<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998
FILE NO. 33-54016
811-7326
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. 8 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 10 [X]
(CHECK APPROPRIATE BOX OR BOXES)
--------------
GABELLI INVESTOR FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER (800) 422-3554
BRUCE N. ALPERT
GABELLI FUNDS, INC.
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 FUNDS, INC. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE CORPORATE CENTER 919 THIRD AVENUE
RYE, NEW YORK 10580-1434 NEW YORK, NEW YORK 10022
(212) 735-2000
It is proposed that this filing will be effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b); or
[X] on May 1, 1998 pursuant to paragraph (b); or
[ ] 60 days after filing pursuant to paragraph (a); or
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a) 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> 2
GABELLI INVESTOR FUNDS, INC.
FORM N-1A
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a))
<TABLE>
<CAPTION>
PART A
ITEM NO. PROSPECTUS HEADING
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<S> <C>
1. Cover Page....... Cover Page
2. Synopsis......... Prospectus Summary; Table of Fees and
Expenses for the Fund
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Investment Objective and
Policies and Related Risk Factors; General
Information
5. Management of the Fund Management of the Fund; Investment
Objective and Policies; Risk Factors;
General Information
5(a) Management's Discussion of
the Fund Performance Not Applicable
6. Capital Stock and Other Securities Management of the Fund; Dividends,
Distributions and Taxes; General
Information
7. Purchase of Securities Being
Offered........ Management of the Fund; Distribution Plan;
Purchase of Shares; Retirement Plans
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not applicable
<CAPTION>
LOCATION IN
PART B STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
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<S> <C> <C>
10. Cover Page....... Cover Page
11. Table of Contents Table of Contents
12. General Information and History Notes to Financial Statements; See
Prospectus -- "General Information"
13. Investment Objective and Policies Investments; Investment Restrictions; See
Prospectus -- "Investment Objective and
Policies and Related Risk Factors"
14. Management of the Fund The Adviser; The Distributor; Directors and
Officers; See Prospectus -- "Management
of the Fund"
15. Control Persons and Principal
Holders of Securities Management of the Fund; See Prospectus --
"Management of the Fund"
16. Investment Advisory and Other
Services....... The Adviser; The Distributor; Directors and
Officers; See Prospectus -- "Management
of the Fund"
17. Brokerage Allocation and Other
Practices...... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities Dividends, Distributions and Taxes; Notes
to Financial Statements; See Prospectus --
"Dividends, Distributions and Taxes" and
"General Information"
19. Purchase, Redemption and Pricing
of Securities Being Offered Purchase and Redemption of Shares
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
LOCATION IN
PART B STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
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<S> <C> <C>
20. Tax Status....... Dividends, Distributions and Taxes; See
Prospectus-- "Dividends, Distributions and
Taxes"
21. Underwriters..... Purchase and Redemption of Shares; See
Prospectus-- "Management of the Fund"
22. Calculation of Performance Data Investment Performance Information
23. Financial Statements Report of Independent Auditors; Financial
Statements
</TABLE>
PART C
Information required to be included in Part C is set forth after the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE> 4
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The Gabelli ABC Fund
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
HTTP://WWW.GABELLI.COM
================================================================================
PROSPECTUS
MAY 1, 1998
The Gabelli ABC Fund's (the "Fund") investment objective is to achieve total
returns that are attractive to investors in various market conditions without
excessive risk of capital loss. The Fund seeks to achieve its investment
objective through investment in securities that the Fund's investment adviser
believes provide attractive opportunities for appreciation or investment income.
The Fund is an open-end non-diversified series of Gabelli Investor Funds, Inc.,
a Maryland corporation registered as a management investment company.
----------------------
The Fund is available to all investors without a sales charge. The minimum
initial investment in the Fund is $1,000. The Fund has a distribution plan which
permits it to pay .25% per year of its average daily net assets for marketing
and shareholder services and expenses. For further information, contact Gabelli
& Company, Inc. at the address or telephone number shown above.
----------------------
The Statement of Additional Information ("Additional Statement"), dated May 1,
1998, which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and Exchange Commission
(the "SEC") and is available for reference, along with other materials on the
SEC Internet Web Site (http://www.sec.gov) and is incorporated herein by
reference. For a free copy, write to The Gabelli ABC Fund at One Corporate
Center, Rye, New York 10580-1434 or call 1-(800) GABELLI (1-800-422-3554).
Purchase orders and redemption requests may be directed to the Gabelli Funds at
P.O. Box 8308, Boston, Massachusetts 02266-8909.
----------------------
Shares of the Fund are not deposits or obligations of any bank, and are not
insured or guaranteed by any bank, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other agency. An investment in the Fund
involves investment risks, including the possible loss of principal.
----------------------
This Prospectus should be retained by investors for future reference.
----------------------
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases..................... None
Deferred Sales Load......................................... None
Redemption Fees............................................. None
Exchange Fees............................................... None
ANNUAL FUND OPERATING EXPENSES: (as a percentage of average
net assets)
Management Fees............................................. 1.00%
12b-1 Expenses (a).......................................... .25%
Other Expenses (b).......................................... 1.01%
-----
Total Operating Expenses.......................... 2.26%
=====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming a 5% annual return............................... $23 $71 $121 $260
</TABLE>
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The amounts listed in this example should not be considered as representative of
future expenses and actual expenses may be greater or less than those indicated.
Moreover, while the example assumes a 5% annual return, the Fund's actual
performance will vary and may result in an actual return greater or less than
5%. The amounts shown are based on the annualized expenses incurred during the
fiscal year ended December 31, 1997.
The foregoing table is to assist you in understanding the various direct and
indirect costs and expenses that an investor in the Fund would bear.
(a) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the rules of the National
Association of Securities Dealers, Inc.
(b) Such expenses include custodian and transfer agency fees and other customary
Fund expenses.
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Management's Discussion and Analysis of the Fund's performance during the fiscal
year ended December 31, 1997 is included in the Fund's Annual Report to
Shareholders dated December 31, 1997. The Fund's Annual Report to Shareholders
may be obtained upon request and without charge by writing or calling the Fund
at the address or telephone number listed on the Prospectus cover.
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2
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FINANCIAL HIGHLIGHTS
The following has been audited by Grant Thornton LLP, independent auditors,
whose unqualified report thereon is incorporated by reference in the Additional
Statement. This information should be read in conjunction with the financial
statements. Selected data for a share of capital stock outstanding throughout
each period appears below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993+
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period.................... $ 9.84 $ 9.71 $ 9.57 $ 10.03 $ 10.00
-------- -------- -------- -------- -------
Net investment income................................... 0.08 0.21 0.21 0.33 0.29
Net realized and unrealized gain on investments......... 1.17 0.54 0.86 0.12 0.62
-------- -------- -------- -------- -------
Total from investment operations........................ 1.25 0.75 1.07 0.45 0.91
-------- -------- -------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.............................. (0.08) (0.21) (0.21) (0.33) (0.29)
From net realized gain on investments................... (0.77) (0.41) (0.72) (0.58) (0.59)
In excess of net investment income...................... (0.01) -- -- -- --
-------- -------- -------- -------- -------
Total distributions..................................... (0.86) (0.62) (0.93) (0.91) (0.88)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD............................ $ 10.23 $ 9.84 $ 9.71 $ 9.57 $ 10.03
======== ======== ======== ======== =======
Total return(a)......................................... 12.8% 7.8% 11.2% 4.5% 9.1%
-------- -------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................ $ 35,228 $ 26,801 $ 19,862 $ 24,419 $ 8,847
Ratio of net investment income to average net assets.... 0.87% 2.11% 1.83% 2.95% 2.96%(c)
Ratio of operating expenses to.......................... 2.09% 2.10% 2.09% 2.75%(c)
average net assets(b)................................... 2.26%
Portfolio turnover rate................................. 493% 343% 508% 490% 232%
Average commission rate per share(d).................... $ 0.0464 $ 0.0499 -- -- --
</TABLE>
- ------------
<TABLE>
<C> <S>
+ From commencement of operations on May 14, 1993.
(a) 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. Total return for the period of
less than one year is not annualized.
(b) The ratio of operating expenses to average net assets for
the year ended December 31, 1997 does not include a
reduction of expenses for custodian fee credits. Including
such credits, the ratio would have been 2.25%.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995,
the SEC requires a fund to disclose its average commission
rate per share.
</TABLE>
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3
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INVESTMENT OBJECTIVE AND POLICIES
AND RELATED RISK FACTORS
The Fund's investment objective is to achieve total returns that are attractive
to investors in various market conditions without excessive risk of capital
loss. The Fund will seek to achieve this objective through investment in
securities that the Adviser believes provide attractive opportunities for
appreciation or investment income. The Fund is not restricted as to the types
and quantities of securities it may buy except as described below.
In selecting securities for investment, the Adviser normally will consider the
following factors, among others: (1) the Adviser's own evaluations of the
private market value of the underlying assets and business of the company; (2)
the interest or dividend income generated by the securities; (3) the potential
for capital appreciation of the securities; (4) the prices of the securities
relative to other comparable securities; (5) whether the securities are entitled
to the benefits of sinking funds or other protective conditions; (6) the
existence of any anti-dilution protections or guarantees of the security; and
(7) the diversification of the Fund's portfolio as to issuers. The Adviser's
investment philosophy with respect to equity securities hinges on identifying
assets that are selling in the public market at a discount to the private market
value, which the Adviser defines as the value informed purchasers are willing to
pay to acquire assets with similar characteristics. The Adviser also evaluates
the issuers' free cash flow and long-term earnings trends. Finally, the Adviser
looks for a catalyst: something in the company's industry or indigenous to the
company or country itself that will surface additional value.
The Fund may invest without limit in common stock, preferred stock, convertible
securities, depository receipts, bonds, notes and other debt obligations of any
maturity, mortgage-backed and asset-backed securities, warrants, options and
futures contracts on securities and securities indices, and securities of
companies in bankruptcy or reorganization. Such securities may be issued by
domestic or foreign corporations or other types of entities, governments or
agencies or instrumentalities of governments or supranational agencies. There is
no minimum rating or credit quality of fixed income securities in which the Fund
may invest. The Fund may also utilize other investment strategies such as short
selling, buying when-issued securities, entering into forward commitments,
buying securities of unseasoned companies and engaging in various hedging
strategies such as the use of futures and options and repurchase agreements, and
foreign currency transactions.
The Fund may invest up to 25% of its total assets in fixed income securities
rated, at the time of investment, lower than BBB by Standard & Poor's Rating
Group ("S&P") or Baa by Moody's Investors Services, Inc. ("Moody's"), or unrated
but determined by the investment adviser to be of equivalent quality. The Fund
does not expect to invest in excess of 10% of its total assets in such
securities. Securities rated below BBB or Baa are typically referred to as "junk
bonds" and have speculative characteristics.
The Fund may invest without limit in securities for which a tender offer or
exchange offer has been made or announced and in securities of companies for
which a merger, consolidation, liquidation or similar proposal has been
announced. The Fund also may invest without limit in options, warrants to buy
securities, and securities issued by real estate investment trusts. Furthermore,
the Fund may invest without limit in securities issued by other investment
companies, subject to the conditions set forth in the Investment Company Act of
1940.
The Fund may invest in repurchase agreements with respect to any securities it
may own. Repurchase agreements are considered loans to the counterparty, and
will be fully collateralized at all
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4
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times with liquid securities and will only be entered into with financial
institutions approved by the Board of Directors.
The Fund may also lend securities to dealers or others and may borrow from banks
for temporary or emergency purposes or to satisfy redemption requests in amounts
not in excess of 15% of the Fund's total assets, with such borrowing not to
exceed 5% of the Fund's total assets for purposes other than satisfying
redemption requests. The Fund will not purchase securities when borrowings
exceed 5%.
The Fund may invest up to 15% of its net assets in securities with resale
restrictions or illiquid securities as to which market quotations are not
readily available.
See the Additional Statement for more information about these securities and
investment practices.
RISKS. The Adviser expects that, in accordance with the Fund's investment
objective, it will invest the Fund's assets in a more conservative manner than
it would in a small capitalization growth fund, for example, and may utilize
fixed income securities and hedging strategies to reduce the risk of capital
loss to a greater extent than it does in other equity funds managed by the
Adviser. As a result, the Fund's total return is not expected to be as high as
equity funds in periods of significant appreciation in the equity markets.
All securities investments are subject to risks. The equity securities in which
the Fund may invest are generally subordinated to the claims of creditors and
market prices are subject to the performance of the issuer, its financial health
and market perceptions. The value of securities of an issuer engaged in a tender
offer, restructuring or exchange offer may decline substantially if the
transaction fails to occur. Ratings of debt securities generally are intended to
reflect the rating agency's analysis of the strength of the issuer and the
likelihood of timely payment of principal and interest. Because the Fund may
invest in lower rated or unrated securities, it bears a substantially greater
risk of loss of the purchase price as a result of bankruptcy, default or
reorganization of the issuer than funds that own higher rated debt securities
and it is more dependent upon the adviser's evaluations of the security and the
issuer. Many of these lower rated securities are considered speculative and thus
the Fund should not be considered to be a balanced investment but rather only as
a component of an investment program. The market values of lower quality fixed
income securities tend to be less sensitive to changes in prevailing interest
rates and more sensitive to individual corporate developments and economic
conditions than higher rated securities. The secondary market for lower rated
securities is generally not as liquid as that for higher rated securities, which
may adversely affect the Fund's liquidity or net asset valuation process.
Mortgage backed securities may be more volatile than other fixed-income
securities and are subject to prepayment risk, which can result in the Fund
failing to recoup all of its investment or achieving lower than expected
returns. With respect to short sales, if a security sold short increases in
value the Fund could incur additional costs in covering its obligation greater
than any income otherwise obtained or could lose the opportunity for gain.
Repurchase agreements have the risk that collateral may not be able to be
disposed of at a desirable price, or that delays as a result of bankruptcy of
the counterparty or encumbrances of collateral or restrictions on its
disposition may occur. Lending of securities can result in a failure to deliver
the original security by the borrower, and similar risks with respect to
disposition of the collateral. When-issued and delayed delivery securities
transactions and forward commitments involve potential loss to the Fund if the
counterparty to the transaction fails to perform. Hedging transactions also have
certain risks
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5
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including imperfect market correlations, dependence on the credit of the
counterparty, possible inability to enter into offsetting transactions and
market fluctuations that can result in the Fund being in a worse position than
if the hedging had not occurred. Currency transactions also include the risk
securities losses could be magnified by changes in the value of the currency in
which a security is denominated relative to the U.S. dollar. While the Adviser
may try to hedge such risks, entering into hedging transactions can result in
even greater losses. The Adviser will attempt to manage these risks so that such
strategies and investments benefit the Fund, but no assurance can be given that
they will be successfully managed.
Disposition of illiquid securities often takes more time than for more liquid
securities and may result in higher selling expenses and may not be able to be
made at desirable prices.
The Fund's investments in foreign securities involve certain risks not
ordinarily associated with investments in securities of domestic issuers,
including fluctuations in foreign exchange rates, 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 accounting, auditing and financial reporting standards
and requirements may not be comparable. 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
Fund might have greater difficulty taking appropriate legal action in non-U.S.
courts.
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 Fund or the investor.
These risks are more fully described in the Additional Statement.
MANAGEMENT OF THE FUND
The Corporation's Board of Directors (who, with its officers, are described in
the Additional Statement) has overall responsibility for the management of the
Fund. The Board of Directors decides upon matters of general policy and reviews
the actions of Gabelli & Company, Inc. (the "Distributor") and the Adviser.
Pursuant to an Investment Advisory Contract with the Corporation on behalf of
the Fund, the Adviser under the supervision of the Corporation's Board of
Directors, provides a continuous investment program for the Fund's portfolio;
provides investment research and makes and executes recommendations for the
purchase and sale of securities; provides facilities and personnel,
and the exercise of all voting and other rights appertaining thereto required
for the Fund's administrative management, supervises the performance of
administrative and professional services provided by others and pays the
compensation of the Administrator and all officers and directors of the Fund who
are its affiliates. Mario J. Gabelli, Portfolio Manager, is primarily
responsible for the day-to-day management of The Gabelli ABC Fund. Mr. Gabelli
has been Chairman, Chief Executive Officer and Chief Investment Officer of the
Adviser since its organization in 1980. As compensation for its services and the
related expenses borne by the Adviser, the Fund pays the Adviser a fee, com-
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6
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puted daily and payable monthly, equal, on an annual basis, to 1.00% of the
Fund's average daily net assets. The Adviser is located at One Corporate Center,
Rye, New York 10580-1434.
The Adviser was formed in 1980 and as of March 31, 1998, acts as investment
adviser to the following investment companies with aggregate assets in excess of
$6.6 billion:
<TABLE>
<CAPTION>
NET ASSETS
3/31/98
Open-end investment companies: (in millions)
- ------------------------------ -------------
<S> <C>
Gabelli Asset Fund........................ $1,559
Gabelli Growth Fund....................... 1,401
Gabelli Value Fund Inc.................... 12
Gabelli Small Cap Growth Fund............. 763
Gabelli Equity Income Fund................ 348
Gabelli ABC Fund.......................... 88
Gabelli Global Telecommunications Fund.... 308
Gabelli Global Interactive Couch
Potato(R)Fund........................... 62
Gabelli Global Convertible Securities
Fund.................................... 150
Gabelli Gold Fund, Inc.................... 96
Gabelli U.S. Treasury Money Market Fund... 9
Gabelli International Growth Fund, Inc.... 29
Gabelli Capital Asset Fund................ 138
CLOSED-END INVESTMENT COMPANIES:
- ------------------------------------------
Gabelli Convertible Securities Fund,
Inc..................................... 125
Gabelli Equity Trust Inc.................. 1,319
Gabelli Global Multimedia Trust Inc....... 159
</TABLE>
The Distributor of the Fund is an indirect majority owned subsidiary 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, endowments and investment companies. As of March 31, 1998, GAMCO
had aggregate assets in excess of $7.2 billion under its management. Gabelli
Advisers, Inc., an affiliate of the Adviser, acts as investment adviser of the
Gabelli Westwood Funds with assets under management in excess of $349 million as
of March 31, 1998. Gabelli Fixed Income LLC is an affiliated Investment Adviser
to The Treasurer's Fund, Inc. and separate accounts with aggregate assets in
excess of $1.2 billion. Mr. Mario J. Gabelli may be deemed a "controlling
person" of the Adviser and the Distributor on the basis of his ownership of
stock of the Adviser.
In addition to the fees of the Adviser, the Fund is responsible for the payment
of all its other expenses incurred in the operation of the Fund, which include,
among other things, expenses for legal and independent auditor's services, costs
of printing all materials sent to shareholders, charges of State Street Bank and
Trust Company (the "Custodian", "Transfer Agent" and "Dividend Disbursing
Agent") and any other persons hired by the Fund, securities registration fees,
fees and expenses of unaffiliated directors, accounting and printing costs for
reports and similar materials sent to shareholders, membership fees in trade
organizations, fidelity bond and liability coverage for the Corporation's
directors, officers and employees, interest, brokerage and other trading costs,
taxes, expenses of qualifying the Fund for sale in various jurisdictions,
expenses of the Fund's distribution plan adopted under Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), expenses of
personnel performing shareholder servicing functions, litigation and other
extraordinary or non-recurring expenses and other expenses properly payable by
the Fund.
The Additional Statement contains further information about the Investment
Advisory Contract including a more complete description of the advisory and
expense arrangements, and administrative provisions.
The Adviser has entered into a Sub-Administration Contract with BISYS Fund
Services L.P. ("BISYS" or the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations. These services include the preparation and distribution of
materials for meetings of the Corporation's Board of Directors, compliance
testing of Fund activities and assistance in the preparation of proxy
statements, reports to shareholders and other documentation. The Adviser pays
the Sub-Administrator a prorated monthly fee at the annual rate of .0625% of the
average net assets (with a minimum annual fee of $30,000 per portfolio) on the
first $350 million of all the funds advised by the Adviser and affili-
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7
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ates and administered by BISYS; .0425% of any assets above $350 million and
.0225% of any assets above $700 million which, together with the services to be
rendered are subject to negotiation between the parties and both parties retain
the right unilaterally to terminate the arrangement on not less than 60 days'
notice. The Sub-Administrator has its principal office at 3435 Stelzer Road,
Columbus, Ohio 43219.
DISTRIBUTION PLAN
The Board of Directors of the Corporation has approved on behalf of the Fund as
being in the best interests of the Fund and its shareholders a Distribution Plan
which authorizes payments by the Fund in connection with the distribution of its
shares at an annual rate of .25% of the Fund's average daily net assets.
Payments may be made by the Fund under the Distribution Plan for the purpose of
financing any activity primarily intended to result in the sale of shares of the
Fund as determined by the Board of Directors. Such activities typically include
advertising; compensation for sales and 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 be subject to
its limitations.
