WESTWOOD FUNDS, 485BPOS, 1998-01-20

WESTWOOD FUNDS
485BPOS, 1998-01-20

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 1998

REGISTRATION NOS. 33-6790 AND 811-4719
================================================================================

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. 18

and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940

AMENDMENT NO. 18

(Check appropriate box or boxes)

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

THE GABELLI WESTWOOD FUNDS
(FORMERLY THE WESTWOOD FUNDS)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

ONE CORPORATE CENTER
RYE, NEW YORK 10580

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 921-5100

BRUCE N. ALPERT
GABELLI ADVISERS LLC
ONE CORPORATE CENTER
RYE, NEW YORK 10580

(NAME AND ADDRESS OF AGENT FOR SERVICE)

copies to:
MICHAEL R. ROSELLA, ESQ.
BATTLE FOWLER LLP
75 EAST 55TH STREET
NEW YORK, NEW YORK 10022
---------------------

It is proposed that this filing will be effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485

[X] on January 28, 1998 pursuant to paragraph (b) of Rule 485

[ ] 60 days after filing pursuant to paragraph (a) of Rule 485

[ ] on (date) pursuant to paragraph (a) of Rule 485

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL
INTEREST UNDER THE SECURITIES ACT OF 1933 PURSUANT TO SECTION 24(F) OF THE
INVESTMENT COMPANY ACT OF 1940. REGISTRANT'S RULE 24F-2 NOTICE FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1997 WAS FILED ON DECEMBER 29, 1997.

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

TOTAL PAGES:

EXHIBIT INDEX:
<PAGE> 2

CROSS-REFERENCE SHEET
(AS REQUIRED BY RULE 495(A)
UNDER THE SECURITIES ACT OF 1933)

<TABLE>
<CAPTION>
N1A
ITEM NO LOCATION
- -------- ----------------------------------------
<C> <S> <C>
PART A PROSPECTUS CAPTION
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial Information Condensed Financial Information
Item 4. General Description of Registrant Cover Page; Description of the Funds and
Risk Considerations; General Information
Item 5. Management of the Fund Management of the Funds
Item 5(a) Management's Discussion of Performance Not Applicable
Item 6. Capital Stock and Other Securities Cover Page; How to Buy Fund Shares;
Dividends, Distributions and Taxes;
General Information
Item 7. Purchase of Securities Being Offered How to Buy Fund Shares
Item 8. Redemption or Repurchase How to Redeem Fund Shares
Item 9. Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
CAPTION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information and History
Item 13. Investment Objectives and Policies Investment Objectives and Management
Policies; Appendix
Item 14. Management of the Fund Management of the Fund
Item 15. Control Persons and Principal Holders Management of the Fund
of Securities
Item 16. Investment Advisory and Other Services Investment Advisory and Other Services
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Securities Information About the Funds
Item 19. Purchase, Redemption and Pricing of Purchase of Fund Shares; Redemption of
Securities Being Offered Fund Shares; Shareholder Services;
Determination of Net Asset Value
Item 20. Tax Status and Taxes Dividends, Distributions and Taxes
Item 21. Underwriters Investment Advisory and Other Services
-- Distribution of Fund Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
<PAGE> 3

PART A
<PAGE> 4

THE GABELLI WESTWOOD FUNDS

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

One Corporate Center

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

SERVICE CLASS PROSPECTUS -- JANUARY 28, 1998

The Gabelli Westwood Funds (the "Trust") is an open-end, diversified,
management investment company, known as a mutual fund, which currently consists
of five separate investment portfolios that offer two separate classes of
shares. This Prospectus provides information about "Service Class" shares for
three of the portfolios. The portfolios are referred to as the Gabelli Westwood
Equity Fund, the Gabelli Westwood Balanced Fund, and the Gabelli Westwood
Intermediate Bond Fund (collectively, the "Funds"). Service Class shares are
offered exclusively to investors who have purchased their shares through an
entity that has signed a Dealer Agreement with Gabelli & Company, Inc. (the
"Distributor") to offer such shares. Retail Class shares are offered to all
other investors and certain dealers offering shares to certain retirement plans
and through other special programs. (See "General Information"). Each Fund has a
separate investment objective, as set forth below. There is no assurance that
any of these investment objectives will be achieved.

GABELLI WESTWOOD EQUITY FUND (the "Equity Fund") seeks as its primary goal
to provide investors with capital appreciation; income is a secondary, but
nonetheless an important goal. The net asset value per share of the Equity Fund
will fluctuate.

GABELLI WESTWOOD BALANCED FUND (the "Balanced Fund") seeks to realize both
capital appreciation and current income resulting in a high total investment
return consistent with prudent investment risk and a balanced investment
approach. The net asset value per share of the Balanced Fund will fluctuate.

GABELLI WESTWOOD INTERMEDIATE BOND FUND (the "Intermediate Bond Fund")
seeks to maximize total return, while maintaining a level of current income
consistent with the maintenance of principal and liquidity. The net asset value
per share of the Intermediate Bond Fund will fluctuate.

This Prospectus sets forth concisely information about the Funds that an
investor should know before investing. It should be read and retained for future
reference.

Part B (also known as the Statement of Additional Information), dated
January 28, 1998, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission (the "SEC") and is available for reference, along with other
materials on the SEC Internet Web Site (http://www.sec.gov) and is incorporated
herein by reference. For a free copy, write or call The Gabelli Westwood Funds
at the address or telephone number shown above. Purchase orders and redemption
requests for the Service Class shares may be directed to the Gabelli Westwood
Funds through broker/dealers that have signed a Dealer Agreement with Gabelli &
Company, Inc.

Shares of the Funds are not deposits or obligations of any bank, and are
not endorsed or guaranteed by any bank, and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. An investment in the Funds involve investment risks, including the
possible loss of principal.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5

Gabelli Advisers LLC (formerly Teton Advisers LLC) (the "Adviser"), a
limited liability company formed by Gabelli Funds, Inc. ("Gabelli") and Westwood
Management Corporation ("Westwood"), is adviser to the Funds pursuant to an
investment advisory agreement with the Trust (the "Investment Advisory
Agreement"). The Adviser has entered into a sub-advisory agreement with Westwood
and the Trust whereby Westwood (the "Sub-Adviser") serves as sub-adviser to the
Funds (the "Sub-Advisory Agreement"). Prior to serving as Sub-Adviser, Westwood
acted as adviser to the Funds from their inception through October 6, 1994. The
Adviser oversees the administration of each Fund's business and affairs and in
this connection is responsible for maintaining certain of the Funds' books and
records and providing other administrative services. (See "Management of the
Fund.") On November 18, 1997, the Trustees approved the change in name to The
Gabelli Westwood Funds.

FEE TABLE -- SERVICE CLASS

Each Fund is authorized to issue two separate classes of shares. Service
Class shares will be offered exclusively to investors who have purchased their
shares through an entity that has signed a Dealer Agreement with the Distributor
to offer such shares. Retail Class shares will be offered to all other investors
for certain retirement plans and special programs offered through
broker-dealers. Retail Class shares and Service Class shares are identical in
all respects, except that Service Class shares bear a sales load and higher
expenses incurred in the distribution and marketing of such shares ("12b-1
Fees"). These charges and fees reflect the additional services available through
broker/dealers, such as investment advice, acquiring securities on margin and
borrowing against the portfolio. Retail Class shares bear no sales load and
lower 12b-1 fees. The table below sets forth certain information regarding
annual operating expenses incurred by the Service Class, including the amounts
of these fees.

<TABLE>
<CAPTION>
INTERMEDIATE
EQUITY FUND BALANCED FUND BOND FUND(A)
----------- ------------- ------------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price)..................................... 4.00% 4.00% 4.00%
Annual Fund Operating Expenses: (as a percentage of
average daily net assets)
Management Fees........................................ 1.00% 0.75% 0.60%
12b-1 Fees............................................. 0.50% 0.50% 0.35%
Other Expenses......................................... 0.34% 0.36% 0.15%
----- ----- -----
Total Fund Operating Expenses............................ 1.84% 1.61% 1.10%
===== ===== =====
</TABLE>

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

(a) On November 8, 1994 all shares of the Service Class were redeemed and there
have been no further shares issued in this class since that date.

Example:

An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund.............................................. $ 58 $95 $ 136 $241
Balanced Fund............................................ $ 56 $89 $ 124 $217
Intermediate Bond Fund................................... $ 51 $74 -- --
</TABLE>

2
<PAGE> 6

The amounts listed in the example should not be considered as
representative of past or future expenses and actual expenses may be greater or
less than those indicated. Moreover, while the example assumes a 5% annual
return, a Fund's actual performance will vary and may result in an actual return
greater or less than 5%. The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear, directly
or indirectly, the payment of which will reduce investors' return on an annual
basis. (See "Management of the Funds".) The information set forth above with
respect to the Intermediate Bond Fund is based on estimated projections of
average net asset levels. The information with respect to the Equity and
Balanced Funds, is based on actual expenses incurred for the fiscal year ended
September 30, 1997 without imposition of any management fee waiver.

Management's Discussion and Analysis of the Funds' performance during the
fiscal year ended September 30, 1997 is included in the Funds' Annual Report to
Shareholders dated September 30, 1997. The Funds' Annual Report to Shareholders
may be obtained upon request and without charge by writing or calling the Fund
at the address or telephone number listed on the Prospectus cover.

3
<PAGE> 7

FINANCIAL HIGHLIGHTS

The following information for each of the periods from commencement of
offering through September 30, 1997 have been audited by Price Waterhouse LLP,
the Funds' independent accountants, whose report on the Financial Statements
which incorporate such information appears in the Statement of Additional
Information. All such information should be read in conjunction with the related
financial statements and notes thereto, which are included in the Statement of
Additional Information, and is available upon request. There are no financial
statements for the Intermediate Bond Fund for the fiscal periods September 30,
1996 and 1997 because there were no shares outstanding during these fiscal
periods.

For a share outstanding throughout each period ended September 30+

<TABLE>
<CAPTION>
EQUITY FUND BALANCED FUND
------------------------------------- -----------------------------------------------
1997 1996 1995 1994* 1997 1996 1995 1994 1993**
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net Asset Value, Beginning of
Period.......................... $ 7.69 $ 6.57 $ 5.48 $ 5.53 $ 9.69 $ 8.45 $ 7.10 $10.88 $10.24
----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment Operations
Net investment income........... 0.06 0.06 0.04 0.06 0.24 0.20 0.17 0.15 0.19
Net realized and unrealized gain
(loss) on investments......... 2.71 1.58 1.29 (0.11) 2.33 1.37 1.35 0.36 0.52
----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment
Operations.................... 2.77 1.64 1.33 (0.05) 2.57 1.57 1.52 0.51 0.71
----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Dividends from net investment
income........................ (0.06) -- (0.04) -- (0.22) (0.20) (0.17) (0.11) (0.07)
Distributions from net realized
capital gains................. (0.83) (0.52) (0.20) -- (0.58) (0.13) -- (4.18) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions............. (0.89) (0.52) (0.24) -- (0.80) (0.33) (0.17) (4.29) (0.07)
----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD.... $ 9.57 $ 7.69 $ 6.57 $ 5.48 $11.46 $ 9.69 $ 8.45 $ 7.10 $10.88
===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (not reflecting sales
load)........................... 39.31% 26.33% 25.54% (0.90%) 27.93% 18.85% 21.67% 4.67% 6.96%
Net Assets, End of Period (in
thousands)...................... $3,338 $1,221 $68 $254 $14,444 $11,216 $7,212 $10,810 $114
Ratios to average net assets of:
Net investment income........... 0.85% 0.92% 0.64% 1.64%*** 2.37% 2.34% 2.26% 2.15% 1.76%***
Expenses net of
reimbursements++.............. 1.78% 1.74% 1.85% 1.04%*** 1.53% 1.57% 1.62% 1.17% 2.07%***
Expenses before
reimbursements++.............. 1.84% 2.19% 2.63% 2.29%*** 1.61% 1.96% 2.24% 2.11% 3.14%***
Portfolio Turnover Rate........... 61% 106% 107% 137% 110% 111% 133% 168% 192%
Average Commission Rate (per share
of security)(b)................. $0.0572 $0.0540 -- -- $0.0593 $0.0550 -- -- --
</TABLE>

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

+ Per share based on the average number of shares outstanding during the
period.

++ Effective 1995, the ratios do not include a reduction of expenses for
custodian fee credits on cash balances maintained with the custodian.
Including such custodian fee credits, the expense ratios for 1997, 1996 and
1995 would be 1.75%, 1.68% and 1.72% for Equity Service Class, net of
reimbursements and 1.81%, 2.13% and 2.38% before reimbursements,
respectively. For Balanced Service Class, the expense ratios for 1997, 1996
and 1995 would be 1.50%, 1.49% and 1.50% net or reimbursements and 1.59%,
1.63% and 2.11% before reimbursements.

(b) For fiscal years beginning on or after November 1995, a fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.

* Prior to January 28, 1994, no shares of the Service Class were issued.

** Prior to April 6, 1993, no shares of the Service Class were issued.

*** Annualized.

4
<PAGE> 8

FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period+

INTERMEDIATE BOND FUND
--------------------------

<TABLE>
<CAPTION>
1995(A) 1994*
------- ------
<S> <C> <C>
OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period.................................... $ 9.48 $18.51
------ ------
Income from Investment Operations:
Net investment income................................................. 0.05 0.41
Net realized and unrealized gain on investments....................... (0.14) (1.03)
------ ------
Total from Investment Operations...................................... (0.09) (0.62)
------ ------
Less Distributions:
Dividends from net investment income.................................. (0.05) (0.41)
Distributions from net realized capital gain.......................... -- --
------ ------
Total Distributions................................................... (0.05) (0.41)
------ ------
Net Asset Value, End of Period.......................................... $ 9.34 $ 9.48
====== ======
Total Return (not reflecting sales load)................................ (0.95%) (6.81%)
------ ------
Net Assets End of Period (in thousands)................................. $0 $76
Ratios to Average Net Assets of:
Net investment income................................................. 4.85% 6.05%
Expenses net of waivers/reimbursements................................ 1.45% 1.34%
Expenses before waivers/reimbursements................................ 4.07% 2.37%
Portfolio Turnover Rate................................................. 70% 203%
</TABLE>

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

+ Per share based on the average number of shares outstanding during the
period.

(a) On November 8, 1994, all shares of the Service Class were redeemed and there
have been no further shares issued in this class since that date.
Accordingly, the NAV per share of $9.34 represents the net asset value on
November 8, 1994.

* Prior to January 31, 1994, no shares of the Service Class were issued.

** Annualized.

5
<PAGE> 9

DESCRIPTION OF THE FUNDS AND RISK CONSIDERATIONS

INVESTMENT OBJECTIVES

Each Fund's investment objectives, as previously set forth on the cover
page of this Prospectus, are fundamental policies which cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940) of each Fund's outstanding voting shares. There can be no
assurance that a Fund's investment objectives will be achieved.

MANAGEMENT POLICIES

EQUITY FUND -- The Equity Fund attempts to achieve its goals by investing
primarily (i.e., in normal circumstances), at least 65% of its total assets in
common stocks, some of which may pay dividends, or securities convertible into
common stocks (see "Convertible Securities" below for a complete description).
The Equity Fund invests in securities issued by seasoned companies (generally
with market capitalizations in excess of $500,000,000 and continuous operating
histories of at least three years) believed to have proven records and
above-average historical earnings growth when compared to published indexes,
such as those published by the Department of Commerce, and in smaller companies
(generally with market capitalizations greater than $100,000,000 but less than
$500,000,000) believed to have outstanding potential for capital appreciation,
in both cases in industries which the Adviser has identified as appropriate in
light of the then current status of the economic and business cycles. These
securities may have above-average price/earnings ratios or less than average
current yields, when compared to published indexes, such as the Standard &
Poor's 500 Composite Stock Price Index. Price/earnings ratio is a comparison of
a security's market price to its earnings per share, usually expressed as a
simple numeral, and current yield expresses the income on an amount invested.
The Equity Fund may invest in preferred stocks and the common stock issued by
real estate investment trusts (see "Real Estate Investment Trusts" below for
more complete information). The Equity Fund also may invest, in normal
circumstances, up to 35% of its total assets in U.S.dollar- and foreign
currency-denominated debt securities of domestic and foreign issuers, which are
rated at least "BBB" by Standard & Poor's Corporation ("S&P") or "Baa" by
Moody's Investors Service, Inc. ("Moody's") (except with respect to investments
in commercial paper which will consist only of direct obligations that at the
time of purchase are rated in the highest rating category by Moody's or S&P) or,
if unrated, are determined to be of comparable quality by the Adviser, or in
index options when it believes they hold less risk or greater potential for
capital appreciation than equity securities. Such investments are made without
regard to the remaining maturities of such securities. The Equity Fund may
invest up to 10% of its total assets in debt securities (other than commercial
paper) that are rated or, if unrated, determined to be below investment grade.
(Investment grade debt securities are those which are rated at least "BBB" by
S&P or "Baa" by Moody's). These investments generally carry a high degree of
risk and are sometimes referred to as "high yield, high risk" securities by the
investment community (see "Lower Rated Securities" below for more complete
information).

Debt securities rated "BBB" by S&P or "Baa" by Moody's are considered
medium grade obligations. Securities rated "Baa" by Moody's lack outstanding
investment characteristics and in fact have speculative characteristics as well,
while those rated "BBB" by S&P are regarded as having an adequate capacity to
pay principal and interest. Securities rated in these categories are generally
more sensitive to economic changes than higher rated securities. See the
"Appendix" in the Statement of Additional Information for more details on the
ratings of Moody's and S&P.

6
<PAGE> 10

The Equity Fund may invest in U.S. Government securities, certificates of
deposit, bankers' acceptances and other short-term debt instruments or high
quality corporate bonds, and repurchase agreements in respect of the foregoing.

Common stocks, debt securities in periods of declining interest rates, and
index options provide opportunities for capital growth. Dividend paying common
stocks, covered call options written by the Equity Fund and debt securities are
expected to provide income for the Equity Fund. The securities purchasable for
temporary defensive purposes provide income, but little opportunity for capital
growth.

The majority of the Equity Fund's investments are in securities listed on
the New York Stock Exchange or other national securities exchanges. The Equity
Fund also may invest in unlisted securities; but these generally will be
securities that have an established over-the-counter market, although the depth
and liquidity of that market may vary from time to time and from security to
security. Generally, these securities are issued by smaller companies than those
whose securities are listed on national securities exchanges. The market prices
of equity securities of smaller companies may tend to be more volatile than the
market prices of equity securities generally.

The Equity Fund may invest up to 25% of its total assets in the securities
of foreign issuers, either directly, or in the form of American Depository
Receipts ("ADRs") or other similar arrangements, such as European Depository
Receipts ("EDRs"). ADRs are receipts typically issued by a United States bank or
trust company which evidence ownership of underlying securities issued by a
foreign corporation. Generally, ADRs in registered form are designed for use in
United States securities markets. EDRs are similar to ADRs and are issued and
traded in Europe.

It is a fundamental policy of the Equity Fund that it may invest (together
with all other securities which are not readily marketable -- see "Certain
Fundamental Policies" below and "Investment Restrictions" in the Statement of
Additional Information) up to 10% of the value of its net assets in securities
that have not been registered under the Securities Act of 1933, as amended, and
therefore are subject to restrictions on resale, provided such investments are
consistent with the Equity Fund's goals. When purchasing unregistered
securities, the Equity Fund will endeavor to obtain the right to registration at
the expense of the issuer. Generally, there will be a lapse of time between the
Equity Fund's decision to publicly offer any such security and the registration
of the security permitting such offer. During any such period, the price of the
securities will be subject to market fluctuations.

The Equity Fund may invest up to 2% of its net assets in warrants, except
that this limitation does not apply to warrants acquired in units or attached to
securities. A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the issuer's securities
at a set price for a specified period of time.

The Equity Fund also may invest in securities of investment companies
subject to the provisions of the Investment Company Act of 1940. The return on
such investments will be reduced by the operating expenses, including investment
advisory and administration fees, of such companies. See "Investment Objectives
and Management Policies -- Investment Company Securities" in the Statement of
Additional Information.

BALANCED FUND -- The Balanced Fund pursues its objective through a balanced
and diversified program of investing in equity securities and debt instruments.

With respect to its investments in equity securities, the Balanced Fund
invests between 30% to 70% of its assets in common stocks, some of which may pay
dividends, or securities convertible into common stocks. With respect to the
equity portion of its portfolio, the Balanced Fund invests in equity securities
using the same investment criteria as the Equity Fund.

7
<PAGE> 11

The remaining 70% to 30% of the Balanced Fund's assets are invested in U.S.
dollar or foreign currency-denominated debt securities of domestic and foreign
issuers, including debt securities of corporate and government issuers,
commercial paper and mortgage and asset-backed securities, for the relative
stability of income and principal. With respect to these investments, at least
25% of the Balanced Fund's total assets will be invested in fixed income senior
securities. The debt securities in which the Balanced Fund invests are the same
types of securities used by the Intermediate Bond Fund.

As noted above, the Adviser may also select other equity securities in
addition to common stocks for investment by the Balanced Fund, such as preferred
stocks, REITs, high grade securities convertible into common stocks and
warrants. The Balanced Fund may invest up to 25% of its total assets in the
securities of foreign issuers, either directly, or in the form of American or
European Depository Receipts, and up to 10% of the value of its net assets,
together with all other investments which are not readily marketable, in
securities which have not been registered under the Securities Act of 1933, as
amended, and which therefore are subject to restrictions on resale. (See the
information set forth above under "Management Policies -- Equity Fund" for more
information on these types of investments.) The Balanced Fund may also invest in
warrants.

In addition, the Balanced Fund may invest up to 100% of its total assets in
U.S. Government securities, certificates of deposit, bankers' acceptances, time
deposits, repurchase agreements and other high quality debt instruments in order
to maintain a temporary "defensive" posture when, in the opinion of the Adviser,
it is advisable to do so.

INTERMEDIATE BOND FUND -- The Intermediate Bond Fund will pursue its
objective by investing, in normal circumstances, at least 65% of its total
assets in bonds of various types and with various maturities. Although it will
not be a fundamental policy of the Intermediate Bond Fund and there will be no
restrictions as to the maximum or minimum maturity of any individual security in
which the Fund may invest, the Intermediate Bond Fund will normally have a
dollar weighted average portfolio maturity of three to ten years. (See the
discussion below under "Description of Securities and Other Investment
Practices" for special information regarding the maturities of certain of the
Intermediate Bond Fund's permissible investments.)

To achieve its investment objective, the Intermediate Bond Fund invests
primarily in a diversified portfolio of investment grade, U.S. dollar or foreign
currency denominated bonds of domestic and foreign issuers. The Fund's portfolio
consists of bonds issued by both corporate and government entities. In pursuing
its investment objective, the Intermediate Bond Fund may also invest in other
types of investment grade debt securities, including debentures, notes,
convertible debt securities, municipal securities, mortgage-related securities
and other collateralized securities that are backed by a pool of assets, such as
loans or receivables which generate cash flow to cover the payments due on the
collateralized securities, as well as zero coupon and payment in kind
securities. The Intermediate Bond Fund's portfolio, consisting primarily of
investment grade debt securities, will include bonds rated "BBB" or better by
S&P or "Baa" or better by Moody's, commercial paper rated "A-2" or better by S&P
or "P-2" or better by Moody's, mortgage and asset-backed securities rated "AA"
or better by S&P or "Aa" or better by Moody's and other investment grade-rated
debt securities or those which are unrated but determined to be of comparable
quality by the Adviser. The Intermediate Bond Fund may invest in preferred
stock, real estate investment trusts (REITs) or other equity securities
including securities of foreign issuers although it does not expect to invest
more than 25% of its assets in securities of foreign issuers.

8
<PAGE> 12

debt securities that are rated or, if unrated, determined to be below investment
grade. These investments generally carry a high degree of risk and are sometimes
referred to as "high yield, high risk" securities by the investment community
(see "Lower Rated Securities" below for more complete information).

In view of the expected maturity of the Intermediate Bond Fund's portfolio,
in normal market conditions, it is anticipated that the Fund may experience a
higher yield and less stable net asset value than a fund which invests primarily
in shorter-term securities. Conversely, it is also anticipated that the
Intermediate Bond Fund may experience a lower yield and more stable net asset
value than a fund which invests primarily in longer-term securities.

The net asset value of the Intermediate Bond Fund will vary in response to
fluctuations in prevailing interest rates and changes in the value of its
portfolio securities. When interest rates decline, the value of securities
already held in the Intermediate Bond Fund's portfolio can be expected to rise.
Conversely, when interest rates rise, the value of existing portfolio security
holdings can be expected to decline. Although the lowest investment grade
securities and those which are unrated in the Intermediate Bond Fund's portfolio
may produce a higher return, they are subject to a greater degree of market
fluctuation and credit risks than the high quality securities in which the
Intermediate Bond Fund may invest. In addition, the Intermediate Bond Fund may
invest in zero coupon and payment in kind securities which may be subject to
greater fluctuations in value due to changes in interest rates than other debt
securities.

In normal circumstances, the Intermediate Bond Fund may invest up to 35% of
its total assets in short-term, money market instruments of at least comparable
quality to the Fund's longer-term investments, and in repurchase agreements.
However, as a temporary "defensive" measure during, or in anticipation of, a
declining market or rising interest rates, or for other reasons when, in the
opinion of the Fund's investment adviser, it is advisable to do so, the
Intermediate Bond Fund may invest up to 100% of its total assets in high quality
short-term investments.

DESCRIPTION OF SECURITIES AND OTHER INVESTMENT PRACTICES

CONVERTIBLE SECURITIES (THE EQUITY FUND AND THE BALANCED FUND) -- A
convertible security is a fixed-income security, such as a bond or preferred
stock, which may be converted at a stated price within a specified period of
time into a specified number of shares of common stock of the same or a
different issuer. Convertible securities are senior to common stock in a
corporation's capital structure, but usually are subordinated to non-convertible
debt securities. While providing a fixed income stream (generally higher in
yield than the income derivable from a common stock but lower than that afforded
by a similar non-convertible debt security), a convertible security also affords
an investor the opportunity, through its conversion feature, to participate in
the capital appreciation of the common stock into which it is convertible.

In general, the market value of a convertible security is the higher of its
"investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock if
the security is converted). As a fixed-income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock.

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<PAGE> 13

in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. REITs
involve risks similar to those associated with investing in common stock (i.e.,
securities market risks) and risks associated with investing in the real estate
industry in general. REITs (especially mortgage REITs) are subject to interest
rate risks. Investors in REITs indirectly bear a proportionate share of expenses
incurred by the REITs. See "Investment Objectives and Management Policies --
Real Estate Investment Securities"in the Statement of Additional Information for
more details on REITs.

U.S. GOVERNMENT SECURITIES (ALL FUNDS) -- Securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities include U.S.
Treasury securities, which differ only in their interest rates, maturities and
times of issuance. Treasury Bills have initial maturities of one year or less;
Treasury Notes have initial maturities of one to ten years; and Treasury Bonds
generally have initial maturities of greater than ten years. Some obligations
issued or guaranteed by U.S. Government agencies and instrumentalities, for
example, Government National Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, by the right of the issuer to borrow from
the U.S. Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by credit of the agency
or instrumentality. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies or instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law. A Fund will
invest in such securities only when it is satisfied that the credit risk with
respect to the issuer is minimal.

REPURCHASE AGREEMENTS (ALL FUNDS) -- Repurchase agreements involve the
acquisition by a Fund of a security, subject to an obligation of the seller to
repurchase, and the Fund to resell, the security at a fixed price, usually not
more than one week after its purchase. The Funds' custodian will have custody
of, and will hold in a segregated account, securities acquired by the Fund under
a repurchase agreement. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by a Fund. In an attempt to
reduce the risk of incurring a loss on the repurchase agreement, a Fund will
enter into repurchase agreements only with domestic banks with total assets in
excess of one billion dollars or primary government securities dealers reporting
to the Federal Reserve Bank of New York, with respect to highest rated
securities of the type in which a Fund may invest. It will also require that the
repurchase agreement be at all times fully collateralized in an amount at least
equal to the repurchase price including accrued interest earned on the
underlying securities, and that the underlying securities be marked to market
every business day to assure that the repurchase agreement remains fully
collateralized. Certain costs may be incurred by a Fund in connection with the
sale of the securities if the seller does not repurchase them in accordance with
the repurchase agreement. If bankruptcy proceedings are commenced with respect
to the seller of the securities, realization on the securities by the Fund may
be delayed or limited. A Fund will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.

BANK OBLIGATIONS (ALL FUNDS) -- Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time (in no event
longer than seven days) at a stated interest rate. Time deposits which may be
held by a Fund will not benefit from insurance from the Bank Insurance Fund or
the Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation. Certificates of deposit are certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.

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<PAGE> 14

COMMERCIAL PAPER (ALL FUNDS) -- Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions (see "Variable and Floating Rate Demand and Master
Demand Notes" below for more details) as well as similar taxable and tax-exempt
instruments issued by government agencies and instrumentalities. Each Fund
establishes its own standards of creditworthiness for issuers of such
instruments.

OTHER MUTUAL FUNDS (ALL FUNDS) -- Each Fund may invest in shares of other
management investment companies, subject to the limitations of the 1940 Act and
subject to such investments being consistent with the overall objective and
policies of the Fund making such investment, provided that any such purchases
will be limited to short-term investments in shares of unaffiliated investment
companies. The purchase of securities of other mutual funds results is
duplication of expenses such that investors indirectly bear a proportionate
share of the expenses of such mutual funds including operating costs, and
investment advisory and administrative fees.

CORPORATE DEBT SECURITIES (ALL FUNDS) -- A Fund's investments in corporate
debt may include U.S. dollar- or foreign currency-denominated corporate bonds,
debentures, notes and other similar corporate debt instruments of domestic and
foreign issuers, which meet the previously disclosed minimum ratings and
maturity criteria established for each Fund under the direction of the Board of
Trustees and the Adviser or, if unrated, are in the Adviser's opinion comparable
in quality to rated corporate debt securities in which each Fund may invest. The
rate of return or return of principal on some debt obligations in which the
Funds may invest may be linked or indexed to the level of exchange rates between
the U.S. dollar and a foreign currency or currencies.

VARIABLE AND FLOATING RATE DEMAND AND MASTER DEMAND NOTES (ALL FUNDS) -- A
Fund may, from time to time, buy variable or floating rate demand notes issued
by corporations, bank holding companies and financial institutions and similar
taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity over one year
but carry with them the right of the holder to put the securities to a
remarketing agent or other entity at designated time intervals and on specified
notice. The obligation of the issuer of the put to repurchase the securities may
be backed up by a letter of credit or other obligation issued by a financial
institution. The purchase price is ordinarily par plus accrued and unpaid
interest. Generally, the remarketing agent will adjust the interest rate every
seven days (or at other specified intervals) in order to maintain the interest
rate of the prevailing rate for securities with a seven-day or other designated
maturity. A Fund's investment in demand instruments which provide that the Fund
will not receive the principal note amount within seven days' notice, in
combination with the Fund's other investments which are not readily marketable,
will be limited to an aggregate total of 10% of that Fund's net assets.

