As filed with the Securities and Exchange Commission on
January 31, 2000.
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. 22 X
------ -
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 X
------ -
/R>
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)
X on February 1, 2000 pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)(1) on ______________
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 MitesSM 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
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 Table of Contents
Introduction
- -------------------------------------------------------------------------------
3
Investment and Performance Summary
- -------------------------------------------------------------------------------
3 - 29
More Investment and Risk Information
- -------------------------------------------------------------------------------
29
Management of the Funds
- -------------------------------------------------------------------------------
30 - 31
- -------------------------------------------------------------------------------
32 - 36 Classes of Shares
36 - 37 Purchase of Shares
37 - 38 Redemption of Shares
38 - 39 Exchange of Shares
39 Pricing of Fund Shares
40 Dividends and Distributions
40 Tax Information
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
41 - 43
<PAGE>
INTRODUCTION
The Gabelli Westwood Funds (the "Trust") currently consists of the following six
separate investment portfolios (the "Funds"):
(BULLET) Gabelli Westwood Equity Fund (the "Equity Fund")
(BULLET) Gabelli Westwood Balanced Fund (the "Balanced Fund")
(BULLET) Gabelli Westwood SmallCap Equity Fund (the "SmallCap Equity Fund")
(BULLET) Gabelli Westwood Mighty MitesSM Fund (the "Mighty Mites Fund")
(BULLET) Gabelli Westwood Realty Fund (the "Realty Fund")
(BULLET) 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, until November 1994, 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.
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:
Under normal market conditions, the Fund invests at least 65% of its assets in
common stocks and securities which may be converted into common stocks. The Fund
invests in a portfolio of seasoned companies. Seasoned companies generally have
market capitalizations of $1 billion or more 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.
3
<PAGE>
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:
(BULLET) you are a long-term investor
(BULLET) you seek growth of capital
(BULLET) 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:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) 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.
4
<PAGE>
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.
GABELLI WESTWOOD EQUITY FUND*
[GRAPHICOMITTED]
EDGARREPRESENTATIONOFDATAPOINTSUSEDIPRINTEDGRAPHIC
1995 36.6
1996 26.2
1997 29.3
1998 12.8
1999 14.34
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
15.37% (quarter ended 6/30/97) and the lowest return for a quarter was (9.12)%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year Past Five Years (1/28/94)
- ------------------------------------------------------------------- ------------- --------------
The Gabelli Westwood Equity Fund
Class A Shares
(formerly known as Service Class Shares)* 9.76% 22.49% 18.36%
S&P 500 Stock Index(DAGGER) 21.03% 28.54% 23.38%
- ------------------------
* Includes the effect of the initial sales charge.
(DAGGER) 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.
5
</TABLE>
<PAGE>
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) 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 0.24% 0.24% 0.24%
------- ------- -------
Total Annual Operating Expenses 1.74% 2.24% 2.24%
------- ------- -------
------- ------- -------
- ------------------------
(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 1.00%.
(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 1.00% applies to redemptions of Class C Shares
within 24 months after purchase.
</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 $2,449
- assuming no redemption $227 $ 700 $1,200 $2,449
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 uses a top down approach in seeking 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 30% to 70% in debt securities, and the balance of the
Fund's assets in cash or cash equivalents. The actual mix of assets will vary
depending on the Sub-Adviser's anaylsis of market and economic conditions.
The Fund invests in stocks of seasoned companies. Seasoned companies generally
have market capitalizations of $1 billion or more 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. There are no restrictions on the maximum or minimum maturity of any
individual security that the Fund may invest in.
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 rise, the value of the portfolio's debt securities generally
declines. The magnitude of the decline will often be greater for longer-term
debt securities than shorter-term debt securities. It is also possible that the
issuer of a security will not be able to make interest and principal payments
when due. In addition, investing in certain types of debt securities involves
pre-payment risk. Pre-payment risk is the risk that the Fund may experience
losses when an issuer excercises its right to pay principal on an obligation
held by the Fund (such as a mortgage-backed security) earlier than expected.
Your investment in the Fund is not guaranteed and you could lose some or all of
the amount you invested 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.
7
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek both growth of capital and current income
(BULLET) 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:
(BULLET) you seek stability of principal more than growth of capital
(BULLET) 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.
8
<PAGE>
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.
GABELLI WESTWOOD BALANCED FUND*
[GRAPHICOMITTED]
EDGARREPRESENTATION OFDATAPOINTSUSEDINPRINTEDGRAPHIC
1994 -0.5
1995 30.9
1996 17.9
1997 22.2
1998 11.1
1999 7.51
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
11.28% (quarter ended 6/30/97) and the lowest return for a quarter was (4.68)%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year Past Five Years (4/6/93)
- ------------------------------------------------------------------- ------------- --------------
The Gabelli Westwood Balanced Fund
Class A Shares (formerly known as
Service Class Shares)* 3.24% 16.68% 13.94%
S&P 500 Index(DAGGER) 21.03% 28.54% 21.71%
Lehman Brothers Government/
Corporate Bond Index(DAGGER) (2.15)% 7.61% 5.95%
50% S&P(REGISTRATION MARK) 500 Stock Index and
50% Lehman Brothers
Government/Corporate Bond Index(DAGGER) 9.44% 18.08% 13.80%
- ------------------------
* Includes the effect of the initial sales charge.
(DAGGER) 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 performance of the indices do not include
expenses or fees.
</TABLE>
<PAGE>
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) 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 0.20% 0.20% 0.20%
------- ------- -------
Total Annual Operating Expenses 1.45% 1.95% 1.95%
------- ------- -------
------- ------- -------
- ------------------------
(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
1.00%.
(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 1.00% applies to redemptions of Class C Shares
within 24 months after purchase.
</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 $2,146
- assuming no redemption $198 $612 $1,052 $2,146
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:
(BULLET) an earnings growth rate exceeding the Fund's benchmark, the
Russell 2000 Index
(BULLET) an increasing return on equity (BULLET) a low
debt/equity ratio
(BULLET) sequential earnings per share and sales growth
(BULLET) a recent positive earnings surprise
Frequently smaller capitalization companies exhibit one or more of the following
traits:
(BULLET) new products or technologies (BULLET) new distribution methods
(BULLET) rapid changes in industry conditions due to regulatory or
other developments
(BULLET) 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.
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.
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek long-term growth of capital
(BULLET) 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:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) 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>
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. Both the chart and the table assume reinvestment of dividends and
distributions.
GABELLI WESTWOOD SMALLCAP EQUITY FUND*
[GRAPHIC OMITTED]
EDGARREPRESENTATIONOFDATAPOINTSUSEDINPRINTEDGRAPHIC
1998 10.6
1999 52.51
* 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
28.71% (quarter ended 12/31/98) and the lowest return for a quarter was (18.80)%
(quarter ended 9/30/99).
<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) 52.51% 36.78%
Russell 2000 Index(DAGGER) 21.26% 17.02%
- ------------------------
(DAGGER) 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. 13
</TABLE>
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) 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 1.97% 2.47% 2.47%
------- ------- -------
Fee Waiver and Expense Reimbursement(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, 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 1.00%.
(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 1.00% applies to redemptions of Class C Shares
within 24 months after purchase.
(6) The Adviser contractually has 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.
</TABLE>
14
<PAGE>
Expense Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes (1) you
invest $10,000 in the Fund for the time periods shown, (2) you redeem your
shares at the end of those periods (except as noted), (3) your investment has a
5% return each year and (4) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- -----------
Class A Shares $571 $ 973 $1,400 $2,587
Class B Shares
- assuming redemption $728 $1,049 $1,496 $2,666
- assuming no redemption $228 $ 749 $1,296 $2,666
Class C Shares
- assuming redemption $328 $ 749 $1,296 $2,790
- assuming no redemption $228 $ 749 $1,296 $2,790
</TABLE>
15
<PAGE>
GABELLI WESTWOOD MIGHTY MITES FUND
Investment Objective:
The Gabelli Westwood Mighty Mites 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:
(BULLET) have above-average sales and earnings growth prospects
(BULLET) have improving balance sheet fundamentals given the current
status of economic and business cycles
(BULLET) are undervalued and may significantly appreciate due to
management changes, stock acquisitions, mergers, reorganizations,
tender offers, spin-offs or other significant events
(BULLET) 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.
Micro-cap companies are generally not well-known to investors and have less of
an investor following than larger companies. The Adviser will attempt to
capitalize on the lack of analyst attention to micro-cap stocks and the
inefficiency of the micro-cap market.
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.
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek long-term growth of capital
(BULLET) 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:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) 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.
17
<PAGE>
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. Both the chart and the table assume reinvestment of dividends and
distributions.
GABELLI WESTWOOD MIGHTY MITES FUND*
[GRAPHIC OMITTED]
EDGARREPRESENTATION OF DATAPOINTSUSEDINPRINTEDGRAPHIC
1999 36.45
* 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
17.87% (quarter ended 6/30/99) and the lowest return for a quarter was (0.45)%
(quarter ended 3/31/99).
<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 Fund
Class AAA Shares (formerly known as
Retail Class Shares) 36.45% 28.82%
Russell 2000 Index(DAGGER) 21.26% 4.06%
- ------------------------
(DAGGER) 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. 18
</TABLE>
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) 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 and Expense Reimbursement(6) 0.82% 0.82% 0.82%
------- ------- -------
Net Annual Operating Expenses(6) 1.75% 2.25% 2.25%
------- ------- -------
------- -------
</TABLE>
- ------------------------
(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 1.00%.
(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 1.00% applies to redemptions of Class C Shares
within 24 months after purchase.
(6) The Adviser contractually has 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.
19
<PAGE>
Expense Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes (1) you
invest $10,000 in the Fund for the time periods shown, (2) you redeem your
shares at the end of those periods (except as noted), (3) your investment has a
5% return each year and (4) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- -----------
Class A Shares $571 $1,093 $1,640 $3,130
Class B Shares
- assuming redemption $728 $1,171 $1,739 $3,209
- assuming no redemption $228 $ 871 $1,539 $3,209
Class C Shares
- assuming redemption $328 $ 871 $1,539 $3,326
- assuming no redemption $228 $ 871 $1,539 $3,326
</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. 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:
Under normal market conditions, the Fund invests at least 65% of its assets in
the securities of publicly traded real estate investment trusts ("REITs") 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 database model to rank various growth,
value and management characteristics of a universe of REITs and then follows the
ranking process with in-depth fundamental research. Securities considered for
purchase have:
(BULLET) attractive rankings based on the Sub-Adviser's database model
(BULLET) assets in regions with favorable demographic trends
(BULLET) assets in sectors with attractive long-term fundamentals
(BULLET) issuers with strong management teams and/or
(BULLET) 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.
21
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek current income as well as growth of capital
(BULLET) you seek to invest in a market which does not correlate directly
with other equity markets (BULLET) 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:
(BULLET) you are conservative in your investment approach (BULLET) 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.
22
<PAGE>
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. Both the chart and the table assume reinvestment of dividends and
distributions.
GABELLI WESTWOOD REALTY FUND*
[GRAPHICOMITTED]
EDGARREPRESENTATIONODDATAOPOINTSUSEDINPRINTED GRAPHIC
1998 -15.2
1999 -2.7
* 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
12.58% (quarter ended 6/30/99) and the lowest return for a quarter was (10.29)%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year (09/30/97)
- -------------------------------------------------------------------------------- --------------
The Gabelli Westwood Realty Fund
Class AAA Shares (formerly known as
Retail Class Shares) (2.70)% (6.44)%
Russell 2000 Index(DAGGER) (21.26)% (6.08)%
NAREIT ALL REIT Index(DAGGER) (6.48)% (10.63)%
- ------------------------
(DAGGER) 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 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 performance of the indices do not include
expenses or fees. 23
</TABLE>
<PAGE>
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) 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 and Expense Reimbursement(6) 2.18% 2.18% 2.18%
------- ------- -------
Net Annual Operating Expenses(6) 1.75% 2.25% 2.25%
------- ------- -------
------- ------- -------
</TABLE>
- -----------------------
(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 1.00%.
(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 1.00% applies to redemptions of Class C
Shares within 24 months after purchase.
(6) The Adviser contractually has 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.
24
<PAGE>
Expense Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes (1) you
invest $10,000 in the Fund for the time periods shown, (2) you redeem your
shares at the end of those periods (except as noted), (3) your investment has a
5% return each year and (4) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- -----------
Class A Shares $571 $1,358 $2,163 $4,250
Class B Shares
- assuming redemption $728 $1,444 $2,270 $4,328
- assuming no redemption $228 $1,144 $2,070 $4,328
Class C Shares
- assuming redemption $328 $1,144 $2,070 $4,431
- assuming no redemption $228 $1,144 $2,070 $4,431
</TABLE>
</R.
25
<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 ratings 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
and 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 rise, the value of the portfolio's
securities generally declines. The magnitude of the decline will often be
greater for longer-term debt securities than shorter-term debt securities. It is
also possible that the issuer of a security will not be able to make interest
and principal payments when due. Investing in certain types of debt securities
involves pre-payment risk. Pre-payment risk is the risk that the Fund may
experience losses when an issuer exercises its right to pay principal on an
obligation held by the Fund (such as a mortgage-backed security) earlier than
expected. 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 you invested in the
Fund.
Who May Want to Invest: The Fund may appeal to you if:
(BULLET) you are seeking current income consistent with the maintenance of
principal and liquidity (BULLET) you are conservative in your investment
approach (BULLET) you are seeking exposure to investment grade bonds as
part of your overall investment strategy
You may not want to invest in the Fund if:
(BULLET) you seek growth of capital
(BULLET) 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.
26
<PAGE>
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.
GABELLI WESTWOOD INTERMEDIATE BOND FUND*
[GRAPHICOMITTED] f
[GRAPHICOMITTED}
EDGARREPRESENTATIONOFDATAPOINTSUSEDIN GRAPHIC
1992 6.1
1993 10.5
1994 -5.6
1995 16.2
1996 3.7
1997 10.7
1998 6.6
1999 2.4
* 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
5.27% (quarter ended 6/30/95) and the lowest return for a quarter was (3.74)%
(quarter ended 3/31/94).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1999) Past One Year Past Five Years (10/1/91)
- ------------------------------------------------------------------- ------------- --------------
- -------------
The Gabelli Westwood Intermediate Bond
Fund Class AAA Shares (formerly known as
Retail Class Shares) (2.40)% 6.75% 5.96%
Lehman Brothers Government/
Corporate Bond Index(DAGGER) (2.15)% 7.61% 7.03%
- ------------------------
(DAGGER) 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>
27
<PAGE>
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) 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 and Expense Reimbursement(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 1.00%.
(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 1.00% applies to redemptions of Class C Shares
within 24 months after purchase.
(6) The Adviser contractually has 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.
28
</TABLE>
<PAGE>
Expense Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes (1) you
invest $10,000 in the Fund for the time periods shown, (2) you redeem your
shares at the end of those periods (except as noted), (3) your investment has a
5% return each year and (4) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- -----------
Class A Shares $508 $864 $1,244 $2,309
Class B Shares
- assuming redemption $678 $982 $1,413 $2,506
- assuming no redemption $178 $682 $1,213 $2,506
Class C Shares
- assuming redemption $278 $682 $1,213 $2,668
- assuming no redemption $178 $682 $1,213 $2,668
</TABLE>
MORE INVESTMENT AND RISK INFORMATION
INVESTMENT TECHNIQUES
The Funds may also use the following investment technique:
Defensive Investments. 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:
(BULLET) Equity Risk. Equity Fund, Balanced Fund, SmallCap Equity Fund,
Mighty Mites Fund and 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.
(BULLET) Interest Rate Risk, Maturity Risk and Credit Risk. Balanced Fund,
Intermediate Bond Fund and 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. The
magnitude of the decline will often be greater for longer-term debt securities
than shorter-term debt securities. It is also possible that the issuer of a
security will not be able to make interest and principal payments when due.
(BULLET) Pre-Payment Risk. Balanced Fund and Intermediate Bond Fund -- A
Fund may experience losses when an issuer exercises its right to pay principal
on an obligation held by the Fund (such as a mortgage-backed security) earlier
than expected. This may happen during a period of declining interest rates.
