WCC CAPITAL GROWTH FUND INC, N-1A EL/A, 1995-04-28

WCC CAPITAL GROWTH FUND INC
N-1A EL/A, 1995-04-28

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<PAGE>1

As filed with the Securities and Exchange Commission
on April 28, 1995

Securities Act File No. 33-61254
Investment Company Act File No. 811-7644

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. 2 [X]

Post-Effective Amendment No. ___ [ ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 2

(Check appropriate box or boxes)

Gabelli Capital Series Funds, Inc.
(Exact Name of Registrant as Specified in Charter)

One Corporate Center
Rye, New York 10580-1434
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including
Area Code: 1-800-422-3554

Bruce N. Alpert
One Corporate Center
Rye, New York 10580-1434
(Name and Address of Agent for Service)

Copies to:

J. Hamilton Crawford, Jr., Esq. Daniel Schloendorn, Esq.
Gabelli Capital Series Willkie Farr & Gallagher
Funds, Inc. One Citicorp Center
One Corporate Center 153 East 53rd Street
Rye, New York 10580-1434 New York, New York 10022

<PAGE>2

Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.

It is proposed that this filing will become effective (check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1) of Rule 485

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

Proposed
Title of Maximum Proposed
Securities Offering Maximum Amount of
Being Amount Being Price Per Aggregate Registra-
Registered Registered Unit Offering tion Fee
---------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C>

Common Indefinite* * Indefinite* $500**
Stock,
$.001 par
value per
share

</TABLE>

* Registrant is registering an indefinite number of shares of Common Stock
by this Registration Statement pursuant to Rule 24f-2 under the
Investment Company Act of 1940.

** Previously paid.

<PAGE>3

The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

<PAGE>4

GABELLI CAPITAL SERIES FUNDS, INC.

FORM N-1A

CROSS REFERENCE SHEET

PURSUANT TO RULE 495(a)

Part A
Items No. Prospectus Heading
- --------- ------------------
1. Cover Page . . . . . . . . . Cover Page

2. Synopsis . . . . . . . . . . Not Applicable

3. Condensed Financial
Information . . . . . . . . Not applicable

4. General Description of
Registrant . . . . . . . . Cover Page; Investment Objectives and
Policies; General Information

5. Management of the Fund . . . Management of the Fund; Investment
Objectives and Policies; General
Information; Purchase and Redemption
of Shares

6. Capital Stock and Other
Securities . . . . . . . . Dividends, Distributions and Taxes;
General Information

7. Purchase of Securities
Being Offered . . . . . . . Purchase and Redemption of Shares

8. Redemption or Repurchase . . Purchase and Redemption of Shares

9. Pending Legal Proceedings . Not applicable

Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
10. Cover Page . . . . . . . . . Cover Page

11. Table of Contents . . . . . Table of Contents

<PAGE>5

Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------

12. General Information and
History . . . . . . . . . . The Manager; The Adviser; Directors
and Officers; see Prospectus --
"General Information"

13. Investment Objectives and
Policies . . . . . . . . . Investment Policies; Special
Investment Methods; Investment
Objectives;

14. Management of the Fund . . . Directors and Officers; The Manager;
The Adviser; see Prospectus --
"Management of the Fund"

15. Control Persons and Principal
Holders of Securities . . . Directors and Officers; The Manager;
The Adviser; see Prospectus --
"Purchase and Redemption of Shares";
"General Information"

16. Investment Advisory and
Other Services . . . . . . The Manager; The Adviser; The
Distributor; see Prospectus --
"Custodian, Transfer Agent and
Dividend Disbursing Agent";
"Management of the Fund"

17. Brokerage Allocation and
Other Practices . . . . . . Portfolio Transactions and Brokerage

18. Capital Stock and Other
Securities . . . . . . . . Dividends, Distributions and Taxes;
General Information; see Prospectus --
"Dividends, Distributions and Taxes";
"General Information"

19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . . . Purchase and Redemption of Shares;
Determination of Net Asset Value

<PAGE>6

Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------

20. Tax Status . . . . . . . . . Dividends, Distributions and Taxes;
see Prospectus -- "Dividends,
Distributions and Taxes"

21. Underwriters . . . . . . . . The Distributor; see Prospectus --
"Purchase and Redemption of Shares";
"Management of the Fund"

22. Calculation of
Performance Data . . . . . Investment Performance Information

23. Financial Statements . . . . Financial Statements

Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY STATE.

<PAGE>1

Subject to Completion, Dated April 28, 1995

GABELLI CAPITAL ASSET FUND

One Corporate Center
Rye, New York 10580-1434
Telephone: 1-800-GABELLI (1-800-422-3554)

PROSPECTUS
May 1, 1995

Gabelli Capital Asset Fund (the "Fund") is a series of Gabelli
Capital Series Funds, Inc. (the "Company"), an open-end, diversified
management investment company. The primary investment objective of the Fund
is growth of capital, with current income as a secondary objective. See
"Investment Objectives and Policies."

Shares of the Fund are available to the public only through the
purchase of certain variable annuity and variable life insurance contracts
("Contract(s)") issued by The Guardian Insurance & Annuity Company, Inc.
("GIAC").

This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Fund. A Statement of Additional
Information dated May 1, 1995 (the "Additional Statement") containing
additional information about the Fund has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus.
For a free copy, call or write the Fund at the telephone number or address set
forth above.

_______________

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.
- -----------------------------------------------------------------------------

<PAGE>2

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of the Fund is growth of capital
and investments will be made based on management's perception of their
potential for capital appreciation. Current income is a secondary objective.
There is no assurance that the Fund will achieve its investment objectives.
The investment objectives of the Fund are fundamental and may not be changed
without shareholder approval. The other investment policies described below
may be changed by the Board of Directors without shareholder approval.

The Fund expects that its assets will be invested primarily in a
diversified portfolio of readily marketable equity securities (including
common stock, preferred stock, securities representing the right to acquire
common stock and securities that are convertible into or exchangeable for
common stock). Gabelli Funds, Inc., the investment adviser to the Fund (the
"Adviser"), will invest in companies that are selling in the public market at
a significant discount to their private market value ("PMV"), that is, that
value the Adviser believes an informed industrialist would be willing to pay
to acquire companies with similar characteristics. Factors considered by the
Adviser include price, earnings expectations, earnings and price histories,
balance sheet characteristics and perceived management skills. Also
considered are changes in economic and political outlooks as well as
individual corporate developments. Fund investments which lose their
perceived value relative to other investment alternatives are sold.

When deemed appropriate by the Adviser, the Fund may without limit
invest temporarily in defensive securities such as high grade debt securities,
obligations of the U.S. Government, its agencies or instrumentalities, or in
short-term (maturing less than one year) money market instruments, including
commercial paper rated A-1 or better by Standard & Poor's Ratings Group
("S&P") or P-1 or better by Moody's Investors Services ("Moody's").

It is the Adviser's expectation that most Fund investments will be
long term in nature and that the annual turnover of the Fund's portfolio
should not exceed 100%. A portfolio turnover rate of 100% would occur if all
the stocks in the portfolio were replaced in a one-year period. High turnover
involves correspondingly greater commission expenses and transaction costs.

<PAGE>3

Convertible Securities

Convertible securities are ordinarily a long-term debt obligation of
the issuer convertible at a stated exchange rate into common stock of the
issuer and may also include short-term debt obligations or preferred stock.
As with all fixed income securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of similar
quality. However, when the market price of the common stock underlying a
convertible security exceeds the conversion price, the price of the
convertible security tends to reflect the value of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common stock.
Convertible securities rank senior to common stock in an issuer's capital
structure and are consequently of higher quality and entail less risk than the
issuer's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security
sells above its value as a fixed income security.

The Fund may invest in convertible securities when it appears to the
Adviser that it may not be prudent to be fully invested in common stocks. In
evaluating a convertible security, the Adviser places primary emphasis on the
attractiveness of the underlying common stock and the potential for capital
appreciation through conversion. See "Convertible Securities" in the
Additional Statement.

Debt Securities

The Fund will normally purchase only investment grade debt
securities having a rating of, or equivalent to, at least an S&P rating of BBB
(which rating may have speculative characteristics) or, if unrated, judged by
the Adviser to be of comparable quality. However, the Fund may also invest up
to 25% of its assets in more speculative debt securities provided, that, as
described in the following paragraph, no more than 5% of the Fund's assets may
be invested in corporate debt securities with a rating of, or equivalent to, a
Standard & Poor's rating of CCC or lower. Corporate debt obligations having a
B rating will likely have some quality and protective characteristics which,
in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions. Although lower
rated debt securities generally have higher yields, they are also more subject
to market price

<PAGE>4

volatility based on increased sensitivity to changes in interest rates and
economic conditions or the liquidity of their secondary trading market. A
description of corporate debt ratings is contained in the Additional
Statement.

The Fund may invest up to 5% of its assets in low rated and unrated
corporate debt securities (often referred to in the financial press as "junk
bonds") which are perceived by the Adviser to present an opportunity for
significant capital appreciation, if, in the judgment of the Adviser, the
ability of the issuer to repay principal and interest when due is
underestimated by the market. For purposes of the foregoing limitation,
corporate debt securities are "low rated" if they have a rating of, or
equivalent to, an S&P rating of CCC or lower. See "Debt Securities" in the
Additional Statement.

Investments in Small, Unseasoned Companies

The Fund may invest up to 5% of its net assets in small, less well
known companies which (including predecessors) have operated less than three
years. The securities of such companies may have limited liquidity.

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 its portfolio. The Fund will not purchase options if,
as a result, the aggregate cost or proceeds of all outstanding options exceeds
5% of the Fund's assets.

Warrants and Rights

The Fund may invest up to 5% of its total assets in warrants or
rights (other than those acquired in units or attached to other securities)
which entitle the holder to buy

<PAGE>5

equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by the Adviser for
inclusion in the Fund's portfolio. The Fund will not invest more than 2% of
its total assets in warrants or rights which are not listed on the New York or
American Stock Exchanges.

Foreign Securities

The Fund may invest up to 25% of its total assets in the securities
of non-U.S. issuers. These investments involve certain risks not ordinarily
associated with investments in securities of domestic issuers. These risks
include fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other
foreign governmental laws or restrictions. In addition, with respect to
certain countries, there is the possibility of expropriation of assets,
confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.

There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies. Non-U.S. securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets, and securities of many foreign companies are less
liquid and their prices more volatile than securities of comparable U.S.
companies. Transaction costs of investing in non-U.S. securities markets are
generally higher than in the U.S. There is generally less government
supervision and regulation of exchanges, brokers and issuers than there is in
the U.S. The Fund might have greater difficulty taking appropriate legal
action in non-U.S. courts. Non-U.S. markets also have different clearance and
settlement procedures which in some markets have at times failed to keep pace
with the volume of transactions, thereby creating substantial delays and
settlement failures that could adversely affect the Fund's performance.

Dividend and interest income from non-U.S. securities will generally
be subject to withholding taxes by the country in which the issuer is located
and may not be recoverable by the Fund or the investor.

<PAGE>6

Other Investment Companies

The Fund does not intend to purchase the shares of other open-end
investment companies and reserves the right to invest up to 10% of its total
assets in the securities of closed-end investment companies including small
business investment companies (not more than 5% of its total assets may be
invested in not more than 3% of the voting securities of any investment
company). To the extent that the Fund invests in the securities of other
investment companies, shareholders in the Fund may be subject to duplicative
advisory and administrative fees.

SPECIAL INVESTMENT METHODS

The Fund will not in the aggregate invest more than 15% of its net
assets in illiquid securities. These securities include securities which are
restricted for public sale, securities for which market quotations are not
readily available, and repurchase agreements maturing or terminable in more
than seven days. Securities freely salable among qualified institutional
investors under special rules adopted by the Securities and Exchange
Commission 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. Further
information on the investment methods and policies of the Fund are set forth
in the Additional Statement.

The Fund may purchase and sell securities on a "when, as and if
issued basis" under which the issuance of the security depends upon the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. For further information, see "When
Issued, Delayed Delivery Securities and Forward Commitments" in the Additional
Statement.

Corporate Reorganizations

Subject to the diversification requirements of its investment
restrictions, the Fund may invest not more than 35% of its total assets in
securities for which a tender or exchange offer has been made or announced and
in the securities of companies for which a merger, consolidation, liquidation
or similar reorganization proposal has been announced if, in the judgment of
the Adviser, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in
the short-term nature of

<PAGE>7

such transactions. The 35% limitation does not apply to the securities of
companies which may be involved in simply consummating an approved or agreed
upon merger, acquisition, consolidation, liquidation or reorganization. The
principal risk is that such offers or proposals may not be consummated within
the time and under the terms contemplated at the time of the investment in
which case, unless replaced by an equivalent or increased offer or proposal
which is consummated, the Fund may sustain a loss. For further information on
such investments, see "Corporate Reorganizations" in the Additional Statement.

Repurchase Agreements

The Fund may enter into repurchase agreements with "primary dealers"
in U.S. Government securities and member banks of the Federal Reserve System
which furnish collateral at least equal in value or market price to the amount
of their repurchase obligation. In a repurchase agreement, an investor (e.g.,
the Fund) purchases a debt security from a seller which undertakes to
repurchase the security at a specified resale price on an agreed future date
(ordinarily a week or less). The resale price generally exceeds the purchase
price by an amount which reflects an agreed-upon market interest rate for the
term of the repurchase agreement. The principal risk is that, if the seller
defaults, the Fund might suffer a loss to the extent that the proceeds from
the sale of the underlying securities and other collateral held by the Fund
are less than the repurchase price. Except for repurchase agreements with a
duration of seven days or less, not more than 5% of the Fund's total assets
may be so invested.

Borrowing

The Fund may not borrow money except for (i) short-term credits from
banks as may be necessary for the clearance of portfolio transactions, and
(ii) 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 for any purpose, including
redemptions, may not, in the aggregate, exceed 15%, and borrowing for purposes
other than meeting redemptions may not exceed 5%, of the value of the Fund's
total assets at the time a borrowing is made. The Fund will not make any
additional purchases of portfolio securities at any time its borrowings exceed
5% of its assets. The Fund will not mortgage, pledge or hypothecate any of
its assets except that, in connection with the foregoing, not more than 20% of
the assets of the Fund may be used as collateral.

<PAGE>8

Short Sales

The Fund may make short sales of securities. A short sale is a
transaction in which a Fund sells a security it does not own in anticipation
that the market price of that security will decline. The market value of the
securities sold short of any one issuer will not exceed either 5% of the
Fund's total assets or 5% of such issuer's voting securities. The Fund will
not make a short sale if, after giving effect to such sale, the market value
of all securities sold short exceeds 10% of the value of its assets or the
Fund's aggregate short sales of a particular class of securities exceeds 10%
of the outstanding securities of that class. Short sales may only be made in
securities listed on a national securities exchange. The 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, the Fund owns or has the
immediate and unconditional right to acquire at no additional cost the
identical security.

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. Although the Fund's gain is limited to the price at
which it sold the security short, its potential loss is theoretically
unlimited.

Forward Currency Exchange Contracts

The Fund may enter into forward currency exchange contracts to
protect against the effects of fluctuating rates of currency exchange and
exchange control regulations. Forward currency exchange contracts provide for
the purchase or sale of an amount of a specified currency at a future date.
Purposes for which such currency transactions may be used include protecting
against a decline in a foreign currency against the U.S. dollar between the
trade date and settlement date when the Fund purchases or sells non-U.S.
dollar-denominated securities, locking in the U.S. dollar value of dividends
and interest on securities held by the Fund and generally protecting the U.S.
dollar value of securities held by the Fund against exchange rate fluctuation.
While such forward contracts may limit losses to the Fund as a result of
exchange rate fluctuation, they will also limit any gains that may otherwise
have been realized. Currency transactions 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.

<PAGE>9

Derivative Transactions

As described above, the Fund may invest in options and warrants,
forward foreign currency exchange contracts, futures contracts, options on
futures and other transactions using derivative instruments. Derivative
transactions have certain risks, 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 transaction had not occurred. The loss
from the Fund's investing in futures and other derivative transactions is
potentially unlimited.

MANAGEMENT OF THE FUND

The Company's Board of Directors (the members of which, together
with the Company's 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 Guardian
Investor Services Corporation, the manager of the Fund (the "Manager"), the
Adviser and Gabelli & Company, Inc., the distributor of the Fund's shares (the
"Distributor").

Pursuant to a Management Agreement with the Fund, the Manager, under
the supervision of the Board of Directors, supervises the performance of
administrative and professional services provided to the Fund by others
including the Adviser and The Shareholder Services Group, Inc., the
administrator of the Fund (the "Sub-Administrator"), and pays the fees of the
Adviser. As compensation for its services and the related expenses borne by
the Manager, the Fund pays the Manager a fee, computed daily and payable
monthly, equal, on an annual basis, to 1.00% of the Fund's average daily net
assets. The management fee paid by the Fund is higher than that paid by most
mutual funds. Pursuant to an Investment Advisory Agreement among the Fund,
the Manager and the Adviser, the Adviser, under the supervision of the
Company's Board of Directors and the Manager, manages the Fund's assets in
accordance with the Fund's investment objective and policies, makes investment
decisions for the Fund, places purchase and sale orders on behalf of the Fund,
provides investment research and provides facilities and personnel required
for the Fund's administrative needs. The Adviser may delegate its
administrative role and currently has done so to the Sub-Administrator. The
Adviser will supervise the performance of administrative and professional
services provided by others and pays the compensation of the Sub-Administrator
and all officers and directors of the Fund who are its affiliates. As

<PAGE>10

compensation for its services and the related expenses borne by the Adviser,
the Manager pays the Adviser a fee, computed daily and payable monthly, equal,
on an annual basis, to .75% of the Fund's average daily net assets.

Mario J. Gabelli, CFA has been designated by the Adviser to be
primarily responsible for the day-to-day management of the Fund. Mr. Gabelli
has been Chairman and Chief Investment Officer of the Adviser since its
inception in 1980. The Adviser relies to a considerable extent on the
expertise of Mr. Gabelli, who may be difficult to replace in the event of his
death, disability or resignation.

The Company, the Manager, GIAC, the Adviser and the Distributor have
entered into a Participation Agreement regarding the marketing of the Fund's
shares as an investment option for variable annuity and variable life
contracts issued by GIAC.

The Manager

The Manager is located at 201 Park Avenue South, New York, New York
10003 and as of March 31, 1995 serves as investment adviser to eight funds
with aggregate assets of over $2.7 billion and as co-adviser of a separate
account of GIAC. The Manager is also the underwriter and distributor of all
mutual funds sponsored by The Guardian Life Insurance Company of America
("Guardian Life") and of the variable annuity and variable life insurance
contracts issued by GIAC. The Manager is a wholly owned subsidiary of GIAC,
which is, in turn, a wholly owned subsidiary of Guardian Life, a mutual life
insurance company organized in the State of New York in 1860.

