GABELLI UTILITIES FUND, 497, 1999-09-02

GABELLI UTILITIES FUND
497, 1999-09-02

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THE GABELLI UTILITIES FUND
One Corporate Center
Rye, New York 10580-1434
Telephone: 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com

PROSPECTUS
August 30, 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.....................................................1
INVESTMENT AND RISK INFORMATION........................................1
MANAGEMENT OF THE FUND.................................................6
PURCHASING, SELLING AND EXCHANGING SHARES..............................7
PRICING OF FUND SHARES.................................................8
DIVIDENDS AND DISTRIBUTIONS............................................8
TAX INFORMATION........................................................8
FINANCIAL HIGHLIGHTS...................................................9

INVESTMENT SUMMARY

INVESTMENT OBJECTIVE:

The Gabelli Utilities Fund (the "Fund"), seeks to provide a high level of
total return through a combination of capital appreciation and current
income. Capital is the amount of money you invest in the Fund. Income is
the amount of money that you earn annually on your invested capital.

PRINCIPAL INVESTMENT STRATEGIES:

At least 65% of the Fund's assets will be invested in common stocks of
companies that meet two requirements. First, the companies must be involved
to a substantial extent in providing products, services or equipment for
the generation or distribution of electricity, gas and water and the
provision of infrastructure operations or telecommunications services, such
as telephone, telegraph, satellite, cable, microwave, radiotelephone,
mobile communication and cellular, paging, electronic mail, videotext,
voice communications, data communications and Internet (collectively,
"Utility Companies"). Second, the Fund's investment adviser, Gabelli Funds,
LLC (the "Adviser"), must believe that the securities either have the
potential to achieve current income or are undervalued and have the
potential to achieve capital appreciation. The Adviser will emphasize
quality in selecting utility investments, and looks for companies that have
proven dividend records and sound financial structures. Generally, Utility
Companies generate relatively predictable streams of revenue and income,
and in the view of the Adviser, are likely to pay dividends.

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. The Fund is also
subject to the risks that its portfolio companies will reduce or eliminate
the dividend rate on the securities held by the Fund, that the price of the
Fund's portfolio securities will decline or that the Adviser's judgment
regarding the traditional utilities and telecommunications sectors of the
utilities industry proves to be incorrect. As a consequence of its
concentration policy, the Fund's investments may be subject to greater risk
and market fluctuation than a fund that has securities representing a
broader range of alternatives. 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.

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
o you seek growth of capital as well as current income
o you wish to include an income strategy as a portion
of your overall investments
o you believe that the utilities industry can generate
growth of capital

You may not want to invest in the Fund if:

o you are conservative in your investment approach
o you seek stability of principal more than growth of
capital
o you do not believe the utilities industry has
favorable growth prospects

PERFORMANCE INFORMATION:

Since the Fund did not exist before this offering, no performance bar chart
or table has been presented.

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 Expenses(1)......................................................0.50%
Total Annual Operating Expenses........................................1.75%

- -----------------
(1) Based on an estimated asset size of $30 million for the current
fiscal year. Actual costs may be higher or lower.

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 a high level of total
return through a combination of capital appreciation and current income.
The investment objectives of the Fund may not be changed without
shareholder approval.

At least 65% of the Fund's assets will be invested in securities of Utility
Companies which the Adviser believes have the potential to provide either
capital appreciation or current income. Generally, Utility Companies
generate relatively predictable streams of revenue and income, and in the
view of the Adviser, are likely to pay dividends. However, the Fund intends
to focus on those companies in this industry whose common stocks have the
potential for capital appreciation. The Fund's performance is expected to
reflect conditions affecting the utilities industry. This industry is
sensitive to factors such as interest rates, local and national government
regulations, the price and availability of materials used in the particular
utility, environmental protection or energy conservation regulations, the
level of demand for services, and the risks associated with constructing
and operating certain kinds of facilities, such as nuclear power
facilities. These factors may change rapidly. The Adviser emphasizes
quality in selecting utility investments, and looks for companies that have
proven dividend records and sound financial structures. Believing that the
industry is under consolidation due to changes in regulation, the Fund
intends to position itself to take advantage of trends in consolidation.

Undervaluation of the stock of a public utility 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 level of demand for services,
o the underlying value of the companies within the public
utilities industry,
o beneficial changes in interest rates,
o beneficial changes in the price and availability of fuel,
o the value of a consumer or commercial franchise,
o changes in the economic or financial environment affecting
the company,
o new or rapidly expanding markets,
o technological developments or advancements affecting the
company or its products,
o changes in local and national governmental regulations,
political climate or competitive conditions, or
o changes in environmental protection or energy conservation
regulations.

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 a beneficial change in the local or national governmental
regulations,
o a beneficial change in environmental protection regulations
or energy conservation regulations,
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 retirement or death of a senior officer or substantial
shareholder of the company, or
o a beneficial change in the company's dividend policy.

