As filed with the Securities and Exchange Commission on April 28, 2000
Securities Act File No. 333-81209
Investment Company Act File No. 811-09397
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ____
Pre-Effective Amendment No.
Post-Effective Amendment No. 1 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ____
Amendment No. 2 X
THE GABELLI UTILITIES FUND
(Exact Name of Registrant as Specified in Charter)
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 1-800-422-3554
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
RYE, NEW YORK 10580-1434
(Name and Address of Agent for Service)
Copies to:
James E. McKee, Esq. Richard T. Prins, Esq.
The Gabelli Utilities Fund Skadden, Arps, Slate, Meagher & Flom
One Corporate Center Four Times Square, 30th Floor
Rye, New York 10580-1434 New York, New York 10036
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b);or
X on May 1, 2000 pursuant to paragraph (b);or
___ 60 days after filing pursuant to paragraph (a)(1);or
___ on ________ pursuant to paragraph (a)(1);or
___ 75 days after filing pursuant to paragraph (a)(2);or
___ on ________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
___ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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THE
GABELLI
UTILITIES
FUND
CLASS AAA SHARES
PROSPECTUS
MAY 1, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES DESCRIBED IN THIS PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INVESTMENT AND PERFORMANCE 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. Capital appreciation is an
increase in the value of your investment. 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 stocks have the potential to achieve either capital appreciation or current
income. 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. When you sell
Fund shares, they may be worth less than what you paid for them. Consequently,
you can lose money by investing in the Fund. The Fund is also subject to the
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.
WHO MAY WANT TO INVEST: The Fund's Class AAA Shares offered herein are offered
only to investors who acquire them directly through Gabelli & Company, Inc., the
Fund's distributor (the "Distributor"), or through a select number of financial
intermediaries with whom the Fund's Distributor has entered into selling
agreements specifically authorizing them to offer Class AAA Shares.
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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:
The Fund commenced operations on August 31, 1999 and does not have a full year
of performance history. Therefore 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 and Service (Rule 12b-1) Fees .................... 0.25%
Other Expenses(1).............................................. 2.00%
----
Total Annual Fund Operating Expenses(2)........................ 3.25%
----
Fee Waiver and/or Expense Reimbursement(2)..................... (1.25)%
----
Net Annual Fund Operating Expenses(2) ......................... 2.00%
====
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(1) Other expenses are based on estimated amounts for the current fiscal year.
(2) The Adviser has agreed to waive its investment advisory fee and/or reimburse
expenses of the Fund to the extent necessary to maintain the Total Annual
Fund Operating Expenses (excluding brokerage, interest, tax and
extraordinary expenses) at no more than 2.00% through December 31, 2000. In
addition, the Fund has agreed during the two-year period following any
waiver or reimbursement by the Adviser, to repay such amount to the extent,
after giving effect to the repayment, such adjusted Total Annual Fund
Operating Expenses would not exceed 2.00% on an annualized basis.
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
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$203 $884
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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
objective 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 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 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, (BULLET) 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.
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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 stocks, 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 dividend-paying common stocks in the utilities industry. 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.
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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 as amended (the "1940 Act"), of the Fund's outstanding shares. The
Fund does not have any other fundamental policies.
The Fund may also use the following investment technique:
o DEFENSIVE INVESTMENTS. 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 high grade debt
securities, obligations of the U.S. Government and its agencies and
instrumentalities or high quality short-term money market instruments.
When following a defensive strategy, the Fund will be less likely to
achieve its investment goal.
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) or
your broker.
Investing in the Fund involves the following risks:
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 Utilities Holding 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.
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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 ("NYSE").
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 Adviser contractually has agreed to waive its investment advisory fees
and/or reimburse expenses to the extent necessary to maintain the Total
Operating Expenses (excluding brokerage, interest, taxes and extraordinary
expenses) at no more than 2.00% for the Fund. This fee waiver and expense
reimbursement arrangement will continue until at least December 31, 2000.
Effective January 1, 2000, the Fund has agreed during the two year period
following any waiver or reimbursement by the Adviser, to repay such amount to
the extent that after giving effect to the repayment, such adjusted Total Annual
Operating Expenses would not exceed 2.00% on an annualized basis.
THE PORTFOLIO MANAGER. Mr. Timothy O'Brien, a chartered financial analyst (CFA),
is primarily responsible for the day-to-day management of the Fund. Mr O'Brien
has been a Vice President with the Adviser since April 1999. From April 1994
through March 1999, he was employed by Eaton Vance Management as an analyst
following the utility and telecommunications sectors through December 1994 and
then as 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 that
fund.
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 0.25% 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.
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PURCHASE OF SHARES
You can purchase the Fund's shares on any day the NYSE is open for trading (a
"Business Day"). You may purchase shares through the Fund's Distributor,
directly from the Fund through the Fund's transfer agent or through registered
broker-dealers that have entered into selling agreements with the Fund's
Distributor.
o BY MAIL OR IN PERSON. You may open an account by mailing a completed
subscription order form with a check or money order payable to "The
Gabelli Utilities Fund" to:
BY MAIL BY PERSONAL DELIVERY
------- --------------------
THE GABELLI FUNDS THE GABELLI FUNDS
P.O. BOX 8308 C/O BFDS
BOSTON, MA 02266-8308 66 BROOKS DRIVE
BRAINTREE, MA 02184
You can obtain a subscription order form by calling 1-800-GABELLI
(1-800-422-3554). Checks made payable to a third party and endorsed by the
depositor are not acceptable. For additional investments, send a check to the
above address with a note stating your exact name and account number, the name
of the Fund and class of shares you wish to purchase.
o BY BANK WIRE. To open an account using the bank wire transfer system,
first telephone the Fund at 1-800-GABELLI (1-800-422-3554) to obtain a
new account number. Then instruct a Federal Reserve System member bank
to wire funds to:
STATE STREET BANK AND TRUST COMPANY
[ABA #011-0000-28 REF DDA #99046187]
RE: THE GABELLI UTILITIES FUND
CLASS AAA SHARES
ACCOUNT #__________
ACCOUNT OF [REGISTERED OWNERS]
225 FRANKLIN STREET, BOSTON, MA 02110
If you are making an initial purchase, you should also complete and mail
a subscription order form to the address shown under "By Mail." Note
that banks may charge fees for wiring funds, although State Street Bank
and Trust Company ("State Street") will not charge you for receiving
wire transfers.
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SHARE PRICE. The Fund sells its Class AAA Shares at the net asset value next
determined after the Fund receives your completed subscription order form and
your payment. See "Pricing of Fund Shares" for a description of the calculation
of net asset value.
MINIMUM INVESTMENTS. 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. Broker-dealers may have different minimum investment requirements.
RETIREMENT PLANS. The Fund has available a form of IRA, "Roth" IRA and Education
IRA for investment in Fund shares that may be obtained from the Fund's
Distributor by calling 1-800-GABELLI (1-800-422-3554). Self-employed investors
may purchase shares of the Fund through tax-deductible contributions to existing
retirement plans for self-employed persons, known as "Keogh" or "H.R.-10" plans.
The Fund does not currently act as a sponsor to such 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." The minimum initial investment in all
such retirement plans is $250. There is no subsequent investment requirement for
retirement plans.
AUTOMATIC INVESTMENT PLAN. The Fund offers an automatic monthly investment plan.
There is no minimum initial investment for accounts establishing an automatic
investment plan. Call the Fund's Distributor at 1-800-GABELLI (1-800-422-3554)
for more details about the plan.
TELEPHONE OR INTERNET INVESTMENT PLAN. You may purchase additional shares of the
Fund by telephone and/or over the Internet if 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 or Internet investment. To
initiate an ACH Purchase, please call 1-800-GABELLI (1-800-422-3554) or
1-800-872-5365 or visit our website at www.gabelli.com.
GENERAL. State Street 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 the Fund's management, it is in the Fund's best interest to do so, (ii)
suspend the offering of shares for any period of time and (iii) waive the Fund's
minimum purchase requirement.
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REDEMPTION OF SHARES
You can redeem shares of the Fund on any Business Day without a redemtion fee.
The Fund may temporarily stop redeeming its shares when the NYSE is closed or
trading on the NYSE is restricted, when an emergency exists and the Fund cannot
sell its shares or accurately determine the value of its assets, or if the
Securities and Exchange Commission 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. See "Pricing of Fund Shares" below for a
description of the calculation of net asset value.
You may redeem shares through the Fund's Distributor or directly from the Fund
through the Fund's transfer agent.
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 wish to redeem 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 OR THE INTERNET. You may redeem your shares in an account
directly registered with State Street by calling either 1-800-GABELLI
(1-800-422-3554) or 1-800-872-5365 (617-328-5000 from outside the United
States) or visiting our website at www.gabelli.com, subject to a $25,000
limitation. YOU MAY NOT REDEEM SHARES HELD THROUGH AN IRA BY TELEPHONE
OR THE INTERNET. If State Street properly acts on telephone or Internet
instructions and follows reasonable procedures to protect against
unauthorized transactions, neither State Street nor the Fund will be
responsible for any losses due to telephone or Internet transactions.
You may be responsible for any fraudulent telephone or Internet order as
long as State Street or the Fund takes reasonable measures to verify the
order. 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").
1. TELEPHONE OR INTERNET 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 OR INTERNET REDEMPTION BY BANK WIRE. The Fund accepts
telephone or Internet 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.
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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. Call 1-800-GABELLI
(1-800-422-3554) for more information about this plan.
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 if the Fund initiates such action and allowed 30 days to
increase the value of your account to at least $1,000.
REDEMPTION PROCEEDS. A redemption request received by the Fund will be effected
at the net asset value next determined after the Fund receives the request. If
you request redemption proceeds by check, the Fund will normally mail the check
to you within seven days after receipt of your redemption request. If you
purchased your Fund shares by check or through the Automatic Investment Plan,
you may not receive proceeds from your redemptions until the check clears, which
may take up to as many as 15 days following purchase. While the Fund will delay
the processing of the redemption until the check clears, your shares will be
valued at the next determined net asset value after receipt of your redemption
request. The Fund may pay to you your redemption proceeds wholly or partly in
portfolio securities. Payments would be made in portfolio securities 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.
EXCHANGE 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 an exchange call 1-800-GABELLI (1-800-422-3554). You may also exchange
your shares for shares of a money market fund managed by the Adviser or its
affiliates. In effecting an exchange:
o you must meet the minimum investment requirements for the fund whose
shares you purchase through exchange
o if you are exchanging to 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 through exchange. Call 1-800-GABELLI (1-800-422-3554) to
obtain the prospectus.
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You may exchange shares through the Fund's Distributor, directly through the
Fund's transfer agent or through a registered broker-dealer.
o EXCHANGE BY TELEPHONE. You may give exchange instructions by telephone
by calling 1-800-GABELLI (1-800-422-3554). You may not exchange shares
by telephone if you hold share certificates.
o EXCHANGE BY MAIL. You may send a written request for exchanges to: THE
GABELLI FUNDS, P.O. BOX 8308, BOSTON, MA 02266-8308. Your letter should
state your name, your account number, the dollar amount 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.
o EXCHANGE THROUGH THE INTERNET. You may also give exchange instructions
via the Internet at www.gabelli.com. You may not exchange shares through
the Internet if you hold share certificates.
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 of the Class AAA Shares is calculated on
each Business Day. The NYSE is open Monday through Friday, but 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 per share of the Class AAA Shares is determined as of
the close of regular trading on the NYSE, normally 4:00 p.m., Eastern 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 orders will be based upon the next
calculation of net asset value after the purchase or redemption order is
received in proper form.
Because the Fund is not open for business every day that its assets trade, the
net asset value of the Fund's shares may change on days when shareholders will
not be able to purchase or redeem the Fund's shares.
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DIVIDENDS AND DISTRIBUTIONS
The Fund intends to pay dividends, if any, monthly, and to distribute, at least
annually, substantially all net realized capital gains. You 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 the length of time the Fund holds 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 are taxable to you at long-term capital gain rates. The
Fund's distributions, whether you receive them in cash or reinvest them in
additional shares of the Fund, 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.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance for the period of the Fund's operation. The total return in the
table represents the rate that an investor would have earned or lost on an
investment in the Fund's Class AAA Shares. This information has been audited by
Ernst & Young LLP, independent auditors, whose report along with the Fund's
financial statements and related notes are included in the annual report, which
is available upon request.
THE GABELLI UTILITIES FUND
Per share amounts for the Fund's Class AAA Shares outstanding throughout the
period
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1999+
-------------------------
<S> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period ............................................. $10.00
------
Net investment income ............................................................ 0.04(a)
Net realized and unrealized gain on investments .................................. 2.18
------
Total from investment operations ................................................. 2.22
------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................................................ (0.03)
Net realized gain on investments ................................................. (1.23)
In excess of net realized gain on investments .................................... (0.07)
------
Total distributions .............................................................. (1.33)
------
NET ASSET VALUE, END OF PERIOD ................................................... $10.89
------
Total return++ .................................................................. 22.3%
------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ............................................. $3,685
Ratio of net investment income to average net assets (c) ......................... 0.99%(b)
Ratio of operating expenses to average net assets (c) ............................ 2.00%(b)
Portfolio turnover rate .......................................................... 94%
<FN>
- ----------------
+ From commencement of investment operations on August 31, 1999 through
December 31, 1999.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period less than
one year is not annualized.
(a) Based on average month-end shares outstanding.
(b) Annualized.
(c) During the period ended December 31, 1999, the Adviser voluntarily
reimbursed certain expenses. Before reimbursement, the ratios of operating
expenses and net investment income to average net assets would have been
10.63% and (7.64)% for 1999 (annualized), respectively.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
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- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THE GABELLI UTILITIES FUND
================================================================================
FOR MORE INFORMATION:
For more information about the Fund, the following documents are available upon
request:
ANNUAL/SEMI-ANNUAL REPORTS
The Fund's semi-annual and annual reports to shareholders contain additional
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 last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAIprovides more detailed
information about the Fund, including its operations and investment policies. It
is incorporated by reference, and is legally considered a part of this
prospectus.
You can get free copies of these documents and prospectuses of
other funds in the Gabelli family, or request other
information and discuss your questions about the Fund, by contacting:
The Gabelli Utilities Fund
One Corporate Center
Rye, NY 10580
Telephone: 1-800-GABELLI (1-800-422-3554)
www.gabelli.com
You can review the Fund's reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-202-942-8090. You
can get text-only copies:
o For a fee, by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102, or by calling 1-202-942-8090, or by
electronic request at the following email address: [email protected].
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act File No. 811-09397
- --------------------------------------------------------------------------------
<PAGE>
THE GABELLI UTILITIES FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be
obtained daily by calling
1-800-GABELLI after 6:00 p.m.)
QUESTIONS?
Call 1-800-GABELLI
or your investment representative.
TABLE OF CONTENTS
-----------------
INVESTMENT AND PERFORMANCE SUMMARY ............................... 2-3
INVESTMENT AND RISK INFORMATION .................................. 4-6
MANAGEMENT OF THE FUND ........................................... 7
Purchase of Shares ...................................... 8
Redemption of Shares .................................... 10
Exchange of Shares ...................................... 11
Pricing of Fund Shares .................................. 12
Dividends and Distributions ............................. 13
Tax Information ......................................... 13
FINANCIAL HIGHLIGHTS ............................................. 14
<PAGE>
THE
GABELLI
UTILITIES
FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS
MAY 1, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES DESCRIBED IN THIS PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT AND PERFORMANCE 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. Capital appreciation is an
increase in the value of your investment. 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 stocks have the potential to achieve either capital appreciation or current
income. 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. When you sell Fund shares, they may
be worth less than what you paid for them. Consequently, you can lose money by
investing in the Fund. The Fund is also subject to the 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.
WHO MAY WANT TO INVEST:
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
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE:
The Fund commenced operations on August 31, 1999 and does not have a full year
of performance history. Therefore 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
shares of the Fund.
<TABLE>
<CAPTION>
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(4)) ....................... None(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) Expenses ................... 0.25% 1.00% 1.00%
Other Expenses(5) ................................................ 2.00% 2.00% 2.00%
---- ---- ----
Total Annual Fund Operating Expenses(6)........................... 3.25% 4.00% 4.00%
---- ---- ----
Fee Waiver and/or Expense Reimbursement(6) ....................... (1.25)% (1.25)% (1.25)%
---- ---- ----
Net Annual Fund Operating Expenses(6)............................. 2.00% 2.75% 2.75%
==== ==== ====
<FN>
- -----------------
(1) The sales charge declines as the amount invested increases.
(2) If no sales charge was paid at the time of purchase as part of an investment
that is greater than $2,000,000, shares redeemed within 24 months of such
purchase may be subject to a maximum deferred sales charge of 1.00%.
(3) The Fund imposes a sales charge upon redemption of B shares if you sell your
shares within seventy-two months after purchase. The sales charge declines
the longer the investment remains in the Fund. A maximum sales charge of
1.00% applies to redemptions of Class C shares within twenty-four months
after purchase.
(4) "Redemption Price" equals the net asset value at the time of investment or
redemption, whichever is lower.
(5) Other expenses are based on estimated amounts for the current fiscal year.
(6) The Adviser has agreed to waive its investment advisory fee and/or reimburse
expenses of the Fund to the extent necessary to maintain the Total Annual
Fund Operating Expenses (excluding brokerage, interest, tax and
extraordinary expenses) at no more than 2.00%, 2.75% and 2.75% for Class A,
B and C Shares, respectively, through December 31, 2000. In addition, the
Fund has agreed during the two-year period following any waiver or
reimbursement by the Adviser, to repay such amount to the extent, after
giving effect to the repayment, such adjusted Total Annual Fund Operating
Expenses would not exceed 2.00%, 2.75% and 2.75% for Class A, B and C
Shares, respectively, on an annualized basis.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
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 those periods 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............................................. $766 $1,408
Class B Shares
- assuming redemption................................. $778 $1,404
- assuming no redemption.............................. $278 $1,104
Class C Shares
- assuming redemption................................. $378 $1,104
- assuming no redemption.............................. $278 $1,104
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
objective 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 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 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,
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
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 stocks, 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 dividend-paying common stocks in the utilities industry. 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 as amended (the "1940 Act")), of the Fund's outstanding shares. The
Fund does not have any other fundamental policies.
The Fund may also use the following investment technique:
o DEFENSIVE INVESTMENTS. 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 high grade debt
securities, obligations of the U.S. Government and its agencies and
instrumentalities or high quality, short-term money market instruments.
When following a defensive strategy, the Fund will be less likely to
achieve its investment goal.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
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) or
your broker.
Investing in the Fund involves the following risks:
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 Utilities Holding 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 ("NYSE").
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 Adviser contractually has agreed to waive its investment advisory fees
and/or reimburse expenses to the extent necessary to maintain the Total Annual
Operating Expenses at no more than 2.00%, 2.75% and 2.75% for the Fund's Class
A, B, and C Shares, respectively. This fee waiver and expense reimbursement
arrangement will continue until at least December 31, 2000.
