Registration Nos. 33-6790
811-4719
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 21 X
------ -
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21 X
------ -
THE GABELLI WESTWOOD FUNDS
(Exact Name of Registrant as Specified in Charter)
One Corporate Center, Rye, New York 10580-1434
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 1-800-422-3554
Bruce N. Alpert
Gabelli Advisers, Inc.
One Corporate Center
Rye, New York 10580-1434
---------------------------------------------
(Name and Address of Agent for Service)
Copies to:
James E. McKee, Esq. Michael R. Rosella, Esq.
The Gabelli Westwood Funds Battle Fowler LLP
One Corporate Center 75 East 55th Street
Rye, New York 10580-1434 New York, New York 10022
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b) on ____________
pursuant to Rule 485(b) 60 days after filing pursuant to Rule 485(a)(1)
X on February 1, 2000 pursuant to Rule 485(a)(1) 75 days after filing
pursuant to Rule 485(a)(2) on ____________ pursuant to Rule 485(a)(2)
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
THE GABELLI WESTWOOD FUNDS
Gabelli Westwood Equity Fund
Gabelli Westwood Balanced Fund
Gabelli Westwood SmallCap Equity Fund
Gabelli Westwood Mighty Mites(sm) Fund
Gabelli Westwood Realty Fund
Gabelli Westwood Intermediate Bond Fund
Class A Shares (formerly Service Class Shares)
Class B Shares
Class C Shares
PROSPECTUS
February 1, 2000
This Prospectus contains important information about the
Funds. Please read it before investing and keep it for
future reference.
Like all mutual funds, these securities have not been approved or disapproved by
the Securities and Exchange Commission, nor has the Securities and Exchange
Commission determined whether this Prospectus is accurate or complete. It is a
criminal offense to state otherwise.
The Gabelli Westwood Funds
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
(1-800-422-3554)
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by
calling 1-800-GABELLI after 6:00 p.m.)
Board of Trustees
Susan M. Byrne Karl Otto Pohl
President and Chief Executive Officer Former President
Westwood Management Corporation Deutsche Bundesbank
Anthony J. Colavita Werner J. Roeder
Attorney-at-law Practicing Private Physician
Anthony J. Colavita, P.C. Medical Director, Lawrence Hospital
James P. Conn
Former Chief Investment Officer
Financial Security Assurance Holdings Ltd.
<PAGE>
Officers
Susan M. Byrne Patricia R. Fraze
President Vice President
Bruce N. Alpert James E. McKee
Vice President and Treasurer Secretary
Lynda J. Calkin
Vice President
Questions?
Call 1-800-GABELLI or your
investment representative.
<PAGE>
Table of Contents
Page
Introduction..................................................................i
Investment and Performance Summary............................................1
More Investment and Risk Information.........................................19
Management of the Funds......................................................20
Classes of Shares............................................................21
Purchase of Shares...........................................................25
Redemption of Shares.........................................................26
Exchanges of Shares..........................................................27
Pricing of Fund Shares.......................................................27
Dividends and Distributions..................................................28
Tax Information..............................................................28
Financial Highlights.........................................................29
INTRODUCTION
.........The Gabelli Westwood Funds (the "Trust") currently consists of the
following six separate investment portfolios (the "Funds"):
Gabelli Westwood Equity Fund (the "Equity Fund") Gabelli Westwood
Balanced Fund (the "Balanced Fund") Gabelli Westwood SmallCap
Equity Fund (the "SmallCap Equity Fund") Gabelli Westwood Mighty
Mites(sm) Fund (the "Mighty Mites Fund") Gabelli Westwood Realty
Fund (the "Realty Fund") Gabelli Westwood Intermediate Bond Fund
(the "Intermediate Bond Fund")
This Prospectus describes Class A Shares, Class B Shares and Class C
Shares of the Funds. Class A Shares were formerly known as Service Class Shares
and prior to the date of this prospectus were only offered by the Equity Fund,
the Balanced Fund and the Intermediate Bond Fund. Each Fund is advised by
Gabelli Advisers, Inc. (the "Adviser") and each Fund, other than the
Mighty Mites Fund, is sub-advised by Westwood Management Corporation
(the "Sub-Adviser"). Each Fund's investment objective cannot be changed
without shareholder approval.
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD EQUITY FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Equity Fund seeks to provide
capital appreciation. Capital is the amount of money you invest in the
Fund. Capital appreciation is an increase in the value of your investment.
The Fund's secondary goal is to produce current income.
Principal Investment Strategies. The Fund primarily invests in common stocks and
may also invest in securities which may be converted into common stocks. The
Fund invests in a portfolio of seasoned companies. Seasoned companies
generally have market capitalizations in excess of $500 million and have
been operating for at least three years.
In selecting securities, the Sub-Adviser maintains a list of securities which it
believes have proven records and potential for above-average earnings growth. It
considers purchasing a security on such list if the Sub-Adviser's forecast for
growth rates and earning estimates exceeds Wall Street expectations, the issuer
of the security has a positive earnings surprise or the Adviser's forecasted
price/earnings ratio is less than the forecasted growth rate. The Sub-Adviser
closely monitors the issuers and will sell a stock if the Sub-Adviser expects
limited future price appreciation, the projected price/earnings ratio exceeds
the three-year growth rate and/or the price of the stocks declines 15% in the
first 90 days held. The Fund's risk characteristics, such as beta (a measure of
volatility), are generally less than those of the S&P 500 Composite Stock
Price Index (the "S&P 500 Index"), the Fund's benchmark.
Principal Risks. The Fund's share price will increase or decrease with changes
in the market value of the Fund's portfolio securities. Stocks are subject to
market, economic and business risks that cause their prices to fluctuate.
The Fund is also subject to the risk that the Sub-Adviser's judgments
about above-average growth potential of a particular company's stocks is
incorrect and the perceived value of such stock is not realized by the
market, or that the price of the Fund's portfolio securities will decline.
Your investment in the Fund is not guaranteed and you could lose some or all of
the amount you invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek growth of capital
you seek a fund with a growth orientation as part of your over
all investment plan
You may not want to invest in the Fund if: you are seeking a high
level of current income you are conservative in your investment
approach you seek stability of principal more than growth of
capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- -------------------------------------------------------------------------------
<PAGE>
GABELLI WESTWOOD EQUITY FUND
- -------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year,
five years and the life of the Fund compare to those of the relevant index. As
with all mutual funds, the Fund's past performance does not predict how the Fund
will perform in the future. Both the chart and the table assume reinvestment of
dividends and distributions.
BAR CHART* (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Calendar Year Total Return Calendar Year Total Return
1995 36.6% 1997 29.3%
1996 26.2% 1998 12.8%
1999 _____%
</TABLE>
* The bar chart above shows the total returns for Class A Shares (not
including sales load). The Class B and Class C Shares of the Fund are new
classes for which performance is not yet available. The returns for the
Class B and Class C Shares will be substantially similar to those of the
Class A Shares shown here because all shares of the Fund are invested in
the same portfolio of securities. The annual returns of the different
classes of shares will differ only to the extent that the expenses of the
classes differ.
Class A, B and C Share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended __________) and the lowest return for a quarter was _____%
(quarter ended
- ----------).
-------------------------------------------------------------------- ---------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Since
Average Annual Total Returns Past One Year Past Five Inception
(for the periods ended December 31, 1999) Years (1/28/94)
-------------------------------------------------------------------- ---------
-------------------------------------------------------------------- ---------
The Gabelli Westwood Equity Fund
Class A Shares (formerly known as Service Class Shares)+ _____% _____% _____%
-------------------------------------------------------------------- ---------
-------------------------------------------------------------------- ---------
S&P 500 Stock Index+ _____% _____% _____%
-------------------------------------------------------------------- ---------
+ Includes the effect of the initial sales charge.
+ The S&P 500 Price Index is a widely recognized,
unmanaged index of common stock prices. The performance of the Index does
not include expenses or fees.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD EQUITY FUND
- ------------------------------------------------------------------------------
Fees and Expenses of the Fund. The following table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)................... 4.00%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price)(2)........... None(3) 5.00%(4) 1.00%(5)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................... 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Expenses . 0.50% 1.00% 1.00%
Other Expenses(6)..................................... 0.24% 0.24% 0.24%
----- ----- -----
Total Annual Operating Expenses.................... 1.74% 2.24% 2.24%
----- ----- -----
Custodian Fee Credits(6)........................................0.05% 0.05% 0.05%
----- ----- -----
Net Annual Operating Expenses(6)................................1.69% 2.19% 2.19%
===== ===== =====
(1) The sales charge declines as the amount invested increases.
(2) "Redemption Price" equals the net asset value at the time of investment or
redemption, whichever is lower. (3) If no sales charge was paid at the time of
purchase, as part of an investment that is greater than $1,000,000, shares
redeemed within 24 months of such purchase may be subject to
a maximum deferred sales charge of 4.00%.
(4) The Fund imposes a sales charge upon redemption of Class B Shares if you
sell your shares within 72 months
after purchase.
(5) A maximum sales charge of 1% applies to redemptions of Class C Shares within
24 months after purchase. (6) Expenses are reduced due to custodian fee
credits on cash balances maintained with the Fund's custodian.
</TABLE>
Expense Example. This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes (1) you invest $10,000 in the Fund for the time periods shown,
(2) you redeem your shares at the end of those periods (except as noted), (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares........................ $570 $926 $1,306 $2,370
Class B Shares
- assuming redemption............... $727 $1,000 $1,400 $2,447
- assuming no redemption............ $227 $700 $1,200 $2,447
Class C Shares
- assuming redemption............... $327 $700 $1,200 $2,575
- assuming no redemption............ $227 $700 $1,200 $2,575
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
GABELLI WESTWOOD BALANCED FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Balanced Fund seeks to provide
capital appreciation and current income resulting in a high total investment
return consistent with prudent investment risk and a balanced investment
approach. Capital is the amount of money you invest in the Fund. Capital
appreciation is an increase in the value of an investment. Income is the amount
of money you earn annually on your invested capital.
Principal Investment Strategies. The Fund invests in a combination of equity and
debt securities. The Fund is primarily equity-oriented, and seeks to provide
equity-like returns but with lower volatility than a fully invested equity
portfolio. The Sub-Adviser will typically invest 30% to 70% of the Fund's assets
in equity securities and 70% to 30% in debt securities, and the balance of
the Fund's assets in cash and cash equivalents.
The Fund invests in stocks of seasoned companies. Seasoned companies
generally have market capitalizations in excess of $500 million and have
been operating for at least three years. The Sub-Adviser chooses stocks of
seasoned companies with proven records and above-average earnings growth
potential.
The debt securities held by the Fund are investment grade securities of
corporate and government issuers and commercial paper and mortgage- and
asset-backed securities. Investment grade debt securities are securities rated
in one of the four highest ratings categories by a nationally recognized rating
agency.
Principal Risks. The Fund is subject to the risk that its allocations between
equity and debt securities may underperform other allocations. The Fund's share
price will fluctuate with changes in the market value of the Fund's portfolio
securities. Stocks are subject to market, economic and business risks that cause
their prices to fluctuate. The Fund is also subject to the risk that
the Sub-Adviser's judgments about the above-average growth potential of a
particular company's stocks is incorrect and the perceived value of such
stock is not realized by the market, or that the price of the Fund's
portfolio securities will decline. Investing in debt securities involves
interest rate risk and credit risk. When interest rates decline, the value of
the portfolio's securities generally rises. Conversely, when interest rates
rise, the value of the portfolio's securities generally declines. It is
also possible that the issuer of a security will not be able to make interest
and principal payments when due. Consequently, you can lose money by
investing in the Fund. Your investment in the Fund is not guaranteed and you
could lose some or all of the amount you invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek both growth of capital and current income
you want participation in market growth with some emphasis on pr
eserving assets in "down" markets
You may not want to invest in the Fund if:
you seek stability of principal more than growth of capital
you seek an aggressive growth strategy
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- --------------------------------------------------------------------------------
<PAGE>
GABELLI WESTWOOD BALANCED FUND
- -----------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of
the risks of investing in the Fund by showing changes in the Fund's performance
from year to year, and by showing how the Fund's average annual returns for one
year, five years and the life of the Fund compare to those of the relevant
index. As with all mutual funds, the Fund's past performance does not predict
how the Fund will perform in the future.
BAR CHART* (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Calendar Year Total Return Calendar Year Total Return
------------- ------------ ------------- ------------
1994 (0.5)% 1997 22.2%
1995 30.9% 1998 11.1%
1996 17.9% 1999 _____%
* The bar chart above shows the total returns for Class A Shares (not
including sales load). The Class B and Class C Shares of the Fund are new
classes for which performance is not yet available. The returns for the
Class B and Class C Shares will be substantially similar to those of the
Class A Shares shown here because all shares of the Fund are invested in
the same portfolio of securities. The annual returns of the different
classes of shares will differ only to the extent that the expenses of the
classes differ.
Class A, B and C Share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended __________) and the lowest return for a quarter was _____%
(quarter ended
- ----------).
</TABLE>
-------------------------------------------------------------------- ---------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Since
Average Annual Total Returns Past One Year Past Five Inception
(for the periods ended December 31, 1999) Years (4/6/93)
-------------------------------------------------------------------- ----------
-------------------------------------------------------------------- ---------
The Gabelli Westwood Balanced Fund
Class A Shares (formerly known as Service Class Shares)+ _____% _____% _____%
-------------------------------------------------------------------- ---------
-------------------------------------------------------------------- ----------
60% S&P 500 Stock Index and 40% Lehman Brothers
Government/Corporate Bond Index+ _____% _____% _____%
-------------------------------------------------------------------- ---------
+ Includes the effect of the initial sales charge.
+ The S&P 500 Index is a widely recognized,
unmanaged index of common stock prices. The Lehman Brothers
Government/Corporate Bond Index is an unmanaged index of prices of
U.S. government and corporate bonds with not less than one year to
maturity. The Index figures do not include expenses or fees.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD BALANCED FUND
- ------------------------------------------------------------------------------
Fees and Expenses of the Fund. The following table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)................... 4.00%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price)(2)........... None(3) 5.00%(4) 1.00%(5)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................... 0.75% 0.75% 0.75%
Distribution and Service (Rule 12b-1) Expenses .. 0.50% 1.00% 1.00%
Other Expenses(6)..................................... 0.20% 0.20% 0.20%
----- ----- -----
Total Annual Operating Expenses.................... 1.45% 1.95% 1.95%
----- ----- -----
Custodian Fee Credits(6)........................................0.05% 0.05% 0.05%
----- ----- -----
Net Annual Operating Expenses(6)................................1.40% 1.90% 1.90%
===== ===== =====
(1) The sales charge declines as the amount invested increases.
(2) "Redemption Price" equals the net asset value at the time of investment or
redemption, whichever is lower. (3) If no sales charge was paid at the time of
purchase, as part of an investment that is greater than $1,000,000, shares
redeemed within 24 months of such purchase may be subject to
a maximum deferred sales charge of 4.00%.
(4) The Fund imposes a sales charge upon redemption of Class B Shares if you
sell your shares within 72 months
after purchase.
(5) A maximum sales charge of 1% applies to redemptions of Class C Shares within
24 months after purchase. (6) Expenses are reduced due to custodian fee
credits on cash balances maintained with the Fund's custodian.
</TABLE>
Expense Example. This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes (1) you invest $10,000 in the Fund for the time periods shown,
(2) you redeem your shares at the end of those periods (except as noted), (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares........................ $542 $840 $1,160 $2,066
Class B Shares
- assuming redemption............... $698 $912 $1,252 $2,144
- assuming no redemption............ $198 $612 $1,052 $2,144
Class C Shares
- assuming redemption............... $298 $612 $1,052 $2,275
- assuming no redemption............ $198 $612 $1,052 $2,275
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
GABELLI WESTWOOD SMALLCAP EQUITY FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood SmallCap Equity Fund seeks to provide
long-term capital appreciation by investing primarily in smaller capitalization
equity securities. Capital is the amount of money you invest in the Fund.
Capital appreciation is an increase in the value of your investment.
Principal Investment Strategies. The Fund primarily invests in a portfolio of
common stocks of smaller companies. These
smaller companies have a market capitalization (defined as shares outstanding
times current market price) of between $100 million and $1.5 billion at the time
of the Fund's initial investment.
In selecting securities for the Fund, the Sub-Adviser considers
companies which offer: an earnings growth rate exceeding the
Fund's benchmark, the Russell 2000 Index an increasing return on
equity a low debt/equity ratio sequential earnings per share and
sales growth a recent positive earnings surprise
Frequently smaller capitalization companies exhibit one or more of the
following traits: new products or technologies new distribution
methods rapid changes in industry conditions due to regulatory or
other developments changes in management or similar
characteristics that may result not only in expected
growth in revenues but in an accelerated or above average rate of
earnings growth
The Fund may invest in relatively new or unseasoned companies, which are in
their early stages of development, or small companies in new and emerging
industries.
The Sub-Adviser closely monitors the issuers and will sell a stock if the stock
achieves 90% of its price objective and has limited further potential for price
increase, the forecasted price/earnings ratio exceeds the future forecasted
growth rate and/or the issuer suffers an earnings disappointment.
Because smaller growth companies are less actively followed by stock analysts
and less information is available on which to base stock price evaluations, the
market may overlook favorable trends in particular smaller growth companies, and
then adjust its valuation more quickly once investor interest is gained. Smaller
growth companies may also be more subject to a valuation catalyst (such as
increased investor attention, takeover efforts or a change in management) than
larger companies. Small growth companies may offer greater potential for capital
appreciation than larger companies.
Principal Risks. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. Stocks are subject to market,
economic and business risks that cause their prices to fluctuate. Investment in
small capitalization stocks may be subject to more abrupt or erratic movements
in price than investment in medium and large capitalization stocks. The Fund is
subject to the risk that small capitalization stocks fall out of favor generally
with investors. Your investment in the Fund is not guaranteed and you could
lose some or all of the amount you invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek long-term growth of capital
you seek investments in small capitalization growth stocks as
part of your overall investment strategy
You may not want to invest in the Fund if: you are seeking a high
level of current income you are conservative in your investment
approach you seek stability of principal more than growth of
capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- --------------------------------------------------------------------------------
GABELLI WESTWOOD SMALLCAP EQUITY FUND
- -------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of
the risks of investing in the Fund by showing changes in the Fund's
performance from year to year, and by showing how the Fund's average annual
returns for one year and the life of the Fund compare to those of the
relevant index. As with all mutual funds, the Fund's past performance does
not predict how the Fund will perform in the future.
BAR CHART* (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Return
1998 10.6%
1999 ____%
* The bar chart above shows the total returns for Class AAA Shares. The Class
A, Class B and Class C Shares of the Fund are new classes for which
performance is not yet available. The returns for the Class A, Class B and
Class C Shares will be substantially similar to those of the Class AAA
Shares shown here because all shares of the Fund are invested in the same
portfolio of securities. The annual returns of the different classes of
shares will differ only to the extent that the expenses of the classes
differ.
Class A, B and C Share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended __________) and the lowest return for a quarter was _____%
(quarter ended
- ----------).
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------- ---------------------- ------------------------
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year (4/15/97)
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
The Gabelli Westwood SmallCap Equity Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
Russell 2000 Index+ _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
+ The Russell 2000 Index is an unmanaged index of the 2000 smallest common
stocks in the Russell 3000, which contains the 3000 largest stocks in the
U.S. based on total market capitalization. The performance of the Index
does not include expenses or fees.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD SMALLCAP EQUITY FUND
- --------------------------------------------------------------------------------
Fees and Expenses of the Fund. The following table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)................... 4.00%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price)(2)........... None(3) 5.00%(4) 1.00%(5)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................... 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Expenses . 0.50% 1.00% 1.00%
Other Expenses(6).................................. 0.47% 0.47% 0.47%
----- ----- -----
Total Annual Operating Expenses(6).................... 1.97% 2.47% 2.47%
----- ----- -----
Fee Waiver, Expense Reimbursement and Custodian Fee Credits(6)..0.22% 0.22% 0.22%
----- ----- -----
Net Annual Operating Expenses(6)................................1.75% 2.25% 2.25%
===== ===== =====
(1) The sales charge declines as the amount invested increases.
(2) "Redemption Price" equals the net asset value at the time of investment or
redemption, whichever is lower. (3) If no sales charge was paid at the time of
purchase, shares redeemed within 24 months of such purchase, as
part of an investment that is greater than $1,000,000, may be subject to
a maximum deferred sales charge of 4.00%.
(4) The Fund imposes a sales charge upon redemption of Class B Shares if you
sell your shares within 72 months
after purchase.
(5) A maximum sales charge of 1% applies to redemptions of Class C Shares within
24 months after purchase.
(6) The Adviser has contracually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain
the Total Annual Operating Expenses at 1.75% for Class A Shares, 2.25%
for Class B Shares and 2.25% for Class C Shares. The fee waiver and
expense reimbursement arrangement will continue until at least
September 30, 2000. The custodian reduces its fees to reflect credits
on cash balances.
</TABLE>
Expense Example. This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes (1) you invest $10,000 in the Fund for the time periods shown,
(2) you redeem your shares at the end of those periods (except as noted), (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares........................ $592 $994 $1,420 $2,604
Class B Shares
- assuming redemption............... $750 $1,070 $1,516 $2,681
- assuming no redemption............ $250 $770 $1,316 $2,681
Class C Shares
- assuming redemption............... $350 $770 $1,316 $2,806
- assuming no redemption............ $250 $770 $1,316 $2,806
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD MIGHTY MITES(sm) FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Mighty Mites(sm) Fund seeks to
provide long-term capital appreciation by investing primarily in
micro-capitalization equity securities. Capital is the amount of money you
invest in the Fund. Capital appreciation is an increase in the value of your
investment.
Principal Investment Strategies. The Fund primarily invests in common stocks of
smaller companies that have a market capitalization (defined as shares
outstanding times current market price) of $300 million or less at the time of
the Fund's initial investment. These companies are called micro-cap companies.
The Fund focuses on micro-capitalization companies which appear to be
underpriced relative to their "private market value." Private market value is
the value the Adviser believes informed investors would be willing to pay to
acquire a company.
In selecting stocks, the Adviser attempts to identify companies that: have
above-average sales and earnings growth prospects have improving balance
sheet fundamentals given the current status of economic and business cycles
are undervalued and may significantly appreciate due to management changes,
stock acquisitions, mergers, reorganizations, tender offers, spin-offs or
other significant events have new or unique products, new or expanding
markets, changing competitive or regulatory climates or undervalued assets
or franchises
The Adviser also considers the stocks' prices, the issuers' balance sheet
characteristics and the strength of issuers' managements.
Micro-cap companies may also be new or unseasoned companies which are in their
very early stages of development. Micro-cap companies can also be engaged in
new and emerging industries.
Since micro-cap companies are generally not well-known to investors and have
less of an investor following than larger companies, they may present
opportunities for greater investment gains. The Adviser will attempt to
capitalize on the lack of analyst attention to micro-cap stocks and the
inefficiency of the micro-cap market. Micro-cap companies may offer greater
growth potential for capital appreciation than larger companies.
Principal Risks. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. Stocks are subject to market,
economic and business risks that cause their prices to fluctuate. The Fund is
also subject to the risk that investment in micro-capitalization stocks may be
subject to more abrupt or erratic movements in price than investment in
small-, medium- and large-capitalization stocks. Your investment in the Fund
is not guaranteed and you could lose some or all of the amount you invested in
the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek long-term growth of capital
you seek an exposure to the micro-capitalization market segment
despite the potential volatility
of micro-capitalization stocks
You may not want to invest in the Fund if: you are seeking a high
level of current income you are conservative in your investment
approach you seek stability of principal more than growth of
capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD MIGHTY MITES(sm) FUND
- -----------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of
the risks of investing in the Fund by showing changes in the Fund's
performance from year to year, and by showing how the Fund's average annual
returns for one year and the life of the Fund compare to those of the
relevant index. As with all mutual funds, the Fund's past performance does
not predict how the Fund will perform in the future.
BAR CHART* (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Return
1999 ____%
* The bar chart above shows the total returns for Class AAA Shares. The Class
A, Class B and Class C Shares of the Fund are new classes for which
performance is not yet available. The returns for the Class A, Class B and
Class C Shares will be substantially similar to those of the Class AAA
Shares shown here because all shares of the Fund are invested in the same
portfolio of securities. The annual returns of the different classes of
shares will differ only to the extent that the expenses of the classes
differ.
Class A, B and C Share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended __________) and the lowest return for a quarter was _____%
(quarter ended
- ----------).
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------- ---------------------- ------------------------
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year (5/11/98)
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
The Gabelli Westwood Mighty Mites(sm) Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
Russell 2000 Index+ _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
+ The Russell 2000 Index is an unmanaged index of the 2000 smallest common
stocks in the Russell 3000, which contains the 3000 largest stocks in the
U.S. based on total market capitalization. The performance of the Index
does not include expenses or fees.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD MIGHTY MITES(sm) FUND
- --------------------------------------------------------------------------------
Fees and Expenses of the Fund. The following table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)................... 4.00%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price)(2)........... None(3) 5.00%(4) 1.00%(5)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................... 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Expenses .. 0.50% 1.00% 1.00%
Other Expenses(6).................................. 1.07% 1.07% 1.07%
----- ----- -----
Total Annual Operating Expenses.................... 2.57% 3.07% 3.07%
----- ----- -----
Fee Waiver, Expense Reimbursement and Custodian Fee Credits(6)..1.32% 1.32% 1.32%
----- ----- -----
Net Annual Operating Expenses(6)................................1.25% 1.75% 1.75%
===== ===== =====
(1) The sales charge declines as the amount invested increases.
(2) "Redemption Price" equals the net asset value at the time of investment or
redemption, whichever is lower. (3) If no sales charge was paid at the time of
purchase, as part of an investment that is greater than $1,000,000, shares
redeemed within 24 months of such purchase, may be subject to
a maximum deferred sales charge of 4.00%.
(4) The Fund imposes a sales charge upon redemption of Class B Shares if you
sell your shares within 72 months
after purchase.
(5) A maximum sales charge of 1% applies to redemptions of Class C Shares within
24 months after purchase.
(6) The Adviser has contractually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain the Total
Annual Operating Expenses at 1.25% for Class A Shares, 1.75% for Class B
Shares and 1.75% for Class C Shares. The fee waiver and expense
reimbursement arrangement will continue until at least
September 30, 2000. The custodian reduces its fees to reflect credits
on cash balances.
</TABLE>
Expense Example. This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes (1) you invest $10,000 in the Fund for the time periods shown,
(2) you redeem your shares at the end of those periods (except as noted), (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares........................ $650 $1,168 $1,711 $3,189
Class B Shares
- assuming redemption............... $810 $1,248 $2,811 $3,264
- assuming no redemption............ $310 $948 $1,611 $3,264
Class C Shares
- assuming redemption............... $410 $948 $1,611 $3,383
- assuming no redemption............ $310 $948 $1,611 $3,383
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD REALTY FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Realty Fund seeks to provide
long-term capital appreciation as well as current income. It invests primarily
in companies that are engaged in real estate or real estate related industries.
Capital is the amount of money you invest in the Fund. Capital appreciation is
an increase in the value of your investment. Income is the amount of money that
you earn annually on your invested capital.
