by Gabelli
Funds, LLC and its affiliates.
Bruce N. Alpert, 47 Executive Vice President and Chief Operating
Vice President and Treasurer Officer of the Adviser; President and
Director of Gabelli Advisers, Inc. and an
Officer of all funds advised by Gabelli
Funds, LLC and its affiliates.
James E. McKee, 35 Vice President and General Counsel of the
Secretary Adviser; Vice President and General Counsel
of GAMCO Investors, Inc. since 1993;
Secretary of all funds advised by Gabelli
Funds, LLC and Gabelli Advisers, Inc. since
August 1995.
________________
+ Mr. Pohl is a director of the parent company of the Adviser.
No director, officer or employee of the Adviser receives any
compensation from the Fund for serving as an officer or Trustee of the
Fund. The Fund pays each of its Trustees who is not a director, officer or
employee of the Adviser or any of their affiliates, $3,000 per annum plus
$500 per meeting attended in person or by telephone and reimburses each
Trustee for related travel and out-of-pocket expenses. The Fund also pays
each Trustee serving as a member of the Audit, Proxy or Nominating
Committees a fee of $500 per committee meeting if held on a day other than
a regularly scheduled board meeting.
COMPENSATION TABLE
(1) (2) (3)
Total Compensation
Aggregate Compensation from Registrant and Fund
from Registrant for Complex Paid to Trustees
Name of Person, Position Fiscal Year for Calendar Year
------------------------ ---------------------- ------------------------
Mario J. Gabelli $ 0 $ 0 (13)
Trustee
Anthony J. Colavita $ 0 $81,500 (16)
Trustee
Vincent D. Enright $ 0 $18,000 (6)
Trustee
Karl Otto POEhl $ 0 $102,466 (17)
Trustee
Werner J. Roeder $ 0 $25,500 (8)
Trustee
______________
* The total compensation paid to such persons during the calendar year
ending December 31, 1998 by investment companies (including the Fund)
from which such person receives compensation that are part of the same
Fund complex as the Fund, because they have common or affiliated
investment advisers. The number in parentheses represents the number
of such investment companies.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of __________, 1999, no person owned of record or beneficially 5%
or more of the Fund's outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The Adviser is a New York limited liability company which also serves
as Adviser to 12 other open-end investment companies, and 4 closed-end
investment companies with aggregate assets in excess of $8.2 billion as of
December 31, 1998. The Adviser is a registered investment adviser under
the Investment Advisers Act of 1940, as amended. Mr. Mario J. Gabelli may
be deemed a "controlling person" of the Adviser on the basis of his
controlling interest of the ultimate parent company of the Adviser. GAMCO
Investors, Inc. ("GAMCO"), a wholly-owned subsidiary of the Adviser, acts
as investment adviser for individuals, pension trusts, profit-sharing
trusts and endowments, and had aggregate assets in excess of $8.0 billion
under its management as of December 31, 1998.
Affiliates of the Adviser may, in the ordinary course of their
business, acquire for their own account or for the accounts of their
advisory clients, significant (and possibly controlling) positions in the
securities of companies that may also be suitable for investment by the
Fund. The securities in which the Fund might invest may thereby be limited
to some extent. For instance, many companies in the past several years
have adopted so-called "poison pill" or other defensive measures designed
to discourage or prevent the completion of non-negotiated offers for
control of the company. Such defensive measures may have the effect of
limiting the shares of the company which might otherwise be acquired by the
Fund if the affiliates of the Adviser or their advisory accounts have or
acquire a significant position in the same securities. However, the
Adviser does not believe that the investment activities of its affiliates
will have a material adverse effect upon the Fund in seeking to achieve its
investment objectives. Securities purchased or sold pursuant to
contemporaneous orders entered on behalf of the investment company accounts
of the Adviser or the advisory accounts managed by its affiliates for their
unaffiliated clients are allocated pursuant to principles believed to be
fair and not disadvantageous to any such accounts. In addition, all such
orders are accorded priority of execution over orders entered on behalf of
accounts in which the Adviser or its affiliates have a substantial
pecuniary interest. The Adviser may on occasion give advice or take action
with respect to other clients that differ from the actions taken with
respect to the Fund. The Fund may invest in the securities of companies
which are investment management clients of GAMCO. In addition, portfolio
companies or their officers or directors may be minority shareholders of
the Adviser or its affiliates.
Pursuant to an Investment Advisory Contract, which was approved by the
Trustees of the Fund at a meeting held on May 19, 1999 (the "Contract"),
the Adviser furnishes a continuous investment program for the Fund's
portfolio, makes the day-to-day investment decisions for the Fund, arranges
the portfolio transactions of the Fund and generally manages the Fund's
investments in accordance with the stated policies of the Fund, subject to
the general supervision of the Board of Trustees of the Fund.