Under these circumstances, the Fund may be unable to recoup all of its initial
29
<PAGE>
investment and will suffer from having to invest in lower yielding securities.
The loss of higher yielding securities and the reinvestment at lower interest
rates can reduce the Fund's income, total return and share price.
(BULLET) Fund and Management Risk. If the Fund's manager's judgment in
selecting securities is wrong 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.
(BULLET) Small- and Micro-Capitalization Company Risk. SmallCap Equity Fund
and Mighty Mites Fund -- Although small-cap and micro-capitalization companies
may offer greater potential for capital appreciation than larger companies,
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.
(BULLET) 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 traded company listed on
the New York Stock Exchange ("NYSE").
As compensation for its services and the related expenses the Adviser bears, the
Adviser is entitled to an advisory fee, computed daily and payable monthly, at
annual rates set forth in the table below. The table also reflects the advisory
fees (after voluntary waivers) paid by the Funds for the fiscal year ended
September 30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Advisory Fee Paid for
Annual Advisory Fee-Contractual Rate Fiscal Year Ended 9/30/99
Fund (as a percentage of average daily net assets)(as a percentage of average daily net assets)
------ --------------------------------------------------------------------------------------
Equity Fund 1.00% 1.00%
Balanced Fund 0.75% 0.75%
SmallCap Equity Fund 1.00% 0.90%
Mighty Mites Fund 1.00% 0.00%
Realty Fund 1.00% 0.00%
Intermediate Bond Fund 0.60% 0.02%
</TABLE>
30
<PAGE>
The Adviser contractually has agreed to waive its investment advisory fees and
reimburse the Funds to the extent necessary to maintain Total Operating Expenses
at certain levels for certain Funds. The fee waiver and expense reimbursement
arrangement will continue until at least September 30, 2000. As of
September 30, 1999, the SmallCap Equity, Mighty Mites, Realty and Intermediate
Bond 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 Manager. 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 the
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 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 through 1996, are jointly responsible for the day-to-day
management of the Realty Fund. 31
<PAGE>
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.
(BULLET) A "front-end sales load," or sales charge, is a one-time fee
charged at the time of purchase of shares. (BULLET) A "contingent deferred
sales charge" ("CDSC") is a one-time fee charged at the time of
redemption. (BULLET) 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.
Front-End Sales Load?
Contingent Deferred Sales Charge?
Rule 12b-1 Fee
Convertible to Another Class?
Fund Expense Levels
Yes. The percentage declines as the amount invested increases.
Yes, for shares redeemed within twenty-four months after purchase as part of an
investment greater than $1 million if no front-end sales charge was paid at the
time of purchase.
0.50% with respect to all Funds except the Intermediate Bond Fund. 0.35% with
respect to the Intermediate Bond Fund.
No.
Lower annual expenses than Class B or Class C Shares.
No.
Yes, for shares redeemed within seventy-two months after purchase. Declines over
time.
1.00%
Yes. Automatically converts to Class A Shares approximately ninety-six months
after purchase.
Higher annual expenses than Class A Shares.
32
<PAGE>
No.
Yes, for shares redeemed within twenty-four months after purchase.
1.00%
No.
Higher annual expenses than Class A Shares.
In selecting a class of shares in which to invest, you should consider:
(BULLET) the length of time you plan to hold the shares
(BULLET) 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
(BULLET) whether you qualify for a reduction or waiver of the Class A
sales charge (BULLET) that Class B shares convert to Class A shares
approximately ninety-six months after purchase
If you...
(BULLET) do not qualify for a reduced or waived front-end sales load and intend
to hold your shares for only a few years
(BULLET) do not qualify for a reduced or waived front-end sales load and intend
to hold your shares for several years (BULLET) do not qualify for a reduced
or waived front-end sales load and intend to hold your shares indefinitely
then you should consider...
purchasing Class C Shares instead of either Class A shares or Class B Shares
purchasing Class B Shares instead of either Class A Shares or Class C Shares
purchasing Class A Shares
Sales Charge -- Class A Shares. The sales charge is imposed on Class A shares at
the time of purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sales Charge Sales Charge Reallowance
as % of the as % of to
Amount of 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 the Adviser 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 have an aggregate value of
$100,000,
33
<PAGE>
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. 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 Gabelli & Company
Inc., the Fund's distributor (the "Distributor") when they first satisfy these
requirements); (6) any unit investment trusts registered under the Investment
Company Act of 1940, as amended (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:
(BULLET) 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
(BULLET) Class B shares within approximately seventy-two months of buying
them (BULLET) Class C shares within approximately twenty-four months of
buying them
34
<PAGE>
The CDSC payable upon redemption of Class A shares and Class C shares in the
circumstances described above is 1%. The CDSC schedule for Class B shares is set
forth below. The CDSC is based on the net asset value at the time of your
investment or the net asset value at the time of redemption, whichever is lower.
Class B shares
Years Since Purchase CDSC
------------------------------- --------------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
The Distributor pays sales commissions of up to 4.00% of the purchase price of
Class B shares of 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
represents reinvestment of dividends or capital gains distributions or capital
appreciation of shares redeemed. When you redeem shares, we will assume that you
are redeeming first shares representing reinvestment of dividends and capital
gains distributions, then any appreciation on shares redeemed, and then
remaining shares held by you for the longest period of time. We will calculate
the holding period of shares acquired through an exchange of shares of another
fund from the date you acquired the original shares of the other fund. The time
you hold shares in a Gabelli-sponsored money market fund, however, will not
count for purposes of calculating the applicable CDSC. We will waive the
CDSC payable upon redemptions of shares for:
(BULLET) redemptions and distributions from retirement plans made after
the death or disability of a shareholder
(BULLET) minimum required distributions made from an IRA or other
retirement plan account after you reach age 59 1/2
(BULLET) involuntary redemptions made by the Funds
(BULLET) a distribution from a tax-deferred retirement plan after your
retirement
(BULLET) returns of excess contributions to retirement plans following
the shareholder's death or disability
Conversion Feature - Class B Shares
(BULLET) 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.
(BULLET) 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.
(BULLET) You will not pay any sales charge or fees when your shares
convert, nor will the transaction be subject to any tax.
35
<PAGE>
(BULLET) 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.
(BULLET) The dollar value of Class A shares you receive will equal the
dollar value of the Class B shares converted.
The Board of Trustees may suspend the automatic conversion of Class B shares to
Class A shares for legal reasons or due to the exercise of its fiduciary duty.
If the Board determines that such suspension is likely to continue for a
substantial period of time, it will create another class of shares into which
Class B shares are convertible.
Rule 12b-1 Plan. The 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:
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
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.
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 directly through registered
broker-dealers or other intermediaries who have selling agreements with Gabelli
& Company, Inc., the Fund's Distributor. The broker-dealer or other
intermediary will transmit a purchase order and payment to State Street Bank and
Trust Company ("State Street") on your behalf. Broker-dealers or other
intermediaries may send you confirmations of your transactions and periodic
account statements showing your investments in the Funds. Share Price.
The Funds sell shares at the "net asset value" next determined after the Funds
receive your completed subscription order form and your payment, subject to a
sales charge in the case of Class A shares. See "Pricing of Fund Shares" for a
description of the calculation of net asset value as described under "Classes of
Shares - Sales Charge Class A Shares." Minimum Investments. Your
minimum initial investment must be at least $1,000. See "Retirement Plans" and
"Automatic Investment Plan" regarding minimum investment amounts applicable to
such plans. There is no minimum for subsequent investments. Broker-dealers may
have different minimum investment requirements. 36
<PAGE>
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 a sponsor to such plans. Fund shares may also be a suitable
investment for other types of qualified pension or profit-sharing plans which
are employer sponsored, including deferred compensation or salary reduction
plans known as "401(k) Plans." The minimum initial investment in all retirement
plans is $250. There is no subsequent investment requirement for retirement
plans. 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. 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 the Funds' management, it is in the
Funds' best interest to do so, (ii) suspend the offering of shares for any
period of time and (iii) waive the Funds' minimum purchase requirement.
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
"Classes 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 or other financial intermediary
that has entered into a selling agreement with the Distributor. The
broker-dealer or financial intermediary will transmit a redemption order to
State Street on your behalf. The redemption request will be effected at the net
asset value next determined (less any applicable CDSC) after State Street
receives the request. If you hold share certificates, you must present the
certificates endorsed for transfer. A broker-dealer may charge you fees for
effecting redemptions for you. In the event that you wish to redeem
shares and you are unable to contact your broker-dealer 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 37
<PAGE>
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 circumstances in which
sales loads 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 or through the
Automatic Investment Plan, you may not receive proceeds from your redemptions
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 request.
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.
EXCHANGE 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 such shares 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.
38
<PAGE>
In effecting an exchange:
(BULLET) you must meet the minimum purchase requirements for the fund
whose shares you purchase through exchange.
(BULLET) if you are exchanging into a fund with a higher sales charge, you
must pay the difference at the time of exchange.
(BULLET) you may realize a taxable gain or loss.
(BULLET) 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).
(BULLET) you should be aware that brokers may charge a fee for handling an
exchange for you. You may exchange shares by telephone, by mail, over the
Internet or through a registered broker-dealer or other financial
intermediary.
(BULLET) 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.
(BULLET) 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.
(BULLET) 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., Eastern 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. 39
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions 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. Dividends
and distributions may differ for different Funds.
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.
40
<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 Class A Shares (formerly
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 fiscal 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 gain on 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 (DAGGER) 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%
- ----------------
(DAGGER) 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 fiscal 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 gain on 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 (DAGGER) 12.20% 2.60% 27.98% 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%
- ----------------
(DAGGER) 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>
42
<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 fiscal 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 gain on investments --
--------
Total distributions (0.05)
Net asset value, end of year $9.34
--------
--------
Total return (DAGGER) (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
(net of waivers/reimbursements) (a) 1.45%
Ratio of operating expenses to average net assets
(before waivers/reimbursements) (b) 4.07%
Portfolio turnover rate 70%
- ----------------
(DAGGER) 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
at the end of the period represents the net asset value on November 8, 1994
</TABLE>
.
<PAGE>
(This page intentionally left blank.)
44
<PAGE>
(This page intentionally left blank.)
The Gabelli Westwood Funds
Gabelli Westwood Equity Fund
Gabelli Westwood Balanced Fund
Gabelli Westwood SmallCapEquity Fund
Gabelli Westwood Mighty Mites Fund
Gabelli Westwood Realty Fund
Gabelli Westwood Intermediate Bond Fund
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 annual reports to shareholders contain additional
information on each of the Fund's investments. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during their 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 review the Funds' reports and SAI at the Public
Reference Room of the Securities and Exchange Commission. Information on the
operation of the Public Reference Room may be obtained by calling
1-202-942-8090. You can get text-only copies:
(BULLET) For a fee, by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102, or by calling 1-202-942-8090, or by
electronic request at the following e-mail address: [email protected].
(BULLET) Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act File Number: 811-04719)
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.)
Questions?
Call 1-800-GABELLI
or your investment representative.
The
Gabelli
Westwood
Funds
Gabelli Westwood Equity Fund
Gabelli Westwood Balanced Fund
Gabelli Westwood SmallCap Equity Fund
Gabelli Westwood Mighty MitesSM 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.
<PAGE>
The Gabelli Westwood Funds Table of Contents Introduction
- --------------------------------------------------------------------------------
3
Investment and Performance Summary
- -------------------------------------------------------------------------------
3 - 24
More Investment and Risk Information
- -------------------------------------------------------------------------------
25
Management of the Funds
- -------------------------------------------------------------------------------
26 - 27
- -------------------------------------------------------------------------------
27 - 28 Purchase of Shares
28 - 29 Redemption of Shares
30 Exchange of Shares
30 Pricing of Fund Shares
31 Dividends and Distributions
31 Tax Information
Financial Highlights
- -------------------------------------------------------------------------------
32 - 37
<PAGE>
INTRODUCTION
The Gabelli Westwood Funds (the "Trust") consists of the following six
separate investment portfolios (the "Funds"): (BULLET) Gabelli Westwood
Equity Fund (the "Equity Fund") (BULLET) Gabelli Westwood Balanced Fund
(the "Balanced Fund") (BULLET) Gabelli Westwood SmallCap Equity Fund (the
"SmallCap Equity Fund") (BULLET) Gabelli Westwood Mighty MitesSM Fund (the
"Mighty Mites Fund") (BULLET) Gabelli Westwood Realty Fund (the "Realty
Fund") (BULLET) 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.
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: Under normal market
conditions, the Fund invests at least 65% of its assets in common stocks and
securities which may be converted into common stocks. The Fund invests in a
portfolio of seasoned companies. Seasoned companies generally have market
capitalizations of $1 billion or more 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.
3
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek growth of capital
(BULLET) 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:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) 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.
4
<PAGE>
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 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. [GRAPHICOMITTED]
EDGARREPRESENTATIONOFDATAPOINTSUSEDINPRINTEDGRAPHIC
GABELLI WESTWOOD EQUITY FUND
1990 -6.3
1991 21.2
1992 6
1993 17.2
1994 2.3
1995 36.9
1996 26.8
1997 29.6
1998 13.1
1999 14.67
During the periods shown in the bar chart, the highest return for a quarter was
15.53% (quarter ended 6/30/97) and the lowest return for a quarter was (10.43)%
(quarter ended 9/30/90).
<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) 14.67% 23.85% 15.44% 15.47%
S&P(R)500 Stock Index(DAGGER) 21.03% 28.54% 18.19% 17.97%
- ------------------------
(DAGGER) The S&P(REGISTRATION MARK) 500 Index is a widely recognized, unmanaged
index of common stock prices. The performance of the Index does not include
expenses or fees.
</TABLE>
5
<PAGE>
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 Fund Operating Expenses 1.49%
-------
-------
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>
6
<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 uses a top down approach in seeking 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 actual mix of assets will vary depending
on the Sub-Adviser's analysis of market and economic conditions. The Fund
invests in stocks of seasoned companies. Seasoned companies generally have
market capitalizations of $1 billion or more 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. There are no
restrictions on the maximum or minimum maturity of any individual security that
the Fund may invest in. 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 rise, the value of the
portfolio's securities generally declines. The magnitude of the decline will
often be greater for longer-term debt securities than shorter-term debt
securities. It is also possible that the issuer of a security will not be able
to make interest and principal payments when due. In addition, investing in
certain types of debt securities involves pre-payment risk. Pre-payment risk is
the risk that the Fund may experience losses when an issuer excercises its right
to pay principal on an obligation held by the Fund (such as a mortgage-backed
security) earlier than expected. 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:
(BULLET) you are a long-term investor
(BULLET) you seek growth of capital and current income
(BULLET) you want participation in market growth with some emphasis
on preserving assets in "down" markets
7
<PAGE>
You may not want to invest in the Fund if:
(BULLET) you seek stability of principal more than growth of capital
(BULLET) 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.
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.
GABELLI WESTWOOD BALANCED FUND
During the periods shown in the bar chart, the highest return for a quarter was
11.43% (quarter ended 6/30/97) and the lowest return for a quarter was (4.69)%
(quarter ended 9/30/98).
[GRAPHICOMITTED]
EDGARREPRESENTATIONOFDATAPOINTSUSEDINPRINTEDGRAPHIC
1992 5.9
1993 16.8
1994 0.1
1995 31.2
1996 18
1997 22.4
1998 11.5
1999 7.75
<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) 7.75% 17.90% 14.31%
S&P 500 Index(DAGGER) 21.03% 28.54% 20.27%
Lehman Brothers Government/
Corporate Bond Index(DAGGER) (2.15)% 7.61% 7.03%
50% S&P(REGISTRATION MARK) 500 Index and 50% Lehman Brothers
Government/Corporate Bond Index(DAGGER) 9.44% 18.08% 13.68%
- ------------------------
(DAGGER) 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 performance of each index does not include
expenses or fees.
</TABLE>
8
<PAGE>
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 Fund Operating Expenses 1.20%
-------
-------
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 $1,445
</TABLE>
9
<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:
(BULLET) an earnings growth rate exceeding the Fund's benchmark, the
Russell 2000 Index (BULLET) an increasing return on equity (BULLET) a low
debt/equity ratio (BULLET) sequential earnings per share and sales growth
(BULLET) a recent positive earnings surprise
Frequently small capitalization companies exhibit one or more of the following
traits:
(BULLET) new products or technologies
(BULLET) new distribution methods
(BULLET) rapid changes in industry conditions due to regulatory or
other developments
(BULLET) 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. 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.