The Adviser

The Adviser, which is located at One Corporate Center, Rye, New York
10580-1435, was formed in 1980 and as of March 31, 1995 acts as investment
adviser to the following funds with aggregate assets in excess of
$3.7 billion:

Open-end funds:

Net Assets
3/31/95
----------
(in millions)

The Gabelli Asset Fund $1,048
The Gabelli Growth Fund 478
The Gabelli Value Fund 463
The Gabelli Small Cap Growth Fund 212
The Gabelli Equity Income Fund 51

<PAGE>11

The Gabelli U.S. Treasury
Money Market Fund 264
The Gabelli ABC Fund 23
The Gabelli Global
Telecommunications Fund 132
The Gabelli Global Interactive
Couch Potato[TM][COPYRIGHT] Fund 27
The Gabelli Global Convertible
Securities Fund 17
Gabelli Gold Fund 16

Closed-end funds:

The Gabelli Equity Trust Inc. 856
The Gabelli Global Multimedia Trust Inc. 66
The Gabelli Convertible
Securities Fund, Inc. 90

The Distributor is an indirect majority-owned subsidiary of the
Adviser. GAMCO Investors, Inc. ("GAMCO"), a majority-owned subsidiary of the
Adviser, acts as investment adviser for individuals, pension trusts, profit
sharing trusts and endowments. As of March 31, 1995, GAMCO had aggregate
assets in excess of $4.5 billion under its management. 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.

Affiliates of the Adviser may, in the ordinary course of their
business, acquire for their own accounts or for the accounts of their advisory
clients, significant (and possibly controlling) positions in the securities of
companies that may also be suitable for investment by the Fund. The
securities in which the Fund might invest may thereby be limited to some
extent. For instance, many companies in the past several years have adopted
so-called "poison pill" or other defensive measures designed to discourage or
prevent the completion of non-negotiated offers for control of the company.
Such defensive measures may have the effect of limiting the shares of the
company which may be available to be acquired by the Fund if the affiliates of
the Adviser or their advisory accounts have or acquire a significant position
in the same securities. However, the Adviser does not believe that the
investment programs of its affiliates will have a material adverse effect upon
the Fund in seeking to achieve its investment objectives. Securities
purchased or sold pursuant to contemporaneous orders entered on behalf of the
investment company accounts of the Adviser or the advisory accounts managed by
its affiliates for their

<PAGE>12

unaffiliated clients are allocated pursuant to principles believed to be fair
and not disadvantageous to any such accounts. In addition, all such orders
are accorded priority of execution over orders entered on behalf of accounts
in which the Adviser or its affiliates have substantial pecuniary interests.

The Investment Advisory Agreement contains provisions relating to
the selection of securities brokers to effect the portfolio transactions of
the Fund. Under those provisions, subject to applicable law and procedures
adopted by the Directors, the Adviser may (1) direct Fund portfolio brokerage
to the Distributor or any other broker-dealer affiliates of the Adviser; (2)
pay commissions to brokers other than the Distributor which are higher than
might be charged by another qualified broker to obtain brokerage and/or
research services considered by the Adviser to be useful or desirable for its
investment management of the Fund and/or other advisory accounts of itself and
any investment adviser affiliated with it; and (3) 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.

Expenses

In addition to the fees of the Manager, 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, charges of State Street Bank and Trust Company (the Fund's
custodian, transfer agent and dividend paying agent) and any persons hired by
the Fund, Securities and Exchange Commission fees, compensation including fees
of the Fund's unaffiliated directors, officers and employees, accounting costs
for reports sent to owners of the Contracts which provide for investment in
the Fund ("Contractowner(s)"), the Fund's pro rata portion of membership fees
in trade organizations, fidelity bond coverage for the Fund's officers and
employees, interest, brokerage and other trading costs, taxes, all expenses of
computing the Fund's net asset value per share, expenses involved in
registering and maintaining the registration of the Fund's shares with the
Securities and Exchange Commission and qualifying the Fund for sale in various
jurisdictions and maintaining such qualification, litigation and other
extraordinary or non-recurring expenses. However, other typical Fund expenses
such as Contractowner servicing, distribution of reports to Contractowners and
prospectus printing and postage will be borne by GIAC.

<PAGE>13

Sub-Administrator

The Adviser has entered into a Sub-Administration Agreement with the
Sub-Administrator covering the Fund and certain other funds advised by the
Adviser. Under the Sub-Administration Agreement, the Sub-Administrator
provides certain administrative services necessary for the Fund's operations,
including the preparation and distribution of materials for meetings of the
Company's Board of Directors relating to the Fund, compliance testing of Fund
activities and assistance in the preparation of proxy statements, reports to
Contractowners and other documentation. The Sub-Administrator, which is a
subsidiary of First Data Corp., has its principal office at One Exchange
Place, Boston, Massachusetts 02109. The Adviser will pay the compensation of
the Sub-Administrator from the fees which are paid to the Adviser by the
Manager. No additional amount will be paid by the Fund for services by the
Sub-Administrator.

Distributor

The Distributor, located at One Corporate Center, Rye, New York
10580-1435, serves as distributor of the Fund's shares to separate accounts of
GIAC, for which it receives no separate fee from the Fund.

PURCHASE AND REDEMPTION OF SHARES

Fund shares are continuously offered to GIAC's separate accounts at
the net asset value per share next determined after a proper purchase request
has been received by GIAC. GIAC then offers to its Contractowners units in
its separate accounts which directly correspond to shares in the Fund. GIAC
submits purchase and redemption orders to the Fund based on allocation
instructions for premium payments, transfer instructions and surrender or
partial withdrawal requests which are furnished to GIAC by such
Contractowners. Contractowners can send such instructions and requests to
GIAC at P.O. Box 26210, Lehigh Valley, PA 18002 by first class mail or 3900
Burgess Place, Bethlehem, PA 18017 by overnight or express mail. 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, which is currently 4:00 p.m., New York
City 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

<PAGE>14

available are valued at market value as determined by the last quoted sale
price prior to the valuation time 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. Until June 7,
1995 payments for redeemed shares will ordinarily be made within seven (7)
days after the Fund receives a redemption order from GIAC. Thereafter payment
will ordinarily be made within three (3) business days. The redemption price
will be the net asset value per share next determined after GIAC receives the
Contractowner's request in proper form.

The Fund may suspend the right of redemption or postpone the date of
payment during any period when trading on the New York Stock Exchange is
restricted, or such Exchange is closed for other than weekends and holidays;
when an emergency makes it not reasonably practicable for the Fund to dispose
of assets or calculate its net asset value; or as permitted by the Securities
and Exchange Commission.

The accompanying prospectus for a GIAC variable annuity or variable
life insurance policy describes the allocation, transfer and withdrawal
provisions of such annuity or policy.

DIVIDENDS, DISTRIBUTIONS AND TAXES

All dividends and capital gains distributions paid by the Fund will
be automatically reinvested, at net asset value, by GIAC's separate accounts
in additional shares of the Fund. 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 and in amounts that
will avoid the imposition on the Fund of a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of net investment
income and capital gains. Contractowners who own units in a separate account
which correspond to shares in the Fund will be notified when distributions are
made.

The Fund will be treated as a separate entity for federal income tax
purposes. The Fund intends to qualify as a "regulated investment company"
under the Internal Revenue Code of

<PAGE>15

1986, as amended (the "Code"), in order to be relieved of federal income tax
on that part of its net investment income and realized capital gains which it
distributes to GIAC's separate accounts. To qualify, the Fund must meet
certain relatively complex income and diversification tests, including the
requirement that less than 30% of its gross income (exclusive of losses) may
be derived from the sale or other disposition of securities held for less than
three months. The loss of such status would result in the Fund being subject
to federal income tax on its taxable income and gains.

The Code and Treasury Department regulations promulgated thereunder
require that mutual funds that are offered through insurance company separate
accounts must meet certain diversification requirements to preserve the tax-
deferral benefits provided by the variable contracts which are offered in
connection with such separate accounts. The Adviser intends to diversify the
Fund's investments in accordance with those requirements. The prospectuses
for GIAC's variable annuities and variable life insurance policies describe
the federal income tax treatment of distributions from such contracts to
Contractowners.

The foregoing is only a summary of important federal tax law
provisions that can affect the Fund. Other federal, state, or local tax law
provisions may also affect the Fund and its operations. Anyone who is
considering allocating, transferring or withdrawing monies held under a GIAC
variable contract to or from this Fund should consult a qualified tax adviser.

GENERAL INFORMATION

Descriptions of Shares and Voting Rights

The Fund is currently the only series of the Company, which was
incorporated in Maryland on April 8, 1993 and is registered with the
Securities and Exchange Commission as an open-end, diversified investment
company. The Company has authorized capital stock consisting of one billion
shares having a par value of one-tenth of one cent ($.001) per share. Of
these authorized shares, five hundred million are designated as shares of the
Fund. The Company's Board of Directors has the authority to create additional
series funds without obtaining stockholder approval. The Company 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. There are no conversion or preemptive rights in

<PAGE>16

connection with any shares of the Fund. All shares, when issued, will be
fully paid and nonassessable. Semi-annual and annual reports will be sent to
all Contractowners which include a list of the Fund's portfolio securities and
its financial statements which shall be audited annually.

Through its separate accounts, GIAC is the Fund's sole stockholder
of record, so, under the 1940 Act, GIAC is deemed to be in control of the
Fund. Nevertheless, when a stockholders' meeting occurs, GIAC solicits and
accepts voting instructions from its Contractowners who have allocated or
transferred monies for an investment in the Fund as of the record date of the
meeting. GIAC then votes the Fund's shares that are attributable to its
Contractowners' interests in the Fund in accordance with their instructions.
GIAC will vote any shares that it is entitled to vote directly due to amounts
it has contributed or accumulated in its separate accounts in the manner
described in the prospectuses for its variable annuities and variable life
insurance policies.

Each share of the Fund is entitled to one vote, and fractional
shares are entitled to fractional votes. Fund shares have non-cumulative
voting rights, so the vote of more than 50% of the shares can elect 100% of
the directors.

The Fund is only available to owners of variable annuities or
variable life insurance policies issued by GIAC through its separate accounts.
The Fund does not currently foresee any disadvantages to Contractowners
arising from offering its shares to variable annuity and variable life
insurance policy separate accounts simultaneously, and the Board of Directors
monitors events for the existence of any material irreconcilable conflict
between or among Contractowners. If a material irreconcilable conflict
arises, one or more separate accounts may withdraw their investments in the
Fund. This could possibly force the Fund to sell portfolio securities at
disadvantageous prices. GIAC will bear the expenses of establishing separate
portfolios for variable annuity and variable life insurance separate accounts
if such action becomes necessary; however, ongoing expenses that are
ultimately borne by Contractowners will likely increase due to the loss of the
economies of scale benefits that can be provided to mutual funds with
substantial assets.

Performance Information

The Fund may, from time to time, provide performance information in
advertisements, sales literature or other

<PAGE>17

materials furnished to existing or prospective owners of GIAC's variable
contracts. When performance information is provided in advertisements, it
will include the effect of all charges deducted under the terms of the
specified contract, as well as all recurring and non-recurring charges
incurred by the Fund. All performance results are historical and are not
representative of future results.

Total return and average annual total return reflect the change in value
of an investment in the Fund over a specified period, assuming the
reinvestment of all capital gains distributions and income dividends. Average
annual total returns show the average change in value for each annual period
within a specified period. Total returns, which are not annualized, show the
total percentage or dollar change in value over a specified period.
Promotional materials relating to the Fund's performance will always at least
provide average annual total returns for one, five and ten years (if
applicable).

The Fund may also compare its performance to other investment vehicles or
other mutual funds which have similar investment objectives or programs.
Also, the Fund may quote information from securities indices or financial and
industry or general interest publications in its promotional materials.
Additionally, the Fund's promotional materials may contain references to types
and characteristics of certain securities; features of its portfolio;
financial markets; or historical, current or prospective economic trends.
Topics of general interest, such as personal financial planning, may also be
discussed. More information about the Fund's performance is contained in the
Additional Statement.

Custodian, Transfer Agent and Dividend Disbursing Agent

State Street Bank and Trust Company, 1776 Heritage Drive, North
Quincy, Massachusetts 02171, is the Custodian for the Fund's cash and
securities. Foreign securities purchased by the Fund will be maintained in
the custody of either foreign banks or trust companies that are members of
State Street Bank and Trust Company's Global Custody Network, or foreign
depositories used by such members. State Street Bank and Trust Company is the
Transfer Agent for the Fund's shares as well. Boston Financial Data Services,
Inc., an affiliate of State Street Bank and Trust Company, performs the
shareholder services on behalf of State Street and is located at The BFDS
Building, Two Heritage Drive, Quincy, Massachusetts 02171.

<PAGE>18

_____________________________________________________________________________

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 Additional Statement or the Fund's official sales literature
in connection with the offering of the Fund's shares, and if given or made,
such information or representation may not be relied upon as being authorized
by the Fund, the Manager, the Adviser, the Sub-Administrator, the Distributor
or any affiliate thereof. This Prospectus does not constitute an offer to
sell or a solicitation of any offer to buy in any state to any person to whom
it is unlawful to make such offer in such state.
_____________________________________________________________________________

<PAGE>

<PAGE>1

GABELLI CAPITAL ASSET FUND
One Corporate Center
Rye, New York 10580-1434
Telephone 1-800-GABELLI (1-800-422-3554)

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1995

This Statement of Additional Information ("Additional Statement") relates to
Gabelli Capital Asset Fund (the "Fund"), a series of Gabelli Capital Series
Funds, Inc., a Maryland corporation (the "Company"). The Additional Statement
is not a prospectus and is only authorized for distribution when preceded or
accompanied by the Fund's prospectus dated May 1, 1995, as supplemented
from time to time (the "Prospectus"). This Additional Statement contains
additional and more detailed information than that set forth in the Prospectus
and should be read in conjunction with the Prospectus. Additional copies of
the Prospectus and Additional Statement may be obtained without charge by
writing or telephoning the Fund at the address and telephone number set forth
above.

Please retain this document for future reference.

TABLE OF CONTENTS

Page

Investment Policies . . . . . . . . . . B -
Special Investment Methods . . . . . . B -
Investment Restrictions . . . . . . . . B -
The Manager . . . . . . . . . . . . . . B -
The Adviser . . . . . . . . . . . . . . B -
The Distributor . . . . . . . . . . . . B -
Directors and Officers . . . . . . . . B -
Portfolio Transactions and Brokerage . B -
Purchase and Redemption of Shares . . . B -
Determination of Net Asset Value . . . B -
Dividends, Distributions and Taxes . . B -
Investment Performance Information . . B -
Counsel and Independent Auditors . . . B -
Financial Statements . . . . . . . . . B -
Bond and Preferred Stock Ratings B -

<PAGE>2

INVESTMENT POLICIES

The Fund expects that, for most periods, a substantial portion, if not
all, of its assets will be invested in a diversified portfolio of common
stocks judged by Gabelli Funds, Inc., the investment adviser to the Fund (the
"Adviser"), to have favorable value to price characteristics. The Fund may
also invest in U.S. Government or Government Agency obligations, investment
grade corporate bonds, preferred stocks, convertible securities, foreign
securities, debt securities and/or short term money market instruments when
deemed appropriate by the Adviser.

SPECIAL INVESTMENT METHODS

Convertible Securities

The Fund may, as an interim alternative to investment in common stocks,
purchase investment grade convertible debt securities having a rating of, or
equivalent to, at least "BBB" by Standard & Poor's Ratings Group ("Standard &
Poor's) or, if unrated, judged by the Adviser to be of comparable quality.
Securities rated less than "A" by Standard & Poor's may have speculative
characteristics. The Fund may also invest up to 25% of its assets in
convertible debt securities which have a lesser rating or are unrated,
provided, however, that the Fund may only invest up to 5% of its assets in
corporate debt securities with a rating of, or equivalent to, a Standard &
Poor's rating of CCC or lower. Unrated convertible securities which, in the
judgement of the Adviser, have equivalent credit worthiness may also be
purchased for the Fund. Although lower rated bonds generally have higher
yields, they are more speculative and subject to a greater risk of default
with respect to the issuer's capacity to pay interest and repay principal than
are higher rated debt securities.

In selecting convertible securities for the Fund, the Adviser relies
primarily on its own evaluation of the issuer and the potential for capital
appreciation through conversion. It does not rely on the rating of the
security or sell because of a change in rating absent a change in its own
evaluation of the underlying common stock and the ability to the issuer to pay
principal and interest or dividends when due without disrupting its business
goals. Interest or dividend yield is a factor only to the extent it is
reasonably consistent with prevailing rates for securities of similar quality
and thereby provides a support level for the market price of the security.
The Fund will purchase the convertible securities of highly leveraged issuers

<PAGE>3

only when, in the judgment of the Adviser, the risk of default is outweighed
by the potential for capital appreciation.

The issuers of debt obligations having speculative characteristics may
experience difficulty in paying principal and interest when due in the event
of a downturn in the economy or unanticipated corporate developments. The
market prices of such securities may become increasingly volatile in periods
of economic uncertainty. Moreover, adverse publicity or the perceptions of
investors over which the Adviser has no control, whether or not based on
fundamental analysis, may decrease the market price and liquidity of such
investments. Although the Adviser will attempt to avoid exposing the Fund to
such risks, there is no assurance that it will be successful or that a liquid
secondary market will continue to be available for the disposition of such
securities.

Debt Securities

Corporate debt securities which are either unrated or have a
predominantly speculative rating (often referred to in the financial press as
"junk bonds") may present opportunities for significant long-term capital
appreciation if the ability of the issuer to repay principal and interest when
due is underestimated by the market or the rating organizations. Because of
its perceived credit weakness, the issuer is generally required to pay a
higher interest rate and/or its debt securities may be selling at a
significantly lower market price than the debt securities of issuers actually
having similar strength. When the inherent value of such securities is
recognized, the market value of such securities may appreciate significantly.
The Adviser believes that its research on the credit and balance sheet
strength of certain issuers may enable it to select a limited number of
corporate debt securities, which in certain markets, will better serve the
objective of capital appreciation than alternative investments in common
stocks. Of course, there can be no assurance that the Adviser will be
successful. In its evaluation, the Adviser will not rely on ratings and the
receipt of income is only an incidental consideration.

As in the case of the convertible debt securities discussed above, low
rated and unrated corporate debt securities are generally considered to be
more subject to default and therefore significantly more speculative than
those having an investment grade rating. They also are more subject to market
price volatility based on increased sensitivity to changes in interest rates
and economic conditions or the liquidity of their secondary trading market.
The Fund does not intend to purchase debt securities for which a liquid
trading market does not exist but

<PAGE>4

there can be no assurance that such a market will exist for the sale of such
securities.

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 its 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.

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 unrecognized but
forgoes 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 or proceeds of all
outstanding options exceeds 5% 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 investments
not in excess of 5% of its total assets.

<PAGE>5

Investments in Warrants and Rights

Warrants basically are options to purchase equity securities at a
specified price valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and warrants
have no voting rights, receive no dividends and have no rights with respect to
the assets of the issuer.

Investment in Small, Unseasoned Companies

The securities of small, unseasoned companies may have a limited trading
market, which may adversely affect their disposition and can result in their
being priced lower than might otherwise be the case. If other investment
companies and investors who invest in such issuers trade the same securities
when the Fund attempts to dispose of its holdings, the Fund may receive lower
prices than might otherwise be obtained.

Corporate Reorganizations

The Fund may invest up to 35% of its total assets in securities for which
a tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgement of the Adviser, there is
reasonable prospect of capital appreciation significantly greater than the
brokerage and other transaction expenses involved. The 35% limitation does
not apply to the securities of companies which may be involved in simply
consummating an approved or agreed upon merger, acquisition, consolidation,
liquidation or reorganization. The primary risk of such investments is that
if the contemplated transaction is abandoned, revised, delayed or becomes
subject to unanticipated uncertainties, the market price of the securities may
decline below the purchase price paid by the Fund.