The Plan was implemented by written agreements between the Fund and/or the
Distributor and each person (including the Distributor)
to which payments may be made. Administration of the Plan is regulated by Rule
12b-1 under the Investment Company Act of 1940 (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 approve all agreements implementing the
Plan and that the Plan may be continued from year to year only if the Board of
Directors concludes at least annually that continuation of the Plan is likely to
benefit shareholders.
The Board of Directors has implemented the Plan by having the Corporation enter
into an agreement with the Distributor authorizing payment to the Distributor
and its affiliates the .25% rate authorized by the Plan for distribution and
shareholder servicing activities of the types listed above. To the extent any of
the expenditures are based on allocations by the Distributor, the Fund 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 Fund's non-interested Directors and would be based on such
factors as the net assets of each Fund, the number of shareholder or prospective
shareholder inquiries and similar pertinent criteria. For the fiscal year ended
December 31, 1997, the Fund incurred distribution costs of $70,695 or 0.25% of
average daily net assets under the Plan.
PURCHASE OF SHARES
Shares of the Fund are offered without a sales load. The minimum initial
investment is $1,000. There is no minimum for subsequent investments. Shares of
the Fund are sold at the net asset value per share next determined after receipt
of an order by the Fund's Distributor or Transfer Agent in proper form with
accompanying check or bank wire or other payment arrangements satisfactory to
the Fund. Although most shareholders elect not to receive stock certificates,
certificates for whole shares only can be obtained on specific written request
to the Transfer Agent.
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8
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Shares of the Fund may also be purchased through registered broker-dealers. Such
broker-dealers may charge the investor a fee for their services. Such fees may
vary among broker-dealers, and such broker-dealers may impose higher initial or
subsequent investment requirements than those established by the Fund. Services
provided by broker-dealers may include allowing the investor to establish a
margin account and to borrow on the value of the Fund's shares in that account.
The net asset value per share of the Fund is determined as of the close of the
regular session of the New York Stock Exchange, Inc., which is generally 4:00
p.m. eastern time, on each day that trading is conducted on the New York Stock
Exchange by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the number of shares
outstanding at the time the determination is made. Portfolio securities for
which market quotations are readily available are valued at market value as
determined by the last quoted sale price prior to the valuation time on the
valuation date in the case of securities traded on securities exchanges or other
markets for which such information is available. Other readily marketable
securities are valued at the average of the latest bid and asked quotations for
such securities prior to the valuation time. Debt securities with remaining
maturities of 60 days or less are valued at amortized cost. All other assets are
valued at fair value as determined by or under the supervision of the Board of
Directors of the Fund. See "Determination of Net Asset Value" in the Additional
Statement.
Prospectuses, sales materials and applications may be obtained from the
Distributor. The Fund and its Distributor reserve the right in their sole
discretion (1) to suspend the offerings of the Fund's shares and (2) to reject
purchase orders when, in the judgment of the Fund's management, such rejection
is in the best interest of the Fund.
To invest, send a completed subscription order form to:
THE GABELLI FUNDS
P.O. BOX 8308
BOSTON, MA 02266-8308
If you are paying for your shares by check, your check for the amount of the
investment should be mailed to the same address and be made payable to "The
Gabelli ABC Fund". The exact name and number of the shareholder's account should
be clearly indicated.
Checks will be accepted if drawn in U.S. currency on a domestic bank for less
than $100,000. U.S. dollar checks drawn against a non-U.S. bank may be subject
to collection delays and will be accepted only upon actual receipt of funds by
the Transfer Agent. Bank collection fees may apply. The Fund will not accept
checks made payable to a third party.
If you are paying for your shares by bank wire, you should first telephone the
Fund at 1-800-422-3554. You should 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
Attn: Custody and Shareholder Services
Re: The Gabelli ABC Fund
A/C#
---------------------------------------------
Account of (Registered Owner)
----------------------------------------------
225 Franklin Street, Boston, MA 02110
There may be a charge by your bank for transmitting the money by bank wire but
State Street Bank and Trust Company does not charge investors in the Fund for
the receipt of wire transfers. If you are planning to wire funds, it is
suggested that you instruct your bank early in the day so the wire transfer can
be accomplished the same day.
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9
<PAGE> 13
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If you are delivering your check by overnight or personal delivery, send it to:
THE GABELLI FUNDS
THE BFDS BUILDING, 6TH FLOOR
TWO HERITAGE DRIVE
NORTH QUINCY, MA 02171
TELEPHONE INVESTMENT PLAN. You may purchase additional shares of the Fund by
telephone through the Automated Clearinghouse (ACH) system as long as your bank
is a member of the ACH system and you have a completed, approved Investment Plan
application on file with our Transfer Agent. The funding for your purchase will
be automatically deducted from the ACH eligible account you designate on the
application. Your investment will normally be credited to your Mutual Fund
account on the first business day following your telephone request. Your request
must be received no later than 4:00 p.m. eastern time. There is a minimum of
$100 for each telephone investment. Any subsequent changes in banking
information must be submitted in writing and accompanied by a sample voided
check. To initiate an ACH purchase, please call 1-800-GABELLI (422-3554) or
1-800-872-5365. Fund shares purchased through the Telephone or Automatic
Investment Plan will not be available for redemption for up to fifteen (15) days
following the purchase date.
AUTOMATIC INVESTMENT PLAN. The Fund offers an automatic monthly investment
plan, details of which can be obtained from the Distributor. There is no minimum
initial investment for accounts establishing an automatic investment plan.
SYSTEMATIC WITHDRAWAL PLAN. The Fund offers a systematic withdrawal program for
shareholders whereby they can authorize an automatic redemption on a monthly,
quarterly or annual basis. Details can be obtained from the Distributor.
OTHER INVESTORS. No minimum initial investment in the Fund is required for
officers, directors or full-time employees of the Fund, other investment
companies managed by the Adviser, the Adviser, the Sub-Administrator, the
Distributor or their affiliates, including members of the "immediate family" of
such individuals and retirement plans and trusts for their benefit. The term
"immediate family" refers to spouses, children and grandchildren (adopted or
natural), parents, grandparents, siblings, a spouse's siblings, a sibling's
spouse and a sibling's children.
REDEMPTION OF SHARES
Upon receipt by the Distributor or the Transfer Agent of a redemption request in
proper form, shares of the Fund will be redeemed at their next determined net
asset value. Redemption requests received after the time as of which the Fund's
net asset value is determined on a particular day will be redeemed at the net
asset value of the Fund determined on the next day that net asset value is
determined. Checks for redemption proceeds will normally be mailed to the
shareholder's address of record within seven days, but will not be mailed until
all checks in payment for the purchase of the shares to be redeemed have been
honored, which may take up to 15 days. Redemption requests may be made by letter
to the Transfer Agent specifying the name of the Fund, the dollar amount or
number of shares to be redeemed, and the account number. The letter must be
signed in exactly the same way the account is registered (if there is more than
one owner of the shares, all must sign) and, if any certificates for the shares
to be redeemed are outstanding, presentation of such certificates properly
endorsed is also required. Signatures on a redemption request and/or
certificates must be guaranteed by an "eligible guarantor institution" which
includes certain banks, brokers, dealers, credit unions, securities exchanges
and associations, clearing agencies and savings associations (signature
guarantees by notaries public are not acceptable). Shareholders may also redeem
Fund shares through
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10
<PAGE> 14
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shareholder agents, who have made arrangements with the Fund permitting them to
redeem shares by telephone or facsimile transmission and who may charge
shareholders a fee for this service if they have not received any payments under
the Distribution Plan. It is the responsibility of the shareholder's agent to
establish procedures which would assure that upon receipt of a shareholder's
order to redeem shares of the Fund the order will be transmitted so that it will
be received by the Distributor before the time when the price applicable to the
order expires.
Further documentation, such as copies of corporate resolutions and instruments
of authority, are normally requested from corporations, administrators,
executors, personal representatives, trustees or custodians to evidence the
authority of the person or entity making the redemption request.
If the Board of Directors should determine that it would be detrimental to the
remaining shareholders of the 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 Securities and Exchange Commission. Under such
circumstances, shareholders of the Fund receiving distributions in kind of
securities will incur brokerage commissions when they dispose of the securities.
The Fund may suspend the right of redemption or postpone the date of payment for
more than seven days during any period when (1) trading on the New York Stock
Exchange is restricted or the Exchange is closed, other than customary weekend
and holiday closings; (2) the Securities and Exchange Commission has by order
permitted such suspension; or (3) an emergency, as defined by rules of the
Securities and Exchange Commission, exists making disposal of portfolio
investments or determination of the value of the net assets of the Fund not
reasonably practicable.
To minimize expenses, the Fund reserves the right to redeem, upon not less than
30 days' notice, all shares of the Fund in an account (other than an IRA) which
as a result of shareholder redemption has a value below $500. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.
TELEPHONE REDEMPTION BY CHECK. The Fund accepts telephone requests for
redemption of unissued shares from shareholders provided the check is mailed to
the address of record on the account and such address has not been changed
within thirty (30) days prior to the request.
BY BANK WIRE. The Fund accepts telephone requests for wire redemption in excess
of $1,000 (but subject to a $25,000 limitation) to a predesignated bank either
on the subscription order form or in a subsequent written authorization with the
signature guaranteed. The Fund accepts signature guaranteed written requests for
redemption by bank wire without limitation. The proceeds are normally wired on
the following business day. Your bank must be either a member of the Federal
Reserve System or have a correspondent bank which is a member. Any change to the
banking information made at a later date must be submitted in writing with a
signature guarantee.
Requests for telephone redemption must be received between 9:00 a.m. and 4:00
p.m. eastern time. If your telephone call is received after this time or on a
day when the New York Stock Exchange is not open, the request will be entered
for the following business day. Shares are redeemed at the net asset value next
determined following your request. Fund shares purchased by check or through the
automatic purchase plan will not be available for redemption for fifteen (15)
days following the purchase.
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11
<PAGE> 15
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Shares held in certificate form must be returned to the Transfer Agent for
redemption of shares. Telephone redemption is not available for IRAs. The
proceeds of a telephone redemption may be directed to an account in another
mutual fund advised by Gabelli Funds, Inc., or its affiliate, provided the
account is registered in the redeeming shareholder's name. Such purchase will be
made at the respective net asset value plus applicable sales charge, if any,
with credit for any sales charge previously paid to the Distributor.
The Fund and its Transfer Agent will not be liable for following telephone
instructions reasonably believed to be genuine. In this regard the Fund and its
Transfer Agent require personal identification information before accepting a
telephone redemption. If the Fund or its Transfer Agent fail to use reasonable
procedures, the Fund might be liable for losses due to fraudulent instructions.
RETIREMENT PLANS
The Fund has available a form of Individual Retirement Account ("IRA") for
investment in Fund shares which may be obtained from the Distributor. The
minimum investment required to open an IRA for investment in shares of the Fund
is $1,000 for an individual except that both the individual and his or her
spouse may establish separate IRAs if their combined investment is $1,250. There
is no minimum for additional investment in an IRA account. For tax years
beginning after December 31, 1997, investors may be eligible to make
contributions to a new type of individual retirement account (a "Roth IRA"). An
investor can open a Roth IRA if he meets certain income limits specified in the
Internal Revenue Code of 1986, as amended (the "Code"). Any contributions made
by an investor to a Roth IRA are nondeductible for U.S. Federal income tax
purposes. Distributions from a Roth IRA are not included in the investor's gross
income and are not subject to a 10% penalty for early withdrawal if the
distributions are made after the end of the five-year period beginning with the
first tax year in which the investor made a contribution to the Roth IRA and the
distributions meet other criteria set forth in the Code. The maximum annual
aggregate contribution that can be made to IRAs and Roth IRAs is $2,000. In
addition, for tax years beginning after December 31, 1997, certain low and
middle-income investors may open an education individual retirement account (an
"Education IRA"). Eligible individuals are permitted to contribute up to $500
per year per beneficiary under 18 years old to an Education IRA. The minimum
initial investment for an Education IRA through the Fund is $250. A distribution
from an education IRA is generally excludable from gross income to the extent
that such distribution does not exceed qualified higher education expenses
incurred by the beneficiary during the year in which the distribution is made.
Investors who are self-employed may purchase shares of the Fund through
tax-deductible contributions to retirement plans for self-employed persons,
known as Keogh or H.R. 10 plans. The Fund does not currently act as Sponsor for
such plans. Fund shares may also be a suitable investment for other types of
qualified pension or profit sharing plans which are employer-sponsored,
including deferred compensation or salary reduction plans known as "401(k)
Plans" which give participants the right to defer portions of their compensation
for investment on a tax-deferred basis until distributions are made from the
plans. The minimum initial investment for an individual under such plans is
$1,000 and there is no minimum for additional investments. Under the 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
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12
<PAGE> 16
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non-working spouse may establish a separate IRA under the same conditions and
contribute a maximum of $4,000 annually provided that no more than $2,000 may be
contributed to the IRA of either spouse. Persons desiring information concerning
investments through IRA accounts or other retirement plans should write or
telephone the Distributor.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, unless the shareholder elects otherwise, be paid on
the payment date fixed by the Board of Directors in additional shares of the
Fund having an aggregate net asset value as of the ex-dividend date of such
dividend or distribution equal to the cash amount of such distribution. An
election to receive dividends and distributions may be changed by notifying the
Fund 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 Fund will pay any
dividends or realize any capital gains. However, the Fund currently intends to
pay dividends and capital gains distributions, if any, on an annual basis.
The Fund intends to qualify for tax treatment as a "Regulated Investment
Company" under the Internal Revenue Code in order to be relieved of Federal
income tax on that part of its net investment income and realized capital gains
which it pays out to its shareholders.
Dividends out of net investment income and distributions of realized short-term
capital gains are taxable to the recipient shareholders as ordinary income. In
the case of corporate shareholders, such distributions are eligible for the
dividends received deduction subject to proportionate reduction if the aggregate
qualifying dividends received by the Fund from domestic corporations in any year
are less than its "gross income" as defined by the Code. Distributions out of
long-term capital gains are taxable to the recipient as long-term capital gains.
Shareholders will be advised as to what portion of capital gains are to be
treated as 28% rate gain or 20% rate gain with respect to the maximum tax rate
for such gains (i.e., the portion of such capital gains that relates to assets
held for more than 12 months but not more than 18 months and the portion that
relates to assets held more than 18 months, respectively.) Dividends and
distributions, if any, declared by the Fund may also be subject to state and
local taxes. Prior to investing in shares of the Fund, prospective shareholders
may wish to consult their tax advisers concerning the Federal, state and local
tax consequences of such investment.
GENERAL INFORMATION
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES. The Fund is a series of
Gabelli Investor Funds, Inc., (the "Corporation") which was incorporated in
Maryland on October 30, 1992. The authorized capital stock consists of one
billion shares of stock having a par value of one tenth of one cent ($.001) per
share, all of which have been initially classified as Fund shares. 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 shares of each series would participate equally in the earnings,
dividends, and assets of the particular series and would vote separately to
approve management
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13
<PAGE> 17
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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
Articles 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.
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 audited annual reports to all of its shareholders
which include a list of portfolio securities and the Fund's financial statements
which shall be audited annually. 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.
PORTFOLIO TURNOVER. The investment policies of the Fund may lead to frequent
changes in investments, particularly in periods of rapidly fluctuating interest
or currency exchange rates. The portfolio turnover may be higher than that of
other investment companies. For the fiscal years ended December 31, 1996 and
1997, the portfolio turnover rates were 343% and 493%, respectively. The high
portfolio turnover rates for 1996 and 1997 are attributable to the investment in
securities subject to mergers or tender offers for which the holding period was
relatively short. Accordingly, the Fund experienced a large amount of purchases
and sales of investment securities relative to the average value of its long
term holdings.
Portfolio turnover generally involves some cost 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).
PERFORMANCE INFORMATION. The 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. The Fund may also furnish total return and yield calculations
for other periods.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. State Street Bank and
Trust Company is the Custodian for the Fund's cash and securities as well as the
Transfer and Dividend Disbursing Agent for its shares. Boston Financial Data
Services, Inc., an affiliate of State
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14
<PAGE> 18
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Street Bank and Trust Company performs the shareholder services on behalf of
State Street and is located at The BFDS Building, Two Heritage Drive, North
Quincy, MA 02171. State Street Bank and Trust Company does not assist in and is
not responsible for investment decisions involving assets of the Fund.
INDEPENDENT AUDITORS. Grant Thornton LLP has been appointed independent
auditors for the Fund, and is located at 7 Hanover Square, 6th Floor, New York,
New York 10004.
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).
Upon request, Gabelli & Company, Inc. will provide without charge, a paper copy
of this Prospectus to investors or their representatives who received this
Prospectus in an electronic format.
This Prospectus omits certain information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of the
Registration Statement including items omitted herein, may be obtained from the
Commission by paying the charges prescribed under its rules and regulations. The
Statement of Additional Information included in such Registration Statement may
be obtained without charge from the Fund or its Distributor.
YEAR 2000 UPDATE. As the year 2000 approaches, an issue has emerged regarding
how existing application software programs and operating systems can accommodate
this date value. Failure to adequately address this issue could have potentially
serious repercussions. The Adviser is in the process of working with the Fund's
service providers to prepare for the year 2000. Based on information currently
available, the Adviser does not expect that the Fund will incur significant
operating expenses or be required to incur material costs to be year 2000
compliant. Although the Adviser does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.
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<PAGE> 19
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Fees and Expenses........... 2
Financial Highlights................. 3
Investment Objective and Policies and
Related Risk Factors............... 4
Management of the Fund............... 6
Distribution Plan.................... 8
Purchase of Shares................... 8
Redemption of Shares................. 10
Retirement Plans..................... 12
Dividends, Distributions and Taxes... 13
General Information.................. 13
</TABLE>
- ------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus, the
Statement of Additional Information and in the Fund's official sales literature,
and if given or made, such information and representation may not be relied upon
as authorized by the Fund, its Investment Adviser, Distributor or any affiliate
thereof.
- ------------------------------------------------------
THE
GABELLI
ABC
FUND
PROSPECTUS
MAY 1, 1998
GABELLI FUNDS, INC.
INVESTMENT ADVISER
GABELLI & COMPANY, INC.
DISTRIBUTOR
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<PAGE> 20
THE GABELLI ABC FUND
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
TELEPHONE 1-800-GABELLI (1-800-422-3554)
HTTP://WWW.GABELLI.COM
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
This Statement of Additional Information ("Additional Statement") relates to The
Gabelli ABC Fund (the "Fund") which is a series of Gabelli Investor Funds, Inc.,
a Maryland corporation (the "Corporation"), and is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Fund's
prospectus dated May 1, 1998, as supplemented from time to time (the
"Prospectus"). This Additional Statement contains information in addition to
that set forth in the Prospectus into which this document is incorporated by
reference and should be read in conjunction with the Prospectus. Additional
copies of this document may be obtained without charge by writing or telephoning
the Fund at the address and telephone number set forth above.
TABLE OF CONTENTS
PAGE
---
Investments............................................................. B-2
The Adviser............................................................. B-10
The Distributor......................................................... B-11
Directors and Officers.................................................. B-11
Investment Restrictions................................................. B-13
Portfolio Transactions and Brokerage.................................... B-15
Purchase and Redemption of Shares....................................... B-16
Dividends, Distributions and Taxes...................................... B-16
Determination of Net Asset Value........................................ B-18
Investment Performance Information...................................... B-19
Counsel and Independent Auditors........................................ B-20
Shares of Beneficial Interest........................................... B-20
Appendix -- Description of Ratings of Bonds and Preferred Stock.......... B-22
<PAGE> 21
THE FOLLOWING INFORMATION SUPPLEMENTS THAT IN THE PROSPECTUS
INVESTMENTS
EQUITY SECURITIES
Because the Fund may invest without limit in the common stocks of both domestic
and foreign issuers, an investment in the Fund should be made with an
understanding of the risks inherent in any investment in common stocks including
the risk that the financial condition of the issuers of the Fund's portfolio
securities may become impaired or that the general condition of the stock market
may worsen (both of which may contribute directly to a decrease in the value of
the securities and thus in the value of the Fund's Shares). Additional risks
include risks associated with the right to receive payments from the issuer
which is generally inferior to the rights of creditors of, or holders of debt
obligations or preferred stock issued by, the issuer.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even preferred
stock by an issuer will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the economic interest
of holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither a fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Fund's portfolio thus may be expected to fluctuate.
Preferred stocks are usually entitled to rights on liquidation which are senior
to those of common stocks. For these reasons, preferred stocks generally entail
less risk than common stocks. Such securities may pay cumulative dividends.
Because the dividend rate is pre-established, and they are senior to common
stocks, such securities tend to have less possibility of capital appreciation.
Some of the securities in the Fund may be in the form of depository receipts.