A Fund may also buy variable rate master demand notes. The terms of these
obligations permit a Fund to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. The Fund has the right to increase the amount under the
note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between a Fund and
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and, thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. In connection with any such purchase and on an ongoing
basis, the Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation

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<PAGE> 15

in which all holders of such notes make demand simultaneously. While master
demand notes, as such, are not typically rated by credit rating agencies, a Fund
may, under its minimum rating standards, invest in them only if, at the time of
an investment, the issuer meets the criteria set forth in this Prospectus for
commercial paper obligations.

WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES (ALL FUNDS) -- New issues of
fixed-income securities usually are offered on a when-issued or delayed-delivery
basis, which means that delivery and payment for such securities ordinarily take
place within 45 days after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on such securities are
fixed at the time the Fund enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. The Fund will not accrue income in
respect of a when-issued or delayed-delivery security prior to its stated
delivery date. No additional when-issued commitments will be made if more than
20% of a Fund's net assets would be so committed.

Securities purchased on a when-issued or delayed-delivery basis and certain
other securities held in a Fund's portfolio are subject to changes in value
(both generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a
when-issued or delayed-delivery basis may expose a Fund to the risk that such
fluctuations will occur prior to their actual delivery. Purchasing securities on
a when-issued or delayed-delivery basis can involve an additional risk that the
yield available in the market when the delivery takes place actually may be
higher than that obtained in the transaction itself. A segregated account of a
Fund consisting of cash, cash equivalents or U.S. Government securities or other
liquid debt securities at least equal at all times to the amount of the
when-issued commitments will be established and maintained at the Fund's
custodian bank.

FOREIGN SECURITIES (ALL FUNDS, EXCEPT AS SPECIFICALLY NOTED) -- A Fund may
invest directly in both sponsored and unsponsored U.S. dollar- or foreign
currency-denominated corporate debt securities, certificates of deposit and
bankers' acceptances issued by foreign banks, and obligations of foreign
governments or their subdivisions, agencies and instrumentalities, international
agencies and supranational entities, and the Equity Fund and the Balanced Fund
may invest directly in foreign equity securities and in securities represented
by European Depository Receipts ("EDRs") or American Depository Receipts
("ADRs"). ADRs are dollar-denominated receipts generally issued by domestic
banks, which represent the deposit with the bank of a security of a foreign
issuer, and which are publicly traded on exchanges or over-the-counter in the
United States. EDRs are receipts similar to ADRs and are issued and traded in
Europe.

There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depository and the shareholder. The company issuing the
stock underlying the ADRs pays nothing to establish the unsponsored facility, as
fees for ADR issuance and cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate transfer, custody and dividend
payment.

In an unsponsored ADR program, there also may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports.

In addition, with respect to all ADRs and EDRs, there is always the risk of
loss due to currency fluctuations.

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ZERO COUPON AND PAYMENT IN KIND SECURITIES (THE BALANCED FUND AND THE
INTERMEDIATE BOND FUND) -- A Fund may invest in zero coupon bonds, deferred
interest bonds and bonds on which the interest is payable in kind ("PIK
securities"). Zero coupon and deferred interest bonds are debt obligations which
are issued at a significant discount from face value. The discount approximates
the total amount of interest the bonds will accrue and compound over the period
until maturity or the first interest accrual date at a rate of interest
reflecting the market rate of the security at the time of issuance. While zero
coupon bonds do not require the periodic payment of interest, deferred interest
bonds provide for a period of delay before the regular payment of interest
begins. Although this period of delay is different for each deferred interest
bond, a typical period is approximately one-third of the bond's term to
maturity. PIK securities are debt obligations which provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of return
to attract investors who are willing to defer receipt of such cash. Such
investments experience greater volatility in market value due to changes in
interest rates than debt obligations which provide for regular payments of
interest. A Fund will accrue income on such investments based on an effective
interest method, which is distributable to shareholders and which, because no
cash is received at the time of accrual, may require the liquidation of other
portfolio securities to satisfy the Fund's distribution obligations. As a
result, a Fund may have to sell securities at a time when it may be
disadvantageous to do so.

LOWER RATED SECURITIES (ALL FUNDS) -- Debt securities rated lower than
investment grade involve much greater risk of principal and income, and often
involve greater volatility of price, than securities in the higher rating
categories. They are also subject to greater credit risks (including, without
limitation, the possibility of default by or bankruptcy of the issuers of such
securities) than securities in higher rating categories. In this connection,
there have been recent instances of such defaults and bankruptcies which were
not foreseen by the financial and investment communities. The lower quality and
unrated obligations in which the Funds may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by large uncertainties or major risk exposures to adverse
conditions. The value of such obligations may be more susceptible to real and
perceived adverse economic or industry conditions than is the case of higher
rated securities. The Funds are dependent on the Adviser's judgment, analysis
and experience in the evaluation of high yield obligations. In evaluating the
creditworthiness of a particular issue, whether rated or unrated, the Adviser
will normally take into consideration, among other things, the issuer's
financial resources, its sensitivity to economic conditions and trends, the
operating history of the issuer, the ability of the issuer's management and
regulatory matters. The Adviser will attempt to reduce the risks of investing in
lower rated or unrated obligations through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets. The Funds will also take such
action as they consider appropriate in the event of anticipated financial
difficulties, default or bankruptcy of the issuers of any such obligation.

DERIVATIVES

The Funds may invest in derivative securities as described below, however,
none of the Funds have a present intention to utilize one or more of the various
practices such that five percent or more of a Fund's net assets will be at risk
with respect to derivative practices. The successful use by a Fund of
derivatives is subject to the Advisor's ability to predict correctly movements
in one or more underlying instruments, indexes, stocks, the market generally or
a particular industry. The use of derivatives requires different skills and
techniques than predicting changes in the price of individual stocks. There can
be no assurance of a Fund's successful use of derivatives if and when utilized.
See "Statement of Additional Information" for more information on derivatives,
including risk considerations.

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<PAGE> 17

CALL AND PUT OPTIONS ON SPECIFIC SECURITIES (THE EQUITY FUND AND THE
BALANCED FUND) -- A Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options in respect of specific
securities. A Fund may write covered call and put option contracts to the extent
of 10% of the value of its net assets at the time such option contracts are
written. A call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, the underlying security at the exercise price at
any time during the option period. Conversely, a put option gives the purchaser
of the option the right to sell, and obligates the writer to buy, the underlying
security at the exercise price at any time during the option period.

STOCK INDEX OPTIONS (THE EQUITY FUND AND THE BALANCED FUND) -- A Fund may
purchase and write put and call options on stock indexes listed on national
securities exchanges as an investment vehicle for the purpose of realizing its
investment objectives or for the purpose of hedging its portfolio. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Should a Fund seek to engage in transactions concerning put and call
options on stock indexes, options would be purchased or written with respect to
not more than 25% of the value of the Fund's net assets.

FUTURES TRANSACTIONS -- IN GENERAL (ALL FUNDS AS NOTED BELOW) -- The Funds
are not commodity pools. However, the Funds may engage in futures transactions,
including those relating to indexes, as described below.

A Fund's commodities transactions must constitute bona fide hedging or
other permissible transactions pursuant to regulations promulgated by the
Commodity Futures Trading Commission (the "CFTC"). In addition, a Fund may not
engage in such activities if the sum of the amount of initial margin deposits
and premiums paid for unexpired commodity options would exceed 5% of the fair
market value of a Fund's assets, after taking into account unrealized profits
and unrealized losses on such contracts it has entered into; provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%.

Initially, when purchasing or selling futures contracts, a Fund will be
required to deposit with its custodian in the broker's name an amount of cash or
cash equivalents equal to approximately 5% to 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and is
in the nature of a performance bond or good faith deposit on the contract which
is returned to a Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." At any time prior to the expiration of a futures contract,
a Fund may elect to close the position by taking an opposite position at the
then prevailing price, which will operate to terminate the Fund's existing
position in the contract.

Although a Fund will intend to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given that a
liquid market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. Futures contract prices could move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially subjecting a
Fund to substantial losses. If it is not possible or a Fund determines not to
close a futures position in anticipation of adverse price movements, the Fund
will be required to make daily cash payments of variation margin. In such
circumstances, an increase in the value of the portion of the

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<PAGE> 18

portfolio being hedged, if any, may offset partially or completely losses on the
futures contract. However, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a futures
contract and thus provide an offset to losses on the futures contract.

In addition, due to the risk of an imperfect correlation between securities
in the Fund's portfolio that are the subject of a hedging transaction and the
futures contract used as a hedging device, it is possible that the hedge will
not be fully effective in that, for example, losses on the portfolio securities
may be in excess of gains on the futures contract or losses on the futures
contract may be in excess of gains on the portfolio securities that were the
subject of the hedge. In futures contracts based on indexes, the risk of
imperfect correlation increases as the composition of the Fund's portfolio
varies from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being hedged
and movements in the price of futures contracts, a Fund may buy or sell futures
contracts in a greater or lesser dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the futures contract has
been less or greater than that of the securities. Such "over hedging" or "under
hedging" may adversely affect a Fund's net investment results if market
movements are not as accurately anticipated when the hedge is established.

STOCK INDEX FUTURES (THE EQUITY FUND AND THE BALANCED FUND) -- A Fund may
purchase and sell stock index futures contracts. A stock index future obligates
the seller to deliver (and the purchaser to take) an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement is made. No physical delivery of the underlying stocks in
the index is made. A Fund will intend to purchase and sell futures contracts on
the stock index for which it can obtain the best price with consideration also
given to liquidity. A Fund may not purchase or sell stock index futures
contracts if, immediately thereafter, more than 25% of its net assets would be
hedged.

INTEREST RATE FUTURES (THE BALANCED FUND AND THE INTERMEDIATE BOND
FUND) -- A Fund may purchase an interest rate futures contract in anticipation
of a decline in interest rates, and resulting increase in market price, in debt
securities the Fund intends to acquire. A Fund may sell an interest rate futures
contract in anticipation of an increase in interest rates, and resulting decline
in market price, in debt securities the Fund owns. An interest rate futures
contract is an agreement to purchase or sell an agreed amount of debt securities
at a set price for delivery on a future date. These transactions are subject to
similar risk factors as those described above with respect to stock index
futures. A Fund may not purchase or sell interest rate futures contracts if,
immediately thereafter more than 25% of its net assets would be hedged.

OPTIONS ON FUTURES (ALL FUNDS) -- A Fund may purchase and write call and
put options on futures contracts which are traded on a United States exchange or
board of trade. An option on a futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the option period. Upon exercise of
the option, the writer of the option is obligated to convey the appropriate
futures position to the holder of the option. If an option is exercised on the
last trading day before the expiration date of the option, a cash settlement
will be made in an amount equal to the difference between the closing price of
the futures contract and the exercise price of the option. The risks associated
with these transactions are similar to those described above with respect to
options on securities. A Fund may not purchase or write options on futures if,
immediately thereafter, more than 25% of its net assets would be hedged.

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<PAGE> 19

A forward contract involves an obligation to purchase or sell a specific
currency for an agreed price at a future date, which may be any fixed number of
days from the date of the contract. A Fund may engage in cross-hedging by using
forward contracts in one currency to hedge against fluctuations in the value of
securities denominated in a different currency. The purpose of entering into
forward currencies contracts for hedging purposes is to minimize the risk to a
Fund from adverse changes in the relationship between the U.S. dollar and
foreign currencies.

MORTGAGE-RELATED SECURITIES (THE BALANCED FUND AND THE INTERMEDIATE BOND
FUND) -- Mortgage pass-through securities are securities representing interests
in "pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).

Early repayment of principal on mortgage pass-through securities (arising
from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose a Fund to a lower rate of return upon reinvestment of principal. Also, if
a security subject to repayment has been purchased at a premium, in the event of
prepayment the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; and generally may also increase the volatility of the
mortgage-related security by effectively converting short-term debt instruments
into long-term debt instruments. However, when interest rates decline, the value
of mortgage-related securities with prepayment features may not increase as much
as other fixed-income securities. In recognition of this prepayment risk to
investors, the Public Securities Association (the "PSA") has standardized the
method of measuring the rate of mortgage loan principal prepayments. The PSA
formula, the Constant Prepayment Rate (the "CPR") or other similar models that
are standard in the industry will be used by a Fund in calculating maturity for
purposes of its investment in mortgage-related securities.

Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association "GNMA"); or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit, which may be issued by governmental entities, private
insurers of the mortgage poolers.

Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, monthly. CMOs may be collateralized by whole mortgage loans but
are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple
classes, with each class bearing a different stated maturity and principal
payment schedule. To the extent a particular CMO is issued by an investment
company, a Fund's ability to invest in such CMOs will be limited. See
"Investment Restrictions" in the Statement of Additional Information.

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OTHER ASSET-BACKED SECURITIES (THE BALANCED FUND AND THE INTERMEDIATE BOND
FUND) -- Other asset-backed securities (unrelated to mortgage loans) have been
offered to investors, such as Certificates for Automobile Receivables
("CARS(SM)"). CARS(SM)represent undivided fractional interests in a trust
("trust") whose assets consist of a pool of motor vehicle retail installment
sales contracts and security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS(SM) are "passed through" monthly to
certificate holders and are guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution unaffiliated
with the trustee or originator of the trust or by the existence of a
subordinated class of securities. Underlying sales contracts are subject to
prepayment, which may reduce the overall return to certificate holders. If the
letter of credit is exhausted, certificate holders may also experience delays in
payment or losses on CARS(SM) if the full amounts due on underlying sales
contracts are not realized by the trust because of unanticipated legal or
administrative costs of enforcing the contracts, or because of depreciation,
damage or loss of the vehicles securing the contracts, or other factors. For
asset-backed securities, the industry standard uses a principal prepayment
model, the ABS model, which is similar to the PSA described previously under
"Mortgage-Related Securities". Either the PSA model, the ABS model or other
similar models that are standard in the industry will be used by a Fund in
calculating maturity for purposes of its investment in asset-backed securities.

LENDING PORTFOLIO SECURITIES (ALL FUNDS) -- To earn additional income, a
Fund may lend securities from its portfolio to brokers, dealers or other
financial institutions needing to borrow securities to complete certain
transactions. Such loans may not exceed 33 1/3% of a Fund's total assets. In
connection with such loans, a Fund will receive collateral which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. A Fund can increase its income through
the investment of such collateral.

ILLIQUID SECURITIES (ALL FUNDS, EXCEPT AS NOTED IN "CERTAIN FUNDAMENTAL
POLICIES" BELOW). Each Fund may invest its net assets in securities as to which
a liquid trading market does not exist, provided such investments are consistent
with the Fund's investment objective. Such securities may include securities
that are not readily marketable, such as certain securities that are subject to
legal or contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should the
Fund desire to sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Fund's net assets could be
adversely affected. Illiquid securities do not include securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933, or other restricted
securities, which have been determined liquid by the Fund's Board of Trustees.

17
<PAGE> 21

seven days after notice and in securities that are not readily marketable
(including those options in respect of specific securities that are not traded
on a national securities exchange, and the underlying security, which are not
readily marketable). Subject to this limitation, the Equity Fund may invest in
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 which have been determined to be liquid by the Fund's Board of Trustees
based upon the trading markets for the securities. Each of the other Funds may
invest up to 10% of its net assets in repurchase agreements providing for
settlement in more than seven days after notice and in securities that are not
readily marketable. Included in this limitation are "restricted"securities and
any other assets for which an active and substantial market does not exist at
the time of purchase or subsequent valuation. Restricted securities for purposes
of this limitation do not include investments by these Funds in securities
eligible for resale pursuant to Rule 144A of the Securities Act of 1933 which
have been determined to be liquid by the Fund's Board of Trustees based upon the
trading markets for the securities (see "Investment Objectives and Management
Policies -- Rule 144A Securities" in the Statement of Additional Information for
further details). This paragraph describes fundamental policies that cannot be
changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of each Fund's outstanding voting shares. See
"Investment Objectives and Management Policies -- Investment Restrictions" in
the Statement of Additional Information.

OTHER INVESTMENT CONSIDERATIONS -- Investment decisions for each Fund are
made independently from those of other investment advisory accounts that may be
advised by the Adviser or Sub-Adviser. However, if such other investment
advisory accounts are prepared to invest in, or desire to dispose of, securities
of the type in which a Fund invests at the same time as the Fund, available
investments or opportunities for sales will be allocated equitably to each of
them. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by a Fund or the price paid or received by
the Fund.

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER AND ADMINISTRATOR

Under the Sub-Advisory Agreement, the Adviser pays Westwood out of its
advisory fees with respect to the Funds a fee computed daily and payable monthly
in an amount equal on an annualized basis to the greater of (i) $150,000 per
year on an aggregate basis for all the Funds or (ii) 35% of the net revenues to
the Adviser from the Funds. Westwood Management Corporation, formed in 1983 and
located at 300 Crescent Court, Suite 1320, Dallas, TX 75201, is a registered
investment adviser managing, as of September 30, 1997, an aggregate of
approximately $900 million in separate accounts, primarily corporate pension
funds. Susan M. Byrne, President of the Sub-Adviser since 1983, is responsible
for the day-to-day management of the Equity Fund's portfolio. Douglas Lehmann,
Vice President of the Sub-Adviser since 1994, is responsible for the day-to-day
management of the Intermediate Bond Fund's portfolio. Prior to 1994, Mr. Lehmann
was a Special Trader for First New York Securities (beginning 1993) and Vice
President and Special Trader for Lehmann Brothers (beginning 1989). Ms. Byrne
and Ms. Patricia Fraze, Senior Vice President of the Sub-Adviser since 1992, are
jointly responsible for the day-to-day management of the Balanced Fund's
portfolio. Ms. Fraze joined the Sub-Adviser in 1990. Westwood Management is a
wholly owned subsidiary of Southwest Securities Group, Inc., a Dallas based
securities firm.

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<PAGE> 22

The Adviser is responsible for overseeing Westwood's activities. The
Investment Advisory Agreement provides that the Adviser will supervise and
manage each Fund's investment activities on a discretionary basis and oversee
the administration of each Fund's business and affairs. In this connection the
Adviser is responsible for maintaining certain of the Funds' books and records
and performing other administrative aspects of the Funds' operations to the
extent not performed by the Funds' custodians, transfer agents and dividend
disbursing agents. The Adviser is permitted to subcontract at its own expense
those administrative responsibilities to persons it believes are qualified to
perform such services with respect to the Funds. As compensation for its
services and related expenses, the Trust will pay the Adviser a fee computed
daily and payable monthly in an amount equal on an annualized basis to 1.0% for
the Equity Fund, .60% for the Intermediate Bond Fund and .75% for the Balanced
Fund of each Fund's daily average net asset value. The fees paid by the Trust
for the Equity Fund and the Balanced Fund are higher than the fees paid by most
funds for such services and related expenses. The Funds will also pay the
Adviser or Distributor separately for any costs and expenses incurred in
connection with distribution of the classes of each Fund's shares in accordance
with the terms of their respective Plans of Distribution adopted for such
classes pursuant to Rule 12b-1 under the 1940 Act.

The Adviser has retained at its own cost BISYS Fund Services, Inc.
("BISYS") (the "Sub-Administrator") to provide administrative services with
respect to the Funds. BISYS has its main office at 3435 Stelzer Rd., Columbus,
Ohio 43219. BISYS is a registered transfer agent and broker-dealer and acts as
administrator and general distribution agent for certain other investment
companies.

DISTRIBUTOR

Gabelli & Company, Inc. serves as the distributor (the "Distributor") of
the Funds and is an indirect subsidiary of Gabelli Funds, Inc. The business
address of Gabelli & Company, Inc. is One Corporate Center, Rye, New York
10580-1434.

The Funds have entered into a Distribution Agreement with the Distributor
authorizing the Distributor to engage in distribution activities which include,
without limitation, advertising the Funds, compensating underwriters, dealers,
brokers, banks and other entities for sales of shares of the Funds and/or for
providing services to shareholders of the Funds relating to their investment in
the Funds. To the extent any of these payments is based on allocations by the
Distributor, the Funds may be considered to be participating in joint
distribution activities with other funds distributed by the Distributor. Various
federal and state laws prohibit national banks and some state-chartered
commercial banks from underwriting or dealing in the Funds' Shares. In the
unlikely event that a court were to find that these laws prevent such banks from
providing the services described above, the Funds would seek alternative
providers and expects that shareholders would not experience any disadvantage.

The Funds have adopted a Rule 12b-1 Distribution Plan and Agreement (the
"Plan") pursuant to which the Service Class of each Fund may pay the Distributor
on a monthly basis for costs and expenses of the Distribution in connection with
the distribution and marketing of Service Class shares. These costs and
expenses, which are subject to a maximum limit of .35% per annum of the average
daily net assets of the Intermediate Bond Fund and .50% per annum of the Service
Class of the Equity Fund and the Balanced Fund, include (i) advertising by
radio, television, newspapers, magazines, brochures, sales literature, direct
mail or any other form of advertising, (ii) expenses of sales employees or
agents of the Distributor, including salary, commissions, travel and related
expenses, (iii) payments to broker-dealers and financial institutions for
services in connection with the distribution of shares, including promotional
incentives and fees calculated with reference to the average daily net asset
value of shares held by shareholders who have a brokerage or other service
relationship with the broker-dealer or other institution receiving such fees,
(iv) costs of printing

19
<PAGE> 23

prospectuses, statements of additional information and other materials to be
given or sent to prospective investors, (v) such other similar services as the
Trustees determine to be reasonably calculated to result in the sale of shares
of the Funds, (vi) costs of shareholder servicing which may be incurred by
broker-dealers, banks or other financial institutions, and (vii) other direct
and indirect distribution-related expenses, including the provision of services
with respect to maintaining the assets of the Funds. Each Fund's Service Class
will pay all costs and expenses in connection with the preparation, printing and
distribution of its Prospectus to current shareholders and the operation of its
Plan, including related legal and accounting fees. No Service Class will be
liable for distribution expenditures made by the Distributor in any given year
in excess of the maximum amount payable under the Plan for that Fund year.

PURCHASE OF SHARES

Purchase of Fund shares may be made through brokerage accounts maintained
through Gabelli & Company or through any other firm with whom the Fund enters
into an arrangement for the distribution of its shares on substantially
identical terms as those agreed upon with Gabelli & Company. Purchases may also
be made through any registered broker-dealer with whom Gabelli & Company enters
into a selling agreement ("Soliciting Broker-Dealers"). Payment for the shares
must be made directly to the firm through which the order was placed or to the
Fund's transfer agent. Gabelli & Company may enter into selling or selected
broker-dealer agreements with Soliciting Broker-Dealers pursuant to which
Gabelli & Company may reallow a portion of the sales charge to Soliciting
Broker-Dealers in accordance with the schedule set forth below. The reallowance
to Soliciting Broker-Dealers may be changed at any time by Gabelli & Company.

Service Class Shares of the Funds are offered with a maximum sales charge
of 4.00%. The minimum initial investment is $1,000. There is no minimum initial
investment for accounts establishing an Automatic Investment Plan. Custodial
accounts for minor children are also available. There is no minimum for
subsequent investments. Shares of the Funds are sold at the public offering
price based on the net asset value per share next determined after receipt of an
order by the Funds' Distributor or transfer agent in proper form with
accompanying check or bank wire payment arrangements satisfactory to the Funds.
Although most shareholders elect not to receive stock certificates, certificates
for whole shares can be obtained on specific written request to the Transfer
Agent.

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

Prospectuses, sales material and subscription order forms ("applications")
may be obtained from your broker-dealer or the Distributor. The Funds and the
Distributor reserve the right in their sole discretion (1) to suspend the
offering of the Funds' shares and (2) to reject purchase orders when, in the
judgment of the Funds' management, such rejection is in the best interest of the
Funds. The calculation of net asset value per share is performed at 4:15 p.m. on
each day that the New York Stock Exchange is open for business. Net asset value
per share is computed by dividing the value of a Fund's net assets (i.e., the
value of its assets less its liabilities) by the total number of shares
outstanding. All expenses of the Funds are accrued daily and taken into account
for the purpose of determining net asset value.

In determining net asset value, securities listed on an exchange are valued
on the basis of the last sale price prior to the time the valuation is made. If
there has been no sale since the immediately previous

20
<PAGE> 24

valuation, then the current bid price is used. Quotations are taken from the
exchange where the security is primarily traded. Portfolio securities which are
primarily traded on foreign exchanges may be valued with the assistance of a
pricing service and are generally valued at the preceding closing values of such
securities on their respective exchanges, except that when an occurrence
subsequent to the time a foreign security is valued is likely to have changed
such value, then the fair value of those securities will be determined by
consideration of other factors by or under the direction of the Board of
Trustees. Over-the-counter securities are valued on the basis of the bid price
at the close of business on each business day. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees. Notwithstanding the
above, bonds and other fixed-income securities are valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. All assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the mean
between the bid and asked prices of such currencies against U.S. dollars as last
quoted by any major bank.

With respect to written options contracts, the premium received is recorded
as an asset and equivalent liability, and thereafter the liability is adjusted
to the market value of the option determined in accordance with the preceding
paragraph. The premium paid for an option purchased by a Fund is recorded as an
asset and subsequently adjusted to market value. See "Determination of Net Asset
Value" in the Statement of Additional Information.

MAIL

To make an initial purchase by mail, contact your broker or send a
completed application for Service Class shares with a check for the amount of
the investment payable to: THE GABELLI WESTWOOD FUNDS, P.O. BOX 8308, BOSTON, MA
02266-8308.

Subsequent purchases do not require a completed application and can be made
by (1) mailing a check to the same address noted above or by (2) bank wire, as
indicated below. The exact name and number of the shareholder's account should
be clearly indicated.

BANK WIRE

To initially purchase shares of the Funds using the wire system for
transmittal of money among banks, contact your broker or telephone the Funds at
1-800-GABELLI to obtain a new account number. The investor should instruct a
Federal Reserve System member bank to wire funds to: STATE STREET BANK AND TRUST
COMPANY, ABA011-0000-28 REF DDA99046187, ATTN: SHAREHOLDER SERVICES, RE: THE
GABELLI WESTWOOD FUNDS, A/C, ACCOUNT OF (REGISTERED OWNER), 225 FRANKLIN STREET,
BOSTON, MA 02110.

There may be a charge by your bank for transmitting the money by bank wire
but State Street Bank and Trust Company does not charge investors in the Funds
for the receipt of wire transfers. If you are planning to wire funds, it is
suggested that you instruct your bank early in the day so the wire transfer can
be accomplished the same day.

PERSONAL DELIVERY

Contact your broker or deliver a check made payable to "The Gabelli
Westwood Funds" along with a completed subscription order form to: THE GABELLI
WESTWOOD FUNDS, THE BFDS BUILDING, 7TH FLOOR, TWO HERITAGE DRIVE, NORTH QUINCY,
MA 02171.

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<PAGE> 25

TELEPHONE INVESTMENT PLAN

You may purchase additional shares of the Funds by telephone through your
broker or the Automated Clearinghouse (ACH) system as long as your bank is a
member of the ACH system and you have a completed, approved Investment Plan
application on file with our Transfer Agent. The funding for your purchase will
be automatically deducted from the ACH eligible account you designate on the
application. Your investment will normally be credited to your Gabelli Westwood
Fund account on the first business day following your telephone request. Your
request must be received no later than 4:00 p.m. eastern time. There is a
minimum of $100 for each telephone investment. Any subsequent changes in banking
information must be submitted in writing and accompanied by a sample voided
check. To initiate an ACH purchase, please call 1-800-GABELLI. Fund shares
purchased through the Telephone or Automatic Investment Plan will not be
available for redemption for up to fifteen (15) days following the purchase
date.

AUTOMATIC INVESTMENT PLAN

The Funds offer an automatic monthly investment plan, details of which can
be obtained from the Distributor. There is no minimum initial investment for
accounts establishing an automatic investment plan.

SYSTEMATIC WITHDRAWAL PLAN

The Funds offer a systematic withdrawal program for shareholders whereby
they can authorize an automatic redemption on a monthly, quarterly or annual
basis. Details can be obtained from your broker or the Distributor.

OTHER INVESTORS

No minimum initial investment is required for officers, directors or
full-time employees of the Funds, other investment companies managed by the
Adviser, the Sub-Adviser, the Administrator, the Distributor or their
affiliates, including members, of the "immediate family" of such individuals and
retirement plans and trusts for their benefit. The term "immediate family"
refers to spouses, children and grandchildren (adopted or natural), parents,
grandparents, siblings, a spouse's siblings, a sibling's spouse and a sibling's
children.

SALES CHARGES

Service Class Shares of the Funds will be offered to accounts at a price
equal to their net asset value plus a sales charge, as described below, on a
continuous basis through entities that have entered into a Dealer Agreement with
the Distributor. Shares issued through the automatic reinvestment of income
dividends or capital gains are not subject to any sales charges. Each Fund would
receive the entire net asset value of its shares sold to investors through
reinvestment. The Distributor's commission is the sales charge shown below less
any applicable discount "reallowed" to selected brokers and agents. Normally,
the Distributor will reallow discounts to selected brokers and agents in the
amounts indicated in the table below. From time to time, however, the
Distributor may elect to reallow the entire sales charge to selected brokers or
agents for all sales with respect to which orders are placed with the
Distributor during a particular period. A selected broker who receives
reallowance equal to or in excess of such a sales charge may be deemed an
"Underwriter" under the Securities Act of 1933.

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<PAGE> 26

<TABLE>
<CAPTION>
TOTAL SALES LOAD
------------------------------------------------------
DEALERS'
AS A % OF AS A % OF REALLOWANCE AS
AMOUNT OF TRANSACTION OFFERING PRICE AMOUNT INVESTED % OF OFFERING PRICE
- ----------------------------------------------------- -------------- --------------- -------------------
<S> <C> <C> <C>
Less than $100,000................................... 4.0% 4.2% 3.5%
$100,000-$249,999.................................... 3.0% 3.1% 2.5%
$250,000-$500,000.................................... 2.0% 2.0% 1.75%
$500,000-$999,999.................................... 1.0% 1.0% 0.75%
$1,000,000 and over.................................. No Load No Load No Load
</TABLE>

REDUCED SALES CHARGES

A reduction of sales charges rates in the tables above may be obtained as
follows:

Right of Accumulation A "single purchaser" (as defined below) is entitled
to a reduced sales charge and will be credited with amounts currently and
previously paid to purchase shares (sold subject to a sales charge) of the
Funds. The Right of Accumulation is illustrated by the following example: if a
previous purchase currently valued in the amount of $95,000 had been made
subject to a sales charge and the shares are still held, a current purchase of
$6,000 will qualify for a 3.0% sales charge. The reduced sales charge is
applicable only to current purchases. The term "single purchaser" refers to (1)
an individual, (2) an individual and spouse purchasing shares of the Funds for
their own account or for trust or custodial accounts for their minor children,
or (3) a trustee or other fiduciary purchasing for any one trust, estate, or
fiduciary account (including a pension, profit sharing or other employee benefit
trust created pursuant to a plan qualified under Sections 401 or 403 of the
Internal Revenue Code (the "Code") but not for a group formed to acquire
shares). To be entitled to a reduced sales charge for shares already owned, the
investor must notify the Distributor or the Transfer Agent at the time of the
purchase that he wishes to take advantage of such entitlement, and give the
numbers of his accounts, and those accounts held in the name of his spouse or
for minor children, the age of any such child and the specific relationship of
each such person to the investor.