In general, securities which are the subject of such an offer or proposal
sell at a premium to their historic market place immediately prior to the
announcement of the offer or proposal. However, the increased market price of
such securities 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

<PAGE>6

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 offerer as well as the dynamic of the business climate when
the offer or proposal is in process.

In making such investments, the Fund will not violate any of its
diversification requirements or investment restrictions (see below,
"Investment Restrictions") including the requirements that, except for the
investment of up to 25% of its assets in any one company or industry, not more
than 5% of its assets may be invested in the securities of any issuer. Since
such investments are ordinarily short term in nature, they will tend to
increase the turnover ratio of the Fund thereby increasing its brokerage and
other transaction expenses as well as make it more difficult for the Fund to
meet the test for favorable tax treatment as a "Regulated Investment Company"
specified by the Internal Revenue Code (see the Prospectus, "Dividends,
Distributions and Taxes"). 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 the risk involved and
the potential of available alternate investments as well as monitor the effect
of such investments on the tax qualification tests of the Internal Revenue
Code.

When Issued, Delayed Delivery Securities and Forward Commitments

The Fund is authorized to buy and sell when issued securities as an
additional investment strategy in furtherance of its investment objectives.

In utilizing this strategy, 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

<PAGE>7

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
high-grade debt securities with the Fund's custodian in an aggregate amount at
least equal to the amount of its outstanding forward commitments.

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 debt securities. The Fund will also be
required to deposit similar collateral with its Custodian to the extent, if
any, necessary so that the value of both collateral deposits in the aggregate
is at all times equal to the greater of the price at which the security is
sold short or 100% of the current market value of the security sold short.
Depending on arrangements made with the broker-dealer from which it borrowed
the security regarding payment over of any payments received by the Fund on
such security, the Fund may not receive any payments (including interest) on
its collateral deposited with such broker-dealer. If the price of the
security sold short increases between the time of the short sale and the time
the Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. Any
gain will be decreased, and any loss increased, by the transaction

<PAGE>8

costs described above. Although the Fund's gain is limited to the price at
which it sold the security short, its potential loss is theoretically
unlimited.

The market value of the securities sold short of any one issuer will not
exceed either 5% of the Fund's total assets or 5% of such issuer's voting
securities. The Fund will not make a short sale if, after giving effect to
such sale, the market value of all securities sold short exceeds 10% of the
value of its assets or the Fund's aggregate short sales of a particular class
of securities exceeds 10% of the outstanding securities of that class. The
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, the Fund
owns or has the immediate and unconditional right to acquire at no additional
cost the identical security.

Repurchase Agreements

The Fund may engage in repurchase agreements as set forth in the
Prospectus. A repurchase agreement is an instrument under which the purchaser
(i.e., the Fund) acquires a debt security and the seller agrees, at the time
of the sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding period.
This results in a fixed rate of return insulated from market fluctuations
during such period. The underlying securities are ordinarily U.S. Treasury or
other government obligations or high quality money market instruments. The
Fund will require that the value of such underlying securities, together with
any other collateral held by the Fund, always equals or exceeds the amount of
the repurchase obligations of the vendor. While the maturities of the
underlying securities in repurchase agreement transactions may be more than
one year, the term of each repurchase agreement will always be less than one
year. The Fund's risk is primarily that, if the seller defaults, the proceeds
from the disposition of underlying securities and other collateral for the
seller's obligation are less than the repurchase price. If the seller becomes
bankrupt, the Fund might be delayed in selling the collateral. Under the
Investment Company Act of 1940, as amended (the "Act"), repurchase agreements
are considered loans. Repurchase agreements usually are for short periods,
such as one week or less, but could be longer. The Fund will not enter into
repurchase agreements of a duration of more than seven days if, taken together
with illiquid securities and other securities for which there are no readily
available quotations, more than 15% of its total assets would be so invested.

<PAGE>9

Hedging Transactions

Futures Contracts. The Fund may enter into futures contracts only for
certain bona fide hedging 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, 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 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, 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.
Forward foreign currency contracts 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

<PAGE>10

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 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 choose to use such instruments on behalf of the Fund
depending upon market conditions prevailing and the perceived investment needs
of the Fund. Futures contracts, interest rate swaps, and 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 Fund 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 high grade liquid debt 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 swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap
market has become relatively broad and deep as compared to the markets for
similar instruments which are established in the interbank market. In
accordance with the current position of the staff of the Securities and
Exchange Commission (the "Commission"), the Fund will treat swap transactions
as illiquid for purposes of the Fund's policy regarding illiquid securities.

<PAGE>11

INVESTMENT RESTRICTIONS

The Fund has adopted the following investment restrictions which may not
be changed without the approval of the Fund's shareholders. Under such
restrictions, the Fund may not:

1. Purchase the securities of any one issuer, other than the United States
Government, or any of its agencies or instrumentalities, if immediately
after such purchase more than 5% of the value of its total assets would
be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of
the value of the Fund's total assets may be invested without regard to
such 5% and 10% limitations;

2. Invest more than 25% of the value of its total assets in any particular
industry;

3. Purchase securities on margin, but it may obtain such short term credits
from banks as may be necessary for the clearance of purchase and sales of
securities;

4. Make loans of its assets except for the purchase of debt securities;

5. Borrow money except subject to the restrictions set forth in the
prospectus under "Borrowing";

6. Mortgage, pledge or hypothecate any of its assets except (a) that, in
connection with permissible borrowings mentioned in paragraph 5 above,
not more than 20% of the assets of the Fund (not including amounts
borrowed) may be used as collateral and (b) in connection with hedging
transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies;

7. Invest more than 5% of its total assets in more than 3% of the securities
of another investment company or invest more than 10% of its total assets
in the securities of other investment companies, nor make any such
investments other than through purchase in the open market where to the
best information of the Fund no commission or profit to a sponsor or
dealer (other than the customary broker's commission) results from such
purchase;

8. Act as an underwriter of securities of other issuers;

9. Invest, in the aggregate, more than 15% of the value of its total assets
in securities for which market quotations are

<PAGE>12

not readily available, securities which are restricted for public sale,
or in repurchase agreements maturing or terminable in more than seven
days;

10. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration or
development programs;

11. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with any permitted borrowing,
hedging transaction, short sale, when-issued or forward commitment
transaction or similar investment strategy;

12. Participate on a joint, or a joint and several, basis in any securities
trading account; or

13. Invest in companies for the purpose of exercising control.

THE MANAGER

Guardian Investor Services Corporation, the manager of the Fund (the
"Manager"), has its principal offices at 201 Park Avenue South, New York, New
York 10003.

Pursuant to a Management Agreement with the Company, the Manager, subject
to the supervision of the Board of Directors of the Company and in conformity
with the stated policies of the Fund, supervises the performance of
administrative and professional services provided by others to the Fund
including the Adviser and The Shareholder Services Group, Inc., the
administrator of the Fund (the "Sub-Administrator"). The management services
provided to the Fund are not exclusive under the terms of the Management
Agreement and the Manager is free to, and does, render management or
investment advisory services to others.

The Manager bears all expenses in connection with the services it renders
under the Management Agreement and the costs and expenses payable to the
Adviser pursuant to the Investment Advisory Agreement among the Manager, the
Adviser and the Company. The Guardian Insurance & Annuity Company, Inc.
("GIAC"), the parent of the Manager, has agreed to advance all costs in
connection with the organization of the Fund including legal and auditing
fees, Commission registration fees and the cost of printing the registration
statement filed with Commission. The Fund has agreed to reimburse GIAC for
such costs

<PAGE>13

when the Fund's total assets exceed $50 million or when the Fund has completed
one year of operations, whichever is sooner.

The Management Agreement provides that absent willful misfeasance, bad
faith, gross negligence or reckless disregard of its duty ("Disabling
Conduct"), the Manager will not be liable for any error of judgment or mistake
of law or for losses sustained by the Fund in connection with the matters
relating to the Management Agreement. However, the Management Agreement
provides that the Fund is not waiving any rights it may have which cannot be
waived. The Management Agreement also provides indemnification for the
Manager and its directors, officers, employees and controlling persons for any
conduct that does not constitute Disabling Conduct.

The Management Agreement is terminable without penalty on sixty days'
written notice by the Manager or by the Fund when authorized by the Directors
of the Company or a majority, as defined in the Act, of the outstanding shares
of the Fund. The Management Agreement will automatically terminate in the
event of its assignment, as defined in the Act and rules thereunder. The
Management Agreement provides that, unless terminated, it will remain in
effect for two years following the date of the Agreement and thereafter from
year to year, so long as such continuance of the Management Agreement is
approved annually by the Directors of the Company or a vote by a majority of
the outstanding shares of the Fund and in either case, by a majority vote of
the Directors who are not interested persons of the Fund within the meaning of
the Act ("Disinterested Directors") cast in person at a meeting called
specifically for the purpose of voting on the continuance.

The Management Agreement also provides that the Manager is obligated to
reimburse to the Fund any amount up to the amount of its management fee, by
which its aggregate expenses including management fees payable to the Manager
(but excluding interest, taxes, brokerage commissions, extraordinary expenses
and any other expenses not subject to the applicable expense limitation),
during the portion of any fiscal year in which the Agreement is in effect,
exceed the most restrictive expense limitation imposed by the securities law
of any jurisdiction in which the Fund's shares are offered for sale. Such
limitation is currently believed to be 2.5% of the first $30 million of
average net assets, 2.0% of the next $70 million of average net assets and
1.5% of average net assets in excess of $100 million. For purposes of this
expense limitation, Fund expenses are accrued monthly and the monthly fee
otherwise payable to the Manager is postponed to the extent that the
includable Fund expenses exceed the proportionate amount of such limitation to
date.

<PAGE>14

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 Agreement 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 Company and the Manager.

Under the Investment Advisory Agreement, the Adviser also provides,
or arranges for others to provide at the Adviser's cost, the following
administrative services: (1) providing 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) overseeing 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) providing the Fund, if requested, with adequate office space and
facilities; (4) preparing, but not paying 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
Commission; (5) supervising the calculation of the net asset value of shares
of the Fund; (6) preparing, but not paying for, any filings under state law;
and (7) preparing notices and agendas for meetings of the Fund's Board of
Directors and minutes of such meetings in all matters required by the Act to
be acted upon by the Board.

The Adviser has delegated its administrative duties to the Sub-
Administrator pursuant to a Sub-Administration Agreement between the Adviser
and the Sub-Administrator relating to the Fund and certain other funds advised
by the Adviser. Under the Sub-Administration Agreement, the Sub-
Administrator, subject to the supervision of the Adviser, provides certain
administrative services necessary for the Fund's operations. The Adviser and
not the Fund pays the fees of the Sub-Administrator. For its services to the
Fund, the Sub-Administrator receives a fee calculated at the following rates
on the aggregate daily net

<PAGE>15

assets of all funds that are advised by the Adviser and administered by the
Sub-Administrator: .10% for aggregate assets up to $1 billion, .08% for
aggregate assets over $1 billion to $1.5 billion, .03% for aggregate assets
over $1.5 billion to $3 billion and .02% thereafter.

The Investment Advisory Agreement provides that absent Disabling
Conduct, the Adviser will not be liable for any error of judgment or mistake
of law or for losses sustained respectively by the Fund or the Manager.
However, the Investment Advisory Agreement provides that the Fund is not
waiving any rights it may have which cannot be waived. The Investment
Advisory Agreement also provides indemnification for the Adviser and its
directors, officers, employees and controlling persons for any conduct that
does not constitute Disabling Conduct. The Investment Advisory Agreement
permits the Adviser to act as investment adviser to others, provided that
whenever the Fund and one or more other portfolios of or investment companies
advised by the Adviser have available funds for investment, investments
suitable and appropriate for each will be allocated in a manner believed to be
equitable to each entity. In some cases, this procedure may adversely affect
the size of the position obtainable for the Fund.

The Investment Advisory Agreement is terminable without penalty on
sixty days' written notice by the Manager, the Adviser or, when authorized by
the Directors of the Company, or a majority, as defined in the Act, of the
outstanding shares of the Fund, by the Fund. The Investment Advisory
Agreement will automatically terminate in the event of its assignment, as
defined in the Act, and rules thereunder. The Investment Advisory Agreement
provides that, unless terminated, it will remain in effect for two years
following the date of the Agreement and thereafter from year to year, so long
as such continuance of the Investment Advisory Agreement is approved annually
by the Directors of the Company or a vote by a majority of the outstanding
shares of the Fund and in either case, by a majority vote of the Disinterested
Directors cast in person at a meeting called specifically for the purpose of
voting on the continuance.

The Investment Advisory Agreement also provides that the Adviser is
obligated to reimburse the Manager 75 percent of any amount the Manager is
obligated to reimburse the Fund by reason of any state expense limitation
described above under "The Manager;" provided, however, that Adviser is in no
event obligated to pay more than the amount of its advisory fee.

<PAGE>16

THE DISTRIBUTOR

The Fund has entered into a Distribution Agreement with Gabelli &
Company, Inc. (the "Distributor"), a New York corporation which is a
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 the Fund's shares to separate accounts
of GIAC.

The Distribution Agreement is terminable by the Distributor or the
Fund at any time without penalty on sixty days' written notice, provided, that
termination by the Fund must be directed or approved by the Board of Directors
of the Fund or by the vote of the holders of a majority of the outstanding
securities of the Fund. 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 for two years following the date of the Agreement and thereafter from
year to year, so long as continuance of the Distribution Agreement is approved
annually by the Fund's Board of Directors or by a majority of the outstanding
voting securities of the Fund, and in either case, also by a majority of the
Disinterested Directors.

DIRECTORS AND OFFICERS

The Director and Executive Officers of the Company, their principal
business occupations during the last five years and their affiliations, if
any, with the Manager, the Adviser or the Sub-Administrator, are shown below.
Directors deemed to be "interested persons" of the Fund for purposes of the
Act are indicated by an asterisk.

Principal Occupations During
Last Five Years; Affiliations
Name, Position with Company, with the Manager, Adviser
Address and Age or Sub-Administrator
---------------------------- -----------------------------

Mario J. Gabelli * Chairman, President, Chief
Chairman of the Board, Executive Officer and a
President and Director of the Adviser and
Chief Investment Chairman, Chief, Executive
Officer Officer, Chief Investment
One Corporate Center Officer and Director of GAMCO
Rye, New York 10580 Investors, Inc.; President and
Age: 52 Chairman of The Gabelli Equity
Trust Inc. and The Gabelli
Global Multimedia Trust Inc.,
President, Chief Investment
Officer and Director of
Gabelli Investor Funds, Inc.,
Gabelli Equity Series Funds,

<PAGE>17

Inc., Gabelli Global Series
Funds, Inc., The Gabelli Value
Fund Inc. and The Gabelli Series
Funds, Inc., Chairman of Gabelli
Gold Fund, Inc. and President and
Trustee of The Gabelli Asset
Fund, The Gabelli Growth Fund and
The Gabelli Money Market Funds;
Chairman and Director of Lynch
Corporation; Director and Adviser
of Gabelli International Ltd.;
Director of the Morgan Group,
Inc.

Anthony J. Colavita President and Attorney at Law
Director in the law firm of Anthony J.
575 White Plains Road Colavita, P.C.; Director of
Eastchester, New York 10709 Gabelli Equity Series Funds,
Age: 59 Inc., Gabelli Global Series
Funds, Inc., Gabelli Investor
Funds, Inc, The Gabelli Value
Fund Inc., The Gabelli Series
Funds, Inc. and Gabelli Gold
Fund, Inc.; Trustee of The
Gabelli Asset Fund, The
Gabelli Growth Fund and the
Westwood Funds.

Arthur V. Ferrara* Chairman of the Board and
Director Chief Executive Officer of The
201 Park Avenue South Guardian Life Insurance
New York, New York 10003 Company of America since
Age: 64 January 1993; President, Chief
Executive Officer and a
Director prior thereto.
Chairman of the Board of GIAC,
the Manager, Guardian Asset
Management Corporation,
Guardian Baillie Gifford
Limited and five mutual funds
within the Guardian Fund
Complex.

<PAGE>18

Karl Otto Pohl* ** Partner of Sal Oppenheim Jr. &
Director Cie. (private investment
One Corporate Center bank); Former President of the
Rye, New York 10580 Deutsche Bundesbank (Germany's
Age: 64 Central Bank) and Chairman of
its Central Bank Council
(1980-1991); Currently board
member of IBM World Trade
Europe/Middle East/Africa
Corp., Bertlesmann AG, Zurich
Versicherungs-Gesellshaft
(insurance), the International
Advisory Board of General
Electric Company; the
International Council for JP
Morgan & Co., the Board of
Supervisory Directors of
ROBECo/o Group, and the
Supervisory Board of Royal
Dutch (petroleum company);
Advisory Director of Unilever
N.V. and Unilever
Deutschland; German Governor,
International Monetary Fund
(1980-1991); Board Member,
Bank for International
Settlements (1980-1991);
Chairman, European Economic
Community Central Bank
Governors (1990-1991);
Director of Gabelli Investor
Funds, Inc., Gabelli Equity
Series Funds, Inc., Gabelli
Global Series Funds, Inc., The
Gabelli Series Funds, Inc.,
The Gabelli Value Fund Inc.,
The Gabelli Global Multimedia
Trust, Inc., The Gabelli
Equity Trust Inc. and Gabelli
Gold Fund, Inc; Trustee of The
Gabelli Asset Fund, The
Gabelli Growth Fund and The
Gabelli Money Market Funds.

<PAGE>19

Anthony R. Pustorino Certified Public Accountant.
Director Professor of Accounting, Pace
121 Arleigh Road University, since 1965.
Douglaston, New York 11363 Director, President and
Age: 69 shareholder of Pustorino,
Puglisi & Co., P.C., certified
public accountants, from 1961
to 1990; Trustee of The
Gabelli Asset Fund and The
Gabelli Growth Fund; Director
of The Gabelli Value Fund
Inc., The Gabelli Series
Funds, Inc., Gabelli Equity
Series Funds, Inc., The
Gabelli Equity Trust Inc. and
The Gabelli Global Multimedia
Trust Inc.

Werner J. Roeder, M.D. Director of Surgery, Lawrence
Director Hospital and practicing
One Corporate Center private physician. Director,
Rye, New York 10580 Gabelli Investor Funds, Inc.,
Age: 54 Gabelli Global Series Funds,
Inc. and Gabelli Gold Fund,
Inc.; Trustee of the Westwood
Funds.

Anthonie C. van Ekris Managing Director of Balmac
Director International. Formerly
Le Columbia Chairman and Chief Executive
11 Blvd. Princess Grace Officer of Balfour MacLaine
Monaco, MC98000 Corporation and Kay
Age: 60 Corporation (through 1990).
Director of Stahal Hardmayer
A.Z. (through present).
Director of Gabelli Equity
Series Funds, Inc., Gabelli
Global Series Funds, Inc. and
Gabelli Gold Fund, Inc.

