Registration Nos. 33-30139
811-5848
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. 13 X
------ --
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 X
------ --
THE GABELLI VALUE FUND INC.
(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 Funds, LLC
One Corporate Center
Rye, New York 10580-1434
(Name and Address of Agent for Service)
Copies to:
James E. McKee, Esq. Daniel Schloendorn, Esq.
Gabelli Value Fund Inc. Willkie Farr & Gallagher
One Corporate Center 787 Seventh Avenue
Rye, New York 10580-1434 New York, New York 10022-4469
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b)
X on May 1, 1998 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 Registrant will file a Rule 24f-2 Notice for its fiscal year
ended December 31, 1998 no later than March 31, 1999.
<PAGE>
THE GABELLI VALUE FUND INC.
One Corporate Center
Rye, New York 10580-1434
Telephone: 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
PROSPECTUS
May 1, 1999
Class A Shares
Class B Shares
Class C Shares
This Prospectus contains important information about
the Fund. Please read it before investing and keep it
for future reference.
================================================================================
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
================================================================================
<PAGE>
G:\shared\boslegal\clients\gabvalue\peas\1999\prosp99.doc
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
INVESTMENT AND PERFORMANCE SUMMARY................................................................................1
INVESTMENT AND RISK INFORMATION...................................................................................3
MANAGEMENT OF THE FUND............................................................................................7
CLASSES OF SHARES.................................................................................................8
PURCHASE OF SHARES...............................................................................................10
REDEMPTION OF SHARES.............................................................................................13
EXCHANGES OF SHARES..............................................................................................16
PRICING OF FUND SHARES...........................................................................................16
DIVIDENDS AND DISTRIBUTIONS......................................................................................17
TAX INFORMATION..................................................................................................17
FINANCIAL HIGHLIGHTS.............................................................................................18
</TABLE>
<PAGE>
- 24 -
INVESTMENT AND PERFORMANCE SUMMARY
Investment Objective:
The Fund seeks to provide long-term capital appreciation. 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 will primarily invest in equity securities consisting of common
stocks, preferred stocks and securities which may be converted into common
stocks. The Fund focuses on securities of companies which appear underpriced
relative to their "private market value." Private market value is the value the
Fund's adviser believes informed investors would be willing to pay for a
company. Who May Want to Invest:
The Fund may appeal to you if:
you are a long-term investor or saver
you are willing to accept the higher risks of losing a
portion of your principal in exchange for the opportunity to
potentially earn higher long-term returns
you seek growth of capital
you believe that the market will favor value over growth
stocks over the long term you wish to include a value
strategy as a portion of your overall investments. you prefer
to invest in a more concentrated portfolio.
You may not want to invest in the Fund if: you are seeking a high level of
current income you are conservative in your investment approach you seek to
maintain the value of your original investment more than potential growth of
capital
Principal Risks:
The Fund's share price will fluctuate with changes in the market value of
the Fund's portfolio securities. Stocks are subject to market, economic and
business risks that cause their prices to fluctuate. When you sell Fund shares,
they may be worth less than what you paid for them. Consequently, you can lose
money by investing in the Fund. The Fund is also subject to the risk that the
portfolio securities' private market values may never be realized by the market,
or their prices may go down. An investment in the Fund is not a deposit of a
bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Performance:
The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year (since commencement of operations), and by showing how the Fund's average
annual returns for one year, five years and the life of the Fund compare to
those of the S&P(R) 500 Stock Index. As with all mutual funds, the Fund's past
performance does not predict how the Fund will perform in the future. Both the
chart and the table assume reinvestment of dividends and distributions.
BAR CHART* [Graphic Omitted]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Returns
1989 2.1%
1990 (5.6)%
1991 15.3%
1992 12.7%
1993 39.4%
1994 0.0%
1995 22.5%
1996 8.7%
1997 48.2%
1998 23.2%
*The Class B and Class C shares of the Fund are new classes for which
performance is not yet available. The returns of 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 will differ.
Class A 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
period shown in the bar chart, the highest return for a quarter was 21.3%
(quarter ended June 30, 1997) and the lowest return for a quarter was (13.2%)
(quarter ended September 30, 1998).
- ----------------------------------------------- ------------------
- ------------------ ------------------------------- Average Annual Total Returns
Past One Year Past Five Years Since September 29, 1989* (for the periods ended
December 31, 1998) -----------------------------------------------
- ------------------ ------------------ -------------------------------
- ----------------------------------------------- ------------------
- ------------------ ------------------------------- The Gabelli Value Fund Class
A shares 16.5% 18.1% 16.2% -----------------------------------------------
- ------------------ ------------------ -------------------------------
- ----------------------------------------------- ------------------
- ------------------ ------------------------------- S&P(R)500 Stock Index**
28.58% 24.05% 17.62% -----------------------------------------------
- ------------------ ------------------ -------------------------------
* From September 29, 1989, the date that the Fund began operations.
** The S&P(R) 500 Composite Stock Price Index is a widely recognized, unmanaged
index of common stock prices. The performance of the Index does not include
expenses or fees and includes the effect of the 5.0% initial sales charge.
<PAGE>
Fees and Expenses of the Fund:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Class A Class B Class C
Shareholder Fees (fees paid directly from your investment): Shares Shares Shares
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)........................................ 5.50%1 None None
Maximum Deferred Sales Charge (Load) ...................................... None 5.00%2 1.00%2
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees............................................................ 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Expenses3............................ 0.25% 1.00% 1.00%
Other Expenses............................................................. 0.15% 0.15% 0.15%
---- ---- ----
Total Annual Operating Expenses............................................ 1.40% 2.15% 2.15%
==== ==== ====
..................
1 The sales charge declines as a percentage of your investment as the amount
invested increases. 2 The Fund imposes a CDSC, which is a back-end sales charge
(load), upon redemption if you sell your Class B
shares within approximately eighty-five months after purchase. A maximum
CDSC of 1% applies to redemptions of Class C shares within twenty-four
months after purchase.
3 As a result of the payment of sales charges and Rule 12b-1 expenses, long
term shareholders may pay more than the maximum permitted front-end sales
charge.
</TABLE>
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 that
(1) you invest $10,000 in the Fund for the time periods indicated, (2) you
redeem your shares at the end of those periods (except as noted), (3) your
investment has a 5% return and (4) the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years ------ -------
- ------- --------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Shares $685 $969 $1,274 $2,137
Class B Shares
-assuming redemption $732 $1,217 $1,730 $3,145
-assuming no redemption $218 $673 $1,154 $2,483
Class C Shares
-assuming redemption $321 $782 $1,269 $2,615
-assuming no redemption $218 $673 $1,154 $2,483
</TABLE>
INVESTMENT AND RISK INFORMATION
The Fund's investment objective is long-term capital appreciation. The
Fund's investment objective may not be changed without shareholder approval. The
Fund seeks to achieve its investment objective by investing principally in
equity securities consisting of: common stocks, preferred stocks and other
securities convertible into, or exchangeable for, common stocks. The Fund
invests primarily in equity securities of companies which the Fund's adviser,
Gabelli Funds, LLC (the "Adviser"), believes are undervalued and have the
potential to achieve significant capital appreciation. The Adviser invests in
companies whose stocks are selling at a significant discount to their "private
market value." Private market value is the value the Adviser believes informed
investors would be willing to pay to acquire the entire company. If investor
attention is focused on the underlying asset value of a company due to expected
or actual developments or other catalysts, an investment opportunity to realize
this private market value may exist. Undervaluation of a company's stock can
result from a variety of factors, such as a lack of investor recognition of the
underlying value of a company's fixed assets, the value of a consumer or
commercial franchise, changes in the economic or financial environment affecting
the company, new, improved or unique products or services, new or rapidly
expanding markets, technological developments or advancements affecting the
company or its products, or changes in governmental regulations, political
climate or competitive conditions.
The actual events that may lead to a significant increase in the value of a
company's securities include: a change in the company's management or management
policies, an investor's purchase of a large portion of the company's stock, a
merger or reorganization or recapitalization of the company, a sale of a
division of the company, a tender offer (an offer to purchase investors'
shares), the spin-off to shareholders of a subsidiary, division or other
substantial assets, or the retirement or death of a senior officer or
substantial shareholder of the company.
In selecting investments, the Adviser also considers the market price of
the issuer's securities, its balance sheet characteristics and the perceived
strength of its management. The Fund invests primarily in a diversified
portfolio of readily marketable common stocks and preferred stocks. The Fund may
also use the following investment techniques: Defensive Investments. When
opportunities for capital appreciation do not appear attractive or when adverse
market or economic conditions occur, the Fund may temporarily invest all or a
portion of its assets in short-term money market instruments. Such instruments
include obligations of the U.S. Government and its agencies and
instrumentalities, high-quality commercial paper (rated at least "A-1" by S&P or
"P-1" by Moody's), bank certificates of deposit and time deposits, repurchase
agreements with respect to such instruments, and certain money market mutual
funds. When following a defensive strategy, the Fund will be less likely to
achieve its investment goal of capital appreciation.
Corporate Reorganizations. The Fund may invest up to 50% of its total
assets in securities for which a tender or exchange offer has been made
or announced and in securities of companies for which a merger,
consolidation, liquidation or similar reorganization proposal has been
announced ("reorganization securities"). Frequently, the holders of
securities of companies involved in such transactions will receive new
securities ("substituted securities") in exchange therefor. No more
than 30% of the Fund's total assets, however, may be invested in
reorganization securities where the Adviser anticipates selling the
reorganization securities or the substituted securities within six
months or less of the initial purchase of the reorganization
securities. This limitation, however, will not apply to reorganization
securities that have been purchased to supplement a position in such
securities held by the Fund for more than six months.
Convertible and Nonconvertible Corporate Debt Obligations. The Fund
may invest up to 35% of its assets in convertible securities or
nonconvertible debt securities having a rating lower than a Standard &
Poor's Ratings Services, a division of McGraw-Hill Companies, Inc.
("S&P"), rating of "CCC", a Moody's Investors Service, Inc. ("Moody's")
rating of "Caa" or, if unrated, judged by the Adviser to be of
comparable quality. However, as a matter of current operating policy,
the Adviser and Fund have agreed that the Fund will not invest more
than 35% of the Fund's total assets in debt securities rated less than
S&P's BBB or the equivalent by other major rating agencies or, if
unrated, judged by the Adviser to be of comparable quality. These debt
securities are predominantly speculative and involve major risk
exposure to adverse conditions, and are often referred to in the
financial press as "junk bonds".
Foreign Securities. The Fund may invest up to 25% of its total assets
in foreign securities. Among the foreign securities in which the Fund
may invest are those issued by companies located in developing
countries, which are countries in the initial stages of their
industrialization cycles. Developing countries often face serious
economic problems (such as high external debt, inflation and
unemployment) that could subject the Fund to increased volatility or
substantial declines in value. The Fund may also invest in debt
securities of foreign governments. Investments in sovereign debt
involve special risks. The issuer of the debt or the governmental
authorities that control the repayment of the debt may be unable or
unwilling to repay principal or interest when due in accordance with
the terms of the debt.
The Fund may have limited legal recourse in the event of a default.
American Depositary Receipts. The Fund may purchase American
Depositary Receipts ("ADRs") or U.S. dollar-denominated securities of
foreign issuers that are not included in the Fund's 25% limitation on
foreign securities. ADRs are receipts issued by U.S. banks or trust
companies with respect to securities of foreign issuers held on deposit
for use in the U.S. securities markets. While ADRs may not necessarily
be denominated in the same currency as the securities into which they
may be converted, many of the risks associated with foreign securities
may also apply to ADRs.
Derivative Instruments.
Options. The Fund may purchase or sell (that is, write) listed options
on securities to achieve additional return or to hedge the value of the
Fund's portfolio. The Fund may write covered call options in an amount
not to exceed 25% of total assets. The Fund will not purchase options
if, as a result, the aggregate cost of all outstanding options exceeds
10% of the Fund's total assets.
The Fund will generally purchase or write only those options for which
there appears to be an active secondary market. There is no assurance,
however, that a liquid secondary market on an exchange will exist for
any particular option. The Fund may only buy options that are listed on
a national securities exchange.
The Fund may write put and call options on stock indexes to increase
its gross income and to protect its portfolio against declines in the
value of the securities it owns or increases in the value of securities
it plans to acquire. In addition, the Fund may purchase put and call
options on stock indexes in order to hedge its investments against a
decline in value or to attempt to reduce the risk of missing a market
or industry segment advance.
Futures Contracts and Options on Futures. The Fund may enter into
futures contracts and options on futures contracts that are traded on a
U.S. exchange or board of trade solely for the purpose of hedging
against changes in the value of its portfolio securities. The aggregate
initial margins and premiums on such investments may not constitute
more than 5% of the Fund's total assets.
Investing in the Fund involves the following risks, listed in the order
of importance.
Market Risk. The principal risk of investing in the Fund is market
risk. Market risk is the risk that the prices of the securities held by
the Fund will change due to general market and economic conditions,
perceptions regarding the industries in which the companies issuing the
securities participate and the issuer company's particular
circumstances.
Fund Risk. The Fund invests in stocks issued by companies believed by
the Adviser to be trading at a discount to their private market values
(value stocks). The Fund's price may decline because the market favors
other stocks, or small capitalization stocks over stocks of larger
companies. If the Adviser is incorrect in its assessment of the private
market values of the securities it holds, then the value of the Fund's
shares may decline.
Concentration Risk. The Fund is a "non-diversified investment company"
which means that it can concentrate its investments in the securities
of a single company to a greater extent than a diversified investment
company. Because the Fund may invest its assets in the securities of a
limited number of companies, a decline in the value of the stock of any
one of these issuers will have a greater impact on the Fund's share
price. In addition, many companies in the past several years have
adopted so-called "poison pill" and other defensive measures. Such
measures may limit the amount of securities in any one issuer that the
Fund may buy. This may limit tender offers or other non-negotiated
offers for a company and/or prevent competing offers.
Risks of Focusing on Corporate Reorganizations. The Fund may invest a
substantial portion of its assets in securities of companies that are
involved or may become involved in corporate transactions such as
tender offers and corporate reorganizations. The principal risk of this
type of investing is that the anticipated transactions may not be
completed at the anticipated time or upon the expected terms, in which
case the Fund may suffer a loss on its investments.
Lower Rated Securities. The Fund may invest in lower rated securities,
including up to 5% of its assets in securities of issuers that are in
default. These securities carry a higher risk that the issuer will be
unable to pay principal and interest when due, and the market to sell such
securities may be limited. These securities are often referred to in the
financial press as "junk bonds."
Foreign Risk. Investments in foreign securities involve risks relating to
political, social and economic developments abroad, as well as risks resulting
from the differences between the regulations to which U.S. and foreign issuers
and markets are subject:
- These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets
and political or social instability.
- Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
- Foreign companies may be not subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be less
public information about their operations.
- Foreign markets may be less liquid and more volatile than U.S. markets.
- Foreign securities often trade in currencies other than the U.S.
dollar, and the Fund may directly hold foreign currencies and
purchase and sell foreign currencies. Changes in currency
exchange rates will affect the Fund's net asset value, the value
of dividends and interest earned, and gains and losses realized
on the sale of securities. An increase in the strength of the
U.S. dollar relative to these other currencies may cause the
value of the Fund to decline. Certain foreign currencies may be
particularly volatile, and foreign governments may intervene in
the currency markets, causing a decline in value or liquidity of
the Fund's foreign currency holdings.
- Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than
those involved in domestic transactions.
The Fund's investments in the equity and debt markets of developing
countries involves exposure to economic structures that are generally less
diverse and less mature, and to political systems that can be expected to have
less stability, than those of developed countries. The markets of developing
countries historically have been more volatile than the markets of the more
mature economies of developed countries, but often have provided higher rates of
return to investors.
Hedging Risk. The Fund may use options and futures to hedge the risks
of investing in the Fund. The success of hedging depends on the
Adviser's ability to predict movements in the prices of the hedged
securities and market fluctuations. The Adviser may not be able to
perfectly correlate changes in the market value of securities and the
prices of the corresponding options or futures. The Adviser may have
difficulty selling or buying futures contracts and options when it
chooses and there may be certain restrictions on trading futures
contracts and options. The Fund is not obligated to pursue any hedging
strategy. In addition, hedging practices may not be available, may be
too costly to be used effectively or may be unable to be used for other
reasons.
MANAGEMENT OF THE FUND
The Adviser. Gabelli Funds, LLC, with principal offices located at One
Corporate Center, Rye, New York 10580-1434, serves as investment adviser to the
Fund. The Adviser makes investment decisions for the Fund and continuously
reviews and administers the Fund's investment program under the supervision of
the Fund's Board of Directors. The Adviser and its affiliates manage several
other open-end and closed-end investment companies in the Gabelli family of
funds. The Adviser is a New York limited liability company organized in 1999 as
successor to Gabelli Funds, Inc., a New York Corporation organized in 1980. The
Adviser is a wholly-owned subsidiary of Gabelli Asset Management Inc. ("GAMI"),
a publicly held company listed on the New York Stock Exchange, Inc.
("NYSE").
As compensation for its services and the related expenses borne by the
Adviser, for the fiscal year ended December 31, 1998, the Fund paid the Adviser
an annual fee equal to 1.00% of the value of the Fund's average daily net
assets. The Portfolio Manager. Mario J. Gabelli, CFA, is primarily responsible
for the day-to-day management of the Fund. Mr. Gabelli has been Chairman, Chief
Executive Officer and Chief Investment Officer of the Adviser and its
predecessor since inception in 1980 and of its parent company, GAMI, since 1999.
Mr. Gabelli also acts as Chief Executive Officer and Chief Investment Officer of
GAMCO, and is an officer or director of various other companies affiliated with
GAMI. The Adviser relies to a considerable extent on the expertise of Mr.
Gabelli, who may be difficult to replace in the event of his death, disability
or resignation.
Year 2000. As the year 2000 approaches, an issue has emerged regarding
how the software used by the Fund's service providers can accommodate the date
"2000." Failure to adequately address this issue could result in major systems
or process failures which could disrupt the Fund's operations. The Adviser is in
the process of working with the Fund's service providers to prepare for the year
2000. Based on information currently available, the Adviser does not expect that
the Fund will incur significant operating expenses or be required to incur
material costs to be year 2000 compliant. The Fund cannot guarantee, however,
that all year 2000 issues will be identified and corrected by January 1, 2000.
The Year 2000 issue also affects companies and governmental entities in which
the Fund invests. To the extent that the impact on a Fund holding is negative,
it could seriously affect the Fund's performance.
CLASSES OF SHARES
Three classes of the Fund's shares are offered in this prospectus - Class A
shares, Class B shares, and Class C shares. Class B and Class C shares are newly
offered. The table below summarizes the differences among the classes of shares.
a "front-end sales load," or sales charge, is a one-time fee charged
at the time of purchase of shares. a "contingent deferred sales
charge" ("CDSC") is a one-time fee charged at the time of redemption.
a "Rule 12b-1 fee" is a recurring annual fee for distributing shares
and servicing shareholder accounts
based on the Fund's average daily net assets attributable to the particular
class of shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Shares Class B Shares Class C Shares
Front-End Sales Load? Yes. The percentage No. No.
declines as the amount
invested increases.