LETTER OF INTENT

By initially investing at least $1,000 and submitting a Letter of Intent to
the Distributor, a "single purchaser" may make purchases of shares of one of the
Funds 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.

OTHER CIRCUMSTANCES

No sales charge is imposed on shares of the Funds: (1) sold to persons
described under "Purchase of Shares -- Other Investors" with respect to whom no
minimum investment is required; (2) issued in plans of reorganization, such as
mergers, asset acquisitions and exchange offers, to which the Trust is a party;
(3) sold to charities and endowments and other tax-exempt organizations
enumerated in Section 501(c)(3) of the Code; (4) sold through asset allocation
programs of an affiliate of the Adviser; (5) financial institutions purchasing
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; or (6)
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 planers who place trades for their own accounts if the
accounts are linked to the master account of such investment adviser or
financial planer on books and records of a broker or agent. Investors who
qualify under the categories described above should contact their brokerage firm
or Gabelli & Company, Inc.

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<PAGE> 27

REDEMPTION OF SHARES

Redemption requests may be made through a brokerage firm with which the
shareholder maintains a brokerage account. A shareholder desiring to redeem Fund
shares represented by certificates must also present the certificates to a
brokerage firm endorsed for transfer (or accompanied by an endorsed stock
power), signed exactly as the shares are registered. Redemption requests
involving shares represented by certificates will not be deemed received until
the certificates are received by the Fund's transfer agent in proper form.

Redemption requests made through Gabelli & Company with respect to
uncertificated shares must be in writing addressed to the Fund's transfer agent
at the address and in accordance with the signature guarantee procedures
specified below under "Redemption by Mail" in order to be deemed in proper form
or, if a brokerage account is maintained by a shareholder with Gabelli &
Company, in writing, by telephone or in person. Redemption requests made through
brokerage firms other than Gabelli & Company need to be made in accordance with
that brokerage firm's redemption procedures.

Upon receipt by the Distributor or the Transfer Agent of a redemption
request in proper form, shares of the Funds will be redeemed at their next
determined net asset value. Redemption requests received after the time as of
which each Fund's net asset value is determined on a particular day will be
redeemed at the next determined net asset value of such Fund on the next day
that net asset value is determined. Checks for redemption proceeds will normally
be mailed to the shareholder's address of record within seven days, but will not
be mailed until all checks in payment for the purchase of the shares to be
redeemed have been honored, which may take up to 15 days. The proceeds of a
redemption may be more or less than the amount invested and, therefore, a
redemption may result in gain or loss for income tax purposes. Redemption
requests may be made by letter to the Transfer Agent, specifying the name of the
Fund, the dollar amount or number of shares to be redeemed, and the account
number. The letter must be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
if any certificates for the shares to be redeemed are outstanding, presentation
of such certificates properly endorsed is also required. Signatures on a
redemption request and/or certificates must be guaranteed by an "eligible
guarantor institution" as such term is defined in Rule 17Ad-15 under the
Securities and Exchange Act of 1934, which includes certain banks, brokers,
dealers, credit unions, securities exchanges and associations, clearing agencies
and savings associations (signature guarantees by notaries public are not
acceptable). Shareholders may also redeem a Fund's shares through certain
registered broker-dealers, who have made arrangements with the Funds permitting
them to redeem shares by telephone or facsimile transmission and who may charge
shareholders a fee for this service if they have not received any payments under
the Distribution Plan.

Further documentation, such as copies of corporate resolutions and
instruments of authority, are normally requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.

If the Board of Directors should determine that it would be detrimental to
the remaining shareholders of the Funds to make payment wholly or partly in
cash, the Funds may pay the redemption price in whole or in part by a
distribution in kind of securities from the portfolio of the Funds, in lieu of
cash, in conformity with applicable rules of the Securities and Exchange
Commission. Under such circumstances, shareholders of the Funds receiving
distributions in kind of securities will incur brokerage commissions when they
dispose of the securities.

The Funds may suspend the right of redemption or postpone the date of
payment for more than seven days during any period when (1) trading on the New
York Stock Exchange is restricted or the Exchange is closed, other than
customary weekend and holiday closings; (2) the Securities and Exchange

24
<PAGE> 28

Commission has by order permitted such suspension or (3) an emergency, as
defined by rules of the Securities and Exchange Commission, exists making
disposal of portfolio investments or determination of the value of the net
assets of the Funds not reasonably practicable.

To minimize expenses, the Funds reserve the right to redeem, upon not less
than 30 days' notice, all shares of the Funds in an account (other than an IRA)
which as a result of shareholder redemption has a value below $500. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.

TELEPHONE REDEMPTION BY CHECK

The Funds accept telephone requests for redemption of unissued shares,
subject to a $25,000 limitation. By calling 1-800-GABELLI, you may request that
a check be mailed to the address of record on the account, provided that the
address has not changed within thirty (30) days prior to your request. The check
will be made payable to the person in whose name the account is registered and
will normally be mailed within seven (7) days.

The Fund and its transfer agent will not be liable for following telephone
instructions reasonably believed to be genuine. In this regard, the Fund and its
transfer agent require personal identification information before accepting a
telephone redemption. If the Fund or its transfer agent fail to use reasonable
procedures, the Fund might be liable for losses due to fraudulent instructions.
A shareholder may redeem shares by telephone unless he elects in the
subscription order form not to have such ability.

Requests for telephone redemption must be received between 9:00 a.m. and
4:00 p.m. eastern time. If your telephone call is received after this time or on
a day when the New York Stock Exchange is not open, the request will be entered
the following business day. Shares are redeemed at the net asset value next
determined following your request. Fund shares purchased by check or through the
automatic purchase plan will not be available for redemption for up to fifteen
(15) days following the purchase. Shares held in certificate form must be
returned to the Transfer Agent for redemption of shares. Telephone redemption is
not available for IRAs. The proceeds of a telephone redemption may be directed
to an existing account in another of the Funds, provided the account is
registered in the redeeming shareholder's name. See "Exchange of Fund Shares."

BY BANK WIRE

The Funds accept telephone requests for wire redemption in excess of $1,000
(but subject to a $25,000 limitation) to a bank predesignated either on the
application or in a subsequent written authorization with the signature
guaranteed. The Funds accept signature guaranteed written requests for
redemption by bank wire without limitation. The proceeds are normally wired on
the following business day. Your bank must be either a member of the Federal
Reserve System or have a correspondent bank which is a member. Any change to the
banking information made at a later date must be submitted in writing with a
signature guarantee.

REINSTATEMENT PRIVILEGE

A shareholder in any Fund who has redeemed shares may reinvest, without a
sales charge, up to the full amount of such redemption at the net asset value
determined at the time of the reinvestment within 30 days of the original
redemption. This privilege must be affected within 30 days of the redemption and
may be exercised only once. The shareholder must reinvest in the same Fund,
class and account from which the shares were redeemed. A redemption is a taxable
transaction and gain or loss may be recognized for Federal income tax purposes
even if the reinstatement privilege is exercised. Any loss realized upon the
redemption will not be

25
<PAGE> 29

recognized as to the number of shares acquired by reinstatement, except through
an adjustment in the tax basis of the shares so acquired. See "Dividends,
Distribution and Taxes" for an explanation of circumstance in which sales load
paid to acquire shares of the Funds may be taken into account in determining
gain or loss on the disposition of those shares.

RETIREMENT PLANS

The Funds have available a form of traditional Individual Retirement
Account ("IRA") and a "Roth IRA" for investment in Fund shares which may be
obtained from the Distributor. The minimum investment required to open an IRA
for investment in shares of the Funds is $1,000 for an individual, except that
both the individual and his or her spouse may establish separate IRAs if their
combined investment is $1,250. There is no minimum for additional investment in
an IRA account. Investors who are self-employed may purchase shares of the Funds
through tax-deductible contributions to retirement plans for self-employed
persons, known as Keogh or H.R.-S.10 plans. The Funds do not currently act as
Sponsor for 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 investment for an individual under such plans is
$1,000 and there is no minimum for additional investments. Under the Internal
Revenue Code of 1986 (the "Code"), individuals may make wholly or partly tax
deductible IRA contributions of up to $2,000 annually ($4,000 maximum) in the
case of a married couple where one spouse is not working and certain other
conditions are met), 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. Beginning January 1, 1998, investors
may make non-deductible contributions to a Roth IRA up to $2,000 annually.
Consult your tax advisor.

Investors should be aware that they may be subject to penalties of
additional tax on contributions or withdrawals from IRAs or other retirement
plans which are not permitted by the applicable provisions of the Code. Persons
desiring information concerning investments through IRA accounts or other
retirement plans should write or telephone the Distributor.

EXCHANGE OF FUNDS SHARES

The Funds offer two convenient ways to exchange shares in a class of one
Fund for shares in a corresponding class of another fund managed by the Adviser
or its affiliates. Before engaging in an exchange transaction, a shareholder
should read carefully the portions of this Prospectus or the other
Prospectus(es) describing the Fund into which the exchange will occur. A
shareholder may not exchange shares of a class of one Fund for shares of a
corresponding class of another fund if either are not legally qualified or
registered for sale in the state of the shareholder's residence. The minimum
amount for an initial exchange is $1,000. No minimum is required in subsequent
exchanges. The Trust may terminate or amend the terms of the exchange privilege
at any time upon 60 days' written notice to shareholders.

A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by a Fund in good order, plus any applicable sales load.

An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholder should receive written confirmation of the exchange
within a few days of the completion of the transaction.

26
<PAGE> 30

In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of shares, equal to the excess of the sales load
applicable to the shares to be acquired, over the amount of any sales load
previously paid to the Distributor on the shares to be exchanged. No service fee
is imposed. See "Dividends, Distributions and Taxes" for an explanation of
circumstances in which sales load paid to acquire shares of the Funds may not be
taken into account in determining gain or loss on the disposition of those
shares.

EXCHANGE BY MAIL

To exchange Fund shares by mail, simply send a letter of instruction to
your broker or the Distributor. The letter of instruction must include: (i) your
account number; (ii) the names of the Funds from and into which you wish to
exchange your investment; (iii) the dollar or share amount you wish to exchange;
and (iv) the signatures of all registered owners or authorized parties. All
signatures must be guaranteed by a member of a national securities exchange or
by a commercial bank or trust company. Corporations, trusts, partnerships or
other legal entities will be required to furnish other documentation. Please
call your broker or the Funds for more information.

EXCHANGE BY TELEPHONE

To exchange Fund shares by telephone or if you have any questions, simply
call your broker or the Funds toll free at 1-800-GABELLI. You should be prepared
to give the telephone representative the following information: (i) your account
number, social security number and account registration; (ii) the names of the
Funds from and into which you wish to exchange your investment, and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Funds. Telephone exchanges are available only if the
shareholder so indicates by checking the "yes" box on the Purchase Application.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). The Funds did so qualify
for the previous taxable year and intend to continue to so qualify. By so
qualifying and electing, each Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net capital gains in the manner required under the Code. In addition, the
Code subjects regulated investment companies, such as the Funds, to a
non-deductible 4% excise tax each calender year to the extent that such
investment companies do not distribute substantially all of their taxable
investment income and capital gain, generally determined on a calendar year
basis and the one year period ending October 31 of each calender year,
respectively.

Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed by the Equity
Fund annually and the Balanced Fund quarterly. The Intermediate Bond Fund will
declare distributions of such income daily and pay those dividends monthly. Each
Fund intends to distribute, at least annually, substantially all net capital
gains (the excess of net long-term capital gains over net short-term capital
losses). Shareholders will be advised as to what portion of capital gains are to
be treated as "mid-term" or "long-term" with respect to the maximum tax rate for
such gains (for noncorporate shareholders, 28% for mid-term gains and 20% for
long-term gains (10% for noncorporate shareholders who are subject to the 15%
marginal tax bracket for ordinary income)). In

27
<PAGE> 31

determining amounts of capital gains to be distributed, any capital loss
carryovers from prior years will be applied against capital gains to reduce the
amount of distributions paid. In addition, any losses incurred in the taxable
year subsequent to October 31, will be deferred to the next taxable year and
used to reduce subsequent year distributions (see "Dividends, Distributions and
Taxes" in the Statement of Additional Information). You may choose whether to
receive dividends and distributions in cash or to reinvest in additional shares
of the class in which you are invested at the next determined net asset value
without a sales load.

Dividends from net investment income or distributions of net realized
short-term securities gains to shareholders generally are taxable as ordinary
income whether received in cash or reinvested in additional shares.
Distributions from net realized long-term gains (i.e. net capital gains) to
shareholders are taxable as long-term capital gains whether received in cash or
reinvested in additional shares.

Special tax rules may apply to a Fund's acquisition of futures contracts,
forward contracts, and options on futures contracts. Such rules may, among other
things, affect whether gains and losses from such transactions are considered to
be short-term or long-term, may have the effect of deferring losses and/or
accelerating the recognition of gains or losses, and, for purposes of qualifying
as a regulated investment company, may limit the extent to which a Fund may be
able to engage in such transactions.

It is anticipated that a portion of the dividends paid by the Equity Fund
and the Balanced Fund will qualify for the dividends-received deduction
available to corporations. The dividends paid by the Intermediate Bond Fund are
not expected to so qualify. Shareholders will be notified at the end of the year
as to the amount of the dividends that qualify for the dividends-received
deduction. Under certain circumstances, the sales charge incurred in acquiring
shares of a Fund may not be taken into account in determining the gain or loss
on the disposition of those shares. This rule applies where shares of a Fund are
exchanged within 90 days after the date they were purchased and new shares of a
Fund are acquired without a sales charge or at a reduced sales charge. In that
case, the gain or loss recognized on the exchange will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales load with respect to the newly
acquired shares is reduced as a result of having incurred a sales load
initially. The portion of the sales load affected by this rule will be treated
as a sales load paid for the new shares.

The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that it is subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code are exempt from backup withholding.

Those Funds which may invest in securities of foreign issuers may be
subject to withholding and other similar income taxes imposed by a foreign
country.

Notice as to the tax status of your dividends and distributions is mailed
to you annually. You also will receive periodic summaries of your account.
Dividends and distributions may be subject to state and local taxes. Dividends
paid or credited to accounts maintained by non-resident shareholders may also be
subject to U.S. non-resident withholding taxes as discussed above. You should
consult your tax adviser regarding specific questions as to Federal, state and
local income and withholding taxes.

28
<PAGE> 32

PERFORMANCE INFORMATION

A Fund may, from time to time, include its yield, if applicable, and total
return in advertisements or reports to shareholders or prospective investors.
The methods used to calculate the yield and total return of the Funds are
mandated by the Securities and Exchange Commission.

Quotations of "yield" for a Fund that is not a money market fund will be
based on the investment income per share during a particular 30-day (or one
month) period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and will be computed by dividing net
investment income by the maximum public offering price per share on the last day
of the period.

A Fund's average annual total return is expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
periods of one, five and ten years (up to the life of the Fund or for shorter
time periods depending upon the length of time during which the Fund has
operated), reflect the deduction of a proportional share of Fund expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid. Total returns may be calculated either with or without the effect of
the 4.00% initial maximum sales load.

Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's Composite Stock Price Index, the Dow
Jones Industrial Average, Lehman Brothers Corporate/Government Bond Index,
indices prepared by Lipper Analytical Services, Morningstar ratings and other
entities or organizations which track the performance of investment companies.

Performance will vary and past results are not necessarily representative
of future results. You should remember that performance is a function of
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses. Performance information, such as that
described above, may not provide a basis for comparison with other investments
or other investment companies using a different method of calculating
performance.

GENERAL INFORMATION

The Funds are series portfolios of The Gabelli Westwood Funds, a
Massachusetts business trust (the "Trust") organized pursuant to an Agreement
and Declaration of Trust (the "Trust Agreement"), as amended and restated on
June 12, 1986. On November 18, 1997, the Board of Trustees approved the change
in the name of the Trust from The Westwood Funds to The Gabelli Westwood Funds.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest, par value $.001 per share. Each share has one vote and, when issued,
is fully paid and non-assessable. The Board of Trustees may, in the future,
authorize the issuance of other series of shares of beneficial interest
representing shares of other investment portfolios which may consist of separate
classes as in the case of the Funds. Each additional portfolio within the Trust
is separate for investment and accounting purposes and is represented by a
separate series of shares. Each portfolio will be treated as a separate entity
for Federal income tax purposes.

Each Fund is comprised of two classes of shares -- the "Retail Class" and
the "Service Class." The classes have identical rights with respect to the
series portfolio of which they are a part; however, there are certain matters
affecting one class but not another, such as the existence of a load and the
amount of permissible payments under a distribution plan, which may be
considered to create a preference. On all such matters, shareholders vote as a
class, and not by series. Service Class shares are sold to investors who
purchase their shares through an entity that has signed a Dealer Agreement with
the Distributor. Retail Class shares are sold to all other investors, including
shares sold by dealers for certain retirement plans and to those who

29
<PAGE> 33

contact the Fund directly or purchase shares through an entity that has signed
an agreement for other special programs (e.g., Charles Schwab & Co., Inc. or
Fidelity Brokerage Services).

Shareholders have the right to vote on the election of Trustees and on any
and all matters which, by law or the provisions of the Trust's Declaration of
Trust, they may be entitled to vote. All shares of the Trust have equal voting
rights and will be voted in the aggregate, and not by class or series, except
where voting by class or series is required by law or where the matter involved
affects only one class.

Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or a Trustee on
behalf of the Trust. The Trust Agreement provides for indemnification from the
Trust's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of shareholders
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations,
a possibility which management believes is remote. Upon payment of any liability
incurred by the Trust, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Trust.
As described under "Management of the Funds" in the Statement of Additional
Information, the Funds ordinarily will not hold shareholder meetings; however,
the Trustees are required to call a meeting for the purpose of considering the
removal of persons serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust. Under the
Trust Agreement, shareholders of record of not less than two-thirds of the
outstanding shares of the Trust may remove a Trustee either by declaration in
writing or by vote cast in person or by proxy at a meeting called for such
purpose. In connection with the calling of such shareholder meetings,
shareholders will be provided with communication assistance.

State Street Bank and Trust Company and its affiliate, Boston Financial
Data Services, maintain a record of share ownership and send to shareholders
confirmations and statements of account.

Shareholder inquiries may be made by writing to the Gabelli Westwood Funds
at One Corporate Center, Rye, New York 10580-1434, by calling 1-800-GABELLI, or
through the internet at http//www.gabelli.com/westwood or e-mail: info @
gabelli.com.

Upon request, Gabelli & Company, Inc. will provide without a charge, a
paper copy of this Prospectus to investors or their representatives who received
this Prospectus in an electronic format.

NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
THE STATEMENT OF ADDITIONAL INFORMATION, AND IN THE FUNDS' OFFICIAL SALES
LITERATURE IN CONNECTION WITH THE OFFER OF FUND SHARES, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS, ITS INVESTMENT ADVISER, DISTRIBUTOR OR ANY AFFILIATE
THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR
TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.

30
<PAGE> 34

[This page intentionally left blank.]
<PAGE> 35

THE GABELLI WESTWOOD FUNDS
One Corporate Center
Rye, New York 10580-1434

General and Account Information:
1-(800) GABELLI
1-(800) 422-3554

Fax 1-(914) 921-5118

http://www.gabelli.com/westwood

e-mail: info @ gabelli.com

INVESTMENT ADVISER
Gabelli Advisers LLC
One Corporate Center
Rye, New York 10580-1434

INVESTMENT SUB-ADVISER
Westwood Management Corporation

300 Crescent Court, Suite 1320

Dallas, TX 75201

DISTRIBUTOR
Gabelli & Company, Inc.
One Corporate Center
Rye, New York 10580-1434

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

LEGAL COUNSEL
Battle Fowler LLP
75 East 55th Street
New York, New York 10022

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table............................. 2
Financial Highlights.................. 4
Description of the Funds and
Risk Considerations................. 6
Management of the Funds............... 18
Purchase of Shares.................... 20
Redemption of Shares.................. 24
Retirement Plans...................... 26
Exchange of Funds Shares.............. 26
Dividends, Distributions and Taxes.... 27
Performance Information............... 29
General Information................... 29
</TABLE>

THE

GABELLI

WESTWOOD

FUNDS

EQUITY FUND
BALANCED FUND
INTERMEDIATE BOND FUND
SERVICE CLASS
PROSPECTUS
----------------------------------------------------

JANUARY 28, 1998

----------------------------------------------------
<PAGE> 36

THE GABELLI WESTWOOD FUNDS

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

One Corporate Center

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

RETAIL CLASS PROSPECTUS -- JANUARY 28, 1998

The Gabelli Westwood Funds (the "Trust") is an open-end, diversified,
management investment company, known as a mutual fund. This prospectus contains
information about five separate investment portfolios referred to as the Gabelli
Westwood Equity Fund, the Gabelli Westwood Balanced Fund, the Gabelli Westwood
SmallCap Equity Fund, the Gabelli Westwood Realty Fund, and the Gabelli Westwood
Intermediate Bond Fund (collectively, the "Funds").

GABELLI WESTWOOD SMALLCAP EQUITY FUND (the "SmallCap Fund") seeks to
provide investors with long-term capital appreciation by investing primarily in
smaller capitalization equity securities. The net asset value per share of the
SmallCap Fund will fluctuate.

GABELLI WESTWOOD REALTY FUND (the "Realty Fund") seeks to provide investors
with long-term capital appreciation as well as current income through
investments primarily in a portfolio of publicly traded securities of domestic
issuers that are primarily engaged in or related to the real estate industry.
The net asset value per share of the Realty Fund will fluctuate.

The Funds offer two classes of shares, with the exception of the Realty
Fund and the SmallCap Fund that offer only Retail shares. This Prospectus
provides information about "Retail Class" shares. Retail Class shares are
offered exclusively to investors who have not purchased their shares through an
entity that has signed a Dealer Agreement with Gabelli & Company, Inc. (the
"Distributor") to offer Service Class Shares, with the exception of certain
dealer-sold retirement plans and other special programs. Each Fund has a
separate investment objective, as set forth below. There is no assurance that
any of these investment objectives will be achieved.

Part B (also known as the Statement of Additional information), dated
January 28, 1998, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission (the "SEC") and is available for reference, along with other
materials on the SEC Internet Web Site (http://www.sec.gov) and is incorporated
herein by reference. For a free copy, write or call The Gabelli Westwood Funds
at the address or telephone number shown above.

Gabelli Advisers LLC (formerly Teton Advisers LLC) (the "Adviser"), a
limited liability company formed by Gabelli Funds, Inc. ("Gabelli") and Westwood
Management Corporation ("Westwood"), is adviser to the Funds pursuant to an
investment advisory agreement with the Trust (the "Investment Advisory
Agreement"). The Adviser has entered into a sub-advisory agreement with Westwood
and the Trust whereby Westwood (the "Sub-Adviser") serves as sub-adviser to the
Funds (the "Sub-Advisory Agreement"). Prior to serving as Sub-Adviser, Westwood
acted as adviser to the Funds from their inception through October 6, 1994. The
Adviser oversees the administration of each Fund's business and affairs and in
this connection is responsible for maintaining certain of the Funds' books and
records and providing other administrative services. (See "Management of the
Funds.") On November 18, 1997, The Trustees approved the change in name to The
Gabelli Westwood Funds.

FEE TABLE -- RETAIL CLASS

Each Fund is authorized to issue two separate classes of shares. Service
Class shares will be offered exclusively to investors who have purchased their
shares through an entity that has signed a Dealer Agreement with the Distributor
to offer such shares. Retail Class shares will be offered to all other
investors, including certain retirement plans or other special programs offered
through broker-dealers. Retail Class shares and Service Class shares are
identical in all respects, except that Service Class shares bear a sales load
and higher expenses incurred in the distribution and marketing of such shares
("12b-1 Fees"). Retail Class shares bear no sales load and lower 12b-1 Fees. The
table below sets forth certain information regarding annual operating expenses
incurred by the Retail Class for the fiscal year ended September 30, 1997
including the amounts of these fees. The annual operating expense information
for the Realty Fund is estimated, based on an asset level of $30,000,000.

<TABLE>
<CAPTION>
EQUITY BALANCED SMALLCAP REALTY INTERMEDIATE
FUND FUND FUND+ FUND+ BOND FUND+
------ -------- -------- ------ ------------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases.......... None None None None None
Annual Fund Operating Expenses:
Management Fees................................ 1.00% 0.75% 1.00% 1.00% 0.60%
12b-1 Fees..................................... 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses................................. 0.34% 0.36% 0.25% 0.25% 0.15%
----- ----- ----- ----- -----
Total Fund Operating Expenses*................... 1.59% 1.36% 1.50% 1.50% 1.00%
===== ===== ===== ===== =====
</TABLE>

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

* Prior to any expense reimbursements, total fund operating expenses for the
SmallCap Fund and Intermediate Bond Fund for Retail Shares would have been
2.45% and 1.70%, respectively. Total Fund Operating Expenses for the Equity
and Balanced Funds have been restated to reflect the elimination of previous
reimbursement policies and do not include a reduction of expenses for
custodian fee credits on cash balances maintained with the custodian.
Including such custodian fee credits, the expense ratios of these funds would
be 1.56% and 1.33%, respectively. The Total Fund Operating Expenses for
SmallCap and Intermediate Bond funds have been restated to reflect current
reimbursement policies.

+ The Adviser has agreed to voluntarily reimburse the funds to the extent
necessary to maintain the Total Fund Operating Expenses at the level set
forth in the table above.

2
<PAGE> 38

Example:

An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund.............................................. $ 16 $50 $87 $189
Balanced Fund............................................ $ 14 $43 $74 $164
SmallCap Fund............................................ $ 15 $47 -- --
Realty Fund.............................................. $ 15 $47 -- --
Intermediate Bond Fund................................... $ 10 $32 $55 $122
</TABLE>

The amounts listed in the example should not be considered as
representative of past or future expenses and actual expenses may be greater or
less than those indicated. The expense ratios used above are after expense
reimbursements. Moreover, while the example assumes a 5% annual return, a Fund's
actual performance will vary and may result in an actual return greater or less
than 5%. The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or indirectly,
the payment of which will reduce investors' return on an annual basis. (See
"Management of the Funds.")

3
<PAGE> 39

FINANCIAL HIGHLIGHTS

The following information for each of the five years in the period ended
September 30, 1997 have been audited by Price Waterhouse LLP, the Funds'
independent accountants, whose report on the Financial Statements which
incorporate such information appears in the Statement of Additional Information.
All such information should be read in conjunction with the related financial
statements and notes thereto, which are included in the Statement of Additional
Information, and are available upon request. The Realty Fund was launched on
September 30, 1997 and had no operations other than the sale of 10,000 shares at
$10.00 per share on September 30, 1997.

For a share outstanding throughout each period+

EQUITY FUND -- RETAIL CLASS(a)

-----------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net Asset Value,
Beginning of Period.... $ 7.68 $ 6.59 $ 5.50 $ 9.91 $14.19 $14.23 $12.62 $15.11 $12.02 $15.12
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income.... 0.07 0.08 0.04 0.10 0.05 0.27 0.46 0.53 0.61 0.42
Net realized and
unrealized gain (loss)
on investments......... 2.72 1.59 1.31 0.64 2.12 0.34 1.92 (2.04) 2.89 (2.15)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment
Operations........... 2.79 1.67 1.35 0.74 2.17 0.61 2.38 (1.51) 3.50 (1.73)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Dividends from net
investments income... (0.07) (0.06) (0.06) (0.07) (0.55) (0.51) (0.61) (0.56) (0.41) (0.30)
Distributions from net
realized capital
gains................ (0.83) (0.52) (0.20) (5.08) (5.90) (0.14) (0.16) (0.42) -- (1.07)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Dividends and
Distributions........ (0.90) (0.58) (0.26) (5.15) (6.45) (0.65) (0.77) (0.98) (0.41) (1.37)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of
Period................. $ 9.57 $ 7.68 $ 6.59 $ 5.50 $ 9.91 $14.19 $14.23 $12.62 $15.11 $12.02
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return............. 39.61% 26.88% 25.85% 9.14% 20.16% 4.16% 19.61% (10.59%) 30.08% (10.40%)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Assets End of Period
(in thousands)......... $128,697 $29,342 $14,903 $8,637 $5,172 $13,161 $52,884 $51,754 $57,763 $46,245
Ratios to average net assets of:
Net investment
income............... 1.11% 1.16% 0.77% 1.63% 0.40% 1.85% 3.06% 3.74% 4.57% 4.24%
Expenses net of
reimbursements++..... 1.53% 1.50% 1.61% 0.71% 1.95% 1.40% 1.29% 1.26% 1.27% 1.48%
Expenses before
reimbursements++..... 1.59% 1.95% 2.29% 1.94% 2.32% 1.54% 1.29% 1.26% 1.27% 1.62%
Portfolio Turnover
Rate................... 61% 106% 107% 137% 102% 75% 143% 127% 151% 198%
Average Commission Rate
(per share of security)
(b).................... $0.0572 $0.0540 -- -- -- -- -- -- -- --
</TABLE>

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

+ Per share based on the average number of shares outstanding during the
period.

(a) Formerly named "Institutional Class."

(b) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate paid per share for purchases and
sales of investment securities.