<PAGE>20

Bruce N. Alpert* Vice President, Treasurer and
Vice President and Treasurer Chief Financial and
One Corporate Center Administrative Officer of the
Rye, New York 10580 investment advisory division
Age: 43 of the Adviser; President and
Treasurer of The Gabelli Asset
Fund, The Gabelli Growth Fund
and Gabelli International
Growth Fund, Inc.; Vice
President and Treasurer of
Gabelli Equity Series Funds,
Inc., The Gabelli Equity Trust
Inc., The Gabelli Global
Multimedia Trust, Inc., The
Gabelli Money Market Funds,
The Gabelli Value Fund Inc.,
Gabelli Investor Funds, Inc.,
Gabelli Global Series Funds,
Inc., The Gabelli Series
Funds, Inc. and Vice President
of the Westwood Funds and
Manager of Teton Advisers LLC.

J. Hamilton Crawford, Jr.* Senior Vice President and
Secretary General Counsel of the
One Corporate Center investment advisory division
Rye, New York 10580 of the Adviser; Secretary of
Age: 65 all funds managed by the
Adviser; Secretary of the
Westwood Funds and Teton
Advisers LLC; Attorney in
private practice, 1990-1992;
Executive Vice President and
General Counsel of Prudential
Mutual Fund Management, Inc.
from 1988-1990.

Thomas R. Hickey, Jr.* Vice President, Equity
Vice President Operations, The Guardian Life
201 Park Avenue South Insurance Company of America,
New York, New York 10003 from March 1992 to the
Age: 42 present; Second Vice President
and Equity Counsel from July
1989 to February 1992; and
Counsel prior thereto. Vice
President, Administration, of
GIAC. Vice President of the
Manager and five Guardian-
sponsored mutual funds.

The Company has agreed that GIAC shall have the right to nominate
one person for election to the Company's Board of Directors and Mr. Ferrara
was nominated by GIAC pursuant to this agreement.

<PAGE>21

The Company pays each Director who is not an employee of the
Manager, the Adviser or an affiliated company an annual fee of $3,000 and $500
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. If the net
assets of the Fund exceed $500 million, a non-interested Director will receive
an annual fee of $500 for serving as the chair of a committee of the Board of
the Directors and a $250 fee for each committee meeting attended. Directors
and officers of the Company who are employed by the Manager, the Adviser or an
affiliated company receive no compensation or expense reimbursement from the
Company.

The following table sets forth certain information regarding the
compensation of the Company's directors and officers. Except as disclosed
below, the Company does not anticipate that any executive officer or person
affiliated with the Company will receive compensation from the Company for the
calendar year ending December 31, 1995 in excess of $60,000.

- --------------------------
** - Mr. Pohl receives fees from the Adviser but has no obligation to provide
any service to the Adviser. Although this relationship does not appear
to require designation of Mr. Pohl as an interested person, the Fund is
currently making such designation in order to avoid the possibility that
Mr. Pohl's independence would be questioned.

<PAGE>22

COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation
From the Fund
Aggregate Pension or Retirement Estimated Annual and Fund Complex
Name of Person Compensation Benefits Accrued As Benefits Upon Paid to Directors**
Position From the Fund* Part of Fund Expenses* Retirement
-------------- -------------- ---------------------- ---------------- -------------------
<S> <C> <C> <C> <C>

Mario J. Gabelli
Chairman of the Board $ 0 $0 N/A $ 0

Anthony J. Colavita
Director 5,000 0 N/A 64,500(11)

Arthur V. Ferrara
Director 0 0 N/A 0

Karl Otto Pohl
Director 5,000 0 N/A 69,750(15)

Anthony R. Pustorino
Director 5,000 0 N/A 64,000(10)

Werner Roeder, M.D.
Director 5,000 0 N/A 11,000(4)

Anthonie C. van Ekris
Director 5,000 0 N/A 46,500(9)

</TABLE>

* The Fund has not been in operation for a full fiscal year and therefore,
the amounts shown represent those estimated to be paid during a full
fiscal year.
** Represents the total compensation paid to such persons during the
calendar year ended December 31, 1994 (and, with respect to the Fund,
estimated to be paid during a full calendar year). 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.

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

<PAGE>23

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 the Fund regarding purchases and sales of securities and
options for its portfolio is that primary consideration will be given to
obtaining the most favorable prices and efficient execution of transactions.
In seeking to implement the Fund's policies, the Adviser effects transactions
with those brokers and dealers who the Adviser believes provide the most
favorable prices and are capable of providing efficient executions. If the
Adviser believes such price and execution are obtainable from more than one
broker or dealer, it may give consideration to placing portfolio transactions
with those brokers and dealers who also furnish research and other services to
the Fund or the Adviser of the type described in Section 28(e) of the
Securities Exchange Act of 1934. In doing so, the 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. 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.

<PAGE>24

The Adviser may also place orders for the purchase or sale of portfolio
securities with the Distributor, a broker-dealer member of the National
Association of Securities Dealers, Inc. and an affiliate of the Adviser, or
any other broker-dealer affiliated with the Adviser, when it appears that, as
an introducing broker or otherwise, the affiliated broker-dealer can obtain a
price and execution which is at least as favorable as that obtainable by other
qualified brokers.

As required by Rule 17e-1 under the Act, the Board of Directors has
adopted "Procedures" which provide that the commissions paid to the
Distributor 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
Disinterested Directors, conduct periodic compliance reviews of such brokerage
allocations and review the Procedures at least annually for its continuing
compliance with the foregoing standard. The Adviser and the Distributor are
also required to furnish reports and maintain records in connection with such
reviews.

To obtain the best execution of portfolio trades on the New York Stock
Exchange ("Exchange"), the Distributor 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 the Distributor, and settled directly with the Custodian of the
Fund by a clearing house member firm which remits the commission less its
clearing charges to the Distributor. The Distributor 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 Exchange.

PURCHASE AND REDEMPTION OF SHARES

<PAGE>25

instructions and requests to GIAC at P.O. Box 26210, Lehigh Valley, PA 18002
by first class mail or 3900 Burgess Place, Bethlehem, PA 18017 by overnight or
express mail. The net asset value per share of the Fund is determined as of
the close of the regular session of the Exchange, which is currently 4:00
p.m., New York City time, on each day that trading is conducted on the
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 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. Until June 7, 1995
payments for redeemed shares will ordinarily be made within seven (7) days
after the Fund receives a redemption order from GIAC. Thereafter payment will
ordinarily be made within three (3) business days. The redemption price will
be the net asset value per share next determined after GIAC receives the
Contractowner's request in proper form.

The Fund may suspend the right of redemption or postpone the date of
payment during any period when trading on the Exchange is restricted, or the
Exchange is closed for other than weekends and holidays; when an emergency
makes it not reasonably practicable for the Fund to dispose of assets or
calculate its net asset value; or as permitted by the Commission.

The prospectus for a GIAC variable annuity or variable life
insurance policy describes the allocation, transfer and withdrawal provisions
of such annuity or policy.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of the Fund is determined once daily as of
the close of business of the regular trading session of the Exchange, normally
4:00 p.m. New York time, on each day that the Exchange is open and each other
day in which there is a sufficient degree of trading in the Fund's investments
to affect the net asset value, except that the net asset value may not be
computed on a day on which no orders to purchase, or tenders to

<PAGE>26

sell or redeem, Fund shares have been received, by taking the value of all
assets of the Fund, subtracting its liabilities, dividing by the number of
shares outstanding and adjusting to the nearest cent. The Exchange currently
observes the following holidays: New Year's Day; President's Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and
Christmas Day.

In the calculation of the Fund's net asset value: (1) a portfolio
security listed or traded on the Exchange or the American Stock Exchange or
quoted by NASDAQ is valued at its last sale price on that exchange or market
(if there were no sales that day, the security is valued at the average of the
bid and asked price); (2) all other portfolio securities for which over-the-
counter market quotations are readily available are valued at the latest
average of the bid and asked price; and (3) when market quotations are not
readily available, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Directors.

DIVIDENDS, DISTRIBUTIONS AND TAXES

All dividends and capital gains distributions paid by the Fund will
be automatically reinvested, at net asset value, by GIAC's separate accounts
in additional shares of the Fund. 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. Contract owners who
own units in a separate account which correspond to shares in the Fund will be
notified when distributions are made.

The Fund will be treated as a separate entity for federal income tax
purposes. The Fund intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), in order to
be relieved of federal income tax on that part of its net investment income
and realized capital gains which it distributes to GIAC's separate accounts.
To qualify, the Fund must meet certain relatively complex tests, including the
requirement that less than 30% of its gross income (exclusive of losses) may
be derived from the sale or other disposition of securities held for less than
three months. The loss of such status would result in the Fund being subject
to federal income tax on its taxable income and gains. In addition, the Fund
must distribute at least 90% of its net investment income and 90% of its net
tax-exempt interest income each year.

<PAGE>27

To comply with regulations under Section 817(h) of the Code, the
Fund will be required to diversify its investments so that on the last day of
each calendar quarter no more than 55% of the value of its assets is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments and no
more than 90% is represented by any four investments. Generally, all
securities of the same issuer are treated as a single investment. For the
purposes of Section 817(h) of the Code, obligations of the U.S. Treasury and
each U.S. Government instrumentality are treated as securities of separate
issuers. The Treasury Department has indicated that it may issue future
pronouncements addressing the circumstances in which a variable annuity
contract owner's control of the investments of a separate account may cause
the variable contract owner, rather than the separate account's sponsoring
insurance company, to be treated as the owner of the assets held by the
separate account. If the variable annuity contract owner is considered the
owner of the securities underlying the separate account, income and gains
produced by those securities would be included currently in the variable
annuity contract owner's gross income. It is not known what standards will be
set forth in such pronouncements or when, if at all, these pronouncements may
be issued. In the event that rules or regulations are adopted, there can be
no assurance that the Fund will be able to operate as described currently in
the Prospectus or that the Fund will not have to change its investment
policies or goals.

Hedging Transactions

The Fund's transactions in foreign currencies, forward contracts,
options, futures contracts (including options and futures contracts on foreign
currencies) and warrants will be subject to special provisions of the Code
that, among other things, may affect the character of gains and losses
realized by the Fund (i.e., may affect whether gains or losses are ordinary or
capital), accelerate recognition of income to the Fund and defer Fund losses.
These rules could therefore affect the

<PAGE>28

character, amount and timing of distributions to shareholders. These
provisions also (a) will require the Fund to mark-to-market certain types of
the positions in its portfolio (i.e., treat them as if they were closed out)
and (b) may cause the Fund to recognize income without receiving cash with
which to pay dividends or make distributions in amounts necessary to satisfy
the 90% distribution requirement for avoiding income tax. The Fund will
monitor its transactions, will make the appropriate tax elections and will
make the appropriate entries in its books and records when it acquires any
foreign currency, forward contract, option, futures contract, warrant or
hedged investment in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.

The 30% limitation and the diversification requirements applicable
to the Fund's assets may limit the extent to which the Fund will be able to
engage in transactions in options, futures contracts and options on futures
contracts and in certain other permitted investments.

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 can vary.

Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to Federal, state or local taxes.

INVESTMENT PERFORMANCE INFORMATION

The Fund may, from time to time, provide performance information in
advertisements, sales literature or other materials furnished to existing or
prospective owners of GIAC's variable contracts. When performance information
is provided in advertisements, it will include the effect of all charges
deducted under the terms of the specified contract, as well as all recurring
and non-recurring charges incurred by the Fund. All performance results are
historical and are not representative of future results.

Total return and average annual total return reflect the change in value
of an investment in the Fund over a specified

<PAGE>29

period, assuming the reinvestment of all capital gains distributions and
income dividends. Average annual total returns show the average change in
value for each annual period within a specified period. Total returns, which
are not annualized, show the total percentage or dollar change in value over a
specified period. Promotional materials relating to the Fund's performance
will always at least provide average annual total returns for one, five and
ten years (if applicable).

Quotations of yield will be based on the investment income per share
earned during a particular 30 day period, less expenses accrued during the
period ("net investment income") and will be computed by dividing net
investment income by the maximum offering price per share on the last day of
the period, according to the following formula:

YIELD = 2[(A-B + 1)[*GRAPHIC OMITTED-SEE FOOTNOTE]- 1]
CD

where A = dividends and interest earned during the period, B = expenses
accrued for the period (net of any reimbursements), C = the average daily
number of shares outstanding during the period that were entitled to receive
dividends, and D = the maximum offering price per share on the last day of the
period.

Quotations of total return will reflect only the performance of a
hypothetical investment in 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
changes in the value of the Fund's shares and the risks associated with the
Fund's investment objectives and policies. At any time in the future, total

- --------------------------
* - The expression (A-B + 1) is being raised to the sixth power.

<PAGE>30

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.

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:

T = n [*GRAPHIC OMITTED-SEE FOOTNOTE] ERV/P - 1

(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the
end of the period of a $1,000 payment made at the beginning of the period).
Total return figures will reflect the deduction of Fund expenses (net of
certain expenses reimbursed by the Manager or 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. The Fund may also state
the total return figures without a sales charge along with such figures.

COUNSEL AND INDEPENDENT AUDITORS

Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York 10022,
serves as counsel for the Fund.

Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
appointed independent auditors for the Fund.

FINANCIAL STATEMENTS

The Company's audited Statement of Assets and Liabilities as of April 26,
1995 follow the Report of Independent Auditors.

- -------------------------
* - In this equation n is multiplied by the square root of ERV/P.

<PAGE>31

BOND AND PREFERRED STOCK RATINGS

Description of Moody's Investors Service, Inc.'s ("Moody's") Corporate Bond
Ratings

Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which made the long term risks appear somewhat larger than in Aaa
securities. A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment sometime
in the future. Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well. Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well as 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

<PAGE>32

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 Ratings Group ("S&P") 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. C1:
The rating C1 is reserved for income bonds on which no interest is being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P's believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.

<PAGE>33

r: The "r" symbol is attached to derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high
variability in expected returns due to non-credit risks created by the terms
of the obligation.

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 buy 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. 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.

<PAGE>34

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. BBB, B,
CCC: Preferred stock rated BB, B, and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. CC: The rating
CC is reserved for a preferred stock in arrears on dividends or sinking fund
payments but that is currently paying. C: A preferred stock rated C is a
non-paying issue. D: A preferred stock rated D is a non-paying issue with
the issuer in default on debt instruments.

Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.

<PAGE>35

Report of Ernst & Young LLP, Independent Auditors

Shareholder and Board of Directors
Gabelli Capital Asset Fund

We have audited the accompanying statement of assets and liabilities
of Gabelli Capital Asset Fund, a series of Gabelli Capital Series Funds, Inc.,
as of April 26, 1995. This statement of assets and liabilities is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this statement of assets and liabilities based on our audit.

We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether this statement of assets
and liabilities is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall statement of assets and liabilities
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial position of
Gabelli Capital Asset Fund at April 26, 1995, in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

New York, New York
April 27, 1995

<PAGE>36

GABELLI CAPITAL SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES

April 26, 1995

Gabelli
Capital Asset
Fund
-------------
Assets

Cash $100,000
Deferred organization costs 100,000
-------
200,000

Liabilities

Organization costs payable 100,000

Net Asset (applicable to 10,000 shares of
common stock issued and outstanding, $.001
par value, 500 million shares authorized) $100,000

Net Asset value, offering price and redemption
price per share $10.00

Note 1. Organization

The Gabelli Capital Asset Fund (the "Fund") is the initial series of Gabelli
Capital Series Funds, Inc. (the "Company"), which was incorporated in Maryland
on April 8, 1993. The Fund is an open-end, diversified management investment
company and has had not operations other than the sale to The Guardian
Insurance & Annuity Company, Inc. ("Guardian") of 10,000 shares of common
stock for $100,000 on April 26, 1995 ("Initial Shares"). Costs incurred and
to be incurred in connection with its organization and registration will be
deferred and amortized by the Fund over the period of benefit not to exceed 60
months from the date the Fund commences operations. Guardian has agreed that
if any of the Initial Shares are redeemed by any holder thereof prior to
amortization of the organization costs, the proceeds of such redemption will
be reduced by any unamortized organizational costs in the same proportion as
the number of initial shares being redeemed bears to the number of Initial
Shares outstanding at the time of redemption.

<PAGE>37

Shares of the Fund are available to the public only through the purchase of
certain variable annuity and variable life insurance contracts issued by
Guardian.

Note 2. Management, Investment Advisory and Distribution Agreements

The Company will enter into a Management Agreement with Guardian Investors
Services Corporation (the "Manager"). The basic fee payable to the Manager
under the Management Agreement is computed daily and paid monthly, at an
annual rate of 1.00% applied to the average daily net assets of the Fund. The
Manager has agreed to reimburse the Fund, up to its management fee, any amount
by which its aggregate expenses (including the management fee but excluding
interest, taxes, brokerage commissions, extraordinary expenses and any other
expenses not subject to the applicable expense limitation) exceed the most
restrictive expense limitation imposed by the securities law of any
jurisdiction in which the Fund's shares are offered for sale. The most
restrictive applicable limitation is presently believed to be 2-1/2% of the
first $30 million of average net assets, 2% of the next $70 million of average
net assets and 1-1/2% of the average net assets in excess of $100 million.

Pursuant to an Investment Advisory Agreement into which the Company and the
Manager will enter, Gabelli Funds, Inc. (the "Adviser") is responsible for the
management of the Fund's portfolio. The Adviser also is obligated to perform
certain administrative and management services for the Fund and will provide
all of the facilities, equipment and personnel and, if requested, office
space, necessary to perform its duties under the Investment Advisory
Agreement. As compensation for its services and the related expenses borne by
the Adviser, the Manager pays the Adviser a fee, computed daily and paid
monthly, at an annual rate of 0.75% applied to the average daily net assets of
the Fund.

The Fund will enter into a Distribution Agreement under which the Fund's
shares will be continuously offered by Gabelli & Company, Inc., an affiliate
of the Adviser.

91140317

<PAGE>1

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements included in Part B:

(1) Report of Independent Auditors, April 27, 1995*

(2) Statement of Assets and Liabilities, April 26, 1995*

(b) Exhibits:

Exhibit No. Description of Exhibits

1 Articles of Amendment and Restatement of Registrant*

2 Amended and Restated By-Laws of Registrant*

3 Not applicable

4 Specimen copy of certificates for shares issued by Fund*

5(a) Form of Investment Management Agreement*

5(b) Form of Investment Advisory Agreement*

6 Form of Distribution Agreement*

7 Not applicable

8 Form of Custody Agreement*

9(a) Form of Transfer Agency Agreement*

9(b) Form of Participation Agreement among the Registrant, Gabelli
Funds, Inc., Gabelli & Company, Inc., The Guardian Insurance &
Annuity Company, Inc. and Guardian Investor Services
Corporation*

10 Opinion and Consent of Willkie Farr & Gallagher*

11 Consent of Independent Auditors*

12 Not applicable

13 Purchase Agreement*

14 Not applicable

15 Not applicable

16 Not applicable

__________________________

* Filed herewith

<PAGE>2

Item 25. Persons Controlled by or Under Common Control
with Registrant

None

Item 26. Number of Holders of Securities

It is anticipated that there will be one record holder of
registrant's shares of common stock, par value $.001 per share, relating to
Gabelli Capital Asset Fund, on the date the registrant's registration
statement becomes effective.