In selecting investments, the Adviser will look for companies that have
proven dividend records and sound financial structures. The Adviser will
consider factors such as (i) the market price of the issuer's common stock,
earnings expectations, earnings and price histories, balance sheet
characteristics, perceived management skills and the conditions affecting
the industry in which the issuer practices; (ii) the level of interest
rates, local and national government regulations, the price and
availability of materials used in the particular utility, environmental
protection or energy conservation regulations, the level of demand for
services, and the risks associated with constructing and operating certain
kinds of facilities, such as nuclear power facilities; (iii) the potential
for capital appreciation of the stock; (iv) the dividend income generated
by the stock; (v) the prices of the stock relative to other comparable
stock; and (vi) the diversification of the portfolio of the Fund as to
issuers. 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 common stocks in the utilities industry, most of which will pay
dividends. Although many of the common stocks will pay above average
dividends, the Fund will buy stock of those companies whose securities have
the potential for their prices to increase, providing either capital
appreciation or current income 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's policy of concentration in companies in the utilities industry
is also a fundamental policy of the Fund. Fundamental policies may not be
changed without the authorization of a majority (as defined in the
Investment Company Act of 1940 (the "1940 Act"), as amended) of the Fund's
outstanding shares. The Fund does not have any other fundamental policies.

The Fund may also use the following investment techniques:

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, 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.) and certificates
of deposit and bankers' acceptances issued by domestic
branches of U.S. banks that are members of the Federal
Deposit Insurance Corporation. When following a defensive
strategy, the Fund may not achieve its investment objective
of a high level of total return.

o BORROWING. The Fund may not borrow money except for (i)
short-term credits from banks as may be necessary for the
clearance of portfolio transactions, and (ii) borrowings
from banks for temporary or emergency purposes, including
the meeting of redemption requests, which would otherwise
require the untimely disposition of its portfolio
securities. Borrowing for any purpose (including
redemptions) may not, in the aggregate, exceed 15% and
borrowing for purposes other than meeting redemptions may
not exceed 5% of the value of the Fund's total assets at the
time a borrowing is made. The Fund will not make any
additional purchases of portfolio securities at any time its
borrowings exceed 5% of its assets. The Fund will not
mortgage, pledge or hypothecate any of its assets except
that, in connection with the foregoing, not more than 20% of
the assets of the Fund may be used as collateral.

The Fund may also engage in other investment practices in order to
achieve its investment objective. 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's price may decline
because the market favors stocks of companies from different
industries over stocks of companies from the utilities
industry. If the Adviser is incorrect in its assessment of
the values of the securities it holds, no event occurs which
surfaces value or any of the companies either cease to pay
dividends or reduce the level of dividends paid, then the
value of the Fund's shares may decline.

o INDUSTRY RISK. The Fund's investments in utility companies
may be more susceptible to factors affecting those
particular types of companies and may go down because of
cost increases in operating expenses, high interest costs,
higher inflation and reduced demand for services.

o REGULATORY RISK. The Fund's investments in utility companies
may lose value because of changes in the amounts and types
of governmental and environmental regulation. Various
regulatory regimes impose limitations on the percentage of
the shares of a public utility held by an investment company
for its clients. In addition, various types of ownership
restrictions are imposed by the Public Utility Holding
Company Act of 1935, as amended, on energy utility companies
and by the Federal Communications Commission on investments
both in mass media companies, such as broadcasters and cable
operators, as well as in common carrier companies, such as
the providers of local telephone service and cellular radio.
Moreover, deregulation of various sectors of the utilities
industry could have a negative impact on the Fund's shares
as certain companies prove to be less able to meet the
challenge of deregulation.

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 Group Capital Partners, Inc.
(formerly named 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. Mr. Timothy P. O'Brien, a chartered financial
analyst ("CFA"), is responsible for the day-to-day management of the Fund.
Mr. O'Brien received an MBA from the Wharton School of the University of
Pennsylvania in 1983. He is a graduate of the University of Massachusetts.
From April 1994 through March 1999, he was employed by Eaton Vance
Management. Through December 1994 he was an analyst following the utility
and telecommunications sectors. From January 1, 1995 through March 1999, he
was the sole portfolio manager of the Eaton Vance Utilities Fund (formerly
known as the Eaton Vance Total Return Fund until December 31, 1997) over
which he exercised full discretionary authority over selection of
investments for the Fund.

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. 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 Day and Christmas
Day 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 price of Fund shares for purposes of purchase
and redemption will be based upon the next calculation of net asset value
after the purchase or redemption order is placed.

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 quarterly 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. Capital gains may be
taxed at different rates depending on how long the Fund held the asset
giving rise to such gains. Dividends out of net investment income and
distributions of net realized short-term capital gains (i.e., gains from
assets held by the Fund for one year or less) are taxable to you as
ordinary income. Distributions of net long-term capital gains (i.e., gains
from assets held by the Fund for more than one year) 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 foregoing discussion is subject to and qualified in its entirely by the
discussion in "Taxation" in the Statement of Additional Information.