4
<PAGE> 40

For a share outstanding throughout each period ended September 30,+

<TABLE>
<CAPTION>
RETAIL CLASS
----------------------------------------------------------------------------------
SMALLCAP
EQUITY
BALANCED FUND(A) FUND(B)
1997 1996 1995 1994 1993 1992 1997
------- ------- ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net Asset Value, Beginning of
Period............................ $ 9.71 $ 8.47 $ 7.12 $10.89 $10.45 $10.00 $ 10.00
------- ------- ------ ------ ------ ------ --------
Income from Investment Operations:
Net investment income............. 0.25 0.22 0.19 0.12 0.20 0.31 0.08
Net realized and unrealized gain
on investments.................. 2.36 1.37 1.35 0.42 1.44 0.49 4.40
------- ------- ------ ------ ------ ------ --------
Total from Investment
Operations...................... 2.61 1.59 1.54 0.54 1.64 0.80 4.48
------- ------- ------ ------ ------ ------ --------
Less Distributions:
Dividends from net investment
income.......................... (0.25) (0.22) (0.19) (0.13) (0.24) (0.31) 0.00
Distributions from net realized
capital gain.................... (0.58) (0.13) -- (4.18) (0.96) (0.04) 0.00
------- ------- ------ ------ ------ ------ --------
Total Dividends and
Distributions................... (0.83) (0.35) (0.19) (4.31) (1.20) (0.35) 0.00
------- ------- ------ ------ ------ ------ --------
Net Asset Value, End of Period...... $ 11.49 $ 9.71 $ 8.47 $ 7.12 $10.89 $10.45 $ 14.48
======= ======= ====== ====== ====== ====== =========
Total Return........................ 28.32% 19.11% 21.98% 5.30% 17.60% 7.32% 44.80%
------- ------- ------ ------ ------ ------ --------
Net Assets End of Period (in
thousands)........................ $67,034 $23,158 $6,912 $3,081 $1,583 $3,716 $ 8,546
Ratios to Average Net Assets of:
Net investment income............. 2.60% 2.62% 2.47% 1.55% 1.90% 3.13% 1.89%
Expenses net of reimbursement..... 1.28%++ 1.32%++ 1.35%++ 1.68% 1.82% 1.44% 1.89% *
Expenses before reimbursements.... 1.36%++ 1.71%++ 1.86%++ 2.36% 2.97% 2.38% 2.45% **
Portfolio Turnover Rate............. 110% 111% 133% 168% 192% 178% 146%
Average Commission Rate (per share
of security)(c)................... $0.0593 $0.0550 $0.0358
</TABLE>

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

+ Per share based on the average number of shares outstanding during the
period.

++ Effective 1995, the ratios do not include a reduction of expenses for
custodian fee credits on cash balances maintained with the custodian.
Including such custodian fee credits, the expense ratios for 1997, 1996 and
1995, net of reimbursements would be 1.25%, 1.24% and 1.25% respectively,
and 1.33%, 1.63% and 1.85% before reimbursements respectively.

(a) Formerly named "Institutional Class".

(b) For the period from April 15, 1997 (inception date of Fund) through
September 30, 1997.

(c) For the fiscal years beginning on or after September 1 1995, a fund is
required to disclose its average commission rate period per share for
purchases and sales of investment securities.

* The ratio does not include a reduction of expenses for custodian fee credits
on cash balances maintained with the custodian. Including such custodian fee
credits, the expense ratio would be 1.50%.

** During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursement had not occurred, the ratios
would have been as shown.

5
<PAGE> 41

For a share outstanding throughout each period+

INTERMEDIATE BOND FUND -- RETAIL CLASS(a)

----------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period.......... $ 9.88 $ 9.98 $ 9.48 $10.73 $10.65 $10.00
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income....................... 0.68 0.51 0.52 0.48 0.39 0.51
Net realized and unrealized gain on
investments............................... 0.41 (0.10) 0.50 (1.04) 0.62 0.65
------ ------ ------ ------ ------ ------
Total from Investment Operations............ 1.09 0.41 1.02 (0.56) 1.01 1.16
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income........ -- (0.51) (0.52) (0.48) (0.39) (0.51)
Distributions from net realized capital
gain...................................... (0.68) -- -- (0.21) (0.54) --
------ ------ ------ ------ ------ ------
Total Distributions......................... (0.68) (0.51) (0.52) (0.69) (0.93) (0.51)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period................ $10.29 $ 9.88 $ 9.98 $ 9.48 $10.73 $10.65
====== ====== ====== ====== ====== ======
Total Return.................................. 11.36% 4.50% 11.13% (5.46%) 10.24% 11.87%
------ ------ ------ ------ ------ ------
Net Assets End of Period (in thousands)....... $5,912 $5,496 $4,729 $7,339 $2,849 $3,153
Ratios to Average Net Assets of:
Net investment income....................... 6.71% 5.43% 5.38% 4.86% 3.74% 5.25%
Expenses net of reimbursements++............ 1.11% 1.09% 1.17% 0.92% 2.40% 1.94%
Expenses before reimbursements++............ 1.70% 2.46% 2.47% 1.75% 3.46% 3.40%
Portfolio Turnover Rate....................... 628% 309% 165% 203% 222% 198%
</TABLE>

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

+ Per share data based on the average number of shares outstanding during the
period.

(a) Formerly named "Institutional Class"

DESCRIPTION OF THE FUNDS AND RISK CONSIDERATIONS

INVESTMENT OBJECTIVES

MANAGEMENT POLICIES

6
<PAGE> 42

published by the Department of Commerce, and in smaller companies (generally
with market capitalizations greater than $100,000,000 but less than
$500,000,000) believed to have outstanding potential for capital appreciation,
in both cases in industries which the Adviser has identified as appropriate in
light of the then current status of the economic and business cycles. These
securities may have above-average price/earnings ratios or less than average
current yields, when compared to published indexes, such as the Standard &
Poor's 500 Composite Stock Price Index. Price/earnings ratio is a comparison of
a security's market price to its earnings per share, usually expressed as a
simple numeral, and current yield expresses the income on an amount invested.
The Equity Fund may invest in preferred stocks and common stock issued by real
estate investment trusts (see "Real Estate Investment Trusts" below for more
complete information). The Equity Fund also may invest, in normal circumstances,
up to 35% of its total assets in U.S. dollar- and foreign currency-denominated
debt securities of domestic and foreign issuers, which are rated at least "BBB"
by Standard & Poor's Corporation ("S&P") or "Baa" by Moody's Investors Service,
Inc. ("Moody's") (except with respect to investments in commercial paper which
will consist only of direct obligations that at the time of purchase are rated
in the highest rating category by Moody's or S&P) or, if unrated, are determined
to be of comparable quality by the Adviser, or in index options when it believes
they hold less risk or greater potential for capital appreciation than equity
securities. Such investments are made without regard to the remaining maturities
of such securities. The Equity Fund may invest up to 10% of its total assets in
debt securities (other than commercial paper) that are rated or, if unrated,
determined to be below investment grade. (Investment grade debt securities are
those which are rated at least "BBB" by S&P or "Baa" by Moody's). These
investments generally carry a high degree of risk and are sometimes referred to
as "high yield, high risk" securities by the investment community (see "Lower
Rated Securities" below for more complete information).

The majority of the Equity Fund's investments are in securities listed on
the New York Stock Exchange or other national securities exchanges. The Equity
Fund also may invest in unlisted securities; but these generally will be
securities that have an established over-the-counter market, although the depth
and liquidity of that market may vary from time to time and from security to
security. Generally, those securities are issued by smaller companies than those
whose securities are listed on national securities exchanges. The market prices
of equity securities of smaller companies may tend to be more volatile than the
market prices of equity securities generally.

7
<PAGE> 43

European Depository Receipts ("EDRs"). ADRs are receipts typically issued by a
United States bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. Generally, ADRs in registered form
are designed for use in United States securities markets. EDRs are similar to
ADRs and are issued and traded in Europe.

BALANCED FUND -- The Balanced Fund pursues its objective through a balanced
and diversified program of investing in equity securities and debt instruments.

8
<PAGE> 44

instruments in order to maintain a temporary "defensive" posture when, in the
opinion of the Adviser, it is advisable to do so.

THE SMALLCAP FUND -- The SmallCap Fund will seek to achieve its investment
objective by investing, under normal circumstances as determined by the Adviser,
at least 65% of the Fund's total assets in equity securities, including
preferred stock and convertible securities ("equity securities"), of companies
that have market capitalization (defined as shares outstanding times current
market price) of $1 billion or less at the time of the Fund's initial
investment. The SmallCap Fund also may invest, under normal circumstances, up to
35% of its total assets in the equity securities of issuers without respect to
market capitalization. The SmallCap Fund may invest up to 25% of its total
assets in the equity securities of foreign issuers, either directly, or in the
form of ADRs or other similar arrangements, such as EDRs. The SmallCap Fund may
also invest in equity securities issued by real estate investment trusts (see
"Real Estate Investment Trusts" below). The SmallCap Fund may invest, in normal
circumstances, up to 35% of its total assets in U.S. dollar and foreign
currency-denominated debt securities of domestic and foreign issuers, which are
rated at least "BBB" by "S&P" or "Baa" by Moody's (except with respect to
investments in commercial paper which will consist only of direct obligations
that at the time of purchase are rated in the highest rating category by Moody's
or S&P) or, if unrated, are determined to be of comparable quality by the
Adviser, or in index options when it believes they hold less risk or greater
potential for capital appreciation than equity securities. Such investments are
made without regard to the remaining maturities of such securities. The SmallCap
Fund may invest up to 10% of its total assets in debt securities (other than
commercial paper) that are rated or, if unrated, determined to be below
investment grade. (Investment grade debt securities are those which are rated at
least "BBB" by S&P or "Baa" by Moody's). These investments generally carry a
high degree of risk and are sometimes referred to as "high yield, high risk"
securities by the investment community (see "Lower Rated Securities" below for
more complete information). The Fund may invest up to 15% of the value of its
net assets in illiquid securities, (see "Illiquid Securities" below). The
SmallCap Fund may invest without limit in U.S. Government securities,
certificates of deposit, bankers' acceptances and other short-term debt
instruments or high quality corporate bonds, and repurchase agreements in
respect of the foregoing as a temporary "defensive" measure as deemed advisable
by the Adviser. The Adviser will utilize a disciplined investment approach to
identify companies that have above average sales and earnings growth prospects
or otherwise improving fundamentals captured on the balance sheet given the
current status of the economic and business cycles on selecting the SmallCap
Fund's securities. Fundamental analysis and computer-aided quantitative analysis
are used to identify companies with attractive fundamental investment
characteristics such as growth potential and earnings growth. Investing in small
capitalization stocks may involve greater risk than investing in medium and
large capitalization stocks, since they can be subject to more abrupt or erratic
movements in price. The Fund may invest in relatively new or unseasoned
companies, which are in their early stages of development, or small companies
positioned in new and emerging industries. Securities of small and unseasoned
companies present greater risks than securities of larger, more established
companies. The companies in which the SmallCap Fund may invest may have
relatively small revenues and limited product lines, and may have a small share
of the market for their products or services. Small companies may lack depth of
management. They may be unable to internally generate funds necessary for growth
or potential development or to generate such funds through external financing on
favorable terms. They may be developing or marketing new products or services
for which markets are not yet established and may never become established. Due
to these and other factors, small companies may incur significant losses, and
investments in such companies are therefore speculative. There can be no
assurance that the SmallCap Fund will achieve its investment objective.

THE REALTY FUND -- The Realty Fund will seek to achieve its investment
objective by investing at least 65% of the Fund's total assets, under normal
circumstances as determined by the Adviser, in the securities of

9
<PAGE> 45

publicly traded real estate investment trusts ("REITs") and real estate
operating companies. The Fund's investments will be restricted to securities
with a market capitalization (defined as shares outstanding times current market
price) of a minimum of $50 million at the time of the Fund's initial investment.
The Fund may invest in equity REITs, mortgage REITs and hybrid REITs and other
types of real estate securities such as publicly traded common stock, preferred
stock, limited partnerships (including real estate master limited partnerships),
rights or warrants to purchase common stock or convertible securities of
corporations engaged in real estate development, as well as companies whose
financial prospects are deemed by the Adviser to be real estate oriented (e.g.,
a construction company) and consistent with the Fund's investment objectives.
The Fund may invest up to 25% of its total assets in foreign real estate
securities. The Realty Fund also may invest, in normal circumstances, up to 35%
of its total assets in domestic and foreign debt securities and equity
securities, including preferred stock and convertible securities, of issuers
engaged in businesses other than real estate. The Fund may invest up to 15% of
the value of its net assets in illiquid securities (see "Illiquid Securities"
below). The Realty Fund will not purchase direct interests in real estate. The
Realty Fund may invest without limit in U.S. Government securities, certificates
of deposit, bankers' acceptances and other short-term debt instruments or high
quality corporate bonds, and repurchase agreements in respect of the foregoing
as a temporary "defensive" measure as deemed advisable by the Adviser. The
Adviser will utilize a combination of fundamental and quantitative techniques to
identify real estate securities for investment that meet various criteria,
including various financial, geographical and strategic criteria as appropriate
in light of the then current status of the economic and business cycles. Based
on a weighting of the various criteria, securities are to be integrated into the
Fund's portfolio according to their contribution to the portfolio's overall
investment characteristics. The Fund's portfolio will be diversified across
regional, strategic, and financial parameters as deemed appropriate by the
Adviser. There can be no assurance that the Realty Fund will achieve its
investment objective. See "Real Estate Investment Trusts" below for more
complete information, including risk considerations.

To achieve its investment objective, the Intermediate Bond Fund invests
primarily in a diversified portfolio of investment grade, U.S. dollar or foreign
currency denominated bonds of domestic and foreign issuers. The Fund's portfolio
consists of bonds issued by both corporate and government entities. In pursuing
its investment objective, the Intermediate Bond Fund may also invest in other
types of investment grade debt securities, including debentures, notes,
convertible debt securities, municipal securities, mortgage-related securities,
and other collateralized securities that are backed by a pool of assets, such as
loans or receivables which generate cash flow to cover the payments due on the
collateralized securities, as well as zero coupon and payment in kind
securities. The Intermediate Bond Fund's portfolio, consisting primarily of
investment grade debt securities, will include bonds rated "BBB" or better by
S&P or "Baa" or better by Moody's, commercial paper rated "A-2" or better by S&P
or "P-2" or better by Moody's, mortgage and asset-backed securities rated "AA"
or better by S&P or "Aa" or better by Moody's and other investment grade-rated
debt securities or those which are unrated but determined to be of comparable
quality by the Adviser. The Intermediate Bond Fund may invest in preferred
stock, real estate investment trusts (REITs) or other equity securities
including securities of foreign issuers although it does not expect to invest
more than 25% of its assets in securities of foreign issuers.

10
<PAGE> 46

Although the lowest rated investment grade securities and those which are
unrated in the Intermediate Bond Fund's portfolio may produce a higher return,
they are subject to a greater degree of market fluctuation and credit risks than
the high quality securities in which the Fund may invest and may be regarded as
having speculative characteristics as well. The Intermediate Bond Fund may also
invest up to 10% of its total assets in debt securities that are rated or, if
unrated, determined to be below investment grade. These investments generally
carry a high degree of risk and are sometimes referred to as "high yield, high
risk" securities by the investment community (see "Lower Rated Securities" below
for more complete information).

DESCRIPTION OF SECURITIES AND OTHER INVESTMENT PRACTICES

CONVERTIBLE SECURITIES (THE EQUITY FUND, THE BALANCED FUND, THE SMALLCAP
FUND AND THE REALTY FUND) -- A convertible security is a fixed-income security,
such as a bond or preferred stock, which may be converted at a stated price
within a specified period of time into a specified number of shares of common
stock of the same or a different issuer. Convertible securities are senior to
common stock in a corporation's capital structure, but usually are subordinated
to non-convertible debt securities. While providing a fixed income stream
(generally higher in yield than the income derivable from a common stock but
lower than that afforded by a similar non-convertible debt security), a
convertible security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible.

11
<PAGE> 47

REAL ESTATE INVESTMENT TRUSTS (ALL FUNDS) -- The Funds may invest in the
securities of real estate investment trusts ("REITs"). A REIT is a pooled
investment vehicle that is organized as a corporation or business trust which
invests primarily in income producing real estate or real estate related loans
or interests. REITs are generally classified as equity REITs, mortgage REITs or
a combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. REITs involve risks similar to those associated with
investing in common stock (i.e., securities market risks) and risks associated
with investing in the real estate industry in general: declines in real estate
value, general and local economic conditions, overbuilding and competition,
property tax and operating expense increases, changes in zoning laws, casualty
losses, variations in rental income, costs related to environmental problems and
increases in interest rates. REITs (especially mortgage REITs) are subject to
interest rate risks. In addition to these risks, equity REITs may be affected by
changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of any credit extended. Further,
equity and mortgage REITs are dependent upon management skills and generally may
not be diversified. Equity and mortgage REITs are also subject to heavy cash
flow dependency, defaults by borrowers and self-liquidation. In addition, equity
and mortgage REITS could possibly fail to qualify for tax free pass-through of
income under the Internal Revenue Code of 1986, as amended, or to maintain their
exemptions from registration under the Investment Company Act of 1940. The above
factors may also adversely affect a borrower's or a lessee's ability to meet its
obligations to the REIT. In the event of a default by a borrower or lessee, the
REIT may experience delays in enforcing its rights as a mortgagee or lessor and
may incur substantial costs associated with protecting its investments.
Investors in REITs indirectly bear a proportionate share of expenses incurred by
the REITs. See "Investment Objectives and Management Policies -- Real Estate
Investment Securities" in the Statement of Additional Information for more
details on REITs.

12
<PAGE> 48

government securities dealers reporting to the Federal Reserve Bank of New York,
with respect to highest rated securities of the type in which a Fund may invest.
It will also require that the repurchase agreement be at all times fully
collateralized in an amount at least equal to the repurchase price including
accrued interest earned on the underlying securities, and that the underlying
securities be marked to market every business day to assure that the repurchase
agreement remains fully collateralized. Certain costs may be incurred by a Fund
in connection with the sale of the securities if the seller does not repurchase
them in accordance with the repurchase agreement. If bankruptcy proceedings are
commenced with respect to the seller of the securities, realization on the
securities by the Fund may be delayed or limited. A Fund will consider on an
ongoing basis the creditworthiness of the institutions with which it enters into
repurchase agreements.

OTHER MUTUAL FUNDS (ALL FUNDS) -- Each Fund may invest in shares of other
management investment companies, subject to the limitations of the 1940 Act and
subject to such investments being consistent with the overall objective and
policies of the Fund making such investment, provided that any such purchases
will be limited to short-term investments in shares of unaffiliated investment
companies. The purchase of securities of other mutual funds results in
duplication of expenses such that investors indirectly bear a proportionate
share of the expenses of such mutual funds including operating costs, and
investment advisory and administrative fees.

CORPORATE DEBT SECURITIES (ALL FUNDS) -- A Fund's investments in corporate
debt may include U.S. dollar or foreign currency denominated corporate bonds,
debentures, notes and other similar corporate debt instruments of domestic and
foreign issuers, which meet the previously disclosed minimum ratings and
maturity criteria established for each Fund under the direction of the Board of
Trustees and the Adviser or, if unrated, are in the Adviser's opinion comparable
in quality to rated corporate debt securities in which each Fund may invest. The
rate of return or return of principal on some debt obligations in which the
Funds may invest may be linked or indexed to the level of exchange rates between
the U.S. dollar and a foreign currency or currencies.

13
<PAGE> 49

a letter of credit or other obligation issued by a financial institution. The
purchase price is ordinarily par plus accrued and unpaid interest. Generally,
the remarketing agent will adjust the interest rate every seven days (or at
other specified intervals) in order to maintain the interest rate of the
prevailing rate for securities with a seven-day or other designated maturity. A
Fund's investment in demand instruments which provide that the Fund will not
receive the principal note amount within seven days' notice, in combination with
the Fund's other investments which are not readily marketable, will be limited
to an aggregate total of 10% of that Fund's net assets.

Securities purchased on a when-issued or delayed-delivery basis and certain
other securities held in a Fund's portfolio are subject to changes in value
(both generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a
when-issued or delayed-delivery basis may expose a Fund to the risk that such
fluctuations will occur prior to their actual delivery. Purchasing securities on
a when-issued or delayed-delivery basis can involve an additional risk that the
yield available in the market when the delivery takes place actually may be
higher than that obtained in the transaction itself. A segregated account of a
Fund consisting of cash or other liquid securities at least equal at all times
to the amount of the when-issued commitments will be established and maintained
at the Fund's custodian bank.

14
<PAGE> 50

Fund, Balanced Fund, SmallCap Fund and Realty Fund may invest directly in
foreign equity securities and in securities represented by European Depository
Receipts ("EDRs") or American Depository Receipts ("ADRs"). ADRs are
dollar-denominated receipts generally issued by domestic banks, which represent
the deposit with the bank of a security of a foreign issuer, and which are
publicly traded on exchanges or over-the-counter in the United States. EDRs are
receipts similar to ADRs and are issued and traded in Europe.

In addition, with respect to all ADRs and EDRs, there is always the risk of
loss due to currency fluctuations.

ZERO COUPON AND PAYMENT IN KIND SECURITIES (THE BALANCED FUND AND THE
INTERMEDIATE BOND FUND) -- A Fund may invest in zero coupon bonds, deferred
interest bonds and bonds on which the interest is payable in kind ("PIK
securities"). Zero coupon and deferred interest bonds are debt obligations which
are issued at a significant discount from face value. The discount approximates
the total amount of interest the bonds will accrue and compound over the period
until maturity or the first interest accrual date at a rate of interest
reflecting the market rate of the security at the time of issuance. While zero
coupon bonds do not require the periodic payment of interest, deferred interest
bonds provide for a period of delay before the regular payment of interest
begins. Although this period of delay is different for each deferred interest
bond, a typical period is approximately one- third of the bond's term to
maturity. PIK securities are debt obligations which provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of return
to attract investors who are willing to defer receipt of such cash. Such
investments experience greater volatility in market value due to changes in
interest rates than debt obligations which provide for regular payments of
interest. A Fund will accrue income on such investments based on an effective
interest method, which is distributable to shareholders and which, because no
cash is received at the time of accrual, may require the liquidation of other
portfolio securities to satisfy the Fund's distribution obligations. As a
result, a Fund may have to sell securities at a time when it may be
disadvantageous to do so.

15
<PAGE> 51

susceptible to real and perceived adverse economic or industry conditions than
is the case of higher rated securities. The Funds are dependent on the Adviser's
judgment, analysis and experience in the evaluation of high yield obligations.
In evaluating the creditworthiness of a particular issue, whether rated or
unrated, the Adviser will normally take into consideration, among other things,
the issuer's financial resources, its sensitivity to economic conditions and
trends, the operating history of the issuer, the ability of the issuer's
management and regulatory matters. The Adviser will attempt to reduce the risks
of investing in lower rated or unrated obligations through active portfolio
management, diversification, credit analysis and attention to current
developments and trends in the economy and the financial markets. The Funds will
also take such action as they consider appropriate in the event of anticipated
financial difficulties, default or bankruptcy of the issuers of any such
obligation.

DERIVATIVES

The Funds may invest in derivative securities as described below, however,
none of the Funds have a present intention to utilize one or more of the various
practices such that five percent or more of a Fund's net assets will be at risk
with respect to derivative practices. The successful use by a Fund of
derivatives is subject to the Adviser's ability to predict correctly movements
in one or more underlying instruments, indexes, stocks, the market generally or
a particular industry. The use of derivatives requires different skills and
techniques than predicting changes in the price of individual stocks. There can
be no assurance of a Fund's successful use of derivatives if and when utilized.
See "Statement of Additional Information" for more information on derivatives,
including risk considerations.

CALL AND PUT OPTIONS ON SPECIFIC SECURITIES (THE EQUITY FUND, THE BALANCED
FUND, THE SMALLCAP FUND AND THE REALTY FUND) -- A Fund may invest up to 5% of
its assets, represented by the premium paid, in the purchase of call and put
options in respect of specific securities. A Fund may write covered call and put
option contracts to the extent of 10% of the value of its net assets at the time
such option contracts are written. A call option gives the purchaser of the
option the right to buy, and obligates the writer to sell, the underlying
security at the exercise price at any time during the option period. Conversely,
a put option gives the purchaser of the option the right to sell, and obligates
the writer to buy, the underlying security at the exercise price at any time
during the option period.

STOCK INDEX OPTIONS (THE EQUITY FUND, THE BALANCED FUND, THE SMALLCAP FUND
AND THE REALTY FUND) -- A Fund may purchase and write put and call options on
stock indexes listed on national securities exchanges as an investment vehicle
for the purpose of realizing its investment objectives or for the purpose of
hedging its portfolio. A stock index fluctuates with changes in the market
values of the stocks included in the index. Should a Fund seek to engage in
transactions concerning put and call options on stock indexes, options would be
purchased or written with respect to not more than 25% of the value of the
Fund's net assets.

16
<PAGE> 52

STOCK INDEX FUTURES (THE EQUITY FUND, THE BALANCED FUND, THE SMALLCAP FUND
AND THE REALTY FUND) -- A Fund may purchase and sell stock index futures
contracts. A stock index future obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. A Fund will
intend to purchase and sell futures contracts on the stock index for which it
can obtain the best price with consideration also given to liquidity. A Fund may
not purchase or sell stock index futures contracts if, immediately thereafter,
more than 25% of its net assets would be hedged.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (ALL FUNDS) -- A Fund may enter
into forward foreign currency exchange contracts for hedging and non-hedging
purposes. A forward foreign currency exchange contract is a contract
individually negotiated and privately traded by currency traders and their
customers. A forward contract involves an obligation to purchase or sell a
specific currency for an agreed price at a future date, which may be any fixed
number of days from the date of the contract. A Fund may engage in cross-hedging
by using forward contracts in one currency to hedge against fluctuations in the
value of securities denominated in a different currency. The purpose of entering
into forward currency contracts for hedging purposes is to minimize the risk to
a Fund from adverse changes in the relationship between the U.S. Dollar and
foreign currencies.

17
<PAGE> 53

lost. Like other fixed-income securities, when interest rates rise, the value of
a mortgage-related security generally will decline and generally may also
increase the inherent volatility of the mortgage-related security by effectively
converting short-term debt instruments into long-term debt instruments; however,
when interest rates decline, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed-income securities.
In recognition of this prepayment risk to investors, the Public Securities
Association (the "PSA") has standardized the method of measuring the rate of
mortgage loan principal prepayments. The PSA formula, the Constant Prepayment
Rate (the "CPR") or other similar models that are standard in the industry will
be used by a Fund in calculating maturity for purposes of its investment in
mortgage-related securities.

OTHER ASSET-BACKED SECURITIES (THE BALANCED FUND AND THE INTERMEDIATE BOND
FUND) -- Other as-set-backed securities (unrelated to mortgage loans) have been
offered to investors, such as Certificates for Automobile Receivables
("CARS(SM)"). CARS(SM) represent undivided fractional interests in a trust
("trust") whose assets consist of a pool of motor vehicle retail installment
sales contracts and security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS(SM) are "passed through" monthly to
certificate holders and are guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution unaffiliated
with the trustee or originator of the trust or by the existence of a
subordinated class of securities. Underlying sales contracts are subject to
prepayment, which may reduce the overall return to certificate holders. If the
letter of credit is exhausted, certificate holders may also experience delays in
payment or losses on CARS(SM) if the full amounts due on underlying sales
contracts are not realized by the trust because of unanticipated legal or
administrative costs of enforcing the contracts, or because of depreciation,
damage or loss of the vehicles securing the contracts, or other factors. For
asset-backed securities, the industry standard uses a principal prepayment
model, the ABS model, which is similar to the PSA described previously under
"Mortgage-Related Securities". Either the PSA model, the ABS model or other
similar models that are standard in the industry will be used by a Fund in
calculating maturity for purposes of its investment in asset-backed securities.

18
<PAGE> 54

CERTAIN FUNDAMENTAL POLICIES (ALL FUNDS, EXCEPT AS NOTED BELOW) -- Each
Fund (i) may borrow money from banks, but only for temporary or emergency (not
leveraging) purposes, in an amount up to 5% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made; (ii) may pledge, hypothecate, mortgage or otherwise encumber its assets,
but only in an amount up to 10% of the value of its total assets to secure
borrowings for temporary or emergency purposes, or up to 20% in connection with
the purchase and sale of put and call options; (iii) may invest up to 5% of the
value of its total assets in the securities of any one issuer (This restriction
applies only with respect to 75% of the total assets of each Fund; (iv) may
invest up to 25% of its total assets in any single industry; and (v) may invest
up to 10% of its total assets in time deposits maturing from two business days
through seven calendar days. The Equity Fund may invest up to 10% of its net
assets in securities that have not been registered under the Securities Act of
1933, as amended, and therefore are subject to restrictions on resale, in
repurchase agreements providing for settlement in more than seven days after
notice and in securities that are not readily marketable (including those
options in respect of specific securities that are not traded on a national
securities exchange, and the underlying security, which are not readily
marketable). Subject to this limitation, the Equity Fund may invest in
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 which have been determined to be liquid by the Fund's Board of Trustees
based upon the trading markets for the securities. Each of the other Funds
excluding the SmallCap and Realty Fund may invest up to 10% of its net assets in
repurchase agreements providing for settlement in more than seven days after
notice and in securities that are not readily marketable. Included in this
limitation are "restricted" securities and any other assets for which an active
and substantial market does not exist at the time of purchase or subsequent
valuation. Restricted securities for purposes of this limitation do not include
investments by these Funds in securities eligible for resale pursuant to Rule
144A of the Securities Act of 1933 which have been determined to be liquid by
the Fund's Board of Trustees based upon the trading markets for the securities
(see "Investment Objectives and Management Policies -- Rule 144A Securities" in
the Statement of Additional Information for further details). This paragraph
describes fundamental policies that cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940) of each
Fund's outstanding voting shares. See "Investment Objectives and Management
Policies -- Investment Restrictions" in the Statement of Additional Information.

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<PAGE> 55

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER AND ADMINISTRATOR

Gabelli Advisers LLC (formerly Teton Advisers LLC prior to November 7,
1997), located at One Corporate Center, Rye, New York 10580-1434, is adviser to
the Funds. The Adviser, formed in 1994, is a Texas limited liability company.
Gabelli and its affiliates own a majority of the Adviser. Gabelli and Gabelli
Advisers are registered investment advisers. The Adviser has entered into a
Sub-Advisory Agreement with Westwood. Under the Sub-Advisory Agreement, the
Adviser pays Westwood out of its advisory fees with respect to the Funds a fee
computed daily and payable monthly in an amount equal on an annualized basis to
the greater of (i) $150,000 per year on an aggregate basis for all the Funds or
(ii) 35% of the net revenues to the Adviser from the Funds. Westwood Management
Corporation., formed in 1983 and located at 300 Crescent Court, Suite 1320,
Dallas, TX 75201, is a registered investment adviser managing, as of September
30, 1997, an aggregate of approximately $900 million in separate accounts,
primarily corporate pension funds. Westwood Management Corporation is a wholly
owned subsidiary of Southwest Securities Group, Inc., a Dallas based securities
firm. Susan M. Byrne, President of the Sub-Adviser since 1983, is responsible
for the day-to-day management of the Equity Fund and a team manager for the
Realty Fund. Patricia R. Fraze, Senior Vice President of the Sub-Adviser since
1992, is a co-manager along with Ms. Byrne, for the Balanced Fund's portfolio.
Ms. Fraze joined the Sub-Adviser in 1990. Lynda Calkin, Senior Vice President of
the Sub-Advisor is responsible for the day-to-day management of the SmallCap
Fund. Mr. Douglas Lehmann, Vice President of the Sub-Adviser since 1994, is
responsible for the day-to-day management of the Intermediate Bond Funds'
portfolio. Prior to 1994, Mr. Lehmann was a special trader for First New York
Securities (beginning 1993) and Vice President of and Special Trader for Lehman
Brothers (beginning 1989).