Item 27. Indemnification

Under the registrant's Articles of Amendment and Restatement and the
registrant's By-Laws, any past or present director or officer of the
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. These
provisions do 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,
the Articles of Amendment and Restatement and the By-Laws provide that to the
fullest extent permitted by Maryland General Corporation Law, as amended from
time to time, no director or officer of the registrant shall be personally
liable to the registrant 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 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, provided however, that
at least one of the following additional conditions are met: (1) the person
seeking indemnification provides a security in form and amount acceptable to
the registrant for his undertaking; (2) the registrant is insured against
losses arising by reason of the advance; or (3) a majority of a quorum of
Directors of the registrant who are neither "interested persons" as defined in
the Investment Company Act of 1940, as amended, nor parties to the proceeding,
or independent legal counsel, in a written opinion, determine at the time the
advance is proposed to be made, that there is reason to believe that the
person seeking indemnification will ultimately be found to be entitled to
indemnification.

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

<PAGE>3

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

Guardian Investor Services Corporation is the manager of the
registrant (the "Manager"). For a list of officers and directors of the
Manager, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by the Manager 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.

Gabelli Funds, Inc. is the sub-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) Gabelli & Company, Inc. is registrant's proposed principal
underwriter.

(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.

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; State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts 02171; and The Shareholder Services Group, Inc., One Exchange
Place, Boston, Massachusetts 02109.

<PAGE>4

Item 31. Management Services

Not applicable.

Item 32. Undertakings

(a) Registrant hereby undertakes to file a post-effective
amendment, using financial statements that need not be certified, within four
to six months from the effective date of registrant's 1933 Act registration
statement.

<PAGE>5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Rye and State of New York on the 27th day of
April, 1995.

GABELLI CAPITAL SERIES FUNDS, INC.

By: /s/ Mario J. Gabelli
Mario J. Gabelli
Chairman of the Board,
President and Chief
Investment Officer

POWER OF ATTORNEY

Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Mario J. Gabelli, Bruce N. Alpert
and J. Hamilton Crawford, Jr., and each of them, with full power to act
without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (until revoked in writing) to sign any and
all subsequent amendments to this Registration Statement (including post-
effective amendments thereto), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof. This Power of Attorney may be executed in
multiple counterparts, each of which shall be deemed an original, but which
taken together shall constitute one instrument.

<PAGE>6

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this registration statement has been signed
below by the following persons in the capacities and on the date indicated.

Signature Title Date

/s/ Mario J. Gabelli Chairman of the Board, April 27, 1995
Mario J. Gabelli President, and Chief
Investment Officer

/s/ Bruce N. Alpert Vice-President and April 27, 1995
Bruce N. Alpert Treasurer (Principal
Financial and
Accounting Officer)

/s/ Anthony J. Colavita Director April 27, 1995
Anthony J. Colavita

/s/ Arthur V. Ferrara Director April 27, 1995
Arthur V. Ferrara

______________________ Director
Karl Otto Pohl

/s/ Anthony R. Pustorino Director April 27, 1995
Anthony R. Pustorino

/s/ Werner J. Roeder Director April 27, 1995
Werner J. Roeder

/s/ Anthonie C. van Ekris Director April 27, 1995
Anthonie C. van Ekris

<PAGE>

INDEX OF EXHIBITS

Exhibit No. Description of Exhibits
- ----------- -----------------------

1 Articles of Amendment and Restatement of Registrant*

2 Amended and Restated By-Laws of Registrant*

3 Not applicable

4 Specimen copy of certificates for shares issued by Fund*

5(a) Form of Investment Management Agreement*

5(b) Form of Investment Advisory Agreement*

6 Form of Distribution Agreement*

7 Not applicable

8 Form of Custody Agreement*

9(a) Form of Transfer Agency Agreement*

9(b) Form of Participation Agreement among the Registrant, Gabelli
Funds, Inc., Gabelli & Company, Inc., The Guardian Insurance &
Annuity Company, Inc. and Guardian Investor Services
Corporation*

10 Opinion and Consent of Willkie Farr & Gallagher*

11 Consent of Independent Auditors*

12 Not applicable

13 Purchase Agreement*

14 Not applicable

15 Not applicable

16 Not applicable

__________________________

* Filed herewith

<PAGE>1

ARTICLES OF AMENDMENT AND RESTATEMENT
OF
THE WCC CAPITAL GROWTH FUND INC.

THE WCC CAPITAL GROWTH FUND INC., a Maryland corporation having its
principal office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland:

FIRST: The Articles of Incorporation of the Corporation are amended and
as so amended are restated in their entirety by striking out Articles I
through IX of the Articles of Incorporation and inserting in place thereof the
following:

"ARTICLE I

THE UNDERSIGNED, Gerald W. Wheeler, whose post office address is c/o
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022, being at least 18 years of age, does hereby act as an
incorporator and forms a corporation, under and by virtue of the Maryland
General Corporation Law.

ARTICLE II

NAME

The name of the Corporation is Gabelli Capital Series Funds, Inc. (the
"Corporation")

ARTICLE III

PURPOSES AND POWERS

The Corporation is formed for the following purposes:

(1) To conduct and carry on the business of an investment company.

(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.

(3) To issue and sell shares of its capital stock in such amounts and on
such terms and conditions and for such purposes

<PAGE>2

and for such amount or kind of consideration as may now or hereafter be
permitted by law.

(4) To redeem, purchase or acquire in any other manner (all without the
vote or consent of the stockholders of the Corporation) shares of its capital
stock, in any manner and to the extent now or hereafter permitted by law and
by the Charter of the Corporation.

(5) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.

The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by
the Maryland General Corporation Law now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.

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 Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name and address of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Incorporated, a
Maryland Corporation, 32 South Street, Baltimore, Maryland 21202.

ARTICLE V

CAPITAL STOCK

(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is one billion (1,000,000,000) shares, of the
par value of one tenth of one cent ($.001) per share and of the aggregate par
value of one million dollars ($1,000,000), all of which one billion
(1,000,000,000) shares are designated Common Stock.

(2) The Board of Directors of the Corporation is authorized, from time
to time, to classify or to reclassify, as the case may be, any unissued shares
of the Corporation, whether now or hereafter authorized, in separate series
("Series") and classes. The shares of said Series and classes of stock shall

<PAGE>3

have such preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as shall be fixed and determined from time to time by
the Board of Directors. The Board of Directors is authorized to increase or
decrease the number of shares of any Series or class, but the number of shares
of any Series or class shall not be decreased by the Board of Directors below
the number of shares thereof then outstanding. The Corporation may reissue
for such consideration and on such terms as the Board of Directors may
determine, or cancel, at their discretion from time to time, any shares
reacquired by the Corporation.

(3) The Board of Directors may redesignate a class or Series of shares
of capital stock whether or not shares of such class or Series are issued and
outstanding, provided that such redesignation does not in itself affect the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of such shares of stock.

(4) There is hereby established and classified a Series of stock
comprised of five hundred million (500,000,000) shares to be known initially
as the "Gabelli Capital Asset Fund". Without limiting the authority of the
Board of Directors set forth herein to establish and designate any further
Series or classes, and to classify and reclassify any unissued shares, and
subject to such authority, shares of each Series, now authorized and hereafter
authorized, shall be subject to the following provisions:

(a) The assets attributable to each Series (and to any classes
within a Series) may be invested in a common investment portfolio. As
more fully set forth hereafter, the assets and liabilities and the income
and expenses of each Series shall be determined separately and,
accordingly, the net asset value, the dividends 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 Series to
Series.

(b) All consideration received by the Corporation for the issue or
sale of shares of a particular Series, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including all 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,
shall irrevocably belong to that Series for all purposes, subject only to
the rights of creditors and shall be referred to as "assets belonging to"

<PAGE>4

that Series. The assets belonging to a particular Series shall be so
recorded upon the books of the Corporation.

(c) The assets belonging to each particular Series shall be charged
with the liabilities of the Corporation with respect to that Series, all
expenses, costs, charges and reserves attributable to that Series and
that Series' share of the liabilities, expenses, costs, charges or
reserves of the Corporation not attributable to any particular Series, in
the latter case in the proportion that the net asset value of that Series
(determined without regard to such liabilities) bears to the net asset
value of all Series (determined without regard to such liabilities). 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 Series or Series.

(d) shares of each Series shall be entitled to such dividends and
distributions, in shares 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 Series, provided that dividends and distributions shall
be paid on shares of a Series only out of lawfully available assets
belonging to that Series. Dividends may be declared daily or otherwise
pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Board of Directors may determine. Any such
dividend or distribution paid in shares will be paid at the current net
asset value thereof.

(e) The Board of Directors shall have the power, in its sole
discretion, to distribute in any fiscal year as dividends (including
dividends designated in whole or in part as capital gain distributions)
an amount sufficient, in the opinion of the Board of Directors, to enable
each Series of the Corporation to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as from time to time
amended, or any successor or comparable statute thereto, and regulations
promulgated thereunder, and to avoid liability of each Series of the
Corporation for federal income and excise taxes in respect of that year.
However, nothing in the foregoing shall limit the authority of the Board
of Directors to make distributions greater than or less than the amount
necessary to qualify as a regulated investment company and to avoid
liability of any Series of the Corporation for such taxes.

(f) In the event of the liquidation or dissolution of the
Corporation, the stockholders of a Series shall be

<PAGE>5

entitled to receive, as a single class, out of the assets of the
Corporation available for distribution to stockholders, the assets
belonging to that Series. The assets so distributable to the
stockholders of a Series shall be distributed among such stockholders in
proportion to the number of shares of that Series held by them and
recorded on the books of the Corporation or, in the event that the Series
is divided into classes, in the manner determined by the Board of
Directors in accordance with the Investment Company Act of 1940, as
amended. In the event that there are any assets available for
distribution that are not attributable to any particular Series, such
assets shall be allocated to all Series in proportion to the net assets
of the respective Series and then distributed to the holders of stock of
each Series as aforesaid.

(5) All holders of shares of stock shall vote as a single class except
(i) with respect to any matter which affects only one or more classes or
Series of stock, in which case only the holders of shares of the classes or
Series affected shall be entitled to vote, or (ii) as otherwise may be
required by the Investment Company Act of 1940, as amended.

(6) The presence in person or by proxy of the holders of one-third (1/3)
of the shares of capital stock of the Corporation outstanding and entitled to
vote thereat shall constitute a quorum for the transaction of business at a
stockholders' meeting, except that where any provision of law or of the
Charter of the Corporation permit or require that holders of any Series or
class shall vote as a separate Series or class, then one-third (1/3) of the
aggregate number of shares of capital stock of that Series or class, as
applicable, outstanding and entitled to vote shall constitute a quorum for the
transaction of business by that Series or class, as applicable.

(7) The Corporation may issue shares in fractional denominations to the
same extent as its whole shares, and any fractional Share shall carry
proportionately the rights of a whole Share including, without limitation, the
right to vote, the right to receive dividends and distributions and the right
to participate upon liquidation of the Corporation. A fractional Share shall
not, however, have the right to receive a certificate evidencing it.

(8) No holder of stock of the Corporation by virtue of being such a
holder shall have any right to purchase, subscribe for, or otherwise acquire
any shares of the Corporation that the Corporation may issue or sell (whether
out of the number of

<PAGE>6

shares authorized by the Charter of the Corporation or out of any shares of
the Corporation's capital stock that the Corporation may acquire) other than a
right that the Board of Directors in its discretion may determine to grant.

(9) Notwithstanding any provision of the Maryland General Corporation
Law requiring any action to be taken or authorized by the affirmative vote of
a greater proportion than a majority of the votes of all classes or of any
class of stock of the Corporation, such action shall be effective and valid if
taken or authorized by the affirmative vote of a majority of the total number
of votes entitled to be cast thereon, except as otherwise provided in the
Charter of the Corporation.

(10) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the Charter of Corporation and the
By-Laws of the Corporation, as from time to time amended or supplemented.

ARTICLE VI

REDEMPTION

Each holder of shares of the Corporation's capital stock shall be
entitled to require the Corporation to redeem all or any part of the shares of
capital stock of the Corporation standing in the name of the holder on the
books of the Corporation, and all shares of capital stock issued by the
Corporation shall be subject to redemption by the Corporation, at the
redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article VI, subject to the
right of the Board of Directors of the Corporation to suspend the right of
redemption or postpone the date of payment of the redemption price in
accordance with provisions of applicable law. Without limiting the generality
of the foregoing, the Corporation shall, to the extent permitted by applicable
law, have the right at any time to redeem the shares owned by any holder of
capital stock of the Corporation (i) if the redemption is, in the opinion of
the Board of Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a "personal holding company" within the meaning
of the Internal Revenue Code of 1986 or (ii) if the value of the shares in the
account maintained by the Corporation or its transfer agent for any Series or
class of stock for the stockholder is less than any minimum value of shares as
set forth in the then current prospectus or statement of additional
information of the Corporation and the stockholder has been given written
notice of the redemption and has failed to make

<PAGE>7

additional purchases of shares in an amount sufficient to bring the value in
his account to such minimum or more before the redemption is effected by the
Corporation. Payment of the redemption price shall be made in cash by the
Corporation at the time and in the manner as may be determined from time to
time by the Board of Directors of the Corporation unless, in the opinion of
the Board of Directors, which shall be conclusive, conditions exist that make
payment wholly in cash unwise or undesirable; in such event the Corporation
may make payment wholly or partly by securities or other property included in
the assets belonging or allocable to the Series or class of the shares
redemption of which is being sought, the value of which shall be determined as
provided herein. The Board of Directors may establish procedures for
redemption of shares. The Corporation shall also 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, by agreement with the stockholder at a price not exceeding the net
asset value per Share determined in accordance with this Article VI. All
shares so redeemed or purchased shall continue to belong to the same Series
and class to which they belonged at the time of their redemption or purchase,
until they are reclassified by the Board of Directors.

ARTICLE VII

BOARD OF DIRECTORS

(1) The number of directors constituting the Board of Directors
initially shall be one (1) and may in the future be such other number as may
be set forth in the By-Laws or determined by the Board of Directors pursuant
to the By-Laws. The number of Directors shall at no time be less than the
minimum number required under the Maryland General Corporation Law. Bruce N.
Alpert is appointed director of the Corporation to hold office until the first
meeting of stockholders or until his successor is elected and qualified.

(2) In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Maryland, the Board of Directors is expressly
authorized:

(i) To make, alter or repeal the By-Laws of the Corporation, except
where such power is reserved by the By-Laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.

<PAGE>8

(ii) From time to time to determine whether and to what extent and
at what times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them other than the stock ledger,
shall be open to the inspection of the stockholders. No stockholder shall
have any right to inspect any account or book or document of the Corporation,
except as conferred by law or authorized by resolution of the Board of
Directors.

(iii) Without the assent or vote of the stockholders, to authorize
the issuance from time to time of shares of the stock of any Series or class
of the Corporation, whether now or hereafter authorized, and securities
convertible into shares of stock of the Corporation of any Series or class,
whether now or hereafter authorized, for such consideration as the Board of
Directors may deem advisable.

(iv) Without the assent or vote of the stockholders, to authorize
and issue obligations of the Corporation, secured and unsecured, as the Board
of Directors may determine, and to authorize and cause to be executed
mortgages and liens upon the real or personal property of the Corporation.

(v) Notwithstanding anything in this Charter to the contrary, to
establish in its absolute discretion the basis or method for determining the
value of the assets belonging to or attributable to any Series or class, the
amount of the liabilities belonging to or attributable to any Series or class
and the net asset value of each share of any Series or class of the
Corporation's stock.

(vi) To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits, earnings, surplus or
net assets in excess of capital, and to determine what accounting periods
shall be used by the Corporation for any purpose; to set apart out of any
funds of the Corporation reserves for such purposes as it shall determine and
to abolish the same; to declare and pay any dividends and distributions in
cash, securities or other property from surplus or any funds legally available
therefor, at such intervals as it shall determine; to declare dividends or
distributions by means of a formula or other method of determination, at
meetings held less frequently than the frequency of the effectiveness of such
declarations; and to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less frequently than the
effectiveness of declarations thereof.

(vii) In addition to the powers and authorities granted herein and
by statute expressly conferred upon it, the Board of Directors is authorized
to exercise all powers and do

<PAGE>9

all acts that may be exercised or done by the Corporation pursuant to the
provisions of the laws of the State of Maryland, the Charter of the
Corporation and the By-Laws of the Corporation.

(3) Any determination made in good faith, and in accordance with
accepted accounting practices, if applicable, by or pursuant to the direction
of the Board of Directors, with respect 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
the reserves or charges have been created has been paid or discharged or is
then or thereafter required to be paid or discharged), as to the value of any
security owned by the Corporation, the determination of the net asset value of
shares of any Series or class of the Corporation's capital stock, or as to any
other matters relating to the issuance, sale 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
whether any transaction constitutes a purchase of securities on "margin", a
sale of securities "short," or an underwriting of the sale of, or a
participation in any underwriting or selling group in connection with the
public distribution of, any securities, 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 this Charter of the Corporation shall be effective to (i) require a waiver
of compliance with any provision of the Securities Act of 1933, as amended, or
the Investment Company Act of 1940, as amended, or of any valid rule,
regulation or order of the Securities and Exchange Commission under those Acts
or (ii) 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.

<PAGE>10

ARTICLE VIII

LIABILITY AND INDEMNIFICATION

To the fullest extent permitted by the Maryland General Corporation Law,
as amended from time to time, no director or officer of the Corporation shall
be personally liable to the Corporation 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. In addition, any person who was or is a party or is threatened to be
made a party in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is a current or former director or officer
of the Corporation, or is or was serving while a director or officer of the
Corporation at the request of the Corporation as a director, officer, partner,
trustee, employee, agent or fiduciary of another corporation, partnership,
joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees)
actually incurred by such person in connection with such action, suit or
proceeding to the full extent permissible under the Maryland General
Corporation Law, the Securities Act of 1933 and the Investment Company Act of
1940, as such statutes are now or hereafter in force, 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.

ARTICLE IX

AMENDMENTS

The Corporation reserves the right from time to time to make any
amendment to its Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in its
Charter, of any outstanding stock."

SECOND: The Corporation desires to amend and restate its Charter as
currently in effect. The provisions set forth in these Articles of Amendment
and Restatement are all the provisions of the Charter, as herein amended,
currently in effect. The current address of the principal office of the
Corporation, the name and address of the Corporation's current resident agent
and the number of directors of the Corporation and

<PAGE>11

the name of the sole director currently in office are as set forth herein.

THIRD: The amendment and restatement of the Charter of the Corporation
as herein set forth has been approved by the sole director of the Corporation
and, at the time of such approval, no stock entitled to vote on the amendment
and restatement was outstanding or subscribed for.

<PAGE>12

IN WITNESS WHEREOF, The WCC Capital Growth Fund Inc. has caused these
Articles of Amendment and Restatement to be signed in its name and on its
behalf by its President and witnessed by its Secretary, this 21st day of April,
1995.

The undersigned President acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Corporation, and states to the best
of his knowledge, information and belief that the matters and facts set forth
in these Articles of Amendment and Restatement with respect to authorization
and approval are true in all material respects and that this statement is made
under penalties of perjury.

THE WCC CAPITAL GROWTH FUND INC.

/s/ Bruce N. Alpert
Name: Bruce N. Alpert
President

WITNESS:

/s/ J. Hamilton Crawford, Jr.
Name: J. Hamilton Crawford, Jr.
Secretary

<PAGE>1

AMENDED AND RESTATED BY-LAWS

GABELLI CAPITAL SERIES FUNDS, INC.