Depository receipts usually represent common stock or other equity securities of
non-U.S. issuers deposited with a custodian in a depository. The underlying
securities are usually withdrawable at any time by surrendering the depository
receipt. Depository receipts are usually denominated in U.S. dollars and
dividends and other payments from the issuer are converted by the custodian into
U.S. dollars before payment to receipt holders. In other respects depository
receipts for foreign securities have the same characteristics as the underlying
securities. Depository receipts that are not sponsored by the issuer may be less
liquid and there may be less readily available public information about the
issuer.
NONCONVERTIBLE FIXED INCOME SECURITIES
The category of fixed income securities which are not convertible or
exchangeable for common stock includes 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 Fund may invest. Accordingly, the Fund could
invest in securities in default although the Fund will not invest more than 5%
of its assets in such securities.
Up to 25% of the Fund's total assets may be invested in lower quality debt
securities although the Fund does not expect to invest more than 10% 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
B-2
<PAGE> 22
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 Investors
Service, Inc., ("Moody's") and Standard & Poor's Rating Group ("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 Fund 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 the Fund's net asset value. In addition, the 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
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 the Fund's ability to
dispose of particular issues when necessary to meet the Fund's 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 the Fund to obtain
accurate market quotations for purposes of valuing the Fund's 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 Fund'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.
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<PAGE> 23
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 the
Fund purchases these securities at a discount, faster than expected prepayments
will increase, while slower than expected prepayments will reduce, yield to
maturity.
CONVERTIBLE SECURITIES
The Adviser believes that opportunities for capital appreciation may also be
found in convertible securities and the Fund may invest without limit in
convertible securities. This is particularly true in the case of companies that
have performed below expectations at the time the convertible security was
issued. If the company's performance has been poor enough, its convertible debt
securities will trade more like 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 S&P or Baa or better by Moody's and not considered by the Adviser to
be of equivalent credit quality.
The Fund may invest up to 25% of its total assets in convertible securities
rated, at the time of investment, less than BBB by S&P or Baa by Moody's or are
unrated but of equivalent credit quality in the judgment of the Adviser.
Securities which are not investment grade are viewed by the rating agencies as
being predominantly speculative in character and are characterized by
substantial risk concerning payments of interest and principal, sensitivity to
economic conditions and changes in interest rates, as well as by market price
volatility and/or relative lack of secondary market trading among other risks
and may involve major risk exposure to adverse conditions or be in default.
However, the Fund does not expect to invest more than 5% of its assets in
securities which are in default at the time of investment and will invest in
such securities only when the Adviser expects that the securities will
appreciate in value. There is no minimum rating of securities in which the Fund
may invest. Securities rated less than BBB by S&P or Baa by Moody's or
comparable unrated securities are typically referred to as "junk bonds." For
further information regarding lower rated securities and the risk associated
therewith, see the Description of Corporate Bond and Corporate Debt Ratings
attached hereto as an Appendix.
Some of the convertible securities in the Fund portfolio may be "Pay-In-Kind"
securities. During a designated period from original issuance, the issuer of
such a security may pay dividends or interest to the holder by issuing
additional fully paid and nonassessable shares or units of the same or another
specified security.
SOVEREIGN DEBT SECURITIES
The Fund may invest in securities issued by any country and denominated in any
currency, but expects that it generally will invest in developed countries
including Australia, Canada, Finland, the Netherlands, France, Germany, Hong
Kong, Italy, Japan, New Zealand, Norway, Spain, Sweden, the United Kingdom and
the United States. The obligations of governmental entities have various kinds
of government support and include obligations issued or guaranteed by
governmental entities with taxing power. These obligations may or may not be
supported by the full faith and credit of a government. The Fund will invest in
government securities of issuers considered stable by the Adviser, based on its
analysis of factors such as general political or economic conditions relating to
the government and the likelihood of expropriation, nationalization, freezes or
confiscation of private property. The Adviser does not believe that the credit
risk inherent in the obligations of one stable government is necessarily
significantly greater than that of another. Except for the fact that the Fund
may invest up to 100% of its assets in U.S. government securities for temporary
defensive purposes and except for the absence of currency exchange volatility,
the
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<PAGE> 24
Fund would utilize the same factors in determining whether and to what
extent to invest in U.S. government securities as with respect to debt
securities of other sovereign issuers.
The Fund may also purchase securities issued by semi-governmental or
supranational agencies such as the Asian Development Bank, the International
Bank for Reconstructional Development, the Export-Import Bank and the European
Investment Bank. The governmental members, or "stockholders," usually make
initial capital contributions to the supranational entity and in many cases are
committed to make additional capital contributions if the supranational entity
is unable to repay its borrowings.
The Fund may invest in securities denominated in a multi-national currency unit.
An illustration of a multi-national currency unit is the European Currency Unit
(the "ECU"), which is a "basket" consisting of specified amounts of the
currencies of the member states of the European Community, a Western European
economic cooperative organization that includes France, Germany, the
Netherlands, the United Kingdom and other countries. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. Such investments involve credit risks associated with the issuer and
currency risks associated with the currency in which the obligation is
denominated.
SECURITIES SUBJECT TO REORGANIZATION
The 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 Gabelli Funds, Inc. (the "Adviser"), there is a
reasonable prospect of total return 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. Since such investments are ordinarily
short-term in nature, they will tend to increase the turnover ratio of the
Funds, thereby increasing its brokerage and other transaction expenses. The
Adviser intends to select investments of the type described which, in its view,
have a reasonable prospect of capital appreciation which is significant in
relation to both risk involved and the potential of available alternate
investments.
OPTIONS
The 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
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. The Fund's transactions in options
may be subject to specific segregation requirements. See "Hedging Transactions"
below.
B-5
<PAGE> 25
If the 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 the 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 unexercised 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 the fund the credit risk that the counterparty will
fail to honor its obligations. The 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 the
Fund is limited to an investment not in excess of 5% of its total assets.
WARRANTS AND RIGHTS
The Fund may invest without limit in warrants or rights 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
The 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 Fund will only enter
into a forward commitment with the intention of actually acquiring the security,
the Fund may sell the security before the settlement date if it is deemed
advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate with its custodian cash or liquid
securities with the Fund's custodian in an aggregate amount at least equal to
the amount of its outstanding forward commitments.
UNSEASONED COMPANIES
The Fund may invest in securities of unseasoned companies.
SHORT SALES
The 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 the 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
B-6
<PAGE> 26
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 each Fund's total assets or 5% of such issuer's voting securities.
A 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 such Fund's aggregate short sales of a particular class of securities exceeds
25% of the outstanding securities of that class. A Fund 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, such Fund owns or has the immediate and
unconditional right to acquire at no additional cost the identical security.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest up to a total of 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 or otherwise determined to be liquid 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. The Board will review pertinent factors such as trading
activity, reliability of price information and trading patterns of comparable
securities in determining whether to treat any such security as liquid for
purposes of the foregoing 15% test. To the extent the Board treats such
securities as liquid, temporary impairments to trading patterns of such
securities may adversely affect the Fund's liquidity.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements, which are agreements pursuant to
which securities are acquired by the 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 Fund 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 the creditworthiness standards
established by the Fund's board of directors ("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 the 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, the 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, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities.
B-7
<PAGE> 27
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, the Fund may suffer a loss to the extent proceeds from the sale
of the underlying securities are less than the repurchase price. The Fund will
not enter into repurchase agreements of a duration of more than seven days if
taken together with all other illiquid securities in the Fund's portfolio, more
than 15% of its total assets would be so invested.
LOANS OF PORTFOLIO SECURITIES
To increase income, the 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 collaterization
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 1/3% 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.
BORROWING
The Fund 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
its 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 the Fund's assets
after giving effect to the borrowing. The Fund will not make additional
investments when borrowings exceed 5% of assets. The Fund may mortgage, pledge
or hypothecate assets to secure such borrowings.
HEDGING TRANSACTIONS
Futures Contracts. The Fund may enter into futures contracts only for certain
bona fide hedging, yield enhancement and risk management purposes. The 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 Commodity Futures Trading Commission (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 the 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
B-8
<PAGE> 28
securities being hedged, and potential losses in excess of the amount invested
in the futures contracts themselves.
Currency Transactions. The 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. The 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 the 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. The 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.
The Adviser may use such instruments on behalf of the Fund, depending upon
market conditions prevailing at such time and the perceived investment needs of
the Fund. Futures contracts, interest rate swaps, options on securities, indices
and futures contracts and certain currency contracts sold by the Fund are
generally subject to segregation and coverage requirements with the result that,
if the Trust does not hold the security or futures contract underlying the
instrument, the Fund will be required to segregate on an ongoing basis with its
custodian, cash, U.S. government securities, or other liquid obligations in an
amount at least equal to the Fund's obligations with respect to such
instruments. Such amounts fluctuate as the obligations increase or decrease. The
segregation requirement can result in the Fund maintaining securities positions
it would otherwise liquidate or segregating assets at a time when it might be
disadvantageous to do so.
THE ADVISER
The Adviser is a New York corporation with principal offices located at One
Corporate Center, Rye, New York 10580-1434.
Pursuant to an Investment Advisory Contract which was originally approved by the
Fund's sole shareholder on March 12, 1993 and last approved by the Fund's Board
of Directors on February 18, 1998, the Adviser furnishes a continuous investment
program for the Fund's portfolio, makes the day-to-day investment decisions for
the Fund, arranges the portfolio transactions for the Fund and generally manages
the Fund's investments in accordance with the stated policies of the Fund,
subject to the general supervision of the Board of Directors of the Corporation.
Under the 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 Statement of
Additional Information, including the printing of such documents for the purpose
of filings with the Securities and Exchange Commission; (5) supervises the
calculation of the net asset value of
B-9
<PAGE> 29
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 Fund's Board of
Directors and minutes of such meetings in all matters required by the Investment
Company Act of 1940, as amended, (the "1940 Act") to be acted upon by the Board.
The Adviser has entered into a Sub-Administration Contract with BISYS Fund
Services L.P. ("BISYS" or the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's 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 Administrator, the Adviser pays a prorated monthly fee at
the annual rate of .0625% of the average net assets of the Fund (minimum annual
fee of $30,000 per portfolio) on the first $350 million of all of the funds
advised by the Adviser and its affiliates and administered by BISYS and .0425%
of any net assets above $350 million, and .0225% of any assets above $700
million which, together with the services to be rendered, is subject to
negotiation between the parties and both parties retain the right unilaterally
to terminate the arrangement on not less than 60 days' notice.
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
Fund 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 Fund. However, the Investment
Advisory Contract provides that the Fund is not waiving any rights it may have
with respect to any violation of law which cannot be waived. The Investment
Advisory Contract also provides indemnification for the Adviser and each of
these persons for any conduct for which they are not liable to the Fund. The
Investment Advisory Contract in no way restricts the Adviser from acting as
adviser to others. The Fund has 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 Fund has further agreed that in the event
that for any reason, the Adviser ceases to be its investment adviser, the Fund
will, unless the Adviser otherwise consents in writing, promptly take all steps
necessary to change its name to one which does not include "Gabelli."
The 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
1940 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 1940 Act and rules thereunder except to the extent
otherwise provided by order of the Commission or any rule under the 1940 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." The Investment Advisory Contract provides in effect, that
unless terminated it will remain in effect so long as continuance of the
Investment Advisory Contract is approved annually by the Directors of the Fund,
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.
<TABLE>
ADVISORY FEES EARNED
FOR THE FISCAL YEARS ENDED DECEMBER 31,
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
$223,130 $270,747 $281,337
</TABLE>
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<PAGE> 30
THE DISTRIBUTOR
The Corporation on behalf of the Fund has entered into a Distribution Agreement
with Gabelli & Company, Inc. (the "Distributor"), a New York corporation which
is an indirect subsidiary of Gabelli Funds, Inc., having principal offices
located at One Corporate Center, Rye, New York 10580-1434. The Distributor acts
as agent of the Fund for the continuous offering of its shares on a best efforts
basis.
The Distribution Agreement is terminable by the Distributor or the Corporation
at any time without penalty on not more than sixty nor less than thirty days'
written notice, provided, that termination by the Corporation must be directed
or approved by the Board of Directors of the Corporation, by the vote of the
holders of a majority of the outstanding securities of the Corporation, or by
written consent of a majority of the Directors who are not interested persons of
the Corporation or the Distributor. The Distribution Agreement will
automatically terminate in the event of its assignment, as defined in the Act.
The Distribution Agreement provides that, unless terminated, it will remain in
effect so long as continuance of the Distribution Agreement is approved annually
by the Corporation's Board of Directors or by a majority of the outstanding
voting securities of the Corporation, and in either case, also by a majority of
the Directors who are not interested persons of the Corporation or the
Distributor. The Distribution Agreement was last approved by the Board of
Directors on February 18, 1998.
During the fiscal year ended December 31, 1997, the Distributor paid
distribution expenses under the Distribution Plan of $30,600. Of this amount
$12,300 was spent on printing, postage and stationery, $2,100 on overhead
support expenses, $14,800 on salaries of personnel of the Distributor and $1,400
on third party brokers. Pursuant to the Distribution Plan, the Fund paid the
Distributor $70,695, or .25% of its average daily net assets.
DIRECTORS AND OFFICERS
The Directors and Executive Officers of the Corporation, their principal
business occupations during the last five years and their affiliations, if any,
with the Adviser or the Sub-Administrator, are shown below. Directors deemed to
be "interested persons" of the Fund for purposes of the 1940 Act are indicated
by an asterisk.
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE
- ------------------------------------ --------------------------------------
YEARS; AFFILIATIONS WITH THE ADVISER OR
---------------------------------------
ADMINISTRATOR
-------------
Mario J. Gabelli* Chairman of the Board and President of
Chairman of the Board the Fund since 1989; Chairman of the
One Corporate Center Board, Chief Executive Officer and Chief
Rye, New York 10580 Investment Officer of Gabelli Funds,
Age: 55 Inc. and GAMCO Investors, Inc., Chairman
of the Board and Chief Executive Officer
of Lynch Corporation, a diversified
manufacturing and communications
services company; Director of East/West
Communications, Inc.; Governor of the
American Stock Exchange and officer
and/or Director or Trustee of 12 other
Gabelli funds.
Anthony J. Colavita President and Attorney at Law in the law
Director firm of Anthony J. Colavita, P.C. since
575 White Plains Road 1961; Director or Trustee of 12 other
Eastchester, New York 10709 Gabelli funds.
Age: 62
B-11
<PAGE> 31
Vincent D. Enright Senior Vice President and Chief
Director Financial Officer of KeySpan Energy
One Corporate Center Corporation; Director or Trustee of 2
Rye, New York 10580 other Gabelli funds.
Age: 54
Karl Otto Pohl* Director of the Fund since 1992. Partner
Director of Sal Oppenheim Jr. & Cie (private
One Corporate Center investment bank); Former President of
Rye, New York 10580 the Deutsche Bundesbank and Chairman of
Age: 68 its Central Bank Council from 1980
through 1991; Currently Board Member of
IBM World Trade Europe/Middle
East/Africa Corp.; Bertelsmann AG,
Zurich Versicherungs-Gesellschaft
(insurance); the International Advisory
Board for JP Morgan & Co.; Supervisory
Board Member of Royal Dutch (petroleum
company) ROBECo/o Group; Advisory Board
of Unilever N.V. and Unilever
Deutschland; German Governor,
International Monetary Fund from 1980
through 1991; Board Member, Bank for
International Settlements from 1980
through 1991; and Director or Trustee of
14 other Gabelli funds.
Werner Roeder, M.D Director of Surgery, Lawrence Hospital,
Director and practicing private physician.
One Corporate Center Director or Trustee of 6 other Gabelli
Rye, New York 10580 funds.
Age: 57
Bruce N. Alpert Vice President and Chief Operating
Vice President and Treasurer Officer of the Investment Advisory
One Corporate Center Division of Gabelli Funds, Inc. (the
Rye, New York 10580 "Adviser"); officer of each mutual fund
Age: 46 managed by the Adviser or its
affiliates.
James E. McKee Vice President and General Counsel of
Secretary GAMCO Investors, Inc. since 1993;
One Corporate Center Secretary of all mutual funds managed by
Rye, New York 10580 the Adviser or its affiliates; U.S.
Age: 35 Securities and Exchange Commission, New
York, (Branch Chief, 1992-1993, Staff
Attorney, 1989-1992).
The Fund pays each Director who is not an employee of the Adviser or an
affiliated company an annual fee of $1,000 and $250 for each 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. Directors and officers of the Fund who are
employed by the Adviser or an affiliated company receive no compensation or
expense reimbursement from the Corporation.
The following table sets forth certain information regarding the compensation of
the Fund's directors and officers. Except as disclosed below, no executive
officer or person affiliated with the Fund received compensation from the Fund
for the calendar year ended December 31, 1997, in excess of $60,000.
B-12
<PAGE> 32
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM THE FUND
NAME OF PERSON, COMPENSATION AND FUND COMPLEX
POSITION FROM THE FUND PAID TO DIRECTORS*
- --------------- ------------- ------------------
<S> <C> <C>
Mario J. Gabelli.................... $ 0 $ 0
Chairman of the Board
Vincent D. Enright.................. $ 2,000 $17,000(3)
Director
Anthony J. Colavita................. $ 2,000 $79,190(13)
Director
Karl Otto Pohl...................... $ 1,750 $85,690(15)
Director
Werner Roeder, M.D.................. $ 2,000 $21,691(7)
Director
<FN>
- ----------------
* Represents the total compensation paid to such persons during the calendar
year ending December 31, 1997. The parenthetical number represents the
number of investment companies (including the Fund) from which such person
receives compensation that are considered part of the same fund complex as
the Fund, because, among other things, they have a common investment
adviser.
</TABLE>
INVESTMENT RESTRICTIONS
The Fund's investment objective and the following investment restrictions are
fundamental and cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities (defined in the 1940 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 by the Fund not to be fundamental and accordingly may be changed
without stockholder 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 the Fund will not be considered a deviation from policy. The Fund may
not:
(1) invest 25% or more of the value of its total assets in any one industry
or issuer;
(2) issue senior securities, except that the Fund may borrow money,
including on margin if margin securities are owned and enter into reverse
repurchase agreements in an amount up to 33 1/3% of its total assets (including
the amount of such enumerated senior securities issued but excluding any
liabilities and indebtedness not constituting senior securities) and except that
the 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. The Fund's
obligations under the foregoing types of transactions and investment strategies
are not treated as senior securities;
(3) 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;
B-13
<PAGE> 33
(4) 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;
(5) invest for the purpose of exercising control over management of any
company;
(6) purchase real estate or interests therein, including limited
partnerships that invest primarily in real estate equity interests, other than
mortgage-backed securities, publicly traded real estate investment trusts and
similar instruments; or
(7) purchase or sell commodities or commodity contracts except for hedging
purposes or invest in any oil, gas or mineral interests.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is authorized on behalf of the Fund to employ brokers to effect the
purchase or sale of portfolio securities with the objective of obtaining prompt,
efficient and reliable execution and clearance of such transactions at the most
favorable price obtainable ("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. The
Fund also expects that securities will be purchased at times in underwritten
offerings where the price includes a fixed amount of compensation generally
referred to as 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. It is the
practice of the Adviser and its affiliates to cause purchase and sale
transactions to be allocated among the Fund and others whose assets they manage
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
The policy of each Fund regarding purchases and sales of portfolio securities 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 each Fund or the Adviser of the type described in
Section 28(e) of the Securities Exchange Act of 1934. In doing so, each Fund 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 brokers or dealers through which the Fund effects
securities transactions are used by the Adviser and its advisory affiliates in
carrying out their responsibilities with respect to all of their accounts over
which they exercise investment discretion. Such investment information may be
useful only to one or more of the other accounts of the Adviser and its advisory
affiliates, and research
B-14
<PAGE> 34
information received for the commissions of those particular accounts may be
useful both to the Fund and 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 Fund nor the Adviser has any legally binding agreement 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 has allocated brokerage commissions of $56,907 on portfolio transactions
in the principal amount of $83,452,740 during 1997, to various broker-dealers
that have provided research services to the Adviser. The average commission on
these transactions was $0.0007 per share.
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 Fund 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 Fund.
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.
The following table sets forth certain information regarding the brokerage
commissions paid, the brokerage commissions paid to Gabelli affiliates,
percentage of commissions paid to affiliates and percentage of aggregate dollar
amount of transactions involving commissions paid to affiliates for the fiscal
years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE DOLLAR
AMOUNT OF
TRANSACTIONS
BROKERAGE PERCENTAGE OF INVOLVING
TOTAL BROKERAGE COMMISSIONS PAID TO COMMISSIONS PAID TO COMMISSIONS
PERIOD COMMISSIONS PAID GABELLI AFFILIATES AFFILIATES PAID TO AFFILIATES
----- ------------ ------------- --------------- -----------
<S> <C> <C> <C> <C>
1995............................ $90,302 $25,448 28.2% 27.6%
1996............................ $44,077 $16,011 36.3% 19.6%
1997............................ $122,327 $51,270 41.9% 32.5%
</TABLE>
To obtain the best execution of portfolio trades on the New York Stock Exchange,
Inc. ("Exchange"), Gabelli controls and monitors the execution of such
transactions on the floor of the Exchange through independent "floor brokers" or
through the Designated Order Turnaround ("DOT") System of the Exchange. Such
transactions are then cleared, confirmed to the Fund for the account of Gabelli,
and settled directly with the Custodian of the Fund by a clearing house member
firm which remits the commission less its clearing charges to Gabelli. 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 New York Stock Exchange.