Principal Investment Strategies. The Fund principally invests in the securities
of publicly traded real estate investment trusts ("REITs") and real estate
operating companies 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. A REIT is a pooled investment vehicle which invests
primarily in income producing real estate or real estate loans or interests. The
Fund's investments include equity REITs, mortgage REITs and hybrid REITs and
other equity securities engaged in real estate.
The Sub-Adviser invests in REITs with attractive income and growth
characteristics. It uses a multi-factor quantitative model to rank a universe of
REITs and then follows the ranking process with in-depth fundamental research.
Securities considered for purchase have:
attractive rankings based on the Sub-Adviser's quantitative model
assets in regions with favorable demographic trends assets in
sectors with attractive long-term fundamentals issuers with
strong management teams and/or issuers with good balance sheet
fundamentals
The Sub-Adviser will consider selling a security if real estate supply/demand
fundamentals become unfavorable in the issuer's sector or region, there is
limited growth opportunity, the issuer is at risk of losing its competitive edge
and/or the issuer is serving markets with slowing growth.
Principal Risks. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. Stocks are subject to market,
economic and business risks that cause their prices to fluctuate. The Fund is
also subject to the risks associated with direct ownership of real estate. Real
estate values can fluctuate due to general and local economic conditions,
overbuilding or undersupply, changes in zoning and other laws and a number of
other factors. An investor in the Fund is subject to the risk that the real
estate industry will underperform other industries or the stock market
generally. Your investment in the Fund is not guaranteed and you could lose
some or all of the amount you invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek current income as well as growth of capital
you seek to invest in a market which does not correlate directly
with other equity markets you seek broad-based exposure to the
real estate market without owning real estate directly
You may not want to invest in the Fund if:
you are conservative in your investment approach
you seek stability of principal more than growth of capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD REALTY FUND
- -------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year
and the life of the Fund compare to those of the relevant index. As with all
mutual funds, the Fund's past performance does not predict how the Fund will
perform in the future.
BAR CHART* (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Return
1998 (15.2)%
1999 ____%
* The bar chart above shows the total returns for Class AAA Shares. The Class
A, Class B and Class C Shares of the Fund are new classes for which
performance is not yet available. The returns for the Class A, Class B and
Class C Shares will be substantially similar to those of the Class AAA
Shares shown here because all shares of the Fund are invested in the same
portfolio of securities. The annual returns of the different classes of
shares will differ only to the extent that the expenses of the classes
differ.
Class A, B and C Share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended __________) and the lowest return for a quarter was _____%
(quarter ended
- ----------).
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------- ---------------------- ------------------------
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year (11/1/97)
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
The Gabelli Westwood Realty Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
NAREIT All REIT Index+ _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
Russell 2000 Index+ _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
+ The NAREIT All REIT Index is a market capitalization weighted unmanaged
index of all tax-qualified REITs listed on the New York Stock Exchange,
Inc., American Stock Exchange and the National Association of Securities
Dealers Automated Quotations, Inc. which have 75% or more of their gross
invested book assets invested directly or indirectly in the equity
ownership of real estate. The Russell 2000 Index is an unmanaged index of
the 2000 smallest common stocks in the Russell 3000, which contains the
3000 largest stocks in the U.S. based on total market capitalization. The
performance of the indices does not include expenses or fees.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD REALTY FUND
- -------------------------------------------------------------------------------
Fees and Expenses of the Fund. The following table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)................... 4.00%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price)(2)........... None(3) 5.00%(4) 1.00%(5)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................... 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Expenses .. 0.50% 1.00% 1.00%
Other Expenses(6).................................. 2.43% 2.43% 2.43%
----- ----- -----
Total Annual Operating Expenses.................... 3.93% 4.43% 4.43%
----- ----- -----
Fee Waiver, Expense Reimbursement and Custodian Fee Credits(6)..2.18% 2.18% 2.18%
----- ----- -----
Net Annual Operating Expenses(6)................................1.75% 2.25% 2.25%
===== ===== =====
(1) The sales charge declines as the amount invested increases.
(2) "Redemption Price" equals the net asset value at the time of investment or
redemption, whichever is lower. (3) If no sales charge was paid at the time of
purchase, as part of an investment that is greater than $1,000,000,shares
redeemed within 24 months of such purchase may be subject to
a maximum deferred sales charge of 4.00%.
(4) The Fund imposes a sales charge upon redemption of Class B Shares if yo
sell your shares within 72 months
after purchase.
(5) A maximum sales charge of 1% applies to redemptions of Class C Shares within
24 months after purchase.
(6) The Adviser has contractually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain the
Total Annual Operating Expenses at 1.75% for Class A Shares, 2.25% for
Class B Shares and 2.25% for Class C Shares. The fee waiver and
expense reimbursement arrangement will continue until at least
September 30, 2000. The custodian reduces its fees to reflect credits
on cash balances.
</TABLE>
Expense Example. This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes (1) you invest $10,000 in the Fund for the time periods shown,
(2) you redeem your shares at the end of those periods (except as noted), (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares........................ $779 $1,550 $2,338 $4,381
Class B Shares
- assuming redemption............... $944 $1,640 $2,447 $4,453
- assuming no redemption............ $444 $1,340 $2,247 $4,453
Class C Shares
- assuming redemption............... $544 $1,340 $2,247 $4,558
- assuming no redemption............ $444 $1,340 $2,247 $4,558
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD INTERMEDIATE BOND FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Intermediate Bond Fund seeks to
maximize total return, while maintaining a level of current income consistent
with the maintenance of principal and liquidity.
Principal Investment Strategies. The Fund primarily invests in bonds of various
types and with various maturities. The Fund focuses on investment grade bonds of
domestic corporations and governments. Investment grade debt
securities are securities rated in the four highest rating categories by a
nationally recognized rating agency.
Although there are no restrictions on the maximum or minimum maturity of any
individual security that the Fund may invest in, generally the Fund will have a
dollar weighted average maturity of three to ten years. The Fund may also invest
in other types of investment grade debt securities, including debentures,
notes, convertible debt securities, municipal securities, mortgage-related
securities, certain collateralized and asset-backed securities.
The Fund will maintain an average rating of AA or better by Standard & Poor's
Rating Services, a division of McGraw-Hill Companies ("S&P"), or comparable
quality.
In selecting securities for the Fund, the Sub-Adviser focuses both on the
fundamentals of particular issuers and yield curve positioning. The Sub-Adviser
seeks to earn risk-adjusted returns superior to those of the Lehman Brothers
Government/Corporate Bond Index over time. The Sub-Adviser invests 75% to 100%
of the Fund's assets in debt securities and the remainder in cash or cash
equivalents.
Principal Risks. The Fund's share price will fluctuate with changes in
prevailing interest rates and the market value of the Fund's portfolio
securities. When interest rates decline, the value of the portfolio's securities
generally rises. Conversely, when interest rates rise, the value of the
portfolio's securities generally declines. It is also possible that the issuer
of a security will not be able to make interest and principal payments when due.
To the extent that the Fund's portfolio is invested in
cash, if interest rates decline, the Fund may lose the opportunity to benefit
from a probable increase in debt securities valuations. Your investment in the
Fund is not guaranteed and you could lose some or all of the amount that you
invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are seeking a high level of current income
you are conservative in your investment approach
you are seeking exposure to high quality bonds as part of your
overall investment strategy
You may not want to invest in the Fund if:
you seek growth of capital
you seek stability of principal more than total return
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD INTERMEDIATE BOND FUND
- -------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year,
five years and the life of the Fund compare to those of the relevant index. As
with all mutual funds, the Fund's past performance does not predict how the Fund
will perform in the future.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Calendar Year Total Return Calendar Year Total Return
------------- ------------ ------------- ------------
1992 6.1% 1996 3.7%
1993 10.5% 1997 10.7%
1994 (5.6)% 1998 6.6%
1995 16.2% 1999 ____%
</TABLE>
The bar chart above shows the total returns for Class AAA Shares. The Class
A, Class B and Class C Shares of the Fund are new classes for which
performance is not yet available. The returns for the Class A, Class B and
Class C Shares will be substantially similar to those of the Class AAA
Shares shown here because all shares of the Fund are invested in the same
portfolio of securities. The annual returns of the different classes of
shares will differ only to the extent that the expenses of the classes
differ.
Class A, B and C share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended __________) and the lowest return for a quarter was _____%
(quarter ended
- ----------).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
--------------------------------------------------------------------- -------------- --------------- --------------
Since
Average Annual Total Returns Past One Year Past Five Inception
(for the periods ended December 31, 1999) Years (10/1/91)
--------------------------------------------------------------------- -------------- --------------- --------------
--------------------------------------------------------------------- -------------- --------------- --------------
The Gabelli Westwood Intermediate Bond Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____% _____%
--------------------------------------------------------------------- -------------- --------------- --------------
--------------------------------------------------------------------- -------------- --------------- --------------
Lehman Brothers Government/Corporate Bond Index+ _____% _____% _____%
--------------------------------------------------------------------- -------------- --------------- --------------
+ The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
of prices of U.S. government and corporate bonds with not less than one
year to maturity. The Index figures do not include expenses or fees.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
GABELLI WESTWOOD INTERMEDIATE BOND FUND
- -------------------------------------------------------------------------------
Fees and Expenses of the Fund. The following table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)................... 4.00%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price)(2)........... None(3) 5.00%(4) 1.00%(5)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................... 0.60% 0.60% 0.60%
Distribution and Service (Rule 12b-1) Expenses .. 0.35% 1.00% 1.00%
Other Expenses(6).................................. 0.78% 0.78% 0.78%
----- ----- -----
Total Annual Operating Expenses.................... 1.73% 2.38% 2.38%
----- ----- -----
Fee Waiver, Expense Reimbursement and Custodian Fee Credits(6)..0.63% 0.63% 0.63%
----- ----- -----
Net Annual Operating Expenses(6)................................1.10% 1.75% 1.75%
===== ===== =====
(1) The sales charge declines as the amount invested increases.
(2) "Redemption Price" equals the net asset value at the time of investment or
redemption, whichever is lower. (3) If no sales charge was paid at the time of
purchase, as part of an investment that is greater than $1,000,000, shares
redeemed within 24 months of such purchase may be subject to
a maximum deferred sales charge of 4.00%.
(4) The Fund imposes a sales charge upon redemption of Class B Shares if you
sell your shares within 72 months
after purchase.
(5) A maximum sales charge of 1% applies to redemptions of Class C Shares within
24 months after purchase.
(6) The Adviser has contractually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain the
Total Annual Operating Expenses at 1.10% for Class A Shares, 1.75% for
Class B Shares and 1.75% for Class C Shares. The fee waiver and
expense reimbursement arrangement will continue until at least
September 30, 2000. The custodian reduces its fees to reflect credits
on cash balances.
</TABLE>
Expense Example. This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes (1) you invest $10,000 in the Fund for the time periods shown,
(2) you redeem your shares at the end of those periods (except as noted), (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares........................ $569 $923 $1,301 $2,359
Class B Shares
- assuming redemption............... $741 $1,042 $1,470 $2,552
- assuming no redemption............ $241 $742 $1,270 $2,552
Class C Shares
- assuming redemption............... $341 $742 $1,270 $2,716
- assuming no redemption............ $241 $742 $1,270 $2,716
</TABLE>
<PAGE>
MORE INVESTMENT AND RISK INFORMATION
INVESTMENT TECHNIQUES
The Funds may also use the following investment technique:
Defensive Investments. When opportunities for capital appreciation do not appear
attractive or when adverse market or economic conditions occur, each Fund may
temporarily invest all or a portion of its assets in defensive investments. Such
investments include U.S. Government securities, certificates of deposit, bankers
acceptances, time deposits, repurchase agreements and other high quality debt
instruments. When following a defensive strategy, a Fund will be less likely to
achieve its investment goal.
RISK INFORMATION
Investing in the Funds involves the following risks:
Equity Risk
Equity Fund
Balanced Fund
SmallCap Equity Fund
Mighty Mites Fund
Realty Fund
The principal risk of investing in the Fund is equity risk. Equity risk is the
risk that the prices of the securities held by the Fund will change due to
general market and economic conditions, perceptions regarding the industries in
which the companies issuing the securities participate and the issuer company's
particular circumstances.
.........
Small- and Micro-Capitalization Company Risk
SmallCap Equity Fund
Mighty Mites Fund
Investing in securities of small-cap and micro-cap companies may involve greater
risks than investing in larger, more established issuers. Small-cap and
micro-cap companies generally have limited product lines, markets and financial
resources. Their securities may trade less frequently and in more limited volume
than the securities of larger, more established companies. Also, small-cap and
micro-cap companies are typically subject to greater changes in earnings and
business prospects than larger companies. Consequently, small-cap and micro-cap
company stock prices tend to rise and fall in value more than other stocks.
The risks of investing in micro-cap companies are even greater than those of
investing in small-cap companies. Your investment in the Fund is not
guaranteed and you could lose some or all of the amount you invested in the
Fund.
Interest Rate Risk and Credit Risk
Balanced Fund
Intermediate Bond Fund
Realty Fund
When interest rates decline, the value of the portfolio's debt securities
generally rises. Conversely, when interest rates rise, the value of the
portfolio's debt securities generally declines. It is also possible that the
issuer of a security will not be able to make interest and principal payments
when due.
Fund and Management Risk
All Funds
If the Fund's manager makes errors in selecting securities or if the market
segment in which the Fund invests falls out of favor with investors, the Fund
could underperform the stock market or its peers. The Fund could also fail to
meet its investment objective. When you sell Fund shares, they may be worth less
than what you paid for them. Therefore, you may lose money by investing in the
Fund.
<PAGE>
Real Estate Industry Concentration Risk
Realty Fund
The real estate industry is particularly sensitive to economic downturns. The
value of securities of issuers in the real estate industry is sensitive to
changes in real estate values and rental income, property taxes, interest rates,
and tax and regulatory requirements. Adverse economic, business, regulatory or
political developments affecting the real estate industry could have a major
effect on the value of the Fund's investments. In addition, the value of a REIT
can depend on the structure of and cash flow generated by the REIT.
MANAGEMENT OF THE FUNDS
The Adviser. Gabelli Advisers, Inc. (the "Adviser"), with principal offices
located at One Corporate Center, Rye, New York 10580-1434, serves as
investment adviser to the Funds. The Adviser makes investment decisions for
the Funds and continuously reviews and administers the Funds' investment
programs under the supervision of the Trust's Board of Trustees. The
Adviser is a Delaware corporation formerly known as Teton Advisers, LLC
(prior to November 1997). The Adviser is a subsidiary of
Gabelli Asset Management Inc., a publicly traded company listed on the New
York Stock Exchange, Inc. ("NYSE").
As compensation for its services and the related expenses the Adviser bears, for
the fiscal year ended September 30, 1999, each Fund paid the Adviser a fee as
shown in the table below.
Annual Advisory Fee
(as a percentage of average daily net assets)
Equity Fund 1.00%
Balanced Fund 0.75%
SmallCap Equity Fund 1.00%
Mighty Mites Fund 1.00%
Realty Fund 1.00%
Intermediate Bond Fund 0.60%
As of September 30, 1999, the SmallCap Equity, Mighty Mites and Realty Funds did
not offer Class A, Class B or Class C Shares and the Equity, Balanced and
Intermediate Bond Funds did not offer Class B shares or Class C Shares.
Sub-Adviser. The Adviser has entered into a Sub-Advisory Agreement with Westwood
Management Corporation for all Funds except the Mighty Mites
Fund with which there is not a Sub-Advisory Agreement. The Sub-Adviser has its
principal offices located at 300 Crescent Court, Suite 1300, Dallas, Texas
75201. The Adviser pays the Sub-Adviser out of its advisory fees with respect to
the Funds (except the Mighty Mites Fund), 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 applicable Funds or (ii) 35% of
the net revenues to the Adviser from the applicable Funds. The Sub-Adviser is a
registered investment adviser formed in 1983. The Sub-Adviser is a wholly-owned
subsidiary of Southwest Securities Group, Inc., a Dallas based securities firm.
The Portfolio Managers. Susan M. Byrne, President of the Sub-Adviser since 1983,
is responsible for the day-to-day management of the Equity Fund. Kellie R.
Stark, Vice President of the Sub-Adviser since 1992, assists in the management
of the Equity Fund. Ms. Byrne and Patricia Fraze, Executive Vice President of
the Sub-Adviser since 1990, are jointly responsible for the day-to-day
management of the Balanced Fund. Ms. Fraze is also responsible for the
day-to-day management of the Intermediate Bond Fund. Lynda Calkin, Senior Vice
President of the Sub-Adviser since 1993 is responsible for the day-to-day
management of the SmallCap Equity Fund and C.J. MacDonald assists in management
of such Fund. Mario J. Gabelli, Marc J. Gabelli, Laura Linehan and Walter K.
Walsh are primarily responsible for the day-to-day management of the Mighty
Mites(sm) Fund. Mario J. Gabelli has been Chairman, Chief Executive Officer and
Chief Investment Officer of Gabelli Funds, LLC since its organization in 1999
(Gabelli Funds, LLC is the successor adviser to Gabelli Funds, Inc., an
entity organized in 1980). Marc J. Gabelli has been Managing Director and an
analyst of Gabelli Funds, LLC since 1993. Laura Linehan has been Directo
of Creative Research at Gabelli & Company, Inc. since May 1995 and an
associate in Corporate Finance at Smith Barney from May 1994. Walter K.
Walsh has been Compliance Officer of Gabelli & Company, Inc. since 1994. Ms.
Byrne and Timothy M. Ognisty, Vice President of the Sub-Adviser since 1996
and an equity trader at Goldman Sachs from 1994, are jointly responsible for
the day-to-day management of the Realty Fund.
- -----------------------------------------------------------------------------
CLASSES OF SHARES
- ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Three classes of the Funds' shares are offered in this prospectus - Class A
shares, Class B shares and Class C shares. The table below summarizes the
differences among the classes of shares.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A "front-end sales load," or sales charge, is a one-time fee
charged at the time of purchase of shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A "contingent deferred sales charge" ("CDSC") is a one-time fee
charged at the time of redemption.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A "Rule 12b-1 fee" is a recurring annual fee for distributing
shares and servicing shareholder
accounts based on the Fund's average daily net assets attributable
to the particular class of shares.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------- ----------------------------- ------------------------- -----------------------
---------------------------- Class B Shares Class C Shares
Class A Shares
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------ Yes. The percentage No. No.
Front-End Sales Load? declines as the amount
invested increases.
----------------------------
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------ Yes, for shares redeemed Yes, for shares Yes, for shares
Contingent Deferred within twenty-four months redeemed within redeemed within
- ------------------------------------ after purchase as part of seventy-two months twenty-four months
Sales Charge? an investment greater than after purchase. after purchase.
$1 million if no front-end Declines over time.
sales charge was paid at
the time of purchase.
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------ 0.50% with respect to all 1.00% 1.00%
Rule 12b-1 Fee Funds except the ----------------------
Intermediate Bond Fund.
0.35% with respect to the
Intermediate Bond Fund.
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------ No. Yes. Automatically No.
Convertible to Another Class? converts to Class A
shares after
approximately
ninety-six months.
------------------------
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------- ----------------------------- ------------------------- -----------------------
- ------------------------------------ Lower annual expenses than Higher annual expenses Higher annual
Fund Expense Levels Class B or Class C shares. than Class A shares. expenses than Class A
shares.
----------------------
</TABLE>
- ------------------------------------- ----------------------------- -----------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
In selecting a class of shares in which to invest, you should consider:
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the length of time you plan to hold the shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
the amount of sales charge and Rule 12b-1 fees, recognizing that
your share of 12b-1 fees as a percentage of your investment
increases if a Fund's assets increase in value and decreases if a
Fund's assets decrease in value
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
whether you qualify for a reduction or waiver of the Class A
sales charge
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
that Class B shares convert to Class A shares approximately
ninety-six months after purchase
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- ---------------------------------------------------- --------------------------
- --------------------------------------------------- --------------------------
If you... --------------------------
then you should consider...
- ---------------------------------------------------- --------------------------
- ---------------------------------------------------- --------------------------
- --------------------------------------------------- --------------------------
do not qualify for a reduced or waived --------------------------
front-end sales load and intend to hold purchasing Class C shares
your shares for only a few years or less instead of either Class A
shares or Class B shares
- ---------------------------------------------------- --------------------
- ---------------------------------------------------- --------------------------
- --------------------------------------------------- --------------------------
do not qualify for a reduced or waived --------------------------
front-end sales load and intend to hold purchasing Class B shares
instead of Class A or Class C
your shares for several years shares
- ---------------------------------------------------- --------------------------
- ---------------------------------------------------- --------------------------
- --------------------------------------------------- --------------------------
qualify for a significantly reduced or --------------------------
waived front-end sales load purchasing Class A shares
no matter how long you
intend to hold your shares
- ---------------------------------------------------- --------------------------
- ----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Sales Charge - Class A Shares. The sales charge is imposed on Class A at the
time of purchase shares in accordance with the following schedule:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Amount Sales Charge Sales Charge Reallowance
of as % of the as % of to
Investment Offering Price* Amount Invested Broker-Dealers
Under $100,000 4.00% 4.20% 3.50%
$100,000 but under $250,000 3.00% 3.10% 2.50%
$250,000 but under $500,000 2.00% 2.00% 1.75%
$500,000 but under $1 million 1.00% 1.00% 0.75%
$1 million or more None None None
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
* Includes front-end sales load
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Sales Charge Reductions and Waivers - Class A Shares
- --------------------------------------------------------------------------------
Reduced sales charges are available to (1) investors who are eligible to combine
their purchases of Class A shares to receive volume discounts and (2) investors
who sign a Letter of Intent agreeing to make purchases over time. Certain types
of investors are eligible for sales charge waivers.
- -------------------------------------------------------------------------------
1. Volume Discounts. Investors eligible to receive volume discounts are
individuals and their immediate families, tax-qualified employee benefit plans
and a trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account even though more than one beneficiary is involved. You
also may combine the value of Class A shares you already hold in a Fund and
other funds advised by Gabelli Funds, LLC or its affiliates along with the value
of the Class A shares being purchased to qualify for a reduced sales charge. For
example, if you own Class A shares of a Fund that has an aggregate value of
$100,000, and make an additional investment in Class A shares of the Fund of
$4,000, the sales charge applicable to the additional investment would be 3.00%,
rather than the 4.00% normally charged on a $4,000 purchase. If you want more
information on volume discounts, call your broker.
2. Letter of Intent. If you initially invest at least $1,000 in Class A shares
of a Fund and submit a Letter of Intent to the Distributor, you may make
purchases of Class A shares of the Fund during a 13-month period at the reduced
sales charge rates applicable to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. You will have to pay sales charges at the higher
rate if you fail to honor your Letter of Intent. For more information on the
Letter of Intent, call your broker.
<PAGE>
3. Investors Eligible for Sales Charge Waivers. Class A shares of each Fund may
be offered without a sales charge to: (1) any other investment company in
connection with the combination of such company with the Fund by merger,
acquisition of assets or otherwise; (2) shareholders who have redeemed shares in
the Fund and who wish to reinvest up to the dollar amount redeemed in the Fund,
provided the reinvestment is made within 30 days of the redemption; (3)
tax-exempt organizations enumerated in Section 501(c)(3) of the Internal Revenue
Code of 1986 (the "Code") and private, charitable foundations that in each case
make lump-sum purchases of $100,000 or more; (4) qualified employee benefit
plans established pursuant to Section 457 of the Code that have established
omnibus accounts with the Fund; (5) qualified employee benefit plans having more
than one hundred eligible employees and a minimum of $1 million in plan assets
invested in the Fund (plan sponsors are encouraged to notify the Fund's
distributor when they first satisfy these requirements); (6) any unit investment
trusts registered under the Investment Company Act of 1940 (the "1940 Act")
which have shares of the Fund as a principal investment; (7) financial
institutions purchasing Class A shares of the Fund for clients participating in
a fee based asset allocation program or wrap fee program which has been approved
by the Distributor; and (8) registered investment advisers or financial planners
who place trades for their own accounts or the accounts of their clients and who
charge a management, consulting or other fee for their services; and clients of
such investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser or financial planner on the books and records of a broker or agent.
Investors who qualify under any of the categories described above should contact
their brokerage firm.
Contingent Deferred Sales Charges. You will pay a CDSC when you redeem:
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A shares within approximately twenty-four months of buying
them as part of an investment greater than $1 million if no
front-end sales charge was paid at the time of purchase.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B shares within approximately seventy-two months of buying
them.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C shares within approximately twenty-four months of buying
them.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The CDSC payable upon redemption of Class A shares and Class C shares in the
circumstances described above is 1%. The CDSC schedule for Class B shares is set
forth below. The CDSC is based on the net asset value at the time of your
investment or the net asset value at the time of redemption, whichever is lower.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Class B shares
Years Since Purchase CDSC
-------------------- ----
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The Distributor pays sales commissions of up to 4.00% of the purchase price of
Class B shares of a Fund to brokers at the time of sale that initiate and are
responsible for purchases of such Class B shares of the Fund.
- -------------------------------------------------------------------------------
You will not pay a CDSC to the extent that the value of the redeemed shares
represent reinvestment of dividends or capital gains distributions or capital
appreciation of shares redeemed. When you redeem shares, we will assume that you
are redeeming first shares representing reinvestment of dividends and capital
gains distributions, then any appreciation on shares redeemed, and then
remaining shares held by you for the longest period of time. We will calculate
the holding period of shares acquired through an exchange of shares of another
fund from the date you acquired the original shares of the other fund. The time
you hold shares in a Gabelli-sponsored money market fund, however, will not
count for purposes of calculating the applicable CDSC.
<PAGE>
We will waive the CDSC payable upon redemptions of shares for:
- --------------------------------------------------------------------------------
redemptions and distributions from retirement plans made after
the death or disability of a
shareholder
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
minimum required distributions made from an IRA or other
retirement plan account after you reach
age 59 1/2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
involuntary redemptions made by the Funds
- ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
a distribution from a tax-deferred retirement plan after your
retirement
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
returns of excess contributions to retirement plans following
the shareholder's death or disability
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Conversion Feature - Class B Shares
- --------------------------------------------------------------------------------
Class B shares automatically convert to Class A shares of a Fund
on the first business day of the ninety-seventh month following
the month in which you acquired such shares.
- ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
After conversion, your shares will be subject to the lower Rule
12b-1 fees charged on Class A shares, which will increase your
investment return compared to the Class B shares.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You will not pay any sales charge or fees when your shares
convert, nor will the transaction be subject to any tax.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
If you exchange Class B shares of one fund for Class B shares of
another fund, your holding period will be calculated from the time
of your original purchase of Class B shares. If you exchange
shares into a Gabelli money market fund, however, your holding
period will be suspended.
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The dollar value of Class A shares you receive will equal the
dollar value of the B shares converted.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The Board of Trustees may suspend the automatic conversion of Class B to Class A
shares for legal reasons or due to the exercise of its fiduciary duty. If the
Board determines that such suspension is likely to continue for a substantial
period of time, it will create another class of shares into which Class B shares
are convertible.
Rule 12b-1 Plan. The Funds have adopted a plan under Rule 12b-1 (the "Plan") for
each of its classes of shares. Under the Plan, the Fund may use its assets to
finance activities relating to the sale of its shares and the provision of
certain shareholder services.