A Maryland Corporation

ARTICLE I

STOCKHOLDERS

SECTION 1. Annual Meetings. No annual meeting of the stockholders
of the Corporation shall be held unless required by applicable law or
otherwise determined by the Board of Directors. An annual meeting may be held
at any place within the United States as may be determined by the Board of
Directors and as shall be designated in the notice of the meeting, and at the
time specified by the Board of Directors. Any business of the Corporation may
be transacted at an annual meeting without being specifically designated in
the notice unless otherwise provided by statute, the Corporation's Charter, as
amended or supplemented (the "Charter"), or these By-Laws.

SECTION 2. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Charter, may be held at any place within the United States, and
may be called at any time by the Board of Directors or by the President, and
shall be called by the Secretary at the request in writing of a majority of
the Board of Directors or at the request in writing of stockholders entitled
to cast at least 10 (ten) percent of the votes entitled to be cast at the
meeting upon payment by such stockholders to the Corporation of the reasonably
estimated cost of preparing and mailing a notice of the meeting (which
estimated cost shall be provided to such stockholders by the Secretary of the
Corporation). Notwithstanding the foregoing, unless requested by stockholders
entitled to cast a majority of the votes entitled to be cast at the meeting, a
special meeting of the stockholders need not be called at the request of
stockholders to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding 12 (twelve) months. A written request shall state the purpose or
purposes of the proposed meeting.

SECTION 3. Notice of Meetings. Written or printed notice of the
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary

<PAGE>2

of the Corporation to each stockholder of record entitled to vote at the
meeting, by placing the notice in the mail at least 10 (ten) days, but not
more than 90 (ninety) days, prior to the date designated for the meeting
addressed to each stockholder at his address appearing on the books of the
Corporation or supplied by the stockholder to the Corporation for the purpose
of notice. The notice of any meeting of stockholders may be accompanied by a
form of proxy approved by the Board of Directors in favor of the actions or
persons as the Board of Directors may select. Notice of any meeting of
stockholders shall be deemed waived by any stockholder who attends the meeting
in person or by proxy, or who before or after the meeting submits a signed
waiver of notice that is filed with the records of the meeting.

SECTION 4. Quorum. Except as otherwise provided by law or by the
Corporation's Charter, the presence in person or by proxy of stockholders of
the Corporation entitled to cast at least one-third of the votes entitled to
be cast shall constitute a quorum at each meeting of the stockholders;
provided, however, that where any provision of law or the Charter permits or
requires that stockholders of any series or class of capital stock of the
Corporation shall vote as a series or class, stockholders of one-third of the
aggregate number of shares of capital stock of that series or class
outstanding and entitled to vote shall constitute a quorum at such meeting.
Except as otherwise required by law, all questions shall be decided by a
majority of the votes cast on such questions, except for the election of
directors. A plurality of all the votes cast at a meeting at which a quorum
is present is sufficient to elect a director. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote and without
notice other than by announcement at the meeting, may adjourn the meeting from
time to time as provided in Section 5 of this Article I until a quorum shall
attend. The stockholders present at any duly organized meeting may continue
to do business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. 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 one-third that may be required by the laws of the
State of Maryland, the Investment Company Act of 1940, as amended, or other
applicable statute, the Corporation's Charter or these By-Laws, for action
upon any given matter shall not prevent action at the meeting on any other
matter or matters that may properly come before the meeting, so long as there
are present, in person or by proxy, holders of the number of shares of stock
of the Corporation required for action upon the other matter or matters.

<PAGE>3

SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken to a date not more than 120 (one
hundred twenty) days after the original record date. At any adjourned meeting
at which a quorum shall be present any action may be taken that could have
been taken at the meeting originally called.

SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President,
or in his absence or inability to act, a Vice President, or in the absence or
inability to act of the Chairman of the Board, the President and all the Vice
Presidents, a Chairman chosen by the stockholders, shall act as Chairman of
the meeting. The Secretary, or in his absence or inability to act, a person
appointed by the Chairman of the meeting, shall act as secretary of the
meeting and keep the minutes of the meeting.

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. Except as otherwise provided by statute or the
Corporation's Charter, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of stock standing in his name on the
records of the Corporation as of the record date determined pursuant to
Section 9 of this Article I; provided, however, that when required by the
Corporation's Charter, the Investment Company Act of 1940, as amended, or the
laws of the State of Maryland or when the Board of Directors has determined
that the matter affects only the interest of one series or class of stock,
matters may be submitted only to a vote of the stockholders of that particular
series or class, and each stockholder thereof shall be entitled to votes equal
to the shares of stock of that series or class registered in his name on the
books of the Corporation.

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 the
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 in which the proxy states that
it is irrevocable and in which an irrevocable proxy is permitted by law.

<PAGE>4

If a vote shall be taken on any question then unless required by
statute 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, 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 for a particular meeting
shall be not more than 90 (ninety) nor fewer than 10 (ten) days before the
date of the meeting. All persons who were holders of record of shares as of
the record date of a meeting, and no others, shall be entitled to vote at such
meeting and any adjournment thereof.

SECTION 10. Inspectors. The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more inspectors to act at the
meeting or at any adjournment of the meeting. If the inspectors shall not be
so appointed or if any of them shall fail to appear or act, the chairman of
the meeting may 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 the meeting with strict impartiality and according to
the best of his ability. The inspectors shall determine the number of shares
outstanding and the voting power of each share, the number of shares
represented at the meeting, the existence of a quorum and 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 those 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 at the meeting, 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 of the Corporation.

SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute, any action required to be taken at any meeting
of stockholders, or any action that may be taken at any meeting of the
stockholder, 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 that sets forth the action and is signed by
each stockholder entitled

<PAGE>5

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
at the meeting.

ARTICLE II

BOARD OF DIRECTORS

SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Charter, 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 Directors
except as conferred on or reserved to the stockholder by law, by the
Corporation's Charter or by these By-Laws.

SECTION 2. Number of Directors. The number of Directors initially
shall be one, and thereafter shall be fixed from time to time by resolution of
the Board of Directors adopted by a majority of the entire Board of Directors;
provided, however, that the number of Directors shall in no event be fewer
than the number required by the Maryland General Corporation Law nor more than
fifteen. Any vacancy created by an increase in Directors may be filled in
accordance with Section 6 of this Article II. No reduction in the number of
Directors shall have the effect of removing any Director from office prior to
the expiration of his term unless the Director is specifically removed
pursuant to Section 5 of this Article II at the time of the decrease. A
Director need not be a stockholder of the Corporation, a citizen of the United
States or a resident of the State of Maryland.

SECTION 3. Election and Term of Directors. The term of office of
each director shall be from the time of his election and qualification until
his successor shall have been elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed as provided in
these By-Laws, or as otherwise provided by statute or the Corporation's
Charter.

SECTION 4. Resignation. A Director of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors or the Chairman of the Board or to the President or the Secretary of
the Corporation. Any resignation shall take effect at the time specified in
it or, should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be
necessary to make it effective unless the resignation states otherwise.

<PAGE>6

SECTION 5. Removal of Directors. Any Director of the Corporation
may be removed by the stockholders with or without cause at any time 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 Investment
Company Act of 1940, as amended, any vacancies in the Board of Directors,
whether arising from death, resignation, removal or any other cause except an
increase in the number of Directors, shall be filled by a vote of the majority
of the Board of Directors then in office even though that majority is less
than a quorum, provided that no vacancy or vacancies shall be filled by action
of the remaining Directors if, after the filling of the vacancy or vacancies,
fewer than two-thirds of the Directors then holding office shall have been
elected by the stockholders of the Corporation. A majority of the entire
Board in office at the time of increase may fill a vacancy which results from
an increase in the number of Directors. In the event that at any time a
vacancy exists in any office of a Director that may not be filled by the
remaining Directors, a special meeting of the stockholders shall be held as
promptly as possible and in any event within 60 (sixty) days, for the purpose
of filling the vacancy or vacancies. Any Director elected or appointed to
fill a vacancy shall hold office until a successor has been chosen and
qualifies or until his earlier resignation or removal.

SECTION 7. Place of Meetings. Meetings of the Board may be held at
any place that the Board of Directors may from time to time determine or that
is specified in the notice of the meeting.

SECTION 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.

SECTION 9. Special Meetings. Special meetings of the Board of
Directors may be called by two or more Directors of the Corporation or by the
Chairman of the Board or the President.

SECTION 10. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as
hereinafter provided. Each notice shall state the time and place of the
meeting and shall be delivered to each Director, either personally or by
telephone or other standard form of telecommunication, at least 24 (twenty-
four) hours before the time at which the meeting is to be held, or by first-
class mail, postage prepaid, addressed to the Director at his residence

<PAGE>7

or usual place of business, and mailed at least 3 (three) days before the day
on which the meeting is to be held.

SECTION 11. 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 that is filed with the records of
the meeting or who shall attend the meeting.

SECTION 12. Quorum and Voting. One-third (but not fewer than 2
(two)) of the members of the entire Board of Directors shall be present in
person at any meeting of the Board in order to constitute a quorum for the
transaction of business at the meeting (unless there is only one director, in
which case that one will constitute a quorum for the transaction of business),
and except as otherwise expressly required by statute, the Corporation's
Charter, these By-Laws, the Investment Company Act of 1940, as amended, or any
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. In
the absence of a quorum at any meeting of the Board, a majority of the
Directors present may adjourn the meeting to another time and place until a
quorum shall be present. Notice of the time and place of any adjourned
meeting shall be given to all Directors. At any adjourned meeting at which a
quorum is present, any business may be transacted that might have been
transacted at the meeting as originally called.

SECTION 13. Organization. The Board of Directors may 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 act, 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 at the
meeting. 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 14. Committees. The Board of Directors may designate one
or more committees of the Board of Directors, each consisting of 2 (two) or
more Directors. To the extent provided in the resolution, and permitted by
law, the committee or committees shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers that may require it. Any committee or committees shall have the name
or names determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and
report

<PAGE>8

the same to the Board of Directors when required. The members of a committee
present at any meeting, whether or not they constitute a quorum, may appoint a
Director to act in the place of an absent member.

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 of the Board may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.

SECTION 16. Telephone Conference. Members of the Board of
Directors or any committee of the Board may participate in any Board or
committee meeting by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at the meeting.

SECTION 17. Compensation. Each Director shall be entitled to
receive compensation, if any, as may from time to time be fixed by the Board
of Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by
the Corporation for all reasonable expenses incurred in traveling to and from
the place of a Board or committee meeting.

ARTICLE III

OFFICERS, AGENTS AND EMPLOYEES

SECTION 1. Number and Qualifications. The officers of the
Corporation shall be a President, 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 any other
officers, agents and employees it deems 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 in more
than one capacity any instrument required by law to be executed, acknowledged
or verified by more than one officer. Officers shall be elected by the Board
of Directors to hold office until their successors shall have been duly
elected and shall have qualified. Officers shall serve at the pleasure of the
Board of Directors. The Board of Directors

<PAGE>9

may from time to time elect, or delegate to the President the power to
appoint, such officers (including one or more Assistant Vice President, 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 other 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 his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary. Any
resignation shall take effect at the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. Acceptance of a resignation shall not be necessary to make it
effective unless the resignation states otherwise.

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 the power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Removal shall be without prejudice to the 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 whether arising from
death, resignation, removal or any other cause, may be filled in the manner
prescribed in these By-Laws for the regular election or appointment to the
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 with respect to 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 an amount and with any
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 or inability of the Chairman of
the Board (or if there is none) to act, the President shall preside at all
meetings of the stockholders and of the Board of Directors. The President
shall

<PAGE>10

have, subject to the control of the Board of Directors, general charge of the
business and affairs of the Corporation, and may employ and discharge
employees and agents of the Corporation, except those elected or appointed by
the Board, and he may delegate these powers.

SECTION 8. Chief Operating Officer. The Chief Operating Officer
shall be the Chief Operating Officer of the Corporation, and shall have
responsibility for the various operational facilities and personnel and
related support services of the Corporation. In general, he shall perform all
duties incident to the office of Chief Operating Officer and such other duties
as from time to time may be assigned to him by the Board of Directors or the
President.

SECTION 9. Vice President. Each Vice President shall have the
powers and perform the duties that the Board of Directors or the President may
from time to time prescribe.

SECTION 10. Treasurer. Subject to the provisions of any contract
that may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to
receive and give receipts for all money due and payable to the Corporation,
and to endorse checks, drafts and warrants, in its name and on its behalf and
to give full discharge for the same; he shall deposit all funds of the
Corporation, except those that may be required for current use, in such banks
or other places of deposit as the Board of Directors may from time to time
designate; and, in general, he shall perform all duties incident to the office
of Treasurer and such other duties as may from time to time be assigned to him
by the Board of Directors or the President.

SECTION 11. 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 of Directors, 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 seal of the

<PAGE>11

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 of Directors or the President.

SECTION 12. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of
Directors 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 IV

STOCK

SECTION 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation to have a certificate or certificates, in
a form approved by the Board, representing the number of shares of stock 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 Chairman of the Board, 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 facsimiles. 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 the office at the date of issue.

SECTION 2. 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

<PAGE>12

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 the 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 right of a person in
whose name any share or shares stand on the record of stockholders as the
owner of the share or shares for all purposes, including, without limitation,
the rights to receive dividends or other distributions and to vote as the
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 3. Regulations. The Board of Directors may make any
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 4. Stolen, Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of its theft, loss, destruction or
mutilation and the Corporation may issue a new certificate of stock in the
place of any certificate issued by it that has been alleged to have been
stolen, lost or destroyed or that shall have been mutilated. The Board may,
in its discretion, require the owner (or his legal representative) of a
stolen, lost, destroyed or mutilated certificate to give to the Corporation a
bond in a sum, limited or unlimited, and in a form and with any surety or
sureties, as the Board in its absolute discretion shall determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged theft, loss or destruction of any such certificate, or
issuance of a new certificate. Anything herein to the contrary
notwithstanding, the Board of Directors, 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 5. Fixing of Record Date for Dividends, Distributions, etc.
The Board may fix, in advance, a date not more than 90 (ninety) days preceding
the date fixed for the payment of any dividend or the making of any
distribution or the

<PAGE>13

allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities entitled to
receive any such dividend, distribution, allotment, rights or interests, and
in such case only the stockholders of record at the time so fixed shall be
entitled to receive such dividend, distribution, allotment, rights or
interests.

SECTION 6. Information to Stockholders and Others. Any stockholder
of the Corporation or his agent may inspect and copy during the Corporation's
usual business hours the Corporations' 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 V

INDEMNIFICATION AND INSURANCE

SECTION 1. Indemnification of Directors and Officers. Any person
who was or is a party or is threatened to be made a party in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is a
current or former Director or officer of the Corporation, or is or was serving
while a Director or officer of the Corporation at the request of the
Corporation as a Director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit or proceeding to the full extent permissible
under the Maryland General Corporation Law, the Securities Act of 1933 and the
Investment Company Act of 1940, as such statutes are now or hereafter in
force, 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 ("disabling conduct").

SECTION 2. Advances. Any current or former Director or officer of
the Corporation claiming indemnification within the scope of this Article V
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by

<PAGE>14

him in connection with proceedings to which he is a party in the manner and to
the full extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such
statutes are now or hereafter in force; provided, however, that the person
seeking indemnification shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance unless it is ultimately determined that he is entitled
to indemnification, and provided further that at least one of the following
additional conditions are met: (1) the person seeking indemnification shall
provide a security in form and amount acceptable to the Corporation for his
undertaking; (2) the Corporation is insured against losses arising by reason
of the advance; or (3) a majority of a quorum of Directors of the Corporation
who are neither "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there
is reason to believe that the person seeking indemnification will ultimately
be found to be entitled to indemnification.

SECTION 3. Procedure. At the request of any current or former
Director or officer, or any employee or agent whom the Corporation proposes to
indemnify, the Board of Directors shall determine, or cause to be determined,
in a manner consistent with the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such
statutes are now or hereafter in force, whether the standards required by this
Article V have been met; provided, however, that indemnification shall be made
only following: (1) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be indemnified was
not liable by reason of disabling conduct or (2) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that
the person to be indemnified was not liable by reason of disabling conduct, by
(a) the vote of a majority of a quorum of disinterested non-party Directors or
(b) an independent legal counsel in a written opinion.

SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or Directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, in accordance with the procedures set forth in this Article V to the
extent permissible under the Investment Company Act of 1940, the Securities
Act of

<PAGE>15

1933 and the Maryland General Corporation Law, as such statutes are now or
hereafter in force, and to such further extent, consistent with the foregoing,
as may be provided by action of the Board of Directors or by contract.

SECTION 5. Other Rights. The indemnification provided by this
Article V shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may
be entitled under any insurance or other agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action by a Director or
officer of the Corporation in his official capacity and as to action by such
person in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be a Director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.

SECTION 6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation, or who, while a
Director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a Director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, enterprise or employee benefit plan, against any liability
asserted against and incurred by him in any such capacity, or arising out of
his status as such.

SECTION 7. Constituent, Resulting or Surviving Corporations. For
the purposes of this Article V, references to the "Corporation" shall include
all constituent corporations absorbed in a consolidation or merger as well as
the resulting or surviving corporation so that any person who is or was a
Director or officer of a constituent corporation or is or was serving at the
request of a constituent corporation as a Director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under this Article V with respect to the
resulting or surviving corporation as he would if he had served the resulting
or surviving corporation in the same capacity.

ARTICLE VI

SEAL

The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words
"Corporate Seal" and "Maryland" and any

<PAGE>16

emblem or device approved by the Board of Directors. The seal may be used by
causing it or a facsimile to be impressed or affixed or in any other manner
reproduced, or by placing the word "(seal)" adjacent to the signature of the
authorized officer of the Corporation.

ARTICLE VII

FISCAL YEAR

The Corporation's fiscal year shall be fixed by the Board of
Directors.

ARTICLE VIII

AMENDMENTS

These By-Laws may be amended or repealed by the affirmative vote of
a majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the Investment Company Act
of 1940, as amended.

Dated: April 21, 1995

<PAGE>1

[Front of Stock Certificate]

GABELLI CAPITAL ASSET FUND
A Series Of Gabelli Capital Series Funds, Inc.

GABELLI CAPITAL SERIES FUNDS, INC.
Incorporated Under the Laws of the State of Maryland

This Certifies that is the owner of

Fully Paid and Non-Assessable Shares of COMMON STOCK of Gabelli
Capital Asset Fund, a series of Gabelli Capital Series Funds, Inc.(the
"Corporation"), par value $.001 per share, transferable on the books of the
Corporation by the holder hereof, in person or duly authorized attorney, upon
surrender of this Certificate properly endorsed. This Certificate is not
valid unless countersigned by the Transfer Agent. Witness the seal of the
Corporation and the signatures of its duly authorized officers.

[Corporate Seal]

[Signature of Treasurer] [Signature of President]
Treasurer President

See Reverse Side for Certain Directions
CUSIP:

Countersigned Boston Financial Services
Servicing Agent for State Street Bank and Trust
Company
Boston, Mass. 02266

By
_________________________
Authorized Agent

<PAGE>2

[Back of Stock Certificate]

Gabelli Capital Asset Fund, a series of Gabelli Capital Series Funds,
Inc.

Number

Account No. Alpha Code Dealer No. Confirm No.

Trade Date Confirm Date Batch ID. No.