B-15
<PAGE> 35
PURCHASE AND REDEMPTION OF SHARES
Cancellation of purchase orders for Fund shares (as, for example, when checks
submitted to purchase shares are returned unpaid) cause a loss to be incurred
when the net asset value of the Fund shares on the date of cancellation is less
than on the original date of purchase. The investor is responsible for such
loss, and 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.
To minimize expenses, the Fund reserves the right to redeem, upon not less than
30 days notice, all shares of the Fund in an account (other than an IRA) which
as a result of shareholder redemption has a value below $500 and has reserved
the ability to raise this amount to up to $10,000. However, a shareholder will
be allowed to make additional investments prior to the date fixed for redemption
to avoid liquidation of the account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
GENERAL
The Fund will determine either to distribute or to retain all or part of any net
long-term capital gains in any year for reinvestment. If any such gains are
retained, the Fund will be subject to a tax of 34% of such amount. In that
event, the Fund expects to designate the retained amount as undistributed
capital gains in a notice to its shareholders, each of whom (1) will be required
to include in income for tax purposes as long-term capital gains, 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 66% of the amount of
undistributed capital gains included in such shareholder's gross income.
Under the Code, amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To avoid the tax, the Fund must distribute during each calendar year, an
amount equal to, at the minimum, the sum of (1) 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) 98%
of its capital gains in excess of its capital losses for the twelve-month period
ending on October 31 of the calendar year, (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. A distribution will be treated as paid during the
calendar year if it is paid during the calendar year or declared by the Fund in
October, November or December of the year, payable to shareholders of record 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.
Gains or losses on the sales of securities by the Fund will be long-term capital
gains or losses if the securities have been held by the Fund for more than
eighteen months. Gains or losses on the sale of securities held for more than
twelve months but less than eighteen months will be mid-term capital gains or
losses.
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Code. If so qualified, the Fund will not be subject to Federal income tax
on its net investment income and net short-term capital gains, if any, realized
during any fiscal year in which it distributes such income and capital gains to
its shareholders.
HEDGING TRANSACTIONS
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 Fund at the end of each taxable year
are
B-16
<PAGE> 36
"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.
Generally, the hedging transactions undertaken by the Fund 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 Fund 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 Fund 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.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences of hedging transactions to the Fund are not
entirely clear.
The Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections accelerate
the recognition of gains or losses from the affected straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, and require the capitalization of interest
expense, 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.
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 shares. Dividends paid by the 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 gains (which consists of the excess of long-term capital gains
over net short-term capital losses), if any, are taxable as long-term capital
gains, whether paid in cash or in shares, 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 will be taxable even though it represents a return
of invested capital. The price of shares purchased at this time may reflect the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which will nevertheless be taxable to
them.
SALES OF SHARES
Upon a sale or exchange of his or her shares, a shareholder will realize a
taxable gain or loss depending upon his or her basis in the shares. Such gain or
loss will be treated as a long-term, mid-term, or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of. In such case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
B-17
<PAGE> 37
BACKUP WITHHOLDING
The Corporation may be required to withhold Federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide the
Fund with 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 a shareholder's Federal income
tax liability.
FOREIGN WITHHOLDING TAXES
Income received by the Fund 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 Fund's assets to be invested in various countries is not
known. Because the Fund will not have more than 50% of its total assets invested
in securities of foreign governments or corporations, the Fund will not be
entitled to "pass-through" to shareholders the amount of foreign taxes paid by
the Fund. Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to Federal, state or local taxes.
DETERMINATION OF NET ASSET VALUE
For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the New York Stock Exchange are
valued, except as indicated below, at the last sale price reflected at the close
of the regular trading session of the New York Stock Exchange on the business
day as of which such value is being determined. If there has been no sale on
such day, the securities are valued at the mean of the closing bid and asked
prices on such day. If no bid or asked prices are quoted on such day, then the
security is valued by such method as the Board of Directors shall determine in
good faith to reflect its fair market value. Readily marketable securities not
listed on the New York Stock Exchange but listed on other national securities
exchanges or admitted to trading on the National Association of Securities
Dealers Automated Quotations, Inc. ("NASDAQ") National List are valued in like
manner. Portfolio securities traded on more than one national securities
exchange are valued at the last sale price on the business day as of which such
value is being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Directors deems appropriate to reflect their fair value.
United States Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Fund's Board of
Directors designed to reflect in good faith the fair value of such securities.
As indicated in the Prospectus, the net asset value per share of the Fund's
shares will be determined on each day that the New York Stock Exchange is open
for trading. That Exchange annually announces the days on which it will not be
open for trading; the most recent announcement indicates that it will not be
open on the following days: New Year's Day, President's Day, Martin Luther King,
Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. However, that Exchange may close on days not included in
that announcement.
B-18
<PAGE> 38
INVESTMENT PERFORMANCE INFORMATION
The 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 year period and the life of the Fund through the most
recent calendar quarter, assuming reinvestment of all dividends and
distributions. The Fund may also furnish total return calculations for these and
other periods, based on investments at various sales charge levels or net asset
value. Any performance data which is based on the Fund's net asset value per
share would be reduced if a sales charge were taken into account.
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:
(a-b)
----
YIELD = 2[ (cd + 1)to the 6th power - 1]
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 share on the last day of the period. For the
30-day period ended December 31, 1997, the Fund's current yield was 1.7489%.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. The Fund's total
return and current yield may vary from time to time depending on market
conditions, the compositions of the Fund's portfolio and operating expenses.
These factors and possible differences in the methods used in calculating yield
should be considered when comparing the 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 Fund's
shares and the risks associated with 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 fund. These sources include:
Lipper Analytical Services, CDA/ Weisenberger Investment Company Service,
Barron's, Business Week, Kiplinger's Personal Financial Report, 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 Fund's 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). All
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.
B-19
<PAGE> 39
The cumulative returns for the fiscal year ended December 31, 1997 and since
inception were 12.8% and 54.1%, respectively and the average annual total
returns were 12.8% and 9.8%, respectively.
COUNSEL AND INDEPENDENT AUDITORS
Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York
10022, serves as counsel for the Fund.
Grant Thorton LLP, 7 Hanover Square, New York, New York 10004-2616, have been
appointed independent auditor for the Fund.
SHARES OF BENEFICIAL INTEREST
As of the date of this Statement of Additional Information, the Officers and
Directors of the Fund as a group owned 9.4% of the outstanding shares. As of
April 3, 1998, the following were 5% or greater shareholders of the Fund:
<TABLE>
<S> <C>
c/o Avansino & Malarkey 9.94%
Prudential Securities Inc. FBO
Gabelli Foundation, Inc.
Weigand Center
165 West Liberty Street
Reno, NV 89501
c/o W. Frewin-Cablevision Systems 8.09%
Wexford Clearing Services Corp for
Charles F. Dolan
One Media Cross Ways
Woodbury, NY 11797
Bear Stearns 8.04%
FBO 461-02993-17
1 Metrotech Center North
Brooklyn, NY 11201
Gabelli Securities, Inc. 5.32%
Attn: Joseph Grammatica
One Corporate Center
Rye, NY 10580
Bear Stearns 5.16%
FBO 461-02671-169
1 Metrotech Center North
Brooklyn, NY 11201
Bear Stearns Securities Corp. 5.01%
FBO 483-76166-16
1 Metrotech Center North
Brooklyn, NY 11201-3870
</TABLE>
B-20
<PAGE> 40
APPENDIX TO STATEMENT OF ADDITIONAL INFORMATION
DESCRIPTION OF MOODY'S INVESTORS SERVICES, 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 RATING GROUP ("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
B-21
<PAGE> 41
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.
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.
B-22
<PAGE> 42
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements:
(1) Financial Statements included in Part A, the Prospectus:
(a) Financial Highlights for the period from May 14, 1993 (commencement of
operations) through December 31, 1993 and for the fiscal years ended
December 31, 1994, 1995, 1996 and 1997.
(2) Financial Statements included in Part B, the Statement of Additional
Information:
(a) Report of Independent Auditors**
(b) Statement of Assets and Liabilities for the fiscal year ended December
31, 1997.**
(c) Portfolio of Investments, December 31, 1997.**
(d) Statement of Operations for the fiscal year ended December 31, 1997.**
(e) Statement of Changes in Net Assets for the fiscal years ended December
31, 1997 and December 31, 1996.**
(f) Financial Highlights for the period from May 14, 1993 (commencement of
operations) through December 31, 1993, and the fiscal years ended
December 31, 1997, 1996, 1995 and 1994.**
(g) Notes to the Financial Statements**
(B) Exhibits:
Exhibit No. Description of Exhibits
----------- -----------------------
1 Articles of Incorporation of Registrant
2 By-Laws of Registrant
3 Not applicable
4 Specimen copies of certificates for shares issued by
Registrant*
5 Investment Advisory Agreement
6 Distribution Agreement
7 Not applicable
8(a) Custodian Contract
9 Transfer Agency and Service Agreement
9(a) Sub-Administration Agreement
10(a) Opinion and consent of Counsel for the Registrant*
<PAGE> 43
11(a) Consent of Independent Auditors
12 Not applicable
13 Subscription Agreement*
14 Not Applicable
15 Distribution Plan under Rule 12b-1
16 Computation of Performance Quotations
17 Financial Data Schedule
18 Form of Reimbursement Agreement for Performance Guaranty
Program*
24(a) Power of Attorney*
24(b) Not applicable
- --------------
* Previously filed as an exhibit to the Post-Effective Amendment No. 1
to Registration Statement no. 33-54016 filed on November 4, 1993.
** Previously filed with the Fund's Annual Report for the year ended
December 31, 1997.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of April 3, 1998, the approximate number of holders of securities of the
registrant were:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, par value $.001 per share 2,466
ITEM 27. INDEMNIFICATION
Under Article V, Section 1, of the registrant's By-Laws, any past or present
director or officer of registrant is indemnified to the fullest extent permitted
by law against liability and all expenses reasonably incurred by him in
connection with any action, suit or proceeding to which he may be a party or
otherwise involved by reason of his being or having been a director or officer
of registrant. This provision does not authorize indemnification when it is
determined, in the manner specified in the By-Laws, that such director or
officer would otherwise be liable to registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of his
duties. In addition, Section 1 provides that to the fullest extent permitted by
Maryland General Corporation Law, as amended from time to time, no director or
officer of the Fund shall be personally liable to the Fund or its stockholders
for money damages, except to the extent such exemption from liability or
limitation thereof is not permitted by the Investment Company Act of 1940, as
amended from time to time. Under Article V, Section 2, of the registrant's
By-Laws, expenses may be paid by registrant in advance of the final disposition
of any action, suit or proceeding upon receipt of an undertaking by such
director or officer to repay such expenses to registrant in the event that it is
ultimately determined that indemnification of the advanced expenses is not
authorized under the By-Laws.
B-24
<PAGE> 44
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of registrant 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 the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by registrant
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, 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 1933 Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Gabelli Funds, Inc. is the investment adviser of the registrant (the "Adviser").
For a list of officers and directors of the Adviser, together with information
as to any other business, profession, vocation or employment of a substantial
nature engaged in by the Adviser or such officers and directors during the past
two years, reference is made to Form ADV filed by it under the Investment
Advisers Act of 1940. Item 29. Principal Underwriters
(A) The Distributor, Gabelli & Company, Inc., is also the principal
underwriter for The Gabelli Global Telecommunications Fund, The Gabelli Global
Interactive Couch Potato Fund, The Gabelli Global Convertible Securities Fund,
The Gabelli Growth Fund, The Gabelli Asset Fund, The Gabelli Value Fund, The
Gabelli Capital Asset Fund, The Gabelli Small Cap Growth Fund, Gabelli Equity
Income Fund, Gabelli Gold Fund, Inc., The Westwood Funds and The Gabelli Money
Market Funds.
(B) For information with respect to each director and officer of Gabelli &
Company, Inc., reference is made to Form BD filed by Gabelli & Company, Inc.
under the Securities Exchange Act of 1934.
(C) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices of:
Gabelli Funds, Inc., One Corporate Center, Rye, New York, 10580-1434; BISYS Fund
Services, 3435 Stelzer Rd., Columbus, OH 43219 and State Street Bank and Trust
Company, 1776 Heritage Drive, North Quincy, Massachusetts 02171.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(C) Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Annual Report to
Shareholders upon request and without charge.
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the registrant certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933, as amended, has duly caused this Amendment No. 8 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rye and State of New York on the 30th day of April,
1998.
THE GABELLI INVESTOR FUNDS
/s/ Bruce N. Alpert
----------------------------
By: Bruce N. Alpert
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 8 to the Registration Statement has been signed below by the
following in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* President and Trustee April 30, 1998
- ----------------------------
Mario J. Gabelli
* Vice President and Treasurer April 30, 1998
- ----------------------------
Bruce N. Alpert
* Director April 30, 1998
- ----------------------------
Vincent D. Enright
* Director April 30, 1998
- ----------------------------
Anthony Colavita
* Director April 30, 1998
- ----------------------------
Karl Otto Pohl
* Director April 30, 1998
- ----------------------------
Werner Roeder, M.D.
*By: /s/ Bruce N. Alpert
-----------------------
Bruce N. Alpert
Attorney-in-fact
<PAGE> 1
Exhibit 1
ARTICLES OF INCORPORATION
OF
GABELLI INVESTOR FUNDS, INC.
* * * * *
ARTICLE I
THE UNDERSIGNED, John B. Frisch, whose post office address is 10 Light
Street, Baltimore Maryland 21202, being at least eighteen (18) years of age,
hereby forms a corporation under and by virtue of the Maryland General
Corporation Law.
ARTICLE II
NAME
----
The name of the Corporation is GABELLI INVESTOR FUNDS, INC. (the
"Corporation").
ARTICLE III
PURPOSES AND POWERS
-------------------
The purposes for which the Corporation is formed are to act as an
investment company under the federal Investment Company Act of 1940 as amended
(the "1940 Act"), and to exercise and enjoy all of the general powers, rights
and privileges granted to, or conferred upon, corporations by the Maryland
General Corporation Law now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The
<PAGE> 2
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The
name of the resident agent of the Corporation in the State of Maryland is The
Corporation Trust Incorporated, a corporation of the State of Maryland, and the
post office address of the resident agent is 32 South Street, Baltimore,
Maryland 21202.
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).
(2) (a) The Board of Directors of the Corporation is authorized to
classify or to reclassify, 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, but the number of shares of any class shall not
be reduced by the Board of Directors below the number of shares thereof then
outstanding.
(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 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 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
2
<PAGE> 3
time to time, any unissued shares of stock of the Corporation, whether now or
hereafter authorized, as a class or classes or a number of series 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).
(3) Until such time as the Board of Directors shall provide otherwise
pursuant to the authority granted in section (2) of this Article V, all of
shares of the authorized shares of the Corporation are designated as The Gabelli
Six Plus Fund Stock ("Six Plus Stock"). Shares of the Six Plus Stock and the
holders thereof, and shares of any class or series of the type referred to in
subsection (c) of section (2) of this Article V and the holders thereof, shall
be subject to the following provisions, provided, however, that if no shares of
any class or series of the type referred to in subsection (c) of section (2) of
this Article V are outstanding, the shares of the Six Plus Stock and the holders
thereof shall nevertheless be subject to the following provisions except to the
extent that such provisions are by their terms applicable only when shares of
two or more classes are outstanding.
(a) As more fully set forth hereafter, the assets and liabilities and
the income and expenses of each class 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. Except for these differences and certain other differences
hereafter set forth, each class of the Corporation's stock 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.
(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
3
<PAGE> 4
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 which
are issued by the Corporation pursuant to the merger.
(c) For purposes of determining the net asset value per share of stock
of a class, the assets belonging to such class of the Corporation's stock shall
be charged with the liabilities of the Corporation with respect to that class
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 in
accordance with procedures adopted by the Board of Directors. 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. 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 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.
4
<PAGE> 5
(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.
(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 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
value of at least $500. In the event the Corporation determines to exercise its
power to redeem Shares provided in this subsection (g), the Shareholder 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.
5
<PAGE> 6
(i) The net asset value of each share of each 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 as
determined in accordance with procedures adopted from time to time by the Board
of Directors 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.
(i) 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 or series to which they belonged at the
time of their redemption or purchase.
(k) Shares of each class 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, provided that dividends or distributions shall be paid on shares of
a class of stock only out of lawfully available assets belonging to that class.
(1) in the event of the liquidation or dissolution of the Corporation,
the stockholders of a 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. The assets so
distributable to the stockholders of a class shall be distributed among such
stockholders in proportion to the number of shares of that class held by them
and recorded on the books of the Corporation. 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 and then distributed to the holders of
stock of each class in proportion to the number of shares of that class held by
the respective holders.
6
<PAGE> 7
(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 series thereof, and all shares of all classes or series shall vote
as a single class or series ("Single Class Voting"); provided, however, that (a)
as to any matter with respect to which a separate vote of any class or series is
required by the 1940 Act or by the Maryland General Corporation Law, such
requirement as to a separate vote by that class or 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
of series, then, subject to (c) below, the shares of all other classes or series
shall vote as a single class or series; and (c) as to any matter which does not
affect the interest of all classes or series, only the holders of shares of the
one or more affected classes or series shall be entitled to vote.
(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.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF
THE CORPORATION AND OF THE DIRECTORS
AND STOCKHOLDERS
------------------------------------
(1) The number of directors of the Corporation shall be two (2), which
number may be altered by and pursuant to the By-Laws of the Corporation but
shall
7
<PAGE> 8
never be less than two nor more than fifteen. The names of the persons who shall
act as directors until the first stockholders meeting and until their successors
are duly elected and qualify are:
Mario J. Gabelli; and
Bruce N. Alpert.
The term of office for a director is until the next annual meeting of
stockholders at which directors are elected or until death, resignation,
retirement or reelection, or until a successor is elected and qualified. In no
case shall a decrease in the number of directors shorten the term of any
incumbent director. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the entire
Board of Directors, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors may be filled by a majority of the directors
then in office, whether or not sufficient to constitute a quorum, or by a sole
remaining director. A director elected by the Board of Directors to fill any
vacancy in the Board of Directors shall serve until the next meeting of
stockholders and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. At any meeting of stockholders, stockholders shall be
entitled to elect directors to fill any vacancies in the Board of Directors that
have arisen since the preceding meeting of stockholders (whether or not any such
vacancy has been filled by election of a new director by the Board of Directors)
and any director so elected by the stockholders shall hold office until the next
meeting of stockholders or until death, resignation or retirement or until a
successor is elected and qualified. A director may be removed for cause or
without cause, and only by action of the stockholders taken by the holders of at
least a majority of the shares of capital stock then entitled to vote in an
election of directors.
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors may
deem advisable, subject to such limitations as may be set forth in these
Articles of Incorporation or
8
<PAGE> 9
in the By-Laws of the Corporation or in the Maryland General Corporation Law.
(3) Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the Maryland
General Corporation Law, subject to the requirements of the 1940 Act that such
indemnity shall not protect such person against any liability to the Corporation
or a stockholder to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
(4) The Board of Directors of the Corporation shall have the exclusive
authority to make, alter or repeal from time to time any of the By-Laws of the
Corporation except any particular By-Law which is specified as not subject to
alteration or repeal by the Board of Directors, subject to the requirements of
the 1940 Act.
(5) The Board of Directors may designate, from time to time, the
location of the offices of the Corporation.
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
---------------------------
No stockholder of the Corporation shall by reason of his holding shares
of capital stock have any preemptive or preferential right to purchase or
subscribe to any shares of capital stock of the Corporation, now or hereafter
authorized, or any notes, debentures, bonds or other securities convertible into
shares of capital stock, now or hereafter to be authorized, whether or not the
issuance of any such shares of capital stock, or notes, debentures, bonds or
other securities would adversely affect the dividend or voting rights of such
shareholder; and the Board of Directors may issue shares of any class of capital
stock of the Corporation, or any notes, debentures, bonds, other securities
convertible into shares of any class of capital stock of the Corporation, either
whole or in part, to the existing stockholders for such lawful consideration and
on such terms as the Board of Directors, in its sole discretion, may determine.