For the classes covered by this Prospectus, the Rule 12b-1 fees vary by class as
follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
Service Fees None 0.25% 0.25%
Distribution Fees 0.50%/0.35%* 0.75% 0.75%
- -----------------------------------------------------------------------------
* Intermediate Bond Fund only
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
These are annual rates based on the value of each of these Classes' average
daily net assets. Because the Rule 12b-1 fees are higher for Class B and
Class C shares than for Class A shares, Class B and Class C shares will
have higher annual expenses. Because Rule 12b-1 fees are paid out of the
Funds' assets on an on-going basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of
sales charges.
--------------------------------------------------------------------------
---------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PURCHASE OF SHARES
You can purchase the Fund's shares on any day the NYSE is open for trading (a
"Business Day"). You may purchase shares through broker-dealers, banks and other
intermediaries who have selling agreements with Gabelli & Company, Inc., the
Fund's distributor. The broker-dealer, bank or other intermediary will
transmit a purchase order and payment to State Street on your behalf.
Broker-dealers, banks or other intermediaries may send you confirmation
of your transactions and periodic account statements showing your
investments in the Fund.
Minimum Investments. Unless your broker has a different minimum, your minimum
initial investment must be at least $1,000. See "Retirement Plans" and
"Automatic Investment Plan" regarding minimum investment amounts applicable to
such plans. There is no minimum for subsequent investments.
Share Price. The Funds sell shares at the "net asset value" next determined
after the Funds receive your completed subscription order form,
subject to a sales charge in the case of Class A shares. See
"Pricing of Fund Shares" for a description of the calculation of net asset value
and "Class of Shares - Sales Charges - Class A Shares" for a description of the
sales charges.
Retirement Plans. The Funds have available a form of IRA and "ROTH" IRA for
investment in Fund shares that may be obtained from the Distributor by calling
1-800-GABELLI (1-800-422-3554). Self-employed investors may purchase shares of
the Funds through tax-deductible contributions to existing retirement plans for
self-employed persons, known as Keogh or H.R. 10 plans. The Funds do not
currently act as sponsor to such plans. Fund shares may also be a suitable
investment for other types of qualified pension or profit-sharing plans which
are employer sponsored, including deferred compensation or salary reduction
plans known as "401(k) Plans" which give participants the right to defer
portions of their compensation for investment on a tax-deferred basis until
distributions are made from the plans. The minimum initial investments for all
such retirement plans is $1,000 except that an individual and his or her spouse
may establish separate IRAs if their combined investment is $1,250. There is no
minimum for subsequent investments.
Automatic Investment Plan. The Funds offer an automatic monthly investment plan.
There is no minimum monthly investment for accounts establishing an automatic
investment plan. Call your broker for more details about the plan.
Telephone Investment Plan. You may purchase additional shares of the Funds by
telephone as long as your bank is a member of the Automated Clearing House (ACH)
system. You must also have a completed, approved Investment Plan application on
file with the Fund's Transfer Agent. There is a minimum of $100 for each
telephone investment. To initiate an ACH purchase, please call 1-800-GABELLI
(1-800-422-3554) or 1-800-872-5365.
General. The Funds will not issue share certificates unless requested by you.
The Funds reserve the right to (i) reject any purchase order if, in the opinion
of Fund management, it is in the Funds' best interest to do so and (ii) suspend
the offering of shares for any period of time.
<PAGE>
REDEMPTION OF SHARES
You can redeem shares on any Business Day without a redemption fee. The Funds
may temporarily stop redeeming shares when the NYSE is closed or trading on the
NYSE is restricted, when an emergency exists and the Funds cannot sell shares or
accurately determine the value of assets, or if the Securities and Exchange
Commission ("SEC") orders the Funds to suspend redemptions.
The Funds redeem shares at the net asset value next determined after the Funds
receive your redemption request, subject in some cases to a CDSC, as described
under "Class of Shares - Contingent Deferred Sales Charges" above. See "Pricing
of Fund Shares" for a description of the calculation of net asset value.
You may redeem shares through a broker-dealer, bank or other financial
intermediary that has entered into a selling agreement with the Distributor. The
broker-dealer, bank or financial intermediary will transmit a redemption order
to State Street on your behalf. The redemption request will be effected at the
net asset value next determined (less any applicable CDSC) after State Street
receives the request. If you hold share certificates, you must present the
certificates endorsed for transfer. A broker-dealer may charge you fees for
effecting redemptions for you.
In the event that you wish to redeem shares and you are unable to contact your
broker-dealer, bank or financial intermediary, you may redeem shares by mail.
You may mail a letter requesting redemption of shares to: The Gabelli Funds,
P.O. Box 8308, Boston, MA 02266-8308. Your letter should state the name of the
Fund and the share class, the dollar amount or number of shares you are
redeeming and your account number. If there is more than one owner of shares,
all must sign. A signature guarantee is required for each signature on your
redemption letter. You can obtain a signature guarantee from financial
institutions such as commercial banks, brokers, dealers and savings
associations. A notary public cannot provide a signature guarantee.
Through Involuntary Redemption. The Funds may redeem all shares in your account
(other than an IRA account) if their value falls below $1,000 as a result of
redemptions (but not as a result of a decline in net asset value). You will be
notified in writing and allowed 30 days to increase the value of your shares to
at least $1,000.
.........
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. 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
recognized as to the number of shares acquired by reinstatement except through
an adjustment in the tax basis of the shares so acquired. See "Tax Information"
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.
Redemption Proceeds. If you request redemption proceeds by check, a Fund will
normally mail the check to you within seven days after it receives your
redemption request. If you purchased your Fund shares by check, you may not
redeem shares until the check clears, which may take up to 15 days following
purchase. While a Fund will delay the processing of the redemption until the
check clears, your shares will be valued at the next determined net asset value
after receipt of your redemption order.
The Funds may pay to you your redemption proceeds wholly or partly in portfolio
securities. Payments would be made in portfolio securities, however, only in the
rare instance that the Trust's Board of Trustees believes that it would be in a
Fund's best interest not to pay redemption proceeds in cash.
<PAGE>
EXCHANGES OF SHARES
You may exchange shares of the Funds you hold for shares of the same class of
another fund managed by the Adviser or its affiliates based on their relative
net asset values. To obtain a list of the funds whose shares you may acquire
through exchange, call your broker. Class B and Class C shares will continue to
age from the date of the original purchase of such shares and will assume the
CDSC rate they had at the time of exchange. You may also exchange your shares
for shares of a money market fund managed by the Adviser or its affiliates,
without imposition of any CDSC at the time of exchange. Upon subsequent
redemption from such money market funds or the Fund (after re-exchange into the
Fund), such shares will be subject to the CDSC calculated by excluding the time
such shares were held in the money market fund.
In effecting an exchange:
you must meet the minimum purchase requirements for the fund
whose shares you purchase through exchange.
if you are exchanging into shares of a fund with a higher sales
charge, you must pay the difference at the time of exchange.
you may realize a taxable gain or loss.
you should read the prospectus of the fund whose shares you are
purchasing (call 1-800-GABELLI (1-800-422-3554) to obtain the
prospectus).
you should be aware that brokers may charge a fee for handling
an exchange for you.
You may exchange shares by telephone, by mail or through the Internet.
Exchanges by Telephone. You may give exchange instructions by telephone by
calling your broker. You may not exchange shares by telephone if you hold
share certificates.
Exchanges by Mail. You may send a written request for exchanges to: The Gabelli
Funds, P.O. Box 8308, Boston, MA 02266-8308. State your name, your account
number, the dollar value or number of shares you wish to exchange, the name and
class of the funds whose shares you wish to exchange, and the name of the fund
whose shares you wish to acquire.
Exchanges through the Internet. You may also give exchange instructions via the
Internet at www.gabelli.com..
We may modify or terminate the exchange privilege at any time. You will be given
notice 60 days prior to any material change in the exchange privilege.
PRICING OF FUND SHARES
The Funds' net asset values per share are calculated on each Business Day. The
NYSE is currently scheduled to be closed on New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day and on the preceding Friday or
subsequent Monday when a holiday falls on a Saturday or Sunday, respectively.
The Funds' net asset values are determined as of the close of regular trading on
the NYSE, normally 4:00 p.m., New York time, and are computed by dividing the
value of each Fund's net assets (i.e. the value of its securities and other
assets less its liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the total number of its shares outstanding at the
time the determination is made. The Funds use market quotations in valuing
portfolio securities. Short-term investments that mature in 60 days or less are
valued at amortized cost, which the Trustees of the Funds believe represents
fair value.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions may differ for different Funds. They will be
automatically reinvested for your account at net asset value in additional
shares of the Funds, unless you instruct the Funds to pay all dividends and
distributions in cash. If you elect cash distributions, you must instruct the
Funds either to credit the amounts to your brokerage account or to pay the
amounts to you by check. Dividends from net investment income will be paid
annually by the Equity Fund, the SmallCap Equity Fund and the Mighty Mites Fund
and quarterly by the Balanced Fund and the Realty Fund. 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 realized capital gains. There are no sales or other charges in connection
with the reinvestment of dividends and capital gains distributions. There is no
fixed dividend rate, and there can be no assurance that the Funds will pay any
dividends or realize any capital gains.
TAX INFORMATION
Each Fund expects that its distributions will consist primarily of net
investment income and capital gains, which may be taxable at different rates
depending on the length of time the Fund holds its assets. Dividends from net
investment income and distributions of realized short-term capital gains are
taxable to you as ordinary income. Distributions of net long-term capital gains
are taxable to you at long-term capital gain rates. The Funds' distributions,
whether you receive them in cash or reinvest them in additional shares of the
Funds, generally will be subject to federal, state or local taxes. An exchange
of a Fund's shares for shares of another fund will be treated for tax purposes
as a sale of the Fund's shares, and any gain you realize on such a transaction
generally will be taxable. Foreign shareholders generally will be subject to a
federal withholding tax.
This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of your investment
in the Funds.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table for each Fund is intended to help you understand
the Fund's financial performance for the past five years or the life of the
Fund. The total returns in the table represent the rate that an investor would
have earned or lost on an investment in each Fund's Service Class shares. This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Funds' financial statements and
related notes, is included in the annual report, which is available upon
request.
Gabelli Westwood Equity Fund
Per share amounts for the Fund's Class A Shares (formerly known as Service Class
Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating performance:
Net asset value, beginning of year $8.97 $9.57 $7.69 $6.57 $5.48
----- ----- ----- ----- -----
Net investment income 0.02 0.08 0.06 0.06 0.04
Net realized and unrealized gain/(loss)
on investments 1.73 (0.25) 2.71 1.58 1.29
---- ------ ---- ---- ----
Total from investment operations 1.75 (0.17) 2.77 1.64 1.33
---- ------ ---- ---- ----
Distributions to shareholders:
Net investment income (0.03) (0.06) (0.06) --- (0.04)
Net realized gains and investments (0.23) (0.37) (0.83) (0.52) (0.20)
------ ------ ------ ------ ------
Total distributions (0.26) (0.43) (0.89) (0.52) (0.24)
------ ------ ------ ------ ------
Net asset value, end of year $10.46 $8.97 $9.57 $7.69 $6.57
====== ===== ===== ===== =====
Total return +.... 19.51% (1.80)% 39.31% 26.33% 25.54%
Ratios to average net assets
and supplemental data:
Net assets, end of year (in 000's) $2,222 $2,468 $3,338 $1,221 $68
Ratio of net investment income
to average net assets 0.13% 0.46% 0.85% 0.92% 0.64%
Ratio of operating expenses
to average net assets
(net of waivers/reimbursements) (a) 1.74% 1.72% 1.78% 1.74% 1.85%
Ratio of operating expenses
to average net assets
(before waivers/reimbursements) (b) 1.74% 1.72% 1.84% 2.19% 2.63%
Portfolio turnover rate 67% 77% 61% 106% 107%
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) 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 would be 1.69% for 1999, 1.70% for 1998,
1.75% for 1997, 1.68% for 1996 and 1.72% for 1995.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
</TABLE>
<PAGE>
Gabelli Westwood Balanced Fund
Per share amounts for the Fund's Class A Shares (formerly known as Service Class
Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating performance:
Net asset value, beginning of year $10.96 $11.46 $9.69 $8.45 $7.10
------ ------ ----- ----- -----
Net investment income 0.22 0.26 0.24 0.20 0.17
Net realized and unrealized gain/(loss)
on investments 1.11 0.02 2.33 1.37 1.35
---- ---- ---- ---- ----
Total from investment operations 1.33 0.28 2.57 1.57 1.52
---- ---- ---- ---- ----
Distributions to shareholders:
Net investment income (0.22) (0.22) (0.22) (0.20) (0.17)
Net realized gains and investments (0.12) (0.56) (0.58) (0.13) ---
------ ------ ------ ------ -------
Total distributions (0.34) (0.78) (0.80) (0.33) (0.17)
------ ------ ------ ------ ------
Net asset value, end of year $11.95 $10.96 $11.46 $9.69 $8.45
====== ====== ====== ===== =====
Total return + 12.20% 2.60% 27.93% 18.85% 21.67%
Ratios to average net assets
and supplemental data:
Net assets, end of year (in 000's) $9,374 $14,585 $14,444 $11,216 $7,212
Ratio of net investment income
to average net assets 1.81% 2.16% 2.37% 2.34% 2.26%
Ratio of operating expenses
to average net assets
(net of waivers/ reimbursements) (a) 1.45% 1.45% 1.53% 1.57% 1.62%
Ratio of operating expenses
to average net assets
(before waivers/ reimbursements) (b) 1.45% 1.45% 1.61% 1.96% 2.24%
Portfolio turnover rate 86% 77% 110% 111% 133%
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) 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 would be 1.40% for 1999, 1.42% for 1998,
1.50% for 1997, 1.49% for 1996 and 1.50% for 1995.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
</TABLE>
<PAGE>
Gabelli Westwood Intermediate Bond Fund
Per share amounts for the Fund's Class A Shares (formerly known as Service Class
Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C>
1995 (c)
Operating performance:
Net asset value, beginning of year $9.48
-----
Net investment income 0.05
Net realized and unrealized gain/(loss) on investments (0.14)
------
Total from investment operations (0.09)
------
Distributions to shareholders:
Net investment income (0.05)
Net realized gains and investments ---
Total distributions (0.05)
------
Net asset value, end of year $9.34
=====
Total return + (1.0)%
Ratios to average net assets and supplemental data:
Net assets, end of year (in 000's) $0
Ratio of net investment income to average net assets 4.85%
Ratio of operating expenses to average net assets 1.45%
(net of waivers/reimbursements) (a)
Ratio of operating expenses to average net assets 4.07%
(before waivers/reimbursements) (b)
Portfolio turnover rate 70%
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) 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 would be 1.00% for the period.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
(c) 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 net asset value per share represents the net asset value
on November 8, 1994.
</TABLE>
<PAGE>
[BACK COVER PAGE]
The Gabelli Westwood Funds
Class A, B, C Shares
For More Information:
For more information about the Funds, the following documents are available free
upon request:
Annual/Semi-Annual Reports:
The Funds' semi-annual and audited annual reports to shareholders contain
detailed information on each of the Fund's investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected each Fund's performance during its last fiscal year.
Statement of Additional Information (SAI):
The SAI provides more detailed information about the Funds, including their
operations and investments policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of these documents and prospectuses of other funds in
the Gabelli family, or request other information and discuss your questions
about the Funds by contacting:
The Gabelli Westwood Funds
One Corporate Center
Rye, NY 10580
Telephone: 1-800-GABELLI (1-800-422-3554)
www.gabelli.com
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
Free from the Commission's Website at http://www.sec.gov
Investment Company Act File Number: 811-04719
<PAGE>
THE GABELLI WESTWOOD FUNDS
Gabelli Westwood Equity Fund
Gabelli Westwood Balanced Fund
Gabelli Westwood SmallCap Equity Fund
Gabelli Westwood Mighty Mites(sm) Fund
Gabelli Westwood Realty Fund
Gabelli Westwood Intermediate Bond Fund
Class AAA Shares
(Formerly Retail Class Shares)
PROSPECTUS
February 1, 2000
The Securities and Exchange Commission has not approved or disapproved the
shares described in this prospectus or determined whether this prospectus
is accurate or complete. Any representation to the contrary is a criminal
offense.
==========================================================================
===============================================================================
The Gabelli Westwood Funds
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by
calling 1-800-GABELLI after 6:00 P.M.)
Board of Trustees
Susan M. Byrne Karl Otto Pohl
President and Chief Executive Officer Former President
Westwood Management Corporation Deutsche Bundesbank
Anthony J. Colavita Werner J. Roeder
Attorney-at-Law Practicing Private Physician
Anthony J. Colavita, P.C. Medical Director, Lawrence Hospital
James P. Conn
Former Chief Investment Officer
Financial Security Assurance Holdings Ltd.
<PAGE>
Officers
Susan M. Byrne Patricia R. Fraze
President Vice President
Bruce N. Alpert James McKee
Vice President and Treasurer Secretary
Lynda J. Calkin
Vice President
Questions?
Call 1-800-GABELLI or your
investment representative.
<PAGE>
Table of Contents
Page
Introduction
Investment and Performance Summary............................................1
More Investment and Risk Information.........................................13
Management of the Funds......................................................14
Purchase of Shares...........................................................15
Redemption of Shares.........................................................16
Exchanges of Shares..........................................................16
Pricing of Fund Shares.......................................................17
Dividends and Distributions..................................................17
Tax Information..............................................................17
Financial Highlights.........................................................18
INTRODUCTION
The Gabelli Westwood Funds (the "Trust") consists of the following six
separate investment portfolios (the "Funds"):
Gabelli Westwood Equity Fund (the "Equity Fund") Gabelli Westwood
Balanced Fund (the "Balanced Fund") Gabelli Westwood SmallCap
Equity Fund (the "SmallCap Equity Fund") Gabelli Westwood Mighty
Mites(sm) Fund (the "Mighty Mites Fund") Gabelli Westwood Realty
Fund (the "Realty Fund") Gabelli Westwood Intermediate Bond Fund
(the "Intermediate Bond Fund")
This Prospectus describes Class AAA Shares (formerly Retail Class
Shares) of each of the Funds. Each Fund is advised by Gabelli
Advisers, Inc. (the "Adviser") and each Fund, other than the
Mighty Mites Fund, is sub-advised by Westwood Management
Corporation (the "Sub-Adviser"). Each Fund's investment objective
cannot be changed without shareholder approval.
<PAGE>
26
p
- -------------------------------------------------------------------------------
GABELLI WESTWOOD EQUITY FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Equity Fund seeks to provide
capital appreciation. Capital is the amount of money you invest in the
Fund. Capital appreciation is an increase in the value of your investment.
The Fund's secondary goal is to produce current income.
Principal Investment Strategies. The Fund primarily invests in common stocks and
may also invest in securities which may be converted into common stocks. The
Fund invests in a portfolio of seasoned companies.
Seasoned companies generally have market capitalizations in excess of $500
million and have been operating for at least three years.
In selecting securities, the Sub-Adviser maintains a list of securities which it
believes have proven records and potential for above-average earnings growth. It
considers purchasing a security on such list if the Sub-Adviser's forecast for
growth rates and earning estimates exceeds Wall Street expectations, the issuer
of the security has a positive earnings surprise or the Adviser's forecasted
price/earnings ratio is less than the forecasted growth rate. The Sub-Adviser
closely monitors the issuers and will sell a stock if the Sub-Adviser expects
limited future price appreciation, the projected price/earnings ratio exceeds
the three-year growth rate and/or the price of the stocks declines 15% in the
first 90 days held. The Fund's risk characteristics, such as beta (a measure of
volatility), are generally less than those of the S&P 500 Composite Stock
Price Index (the "S&P 500 Index"), the Fund's benchmark.
Principal Risks. The Fund's share price will increase or decrease with
changes in the market value of the Fund's portfolio securities. Stocks
are subject to market, economic and business risks that cause their
prices to fluctuate. The Fund is also subject to the risk that the
Sub-Adviser's judgments about above-average growth potential of a
particular company's stocks is incorrect and the perceived value of
such stock is not realized by the market, or that the price of the
Fund's portfolio securities will decline. Your investment in the Fund
is not guaranteed and you could lose some or all of the amount you
invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek growth of capital
you seek a fund with a growth orientation as part of your
overall investment plan
You may not want to invest in the Fund if:
you are seeking a high level of current income you are
conservative in your investment approach you seek stability of
principal more than growth of capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD EQUITY FUND
- --------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year,
five years, ten years and the life of the Fund compared to those of the relevant
index. As with all mutual funds, the Fund's past performance does not predict
how the Fund will perform in the future. Both the chart and the table assume
reinvestment of dividends and distributions.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Calendar Year Total Return Calendar Year Total Return
------------- ------------ ------------- ------------
1990 (6.3)% 1995 36.9%
1991 21.2% 1996 26.8%
1992 6.0% 1997 29.6%
1993 17.2% 1998 13.1%
1994 2.3% 1999 ____%
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended ___________________) and the lowest return for a quarter
was ______% (quarter ended ___________________).
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------ ------------- -------------- -------------- -------------
Since
Average Annual Total Returns Past Past Past Inception
(for the periods ended December 31, 1999) One Year Five Years Ten Years (1/2/87)
- ------------------------------------------------------------ ------------- -------------- -------------- -------------
- ------------------------------------------------------------ ------------- -------------- -------------- -------------
The Gabelli Westwood Equity Fund
Class AAA Shares
(formerly known as Retail Class Shares) _____% _____% _____% _____%
- ------------------------------------------------------------ ------------- -------------- -------------- -------------
- ------------------------------------------------------------ ------------- -------------- -------------- -------------
S&P(R)500 Stock Index+ _____% _____% _____% _____%
- ------------------------------------------------------------ ------------- -------------- -------------- -------------
+ The S&P(R) 500 Composite Stock Price Index is a widely recognized,
unmanaged index of common stock prices. The performance of the Index does
not include expenses or fees.
</TABLE>
Fees and Expenses of the Fund. This table describes the fees and expenses that
you may pay if you buy and hold Class AAA Shares of the Fund.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................................... 1.00%
Distribution (Rule 12b-1) Expenses............................... 0.25%
Other Expenses.................................................... 0.24%
-----
Total Annual Operating Expenses....................................... 1.49%
----
Custodian Fee Credits*.................................................. .0.05%
-----
Net Annual Operating Expenses*......................................... 1.44%
=======
* Expenses are reduced due to custodian fee credits on cash balances
maintained with the Fund's custodian.
Expense Example. This example is intended to help you compare the cost of
investing in Class AAA Shares of the Fund with the cost of investing in other
mutual funds. The example assumes (1) you invest $10,000 in the Fund for the
time periods shown, (2) you redeem your shares at the end of those periods, (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$152 $471 $813 $1,779
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
GABELLI WESTWOOD BALANCED FUND
- --------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Balanced Fund seeks to provide
capital appreciation and current income resulting in a high total investment
return consistent with prudent investment risk and a balanced investment
approach. Capital is the amount of money you invest in the Fund. Capital
appreciation is an increase in the value of an investment. Income is the amount
of money you earn annually on your invested capital.
Principal Investment Strategies. The Fund invests in a combination of equity and
debt securities. The Fund is primarily equity-oriented, and seeks to provide
equity-like returns but with lower volatility than a fully invested equity
portfolio. The Sub-Adviser will typically invest 30% to 70% of the Fund's assets
in equity securities and 70% to 30% in debt securities, and the balance of
the Fund's assets in cash or cash equivalents.
The Fund invests in stocks of seasoned companies. Seasoned companies
generally have market capitalizations in excess of $500 million and have
been operating for at least three years. The Sub-Adviser chooses stocks
of seasoned companies with proven records and above-average earnings
growth potential.
The debt securities held by the Fund are investment grade securities of
corporate and government issuers and commercial paper and mortgage- and
asset-backed securities. Investment grade debt securities are securities rated
in one of the four highest ratings categories by a nationally recognized rating
agency.
Principal Risks. The Fund is subject to the risk that its allocations between
equity and debt securities may underperform other allocations. The Fund's share
price will fluctuate with changes in the market value of the Fund's portfolio
securities. Stocks are subject to market, economic and business risks that cause
their prices to fluctuate. In addition, the market prices of stocks of smaller
companies may tend to be more volatile than the market prices of stocks
generally. The Fund is also subject to the risk that the Sub-Adviser's
judgments about the above-average growth potential of a particular company's
stocks is incorrect and the perceived value of such stock is not realized by the
market, or that the price of the Fund's portfolio securities will decline.
Investing in debt securities involves interest rate risk and credit risk. When
interest rates decline, the value of the portfolio's securities generally rises.
Conversely, when interest rates rise, the value of the portfolio's securities
generally declines. It is also possible that the issuer of a security will not
be able to make interest and principal payments when due. Your investment in
the Fund is not guaranteed and you could lose some or all of the amound you
invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek both growth of capital and current income
you want participation in market growth with some emphasis on
preserving assets in "down" markets
You may not want to invest in the Fund if:
you seek stability of principal more than growth of capital
you seek an aggressive growth strategy
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- --------------------------------------------------------------------------------
GABELLI WESTWOOD BALANCED FUND
- -------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year,
five years and the life of the Fund compared to those of the relevant index. As
with all mutual funds, the Fund's past performance does not predict how the Fund
will perform in the future. Both the chart and the table assume reinvestment of
dividends and distributions.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Calendar Year Total Return Calendar Year Total Return
------------- ------------ ------------- ------------
1992 5.9% 1996 18.0%
1993 16.8% 1997 22.4%
1994 0.1% 1998 11.5%
1995 31.2% 1999 ____%
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended _____________________) and the lowest return for a quarter
was _____% (quarter ended _____________________).
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------- ----------------- --------------- --------------
Since
Average Annual Total Returns Past Past Inception
(for the periods ended December 31, 1999) One Year Five Years (10/1/91)
- -------------------------------------------------------------------- ----------------- --------------- --------------
- -------------------------------------------------------------------- ----------------- --------------- --------------
The Gabelli Westwood Balanced Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____% _____%
- -------------------------------------------------------------------- ----------------- --------------- --------------
- -------------------------------------------------------------------- ----------------- --------------- --------------
60% S&P 500 Index and 40% Lehman Brothers
Government/Corporate Bond Index+ _____% _____% _____%
- -------------------------------------------------------------------- ----------------- --------------- --------------
+ The S&P 500 Index is a widely recognized,
unmanaged index of common stock prices. The performance of the Index does
not include expenses or fees. The Lehman Brothers Government/Corporate Bond
Index is an unmanaged index of prices of U.S. Government and corporate
bonds with not less than one year to maturity. The performance of each
index does not include expenses or fees.
</TABLE>
Fees and Expenses of the Fund. This table describes the fees and expenses that
you may pay if you buy and hold Class AAA Shares of the Fund.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................................... 0.75%
Distribution (Rule 12b-1) Expenses................................ 0.25%
Other Expenses..................................................... 0.20%
-----
Total Annual Operating Expenses....................................... 1.20%
-----
Custodian Fee Credits*.................................................... 0.05%
-----
Net Annual Operating Expenses*.............................................1.15%
=====
* Expenses are reduced due to custodian fee credits on cash balances
maintained with the Fund's custodian.