FINANCIAL HIGHLIGHTS

The Class AAA shares of the Fund have not previously been offered and
therefore do not have a previous financial history.

THE GABELLI UTILITIES FUND

FOR MORE INFORMATION:
For more information about the Fund, the following documents are available
free upon request:

OWNERS MANUAL:
Information about purchasing, selling and exchanging shares of the Fund is
included in a separate document entitled "Owner's Manual." The Owner's
Manual is incorporated by reference into the Prospectus. If you have not
received it, please contact the Fund a the number listed below.

ANNUAL/SEMI-ANNUAL REPORTS:

The Fund's semi-annual and audited annual reports to shareholders will
contain detailed information on the Fund's investments. 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.

STATEMENT OF ADDITIONAL INFORMATION (SAI):

The SAI provides more detailed information about the Fund, including its
operation and investment policies. It is incorporated by reference, and is
legally considered a part of this Prospectus.

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. 811-09397

THE GABELLI FAMILY
OF FUNDS

OWNER'S MANUAL
AAA CLASS -
NO-LOAD CLASS

THE INFORMATION CONTAINED IN THE OWNER'S MANUAL IS INCORPORATED BY
REFERENCE INTO, AND IS LEGALLY CONSIDERED PART OF, THE PROSPECTUSES FOR THE
GABELLI FAMILY OF FUNDS. THE OWNER'S MANUAL MUST BE PRECEDED OR ACCOMPANIED
BY A GABELLI FUNDS PROSPECTUS.

OWNER'S MANUAL
TABLE OF CONTENTS

PURCHASING SHARES

3 Instructions for Opening or Adding to an Account

4 Telephone Investment Plan

4 Automatic Investment Plan

4 Retirement Plans

4 Minimum Investments

5 Dividends and Distributions

SELLING SHARES

5 Instructions for Selling Shares

5 By Bank Wire or Check via Telephone

5 By Bank Wire or Check via Mail

6 General Policies on Selling Shares

6 Signature Guarantees

6 Verifying Telephone Redemptions

6 Redemptions Within 15 Days of Investment

6 Refusal of Redemption Request

6 Closing of Small Accounts

6 Undeliverable Distribution Checks

EXCHANGING SHARES

7 Instructions for Exchanging Shares

PRICING OF FUND SHARES

7 How NAV is Calculated

PURCHASING SHARES

INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT

PURCHASES THROUGH BROKERS/DEALERS:

If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds
and he or she will take care of the necessary documentation. Your should
state specifically which class of shares you are buying. For all other
purchases directly with the Fund, follow the instructions below.

PURCHASES DIRECTLY FROM THE FUND:

All investments made by regular mail or personal delivery, whether initial
or subsequent, should be sent to:

BY REGULAR MAIL BY OVERNIGHT DELIVERY
--------------- ---------------------
The Gabelli Funds The Gabelli Funds
PO Box 8308 c/o BFDS Building, 6th Floor
Boston, MA 02266-8308 Two Heritage Drive
Quincy, MA 02171

For Initial Investment:
1. Carefully read and complete the application.
2. Make check, bank draft or money order payable to "[name of Fund]."
3. Mail or deliver application and payment to the address above.

For Subsequent Investments:
1. Make check, bank draft or money order payable to "[name of Fund]."
2. Provide the exact name and number of your account.
3. Mail or deliver payment to the address above.

BY WIRE TRANSFER

For Initial Investment:
Call 1-800-GABELLI (1-800-422-3554) to obtain a new account number.
Promptly mail the completed application to the address shown above for
regular mail, and

For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:

STATE STREET BANK AND TRUST COMPANY
ABA #011-0000-28 REF DDA# 9904-6187
ATTN: SHAREHOLDER SERVICES
RE: [FUND NAME]
A/C#___________________________
YOUR NAME ______________________
225 FRANKLIN STREET, BOSTON, MA 02110

NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.

QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE

PURCHASING SHARES (CONTINUED)

You can add to your account by using the convenient options described
below. The Fund reserves the right to change or eliminate these privileges
at any time upon 60 days notice to shareholders.

TELEPHONE INVESTMENT PLAN

You may purchase additional shares of the Funds by telephone as long as
your bank is a member of the Automated Clearing House (ACH) system. You
must also have a completed, approved Investment Plan application on file
with the Fund's Transfer Agent.

There is a minimum of $100 for each telephone investment. To initiate an
ACH purchase, please call 1-800-GABELLI (1-800-422-3554) or 1-800-872-5365.

AUTOMATIC INVESTMENT PLAN

You can make automatic monthly investments in the Funds. Details about this
plan can be obtained from the Distributor on a separate application by
calling 1-800-GABELLI (800-422-3554).