10
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek growth of capital
(BULLET) 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:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) 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.
11
<PAGE>
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. Both the chart and the table assume reinvestment of dividends and
distributions.
GABELLI WESTWOOD SMALLCAP EQUITY FUND
1998 10.6
1999 52.51
During the periods shown in the bar chart, the highest return for a quarter was
28.71% (quarter ended 12/31/98) and the lowest return for a quarter was (18.80)%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
<S> <C> <C>
Since
Average Annual Total Returns Past Inception
(for the periods ended December 31, 1999) One Year (4/15/97)
- ------------------------------------------------------------------- ------------- ------------
The Gabelli Westwood SmallCap Equity Fund
Class AAA Shares (formerly known as
Retail Class Shares) 52.51% 36.78%
Russell 2000 Index(DAGGER) 21.26% 17.02%
- ------------------------
(DAGGER) 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>
12
<PAGE>
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 Fund Operating Expenses 1.72%
-------
Fee Waiver and Expense Reimbursement* 0.22%
-------
Net Annual Operating Expenses* 1.50%
-------
-------
* The Adviser contractually has 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.
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
--------- --------- --------- -----------
$153 $520 $913 $2,012
</TABLE>
13
<PAGE>
GABELLI WESTWOOD MIGHTY MITESSM FUND
Investment Objective:
The Gabelli Westwood Mighty Mites 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:
(BULLET) have above-average sales and earnings growth prospects
(BULLET) have improving balance sheet fundamentals given the current
status of economic and business cycles (BULLET) are undervalued and may
significantly appreciate due to management changes, stock acquisitions,
mergers, reorganizations, tender offers, spin-offs or other significant events
(BULLET) 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. Micro-cap companies are generally not well-known to investors
and have less of an investor following than larger companies. The Adviser will
attempt to capitalize on the lack of analyst attention to micro-cap stocks and
the inefficiency of the micro-cap market. 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.
14
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek long-term growth of capital
(BULLET) 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:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) 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.
15
<PAGE>
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. Both the chart and the table assume reinvestment of dividends and
distributions.
GABELLI WESTWOOD MIGHTY MITES EQUITY FUND
[GRAPHICOMITTED]
EDGARREPRESENTATIONOFDATAPOINTSUSEDINPRINTEDGRAPHIC
1999 36.45
During the periods shown in the bar chart, the highest return for a quarter was
17.87% (quarter ended 6/30/99) and the lowest return for a quarter was (0.45)%
(quarter ended 3/31/99).
<TABLE>
<CAPTION>
<S> <C> <C>
Since
Average Annual Total Returns Past Inception
(for the periods ended December 31, 1999) One Year (5/11/98)
- ------------------------------------------------------------------- ------------- ------------
The Gabelli Westwood Mighty Mites Fund
Class AAA Shares (formerly known as
Retail Class Shares) 36.45% 28.82%
Russell 2000 Index(DAGGER) 21.26% 4.06%
- ------------------------
(DAGGER) 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>
16
<PAGE>
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 Fund Operating Expenses 2.32%
-------
Fee Waiver and Expense Reimbursement* 0.82%
-------
Net Annual Operating Expenses* 1.50%
-------
-------
* The Adviser contractually has 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. 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
--------- --------- --------- -----------
$153 $646 $1,166 $2,593
</TABLE>
17
<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. 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: Under normal market conditions, the Fund invests at least
65% of its assets in the securities of publicly traded real estate investment
trusts ("REITs") 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
database model to rank various growth, value and management characteristics of a
universe of REITs and then follows the ranking process with in-depth fundamental
research. Securities considered for purchase have:
(BULLET) attractive rankings based on the Sub-Adviser's database model
(BULLET) assets in regions with favorable demographic trends (BULLET)
assets in sectors with attractive long-term fundamentals (BULLET) issuers
with strong management teams and/or (BULLET) 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.
18
<PAGE>
Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek current income as well as growth of capital
(BULLET) you seek to invest in a market which does not correlate
directly with other equity markets (BULLET) 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:
(BULLET) you are conservative in your investment approach
(BULLET) 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.
19
<PAGE>
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. Both the chart and the table assume reinvestment of dividends and
distributions.
GABELLI WESTWOOD REALTY FUND
[GRAPHICOMITTED]
EDGARREPRESENTATIONOFDATAPOINTSUSEDINPRINTEDGRAPHIC
"1998" -15.2
"1999" -2.7
During the periods shown in the bar chart, the highest return for a quarter was
12.58% (quarter ended 6/30/99) and the lowest return for a quarter was (10.29)%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
<S> <C> <C>
Since
Average Annual Total Returns Past Inception
(for the periods ended December 31, 1999) One Year (09/30/97)
- ------------------------------------------------------------------- ------------- ------------
The Gabelli Westwood Realty Fund
Class AAA Shares (formerly known as
Retail Class Shares) (2.70)% (6.44)%
Russell 2000 Index(DAGGER) (21.26)% (6.08)%
NAREIT All REIT Index(DAGGER) (6.48)% (10.63)%
- ------------------------
(DAGGER) 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 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 performance of the indices do not include
expenses or fees.
</TABLE>
20
<PAGE>
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 Fund Operating Expenses 3.68%
-------
Fee Waiver and Expense Reimbursement* 2.18%
-------
Net Annual Operating Expenses* 1.50%
-------
-------
* The Adviser contractually has 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.
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
--------- --------- --------- -----------
$153 $924 $1,717 $3,791
</TABLE>
21
<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 ratings 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
and 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 rise, the value of the portfolio's
securities generally declines. The magnitude of the decline will often be
greater for longer-term debt securities than shorter-term debt securities. It is
also possible that the issuer of a security will not be able to make interest
and principal payments when due. Investing in certain types of debt securities
involves pre-payment risk. Pre-payment risk is the risk that the Fund may
experience losses when an issuer exercises its right to pay principal on an
obligation held by the Fund (such as a mortgage-backed security) earlier than
expected. 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 you invested in the
Fund. Who May Want to Invest: The Fund may appeal to you if:
(BULLET) you are seeking current income consistent with the maintenance of
principal and liquidity (BULLET) you are conservative in your investment
approach (BULLET) you are seeking exposure to investment grade bonds as
part of your overall investment strategy
You may not want to invest in the Fund if:
(BULLET) you seek growth of capital
(BULLET) 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.
22
<PAGE>
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.
GABELLI WESTWOOD INTERMEDIATE BOND FUND
1992 6.1
1993 10.5
1994 -5.6
1995 16.2
1996 3.7
1997 10.7
1998 6.6
1999 -2.4
During the periods shown in the bar chart, the highest return for a quarter was
5.27% (quarter ended 6/30/95) and the lowest return for a quarter was (3.74)%
(quarter ended 3/31/94)
<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) (2.40)% 6.75% 5.96%
Lehman Brothers Government/Corporate
Bond Index(DAGGER) (2.15)% 7.61% 7.03%
- ------------------------
(DAGGER) 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>
23
<PAGE>
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 0.60%
Distribution (Rule 12b-1) Expenses 0.25%
Other Expenses* 0.78%
-------
Total Annual Fund Operating Expenses 1.63%
------
Fee Waiver and Expense Reimbursement* 0.63%
-------
Net Annual Operating Expenses* 1.00%
-------
-------
* The Adviser contractually has 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. 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
--------- --------- --------- -----------
$102 $453 $827 $1,880
</TABLE>
24
<PAGE>
MORE INVESTMENT AND RISK INFORMATION
INVESTMENTTECHNIQUES
The Funds may also use the following investment technique:
(BULLET) Defensive Investments. 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:
(BULLET) Equity Risk. Equity Fund, Balanced Fund, SmallCap Equity Fund,
Mighty Mites Fund and 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.
(BULLET) Interest Rate Risk, Maturity Risk and Credit Risk. Balanced Fund,
Intermediate Bond Fund and 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. The
magnitude of the decline will often be greater for longer-term debt securities
than shorter-term debt securities. It is also possible that the issuer of a
security will not be able to make interest and principal payments when due.
(BULLET) Pre-Payment Risk. Balanced Fund and Intermediate Bond Fund -- A
Fund may experience losses when an issuer exercises its right to pay principal
on an obligation held by the Fund (such as a mortgage-backed security) earlier
than expected. This may happen during a period of declining interest rates.
Under these circumstances, the Fund may be unable to recoup all of its initial
investment and will suffer from having to invest in lower yielding securities.
The loss of higher yielding securities and the reinvestment at lower interest
rates can reduce the Fund's income, total return and share price.
(BULLET) Fund and Management Risk. If the Fund's manager's judgment in
selecting securities is wrong 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.
(BULLET) Small- and Micro-Capitalization Company Risk. SmallCap
Equity Fund and Mighty Mites Fund -- Although small-cap and
micro-capitalization companies may offer greater potential for capital
appreciation than larger companies, 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. 25
<PAGE>
(BULLET) 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 ("NYSE").
As compensation for its services and the related expenses the Adviser bears, the
Adviser is entitled to an advisory fee, computed daily and payable monthly, at
annual rates set forth in the table below. The table also reflects the advisory
fees (after voluntary waivers) paid by the Funds for the fiscal year ended
September 30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Advisory Fee Paid for
Annual Advisory Fee-Contractual Rate Fiscal Year Ended 9/30/99
Fund (as a percentage of average daily net assets)(as a percentage of average daily net assets)
- ----- -----------------------------------------------------------------------------------------------
Equity Fund 1.00% 1.00%
Balanced Fund 0.75% 0.75%
SmallCap Equity Fund 1.00% 0.90%
Mighty MitesSM Fund 1.00% 0.00%
Realty Fund 1.00% 0.00%
Intermediate Bond Fund 0.60% 0.02%
</TABLE>
The Adviser contractually has agreed to waive its investment advisory fees and
reimburse expenses to the extent necessary to maintain the Total Operating
Expenses at certain levels for certain Funds. The fee waiver and expense
reimbursement arrangement will continue until at least September 30, 2000.
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 Manager.
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
26
<PAGE>
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 the 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 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 through 1996, are jointly
responsible for the day-to-day management of the Realty Fund. 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
Funds' transfer agent or through registered broker-dealers.
(BULLET) 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.
(BULLET) 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:
27
<PAGE>
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. Share Price.
The Funds sell their Class AAA shares at the net asset value next determined
after the Funds receive your completed subscription order forms and your
payment. See "Pricing of Fund Shares" for a description of the calculation of
the net asset value. Minimum Investments. Your minimum initial investment must
be at least $1,000. See "Retirement Plans" and "Automatic Investment Plan"
regarding minimum investment amounts applicable to such plans. There is no
minimum for subsequent investments. Broker-dealers may have different minimum
investment requirements. Retirement Plans. The 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 a sponsor to such plans. Fund
shares may also be a suitable investment for other types of qualified pension or
profit-sharing plans which are employer sponsored, including deferred
compensation or salary reduction plans known as "401(k) Plans." The minimum
initial investment in all retirement plans is $250. There is no subsequent
investment requirement for retirement plans. 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 or
Internet Investment Plan. You may purchase additional shares of the Funds by
telephone and/or over the Internet 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 or Internet investment. To initiate an ACH
purchase, please call 1-800-GABELLI (1-800-422-3554) or 1-800-872-5365 or visit
our website at www.gabelli.com. General. 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 the Funds' management, it is in the
Funds' best interest to do so, (ii) suspend the offering of shares for any
period of time and (iii) waive the Funds' minimum purchase requirement.
28
<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 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. (BULLET) 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.
(BULLET) By Telephone or the Internet. 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) or by visiting our website at
www.gabelli.com, subject to a $25,000 limitation. You may not redeem shares held
through an IRA by telephone or the Internet. If State Street properly acts on
telephone or Internet instructions and follows reasonable procedures to protect
against unauthorized transactions, neither State Street nor the Fund will be
responsible for any losses due to telephone or Internet transactions. You may be
responsible for any fraudulent telephone or Internet order as long as State
Street or the Fund takes reasonable measures to verify the order. You may
request that redemption proceeds be mailed to you by check (if your address has
not changed in the prior 30 days), forwarded to you by bank wire or invested in
another mutual fund advised by the Adviser (see "Exchange of Shares" below).
1. Telephone or Internet Redemption By Check. Each Fund will make checks
payable to the name in which the account is registered and normally will mail
the check to the address of record within seven days.
2. Telephone or Internet Redemption By Bank Wire. Each Fund accepts
telephone or Internet requests for wire redemption in amounts of at least
$1,000. Each Fund will send a wire to either a bank designated on your
subscription order form or on a subsequent letter with a guaranteed signature.
The proceeds are normally wired on the next Business Day.
(BULLET) 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 29
<PAGE>
shares by check or through the Automatic Investment Plan, you may not receive
proceeds from your redemptions until the check clears, which may take up to 15
days following purchase. While the Funds will delay the processing of the
redemption until the check clears, your shares will be valued at the next
determined net asset value after receipt of your redemption request. 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.
EXCHANGE 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: (BULLET) you must meet the minimum purchase
requirements for the fund whose shares you purchase through exchange. (BULLET)
if you are exchanging into shares of a fund with a higher sales charge, you must
pay the difference at the time of exchange. (BULLET) you may realize a taxable
gain or loss. (BULLET) 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). (BULLET) you should be aware that brokers may charge a fee for
handling an exchange for you. You may exchange shares by telephone or mail.
(BULLET) Exchange by Telephone. You may give exchange instructions by telephone
by calling 1-800-GABELLI (1-800-422-3554). You may not exchange shares by
telephone if you hold share certificates. (BULLET) Exchange 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. (BULLET) Exchange 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 preced
30
<PAGE>
ing 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., Eastern 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 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. Dividends
and distributions may differ for different Funds.
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.
31
<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 rates that an investor would
have earned or lost on an investment in each Fund's Class AAA Shares (formerly
Retail 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 AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each fiscal 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 $ 5.59 $ 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(DAGGER) 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%
</TABLE>
- ----------------
(DAGGER) 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.
32
<PAGE>
GABELLI WESTWOOD BALANCED FUND
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each fiscal 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(DAGGER) 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%
</TABLE>
- ----------------
(DAGGER) 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.
33
<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 fiscal 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(DAGGER) 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 178% 200% 146%
</TABLE>
- ----------------
(DAGGER) 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.
34
<PAGE>
GABELLI WESTWOOD MIGHTY MITESSM FUND
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each fiscal 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(DAGGER) 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%
</TABLE>
- ----------------
(DAGGER) 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 1.00% 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.
35
<PAGE>
GABELLI WESTWOOD REALTY FUND
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each fiscal 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(DAGGER) (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%
</TABLE>
- ----------------
(DAGGER) 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 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.
<PAGE>
36
<PAGE>
THE GABELLI WESTWOOD INTERMEDIATE BOND FUND
Per share amounts for the Fund's Class AAA Shares (formerly known as Retail
Class Shares) outstanding throughout each fiscal 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)on investments (0.75) 0.45 0.41 (0.10) 0.50
------------ ------------ ------------ ------------------------
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(DAGGER) (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%
</TABLE>
- ----------------
(DAGGER) 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 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. 37
<PAGE>
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<PAGE>
(This page intentionally left blank.)
<PAGE>
The Gabelli Westwood Funds
Gabelli Westwood Equity Fund
Gabelli Westwood Balanced Fund
Gabelli Westwood SmallCapEquity Fund
Gabelli Westwood Mighty Mites Fund
Gabelli Westwood Realty Fund
Gabelli Westwood Intermediate Bond Fund
Class AAA 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 annual reports to shareholders contain additional
information on each of the Fund's investments. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during their 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 review the Funds' reports and SAI at the Public Reference
Room of the Securities and Exchange
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
Commission. Information on the operation of the Public Reference Room can be
obtained by calling 1-202-942-8090.You can get text-only copies:
(BULLET) For a fee, by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102, or by calling 1-202-942-8090, or by
electronic request at the following e-mail address: [email protected].
(BULLET) Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act file no. 811-4719)
<PAGE>
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.)
