GABELLI ASSET FUND, 485APOS, 1999-03-01

GABELLI ASSET FUND
485APOS, 1999-03-01

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Registrant Nos. 33-1719 and 811-4494

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. 16 X
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 18 X

THE GABELLI ASSET FUND
(Exact Name of Registrant as Specified in Charter)

One Corporate Center, Rye, New York 10580-1434
(Address of Principal Executive Office)
Registrant's Telephone Number (800) 422-3554

Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center, Rye, New York 10580-1434
(Name and Address of Agent for Service)

Copies to:
James E. McKee, Esq. Richard T. Prins, Esq.
Gabelli Funds, Inc. Skadden, Arps, Slate, Meagher & Flom
One Corporate Center 919 Third Avenue
Rye, New York 10580-1434 New York, New York 10022

It is proposed that this filing will become effective (check appropriate
box):
immediately upon filing pursuant to Rule 485(b); or
X on May 1, 1998 pursuant to paragraph (b); or 60 days after
filing pursuant to Rule 485(a)(1); or on [____] pursuant to
paragraph (a)(1); or 75 days after filing pursuant to Rule
485(a)(2); or on [____] pursuant to paragraph (a)(2)

If appropriate, check the following box: this post-effective amendment
designates a new effective date for a previously filed post-effective amendment.

The Registrant will file a Rule 24f-2 Notice for its fiscal year ended
December 31, 1998 no later than March 31, 1999.

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

PROSPECTUS
May 1, 1999

Class AAA Shares

This Prospectus contains important information about the Fund.
Please read it before investing and keep it
for future reference.

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

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A
CRIMINAL OFFENSE TO STATE OTHERWISE.
===============================================================================

TABLE OF CONTENTS

Page

INVESTMENT AND PERFORMANCE SUMMARY............................................1

INVESTMENT AND RISK INFORMATION...............................................3

MANAGEMENT OF THE FUND........................................................5

PURCHASING, SELLING AND EXCHANGING SHARES.....................................6

PRICING OF FUND SHARES........................................................6

DISTRIBUTION PLAN.............................................................6

DIVIDENDS AND DISTRIBUTIONS...................................................7

TAX INFORMATION...............................................................7

FINANCIAL HIGHLIGHTS..........................................................8

INVESTMENT AND PERFORMANCE SUMMARY

Investment Objective:
The Fund seeks to provide growth of capital. Capital is the amount of money you
invest in the Fund. The Fund's secondary goal is to provide current income.

Principal Investment Strategies:
The Fund will primarily invest in equity securities consisting of common stocks,
preferred stocks and securities which may be converted into common stocks. In
making stock selections, the Fund strives to earn a 10% real rate of return. The
Fund focuses on companies which appear underpriced relative to their "private
market value." Private market value is the value the Fund's adviser believes
informed investors would be willing to pay for a company.

Who May Want to Invest:
The Class AAA Shares are offered only to investors who acquire them directly
from the Fund's distributor or through a financial intermediary with whom the
Distributor has entered into a selling agreement.

The Fund may appeal to you if:

you are a long-term investor or saver
you are willing to accept the higher risks of losing a
portion of your principal in exchange for the opportunity to
potentially earn higher long-term returns
you seek growth of capital
you believe that the market will favor value over growth
stocks over the long term you wish to include a value
strategy as a portion of your overall investments.

You may not want to invest in the Fund if:

you are seeking a high level of current income you are
conservative in your investment approach you seek stability
of principal more than growth of capital

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 risk that the portfolio
securities' private market values may never be realized by the market, or their
prices may go down.

An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Performance:
The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year (since commencement of operations), and by showing how the Fund's average
annual returns for 1, 5 and 10 years compare to those of the S&P(R) 500 Stock
Index. As with all mutual funds, the Fund's past performance does not predict
how the Fund will perform in the future.

BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC

Calendar Year Total Returns

1998 15.9%
1997 38.1
1996 13.4
1995 24.9
1994 (0.1)
1993 21.8
1992 14.9
1991 18.1
1990 (5.0)
1989 26.2

During the period shown in the bar chart, the highest return for a quarter was
18.2% (quarter ended 12/31/98) and the lowest return for a quarter was (14.2)%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
<S> <C> <C> <C>

- ----------------------------------------------- ----------------------- ---------------------- ----------------------
Average Annual Total Returns Past One Year Past Five Years Past Ten Years
(for the periods ended December 31, 1998)
- ----------------------------------------------- ----------------------- ---------------------- ----------------------
- ----------------------------------------------- ----------------------- ---------------------- ----------------------
The Gabelli Asset Fund Class AAA Shares
15.9% 17.8% 16.2%
- ----------------------------------------------- ----------------------- ---------------------- ----------------------
- ----------------------------------------------- ----------------------- ---------------------- ----------------------
S&P(R)500 Stock Index* 28.6% 24.05% 19.19%
- ----------------------------------------------- ----------------------- ---------------------- ----------------------

* The S&P(R) 500 Composite Stock Price Index is a widely recognized,
unmanaged index of common stock prices. The performance of the Index
does not include expenses or fees.
</TABLE>

Fees and Expenses of the Fund:
This table describes the fees and expenses that you may pay if you buy and hold
Class AAA shares of the Fund.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees...................................................... 1.00%
Distribution (Rule 12b-1) Expenses1.................................. 0.25%
Other Expenses....................................................... 0.11%
----
Total Annual Operating Expenses................................ 1.36%

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 5 Years 10 Years

$138 $431 $745 $1,635

INVESTMENT AND RISK INFORMATION
The Fund's primary investment objective is to seek growth of capital, and
investments will be made based on management's perception of their potential for
capital appreciation. Current income, to the extent it may affect potential
growth of capital, is a secondary objective. The investment objectives of the
Fund may not be changed without shareholder approval.

Under normal market conditions, the Fund invests at least 80% of its assets in
stocks that are listed on a nationally recognized securities exchange or traded
on the NASDAQ National Market System of the National Association of Securities
Dealers. The Fund's adviser, Gabelli Funds, LLC (the "Adviser"), will invest in
companies that, in the public market, are selling at a significant discount to
their "private market value." Private market value is the value the Adviser
believes informed investors would be willing to pay to acquire companies with
similar characteristics. The Adviser considers factors such as price, earnings
expectations, earnings and price histories, balance sheet characteristics and
perceived management skills. The Adviser also considers 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 investment alternatives.

The Fund invests primarily in a diversified portfolio of readily marketable
common stocks and preferred stocks. The Fund may also use the following
investment techniques:

Defensive Investments. When opportunities for capital growth do not
appear attractive or when adverse market or economic conditions occur,
the Fund may temporarily invest all or a portion of its assets in
defensive investments. Such investments include preferred stocks,
high-grade debt securities, obligations of the U.S. Government and its
agencies and instrumentalities, and short-term money market instruments
such as high-quality commercial paper (rated at least "A-1" by S&P or
"P-1" by Moody's Investors Service, Inc.). When following a defensive
strategy, the Fund will be less likely to achieve its investment goal
of capital growth.

Convertible Debt Securities. The Fund may invest in convertible
securities when it appears to the Adviser that it may not be prudent to
be fully invested in common stocks. In evaluating a convertible
security, the Adviser places primary emphasis on the attractiveness of
the underlying common stock and the potential for capital appreciation
through conversion. The Fund will normally purchase only investment
grade, convertible debt securities having a rating of, or equivalent
to, at least "BBB" (which securities may have speculative
characteristics) by Standard & Poor's Rating Service ("S&P") or, if
unrated, judged by the Adviser to be of comparable quality. However,
the Fund may also invest up to 25% of its assets in more speculative
convertible debt securities, provided such securities have a rating of,
or equivalent to, at least an S&P rating of B.

Debt Securities. The Fund may invest up to 5% of its assets in low
rated and unrated corporate debt securities (often referred to as "junk
bonds"). The Fund will invest in such securities if the Adviser
believes that the issuer's ability to repay principal and interest when
due is underestimated by the market.

Foreign Securities. The Fund may invest up to 25% of its total assets in
securities of non-U.S. issuers.

Borrowing. The Fund may borrow money from banks (1) as may be
necessary for the clearance of portfolio transactions, and (2) for
temporary or emergency purposes, including the meeting of redemption
requests. Borrowing for any purpose (including redemptions) may not
exceed 15% of the value of the Fund's total assets. Borrowing for
purposes other than meeting redemptions may not exceed 5% of the value
of the Fund's total assets at the time a borrowing is made. The Fund
will not make any additional purchases of portfolio securities at any
time its borrowings exceed 5% of its assets. Not more than 20% of the
assets of the Fund may be used as collateral in connection with the
borrowings described above.

Investing in the Fund involves the following risks, listed in the order of
importance.

Market Risk. The principal risk of investing in the Fund is market
risk. Market 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.

Fund Risk. The Fund invests in stocks issued by companies believed by
the Adviser to be trading at a discount to their private market value
(value stocks). The Fund's price may decline because the market favors
other stocks or large capitalization stocks over stocks of small to
mid-size companies. If the Adviser is incorrect in its assessment of
the private market values of the securities it holds, then the value of
the Fund's shares may decline.

Foreign Risk. Investments in foreign securities involve risks relating to
political, social and economic developments abroad, as well as risks resulting
from the differences between the regulations to which U.S. and foreign issuers
and markets are subject:

- These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer of
portfolio assets, and political or social instability.

- Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.

- Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S.
companies, and there may be less public information about
their operations.

- Foreign markets may be less liquid and more volatile than
U.S. markets.

- Foreign securities often trade in currencies other than the
U.S. dollar, and the Fund may directly hold foreign currencies
and purchase and sell foreign currencies. Changes in currency
exchange rates will affect the Fund's net asset value, the
value of dividends and interest earned, and gains and losses
realized on the sale of securities. An increase in the
strength of the U.S. dollar relative to these other currencies
may cause the value of the Fund to decline. Certain foreign
currencies may be particularly volatile, and foreign
governments may intervene in the currency markets, causing a
decline in value or liquidity of the Fund's foreign currency
holdings.

- Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than
those involved in domestic transactions.

Lower Rated Securities. The Fund may invest in securities rated below
investment grade. Although these securities usually have higher yields,
these securities carry a higher risk that the issuer will be unable to
pay principal and interest when due, and the market to sell such
securities may be limited.

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. As
successor to Gabelli Funds, Inc., the Fund's previous adviser, the Adviser makes
investment decisions for the Fund and continuously reviews and administers the
Fund's investment program under the supervision of the Fund's Board of Trustees.
The Adviser also manages several other open-end and closed-end investment
companies in the Gabelli family of funds. The Adviser is a New York limited
liability company organized in 1999 as successor to Gabelli Funds, Inc., a New
York corporation organized in 1980. The Adviser is a wholly owned subsidiary of
Gabelli Asset Management Inc. ("GAMI") a publicly held company listed on the New
York Stock Exchange.

As compensation for its services and the related expenses borne by the Adviser,
for the fiscal year ended December 31, 1998, the Fund paid the Adviser an annual
fee equal to 1.00% of the value of the Fund's average daily net assets.

The Portfolio Manager. Mr. Mario J. Gabelli, CFA, is responsible for the
day-to-day management of the Fund. Mr. Gabelli has been Chairman, Chief
Executive Officer and Chief Investment Officer of the Adviser and its parent
company, GAMI since its inception in 1980. Mr. Gabelli also acts as Chief
Executive Officer and Chief Investment Officer of GAMCO Investors, Inc.
("GAMCO"), a wholly-owned subsidiary of the GAMI, and is an officer or director
of various other companies affiliated with GAMI. The Adviser relies to a
considerable extent on the expertise of Mr. Gabelli, who may be difficult to
replace in the event of his death, disability or resignation.

Year 2000. As the year 2000 approaches, an issue has emerged regarding how the
software used by the Fund's service providers can accommodate the date "2000."
Failure to adequately address this issue could result in major systems or
process failures which could disrupt the Fund's operations. The Adviser is in
the process of working with the Fund's service providers to prepare for the year
2000. Based on information currently available, the Adviser does not expect that
the Fund will incur significant operating expenses or be required to incur
material costs to be year 2000 compliant. The Fund cannot guarantee, however,
that all year 2000 issues will be identified and corrected by January 1, 2000.

purchasING, SELLING AND EXCHANGING SHARES
Information about purchasing, selling and exchanging your shares is contained in
a separate document called the Owner's Manual which has been delivered with this
Prospectus. The Owner's Manual is considered an integral part of this
Prospectus. The Owner's Manual also contains information about the following
shareholder services:

Telephone Investment Plan

Telephone Redemption Plan

Automatic Investment Plan

Systematic Withdrawal Plan

Retirement Plans

PRICING OF FUND SHARES
The Fund's net asset value per share is calculated on each day the New York
Stock Exchange ("NYSE") is open for trading. The NYSE is open Monday through
Friday, but currently is scheduled to be closed on New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas and on the preceding Friday or
subsequent Monday when a holiday falls on a Saturday or Sunday, respectively.

The Fund's net asset value per share is determined as of the close of regular
trading on the NYSE, normally 4:00 p.m., New York time. Net asset value is
computed by dividing the value of the Fund's net assets (i.e. the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the total number of its
shares outstanding at the time the determination is made. The Fund uses market
quotations in valuing its portfolio securities. Short-term investments that
mature in 60 days or less are valued at amortized cost, which the Trustees of
the Fund believes represents fair value.

The Fund may from time to time hold securities that are primarily listed on
foreign exchanges. Such securities may trade on days when the Fund does not
price its shares. Therefore, the Fund's net asset value may change on days when
you are not able to purchase or redeem Fund shares.

Distribution plan
The Fund has adopted a plan under Rule 12b-1 (the "Plan") which authorizes
payments by the Fund of .25% of the Fund's average daily net assets to finance
distribution of the Fund's shares. The Fund may make payments under the Plan for
the purpose of financing any activity primarily intended to result in the sales
of shares of the Fund. To the extent any activity is one which the Fund may
finance without a distribution plan, the Fund may also make payments to
compensate such activity outside of the Plan and not be subject to its
limitations. Because payments under the Plan are paid out of the Fund's assets
on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

Dividends and DistributionS
The Fund intends to pay dividends and capital gain distributions, if any, on an
annual basis. Shareholders may have dividends or capital gains distributions
that are declared by the Fund automatically reinvested at net asset value in
additional shares of the Fund. You will make an election to receive dividends
and distributions in cash or Fund shares at the time you purchase your shares.
You may change this election by notifying the Fund in writing at any time prior
to the record date for a particular dividend or distribution. There are no sales
or other charges in connection with the reinvestment of dividends and capital
gains distributions. There is no fixed dividend rate, and there can be no
assurance that the Fund will pay any dividends or realize any capital gains.

TAX INFORMATION
The Fund expects that its distributions will consist primarily of net investment
income and capital gains. Dividends out of net investment income and
distributions of realized short-term capital gains are taxable to you as
ordinary income. Distributions of net long-term capital gains are taxable to you
at long-term capital gain rates. The Fund's distributions, whether you receive
them in cash or reinvest them in additional shares of the Fund, may 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;
therefore, any gain you realize on such a transaction may be taxable.

Foreign shareholders may be subject to special withholding requirements.

This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of your investment
in the Fund.

Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five fiscal years of the Fund. The total
returns in the table represent the rate that an investor would have earned on an
investment in the Fund's Class AAA shares. This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report along with the
Fund's financial statements and related notes are included in the annual report,
which is available upon request.

Per share amounts for the Fund's Class AAA shares outstanding throughout each
year ended December 31,

1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Operating performance:
Net asset value, beginning of year.......... $31.85 $ 26.42 $ 25.75 $ 22.21 $ 23.30
----- ------- ------- ------- -------
Net investment income....................... 0.02 0.07 0.15 0.26 0.26
Net realized and unrealized gain/(loss)
on investments......................... 5.02 9.97 3.29 5.28 (0.30)
---- ---- ---- ---- ------
Total from investment operations 5.04 10.04 3.44 5.54 (0.04)
---- ----- ---- ---- ------

Distributions to shareholders from:
Net investment income.................. (0.02) (0.07) (0.15) (0.25) (0.25)
Distributions in excess of net
Investment income................. (0.00)(a) ----- ----- (0.01)
Net realized gains..................... (1.40) (4.54) (2.61) (1.75) (0.76)
Distributions in excess of net
Realized gains.................... (0.00)(a) (0.01) (0.00) (0.03)
--------- ------ ------ ------
Total distributions......................... (1.42) (4.61) (2.77) (2.00) (1.05)
------ ------ ------ ------ ------

Net asset value, end of year................ $35.47 $31.85 $ 26.42 $25.75 $22.21
====== ====== ======= ====== ======

Total return*............................... 15.9% 38.1% 13.4% 24.9% (0.1)%
===== ===== ===== ===== ======

Ratios to average net
Assets/supplemental data:
Net assets, end of year (in 000s) $1,575,976 $1,335,052 $1,080,639 $1,091,539 $982,250
Ratio of net investment income to
Average net assets................ 0.06% 0.22% 0.52% 0.95% 1.10%
Ratio of operating expenses to
Average net assets................ 1.36% 1.38% 1.34% 1.33% 1.28%
Portfolio turnover rate..................... 21.0% 22.0% 14.9% 26.4% 18.7%

.........
* 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.
(a) Amount represents less than $0.005 per share.

</TABLE>

[BACK COVER PAGE]

THE GABELLI ASSET FUND

A Statement of Additional Information dated May 1, 1999 (the "SAI") includes
additional information about the Fund. The SAI is incorporated by reference into
this Prospectus and, therefore, is legally a part of this Prospectus.

Purchase and sale information is provided in a separate document called the
Owner's Manual which is incorporated by reference into this Prospectus.