Effective January 1, 2000, the Fund has agreed, during the two year period
following any waiver or reimbursement by the Adviser, to repay such amount to
the extent, after giving effect to the repayment, such adjusted Total Annual
Operating Expenses would not exceed 2.00%, 2.75% and 2.75% on an annualized
basis for Class A, B and C Shares, respectively.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THE PORTFOLIO MANAGER. Mr. Timothy O'Brien, a chartered financial analyst (CFA),
is primarily responsible for the day-to-day management of the Fund. Mr. O'Brien
has been a Vice President with the Adviser since April 1999. From April 1994
through March 1999, he was employed by Eaton Vance Management as an analyst
following the utility and telecommunications sectors through December 1994 and
then as 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 that
fund.
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Front-End Sales Load? Yes. The percentage declines No. No.
as the amount invested
increases.
- -----------------------------------------------------------------------------------------------------------------------------
Contingent Deferred Sales Yes, for shares redeemed Yes, for shares redeemed Yes, for shares redeemed
Charge? within twenty-four months within within twenty-four months
after purchase as part of an seventy-two months after purchase.
investment greater than $2 of purchase. Declines over
million if no front-end time.
sales charge was paid at the
time of purchase.
- -----------------------------------------------------------------------------------------------------------------------------
Rule 12b-1 Fee 0.25% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
Convertible to Another Class? No. Yes. Automatically converts No.
to Class A Shares
approximately ninety-six
months after purchase.
- -----------------------------------------------------------------------------------------------------------------------------
Fund Expense Levels Lower annual expenses than Higher annual expenses than Higher annual expenses than
Class B or Class C Shares. Class A Shares. Class A Shares.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
In selecting a class of shares in which to invest, you should consider:
o the length of time you plan to hold the shares
o the amount of sales charge and Rule 12b-1 fees, recognizing that your
share of 12b-1 fees as a percentage of your investment increases if the
Fund's assets increase in value and decreases if
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
the Fund's assets decrease in value
o whether you qualify for a reduction or waiver of the Class A sales
charge
o that Class B Shares convert to Class A Shares approximately ninety-six
months after purchase
- ---------------------------------------------------------------- -------------------------------------------------
IF YOU... THEN YOU SHOULD CONSIDER...
- ---------------------------------------------------------------- -------------------------------------------------
<S> <C>
o do not qualify for a reduced or waived front-end purchasing Class C Shares instead of either
sales load and intend to hold your Class A Shares or Class B Shares
shares for only a few years
- ---------------------------------------------------------------- -------------------------------------------------
o do not qualify for a reduced or waived front-end purchasing Class B Shares instead of either
sales load and intend to hold your shares for Class A Shares or Class C Shares
several years
- ---------------------------------------------------------------- -------------------------------------------------
o do not qualify for a reduced or waived front-end purchasing Class A Shares
sales load and intend to hold your shares
indefinitely.
- ---------------------------------------------------------------- -------------------------------------------------
</TABLE>
SALES CHARGE -- CLASS A SHARES. The sales charge is imposed on Class A Shares at
the time of purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE REALLOWANCE
AS % OF THE AS % OF TO
AMOUNT OF INVESTMENT OFFERING PRICE* AMOUNT INVESTED BROKER-DEALERS
- -------------------------- ---------------- --------------- --------------
<S> <C> <C> <C>
Under $50,000 5.75% 6.10% 5.00%
$50,000 but under $100,000 4.50% 4.71% 3.75%
$100,000 but under $250,000 3.50% 3.62% 2.75%
$250,000 but under $500,000 2.50% 2.56% 2.00%
$500,000 but under $1 million 2.00% 2.04% 1.75%
$1 million but under $2 million 1.00% 1.01% 1.00%
$2 million but under $3 million 0.00%** 0.00% 1.00%
$3 million or more 0.00%** 0.00% 0.50%
<FN>
- --------------------
* Includes front-end sales load.
** Subject to a 1.00% CDSC for two years after purchase.
</FN>
</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 the Adviser or its affiliates along
with the value of the Class A
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
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 Gabelli & Company, Inc. (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 1.00%. 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.
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9
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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.
The Distributor pays sales commissions of up to 1.00% of the purchase price of
Class C Shares of the Fund to brokers at the time of sale that initiate and are
responsible for purchase of such Class C Shares of the Fund.
You will not pay a CDSC to the extent that the value of the redeemed shares
represents reinvestment of dividends or capital gains distributions or capital
appreciation of shares redeemed. When you redeem shares, we will assume that you
are redeeming first shares representing reinvestment of dividends and capital
gains distributions, then any appreciation on shares redeemed, and then
remaining shares held by you for the longest period of time. We will calculate
the holding period of shares acquired through an exchange of shares of another
fund from the date you acquired the original shares of the other fund. The time
you hold shares in a money market fund, however, will not count for purposes of
calculating the applicable CDSC.
We will waive the CDSC payable upon redemptions of shares for:
o redemptions and distributions from retirement plans made after the
death or disability of a shareholder
o minimum required distributions made from an IRA or other retirement
plan account after you reach age 591/2
o involuntary redemptions made by the Fund
o a distribution from a tax-deferred retirement plan after your
retirement
o returns of excess contributions to retirement plans following the
shareholder's death or disability
CONVERSION FEATURE - CLASS B SHARES:
o Class B Shares automatically convert to Class A Shares of the Fund on
the first business day of the ninety-seventh month following the month
in which you acquired such shares.
o After conversion, your shares will be subject to the lower Rule 12b-1
fees charged on Class A Shares, which will increase your investment
return compared to the Class B Shares.
o You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
o If you exchange Class B Shares of one fund for Class B Shares of
another fund, your holding period for calculating the CDSC 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 Class B Shares converted.
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10
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The Board of Trustees may suspend the automatic conversion of Class B Shares 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. Due to payments
of Rule 12b-1 fees, long-term shareholders may indirectly pay more than the
equivalent of the maximum permitted front-end sales load.
PURCHASE OF SHARES
You can purchase the Fund's shares on any day the NYSE is open for trading (a
"Business Day"). You may purchase shares through registered broker-dealers or
other intermediaries that have entered into selling agreements with the Fund's
Distributor.
The broker-dealer, bank or other financial intermediary will transmit a purchase
order and payment to State Street on your behalf. Broker-dealers, banks or other
financial intermediaries may send you confirmations of your transactions and
periodic account statements showing your investments in the Fund.
o BY MAIL OR IN PERSON. Your broker-dealer or financial consultant can
obtain a subscription order form by calling 1-800-GABELLI
(1-800-422-3554). Checks made payable to a third party and endorsed by
the depositor are not acceptable. For additional investments, send a
check to the following address with a note stating your exact name and
account number, the name of the Fund and class of shares you wish to
purchase.
BY MAIL BY PERSONAL DELIVERY
-------------------- --------------------
THE GABELLI FUNDS THE GABELLI FUNDS
P.O. BOX 8308 C/O BFDS
BOSTON, MA 02266-8308 66 BROOKS DRIVE
BRAINTREE, MA 02184
o BY BANK WIRE. To open an account using the bank wire transfer system,
first telephone the Fund at 1-800-GABELLI (1-800-422-3554) to obtain a
new account number. Then instruct a Federal Reserve System member bank
to wire funds to:
STATE STREET BANK AND TRUST COMPANY
[ABA #011-0000-28 REF DDA #99046187]
RE: GABELLI UTILITIES FUND
CLASS A, B OR C SHARES
ACCOUNT #__________
ACCOUNT OF [REGISTERED OWNERS]
225 FRANKLIN STREET, BOSTON, MA 02110
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11
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If you are making an initial purchase, you should also complete and mail a
subscription order form to the address shown under "By Mail." Note that
banks may charge fees for wiring funds, although State Street Bank and
Trust Company ("State Street") will not charge you for receiving wire
transfers.
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,
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."
MINIMUM INVESTMENTS. 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. Broker-dealers may have different minimum investment requirements.
RETIREMENT PLANS. The Fund has available a form of IRA, "Roth" IRA and Education
IRA for investment in Fund shares that may be obtained from the Fund's
Distributor by calling 1-800-GABELLI (1-800-422-3554). Self-employed investors
may purchase shares of the Fund through tax-deductible contributions to existing
retirement plans for self-employed persons, known as "Keogh" or "H.R.-10" plans.
The Fund does not currently act as a sponser to such 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." The minimum initial investments for all
retirement plans is $250. There is no subsequent investment requirement for
retirement plans.
AUTOMATIC INVESTMENT PLAN. The Fund offers an automatic monthly investment plan.
There is no minimum initial investment for accounts establishing an automatic
investment plan. Call the Fund's Distributor at 1-800-GABELLI (1-800-422-3554)
for more details about the plan.
GENERAL. State Street 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, (ii) suspend the
offering of shares for any period of time and (iii) waive the Fund's minimum
purchase requirement.
REDEMPTION OF SHARES
You can redeem shares of the Fund 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 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 through a broker-dealer or other financial intermediary
that has entered into a selling agreement with the Fund's Distributor. The
broker-dealer or financial intermediary will transmit a redemption order to
State Street on your behalf. The redemption request 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 endorsed for transfer. A broker-dealer may charge you fees for
effecting redemptions for you.
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12
<PAGE>
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In the event that you wish to redeem shares and you are unable to contact your
broker-dealer or other financial intermediary, you may redeem shares by mail.
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.
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 if the Fund initiates such action and allowed 30 days to
increase the value of your account to at least $1,000.
REDEMPTION PROCEEDS. A redemption request received by the Fund will be effected
at the net asset value next determined after the Fund receives the request. If
you request redemption proceeds by check, the Fund will normally mail the check
to you within seven days after receipt of your redemption request. If you
purchased your Fund shares by check or through the Automatic Investment Plan,
you may not receive proceeds from your redemptions until the check clears, which
may take up to as many as 15 days following purchase. While the Fund will delay
the processing of the redemption until the check clears, your shares will be
valued at the next determined net asset value after receipt of your redemption
request.
The Fund may pay to you your redemption proceeds wholly or partly in portfolio
securities. Payments would be made in portfolio securities 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.
EXCHANGE 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 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 through exchange. Call 1-800-GABELLI (1-800-422-3554) to
obtain the prospectus.
o you should be aware that brokers may charge a fee for handling an
exchange for you
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13
<PAGE>
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You may exchange shares by telephone, by mail or through a registered
broker-dealer or other financial intermediary.
o EXCHANGE BY TELEPHONE. You may give exchange instructions by telephone
by calling 1-800-GABELLI (1-800-422-3554). You may not exchange shares
by telephone if you hold share certificates.
o EXCHANGE BY MAIL. You may send a written request for exchanges to: THE
GABELLI FUNDS, P.O. BOX 8308, BOSTON, MA 02266-8308. Your letter should
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.
o EXCHANGE THROUGH THE INTERNET. You may also give exchange instructions
via the Internet at www.gabelli.com. You may not exchange shares
through the Internet if you hold share certificates.
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 separately for each class of
shares on each Business Day. The NYSE is open Monday through Friday, but 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.,
Eastern 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 orders will be
based upon the next calculation of net asset value after the purchase or
redemption order is received in proper form.
Because the Fund is not open for business every day that its assets trade, the
net asset value of the Fund's shares may change on days when shareholders will
not be able to purchase or redeem the Fund's shares.
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14
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DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions may differ for different classes of shares. The Fund
intends to pay dividends, if any, monthly, and to distribute, at least annually,
substantially all net realized capital gains. You 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 the length of time the Fund holds 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 are taxable to you at long-term capital gain rates. The
Fund's distributions, whether you receive them in cash or reinvest them in
additional shares of the Fund, 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 or your investment
in the Fund.
FINANCIAL HIGHLIGHTS
The Class A, Class B and Class C Shares of the Fund have not previously been
offered and therefore do not have previous financial history.
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15
<PAGE>
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THE GABELLI UTILITIES FUND
================================================================================
FOR MORE INFORMATION:
For more information about the Fund, the following documents are available upon
request:
ANNUAL/SEMI-ANNUAL REPORTS:
The Fund's semi-annual and annual reports to shareholders contain additional
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 last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including its
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus.
- --------------------------------------------------------------------------------
You can get free copies of these documents and prospectuses of other funds in
the Gabelli family, or request other information and discuss your questions
about the Funds, by contacting:
The Gabelli Utilities Fund
One Corporate Center
Rye, NY 10580
Telephone: 1-800-GABELLI (1-800-422-3554)
WWW.GABELLI.COM
- --------------------------------------------------------------------------------
You can review the Fund's reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-202-942-8090.
You can get text-only copies:
o For a fee, by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102, or by calling 1-202-942-8090, or by
electronic request at the following email address: [email protected].
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act File No. 811-09397
- --------------------------------------------------------------------------------
<PAGE>
THE GABELLI UTILITIES FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
EMAIL: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 p.m.)
- --------------------------------------------------------------------------------
QUESTIONS?
Call 1-800-GABELLI
or your investment representative.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
INVESTMENT AND PERFORMANCE SUMMARY ............. 2-4
INVESTMENT AND RISK INFORMATION ................ 4-6
MANAGEMENT OF THE FUND ......................... 6-7
Classes of Shares ..................... 7
Purchase of Shares .................... 11
Redemption of Shares .................. 12
Exchange of Shares .................... 13
Pricing of Fund Shares ................ 14
Dividends and Distributions ........... 15
Tax Information ....................... 15
FINANCIAL HIGHLIGHTS ........................... 15
<PAGE>
THE GABELLI UTILITIES FUND
Statement of Additional Information
May 1, 2000
This Statement of Additional Information (the "SAI"), which is not a prospectus,
describes The Gabelli Utilities Fund (the "Fund"). This 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, each dated May 1, 2000.
For a free copy of the Prospectuses, please contact the Fund at the address,
telephone number or Internet website 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...........................................................2
INVESTMENT STRATEGIES AND RISKS...............................................2
INVESTMENT RESTRICTIONS......................................................11
TRUSTEES AND OFFICERS........................................................12
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS...................................14
INVESTMENT ADVISORY AND OTHER SERVICES.......................................15
DISTRIBUTION PLANS...........................................................18
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................19
REDEMPTION OF SHARES.........................................................21
DETERMINATION OF NET ASSET VALUE.............................................21
DIVIDENDS AND DISTRIBUTIONS .................................................22
TAXES........................................................................22
INVESTMENT PERFORMANCE INFORMATION...........................................26
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES.........................26
FINANCIAL STATEMENTS.........................................................27
APPENDIX A...................................................................28
<PAGE>
GENERAL INFORMATION
The Fund is a diversified, open-end, management investment company organized
under the laws of the state of Delaware on May 18, 1999. The Fund commenced
investment operations on August 31, 1999.
INVESTMENT STRATEGIES AND RISKS
The Fund's Prospectuses discuss the investment objective of the Fund and the
principal strategies to be employed to achieve that objective. This SAI 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 Gabelli Funds,
LLC, the Fund's Adviser (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.
3
<PAGE>
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 S&P 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 Debt 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.
4
<PAGE>
INVESTMENTS IN WARRANTS AND RIGHTS
The Fund may invest in warrants and rights (other than those acquired in units
or attached to other securities) which entitle the holder to buy equity
securities at a specific price for or at the end of a specific period of time.
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
Securities and Exchange Commission ("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,
5
<PAGE>
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 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 with its custodian cash or liquid
securities 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 banks and non-bank dealers of
U.S. Government securities which are listed as reporting dealers of the Federal
Reserve Bank and which furnish collateral at least equal in value or market
price to the amount of their repurchase obligation. In a repurchase agreement,
the Fund purchases a debt security from a seller which undertakes to repurchase
the security at a specified resale price on an agreed future date. 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 not borrow money except for (1) short-term credits from banks as
may be necessary for the clearance of portfolio transactions, and (2) 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 may not, in the aggregate, exceed 15% of
assets after giving effect to the borrowing, and borrowing for purposes other
than meeting redemptions may not
6
<PAGE>
exceed 5% of the Fund's assets after giving effect to the borrowing. The Fund
will not make additional investments when borrowings exceed 5% of assets. The
Fund may mortgage, pledge or hypothecate up to 20% of its assets to secure such
borrowings.
Borrowing may exaggerate the effect on net asset value of any increase or
decrease in the market value of securities purchased with borrowed funds. Money
borrowed will be subject to interest costs which may or may not be recovered by
an appreciation of securities purchased.
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 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 a contract that gives
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
7
<PAGE>
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
8
<PAGE>
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.
LOANS 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.
9
<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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,
and (c) lending its portfolio securities consistent with applicable regulatory
requirements;
(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
this SAI
;
(7)......Mortgage, pledge or hypothecate any of its assets except that,
in connection with permissible borrowings mentioned in restriction (6) 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
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<PAGE>
(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 executive officers of the Fund, their ages and their principal
occupations during the last five years, and their affiliations, if any with the
Adviser, are set forth below. Trustees deemed to be "interested persons" of the
Fund for purposes of the 1940 Act are indicated by an asterick. Unless otherwise
specified, the address of each such person is One Corporate Center, Rye, New
York 10580-1434.
NAME, AGE AND POSITION(S)
WITH FUND PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
Mario J. Gabelli* Chairman of the Board and Chief Investment Officer
Trustee of Gabelli Asset Management Inc. and Chief
Age: 57 Investment Officer of Gabelli Funds, LLC and GAMCO
Investors, Inc.; Chairman of the Board and Chief
Executive Officer of Lynch Corporation
(diversified manufacturing company) and Chairman
of the Board of Lynch Interactive Corporation
(multimedia and services corporation); Director of
Spinnaker Industries, Inc. (manufacturing
company); Director or Trustee of 16 other mutual
funds advised by Gabelli Funds, LLC and it
affiliates.
Anthony J. Colavita President and Attorney at Law in the law firm of
Trustee Anthony J. Colavita, P.C. since 1961; Director
Age: 64 or Trustee of 17 other mutual funds advised by
Gabelli Funds, LLC and its affiliates.
Vincent D. Enright Former Senior Vice President and Chief Financial
Trustee Officer of Key Span Energy Corporation; Director
Age: 56 or Trustee of 6 other mutual funds advised by
Gabelli Funds, LLC and its affiliates.
Werner J. Roeder, M.D. Medical Director, Lawrence Hospital and practicing
Trustee private physician; Director or Trustee of 10 other
Age: 59 mutual funds advised by Gabelli Funds, LLC and
its affiliates.
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NAME, AGE AND POSITION(S)
WITH FUND PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
Karl Otto Pohl*+ Member of the Shareholder Committee of Sal
Trustee Oppenheim Jr. & Cie (private investment bank);
Age: 70 Director of Gabelli Asset Management Inc.,
(investment management), Zurich Allied (insurance
company), and TrizecHahn Corp. (real estate
company); 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 Executive Vice President and Chief Operating
Vice President and Officer of Gabelli Funds, LLC since 1988;
Treasurer President and Director of Gabelli Advisers, Inc.