Susan M. Byrne is responsible for the day-to-day management of a composite
of separate private accounts investing in REITs and other types of real estate
securities managed by Westwood Management Corporation. The investment returns
below are actual returns of the Westwood Management Corporation REIT Composite
of separate accounts which are managed in an investment style substantially
similar to the Realty Fund.

WESTWOOD REIT COMPOSITE
ANNUALIZED RATES OF RETURN FOR
PERIODS ENDING SEPTEMBER 30, 1997
-------------------------------------------------

<TABLE>
<CAPTION>
WESTWOOD REIT NATIONAL ASSOCIATION OF
COMPOSITE REIT INDEX
------------- -----------------------
<S> <C> <C>
One (1) Year (ended September 30, 1997).................... 44.9% 40.5%
Since Inception (July 1, 1995)............................. 31.2% 28.0%
</TABLE>

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<PAGE> 56

The Westwood REIT Composite reflects reinvestment of dividends and
distributions and is calculated net of estimated Realty Fund fees as set forth
in the Fee Table in this Prospectus. The National Association of REIT Index is
an unmanaged index which reflects reinvestment of dividends and distributions
but does not include any commissions or fees that would be paid by an investor
purchasing the securities it represents. Private accounts are not subject to
certain investment limitations, diversification requirements, and other
restrictions imposed by the 1940 Act and the U.S. Internal Revenue Code which,
if applicable, may have adversely affected performance. As a result, portfolio
management strategies used on Westwood's REIT Composite and those for the Realty
Fund may vary. This performance does not represent historical performance of the
Realty Fund which is newly organized and has no performance of its own. This
performance should not be interpreted as indicative of future performance of the
Realty Fund which may be higher or lower than that shown. Past performance is no
guarantee of future results.

Lynda Calkin is responsible for the day-to-day management of a composite of
separate private accounts investing in small capitalization equity securities
managed by Westwood Management Corporation. The investment returns below are
actual returns of the Westwood Management Corporation SmallCap Composite of
separate accounts which are managed in an investment style substantially similar
to the SmallCap Fund.

WESTWOOD SMALLCAP COMPOSITE
ANNUALIZED RATES OF RETURN FOR
PERIODS ENDING SEPTEMBER 30, 1997
-------------------------------------------------

<TABLE>
<CAPTION>
WESTWOOD SMALLCAP
COMPOSITE RUSSELL 2000 INDEX
----------------- ------------------
<S> <C> <C>
One (1) Year (ended September 30, 1997).................... 53.2% 33.2%
Since Inception (October 1, 1994).......................... 41.5% 23.0%
</TABLE>

The Gabelli Westwood SmallCap Composite reflects reinvestment of dividends
and distributions and is calculated net of estimated SmallCap Fund fees as set
forth in the Fee Table in this Prospectus. The Russell 2000 Index is an
unmanaged index which reflects reinvestment of dividends and distributions, but
does not include any commissions or fees that would be paid by an investor
purchasing the securities it represents. Private accounts are not subject to
certain investment limitations, diversification requirements, and other
restrictions imposed by the 1940 Act and the U.S. Internal Revenue Code which,
if applicable, may have adversely affected performance. As a result, portfolio
management strategies used on Westwood's SmallCap Composite and those for the
Fund may vary. This performance does not represent historical performance of the
SmallCap Fund. This performance should not be interpreted as indicative of
future performance of the SmallCap Fund which may be higher or lower than that
shown. Past performance is no guarantee of future results.

The Adviser is responsible for overseeing Westwood's activities. The
Investment Advisory Agreement provides that the Adviser will supervise and
manage each Fund's investment activities on a discretionary basis and oversee
the administration of each Fund's business and affairs. In this connection the
Adviser is responsible for maintaining certain of the Funds' books and records
and performing other administrative aspects of the Funds' operations to the
extent not performed by the Funds' custodians, transfer agents and dividend
disbursing agents. The Adviser is permitted to subcontract at its own expense
those administrative responsibilities to persons it believes are qualified to
perform such services. As compensation for its services and related expenses,
the Trust will pay the Adviser a fee computed daily and payable monthly in an
amount equal on an annualized basis to 1.0% for the Equity Fund, 1.0% for the
SmallCap Fund, 1.0% for the Realty Fund, .60% for the Intermediate Bond Fund and
.75% for the Balanced Fund of each Fund's daily average net asset value. The
fees paid by the Trust for the Equity Fund, the SmallCap Fund, Realty Fund, and
the

21
<PAGE> 57

Balanced Fund are higher than the fees paid by most funds for such services and
related expenses. The Funds will also pay the Adviser or Distributor separately
for any costs and expenses incurred in connection with distribution of the
classes of each Fund's shares in accordance with the terms of their respective
Plans of Distribution adopted for such classes pursuant to Rule 12b-1 under the
1940 Act.

The Adviser has retained at its own cost BISYS Fund Services, Inc.
("BISYS") (the "Sub-Administrator") to provide administrative services with
respect to the Funds. BISYS has its main office at 3435 Stelzer Road, Columbus,
Ohio 43219. BISYS is a registered transfer agent and broker-dealer and acts as
administrator and general distribution agent for certain other investment
companies.

DISTRIBUTOR

The Funds' shareholders have approved a Plan of Distribution for the Retail
Class shares pursuant to Rule 12b-1 (the "Retail 12b-1 Plan"). The Retail 12b-1
Plan authorizes payments by the Funds in connection with the distribution of the
Funds' Retail Class shares at an annual rate, of up to .25% of the Funds'
average daily net assets. Payments will be accrued daily and paid monthly or at
such other intervals as the Board may determine and may be paid in advance of
actual billing.

Payments may be made by the Funds under the Retail 12b-1 Plan for the
purpose of financing any activity primarily intended to result in the sale of
the Retail Class shares of the Funds as determined by the Board of Trustees. To
the extent any activity is one which the Funds may finance without a plan of
distribution, the Funds may also make payments to finance such activity outside
of the Retail 12b-1 Plan and not be subject to its limitations. On August 8,
1997, the Trustees of the Funds approved an amendment to the Plan such that
payments under the Plan are not solely dependent on distribution expenses
actually incurred by the Distributor.

The Funds have entered into a Distribution Agreement with the Distributor
authorizing reimbursement of expenses (including overhead) incurred by the
Distributor and its affiliates as described above. Distribution activities
include, without limitation, advertising the Funds; compensating underwriters,
dealers, brokers, banks and other selling entities and sales and marketing
personnel of any of them for sales of shares of the Funds, 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 of any of them (including the Adviser and its personnel) for providing
services to shareholders of the Funds relating to their investment in the Funds,
including assistance in connection with inquiries relating to shareholder
accounts; the production and dissemination of prospectuses (including statements
of additional information) of the Funds and the preparation, production and
dissemination of sales, marketing and shareholder servicing materials, ordinary
or capital expenses, such as equipment, rent, fixtures, salaries, bonuses,
reporting and recordkeeping and third party consultancy or similar direct and
indirect expenses relating to any activity for which payment is authorized by
the Board of Trustees. To the extent any of these payments is based on
allocations by the Distributor, the Funds may be considered to be participating
in joint distribution activities with other funds distributed by the
Distributor. Various federal and state laws prohibit national banks and some
state-chartered commercial banks from underwriting or dealing in the Funds'
Shares. In the unlikely event that a court were to find that these laws prevent
such banks from providing the services described above, the Funds would seek
alternative providers and expects that shareholders would not experience any
disadvantage.

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<PAGE> 58

PURCHASE OF SHARES

Retail Class Shares are no-load. The minimum initial investment is $1,000.
There is no minimum initial investment for accounts establishing an Automatic
Investment Plan. Custodial accounts for minor children are also available. There
is no minimum for subsequent investments. Shares of the Funds are sold at the
public offering price based on the net asset value per share next determined
after receipt of an order by the Funds' Distributor or transfer agent in proper
form with accompanying check or bank wire payments arrangements satisfactory to
the Funds. Although most shareholders elect not to receive stock certificates,
certificates for whole shares only can be obtained on specific written request
to the Transfer Agent.

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

Prospectuses, sales material and subscription order forms ("applications")
may be obtained from the Distributor. The Funds and the Distributor reserve the
right in their sole discretion (1) to suspend the offering of the Funds' shares
and (2) to reject purchase orders when, in the judgment of the Funds'
management, such rejection is in the best interest of the Funds. The calculation
of net asset value per share is performed at 4:15 p.m. for each Fund on each day
that the New York Stock Exchange is open for business. Net asset value per share
is computed by dividing the value of a Fund's net assets (i.e., the value of its
assets less its liabilities) by the total number of shares outstanding. All
expenses of the Funds are accrued daily and taken into account for the purpose
of determining net asset value.

In determining net asset value securities listed on an exchange are valued
on the basis of the last sale price prior to the time the valuation is made. If
there has been no sale since the immediately previous valuation, then the
current bid price is used. Quotations are taken for the exchange where the
security is primarily traded. Portfolio securities which are primarily traded on
foreign exchanges may be valued with the assistance of a pricing service and are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
foreign security is valued is likely to have changed such value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees. Over-the-counter securities
are valued on the basis of the bid price at the close of business on each
business day. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by or at the direction of
the Board of Trustees. Notwithstanding the above, bonds and other fixed-income
securities are valued by using market quotations and may be valued on the basis
of prices provided by a pricing service approved by the Board of Trustees. All
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and asked prices of such
currencies against U.S. dollars as last quoted by any major bank.

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<PAGE> 59

MAIL

To make an initial purchase by mail, send a completed application with a
check for the amount of the investment payable to "The Gabelli Westwood Funds,"
to: THE GABELLI WESTWOOD FUNDS, P.O. BOX 8308, BOSTON, MA 02266-8308. You may
also personally deliver a check made payable to "The Gabelli Westwood Funds"
along with a completed application to: THE GABELLI WESTWOOD FUNDS, THE BFDS
BUILDING, 7TH FLOOR, TWO HERITAGE DRIVE, NORTH QUINCY, MA 02171.

Checks will be accepted if drawn in U.S. currency on a domestic bank for
less than $100,000. U.S. dollar checks drawn against a non-U.S. bank may be
subject to collection delays and will be accepted only upon actual receipt of
funds by the Transfer Agent. Bank collection fees may apply. Bank or certified
checks for investments of $100,000 or more will be required unless the investor
elects to invest by bank wire as described below. Third party checks are not
accepted.

BANK WIRE

To initially purchase shares of the Funds using the wire system for
transmittal of money among banks, an investor should first telephone the Funds
at 1-800-GABELLI to obtain a new account number. The investor should instruct a
Federal Reserve System member bank to wire funds to:

State Street Bank and Trust Company
ABA #011-0000-28 REF DDA #99046187
Attn: Shareholder Services
Re: The Gabelli Westwood Funds
A/C #

- -------------------------------------------------------------------------
Account of (Registered Owner)
225 Franklin Street, Boston, MA
02110

For initial purchases by wire, the investor should promptly complete and
mail the application to the address shown above for mail purchases. There may be
a charge by your bank for transmitting the money by bank wire but State Street
Bank and Trust Company does not charge investors in the Funds for the receipt of
wire transfers. If you are planning to wire funds, it is suggested that you
instruct your bank early in the day so the wire transfer can be accomplished the
same day.

TELEPHONE INVESTMENT PLAN

You may purchase additional shares of the Funds by telephone through the
Automated Clearinghouse (ACH) system as long as your bank is a member of the ACH
system and you have a completed, approved Investment Plan application on file
with our Transfer Agent. The funding for your purchase will be automatically
deducted from the ACH eligible account you designate on the application. Your
investment will normally be credited to your Gabelli Westwood Fund account on
the first business day following your telephone request. Your request must be
received no later than 4:00 p.m. eastern time. There is a minimum of $100 for
each telephone investment. Any subsequent changes in banking information must be
submitted in writing and accompanied by a sample voided check. To initiate an
ACH purchase, please call 1-800-GABELLI. Fund shares purchased through the
Telephone or Automatic Investment Plan will not be available for redemption for
up to fifteen (15) days following the purchase date.

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<PAGE> 60

AUTOMATIC INVESTMENT PLAN

OTHER INVESTORS

No minimum initial investment is required for officers, directors or
full-time employees of the Funds, other investment companies managed by the
Sub-Adviser, the Adviser, the Administrator, the Distributor or their
affiliates, including members, of the "immediate family" of such individuals and
retirement plans and trusts for their benefit. The term "immediate family"
refers to spouses, children and grandchildren (adopted or natural), parents,
grandparents, siblings, a spouse's siblings, a sibling's spouse and a sibling's
children.

REDEMPTION OF SHARES

25
<PAGE> 61

To minimize expenses, the Funds reserve the right to redeem, upon not less
than 30 days notice, all shares of the Funds in an account (other than an IRA)
which as a result of shareholder redemption has a value below $500. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.

TELEPHONE REDEMPTION BY CHECK

BY BANK WIRE

The Funds accept telephone requests for wire redemption in excess of $1,000
(but subject to a $25,000 limitation) to a predesignated bank either on the
application or in a subsequent written authorization with the signature
guaranteed. The Funds accept signature guaranteed written requests for
redemption by bank wire without limitation. The proceeds are normally wired on
the following business day. Your bank must be either a member of the Federal
Reserve System or have a correspondent bank which is a member. Any change to the
banking information made at a later date must be submitted in writing with a
signature guarantee.

SYSTEMATIC WITHDRAWAL PLAN

EXCHANGE OF FUNDS SHARES

The Funds offer two convenient ways to exchange shares in a class of one
Fund for shares in a corresponding class of another fund managed by the Adviser
or an affiliate. Before engaging in an exchange

26
<PAGE> 62

transaction, a shareholder should read carefully the portions of this Prospectus
or the other Prospectus describing the fund into which the exchange will occur.
A shareholder may not exchange shares of a class of one Fund for shares of a
corresponding class of another fund if either are not legally qualified or
registered for sale in the state of the shareholder's residence. The minimum
amount for an initial exchange is $1,000. No minimum is required in subsequent
exchanges. The Trust may terminate or amend the terms of the exchange privilege
at any time upon 60 days' written notice to shareholders.

An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.

EXCHANGE BY MAIL

To exchange Fund shares by mail, simply send a letter of instruction to the
Distributor. The letter of instruction must include: (i) your account number;
(ii) the names of the Funds from which and into which you wish to exchange your
investment; (iii) the dollar or share amount you wish to exchange; and (iv) the
signatures of all registered owners or authorized parties. All signatures must
be guaranteed by a member of a national securities exchange or by a commercial
bank or trust company. Corporations, trusts, partnerships or other legal
entities will be required to furnish other documentation. Please call the Funds
for more information.

EXCHANGE BY TELEPHONE

To exchange Fund shares by telephone or if you have any questions, simply
call the Funds toll free at 1-800-GABELLI. You should be prepared to give the
telephone representative the following information; (i) your account number,
social security number and account registration; (ii) the names of the Funds
from which and into which you wish to exchange your investment; and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Funds. Telephone exchanges are available only if the
shareholder so indicates by checking the "yes" box on the Purchase Application.

RETIREMENT PLANS

The Funds have available a form of Traditional Individual Retirement
Account ("IRA") and a "Roth IRA" for investment in Fund shares which may be
obtained from the Distributor. The minimum investment required to open an IRA
for investment in shares of the Funds is $1,000 for an individual, except that
both the individual and his or her spouse may establish separate IRAs if their
combined investment is $1,250. There is no minimum for additional investment in
an IRA account. Investors who are self-employed may purchase shares of the Funds
through tax-deductible contributions to retirement plans for self-employed
persons, known as Keogh or HR 10 plans. The Funds do not currently act as
Sponsor for such plans. Fund

27
<PAGE> 63

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 investment for an individual under such plans is $1,000 and there is no
minimum for additional investments. Under the Internal Revenue Code of 1986 (the
"Code"), individuals may make wholly or partly tax deductible IRA contributions
of up to $2,000 annually ($4,000 maximum in the case of a married couple where
one spouse is not working and certain other conditions are met), 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. Beginning January 1, 1998, investors satisfying statutory income level
requirements may make non-deductible contributions up to $2,000 annually to a
Roth IRA, distributions from which are not subject to tax if a statutory five
year holding period requirement is satisfied. New for 1998, the Fund also makes
available education IRAs. Education IRAs permit eligible individuals to
contribute up to $500 per year per beneficiary under 18 years old. Distributions
from an education IRA are generally excluded from income when used for qualified
higher education expenses. Consult your tax advisor.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund has elected to be treated as and intends to qualify annually as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). The Funds did so qualify
for the previous taxable year and intend to continue to so qualify. By so
qualifying, each Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code. In addition, the Code subjects
regulated investment companies, such as the Funds, to a non-deductible 4% excise
tax in each calender year to the extent that such investment companies do not
distribute substantially all of their taxable investment income and capital
gain, generally determined on a calendar year basis and the one year period
ending October 31 of each calender year, respectively.

Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed by the Equity
Fund and the SmallCap Fund annually, and the Realty Fund and the Balanced Fund
quarterly. The Intermediate Bond Fund will declare distributions of such income
daily and pay those dividends monthly. Each Fund intends to distribute, at least
annually, substantially all net capital gains (the excess of net long-term
capital gains over net short-term capital losses). Shareholders will be advised
as to what portion of capital gains are to be treated as "mid-term" or
"long-term" with respect to the maximum tax rate for such gains (for
noncorporate shareholders, 28% for mid-term capital gains and 20% for long-term
capital gains (10% for noncorporate shareholders who are subject to the 15%
marginal tax bracket for ordinary income)). In determining amounts of capital
gains to be distributed, any capital loss carryovers from prior years will be
applied against capital gains to reduce the amount of distributions paid. In
addition, any losses incurred in the taxable year subsequent to October 31, will
be deferred to the next taxable year and used to reduce subsequent year
distributions (see "Dividends,

28
<PAGE> 64

Distributions and Taxes" in the Statement of Additional Information). You may
choose whether to receive dividends and distributions in cash or to reinvest in
additional shares of the class in which you are invested at the next determined
net asset value without a sales load.

It is anticipated that a portion of the ordinary income dividends paid by
the Equity Fund, the SmallCap Fund and the Balanced Fund will qualify for the
dividends-received deduction available to corporations. Shareholders will be
notified at the end of the year as to the amount of the dividends that qualify
for the dividends-received deduction.

Those Funds which may invest in securities of foreign issuers may be
subject to withholding and other similar income taxes imposed by a foreign
country.

PERFORMANCE INFORMATION

Quotations of "yield" for each Fund will be based on the investment income
per share during a particular 30-day (or one month) period (including dividends
and interest), less expenses accrued during the period ("net investment
income"), and will be computed by dividing net investment income by the maximum
public offering price per share on the last day of the period.

A Fund's average annual total return is expressed in terms of the average
annual compounded rate of return of a hypothetical investment in the Fund over
periods of one, five and ten years (up to the life of the Fund or for shorter
time periods depending upon the length of time during which the Fund has
operated), reflect the deduction of a proportional share of Fund expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid.

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<PAGE> 65

Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's Composite Stock Price Index, the Dow
Jones Industrial Average, the Russell 2000 Index, Lehman Brothers
Corporate/Government Bond Index, National Association of REIT Index, indices
prepared by Lipper Analytical Services, Morningstar ratings and other entities
or organizations which track the performance of investment companies.

GENERAL INFORMATION

Each Fund is comprised of two classes of shares -- the "Retail Class" and
the "Service Class" (the SmallCap Fund and Realty Fund will currently offer only
Retail Class shares). The classes have identical rights with respect to the
series portfolio of which they are a part; however, there are certain matters
affecting one class but not another, such as the existence of a load and the
amount of permissible payments under a distribution plan, which may be
considered to create a preference. On all such matters, shareholders vote as a
class, and not by series. Service Class shares are sold to investors who
purchase their shares through an entity that has signed a Dealer Agreement with
the Distributor for such shares. Retail Class shares are sold to all other
investors by dealers for certain retirement plans, through other special
programs and to those who contact the Fund directly or purchase shares through
an entity that has signed an agreement to offer the Retail Class shares (e.g.,
Charles Schwab & Co., Inc. or Fidelity Brokerage Services).

30
<PAGE> 66

its obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Trust, the shareholder paying such liability
will be entitled to reimbursement from the general assets of the Trust. The
Trustees intend to conduct the operations of the Trust in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Trust. As described under "Management of the Funds" in the
Statement of Additional Information, the Funds ordinarily will not hold
shareholder meetings; however, the Trustees are required to call a meeting for
the purpose of considering the removal of persons serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. Under the Trust Agreement, shareholders of
record of not less than two-thirds of the outstanding shares of the Trust may
remove a Trustee either by declaration in writing or by vote cast in person or
by proxy at a meeting called for such purpose. In connection with the calling of
such shareholder meetings, shareholders will be provided with communication
assistance.

State Street Bank and Trust Company and its affiliate, Boston Financial
Data Services, maintain a record of share ownership and sends to shareholders
confirmations and statements of account.

Shareholder inquiries may be made by writing to The Gabelli Westwood Funds
at One Corporate Center, Rye, New York 10580-1434, calling 1-800-GABELLI or
through the internet http://www.gabelli.com/ westwood, or email:
[email protected].

Upon request, Gabelli & Company, Inc. will provide without a charge, a
paper copy of this Prospectus to investors or their representatives who received
this Prospectus in an electronic format.

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION, AND IN THE FUNDS' OFFICIAL
SALES LITERATURE IN CONNECTION WITH THE OFFER OF FUND SHARES, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUNDS, ITS INVESTMENT ADVISER, DISTRIBUTOR, OR ANY
AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.

31
<PAGE> 67

THE GABELLI WESTWOOD FUNDS
One Corporate Center
Rye, New York 10580-1434
http://www.gabelli.com/westwood

GENERAL AND ACCOUNT INFORMATION:
1-(800) GABELLI
1-(800) 422-3554

Fax 1-(914) 921-5118

INVESTMENT ADVISER
Gabelli Advisers LLC
One Corporate Center
Rye, New York 10580-1434

INVESTMENT SUB-ADVISER
Westwood Management Corporation
300 Crescent Court
Suite 1320
Dallas, TX 75201

DISTRIBUTOR
Gabelli & Company, Inc.
One Corporate Center
Rye, New York 10580-1434

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

LEGAL COUNSEL
Battle Fowler LLP
75 East 55th Street
New York, New York 10022

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table............................. 2
Financial Highlights.................. 4
Description of the Funds and
Risk Considerations................. 6
Management of the Funds............... 20
Purchase of Shares.................... 23
Redemption of Shares.................. 25
Exchange of Funds Shares.............. 26
Retirement Plans...................... 27
Dividends, Distributions and Taxes.... 28
Performance Information............... 29
General Information................... 30
</TABLE>

THE

GABELLI

WESTWOOD

FUNDS

EQUITY FUND
BALANCED FUND

SMALLCAP EQUITY FUND
REALTY FUND
INTERMEDIATE BOND FUND
RETAIL CLASS
PROSPECTUS
----------------------------------------------

JANUARY 28, 1998

----------------------------------------------
<PAGE> 68

THE GABELLI WESTWOOD FUNDS

PART B

(STATEMENT OF ADDITIONAL INFORMATION)

JANUARY 28, 1998

The Gabelli Westwood Funds (the "Trust") is an open-end, diversified,
management investment company, known as a mutual fund, which currently consists
of five separate investment portfolios referred to as the Gabelli Westwood
Equity Fund (the "Equity Fund"), the Gabelli Westwood SmallCap Equity Fund (the
"SmallCap Fund"), the Gabelli Westwood Realty Fund (the "Realty Fund"), the
Gabelli Westwood Intermediate Bond Fund (the "Intermediate Bond Fund") and the
Gabelli Westwood Balanced Fund (the "Balanced Fund") (collectively, the
"Funds"). Each Fund is authorized to issue two separate classes of shares,
referred to as the "Service Class" and the "Retail Class". The SmallCap Fund and
the Realty Fund are currently offering only Retail Class shares.

This Statement of Additional Information provides information about both
classes of shares. It is not a prospectus, but supplements and should be read in
conjunction with the Funds' current Prospectus, dated January 28, 1998, as it
may be revised from time to time. To obtain a copy of the Funds' Prospectus,
please write to the Funds at One Corporate Center, Rye, New York, 10580, call
(800) GABELLI (1-800-422-3554) or via internet http://www.gabelli.com/westwood.

Gabelli Advisers LLC (formerly Teton Advisers LLC) (the "Adviser") serves
as the Funds' investment adviser and administrator. Westwood Management
Corporation (the "Sub-Adviser") serves as sub-adviser to the Funds.

Gabelli & Company, Inc. serves as the Funds' distributor (the
"Distributor").

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
General Information and History B-2
Investment Objectives and Management Policies B-2
Management of the Funds B-14
Investment Advisory and Other Services B-18
Purchase and Redemption of Shares B-21
Determination of Net Asset Value B-21
Shareholder Services B-22
Dividends, Distributions and Taxes B-22
Performance Information B-25
Information About the Funds B-27
Custodian, Transfer and Dividend Disbursing Agent, Counsel and Independent Accountants B-28
Appendix B-28
Financial Statements B-29
</TABLE>

<PAGE> 69

GENERAL INFORMATION AND HISTORY

The Adviser, which was organized in 1994, is a registered investment
adviser and is a subsidiary of Gabelli Funds, Inc. which was organized in 1980
and is currently a registered investment adviser to sixteen management
investment companies. The business address of Gabelli Funds, Inc. is One
Corporate Center, Rye, New York 10580-1434. GAMCO Investors, Inc. ("GAMCO"), a
majority owned subsidiary of Gabelli Funds, Inc., acts as investment adviser for
individuals, pension and profit sharing trusts, institutions and endowments. As
of September 30, 1997 GAMCO had aggregate assets in excess of $5.9 billion under
management.

On August 20, 1991, the Board of Trustees approved the change in the name
of the Trust from "The Westwood Fund" to "The Westwood Funds" and the name of
the Trust's initial series of shares from "The Westwood Fund" to "Westwood
Equity Fund". In addition, at the same time the Board authorized the designation
of three new series of shares of the Trust, "Westwood Intermediate Bond Fund",
"Westwood Cash Management Fund," and "Westwood Balanced Fund". The Board
authorized the designation of the "Westwood SmallCap Equity Fund" and "Westwood
Realty Fund" series shares of the Trust on February 25, 1997. On November 18,
1997, the Board of Trustees approved the change in the name of the Trust from
"The Westwood Funds" to "The Gabelli Westwood Funds" and names of each series to
include the name "Gabelli" before the name "Westwood" (i.e., "Gabelli Westwood
SmallCap Equity Fund").

The Trust operates a multi-class structure pursuant to Rule 18f-3 of the
Investment Company Act of 1940 and the Board of Trustees has authorized pursuant
thereto the designation of two separate classes of shares in each Fund referred
to as "Retail Class" and "Service Class" shares.

The Cash Management Fund has not commenced operations.

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "DESCRIPTION OF THE FUNDS AND
RISK CONSIDERATIONS".

The Funds will not (i) invest in real estate limited partnerships (except
the Realty Fund which may also invest in publicly traded master limited
partnerships), (ii) engage in the short-selling of securities, (iii) engage in
arbitrage, or (iv) as a fundamental policy, issue senior securities (collateral
arrangements with regard to initial and variation margin on futures and options
transactions shall not be considered the issuance of a senior security), except
as permitted by Investment Restriction No. 7 set forth under "Investment
Restrictions" below.

CERTIFICATES OF DEPOSIT (ALL FUNDS). Domestic commercial banks organized under
Federal law are supervised and examined by the Comptroller of the Currency and
are required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and examined by state
banking authorities but are members of the Federal Reserve System only if they
elect to join. In addition, state banks whose certificates of deposit (CDs) may
be purchased by the Funds are insured by the FDIC (although such insurance may
not be of material benefit to a Fund, depending upon the principal amount of the
CDs of each bank held by the Fund) and are subject to Federal examination and to
a substantial body of Federal law and regulation. As a result of Federal or
state laws and regulations, domestic banks, among other things, generally are
required to maintain specified levels of reserves, limited in the amounts which
they can loan to a single borrower and subject to other regulations designed to
promote financial soundness.
<PAGE> 70

The Funds may purchase CDs issued by banks, savings and loan associations
and similar institutions with less than one billion dollars in assets, which
have deposits insured by the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the FDIC, provided a Fund purchases any such CD
in a principal amount of no more than $100,000, which amount would be fully
insured by the FDIC. Interest payments on such a CD are not insured by the FDIC.
A Fund would not own more than one such CD per issuer.

INVESTMENT COMPANY SECURITIES (ALL FUNDS). Each Fund may purchase securities of
investment companies in the open market where no commission except the ordinary
broker's commission is paid, which purchases are limited to a maximum of (i) 3%
of the total voting stock of any one closed-end investment company, (ii) 5% of
the Fund's net assets with respect to any one closed-end investment company and
(iii) 10% of the Fund's net assets in the aggregate, or may receive such
securities as part of a merger or consolidation.

REAL ESTATE INVESTMENT SECURITIES (ALL FUNDS). The Funds may invest in REITs
and real estate operating companies, as well as other types of real estate
securities such as publicly traded common stock, preferred stock, limited
partnerships (including real estate master limited partnerships), rights or
warrants to purchase common stock or convertible securities of corporations
engaged in real estate development or companies whose financial prospects are
deemed by the Adviser to be real estate oriented and consistent with the Fund's
investment objectives. Investing in REITs involves certain unique risks in
addition to those risks associated with investing in the real estate industry in
general. Although the Funds will not invest directly in real estate, the Funds
may invest in securities of issuers primarily engaged in or related to the real
estate industry. Therefore, an investment in REITs or other real estate
securities is subject to certain risks associated with the direct ownership of
real estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; risks related to
general and local economic conditions; possible lack of availability of mortgage
funds; overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages resulting from,
environmental problems; casualty or condemnation losses; uninsured damages from
floods, earthquakes or other natural disasters; limitations on and variations in
rents; and changes in interest rates. To the extent that assets underlying the
REITs' investments are concentrated geographically, by property type or in
certain other respects, the REITs may be subject to certain of the foregoing
risks to a greater extent. Equity REITs may be affected by changes in the value
of the underlying property owned by the REITs, while mortgage REITs may be
affected by the quality of any credit extended. REITs are dependent upon
management skills, are not diversified, and are subject to heavy cash flow
dependency, default by borrowers and self-liquidation. REITs are also subject to
the possibilities of failing to qualify for tax-free pass-throughs of income
under the U.S. Internal Revenue Code and failing to maintain their exemptions
from registration under the 1940 Act.

REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investment in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
<PAGE> 71

Investing in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.