RETIREMENT PLANS

You can invest in various types of retirement plans through the Fund.
Details about these plans can be obtained from the Distributor on a
separate application by calling 1-800-GABELLI (800-422-3554).

MINIMUM INVESTMENTS

You may purchase Funds through the Distributor or participating
organizations, which may charge additional fees and may require higher or
lower minimum investments or impose other limitations on buying and selling
shares.

MINIMUM
INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT

Regular (non-retirement) $ 1,000 $ 0

Retirement (IRA)
Traditional IRA $ 1,000 $ 0
Roth IRA $ 1,000 $ 0
Spousal IRA $ 250 $ 0
Education IRA $ 250 $ 0

Automatic Investment Plan $ 0 $ 100

Telephone Investment Plan $ 100 $ 100

All purchases must be in U.S. dollars. A fee will be charged for any checks
that do not clear. Third-party checks are not accepted. Your purchase of
shares will be effective on the same business day if the Fund's transfer
agent receives your order by 4:00 p.m. (12 noon for a money market fund),
and receives Federal funds by 4:00 p.m., eastern time. Otherwise, your
purchase will be effective on the next business day. (See "Pricing of Fund
Shares.") Shares are held on account for you unless you specify in writing
that you would like to receive a stock certificate (certificates are not
available for money market funds). We can only issue a certificate for
whole shares.

The Distributor may reject a purchase order if it considers it in the best
interest of the Fund and its shareholders. A Fund may waive its minimum
purchase requirement.

DIVIDENDS AND DISTRIBUTIONS

All dividends and distributions will be automatically reinvested unless you
request otherwise.

SELLING SHARES

As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares.

WITHDRAWING MONEY FROM YOUR INVESTMENT

You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. See section on "General Policies on Selling
Shares" below.

SYSTEMATIC WITHDRAWAL PLAN

You can receive automatic payments from your account on a monthly,
quarterly or annual basis. You can obtain details from the Distributor.

INSTRUCTIONS FOR SELLING SHARES

The Fund accepts telephone requests for redemptions of unissued shares.

BY BANK WIRE OR CHECK VIA TELEPHONE

1. Call 1-800-GABELLI (1-800-422-3554) with your account number, the
amount of the redemption and instructions as to how you wish to
receive your funds.

2. If you are unable to reach the Fund by telephone, you may telecopy
your redemption request to the Fund at 914-921-____.

NOTE: If you call by 4:00 p.m., eastern time, your payment will normally be
wired to your bank on the following business day. (For Money Market Funds:
If you call before 12:00 noon, eastern time, your payment will be wired to
your bank on that day.) If you call after that time, your payment will be
wired to your bank on the next business day. If you request your wire
redemption by telephone, it must be at least $1,000. Your bank may charge a
fee for incoming wires.

BY BANK WIRE OR CHECK VIA MAIL

Submit a redemption request to the Fund. Redemption requests may be made by
letter to the Transfer Agent. You must specify the name of the Fund, the
dollar amount or number of shares you wish to redeem and the 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 most requests.

SELLING SHARES (CONTINUED)

GENERAL POLICIES ON SELLING SHARES

SIGNATURE GUARANTEES

Signature guarantees are required on redemption requests for the following:

o The check is not being mailed to the address on your account

o The check is not being made payable to the owner of the account

o The redemption proceeds are being transferred to another person's
Fund account.

A signature guarantee can be obtained from most banks and securities
dealers. Notarized signatures are not considered a signature guarantee.

VERIFYING TELEPHONE REDEMPTIONS

The Fund makes every effort to ensure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
If appropriate precautions have not been taken, the Fund may be liable for
losses due to unauthorized transactions.

REDEMPTIONS WITHIN 15 DAYS OF INVESTMENT

When you have made an investment by check or through the automatic
investment plan, your redemption proceeds will not be mailed until the
Transfer Agent is satisfied that the check has cleared (which may require
up to 15 days). You can avoid this delay by purchasing shares with a
certified check or federal funds wire.

REDEMPTION IN KIND

The Fund reserves the right to make a redemption in kind - payment in
portfolio securities rather than cash - for certain large redemption
amounts that could hurt fund operations.

REFUSAL OF REDEMPTION REQUEST

Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.

CLOSING OF SMALL ACCOUNTS

If your account (other than an IRA) falls below $500, the Fund may ask you
to increase your balance. If it is still below $500 after 30 days, the Fund
may close your account and send you the proceeds at the current NAV.

UNDELIVERABLE DISTRIBUTION CHECKS

If distribution checks (1) are returned and marked as "undeliverable" or
(2) remain uncashed for six months, your account will be changed
automatically so that all future distributions are reinvested in your
account. Checks that remain uncashed for six months will be canceled and
the money reinvested in the Fund at the then current net asset value.

QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE

EXCHANGING SHARES

You can exchange your shares in one Fund for shares of the same class of
another Fund managed by Gabelli Funds, LLC, or its affiliates, usually
without paying additional sales charges (see "Notes" below).