Under the Contract, the Adviser also (i) provides the Fund with the
services of persons competent to perform such supervisory, administrative,
and clerical functions as are necessary to provide effective administration
of the Fund, including maintaining certain books and records and overseeing
the activities of the Fund's Custodian and Transfer Agent; (ii) oversees
the performance of administrative and professional services to the Fund by
others, including the Fund's Sub-Administrator, Custodian, Transfer Agent
and Dividend Disbursing Agent, as well as accounting, auditing and other
services performed for the Fund; (iii) provides the Fund with adequate
office space and facilities; (iv) prepares, but does not pay for, the
periodic updating of the Fund's registration statement, Prospectus and
Additional Statement, including the printing of such documents for the
purpose of filings with the SEC and state securities administrators, the
Fund's tax returns, and reports to the Fund's shareholders and the SEC; (v)
calculates the net asset value of shares in the Fund; (vi) prepares, but
does not pay for, all filings under the securities or "Blue Sky" laws of
such states or countries as are designated by the Distributor, which may be
required to register or qualify, or continue the registration or
qualification, of the Fund and/or its shares under such laws; and (vii)
prepares notices and agendas for meetings of the Fund's Board of Trustees
and minutes of such meetings in all matters required by the Act to be acted
upon by the Board.
The Contract provides that absent willful misfeasance, bad faith,
gross negligence or reckless disregard of its duty, the Adviser and its
employees, officers, directors and controlling persons are not liable to
the Fund or any of its investors for any act or omission by the Adviser or
for any error of judgment or for losses sustained by the Fund. However,
the Contract provides that the Fund is not waiving any rights it may have
with respect to any violation of law which cannot be waived. The Contract
also provides indemnification for the Adviser and each of these persons for
any conduct for which they are not liable to the Fund. The Contract in no
way restricts the Adviser from acting as Adviser to others. The Fund has
agreed by the terms of the Contract that the word "Gabelli" in its name is
derived from the name of the Adviser which in turn is derived from the name
of Mario J. Gabelli; that such name is the property of the Adviser for
copyright and/or other purposes; and that, therefore, such name may freely
be used by the Adviser for other investment companies, entities or
products. The Fund has further agreed that in the event that for any
reason, the Adviser ceases to be its investment adviser, the Fund will,
unless the Adviser otherwise consents in writing, promptly take all steps
necessary to change its name to one which does not include "Gabelli."
By its terms, the Contract will remain in effect from year to year,
provided each such annual continuance is specifically approved by the
Fund's Board of Trustees or by a "majority" (as defined in the 1940 Act)
vote of its shareholders and, in either case, by a majority vote of the
Trustees who are not parties to the Contract or interested persons of any
such party, cast in person at a meeting called specifically for the purpose
of voting on the Contract. The Contract is terminable without penalty by
the Fund on sixty days' written notice when authorized either by majority
vote of its outstanding voting shares or by a vote of a majority of its
Board of Trustees, or by the Adviser on sixty days' written notice, and
will automatically terminate in the event of its "assignment" as defined by
the 1940 Act.
SUB-ADMINISTRATOR
First Data Investor Services Group, Inc. (the "Sub-Administrator"), a
subsidiary of First Data Corporation which is located at Exchange Place,
Boston, Massachusetts 02109, serves as Sub-Administrator to the Fund
pursuant to a Sub-Administration Agreement with the Adviser (the "Sub-
Administration Agreement"). Under the Sub-Administration Agreement, the
Sub-Administrator (a) assists in supervising all aspects of the Fund's
operations except those performed by the Adviser under its advisory
agreement with the Fund; (b) supplies the Fund with office facilities
(which may be in the Sub-Administrator's own offices), statistical and
research data, data processing services, clerical, accounting and
bookkeeping services, including, but not limited to, the calculation of the
net asset value of shares in the Fund, internal auditing and legal
services, internal executive and administrative services, and stationery
and office supplies; (c) prepares and distributes materials for all Fund
Board of Trustees' Meetings including the mailing of all Board materials
and collates the same materials into the Board books and assists in the
drafting of minutes of the Board Meetings; (d) prepares reports to Fund
shareholders, tax returns and reports to and filings with the SEC and state
"Blue Sky" authorities; (e) calculates the Fund's net asset value per
share, provides any equipment or services necessary for the purpose of
pricing shares or valuing the Fund's investment portfolio and, when
requested, calculates the amounts permitted for the payment of distribution
expenses under any distribution plan adopted by the Fund; (f) provides
compliance testing of all Fund activities against applicable requirements
of the 1940 Act and the rules thereunder, the Code, and the Fund's
investment restrictions; (g) furnishes to the Adviser such statistical and
other factual information and information regarding economic factors and
trends as the Adviser from time to time may require; and (h) generally
provides all administrative services that may be required for the ongoing
operation of the Fund in a manner consistent with the requirements of the
1940 Act.
For the services it provides, the Adviser pays the Sub-Administrator
an annual fee based on the value of the aggregate average daily net assets
of all funds under its administration managed by the Adviser as follows:
up to $10 billion - .0275%; $10 billion to $15 billion - .0125%; over $15
billion - .001%. The Sub-Administrator's fee is paid by the Adviser and
will result in no additional expenses to the Fund.
COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, serves as the Fund's legal counsel.
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP, independent accountants, have been selected to
audit and express their opinions on the Fund's annual financial statements.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, MA 02110 is the Custodian for the Fund's cash and
securities. Boston Financial Data Services, Inc. ("BFDS"), an affiliate of
State Street located at the BFDS Building, Two Heritage Drive, Quincy,
Massachusetts 02171, performs the services of transfer agent and dividend
disbursing agent for the Fund. Neither BFDS nor State Street assists in or
is responsible for investment decisions involving assets of the Fund.