CALL AND PUT OPTIONS ON SECURITIES (THE EQUITY FUND, BALANCED FUND, SMALLCAP
FUND AND REALTY FUND). A Fund may engage in options transactions, such as
purchasing call and put options on securities and writing covered call and put
options on securities. The principal reason for writing covered call options is
to realize, through the receipt of premiums, a greater return than would be
realized on a Fund's portfolio securities alone. In return for a premium, the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the underlying
security. Similarly, the principal reason for writing covered put options is to
realize income in the form of premiums. The writer of a covered put option
accepts the risk of a decline in the price of the underlying security. The size
of the premiums that a Fund may receive may be adversely affected as new or
existing institutions, including other investment companies, engage in or
increase their option-writing activities.

Options written ordinarily will have expiration dates between one and nine
months from the date written. The exercise price of the options may be below,
equal to or above the market values of the underlying securities at the times
the options are written. In the case of call options, these exercise prices are
referred to as "in-the-money," "at-the-money" and "out-of-the money,"
respectively. A Fund may write (a) in-the-money call options when the Adviser
expects that the price of the underlying security will remain stable or decline
moderately during the option period, (b) at-the-money call options when the
Adviser expects that the price of the underlying security will remain stable or
advance moderately during the option period and (c) out-of-the-money call
options when the Adviser expects that the premiums received from writing the
call option plus the appreciation in market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of the
underlying security alone. In these circumstances, if the market price of the
underlying security declines and the security is sold at this lower price, the
amount of any realized loss will be offset wholly or in part by the premium
received. Out-of-the-money, at-the-money and in-the-money put options (the
reverse of call options as to the relation of exercise price to market price)
may be utilized in the same market environments that such call options are used
in equivalent transactions.

So long as a Fund's obligation as the writer of an option continues, the
Fund may be assigned an exercise notice by the broker-dealer through which the
option was sold, requiring the Fund to deliver, in the case of a call, the
underlying security against payment of the exercise price. This obligation
terminates when the option expires or the Fund effects a closing purchase
transaction. A Fund can no longer effect a closing purchase transaction with
respect to an option once it has been assigned an exercise notice. To secure its
obligation to deliver the underlying security when it writes a call option, or
to pay for the underlying security when it writes a put option, a Fund will be
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "Clearing
Corporation") and of the national securities exchange on which the option is
written.
<PAGE> 72

An options position may be closed out only where there exists a secondary
market for an option of the same series on a recognized national securities
exchange or in the over-the-counter market. Because of this fact and current
trading conditions, the Funds expect to purchase only call or put options issued
by the Clearing Corporation. The Funds expect to write options on national
securities exchanges and in the over-the-counter market.

While it may choose to do otherwise, a Fund generally purchases or writes
only those options for which the Adviser believes there is an active secondary
market so as to facilitate closing transactions. There is no assurance that
sufficient trading interest to create a liquid secondary market on a securities
exchange will exist for any particular option or at any particular time, and for
some options no such secondary market may exist. A liquid secondary market in an
option may cease to exist for a variety of reasons. In the past, for example,
higher than anticipated trading activity or order flow, or other unforeseen
events, at times have rendered certain of the facilities of the Clearing
Corporation and the national securities exchanges inadequate and resulted in the
institution of special procedures, such as trading rotations, restrictions on
certain types of orders or trading halts or suspensions in one or more options.
There can be no assurance that similar events, or events that may otherwise
interfere with the timely execution of customers' orders, will not recur. In
such event, it might not be possible to effect closing transactions in
particular options. If as a covered call option writer a Fund is unable to
effect a closing purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it delivers the
underlying security upon exercise.

A covered call option written by the Fund, which is a call option with
respect to which the Fund owns the underlying security, exposes the Fund during
the term of the option to possible loss of opportunity to realize appreciation
in the market price of the underlying security or to possible continued holding
of a security which might otherwise have been sold to protect against
depreciation in the market price of the security. A covered put option sold by a
Fund exposes the Fund during the term of the option to a decline in price of the
underlying security. A put option sold by a Fund is covered when, among other
things, cash, cash equivalents or U.S. Government securities or other liquid
debt securities are placed in a segregated account to fulfill the obligation
undertaken.

A Fund treats options in respect of specific securities that are not traded
on a national securities exchange, and the underlying security, as not readily
marketable and, therefore, subject to the limitations under "Certain Fundamental
Policies" below.

STOCK INDEX OPTIONS (THE EQUITY FUND, THE BALANCED FUND, THE SMALLCAP FUND, AND
THE REALTY FUND). A Fund may purchase and write put and call options on stock
indexes listed on national securities exchanges in order to realize its
investment objectives or for the purpose of hedging its portfolio. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Some stock index options are based on a broad market index such as the
New York Stock Exchange Composite Index, or a narrower market index such as the
Standard & Poor's 100. Indexes are also based on an industry or market segment
such as the American Stock Exchange Oil and Gas Index or the Computer and
Business Equipment Index.

Options on stock indexes are similar to options on stock except that (a)
the expiration cycles of stock index options are monthly, while those of stock
options are currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
<PAGE> 73
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt
of this cash amount will depend upon the difference between the closing level of
the stock index upon which the option is based and the exercise price of the
option. The amount of cash received will be equal to such difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. The writer may
offset its position in stock index options prior to expiration by entering into
a closing transaction on an exchange or it may let the option expire
unexercised. The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in a Fund's portfolio correlate
with price movements of the stock index selected. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular stock, whether the Fund will realize a gain or loss from the
purchase or writing of options on an index depends upon movements in the level
of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or market segments, rather than movements in the price
of a particular stock. Accordingly, successful use by a Fund of options on stock
indexes is subject to the Adviser's ability to predict correctly movements in
the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.

A Fund engages in stock index option transactions only when determined by
the Adviser to be consistent with the Fund's investment objectives. There can be
no assurance that the use of these portfolio strategies will be successful. When
a Fund writes an option on a stock index, the Fund will place in a segregated
account with its custodian, cash or U.S. Government securities in an amount at
least equal to the market value of the underlying stock index and will maintain
the account while the option is open or the Fund will otherwise cover the
transaction. Although a Fund intends to purchase or write only those stock index
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular option at
any specific time. In such event, it may not be possible to effect closing
transactions with respect to certain stock index options, with the result that a
Fund would have to exercise those options which it has purchased in order to
realize any profit. With respect to stock index options written by a Fund, the
inability to enter into a closing transaction may result in material losses to
the Fund. For example, because a Fund must maintain a covered position with
respect to any call option it writes, the Fund may not sell the underlying
securities used as cover during the period it is obligated under an option. This
requirement may impair the Fund's ability to sell a portfolio security or make
an investment at a time when such a sale or investment might be advantageous.

FUTURES TRANSACTIONS -- IN GENERAL (ALL FUNDS). In connection with its futures
transactions, a Fund will establish and maintain at its custodian bank or
qualified futures commission merchant a segregated account consisting of cash or
other high quality liquid securities as determined by the Board of Trustees in
an amount generally equal to the market value of the underlying commodity less
any amount deposited as margin. The segregation of such assets will not have the
effect of limiting a Fund's ability to otherwise invest those assets.

Initially, when purchasing or selling futures contracts, a Fund will be required
to deposit with its custodian in the broker's name an amount of cash or cash
equivalents equal to approximately 5% to 10% of the contract amount. This amount
is subject to change by the exchange or board of trade on which the contract is
traded and members of such exchange or board of trade may impose their own
higher requirements. This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to a Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." At any time prior to the expiration of a futures contract,
a Fund may elect to close the position by taking an opposite position at the
then prevailing price, which will operate to terminate the Fund's existing
position in the contract.

Although a Fund will intend to purchase or sell futures contracts only if there
is an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit. Futures contract prices could move to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting a Fund to
substantial losses. If it is not possible or a Fund determines not to close a
futures position in anticipation of adverse price movements, the Fund will be
required to make daily cash payments of variation margin. In such circumstances,
an increase in the value of the portion of the portfolio being hedged, if any,
may offset partially or completely losses on the futures contract. However, no
assurance can be given that the price of the securities being hedged will
correlate with the price movements in a futures contract and thus provide an
offset to losses on the futures contract.

In addition, due to the risk of an imperfect correlation between securities in
the Fund's portfolio that are the subject of a hedging transaction and the
futures contract used as a hedging device, it is possible that the hedge will
not be fully effective in that, for example, losses on the portfolio securities
may be in excess of gains on the futures contract or losses on the futures
contract may be in excess of gains on the portfolio securities that were the
subject of the hedge. In futures contracts based on indexes, the risk of
imperfect correlation increases as the composition of the Fund's portfolio
varies from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being hedged
and movements in the price of futures contracts, a Fund may buy or sell futures
contracts in a greater or lesser dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the futures contract has
been less or greater than that of the securities. Such "over hedging" or "under
hedging" may adversely affect a Fund's net investment results if market
movements are not as accurately anticipated when the hedge is established.

<PAGE> 74

INTEREST RATE FUTURES CONTRACTS (THE BALANCED FUND AND THE INTERMEDIATE BOND
FUND). These Funds may purchase and sell interest rate futures contracts
("futures contracts") as a hedge against changes in interest rates. A futures
contract is an agreement between two parties to buy and sell a security for a
set price on a future date. Futures contracts are traded on designated
"contracts markets" which, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures contracts based on
securities such as long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA
Certificates and three-month U.S. Treasury bills.

Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although the sale of the futures contract might be accomplished more easily and
quickly. For example, if a Fund holds long-term U.S. Government securities and
the Adviser anticipates a rise in long-term interest rates, it could, in lieu of
disposing of its portfolio securities, enter into futures contracts for the sale
of similar long-term securities. If rates increased and the value of the Fund's
portfolio securities declined, the value of the Fund's futures contracts would
increase, thereby protecting the Fund by preventing net asset value from
declining as much as it otherwise would have. Similarly, entering into futures
contracts for the purchase of securities has an effect similar to actual
purchase of the underlying securities, but permits the continued holding of
securities other than the underlying securities. For example, if the Adviser
expects long-term interest rates to decline, the Fund might enter into futures
contracts for the purchase of long-term securities, so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase, while continuing to hold higher yielding short-term
securities or waiting for the long-term market to stabilize.

STOCK INDEX FUTURES CONTRACTS (THE EQUITY FUND, THE BALANCED FUND, THE SMALLCAP
FUND, AND THE REALTY FUND). These Funds may enter into stock index futures
contracts in order to protect the value of their common stock investments. A
stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
As the aggregate market value of the stocks in the index changes, the value of
the index also will change. In the event that the index level rises above the
level at which the stock index futures contract was sold, the seller of the
stock index futures contract will realize a loss determined by the difference
between the two index levels at the time of expiration of the stock index
futures contract, and the purchaser will realize a gain in that amount. In the
event the index level falls below the level at which the stock index futures
contracts was sold, the seller of the stock index futures contract will realize
a loss determined by the difference between the two index levels at the time of
expiration of the stock index futures contract, and the purchaser will realize a
gain in that amount. In the event the index level falls below the level at which
the stock index futures contract was sold, the seller will recognize a gain
determined by the difference between the two index levels at the expiration of
the stock index futures contract, and the purchaser will realize a loss. Stock
index futures contracts expire on a fixed date, currently one to seven months
from the date of the contract, and are settled upon expiration of the contract.

The Funds intend to utilize stock index futures contracts only for the
purpose of attempting to protect the value of their common stock portfolios in
the event of a decline in stock prices and, therefore, usually will be sellers
of stock index futures contracts. This risk management strategy is an
alternative to selling securities in a portfolio and investing in money market
instruments. Also, stock index futures contracts may be purchased to protect a
Fund against an increase in prices of stocks which the Fund intends to purchase.
If a Fund is unable to invest its cash (or cash equivalents) in stock in an
orderly fashion, the Fund could purchase a stock index futures contract which
<PAGE> 75

may be used to offset any increase in the price of the stock. However, it is
possible that the market may decline instead, resulting in a loss on the stock
index futures contract. If a Fund then concludes not to invest in stock at that
time, or if the price of the securities to be purchased remains constant or
increases, the Fund will realize a loss on the stock index futures contract that
is not offset by a reduction in the price of securities purchased. The Funds
also may buy or sell stock index futures contracts to close out existing futures
positions.

A Fund will intend to purchase and sell futures contracts on the stock
index for which it can obtain the best price with consideration also given to
liquidity. While incidental to its securities activities, a Fund may use stock
index futures as a substitute for a comparable market position in the underlying
securities.

There can be no assurance of a Fund's successful use of stock index futures
as a hedging device. In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between movements in the stock
index futures and portion of the portfolio being hedged, the price of stock
index futures may not correlate perfectly with the movement in the stock index
because of certain market distortions. First, all participants in the futures
market are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which would distort the normal
relationship between the index and futures markets. Secondly, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than the margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may cause
temporary price distortions. Because of the possibility of price distortions in
the futures market and the imperfect correlation between movements in the stock
index and movements in the price of stock index futures, a correct forecast of
general market trends by the Adviser still may not result in a successful
hedging transaction.

Successful use of stock index futures by a Fund also is subject to the
Adviser's ability to predict correctly movements in the direction of the market.
For example, if a Fund has hedged against the possibility of a decline in the
market adversely affecting stocks held in its portfolio and stock prices
increase instead, a Fund will lose part or all of the benefit of the increased
value of its stocks which it has hedged because it will have offsetting losses
in its futures positions. In addition, in such situations, if a Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.

OPTIONS ON FUTURES (ALL FUNDS). The Funds may purchase and write call and put
options on futures contracts which are traded on a United States or foreign
exchange or board of trade. An option on a futures contract gives the purchaser
the right, in return for the premium paid, to assume a position in a future
contract at a specified exercise price at any time during the option period.
Upon exercise of the option, the writer of the option is obligated to convey the
appropriate futures position to the holder of the option. If an option is
exercised on the last trading day before the expiration date of the option, a
cash settlement will be made in an amount equal to the difference between the
closing price of the futures contract and the exercise price of the option.

The Funds may use options on futures contracts solely for bona fide hedging
or other appropriate risk management purposes. If a Fund purchases a call (put)
option on a futures contract, it benefits from any increase (decrease) in the
value of the futures contract, but is subject to the risk of decrease (increase)
in value of the futures contract. The benefits received are reduced by the
amount of the premium and transaction costs paid by a Fund for the option. If
market conditions do not favor the exercise of the option, a Fund's loss is
limited to the amount of such premium and transaction costs paid by the Fund for
the option.
<PAGE> 76

If a Fund writes a call (put) option on a futures contract, the Fund
receives a premium but assumes the risk of a rise (decline) in value in the
underlying futures contract. If the option is not exercised, a Fund gains the
amount of the premium, which may partially offset unfavorable changes due to
interest rate or currency exchange rate fluctuations in the value of securities
held or to be acquired for the Fund's portfolio. If the option is exercised, a
Fund will incur a loss, which will be reduced by the amount of the premium it
receives. However, depending on the degree of correlation between changes in the
value of its portfolio securities (or the currency in which they are
denominated) and changes in the value of futures positions, a Fund's losses from
writing options on futures may be partially offset by favorable changes in the
value of portfolio securities or in the cost of securities to be acquired.

The holder or writer of an option on futures contracts may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (ALL FUNDS). The Funds may enter
into forward foreign currency exchange contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades.

At the maturity of a forward contract, a Fund may either accept or make
delivery of the currency specified in the contract or, at or prior to maturity,
enter into a closing purchase transaction involving the purchase or sale of an
offsetting contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract.

The Funds may enter into forward foreign currency exchange contracts in
several circumstances. First, when a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when a Fund
anticipates the receipt in a foreign currency of dividend or interest payments
on such a security which it holds, the Fund may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying transactions, a Fund will attempt to protect
itself against an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date on which the
security is purchased or sold, or on which the dividend or interest payment is
declared, and the date on which such payments are made or received.

Additionally, when management of the Fund believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
<PAGE> 77
contract is entered into and date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the Fund's
foreign assets.

The Funds will not enter into forward contracts or maintain a net exposure
to such contracts where the consummation of the contracts would obligate a Fund
to deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency. The Funds'
custodian will place cash or liquid high grade debt securities into a segregated
account of a Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of forward foreign currency exchange contracts
requiring the Fund to purchase foreign currencies or forward contracts entered
into for non-hedging purposes. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of a Fund's commitments with respect to such contracts.

The Funds generally will not enter into a forward contract with a term of
greater than one year. Using forward contracts to protect the value of a Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which a Fund can achieve at some future point in
time.

While the Funds will enter into forward contracts to reduce currency
exchange rate risks, transactions in such contracts involve certain other risks.
Thus, while a Fund may benefit from such transactions, unanticipated changes in
currency prices may result in a poorer overall performance for a Fund than if it
had not engaged in any such transactions. Moreover, there may be imperfect
correlation between a Fund's portfolio holdings of securities denominated in a
particular currency and forward contracts entered into by the Fund. Such
imperfect correlation may prevent a Fund from achieving a complete hedge or may
expose the Fund to risk of foreign exchange loss.

LENDING PORTFOLIO SECURITIES (ALL FUNDS). To a limited extent, each Fund may
lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, a Fund can increase
its income through the investment of the cash collateral. For the purposes of
this policy, the Funds consider collateral consisting of U.S. Government
securities or irrevocable letters of credit issued by banks whose securities
meet the standards for investment by the Funds to be the equivalent of cash.
Such loans may not exceed 33- 1/3% of a Fund's total assets. From time to time,
a Fund may return to the borrower and/or a third party which is unaffiliated
with the Fund, and which is acting as a "placing broker," a part of the interest
earned from the investment of collateral received for securities loaned.

The Securities and Exchange Commission currently requires that the
following conditions must be met whenever a Fund's portfolio securities are
loaned: (1) the Fund must receive at least 100% cash collateral from the
borrower; (2) the borrower must increase such collateral whenever the market
value of the securities rises above the level of such collateral; (3) the Fund
must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions on the loaned securities, and any increase in market value; (5)
the Fund may pay only reasonable custodian fees in connection with the loan; and
(6) while voting rights on the loaned securities may pass to the borrower, the
Funds' Trustees must terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs. These
conditions may be subject to future modification.
<PAGE> 78

Such loans will be terminable at any time upon specified notice. A Fund
might experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund.

RULE 144A SECURITIES (ALL FUNDS). The Funds have adopted fundamental policies
with respect to investments in illiquid securities (see Investment Restrictions
Nos. 10 and 11 below). Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), securities that are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven days. Securities
that have not been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Each Fund may invest up to 5% (except for the SmallCap Fund and Realty Fund
which may invest up to 15%) of its total assets in restricted securities issued
under Section 4(2) of the Securities Act, which exempts from registration
"transactions by an issuer not involving any public offering". Section 4(2)
instruments are restricted in the sense that they can only be resold through the
issuing dealer and only to institutional inventors; they cannot be resold to the
general public without registration. Restricted securities issued under Section
4(2) of the Securities Act will be treated as illiquid and subject to each
Fund's investment restriction on illiquid securities.

The Commission has adopted Rule 144A, which allows a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act applicable to resales of certain securities
to qualified institutional buyers. The Adviser anticipates that the market for
certain restricted securities such as institutional commercial paper will expand
further as a result of this new regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. (the "NASD"). Consequently, it
is the intent of the Funds to invest, pursuant to procedures established by the
Board of Trustees and subject to applicable investment restrictions, in
securities eligible for resale under Rule 144A which are determined to be liquid
based upon the trading markets for the securities.

The Adviser will monitor the liquidity of restricted securities in a Fund's
portfolio under the supervision of the Trustees. In reaching liquidity
decisions, the Adviser will consider, inter alia, the following factors: (1) the
<PAGE> 79
frequency of trades and quotes for the security over the course of six months
or as determined in the discretion of the Adviser; (2) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers over the course of six months or as determined in the discretion of
the Adviser; (3) dealer undertakings to make a market in the security; (4) the
nature of the security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer); and (5) other factors, if any, which the Adviser
deems relevant. The Adviser will also monitor the purchase of Rule 144A
securities to assure that the total of all Rule 144A securities held by a Fund
(except for the SmallCap Fund and Realty Fund which may invest up to 15%) does
not exceed 5% of the Fund's average daily net assets.

INVESTMENT RESTRICTIONS. The Funds have adopted the following restrictions as
fundamental policies. These restrictions cannot be changed without approval by
the holders of a majority (as defined in the Investment Company Act of 1940 (the
"Act")) of each Fund's outstanding voting shares. Each Fund, except as otherwise
indicated, may not:

1. Purchase the securities of any issuer if such purchase would cause more
than 5% of the value of its total assets to be invested in securities of such
issuer. This restriction applies only with respect to 75% of each Fund's total
assets.

2. Purchase the securities of any issuer if such purchase would cause the
Fund to hold more than 10% of the outstanding voting securities of such issuer.
This restriction applies only with respect to 75% of each Fund's total assets.

3. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of a Fund's investments in all such companies to
exceed 5% of the value of its total assets.

4. Purchase or retain the securities of any issuer if the officers or
Trustees of the Funds or the officers or Directors of the Adviser who
individually own beneficially more than 1/2 of 1% of the securities of such
issuer together own beneficially more than 5% of the securities of such issuer.

5. Purchase, hold or deal in commodities or commodity contracts, but the
Funds may engage in transactions involving futures contracts and related
options, including the futures and related options transactions as described in
the Prospectus and Statement of Additional Information.

6. Purchase, hold or deal in real estate, or oil and gas interests, but the
Funds may purchase and sell securities that are secured by real estate and may
purchase and sell securities issued by companies that invest or deal in real
estate.

7. Borrow money or pledge, mortgage or hypothecate its assets, except as
described in the Funds' Prospectus and the Statement of Additional Information
and in connection with entering into futures contracts, but the deposit of
assets in escrow in connection with the writing of covered call options and the
purchase of securities on a when-issued or delayed-delivery basis and collateral
arrangements with respect to initial or variation margins for futures contracts
will not be deemed to be pledges of a Fund's assets.
<PAGE> 80

8. Lend any funds or other assets except through the purchase of a portion
of an issue of publicly distributed bonds, debentures or other debt securities,
or the purchase of bankers' acceptances and commercial paper of corporations.
However, each Fund may lend its portfolio securities in an amount not to exceed
33-1/3% of the value of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the Securities and Exchange
Commission and the Funds' Trustees.

9. Act as an underwriter of securities of other issuers.

10. The Equity Fund may not enter into repurchase agreements providing for
settlement in more than seven days after notice, or purchase securities which
are not readily marketable, including certain securities which are subject to
legal or contractual restrictions on resale, if, in the aggregate, more than 10%
of the value of the Fund's net assets would be so invested. This restriction
applies to those options in respect of specific securities that are not traded
on a national securities exchange, and the underlying security, which are not
readily marketable.

11. Each Fund other than the Equity Fund, may not enter into repurchase
agreements providing for settlement in more than seven days after notice, or
purchase securities which are not readily marketable, if, in the aggregate, more
than 10% (15% for the SmallCap and Realty Funds) of the value of a Fund's net
assets would be so invested. Included in this category are "restricted"
securities and any other assets for which an active and substantial market does
not exist at the time of purchase or subsequent valuation. Restricted securities
for purposes of this limitation do not include securities eligible for resale
pursuant to Rule 144A of the Securities Act of 1933 which have been determined
to be liquid by the Fund's Board of Trustees based upon the trading markets for
the securities.

12. Enter into time deposits maturing in more than seven days and time
deposits maturing from two business days through seven calendar days will not
exceed 10% of a Fund's total assets.

13. Invest in the securities of a company for the purpose of exercising
management or control, but each Fund will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.

14. Purchase securities on margin, but the Funds may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
securities and the Funds may make margin payments in connection with
transactions in options and futures.

15. Purchase or sell put and call options, or combinations thereof, except
as set forth in the Prospectus and Statement of Additional Information.
<PAGE> 81

16. Invest more than 25% of its assets in investments in any particular
industry or industries, provided that, when a Fund has adopted a temporary
defensive posture, there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements in respect of the foregoing.

17. The Equity Fund shall not purchase warrants in excess of 2% of net
assets. (For purposes of this restriction, such warrants shall be valued at the
lower of cost or market, except that warrants acquired by the Equity Fund in
units or attached to securities shall not be included within this 2%
restriction.) The Balanced Fund shall not invest more than 5% of its net assets
in warrants, no more than 2% of which may be invested in warrants which are not
listed on the New York or American Stock Exchanges.

The limitations set forth above in Restriction No. 1 do not apply with
respect to securities issued by the U.S. Government, its agencies or
instrumentalities.

If a percentage restriction is adhered to at the time of investment, a
later increase in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.

MANAGEMENT OF THE FUNDS

Trustees and officers of the Funds, together with information as to their
principal business occupations during at least the last five years, are shown
below. Each Trustee who is deemed to be an "interested person" of the Funds, as
defined in the Act, is indicated by an asterisk.

TRUSTEES AND OFFICERS OF THE FUNDS

ANTHONY J. COLAVITA, (62) TRUSTEE.
President and Attorney at Law in the firm of Anthony J. Colavita, P.C.,
Director of Gabelli Global Series Funds, Inc., Gabelli Investor Funds,
Inc., The Gabelli Convertible Securities Fund, Inc., Gabelli Equity Series
Funds, Inc., Gabelli Gold Fund, Inc., The Gabelli Value Fund Inc., Gabelli
Capital Series Funds, Inc., Gabelli International Growth Fund, Inc., The
Treasurer's Fund, Inc., and a Trustee of The Gabelli Growth Fund, The
Gabelli Money Market Funds, and The Gabelli Asset Fund. His address is One
Corporate Center, Rye, New York 10580.

JAMES P. CONN, (59) TRUSTEE.
Managing Director/Chief Investment Officer, Financial Security Assurance,
since 1992. Director of Meditrust Corp., First Republic Bank, The Gabelli
Equity Trust Inc. and Gabelli Global Multimedia Trust Inc., Trustee of The
Gabelli Asset Fund and The Gabelli Growth Fund. His address is One
Corporate Center, Rye, New York 10580.

WERNER ROEDER, M.D., (57) TRUSTEE.
Director of Surgery, Lawrence Hospital and practicing private physician.
Director of Gabelli Investor Funds, Inc., Gabelli Gold Fund, Inc., Gabelli
Capital Series Funds, Inc., Gabelli International Growth Fund, Inc., The
Treasurer's Fund, Inc. and Gabelli Global Series Funds, Inc. His address is
One Corporate Center, Rye, New York 10580.

<PAGE> 82

KARL OTTO POHL*, (68) TRUSTEE.
Partner of Sal Oppenheim Jr. & Cie. (private investment bank); Former
President of the Deutsche Bundesbank (Germany's Central Bank) and Chairman
of its Central Bank Council (1980-1991); Currently board member of IBM
World Trade Europe/Middle East/Africa Corp.; Bertlesmann AG; Zurich
Versicherungs-Gesellshaft (insurance); the International Advisory Board of
General Electric Company; the International Council for JP Morgan & Co.;
the Board of Supervisory Directors of ROBECo/o Group; and the Supervisory
Board of Royal Dutch (petroleum company); Advisory Director of Unilever
N.V. and Unilever Deutchland; German Governor, International Monetary Fund
(1980-1991); Board Member, Bank for International Settlements (1980-1991);
Chairman, European Economic Community Central Bank Governors (1990-1991);
Director/Trustee of all the funds in the Gabelli family of funds. His
address is 300 Crescent Court, Suite 1320, Dallas, TX 75201.

SUSAN M. BYRNE*, (51) TRUSTEE.
President and CEO of Westwood Management Corporation since 1983. Her
address is One Corporate Center, Rye, New York 10580.

All of the Funds' Trustees were elected at a meeting of shareholders held
on September 30, 1994 except Mr. Pohl, who was elected by the Board of Trustees
on August 8, 1997 to begin serving on the Board on October 6, 1997. Ordinarily,
there will be no further meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of record of not less than two-thirds of the Fund's
outstanding shares may remove a Trustee through a declaration in writing or by
vote casting person or by proxy at a meeting called for that purpose. In
accordance with the Act and the Trust's Agreement and Declaration of Trust, the
Trustees are required to call a meeting of shareholders for the purpose of
voting upon the question of removal of any such Trustee when requested in
writing to do so by the shareholders of record of not less than 10% of the
Trust's outstanding shares.

The Trust does not pay any remuneration to its officers and Trustees other
than fees and expenses to Trustees who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities of the Adviser,
Sub-Adviser or the Distributor, which totalled for all such Trustees $11,822.42
for the fiscal year ended September 30, 1997. Each Trustee other than Susan
Byrne is paid an annual fee of $1,000 and $625 for each meeting attended.

EXECUTIVE OFFICERS OF THE FUNDS NOT LISTED ABOVE

BRUCE N. ALPERT, (46) VICE PRESIDENT AND TREASURER.
General Manager of the Adviser since 1994. Vice President and Chief
Operating Officer of the Investment Advisory Division of Gabelli Funds,
Inc., an officer of all funds advised by Gabelli Funds, Inc. and its
affiliates. His address is One Corporate Center, Rye, New York 10580.

PATRICIA R. FRAZE, (53) VICE PRESIDENT.
Senior Vice President of the Sub-Adviser, fixed income analyst and
portfolio manager since April 1990. Her address is 855 Third Avenue, New
York, NY 10022.

LYNDA J. CALKIN, (46) VICE PRESIDENT.
Senior Vice President of the Sub-Adviser, small cap portfolio manager since
1993. Previously, Vice President and Portfolio Manager for Hourglass
Capital Management Inc.

DOUGLAS G. LEHMAN, (33) VICE PRESIDENT.
Vice President of the Sub-Adviser, since December 1994. Previously, Special
Trader for First New York Securities, June 1993 to December 1994. From
September 1989 to May 1993, he was Vice President and Special Trader for
Lehman Brothers. His address is 855 Third Avenue, New York, NY 10022.
<PAGE> 83

JAMES E. McKEE, (33) SECRETARY.
Secretary of the Adviser since 1995. Vice President and General Counsel of
Gabelli Funds, Inc.; Secretary of all Funds advised by Gabelli Funds, Inc.
since August 1995. Vice President and General Counsel of GAMCO Investors
Inc. since 1993. Formerly Branch Chief of the U.S. Securities and Exchange
Commission in New York from 1992 through 1993. Staff attorney with the
Securities and Exchange Commission in New York from 1989 through 1992. His
address is One Corporate Center, Rye, New York 10580.

As of January 2, 1998, the Officers and Trustees of the Funds, as a group,
owned 1.13% of the Gabelli Westwood Intermediate Bond Fund, and 1.55% of the
Gabelli Westwood Small Cap Equity Fund. Susan M. Byrne, Trustee of the Funds,
owned approximately 4.2% of the outstanding shares of the Gabelli Westwood
Realty Fund. Bruce N. Alpert, Vice President and Treasurer of the Funds, owned
approximately 2.0% of the outstanding shares of the Gabelli Westwood Realty
Fund. In the case of Funds other than the Intermediate Bond Fund and Realty
Fund, the Officers and Trustees of the Funds, as a group, owned less than 1% of
each class of such Funds.