Information about the Fund's investments is available in the Fund's annual and
semi-annual reports to shareholders. In the Fund's annual report, you will find
a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its fiscal year. You may
make inquiries about the Fund, or obtain a copy of the SAI or of the annual or
semi-annual reports without charge, by calling 1-800-GABELLI (1-800-422-3554).

You can review and copy information about the Fund (including the SAI) at the
SEC Public Reference Room in Washington, DC (for information call
1-800-SEC-0330). Such information is also available on the SEC's Internet site
at http://www.sec.gov. You may request documents by mail from the SEC, upon
payment of a duplicating fee, by writing to the Securities and Exchange
Commission, Public Reference Section, Washington, DC ###-##-####.

Investment Company Act File No: 811-04494)

THE GABELLI FAMILY
OF FUNDS

- ------------------------------------------------------------------------------
Owner's Manual
- -------------------------------------------------------------------------------
AAA Class -

No-Load Class

Gabelli Global Series Funds, Inc.
Gabelli Gold Fund, Inc.
Gabelli International Growth Fund, Inc.
Gabelli ABC Fund
Gabelli Asset Fund
Gabelli Growth Fund

May 1, 1999

The information contained in the Owner's Manual is
incorporated by reference into, and is legally
considered part of, the Prospectuses for the
Gabelli family of Funds. The Owner's Manual
must be preceded or accompanied by a Gabelli
Funds Prospectus.

Owner's Manual
Table of Contents

Purchasing Shares
----------------------------------------------------------------------------
3 Instructions for Opening or Adding to
an Account 4 Telephone Investment Plan
4 Automatic Investment Plan 4
Retirement Plans 4 Minimum Investments
5 Dividends and Distributions

Selling Shares
----------------------------------------------------------------------------
5 Instructions for Selling Shares
5 By Bank Wire or Check via Telephone
5 By Bank Wire or Check via Mail
6 General Policies on Selling Shares
6 Signature Guarantees
6 Verifying Telephone Redemptions
6 Redemptions Within 15 Days of Investment
6 Refusal of Redemption Request
6 Closing of Small Accounts
6 Undeliverable Distribution Checks

Exchanging Shares
-----------------------------------------------------------------------
7 Instructions for Exchanging Shares

Pricing of Fund Shares
------------------------------------------------------------------------
7 How NAV is Calculated

PURCHASING SHARES

Instructions for Opening or Adding to an Account

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

Purchases directly from the Fund:
All investments made by regular mail or personal delivery, whether initial or
subsequent, should be sent to:

By Regular Mail By Overnight Delivery
The Gabelli Funds The Gabelli Funds

PO Box 8308 c/o BFDS Building, 6th Floor
Boston, MA 02266-8308 Two Heritage Drive
Quincy, MA 02171

For Initial Investment:

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

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

By Wire Transfer

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

For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:
State Street Bank and Trust Company
ABA #011-0000-28 REF DDA# 9904-6187
Attn: Shareholder Services
Re: [Fund Name]
A/C#___________________________
Your name ______________________
225 Franklin Street, Boston, MA 02110

Note: Your bank may charge a wire transfer fee.

Call 1-800-GABELLI
or your investment representative.
Questions?
Call 1-800-GABELLI
or your investment representative.

Purchasing Shares (continued)

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

Telephone Investment Plan Automatic Investment Plan

You may purchase additional shares of the Funds by You can make automatic
monthly investments in the telephone as long as your bank is a member of the
Funds. Details about this plan can be obtained from Automated Clearing House
(ACH) system. You must also the Distributor on a separate application by calling
have a completed, approved Investment Plan application 1-800-GABELLI
(800-422-3554).
on file with the Fund's Transfer Agent.
------------------------------------------------------
There is a minimum of $100 for each telephone
investment. To initiate an ACH purchase, please call
1-800-GABELLI (1-800-422-3554) or 1-800-872-5365. Retirement Plans

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

- -------------------------------------------------------------------------------

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

Minimum
Initial Minimum
Account type Investment Subsequent
................................ ......................................
................................ ......................................

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

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

Automatic Investment Plan $ 0 $ 100
................................ ......................................
................................ .......................................

Telephone Investment Plan $ 100 $ 100
................................ .......................................

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

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

Dividends and Distributions

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

SELLING SHARES

As a mutual fund shareholder, you are technically selling shares when
you request a withdrawal in cash. This is also known as redeeming shares.
- ------------------------------------------------------------------------------
Withdrawing Money from Your Investment
- ------------------------------------------------------------------------------
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. See section on "General Policies on Selling
Shares" below.

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

Instructions for Selling Shares

The Fund accepts telephone requests for redemptions of unissued shares.

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

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

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

By Bank Wire or Check via Mail
Submit a redemption request to the Fund. Redemption requests may be made by
letter to the Transfer Agent. You must specify the name of the Fund, the dollar
amount or number of shares you wish to redeem and the account number. You must
sign the letter in exactly the same way the account is registered, and if there
is more than one owner of shares, all must sign. A signature guarantee is
required for most requests.

Selling Shares (continued)

General Policies on Selling Shares

Signature Guarantees
Signature guarantees are required on redemption requests for the following: o
The check is not being mailed to the address on your account o The check
is not being made payable to the owner of the account o The redemption
proceeds are being transferred to another person's Fund account.

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

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

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

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

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

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

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

Call 1-800-GABELLI
or your investment representative.
Questions?
Call 1-800-GABELLI
or your investment representative.

EXCHANGING SHARES

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

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

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

Please provide the following information:
o Your name and telephone number
o The exact name on your account and account number
o Taxpayer identification number (usually your Social Security number)
o Dollar value or number of shares to be exchanged o The names of the
Funds from/into which the exchange is to be made

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

Notes on exchanges
o When exchanging from a Fund that
has no sales charge or a lower
sales charge to a Fund with a
higher sales charge, you will pay
the difference.
o The registration and tax
identification numbers of the two
accounts must be identical.
o This exchange privilege may be
changed or eliminated at any time
upon a 60-day notice to
shareholders.
o Be sure to read the prospectus
carefully of any Fund into which
you wish to exchange shares.

PRICING OF FUND SHARES

How NAV is Calculated

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

NAV =

Total Assets - Liabilities
Number of Shares
Outstanding

You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers, or by calling 1-800-GABELLI (800-422-3554).
A Fund's net asset value, or NAV, is determined and its shares are priced
at the close of regular trading on the New York Stock Exchange, normally
at 4:00 p.m., eastern time, on days the New York Stock Exchange is open.
Your order for purchase, sale or exchange of shares is priced at the next
NAV calculated after your order is received by the Fund. This is what is
known as the offering price.

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

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

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

PROSPECTUS
May 1, 1999

Class A Shares
Class B Shares
Class C Shares

This Prospectus contains important information about
the Fund. Please read it before investing and keep it
for future reference.

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

TABLE OF CONTENTS
Page

INVESTMENT AND PERFORMANCE SUMMARY............................................3
INVESTMENT OBJECTIVE..........................................................3
INVESTMENT AND RISK INFORMATION...............................................6
MANAGEMENT OF THE FUND........................................................8
CLASSES OF SHARES.............................................................8
PURCHASE OF SHARES...........................................................10
REDEMPTION OF SHARES.........................................................14
EXCHANGES OF SHARES..........................................................16
PRICING OF FUND SHARES.......................................................17
DISTRIBUTION PLAN............................................................17
DIVIDENDS AND DISTRIBUTIONS..................................................18
TAX INFORMATION..............................................................18
FINANCIAL HIGHLIGHTS.........................................................19

INVESTMENT AND PERFORMANCE SUMMARY

Investment Objective:

The Fund seeks to provide growth of capital. Capital is the amount of money you
invest in the Fund. The Fund's secondary goal is to provide current income.

Principal Investment Strategies:

The Fund will primarily invest in equity securities
consisting of common stocks, preferred stocks and securities which may
be converted into common stocks. The Fund focuses on companies which
appear underpriced relative to their "private market value." Private
market value is the value the Fund's adviser believes informed
investors would be willing to pay for a company.

Who May Want to Invest:

The Fund may appeal to you if:

You may not want to invest in the Fund if:

you are seeking a high level of current income you are
conservative in your investment approach you seek stability
of principal more than growth of capital

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 risk that the portfolio
securities' private market values may never be realized by the market, or their
prices may go down.

An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Performance:

The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year (since commencement of operations), and by showing how the Fund's average
annual returns for 1, 5 and 10 years compare to those of the S&P(R) 500 Stock
Index. As with all mutual funds, the Fund's past performance does not predict
how the Fund will perform in the future.

BAR CHART* (Graphic Omitted)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Calendar Year Total Returns

1998 15.9%
1997 38.1
1996 13.4
1995 24.9
1994 (0.1)
1993 21.8
1992 14.9
1991 18.1
1990 (5.0)
1989 26.2

* The Class A, Class B and Class C shares are new classes of the Fund for
which performance is not yet available. The Class AAA shares of the Fund
are offered in a separate prospectus. The returns for the Class A, Class B
and Class C shares will be substantially similar to those of the Class AAA
shares because all shares of the Fund are invested in the same portfolio of
securities. The annual returns of the different Classes of shares will
differ only to the extent that the expenses of the Classes differ.

During the period shown in the bar chart, the highest return
for a quarter was 18.2% (quarter ended 12/31/98) and the lowest return
for a quarter was (14.2)% (quarter ended 9/30/98).

------------------------------------------------- -------------------- --------------------- ----------------------
Average Annual Total Returns Past One Year Past Five Years Past Ten Years
(for the periods ended December 31, 1998)
------------------------------------------------- -------------------- --------------------- ----------------------
------------------------------------------------- -------------------- --------------------- ----------------------
The Gabelli Asset Fund Class AAA Shares 15.9% 17.8%% 16.2%
------------------------------------------------- -------------------- --------------------- ----------------------
------------------------------------------------- -------------------- --------------------- ----------------------
S&P(R)500 Stock Index** 28.6% 24.05% 19.19%
------------------------------------------------- -------------------- --------------------- ----------------------

** The S&P(R) 500 Composite Stock Price Index is a widely recognized,
unmanaged index of common stock prices. The performance of the Index does
not include expenses or fees.

</TABLE>

Fees and Expenses of the Fund:

These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund.

Class A Shares Class B Shares Class C Shares
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) on Purchases.................... 5.50%1 None None
Maximum Deferred Sales Charge (Load)........................ None2 5.00%2 1.00%2

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) Fees3................. 0.25% 1.00% 1.00%
Other Expenses.............................................. 0.11% 0.11% 0.11%
----- ----- -----
Total Annual Operating Expenses............................. 1.36% 2.11% 2.11%
===== ===== =====
- ----------------------
1 The sales charge declines as the amount invested increases. However,
any such shares redeemed within 90 days of purchase will be subject to a
sales charge payable upon redemption.
2 The Fund imposes a CDSC upon redemption, which is a back-end load, if you
sell your shares within eighty-four months after purchase. After seven
years, Class B shares are converted to Class A shares, which have a lower
12b-2 fee. A maximum CDSC of 1% applies to redemptions of Class C shares
within twenty-four months after purchase and maximum of CDSC of 1% applies
to certain redemptions of Class A shares within twelve months after
purchase.
3 Long-term shareholders may indirectly pay more than the equivalent of the
maximum permitted front-end sales charge.
</TABLE>

Expense Example

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes (1) you
invest $10,000 in the Fund for the time periods shown, (2) you redeem your
shares at the end of the period, except as noted, (3) your investment has a 5%
return each year and (4) the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Class A shares $681 $ 957 $1,234 $2,095

Class B shares
- assuming redemption
- assuming no redemption $728 $1,205 $1,710 $3,106
$214 $ 661 $1,314 $2,441
Class C shares
- assuming redemption $317 $ 770 $1,249 $2,574
- assuming no redemption $214 $ 661 $1,134 $2,441
</TABLE>

INVESTMENT AND RISK INFORMATION

The Fund's primary investment objective is to seek growth of capital,
and investments will be made based on management's perception of their
potential for capital appreciation. Current income, to the extent it
may affect potential growth of capital, is a secondary objective. The
investment objectives of the Fund may not be changed without
shareholder approval.

Under normal market conditions, the Fund invests at least 80% of its
assets in stocks that are listed on a nationally recognized securities
exchange or traded on the NASDAQ National Market System of the National
Association of Securities Dealers. The Fund's Adviser, Gabelli Funds,
LLC (the "Adviser"), will invest in companies that, in the public
market, are selling at a significant discount to their "private market
value." Private market value is the value the Adviser believes informed
investors would be willing to pay to acquire companies with similar
characteristics. The Adviser considers factors such as price, earnings
expectations, earnings and price histories, balance sheet
characteristics and perceived management skills. The Adviser also
considers 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
investment alternatives.

The Fund invests primarily in a diversified portfolio of readily
marketable common stocks and preferred stocks. The Fund may also use
the following investment techniques:

Defensive Investments. When opportunities for capital growth do not
appear attractive or when adverse market or economic conditions occur,
the Fund may temporarily invest all or a portion of its assets in
defensive investments. Such investments include preferred stocks,
high-grade debt securities, obligations of the U.S. Government and its
agencies and instrumentalities, and short-term money market instruments
such as high-quality commercial paper (rated at least "A-1" by S&P or
"P-1" by Moody's Investors Service, Inc.) When following a defensive
strategy, the Fund will be less likely to achieve its investment goal
of capital growth.

Foreign Securities. The Fund may invest up to 25% of its total
assets in securities of non-U.S. issuers.

Investing in the Fund involves the following risks, listed in the order of
importance:

Fund Risk. The Fund invests in stocks issued by companies believed by
the Adviser to be trading at a discount to their private market value
(value stocks). The Fund's price may decline because the market favors
other stocks or small capitalization stocks over stocks of larger
companies. If the Adviser is incorrect in its assessment of the private
market values of the securities it holds, then the value of the Fund's
shares may decline.

Foreign Risk. Investments in foreign securities involve risks related to
political, social and economic developments abroad, as well as risks
resulting from the differences between the regulations to which U.S.
and foreign issuers and markets are subject:

- Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.

- Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S.
companies, and there may be less public information about
their operations.

- Foreign markets may be less liquid and more volatile than
U.S. markets.

- Foreign securities often trade in currencies other than the
U.S. dollar, and the Fund may directly hold foreign currencies
and purchase and sell foreign currencies. Changes in currency
exchange rates will affect the Fund's net asset value, the
value of dividends and interest earned, and gains and losses
realized on the sale of securities. An increase in the
strength of U.S. dollar relative to these other currencies may
cause the value of the Fund to decline. Certain foreign
currencies may be particularly volatile, and foreign
governments may intervene in the currency markets, causing a
decline in value or liquidity of the Fund's foreign currency
holdings.

- Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than
those involved in domestic transactions.

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. As
successor to Gabelli Funds, Inc., the Fund's previous adviser, the Adviser makes
investment decisions for the Fund and continuously reviews and administers the
Fund's investment program under the supervision of the Fund's Board of Trustees.
The Adviser also manages several other open-end and closed-end investment
companies in the Gabelli family of funds. The Adviser is a New York limited
liability company organized in 1999 as successor to Gabelli Funds, Inc., a New
York Corporation organized in 1980. The Adviser is a wholly-owned subsidiary of
Gabelli Asset Management Inc. ("GAMI"), a publicly held company listed on the
New York Stock Exchange.

As compensation for its services and the related expenses borne by the
Adviser, for the fiscal year ended December 31, 1998, the Fund paid the
Adviser an annual fee equal to 1.00% of the value of the Fund's average
daily net assets.

The Portfolio Manager. Mr. Mario J. Gabelli, CFA, is responsible for the
day-to-day management of the Fund. Mr. Gabelli has been Chairman, Chief
Executive Officer and Chief Investment Officer of the Adviser and its
predecessor since its inception in 1980 and of its parent company, GAMI since
1999. Mr. Gabelli also acts as Chief Executive Officer and Chief Investment
Officer of GAMCO Investors, Inc. ("GAMCO"), a wholly-owned subsidiary of GAMI,
and is an officer or director of various other companies affiliated with GAMI.
The Adviser relies to a considerable extent on the expertise of Mr. Gabelli, who
may be difficult to replace in the event of his death, disability or
resignation.

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. Note that the Fund's shareholders must
improve certain technical amendments to the Fund's Declaration of Trust before
the Fund is able to implement a multi-class structure. Therefore, the Fund will
not offer Class A, Class B or Class C shares until it receives such shareholder
approval.

A "front-end sales load," or sales charge, is a one-time fee charged
at the time of purchase of shares. A "contingent deferred sales
charge" ("CDSC") is a one-time fee charged at the time of redemption.
A "Rule 12b-1 fee" is a recurring annual fee for distributing shares
and servicing shareholder accounts
based on the Fund's average daily net assets attributable to the
particular class of shares.

