As filed with the Securities and Exchange Commission on January 31, 2000
Registration Nos. 33-41913 and 811-06367
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 10 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 X
GABELLI EQUITY SERIES FUNDS, INC
(Exact Name of Registrant as Specified in Charter)
One Corporate Center, Rye, New York 10580-1434
(Address of Principal Executive Offices)
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. Richard T. Prins, Esq.
Gabelli Equity Series Funds, Inc. Skadden, Arps, Slate, Meagher & Flom
One Corporate Center 919 Third Avenue
Rye, New York 10580-1434 New York, New York 10022
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b); or
X on February 1, 2000 pursuant to paragraph (b); or
60 days after filing pursuant to paragraph (a)(1); or
on [____] pursuant to paragraph (a)(1); or
75 days after filing pursuant to paragraph (a)(2); or
on [____] pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Gabelli
Equity
Series
Funds,
Inc.
The Gabelli Small Cap Growth Fund
The Gabelli Equity Income Fund
Class AAA Shares
PROSPECTUS
February 1, 2000
The Securities and Exchange Commission has not approved or disapproved the
shares described in this prospectus or determined whether this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
<PAGE>
<PAGE>
GABELLI EQUITY SERIES FUNDS, INC. TABLE OF CONTENTS
Investment and Performance Summary
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3 - 7
Investment and Risk Information
- -------------------------------------------------------------------------------
7 - 9
Management of the Funds
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9 - 10
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10 Purchase of Shares
11 Redemption of Shares
13 Exchange of Shares
13 Pricing of Fund Shares
14 Dividends and Distributions
14 Tax Information
Financial Highlights
- ------------------------------------------------------------------------------
15
INVESTMENT AND PERFORMANCE SUMMARY
The Gabelli Small Cap Growth Fund (the "Small Cap Fund") and The Gabelli Equity
Income Fund (the "Equity Income Fund") (each a "Fund" and collectively, the
"Funds") are series of Gabelli Equity Series Funds, Inc.
GABELLI SMALL CAP GROWTH FUND
Investment Objective:
The Fund seeks to provide a high level of 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 invests primarily in the common stocks of growth companies with total
market values at the time of investment of less than $500 million which the
Fund's investment adviser, Gabelli Funds, LLC (the "Adviser"), believes are
likely to have rapid growth in revenues and above average rates of earnings
growth.
Principal Risks: The Fund's share price will fluctuate with
changes in the market value of the Fund's portfolio securities. Stocks are
subject to market, economic and business risks that cause their prices to
fluctuate. 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
subject to the risk that small capitalization stocks may trade less frequently
and may be subject to more abrupt or erratic movements in price than medium and
large capitalization stocks. The Fund is also subject to the risk that the
Adviser may be incorrect in its assessment of the value of the securities it
holds, which may result in a decline in the value of Fund shares.
Who May
Want to Invest: The Fund's Class AAA Shares offered herein are offered only
to investors who acquire them directly through Gabelli & Company, Inc., the
Fund's distributor (the "Distributor"), or through a select number of financial
intermediaries with whom the Distributor has entered into selling agreements
specifically authorizing them to offer Class AAA Shares. The Fund may
appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek growth of capital
(BULLET) you believe that the market will favor small capitalization
stocks over the long term You may not want to invest in the Fund if:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) you seek stability of principal more than potential growth
of capital
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
3
GABELLI EQUITY INCOME FUND
Investment Objective:
The Fund seeks to provide a high level of total return on its assets with an
emphasis on income.
Principal Investment Strategies:
The Fund will seek to achieve its investment objective through a combination of
capital appreciation and current income by investing primarily in income
producing equity securities including securities convertible into common stock.
In making stock selections, the Fund's Adviser looks for securities that have a
better yield than the average of the Standard and Poor's 500 Stock Index, as
well as capital gains potential.
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. Preferred stocks and debt securities convertible into
or exchangeable for common or preferred stock also are subject to interest rate
risk and/or credit risk. When interest rates rise, the value of such securities
generally declines. It is also possible that the issuer of a security will not
be able to make interest and principal payments when due. 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 subject to the risk that
its portfolio companies will reduce or eliminate the dividend rate on securities
held by the Fund. The Fund is also subject to the risk that the Adviser may be
incorrect in its assessment of the value of the securities it holds, which may
result in a decline in the value of Fund shares.
Who May Want to Invest:
The Fund's Class AAA Shares offered herein are offered only to investors who
acquire them directly through the Fund's Distributor or through a select number
of financial intermediaries with whom the Distributor has entered into selling
agreements specifically authorizing them to offer Class AAA Shares. The
Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you are seeking income as well as growth of capital You may not
want to invest in the Fund if:
(BULLET) you are conservative in your investment approach
(BULLET) you seek stability of principal more than potential growth
of capital
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance:
The bar charts and tables shown below provide an indication of the risks of
investing in the Funds by showing changes in the Funds' performance from year to
year (since 1992), and by showing how the Funds' average annual returns for the
one year, five years and the life of each Fund compare to its benchmark. As with
all mutual funds, the Funds' past performance does not predict how the Funds
will perform in the future.
GABELLI SMALL CAP GROWTH FUND
During the period shown in the bar chart, the highest return for a quarter
was 17.10% (quarter ended June 30, 1999) and the lowest
return for a quarter was (20.26)% (quarter ended September 30, 1998).
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
"1992" 20.3
"1993" 22.8
"1994" -2.9
"1995" 25.2
"1996" 11.9
"1997" 36.5
"1998" 0
"1999" 14.22
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annual Total Returns Since October 22,
(for the periods ended December 31, 1999) Past One Year Past Five Years 1991*
- ------------------------------------------------------------------- ------------- -------------- ------
The Gabelli Small Cap Growth Fund Class
AAA Shares 14.22% 16.90% 17.86%
Russell 2000 Index** 21.26% 16.69% 13.52%
- ------------------------
* From October 22, 1991, the date that the Fund commenced investment
operations.
** The Russell 2000 Index is an unmanaged index consisting of broad-based
common stocks. The performance of the Index does not include expenses or fees.
</TABLE>
5
GABELLI EQUITY INCOME FUND
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
"1992" 9.8
"1993" 17.9
"1994" 1.1
"1995" 28.3
"1996" 17.9
"1997" 27.9
"1998" 12.6
"1999" 9.3
During the period shown in the bar chart, the highest return for a quarter was
12.71% (quarter ended December 31, 1998) and the
lowest return for a quarter was (9.65)% (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annual Total Returns Since January 2,
(for the periods ended December 31, 1999) Past One Year Past Five Years 1992*
- ------------------------------------------------------------------- ------------- -------------- ------
The Gabelli Equity Income Fund Class
AAA Shares 9.33% 18.95% 15.25%
S&P(R)500 Stock Index** 21.03% 28.54% 17.04%
- ------------------------
* From January 2, 1992, the date that the Fund commenced investment 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.
</TABLE>
Fees and Expenses of the Funds:
This table describes the fees and expenses that you may pay if you buy and hold
Class AAA Shares of the Funds.
Small Cap Equity
Growth Income
Fund Fund
----------- -----------
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)
Management Fees 1.00% 1.00%
Distribution (Rule 12b-1) Expenses 0.25% 0.25%
Other Expenses 0.31% 0.35%
------- -------
Total Annual Fund Operating Expenses 1.56% 1.60%
------- -------
------- -------
6
Expense Example:
This example is intended to help you compare the cost of investing in Class AAA
Shares of the Funds with the cost of investing in other mutual funds. The
example assumes (1) you invest $10,000 in the Funds for the time periods shown,
(2) you redeem your shares at the end of those periods, (3) your investment has
a 5% return each year and (4) the Funds' 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
--------- --------- --------- ---------
Small Cap Growth Fund $159 $493 $850 $1,856
Equity Income Fund $163 $505 $871 $1,900
INVESTMENT AND RISK INFORMATION
Small Cap Fund:
In selecting investments for the Small Cap Fund, the Adviser seeks issuers with
a dominant market share or niche franchise in growing and/or consolidating
industries. The Adviser considers for purchase the stocks of small
capitalization (capitalization is the price per share multiplied by the number
of shares outstanding) companies with experienced management, strong balance
sheets and rising free cash flow and earnings. The Adviser's goal is to invest
long term in the stocks of companies trading at reasonable valuations relative
to perceived economic worth.
Frequently, smaller growth companies
exhibit one or more of the following traits:
(BULLET) New products or technologies
(BULLET) New distribution methods
(BULLET) Rapid changes in industry conditions due to regulatory or
other developments
(BULLET) Changes in management or similar characteristics that may result
not only in expected growth in revenues but in an accelerated or above average
rate of earnings growth, which would usually be reflected in capital
appreciation.
In addition, because smaller growth companies are less actively followed by
stock analysts and less in
formation is available on which to base stock price evaluations, the market may
overlook favorable trends in particular smaller growth companies and then adjust
its valuation more quickly once investor interest is gained.
Equity Income Fund:
In selecting investments for the Equity Income Fund, the Adviser focuses on
issuers that (BULLET) have strong free cash flow and pay regular dividends
(BULLET) have potential for long-term earnings per share growth
(BULLET) may be subject to a value catalyst, such as industry
developments, regulatory changes, changes in management, sale or spin-off of a
division or the development of a profitable new business
(BULLET) are well-managed
(BULLET) will benefit from sustainable long-term economic dynamics, such
as globalization of an issuer's industry or an issuer's increased focus on
productivity or enhancement of services
The Adviser also believes preferred stock and convertible securities of selected
companies offer opportunities for capital appreciation as well as periodic
income and may invest a portion of the Equity Income Fund's assets in such
securities. This is particularly true in the case of companies that have
performed below expectations. If a company's performance has been poor enough,
its preferred stock and convertible debt securities will trade more like the
common stock than like a fixed income security and may result in above average
appreciation if performance improves. Even if the credit quality of the company
is not in question, the market price of the convertible security will reflect
little or no element of conversion value if the price of its common stock has
fallen substantially below the conversion price. This leads to the possibility
of capital appreciation if the price of the common stock recovers. The
Funds may also use the following investment technique:
(BULLET) Defensive
Investments. When adverse market or economic conditions occur, the Funds may
temporarily invest all or a portion of their assets in defensive investments.
Such investments include fixed income securities or high quality money market
instruments. When following a defensive strategy, the Funds will be less likely
to achieve their investment goals. Investing in the Funds involve the
following risks:
(BULLET) Equity Risk. The principal risk of investing in the Funds is
equity risk. Equity risk is the risk that the prices of the securities held by
the Funds will change due to general market and economic conditions, perceptions
regarding the industries in which the companies issuing the securities
participate and the issuer company's particular circumstances.
(BULLET) Fund and Management Risk. Small Cap Fund only -- The Fund invests in
growth and value stocks issued by smaller companies. The Fund's price may
decline because the market favors large capitalization company stocks over
stocks of small to mid-size companies or value stocks over growth stocks. If the
Adviser is incorrect in its assessment of the growth prospects of the securities
it holds or no event occurs which surfaces value, then the value of the Fund's
shares may decline.
(BULLET) Fund and Management Risk. Equity Income Fund only -- The Fund
invests in stocks issued by companies believed by the Adviser to be undervalued
and that have the potential to achieve significant capital appreciation. If the
Adviser is incorrect in its assessment of the values of the securities it holds
or no event occurs which surfaces value, then the value of the Fund's shares may
decline.
(BULLET) Small Capitalization Company Risk. Small Cap Fund only -- Investing
in securities of small capitalization companies may involve greater risks than
investing in larger, more established issuers. Small capitalization companies
generally have limited product lines, markets and financial resources. Their
securities may trade less frequently and in more limited volume than the
securities of larger, more established companies. Also, small capitalization
companies are typically subject to greater changes in earnings and business
prospects than larger companies. Consequently, small capitalization company
stock prices tend to rise and fall in value more than other stocks. The Fund, as
a holder of equity securities, only has rights to a value in the company after
all its debts have been paid, and it could lose its entire investment in a
company that encounters financial difficulty.
(BULLET) Interest Rate Risk and Credit Risk. Equity Income Fund only --
Investments in preferred stock and securities convertible into or exchangeable
for common or preferred stock involve interest rate risk and credit risk. When
interest rates decline, the value of such securities generally rises.
Conversely, when interest rates rise, the value of such securities generally
declines. It is also possible that the issuer of a security will not be able to
make interest and principal payments when due.
8
(BULLET) Low Credit Quality Risk. Equity Income Fund only -- Lower rated
convertible securities are subject to greater credit risk, price volatility and
risk of loss than investment grade securities. There may be less of a market for
lower rated securities, which could make it harder to sell them at an acceptable
price.
MANAGEMENT OF THE FUNDS
The Adviser. Gabelli Funds, LLC, with principal offices located at One Corporate
Center, Rye, New York 10580-1434, serves as investment adviser to the Funds. The
Adviser makes investment decisions for the Funds and continuously reviews and
administers the Funds' investment program under the supervision of the Funds'
Board of Directors. The Adviser also manages several other open-end and
closed-end investment companies in the Gabelli family of funds. The Adviser is a
New York limited liability company organized in 1999 as successor to Gabelli
Group Capital Partners, Inc. (formerly named 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 ("NYSE").
As compensation for its services and
the related expenses borne by the Adviser, for the fiscal year ended September
30, 1999, the Funds paid the Adviser a fee equal to 1.00% of the value of each
of the Fund's average daily net assets.
The Portfolio Manager. Mr. Mario J.
Gabelli, CFA, is responsible for the day-to-day management of the Funds. Mr.
Gabelli has been Chairman, Chief Executive Officer and Chief Investment Officer
of the Adviser and its predecessor since inception, as well as its parent
company, GAMI. Mr. Gabelli also acts as Chief Executive Officer and Chief
Investment Officer of GAMCO Investors, Inc. ("GAMCO"), a wholly-owned subsidiary
of GAMI, and is an officer or director of various other companies affiliated
with GAMI. The Adviser relies to a considerable extent on the expertise of Mr.
Gabelli, who may be difficult to replace in the event of his death, disability
or resignation. Rule 12b-1 Plan. The Funds have adopted a plan under Rule 12b-1
(the "Plan") which authorizes payments by the Funds on an annual basis of 0.25%
of the Funds' average daily net assets attributable to Class AAA Shares to
finance distribution of the Funds' Class AAA Shares. The Funds may make payments
under the Plan for the purpose of financing any activity primarily intended to
result in the sales of Class AAA Shares of the Funds. To the extent any activity
is one that the Funds may finance without a distribution plan, the Funds may
also make payments to compensate such activity outside of the Plan and not be
subject to its limitations. Because payments under the Plan are paid out of the
Funds' assets on an ongoing basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges. Due to the payment of 12b-1 fees, long-term shareholders may indirectly
pay more than the equivalent of the maximum permitted front-end sales charge.
PURCHASE OF SHARES
You can purchase the Funds' shares on any day the NYSE is open for trading (a
"Business Day"). You may purchase shares through the Distributor, directly from
the Funds through the Funds' transfer agent or through registered broker-dealers
that have entered into selling agreements with the Distributor.
(BULLET) By Mail or In Person. You may open an account by mailing a
completed subscription order form with a check or money order payable to "The
Gabelli Small Cap Growth Fund" or "The Gabelli Equity Income Fund" to:
By Mail By Personal Delivery
-------------------- --------------------------
The Gabelli Funds The Gabelli Funds
P.O. Box 8308 c/o BFDS
Boston, MA 02266-8308 66 Brooks Drive
Braintree, MA 02184
You can obtain a subscription order form by calling 1-800-GABELLI
(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(s) and class of shares you wish to purchase.
(BULLET) By Bank Wire. To open an account using the bank wire
transfer system, first telephone the Fund(s) at 1-800-GABELLI (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 ______ Fund
Account #__________
Account of [Registered Owners]
225 Franklin Street, Boston, MA 02110
If you are making an initial purchase, you should also complete and mail
a subscription order form to the address shown under "By Mail." Note that banks
may charge fees for wiring funds, although State Street Bank and Trust Company
("State Street") will not charge you for receiving wire transfers.
Share Price. The Funds sell their Class AAA Shares at the net asset value next
determined after the Funds receive your completed subscription order form and
your payment. See "Pricing of Fund Shares" for a description of the calculation
of net asset value.
Minimum Investments. Your minimum initial investment must be at least $1,000.
See "Retirement Plans" and "Automatic Investment Plan" regarding minimum
investment amounts applicable to such plans. There is no minimum for subsequent
investments. Broker-dealers may have different minimum investment requirements.
Retirement Plans. The Funds have available a form of IRA and a "Roth"
IRA for investment in Fund shares that may be obtained from the Distributor by
calling 1-800-GABELLI (1-800-422-3554). Self-employed investors may purchase
shares of the Funds through tax-deductible contributions to existing retirement
plans for self-employed persons, known as "Keogh" or "H.R.-10" plans. The Funds
do not currently act as a sponsor to such plans. Fund shares may also be a
suitable investment for other types of qualified pension or profit-sharing plans
which are employer sponsored, including deferred compensation or salary
reduction plans known as "401(k) Plans." The minimum initial investment in all
such retirement plans is $250. There is no subsequent investment requirement for
retirement plans. 10
Automatic Investment Plan. The Funds offer an automatic monthly investment plan.
There is no minimum monthly investment for accounts establishing an automatic
investment plan. Call the Distributor at 1-800-GABELLI (1-800-422-3554) for more
details about the plan.
Telephone or Internet Investment Plan. You may purchase additional shares of the
Funds by telephone and/or over the Internet if your bank is a member of the
Automated Clearing House ("ACH") system. You must also have a completed,
approved Investment Plan application on file with the Funds' Transfer Agent.
There is a minimum of $100 for each telephone or Internet investment. To
initiate an ACH Purchase, please call 1-800-GABELLI (1-800-422-3554) or
1-800-872-5365 or visit our website @ www.gabelli.com.
General. State Street will not issue share certificates unless requested by you.
The Funds reserve the right to (i) reject any purchase order if, in the opinion
of the Funds' management, it is in the Funds' best interest to do so, (ii)
suspend the offering of shares for any period of time and (iii) waive the Funds'
minimum purchase requirement.
REDEMPTION OF SHARES
You can redeem shares of the Funds on any Business Day without a redemption fee.
The Funds may temporarily stop redeeming their shares when the NYSE is closed or
trading on the NYSE is restricted, when an emergency exists and the Funds cannot
sell their shares or accurately determine the value of their assets, or if the
Securities and Exchange Commission orders the Funds to suspend redemptions. The
Funds redeem their shares at the net asset value next determined after the Funds
receive your redemption request. See "Pricing of Fund Shares" for a description
of the calculation of net asset value.
You may redeem shares through the
Distributor or directly from the Funds through the Funds' transfer agent.
(BULLET) By Letter. You may mail a letter requesting redemption of shares
to: The Gabelli Funds, P.O. Box 8308, Boston, MA 02266-8308. Your letter should
state the name of the Fund(s) and the share class, the dollar amount or number
of shares you wish to redeem and your account number. You must sign the letter
in exactly the same way the account is registered and if there is more than one
owner of shares, all must sign. A signature guarantee is required for each
signature on your redemption letter. You can obtain a signature guarantee from
financial institutions such as commercial banks, brokers, dealers and savings
associations. A notary public cannot provide a signature guarantee.
(BULLET) By Telephone or the Internet. You may redeem your shares in an
account directly registered with State Street by calling either 1-800-GABELLI
(1-800-422-3554) or 1-800-872-5365 (617-328-5000 from outside the United States)
or visiting our website at www.gabelli.com, subject to a $25,000 limitation. You
may not redeem shares held through an IRA by telephone or th Internet. If State
Street properly
acts on telephone or Internet instructions and follows reasonable procedures to
protect against unauthorized transactions, neither State Street nor the Funds
will be responsible for any losses due to telephone or Internet transactions.
You may be responsible for any fraudulent telephone or Internet order as
long as State
Street or the Funds take reasonable measures to verify the order. You may
request that redemption proceeds be mailed to you by check (if your address has
not changed in the prior 30 days), forwarded to you by bank wire or invested in
another mutual fund advised by the Adviser (see "Exchange of Shares").
1. Telephone or Internet Redemption By Check. The Funds will
make checks payable to the name in which the account is
registered and normally will mail the check to the address of record within
seven days.
11
2. Telephone or Internet Redemption By Bank Wire. The Funds
accept telephone or Internet requests for wire redemption in amounts of at least
$1,000. The Funds will send a wire to either a bank designated on your
subscription order form or on a subsequent letter with a guaranteed signature.
The proceeds are normally wired on the next Business Day.
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. Call 1-800-GABELLI
(1-800-422-3554) for more information about this plan. Involuntary Redemption.
The Funds may redeem all shares in your account (other than an IRA account) if
their value falls below $1,000 as a result of redemptions (but not as a result
of a decline in net asset value). You will be notified in writing if the Funds
initiate such action and allowed 30 days to increase the value of your account
to at least $1,000.
Redemption Proceeds. A redemption request received by a
Fund wilI be effected at the net asset value next determined after a Fund
receives the request. If you request redemption proceeds by check, the Funds
will normally mail the check to you within seven days after receipt of your
redemption request. If you purchased your Fund(s) shares by check or through the
Automatic Investment Plan, you may not receive proceeds from your redemptions
until the check clears, which may take up to as many as 15 days following
purchase. While the Funds will delay the processing of the redemption until the
check clears, your shares will be valued at the next determined net asset value
after receipt of your redemption request.
The Funds may pay you your
redemption proceeds wholly or partly in portfolio securities. Payments would be
made in portfolio securities only in the rare instance that the Funds' Board of
Directors believes that it would be in the Funds' best interest not to pay
redemption proceeds in cash.
EXCHANGE OF SHARES
You can exchange shares of the Fund(s) 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 an exchange call 1-800-GABELLI (1-800-422-3554). You may also exchange
your shares for shares of a money market fund managed by the Adviser or its
affiliates. In effecting an exchange:
(BULLET) you must meet the minimum investment requirements for the
fund whose shares you purchase through exchange (BULLET) if you are
exchanging to a fund with a higher sales charge, you must pay the difference at
the time of exchange (BULLET) you may realize a taxable gain or loss
(BULLET) you should read the prospectus of the fund whose shares
you are purchasing through exchange [call 1-800-GABELLI (1-800-422-3554) to
obtain the prospectus] You may exchange shares through the Distributor,
directly through the Funds' transfer agent or through a registered
broker-dealer.
(BULLET) Exchange by Telephone. You may give exchange instructions by
telephone by calling
1-800-GABELLI (1-800-422-3554). You may not exchange shares by telephone if you
hold share
certificates.
12
(BULLET) Exchange by Mail. You may send a written request for exchanges
to: The Gabelli Funds, P.O. Box 8308, Boston, MA 02266-8308. Your letter should
state your name, your account number, the dollar amount or number of shares you
wish to exchange, the name and class of the funds whose shares you wish to
exchange, and the name of the fund whose shares you wish to acquire.
(BULLET) Exchange through the Internet. You may also give exchange
instructions via the Internet at www.gabelli.com. You may not exchange shares
through the Internet if you hold share certificates. We may modify or
terminate the exchange privilege at any time. You will be given notice 60 days
prior to any material change in the exchange privilege.
PRICING OF FUND SHARES
The Funds' net asset value per share of the Class AAA Shares is calculated on
each Business Day. The NYSE is open Monday through Friday, but currently is
scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day and on the preceding Friday or subsequent
Monday when a holiday falls on a Saturday or Sunday, respectively. The
Funds' net asset value per share of the Class AAA Shares is determined as of the
close of regular trading on the NYSE, normally 4:00 p.m., Eastern Time. Net
asset value is computed by dividing the value of the Funds' net assets (i.e. the
value of their securities and other assets less their liabilities, including
expenses payable or accrued but excluding capital stock and surplus) by the
total number of their shares outstanding at the time the determination is made.
The Funds use market quotations in valuing their portfolio securities.
Short-term investments that mature in 60 days or less are valued at amortized
cost, which the Directors of the Funds believe represents fair value.
DIVIDENDS AND DISTRIBUTIONS
The Funds intend to pay dividends quarterly for the Equity Income Fund and
annually for the Small Cap Fund and capital gain distributions, if any, on an
annual basis. You may have dividends or capital gains distributions that are
declared by the Funds automatically reinvested at net asset value in additional
shares of the Funds. You will make an election to receive dividends and
distributions in cash or Fund(s) shares at the time you purchase your shares.
You may change this election by notifying the Funds in writing at any time prior
to the record date for a particular dividend or distribution. There are no sales
or other charges in connection with the reinvestment of dividends and capital
gains distributions. There is no fixed dividend rate, and there can be no
assurance that the Funds will pay any dividends or realize any capital
gains.
TAX INFORMATION
The Funds expect that their distributions will consist primarily of net
investment income and net realized capital gains. Capital gains may be taxed at
different rates depending on the length of time the Funds hold the asset giving
rise to such gains. Dividends out of net investment income and distributions of
net realized short-term capital gains (i.e. gains from assets held by the Funds
for one year or less) are taxable to you as ordinary income. Distributions of
net long-term capital gains are taxable to you at long-term capital gain rates.
The Funds' distributions, whether you receive them in cash or reinvest them in
additional shares of the Fund, generally will be subject to federal, state or
local taxes. An exchange of
13
the Funds' shares for shares of another fund will be treated for tax purposes as
a sale of the Funds' shares; and any gain you realize on such a transaction
generally will be taxable. Foreign shareholders generally will be subject to a
federal withholding tax.
This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of your investment
in the Funds.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
financial performance for the past five fiscal years of the Funds. The total
returns in the tables represent the rate that an investor would have earned or
lost on an investment in the Funds' Class AAA Shares. This information has been
audited by Ernst & Young LLP, independent auditors, whose report along with the
Funds' financial statements and related notes are included in the annual report,
which is available upon request.
GABELLI SMALL CAP GROWTH FUND
Per share amounts for the Fund's Class AAA Shares outstanding throughout each
fiscal year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
Operating performance:
Net asset value, beginning of year $ 18.81 $ 25.42 $ 20.02 $ 19.34 $ 17.24
------------------------ ------------ ------------ ------------
Net investment loss (0.07) (0.03) (0.07) (0.09) (0.04)
Net realized and unrealized
gain/(loss) on investments 3.63 (2.99) 7.70 2.11 3.17
------------------------ ------------ ------------ ------------
Total from investment operations 3.56 (3.02) 7.63 2.02 3.13
------------------------ ------------ ------------ ------------
Distributions to shareholders:
Net realized gain on investments (0.53) (3.59) (2.23) (1.34) (1.03)
------------------------ ------------ ------------ ------------
Total distributions (0.53) (3.59) (2.23) (1.34) (1.03)
------------------------ ------------ ------------ ------------
Net asset value, end of year $ 21.84 $ 18.81 $ 25.42 $ 20.02 $ 19.34
------------------------ ------------ ------------ ------------
------------------------ ------------ ------------ ------------
Total return+ 19.24% (13.53)% 42.22% 10.97% 19.66%
------------------------ ------------ ------------ ------------
------------------------ ------------ ------------ ------------
Ratios to average net assets and
supplemental data:
Net assets, end of year (in 000's) $305,403 $277,820 $296,519 $223,239 $231,156
Ratio of net investment loss to
average net assets (0.34)% (0.14)% (0.36)% (0.42)% (0.24)%
Ratio of operating expenses to
average net assets (a) 1.56% 1.44% 1.62% 1.58% 1.54%
Portfolio turnover rate 24% 20% 14% 11% 17%
- ----------------
(DAGGER) Total return represents aggregate total return of a hypothetical
$1,000 investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. (a) The Fund incurred interest
expense during the fiscal years ended September 30, 1999 and 1997. Excluding
interest expense, the
ratios of operating expenses to average net assets would have been
1.53% and 1.52%, respectively.
</TABLE>
14
GABELLI EQUITY INCOME FUND
Per share amounts for the Fund's Class AAA Shares outstanding throughout each
fiscal year ended September 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
-----------------------------------------------------------------
Operating performance:
Net asset value, beginning of year $ 15.97 $ 17.39 $ 13.81 $ 15.65 $ 11.54
-----------------------------------------------------------------
Net investment income 0.23 0.22 0.22 0.28 0.29
Net realized and unrealized
gain on investments 2.82 0.29 4.28 1.76 1.77
-----------------------------------------------------------------
Total from investment operations 3.05 0.51 4.50 2.04 2.06
-----------------------------------------------------------------
Distributions to shareholders:
Net investment income (0.22) (0.26) (0.22) (0.28) (0.29)
In excess of net investment income -- -- -- (0.01) --
Net realized gain on investments (1.22) (1.67) (0.70) (0.59) (0.66)
-----------------------------------------------------------------
Total distributions (1.44) (1.93) (0.92) (0.88) (0.95)
-----------------------------------------------------------------
Net asset value, end of year $ 17.58 $ 15.97 $ 17.39 $ 13.81 $ 12.65
-----------------------------------------------------------------
-----------------------------------------------------------------
Total return+ 19.82% 2.98% 33.98% 16.69% 19.20%
-----------------------------------------------------------------
-----------------------------------------------------------------
Ratios to average net assets and
supplemental data:
Net assets, end of year (in 000's) $92,111 $79,669 $73,730 $57,006 $54,806
Ratio of net investment income to
average net assets 1.32% 1.27% 1.42% 1.99% 2.50%
Ratio of operating expenses to
average net assets 1.60% 1.64% 1.78% 1.93% 1.83%
Portfolio turnover rate 39% 35% 43% 20% 30%
- ----------------
(DAGGER) Total return represents aggregate total return of a hypothetical
$1,000 investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends.
</TABLE>
15
Gabelli Equity Series Funds, Inc.
The Gabelli Small Cap Growth Fund
The Gabelli Equity Income Fund
Class AAA Shares
For More Information:
For more information about the Funds, the following documents are available free
upon request: Annual/Semi-annual Reports:
The Funds' semi-annual and annual reports to shareholders contain additional
information on the Funds' investments. In the Funds' annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during their last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Funds, including their operations and investments
policies. It is incorporated by reference, and is legally considered a part of
this prospectus.