DISTRIBUTOR
To implement the Fund's 12b-1 Plans, the Fund has entered into a
Distribution Agreement with the Gabelli & Company, Inc., a New York
corporation which is an indirect majority owned subsidiary of Gabelli Asset
Management Inc., having principal offices located at One Corporate Center,
Rye, New York 10580. The Distributor continuously solicits offers for the
purchase of shares of the Fund on a best efforts basis.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (a "Plan") pursuant to
Rule 12b-1 under the 1940 Act on behalf of each of the Class AAA Shares,
the Class A Shares, the Class B Shares and the Class C Shares. Payments
may be made by the Fund under each Plan for the purpose of financing any
activity primarily intended to result in the sales of shares of the class
to which such Plan relates as determined by the Board of Trustees. Such
activities typically include advertising, compensation for sales and
marketing activities of the Distributor and other banks, broker-dealers and
service providers; shareholder account servicing; production and
dissemination of prospectus and sales and marketing materials; and capital
or other expenses of associated equipment, rent, salaries, bonuses,
interest and other overhead. To the extent any activity is one which the
Fund may finance without a distribution plan, the Fund may also make
payments to finance such activity outside of the Plan and not be subject to
its limitations. Payments under the Plan are not solely dependent on
distribution expenses actually incurred by the Distributor.
Under its terms, each Plan remains in effect so long as its
continuance is specifically approved at least annually by vote of the
Fund's Board of Trustees, including a majority of the Trustees who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Fund ("Independent Trustees"). No Plan
may be amended to increase materially the amount to be spent for services
provided by the Distributor thereunder without shareholder approval, and
all material amendments of any Plan must also be approved by the Trustees
in the manner described above. Each Plan may be terminated at any time,
without penalty, by vote of a majority of the Independent Trustees, or by a
vote of a majority of the outstanding voting securities of the Fund (as
defined in the 1940 Act). Under each Plan, the Distributor will provide
the Trustees periodic reports of amounts expanded under such Plan and the
purpose for which expenditures were made. The Plan compensates the
Distributor regardless of expenses.
No interested person of the Fund or any Independent Trustee of the
Fund had a direct or indirect financial interest in the operation of any
Plan or related agreements.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Contract, the Adviser is authorized on behalf of the Fund to
employ brokers to effect the purchase or sale of portfolio securities with
the objective of obtaining prompt, efficient and reliable execution and
clearance of such transactions at the most favorable price obtainable
("best execution") at reasonable expense. The Adviser is permitted to (1)
direct Fund portfolio brokerage to Gabelli & Company, a broker-dealer
affiliate of the Adviser; (2) pay commissions to brokers other than Gabelli
& Company which are higher than might be charged by another qualified
broker to obtain brokerage and/or research services considered by the
Adviser to be useful or desirable for its investment management of the Fund
and/or other advisory accounts under the management of the Adviser and any
investment adviser affiliated with it; and (3) consider the sales of shares
of the Fund by brokers other than Gabelli & Company as a factor in its
selection of brokers for Fund portfolio transactions. Transactions in
securities other than those for which a securities exchange is the
principal market are generally executed through a brokerage firm and a
commission is paid whenever it appears that the broker can obtain a more
favorable overall price. In general, there may be no stated commission on
principal transactions in over-the-counter securities, but the prices of
such securities may usually include undisclosed commissions or markups.
When consistent with the objective of obtaining best execution, Fund
brokerage may be directed to brokers or dealers which furnish brokerage or
research services to the Fund or the Adviser of the type described in
Section 28(e) of the Securities Exchange Act of 1934, as amended. The
commissions charged by a broker furnishing such brokerage or research
services may be greater than that which another qualified broker might
charge if the Adviser determines, in good faith, that the amount of such
greater commission is reasonable in relation to the value of the additional
brokerage or research services provided by the executing broker, viewed in
terms of either the particular transaction or the overall responsibilities
of the Adviser or its advisory affiliates to the accounts over which they
exercise investment discretion. Since it is not feasible to do so, the
Adviser need not attempt to place a specific dollar value on such services
or the portion of the commission which reflects the amount paid for such
services but must be prepared to demonstrate a good faith basis for its
determinations.
Investment research obtained by allocations of Fund brokerage is used
to augment the scope and supplement the internal research and investment
strategy capabilities of the Adviser but does not reduce the overall
expenses of the Adviser to any material extent. Such investment research
may be in written form or through direct contact with individuals and
includes information on particular companies and industries as well as
market, economic or institutional activity areas. Research services
furnished by brokers through which the Fund effects securities transactions
are used by the Adviser and its advisory affiliates in carrying out their
responsibilities with respect to all of their accounts over which they
exercise investment discretion. Such investment information may be useful
only to one or more of the other accounts of the Adviser and its advisory
affiliates, and research information received for the commissions of those
particular accounts may be useful both to the Fund and one or more of such
other accounts.
Neither the Fund nor the Adviser has any agreement or legally binding
understanding with any broker regarding any specific amount of brokerage
commissions which will be paid in recognition of such services. However,
in determining the amount of portfolio commissions directed to such
brokers, the Adviser does consider the level of services provided.