9
<PAGE> 10
ARTICLE VIII
MAJORITY VOTES OF STOCKHOLDERS
------------------------------
Except as otherwise provided in these Articles of Incorporation or as
required under the 1940 Act, and notwithstanding any provision of the Maryland
General Corporation Law requiring approval by the stockholders of any action by
the affirmative vote of a greater proportion than a majority of the votes
entitled to be cast upon the matter, any such action may be taken or authorized
upon the concurrence of a majority of the number of votes entitled to be cast
thereon.
ARTICLE IX
DETERMINATION BINDING
---------------------
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
authority of the direction of the Board of Directors; as to the amount of
assets, obligations or liabilities of the Corporation, as to the amount of net
income of the Corporation from dividends and interest for any period or amounts
at any time legally available for the payment of dividends, as to the amount of
any reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have been created, shall have been paid or
discharged or shall be then or thereafter required to be paid or discharged), as
to the price of any security owned by the Corporation or as to any other matters
relating to the issuance, sale, redemption or other acquisition or disposition
of securities or shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors shall be final and
conclusive, and shall be binding upon the Corporation and all holders of its
capital stock, past, present and future, and shares of the capital stock of the
Corporation are issued and sold on the condition and understanding, evidenced by
the purchase of shares of capital stock or acceptance of share certificates,
that any and all such determinations shall be binding as aforesaid. No provision
of these Articles of
10
<PAGE> 11
Incorporation shall be effective to (a) require a waiver of compliance with any
provision of the Securities Act of 1933, as amended, or the 1940 Act, or of any
valid rule, regulation or order of the Securities and Exchange Commission
thereunder or (b) protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
ARTICLE X
PRIVATE PROPERTY OF STOCKHOLDERS
--------------------------------
The private property of stockholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
ARTICLE XI
PERPETUAL EXISTENCE
-------------------
The duration of the Corporation shall be perpetual.
ARTICLE XII
AMENDMENT
---------
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation. All amendments shall require the
affirmative vote of a majority of the Corporation's outstanding stock entitled
to vote.
11
<PAGE> 12
IN WITNESS WHEREOF, the undersigned incorporator of GABELLI INVESTOR
FUNDS, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be his act and further acknowledges that, to the best
of his knowledge, the matters and facts set forth therein are true in all
material respects under the penalties of perjury.
Dated the 30th day of October, 1992.
/s/ JOHN B. FRISCH
----------------------------
John B. Frisch
12
<PAGE> 13
RESOLVED, that the Actions of the Board of Directors taken by unanimous
consent as of October 30, 1992 and the actions taken by the officers of the
Corporation pursuant thereto, be and they hereby are, ratified, approved,
confirmed and accepted in all respects.
<PAGE> 14
ACTION BY UNANIMOUS WRITTEN CONSENT
OF DIRECTOR IN LIEU
OF
A MEETING OF THE BOARD OF DIRECTORS
OF
GABELLI INVESTOR FUNDS, INC.
The undersigned, being the directors of Gabelli Investors Funds, Inc.,
a Maryland corporation (the "Fund"), acting pursuant to the authority of Section
2-408(c) of the Maryland General Corporation Law, hereby consent to the adoption
of the following resolutions and approve and adopt such resolutions with the
same force and effect as if they had been approved and adopted at a duly
convened meeting of the board of directors of the Fund and direct that this
Action by Unanimous Written Consent be filed with the minutes of proceedings of
the board of directors:
WHEREAS, the Articles of Incorporation in the form attached hereto as
Exhibit A have been submitted to the Maryland State Department of Assessments
and Taxation, and have been filed and accepted as of October 30, 1992, be it
RESOLVED, that the Articles of Incorporation in all respects be, and
they hereby are, ratified, approved, confirmed and accepted as the Articles of
Incorporation of this Fund and the Secretary is instructed to cause a complete
and accurate copy of the same to be inserted in the Fund's minute book; and
further
<PAGE> 15
RESOLVED, that the adoption of the By-Laws in the form attached hereto
as Exhibit B be, and it hereby is, ratified, approved, confirmed and accepted in
all respects as and for the By-Laws of this Fund; and further
RESOLVED, that the number of directors shall initially be two; and
further
RESOLVED, that the principal office of this Fund in Maryland shall be
located at c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202, as so stated in the Articles of Incorporation and the resident
agent of the Fund shall be The Corporation Trust Incorporated; and further
RESOLVED, that said agent shall act under the direction and supervision
of counsel of the Fund in all matters arising out of or pertaining to said
agency; and further
RESOLVED, that offices of the Fund be established and maintained at One
Corporate Center, Rye, New York, and that meetings of the board of directors
from time to time may be held either at the principal office of the Fund, or at
offices in the City of New York, or elsewhere, as the board of directors shall
from time to time order; and further
RESOLVED, that the Secretary of the Fund be, and hereby is, authorized
and directed to procure all corporate books of account and stockholder records
in which shall be recorded, among other things, the names and addresses of
stockholders and the number of shares owned by each and such other matters
required by the laws of the State of Maryland or necessary or appropriate in
connection with the organization or business of the Fund; and further
RESOLVED, that the Treasurer of the Fund be and hereby is, authorized
to pay all charges and expenses incident to or arising out of the organization
of this Fund and to reimburse any person who has made any disbursements
therefor; and further
RESOLVED, that the fiscal year of the Fund shall commence on the 1st of
January and terminate on the 31st of December of each year; and further
2
<PAGE> 16
RESOLVED, that the proposed corporate seal, an impression of which is
affixed to this page in the margin opposite this resolution, be, and it hereby
is, adopted as and for the corporate seal of the Fund; and further
RESOLVED, that any person, firm or corporation may rely upon the
aforesaid facsimile signatures and corporate seal when properly imprinted on the
certificates of Common Stock and that any such facsimile signatures and
corporate seal so relied upon shall be valid, effectual and binding upon the
Fund as if the same had in fact been executed or impressed manually by a duly
authorized officer or agent of the Fund acting on its behalf; and further
RESOLVED, that each of the following individuals be, and hereby is,
appointed to the office set forth opposite his or her name to serve at the
pleasure of the board of directors and until his or her successor is appointed
and qualified or until his earlier resignation or removal:
Mario Gabelli President and
Chief Investment Officer
Bruce N. Alpert Vice President
and Treasurer
J. Hamilton Crawford, Jr. Secretary
Salvatore Muoio Vice President-Research
Ernest G. Wiggins, Jr. Vice President-Portfolio
and further
RESOLVED, that the capital account of the Fund be credited by $.001 per
share from the proceeds of the sale of Common Stock, par value $.001 per share,
of the Fund authorized by the preceding resolution and that the balance of such
proceeds be credited to surplus; and further
RESOLVED, that the Fund retain Skadden, Arps, Slate, Meagher & Flom to
act as counsel for the Fund; and further
3
<PAGE> 17
RESOLVED, that the preparation, execution and filing by the President
of the Fund in the name and on behalf of the Fund with the Securities and
Exchange Commission (the "Commission"), of a Notification of Registration on
Form N-8A for the purpose of notifying the Commission of the registration of the
Fund under the Investment Company Act of 1940, as amended (the "1940 Act") and
the form thereof be, and it hereby is, ratified, approved, confirmed and
accepted in all respects; and further
RESOLVED, that the form of the Fund's registration statement on Form
N-lA (the "Registration Statement"), in the form provided to the directors be,
and it hereby is approved; and further
RESOLVED, that the execution of the Registration Statement on behalf of
the Fund by its President, and the filing thereof with the Commission be, and
they hereby are, ratified, approved, confirmed and accepted; and further
RESOLVED, that the officers of the Fund, and each of them acting
individually, be, and they hereby are, authorized to prepare or cause to be
prepared, and to execute and file in the name and on behalf of the Fund with the
Commission, such amendments (including post-effective amendments) and
supplements to the Registration Statement and Exhibits thereto, including a
prospectus meeting the requirements of Rules 497 and/or 430A under the
Securities Act of 1933, as amended (the "Securities Act"), together with any
amendments or supplements thereto and the prospectus included therein, as they
or any of them in his or their discretion deem necessary or desirable and to
take or cause to be taken each and every act necessary, convenient or proper in
order to effect the registration and offering of the Common Stock, and further
to cause to be filed with the Commission such other documents as the officers of
the Fund taking and filing the same deem necessary or desirable in order to
comply with rules and regulations under the Securities Act, the execution and
filing of any such amendment or supplement to the Registration Statement, and
such other documents and the performance of such acts by such officers being
conclusive evidence of their approval thereof and their authority therefor from
the Fund and the approval and ratification by the Fund of the document so filed
or action so taken; and further
4
<PAGE> 18
RESOLVED, that the designation of Bruce N. Alpert, Vice President and
Treasurer of the Fund, as the person authorized to receive notices and
communications from the Commission with respect to the Registration Statement
and any amendments thereto and his designation as agent for service of process
in connection with any and all matters relating to the Registration Statement is
hereby ratified, approved, confirmed and accepted and there are hereby conferred
upon him the powers enumerated in Rule 478 of the Rules and Regulations
promulgated by the Commission pursuant to the Securities Act; and further
RESOLVED, that it is desirable and in the best interests of the Fund
that its securities be qualified or registered for sale in various states and,
accordingly, that the officers of the Fund be, and they hereby are, authorized
to determine the states in which appropriate action shall be taken to qualify or
register for sale all or such part of the securities of this Fund as any of said
officers may deem advisable; that said officers be, and they hereby are
authorized to perform on behalf of this Fund any and all such acts as they may
deem necessary or advisable in order to comply with the applicable laws of any
such states, and in connection therewith to execute and file all requisite
papers and documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; that the execution by such officers of any such paper or document or
the doing by them of any act in connection with the foregoing matters shall
conclusively establish their authority therefor from this Fund and the approval
and ratification by this Fund of the papers and documents so executed and the
action or actions so taken; and that any action previously taken by such
officers in connection with the foregoing be, and each of them hereby is,
approved, ratified and confirmed in all respects; and further
RESOLVED, that if any resolutions are required to be adopted in
connection with any application or other documents to be submitted under the
securities or "blue sky" laws of any states in order to permit the issuance and
offering of the shares of Common Stock, such resolutions be, and they hereby
are, deemed adopted in haec verba with the same force and effect as if set forth
herein at length and that copies thereof be filed with this Action; and further
5
<PAGE> 19
RESOLVED, that the President, any Vice President and the Secretary of
the Fund be, and each of them individually hereby is, authorized and empowered,
in the name and on behalf of the Fund to go and perform all such acts and things
as in such officer's absolute discretion may be necessary or appropriate to
render permissible the offer and sale of the Common Stock to the public in such
states and other jurisdictions as may hereafter be designated, or as may be
otherwise appropriate, including, without limitation, the preparation,
execution, delivery and filing with the appropriate state or other authorities,
under the seal of the Fund if requested or required, or any such applications,
notices, certificates, powers of attorney, consents to service of process,
issuer's covenants, reports, certified copies of minutes of shareholder's or
directors' meetings, escrow, bond or impounding agreements, or any other
writings or instruments as may be necessary or appropriate in order to render
permissible the offer and sale of the Common Stock to the public in such states
or other jurisdictions; and further
RESOLVED, that in connection with the proposed offering and sale of the
Common Stock, the following Uniform Form of Corporation Resolution be, and it
hereby is, adopted: "RESOLVED, that it is desirable and in the best interest of
this Fund that its securities be qualified or registered for sale in various
states; that the Chairman of the board of directors and the President, any Vice
President or Assistant Vice President and Secretary or any Assistant Secretary
hereby are authorized to determine the states in which appropriate action shall
be taken to qualify or register for sale all or such part of the securities of
this Fund as said officers may deem advisable; that said officers are hereby
authorized to perform on behalf of this Fund any and all such acts as they may
deem necessary or advisable in order to comply with the applicable laws of any
such states, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process and the execution by such officers of any such paper or document or the
doing by them of any act in connection with the foregoing matters shall
conclusively establish their authority therefor by the Fund and the approval and
ratification by the Fund of the papers and documents so executed and the action
so taken"; and further
6
<PAGE> 20
RESOLVED, that this board of directors hereby adopts the form of any
resolution required by any state or other authority to be filed in connection
with the offering and sale of the Common Stock if (i) in the opinion of the
officers of the Fund upon advice of counsel, the adoption of such resolution is
advisable, and (ii) the Secretary of the Fund evidences such adoption by
attaching to these Resolutions a copy of such resolution which will thereupon be
deemed to have been adopted by this board of directors with the same force and
effect as if presented in writing to, and specifically adopted by, this board of
directors; and further
RESOLVED, that the Chairman of the Board, President or any Vice
President together with the Secretary or any Assistant Secretary be, and each of
them individually hereby is, authorized, empowered and directed, for, in the
name and on behalf of the Fund to execute and deliver certificates representing
the Common Stock of the Fund; and further
RESOLVED, that the signatures of such officers of the Fund so
authorized to execute such certificates may be the facsimile signatures of the
present or any future such authorized officers and may be imprinted or otherwise
reproduced thereon, the Fund for such purpose hereby adopting such facsimile
signature as binding upon it, notwithstanding the fact that, at the time such
certificates shall be authenticated and delivered or disposed of, the officer or
officers so signing shall have ceased to be such officer or officers; and
further
RESOLVED, that it is in the best interests of the Fund to qualify to do
business in New York State; and the officers of the Fund and each of them acting
individually be, and they hereby are, authorized to prepare, execute and deliver
and authorized to direct counsel for the Fund to prepare, execute and deliver,
where applicable, any documents appropriate to such qualification with such
execution and delivery being conclusive evidence of their authority to so act;
and further
RESOLVED, that unless and until otherwise determined by the board of
directors, regular meetings of the Board shall be held quarterly on such dates
and times as shall be determined from time to time by the board of directors;
and further
7
<PAGE> 21
RESOLVED, that the Secretary of the Fund be, and hereby is, directed to
give notice to each director of such meetings not less than two days before the
meeting; and further
RESOLVED, that the officers of the Fund be, and each of them hereby is,
authorized and empowered for, in the name and on behalf of the Fund, to do and
perform all such further acts and things including, but not limited to, making
all necessary filings with the Commission, preparing newspaper advertisements or
press releases, and executing and delivering, and where necessary or
appropriate, filing with the appropriate governmental authorities, all such
certificates, contracts, bonds, agreements, documents, instruments, receipts, or
other papers and making all such payments, including payments of all fees and
expenses, as in the judgment of such officer shall be necessary, desirable or
appropriate to carry out and effectuate the issuance and sale of the Common
Stock, each of the foregoing resolutions adopted by this Board of Directors and
each of the transactions contemplated thereby; and further
RESOLVED, that the proper officers of the Fund be, and each of them
acting individually hereby is, authorized and directed to take all such actions,
to cause to be prepared and filed all such other documents, to make all
expenditures and to execute all instruments deemed by them to be necessary or
desirable in carrying out the purposes of the foregoing resolutions, including
without limitation the employment or retention of all such counsel, accountants
and experts as may be deemed advisable by them, and the taking of such actions,
the execution and filing or delivery of such documents, and the performance of
such acts by them shall be conclusive evidence of their approval thereof and the
approval thereof and authority therefor by and from the Fund; and further
RESOLVED, that all actions previously taken by any officer or director
of the Fund in connection with the transactions and other matters contemplated
by the foregoing resolutions are hereby ratified, approved, confirmed and
accepted in all respects.
8
<PAGE> 22
IN WITNESS WHEREOF, the undersigned, being the directors of Gabelli
Investor Funds, Inc., has executed this written consent, which may be executed
in multiple counterparts, all of which taken together shall constitute one
original, as of the 30th day of October, 1992.
/s/ MARIO GABELLI
----------------------------
Mario Gabelli
/s/ BRUCE N. ALPERT
----------------------------
Bruce N. Alpert
9
<PAGE> 1
Exhibit 2
BY-LAWS
OF
GABELLI INVESTOR FUNDS, INC.
ARTICLE I
Offices
-------
Section 1. Principal Office. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be at One Corporate Center, Rye, New York 10580.
Section 3. Other Offices. The Corporation may have such other offices
in such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meetings. The Corporation is not required to hold an
annual meeting in any year in which the election of directors is not required to
be acted upon under the Investment Company Act of 1940 (the "1940 Act"), but it
may hold annual meetings (whether or not required by the 1940 Act). Any meeting
held for the purpose of electing directors shall be designated the annual
meeting of stockholders for that year. If the Corporation is required to hold a
meeting of stockholders to elect directors pursuant to the Investment Company
Act of 1940, the annual meeting shall be held no later than 120 days after the
occurrence of the event requiring the meeting. All other annual meetings shall
be held on a day in the month of May selected by the Board of Directors.
Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law or by the Articles of Incorporation (the
"Articles") may be
<PAGE> 2
called for any purpose or purposes by a majority of the Board of Directors, the
President, or on the written request of the holders of at least 25% of the
outstanding capital stock of the Corporation entitled to vote at such meeting.
Section 3. Place of Meetings. Annual and special meetings of the
stockholders shall be held at such place within the United States as the Board
of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place,
date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be given
personally or by mail, not less than ten nor more than ninety days before the
date of such meeting, to each stockholder entitled to vote at such meeting and
to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
one hundred and twenty days after the original record date, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of
a majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute, the 1940
Act and the Rules promulgated thereunder (the "1940 Act Rules"), or the
Articles. In the absence of a quorum no business may be transacted, except that
the holders of a majority of the shares of stock present in person or by proxy
and entitled to vote
2
<PAGE> 3
may adjourn the meeting from time to time, without notice other than
announcement thereat except as otherwise required by these By-Laws, until the
holders of the requisite amount of shares of stock shall be so present. At any
such adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally called.
The absence from any meeting, in person or by proxy, of holders of the number of
shares of stock of the Corporation in excess of a majority thereof which may be
required by the laws of the State of Maryland, the 1940 Act, or other applicable
statute, the Articles, or these By-Laws, for action upon any given matter shall
not prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, holders of the number of shares of stock of the Corporation
required for action in respect of such other matter or matters. A quorum shall
be present with respect to matters as to which only the holders of one class of
stock may vote if a majority of the shares of that class are present at the
meeting in person or by proxy, and the absence of holders of a majority of
shares with respect to one class shall have no effect with respect to any other
class of stock.
Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in the
Chairman of the Board's absence or inability to act, the President, or in the
absence or inability of the Chairman of the Board and the President, a Vice
President, shall act as chairman of the meeting. The Secretary, or in the
Secretary's absence or inability to act, any person appointed by the chairman of
the meeting, shall act as secretary of the meeting and keep the minutes thereof.
Section 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Pursuant to Article V, section (3)(m) of the
Corporation's Articles, stockholders shall be entitled to one vote on each
matter submitted to the stockholders for approval for every share of such stock
standing in such stockholder's name an the record of stockholders of the
Corporation as of the record date determined pursuant to Section 9 of this
Article or if such record date shall not have been so fixed,
3
<PAGE> 4
then at the later of (i) the close of business on the day on which notice of the
meeting is mailed or (ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the 1940 Act, the 1940 Act Rules, the Articles or
these By-Laws, any corporate action to be taken by vote of the stockholders
shall be authorized by a majority of the total votes cast at a meeting of
stockholders by the holders of shares present in person or represented by proxy
and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute,
the 1940 Act, the 1940 Act Rules or these By-Laws, or determined by the chairman
of the meeting to be advisable, any such vote need not be by ballot. On a vote
by ballot, each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at any
meeting of the stockholders. The record date, which may not be prior to the
close of business on the day the record date is fixed, shall be not more than
ninety nor less than ten days before the date of the meeting of the
stockholders. All persons who were holders of record of shares at such time, and
not others, shall be entitled to vote at such meeting and any adjournment
thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspector shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder
4
<PAGE> 5
entitled to vote thereat shall, appoint inspectors. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath to
execute faithfully the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting powers of each, the
number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. Inspectors need
not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute, the 1940 Act, the 1940 Act Rules or the Articles,
any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if the following are filed with the records of stockholders
meetings: (i) a unanimous written consent which sets forth the action and is
signed by each stockholder entitled to vote on the matter and (ii) a written
waiver of any right to dissent signed by each stockholder entitled to notice of
the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. Except as otherwise provided in the
Articles, the business and affairs of the Corporation shall be managed under the
direction of the Board of Directors. All powers of the Corporation may be
exercised by or under authority of the Board of
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Directors except as conferred on or reserved to the stockholders by law or by
the Articles or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the directors then in office; provided, however, that the number of directors
shall in no event be less than two nor more than fifteen. Any vacancy created by
an increase in the number of Directors may be filled in accordance with Section
6 of this Article III. No reduction in the number of directors shall have the
effect of removing any director from office prior to the expiration of his term.
Directors need not be stockholders.
Section 3. Election and Term of Directors. Directors shall be elected
by written ballot at a meeting of stockholders, held for that purpose unless
otherwise provided by statute or the Articles. The term of office of directors
shall be from the time of their election and qualification until the next annual
meeting of stockholders and until their successors are elected and qualify.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be
removed for cause or without cause by the stockholders by a vote of a majority
of the votes entitled to be cast for the election of directors.