Change Notice: If The Above Information Is Incorrect or
Missing Please Print The Correct Information Below, and
Return To:
Boston Financial Data Services
Servicing Agent for State Street Bank and
Trust Company
Boston, Mass. 02266

The Corporation is authorized to issue two or more classes of stock.
The Corporation will furnish to any stockholder on request and without charge
a full statement of the designation and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue and, if the Corporation is
authorized to issue any preferred or special class in series, of the
differences in the relative rights and preferences between the shares of each
series to the extent they have been set and the authority of the Board of
Directors to set the relative rights and preferences of subsequent series.

<PAGE>1

MANAGEMENT AGREEMENT

, 1995

Guardian Investor Services Corporation
201 Park Avenue South
New York, New York 10003

Dear Sir:

Gabelli Capital Series Funds, Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, confirms its management
agreement with Guardian Investor Services Corporation (the "Manager"), with
respect to Gabelli Capital Asset Fund (the "Fund"), a series of the Company,
as follows:

1. Investment Description; Appointment

The Company desires that the Fund employ its capital by investing
and reinvesting in investments of the kind and in accordance with the
limitations specified in its Articles of Amendment and Restatement, as amended
from time to time (the "Articles of Incorporation"), and in the current
Prospectus and Statement of Additional Information describing the Fund as from
time to time in effect and in such manner and to such extent as may from time
to time be approved by the Company's Board of Directors. Copies of the
Articles of Incorporation and the current Prospectus and Statement of
Additional Information have been submitted to the Manager. The Company
desires to employ and hereby appoints the Manager to act as the manager of the
Fund. The Manager accepts the appointment and agrees to furnish the services
set forth below for the compensation set forth 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.

2. Services

Subject to the supervision and direction of the Company's Board of
Directors, the Manager will (i) act in strict conformity with the Articles of
Incorporation, the Investment Company Act of 1940, as amended (the "1940
Act"), and the Investment Advisers Act of 1940, as the same may from time to
time be amended, (ii) supervise the performance of administrative and
professional services provided by others including the

<PAGE>2

investment advisor and the sub-administrator to the Fund and (iii) pay the
fees of the Fund's investment advisor. In addition, since shares of the Fund
are intended to be offered to separate accounts of The Guardian Insurance &
Annuity Company, Inc. to fund variable annuity and variable life contracts,
the Manager will advise the Company of (a) relevant insurance laws and
regulations and other insurance related matters, such as possible material
conflicts which might arise through offering shares of the Fund through both
variable annuity and variable life contracts, and (b) requirements of Internal
Revenue Code of 1986, as amended, and the regulations thereunder that must be
met to ensure that such contracts are treated as variable contracts for
purposes of such Code.

3. Information Provided to the Company

The Manager will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information the Manager believes is
appropriate for this purpose.

4. Standard of Care

The Manager shall exercise its best judgment in rendering the
services described in Section 2 above. The Manager shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Company in connection with the matters of which this Agreement relates,
provided that nothing in this paragraph shall be deemed to protect or purport
to protect the Manager against any liability to the Company or to its
shareholders to which the Manager would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Manager's reckless disregard of
its obligations and duties under this Agreement.

5. Compensation, Excess Expense Reimbursement

(a) In consideration of the services rendered pursuant to this
Agreement, the Company will pay the Manager on the first business day of each
month a fee for the previous month computed daily at the annual rate of 1.00%
of the Fund's average daily net assets from which the Manager will pay the
fees of the Fund's investment advisor. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be
prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Manager, the
value of the Fund's

<PAGE>3

net assets shall be computed at the times and in the manner specified in the
Prospectus and Statement of Additional Information.

(b) If, in any fiscal year of the Fund, the aggregate expenses of
the Fund (including management fees, but excluding interest, taxes, brokerage
and, with the prior written consent of the necessary state securities
authorities, extraordinary expenses), exceed the expense limitation of any
state having jurisdiction over the Company, the Manager will reimburse the
Company for the excess expense, which reimbursement, however, will be limited
to the amount of fees to which the Manager is entitled under this Agreement.
Any expense reimbursement payable under the terms of this Section 5(b) will be
estimated, reconciled and paid on a monthly basis.

6. Expenses

The Manager will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear certain
other expenses to be incurred in its operation, including: expenses for legal
and independent accountants' services, costs of printing proxies, stock
certificates and shareholder reports, charges of the custodian, any sub-
custodian and transfer and dividend paying agent, Securities and Exchange
Commission fees, fees and expenses of unaffiliated directors, accounting and
pricing costs, membership fees in trade associations, fidelity bond coverage
for the Company's officers and employees, directors' and officers' errors and
omissions insurance coverage, interest, brokerage costs, taxes, 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 portfolios, expenses involved in registering and maintaining
the registration of the Fund's shares with the Securities and Exchange
Commission and qualifying the Fund's shares for sale in various states and
maintaining such qualifications, litigation and other extraordinary or non-
recurring expenses, and other expenses properly payable by the Fund.

7. Indemnity

(a) The Company hereby agrees to indemnify the Manager and
each of the Manager's directors, officers, employees, and agents (including
any individual who serves at the Manager'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

<PAGE>4

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
interests 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 or (iv) reckless disregard of the duties
involved in the conduct of his position (the conduct referred to in such
clauses (i) through (iv) 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 interests of the Company and did not involve disabling conduct
by such indemnitee and (3) with respect to any action, suit or other
proceeding voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action,
suit or other proceeding by such indemnitee was authorized by a majority of
the full Board of Directors 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.

<PAGE>5

indemnification. In addition, at least one of the following conditions must
be met: (A) the indemnitee shall provide 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 1940 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.

8. Services to Other Companies or Accounts

The Company understands that the Manager now acts and will continue
to act as investment advisor to other investment companies and may act in the
future as manager or investment advisor to other investment companies or
portfolios, and the Company has no objection to the Manager so acting. In
addition, the Company understands that the persons employed by the Manager to
assist in the performance of the Manager's duties under this Agreement will
not devote their full time to such service and nothing contained herein shall
be deemed to limit or restrict the right of the Manager or any affiliate of
the Manager to engage in and devote time and attention to other businesses or
to render services of whatever kind or nature.

9. Term of Agreement

<PAGE>6

Company's Board of Directors or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Fund's outstanding voting securities, provided that in either
event the continuance is also approved by a majority of the Board of Directors
who are not "interested persons" (as defined in the 1940 Act) of any party to
this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' written notice, by the Company's Board of Directors, by vote of holders
of a majority of the Fund's shares, or by the Manager. This Agreement will
also terminate automatically in the event of its assignment (as defined in the
1940 Act and the rules thereunder).

If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy.

Very truly yours,

GABELLI CAPITAL SERIES FUNDS, INC.

By:________________________
Name:
Title:

Agreed to and Accepted:

GUARDIAN INVESTOR SERVICES CORPORATION

By:________________________
Name:
Title:

<PAGE>1

INVESTMENT ADVISORY AGREEMENT

, 1995

Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580-1434

Dear Sir:

Gabelli Capital Series Funds, Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, and Guardian Investor
Services Corporation (the "Manager"), confirm their investment advisory
agreement with Gabelli Funds, Inc. (the "Advisor"), with respect to Gabelli
Capital Asset Fund ("the Fund"), a series of the Company, as follows:

1. Investment Description; Appointment

The Company desires that the Fund employ its capital by investing
and reinvesting in investments of the kind and in accordance with the
limitations specified in its Articles of Amendment and Restatement, as amended
from time to time (the "Articles of Incorporation"), and in the current
Prospectus and Statement of Additional Information describing the Fund as from
time to time in effect and in such manner and to such extent as may from time
to time be approved by the Company's Board of Directors. Copies of the
Articles of Incorporation and the current Prospectus and Statement of
Additional Information have been submitted to the Advisor. Under a Management
Agreement dated the date hereof between the Company and the Manager relating
to the Fund, the Manager serves as manager of the Fund and is responsible for
compensating the investment adviser to the Fund. The Company desires to
employ and hereby appoints the Advisor to act as sub-investment advisor to the
Fund and to 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 paragraph 2(b) below.
The Advisor accepts the appointment and agrees to furnish the services set
forth below for the compensation set forth 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

2. Services

(a) Investment Advice. Subject to the supervision and direction of
the Company's Board of Directors, and subject to the supervision and review by
the Manager, the Advisor will (i) act in strict conformity with the Articles
of Incorporation, the Investment Company Act of 1940, as amended (the "1940
Act"), and the Investment Advisers Act of 1940, as the same may from time to
time be amended, (ii) manage the Fund's assets in accordance with the Fund's
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information, (iii) make investment decisions for the
Fund and (iv) place purchase and sale orders on behalf of the Fund. In
rendering those services, the Advisor will provide investment research and
supervision of the Fund's investments and conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets. In addition, the Advisor will furnish the Company with
whatever statistical information the Company may reasonably request with
respect to the securities that the Fund may hold or contemplate purchasing.

(b) Administration. The specific services to be provided or
arranged for by the Advisor for the Company 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 or dividend disbursing agent; (ii)
initiating all money transfers to the Fund's custodian and from the Fund's
custodian for the payment of the Fund's expenses, investments, and dividends;
(iii) reconciling account information and balances among the Fund's custodian,
transfer agent, dividend disbursing agent and the Advisor; (iv) providing the
Company, upon request, with such office space and facilities, utilities and
office equipment as are adequate for the needs of the Fund; (v) preparing, but
not paying for, all reports by the Fund to its shareholders and all reports
and filings required to maintain registration and qualification of the Fund's
shares under federal and state law including the updating of the Company's
Registration Statement relating to the Fund, when necessary; (vi) supervising
the calculation of net asset value of the Fund's shares; and (vii) 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.

3. Brokerage

In the course of the Advisor's execution of portfolio transactions
for the Fund, it is agreed that the Advisor shall

<PAGE>3

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 Fund shareholders and to
ensure compliance with applicable law and regulations, the Advisor may (a)
place orders for the purchase or sale of the Company's portfolio securities
with its affiliate, Gabelli & Company, Inc. (or any other affiliated broker);
(b) pay commissions to brokers other than an affiliate which are higher than
might be charged by another qualified broker to obtain brokerage and/or
research services considered by the Advisor 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 the Fund's portfolio transactions.

4. Information Provided to the Company and the Manager

The Advisor will keep the Company and the Manager informed of
developments materially affecting the Fund, and will, on its own initiative,
furnish the Company and the Manager from time to time with whatever
information the Advisor believes is appropriate for this purpose.

5. Standard of Care

The Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Company or the Manager in connection with the matters of which this
Agreement relates, provided that nothing in this paragraph shall be deemed to
protect or purport to protect the Advisor against any liability to the Company
or the Manager or to their respective shareholders to which the Advisor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of the
Advisor's reckless disregard of its obligations and duties under this
Agreement.

<PAGE>4

6. Compensation; Excess Expense Reimbursement

(a) In consideration of the services rendered pursuant to this
Agreement, the Manager will pay the Advisor on the first business day of each
month a fee for the previous month computed daily at the annual rate of .75%
of the Fund's average daily net assets. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Advisor, the
value of the Fund's net assets shall be computed at the times and in the
manner specified in the Prospectus and Statement of Additional Information.

(b) If, in any fiscal year of the Fund, the aggregate expenses of
the Fund (including management fees, but excluding interest, taxes, brokerage
and, with the prior written consent of the necessary state securities
authorities, extraordinary expenses), exceed the expense limitation of any
state having jurisdiction over the Company, and as a result the Manager
reimburses the Company for the excess expense, the Advisor will reimburse the
Manager for 75% of such amounts that the Manager reimburses the Company for
the excess expense; provided, however, that such reimbursement of the Manager
by the Advisor will be limited to the amount of fees to which the Advisor is
entitled under this Agreement. Any expense reimbursement payable under the
terms of this Section 6(b) will be estimated, reconciled and paid on a monthly
basis.

7. Expenses

The Advisor will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear certain
other expenses to be incurred in its operation, including: fees payable to
the Manager for serving as the Fund's manager, expenses for legal and
independent accountants' services, costs of printing proxies, stock
certificates and shareholder reports, charges of the custodian, any sub-
custodian and transfer and dividend paying agent, Securities and Exchange
Commission fees, fees and expenses of unaffiliated directors, accounting and
pricing costs, membership fees in trade associations, fidelity bond coverage
for the Company's officers and employees, directors' and officers' errors and
omissions insurance coverage, interest, brokerage costs, taxes, 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 portfolios, expenses involved in registering and maintaining
the

<PAGE>5

registration of the Fund's shares with the Securities and Exchange Commission
and qualifying the Fund's shares for sale in various states and maintaining
such qualifications, litigation and other extraordinary or non-recurring
expenses, and other expenses properly payable by the Fund.

8. Indemnity

(a) The Company hereby agrees to indemnify the Advisor and
each of the Advisor's directors, officers, employees, and agents (including
any individual who serves at the Advisor'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 interests 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 or (iv) reckless
disregard of the duties involved in the conduct of his position (the conduct
referred to in such clauses (i) through (iv) 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 interests of the Company and did not involve
disabling conduct by such indemnitee and (3) with respect to any action, suit
or other proceeding voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action,
suit or other proceeding by such indemnitee was

<PAGE>6

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
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 1940 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.

The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.

9. Services to Other Companies or Accounts

The Company and the Manager understand that the Advisor now acts and
will continue to act as investment advisor to other investment companies and
may act in the future as investment advisor to other investment companies or
portfolios, and the Company and the Manager have no objection to the Advisor
so

<PAGE>7

acting, provided that whenever the Fund and one or more other portfolios of or
investment companies advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
a manner believed to be equitable to each entity. The Company and the Manager
recognize that in some cases this procedure may adversely affect the size of
the position obtainable for the Fund. In addition, the Company and the
Manager understand that the persons employed by the Advisor to assist in the
performance of the Advisor's duties under this Agreement will not devote their
full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of the Advisor or any affiliate of the Advisor to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.

10. Use of the Word "Gabelli"

It is understood and agreed that the word "Gabelli" is the Advisor's
property for copyright and other purposes. The Company and the Manager
further agree that the word "Gabelli" in the Company's name and the Fund's
name is derived from the name of Mario J. Gabelli and such name may freely be
used by the Advisor for other investment companies, entities or products. The
Company and the Manager further agree that, in the event that the Advisor
shall cease to act as an sub-investment advisor to the Fund, the Company shall
promptly take all necessary and appropriate action to change its name and that
of the Fund to ones that do not include the word "Gabelli"; provided, however,
that the Company and the Fund may continue to use such name if the Advisor
consents in writing to such use.

11. Term of Agreement

This Agreement shall become effective on the date hereof and shall
continue in effect for two years and thereafter shall continue for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Company's Board of Directors or (ii) a vote of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by
a majority of the Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 60 days' written notice, by the
Company's Board of Directors, by vote of holders of a majority of the Fund's
shares, by the Manager or by the Advisor. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act and
the rules thereunder).

<PAGE>8

If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy.

Very truly yours,

GABELLI CAPITAL SERIES FUNDS, INC.

By:________________________
Name:
Title:

GUARDIAN INVESTOR SERVICES
CORPORATION

By:________________________
Name:
Title:

Agreed to and Accepted:

GABELLI FUNDS, INC.

By:________________________
Name:
Title:

<PAGE>1

DISTRIBUTION AGREEMENT

DISTRIBUTION AGREEMENT, dated , 1995, between Gabelli
Capital Series Funds, Inc., a Maryland corporation (the "Company"), and
Gabelli & Company, Inc., a New York corporation (the "Distributor"), relating
to Gabelli Capital Asset Fund, a series of the Company (the "Fund"). The
Company is registered as an investment company under the Investment Company
Act of 1940 (the "1940 Act"), and an indefinite number of shares of 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 (together, the
"Prospectus") of the Company included in the Company's Registration Statement
on Form N-1A, relating to the Fund, 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 to separate accounts of The Guardian Insurance & Annuity Company, Inc.
(the "Separate Accounts"). 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 Company at any time for any reason the Distributor will
suspend such efforts. The Company may also withdraw the offering of Shares at
any time when required by the provisions of any statute, order, rule or
regulation of any governmental body having jurisdiction. It is understood
that the Distributor does not undertake to sell all or any specific portion of
the Shares.

3. The Distributor represents that it is a member in good standing
of the National Association of Securities 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

<PAGE>2

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
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. 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 its
current Prospectus. It agrees that it will use its best efforts to continue
the effectiveness of its Registration Statement filed under the 1933 Act and
the 1940 Act. The Company further agrees to prepare and file any amendments
to its Registration Statement as may be necessary and any supplemental data in
order to comply with such Acts. The Company will furnish the Distributor at
the Distributor's expense with a reasonable number of copies of the Prospectus
and any amended Prospectus for use in connection with the sale of Shares.

6. At the Distributor's request, the Company will take such steps
at its own expense as may be necessary and feasible to qualify Shares for sale
in states, territories or dependencies of the United States of America and in
the District of Columbia in accordance with the laws thereof, and to renew or
extend any such qualification; provided, however, that the Company shall not
be required to qualify Shares or to maintain the qualification of Shares in
any state, territory, dependency or district where it shall deem such
qualification disadvantageous to the Company.

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;

<PAGE>3

(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; and

(c) It will not use or distribute or authorize the use or
distribution of any statements other than those contained in the
Company's then current Prospectus or in such supplemental literature or
advertising as may be authorized in writing by the Company.

8. The Company will pay its legal and auditing expenses and the
cost of composition of any prospectuses and annual or interim reports of the
Company.

9. The Company will neither pay the Distributor any compensation
for its services hereunder nor pay the Distributor for costs and expenses
incurred by the Distributor in connection with distribution of Shares by the
Distributor.

10. The Company agrees to indemnify, defend and hold the
Distributor, its officers, directors, employees and agents and any person who
controls the Distributor within the meaning of Section 15 of the 1933 Act
(each, an "indemnitee"), free and harmless from any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, in which such indemnitee may be or may have been involved as a party
or otherwise or with which he may be or may have been threatened, while the
Distributor was active in such capacity or by reason of the Distributor having
acted in any such capacity or arising out of or based upon any untrue
statement of a material fact contained in the then-current Prospectus relating
to the Shares or arising out of or based upon any alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information furnished in writing by the
Distributor to the Company expressly for use in any such Prospectus; provided,
however, that (1) no indemnitee shall be indemnified hereunder against any
liability to the Company or its shareholders 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

<PAGE>4

misfeasance, bad faith, or gross negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations under this Agreement
("disabling conduct"), or (2) as to any matter disposed of by settlement or a
compromise payment by such indemnitee, no indemnification shall be provided
unless there has been a determination that such settlement or compromise is in
the best interests of the Company and that such indemnitee appears to have
acted in good faith in the reasonable belief that its action was in the best
interest of the Company and did not involve disabling conduct by such
indemnitee. Notwithstanding the foregoing, the Company shall not be obligated
to provide any such indemnification to the extent such provision would waive
any right which the Company cannot lawfully waive.

The Distributor agrees to indemnify, defend and hold the Company,
its Directors, officers, employees and agents and any person who controls the
Company within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense shall arise out of or be based upon any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor of the Company expressly for use in a Prospectus or
any alleged omission to state a material fact in connection with such
information required to be stated therein or necessary to make such
information not misleading or arising by reason of disabling conduct by such
indemnitee.