Contingent Deferred Sales No. Yes, for shares redeemed Yes, for shares redeemed
Charge? within eighty-four within twenty-four
months after purchase. months of purchase.
Declines over time.
Rule 12b-1 Fee? 0.25% 1.00% 1.00%
Convertible to Another No. Yes. Automatically No.
Class? converts to Class A
shares after
approximately seven
years.
</TABLE>
Fund Expense Levels Lower annual expenses Higher annual
expenses Higher annual expenses than Class B or
Class C than Class A shares. than Class A shares
shares.
In selecting a class of shares in which to invest, you should consider: the
length of time you plan to hold the shares. the amount of sales charge and Rule
12b-1 fees. whether you qualify for a reduction or waiver of the Class A sales
charge. that Class B shares convert to Class A shares approximately seven year
after purchase.
- ------------------------------------------------------ ------------------------
If you . . . then you should consider
- ------------------------------------------------------ -------------------------
- ------------------------------------------------------ -------------------------
o intend to hold your shares for less than seven purchasing Class C shares
instead of either Class A years or Class B shares
o do not qualify for a reduced or waived front-
end sales load
- ------------------------------------------------------ -------------------------
- ------------------------------------------------------ -------------------------
o intend to hold your shares for six years or purchasing Class B shares
instead of either Class A more shares or Class C shares
o do not qualify for a reduced or waived front-
end sales load
- ------------------------------------------------------ -------------------------
- ------------------------------------------------------ -------------------------
o qualify for a reduced or waived front-end purchasing Class A shares no
matter how long you sales load intend to hold your shares
- ------------------------------------------------------ -------------------------
Conversion Feature - Class B Shares
Class B shares automatically convert to Class A shares of the Fund on
the first business day of the eighty-fifth month following the month in
which you acquired such shares.
After conversion, your shares will be subject to the lower Rule 12b-1
fees charged on Class A shares, which will increase your investment
return compared to the Class B shares.
You will not pay any sales charge or fees when your shares convert,
nor will the transaction be subject to any tax.
If you exchange Class B shares of one fund for Class B shares of
another fund (See "Exchanges of Shares"), your holding period will be
calculated from the time of your original purchase of Class B shares.
The dollar value of Class A shares you receive will equal the dollar
value of the B shares converted.
The Board of Directors may suspend the automatic conversion of Class B to
Class A shares for legal reasons or due to the exercise of its fiduciary duty.
If the Board determines that such suspension is likely to continue for a
substantial period of time, it will create another class of shares into which
Class B shares are convertible.
PURCHASE OF SHARES
You can purchase the Fund's shares on any day the NYSE is open for trading
(a "Business Day"). You may purchase shares through Gabelli & Company, Inc. (the
"Distributor"), directly from the Fund, through the Fund's transfer agent or
through broker-dealers that have entered into selling agreements with the
Distributor ("Soliciting Broker-Dealers"). From a Soliciting Broker-Dealer. You
may purchase shares from Soliciting Broker-Dealers. The Soliciting Broker-Dealer
will transmit a purchase order and payment to State Street on your behalf.
Soliciting Broker-Dealers may send you confirmations of your transactions and
periodic account statements showing your investments in the Fund.
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 Value Fund" to:
By Mail By Personal Delivery
The Gabelli Funds The Gabelli Funds
P.O. Box 8308 The BFDS Building, 7th Floor
Boston, MA 02266-8308 Two Heritage Drive
Quincy, MA 02171
You can obtain a subscription order form by calling 1-800-422-3554.
Checks made payable to a third party and endorsed by the depositor are
not acceptable. For additional investments, send a check to the above
address with a note stating your exact name and account number, the
name of the Fund and class of shares you wish to purchase.
By Bank Wire. To open an account using the bank wire system, first
telephone the Fund at 1-800-422-3554 to obtain a new account number.
Then instruct a Federal Reserve System member bank to wire funds to:
State Street Bank and Trust Company
ABA #011-0000-28 REF DDA #99046187
Re: The Gabelli Value Fund
Class ___ Shares
Account #__________
Account of [Registered Owners]
225 Franklin Street, Boston, MA 02110
If you are making an initial purchase, you should also complete and
mail a subscription order form to the address shown under "By Mail."
Note that banks may charge fees for wiring funds, although State Street
Bank and Trust Company ("State Street") will not charge you for
receiving wire transfers.
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. Soliciting Broker-Dealers may have different minimum investment
requirements.
Share Price. The Fund sells its shares at the "net asset value" next determined
after the Fund receives your completed subscription order form and your payment
in Federal funds, subject to a sales charge. See "Pricing of Fund Shares" for a
description of the calculation of net asset value. The sales charge is imposed
on Class A shares in accordance with the following schedule:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sales Charge Sales Charge Reallowance
as % of the as % of to Soliciting
Amount of Investment Offering Price* Amount Invested Broker-Dealers
Less than $100,000................................... 5.50% 5.82% 4.50%
$100,000 but under $250,000.......................... 4.50% 4.71% 3.75%
$250,000 but under $500,000.......................... 3.50% 3.63% 3.00%
$500,000 but under $1 million........................ 2.75% 2.83% 2.50%
$1 million or more................................... 2.00% 2.04% 1.75%
*Includes front-end sales load
</TABLE>
Reduced Sales Charges - Class A Shares
Reduced sales charges are available to (1) investors who are eligible to
combine their purchases of Class A shares to receive volume discounts and (2)
investors who sign a Letter of Intent and agree to make purchases over time.
Certain types of investors are eligible for sales charge waivers. Volume
Discounts. Investors eligible to receive volume discounts are individuals and
their immediate families, tax-qualified employee benefit plans and a trustee or
other fiduciary purchasing shares for a single trust estate or single fiduciary
account even though more than one beneficiary is involved. You also may combine
the value of Class A shares you already hold in the Fund and other funds advised
by Gabelli Funds, LLC or its affiliates along with the value of the Class A
shares being purchased to qualify for a reduced sales charge. For example, if
you own Class A shares of the Fund that have an aggregate value of $100,000, and
make an additional investment in Class A shares of the Fund of $4,000, the sales
charge applicable to the additional investment would be 4.50%, rather than the
5.50% normally charged on a $4,000 purchase. If you want more information on
volume discounts, call the Distributor at 1-800-GABELLI (1-800-422-3554) or your
broker.
Letter of Intent. If you initially invest at least $1,000 in Class A shares of
the Fund and submit a Letter of Intent to the Distributor, you may make
purchases of Class A shares of the Fund during a 13-month period at the reduced
sales charge rates applicable to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. For more information on the Letter of Intent,
call 1-800-GABELLI (1-800-422-3554).
Investors Eligible for Sales Charge Reductions. Class A shares of the Fund may
be offered without a sales charge to (1) employees of Gabelli & Company, Inc.
Boston Safe Deposit and Trust Company ("Boston Safe"), BFDS, State Street, First
Data Investor Services Group, Inc. and Soliciting Broker-Dealers, employee
benefit plans for those employees and the spouses and minor children of such
employees when orders on their behalf are placed by such employees (the minimum
initial investment for such purchases is $500); (2) the Adviser, GAMCO,
officers, directors, trustees, general partners, directors and employees of
other investment companies managed by the Adviser, employee benefit plans for
such persons and their spouses and minor children when orders on their behalf
are placed by such persons (with no required minimum initial investment), the
term "immediate family" for this purpose refers to a person's spouse, children
and grandchildren (adopted or natural), parents, grandparents, siblings, a
spouse's siblings, a sibling's spouse and a sibling's children; (3) any other
investment company in connection with the combination of such company with the
Fund by merger, acquisition of assets or otherwise; (4) shareholders who have
redeemed shares in the Fund and who wish to reinvest their redemption proceeds
in the Fund, provided the reinvestment is made within 30 days of the redemption;
(5) tax-exempt organizations enumerated in Section 501(c)(3) of the Internal
Revenue Code of 1986 (the "Code") and private, charitable foundations that in
each case make lump-sum purchases of $100,000 or more; (6) qualified employee
benefit plans established pursuant to Section 457 of the Code that have
established omnibus accounts with the Fund; (7) qualified employee benefit plans
having more than one hundred eligible employees and a minimum of $1 million in
plan assets invested in the Fund (plan sponsors are encouraged to notify the
Fund's distributor when they first satisfy these requirements); (8) any unit
investment trusts registered under the Investment Company Act of 1940 (the "1940
Act") which have shares of the Fund as a principal investment; (9) investment
advisory clients of GAMCO and their immediate family; (10) employee participants
of organizations adopting the 401(k) Plan sponsored by the Adviser; (11)
financial institutions purchasing Class A shares of the Fund for clients
participating in a fee based asset allocation program or wrap fee program which
has been approved by the Distributor; and (12) registered investment advisers or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge a management, consulting or other fee for their
services; and clients of such investment advisers or financial planners who
place trades for their own accounts if the accounts are linked to the master
account of such investment adviser or financial planner on the books and records
of a broker or agent. Investors who qualify under the categories described above
should contact their brokerage firm or the Distributor.
Retirement Plans
The Fund has available a form of IRA for investment in Fund shares that
may be obtained from the Distributor by calling 1-800-GABELLI (1-800-422-3554).
Self-employed investors may purchase shares of the Fund through tax-deductible
contributions to existing retirement plans for self-employed persons, known as
Keogh or H.R. 10 plans. The Fund does not currently act as sponsor to such
plans. Fund shares may also be a suitable investment for other types of
qualified pension or profit-sharing plans which are employer sponsored,
including deferred compensation or salary reduction plans known as "401(k)
Plans" which give participants the right to defer portions of their compensation
for investment on a tax-deferred basis until distributions are made from the
plans. The minimum initial investments for all such retirement plans is $250.
The minimum for all subsequent investments is $100.
Distribution Plan
The Fund has adopted a plan under Rule 12b-1 (the "plan") for each of its
classes of shares. Under the plan, the Fund may use its assets to finance
activities relating to the sale of its shares and the provision of certain
shareholder services. The Fund pays the Rule 12b-1 fees to the Distributor,
which uses the fees primarily to pay (1) ongoing service fees to securities
dealers (which may include the Distributor itself) and (2) fees to other
organizations which provide services such as processing account applications,
maintaining shareholder sub-accounts, mailing shareholder reports, transaction
confirmations and monthly statements, and serving as the primary information
source to customers concerning the Funds. The Rule 12b-1 fees vary by class as
follows: Class A Class B Class C Service Fees None 0.25% 0.25% Distribution Fees
0.25% 0.75% 0.75% These are annual rates based on the value of each Class'
average daily net assets. Because the Rule 12b-1 fees are higher for Class B and
Class C shares than Class A shares, Class B and Class C shares will have higher
annual expenses. Automatic Investment Plan
The Fund offers an automatic monthly investment plan. There is no
minimum monthly investment for accounts establishing an automatic
investment plan. Call the Distributor at 1-800-GABELLI (1-800-422-3554) for
more details about the plan. State Street will not issue share certificates
unless requested by you. The Fund reserves the right to (i) reject any
purchase order if, in the opinion of Fund management, it is in the Fund's
best interest to do so and (ii) suspend the offering of shares for any
period of time.
REDEMPTION OF SHARES
You can redeem shares on any Business Day without a redemption fee.
The Fund may temporarily stop redeeming its shares when the NYSE is closed
or trading on the NYSE is restricted, when an emergency exists and the Fund
cannot sell its shares or accurately determine the value of its assets, or
if the Securities and Exchange Commission ("SEC") orders the Fund to
suspend redemptions. The Fund redeems its shares at the net asset value
next determined after the Fund receives your redemption request, subject in
some cases to a CDSC, for Class B and Class C shares, as described under
"Redemption Proceeds" below. See "Pricing of Fund Shares" for a description
of the calculation of net asset value. You may redeem shares through the
Distributor, directly from the Fund through its transfer agent or through
Soliciting Broker-Dealers. By Letter. You may mail a letter requesting
redemption of shares to: The Gabelli Funds, P.O. Box 8308, Boston, MA
02266-8308. Your letter should state the name of the Fund and the class,
the dollar amount or number of shares you are redeeming and your account
number. You must sign the letter in exactly the same way the account is
registered and if there is more than one owner of shares, all must sign. A
signature guarantee is required for each signature on your redemption
letter. You can obtain a signature guarantee from financial institutions
such as commercial banks, brokers, dealers and savings associations. A
notary public cannot provide a signature guarantee.
By Telephone. You may redeem your shares in a direct
registered account by calling either 1-800-422-3554 or
1-800-872-5365 (617-328-5000 from outside the United States),
subject to a $25,000 limitation. You may not redeem shares
held through an IRA by telephone. If State Street properly
acts on telephone instructions and follows reasonable
procedures to protect against unauthorized transactions,
neither State Street nor the Fund will be responsible for any
losses due to telephone transactions. You may be responsible
for any fraudulent telephone order as long as State Street or
the Fund takes reasonable measures to verify the order. You
may request that redemption proceeds be mailed to you by check
(if your address has not changed in the prior 30 days),
forwarded to you by bank wire or invested in another mutual
fund advised by the Adviser (see "Exchange of Shares" below).
1. Telephone Redemption By Check. The Fund will make
checks payable to the name in which the account is
registered and normally will mail the check to the
address of record within seven days.
2. Telephone Redemption By Wire. The Fund accepts
telephone requests for wire redemption in amounts of
at least $1,000. The Fund will send a wire to either
a bank designated on your subscription order form or
on a subsequent letter with a guaranteed signature.
The proceeds are normally wired on the next Business
Day.
Through the Automatic Cash Withdrawal Plan. You may
automatically redeem shares on a monthly, quarterly or annual
basis if you have at least $10,000 in your account and if your
account is directly registered with State Street. If you
redeem Class B or Class C shares under this plan, you must pay
the applicable CDSC. Please call the Distributor at
1-800-422-3554 for more information.
Through a Broker-Dealer. You may redeem shares through a
broker-dealer which will transmit a redemption order to State
Street on your behalf. A redemption request received from a
broker-dealer will be effected at the net asset value next
determined (less any applicable CDSC) after State Street
receives the request. If you hold share certificates, you must
present the certificates to the broker-dealer endorsed for
transfer. A broker-dealer may charge you fees for effecting
redemptions for you.
Through Involuntary Redemption. The Fund may redeem all
shares in your account (other than an IRA account) if their
value falls below $1,000 as a result of redemptions (but not
as a result of a decline in net asset value). You will be
notified in writing and allowed 30 days to increase the value
of your shares to at least $1,000.
<PAGE>
Redemption Proceeds
You will pay a CDSC when you redeem:
Class B shares within seventy-two months of buying them Class
C shares within twenty-four months of buying them.
The CDSC schedule for Class B shares is set forth below. The CDSC
is based on the net asset value at the time of your investment or the
net asset value at the time of redemption, whichever is lower.
Class C Shares CDSC CDSC Years Since Purchase 5.00% 1.00% First
4.00% 1.00% Second 3.00% None Third 3.00% None Fourth 2.00% None Fifth
1.00% None Sixth 0.00% None Seventh and thereafter
The Distributor pays sales commissions of 4.00% of the purchase
price of Class B shares of the Fund to brokers at the time of sale
that initiate and are responsible for purchases of such Class B shares
of the Fund. You will not pay a CDSC to the extent that the value of
the redeemed shares represents: reinvestment of dividends or capital
gains distributions capital appreciation of shares redeemed
When you redeem shares, we will assume that you are redeeming
first shares representing reinvestment of dividends and capital gains
distributions, then any appreciation on shares redeemed, and then
remaining shares held by you for the longest period of time. We will
calculate the holding period of shares acquired through an exchange of
shares of another fund from the date you acquired the original shares
of the other fund. The time you hold shares in a money market fund,
however, will not count for purposes of calculating the applicable
CDSC. We will waive the CDSC payable upon redemptions of shares for:
redemptions and distributions from retirement plans made after the
death or disability of a shareholder minimum required distributions
made from an IRA or other retirement plan account after you reach age
59 1/2 involuntary redemptions made by the Fund a distribution from a
tax-deferred retirement plan after your retirement returns of excess
contributions to retirement plans following the shareholder's death or
disability
If you request redemption proceeds by check, the Fund will
normally mail the check to you within seven days after it receives
your redemption request. If you purchased your Fund shares by check,
you may not redeem shares until 15 days following purchase. The Fund
may pay to you your redemption proceeds wholly or partly in portfolio
securities. Payments would be made in portfolio securities, however,
only in the rare instance that the Fund's Board of Directors believes
that it would be in the Fund's best interest not to pay redemption
proceeds in cash.
EXCHANGES OF SHARES
You may exchange shares of the Fund you hold for shares of the same
class of another fund managed by the Adviser or its affiliates based on their
relative net asset values. To obtain a list of the funds whose shares you may
acquire through exchange call 1-800-GABELLI (1-800-422-3554). You may also
exchange your shares for shares of a money market fund managed by the Adviser or
its affiliates. Except for shares exchanged into a money market fund, Class B
and Class C shares will continue to age from the date of the original purchase
of such shares and will assume the CDSC rate they had at the time of exchange.
In effecting an exchange: you must meet the minimum purchase
requirements for the fund whose shares you purchase through exchange.
if you are exchanging into Class A shares of a fund with a higher
sales charge, you must pay the difference at the time of exchange. you
may realize a taxable gain or loss. you should read the prospectus of
the fund whose shares you are purchasing (call 1-800-GABELLI
(1-800-422-3554) to obtain the prospectus). you should be aware that
brokers may charge a fee for handling an exchange for you.
You may exchange share by telephone, by mail or through a broker.
Exchanges by Telephone. You may give exchange instructions by
telephone by calling 1-800-GABELLI (1-800-422-3554). You may not
exchange shares by telephone if you hold share certificates.
Exchanges by Mail. You may send a written request for exchanges to:
The Gabelli Funds, P.O. Box 8308, Boston, MA 02266-8308. State your
name, your account number, the dollar value or number of shares you
wish to exchange, the name and class of the funds whose shares you wish
to exchange, and the name of the fund whose shares you wish to acquire.
We may modify or terminate the exchange privilege at any time.
You will be given notice 60 days prior to any material change in the
exchange privilege.
PRICING OF FUND SHARES
The Fund's net asset value per share is calculated on each
Business Day. The NYSE is currently scheduled to be closed on New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas and on the preceding Friday or subsequent Monday when a
holiday falls on a Saturday or Sunday, respectively. The Fund's net
asset value is calculated separately for each class. It is determined
as of the close of regular trading on the NYSE, normally 4:00 p.m.,
New York time, 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 Fund uses
market quotations in valuing its portfolio securities. Short-term
investments that mature in 60 days or less are valued at amortized
cost. The Fund may from time to time hold securities that are
primarily listed on foreign exchanges. Such securities may trade on
days when the Fund does not price its shares. Therefore, the Fund's
net asset value may change on days when you are not able to purchase
or redeem the Fund's shares.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions may differ for different classes of
shares. They will be automatically reinvested for your account at net
asset value in additional shares of the Fund, unless you instruct the
Fund to pay all dividends and distributions in cash. If you elect cash
distributions, you must instruct the Fund either to credit the amounts
to your brokerage account or to pay the amounts to you by check.