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

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

- --------------------------------- ------------------------------ ----------------------- ---------------------------
- --------------------------------- ------------------------------ ----------------------- ---------------------------
Contingent Deferred Sales Yes, for certain shares Yes, for shares Yes, for shares redeemed
Charge? redeemed within twelve redeemed within within twenty-four months
months of purchase. eighty-four months after purchase.
after purchase.
Declines over time.
- --------------------------------- ------------------------------ ----------------------- ---------------------------
- --------------------------------- ------------------------------ ----------------------- ---------------------------

- --------------------------------- ------------------------------ ----------------------- ---------------------------
- --------------------------------- ------------------------------ ----------------------- ---------------------------
Convertible to Another Class? No. Yes. Automatically No.
converts to Class A
shares after
approximately seven
years.
- --------------------------------- ------------------------------ ----------------------- ---------------------------
- --------------------------------- ------------------------------ ----------------------- ---------------------------

- --------------------------------- ------------------------------ ----------------------- ---------------------------
- --------------------------------- ------------------------------ ----------------------- ---------------------------
Fund Expense Levels Lower annual expenses than Higher annual Higher annual expenses
Class B or Class C shares. expenses than Class A than Class A shares.
shares.
- --------------------------------- ------------------------------ ----------------------- ---------------------------

In selecting a class of shares in which to invest, you should consider

the length of time you plan to hold the shares
the amount of sales charge and Rule 12b-1 fees
whether you qualify for a reduction or waiver of the Class A sales
charge that Class B shares convert to Class A shares approximately
seven years after purchase

- ----------------------------------------------------------- ---------------------------------------------------------
If you... then you should consider...
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
intend to hold your shares for less than seven Purchasing Class C
shares instead of either Class A years shares or Class B shares
do not qualify for a reduced or waived
front-end sales load
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
intend to hold your shares for six years or more Purchasing Class B
shares instead of either Class A do not qualify for a reduced or
waived shares or Class C shares
front-end sales load
- ----------------------------------------------------------- ---------------------------------------------------------
qualify for a reduced or waived front-end sales purchasing Class A shares no matter how long you intend
load to hold your shares
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>

Conversion Feature - Class B Shares

Class B shares automatically convert to Class A shares of the Fund on
the first business day of the eighty-fifth month following the month
following the month in which you acquired such shares.
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.
You will not pay any sales charge or fees when your shares convert,
nor will the transaction be subject to any tax.

If you exchange Class B shares of one fund for Class B shares of
another fund, your holding period will be calculated from the time of
your original purchase of Class B shares. The dollar value of Class A
shares you receive will equal the dollar value of the B shares
converted.

PURCHASE OF SHARES

You can purchase the Fund's shares on any day the New York Stock
Exchange, Inc. ("NYSE") is open for trading (a "Business Day"). You may
purchase shares through Gabelli & Company, Inc. (the "Distributor"),
directly from the Fund, through the Fund's transfer agent or through
broker-dealers that have entered into selling agreements with the
Distributor.

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 Asset Fund" to:

By Mail By Personal Delivery
The Gabelli Funds The Gabelli Funds
P.O. Box 8308 The BFDS Building, 7th Floor
Boston, MA 02266-8308 Two Heritage Drive
Quincy, MA 02171

You can obtain a subscription order form by calling 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.

By Bank Wire. To open an account using the bank wire system, first
telephone the Fund at 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 Value Fund
Class ___ 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.

From a Broker-Dealer. You may purchase shares from broker-dealers. The
broker-dealer will transmit a purchase order and payment to State
Street on your behalf. Broker-dealers may send you confirmations of
your transactions and periodic account statements showing your
investments in the Fund.

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.

Share Price. The Fund sells its shares at the "net asset value" next
determined after the Fund receives your completed subscription order
form and your payment in Federal funds, subject to a sales charge. See
"Pricing of Fund Shares" for a description of the calculation of net
asset value. The sales charge is imposed on Class A shares in
accordance with the following schedule:

Sales Charge Sales Charge Reallowance
as % of the as % of to
Amount of Investment Offering Price* Amount Invested Broker-Dealers

$25,000 but under $50,000............................ 5.75% 6.10% 5.00%
$50,000 but under $100,000........................... 4.50% 4.71% 3.75%
$100,000 but under $250,000.......................... 3.50% 3.62% 2.75%
$250,000 but under $500,000.......................... 2.50% 2.56% 2.00%
$500,000 but under $1 million........................ 2.00% 2.04% 1.75%
$1 million but under $2 million...................... 1.00% 1.01% 1.00%
$2 million or more................................... 0.00% 0.00% 1.00%

* Includes front-end sales load
</TABLE>

Reduced Sales Charges - Class A Shares

Reduced sales charges are available to (1) investors who are eligible
to combine their purchases of Class A shares to receive volume
discounts and (2) investors who sign a Letter of Intent and agree to
make purchases over time. Certain types of investors are eligible for
sales charge waivers.

Volume Discounts. Investors eligible to receive volume discounts are individuals
and their immediate families, tax-qualified employee benefit plans and a trustee
or other fiduciary purchasing shares for a single trust estate or single
fiduciary account even though more than one beneficiary is involved. You also
may combine the value of Class A shares you already hold in the Fund and other
funds advised by Gabelli Funds, LLC or its affiliates along with the value of
the Class A shares being purchased to qualify for a reduced sales charge. For
example, if you own Class A shares of the Fund that have an aggregate value of
$100,000, and make an additional investment in Class A shares of the Fund of
$4,000, the sales charge applicable to the additional investment would be 4.50%,
rather than the 5.50% normally charged on a $4,000 purchase. If you want more
information on volume discounts, call the Distributor at 1-800-GABELLI
(1-800-422-3554) or your broker.

Letter of Intent. If you initially invest at least $1,000 in Class A shares of
the Fund and submit a Letter of Intent to the Distributor, you may make
purchases of Class A shares of the Fund during a 13-month period at the reduced
sales charge rates applicable to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. For more information on the Letter of Intent,
call 1-800-GABELLI (1-800-422-3554).

Investors Eligible for Sales Charge Reductions. Class A shares of the Fund may
be offered without a sales charge to (1) employees of Gabelli & Company, Inc.
BFDS, State Street, and First Data Investor Services Group, Inc., employee
benefit plans for those employees and the spouses and minor children of such
employees when orders on their behalf are placed by such employees (the minimum
initial investment for such purchases is $500); (2) the Adviser, GAMCO,
officers, directors, trustees, general partners, directors and employees of
other investment companies managed by the Adviser, employee benefit plans for
such persons and their spouses and minor children when orders on their behalf
are placed by such persons (with no required minimum initial investment), the
term "immediate family" for this purpose refers to a person's spouse, children
and grandchildren (adopted or natural), parents, grandparents, siblings, a
spouse's siblings, a sibling's spouse and a sibling's children; (3) any other
investment company in connection with the combination of such company with the
Fund by merger, acquisition of assets or otherwise; (4) shareholders who have
redeemed shares in the Fund and who wish to reinvest their redemption proceeds
in the Fund, provided the reinvestment is made within 30 days of the redemption;
(5) 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; (6) qualified employee
benefit plans established pursuant to Section 457 of the Code that have
established omnibus accounts with the Fund; (7) 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); (8) any unit
investment trusts registered under the Investment Company Act of 1940 (the "1940
Act") which have shares of the Fund as a principal investment; (9) investment
advisory clients of GAMCO and their immediate family; (10) employee participants
of organizations adopting the 401(k) Plan sponsored by the Adviser; (11)
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 (12) registered investment advisers or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge a management, consulting or other fee for their
services; and clients of such investment advisers or financial planners who
place trades for their own accounts if the accounts are linked to the master
account of such investment adviser or financial planner on the books and records
of a broker or agent. Investors who qualify under the categories described above
should contact their brokerage firm or the Distributor.

Retirement Plans

The Fund has available a form of IRA for investment in Fund
shares that may be obtained from the 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 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"
which give participants the right to defer portions of their
compensation for investment on a tax-deferred basis until distributions
are made from the plans. The minimum initial investments for all such
retirement plans is $250. The minimum for all subsequent investments is
$100.

Distribution Plan

The Fund has adopted a plan under Rule 12b-1 (the "plan") for each of
its classes of shares. Under the plan, the Fund may use its assets to
finance activities relating to the sale of its shares and the provision
of certain shareholder services. The Fund pays the Rule 12b-1 fees to
the Distributor, which uses the fees primarily to pay (1) ongoing
service fees to securities dealers (which may include the Distributor
itself) and (2) fees to other organizations which provide services such
as processing account applications, maintaining shareholder
sub-accounts, mailing shareholder reports, transaction confirmations
and monthly statements, and serving as the primary information source
to customers concerning the Funds.

The Rule 12b-1 fees vary by class as follows:

Class A Class B Class C

Service Fees 0.25% 0.25% 0.25%

Distribution Fees None 0.75% 0.75%

These are annual rates based on the value of each Class'
average daily net assets. Because the Rule 12b-1 fees are higher for
Class B and Class C shares than Class A shares, Class B and Class C
shares will have higher annual expenses.

Automatic Investment Plan

The Fund offers an automatic monthly investment plan. There is no
minimum monthly investment for accounts establishing an automatic
investment plan. Call the Distributor at 1-800-GABELLI (1-800-422-3554)
for more details about the plan.

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 and (ii) suspend the offering of shares for any period of time.

REDEMPTION OF SHARES

You can redeem shares on any Business Day without a redemption fee.
The Fund may temporarily stop redeeming its shares when the NYSE is
closed or trading on the NYSE is restricted, when an emergency exists
and the Fund cannot sell its shares or accurately determine the value
of its assets, or if the Securities and Exchange Commission ("SEC")
orders the Fund to suspend redemptions.

The Fund redeems its shares at the net asset value next determined
after the Fund receives your redemption request, subject in some cases
to a CDSC, for Class B and Class C shares, as described under
"Redemption Proceeds" below. See "Pricing of Fund Shares" for a
description of the calculation of net asset value.

You may redeem shares through the Distributor, directly from the Fund
through its transfer agent or through a broker-dealer.

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 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.

By Telephone. You may redeem your shares in a direct registered
account by calling either 1-800-422-3554 or 1-800-872-5365
(617-328-5000 from outside the United States), subject to a $25,000
limitation. You may not redeem shares held through an IRA by telephone.
If State Street properly acts on telephone 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 transactions. You may be responsible for any
fraudulent telephone 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" below).

1. Telephone Redemption By Check. The Fund will make checks
payable to the name in which the account is registered and
normally will mail the check to the address of record within
seven days.

2. Telephone Redemption By Wire. The Fund accepts telephone
requests for wire redemption in amounts of at least $1,000.
The Fund will send a wire to either a bank designated on your
subscription order form or on a subsequent letter with a
guaranteed signature. The proceeds are normally wired on the
next Business Day.

Through the Automatic Cash Withdrawal Plan. You may automatically
redeem shares on a monthly, quarterly or annual basis if you have at
least $10,000 in your account and if your account is directly
registered with State Street. If you redeem Class B or Class C shares
under this plan, you must pay the applicable CDSC. Please call the
Distributor at 1-800-422-3554 for more information.

Through a Broker-Dealer. You may redeem shares through a broker-dealer
which will transmit a redemption order to State Street on your behalf.
A redemption request received from a broker-dealer will be effected at
the net asset value next determined (less any applicable CDSC) after
State Street receives the request. If you hold share certificates, you
must present the certificates to the broker-dealer endorsed for
transfer. A broker-dealer may charge you fees for effecting redemptions
for you.

Through Involuntary Redemption. The Fund may redeem all shares in your
account (other than an IRA account) if their value falls below $1,000
as a result of redemptions (but not as a result of a decline in net
asset value). You will be notified in writing and allowed 30 days to
increase the value of your shares to at least $1,000.

Redemption Proceeds

You will pay a CDSC when you redeem:

Class A shares purchased as part of an investment of greater than $2
million if no front-end sales load was paid at the time of purchase,
within twelve months of buying them.
Class B shares within eighty-four months of buying them Class C shares
within twenty-four months of buying them.

The CDSC schedule for Class B shares is set forth below. The CDSC is
based on the net asset value at the time of your investment or the net
asset value at the time of redemption, whichever is lower.

Class B
Shares
Years Since Purchase CDSC
--------------------- - ----
............................................... First 5.00%
.............................................. Second 4.00%
............................................... Third 3.00%
.. ........................................... Fourth 3.00%
............................................... Fifth 2.00%
............................................... Sixth 1.00%
... .......................... Seventh and thereafter 0.00%

<PAGE>

The Distributor pays sales commissions of _____% of the purchase price
of Class B shares of the Fund to brokers at the time of sale that
initiate and are responsible for purchases of such Class B shares of
the Fund.

You will not pay a CDSC to the extent that the value of the redeemed
shares represents:

reinvestment of dividends or capital gains distributions
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:

redemptions and distributions from retirement plans made after the
death or disability of a shareholder minimum required distributions
made from an IRA or other retirement plan account after you reach age
59 1/2 involuntary redemptions made by the Fund a distribution from a
tax-deferred retirement plan after your retirement returns of excess
contributions to retirement plans following the shareholder's death or
disability

If you request redemption proceeds by check, the Fund will normally
mail the check to you within seven days after it receives your
redemption request. If you purchased your Fund shares by check, you may
not redeem shares until 15 days following purchase.

The Fund may pay to you your redemption proceeds wholly or partly in
portfolio securities. Payments would be made in portfolio securities,
however, only in the rare instance that the Fund's Board of Directors
believes that it would be in the Fund's best interest not to pay
redemption proceeds in cash.

EXCHANGES OF SHARES

You may exchange shares of the Fund you hold for shares of the same
class of another fund managed by the Adviser or its affiliates based on their
relative net asset values. To obtain a list of the funds whose shares you may
acquire through exchange call 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. 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.

In effecting an exchange:

you must meet the minimum purchase requirements for the fund whose
shares you purchase through exchange.
if you are exchanging into Class A shares of a fund with a
higher sales charge, you must pay the
difference at the time of exchange.
you may realize a taxable gain or loss.
you should read the prospectus of the fund whose shares you are
purchasing (call 1-800-GABELLI (1-800-422-3554) to obtain
the prospectus).
you should be aware that brokers may charge a fee for handling an
exchange for you.

You may exchange share by telephone, by mail or through a broker-dealer.

Exchanges 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.

Exchanges by Mail. You may send a written request for exchanges to:
The Gabelli Funds, P.O. Box 8308, Boston, MA 02266-8308. State your
name, your account number, the dollar value or number of shares you
wish to exchange, the name and class of the funds whose shares you wish
to exchange, and the name of the fund whose shares you wish to acquire.

We may modify or terminate the exchange privilege at any time.
You will be given notice 60 days prior
to any material change in the exchange privilege.

PRICING OF FUND SHARES

The Fund's net asset value per share is calculated on each Business Day. The
NYSE is currently scheduled to be closed on New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas and on the preceding Friday or subsequent
Monday when a holiday falls on a Saturday or Sunday, respectively.

The Fund's net asset value is calculated separately for each class. It is
determined as of the close of regular trading on the NYSE, normally 4:00 p.m.,
New York time. Net asset value is computed by dividing the value of the Fund's
net assets (i.e. the value of its securities and other assets less its
liabilities, including expenses payable or accrued but excluding capital stock
and surplus) by the total number of its shares outstanding at the time the
determination is made. The Fund uses market quotations in valuing its portfolio
securities. Short-term investments that mature in 60 days or less are valued at
amortized cost.

DISTRIBUTION PLAN

The Fund has adopted a plan under Rule 12b-1 (the "plan") for each of its
classes of shares. Under the plan, the Fund may use its assets to finance
activities relating to the sale of its shares and the provision of certain
shareholder services. The Fund pays the Rule 12b-1 fees to the Distributor,
which uses the fees primarily to pay (1) ongoing trail commissions to securities
dealers (which may include the Distributor itself) and (2) fees to other
organizations which provide services such as processing account applications,
maintaining shareholder sub-accounts, mailing shareholder reports, transaction
confirmations and monthly statements, and serving as the primary information
source to customers concerning the Funds.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
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%

</TABLE>

These are annual rates based on the value of each Class' average daily net
assets. Because the Rule 12b-1 fees are higher for Class B and Class C shares
than Class A shares, Class B and Class C shares will have higher annual
expenses.

DIVIDENDS AND DISTRIBUTIONS

Shareholders may have dividends or capital gains distributions that are declared
by the Fund automatically reinvested at net asset value in additional shares of
the Fund. You will make an election to receive dividends and distributions in
cash or Fund shares at the time you purchase your shares. You may change this
election by notifying the Fund in writing at any time prior to the record date
for a particular dividend or distribution. There are no sales or other charges
in connection with the reinvestment of dividends and capital gains
distributions. There is no fixed dividend rate, and there can be no assurance
that the Fund will pay any dividends or realize any capital gains.

TAX INFORMATION

The Fund expects that its distributions will consist primarily of net investment
income and capital gains. Dividends out of net investment income and
distributions of realized short-term capital gains are taxable to you as
ordinary income. Distributions of net long-term capital gains are taxable to you
at long-term capital gain rates. The Fund's distributions, whether you receive
them in cash or reinvest them in additional shares of the Fund, may 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;
therefore, any gain you realize on such a transaction may be taxable.

Foreign shareholders may be subject to special withholding requirements.

This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of your investment
in the Fund.

FINANCIAL HIGHLIGHTS

The Class A, Class B and Class C shares of the Fund have not previously been
offered.

[BACK COVER PAGE]

THE GABELLI ASSET FUND

You may make inquiries about the Fund, or obtain a copy of the SAI or of the
annual or semi-annual reports without charge, by calling 1-800-GABELLI
(1-800-422-3554).

Investment Company Act File No.: 811-04494

THE GABELLI ASSET FUND

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1999

This Statement of Additional Information (the "SAI"), which is not a prospectus,
describes the Gabelli Asset Fund. The SAI should be read in conjunction with the
Fund's Prospectuses for Class A, Class B, Class C and Class AAA shares dated May
1, 1999. For a free copy of the Prospectuses, please contact the Fund at the
address, telephone number or Internet Web site printed below.