Section 6. Vacancies. Subject to the provisions of the 1940 Act, any
vacancies in the Board, whether arising from death, resignation, removal, an
increase in the number of directors or any other cause, shall be filled by a
vote of the Board of Directors in accordance with the Articles.
Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from
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time to time determine or as shall be specified in the notice of such meeting.
Section 8. Regular Meeting. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.
Section 9. Special Meetings Special meetings of the Board may be
called by two or more directors of the Corporation or by the Chairman of the
Board or the President.
Section 10. Post Stockholder Meetings. A meeting of the Board of
Directors shall be held as soon as practicable after each meeting of
stockholders at which directors were elected. No notice of such meeting shall be
necessary if held immediately after the adjournment, and at the site, of the
meeting of stockholders. If not so held, notice shall be given as hereinafter
provided for special meetings of the Board of Directors.
Section 11. Notice of Special Meetings. Notice of each special meeting
of the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before the
time at which such meeting is to be held, or mailed by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the records of the meeting
or who shall attend such meeting. Except as otherwise specifically required by
these ByLaws, a notice or waiver of notice of any meeting need not state the
purpose of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly
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required by statute, the 1940 Act, the 1940 Act Rules, the Articles, these
By-Laws, or other applicable statute, the act of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board; provided, however, that the approval of any contract with an investment
adviser or principal underwriter, as such terms are defined in the 1940 Act,
which the Corporation enters into or any renewal or amendment thereof, and the
selection of the Corporation's independent public accountants shall each require
the affirmative vote of a majority of the directors who are not interested
persons, as defined in the 1940 Act, of the Corporation cast in person at such
meeting and the approval of the fidelity bond required by the 1940 Act shall
require the approval of a majority of such directors. In the absence of a quorum
at any meeting of the Board, a majority of the directors present thereat may
adjourn such meeting to another time and place until a quorum shall be present
thereat. Notice of the time and place of any such adjourned meeting shall be
given to the directors who were not present at the time of the adjournment and,
unless such time and place were announced at the meeting at which the
adjournment was taken, to the other directors. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his absence
or inability to act, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the Chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting. Subject
to the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writ-
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ing, and the writings or writing are filed with the minutes of the proceedings
of the Board or committee.
Section 16. Compensation. Directors may receive compensation for
services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board.
ARTICLE IV
Committees
----------
Section 1. Committees of the Board. The Board of Directors may from
time to time, by resolution adopted by a majority of the whole Board, designate
one or more committees of the Board, each such committee to consist of two or
more directors and to have such powers and duties as the Board of Directors may,
by resolution, prescribe.
Section 2. General. One-third, but not less than two, of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The Board
may designate a chairman of any committee and such chairman or any two members
of any committee may fix the time and place of its meeting unless the Board
shall otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not directors of the Corporation; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Corporation.
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ARTICLE V
Officers, Agents and Employees
------------------------------
Section 1. Officers. The officers of the Corporation shall be a
President, who shall be a director of the Corporation, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. The Board of
Directors may elect or appoint one or more Vice Presidents and may also appoint
such other officers, agents and employees as it may deem necessary or proper.
Any two or more offices may be held by the same person, except the offices of
President and Vice President, but no officer shall execute, acknowledge or
verify any instrument as an officer in more than one capacity. Such officers
shall be elected by the Board of Directors to serve at the pleasure of the
Board, each to hold office until the next meeting of stockholders and until
their successors shall have been duly elected and shall have qualified, or until
death, resignation, or removal, as hereinafter provided in these By-Laws. The
Board may from time to time elect, or delegate to the President the power to
appoint, such officers (including one or more Assistant Vice Presidents, one or
more Assistant Treasurers and one or more Assistant Secretaries) and such
agents, as may be necessary or desirable for the business of the Corporation.
Such officers and agents shall have such duties and shall hold their offices for
such terms as may be prescribed by the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of resignation to the Board, the Chairman of
the Board, President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3. Removal of Officer. Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
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removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, either arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 6. Bonds or Other Security. If required by the Board, any
officer agent or employee of the Corporation shall give a bond or other security
for the faithful performance of his duties, in such amount and with such surety
or sureties as the Board may require.
Section 7. President. The President shall be the chief executive
officer of the Corporation. In the absence of the Chairman of the Board (or if
there be none), he shall preside at all meetings of the stockholders and of the
Board of Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He may
employ and discharge employees and agents of the Corporation, except such as
shall be appointed by the Board, and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the President may from time
to time prescribe.
Section 9. Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation, except those which the Corporation
has placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is
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defined in the Securities Exchange Act of 1934, as amended) pursuant to a
written agreement designating such bank or trust company or member of a national
securities exchange as a custodian or sub-custodian of the property of the
corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to
the credit of the Corporation;
(d) receive, and give receipts for, moneys due and payable, to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking proper
vouchers therefor;
(f) provide assistance to the Audit Committee of the Board and
report to such committee as necessary;
(g) be designated as principal accounting officer for purposes
of Section 32 of the 1940 Act; and
(h) in general, perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the
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seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 11. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board may deem sufficient,
the Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
Indemnification
---------------
Each officer and director of the Corporation shall be indemnified by
the Corporation 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 the Corporation or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Absent a court determination that an officer or director
seeking indemnification was not liable on the merits or guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, the decision by the Corporation to
indemnify such person must be based upon the reasonable determination of
independent counsel or nonparty independent directors, after review of the
facts, that such officer or director is not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
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The Corporation may purchase insurance on behalf of an officer,
director, employee or other agent of the corporation protecting such person to
the full extent permitted under the General Laws of the State of Maryland, from
liability arising from his activities as officer or director of the Corporation.
The Corporation, however, may not purchase insurance on behalf of any officer or
director of the Corporation that protects or purports to protect such person
from liability to the Corporation or to its stockholders to which such officer
or director would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office.
ARTICLE VII
Capital Stock
-------------
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of the
Corporation owned by him, provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the President
or a Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation.
Any or all of the signatures or the seal on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still in office at the date of issue.
Section 2. Books of Accounts and Record of Stockholders. There shall be
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder, in
accordance with Maryland law, a record containing the number of
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shares of stock issued during a specified period not to exceed twelve months and
the consideration received by the Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
rights of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discre-
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tion shall determine, to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss or destruction of any such
certificate, or issuance of a new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may refuse to issue any
such new certificate, except pursuant to legal proceedings under the laws of the
State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution. Once
the Board of Directors fixes a record date as the record date for the
determination of the stockholders entitled to receive any such dividend or
distribution, in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend or distribution.
Section 7. Information to Stockholders and Others. Any stockholder of
the Corporation or his agent may inspect and copy during usual business hours
the Corporation's By-Laws, minutes of the proceedings of its stockholders,
annual statements of its affairs, and voting trust agreements on file at its
principal office.
ARTICLE VIII
Seal
----
The seal of the Corporation shall be circular in form and shall bear,
in addition to any other emblem or device approved by the Board of Directors,
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Maryland". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
-----------
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 31st day of December.
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ARTICLE X
Depositories and Custodians
---------------------------
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE XI
Execution of Instruments
------------------------
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances bills of exchange and other orders or obligations for the payment of
money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board and,
when so authorized to be held on behalf of the Corporation or sold, transferred
or otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President or a Vice President or the Treasurer or pursuant
to any procedure approved by the Board of Directors, subject to applicable law.
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ARTICLE XII
Independent Public Accountants
------------------------------
The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the Securities
and Exchange Commission shall be selected annually by the Board of Directors and
ratified by the stockholders to the extent required by the 1940 Act and the 1940
Act Rules.
ARTICLE XIII
Annual Statement
----------------
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board. A report to
the stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders and be placed on file at the Corporation's
principal office in the State of Maryland. Each such report shall show the
assets and liabilities of the Corporation as of the close of the annual or
quarterly period covered by the report and the Securities in which the funds of
the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or quarterly
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
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ARTICLE XIV
Amendments
----------
The Board of Directors, by affirmative vote of a majority thereof,
shall have the right to amend, alter or repeal these By-Laws at any regular or
special meeting of the Board of Directors, except any particular By-Law which is
specified as not subject to alteration or repeal by the Board of Directors.
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Exhibit 5
INVESTMENT ADVISORY AGREEMENT
-----------------------------
INVESTMENT ADVISORY AGREEMENT, dated March 10, 1993, between Gabelli
Investor Funds, Inc. (the "Company"), a Maryland corporation, and Gabelli Funds,
Inc. (the "Adviser"), a Delaware Corporation.
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
----------
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Company with respect to the investment of the assets
of the Company allocated to The Gabelli ABC Fund Stock (the "Fund") and to
supervise and arrange the purchase and sale of assets held in the investment
portfolio of the Fund.
2. Duties and obligations of the Adviser with
respect to investments of assets of the Fund
--------------------------------------------
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Company's Board of Directors, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Fund's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Fund and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Fund; (ii)
arrange for the purchase and sale of securities and other assets held in the
investment portfolio of the Fund and (iii) oversee the administration of all
aspects of the Fund's business and affairs and provide, or arrange for others
whom it believes to be competent to provide, certain services as specified in
subparagraph (b) below. Nothing contained herein shall be construed to restrict
the Company's right to hire its own employees or to contract for administrative
services to be performed by third parties, including but not limited to, the
calculation of the net asset value of the Fund's shares.
<PAGE> 2
(b) The specific services to be provided or arranged for by
the Adviser for the Fund are (i) maintaining the Fund's books and records, such
as journals, ledger accounts and other records in accordance with applicable
laws and regulations to the extent not maintained by the Fund's custodian,
transfer agent and dividend disbursing agent; (ii) transmitting purchase and
redemption orders for Fund shares to the extent not transmitted by the Fund's
distributor or others who purchase and redeem shares; (iii) initiating all money
transfers to the Fund's custodian and from the Fund's custodian for the payment
of the Fund's expenses, investments, dividends and share redemptions; (iv)
reconciling account information and balances among the Fund's custodian,
transfer agent, distributor, dividend disbursing agent and the Adviser; (v)
providing the Fund, upon request, with such office space and facilities,
utilities and office equipment as are adequate for the Fund's needs; (vi)
preparing, but not paying for, all reports by the Company, on behalf of the
Fund, to its shareholders and all reports and filings required to maintain the
registration and qualification of the Fund's shares under federal and state law
including periodic updating of the Company's registration statement and
Prospectus (including its Statement of Additional Information); (vii)
supervising the calculation of the net asset value of the Fund's shares; and
(viii) preparing notices and agendas for meetings of the Fund's shareholders and
the Company's Board of Directors as well as minutes of such meetings in all
matters required by applicable law to be acted upon by the Board of Directors.
(c) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940 (the "Act"), and of any rules or regulations in
force thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Articles of Incorporation and By-Laws of the Company, as such
documents are amended from time to time; (iv) the investment objective, policies
and restrictions applicable to the Fund as set forth in the Company's
Registration Statement ox Form N-lA and (v) any policies and determinations of
the Board of Directors of the Company with respect to the Fund.
(d) The Adviser will seek to provide qualified personnel to
fullfil its duties hereunder and will bear all costs and expenses (including any
overhead
2
<PAGE> 3
and personnel costs) incurred in connection with its duties hereunder and shall
bear the costs of any salaries or directors fees of any officers or directors of
the Company who are affiliated persons (as defined in the Act) of the Adviser.
If in any fiscal year the Fund's aggregate expenses (excluding interest, taxes,
distribution expenses, brokerage commissions and extraordinary expenses) exceed
the most restrictive expense limitation imposed by the securities law of any
state in which the shares of the Fund are registered or qualified for sale, the
Adviser will reimburse the Company for the amount of such excess up to the
amount of fees accrued for such fiscal year hereunder. The amount of such
reimbursement shall be calculated monthly and an appropriate amount shall be
held back or released to the Adviser each month so that the aggregate amount
held back at any particular time shall equal the net amount of the reimbursement
on a cummulative year-to-date basis. As of the end of the year the final amount
of the total reimbursement shall be calculated and the appropriate amount
released to the Fund or the Adviser or paid to the Fund by the Adviser. Subject
to the foregoing, the Company shall be responsible for the payment of all the
Fund's other expenses, including (i) payment of the fees payable to the Adviser
under paragraph 4 hereof; (ii) organizational expenses; (iii) brokerage fees and
commissions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
liability insurance or fidelity bond coverage for the Company officers and
employees, and directors' and officers' errors and omissions insurance coverage;
(vii) legal, auditing and accounting fees and expenses; (viii) charges of the
Fund's custodian, transfer agent and dividend disbursing agent; (ix) the Fund's
pro rata portion of dues, fees and charges of any trade association of which the
Company is a member; (x) the expenses of printing, preparing and mailing
proxies, stock certificates and reports, including the Fund's prospectuses and
statements of additional information, and notices to shareholders; (xi) filing
fees for the registration or qualification of the Fund and its shares under
federal or state securities laws; (xii) the fees and expenses involved in
registering and maintaining registration of the Fund's shares with the
Securities and Exchange Commission; (xiii) the expenses of holding shareholder
meetings; (xiv) the compensation, including fees, of any of the Company's
directors, officers or employees who are not affiliated persons of the Adviser;
(xv) all expenses of computing the Fund's net asset value per share, including
any equipment or services obtained solely for the purpose of pricing shares or
valuing the Fund's investment portfolio; (xvi)
3
<PAGE> 4
expenses of personnel performing shareholder servicing functions and all other
distribution expenses payable by the Company; and (xvii) litigation and other
extraordinary or non-recurring expenses and other expenses properly payable by
the Fund.
(e) The Adviser shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder, but neither the Adviser nor
any of its officers, directors, employees, agents or controlling persons shall
be liable for any act or omission or for any loss sustained by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Company may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Adviser or any
director, officer, employee or other affiliate thereof from acting as investment
adviser for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Adviser or any
of its directors, officers, employees or agents from buying, selling or trading
any securities for its or their own accounts or for the accounts of others for
whom it or they may be, acting.
3. Portfolio Transactions
----------------------
In the course of the Adviser's execution of portfolio transactions for
the Fund, it is agreed that the Adviser shall employ securities brokers and
dealers which, in its judgment, will be able to satisfy the policy of the Fund
to seek the best execution of its portfolio transactions at reasonable expenses.
For purposes of this agreement, "best execution" shall mean prompt, efficient
and reliable execution at the most favorable price obtainable. Under such
conditions as may be specified by the Company's Board of Directors in the
interest of its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale of the
Fund's portfolio securities with its affiliate, Gabelli & Company, Inc.; (b) pay
commissions to brokers other than its affiliate which are higher than might be
charged by another qualified broker to
4
<PAGE> 5
obtain brokerage and/or research services considered by the Adviser to be useful
or desirable in the performance of its duties hereunder and for the investment
management of other advisory accounts over which it or its affiliates exercise
investment discretion; and (c) consider sales by brokers (other than its
affiliate distributor) of shares of the Fund and any other mutual fund for which
it or its affiliates act as investment adviser, as a factor in its selection of
brokers and dealers for Fund portfolio transactions.
4. Compensation of the Adviser
---------------------------
(a) subject to paragraph 2(b), the Company agrees to pay to
the Adviser out of the Fund's assets and the Adviser agrees to accept as full
compensation for all services rendered by or through the Adviser (other than any
amounts payable to the Adviser pursuant to paragraph 4(b)) a fee computed daily
and payable monthly in an amount equal on an annualized basis to 1.0% of the
Fund's daily average net asset value. For any period less than a month during
which this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.
(b) The Company will Day the Adviser separately for any costs
and expenses incurred by the Adviser in connection with distribution of the
Fund's shares in accordance with the terms (including proration or nonpayment
as a result of allocations of payments) of a Plan of Distribution (the "Plan")
adopted for the Fund pursuant to Rule 12b-1 under the Act as such Plan may be in
effect from time to time; provided, however, that no payments shall be due or
paid to the Adviser 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
subparagraph shall thereupon be modified or terminated to the same extent
without further action of the parties. The persons authorized to direct the
payment of the funds pursuant to this Agreement and the Plan shall provide to
the Company's Board of Directors, and the Directors shall review, at least
quarterly a written report of the amount so paid and the purposes for which such
expenditures were made.
5
<PAGE> 6
(c) For purposes of this Agreement, the net asset of the Fund
shall be calculated pursuant to the procedures adopted by resolutions of the
Directors of the Company for calculating the net asset value of the Fund's
shares.
5. Indemnity.
----------
(a) The Company hereby agrees to indemnify the Adviser and
each of the Adviser's directors, officers, employees, and agents (including any
individual who serves at the Adviser's request as director, officer, partner,
trustee or the like of another corporation) and controlling persons (each such
person being an "indemnitee") against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees (all as provided in accordance with applicable
corporate law) reasonably incurred by such indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which he
may be or may have been involved as a party or otherwise or with which he may be
or may have been threatened, while acting in any capacity set forth above in
this paragraph or thereafter by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall have been adjudicated not
to have acted in good faith in the reasonable belief that his action was in the
best interest of the Company and furthermore, in the case of any criminal
proceeding, so long as he had no reasonable cause to believe that the conduct
was unlawful, provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Company or its shareholders or any
expense of such indemnitee arising by reason of (i) willful misfeasance, (ii)
bad faith, (iii) gross negligence (iv) reckless disregard of the duties involved
in the conduct of his position (the conduct referred to in such clauses (i)
through (v) being sometimes referred to herein as "disabling conduct"), (2) as
to any matter disposed of by settlement or a compromise payment by such
indemnitee, pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless there has
been a determination that such settlement or compromise is in the best interests
of the Company and that such indemnitee appears to have acted in good faith in
the reasonable belief that his action was in the best interest of the Company
and did not involve disabling conduct by such indemnitee and (3) with respect to
any
6
<PAGE> 7
action, suit or other proceeding voluntarily prosecuted by any indemnitee as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such indemnitee was authorized by a majority
of the full Board of the Company. 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.
(b) 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.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-party 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.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
7
<PAGE> 8
6. Duration and Termination
------------------------
This Agreement shall become effective upon on the date hereof and shall
continue in effect for a period of two years and thereafter from year to year,
but only so long as such continuation is specifically approved at least annually
in accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Company sixty days written notice (which notice may be
waived by the Company) and may be terminated by the Company at any time without
penalty upon giving the Adviser sixty days notice (which notice may be waived by
the Adviser), provided that such termination by the Company shall be directed or
approved by the vote of a majority of the Directors of the Company in office at
the time or by the vote of the holders of a "majority of the voting securities"
(as defined in the Act) of the Fund at the time outstanding and entitled to vote
or, with respect to paragraph 4(b), by a majority of the Directors of the
Company who are not "interested persons" of the Company and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan. This Agreement shall terminate automatically in the event
of its assignment (as "assignment" is defined in the Act and the rules
thereunder.)
It is understood and hereby agreed that the word "Gabelli" is the
property of the Adviser for copyright and other purposes. The Company further
agrees that the word "Gabelli" in its name is derived from the name of Mario J.
Gabelli and such name may freely be used by the Adviser for other investment
companies, entities or products. The Company further agrees that, in the event
that the Adviser shall cease to act as investment adviser to the Company with
respect to the investment of assets allocated to the Fund, both the Company and
the Fund shall promptly take all necessary and appropriate action to change
their names to names which do not include the word "Gabelli"; provided, however,
that the Company and the Fund may continue to use the word "Gabelli" if the
Adviser consents in writing to such use.
7. Notices
-------
Any notice under this Agreement shall be in writing to the other party
at such address as the other party may designate from time to time for the
receipt of
8
<PAGE> 9
such notice and shall be deemed to be received on the earlier of the date
actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
8. Governing Law
-------------
This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
GABELLI INVESTOR FUNDS, INC.
By /s/ BRUCE N. ALPERT
------------------------------
Name: Bruce N. Alpert
Title: Vice President
GABELLI FUNDS, INC.
By /s/ STEPHEN G. BONDI
------------------------------
Name: Stephen G. Bondi
Title: Vice President-Finance
10
<PAGE> 1
Exhibit 6
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated March 10, 1993, between Gabelli Investor
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 ABC Fund Stock
(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.
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
<PAGE> 2
that the Distributor does not undertake to sell all or any specific portion of
the Shares.
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.
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
2
<PAGE> 3
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
(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
3
<PAGE> 4
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.
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.
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
4
<PAGE> 5
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
5
<PAGE> 6
indemnitee or any person selling Shares pursuant to an agreement with the
Distributor.
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
6
<PAGE> 7
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)).
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.
7
<PAGE> 8
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 INVESTOR FUNDS, INC.
By: /s/ BRUCE N. ALPERT
-----------------------------
Name:
Title:
GABELLI & COMPANY, INC.