Questions?
Call 1-800-GABELLI
or your investment representative.
<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
Page
General Information and History........................................... 2
Investment Objectives and Management Policies.............................. 2
Management of the Funds.................................................... 18
Control Persons and Principal Shareholders................................. 21
Investment Advisory and Other Services..................................... 23
Distribution Plans......................................................... 27
Purchase and Redemption of Shares........................................... 28
Determination of Net Asset Value........................................... 29
Shareholder Services....................................................... 29
Dividends, Distributions and Taxes......................................... 30
Performance Information.................................................... 32
Information About the Funds............................................... 34
Financial Statements........................................................ 35
Appendix................................................................... 36
<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.
<PAGE>
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 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.
<PAGE>
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.
<PAGE>
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 their 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 their investment objectives or for the purpose of
hedging their 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.
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 those
relating to indexes, as described below.
A Fund's commodities transactions must constitute bona fide hedging or
other permissible transactions pursuant to regulations promulgated by the
Commodity Futures Trading Commission (the "CFTC"). In addition, a Fund may not
engage in such activities if the sum of the amount of initial margin deposits
and premiums paid for unexpired commodity options would exceed 5% of the fair
market value of a Fund's assets, after taking into account unrealized profits
and unrealized losses on such contracts it has entered into, provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%.
In connection with its futures transactions, a Fund will establish and
maintain at its custodian bank or qualified futures commission merchant a
segregated account consisting of cash or other high quality liquid securities as
determined by the Board of Trustees in an amount generally equal to the market
value of the underlying commodity less any amount deposited as margin. The
segregation of such assets will not have the effect of limiting a Fund's ability
to otherwise invest those assets.
Initially, when purchasing or selling futures contracts, a Fund will be
required to deposit with its custodian in the broker's name an amount of cash or
cash equivalents equal to approximately 5% to 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and is
in the nature of a performance bond or good faith deposit on the contract which
is returned to a Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." At any time prior to the expiration of a futures contract,
a Fund may elect to close the position by taking an opposite position at the
then prevailing price, which will operate to terminate the Fund's existing
position in the contract.
Although a Fund will intend to purchase or sell futures contracts only
if there is an active market for such contracts, no assurance can be given that
a liquid market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. Futures contract prices could move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially subjecting a
Fund to substantial losses. If it is not possible or a Fund determines not to
close a futures position in anticipation of adverse price movements, the Fund
will be required to make daily cash payments of variation margin. In such
circumstances, an increase in the value of the portion of the portfolio being
hedged, if any, may offset partially or completely losses on the futures
contract. However, no assurance can be given that the price of the securities
being hedged will correlate with the price movements in a futures contract and
thus provide an offset to losses on the futures contract.
In addition, due to the risk of an imperfect correlation between securities
in the Fund's portfolio that are the subject of a hedging transaction and the
futures contract used as a hedging device, it is possible that the hedge will
not be fully effective in that, for example, losses on the portfolio securities
may be in excess of gains on the futures contract or losses on the futures
contract may be in excess of gains on the portfolio securities that were the
subject of the hedge. In futures contracts based on indexes, the risk of
imperfect correlation increases as the composition of the Fund's portfolio
varies from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being hedged
and movements in the price of futures contracts, a Fund may buy or sell futures
contracts in a greater or lesser dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the futures contract has
been less or greater than that of the securities. Such "over hedging" or "under
hedging" may adversely affect a Fund's net investment results if market
movements are not as accurately anticipated when the hedge is established.
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.
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.
<PAGE>
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.
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.
<PAGE>
Illiquid Securities and Rule 144A Securities (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.
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 to 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
this 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 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.
<PAGE>
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 this SAI.
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. This 25% limitation does
not apply to the Realty Fund's investments in companies engaged in real estate.
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.
<PAGE>
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.
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 $15,750 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.
<PAGE>
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 $ 4,500 $ 94,750 (18)
Karl Otto Pohl, Trustee $ 2,250 $ 25,250 (19)
Werner Roeder, M.D., Trustee $ 4,500 $ 32,734 (11)
James P. Conn, Trustee $ 4,500 $ 54,500 (6)
* 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, (48) 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, (36) 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 January 7, 2000, the Officers and Trustees of the Funds, as a
group, owned 1.24% of the Intermediate Bond Fund, 6.75% of the Realty Fund and
1.37% of the SmallCap Equity Fund. The Officers and Trustees of the Funds, as a
group, owned less than 1% of each of the remaining Funds.
<PAGE>
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
The following persons were known by the Funds to own of record 5% or
more of the outstanding voting securities of any Fund on January 7, 2000:
Name and Address of Holder of Record Percentage of Fund
Equity Fund
Class AAA
Charles Schwab & Co., Inc. 38.10%*
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Class A
Southwest Securities Inc. 13.82%
FBO Kenneth R. Reiser
& Caroline P. Reiser
Acct. 69021986
P.O. Box 509002
Dallas, TX 75250-9002
Billy M. Willis 6.45%
1118 Victoria
Nacogdoches, TX 75961-3056
Balanced Fund
Class A
Charles Schwab & Co., Inc. 48.29%*
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Southwest Securities Inc. 5.98%
FBO Yarborough Investments LP
Acct. 87475087
P.O. Box 509002
Dallas, TX 75250-9002
SmallCap Equity Fund
Class AAA
Wendel & Co. 45.94%*
A/C #659115
c/o Bank of New York
Attn: Ellen Whalen
1 Wall St.
New York, NY 10005-2500
TCTCO 6.60%
300 Crescent Court, Suite 1300
Dallas, TX 75201-7853
Charles Schwab & Co., Inc. 5.89%
Special Custody Acct.
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
Christina Mattin TTEE & 5.83%
Michael Penniman TTEE
Christina Mattin FAM 1995
CHAR REMAIN UNTRST B DTD 9-1-95
Attn: Anthony Colavita, Sr.
575 White Plains Rd.
Eastchester, NY 10709-5500
Christina Mattin 5.83%
Michael Penniman TTEE
Christina Mattin FAM 1995
CHAR REMAIN UNTRST A DTD 9-1-95
Attn: David P. Geis
1 North Broadway
White Plains, NY 10601-2310
Mighty Mites Fund
Class AAA
Gabelli Funds, Inc. 20.77%
Attn: John Fodera
One Corporate Center
Rye, NY 10580-1442
Gabelli Asset Management Inc. 10.49%
Attn: Robert Zuccaro
401 Theodore Fremnd Ave.
Rye, NY 10580-1422
Charles Schwab & Co., Inc. 9.62%
Reinvest Account
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Realty Fund
Class AAA
TCTCO 20.82%
300 Crescent Court, Suite 1300
Dallas, TX 75201-7838
Charles Schwab & Co., Inc. 6.56%
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Margaret Byrne McKenzie 5.45%
118 John Street
Greenwich, CT 06831-2649
Westwood Management Corporation 5.45%
Attn: Jackie Finley
300 Crescent Court, Suite 1300
Dallas, TX 75201-7838
<PAGE>
Intermediate Bond Fund
Class AAA
Southwest Securities Inc. 30.53%*
FBO Guaranty & Trust Co.
P.O. Box 509002
Dallas, TX 75250-9002
Westwood Trust 17.84%
Corporate Account
300 Crescent Court, Suite 1300
Dallas, TX 75201-7838
* Beneficial ownership is disclaimed.
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
$9.4 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 $230 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 $1.4 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. As of December 31, 1999,
Westwood Management Corporation had $1.9 billion in separate accounts, including
those for endowments, corporations and institutions.
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 R. 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Advisory Fees Earned and Advisory Fees Waived
and Expenses Reimbursed by Gabelli Advisers, Inc.
For the Year Ended September 30,
1999 1998 1997
------------------------------- ------------------------------ ---------------------------
Fees Waived Fees Waived Fees Waived
and and and
Expenses Expenses Expenses
Reimbursed Reimbursed Reimbursed
Earned Earned Earned
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.
<PAGE>
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-Adviser did
not allocate brokerage commissions on portfolio transactions during the fiscal
year ended September 30, 1999 to any broker-dealers for research services
provided 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
</TABLE>
* None of these amounts were paid to affiliates except for the Mighty
Mites Fund, which paid $3,517 to affiliates, which is 15.06% of total
commissions paid, or 0.42% of the aggregate dollar amount of
transactions involving commissions paid to affiliates.
<PAGE>
Sub-Administrator
PFPC Inc. (formerly known as First Data Investor Services Group, Inc.)
(the "Sub-Administrator"), a majority-owned subsidiary of PNC Bank Corp., which
is located at 101 Federal Street, Boston, Massachusetts 02110, 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.
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 $12,963 and $34,941 in sales charges for sales of Service Class
shares of the Equity Fund and the Balanced Fund, respectively. Of those amounts,
$1,620 and $4,838 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 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
Trustees 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 by 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 $1,012,407. Of this
amount, $2,200 was spent on advertising, $175,200 was spent on printing, postage
and stationery, $36,100 on overhead support expenses, $208,700 on salaries of
personnel of the Distributor and $590,207 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 their 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 their 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 Funds 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.
<PAGE>
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 applicable sales charge with respect to
the newly acquired shares is reduced as a result of having incurred the sales
charge initially. Instead, the portion of the sales charge affected by this rule
will be treated as a sales charge paid for the new shares.
<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.
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 5.01%.
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)% (5.7)% 39.61% 33.75%
Balanced 12.56% 7.68% 2.8% (1.5)% 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
</TABLE>
* 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>
<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, Realty and Intermediate Bond 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.
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.
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.
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. 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, is filed herein.
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, is filed herein.
Investment Advisory Agreement between the Registrant, on behalf of
the Gabelli Westwood Mighty Mites(sm) Fund, and Gabelli Advisers,
Inc., dated May 11, 1998, is filed herein.
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, is filed herein.
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, is filed herein.
Form of Contractual Advisory Fee and Expense Reimbursement Agreement
Is filed herein.
(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.
Form of Amended and Restated Distribution Agreement between the Registrant
and Gabelli & Company, Inc. is filed herein.
(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.
(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 and Opinion of Battle Fowler LLP, Trust counsel, dated
January 31, 2000, is filed herein.
(j) Consent of PricewaterhouseCoopers LLP, Independent Accountants, dated
January 27, 2000, is filed herein.
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 is filed herein.
(m) Amended and Restated Plan of Distribution pursuant to Rule 12b-1
relating to Class AAA Series Shares, dated November 16, 1999, is
incorporated by reference to Post-Effective Amendment No. 21 to
the Registration Statement on Form N-1A, as filed on December 1,
1999 ("Post-Effective Amendment No. 21").
Amended and Restated Plan of Distribution pursuant to Rule 12b-1
relating to Class A Series Shares, dated November 16, 1999, is
incorporated by reference to Post-Effective No. 21.
Plan of Distribution pursuant to Rule 12b-1 relating to Class A
Series Shares, dated November 16, 1999, is incorporated by
reference to Post-Effective No. 21.
Plan of Distribution pursuant to Rule 12b-1 relating to Class B
Series Shares, dated November 16, 1999, is incorporated by
reference to Post-Effective No. 21.
Plan of Distribution pursuant to Rule 12b-1 relating to Class C
Series Shares, dated November 16, 1999, is incorporated by
reference to Post-Effective No. 21.
(n) Amended and Restated Rule 18f-3 Multi-Class Plan, dated November 16,
1999, is incorporated by reference to Post-Effective Amendment No. 21.
(o) 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 Growth 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. PFPC Inc. (formerly known as First Data Investor Services
Group, Inc.)
101 Federal Street
Boston, Massachusetts 02110
4. PFPC Inc. (formerly known as 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.
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, certifies that it meets all of the requirements for effectiveness of this
Post Effective Amendment to its Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933, as amended, and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rye and
State of New York on the 28th day of January, 2000.
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 its 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 January 28, 2000
- -------------------------------
Susan M. Byrne Principal Executive Officer
Anthony J. Colavita* Trustee January 28, 2000
Anthony J. Colavita
James P. Conn* Trustee January 28, 2000
James P. Conn
Werner Roeder, M.D.* Trustee January 28, 2000
- -------------------------------
Werner Roeder, M.D.
Karl Otto Pohl* Trustee January 28, 2000
Karl Otto Pohl
*By: /s/ Bruce N. Alpert
Bruce N. Alpert
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(d) Investment Advisory Agreement dated October 6, 1994
(d) Investment Advisory Agreement dated February 25, 1997
(d) Investment Advisory Agreement dated May 11, 1998
(d) Investment Sub-Advisory Agreement dated October 6, 1994
(d) Investment Sub-Advisory Agreement dated February 25, 1997
(d) Form of Contractual Advisory Agreement and Expense
Reimbursement Agreement
(e) Form of Amended and Restated Distribution Agreement
(i) Consent and Opinion of Trust counsel
(j) Consent of Independent Accountants
(l) Purchase Agreement for Class A Series Shares, Class B
Series Shares and Class C Series
Shares
<PAGE>
EXHIBIT (d)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated October 6, 1994, between The
Westwood Funds and its four series, the Equity Fund, the Cash Management Fund,
the Intermediate Bond Fund and the Balanced Fund (the "Trust" and the "Funds,"
respectively), a Massachusetts business trust, and Teton Advisers, LLC (the
"Adviser"), a Texas limited liability company.
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust and the Funds with respect to the investment of
the assets of the Trust allocated to the Funds and to supervise and arrange the
purchase and sale of assets held in the investment portfolios of the Funds. The
Adviser may delegate any or all of its responsibilities to one or more
sub-advisers or administrators, subject to the approval of the Board of Trustees
of the Trust. Such delegation shall not relieve the Adviser of its duties and
responsibilities hereunder.
2. Duties and obligations of the Adviser with respect to
investment of assets of the Funds
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of each Fund's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Funds and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Funds; (ii)
arrange for the purchase and sale of securities and other assets held in the
investment portfolio of each Fund and (iii) oversee the administration of all
aspects of each Fund's business and affairs and provide, or arrange for others
whom it believes to be competent to provide, certain services as specified in
subparagraph (b) below. Nothing contained herein shall be construed to restrict
the Trust's right to hire its own employees or to contract for administrative
services to be performed by third parties, including but not limited to, the
calculation of the net asset value of each Fund's shares.
(b) The specific services to be provided or arranged for by
the Adviser for the Funds are (i) maintaining each Fund's books and records,
such as journals, ledger accounts and other records in accordance with
applicable laws and regulations to the extent not maintained by each Fund's
custodian, transfer agent and dividend disbursing agent; (ii) transmitting
purchase and redemption orders for each Fund's shares to the extent not
transmitted by each Fund's distributor or others who purchase and redeem shares;
(iii) initiating all money transfers to each Fund's custodian and from each
Fund's custodian for the payment of each Fund's expenses, investments, dividends
and share redemptions; (iv) reconciling account information and balances among
each Fund's custodian, transfer agent, distributor, dividend disbursing agent
and the Adviser; (v) providing the Funds, upon request, with such office space
and facilities, utilities and office equipment as are adequate for each Fund's
needs; (vi) preparing, but not paying for, all reports by the Trust, on behalf
of each Fund, to their shareholders and all reports and filings required to
maintain the registration and qualification of each Fund's shares under federal
and state law including periodic updating of the Trust's registration statement
and Prospectus (including its Statement of Additional Information); (vii)
supervising the calculation of the net asset value of each Fund's shares; and
(viii) preparing notices and agendas for meetings of each Fund's shareholders
and the Trust's Board of Trustees as well as minutes of such meetings in all
matters required by applicable law to be acted upon by the Board of Trustees.
(c) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Articles of Incorporation and By-Laws of the Trust,
as such documents are amended from time to time; (iv) the investment objectives,
policies and restrictions applicable to the Funds as set forth in the Trust's
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust with respect to the Funds.