Dividends from net investment income and distributions of net realized
capital gains earned by the Fund, if any, will be paid annually. There
are no sales or other charges in connection with the reinvestment of
dividends and capital gains distributions. There is no fixed dividend
rate, and there can be no assurance that the Fund will pay any
dividends or realize any capital gains.
TAX INFORMATION
The Fund expects that its distributions will consist primarily of
net investment income and capital gains. Dividends out of net
investment income and distributions of realized short-term capital
gains are taxable to you as ordinary income. Distributions of net
long-term capital gains are taxable to you at long-term capital gain
rates. The Fund's distributions, whether you receive them in cash or
reinvest them in additional shares of the Fund, may be subject to
federal, state or local taxes. An exchange of the Fund's shares for
shares of another fund will be treated for tax purposes as a sale of
the Fund's shares; therefore, any gain you realize on such a
transaction may be taxable. This summary of tax consequences is
intended for general information only. You should consult a tax
adviser concerning the tax consequences of your investment in the
Fund.
<PAGE>
FINANCIAL HIGHLIGHTS The financial highlights table is intended
to help you understand the Fund's financial performance for the past
five fiscal years of the Fund. The total returns in the table
represent the rate that an investor would have earned on an investment
in the Fund's Class A shares. This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report,
along with the Fund's financial statements and related notes are
included in the annual report, which is available upon request. Per
share amounts for the Fund's Class A shares outstanding throughout
each year ended December 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Operating performance:
Net asset value, beginning of year.... $14.30 $11.52 $11.61 $ 10.49 $ 12.09
----- ------ ------ ------- -------
Net investment income/(loss).......... (0.06) (0.05) (0.02) 0.05 0.09
Net realized and unrealized gain/(loss) on
investments......................... 3.33 5.55 1.04 2.30 (0.09)
------ ---- ---- ----- -------
Total from investment operations..... 3.27 5.50 1.02 2.35 0.00
Distributions to shareholders:
Net investment income............... --- --- --- (0.05) (0.09)
Distributions in excess of net investment income --- --- --- --- (0.00)(a)
Net realized gains.................. (1.49) (2.72) (1.10) (1.18) (1.50)
Distributions in excess of net realized gains --- --- --- --- (0.01)
Paid-in capital....................... --- --- (0.01) --- ---
Total distributions................... (1.49) (2.72) (1.11) (1.23) (1.60)
Net asset value, end of year.......... $16.08 $14.30 $11.52 $ 11.61 $ 10.49
===== ====== ====== ======= =======
Total return* ...................... 23.2% 48.2% 8.7% 22.5% 0.0%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's).... $798,812 $596,547 $460,836 $486,144 $436,629
Ratio of net investment income
to average net assets/(loss)...... (0.41)% (0.45)% (0.12)% 0.42% 0.73%
Ratio of operating expenses to
average net assets................ 1.40% 1.42% 1.40% 1.50% 1.50%
Portfolio turnover rate............... 46.4% 43.9% 37.1% 64.6% 66.6%
.........
* 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 charge.
(a) Amount represents less than $0.005 per share.
</TABLE>
<PAGE>
\\FSG\VOL1\SHARED\BOSLEGAL\CLIENTS\GABVALUE\PEAS\1999\redsai99.doc
G:\shared\boslegal\clients\gabvalue\peas\1999\redsai99.doc
[BACK COVER PAGE]
THE GABELLI VALUE FUND
A Statement of Additional Information dated May 1, 1999 (the
"SAI") includes additional information about the Fund. The SAI is
incorporated by reference into this Prospectus and, therefore, is
legally a part of this Prospectus. Information about the Fund's
investments is available in the Fund's annual and semi-annual reports
to shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its fiscal year.
You may make inquiries about the Fund, or obtain a copy of the SAI or
of the annual or semi-annual reports without charge, by calling
1-800-GABELLI (1-800-422-3554). You can review and copy information
about the Fund (including the SAI) at the SEC Public Reference Room in
Washington, DC (for information call 1-800-SEC-0330). Such information
is also available on the SEC's Internet site at http://www.sec.gov.
You may request documents by mail from the SEC, upon payment of a
duplicating fee, by writing to the Securities and Exchange Commission,
Public Reference Section, Washington, DC 20549-6009.
Investment Company Act File Number:
811-05848.
<PAGE>
THE GABELLI VALUE FUND INC.
Statement of Additional Information
May 1, 1999
This Statement of Additional Information (the "SAI"), which is not a
prospectus, describes The Gabelli Value Fund Inc. The SAI should be read in
conjunction with the Fund's Prospectus for Class A, Class B and Class C shares
dated May 1, 1999, and is incorporated by reference in its entirety into the
Prospectus. For a free copy of the Prospectus, please contact the Fund at the
address, telephone number or Internet web site printed below.
One Corporate Center
Rye, New York 10580-1434
Telephone: 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
<PAGE>
\\FSG\VOL1\SHARED\BOSLEGAL\CLIENTS\GABVALUE\PEAS\1999\redsai99.doc
-i-
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
GENERAL INFORMATION...............................................................................................1
INVESTMENT STRATEGIES AND RISKS...................................................................................1
INVESTMENT RESTRICTIONS..........................................................................................10
DIRECTORS AND OFFICERS...........................................................................................12
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS.......................................................................15
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................16
DISTRIBUTION PLAN................................................................................................19
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................19
PURCHASE OF SHARES...............................................................................................22
RETIREMENT PLANS.................................................................................................22
REDEMPTION OF SHARES.............................................................................................23
COMPUTATION OF NET ASSET VALUE...................................................................................24
DIVIDENDS, DISTRIBUTIONS AND TAXES...............................................................................25
CALCULATION OF INVESTMENT PERFORMANCE............................................................................28
DESCRIPTION OF THE FUND'S SHARES.................................................................................30
FINANCIAL STATEMENTS.............................................................................................32
APPENDIX A........................................................................................................1
</TABLE>
<PAGE>
\\FSG\VOL1\SHARED\BOSLEGAL\CLIENTS\GABVALUE\PEAS\1999\redsai99.doc
- 41 -
GENERAL INFORMATION
The Fund is a non-diversified, open-end, management investment
company. The Fund was organized as a corporation under the laws of the State of
Maryland on July 20, 1989.
INVESTMENT STRATEGIES AND RISKS
The Prospectus discusses the investment objective of the Fund and the
principal strategies to be employed to achieve that objective. This section
contains supplemental information concerning certain types of securities and
other instruments in which the Fund may invest, additional strategies that the
Fund may utilize and certain risks associated with such investments and
strategies.
Corporate Reorganizations
The Fund may invest up to 50% of its total assets in securities for
which a tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced. The primary risk of this type of investing is that
if the contemplated transaction is abandoned, revised, delayed or becomes
subject to unanticipated uncertainties, the market price of the securities may
decline below the purchase price paid by the Fund.
In general, securities that are the subject of such an offer or
proposal sell at a premium to their historic market price immediately prior to
the announcement of the offer or proposal. The increased market price of these
securities may also discount what the stated or appraised value of the security
would be if the contemplated transaction were approved or consummated. These
investments may be advantageous when the discount significantly overstates the
risk of the contingencies involved; significantly undervalues the securities,
assets or cash to be received by shareholders of the prospective portfolio
company as a result of the contemplated transactions; or fails adequately to
recognize the possibility that the offer or proposal may be replaced or
superseded by an offer or proposal of greater value. The evaluation of these
contingencies requires unusually broad knowledge and experience on the part of
the Fund's adviser, Gabelli Funds, LLC (the "Adviser"). The Adviser must
appraise not only the value of the issuer and its component businesses as well
as the assets or securities to be received as a result of the contemplated
transaction, but also the financial resources and business motivation of the
offeror as well as the dynamics of the business climate when the offer or
proposal is in progress.
Although the Fund limits its investments in corporate reorganization
securities that it expects to hold for less than six months, such transactions
may tend to increase the Fund's portfolio turnover ratio thereby increasing its
brokerage and other transaction expenses. The Adviser intends to select
investments of the type described that, in its view, have a reasonable prospect
of capital appreciation that is significant in relation to both the risk
involved and the potential of available alternate investments.
Convertible Securities
A convertible security entitles the holder to exchange the security for
a fixed number of shares of common stock or other equity security, usually of
the same company, at fixed prices within a specified period of time. A
convertible security entitles the holder to receive the fixed income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege.
A convertible security's position in a company's capital structure
depends upon its particular provisions. In the case of subordinated convertible
debentures, the holders' claims on assets and earnings are subordinated to the
claims of others and are senior to the claims of common shareholders.
To the degree that the price of a convertible security rises above its
investment value because of a rise in price of the underlying common stock, it
is influenced more by price fluctuations of the underlying common stock and less
by its investment value. The price of a convertible security that is supported
principally by its conversion value will rise along with any increase in the
price of the common stock, and the price generally will decline along with any
decline in the price of the common stock except that the convertible security
will receive additional support as its price approaches investment value. A
convertible security purchased or held at a time when its price is influenced by
its conversion value will produce a lower yield than nonconvertible senior
securities with comparable investment values. Convertible securities may be
purchased by the Fund at varying price levels above their investment values
and/or their conversion values in keeping with the Fund's investment objective.
Many convertible securities in which the Fund will invest have call
provisions entitling the issuer to redeem the security at a specified time and
at a specified price. This is one of the features of a convertible security that
affects valuation. Calls may vary from absolute calls to provisional calls.
Convertible securities with superior call protection usually trade at a higher
premium. If long-term interest rates decline, the interest rates of new
convertible securities will also decline. Therefore, in a falling interest rate
environment companies may be expected to call convertible securities with high
coupons and the Fund would have to invest the proceeds from such called issues
in securities with lower coupons. Thus, convertible securities with superior
call protection will permit the Fund to maintain a higher yield than issues
without call protection.
Investments in Warrants and Rights
Warrants basically are options to purchase equity securities at a
specified price valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights are
similar to warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer. Investing in rights and warrants can provide a greater potential for
profit or loss than an equivalent investment in the underlying security, and,
thus, can be a speculative investment. The value of a right or warrant may
decline because of a decline in the value of the underlying security, the
passage of time, changes in interest rates or in the dividend or other policies
of the company whose equity underlies the warrant or a change in the perception
as to the future price of the underlying security, or any combination thereof.
The Fund may invest up to 5% of its net assets in warrants or rights
(other than those acquired in units or attached to other securities) but will do
so only if the underlying equity securities are deemed appropriate by the
Adviser for inclusion in the Fund's portfolio.
Investments in Foreign Securities
The Fund may invest up to 25% of the value of its total assets in
foreign securities (not including American Depositary Receipts). Foreign
securities investments may be affected by changes in currency rates or exchange
control regulations, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in
dealings between nations. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes that may decrease the net return on these
investments as compared to dividends paid to the Fund by domestic corporations.
In addition, there may be less publicly available information about foreign
issuers than about domestic issuers, and foreign issuers are not subject to
uniform accounting, auditing and financial reporting standards and requirements
comparable to those of domestic issuers. Securities of some foreign issuers are
less liquid and more volatile than securities of comparable domestic issuers and
foreign brokerage commissions are generally higher than in the United States.
Foreign securities markets may also be less liquid, more volatile and less
subject to government supervision than those in the United States. Investments
in foreign countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation and potential
difficulties in enforcing contractual obligations. Securities purchased on
foreign exchanges may be held in custody by a foreign branch of a domestic
bank.
Other Investment Companies
The Fund reserves the right to invest up to 10% of its total assets
in the securities of money market mutual funds, which are open-end investment
companies, and closed-end investment companies, including small business
investment companies, none of which are affiliated with the Fund, Lehman
Brothers Inc. ("Lehman Brothers") or Gabelli & Company, Inc. ("Gabelli &
Company"). No more than 5% of the Fund's total assets may be invested in the
securities of any one investment company, and the Fund may not own more than 3%
of the securities of any investment company. Money market mutual funds are
investment companies that are regulated under the Investment Company Act of
1940, as amended (the "1940 Act"). As open-end management companies like the
Fund, money market mutual funds make continuous offerings of redeemable shares
to the public and stand ready to sell and redeem these shares daily. Generally
speaking, these mutual funds offer investors the opportunity to invest in a
professionally managed diversified portfolio of short-term debt obligations,
including U.S. Treasury bills and notes and other U.S. Government securities,
certificates of deposits, bankers' acceptances, repurchase agreements and
commercial paper. Many of the costs, including the investment advisory fee,
attendant with the operation of money market mutual funds and other management
investment companies are borne by shareholders. When the Fund holds shares of a
money market mutual fund (or other management investment company) it, like other
shareholders, will bear its proportionate share of the fund's costs. These costs
will be borne indirectly by shareholders of the Fund resulting in the payment by
shareholders of duplicative fees, including investment advisory fees.
Investments in Small, Unseasoned Companies and Other Illiquid Securities
The Fund may invest in small, less well-known companies (including
predecessors) which have operated less than three years. The securities of
small, unseasoned companies may have a limited trading market, which may
adversely affect their disposition and can result in their being priced lower
than what might otherwise be the case. If other investment companies and
investors who invest in these issuers trade the same securities when the Fund
attempts to dispose of its holdings, the Fund may receive lower prices than what
might otherwise be obtained. These companies may have limited product lines,
markets or financial resources and may lack management depth. In addition, these
companies are typically subject to a greater degree of changes in earnings and
business prospects than are larger, more established companies. Although
investing in securities of these companies offers potential for above-average
returns if the companies are successful, the risk exists that the companies will
not succeed and the prices of the companies' shares could significantly decline
in value.
The Fund will not invest, in the aggregate, more than 10% of its net
assets in securities for which market quotations are not readily available,
securities which are restricted for public sale, repurchase agreements maturing
or terminable in more than seven days and all other illiquid securities.
Securities freely salable among qualified institutional investors pursuant to
Rule 144A under the Securities Act of 1933, as amended, and as adopted by the
SEC, may be treated as liquid if they satisfy liquidity standards established by
the Board of Directors. The continued liquidity of such securities is not as
well assured as that of publicly traded securities, and accordingly, the Board
of Directors will monitor their liquidity.
Repurchase Agreements
The Fund may enter into repurchase agreements with primary
government securities dealers recognized by the Federal Reserve Bank of New York
and member banks of the Federal Reserve System that furnish collateral at least
equal in value or market price to the amount of their repurchase obligation. In
a repurchase agreement, the Fund purchases a debt security from a seller who
undertakes to repurchase the security at a specified resale price on an agreed
future date. Repurchase agreements are generally for one business day and
generally will not have a duration of longer than one week. The SEC has taken
the position that, in economic reality, a repurchase agreement is a loan by the
Fund to the other party to the transaction secured by securities transferred to
the Fund. The resale price generally exceeds the purchase price by an amount
which reflects an agreed upon market interest rate for the term of the
repurchase agreement. The Fund's risk is primarily that, if the seller defaults,
the proceeds from the disposition of the underlying securities and other
collateral for the seller's obligation may be less than the repurchase price. If
the seller becomes insolvent, the Fund might be delayed in or prevented from
selling the collateral. In the event of a default or bankruptcy by a seller, the
Fund will promptly seek to liquidate the collateral. To the extent that the
proceeds from any sale of the collateral upon a default in the obligation to
repurchase is less than the repurchase price, the Fund will experience a loss.
If the financial institution that is a party to the repurchase agreement
petitions for bankruptcy or becomes subject to the U.S. Bankruptcy Code, the law
regarding the rights of the Fund is unsettled. As a result, under extreme
circumstances, there may be a restriction on the Fund's ability to sell the
collateral and the Fund could suffer a loss.
The Fund may not enter into repurchase agreements which would cause
more than 5% of the value of its total assets to be so invested. This percentage
limitation does not apply to repurchase agreements involving U.S. Government
obligations, or obligations of its agencies or instrumentalities, for a period
of a week or less. The term of each of the Fund's repurchase agreements will
always be less than one year and the Fund will not enter into repurchase
agreements of a duration of more than seven days if, taken together with all
other illiquid securities in the Fund's portfolio, more than 10% of its net
assets would be so invested.
Borrowing. The Fund may borrow money (1) for short-term credits from
banks as may be necessary for the clearance of portfolio transactions, and (2)
from banks for temporary or emergency purposes, including the meeting of
redemption requests. Borrowing for any purpose (including redemptions) may not,
in the aggregate, exceed 15% of the value of the Fund's total assets. Borrowing
for purposes other than meeting redemptions may not exceed 5% of the value of
the Fund's total assets at the time the borrowing is made. The Fund will not
purchase any portfolio securities at any time its borrowings exceed 5% of its
assets. Not more than 20% of the total assets of the Fund may be used as
collateral in connection with the borrowings described above.
Corporate Debt Obligations
Corporate debt obligations include securities such as bonds,
debentures, notes or other similar securities issued by corporations.
The Fund believes that investing in corporate debt obligations is
consistent with the Fund's investment objective of seeking securities of
companies in the public market that can provide significant long-term capital
appreciation. For example, an issuer's ability to repay principal and interest
when due may be underestimated by the market; as a result, that issuer may be
required to pay a higher interest rate or its debt securities may be selling at
a lower market price than issuers of similar strength. When the market
recognizes their inherent value, the Fund anticipates that the price of such
securities will appreciate. In the case of convertible debt securities, the
market's recognition of a company's real value and, in turn, the market value of
its convertible securities, may not occur until some anticipated development or
other catalyst emerges to cause an increase in the market value of the company's
common stock. In the case of any corporate debt obligation under evaluation by
the Adviser for purchase by the Fund, the receipt of income is an incidental
consideration.
The Fund may invest up to 5% of its total assets in securities of
issuers in default. The Fund will invest in securities of issuers in default
only when the Adviser believes that such issuers will honor their obligations or
emerge from bankruptcy protection and the value of these securities will
appreciate. By investing in securities of issuers in default, the Fund bears the
risk that such issuers will not continue to honor their obligations nor emerge
from bankruptcy protection or that the value of such securities will not
appreciate.
The ratings of Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Service, a division of McGraw Hill Companies ("S&P")
generally represent the opinions of those organizations as to the quality of the
securities that they rate. Such ratings, however, are relative and subjective,
are not absolute standards of quality and do not evaluate the market risk of the
securities. Although the Adviser uses these ratings as a criterion for the
selection of securities for the Fund, the Adviser also relies on its independent
analysis to evaluate potential investments for the Fund. See Appendix A -
"Description of Corporate Bond Ratings."
Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its ratings may be reduced below the minimum required for
purchase by the Fund. In addition, it is possible that Moody's and S&P might not
timely change their ratings of a particular issue to reflect subsequent events.