The Adviser may also place orders for the purchase or sale of
portfolio securities with Gabelli & Company when it appears that, as an
introducing broker or otherwise, Gabelli & Company can obtain a price and
execution which is at least as favorable as that obtainable by other
qualified brokers. As required by Rule 17e-1 under the 1940 Act, the Board
of Trustees has adopted "Procedures" which provide that commissions paid to
Gabelli & Company on stock exchange transactions may not exceed that which
would have been charged by another qualified broker or member firm able to
effect the same or a comparable transaction at an equally favorable price
and contains a schedule setting forth maximum commission charges for such
transactions designed to reflect that standard. Rule 17e-1 and the
Procedures contain requirements that the Board, including its "independent"
Trustees, conduct periodic compliance reviews of such brokerage allocations
and review such schedule at least annually for its continuing compliance
with the foregoing standard. The Adviser and Gabelli & Company are also
required to furnish reports and maintain records in connection with such
reviews.
To obtain the best execution of portfolio transactions on the New York
Stock Exchange ("NYSE"), Gabelli & Company controls and monitors the
execution of such transactions on the floor of the NYSE through independent
"floor brokers" or through the Designated Order Turnaround System of the
NYSE. Such transactions are then cleared, confirmed to the Fund for the
account of Gabelli & Company, and settled directly with the Custodian of
the Fund by a clearing house member firm which remits the commission less
its clearance charges to Gabelli & Company. Pursuant to an agreement with
the Fund, Gabelli & Company pays all charges incurred for such services and
reports at least quarterly to the Board the amount of such expenses and
commissions. The net compensation realized by Gabelli & Company for its
brokerage services is subject to the approval of the Board and the
Independent Trustees of the Fund who must approve the continuance of the
arrangement at least annually. Commissions paid by the Fund pursuant to
the arrangement may not exceed the commission level specified by the
Procedures described above. Gabelli may also effect Fund portfolio
transactions in the same manner and pursuant to the same arrangements on
other national securities exchanges which adopt direct order access rules
similar to those of the NYSE.
RETIREMENT PLANS
Under the Internal Revenue Code of 1986, as amended (the "Code"),
individuals may make wholly or partly tax deductible IRA contributions of
up to $2,000 annually, depending on whether they are active participants in
an employer-sponsored retirement plan and on their income level. However,
dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual
with a non-working spouse may establish a separate IRA for the spouse under
the same conditions and contribute a combined maximum of $4,000 annually to
both IRAs provided that no more than $2,000 may be contributed to the IRA
of either spouse. Other provisions permit additional IRA contributions
which are not tax deductible but the tax on reinvested dividends and
distributions is deferred while held in the account. There are also rules
on the amount of tax deductible contributions which may be made to other
retirement plans.
Investors may be eligible to make contributions to another type of
individual retirement account (a "Roth IRA"). An investor can open a Roth
IRA if he or she meets certain income limits specified in the Code. Any
contributions made by an investor to a Roth IRA are nondeductible for U.S.
Federal income tax purposes. Distributions from a Roth IRA are not
included in the investor's gross income and are not subject to a 10%
penalty for early withdrawal if the distributions are made after the end of
the five-year period beginning with the first tax year in which the
investor made a contribution to the Roth IRA and the distributions meet
other criteria set forth in the Code. The maximum annual aggregate
contribution that can be made to IRAs and Roth IRAs is $2,000. In
addition, certain low and middle-income investors may open an education
individual retirement account (an "Education IRA"). Eligible individuals
are permitted to contribute up to $500 per year per beneficiary under 18
years old to an Education IRA. The minimum initial investment for an
Education IRA through the Fund is $250. A distribution from an Education
IRA is generally excludable from gross income to the extent that such
distribution does not exceed qualified higher education expenses incurred
by the beneficiary during the year in which the distribution is made.
Investors should be aware that they may be subject to penalties or
additional tax on contributions to or withdrawals from IRAs or other
retirement plans which are not permitted by the applicable provisions of
the Code and prior to a withdrawal, shareholders may be required to certify
their age and awareness of such restrictions in writing. Persons desiring
information concerning investments through IRAs or other retirement plans
should write or telephone the Distributor.
REDEMPTION OF SHARES
Payment of the redemption price for shares redeemed may be made either
in cash or in portfolio securities (selected in the discretion of the Board
of Trustees of the Fund and taken at their value used in determining the
Fund's net asset value per share as described under "Computation of Net
Asset Value"), or partly in cash and partly in portfolio securities.
However, payments will be made wholly in cash unless the Board of Trustees
believes that economic conditions exist which would make such a practice
detrimental to the best interests of the Fund. If payment for shares
redeemed is made wholly or partly in portfolio securities, brokerage costs
may be incurred by the investor in converting the securities to cash. The
Fund will not distribute in-kind portfolio securities that are not readily
marketable. The Fund has filed a formal election with the SEC pursuant to
which the Fund will only effect a redemption in portfolio securities where
the particular shareholder of record is redeeming more than $250,000 or 1%
of the Fund's total net assets, whichever is less, during any 90 day
period. In the opinion of the Fund's management, however, the amount of a
redemption request would have to be significantly greater than $250,000
before a redemption wholly or partly in portfolio securities would be made.