The following persons were known by the Funds to own of record 5% or more
of the outstanding voting securities of any Fund on January 2, 1998:

<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE
OF HOLDER OF RECORD OF FUND
<S> <C>
EQUITY FUND
RETAIL CLASS
Charles Schwab & Co., Inc. 32.73% *
Special Custody Account
FBO Ben of Custs
Attn Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122

The Bank of Tokyo Trust Co. TTEE 14.29% *
FBO The Komatsu Dresser Co. Sav. Plan
Pension & Investment
Attn Melissa Kruppa
1251 Avenue of Americas
New York NY 10020

SERVICE CLASS
Billy M. Willis 7.27%
1118 Victoria
Nacogdoches, TX 75961-3056

Southwest Securities Inc, FBO 7.19%
Todd Esse
P.O. Box 509002
Dallas, TX 75280-9002

Southwest Securities Inc., FBO 5.80%
James D. Pool
& James Riley Pool JTWROS
ACCT 67177395
P.O. Box 509002
Dallas, TX 75250-9002
</TABLE>

<PAGE> 84

<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE
OF HOLDER OF RECORD OF FUND
<S> <C>
BALANCED FUND
Charles Schwab & Co., Inc. 35.95% *
Special Custody Acct.
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122

SMALLCAP EQUITY FUND
RETAIL CLASS
Wendel & Co. 61.20% *
A/C659115
c/o Bank of New York
Attn: Ellen Whalen
1 Wall Street
New York, NY 10286

REALTY FUND
RETAIL CLASS
Margaret Byrne McKenzie 5.61%
118 John Street
Greenwich, CT 06831-2649

Edward Lachman 5.61%
1 Humphrey Road
Morristown, NJ 07960-5707

Westwood Management Corporation 5.61%
Attn: Jacki Finley
300 Crescent Court Suite 1320
Dallas, TX 75201-7854

Kathryn B. Montgomery 5.38%
Carl B. Montgomery JT TEN
3431 Golfing Green Drive
Dallas, TX 75234-3707

Joseph E. Simmons 5.56%
Gertrude H. Simmons JTTEN
1645 Hillside Drive
Quakertown, PA 18951-2056

TCTCO 5.01%
200 Crescent Ct. Ste 1300
Dallas, TX 75201-7838

INTERMEDIATE BOND FUND
RETAIL CLASS
TCTCO 20.60%
200 Crescent Ct. Suite 1300
Dallas, TX 75201-7838

Southwest Securities, Inc. FBO 27.72% *
Guarantee & Trust Co. Tr.
P.O. Box 509 002
Dallas, TX 75250

Westwood Trust 16.20%
200 Crescent Ct. Suite 1300
Dallas, TX 75201-7838

*Beneficial ownership is disclaimed
</TABLE>

Beneficial ownership of shares representing 25% or more of the outstanding
shares of each class of the Funds may be deemed to have control, as that term is
defined in the 1940 Act.
<PAGE> 85

INVESTMENT ADVISORY AND OTHER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "MANAGEMENT OF THE FUNDS."

INVESTMENT ADVISORY AGREEMENTS. The Adviser retains Westwood Management
Corporation ("Westwood" or the "Sub-Adviser") to furnish investment advice and
manage the Funds' assets.

Each Advisory and Sub-Advisory Agreement is subject to annual approval by
(i) the Funds' Board of Trustees or (ii) vote of a majority (as defined in the
Act) of the outstanding voting securities of each Fund, provided that in either
event the continuance also is approved by a majority of the Trustees who are not
"interested persons" (as defined in the Act) of the Funds or the Adviser, by
vote cast in person at a meeting called for the purpose of voting on such
approval. Each Advisory Agreement is terminable without penalty, on 60 days'
notice, by the Funds' Board of Trustees or, by vote of the holders of a majority
of each Fund's shares, or by the Adviser, upon not less than 60 days' notice
with respect to the Investment Advisory Agreement for each Fund. Each Advisory
Agreement will terminate automatically in the event of its assignment (as
defined in the Act).

The Sub-Adviser manages each Fund's portfolio of investments in accordance
with the stated policies of each Fund, subject to the approval of the Board of
Trustees. The Sub-Adviser is responsible for investment decisions, and provides
each Fund with Investment Officers who are authorized by the Board of Trustees
to execute purchases and sales of securities. The Funds' Investment Officers are
Susan M. Byrne, Douglas Lehman, Lynda Calkin, and Patricia N. Fraze. All
purchases and sales are reported for the Trustees' review at the meeting
subsequent to such transactions.

The fees paid to the Adviser are allocated between the classes of shares
based upon the amount of assets in each such class. As compensation for its
services under the Advisory Agreement, the Adviser is paid a monthly advisory
fee.

As compensation for its advisory and administrative services under the
Advisory Agreement for the SmallCap Fund, the Realty Fund, the Equity Fund, the
Intermediate Bond Fund and the Balanced Fund, Gabelli Advisers is paid a monthly
fee based upon the average daily net asset value of each Fund, at the following
annual rates: 1.0%, 1.0%, 1.0%, .60% and .75%, respectively. Under the
Sub-Advisory Agreement, the Adviser pays Westwood out of its advisory fees with
respect to the Funds a fee computed daily and payable monthly in an amount equal
on an annualized basis to the greater of (i) $150,000 per year on an aggregate
basis for all the Funds or (ii) 35% of the net revenues to the Adviser from the
Funds.

Advisory Fees
Earned and Waived by Gabelli Advisers LLC
For the Year Ended September 30

<TABLE>
<CAPTION>
Earned 1997 Waived Earned 1996 Waived Earned 1995 Waived
<S> <C> <C> <C> <C> <C> <C>
EQUITY FUND $700,389 $38,601 $214,970 $82,555 $118,524 $80,907
BALANCED FUND $419,264 $43,972 $178,593 $93,020 $ 97,048 $75,402
SMALLCAP EQUITY FUND $ 24,918 $14,207 N/A N/A N/A N/A
INTERMEDIATE BOND FUND $ 33,052 $32,389 $ 31,128 $31,128 $ 28,016 $27,288
</TABLE>

The Adviser is responsible for overseeing Westwood's activities as
Sub-Adviser. Westwood assumes general supervision over placing orders on behalf
of the Funds for the purchase or sale of portfolio securities. Allocation of
brokerage transactions, including their frequency, is made in the best judgment
of Westwood and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable net
price. Subject to this consideration, the brokers selected will include those
that supplement Westwood's research facilities with statistical data, investment
information, economic facts and opinions. Information so received is in addition
to and not in lieu of services required to be performed by Westwood and the fee
for Westwood is not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to Westwood in serving both the
Funds and other accounts it manages and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to Westwood
in carrying out its obligations to the funds, although not all of these services
are necessarily useful and of value in managing the Funds. Brokers also are
selected because of their ability to handle special executions such as are
involved in large block trades or broad distributions, provided the primary
consideration is met. While Westwood generally seeks reasonably competitive
spreads or commissions, the Funds will not necessarily be paying the lowest
spread or commissions available.
<PAGE> 86

As permitted by section 28(e) of the Securities Exchange Act of 1934 (the
"1934 Act"), Westwood may cause the Funds to pay a broker-dealer which provides
"brokerage and research services" (as defined in the 1934 Act) to Westwood an
amount of undisclosed commission for effecting a securities transaction for the
Funds in excess of the commission which another broker-dealer would have charged
for effecting that transaction. Westwood may also effect transactions through a
broker affiliated with the Adviser and Southwest Securities Group, Inc. subject
to compliance with the 1940 Act.

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine,
Westwood may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.

Portfolio turnover may vary from year to year, as well as within a year.
The portfolio turnover rate is estimated to be 100% for the Realty Fund. For the
fiscal years ended September 30, 1997 and September 30, 1996, the turnover rates
were 61% and 106% in the case of the Equity Fund, 628% and 309%, in the case of
the Intermediate Bond Fund, 110% and 111% in the case of the Balanced Fund and
146% and 0% in the case of the SmallCap Equity Fund; however, in periods in
which extraordinary market conditions prevail, the Adviser will not be deterred
from changing investment strategy as rapidly as needed, in which case higher
turnover rates can be anticipated. High turnover rates are likely to result in
comparatively greater brokerage expenses. The overall reasonableness of
brokerage commissions paid is evaluated by the Adviser based upon its knowledge
of available information as to the general level of commissions paid by other
institutional investors for comparable services.

Brokerage Commissions Paid*
For the Year Ended September 30

<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Equity Fund $154,989 $48,678
Balanced Fund $ 69,311 $36,359
SmallCap Equity Fund $ 21,208 $ 0
Intermediate Bond Fund $ 0 $ 0
</TABLE>

*None of these amounts were paid to the affiliates.

The Adviser is responsible for overseeing the administration of each Fund's
business and affairs, including the maintenance of certain of the Fund's books
and records and the performance of other administrative aspects of the Funds'
operations to the extent not performed by the Funds' custodians, transfer agents
and dividend disbursing agents. The Adviser is permitted to subcontract at its
own expense the administrative responsibilities to persons it believes are
qualified to perform such services and has retained BISYS Fund Services, Inc.
("BISYS") to provide administrative services with respect to the Funds. Pursuant
to the Sub-Administration Contracts, BISYS provides management and
administrative services necessary for the operation of the Funds, including,
among other things, (i) preparation of shareholder reports and communications,
(ii) regulatory compliance, such as reports to and filings with the Securities
and Exchange Commission ("SEC") and state securities commissions and (iii)
general supervision of the operation of the Funds, including coordination of the
services performed by the Funds' Adviser and Sub-Adviser, transfer agent,
custodians, independent accountants, legal counsel and others. In addition,
Gabelli Funds, Inc. furnishes office space and facilities required for
conducting the business of the Funds and pays the compensation of the Funds'
officers, employees and Trustees affiliated with Gabelli Funds, Inc.
<PAGE> 87

DISTRIBUTION OF FUND SHARES. The Funds have retained Gabelli & Company, Inc. to
serve as principal underwriter and distributor (the "Distributor") for the
shares of the Funds pursuant to Distribution Contracts (the "Distribution
Contracts"). The Distribution Contracts provide that the Distributor will use
its best efforts to maintain a broad distribution of the Funds' shares among
bona fide investors and may enter into selling group agreements with responsible
dealers and dealer managers as well as to sell the Funds' shares to individual
investors. The Distributor is not obligated to sell any specific amount of
shares.

For the fiscal year ended September 30, 1997, the purchasers of fund shares
paid $33,750 and $207,478 in sales charges for sales of Service Class shares of
Equity Fund and Balanced Fund, respectively. Of those amounts, $4,500 and
$12,518 were retained by the Distributor.

The Funds have adopted on behalf of the Service Class shares of each Fund a
Rule 12b-1 Distribution Plan and Agreement (the "Service Class Plan") and on
behalf of the Retail Class shares of each Fund, a Plan of Distribution Pursuant
to Rule 12b-1 (the "Retail Class Plan") pursuant to which each Class of shares
of the Funds makes payments to the Distributor on a monthly basis in amounts
described in the Prospectus in connection with distribution of shares of such
class, respectively. The Board of Trustees has concluded that there is a
reasonable likelihood that the Retail Class Plan and Service Class Plan will
benefit these classes and their shareholders, respectively.

Each Plan provides that it may not be amended to increase materially the
payment made by each Class pursuant to such Plan without shareholder approval
and that other material amendments of such Plan must be approved by the Board of
Trustees, and by the Trustees who are neither "interested persons" (as defined
in the Act) of the Funds nor have any direct or indirect financial interest in
the operation of the Plan or in any related agreement (the "non-interested
Trustees"), by a vote cast in person at a meeting called for the purpose of
considering such amendments. The selection and nomination of the Funds' Trustees
have been committed to the discretion of the non-interested Trustees. The
Service Class Plan was approved by Service Class shareholders on January 15,
1991, and the Retail Class Plan was approved by Retail Class shareholders on
September 30, 1994. On August 8, 1997, the Board of Trustees, including a
majority of the non-interested Trustees, amended the Retail Class Plan to
authorize payments by the Funds to the Distributor of a fee in connection with
the distribution and servicing of its Retail Class shares at an annual rate of
up to .25% of the Funds' average daily net assets, whether or not the
Distributor spent all of such amount. Each Plan is subject to annual approval by
the Board of Trustees and by the non-interested Trustees, by a vote cast in
person at a meeting called for the purpose of voting on the respective Plan.
Each Plan is terminable with respect to the applicable Class at any time by a
vote of a majority of the non-interested Trustees or by a vote of the holders of
a majority of the shares of such class. Payments will be accrued daily and paid
monthly or at such other intervals as the Board may determine and may be paid in
advance of actual billing.

Payments may be made by the Funds under the Retail Class Plan for the
purpose of financing any activity primarily intended to result in the sale of
the Retail Class shares of the Funds as determined by the Board of Trustees.
Such activities typically include advertising, compensation for sales and sales
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 Funds may finance without a plan of
distribution, the Funds may also make payments to finance such activity outside
of the Retail Class Plan and not be subject to its limitations.

The Retail Class Plan of the Funds has been implemented by written
agreements between the Funds and/or the Distributor and each person (including
the Distributor) to which payments may be made. Administration of the Retail
Class and Service Class Plan is regulated by Rule 12b-1 under the 1940 Act,
which includes requirements that the Board of Trustees receive and review at
least quarterly reports concerning the nature and qualification of expenses for
which payments are made and that the Board of Trustees approve all agreements
implementing the Retail Class and Service Class Plans and other requirements of
Rule 12b-1.
<PAGE> 88

The Board of Trustees has approved implementation of the Retail 12b-1 Plan
through the Advisory Agreements which provide for separate payments pursuant to
a plan of distribution, and by having the Funds enter into a Distribution
Agreement with the Distributor authorizing reimbursement of expenses (including
overhead) incurred by the Distributor and its affiliates up to the .25% rate
authorized by the Retail 12b-1 Plan. Distribution activities include, without
limitation, advertising the Funds; compensating underwriters, dealers, brokers,
banks and other selling entities and sales and marketing personnel of any of
them for sales of shares of the Funds, 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 of
any of them (including Westwood and its personnel) for providing services to
shareholders of the Funds relating to their investment in the Funds, including
assistance in connection with inquiries relating to shareholder accounts; the
production and dissemination of prospectuses (including statements of additional
information) of the Funds and the preparation, production and dissemination of
sales, marketing and shareholder servicing materials; ordinary or capital
expenses, such as equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar direct and indirect
expenses relating to any activity for which payment is authorized by the Board
of Trustees; and the financing of any activity for which payment is authorized
by the Board of Trustees. To the extent any of these payments is based on
allocations by the Distributor, the Funds may be considered to be participating
in joint distribution activities with other funds distributed by the
Distributor. Various federal and state laws prohibit national banks and some
state-chartered commercial banks from underwriting or dealing in the Funds'
Shares. In the unlikely event that a court were to find that these laws prevent
such banks from providing the services described above, the Funds would seek
alternative providers and expect that shareholders would not experience any
disadvantage.

For the year ended September 30, 1997, the Funds, with respect to the
Service Class, incurred distribution costs and expenses of $11,200 for the
Equity Fund and $43,400 for the Balance Fund. There were no Service Class shares
outstanding during the year ended September 30, 1997 for the Intermediate Bond
Fund. For the year ended September 30, 1997, with respect to the Retail Class,
distribution costs and expenses of $417,000, $6,900, $62,000, and $12,500 were
incurred for the Equity Fund, Intermediate Bond Fund, Balanced Fund, and
SmallCap Equity Fund, respectively.

EXPENSES AND EXPENSE INFORMATION. On October 11, 1996 the "National Securities
Market Improvement of 1996" vested in the Securities and Exchange Commission
exclusive authority for the registration or qualification of investment company
offerings, thus, preempting any state law expense limitation requirement,
effective October 11, 1996. Notwithstanding, Gabelli Advisers LLC reimbursed the
Equity Fund, SmallCap Fund, Intermediate Bond Fund, and Balanced Fund in the
amounts of $38,601, $14,207, $32,389 and $43,972 for the period ended September
30, 1997 for expenses in excess of its voluntary limitation of expenses.

PURCHASE AND REDEMPTION OF SHARES

Cancellation of purchase orders for Fund shares (as, for example, when
checks submitted to purchase shares are returned unpaid) cause 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 each Fund may reimburse itself or the Distributor for such loss
by automatically redeeming shares from any account registered in that
shareholder's name, or by seeking other redress. If a Fund is unable to recover
any loss to itself, it is the position of the SEC that the Distributor will be
immediately obligated to make such Fund whole.

DETERMINATION OF NET ASSET VALUE

The Funds value their portfolio securities in accordance with the
procedures described in the Prospectus.

NEW YORK STOCK EXCHANGE CLOSINGS. The holidays (as observed) on which the New
York Stock Exchange is closed, and therefore days upon which shareholders can't
redeem shares, currently are: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
<PAGE> 89

SHAREHOLDER SERVICES

CORPORATE PENSION/PROFIT-SHARING AND PERSONAL RETIREMENT PLANS. The Funds make
available to corporations a 401(k) Salary Reduction Plan. In addition, the Funds
make available IRAs, including IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs") and IRA "Rollover Accounts." New for 1998, the Funds also make
available education IRAs. Education IRAs permit eligible individuals to
contribute up to $500 per year per beneficiary under 18 years old. Distributions
from an education IRA are generally excluded from income when used for qualified
higher education expenses. Also new for 1998 is the Roth IRA. Unlike a
traditional IRA, contributions to a Roth IRA are not deductible. However,
distributions are generally excluded from income provided they occur at least
five years after the creation of the IRA and are either after the individual
reaches age 59 1/2, because of death or disability, or for first time home
buyers expenses. Plan support services are also available. For details contact
the Distributor by calling toll free 1-800-GABELLI (1-800-422-3554). The Funds
have the right to terminate any of these plans at any time giving proper notice
to existing accounts.

Investors who wish to purchase Fund shares in conjunction with an IRA,
including a SEP-IRA, Roth IRA or education IRA may request from the Distributor
forms for adoption of such plans. The Funds can also be used as vehicles for
existing pension and profit-sharing plans.

A fee may be charged by the entity acting as custodian for 401(k) Plans or
IRAs, payment of which could require the liquidation of shares.

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT REMITTANCE
TO THE ENTITY WHICH ACTS AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT BE MADE
IN ADVANCE OF RECEIPT OF FUNDS.

The minimum initial investment for corporate plans, Salary Reduction Plans,
403(b)(7) Plans, and SEP-IRAs, with more than one participant, is $1,000, with
no minimum on subsequent purchases. The minimum initial investment for
Distributor-sponsored IRAs, SEP-IRAs and Roth or education IRAs with only one
participant is normally $750, with no minimum on subsequent purchases.

The investor should read the Prototype Retirement Plan and the relevant
form of custodial agreement for further details as to eligibility, service fees
and tax implications, and should consult a tax advisor.

DIVIDENDS, DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE
SECTION IN THE FUNDS' PROSPECTUS ENTITLED "DIVIDENDS, DISTRIBUTIONS AND TAXES."

The Funds intend to continue to qualify to be treated as regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, a Fund must
distribute to shareholders at least 90% of its investment company taxable income
(which includes, among other items, dividends, taxable interest and the excess
of net short-term capital gains over net long-term capital losses), and meet
certain diversification of assets, source of income, and other requirements of
the Code. By meeting these requirements, a Fund generally will not be subject to
Federal income tax on its investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) designated by the Fund as capital gain dividends and distributed to
shareholders. If the Funds do not meet all of these Code requirements, they will
be taxed as ordinary corporations and their distributions will be taxed to
shareholders as ordinary income. In determining the amount of capital gains to
be distributed, any capital loss carryover from prior years will be applied
against capital gains to reduce the amount of distributions paid. In addition,
any losses incurred in the taxable year subsequent to October 31, will be
deferred to the next taxable year and used to reduce distributions in the
subsequent year.

Amounts, other than tax-exempt interest, not distributed on a timely basis
in accordance with a calendar year distribution requirement may be subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund
must distribute for the calendar year an amount equal to the sum of (1) at least
98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and (3) all ordinary income and capital gain net income
<PAGE> 90
(adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of a calendar year if it is declared by a Fund during October,
November or December of that year to shareholders of record on a date in such a
month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.

The Funds may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC under the Code if at least one-half of
its assets constitutes investment-type assets or 75% or more of its gross income
is investment-type income. Under the PFIC rules, an "excess distribution"
received with respect to PFIC stock is treated as having been realized ratably
over the period during which the Fund held the PFIC stock.

A Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax had
actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to stockholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.

A Fund may be able to elect alternative tax treatment with respect to PFIC
stock it holds. One election that is currently available, provided the
appropriate information is received from the PFIC, requires a Fund to generally
include in its gross income its share of the earnings of a PFIC on a current
basis, regardless of whether any distributions are received from the PFIC. If
this election is made, the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition, other elections
may become available that would affect the tax treatment of PFIC stock held by a
Fund. Each Fund's intention to qualify annually as a regulated investment
company may limit its elections with respect to PFIC stock.

Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income and loss with respect to PFIC stock, as well as subject a
Fund itself to tax on certain income from PFIC stock, the amount that must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock. Investors should consult
their own tax advisors in this regard.

Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions from certain of the Funds may be
eligible for the dividends-received deduction available to corporations. To the
extent dividends received by a Fund are attributable to foreign corporations, a
corporation that owns shares in a Fund will not be entitled to the dividends
received deduction with respect to its pro rata portion of such dividends, since
the dividends-received deduction is generally available only with respect to
dividends paid by domestic corporations. In addition, the dividends received
deduction will be disallowed for shareholders who do not hold their shares in a
Fund for at least 45 days during the 90 day period beginning 45 days before a
share in the Fund becomes ex dividend with respect to such dividend.

Distributions of net capital gains, if any, designated by a Fund as capital
gain dividends are taxable to shareholders as long-term or mid-term capital
gain, regardless of the length of time the Fund's shares have been held by a
shareholder. All distributions are taxable to the shareholder whether reinvested
in additional shares or received in cash. Shareholders will be notified annually
as to the Federal tax status of distributions.

Investors should be careful to consider the tax implications of buying
shares just prior to a distribution by the Funds. Distributions by a Fund reduce
the net asset value of the Fund's shares. Should a distribution reduce the net
asset value below a stockholder's cost basis, such distribution, nevertheless,
would be taxable to the shareholder as ordinary income or capital gain as
described above, even though, from an investment standpoint, it may constitute a
partial return of capital. The price of shares purchased at that time includes
the amount of the forthcoming distribution.
<PAGE> 91

Upon the taxable disposition (including a sale or redemption) of shares of
a Fund, a shareholder may realize a gain or loss depending upon his basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands. Such gain or loss will be
long-term, mid-term, or short-term, generally depending upon the shareholder's
holding period for the shares. Non-corporate shareholders are subject to tax at
a minimum rate of 28% on capital gains resulting from the disposition of shares
held for more than 12 months but not more than 18 months, and at a maximum rate
of 20% on capital gains from the disposition of shares held for more than 18
months, (10% if the taxpayer is, and would be after accounting for such gains,
subject to the 15% tax bracket for ordinary income). However, a loss realized by
a shareholder on the disposition of Fund shares with respect to which capital
gain dividends have been paid will, to the extent of such capital gain
dividends, be treated as long-term capital loss if such shares have been held by
the shareholder for six months or less. Further, a loss realized on a
disposition will be disallowed to the extent the shares disposed of are replaced
(whether by reinvestment of distributions or otherwise) within a period of 61
days beginning 30 days before and ending 30 days after the shares are disposed
of. In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss. Shareholders receiving distributions in the form of
additional shares will have a cost basis for Federal income tax purposes in each
share received equal to the net asset value of a share of the Funds on the
reinvestment date.

Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund are
exchanged within 90 days after the date they were purchased and new Service
Class shares of a Fund are acquired without a sales charge or at a reduced sales
charge. In that case, the gain or loss recognized on the exchange will be
determined by excluding from the tax basis of the shares exchanged all or a
portion of the sales charge incurred in acquiring those shares. This exclusion
applies to the extent that the otherwise applicable sales charge with respect to
the newly acquired shares is reduced as a result of having incurred the sales
charge initially. Instead, the portion of the sales charge affected by this rule
will be treated as a sales charge paid for the new shares.

Certain of the options, futures contracts, and forward foreign currency
exchange contracts in which certain of the Funds may invest are so-called
"section 1256 contracts". With certain exceptions, realized gains or losses on
section 1256 contracts generally are considered 60% long-term and 40% short-term
capital gains or losses ("60/40"). Also, section 1256 contracts held by a Fund
at the end of each taxable year (and, generally, for purposes of the 4% excise
tax, on October 31 of each year) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were realized and the
resulting gain or loss is treated as 60/40 gain or loss. Investors should
consult their own tax advisers in this regard.

Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on a position that is part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to a Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term capital gain realized
by a Fund which is taxed as ordinary income when distributed to stockholders.

A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and will be taxed to shareholders as ordinary income or long-term
capital gain, may be increased or decreased substantially as compared to a Fund
that did not engage in such hedging transactions.

Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues interest or other receivables
or accrues expenses or other liabilities denominated in a foreign
<PAGE> 92

currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase, decrease, or eliminate the amount
of a Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.

Income received by a Fund from sources within foreign countries may be
subject to withholding and other similar income taxes imposed by the foreign
country.

Generally, a credit for foreign taxes is available but is subject to the
limitation that it may not exceed the shareholder's U.S. tax attributable to his
total foreign source taxable income. For this purpose, if a Fund makes the
election to qualify as a regulated investment company, the source of the Fund's
income flows through to its shareholders. With respect to a Fund, gains from the
sale of securities will be treated as derived from U.S. sources and certain
currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit) including foreign source passive income of a
Fund. The foreign tax credit may offset only 90% of the alternative minimum tax
imposed on corporations and individuals, and foreign taxes generally may not be
deducted in computing alternative minimum taxable income.

The Funds are required to report to the Internal Revenue Service ("IRS")
all distributions to shareholders except in the case of certain exempt
shareholders. All such distributions generally are subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the case of
non-exempt shareholders if (1) the shareholder fails to furnish the Funds with
and to certify the shareholder's correct taxpayer identification number or
social security number, (2) the IRS notifies the Funds or a shareholder that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions whether reinvested in additional shares or taken in cash, will be
reduced by the amounts required to be withheld.

The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from the Federal income tax treatment.
Shareholders should consult their tax advisors with respect to particular
questions of Federal, state and local taxation. Shareholders who are not U.S.
persons should consult their tax advisors regarding U.S. and foreign tax
consequences of ownership of shares of the Funds, including the likelihood that
distributions to them would be subject to withholding of U.S. tax at a rate of
30% (or at a lower rate under a tax treaty).

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE
SECTION IN THE FUNDS' PROSPECTUS ENTITLED "PERFORMANCE INFORMATION".

The Funds may, from time to time, include their yield, effective yield and
average annual total return in advertisements or reports to shareholders or
prospective investors.

Current yield for the Cash Management Fund will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular seven-day period, less a pro-rata share of the Fund's expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
"Effective yield" for the Cash Management Fund assumes that all dividends
received during an annual period have been reinvested.
<PAGE> 93

Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:

Effective Yield = [(Base Period Return + 1) 365/7] - 1.

Quotations of yield for the other Funds will be based on the investment
income per share earned during a particular 30-day period, less expenses accrued
during a period ("net investment income") and will be computed by dividing net
investment income by the maximum offering price per share on the last day of the
period, according to the following formula:

YIELD = 2[(a-b + 1)6-1]
cd

where a = dividends and interest earned during the period, b = expenses
accrued for the period (net of any reimbursements), c = the average daily number
of shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period. For
the thirty day period ended September 30, 1997, the yield of the Intermediate
Bond Fund was 5.56%.

Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a Fund
over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:

P (1 + T)n = ERV

(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of certain reimbursed expenses) on an
annual basis, and will assume that all dividends and distributions are
reinvested when paid.

Rates of Total Return
For the Year Ended September 30

<TABLE>
<CAPTION>
1997 1996 1995
Retail Svc. Retail Svc. Retail Svc.
Class Class Class Class Class Class
<S> <C> <C> <C> <C> <C> <C>
EQUITY 39.61% 33.75% 26.9% 26.3% 25.54% 25.85%
BALANCED 28.32% 22.91% 19.0% 18.8% 21.67% 21.98%
SMALLCAP EQUITY 44.8%* n/a n/a n/a n/a n/a
INTERMEDIAT E BOND 11.36% n/a 4.5% n/a (.95%) 11.13%
</TABLE>

*For the period from April 15, 1997 through September 30, 1997.

Average Annual Total Return

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
EQUITY -- RETAIL CLASS 39.6% 23.9% 14.3% 16.1%
EQUITY -- SERVICE CLASS 33.7% 22.4%
BALANCED -- RETAIL CLASS 28.3% 18.1% 16.3%
BALANCED -- SERVICE CLASS 22.9% 16.6%
SMALLCAP EQUITY -- RETAIL CLASS 44.8%*
INTERMEDIATE BOND -- RETAIL CLASS 11.4% 6.1% 7.1%
</TABLE>

*For the period from April 15, 1997 through September 30, 1997 (not annualized).

Quotations of yield and total return will reflect only the performance of a
hypothetical investment in the Funds during the particular time period shown.
Yield and total return for the Funds will vary based on changes in the market
conditions and the level of the Funds' expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.

In connection with communicating its yields or total return to current or
prospective shareholders, the Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but generally
do no reflect deductions for administrative and management costs.

<PAGE> 94
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Composite Stock Index,
the Dow Jones Industrial Average, the Russell 2000 Index, Lehman Brothers
Corporate/Government Bond Index, National Association of REIT Index, or other
unmanaged indices so that investors may compare the Funds' results with those of
a group of unmanaged securities widely regarded by investors as representative
of the securities markets in general; (ii) other groups of mutual funds tracked
by Lipper Analytical Services, a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
investment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

INFORMATION ABOUT THE FUNDS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE
SECTION IN THE FUNDS' PROSPECTUS ENTITLED "GENERAL INFORMATION."

The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest having a par value of $0.001 per share. The
Trust's Declaration of Trust authorizes the Board of Trustees to classify or
reclassify any unissued shares of beneficial interest. Pursuant to that
authority, the Board of Trustees has authorized the issuance of six series
representing six portfolios of the Trust (i.e., the Funds).

Except as noted below, each share of a Fund represents an equal
proportionate interest in that Fund with each other share of the same Fund and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that Fund as are declared in the discretion of the Trust's
Board of Trustees. In the event of the liquidation or dissolution of the Trust,
shares of a Fund are entitled to receive the assets belonging to that Fund which
are available for distribution, and a proportionate distribution, based upon the
relative net assets of the Funds, of any general assets not belonging to a Fund
which are available for distribution.

Each Fund is comprised of two classes of shares of beneficial interest --
"Retail Class" shares (formerly "Institutional Class") and "Service Class"
shares. Retail Class shares and Service Class shares are identical in all
respects, except that Service Class shares are subject to a sales load and bear
higher expenses incurred in the distribution and marketing of such shares. These
expenses are paid pursuant to the Rule 12b-1 Distribution Plan and Agreement
described under "Investment Advisory and Other Services" in this Statement of
Additional Information.