None of these events will require the sale of the securities by the Fund,
although the Adviser will consider these events in determining whether the Fund
should continue to hold the securities. To the extent that the ratings given by
Moody's or S&P for securities may change as a result of changes in the ratings
systems or due to a corporate reorganization of Moody's and/or S&P, the Fund
will attempt to use comparable ratings as standards for its investments in
accordance with the investment objectives and policies of the Fund.
Low-rated and comparable unrated securities (a) will likely have some
quality and protective characteristics that, in the judgment of the rating
organization, are outweighed by large uncertainties or major risk exposures to
adverse conditions and (b) are predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation.
While the market values of low-rated and comparable unrated securities
tend to react less to fluctuations in interest rate levels than the market
values of higher-rated securities, the market values of certain low-rated and
comparable unrated securities also tend to be more volatile and sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, low-rated securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
low-rated and comparable unrated securities are often highly leveraged and may
not have more traditional methods of financing available to them so that their
ability to service their debt obligations during an economic downturn or during
sustained periods of rising interest rates may be impaired. The risk of loss due
to default by such issuers is significantly greater because low-rated and
comparable unrated securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness. The Fund may incur
additional expenses to the extent that it is required to seek recovery upon a
default in the payment of principal or interest on its portfolio holdings. The
existence of limited markets for low-rated and comparable unrated securities may
diminish the Fund's ability to obtain accurate market quotations for purposes of
valuing such securities and calculating its net asset value. Moreover, because
not all dealers maintain markets in all low-rated and comparable unrated
securities, there is no established retail secondary market for many of these
securities and the Fund does not anticipate that those securities could be sold
other than to institutional investors.
Fixed-income securities, including low-rated securities and comparable
unrated securities, frequently have call or buy-back features that permit their
issuers to call or repurchase the securities from their holders, such as the
Fund. If an issuer exercises these rights during periods of declining interest
rates, the Fund may have to replace the security with a lower-yielding security,
thus resulting in a decreased return to the Fund.
Short Sales Against the Box
The Fund may, from time to time, make short sales of securities it
owns or has the right to acquire through conversion or exchange of other
securities it owns. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain, at no added cost,
securities identical to those sold short. In a short sale, the Fund does not
immediately deliver the securities sold or receive the proceeds from the sale.
The Fund may not make short sales or maintain a short position if it would cause
more than 25% of the Fund's total assets, taken at market value, to be held as
collateral for the sales.
The 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 Fund or security convertible into, or
exchangeable for, the security.
To secure its obligations to deliver the securities sold short, the
Fund will deposit in escrow in a separate account with the Fund's custodian,
Boston Safe Deposit and Trust Company ("Boston Safe"), an amount at least equal
to the securities sold short or securities convertible into, or exchangeable
for, the securities. The Fund may close out a short position by purchasing and
delivering an equal amount of securities sold short, rather than by delivering
securities already held by the Fund, because the Fund may want to continue to
receive interest and dividend payments on securities in its portfolio that are
convertible into the securities sold short.
Options
The Fund may, from time to time, purchase or sell (that is, write)
listed call or put options on securities as a means of achieving additional
return or of hedging the value of the Fund's portfolio. A call option is a
contract that, in return for a premium, gives the holder of the option the right
to buy from the writer of the call option the security underlying the option at
a specified exercise price at any time during the term of the option. The writer
of the call option has the obligation, upon exercise of the option, to deliver
the underlying security upon payment of the exercise price during the option
period. A put option is 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.
A call option is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds a call on the same security as the call written where
the exercise price of the call held is (1) equal to or less than the exercise
price of the call written or (2) greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, U.S. Government
securities or other high grade short-term obligations in a segregated account
held with its custodian. A put option is "covered" if the Fund maintains cash or
other liquid portfolio securities with a value equal to the exercise price in a
segregated account held with its custodian, or else holds a put on the same
security as the put written where the exercise price of the put held is equal to
or greater than the exercise price of the put written.
If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction. Similarly, if the Fund is the holder of an option
it may liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same series as the option previously
purchased. There can be no assurance that either a closing purchase or sale
transaction can be effected when the Fund so desires.
The Fund will realize a profit from a closing transaction if the price
of the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Since call option prices generally reflect increases in the
price of the underlying security, any loss resulting from the repurchase of a
call option may also be wholly or partially offset by unrealized appreciation of
the underlying security. Other principal factors affecting the market value of a
put or a call option include supply and demand, interest rates, the current
market price and price volatility of the underlying security and the time
remaining until the expiration date.
An option position may be closed out only on an exchange which provides
a secondary market for an option of the same series. Although the Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. In such event it might not be
possible to effect closing transactions in particular options, so that the Fund
would have to exercise its options in order to realize any profit and would
incur brokerage commissions upon the exercise of call options and upon the
subsequent disposition of underlying securities for the exercise of put options.
If the Fund, as a covered call option writer, is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or otherwise covers the position.
In addition to options on securities, the Fund may also purchase and
sell call and put options on securities indexes. A stock index reflects in a
single number the market value of many different stocks. Relative values are
assigned to the stocks included in an index and the index fluctuates with
changes in the market values of the stocks. The options give the holder the
right to receive a cash settlement during the term of the option based on the
difference between the exercise price and the value of the index. By writing a
put or call option on a securities index, the Fund is obligated, in return for
the premium received, to make delivery of this amount. The Fund may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
The fund may write put and call options on stock indexes for the
purposes of increasing its gross income and protecting its portfolio against
declines in the value of the securities it owns or increases in the value of
securities to be acquired. In addition, the Fund may purchase put and call
options on stock indexes in order to hedge its investments against a decline in
value or to attempt to reduce the risk of missing a market or industry segment
advance. Options or stock indexes are similar to options on specific securities.
However, because options on stock indexes do not involve the delivery of an
underlying security, the option represents the holder's right to obtain from the
writer cash in an amount equal to a fixed multiple of the amount by which the
exercise price exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying stock index on the exercise date.
Therefore, while one purpose of writing such options is to generate additional
income for the Fund, the Fund recognizes that it may be required to deliver an
amount of cash in excess of the market value of a stock index at such time as an
option written by the Fund is exercised by the holder. The writing and
purchasing of options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. The successful use of protective puts for hedging
purposes depends in part on the Adviser's ability to predict future price
fluctuations and the degree of correlation between the options and securities
markets.
Use of options on securities indexes entails the risk that trading in
the options may be interrupted if trading in certain securities included in the
index is interrupted. The Fund will not purchase these options unless the
Adviser is satisfied with the development, depth and liquidity of the market and
the Adviser believes the options can be closed out.
Price movements in the Fund's portfolio may not correlate precisely
with movements in the level of an index and, therefore, the use of options on
indexes cannot serve as a complete hedge and will depend, in part, on the
ability of the Adviser to predict correctly movements in the direction of the
stock market generally or of a particular industry. Because options on
securities indexes require settlement in cash, the Adviser may be forced to
liquidate portfolio securities to meet settlement obligations.
Although the Adviser will attempt to take appropriate measures to
minimize the risks relating to the Fund's writing of put and call options, there
can be no assurance that the Fund will succeed in any option-writing program it
undertakes.
Lending of Portfolio Securities
The Fund may lend its portfolio securities to broker-dealers or
financial institutions provided that the loans are callable at any time by the
Fund. Loans by the Fund, if and when made, (1) will be collateralized in
accordance with applicable regulatory requirements and (2) will be limited so
that the value of all loaned securities does not exceed 33% of the value of the
Fund's total assets. The Fund, however, currently intends to limit the value of
all loaned securities to no more than 5% of the Fund's total assets.
The Fund lends its portfolio securities in order to generate revenue to
defray certain operating expenses. The advantage of this practice is that the
Fund continues to receive the income on the loaned securities while at the same
time earns interest on the cash amounts deposited as collateral, which will be
invested in short-term obligations.
A loan may generally be terminated by the borrower on one business
day's notice, or by the Fund on five business days' notice. If the borrower
fails to deliver the loaned securities within five days after receipt of notice,
the Fund could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans of portfolio securities will only be made to firms
deemed by the Fund's management to be creditworthy and when the income that can
be earned from the loans justifies the attendant risks. The Board of Directors
will oversee the creditworthiness of the contracting parties on an ongoing
basis. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund. The risks associated with loans of portfolio
securities are substantially similar to those associated with repurchase
agreements. Thus, if the party to whom the loan was made petitions for
bankruptcy or becomes subject to the U.S. Bankruptcy Code, the law regarding the
rights of the Fund is unsettled. As a result, under extreme circumstances, there
may be a restriction on the Fund's ability to sell the collateral and the Fund
could suffer a loss.
When voting or consent rights that accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned securities,
to be delivered within one day after notice, to permit the exercise of such
rights if the matters involved would have a material effect on the Fund's
investment in such loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
When Issued, Delayed Delivery Securities and Forward Commitments
The Fund may enter into forward commitments for the purchase of
securities. Such transactions may include purchases on a "when issued" or
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization of debt restructuring, i.e., a when, as and
if issued security. When such transactions are negotiated, the price is fixed at
the time of the commitment, with payment and delivery taking place in the
future, generally a month or more after the date of the commitment. While the
Fund will only enter into a forward commitment with the intention of actually
acquiring the security, the Fund may sell the security before the settlement
date if it is deemed advisable. Securities purchased under a forward commitment
are subject to market fluctuation, and no interest or dividends accrue to the
Fund prior to the settlement date.
The commitment for the purchase of a "when, as and if issued security"
will not be recognized in the portfolio of the Fund until the Adviser determines
that issuance of the security is probable. At such time, the Fund will record
the transaction and, in determining its net asset value, will reflect the value
of the security daily. The Fund will also establish at that time a segregated
account with Boston Safe in which it will maintain cash or liquid portfolio
securities at least equal in value to the amount of its commitments.
Futures Contracts and Options on Futures
The Fund has authorized the Adviser to enter into futures contracts
that are traded on a U.S. exchange or board of trade, provided, however, that
the Fund will not enter into futures contacts for which the aggregate initial
margins and premiums would exceed 5% of the fair market value of the Fund's
assets. Although the Fund has no current intention of using options on futures
contracts, the Fund may at some future date authorize the Adviser to enter into
options on futures contracts, subject to the limitations stated in the preceding
sentence. These investments will be made by the Fund solely for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Such investments will only be made
if they are economically appropriate to the reduction of risks involved in the
management of the Fund. In this regard, the Fund may enter into futures
contracts or options on futures for the purchase or sale of securities indices
or other financial instruments including but not limited to U.S. Government
securities. Futures exchanges and trading in the United States are regulated
under the Commodity Exchange Act by the Commodity Futures Trading Commission.
A "sale" of a futures contract (or a "short" futures position) means
the assumption of a contractual obligation to deliver the securities underlying
the contract at a specified price at a specified future time. A "purchase" of a
futures contract (or a "long" futures position) means the assumption of a
contractual obligation to acquire the securities underlying the contract at a
specified price at a specified future time. Certain futures contracts, including
stock and bond index futures, are settled on a net cash payment basis rather
than by the sale and delivery of the securities underlying the futures
contracts.
No consideration will be paid or received by the Fund upon the purchase
or sale of a futures contract. Initially, the Fund will be required to deposit
with the broker an amount of cash or cash equivalents equal to approximately 1%
to 10% of the contract amount (this amount is subject to change by the exchange
or board of trade on which the contract is traded and brokers or members of such
board of trade may charge a higher amount). This amount is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on the
contract. Subsequent payments, known as "variation margin," to and from the
broker will be made daily as the price of the index or security underlying the
futures contract fluctuates. At any time prior to the expiration of a futures
contract, the portfolio may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time prior to the expiration of the option. Upon
exercise of an option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account attributable to that
contract, which represents the amount by which the market price of the futures
contract exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. The potential loss
related to the purchase of an option on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of the
option purchased is fixed at the point of sale, there are no daily cash payments
by the purchaser to reflect changes in the value of the underlying contract;
however, the value of the option does change daily and that change would be
reflected in the net asset value of the portfolio.
As noted above, the Fund may authorize the Adviser to use such
instruments depending upon market conditions prevailing at such time and the
perceived investment needs of the Fund. However, in no event may the Fund enter
into futures contracts or options on futures contracts if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures contracts and premiums paid for options would exceed 5% of the value of
the Fund's total assets after taking into account unrealized profits and losses
on any existing contracts. In the event the Fund enters into long futures
contracts or purchases call options, an amount of cash, obligations of the U.S.
Government and its agencies and instrumentalities or other high grade debt
securities equal to the market value of the contract will be deposited and
maintained in a segregated account with the Fund's custodian to collateralize
the positions, thereby insuring that the use of the contract is unleveraged.
INVESTMENT RESTRICTIONS
The Fund's investment objective and the following investment
restrictions are fundamental and may not be changed without the approval of a
majority of the Fund's shareholders, defined as the lesser of (1) 67% of the
Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the Fund's outstanding shares. Under these restrictions, the Fund may not:
1. Invest more than 25% of the value of its total assets in
any particular industry (this restriction does not apply to obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities);
2. Purchase securities on margin, but it may obtain short-term
credits from banks as may be necessary for the clearance of purchase
and sales of portfolio securities;
3. Make loans of its assets except for: (a) purchasing debt
securities, (b) engaging in repurchase agreements as set forth in the
Prospectus, and (c) lending its portfolio securities consistent with
applicable regulatory requirements and as set forth in the Prospectus;
4. Borrow money except subject to the restrictions set forth in
the Prospectus;
5. Mortgage, pledge or hypothecate any of its assets except
that, in connection with permissible borrowings mentioned in
restriction (4) above, not more than 20% of the assets of the Fund (not
including amounts borrowed) may be used as collateral and that
collateral arrangements with respect to the writing of options or any
other hedging activity are not deemed to be pledges of assets and these
arrangements are not deemed to be the issuance of a senior security as
set forth below in restriction (11);
6. Except to the extent permitted by restriction (14) below,
invest in any investment company affiliated with the Fund, Lehman
Brothers or Gabelli & Company, invest more than 5% of its total assets
in the securities of any one investment company, own more than 3% of
the securities of any investment company or invest more than 10% of its
total assets in the securities of all other investment companies;
7. Engage in the underwriting of securities, except insofar as
the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended (the "1933 Act"), in disposing of a portfolio security;
8. Invest, in the aggregate, more than 10% of the value of its
net assets in securities for which market quotations are not readily
available, securities which are restricted for public sale, in
repurchase agreements maturing or terminable in more than seven days
and all other illiquid securities;
9. Purchase or otherwise acquire interests in real estate,
real estate mortgage loans or interests in oil, gas or other mineral
exploration or development programs;
10. Purchase or acquire commodities or commodity contracts
except that the Fund may purchase or sell futures contracts and related
options thereon if thereafter no more than 5% of its total assets are
invested in margin and premiums;
11. Issue senior securities, except insofar as the Fund may be
deemed to have issued a senior security in connection with: (a)
borrowing money in accordance with restriction (4) above, (b) lending
portfolio securities, (c) entering into repurchase agreements, (d)
purchasing or selling options contracts, (e) purchasing or selling
futures contracts and related options thereon, or (f) acquiring when
issued or delayed delivery securities and forward commitments;
12. Sell securities short, except transactions involving
selling securities short "against the box";
13. Purchase warrants if, thereafter, more than 5% of the
value of the Fund's net assets would consist of such warrants, but
warrants attached to other securities or acquired in units by the Fund
are not subject to this restriction; or
14. Invest in companies for the purpose of exercising control,
except transactions involving investments in investment companies for
the purpose of effecting mergers and other corporate reorganizations
involving the Fund and such other investment companies.
If any percentage limitation is adhered to at the time of an
investment, a later increase or decrease in the percentage of assets resulting
from a change in the values of portfolio securities or in the amount of the
Fund's assets will not constitute a violation of such restriction.
DIRECTORS AND OFFICERS
Under Maryland law, the Fund's Board of Directors is responsible for
establishing the Fund's policies and for overseeing the management of the Fund.
The Board also elects the Fund's officers who conduct the daily business of the
Fund. The Directors and principal officers of the Fund, their ages, and their
principal occupations for the past five years, are listed below. Unless
otherwise specified, the address of each such person is One Corporate Center,
Rye, New York 10580-1434. Directors deemed to be "interested persons" of the
Fund for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C>
Name, Address, Age and
Position(s) with Fund Principal Occupations During Last Five Years
Mario J. Gabelli, CFA,* 56 Chairman of the Board, Chief Executive Officer, Chief Investment
Chairman, President and Officer of Gabelli Asset Management Inc. (since 1999), Gabelli
Chief Investment Officer Funds, LLC and of GAMCO Investors, Inc.; Director or Trustee and
Officer of various other mutual funds
advised by Gabelli Funds, LLC and it
affiliates; and Chairman and Chief
Executive Officer of Lynch Corporation
(diversified manufacturing and
communications services company).
Bill Callaghan, 54 President of Bill Callaghan Associates Ltd. (executive search
Director company); Director of various other mutual funds advised by Gabelli
Funds, LLC and its affiliates.
Felix J. Christiana, 73 Formerly Senior Vice President of Dry Dock Savings Bank; Director
Director or Trustee of various other mutual funds advised by Gabelli Funds,
LLC and its affiliates.
Anthony J. Colavita, 64 President and Attorney at Law in the law firm of Anthony J.
Director Colavita, P.C. since 1961; Director or Trustee of various other
mutual funds advised by Gabelli Funds, LLC and its affiliates.
<PAGE>
Name, Address, Age and
Position(s) with Fund Principal Occupations During Last Five Years
Robert J. Morrissey, 58 Partner in the law firm of Morrissey, Hawkins & Lynch; Director of
Director one other mutual fund advised by Gabelli Funds, LLC
Karl Otto Pohl, * + 69 Member of the Shareholder Committee of Sal. Oppenheim Jr. & Cie.
Director (private investment bank); Board Member of Gabelli Asset Management
Inc. (investment management), Zurich
Versicherungs - Gesellschaft
(insurance); the International Council
for JP Morgan & Co. and Trizec Hahn
Corp.; former President of the Deutsche
Bundesbank and Chairman of its Central
Bank Council from 1980 through 1991;
Director or Trustee of all other mutual
funds advised by Gabelli Funds, LLC and
its affiliates.
Anthony R. Pustorino, CPA, 73 Certified Public Accountant; Professor of Accounting, Pace
Director University since 1965. Director or Trustee of various other mutual
funds advised by Gabelli Funds, LLC and its affiliates.
Bruce N. Alpert, 47 Executive Vice President, Treasurer and Chief Operating Officer of
Chief Operating Officer, the Adviser; Director and President of Gabelli Advisers, Inc. and
Vice President and Treasurer an officer of all funds advised by Gabelli Funds, LLC and its
affiliates.
James E. McKee, 35 Vice President and General Counsel GAMCO Investors, Inc. since
Secretary 1993, Gabelli Funds, LLC since August 1995 and Gabelli Asset
Management Inc. since 1998; Secretary of all Funds advised by
Gabelli Funds, LLC and Gabelli Advisers, Inc. since August 1995;
Branch Chief with the U.S. Securities and Exchange Commission in
New York, 1992 through 1993.