You must meet the minimum investment requirements for the Fund into which
you are exchanging. Exchanges from one Fund to another are taxable
transactions.

INSTRUCTIONS FOR EXCHANGING SHARES

Exchanges may be made by sending a written request to The Gabelli Funds, PO
Box 8308, Boston, MA 02266-8308 or by calling 1-800-GABELLI
(1-800-422-3554).

Please provide the following information:

o Your name and telephone number

o The exact name on your account and account number

o Taxpayer identification number (usually your Social Security
number)

o Dollar value or number of shares to be exchanged

o The names of the Funds from/into which the exchange is to be made

See "Selling Shares" for important information about telephone transactions.

NOTES ON EXCHANGES

o When exchanging from a Fund that has no sales charge or a lower
sales charge to a Fund with a higher sales charge, you will pay
the difference.

o The registration and tax identification numbers of the two
accounts must be identical.

o This exchange privilege may be changed or eliminated at any time
upon a 60-day notice to shareholders.

o Be sure to read the prospectus carefully of any Fund into which
you wish to exchange shares.

PRICING OF FUND SHARES

HOW NAV IS CALCULATED

The NAV is calculated by adding the total value of the Fund's investments
and other assets, subtracting its liabilities and then dividing that figure
by the number of outstanding shares of the Fund:

NAV =

TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding

You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers, or by calling 1-800-GABELLI (800-422-3554).

A Fund's net asset value, or NAV, is determined and its shares are priced
at the close of regular trading on the New York Stock Exchange, normally at
4:00 p.m., eastern time, on days the New York Stock Exchange is open. Your
order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is received by the Fund. This is what is known
as the offering price.

Fund securities are valued as of the close of trading on the primary
exchange on which they trade. Fund securities are generally valued at
current market prices. If market quotations are not available, prices will
be based on the average of the latest bid and asked quotations for such
securities prior to the valuation time, or the latest bid price if asked
prices are not available. Debt securities with remaining maturities of 60
days or less will be valued at amortized cost, which the Board of Directors
believes represents fair value.

Some Fund securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when a Fund does not compute its NAV. This
could cause the value of a Fund's portfolio investments to be affected on
days when you cannot buy or sell shares.

THE GABELLI UTILITIES 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.

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

TABLE OF CONTENTS

Page

INVESTMENT SUMMARY....................................................1
INVESTMENT AND RISK INFORMATION.......................................3
MANAGEMENT OF THE FUND................................................7
CLASSES OF SHARES.....................................................8
PURCHASE OF SHARES...................................................14
REDEMPTION OF SHARES.................................................15
EXCHANGES OF SHARES..................................................17
PRICING OF FUND SHARES...............................................18
DIVIDENDS AND DISTRIBUTIONS..........................................18
TAX INFORMATION......................................................18
FINANCIAL HIGHLIGHTS.................................................19

INVESTMENT SUMMARY

INVESTMENT OBJECTIVE:

PRINCIPAL INVESTMENT STRATEGIES:

PRINCIPAL RISKS:

WHO MAY WANT TO INVEST:

The Fund may appeal to you if:

You may not want to invest in the Fund if:

o you are conservative in your investment approach
o you seek stability of principal more than growth of
capital
o you do not believe the utilities industry has
favorable growth prospects

PERFORMANCE INFORMATION:

Since the Fund did not exist before this offering, no performance bar chart
or table has been presented.

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
------- ------- -------
<S> <C> <C> <C>
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*) (2) 5.00%(3) 1.00%(3)

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 Expenses(4) 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 If no sales charge was paid at the time of purchase, shares
redeemed within 24 months of such purchase, as part of an
investment that is greater than $2,000,000, may be subject to a
maximum deferred sales charge of 1%.
3 The Fund imposes a sales charge upon redemption of B shares if you
sell your shares within seventy-two months after purchase. A
maximum sales charge of 1% applies to redemptions of Class C shares
within twenty-four months after purchase.
4 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.

</TABLE>

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

Class C shares
- assuming redemption $353 $779
- assuming no redemption $253 $779

INVESTMENT AND RISK INFORMATION

Undervaluation of the stock of a public utility company with good
intermediate and longer-term fundamentals can result from a variety of
factors, such as a lack of investor recognition of:

The actual events that may lead to a significant increase in the
value of a company's securities include:

The Fund may also use the following investment techniques:

The Fund may also engage in other investment practices in order to achieve
its investment objective. These are briefly discussed in the Statement of
Additional Information which may be obtained by calling your broker. 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:

MANAGEMENT OF THE FUND

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.

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 average daily net assets attributable to the
particular class of shares.

- -------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class C Shares
- -------------------------------------------------------------------------------------------

<S> <C> <C> <C>
Front-End Sales Load? Yes. The percentage No. No.
declines as the amount
invested increases.