<You can get free copies of these documents and prospectuses of other funds in
the Gabelli family, or request other information and discuss your questions
about the Funds by contacting:
Gabelli Equity Series Funds, Inc.
One Corporate Center
Rye, NY 10580
Telephone: 1-800-GABELLI (1-800-422-3554)
www.gabelli.com
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-202-942-8090. You
can get text-only copies:
(BULLET) For a fee, by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102 [or by calling
1-202-942-8090], or by electronic request at the following email address:
[email protected].
(BULLET) Free from the Commission's Website at http://www.sec.gov
(Investment Company Act file no. 811-06367)
Gabelli Equity Series Funds, Inc.
The Gabelli Small Cap Growth Fund
The Gabelli Equity Income Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 p.m.)
Questions?
Call 1-800-GABELLI
or your investment representative.
Gabelli
Equity
Series
Funds,
Inc.
The Gabelli Small Cap Growth Fund
The Gabelli Equity Income Fund
Class A, B, C Shares
PROSPECTUS
February 1, 2000
The Securities and Exchange Commission has not approved or disapproved the
shares described in this prospectus or determined whether this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
GABELLI EQUITYSERIES FUNDS, INC. TABLE OF CONTENTS
Investment and Performance Summary
- -------------------------------------------------------------------------------
3 - 8
Investment and Risk Information
- -------------------------------------------------------------------------------
9 -10
Management of the Funds
- -------------------------------------------------------------------------------
11
- -------------------------------------------------------------------------------
11 - 16 Classes of Shares
16 - 17 Purchase of Shares
17 - 18 Redemption of Shares
18 Exchange of Shares
19 Pricing of Fund Shares
19 Dividends and Distributions
19 Tax Information
Financial Highlights
- ------------------------------------------------------------------------------
19
INVESTMENT AND PERFORMANCE SUMMARY
The Gabelli Small Cap Growth Fund (the "Small Cap Fund") and The Gabelli Equity
Income Fund (the "Equity Income Fund") (each a "Fund" and collectively, the
"Funds") are series of Gabelli Equity Series Funds, Inc.
GABELLI SMALL CAP GROWTH FUND
Investment Objective:
The Fund seeks to provide a high level of 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 invests primarily in the common stocks of growth companies with total
market values at the time of investment of less than $500 million which the
Fund's investment adviser, Gabelli Funds, LLC (the "Adviser"), believes are
likely to have rapid growth in revenues and above average rates of earnings
growth. Principal Risks: The Fund's share price will fluctuate with
changes in the market value of the Fund's portfolio securities. Stocks are
subject to market, economic and business risks that cause their prices to
fluctuate. 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
subject to the risk that small capitalization stocks may trade less frequently
and may be subject to more abrupt or erratic movements in price than medium and
large capitalization stocks. The Fund is also subject to the risk that the
Adviser may be incorrect in its assessment of the value of the securities it
holds, which may result in a decline in the value of Fund shares. Who May
Want to Invest: The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you seek growth of capital
(BULLET) you believe that the market will favor small capitalization
stocks over the long term You may not want to invest in the Fund if:
(BULLET) you are seeking a high level of current income
(BULLET) you are conservative in your investment approach
(BULLET) you seek stability of principal more than potential growth
of capital
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
GABELLI EQUITY INCOME FUND
Investment Objective:
The Fund seeks to provide a high level of total return on its assets with an
emphasis on income.
Principal Investment Strategies:
The Fund will seek to achieve its investment objective through a combination of
capital appreciation and current income by investing primarily in income
producing equity securities including securities convertible into common stock.
In making stock selections, the Fund's Adviser looks for securities that have a
better yield than the average of the Standard and Poor's 500 Stock Index, as
well as capital gains potential.
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. Preferred stocks and debt securities convertible into
or exchangeable for common or preferred stock also are subject to interest rate
risk and/or credit risk. When interest rates rise, the value of such securities
generally declines. It is also possible that the issuer of a security will not
be able to make interest and principal payments when due. 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 subject to the risk that
its portfolio companies will reduce or eliminate the dividend rate on securities
held by the Fund. The Fund is also subject to the risk that the Adviser may be
incorrect in its assessment of the value of the securities it holds, which may
result in the decline in the value of Fund shares. Who May Want to Invest:
The Fund may appeal to you if:
(BULLET) you are a long-term investor
(BULLET) you are seeking income as well as growth of capital
You may not want to invest in the Fund if:
(BULLET) you are conservative in your investment approach
(BULLET) you seek stability of principal more than potential growth
of capital
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
Performance:
The bar charts and tables shown below provide an indication of the risks of
investing in the Funds by showing changes in the Funds' performance from year to
year (since 1992), and by showing how the Funds' average annual returns for one
year, five years and the life of each Fund compare to those of its benchmark. As
with all mutual funds, the Funds' past performance does not predict how the
Funds will perform in the future.
GABELLI SMALL CAP GROWTH FUND*
"1992" 20.3
"1993" 22.8
"1994" -2.9
"1995" 25.2
"1996" 11.9
"1997" 36.5
"1998" 0
"1999" 14.22
- ------------------------
* The bar chart above shows the total returns for Class AAA Shares (not
including sales load). The Class A, Class B and Class C Shares are new classes
of the Fund for which performance is not yet available. The Class AAA Shares of
the Fund are offered in a separate prospectus. The returns for the Class A,
Class B and Class C Shares will be substantially similar to those of the Class
AAA Shares shown in the chart above because all shares of the Fund are invested
in the same portfolio of securities. The annual returns of the different classes
of shares will differ only to the extent that the expenses of the classes
differ.
Class A, B and C Share sales loads are not reflected in the above chart. If sale
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 17.10%
(quarter ended June 30, 1999) and the lowest return for a quarter was (20.26%)
(quarter ended September 30, 1998).
Average Annual Total Returns Since
<TABLE>
<CAPTION>
<S> <C> <C> <C>
October 22,
(for the periods ended December 31, 1999) Past One Year Past Five Years 1991*
- ------------------------------------------------------------------- ------------- -------------- -------------
The Gabelli Small Cap Growth Fund Class
AAA Shares 14.22% 16.90% 17.86%
Russell 2000 Index** 21.26% 16.69% 13.52%
- ------------------------
* From October 22, 1991, the date that the Fund commenced investment
operations.
** The Russell 2000 Index is an unmanaged index consisting of broad-based
common stocks. The performance of the Index does not include expenses or fees.
</TABLE>
GABELLI EQUITY INCOME FUND*
"1992" 9.8
"1993" 17.9
"1994" 1.1
"1995" 28.3
"1996" 17.9
"1997" 27.9
"1998" 12.6
"1999" 9.3
- ------------------------
* The bar chart above shows the total returns for Class AAA Shares (not
including sales load). The Class A, Class B and Class C Shares are new classes
of the Fund for which performance is not yet available. The Class AAA Shares of
the Fund are offered in a separate prospectus. The returns for the Class A,
Class B and Class C Shares will be substantially similar to those of the Class
AAA Shares shown in the chart above because all shares of the Fund are invested
in the same portfolio of securities. The annual returns of the different classes
of shares will differ only to the extent that the expenses of the classes
differ.
Class A, B and C Share sales loads are not reflected in the above chart. If sale
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 12.71%
(quarter ended December 31, 1998) and the lowest return for a quarter was
(9.65%) (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Annual Total Returns
Since January 2,
(for the periods ended December 31, 1999) Past One Year Past Five Years 1992*
- ------------------------------------------------------------------- ------------- -------------- ------
The Gabelli Equity Income Fund Class
AAA Shares 9.33% 18.95% 15.25%
S&P(R)500 Stock Index** 21.03% 28.54% 17.04%
- ------------------------
* From January 2, 1992, the date that the Fund commenced investment 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.
</TABLE>
6
Fees and Expenses of the Funds:
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Funds.
GABELLI SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
--------- --------- ---------
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price(4)) None(2) 5.00%(3) 1.00%(3)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Expenses 0.25% 1.00% 1.00%
Other Expenses 0.31% 0.31% 0.31%
--------- --------- ---------
Total Annual Operating Expenses 1.56% 2.31% 2.31%
--------- --------- ---------
--------- --------- ---------
</TABLE>
GABELLI EQUITY INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Shares Shares Shares
--------- --------- ---------
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption price(4)) None(2) 5.00%(3) 1.00%(3)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees 1.00% 1.00% 1.00%
Distribution and Service (Rule 12b-1) Expenses 0.25% 1.00% 1.00%
Other Expenses 0.35% 0.35% 0.35%
--------- --------- ---------
Total Annual Operating Expenses 1.60% 2.35% 2.35%
--------- --------- ---------
--------- --------- ---------
- ------------------------
(1) The sales charge declines as the amount invested increases.
(2) If no sales charge was paid at the time of purchase as part of an investment
that is greater than $2,000,000, shares redeemed within 24 months of such
purchase may be subject to a deferred sales charge of 1.00%. (3) The Fund
imposes a sales charge upon redemption of Class B Shares if you sell your shares
within seventy-two months after purchase. A maximum sales charge of 1.00%
applies to redemptions of Class C Shares within twenty-four months after
purchase. (4) "Redemption price" equals the net asset value at the time of
investment or redemption, whichever is lower.
</TABLE>
Expense Example:
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. The example assumes (1) you
invest $10,000 in the Funds for the time periods shown, (2) you redeem your
shares at the end of those periods except as noted, (3) your investment has a 5%
return each year and (4) the Funds' operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
GABELLI SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- -----------
Class A Shares $725 $1,039 $1,376 $2,325
Class B Shares
- assuming redemption $734 $1,021 $1,435 $2,459
- assuming no redemption $234 $721 $1,235 $2,459
Class C Shares
- assuming redemption $334 $721 $1,235 $2,646
- assuming no redemption $234 $721 $1,235 $2,646
</TABLE>
GABELLI EQUITY INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- -----------
Class A Shares $728 $1,051 $1,396 $2,366
Class B Shares
- assuming redemption $738 $1,033 $1,455 $2,499
- assuming no redemption $238 $733 $1,255 $2,499
Class C Shares
- assuming redemption $338 $733 $1,255 $2,686
- assuming no redemption $238 $733 $1,255 $2,686
</TABLE>
8
INVESTMENT AND RISK INFORMATION
Small Cap Fund
In selecting investments for the Small Cap Fund, the Adviser seeks issuers with
a dominant market share or niche franchise in growing and/or consolidating
industries. The Adviser considers for purchase the stocks of small
capitalization (capitalization is the price per share multiplied by the number
of shares outstanding) companies with experienced management, strong balance
sheets and rising free cash flow and earnings. The Adviser's goal is to invest
long term in the stocks of companies trading at reasonable valuations relative
to perceived economic worth.
Frequently, smaller growth companies
exhibit one or more of the following traits:
(BULLET) New products or technologies
(BULLET) New distribution methods
(BULLET) Rapid changes in industry conditions due to regulatory or
other developments
(BULLET) Changes in management or similar characteristics that may result
not only in expected growth in revenues but in an accelerated or above average
rate of earnings growth, which would usually be reflected in capital
appreciation.
In addition, because smaller growth companies are less actively followed by
stock analysts and less information is available on which to base stock price
evaluations, the market may overlook favorable trends in particular smaller
growth companies and then adjust its valuation more quickly once investor
interest is gained.
Equity Income Fund In selecting investments for the
Equity Income Fund, the Adviser focuses on issuers that
(BULLET) have strong free cash flow and pay regular dividends
(BULLET) have potential for long-term earnings per share growth
(BULLET) may be subject to a value catalyst, such as industry
developments, regulatory changes, changes in management, sale or spin-off of a
division or the development of a profitable new business
(BULLET) are well-managed
(BULLET) will benefit from sustainable long-term economic dynamics, such
as globalization of an issuer's industry or an issuer's increased focus on
productivity or enhancement of services
The Adviser also believes
preferred stock and convertible securities of selected companies offer
opportunities for capital appreciation as well as periodic income and may invest
a portion of the Equity Income Fund's assets in such securities. This is
particularly true in the case of companies that have performed below
expectations. If a company's performance has been poor enough, its preferred
stock and convertible debt securities will trade more like the common stock than
like a fixed income security and may result in above average appreciation if
performance improves. Even if the credit quality of the company is not in
question, the market price of the convertible security will reflect little or no
element of conversion value if the price of its common stock has fallen
substantially below the conversion price. This leads to the possibility of
capital appreciation if the price of the common stock recovers.
The Funds may also use the following investment technique:
(BULLET) Defensive Investments. When adverse market or economic
conditions occur, the Funds may temporarily invest all or a portion of their
assets in defensive investments. Such investment include fixed income securities
or high quality money market instruments. When following a defensive strategy,
the Funds will be less likely to achieve their investment goals. Investing
in the Funds involve the following risks:
(BULLET) Equity Risk. The principal risk of investing in the Funds is
equity risk. Equity risk is the risk that the prices of the securities held by
the Funds will change due to general market and economic conditions, perceptions
regarding the industries in which the companies issuing the securities
participate and the issuer company's particular circumstances.
(BULLET) Fund and Management Risk. Small Cap Fund only -- The Fund
invests in growth and value stocks issued by smaller companies. The Fund's price
may decline because the market favors large capitalization company stocks over
stocks of small to mid-size companies or value stocks over growth stocks. If the
Adviser is incorrect in its assessment of the values of the securities it holds
or no event occurs which surfaces value, then the value of the Fund's shares may
decline.
(BULLET) Small Capitalization Company Risk. Small Cap Fund only --
Investing in securities of small capitalization companies may involve greater
risks than investing in larger, more established issuers. Small capitalization
companies generally have limited product lines, markets and financial resources.
Their securities may trade less frequently and in more limited volume than the
securities of larger, more established companies. Also, small capitalization
companies are typically subject to greater changes in earnings and business
prospects than larger companies. Consequently, small capitalization company
stock prices tend to rise and fall in value more than other stocks. The Fund, as
a holder of equity securities, only has rights to a value in the company after
all its debts have been paid, and it could lose its entire investment in a
company that encounters financial difficulty.
(BULLET) Fund and Management Risk. Equity Income Fund only -- The Fund
invests in stocks issued by companies believed by the Adviser to be undervalued
and that have the potential to achieve significant capital appreciation. If the
Adviser is incorrect in its assessment of the values of the securities it holds
or no event occurs which surfaces value, then the value of the Fund's shares may
decline.
(BULLET) Interest Rate Risk and Credit Risk. Equity Income Fund only --
Investments in preferred stock and securities convertible into or exchangeable
for common or preferred stock involve interest rate risk and credit risk. When
interest rates decline, the value of such securities generally rises.
Conversely, when interest rates rise, the value of such securities generally
declines. It is also possible that the issuer of a security will not be able to
make interest and principal payments when due.
(BULLET) Low Credit Quality Risk. Equity Income Fund only -- Lower rated
convertible securities are subject to greater credit risk, price volatility and
risk of loss than investment grade securities. There may be less of a market for
lower rated convertible securities, which could make it harder to sell them at
an acceptable price.
10
MANAGEMENT OF THE FUNDS
The Adviser. Gabelli Funds, LLC, with principal offices located at One Corporate
Center, Rye, New York 10580-1434, serves as investment adviser to the Funds. The
Adviser makes investment decisions for the Funds and continuously reviews and
administers the Funds' investment program under the supervision of the Funds'
Board of Directors. The Adviser also manages several other open-end and
closed-end investment companies in the Gabelli family of funds. The Adviser is a
New York limited liability company organized in 1999 as successor to Gabelli
Group Capital Partners, Inc. (formerly named 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 ("NYSE").
As compensation for its services and
the related expenses borne by the Adviser, for the fiscal year ended September
30, 1999, the Funds paid the Adviser a fee equal to 1.00% of the value of each
of the Fund's average daily net assets.
The Portfolio Manager. Mr. Mario J.
Gabelli, CFA, is responsible for the day-to-day management of the Funds. Mr.
Gabelli has been Chairman, Chief Executive Officer and Chief Investment Officer
of the Adviser and its predecessor since inception, as well as its parent
company, GAMI. Mr. Gabelli also acts as Chief Executive Officer and Chief
Investment Officer of GAMCO Investors, Inc. ("GAMCO"), a wholly-owned subsidiary
of GAMI, and is an officer or director of various other companies affiliated
with GAMI. The Adviser relies to a considerable extent on the expertise of Mr.
Gabelli, who may be difficult to replace in the event of his death, disability
or resignation.
CLASSES OF SHARES
Three classes of the Funds' shares are offered in this prospectus -- Class A
Shares, Class B Shares and Class C Shares. The table below summarizes the
differences among the classes of shares.
(BULLET) A "front-end sales load," or sales charge, is a one-time fee
charged at the time of purchase of shares.
(BULLET) A "contingent deferred sales charge" ("CDSC") is a one-time fee
charged at the time of redemption.
(BULLET) A "Rule 12b-1 fee" is a recurring annual fee for distributing
shares and servicing shareholder accounts based on the Fund's average daily net
assets attributable to the particular class of shares.
Class A Shares Class B Shares Class C Shares
Front-End Sales Load?
Contingent Deferred Sales Charge?
Rule 12b-1 Fee
Convertible to Another Class?
Fund Expense Levels
Yes. The percentage declines as the amount invested increases.
Yes, for shares redeemed within twenty-four months after purchase as part of an
investment greater than $2 million if no front-end sales charge was paid at the
time of purchase.
0.25%
No.
Lower annual expenses than Class B or Class C Shares.
No.
Yes, for shares redeemed within seventy-two months after purchase. Declines
over time.
1.00%
Yes. Automatically converts to Class A Shares approximately ninety-six months
after purchase.
Higher annual expenses than Class A Shares.
No
Yes, for shares redeemed within twenty-four months after purchase.
1.00%
No.
Higher annual expenses than Class A Shares.
In selecting a class of shares in which to invest, you should consider
(BULLET) the length of time you plan to hold the shares
(BULLET) the amount of sales charge and Rule 12b-1 fees, recognizing
that your share of 12b-1 fees as a percentage of your investment increases if
the Fund's assets increase in value and decreases if the Fund's assets decrease
in value
(BULLET) whether you qualify for a reduction or waiver of the Class A
sales charge
(BULLET) that Class B Shares convert to Class A Shares approximately
ninety-six months after purchase
12
If you...
(BULLET) do not qualify for a reduced or waived front-end sales load and intend
to hold your shares for only a few years
(BULLET) do not qualify for a reduced or waived front-end sales load and intend
to hold your shares for several years
(BULLET) do not qualify for a reduced
or waived front-end sales load and intend to hold your shares
indefinitely
then you should consider...
purchasing Class C Shares instead of either Class A Shares or Class B Shares
purchasing Class B Shares instead of either Class A Shares or Class C Shares
purchasing Class A Shares
Sales Charge -- Class A Shares. The sales charge is imposed on Class A Shares at
the time of purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sales Charge Sales Charge Reallowance
as % of the as % of to
Amount of Investment Offering Price* Amount Invested Broker-Dealers
- ----------------------------- -------------------- --------------------------------------------
Under $50,000 5.75% 6.10% 5.00%
$50,000 but under $100,000 4.50% 4.71% 3.75%
$100,000 but under $250,000 3.50% 3.62% 2.75%
$250,000 but under $500,000 2.50% 2.56% 2.00%
$500,000 but under $1 million 2.00% 2.04% 1.75%
$1 million but under $2 million 1.00% 1.01% 1.00%
$2 million or more 0.00% 0.00% 1.00%
- ------------------------
* Front-end sales load
</TABLE>
Sales Charge Reductions and Waivers -- Class A Shares:
Reduced sales charges are available to (1) investors who are eligible to combine
their purchases of Class A Shares to receive volume discounts and (2) investors
who sign a Letter of Intent agreeing to make purchases over time. Certain types
of investors are eligible for sales charge waivers.
(b) 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 Funds and other funds advised by the
Adviser or its affiliates along with the value of the Class A Shares
being purchased to qualify for a reduced sales charge. For example, if
you own Class A Shares of the Funds that have an aggregate value of
$100,000, and make an additional investment in Class A Shares of the
Funds of $4,000, the sales charge applicable to the additional
investment would be 3.50%, rather than the 5.75% normally charged on a
$4,000 purchase. If you want more information on volume discounts, call
your broker
13
2. Letter of Intent. If you initially invest at least $1,000 in Class A Shares
of the Funds and submit a Letter of Intent to the Distributor, you may make
purchases of Class A Shares of the Funds during a 13-month period at the reduced
sales charge rates applicable to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. You will have to pay sales charges at the higher
rate if you fail to honor your Letter of Intent. For more information on the
Letter of Intent, call your broker.
3. Investors Eligible for Sales Charge Waivers. Class A Shares of the Funds may
be offered without a sales charge to: (1) any other investment company in
connection with the combination of such company with the Funds by merger,
acquisition of assets or otherwise; (2) shareholders who have redeemed shares in
the Funds and who wish to reinvest in the Funds, provided the reinvestment is
made within 30 days of the redemption; (3) tax-exempt organizations enumerated
in Section 501(c)(3) of the Internal Revenue Code of 1986 (the "Code") and
private, charitable foundations that in each case make lump-sum purchases of
$100,000 or more; (4) qualified employee benefit plans established pursuant to
Section 457 of the Code that have established omnibus accounts with the Fund;
(5) qualified employee benefit plans having more than one hundred eligible
employees and a minimum of $1 million in plan assets invested in the Funds (plan
sponsors are encouraged to notify the Funds' distributor when they first satisfy
these requirements); (6) any unit investment trusts registered under the
Investment Company Act of 1940 (the "1940 Act") which have shares of the Funds
as a principal investment; (7) financial institutions purchasing Class A Shares
of the Funds for clients participating in a fee based asset allocation program
or wrap fee program which has been approved by Gabelli & Company, Inc., the
Funds'distributor (the "Distributor"); and (8) registered investment advisers or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge a management, consulting or other fee for their
services; and clients of such investment advisers or financial planners who
place trades for their own accounts if the accounts are linked to the master
account of such investment adviser or financial planner on the books and records
of a broker or agent.
Investors who qualify under any of the categories
described above should contact their brokerage firm.
Contingent Deferred
Sales Charges.
You will pay a CDSC when you redeem:
(BULLET) Class A Shares within approximately twenty-four months of
buying them as part of an investment greater than $2 million if no front-end
sales charge was paid at the time of purchase
(BULLET) Class B Shares within approximately seventy-two months of
buying them
(BULLET) Class C Shares within approximately twenty-four
months of buying them
The CDSC payable upon redemption of Class A Shares and Class C Shares in the
circumstances described above is 1%. The CDSC schedule for Class B Shares is set
forth below. The CDSC is based on the net asset value at the time of your
investment or the net asset value at the time of redemption, whichever is lower.
14
Class B Shares
Years Since Purchase CDSC
-------------------- ---------------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
The Distributor pays sales commissions of up to 4.00% of the purchase price of
Class B Shares of the Funds to brokers at the time of sale that initiate and are
responsible for purchases of such Class B Shares of the Funds. You will not pay
a CDSC to the extent that the value of the redeemed shares represents
reinvestment of dividends or capital gains distributions or capital appreciation
of shares redeemed. When you redeem shares, we will assume that you are
redeeming first shares representing reinvestment of dividends and capital gains
distributions, then any appreciation on shares redeemed, and then remaining
shares held by you for the longest period of time. We will calculate the holding
period of shares acquired through an exchange of shares of another fund from the
date you acquired the original shares of the other fund. The time you hold
shares in a money market fund, however, will not count for purposes of
calculating the applicable CDSC. We will waive the CDSC payable upon redemptions
of shares for:
(BULLET) redemptions and distributions from retirement plans made
after the death or disability of a
shareholder
(BULLET) minimum required distributions made from an IRA or other
retirement plan account after you reach age 591/2 (BULLET) involuntary
redemptions made by the Funds (BULLET) a distribution from a tax-deferred
retirement plan after your retirement (BULLET) returns of excess
contributions to retirement plans following the shareholder's death or
disability
Conversion Feature -- Class B Shares:
(BULLET) Class B Shares automatically convert to Class A Shares of the
Funds on the first business day of the ninety-seventh month following the month
in which you acquired such shares.
(BULLET) After conversion, your shares will be subject to the lower Rule
12b-1 fees charged on Class A Shares, which will increase your investment return
compared to the Class B Shares.
(BULLET) You will not pay any sales charge or fees when your shares
convert, nor will the transaction be subject to any tax. (BULLET) If you
exchange Class B Shares of one fund for Class B Shares of another fund,
your holding period will be
calculated from the time of your original purchase of Class B Shares. If you
exchange shares into a Gabelli money market fund, however, your holding period
will be suspended.
(BULLET) The dollar value of Class A Shares you receive will equal the
dollar value of the Class B Shares converted.
15
The Board of Directors may suspend the automatic conversion of Class B Shares to
Class A Shares for legal reasons or due to the exercise of its fiduciary duty.
If the Board determines that such suspension is likely to continue for a
substantial period of time, it will create another class of shares into which
Class B Shares are convertible. Rule 12b-1 Plan. The Funds have adopted a
plan under Rule 12b-1 (the "Plan") for each of its classes of shares. Under the
Plan, the Funds may use their assets to finance activities relating to the sale
of their shares and the provision of certain shareholder services. For the
classes covered by this Prospectus, the Rule 12b-1 fees vary by class as
follows:
Class A Class B Class C
--------- --------- ---------
Service Fees 0.25% 0.25% 0.25%
Distribution Fees None 0.75% 0.75%
These are annual rates based on the value of each of these Classes' average
daily net assets. Because the Rule 12b-1 fees are higher for Class B and Class C
Shares than for Class A Shares, Class B and Class C Shares will have higher
annual expenses. Because Rule 12b-1 fees are paid out of the Funds' assets on an
on-going basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
PURCHASE OF SHARES
You can purchase the Funds' shares on any day the NYSE is open for trading (a
"Business Day"). You may purchase shares directly through registered
broker-dealers or other financial intermediaries that have entered into selling
agreements with the Funds' Distributor.
The broker-dealer or other financial intermediary will transmit a purchase
order and
payment to State Street Bank and Trust Company ("State Street") on your behalf.
Broker-dealers or other financial intermediaries may send confirmations of your
transactions and periodic statements showing your investments in the Funds.
Share Price. The Funds sell their shares at the net asset
value next determined after the Funds receive your completed subscription order
form and your payment, subject to a sales charge in the case of Class A Shares.
See "Pricing of Fund Shares" for a description of the calculation of the net
asset value as described under "Classes of Shares-Sales Charge-Class A
Shares."
Minimum Investments. Your minimum initial investment must be at least
$1,000. See "Retirement Plans" and "Automatic Investment Plan" regarding minimum
investment amounts applicable to such plans. There is no minimum for subsequent
investments. Broker-dealers may have different minimum investment
requirements.
Retirement Plans. The Funds have available a form of IRA and a
"Roth" IRA for investment in Fund shares that may be obtained from the
Distributor by calling 1-800-GABELLI (1-800-422-3554). Self-employed investors
may purchase shares of the Funds through tax-deductible contributions to
existing retirement plans for self-employed persons, known as "Keogh" or
"H.R.-10" plans. The Funds do not currently act as sponsor to such plans. Fund
shares may also be a suitable investment for other types of qualified pension or
profit-sharing plans which are employer sponsored, including deferred
compensation or salary reduction plans known as "401(k) Plans." The minimum
initial investment in all such retirement plans is $250. There is no minimum
subsequent investment requirement for retirement plans. Automatic
Investment Plan. The Funds offer an automatic monthly investment plan. There is
no minimum monthly investment for accounts establishing an automatic investment
plan. Call the Distributor at 1-800-GABELLI (1-800-422-3554) for more details
about the plan. General. State Street will not issue share certificates
unless requested by you. The Funds reserve the right to (i) reject any purchase
order if, in the opinion of the Funds' management, it is in the Funds' best
interest to do so, (ii) suspend the offering of shares for any period of time
and (iii) waive the Funds' minimum purchase requirement.
REDEMPTION OF SHARES
You can redeem shares of the Funds on any Business Day without a redemption fee.
The Funds may temporarily stop redeeming their shares when the NYSE is closed or
trading on the NYSE is restricted, when an emergency exists and the Funds cannot
sell their shares or accurately determine the value of their assets, or if the
Securities and Exchange Commission ("SEC") orders the Funds to suspend
redemptions.
The Funds redeem their shares at the net asset value next
determined after the Funds receive your redemption request, subject in some
cases to a CDSC, as described under "Classes of Shares - Contingent Deferred
Sales Charges". See "Pricing of Fund Shares" for a description of the
calculation of net asset value.
You may redeem shares through a
broker-dealer or other financial intermediary that has entered into a selling
agreement with the Distributor. The broker-dealer or financial intermediary will
transmit a redemption order to State Street on your behalf. The redemption
request will be effected at the net asset value next determined (less any
applicable CDSC) after State Street receives the request. If you hold share
certificates, you must present the certificates endorsed for transfer. A
broker-dealer may charge you fees for effecting redemptions for you.
In
the event that you wish to redeem shares and you are unable to contact your
broker-dealer or other financial intermediary, you may redeem shares by mail.
You may mail a letter requesting redemption of shares to: The Gabelli Funds,
P.O. Box 8308, Boston, MA 02266-8308. Your letter should state the name of the
Fund(s) and the share class, the dollar amount or number of shares you wish to
redeem and your account number. If there is more than one owner of shares, all
must sign. A signature guarantee is required for each signature on your
redemption letter. You can obtain a signature guarantee from financial
institutions such as commercial banks, brokers, dealers and savings
associations. A notary public cannot provide a signature guarantee.
Involuntary Redemption. The Funds may redeem all shares in your account (other
than an IRA account) if their value falls below $1,000 as a result of
redemptions (but not as a result of a decline in net asset value). You will be
notified in writing if the Funds initiate such action and allowed 30 days to
increase the value of your account to at least $1,000. Redemption Proceeds.