- ---------------------
+ Mr. Pohl is a director of the parent company of the Adviser.
</TABLE>
No director, officer or employee of Gabelli & Company or the Adviser or
of any affiliate of Gabelli & Company or the Adviser will receive any
compensation from the Fund for serving as an officer or director of the Fund.
The Fund pays each of its Directors who is not a director, officer or employee
of the Adviser or any of their affiliates, $10,000 per annum plus $1,000 per
meeting attended in person and reimburses each Director for related travel and
out-of-pocket expenses. The Fund also pays each Director serving as Chairman of
the Audit, Investment, Proxy or Nominating Committees $2,500 per annum. For the
year ended December 31, 1998, such fees totaled $95,000.
Mr. Morrissey (Chairman) and Mr. Callaghan are members of the
Fund's Investment Committee. The Investment Committee reviews
investment related matters as needed.
Each Director serves as a director or trustee of certain other mutual
funds for which Gabelli Funds, LLC serves as Adviser and Gabelli & Company
serves as Distributor.
The following table sets forth certain information regarding the
compensation of the Fund's Directors and officers. Except as disclosed below, no
executive officer or person affiliated with the Fund received compensation in
excess of $60,000 from the Fund for the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
Compensation Table
Total Compensation
Aggregate Compensation from the From the Fund and
Name of Person and Position Fund Fund Complex *
- --------------------------- ---- -------------
Mario J. Gabelli $ 0 $ 0
Chairman of the Board
Bill Callaghan $14,000 $39,000 (3)
Director
Felix J. Christiana $15,000 $88,100 (10)
Director
Anthony J. Colavita $16,500 $81,500 (14)
Director
Robert J. Morrissey $15,500 $24,500 (3)
Director
Karl Otto Pohl $14,000 $98,466 (15)
Director
Anthony R. Pustorino $20,000 $100,500 (10)
Director
* Represents the total compensation paid to such persons during the fiscal
year ending December 31, 1998 by investment companies (including the Fund)
from which such person receives compensation that are part of the same fund
complex as the Fund because they have common or affiliated investment
advisers. The number in parentheses represents the number of such
investment companies.
</TABLE>
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
[As of _______, 1999, the following persons owned more than 25% of
the voting securities of the Fund and therefore may be deemed to control the
Fund:]
[Name/Address ____%]
As of ________, 1999, the following persons owned of record or
beneficially 5% or more of the Fund's outstanding shares:
Name/Address ____%
As of ________, 1999, as a group the Directors and officers of the Fund
owned less than 1% of the outstanding shares of common stock of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
The Adviser is a New York limited liability company with principal
offices located at One Corporate Center, Rye, New York 10580-1434. The Adviser
also serves as investment adviser to three closed-end investment companies and
twelve open-end investment companies. The Adviser is a registered investment
adviser under the Investment Advisers Act of 1940, as amended. Mr. Mario J.
Gabelli may be deemed a controlling person of the Adviser on the basis of his
controlling interest of the parent company of the Adviser. GAMCO Investors, Inc.
("GAMCO"), an affiliate of the Adviser, acts as investment adviser for
individuals, pension trusts, profit-sharing trusts and endowments, and had
aggregate assets in excess of $8.0 billion under its management as of December
31, 1998.
The Adviser and its affiliates act as investment advisers to other
clients that may invest in the same securities. As a result, clients of the
Adviser and its affiliates hold substantial positions in the same issuers of
securities. If a substantial position in an issuer is held, liquidity and
concentration considerations may limit the ability of the Adviser to add to the
position on behalf of the Fund or other clients or to readily dispose of the
position. Although the availability at acceptable prices of such securities may
from time to time be limited, it is the policy of the Adviser and its affiliates
to allocate purchases and sales of such securities in a manner believed by the
Adviser to be equitable to all clients, including the Fund. The Adviser may on
occasion give advice or take action with respect to other clients that differs
from the actions taken with respect to the Fund. The Fund may invest in the
securities of companies which are investment management clients of GAMCO. In
addition, portfolio companies or their officers or directors may be minority
shareholders of the Adviser or its affiliates.
The Adviser currently serves as investment adviser to the Fund pursuant
to an investment advisory agreement dated March 1, 1994 (the "Advisory
Agreement"), which was most recently approved by the Fund's Board of Directors,
including a majority of the Directors who are not "interested persons" of the
Fund, at a Board Meeting held on February 17, 1999. Pursuant to the Advisory
Agreement, the Fund employs the Adviser to act as its investment adviser and to
oversee the administration of all aspects of the Fund's business affairs and to
provide, or arrange for others whom it believes to be competent to provide
certain services. The Adviser generally is responsible for the investment and
management of the Fund's assets, subject to and in accordance with the Fund's
investment objective, policies, and restrictions as stated in the Prospectus and
herein. In discharging its responsibility, the Adviser determines and monitors
the investments of the Fund. In addition, the Adviser has full authority to
implement its determinations by selecting and placing individual transactions on
behalf of the Fund.
Under the Advisory Agreement, the Adviser also provides or arranges for
the following services: (i) maintains 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 or dividend disbursing agent; (ii) transmitting purchase and redemption
orders for Fund shares to the extent not transmitted by the Fund's distributor
or others who purchase and redeem shares; (iii) initiating all money transfers
to the Fund's custodian and from the Fund's custodian for the payment of the
Fund's expenses, investments, dividends and share redemptions; (iv) reconciling
account information and balances among the Fund's custodian, transfer agent,
distributor, dividend disbursing agent and the Adviser; (v) providing the Fund,
upon request, with such office space and facilities, utilities and office
equipment as are adequate for the Fund's needs; (vi) preparing, but not paying
for, all reports by the Fund to its shareholders and all reports and filings
required to maintain the registration and qualification of the Fund's shares
under federal and state law including periodic updating of the Fund's
registration statement and Prospectus (including its SAI); (vii) supervising the
calculation of the net asset value of the Fund's shares; and (viii) preparing
notices and agendas for meetings of the Fund's shareholders and the Fund's Board
of Directors as well as minutes of such meetings in all matters required by
applicable law to be acted upon by the Board of Directors.
The Advisory Agreement provides that, absent willful misfeasance, bad
faith, gross negligence or reckless disregard of duty, the Adviser shall not be
liable to the Fund for any error of judgment or mistake of law or for any loss
sustained by the Fund. The Fund has agreed by the terms of the Advisory
Agreement that the word "Gabelli" in its name is derived from the name of the
Adviser that in turn is derived from the name of Mario J. Gabelli; that the name
is the property of the Adviser for copyright and other purposes; and that,
therefore, the name may freely be used by the Adviser for other investment
companies, entities or products. The Fund has further agreed that in the event
that for any reason, the Adviser ceases to be its investment adviser, the Fund
will, unless the Adviser otherwise consents in writing, promptly take all steps
necessary to change its name to one which does not include "Gabelli."
The Advisory Agreement is terminable without penalty by the Fund on 60
days' written notice when authorized either by majority vote of its outstanding
voting shares or by vote of a majority of its Board of Directors, or by the
Adviser on 60 days' written notice, and will automatically terminate in the
event of its "assignment" as defined by the 1940 Act. The Advisory Agreement
provides that, unless terminated, it will remain in effect from year to year as
long as such continuance is annually approved by the Board of Directors or by
majority vote of its outstanding voting shares and, in either case, by a
majority vote of the Directors who are not parties to the Advisory Agreement or
"interested persons," as defined by the 1940 Act, of any such party cast in
person at a meeting called specially for the purpose of voting on the
continuance of the Advisory Agreement.
As compensation for its services and the related expenses borne by
the Adviser, the Adviser is paid a fee computed and payable monthly, equal, on
an annual basis, to 1.00% of the value of the Fund's average daily net assets,
which is higher than that paid by most mutual funds. For the fiscal years ended
December 31, 1996, December 31, 1997 and December 31, 1998, the Fund paid
investment advisory fees to the Adviser amounting to $4,983,647, $5,036,742 and
$7,237,856, respectively.
Sub-Administrator
First Data Investor Services Group, Inc. (the "Sub-Administrator"), a
subsidiary of First Data Corporation, serves as Sub-Administrator to the Fund
pursuant to a Sub-Administration Agreement with the Adviser (the
"Sub-Administration Agreement"). Under the Sub-Administration Agreement, the
Sub-Administrator (a) assists in supervising all aspects of the Fund's
operations except those performed by the Adviser under its advisory agreement
with the Fund; (b) supplies the Fund with office facilities (which may be in the
Sub-Administrator's own offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of the net asset value of shares in the Fund,
internal auditing and legal services, internal executive and administrative
services, and stationery and office supplies; (c) prepares and distributes
materials for all Fund Board of Directors' Meetings including the mailing of all
Board materials and collates the same materials into the Board books and assists
in the drafting of minutes of the Board Meetings; (d) prepares reports to Fund
shareholders, tax returns and reports to and filings with the SEC and state
"Blue Sky" authorities; (e) calculates the Fund's net asset value per share,
provides any equipment or services necessary for the purpose of pricing shares
or valuing the Fund's investment portfolio and, when requested, calculates the
amounts permitted for the payment of distribution expenses under any
distribution plan adopted by the Fund; (f) provides compliance testing of all
Fund activities against applicable requirements of the 1940 Act and the rules
thereunder, the Internal Revenue Code of 1986, as amended (the "Code"), and the
Fund's investment restrictions; (g) furnishes to the Adviser such statistical
and other factual information and information regarding economic factors and
trends as the Adviser from time to time may require; and (h) generally provides
all administrative services that may be required for the ongoing operation of
the Fund in a manner consistent with the requirements of the 1940 Act.
For the services it provides, the Advisor pays the Sub-Administrator an
annual fee based on the value of the aggregate average daily net assets of all
funds under its administration managed by the Adviser as follows: up to $1
billion - 0.10%; $1 billion to $1.5 billion - 0.08%; $1.5 billion to $3 billion
- - 0.03%; over $3 billion - 0.02%.
Distributor
The Fund has entered into a distribution agreement with Gabelli &
Company, Inc. the Fund's Distributor, and may enter into substantially identical
arrangements with other firms. Gabelli & Company, a New York corporation which
is a majority owned subsidiary of the Adviser, has its principal offices at One
Corporate Center, Rye, New York 10580. Gabelli & Company continuously solicits
offers for the purchase of shares of the Fund on a best efforts basis. Expenses
normally attributable to the sale of Fund shares which are not paid by the Fund
(see "Management of the Fund" and "Purchase of Share - Distribution Plan" in the
Prospectus) are paid by Gabelli & Company. Gabelli & Company may enter into
selling agreements with registered broker-dealers ("Soliciting Broker-Dealers")
pursuant to which Gabelli & Company may reallow the sales charge to Soliciting
Broker-Dealers in accordance with the schedule set forth in the Prospectus under
"Purchase of Shares."
For the fiscal years ended December 31, 1996, December 31, 1997, and
December 31, 1998, commissions (sales charges) on sales of the Fund's shares
received by Gabelli & Company were $227,803, $72,835 and $367,320,
respectively.
Counsel
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019, serves as the Fund's legal counsel.
Independent Accountant
The financial statements included in the SAI have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in auditing and
accounting. PricewaterhouseCoopers LLP serves as the Fund's independent
accountants and in that capacity audits the Fund's annual financial
statements.
Custodian, Transfer Agent and Dividend Disbursing Agent
Boston Safe, an indirect wholly owned subsidiary of Mellon Bank
Corporation., is located at One Boston Place, Boston, Massachusetts 02108, and
acts as custodian of the Fund's cash and securities. Boston Financial Data
Services, Inc. ("BFDS"), an affiliate of State Street Bank and Trust Company
("State Street"), is located at the BFDS Building, Two Heritage Drive, Quincy,
Massachusetts 02171 and acts as the Fund's transfer agent and dividend
disbursing agent. Neither Boston Safe, BFDS nor State Street assists in or is
responsible for investment decisions involving assets of the Fund.
DISTRIBUTION PLAN
The Fund has adopted a plan of distribution (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, the Fund will make monthly
payments to registered broker-dealers, including Gabelli & Company, who have
entered into an agreement with the Fund (each, a "Designated Dealer") for
activities intended to result in the distribution of Fund shares as described
below.
Payments under the Plan are not tied exclusively to the distribution
expenses actually incurred by Designated Dealers and such payments may exceed
their distribution expenses. Expenses incurred in connection with the offering
and sale of shares may include, but are not limited to, payments to the
Designated Dealer's (or its affiliates') sales personnel for selling shares of
the Fund; costs of printing and distributing the Fund's Prospectus, SAI and
sales literature; an allocation of overhead and other Designated Dealer branch
office distribution-related expenses; payments to and expenses of persons who
provide support services in connection with the distribution of shares of the
Fund; and financing costs on the amount of the foregoing expenses.
The Board of Directors will evaluate the appropriateness of the Plan
and its payment terms on a continuing basis and in doing so will consider all
relevant factors, including expenses borne by Designated Dealers in the current
year and in prior years and amounts received under the Plan.
Under its terms, the Plan remains in effect so long as its
continuance is specifically approved at least annually by vote of the
Fund's Board of Directors, including a majority of the Directors who
are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Fund ("Independent
Directors"). The Plan may not be amended to increase materially the
amount to be spent for the services provided by the Designated Dealers
thereunder without shareholder approval, and all material amendments
of the Plan must also be approved by the Directors in the manner
described above. The Plan may be terminated at any time, without
penalty, by vote of a majority of the Independent Directors, or by a
vote of a majority of the outstanding voting securities of the Fund
(as defined in the 1940 Act). Under the Plan, Designated Dealers will
provide the Directors periodic reports of amounts expended under the
Plan and the purpose for which such expenditures were made. For the
fiscal year ended December 31, 1998, the Fund made aggregate
distribution payments of approximately $2,133,120 to Designated
Dealers pursuant to the Plan. Such payments funded expenditures of
approximately $668,720 for support services, $174,100 to sales
personnel of Designated Dealers, $21,200 for advertising expenses and
$104,700 for printing and mailing expenses and also payments of
$1,164,400 to selected dealers.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser is authorized on behalf of
the Fund to employ brokers to effect the purchase or sale of portfolio
securities with the objective of obtaining prompt, efficient and reliable
execution and clearance of such transactions at the most favorable price
obtainable at reasonable expense ("best execution"). The Adviser is permitted to
(1) direct Fund portfolio brokerage to Gabelli & Company, a broker-dealer
affiliate of the Adviser; (2) pay commissions to brokers other than Gabelli &
Company which are higher than might be charged by another qualified broker to
obtain brokerage and/or research services considered by the Adviser to be useful
or desirable for its investment management of the Fund and/or other advisory
accounts under the management of the Adviser and any investment adviser
affiliated with it; and (3) consider the sales of shares of the Fund by brokers
other than Gabelli & Company as a factor in its selection of brokers for Fund
portfolio transactions.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions, which may vary among different brokers. Transactions in
securities other than those for which a securities exchange is the principal
market are generally executed through the principal market maker. However, such
transactions may be effected through a brokerage firm and a commission paid
whenever it appears that the broker can obtain a more favorable overall price.
In general, there may be no stated commission in the case of securities traded
on the over-the-counter markets, but the prices of those securities may include
undisclosed commissions or markups. Option transactions will usually be effected
through a broker and a commission will be charged. The Fund also expects that
securities will be purchased at times in underwritten offerings where the price
includes a fixed amount of compensation generally referred to as a concession or
discount.
The Adviser and its affiliates currently serve as investment adviser to
a number of investment companies and private account clients and may in the
future act as advisers to others. It is the policy of the Adviser and its
affiliates to allocate investments suitable and appropriate for each such client
in a manner believed by the Adviser to be equitable to each client. In making
such allocations among the Fund and other client accounts, the main factors
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts.
The following table sets forth certain information regarding the Fund's
payment of brokerage commissions to Gabelli & Company and Keeley Investment
Corp. ("Keeley"). A significant shareholder of Keeley is a director of a company
that is an affiliate of the Adviser:
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Year Ended
December 31, Commissions Paid
Total Brokerage Commissions 1996 $ 446,848
1997 $629,709
1998 $721,108
Commissions paid to Gabelli & Company 1996 $ 110,275
1997 $226,899
1998 $381,995
Commissions paid to Keeley Investment Corp. 1996 $ 5,110
1997 $ 900
1998 $ 9,755
% of Total Brokerage Commissions paid to Gabelli & Company 1998 52.97%
<PAGE>
Fiscal Year Ended
December 31, Commissions Paid
% of Total Brokerage Commissions paid to Keeley Investment Corp. 1998 1.35%
% of Total Transactions involving Commissions paid to 1998 49.25%
Gabelli & Company
% of Total Transactions involving Commissions paid to 1998 0.48%
Keeley Investment Corp.
</TABLE>
The policy of the Fund regarding purchases and sales of securities and
options for its portfolio is that primary consideration will be given to
obtaining best execution. The Adviser may also give consideration to placing
portfolio transactions with those brokers and dealers who also furnish research
and other services to the Fund or the Adviser of the type described in Section
28(e) of the Securities Exchange Act of 1934, as amended. In doing so, the Fund
may also pay higher commission rates than the lowest available to obtain
brokerage and research services provided by the broker effecting the transaction
for the Fund and for other advisory accounts over which the Adviser or its
affiliates exercise investment discretion. These services may include, but are
not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investments; wire services; and appraisals
or evaluations of portfolio securities. Since it is not feasible to do so, the
Adviser does not attempt to place a specific dollar value on such services or
the portion of the commission which reflects the amount paid for such services
but must be prepared to demonstrate a good faith basis for its determination.
Investment research obtained by allocations of Fund brokerage is used
to augment the scope and supplement the internal research and investment
strategy capabilities of the Adviser but does not reduce the overall expenses of
the Adviser to any material extent. Such investment research may be in written
form or through direct contact with individuals and includes information on
particular companies and industries as well as market, economic or institutional
activity areas. Research services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser and its advisory
affiliates in carrying out their responsibilities with respect to all of their
accounts over which they exercise investment discretion. Such investment
information may be useful only to one or more of the other accounts of the
Adviser and its advisory affiliates, and research information received for the
commissions of those particular accounts may be useful both to the Fund and one
or more of such other accounts.
Neither the Fund nor the Adviser has any agreement or legally
binding understanding with any broker regarding any specific amount of brokerage
commissions which will be paid in recognition of such services. However, in
determining the amount of portfolio commissions directed to such brokers, the
Adviser does consider the level of services provided and, based on such
determinations, has allocated brokerage commissions of $721,108 on portfolio
transactions in the principal amounts of $506,087,023 during 1998.
The Adviser may also place orders for the purchase or sale of portfolio
securities with Gabelli & Company or other affiliates of the Adviser, when it
appears that Gabelli & Company can obtain a price and execution which is at
least as favorable as that obtainable by other qualified brokers. As required by
Rule 17e-1 under the 1940 Act, the Board of Directors has adopted "Procedures"
that provide that the commissions paid to Gabelli & Company or affiliated
brokers on stock exchange transactions must be consistent with those charged by
such firms in similar transactions to unaffiliated clients that are comparable
to the Fund. Rule 17e-1 under the 1940 Act and the Procedures contain
requirements that the Board, including those directors who are not "interested
persons" of the Fund, conduct periodic compliance reviews of such brokerage
allocations and the Procedures to determine their continuing appropriateness.