Expense Example. This example is intended to help you compare the cost of
investing in Class AAA Shares of the Fund with the cost of investing in other
mutual funds. The example assumes (1) you invest $10,000 in the Fund for the
time periods shown, (2) you redeem your shares at the end of those periods, (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$122 $381 $660 $1,455
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD SMALLCAP EQUITY FUND
- ------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood SmallCap Equity Fund seeks to provide
long-term capital appreciation by investing primarily in smaller capitalization
equity securities. Capital is the amount of money you invest in the Fund.
Capital appreciation is an increase in the value of your investment.
Principal Investment Strategies. The Fund primarily invests in a portfolio of
common stock of smaller companies. These
smaller companies have a market capitalization (defined as shares outstanding
times current market price) of between $100 million and $1.5 billion at the time
of the Fund's initial investment.
In selecting securities for the Fund, the Sub-Adviser considers
companies which offer: an earnings growth rate exceeding the
Fund's benchmark, the Russell 2000 Index
an increasing return on equity
a low debt/equity ratio
sequential earnings per share and sales growth
a recent positive earnings surprise
Frequently small capitalization companies exhibit one or more of the following
traits:
new products or technologies
new distribution methods
rapid changes in industry conditions due to regulatory or other
developments
changes in management or similar characteristics that may result
not only in expected growth in revenues but in an accelerated or
above average rate of earnings growth
The Sub-Adviser closely monitors the issuers and will sell a stock
if the stock achieves 90% of its price objective and has limited
further potential for price increase, the forecasted
price/earnings ratio exceeds the future forecasted growth rate
and/or the issuer suffers an earnings disappointment.
Because smaller growth companies are less actively followed by stock analysts
and less information is available on which to base stock price evaluations, the
market may overlook favorable trends in particular smaller growth companies, and
then adjust its valuation more quickly once investor interest is gained. Smaller
growth companies may also be more subject to a valuation catalyst (such as
increased investor attention, takeover efforts or a change in management) than
larger companies. Small growth companies may offer greater potential for capital
appreciation than larger companies.
Principal Risks. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. Stocks are subject to market,
economic and business risks that cause their prices to fluctuate. Investment in
small capitalization stocks may be subject to more abrupt or erratic movements
in price than investment in medium and large capitalization stocks. The Fund is
subject to the risk that small capitalization stocks fall out of favor
generally with investors. Your investment in the Fund is not guaranteed and
you could lose some or all of the amount you invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek long-term growth of capital
you seek investments in small capitalization growth stocks
as part of your overall investment strategy
You may not want to invest in the Fund if: you are seeking a high
level of current income you are conservative in your investment
approach you seek stability of principal more than growth of
capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- --------------------------------------------------------------------------------
GABELLI WESTWOOD SMALLCAP EQUITY FUND
- --------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year
and the life of the Fund compared to those of the relevant index. As with all
mutual funds, the Fund's past performance does not predict how the Fund will
perform in the future. Both the chart and the table assume reinvestment of
dividends and distributions.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Return
1998 10.6%
1999 ____%
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended ______________________________) and the lowest return for
a quarter was _____% (quarter ended
- ------------------------------).
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------- ---------------------- ------------------------
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year (4/15/97)
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
The Gabelli Westwood SmallCap Equity Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
- -------------------------------------------------------------------- ---------------------- ------------------------
Russell 2000 Index+ _____% _____%
- -------------------------------------------------------------------- ---------------------- ------------------------
+ The Russell 2000 Index is an unmanaged index of the 2000 smallest common
stocks in the Russell 3000, which contains the 3000 largest stocks in the
U.S. based on total market capitalization. The performance of the Index
does not include expenses or fees.
</TABLE>
Fees and Expenses of the Fund. This table describes the fees and expenses that
you may pay if you buy and hold Class AAA Shares of the Fund.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees...................................................... 1.00%
Distribution (Rule 12b-1) Expenses................................... 0.25%
Other Expenses*...................................................... 0.47%
-----
Total Annual Operating Expenses*...................................... 1.72%
-----
Fee Waiver, Expense Reimbursement and Custodian Fee Credits*..............0.22%
-----
Net Annual Operating Expenses*............................................1.50%
=====
* The Adviser has contractually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain the
Total Annual Operating Expenses at 1.50%. The fee waiver and expense
reimbursement arrangement will continue until at least September 30, 2000.
The custodian reduces its fees to reflect credits on cash balances.
Expense Example. This example is intended to help you compare the cost of
investing in Class AAA Shares of the Fund with the cost of investing in other
mutual funds. The example assumes (1) you invest $10,000 in the Fund for the
time periods shown, (2) you redeem your shares at the end of those periods, (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$175 $542 $933 $2,030
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD MIGHTY MITES(sm) FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Mighty Mites(sm) Fund seeks to
provide long-term capital appreciation by investing primarily in
micro-capitalization equity securities. Capital is the amount of money you
invest in the Fund. Capital appreciation is an increase in the value of your
investment.
Principal Investment Strategies. The Fund primarily invests in common stocks of
smaller companies that have a market capitalization (defined as shares
outstanding times current market price) of $300 million or less at the time of
the Fund's initial investment. These companies are called micro-cap companies.
The Fund focuses on micro-cap companies which appear to be underpriced relative
to their "private market value." Private market value is the value the Adviser
believes informed investors would be willing to pay to acquire a company.
In selecting stocks, the Adviser attempts to identify companies that:
have above-average sales and earnings growth prospects
have improving balance sheet fundamentals given the current
status of economic and business cycles
are undervalued and may significantly appreciate due to
management changes, stock acquisitions, mergers, reorganizations,
tender offers, spin-offs or other significant events
have new or unique products, new or expanding markets,
changing competitive or regulatory climates or undervalued
assets or franchises
The Adviser also considers the stocks' prices, the issuers' balance sheet
characteristics and the strength of issuers' managements.
Micro-cap companies may also be new or unseasoned companies which are in their
very early stages of development. Micro-cap companies can also be engaged in
new and emerging industries.
Since micro-cap companies are generally not well-known to investors and have
less of an investor following than larger companies, they may present
opportunities for greater investment gains. The Adviser will attempt to
capitalize on the lack of analyst attention to micro-cap stocks and the
inefficiency of the micro-cap market. Micro-cap companies may offer greater
growth potential for capital appreciation than larger companies.
Principal Risks. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. Stocks are subject to market,
economic and business risks that cause their prices to fluctuate. The Fund is
also subject to the risk that investment in micro-capitalization stocks may be
subject to more abrupt or erratic movements in price than investment in
small-, medium- and large-capitalization stocks. Your investment in the Fund
is not guaranteed and you could lose some or all of the amound you invested
in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek long-term growth of capital
you seek an exposure to the micro-capitalization market
segment despite the potential volatility
of micro-capitalization stocks
You may not want to invest in the Fund if: you are seeking a high
level of current income you are conservative in your investment
approach you seek stability of principal more than growth of
capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD MIGHTY MITES(sm) FUND
- -------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year
and the life of the Fund compared to those of the relevant index. As with all
mutual funds, the Fund's past performance does not predict how the Fund will
perform in the future. Both the chart and the table assume reinvestment of
dividends and distributions.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Return
1999 ____%
During the period shown in the bar chart, the highest return for a quarter was
_____% (quarter ended ______________________________) and the lowest return for
a quarter was _____% (quarter ended
- ------------------------------).
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------- --------------------- ----------------------
Average Annual Total Returns Since Inception
(for the period ended December 31, 1999) Past One Year (5/11/98)
- ----------------------------------------------------------------------- --------------------- ----------------------
- ----------------------------------------------------------------------- --------------------- ----------------------
The Gabelli Westwood Mighty Mites(sm) Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____%
- ----------------------------------------------------------------------- --------------------- ----------------------
- ----------------------------------------------------------------------- --------------------- ----------------------
Russell 2000 Index+ _____% _____%
- ----------------------------------------------------------------------- --------------------- ----------------------
+ The Russell 2000 Index is an unmanaged index of the 2000 smallest common
stocks in the Russell 3000, which contains the 3000 largest stocks in the
U.S. based on total market capitalization. The performance of the Index
does not include expenses or fees.
</TABLE>
Fees and Expenses of the Fund. This table describes the fees and expenses that
you may pay if you buy and hold Class AAA Shares of the Fund.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees.................................................... 1.00%
Distribution (Rule 12b-1) Expenses.................................. 0.25%
Other Expenses*...................................................... 1.07%
-----
Total Annual Operating Expenses....................................... 2.32%
-----
Fee Waiver, Expense Reimbursement and Custodian Fee Credits*.............0.82%
------
Net Annual Operating Expenses*...........................................1.50%
======
* The Adviser has contractually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain the Total
Annual Operating Expenses at 1.50%. The fee waiver and expense
reimbursement arrangement will continue until at least September 30, 2000.
The custodian reduces its fees to reflect credits on cash balances.
Expense Example. This example is intended to help you compare the cost of
investing in Class AAA Shares of the Fund with the cost of investing in other
mutual funds. The example assumes (1) you invest $10,000 in the Fund for the
time periods shown, (2) you redeem your shares at the end of those periods, (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$235 $725 $1,240 $2,656
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD REALTY FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Realty Fund seeks to provide
long-term capital appreciation as well as current income. It invests primarily
in companies that are engaged in real estate or real estate related industries.
Capital is the amount of money you invest in the Fund. Capital appreciation is
an increase in the value of your investment. Income is the amount of money that
you earn annually on your invested capital.
Principal Investment Strategies. The Fund principally invests in the securities
of publicly traded real estate investment trusts ("REITs") and real estate
operating companies 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. A REIT is a pooled investment vehicle which invests
primarily in income producing real estate or real estate loans or interests. The
Fund's investments include equity REITs, mortgage REITs and hybrid REITs and
other equity securities engaged in real estate.
The Sub-Adviser invests in REITs with attractive income and growth
characteristics. It uses a multi-factor quantitative model to rank a universe of
REITs and then follows the ranking process with in-depth fundamental research.
Securities considered for purchase have:
attractive rankings based on the Sub-Adviser's quantitative model
assets in regions with favorable demographic trends
assets in sectors with attractive long-term fundamentals
issuers with strong management teams and/or
issuers with good balance sheet fundamentals
The Sub-Adviser will consider selling a security if real estate supply/demand
fundamentals become unfavorable in the issuer's sector or region, there is
limited growth opportunity, the issuer is at risk of losing its competitive edge
and/or the issuer is serving markets with slowing growth.
Principal Risks. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. Stocks are subject to market,
economic and business risks that cause their prices to fluctuate. The Fund is
also subject to the risks associated with direct ownership of real estate. Real
estate values can fluctuate due to general and local economic conditions,
overbuilding or undersupply, changes in zoning and other laws and a number of
other factors. An investor in the Fund is subject to the risk that the real
estate industry will underperform other industries or the stock market
generally. Your investment in the Fund is not guaranteed and you could lose
some or all of the amound you invested in the Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor
you seek current income as well as growth of capital
you seek to invest in a market which does not correlate directly
with other equity markets you seek broad-based exposure to the
real estate market without owning real estate directly
You may not want to invest in the Fund if:
you are conservative in your investment approach
you seek stability of principal more than growth of capital
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- ------------------------------------------------------------------------------
GABELLI WESTWOOD REALTY FUND
- ------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year
and the life of the Fund compared to those of the relevant index. As with all
mutual funds, the Fund's past performance does not predict how the Fund will
perform in the future. Both the chart and the table assume reinvestment of
dividends and distributions.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Return
1998 (15.2)%
1999 ____%
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended ______________________________) and the lowest return for
a quarter was _____% (quarter ended
- ------------------------------).
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------- ------------------- -------------------------
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year (11/1/97)
- ---------------------------------------------------------------------- ------------------- -------------------------
- ---------------------------------------------------------------------- ------------------- -------------------------
The Gabelli Westwood Realty Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____%
- ---------------------------------------------------------------------- ------------------- -------------------------
- ---------------------------------------------------------------------- ------------------- -------------------------
NAREIT All REIT Index+ _____% _____%
- ---------------------------------------------------------------------- ------------------- -------------------------
- ---------------------------------------------------------------------- ------------------- -------------------------
Russell 2000 Index+ _____% _____%
- ---------------------------------------------------------------------- ------------------- -------------------------
+ The NAREIT All REIT Index is a market capitalization weighted unmanaged
index of all tax-qualified REITs listed on the New York Stock Exchange,
Inc., American Stock Exchange and the National Association of Securities
Dealers Automated Quotations, Inc. which have 75% or more of their gross
invested book assets invested directly or indirectly in the equity
ownership of real estate. The Russell 2000 Index is an unmanaged index of
the 2000 smallest common stocks in the Russell 3000 which contains the 3000
largest stocks in the U.S. based on total market capitalization. The
performance of the indices does not include expenses or fees.
</TABLE>
Fees and Expenses of the Fund. This table describes the fees and expenses that
you may pay if you buy and hold Class AAA Shares of the Fund.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees..................................................... 1.00%
Distribution (Rule 12b-1) Expenses................................... 0.25%
Other Expenses*...................................................... 2.43%
-----
Total Annual Operating Expenses....................................... 3.68%
------
Fee Waiver, Expense Reimbursement and Custodian Fee Credits*.............2.18%
------
Net Annual Operating Expenses*...........................................1.50%
======
* The Adviser has contractually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain the Total
Annual Operating Expenses at 1.50%. The fee waiver and expense
reimbursement arrangement will continue until at least September 30, 2000.
The custodian reduces its fees to reflect credits on cash balances.
Expense Example. This example is intended to help you compare the cost of
investing in Class AAA Shares of the Fund with the cost of investing in other
mutual funds. The example assumes (1) you invest $10,000 in the Fund for the
time periods shown, (2) you redeem your shares at the end of those periods, (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$370 $1,126 $1,902 $3,932
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD INTERMEDIATE BOND FUND
- -------------------------------------------------------------------------------
Investment Objective. The Gabelli Westwood Intermediate Bond Fund seeks to
maximize total return, while maintaining a level of current income consistent
with the maintenance of principal and liquidity.
Principal Investment Strategies. The Fund primarily invests in bonds of various
types and with various maturities. The Fund focuses on investment grade bonds of
domestic corporations and governments. Investment grade debt
securities are securities rated in the four highest rating categories by a
nationally recognized rating agency.
Although there are no restrictions on the maximum or minimum maturity of any
individual security that the Fund may invest in, generally the Fund will have a
dollar weighted average maturity of three to ten years. The Fund may also invest
in other types of investment grade debt securities, including debentures,
notes, convertible debt securities, municipal securities, mortgage-related
securities, certain collateralized and asset-backed securities, The Fund will
maintain an average rating of AA or better by Standard & Poor's Rating
Services, a division of McGraw-Hill Companies, or comparable quality.
In selecting securities for the Fund, the Sub-Adviser focuses both on the
fundamentals of particular issuers and yield curve positioning. The Sub-Adviser
seeks to earn risk-adjusted returns superior to those of the Lehman Brothers
Government/Corporate Bond Index over time. The Sub-Adviser invests 75% to 100%
of the Fund's assets in debt securities and the remainder in cash or cash
equivalents.
Principal Risks. The Fund's share price will fluctuate with changes in
prevailing interest rates and the market value of the Fund's portfolio
securities. When interest rates decline, the value of the portfolio's securities
generally rises. Conversely, when interest rates rise, the value of the
portfolio's securities generally declines. It is also possible that the issuer
of a security will not be able to make interest and principal payments when due.
To the extent that the Fund's portfolio is invested in cash, if interest
rates decline, the Fund may lose the opportunity to benefit from a probable
increase in debt securities valuations. Your investment in the Fund is not
guaranteed and you could lose some or all of your investment in the
Fund.
Who May Want to Invest:
The Fund may appeal to you if:
you are seeking a high level of current income
you are conservative in your investment approach
you are seeking exposure to high quality bonds as part of your
overall investment strategy
You may not want to invest in the Fund if:
you seek growth of capital
you seek stability of principal more than total return
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
- -------------------------------------------------------------------------------
GABELLI WESTWOOD INTERMEDIATE BOND FUND
- -------------------------------------------------------------------------------
Performance. The bar chart and table shown below provide an indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year, and by showing how the Fund's average annual returns for one year,
five years and the life of the Fund compared to those of the relevant index. As
with all mutual funds, the Fund's past performance does not predict how the Fund
will perform in the future. Both the chart and the table assume reinvestment of
dividends and distributions.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Calendar Year Total Return Calendar Year Total Return
------------- ------------ ------------- ------------
1992 6.1% 1996 3.7%
1993 10.5% 1997 10.7%
1994 (5.6)% 1998 6.6%
1995 16.2% 1999 ____%
During the periods shown in the bar chart, the highest return for a quarter was
_____% (quarter ended _______________________) and the lowest return for a
quarter was _____% (quarter ended _______________________).
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------- -------------- --------------- --------------
Since
Average Annual Total Returns Past Past Inception
(for the periods ended December 31, 1999) One Year Five Years (10/1/91)
- ----------------------------------------------------------------------- -------------- --------------- --------------
- ----------------------------------------------------------------------- -------------- --------------- --------------
The Gabelli Westwood Intermediate Bond Fund
Class AAA Shares (formerly known as Retail Class Shares) _____% _____% _____%
- ----------------------------------------------------------------------- -------------- --------------- --------------
- ----------------------------------------------------------------------- -------------- --------------- --------------
Lehman Brothers Government/Corporate Bond Index+ _____% _____% _____%
- ----------------------------------------------------------------------- -------------- --------------- --------------
+ The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
of prices of U.S. Government and corporate bonds with not less than one
year to maturity. The performance of the Index does not include expenses or
fees.
</TABLE>
Fees and Expenses of the Funds. This table describes the fees and expenses that
you may pay if you buy and hold Class AAA Shares of the Fund.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees...........................................................60%
Distribution (Rule 12b-1) Expenses.................................. 0.25%
Other Expenses*....................................................... 0.78%
-----
Total Annual Operating Expenses...................................... 1.63%
------
Fee Waiver, Expense Reimbursement and Custodian Fee Credits*.............0.63%
------
Net Annual Operating Expenses*...........................................1.00%
======
* The Adviser has contractually agreed to waive its investment advisory
fees and reimburse the Fund to the extent necessary to maintain the Total
Annual Operating Expenses at 1.00%. The fee waiver and expense
reimbursement arrangement will continue until at least September 30, 2000.
The custodian reduces its fees to reflect credits on cash balances.
Expense Example. This example is intended to help you compare the cost of
investing in Class AAA Shares of the Fund with the cost of investing in other
mutual funds. The example assumes (1) you invest $10,000 in the Fund for the
time periods shown, (2) you redeem your shares at the end of those periods, (3)
your investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$166 $514 $887 $1,933
</TABLE>
<PAGE>
MORE INVESTMENT AND RISK INFORMATION
INVESTMENT TECHNIQUES
The Funds may also use the following investment technique:
Defensive Investments. When opportunities for capital appreciation
do not appear attractive or when adverse market or economic
conditions occur, each Fund may temporarily invest all or a
portion of its assets in defensive investments. Such investments
include U.S. Government securities, certificates of deposit,
bankers acceptances, time deposits, repurchase agreements and
other high quality debt instruments. When following a defensive
strategy, a Fund will be less likely to achieve its investment
goal.
RISK INFORMATION
Investing in the Funds involves the following risks:
Equity Risk
Equity Fund
Balanced Fund
SmallCap Equity Fund
Mighty Mites Fund
Realty Fund
The principal risk of investing in the Fund is equity risk. Equity
risk is the risk that the prices of the securities held by the
Fund will change due to general market and economic conditions,
perceptions regarding the industries in which the companies
issuing the securities participate and the issuer company's
particular circumstances.
Small- and Micro-Capitalization Company Risk
SmallCap Equity Fund
Mighty Mites Fund
Investing in securities of small-cap and micro-cap companies may
involve greater risks than investing in larger, more established
issuers. Small-cap and micro-cap companies generally have limited
product lines, markets and financial resources. Their securities
may trade less frequently and in more limited volume than the
securities of larger, more established companies. Also, small-cap
and micro-cap companies are typically subject to greater changes
in earnings and business prospects than larger companies.
Consequently, small-cap and micro-cap company stock prices tend to
rise and fall in value more than other stocks. The risks of
investing in micro-cap stocks and companies are even greater than
those of investing in small-cap companies.
Interest Rate Risk and Credit Risk
Balanced Fund
Intermediate Bond Fund
Realty Fund
When interest rates decline, the value of the portfolio's
debt securities generally rises. Conversely, when interest
rates rise, the value of the portfolio's debt securities
generally declines. It is also possible that the issuer of a
security will not be able to make interest and principal
payments when due.
Fund and Management Risk
All Funds
If the Fund's manager makes errors in selecting securities or if
the market segment in which the Fund invests falls out of favor
with investors, the Fund could underperform the stock market or
its peers. The Fund could also fail to meet its investment
objective. When you sell Fund shares, they may be worth less than
what you paid for them. Therefore, you may lose money by investing
in the Fund.
<PAGE>
Real Estate Industry Concentration Risk
Realty Fund
The real estate industry is particularly sensitive to economic
downturns. The value of securities of issuers in the real estate
industry is sensitive to changes in real estate values and rental
income, property taxes, interest rates, and tax and regulatory
requirements. Adverse economic, business, regulatory or political
developments affecting the real estate industry could have a major
effect on the value of the Fund's investments. In addition, the
value of a REIT can depend on the structure of and cash flow
generated by the REIT.
MANAGEMENT OF THE FUNDS
The Adviser. Gabelli Advisers, Inc., with principal offices located at One
Corporate Center, Rye, New York 10580-1434, serves as investment adviser to the
Funds. The Adviser makes investment decisions for the Funds and continuously
reviews and administers the Funds' investment programs under the supervision of
the Trust's Board of Trustees. The Adviser is a Delaware corporation formerly
known as Teton Advisers LLC (prior to November 1997). The Adviser is a
subsidiary of Gabelli Asset Management Inc., a publicly held
company listed on the New York Stock Exchange, Inc ("NYSE").
As compensation for its services and the related expenses the Adviser bears, for
the fiscal year ended September 30, 1999, each Fund paid the Adviser a fee as
shown in the table below.
Annual Advisory Fee
(as a percentage of average daily net assets)
Equity Fund 1.00%
Balanced Fund 0.75%
SmallCap Equity Fund 1.00%
Mighty Mites(sm) Fund 1.00%
Realty Fund 1.00%
Intermediate Bond Fund 0.60%
Sub-Adviser. The Adviser has entered into a Sub-Advisory Agreement with Westwood
Management Corporation for all Funds except the Mighty
Mites(sm) Fund with which there is not a Sub-Advisory Agreement. The Sub-Adviser
has its principal offices located at 300 Crescent Court, Suite 1300, Dallas,
Texas 75201. The Adviser pays the Sub-Adviser out of its advisory fees with
respect to the Funds (except the Mighty Mites(sm) Fund), 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 applicable Funds or (ii) 35%
of the net revenues to the Adviser from the applicable Funds. The Sub-Adviser is
a registered investment adviser formed in 1983. The Sub-Adviser is a
wholly-owned subsidiary of Southwest Securities Group, Inc., a Dallas based
securities firm.
The Portfolio Managers. Susan M. Byrne, President of the Sub-Adviser since
1983, is responsible for the day-to-day management of the Equity Fund.
Kellie R. Stark, Vice President of the Sub-Adviser since 1992, assists in
the management of the Equity Fund. Ms. Byrne and Patricia Fraze, Executive
Vice President of the Sub-Adviser since 1990, are jointly responsible for
the day-to-day management of the Balanced Fund. Ms. Fraze is also
responsible for the day-to-day management of the Intermediate Bond Fund.
Lynda Calkin, Senior Vice President of the Sub-Adviser since 1993 is
responsible for the day-to-day management of the SmallCap Equity Fund and
C.J. MacDonald assists in management of such Fund. Mario J. Gabelli, Marc
J. Gabelli, Laura Linehan and Walter K. Walsh are primarily responsible for
the day-to-day management of the Mighty Mites(sm) Fund. Mario J. Gabelli
has been Chairman, Chief Executive Officer and Chief Investment Officer of
Gabelli Funds, LLC since its organization in 1999 (Gabelli Funds, LLC is
the successor adviser to Gabelli Funds, Inc., an entity organized in
1980). Marc J. Gabelli has been Managing Director and an analyst of
Gabelli Funds, LLC since 1993. Laura Linehan has been Director of
Creative Research at Gabelli & Company, Inc. since May 1995 and an
associate in Corporate Finance at Smith Barney from May 1994.
Walter K. Walsh has been Compliance Officer of Gabelli & Company, Inc.
since 1994. Ms. Byrne and Timothy M. Ognisty, Vice President of the
Sub-Adviser since 1996 and an equity trader at Goldman Sachs from 1994,
are jointly responsible for the day-to-day management of the Realty Fund.
<PAGE>
Rule 12b-1 Plan. The Funds have adopted a plan under Rule 12b-1 (the "Plan")
which authorizes payments by the Funds on an annual basis of 0.25% of each
Fund's average daily net assets attributable to Class AAA Shares to finance the
distribution of the Funds' Class AAA Shares. Each Fund may make payments under
the Plan for the purpose of financing any activity primarily intended to result
in the sale of Class AAA Shares of the Funds. To the extent any activity is one
which a Fund may finance without a distribution plan, each Fund may also make
payments to compensate such activity outside of the Plan and not be subject to
its limitations. Because payments under the Plan are paid out of each Fund's
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
PURCHASE OF SHARES
You can purchase the Funds' shares on any day the NYSE is open for
trading (a "Business Day"). You may purchase shares directly from
the Fund through the Fund's transfer agent or through registered
broker-dealers.
By Mail or in Person. You may open an account by mailing a completed
subscription order form with a check or money order payable to "The
Gabelli Westwood Funds" to:
By Mail: By Personal Delivery:
The Gabelli Funds The Gabelli Funds
P.O Box 8308 c/o BFDS
Boston, MA 02266-8308 66 Brooks Drive
Braintree, MA 02184
You can obtain a subscription order form by calling 1-800-422-3554.
Checks made payable to a third party and endorsed by the depositor are
not acceptable. For additional investments, send a check to the above
address with a note stating your exact name and account number, the
name of the Fund and class of shares you wish to purchase.
By Bank Wire. To open an account using the bank wire system, first
telephone the Fund at 1-800-422-3554 to obtain a new account number.
Then instruct a Federal Reserve System member bank to wire funds to:
State Street Bank and Trust Company
[ABA #011-0000-28-REF DDA #99046187]
Re: The Gabelli Westwood Funds
________________________
Account # ______________
Account of [Registered Owners]
225 Franklin Street, Boston, MA 02110
If you are making an initial purchase, you should also complete and
mail a subscription order form to the address shown under "By Mail."
Note that banks may charge fees for wiring funds, although State
Street Bank and Trust Company ("State Street") will not charge you for
receiving wire transfers.
Minimum Investments. Your minimum initial investment must be at least
$1,000. See "Retirement Plans" and "Automatic Investment Plan"
regarding minimum investment amounts applicable to such plans. There is
no minimum for subsequent investments. Brokers may have different
minimum investment requirements.
Share Price. The Funds sell their Class AAA shares at the net asset
value next determined after the Funds receive your completed subscription
order form. See "Pricing of Fund
Shares" for a description of the calculation of the net asset value.