A redemption request received by a Fund will be effected at the net asset value
next determined after a Fund receives the request. If you request redemption
proceeds by check, the Funds will normally mail the check to you within seven
days after receipt of your redemption request. If you purchased your Fund(s)
shares by check or through the Automatic Investment Plan, you may not
receive
proceeds from your redemptions until the check clears, which may take up to as
many as 15 days following purchase. While the Funds will delay the processing of
the redemption until the check clears, your shares will be valued at the next
determined net asset value after receipt of your redemption request.
The Funds may pay to you your redemption proceeds wholly or partly in portfolio
securities. Payments would be made in portfolio securities only in the rare
instance that the Funds' Board of Directors believes that it would be in the
Funds' best interest not to pay redemption proceeds in cash.
EXCHANGE OF SHARES
You can exchange shares of the Fund(s) 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 an exchange call your broker. Class B and Class C Shares will continue
to age from the date of the original purchase of such shares and will assume the
CDSC rate such shares had at the time of exchange. You may also exchange your
shares for shares of a money market fund managed by the Adviser or its
affiliates, without imposition of any CDSC at the time of exchange. Upon
subsequent redemption from such money market funds or the Fund(s) (after
re-exchange into the Fund(s)), such shares will be subject to the CDSC
calculated by excluding the time such shares were held in a money market
fund. In effecting an exchange:
(BULLET) you must meet the minimum investment requirements
for the fund whose shares you
purchase through exchange
(BULLET) if you are exchanging into a fund with a higher
sales charge, you must pay the difference at the time of
exchange
(BULLET) you may realize a taxable gain or loss
(BULLET) you should read the prospectus of the fund whose
shares you are purchasing through exchange (call your broker to obtain the
prospectus)
(BULLET) you should be aware that brokers may charge a fee for
handling an exchange for you You may exchange shares by telephone, by
mail, over the Internet or through a registered broker-dealer or other financial
intermediary.
(BULLET) Exchange by Telephone. You may give exchange instructions by
telephone by calling
1-800-GABELLI (1-800-422-3554). You may not exchange shares by telephone if
you hold share certificates.
(BULLET) Exchange by Mail. You may send a written request for exchanges
to: The Gabelli Funds, P.O. Box 8308, Boston, MA 02266-8308. Your letter should
state your name, your account number, the dollar amount or number of shares you
wish to exchange, the name and class of the funds whose shares you wish to
exchange, and the name of the fund whose shares you wish to acquire.
(BULLET) Exchange through the Internet. You may also give exchange
instructions via the Internet at www.gabelli.com. You may not exchange shares
through the Internet if you hold share certificates. 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. 18 <PAGE>
PRICING OF FUND SHARES
The Funds' net asset value is calculated separately for each class of shares on
each Business Day. The NYSE is open Monday through Friday, but currently is
scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day and on the preceding Friday or subsequent
Monday when a holiday falls on a Saturday or Sunday, respectively. The
Funds' net asset value is calculated separately for each class of shares. The
net asset value is determined as of the close of regular trading on the NYSE,
normally 4:00 p.m., Eastern Time. Net asset value is computed by dividing the
value of the Funds' net assets (i.e. the value of their securities and other
assets less their liabilities, including expenses payable or accrued but
excluding capital stock and surplus) by the total number of their shares
outstanding at the time the determination is made. The Funds use market
quotations in valuing their portfolio securities. Short-term investments that
mature in 60 days or less are valued at amortized cost, which the Directors of
the Funds believe represents fair value. The price of Fund shares for purchases
and redemption will be based upon the next calculation of net asset value after
the purchase or redemption order is placed.
DIVIDENDS AND DISTRIBUTIONS
The Funds intend to pay dividends quarterly for the Equity Income Fund and
annually for the Small Cap Fund and capital gains distributions, if any on an
annual basis. You may have dividends or capital gains distributions that are
declared by the Funds automatically reinvested at net asset value in additional
shares of the Funds. You will make an election to receive dividends and
distributions in cash or Fund(s) shares at the time you purchase your shares.
You may change this election by notifying the Funds in writing at any time prior
to the record date for a particular dividend or distribution. There are no sales
or other charges in connection with the reinvestment of dividends and capital
gains distributions. There is no fixed dividend rate, and there can be no
assurance that the Funds will pay any dividends or realize any capital gains.
Dividends and distributions may differ for different classes of shares.
TAX INFORMATION
The Funds expect that their distributions will consist primarily of net
investment income and net realized capital gains. Capital gains may be taxed at
different rates depending on the length of time the Funds hold the asset giving
rise to such gains. Dividends out of net investment income and distributions of
net realized short-term capital gains (i.e. gains from assets held by the Funds
for one year or less) are taxable to you as ordinary income. Distributions of
net long-term capital gains are taxable to you at long-term capital gain rates.
The Funds' distributions, whether you receive them in cash or reinvest them in
additional shares of the Funds, generally will be subject to federal, state or
local taxes. An exchange of the Funds' shares for shares of another fund will be
treated for tax purposes as a sale of the Funds' shares; and any gain you
realize on such a transaction generally will be taxable. Foreign shareholders
generally will be subject to a federal withholding tax. This summary of tax
consequences is intended for general information only. You should consult a tax
adviser concerning the tax consequences of your investment in the Funds.
FINANCIAL HIGHLIGHTS
The Class A, Class B and Class C Shares of the Funds have not previously been
offered and therefore do not have a previous financial history.
19
Gabelli Equity Series Funds, Inc.
The Gabelli Small Cap Growth Fund
The Gabelli Equity Income Fund
Class A, B, C Shares
For More Information:
For more information about the Funds, the following documents are available free
upon request: Annual/Semi-annual Reports:
The Funds' semi-annual and annual reports to shareholders contain additional
information on the Funds' investments. In the Funds' annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during their last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Funds, including their operations and investments
policies. It is incorporated by reference, and is legally considered a part of
this prospectus.
You can get free copies of these documents and prospectuses of other funds in
the Gabelli family, or request other information and discuss your questions
about the Funds by contacting:
Gabelli Equity Series Funds, Inc.
One Corporate Center
Rye, NY 10580
Telephone: 1-800-GABELLI (1-800-422-3554)
www.gabelli.com
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-202-942-8090. You
can get text-only copies:
(BULLET) For a fee, by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102 [or by calling
1-202-942-8090], or by electronic request at the following email address:
[email protected].
(BULLET) Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act file no. 811-06367)><Questions?
Call 1-800-GABELLI
or your investment representative.
Gabelli Equity Series Funds, Inc.
The Gabelli Small Cap Growth Fund
The Gabelli Equity Income Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 p.m.)
Gabelli Equity Series Funds, Inc.
The Gabelli Equity Income Fund
The Gabelli Small Cap Growth fund
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
- -------------------------------------------------------------------------------
This Statement of Additional Information ("SAI"), which is not a prospectus,
describes The Gabelli Equity Income Fund and The Gabelli Small Cap Growth Fund
(each a "Fund") which are series of Gabelli Equity Series Funds, Inc., a
Maryland corporation (the "Corporation"). This SAI should be read in conjunction
with the Prospectuses for Class A, Class B, Class C, and Class AAA Shares dated
February 1, 2000. For a free copy of the Prospectuses, please contact the Funds
at the address, telephone number or Internet Web site printed below.
One Corporate Center
Rye, New York 10580-1434
Telephone 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
TABLE OF CONTENTS
Page
GENERAL INFORMATION 2
OTHER INVESTMENT STRATEGIES AND 2
RISKS
INVESTMENT RESTRICTIONS 9
DIRECTORS AND OFFICERS 10
CONTROL PERSONS AND PRINCIPAL 12
SHAREHOLDERS
INVESTMENT ADVISORY AND OTHER SERVICES 13
THE DISTRIBUTION PLAN 15
PORTFOLIO TRANSACTIONS AND BROKERAGE 15
REDEMPTION OF SHARES 17
RETIREMENT PLAN 18
DETERMINATION OF NET ASSET VALUE 18
DIVIDENDS, DISTRIBUTIONS AND TAXES 18
INVESTMENT PERFORMANCE INFORMATION 21
DESCRIPTION OF SHARES, VOTING 22
RIGHTS AND LIABILITIES
FINANCIAL STATEMENTS 23
APPENDIX A A-1
<PAGE>
GENERAL INFORMATION
The Corporation is diversified, open-end, management investment company
organized under the laws of the State of Maryland on July 25, 1991. The Equity
Income Fund and the Small Cap Fund are each a series of the Corporation and
commenced operations on January 2, 1992 and October 22, 1991, respectively.
The Prospectus discusses the investment objective of each 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 Funds may invest, additional strategies that the Funds
may utilize and certain risks associated with such investments and strategies.
OTHER INVESTMENT STRATEGIES AND RISKS
Equity Securities
Common stocks represent the residual ownership interest in the issuer and
holders of common stock are entitled to the income and increase in the value of
the assets and business of the issuer after all of its debt obligations and
obligations to preferred stockholders are satisfied. Common stocks generally
have voting rights. Common stocks fluctuate in price in response to many factors
including historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions and
market liquidity.
Equity securities also include preferred stock (whether or not convertible into
common stock) and debt securities convertible into or exchangeable for common or
preferred stock. Preferred stock has a preference over common stock in
liquidation (and generally dividends as well) but is subordinated to the
liabilities of the issuer in all respects. As a general rule the market value of
preferred stock with a fixed dividend rate and no conversion element varies
inversely with interest rates and perceived credit risk, while the market price
of convertible preferred stock generally also reflects some element of
conversion value. Because preferred stock is junior to debt securities and other
obligations of the issuer, deterioration in the credit quality of the issuer
will cause greater changes in the value of a preferred stock than in a more
senior debt security with similarly stated yield characteristics. Debt
securities that are convertible into or exchangeable for preferred common stock
are liabilities of the issuer but are generally subordinated to more senior
elements of the issuer's balance sheet. Although such securities also generally
reflect an element of conversion value, their market value also varies with
interest rates and perceived credit risk.
Gabelli Funds, LLC (the "Adviser") believes that opportunities for capital
appreciation may be found in the preferred stock and convertible securities of
companies. This is particularly true in the case of companies that have
performed below expectations at the time the preferred stock or convertible
security was issued. If the company's performance has been poor enough, its
preferred stock and convertible debt securities will trade more like the common
stock than like a fixed income security and may result in above average
appreciation once it becomes apparent that performance is improving. Even if the
credit quality of the company is not in question, the market price of the
convertible security will often reflect little or no element of conversion value
if the price of its common stock has fallen substantially below the conversion
price. This leads to the possibility of capital appreciation if the price of the
common stock recovers. Many convertible securities are not investment grade,
that is, not rated BBB or better by Standard & Poor's Corporation or Baa or
better by Investors Service and not considered by the Adviser to be of similar
quality. There is no minimum credit rating for these securities in which the
Fund may invest. Preferred stocks and convertible securities have many of the
same characteristics and risks as Nonconvertible Debt securities described
below.
Nonconvertible Debt Securities
Under normal market conditions, each Fund may invest up to 35% of its total
assets in lower quality nonconvertible debt securities. These securities include
preferred stocks, bonds, debentures, notes, asset- and mortgage- backed
securities and money market instruments such as commercial paper and bankers'
acceptances. There is no minimum credit rating for these securities in which the
Funds may invest. Accordingly, the Funds could invest in securities in default
although the Funds will not invest more than 5% of its assets in such
securities. The market values of lower quality fixed income securities tend to
be less sensitive to changes in prevailing interest rates than higher-quality
securities but more sensitive to individual corporate developments than
higher-quality securities. Such lower-quality securities also tend to be more
sensitive to economic conditions than are higher-quality securities.
Accordingly, these lower-quality securities are considered predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation and will generally
involve more credit risk than securities in the higher-quality categories. Even
securities rated Baa or BBB by Moody's Investor Services, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") respectively, which ratings are considered
investment grade, possess some speculative characteristics. There are risks
involved in applying credit ratings as a method for evaluating high yield
obligations in that credit ratings evaluate the safety of principal and interest
payments, not market value risk. In addition, credit rating agencies may not
change credit ratings on a timely basis to reflect changes in economic or
company conditions that affect a security's market value. The Funds will rely on
the Adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer. In this evaluation, the Adviser will take into
consideration, among other things, the issuer's financial resources and ability
to cover its interest and fixed charges, factors relating to the issuer's
industry and its sensitivity to economic conditions and trends, its operating
history, the quality of the issuer's management and regulatory matters.
The risk of loss due to default by the issuer is significantly greater for the
holders of lower quality securities because such securities are generally
unsecured and are often subordinated to other obligations of the issuer. During
an economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress
and may not have sufficient revenues to meet their interest payment obligations.
An issuer's ability to service its debt obligations may also be adversely
affected by specific corporate developments, its inability to meet specific
projected business forecasts, or the unavailability of additional financing.
Factors adversely affecting the market value of high yield and other securities
will adversely affect each Fund's net asset value. In addition, each Fund may
incur additional expenses to the extent it is required to seek recovery upon a
default in the payment of principal of or interest on its portfolio holdings.
From time to time, proposals have been discussed regarding new legislation
designed to limit the use of certain high yield debt securities by issuers in
connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such proposals, if
enacted into law, could reduce the market for such debt securities generally,
could negatively affect the financial condition of issuers of high yield
securities by removing or reducing a source of future financing, and could
negatively affect the value of specific high yield issues and the high yield
market in general. For example, under a provision of the Internal Revenue Code
of 1986 enacted in 1989, a corporate issuer may be limited from deducting all of
the original issue discount on high-yield discount obligations (i.e., certain
types of debt securities issued at a significant discount to their face amount).
The likelihood of passage of any additional legislation or the effect thereof is
uncertain.
The secondary trading market for lower-quality fixed income securities is
generally not as liquid as the secondary market for higher-quality securities
and is very thin for some securities. The relative lack of an active secondary
market may have an adverse impact on market price and a Fund's ability to
dispose of particular issues when necessary to meet the Funds' liquidity needs
or in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The relative lack of an active secondary market
for certain securities may also make it more difficult for a Fund to obtain
accurate market quotations for purposes of valuing the Funds' portfolio. Market
quotations are generally available on many high yield issues only from a limited
number of dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales. During such times, the responsibility of the
Corporation's Board of Directors to value the securities becomes more difficult
and judgment plays a greater role in valuation because there is less reliable,
objective data available.
Securities Subject to Reorganization
Subject to each Fund's policy of investing at least 65% of its total assets in
income producing equity securities (Equity Income Fund) or small company equity
securities (Small Cap Fund), each Fund may invest without limit 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 if, in the judgment of the Adviser,
there is a reasonable prospect of capital appreciation significantly greater
than the brokerage and other transaction expenses involved.
In general, securities which 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 may also discount what the stated or appraised
value of the security would be if the contemplated transaction were approved or
consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of the
prospective portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction but also the financial resources and
business motivation of the offeror and the dynamics and business climate when
the offer of proposal is in process. In making the investments each Fund will
not violate any of its investment restrictions (see below, "Investment
Restrictions") including the requirement that, (a) as to 75% of its total
assets, it will not invest more than 5% of its total assets in the securities of
any one issuer and (b) it will not invest more than 25% of its total assets in
any one industry. The principal risk is that such offers or proposals may not be
consummated within the time and under the terms contemplated at the time of the
investment, in which case, unless such offers or proposals are replaced by
equivalent or increased offers or proposals which are consummated, the Funds may
sustain a loss. Since such investments are ordinarily short-term in nature, they
will tend to increase the turnover ratio of the Funds thereby increasing their
brokerage and other transaction expenses (see "Dividends, Distributions and
"Taxes" in this SAI).
Asset-Backed and Mortgage-Backed Securities
Prepayments of principal may be made at any time on the obligations underlying
asset- and mortgage- backed securities and are passed on to the holders of the
asset- and mortgage- backed securities. As a result, if the Fund purchases such
a security at a premium, faster than expected prepayments will reduce, and
slower than expected prepayments will increase, yield to maturity. Conversely,
if a Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity.
Foreign Securities
Each Fund may invest up to 35% of its total assets in the securities of non-U.S.
issuers. These investments involve certain risks not ordinarily associated with
investments in securities of domestic issuers. These risks include fluctuations
in foreign exchange rates (which the Funds will not seek to hedge), future
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. In addition, with
respect to certain countries, there is the possibility of expropriation of
assets, confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to or as
uniform as those of U.S. companies. Non-U.S. securities markets, while growing
in volume, have, for the most part, substantially less volume than U.S. markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable U.S. companies. Transaction costs of
investing in non-U.S. securities markets are generally higher than in the U.S.
There is generally less government supervision and regulation of exchanges,
brokers and issuers than there is in the U.S. The Funds might have greater
difficulty taking appropriate legal action in non-U.S. courts. Non-U.S. markets
also have different clearance and settlement procedures which in some markets
have at times failed to keep pace with the volume of transactions, thereby
creating substantial delays and settlement failures that could adversely affect
the Funds' performance.
Dividend and interest income from non-U.S. securities will generally be subject
to withholding taxes by the country in which the issuer is located and may not
be recoverable by the Funds or the investor.
Hedging Transactions
Options. Each Fund may purchase or sell options on individual securities as well
as on indices of 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
gives the holder of the option the right, in return for a premium paid, to buy
from the seller the security underlying the option at a specified exercise price
at any time during the term of the option or, in some cases, only at the end of
the term of the option. The seller of the call option has the obligation upon
exercise of the option to deliver the underlying security upon payment of the
exercise price. A put option is a contract that gives the holder of the option
the right, in return for a premium paid, to sell to the seller the underlying
security at a specified price. The seller of the put option, on the other hand,
has the obligation to buy the underlying security upon exercise at the exercise
price.
If a Fund has sold 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 sold. There can be no assurance that a
closing purchase transaction can be effected when a Fund so desires.
The purchaser of an option risks a total loss of the premium paid for the option
if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unexercized but
foregoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on a Fund the credit risk that the
counterparty will fail to honor its obligations. Each Fund will not purchase
options if, as a result, the aggregate cost of all outstanding options exceeds
10% of the Fund's assets. To the extent that puts, straddles and similar
investment strategies involve instruments regulated by the Commodity Futures
Trading Commission each Fund is limited to an investment not in excess of 5% of
its total assets.
Futures Contracts. Each Fund may enter into futures contracts only for certain
bona fide hedging, yield enhancement and risk management purposes. Each Fund may
enter into futures contracts for the purchase or sale of debt securities, debt
instruments, or indices of prices thereof, stock index futures, other financial
indices, and U.S. Government Securities.
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 are settled on a net cash payment basis rather than by
the sale and delivery of the securities underlying the futures contracts. U.S.
futures contracts have been designed by exchanges that have been designated as
"contract markets" by the CFTC, an agency of the U.S. Government, and must be
executed through a futures commission merchant (i.e., a brokerage firm) which is
a member of the relevant contract market. Futures contracts trade on these
contract markets and the exchange's affiliated clearing organization guarantees
performance of the contracts as between the clearing members of the exchange.
These contracts entail certain risks, including but not limited to the
following: no assurance that futures contracts transactions can be offset at
favorable prices, possible reduction of each Fund's yield due to the use of
hedging, possible reduction in value of both the securities hedged and the
hedging instrument, possible lack of liquidity due to daily limits on price
fluctuation, imperfect correlation between the contracts and the securities
being hedged, and potential losses in excess of the amount invested in the
futures contracts themselves.
Currency Transactions. Each Fund may enter into various currency transactions,
including forward foreign currency contracts, currency swaps, foreign currency
or currency index futures contracts and put and call options on such contracts
or on currencies. A forward foreign currency contract involves an obligation to
purchase or sell a specific currency for a set price at a future date. A
currency swap is an arrangement whereby each party exchanges one currency for
another on a particular date and agrees to reverse the exchange on a later date
at a specific exchange rate. Forward foreign currency contracts and currency
swaps are established in the interbank market conducted directly between
currency traders (usually large commercial banks or other financial
institutions) on behalf of their customers. Futures contracts are similar to
forward contracts except that they are traded on an organized exchange and the
obligations thereunder may be offset by taking an equal but opposite position to
the original contract, with profit or loss determined by the relative prices
between the opening and offsetting positions. Each Fund expects to enter into
these currency contracts and swaps in primarily the following circumstances: to
"lock in" the U.S. dollar equivalent price of a security a Fund is contemplating
to buy or sell that is denominated in a non-U.S. currency; or to protect against
a decline against the U.S. dollar of the currency of a particular country to
which the Fund's portfolio has exposure. Each Fund anticipates seeking to
achieve the same economic result by utilizing from time to time for such hedging
a currency different from the one of the given portfolio security as long as, in
the view of the Adviser, such currency is essentially correlated to the currency
of the relevant portfolio security based on historic and expected exchange rate
patterns.
Unseasoned Companies. The Gabelli Small Cap Growth Fund (the "Small Cap Fund")
may invest in securities of unseasoned companies. In view of the limited
liquidity, more speculative prospects and price volatility, the Fund will not
invest more than 10% its of assets (at the time of purchase) in securities of
companies (including predecessors) that have operated less than three years.
Other Investment Companies
The Small Cap Fund may invest up to 10% of its total assets in other investment
companies (not more than 5% of its total assets may be invested in any one
investment company and it may not invest in more that 3% of the voting
securities of any one investment company).
Warrants and Rights
Each Fund may invest up to 5% of its total assets in warrants or rights (other
than those acquired in units or attached to other securities) which entitle the
holder to buy equity securities at a specific price for or at the end of a
specific period of time.
When Issued, Delayed Delivery Securities and Forward Commitments
Each Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Funds will only enter
into a forward commitment with the intention of actually acquiring the security,
the Funds may sell the security before the settlement date if it is deemed
advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Funds prior to the
settlement date. Each Fund will segregate with its Custodian (as hereinafter
defined) cash or liquid securities in an aggregate amount at least equal to the
amount of its outstanding forward commitments.
Short Sales
Each Fund may make short sales of securities. A short sale is a transaction in
which the Fund sells a security it does not own in anticipation that the market
price of that security will decline. The Fund expects to make short sales both
to obtain capital gains from anticipated declines in securities and as a form of
hedging to offset potential declines in long positions in the same or similar
securities. The short sale of a security is considered a speculative investment
technique.
When a Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale in order to
satisfy its obligation to deliver the security upon conclusion of the sale. The
Fund may have to pay a fee to borrow particular securities and is often
obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other highly liquid securities. The Fund will also be required to
deposit similar collateral with its custodian to the extent, if any, necessary
so that the value of both collateral deposits in the aggregate is at all times
equal to the greater of the price at which the security is sold short or 100% of
the current market value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security regarding
payment over of any payments received by the Fund on such security, the Fund may
not receive any payments (including interest) on its collateral deposited with
such broker-dealer.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a capital gain.
Any gain will be decreased, and any loss increased, by the transaction costs
described above. Although the Fund's gain is limited to the price at which it
sold the security short, its potential loss is theoretically unlimited.
The market value of the securities sold short of any one issuer will not exceed
either 5% of the Fund's total assets or 5% of such issuer's voting securities.
Each Fund will not make a short sale, if, after giving effect to such sale, the
market value of all securities sold short exceeds 25% of the value of its assets
or the Fund's aggregate short sales of a particular class of securities exceeds
25% of the outstanding securities of that class. The Funds may also make short
sales "against the box" without respect to such limitations. In this type of
short sale, at the time of the sale, the Funds own or have the immediate and
unconditional right to acquire at no additional cost the identical security.
Restricted and Illiquid Securities
Each Fund may invest up to 15% of its net assets in securities the markets for
which are illiquid. Illiquid securities include most of the securities the
disposition of which is subject to substantial legal or contractual
restrictions. The sale of illiquid securities often requires more time and
results in higher brokerage charges or dealer discounts and other selling
expenses than does the sale of securities eligible for trading on national
securities exchanges or in the over-the-counter markets. Restricted securities
may sell at a price lower than similar securities that are not subject to
restrictions on resale. Securities freely salable among qualified institutional
investors under special rules adopted by the Securities and Exchange Commission
("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
Each Fund may invest in repurchase agreements, which are agreements pursuant to
which securities are acquired by a Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed date. These agreements may be made with respect to any of the portfolio
securities in which the Fund is authorized to invest. Repurchase agreements may
be characterized as loans secured by the underlying securities. The Funds may
enter into repurchase agreements with (i) member banks of the Federal Reserve
System having total assets in excess of $500 million and (ii) securities
dealers, provided that such banks or dealers meet certain creditworthiness
standards ("Qualified Institutions"). The Adviser will monitor the continued
creditworthiness of Qualified Institutions, subject to the supervision of the
Fund's Board of Directors. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon rate or
date of maturity of the purchased security. The collateral is marked-to-market
daily. Such agreements permit a Fund to keep all its assets earning interest
while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, a Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, a
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that a Fund may not be able to substantiate its interest
in the underlying securities. To minimize this risk, the securities underlying
the repurchase agreement will be held by the Fund's Custodian at all times in an
amount at least equal to the repurchase price, including accrued interest. If
the seller fails to repurchase the securities, a Fund may suffer a loss to the
extent proceeds from the sale of the underlying securities are less than the
repurchase price. The Funds 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 15% of its net assets would be so
invested.
Loans of Portfolio Securities
To increase income, each Fund may lend its portfolio securities to securities
broker-dealers or financial institutions if (1) the loan is collateralized in
accordance with applicable regulatory requirements including collateralization
continuously at no less than 100% by marking to market daily, (2) the loan is
subject to termination by the Fund at any time, (3) the Fund receives reasonable
interest or fee payments on the loan, (4) the Fund is able to exercise all
voting rights with respect to the loaned securities and (5) the loan will not
cause the value of all loaned securities to exceed 33% of the value of the
Fund's assets.
If the borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates and the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over the value of the collateral. As with any extension of credit, there are
risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities fail financially.
<PAGE>
Borrowing
The Funds may not borrow money except for (1) short-term credits from banks as
may be necessary for the clearance of portfolio transactions, and (2) borrowings
from banks for temporary or emergency purposes, including the meeting of
redemption requests, which would otherwise require the untimely disposition of
portfolio securities. Borrowing may not, in the aggregate, exceed 15% of assets
after giving effect to the borrowing and borrowing for purposes other than
meeting redemptions may not exceed 5% of the value of each Fund's assets after
giving effect to the borrowing. The Funds will not make additional investments
when borrowings exceed 5% of assets. The Funds may mortgage, pledge or
hypothecate assets to secure such borrowings.
Temporary Defensive Investments
For temporary defensive purposes each Fund may invest up to 100% of its assets
in nonconvertible fixed income securities or high quality money market
instruments.
Portfolio Turnover
The investment policies of the Funds may lead to frequent changes in
investments, particularly in periods of rapidly fluctuating interest or currency
exchange rates. Each Fund's portfolio turnover is expected to be less than 100%.
Portfolio turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities. The portfolio turnover rate
is computed by dividing the lesser of the amount of the securities purchased or
securities sold by the average monthly value of securities owned during the year
(excluding securities whose maturities at acquisition were one year or less).
Portfolio turnover may vary from year to year, as well as within a year. For the
fiscal years ended September 30, 1999 and 1998, the turnover rates were 39% and
35%, respectively, in the case of the Equity Income Fund, and 24% and 20%,
respectively, in the case of the Small Cap Fund.
INVESTMENT RESTRICTIONS
Each Fund's investment objective and the following investment restrictions are
fundamental and cannot be changed without the approval of a majority of the
Fund's shareholders (defined in the Investment Company Act of 1940, as amended
(the "Act") as the lesser of (a) more than 50% of the outstanding shares or (b)
67% or more of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented). All other investment policies or practices
are considered not to be fundamental and accordingly may be changed without
shareholder approval. If a percentage restriction on investment or use of assets
set forth below is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing market values or total assets of a
Fund will not be considered a deviation from policy. Under such restrictions,
each Fund may not:
(1) with respect to 75% of its total assets, invest more than 5% of the
value of its total assets taken at market value at time of purchase) in the
outstanding securities of any one issuer or own more than 10% of the outstanding
voting securities of any one issuer, in each case other than securities issued
or guaranteed by the U.S. Government or any agency or instrumentality thereof;
(2) invest 25% or more of the value of its total assets in any one
industry;
(3) issue senior securities (including borrowing money, including on
margin if margin securities are owned and through entering into reverse
repurchase agreements) in excess of 33-1/3% of its total (including the amount
of senior securities issued but excluding any liabilities and indebtedness not
constituting senior securities) except that a Fund may borrow up to an
additional 5% of its total assets for temporary purposes; or pledge its assets
other than to secure such issuances or in connection with hedging transactions,
short sales, when-issued and forward commitment transactions and similar
investment strategies. A Fund's obligations under the foregoing types of
transactions and investment strategies are not treated as senior securities;
(4) make loans of money or property to any person, except through loans
of portfolio securities, the purchase of fixed income securities or the
acquisition of securities subject to repurchase agreements;
(5) underwrite the securities of other issuers, except to the extent
that in connection with the disposition of portfolio securities or the sale of
its own shares the Fund may be deemed to be an underwriter;
(6) invest for the purpose of exercising control over management of any
company;
(7) purchase real estate or interests therein, including limited
partnerships that invest primarily in real estate equity interests, other than
mortgage-backed securities and similar instruments; or
(8) purchase or sell commodities or commodity contracts except for hedging
purposes or invest in any oil, gas or mineral interests.
DIRECTORS AND OFFICERS
Under Maryland law, the Funds' Board of Directors is responsible for
establishing the Funds' policies and for overseeing the management of the Funds.
The Board also elects the Funds' officers who conduct the daily business of the
Funds. The Directors and principal Officers of the Corporation, their ages and
their principal business occupations during the last 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 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C>
Principal Occupations During Last Five Years;
Name, Address, Age and Position(s) with the Affiliations with the Adviser or Administrator
Funds
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Mario J. Gabelli* Chairman of the Board and President of the Funds, Chief
President, Director and Chief Investment Executive Officer and Chief Investment Officer Gabelli Asset
Officer Management Inc., (Since 1999) and of Gabelli Funds, LLC.