The Adviser is also required to furnish reports and maintain records in
connection with the reviews.
To obtain the best execution of portfolio trades on The New York Stock
Exchange, Inc. ("NYSE"), Gabelli & Company controls and monitors the execution
of such transactions on the floor of the NYSE through independent "floor
brokers" or the Designated Order Turnaround System of the NYSE. These
transactions are then cleared, confirmed to the Fund for the account of Gabelli
& Company, and settled directly with the custodian of the Fund by a clearing
house member firm which remits the commission less its clearing charges to
Gabelli & Company. Pursuant to an agreement with the Fund, Gabelli & Company
pays all charges incurred for these services and reports at least quarterly to
the Board of Directors the amount of the expenses and commissions for its
brokerage services, which is subject to review and approval of the Board of
Directors including those directors who are not "interested persons" of the
Fund. Gabelli & Company may also effect Fund portfolio transactions in the same
manner and pursuant to the same arrangements on other national securities
exchanges that adopt direct access rules similar to those of the NYSE. In
addition, Gabelli & Company may directly execute transactions for the Fund on
the floor of any exchange, provided: (i) the Board of Directors has expressly
authorized Gabelli & Company to effect such transactions; and (ii) Gabelli &
Company annually advises the Fund of the aggregate compensation it earned on
such transactions.
PURCHASE OF SHARES
Payment for shares purchased through a brokerage firm is
generally due on the third business day after purchases are effected (each such
day being a "Settlement Date"). When payment is made to a brokerage firm before
a Settlement Date, unless otherwise directed by the investor, the monies may be
held as a free credit balance in the investor's brokerage account and the
brokerage firm may benefit from the temporary use of these monies. The investor
may designate another use for the monies prior to the Settlement Date, such as
investment in a money market fund. If the investor instructs a brokerage firm to
invest the monies in a money market fund, the amount of the investment will be
included as part of the average daily net assets of both the Fund and the money
market fund, and any affiliates of Gabelli & Company which serve the funds in an
investment advisory, administrative or other capacity will benefit from the fact
that they are receiving fees from both investment companies computed on the
basis of their average daily net assets. The Board of Directors of the Fund is
advised of the benefits to Gabelli & Company resulting from three-day settlement
procedures and will take such benefits into consideration when reviewing the
distribution agreement for continuance.
.........Gabelli & Company imposes no restrictions on the
transfer of shares held by it for clients in "street name" in either
certificate or uncertificated form. The Fund has agreed to indemnify
Gabelli & Company against certain liabilities, including liabilities
arising under the 1933 Act.
RETIREMENT PLANS
Under the Code, individuals may make wholly or partly tax-deductible
IRA contributions of up to $2,000 annually, depending on whether they are active
participants in an employer-sponsored retirement plan and on their income level.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a combined maximum of $4,000 annually to both IRAs
provided that no more than $2,000 may be contributed to the IRA of either
spouse.
Investors may be eligible to make contributions to a new type of
individual retirement account (a "Roth IRA"). An investor can open a Roth IRA if
he or she meets certain income limits specified in the Code. Any contributions
made by an investor to a Roth IRA are nondeductible for U.S. Federal income tax
purposes. Distributions from a Roth IRA are not included in the investor's gross
income and are not subject to a 10% penalty for early withdrawal if the
distributions are made after the end of the five-year period beginning with the
first tax year in which the investor made a contribution to the Roth IRA and the
distributions meet other criteria set forth in the Code. The maximum annual
aggregate contribution that can be made to IRAs and Roth IRAs is $2,000. In
addition, certain low and middle-income investors may open an education
individual retirement account (an "Education IRA"). Eligible individuals are
permitted to contribute up to $500 per year per beneficiary under 18 years old
to an Education IRA. The minimum initial investment for an Education IRA through
the Fund is $250. A distribution from an Education IRA is generally excludable
from gross income to the extent that such distribution does not exceed qualified
higher education expenses incurred by the beneficiary during the year in which
the distribution is made.
Investors should be aware that they may be subject to penalties or
additional tax on contributions to or withdrawals from IRAs or other retirement
plans which are not permitted by the applicable provisions of the Code. Persons
desiring information concerning investments through IRAs or other retirement
plans should write or telephone their brokerage firm or Gabelli & Company.
REDEMPTION OF SHARES
Redemption requests received after the close of trading on the NYSE
will be effected at the net asset value per share as next determined. The Fund
normally transmits redemption proceeds with respect to redemption requests made
through a brokerage firm for credit to the shareholder's account at no charge
within seven days after receipt of a redemption request or by check directly to
the shareholder. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction, and the brokerage firm will
benefit from the use of temporarily uninvested funds. Redemption proceeds with
respect to redemption requests made through Gabelli & Company normally will be
transmitted by the Fund's transfer agent to the shareholder by check within
seven days after receipt of a redemption request or to a shareholder's brokerage
account maintained by Gabelli & Company. A shareholder who anticipates the need
for more immediate access to his or her investment should purchase shares with
federal funds, bank wire or by a certified or cashier's check.
Payment of the redemption price for shares redeemed may be made either
in cash or in portfolio securities (selected at the discretion of the Board of
Directors of the Fund and taken at their value used in determining the Fund's
net asset value per share as described below under "Computation of Net Asset
Value"), partly in cash and partly in portfolio securities. However, payments
will be made wholly in cash unless the Board of Directors believes that economic
conditions exist which would make such a practice detrimental to the best
interests of the Fund. If payment for shares redeemed is made wholly or partly
in portfolio securities, brokerage costs may be incurred by the investor in
converting the securities to cash. The Fund will not distribute in-kind
portfolio securities that are not readily marketable. The Fund has filed a
formal election with the SEC pursuant to which the Fund will only effect a
redemption in portfolio securities where the particular shareholder of record is
redeeming more than $250,000 or 1% of the Fund's total net assets, whichever is
less, during any 90 day period. In the opinion of the Fund's management,
however, the amount of a redemption request would have to be significantly
greater than $250,000 or 1% of total net assets before a redemption wholly or
partly in portfolio securities was made.
Cancellation of purchase orders for Fund shares (as, for example, when
checks submitted to purchase shares are returned unpaid) causes a loss to be
incurred when the net asset value of the Fund shares on the date of cancellation
is less than on the original date of purchase. The investor is responsible for
the loss, and the Fund, to the extent permissible by law, may reimburse itself
or Gabelli & Company for the loss by automatically redeeming shares from any
account registered at any time in that shareholder's name, or by seeking other
redress. In the event shares held in the account of the shareholder are not
sufficient to cover such loss, Gabelli & Company will promptly reimburse the
Fund for the amount of such unrecovered loss.
COMPUTATION OF NET ASSET VALUE
For
purposes of determining the Fund's net asset value per share,
readily marketable portfolio securities listed on the NYSE are valued,
except as indicated below, at the last sale price reflected at the
close of the regular trading session of the NYSE on the business day
as of which such value is being determined. If there has been no sale
on such day, the securities are valued at the mean of the closing bid
and asked prices on such day. If no asked prices are quoted on such
day, then the security is valued at the closing bid price on such day.
If no bid or asked prices are quoted on such day, then the security is
valued by such method as the Board of Directors shall determine in
good faith to reflect its fair market value, although the actual
calculation may be done by others. Options are priced at 4:15 p.m. and
are generally valued at the last sale price or, in the absence of a
last sale price, the last offer price. Readily marketable securities
not listed on the NYSE but listed on other national securities
exchanges or admitted to trading on the Nasdaq National List are
valued in like manner. Readily marketable securities traded in the
over-the-counter market, including listed securities whose primary
market is believed by the Adviser to be over-the-counter but excluding
securities admitted to trading on the Nasdaq National List, are valued
at the mean of the current bid and asked prices as reported by Nasdaq
or, in the case of securities not quoted by Nasdaq, the National
Quotation Bureau or such other comparable sources as the Board of
Directors deems appropriate to reflect their fair value. If no asked
prices are quoted on such day, then the security is valued by such
method as the Board of Directors shall determine in good faith to
reflect its fair market value.
Portfolio securities traded on more than one national securities
exchange or market are valued according to the broadest and most representative
market as determined by the Adviser. Securities traded primarily on foreign
exchanges are valued at the closing price on such foreign exchange immediately
prior to the close of the NYSE.
United States Government obligations and other debt instruments having
60 days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Fund's Board of
Directors designed to reflect in good faith the fair value of such securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
General
Dividends and distributions will be automatically reinvested for each
shareholder's account at net asset value in additional shares of the Fund,
unless the shareholder instructs the Fund to pay all dividends and distributions
in cash and to credit the amounts to his or her brokerage account or to pay the
amounts by check. Fractional shares may be paid in cash. Dividends from net
investment income, if any, and distributions of any net realized capital gains
earned by the Fund will be paid annually.
Under the Code, amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To avoid the tax, the Fund must distribute during each calendar
year, at least the sum of (1) 98% of its ordinary income (not taking into
account any capital gains or losses) for the calendar year, (2) 98% of its
capital gains in excess of its capital losses for the twelve-month period ending
on October 31 of the calendar year or, upon election, during the calendar year
and (3) all ordinary income and net capital gains for previous years that were
not previously distributed. A distribution will be treated as paid during the
calendar year if it is paid during the calendar year or declared by the Fund in
October, November or December of the year, payable to shareholders of record as
of a specified date in such a month and actually paid by the Fund during January
of the following year. Any such distributions paid during January of the
following year will be deemed to be paid and received on December 31 of the year
the distributions are declared.
Gains or losses on the sales of securities by the Fund will be
long-term capital gains or losses if the securities have been held by the Fund
for more than twelve months. Gains or losses on the sale of securities held for
twelve months or less will be short-term capital gains or losses.
The Fund has qualified and intends to continue to qualify as a
"Regulated Investment Company" under Subchapter M of the Code. If so qualified,
the Fund will not be subject to federal income tax on its net investment income
and net short-term and long-term capital gains, if any, realized during any
taxable year in which it distributes such income and capital gains to its
shareholders. Although the Fund is non-diversified for purposes of the 1940 Act,
the Fund nevertheless is subject to diversification requirements under
Subchapter M. In general, the Code requires the Fund to diversify its holdings
so that, at the close of each quarter of its taxable year, (1) at least 50% of
the value of its total assets consist of cash, cash items, U.S. Government
securities, securities of other regulated investment companies, and other
securities limited generally with respect to any one issuer to not more than 5%
of the total assets of the Fund and not more than 10% of the outstanding voting
securities of each issuer, and (2) not more than 25% of the value of its assets
is invested in the securities of any issuer (other than U.S. Government
securities or the securities of other regulated investment companies).
If the Fund is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends shall be
included in the Fund's gross income as of the later of (a) the date such stock
became ex-dividend with respect to such dividends (i.e., the date on which a
buyer of the stock would not be entitled to receive the declared, but unpaid,
dividends) or (b) the date the Fund acquired such stock. Accordingly, in order
to satisfy its income distribution requirements, the Fund may be required to pay
dividends based on anticipated earnings, and shareholders may receive dividends
in an earlier year than would otherwise be the case.
The Fund's short sales against the box and transactions in futures
contracts and options will be subject to special provisions of the Code that,
among other things, may affect the character of gains and losses realized by the
Fund (i.e., may affect whether gains or losses are ordinary or capital), may
accelerate recognition of income to the Fund and may defer Fund losses. These
rules could therefore affect the character, amount and timing of distributions
to shareholders. These provisions also (a) will require the Fund to
mark-to-market certain types of the positions in its portfolio (i.e., treat them
as if they were closed out), and (b) may cause the Fund to recognize income
without receiving cash with which to make distributions in amounts necessary to
satisfy the 90% and 98% distribution requirements for avoiding income and excise
taxes described above. The Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it engages in short sales against the box or acquires any futures
contract, option or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Fund as a regulated investment
company.
Foreign Withholding Taxes
Income received by the Fund from investments in foreign securities may
be subject to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the rate of foreign tax in
advance since the amount of the Fund's assets to be invested in various
countries is not known. Because the Fund will not have more than 50% of its
total assets invested in securities of foreign governments or corporations, the
Fund will not be entitled to "pass-through" to shareholders the amount of
foreign taxes paid by the Fund.
Passive Foreign Investment Companies
If the Fund purchases shares in certain foreign investment entities,
called "passive foreign investment companies" (a "PFIC"), it may be subject to
United States federal income tax on a portion of any "excess distribution" or
gain from the disposition of such shares even if such income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on the Fund in respect of deferred taxes
arising from such distributions or gains. If the Fund were to invest in a PFIC
and elected to treat the PFIC as a "qualified electing fund" under the Code, in
lieu of the foregoing requirements, the Fund might be required to include in
income each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if not distributed to the Fund, and such amounts
would be subject to the 90% and excise tax distribution requirements described
above. In order to make this election, the Fund would be required to obtain
certain annual information from the passive foreign investment companies in
which it invests, which may be difficult or not possible to obtain.
Alternatively, the Fund may make a mark-to-market election that will
result in the Fund being treated as if it had sold and repurchased all of the
PFIC stock at the end of each year. In this case, the Fund would report gains as
ordinary income and would deduct losses as ordinary losses to the extent of
previously recognized gains. The election, once made, would be effective for all
subsequent taxable years of the Fund, unless revoked with the consent of the
IRS. By making the election, the Fund could potentially ameliorate the adverse
tax consequences with respect to its ownership of shares in a PFIC, but in any
particular year may be required to recognize income in excess of the
distributions it receives from PFICs and its proceeds from dispositions of PFIC
company stock. The Fund may have to distribute this "phantom" income and gain to
satisfy its distribution requirement and to avoid imposition of the 4% excise
tax. The Fund will make the appropriate tax elections, if possible, and take any
additional steps that are necessary to mitigate the effect of these rules.
Distributions
Distributions of investment company taxable income (which includes
interest and dividends and the excess of net short-term capital gains over
long-term capital losses, but not the excess of net long-term capital gains over
net short-term capital losses) are taxable to a U.S. shareholder as ordinary
income, whether paid in cash or shares. Dividends paid by the Fund will qualify
for the 70% deduction generally available for dividends received by corporations
to the extent the Fund's income consists of qualified dividends received from
U.S. corporations. Distributions of net capital gains (which consists of the
excess of net long-term capital gains over net short-term capital losses), if
any, are taxable as long-term capital gains, whether paid in cash or in shares,
regardless of how long the shareholder has held the Fund's shares, and are not
eligible for the dividends received deduction. Shareholders receiving
distributions in the form of newly issued shares will have a basis in such
shares of the Fund equal to the fair market value of such shares on the
distribution date.
The price of shares purchased just prior to a distribution by the Fund
may reflect the amount of the forthcoming distribution. Those purchasing at that
time will receive a distribution that represents a return of investment, but
that will nevertheless be taxable to them.
Sales of Shares
Upon a sale or exchange of his or her shares, a shareholder will
realize a taxable gain or loss depending upon his or her basis in the shares.
The gain or loss will be treated as a long-term capital gain or loss if the
shares have been held for more than one year. Any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of are replaced
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of. In such case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized by a shareholder on
the sale of Fund shares held by the shareholder for six months or less will be
treated for tax purposes as a long-term capital loss to the extent of any
distributions of long-term capital gains received by the shareholder with
respect to such shares. However, capital losses are deductible only against
capital gains plus, for individuals, up to $3,000 of ordinary income.
Backup Withholding
The Fund may be required to withhold federal income tax at the rate
of 31% with respect to (1) taxable dividends and distributions and (2) proceeds
of any redemptions of Fund shares if a shareholder fails to provide the Fund
with his or her correct taxpayer identification number or to make required
certifications, or who has been notified by the Internal Revenue Service that he
or she is subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's federal income
tax liability.
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state, local or foreign taxes.
CALCULATION OF INVESTMENT PERFORMANCE
From time to time, the Fund may quote its performance in advertisements
or in reports and other communications to shareholders.
Average Annual Total Return
The Fund may advertise its "average annual total return" over
various periods of time. Total return figures show the average
percentage change in value of an investment in the Fund from the
beginning date of the measuring period to the end of the measuring
period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the period were reinvested in
shares of the Fund. Figures will be given for the recent one-, five-
and ten-year periods, or for the life of the Fund to the extent it has
not been in existence for any such periods, and may be given for other
periods as well, such as on a year-by-year basis. When considering
"average" total return figures for periods longer than one year, it is
important to note that the Fund's annual total return for any one year
in the period might have been greater or less than the average for the
entire period. The Fund's "average annual total return" figures are
computed according to a formula prescribed by the SEC. The formula can
be expressed as follows: P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical
$1,000 investment made at the beginning of a
1-, 5- or 10-year period at the end of a 1-,
5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all
dividends and distributions.
The following average annual total return figures for the
Fund's Class A shares, calculated in accordance with the above formula, assume
that the maximum 5.5% sales load has been deducted from the hypothetical $1,000
initial investment at the time of purchase.
16.5% for the one year period from January 1, 1998 through December 31,
1998
18.1% for the five year period from January 1, 1994 through December
31, 1998
16.2% for the period from the Fund's inception on September 29,
1989 through December 31, 1998
Aggregate Total Return
The Fund may also use "aggregate" total return figures for various
periods, representing the cumulative change in value of an investment in the
Fund for the specific period (again reflecting changes in Fund share prices and
assuming reinvestment of dividends and distributions). Aggregate total return
may be calculated either with or without the effect of the maximum 5.5% sales
load and may be shown by means of schedules, charts, or graphs, and may indicate
subtotals of the various components of total return (that is, change in value of
initial investment, income dividends, and capital gains distributions). The
Fund's aggregate total return figures represent the cumulative change in the
value of an investment in the Fund for the specified period and are computed
according to the following formula:
AGGREGATE TOTAL RETURN = ERV-P
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical
$10,000 investment made at the beginning of
a 1-, 5-, or 10-year period (or fractional
portion thereof) at the end of the 1-, 5-,
or 10-year period (or fractional portion
thereof), assuming reinvestment of all
dividends and distributions.
<PAGE>
The Fund's aggregate total return for Class A shares was as follows
for the periods indicated:
16.5% for the one year fiscal period from January 1, 1998 through
December 31, 1998
129.9% for the five year period from January 1, 1994 through December
31, 1998
301.6% for the period from the Fund's inception on September 29, 1989
through December 31, 1998
The above aggregate total return figures do not assume that the maximum
5.5% sales load has been deducted from the investment at the time of purchase.
If the maximum sales charge had been deducted at the time of purchase, the Class
A shares' aggregate total returns for the same periods would have been 23.2%,
143.2% and 325.0%, respectively.
The Fund's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for any specified period in the future.
In addition, because the performance will fluctuate, it may not provide a basis
for comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors
comparing the Fund's performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.