(d) The Adviser will seek to provide qualified personnel to
fulfill its duties hereunder and will bear all costs and expenses (including any
overhead and personnel costs) incurred in connection with its duties hereunder
and shall bear the costs of any salaries or trustees fees of any officers or
trustees of the Trust who are affiliated persons (as defined in the Act) of the
Adviser. If in any fiscal year any Fund's aggregate expenses (excluding
interest, taxes, distribution expenses, brokerage commissions and extraordinary
expenses) exceed the most restrictive expense limitation imposed by the
securities law of any state in which the shares of that Fund are registered or
qualified for sale, the Adviser will reimburse the Trust for the amount of such
excess up to the amount of fees accrued for such fiscal year hereunder. The
amount of such reimbursement shall be calculated monthly and an appropriate
amount shall be held back or released to the Adviser each month so that the
aggregate amount held back at any particular time shall equal the net amount of
the reimbursement on a cumulative year-to-date basis. As of the end of the year,
the final amount of the total reimbursement shall be calculated and the
appropriate amount released to the Funds or the Adviser or paid to the Funds by
the Adviser. Subject to the foregoing, the Trust shall be responsible for the
payment of all the Funds' other expenses, including (i) payment of the fees
payable to the Adviser under paragraph 4 hereof; (ii) organizational expenses;
(iii) brokerage fees and commissions; (iv) taxes; (v) interest charges on
borrowings; (vi) the cost of liability insurance or fidelity bond coverage for
the Trust officers and employees, and trustees' and officers' errors and
omissions insurance coverage; (vii) legal, auditing and accounting fees and
expenses; (viii) charges of the Funds' custodian, transfer agent and dividend
disbursing agent; (ix) the Funds' pro rata portion of dues, fees and charges of
any trade association of which the Trust is a member; (x) the expenses of
printing, preparing and mailing proxies, share certificates and reports,
including each Fund's prospectuses and statements of additional information, and
notices to shareholders; (xi) filing fees for the registration or qualification
of each Fund and its shares under federal or state securities laws; (xii) the
fees and expenses involved in registering and maintaining registration of each
Fund's shares with the Securities and Exchange Commission; (xiii) the expenses
of holding shareholder meetings; (xiv) the compensation, including fees, of any
of the Trust's trustees, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing each Fund's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing each Fund's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions and all other distribution
expenses payable by the Trust; and (xvii) litigation and other extraordinary or
non-recurring expenses and other expenses properly payable by the Funds.
(e) The Adviser shall give the Funds the benefit of its best
judgment and effort in rendering services hereunder, but neither the Adviser nor
any of its officers, trustees, employees, agents or controlling persons shall be
liable for any act or omission or for any loss sustained by the Funds in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Adviser or any
Trustee, officer, employee or other affiliate thereof from acting as investment
adviser for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Adviser or any
of its trustees, officers, employees or agents from buying, selling or trading
any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting.
3. Portfolio Transactions
In the course of the Adviser's execution of portfolio transactions for
the Funds, it is agreed that the Adviser shall employ securities brokers and
dealers which, in its judgment, will be able to satisfy the policy of the Funds
to seek the best execution of its portfolio transactions at reasonable expenses.
For purposes of this agreement, "best execution" shall mean prompt, efficient
and reliable execution at the most favorable price obtainable. Under such
conditions as may be specified by the Trust's Board of Trustees in the interest
of its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale of each
Fund's portfolio securities with its affiliates including Gabelli & Company,
Inc.; (b) pay commissions to brokers other than its affiliates which are higher
than might be charged by another qualified broker to obtain brokerage and/or
research services considered by the Adviser to be useful or desirable in the
performance of its duties hereunder and for the investment management of other
advisory accounts over which it or its affiliates exercise investment
discretion; and (c) consider sales by brokers (other than its affiliated
distributor) of shares of the Funds and any other mutual fund for which it or
its affiliates act as investment adviser, as a factor in its selection of
brokers and dealers for each Fund's portfolio transactions.
<PAGE>
4. Compensation of the Adviser
(a) Subject to paragraph 2(b), the Trust agrees to pay to the
Adviser out of each Fund's assets and the Adviser agrees to accept as full
compensation for all services rendered by or through the Adviser (other than any
amounts payable to the Adviser pursuant to paragraph 4(b)), a fee computed daily
and payable monthly in an amount equal on an annualized basis to 1.00% for
Equity Fund, .50% for Cash Management Fund, .60% for Intermediate Bond Fund and
.75% for Balanced Fund of each Fund's daily average net asset value. For any
period less than a month during which this Agreement is in effect, the fee shall
be prorated according to the proportion which such period bears to a full month
of 28, 29, 30 or 31 days, as the case may be.
(b) The Trust will pay the Adviser or the distributor
separately for any costs and expenses incurred by the Adviser or the distributor
in connection with distribution of each Fund's shares in accordance with the
terms (including proration or nonpayment as a result of allocations of payments)
of a Plan of Distribution (the "Plan") adopted for each Fund pursuant to Rule
12b-1 under the Act as such Plan may be in effect from time to time; provided,
however, that no payments shall be due or paid to the Adviser or the Distributor
hereunder unless and until this Agreement shall have been approved by Trustee
Approval and Disinterested Trustee Approval (as such terms are defined in such
Plan). The Trust reserves the right to modify or terminate such Plan at any time
as specified in the Plan and Rule 12b-1, and this subparagraph shall thereupon
be modified or terminated to the same extent without further action of the
parties. The persons authorized to direct the payment of the funds pursuant to
this Agreement and the Plan shall provide to the Trust's Board of Trustees, and
the Trustees shall review, at least quarterly, a written report of the amount so
paid and the purposes for which such expenditures were made.
(c) For purposes of this Agreement, the net assets of the Fund
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the net asset value of each Fund's shares.
5. Indemnity
(a) The Trust hereby agrees to indemnify the Adviser and each
of the Adviser's subadvisers, trustees, officers, employees, and agents
(including any individual who serves at the Adviser's request as trustee,
officer, partner, trustee or the like of another corporation) and controlling
persons of each of them (each such person being an "indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable corporate law) reasonably incurred by such indemnitee
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court of administrative or
investigative body in which he may be or may have been involved as a party or
otherwise or with which he may be or may have been threatened, while acting in
any capacity set forth above in this paragraph or thereafter by reason of his
having acted in any such capacity, except with respect to any matter as to which
he shall have adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust and furthermore, in
the case of any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence (iv) reckless disregard of
the duties involved in the conduct of his position (the conduct referred to in
such clauses (i) through (v) being sometimes referred to herein as "disabling
conduct"), (2) as to any matter disposed of by settlement or a compromise
payment by such indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such indemnitee
appears to have acted in good faith in the reasonable belief that his action was
in the best interest of the Trust and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall be
mandatory only if the prosecution of such action, suit or other proceeding by
such indemnitee was authorized by a majority of the full Board of the Trust.
Notwithstanding the foregoing, the Trust shall not be obligated to provide any
such indemnification to the extent such provision would waive any right which
the Trust cannot lawfully waive.
(b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that he is entitled to such indemnification
and if the Trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (b) the Trust shall be insured against losses arising by reason of
any lawful advances, or (C) a majority of a quorum of Trustees of the Trust who
are neither "interested persons" of the Trust (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Trustees"; or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum is not obtainable or even, if obtainable, if
a majority vote of such quorum so directs, independent legal counsel in a
written opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
<PAGE>
6. Duration and Termination
This Agreement shall become effective upon the date hereof and shall
continue in effect for a period of two years and thereafter from year to year,
but only so long as such continuation is specifically approved at least annually
in accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Trust sixty days' written notice (which notice may be
waived by the Trust) and may be terminated by the Trust at any time without
penalty upon giving the Adviser sixty days' notice (which notice may be waived
by the Adviser), provided that such termination by the Trust shall be directed
or approved by the vote of a majority of the Trustees of the Trust in office at
the time or by the vote of the holders of a "majority of the voting securities"
(as defined in the Act) of the Funds at the time outstanding and entitled to
vote or, with respect to paragraph 4(b), by a majority of the Trustees of the
Trust who are not "interested persons" of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan. This Agreement shall terminate automatically in the event
of its assignment (as "assignment" is defined in the Act and the rules
thereunder).
7. Notices
Any notice under this Agreement shall be in writing to the other party
at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
9. Miscellaneous
The Declaration of Trust has been filed with the Secretary of State of
the Commonwealth of Massachusetts. The obligations of the Trust are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Trust, but
only the Trust's property shall be bound.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
THE WESTWOOD FUNDS
By: /s/ Susan Byrne
Name: Susan Byrne
Title: President
TETON ADVISERS, LLC
By: /s/ Bruce Alpert
Name: Bruce Alpert
Title: Manager
EXHIBIT (D)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated February 25, 1997, between The
Westwood Funds on behalf of the Westwood Realty Fund, and the Westwood SmallCap
Equity Fund (the "Trust" and the "Funds", respectively), a Massachusetts
business trust, and Teton Advisers, LLC (the "Adviser"), a Texas limited
liability company.
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust and the Funds with respect to the investment of
the assets of the Trust allocated to the Funds and to supervise and arrange the
purchase and sale of assets held in the investment portfolios of the Funds. The
Adviser may delegate any or all of its responsibilities to one or more
sub-advisers or administrators, subject to the approval of the Board of Trustees
of the Trust. Such delegation shall not relieve the Adviser of its duties and
responsibilities hereunder.
2. Duties and obligations of the Adviser with respect to
investments of assets of the Funds
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of each Fund's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Funds and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Funds; (ii)
arrange for the purchase and sale of securities and other assets held in the
investment portfolio of each Fund and (iii) oversee the administration of all
aspects of each Fund's business and affairs and provide, or arrange for others
whom it believes to be competent to provide, certain services as specified in
subparagraph (b) below. Nothing contained herein shall be construed to restrict
the Trust's right to hire its own employees or to contract for administrative
services to be performed by third parties, including but not limited to, the
calculation of the net asset value of each Fund's shares.
(b) The specific services to be provided or arranged for by
the Adviser for the Funds are (i) maintaining each Fund's books and records,
such as journals, ledger accounts and other records in accordance with
applicable laws and regulations to the extent not maintained by each Fund's
custodian, transfer agent and dividend disbursing agent; (ii) transmitting
purchase and redemption orders for each Fund's shares to the extent not
transmitted by each Fund's distributor or others who purchase and redeem shares;
(iii) initiating all money transfers to each Fund's custodian and from each
Fund's custodian for the payment of each Fund's expenses, investments, dividends
and share redemptions; (iv) reconciling account information and balances among
each Fund's custodian, transfer agent, distributor, dividend disbursing agent
and the Adviser; (v) providing the Funds, upon request, with such office space
and facilities, utilities and office equipment as are adequate for each Fund's
needs; (vi) preparing, but not paying for, all reports by the Trust, on behalf
of each Fund, to their shareholders and all reports and filings required to
maintain the registration and qualification of each Fund's shares under federal
and state law including periodic updating of the Trust's registration statement
and Prospectus (including its Statement of Additional Information); (vii)
supervising the calculation of the net asset value of each Fund's shares; and
(viii) preparing notices and agendas for meetings of each Fund's shareholders
and the Trust's Board of Trustees as well as minutes of such meetings in all
matters required by applicable law to be acted upon by the Board of Trustees.
(c) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Articles of Incorporation and By-Laws of the Trust,
as such documents are amended from time to time; (iv) the investment objective,
policies and restrictions applicable to the Funds as set forth in the Trust's
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust with respect to the Funds.
(d) The Adviser will seek to provide qualified personnel to
fulfill its duties hereunder and will bear all costs and expenses (including any
overhead and personnel costs) incurred in connection with its duties hereunder
and shall bear the costs of any salaries or trustees fees of any officers or
Trustees of the Trust who are affiliated persons (as defined in the Act) of the
Adviser. If in any fiscal year any Fund's aggregate expenses (excluding
interest, taxes, distribution expenses, brokerage commissions and extraordinary
expenses) exceed the most restrictive expense limitation imposed by the
securities law of any state in which the shares of that Fund are registered or
qualified for sale, the Adviser will reimburse the Trust for the amount of such
excess up to the amount of fees accrued for such fiscal year hereunder. The
amount of such reimbursement shall be calculated monthly and an appropriate
amount shall be held back or released to the Adviser each month so that the
aggregate amount held back at any particular time shall equal the net amount of
the reimbursement on a cumulative year-to-date basis. As of the end of the year,
the final amount of the total reimbursement shall be calculated and the
appropriate amount released to the Funds or the Adviser or paid to the Funds by
the Adviser. Subject to the foregoing, the Trust shall be responsible for the
payment of all the Funds' other expenses, including (i) payment of the fees
payable to the Adviser under paragraph 4 hereof; (ii) organizational expenses,
(iii) brokerage fees and commissions; (iv) taxes; (v) interest charges on
borrowings; (vi) the cost of employees and Trustees' and officers' errors and
omissions insurance coverage; (vii) legal, auditing, and accounting fees and
expenses; (viii) charges of the Funds' custodian, transfer agent and dividend
disbursing agent; (ix) the Funds' pro rata portion of dues, fees and charges of
any trade association of which the Trust is a member; (x) the expenses of
printing, preparing and mailing proxies, share certificates and reports,
including each Fund's prospectuses and statements of additional information, and
notices to shareholders; (xi) filing fees for the registration or qualification
of each Fund and its shares under federal or state securities laws; (xii) the
fees and expenses involved in registering and maintaining registration of each
Fund's shares with the Securities and Exchange Commission; (xiii) the expenses
of holding shareholder meetings; (xiv) the compensation, including fees, of any
of the Trust's Trustees, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing each Fund's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing each Fund's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions and all other distribution
expenses payable by the Trust; and (xvii) litigation and other extraordinary or
non-recurring expenses and other expenses properly payable by the Funds.
(e) The Adviser shall give the Funds the benefit of its best
judgment and effort in rendering services hereunder, but neither the Adviser nor
any of its officers, trustees, employees, agents or controlling persons shall be
liable for any act or omission or for any loss sustained by the Funds in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Adviser or any
trustee, officer, employee or other affiliate thereof from acting as investment
adviser for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Adviser or any
of its trustees, officers, employees or agents from buying, selling or trading
any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting.
3. Portfolio Transactions
In the course of the Adviser's execution of portfolio transactions for
the Funds, it is agreed that the Adviser shall employ securities brokers and
dealers which, in its judgment, will be able to satisfy the policy of the Funds
to seek the best execution of its portfolio transactions at reasonable expenses.
For purposes of this Agreement, "best execution" shall mean prompt, efficient
and reliable execution at the most favorable price obtainable. Under such
conditions as may be specified by the Trust's Board of Trustees in the interest
of its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale of each
Fund's portfolio securities with its affiliates including, Gabelli & Company,
Inc.; (b) pay commissions to brokers other than its affiliates which are higher
than might be charged by another qualified broker to obtain brokerage and/or
research services considered by the Adviser to be useful or desirable in the
performance of its duties hereunder and for the investment management of other
advisory accounts over which it or its affiliates exercise investment
discretion; and (c) consider sales by brokers (other than its affiliated
distributor) of shares of the Funds and any other mutual fund for which it or
its affiliates act as investment adviser, as a factor in its selection of
brokers and dealers for each Fund's portfolio transactions.
<PAGE>
4. Compensation of the Adviser
(a) Subject to paragraph 2(b), the Trust agrees to pay to the
Adviser out of each Fund's assets and the Adviser agrees to accept as full
compensation for all services rendered by or through the Adviser (other than any
amounts payable to the Adviser pursuant to paragraph 4(b)), a fee computed daily
and payable monthly in an amount equal on an annualized basis to 1.00% for
Equity Fund, .50% for Cash Management Fund, .60% for Intermediate Bond Fund,
.75% for Balanced Fund, 1.00% for the Westwood Realty Fund, and 1.00% for the
Westwood SmallCap Equity Fund of each Fund's daily average net asset value. For
any period less than a month during which this Agreement is in effect, the fee
shall be prorated according to the proportion which such period bears to a full
month of 28, 29, 30 or 31 days, as the case may be.