Retirement Plans. The Funds have available a form of IRA and a "Roth" IRA for
investment in Fund shares that may be obtained from the Distributor by calling
1-800-GABELLI (1-800-422-3554). Self-employed investors may purchase shares of
the Funds through tax-deductible contributions to existing retirement plans for
self-employed persons, known as Keogh or H.R. 10 plans. The Funds do not
currently act as sponsor to such plans. Fund shares may also be a suitable
investment for other types of qualified pension or profit-sharing plans which
are employer sponsored, including deferred compensation or salary reduction
plans known as "401(k) Plans" which give participants the right to defer
portions of their compensation for investment on a tax-deferred basis until
distributions are made from the plans. The minimum initial investments for all
such retirement plans is $1,000, except that an individual and his or her spouse
may establish separate IRAs if the combined investment is $1,250. There is no
minimum for subsequent investments.
Automatic Investment Plan. The Funds offer an automatic monthly investment plan.
There is no minimum monthly investment for accounts establishing an automatic
investment plan. Call 1-800-GABELLI (1-800-422-3554) for more details about the
plan.
Telephone Investment Plan. You may purchase additional shares of the Funds by
telephone as long as your bank is a member of the Automated Clearing House
(ACH) system. You must also have a completed, approved Investment Plan
application on file with the Fund's Transfer Agent. There is a minimum of
$100 for each telephone investment. To initiate an ACH purchase, please call
1-800-GABELLI (1-800-422-3554) or 1-800-872-5365
General. State Street will not issue share certificates unless requested by you.
Each Fund reserves the right to (i) reject any purchase order if, in the opinion
of Fund management, it is in the Funds' best interest to do so and (ii) suspend
the offering of shares for any period of time.
<PAGE>
REDEMPTION OF SHARES
You can redeem shares on any Business Day without a redemption
fee. The Funds may temporarily stop redeeming their shares when
the NYSE is closed or trading on the NYSE is restricted, when an
emergency exists and the Funds cannot sell their shares or
accurately determine the value of their assets, or if the
Securities and Exchange Commission ("SEC") orders the Funds to
suspend redemptions.
The Funds redeem their shares at the net asset value next
determined after the Funds receive your redemption request.
See "Pricing of Fund Shares" for a description of the
calculation of net asset value.
You may redeem shares through the Distributor or directly from
the Funds through the transfer agent.
By Letter. You may mail a letter requesting redemption of shares to: The
Gabelli Funds, P.O. Box 8308, Boston, MA 02266-8308. Your letter should state
the name of the Fund and the share class, the dollar amount or number of shares
you are redeeming and your account number. You must sign the letter in exactly
the same way the account is registered and if there is more than one owner of
shares, all must sign. A signature guarantee is required for each signature
on your redemption letter. You can obtain a signature guarantee from financial
institutions such as commercial banks, brokers, dealers and savings
associations. A notary public cannot provide a signature guarantee.
By Telephone. You may redeem your shares in a direct registered account by
calling either 1-800-422-3554 or 1-800-872-5365 (617-328-5000
from outside the United States), subject to a $25,000 limitation. You may not
redeem shares held through an IRA by telephone. If State Street properly acts on
telephone instructions and follows reasonable procedures to protect against
unauthorized transactions, neither State Street nor the Funds will be
responsible for any losses due to telephone transactions. You may be responsible
for any fraudulent telephone order as long as State Street or the Funds take
reasonable measures to verify the order. You may request that redemption
proceeds be mailed to you by check (if your address has not changed in the prior
30 days), forwarded to you by bank wire or invested in another mutual fund
advised by the Adviser (see "Exchanges of Shares" below).
1. Telephone Redemption By Check. The Funds will make checks payable to
the name in which the account is registered and normally will mail the
check to the address of record within seven days.
2. Telephone Redemption By Wire. The Funds accept telephone requests for
wire redemption in amounts of at least $1,000. The Funds will send a
wire to either a bank designated on your subscription order form or on
a subsequent letter with a guaranteed signature. The proceeds are
normally wired on the next Business Day.
Through the Automatic Cash Withdrawal Plan. You may automatically redeem shares
on a monthly, quarterly or annual basis if your account is directly
registered with State Street. Please call the Distributor at
1-800-422-3554 for more information.
Involuntary Redemption. The Funds may redeem all shares in your account (other
than an IRA account) if their value falls below $500 as a result of redemptions
(but not as a result of a decline in net asset value). You will be notified in
writing and allowed 30 days to increase the value of your shares to at least
$500.
Redemption Proceeds. If you request redemption proceeds by check, the Funds will
normally mail the check to you within seven days after it receives your
redemption request. If you purchased your Fund shares by check, you may not
redeem shares until the check clears, which may take up to 15 days following
purchase.
Redemption In Kind. The Funds reserve the right to make a redemption in kind-
payment in portfolio securities rather than cash - for certain large redemption
amounts. Payments would be made in portfolio securities only in the
rare instance that the Trust's Board of Trustees believes that it
would be in the Funds' best interest not to pay redemption proceeds in cash.
EXCHANGES OF SHARES
You may exchange shares of each Fund you hold for shares of the same class of
another fund managed by the Adviser or its affiliates based on their relative
net asset values. To obtain a list of the funds whose shares you may acquire
through exchange, call 1-800-GABELLI (1-800-422-3554). You may also exchange
your shares for shares of a money market fund managed by the Adviser or its
affiliates.
In effecting an exchange:
you must meet the minimum purchase requirements for the fund
whose shares you purchase through exchange.
if you are exchanging into shares of a fund with a higher
sales charge, you must pay the difference at the time of
exchange.
you may realize a taxable gain or loss.
you should read the prospectus of the fund whose shares you
are purchasing (call 1-800-GABELLI (1-800-422-3554) to obtain
the prospectus).
you should be aware that brokers may charge a fee for
handling an exchange for you.
<PAGE>
You may exchange shares by telephone or mail.
Exchanges by Telephone. You may give exchange instructions by telephone by
calling 1-800-GABELLI (1-800-422-3554). You may not exchange shares by
telephone if you hold share certificates.
Exchanges by Mail. You may send a written request for exchanges to: The Gabelli
Funds, P.O. Box 8308, Boston, MA 02266-8308. State your name, your account
number, the dollar value or number of shares you wish to exchange, the name and
class of the funds whose shares you wish to exchange, and the name of the fund
whose shares you wish to acquire.
Exchanges through the Internet. You may also give exchange instructions via the
Internet at www.gabelli.com.
We may modify or terminate the exchange privilege at any time. You will be given
notice 60 days prior to any material change in the exchange privilege.
PRICING OF FUND SHARES
Shares of each Fund are sold at the net asset value per share next
determined after receipt of the order. Each Fund's net asset value
per share is calculated on each Business Day. The NYSE is
currently scheduled to be closed on New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day
and on the preceding Friday or subsequent Monday when a holiday
falls on a Saturday or Sunday, respectively. Each Fund's net asset
value is determined as of the close of regular trading on the
NYSE, normally 4:00 p.m., New York time, and is computed by
dividing the value of the Fund's net assets (i.e., the value of
its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and
surplus) by the total number of its shares outstanding at the time
the determination is made. The Funds use market quotations in
valuing portfolio securities. Short-term investments that mature
in 60 days or less are valued at amortized cost, which the
Trustees of the Funds believe represents fair value.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions may differ for different Funds. They
will be automatically reinvested for your account at net asset
value in additional shares of the Funds, unless you instruct the
Funds to pay all dividends and distributions in cash. If you elect
cash distributions, you must instruct the Funds either to credit
the amounts to your brokerage account or to pay the amounts to you
by check. Dividends from net investment income will be paid
annually by the Equity Fund, the SmallCap Equity Fund and the
Mighty Mites Fund and quarterly by the Balanced Fund and the
Realty Fund. 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
realized capital gains. There are no sales or other charges in
connection with the reinvestment of dividends and capital gains
distributions. There is no fixed dividend rate, and there can be
no assurance that the Funds will pay any dividends or realize any
capital gains.
TAX INFORMATION
The Funds expect that their distributions will consist primarily
of net investment income and capital gains, which may be taxable
at different rates depending on the length of time the Funds hold
their assets. Dividends out of net investment income and
distributions of realized short-term capital gains are taxable to
you as ordinary income. Distributions of net long-term capital
gains are taxable to you at long-term capital gain rates. The
Funds' distributions, whether you receive them in cash or reinvest
them in additional shares of the Funds, generally will be subject
to federal, state or local taxes. An exchange of a Fund's shares
for shares of another fund will be treated for tax purposes as a
sale of the Fund's shares, and any gain you realize on such a
transaction generally will be taxable. Foreign shareholders
generally will be subject to a federal withholding tax. This
summary of tax consequences is intended for general information
only. You should consult a tax adviser concerning the tax
consequences of your investment in the Funds.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table for each Fund is intended to help
you understand the Fund's financial performance for the past five
fiscal years of the Funds. The total returns in the tables
represent the rates that an investor would have earned or lost on
an investment in each Fund's Class AAA Shares. This information
has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Funds' financial
statements and related notes are included in the annual report,
which is available upon request.
Gabelli Westwood Equity Fund
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating Performance:
Net Asset Value, Beginning of Period $8.99 $9.57 $7.68 $6.59 $5.50
----- ----- ----- ----- -----
Net investment income................ 0.04 0.07 0.07 0.08 0.04
Net realized and unrealized gain (loss)
on investments..................... 1.72 (0.22) 2.72 1.59 1.31
---- ------ ---- ---- ----
Total from Investment Operations..... 1.76 (0.15) 2.79 1.67 1.35
---- ------ ---- ---- ----
Distributions to Shareholders:
Net investment income................ (0.06) (0.06) (0.07) (0.06) (0.06)
Net realized gain on investments..... (0.23) (0.37) (0.83) (0.52) (0.20)
------ ------ ------ ------ ------
Total Distributions.................. (0.29) (0.43) (0.90) (0.58) (0.26)
------ ------ ------ ------ ------
Net Asset Value, End of Period....... $10.46 $8.99 $9.57 $7.68 $6.59
====== ===== ===== ===== =====
Total Return (+)..................... 19.77% (1.40)% 39.61% 26.88% 25.85%
Ratios to Average Net Assets
and Supplemental Data:
Net Assets, End of Period (in 000's). $155,036 $175,391 $128,697 $29,342 $14,903
Ratio of net investment income
to average net assets.............. 0.38% 0.73% 1.11% 1.16% 0.77%
Expenses net of waivers
/reimbursements (a)................ 1.49% 1.47% 1.53% 1.50% 1.61%
Expenses before waivers
/reimbursements.................... 1.49% 1.47% 1.59% (b) 1.95% (b) 2.29% (b)
Portfolio Turnover Rate.............. 67% 77% 61% 106% 107%
- --------------------------------------------
(+) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period, including reinvestment of dividends, and does not reflect any
applicable sales charges.
(a) 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 would be 1.44% for 1999, 1.45% for 1998,
1.50% for 1997, 1.44% for 1996 and 1.50% for 1995.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
</TABLE>
<PAGE>
Gabelli Westwood Balanced Fund
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating Performance:
Net Asset Value, Beginning of Period. $10.98 $11.49 $9.71 $8.47 $7.12
------ ------ ----- ----- -----
Net investment income................ 0.25 0.26 0.25 0.22 0.19
Net realized and unrealized gain (loss)
on investments..................... 1.12 0.05 2.36 1.37 1.35
---- ---- ---- ---- ----
Total from Investment Operations..... 1.37 0.31 2.61 1.59 1.54
---- ---- ---- ---- ----
Distributions to Shareholders:
Net investment income................ (0.25) (0.26) (0.25) (0.22) (0.19)
Net realized gain on investments..... (0.12) (0.56) (0.58) (0.13) -------
------ ------ ------ ------ -------
Total Distributions.................. (0.37) (0.82) (0.83) (0.35) (0.19)
------ ------ ------ ------ ------
Net Asset Value, End of Period....... $11.98 $10.98 $11.49 $9.71 $8.47
====== ====== ====== ===== =====
Total Return (+)..................... 12.56% 2.80% 28.32% 19.11% 21.98%
Ratios to Average Net Assets
and Supplemental Data:
Net Assets, End of Period (in 000's). $160,352 $128,222 $67,034 $23,158 $6,912
Ratio of net investment income
to average net assets.............. 2.06% 2.37% 2.60% 2.62% 2.47%
Expenses net of waivers
/reimbursements (a)................ 1.20% 1.20% 1.28% 1.32% 1.35%
Expenses before waivers
/reimbursements.................... 1.20% 1.20% 1.36% (b) 1.71% (b) 1.86% (b)
Portfolio Turnover Rate.............. 86% 77% 110% 111% 133%
- --------------------------------------------
(+) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period, including reinvestment of dividends, and does not reflect any
applicable sales charges.
(a) 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 would be 1.15% for 1999, 1.17% for 1998,
1.25% for 1997, 1.24% for 1996 and 1.25% for 1995.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
</TABLE>
<PAGE>
Gabelli Westwood SmallCap Equity Fund
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997 (c)
---- ---- --------
Operating Performance:
Net Asset Value, Beginning of Period....................... $11.18 $14.48 $10.00
------ ------ ------
Net investment income...................................... (0.12) (0.09) 0.08
Net realized and unrealized gain (loss) on investments..... 6.71 (2.39) 4.40
---- ------ ----
Total from Investment Operations........................... 6.59 (2.48) 4.48
---- ------ ----
Distributions to Shareholders:
Net investment income...................................... -------- -------- --------
In excess of net investment income......................... -------- (0.08) --------
Net realized gain on investments........................... -------- (0.60) --------
In excess of net realized gain on investments.............. -------- (0.14) --------
-------- ------ --------
Total Distributions........................................ -------- (0.82) --------
-------- ------ --------
Net Asset Value, End of Period............................. $17.77 $11.18 $14.48
====== ====== ======
Total Return (+)........................................... 58.94% (17.7)% 44.8%
------ ------- -----
Ratios to Average Net Assets and Supplemental Data:
Net Assets, End of Period (in 000's)....................... $20,361 $11,694 $8,546
Ratio of net investment income to average net assets....... (0.88)% (0.74)% 1.89% (d)
Expenses net of waivers /reimbursements (a)................ 1.62% 1.72% 1.89% (d)
Expenses before waivers /reimbursements (b)................ 1.72% 2.11% 2.45% (d)
Portfolio Turnover Rate.................................... 1.78% 200% 146%
(+) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period, including reinvestment of dividends, and does not reflect any
applicable sales charges.
(a) 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 would be 1.50% for 1999, 1.50% for 1998 and
1.50% for 1997.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
(c) Period from April 15, 1997 (inception date of fund) to September 30, 1997.
(d) Annualized.
</TABLE>
<PAGE>
Gabelli Westwood Mighty Mites(sm) Fund
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998 (d)
---- --------
Operating Performance:
Net Asset Value, Beginning of Period....................... $9.70 $10.00
----- ------
Net investment income...................................... 0.10 0.04
Net realized and unrealized gain (loss) on investments..... 3.20 (0.34)
---- ------
Total from Investment Operations........................... 3.30 (0.30)
---- ------
Distributions to Shareholders:
Net investment income...................................... (0.09) -------
In excess of net investment income......................... -------- -------
Net realized gain on investments........................... -------- -------
In excess of net realized gain on investments.............. -------- -------
-------- -------
Total Distributions........................................ (0.09) -------
------ -------
Net Asset Value, End of Period............................. $12.91 $9.70
====== =====
Total Return (+)........................................... 34.21% (3.0)%
------ ------
Ratios to Average Net Assets and Supplemental Data:
Net Assets, End of Period (in 000's)....................... $10,205 $4,838
Ratio of net investment income to average net assets....... 0.94% 1.60% (c)
Expenses net of waivers /reimbursements (a)................ 1.01% 2.05% (c)
Expenses before waivers /reimbursements (b)................ 2.32% 4.50% (c)
Portfolio Turnover Rate.................................... 88% 18%
(+) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period, including reinvestment of dividends, and does not reflect any
applicable sales charges.
(a) 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 ratio would be 1.00% for 1999 and 2.00% for 1998.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
(c) Annualized.
(d) Period from May 11, 1998 (inception date of fund) to September 30, 1998.
</TABLE>
<PAGE>
Gabelli Westwood Realty Fund
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998 (c)
---- --------
Operating Performance:
Net Asset Value, Beginning of Period....................... $8.43 $10.00
----- ------
Net investment income...................................... 0.22 0.37
Net realized and unrealized gain (loss) on investments..... (0.81) (1.37)
------ ------
Total from Investment Operations........................... (0.59) (1.00)
------
Distributions to Shareholders:
Net investment income...................................... (0.23) (0.33)
In excess of net investment income......................... -------- -------
Net realized gain on investments........................... -------- -------
In excess of net realized gain on investments.............. -------- (0.24)
-------- ------
Total Distributions........................................ (0.23) (0.57)
------ ------
Net Asset Value, End of Period............................. $7.61 $8.43
===== =====
Total Return (+)........................................... (5.68)% (10.5)%
------- -------
Ratios to Average Net Assets and Supplemental Data:
Net Assets, End of Period (in 000's)....................... $1,784 $1,815
Ratio of net investment income to average net assets....... 4.32% 3.87%
Expenses net of waivers /reimbursements (a)................ 1.60% 1.70%
Expenses before waivers /reimbursements (b)................ 3.68% 3.95%
Portfolio Turnover Rate.................................... 55% 142%
(+) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period, including reinvestment of dividends, and does not reflect any
applicable sales charges.
(a) 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 ratio would be 1.50% for 1999 and 1.50% for 1998.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
(c) Period from October 1, 1997 (inception date of fund) to September 30, 1998.
</TABLE>
<PAGE>
Gabelli Westwood Intermediate Bond Fund
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating Performance:
Net Asset Value, Beginning of Period $10.74 $10.29 $9.88 $9.98 $9.48
------ ------ ----- ----- -----
Net investment income............ 0.50 0.57 0.68 0.51 0.52
Net realized and unrealized gain
(loss) (0.75) 0.45 0.41 (0.10) 0.50
------ ---- ---- ------ ----
on investments.................
Total from Investment Operations. (0.25) 1.02 1.09 0.41 1.02
------ ---- ---- ---- ----
Distributions to Shareholders:
Net investment income............ 0.50 (0.57) (0.68) (0.51) (0.52)
---- ------ ------ ------ ------
Total Distributions.............. (0.50) (0.57) (0.68) (0.51) (0.52)
------ ------ ------ ------ ------
Net Asset Value, End of Period... $9.99 $10.74 $10.29 $9.88 $9.98
===== ====== ====== ===== =====
Total Return (+)................. (2.37)% 10.20% 11.36% 4.50% 11.13%
Ratios to Average Net Assets
and Supplemental Data:
Net Assets, End of Period (in 000's) $6,214 $7,618 $5,912 $5,496 $4,729
Ratio of net investment income
to average net assets.......... 4.82% 5.45% 6.71% 5.43% 5.38%
Expenses net of waivers
/reimbursements(a)............. 1.05% 1.08% 1.11% 1.09% 1.17%
Expenses before waivers
/reimbursements (b)............ 1.63% 2.08% 1.70% 2.46% 2.47%
Portfolio Turnover Rate.......... 108% 232% 628% 309% 165%
- -----------------------------------------
(+) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period, including reinvestment of dividends, and does not reflect any
applicable sales charges.
(a) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained by the custodian. Including fee
credits, the expense ratio would be 1.00% for each period.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
</TABLE>
<PAGE>
118
THE GABELLI WESTWOOD FUNDS
Class AAA Shares
Gabelli Westwood Equity Fund
Gabelli Westwood Balanced Fund
Gabelli Westwood SmallCap Equity Fund
Gabelli Westwood Mighty Mites(sm) Fund
Gabelli Westwood Realty Fund
Gabelli Westwood Intermediate Bond Fund
For More Information:
For more information about the Funds, the following documents are
available free upon request:
Annual/Semi-annual Reports:
The Funds' semi-annual and audited annual reports to shareholders
contain detailed information on each of the Fund's investments. In
the annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected
each Fund's performance during its last fiscal year.
Statement of Additional Information (SAI):
The SAI provides more detailed information about the Funds,
including their operations and investment policies. It is
incorporated by reference, and is legally considered a part of
this prospectus.
You can get free copies of these documents and prospectuses of
other Funds in the Gabelli Family, or request other information
and discuss your questions about the Funds by contacting:
The Gabelli Westwood Funds
One Corporate Center
Rye, New York 10580-1434
Telephone 1-800-GABELLI (1-800-422-3554)
www.gabelli.com
You can review the Funds' reports and SAI at the Public Reference
Room of the Securities and Exchange Commission. You can get
text-only copies:
For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
Free from the Commission's Website at http://www.sec.gov.
Investment Company Act File Number: 811-05848.
<PAGE>
THE GABELLI WESTWOOD FUNDS
Gabelli Westwood Equity Fund
Gabelli Westwood Balanced Fund
Gabelli Westwood SmallCap Equity Fund
Gabelli Westwood Mighty Mites(sm) Fund
Gabelli Westwood Realty Fund
Gabelli Westwood Intermediate Bond Fund
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
The Gabelli Westwood Funds (the "Trust") currently consists of six
separate investment portfolios referred to as the Gabelli Westwood Equity Fund
(the "Equity Fund"), the Gabelli Westwood SmallCap Equity Fund (the "SmallCap
Equity Fund"), the Gabelli Westwood Mighty Mites(SM) Fund (the "Mighty Mites
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").
This Statement of Additional Information ("SAI"), which is not a
prospectus, provides information about each of the Funds. The SAI should be read
in conjunction with the Funds' current Prospectuses for Class A shares, Class B
shares, Class C shares and Class AAA shares dated February 1, 2000. For a free
copy of the Prospectuses, please contact the Funds at One Corporate Center, Rye,
New York 10580-1434, call (800) GABELLI (1-800-422-3554) or via Internet
http://www.gabelli.com/westwood.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
General Information and History............................................................................. 2
Investment Objectives and Management Policies............................................................... 2
Management of the Funds..................................................................................... 19
Control Persons and Principal Shareholders.................................................................. 21
Investment Advisory and Other Services...................................................................... 23
Distribution Plans.......................................................................................... 26
Purchase and Redemption of Shares........................................................................... 28
Determination of Net Asset Value............................................................................ 29
Shareholder Services........................................................................................ 29
Dividends, Distributions and Taxes.......................................................................... 30
Performance Information..................................................................................... 33
Information About the Funds................................................................................. 34
Financial Statements....................................................................................... 36
Appendix.................................................................................................. .37
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
......... The Trust is a diversified, open-end management investment company.
The Trust was organized as a Massachusetts business trust on June 12, 1986.
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 of 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"). On November 18, 1997, the Board of Trustees then
authorized the designation of the "Gabelli Westwood Mighty Mites Fund" series of
shares of the Trust.
The Trust operates a multi-class structure pursuant to Rule 18f-3 of
the Investment Company Act of 1940, as amended (the "1940 Act"). On
November 16, 1999, the Board of Trustees approved an Amended and Restated
Rule 18f-3 Multi-Class Plan designating four separate
classes of shares in each Fund: Class A shares (formerly known as Service Class
shares), Class B shares, Class C shares and Class AAA shares (formerly known as
Retail Class shares).
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectuses discuss the investment objectives of each Fund and
the principal strategies to be employed to achieve those objectives. This
section contains supplemental information concerning certain types of securities
and other instruments in which each Fund may invest, additional strategies that
each Fund may utilize and certain risks associated with such investments and
strategies.
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. However, the Mighty Mites Fund may engage in short-selling
of securities or in arbitrage.
Convertible Securities (All Funds). 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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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 ("GNMA") 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 ("FNMA"), 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 Fund's 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 ("SEC") 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.
Borrowing (All Funds). 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 and (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.
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 ("FDIC"). 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.
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.
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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 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.
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.
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.
Specifically, 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.
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 minimum ratings and maturity criteria
established for each Fund under the direction of the Board of Trustees and
Gabelli Advisers, Inc. (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.
The Equity Fund, SmallCap Equity Fund, Mighty Mites Fund and Realty
Fund may
invest, in normal circumstances, up to 35% of their respective 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 Rating Services, a division of the McGraw-Hill Companies ("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 is believed 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. (Investment
grade debt securities are those which are rated at least "BBB" by S&P or "Baa"
by Moody's). The Equity Fund may
investment up to 10% of its respective total assets in debt securities (other
than commercial paper) 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). The Equity Fund will not invest in below investment grade
securities which are rated below "C" by S&P or Moody's.
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 this SAI for more details on the ratings of Moody's and S&P.
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
outweighted 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 judgement, 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.
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 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 SAI for commercial paper obligations.
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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-issue 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 on 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.
Foreign Securities (All Funds). Each 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, Balanced Fund,
SmallCap Equity Fund, Mighty Mites Fund and Realty Fund may invest up to 25% of
their respective total assets directly in foreign equity securities and in
securities represented by EDRs or 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. The Intermediate Bond Fund does not expect to
invest more than 25% of its assets in securities of foreign issuers.
.........Thus, investment in shares of the Funds should be made with an
understanding of the risks inherent in an investment in foreign securities
either directly or in the form of ADRs or EDRs, including risks associated with
government, economic, monetary and fiscal policies, possible foreign withholding
taxes, inflation and interest rates, economic expansion or contraction, and
global or regional political, economic or banking crises. Investment in
obligations of foreign issuers and in direct obligations of foreign nations
involves somewhat different investment risks from those affecting obligations of
United States domestic issuers. Foreign issuers are not necessarily subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic issuers. In addition,
for the foreign issuers that are not subject to the reporting requirements of
the Securities Exchange Act of 1934 (the "1934 Act"), there may be less publicly
available information than is available from a domestic issuer. Dividends and
interest paid by foreign issuers may be subject to withholding and other foreign
taxes, which may decrease the net return on foreign investments as compared to
dividends and interest paid to the Funds by domestic companies. Additional risks
include future political and economic developments, the possibility that a
foreign jurisdiction might impose or charge withholding taxes on income payable
with respect to foreign securities, the possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the possible
adoption of foreign governmental restrictions such as exchange controls.
.........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.
Zero Coupon and Payment In Kind Securities (The Balanced Fund and 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 a 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.
Real Estate Investment Securities ("REITs") (All Funds). 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 loans or
interests. 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 REIT's 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 invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. 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.
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.
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.
Call And Put Options On Specific Securities (The Equity Fund, Balanced Fund,
SmallCap Equity Fund, Mighty Mites Fund and Realty Fund). These Funds may
invest up
to 5% of its assets, represented by the premium paid, in the purchase of call
and put options on specific securities. A Fund may write covered call and put
options on securities to the extent of 10% of the value of its net assets at the
time such option contracts are written. A call option is a contract that, in
return for a premium, gives the holder of the option the right to buy from the
writer of the call option the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of a call
option has the obligation, upon exercise of the option, to deliver the
underlying security upon payment of the exercise price during the option period.
A put option is the reverse of a call option, giving the holder the right to
sell the security to the writer and obligating the writer to purchase the
underlying security from the holder. 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.
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. As a result, and because
of 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 Equity
Fund, The Mighty Mites Fund and The Realty Fund). These Funds 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. 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. 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
NYSE 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.
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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
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 segment, 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). The Funds are not commodity
pools. However, the Funds may engage in futures transactions, including thos
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%.
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.
<PAGE>
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.