Age: 48 and an officer of all mutual funds advised by
Gabelli Funds, LLC and its affiliates.
James E. McKee Secretary of Gabelli Funds, LLC; Vice President,
Secretary Secretary and General Counsel of GAMCO Investors,
Age: 36 Inc. since 1993, and of Gabelli Asset Management
Inc. since 1999; Secretary of all mutual 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.
The Fund, its Adviser and principal underwriter have adopted a code of ethics
(the "Code of Ethics") under Rule 17j-1 of the 1940 Act. The Code of Ethics
permits personnel, subject to the Code of Ethics and its restrictive provisions,
to invest in securities, including securities that may be purchased or held by
the Fund.
No director, officer or employee of the Adviser or any affiliate 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.
The following table sets forth certain information regarding the compensation of
the Fund's Trustees. No executive officer or person affiliated with the Fund
received compensation in excess of $60,000 from the Fund for the fiscal period
ended December 31, 1999.
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COMPENSATION TABLE
- --------------------- --------------------------- ---------------------------
(1) (2) (3)
NAME OF PERSON AGGREGATE COMPENSATION TOTAL COMPENSATION
AND POSITION FROM THE FUND FROM THE FUND AND FUND
COMPLEX PAID TO TRUSTEES*
- --------------------- --------------------------- ---------------------------
Anthony J. Colavita $1,750 $94,875 (18)
Trustee
Vincent D. Enright $1,750 $25,500 (7)
Trustee
Karl Otto Pohl $ 0 $ 7,042 (19)
Trustee
Werner J. Roeder $1,750 $34,859 (11)
Trustee
* Represents the total compensation paid to such persons from the Fund's
commencement of operations on August 31, 1999 through December 31, 1999.
The parenthetical number represents the number of investment companies
(including the Fund) from which such person receives compensation that are
part of the same "fund complex" as the Fund because they have common or
affiliated investment advisers.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of April 17, 2000, the following persons owned of record or beneficially 5%
or more of the Fund's outstanding shares:
NAME AND ADDRESS OF HOLDER OF RECORD PERCENTAGE OF FUND NATURE OF OWNERSHIP
- ------------------------------------ ------------------ -------------------
FRAYDUN ENTERPRISES 7.52% RECORD(A)
3 New York Plaza, 19th Floor
New York, NY 10004-2442
CHARLES SCHWAB & CO., INC. 8.09% RECORD(A)
Special Custody Account
FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
15
<PAGE>
NAME AND ADDRESS OF HOLDER OF RECORD PERCENTAGE OF FUND NATURE OF OWNERSHIP
- ------------------------------------ ------------------ -------------------
NATIONAL FINANCIAL SERV. CORP. 5.52% RECORD(A)
FBO Customers
Attn: Mutual Funds Dept.
200 Liberty Street, 5th Floor
New York, NY 10281-5500
WEXFORD CLEARING SERVICES CORP. FBO 6.04% RECORD(A)
Prudential Securities C/F
Timothy P. O'Brien
IRA Rollover DTD 08/03/99
Scituate, MA 02066
GRAT UA 11/23/99 C/O 7.36% RECORD(A)
Wexford Clearing Services Corp. FBO
Lucille Maslin Janet Cheever
Lucille Maslin Trust
Stephen Katz, CPA
White Plains, NY 10604
(a) Fraydun Enterprises, Charles Schwab, National Financial Service Corp.,
and Wexford Clearing Services Corp. disclaim beneficial ownership and
have not indicated that any account holders own beneficially more than
5% of the shares of the Fund.
As of April 1, 2000, as a group, the Directors and officers of the Fund owned
59,598 or 11.54% of the outstanding shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The Adviser is a New York limited liability company which also serves as an
investment adviser to 13 other open-end investment companies, and 4 closed-end
investment companies with aggregate assets in excess of $10.6 billion as of
December 31, 1999. 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"), a wholly-owned subsidiary of the Adviser, acts as investment adviser
for individuals, pension trusts, profit-sharing trusts and endowments, and had
assets under management of approximately $9.4 billion under its management as of
December 31, 1999; Gabelli Advisers, Inc. acts as investment adviser to the
Gabelli Westwood Funds with assets under management of approximately $390
million as of December 31, 1999; 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
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approximately $230 million as of December 31, 1999; and Gabelli Fixed Income LLC
acts as investment adviser for the five portfolios of The Treasurer's Fund and
separate accounts having assets under management of approximately $1.4 billion
as of December 31, 1999.
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 PFPC
Inc., the Fund's Sub-Administrator, and State Street, the Fund's 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 Gabelli & Company, Inc. (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.
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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.
As compensation for its services and the related expenses borne by the Adviser,
the Fund pays the Adviser a fee, computed daily and paid monthly, at the annual
rate of 1.00% of the Fund's average daily net assets, payable out of the Fund's
net assets. For the fiscal period ended December 31, 1999, the Fund incurred
$7,382 in investment advisory fees and reimbursed expenses of the Fund in the
amount of $63,698 to maintain the annualized total operating expenses of the
Fund (excluding brokerage, interest, tax and extraordinary expenses) at 2.00% of
the value of the Fund's average daily net assets.
Additionally, the Adviser has contractually agreed to waive its investment
advisory fee and/or reimburse expenses of the Fund to the extent necessary to
maintain the Total Annual Fund Operating Expenses (excluding brokerage,
interest, tax and extraordinary expenses) at no more than 2.00% (2.00%, 2.75%
and 2.75% in the case of Class A, Class B and Class C Shares, respectively)
through December 31, 2000. Effective January 1, 2000, the Fund has agreed during
the two-year period following any waiver or reimbursement by the Adviser, to
repay such amount to the extent, after giving effect to the repayment, such
adjusted Total Annual Fund Operating Expenses would not exceed 2.00% (2.00%,
2.75% and 2.75% in the case of Class A, Class B and Class C Shares,
respectively) on an annualized basis.
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SUB-ADMINISTRATOR
The Adviser has entered into a Sub-Administration Agreement (the
"Sub-Administration Agreement") with PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.) (the "Sub-Administrator"), a majority-owned
subsidiary of PNC Bank Corp., which is located at 101 Federal Street, Boston,
Massachusetts 02110. 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 Internal Revenue Code of 1986, as amended (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 - .0100%. 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, Four Times Square, New York,
New York 10036, 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, and is located at 787 Seventh Avenue, New York, New
York 10019.
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CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
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, 66 Brooks Drive,
Braintree, Massachusetts 02184, 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 Gabelli & Company, Inc. (the "Distributor"), a New York
corporation which is an indirect majority owned subsidiary of Gabelli Asset
Management Inc. ("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 PLANS
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. The Plans compensate the Distributor regardless of
expenses. The Plans are intended to benefit the Fund by increasing its assets
and thereby reducing the Fund's expense ratio.
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.
During the fiscal period ended December 31, 1999, the Fund incurred distribution
expenses under the Distribution Plan for Class AAA Shares of $82,900. Of this
amount, $600 was spent on advertising, $19,600 for printing, postage and
stationary, $39,700 for overhead support expenses and $23,000 for salaries of
personnel of the Distributor.
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As of December 31, 1999, the Fund had not commenced offering Class A, B and C
Shares to the public.
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 member of the National
Association of Securities Dealers, Inc. and an 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. The purpose of this sharing of research
information is to avoid duplicative charges for research provided by brokers and
dealers. Neither the Fund nor the Adviser has any agreement or legally binding
understanding with any broker regarding any specific amount of brokerage
commissions which
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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. Based on such determinations, the Adviser allocated
brokerage commissions of $8,467 on portfolio transactions in the principal
amount of $____ during the fiscal period ended December 31, 1999 to any
broker-dealer for research services provided to the Adviser.
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. The Adviser
may also consider sales of shares of the Fund and any other registered
investment company managed by the Adviser and its affiliates by brokers and
dealers other than the distributor as a factor in its selection of brokers and
dealers to execute portfolio transaction for the Fund. The Fund paid the
following brokerage commissions for the fiscal period ended December 31, 1999 as
indicated:
Period Ended December 31, 1999
Total Brokerage Commissions Paid $8,467
Commissions paid to Gabelli & $0
Company
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. Rule 17e-1 and the procedures contain
requirements that the Board, including its "independent" Trustees, conduct
periodic compliance reviews of such brokerage allocations. The Adviser and the
Distributor 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"), the Distributor 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 the Distributor, and
settled directly with the Custodian of the Fund by a clearing house member firm
which remits the commission less its clearance charges to the Distributor.
Pursuant to an agreement with the Fund, the Distributor 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 the
Distributor 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. The distributor 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.
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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 shareholder has redeemed more than $250,000 over the
preceding three months and the Adviser believes that economic conditions exist
which would make payments in cash 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.
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. If the Fund is unable to
recover any loss to itself, it is the position of the SEC that the Distributor
will be immediately obligated to make the Fund whole.
DETERMINATION OF NET ASSET VALUE
Net asset value ("NAV") is calculated separately for each class of the Fund. The
NAV of Class B Shares and Class C Shares of the Fund will generally be lower
than the NAV of Class A Shares or Class AAA Shares as a result of the higher
distribution-related fee to which Class B Shares and Class C Shares are subject.
It is expected, however, that the NAV 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 NAV 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.
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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.
DIVIDENDS AND DISTRIBUTIONS
Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, unless you have elected otherwise, be paid on the
payment date fixed by the Board of Trustees in additional shares of the Fund
having an aggregate net asset value as of the ex-dividend date of such dividend
or distribution equal to the cash amount of such distribution. An election to
receive dividends and distributions in cash or inadditional shares may be
changed by notifying the Fund in writing at any time prior to the record date
for a particular dividend or distribution. No sales charges or other fees are
imposed on shareholders in connection with the reinvestment of dividends and
capital gains distribution. There is no fixed dividend rate, and there can be no
assurance that the Fund will pay any dividends or realize any capital gains.
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 has qualified and intends to remain qualified 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 (including but not limited to
gains from options, futures, or forward contracts) 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
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invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies) of any
one issuer or of any two or more issuers that it controls and that are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses.
As a regulated investment company, the Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes 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 (which includes taxable
interest and dividend income and the excess of net short-term capital gains over
long-term capital losses) are taxable to U.S. shareholders 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 and to the extent the aggregate amount of
such dividends do not exceed the aggregate dividends received by the Fund for
the taxable year, may, subject to limitations, be eligible for the dividends
received deduction. The alternative minimum tax applicable to corporations,
however, 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.
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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.
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.
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 for noncorporate shareholders 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.
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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.
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.
Quotations of the Fund's total return will represent the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of 1, 5, and 10 years (up to the life of the Fund), and are calculated pursuant
to the following formula:
P (1 + T) n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period). Total
return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed by the Adviser) on an annual basis, and will assume that all
dividends and distributions are reinvested and will deduct the maximum sales
charge, if any is imposed.
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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.
The Fund's aggregate total return for Class AAA Shares since its inception on
August 26, 1999 through December 31, 1999 was
22.25%.
As of December 31, 1999, the Fund had not commenced offering Class A, Class B
and Class C Shares to the public.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
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.
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LIABILITIES
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 Delaware 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.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal period ended December 31, 1999,
including the report of Ernst & Young LLP, independent auditors, is incorporated
by reference to the Fund's Annual Report. The Fund's Annual Report is available
upon request and without charge. Ernst & Young LLP provides audit services, tax
return preparation and assistance and consultation in connection with certain
SEC filings.
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APPENDIX A
DESCRIPTION OF CORPORATE DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat large than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or
have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been suspended
or withdrawn, it may be for reasons unrelated to the quality of the issue.
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Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in
Moody's Investors Services, Inc.'s publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating
classification grom Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range rating; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
STANDARD & POOR'S RATINGS SERVICE
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's Ratings Service, a division of McGraw Hill Companies,
Inc. Capacity to pay interest and repay principal is extremely
strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only
in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in the highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B Bonds rated BB, B, CCC, CC and C are regarded, on balance,
CCC, as predominantly speculative with respect to capacity to pay
CC,C: interest and repay principal in accordance with the terms of
this obligation. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, they
are outweighed by large uncertainties of major risk exposures
to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no
interest is being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the
major rating categories.
or
Minus(-)
NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that
S&P does not rate a particular type of
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obligation as a matter of policy.
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THE GABELLI UTILITIES FUND
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Agreement and Declaration of Trust of Registrant is
incorporated by reference to Pre-Effective Amendment No. 1 to
the Registrant's Registration Statement on Form N-1A as filed
with the SEC via EDGAR on August 20, 1999 (Accession No.
0000950172-99-001002)("Pre-Effective Amendment No. 1").
(b) By-Laws of Registrant are incorporated by reference to
Pre-Effective Amendment No. 1.
(c) Not Applicable.
(d) Investment Advisory Agreement between the Registrant and
Gabelli Funds, LLC is filed herewith.
(e) Distribution Agreement between the Registrant and Gabelli &
Company, Inc. is filed herewith.
(f) Not Applicable.
(g) Custodian Agreement between the Registrant and State Street
Bank and Trust Company ("State Street") is filed herewith.
CustodianFee Schedule between the Registrant and State Street
is filed herewith.
(h) Registrar, Transfer Agency and Service Agreement between the
Registrant and State Street is filed herewith.
(i) Consent of Counsel incorporated by reference to Pre-Effective
Amendment No. 1.
(j) Consent of Independent Auditors is filed herewith.
Powers of attorney for Bruce N. Alpert, Anthony J. Colavita,
Vincent D.Enright, Mario J.Gabelli, Karl Otto Pohl and Werner
J. Roeder are incorporated by reference to the Registrant's
Registration Statement on Form N-1A as filed with the SEC via
EDGAR on June 7, 1999 (Accession No. 0000950172-99-000691).
(k) Not Applicable.
(l) Purchase Agreement with initial shareholder is incorporated by
reference to Pre-Effective Amendment No. 1.
(m) Plan of Distribution pursuant to Rule 12b-1 relating to Class
AAA Shares is incorporated by reference to Pre-Effective
Amendment No. 1.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
A Shares is incorporated by reference to Pre-Effective
Amendment No. 1.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
B Shares is incorporated by reference to Pre-Effective
Amendment No. 1.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
C Shares is incorporated by reference to Pre-Effective
Amendment No. 1.
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(n) Rule 18f-3 Multi-Class Plan is incorporated by reference to
Pre-Effective Amendment No. 1.
(o) Not Applicable.
(p) Revised Code of Ethics for the Registrant, Gabelli Funds, LLC
and Gabelli & Company, Inc. is filed herewith.
ITEM. 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM. 25. INDEMNIFICATION.
The response to this Item 25 is incorporated by reference to
Pre-Effective Amendment No. 1.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Gabelli Funds, LLC (the "Adviser") is a registered investment adviser
providing investment management and administrative services to the
Registrant. The Adviser also provides similar services to other mutual
funds.
The information required by this Item 26 with respect to any other
business, profession, vocation or employment of a substantial nature
engaged in by directors and officers of the Adviser during the
past two years is incorporated by reference to Form ADV filed by the
Adviser pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-37706).
ITEM. 27. PRINCIPAL UNDERWRITERS
(a) Gabelli & Company, Inc. currently acts as distributor for The
Gabelli ABC Fund, The Gabelli Asset Fund, The Gabelli Blue
Chip Value Fund, Gabelli Capital Asset Fund, The Gabelli
Convertible Securities Fund, Inc., The Gabelli Equity Income
Fund, The Gabelli Equity Trust Inc., The Gabelli Global
Convertible Securities Fund, The Gabelli Global Growth Fund,
The Gabelli Global Multimedia Trust Inc., The Gabelli Global
Telecommunications Fund, Gabelli Gold Fund, Inc., The Gabelli
Growth Fund, The Gabelli International Growth Fund, Inc., The
Gabelli Global Opportunity Fund, The Gabelli Mathers Fund, The
Gabelli Small Cap Growth Fund, The Gabelli U.S. Treasury Money
Market Fund, The Gabelli Utilities Fund, The Gabelli Utility
Trust, The Gabelli Value Fund, Inc. and the Gabelli Westwood
Funds.
(b) The information required by this Item 27 with respect to each
director, officer or partner of Gabelli & Company, Inc. is
incorporated by reference to Schedule A of Form BD filed by
Gabelli & Company, Inc. pursuant to the Securities Exchange
Act of 1934, as amended (SEC File No. 8-21373).
(c) Not Applicable.
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ITEM. 28. LOCATION OF ACCOUNTS AND RECORDS.
All such accounts, books and other documents required by Section 31(a)
of the Investment Company Act of 1940, as amended, and Rules 31a-1
through 31a-3 thereunder are maintained at the offices of the Adviser,
Gabelli Funds, LLC, One Corporate Center, Rye, New York 10580-1434;
PFPC Inc., 101 Federal Street, Boston, Massachusetts 02110; State
Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110; and Boston Financial Data Services, Inc., Two
Heritage Drive, North Quincy, Massachusetts 02171.
ITEM. 29. MANAGEMENT SERVICES.
Not Applicable.
ITEM. 30. UNDERTAKINGS.
Not Applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant, THE GABELLI
UTILITIES FUND, certifies that it meets all the requirements for effectiveness
of this Post Effective Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933, as amended, and has duly caused this
Post Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Rye and State
of New York on the 28th day of April, 2000.
THE GABELLI UTILITIES FUND
BY: /S/ BRUCE N. ALPERT
Bruce N. Alpert
Vice President and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 1 to its Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
SIGNATURES TITLE DATE
/S/ MARIO J. GABELLI* Chairman of the Board, President 04/28/00
Mario J. Gabelli and Chief Investment Officer
/S/ BRUCE N. ALPERT Vice President and 04/28/00
Bruce N. Alpert Treasurer
/S/ ANTHONY J. COLAVITA* Trustee 04/28/00
Anthony J. Colavita
/S/ VINCENT D. ENRIGHT* Trustee 04/28/00
Vincent D. Enright
/S/ KARL OTTO POHL* Trustee 04/28/00
Karl Otto Pohl
/S/ WERNER J. ROEDER* Trustee 04/28/00
Werner J. Roeder
*BY: /S/ BRUCE N. ALPERT
Bruce N. Alpert
Attorney-in-fact
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EXHIBIT INDEX
Exhibit
Number Description
23(d) Investment Advisory Agreement
23(e) Distribution Agreement
23(g) Custodian Agreement
Custodian Fee Schedule
23(h) Registrar, Transfer Agency and Service Agreement
23(j) Consent of Independent Auditors
23(p) Revised Code of Ethics
37
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of August 31, 1999, between The
Gabelli Utilities Fund (the "Fund"), a Delaware business trust, and Gabelli
Funds, LLC (the "Adviser"), a New York limited liability company.