(b) The Trust will pay the Adviser or the distributor
separately for any costs and expenses incurred by the Adviser or the distributor
in connection with distribution of each Fund's shares in accordance with the
terms (including proration or nonpayment as a result of allocations of payments)
of a Plan of Distribution (the "Plan") adopted for each Fund pursuant to Rule
12b-1 under the Act as such Plan may be in effect from time to time; provided,
however, that no payments shall be due or paid to the Adviser or the Distributor
hereunder unless and until this Agreement shall have been approved by Trustee
Approval and Disinterested Trustee Approval (as such terms are defined in such
Plan). The Trust reserves the right to modify or terminate such Plan at any time
as specified in the Plan and Rule 12b-1, and this subparagraph shall thereupon
be modified or terminated to the same extent without further action of the
parties. The persons authorized to direct the payment of the funds pursuant to
this Agreement and the Plan shall provide to the Trust's Board of Trustees, and
the Trustees shall review, at least quarterly, a written report of the amount so
paid and the purposes for which such expenditures were made.
(c) For purposes of this Agreement, the net assets of the Fund
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the net asset value of each Fund's shares.
5. Indemnity
(a) The Trust hereby agrees to indemnify the Adviser and each
of the Adviser's subadvisers, trustees, officers, employees, and agents
(including any individual who serves at the Adviser's request as trustee,
officer, partner, trustee or the like of another corporation) and controlling
persons of each of them (each such person being an "indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable corporate law) reasonably incurred by such indemnitee
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which he may be or may have been threatened, while acting
in any capacity set forth above in this paragraph or thereafter by reason of his
having acted in any such capacity, except with respect to any matter as to which
he shall have been adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust and furthermore, in
the case of any criminal proceeding, so long as he has no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence, (iv) reckless disregard of
the duties involved in the conduct of his position (the conduct referred to in
such clauses (i) through (v) being sometimes referred to herein as "disabling
conduct"), (2) as to any matter disposed of by settlement or a compromise
payment by such indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such indemnitee
appears to have acted in good faith in the reasonable belief that his action was
in the best interest of the Trust and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding by such
indemnitee was authorized by a majority of the full Board of the Trust.
Notwithstanding the foregoing, the Trust shall not be obligated to provide any
such indemnification to the extent such provision would waive any right which
the Trust cannot lawfully waive.
(b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that he is entitled to such indemnification
and if the Trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Trust shall be insured against losses arising by reason of
any lawful advances, or (C) a majority of a quorum of Trustees of the Trust who
are "interested persons" of the Trust (as defined in Section 2(a)(19) of the
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry, that
there is reason to believe that the indemnitee ultimately will be found entitled
to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct of, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-party Trustees of
the Trust, or (ii) if such a quorum so directs, independent legal counsel in a
written opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
<PAGE>
6. Duration and Termination
This Agreement shall become effective upon the date hereof and
shall continue in effect for a period of two years and thereafter from year to
year, but only so long as such continuation is specifically approved at least
annually in accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time
without penalty upon giving the Trust sixty days' written notice (which notice
may be waived by the Trust) and may be terminated by the Trust at any time
without penalty upon giving the Adviser sixty days' notice (which notice may be
waived by the Adviser), provided that such termination by the Trust shall be
directed or approved by the vote of a majority of the Trustees of the Trust in
office at the time or by the vote of the holders of a "majority of voting
securities" (as defined in the Act) of the Funds at the time outstanding and
entitled to vote or, with respect to paragraph 4(b), by a majority of the
Trustees of the Trust who are not "interested persons" of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to the Plan. This Agreement shall terminate automatically in
the event of its assignment (as "assignment" is defined in the Act and the rules
thereunder.)
7. Notices
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws
of the State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
9. Miscellaneous
The Declaration of Trust has been filed with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of the Trust are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Trust, but
only the Trust's property shall be bound.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized officers, all as of
the day and the year first above written.
THE WESTWOOD FUNDS
By: /S/ James McKee
Name: James McKee
itle: Secretary
TETON ADVISERS, LLC
By: /S/ Bruce Alpert
Name: Bruce Alpert
Title: Vice President and Treasurer
EXHIBIT (d)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated May 11, 1998, between The Gabelli
Westwood Funds on behalf of the Gabelli Westwood Mighty Mitessm Fund (the
"Trust" and the "Fund", respectively), a Massachusetts business trust, and
Gabelli Advisers, Inc. (the "Adviser"), a Delaware corporation.
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust and the Fund with respect to the investment of
the assets of the Trust allocated to the Fund and to supervise and arrange the
purchase and sale of assets held in the investment portfolios of the Fund. The
Adviser may delegate any or all of its responsibilities to one or more
sub-advisers or administrators, subject to the approval of the Board of Trustees
of the Trust. Such delegation shall not relieve the Adviser of its duties and
responsibilities hereunder.
2. Duties and obligations of the Adviser with respect to
investments of assets of the Fund
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Fund's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Fund and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Fund; (ii)
arrange for the purchase and sale of securities and other assets held in the
investment portfolio of the Fund and (iii) oversee the administration of all
aspects of the Fund's business and affairs and provide, or arrange for others
whom it believes to be competent to provide, certain services as specified in
subparagraph (b) below. Nothing contained herein shall be construed to restrict
the Trust's right to hire its own employees or to contract for administrative
services to be performed by third parties, including but not limited to, the
calculation of the net asset value of the Fund's shares.
(b) The specific services to be provided or arranged for by
the Adviser for the Fund are (i) maintaining the Fund's books and records, such
as journals, ledger accounts and other records in accordance with applicable
laws and regulations to the extent not maintained by the Fund's custodian,
transfer agent and dividend disbursing agent; (ii) transmitting purchase and
redemption orders for the Fund's shares to the extent not transmitted by the
Fund's distributor or others who purchase and redeem shares; (iii) initiating
all money transfers to the Fund's custodian and from the Fund's custodian for
the payment of the Fund's expenses, investments, dividends and share
redemptions; (iv) reconciling account information and balances among the Fund's
custodian, transfer agent, distributor, dividend disbursing agent and the
Adviser; (v) providing the Fund, upon request, with such office space and
facilities, utilities and office equipment as are adequate for the Fund's needs;
(vi) preparing, but not paying for, all reports by the Trust, on behalf of the
Fund, to its shareholders and all reports and filings required to maintain the
registration and qualification of the Fund's shares under federal and state law
including periodic updating of the Trust's registration statement and Prospectus
(including its Statement of Additional Information); (vii) supervising the
calculation of the net asset value of the Fund's shares; and (viii) preparing
notices and agendas for meetings of the Fund's shareholders and the Trust's
Board of Trustees as well as minutes of such meetings in all matters required by
applicable law to be acted upon by the Board of Trustees.
(c) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Declaration of Trust and By-Laws of the Trust, as
such documents are amended from time to time; (iv) the investment objective,
policies and restrictions applicable to the Fund as set forth in the Trust's
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust with respect to the Fund.
(d) The Adviser will seek to provide qualified personnel to
fulfill its duties hereunder and will bear all costs and expenses (including any
overhead and personnel costs) incurred in connection with its duties hereunder
and shall bear the costs of any salaries or trustees fees of any officers or
Trustees of the Trust who are affiliated persons (as defined in the Act) of the
Adviser. The Trust shall be responsible for the payment of all the Fund's other
expenses, including (i) payment of the fees payable to the Adviser under
paragraph 4 hereof; (ii) organizational expenses; (iii) brokerage fees and
commissions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
employees' and Trustees' and officers' errors and omissions insurance coverage;
(vii) legal, auditing, and accounting fees and expenses; (viii) charges of the
Fund's custodian, transfer agent and dividend disbursing agent; (ix) the Fund's
pro-rata portion of dues, fees and charges of any trade association of which the
Trust is a member; (x) the expenses of printing, preparing and mailing proxies,
share certificates and reports, including the Fund's prospectuses and statements
of additional information, and notices to shareholders; (xi) filing fees for the
registration or qualification of the Fund and its shares under federal or state
securities laws; (xii) the fees and expenses involved in registering and
maintaining registration of the Fund's shares with the Securities and Exchange
Commission; (xiii) the expenses of holding shareholder meetings; (xiv) the
compensation, including fees, of any of the Trust's Trustees, officers or
employees who are not affiliated persons of the Adviser; (xv) all expenses of
computing the Fund's net asset value per share, including any equipment or
services obtained solely for the purpose of pricing shares or valuing the Fund's
investment portfolio; (xvi) expenses of personnel performing shareholder
servicing functions and all other distribution expenses payable by the Trust;
and (xvii) litigation and other extraordinary or non-recurring expenses and
other expenses properly payable by the Fund.
<PAGE>
(e) The Adviser shall give the Fund the benefit of its best
judgement and effort in rendering services hereunder, but neither the Adviser
nor any of its officers, trustees, employees, agents or controlling persons
shall be liable for any act or omission or for any loss sustained by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Adviser or any
trustee, officer, employee or other affiliate thereof from acting as investment
adviser for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Adviser or any
of its trustees, officers, employees or agents from buying, selling or trading
any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting.
3. Portfolio Transactions
In the course of the Adviser's execution of portfolio transactions for
the Fund, it is agreed that the Adviser shall employ securities brokers and
dealers which, in its judgement, will be able to satisfy the policy of the Fund
to seek the best execution of its portfolio transactions at reasonable expenses.
For purposes of this agreement, "best execution" shall mean prompt, efficient
and reliable execution at the most favorable price obtainable. Under such
conditions as may be specified by the Trust's Board of Trustees in the interest
of its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale of the
Fund's portfolio securities with its affiliates including Gabelli & Company,
Inc.; (b) pay commissions to brokers other than its affiliates which are higher
than might be charged by another qualified broker to obtain brokerage and/or
research services considered by the Adviser to be useful or desirable in the
performance of its duties hereunder and for the investment management of other
advisory accounts over which it or its affiliates exercise investment
discretion; and (c) consider sales by brokers (other than its affiliated
distributor) of shares of the Fund and any other mutual fund for which it or its
affiliates act as investment adviser, as a factor in its selection of brokers
and dealers for the Fund's portfolio transactions.
4. Compensation of the Adviser
(a) Subject to paragraph 2 (b), the Trust agrees to pay to the
Adviser out of the Fund's assets and the Adviser agrees to accept as full
compensation for all services rendered by or through the Adviser (other than any
amounts payable to the Adviser pursuant to paragraph 4 (b)) a fee computed daily
and payable monthly in an amount equal on an annualized basis to 1.00% of the
Gabelli Westwood Mighty Mitessm Fund's daily average net asset value. For any
period less than a month during which this Agreement is in effect, the fee shall
be pro-rated according to the proportion which such period bears to a full month
of 28, 29, 30 or 31 days, as the case may be.
(b) The Trust will pay the Adviser or the Fund's distributor
separately for any costs and expenses incurred by the Adviser or the distributor
in connection with distribution of the Fund's shares in accordance with the
terms (including proration or non-payment as a result of allocations of
payments) of a Plan of Distribution (the "Plan") adopted for the Fund pursuant
to Rule 12b-1 under the Act as such Plan may be in effect from time to time;
provided, however, that no payments shall be due or paid to the Adviser or the
distributor hereunder unless and until this Agreement shall have been approved
by Trustee Approval and Disinterested Trustee Approval (as such terms are
defined in such Plan). The Trust reserves the right to modify or terminate such
Plan at any time as specified in the Plan and Rule 12b-1, and this subparagraph
shall thereupon be modified or terminated to the same extent without further
action of the parties. The persons authorized to direct the payment of the funds
pursuant to this Agreement and the Plan shall provide to the Trust's Board of
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amount so paid and the purposes for which such expenditures were made.
(c) For purposes of this Agreement, the net assets of the Fund
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the net asset value of the Fund's shares.
5. Indemnity
(a) The Trust hereby agrees to indemnify the Adviser and the
Adviser's sub-advisers, trustees, officers, employees, and agents (including any
individual who serves at the Adviser's request as trustee, officer, partner,
trustee or the like of another corporation) and controlling persons of them (the
such person being an "indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgements, in compromise or as fines
and penalties, and counsel fees (all as provided in accordance with applicable
corporate law) reasonably incurred by such indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which such
indemnitee may be or may have been threatened, while acting in any capacity set
forth above in this paragraph or thereafter by reason of his having acted in any
such capacity, except with respect to any matter as to which such indemnitee
shall have been adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust and furthermore, in
the case of any criminal proceeding, so long as he has no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence, (iv) reckless disregard of
the duties involved in the conduct of such indemnitee's position (the conduct
referred to in such clauses (i) through (v) being sometimes referred to herein
as "disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such indemnitee, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such indemnitee
appears to have acted in good faith in the reasonable belief that its action was
in the best interest of the Trust and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding by such
indemnitee was authorized by a majority of the full Board of the Trust.
Notwithstanding the foregoing, the Trust shall not be obligated to provide any
such indemnification to the extent such provision would waive any right which
the Trust cannot lawfully waive.
(b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that such indemnitee is entitled to such
indemnification and if the Trustees of the Trustee determine that the facts then
known to them would not preclude indemnification. In addition, at least one of
the following conditions must be met: (A) the indemnitee shall provide a
security for such indemnitee's undertaking, (B) the Trust shall be insured
against losses arising by reason of any lawful advances, or (C) a majority of a
quorum of Trustees of the Trust who are not "interested persons" of the Trust
(as defined in Section 2(a)(19) of the Act) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum so directs, independent legal counsel in a
written opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which such indemnitee may be lawfully
entitled.
6. Duration and Termination
This Agreement shall become effective upon the date hereof and shall
continue in effect for a period of two years and thereafter from year to year,
but only so long as such continuation is specifically approved at least annually
in accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Trust sixty days' written notice (which notice may be
waived by the Trust) and may be terminated by the Trust at any time without
penalty upon giving the Adviser sixty days' notice (which notice may be waived
by the Adviser), provided that such termination by the Trust shall be directed
or approved by the vote of a majority of the Trustees of the Trust in office at
the time or by vote of the holders of a "majority of voting securities" (as
defined in the Act) of the Fund at the time outstanding and entitled to vote or,
with respect to paragraph 4 (b), by a majority of the Trustees of the Trust who
are not "interested persons" of the Trust. This Agreement shall terminate
automatically in the event of its assignment (as "assignment" is defined in the
Act and the rules thereunder).
It is understood and hereby agreed that the word "Gabelli" is the
property of the Adviser for copyright and other purposes. The Fund further
agrees that the word "Gabelli" in its name is derived from the name of Mario J.
Gabelli and such name may freely be used by the Adviser for other investment
companies, entities or products. The Fund further agrees that, in the event that
the Adviser shall cease to act as investment adviser to the Fund with respect to
the investment of assets allocated to the Fund, both the Fund and the Trust
shall promptly take all necessary and appropriate action to change their names
to names which do not include the word "Gabelli"; provided, however, that the
Fund and the Trust may continue to use the word "Gabelli" if the Adviser
consents in writing to such use.
7. Notices
Any notice under this Agreement shall be in writing to the other party
at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
9. Miscellaneous
The Declaration of Trust has been filed with the Secretary of State of
the Commonwealth of Massachusetts. The obligations of the Trust are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Trust, but
only the Trust's property shall be bound.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
THE GABELLI WESTWOOD FUNDS, ON BEHALF OF THE
GABELLI WESTWOOD MIGHTY MITESSM FUND
By: /s/ James McKee
Name: James McKee
Title: Secretary
GABELLI ADVISERS, INC.
By: /s/ Bruce Alpert
Name: Bruce Alpert
Title: Vice President and Treasurer
EXHIBIT (d)
INVESTMENT SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT, dated October 6, 1994, between The
Westwood Funds and its four series, the Equity Fund, the Cash Management Fund,
the Intermediate Bond Fund and the Balanced Fund (the "Trust" and the "Funds,"
respectively), a Massachusetts business trust, for purposes of section 5 only,
and Teton Advisers, LLC (the "Adviser"), a Texas limited liability company and
Westwood Management Corp. (the "Sub-Adviser").
Whereas the Adviser has been appointed investment adviser to the Trust
and pursuant to such appointment desires to appoint the Sub-Adviser as its
sub-adviser; and whereas the Sub-Adviser desires to be so appointed;
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Sub-Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust with respect to the investment of the assets of
the Trust allocated to the Funds and to supervise and arrange the purchase and
sale of assets held in the investment portfolios of the Funds.
2. Duties and obligations of the Sub-Adviser with respect to
investments of assets of the Funds
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Adviser, the Sub-Adviser shall (i)
act as investment adviser for and supervise and manage the investment and
reinvestment of each Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Funds
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Funds and (ii) arrange for
the purchase and sale of securities and other assets held in the investment
portfolio of each Fund.