Contingent Deferred Yes, for shares Yes, for shares Yes, for shares
Sales Charge redeemed within redeemed within redeemed within
twenty-four months seventy-two twenty-four months
after purchase as part months after after purchase.
of an investment purchase.
greater than $2 Declines over
million if no time.
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. No.
Class? Automatically
converts to Class
A shares after
approximately
ninety-six months.

Fund Expense Levels Lower annual expenses Higher annual Higher annual
than Class B or Class C expenses than expenses than Class
shares. Class A shares. 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
<TABLE>
<CAPTION>

If you... then you should consider...
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
o do not qualify for a reduced purchasing Class C shares instead of either
or waived front-end sales Class A shares or Class B shares
load and intend to hold
your shares for only a few
years or less
- -------------------------------------------------------------------------------------------
o do not qualify for a reduced purchasing Class A or Class B shares instead
or waived front-end sales of Class C shares
load and intend to hold your
shares for several years
- -------------------------------------------------------------------------------------------
o qualify for a significantly purchasing Class A shares no matter how long
reduced or waived front-end you intend to hold your shares
sales load
- --------------------------------------------- ---------------------------------------------

</TABLE>

SALES CHARGE - CLASS A SHARES. The sales charge is imposed on Class A at
the time of purchase shares in accordance with the following schedule:

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%

* Front-end sales load
</TABLE>

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 agreeing 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 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 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 any of 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 59 1/2

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.

For the classes covered by this Prospectus, 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 of these Classes' average
daily net assets. Because the Rule 12b-1 fees are higher for Class B and
Class C shares than for 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. 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. While the Fund will delay the payment of the redemption
proceeds until the check clears, your shares will be valued at the next
determined net asset value after receipt of your redemption order.

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 your broker to obtain the prospectus).

o you should be aware that brokers may charge a fee for
handling an exchange for you.

You may exchange shares 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 Day and Christmas Day 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
believe represents fair value. The price of Fund shares for purposes of
purchase and redemption will be based upon the next calculation of net
asset value after the purchase or redemption order is placed.

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 will be paid quarterly 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

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 foregoing discussion is subject to and qualified in its entirely by the
discussion in "Taxation" in the Statement of Additional Information.

FINANCIAL HIGHLIGHTS

The Class A, Class B and Class C shares of the Fund have not previously
been offered and therefore do not have a previous financial history.

THE GABELLI UTILITIES FUND

FOR MORE INFORMATION:
For more information about the Fund, the following documents are available
free upon request:

ANNUAL/SEMI-ANNUAL REPORTS:

STATEMENT OF ADDITIONAL INFORMATION (SAI):

The SAI provides more detailed information about the Fund, including its
operation and investment policies. It is incorporated by reference, and is
legally considered a part of this Prospectus.

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).

Investment Company Act File No. 811-09397

THE GABELLI UTILITIES FUND

STATEMENT OF ADDITIONAL INFORMATION

August 30, 1999

This Statement of Additional Information (the "SAI"), which is not a
prospectus, describes The Gabelli Utilities 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 August 30, 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.....................................................
TRUSTEES AND OFFICERS.......................................................
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS..................................
INVESTMENT ADVISORY AND OTHER SERVICES......................................
DISTRIBUTION PLAN...........................................................
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................
RETIREMENT PLANS............................................................
PURCHASE OF SHARES..........................................................
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 18, 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 use of
convertible securities will allow the Fund to have greater exposure to the
telecommunications companies that have superior growth characteristics than
traditional public utility companies. 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 market value
of the securities sold short of any one issuer will not exceed either 5% of
the Fund's total assets or 5% of such issuer's voting securities. 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 both to obtain capital appreciation
and 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 listed call or
put options on securities as a means of achieving additional return or of
hedging the value of the Fund's portfolio. 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.

The Fund also may buy or sell put and call options on foreign
currencies. A put option on a foreign currency gives the purchaser of the
option the right to sell a foreign currency at the exercise price until the
option expires. A call option on a foreign currency gives the purchaser of
the option the right to purchase the currency at the exercise price until
the option expires. Currency options traded on U.S. or other exchanges may
be subject to position limits which may limit the ability of the Fund to
reduce foreign currency risk using such options. Over-the-counter options
differ from exchange-traded options in that they are two-party contracts
with price and other terms negotiated between buyer and seller and
generally do not have as much market liquidity as exchange-traded options.
Over-the-counter options are illiquid securities.

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, other than to close an existing position, 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 other than the utilities 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 private or
publicly distributed 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 to the extent permitted by
applicable law;

(6) Borrow money, except subject to the restrictions set forth in
the prospectus;

(7) 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;

(8) 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;

(9) 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;

(10) Purchase real estate or interests therein, other than
mortgage-backed securities and securities of companies that invest in real
estate or interests therein; or

(11) 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 PRINCIPAL OCCUPATIONS
POSITION(S) WITH FUND DURING PAST FIVE YEARS
- ---------------------- ----------------------

Mario J. Gabelli,* 57 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
Trustee law 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,
Trustee and practicing private physician.
Director or Trustee of various
other mutual funds advised by
Gabelli Funds, LLC and its
affiliates.