Cancellation of purchase orders for Fund shares (as, for example, when
checks submitted to purchase shares are returned unpaid) causes a loss to
be incurred when the net asset value of the Fund shares on the date of
cancellation is less than on the original date of purchase. The investor
is responsible for such loss, and the Fund may reimburse itself or the
Distributor for such loss by automatically redeeming shares from any
account registered at any time in that shareholder's name, or by seeking
other redress. In the event shares held in the account of such shareholder
are not sufficient to cover such loss, the Distributor will promptly
reimburse the Fund for the amount of such unrecovered loss.
COMPUTATION OF NET ASSET VALUE
Net asset value is calculated separately for each class of the Fund.
The net asset value of Class B Shares and Class C Shares of the Fund will
generally be lower than the net asset value of Class A Shares or Class AAA
Shares as a result of the larger distribution-related fee to which Class B
Shares and Class C Shares are subject. It is expected, however, that the
net asset value per share of each class will tend to converge immediately
after the recording of dividends, if any, which will differ by
approximately the amount of the distribution and/or service fee expense
accrual differential among the classes.
For purposes of determining the Fund's net asset value per share,
readily marketable portfolio securities listed on a market subject to
governmental regulation on which trades are reported contemporaneously are
valued, except as indicated below, at the last sale price reflected at the
close of the regular trading session of the principal market for such
security on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued at the
average of the closing bid and asked prices on the principal market for
such security on such day. If no asked prices are quoted on such day, then
the security is valued at the closing bid price on the principal market for
such security on such day. If no bid or asked prices are quoted on such
day, then the security is valued by such method as the Board of Trustees
shall determine in good faith to reflect its fair market value.
All other readily marketable securities are valued at the latest
average of the bid and asked price obtained from a dealer maintaining an
active market in such security.
Debt instruments having 60 days or less remaining until maturity are
stated at amortized cost. Debt instruments having a greater remaining
maturity will be valued at the latest bid price obtainable from a dealer
which maintains an active market in the security until the maturity of the
instrument is 60 days or less when it will be valued as if purchased at the
valuation established as of the 61st day of its maturity. Listed debt
securities which are actively traded on a securities exchange may also be
valued at the last sale price in lieu of the quoted bid price of a dealer.
All other investment assets, including restricted and not readily
marketable securities, are valued under procedures established by and under
the general supervision and responsibility of the Fund's Board of Trustees
designed to reflect in good faith the fair value of such securities.
TAXATION
GENERAL
Set forth below is a discussion of certain U.S. federal income tax
issues concerning the Fund and the purchase, ownership and disposition of
Fund shares. This discussion is based upon present provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities,
all of which are subject to change, which change may be retroactive. This
discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to investors in light of their
particular circumstances. Prospective investors should consult their own
tax advisors with regard to the federal tax consequences of the purchase,
ownership, or disposition of Fund shares, as well as the tax consequences
arising under the laws of any state, foreign country, or other taxing
jurisdiction.
TAX STATUS OF THE FUND
The Fund intends to qualify and to elect to be taxed as a regulated
investment company under Subchapter M of the Code. Accordingly, the Fund
must, among other things, (a) derive in each taxable year at least 90% of
its gross income 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 derived with respect to
its business of investing in such stock, securities or currencies; and (b)
diversify its holdings so that, at the end of each fiscal quarter (i) at
least 50% of the 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 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value
of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other regulated
investment companies).
As a regulated investment company, the Fund generally is not subject
to U.S. federal income tax on income and gains that it distributes to
shareholders, if at least 90% of the Fund's 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) for the taxable year is distributed. The Fund intends to
distribute 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 equal to the sum of (1) at least 98% of
its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) at least 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, and (3) all
ordinary income and capital gains for previous years that were not
distributed during such years. To avoid application of the excise tax, the
Fund intends to make distributions in accordance with the calendar year
distribution requirement.
A distribution will be treated as paid on December 31 of a calendar
year if it is declared by the Fund in October, November or December of that
year with a record date in such a month and paid by the Fund during January
of the following year. Such a distribution will be taxable to shareholders
in the calendar year in which the distribution is declared, rather than the
calendar year in which it is received.
DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a
U.S. shareholder as ordinary income, whether paid in cash or shares.
Dividends paid by the Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received by the Fund from U.S.
corporations, may, subject to limitations, be eligible for the dividends
received deduction. However, the alternative minimum tax applicable to
corporations may reduce the value of the dividends received deduction.
The excess of net long-term capital gains over net short-term capital
losses realized, distributed and properly designated by the Fund, whether
paid in cash or reinvested in Fund shares, will generally be taxable to
shareholders as long-term gain, regardless of how long a shareholder has
held Fund shares. Net capital gains from assets held for one year or less
will be taxed as ordinary income.
Shareholders will be notified annually as to the U.S. federal tax
status of distributions, and shareholders receiving distributions in the
form of newly issued shares will receive a report as to the net asset value
of the shares received.
Investors should be careful to consider the tax implications of
buying shares of the Fund just prior to the record date of a distribution
(including a capital gain dividend). The price of shares purchased at such
a time will reflect the amount of the forthcoming distribution, but the
distribution will generally be taxable to the shareholder.