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. IN GENERAL
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Fund with respect to the investment of the assets of
the Fund and to supervise and arrange the purchase and sale of assets held in
the investment portfolio of the Fund. The Adviser may delegate any or all of its
responsibilities to one or more sub-advisers or administrators, subject to the
approval of the Board of Trustees of the Fund. Such delegation shall not relieve
the Adviser of its duties and responsibilities hereunder.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO INVESTMENTS OF
ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Fund's Board of
Trustees, the Adviser shall (i) act as investment adviser for and
supervise and manage the investment and reinvestment of the
Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets
for the Fund and in voting, exercising consents and exercising
all other rights appertaining to such securities and other assets
on behalf of the Fund; (ii) arrange for the purchase and sale of
securities and other assets held in the investment portfolio of
the Fund and (iii) oversee the administration of all aspects of
the Fund's business and affairs and provide, or arrange for
others whom it believes to be competent to provide, certain
services as specified in subparagraph (b) below. Nothing
contained herein shall be construed to restrict the Fund's right
to hire its own employees or to contract for administrative
services to be performed by third parties, including but not
limited to, the calculation of the net asset value of the Fund's
shares.
(b) The specific services to be provided or arranged for by the
Adviser for the Fund are (i) maintaining the Fund's books and
records, such as journals, ledger accounts and other records in
accordance with applicable laws and regulations to the extent not
maintained by the Fund's custodian, transfer agent and dividend
disbursing agent; (ii) transmitting purchase and redemption
orders for the Fund's shares to the extent not transmitted by the
Fund's distributor or others who purchase and redeem shares;
(iii) initiating all money transfers to the Fund's custodian and
from the Fund's custodian for the payment of the Fund's expenses,
investments, dividends and share redemptions; (iv) reconciling
account information and balances among the Fund's custodian,
transfer agent, distributor, dividend disbursing agent and the
Adviser; (v) providing the Fund, upon request, with such office
space and facilities, utilities and office equipment as are
adequate for the Fund's needs; (vi) preparing, but not paying
for, all reports by the Fund to its shareholders and all reports
and filings required to maintain the registration and
qualification of the Fund's shares under federal and state law
including periodic updating of the Fund's registration statement
and the Fund's Prospectus (including its Statement of Additional
Information); (vii) supervising the calculation of the net asset
value of the Fund's shares; and (viii) preparing notices and
agendas for meetings of the Fund's shareholders and the Fund's
Board of Trustees as well as minutes of such meetings in all
matters required by applicable law to be acted upon by the Board
of Trustees.
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(c) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform
to, and act in accordance with, any requirements imposed by (i)
the provisions of the Investment Company Act of 1940, as amended
(the "Act"), and of any rules or regulations in force thereunder;
(ii) any other applicable provision of law; (iii) the provisions
of the Declaration of Trust, as amended, and By-Laws of the Fund,
as such documents are amended from time to time; (iv) the
investment objectives, policies and restrictions applicable to
the Fund as set forth in the Fund's Registration Statement on
Form N-1A and (v) any policies and determinations of the Board of
Trustees of the Fund.
(d) The Adviser will seek to provide qualified personnel to fulfill
its duties hereunder and will bear all costs and expenses
(including any overhead and personnel costs) incurred in
connection with its duties hereunder and shall bear the costs of
any salaries or Trustees fees of any officers or trustees of the
Fund who are affiliated persons (as defined in the Act) of the
Adviser. Subject to the foregoing, the Fund shall be responsible
for the payment of all the Fund's other expenses, including (i)
payment of the fees payable to the Adviser under paragraph 4
hereof; (ii) organizational expenses; (iii) brokerage fees and
commissions; (iv) taxes; (v) interest charges on borrowings; (vi)
the cost of liability insurance or fidelity bond coverage for the
Fund officers and employees, and trustees' and officers' errors
and omissions insurance coverage; (vii) legal, auditing and
accounting fees and expenses; (viii) charges of the Fund's
custodian, transfer agent and dividend disbursing agent; (ix) the
Fund's pro rata portion of dues, fees and charges of any trade
association of which the Fund is a member; (x) the expenses of
printing, preparing and mailing proxies, stock certificates and
reports, including the Fund's prospectus and statement of
additional information, and notices to shareholders; (xi) filing
fees for the registration or qualification of the Fund and its
shares under federal or state securities laws; (xii) the fees and
expenses involved in registering and maintaining registration of
the Fund's shares with the Securities and Exchange Commission;
(xiii) the expenses of holding shareholder meetings; (xiv) the
compensation, including fees, of any of the Fund's trustees,
officers or employees who are not affiliated persons of the
Adviser; (xv) all expenses of computing the Fund's net asset
value per share, including any equipment or services obtained
solely for the purpose of pricing shares or valuing the Fund's
investment portfolio; (xvi) expenses of personnel performing
shareholder servicing functions and all other distribution
expenses payable by the Fund; and (xvii) litigation and other
extraordinary or non-recurring expenses and other expenses
properly payable by the Fund.
(e) The Adviser shall give the Fund the benefit of its best judgment
and effort in rendering services hereunder, but neither the
Adviser nor any of its officers, directors, employees, agents or
controlling persons shall be liable for any act or omission or
for any loss sustained by the Fund in connection with the matters
to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard
of its obligations and duties under this Agreement; provided,
however, that the foregoing shall not constitute a waiver of any
rights which the Fund may have which may not be waived under
applicable law.
(f) Nothing in this Agreement shall prevent the Adviser or any
director, officer, employee or other affiliate thereof from
acting as investment adviser for any other person, firm or
corporation, or from engaging in any other lawful activity, and
shall not in any way limit or restrict the Adviser or any of its
directors, officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting.
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3. PORTFOLIO TRANSACTIONS
In the course of the Adviser's execution of portfolio transactions for
the Fund, it is agreed that the Adviser shall employ securities brokers and
dealers which, in its judgment, will be able to satisfy the policy of the Fund
to seek the best execution of its portfolio transactions at reasonable expenses.
For purposes of this agreement, "best execution" shall mean prompt, efficient
and reliable execution at the most favorable price obtainable. Under such
conditions as may be specified by the Fund's Board of Trustees in the interest
of its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale of the
Fund's portfolio securities with its affiliate, Gabelli & Company, Inc.; (b) pay
commissions to brokers other than its affiliate 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 in the performance of its
duties hereunder and for the investment management of other advisory accounts
over which it or its affiliates exercise investment discretion; and (c) consider
sales by brokers (other than its affiliate distributor) of shares of the Fund
and any other mutual fund for which it or its affiliates act as investment
adviser, as a factor in its selection of brokers and dealers for the Fund's
portfolio transactions.
4. COMPENSATION OF THE ADVISER
(a) Subject to paragraph 2(b), the Fund agrees to pay to the Adviser
out of the Fund's assets and the Adviser agrees to accept as full
compensation for all services rendered by or through the Adviser
(other than any amounts payable to the Adviser pursuant to
paragraph 4(b) a fee computed daily and payable monthly in an
amount equal on an annualized basis to 1.0% of the Fund's daily
average net asset value. For any period less than a month during
which this Agreement is in effect, the fee shall be prorated
according to the proportion which such period bears to a full
month of 28, 29, 30 or 31 days, as the case may be.
(b) The Fund will pay the Adviser separately for any costs and
expenses incurred by the Adviser in connection with distribution
of the Fund's shares in accordance with the terms (including
proration or nonpayment as a result of allocations of payments)
of Plans of Distribution (collectively, the "Plan") adopted by
the Fund pursuant to Rule 12b-1 under the Act as such Plan may be
in effect from time to time; provided, however, that no payments
shall be due or paid to the Adviser hereunder unless and until
this Agreement shall have been approved by Board Approval and
Disinterested Board Approval (as such terms are defined in such
Plan). The Fund reserves the right to modify or terminate such
Plan at any time as specified in the Plan and Rule 12b-1, and
this subparagraph shall thereupon be modified or terminated to
the same extent without further action of the parties. The
persons authorized to direct the payment of the funds pursuant to
this Agreement and the Plan shall provide to the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly a
written report of the amount so paid and the purposes for which
such expenditures were made.
(c) For purposes of this Agreement, the net assets of the Fund shall
be calculated pursuant to the procedures adopted by resolutions
of the Trustees of the Fund for calculating the net asset value
of the Fund's shares.
5. INDEMNITY
(a) The Fund hereby agrees to indemnify the Adviser and each of the
Adviser's directors, officers, employees, and agents (including
any individual who serves at the Adviser's request as director,
officer, partner, trustee or the like of another corporation) and
controlling persons (each such person being an "indemnitee)
against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and
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<PAGE>
penalties, and counsel fees (all as provided in accordance with
applicable corporate law) reasonably incurred by such indemnitee
in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court
or administrative or investigative body in which he may be or may
have been involved as a party or otherwise or with which he may
be or may have been threatened, while acting in any capacity set
forth above in this paragraph or thereafter by reason of his
having acted in any such capacity, except with respect to any
matter as to which he shall have been adjudicated not to have
acted in good faith in the reasonable belief that his action was
in the best interest of the Fund and furthermore, in the case of
any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that
(1) no indemnitee shall be indemnified hereunder against any
liability to the Fund or its shareholders or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad
faith, (iii) gross negligence iv) reckless disregard of the
duties involved in the conduct of his position (the conduct
referred to in such clauses (i) through (v) being sometimes
referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such
indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such
settlement or compromise is in the best interests of the Fund and
that such indemnitee appears to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Fund and did not involve disabling conduct by such indemnitee and
(3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of
such action, suit or other proceeding by such indemnitee was
authorized by a majority of the full Board of the Fund.
Notwithstanding the foregoing the Fund shall not be obligated to
provide any such indemnification to the extent such provision
would waive any right which the Fund cannot lawfully waive.
(b) The Fund shall make advance payments in connection with the
expenses of defending any action with respect to which
indemnification might be sought hereunder if the Fund receives a
written affirmation of the indemnitee's good faith belief that
the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Fund unless it is
subsequently determined that he is entitled to such
indemnification and if the trustees of the Fund determine that
the facts then known to them would not preclude indemnification.
In addition, at least one of the following conditions must be
met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Fund shall be insured against losses arising
by reason of any lawful advances, or (C) a majority of a quorum
of trustees of the Fund who are neither "interested persons" of
the Fund (as defined in Section 2(a)(19) of the Act) nor parties
to the proceeding ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine,
based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that
the indemnitee ultimately will be found entitled to
indemnification.
(c) All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such
indemnitee is not liable by reason of disabling conduct or, (2)
in the absence of such a decision, by (i) a majority vote of a
quorum of the Disinterested Non-Party Trustees of the Fund, or
(ii) if such a quorum is not obtainable or even, if obtainable,
if a majority vote of such quorum so directs, independent legal
counsel in a written opinion.
The rights accruing to any indemnitee under these provisions shall not
exclude any other right to which he may be lawfully entitled.
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<PAGE>
6. DURATION AND TERMINATION
This Agreement shall become effective upon on the date hereof and shall
continue in effect for a period of two years and thereafter from year to year,
but only so long as such continuation is specifically approved at least annually
in accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without penalty
upon giving the Fund sixty days written notice (which notice may be waived by
the Fund) and may be terminated by the Fund at any time without penalty upon
giving the Adviser sixty days notice (which notice may be waived by the
Adviser), provided that such termination by the Fund shall be directed or
approved by the vote of a majority of the Trustees of the Fund in office at the
time or by the vote of the holders of a "majority of the voting securities" (as
defined in the Act) of the Fund at the time outstanding and entitled to vote or,
with respect to paragraph 4(b), by a majority of the Trustees of the Fund who
are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to the
Plan. This Agreement shall terminate automatically in the event of its
assignment (as "assignment" is defined in the Act and the rules thereunder.)
It is understood and hereby agreed that the word "Gabelli" is the property
of the Adviser for copyright and other purposes. The Fund further agrees that
the word "Gabelli" in its name is derived from the name of Mario J. Gabelli and
such name may freely be used by the Adviser for other investment companies,
entities or products. The Fund further agrees that, in the event that the
Adviser shall cease to act as investment adviser to the Fund and the Fund shall
promptly take all necessary and appropriate action to change its name to names
which do not include the word "Gabelli"; provided, however, that the Fund may
continue to use the word "Gabelli" if the Adviser consents in writing to such
use.
7. NOTICES
Any notice under this Agreement shall be in writing to the other party at
such address as the other party may designate from time to time for the receipt
of such notice and shall be deemed to be received on the earlier of the date
actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
8. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of New York for contracts to be performed entirely therein and in accordance
with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers, all as of the day and the year
first above written.
THE GABELLI UTILITIES FUND
BY: /S/ BRUCE N. ALPERT
Name: Bruce N. Alpert
Title: Vice President and Treasurer
GABELLI FUNDS, LLC
BY: /S/ STEPHEN G. BONDI
Name: Stephen G. Bondi
Title: Vice President of Finance
42
DISTRIBUTION AGREEMENT
FOR
THE GABELLI UTILITIES FUND
DISTRIBUTION AGREEMENT, dated July __, 1999, between The Gabelli Utilities
Fund, a Delaware business trust (the "Fund"), and Gabelli & Company, Inc., a New
York corporation (the "Distributor"). The Fund is registered as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and an indefinite number of shares (the "Shares") of the Fund, par value $.001
per share (the "Shares"), have been registered under the Securities Act of 1933,
as amended (the "1933 Act") to be offered for sale to the public in a continuous
public offering in accordance with terms and conditions set forth in the
Prospectus and Statement of Additional Information (the "Prospectus") of the
Fund included in the Fund's Registration Statement on Form N-1A as such
documents may be amended from time to time.
In this connection, the Fund desires that the Distributor act as its
exclusive sales agent and distributor for the sale and distribution of Shares.
The Distributor has advised the Fund that it is willing to act in such
capacities, and it is accordingly agreed between them as follows:
1. The Fund hereby appoints the Distributor as exclusive sales agent
and distributor for the sale and distribution of Shares pursuant to
the aforesaid continuous public offering of Shares, and the Fund
further agrees from and after the commencement of such continuous
public offering that it will not, without the Distributor's
consent, sell or agree to sell any Shares otherwise than through
the Distributor, except the Fund may issue Shares in connection
with a merger, consolidation or acquisition of assets on such basis
as may be authorized or permitted under the 1940 Act.
2. The Distributor hereby accepts such appointment and agrees to use
its best efforts to sell such Shares; provided, however, that when
requested by the Fund at any time for any reason the Distributor
will suspend such efforts. The Fund may also withdraw the offering
of Shares at any time when required by the provisions of any
statute, order, rule or regulation of any governmental body having
jurisdiction. It is understood that the Distributor does not
undertake to sell all or any specific portion of the Shares of the
Fund. The Fund acknowledges that the Distributor will enter into
sales or servicing agreements with registered securities brokers
and banks and into servicing agreements with financial institutions
and other industry professionals, such as investment advisers,
accountants and estate planning firms. In entering into such
agreements, the Distributor shall act only on its own behalf as
principal underwriter and distributor. The Distributor shall not be
responsible for making any distribution plan or service fee
payments pursuant to any plans the Fund may adopt or agreements it
may enter into.
3. The Distributor represents that it is a member in good standing of
the National Association of Dealers, Inc. and agrees that it will
use all reasonable efforts to maintain such status and to abide by
the Rules of Fair Practice, the Constitution and the Bylaws of the
National Association of Securities Dealers, Inc., and all other
rules and regulations that are now or may become applicable to its
performance hereunder. The Distributor will undertake and discharge
its obligations hereunder as an independent contractor and it shall
have no authority or power to obligate or bind the Fund by its
actions, conduct or contracts except that it is authorized to
accept orders for the purchase or repurchase of Shares as the
Fund's agent and subject to its approval. The Fund reserves the
right to reject any order in whole or in part. The Distributor may
appoint sub-agents or distribute through dealers or otherwise as it
may determine from time to time pursuant to agreements approved by
the Fund, but this Agreement shall not be construed as authorizing
any dealer or other person to accept orders for sale or repurchase
of Shares on behalf of the Fund or
43
<PAGE>
otherwise act as the Fund's agent for any purpose. The Distributor
shall not utilize any materials in connection with the sale or
offering of Shares except the then current Prospectus and such
other materials as the Fund shall provide or approve in writing.
4. Shares may be sold by the Distributor only at prices and terms
described in the then current Prospectus relating to the Shares and
may be sold either through persons with whom it has selling
agreements in a form approved by the Fund's Board of Trustees or
directly to prospective purchasers. To facilitate sales, the Fund
will furnish the Distributor with the net asset value of its Shares
promptly after each calculation thereof.
5. The Fund has delivered to the Distributor a copy of the current
Prospectus for the Fund. It agrees that it will use its best
efforts to continue the effectiveness of its Registration Statement
filed under the 1933 Act and the 1940 Act. The Fund further agrees
to prepare and file any amendments to its Registration Statement as
may be necessary and any supplemental data in order to comply with
such Acts. The Fund will furnish the Distributor at the
Distributor's expense with a reasonable number of copies of the
Prospectus and any amended Prospectus for use in connection with
the sale of Shares.
6. At the Distributor's request, the Fund will take such steps at its
own expense as may be necessary and feasible to qualify Shares for
sale in states, territories or dependencies of the United States of
America and in the District of Columbia in accordance with the laws
thereof, and to renew or extend any such qualification; provided,
however, that the Fund shall not be required to qualify Shares or
to maintain the qualification of Shares in any state, territory,
dependency or district where it shall deem such qualification
disadvantageous to the Fund.
7. The Distributor agrees that:
(a) It will furnish to the Fund any pertinent information required
to be inserted with respect to the Distributor as exclusive
sales agent and distributor within the purview of Federal and
state securities laws in any reports or registrations required
to be filed with any government authority;
(b) It will not make any representations inconsistent with the
information contained in the Registration Statement or
Prospectus filed under the Securities Act of 1933, as in
effect from time to time;
(c) It will not use or distribute or authorize the use or
distribution of any statements other than those contained in
the Fund's then current Prospectus or in such supplemental
literature or advertising as may be authorized in writing by
the Fund; and
(d) Subject to Paragraph 9 below, the Distributor will bear the
costs and expenses of printing and distributing any copies of
any prospectuses and annual and interim reports of the Fund
(after such items have been prepared and set in type) which
are used in connection with the offering of Shares, and the
costs and expenses of preparing, printing and distributing any
other literature used by the Distributor or furnished by the
Distributor for use in connection with the offering of the
Shares and the costs and expenses incurred by the Distributor
in advertising, promoting and selling Shares of the Fund to
the public. The Fund has adopted a separate plan of
distribution (collectively, the "Plan") pursuant to the
provisions of rule 12b-1 of the 1940 Act on behalf of its
Class A, Class B, Class C and Class AAA shares, respectively,
each of which provides for the payment of administrative and
sales related expenses in connection with the distribution of
Fund shares and the Distributor agrees to take no action
inconsistent with said Plan.