By: /s/ STEPHEN G. BONDI
-----------------------------
Name: Stephen G. Bondi
Title: Vice President Finance
8
<PAGE> 1
Exhibit 8(a)
CUSTODIAN CONTRACT
Between
GABELLI INVESTOR FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By It .............1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States ........................3
2.1 Holding Securities .........................................3
2.2 Delivery of Securities .....................................3
2.3 Registration of Securities .................................8
2.4 Bank Accounts ..............................................9
2.5 Availability of Federal Funds .............................10
2.6 Collection of Income ......................................10
2.7 Payment of Fund Monies ....................................11
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased ......................................14
2.9 Appointment of Agents .....................................15
2.10 Deposit of Fund Assets in Securities System ...............15
2.10A Fund Assets Held in the Custodian's Direct Paper System ...18
2.11 Segregated Account ........................................20
2.12 Ownership Certificates for Tax Purposes ...................21
2.13 Proxies ...................................................22
2.14 Communications Relating to Portfolio Securities ...........22
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States ................................23
3.1 Appointment of Foreign Sub-Custodians .....................23
3.2 Assets to be Held .........................................23
3.3 Foreign Securities Depositories ...........................24
3.4 Segregation of Securities .................................24
3.5 Agreements with Foreign Banking Institutions ..............25
3.6 Access of Independent Accountants of the Fund .............25
3.7 Reports by Custodian ......................................26
3.8 Transactions in Foreign Custody Account ...................26
3.9 Liability of Foreign Sub-Custodians .......................27
3.10 Liability of Custodian ....................................28
3.11 Reimbursement for Advances ................................29
3.12 Monitoring Responsibilities ...............................29
3.13 Branches of U.S. Banks ....................................30
3.14 Tax Law ...................................................30
4. Payments for Sales or Repurchase or Redemptions of Shares of
the Fund .........................................................31
5. Proper Instructions ..............................................32
6. Actions Permitted Without Express Authority ......................33
7. Evidence of Authority ............................................34
8. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income ....................34
<PAGE> 3
9. Records ..........................................................35
l0. Opinion of Fund's Independent Accountants ........................35
11. Reports to Fund by Independent Public Accountants ................36
12. Compensation of Custodian ........................................36
13. Responsibility of Custodian ......................................36
14. Effective Period, Termination and Amendment ......................39
15. Successor Custodian ..............................................40
16. Interpretive and Additional Provisions ...........................42
17. Additional Funds .................................................42
18. Massachusetts Law to Apply .......................................43
19. Prior Contracts ..................................................43
<PAGE> 4
CUSTODIAN CONTRACT
------------------
This Contract between Gabelli Investor Funds, Inc., a corporation
organized and existing under the laws of Maryland, having its principal place of
business at One Corporate Center, Rye, New York, 10580-1434 hereinafter called
the "Fund", and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, The
Gabelli ABC Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic
<PAGE> 5
securities") and securities it desires to be held outside the United States
("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of capital stock of
the Fund representing interests in the Portfolios, ("Shares") as may be issued
or sold from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
-2-
<PAGE> 6
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System" and
(b) commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
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<PAGE> 7
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Portfolio;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of
any nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.9 or into the name or nominee name of
any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
-4-
<PAGE> 8
7) Upon the sale of such securities for the account of
the Portfolio, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for
-5-
<PAGE> 9
definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund on behalf
of the Portfolio, which may be in the form of cash or
obligations issued by the United States government,
its agencies or instrumentalities, except that in
connection with any loans for which collateral is to
be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department
of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities
owned by the Portfolio prior to the receipt of such
collateral;
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf of
the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian and a
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<PAGE> 10
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of
any registered national securities exchange, or of
any similar organization or organizations, regarding
escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding
account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described
-7-
<PAGE> 11
from time to time in the currently effective
prospectus and statement of additional information of
the Fund, related to the Portfolio ("Prospectus"), in
satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from
the Fund on behalf of the applicable Portfolio, a
certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or
an Assistant Secretary, specifying the securities of
the Portfolio to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to
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<PAGE> 12
be used in common with other registered investment companies having the
same investment adviser as the Portfolio, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Portfolio under
the terms of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department
-9-
<PAGE> 13
of the Custodian or in such other banks or trust companies as it may in
its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each such
bank or trust company and the funds to be deposited with each such bank
or trust company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board of Directors of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall
-10-
<PAGE> 14
collect on a timely basis all income and other payments with respect to
bearer domestic securities if, on the date of payment by the issuer,
such securities are held by the Custodian or its agent thereof and
shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other
income items requiring presentation as and when they become due and
shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than
to provide the Fund with such information or data as may be necessary
to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Portfolio but only (a) against the
delivery
-11-
<PAGE> 15
of such securities or evidence of title to such
options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States
or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of
the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in
accordance with the conditions set forth in Section
2.10 hereof; (c) in the case of a purchase involving
the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the
case of repurchase agreements entered into between
the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the
securities either in certificate form or through an
entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or
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<PAGE> 16
(ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to
a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender
of securities owned by the Portfolio as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Portfolio, including but not limited to the
following payments for the account of the Portfolio:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
-13-
<PAGE> 17
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing
documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund
on behalf of the Portfolio, a certified copy of a
resolution of the Board of Directors or of the
Executive Committee of the Fund signed by an officer
of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to
whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the
-14-
<PAGE> 18
same extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in
a Securities System provided that such securities are
represented in an account ("Account") of the
Custodian in the
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<PAGE> 19
Securities System which shall not include any assets
of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of
advice from the Securities System that such
securities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities
has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the
Securities System of transfers of securities for the
-16-
<PAGE> 20
account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer
to or from the account of the Portfolio in the form
of a written advice or notice and shall furnish to
the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions
in the Securities System for the account of the
Portfolio.
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the Custodian
on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding securities deposited in the Securities
System;
5) The Custodian shall have received from the Fund on
behalf of the Portfolio the initial or annual
certificate, as the case may be, required by Article
14 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any loss or
damage to the
-17-
<PAGE> 21
Portfolio resulting from use of the Securities System
by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of
the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the
Securities System or any other person which the
Custodian may have as a consequence of any such loss
or damage if and to the extent that the Portfolio has
not been made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions from the Fund on behalf of the
Portfolio;
2) The Custodian may keep securities of the Portfolio in
the Direct Paper System only if such securities are
represented in an account
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<PAGE> 22
("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the
Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are maintained in
the Direct Paper System shall identify by book-entry
those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for
the account of the Portfolio upon the making of an
entry on the records of the Custodian to reflect such
payment and transfer of securities to the account of
the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from
the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next
business day following such transfer and shall
furnish
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<PAGE> 23
to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's
transaction in the Securities System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal
accounting control as the Fund may reasonably request
from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with
-20-
<PAGE> 24
transactions by the Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or
written by the Portfolio or commodity futures contracts or options
thereon purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases of
the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
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<PAGE> 25
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the
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<PAGE> 26
Portfolio shall notify the Custodian at least three business days prior
to the date on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board of
Directors, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
-23-
<PAGE> 27
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign securities
transactions.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Portfolios
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.5 hereof.
3.4 Segregation of Securities. The Custodian shall identify on its books as
belonging to each applicable Portfolio of the Fund, the foreign
securities of such Portfolios held by each foreign sub-custodian. Each
agreement pursuant to which the Custodian employs a foreign banking
institution shall require that such institution establish a custody
account for the Custodian on behalf of the Fund for each applicable
Portfolio of the Fund and physically segregate in each account,
securities and other assets of the Portfolios, and, in the event that
such institution deposits the securities of one or more of the
Portfolios in a foreign securities depository, that it shall identify
on its books as belonging to the Custodian, as agent for each
applicable Portfolio, the securities so deposited.
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<PAGE> 28
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without the
payment of money or value other than for custody or administration; (c)
adequate records will be maintained identifying the assets as belonging
to each applicable Portfolio; (d) officers of or auditors employed by,
or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
-25-
<PAGE> 29
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.
3.8 Transactions in Foreign Custody Account.
(a) Except as otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
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<PAGE> 30
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to
-27-
<PAGE> 31
the extent that the Fund has not been made whole for any such loss,
damage, cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
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<PAGE> 32
3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolios assets to the extent
necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian
-29-
<PAGE> 33
not the subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there appears
to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each
case computed in accordance with generally accepted U.S. accounting
principles).
3.13 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Portfolios assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or both.
3.14 Tax Law
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund
-30-
<PAGE> 34
or the Custodian as custodian of the Fund by the tax law of the United
States of America or any state or political subdivision thereof. It
shall be the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund
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<PAGE> 35
pursuant thereto, the Custodian shall, upon receipt of instructions from the
Transfer Agent, make funds available for payment to holders of Shares who have
delivered to the Transfer Agent a request for redemption or repurchase of their
Shares. In connection with the redemption or repurchase of Shares of a
Portfolio, the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the Fund and the
Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialled by one or more person or persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by
-32-
<PAGE> 36
the Board of Directors of the Fund accompanied by a detailed description of
procedures approved by the Board of Directors, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Directors and the Custodian are satisfied
that such procedures afford adequate safeguards for the Portfolios' assets.
For purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which requires
a segregated asset account in accordance with Section 2.11.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise directed
by the Board of Directors of the Fund.
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<PAGE> 37
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent
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<PAGE> 38
periodically of the division of such net income among its various components.
The calculations of the net asset value per share and the daily income of each
Portfolio shall be made at the time or times described from time to time in the
Fund's currently effective prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
3la-1 and 3la-2 thereunder. All such records shall be the property of the Fund
and shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of the Fund
and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form
-35-
<PAGE> 39
N-lA, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibilities of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this
-36-
<PAGE> 40
Contract and shall be held harmless in acting upon any notice, request, consent,
certificate or other instrument reasonably believed by it to be genuine and to
be signed by the proper party or parties including any futures commission
merchant acting pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract, but shall be kept indemnified by
and shall be without liability to the Fund for any action taken or omitted by it
in good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.10)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.13 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
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<PAGE> 41
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
for the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
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<PAGE> 42
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund has
approved the initial use of a particular Securities System by such Portfolio and
the receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors has reviewed the use by such Portfolio of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not with respect to
a Portfolio act under Section 2.10A hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board of
Directors has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by such
Portfolio of the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state
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<PAGE> 43
regulations, or any provision of the Articles of Incorporation, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of its Board of Directors (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Directors of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the
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<PAGE> 44
office of the Custodian and transfer such securities, funds and other properties
in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities,
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<PAGE> 45
funds and other properties and the provisions of this Contract relating to the
duties and obligations of the Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Articles of Incorporation
of the Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to The Gabelli ABC Fund with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
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<PAGE> 46
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 11th day of March, 1993.
ATTEST GABELLI INVESTOR FUNDS, INC.
/s/ Terri Ellingway By /s/ Bruce N. Alpert
- ------------------------------ ------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ M. E. Bonomo By /s/ ??????????????????
- ------------------------------ ------------------------------
Assistant Secretary Executive Vice President
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<PAGE> 47
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of Gabelli Investor
Funds, Inc. for use as sub-custodians for the Fund's securities and other
assets:
(Insert banks and securities depositories)
Certified:
- -------------------------------
Fund's Authorized Officer
Date:
--------------------------
-44-
<PAGE> 1
Exhibit 9
TRANSFER AGENCY AND SERVICE AGREEMENT
between
GABELLI INVESTOR FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
Article 1 Terms of Appointment; Duties of the Bank........................2
Article 2 Fees and Expenses...............................................6
Article 3 Representations and Warranties of the Bank......................7
Article 4 Representations and Warranties of the Fund......................7
Article 5 Data Access and Proprietary Information.........................8
Article 6 Indemnification................................................10
Article 7 Standard of Care...............................................13
Article 8 Covenants of the Fund and the Bank.............................13
Article 9 Termination of Agreement.......................................14
Article 10 Additional Funds...............................................15
Article 11 Assignment.....................................................15
Article 12 Amendment......................................................16
Article 13 Massachusetts Law to Apply.....................................16
Article 14 Force Majeure..................................................16
Article 15 Consequential Damages..........................................16
Article 16 Merger of Agreement............................................17
Article 17 Counterparts...................................................17
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ____ day of _______________, 1993, by and between
GABELLI INVESTOR FUNDS, INC., a Maryland corporation, having its principal
office and place of business at One Corporate Center, Rye, New York, 10580-1434
(the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, The
Gabelli ABC Fund (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Article 10, being herein referred to, as a "Portfolio", and collectively as the
"Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank
as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities and the
Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
<PAGE> 4
Article 1 Terms of Appointment; Duties of the Bank
----------------------------------------
1.01 Subject to the terms and conditions set forth in this Agreement,
the Fund, on behalf of the Portfolios, hereby employs and appoints the Bank to
act as, and the Bank agrees to act as its transfer agent for the authorized and
issued shares of capital stock of the Fund representing interests in each of the
respective Portfolios ("Shares"), dividend disbursing agent, custodian of
certain retirement plans and agent in connection with any accumulation,
open-account or similar plans provided to the shareholders of each of the
respective Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus") of
the Fund on behalf of the applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as applicable
and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the Custodian of the Fund authorized pursuant to the
Articles of Incorporation of the Fund (the "Custodian");
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<PAGE> 5
(ii) Pursuant to Purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over
or cause to be paid over in the appropriate manner such monies
as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) Issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the
Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at
-3-
<PAGE> 6
its option, may issue replacement certificates in place of
mutilated stock certificates upon presentation thereof and
without such indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of Shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of Shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares or
to take cognizance of any laws relating to the issue or sale
of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i) perform the
customary services of a transfer agent, dividend disbursing agent, custodian of
certain retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists,
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<PAGE> 7
mailing proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky reporting
for each State and (ii) verify the establishment of transactions for each State
on the system prior to activation and thereafter monitor the daily activity for
each State. The responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Article 1 may be established from time to time by agreement between the Fund on
behalf of each Portfolio and the Bank per the attached service responsibility
schedule. The Bank may at times perform only a portion of these services and the
Fund or its agent may perform these services on the Fund's behalf.
-5-
<PAGE> 8
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing between the
Fund and the Bank.
Article 2 Fees and Expanses
-----------------
2.01 For the performance by the Bank pursuant to this Agreement, the
Fund agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.02 below may be changed from time to time subject to
mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees on behalf of each of the Portfolios to reimburse the Bank for
out-of-pocket expenses, including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating proxies, records
storage or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the Bank
at the request or with the consent of the Fund, will be reimbursed by the Fund
on behalf of the applicable Portfolio.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced to the
Bank by the Fund at least seven (7) days prior to the mailing date of such
materials.
-6-
<PAGE> 9
Article 3 Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
-7-
<PAGE> 10
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of the Fund being
offered for sale.
Article 5 Data Access and Proprietary Information
---------------------------------------
5.01 The Fund acknowledges that the data bases, computer programs,
screen formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank on
data bases under the control and ownership of the Bank ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the Bank. The
Fund agrees to treat all Proprietary Information as proprietary to the Bank and
further agrees that it shall not divulge any Proprietary Information to any
person or organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
-8-
<PAGE> 11
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal copyright
law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article shall
survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access Services
do not operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner to
correct such failure. organizations from which the Bank may obtain certain
-9-
<PAGE> 12
data included in the Data Access Services are solely responsible for the
contents of such data and the Fund agrees to make no claim against the Bank
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder information
or other information (such transactions constituting a "COEFI"), then in such
event the Bank shall be entitled to rely on the validity and authenticity of
such instruction without undertaking any further inquiry as long as such
instruction is undertaken in conformity with security procedures established by
the Bank from time to time.
Article 6 Indemnification
---------------
6.01 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
-10-
<PAGE> 13
(a) All actions of the Bank or its agent or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are received by the
Bank or its agents or subcontractors, and (ii) have been prepared, maintained or
performed by the Fund or any other person or firm on behalf of the Fund
including but not limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf of the
applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and
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<PAGE> 14
the Bank and its agents or subcontractors shall not be liable and shall be
indemnified by the Fund on behalf of the applicable Portfolio for any action
taken or omitted by it in reliance upon such instructions or upon the opinion of
such counsel. The Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in this
Article 6 shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of such
assertion, and shall keep the Fund advised with respect to all developments
concerning such claim. The Fund shall have the option to participate with the
Bank in the defense of such claim or to defend against said claim in its own
name or in the name of the
-12-
<PAGE> 15
Bank. The Bank shall in no case confess any claim or make any compromise in any
case in which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
Article 7 Standard of Care
----------------
7.01 The Bank shall at all times act in good faith and agrees to use
its best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not be
liable for loss or damage due to errors unless said errors are caused by its
negligence, bad faith, or willful misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
----------------------------------
8.01 The Fund shall on behalf of each of the Portfolios promptly
furnish to the Bank the following:
(a) A certified copy of the resolution of the Directors of the Fund
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the Fund and
all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it
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<PAGE> 16
may deem advisable. To the extent required by Section 31 of the Investment
Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that
all such records prepared or maintained by the Bank relating to the services to
be performed by the Bank hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in accordance with
its request.
8.04 The Bank and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Bank will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
------------------------
9.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of
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<PAGE> 17
records and material will be borne by the Fund on behalf of the applicable
Portfolio(s). Additionally, the Bank reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge equivalent
to the average of three (3) months' fees.
Article 10 Additional Funds
-------------------
10.01 In the event that the Fund establishes one or more series of
Shares in addition to The Gabelli ABC Fund with respect to which it desires to
have the Bank render services as transfer agent under the terms hereof, it shall
so notify the Bank in writing, and if the Bank agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
Article 11 Assignment
----------
11.01 Except as provided in Section 11.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
11.03 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(l)"), (ii) a BFDS subsidiary duly
-15-
<PAGE> 18
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to the
Fund for the acts and omissions of any subcontractor as it is for its own acts
and omissions.
Article 12 Amendment
---------
12.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Directors of the Fund.
Article 13 Massachusetts Law to Apply
--------------------------
13.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 14 Force Majeure
-------------
14.01 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
Article 15 Consequential Damages
---------------------
15.01 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
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<PAGE> 19
Article 16 Merger of Agreement
-------------------
16.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 17 Counterparts
------------
17.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
GABELLI INVESTOR FUNDS, INC.
BY: /s/ BRUCE N. ALPERT
----------------------------
ATTEST:
/s/ TERRI ELLINGWAY
- ---------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ XXXXXXXXXXXXXXXXXXXX
----------------------------
Executive Vice President
ATTEST:
/s/ XXXXXXXXXXXXXXXXXX
- ---------------------------
Assistant Secretary
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<PAGE> 1
Exhibit 9.1
SUB-ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of May, 1997, by and between
GABELLI FUNDS, INC. (the "Administrator"), and BISYS FUND SERVICES LIMITED
PARTNERSHIP, d/b/a BISYS FUND SERVICES ("BISYS").
WHEREAS, the Administrator is the investment adviser for the registered
investment companies (hereinafter referred to individually as a "Company" and
collectively as the "Companies") set forth in Schedule A attached hereto and is
responsible for the provision of administrative services to such Companies and
each of the Portfolios (hereinafter referred to individually as a "Portfolio"
and collectively as the "Portfolios") of such Companies;
WHEREAS, each Company is a management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator desires to retain BISYS to assist it in
performing administrative services with respect to each Portfolio and BISYS is
willing to perform such services on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Administrator and BISYS hereby agree as follows:
ARTICLE 1. Retention of BISYS. The Administrator hereby engages BISYS
to furnish each Portfolio with the administrative services as set forth in
Article 2 below (collectively, the "Services"). BISYS shall, for all purposes
herein, be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Administrator or the Companies in any way.
ARTICLE 2. Administrative Services. BISYS shall perform or supervise
the performance by others of administrative services in connection with the
operations of the Portfolios, and, on behalf of the Companies, will investigate,
assist in the selection of and conduct relations with custodians, depositories,
accountants, legal counsel, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and persons in any other capacity deemed to be
necessary or desirable for the Portfolios' operations. BISYS shall provide the
Directors/Trustees (hereafter, the "Directors") of the Companies with such
reports regarding investment performance as they may reasonably request but
shall have no responsibility for supervising the performance by any investment
adviser or sub-adviser of its responsibilities.