Interest Rate Futures Contracts (The Balanced Fund and The Intermediate Bond
Fund). The Funds may purchase and sell interest rate futures contracts as a
hedge against changes in interest rates. A Fund may not purchase or sell
interest rate futures contracts if, immediately thereafter, more than 25% of its
net assets would be hedged. 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 Equity Fund, The Mighty Mites 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. No physical delivery of the underlying stocks in
the index 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 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 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
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. A Fund may not purchase or sell stock index futures
contracts if, immediately thereafter, more than 25% of its net assets would be
hedged.
<PAGE>
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.
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.
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.
Forward Foreign Currency Exchange Contracts (All Funds). The Funds may enter
into forward foreign currency exchange contracts for hedging and non-hedging
purposes. 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
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.
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 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.
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 GNMA); or guaranteed by agencies or instrumentalities
of the U.S. Government (in the case of securities guaranteed by 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 or 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" below.
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.
Short Sales Against the Box (Mighty Mites Fund). The Mighty Mites Fund may sell
securities "short against the box." While a short sale is the sale of a security
that the Mighty Mites Fund does not own, it is "against the box" if at all times
when the short position is open the Mighty Mites Fund owns an equal amount of
securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issue as the securities sold short. In
a short sale, the Fund does not immediately deliver the securities sold or
receive the proceeds from the sale.
The Mighty Mites Fund may make a short sale in order to hedge against
market risks when it believes that the price of a security may decline, causing
a decline in the value of a security owned by the Mighty Mites Fund or security
convertible into, or exchangeable for, the security, or when the Mighty Mites
Fund does not want to sell the security it owns, because among other reasons, it
wishes to defer recognition of gain or loss for U.S. federal income tax
purposes. The Mighty Mites Fund may close out a short position by purchasing and
delivering an equal amount of securities sold short, rather than by delivering
securities already held by the Mighty Mites Fund, because the Mighty Mites Fund
may want to continue to receive interest and dividend payments on securities in
its portfolio that are convertible into the securities sold short.
<PAGE>
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 SEC 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.
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.
Illiquid Securities and Rule 144A Securites (All Funds). Each Fund may
invest its net asset 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, as amended (the "Securities Act"), or other restricted securities,
which have been determined liquid by the Trust's Board of Trustees.
The Funds have adopted fundamental policies
with respect to investments in illiquid securities (see Investment Restrictions
Nos. 10 and 11 below). 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.
<PAGE>
Each Fund may invest up to 5% (except for the SmallCap Equity Fund,
Mighty Mites Fund and Realty Fund which may invest up to 15%) of its net 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 investors;
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 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 which
the Trustees consider to be illiquid to assure that the total of all such Rule
144A securities held by a Fund (except for the SmallCap Equity
Fund, Mighty Mites Fund and Realty Fund, which may invest up to 15%) does not
exceed [10%] of the Fund's average daily net assets.
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 Westwood Management Corporation ("Westwood" or the
"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.
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 1940 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. For purposes of this restriction, these
limitations do not apply with respect ti securities issued by the U.S.
Government, its agencies or instrumentalities.
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. Each Fund, other than the Mighty Mites Fund, may not 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 and SAI.
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 and this SAI 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.
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 SEC 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 Equity, Mighty Mites 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 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 and this SAI.
<PAGE>
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.
18. Issue senior securities.
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
Under Massachusetts law, the Trust's Board of Trustees is
responsible for establishing the Funds' policies and for overseeing management
of the Funds. The Board also elects the Trust's officers who conduct the daily
business of the Funds. The Trustees and officers of the Trust, 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, (64) TRUSTEE.
President and Attorney at Law in the law firm of Anthony J. Colavita,
P.C. since 1961; Director or Trustee of various other mutual funds advised by
Gabelli Funds, LLC and its affiliates. His address is One Corporate Center, Rye,
New York 10580.
JAMES P. CONN, (61) TRUSTEE.
Former Managing Director/Chief Investment Officer of Financial
Security Assurance Holdings Ltd. since 1992; Director of Santa Anita
Operating Company since 1995; Director of California Jockey Club since
1983; Director of Meditrust Corporation and First Republic Bank;
Director or Trustee of four other Gabelli funds. His address is One
Corporate Center, Rye, New York 10580.
WERNER ROEDER, M.D., (58) TRUSTEE.
Medical Director, Lawrence Hospital and practicing private physician.
Director of various other Gabelli funds. His address is One Corporate Center,
Rye, New York 10580.
KARL OTTO POHL*, (69) TRUSTEE.
Member of the Shareholder Committee of Sal Oppenheim Jr. & Cie (private
investment bank); Director of Gabelli Asset Management Inc. (investment
management), Zurich Allied (insurance), and TrizecHahn Corp. (real estate),
Former President
of the Deutsche Bundesbank and Chairman of its Central Bank Council from 1980
through 1991; Director or Trustee of all other mutual funds advised by Gabelli
Funds, LLC and its affiliates. His address is One Corporate Center, Rye, New
York 10580.
<PAGE>
SUSAN M. BYRNE*, (52) TRUSTEE.
President and CEO of Westwood Management Corporation since 1983. Her
address is 300 Crescent Court, Suite 1300, Dallas, Texas 75201.
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 1940 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 cast in person or by proxy at a meeting called for that
purpose. In accordance with the 1940 Act and the Trust's Amended and Restated
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 affiliated with
the Adviser, Sub-Adviser or Gabelli & Company, Inc. (the "Distributor"),
which totaled for all such Trustees $_____ for the fiscal year ended
September 30, 1999. Each Trustee, other than Susan Byrne and Karl Otto
Pohl, is paid an annual fee of $2,500 and $500 for each meeting attended.
The Trust also pays each Trustee serving on the Audit Committee $250 for
each meeting attended.
Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C>
Total Compensation
from the Fund
Aggregate Compensation and Fund Complex
Name of Person, Position from the Fund Paid to Trustees*
Susan M. Byrne, President $0 $0
Anthony J. Colavita, Trustee $2,500 $
Karl Otto Pohl, Trustee $0 $
Werner Roeder, M.D., Trustee $2,500 $
James P. Conn, Trustee $2,500 $
* Represents the total compensation paid to such persons during the
calendar year ended December 31, 1999. The parenthetical number
represents the number of investment companies (including the Trust)
from which such person received compensation that are considered part
of the same fund complex as the Trust because they have common or
affiliated investment advisers.
</TABLE>
Executive Officers of the Funds (Not Listed Above)
BRUCE N. ALPERT, (47) VICE PRESIDENT AND TREASURER.
Director and President of the Adviser. Executive Vice President and
Chief Operating Officer of Gabelli
Funds, LLC since 1988, an Officer of all funds advised by Gabelli
Advisers, Inc. and its affiliates. His address is One Corporate
Center, Rye, New York 10580.
PATRICIA R. FRAZE, (54) VICE PRESIDENT.
Senior Vice President of the Sub-Adviser, fixed income analyst and
portfolio manager since April 1990. Her address is 300 Crescent Court, Suite
1300, Dallas, Texas 75201.
LYNDA J. CALKIN, (47) 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. Her address is 300 Crescent Court, Suite 1300, Dallas,
Texas 75201.
JAMES E. MCKEE, (35) SECRETARY.
Secretary of the Adviser since 1995. Vice President, General Counsel
and Secretary of Gabelli Funds, LLC; Secretary of all Funds advised by
Gabelli Funds, Inc. since August 1995. Vice President and General
Counsel of GAMCO Investors, Inc. since 1993 and Gabelli Asset
Management Inc. since 1999. His address is One Corporate Center, Rye,
New York 10580.
As of December 31, 1999, the Officers and Trustees of the Funds, as a
group, owned _____% of the Intermediate Bond Fund, _____% of the Realty Fund,
_____% of the SmallCap Equity Fund , _____% of tThe Equity Fund, _____% of the
Balanced Fund and _____% of the Mighty Mites Fund. [The Officers and Trustees
of the Funds, as a group, owned less than 1% of each class of such
Funds.]
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
The following persons were known by the Funds to own of record 5% or
more of the outstanding voting securit es of any Fund on December 31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address of Holder of Record Percentage of Fund
Equity Fund
Class AAA
Charles Schwab & Co., Inc. _____%*
Special Custody Account
FPO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
<PAGE>
Balanced Fund
Class A
Charles Schwab & Co., Inc. _____%*
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
SmallCap Equity Fund
_____%*
Mighty Mites Fund
Class AAA
Gabelli Funds, Inc. _____%
Attn: John Fodera
One Corporate Center
Rye, NY 10580-1442
Charles Schwab & Co., Inc. _____%
Reinvest Account
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Realty Fund
Class AAA
Charles Schwab & Co., Inc. _____%
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
TCTCO _____%
200 Crescent Court, Suite 1300
Dallas, TX 75201-7838
Intermediate Bond Fund
Class AAA
TCTCO _____%
200 Crescent Court, 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.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser and Sub-Adviser
Gabelli Advisers, Inc. serves as the Funds' investment adviser and
administrator. The Adviser is a Delaware corporation and was formerly known as
Teton Advisers LLC, a company organized in 1994. The Adviser is a registered
investment adviser and a subsidiary of Gabelli Asset Management
Inc., a publicly held company listed on the New York Stock Exchange, Inc
("NYSE"). The business address of Gabelli Advisers, Inc. is One Corporate
Center, Rye, New York 10580-1434. The Adviser has several affiliates that
provide investment advisory services: GAMCO Investors, Inc. ("GAMCO") acts as
investment adviser for individuals, pension and profit sharing trusts,
institutions and endowments. As of December 31, 1999, GAMCO had aggregate assets
under management in excess of $_____ billion. Gabelli Securities, Inc. acts as
investment adviser to certain alternative investment products, consisting
primarily of risk arbitrage and merchant banking limited partnerships and
offshore companies with assets under management of approximately $_____ million
as of December 31, 1999; and Gabelli Fixed Income, Inc. acts as investment
adviser to The Treasurer's Fund, Inc. and separate accounts for individuals and
institutions with aggregate assets under management in excess of $_____ billion
as of December 31, 1999. Westwood Management Corporation serves as sub-adviser
to the Funds, with the exception of the Mighty Mites Fund for which the Adviser
is responsible for the management of such Fund's portfolio. The Sub-Adviser is a
wholly-owned subsidiary of Southwest Securities Group, Inc., a Dallas-based
securities firm.
Each Advisory and Sub-Advisory Agreement is subject to annual approval
by (i) the Board of Trustees or (ii) vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of each applicable 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 1940 Act) of the applicable
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 applicable Funds' Board of Trustees or by
vote of the holders of a majority of each applicable Fund's shares, or by the
Adviser, upon not less than 60 days' notice with respect to the Investment
Advisory Agreement for each applicable Fund. Each Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
The Sub-Adviser manages each applicable Fund's portfolio of investments
in accordance with the stated policies of each applicable Fund, subject to the
approval of the Board of Trustees. The Sub-Adviser is responsible for investment
decisions, and provides each applicable Fund with Investment Officers who are
authorized by the Board of Trustees to execute purchases and sales of
securities. The applicable Funds' Investment Officers are Susan M. Byrne, 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 Equity Fund, the Realty Fund,
the Equity Fund, the Mighty Mites Fund, the Intermediate Bond Fund and the
Balanced Fund, the Adviser 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%, 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, with the exception of the Mighty Mites Fund, 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 the Funds or (ii)
35% of the net revenues to the Adviser from the Funds. The Adviser has
contractually agreed to waive its fees and reimburse the Funds' expenses to the
extent necessary to maintain certain expense ratio caps until at least
September 30, 2000.
<PAGE>
Advisory Fees
Earned and Advisory Fees Waived and Expenses Reimbused
by Gabelli Advisers, Inc.For the Year Ended
September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
------------------------------- ------------------------------- --------------------------
Fees Fees Fees
Earned Waived Earned Waived Earned Waived
and Expenses and Expenses and Expenses
Reimbursed Reimbursed Reimbursed
Equity Fund $ 1,920,350 N/A $ 1,759,265 N/A $ 700,389 $ 38,601
Balanced Fund $ 1,247,960 N/A $ 905,501 N/A $ 419,264 $ 43,972
SmallCap Equity Fund $ 159,566 $ 16,004 $ 119,031 $46,468 $ 24,918 $ 14,207
---
Mighty Mites Fund $ 77,008 $ 100,915 $ 12,543 $46,272 N/A N/A
Realty Fund $ 19,298 $ 39,976 $ 20,515 $30,816 N/A N/A
Intermediate Bond Fund $ 42,858 $ 41,731 $ 39,002 $65,358 $ 33,052 $ 32,389
---
</TABLE>
The Adviser is responsible for overseeing Westwood's
activities as Sub-Adviser for the Funds it sub-advises. Westwood assumes
general supervision over placing orders on behalf of such Funds for the
purchase or sale of portfolio securities and the Adviser performs this
function for the Mighty Mites Fund. Allocation of brokerage transactions,
including their frequency, is made in the best judgment of Westwood
(the Adviser in the case of the Mighty Mites
Fund) 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 (the Adviser's in the case of the Mighty Mites Fund)
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 (the Adviser in the case of the
Mighty Mites Fund) and the fee for Westwood (the Adviser in the case of the
Mighty Mites Fund) is not reduced as a consequence of the receipt of such
supplemental information. Such information may be useful to Westwood (the
Adviser in the case of the Mighty Mites Fund) 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 (the
Adviser in the case of the Mighty Mites Fund) 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 (the
Adviser in the case of the Mighty Mites Fund) generally seeks reasonably
competitive spreads or commissions, the Funds will not necessarily be paying the
lowest spread or commissions available.
As permitted by section 28(e) of the 1934 Act, Westwood (the Adviser in
the case of the Mighty Mites Fund) may cause the Funds to pay a broker-dealer
which provides "brokerage and research services" (as defined in the 1934 Act) to
Westwood (the Adviser in the case of the Mighty Mites Fund) 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.
Neither the Funds, the Adviser, nor the Sub-Adviser has any
agreement or legally binding understanding with any broker or dealer regarding
any specific amount of brokerage commissions which will be paid in recognition
of such services. However, in determining the amount of portfolio commissions
directed to such brokers or dealers, the Adviser does consider the level of
services provided. Based on such determinations, the Adviser and
Sub-Advise has allocated
brokerage commissions of $_____ on portfolio transactions in the principal
amount of $_____ during fiscal year ended September 30, 1999, to various
broker-dealers that have provided research services to the Adviser.
Consistent with the Rules of Fair Practice of the NASD and subject to
seeking the most favorable price and execution available and such other policies
as the Trustees may determine, Westwood (the Adviser in the case of the Mighty
Mites Fund) 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. For the fiscal years ended September 30, 1999 and September 30, 1998, the
turnover rates were 67% and 77% in the case of the Equity Fund, 108% and 232% in
the case of the Intermediate Bond Fund, 86% and 77% in the case of the Balanced
Fund, 178% and 200% in the case of the SmallCap Equity Fund, 88% and 18% in the
case of the Mighty Mites Fund and 55% and 142% in the case of the Realty Fund.
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>
<S> <C> <C> <C>
1999 1998 1997
------------------------ ---------------------- --------------------------
Equity Fund $ 331,466 $ 451,706 $ 154,989
Balanced Fund $ 169,626 $ 221,346 $ 69,311
SmallCap Equity Fund $ 39,649 $ 53,080 $ 21,208
Mighty Mites Fund $ 21,393 $ 4,771 N/A
Realty Fund $ 2,988 $ 8,067 N/A
Intermediate Bond Fund $ 0 $ 750 $ 0
* None of these amounts were paid to affiliates except for the Mighty
Mites Fund, which paid $_____ to affiliates, which is _____% of total
commissions paid, or _____% of the aggregate dollar amount of
transactions involving commissions paid to affiliates.
</TABLE>
Sub-Administrator
First Data Investor Services Group, Inc. (the "Sub-Administrator"), a
subsidiary of First Data Corporation which is located at 101 Federal Street,
Boston, Massachusetts 02110, serves as Sub-Administrator to the Trust pursuant
to a Sub-Administration Agreement with the Adviser (the "Sub-Administration
Agreement"). Under the Sub-Administration Agreement, the Sub-Administrator (a)
assists in supervising all aspects of the Trust's operations except those
performed by the Adviser under its advisory agreement with the Trust; (b)
supplies the Trust with office facilities (which may be in the
Sub-Administrator's own offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of the net asset value of shares in each Fund,
internal auditing and legal services, internal executive and administrative
services, and stationery and office supplies; (c) prepares and distributes
materials for all Trust Board of Trustees' Meetings including the mailing of all
Board materials and collates the same materials into the Board books and assists
in the drafting of minutes of the Board Meetings; (d) prepares reports to Trust
shareholders, tax returns and reports to and filings with the SEC and state
"Blue Sky" authorities; (e) calculates each Fund's net asset value per share,
provides any equipment or services necessary for the purpose of pricing shares
or valuing the Fund's investment portfolio and, when requested, calculates the
amounts permitted for the payment of distribution expenses under any
distribution plan adopted by the Funds; (f) provides compliance testing of all
Fund activities against applicable requirements of the 1940 Act and the rules
thereunder, the Internal Revenue Code of 1986, as amended (the "Code"), and the
Trust's investment restrictions; (g) furnishes to the Adviser such statistical
and other factual information and information regarding economic factors and
trends as the Adviser from time to time may require; and (h) generally provides
all administrative services that may be required for the ongoing operation of
the Trust in a manner consistent with the requirements of the 1940 Act.
For the services it provides, the Adviser pays the Sub-Administrator an
annual fee based on the value of the aggregate average daily net assets of all
funds under its administration managed by the Adviser as follows: up to $10
billion - .0275%; $10 billion to $15 billion - .0125%; over $15 billion - .001%.
The Sub-Administrator's fee is paid by the Adviser and will result in no
additional expenses to the Trust.
<PAGE>
Counsel
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.
Independent Auditors
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036, serves as the independent accountants for the Trust.
PricewaterhouseCoopers LLP provides audit services, tax return preparation and
assistance and consultation in connection with certain SEC filings.
Custodian, Transfer Agent and Dividend Disbursing Agent
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, Massachusetts 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.
Distributor
The Funds have retained Gabelli & Company, Inc. to serve as principal
underwriter and distributor for the shares of the Funds pursuant to Distribution
Contracts (the "Distribution Contracts"). The business address of the
Distributor is One Corporate Center, Rye, New York 10580-1434. 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, 1999, the purchasers of Fund
shares paid $_____ and $_____ in sales charges for sales of Service Class shares
of the Equity Fund and the Balanced Fund, respectively. Of those amounts, $_____
and $_____ were retained by the Distributor.
For the fiscal year ended September 30, 1998, the purchasers of Fund
shares paid $51,000 and $110,823 in sales charges for sales of Service Class
shares of the Equity Fund and the Balanced Fund, respectively. Of those amounts,
$6,633 and $14,617 were retained by the Distributor.
DISTRIBUTION PLANS
The Funds have adopted on behalf of each class of shares
a Rule 12b-1 Distribution Plan (the "Plans") 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
the respective classes. The Board of Trustees has concluded that there is a
reasonable likelihood that the Plans will benefit these classes and their
respective shareholders.
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. 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 applicable 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 Plans for the
purpose of financing any activity primarily intended to result in the sale of
the 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 Plans and not be subject to its limitations.
Administration of the Plans 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.
The Trust has entered into a
Distribution Agreement with the Distributor authorizing payments to the
Distributor at the following annual rates, based on each Fund's average daily
net assets: Class AAA shares, 0.25%; Class A shares, distribution fees of 0.50%
for the Equity Fund, Balanced Fund, SmallCap Equity Fund, Mighty Mites Fund and
Realty Fund and 0.35% for the Intermediate Bond Fund and Cash Management Fund;
Class B shares and Class C shares, service fees of 0.25% and distribution fees
of 0.75%. Pursuant to the Distribution Agreement, the Trust appoints the
Distributor as its general distributor and exclusive agent for the sale of the
Trust's shares. The Trust has agreed to indemnify the Distributor to the extent
permitted by applicable law against certain liabilities under the federal
securities laws. The Distribution Agreement shall remain in effect from year to
year provided that the continuance of such agreement shall be approved at least
annually (a) by the Trust's Board of Trustees, including a vote of a majority
of the non-interested Trusteees cast in person at a meeting called for the
purpose of voting on such approval or (b) by the vote of the holders of a
majority of the outstanding voting securities of the Trust and by a vote of the
Board of Trustees. The Distribution Agreement may be terminated be either
party thereto upon 60 days' written notice.
For the year ended September 30, 1999, the Funds, with respect to
the Class A shares (formerly Service Class shares), incurred distribution
costs and expenses of $12,096 for the
Equity Fund and $54,878 for the Balanced Fund. There were no Service Class
shares outstanding during the year ended September 30, 1999 for the Intermediate
Bond Fund. For the year ended September 30, 1999, with respect to the Class
AAA shares (formerly Retail
Class shares), distribution costs and expenses of $475,152, $17,817, $388,540,
$19,261,
$4,810 and $39,853 were incurred for the Equity Fund, Intermediate Bond Fund,
Balanced Fund, Mighty Mites Fund, Realty Fund and SmallCap Equity Fund,
respectively. During the fiscal year ended September 30, 1999, the Distributor
paid total distribution expenses under the Rule 12b-1 Plans then in effect
of $_____. Of this amount, $_____ was spent on advertising, $_____ was spent on
printing, postage and stationery, $_____ on overhead support expenses, $_____ on
salaries of personnel of the Distributor and $_____ on servicing fees.
PURCHASE AND REDEMPTION OF SHARES
Purchases. With respect to purchases by mail, 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.
Third party checks are not accepted.
With respect to purchases via telephone, you may purchase additional
shares of the Funds through the Automated Clearinghouse (ACH) system as long as
your bank is a member bank of the ACH system and you have a completed, approved
Investment Plan application on file with the Transfer Agent. The funding for
your purchase will be automatically deducted from your 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.
With respect to minimum investments on purchases, 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.
Redemptions. You may redeem your shares through the Distributor or the Transfer
Agent. You may also redeem your 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.
Fund shares purchased by check or through the automatic investment 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. The Funds accept telephone requests for wire
redemption in excess of $1,000, but subject to a $25,000 limitation. The Funds
accept signature guaranteed written requests for redemption by bank wire without
limitation. 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.
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.
<PAGE>
DETERMINATION OF 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 mean price between bid and asked 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 mean price
between bid and asked 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.
NYSE Closings. The holidays (as observed) on which the NYSE is closed,
and therefore days upon which shareholders cannot 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 and on the preceding Friday or subsequent Monday when a holiday
falls on a Saturday or Sunday, respectively.
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." 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. The Funds also make available 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 SECTIONS IN THE FUNDS' PROSPECTUS ENTITLED "DIVIDENDS
AND DISTRIBUTIONS" AND "TAX INFORMATION."
To qualify as a regulated
investment company, the Funds 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. By meeting these requirements, the Funds
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. In determining the
amount of net 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.If the Funds do not meet
all of these requirements, they will be taxed as ordinary corporations and
their distributions will generally be taxed to shareholders as ordinary income.
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
(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, distribution of accumulated
earnings or gain from the sale of stock of the PFIC (referred to as 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. 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 by a Fund that holds PFIC stock, 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 other than S 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.
Dividends received by a Fund that are attributable to foreign corporations will
not be eligible for the dividends-received deduction, since that 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 and will be disallowed with respect to
an investment in the Fund that is debt-financed.
Distributions of net capital gains, if any, designated by a Fund as
capital gain dividends are taxable to shareholders as long-term capital gains,
regardless of the length of time the Fund's shares have been held by the
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. The price of shares purchased
at that time includes the amount of the forthcoming distribution. Distributions
by a Fund reduce the net asset value of the Fund's shares, and if a distribution
reduces 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.
Upon the taxable disposition (including a sale or redemption) of
shares of a Fund, a shareholder may realize a gain or loss depending upon its
basis in the 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 or short-term, generally depending upon the shareholder's
holding period for the shares. Non-corporate shareholders are subject to tax at
a maximum rate of 20% on capital gains resulting from the disposition of shares
held for more than 12 months (25% in the case of certain capital gains
distributions from REITs; 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, also 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 a Class of 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 applicabl
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.
<PAGE>
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. Since only a few regulations implementing the straddle rules have
been promulgated, the tax consequences to a Fund of hedging transactions
are not entirely clear. A Fund may make one or more of the elections
applicable to straddles available under the Code. If an election is made,
the amount, character and timing of the recognition of gains or losses from
the affected straddle positions will be determined pursuant to the rules
applicable to the election(s) made, which may 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.
Gains or losses attributable to fluctuations in
exchange rates resulting from transactions in a
foreign currency generally are treated as ordinary income or ordinary
loss. These 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. The Funds do not expect to be eligible
to elect to allow shareholders to claim such foreign taxes or a credit
against their U.S. tax liability.
The Funds are required to report to the
IRS all distributions to shareholders except in the case of certain exempt
shareholders. Distributions by the Funds (other than distributions to exempt
shareholders) are generally subject to backup withholding of Federal income
tax at a rate of 31% 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 or she 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.
<PAGE>
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 the treatment of distributions
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 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. The methods used to calculate the yield
and total return of the Funds are mandated by the SEC.
Quotations of yield will be based on the investment income per share
earned during a particular 30-day period (including dividends and interest),
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, 1999, the yield of the Intermediate
Bond Fund was _____%.
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>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
----------------------------- ------------------------------ ------------------------------
Class AAA Class A Class AAA Class A Class AAA Class A
Equity 19.77% 14.78% (1.4)% (1.8)% 39.61% 33.75%
Balanced 12.56% 7.68% 2.8% 2.6% 28.32% 22.91%
SmallCap Equity 58.94% N/A (17.7)% N/A 44.8%* N/A
Intermediate Bond (2.37)% N/A 10.2% N/A 11.36% N/A
Mighty Mites 34.21% N/A (3.0)%** N/A N/A N/A
Realty (5.68)% N/A (10.5)%*** N/A N/A N/A
* For the period from April 15, 1997 through September 30, 1997.
** For the period from May 11, 1998 through September 30, 1998.
*** For the period from October 1, 1997 through September 30, 1998.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annual Total Return
One Year Five Years Ten Years Life of Fund
Equity - Class AAA 19.77% 21.35% 14.42% 14.92%
Equity - Class A 14.78% 20.01% N/A 17.25%
Balanced - Class AAA 12.56% 16.61% N/A 14.05%
Balanced - Class A 7.68% 15.37% N/A 13.63%
SmallCap Equity - Class AAA 58.94% N/A N/A 29.63%
Mighty Mites - Class AAA 34.21% N/A N/A 20.87%
Realty - Class AAA (5.68)% N/A N/A (8.11)%
Intermediate Bond - Class AAA (2.37)% 6.82% N/A 6.23%
</TABLE>
The SmallCap Equity, Mighty Mites and Realty Funds did not offer Class
A shares and none of the Funds offered Class B or Class C shares during the
fiscal year ended September 30, 1999.
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 not reflect deductions for administrative and management costs.
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.
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.
INFORMATION ABOUT THE FUNDS
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 Amended and Restated 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
seven series representing seven portfolios of the Trust (i.e., the Funds and the
inactive Gabelli Westwood Cash Management Fund). 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.
<PAGE>
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 four classes of shares of beneficial
interest - "Class AAA" shares (formerly known as "Retail Class" shares,) "Class
A" shares (formerly known as "Service Class" shares), "Class B" shares and
"Class C" shares.