To the extent that the Fund retains any net long-term capital gains,
it may designate them as "deemed distributions" and pay a tax thereon for
the benefit of its shareholders. In that event, the shareholders report
their share of the Fund's retained realized capital gains on their
individual tax returns as if it had been received, and report a credit for
the tax paid thereon by the Fund. The amount of the deemed distribution
net of such tax is then added to the shareholder's cost basis for his
shares. Shareholders who are not subject to federal income tax or tax on
capital gains should be able to file a return on the appropriate form or a
claim for refund that allows them to recover the tax paid on their behalf.
FOREIGN TAXES
The Fund may be subject to certain taxes imposed by the countries in
which it invests or operates. The Fund will not have more than 50% of its
total assets invested in securities of foreign governments or corporations
and consequently will not qualify to elect to treat any foreign taxes paid
by the Fund as having been paid by the Fund's shareholders.
DISPOSITIONS
Upon a redemption, sale or exchange of shares of the Fund, a
shareholder will realize a taxable gain or loss depending upon his basis in
the shares. A gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands, and the rate of tax
will depend upon the shareholder's holding period for the shares. Any loss
realized on a redemption, sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days, beginning 30 days before and ending
30 days after the shares are disposed of. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. If a
shareholder holds Fund shares for six months or less and during that period
receives a distribution taxable to the shareholder as long-term capital
gain, any loss realized on the sale of such shares during such six month
period would be a long-term capital loss to the extent of such
distribution.
BACKUP WITHHOLDING
The Fund generally will be required to withhold federal income tax at
a rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to shareholders if (1) the
shareholder fails to furnish the Fund with the shareholder's correct
taxpayer identification number or social security number, (2) the IRS
notifies the shareholder or the Fund that the shareholder has failed to
report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the
shareholder's federal income tax liability.
OTHER TAXATION
Distributions may be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly
from those summarized above, including the likelihood that ordinary income
dividends distributed to them will be subject to withholding of U.S. tax at
a rate of 30% (or a lower treaty rate, if applicable). Non-U.S. investors
should consult their own tax advisors regarding federal, state, local and
foreign tax considerations.
FUND INVESTMENTS
Options, Futures and Forward Contracts. Any regulated futures
contracts and certain options in which the Fund may invest may be "section
1256 contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains or losses.
Also, section 1256 contracts held by the Fund at the end of each taxable
year (and on certain other dates prescribed in the Code) are "marked to
market" with the result that unrealized gains or losses are treated as
though they were realized.
Code section 1092, which applies to certain straddles, may affect the
taxation of the Fund's sales of securities and transactions in financial
futures contracts and related options. Under section 1092, the Fund may be
required to postpone recognition of losses incurred in certain sales of
securities and certain closing transactions in financial futures contracts
or related options.
Passive Foreign Investment Companies. The Fund may invest in shares of
foreign corporations that may be classified under the Code as passive
foreign investment companies ("PFICs"). In general, a foreign corporation
is classified as a PFIC if at least one-half of its assets constitute
investment-type assets, or 75% or more of its gross income is investment-
type income. If the Fund receives a so-called "excess distribution" with
respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules,
any excess distribution is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The Fund will itself be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC
shares are treated as excess distributions. Excess distributions are
characterized as ordinary income even though, absent application of the
PFIC rules, certain excess distributions might have been classified as
capital gain.
The Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under one election currently available in some
circumstances, the Fund would be required to include in its gross income
its share of the earnings of a PFIC, on a current basis, whether or not
distributions were received from the PFIC in a given year. Under another
election, the Fund would be required to mark to market the Fund's PFIC
shares at the end of each taxable year, with the result that unrealized
gains would be treated as realized and such gains would be required to be
reported as ordinary income. Any mark-to-market losses and any loss from
an actual disposition of PFIC shares would be deductible as ordinary losses
to the extent of any net mark-to-market gains included in income in prior
years. If either one of these elections were made the special rules,
discussed above, relating to the taxation of excess distributions would not
apply.
Special Code provisions applicable to Fund investments, discussed
above, may affect characterization of gains and losses realized by the
Fund, and may accelerate recognition of income or defer recognition of
losses. The Fund will monitor these investments and when possible will
make appropriate elections in order to mitigate unfavorable tax treatment.
INVESTMENT PERFORMANCE INFORMATION
The investment performance of the Fund quoted in advertising or sales
literature for the sale of its shares will be calculated on a total return
basis which assumes the reinvestment of all dividends and distributions.
Total return is computed by comparing the value of an assumed investment in
Fund shares at the offering price in effect at the beginning of the period
shown with the redemption price of the same investment at the end of the
period (including share(s) accrued thereon by the reinvestment of dividends
and distributions). Performance quotations given as a percentage will be
derived by dividing the amount of such total return by the amount of the
assumed investment. When the period shown is greater than one year, the
result is referred to as cumulative performance or cumulative total return.
Performance quotations will ordinarily be accompanied by the average
annual total return of the Fund for the past ten years as well as its total
return for the past five years and for the twelve months as of the end of
the most recent calendar quarter. Quotations of average annual total
return for periods greater than one year will be the compounded annual rate
of return which equates to the result of the previously described
calculation of cumulative total return.
The formula for computing the annual rate of total return is:
P (1 + T)n = ERV
P = Investment at the beginning of the period.