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<PAGE>
8. The Fund will pay its legal and auditing expenses and the cost of
composition of any prospectuses of annual or interim reports of the
Fund.
9. The Fund will pay the Distributor for costs and expenses incurred
by the Distributor in connection with distribution of Shares by the
Distributor in accordance with the terms of a Plan of Distribution
(the "Plan") adopted by the Fund pursuant to Rule 12b-1 under the
1940 Act as such Plan may be in effect from time to time; provided,
however, that no payments shall be due or paid to the Distributor
hereunder unless and until this Agreement shall have been approved
by Board Approval and Disinterested Board Approval (as such terms
are defined in such Plan). The Fund reserves the right to modify or
terminate such Plan at any time as specified in the Plan and Rule
12b-1, and this Section 9 shall thereupon be modified or terminated
to the same extent without further action of the parties. The
persons authorized to direct the payment of funds pursuant to this
Agreement and the Plan shall provide to the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly a
written report of the amounts so paid and the purposes for which
such expenditures were made.
10. The Fund agrees to indemnify, defend and hold the Distributor, its
officers, directors, employees and agents and any person who
controls the Distributor within the meaning of Section 15 of the
1933 Act (each, an "indemnitee"), free and harmless from any and
all liabilities and expenses, including costs of investigation or
defense (including reasonable counsel fees) incurred by such
indemnitee in connection with the defense or imposition of any
action, suit or other proceeding, whether civil or criminal, in
which such indemnitee may be or may have been involved as a party
or otherwise or with which he may be or may have been threatened,
while the Distributor was active in such capacity or by reason of
the Distributor having acted in any such capacity or arising out of
or based upon any untrue statement of a material fact contained in
the then-current Prospectus relating to the Shares or arising out
of or based upon any alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information
furnished in writing by the Distributor to the Fund expressly for
use in any such Prospectus; provided, however, that (1) no
indemnitee shall be indemnified thereunder against any liability to
the Fund or the shareholders of the Fund or any expense of such
indemnitee with respect to any matter as to which such indemnitee
shall have been adjudicated not to have acted in good faith in the
reasonable belief that its action was in the best interest of the
Fund or arising by reason of such indemnitee's willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations under this
Agreement ("disabling conduct"), or (2) as to any matter disposed
of by settlement or a compromise payment by such indemnitee, no
indemnification shall be provided unless there has been a
determination that such settlement or compromise is in the best
interests of the Fund and that such indemnitee appears to have
acted in good faith in the reasonable belief that its action was in
the best interest of the Fund and did not involve disabling conduct
by such indemnitee. Notwithstanding the foregoing the Fund shall
not be obligated to provide any such indemnification to the extent
such provision would waive any right which the Fund cannot lawfully
waive.
The Distributor agrees to indemnify, defend and hold the Fund, its
Trustees, officers, employees and agents and any person who
controls the Fund within the meaning of Section 15 of the 1933 Act
(each, an "indemnitee"), free and armless from and against any and
all liabilities and expenses, including costs of investigation or
defense (including reasonable counsel fees) incurred by such
indemnitee, but only to the extent that such liability or expense
shall arise out of or be based upon any untrue or alleged untrue
statement of a material fact contained in information furnished in
writing by the Distributor of the Fund expressly for use in a
Prospectus or any alleged omission to state a material fact in
connection with such information required to be stated therein
45
<PAGE>
or necessary to make such information not misleading or arising by
reason of disabling conduct by such indemnitee or any person
selling Shares pursuant to an agreement with the Distributor.
The Fund shall make advance payments in connection with the
expenses of defending any action with respect to which
indemnification might be sought hereunder if the Fund receives a
written affirmation of the indemnitee's good faith belief that the
standard of conduct necessary for indemnification has been met and
a written undertaking to reimburse the Fund unless it is
subsequently determined that he is entitled to such indemnification
and if the trustees of the Fund determine that the facts then known
to them would not preclude indemnification. In addition, at least
one of the following conditions must be met: (A) the indemnitee
shall provide a security for his undertaking, (B) the Fund shall be
insured against losses arising by reason of any lawful advances, or
(C) a majority of a quorum of trustees of the Fund who are neither
"interested persons" of the Fund (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party
Trustees") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.
All determinations with respect to indemnification hereunder shall
be made (1) by a final decision on the merits by a court or other
body before whom the proceeding was brought that such indemnitee is
not liable by reason of disabling conduct or, (2) in the absence of
such a decision, by (i) a majority vote of a quorum of the
Disinterested Non-Party Trustees of the Fund, or (ii) if such a
quorum is not obtainable or even, if obtainable, if a majority vote
of such quorum so directs, independent legal counsel in a written
opinion.
11. This Agreement shall become effective on the date first set forth
above and shall remain in effect for up to two years from such date
(one year in the case of Section 9 and thereafter from year to year
provided such continuance is specifically approved at least
annually prior to each anniversary of such date by (a) Board
Approval or by vote at a meeting of shareholders of the Fund of the
lesser of (i) 67 per cent of the Shares present or represented by
proxy and (ii) 50 per cent of the outstanding Shares and (b) by
Disinterested Board Approval.
12. This Agreement may be terminated (a) by the Distributor at any time
without penalty by giving sixty (60) days' written notice to the
Fund which notice may be waived by the Fund; or (b) by the Fund at
any time without penalty upon sixty (60) days' written notice to
the Distributor (which notice may be waived by the Distributor);
provided, however, that any such termination by the Fund shall be
directed or approved in the same manner as required for continuance
of this Agreement by Section 11(a) (or, in the case of termination
of Section 9, by Section 11(b)).
13. This Agreement may not be amended or changed except in writing
signed by each of the parties hereto and approved in the same
manner as provided for continuance of this Agreement in Section
11(a) (or, in the case of amendment of Section 9, by Section
11(b)). Any such amendment or change shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors, but this Agreement shall not be assigned by
either party and shall automatically terminate upon assignment (as
such term is defined in the 1940 Act and the rules thereunder).
14. This Agreement shall be construed in accordance with the laws of
the State of New York applicable to agreements to be performed
entirely therein and in accordance with applicable provisions of
the 1940 Act.
15. If any provision of this Agreement shall be held or made invalid or
unenforceable by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected or impaired
thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
THE GABELLI UTILITIES FUND
BY: /S/ BRUCE N. ALPERT
Name: Bruce N. Alpert
Title: Vice President
GABELLI & COMPANY, INC.
BY: /S/ BRUCE N. ALPERT
Name: Bruce N. Alpert
Title: Vice President
47
CUSTODIAN CONTRACT
Between
THE GABELLI UTILITIES FUND
and
STATE STREET BANK AND TRUST COMPANY
48
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian with Respect to Property
of the Fund Held By the Custodian 1
2.1 Holding Securities 1
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 5
2.5 Payments for Shares 5
2.6 Availability of Federal Funds 6
2.7 Collection of Income 6
2.8 Payment of Fund Monies 6
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased 8
2.10 Payments for Repurchases or
Redemptions of Shares of
the Fund 8
2.11 Appointment of Agents 8
2.12 Deposit of Fund Assets in
Securities Systems 9
2.13 Fund Assets Held in the
Custodian's Direct
Paper System 10
2.14 Segregated Account 11
2.15 Ownership Certificates for Tax Purposes 12
2.16 Proxies 12
2.17 Communications Relating to
Fund Portfolio Securities 12
2.18 Proper Instructions 12
2.17 Actions Permitted without
Express Authority 13
2.20 Evidence of Authority 14
2. Duties of Custodian with Respect to the Books
of Account and Calculation of Net Asset
Value and Net Income 14
4. Records 14
5. Opinion of Fund's Independent Accountant 15
6. Reports to Fund by Independent Public
Accountants 15
7. Compensation of Custodian 15
8. Responsibility of Custodian 15
9. Effective Period, Termination and Amendment 16
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<PAGE>
10. Successor Custodian 17
11. Interpretive and Additional Provisions 18
12. Massachusetts Law to Apply 18
13. Prior Contracts 18
50
<PAGE>
CUSTODIAN CONTRACT
This Contract between The Gabelli Utilities Fund, a business trust
organized and existing under the laws of Delaware, having its principal place of
business at One Corporate Center, Rye, NY 10580, hereinafter called the "Fund",
and State Street Bank and Trust Company, a Massachusetts business trust, having
its principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the ("Custodian").
WITNESSETH, that in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Declaration of Trust. The Fund agrees to
deliver to the Custodian all securities and cash owned by it, and all payments
of income, payments of principal or capital distributions received by it with
respect to all securities owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest ("Shares") of the Fund as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund held or received
by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section 2.17),
the Custodian shall from time to time employ one or more subcustodians, but only
in accordance with an applicable vote by the Board of Trustees of the Fund, and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN
2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property,
including all securities owned by the Fund, other than (a)
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as a Securities System'
and (b) commercial paper of an issuer for which State Street Bank
and Trust Company acts as issuing and paying agent ("Direct Paper)
which is deposited and/or maintained in the Direct Paper System of
the Custodian pursuant to Section 2.12A.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper Account")
only upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
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<PAGE>
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Article l; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
PROVIDED that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) FOR DELIVERY IN CONNECTION WITH ANY LOANS OF SECURITIES MADE
BY THE FUND, BUT ONLY against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange,
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or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions
by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption;
and
For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or
an Assistant Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be
made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund
or in the name of any nominee of the Fund or of any nominee of the
CUSTODIAN WHICH NOMINEE SHALL BE ASSIGNED EXCLUSIVELY TO THE FUND,
UNLESS the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment
companies having the same investment adviser as the Fund, or in the
name or nominee name of any agent appointed pursuant to Section
2.11 or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Contract shall be in
"street name or other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in street name, the
Custodian shall utilize its best efforts only to timely collect
income due the Fund on such securities and to notify the Fund on a
best efforts basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject
to the provisions hereof, all cash received by it from or for the
account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by
the Custodian only in that capacity.
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2.5 PAYMENTS FOR SHARES. The Custodian shall receive from the
distributor for the Fund's Shares or from the Transfer Agent of the
Fund and deposit into the Fund's account such payments as are
received for Shares of the Fund issued or sold from time to time by
the Fund. The Custodian will provide timely notification to the
Fund and the Transfer Agent of any receipt by it of payments for
Shares of the Fund.
2.6 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the
Fund and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions, make federal funds available to the Fund as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
the Fund which are deposited into the Fund's account.
2.7 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall
credit such income, as collected, to the Fund's custodian account.
Without limiting the generality of the foregoing, the Custodian
shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall
collect interest when due on securities held hereunder. Income due
the Fund on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which the Fund is properly
entitled.
2.8 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out monies of the Fund in the
following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but
only (a) against the delivery of such securities or evidence
of title to such options, futures contracts or options on
futures contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940,
as amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the
name of the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.12 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.12A; (d) n the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation
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from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Section 2.17;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) FOR ANY OTHER PROPER PURPOSE, BUT ONLY upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian in
advance of receipt of the securities purchased in the absence of
specific written instructions from the Fund to so pay in advance,
the Custodian shall be bsolutely liable to the Fund for such
securities to the same extent as if the securities had been
received by the Custodian.
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. From
such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of
the Board of Trustees of the Fund pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make
funds available for payment to holders of Shares who have delivered
to the Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the Fund,
the Custodian shall honor checks drawn on the Custodian by a holder
of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance
with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
2.11 APPOINTMENT OF AGENTS. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the Investment
Company Act of 1940, as amended, to act as a custodian, as its
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agent to carry out such of the provisions of this Article 2 AS THE
CUSTODIAN MAY FROM TIME TO TIME DIRECT; PROVIDED, however, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by
the U.S. department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to
the following provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon (i) receipt of advice
from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all advices
from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the
Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the Securities System
for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
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respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
2.13 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The
Custodian may deposit and/or maintain securities owned by the Fund
in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of dally transaction sheets reflecting each day's
transaction in the Securities System for the account of the
Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time;
2.14 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or
the Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by
the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purpose of compliance
by the Fund with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
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other proper corporate purposes, but only, in the case of clause
(iv), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and certified
by the Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.15 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of income
or other payments with respect to securities of the Fund held by it
and in connection with transfers of securities.
2.16 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be Promptly executed by the registered holder
of such securities, if the securities are registered otherwise than
in the name of the Fund or a nominee of the Fund, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies, all
proxy soliciting materials and all notices relating to such
securities.
2.17 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. Subject to
the provisions of Section 2.3, the Custodian shall transmit
promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities being held
for the Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Fund
desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Fund shall notify the
Custodian at least three business days prior to the date on which
the Custodian is to take such action.
2.18 PROPER INSTRUCTIONS. Proper Instructions as used throughout this
Article 2 means a writing signed or initialed by one or more person
or persons as the Board of Trustees shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to
be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the
Board of Trustees of the Fund accompanied by a detailed description
of procedures approved by the Board of Trustees, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures
afford adequate safeguards for the Fund's assets. For purposes of
this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with
Section 2.13.
2.19 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items RELATING TO ITS
DUTIES UNDER THIS CONTRACT, PROVIDED that all such payments
shall be accounted for to the Fund;
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2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Trustees of the Fund.
2.20 EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The Custodian
may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant to
the Declaration of Trust as described in such vote, and such vote
may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the daily income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective prospectus.
4. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the custodian,
include certificate numbers in such tabulations.
5. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants With respect to its activities hereunder in connection
with the preparation of the Fund's Form N-lA, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
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6. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
7. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
8. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into between the
Custodian and the Fund.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of Fund
assets to the extent necessary to obtain reimbursement.
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than THIRTY (30)
DAYS AFTER THE DATE OF SUCH DELIVERY OR MAILING; PROVIDED, however that the
Custodian shall not act under Section .12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Trustees
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has reviewed the use by the Fund of such Securities System, as required in each
case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that
the Custodian shall not act under Section 2.12A hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has approved the initial use of the Direct Paper System and
the receipt of an annual certificate of the Secretary or an Assistant SECRETARY
THAT THE BOARD OF TRUSTEES HAS REVIEWED THE USE BY THE FUND OF THE DIRECT PAPER
SYSTEM; PROVIDED FURTHER, however, that the Fund shall not amend or terminate
this Contract in contravention of any applicable federal or state regulations,
or any provision of the Declaration of Trust, and further provided, that the
Fund may at any time by action of its Board of Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Trustees of the
Fund, the Custodian shall, upon termination, deliver to such successor custodian
at the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a bank as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to an account of
such successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
12. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
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<PAGE>
13. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of August 20, 1999.
THE GABELLI UTILITIES FUND FUND SIGNATURE ATTESTED BY:
BY: /S/ BRUCE N. ALPERT BY: /S/ PETER D. GOLDSTEIN
Name: Bruce N. Alpert Name: Peter D. Goldstein
Title: Treasurer Title: Deputy Gen. Counsel, Gabelli
Asset Management Inc.
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED BY:
BY: /S/ RONALD E. LOGUE BY: /S/ MARC L. PARSONS
Name: Ronald E. Logue Name: Marc L. Parsons
Title: Vice Chairman Title: Associate Counsel
62
STATE STREET
GABELLI FUNDS, LLC
THE GABELLI BLUE CHIP VALUE FUND
THE GABELLI UTILITIES FUND
FORM OF GLOBAL CUSTODY FEE SCHEDULE
CUSTODY: Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions in local and base currency. Withhold
foreign taxes. File foreign tax reclaims. Monitor corporate actions. Report
portfolio positions.
<TABLE>
<CAPTION>
COUNTRY * HOLDING TRANSACTION COUNTRY *HOLDING TRANSACTION
CHARGES IN CHARGES CHARGES IN CHARGES
BASIS POINTS (PER TRADE) BASIS POINTS (PER TRADE)
(ANNUAL FEE) (ANNUAL FEE)
========================================================================================================
<S> <C> <C> <C> <C> <C>
Argentina 45.0 $125 Lebanon 40.0 $100
Australia 5.0 $25 Lithuania 35.0 $50
Austria 15.0 $25 Luxembourg 35.0 $100
Bahrein 50.0 $150 Malaysia 15.0 $50
Bangladesh 45.0 $125 Mauritius 45.0 $125
Belgium 15.0 $50 Mexico 15.0 $50
Bermuda 65.0 $150 Morocco 35.0 $100
Bolivia 45.0 $125 Namibia 45.0 $125
Botswana 35.0 $100 Netherlands 15.0 $50
Brazil 35.0 $100 New Zealand 5.0 $25
Bulgaria 50.0 $100 Norway 15.0 $50
Canada 5.0 $25 Oman 65.0 $150
Chile 45.0 $125 Pakistan 45.0 $125
China 35.0 $100 Peru 45.0 $125
Colombia 45.0 $125 Philippines 15.0 $50
Croatia 50.0 $100 Poland 45.0 $125
Cyprus 45.0 $125 Portugal 15.0 $50
Czech Republic 35.0 $100 Romania 75.0 $100
Denmark 5.0 $25 Russia 50.0 $300
Ecuador 35.0 $100 Singapore 15.0 $50
Egypt 35.0 $100 Slovakia 45.0 $125
Estonia 50.0 $50 Slovak Republic 45.0 $75
Euroclear 5.0 $25 Slovania 75.0 $100
Finland 15.0 $50 South Africa 5.0 $25
France 5.0 $25 South Korea 45.0 $125
Germany 5.0 $25 Spain 15.0 $50
Ghana 35.0 $100 Sri Lanka 35.0 $100
Greece 45.0 $125 Swaziland 75.0 $200
Hong Kong 15.0 $50 Sweden 15.0 $50
Hungary 45.0 $125 Switzerland 5.0 $25
Iceland 35.0 $50 Taiwan 35.0 $100
India 45.0 $125 Thailand 15.0 $50
Indonesia 15.0 $50 Trinidad & 35.0 $100
Tobago
Ireland 15.0 $50 Tunisia 45.0 $125
Israel 35.0 $100 Turkey 35.0 $100
Italy 5.0 $25 Ukraine 75.0 $300
</TABLE>
63
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Ivory Coast 75.0 $150 United Kingdom 5.0 $25
Jamaica 45.0 $125 Uruguay 45.0 $125
Japan 5.0 $25 USA 1.0 SSB Repos/
Euros-$7;
Book Entry-$12
All Other-$25
FX 3rd Party-$50
Jordan 45.0 $125 Venezuela 45.0 $125
Kenya 35.0 $100 Zambia 35.0 $100
Latvia 65.0 $50 Zimbabwe 35.0 $100
- -------------------------------------------------------------------------------------------------------
</TABLE>
SPECIAL SERVICES:
Fees for activities of a non-recurring nature such as fund consolidations or
reorganizations, extraordinary security shipments and the preparation of special
reports will be subject to negotiation. These services include, but are not
limited to, the following: fees for fund administration activities, self
directed securities lending, linkages/feeds with third party lending agents,
development of customized reports, financial reporting, and access to State
Street systems.