Age: 57 Director or Trustee and officer of various other investment
companies advised by Gabelli Funds, LLC and its affiliates;
Chairman of the Board and Chief Executive Officer of Lynch
Corporation, a (diversified manufacturing and communications
services company); and Director of East/West Communications, Inc.
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Felix J. Christiana Formerly Senior Vice President of Dry Dock Savings Bank.
Director Director or Trustee of 10 other Gabelli funds.
Age: 73
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Anthony J. Colavita President and Attorney at Law in the law firm of Anthony J.
Director Colavita, P.C. since 1961; Director or Trustee of various
Age: 64 other mutual funds advised by Gabelli Funds, LLC and its
affiliates.
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Vincent D. Enright Former Senior Vice President and Chief Financial Officer of
Director KeySpan Energy Corporation; Director or Trustee of various
Age: 56 other mutual funds advised by Gabelli Funds, LLC and its
affiliates.
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
John D. Gabelli* Senior Vice President of Gabelli & Company, Inc.; Director of
Director Gabelli Advisers, Inc.; Director of one other mutual funds
Age: 54 advisedly Gabelli Funds, LLC and its affiliates.
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Robert J. Morrissey Partner in the law firm of Morrissey & Hawkins. Director of
Director The Gabelli Value Fund Inc. and The Gabelli Utility Trust
Age: 58
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Karl Otto Pohl+ Member of the Shareholder Committee of Sal Oppenheim Jr. &
Director Cie (private investment bank); Director of Gabelli Asset
Age: 69 Management Inc. (investment management), Zurich Allied
(insurance), and TrizecHahn Corp.; Former President of the
Deutsche Bundesbank and Chairman of its Central Bank Council from
1980 through 1991; and Director or Trustee of all other mutual
funds advised by Gabelli Funds, LLC and its affiliates.
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Anthony R. Pustorino Professor of Accounting at Pace University (1965 - present).
Director Formerly President, consultant, and shareholder, Pustorino
Age: 72 Puglisi & Co., certified public accountants (1961-1989). Director
or Trustee of 10 other mutual funds advised by Gabelli Funds,
LLC and its affiliates.
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Anthonie C. van Ekris Managing Director of Balmac International, Ltd.; Director of
Director Spinnaker Industries, Inc. and Stahel Mardmeyer A.Z.; and
Age: 63 Director or Trustee of 9 other mutual funds advised by Gabelli
Funds, LLC and its affiliates.
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
James E. McKee Vice President and General Counsel of GAMCO Investors, Inc.
Secretary since 1993; Secretary of all mutual funds managed by the
Age: 36 Adviser or its affiliates; U.S. SEC, New York, (Branch Chief,
1992-1993, Staff Attorney, 1989-1992).
- ---------------------------------------------- ---------------------------------------------------------------
- ---------------------------------------------- ---------------------------------------------------------------
Bruce N. Alpert Vice President and Chief Operating Officer of the Investment
Vice President and Treasurer Advisory Division of Gabelli Funds, Inc. (the "Adviser");
Age: 48 officer of each mutual fund managed by the Adviser or its
affiliates.
- ---------------------------------------------- ---------------------------------------------------------------
+ Mr. Pohl is a director of the parent company of the Adviser.
</TABLE>
Each Fund pays each Director who is not an employee of the Adviser or an
affiliated company an annual fee of $6,000 and $1,000 for each regular meeting
of the Board of Directors attended by the Director, and reimburses Directors for
certain travel and other out-of-pocket expenses incurred by them in connection
with attending such meetings. Each Fund pays each Director serving as a member
of the Audit, Proxy and Nominating Committees a fee of $250 per meeting when
assets under management by the Corporation are below $100 million and $500 per
meeting when assets under management by the Corporation are above $100 million.
For the fiscal year ended September 30, 1999 such fees paid totaled $23,968 and
$35,200 for the Equity Fund and the Small Cap Fund, respectively. Directors and
officers of the Funds who are employed by the Adviser or an affiliated company
receive no compensation or expense reimbursement from the Corporation. Messrs.
Mario J. Gabelli and John D. Gabelli are brothers.
The following table sets forth certain information regarding the
compensation of the Corporation's directors. Except as disclosed below, no
principal officer or person affiliated with the Funds received compensation from
either Fund for the fiscal year ended September 30, 1999 in excess of $60,000.
<PAGE>
COMPENSATION TABLE
Aggregate Compensation
from Registrant
(Fiscal Year)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
------------------------------------------ ---------------------------------- ---------------------
Total Compensation
From Registrant and
Name of Person, Equity Series Fund Complex Paid
Position Funds To Directors for
calendar year*
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Mario J. Gabelli
President, Director and
Chief Investment Officer $0 $ 0 (17)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Felix J. Christiana $10,000
Director $98,750 (11)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Anthony J. Colavita $10,000
Director $95,375 (17)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Vincent D. Enright $10,000
Director $25,500 (7)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
John D. Gabelli
Director 0 $0 (6)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Robert J. Morrissey $10,000
Director $27,000 (2)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Anthony R. Pustorino $10,000
Director $107,000 (11)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Anthonie C. van Ekris $10,000
Director $59,750 (11)
------------------------------------------ ---------------------------------- ---------------------
------------------------------------------ ---------------------------------- ---------------------
Karl Otto Pohl
Director 0 $0 (19)
------------------------------------------ ---------------------------------- ---------------------
- -------------
* Represents the total compensation paid to such persons during the calendar
year ended December 31, 1999 (and, with respect to the Funds, estimated to be
paid during a full calendar year). The parenthetical number represents the
number of investment companies (including each Fund) from which such person
receives compensation that are considered part of the same fund complex as the
Funds, because, among other things, they have a common investment adviser.
</TABLE>
As of the date of this Additional Statement, the Directors of the
Corporation as a group owned less than 1% of the outstanding shares of each
Fund.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
The following persons were known to own of record 5% or more of the
outstanding voting securities of the indicated Funds as of January 7, 2000:
NAME AND ADDRESS OF HOLDER OF RECORD PERCENTAGE OF FUND
SMALL CAP FUND
Charles Schwab & Co., Inc. 17.47%
101 Montgomery Street
San Francisco, CA 94104
EQUITY INCOME FUND
Charles Schwab & Co., Inc. 14.27%
101 Montgomery Street
San Francisco, CA 94104
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Investment Adviser
The Adviser is a New York limited liability company which also serves as Adviser
to 15 other open-end investment companies, and 4 closed-end investment companies
with aggregate assets in excess of $10.6 billion as of December 31, 1999. The
Adviser is a registered investment adviser under the Investment Advisers Act of
1940, as amended. Mr. Mario J. Gabelli may be deemed a "controlling person" of
the Adviser on the basis of his controlling interest of the parent company of
the Adviser. GAMCO Investors, Inc. ("GAMCO"), a wholly-owned subsidiary of the
Adviser, acts as investment adviser for individuals, pension trusts,
profit-sharing trusts and endowments, and had aggregate assets in excess of $9.4
billion under its management as of December 31, 1999. Gabelli Advisers, Inc.
acts as investment adviser to the Gabelli Westwood Funds with assets under
management of approximately $390 million as of December 31, 1999; Gabelli
Securities, Inc. acts as investment adviser to certain alternative investments
products, consisting primarily of risk arbitrage and merchant banking limited
partnerships and offshore companies, with assets under management of
approximately $230 million as of December 31, 1999; and Gabelli Fixed Income LLC
acts as investment adviser for the Treasurer's Funds and separate accounts
having assets under management of approximately $1.4 billion as of December 31,
1999.
Affiliates of the Adviser may, in the ordinary course of their business, acquire
for their own account or for the account of their advisory clients, significant
(and possibly controlling) positions in the securities of companies that may
also be suitable for investment by the Funds. The securities in which the Funds
might invest may thereby be limited to some extent. For instance, many companies
in the past several years have adopted so-called "poison pill" or other
defensive measures designed to discourage or prevent the completion of
non-negotiated offers for control of the company. Such defensive measures may
have the effect of limiting the shares of the company which might otherwise be
acquired by the Funds if the affiliates of the Adviser or their advisory
accounts have or acquire a significant position in the same securities. However,
the Adviser does not believe that the investment activities of its affiliates
will have a material adverse effect upon the Funds in seeking to achieve their
respective investment objectives. Securities purchased or sold pursuant to
contemporaneous orders entered on behalf of the investment company accounts of
the Adviser or the advisory accounts managed by its affiliates for their
unaffiliated clients are allocated pursuant to principles believed to be fair
and not disadvantageous to any such accounts. In addition, all such orders are
accorded priority of execution over orders entered on behalf of accounts in
which the Adviser or its affiliates have a substantial pecuniary interest. The
Adviser may on occasion give advice or take action with respect to other clients
that differ from the actions taken with respect to the Funds. The Funds may
invest in the securities of companies which are investment management clients of
GAMCO. In addition, portfolio companies or their officers or directors may be
minority shareholders of the Adviser or its affiliates.
Pursuant to each investment advisory contract ("Investment Advisory Contract")
which was initially approved by each Fund's sole shareholder on December 9, 1991
for the Equity Income Fund and October 2, 1991 for the Small Cap Fund, the
Adviser furnishes a continuous investment program for each Fund's portfolio,
makes the day-to-day investment decisions for each Fund, arranges the portfolio
transactions for each Fund and generally manages each Fund's investments in
accordance with the stated policies of each Fund, subject to the general
supervision of the Board of Directors of the Corporation. For the services it
provides, the Adviser is paid by each Fund an annual fee based on the value of
the Fund's average daily net assets of 1.00%.
Advisory Fees
For the Year Ended September 30
1999 1998 1997
Equity Income Fund $865,741 $823,207 $640,070
Small Cap Fund $3,024,908 $3,223,995 $2,269,141
Under each Investment Advisory Contract, the Adviser also (1) provides the Fund
with the services of persons competent to perform such supervisory,
administrative, and clerical functions as are necessary to provide efficient
administration of the Fund, including maintaining certain books and records and
overseeing the activities of the Fund's Custodian and Transfer Agent; (2)
oversees the performance of administrative and professional services provided to
the Fund by others, including the Fund's Custodian, Transfer Agent and Dividend
Disbursing Agent, as well as legal, accounting, auditing and other services
performed for the Fund; (3) provides the Fund, if requested, with adequate
office space and facilities: (4) prepares, but does not pay for, periodic
updating of the Fund's registration statement, Prospectus and Additional
Statement, including the printing of such documents for the purpose of filings
with the SEC; (5) supervises the calculation of the net asset value of shares of
the Fund; (6) prepares, but does not pay for, all filings under state "Blue Sky"
laws of such states or countries as are designated by the Distributor, which may
be required to register or qualify, or continue the registration or
qualification, of the Fund and/or its shares under such laws; and (7) prepares
notices and agendas for meetings of the Corporation's Board of Directors and
minutes of such meetings in all matters required by the Investment Company Act
of 1940 to be acted upon by the Board.
The Investment Advisory Contract provides that absent willful misfeasance, bad
faith, gross negligence or reckless disregard of its duty, the Adviser and its
employees, officers, directors and controlling persons are not liable to the
Funds or any of its investors for any act or omission by the Adviser or for any
error of judgment or for losses sustained by the Funds. However, the Contract
provides that each Fund is not waiving any rights it may have with respect to
any violation of law which cannot be waived. The Contract also provides
indemnification for the Adviser and each of these persons for any conduct for
which they are not liable to the Funds. The Investment Advisory Contract in no
way restricts the Adviser from acting as adviser to others. The Funds have
agreed by the terms of the Investment Advisory Contract that the word "Gabelli"
in its name is derived from the name of the Adviser which in turn is derived
from the name of Mario J. Gabelli; that such name is the property of the Adviser
for copyright and/or other purposes; and that therefore, such name may freely be
used by the Adviser for other investment companies, entities or products. The
Funds have further agreed that in the event that for any reason, the Adviser
ceases to be its investment adviser, the Funds 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 Investment Advisory Contract is terminable without penalty by the
Corporation on not more than sixty days' written notice when authorized by the
Directors of the Corporation, by the holders of a majority, as defined in the
Act, of the outstanding shares of the Corporation, or by the Adviser. The
Investment Advisory Contract will automatically terminate in the event of its
assignment, as defined in the Act and rules thereunder except to the extent
otherwise provided by order of the Commission or any rule under the Act and
except to the extent the Act no longer provides for automatic termination, in
which case the approval of a majority of the disinterested directors is required
for any "assignment." Each Investment Advisory Contract provides in effect, that
unless terminated it will remain in effect from year to year so long as
continuance of the Investment Advisory Contract is approved annually by the
Directors of the Corporation, or the shareholders of the Fund and in either
case, by a majority vote of the Directors who are not parties to the Investment
Advisory Contract or "interested persons" as defined in the Act of any such
person cast in person at a meeting called specifically for the purpose of voting
on the continuance of the Investment Advisory Contract.
The Sub-Administrator
The Adviser has entered into a Sub-Administration Contract with PFPC Inc. (
formerly known as First Data Investor Services Group, Inc.) (the
"Sub-Administrator"), a majority-owned subsidiary of PNC Bank Corp., 101 Federal
Street, Boston, MA 02110, pursuant to which the Sub-Administrator provides
certain administrative services necessary for the Fund operations but which do
not concern the investment advisory and portfolio management services provided
by the Adviser. For such services and the related expenses borne by the
Sub-Administrator , the Adviser pays the Sub-Administrator on the first business
day of each month a fee for the previous month at the following rates: .0275% on
aggregate net assets under administration of $0-$10 billion, .0125% on aggregate
net assets under administration of $10-$15 billion and .0100% on aggregate net
assets under administration over $15 billion, which together with the services
rendered, is subject to re-negotiation if net assets under administration exceed
$20 billion.
Custodian, Transfer Agent and Dividend Disbursing Agent State
Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston,
Massachusetts 02110 is the Custodian for each Fund's cash and securities. Boston
Financial Data Services, Inc. ("BFDS"), an affiliate of State Street, performs
the shareholder services on behalf of State Street and is located at The BFDS
Building, 66 Brooks Drive, Braintree, MA 02184 and act as each Fund's Transfer
Agent and Dividend Disbursing Agent. Neither BFDS or State Street assists in or
is responsible for investment decisions involving assets of the Funds.
Counsel
Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York
10036, serves as the Corporation's legal counsel.
Independent Auditors
Ernst & Young LLP has been appointed independent auditors for the Funds, and is
located at 787 Seventh Ave., New York, NY 10019.
Distributor
To implement the Fund's 12b-1 Plan, each Fund has entered into a Distribution
Agreement with Gabelli & Company, Inc. (the "Distributor"), a New York
corporation which is an indirect majority owned subsidiary of GAMI, having
principal offices located at One Corporate Center, Rye, New York 10580-1434. The
Distributor acts as agent of the Funds for the continuous offering of its shares
on a best efforts basis.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (a "Plan") pursuant to Rule 12b-1
under the Act on behalf of each Fund's Class AAA Shares, Class A Shares, Class B
Shares and the Class C Shares. Payments may be made by each Fund under each Plan
for the purpose of financing any activity primarily intended to result in the
sales of shares in the class to which such Plan relates as determined by the
Board of Directors. Such activities that typically include advertising;
compensation for sales and sales marketing activities of the Distributor and
other banks, broker-dealers and service providers; shareholder account
servicing; production and dissemination of prospectuses and sales and marketing
materials; and capital or other expenses of associated equipment, rent,
salaries, bonuses, interest and other overhead. To the extent any activity is
one which the Fund may finance without a Distribution Plan, the Fund may also
make payments to finance such activity outside of the Plan and not subject to
its limitations. Payments under the Plans are not solely dependent on
distribution expenses actually incurred by the Distributor.
Each Plan has been implemented by written agreements between each Fund and/or
the Distributor and each person (including the Distributor) to which payments
may be made. Administration of the Plans is regulated by Rule 12b-1 under the
Act which includes requirements that the Board of Directors receive and review,
at least quarterly, reports concerning the nature and qualification of expenses
for which payments are made, that the Board of Directors approves all agreements
implementing the Plans and that the Plans may be continued from year to year
only if the Board of Directors concludes, at least annually, that continuation
of the Plans is likely to benefit shareholders. To the extent any of these
payments are based on allocations by the Distributor, the Funds may be
considered to be participating in joint distribution activities with other funds
distributed by the Distributor. Any such allocations would be subject to
approval by the Funds' non-interested Directors and would be based on such
factors as the net assets of each Fund, the number of shareholder inquiries and
similar pertinent criteria. For the fiscal year ended September 30, 1999, the
Equity Income Fund and Small Cap Fund incurred distribution costs of $217,480
and $758,069, respectively, or 0.25% of average net assets under the Plans. Such
payments funded expenditures for the Equity Income Fund and Small Cap Fund,
respectively, of approximately: $1,800 and $6,100 for advertising, $36,600 and
$77,800 for printing, postage and stationary, $57,700 and $209,000 for overhead
support expenses and $50,000 and $119,200 for salaries of personnel of the
Distributor. The Plan compensates the Distributor regardless of its expense.
Long term investors may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Investment Advisory Contract the Adviser is authorized on behalf of
each Fund to employ brokers to effect the purchase or sale of portfolio
securities with the objective of obtaining prompt, efficient and reliable
execution and clearance of such transactions at the most favorable price
obtainable ("best execution") at reasonable expense. Transactions in securities
other than those for which a securities exchange is the principal market are
generally done through a 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. Options transactions will usually be effected through a broker and a
commission will be charged. Each 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 the underwriter's concession or
discount.
The Adviser currently serves as Adviser to a number of investment company
clients and may in the future act as adviser to others. Affiliates of the
Adviser act as investment adviser to numerous private accounts and adviser to
other investment companies. It is the practice of the Adviser and its affiliates
to cause purchase and sale transactions to be allocated among the Funds and
others whose assets they manage in such manner as it deems equitable. In making
such allocations among the Funds 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 Funds and
other client accounts.
The policy of each Fund regarding purchases and sales of securities and options
for its portfolio is that primary consideration will be given to obtaining the
most favorable prices and efficient execution of transactions. In seeking to
implement each Fund's policies, the Adviser effects transactions with those
brokers and dealers who the Adviser believes provide the most favorable prices
and are capable of providing efficient executions. If the Adviser believes such
price and execution are obtainable from more than one broker or dealer, it may
give consideration to placing portfolio transactions with those brokers and
dealers who also furnish research and other services to the Funds or the Adviser
of the type described in Section 28(e) of the Exchange Act of 1934. In doing so,
the Funds may also pay higher commission rates than the lowest available when
the Adviser believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. Such 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
investment; wire services; and appraisals or evaluations of portfolio
securities.
Research services furnished by broker or dealers through which the Funds effect
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 such other accounts. The purpose of this sharing
of research information is to avoid duplicative charges for research provided by
brokers and dealers. Neither the Funds nor the Adviser has any agreement or
legally binding understanding with any broker or dealer regarding any specific
amount of brokerage commissions which will be paid in recognition of such
services. However, in determining the amount of portfolio commissions directed
to such brokers or dealers, the Adviser does consider the level of services
provided. Based on such determinations, the Adviser did not allocate brokerage
commissions on portfolio transaction during the fiscal year ended September 30,
1999 to any broker-dealer for research services provided to the Adviser.
The Adviser may also place orders for the purchase or sale of portfolio
securities with Gabelli & Company, Inc. ("Gabelli"), a broker-dealer member of
the National Association of Securities Dealers, Inc. and an affiliate of the
Adviser, when it appears that, as an introducing broker or otherwise, Gabelli
can obtain a price and execution which is at least as favorable as that
obtainable by other qualified brokers. The Adviser may also consider sales of
shares of the Funds and any other registered investment companies managed by the
Adviser and its affiliates by brokers and dealers other than the Distributor as
a factor in its selection of brokers and dealers to execute portfolio
transactions for the Funds. The Funds paid the following brokerage commissions
for the year ended September 30, 1999 as indicated:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Year Ended
September 30, Commissions Paid
Total Brokerage Commissions 1997 $ 204,515
1998 $ 334,559
1999 $ 243,760
Commissions paid to Gabelli & Company 1997 $ 63,175
1998 $ 173,986
1999 $ 132,644
Commissions paid to Keeley Investment Corp. 1997 $ 1,825
1998 $ 2,155
1999 $ 0
% of Total Brokerage Commissions paid to Gabelli & Company 1999 63%
% of Total Brokerage Commissions paid to Keeley Investment Corp. 1999 0%
% of Aggregate Dollar Amount of Transactions 1999 69%
involving Commissions paid to Gabelli & Company
% of Aggregate Dollar Amount of Transactions 1999 0%
involving Commissions paid to Keeley Investment Corp.
</TABLE>
As required by Rule 17e-1 under the Act, the Board of Directors has adopted
"Procedures" which provide that the commissions paid to Gabelli on stock
exchange transactions may not exceed that which would have been charged by
another qualified broker or member firm able to effect the same or a comparable
transaction at an equally favorable price. Rule 17e-1 and the Procedures contain
requirements that the Board, including its independent Directors, conduct
periodic compliance reviews of such brokerage allocations and review such
schedule at least annually for its continuing compliance with the foregoing
standard. The Adviser and Gabelli are also required to furnish reports and
maintain records in connection with such reviews.
To obtain the best execution of portfolio trades on the New York Stock Exchange
("NYSE"), Gabelli controls and monitors the execution of such transactions on
the floor of the NYSE through independent "floor brokers" or through the
Designated Order Turnaround ("DOT") System of the NYSE. Such transactions are
then cleared, confirmed to the Fund for the account of Gabelli, and settled
directly with the Custodian of the Funds by a clearing house member firm which
remits the commission less its clearing charges to Gabelli. Gabelli may also
effect Fund portfolio transactions in the same manner and pursuant to the same
arrangements on other national securities exchanges which adopt direct access
rules similar to those of the NYSE.
REDEMPTION OF SHARES
Cancellation of purchase orders for Fund shares (as, for example, when checks
submitted to purchase shares are returned unpaid) cause a loss to be incurred
when the net asset value of the Fund shares on the date of cancellation is less
than on the original date of purchase. The investor is responsible for such
loss, and the Fund may reimburse shares from any account registered in that
shareholder's name, or by seeking other redress. If the Fund is unable to
recover any loss to itself, it is the position of the SEC that the Distributor
will be immediately obligated to make the Fund whole.
<PAGE>
Other Investors
No minimum initial investment is required for officers, directors or full-time
employees of the Fund, other investment companies managed by the Adviser, the
Adviser, the Administrator, the Distributor or their affiliates, including
members of the "immediate family" of such individuals and retirement plans and
trusts for their benefit. The term "immediate family" refers to spouses,
children and grandchildren (adopted or natural), parents, grandparents,
siblings, a spouse's siblings, sibling's spouse and a sibling's children.
If the Board of Directors should determine that it would be detrimental to the
remaining shareholders of a Fund to make payment wholly or partly in cash, the
Fund may pay the redemption price in whole or in part by a distribution in kind
of securities from the portfolio of the Fund, in lieu of cash, in conformity
with applicable rules of the SEC. Under such circumstances, shareholders of the
Fund receiving distributions in kind of securities will incur brokerage
commissions when they dispose of the securities.
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 maximum of $4,000 annually to either or both IRAs
provided that no more than $2,000 may be contributed to the IRA of either
spouse. Beginning January 1, 1998, investors satisfying statutory income level
requirements may make non-deductible contributions up to $2,000 annually to a
Roth IRA, distributions from which are not subject to tax if a statutory five
year holding period requirement is satisfied
DETERMINATION OF NET ASSET VALUE
Net asset value is calculated separately for each class of each Fund. The net
asset value of Class B Shares and Class C Shares of each Fund will generally be
lower than the net asset value of Class A Shares or Class AAA Shares as a result
of the larger distribution-related fee to which Class B Shares and Class C
Shares are subject. It is expected, however, that the net asset value per share
of each class will tend to converge immediately after the recording of
dividends, if any, which will differ by approximately the amount of the
distribution and/or service fee expense accrual differential among the classes.
For purposes of determining each Fund's net asset value per share, readily
marketable portfolio securities listed on a market subject to governmental
regulation on which trades are reported contemporaneously are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the principal market for such security 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 average of the closing bid and asked prices on
the principal market for such security on such day. If no asked prices are
quoted on such day, then the security is valued at the closing bid price on the
principal market for such security on such day. If no bid or asked prices are
quoted on such day, then the security is valued by such method as the Board of
Trustees shall determine in good faith to reflect its fair market value.
All other readily marketable securities are valued at the latest average of the
bid and asked price obtained from a dealer maintaining an active market in such
security.
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 latest bid price obtainable from a dealer which maintains an
active market in the security until the maturity of the instrument is 60 days or
less when it will be valued as if purchased at the valuation established as of
the 61st day of its maturity. Listed debt securities which are actively traded
on a securities exchange may also be valued at the last sale price in lieu of
the quoted bid price of a dealer. All other investment assets, including
restricted and not readily marketable securities, are valued under procedures
established by and under the general supervision and responsibility of the
Fund's Board of Trustees designed to reflect in good faith the fair value of
such securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
General
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. If it so qualifies, the Fund
will not be subject to Federal income tax on its net investment income and net
short-term capital gain, if any, realized during any fiscal year to the extent
that it distributes such income and capital gains to its shareholders.
Each Fund will determine either to distribute, or to retain for reinvestment,
all or part of any net long-term capital gain. If any such gains are retained,
the Fund will be subject to a tax of 35% of such amount. In that event, the Fund
expects to designate the retained amount as undistributed capital gain in a
notice to its shareholders, each of whom (1) will be required to include in
income for tax purposes as long-term capital gain its share of undistributed
amount, (2) will be entitled to credit its proportionate share of the tax paid
by the Fund against its Federal income tax liability and to claim refunds to the
extent the credit exceeds such liability, and (3) will increase its basis in its
shares of the Fund by an amount equal to 65% of the amount of undistributed
capital gain included in such shareholder's gross income.
A distribution will be treated as paid during any calendar year if it is
declared by the Fund in October, November or December of the year, payable to
shareholders of record on a date during such month and 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 received on December 31 of the year the
distributions are declared, rather than when the distributions are received.
Under the Code, amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a 4% excise tax. To avoid
the tax, the Fund must distribute during each calendar year, an amount equal to
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,
(unless an election is made by a fund with a November or December year-end to
use the fund's fiscal year) and (3) all ordinary income and net capital gains
for previous years that were not previously distributed.
Gains or losses on the sales of securities by the Funds 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.
Certain options, futures contracts and options on futures contracts are "section
1256 contracts". Any gains or losses on section 1256 contracts are generally
considered 60% long-term and 40% short-term capital gains or losses ("60/40").
Also, section 1256 contracts held by the Funds at the end of each taxable year
(and, generally, for purposes of the 4% excise tax), are "marked-to-market" with
the result that unrealized gains or losses are treated as though they were
realized and the resulting gain or loss is treated as 60/40 gain or loss.
Hedging transactions undertaken by the Funds may result in "straddles" for U.S.
Federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Fund. In addition, losses realized by the
Funds on positions that are part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Further, the
Funds may be required to capitalize, rather than deduct currently, any interest
expense on indebtedness incurred or continued to purchase or carry any positions
that are part of a straddle. The Funds may make one or more of the elections
available under the Code which are applicable to straddles. If the Funds make
any of the elections, the amount, character and timing of the recognition of
gains or losses from the affected straddle positions will be determined under
rules that vary according to the election(s) made. The rules applicable under
certain of the elections accelerate the recognition of gains or losses from the
affected straddle positions. Because application of the straddle rules may
affect the character and timing of gains, losses or deductions from the affected
straddle positions, the amount which must be distributed to shareholders, and
which will be taxed to shareholders as ordinary income or long-term capital
gain, may be increased or decreased substantially as compared to a fund that did
not engage in such hedging transactions.
The diversification requirements applicable to each Fund's assets may limit the
extent to which a Fund will be able to engage in transactions in options,
futures contracts and options on futures contracts.
Distributions
Distributions of investment company taxable income (which includes taxable
interest income and the excess of net short-term capital gains over long-term
capital losses) are taxable to a U.S. shareholder as ordinary income, whether
paid in cash or in additional Fund shares. Dividends paid by a Fund will qualify
for the 70% deduction 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 gain (which consist of the excess of long-term
capital gains over net short-term capital losses), if any, are taxable as
long-term capital gain, whether paid in cash or in 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. If the
net asset value of shares is reduced below a shareholder's cost as a result of a
distribution by the Fund, such distribution may be taxable even though it
represents a return of invested capital. The price of shares purchased at any
time may reflect the amount of a forthcoming distribution. Those purchasing
shares just prior to a distribution will receive a distribution which will be
taxable to them, even though the distribution represents in part a return of
invested capital.
Sales of Shares
Upon a sale or exchange of shares, a shareholder will realize a taxable gain or
loss depending upon the basis in the shares. Such gain or loss will be
long-term, or short-term, generally depending upon the shareholder's holding
period for the shares. Non-corporate shareholders are subject to tax at a
maximum rate of 20% on capital gains resulting from the disposition of shares
held for more than 12 months (10% if the taxpayer is, and would be after
accounting for such gains, subject to the 15% tax bracket for ordinary income).
Any loss realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced within a 61-day period beginning 30 days before
and ending 30 days after the date 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 net capital gain
received by the shareholder with respect to such shares.