All shares of the Trust have equal voting rights and will be voted in the
aggregate, and not by class or series, except where voting by class or series is
required by law or where the matter involved affects only one class or series.
For example, shareholders of each Fund will vote separately by series on matters
involving investment advisory contracts and shareholders of each Class will vote
separately by class for matters involving the Rule 12b-1 Distribution Plan. As
used in the Prospectus and in this Statement of Additional Information, the term
"majority", when referring to the approvals to be obtained from shareholders in
connection with general matters affecting all of the Funds (e.g., election of
Trustees and ratification of independent accountants), means the vote of a
majority of each Fund's outstanding shares represented at a meeting. The term
"majority", as defined by the Act when referring to the approvals to be obtained
from shareholders in connection with matters affecting a single Fund or class
(e.g., approval of investment advisory contracts or changing the fundamental
policies of a Fund, or approving the Rule 12b-1 Distribution Plan and Agreement
with respect to a class), means the vote of the lesser of (i) 67% of the shares
of the Fund (or class) represented at a meeting if the holders of more than 50%
of the outstanding shares of the Fund (or class) are present in person or by
proxy, or (ii) more than 50% of the outstanding shares of the Fund (or class).
Shareholders are entitled to one vote for each full share held, and fractional
votes for fractional shares held.

Shareholders are not entitled to any preemptive rights. All shares, when
issued, will be fully paid and non-assessable by the Trust.

The Funds send annual and semi-annual financial statements to all of their
shareholders.

<PAGE> 95

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT ACCOUNTANTS

The Bank of New York, 110 Washington Street, New York, New York 10286, acts
as the Funds' custodian. State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110, acts as transfer agent for the Trust. Neither State
Street Bank and Trust Company, nor The Bank of New York takes any part in
determining the investment policies of the Funds or which portfolio securities
are to be purchased or sold by the Funds.

Battle Fowler LLP, 75 East 55th Street, New York, New York 10022, passes
upon certain legal matters in connection with the shares offered by the Funds
and also acts as Counsel to the Funds.

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, independent accountants, have been selected as independent accountants of
the Funds.

APPENDIX

Descriptions of certain Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") corporate bond ratings:

S&P
AAA
Bonds rated AAA have the highest rating assigned by S&P to a debt obligation.
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 highest rated issues only in a 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 higher 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 for bonds in higher rated categories.

Plus (+) or minus (-): The ratings from AA to BBB may be modified by the
addition of a plus or minus designation to show relative standing within the
major ratings categories.

MOODY'S
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa
Bonds which are rated Aa are judged to be of higher quality by all standards.
Together with the Aaa group they comprise what generally are 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 larger than in Aaa securities.
<PAGE> 96

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.

Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end or a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.

Description of S&P and Moody's commercial paper ratings:

The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.

The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.

FINANCIAL STATEMENTS

The audited financial statements for the Funds dated September 30, 1997 and the
Report of Price Waterhouse LLP thereon, are incorporated herein by reference to
the Trust's Annual Report. The Annual Report is available upon request and
without charge.
<PAGE> 97
THE GABELLI WESTWOOD FUNDS
PART C: OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Included in Part A:

THE GABELLI WESTWOOD FUNDS

Financial Highlights for each of the five years in the period ended
September 30, 1997.

Included in Part B for all the Funds and incorporated by reference to the Funds'
Annual Report dated September 30, 1997:

THE GABELLI WESTWOOD FUNDS

Portfolio of Investments -- September 30, 1997.

Statement of Assets and Liabilities -- September 30, 1997.

Statement of Operations -- year ended September 30, 1997.

Statement of Changes in Net Assets -- for the years ended September 30,
1996 and September 30, 1997.

Notes to Financial Statements.

Report of Independent Accountants dated November 7, 1997.
(Incorporated by Reference)

(b) Exhibits:

(1) Registrant's Declaration of Trust and Amendments thereto are incorporated
by reference to Exhibit 1 of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on December 22, 1986.

(2) Registrant's By-Laws are incorporated by reference to Exhibit 2 of
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A,
filed on December 22, 1986.

(3) None.

(4) The specimen copy of a share certificate is incorporated by reference to
Exhibit 4 of Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A, filed on December 22, 1986.

(5)(a) Revised form of Investment Advisory Agreement between the Registrant and
Teton Advisers LLC incorporated by reference to Exhibit 5(a) of
Post-Effective Amendment No. 16 to the Registration Statement on Form
N-1A, filed on April 14, 1997.

(5)(b) Sub-Administration Contract with BISYS Fund Services for The Gabelli
Westwood Funds incorporated by reference to Exhibit 5(b) of
Post-Effective Amendment No. 17 to the Registration Statement on Form
N-1A, filed on October 30, 1997.

<PAGE> 98

(5)(c) The Form of Investment Sub-Advisory Agreement between Gabelli Advisers
LLC and Westwood Management Corporation for the Gabelli Westwood SmallCap
Equity Fund and Gabelli Westwood Realty Fund, incorporated by reference
to Exhibit 5(c) of Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A, filed on April 14, 1997.

(6) The Distribution Agreement between Gabelli & Company, Inc. and The
Gabelli Westwood Funds, incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A, filed on January 31, 1995.

(7) None.

(8)(a) The Amended and Restated Custody Agreement dated August 18, 1989 is
incorporated by reference to Exhibit 8 of Post-Effective Amendment No. 4
to the Registration Statement on Form N-1A, filed on January 29, 1990.

(9) None.

(10)(a)Opinion of Baker & McKenzie, Trust Counsel, incorporated by reference to
Exhibit 10(a) of Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A, filed on February 20, 1997.

(10)(b)Consent of Battle Fowler LLP, Trust Counsel.*

(11) Consent of Price Waterhouse LLP, Independent Accountants.*

(12) None.

(13) None.

(14) None.

(15) Rule 12b-1 Distribution Plan and Agreement for The Gabelli Westwood Funds
(Retail Class) incorporated by reference to Exhibit (15)(b) of
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A, filed on January 31, 1995.

(15)(a)Rule 12b-1 Distribution Plan and Agreement for The Gabelli Westwood Funds
(Service Class) incorporated by reference to Exhibit (15)(b) of
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A, filed on January 31, 1995.

(16) Schedule for Computation of Performance Quotations -- the Gabelli
Westwood Equity Fund.*

(17) Financial Data Schedules.*

(18)(a)Power of Attorney is incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement on Form N1-A, filed on
January 29, 1990 (following the signature page).

(b)Certificate of Secretary is incorporated by reference to Post-Effective
Amendment No. 4 to the registration statement on Form N-1A, filed on
January 29, 1990.

(c)Power of Attorney dated as of July 15, 1991 is incorporated by reference
to Exhibit 16(c) of Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A, filed on July 19, 1991.

(d)Power of Attorney dated as of November 27, 1991 is incorporated by
reference to Exhibit 16(d) of Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A, filed on December 4, 1991.
<PAGE> 99

(e)Power of Attorney dated as of November 15, 1994 is incorporated by
reference to Exhibit 16(f) of Post Effective Amendment No. 12 to the
Registration Statement on Form N-1A, filed on January 31, 1995.

(f)Power of Attorney dated as of November 18, 1997.*

(19) Report of Independent Accountants concerning the operation and control
objectives and procedures relating to the calculation of the Funds' net
asset values and dividends and distributions under the multi-class
system, is incorporated by reference to Exhibit 16(e) of Post-Effective
Amendment No. 12 to the Registration Statement on Form N1-A, filed on
January 31, 1995.

Item 25.Persons Controlled by or Under Common Control with Registrant

Not Applicable.

- - ----------
* Filed herewith.

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Record
Holders as of
January 5, 1998

<S> <C>
Gabelli Westwood Equity Fund (Retail Class) 6,252
Gabelli Westwood Cash Management Fund (Retail Class) --
Gabelli Westwood Intermediate Bond Fund (Retail Class) 429
Gabelli Westwood Balanced Fund (Retail Class) 3,175
Gabelli Westwood Equity (Service Class) 153
Gabelli Westwood Balanced (Service Class) 419
Gabelli Westwood SmallCap Equity Fund (Retail Class) 464
Gabelli Westwood Realty Fund (Retail Class) 138
</TABLE>

Item 27. Indemnification

The statement as to the general effect of any contract, arrangements or
statute under which a trustee, officer, underwriter or affiliated person of
the Registrant is indemnified is incorporated by reference to Item 27 of
Part C of Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on December 22, 1986.

Item 28. Business and Other Connections of the Investment Adviser

Gabelli Advisers LLC (the "Adviser"), a subsidiary of Gabelli Funds, Inc.,
serves as the Funds' investment adviser. The Adviser is a Texas limited
liability company. The Adviser was formed in 1994 and prior to November 7,
1997, it was known as Teton Advisers LLC.

Westwood Management Corporation (the "Sub-Adviser") serves as the Fund's
investment adviser. The Sub-Adviser is a registered investment adviser
managing in excess of $900 million in separate accounts, primarily
corporate pension funds. The Sub-Adviser was formed in 1983.

<PAGE> 100

Officers and Directors of Investment Adviser

<TABLE>
<CAPTION>
<S> <C>
Name and Position
with Investment Adviser Other Businesses:

Bruce N. Alpert Chief Operating Officer of Investment
President and General Manager Advisory Division of Gabelli Funds, Inc.

Gary P. Watson Chief Financial Officer of Gabelli Securities, Inc.
Vice President

Joseph R. Rindler Chairman of Gabelli Asset Management Company, Inc.
Member

John D. Gabelli Senior Vice President of Gabelli & Company, Inc.
Member

James E. McKee General Counsel of Gabelli Funds, Inc.
Secretary
</TABLE>

Officers and Directors of Investment Sub-Adviser

<TABLE>
<CAPTION>
<S> <C>
Name and Position
with Investment Sub-Adviser Other Businesses:

Susan M. Byrne Director:
Director, President and Treasurer Westwood Trust
200 Crescent Court
Suite 1300
Dallas, TX
Director:
Southwest Securities Group
1201 Elm Street, #3500
Dallas, TX

Patricia Rice Fraze None
Director and Executive Vice President

Lynda Jean Calkin None
Senior Vice President

Donald A. Buchholz Chairman, Director:
Director Southwest Securities Group
1201 Elm Street, #3500
Dallas, TX
Director:
Westwood Trust
200 Crescent Court
Suite 1300
Dallas, TX
Director:
Southwest Investment Advisers, Inc.
1201 Elm Street, #3500
Dallas, TX

Raymond E. Woolridge Vice Chairman:
Director Southwest Securities Group
1201 Elm Street, #3500
Dallas, TX
Director:
Westwood Trust
200 Crescent Court
Suite 1300
Dallas, TX
Chief Executive Officer:
Southwest Investment Advisers, Inc.
1201 Elm Street, #3500
Dallas, TX
</TABLE>

<PAGE> 101

<TABLE>
<CAPTION>
<S> <C>
Director:
Brokers Transactions
Services
Preston Road, Dallas, TX
Director:
D.A. Davidson & Co.
Great Falls, MT

David Glatstein Director, President and Chief Executive Officer:
Director Southwest Securities Group
1201 Elm Street, #3500
Dallas, TX

Jacqueline Finley Subsidiary Accountant:
Secretary Southwest Securities, Inc.
1201 Elm Street, #3500
Dallas, TX
</TABLE>

Item 29. Principal Underwriter

(a) Gabelli & Company, Inc. or its affiliate is Distributor for the
Registrant, Gabelli Equity Series Funds, Inc., Gabelli Gold Fund,Inc., Gabelli
Global Series Funds, Inc., Gabelli International Growth Fund, Inc., Gabelli
Investor Funds, Inc., Gabelli Capital Asset Fund, Gabelli Asset Fund, Gabelli
Growth Fund, Gabelli Value Fund, Inc., Gabelli Westwood Equity Fund, Gabelli
Westwood Intermediate Bond Fund, Gabelli Westwood Balanced Fund, Gabelli
Westwood Cash Management Fund, Gabelli Westwood Realty Fund and Gabelli Westwood
SmallCap Equity Fund.

(b) Officers and Trustees

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Distributor with Registrant

<S> <C> <C>
Stephen G. Bondi Director, Vice President -- Finance None
James E. McKee Secretary Secretary
Donald C. Jenkins Director None
Walter K. Walsh Compliance Officer None
James G. Webster, III Chairman and Director None
Gary P. Watson Chief Financial Officer None

- - ----------
<FN>
* All addresses are One Corporate Center, Rye, New York 10580.
</TABLE>

<PAGE> 102

Item 30. Location of Accounts and Records

1. The Bank of New York
90 Washington Street
New York, New York 10266

2. Gabelli Advisers LLC
One Corporate Center
Rye, New York 10580

3. Westwood Management Corporation
300 Crescent Court, Suite 1320
Dallas, TX 75201

4. BISYS Fund Services, Inc.
3435 Stelzer Rd., Suite 1000
Columbus, OH 43219

5. State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Item 31. Management Services

Not Applicable.

Item 32. Undertakings

(a) Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the removal of a trustee if requested to do so by the
holders of at least 10% of the Registrant's outstanding shares.

(b) Registrant undertakes to provide the support to shareholders specified
in Section 16(c) of the 1940 Act as though that section applied to the
Registrant.

(c) Registrant hereby undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of the Registrant's 1933 Act
Registration Statement relating to shares of the Gabelli Westwood
Realty Fund (the "Shares") or the initial public offering of the
Shares, whichever is later.

<PAGE> 103
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Rye, and State of
New York on the 16th day of January 1998.

THE GABELLI WESTWOOD FUNDS

BY: *Susan M. Byrne
--------------------------
Susan M. Byrne
President and Principal Executive Officer

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities and on the
date indicated.

Signature Title Date
- --------- ----- ----

* Susan M. Byrne Trustee, President and
- ---------------------- Principal Executive Officer January , 1998
Susan M. Byrne

* Anthony J. Colavita Trustee January , 1998
- ----------------------
Anthony J. Colavita

*James P. Conn Trustee January , 1998
- ----------------------
James P. Conn

* Werner Roeder, M.D. Trustee January , 1998
- ----------------------
Werner Roeder, M.D.

* Karl Otto Pohl Trustee January , 1998
- ----------------------
Karl Otto Pohl

By: /Bruce N. Alpert/
------------------
Bruce N. Alpert
Attorney-in-Fact

* Pursuant to Power of Attorney filed herewith as Exhibit 18(f).

<PAGE> 1

Exhibit 10b

CONSENT OF BATTLE FOWLER LLP

We consent to the reference to our firm under the heading "Custodian,
Transfer and Dividend Disbursing Agent, Counsel and Independent Accountants" in
Amendment No. 18 to the Registration Statement on Form N-1A of The Gabelli
Westwood Funds as filed with the Securities and Exchange Commission on January
16, 1988.

/s/ Battle Fowler LLP
BATTLE FOWLER LLP

New York, New York
January 16. 1998

<PAGE> 1
Exhibit 11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
November 7, 1997, relating to the financial statements and financial highlights
of Gabelli Westwood Equity Fund, Gabelli Westwood Intermediate Bond Fund,
Gabelli Westwood Balanced Fund, and Gabelli Westwood SmallCap Equity Fund
(constituting The Gabelli Westwood Funds), which appears in such Statement of
Additional Information, and to the incorporation by reference to our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the headings "Independent Accountants" and
"Financial Highlights" in the Prospectus and under the headings "Custodian,
Transfer and Dividend Disbursing Agent, Counsel and Independent Accountants" and
"Financial Statements" in the Statement of Additional Information.

/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
January 16, 1998

<PAGE> 1
WESTWOOD MUTUAL FUNDS
EXHIBIT 16
TOTAL RETURN
SERVICE SHARES

EQUITY FUND

AVERAGE ANNUAL TOTAL RETURNS
WITH 4.00% SALES CHARGE

T = ((ERV/P)EXP(1/N)) - 1

WHERE: T = TOTAL RETURN

ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.

P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.

N = NUMBER OF YEARS

EXAMPLE:

SINCE INCEPTION: (01/28/94 TO 09/30/97 ):
( 2,102.0 /1,000)EXP(1/( 1341 /365))-1) = 22.41%
1 YEAR (09/30/96 TO 09/30/97 ):
( 1,337.5 /1,000)EXP(1/( 365 /365))-1) = 33.75%

AVERAGE ANNUAL TOTAL RETURNS
WITHOUT SALES CHARGE

T = ((ERV/P)EXP(1/N)) - 1

WHERE: T = TOTAL RETURN

ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD.

P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.

N = NUMBER OF YEARS

EXAMPLE:

SINCE INCEPTION: (01/28/94 TO 09/30/97 ):
( 2,189.5 /1,000)EXP(1/( 1341 /365))-1) = 23.78%
1 YEAR (09/30/96 TO 09/30/97 ):
( 1,393.1 /1,000)EXP(1/( 365 /365))-1) = 39.31%

<PAGE> 2
WESTWOOD MUTUAL FUNDS
EXHIBIT 16
TOTAL RETURN
SERVICE SHARES

EQUITY FUND

AGGREGATE TOTAL RETURNS
WITH 4.00% SALES CHARGE

T = ((ERV/P)EXP(1/N)) - 1

WHERE: T = TOTAL RETURN

ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.

P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.

N = NUMBER OF YEARS

EXAMPLE:

SINCE INCEPTION: (04/06/93 TO 09/30/97 ):
( 2,102.1 /1,000)-1 = ***********
1 YEAR (09/30/96 TO 09/30/97 ):
( 1,337.5 /1,000)-1 = 33.75%

AGGREGATE TOTAL RETURNS
WITHOUT SALES CHARGE

T = ((ERV/P)EXP(1/N)) - 1

WHERE: T = TOTAL RETURN

ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.

P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.

N = NUMBER OF YEARS

EXAMPLE:

SINCE INCEPTION: (04/06/93 TO 09/30/97 ):
( 2,189.5 /1,000)-1 = ***********
1 YEAR (09/30/96 TO 09/30/97 ):
( 1,393.1 /1,000)-1 = 39.31%

<PAGE> 1
Exhibit 18F

POWER OF ATTORNEY
-----------------

We, the undersigned Trustees of the Westwood Funds (the "Funds"), an
open-ended, diversified, management investment company, organized as a
Massachusetts business trust, do hereby constitute and appoint Bruce N. Alpert
and JAMES E. MCKEE and each of them individually, our true and lawful attorneys
and agents to take any and all action and execute any and all instruments which
said attorneys and agents may deem necessary or advisable to enable the Funds
comply with:,

(i) the Securities Act of 1933, as amended, and any rules,
regulations, orders or other requirements of the Securities and
Exchange Commission thereunder, in connection with the
registration under such Securities Act of 1933, as amended, of
shares of beneficial interest of the Funds to be offered by the
Funds;

(ii) the Investment Company Act of 1940, as amended, and any
rules, regulations, orders or other requirements of the Securities
and Exchange Commission thereunder, in connection With the
registration of the Funds under the Investment Company Act of
1940, as amended; and

(iii) state securities laws and rules, regulations, orders or
other requirements of state securities commissions, in correction
with the registration under. state securities laws of the 'Funds
and with the registration under state securities laws of shares of
beneficial interest of the Funds to be offered by the Funds;

including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Funds in its behalf and to affix its seal, and
to sign the name of such Trustee to any amendment or supplement (including
post-effective amendments) to the registration statement or statements filed
with the Securities and Exchange Commission under such Securities Act of 1933,
as amended, and such Investment Company Act of 1940, as amended, and to execute
any instruments or documents filed or to be filed as part of or in connection
with such registration statement or statements, and to execute any instruments
or documents filed or to be filed as a part of or in connection with compliance
with state securities laws, including, but not limited to, all state filings for
any purpose, state filings in connection with corporate or trust organization or
amending corporate or trust documentation, filings for purposes of state laws
and filings in connection with blue sky regulations; and the undersigned hereby
ratifies and confirms all that said attorney and agent shall do or cause to be
done by virtue hereof.

<PAGE> 2

IN WITNESS WHEREOF, the undersigned place their hands as of this day of
November, 1997.

/s/ Susan M. Byrne
----------------------
Susan M. Byrne

/s/ Anthony J. Colavita
----------------------
Anthony J. Colavita

/s/ James P. Conn
----------------------
James P. Conn

/s/ Dr. Werner J. Roeder
----------------------
Dr. Werner J. Roeder

/s/ Karl Otto Pohl
----------------------
Karl Otto Pohl

<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> WESTWOOD EQUITY FUND RETAIL CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 111,522,351
<INVESTMENTS-AT-VALUE> 132,154,682
<RECEIVABLES> 1,503,715
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 651,607
<TOTAL-ASSETS> 134,310,004
<PAYABLE-FOR-SECURITIES> 1,712,771
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 562,696
<TOTAL-LIABILITIES> 2,275,467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105,702,744
<SHARES-COMMON-STOCK> 13,445,123<F1>
<SHARES-COMMON-PRIOR> 3,821,259<F1>
<ACCUMULATED-NII-CURRENT> 683,192
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,016,270
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,632,331
<NET-ASSETS> 132,034,537
<DIVIDEND-INCOME> 1,423,476
<INTEREST-INCOME> 401,009
<OTHER-INCOME> 0
<EXPENSES-NET> 1,053,632
<NET-INVESTMENT-INCOME> 770,853
<REALIZED-GAINS-CURRENT> 5,123,310
<APPREC-INCREASE-CURRENT> 17,743,737
<NET-CHANGE-FROM-OPS> 23,637,900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 298,531<F1>
<DISTRIBUTIONS-OF-GAINS> 3,698,285<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 11,047,947<F1>
<NUMBER-OF-SHARES-REDEEMED> 1,955,697<F1>
<SHARES-REINVESTED> 531,614<F1>
<NET-CHANGE-IN-ASSETS> 101,471,584
<ACCUMULATED-NII-PRIOR> 199,066
<ACCUMULATED-GAINS-PRIOR> 3,772,156
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 700,389
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,118,847
<AVERAGE-NET-ASSETS> 67,827,520<F1>
<PER-SHARE-NAV-BEGIN> 7.68<F1>
<PER-SHARE-NII> 0.07<F1>
<PER-SHARE-GAIN-APPREC> 2.72<F1>
<PER-SHARE-DIVIDEND> 0.07<F1>
<PER-SHARE-DISTRIBUTIONS> 0.83<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.57<F1>
<EXPENSE-RATIO> 1.53<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>RETAIL CLASS
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> WESTWOOD EQUITY FUND SERVICE CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 111,522,351
<INVESTMENTS-AT-VALUE> 132,154,682
<RECEIVABLES> 1,503,715
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 651,607
<TOTAL-ASSETS> 134,310,004
<PAYABLE-FOR-SECURITIES> 1,712,771
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 562,696
<TOTAL-LIABILITIES> 2,275,467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105,702,744
<SHARES-COMMON-STOCK> 348,798<F1>
<SHARES-COMMON-PRIOR> 158,838<F1>
<ACCUMULATED-NII-CURRENT> 683,192
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,016,270
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,632,331
<NET-ASSETS> 132,034,537
<DIVIDEND-INCOME> 1,423,476
<INTEREST-INCOME> 401,009
<OTHER-INCOME> 0
<EXPENSES-NET> 1,053,632
<NET-INVESTMENT-INCOME> 770,853
<REALIZED-GAINS-CURRENT> 5,123,310
<APPREC-INCREASE-CURRENT> 17,743,737
<NET-CHANGE-FROM-OPS> 23,637,900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,884<F1>
<DISTRIBUTIONS-OF-GAINS> 148,096<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 222,950<F1>
<NUMBER-OF-SHARES-REDEEMED> 54,301<F1>
<SHARES-REINVESTED> 21,311<F1>
<NET-CHANGE-IN-ASSETS> 101,471,584
<ACCUMULATED-NII-PRIOR> 199,066
<ACCUMULATED-GAINS-PRIOR> 3,772,156
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 700,389
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,118,847
<AVERAGE-NET-ASSETS> 2,214,327<F1>
<PER-SHARE-NAV-BEGIN> 7.69<F1>
<PER-SHARE-NII> 0.06<F1>
<PER-SHARE-GAIN-APPREC> 2.71<F1>
<PER-SHARE-DIVIDEND> 0.06<F1>
<PER-SHARE-DISTRIBUTIONS> 0.83<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.57<F1>
<EXPENSE-RATIO> 1.78<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>SERVICE CLASS
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> WESTWOOD INTERMEDIATE BOND FUND RETAIL CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 5,799,617
<INVESTMENTS-AT-VALUE> 5,878,016
<RECEIVABLES> 91,374
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 140,658
<TOTAL-ASSETS> 6,110,048
<PAYABLE-FOR-SECURITIES> 175,022
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,192
<TOTAL-LIABILITIES> 198,214
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,321,563
<SHARES-COMMON-STOCK> 574,529
<SHARES-COMMON-PRIOR> 556,345
<ACCUMULATED-NII-CURRENT> 51
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 488,179
<ACCUM-APPREC-OR-DEPREC> 78,399
<NET-ASSETS> 5,911,834
<DIVIDEND-INCOME> 67,700
<INTEREST-INCOME> 356,967
<OTHER-INCOME> 0
<EXPENSES-NET> 55,071
<NET-INVESTMENT-INCOME> 369,596
<REALIZED-GAINS-CURRENT> 107,861
<APPREC-INCREASE-CURRENT> 116,971
<NET-CHANGE-FROM-OPS> 594,428
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 370,062
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 117,171
<NUMBER-OF-SHARES-REDEEMED> 124,506
<SHARES-REINVESTED> 25,519
<NET-CHANGE-IN-ASSETS> 416,141
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 595,989
<GROSS-ADVISORY-FEES> 33,052
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 93,598
<AVERAGE-NET-ASSETS> 5,508,607
<PER-SHARE-NAV-BEGIN> 9.88
<PER-SHARE-NII> 0.68
<PER-SHARE-GAIN-APPREC> 0.41
<PER-SHARE-DIVIDEND> 0.68
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 1.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> WESTWOOD BALANCED FUND RETAIL CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 69,932,746
<INVESTMENTS-AT-VALUE> 80,702,808
<RECEIVABLES> 1,018,233
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,097,398
<TOTAL-ASSETS> 82,818,439
<PAYABLE-FOR-SECURITIES> 1,077,204
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 263,191
<TOTAL-LIABILITIES> 1,340,395
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,604,931
<SHARES-COMMON-STOCK> 5,833,362<F1>
<SHARES-COMMON-PRIOR> 2,385,267<F1>
<ACCUMULATED-NII-CURRENT> 46,195
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,056,856
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,770,062
<NET-ASSETS> 81,478,044
<DIVIDEND-INCOME> 771,707
<INTEREST-INCOME> 1,384,125
<OTHER-INCOME> 0
<EXPENSES-NET> 730,170
<NET-INVESTMENT-INCOME> 1,425,662
<REALIZED-GAINS-CURRENT> 4,225,571
<APPREC-INCREASE-CURRENT> 8,428,586
<NET-CHANGE-FROM-OPS> 14,079,819
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,102,900<F1>
<DISTRIBUTIONS-OF-GAINS> 1,720,932<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 4,088,896<F1>
<NUMBER-OF-SHARES-REDEEMED> 910,694<F1>
<SHARES-REINVESTED> 269,893<F1>
<NET-CHANGE-IN-ASSETS> 47,104,265
<ACCUMULATED-NII-PRIOR> 472
<ACCUMULATED-GAINS-PRIOR> 2,243,549
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 419,264
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 794,273
<AVERAGE-NET-ASSETS> 43,142,731<F1>
<PER-SHARE-NAV-BEGIN> 9.71<F1>
<PER-SHARE-NII> 0.25<F1>
<PER-SHARE-GAIN-APPREC> 2.36<F1>
<PER-SHARE-DIVIDEND> 0.25<F1>
<PER-SHARE-DISTRIBUTIONS> 0.58<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 11.49<F1>
<EXPENSE-RATIO> 1.28<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>RETAIL CLASS
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 042
<NAME> WESTWOOD BALANCED FUND SERVICE CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 69,932,746
<INVESTMENTS-AT-VALUE> 80,702,808
<RECEIVABLES> 1,018,233
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,097,398
<TOTAL-ASSETS> 82,818,439
<PAYABLE-FOR-SECURITIES> 1,077,204
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 263,191
<TOTAL-LIABILITIES> 1,340,395
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,604,931
<SHARES-COMMON-STOCK> 1,260,223<F1>
<SHARES-COMMON-PRIOR> 1,157,663<F1>
<ACCUMULATED-NII-CURRENT> 46,195
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,056,856
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,770,062
<NET-ASSETS> 81,478,044
<DIVIDEND-INCOME> 771,707
<INTEREST-INCOME> 1,384,125
<OTHER-INCOME> 0
<EXPENSES-NET> 730,170
<NET-INVESTMENT-INCOME> 1,425,662
<REALIZED-GAINS-CURRENT> 4,225,571
<APPREC-INCREASE-CURRENT> 8,428,586
<NET-CHANGE-FROM-OPS> 14,079,819
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 271,666<F1>
<DISTRIBUTIONS-OF-GAINS> 687,890<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 312,801<F1>
<NUMBER-OF-SHARES-REDEEMED> 296,196<F1>
<SHARES-REINVESTED> 85,955<F1>
<NET-CHANGE-IN-ASSETS> 47,104,265
<ACCUMULATED-NII-PRIOR> 472
<ACCUMULATED-GAINS-PRIOR> 2,243,549
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 419,264
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 794,273
<AVERAGE-NET-ASSETS> 12,774,693<F1>
<PER-SHARE-NAV-BEGIN> 9.69<F1>
<PER-SHARE-NII> 0.24<F1>
<PER-SHARE-GAIN-APPREC> 2.33<F1>
<PER-SHARE-DIVIDEND> 0.22<F1>
<PER-SHARE-DISTRIBUTIONS> 0.58<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 11.46<F1>
<EXPENSE-RATIO> 1.53<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>SERVICE CLASS
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 051
<NAME> WESTWOOD SMALLCAP EQUITY REFUND RETAIL CLASS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 6,946,099
<INVESTMENTS-AT-VALUE> 8,303,906
<RECEIVABLES> 215,612
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 214,019
<TOTAL-ASSETS> 8,733,537
<PAYABLE-FOR-SECURITIES> 164,696
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,862
<TOTAL-LIABILITIES> 187,558
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,796,931
<SHARES-COMMON-STOCK> 590,203
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 47,186
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 344,055
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,357,807
<NET-ASSETS> 8,545,979
<DIVIDEND-INCOME> 84,563
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 37,377
<NET-INVESTMENT-INCOME> 47,186
<REALIZED-GAINS-CURRENT> 344,055
<APPREC-INCREASE-CURRENT> 1,357,807
<NET-CHANGE-FROM-OPS> 1,749,048
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 882,585
<NUMBER-OF-SHARES-REDEEMED> 292,382
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,545,979
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24,918
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 61,308
<AVERAGE-NET-ASSETS> 5,395,386
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 4.40
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.48
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>