(b) The specific services to be provided or arranged for by
the Sub-Adviser for the Funds are to supervise the calculation of the net asset
value of each Fund's shares.
(c) In the performance of its duties under this Agreement, the
Sub-Adviser shall at all times use all reasonable efforts to conform to, and act
in accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Articles of Incorporation and By-Laws of the Trust,
as such documents are amended from time to time; (iv) the investment objectives,
policies and restrictions applicable to the Funds as set forth in the Trust's
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust with respect to the Funds.
<PAGE>
(d) The Sub-Adviser will seek to provide qualified personnel
to fulfill its duties hereunder and will bear all costs and expenses (including
any overhead and personnel costs) incurred in connection with its duties
hereunder and shall bear the costs of any salaries or trustees fees of any
officers or Trustees of the Trust who are affiliated persons (as defined in the
Act) of the Sub-Adviser. If in any fiscal year, any Fund's aggregate expenses
(excluding interest, taxes, distribution expenses, brokerage commissions and
extraordinary expenses) exceed the most restrictive expense limitation imposed
by the securities law of any state in which the shares of that Fund are
registered or qualified for sale, the Sub-Adviser will reimburse the Trust
pro-rata with the Adviser for the amount of such excess up to the amount of fees
accrued for such fiscal year hereunder, subject to the minimum fee requirements
of paragraph 4(a)(i). The amount of such reimbursement shall be calculated
monthly and an appropriate amount shall be held back or released to the
Sub-Adviser each month so that the aggregate amount held back at any particular
time shall equal the net amount of the reimbursement on a cumulative
year-to-date basis. As of the end of the year, the final amount of the total
reimbursement shall be calculated and the appropriate amount released to the
Funds or the Sub-Adviser or paid to the Funds by the Sub-Adviser.
(e) The Sub-Adviser shall give the Funds the benefit of its
best judgement and effort in rendering services hereunder, but neither the
Sub-Adviser nor any of its officers, trustees, employees, agents or controlling
persons shall be liable for any act or omission or for any loss sustained by the
Funds in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Sub-Adviser or
any director, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Sub-Adviser or any of its trustees, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided that, for the
term of this Agreement, the Sub-Adviser will not act as investment adviser to
any investment companies other than the Trust.
3. Portfolio Transactions
In the course of the Sub-Adviser's execution of portfolio transactions
for the Funds, it is agreed that the Sub-Adviser shall employ securities brokers
and dealers which, in its judgement, will be able to satisfy the policy of the
Funds to seek the best execution of its portfolio transactions at reasonable
expenses. For purposes of this Agreement, "best execution" shall mean prompt,
efficient and reliable execution at the most favorable price obtainable. Under
such conditions as may be specified by the Trust's Board of Trustees in the
interest of its shareholders and to ensure compliance with applicable law and
regulations, the Sub-Adviser may (a) place orders for the purchase or sale of
each Fund's portfolio securities with the Adviser's affiliate, Gabelli &
Company, Inc., or its affiliates, Southwest Securities Inc., or their affiliated
entities pursuant to procedures under 17e-1; (b) pay commissions to brokers
other than its affiliate which are higher than might be charged by another
qualified broker to obtain brokerage and/or research services considered by the
Sub-Adviser to be useful or desirable in the performance of its duties hereunder
and for the investment management of other advisory accounts over which it or
its affiliates exercise investment discretion; and (c) consider sales by brokers
(other than affiliates) of shares of the Funds and any other mutual fund for
which it or its affiliates act as investment adviser, as a factor in its
selection of brokers and dealers for each Fund's portfolio transactions.
4. Compensation of the Sub-Adviser
(a) The Adviser agrees to pay to the Sub-Adviser out of its
advisory fees with respect to the Funds, which advisory fees may be paid to the
Sub-Adviser directly by the Trust at the Adviser's request, and the Sub-Adviser
agrees to accept as full compensation for all services rendered by or through
the Sub-Adviser, a fee computed daily and payable monthly in an amount equal on
an annualized basis to the greater of (i) $150,000 per year on an aggregate
basis for all the Funds or (ii) 35% of the net revenues to the Adviser from the
Funds; net revenues are gross revenues less administrative and marketing fees at
an annual rate of .20% of each Fund's average net assets; gross revenues equal
all advisory and administrative fees paid to the Adviser. For any period of less
than a month during which this Agreement is in effect, the fee shall be prorated
according to the proportion which such period bears to a full month of 28, 29,
30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of each
Fund shall be calculated pursuant to the procedures adopted by resolutions of
the Trustees of the Trust for calculating the net asset value of each Fund's
shares.
5. Indemnity
(a) The Trust hereby agrees to indemnify the Sub-Adviser and
each of the Sub-Adviser's trustees, officers, employees, and agents (including
any individual who serves at the Adviser's request as director, officer,
partner, trustee or the like of another corporation) and controlling persons
(each such person being an "indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgements, in compromise or as fines
and penalties, and counsel fees (all as provided in accordance with applicable
corporate law) reasonably incurred by such indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which he
may be or may have been involved as a party or otherwise or with which he may be
or may have been threatened, while acting in any capacity set forth above in
this paragraph or thereafter by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall have been adjudicated not
to have acted in good faith in the reasonable belief that his action was in the
best interest of the Trust and furthermore, in the case of any criminal
proceeding, so long as he had no reasonable cause to believe that the conduct
was unlawful, provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Trust or its shareholders or any expense
of such indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith,
(iii) gross negligence or reckless disregard of the duties involved in the
conduct of his position (the conduct referred to in such clauses (i) through (v)
being sometimes referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee, pursuant
to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless there has been a determination
that such settlement or compromise is in the best interest of the Trust and that
such indemnitee appears to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust and did not involve
disabling conduct by such indemnitee and (3) with respect to any action, suit or
other proceeding voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such indemnitee was authorized by a majority of the full
Board of the Trust. Notwithstanding the foregoing, the Trust shall not be
obligated to provide any such indemnification to the extent such provision would
waive any right which the Trust cannot lawfully waive. The Sub-Adviser and
Adviser shall each indemnify the other and their respective officers, trustees,
shareholders, partners and controlling persons to the extent such persons are
not indemnified by the Trust and have not engaged in disabling conduct with
respect to all actions or omissions to act or any matter related to the
activities of the such persons hereunder.
(b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that he is entitled to such indemnification
and if the Trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Trust shall be insured against losses arising by reason of
any lawful advances, or (C) a majority of a quorum of Trustees of the Trust who
are neither "interested persons" of the Trust (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Trustees") or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum is not obtainable or even, if obtainable, if
a majority vote of such quorum so directs, independent legal counsel in a
written opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
6. Duration and Termination
This Agreement shall become effective upon the date hereof and shall
continue in effect for a period of two years and thereafter from year to year,
but only so long as such continuation is specifically approved at least annually
in accordance with the requirements of the Act.
<PAGE>
This Agreement may be terminated by the Sub-Adviser at any time without
penalty upon giving the Trust sixty days' written notice (which notice may be
waived by the Trust) and may be terminated by the Trust or by the Adviser at any
time without penalty upon giving the Sub-Adviser sixty days' notice (which
notice may be waived by the Adviser), provided that such termination by the
Trust shall be directed or approved by the vote of a majority of the Trustees of
the Trust in office at the time or by the vote of the holders of a "majority of
the voting securities" (as defined in the Act) of the Funds at the time
outstanding and entitled to vote. This Agreement shall terminate automatically
in the event of its assignment (as "assignment" is defined in the Act and the
rules thereunder).
7. Notices
Any notice under this Agreement shall be in writing to the other party
at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
9. Miscellaneous
The Declaration of Trust has been filed with the Secretary of State of
the Commonwealth of Massachusetts. The obligations of the Trust are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Trust, but
only the Trust's property shall be bound.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
TETON ADVISERS, LLC
By: /s/ Bruce Alpert
Name: Bruce N. Alpert
Title: President
WESTWOOD MANAGEMENT CORP.
By: /s/ Susan Byrne
Name: Susan Byrne
Title: President
THE WESTWOOD FUNDS
By: /s/ Susan Byrne
Name: Susan Byrne
Title: President
EXHIBIT (d)
INVESTMENT SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT, dated February 25, 1997, between The
Westwood Funds on behalf of the Westwood Realty Fund, and the Westwood SmallCap
Equity Fund (the "Trust" and the "Funds", respectively), a Massachusetts
business trust, for purposes of Section 5 only, and Teton Advisers, LLC (the
"Adviser"), a Texas limited liability company and Westwood Management Corp. (the
"Sub-Adviser").
Whereas the Adviser has been appointed investment adviser to the Trust
and pursuant to such appointment desires to appoint the Sub-Adviser as its
sub-adviser; and whereas the Sub-Adviser desires to be so appointed;
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Sub-Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust with respect to the investment of the assets of
the Trust allocated to the Funds and to supervise and arrange the purchase and
sale of assets held in the investment portfolios of the Funds.
2. Duties and obligations of the Sub-Adviser with respect to
investments of assets of the Funds
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Trust's Advisers, the Sub-Adviser
shall (i) act as investment adviser for and supervise and manage the investment
and reinvestment of each Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Funds
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Funds and (ii) arrange for
the purchase and sale of securities and other assets held in the investment
portfolio of each Fund.
(b) The specific services to be provided or arranged for by
the Sub-Adviser for the Funds are to supervise the calculation of the net asset
value of each Fund's shares.
(c) In the performance of its duties under this Agreement, the
Sub-Adviser shall at all times use all reasonable efforts to conform to, and act
in accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Articles of Incorporation and By-Laws of the Trust,
as such documents are amended from time to time; (iv) the investment objective,
policies and restrictions applicable to the Funds as set forth in the Trust's
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust with respect to the Funds.
<PAGE>
(d) The Sub-Adviser will seek to provide qualified personnel
to fulfill its duties hereunder and will bear all costs and expenses (including
any overhead and personnel costs) incurred in connection with its duties
hereunder and shall bear the costs of any salaries or trustees fees of any
officers or Trustees of the Trust who are affiliated persons (as defined in the
Act) of the Sub-Adviser. If in any fiscal year, any Fund's aggregate expenses
(excluding interest, taxes, distribution expenses, brokerage commissions and
extraordinary expenses) exceed the most restrictive expense limitation imposed
by the securities law of any state in which the shares of that Fund are
registered or qualified for sale, the Sub-Adviser will reimburse the Trust for
the amount of such excess up to the amount of fees accrued for such fiscal year
hereunder. The amount of such reimbursement shall be calculated monthly and an
appropriate amount shall be held back or released to the Adviser each month so
that the aggregate amount held back at any particular time shall equal the net
amount of the reimbursement on a cumulative year-to-date basis. As of the end of
the year, the final amount of the total reimbursement shall be calculated and
the appropriate amount released to the Funds or the Sub-Adviser or paid to the
Funds by the Sub-Adviser.
(e) The Sub-Adviser shall give the Funds the benefit of its
best judgement and effort in rendering services hereunder, but neither the
Sub-Adviser nor any of its officers, trustees, employees, agents or controlling
persons shall be liable for any act or omission or for any loss sustained by the
Funds in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Sub-Adviser or
any trustee, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Sub-Adviser or any of its trustees, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided that, for the
term of this Agreement, the Sub-Adviser will not act as investment adviser to
any investment companies other than the Trust.
3. Portfolio Transactions
In the course of the Sub-Adviser's execution of portfolio transactions
for the Funds, it is agreed that the Sub-Adviser shall employ securities brokers
and dealers which, in its judgement, will be able to satisfy the policy of the
Funds to seek the best execution of its portfolio transactions at reasonable
expenses. For purposes of this agreement, "best execution" shall mean prompt,
efficient and reliable execution at the most favorable price obtainable. Under
such conditions as may be specified by the Trust's Board of Trustees in the
interest of its shareholders and to ensure compliance with applicable law and
regulations, the Sub-Adviser may (a) place orders for the purchase or sale of
each Fund's portfolio with the Adviser's affiliate, Gabelli & Company, Inc. or
its affiliates, Southwest Securities Inc. or their affiliated entities pursuant
to procedures under 17e-1; (b) pay commissions to brokers other than its
affiliates which are higher than might be charged by another qualified broker to
obtain brokerage and/or research services considered by the Sub-Adviser to be
useful or desirable in the performance of its duties hereunder and for the
investment management of other advisory accounts over which it or its affiliates
exercise investment discretion; and (c) consider sales by brokers (other than
its affiliated distributor) of shares of the Funds and any other mutual fund for
which it or its affiliates act as investment adviser, as a factor in its
selection of brokers and dealers for each Fund's portfolio transactions.
4. Compensation of the Sub-Adviser
(a) The Adviser agrees to pay to the Sub-Adviser out of its
advisory fees with respect to the Funds, which advisory fees may be paid to the
Sub-Adviser directly by the Trust at the Adviser's request, and the Sub-Adviser
agrees to accept as full compensation for all services rendered by or through
the Sub-Adviser, a fee computed daily and payable monthly in an amount equal on
an annualized basis to the greater of (i) $150,000 per year on an aggregate
basis for all the Funds or (ii) 35% of the net revenues to the Advisers from the
Funds; net revenues are gross revenues less administrative and marketing fees at
an annual rate of .20% of each Fund's average net assets; gross revenues equal
to all advisory and administrative fees paid to the Adviser. For any period of
less than a month during which this Agreement is in effect, the fee shall be
prorated according to the proportion which such period bears to a full month of
28, 29, 30, or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the Fund
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the net asset value of each Fund's shares.
5. Indemnity
(a) The Trust hereby agrees to indemnify the Sub-Adviser and
each of the Sub-Adviser's sub-advisers, trustees, officers, employees, and
agents (including any individual who serves at the Adviser's request as trustee,
officer, partner, trustee or the like of another corporation) and controlling
persons of each of them (each such person being an "indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgements,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable corporate law) reasonably incurred by such indemnitee
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which he may be or may have been threatened, while acting
in any capacity set forth above in this paragraph or thereafter by reason of his
having acted in any such capacity, except with respect to any matter as to which
he shall have been adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust and furthermore, in
the case of any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence, (iv) reckless disregard of
the duties involved in the conduct of his position (the conduct referred to in
such clauses (i) through (v) being sometimes referred to herein as "disabling
conduct"), (2) as to any matter disposed of by settlement or a compromise
payment by such indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such indemnitee
appears to have acted in good faith in the reasonable belief that his action was
in the best interest of the Trust and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff indemnification shall be
mandatory only if the prosecution of such action, suit or other proceeding by
such indemnitee was authorized by a majority of the full Board of the Trust.
Notwithstanding the foregoing, the Trust shall not be obligated to provide any
such indemnification to the extent such provision would waive any right which
the Trust cannot lawfully waive. The Sub-Adviser and Adviser shall each
indemnify the other and their respective officers, trustees, shareholders,
partners and controlling persons to the extent such persons are not indemnified
by the Trust and have not engaged in disabling conduct with respect to all
actions or omissions to act or any matter related to the activities of the such
persons hereunder.
(b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that he is entitled to such indemnification
and if the Trustees of the Trustee determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Trust shall be insured against losses arising by reason of
any lawful advances, or (C) a majority of a quorum of Trustees of the Trust who
are "interested persons" of the Trust (as defined in Section 2(a)(19) of the
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum so directs, independent legal counsel in a
written opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
6. Duration and Termination
This Agreement shall become effective upon the date hereof and
shall continue in effect for a period of two years and thereafter from year to
year, but only so long as such continuation is specifically approved at least
annually in accordance with the requirements of the Act.
This Agreement may be terminated by the Sub-Adviser at any
time without penalty upon giving the Trust sixty days' written notice (which
notice may be waived by the Trust) and may be terminated by the Trust at any
time without penalty upon giving the Sub-Adviser sixty days' notice (which
notice may be waived by the Adviser), provided that such termination by the
Trust shall be directed or approved by the vote of a majority of the Trustees of
the Trust in office at the time or by the vote of the holders of a "majority of
voting securities" (as defined in the Act) of the Funds at the time outstanding
and entitled to vote. This Agreement shall terminate automatically in the event
of its assignment (as "assignment" is defined in the Act and the rules
thereunder).