If a shareholder (i) incurs a sales load charge in acquiring shares in a Fund
and, by reason of incurring such charge or acquiring the shares, acquires the
right to acquire shares of one or more regulated investment companies without
the payment of a load charge or with the payment of a reduced load charge (a
"reinvestment right") and (ii) disposes of the Fund shares before the 91st day
after the date on which the shares were acquired and subsequently acquires
shares in the Fund or in another regulated investment company whereby the
otherwise applicable load charge is reduced by reason of the reinvestment right,
then the original load charge will not be taken into account for the purposes of
determining the shareholder's gain or loss on the disposition (to the extent the
original load charge does not exceed the reduction in the subsequent load
charge). To the extent such charge is not taken into account in determining the
amount of gain or loss, the charge will be treated as incurred in connection
with the subsequently acquired shares and will have a corresponding effect on
the shareholder's basis in such shares.
Backup Withholding
The Corporation may be required to withhold Federal income tax at a rate of 31%
on all taxable distributions payable to shareholders who fail to provide their
correct taxpayer identification number or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's Federal income tax liability.
Foreign Withholding Taxes
Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such 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 Funds' assets to be invested in various
countries is not known. Because each Fund will not have more than 50% of its
total assets invested in securities of foreign governments or corporations, the
Funds will not be entitled to "pass-through" to shareholders the amount of
foreign taxes paid by the Funds.
Corporate Matters
The Corporation reserves the right to create and issue a number of series
shares, in which case the shares of each series would participate equally in the
earnings, dividends, and assets of the particular series and would vote
separately to approve management agreements or changes in investment policies,
but shares of all series would vote together in the election or selection of
Directors, principal underwriters and auditors and on any proposed material
amendment to the Corporation's Certificate of Incorporation.
Upon liquidation of the Corporation or any series, shareholders of the affected
series would be entitled to share pro rata in the net assets of their respective
series available for distribution to such shareholders.
INVESTMENT PERFORMANCE INFORMATION
Performance Information
Each Fund may furnish data about its investment performance in advertisements,
sales literature and reports to shareholders. "Total return" represents the
annual percentage change in value of $1,000 invested at the maximum public
offering price for the one, five and ten year periods (if applicable) and the
life of the Fund through the most recent calendar quarter, assuming reinvestment
of all dividends and distributions. Quotations of "yield" will be based on the
investment income per share earned during a particular 30 day period, less
expenses accrued during the period, with the remainder being divided by the
maximum offering price per share on the last day of the period. Each Fund may
also furnish total return and yield calculations for other periods based on
investments at various sales charge levels or net asset values.
The Funds may furnish data about their investment performance in advertisements,
sales literature and reports to shareholders. "Total return" represents the
annual percentage change in value of $1,000 invested at the maximum public
offering price for the one year period and the life of the Fund through the most
recent calendar quarter, assuming reinvestment of all dividends and
distributions. The Funds may also furnish total return calculations for these
and other periods, based on investments at various sales charge levels or net
asset value.
Quotations of yield will be based on the investment income per share earned
during a particular 30 day period, less expenses accrued during the period ("net
investment income") and will be computed by dividing net investment income by
the maximum offering price per share on the last day of the period, according to
the following formula:
YIELD = 2[(a-b + 1) 6 - 1]
cd
where A = dividends and interest earned during the period, B = expenses accrued
for the period (net of any reimbursements), C = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and D = the maximum offering price per share on the last day of the period.
Quotations of total return will reflect only the performance of a hypothetical
investment in a Fund during the particular time period shown. A Fund's total
return and current yield may vary from time to time depending on market
conditions, the compositions of the Funds' portfolio and operating expenses.
These factors and possible differences in the methods used in calculating yield
should be considered when comparing a Fund's current yield to yields published
for other investment companies and other investment vehicles. Total return and
yield should also be considered relative to change in the value of the Funds'
shares and the risks associated with each Fund's investment objectives and
policies. At any time in the future, total returns and yield may be higher or
lower than past total returns and yields and there can be no assurance that any
historical return or yield will continue.
From time to time evaluations of performance are made by independent sources
that may be used in advertisements concerning the Funds. These sources include:
Lipper Analytical Services, Weisenberger Investment Company Service, Barron's,
Business Week, Financial World, Forbes, Fortune, Money, Personal Investor,
Sylvia Porter's Personal Finance, Bank Rate Monitor, Morningstar and The Wall
Street Journal.
In connection with communicating its yield or total return to current or
prospective shareholders, the Fund may also compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Quotations of the Funds' total return will represent the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of 1, 5, and 10 years (up to the life of the Fund), and are calculated pursuant
to the following formula:
P(1+T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period). Total
return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed by the Adviser) on an annual basis, and will assume that all
dividends and distributions are reinvested and will deduct the maximum sales
charge, if any is imposed.
Total Return
for the period ended September 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Small Equity Income
Cap Fund* Fund*
----------------- -----------------
Cumulative Total Return (since commencement of operations of the 250.07% 202.91%
Fund)
Average Annual Total Return (since commencement of operations of the 17.08% 15.37%
Fund)
Average Annual Total Return (5 years) 14.23% 18.12%
Average Annual Total Return (12 months) 19.24% 19.82%
* Commencement of operations for the Small Cap Fund and the Equity Income Fund took place on October 22, 1991 and
January 2, 1992, respectively.
</TABLE>
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Description of Shares, Voting Rights and Liabilities
Each Fund is a series of Gabelli Equity Series Funds, Inc., which was
incorporated in Maryland on July 25, 1991. The authorized capital stock consists
of one billion shares of stock having a par value of one tenth of one cent
($.001) per share. The Corporation is not required, and does not intend, to hold
regular annual shareholder meetings, but may hold special meetings for
consideration of proposals requiring shareholder approval, such as changing
fundamental policies or upon the written request of 10% of the Fund's shares to
replace its Directors. The Corporation's Board of Directors is authorized to
divide the unissued shares into separate series of stock, each series
representing a separate, additional portfolio. The Board currently has
authorized the division of the unissued shares into two series each having a
separate portfolio. Shares of all series will have identical voting rights,
except where by law, certain matters must be approved by a majority of the
shares of the affected series. Each share of any series of shares when issued
has equal dividend, liquidation (see "Redemption of Shares") and voting rights
within the series for which it was issued and each fractional share has those
rights in proportion to the percentage that the fractional share represents of a
whole share. Shares will be voted in the aggregate.
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 nonassessable. Shares will be redeemed at net asset
value, at the option of the shareholder.
The Fund sends semi-annual and annual reports to all of its shareholders which
include a list of portfolio securities. Unless it is clear that a shareholder is
a nominee for the account of an unrelated person or a shareholder otherwise
specifically requests in writing, the Fund may send a single copy of
semi-annual, annual and other reports to shareholders to all accounts at the
same address and all accounts of any person at that address.
The shares of the Fund have noncumulative voting rights which means that the
holders of more than 50% of the shares can elect 100% of the directors if the
holders choose to do so, and, in that event, the holders of the remaining shares
will not be able to elect any person or persons to the Board of Directors.
Unless specifically requested by an investor who is a shareholder of record, the
Fund does not issue certificates evidencing Fund shares.
Shareholder Approval
Other than elections of Directors, which is by plurality, any matter for which
shareholder approval is required by the Act of requires the affirmative vote of
at least a "majority" (as defined by the Act) of the outstanding voting
securities of a Fund or the Corporation at a meeting called for the purpose of
considering such approval. A majority of a Fund's outstanding securities is the
lesser of (1) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are present in person or by proxy or (2) more than 50%
of the outstanding shares.
Information for Shareholders
All shareholder inquiries regarding administrative procedures including the
purchase and redemption of shares should be directed to the Distributor, Gabelli
& Company, Inc., One Corporate Center, Rye, New York 10580-1434. For assistance,
call 1-800-GABELLI (1-800-422-3554) or through the internet at
http://www.gabelli.com.
FINANCIAL STATEMENTS
Each Fund's Financial Statements for the year ended September 30, 1999,
including the Report of Ernst & Young LLP, independent auditors, is incorporated
herein by reference to each Fund's Annual Report. Each Fund's Annual Report is
available upon request and without charge. Ernst & Young LLP provides audit
services, tax return preparation and assistance and consultation in connection
with certain SEC filings.
<PAGE>
APPENDIX A
Description of Moody's Investors Service, Inc.'s ("Moody's") Corporate Bond
Ratings
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa: Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which made 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 the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa: Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest. Ca: Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. C: Bonds which are rated C
are the lowest rated class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Description of Standard & Poor's Corporation's ("S&P's") Corporate Debt Ratings
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong. AA: Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree. A: Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. BBB: Debt rated BBB is regarded as having adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher rated categories. BB, B, CCC,
CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. CI: The rating CI
is reserved for income bonds on which no interest is being paid. D: Debt rated D
is in payment default. The D rating category is used when interest payments or
principal payments are not made on the date due even if the applicable grace
period has not expired, unless S&P's believes that such payments will be made
during such grace period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
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.
<PAGE>
Description of Moody's Preferred Stock Ratings
aaa: An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks. aa: An issue which
is rated aa is considered a high-grade preferred stock. This rating indicates
that there is reasonable assurance that earnings and asset protection will
remain relatively well maintained in the foreseeable future. a: An issue which
is rated a is considered to be an upper medium grade preferred stock. While
risks are judged to be somewhat greater than in the aaa and aa classifications,
earnings and asset protection are, nevertheless expected to be maintained at
adequate levels. baa: An issue which is rated baa is considered to be medium
grade, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time. ba: An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class. b: An
issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small. caa: An issue which is rated
caa is likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payment. ca: An issue which is
rated ca is speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payment. c: This is the lowest
rated class of preferred or preference stock. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Description of S&P's Preferred Stock Ratings
AAA: This is the highest rating that may be assigned by S&P's to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations. AA: A preferred stock issue rated AA also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues rated
AAA. A: An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effect of changes in circumstances and economic conditions. BBB: An issue rated
BBB is regarded as backed by an adequate capacity to pay the preferred stock
obligations. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make payments for a preferred stock in this category than
for issues in the A category. BB, B, CCC: Preferred stock rated BB, B, and CCC
are regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such
issues will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CC: The rating CC is reserved for a preferred stock in arrears on dividends or
sinking fund payments but that is currently paying. C: A preferred stock rated C
is a non-paying issue. D: A preferred stock rated D is a non-paying issue with
the issuer in default on debt instruments.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
PART C: OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Incorporation of the Registrant are incorporated
by reference to Post-Effective Amendment No. 7 to the
Registration Statement as filed with the SEC via EDGAR on
January 28, 1998.
Articles of Amendment is filed herewith.
Articles Supplementary with respect to The Equity Income Fund
is filed herewith.
Articles Supplementary with respect to The Small Cap Growth
Fund is filed herewith.
(b) Registrant's By-laws are incorporated by reference to
Post-Effective Amendment No. 7 to the Registration Statement
as filed with the SEC via EDGAR on January 28, 1998.
(c) Not applicable.
(d) Investment Advisory Agreement with Gabelli Funds, Inc. for
The Gabelli Equity Series Funds, Inc. is incorporated by
reference to Post-Effective Amendment No. 7 to the
Registration Statement as filed with the SEC via EDGAR on
January 28, 1998.
(e) Distribution Agreement is incorporated by reference to
Post-Effective Amendment No. 7 to the Registration Statement
as filed with the SEC via EDGAR on January 28, 1998.
Amended and Restated Distribution Agreement relating to The
Gabelli Equity Income Fund is filed herewith.
Amended and Restated Distribution Agreement relating to The
Gabelli Small Cap Growth Fund is filed herewith.
(f) Not applicable.
(g) Form of Custody Agreement is incorporated by reference to
Post-Effective Amendment No. 7 to the Registration Statement
as filed with the SEC on January 28, 1998.
(h) Form of Transfer Agency Agreement is incorporated by reference
to Post-Effective Amendment No. 7 to the Registration
Statement as filed with the SEC on January 28, 1998.
(i) Opinion of Counsel is filed herewith.
(j) Consent of Independent Accountants is filed herewith.
Powers of Attorney of the Directors are incorporated by
reference to Post-Effective Amendment No. 1 to the
Registration Statement as filed with the SEC on August 31,
1992.
(k) Not applicable.
(l) Agreement with initial shareholder is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement as filed with the SEC on September 20, 1991.
Purchase Agreement with respect to Class A Shares of The
Equity Income Fund is filed herewith.
Purchase Agreement with respect to Class B Shares of The
Equity Income Fund is filed herewith.
Purchase Agreement with respect to Class C Shares of The
Equity Income Fund is filed herewith.
Purchase Agreement with respect to Class A Shares of The Small
Cap Growth Fund is filed herewith.
Purchase Agreement with respect to Class B Shares of The Small
Cap Growth Fund is filed herewith.
Purchase Agreement with respect to Class C Shares of The Small
Cap Growth Fund is filed herewith.
(m) Distribution Plan is incorporated by reference to
Post-Effective Amendment No. 7 to the Registration Statement
as filed with the SEC via EDGAR on January 28, 1998.
Amended and Restated Plan of Distribution pursuant to Rule
12b-1 relating to Class AAA Series Shares of The Gabelli
Equity Income Fund is filed herewith.
Amended and Restated Plan of Distribution pursuant to Rule
12b-1 relating to Class AAA Series Shares of The Gabelli Small
Cap Growth Fund is filed herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
A Series Shares of The Gabelli Equity Income Fund is filed
herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
B Series Shares of The Gabelli Equity Income Fund is filed
herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
C Series Shares of The Gabelli Equity Income Fund is filed
herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
A Series Shares of The Gabelli Small Cap Growth Fund is filed
herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
B Series Shares of The Gabelli Small Cap Growth Fund is filed
herewith.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
C Series Shares of The Gabelli Small Cap Growth Fund is filed
herewith.
(n) Rule 18f-3 Multi-Class Plan relating to The Gabelli Equity
Income Fund is filed herewith.
Rule 18f-3 Multi-Class Plan relating to The Gabelli Small Cap
Growth Fund is filed herewith.
(o) Not applicable.
(p) Code of Ethics*
Item 24. Persons Controlled by or Under Common Control with Registrant
None
Item 25. Indemnification
The basic effect of the respective indemnification provisions
of the Registrant's By-Laws, the Investment Advisory Agreement
with Gabelli Funds, LLC for the Gabelli Small Cap Growth Fund,
the Investment Advisory Agreement with Gabelli Funds, LLC for
The Gabelli Equity Income Fund and Section 2-418 of the
Maryland General Corporation Law is to indemnify each officer
and director of both the Registrant and Gabelli Funds, LLC to
the full extent permitted under the General Laws of the State
of Maryland, except that such indemnity shall not protect any
such person against any liability to which such person would
otherwise be subject by reason or willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. Insofar as
indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant and the investment
advisor and distributor pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the Registrant in
and the principal underwriter in connection with the
successful defense of any action, suit or process proceeding)
is asserted against the Registrant by such director, officer
or controlling person or the distributor in connection with
the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
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
(a) Gabelli & Company, Inc. ("Gabelli & Company") currently acts
as distributor for The Gabelli ABC Fund, The Gabelli Asset
Fund, The Gabelli Blue Chip Value Fund, The Gabelli Capital
Asset Fund, The Gabelli Convertible Securities Fund, Inc.,
The Gabelli Equity Income Fund, The Gabelli Equity Trust
Inc., The Gabelli Global Convertible Securities Fund, The
Gabelli Global Growth Fund, The Gabelli Global Multimedia
Trust Inc., The Gabelli Global Telecommunications Fund,
Gabelli Gold Fund, Inc, The Gabelli Growth Fund, Gabelli
International Growth Fund, Inc., The Gabelli Global
Opportunity Fund, The Gabelli Mathers Fund, The Gabelli
Small Cap Growth Fund, The Gabelli U.S. Treasury Money
Market Fund, The Gabelli Utilities Fund, The Gabelli Utility
Trust, The Gabelli Value Fund, Inc. and the Gabelli Westwood
Funds.
(b) The information required by this Item 27 with respect to each
director, officer or partner of Gabelli & Company is
incorporated by reference to Schedule A of Form BD filed by
Gabelli & Company pursuant to the Securities Exchange Act of
1934, as amended (SEC File No. 8-21373).
(c) Not applicable.
Item 28. Location of Accounts and Records
All such accounts, books and other documents required by
Section 31(a) of the 1940 Act and Rules 31a-1 through 31a-3
thereunder are maintained at the offices of Gabelli Funds,
LLC, One Corporate Center, Rye, New York 10580-1434, PFPC Inc.
(formerly known as First Data Investor Services Group, Inc.),
101 Federal Street, Boston, Massachusetts 02110, State Street
Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts, 02110 and Boston Financial Data Services, Inc.,
Two Heritage Drive, North Quincy, Massachusetts, 02171.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<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, GABELLI EQUITY
SERIES FUNDS, INC., certifies that it meets all the requirements for
effectiveness of this Post Effective Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933, as amended, and has
duly caused this Post Effective Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Rye and State of New York on the 28th day of January, 2000.
GABELLI EQUITY SERIES FUNDS, INC.
By: /s/Bruce N. Alpert
Bruce N. Alpert
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 10 to its Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/ Mario J. Gabelli* President and Director January 28, 2000
- -----------------------------
Mario J. Gabelli
* Vice President and Treasurer January 28, 2000
- -----------------------------
Bruce N. Alpert
/s/ James E. McKee* Secretary January 28, 2000
- -----------------------------
James E. McKee
/s/ John D. Gabelli* Director January 28, 2000
- ---------------------------
John D. Gabelli
/s/ Felix J. Christiana* Director January 28, 2000
- -----------------------------
Felix J Christiana
/s/ Anthony J. Colavita* Director January 28, 2000
- -----------------------------
Anthony J. Colavita
/s/ Vincent D. Enright* Director January 28, 2000
- -----------------------------
Vincent D. Enright
/s/ Robert J. Morrissey* Director January 28, 2000
- -----------------------------
Robert J. Morrissey
/s/ Karl Otto Pohl* Director January 28, 2000
- -----------------------------
Karl Otto Pohl
/s/ Anthony R. Pustorino* Director January 28, 2000
- -----------------------------
Anthony R. Pustorino
/s/ Anthonie C. van Ekris* Director January 28, 2000
- -----------------------------
Anthonie C. van Ekris
*By:/s/Bruce N. Alpert
Bruce N. Alpert
Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT
<TABLE>
<CAPTION>
<S> <C>
(a) Articles of Amendment.
Articles Supplementary with respect to The Equity Income Fund.
Articles Supplementary with respect to The Small Cap Growth Fund.
(e) Amended and Restated Distribution Agreement relating to The Gabelli Equity Income Fund.
Amended and Restated Distribution Agreement relating to The Gabelli Small Cap Growth Fund.
(i) Opinion of Counsel.
(j) Consent of Independent Accountants.
(l) Purchase Agreement with respect to Class A Shares of The Equity Income Fund.
Purchase Agreement with respect to Class B Shares of The
Equity Income Fund.
Purchase Agreement with respect to Class C Shares of The
Equity Income Fund.
Purchase Agreement with respect to Class A Shares of The Small
Cap Growth Fund.
Purchase Agreement with respect to Class B Shares of The Small
Cap Growth Fund.
Purchase Agreement with respect to Class C Shares of The Small
Cap Growth Fund.
(m) Amended and Restated Plan of Distribution relating to Class AAA
Series Shares of The Gabelli Equity Income Fund.
Amended and Restated Plan of Distribution relatng to Class AAA
Series Shares of The Gabelli Small Cap Growth Fund.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
A Series Shares of The Gabelli Equity Income Fund.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
B Series Shares of The Gabelli Equity Income Fund.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
C Series Shares of The Gabelli Equity Income Fund.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
A Series Shares of The Gabelli Small Cap Growth Fund.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
B Series Shares of The Gabelli Small Cap Growth Fund.
Plan of Distribution pursuant to Rule 12b-1 relating to Class
C Series Shares of The Gabelli Small Cap Growth Fund.
(n) Rule 18f-3 Multi-Class Plan relating to The Gabelli Equity Income Fund.
Rule 18f-3 Multi-Class Plan relating to The Gabelli Small Cap Growth Fund.
</TABLE>
ARTICLES OF AMENDMENT
OF
GABELLI EQUITY SERIES FUNDS, INC.
Gabelli Equity Series Funds, Inc., a Maryland corporation, having its
principal office at One Corporate Center, Rye, New York 10580 (the
"Corporation"), certifies as follows:
FIRST: The Articles of Incorporation of the Corporation (the "Articles
of Incorporation") are hereby amended by deleting Article V thereof and
inserting in its place the following:
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of stock of all classes which
the Corporation shall have authority to issue is One Billion (1,000,000,000) all
of which stock shall have a par value of one-tenth of one cent ($.001) per
share. The aggregate par value of all authorized shares of stock of the
Corporation is One Million Dollars ($1,000,000).
<PAGE>
(2) (a) The Board of Directors of the Corporation is
authorized to classify or to reclassify (and to designate one or more classes of
capital stock and one or more sub-series of a class or classes of capital stock)
from time to time, any unissued shares of stock of the Corporation, whether now
or hereafter authorized, by setting, changing or eliminating the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, and qualifications or terms and conditions of or rights to require
redemption of the stock and, pursuant to such classification or
reclassification, to increase or decrease the number of authorized shares of any
class or sub-series thereof, but the number of shares of any class or sub-series
shall not be reduced by the Board of Directors below the number of shares
thereof then outstanding. Without limiting the generality of the foregoing, the
Board of Directors may designate from time to time any unissued shares of stock
of the Corporation as a class representing interests in the same portfolio of
assets or one or more sub-series of a class which shall represent interests in
the same portfolio of assets attributable to such class. The Board of Directors
may also establish in Articles Supplementary creating a class and/or a
sub-series of a class different conversion, redemption and other rights for a
class or among or with respect to different sub-series of a class (including
sub-series of the classes classified, designated and authorized herein) and may
establish such other powers, preferences, restrictions, limitations,
qualifications and terms and conditions for any class or sub-series of a class
(including sub-series of the classes classified, designated and authorized
herein) as shall not be inconsistent with the requirements of the 1940 Act or
any rule thereunder respecting multiple classes or sub-series of stock of a
corporation registered as an open-end investment management company under the
1940 Act or any order of the Securities and Exchange Commission applicable to
the Corporation.
(b) Without limiting the generality of the foregoing, the
dividends and distributions of investment income and capital gains with respect
to the stock of the Corporation, and with respect to each class or sub-series
that hereafter may be created, shall be in such amount as may be declared from
time to time by the Board of Directors, and such dividends and distributions may
vary from class to class and among sub-series of a class to such extent and for
such purposes as the Board of Directors may deem appropriate, including, but not
limited to, the purpose of complying with requirements of regulatory or
legislative authorities.
(c) Without limiting the generality of the foregoing, the
Board of Directors may designate, from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter authorized, as a class or
classes of preferred or special stock that is excluded from the definition of
"senior security" set forth in section 18(g) of the 1940 Act (or in any
successor statute) or as one or more sub-series of any such class.
<PAGE>
(3) Until such time as the Board of Directors shall provide
otherwise pursuant to the authority granted in section (2) of this Article V,
500,000,000 shares of the authorized shares of the Corporation are designated
and classified as The Gabelli Small Cap Growth Fund Stock ("Small Cap Stock")
and 500,000,000 shares of the authorized shares of the Corporation are
designated and classified as The Gabelli Equity Income Fund Stock ("Equity
Income Stock"). Until such time as the Board of Directors may provide otherwise
in Articles Supplementary creating a new class or sub-series of capital stock of
the Corporation (including new sub-series of the Small Cap Stock and the Equity
Income Stock) all classes of the Corporation's capital stock and any sub-series
thereof and the respective holders thereof shall have the same preferences,
conversion and other rights, voting powers, restrictions, limitations as to
distributions, qualifications and terms and conditions of and rights to require
redemption and shall be subject to the following provisions.
(a) As more fully set forth hereinafter, the assets and
liabilities and the income and expenses of each class (and, if sub-series of a
class have been issued, each such sub-series) of the Corporation's stock shall
be determined separately and, accordingly, the net asset value, the
distributions payable to holders, and the amounts distributable in the event of
dissolution of the Corporation to holders, of shares of the Corporation's stock
may vary from class to class and sub-series to sub-series.
(b) All consideration received by the Corporation for the
issue or sale of shares of a class of the Corporation's stock, together with all
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be
(collectively referred to as "assets belonging to" that class), shall
irrevocably belong to that class for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account of the
Corporation. For purposes of the preceding sentence, the assets of any
corporation or business trust merged with and into the Corporation pursuant to a
merger in which the Corporation is the surviving corporation shall be deemed to
be assets belonging to that class of the Corporation's stock the shares of that
class or sub-series thereof are issued by the Corporation pursuant to the
merger. Except to the extent shares of a sub-series of a class are to be charged
with certain liabilities and expenses in a manner different from other
sub-series of that class, each share of a class shall have equal rights with
each other share of that class with respect to the assets of the Corporation
belonging to that class.
<PAGE>
(c) For purposes of determining the net asset value per share
of stock of a class or sub-series, the assets belonging to each class of the
Corporation's stock shall be charged with the liabilities of the Corporation
with respect to that class (and in the case of a sub-series of that class,
liabilities allocable to such sub-series) and with that class' share of the
liabilities of the Corporation not attributable to any particular class, in the
latter case in the proportion that the net asset value of that class (determined
without regard to such liabilities) bears to the net asset value of all classes
of the Corporation's stock (determined without regard to such liabilities) as
determined by or in accordance with procedures adopted by the Board of Directors
from time to time. In cases where a class of capital stock has more than one
sub-series, for purposes of determining the net asset value per share of each
sub-series, each sub-series of the class shall be further charged with
liabilities that are allocable to such sub-series (including, without
limitation, liabilities relating to distribution charges or service charges
payable pursuant to a plan of distribution or multi-class plan adopted by or
applicable to such sub-series in accordance with the 1940 Act or any rule or
order of the Securities and Exchange Commission thereunder) as determined by and
in accordance with procedures adopted by the Board of Directors from time to
time. The determination of the Board of Directors shall be conclusive as to the
allocation of liabilities, including accrued expenses and reserves, and assets
to a particular class or classes or sub-series of any such class. The
liabilities of any corporation or business trust merged with and into the
Corporation pursuant to a merger in which the Corporation is the surviving
corporation shall be charged to that class (and, if applicable, sub-series) of
the Corporation's stock the shares of which are issued by the Corporation
pursuant to the merger.
(d) Each holder of stock of the Corporation, upon request to
the Corporation (accompanied by surrender of the appropriate stock certificate
or certificates in proper form for transfer, if any certificates have been
issued to represent such shares) shall be entitled to require the Corporation to
redeem, to the extent that the Corporation may lawfully effect such redemption
under the laws of the State of Maryland and the federal securities laws but
subject to any right of the Corporation to postpone or suspend such right of
redemption pursuant to the federal securities laws, all or any part of the
shares of stock standing in the name of such holder on the books of the
Corporation at a price per share equal to the net asset value per share.
(e) Payment by the Corporation for shares of stock of the
Corporation surrendered to it for redemption shall be made by the Corporation
within seven business days of such surrender out of the funds legally available
therefor, provided that the Corporation may suspend the right of the holders of
stock of the Corporation to redeem shares of stock and may postpone the right of
such holders to receive payment for any shares when permitted or required to do
so by applicable statutes or regulations. Payment of the aggregate price of
shares surrendered for redemption may be made in cash or, at the option of the
Corporation, wholly or partly in such portfolio securities or other assets of
the Corporation as the Corporation shall select.
<PAGE>
(f) The right of any holder of stock of the Corporation
redeemed by the Corporation as provided in subsection (d) of this section (3) to
receive dividends thereon and all other rights of such holder with respect to
such shares shall terminate at the time as of which the purchase or redemption
price of such shares is determined, except the right of such holder to receive
(i) the redemption price of such shares from the Corporation or its designated
agent and (ii) any dividend or distribution to which such holder had previously
become entitled as the record holder of such shares on the record date for such
dividend or distribution.
(g) The Corporation shall have the power to redeem shares of
any class or sub-series at a redemption price determined in accordance with
subsection (d) of this section (3) if at any time the total investment in such
account does not have a net asset value of at least $2,500. In the event the
Corporation determines to exercise its power to redeem shares provided in this
subsection (g), the holder shall be notified that the value of his account is
less than the applicable minimum amount and shall be allowed 30 days to make an
appropriate investment before such mandatory redemption is processed.
(h) The Corporation shall be entitled to purchase shares of
its stock, to the extent that the Corporation may lawfully effect such purchase
under the laws of the State of Maryland, upon such terms and conditions and for
such consideration as the Board of Directors shall deem advisable, at a price
not exceeding the net asset value per share.
(i) The net asset value of each share of each class or
sub-series of such class of the Corporation's stock issued and sold or redeemed
or purchased at net asset value shall be the current net asset value per share
of the shares of that class or sub-series as determined by or in accordance with
procedures adopted by the Board of Directors from time to time which comply with
the 1940 Act with such current net asset value to be based on the assets
belonging to each such class less the liabilities charged to each such class
and, in the case of any such sub-series, the liabilities charged to such
sub-series.
(j) In the absence of any specification as to the purpose for
which shares of stock of the Corporation are redeemed or purchased by it, all
shares so redeemed or purchased shall be deemed to be retired in the sense
contemplated by the laws of the State of Maryland and the number of the
authorized shares of stock of the Corporation shall not be reduced by the number
of any shares redeemed or purchased by it. Until their classification is changed
in accordance with section (2) of this Article V, all shares so redeemed or
purchased shall continue to belong to the same class and sub-series to which
they belonged at the time of their redemption or purchase.
<PAGE>
(k) Shares of each class and sub-series of stock shall be
entitled to such dividends or distributions, in stock or in cash or both, as may
be declared from time to time by the Board of Directors, acting in its sole
discretion, with respect to such class or sub-series, as the case may be;
provided, that dividends or distributions shall be paid on shares of a class or
a sub-series of such class of stock only out of lawfully available assets
belonging to that class. The dividends and distributions per share of a class or
sub-series thereof may vary with respect to the shares of each other class or
sub-series.