T = Compounded annual rate of total return.
n = Number of years.
ERV = Redemption value of the same investment at the end of the period
assuming the reinvestment of all dividends and distributions.
Investors are cautioned that past results are not necessarily
representative of future results; that investment returns and principal
value will fluctuate; that investment performance is primarily a function
of portfolio management (which is affected by the economic and market
environment as well as the volatility of portfolio investments) and
operating expenses; and that performance information, such as that
described above, may not provide a valid basis of comparison with other
investments and investment companies using a different method of computing
performance data.
DESCRIPTION OF THE FUND'S SHARES
The Fund may issue an unlimited number of full and fractional shares
of beneficial interest (par value $.001 per share). The Fund's shares have
no preemptive or conversion rights.
VOTING RIGHTS
Shareholders are entitled to one vote for each share held (and
fractional votes for fractional shares) and may vote on the election of
Trustees and on other matters submitted to meetings of shareholders. As a
Delaware Business Trust, the Fund is not required, and does not intend, to
hold regular annual shareholder meetings but may hold special meetings for
the consideration of proposals requiring shareholder approval such as
changing fundamental policies. In addition, if the Trustees have not
called an annual meeting of shareholders for any year by May 31 of that
year, the Trustees will call a meeting of shareholders upon the written
request of shareholders holding in excess of 50% of the affected shares for
the purpose of removing one or more Trustees or the termination of any
investment advisory agreement. The Declaration of Trust provides that the
Fund's shareholders have the right, upon the vote of more than 662/3 of its
outstanding shares, to remove a Trustee. Except as may be required by the
1940 Act or any other applicable law, the Trustees may amend the
Declaration of Trust in any respect without any vote of shareholders to
make any change that does not (i) impair the exemptions from personal
liability as provided therein or (ii) permit assessments on shareholders.
Shareholders have no preemptive or conversion rights except with respect to
shares that may be denominated as being convertible or as otherwise
provided by the Trustees or applicable law. The Fund may be (i) terminated
upon the affirmative vote of a majority of the Trustees or (ii) merged or
consolidated with, or sell all or substantially all of its assets to
another issuer, if such transaction is approved by the vote of two-thirds
of the Trustees without any vote of the shareholders, in each case except
as may be required by the 1940 Act or any other applicable law. If not so
terminated, the Fund intends to continue indefinitely.
LIABILITIES; SEPARATE SERIES OF SHARES
The Fund's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in
the Declaration of Trust protects a Trustee against any liability to which
he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office. Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as
partners for a trust's obligations. However, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself is unable to meet its obligations
since the Declaration of Trust provides for indemnification and
reimbursement of expenses out of the property of the Fund to any
shareholder held personally liable for any obligation of the Fund and also
provides that the Fund shall, if requested, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and
satisfy any judgment recovered thereon.
The Fund reserves the right to create and issue a number of series and
classes of shares, in which case the shares of each series would
participate equally in the earnings, dividends and assets of the particular
series and would vote separately to approve management agreements , changes
in investment policies and other matters affecting only that series and
requiring shareholder approval under the 1940 Act or other applicable law,
but shares of all series would vote together in the election or selection
of Trustees, principal underwriters and accountants and other matters
affecting all series and classes in the same manner. Upon liquidation of
the Fund, shareholders of each series and classes would be entitled to
share pro rata in the net assets of their respective series or class, as
the case may be, available for distribution to shareholders.
FINANCIAL STATEMENTS
[TO BE FILED BY AMENDMENT]
APPENDIX A
DESCRIPTION OF CORPORATE DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be 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 by an 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 which 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 which make the long-term risks appear somewhat
large than in Aaa securities.
A: Bonds which 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 which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which 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 which 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 which are rated B generally lack characteristics of a
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.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or
have other marked shortcomings.
C: Bonds which 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.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the
quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's Investors Services, Inc.'s publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if
a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa A, Baa Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1.
STANDARD & POOR'S RATINGS SERVICE
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's Ratings Service, a division of McGraw Hill Companies,
Inc. Capacity to pay interest and repay principal is extremely
strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in
small degree.
A: Bonds rated A have 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 bonds in the highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
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 bonds in this
category than in higher rated categories.
BB, B Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
CCC, predominantly speculative with respect to capacity to pay
CC, C: interest and repay principal in accordance with the terms of
this obligation. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, they
are outweighed by large uncertainties of major risk exposures
to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest
is being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) The ratings from AA to CCC may be modified by the addition of a
Or plus or minus sign to show relative standing within the major
Minus (-) rating categories.
NR: Indicates that no 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.
PART C: OTHER INFORMATION
Item 23.
Exhibits
(a) Declaration of Trust of Registrant*
(b) By-laws of Registrant*
(c) (1) Form of Registrant's Common Stock Certificate - Class AAA
Shares*
(2) Form of Registrant's Common Stock Certificate - Class A
Shares*
(3) Form of Registrant's Common Stock Certificate - Class B
Shares*
(4) Form of Registrant's Common Stock Certificate - Class C
Shares*
(d) Form of Investment Advisory Agreement between Registrant and
Gabelli Funds, LLC.*
(e) Form of Distribution Agreement between Registrant and Gabelli &
Company, Inc.*
(f) Not applicable.