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 SAI, 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.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Amended and Restated Declaration of Trust 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 Amended and
Restated Declaration of Trust 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," 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 Amended and Restated Declaration of
Trust, 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.
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>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
SAI 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, THEIR INVESTMENT
ADVISER, DISTRIBUTOR, OR ANY AFFILIATE THEREOF. THIS SAI DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements for the Funds dated September 30,
1999 and the Report of PricewaterhouseCoopers LLP thereon, are
incorporated herein by reference to the Trust's Annual Report. The
Annual Report is available upon request and without charge.
<PAGE>
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.
BB, B, CCC, CC, C
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of this obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, they are outweighed by
large uncertainties of major risk exposures to adverse conditions.
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.
<PAGE>
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.
A
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
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 of 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.
<PAGE>
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.
<PAGE>
THE GABELLI WESTWOOD FUNDS
PART C: OTHER INFORMATION
Item 23. Financial Statements and Exhibits
Exhibits:
(a) Registrant's Amended and Restated Declaration of Trust, dated June
12, 1986, and Amendments thereto are incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, as filed on December 22, 1986 ("Pre-Effective Amendment
No. 1").
(b) Registrant's By-Laws, dated November 24, 1986, are incorporated by
reference to Pre-Effective Amendment No. 1.
(c) The specimen copy of a share certificate is incorporated by
reference to Pre-Effective Amendment No. 1.
(d) Investment Advisory Agreement between the Registrant, on behalf of
the Equity Fund, the Cash Management Fund, the Intermediate Bond
Fund and the Balanced Fund, and Teton Advisers, LLC (now known as
Gabelli Advisers, Inc.), dated October 6, 1994, will be filed by
Amendment.
Investment Advisory Agreement between the Registrant, on behalf of
Westwood SmallCap Equity Fund and Westwood Realty Fund and Teton
Advisers, LLC (now known as Gabelli Advisers, Inc.), dated
February 25, 1997, will be filed by Amendment.
Investment Advisory Agreement between the Registrant, on behalf of
the Gabelli Westwood Mighty Mites(sm) Fund, and Gabelli Advisers,
Inc., dated May 11, 1998, will be filed by Amendment.
Investment Sub-Advisory Agreement between the Registrant, on
behalf of the Equity Fund, the Cash Management Fund, the
Intermediate Bond Fund and the Balanced Fund, and Teton Advisers,
LLC (now known as Gabelli Advisers, Inc.) and Westwood Management
Corporation, dated October 6, 1994, will be filed by Amendment.
Investment Sub-Advisory Agreement between the Registrant, on
behalf of the Westwood SmallCap Equity Fund and the Westwood
Realty Fund, and Teton Advisers, LLC (now known as Gabelli
Advisers, Inc.) and Westwood Management Corporation, dated
February 25, 1997, will be filed by Amendment.
(e) Distribution Agreement between Gabelli & Company, Inc. and the
Registrant, dated October 6, 1994, is incorporated by reference to
Post-Effective Amendment No. 12 to the Registration Statement on
Form N-1A, as filed on January 31, 1995 ("Post-Effective Amendment
No. 12").
<PAGE>
Amended and Restated Distribution Agreement between the Registrant
and Gabelli & Company, Inc., dated November 16, 1999, will be
filed by Amendment.
(f) Not Applicable.
(g) Amended and Restated Custody Agreement between the Registrant and
The Bank of New York, dated August 18, 1989, is incorporated by
reference to Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, as filed on January 29, 1990
("Post-Effective Amendment No. 4").
(h) Not Applicable.
(i) Opinion of Baker & McKenzie, Trust counsel, is incorporated by
reference to Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A, as filed on February 20, 1997.
Consent of Battle Fowler, LLP, Trust counsel, will be filed by
Amendment.
(j) Consent of PricewaterhouseCoopers LLP, Independent Accountants,
will be filed by Amendment.
Power of Attorney for Susan M. Byrne, Anthony J. Colavita, James P.
Conn, Werner Roeder, M.D. and Karl Otto Pohl, dated November 18, 1997,
is incorporated by reference to Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A, as filed on January 20, 1998.
(k) Not Applicable.
(l) Purchase Agreement relating to Class A Series Shares, Class B
Series Shares and Class C Series Shares will be filed by Amendment.
(m) Amended and Restated Plan of Distribution pursuant to Rule 12b-1
relating to Class AAA Series Shares, dated November 16, 1999, is
filed herewith.
Amended and Restated Plan of Distribution pursuant to Rule 12b-1
relating to Class A Series Shares, dated November 16, 1999, is
filed herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class A
Series Shares, dated November 16, 1999, is filed herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class B
Series Shares, dated November 16, 1999, is filed herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class C
Series Shares, dated November 16, 1999, is filed herewith.
(n) Amended and Restated Rule 18f-3 Multi-Class Plan, dated
November 16, 1999, is filed herewith.
(o) Not Applicable.
(p) Not Applicable.
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. 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.
Item 26. Business and Other Connections of the Investment Adviser
Gabelli Advisers, Inc. (the "Adviser"), a subsidiary of Gabelli Funds,
Inc., serves as the Funds' investment adviser. The Adviser is a
Delaware corporation. The Adviser was formed in 1994 and prior to
November 7, 1997, it was known as Teton Advisers LLC.
The information required by this Item 26 with respect to any other
business, profession, vocation or employment of a substantial
nature engaged in by directors and officers of the Adviser during
the past two years is incorporated by reference to Form ADV filed
by the Adviser pursuant to the Investment Advisers Act of 1940
(SEC File No. 801-47568).
Westwood Management Corporation (the "Sub-Adviser") serves as the
Funds' (with the exception of the Mighty Mites(sm) Fund)
sub-investment adviser. The Sub-Adviser is a registered investment
adviser managing in excess of $2 billion in separate accounts,
primarily corporate pension funds. The Sub-Adviser was formed in
1983.
The information required by this Item 26 with respect to any other
business, profession, vocation or employment of a substantial
nature engaged in by directors and officers of the Sub-Adviser
during the past two years is incorporated by reference to Form ADV
filed by the Sub-Adviser pursuant to the Investment Advisers Act
of 1940 (SEC File No. 801-18727).
<PAGE>
Item 27. Principal Underwriter
Gabelli & Company, Inc. currently acts as distributor for The
Gabelli Asset Fund, The Gabelli Blue Chip Value Fund, The Gabelli
Growth Fund, The Gabelli Global Convertible Securities Fund, The
Gabelli Equity Trust Inc., The Gabelli Global Multimedia Trust
Inc., The Gabelli Convertible Securities Fund Inc., The Gabelli
SmallCap Growth Fund, The Gabelli Global Opportunity Fund, The
Gabelli Equity Income Fund, The Gabelli Gold Fund, Inc., The
Gabelli Mathers Fund, The Gabelli U.S. Treasury Money Market Fund,
The Gabelli ABC Fund, The Gabelli Global Interactive Couch
Potato(R) Fund, The Gabelli International Growth Fund, Gabelli
Capital Asset Fund, The Gabelli Global Telecommunications Fund,
The Gabelli Utilities Fund, The Gabelli Utility Trust and The
Gabelli Value Fund Inc.
The information required by this Item 27 with respect to each
director, officer or partner of Gabelli & Company, Inc. is
incorporated by reference to Schedule A of Form BD filed by
Gabelli & Company, Inc. pursuant to the Securities Exchange Act of
1934, as amended (SEC File No. 8-21373).
Item 28. Location of Accounts and Records
1. Gabelli Advisers, Inc
One Corporate Center
Rye, New York 10580
2. Westwood Management Corporation
300 Crescent Court, Suite 1320
Dallas, Texas 75201
3. First Data Investor Services Group, Inc.
101 Federal Street
Boston, Massachusetts 02110
4. First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
5. The Bank of New York
110 Washington Street
New York, New York 10286
6. State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant, THE GABELLI
WESTWOOD FUNDS, has duly caused this Post-Effective 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 1st day of
December, 1999.
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, as amended,
this Post-Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
Susan M. Byrne* Trustee, President and 12/01/99
Susan M. Byrne Principal Executive Officer
Anthony J. Colavita* Trustee 12/01/99
Anthony J. Colavita
James P. Conn* Trustee 12/01/99
James P. Conn
Werner Roeder, M.D.* Trustee 12/01/99
Werner Roeder, M.D.
Karl Otto Pohl* Trustee 12/01/99
Karl Otto Pohl
By: /s/Bruce N. Alpert/
Bruce N. Alpert
Attorney-in-Fact
</TABLE>
- --------
* Pursuant to Power of Attorney filed as Exhibit 18(f) of Post-Effective
Amendment No. 18to the Registration Statement on Form N-1A, on
January 20, 1998.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(m) Amended and Restated Plan
of Distribution for Class
AAA Series Shares
(m) Amended and Restated Plan
of Distribution for Class
A Series Shares
(m) Plan of Distribution for
Class A Series Shares
(m) Plan of Distribution for
Class B Series Shares
(m) Plan of Distribution for
Class C Series Shares
(n) Amended and Restated Rule
18f-3 Multi-Class Plan
Exhibit (m)
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI WESTWOOD FUNDS
(Class AAA Series)
WHEREAS, THE GABELLI WESTWOOD FUNDS, a Massachusetts business
trust (the "Trust"), engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Trust has issued and is authorized to issue
shares of beneficial interest ("Shares") which may be classified into series in
which each series represents the entire undivided interests of a separate
portfolio of assets, and the series to which this Plan relates are identified on
Schedule A hereto, as such schedule may be amended from time to time,
(individually referred to as a "Fund" and collectively, the "Funds");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Trust and the Distributor, which distribution agreement,
as amended and restated, has been duly approved by the Board of Trustees of the
Trust (the "Board"), in accordance with the requirements of the Act (the
"Distribution Agreement");
WHEREAS, the Trust has adopted a plan of distribution pursuant
to Rule 12b-1 under the Act to assist in the distribution of Retail Class Shares
and has renamed the Retail Class Shares as "Class AAA Series Shares" (the
"Plan");
WHEREAS, the Trust offers the Class AAA Series Shares pursuant
to Rule 18f-3 under the Act that permits the Trust to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to amend the
Plan in certain respects and to restate such amended Plan in its entirety and
that, in the exercise of reasonable business judgment and in light of their
fiduciary duties, that there is a reasonable likelihood that a plan of
distribution containing the terms set forth herein will benefit each Fund and
the shareholders of the Class AAA Series Shares, and have accordingly approved
the Plan by votes cast in person at a meeting called for the purpose of amending
and restating the Plan; and
WHEREAS, this Plan governs the Class AAA Series Shares of each
Fund and does not relate to any class of shares which may be offered and sold by
the Funds other than the Class AAA Series Shares.
NOW, THEREFORE, in consideration of the foregoing, the Trust
hereby amends and restates the Plan in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. In consideration of the services to be provided, and the expenses to be
incurred, by the Distributor pursuant to the Distribution Agreement, the Trust
will pay to the Distributor as distribution-related fees (the "Payments") in
connection with the distribution of Class AAA Series Shares of each Fund an
aggregate amount at a rate of 0.25% per year of the average daily net assets of
the Class AAA Series Shares of each Fund. Such Payments shall be accrued daily
and paid monthly in arrears or shall be accrued and paid at such other intervals
as the Board shall determine. Each Fund's obligation hereunder shall be limited
to the assets of the Class AAA Series Shares and shall not constitute an
obligation of the Fund except out of such assets and shall not constitute an
obligation of any shareholder of the Fund. Further, if the Securities and
Exchange Commission and the National Association of Securities Dealers authorize
use of the term "no-load" by a Fund only at a lower maximum amount, the maximum
amount set forth above may be reduced by the Board.
2. It is understood that the Payments made by each Fund under this Plan will be
used by the Distributor for the purpose of financing or assisting in the
financing of any activity which is primarily intended to result in the sale of
Class AAA Series Shares. The scope of the foregoing shall be interpreted by the
Board, whose decision shall be conclusive except to the extent it contravenes
established legal authority. Without in any way limiting the discretion of the
Board, the following activities are hereby declared to be primarily intended to
result in the sale of Class AAA Series Shares of the Fund: advertising the Class
AAA Series Shares or the Trust's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
or any of them for sales of Class AAA Series Shares, whether in a lump sum or on
a continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Trust's investment adviser and its personnel) or any of
them for providing services to shareholders of the Trust relating to their
investment in the Class AAA Series Shares, including assistance in connection
with inquiries relating to shareholder accounts; the production and
dissemination of prospectuses (including statements of additional information)
of the Trust and the preparation, production and dissemination of sales,
marketing and shareholder servicing materials; and the ordinary or capital
expenses, such as equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar expenses relating to any
activity for which Payment is authorized by the Board; and the financing of any
activity for which Payment is authorized by the Board; and profit to the
Distributor and its affiliates arising out of their provision of shareholder
services. Notwithstanding the foregoing, this Plan does not require the
Distributor or any of its affiliates to perform any specific type or level of
distribution activities or shareholder services or to incur any specific level
of expenses for activities covered by this Section 2. In addition, Payments made
in a particular year shall not be refundable whether or not such Payments exceed
the expenses incurred for that year pursuant to this Section 2.
3. The Trust is hereby authorized and directed to enter into appropriate written
agreements with the Distributor and each other person to whom the Trust intends
to make any Payment, and the Distributor is hereby authorized and directed to
enter into appropriate written agreements with each person to whom the
Distributor intends to make any payments in the nature of a Payment. The
foregoing requirement is not intended to apply to any agreement or arrangement
with respect to which the party to whom Payment is to be made does not have the
purpose set forth in Section 2 above (such as the printer in the case of the
printing of a prospectus or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or arrangement should be treated as
a "related" agreement for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3 must contain the
provisions required by Rule 12b-1 under the Act and must be approved by a
majority of the Board ("Board Approval") and by a majority of the Disinterested
Trustees ("Disinterested Trustees Approval"), by vote cast in person at a
meeting called for the purposes of voting on such agreement. All determinations
or authorizations of the Board hereunder shall be made by Board Approval and
Disinterested Trustee Approval.
5. The officers, investment adviser or Distributor of the Trust, as appropriate,
shall provide to the Board and the Board shall review, at least quarterly, a
written report of the amounts expended pursuant to this Plan and the purposes
for which such Payments were made.
6. To the extent any activity is covered by Section 2 and is also an activity
which the Fund may pay for on behalf of the Class AAA Series Shares without
regard to the existence or terms and conditions of a plan of distribution under
Rule 12b-1 of the Act, this Plan shall not be construed to prevent or restrict a
Fund from paying such amounts outside of this Plan and without limitation hereby
and without such payments being included in calculation of Payments subject to
the limitation set forth in Section 1.
7. This Plan may not be amended in any material respect without Board Approval
and Disinterested Trustee Approval and may not be amended to increase the
maximum level of Payments permitted hereunder without such approvals and further
approval by a vote of at least a majority of the Class AAA Series Shares of the
affected Fund. This Plan may continue in effect for longer than one year after
its approval only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Trustee Approval.
8. This Plan may be terminated at any time by a vote of the Disinterested
Trustees, cast in person at a meeting called for the purposes of voting on such
termination, or by a vote of at least a majority of the Class AAA Series Shares
of the relevant Fund.
9. For purposes of this Plan, the terms "interested person" and "related
agreement" shall have the meanings ascribed to them in the Act and the rules
adopted by the Securities and Exchange Commission thereunder and the term "vote
of a majority of the Class AAA Series Shares" of a Fund shall mean the vote, at
the annual or a special meeting of the holders of the Class AAA Series Shares of
the Fund duly called, (a) of 67% or more of the voting securities present at
such meeting, if the holders of more than 50% of the Class AAA Series Shares of
the Fund outstanding on the record date for such meeting are present or
represented by proxy or, if less, (b) more than 50% of the Class AAA Series
Shares of the Fund outstanding on the record date for such meeting.
DATED: NOVEMBER 16, 1999
<PAGE>
SCHEDULE A
AMENDED AND RESTATED PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1 OF THE
GABELLI WESTWOOD FUNDS
(CLASS AAA SERIES)
Below are listed the Trust's separate series of shares under which this
Amended and Restated Plan of Distribution pursuant to Rule 12b-1 is to be
performed as of the date hereof.
THE GABELLI WESTWOOD FUNDS
GABELLI WESTWOOD EQUITY FUND GABELLI WESTWOOD BALANCED
FUND GABELLI WESTWOOD SMALLCAP EQUITY FUND GABELLI
WESTWOOD MIGHTY MITES(SM) FUND GABELLI WESTWOOD REALTY
FUND GABELLI WESTWOOD INTERMEDIATE BOND FUND [GABELLI
WESTWOOD CASH MANAGEMENT FUND]
Dated as of November 16, 1999
Exhibit (m)
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI WESTWOOD FUNDS
(Class A Series)
WHEREAS, THE GABELLI WESTWOOD FUNDS, a Massachusetts business
trust (the "Trust"), engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Trust has issued and is authorized to issue
shares of beneficial interest ("Shares") which may be classified into series in
which each series represents entire undivided interests of a separate portfolio
of assets, and the series to which this Plan relates are identified on Schedule
A hereto, as such Schedule may be amended from time to time (individually
referred to as a "Fund" and collectively, the "Funds");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Trust and the Distributor, which distribution agreement,
as amended and restated, has been duly approved by the Board of Trustees of the
Trust (the "Board"), in accordance with the requirements of the Act (the
"Distribution Agreement");
WHEREAS, the Trust has adopted a plan of distribution and
agreement pursuant to Rule 12b-1 under the Act to assist in the distribution of
Service Class Shares of the Funds (the "Plan") and has renamed the Service Class
Shares as "Class A Series Shares";
WHEREAS, the Trust offers the Class A Series Shares pursuant
to Rule 18f-3 under the Act that permits the Trust to implement a multiple
distribution system providing investors with the option of purchasing Shares of
various classes;
WHEREAS, the Board as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to amend in
certain respects and to restate such amended Plan in its entirety and that, in
the exercise of reasonable business judgement and in light of their fiduciary
duties, that there is a reasonable likelihood that a plan of distribution
containing the terms set forth herein (the "Plan") will benefit each Fund and
the shareholders of the Class A Series Shares, and have accordingly approved the
Plan by votes cast in person at a meeting called for the purpose of amending and
restating the Plan; and
WHEREAS, this Plan governs the Class A Series Shares of each
Fund and does not relate to any class of Shares which may be offered and sold by
the Funds other than the Class A Series Shares;
NOW, THEREFORE, in consideration of the foregoing, the Trust
hereby amends and restates the Plan in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Trust will pay to the Distributor as distribution-related fees
(the "Payments") in connection with the distribution of Class A Series Shares of
each Fund, an aggregate amount at an annual rate of the average daily net assets
of the Class A Series Shares of each Fund as set forth on Schedule A hereto.
Such Payments shall be accrued daily and paid monthly in arrears or shall be
accrued and paid at such other intervals as the Board shall determine. Each
Fund's obligation hereunder shall be limited to the assets of the Class A Series
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by each Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class A Series Shares. The scope of the foregoing shall be
interpreted by the Board, whose decision shall be conclusive except to the
extent it contravenes established legal authority. Without in any way limiting
the discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class A Series Shares of the Funds:
(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 prospectuses 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 and (vi) other direct and indirect
distribution-related expenses, including the provision of services with respect
to maintaining the assets of the Funds. Notwithstanding the foregoing, this Plan
does not require the Distributor or any of its affiliates to perform any
specific type or level of distribution activities or shareholder services or to
incur any specific level of expenses for activities covered by this Section 2.
In addition, Payments made in a particular year shall not be refundable whether
or not such Payments exceed the expenses incurred for that year pursuant to this
Section 2.
3. The Trust is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other person to
whom the Trust intends to make any Payment, and the Distributor is hereby
authorized and directed to enter into appropriate written agreements with each
person to whom the Distributor intends to make any payments in the nature of a
Payment. The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be made does
not have the purpose set forth in Section 2 above (such as the printer in the
case of the printing of a prospectus or a newspaper in the case of an
advertisement) unless the Board determines that such an agreement or arrangement
should be treated as a "related" agreement for purposes of Rule 12b-1 under the
Act.
4. Each agreement required to be in writing by Section 3 must
contain the provisions required by Rule 12b-1 under the Act and must be approved
by a majority of the Board ("Board Approval") and by a majority of the
Disinterested Trustees ("Disinterested Trustee Approval"), by vote cast in
person at a meeting called for the purposes of voting on such agreement. All
determinations or authorizations of the Board hereunder shall be made by Board
Approval and Disinterested Trustee Approval.
5. The officers, investment adviser or Distributor of the
Trust, as appropriate, shall provide to the Board and the Board shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and the purposes for which such Payments were made.
6. To the extent any activity is covered by Section 2 and is
also an activity which a Fund may pay for on behalf of the Class A Series Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan may not be amended in any material respect
without Board Approval and Disinterested Trustee Approval and may not be amended
to increase the maximum level of Payments permitted hereunder without such
approvals and further approval by a vote of at least a majority of the Class A
Series Shares of the affected Fund. This Plan may continue in effect for longer
than one year after its approval only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Trustee Approval.
8. This Plan may be terminated at any time by a vote of the
Disinterested Trustees, cast in person at a meeting called for the purposes of
voting on such termination, or by a vote of at least a majority of the Class A
Series Shares of the relevant Fund.
9. For purposes of this Plan, the terms "interested person"
and "related agreement" shall have the meanings ascribed to them in the Act and
the rules adopted by the Securities and Exchange Commission thereunder and the
term "vote of a majority of the Class A Series Shares" of a Fund shall mean the
vote, at the annual or a special meeting of the holders of the Class A Series
Shares duly called, (a) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the Class A Series Shares of the
Fund outstanding on the record date for such meeting are present or represented
by proxy or, if less, (b) more than 50% of the Class A Series Shares of the Fund
outstanding on the record date for such meeting.
Dated: November 16, 1999
<PAGE>
SCHEDULE A
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1 OF
THE GABELLI WESTWOOD FUNDS
(CLASS A SERIES)
Below are listed the Trust's separate series of shares under which this
Amended and Restated Rule 12b-1 Distribution Plan and Agreement is to be
performed as of the date hereof:
Annual Rule 12b-1 Fee
Fund as a percentage of average daily net assets
Gabelli Westwood Equity Fund .50%
Gabelli Westwood Balanced Fund .50%
Gabelli Westwood Intermediate Bond Fund .35%
Gabelli Westwood Cash Management Fund .35%
Dated as of November 16, 1999
Exhibit (m)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI WESTWOOD FUNDS
(Class A Series)
WHEREAS, THE GABELLI WESTWOOD FUNDS, a Massachusetts business
trust (the "Trust"), engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Trust has issued and is authorized to issue
shares of beneficial interest ("Shares") which may be classified into series in
which each series represents entire undivided interests of a separate portfolio
of assets, and the series to which this Plan relates are identified on Schedule
A hereto, as such Schedule may be amended from time to time (individually
referred to as a "Fund" and collectively, the "Funds");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") will
serve as the principal distributor of the Shares pursuant to the distribution
agreement between the Trust and the Distributor, which distribution agreement,
as amended and restated, has been duly approved by the Board of Trustees of the
Trust (the "Board"), in accordance with the requirements of the Act (the
"Distribution Agreement");
WHEREAS, the Trust has established and plans to offer Shares
of its beneficial interest denominated as Class A Series Shares of each Fund
(the "Class A Series Shares"), pursuant to Rule 18f-3 under the Act that permits
the Trust to implement a multiple distribution system providing investors with
the option of purchasing Shares of various classes;
WHEREAS, the Board as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class A Series Shares of the Funds and that, in the
exercise of reasonable business judgement and in light of their fiduciary
duties, that there is a reasonable likelihood that a plan of distribution
containing the terms set forth herein (the "Plan") will benefit each Fund and
the shareholders of the Class A Series Shares, and have accordingly approved the
Plan by votes cast in person at a meeting called for the purpose of voting on
the Plan; and
WHEREAS, this Plan governs the Class A Series Shares of each
Fund and does not relate to any class of Shares which may be offered and sold by
the Funds other than the Class A Series Shares.
NOW, THEREFORE, in consideration of the foregoing, the Trust
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Trust will pay to the Distributor as distribution-related fees
(the "Payments") in connection with the distribution of Class A Series Shares of
each Fund an aggregate amount at a rate of .50% per year of the average daily
net assets of the Class A Series Shares of each Fund. Such Payments shall be
accrued daily and paid monthly in arrears or shall be accrued and paid at such
other intervals as the Board shall determine. Each Fund's obligation hereunder
shall be limited to the assets of the Class A Series Shares and shall not
constitute an obligation of the Fund except out of such assets and shall not
constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by each Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class A Series Shares. The scope of the foregoing shall be
interpreted by the Board, whose decision shall be conclusive except to the
extent it contravenes established legal authority. Without in any way limiting
the discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class A Series Shares of the Funds:
(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 prospectuses 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 and (vi) other direct and indirect
distribution-related expenses, including the provision of services with respect
to maintaining the assets of the Funds. Notwithstanding the foregoing, this Plan
does not require the Distributor or any of its affiliates to perform any
specific type or level of distribution activities or shareholder services or to
incur any specific level of expenses for activities covered by this Section 2.
In addition, Payments made in a particular year shall not be refundable whether
or not such Payments exceed the expenses incurred for that year pursuant to this
Section 2.
3. The Trust is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other person to
whom the Trust intends to make any Payment, and the Distributor is hereby
authorized and directed to enter into appropriate written agreements with each
person to whom the Distributor intends to make any payments in the nature of a
Payment. The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be made does
not have the purpose set forth in Section 2 above (such as the printer in the
case of the printing of a prospectus or a newspaper in the case of an
advertisement) unless the Board determines that such an agreement or arrangement
should be treated as a "related" agreement for purposes of Rule 12b-1 under the
Act.
4. Each agreement required to be in writing by Section 3 must
contain the provisions required by Rule 12b-1 under the Act and must be approved
by a majority of the Board ("Board Approval") and by a majority of the
Disinterested Trustees ("Disinterested Trustee Approval"), by vote cast in
person at a meeting called for the purposes of voting on such agreement. All
determinations or authorizations of the Board hereunder shall be made by Board
Approval and Disinterested Trustee Approval.
5. The officers, investment adviser or Distributor of the
Trust, as appropriate, shall provide to the Board and the Board shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and the purposes for which such Payments were made.
6. To the extent any activity is covered by Section 2 and is
also an activity which a Fund may pay for on behalf of the Class A Series Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan may not be amended in any material respect
without Board Approval and Disinterested Trustee Approval and may not be amended
to increase the maximum level of Payments permitted hereunder without such
approvals and further approval by a vote of at least a majority of the Class A
Series Shares of the affected Fund. This Plan may continue in effect for longer
than one year after its approval only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Trustee Approval.
8. This Plan may be terminated at any time by a vote of the
Disinterested Trustees, cast in person at a meeting called for the purposes of
voting on such termination, or by a vote of at least a majority of the Class A
Series Shares of the relevant Fund.