(l) In the event of the liquidation or dissolution of the
Corporation, the stockholders of a class or a sub-series of such class of the
Corporation's stock shall be entitled to receive, as a class, out of the assets
of the Corporation available for distribution to stockholders, the assets
belonging to that class after allocation and payment or setting aside of assets
sufficient to pay all liabilities allocable to that class and the various
sub-series thereof. In the event that there are any assets available for
distribution that are not attributable to any particular class of stock, such
assets shall be allocated to all classes in proportion to the net assets of the
respective classes. The assets so distributable to the stockholders of a class
or a sub-series of such class shall be distributed among such stockholders in
proportion to the net asset value of the number of shares of that class held by
them and recorded on the books of the Corporation.
(m) On each matter submitted to a vote of the stockholders for
approval, each holder of a share of stock shall be entitled to one vote for each
such share standing in his name on the books of the Corporation irrespective of
the class or sub-series thereof, and all shares of all classes or sub-series
shall vote as a single class ("Single Class Voting"); provided, however, that
(a) as to any matter with respect to which a separate vote of any class or
sub-series is required by the 1940 Act (including the rules and regulations
thereunder) or by the Maryland General Corporation Law, such requirement as to a
separate vote by that class or sub-series shall apply in lieu of Single Class
Voting as described above; (b) in the event that the separate vote requirements
referred to in (a) above apply with respect to one or more classes or
sub-series, then, subject to (c) below, the shares of all other classes or
sub-series shall vote as a single class or sub-series; and (c) as to any matter
which does not affect the interest of all classes or sub-series, only the
holders of shares of the one or more affected classes or sub-series shall be
entitled to vote.
<PAGE>
(n) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole shares, including without
limitation, the right to vote, the right to receive dividends and distributions,
and the right to participate upon liquidation of the Corporation, but excluding
the right to receive a stock certificate representing fractional shares.
(4) All persons who shall acquire stock or other securities of
the Corporation shall acquire the same subject to the provisions of these
Articles of Incorporation, as from time to time amended.
SECOND: The total number of shares of stock of all classes which the
Corporation had authority to issue immediately before the amendment set forth in
Article FIRST hereof was 1,000,000,000 shares of capital stock with a par value
of $.001 per share and an aggregate par value of $1,000,000. Such shares of
capital stock were designated as follows: 500,000,000 of the authorized shares
of stock were designated as Small Cap Stock and 500,000,000 of the authorized
shares were designated as Equity Income Stock.
THIRD: The total number of shares of stock of all classes the
Corporation has authority to issue, as amended, is 1,000,000,000 shares of
stock, with a par value of $.001 per share and an aggregate par value of
$1,000,000. Until such time as the Board of Directors shall provide otherwise
pursuant to the authority granted in Section (1) of the amended Article V of the
Articles of Incorporation as set forth in Article FIRST hereof, 500,000,000 of
the authorized shares of stock shall constitute a separate class designated as
Small Cap Stock and 500,000,000 of the authorized shares shall constitute a
separate class designated as Equity Income Stock.
FOURTH: A description, as amended, of each class of the Corporation's
stock with the preferences, conversion and other rights, voting powers,
limitations as to dividends, qualifications, terms and conditions of redemption
and other characteristics is set forth in Article FIRST hereof.
<PAGE>
FIFTH: (a) All of the Corporation's currently issued and outstanding
shares of Small Cap Stock are hereby reclassified and designated as shares of
"The Gabelli Small Cap Growth Fund Class AAA Stock" (the "Small Cap Class AAA
Stock") and shall be deemed to be a sub-series of the shares of the
Corporation's class designated as Small Cap Stock, established and designated
pursuant to the amendment made to Article V of the Articles of Incorporation as
set forth in Article FIRST hereof. All of the Corporation's currently issued and
outstanding shares of Equity Income Stock are hereby reclassified as shares of
"The Gabelli Equity Income Fund Class AAA Stock" (the "Equity Income Class AAA
Stock") and shall be deemed to be a sub-series of the shares of the
Corporation's class designated as Equity Income Stock, established and
designated pursuant to the amendment made to Article V of the Articles of
Incorporation as set forth in Article FIRST hereof.
(b) All of the shares of each of the sub-series of the
Corporation's stock established pursuant to sub-paragraph (a) of this Article
FIFTH shall, subject to the terms and conditions of the Articles of
Incorporation as amended pursuant to the amendment made to ARTICLE V of the
Articles of Incorporation as set forth in Article FIRST hereof, represent
proportionate interests in the portfolio of investments attributable to their
respective class.
SIXTH: This amendment was approved by a majority of the Corporation's
Board of Directors and by the affirmative vote of holders of a majority of the
outstanding shares of the Corporation's capital stock currently outstanding at a
special meeting of the Corporation's stockholders duly convened on December 29,
1999, all in accordance with the Maryland General Corporation Law and the
Charter and By-Laws of the Corporation.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed in its name and on its behalf on this 28th day of
January, 2000 by its Vice President and Treasurer, who acknowledges that these
Articles of Amendment are the act of Gabelli Equity Series Funds Inc. and that
to the best of his knowledge, information and belief and under penalties for
perjury, all matters and facts contained herein are true in all material
respects,
ATTEST: GABELLI EQUITY SERIES FUNDS, INC.
/s/James E. McKee By: /s/Bruce N. Alpert(SEAL)
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION
OF
GABELLI EQUITY SERIES FUNDS, INC.
Gabelli Equity Series Funds, Inc., a Maryland corporation,
having its principal office at One Corporate Center, Rye, New York 10580 (the
"Corporation"), certifies as follows:
FIRST: (a) The total number of shares of the capital stock
which the Corporation has authority to issue is one billion (1,000,000,0000)
shares of stock, with a par value of $0.001 per Share with an aggregate par
value of $1,000,000.00. Such one billion (1,000,000,000) shares of capital stock
have been allocated to the following classes in the following amounts:
five-hundred million (500,000,000) of the authorized shares of stock have been
allocated to a separate class designated as "The Gabelli Small Cap Growth Fund
Stock"; and five-hundred million (500,000,000) of the authorized shares of stock
have been allocated to a separate class designated as "The Gabelli Equity Income
Fund Stock." Pursuant to articles of amendment filed by the Corporation on
January 28, 2000, all of the issued and outstanding shares of the Corporation's
The Gabelli Small Cap Growth Fund Stock were reclassified and designated as
shares of The Gabelli Small Cap Growth Fund Class AAA Stock, a sub-series of
shares of the Corporation's class designated as The Gabelli Small Cap Growth
Fund Stock, and all of the issued and outstanding shares of the Corporation's
The Gabelli Equity Income Fund Stock were reclassified and designated as shares
of The Gabelli Equity Income Fund Class AAA Stock, a sub-series of shares of the
Corporation's class designated as The Gabelli Equity Income Fund Stock.
<PAGE>
SECOND: The Board of Directors of the Corporation, at a
meeting held on March 7, 1999, adopted resolutions reclassifying and designating
authorized but unissued shares of capital stock of The Gabelli Equity Income
Fund Stock into distinct sub-series of that class as follows: one-hundred
million (100,000,000) shares of the authorized but unissued shares of capital
stock of The Gabelli Equity Income Fund Stock have been reallocated to a
separate sub-series of the class and are designated as "The Gabelli Equity
Income Fund Class A Stock" (the "Class A Shares"), one-hundred million
(100,000,000) shares of the authorized but unissued shares of capital stock of
The Gabelli Equity Income Fund Stock have been reallocated to a separate
sub-series of the class and are designated as "The Gabelli Equity Income Fund
Class B Stock" (the "Class B Shares"), one-hundred million (100,000,000) shares
of the authorized but unissued shares of capital stock of The Gabelli Equity
Income Fund Stock have been reallocated to a separate sub-series of the class
and are designated as "The Gabelli Equity Income Fund Class C Stock" (the "Class
C Shares") and the balance of the authorized but unissued shares of capital
stock of The Gabelli Equity Income Fund Stock shall be reallocated to the
sub-series of The Gabelli Equity Income Fund Stock class which has been
previously designated as "The Gabelli Equity Income Fund Class AAA Stock" (the
"Class AAA Shares"). The Class A Shares, Class B Shares, Class C Shares and
Class AAA Shares constitute separate and distinct sub-series of The Gabelli
Equity Income Fund Stock, notwithstanding the fact that the word "class" instead
of "series" or "sub-series" appears in the title designating each such
sub-series.
THIRD: The Class A Shares, Class B Shares and Class C Shares,
together with the Class AAA Shares and any other sub-series of capital stock of
the Corporation designated as a sub-series of The Gabelli Equity Income Fund
Stock in the future shall represent interests in the portfolio of assets
attributable to the Gabelli Equity Income Fund Stock class, which assets shall
be allocated to each of the foregoing sub-series in accordance with Article (V)
of the Corporation's Charter and which assets shall be charged with the
liabilities of the Corporation with respect to the class and each such
sub-series in accordance with Article (V) of the Corporation's Charter. The
Class A Shares, Class B Shares and Class C Shares shall have the same
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption applicable to shares of The Gabelli Equity Income Fund Stock class
and sub-series thereof, all as set forth in the Charter of the Corporation
except for the differences hereinafter set forth:
<PAGE>
1. (a) Except as provided below with respect to Class B Shares of the type
referenced in clauses (i) and (ii) of subparagraph (b) hereof, each Class B
Share shall be converted automatically, and without any action or choice on the
part of the holder thereof, into a Class A Share (or into a share of such other
class or sub-series which may be created pursuant to subparagraph (e) hereof) on
the Conversion Date. The term "Conversion Date" means, with respect to each
Class B Share, the first business day of the eighty-fifth calendar month
following the calendar month in which such Class B Share was issued; provided,
however, that, subject to the provisions of the next sentence, for any Class B
Shares acquired through an exchange, or through a series of exchanges, as
permitted by the Corporation and as provided in the Prospectus of the
Corporation relating to the Class B Shares (the "Prospectus"), from another
investment company or another class or sub-series of shares (including the Class
B Shares) of the Corporation (an "Eligible Investment Company"), the Conversion
Date shall be the conversion date applicable to the shares of the Eligible
Investment Company originally subscribed for in lieu of the Conversion Date of
any shares acquired through exchange if such Eligible Investment Company issuing
the Share originally subscribed for had a similar conversion feature, but not
later than the Conversion Date determined as provided above. For the purpose of
calculating the holding period required for conversion, the date of issuance of
a Class B Share shall mean (i) in the case of a Class B Share obtained by the
holder thereof through an original subscription to the Corporation, the date of
the issuance of such Class B Share, or (ii) in the case of a Class B Share
obtained by the holder thereof through an exchange, or through a series of
exchanges, from an Eligible Investment Company, the date of issuance of the
share of the Eligible Investment Company to which the holder originally
subscribed plus the number of days, if any, that such share had been exchanged
for, and was held as, shares of an Eligible Investment Company that holds itself
out as a money market fund pursuant to Rule 2a-7 under the 1940 Act.
(b) Each Class B Share (i) purchased through automatic reinvestment of a
Dividend with respect to that Class B Share or the corresponding class or
sub-series of any other investment company or of any other class or sub-series
of the Corporation issuing such class or sub-series of shares, or (ii) issued
pursuant to an exchange privilege granted by the Corporation in an exchange or
series of exchanges for Shares originally purchased through the automatic
reinvestment of a dividend or distribution with respect to Shares of an Eligible
Investment Company, shall be segregated in a separate sub-account on the Share
records of the Corporation for each of the holders thereof. On any Conversion
Date, a number of the Class B Shares held in the separate sub-account of the
holder, calculated in accordance with the next following sentence, shall be
converted automatically, and without any action or choice on the part of the
holder, into Class A Shares (or into a share of such other class or sub-series
which may be created pursuant to subparagraph (e) hereof). The number of the
Class B Shares in the holder's separate sub-account so converted shall (i) bear
the same ratio to the total number of Shares maintained in the separate
sub-account on the Conversion Date (immediately prior to conversion) as the
number of Shares of the holder converted on the Conversion Date pursuant to
paragraph (2)(a) hereof bears to the total number of Class B Shares of the
holder on the Conversion Date (immediately prior to conversion) after
subtracting the Shares then maintained in the holder's separate sub-account, or
(ii) be such other number as may be calculated in such other manner as may be
determined by the Board of Directors in accordance with a Multi-Class Plan
adopted pursuant to rules and regulations of the Securities and Exchange
Commission and set forth in the Prospectus.
<PAGE>
(c) The number of Class A Shares (or into a share of such other class or
sub-series which may be created pursuant to subparagraph (e) hereof) into which
a Class B Share is converted pursuant to paragraphs 2(a) and 2(b) hereof shall
equal the number (including for this purpose fractions of a Share) obtained by
dividing the net asset value per share of such Class B Share for purposes of
sales and redemption thereof on the Conversion Date by the net asset value per
share of the Class A Shares (or into a share of such other class or sub-series
which may be created pursuant to subparagraph (e) hereof) for purposes of sales
and redemption thereof on the Conversion Date.
(d) On the Conversion Date, the Class B Shares converted into Class A
Shares (or into a share of such other class or sub-series which may be created
pursuant to subparagraph (e) hereof) will no longer be deemed outstanding and
the rights of the holders thereof will cease, except the right to (i) receive
the number of Class A Shares (or into a share of such other class or sub-series
which may be created pursuant to subparagraph (e) hereof) into which such Class
B Shares have been converted and (ii) receive declared but unpaid Dividends that
have been declared as to Class B Shares held as of a record date occurring on or
before the Conversion Date and (iii) vote converting Class B Shares held as of
any record date occurring on or before the Conversion Date and theretofore set
with respect to any meeting held after the Conversion Date).
(e) The automatic conversion of the Class B Shares into Class A Shares
(or into a share of such other class or sub-series which may be created pursuant
to subparagraph (e) hereof), as set forth in paragraphs 2(a) and 2(b) hereof,
may also be suspended by action of the Board of Directors, by resolution making
specific reference to this provision, at any time that the Board of Directors
determines such suspension to be required under applicable law or in the
exercise of their fiduciary duties; provided, however, that if the Board of
Directors determines that the suspension is likely to continue more than 120
days, the Board of Directors shall create one or more additional classes or one
more sub-series of an existing or additional class or classes of shares, and a
sufficient number thereof, into which Class B Shares may be converted under the
rules of the Securities and Exchange Commission and other applicable law. If the
Board of Directors creates an additional class or sub-series of a class of
shares into which the Class B Shares will thereafter be convertible hereunder,
the Board shall file articles supplementary creating such class or sub-series of
shares and such articles supplementary shall indicate that the shares being
created thereby have been created pursuant to this provision of these Articles
Supplementary.
<PAGE>
(f) Notwithstanding the foregoing, if any amendment to a plan of
distribution relating to the Class A Shares that would increase materially the
amount to be borne by the Corporation in respect of the Class A Shares under
such plan of distribution is proposed, no Class B Shares shall thereafter
convert into Class A Shares until the holders of Class B Shares shall have
approved the proposed amendment.
2. When Class B Shares or Class C Shares are redeemed by the holder thereof or
the Corporation, such shares may be redeemed at a redemption price equal to the
net asset value per share of the sub-series less the deduction of a contingent
deferred sales charge from the proceeds of any redemption thereof in amounts and
for time periods as may be determined by the Board of Directors from time to
time and set forth in the Prospectus covering such sub-series.
FOURTH: The Class A Shares, Class B Shares and Class C Shares have been
classified by the Board of Directors as distinct sub-series of The Gabelli
Equity Income Fund Stock pursuant to authority contained in the Charter of the
Corporation.
<PAGE>
IN WITNESS WHEREOF, Gabelli Equity Series Funds, Inc. has
caused these Articles Supplementary to be signed in its name and on its behalf
on this 28th day of January, 2000 by its Vice President and Treasurer, who
acknowledges that these Articles Supplementary are the act of Gabelli Equity
Series Funds, Inc. and that to the best of his knowledge, information and belief
and under penalties of perjury, all matters and facts contained herein are true
in all material respects.
ATTEST: GABELLI EQUITY SERIES FUNDS, INC.
/s/James E. McKee By: /s/Bruce N. Alpert(SEAL)
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION
OF
GABELLI EQUITY SERIES FUNDS, INC.
Gabelli Equity Series Funds, Inc., a Maryland corporation,
having its principal office at One Corporate Center, Rye, New York 10580 (the
"Corporation"), certifies as follows:
FIRST: (a) The total number of shares of the capital stock
which the Corporation has authority to issue is one billion (1,000,000,0000)
shares of stock, with a par value of $0.001 per Share with an aggregate par
value of $1,000,000.00. Such one billion (1,000,000,000) shares of capital stock
have been allocated to the following classes in the following amounts:
five-hundred million (500,000,000) of the authorized shares of stock have been
allocated to a separate class designated as "The Gabelli Small Cap Growth Fund
Stock"; and five-hundred million (500,000,000) of the authorized shares of stock
have been allocated to a separate class designated as "The Gabelli Equity Income
Fund Stock." Pursuant to articles of amendment filed by the Corporation on
January 28, 2000, all of the issued and outstanding shares of the Corporation's
The Gabelli Small Cap Growth Fund Stock were reclassified and designated as
shares of The Gabelli Small Cap Growth Fund Class AAA Stock, a sub-series of
shares of the Corporation's class designated as The Gabelli Small Cap Growth
Fund Stock, and all of the issued and outstanding shares of the Corporation's
The Gabelli Equity Income Fund Stock were reclassified and designated as shares
of The Gabelli Equity Income Fund Class AAA Stock, a sub-series of shares of the
Corporation's class designated as The Gabelli Equity Income Fund Stock.
<PAGE>
SECOND: The Board of Directors of the Corporation, at a
meeting held on March 7, 1999, adopted resolutions reclassifying and designating
authorized but unissued shares of capital stock of The Gabelli Small Cap Growth
Fund Stock into distinct sub-series of that class as follows: one-hundred
million (100,000,000) shares of the authorized but unissued shares of capital
stock of The Gabelli Small Cap Growth Fund Stock have been reallocated to a
separate sub-series of the class and are designated as "The Gabelli Small Cap
Growth Fund Class A Stock" (the "Class A Shares"), one-hundred million
(100,000,000) shares of the authorized but unissued shares of capital stock of
The Gabelli Small Cap Growth Fund Stock have been reallocated to a separate
sub-series of the class and are designated as "The Gabelli Small Cap Growth Fund
Class B Stock" (the "Class B Shares"), one-hundred million (100,000,000) shares
of the authorized but unissued shares of capital stock of The Gabelli Small Cap
Growth Fund Stock have been reallocated to a separate sub-series of the class
and are designated as "The Gabelli Small Cap Growth Fund Class C Stock" (the
"Class C Shares") and the balance of the authorized but unissued shares of
capital stock of The Gabelli Small Cap Growth Fund Stock shall be reallocated to
the sub-series of The Gabelli Small Cap Growth Fund Stock class which has been
previously designated as "The Gabelli Small Cap Growth Fund Class AAA Stock"
(the "Class AAA Shares"). The Class A Shares, Class B Shares, Class C Shares and
Class AAA Shares constitute separate and distinct sub-series of The Gabelli
Small Cap Growth Fund Stock, notwithstanding the fact that the word "class"
instead of "series" or "sub-series" appears in the title designating each such
sub-series.
THIRD: The Class A Shares, Class B Shares and Class C Shares,
together with the Class AAA Shares and any other sub-series of capital stock of
the Corporation designated as a sub-series of The Gabelli Small Cap Growth Fund
Stock in the future shall represent interests in the portfolio of assets
attributable to the Gabelli Small Cap Growth Fund Stock class, which assets
shall be allocated to each of the foregoing sub-series in accordance with
Article (V) of the Corporation's Charter and which assets shall be charged with
the liabilities of the Corporation with respect to the class and each such
sub-series in accordance with Article (V) of the Corporation's Charter. The
Class A Shares, Class B Shares and Class C Shares shall have the same
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption applicable to shares of The Gabelli Small Cap Growth Fund Stock class
and sub-series thereof, all as set forth in the Charter of the Corporation
except for the differences hereinafter set forth:
<PAGE>
1. (a) Except as provided below with respect to Class B Shares of the type
referenced in clauses (i) and (ii) of subparagraph (b) hereof, each Class B
Share shall be converted automatically, and without any action or choice on the
part of the holder thereof, into a Class A Share (or into a share of such other
class or sub-series which may be created pursuant to subparagraph (e) hereof) on
the Conversion Date. The term "Conversion Date" means, with respect to each
Class B Share, the first business day of the eighty-fifth calendar month
following the calendar month in which such Class B Share was issued; provided,
however, that, subject to the provisions of the next sentence, for any Class B
Shares acquired through an exchange, or through a series of exchanges, as
permitted by the Corporation and as provided in the Prospectus of the
Corporation relating to the Class B Shares (the "Prospectus"), from another
investment company or another class or sub-series of shares (including the Class
B Shares) of the Corporation (an "Eligible Investment Company"), the Conversion
Date shall be the conversion date applicable to the shares of the Eligible
Investment Company originally subscribed for in lieu of the Conversion Date of
any shares acquired through exchange if such Eligible Investment Company issuing
the Share originally subscribed for had a similar conversion feature, but not
later than the Conversion Date determined as provided above. For the purpose of
calculating the holding period required for conversion, the date of issuance of
a Class B Share shall mean (i) in the case of a Class B Share obtained by the
holder thereof through an original subscription to the Corporation, the date of
the issuance of such Class B Share, or (ii) in the case of a Class B Share
obtained by the holder thereof through an exchange, or through a series of
exchanges, from an Eligible Investment Company, the date of issuance of the
share of the Eligible Investment Company to which the holder originally
subscribed plus the number of days, if any, that such share had been exchanged
for, and was held as, shares of an Eligible Investment Company that holds itself
out as a money market fund pursuant to Rule 2a-7 under the 1940 Act.
(b) Each Class B Share (i) purchased through automatic reinvestment of a
Dividend with respect to that Class B Share or the corresponding class or
sub-series of any other investment company or of any other class or sub-series
of the Corporation issuing such class or sub-series of shares, or (ii) issued
pursuant to an exchange privilege granted by the Corporation in an exchange or
series of exchanges for Shares originally purchased through the automatic
reinvestment of a dividend or distribution with respect to Shares of an Eligible
Investment Company, shall be segregated in a separate sub-account on the Share
records of the Corporation for each of the holders thereof. On any Conversion
Date, a number of the Class B Shares held in the separate sub-account of the
holder, calculated in accordance with the next following sentence, shall be
converted automatically, and without any action or choice on the part of the
holder, into Class A Shares (or into a share of such other class or sub-series
which may be created pursuant to subparagraph (e) hereof). The number of the
Class B Shares in the holder's separate sub-account so converted shall (i) bear
the same ratio to the total number of Shares maintained in the separate
sub-account on the Conversion Date (immediately prior to conversion) as the
number of Shares of the holder converted on the Conversion Date pursuant to
paragraph (2)(a) hereof bears to the total number of Class B Shares of the
holder on the Conversion Date (immediately prior to conversion) after
subtracting the Shares then maintained in the holder's separate sub-account, or
(ii) be such other number as may be calculated in such other manner as may be
determined by the Board of Directors in accordance with a Multi-Class Plan
adopted pursuant to rules and regulations of the Securities and Exchange
Commission and set forth in the Prospectus.
<PAGE>
(c) The number of Class A Shares (or into a share of such other class or
sub-series which may be created pursuant to subparagraph (e) hereof) into which
a Class B Share is converted pursuant to paragraphs 2(a) and 2(b) hereof shall
equal the number (including for this purpose fractions of a Share) obtained by
dividing the net asset value per share of such Class B Share for purposes of
sales and redemption thereof on the Conversion Date by the net asset value per
share of the Class A Shares (or into a share of such other class or sub-series
which may be created pursuant to subparagraph (e) hereof) for purposes of sales
and redemption thereof on the Conversion Date.
(d) On the Conversion Date, the Class B Shares converted into Class A
Shares (or into a share of such other class or sub-series which may be created
pursuant to subparagraph (e) hereof) will no longer be deemed outstanding and
the rights of the holders thereof will cease, except the right to (i) receive
the number of Class A Shares (or into a share of such other class or sub-series
which may be created pursuant to subparagraph (e) hereof) into which such Class
B Shares have been converted and (ii) receive declared but unpaid Dividends that
have been declared as to Class B Shares held as of a record date occurring on or
before the Conversion Date and (iii) vote converting Class B Shares held as of
any record date occurring on or before the Conversion Date and theretofore set
with respect to any meeting held after the Conversion Date).
(e) The automatic conversion of the Class B Shares into Class A Shares
(or into a share of such other class or sub-series which may be created pursuant
to subparagraph (e) hereof), as set forth in paragraphs 2(a) and 2(b) hereof,
may also be suspended by action of the Board of Directors, by resolution making
specific reference to this provision, at any time that the Board of Directors
determines such suspension to be required under applicable law or in the
exercise of their fiduciary duties; provided, however, that if the Board of
Directors determines that the suspension is likely to continue more than 120
days, the Board of Directors shall create one or more additional classes or one
more sub-series of an existing or additional class or classes of shares, and a
sufficient number thereof, into which Class B Shares may be converted under the
rules of the Securities and Exchange Commission and other applicable law. If the
Board of Directors creates an additional class or sub-series of a class of
shares into which the Class B Shares will thereafter be convertible hereunder,
the Board shall file articles supplementary creating such class or sub-series of
shares and such articles supplementary shall indicate that the shares being
created thereby have been created pursuant to this provision of these Articles
Supplementary.
<PAGE>
(f) Notwithstanding the foregoing, if any amendment to a plan of
distribution relating to the Class A Shares that would increase materially the
amount to be borne by the Corporation in respect of the Class A Shares under
such plan of distribution is proposed, no Class B Shares shall thereafter
convert into Class A Shares until the holders of Class B Shares shall have
approved the proposed amendment.
2. When Class B Shares or Class C Shares are redeemed by the holder thereof or
the Corporation, such shares may be redeemed at a redemption price equal to the
net asset value per share of the sub-series less the deduction of a contingent
deferred sales charge from the proceeds of any redemption thereof in amounts and
for time periods as may be determined by the Board of Directors from time to
time and set forth in the Prospectus covering such sub-series.
FOURTH: The Class A Shares, Class B Shares and Class C Shares
have been classified by the Board of Directors as distinct sub-series of The
Gabelli Small Cap Growth Fund Stock pursuant to authority contained in the
Charter of the Corporation.
<PAGE>
IN WITNESS WHEREOF, Gabelli Equity Series Funds, Inc. has
caused these Articles Supplementary to be signed in its name and on its behalf
on this 28th day of January, 2000 by its Vice President and Treasurer, who
acknowledges that these Articles Supplementary are the act of Gabelli Equity
Series Funds, Inc. and that to the best of his knowledge, information and belief
and under penalties of perjury, all matters and facts contained herein are true
in all material respects.
ATTEST: GABELLI EQUITY SERIES FUNDS, INC.
/s/James E. McKee By:/s/Bruce N. Alpert(SEAL)
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
FOR
THE GABELLI EQUITY INCOME FUND
AMENDED AND RESTATED DISTRIBUTION AGREEMENT, dated January 28,
2000, between Gabelli Equity Series Funds, Inc., a Maryland corporation (the
"Company"), and Gabelli & Company, Inc., a New York corporation (the
"Distributor"). The Company is registered as an investment company under the
Investment Company Act of 1940 (the "1940 Act"), and an indefinite number of
shares (the "Shares") of The Gabelli Equity Income Fund, (the "Fund"), par value
$.001 per share (the "Shares"), have been registered under the Securities Act of
1933 (the "1933 Act") to be offered for sale to the public in a continuous
public offering in accordance with terms and conditions set forth in the
Prospectus and Statement of Additional Information (the "Prospectus") of the
Fund included in the Company's Registration Statement on Form N-1A as such
documents may be amended from time to time.
In this connection, the Company desires that the Distributor
act as its exclusive sales agent and distributor for the sale and distribution
of Shares. The Distributor has advised the Company that it is willing to act in
such capacities, and it is accordingly agreed between them as follows:
1. The Company hereby appoints the Distributor as exclusive
sales agent and distributor for the sale and distribution of Shares pursuant to
the aforesaid continuous public offering of Shares, and the Company further
agrees from and after the commencement of such continuous public offering that
it will not, without the Distributor's consent, sell or agree to sell any Shares
otherwise than through the Distributor, except the Company may issue Shares in
connection with a merger, consolidation or acquisition of assets on such basis
as may be authorized or permitted under the 1940 Act.
<PAGE>
2. The Distributor hereby accepts such appointment and agrees
to use its best efforts to sell such Shares; provided, however, that when
requested by the Fund at any time for any reason the Distributor will suspend
such efforts. The Company may also withdraw the offering of Shares at any time
when required by the provisions of any statute, order, rule or regulation of any
governmental body having jurisdiction. It is understood that the Distributor
does not undertake to sell all or any specific portion of the Shares of the
Fund. The Fund acknowledges that the Distributor will enter into sales or
servicing agreements with registered securities brokers and banks and into
servicing agreements with financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms. In entering into such agreements, the Distributor shall act only on its
own behalf as principal underwriter and distributor. The Distributor shall not
be responsible for making any distribution plan or service fee payments pursuant
to any plans the Fund may adopt or agreements it may enter into.
3. The Distributor represents that it is a member in good
standing of the National Association of Dealers, Inc. and agrees that it will
use all reasonable efforts to maintain such status and to abide by the Rules of
Fair Practice, the Constitution and the Bylaws of the National Association of
Securities Dealers, Inc., and all other rules and regulations that are now or
may become applicable to its performance hereunder. The Distributor will
undertake and discharge its obligations hereunder as an independent contractor
and it shall have no authority or power to obligate or bind the Company by its
actions, conduct or contracts except that it is authorized to accept orders for
the purchase or repurchase of Shares as the Company's agent and subject to its
approval. The Company reserves the right to reject any order in whole or in
part. The Distributor may appoint sub-agents or distribute through dealers or
otherwise as it may determine from time to time pursuant to agreements approved
by the Company, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase of Shares on
behalf of the Company or otherwise act as the Company's agent for any purpose.