OUT-OF-POCKET EXPENSES:
A billing for the recovery of applicable out-of-pocket expenses will be made as
of the end of each month. These out-of-pocket expenses may be adjusted based on
market conditions or other circumstances. Out-of-pocket expenses include, but
are not limited to the following:
o Communications/equipment costs o Duplicating
(telephone, lease lines, etc.) o Non-recurring legal fees
o Wire charges ($5.25 in and $5 out) o Third-party internal control
o Postage and insurance review letter
o Courier service o Subcustodian out-of-pocket
charges (market fees,
registration fees, stamp
duties, etc.)
o SWIFT charges
o 17f-5 review
The Gabelli Blue Chip Value Fund State Street Bank and Trust Company
The Gabelli Utilities Fund
BY: /S/ BRUCE N. ALPERT BY: /S/ RONALD E. LOGUE
Name: Bruce N. Alpert Name: Ronald E. Logue
Title: Treasurer Title: Vice Chairman.
64
REGISTRAR, TRANSFER AGENCY
AND SERVICE AGREEMENT
between
THE GABELLI UTILITIES FUND
and
STATE STREET BANK AND TRUST COMPANY
65
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK 3
ARTICLE 2 FEES AND EXPENSES 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND 7
ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION 8
ARTICLE 6 INDEMNIFICATION 10
ARTICLE 7 STANDARD OF CARE 12
ARTICLE 8 COVENANTS OF THE FUND AND THE BANK 13
ARTICLE 9 TERMINATION OF AGREEMENT 14
ARTICLE 10 ASSIGNMENT 15
ARTICLE 11 AMENDMENT 15
ARTICLE 12 MASSACHUSETTS LAW TO APPLY 16
ARTICLE 13 FORCE MAJEURE 16
ARTICLE 14 CONSEQUENTIAL DAMAGES 16
ARTICLE 15 MERGER OF AGREEMENT 16
ARTICLE 16 SURVIVAL 17
ARTICLE 17 SEVERABILITY 17
ARTICLE 18 COUNTERPARTS 17
66
<PAGE>
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 31st day of August, 1999, by and between The
Gabelli Utilities Fund, a Delaware business trust, having its principal office
and place of business at One Corporate Center, Rye, New York 10580 (the "Fund"),
and STATE STREET BANK AND TRUST, a Massachusetts business trust, having its
principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar, transfer
agent, dividend disbursing agent and agent in connection with certain other
activities and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
ARTICLE 1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.01 Subject to the terms and conditions set forth in this Agreement,
the Fund hereby employs and appoints the Bank to act as, and the
Bank agrees to act as registrar, transfer agent for the Fund's
authorized and issued shares of its common stock ("Shares"),
dividend disbursing agent and agent in connection with any dividend
reinvestment plan as set out in the prospectus of the Fund,
corresponding to the date of this Agreement.
A. The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Issue and record the appropriate number of Shares as
authorized and hold such shares in the appropriate
Shareholder account
(ii) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate documentation;
(iii)Prepare and transmit payments for dividends and
distributions declared by the Fund;
(iv) Act as agent for Shareholders pursuant to the dividend
reinvestment and cash purchase plan as amended from time
to time in accordance with the terms of the agreement to
be entered into between the Shareholders and the Bank in
substantially the form attached as Exhibit hereto;
(v) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory to
the Bank and protecting the Bank and the Fund, and the
Bank at its option, may issue replacement certificates in
place of mutilated stock certificates upon presentation
thereof and without such indemnity.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall:
(i) perform all of the customary services of a registrar,
transfer agent, dividend disbursing agent and agent of the
dividend reinvestment and cash purchase plan as described in
Article 1 consistent with those requirements in effect as of
the date of this agreement. The detailed definition,
frequency, limitations and associated costs (if any) set out
in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, and mailing Shareholder
67
<PAGE>
reports to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts where applicable,
preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and
distributions by federal authorities for all registered
Shareholders.
(c) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in
writing between the Fund and the Bank.
ARTICLE 2. FEES AND EXPENSES
2.01 For the performance by the Bank pursuant to this Agreement, the
Fund agrees to pay the Bank an annual maintenance fee as set out in
the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 2.02
below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Bank for out-of-pocket expenses, including
but not limited to confirmation production, postage, forms,
telephone, microfilm, microfiche, tabulating proxies, records
storage, or advances incurred by the Bank for the items set out in
the fee schedule attached hereto. In addition, any other expenses
incurred by the Bank at the request or with the consent of the
Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice.
Postage and the cost of materials for mailing of dividends,
proxies, Fund reports and other mailings to all Shareholder
accounts shall be advanced to the Bank by the Fund at least seven
(7) days prior to the mailing date of such materials.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement
68
<PAGE>
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter
into and perform this Agreement.
4.04 It is a closed-end, diversified investment company registered under
the Investment Company Act of 1940, as amended.
4.05 To the extent required by federal securities laws a registration
statement under the Securities Act of 1933, as amended is currently
effective and appropriate state securities law filings have been
made with respect to all Shares of the Fund being offered for sale;
information to the contrary will result in immediate notification
to the Bank.
4.06 It shall make all required filings under federal and state
securities laws.
ARTICLE 5. DATA ACCESS AND PROPRIETARY INFORMATION
5.01 The Fund acknowledges that the data bases, computer programs,
screen formats, interactive design techniques, and other
information furnished to the Fund by the Bank are provided solely
in connection with the services rendered under this Agreement and
constitute copyrighted trade secrets or proprietary information of
substantial value to the Bank. Such databases, programs, formats,
designs, techniques and other information are collectively referred
to below as "Proprietary Information." The Fund agrees that it
shall treat all Proprietary Information to any person or
organization except as expressly permitted hereunder. The Fund
agrees for itself and its employees and agents:
(a) to use such programs and databases (i) solely on the Fund
computers, or (ii) solely from equipment at the locations
agreed to between the Fund and the Bank and (iii) in
accordance with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way (other than
in the normal course of performing processing on the Fund's
computers) any part of any Proprietary Information;
(c) to refrain from obtaining unauthorized access to any programs,
data or other information not owned by the Fund, and if such
access is accidentally obtained, to respect and safeguard the
same Proprietary Information;
(d) to refrain from causing or allowing information transmitted
from the Bank's computer to the Funds' terminal to be
retransmitted to any other computer terminal or other device
except as expressly permitted by the Bank, (such permission
not to be unreasonably withheld);
(e) that the Fund shall have access only to those authorized
transactions as agreed to between the Fund and the Bank; and
(f) to honor reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law and under applicable
statues.
5.02 If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i)
effect the transfer or movement of cash or Shares or (ii) transmit
Shareholder information or other information, then in such event
the Bank shall be entitled to rely on the validity and authenticity
of such instruction without undertaking any further inquiry as long
as such instruction is undertaken in conformity with security
procedures established by the Bank from time to time.
69
<PAGE>
ARTICLE 6. INDEMNIFICATION
6.01 The Bank shall not be responsible for, and the Fund shall indemnify
and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement; provided that
such actions are taken in good faith and without negligence or
willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation
or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services
which (i) are received by the Bank or its agents or
subcontractors, and (ii) have been prepared, maintained or
performed by the Fund or any other person or firm on behalf of
the Fund including but not limited to any previous transfer
agent registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop order
or other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
State.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed
by the Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the
Fund for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the
Fund, reasonably believed to be genuine and to have been signed by
the proper person or persons, or upon any instruction, information,
data, records or documents provided the Bank or its agents or
subcontractors by telephone, in person, machine readable input,
telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice thereof from the Fund.
The Bank, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the
officers of the Fund, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer agent or
co-registrar.
6.03 In order that the indemnification provisions contained in this
Article 6 shall apply, upon the assertion of a claim for which the
Fund may be required to indemnify the Bank, the Bank shall promptly
notify the Fund in writing of such assertion, and shall keep the
Fund advised with respect to all developments concerning such
claim. The Fund shall have the option to participate with the Bank
in the defense of such claim or to defend against said claim in its
own name or in the name of the Bank. The Bank shall in no case
confess any claim or make any compromise in any case in which the
Fund may be required to indemnify the Bank except with the Fund's
prior written consent.
ARTICLE 7. STANDARD OF CARE
70
<PAGE>
7.01 The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad faith,
or willful misconduct of that of its employees.
ARTICLE 8. COVENANTS OF THE FUND AND THE BANK
8.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem
advisable. To the extent required by Section 31 of the Investment
Company Act of 1940, as amended, and the Rules thereunder, the Bank
agrees that all such records prepared or maintained by the Bank
relating to the services to be performed by the Bank hereunder are
the property of the Fund and will be preserved, maintained and made
available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its
request.
8.04 The Bank and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying
out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be
requested by a governmental entity or as may be required by law.
8.05 In cases of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify
the Fund and to secure instructions from an authorized officer of
the Fund as to such inspection. The Bank reserves the right,
however, to exhibit the Shareholder records to any person whenever
it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
ARTICLE 9. TERMINATION OF AGREEMENT
9.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of- pocket
expenses associated with the movement of records and material will
be borne by the Fund. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such
termination and/or a charge equivalent to the average of three (3)
month's fees.
ARTICLE 10. ASSIGNMENT
10.01 Except as provided in Section 10.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
71
<PAGE>
10.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial
Data Services, Inc., a Massachusetts corporation ("BFDS"), which is
duly registered as a transfer agent pursuant to Section 17A(c)(2)
of the Securities Exchange Act of 1934 ("Section 17A(c)(2)"), or
(ii) a BFDS affiliate duly registered as a transfer agent pursuant
to Section 17A(c)(2), provided, however, that the Bank shall be as
fully responsible to the Fund for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
ARTICLE 11. AMENDMENT
11.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution
of the Board of Directors of the Fund.
ARTICLE 12. MASSACHUSETTS LAW TO APPLY
12.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The
Commonwealth of Massachusetts.
ARTICLE 13. FORCE MAJEURE
13.01 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such
causes.
ARTICLE 14. CONSEQUENTIAL DAMAGES
14.01 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to
act hereunder.
ARTICLE 15. MERGER OF AGREEMENT
15.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written.
ARTICLE 16. SURVIVAL
16.01 All provisions regarding indemnification, warranty, liability and
limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination
of this Agreement.
ARTICLE 17. SEVERABILITY
17.01 If any provision or provisions of this Agreement shall be held to
be invalid, unlawful, or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
ARTICLE 18. COUNTERPARTS
72
<PAGE>
18.01 This Agreement may be executed by the parties hereto on any number
of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
The Gabelli Utilities Fund
BY: /S/ BRUCE N. ALPERT
State Street Bank and Trust Company
BY: ___________________
73
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights", "Investment Advisory and Other Services" and "Financial Statements"
and to the use of our report dated February 11, 2000, which is incorporated by
reference in this Registration Statement (Form N-1A No. 333-81209) of Gabelli
Utilities Fund.
ERNST & YOUNG LLP
New York, New York
April 26, 2000
74
SECTION S
CODE OF ETHICS
Gabelli Funds, LLC
GAMCO Investors, Inc.
Gabelli & Company, Inc.
Gabelli Advisers, Inc.
Gabelli Fixed Income LLC
Each Registered Investment Company or series thereof (each of which
is considered to be a Company for this purpose) for which any
of the Companies listed above presently or hereafter provides
investment advisory or principal underwriting services, other
than a money market fund or a fund that does not invest in
Securities.
INTRODUCTION
This Code of Ethics establishes rules of conduct for persons who are
associated with the companies named above or with the registered investment
companies for which such companies provide investment advisory or principal
underwriter services. The Code governs their personal investment and other
investment-related activities.
The basic rule is very simple: put the client's interests first. The rest
of the rules elaborate this principle. Some of the rules are imposed
specifically by law. For example, the laws that govern investment advisers
specifically prohibit fraudulent activity, making statements that are not true
or that are misleading or omit something that is significant in the context and
engaging in manipulative practices. These are general words, of course, and over
the years the courts, the regulators and investment advisers have interpreted
these words and established codes of conduct for their employees and others who
have access to their investment decisions and trading activities. Indeed, the
rules obligate investment advisers to adopt written rules that are reasonably
designed to prevent the illegal activities described above and must follow
procedures that will enable them to prevent such activities.
This Code is intended to assist the companies in fulfilling their
obligations under the law. The first part lays out who the Code applies to, the
second part deals with personal investment activities, the third part deals with
other sensitive business practices, and subsequent parts deal with reporting and
administrative procedures.
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THE CODE IS VERY IMPORTANT TO THE COMPANIES AND THEIR EMPLOYEES. VIOLATIONS
CAN NOT ONLY CAUSE THE COMPANIES EMBARRASSMENT, LOSS OF BUSINESS, LEGAL
RESTRICTIONS, FINES AND OTHER PUNISHMENTS BUT FOR EMPLOYEES CAN LEAD TO
DEMOTION, SUSPENSION, FIRING, EJECTION FROM THE SECURITIES BUSINESS AND VERY
LARGE FINES.
I. APPLICABILITY
A. THE CODE APPLIES TO EACH OF THE FOLLOWING:
1. THE COMPANIES NAMED OR DESCRIBED AT THE TOP OF PAGE ONE OF THE CODE
AND ALL ENTITIES THAT ARE UNDER COMMON MANAGEMENT WITH THESE
COMPANIES OR OTHERWISE AGREE TO BE SUBJECT TO THE CODE
("AFFILIATES"). A LISTING OF THE AFFILIATES, WHICH IS PERIODICALLY
UPDATED, IS ATTACHED AS EXHIBIT A.
2. ANY OFFICER, DIRECTOR OR EMPLOYEE OF ANY COMPANY, AFFILIATE OR FUND
CLIENT (AS DEFINED BELOW) WHOSE JOB REGULARLY INVOLVES HIM IN THE
INVESTMENT PROCESS. THIS INCLUDES THE FORMULATION AND MAKING OF
INVESTMENT RECOMMENDATIONS AND DECISIONS, THE PURCHASE AND SALE OF
SECURITIES FOR CLIENTS AND THE UTILIZATION OF INFORMATION ABOUT
INVESTMENT RECOMMENDATIONS, DECISIONS AND TRADES. DUE TO THE MANNER
IN WHICH THE COMPANIES AND THE AFFILIATES CONDUCT THEIR BUSINESS,
EVERY EMPLOYEE SHOULD ASSUME THAT HE IS SUBJECT TO THE CODE UNLESS
THE COMPLIANCE OFFICER SPECIFIES OTHERWISE.
3. WITH RESPECT TO ALL OF THE COMPANIES, AFFILIATES AND FUND CLIENTS
EXCEPT GABELLI & COMPANY, INC., ANY NATURAL PERSON WHO CONTROLS ANY
OF THE COMPANIES, AFFILIATES OR FUND CLIENTS AND WHO OBTAINS
INFORMATION REGARDING THE COMPANIES' OR THE AFFILIATES' INVESTMENT
RECOMMENDATIONS OR DECISIONS. HOWEVER, A PERSON WHOSE CONTROL
ARISES ONLY AS A RESULT OF HIS OFFICIAL POSITION WITH SUCH ENTITY
IS EXCLUDED. DISINTERESTED DIRECTORS OF FUND CLIENTS, FOR EXAMPLE,
ARE EXCLUDED FROM COVERAGE UNDER THIS ITEM.
4. WITH RESPECT TO ALL OF THE COMPANIES AND FUND CLIENTS EXCEPT
GABELLI & COMPANY, INC., ANY DIRECTOR, OFFICER, GENERAL PARTNER OR
PERSON PERFORMING A SIMILAR FUNCTION EVEN IF HE HAS NO KNOWLEDGE OF
AND IS NOT INVOLVED IN THE INVESTMENT PROCESS. DISINTERESTED
DIRECTORS OF FUND CLIENTS AND INDEPENDENT DIRECTORS OF AFFILIATES
ARE INCLUDED IN COVERAGE UNDER THIS ITEM.
5. AS AN EXCEPTION, THE CODE DOES NOT APPLY TO ANY DIRECTOR, OFFICER
OR EMPLOYEE OF ANY FUND CLIENT (SUCH AS CERTAIN OF THE GABELLI
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WESTWOOD FUNDS) WITH RESPECT TO WHICH THE COMPANIES' SERVICES DO
NOT INVOLVE THE FORMULATION OR MAKING OF INVESTMENT RECOMMENDATIONS
OR DECISIONS OR THE EXECUTION OF PORTFOLIO TRANSACTIONS IF THAT
PERSON IS ALSO A DIRECTOR, OFFICER OR EMPLOYEE OF ANY ENTITY THAT
DOES PERFORM SUCH SERVICES (SUCH AS WESTWOOD MANAGEMENT CORP.).
THESE INDIVIDUALS ARE COVERED BY CODES OF ETHICS ADOPTED BY SUCH
ENTITIES.
B. DEFINITIONS
1. ACCESS PERSONS. THE COMPANIES AND THE PERSONS DESCRIBED IN ITEMS
(A)2 AND (A)3 ABOVE OTHER THAN THOSE EXCLUDED BY ITEM (A)5 ABOVE.
2. ACCESS PERSON ACCOUNT. INCLUDES ALL ADVISORY, BROKERAGE, TRUST OR
OTHER ACCOUNTS OR FORMS OF DIRECT BENEFICIAL OWNERSHIP IN WHICH ONE
OR MORE ACCESS PERSONS AND/OR ONE OR MORE MEMBERS OF AN ACCESS
PERSON'S IMMEDIATE FAMILY HAVE A SUBSTANTIAL PROPORTIONATE ECONOMIC
INTEREST. IMMEDIATE FAMILY INCLUDES AN ACCESS PERSON'S SPOUSE AND
MINOR CHILDREN LIVING WITH THE ACCESS PERSON. A SUBSTANTIAL
PROPORTIONATE ECONOMIC INTEREST WILL GENERALLY BE 10% OF THE EQUITY
IN THE ACCOUNT IN THE CASE OF ANY SINGLE ACCESS PERSON AND 25% OF
THE EQUITY IN THE ACCOUNT IN THE CASE OF ALL ACCESS PERSONS IN THE
AGGREGATE, WHICHEVER IS FIRST APPLICABLE. INVESTMENT PARTNERSHIPS
AND SIMILAR INDIRECT MEANS OF OWNERSHIP OTHER THAN REGISTERED
OPEN-END INVESTMENT COMPANIES ARE ALSO TREATED AS ACCOUNTS.
As an exception, accounts in which one or more Access Persons
and/or their immediate family have a substantial proportionate
interest which are maintained with persons who have no
affiliation with the Companies and with respect to which no
Access Person has, in the judgment of the Compliance Officer
after reviewing the terms and circumstances, any direct or
indirect influence or control over the investment or portfolio
execution process are not Access Person Accounts.
As a further exception, subject to the provisions of Article
II(I)7, bona fide market making accounts of Gabelli & Company,
Inc. are not Access Person Accounts.
As a further exception, subject to the provisions of Article
II(I)7, bona fide error accounts of the Companies and the
Affiliates are not Access Person Accounts.