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

TABLE OF CONTENTS
Page

GENERAL INFORMATION............................................................1

INVESTMENT STRATEGIES AND RISKS...............................................1

INVESTMENT RESTRICTIONS.......................................................5

TRUSTEES AND OFFICERS.........................................................6

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS....................................10

INVESTMENT ADVISORY AND OTHER SERVICES.......................................10

DISTRIBUTION PLAN............................................................14

PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................14

RETIREMENT PLANS.............................................................17

REDEMPTION OF SHARES.........................................................18

COMPUTATION OF NET ASSET VALUE...............................................18

INVESTMENT PERFORMANCE INFORMATION...........................................19

DESCRIPTION OF THE FUND'S SHARES..............................................21

FINANCIAL STATEMENTS........................................................23

APPENDIX A..................................................................A-1

GENERAL INFORMATION
The Fund is a diversified, open-end, management investment company. The
Fund was organized as a business trust under the laws of the Commonwealth of
Massachusetts on November 25, 1985.

INVESTMENT STRATEGIES AND RISKS

The Prospectus discusses the investment objective of the Fund and the
principal strategies to be employed to achieve that objective. This
section contains supplemental information concerning certain types of
securities and other instruments in which the Fund may invest,
additional strategies that the Fund may utilize and certain risks
associated with such investments and strategies.

Convertible Securities

Convertible securities may include corporate notes or preferred stock
but are ordinarily a long-term debt obligation of the issuer
convertible at a stated exchange rate into common stock of the issuer.
As with all debt securities, the market value of convertible securities
tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. Convertible securities generally
offer lower interest or dividend yields than non-convertible securities
of similar quality. However, when the market price of the common stock
underlying a convertible security exceeds the conversion price, the
price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common
stock declines, the convertible security tends to trade increasingly on
a yield basis, and thus may not depreciate to the same extent as the
underlying common stock. Convertible securities rank senior to common
stocks on an issuer's capital structure and are consequently of higher
quality and entail less risk than the issuer's common stock, although
the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a
fixed income security.

In selecting convertible securities for the Fund, the Adviser relies
primarily on its own evaluation of the issuer and the potential for
capital appreciation through conversion. It does not rely on the rating
of the security or sell because of a change in rating absent a change
in its own evaluation of the underlying common stock and the ability of
the issuer to pay principal and interest or dividends when due without
disrupting its business goals. Interest or dividend yield is a factor
only to the extent it is reasonably consistent with prevailing rates
for securities of similar quality and thereby provides a support level
for the market price of the security. The Fund will purchase the
convertible securities of highly leveraged issuers only when, in the
judgment of the Adviser, the risk of default is outweighed by the
potential for capital appreciation.

The issuers of debt obligations having speculative characteristics may
experience difficulty in paying principal and interest when due in the
event of a downturn in the economy or unanticipated corporate
developments. The market prices of such securities may become
increasingly volatile in periods of economic uncertainty. Moreover,
adverse publicity or the perceptions of investors over which the
Adviser has no control, whether or not based on fundamental analysis,
may decrease the market price and liquidity of such investments.
Although the Adviser will attempt to avoid exposing the Fund to such
risks, there is no assurance that it will be successful or that a
liquid secondary market will continue to be available for the
disposition of such securities.

Debt Securities

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 strength. When the inherent value of such securities is
recognized, the market value of such securities may appreciate
significantly. The Adviser believes that its research on the credit and
balance sheet strength of certain issuers may enable it to select a
limited number of corporate debt securities, which in certain markets,
will better serve the objective of capital appreciation than
alternative investments in common stocks. Of course, there can be no
assurance that the Adviser will be successful. In its evaluation, the
Adviser will not rely exclusively on ratings and the receipt of income
is only an incidental consideration.

The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Rating Service generally represent the opinions of those organizations
as to the quality of the securities that they rate. Such ratings,
however, are relative and subjective, are not absolute standards of
quality and do not evaluate the market risk of the securities. Although
the Adviser uses these ratings as a criterion for the selection of
securities for the Fund, the Adviser also relies on its independent
analysis to evaluate potential investments for the Fund. See Appendix A
- "Description of Corporate Bond Ratings."

As in the case of the convertible debt securities discussed above, low
rated and unrated corporate debt securities are generally considered to
be more subject to default and therefore significantly more speculative
than those having an investment grade rating. They also are more
subject to market price volatility based on increased sensitivity to
changes in interest rates and economic conditions or the liquidity of
their secondary trading market. The Fund does not intend to purchase
debt securities for which a liquid trading market does not exist but
there can be no assurance that such a market will exist for the sale of
such securities.

Investments in Warrants and Rights

Warrants basically are options to purchase equity securities at a
specified price valid for a specific period of time. Their prices do
not necessarily move parallel to the prices of the underlying
securities. Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its
shareholders. Rights and warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.

The Fund may invest in warrants and rights (other than those acquired
in units or attached to other securities) but will do so only if the
underlying equity securities are deemed appropriate by the Adviser for
inclusion in the Fund's portfolio.

Investing in rights and warrants can provide a greater potential for
profit or loss than an equivalent investment in the underlying security, and
thus can be a speculative investment. The value of a right or warrant may
decline because of a decline in the value of the underlying security, the
passage of time, changes in interest rates or in the dividend or other policies
of the Fund whose equity underlies the warrant or a change in the perception as
to the future price of the underlying security, or any combination thereof.
Rights and warrants generally pay no dividends and confer no voting or other
rights other than to purchase the underlying security.

Investment in Small, Unseasoned Companies and Other Illiquid Securities

The Fund may invest in small, less well-known companies which have
operated for less than three years (including predecessors). The
securities of such companies may have a limited trading market, which
may adversely affect their disposition and can result in their being
priced lower than might otherwise be the case. If other investment
companies and investors who invest in such issuers trade the same
securities when the Fund attempts to dispose of its holdings, the Fund
may receive lower prices than might otherwise be obtained.

The Fund will not invest, in the aggregate, more than 10% 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 under special rules
adopted by the SEC may be treated as liquid if they satisfy liquidity
standards established by the Board of Trustees. The continued liquidity
of such securities is not as well assured as that of publicly traded
securities, and accordingly, the Board of Trustees will monitor their
liquidity.

Corporate Reorganizations

In general, securities of companies engaged in reorganization
transactions sell at a premium to their historic market price
immediately prior to the announcement of the tender offer or
reorganization proposal. However, the increased market price of such
securities may also discount what the stated or appraised value of the
security would be if the contemplated transaction were approved or
consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved;
significantly undervalues the securities, assets or cash to be received
by shareholders of the prospective portfolio company as a result of the
contemplated transaction; or fails adequately to recognize the
possibility that the offer or proposal may be replaced or superseded by
an offer or proposal of greater value. The evaluation of such
contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the
issuer and its component businesses as well as the assets or securities
to be received as a result of the contemplated transaction, but also
the financial resources and business motivation of the offeror as well
as the dynamic of the business climate when the offer or proposal is in
progress.

In making such investments, the Fund will not violate any of its
diversification requirements or investment restrictions (see below,
"Investment Restrictions") including the requirements that, except for
the investment of up to 25% of its assets in any one company or
industry, not more than 5% of its assets may be invested in the
securities of any issuer. Since such investments are ordinarily short
term in nature, they will tend to increase the Fund's portfolio
turnover ratio thereby increasing its brokerage and other transaction
expenses. The Adviser intends to select investments of the type
described which, in its view, have a reasonable prospect of capital
appreciation which is significant in relation to both the risk involved
and the potential of available alternate investments.

When Issued, Delayed Delivery Securities & Forward Commitments

The Fund is authorized to buy and sell when issued securities as an
additional investment strategy in furtherance of its investment
objectives.

In utilizing this strategy, the Fund may enter into forward
commitments for the purchase or sale of securities, including on a
"when issued" or "delayed delivery" basis in excess of customary
settlement periods for the type of securities involved. In some cases,
a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring, i.e., a when, as and if
issued security. When such transactions are negotiated, the price is
fixed at the time of the commitment, with payment and delivery taking
place in the future, generally a month or more after the date of the
commitment. While the Fund will only enter into a forward commitment
with the intention of actually acquiring the security, the Fund may
sell the security before the settlement date if it is deemed advisable.

Securities purchased under a forward commitment are subject to market
fluctuation and no interest (or dividends) accrues to the Fund prior to
the settlement date. The Fund will segregate cash or liquid securities
with its custodian in an aggregate amount at least equal to the amount
of its outstanding forward commitments.

Other Investment Companies

The Fund does not intend to purchase the shares of other open-end
investment companies but reserves the right to invest up to 10% of its
total assets in the securities of closed-end investment companies
including small business investment companies (not more than 5% of its
total assets may be invested in more than 3% of the securities of any
investment company). To the extent that the Fund invests in the
securities of other investment companies, shareholders in the Fund may
be subject to duplicative advisory and administrative fees.

Repurchase Agreements

The Fund may enter into repurchase agreements with "primary dealers"
in U.S. Government securities and member banks of the Federal Reserve
System which furnish collateral at least equal in value or market price
to the amount of their repurchase obligation. In a repurchase
agreement, an investor (e.g., the Fund) purchases a debt security from
a seller which undertakes to repurchase the security at a specified
resale price on an agreed future date (ordinarily a week or less). The
resale price generally exceeds the purchase price by an amount which
reflects an agreed-upon market interest rate for the term of the
repurchase agreement.

The Fund's risk is primarily that, if the seller defaults, the
proceeds from the disposition of underlying securities and other
collateral for the seller's obligation are less than the repurchase
price. If the seller becomes bankrupt, the Fund might be delayed in
selling the collateral. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), repurchase agreements are considered loans.
Repurchase agreements usually are for short periods, such as one week
or less, but could be longer. Except for repurchase agreements for a
period of a week or less in respect to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, not more
than 5% 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 10% of its total assets would
be so invested. These percentage limitations are fundamental and may
not be changed without shareholder approval.

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. 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;

(3) 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;

(4) Make loans of its assets except for the purchase of debt securities;

(5) Borrow money except subject to the restrictions set forth in the prospectus
under "Special Investment Methods - Borrowing";

(6) Mortgage, pledge or hypothecate any of its assets except that, in connection
with permissible borrowings mentioned in paragraph 5 above, not more than 20% of
the assets of the Fund (not including amounts borrowed) may be used as
collateral;

(7) Invest more than 5% of its total assets in more than 3% of the securities of
another investment company or invest more than 10% of its total assets in the
securities of other investment companies, nor make any such investments other
than through purchase in the open market where to the best information of the
Fund no commission or profit to a sponsor or dealer (other than the customary
broker's commission) results from such purchase;

(8) Act as an underwriter of securities of other issuers;

(9) Invest, in the aggregate, more than 10% of the value of its total assets in
securities for which market quotations are not readily available, securities
which are restricted for public sale, or in repurchase agreements maturing or
terminable in more than seven days;

(10) Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration or
development programs;

(11) Sell securities short or invest in puts, calls, straddles, spreads or
combination thereof;

(12) Purchase or acquire commodities or commodity contracts;

(13) Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with any permitted borrowing;

(14) Participate on a joint, or a joint and several, basis in any securities
trading account; or

(15) Invest in companies for the purpose of exercising control.

TRUSTEES AND OFFICERS

Under Massachusetts law, the Fund's Board of Trustees is responsible
for establishing the Fund's policies and for overseeing the management
of the Fund. The Board also elects the Fund's officers who conduct the
daily business of the Fund. The Trustees and principal officers of the
Fund, their ages and their principal occupations for the past five
years, are listed below. Unless otherwise specified, the address of
each such person is One Corporate Center, Rye, New York 10580-1434.
Trustees deemed to be "interested persons" of the Fund for purposes of
the 1940 Act are indicated by an asterisk.

Name, Address, Age and
Position(s) with Fund Principal Occupations During Past Five Years

Mario J. Gabelli,* 56 Chairman of the Board, Chief Executive
Officer, Chief
Trustee Investment Officer of Gabelli Asset
Management Inc.,
Gabelli Funds, LLC and of
GAMCO Investors, Inc.;
Director or Trustee and
Officer of various other
mutual funds advised by
Gabelli Funds, LLC and
its affiliates; Chairman
and Chief Executive
Officer of Lynch
Corporation (diversified
manufacturing and
communications services
company) and Director of
East/West Communications,
Inc.

Felix J. Christiana, 73 Formerly Senior Vice President of Dry Dock
Trustee Savings Bank; Director or Trustee of various
other mutual funds advised by Gabelli Funds,
LLC and its affiliates.

Anthony J. Colavita, 64 President and Attorney at Law in the law firm
Trustee of Anthony J. Colavita, P.C. since 1961;
Director or Trustee of various other mutual
funds advised by Gabelli Funds, LLC and its
affiliates.

James P. Conn, 61 Former Managing Director/Chief Investment
Trustee Officer of Financial Security Assurance
Holdings Ltd. 1992-1998; Director of Santa
Anita Operating Company since 1995;
Director of California Jockey Club since
1983; Director of Meditrust Corporation and
First Republic Bank;
Director or Trustee of
various other mutual
funds advised by Gabelli
Funds, LLC and its
affiliates.

Karl Otto Pohl,*+ 69 Member of the Shareholder Committee of Sal.
Trustee Oppenheim Jr. & Cie. (private investment
bank); Board Member of Gabelli
Asset Management Inc.,
Zurich Versicherungs -
Gesellschaft (insurance),
the International Council
of JP Morgan & Co. and
Trizec Hahn Corp.; Former
President of the Deutsche
Bundesbank and Chairman
of its Central Bank
Council from 1980 through
1991; Director or Trustee
of all other mutual funds
advised by Gabelli Funds,
LLC and its affiliates.

Anthony R. Pustorino, CPA, 73 Certified Public Accountant; Professor of
Trustee Accounting, Pace University, since 1965;
Director or Trustee of various other mutual
funds advised by Gabelli Funds, LLC and its
affiliates.

Anthonie C. van Ekris, 65 Managing Director of Balmac International;
Trustee Director of Stahel Hardmeyer AG; Director or
Trustee of various other mutual funds advised
by Gabelli Funds, LLC and its affiliates.

Salvatore J. Zizza*+, 53 Executive Vice President of FMG Group (OTC),
Trustee a healthcare provider; Chairman of The
Bethlehem Corp. (ASE); Board Member of
Hollis Eden Pharmaceuticals (OTC);
Director of various other
mutual funds advised by
Gabelli Funds, LLC and
its affiliates.

Bruce N. Alpert, 47 Executive Vice President and Chief Operating
President and Treasurer Officer of the
Adviser; President and Director of Gabelli
Advisers, Inc.
and an Officer of all funds advised by Gabelli
Funds, LLC
and its affiliates.

James E. McKee, 34 Vice President and General Counsel of Gabelli Asset
Secretary Management Inc., GAMCO Investors, Inc. since 1993 and of
Gabelli Funds, LLC since August 1995; Secretary of all
funds advised by Gabelli Funds, LLC and Gabelli Advisers,
Inc. since August 1995. Branch Chief with the U.S.
Securities and Exchange Commission in New York (1992-1993).

+ Mr. Pohl is a director of the parent company of the Adviser. Mr. Zizza
may be an "interested person" as a result of his previous association
with Binnings Building Products, Inc., an entity controlled by GLI, Inc.,
an affiliate of the Adviser.

No director, officer or employee of Gabelli & Company, Inc. ("Gabelli
& Company" or the "Distributor") or the Adviser or of any affiliate of
Gabelli & Company or 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, $6,000 per annum plus $500 per
meeting attended in person 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, and the Chairman of each committee receives
$1,000 per annum. For the fiscal year ended December 31, 1998, such
fees totaled $61,000.

Compensation Table

- ----------------------------------------- ---------------------------------- ---------------------------------------
(1) (2) (3)

Total Compensation
Aggregate Compensation from from Registrant and Fund Complex Paid
Registrant for to Trustees
Name of Person, Position Fiscal Year for Calendar Year*
- ----------------------------------------- ---------------------------------- ---------------------------------------
$ 0 $ 0
Mario J. Gabelli
Trustee

Anthony J. Colavita $9,000 $ 81,500 (14)
Trustee

Felix J. Christiana $9,000 $ 88,100 (10)
Trustee

James P. Conn $8,000 $ 46,000 (5)
Trustee

Karl Otto Pohl $8,000 $ 98,466 (15)
Trustee

Anthony R. Pustorino $11,000 $ 100,500 (10)
Trustee

Anthonie C. van Ekris $8,000 $ 57,500 (11)
Trustee

Salvatore J. Zizza $8,000 $ 51,000 (5)
Trustee

* The total compensation paid to such persons during the calendar year
ending December 31, 1998 by investment companies (including the Fund)
from which such person receives compensation that are part of the same
Fund complex as the Fund, because they have common or affiliated
investment advisers. The number in parentheses represents the number of
such investment companies.

</TABLE>

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
[As of _______, 1999, the following persons owned more than 25% of the
voting securities of the Fund and therefore may be deemed to control
the Fund:]

[Name/Address ____%]

As of ________, 1999, the following persons owned of record or
beneficially 5% or more of the Fund's outstanding shares:

Name/Address ____%

As of ________, 1999, as a group the Trustees and officers of the Fund
owned less than 1% of the outstanding shares of common stock of the
Fund.

INVESTMENT ADVISORY AND OTHER SERVICES

Investment Adviser
The Adviser is a New York limited liability company which also serves
as Adviser to 12 other open-end investment companies, and 3 closed-end
investment companies. 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 parent company of the Adviser.
GAMCO Investors, Inc. ("GAMCO"), a wholly-owned subsidiary of the
Adviser, acts as investment adviser for individuals, pension trusts,
profit-sharing trusts and endowments, and had aggregate assets in
excess of $8.0 billion under its management as of December 31, 1998.