7. Notices
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws
of the State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
9. Miscellaneous
The Declaration of Trust has been filed with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of the Trust are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Trust, but
only the Trust's property shall be bound.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
THE WESTWOOD FUNDS
By: /s/ James McKee
Name: James McKee
Title: Secretary
TETON ADVISERS, LLC
By: /s/ Bruce Alpert
Name: Bruce Alpert
Title: Vice President and Treasurer
Exhibit (d)
DRAFT
Contractual Advisory Fee Waiver and Expense Reimbursement
AGREEMENT made this 1st day of October, by and between THE GABELLI WESTWOOD
FUNDS, a Massachusetts business trust (the "Trust"), and GABELLI ADVISERS,
INC. (the "Adviser").
The Adviser hereby agrees to waive advisory fees and reimburse expenses to
the extent necessary to maintain Total Annual Operating Expenses at the
following levels for a period of one year from the date of this Agreement for
each class of the following funds:
Fund Total Annual Operating Expenses
Class Class Class Class
AAA A B C
Gabelli Westwood Small Cap Equity Fund 1.50% 1.75% 2.25%
2.25%
Gabelli Westwood Mighty Mitessm Fund 1.50% 1.75% 2.25% 2.25%
Gabelli Westwood Realty Fund 1.50% 1.75% 2.25% 2.25%
Gabelli Westwood Intermediate Bond 1.00% 1.10% 1.75% 1.75%
Fund
This Agreement shall be renewable at the end of each one year period for an
additional one year period upon the written agreement of the parties hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the day and year first written above.
THE GABELLI WESTWOOD FUNDS GABELLI ADVISERS, INC.
By:____________By:_______________
Attest:_____________Attest:________
EXHIBIT (e)
FORM OF AMENDED AND RESTATED DISTRIBUTION AGREEMENT,
dated __________________ between
THE GABELLI WESTWOOD FUNDS (the "Trust")
and
GABELLI & COMPANY, INC. (the "Distributor")
W I T N E S S E T H:
WHEREAS, the Trust, a Massachusetts business trust, is
registered as an investment company under the Investment Company Act of 1940
(the "1940 Act") currently consisting of the series set forth on Exhibit A
hereto, as such Exhibit may be revised from time to time (each, a "Fund"), and
an indefinite number of shares of its beneficial interest (hereinafter referred
to as "shares") have been registered under the Securities Act of 1933 (the "1933
Act") to be offered for sale to the public in a continuous public offering in
accordance with the terms and conditions set forth in the Trust's Prospectuses
(collectively, the "Prospectus") and Statement of Additional Information ("SAI")
included in the Trust's Registration Statement as they may be amended from time
to time; and
WHEREAS, the Trust desires that the Distributor continue to
act as general distributor and as agent of the Trust for the sale and
distribution of shares which have been registered as described above and of any
additional shares which may become registered during the term of this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration the
receipt and adequacy of which is hereby acknowledged, the parties hereto hereby
agree as follows:
1. The Trust hereby appoints the Distributor as its general
distributor and exclusive agent for the sale of its shares pursuant to the
aforesaid continuous public offering of its shares. From and after the date of
this Agreement, the Trust agrees that it will not, without the Distributor's
consent, sell or agree to sell any shares otherwise than through the
Distributor, except that the Trust may (a) sell shares as an investment to its
officers, Trustees, bona fide full-time employees, its investment adviser and
the affiliates thereof; (b) issue shares in lieu of the cash payments of
dividends and distributions; and (c) issue shares in connection with a merger,
consolidation or acquisition of assets on such basis as may be authorized or
permitted under the 1933 Act.
<PAGE>
2. The Distributor hereby accepts such appointment and agrees
to use its best efforts to sell such shares; provided, however, that when
requested by the Trust at any time because of market or other economic
considerations or abnormal circumstances of any kind, it will suspend such
efforts. The Trust may also withdraw the offering of the shares at any time when
required by the provisions of any statute, order, rule or regulation of any
governmental body having jurisdiction. It is understood that the Distributor
does not undertake to sell all or any specific portion of the shares of the
Trust. The Trust acknowledges that the Distributor may enter into sales or
servicing agreements with registered securities brokers and banks and into
servicing agreements with financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms. In entering into such agreements, the Distributor shall act only on its
own behalf as principal underwriter and distributor. The Distributor shall not
be responsible for making any distribution plan or service fee payments pursuant
to any plans the Trust may adopt or agreements it may enter into.
3. The shares may be sold by the Distributor only at prices
and terms described in the then current Prospectus relating to the shares and
may be sold either through persons with whom it has selling agreements in a form
approved by the Trust's Board of Trustees or directly to prospective purchasers.
The Trust shall furnish the Distributor, with all possible promptness, an advice
of each computation of net asset value. The Distributor shall have the right to
accept or reject orders for the purchase of shares of a Fund. Any consideration
which the Distributor may receive in connection with a rejected purchase order
shall be returned promptly.
4. The Distributor agrees promptly to issue, or arrange for
the issuance of, confirmations of all accepted purchase orders and to transmit a
copy of such confirmations to the Trust, or, if so directed, to any duly
appointed transfer or shareholder servicing agent of the Trust. The net asset
value of all shares sold pursuant to the provisions hereof shall be paid
promptly after receipt of payment from the originating dealer or purchaser and
not later than eleven business days after such confirmation even if the
Distributor has not actually received payment from the originating dealer or
purchaser. If the originating dealer or purchaser shall fail to make timely
settlement of its purchase order in accordance with the rules of the National
Association of Securities Dealers, Inc., then the Distributor shall have the
right to cancel such purchase order and, at its account and risk, to hold
responsible the originating dealer or purchaser. The Distributor agrees promptly
to reimburse the Trust for any amount by which the Trust's losses, attributable
to any such cancellation or to errors on the Distributor's part in relation to
the effective date of accepted purchase orders, exceed contemporaneous gains
realized by the Trust for either of such reasons in respect to other purchase
orders.
5. The Trust shall register or cause to be registered all
shares sold pursuant to the provisions hereof in such name or names and amounts
as the Distributor may request from time to time and the Trust shall issue or
cause to be issued certificates evidencing such shares for delivery to the
Distributor or pursuant to the Distributor's direction if and to the extent that
the shareholder account in question contemplates the issuance of such share
certificates. All shares of the Trust, when so issued and paid for, shall be
fully non-assessable.
6. The Trust has delivered to the Distributor a copy of its
current Prospectus and SAI. The Trust agrees that it will use its best efforts
to continue the effectiveness of its Registration Statement filed under the 1933
Act. The Trust further agrees to prepare and file any amendments to its
Registration Statement as may be necessary and any supplemental data in order to
comply with the 1933 Act. The Trust will furnish to the Distributor, at the
Distributor's expense, a reasonable number of copies of the Prospectus and SAI
and any amended Prospectus and SAI for use in connection with the sale of
shares.
7. The Trust has already registered under the 1940 Act as an
investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of the 1940 Act.
8. The Distributor agrees that:
(a) neither it nor any of its officers shall take any long or short
position in the shares of any Fund; provided, however, that this subsection (a)
shall not prevent the Distributor or its officers from acquiring shares of any
Fund for investment purposes only;
(b) it shall furnish to the Trust any pertinent information required to be
inserted, with respect to it as Distributor within the purview of the 1933 Act,
in any reports or registration required to be filed with any governmental
authority; and
(c) it shall not make any representations inconsistent with the information
contained in the Registration Statement of the Trust filed under the 1933 Act,
as in effect from time to time.
9. The Trust shall pay its legal and auditing expenses and the
cost of composition, printing and mailing of sufficient copies of its Prospectus
and SAI as shall be required for annual distribution to shareholders and the
expense of registering shares for sale under federal securities laws. The
Distributor shall pay the expenses normally attributable to such sales as it may
make, including advertising and the cost of printing and mailing of the Trust's
Prospectus and SAI other than those furnished to existing shareholders. The
Trust has adopted a separate plan of distribution (collectively, the "Plan")
pursuant to the provisions of Rule 12b-1 of the 1940 Act on behalf of its Class
A Series, Class B Series, Class C Series and Class AAA Series shares,
respectively, each of which provides for the payment of administrative and sales
related expenses in connection with the distribution of Fund shares and the
Distributor agrees to take no action inconsistent with said Plan.
10. The Trust agrees to indemnify, defend and hold the
Distributor, its officers, Trustees, employees and agents and any person who
controls the Distributor within the meaning of Section 15 of the 1933 Act (each,
an "indemnitee"), free and harmless from any and all liabilities and expenses,
including costs of investigation or defense (including reasonable counsel fees)
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
indemnitee may be or may have been involved as a party or otherwise or with
which he may be or may have been threatened, while the Distributor was active in
such capacity or by reason of the Distributor having acted in any such capacity
or arising out of or based upon any untrue statement of a material fact
contained in the then-current Prospectus relating to the shares or arising out
of or based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such claims, demands, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information furnished
in writing by the Distributor to the Trust expressly for use in any such
Prospectus; provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Trust or the shareholders of the Trust or
any expense of such indemnitee with respect to any matter as to which such
indemnitee shall have been adjudicated not to have acted in good faith in the
reasonable belief that its action was in the best interest of the Trust or
arising by reason of such indemnitee's willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement ("disabling conduct"), or (2)
as to any matter disposed of by settlement or a compromise payment by such
indemnitee, no indemnification shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Trust and that such indemnitee appears to have acted in good faith in the
reasonable belief that its action was in the best interest of the Trust and did
not involve disabling conduct by such indemnitee. Notwithstanding the foregoing,
the Trust shall not be obligated to provide any such indemnification to the
extent such provision would waive any right which the Trust cannot lawfully
waive.
The Distributor agrees to indemnify, defend and hold the
Trust, its Trustees, officers, employees and agents and any person who controls
the Trust within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense shall arise out of or be based upon any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor of the Trust expressly for use in a Prospectus or any
alleged omission to state a material fact in connection with such information
required to be stated therein or necessary to make such information not
misleading or arising by reason of disabling conduct by such indemnitee or any
person selling shares pursuant to an agreement with the Distributor.
The Trust shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Trust receives a written affirmation of the indemnitee's
good faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to reimburse the Trust unless it is
subsequently determined that he is entitled to such indemnification and if the
Trustees of the Trust determine that the facts then known to them would not
preclude indemnification. In addition, at least one of the following conditions
must be met: (A) the indemnitee shall provide a security for his undertaking,
(B) the Trust shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of Trustees of the Trust who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the Act)
nor parties to this Agreement ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such indemnitee is not liable by
reason of disabling conduct or, (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-Party Trustees, or (ii) if
such a quorum is not obtainable or even, if obtainable, if a majority vote of
such quorum so directs, independent legal counsel in a written opinion.
11. This Agreement shall become effective on the date first
set forth above and shall remain in effect for up to two years from such date
(one year in the case of Section 9) and thereafter from year to year provided
that such continuance shall be specifically approved at least annually (a) by
the Trust's Board of Trustees, including a vote of a majority of the
Disinterested Non-Party Trustees, 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.
12. This Agreement may be terminated (a) by the Distributor at
any time without penalty by giving sixty days' written notice (which notice may
be waived by the Trust), or (b) by the Trust at any time without penalty upon
sixty days' written notice to the Distributor (which notice may be waived by the
Distributor), provided that such termination by the Trust shall be directed or
approved in the same manner as required for continuance of this Agreement by
Section 11(a) (or, in the case of termination of Section 9, by Section 11(b)).
13. This Agreement may not be amended or changed except in
writing and shall be binding upon and shall enure to the benefit of the parties
hereto and their respective successors, but this Agreement shall not be assigned
by either party and shall automatically terminate upon assignment.
14. The Distributor understands and agrees that the
obligations of the Trust under this Agreement are not binding upon any
shareholder of the Trust personally, but only the Trust's property; the
Distributor represents that it has notice of the provisions of the Declaration
of Trust of the Trust disclaiming shareholder liability for acts or obligations
of the Trust.
15. The date of this Agreement shall be for reference purposes
only and shall not be construed to imply that this Agreement was effective on
the date first above written. This Agreement shall become effective on the date
on which the Registration Statement of the Trust shall become effective in
accordance with the provisions of the 1933 Act.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Distribution Agreement as of the date first above written.
THE GABELLI WESTWOOD FUNDS
By
GABELLI & COMPANY, INC.
By
<PAGE>
EXHIBIT A
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
dated as of ________________
BETWEEN THE GABELLI WESTWOOD FUNDS AND
GABELLI & COMPANY, INC. (the "Agreement")
Below are listed the Trust's separate series of shares (the "Funds")
under which this Agreement 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
EXHIBIT (I)
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, NY 10022-3205
(212) 856-7000
(212) 856-7816
January 31, 2000
The Gabelli Westwood Funds
One Corporate Center
Rye, NY 10580-1434
Gentlemen:
We have acted as counsel to The Gabelli Westwood Funds, a
Massachusetts business trust (the "Trust"), in connection with the preparation
and filing of certain amendments to the Registration Statement No. 33-6790 on
Form N-1A (the "Registration Statement") covering the issuance and sale of an
indefinite number of shares of beneficial interest, of the Trust.
We have examined copies of the Agreement and Declaration of
Trust and By-Laws of the Trust, the Registration Statement, and such other
records and documents, proceedings and documents, including the consent of the
Board of Trustees and the minutes of the meeting of the Board of Trustees of the
Trust, as we have deemed necessary for the purpose of this opinion. In our
examination of such material, we have assumed the genuineness of all signatures
and the conformity to original documents of all copies submitted to us. As to
various questions of fact material to such opinion, we have relied upon
statements and certificates of officers and representatives of the Trust and
others.
We are not admitted to the practice of law in any jurisdiction
but the State of New York and we do not express any opinion as to the laws of
other states or jurisdictions except as to matters of Federal law and, with
respect to the limited scope of this opinion, Massachusetts law.
<PAGE>
Based upon and subject to the foregoing, we are of the opinion
that the shares of beneficial interest of the Trust, to be issued in accordance
with the terms of the offering, as set forth in the Prospectus and Statement of
Additional Information included as part of the Registration Statement, and when
issued and paid for, will constitute validly authorized and legally issued
shares, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us in the Registration
Statement under the heading "Counsel" in the Registration Statement.
Very truly yours,
/s/ Battle Fowler LLP
Battle Fowler LLP
EXHIBIT (J)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated November 8, 1999, relating to the
financial statements and financial highlights which appears in the September 30,
1999 Annual Report of The Gabelli Westwood Funds, which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Financial Highlights", "Independent Auditors" and
"Financial Statements" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
January 27, 2000
EXHIBIT (l)
PURCHASE AGREEMENT
The Gabelli Westwood Funds (the "Trust"), a Massachusetts business trust,
and Gabelli & Company, Inc. (the "Buyer") hereby agree as follows:
1. The Trust hereby offers the Buyer and the Buyer hereby purchases 1
share of each of the Class A shares of the Gabelli Westwood SmallCap Equity
Fund, the Gabelli Westwood Mighty Mites Fund and the Gabelli Westwood Realty
Fund and Class B shares and Class C shares of each of the funds (each a "Fund")
of the Trust (the "Shares") at the net asset value per share of the Class AAA
shares on the date hereof. The Shares are the "initial shares" of each such
class. The Buyer hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Shares, and the Trust hereby acknowledges receipt
from the Buyer of funds as full payment for the Shares.
2. The Buyer represents and warrants to the Trust that the Shares
purchased by the Buyer are being acquired for investment purposes and not for
the purpose of distribution.
3. The Trust represents that a copy of its Agreement and Declaration of
Trust, dated June 12, 1986, is on file in the Office of the Secretary of the
Commonwealth of Massachusetts.
4. This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Fund in his or her capacity as an officer of the
Trust.
5. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 26th day of January, 2000.
Attest: THE GABELLI WESTWOOD FUNDS
/s/ Ludmilla Pompadur By: /s/ James McKee
Secretary
<PAGE>
Attest: GABELLI & COMPANY, INC.
/s/ Ludmilla Pompadur By: /s/ Bruce Alpert
Vice President and Treasurer