3. ASSOCIATE PORTFOLIO MANAGERS. ACCESS PERSONS WHO ARE ENGAGED IN
SECURITIES RESEARCH AND ANALYSIS FOR DESIGNATED CLIENTS OR ARE
RESPONSIBLE FOR INVESTMENT RECOMMENDATIONS FOR DESIGNATED CLIENTS
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BUT WHO ARE NOT PRINCIPALLY RESPONSIBLE FOR INVESTMENT DECISIONS
WITH RESPECT TO ANY CLIENT ACCOUNTS.
4. CLIENTS. INVESTMENT ADVISORY ACCOUNTS MAINTAINED WITH ANY OF THE
COMPANIES OR AFFILIATES BY ANY PERSON, OTHER THAN ACCESS PERSON
ACCOUNTS. HOWEVER, FUND CLIENTS COVERED BY ITEM (A)(5) ABOVE ARE
CONSIDERED CLIENT ACCOUNTS ONLY WITH RESPECT TO EMPLOYEES
SPECIFICALLY IDENTIFIED BY THE COMPLIANCE OFFICER AS HAVING REGULAR
INFORMATION REGARDING INVESTMENT RECOMMENDATIONS OR DECISIONS OR
PORTFOLIO TRANSACTIONS FOR SUCH FUND CLIENTS.
5. COMPANIES. THE COMPANIES NAMED OR DESCRIBED AT THE TOP OF PAGE ONE
OF THE CODE.
6. COMPLIANCE OFFICER. THE PERSONS DESIGNATED AS THE COMPLIANCE
OFFICERS OF THE COMPANIES.
7. COVERED PERSONS. THE COMPANIES, THE ACCESS PERSONS AND THE PERSONS
DESCRIBED IN ITEM (A)4 ABOVE.
8. FUND CLIENTS. CLIENTS THAT ARE REGISTERED INVESTMENT COMPANIES OR
SERIES THEREOF.
9. PORTFOLIO MANAGERS. ACCESS PERSONS WHO ARE PRINCIPALLY RESPONSIBLE
FOR INVESTMENT DECISIONS WITH RESPECT TO ANY CLIENT ACCOUNTS.
10. SECURITY. ANY FINANCIAL INSTRUMENT TREATED AS A SECURITY FOR
INVESTMENT PURPOSES AND ANY RELATED INSTRUMENT SUCH AS A FUTURES,
FORWARD OR SWAP CONTRACT ENTERED INTO WITH RESPECT TO ONE OR MORE
SECURITIES, A BASKET OF OR AN INDEX OF SECURITIES OR COMPONENTS OF
SECURITIES. HOWEVER, THE TERM SECURITY DOES NOT INCLUDE SECURITIES
ISSUED BY THE GOVERNMENT OF THE UNITED STATES, BANKERS'
ACCEPTANCES, BANK CERTIFICATES OF DEPOSIT, COMMERCIAL PAPER AND
HIGH QUALITY SHORT-TERM DEBT INSTRUMENTS, INCLUDING REPURCHASE
AGREEMENTS, OR SHARES OF REGISTERED OPEN-END INVESTMENT COMPANIES.
II. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
A. BASIC RESTRICTION ON INVESTING ACTIVITIES
If a purchase or sale order is pending or under active consideration for
any Client account by any Company or Affiliate, neither the same
Security nor any related
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Security (such as an option, warrant or convertible security) may
be bought or sold for any Access Person Account.
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B. Initial Public Offerings
No Security or related Security may be acquired in an initial public
offering for any Access Person Account.
C. BLACKOUT PERIOD
No Security or related Security may be bought or sold for the account of
any Portfolio Manager or Associate Portfolio Manager during the period
commencing seven (7) days prior to and ending seven (7) calendar days
after the purchase or sale (or entry of an order for the purchase or
sale) of that Security or any related Security for the account of any
Client with respect to which such person has been designated a Portfolio
Manager or Associate Portfolio Manager, unless the Client account
receives at least as good a price as the account of the Portfolio
Manager or Associate Portfolio Manager and the Compliance Officer
determines under the circumstances that the Client account has not been
adversely affected (including with respect to the amount of such
Security able to be bought by the Client account) by the transaction for
the account of the Portfolio Manager or Associate Portfolio Manager.
D. SHORT-TERM TRADING
No Security or related Security may, within a 60 day period, be bought
and sold or sold and bought at a profit for any Access Person Account if
the Security or related Security was held at any time during that period
in any Client account.
E. EXEMPT TRANSACTIONS
Participation on an ongoing basis in an issuer's dividend reinvestment
or stock purchase plan, participation in any transaction over which no
Access Person had any direct or indirect influence or control and
involuntary transactions (such as mergers, inheritances, gifts, etc.)
are exempt from the restrictions set forth in paragraphs (A) and (C)
above without case by case preclearance under paragraph (G) below.
F. PERMITTED EXCEPTIONS
Purchases and sales of the following Securities for Access Person
Accounts are exempt from the restrictions set forth in paragraphs A, C
and D above if such purchases and sales comply with the pre-clearance
requirements of paragraph (G) below:
1. NON-CONVERTIBLE FIXED INCOME SECURITIES RATED AT LEAST "A";
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2. EQUITY SECURITIES OF A CLASS HAVING A MARKET CAPITALIZATION IN
EXCESS OF $1 BILLION;
3. EQUITY SECURITIES OF A CLASS HAVING A MARKET CAPITALIZATION IN
EXCESS OF $500 MILLION IF THE TRANSACTION IN QUESTION AND THE
AGGREGATE AMOUNT OF SUCH SECURITIES AND ANY RELATED SECURITIES
PURCHASED AND SOLD FOR THE ACCESS PERSON ACCOUNT IN QUESTION DURING
THE PRECEDING 60 DAYS DOES NOT EXCEED 100 SHARES;
4. MUNICIPAL SECURITIES; AND
5. SECURITIES TRANSACTIONS EFFECTED FOR FEDERAL, STATE OR LOCAL INCOME
TAX PURPOSES THAT ARE IDENTIFIED TO THE COMPLIANCE OFFICER AT THE
TIME AS BEING EFFECTED FOR SUCH PURPOSES.
In addition, the exercise of rights that were received pro rata with
other security holders is exempt if the pre-clearance procedures are
satisfied.
G. PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS
No Security may be bought or sold for an Access Person Account unless
(i) the Access Person obtains prior approval from the Compliance Officer
or, in the absence of the Compliance Officer, from the general counsel
of Gabelli Asset Management Inc.; (ii) the approved transaction is
completed on the same day approval is received; and (iii) the Compliance
Officer or the general counsel does not rescind such approval prior to
execution of the transaction (See paragraph I below for details of the
Pre-Clearance Process.)
H. PRIVATE PLACEMENTS
The Compliance Officer will not approve purchases or sale of Securities
that are not publicly traded, unless the Access Person provides full
details of the proposed transaction (including written certification
that the investment opportunity did not arise by virtue of such person's
activities on behalf of any Client) and the Compliance Officer
concludes, after consultation with one or more of the relevant Portfolio
Managers, that the Companies would have no foreseeable interest in
investing in such Security or any related Security for the account of
any Client.
I. PRE-CLEARANCE PROCESS
1. NO SECURITIES MAY BE PURCHASED OR SOLD FOR ANY ACCESS PERSON
ACCOUNT UNLESS THE PARTICULAR TRANSACTION HAS BEEN APPROVED IN
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WRITING BY THE COMPLIANCE OFFICER OR, IN HIS ABSENCE, THE GENERAL
COUNSEL OF GABELLI ASSET MANAGEMENT INC. THE COMPLIANCE OFFICER
SHALL REVIEW NOT LESS FREQUENTLY THAN WEEKLY REPORTS FROM THE
TRADING DESK (OR, IF APPLICABLE, CONFIRMATIONS FROM BROKERS) TO
ASSURE THAT ALL TRANSACTIONS EFFECTED FOR ACCESS PERSON ACCOUNTS
ARE EFFECTED IN COMPLIANCE WITH THIS CODE.
2. NO SECURITIES MAY BE PURCHASED OR SOLD FOR ANY ACCESS PERSON
ACCOUNT OTHER THAN THROUGH THE TRADING DESK OF GABELLI & COMPANY,
INC., UNLESS EXPRESS PERMISSION IS GRANTED BY THE COMPLIANCE
OFFICER. SUCH PERMISSION MAY BE GRANTED ONLY ON THE CONDITION THAT
THE THIRD PARTY BROKER SUPPLY THE COMPLIANCE OFFICER, ON A TIMELY
BASIS, DUPLICATE COPIES OF CONFIRMATIONS OF ALL PERSONAL SECURITIES
TRANSACTIONS FOR SUCH ACCESS PERSON IN THE ACCOUNTS MAINTAINED WITH
SUCH THIRD PARTY BROKER AND COPIES OF PERIODIC STATEMENTS FOR ALL
SUCH ACCOUNTS.
3. A TRADING APPROVAL FORM, ATTACHED AS EXHIBIT B, MUST BE COMPLETED
AND SUBMITTED TO THE COMPLIANCE OFFICER FOR APPROVAL PRIOR TO ENTRY
OF AN ORDER.
4. AFTER REVIEWING THE PROPOSED TRADE, THE LEVEL OF POTENTIAL
INVESTMENT INTEREST ON BEHALF OF CLIENTS IN THE SECURITY IN
QUESTION AND THE COMPANIES' RESTRICTED LISTS, THE COMPLIANCE
OFFICER SHALL APPROVE (OR DISAPPROVE) A TRADING ORDER ON BEHALF OF
AN ACCESS PERSON AS EXPEDITIOUSLY AS POSSIBLE. THE COMPLIANCE
OFFICER WILL GENERALLY APPROVE TRANSACTIONS DESCRIBED IN PARAGRAPH
(F) ABOVE UNLESS THE SECURITY IN QUESTION OR A RELATED SECURITY IS
ON THE RESTRICTED LIST OR THE COMPLIANCE OFFICER BELIEVES FOR ANY
OTHER REASON THAT THE ACCESS PERSON ACCOUNT SHOULD NOT TRADE IN
SUCH SECURITY AT SUCH TIME.
5. ONCE AN ACCESS PERSON'S TRADING APPROVAL FORM IS APPROVED, THE FORM
MUST BE FORWARDED TO THE TRADING DESK (OR, IF A THIRD PARTY BROKER
IS PERMITTED, TO THE COMPLIANCE OFFICER) FOR EXECUTION ON THE SAME
DAY. IF THE ACCESS PERSON'S TRADING ORDER REQUEST IS NOT APPROVED,
OR IS NOT EXECUTED ON THE SAME DAY IT IS APPROVED, THE CLEARANCE
LAPSES ALTHOUGH SUCH TRADING ORDER REQUEST MAYBE RESUBMITTED AT A
LATER DATE.
6. IN THE ABSENCE OF THE COMPLIANCE OFFICER, AN ACCESS PERSON MAY
SUBMIT HIS OR HER TRADING APPROVAL FORM TO THE GENERAL COUNSEL OF
GABELLI ASSET MANAGEMENT INC. TRADING APPROVAL FOR THE COMPLIANCE
OFFICER MUST BE OBTAINED FROM THE GENERAL COUNSEL, AND TRADING
APPROVAL FOR THE GENERAL COUNSEL MUST BE OBTAINED FROM THE
COMPLIANCE OFFICER. IN NO CASE WILL THE TRADING DESK ACCEPT AN
ORDER FOR AN ACCESS PERSON ACCOUNT UNLESS IT IS ACCOMPANIED BY A
SIGNED TRADING APPROVAL FORM.
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7. THE COMPLIANCE OFFICER SHALL REVIEW ALL TRADING APPROVAL FORMS, ALL
INITIAL, QUARTERLY AND ANNUAL DISCLOSURE CERTIFICATIONS AND THE
TRADING ACTIVITIES ON BEHALF OF ALL CLIENT ACCOUNTS WITH A VIEW TO
ENSURING THAT ALL COVERED PERSONS ARE COMPLYING WITH THE SPIRIT AS
WELL AS THE DETAILED REQUIREMENTS OF THIS CODE. THE COMPLIANCE
OFFICER WILL REVIEW ALL TRANSACTIONS IN THE MARKET MAKING ACCOUNTS
OF GABELLI & COMPANY, INC. AND THE ERROR ACCOUNTS OF THE COMPANIES
AND THE AFFILIATES IN ORDER TO ENSURE THAT SUCH TRANSACTIONS ARE
BONA FIDE MARKET MAKING OR ERROR TRANSACTIONS OR ARE CONDUCTED IN
ACCORDANCE WITH THE REQUIREMENTS OF THIS ARTICLE II.
III. OTHER INVESTMENT-RELATED RESTRICTIONS
A. GIFTS
No Access Person shall accept any gift or other item of more than $100
in value from any person or entity that does business with or on behalf
of any Client.
B. SERVICE AS A DIRECTOR
No Access Person shall commence service on the Board of Directors of a
publicly traded company or any company in which any Client account has
an interest without prior authorization from the Compliance Committee
based upon a determination that the Board service would not be
inconsistent with the interests of the Clients. The Compliance Committee
shall include the senior Compliance Officer of Gabelli Asset Management
Inc., the general counsel of Gabelli Asset Management Inc. and at least
two of the senior executives from among the Companies.
IV. REPORTS AND ADDITIONAL COMPLIANCE PROCEDURES
A. EVERY COVERED PERSON, EXCEPT INDEPENDENT DIRECTORS OF AFFILIATES OF
THE COMPANIES, MUST SUBMIT A REPORT (A FORM OF WHICH IS APPENDED AS
EXHIBIT C) CONTAINING THE INFORMATION SET FORTH IN PARAGRAPH (B) BELOW
WITH RESPECT TO TRANSACTIONS IN ANY SECURITY IN WHICH SUCH COVERED
PERSON HAS OR BY REASON OF SUCH TRANSACTION ACQUIRES, ANY DIRECT OR
INDIRECT BENEFICIAL OWNERSHIP (AS DEFINED IN EXHIBIT D) IN THE SECURITY,
AND WITH RESPECT TO ANY ACCOUNT ESTABLISHED BY THE COVERED PERSON IN
WHICH ANY SECURITIES WERE HELD FOR THE DIRECT OR INDIRECT BENEFIT OF THE
COVERED PERSON; PROVIDED, HOWEVER, THAT:
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1. A COVERED PERSON WHO IS REQUIRED TO MAKE REPORTS ONLY BECAUSE HE IS
A DIRECTOR OF ONE OF THE FUND CLIENTS AND WHO IS A "DISINTERESTED"
DIRECTOR THEREOF NEED NOT MAKE A REPORT WITH RESPECT TO ANY
TRANSACTIONS OTHER THAN THOSE WHERE HE KNEW OR SHOULD HAVE KNOWN IN
THE COURSE OF HIS DUTIES AS A DIRECTOR THAT ANY FUND CLIENT OF
WHICH HE IS A DIRECTOR HAS MADE OR MAKES A PURCHASE OR SALE OF THE
SAME OR A RELATED SECURITY WITHIN 15 DAYS BEFORE OR AFTER THE
PURCHASE OR SALE OF SUCH SECURITY OR RELATED SECURITY BY SUCH
DIRECTOR.
2. A COVERED PERSON NEED NOT MAKE A REPORT WITH RESPECT TO ANY
TRANSACTION EFFECTED FOR, AND SECURITIES HELD IN, ANY ACCOUNT OVER
WHICH SUCH PERSON DOES NOT HAVE ANY DIRECT OR INDIRECT INFLUENCE OR
CONTROL; AND
3. A COVERED PERSON WILL BE DEEMED TO HAVE COMPLIED WITH THE
REQUIREMENTS OF THIS ARTICLE IV INSOFAR AS THE COMPLIANCE OFFICER
RECEIVES IN A TIMELY FASHION DUPLICATE MONTHLY OR QUARTERLY
BROKERAGE STATEMENTS OR TRANSACTION CONFIRMATIONS ON WHICH ALL
TRANSACTIONS REQUIRED TO BE REPORTED HEREUNDER ARE DESCRIBED.
B. A COVERED PERSON MUST SUBMIT THE REPORT REQUIRED BY THIS ARTICLE TO THE
COMPLIANCE OFFICER NO LATER THAN 10 DAYS AFTER THE END OF THE CALENDAR
QUARTER IN WHICH THE TRANSACTION OR ACCOUNT TO WHICH THE REPORT RELATES
WAS EFFECTED OR ESTABLISHED, AND THE REPORT MUST CONTAIN THE DATE THAT
THE REPORT IS SUBMITTED.
1. This report must contain the following information with respect to
transactions:
A. THE DATE OF THE TRANSACTION, THE TITLE AND NUMBER OF SHARES
AND THE PRINCIPAL AMOUNT OF EACH SECURITY INVOLVED;
b. The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
c. The price at which the transaction was effected; and
d. The name of the broker, dealer or bank with or through whom
the transaction was effected.
2. This report must contain the following information with respect to
accounts established:
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A. THE NAME OF THE BROKER, DEALER OR BANK WITH WHOM THE ACCOUNT
WAS ESTABLISHED; AND
b. The date the account was established.
C. ANY REPORT SUBMITTED TO COMPLY WITH THE REQUIREMENTS OF THIS ARTICLE
IV MAY
CONTAIN A STATEMENT THAT THE REPORT SHALL NOT BE CONSTRUED AS AN
ADMISSION BY THE PERSON MAKING SUCH REPORT THAT HE HAS ANY DIRECT OR
INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITY TO WHICH THE REPORT
RELATES. A PERSON NEED NOT MAKE ANY REPORT UNDER THIS ARTICLE IV WITH
RESPECT TO TRANSACTIONS EFFECTED FOR, AND SECURITIES HELD IN, ANY
ACCOUNT OVER WHICH THE PERSON HAS NO DIRECT OR INDIRECT INFLUENCE OR
CONTROL
D. NO LATER THAN 10 DAYS AFTER BEGINNING EMPLOYMENT WITH ANY OF THE
COMPANIES OR AFFILIATES OR OTHERWISE BECOMING A COVERED PERSON, EACH
COVERED PERSON (EXCEPT FOR A "DISINTERESTED" DIRECTOR OF THE FUND CLIENT
WHO IS REQUIRED TO SUBMIT REPORTS SOLELY BY REASON OF BEING SUCH A
DIRECTOR) MUST SUBMIT A REPORT CONTAINING THE FOLLOWING INFORMATION:
1. THE TITLE, NUMBER OF SHARES AND PRINCIPAL AMOUNT OF EACH SECURITY
IN WHICH THE COVERED PERSON HAD ANY DIRECT OR INDIRECT BENEFICIAL
OWNERSHIP WHEN THE PERSON BECAME A COVERED PERSON;
2. The name of any broker, dealer or bank with whom the Covered Person
maintained an account in which any Securities were held for the
direct or indirect benefit of the Covered Person as of the date the
person became a Covered Person; and
3. The date that the report is submitted.
The form of such report is attached as Exhibit E.