Affiliates of the Adviser may, in the ordinary course of their
business, acquire for their own account or for the accounts of their
advisory clients, significant (and possibly controlling) positions in
the securities of companies that may also be suitable for investment by
the Fund. The securities in which the Fund might invest may thereby be
limited to some extent. For instance, many companies in the past
several years have adopted so-called "poison pill" or other defensive
measures designed to discourage or prevent the completion of
non-negotiated offers for control of the company. Such defensive
measures may have the effect of limiting the shares of the company
which might otherwise be acquired by the Fund if the affiliates of the
Adviser or their advisory accounts have or acquire a significant
position in the same securities. However, the Adviser does not believe
that the investment activities of its affiliates will have a material
adverse effect upon the Fund in seeking to achieve its investment
objectives. Securities purchased or sold pursuant to contemporaneous
orders entered on behalf of the investment company accounts of the
Adviser or the advisory accounts managed by its affiliates for their
unaffiliated clients are allocated pursuant to principles believed to
be fair and not disadvantageous to any such accounts. In addition, all
such orders are accorded priority of execution over orders entered on
behalf of accounts in which the Adviser or its affiliates have a
substantial pecuniary interest. The Adviser may on occasion give advice
or take action with respect to other clients that differ from the
actions taken with respect to the Fund. The Fund may invest in the
securities of companies which are investment management clients of
GAMCO. In addition, portfolio companies or their officers or directors
may be minority shareholders of the Adviser or its affiliates.

Pursuant to an Amended and Restated Investment Advisory Contract,
which was approved by the shareholders of the Fund at a meeting held on
May 11, 1992 (the "Contract"), the Adviser furnishes a continuous
investment program for the Fund's portfolio, makes the day-to-day
investment decisions for the Fund, arranges the portfolio transactions
of the Fund and generally manages the Fund's investments in accordance
with the stated policies of the Fund, subject to the general
supervision of the Board of Trustees of the Fund.

Under the Contract, the Adviser also (i) provides the Fund with the
services of persons competent to perform such supervisory,
administrative, and clerical functions as are necessary to provide
effective administration of the Fund, including maintaining certain
books and records and overseeing the activities of the Fund's Custodian
and Transfer Agent; (ii) oversees the performance of administrative and
professional services to the Fund by others, including the Fund's
Sub-Administrator, Custodian, Transfer Agent and Dividend Disbursing
Agent, as well as accounting, auditing and other services performed for
the Fund; (iii) provides the Fund with adequate office space and
facilities; (iv) prepares, but does not pay for, the periodic updating
of the Fund's registration statement, Prospectus and Additional
Statement, including the printing of such documents for the purpose of
filings with the SEC and state securities administrators, the Fund's
tax returns, and reports to the Fund's shareholders and the SEC; (v)
calculates the net asset value of shares in the Fund; (vi) prepares,
but does not pay for, all filings under the securities or "Blue Sky"
laws of such states or countries as are designated by the Distributor,
which may be required to register or qualify, or continue the
registration or qualification, of the Fund and/or its shares under such
laws; and (vii) prepares notices and agendas for meetings of the Fund's
Board of Trustees and minutes of such meetings in all matters required
by the Act to be acted upon by the Board.

The Contract provides that absent willful misfeasance, bad faith,
gross negligence or reckless disregard of its duty, the Adviser and its
employees, officers, directors and controlling persons are not liable
to the Fund or any of its investors for any act or omission by the
Adviser or for any error of judgment or for losses sustained by the
Fund. However, the Contract provides that the Fund is not waiving any
rights it may have with respect to any violation of law which cannot be
waived. The Contract also provides indemnification for the Adviser and
each of these persons for any conduct for which they are not liable to
the Fund. The Contract in no way restricts the Adviser from acting as
Adviser to others. The Fund has agreed by the terms of the Contract
that the word "Gabelli" in its name is derived from the name of the
Adviser which in turn is derived from the name of Mario J. Gabelli;
that such name is the property of the Adviser for copyright and/or
other purposes; and that, therefore, such name may freely be used by
the Adviser for other investment companies, entities or products. The
Fund has further agreed that in the event that for any reason, the
Adviser ceases to be its investment adviser, the Fund will, unless the
Adviser otherwise consents in writing, promptly take all steps
necessary to change its name to one which does not include "Gabelli."

By its terms, the Contract will remain in effect from year to year,
provided each such annual continuance is specifically approved by the
Fund's Board of Trustees or by a "majority" (as defined in the 1940
Act) vote of its shareholders and, in either case, by a majority vote
of the Trustees who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called
specifically for the purpose of voting on the Contract. The Contract is
terminable without penalty by the Fund on sixty days' written notice
when authorized either by majority vote of its outstanding voting
shares or by a vote of a majority of its Board of Trustees, or by the
Adviser on sixty days' written notice, and will automatically terminate
in the event of its "assignment" as defined by the 1940 Act.

For the Fund's fiscal years ended December 31, 1996, December 31, 1997
and December 31, 1998, the Fund paid investment advisory fees to the
Adviser amounting to $11,146,282, $11,701,148 and $14,882,733,
respectively.

Sub-Administrator

First Data Investor Services Group, Inc. (the "Sub-Administrator"), a
subsidiary of First Data Corporation which is located at Exchange
Place, Boston, Massachusetts 02109, serves as Sub-Administrator to the
Fund pursuant to a Sub-Administration Agreement with the Adviser (the
"Sub-Administration Agreement"). Under the Sub-Administration
Agreement, the Sub-Administrator (a) assists in supervising all aspects
of the Fund's operations except those performed by the Adviser under
its advisory agreement with the Fund; (b) supplies the Fund with office
facilities (which may be in the Sub-Administrator's own offices),
statistical and research data, data processing services, clerical,
accounting and bookkeeping services, including, but not limited to, the
calculation of the net asset value of shares in the Fund, internal
auditing and legal services, internal executive and administrative
services, and stationery and office supplies; (c) prepares and
distributes materials for all Fund Board of Trustees' Meetings
including the mailing of all Board materials and collates the same
materials into the Board books and assists in the drafting of minutes
of the Board Meetings; (d) prepares reports to Fund shareholders, tax
returns and reports to and filings with the SEC and state "Blue Sky"
authorities; (e) calculates the Fund's net asset value per share,
provides any equipment or services necessary for the purpose of pricing
shares or valuing the Fund's investment portfolio and, when requested,
calculates the amounts permitted for the payment of distribution
expenses under any distribution plan adopted by the Fund; (f) provides
compliance testing of all Fund activities against applicable
requirements of the 1940 Act and the rules thereunder, the Code, and
the Fund's investment restrictions; (g) furnishes to the Adviser such
statistical and other factual information and information regarding
economic factors and trends as the Adviser from time to time may
require; and (h) generally provides all administrative services that
may be required for the ongoing operation of the Fund in a manner
consistent with the requirements of the 1940 Act.

For the services it provides, the Advisor 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 $1 billion -
0.10%; $1 billion to $1.5 billion - 0.08%; $1.5 billion to $3 billion - 0.03%;
over $3 billion - 0.02%. The Sub-Administrator's fee is paid by the Adviser and
will result in no additional expenses to the Fund.

Distributor

To implement the Fund's 12b-1 Plan, the Fund has entered into a
Distribution Agreement with the Distributor, a New York corporation
which is an indirect majority owned subsidiary of Gabelli Asset
Management Inc., having principal offices located at One Corporate
Center, Rye, New York 10580. The Distributor continuously solicits
offers for the purchase of shares of the Fund on a best efforts basis.

Counsel

Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, serves as the Fund's legal counsel.

Independent Accountant

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036, independent accountants, have been selected to audit, and
express their opinions on, the Fund's annual financial statements.

Custodian, Transfer Agent and Dividend Disbursing Agent

State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, MA 02110 is the Custodian for the Fund's cash and
securities. Boston Financial Data Services, Inc. ("BFDS"), an affiliate
of State Street located at the BFDS Building, Two Heritage Drive,
Quincy, Massachusetts 02171, performs the services of transfer agent
and dividend disbursing agent for the Fund. Neither BFDS nor State
Street assists in or is responsible for investment decisions involving
assets of the Fund.

DISTRIBUTION PLAN

On February 26, 1997, the Fund adopted a Plan of Distribution (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. Payments may be made
by the Fund under the Plan for the purpose of financing any activity
primarily intended to result in the sales of shares of the Fund as
determined by the Board of Trustees. Such activities typically include
advertising, compensation for sales and marketing activities of the
Distributor and other banks, broker-dealers and service providers;
shareholder account servicing; production and dissemination of
prospectus and sales and marketing materials; and capital or other
expenses of associated equipment, rent, salaries, bonuses, interest and
other overhead. To the extent any activity is one which the Fund may
finance without a distribution plan, the Fund may also make payments to
finance such activity outside of the Plan and not be subject to its
limitations. Payments under the Plan are not solely dependent on
distribution expenses actually incurred by the Distributor.

Under its terms, the 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"). The Plan may not 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 the Plan
must also be approved by the Trustees in the manner described above.
The 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 the Plan, the Distributor will provide the Trustees periodic
reports of amounts expanded under the Plan and the purpose for which
expenditures were made.

No interested person of the Fund or any Independent Trustee of the
Fund had a direct or indirect financial interest in the operation of
the Plan or related agreements.

During the fiscal year ended December 31, 1998, the Fund made payments
to the Distributor pursuant to the Plan totaling $3,708,303 or 0.25% of
the Fund's average daily net assets. Such payments funded expenditures
of approximately: $434,700 for advertising, $206,300 for printing,
postage and stationary, $2,675,403 for overhead support expenses and
$391,900 for salaries of personnel of the Distributor. The Plan
compensates the Distributor regardless of its expenses.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Under the Contract, the Adviser is authorized on behalf of the Fund to
employ brokers to effect the purchase or sale of portfolio securities
with the objective of obtaining prompt, efficient and reliable
execution and clearance of such transactions at the most favorable
price obtainable ("best execution") at reasonable expense. The Adviser
is permitted to (1) direct Fund portfolio brokerage to Gabelli &
Company, a broker-dealer affiliate of the Adviser; (2) pay commissions
to brokers other than Gabelli & Company which are higher than might be
charged by another qualified broker to obtain brokerage and/or research
services considered by the Adviser to be useful or desirable for its
investment management of the Fund and/or other advisory accounts under
the management of the Adviser and any investment adviser affiliated
with it; and (3) consider the sales of shares of the Fund by brokers
other than Gabelli & Company as a factor in its selection of brokers
for Fund portfolio transactions. Transactions in securities other than
those for which a securities exchange is the principal market are
generally executed through a brokerage firm and a commission is paid
whenever it appears that the broker can obtain a more favorable overall
price. In general, there may be no stated commission on principal
transactions in over-the-counter securities, but the prices of such
securities may usually include undisclosed commissions or markups.

When consistent with the objective of obtaining best execution, Fund
brokerage may be directed to brokers or dealers which furnish brokerage
or research services to the Fund or the Adviser of the type described
in Section 28(e) of the Securities Exchange Act of 1934, as amended.
The commissions charged by a broker furnishing such brokerage or
research services may be greater than that which another qualified
broker might charge if the Adviser determines, in good faith, that the
amount of such greater commission is reasonable in relation to the
value of the additional brokerage or research services provided by the
executing broker, viewed in terms of either the particular transaction
or the overall responsibilities of the Adviser or its advisory
affiliates to the accounts over which they exercise investment
discretion. Since it is not feasible to do so, the Adviser need not
attempt to place a specific dollar value on such services or the
portion of the commission which reflects the amount paid for such
services but must be prepared to demonstrate a good faith basis for its
determinations.

Investment research obtained by allocations of Fund brokerage is used
to augment the scope and supplement the internal research and
investment strategy capabilities of the Adviser but does not reduce the
overall expenses of the Adviser to any material extent. Such investment
research may be in written form or through direct contact with
individuals and includes information on particular companies and
industries as well as market, economic or institutional activity areas.
Research services furnished by brokers through which the Fund effects
securities transactions are used by the Adviser and its advisory
affiliates in carrying out their responsibilities with respect to all
of their accounts over which they exercise investment discretion. Such
investment information may be useful only to one or more of the other
accounts of the Adviser and its advisory affiliates, and research
information received for the commissions of those particular accounts
may be useful both to the Fund and one or more of such other accounts.

Neither the Fund nor the Adviser has any agreement or legally binding
understanding with any broker regarding any specific amount of
brokerage commissions which will be paid in recognition of such
services. However, in determining the amount of portfolio commissions
directed to such brokers, the Adviser does consider the level of
services provided and, based on such determinations, has allocated
brokerage commissions of $592,888 on portfolio transactions in the
principal amounts of $414,928,963, during 1998. The average commission
on these transactions was $0.0479 per share.

The Adviser may also place orders for the purchase or sale of
portfolio securities with Gabelli & Company when it appears that, as an
introducing broker or otherwise, Gabelli & Company can obtain a price
and execution which is at least as favorable as that obtainable by
other qualified brokers. As required by Rule 17e-1 under the 1940 Act,
the Board of Trustees has adopted "Procedures" which provide that
commissions paid to Gabelli & Company on stock exchange transactions
may not exceed that which would have been charged by another qualified
broker or member firm able to effect the same or a comparable
transaction at an equally favorable price and contains a schedule
setting forth maximum commission charges for such transactions designed
to reflect that standard. Rule 17e-1 and the Procedures contain
requirements that the Board, including its "independent" Trustees,
conduct periodic compliance reviews of such brokerage allocations and
review such schedule at least annually for its continuing compliance
with the foregoing standard. The Adviser and Gabelli & Company are also
required to furnish reports and maintain records in connection with
such reviews.

To obtain the best execution of portfolio transactions on the New York
Stock Exchange ("NYSE"), Gabelli & Company controls and monitors the
execution of such transactions on the floor of the NYSE through
independent "floor brokers" or through the Designated Order Turnaround
System of the NYSE. Such transactions are then cleared, confirmed to
the Fund for the account of Gabelli & Company, and settled directly
with the Custodian of the Fund by a clearing house member firm which
remits the commission less its clearance charges to Gabelli & Company.
Pursuant to an agreement with the Fund, Gabelli & Company pays all
charges incurred for such services and reports at least quarterly to
the Board the amount of such expenses and commissions. The net
compensation realized by Gabelli & Company for its brokerage services
is subject to the approval of the Board and the Independent Trustees of
the Fund who must approve the continuance of the arrangement at least
annually. Commissions paid by the Fund pursuant to the arrangement may
not exceed the commission level specified by the Procedures described
above. Gabelli may also effect Fund portfolio transactions in the same
manner and pursuant to the same arrangements on other national
securities exchanges which adopt direct order access rules similar to
those of the NYSE.

The following table sets forth certain information regarding the
Fund's payment of brokerage commissions including commissions paid to
Gabelli & Company and Keeley Investment Corp. ("Keeley"). A significant
shareholder of Keeley is a director of a company that is an affiliate
of the Adviser.

Fiscal Year Ended
Commissions
December 31 Paid

Total Brokerage Commissions........................................ 1996 $494,944
1997 $700,560
1998 $592,888

Commissions paid to Gabelli & Company.............................. 1996 $130,061
1997 $216,768
1998 $333,718

Commissions paid to Keeley Investment Corp......................... 1996 $5,550
1997 $4,025
1998 $1,350

% of Total Brokerage Commissions paid to Gabelli & Company.........
1998 56.29%

% of Total Brokerage Commissions paid to Keeley Investment Corp....
1998 0.23%

% of Total Transactions involving Commissions paid to Gabelli &
Company............................................................ 1998 47.62%

% of Total Transactions involving Commissions paid to Keeley
Investment Corp.................................................... 1998 0.12%

</TABLE>

RETIREMENT PLANS
Under the Internal Revenue Code of 1986, as amended (the "Code"), individuals
may make wholly or partly tax deductible IRA contributions of up to
$2,000 annually, depending on whether they are active participants in
an employer-sponsored retirement plan and on their income level.
However, dividends and distributions held in the account are not taxed
until withdrawn in accordance with the provisions of the Code. An
individual with a non-working spouse may establish a separate IRA for
the spouse under the same conditions and contribute a combined maximum
of $4,000 annually to both IRAs provided that no more than $2,000 may
be contributed to the IRA of either spouse. Other provisions permit
additional IRA contributions which are not tax deductible but the tax
on reinvested dividends and distributions is deferred while held in the
account. There are also rules on the amount of tax deductible
contributions which may be made to other retirement plans.

Investors may be eligible to make contributions to a new type
of individual retirement account (a "Roth IRA"). An investor can open a
Roth IRA if he or she meets certain income limits specified in the
Code. Any contributions made by an investor to a Roth IRA are
nondeductible for U.S. Federal income tax purposes. Distributions from
a Roth IRA are not included in the investor's gross income and are not
subject to a 10% penalty for early withdrawal if the distributions are
made after the end of the five-year period beginning with the first tax
year in which the investor made a contribution to the Roth IRA and the
distributions meet other criteria set forth in the Code. The maximum
annual aggregate contribution that can be made to IRAs and Roth IRAs is
$2,000. In addition, certain low and middle-income investors may open
an education individual retirement account (an "Education IRA").
Eligible individuals are permitted to contribute up to $500 per year
per beneficiary under 18 years old to an Education IRA. The minimum
initial investment for an Education IRA through the Fund is $250. A
distribution from an Education IRA is generally excludable from gross
income to the extent that such distribution does not exceed qualified
higher education expenses incurred by the beneficiary during the year
in which the distribution is made.

Investors should be aware that they may be subject to penalties or additional
tax on contributions to or withdrawals from IRAs or other retirement
plans which are not permitted by the applicable provisions of the Code
and prior to a withdrawal, shareholders may be required to certify
their age and awareness of such restrictions in writing. Persons
desiring information concerning investments through IRAs or other
retirement plans should write or telephone the Distributor.