9. For purposes of this Plan, the terms "interested person"
and "related agreement" shall have the meanings ascribed to them in the Act and
the rules adopted by the Securities and Exchange Commission thereunder and the
term "vote of a majority of the Class A Series Shares" of a Fund shall mean the
vote, at the annual or a special meeting of the holders of the Class A Series
Shares duly called, (a) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the Class A Series Shares of the
Fund outstanding on the record date for such meeting are present or represented
by proxy or, if less, (b) more than 50% of the Class A Series Shares of the Fund
outstanding on the record date for such meeting.
Dated: November 16, 1999
SCHEDULE A
PLAN OF DISTRIBUTION PURSUANT TO
RULE 12b-1 OF THE GABELLI WESTWOOD FUNDS (the "Plan")
(CLASS A SERIES)
Below are listed the Trust's separate series of shares under which this
Plan is to be performed as of the date hereof:
GABELLI WESTWOOD SMALLCAP EQUITY FUND
GABELLI WESTWOOD MIGHTY MITES(SM) FUND
GABELLI WESTWOOD REALTY FUND
Dated as of November 16, 1999
Exhibit (m)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI WESTWOOD FUNDS
(Class B Series)
WHEREAS, THE GABELLI WESTWOOD FUNDS, a Massachusetts business
trust (the "Trust"), engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Trust has issued and is authorized to issue
shares of beneficial interest ("Shares") which may be classified into series in
which each series represents the entire undivided interests of a separate
portfolio of assets as identified on Schedule A hereto, as such schedule may be
amended from time to time, (individually referred to as a "Fund" and
collectively, the "Funds");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") will
serve as the principal distributor of the Shares pursuant to the distribution
agreement between the Trust and the Distributor, which distribution agreement,
as amended and restated, has been duly approved by the Board of Trustees of the
Trust (the "Board"), in accordance with the requirements of the Act (the
"Distribution Agreement");
WHEREAS, the Trust has established and plans to offer shares
of its beneficial interest denominated as Class B Series Shares of each Fund
(the "Class B Series Shares"), pursuant to Rule 18f-3 under the Act that permits
the Trust to implement a multiple distribution system providing investors with
the option of purchasing shares of various classes;
WHEREAS, the Board as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class B Series Shares of each Fund and that, in the
exercise of reasonable business judgment and in light of their fiduciary duties,
that there is a reasonable likelihood that a plan of distribution containing the
terms set forth herein (the "Plan") will benefit each Fund and the shareholders
of the Class B Series Shares, and have accordingly approved the Plan by votes
cast in person at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class B Series Shares of each
Fund and does not relate to any class of shares which may be offered and sold by
the Funds other than the Class B Series Shares.
NOW, THEREFORE, in consideration of the foregoing, the Trust
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
<PAGE>
1. In consideration of the services to be provided, and the expenses
to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Trust will pay to the Distributor a distribution fee at
the aggregate amount rate of .75% per year of the average daily net
asset value of the Class B Series Shares of each Fund and a service
fee at the aggregate amount rate of .25% per year of the average daily
net asset value of the Class B Series Shares of each Fund (the
"Payments"). Such Payments shall be accrued daily and paid monthly in
arrears or shall be accrued and paid at such other intervals as the
Board shall determine. Each Fund's obligation hereunder shall be
limited to the assets of the Class B Series Shares and shall not
constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by each Fund under this Plan
will be used by the Distributor for the purpose of financing or assisting in the
financing of any activity which is primarily intended to result in the sale of
Class B Series Shares. The scope of the foregoing shall be interpreted by the
Board, whose decision shall be conclusive except to the extent it contravenes
established legal authority. Without in any way limiting the discretion of the
Board, the following activities are hereby declared to be primarily intended to
result in the sale of Class B Series Shares of a Fund: advertising the Class B
Series Shares or the Trust's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
or any of them for sales of Class B Series Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Trust's investment adviser and its personnel) or any of
them for providing services to shareholders of the Trust relating to their
investment in the Class B Series Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Trust and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
3. The Trust is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other
person to whom the Trust intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into
appropriate written agreements with each person to whom the
Distributor intends to make any payments in the nature of a Payment.
The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be
made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper
in the case of an advertisement) unless the Board determines that such
an agreement or arrangement should be treated as a "related" agreement
for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3 must contain
the provisions required by Rule 12b-1 under the Act and must be
approved by a majority of the Board ("Board Approval") and by a
majority of the Disinterested Trustees ("Disinterested Trustee
Approval"), by vote cast in person at a meeting called for the
purposes of voting on such agreement. All determinations or
authorizations of the Board hereunder shall be made by Board Approval
and Disinterested Trustee Approval.
5. The officers, investment adviser or Distributor of the Trust, as
appropriate, shall provide to the Board and the Board shall review, at
least quarterly, a written report of the amounts expended pursuant to
this Plan and the purposes for which such Payments were made.
6. To the extent any activity is covered by Section 2 and is also an
activity which a Fund may pay for on behalf of the Class B Series
Shares without regard to the existence or terms and conditions of a
plan of distribution under Rule 12b-1 of the Act, this Plan shall not
be construed to prevent or restrict the Fund from paying such amounts
outside of this Plan and without limitation hereby and without such
payments being included in calculation of Payments subject to the
limitation set forth in Section 1.
7. This Plan may not be amended in any material respect without Board
Approval and Disinterested Trustee Approval and may not be amended to
increase the maximum level of Payments by a Fund permitted hereunder
without such approvals and further approval by a vote of at least a
majority of the Class B Series Shares of the Fund. This Plan may
continue in effect for longer than one year after its approval only as
long as such continuance is specifically approved at least annually by
Board Approval and by Disinterested Trustee Approval.
8. This Plan may be terminated with respect to a Fund at any time by a
vote of the Disinterested Trustees, cast in person at a meeting called
for the purposes of voting on such termination, or by a vote of at
least a majority of the Class B Series Shares of the Fund.
9. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the
Act and the rules adopted by the Securities and Exchange Commission
thereunder and the term "vote of a majority of the Class B Series
Shares" of a Fund shall mean the vote, at the annual or a special
meeting of the holders of the Class B Series Shares of the Fund duly
called, (a) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the Class B Series Shares
of the Fund outstanding on the record date for such meeting are
present or represented by proxy or, if less, (b) more than 50% of the
Class B Series Shares of the Fund outstanding on the record date for
such meeting.
Dated: November 16, 1999
<PAGE>
SCHEDULE A
PLAN OF DISTRIBUTION PURSUANT TO
RULE 12b-1 OF THE GABELLI WESTWOOD FUNDS
(CLASS B SERIES)
Below are listed the Trust's separate series of shares under which this
Plan of Distribution pursuant to Rule 12b-1 is to be performed as of the date
hereof.
THE GABELLI WESTWOOD FUNDS
GABELLI WESTWOOD EQUITY FUND GABELLI WESTWOOD BALANCED
FUND GABELLI WESTWOOD SMALLCAP EQUITY FUND GABELLI
WESTWOOD MIGHTY MITES(SM) FUND GABELLI WESTWOOD REALTY
FUND GABELLI WESTWOOD INTERMEDIATE BOND FUND [GABELLI
WESTWOOD CASH MANAGEMENT FUND]
Dated as of November 16, 1999
Exhibit (m)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI WESTWOOD FUNDS
(Class C Series)
WHEREAS, THE GABELLI WESTWOOD FUNDS, a Massachusetts business
trust (the "Trust"), engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Trust has issued and is authorized to issue
shares of beneficial interest ("Shares") which may be classified into series in
which each series represents the entire undivided interests of a separate
portfolio of assets and such series are identified on Schedule A hereto, as such
schedule may be amended from time to time, (individually referred to as a "Fund"
and collectively, the "Funds");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") will
serve as the principal distributor of the Shares pursuant to the distribution
agreement between the Trust and the Distributor, which distribution agreement,
as amended and restated, has been duly approved by the Board of Trustees of the
Trust (the "Board"), in accordance with the requirements of the Act (the
"Distribution Agreement");
WHEREAS, the Trust has established and plans to offer shares
of its beneficial interest denominated as Class C Series Shares of each Fund
(the "Class C Series Shares"), pursuant to Rule 18f-3 under the Act that permits
the Trust to implement a multiple distribution system providing investors with
the option of purchasing shares of various classes;
WHEREAS, the Board as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Trustees"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class C Series Shares of each Fund and that, in the
exercise of reasonable business judgment and in light of their fiduciary duties,
that there is a reasonable likelihood that a plan of distribution containing the
terms set forth herein (the "Plan") will benefit each Fund and the shareholders
of the Class C Series Shares of each Fund, and have accordingly approved the
Plan by votes cast in person at a meeting called for the purpose of voting on
the Plan; and
WHEREAS, this Plan governs the Class C Series Shares of each
Fund and does not relate to any class of shares which may be offered and sold by
the Funds other than the Class C Series Shares.
NOW, THEREFORE, in consideration of the foregoing, the Trust
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
<PAGE>
1. In consideration of the services to be provided, and the expenses
to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Trust will pay to the Distributor a distribution fee at
the aggregate amount rate of .75% per year of the average daily net
asset value of the Class C Series Shares of each Fund and a service
fee at the aggregate amount rate of .25% per year of the average daily
net asset value of the Class C Series Shares of each Fund (the
"Payments"). Such Payments shall be accrued daily and paid monthly in
arrears or shall be accrued and paid at such other intervals as the
Board shall determine. Each Fund's obligation hereunder shall be
limited to the assets of the Class C Series Shares and shall not
constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by each Fund under this
Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended
to result in the sale of Class C Series Shares. The scope of the
foregoing shall be interpreted by the Board, whose decision shall be
conclusive except to the extent it contravenes established legal
authority. Without in any way limiting the discretion of the Board,
the following activities are hereby declared to be primarily intended
to result in the sale of Class C Series Shares of a Fund: advertising
the Class C Series Shares or the Trust's investment adviser's mutual
fund activities; compensating underwriters, dealers, brokers, banks
and other selling entities (including the Distributor and its
affiliates) and sales and marketing personnel or any of them for sales
of Class C Series Shares, whether in a lump sum or on a continuous,
periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and
servicing personnel (including the Trust's investment adviser and its
personnel) or any of them for providing services to shareholders of
the Trust relating to their investment in the Class C Series Shares,
including assistance in connection with inquiries relating to
shareholder accounts; the production and dissemination of prospectuses
(including statements of additional information) of the Trust and the
preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses,
such as equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar expenses relating
to any activity for which Payment is authorized by the Board; and the
financing of any activity for which Payment is authorized by the
Board; and profit to the Distributor and its affiliates arising out of
their provision of shareholder services. Notwithstanding the
foregoing, this Plan does not require the Distributor or any of its
affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of
expenses for activities covered by this Section 2. In addition,
Payments made in a particular year shall not be refundable whether or
not such Payments exceed the expenses incurred for that year pursuant
to this Section 2.
3. The Trust is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other
person to whom the Trust intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into
appropriate written agreements with each person to whom the
Distributor intends to make any payments in the nature of a Payment.
The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be
made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper
in the case of an advertisement) unless the Board determines that such
an agreement or arrangement should be treated as a "related" agreement
for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3 must contain
the provisions required by Rule 12b-1 under the Act and must be
approved by a majority of the Board ("Board Approval") and by a
majority of the Disinterested Trustees ("Disinterested Trustee
Approval"), by vote cast in person at a meeting called for the
purposes of voting on such agreement. All determinations or
authorizations of the Board hereunder shall be made by Board Approval
and Disinterested Trustee Approval.
5. The officers, investment adviser or Distributor of the Trust, as
appropriate, shall provide to the Board and the Board shall review, at
least quarterly, a written report of the amounts expended pursuant to
this Plan and the purposes for which such Payments were made.
6. To the extent any activity is covered by Section 2 and is also an
activity which a Fund may pay for on behalf of the Class C Series
Shares without regard to the existence or terms and conditions of a
plan of distribution under Rule 12b-1 of the Act, this Plan shall not
be construed to prevent or restrict the Fund from paying such amounts
outside of this Plan and without limitation hereby and without such
payments being included in calculation of Payments subject to the
limitation set forth in Section 1.
7. This Plan may not be amended in any material respect without Board
Approval and Disinterested Trustee Approval and may not be amended to
increase the maximum level of Payments by a Fund permitted hereunder
without such approvals and further approval by a vote of at least a
majority of the Class C Series Shares of the Fund. This Plan may
continue in effect for longer than one year after its approval only as
long as such continuance is specifically approved at least annually by
Board Approval and by Disinterested Trustee Approval.
8. This Plan may be terminated with respect to a Fund at any time by a
vote of the Disinterested Trustees, cast in person at a meeting called
for the purposes of voting on such termination, or by a vote of at
least a majority of the Class C Series Shares of the Fund.
9. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the
Act and the rules adopted by the Securities and Exchange Commission
thereunder and the term "vote of a majority of the Class C Series
Shares" of a Fund shall mean the vote, at the annual or a special
meeting of the holders of the Class C Series Shares of the Fund duly
called, (a) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the Class C Series Shares
of the Fund outstanding on the record date for such meeting are
present or represented by proxy or, if less, (b) more than 50% of the
Class C Series Shares of the Fund outstanding on the record date for
such meeting.
Dated: November 16, 1999
<PAGE>
SCHEDULE A
PLAN OF DISTRIBUTION PURSUANT TO
RULE 12b-1 OF THE GABELLI WESTWOOD FUNDS
(CLASS C SERIES)
Below are listed the Trust's separate series of shares under which this
Plan of Distribution pursuant to Rule 12b-1 is to be performed as of the date
hereof.
THE GABELLI WESTWOOD FUNDS
GABELLI WESTWOOD EQUITY FUND GABELLI WESTWOOD BALANCED
FUND GABELLI WESTWOOD SMALLCAP EQUITY FUND GABELLI
WESTWOOD MIGHTY MITES(SM) FUND GABELLI WESTWOOD REALTY
FUND GABELLI WESTWOOD INTERMEDIATE BOND FUND [GABELLI
WESTWOOD CASH MANAGEMENT FUND]
Dated as of November 16, 1999
Exhibit (n)
AMENDED AND RESTATED RULE 18f-3
MULTI-CLASS PLAN
FOR
THE GABELLI WESTWOOD FUNDS (the "Trust")
This Amended and Restated Multi-Class Plan (this "Multi-Class
Plan") is adopted pursuant to Rule 18f-3 under the Act to provide for the
issuance and distribution of multiple classes of shares by each series of the
Trust in accordance with the terms, procedures and conditions set forth below. A
majority of the Trustees of the Trust, including a majority of the Trustees who
are not interested persons of the Trust within the meaning of the Act, have
found this Multi-Class Plan, including the expense allocations, to be in the
best interest of each Fund and each Class of Shares constituting each Fund.
A. Definitions. As used herein, the terms set forth below
shall have the meanings ascribed to them below.
1. The Act -- the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated
thereunder.
2. CDSC -- contingent deferred sales charge.
3. CDSC Period -- the period of time following
acquisition during which Shares are assessed a CDSC
upon redemption.
4. Class -- a class of Shares of a Fund.
5. Class A Shares -- shall have the meaning ascribed in
Section B.1.
6. Class B Shares -- shall have the meaning ascribed in
Section B.1.
7. Class C Shares -- shall have the meaning ascribed in
Section B.1.
8. Class AAA Shares -- shall have the meaning ascribed in
Section B.1.
9. Distribution Expenses -- expenses, including
allocable overhead costs, imputed interest, any other
expenses and any element of profit referred to in a
Plan of Distribution and/or board resolutions,
incurred in activities which are primarily intended
to result in the distribution and sale of Shares.
10. Distribution Fee -- a fee paid by a Fund in respect
of the asset of a Class of the Fund to the
Distributor pursuant to the Plan of Distribution
relating to the Class.
11. Distributor -- Gabelli & Company, Inc.
12. Fund or Funds -- Gabelli Westwood Equity Fund,
Gabelli Westwood Balanced Fund, Gabelli Westwood
Intermediate Bond Fund, Gabelli Westwood SmallCap
Equity Fund, Gabelli Westwood Mighty Mites(sm) Fund,
Gabelli Westwood Realty Fund and Gabelli Westwood
Cash Management Fund and any future fund or series
created by the Trust.
13. IRS -- Internal Revenue Service
14. NASD -- National Association of Securities Dealers,
Inc.
15. Plan of Distribution -- any plan adopted under Rule
12b-1 under the Act with respect to payment of a
Distribution Fee.
16. Prospectus -- a prospectus, including the statement
of additional information incorporated by reference
therein, covering the Shares of the referenced Class
or Classes of a Fund.
17. SEC -- Securities and Exchange Commission
18. Service Fee -- a fee paid to financial
intermediaries, including the Distributor and its
affiliates, for the ongoing provision of personal
services to shareholders of a Class and/or the
maintenance of shareholder accounts relating to a
Class.
19. Share -- a share of beneficial interest in a Fund.
20. Trustees -- the trustees of the Trust.
B. Classes. The Funds may offer four Classes as follows:
1. Class A Shares. Class A Shares were formerly known as "Service
Class" Shares with respect to the Gabelli Westwood Equity Fund,
Gabelli Westwood Balanced Fund, Gabelli Westwood Intermediate Bond
Fund and Gabelli Westwood Cash Management Fund. Class A Shares means
Class A Shares of each Fund designated by a vote adopted by the
Trustees. Class A Shares shall be offered at net asset value plus a
front-end sales charge set forth in a Prospectus from time to time,
which may be reduced or eliminated in any manner not prohibited by the
Act or the NASD as set forth in a Prospectus. Class A Shares that are
not subject to a front-end sales charge as a result of the foregoing
may be subject to a CDSC for the CDSC Period set forth in Section D.1.
The offering price of Class A Shares subject to a front-end sales
charge shall be computed in accordance with the Act. Class A Shares
shall be subject to ongoing Distribution Fees or Service Fees approved
from time to time by the Trustees and set forth in a Prospectus.
2. Class B Shares. Class B Shares means Class B Shares of each Fund
designated by a vote adopted by the Trustees. Class B Shares shall be
(1) offered at net asset value, (2) subject to a CDSC for the CDSC
Period set forth in Section D.1, (3) subject to ongoing Distribution
Fees and Service Fees approved from time to time by the Trustees and
set forth in a Prospectus and (4) converted to Class A Shares on the
first business day of the ninety-seventh calendar month following the
calendar month in which such Shares were issued. For Class B Shares
previously exchanged for shares of a money market fund the investment
adviser of which is the same as or an affiliate of the investment
adviser of the Fund, the time period during which such Shares were
held in the money market fund will be excluded.
3. Class C Shares. Class C Shares means Class C Shares
of each Fund designated by a vote adopted by the
Trustees. Class C Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC
Period set forth in Section D.1 and (3) subject to
ongoing Distribution Fees and Service Fees approved
from time to time by the Trustees and set forth in a
Prospectus.
4. Class AAA Shares. Class AAA Shares were formerly known as "Retail
Class" Shares. Class AAA Shares means Class AAA Shares of each Fund
designated by a vote adopted by the Trustees. Class AAA Shares shall
be (1) offered at net asset value, (2) sold without a front-end sales
charge or CDSC, (3) offered to investors acquiring Shares directly
from the Distributor or from a financial intermediary with whom the
Distributor has entered into an agreement expressly authorizing the
sale by such intermediary of Class AAA Shares and (4) subject to
ongoing Distribution Fees or Service Fees approved from time to time
by the Trustees and set forth in a Prospectus.
C. Rights and Privileges of Classes. Each of the Class A Shares,
Class B Shares, Class C Shares and Class AAA Shares will
represent an interest in the same portfolio of assets and will
have identical voting, dividend, liquidation and other rights,
preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions except
as described otherwise in the Supplemental Declaration of
Trust with respect to each of such Classes.
D. CDSC. A CDSC may be imposed upon redemption of Class A Shares.
Class B Shares and Class C Shares that do not incur a
front-end sales charge may charge a CDSC subject to the
following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and
Class C Shares shall be twenty-four months plus any
portion of the month during which payment for such
Shares was received. The CDSC Period for Class B
Shares shall be seventy-two months plus any portion
of the month during which payment for such Shares was
received.
2. CDSC Rate. The CDSC rate shall be recommended by the
Distributor and approved by the Trustees. If a CDSC
is imposed for a period greater than thirteen months
in each succeeding twelve months of the CDSC Period
after the first twelve months (plus any initial
partial month) the CDSC rate must be less than or
equal to the CDSC rate in the preceding twelve months
(plus any initial partial month).
3. Disclosure and changes. The CDSC rates and CDSC
Period shall be disclosed in the Prospectus and may
be decreased at the discretion of the Distributor but
may not be increased unless approved as set forth in
Section L.
4. Method of calculation. The CDSC shall be assessed on an amount
equal to the lesser of the then current net asset value or the cost of
the Shares being redeemed. No CDSC shall be imposed on increases in
the net asset value of the Shares being redeemed above the initial
purchase price. No CDSC shall be assessed on Shares derived from
reinvestment of dividends or capital gains distributions. The order in
which Class B Shares and Class C Shares are to be redeemed when not
all of such Shares would be subject to a CDSC shall be as determined
by the Distributor in accordance with the provisions of Rule 6c-10
under the Act.
5. Waiver. The Distributor may in its discretion waive a
CDSC otherwise due upon the redemption of Shares of
any Class under circumstances previously approved by
the Trustees and disclosed in the Prospectus and as
allowed under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of
Shares of any Class subject to a CDSC shall be
computed in accordance with Rule 22c-1 under the Act
and Section 22(d) of the Act and the rules and
regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect
to Shares of any Class may be retained by the
Distributor to reimburse the Distributor for
commissions paid by it in connection with the sale of
Shares subject to a CDSC and for Distribution
Expenses.
E. Service and Distribution Fees. Class AAA Shares shall be subject to
ongoing Distribution Fees or Service Fees not in excess of 0.25% per
annum of the average daily net assets of the Class. Class A Shares
shall be subject to ongoing Distribution Fees and Service Fees not in
excess of (i) .50% per annum of the average daily net assets of the
Class with respect to all Funds except the Gabelli Westwood
Intermediate Bond Fund and the Gabelli Westwood Cash Management Fund
and (ii) .35% per annum of the average daily net assets of the Class
with respect to the Gabelli Westwood Intermediate Bond Fund. Class B
Shares and Class C Shares shall be subject to a Distribution Fee not
in excess of 0.75% per annum of the average daily net assets of the
Class and a Service Fee not in excess of 0.25% of the average daily
net assets of the Class. All other terms and conditions with respect
to Service Fees and Distribution Fees shall be governed by the plans
adopted by the Fund with respect to such fees and Rule 12b-1 of the
Act.
F. Conversion. Shares acquired through the reinvestment of dividends
and capital gain distributions paid on Shares of a Class subject to
conversion shall be treated as if held in a separate sub-account. Each
time any Shares of a Class in a shareholder's account (other than
Shares held in the sub-account) convert to Class A Shares, a
proportionate number of Shares held in the sub-account shall also
convert to Class A Shares. All conversions shall be effected on the
basis of the relative net asset values of the two Classes without the
imposition of any sales load or other charge. So long as any Class of
Shares converts into Class A Shares, the Distributor shall waive fees
or reimburse the Fund, or take such other actions with the approval of
the Trustees as may be reasonably necessary to ensure that, the
expenses, including payments authorized under a Plan of Distribution,
applicable to the Class A Shares are not higher than the expenses,
including payments authorized under a Plan of Distribution, applicable
to the Class of Shares that converts into Class A Shares. Shares
acquired through an exchange privilege will convert to Class A Shares
after expiration of the conversion period applicable to such Shares.
The continuation of the conversion feature is subject to continued
compliance with the rules and regulations of the SEC, the NASD and the
IRS.
G. Allocation of Liabilities, Expenses, Income and Gains Among
Classes.
1. Liabilities and Expenses applicable to a particular Class. Each
Class of the Fund shall pay any Distribution Fee and Service Fee
applicable to that Class. Other expenses applicable to any of the
foregoing such as incremental transfer agency fees, but not including
advisory or custodial fees or other expenses related to the management
of the Fund's assets, upon approval of the Trustees, may be allocated
among such Classes in different amounts in accordance with the terms
of each such Class if they are actually incurred in different amounts
by such Classes or if such Classes receive services of a different
kind or to a different degree than other Classes.
2. Income, losses, capital gains and losses, and
liabilities and other expenses applicable to all
Classes. Income, losses, realized and unrealized
capital gains and losses, and any liabilities and
expenses not applicable to any particular Class shall
be allocated to each Class on the basis of the net
asset value of that Class in relation to the net
asset value of the Fund.
3. Determination of nature of items. The Trustees shall
determine in their sole discretion whether any
liability, expense, income, gains or loss other than
those listed herein is properly treated as attributed
in whole or in part to a particular Class or all
Classes.
H. Exchange Privilege. Holders of Class A Shares, Class B Shares,
Class C Shares and Class AAA Shares shall have such exchange
privileges as set forth in the Prospectus for such Class.
Exchange privileges may vary among Classes and among holders
of a Class.
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive
voting rights on any matter submitted to them that
relates solely to that Class, provided that:
a. If any amendment is proposed to the Plan of
Distribution under which Distribution Fees
or Service Fees are paid with respect to
Class A Shares of a Fund that would increase
materially the amount to be borne by Class A
Shares under such Plan of Distribution, then
no Class B Shares shall convert into Class A
Shares of the Fund until the holders of
Class B Shares of the Fund have also
approved the proposed amendment.
b. If the holders of either the Class B Shares
referred to in subparagraph a. do not
approve the proposed amendment, the Trustees
and the Distributor shall take such action
as is necessary to ensure that the Class
voting against the amendment shall convert
into another Class identical in all material
respects to Class A Shares of the Fund as
constituted prior to the amendment.
2. Shareholders shall have separate voting rights on any
matter submitted to shareholders in which the
interest of one Class differs from the interests of
any other Class, provided that:
a. If the holders of Class A Shares approve any
increase in expenses allocated to the Class
A Shares, then no Class B Shares shall
convert into Class A Shares of a Fund until
the holders of Class B Shares of the Fund
have also approved such expense increase.
b. If the holders of Class B Shares referred to
in subparagraph a. do not approve such
increase, the Trustees and the Distributor
shall take such action as is necessary to
ensure that the Class B Shares shall convert
into another Class identical in all material
respects to Class A Shares of the Fund as
constituted prior to the expense increase.
J. Dividends and Distributions. Dividends and capital gain
distributions paid by a Fund with respect to each Class, to
the extent any such dividends and distributions are paid, will
be calculated in the same manner and at the same time on the
same day and will be, after taking into account any
differentiation in expenses allocable to a particular Class,
in substantially the same proportion on a relative net asset
value basis.
K. Reports to Trustees. The Distributor shall provide the
Trustees such information as the Trustees may from time to
time deem to be reasonably necessary to evaluate this Plan.
L. Amendment. Any material amendment to this Multi-Class Plan shall be
approved by the affirmative vote of a majority (as defined in the Act)
of the Trustees of the relevant Fund, including the affirmative vote
of the Trustees of the Trust who are not interested persons of the
Trust, except that any amendment that increases the CDSC rate schedule
or CDSC Period must also be approved by the affirmative vote of a
majority of the Shares of the affected Class. Except as so provided,
no amendment to this Multi-Class Plan shall be required to be approved
by the shareholders of any Class of the Shares constituting a Fund.
The Distributor shall provide the Trustees such information as may be
reasonably necessary to evaluate any amendment to this Multi-Class
Plan.
Dated: November 16, 1999