E. ANNUALLY EACH COVERED PERSON MUST CERTIFY THAT HE HAS READ AND
UNDERSTOOD THE CODE AND RECOGNIZES THAT HE IS SUBJECT TO SUCH CODE. IN
ADDITION, ANNUALLY EACH COVERED PERSON MUST CERTIFY THAT HE HAS
DISCLOSED OR REPORTED ALL PERSONAL SECURITIES TRANSACTIONS REQUIRED TO
BE DISCLOSED OR REPORTED UNDER THE CODE AND THAT HE IS NOT SUBJECT TO
ANY REGULATORY DISABILITY DESCRIBED IN THE ANNUAL CERTIFICATION FORM.
FURTHERMORE, EACH COVERED PERSON (EXCEPT FOR A "DISINTERESTED" DIRECTOR
OF THE FUND CLIENT WHO IS REQUIRED TO SUBMIT REPORTS SOLELY BY REASON OF
BEING SUCH A DIRECTOR) ANNUALLY MUST SUBMIT A REPORT CONTAINING THE
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FOLLOWING INFORMATION (WHICH INFORMATION MUST BE CURRENT AS OF A DATE NO
MORE THAN 30 DAYS BEFORE THE REPORT IS SUBMITTED):
1. THE TITLE, NUMBER OF SHARES AND PRINCIPAL AMOUNT OF EACH SECURITY
IN WHICH THE COVERED PERSON HAD ANY DIRECT OR INDIRECT BENEFICIAL
OWNERSHIP;
2. The name of any broker, dealer or bank with whom the Covered Person
maintains an account in which any Securities are held for the
direct or indirect benefit of the Covered Person; and
3. The date that the report is submitted.
THE FORM OF SUCH CERTIFICATION AND REPORT IS ATTACHED AS EXHIBIT F.
F. AT LEAST ANNUALLY (OR QUARTERLY IN THE CASE OF ITEMS 4 AND 5 BELOW),
EACH OF THE COMPANIES THAT HAS A FUND CLIENT OR THAT PROVIDES PRINCIPAL
UNDERWRITING SERVICES FOR A FUND CLIENT SHALL, TOGETHER WITH EACH FUND
CLIENT, FURNISH A WRITTEN REPORT TO THE BOARD OF DIRECTORS OF THE FUND
CLIENT THAT:
1. Describes any issues arising under the Code since the last report.
2. CERTIFIES THAT THE COMPANIES HAVE DEVELOPED PROCEDURES CONCERNING
COVERED PERSONS' PERSONAL TRADING ACTIVITIES AND REPORTING
REQUIREMENTS RELEVANT TO SUCH FUND CLIENTS THAT ARE REASONABLY
NECESSARY TO PREVENT VIOLATIONS OF THE CODE;
3. RECOMMENDS CHANGES, IF ANY, TO THE FUND CLIENTS' OR THE COMPANIES'
CODES OF ETHICS OR PROCEDURES;
4. PROVIDES A SUMMARY OF ANY MATERIAL OR SUBSTANTIVE VIOLATIONS OF
THIS CODE BY COVERED PERSONS WITH RESPECT TO SUCH FUND CLIENTS
WHICH OCCURRED DURING THE PAST QUARTER AND THE NATURE OF ANY
REMEDIAL ACTION TAKEN; AND
5. DESCRIBES ANY MATERIAL OR SIGNIFICANT EXCEPTIONS TO ANY PROVISIONS
OF THIS CODE OF ETHICS AS DETERMINED UNDER ARTICLE VI BELOW.
G. THE COMPLIANCE OFFICER SHALL NOTIFY EACH EMPLOYEE OF ANY OF THE
COMPANIES OR
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AFFILIATES AS TO WHETHER SUCH PERSON IS CONSIDERED TO BE AN ACCESS
PERSON OR COVERED PERSON AND SHALL NOTIFY EACH OTHER PERSON THAT IS
CONSIDERED TO BE AN ACCESS PERSON OR COVERED PERSON.
V. SANCTIONS
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the Board of Directors of the relevant
Company or of the relevant Fund Client, whichever is most appropriate
under the circumstances, may impose on that person whatever sanctions
the Board deems appropriate, including, among other things,
disgorgement of profit, censure, suspension or termination of
employment. Material violations of requirements of this Code by
employees of Covered Persons and any sanctions imposed in connection
therewith shall be reported not less frequently than quarterly to the
Board of Directors of any relevant Company or Fund Client, as
applicable.
VI. EXCEPTIONS
The Compliance Committee of the Companies reserves the right to decide,
on a case-by-case basis, exceptions to any provisions under this Code.
Any exceptions made hereunder will be maintained in writing by the
Compliance Committee and presented to the Board of Directors of any
relevant Fund Client at its next scheduled meeting.
VII. PRESERVATION OF DOCUMENTS
This Code, a copy of each report by a Covered Person, any written report
made hereunder by the Companies or the Compliance Officer, lists of all
persons required to make reports, a list of any exceptions, and the
reasons therefor, with respect to Article II.B, and any records under
Article II.G with respect to purchases pursuant to Article II.H above,
shall be preserved with the records of the relevant Company and any
relevant Fund Client for the period required by Rule 17j-1.
VIII. OTHER LAWS, RULES AND STATEMENTS OF POLICY
Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provision of any
applicable law, rule or regulation or any other statement of policy or
procedure governing the conduct of such person adopted by the Companies,
the Affiliates or the Fund Clients.
IX. FURTHER INFORMATION
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If any person has any question with regard to the applicability of the
provisions of this Code generally or with regard to any Securities
transaction or transactions, he should consult the Compliance Officer.
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EXHIBIT A
LIST OF AFFILIATES OF THE COMPANIES
ALCE Partners, L.P.
Darien Associates LLC
Gabelli Asset Management Inc.
Gabelli Associates Fund
Gabelli Associates Limited
Gabelli Fixed Income Distributors
Gabelli Fixed Income, Inc.
Gabelli Global Partners, L.P.
Gabelli Global Partners, Ltd.
Gabelli International Gold Fund Limited
Gabelli International Limited
Gabelli International II Limited
Gabelli International Securities Limited
Gabelli Multimedia Partners, L.P.
Gabelli Performance Partnership L.P.
Gabelli Securities, Inc.
Gemini Capital Management Ltd.
GLI, Inc.
Gabelli Group Capital Partners, Inc. and its subsidiaries
Gabelli Global Partners, L.P.
Gabelli Global Partners, Ltd.
Gabelli European Partners, Ltd.
Gabelli Fund, LDC
MJG Associates, Inc.
New Century Capital Partners, L.P.
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EXHIBIT B
PRE-CLEARANCE TRADING APPROVAL FORM
I, ______________________________________ (name), am an Access Person or
authorized officer thereof and seek pre-clearance to engage in the transaction
described below for the benefit of myself or another Access Person:
ACQUISITION OR DISPOSITION (circle one)
NAME OF ACCOUNT: ____________________________________________________
ACCOUNT NUMBER: _____________________________________________________
DATE OF REQUEST: ____________________________________________________
SECURITY: ___________________________________________________________
AMOUNT OR # OF SHARES: ______________________________________________
BROKER: _____________________________________________________________
If the transaction involves a Security that is not publicly traded, a
description of proposed transaction, source of investment opportunity and any
potential conflicts of interest:
I hereby certify that, to the best of my knowledge, the transaction described
herein is not prohibited by the Code of Ethics and that the opportunity to
engage in the transaction did not arise by virtue of my activities on behalf of
any Client.
SIGNATURE: ___________________________ PRINT NAME:___________________________
APPROVED OR DISAPPROVED(Circle One)
DATE OF APPROVAL: ___________________________
SIGNATURE: __________________________________ PRINT NAME:______________________
If approval is granted, please forward this form to the trading desk (or if a
third party broker is permitted, to the Compliance Officer) for immediate
execution.
90
<PAGE>
EXHIBIT C
TRANSACTION REPORT
REPORT SUBMITTED BY:
Print Name
This transaction report (the "Report") is submitted pursuant to Section IV (B)
of the Code of Ethics of the Companies and supplies information with respect to
transactions in any Security in which you may be deemed to have, or by reason of
such transaction acquire, any direct or indirect beneficial ownership interest,
and with respect to accounts established by you in which any Securities were
held for your direct or indirect benefit, for the period specified below. If you
were not employed by or affiliated with us during this entire period, amend the
dates specified below to cover your period of employment or affiliation.
Unless the context otherwise requires, all terms used in the Report shall have
the same meaning as set forth in the Code of Ethics.
If you have no reportable transactions or new accounts, sign and return this
page only. If you have reportable transactions or new accounts, complete, sign
and return Page 2 and any attachments.
I HAD NO REPORTABLE SECURITIES TRANSACTIONS OR ACCOUNTS ESTABLISHED DURING THE
PERIOD THROUGH . I CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND
THAT, TO THE BEST OF MY KNOWLEDGE, THE INFORMATION FURNISHED IN THIS REPORT IS
TRUE AND CORRECT.
SIGNATURE____________________________________________________________
POSITION_____________________________________________________________
DATE_________________________________________________________________
91
<PAGE>
Page 2
TRANSACTION REPORT
REPORT SUBMITTED BY:_________________________________________________________
Print Name
The following tables supply the information required by Section IV (B) of the
Code of Ethics for the period specified below. Transactions reported on
brokerage statements or duplicate confirmations actually received by the
Compliance Officer do not have to be listed although it is your responsibility
to make sure that such statements or confirmations are complete and have been
received in a timely fashion.
<TABLE>
<CAPTION>
TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Whether Purchase,
Sale, Short Sale or Name of Broker/Dealer
Securities Other Type of with or through Whom Nature of
(Name AND Date of Disposition or Quantity of Price per Share the Transaction Ownership of
SYMBOL) TRANSACTION ACQUISITION SECURITIES OR OTHER UNIT WAS EFFECTED SECURITIES
</TABLE>
<TABLE>
<CAPTION>
NEW ACCOUNTS ESTABLISHED
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NAME OF BROKER, DEALER OR BANK ACCOUNT NUMBER DATE ACCOUNT ESTABLISHED
</TABLE>
* To the extent specified above, I hereby disclaim beneficial ownership of any
securities listed in this Report or brokerage statements or transaction
confirmations provided by me.
I CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND THAT, TO THE BEST
OF MY KNOWLEDGE, THE INFORMATION IN THIS REPORT IS TRUE AND CORRECT FOR THE
PERIOD OF THROUGH .
SIGNATURE _________________________________DATE ____________________________
POSITION __________________________________________________________________
92
<PAGE>
EXHIBIT D
BENEFICIAL OWNERSHIP
For purposes of the attached Code of Ethics, "beneficial ownership" shall be
interpreted in the same manner as it would be in determining whether a person is
subject to the provisions of Section 16 of the Securities Exchange Act of 1934
and the rules and regulations thereunder, except the determination of direct or
indirect beneficial ownership shall apply to all securities that a Covered
Person has or acquires. The term "beneficial ownership" of securities would
include not only ownership of securities held be a Covered Person for his own
benefit, whether in bearer form or registered in his name or otherwise, but also
ownership of securities held for his benefit by others (regardless of whether or
how they are registered) such as custodians, brokers, executors, administrators,
or trustees (including trusts in which he has only a remainder interest), and
securities held for his account by pledges, securities owned by a partnership in
which he is a member if he may exercise a controlling influence over the
purchase, sale of voting of such securities, and securities owned by any
corporation or similar entry in which he owns securities if the shareholder is a
control-ling shareholder of the entity and has or shares investment control over
the entity's portfolio.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which a Covered Person is a legatee or beneficiary
unless there is a specified legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as beneficially
owned by a Covered Person where such person enjoys "financial benefits
substantially equivalent to ownership." The Securities and Exchange Commission
has said that, although the final determination of beneficial ownership is a
question to be determined in the light of the facts of the particular case,
generally a person is regarded as the beneficial owner of securities held in the
name of his or her spouse and their minor children. Absent special circumstances
such relationship ordinarily results in such person obtaining financial benefits
substantially EQUIVALENT TO OWNERSHIP, E.G., application of the income derived
from such securities to maintain a common home, or to meet expenses that such
person otherwise would meet from other sources, or the ability to exercises a
controlling influence over the purchase, sale or voting of such securities.
A Covered Person also may be regarded as the beneficial owner of securities held
in the name of another person, if by reason of any contract, understanding,
relationship, agreement, or other agreement, he obtains therefrom financial
benefits substantially equivalent to those of ownership.
A Covered Person also is regarded as the beneficial owner of securities held in
the name of a spouse, minor children or other person, even though he does not
obtain therefrom the aforementioned benefits of ownership, if he can vest or
revest title in himself at once or at some future time.
93
<PAGE>
EXHIBIT E
INITIAL HOLDINGS REPORT
REPORT SUBMITTED BY:_________________________________________________________
Print Name
This initial holdings report (the "Report") is submitted pursuant to Section IV
(D) of the Code of Ethics of the Companies and supplies information with respect
to any Security in which you may be deemed to have any direct or indirect
beneficial ownership interest and any accounts established by you in which any
Securities were held for your direct or indirect benefit, as of the date you
became subject to the Code of Ethics.
Unless the context otherwise requires, all terms used in the Report shall have
the same meaning as set forth in the Code of Ethics.
If you have no reportable Securities or accounts, sign and return this page
only. If you have reportable Securities or accounts, complete, sign and return
Page 2 and any attachments.
I HAVE NO REPORTABLE SECURITIES OR ACCOUNTS AS OF ________________________. I
CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND THAT, TO THE BEST
OF MY KNOWLEDGE, THE INFORMATION FURNISHED IN THIS REPORT IS TRUE AND CORRECT.
SIGNATURE ___________________________________________________________________
POSITION ____________________________________________________________________
DATE ________________________________________________________________________
94
<PAGE>
Page 2
INITIAL HOLDINGS REPORT
REPORT SUBMITTED BY:_________________________________________________________
Print Name
The following tables supply the information required by Section IV (D) of the
Code of Ethics as of the date you became subject to the Code.
<TABLE>
<CAPTION>
SECURITIES HOLDINGS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Name of Broker/Dealer Where Nature of Ownership of
SECURITIES (NAME AND SYMBOL) QUANTITY OF SECURITIES SECURITIES ARE HELD SECURITIES
</TABLE>
ACCOUNTS
- -------------------------------------------------------------------------------
NAME OF BROKER, DEALER OR BANK ACCOUNT NUMBER
I CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND THAT, TO THE BEST
OF MY KNOWLEDGE, THE INFORMATION IN THIS REPORT IS TRUE AND CORRECT AS OF
__________________________________.
SIGNATURE_________________________________DATE________________________________
POSITION _________________________________
95
<PAGE>
EXHIBIT F
ANNUAL CERTIFICATION OF CODE OF ETHICS
A. I (A COVERED PERSON) HEREBY CERTIFY THAT I HAVE READ AND UNDERSTOOD THE
CODE OF ETHICS DATED FEBRUARY 15, 2000, AND RECOGNIZE THAT I AM SUBJECT TO
ITS PROVISIONS. IN ADDITION, I HEREBY CERTIFY THAT I HAVE DISCLOSED OR
REPORTED ALL PERSONAL SECURITIES TRANSACTIONS REQUIRED TO BE DISCLOSED OR
REPORTED UNDER THE CODE OF ETHICS;
B. WITHIN THE LAST TEN YEARS THERE HAVE BEEN NO COMPLAINTS OR DISCIPLINARY
ACTIONS FILED AGAINST ME BY ANY REGULATED SECURITIES OR COMMODITIES
EXCHANGE, ANY SELF-REGULATORY SECURITIES OR COMMODITIES ORGANIZATION, ANY
ATTORNEY GENERAL, OR ANY GOVERNMENTAL OFFICE OR AGENCY REGULATING
INSURANCE, SECURITIES, COMMODITIES OR FINANCIAL TRANSACTIONS IN THE UNITED
STATES, IN ANY STATE OF THE UNITED STATES, OR IN ANY OTHER COUNTRY;
C. I HAVE NOT WITHIN THE LAST TEN YEARS BEEN CONVICTED OF OR ACKNOWLEDGED
COMMISSION OF ANY FELONY OR MISDEMEANOR ARISING OUT OF MY CONDUCT AS AN
EMPLOYEE, SALESPERSON, OFFICER, DIRECTOR, INSURANCE AGENT, BROKER, DEALER,
UNDERWRITER, INVESTMENT MANAGER OR INVESTMENT ADVISOR; AND
D. I HAVE NOT BEEN DENIED PERMISSION OR OTHERWISE ENJOINED BY ORDER, JUDGMENT
OR DECREE OF ANY COURT OF COMPETENT JURISDICTION, REGULATED SECURITIES OR
COMMODITIES EXCHANGE, SELF-REGULATORY SECURITIES OR COMMODITIES
ORGANIZATION OR OTHER FEDERAL OR STATE REGULATORY AUTHORITY FROM ACTING AS
AN INVESTMENT ADVISOR, SECURITIES OR COMMODITIES BROKER OR DEALER,
COMMODITY POOL OPERATOR OR TRADING ADVISOR OR AS AN AFFILIATED PERSON OR
EMPLOYEE OF ANY INVESTMENT COMPANY, BANK, INSURANCE COMPANY OR COMMODITY
BROKER, DEALER, POOL OPERATOR OR TRADING ADVISOR, OR FROM ENGAGING IN OR
CONTINUING ANY CONDUCT OR PRACTICE IN CONNECTION WITH ANY SUCH ACTIVITY OR
THE PURCHASE OR SALE OF ANY SECURITY.
E. Unless I am exempt from filing an Annual Holdings Report (as a
"disinterested" director of a Fund Client or an independent director of an
Affiliate), I have attached a completed Annual Holdings Report which is
accurate as of a date no more than 30 days ago.
PRINT NAME: __________________________________________________________________
SIGNATURE: ___________________________________________________________________
DATE: ________________________________________________________________________
96
<PAGE>
Page 2
ANNUAL HOLDINGS REPORT
REPORT SUBMITTED BY:__________________________________________________________
Print Name
The following tables supply the information required by Section IV (E) of the
Code of Ethics as of a date no more than 30 days before this report is
submitted. If you have no reportable Securities holdings or accounts, write
"None" in the space provided.
<TABLE>
<CAPTION>
SECURITIES HOLDINGS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name of Broker/Dealer Where Nature of Ownership
SECURITIES (NAME AND SYMBOL) QUANTITY OF SECURITIES SECURITIES ARE HELD OF SECURITIES
- ---------------------------- ---------------------- ------------------- -------------
</TABLE>
ACCOUNTS
- -----------------------------------------------------------------------------
NAME OF BROKER, DEALER OR BANK ACCOUNT NUMBER
SIGNATURE ______________________________DATE__________________________________
POSITION _______________________________
97