Karl Otto Pohl,*+ 69 Member of the Shareholder Committee
Trustee of Sal 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
Vice President and Treasurer Operating 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
Secretary of the 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**
- ----------------------------------------------------------------------------------------------

<S> <C> <C> <C>
Mario J. Gabelli $ 0 $ 0 (14)
Trustee

Anthony J. Colavita $2,000 $ 84,000 (14)
Trustee

Vincent D. Enright $2,000 $ 20,000 (4)
Trustee

Karl Otto Pohl $2,000 $104,466 (16)
Trustee
Werner J. Roeder $2,000 $ 27,500 (8)
Trustee
- --------------
* Since the Fund has not began operations, this column represents the
estimated compensation to be paid to such persons for the year
ended December 31, 1999.

** The total compensation paid to such persons during the calendar
year ending December 31, 1998 by investment companies, 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, and estimated compensation to be paid to such
person by the Fund, as if the Fund had been in existence. The
number in parentheses represents the number of such investment
companies (including the Fund).
</TABLE>

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS

As of the date of this Registration Statement, 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 an investment adviser to 12 other open-end investment companies,
and 3 closed-end investment companies with aggregate assets in excess of
$7.2 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. The Adviser has several affiliates that provide investment
advisory services: GAMCO Investors, Inc. ("GAMCO"), acts as investment
adviser for individuals, pension trusts, profit-sharing trusts and
endowments, and had assets under management of approximately $7.1 billion
under its management as of December 31, 1998; Gabelli Advisers, Inc. acts
as investment adviser to the Gabelli Westwood Funds with assets under
management of approximately $400 million as of December 31, 1998; Gabelli
Securities, Inc. acts as investment adviser to certain alternative
investments products, consisting primarily of risk arbitrage and merchant
banking limited partnerships and offshore companies, with assets under
management of approximately $146 million as of December 31, 1998; and
Gabelli Fixed Income LLC acts as investment adviser for the Treasurer's
Funds and separate accounts having assets under management of approximately
$1.5 billion 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 for a period of
two years and thereafter 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 AUDITORS

Ernst & Young LLP, independent auditors, have been selected to
audit 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 GAMI, 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, 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 Plans and not be subject to its limitations.
Payments under the Plans 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 Plans compensate 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 compensation realized by Gabelli & Company for its
brokerage services is subject to the approval of the Board, including its
"independent" Trustees, 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.

PURCHASE OF SHARES

Shares of the Fund may be purchased through registered
broker-dealers. Certain broker-dealers may charge the investor a fee for
their services. Such fees may vary among broker-dealers, and such
broker-dealers may impose higher initial or subsequent investment
requirements than those established by the Fund. Services provided by
broker-dealers may include allowing the investor to establish a margin
account and to borrow on the value of the Fund's shares in that account.

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.

Capital gains may be taxed at different rates depending on how long
the Fund held the asset giving rise to such gains. Distributions of the
excess of net long-term capital gains over net short-term capital losses
realized, if any, properly designated by the Fund, whether paid in cash or
reinvested in Fund shares, will generally be taxable to shareholders at the
rates applicable to long-term capital gains, regardless of how long a
shareholder has held Fund shares. Distributions of net capital gains from
assets held for one year or less will be taxable to shareholders at rates
applicable to 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 exemption 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 any 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 and accountants and other matters affecting all series and
classes in the same manner. Upon liquidation of the Fund, shareholders of
each series would be entitled to share pro rata (in accordance with net
asset value per share) in the net assets of their respective series,
available for distribution to shareholders.

THE GABELLI FAMILY
OF FUNDS

OWNER'S MANUAL
AAA CLASS -
NO-LOAD CLASS

OWNER'S MANUAL
TABLE OF CONTENTS

PURCHASING SHARES

3 Instructions for Opening or Adding to an Account

4 Telephone Investment Plan

4 Automatic Investment Plan

4 Retirement Plans

4 Minimum Investments

5 Dividends and Distributions

SELLING SHARES

5 Instructions for Selling Shares

5 By Bank Wire or Check via Telephone

5 By Bank Wire or Check via Mail

6 General Policies on Selling Shares

6 Signature Guarantees

6 Verifying Telephone Redemptions

6 Redemptions Within 15 Days of Investment

6 Refusal of Redemption Request

6 Closing of Small Accounts

6 Undeliverable Distribution Checks

EXCHANGING SHARES

7 Instructions for Exchanging Shares

PRICING OF FUND SHARES

7 How NAV is Calculated

PURCHASING SHARES

INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT

PURCHASES THROUGH BROKERS/DEALERS:

PURCHASES DIRECTLY FROM THE FUND:

All investments made by regular mail or personal delivery, whether initial
or subsequent, should be sent to:

BY WIRE TRANSFER

For Initial Investment:
Call 1-800-GABELLI (1-800-422-3554) to obtain a new account number.
Promptly mail the completed application to the address shown above for
regular mail, and

For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:

NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.

QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE

PURCHASING SHARES (CONTINUED)

You can add to your account by using the convenient options described
below. The Fund reserves the right to change or eliminate these privileges
at any time upon 60 days notice to shareholders.

TELEPHONE INVESTMENT PLAN

There is a minimum of $100 for each telephone investment. To initiate an
ACH purchase, please call 1-800-GABELLI (1-800-422-3554) or 1-800-872-5365.

AUTOMATIC INVESTMENT PLAN

You can make automatic monthly investments in the Funds. Details about this
plan can be obtained from the Distributor on a separate application by
calling 1-800-GABELLI (800-422-3554).

RETIREMENT PLANS

You can invest in various types of retirement plans through the Fund.
Details about these plans can be obtained from the Distributor on a
separate application by calling 1-800-GABELLI (800-422-3554).

MINIMUM INVESTMENTS

MINIMUM
INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT

Regular (non-retirement) $ 1,000 $ 0

Retirement (IRA)
Traditional IRA $ 1,000 $ 0
Roth IRA $ 1,000 $ 0
Spousal IRA $ 250 $ 0
Education IRA $ 250 $ 0

Automatic Investment Plan $ 0 $ 100

Telephone Investment Plan $ 100 $ 100

The Distributor may reject a purchase order if it considers it in the best
interest of the Fund and its shareholders. A Fund may waive its minimum
purchase requirement.

DIVIDENDS AND DISTRIBUTIONS

All dividends and distributions will be automatically reinvested unless you
request otherwise.

SELLING SHARES

As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares.

WITHDRAWING MONEY FROM YOUR INVESTMENT

SYSTEMATIC WITHDRAWAL PLAN

You can receive automatic payments from your account on a monthly,
quarterly or annual basis. You can obtain details from the Distributor.

INSTRUCTIONS FOR SELLING SHARES

The Fund accepts telephone requests for redemptions of unissued shares.

BY BANK WIRE OR CHECK VIA TELEPHONE

1. Call 1-800-GABELLI (1-800-422-3554) with your account number, the
amount of the redemption and instructions as to how you wish to
receive your funds.

2. If you are unable to reach the Fund by telephone, you may telecopy
your redemption request to the Fund at 914-921-____.

BY BANK WIRE OR CHECK VIA MAIL

SELLING SHARES (CONTINUED)

GENERAL POLICIES ON SELLING SHARES

SIGNATURE GUARANTEES

Signature guarantees are required on redemption requests for the following:

o The check is not being mailed to the address on your account

o The check is not being made payable to the owner of the account

o The redemption proceeds are being transferred to another person's
Fund account.

A signature guarantee can be obtained from most banks and securities
dealers. Notarized signatures are not considered a signature guarantee.

VERIFYING TELEPHONE REDEMPTIONS

REDEMPTIONS WITHIN 15 DAYS OF INVESTMENT

REDEMPTION IN KIND

The Fund reserves the right to make a redemption in kind - payment in
portfolio securities rather than cash - for certain large redemption
amounts that could hurt fund operations.

REFUSAL OF REDEMPTION REQUEST

Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.

CLOSING OF SMALL ACCOUNTS

UNDELIVERABLE DISTRIBUTION CHECKS

QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE

EXCHANGING SHARES

You must meet the minimum investment requirements for the Fund into which
you are exchanging. Exchanges from one Fund to another are taxable
transactions.

INSTRUCTIONS FOR EXCHANGING SHARES

Exchanges may be made by sending a written request to The Gabelli Funds, PO
Box 8308, Boston, MA 02266-8308 or by calling 1-800-GABELLI
(1-800-422-3554).

Please provide the following information:

o Your name and telephone number

o The exact name on your account and account number

o Taxpayer identification number (usually your Social Security
number)

o Dollar value or number of shares to be exchanged

o The names of the Funds from/into which the exchange is to be made

See "Selling Shares" for important information about telephone transactions.

NOTES ON EXCHANGES

o When exchanging from a Fund that has no sales charge or a lower
sales charge to a Fund with a higher sales charge, you will pay
the difference.

o The registration and tax identification numbers of the two
accounts must be identical.

o This exchange privilege may be changed or eliminated at any time
upon a 60-day notice to shareholders.

o Be sure to read the prospectus carefully of any Fund into which
you wish to exchange shares.

PRICING OF FUND SHARES

HOW NAV IS CALCULATED

The NAV is calculated by adding the total value of the Fund's investments
and other assets, subtracting its liabilities and then dividing that figure
by the number of outstanding shares of the Fund:

NAV =

TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding

You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers, or by calling 1-800-GABELLI (800-422-3554).