In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings prepared by Lipper Analytical Services, Incorporated,
Morningstar, Inc. or similar independent services that monitor the performance
of mutual funds or other industry or financial publications. It is important to
note that the total return figures are based on historical earnings and are not
intended to indicate future performance. Shareholders may make inquiries
regarding the Fund's total return figures to Gabelli and Company.
In its reports, investor communications or advertisements, the Fund may
also include: (i) descriptions and updates concerning its strategies and
portfolio investments; (ii) its goals, risk factors and expenses compared with
other mutual funds; (iii) analysis of its investments by industry, country,
credit quality and other characteristics; (iv) a discussion of the risk/return
continuum relating to different investments; (v) the potential impact of adding
foreign stocks to a domestic portfolio; (vi) the general biography or work
experience of the portfolio manager of the Fund; (vii) portfolio manager
commentary or market updates; (viii) discussion of macroeconomic factors
affecting the Fund and its investments; and (ix) other information of interest
to investors.
DESCRIPTION OF THE FUND'S SHARES
Voting Rights
As a Maryland corporation, the Fund is not required, and does not
intend, to hold regular annual shareholder meetings. It will hold an
annual meeting if Directors are required to be elected under the 1940
Act and may hold special meetings for the consideration of proposals
requiring shareholder approval such as changing fundamental policies.
A meeting will be called to consider replacing the Fund's Directors
upon the written request of the holders of 10% of the Fund's shares.
When matters are submitted for shareholder vote, each shareholder will
have one vote for each full share owned and proportionate, fractional
votes for fractional shares held. Shares of the Fund have equal rights
with respect to voting, dividends and distributions upon liquidation.
The Board of Directors has authority, without a vote of shareholders,
to increase the number of shares the Fund is authorized to issue and
to authorize and issue additional classes of stock by reclassifying
unissued shares. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares, when issued in
accordance with the terms of the offering, will be fully paid and
non-assessable. Liabilities; Separate Classes of Shares
The Fund's Articles of Incorporation provides that to the fullest
extent that limitations on the liability of Directors and officers are permitted
by the Maryland General Corporation Law, the 1933 Act and the 1940 Act,
Directors and officers shall be indemnified by the Fund against judgments,
penalties, fines, excise taxes, settlements and reasonable expenses actually
incurred in connection with any action, suit or other proceeding. To the fullest
extent permitted by Maryland General Corporation Law, as amended from time to
time, the Fund's Articles of Incorporation also provide that no Director or
officer of the Fund shall be personally liable to the Fund or its shareholders
for money damages, except to the extent such exemption from liability or
limitation thereof is not permitted by the 1940 Act. Nothing in the Articles of
Incorporation protects a Director against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty involved in the conduct of his office.
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional votes held. Shareholders will vote in the
aggregate except where otherwise required by law and except that each class will
vote separately on certain matters pertaining to its distribution and
shareholder servicing arrangements.
The Adviser's investment personnel may invest in securities for their
own account pursuant to a Code of Ethics that establishes procedures for
personal investing and restricts certain transactions.
<PAGE>
FINANCIAL STATEMENTS
[TO BE INSERTED]
<PAGE>
73
g:\shared\clients\gabvalue\peas\peano.12\partc\0598.doc
g:\shared\clients\gabvalue\peas\1999\peano.13\partc\0599.doc
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations 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 market shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the
quality of the issue.
<PAGE>
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately based, in which case the rating is not published in
Moody's Investors Service, Inc.'s publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believe possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1, and B-1.
STANDARD & POOR'S RATINGS SERVICE
AAA: Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, 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.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
<PAGE>
THE GABELLI VALUE FUND INC.
Part C
OTHER INFORMATION
Item 23.
Exhibits
All references are to the Registrant's registration statement
on Form N-1A as filed with the Securities and Exchange
Commission ("SEC") on July 24, 1989, File Nos. 33-30139 and
811-5848 (the "Registration Statement").
(a) Articles of Incorporation dated July 20, 1989 are
incorporated by reference to Post-Effective Amendment No. 11 to the
Registration Statement as filed with the SEC on April 30, 1997
(Accession No. 0000927405-97-000148) ("Post-Effective Amendment No.
11").
Articles Supplementary dated September 27, 1989 are incorporated
by reference to Post-Effective Amendment No. 11.
Articles Supplementary dated _______, 1999 will be
filed by Amendment.
(b) Registrant's Bylaws dated September 18, 1989 are incorporated
by reference to Post-Effective Amendment No. 11.
(b) Not Applicable.
(d) Investment Advisory Agreement with Gabelli Funds, Inc. dated
March 1, 1994 is incorporated by reference to Post-Effective Amendment
No. 11.
Investment Advisory Agreement with Gabelli Funds, LLC
dated February 17, 1999 will be filed by Amendment.
(e) Subscription Agreement is incorporated by reference
to Pre-Effective Amendment No. 2 to the Registration
Statement as filed with the SEC on September 20,
1989.
Distribution Agreement with Gabelli & Company, Inc. dated July
30, 1993 is incorporated by reference to Post-Effective Amendment No.
11.
Designated Dealer Agreement with Gabelli & Company, Inc. dated
September 18, 1989 is incorporated by reference to Post-Effective
Amendment No. 9 to the Registration Statement as filed with the SEC on
May 1, 1995 (Accession No. 0000927405-95-000020).
Amended and Restated Distribution Agreement with Gabelli &
Company Inc. dated _________, 1999 will be filed by Amendment.
(f) Not Applicable.
(g) Custody Agreement with Boston Safe Deposit and Trust
Company dated September 19, 1989 is incorporated by
reference to Post-Effective Amendment No. 11.
Form of First Amendment to the Custody Agreement with Boston Safe
Deposit and Trust Company is incorporated by reference to
Post-Effective Amendment No. 12.
(h) Transfer Agency and Service Agreement with State
Street Bank and Trust Company dated November 17, 1993
is incorporated by reference to Post-Effective
Amendment No. 11.
Sub-Administration Agreement with The Shareholder Services Group,
Inc. (now known as First Data Investor Services Group, Inc.) dated May
1, 1995 is incorporated by reference to Post-Effective Amendment No.
11.
(i) Opinion and Consent of Counsel will be filed by Amendment.
(j) Consent of Independent Accountants will be filed by
Amendment.
Powers of Attorney for Mario J. Gabelli, Bill Callaghan, Felix J.
Christiana, Anthony J. Colavita, Robert J. Morrissey, Karl Otto Pohl
and Anthony R. Pustorino are incorporated by reference to
Post-Effective Amendment No. 11.
Certified Resolution of Board authorizing signature
on behalf of Registrant pursuant to Power of Attorney
is incorporated by reference to Post-Effective
Amendment No. 12.
(k) Not applicable.
(l) Purchase Agreement relating to Class B Series Shares will
be filed by Amendment.
Purchase Agreement relating to Class C Series Shares
will be filed by Amendment.
(m) Distribution Plan dated September 19, 1989 pursuant to Rule
12b-1 is incorporated by reference to Post-Effective Amendment No. 11.
Amended and Restated Plan of Distribution pursuant to
Rule 12b-1 relating to Class A Series Shares is filed
herewith.
Plan of Distribution pursuant to Rule 12b-1 relating
to Class B Series Shares is filed herewith.
Plan of Distribution pursuant to Rule 12b-1 relating
to Class C Series Shares is filed herewith.
(n) Financial Data Schedule is filed herewith.
(o) Rule 18f-3 Multi-Class Plan is filed herewith.
Item 24. Persons Controlled by or Under Common Control with Registrant.
None
<PAGE>
Item 25. Indemnification
The response to this Item 25 is incorporated by reference to
Pre-Effective Amendment No. 2.
Item 26. Business and Other Connections of Investment Adviser
Gabelli Funds, LLC (the "Adviser") is a registered investment
adviser providing investment management and administrative
services to the Registrant. The Adviser also provides similar
services to other mutual funds.
The information required by this Item 26 with respect to any
other business, profession, vocation or employment of a
substantial nature engaged in by directors and officers of the
Adviser during the past two years is incorporated by reference
to Form ADV filed by the Adviser pursuant to the Investment
Advisers Act of 1940 (SEC File No. 801-37706).
Item 27. Principal Underwriter
Gabelli & Company Inc. currently acts as distributor for The
Gabelli Asset 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 Small Cap
Growth Fund, The Gabelli Equity Income Fund, The Gabelli Gold
Fund, The Gabelli U.S. Treasury Money Market Fund, The Gabelli
ABC Fund, The Gabelli Value Fund Inc., The Gabelli Global
Interactive Couch Potato (R) Fund, The Gabelli International
Growth Fund, Inc., Gabelli Capital Asset Fund, The Gabelli
Global Telecommunications Fund, The Treasurer's Fund, Inc. and
the Gabelli Westwood Funds.
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
All accounts, books and other documents required by Section
31(a) of the 1940 Act and Rules 31a-1 through 31a-3 thereunder
are maintained at the offices of Gabelli Funds, Inc., One
Corporate Center, Rye, New York; First Data Investor Services
Group, Inc. One Exchange Place, Boston, Massachusetts; Boston
Safe Deposit and Trust Company, One Boston Place, Boston,
Massachusetts; State Street Bank and Trust Company c/o Boston
Financial Data Services, Inc., Two Heritage Drive, Quincy,
Massachusetts.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant, THE GABELLI VALUE
FUND INC., has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Rye and State of New York, on the 1st day of March,
1999.
THE GABELLI VALUE FUND INC.
By: Mario J. Gabelli*
Mario J. Gabelli
Chairman of the Board and President
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:
Mario J. Gabelli* Chairman of the Board, March 1, 1999
- ------------------------------------
Mario J. Gabelli (President and Chief
Investment Officer)
/s/ Bruce N. Alpert Vice President and Treasurer March 1, 1999
Bruce N. Alpert (Chief Operating Officer)
Bill Callaghan* Director March 1, 1999
Bill Callaghan
Felix J. Christiana* Director March 1, 1999
Felix J. Christiana
Anthony J. Colavita* Director March 1, 1999
Anthony J. Colavita
Robert J. Morrissey* Director March 1, 1999
Robert J. Morrissey
Karl Otto Pohl* Director March 1, 1999
Karl Otto Pohl
Anthony R. Pustorino* Director March 1, 1999
Anthony R. Pustorino
*By: /s/ Bruce N. Alpert
Bruce N. Alpert
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(m) Amended and Restated Plan of Distribution
(m) Plan of Distribution for Class B Shares
(m) Plan of Distribution for Class C Shares
(n) Financial Data Schedule
(o) Rule 18f-3 Multi-Class Plan
<PAGE>
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI VALUE FUND INC.
WHEREAS, THE GABELLI VALUE FUND INC., a Maryland corporation
(the "Fund"), engages in business as an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended
(the "Act");
WHEREAS, the Fund has issued and is authorized to issue shares of
Common Stock ("Shares");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and the Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Directors of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");
WHEREAS, the Fund has adopted a plan of distribution pursuant
to Rule 12b-1 under the Act to assist in the distribution of Shares (the
"Plan");
WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class A Series Shares (the "Class A Series
Shares"), pursuant to Rule 18f-3 under the Act that permits the Fund to
implement a multiple distribution system providing investors with the option of
purchasing shares of various classes;
WHEREAS, the Board as a whole, and the directors who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Directors"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to amend the
Plan in certain respects and to restate such amended Plan in its entirety and
that, in the exercise of reasonable business judgment and in light of their
fiduciary duties, that there is a reasonable likelihood that a plan of
distribution containing the terms set forth herein will benefit the Fund and the
shareholders of the Class A Series Shares, and have accordingly approved the
Plan by votes cast in person at a meeting called for the purpose of amending and
restating the Plan; and
WHEREAS, this Plan governs the Class A Series Shares and does
not relate to any class of shares which may be offered and sold by the Fund
other than the Class A Series Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby amends and restates the Plan in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the
Distribution Agreement, the Fund will pay to the Distributor as
distribution payments (the "Payments") in connection with the
distribution of Class A Series Shares an aggregate amount at a rate of
0.25% per year of the average daily net assets of the Class A Series
Shares. Such Payments shall be accrued daily and paid monthly in
arrears or shall be accrued and paid at such other intervals as the
Board shall determine. The Fund's obligation hereunder shall be
limited to the assets of the Class A Series Shares and shall not
constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under this
Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended
to result in the sale of Class A Series Shares. The scope of the
foregoing shall be interpreted by the Board, whose decision shall be
conclusive except to the extent it contravenes established legal
authority. Without in any way limiting the discretion of the Board,
the following activities are hereby declared to be primarily intended
to result in the sale of Class A Series Shares: advertising the Class
A Series Shares or the Fund's investment adviser's mutual fund
activities; compensating underwriters, dealers, brokers, banks and
other selling entities (including the Distributor and its affiliates)
and sales and marketing personnel of any of them for sales of Class A
Series Shares, whether in a lump sum or on a continuous, periodic,
contingent, deferred or other basis; compensating underwriters,
dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel)
of any of them for providing services to shareholders of the Fund
relating to their investment in the Class A Series Shares, including
assistance in connection with inquiries relating to shareholder
accounts; the production and dissemination of prospectuses (including
statements of additional information) of the Fund and the preparation,
production and dissemination of sales, marketing and shareholder
servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar expenses relating
to any activity for which Payment is authorized by the Board; and the
financing of any activity for which Payment is authorized by the
Board; and profit to the Distributor and its affiliates arising out of
their provision of shareholder services. Notwithstanding the
foregoing, this Plan does not require the Distributor or any of its
affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of
expenses for activities covered by this Section 2. In addition,
Payments made in a particular year shall not be refundable whether or
not such Payments exceed the expenses incurred for that year pursuant
to this Section 2.
3. The Fund is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other
person to whom the Fund intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into
appropriate written agreements with each person to whom the
Distributor intends to make any payments in the nature of a Payment.
The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be
made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper
in the case of an advertisement) unless the Board determines that such
an agreement or arrangement should be treated as a "related" agreement
for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3
must contain the provisions required by Rule 12b-1
under the Act and must be approved by a majority of
the Board ("Board Approval") and by a majority of the
Disinterested Directors ("Disinterested Director
Approval"), by vote cast in person at a meeting
called for the purposes of voting on such agreement.
All determinations or authorizations of the Board
hereunder shall be made by Board Approval and
Disinterested Director Approval.
5. The officers, investment adviser or Distributor of
the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a
written report of the amounts expended pursuant to
this Plan and the purposes for which such Payments
were made.
6. To the extent any activity is covered by Section 2 and is also
an activity which the Fund may pay for on behalf of the Class A Series
Shares without regard to the existence or terms and conditions of a
plan of distribution under Rule 12b-1 of the Act, this Plan shall not
be construed to prevent or restrict the Fund from paying such amounts
outside of this Plan and without limitation hereby and without such
payments being included in calculation of Payments subject to the
limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved by
a vote of at least a majority of the Class A Series Shares. This Plan
may not be amended in any material respect without Board Approval and
Disinterested Director Approval and may not be amended to increase the
maximum level of Payments permitted hereunder without such approvals
and further approval by a vote of at least a majority of the Class A
Series Shares. This Plan may continue in effect for longer than one
year after its approval by a majority of the Class A Series Shares
only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Director Approval.
8. This Plan may be terminated at any time by a vote of
the Disinterested Directors, cast in person at a
meeting called for the purposes of voting on such
termination, or by a vote of at least a majority of
the Class A Series Shares.
9. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the
Act and the rules adopted by the Securities and Exchange Commission
thereunder and the term "vote of a majority of the Class A Series
Shares" shall mean the vote, at the annual or a special meeting of the
holders of the Class A Series Shares duly called, (a) of 67% or more
of the voting securities present at such meeting, if the holders of
more than 50% of the Class A Series Shares outstanding on the record
date for such meeting are present or represented by proxy or, if less,
(b) more than 50% of the Class A Series Shares outstanding on the
record date for such meeting.
Dated: February 17, 1999
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI VALUE FUND INC.
WHEREAS, THE GABELLI VALUE FUND INC., a Maryland corporation
(the "Fund"), engages in business as an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended
(the "Act");
WHEREAS, the Fund has issued and is authorized to issue shares of
Common Stock ("Shares");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and the Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Directors of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");
WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class B Series Shares (the "Class B Series
Shares"), pursuant to Rule 18f-3 under the Act that permits the Fund to
implement a multiple distribution system providing investors with the option of
purchasing shares of various classes;
WHEREAS, the Board as a whole, and the directors who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Directors"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class B Series Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class B Series Shares, and have accordingly approved the Plan by votes cast in
person at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class B Series Shares and does
not relate to any class of shares which may be offered and sold by the Fund
other than the Class B Series Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the
Distribution Agreement, the Fund will pay to the Distributor a
distribution fee at the aggregate amount rate of .75% per year of the
average daily net asset value of the Class B Series Shares and a
service fee at the aggregate amount rate of .25% per year of the
average daily net asset value of the Class B Series Shares (the
"Payments"). Such Payments shall be accrued daily and paid monthly in
arrears or shall be accrued and paid at such other intervals as the
Board shall determine. The Fund's obligation hereunder shall be
limited to the assets of the Class B Series Shares and shall not
constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under this
Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended
to result in the sale of Class B Series Shares. The scope of the
foregoing shall be interpreted by the Board, whose decision shall be
conclusive except to the extent it contravenes established legal
authority. Without in any way limiting the discretion of the Board,
the following activities are hereby declared to be primarily intended
to result in the sale of Class B Series Shares: advertising the Class
B Series Shares or the Fund's investment adviser's mutual fund
activities; compensating underwriters, dealers, brokers, banks and
other selling entities (including the Distributor and its affiliates)
and sales and marketing personnel of any of them for sales of Class B
Series Shares, whether in a lump sum or on a continuous, periodic,
contingent, deferred or other basis; compensating underwriters,
dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel)
of any of them for providing services to shareholders of the Fund
relating to their investment in the Class B Series Shares, including
assistance in connection with inquiries relating to shareholder
accounts; the production and dissemination of prospectuses (including
statements of additional information) of the Fund and the preparation,
production and dissemination of sales, marketing and shareholder
servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar expenses relating
to any activity for which Payment is authorized by the Board; and the
financing of any activity for which Payment is authorized by the
Board; and profit to the Distributor and its affiliates arising out of
their provision of shareholder services. Notwithstanding the
foregoing, this Plan does not require the Distributor or any of its
affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of
expenses for activities covered by this Section 2. In addition,
Payments made in a particular year shall not be refundable whether or
not such Payments exceed the expenses incurred for that year pursuant
to this Section 2.
3. The Fund is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other
person to whom the Fund intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into
appropriate written agreements with each person to whom the
Distributor intends to make any payments in the nature of a Payment.
The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be
made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper
in the case of an advertisement) unless the Board determines that such
an agreement or arrangement should be treated as a "related" agreement
for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3
must contain the provisions required by Rule 12b-1
under the Act and must be approved by a majority of
the Board ("Board Approval") and by a majority of the
Disinterested Directors ("Disinterested Director
Approval"), by vote cast in person at a meeting
called for the purposes of voting on such agreement.