The Distributor shall not utilize any materials in connection with the sale or
offering of Shares except the then current Prospectus and such other materials
as the Company shall provide or approve in writing.
4. Shares may be sold by the Distributor only at prices and
terms described in the then current Prospectus relating to the Shares and may be
sold either through persons with whom it has selling agreements in a form
approved by the Company's Board of Directors or directly to prospective
purchasers. To facilitate sales, the Company will furnish the Distributor with
the net asset value of its Shares promptly after each calculation thereof.
<PAGE>
5. The Company has delivered to the Distributor a copy of the
current Prospectus for the Fund. It agrees that it will use its best efforts to
continue the effectiveness of its Registration Statement filed under the 1933
Act and the 1940 Act. The Company further agrees to prepare and file any
amendments to its Registration Statement as may be necessary and any
supplemental data in order to comply with such Acts. The Company will furnish
the Distributor at the Distributor's expense with a reasonable number of copies
of the Prospectus and any amended Prospectus for use in connection with the sale
of Shares.
6. At the Distributor's request, the Company will take such
steps at its own expense as may be necessary and feasible to qualify Shares for
sale in states, territories or dependencies of the United States of America and
in the District of Columbia in accordance with the laws thereof, and to renew or
extend any such qualification; provided, however, that the Company shall not be
required to qualify Shares or to maintain the qualification of Shares in any
state, territory, dependency or district where it shall deem such qualification
disadvantageous to the Fund.
7. The Distributor agrees that:
(a) It will furnish to the Company any pertinent information
required to be inserted with respect to the Distributor as exclusive
sales agent and distributor within the purview of Federal and state
securities laws in any reports or registrations required to be filed
with any government authority;
(b) It will not make any representations inconsistent with the
information contained in the Registration Statement or Prospectus filed
under the Securities Act of 1933, as in effect from time to time;
(c) It will not use or distribute or authorize the use or
distribution of any statements other than those contained in the Fund's
then current Prospectus or in such supplemental literature or
advertising as may be authorized in writing by the Company; and
<PAGE>
(d) Subject to Paragraph 9 below, the Distributor will bear
the costs and expenses of printing and distributing any copies of any
prospectuses and annual and interim reports of the Fund (after such
items have been prepared and set in type) which are used in connection
with the offering of Shares, and the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor
or furnished by the Distributor for use in connection with the offering
of the Shares and the costs and expenses incurred by the Distributor in
advertising, promoting and selling Shares of the Fund to the public.
The Fund has adopted a separate plan of distribution (collectively, the
"Plan") pursuant to the provisions of rule 12b-1 of the 1940 Act on
behalf of its Class A, Class B, Class C and Class AAA shares,
respectively, each of which provides for the payment of administrative
and sales related expenses in connection with the distribution of Fund
shares and the Distributor agrees to take no action inconsistent with
said Plan.
8. The Company will pay its legal and auditing expenses and
the cost of composition of any prospectuses of annual or interim reports of the
Fund.
9. The Company will pay the Distributor for costs and expenses
incurred by the Distributor in connection with distribution of Shares by the
Distributor in accordance with the terms of a Plan of Distribution (the "Plan")
adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as such Plan may
be in effect from time to time; provided, however, that no payments shall be due
or paid to the Distributor hereunder unless and until this Agreement shall have
been approved by Director Approval and Disinterested Director Approval (as such
terms are defined in such Plan). The Company reserves the right to modify or
terminate such Plan at any time as specified in the Plan and Rule 12b-1, and
this Section 9 shall thereupon be modified or terminated to the same extent
without further action of the parties. The persons authorized to direct the
payment of funds pursuant to this Agreement and the Plan shall provide to the
Company's Board of Directors, and the Directors shall review, at least quarterly
a written report of the amounts so paid and the purposes for which such
expenditures were made.
<PAGE>
10. The Company agrees to indemnify, defend and hold the
Distributor, its officers, directors, employees and agents and any person who
controls the Distributor within the meaning of Section 15 of the 1933 Act (each,
an "indemnitee"), free and harmless from any and all liabilities and expenses,
including costs of investigation or defense (including reasonable counsel fees)
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
indemnitee may be or may have been involved as a party or otherwise or with
which he may be or may have been threatened, while the Distributor was active in
such capacity or by reason of the Distributor having acted in any such capacity
or arising out of or based upon any untrue statement of a material fact
contained in the then-current Prospectus relating to the Shares or arising out
of or based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such claims, demands, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information furnished
in writing by the Distributor to the Company expressly for use in any such
Prospectus; provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Company or the shareholders of the Fund
or any expense of such indemnitee with respect to any matter as to which such
indemnitee shall have been adjudicated not to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company or
arising by reason of such indemnitee's willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement ("disabling conduct"), or (2)
as to any matter disposed of by settlement or a compromise payment by such
indemnitee, no indemnification shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee. Notwithstanding the
foregoing the Company shall not be obligated to provide any such indemnification
to the extent such provision would waive any right which the Company cannot
lawfully waive.
The Distributor agrees to indemnify, defend and hold the
Company, its Directors, officers, employees and agents and any person who
controls the Company within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense shall arise out of or be based upon any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor of the Company expressly for use in a Prospectus or
any alleged omission to state a material fact in connection with such
information required to be stated therein or necessary to make such information
not misleading or arising by reason of disabling conduct by such indemnitee or
any person selling Shares pursuant to an agreement with the Distributor.
<PAGE>
The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Company receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Company
unless it is subsequently determined that he is entitled to such indemnification
and if the directors of the Company determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Company shall be insured against losses arising by reason
of any lawful advances, or (C) a majority of a quorum of directors of the
Company who are neither "interested persons" of the Company (as defined in
Section 2(a)(19) of the Act) nor parties to the proceeding ("Disinterested
Non-Party Directors") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such indemnitee is not liable by
reason of disabling conduct or, (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-party Directors of the
Company, or (ii) if such a quorum is not obtainable or even, if obtainable, if a
majority vote of such quorum so directs, independent legal counsel in a written
opinion.
11. This Agreement shall become effective on the date first
set forth above and shall remain in effect for up to two years from such date
(one year in the case of Section 9 and thereafter from year to year provided
such continuance is specifically approved at least annually prior to each
anniversary of such date by (a) Director Approval or by vote at a meeting of
shareholders of the Fund of the lesser of (i) 67 per cent of the Shares present
or represented by proxy and (ii) 50 per cent of the outstanding Shares and (b)
by Disinterested Director Approval.
12. This Agreement may be terminated (a) by the Distributor at
any time without penalty by giving sixty (60) days' written notice to the
Company which notice may be waived by the Company; or (b) by the Company at any
time without penalty upon sixty (60) days' written notice to the Distributor
(which notice may be waived by the Distributor); provided, however, that any
such termination by the Company shall be directed or approved in the same manner
as required for continuance of this Agreement by Section 11(a) (or, in the case
of termination of Section 9, by Section 11(b)).
<PAGE>
13. This Agreement may not be amended or changed except in
writing signed by each of the parties hereto and approved in the same manner as
provided for continuance of this Agreement in Section 11(a) (or, in the case of
amendment of Section 9, by Section 11(b)). Any such amendment or change shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, but this Agreement shall not be assigned by either party
and shall automatically terminate upon assignment (as such term is defined in
the 1940 Act and the rules thereunder).
14. This Agreement shall be construed in accordance with the
laws of the State of New York applicable to agreements to be performed entirely
therein and in accordance with applicable provisions of the 1940 Act.
15. If any provision of this Agreement shall be held or made
invalid or unenforceable by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the date first
written above.
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/Bruce N. Alpert
Name: Bruce N. Alpert
Title: Vice President
GABELLI & COMPANY, INC.
By:/s/Stephen Bondi
Name:Stephen Bondi
Title:President
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
FOR
THE GABELLI SMALL CAP GROWTH FUND
AMENDED AND RESTATED DISTRIBUTION AGREEMENT, dated January 28,
2000, between Gabelli Equity Series Funds, Inc., a Maryland corporation (the
"Company"), and Gabelli & Company, Inc., a New York corporation (the
"Distributor"). The Company is registered as an investment company under the
Investment Company Act of 1940 (the "1940 Act"), and an indefinite number of
shares (the "Shares") of The Gabelli Small Cap Growth Fund, (the "Fund"), par
value $.001 per share (the "Shares"), have been registered under the Securities
Act of 1933 (the "1933 Act") to be offered for sale to the public in a
continuous public offering in accordance with terms and conditions set forth in
the Prospectus and Statement of Additional Information (the "Prospectus") of the
Fund included in the Company's Registration Statement on Form N-1A as such
documents may be amended from time to time.
In this connection, the Company desires that the Distributor
act as its exclusive sales agent and distributor for the sale and distribution
of Shares. The Distributor has advised the Company that it is willing to act in
such capacities, and it is accordingly agreed between them as follows:
1. The Company hereby appoints the Distributor as exclusive
sales agent and distributor for the sale and distribution of Shares pursuant to
the aforesaid continuous public offering of Shares, and the Company further
agrees from and after the commencement of such continuous public offering that
it will not, without the Distributor's consent, sell or agree to sell any Shares
otherwise than through the Distributor, except the Company may issue Shares in
connection with a merger, consolidation or acquisition of assets on such basis
as may be authorized or permitted under the 1940 Act.
<PAGE>
2. The Distributor hereby accepts such appointment and agrees
to use its best efforts to sell such Shares; provided, however, that when
requested by the Fund at any time for any reason the Distributor will suspend
such efforts. The Company may also withdraw the offering of Shares at any time
when required by the provisions of any statute, order, rule or regulation of any
governmental body having jurisdiction. It is understood that the Distributor
does not undertake to sell all or any specific portion of the Shares of the
Fund. The Fund acknowledges that the Distributor will enter into sales or
servicing agreements with registered securities brokers and banks and into
servicing agreements with financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms. In entering into such agreements, the Distributor shall act only on its
own behalf as principal underwriter and distributor. The Distributor shall not
be responsible for making any distribution plan or service fee payments pursuant
to any plans the Fund may adopt or agreements it may enter into.
3. The Distributor represents that it is a member in good
standing of the National Association of Dealers, Inc. and agrees that it will
use all reasonable efforts to maintain such status and to abide by the Rules of
Fair Practice, the Constitution and the Bylaws of the National Association of
Securities Dealers, Inc., and all other rules and regulations that are now or
may become applicable to its performance hereunder. The Distributor will
undertake and discharge its obligations hereunder as an independent contractor
and it shall have no authority or power to obligate or bind the Company by its
actions, conduct or contracts except that it is authorized to accept orders for
the purchase or repurchase of Shares as the Company's agent and subject to its
approval. The Company reserves the right to reject any order in whole or in
part. The Distributor may appoint sub-agents or distribute through dealers or
otherwise as it may determine from time to time pursuant to agreements approved
by the Company, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase of Shares on
behalf of the Company or otherwise act as the Company's agent for any purpose.
The Distributor shall not utilize any materials in connection with the sale or
offering of Shares except the then current Prospectus and such other materials
as the Company shall provide or approve in writing.
4. Shares may be sold by the Distributor only at prices and
terms described in the then current Prospectus relating to the Shares and may be
sold either through persons with whom it has selling agreements in a form
approved by the Company's Board of Directors or directly to prospective
purchasers. To facilitate sales, the Company will furnish the Distributor with
the net asset value of its Shares promptly after each calculation thereof.
<PAGE>
5. The Company has delivered to the Distributor a copy of the
current Prospectus for the Fund. It agrees that it will use its best efforts to
continue the effectiveness of its Registration Statement filed under the 1933
Act and the 1940 Act. The Company further agrees to prepare and file any
amendments to its Registration Statement as may be necessary and any
supplemental data in order to comply with such Acts. The Company will furnish
the Distributor at the Distributor's expense with a reasonable number of copies
of the Prospectus and any amended Prospectus for use in connection with the sale
of Shares.
6. At the Distributor's request, the Company will take such
steps at its own expense as may be necessary and feasible to qualify Shares for
sale in states, territories or dependencies of the United States of America and
in the District of Columbia in accordance with the laws thereof, and to renew or
extend any such qualification; provided, however, that the Company shall not be
required to qualify Shares or to maintain the qualification of Shares in any
state, territory, dependency or district where it shall deem such qualification
disadvantageous to the Fund.
7. The Distributor agrees that:
(a) It will furnish to the Company any pertinent information
required to be inserted with respect to the Distributor as exclusive
sales agent and distributor within the purview of Federal and state
securities laws in any reports or registrations required to be filed
with any government authority;
(b) It will not make any representations inconsistent with the
information contained in the Registration Statement or Prospectus filed
under the Securities Act of 1933, as in effect from time to time;
(c) It will not use or distribute or authorize the use or
distribution of any statements other than those contained in the Fund's
then current Prospectus or in such supplemental literature or
advertising as may be authorized in writing by the Company; and
<PAGE>
(d) Subject to Paragraph 9 below, the Distributor will bear
the costs and expenses of printing and distributing any copies of any
prospectuses and annual and interim reports of the Fund (after such
items have been prepared and set in type) which are used in connection
with the offering of Shares, and the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor
or furnished by the Distributor for use in connection with the offering
of the Shares and the costs and expenses incurred by the Distributor in
advertising, promoting and selling Shares of the Fund to the public.
The Fund has adopted a separate plan of distribution (collectively, the
"Plan") pursuant to the provisions of rule 12b-1 of the 1940 Act on
behalf of its Class A, Class B, Class C and Class AAA shares,
respectively, each of which provides for the payment of administrative
and sales related expenses in connection with the distribution of Fund
shares and the Distributor agrees to take no action inconsistent with
said Plan.
8. The Company will pay its legal and auditing expenses and
the cost of composition of any prospectuses of annual or interim reports of the
Fund.
9. The Company will pay the Distributor for costs and expenses
incurred by the Distributor in connection with distribution of Shares by the
Distributor in accordance with the terms of a Plan of Distribution (the "Plan")
adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as such Plan may
be in effect from time to time; provided, however, that no payments shall be due
or paid to the Distributor hereunder unless and until this Agreement shall have
been approved by Director Approval and Disinterested Director Approval (as such
terms are defined in such Plan). The Company reserves the right to modify or
terminate such Plan at any time as specified in the Plan and Rule 12b-1, and
this Section 9 shall thereupon be modified or terminated to the same extent
without further action of the parties. The persons authorized to direct the
payment of funds pursuant to this Agreement and the Plan shall provide to the
Company's Board of Directors, and the Directors shall review, at least quarterly
a written report of the amounts so paid and the purposes for which such
expenditures were made.
<PAGE>
10. The Company agrees to indemnify, defend and hold the
Distributor, its officers, directors, employees and agents and any person who
controls the Distributor within the meaning of Section 15 of the 1933 Act (each,
an "indemnitee"), free and harmless from any and all liabilities and expenses,
including costs of investigation or defense (including reasonable counsel fees)
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
indemnitee may be or may have been involved as a party or otherwise or with
which he may be or may have been threatened, while the Distributor was active in
such capacity or by reason of the Distributor having acted in any such capacity
or arising out of or based upon any untrue statement of a material fact
contained in the then-current Prospectus relating to the Shares or arising out
of or based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such claims, demands, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information furnished
in writing by the Distributor to the Company expressly for use in any such
Prospectus; provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Company or the shareholders of the Fund
or any expense of such indemnitee with respect to any matter as to which such
indemnitee shall have been adjudicated not to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company or
arising by reason of such indemnitee's willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement ("disabling conduct"), or (2)
as to any matter disposed of by settlement or a compromise payment by such
indemnitee, no indemnification shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee. Notwithstanding the
foregoing the Company shall not be obligated to provide any such indemnification
to the extent such provision would waive any right which the Company cannot
lawfully waive.
The Distributor agrees to indemnify, defend and hold the
Company, its Directors, officers, employees and agents and any person who
controls the Company within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense shall arise out of or be based upon any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor of the Company expressly for use in a Prospectus or
any alleged omission to state a material fact in connection with such
information required to be stated therein or necessary to make such information
not misleading or arising by reason of disabling conduct by such indemnitee or
any person selling Shares pursuant to an agreement with the Distributor.
<PAGE>
The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Company receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Company
unless it is subsequently determined that he is entitled to such indemnification
and if the directors of the Company determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Company shall be insured against losses arising by reason
of any lawful advances, or (C) a majority of a quorum of directors of the
Company who are neither "interested persons" of the Company (as defined in
Section 2(a)(19) of the Act) nor parties to the proceeding ("Disinterested
Non-Party Directors") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such indemnitee is not liable by
reason of disabling conduct or, (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-party Directors of the
Company, or (ii) if such a quorum is not obtainable or even, if obtainable, if a
majority vote of such quorum so directs, independent legal counsel in a written
opinion.
11. This Agreement shall become effective on the date first
set forth above and shall remain in effect for up to two years from such date
(one year in the case of Section 9 and thereafter from year to year provided
such continuance is specifically approved at least annually prior to each
anniversary of such date by (a) Director Approval or by vote at a meeting of
shareholders of the Fund of the lesser of (i) 67 per cent of the Shares present
or represented by proxy and (ii) 50 per cent of the outstanding Shares and (b)
by Disinterested Director Approval.
12. This Agreement may be terminated (a) by the Distributor at
any time without penalty by giving sixty (60) days' written notice to the
Company which notice may be waived by the Company; or (b) by the Company at any
time without penalty upon sixty (60) days' written notice to the Distributor
(which notice may be waived by the Distributor); provided, however, that any
such termination by the Company shall be directed or approved in the same manner
as required for continuance of this Agreement by Section 11(a) (or, in the case
of termination of Section 9, by Section 11(b)).
<PAGE>
13. This Agreement may not be amended or changed except in
writing signed by each of the parties hereto and approved in the same manner as
provided for continuance of this Agreement in Section 11(a) (or, in the case of
amendment of Section 9, by Section 11(b)). Any such amendment or change shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, but this Agreement shall not be assigned by either party
and shall automatically terminate upon assignment (as such term is defined in
the 1940 Act and the rules thereunder).
14. This Agreement shall be construed in accordance with the
laws of the State of New York applicable to agreements to be performed entirely
therein and in accordance with applicable provisions of the 1940 Act.
15. If any provision of this Agreement shall be held or made
invalid or unenforceable by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the date first
written above.
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/Bruce N. Alpert
Name: Bruce N. Alpert
Title: Vice President
GABELLI & COMPANY, INC.
By:/s/Stephen Bondi
Name:Stephen Bondi
Title:President
January 28, 2000
Gabelli Equity Series Funds, Inc.
One Corporate Center
Rye, New York 10580-1434
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933
(the "Act") of shares of capital stock, par value $0.001 per share, of Gabelli
Equity Series Funds, Inc., a Maryland corporation (the "Fund"), on
Post-Effective Amendment No. 10 to its Registration Statement on Form N-1A
(Registration Nos. 33-41913 and 811-06367) filed with the Securities and
Exchange Commission on the date hereof (the "Registration Statement"), we have
examined such corporate records, certificates and documents as we deemed
necessary for the purpose of this opinion. It is our understanding that the
Stock has been reclassified and designated in the following amounts to each of
the following sub-series of a class of shares (all of the following, the
"Stock"): (a) two-hundred million shares as The Gabelli Small Cap Growth Fund
Class AAA Stock, a sub-series of The Gabelli Small Cap Growth Fund Stock; (b)
two-hundred million shares as The Gabelli Equity Income Fund Class AAA Stock, a
sub-series of The Gabelli Equity Income Fund Stock; (c) one-hundred million
shares as The Gabelli Small Cap Growth Fund Class A Stock, a sub-series of The
Gabelli Small Cap Growth Fund Stock; (d) one-hundred million shares as The
Gabelli Equity Income Fund Class A Stock, a sub-series of The Gabelli Equity
Income Fund Stock; (e) one-hundred million shares as The Gabelli Small Cap
Growth Fund Class B Stock, a sub-series of The Gabelli Small Cap Growth Fund
Stock; (f) one-hundred million shares as The Gabelli Equity Income Fund Class B
Stock, a sub-series of The Gabelli Equity Income Fund Stock; (g) one-hundred
million shares as The Gabelli Small Cap Growth Fund Class C Stock, a sub-series
of The Gabelli Small Cap Growth Fund Stock; and (h) one-hundred million shares
as The Gabelli Equity Income Fund Class C Stock, a sub-series of The Gabelli
Equity Income Fund Stock.
Based on our examination, we advise you that in our opinion the Stock
to be offered by the Fund, when issued and sold under the circumstances
contemplated in the Registration Statement, will be legally issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving our consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Securities and Exchange Commission
thereunder. The opinion expressed herein is limited to the matters set forth in
this letter and no other opinion should be inferred beyond the matters expressly
stated.
Very truly yours,
Miles & Stockbridge P.C.
By:/s/Miles & Stockbridge P.C.
Principal
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights", "Investment Advisory and Other Services- Independent Auditors" and
"Financial Statements" and to the use of our reports dated November 1, 1999 on
The Gabelli Equity Income Fund and The Gabelli Small Cap Growth Fund
incorporated by reference in this Registration Statement (Form N-1A No.
33-41913) of Gabelli Equity Series Funds, Inc.
ERNST & YOUNG LLP
Ernst & Young LLP
New York, New York
January 24, 2000
PURCHASE AGREEMENT
Gabelli Equity Series Funds, Inc. (the "Corporation"), a Maryland Corporation,
and Gabelli & Company, Inc. (the "Buyer") hereby agree as follows:
1. The Corporation hereby offers the Buyer and the Buyer hereby
purchases one Class A Share (the "Share") of The Gabelli Equity Income Fund (the
"Fund"), at a price of $10.00. The Share is the "initial Class A Share" of the
Fund. The Buyer hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Share, and the Corporation hereby acknowledges
receipt from the Buyer of funds in the amount of $10 in full payment for the
Share.
2. The Buyer represents and warrants to the Corporation that the Share
purchased by the Buyer is being acquired for investment purposes and not for the
purpose of distribution.
3. This Agreement has been executed on behalf of the Corporation by the
undersigned officer of the Corporation in his or her capacity as an officer of
the Fund.
4. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 28th day of January, 2000.
Attest:
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/James E. McKee /s/Bruce N. McKee
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
Attest:
GABELLI & COMPANY, INC.
By: /s/Stephen Bondi
Name: Name:Stephen Bondi
Title: Title:President
PURCHASE AGREEMENT
Gabelli Equity Series Funds, Inc. (the "Corporation"), a Maryland Corporation,
and Gabelli & Company, Inc. (the "Buyer") hereby agree as follows:
1. The Corporation hereby offers the Buyer and the Buyer hereby
purchases one Class B Share (the "Share") of The Gabelli Equity Income Fund (the
"Fund"), at a price of $10.00. The Share is the "initial Class B Share" of the
Fund. The Buyer hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Share, and the Corporation hereby acknowledges
receipt from the Buyer of funds in the amount of $10 in full payment for the
Share.
2. The Buyer represents and warrants to the Corporation that the Share
purchased by the Buyer is being acquired for investment purposes and not for the
purpose of distribution.
3. This Agreement has been executed on behalf of the Corporation by the
undersigned officer of the Corporation in his or her capacity as an officer of
the Fund.
4. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 28th day of January, 2000.
Attest:
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/James E. McKee /s/Bruce N. Alpert
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
Attest:
GABELLI & COMPANY, INC.
By: /s/Stephen Bondi
Name: Name:Stephen Bondi
Title: Title:President
PURCHASE AGREEMENT
Gabelli Equity Series Funds, Inc. (the "Corporation"), a Maryland Corporation,
and Gabelli & Company, Inc. (the "Buyer") hereby agree as follows:
1. The Corporation hereby offers the Buyer and the Buyer hereby
purchases one Class C Share (the "Share") of The Gabelli Equity Income Fund (the
"Fund"), at a price of $10.00. The Share is the "initial Class C Share" of the
Fund. The Buyer hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Share, and the Corporation hereby acknowledges
receipt from the Buyer of funds in the amount of $10 in full payment for the
Share.
2. The Buyer represents and warrants to the Corporation that the Share
purchased by the Buyer is being acquired for investment purposes and not for the
purpose of distribution.
3. This Agreement has been executed on behalf of the Corporation by the
undersigned officer of the Corporation in his or her capacity as an officer of
the Fund.
4. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 28th day of January, 2000.
Attest:
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/James E. McKee /s/Bruce N. Alpert
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
Attest:
GABELLI & COMPANY, INC.
By: /s/Stephen Bondi
Name: Name:Stephen Bondi
Title: Title:President
PURCHASE AGREEMENT
Gabelli Equity Series Funds, Inc. (the "Corporation"), a Maryland Corporation,
and Gabelli & Company, Inc. (the "Buyer") hereby agree as follows:
1. The Corporation hereby offers the Buyer and the Buyer hereby
purchases one Class A Share (the "Share") of The Gabelli Small Cap Growth Fund
(the "Fund"), at a price of $10.00. The Share is the "initial Class A Share" of
the Fund. The Buyer hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Share, and the Corporation hereby acknowledges
receipt from the Buyer of funds in the amount of $10 in full payment for the
Share.
2. The Buyer represents and warrants to the Corporation that the Share
purchased by the Buyer is being acquired for investment purposes and not for the
purpose of distribution.
3. This Agreement has been executed on behalf of the Corporation by the
undersigned officer of the Corporation in his or her capacity as an officer of
the Fund.
4. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 28th day of January, 2000.
Attest:
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/James E. McKee /s/Bruce N. Alpert
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
Attest:
GABELLI & COMPANY, INC.
By: /s/Stephen Bondi
Name: Name:Stephen Bondi
Title: Title:President
PURCHASE AGREEMENT
Gabelli Equity Series Funds, Inc. (the "Corporation"), a Maryland Corporation,
and Gabelli & Company, Inc. (the "Buyer") hereby agree as follows:
1. The Corporation hereby offers the Buyer and the Buyer hereby
purchases one Class B Share (the "Share") of The Gabelli Small Cap Growth Fund
(the "Fund"), at a price of $10.00. The Share is the "initial Class B Share" of
the Fund. The Buyer hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Share, and the Corporation hereby acknowledges
receipt from the Buyer of funds in the amount of $10 in full payment for the
Share.
2. The Buyer represents and warrants to the Corporation that the Share
purchased by the Buyer is being acquired for investment purposes and not for the
purpose of distribution.
3. This Agreement has been executed on behalf of the Corporation by the
undersigned officer of the Corporation in his or her capacity as an officer of
the Fund.
4. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 28th day of January, 2000.
Attest:
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/James E. McKee /s/Bruce N. Alpert
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
Attest:
GABELLI & COMPANY, INC.
By: /s/Stephen Bondi
Name: Name:Stephen Bondi
Title: Title:President
PURCHASE AGREEMENT
Gabelli Equity Series Funds, Inc. (the "Corporation"), a Maryland Corporation,
and Gabelli & Company, Inc. (the "Buyer") hereby agree as follows:
1. The Corporation hereby offers the Buyer and the Buyer hereby
purchases one Class C Share (the "Share") of The Gabelli Small Cap Growth Fund
(the "Fund"), at a price of $10.00. The Share is the "initial Class C Share" of
the Fund. The Buyer hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Share, and the Corporation hereby acknowledges
receipt from the Buyer of funds in the amount of $10 in full payment for the
Share.
2. The Buyer represents and warrants to the Corporation that the Share
purchased by the Buyer is being acquired for investment purposes and not for the
purpose of distribution.
3. This Agreement has been executed on behalf of the Corporation by the
undersigned officer of the Corporation in his or her capacity as an officer of
the Fund.
4. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but such counterparts shall, together, constitute
only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 28th day of January, 2000.
Attest:
GABELLI EQUITY SERIES FUNDS, INC.
By:/s/James E. McKee /s/Bruce N. Alpert
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
Attest:
GABELLI & COMPANY, INC.
By: /s/Stephen Bondi
Name: Name:Stephen Bondi
Title: Title:President
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI EQUITY INCOME FUND
WHEREAS, THE GABELLI EQUITY INCOME FUND, 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 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 AAA Shares (the "Class AAA Shares"),
pursuant to Rule 18f-3 under the Act that permits the Fund to implement a
multiple distribution system providing investors with the option of purchasing
shares of various classes;
WHEREAS, the Board as a whole, and the 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 AAA Shares, and have accordingly approved the Plan by
votes cast in person at a meeting called for the purpose of amending and
restating the Plan; and
WHEREAS, this Plan governs the Class AAA Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class AAA Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby amends and restates the Plan in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Fund will pay to the Distributor as distribution payments (the
"Payments") in connection with the distribution of Class AAA Shares an aggregate
amount at a rate of 0.25% per year of the average daily net assets of the Class
AAA Shares. Such Payments shall be accrued daily and paid monthly in arrears or
shall be accrued and paid at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Class AAA
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class AAA Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class AAA Shares: advertising the
Class AAA Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class AAA Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class AAA Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
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 AAA Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved
by a vote of at least a majority of the Class AAA Shares. This Plan may not be
amended in any material respect without Board Approval and Disinterested
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 AAA Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class
AAA Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested 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 AAA
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 AAA Shares" shall mean the vote, at the annual
or a special meeting of the holders of the Class AAA Shares duly called, (a) of
67% or more of the voting securities present at such meeting, if the holders of
more than 50% of the Class AAA Shares outstanding on the record date for such
meeting are present or represented by proxy or, if less, (b) more than 50% of
the Class AAA Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
<PAGE>
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI SMALL CAP GROWTH FUND
WHEREAS, THE GABELLI SMALL CAP GROWTH FUND, 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 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 AAA Shares (the "Class AAA Shares"),
pursuant to Rule 18f-3 under the Act that permits the Fund to implement a
multiple distribution system providing investors with the option of purchasing
shares of various classes;
WHEREAS, the Board as a whole, and the 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 AAA Shares, and have accordingly approved the Plan by
votes cast in person at a meeting called for the purpose of amending and
restating the Plan; and
WHEREAS, this Plan governs the Class AAA Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class AAA Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby amends and restates the Plan in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Fund will pay to the Distributor as distribution payments (the
"Payments") in connection with the distribution of Class AAA Shares an aggregate
amount at a rate of 0.25% per year of the average daily net assets of the Class
AAA Shares. Such Payments shall be accrued daily and paid monthly in arrears or
shall be accrued and paid at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Class AAA
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class AAA Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class AAA Shares: advertising the
Class AAA Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class AAA Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class AAA Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
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 AAA Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved
by a vote of at least a majority of the Class AAA Shares. This Plan may not be
amended in any material respect without Board Approval and Disinterested
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 AAA Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class
AAA Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested 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 AAA
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 AAA Shares" shall mean the vote, at the annual
or a special meeting of the holders of the Class AAA Shares duly called, (a) of
67% or more of the voting securities present at such meeting, if the holders of
more than 50% of the Class AAA Shares outstanding on the record date for such
meeting are present or represented by proxy or, if less, (b) more than 50% of
the Class AAA Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI EQUITY INCOME FUND
WHEREAS, THE GABELLI EQUITY INCOME FUND, 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 A Shares (the "Class A Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the 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 A Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class A Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class A Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class A Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
5. In consideration of the services to be provided, and the expenses to be
incurred, by the Distributor pursuant to the Distribution Agreement, the Fund
will pay to the Distributor as distribution payments (the "Payments") in
connection with the distribution of Class A Shares an aggregate amount at a rate
of 0.25% per year of the average daily net assets of the Class A Shares. Such
Payments shall be accrued daily and paid monthly in arrears or shall be accrued
and paid at such other intervals as the Board shall determine. The Fund's
obligation hereunder shall be limited to the assets of the Class A Shares and
shall not constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class A Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class A Shares: advertising the
Class A Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class A Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class A Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party constancy 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 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 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 Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class A
Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Director Approval.