REDEMPTION OF SHARES

Payment of the redemption price for shares redeemed may be made either
in cash or in portfolio securities (selected in the discretion of the
Board of Trustees of the Fund and taken at their value used in
determining the Fund's net asset value per share as described under
"Computation of Net Asset Value"), or partly in cash and partly in
portfolio securities. However, payments will be made wholly in cash
unless the Board of Trustees believes that economic conditions exist
which would make such a practice detrimental to the best interests of
the Fund. If payment for shares redeemed is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the investor
in converting the securities to cash. The Fund will not distribute
in-kind portfolio securities that are not readily marketable. The Fund
has filed a formal election with the SEC pursuant to which the Fund
will only effect a redemption in portfolio securities where the
particular shareholder of record is redeeming more than $250,000 or 1%
of the Fund's total net assets, whichever is less, during any 90 day
period. In the opinion of the Fund's management, however, the amount of
a redemption request would have to be significantly greater than
$250,000 before a redemption wholly or partly in portfolio securities
would be made.

Cancellation of purchase orders for Fund shares (as, for example, when
checks submitted to purchase shares are returned unpaid) causes a loss
to be incurred when the net asset value of the Fund shares on the date
of cancellation is less than on the original date of purchase. The
investor is responsible for such loss, and the Fund may reimburse
itself or the Distributor for such loss by automatically redeeming
shares from any account registered at any time in that shareholder's
name, or by seeking other redress. In the event shares held in the
account of such shareholder are not sufficient to cover such loss, the
Distributor will promptly reimburse the Fund for the amount of such
unrecovered loss.

COMPUTATION OF NET ASSET VALUE

Net asset value is calculated separately for each class of the Fund.
The net asset value of Class B and Class C shares of the Fund will generally be
lower than the net asset value of Class A or Class AAA shares as a result of the
large distribution-related fee to which Class B and Class C shares are subject.
It is expected, however, that the net asset value per share of each class will
tend to converge immediately after the recording of dividends, if any, which
will differ by approximately the amount of the distribution and/or service fee
expense accrual differential among the classes.

For purposes of determining the Fund's net asset value per share,
readily marketable portfolio securities listed on the NYSE are valued,
except as indicated below, at the last sale price reflected at the
close of the regular trading session of the NYSE 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 mean of the closing bid and
asked prices on such day. If no asked prices are quoted on such day,
then the security is valued at the closing bid price 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. Readily marketable securities not
listed on the NYSE but listed on other national securities exchanges or
admitted to trading on the National Association of Securities Dealers
Automated Quotations, Inc. ("NASDAQ") National List are valued in like
manner.

Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the
Adviser to be over-the-counter but excluding securities admitted to
trading on the NASDAQ National List, are valued at the mean of the
current bid and asked prices as reported by NASDAQ or, in the case of
securities not quoted by NASDAQ, the National Quotation Bureau or such
other comparable sources as the Board of Trustees deems appropriate to
reflect their fair value. If no asked prices are quoted on such day,
then the security is valued at the closing bid price 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.

Portfolio securities traded on more than one national securities
exchange or market are valued according to the broadest and most
representative market as determined by the Adviser. Securities traded
primarily on foreign exchanges are valued at the closing price on such
foreign exchange immediately prior to the close of the NYSE.

United States Government obligations and other 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 highest bid price obtained from a dealer maintaining an active
market in that security or on the basis of prices obtained from a
pricing service approved as reliable by the Board of Trustees. 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.

INVESTMENT PERFORMANCE INFORMATION

The investment performance of the Fund quoted in advertising or sales
literature for the sale of its shares will be calculated on a total
return basis which assumes the reinvestment of all dividends and
distributions. Total return is computed by comparing the value of an
assumed investment in Fund shares at the offering price in effect at
the beginning of the period shown with the redemption price of the same
investment at the end of the period (including share(s) accrued thereon
by the reinvestment of dividends and distributions). Performance
quotations given as a percentage will be derived by dividing the amount
of such total return by the amount of the assumed investment. When the
period shown is greater than one year, the result is referred to as
cumulative performance or cumulative total return.

Performance quotations will ordinarily be accompanied by the average
annual total return of the Fund for the past ten years as well as its
total return for the past five years and for the twelve months as of
the end of the most recent calendar quarter. Quotations of average
annual total return for periods greater than one year will be the
compounded annual rate of return which equates to the result of the
previously described calculation of cumulative total return. Computed
in the manner described, the total return of the Fund's Class AAA
shares has been:

Year ended Total Return

12/31/88 31.1%
12/31/89 26.2%
12/31/90 (5.0)%
12/31/91 18.1%
12/31/92 14.9%
12/31/93 21.8%
12/31/94 (0.1)%
12/31/95 24.9%
12/31/96 13.4%
12/31/97 38.1%
12/31/98 15.9%

The Fund's average annual total return figures for Class AAA shares are
as follows:

15.9% for the one year period from January 1, 1998 through December
31, 1998

17.8% for the five year period from January 1, 1993 through December
31, 1998

16.2% for the ten year period from January 1, 1988 through December
31, 1998

17.2% for the period from the Fund's inception on March 3, 1986
through December 31, 1998

The formula for computing the foregoing annual rate of total return is:

P (1 + T) n = ERV

P = Investment at the beginning of the period. T = Compounded annual rate of
total return.
n = Number of years.
ERV = Redemption value of the same investment at the end of the period
assuming the reinvestment of all dividends and distributions.

Investors are cautioned that past results are not necessarily representative of
future results; that investment returns and principal value will fluctuate; that
investment performance is primarily a function of portfolio management (which is
affected by the economic and market environment as well as the volatility of
portfolio investments) and operating expenses; and that performance information,
such as that described above, may not provide a valid basis of comparison with
other investments and investment companies using a different method of computing
performance data.

DESCRIPTION OF THE FUND'S SHARES
The Fund may issue an unlimited number of full and fractional shares of
beneficial interest (par value $.01 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 Massachusetts 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, the Fund's Trustees will call a meeting of shareholders upon
the written request of the shareholders of 331/3 % of the Fund's
outstanding shares (10% in the case of removal of a Trustee).
Furthermore, ten shareholders holding the lesser of $25,000 worth or
one percent of Fund shares may advise the Trustees in writing that they
wish to communicate with other shareholders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then, if
requested by the applicants, mail at the applicants' expense, the
applicants' communication to all other shareholders. The Declaration of
Trust provides that the Fund's shareholders have the right, upon the
declaration in writing or vote of more than two thirds of its
outstanding shares, to remove a Trustee. Except for a change in the
name of the Trust, no amendment may be made to the Declaration of Trust
without the affirmative vote of the holders of more than 50% of its
outstanding shares. Shareholders have no preemptive or conversion
rights. The Fund may be terminated upon the sale of its assets to
another issuer, if such sale is approved by the vote of the holders of
more than 50% of its outstanding shares. If not so terminated, the Fund
intends to continue indefinitely.

Liabilities; Separate Series of Shares

The Fund's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing
in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for a trust's obligations. However, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund
itself is unable to meet its obligations since the Declaration of Trust
provides for indemnification and reimbursement of expenses out of the
property of the Fund to any shareholder held personally liable for any
obligation of the Fund and also provides that the Fund shall, if
requested, assume the defense of any claim made against any shareholder
for any act or obligation of the Trust and satisfy any judgment
recovered thereon.

The Fund reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate
equally in the earnings, dividends and assets of the particular series
and would vote separately to approve management agreements or changes
in investment policies, but shares of all series would vote together in
the election or selection of Trustees, principal underwriters and
accountants and on any proposed material amendment to the Fund's
Declaration of Trust. Upon liquidation of the Fund, shareholders of
each series would be entitled to share pro rata in the net assets of
their respective series available for distribution to shareholders.

FINANCIAL STATEMENTS

[TO BE FILED BY AMENDMENT]

APPENDIX A
DESCRIPTION OF CORPORATE DEBT RATINGS

MOODY'S INVESTORS SERVICE, INC.

Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat large than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times
over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues
are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for
reasons unrelated to the quality of the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy. 3. There is a lack of essential data pertaining to the issue
or issuer. 4. The issue was privately placed, in which case the rating is not
published in Moody's Investors Services,
Inc.'s publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

Note: Those bonds in the Aa A, Baa Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1.

STANDARD & POOR'S RATINGS SERVICE

AAA: Bonds rated AAA have the highest rating assigned by Standard
& Poor's Ratings Service, a division of McGraw Hill Companies,
Inc. Capacity to pay interest and repay principal is
extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues
only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in the highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB, B Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
predominantly speculative with CCC, respect to capacity to pay interest and
repay principal in accordance with the terms of this CC, C: 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
Or relative standing within the major rating categories.
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
obligation as a matter of policy.

PART C: OTHER INFORMATION

Item 23.

Exhibits

All references are to the Registrant's registration statement on Form
N-1A as filed with the Securities and Exchange Commission ("SEC") on
November 21, 1985, File Nos. 33-1719 and 811-4494 (the "Registration
Statement").

(a) Declaration of Trust will be filed by amendment.

(b) Registrant's By-laws are incorporated by reference to
Post-Effective Amendment No. 14 to the Registration Statement
as filed with the SEC on April 30, 1997 (Accession No.
0000927405-97-000146) ("Post-Effective Amendment No. 14").

(d) Amended and Restated Investment Advisory Agreement with
Gabelli Funds, Inc. dated May 12, 1992 is incorporated by
reference to Post-Effective Amendment No. 14.

Investment Advisory Agreement with Gabelli Funds, LLC dated
_______ will be filed by Amendment.

(e) Amended and Restated Distribution Agreement dated May 11, 1992
is incorporated by reference to Post-Effective Amendment No.
14.

Amended and Restated Distribution Agreement dated _______ will
be filed by Amendment.

(f) Not applicable.

(g) Custody Agreement dated January 11, 1986 is incorporated by
reference to Post-Effective Amendment No. 14.

Amendment to Custody Agreement dated December 7, 1989
is incorporated by reference to
Post-Effective Amendment No. 14.

Amendment to Custody Agreement dated May 13, 1991
is incorporated by reference to
Post-Effective Amendment No. 14.

(h) Transfer Agency Agreement is incorporated by reference to
Post-Effective Amendment No. 14.

Sub-Administration Agreement with The Shareholder Services
Group, Inc. (now known as First Data Investor Services
Group, Inc.) dated May 1, 1995 is incorporated by reference
to Post-Effective
Amendment No. 14.

(i) Not applicable.

(j) Consent of Independent Accountants will be filed by Amendment.

Powers of Attorney for Mario J. Gabelli, Felix J.
Christiana, Anthony J. Colavita, James P. Conn, Karl Otto
Pohl, Anthony R. Pustorino, Anthonie C. van Ekris and
Salvatore J. Zizza are incorporated by reference to
Post-Effective Amendment No. 14.

Assistant Secretary Certificate is incorporated by reference
to Post-Effective Amendment No. 15.

(k) Not applicable.

(l) Agreement with initial shareholder is incorporated by
reference to Post-Effective Amendment No. 14.

(m) Amended and Restated Plan of Distribution pursuant to Rule
12b-1 is incorporated by reference to Post-Effective Amendment
No. 14.

Amended and Restated Plan of Distribution pursuant to Rule
12b-1 relating to Class AAA Series Shares is filed herewith.

Plan of Distribution pursuant to Rule 12b-1 relating to Class
A Series Shares is filed herewith.

Plan of Distribution pursuant to Rule 12b-1 relating to Class
B Series Shares is filed herewith.

Plan of Distribution pursuant to Rule 12b-1 relating to Class
C Series Shares is filed herewith.

(n) Financial Data Schedule is filed herewith.

(o) Rule 18f-3 Multi-Class Plan is filed herewith.

Item 24. Persons Controlled by or Under Common Control with Registrant

None

Item 25. Indemnification

Reference is made to Subdivision (c) of Section 12 of Article
Seventh of Registrant's Declaration of Trust.

Insofar as indemnification of liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person
of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.

The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, its
By-laws, the Management Agreement, the Sub-Advisory Agreement,
the Administration Agreement and the Distribution Agreement in
a manner consistent with Release No. 11330 of the Securities
and Exchange Commission under the 1940 Act.

Item 26. Business and Other Connections of Investment Adviser

Gabelli Funds, LLC (the "Adviser") is a registered investment
adviser providing investment management and administrative
services to the Registrant. The Adviser also provides similar
services to other mutual funds.

The information required by this Item 26 of directors,
officers or partners of the Adviser, together with information
as to any other business, profession, vocation or employment
of a substantial nature engaged in by the Adviser or such
directors, officers or partners during the past two years, is
incorporated by reference to Form ADV filed by the Adviser
under 1940 Act (SEC File No. 801-37706).

Item 27. Principal Underwriter

(a) Gabelli & Company, Inc. ("Gabelli & Company") currently acts as distributor
for The Gabelli ABC Fund, The Gabelli Asset Fund, The Gabelli Capital Asset
Fund, The Gabelli Convertible Securities Fund, Inc., The Gabelli Equity Income
Fund, The Gabelli Equity Trust Inc., The Gabelli Global Convertible Securities
Fund, The Gabelli Global Interactive Couch Potato(R)Fund, The Gabelli Global
Multimedia Trust Inc., The Gabelli Global Telecommunications Fund, Gabelli Gold
Fund, The Gabelli Growth Fund, The Gabelli International Growth Fund, Inc., The
Gabelli Small Cap Growth Fund, The Gabelli U.S. Treasury Money Market Fund, The
Gabelli Value Fund, Inc., The Treasurer's Fund, Inc. and the Westwood Funds.

(b) The information required by this Item 27 with respect to each
director, officer or partner of Gabelli & Company is
incorporated by reference to Schedule A of Form BD filed by
Gabelli & Company under the Securities Exchange Act of 1934,
as amended (SEC File No. 8-21373).

Item 28. Location of Accounts and Records

All such accounts, books and other documents required by
Section 31(a) of the 1940 Act and Rules 31a-1 through 31a-3
thereunder are maintained at the offices of the Adviser,
Gabelli Funds, Inc., One Corporate Center, Rye, New York
10580-1434, First Data Investor Services Group, Inc., One
Exchange Place, Boston, Massachusetts 02109, State Street Bank
and Trust Company, 225 Franklin Street, Boston, Massachusetts,
02110 and Boston Financial Data Services, Inc., Two Heritage
Drive, North Quincy, Massachusetts, 02171.

Item 29. Management Services

Not applicable.

Item 30. Undertakings

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant, THE GABELLI ASSET
FUND, 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 1st day of March,
1999.

THE GABELLI ASSET FUND

By: /s/ Bruce N. Alpert
Bruce N. Alpert
President and Treasurer

- ---------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.

Signature Title Date

/s/ Mario J. Gabelli* Chairman and Trustee March 1, 1999
- -----------------------------
Mario J. Gabelli

/s/ Bruce N. Alpert President and Treasurer March 1, 1999
- -----------------------------
Bruce N. Alpert

/s/ Felix J. Christiana* Trustee March 1, 1999
- -----------------------------
Felix J Christiana

/s/ Anthony J. Colavita* Trustee March 1, 1999
- -----------------------------
Anthony J. Colavita

/s/ James P. Conn* Trustee March 1, 1999
- -----------------------------
James P. Conn

/s/ Karl Otto Pohl* Trustee March 1, 1999
- -----------------------------
Karl Otto Pohl

/s/ Anthony R. Pustorino* Trustee March 1, 1999
- -----------------------------
Anthony R. Pustorino

/s/ Anthonie C. van Ekris* Trustee March 1, 1999
- -----------------------------
Anthonie C. van Ekris

/s/ Salvatore J. Zizza* Trustee March 1, 1999
- -----------------------------
Salvatore J. Zizza

*By: /s/ Bruce N. Alpert
Bruce N. Alpert
Attorney-in-fact

SCHEDULE OF EXHIBITS

EXHIBIT

(m) Amended and Restated Plan of Distribution pursuant to
Rule 12b-1 relating to Class AAA Series Shares.

Plan of Distribution pursuant to Rule 12b-1 relating
to Class A Series Shares.

Plan of Distribution pursuant to Rule 12b-1 relating
to Class B Series Shares.

Plan of Distribution pursuant to Rule 12b-1 relating
to Class C Series Shares.

(n) Financial Data Schedule.

(o) Rule 18f-3 Multi-Class Plan.

AMENDED AND RESTATED

PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1

THE GABELLI ASSET FUND

WHEREAS, THE GABELLI ASSET FUND, a Massachusetts Business
Trust (the "Fund"), engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");

WHEREAS, the Fund has issued and is authorized to issue
shares of Common Stock ("Shares");

WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and the Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Trustees of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");

WHEREAS, the Fund has adopted a plan of distribution pursuant
to Rule 12b-1 under the Act to assist in the distribution of Shares (the
"Plan");

WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class AAA Shares (the "Class AAA Shares"),
pursuant to Rule 18f-3 under the Act that permits the Fund to implement a
multiple distribution system providing investors with the option of purchasing
shares of various classes;

WHEREAS, the Board as a whole, and the trustees who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to amend the
Plan in certain respects and to restate such amended Plan in its entirety and
that, in the exercise of reasonable business judgment and in light of their
fiduciary duties, that there is a reasonable likelihood that a plan of
distribution containing the terms set forth herein will benefit the Fund and the
shareholders of the Class AAA Shares, and have accordingly approved the Plan by
votes cast in person at a meeting called for the purpose of amending and
restating the Plan; and

WHEREAS, this Plan governs the Class AAA Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class AAA Shares.

NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby amends and restates the Plan in accordance with Rule 12b-1 under the Act
on the following terms and conditions:

1. In consideration of the services to be provided, and the expenses to be
incurred, by the Distributor pursuant to the Distribution Agreement, the Fund
will pay to the Distributor as distribution payments (the "Payments") in
connection with the distribution of Class AAA Shares an aggregate amount at a
rate of 0.25% per year of the average daily net assets of the Class AAA Shares.
Such Payments shall be accrued daily and paid monthly in arrears or shall be
accrued and paid at such other intervals as the Board shall determine. The
Fund's obligation hereunder shall be limited to the assets of the Class AAA
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund. 2.
3. It is understood that the Payments made by the Fund under this Plan will be
used by the Distributor for the purpose of financing or assisting in the
financing of any activity which is primarily intended to result in the sale of
Class AAA Shares. The scope of the foregoing shall be interpreted by the Board,
whose decision shall be conclusive except to the extent it contravenes
established legal authority. Without in any way limiting the discretion of the
Board, the following activities are hereby declared to be primarily intended to
result in the sale of Class AAA Shares: advertising the Class AAA Shares or the
Fund's investment adviser's mutual fund activities; compensating underwriters,
dealers, brokers, banks and other selling entities (including the Distributor
and its affiliates) and sales and marketing personnel of any of them for sales
of Class AAA Shares, whether in a lump sum or on a continuous, periodic,
contingent, deferred or other basis; compensating underwriters, dealers,
brokers, banks and other servicing entities and servicing personnel (including
the Fund's investment adviser and its personnel) of any of them for providing
services to shareholders of the Fund relating to their investment in the Class
AAA Shares, including assistance in connection with inquiries relating to
shareholder accounts; the production and dissemination of prospectuses
(including statements of additional information) of the Fund and the
preparation, production and dissemination of sales, marketing and shareholder
servicing materials; and the ordinary or capital expenses, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses relating to any activity for which Payment is
authorized by the Board; and the financing of any activity for which Payment is
authorized by the Board; and profit to the Distributor and its affiliates
arising out of their provision of shareholder services. Notwithstanding the
foregoing, this Plan does not require the Distributor or any of its affiliates
to perform any specific type or level of distribution activities or shareholder
services or to incur any specific level of expenses for activities covered by
this Section 2. In addition, Payments made in a particular year shall not be
refundable whether or not such Payments exceed the expenses incurred for that
year pursuant to this Section 2. 4. 5. The Fund is hereby authorized and
directed to enter into appropriate written agreements with the Distributor and
each other person to whom the Fund intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into appropriate written
agreements with each person to whom the Distributor intends to make any payments
in the nature of a Payment. The foregoing requirement is not intended to apply
to any agreement or arrangement with respect to which the party to whom Payment
is to be made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper in the
case of an advertisement) unless the Board determines that such an agreement or
arrangement should be treated as a "related" agreement for purposes of Rule
12b-1 under the Act. 6. 7. Each agreement required to be in writing by Section 3
must contain the provisions required by Rule 12b-1 under the Act and must be
approved by a majority of the Board ("Board Approval") and by a majority of the
Disinterested Trustees ("Disinterested Trustee Approval"), by vote cast in
person at a meeting called for the purposes of voting on such agreement. All
determinations or authorizations of the Board hereunder shall be made by Board
Approval and Disinterested Trustee Approval. 8. 9. The officers, investment
adviser or Distributor of the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such Payments were
made. 10. 11. To the extent any activity is covered by Section 2 and is also an
activity which the Fund may pay for on behalf of the Class AAA Shares without
regard to the existence or terms and conditions of a plan of distribution under
Rule 12b-1 of the Act, this Plan shall not be construed to prevent or restrict
the Fund from paying such amounts outside of this Plan and without limitation
hereby and without such payments being included in calculation of Payments
subject to the limitation set forth in Section 1. 12. 13. This Plan shall not
take effect until it has been approved by a vote of at least a majority of the
Class AAA Shares. This Plan may not be amended in any material respect without
Board Approval and Disinterested Trustee Approval and may not be amended to
increase the maximum level of Payments permitted hereunder without such
approvals and further approval by a vote of at least a majority of the Class AAA
Shares. This Plan may continue in effect for longer than one year after its
approval by a majority of the Class AAA Shares only as long as such continuance
is specifically approved at least annually by Board Approval and by
Disinterested Trustee Approval. 14. 15. This Plan may be terminated at any time
by a vote of the Disinterested Trustees, cast in person at a meeting called for
the purposes of voting on such termination, or by a vote of at least a majority
of the Class AAA Shares. 16. 17. For purposes of this Plan the terms "interested
person" and "related agreement" shall have the meanings ascribed to them in the
Act and the rules adopted by the Securities and Exchange Commission thereunder
and the term "vote of a majority of the Class AAA Shares" shall mean the vote,
at the annual or a special meeting of the holders of the Class AAA Shares duly
called, (a) of 67% or more of the voting securities present at such meeting, if
the holders of more than 50% of the Class AAA Shares outstanding on the record
date for such meeting are present or represented by proxy or, if less, (b) more
than 50% of the Class AAA Shares outstanding on the record date for such
meeting. 18. 19. Dated: February 17, 1999

PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1

THE GABELLI ASSET FUND

WHEREAS, the Fund has issued and is authorized to issue
shares of Common Stock
("Shares");

WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class A Shares (the "Class A Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;

WHEREAS, the Board as a whole, and the trustees who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class A Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class A Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and

WHEREAS, this Plan governs the Class A Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class A Shares.

NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:

1. In consideration of the services to be provided, and the expenses to be
incurred, by the Distributor pursuant to the Distribution Agreement, the Fund
will pay to the Distributor as distribution payments (the "Payments") in
connection with the distribution of Class A Shares an aggregate amount at a rate
of 0.25% per year of the average daily net assets of the Class A Shares. Such
Payments shall be accrued daily and paid monthly in arrears or shall be accrued
and paid at such other intervals as the Board shall determine. The Fund's
obligation hereunder shall be limited to the assets of the Class A Shares and
shall not constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund. 2. 3. It is
understood that the Payments made by the Fund under this Plan will be used by
the Distributor for the purpose of financing or assisting in the financing of
any activity which is primarily intended to result in the sale of Class A
Shares. The scope of the foregoing shall be interpreted by the Board, whose
decision shall be conclusive except to the extent it contravenes established
legal authority. Without in any way limiting the discretion of the Board, the
following activities are hereby declared to be primarily intended to result in
the sale of Class A Shares: advertising the Class A Shares or the Fund's
investment adviser's mutual fund activities; compensating underwriters, dealers,
brokers, banks and other selling entities (including the Distributor and its
affiliates) and sales and marketing personnel of any of them for sales of Class
A Shares, whether in a lump sum or on a continuous, periodic, contingent,
deferred or other basis; compensating underwriters, dealers, brokers, banks and
other servicing entities and servicing personnel (including the Fund's
investment adviser and its personnel) of any of them for providing services to
shareholders of the Fund relating to their investment in the Class A Shares,
including assistance in connection with inquiries relating to shareholder
accounts; the production and dissemination of prospectuses (including statements
of additional information) of the Fund and the preparation, production and
dissemination of sales, marketing and shareholder servicing materials; and the
ordinary or capital expenses, such as equipment, rent, fixtures, salaries,
bonuses, reporting and recordkeeping and third party consultancy or similar
expenses relating to any activity for which Payment is authorized by the Board;
and the financing of any activity for which Payment is authorized by the Board;
and profit to the Distributor and its affiliates arising out of their provision
of shareholder services. Notwithstanding the foregoing, this Plan does not
require the Distributor or any of its affiliates to perform any specific type or
level of distribution activities or shareholder services or to incur any
specific level of expenses for activities covered by this Section 2. In
addition, Payments made in a particular year shall not be refundable whether or
not such Payments exceed the expenses incurred for that year pursuant to this
Section 2. 4. 5. The Fund is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other person to
whom the Fund intends to make any Payment, and the Distributor is hereby
authorized and directed to enter into appropriate written agreements with each
person to whom the Distributor intends to make any payments in the nature of a
Payment. The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be made does
not have the purpose set forth in Section 2 above (such as the printer in the
case of the printing of a prospectus or a newspaper in the case of an
advertisement) unless the Board determines that such an agreement or arrangement
should be treated as a "related" agreement for purposes of Rule 12b-1 under the
Act. 6. 7. Each agreement required to be in writing by Section 3 must contain
the provisions required by Rule 12b-1 under the Act and must be approved by a
majority of the Board ("Board Approval") and by a majority of the Disinterested
Trustees ("Disinterested Trustee Approval"), by vote cast in person at a meeting
called for the purposes of voting on such agreement. All determinations or
authorizations of the Board hereunder shall be made by Board Approval and
Disinterested Trustee Approval. 8. 9. The officers, investment adviser or
Distributor of the Fund, as appropriate, shall provide to the Board and the
Board shall review, at least quarterly, a written report of the amounts expended
pursuant to this Plan and the purposes for which such Payments were made. 10.
11. To the extent any activity is covered by Section 2 and is also an activity
which the Fund may pay for on behalf of the Class A Shares without regard to the
existence or terms and conditions of a plan of distribution under Rule 12b-1 of
the Act, this Plan shall not be construed to prevent or restrict the Fund from
paying such amounts outside of this Plan and without limitation hereby and
without such payments being included in calculation of Payments subject to the
limitation set forth in Section 1. 12. 13. This Plan shall not take effect until
it has been approved by a vote of at least a majority of the Class A Shares.
This Plan may not be amended in any material respect without Board Approval and
Disinterested Trustee Approval and may not be amended to increase the maximum
level of Payments permitted hereunder without such approvals and further
approval by a vote of at least a majority of the Class A Shares. This Plan may
continue in effect for longer than one year after its approval by a majority of
the Class A Shares only as long as such continuance is specifically approved at
least annually by Board Approval and by Disinterested Trustee Approval. 14. 15.
This Plan may be terminated at any time by a vote of the Disinterested Trustees,
cast in person at a meeting called for the purposes of voting on such
termination, or by a vote of at least a majority of the Class A Shares. 16. 17.
For purposes of this Plan the terms "interested person" and "related agreement"
shall have the meanings ascribed to them in the Act and the rules adopted by the
Securities and Exchange Commission thereunder and the term "vote of a majority
of the Class A Shares" shall mean the vote, at the annual or a special meeting
of the holders of the Class A Shares duly called, (a) of 67% or more of the
voting securities present at such meeting, if the holders of more than 50% of
the Class A Shares outstanding on the record date for such meeting are present
or represented by proxy or, if less, (b) more than 50% of the Class A Shares
outstanding on the record date for such meeting. 18. 19. Dated: February 17,
1999 20.

PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1

THE GABELLI ASSET FUND

WHEREAS, the Fund has issued and is authorized to issue
shares of Common Stock
("Shares");

WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class B Shares (the "Class B Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;

WHEREAS, the Board as a whole, and the trustees who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class B Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class B Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and

WHEREAS, this Plan governs the Class B Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class B Shares.

NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:

1. In consideration of the services to be provided, and the expenses to be
incurred, by the Distributor pursuant to the Distribution Agreement, the Fund
will pay to the Distributor a distribution fee at the aggregate amount rate of
.75% per year of the average daily net asset value of the Class B Shares and a
service fee at the aggregate amount rate of .25% per year of the average daily
net asset value of the Class B Shares (the "Payments"). Such Payments shall be
accrued daily and paid monthly in arrears or shall be accrued and paid at such
other intervals as the Board shall determine. The Fund's obligation hereunder
shall be limited to the assets of the Class B Shares and shall not constitute an
obligation of the Fund except out of such assets and shall not constitute an
obligation of any shareholder of the Fund.
2.
3. It is understood that the Payments made by the Fund under this Plan will be
used by the Distributor for the purpose of financing or assisting in the
financing of any activity which is primarily intended to result in the sale of
Class B Shares. The scope of the foregoing shall be interpreted by the Board,
whose decision shall be conclusive except to the extent it contravenes
established legal authority. Without in any way limiting the discretion of the
Board, the following activities are hereby declared to be primarily intended to
result in the sale of Class B Shares: advertising the Class B Shares or the
Fund's investment adviser's mutual fund activities; compensating underwriters,
dealers, brokers, banks and other selling entities (including the Distributor
and its affiliates) and sales and marketing personnel of any of them for sales
of Class B Shares, whether in a lump sum or on a continuous, periodic,
contingent, deferred or other basis; compensating underwriters, dealers,
brokers, banks and other servicing entities and servicing personnel (including
the Fund's investment adviser and its personnel) of any of them for providing
services to shareholders of the Fund relating to their investment in the Class B
Shares, including assistance in connection with inquiries relating to
shareholder accounts; the production and dissemination of prospectuses
(including statements of additional information) of the Fund and the
preparation, production and dissemination of sales, marketing and shareholder
servicing materials; and the ordinary or capital expenses, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses relating to any activity for which Payment is
authorized by the Board; and the financing of any activity for which Payment is
authorized by the Board; and profit to the Distributor and its affiliates
arising out of their provision of shareholder services. Notwithstanding the
foregoing, this Plan does not require the Distributor or any of its affiliates
to perform any specific type or level of distribution activities or shareholder
services or to incur any specific level of expenses for activities covered by
this Section 2. In addition, Payments made in a particular year shall not be
refundable whether or not such Payments exceed the expenses incurred for that
year pursuant to this Section 2. 4. 5. The Fund is hereby authorized and
directed to enter into appropriate written agreements with the Distributor and
each other person to whom the Fund intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into appropriate written
agreements with each person to whom the Distributor intends to make any payments
in the nature of a Payment. The foregoing requirement is not intended to apply
to any agreement or arrangement with respect to which the party to whom Payment
is to be made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper in the
case of an advertisement) unless the Board determines that such an agreement or
arrangement should be treated as a "related" agreement for purposes of Rule
12b-1 under the Act. 6. 7. Each agreement required to be in writing by Section 3
must contain the provisions required by Rule 12b-1 under the Act and must be
approved by a majority of the Board ("Board Approval") and by a majority of the
Disinterested Trustees ("Disinterested Trustee Approval"), by vote cast in
person at a meeting called for the purposes of voting on such agreement. All
determinations or authorizations of the Board hereunder shall be made by Board
Approval and Disinterested Trustee Approval. 8. 9. The officers, investment
adviser or Distributor of the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such Payments were
made. 10. 11. To the extent any activity is covered by Section 2 and is also an
activity which the Fund may pay for on behalf of the Class B Shares without
regard to the existence or terms and conditions of a plan of distribution under
Rule 12b-1 of the Act, this Plan shall not be construed to prevent or restrict
the Fund from paying such amounts outside of this Plan and without limitation
hereby and without such payments being included in calculation of Payments
subject to the limitation set forth in Section 1. 12. 13. This Plan shall not
take effect until it has been approved by a vote of at least a majority of the
Class B Shares. This Plan may not be amended in any material respect without
Board Approval and Disinterested Trustee Approval and may not be amended to
increase the maximum level of Payments permitted hereunder without such
approvals and further approval by a vote of at least a majority of the Class B
Shares. This Plan may continue in effect for longer than one year after its
approval by a majority of the Class B Shares only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Trustee Approval. 14. 15. This Plan may be terminated at any time by a vote of
the Disinterested Trustees, cast in person at a meeting called for the purposes
of voting on such termination, or by a vote of at least a majority of the Class
B Shares. 16. 17. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the Act and the
rules adopted by the Securities and Exchange Commission thereunder and the term
"vote of a majority of the Class B Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class B Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class B Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
B Shares outstanding on the record date for such meeting. 18. 1.

Dated: February 17, 1999

PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1

THE GABELLI ASSET FUND

WHEREAS, the Fund has issued and is authorized to issue
shares of Common Stock
("Shares");

WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class C Shares (the "Class C Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;

WHEREAS, the Board as a whole, and the trustees who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class C Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class C Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and

WHEREAS, this Plan governs the Class C Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class C Shares.

NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:

1. In consideration of the services to be provided, and the expenses to be
incurred, by the Distributor pursuant to the Distribution Agreement, the Fund
will pay to the Distributor a distribution fee at the aggregate amount rate of
.75% per year of the average daily net asset value of the Class C Shares and a
service fee at the aggregate amount rate of .25% per year of the average daily
net asset value of the Class C Shares (the "Payments"). Such Payments shall be
accrued daily and paid monthly in arrears or shall be accrued and paid at such
other intervals as the Board shall determine. The Fund's obligation hereunder
shall be limited to the assets of the Class C Shares and shall not constitute an
obligation of the Fund except out of such assets and shall not constitute an
obligation of any shareholder of the Fund.
2.
3. It is understood that the Payments made by the Fund under this Plan will be
used by the Distributor for the purpose of financing or assisting in the
financing of any activity which is primarily intended to result in the sale of
Class C Shares. The scope of the foregoing shall be interpreted by the Board,
whose decision shall be conclusive except to the extent it contravenes
established legal authority. Without in any way limiting the discretion of the
Board, the following activities are hereby declared to be primarily intended to
result in the sale of Class C Shares: advertising the Class C Shares or the
Fund's investment adviser's mutual fund activities; compensating underwriters,
dealers, brokers, banks and other selling entities (including the Distributor
and its affiliates) and sales and marketing personnel of any of them for sales
of Class C Shares, whether in a lump sum or on a continuous, periodic,
contingent, deferred or other basis; compensating underwriters, dealers,
brokers, banks and other servicing entities and servicing personnel (including
the Fund's investment adviser and its personnel) of any of them for providing
services to shareholders of the Fund relating to their investment in the Class C
Shares, including assistance in connection with inquiries relating to
shareholder accounts; the production and dissemination of prospectuses
(including statements of additional information) of the Fund and the
preparation, production and dissemination of sales, marketing and shareholder
servicing materials; and the ordinary or capital expenses, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses relating to any activity for which Payment is
authorized by the Board; and the financing of any activity for which Payment is
authorized by the Board; and profit to the Distributor and its affiliates
arising out of their provision of shareholder services. Notwithstanding the
foregoing, this Plan does not require the Distributor or any of its affiliates
to perform any specific type or level of distribution activities or shareholder
services or to incur any specific level of expenses for activities covered by
this Section 2. In addition, Payments made in a particular year shall not be
refundable whether or not such Payments exceed the expenses incurred for that
year pursuant to this Section 2. 4. 5. The Fund is hereby authorized and
directed to enter into appropriate written agreements with the Distributor and
each other person to whom the Fund intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into appropriate written
agreements with each person to whom the Distributor intends to make any payments
in the nature of a Payment. The foregoing requirement is not intended to apply
to any agreement or arrangement with respect to which the party to whom Payment
is to be made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper in the
case of an advertisement) unless the Board determines that such an agreement or
arrangement should be treated as a "related" agreement for purposes of Rule
12b-1 under the Act. 6. 7. Each agreement required to be in writing by Section 3
must contain the provisions required by Rule 12b-1 under the Act and must be
approved by a majority of the Board ("Board Approval") and by a majority of the
Disinterested Trustees ("Disinterested Trustee Approval"), by vote cast in
person at a meeting called for the purposes of voting on such agreement. All
determinations or authorizations of the Board hereunder shall be made by Board
Approval and Disinterested Trustee Approval. 8. 9. The officers, investment
adviser or Distributor of the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such Payments were
made. 10. 11. To the extent any activity is covered by Section 2 and is also an
activity which the Fund may pay for on behalf of the Class C Shares without
regard to the existence or terms and conditions of a plan of distribution under
Rule 12b-1 of the Act, this Plan shall not be construed to prevent or restrict
the Fund from paying such amounts outside of this Plan and without limitation
hereby and without such payments being included in calculation of Payments
subject to the limitation set forth in Section 1. 12. 13. This Plan shall not
take effect until it has been approved by a vote of at least a majority of the
Class C Shares. This Plan may not be amended in any material respect without
Board Approval and Disinterested Trustee Approval and may not be amended to
increase the maximum level of Payments permitted hereunder without such
approvals and further approval by a vote of at least a majority of the Class C
Shares. This Plan may continue in effect for longer than one year after its
approval by a majority of the Class C Shares only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Trustee Approval. 14. 15. This Plan may be terminated at any time by a vote of
the Disinterested Trustees, cast in person at a meeting called for the purposes
of voting on such termination, or by a vote of at least a majority of the Class
C Shares. 16. 17. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the Act and the
rules adopted by the Securities and Exchange Commission thereunder and the term
"vote of a majority of the Class C Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class C Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class C Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
C Shares outstanding on the record date for such meeting. 18. 1.

Dated: February 17, 1999

[ARTICLE] 6
[CIK] 0000783898
[NAME] K:\WDATA\ADMIN\EDGAR\GABELLI\ASSET.FDS
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-1-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 847398996
[INVESTMENTS-AT-VALUE] 1597068823
[RECEIVABLES] 3464725
[ASSETS-OTHER] 3327
[OTHER-ITEMS-ASSETS] 3491372
[TOTAL-ASSETS] 1604028247
[PAYABLE-FOR-SECURITIES] 7455631
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 20596711
[TOTAL-LIABILITIES] 28052342
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 827276606
[SHARES-COMMON-STOCK] 44429209
[SHARES-COMMON-PRIOR] 41918237
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 938014
[ACCUM-APPREC-OR-DEPREC] 749637313
[NET-ASSETS] 1575975905
[DIVIDEND-INCOME] 15387284
[INTEREST-INCOME] 5747659
[OTHER-INCOME] 0
[EXPENSES-NET] 20252395
[NET-INVESTMENT-INCOME] 882548
[REALIZED-GAINS-CURRENT] 59477782
[APPREC-INCREASE-CURRENT] 164961752
[NET-CHANGE-FROM-OPS] 225322082
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 689228
[DISTRIBUTIONS-OF-GAINS] 59570401
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 50493058
[NUMBER-OF-SHARES-REDEEMED] 49630901
[SHARES-REINVESTED] 1648815
[NET-CHANGE-IN-ASSETS] 240924127
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 1038715
[GROSS-ADVISORY-FEES] 14822733
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 20252395
[AVERAGE-NET-ASSETS] 1486738202
[PER-SHARE-NAV-BEGIN] 31.85
[PER-SHARE-NII] .02
[PER-SHARE-GAIN-APPREC] 5.02
[PER-SHARE-DIVIDEND] .02
[PER-SHARE-DISTRIBUTIONS] 1.40
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 35.47
[EXPENSE-RATIO] 1.36
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

RULE 18f-3
MULTI-CLASS PLAN

FOR

THE GABELLI ASSET FUND

This Plan is adopted pursuant to Rule 18f-3 under the Act to
provide for the issuance and distribution of multiple classes of shares by the
Fund in accordance with the terms, procedures and conditions set forth below. A
majority of the Trustees of the Fund, including a majority of the Trustees who
are not interested persons of the Fund within the meaning of the Act, have found
this Multi-Class Plan, including the expense allocations, to be in the best
interest of the Fund and each Class of Shares constituting the Fund.

A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.

1. The Act -- the Investment Company Act of 1940, as amended,
and the rules and regulations promulgated thereunder.

1. CDSC -- contingent deferred sales charge.
- --------- ----

1. CDSC Period -- the period of time following acquisition
during which Shares are assessed a CDSC upon redemption.

1. Class - a class of Shares of the Fund.
- --------- -----

1. Class A Shares -- shall have the meaning ascribed in Section B.1.
- --------- --------------

1. Class B Shares -- shall have the meaning ascribed in Section B.1.
- --------- --------------

1. Class C Shares -- shall have the meaning ascribed in Section B.1.
- --------- --------------

1. Class AAA Shares -- shall have the meaning ascribed in Section B.1.
- --------- ----------------

1. Distribution Expenses -- expenses, including allocable
overhead costs, imputed interest any other expenses and any
element of profit referred to in a Plan of Distribution
and/or board resolutions, incurred in activities which are
primarily intended to result in the distribution and sale
of Shares.

1. Distribution Fee -- a fee paid by the Fund in respect of
the asset of a Class of the Fund to the Distributor
pursuant to the Plan of Distribution relating to the Class.

1. Distributor -- Gabelli & Company, Inc.
- --------- -----------

1. Fund - The Gabelli Asset Fund.

1. IRS - Internal Revenue Service

1. NASD - National Association of Securities Dealers, Inc.

1. Plan of Distribution -- any plan adopted under Rule 12b-1
under the Act with respect to payment of a Distribution
Fee.

1. Prospectus - the prospectus, including the statement of
additional information incorporated by reference therein,
covering the Shares of the referenced Class or Classes of
the Fund.

1. SEC - Securities and Exchange Commission

1. Service Fee -- a fee paid to financial intermediaries,
including the Distributor and its affiliates, for the
ongoing provision of personal services to shareholders of a
Class and/or the maintenance of shareholder accounts
relating to a Class.

1. Share - a share of beneficial interest in the Fund.
- --------- -----

1. Trustees -- the trustees of the Fund.
- --------- --------

A. Classes. The Fund may offer four Classes as follows:

1. Class A Shares. Class A Shares means The Gabelli Asset Fund Class A Shares
designated by --------- -------------- the Supplemental Declaration of Trust and
adopted by the Trustees. Class A Shares shall be offered at net asset value plus
a front-end sales charge set forth in the Prospectus from time to time, which
may be reduced or eliminated in any manner not prohibited by the Act or the NASD
as set forth in the Prospectus. Class A Shares that are not subject to a
front-end sales charge as a result of the foregoing may be subject to a CDSC for
the CDSC Period set forth in Section D.1. The offering price of Class A Shares
subject to a front-end sales charge shall be computed in accordance with the
Act. Class A Shares shall be subject to ongoing Distribution Fees or Service
Fees approved from time to time by the Trustees and set forth in the Prospectus.

1. Class B Shares. Class B Shares means The Gabelli Asset Fund Class B Shares
designated by --------- -------------- the Supplemental Declaration of Trust and
adopted by the Trustees. Class B Shares shall be (1) offered at net asset value,
(2) subject to a CDSC for the CDSC Period set forth in Section D.1, (3) subject
to ongoing Distribution Fees and Service Fees approved from time to time by the
Trustees and set forth in the Prospectus and (4) converted to Class A Shares on
the first business day of the eighty-fifth calendar month following the calendar
month in which such Shares were issued. For Class B Shares previously exchanged
for shares of a money market fund the investment adviser of which is the same as
or an affiliate of the investment adviser of the Fund, the time period during
which such Shares were held in the money market fund will be excluded.

1. Class C Shares. Class C Shares means The Gabelli Asset Fund
Class C Shares designated by the Supplemental Declaration
of Trust and adopted by the Trustees. Class C Shares shall
be (1) offered at net asset value, (2) subject to a CDSC
for the CDSC Period set forth in Section D.1. and (3)
subject to ongoing Distribution Fees and Service Fees
approved from time to time by the Trustees and set forth in
the Prospectus.

1. Class AAA Shares. Class AAA Shares means The Gabelli Asset Fund Class AAA
Shares --------- ---------------- designated by the Supplemental Declaration of
Trust and adopted by the Trustees. Class AAA Shares shall be (1) offered at net
asset value, (2) sold without a front end sales charge or CDSC, (3) offered to
investors acquiring Shares directly from the Distributor or from a financial
intermediary with whom the Distributor has entered into an agreement expressly
authorizing the sale by such intermediary of Class AAA Shares and (4) subject to
ongoing Distribution Fees or Service Fees approved from time to time by the
Trustees and set forth in the Prospectus.

A. Rights and Privileges of Classes. Each of the Class A Shares,
Class B Shares, Class C Shares and Class AAA Shares will represent
an interest in the same portfolio of assets and will have
identical voting, dividend, liquidation and other rights,
preferences, powers, restrictions, limitations, qualifications,
designations and terms and conditions except as described
otherwise in the Supplemental Declaration of Trust with respect to
each of such Classes.

A. CDSC. A CDSC may be imposed upon redemption of Class A Shares. Class B Shares
and Class C Shares that do not incur a front end sales charge subject to the
following conditions:

1. CDSC Period. The CDSC Period for Class A Shares and Class C
Shares shall be twenty-four months plus any portion of the
month during which payment for such Shares was received.
The CDSC Period for Class B Shares shall be eighty-four
months plus any portion of the month during which payment
for such Shares was received.

1. CDSC Rate. The CDSC rate shall be recommended by the Distributor and approved
by the --------- --------- Trustees. If a CDSC is imposed for a period greater
than thirteen months the CDSC rate must decline during the CDSC Period such that
(a) the CDSC rate is less in the last twelve months of the CDSC Period than in
the first twelve months (plus any initial partial month) and (b) in each
succeeding twelve months the CDSC rate shall be less than or equal to the CDSC
rate in the preceding twelve months (plus any initial partial month).

1. Disclosure and changes. The CDSC rates and CDSC Period
shall be disclosed in the Prospectus and may be decreased
at the discretion of the Distributor but may not be
increased unless approved as set forth in Section L.

1. Method of calculation. The CDSC shall be assessed on an amount equal to the
lesser of the --------- --------------------- then current net asset value or
the cost of the Shares being redeemed. No CDSC shall be imposed on increases in
the net asset value of the Shares being redeemed above the initial purchase
price. No CDSC shall be assessed on Shares derived from reinvestment of
dividends or capital gains distributions. The order in which Class B Shares and
Class C Shares are to be redeemed when not all of such Shares would be subject
to a CDSC shall be as determined by the Distributor in accordance with the
provisions of Rule 6c-10 under the Act.

1. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares of any Class
under circumstances previously approved by the Trustees and
disclosed in the Prospectus and as allowed under Rule 6c-10
under the Act.

1. Calculation of offering price. The offering price of Shares
of any Class subject to a CDSC shall be computed in
accordance with Rule 22c-1 under the Act and Section 22(d)
of the Act and the rules and regulations thereunder.

1. Retention by Distributor. The CDSC paid with respect to
Shares of any Class may be retained by the Distributor to
reimburse the Distributor for commissions paid by it in
connection with the sale of Shares subject to a CDSC and
for Distribution Expenses.

A. Service and Distribution Fees. Class A Shares and Class AAA Shares
shall be subject to ongoing Distribution Fees or Service Fees not
in excess of 0.25% per annum of the average daily net assets of
the Class. Class B Shares and Class C Shares shall be subject to a
Distribution Fee not in excess of 0.75% per annum of the average
daily net assets of the Class and a Service Fee not in excess of
0.25% of the average daily net assets of the Class. All other
terms and conditions with respect to Service Fees and Distribution
Fees shall be governed by the plans adopted by the Fund with
respect to such fees and Rule 12b-1 of the Act.

A. Conversion. Shares acquired through the reinvestment of dividends and capital
gain ------------------- distributions paid on Shares of a Class subject to
conversion shall be treated as if held in a separate sub-account. Each time any
Shares of a Class in a shareholder's account (other than Shares held in the
sub-account) convert to Class A Shares, a proportionate number of Shares held in
the sub-account shall also convert to Class A Shares. All conversions shall be
effected on the basis of the relative net asset values of the two Classes
without the imposition of any sales load or other charge. So long as any Class
of Shares converts into Class A Shares, the Distributor shall waive or reimburse
the Fund, or take such other actions with the approval of the Trustees as may be
reasonably necessary to ensure that, the expenses, including payments authorized
under a Plan of Distribution, applicable to the Class A Shares are not higher
than the expenses, including payments authorized under a Plan of Distribution,
applicable to the Class of Shares that converts into Class A Shares. Shares
acquired through an exchange privilege will convert to Class A Shares after
expiration of the conversion period applicable to such Shares. The continuation
of the conversion feature is subject to continued compliance with the rules and
regulations of the SEC, the NASD and the IRS.

A. Allocation of Liabilities, Expenses, Income and Gains Among Classes.

1. Liabilities and Expenses applicable to a particular Class. Each Class of the
Fund shall --------- ---------------------------------------------------------
pay any Distribution Fee and Service Fee applicable to that Class. Other
expenses applicable to any of the foregoing such as incremental transfer agency
fees, but not including advisory or custodial fees or other expenses related to
the management of the Fund's assets, shall be allocated among such Classes in
different amounts in accordance with the terms of each such Class if they are
actually incurred in different amounts by such Classes or if such Classes
receive services of a different kind or to a different degree than other
Classes.

1. Income, losses, capital gains and losses, and liabilities
and other expenses applicable to all Classes. Income,
losses, realized and unrealized capital gains and losses,
and any liabilities and expenses not applicable to any
particular Class shall be allocated to each Class on the
basis of the net asset value of that Class in relation to
the net asset value of the Fund.

1. Determination of nature of items. The Trustees shall
determine in their sole discretion whether any liability,
expense, income, gains or loss other than those listed
herein is properly treated as attributed in whole or in
part to a particular Class or all Classes.

A. Exchange Privilege. Holders of Class A Shares, Class B Shares,
Class C Shares and Class AAA Shares shall have such exchange
privileges as set forth in the Prospectus for such Class. Exchange
privileges may vary among Classes and among holders of a Class.

A. Voting Rights of Classes.

1. Shareholders of each Class shall have exclusive voting
rights on any matter submitted to them that relates solely
to that Class, provided that:

a. If any amendment is proposed to the Plan of Distribution under
which Distribution Fees or Service Fees are paid with respect
to Class A Shares of the Fund that would increase materially
the amount to be borne by Class A Shares under such Plan of
Distribution, then no Class B Shares shall convert into Class
A Shares of the Fund until the holders of Class B Shares of
the Fund have also approved the proposed amendment.

If the holders of either the Class B Shares referred to in subparagraph a.
do not approve the proposed amendment, the Trustees and the Distributor
shall take such action as is necessary to ensure that the Class voting
against the amendment shall convert into another Class identical in all
material respects to Class A Shares of the Fund as constituted prior to
the amendment.

1. Shareholders shall have separate voting rights on any
matter submitted to shareholders in which the interest of
one Class differs from the interests of any other Class,
provided that:

If the holders of Class A Shares approve any increase in expenses
allocated to the Class A Shares, then no Class B Shares shall convert
into Class A Shares of the Fund until the holders of Class B Shares of
the Fund have also approved such expense increase.

If the holders of Class B Shares referred to in subparagraph a. do not
approve such increase, the Trustees and the Distributor shall take such
action as is necessary to ensure that the Class B Shares shall convert
into another Class identical in all material respects to Class A Shares
of the Fund as constituted prior to the expense increase.

A. Dividends and Distributions. Dividends and capital gain
distributions paid by the Fund with respect to each Class, to the
extent any such dividends and distributions are paid, will be
calculated in the same manner and at the same time on the same day
and will be, after taking into account any differentiation in
expenses allocable to a particular Class, in substantially the
same proportion on a relative net asset value basis.

A. Reports to Trustees. The Distributor shall provide the Trustees
such information as the Trustees may from time to time deem to be
reasonably necessary to evaluate this Plan.

A. Amendment. Any material amendment to this Plan shall be approved by the
affirmative vote of a
majority (as defined in the Act) of the Trustees of the Fund,
including the affirmative vote of the Trustees of the Fund who are
not interested persons of the Fund, except that any amendment that
increases the CDSC rate schedule or CDSC Period must also be
approved by the affirmative vote of a majority of the Shares of
the affected Class. Except as so provided, no amendment to the
Plan shall be required to be approved by the shareholders of any
Class of the Shares constituting the Fund. The Distributor shall
provide the Trustees such information as may be reasonably
necessary to evaluate any amendment to this Plan.