BISYS shall provide the Companies with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for meetings of shareholders ("Shareholders") and
Directors of the Companies) for handling the affairs of the Portfolios and such
other services as BISYS and the Administrator shall, from time to time,
determine to be necessary
<PAGE> 2
to perform BISYS' obligations under this Agreement. In addition, at the request
of the Boards of Directors, BISYS shall make reports to the Companies' Directors
concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, BISYS shall:
(a) calculate contractual Company expenses and provide necessary
instructions for all disbursements for the Companies, and as
appropriate compute each Company's yields, total return,
expense ratios, portfolio turnover rate, average commission
rate and, if required, portfolio average dollar-weighted
maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements
and proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register each
Company's Shares with state securities authorities, monitor
the sale of Company Shares for compliance with state
securities laws, and file with the appropriate state
securities authorities the registration statements and reports
for each Company and each Company's Shares and all amendments
thereto, as may be necessary or convenient to register and
keep effective each Company and its Shares with state
securities authorities to enable each Company to make a
continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Administrator,
communications to Shareholders, including the annual report to
Shareholders, coordinate the mailing of prospectuses, notices,
proxy statements, proxies and other reports to Shareholders,
and supervise and facilitate the proxy solicitation process
for all shareholder meetings, including the tabulation of
shareholder votes;
(e) administer contracts on behalf of each Company with, among
others, each Company's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Companies' transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination
to information services covering the investment company
industry;
(h) prepare or cause to be prepared at its expense the filing of
each Company's tax returns;
2
<PAGE> 3
(i) examine and review the operations and performance of the
various organizations providing services to the Companies or
any Portfolio, including, without limitation, the investment
adviser, distributor, custodian, fund accountant, transfer
agent, outside legal counsel and independent public
accountants, and, at the request of a Company's Board of
Directors, report to the Board on the performance of such
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of each Company's quarterly, semi-annual and annual
reports to Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to each Company's
Board of Directors to serve as officers of the Company, who
will be responsible for the management of certain of the
Company's affairs as determined by the Company's Board of
Directors;
(m) advise each Company and its Board of Directors on matters
concerning the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for each
Company in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Company's Board of Directors;
(o) monitor and advise each Company and its Portfolios on their
regulated investment company status under the Internal Revenue
Code of 1986, as amended;
(p) perform all administrative services and functions of each
Company and each Portfolio to the extent administrative
services and functions are not provided to the Company or such
Portfolio pursuant to the Company's or such Portfolio's
administration agreement, investment advisory agreement,
distribution agreement, custodian agreement, transfer agent
agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Administrator and BISYS shall determine desirable;
(r) prepare and file with the SEC the semi-annual report for each
Company on Form N-SAR and all required notices pursuant to
Rule 24f-2;
3
<PAGE> 4
(s) assist each Company with respect to SEC examinations,
including the furnishing of documents and information, as
appropriate, and responding to SEC examination letters; and
(t) assist each Company in preparing for Board meetings by (i)
coordinating board book production and distribution, (ii)
preparing Board agendas, (iii) preparing the BISYS section of
Board materials, (iv) preparing special Board meeting
materials, including but not limited to, materials relating to
annual contract approvals and 12b-1 plan approvals, as agreed
upon by the parties, and (v) such other Board meeting
functions that are agreed upon by the parties.
BISYS shall perform in such other services for each Company that are
mutually agreed upon by the parties from time to time. Such services may include
performing internal audit examinations; mailing the annual reports of the
Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the
Administrator will pay or cause to be paid BISYS' reasonable out-of-pocket
expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) BISYS. BISYS shall furnish at its own expense the executive,
supervisory and clerical personnel necessary to perform its obligations under
this Agreement. BISYS shall also provide the items which it is obligated to
provide under this Agreement, and shall pay all compensation, if any, of
officers of each Company as well as all Directors of each Company who are
affiliated persons of BISYS or any affiliated company of BISYS; provided,
however, that unless otherwise specifically provided, BISYS shall not be
obligated to pay the compensation of any employee of a Company retained by the
Directors of such Company to perform services on behalf of the Company.
(B) The Administrator. The Administrator hereby represents that each
Company has undertaken to pay or cause to be paid all other expenses of the
Company not otherwise allocated herein, including, without limitation,
organization costs, taxes, expenses for legal and auditing services, the
expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Directors who are not
affiliated persons of the Administrator or the Investment Adviser to the Company
or any affiliated corporation of the Administrator or the Investment Adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Company.
4
<PAGE> 5
ARTICLE 4. Compensation of BISYS.
(A) Sub-Administration Fee. For the services rendered, the facilities
furnished and the expenses assumed by BISYS pursuant to this Agreement, the
Administrator shall pay to BISYS compensation at an annual rate specified in
Schedule A attached hereto.
(B) Survival of Compensation Rights. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of liability of BISYS. The duties of BISYS shall
be confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against BISYS hereunder. BISYS shall not be liable
for any error of judgment or mistake of law or for any loss arising out of any
act or omission in carrying out its duties hereunder, except a loss resulting
from willful misfeasance, bad faith or negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions of applicable
law which cannot be waived or modified hereby. (As used in this Article 5, the
term "BISYS" shall include partners, officers, employees and other agents of
BISYS as well as BISYS itself.)
So long as BISYS acts in good faith and with due diligence and without
negligence, the Administrator assumes full responsibility and shall indemnify
BISYS and hold it harmless from and against any and all actions, suits and
claims, whether groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of BISYS' actions taken or nonactions with
respect to the performance of services hereunder. The indemnity and defense
provisions set forth herein shall indefinitely survive the termination of this
Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Administrator may be asked to indemnify or
hold BISYS harmless, the Administrator shall be fully and promptly advised of
all pertinent facts concerning the situation in question, and it is further
understood that BISYS will use all reasonable care to identify and notify the
Administrator promptly concerning any situation which presents or appears likely
to present the probability of such a claim for indemnification against the
Administrator, but failure to do so in good faith shall not affect the rights
hereunder.
The Administrator shall be entitled to participate at its own expense
or, if it so elects, to assume the defense of any suit brought to enforce any
claims subject to this indemnity provision. If the Administrator elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Administrator and satisfactory to BISYS, whose approval shall not
be unreasonably withheld. In the event that the Administrator elects to assume
the defense of any suit
5
<PAGE> 6
and retain counsel, BISYS shall bear the fees and expenses of any additional
counsel retained by it. If the Administrator does not elect to assume the
defense of a suit, it will reimburse BISYS for the reasonable fees and expenses
of any counsel retained by BISYS.
BISYS may apply to the Administrator at any time for instructions and
may consult counsel for the Administrator or its own counsel and with
accountants and other experts with respect to any matter arising in connection
with BISYS' duties, and BISYS shall not be liable or accountable for any action
taken or omitted by it in good faith in accordance with such instruction or with
the opinion of such counsel, accountants or other experts.
Also, BISYS shall be protected in acting upon any document which it
reasonably believes to be genuine and to have been signed or presented by the
proper person or persons. BISYS will not be held to have notice of any change of
authority of any officers, employees or agents of the Administrator until
receipt of written notice thereof from the Administrator.
ARTICLE 6. Activities of BISYS. The services of BISYS rendered
hereunder are not to be deemed to be exclusive. BISYS is free to render such
services to others and to have other businesses and interests. It is understood
that directors, officers, employees and Shareholders are or may be or become
interested in BISYS, as officers, employees or otherwise and that partners,
officers and employees of BISYS and its counsel are or may be or become
similarly interested in the Companies, and that BISYS may be or become
interested in the Companies as a Shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
BISYS may, with the prior consent of the Administrator, at its expense,
subcontract with any entity or person concerning the provision of the services
contemplated hereunder. BISYS shall not, however, be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that BISYS shall be responsible, to the extent provided in
Article 5 hereof, for all acts of such subcontractor as if such acts were its
own. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended if such amendment
is specifically approved in writing by the parties hereto.
ARTICLE 10. Certain Records. BISYS shall maintain customary records in
connection with its duties as specified in this Agreement. Any records required
to be maintained and preserved pursuant to Rules 3la-1 and 3la-2 under the 1940
Act which are prepared or maintained by BISYS on behalf of each Company shall be
prepared and maintained at the expense of BISYS, but shall be
6
<PAGE> 7
the property of each Company and will be made available to or surrendered
promptly to each Company on request.
In case of any request or demand for the inspection of such records by
another party, BISYS shall notify the Administrator and follow the
Administrator's instructions as to permitting or refusing such inspection;
provided that BISYS may exhibit such records to any person in any case where it
is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Administrator or the appropriate Company has agreed to indemnify BISYS against
such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the following address: if to BISYS, to it at 3435 Stelzer Road,
Columbus, Ohio 43219, Attention: George O. Martinez, Esq.; if to the
Administrator, to it at One Corporate Center, Rye, New York 10580-1434,
Attention: Bruce N. Alpert, or at such other address as such party may from time
to time specify in writing to the other party pursuant to this Section.
ARTICLE 13. Confidential Information. Each party acknowledges that it
may acquire knowledge and information relating to the other party and its
affiliates or the Companies including, but not limited to, information
pertaining to business plans, employees, customers and/or suppliers, and that
all such knowledge and information acquired or developed is and shall be
confidential and proprietary information (all such confidential and proprietary
information is herein collectively referred to as the "Confidential
Information"). Each party agrees to hold the Confidential Information in strict
confidence, to refrain from directly or indirectly disclosing it to others or
using it in any way except for purposes of performing services hereunder, and to
prevent any unauthorized person access to it either before or after termination
of this Agreement, without the prior written consent of the other party. Both
parties further agree to take all action reasonable and necessary to protect the
confidentiality of the Confidential Information. The parties shall use their
best efforts to have their directors, officers, employees and agents agree to
the terms of this Section. The obligations of the parties contained in this
section shall survive termination of this Agreement. Neither party's
confidentiality obligations under this provision shall apply to such information
that (i) was in the public domain or available to a third party without
restrictions at or prior to the time such information was made known to such
party, (ii) had been independently known to such party at the time of disclosure
from persons who were not subject to similar confidentiality obligations, or
(iii) is required to be disclosed by law (except that each party will use best
efforts to give the other party written notice prior to any such disclosure).
7
<PAGE> 8
ARTICLE 14. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 15. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
GABELLI FUNDS, INC.
By: /s/ Bruce N. Alpert
---------------------------
Title: Vice President and Chief
Operating Officer
------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ George O. Marting
---------------------------
Title: Senior Vice President
------------------------
8
<PAGE> 9
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
DATED AS OF MAY 1, 1997
BETWEEN GABELLI FUNDS, INC.
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios, either now or
hereafter created of the Companies set forth below. The current
Portfolios of such Companies are also set forth below.
GABELLI CONVERTIBLE SECURITIES FUND, INC.
GABELLI EQUITY SERIES FUNDS, INC.
Gabelli Small Cap Fund
Gabelli Equity Income Fund
GABELLI GLOBAL SERIES FUNDS, INC.
Gabelli Global Telecommunications Fund
Gabelli Global Convertible Securities Fund
Gabelli Global Interactive Couch Potato Fund
Gabelli Global Entertainment & Media Fund
Gabelli Global Growth Fund
GABELLI GOLD FUND, INC.
Gabelli Gold Fund
GABELLI INTERNATIONAL GROWTH FUND, INC.
Gabelli International Growth Fund
GABELLI INVESTOR FUNDS, INC.
Gabelli ABC Fund
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Administrator
will pay BISYS on the first business day of each month, or at
such time(s) as BISYS shall request and the parties hereto shall
agree, a fee based upon a prorated portion (as more particularly
described below) of the assets of all registered management
investment companies for which BISYS serves as Subadministrator
that are advised by Teton Advisers LLC, Gabelli Fixed Income
L.L.C., Gabelli Funds, Inc. or their affiliates
("BISYS-administered Investment Companies"). Such fee shall be
computed daily at the annual rate of:
A-1
<PAGE> 10
Six and one-quarter one-hundredths of one percent (.0625%)
of the BISYS-administered Investment Companies' average
daily net assets up to $350 million.
Four and one-quarter one-hundredths of one percent
(.0425%) of the BISYS-administered Investment Companies'
average daily net assets in excess of $350 million up to
$700 million.
Two and one-quarter one-hundredths of one percent (.0225%)
of the BISYS-administered Investment Companies' average
daily net assets in excess of $700 million.
The prorated portion of the fees that are payable to BISYS under
this Agreement shall be that portion of the fees described above
that is attributable to the average daily net assets of the
Portfolios. The fees set forth above shall be subject to a
minimum annual fee amount of $30,000 for each Portfolio. Such
fees shall be payable to BISYS on the first business day of each
month or at such other time(s) as the parties may agree upon.
The parties hereby acknowledge and agree that the compensation
under this Agreement due to BISYS shall be reduced in each month
(or other applicable payment period) by the amount of
compensation payable to BISYS Fund Services, Inc. under its Fund
Accounting Agreement with the Administrator with respect to the
Companies. The fee for the period from the day of the month this
Agreement is entered into until the end of that month shall be
prorated according to the proportion which such period bears to
the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month
shall be prorated according to the proportion which such period
bears to the full monthly period and shall be payable upon the
date of termination of this Agreement.
For purposes of determining the fees payable to BISYS, the value
of the net assets of a particular Portfolio shall be computed in
the manner described in each Company's Articles of Incorporation
or in the Prospectus or Statement of Additional Information
respecting that Portfolio as from time to time is in effect for
the computation of the value of such net assets in connection
with the determination of the liquidating value of the shares of
such Portfolio.
The parties hereby confirm that the fees payable hereunder shall
be applied to each Portfolio as a whole, and not to separate
classes of shares within the Portfolios.
A-2
<PAGE> 11
Term: The initial term of this Agreement (the "Initial Term") shall
commence on May 1, 1997 and shall remain in effect through
December 31, 1997. This Agreement shall be renewed automatically
for successive periods of one year after the Initial Term, unless
written notice of nonrenewal is provided by either party not less
than 90 days prior to the end of the Initial Term or 90 days
advance written notice of termination is provided by either party
at any time following the Initial Term. In the event of any
breach of this Agreement by either party, the non-breaching party
shall notify the breaching party in writing of such breach and
upon receipt of such notice, the breaching party shall have 45
days to remedy the breach. In the event any material breach is
not remedied within such time period, the nonbreaching party may
immediately terminate this Agreement.
Notwithstanding the foregoing, after such termination for so long
as BISYS, with the written consent of the Administrator, in fact
continues to perform any one or more of the services contemplated
by this Agreement or any schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full
force and effect. Compensation due BISYS and unpaid by the
Administrator upon such termination shall be immediately due and
payable upon and notwithstanding such termination. BISYS shall be
entitled to collect from the Administrator, in addition to the
compensation described in this Schedule A, all costs reasonably
incurred in connection with BISYS' activities in effecting such
termination, including without limitation, the delivery to each
Company and/or its designees of the Company's property, records,
instruments and documents, or any copies thereof. To the extent
that BISYS may retain in its possession copies of any Company
documents or records subsequent to such termination which copies
had not been requested by the Administrator on behalf of a
Company in connection with the termination process described
above, BISYS will provide such Company with reasonable access to
such copies; provided, however, that, in exchange therefor, the
Administrator shall reimburse BISYS for all costs reasonably
incurred in connection therewith.
A-3
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
The Gabelli ABC Fund,
a Series of Gabelli Investor Funds, Inc.:
We hereby consent to the incorporation by reference in Post-Effective Amendment
No. 8 to Registration Statement No. 33-54016 on Form N-1A of our Report of
Independent Auditors dated February 26, 1998, accompanying the financial
statements.
We also consent to the use of our name under the headings "Financial
Highlights" and "Independent Auditors" in the Prospectus, and "Counsel and
Independent Auditors" in the Statement of Additional Information, which is also
part of such Registration Statement.
GRANT THORNTON LLP
New York, New York
April 29, 1998
<PAGE> 1
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE GABELLI ABC FUND
The Gabelli ABC Fund (the "Fund") intends to engage in business as a
separate series of Gabelli Investor Funds, Inc. (the "Company"), which is an
open-end management investment company registered as such under the Investment
Company Act of 1940 (the "Act"). The Fund intends to employ Gabelli & Company,
Inc. and/or others as the principal underwriter and distributor (the
"Distributor") of the shares of the Fund pursuant to a written distribution
agreement. The Fund has adopted a plan of distribution pursuant to Rule 12b-1
under the Act to assist in the distribution of shares of the Fund.
The Board of Directors (the "Board") of the Company having determined that
it would be desirable to amend the current plan of distribution in certain
respects and to restate such amended plan in its entirety and that a plan of
distribution containing the terms set forth herein is reasonably likely to
benefit the Fund and its shareholders, the Fund hereby amends and restates its
plan of distribution (the "Plan") pursuant to Rule 12b-1 under the Act to read
in its entirety as follows:
1. In consideration of the services to be provided, and the expenses to be
incurred, by the Distributor pursuant to the distribution agreement, the
Company will pay to the Distributor as distribution payments (the "Payments")
in connection with the distribution of shares of the Fund an aggregate amount
at a rate of 0.25% per year of the average daily net assets of the Fund. Such
Payments shall be accrued daily and paid monthly in arrears or shall be accrued
and paid at such other intervals as the Board shall determine. The Company's
obligation hereunder shall be limited to the assets of the Fund and shall not
constitute an obligation of the Company except out of such assets and shall not
constitute an obligation of any shareholder of the Fund or other series of the
Company.
<PAGE> 2
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 shares of the Fund. 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 shares of the Fund: advertising the Fund or the Fund's
investment advisor'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 shares of the Fund, 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 Fund,
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 Company is hereby authorized and directed to enter into appropriate
written agreements with
2
<PAGE> 3
the Distributor and each other person to whom the Company 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 Directors
("Disinterested Director Approval") who are not interested persons of the
Company and have no direct or indirect financial interest in the operation of
the Plan or any such agreement, by vote cast in person at a meeting called for
the purposes of voting on such agreement.
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 Company may pay for on behalf of the Fund 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
Company 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 outstanding voting securities of the Fund. This Plan
may not be amended in any material respect without Board Approval and
Disinterested Director Approval and may not
3
<PAGE> 4
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 outstanding voting securities of the Fund. This Plan may continue in effect
for longer than one year after its approval by the shareholders of the Fund
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 directors who
are not interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or any agreement hereunder, 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 outstanding voting securities of the
Fund.
9. For purposes of this Plan the terms "interested person" and "related
agreement" shall have the meanings ascribed to them in the Act and the rules
adopted by the Securities and Exchange Commission thereunder and the term "vote
of a majority of the outstanding voting securities" of the Fund shall mean the
vote, at the annual or a special meeting of the security holders of the Fund
duly called, (a) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the outstanding voting securities
of the Fund are present or represented by proxy or, if less, (b) more than 50%
of the outstanding voting securities of the Fund.
4
<PAGE> 1
THE GABELLI ABC FUND
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 12/31/97
== == ======== ====== = ========= ===== ======== === ======== === ======== =====
THE GABELLI ABC FUND
AVERAGE ANNUAL RETURN
T=((ERV/P)exp(1/N))-1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: (05/14/93 TO 12/31/97):
((1,542.5/1,000)exp(1/(1692/365))-1)= 9.80%
1 YEAR (12/31/96 TO 12/31/97):
((1,128.0/1,000)exp(1/(365/365))-1)= 12.80%
AGGREGATE ANNUAL RETURNS
T =((ERV/P)exp(1/N))-1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: (05/14/93 TO 12/31/97):
((1,541.0/1,000)-1= 54.10%
1 YEAR (12/31/96 TO 12/31/97):
((1,128.0/1,000)-1= 12.80%
== == ======== ====== = ========= ===== ======== === ======== === ======== =====
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000893783
<NAME> GABELLI INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> THE GABELLI ABC FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 32,061,626
<INVESTMENTS-AT-VALUE> 33,101,584
<RECEIVABLES> 2,715,885
<ASSETS-OTHER> 8,822
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,826,291
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 598,284
<TOTAL-LIABILITIES> 598,284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,190,155
<SHARES-COMMON-STOCK> 3,442,361
<SHARES-COMMON-PRIOR> 2,723,940
<ACCUMULATED-NII-CURRENT> (5,775)
<OVERDISTRIBUTION-NII> 20,288
<ACCUMULATED-NET-GAINS> 3,669
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,039,958
<NET-ASSETS> 35,228,007
<DIVIDEND-INCOME> 266,748
<INTEREST-INCOME> 610,136
<OTHER-INCOME> 0
<EXPENSES-NET> 632,073
<NET-INVESTMENT-INCOME> 244,811
<REALIZED-GAINS-CURRENT> 2,253,030
<APPREC-INCREASE-CURRENT> 873,518
<NET-CHANGE-FROM-OPS> 3,371,359
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 265,916
<DISTRIBUTIONS-OF-GAINS> 2,253,195
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,121,544
<NUMBER-OF-SHARES-REDEEMED> 2,608,737
<SHARES-REINVESTED> 205,614
<NET-CHANGE-IN-ASSETS> 8,426,297
<ACCUMULATED-NII-PRIOR> 765
<ACCUMULATED-GAINS-PRIOR> 18,886
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 281,337
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 632,073
<AVERAGE-NET-ASSETS> 28,141,838
<PER-SHARE-NAV-BEGIN> 9.84
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 1.17
<PER-SHARE-DIVIDEND> .09
<PER-SHARE-DISTRIBUTIONS> .77
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.23
<EXPENSE-RATIO> 2.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