8. This Plan may be terminated at any time by a vote of the
Disinterested Director, cast in person at a meeting called for the purposes of
voting on such termination, or by a vote of at least a majority of the Class A
Shares.
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 Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class A Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class A Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
A Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI EQUITY INCOME FUND
WHEREAS, THE GABELLI EQUITY INCOME FUND, 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 Shares (the "Class B Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the 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 Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class B Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class B Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class B Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and
the expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Fund will pay to the Distributor a distribution fee at the
aggregate amount rate of .75% per year of the average daily net asset value of
the Class B Shares and a service fee at the aggregate amount rate of .25% per
year of the average daily net asset value of the Class B Shares (the
"Payments"). Such Payments shall be accrued daily and paid monthly in arrears or
shall be accrued and paid at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Class B
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class B Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class B Shares: advertising the
Class B Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class B Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class B Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
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 B Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved
by a vote of at least a majority of the Class B Shares. This Plan may not be
amended in any material respect without Board Approval and Disinterested
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 Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class B
Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Director Approval.
8. This Plan may be terminated at any time by a vote of the
Disinterested Director, cast in person at a meeting called for the purposes of
voting on such termination, or by a vote of at least a majority of the Class B
Shares.
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 Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class B Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class B Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
B Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI EQUITY INCOME FUND
WHEREAS, THE GABELLI EQUITY INCOME FUND, 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 Shares (the "Class C Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the 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 Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class C Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class C Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class C Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and
the expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Fund will pay to the Distributor a distribution fee at the
aggregate amount rate of .75% per year of the average daily net asset value of
the Class C Shares and a service fee at the aggregate amount rate of .25% per
year of the average daily net asset value of the Class C Shares (the
"Payments"). Such Payments shall be accrued daily and paid monthly in arrears or
shall be accrued and paid at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Class C
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class C Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class C Shares: advertising the
Class C Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class C Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class C Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
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 C Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved
by a vote of at least a majority of the Class C Shares. This Plan may not be
amended in any material respect without Board Approval and Disinterested
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 Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class C
Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested 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
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 Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class C Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class C Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
C Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI SMALL CAP GROWTH FUND
WHEREAS, THE GABELLI SMALL CAP GROWTH FUND, 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 A Shares (the "Class A Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the 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 A Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class A Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class A Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class A Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and the
expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Fund will pay to the Distributor as distribution payments (the
"Payments") in connection with the distribution of Class A Shares an aggregate
amount at a rate of 0.25% per year of the average daily net assets of the Class
A Shares. Such Payments shall be accrued daily and paid monthly in arrears or
shall be accrued and paid at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Class A
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class A Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class A Shares: advertising the
Class A Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class A Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class A Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
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 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 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 Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class A
Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Director Approval.
8. This Plan may be terminated at any time by a vote of the
Disinterested Director, cast in person at a meeting called for the purposes of
voting on such termination, or by a vote of at least a majority of the Class A
Shares.
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 Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class A Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class A Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
A Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI SMALL CAP GROWTH FUND
WHEREAS, THE GABELLI SMALL CAP GROWTH FUND, 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 Shares (the "Class B Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the 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 Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class B Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class B Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class B Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and
the expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Fund will pay to the Distributor a distribution fee at the
aggregate amount rate of .75% per year of the average daily net asset value of
the Class B Shares and a service fee at the aggregate amount rate of .25% per
year of the average daily net asset value of the Class B Shares (the
"Payments"). Such Payments shall be accrued daily and paid monthly in arrears or
shall be accrued and paid at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Class B
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class B Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class B Shares: advertising the
Class B Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class B Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class B Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
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 B Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved
by a vote of at least a majority of the Class B Shares. This Plan may not be
amended in any material respect without Board Approval and Disinterested
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 Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class B
Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested Director Approval.
8. This Plan may be terminated at any time by a vote of the
Disinterested Director, cast in person at a meeting called for the purposes of
voting on such termination, or by a vote of at least a majority of the Class B
Shares.
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 Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class B Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class B Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
B Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI SMALL CAP GROWTH FUND
WHEREAS, THE GABELLI SMALL CAP GROWTH FUND, 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 Shares (the "Class C Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the 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 Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class C Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class C Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class C Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. In consideration of the services to be provided, and
the expenses to be incurred, by the Distributor pursuant to the Distribution
Agreement, the Fund will pay to the Distributor a distribution fee at the
aggregate amount rate of .75% per year of the average daily net asset value of
the Class C Shares and a service fee at the aggregate amount rate of .25% per
year of the average daily net asset value of the Class C Shares (the
"Payments"). Such Payments shall be accrued daily and paid monthly in arrears or
shall be accrued and paid at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Class C
Shares and shall not constitute an obligation of the Fund except out of such
assets and shall not constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under
this Plan will be used by the Distributor for the purpose of financing or
assisting in the financing of any activity which is primarily intended to result
in the sale of Class C Shares. The scope of the foregoing shall be interpreted
by the Board, whose decision shall be conclusive except to the extent it
contravenes established legal authority. Without in any way limiting the
discretion of the Board, the following activities are hereby declared to be
primarily intended to result in the sale of Class C Shares: advertising the
Class C Shares or the Fund's investment adviser's mutual fund activities;
compensating underwriters, dealers, brokers, banks and other selling entities
(including the Distributor and its affiliates) and sales and marketing personnel
of any of them for sales of Class C Shares, whether in a lump sum or on a
continuous, periodic, contingent, deferred or other basis; compensating
underwriters, dealers, brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its personnel) of any of
them for providing services to shareholders of the Fund relating to their
investment in the Class C Shares, including assistance in connection with
inquiries relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
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 C Shares
without regard to the existence or terms and conditions of a plan of
distribution under Rule 12b-1 of the Act, this Plan shall not be construed to
prevent or restrict the Fund from paying such amounts outside of this Plan and
without limitation hereby and without such payments being included in
calculation of Payments subject to the limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved
by a vote of at least a majority of the Class C Shares. This Plan may not be
amended in any material respect without Board Approval and Disinterested
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 Shares. This Plan may continue in
effect for longer than one year after its approval by a majority of the Class C
Shares only as long as such continuance is specifically approved at least
annually by Board Approval and by Disinterested 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
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 Shares" shall mean the vote, at the annual or
a special meeting of the holders of the Class C Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class C Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
C Shares outstanding on the record date for such meeting.
Dated: November 17, 1999
AMENDED AND RESTATED RULE 18f-3
MULTI-CLASS PLAN
FOR
THE GABELLI EQUITY INCOME FUND
SERIES OF GABELLI EQUITY SERIES FUNDS, INC.
This Amended and Restated Multi-Class Plan (this "Multi-Class Plan") is
adopted pursuant to Rule 18f-3 under the Act to provide for the issuance and
distribution of multiple classes of shares in relation to The Gabelli Equity
Income Fund, consisting of a separate class of the capital stock of the Gabelli
Equity Series Funds, Inc. (the "Corporation"), in accordance with the terms,
procedures and conditions set forth below. A majority of the Directors of the
Corporation, including a majority of the Directors who are not interested
persons of the Corporation within the meaning of the Act, have found this
Multi-Class Plan, including the expense allocations, to be in the best interest
of the Corporation and each Class of Shares constituting the Fund.
1. 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 sub-series of Shares of the Fund.
5. Class A Shares - shall have the meaning ascribed in Section B.1.
6. Class B Shares - shall have the meaning ascribed in Section B.1.
7. Class C Shares - shall have the meaning ascribed in Section B.1.
8. Class AAA Shares - shall have the meaning ascribed in Section
B.1.
9. Distribution Expenses - expenses, including allocable overhead
costs, imputed interest, any other expenses and any
element of profit referred to in a Plan of Distribution
and/or board resolutions, incurred in activities which are
primarily intended to result in the distribution and sale
of Shares.
10. Distribution Fee - a fee paid by the Corporation in respect of
the assets of a Class of the Fund to the Distributor
pursuant to the Plan of Distribution relating to the
Class.
11. Directors - the directors of the Corporation.
12. Distributor - Gabelli & Company, Inc.
13. Fund - The Gabelli Equity Income Fund.
14. IRS - Internal Revenue Service
15. NASD - National Association of Securities Dealers, Inc.
16. Plan of Distribution - any plan adopted under Rule 12b-1 under
the Act with respect to payment of a Distribution Fee.
17. 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.
18. SEC - Securities and Exchange Commission
19. Service Fee - a fee paid to financial intermediaries, including
the Distributor and its affiliates, for the ongoing
provision of personal services to shareholders of a Class
and/or the maintenance of shareholder accounts relating to
a Class.
20. Share - a share in the Fund.
2. Classes. Subject to further amendment, the Corporation
may offer different Classes of Shares constituting the Fund as
follows:
1. Class A Shares. Class A Shares means The Gabelli Equity Income Fund
Class A Stock as designated by Articles Supplementary adopted by the
Directors. Class A Shares shall be offered at net asset value plus a
front-end sales charge set forth in the Prospectus from time to time,
which may be reduced or eliminated in any manner not prohibited by the
Act or the NASD as set forth in the Prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing may be subject to a CDSC for the CDSC Period set forth in
Section D.1. The offering price of Class A Shares subject to a
front-end sales charge shall be computed in accordance with the Act.
Class A Shares shall be subject to ongoing Distribution Fees or
Service Fees approved from time to time by the Directors and set forth
in the Prospectus.
2. Class B Shares. Class B Shares means The Gabelli Equity Income Fund
Class B Stock as designated by Articles Supplementary adopted by the
Directors. Class B Shares shall be (1) offered at net asset value, (2)
subject to a CDSC for the CDSC Period set forth in Section D.1, (3)
subject to ongoing Distribution Fees and Service Fees approved from
time to time by the Directors and set forth in the Prospectus and (4)
converted to Class A Shares on the first business day of the
ninety-seventh calendar month following the calendar month in which
such Shares were issued. For Class B Shares previously exchanged for
shares of a money market fund the investment adviser of which is the
same as or an affiliate of the investment adviser of the Fund, the
time period during which such Shares were held in the money market
fund will be excluded.
3. Class C Shares. Class C Shares means The Gabelli Equity Income Fund
Class C Stock as designated by Articles Supplementary adopted by the
Directors. Class C Shares shall be (1) offered at net asset value, (2)
subject to a CDSC for the CDSC Period set forth in Section D.1. and
(3) subject to ongoing Distribution Fees and Service Fees approved
from time to time by the Directors and set forth in the Prospectus.
4. Class AAA Shares. Class AAA Shares means The Gabelli Equity Income
Fund Class AAA Stock as designated by Articles Supplementary adopted
by the Directors. Class AAA Shares shall be (1) offered at net asset
value, (2) sold without a front end sales charge or CDSC, (3) offered
only to investors acquiring Shares directly from the Distributor or
from a financial intermediary with whom the Distributor has entered
into an agreement expressly authorizing the sale by such intermediary
of Class AAA Shares and (4) subject to ongoing Distribution Fees or
Service Fees approved from time to time by the Directors and set forth
in the Prospectus.
3. Rights and Privileges of Classes. Each of the Class A Shares, Class B
Shares, Class C Shares and Class AAA Shares will represent an interest in
the same portfolio of assets and will have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and conditions except
as described otherwise in the Articles Supplementary adopted by the
Directors with respect to each of such Classes.
4. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class B
Shares and Class C Shares that do not incur a front end sales charge
subject to the following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and Class C Shares
shall be twenty-four months plus any portion of the month during which
payment for such Shares was received. The CDSC Period for Class B
Shares shall be ninety-six months plus any portion of the month during
which payment for such Shares was received.
2. CDSC Rate. The CDSC rate shall be recommended by the Distributor and
approved by the Directors. If a CDSC is imposed for a period greater
than thirteen months in each succeeding twelve months of the CDSC
Period after the first twelve months (plus any initial partial month)
the CDSC rate must be less than or equal to the CDSC rate in the
preceding twelve months (plus any initial partial month).
3. Disclosure and changes. The CDSC rates and CDSC Period shall be
disclosed in the Prospectus and may be decreased at the discretion of
the Distributor but may not be increased unless approved as set forth
in Section L.
4. Methodof calculation. The CDSC shall be assessed on an amount equal to
the lesser of the then current net asset value or the cost of the
Shares being redeemed. No CDSC shall be imposed on increases in the
net asset value of the Shares being redeemed above the initial
purchase price. No CDSC shall be assessed on Shares derived from
reinvestment of dividends or capital gains distributions. The order in
which Class B Shares and Class C Shares are to be redeemed when not
all of such Shares would be subject to a CDSC shall be as determined
by the Distributor in accordance with the provisions of Rule 6c-10
under the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC otherwise
due upon the redemption of Shares of any Class under circumstances
previously approved by the 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 of any
Class subject to a CDSC shall be computed in accordance with Rule
22c-1 under the Act and Section 22(d) of the Act and the rules and
regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect to Shares of any
Class may be retained by the Distributor to reimburse the Distributor
for commissions paid by it in connection with the sale of Shares
subject to a CDSC and for Distribution Expenses.
5. Service and Distribution Fees. Class A Shares and Class AAA Shares shall be
subject to ongoing Distribution Fees or Service Fees not in excess of 0.25%
per annum of the average daily net assets of the relevant Class. Class B
Shares and Class C Shares shall be subject to a Distribution Fee not in
excess of 0.75% per annum of the average daily net assets of the Class and
a Service Fee not in excess of 0.25% of the average daily net assets of the
Class. All other terms and conditions with respect to Service Fees and
Distribution Fees shall be governed by the plans adopted by the Fund with
respect to such fees and Rule 12b-1 of the Act.
6. Conversion. Shares acquired through the reinvestment of dividends and
capital gain distributions paid on Shares of a Class subject to conversion
shall be treated as if held in a separate sub-account. Each time any Shares
of a Class in a shareholder's account (other than Shares held in the
sub-account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares. All
conversions shall be effected on the basis of the relative net asset values
of the two Classes without the imposition of any sales load or other
charge. So long as any Class of Shares converts into Class A Shares, the
Distributor shall waive or reimburse the Fund, or take such other actions
with the approval of the Directors as may be reasonably necessary to ensure
that, the expenses, including payments authorized under a Plan of
Distribution, applicable to the Class A Shares are not higher than the
expenses, including payments authorized under a Plan of Distribution,
applicable to the Class of Shares that converts into Class A Shares. Shares
acquired through an exchange privilege will convert to Class A Shares after
expiration of the conversion period applicable to such Shares. The
continuation of the conversion feature is subject to continued compliance
with the rules and regulations of the SEC, the NASD and the IRS.
7. Allocation of Liabilities, Expenses, Income and Gains Among Classes.
1. Liabilities and Expenses applicable to a particular Class. Each Class
shall pay any Distribution Fee and Service Fee applicable to that
Class. Other expenses applicable to any of the foregoing Classes such
as incremental transfer agency fees, but not including advisory or
custodial fees or other expenses related to the management of the
Fund's assets, shall be allocated among such Classes in different
amounts in accordance with the terms of each such Class if they are
actually incurred in different amounts by such Classes or if such
Classes receive services of a different kind or to a different degree
than other Classes.
2. Income, losses, capital gains and losses, and liabilities and other
expenses applicable to all Classes. Income, losses, realized and
unrealized capital gains and losses, and any liabilities and expenses
not applicable to any particular Class shall be allocated to each
Class on the basis of the net asset value of that Class in relation to
the net asset value of the Fund.
3. Determination of nature of items. The Directors shall determine in
their sole discretion whether any liability, expense, income, gains or
loss other than those listed herein is properly treated as attributed
in whole or in part to a particular Class or all Classes.
8. Exchange Privilege. Holders of Class A Shares, Class B Shares, Class C
Shares and Class AAA Shares shall have such exchange privileges as are set
forth in the Prospectus for such Class. Exchange privileges may vary among
Classes and among holders of a Class.
9. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive voting rights on any
matter submitted to them that relates solely to that Class, provided
that:
1. If any amendment is proposed to the Plan of Distribution under
which Distribution Fees or Service Fees are paid with respect to
Class A Shares of the Fund that would increase materially the
amount to be borne by Class A Shares under such Plan of
Distribution, then no Class B Shares shall convert into Class A
Shares of the Fund until the holders of Class B Shares of the
Fund have also approved the proposed amendment.
2. If the holders of either the Class B 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 Shares of the Fund as constituted prior to
the amendment.
2. Shareholders of a Class shall have separate voting rights on any
matter submitted to shareholders with respect to which the interest of
one Class differs from the interests of any other Class, provided
that:
1. If the holders of Class A Shares approve any increase in expenses
allocated to the Class A Shares, then no Class B Shares shall
convert into Class A Shares of the Fund until the holders of
Class B Shares of the Fund have also approved such expense
increase.
2. If the holders of Class B 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
Shares shall convert into another Class identical in all material
respects to Class A Shares of the Fund as constituted prior to
the expense increase.
10. 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.
11. 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.
12. Amendment. Any material amendment to this Multi-Class Plan shall be
approved by the affirmative vote of a majority (as defined in the Act) of
the 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. Except as so provided, no amendment to this Multi-Class
Plan shall be required to be approved by the shareholders of any Class of
the Shares constituting the Fund. The Distributor shall provide the
Directors such information as may be reasonably necessary to evaluate any
amendment to this Multi-Class Plan.
AMENDED AND RESTATED RULE 18f-3
MULTI-CLASS PLAN
FOR
THE GABELLI SMALL CAP GROWTH FUND
SERIES OF GABELLI EQUITY SERIES FUNDS, INC.
This Amended and Restated Multi-Class Plan (this "Multi-Class Plan") is
adopted pursuant to Rule 18f-3 under the Act to provide for the issuance and
distribution of multiple classes of shares in relation to The Gabelli Small Cap
Growth Fund, consisting of a separate class of the capital stock of the Gabelli
Equity Series Funds, Inc. (the "Corporation"), in accordance with the terms,
procedures and conditions set forth below. A majority of the Directors of the
Corporation, including a majority of the Directors who are not interested
persons of the Corporation within the meaning of the Act, have found this
Multi-Class Plan, including the expense allocations, to be in the best interest
of the Corporation and each Class of Shares constituting the Fund.
1. 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 sub-series of Shares of the Fund.
5. Class A Shares - shall have the meaning ascribed in Section B.1.
6. Class B Shares - shall have the meaning ascribed in Section B.1.
7. Class C Shares - shall have the meaning ascribed in Section B.1.
8. Class AAA Shares - shall have the meaning ascribed in Section
B.1.
9. Distribution Expenses - expenses, including allocable overhead
costs, imputed interest, any other expenses and any element of
profit referred to in a Plan of Distribution and/or board
resolutions, incurred in activities which are primarily intended
to result in the distribution and sale of Shares.
10. Distribution Fee - a fee paid by the Corporation in respect of
the assets of a Class of the Fund to the Distributor pursuant to
the Plan of Distribution relating to the Class.
11. Directors - the directors of the Corporation.
12. Distributor - Gabelli & Company, Inc.
13. Fund - The Gabelli Small Cap Growth Fund.
14. IRS - Internal Revenue Service
15. NASD - National Association of Securities Dealers, Inc.
16. Plan of Distribution - any plan adopted under Rule 12b-1 under
the Act with respect to payment of a Distribution Fee.
17. 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.
18. SEC - Securities and Exchange Commission
19. Service Fee - a fee paid to financial intermediaries, including
the Distributor and its affiliates, for the ongoing provision of
personal services to shareholders of a Class and/or the
maintenance of shareholder accounts relating to a Class.
20. Share - a share in the Fund.
2. Classes. Subject to further amendment, the Corporation may offer different
Classes of Shares constituting the Fund as follows:
1. Class A Shares. Class A Shares means The Gabelli Small Cap Growth Fund
Class A Stock as designated by Articles Supplementary adopted by the
Directors. Class A Shares shall be offered at net asset value plus a
front-end sales charge set forth in the Prospectus from time to time,
which may be reduced or eliminated in any manner not prohibited by the
Act or the NASD as set forth in the Prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing may be subject to a CDSC for the CDSC Period set forth in
Section D.1. The offering price of Class A Shares subject to a
front-end sales charge shall be computed in accordance with the Act.
Class A Shares shall be subject to ongoing Distribution Fees or
Service Fees approved from time to time by the Directors and set forth
in the Prospectus.
2. Class B Shares. Class B Shares means The Gabelli Small Cap Growth Fund
Class B Stock as designated by Articles Supplementary adopted by the
Directors. Class B Shares shall be (1) offered at net asset value, (2)
subject to a CDSC for the CDSC Period set forth in Section D.1, (3)
subject to ongoing Distribution Fees and Service Fees approved from
time to time by the Directors and set forth in the Prospectus and (4)
converted to Class A Shares on the first business day of the
ninety-seventh calendar month following the calendar month in which
such Shares were issued. For Class B Shares previously exchanged for
shares of a money market fund the investment adviser of which is the
same as or an affiliate of the investment adviser of the Fund, the
time period during which such Shares were held in the money market
fund will be excluded.
3. Class C Shares. Class C Shares means The Gabelli Small Cap Growth Fund
Class C Stock as designated by Articles Supplementary adopted by the
Directors. Class C Shares shall be (1) offered at net asset value, (2)
subject to a CDSC for the CDSC Period set forth in Section D.1. and
(3) subject to ongoing Distribution Fees and Service Fees approved
from time to time by the Directors and set forth in the Prospectus.
4. Class AAA Shares. Class AAA Shares means The Gabelli Small Cap Growth
Fund Class AAA Stock as designated by Articles Supplementary adopted
by the Directors. Class AAA Shares shall be (1) offered at net asset
value, (2) sold without a front end sales charge or CDSC, (3) offered
only to investors acquiring Shares directly from the Distributor or
from a financial intermediary with whom the Distributor has entered
into an agreement expressly authorizing the sale by such intermediary
of Class AAA Shares and (4) subject to ongoing Distribution Fees or
Service Fees approved from time to time by the Directors and set forth
in the Prospectus.
3. Rights and Privileges of Classes. Each of the Class A Shares, Class B
Shares, Class C Shares and Class AAA Shares will represent an interest in
the same portfolio of assets and will have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and conditions except
as described otherwise in the Articles Supplementary adopted by the
Directors with respect to each of such Classes.
4. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class B
Shares and Class C Shares that do not incur a front end sales charge
subject to the following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and Class C Shares
shall be twenty-four months plus any portion of the month during which
payment for such Shares was received. The CDSC Period for Class B
Shares shall be ninety-six months plus any portion of the month during
which payment for such Shares was received.
2. CDSC Rate. The CDSC rate shall be recommended by the Distributor and
approved by the Directors. If a CDSC is imposed for a period greater
than thirteen months in each succeeding twelve months of the CDSC
Period after the first twelve months (plus any initial partial month)
the CDSC rate must be less than or equal to the CDSC rate in the
preceding twelve months (plus any initial partial month).
3. Disclosure and changes. The CDSC rates and CDSC Period shall be
disclosed in the Prospectus and may be decreased at the discretion of
the Distributor but may not be increased unless approved as set forth
in Section L.
4. Methodof calculation. The CDSC shall be assessed on an amount equal to
the lesser of the then current net asset value or the cost of the
Shares being redeemed. No CDSC shall be imposed on increases in the
net asset value of the Shares being redeemed above the initial
purchase price. No CDSC shall be assessed on Shares derived from
reinvestment of dividends or capital gains distributions. The order in
which Class B Shares and Class C Shares are to be redeemed when not
all of such Shares would be subject to a CDSC shall be as determined
by the Distributor in accordance with the provisions of Rule 6c-10
under the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC otherwise
due upon the redemption of Shares of any Class under circumstances
previously approved by the 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 of any
Class subject to a CDSC shall be computed in accordance with Rule
22c-1 under the Act and Section 22(d) of the Act and the rules and
regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect to Shares of any
Class may be retained by the Distributor to reimburse the Distributor
for commissions paid by it in connection with the sale of Shares
subject to a CDSC and for Distribution Expenses.
5. Service and Distribution Fees. Class A Shares and Class AAA Shares shall be
subject to ongoing Distribution Fees or Service Fees not in excess of 0.25%
per annum of the average daily net assets of the relevant Class. Class B
Shares and Class C Shares shall be subject to a Distribution Fee not in
excess of 0.75% per annum of the average daily net assets of the Class and
a Service Fee not in excess of 0.25% of the average daily net assets of the
Class. All other terms and conditions with respect to Service Fees and
Distribution Fees shall be governed by the plans adopted by the Fund with
respect to such fees and Rule 12b-1 of the Act.
6. Conversion. Shares acquired through the reinvestment of dividends and
capital gain distributions paid on Shares of a Class subject to conversion
shall be treated as if held in a separate sub-account. Each time any Shares
of a Class in a shareholder's account (other than Shares held in the
sub-account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares. All
conversions shall be effected on the basis of the relative net asset values
of the two Classes without the imposition of any sales load or other
charge. So long as any Class of Shares converts into Class A Shares, the
Distributor shall waive or reimburse the Fund, or take such other actions
with the approval of the Directors as may be reasonably necessary to ensure
that, the expenses, including payments authorized under a Plan of
Distribution, applicable to the Class A Shares are not higher than the
expenses, including payments authorized under a Plan of Distribution,
applicable to the Class of Shares that converts into Class A Shares. Shares
acquired through an exchange privilege will convert to Class A Shares after
expiration of the conversion period applicable to such Shares. The
continuation of the conversion feature is subject to continued compliance
with the rules and regulations of the SEC, the NASD and the IRS.
7. Allocation of Liabilities, Expenses, Income and Gains Among Classes.
1. Liabilities and Expenses applicable to a particular Class. Each Class
shall pay any Distribution Fee and Service Fee applicable to that
Class. Other expenses applicable to any of the foregoing Classes such
as incremental transfer agency fees, but not including advisory or
custodial fees or other expenses related to the management of the
Fund's assets, shall be allocated among such Classes in different
amounts in accordance with the terms of each such Class if they are
actually incurred in different amounts by such Classes or if such
Classes receive services of a different kind or to a different degree
than other Classes.
2. Income, losses, capital gains and losses, and liabilities and other
expenses applicable to all Classes. Income, losses, realized and
unrealized capital gains and losses, and any liabilities and expenses
not applicable to any particular Class shall be allocated to each
Class on the basis of the net asset value of that Class in relation to
the net asset value of the Fund.
3. Determination of nature of items. The Directors shall determine in
their sole discretion whether any liability, expense, income, gains or
loss other than those listed herein is properly treated as attributed
in whole or in part to a particular Class or all Classes.
8. Exchange Privilege. Holders of Class A Shares, Class B Shares, Class C
Shares and Class AAA Shares shall have such exchange privileges as are set
forth in the Prospectus for such Class. Exchange privileges may vary among
Classes and among holders of a Class.
9. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive voting rights on any
matter submitted to them that relates solely to that Class, provided
that:
1. If any amendment is proposed to the Plan of Distribution under
which Distribution Fees or Service Fees are paid with respect to
Class A Shares of the Fund that would increase materially the
amount to be borne by Class A Shares under such Plan of
Distribution, then no Class B Shares shall convert into Class A
Shares of the Fund until the holders of Class B Shares of the
Fund have also approved the proposed amendment.
2. If the holders of either the Class B 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 Shares of the Fund as constituted prior to
the amendment.
2. Shareholders of a Class shall have separate voting rights on any
matter submitted to shareholders with respect to which the interest of
one Class differs from the interests of any other Class, provided
that:
1. If the holders of Class A Shares approve any increase in expenses
allocated to the Class A Shares, then no Class B Shares shall
convert into Class A Shares of the Fund until the holders of
Class B Shares of the Fund have also approved such expense
increase.
2. If the holders of Class B 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
Shares shall convert into another Class identical in all material
respects to Class A Shares of the Fund as constituted prior to
the expense increase.
10. 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.
11. 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.
12. Amendment. Any material amendment to this Multi-Class Plan shall be
approved by the affirmative vote of a majority (as defined in the Act) of
the 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. Except as so provided, no amendment to this Multi-Class
Plan shall be required to be approved by the shareholders of any Class of
the Shares constituting the Fund. The Distributor shall provide the
Directors such information as may be reasonably necessary to evaluate any
amendment to this Multi-Class Plan.