All determinations or authorizations of the Board
hereunder shall be made by Board Approval and
Disinterested Director Approval.
5. The officers, investment adviser or Distributor of
the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a
written report of the amounts expended pursuant to
this Plan and the purposes for which such Payments
were made.
6.
<PAGE>
To the extent any activity is covered by
Section 2 and is also an activity which the Fund may
pay for on behalf of the Class B Series Shares
without regard to the existence or terms and
conditions of a plan of distribution under Rule 12b-1
of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts
outside of this Plan and without limitation hereby
and without such payments being included in
calculation of Payments subject to the limitation set
forth in Section 1.
7. This Plan shall not take effect until it has been approved by
a vote of at least a majority of the Class B Series Shares. This Plan
may not be amended in any material respect without Board Approval and
Disinterested Director Approval and may not be amended to increase the
maximum level of Payments permitted hereunder without such approvals
and further approval by a vote of at least a majority of the Class B
Series Shares. This Plan may continue in effect for longer than one
year after its approval by a majority of the Class B Series Shares
only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Director Approval.
8. This Plan may be terminated at any time by a vote of
the Disinterested Directors, cast in person at a
meeting called for the purposes of voting on such
termination, or by a vote of at least a majority of
the Class B Series Shares.
9. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the
Act and the rules adopted by the Securities and Exchange Commission
thereunder and the term "vote of a majority of the Class B Series
Shares" shall mean the vote, at the annual or a special meeting of the
holders of the Class B Series Shares duly called, (a) of 67% or more
of the voting securities present at such meeting, if the holders of
more than 50% of the Class B Series Shares outstanding on the record
date for such meeting are present or represented by proxy or, if less,
(b) more than 50% of the Class B Series Shares outstanding on the
record date for such meeting.
Dated: February 17, 1999
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI VALUE FUND INC.
WHEREAS, THE GABELLI VALUE FUND INC., a Maryland corporation
(the "Fund"), engages in business as an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended
(the "Act");
WHEREAS, the Fund has issued and is authorized to issue shares of
Common Stock ("Shares");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and the Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Directors of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");
WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class C Series Shares (the "Class C Series
Shares"), pursuant to Rule 18f-3 under the Act that permits the Fund to
implement a multiple distribution system providing investors with the option of
purchasing shares of various classes;
WHEREAS, the Board as a whole, and the directors who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Directors"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class C Series Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class C Series Shares, and have accordingly approved the Plan by votes cast in
person at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class C Series Shares and does
not relate to any class of shares which may be offered and sold by the Fund
other than the Class C Series Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the
Distribution Agreement, the Fund will pay to the Distributor a
distribution fee at the aggregate amount rate of .75% per year of the
average daily net asset value of the Class C Series Shares and a
service fee at the aggregate amount rate of .25% per year of the
average daily net asset value of the Class C Series Shares (the
"Payments"). Such Payments shall be accrued daily and paid monthly in
arrears or shall be accrued and paid at such other intervals as the
Board shall determine. The Fund's obligation hereunder shall be
limited to the assets of the Class C Series Shares and shall not
constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under this
Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended
to result in the sale of Class C Series Shares. The scope of the
foregoing shall be interpreted by the Board, whose decision shall be
conclusive except to the extent it contravenes established legal
authority. Without in any way limiting the discretion of the Board,
the following activities are hereby declared to be primarily intended
to result in the sale of Class C Series Shares: advertising the Class
C Series Shares or the Fund's investment adviser's mutual fund
activities; compensating underwriters, dealers, brokers, banks and
other selling entities (including the Distributor and its affiliates)
and sales and marketing personnel of any of them for sales of Class C
Series Shares, whether in a lump sum or on a continuous, periodic,
contingent, deferred or other basis; compensating underwriters,
dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel)
of any of them for providing services to shareholders of the Fund
relating to their investment in the Class C Series Shares, including
assistance in connection with inquiries relating to shareholder
accounts; the production and dissemination of prospectuses (including
statements of additional information) of the Fund and the preparation,
production and dissemination of sales, marketing and shareholder
servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar expenses relating
to any activity for which Payment is authorized by the Board; and the
financing of any activity for which Payment is authorized by the
Board; and profit to the Distributor and its affiliates arising out of
their provision of shareholder services. Notwithstanding the
foregoing, this Plan does not require the Distributor or any of its
affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of
expenses for activities covered by this Section 2. In addition,
Payments made in a particular year shall not be refundable whether or
not such Payments exceed the expenses incurred for that year pursuant
to this Section 2.
3. The Fund is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other
person to whom the Fund intends to make any Payment, and the
Distributor is hereby authorized and directed to enter into
appropriate written agreements with each person to whom the
Distributor intends to make any payments in the nature of a Payment.
The foregoing requirement is not intended to apply to any agreement or
arrangement with respect to which the party to whom Payment is to be
made does not have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus or a newspaper
in the case of an advertisement) unless the Board determines that such
an agreement or arrangement should be treated as a "related" agreement
for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3
must contain the provisions required by Rule 12b-1
under the Act and must be approved by a majority of
the Board ("Board Approval") and by a majority of the
Disinterested Directors ("Disinterested Director
Approval"), by vote cast in person at a meeting
called for the purposes of voting on such agreement.
All determinations or authorizations of the Board
hereunder shall be made by Board Approval and
Disinterested Director Approval.
5. The officers, investment adviser or Distributor of
the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a
written report of the amounts expended pursuant to
this Plan and the purposes for which such Payments
were made.
<PAGE>
6. To the extent any activity is covered by Section 2 and is also
an activity which the Fund may pay for on behalf of the Class C Series
Shares without regard to the existence or terms and conditions of a
plan of distribution under Rule 12b-1 of the Act, this Plan shall not
be construed to prevent or restrict the Fund from paying such amounts
outside of this Plan and without limitation hereby and without such
payments being included in calculation of Payments subject to the
limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved by
a vote of at least a majority of the Class C Series Shares. This Plan
may not be amended in any material respect without Board Approval and
Disinterested Director Approval and may not be amended to increase the
maximum level of Payments permitted hereunder without such approvals
and further approval by a vote of at least a majority of the Class C
Series Shares. This Plan may continue in effect for longer than one
year after its approval by a majority of the Class C Series Shares
only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Director Approval.
8. This Plan may be terminated at any time by a vote of
the Disinterested Directors, cast in person at a
meeting called for the purposes of voting on such
termination, or by a vote of at least a majority of
the Class C Series Shares.
9. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the
Act and the rules adopted by the Securities and Exchange Commission
thereunder and the term "vote of a majority of the Class C Series
Shares" shall mean the vote, at the annual or a special meeting of the
holders of the Class C Series Shares duly called, (a) of 67% or more
of the voting securities present at such meeting, if the holders of
more than 50% of the Class C Series Shares outstanding on the record
date for such meeting are present or represented by proxy or, if less,
(b) more than 50% of the Class C Series Shares outstanding on the
record date for such meeting.
Dated: February 17, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000853438
<NAME> THE GABELLI VALUE FUND, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 510211057
<INVESTMENTS-AT-VALUE> 793408786
<RECEIVABLES> 8666528
<ASSETS-OTHER> 5835
<OTHER-ITEMS-ASSETS> 440736
<TOTAL-ASSETS> 802521885
<PAYABLE-FOR-SECURITIES> 1714691
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1994933
<TOTAL-LIABILITIES> 37098624
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 514600091
<SHARES-COMMON-STOCK> 49692065
<SHARES-COMMON-PRIOR> 41723898
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1008318
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 283203852
<NET-ASSETS> 798812261
<DIVIDEND-INCOME> 4726696
<INTEREST-INCOME> 2392736
<OTHER-INCOME> 0
<EXPENSES-NET> 10122978
<NET-INVESTMENT-INCOME> (3003546)
<REALIZED-GAINS-CURRENT> 71122721
<APPREC-INCREASE-CURRENT> 78651758
<NET-CHANGE-FROM-OPS> 146770933
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 67357159
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27523248
<NUMBER-OF-SHARES-REDEEMED> 23466641
<SHARES-REINVESTED> 3911560
<NET-CHANGE-IN-ASSETS> 202265220
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 246302
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7237856
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10122978
<AVERAGE-NET-ASSETS> 723785654
<PER-SHARE-NAV-BEGIN> 14.30
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 3.33
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.49)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.08
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
RULE 18f-3
MULTI-CLASS PLAN
FOR
THE GABELLI VALUE FUND INC.
This Plan is adopted pursuant to Rule 18f-3 under the Act to provide
for the issuance and distribution of multiple classes of shares by the Fund in
accordance with the terms, procedures and conditions set forth below. A majority
of the Directors of the Fund, including a majority of the Directors who are not
interested persons of the Fund within the meaning of the Act, have found this
Multi-Class Plan, including the expense allocations, to be in the best interest
of the Fund and each Class of Shares of the Fund.
A. Definitions. As used herein, the terms set forth below shall
have the meanings ascribed to them below.
1. The Act -- the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated
thereunder.
2. CDSC -- contingent deferred sales charge.
3. CDSC Period -- the period of time following
acquisition during which Shares are assessed a CDSC
upon redemption.
4. Class -- a class of Shares of a Fund.
5. Class A Series Shares -- shall have the meaning ascribed in
Section B.1.
6. Class B Series Shares -- shall have the meaning ascribed in
Section B.1.
7. Class C Series Shares -- shall have the meaning ascribed in
Section B.1.
8. Distribution Expenses -- expenses, including
allocable overhead costs, imputed interest and any
other expenses referred to in a Plan of Distribution
and/or board resolutions, incurred in activities
which are primarily intended to result in the
distribution and sale of Shares.
9. Distribution Fee -- a fee paid by a Fund to the
Distributor pursuant to the Fund's Plan of
Distribution.
10. Distributor -- Gabelli & Company, Inc.
11. Fund -- The Gabelli Value Fund Inc.
12. IRS -- Internal Revenue Service
13. NASD -- National Association of Securities Dealers, Inc.
14. Plan of Distribution -- any plan adopted under Rule
12b-1 under the Act with respect to payment of a
Distribution Fee.
15. Prospectus -- the prospectus, including the statement
of additional information incorporated by reference
therein, covering the Shares of the referenced Class
or Classes of the Fund.
16. SEC -- Securities and Exchange Commission
17. Service Fee -- a fee paid to financial
intermediaries, including the Distributor and its
affiliates, for the ongoing provision of personal
services to Fund shareholders and/or the maintenance
of shareholder accounts.
18. Share -- a share of beneficial interest in the Fund.
19. Directors -- the directors of the Fund.
B. Classes. The Fund may offer three Classes as follows:
1. Class A Series Shares. Class A Series Shares shall be offered
at net asset value plus ---------------------- a front-end sales
charge set forth in the Prospectus from time to time, which may be
reduced or eliminated in any manner not prohibited by the Act or the
NASD as set forth in the Prospectus. Class A Series Shares that are
not subject to a front-end sales charge as a result of the foregoing
may be subject to a CDSC for the CDSC Period set forth in Section D.1.
The offering price of Shares subject to a front-end sales charge shall
be computed in accordance with the Act. Class A Series Shares shall be
subject to ongoing Distribution Fees or Service Fees approved from
time to time by the Directors and set forth in the Prospectus.
2. Class B Series Shares. Class B Series Shares shall be
(1) offered at net asset value, (2) subject to a CDSC
for the CDSC Period set forth in Section D.1, (3)
subject to ongoing Distribution Fees and Service Fees
approved from time to time by the Directors and set
forth in the Prospectus and (4) converted to Class A
Series Shares on the first business day of the
eighty-fifth calendar month following the calendar
month in which the shareholder's order to purchase
such Shares was accepted.
3. Class C Series Shares. Class C Series Shares shall be
(1) offered at net asset value, (2) subject to a CDSC
for the CDSC Period set forth in Section D.1. and (3)
subject to ongoing Distribution Fees and Service Fees
approved from time to time by the Directors and set
forth in the Prospectus.
C. Rights and Privileges of Classes. Each Class of the Fund will
represent an interest in the same portfolio of investments of
the Fund and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and
conditions except as described otherwise herein.
D. CDSC. A CDSC may be imposed upon redemption of Class A Series
Shares, Class B Series Shares and Class C Series Shares that
do not incur a front end sales charge subject to the following
conditions:
1. CDSC Period. The CDSC Period for Class A Series
Shares and Class C Series Shares shall be twenty-four
months plus any portion of the month during which
payment for such Shares was received as approved by
the Directors and set forth in the Prospectus. The
CDSC Period for Class B Series Shares shall be
eighty-four months plus any portion of the month
during which payment for such Shares was received as
approved by the Directors and set forth in the
Prospectus.
2. CDSC Rate. The CDSC rate shall be recommended by the
Distributor and approved by the Directors.
3. Disclosure and Changes. The CDSC rates and CDSC
Period shall be disclosed in the Prospectus and may
be decreased at the discretion of the Distributor but
may not be increased unless approved as set forth in
Section L.
4. Method of Calculation. The CDSC shall be assessed on an amount
equal to the lesser of ---------------------- the then current market
value or the cost of the Shares being redeemed. No CDSC shall be
imposed on increases in the net asset value of the Shares being
redeemed above the initial purchase price. No CDSC shall be assessed
on Shares derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Series Shares and Class C
Series Shares are to be redeemed when not all of such Shares would be
subject to a CDSC shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.
5. Waiver. The Distributor may in its discretion waive a
CDSC otherwise due upon the redemption of Shares
under circumstances previously approved by the
Directors and disclosed in the Prospectus and as
allowed under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of
Shares subject to a CDSC shall be computed in
accordance with Rule 22c-1 under the Act and Section
22(d) of the Act and the rules and regulations
thereunder.
<PAGE>
7. Retention by Distributor. The CDSC paid with respect
to Shares of the Fund may be retained by the
Distributor to reimburse the Distributor for
commissions paid by it in connection with the sale of
Shares subject to a CDSC and Distribution Expenses.
E. Service and Distribution Fees. Class A Series Shares shall be
subject to ongoing Distribution Fees or Service Fees not in
excess of 0.25% per annum of the average daily net assets of
the Class. Class B Series Shares and Class C Series Shares
shall be subject to a Distribution Fee not in excess of 0.75%
per annum of the average daily net assets of the Class and a
Service Fee not in excess of 0.25% of the average daily net
assets of the Class. All other terms and conditions with
respect to Service Fees and Distribution Fees shall be
governed by the plans adopted by the Fund with respect to such
fees and Rule 12b-1 of the Act.
F. Conversion. Shares purchased through the reinvestment of
dividends and capital gain ---------- distributions paid on Shares
subject to conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a shareholder's account (other
than Shares held in the sub-account) convert to Class A Series Shares,
a proportionate number of Shares held in the sub-account shall also
convert to Class A Series Shares. All conversions shall be effected on
the basis of the relative net asset values of the two Classes without
the imposition of any sales load or other charge. So long as any Class
of Shares converts into Class A Series Shares, the Distributor shall
waive or reimburse the Fund, or take such other actions with the
approval of the Directors as may be reasonably necessary to ensure
that, the expenses, including payments authorized under a Plan of
Distribution, applicable to the Class A Series Shares are not higher
than the expenses, including payments authorized under a Plan of
Distribution, applicable to the class of shares that converts into
Class A Series Shares. Shares acquired through an exchange privilege
will convert to Class A Series shares after expiration of the
conversion period applicable to such Shares. The continuation of the
conversion feature is subject to continued compliance with the rules
and regulations of the SEC the NASD and the IRS.
G. Allocation of Expenses, Income and Gains Among Classes.
1. Expenses applicable to a particular class. Each Class
of the Fund shall pay any Distribution Fee and
Service Fee applicable to that Class. Each class may,
at the Directors' discretion, also pay a different
share of other expenses such as incremental transfer
agency fees, but not including advisory or custodial
fees or other expenses related to the management of
the Fund's assets, if they are actually incurred in
different amounts by the Classes or if the Classes
receive services of a different kind or to a
different degree than other Classes.
<PAGE>
2. Income, capital gains and losses, and liabilities and
other expenses applicable to all Classes. Income,
realized and unrealized capital gains and losses, and
any liabilities and expenses not applicable to any
particular Class shall be allocated to each Class on
the basis of the net asset value of that Class in
relation to the net asset value of the Fund.
3. Determination of nature of expenses. The Directors
shall determine in their sole discretion whether any
expense other than those listed herein is properly
treated as attributed in whole or in part to a
particular Class or all Classes.
H. Exchange Privilege. Holders of Class A Series Shares, Class B
Series Shares and Class C Series Shares shall have such
exchange privileges as are set forth in the Prospectus.
Exchange privileges may vary among Classes and among holders
of a Class.
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive
voting rights on any matter submitted to them that
relates solely to the Plan of Distribution related to
that Class, provided that:
a. If any amendment is proposed to the Plan of
Distribution under which Distribution Fees
or Service Fees are paid with respect to
Class A Series Shares of the Fund that would
increase materially the amount to be borne
by Class A Series Shares under such Plan of
Distribution, then no Class B Series Shares
shall convert into Class A Series Shares of
the Fund until the holders of Class B Series
Shares of the Fund have also approved the
proposed amendment.
b. If the holders of either the Class B Series
Shares referred to in subparagraph a. do not
approve the proposed amendment, the
Directors and the Distributor shall take
such action as is necessary to ensure that
the Class voting against the amendment shall
convert into another Class identical in all
material respects to Class A Series Shares
of the Fund as constituted prior to the
amendment.
2. Shareholders shall have separate voting rights on any
matter submitted to shareholders in which the
interest of one Class differs from the interests of
any other Class, provided that:
a. If the holders of Class A Series Shares
approve any increase in expenses allocated
to the Class A Series Shares, then no Class
B Series Shares shall convert into Class A
Series Shares of the Fund until the holders
of Class B Series Shares of the Fund have
also approved such expense increase.
b. If the holders of Class B Series Shares
referred to in subparagraph a. do not
approve such increase, the Directors and the
Distributor shall take such action as is
necessary to ensure that the Class B Series
Shares shall convert into another Class
identical in all material respects to Class
A Series Shares of the Fund as constituted
prior to the expense increase.
J. Dividends and Distributions. Dividends and capital gain
distributions paid by the Fund with respect to each Class, to
the extent any such dividends and distributions are paid, will
be calculated in the same manner and at the same time on the
same day and will be, after taking into account any
differentiation in expenses allocable to a particular Class,
in substantially the same proportion on a relative net asset
value basis.
K. Reports to Directors. The Distributor shall provide the
Directors such information as the Directors may from time to
time deem to be reasonably necessary to evaluate this Plan.
L. Amendment. Any material amendment to this Plan shall be
approved by the affirmative vote of a majority of the
Directors of the Fund, including the affirmative vote of the
directors of the Fund who are not interested persons of the
Fund, except that any amendment that increases the CDSC rate
schedule or CDSC Period must also be approved by the
affirmative vote of a majority of the Shares of the affected
Class. The Distributor shall provide the Directors such
information as may be reasonably necessary to evaluate any
amendment to this Plan.
<PAGE>