(g) (1) Form of Custodian Contract between Registrant and State
Street Bank and Trust Company.*
(2) Form of Custodian Fee Schedule between Registrant and State
Street Bank and Trust Company.*
(h) Form of Transfer Agent and Registrar Services Fee Agreement
between Registrant and State Street Bank and Trust Company.*
(i) Opinion of Counsel and Consent of Skadden, Arps, Slate, Meagher &
Flom LLP with respect to legality.*
(j) Consent of Independent Accountants.*
(k) Not applicable.
(l) Form of Purchase Agreement with initial shareholder.*
(m) (1) Plan of Distribution pursuant to Rule 12b-1 - Class AAA
Shares.*
(2) Plan of Distribution pursuant to Rule 12b-1 - Class A
Shares.*
(3) Plan of Distribution pursuant to Rule 12b-1 - Class B
Shares.*
(4) Plan of Distribution pursuant to Rule 12b-1 - Class C
Shares.*
(n) Financial Data Schedule.*
(o) Rule 18f-3 Multi-Class Plan.*
-----------------
* To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with Registrant
None
Item 25. Indemnification
Reference is made to Subdivision (a) of Section 4.2 of Article IV
of Registrant's Declaration of Trust.
Insofar as indemnification of liabilities arising under the 1933
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
Securities and Exchange Commission such indemnification is
against public policy as expressed in that 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 trustee, officer or controlling
person of Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, 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 of whether such
indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, its By-
laws, the Investment Advisory Agreement, the Administration
Agreement and the Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission
under the 1940 Act.
Item 26. Business and Other Connections of Investment Adviser
Gabelli Funds, LLC (the "Adviser") is a registered investment
adviser providing investment management and administrative
services to the Registrant. The Adviser also provides similar
services to other mutual funds.
The information required by this Item 26 of directors, officers
or partners of the Adviser, together with information as to any
other business, profession, vocation or employment of a
substantial nature engaged in by the Adviser or such directors,
officers or partners during the past two years, is incorporated
by reference to Form ADV filed by the Adviser under 1940 Act (SEC
File No. 801-37706).
Item 27. Principal Underwriter
(a) Gabelli & Company, Inc. ("Gabelli & Company") currently acts as
distributor for The Gabelli ABC Fund, The Gabelli Asset Fund, The
Gabelli Capital Asset Fund, The Gabelli Convertible Securities
Fund, Inc., The Gabelli Equity Income Fund, The Gabelli Equity
Trust Inc., The Gabelli Global Convertible Securities Fund, The
Gabelli Global Interactive Couch Potatoregistered trademark Fund,
The Gabelli Global Multimedia Trust Inc., The Gabelli Global
Telecommunications Fund, Gabelli Gold Fund, The Gabelli Growth
Fund, The Gabelli International Growth Fund, Inc., The Gabelli
Global Opportunity Fund, The Gabelli Small Cap Growth Fund, The
Gabelli U.S. Treasury Money Market Fund, The Gabelli Utility
Trust, The Gabelli Value Fund, Inc., The Treasurer's Fund, Inc.
and the Gabelli Westwood Funds.
(b) The information required by this Item 27 with respect to each
director, officer or partner of Gabelli & Company is incorporated
by reference to Schedule A of Form BD filed by Gabelli & Company
under the Securities Exchange Act of 1934, as amended (SEC File
No. 8-21373).
(c) Not applicable.
Item 28. Location of Accounts and Records
All such accounts, books and other documents required by Section
31(a) of the 1940 Act and Rules 31a-1 through 31a-3 thereunder
are maintained at the offices of the Adviser, Gabelli Funds,
Inc., One Corporate Center, Rye, New York 10580-1434, First Data
Investor Services Group, Inc., 101 Federal Street, Boston,
Massachusetts 02110, State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts, 02110 and Boston
Financial Data Services, Inc., Two Heritage Drive, North Quincy,
Massachusetts, 02171.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant, THE GABELLI
BLUE CHIP VALUE FUND, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the
City of Rye and State of New York, on the 4th day of June, 1999.
THE GABELLI BLUE CHIP VALUE FUND
By: /s/ Bruce N. Alpert
----------------------------
Bruce N. Alpert
President and Treasurer
POWER OF ATTORNEY
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Mario J. Gabelli, Bruce N. Alpert
and James E. McKee, and each of them, with full power to act without the
other, his rue and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities (until revoked in writing) to sign any and all
amendments to this Registration Statement (including post-effective
amendments thereto), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof. This Power of Attorney may be
executed in multiple counterparts, each of which shall be deemed an
original but which taken together shall constitute one instrument.
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ Mario J. Gabelli Chairman of the Board, June 7, 1999
------------------------ President and Trustee
Mario J. Gabelli
/s/ Bruce N. Alpert Chief Financial Officer June 7, 1999
-----------------------
Bruce N. Alpert
/s/ Anthony J. Colavita Trustee June 7, 1999
-----------------------
Anthony J. Colavita
/s/ Vincent D. Enright Trustee June 7, 1999
-----------------------
Vincent D. Enright
/s/ Karl Otto POEhl Trustee June 7, 1999
-----------------------
Karl Otto POEhl
/s/ Werner Roeder, M.D. Trustee June 7, 1999
-----------------------
Werner Roeder, M.D.