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

<PAGE>5

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, unless terminated pursuant to Section
12, for two years from such date and thereafter from year to year provided
such continuance is specifically approved at least annually by (a) the Board
of Directors of the Company or the vote at a meeting of shareholders of the
Fund of the lesser of (i) 67 per cent of the Shares present or represented by
proxy and (ii) 50 per cent of the outstanding Shares and (b) a majority of the
directors of the Company who are not "interested persons" of the Company as
defined in Section 2(a)(19) of the 1940 Act.

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).

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). 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.

<PAGE>6

15. If any provision of this Agreement shall be held or made
invalid or unenforceable by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected or impaired thereby.

<PAGE>7

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 CAPITAL SERIES FUNDS,
INC.

By:
Name:
Title:

GABELLI & COMPANY, INC.

By:
Name:
Title:

<PAGE>1

CUSTODIAN CONTRACT

Between

GABELLI CAPITAL SERIES 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 . . . . . . . . . . . . . . . 2

2.1 Holding Securities. . . . . . . . . . . . . . . . . . . . . . . 2
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 Systems. . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.14 Communications Relating to Fund 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. . . . . . . . . . . . . . . . . . 30
3.13 Branches of U.S. Banks. . . . . . . . . . . . . . . . . . . . . 30
3.14 Tax Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

4. Payments for Sales or Repurchases or Redemptions of Shares of the
Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . 33

<PAGE>3

6. Actions Permitted without Express Authority . . . . . . . . . . . . 34

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 . . . . . . . . . . . 35

9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

10. Opinion of Fund's Independent Accountant . . . . . . . . . . . . . . 36

11. Reports to Fund by Independent Public Accountants . . . . . . . . . 37

12. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . 37

13. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . 37

14. Effective Period, Termination and Amendment . . . . . . . . . . . . 40

15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . 41

16. Interpretive and Additional Provisions . . . . . . . . . . . . . . . 43

17. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . . 43

18. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 43

<PAGE>4

CUSTODIAN CONTRACT

This Contract between Gabelli Capital Series 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 its shares, representing
interests in a portfolio of securities and other assets;

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 Fund, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities") pursuant to the
provisions of its Articles of Incorporation. The Fund agrees to deliver to
the Custodian all securities and cash of the Fund, and all

<PAGE>5

payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Fund from time to time, and the
cash consideration received by it for such new or treasury shares of capital
stock of the Fund ("Shares"), as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund held or
received by the Fund and not delivered to the Custodian.

Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall 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, 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 the foreign banking institutions and foreign
securities depositories designated in Schedule A hereto but only in accordance
with the provisions of Article 3.

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 the Fund all non-cash property, to be held by it in
the United States

<PAGE>6

including all domestic securities owned by the Fund, 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 the Fund 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, 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 Fund and
receipt of payment therefor;

2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into
by the Fund;

<PAGE>7

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 Fund;

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 Fund 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;

<PAGE>8

7) Upon the sale of such securities for the account of the
Fund, 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 definitive

<PAGE>9

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 Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, 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 Fund prior to the receipt of such collateral;

11) For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but
only against receipt of amounts borrowed;

12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the

<PAGE>10

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 Fund;

13) For delivery in accordance with the provisions of any
agreement among the Fund, 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 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 from time to
time in the currently effective prospectus and statement of
additional

<PAGE>11

information of the Fund ("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, 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 Fund 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
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or

<PAGE>12

nominee name of any sub-custodian appointed pursuant to Article 1.
All securities accepted by the Custodian 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 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 Fund, other than cash maintained by the Fund 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
the Fund may be deposited by it to its credit as Custodian in the
Banking Department 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

<PAGE>13

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 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
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund, make federal funds available to the Fund
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 the Fund which are deposited into the Fund'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 the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall 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

<PAGE>14

collected, to the Fund'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 the Fund 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 Fund is properly entitled.

2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Fund 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 Fund but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on

<PAGE>15

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 Fund 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 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 (ii) against
delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian

<PAGE>16

along with written evidence of the agreement by the
Custodian to repurchase such securities from the Fund 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 Fund as set forth in Section 2.2
hereof;

3) For the redemption or repurchase of Shares issued by the
Fund as set forth in Article 4 hereof;

4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the Fund: 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;

5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing

<PAGE>17

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, 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 the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.

<PAGE>18

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 the Fund 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 Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities

<PAGE>19

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 Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Fund;

3) The Custodian shall pay for securities purchased for the
account of the Fund 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 Fund. The Custodian shall
transfer securities sold for the account of the Fund 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 Fund. Copies of all advices from the
Securities System of transfers of

<PAGE>20

securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form of a
written advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund.

4) The Custodian shall provide the Fund 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 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 any loss or
damage to the Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its

<PAGE>21

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 Fund 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 the Fund 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;

2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a

<PAGE>22

fiduciary, custodian or otherwise for customers;

3) The records of the Custodian with respect to securities of
the Fund which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to
the Fund;

4) The Custodian shall pay for securities purchased for the
account of the Fund 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 Fund. The
Custodian shall transfer securities sold for the account of
the Fund 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 Fund;

5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of
a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to
the Fund copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account
of the Fund;

<PAGE>23

6) The Custodian shall provide the Fund 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 establish and maintain a segregated account
or accounts for and on behalf of the Fund, 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, 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 transactions by the
Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by
the Fund, (iii) for

<PAGE>24

the purposes of compliance by the Fund 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, 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 the Fund held by it
and in connection with transfers of securities.

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 Fund or a nominee of the Fund, all proxies,

<PAGE>25

without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies, all proxy
soliciting materials and all notices relating to such securities.

2.14 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund 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 and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund 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 Fund desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.

<PAGE>26

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 Fund'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 Fund'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
equivalents in such amounts as the Custodian or the Fund

<PAGE>27

may determine to be reasonably necessary to effect the Fund'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 Fund
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 the Fund, the foreign securities of the Fund 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 and physically segregate in each account,
securities and other assets of the Fund, and, in the event that such
institution deposits the securities of the Fund in a foreign
securities depository, that it shall identify on its books as
belonging to the Custodian, as agent, the securities so deposited.

<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
the Fund 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
the Fund 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 the Fund;
(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 Fund 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

<PAGE>29

any foreign banking institution employed as a foreign 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 Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund'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 the Fund indicating, as to securities
acquired for the Fund, 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 the
Fund and delivery of securities

<PAGE>30

maintained for the account of the Fund may be effected in accordance
with 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 the 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

<PAGE>31

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 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

<PAGE>32

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.

3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose 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 Fund 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 Fund's 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

<PAGE>33

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 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 Fund's assets is
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

<PAGE>34

sub-custodian shall be governed by paragraph 1 of this Contract.

(b) Cash held for 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 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.

<PAGE>35

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 Fund
such payments as are received for Shares of the Fund issued or sold from time
to time by the Fund. The Custodian will provide timely notification to the
Fund and the Transfer Agent of any receipt by it of payments for Shares of the
Fund.

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 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 the Fund, 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

<PAGE>36

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 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 Fund's 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.

<PAGE>37

6. Actions Permitted without Express Authority

The Custodian may in its discretion, without express
authority from the Fund:

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;

2) surrender securities in temporary form for securities in definitive
form;

3) endorse for collection, in the name of the Fund, 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 Fund except as otherwise directed by
the Board of Directors of the Fund.

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

<PAGE>38

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 the Fund and/or compute the net asset value per share
of the outstanding shares of the Fund or, if directed in writing to do so by
the Fund, 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 Fund as described in the Fund's currently
effective prospectus 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 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 the Fund
shall be made at the time or times described from time to time in the Fund's
currently effective prospectus.

<PAGE>39

9. Records

The Custodian shall with respect to the Fund 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 31a-1
and 31a-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 the Fund 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 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 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.

<PAGE>40

11. Reports to Fund by Independent Public Accountants

The Custodian shall provide the Fund, 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 and the Custodian.

13. Responsibility 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 Contract and shall be held harmless in acting
upon any notice,

<PAGE>41

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

<PAGE>42

nationalization, expropriation, currency restrictions, or acts of war or
terrorism.

If the Fund 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 being liable for the payment of money or incurring liability of
some other form, the Fund, 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 the Fund 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 Fund 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
the Fund's assets to the extent necessary to obtain reimbursement.

<PAGE>43

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 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 the Fund and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has reviewed the use by the Fund 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 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 the Fund and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has reviewed the use by the Fund of the Direct Paper System;
provided further, that the Fund

<PAGE>44

shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Articles of
Incorporation, and provided, further that the Fund 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 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 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 the Fund then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of the Fund 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

<PAGE>45

of a vote of the Board of Directors of the Fund, deliver at the 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 the Fund and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of the Fund and to transfer to an account
of such successor custodian all of the securities of the Fund 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

<PAGE>46

be entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, 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 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. 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.

<PAGE>47

18. Prior Contracts

This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.

<PAGE>48

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 day of , 1995.

ATTEST GABELLI CAPITAL SERIES FUNDS,
INC.

______________________ By ______________________
Name: Name:
Title: Title:

ATTEST STATE STREET BANK AND TRUST COMPANY

______________________ By ______________________
Name: Name:
Title: Title:

<PAGE>49

Schedule A

The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of Gabelli Capital
Series 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:_______________________

<PAGE>

TRANSFER AGENCY AND SERVICE AGREEMENT

between

GABELLI CAPITAL SERIES FUNDS, INC.

and

STATE STREET BANK AND TRUST COMPANY

<PAGE>

TABLE OF CONTENTS

Page

Article 1 Terms of Appointment; Duties of the Bank . . . . . . . . . . 1

Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 5

Article 3 Representations and Warranties of the Bank . . . . . . . . . 6

Article 4 Representations and Warranties of the Fund . . . . . . . . . 7

Article 5 Data Access and Proprietary Information . . . . . . . . . . 8

Article 6 Indemnification . . . . . . . . . . . . . . . . . . . . . . 11

Article 7 Standard of Care . . . . . . . . . . . . . . . . . . . . . . 13

Article 8 Covenants of the Fund and the Bank . . . . . . . . . . . . . 14

Article 9 Termination of Agreement . . . . . . . . . . . . . . . . . . 15

Article 10 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 16

Article 11 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 16

Article 12 Massachusetts Law to Apply . . . . . . . . . . . . . . . . . 17

Article 13 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . 17

Article 14 Consequential Damages . . . . . . . . . . . . . . . . . . . 17

Article 15 Merger of Agreement . . . . . . . . . . . . . . . . . . . . 17

Article 16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 17

<PAGE>1

TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the day of , 1995, by
and between GABELLI CAPITAL SERIES 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 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:

Article 1 Terms of Appointment; Duties of the Bank

1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund 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 ("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 the Fund
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus")

<PAGE>2

of the Fund, 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 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");

(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, 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

<PAGE>3

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;

(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 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

<PAGE>4

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, 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

<PAGE>5

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 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.

(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 Expenses

2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the

<PAGE>6

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 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.

2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the 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.

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.

<PAGE>7

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 the State 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.

<PAGE>8

4.05 A registration statement under the Securities Act of
1933, as amended, 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;

<PAGE>9

(b) to refrain from copying or duplicating in any way the
Proprietary Information;

(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; and

(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

<PAGE>10

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 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

<PAGE>11

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
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:

(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.

<PAGE>12

(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 the Bank and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund 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

<PAGE>13

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 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.

<PAGE>14

Article 8 Covenants of the Fund and the Bank

8.01 The Fund shall 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 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.

<PAGE>15

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 records and material
will be borne by the Fund. 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.

<PAGE>16

Article 10 Assignment

10.01 Except as provided in Section 10.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.

10.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns.

10.03 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)(1)"), (ii) a BFDS subsidiary duly
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 11 Amendment

11.01 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.

<PAGE>17

Article 12 Massachusetts Law to Apply

12.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.

Article 13 Force Majeure

13.01 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 14 Consequential Damages

14.01 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.

Article 15 Merger of Agreement

15.01 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 16 Counterparts

16.01 This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said

<PAGE>18

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 CAPITAL SERIES FUNDS,
INC.

By:________________________
ATTEST:

________________________

STATE STREET BANK AND TRUST COMPANY

By:________________________
Senior Vice President

ATTEST:

________________________
Assistant Secretary

<PAGE>1

PARTICIPATION AGREEMENT

THIS AGREEMENT is hereby entered into this ____ day of April 1995 by
and among THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC. ("GIAC"), a Delaware
life insurance company, for itself and on behalf of certain of its separate
accounts set forth on Schedule A hereto, as such Schedule may be amended from
time to time (the "Separate Accounts"); GUARDIAN INVESTOR SERVICES CORPORATION
("GISC"), a New York corporation; GABELLI CAPITAL SERIES FUNDS, INC. ("GCSF"),
a Maryland corporation, for itself and on behalf of its series fund, GABELLI
CAPITAL ASSET FUND (the "Fund"); GABELLI FUNDS, INC. ("GFI"), a New York
corporation; and GABELLI & COMPANY, INC. ("G&C") a New York corporation.

WITNESSETH:

WHEREAS, GIAC has established the Separate Accounts under the
Delaware Insurance Code in connection with certain variable annuity and
variable life insurance contracts (the "Contracts") offered to the public by
GIAC and, if required, has registered the Separate Accounts as unit investment
trusts under the Investment Company Act of 1940 (the "1940 Act") to serve as
investment vehicles for the Contracts; and

WHEREAS, GIAC has, if required, registered the Contracts under the
Securities Act of 1933, as amended (the "1933 Act"); and

WHEREAS, the Contracts generally provide for the allocation of net
amounts received by GIAC, at the election of the owners of the Contracts, to
separate subaccounts of the Separate

<PAGE>2

Accounts for investment in various allocation options that are available
through the Separate Accounts; and

WHEREAS, the parties hereto desire that GCSF be registered as an
open-end diversified, management investment company under the 1940 Act and
that the shares of the Fund be registered under the 1933 Act and be made
available as an allocation option offered to GIAC on behalf of the Separate
Accounts in connection with the Contracts; and

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, GIAC intends to purchase Fund shares on behalf of the Separate
Accounts to fund the Contracts; and

WHEREAS, the parties desire that GISC serve as the manager of the
Fund and that GFI serve as the investment adviser of the Fund; and

WHEREAS, the parties desire that G&C serve as underwriter of Fund
shares with the authority to sell Fund shares to the Separate Accounts at net
asset value;

NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, covenants and conditions set forth herein, the parties hereto
hereby agree as follows:

Section 1. The Fund

1(a). GCSF is registered as an open-end diversified management
investment company under the 1940 Act. GCSF has been

<PAGE>3

organized as a series fund and has designated the Fund as the initial series
of GCSF.

1(b). G&C will organize the Fund with investment objectives,
diversification policies, investment philosophies and policies and significant
investment techniques substantially similar to the existing fund known as "The
Gabelli Asset Fund" or as otherwise agreed upon by the parties hereto. G&C
will use commercially reasonable efforts to register the shares of the Fund
under the 1933 Act. The parties hereto agree that additional series of GCSF
may be established and their shares registered from time to time in the future
with the consent of all the parties hereto.

1(c). Subject to the approval of the Board of Directors of GCSF (the
"Board") and the shareholders of the Fund as required under the 1940 Act, GISC
shall act as manager of the Fund pursuant to a Management Agreement which will
provide for the payment to GISC of a management fee at an annual rate of 1.0%
of the average daily net assets of the Fund and will further provide for the
retention of an investment adviser. Subject to the approval of the Board and
the shareholders of the Fund as required under the 1940 Act, GFI shall act as
investment adviser of the Fund pursuant to an Investment Advisory Agreement
among GCSF, GISC and GFI which will provide for the payment to GFI by GISC of
an investment advisory fee at an annual rate of .75% of the average daily net
assets of the Fund.

<PAGE>4

1(d). GFI shall designate Mario J. Gabelli to be primarily
responsible for the day-to-day portfolio management of the Fund. GFI shall
make Mr. Gabelli available to participate in a "roll-out" promotional meeting
for broker-dealer sellers of the Contracts to be held in New York City on or
around the time Fund shares are first made available under the Contracts. GFI
shall use commercially reasonable efforts to make Mr. Gabelli available,
either in person or by conference call, for such additional "roll-out"
meetings to be held in other parts of the United States as GIAC shall
reasonably request.

1(e). GIAC agrees to make a seed money investment into the Fund in
the amount of at least $100,000 before GCSF's registration statement under the
1933 Act and 1940 Act becomes effective. Aside from this seed money
investment, Fund shares shall be offered and sold exclusively to GIAC on
behalf of the Separate Accounts. No shares of the Fund will be offered or
sold to the general public. In addition, for a two year period (the
"Restricted Period") beginning with the date Fund shares are first offered to
the owners of the Contracts, neither G&C, GFI nor any of their affiliates
shall organize or negotiate to organize, own more than a 5% interest in or
provide investment advice (whether as investment manager, sub-investment
manager or as a consultant) to any investment company or other pooled entity
which is (i) substantially similar to the Fund with respect to investment
objectives, diversification policies, investment philosophies and

<PAGE>5

policies and significant investment techniques and (ii) offered as an
investment option under a variable life or variable annuity contract issued by
a company that is not affiliated with GIAC. Subject to the written consent of
the parties hereto, the Restricted Period shall be renewed for additional
periods of two years each. The failure by any party to consent to a renewal
of the Restricted Period will not, in and of itself, cause the termination of
either this Agreement or the activities of the parties pursuant hereto.

1(f). GIAC shall have the right to nominate for election one member
of the Board of the Fund.

1(g). GCSF agrees to make Fund shares indefinitely available to be
purchased by GIAC on behalf of the Separate Accounts at the net asset value
applicable to each order on those days on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission
("SEC"). Fund shares shall be purchased and redeemed in such quantities and
at such times determined by GIAC on behalf of its Separate Accounts as
necessary to meet the requirements of the Contracts. GIAC agrees that
purchases and redemptions of Fund shares offered by the then current
prospectus of the Fund shall be made in accordance with the provisions of such
prospectus. The Fund shall use reasonable efforts to calculate such net asset
value on each day on which the New York Stock Exchange is open for trading and
the Fund is offering for sale and/or redeeming its shares.

<PAGE>6

Notwithstanding the foregoing, the Board may refuse to sell shares of the Fund
to any person, or suspend or terminate the offering of shares of the Fund if
such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of the Fund, or may
suspend the redemption of shares under the circumstances described in the
Fund's prospectus.

1(h). GCSF agrees on behalf of the Fund to redeem for cash, on GIAC's
request, any full or fractional shares of the Fund held by GIAC on behalf of
the Separate Accounts, executing such requests at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption.

1(i). GCSF hereby appoints GIAC as agent of the Fund for the limited
purpose of accepting purchase and redemption orders for Fund shares from the
Separate Accounts, based on allocations of net amounts to subaccounts of the
Separate Accounts relating to the Fund and other transactions relating to the
Contracts or the Separate Accounts. Subject to the last sentence of Section
1(g), all such orders for Fund shares and requests for other Contract
transactions which are received in complete and satisfactory form by GIAC from
Contractowners prior to the close of trading each day that the New York Stock
Exchange (the "Exchange") is open and on which the Fund has calculated its net
asset value (each such day,

<PAGE>7

a "business day") will be executed by the Fund at the net asset value for such
shares determined as of the earlier of the close of business of the Exchange
or 4:00 p.m., Eastern time, on such business day. Subject to the last
sentence of Section l(g), any orders for Fund shares for the Separate
Accounts, based on premium payments or Contractowner transaction requests
which are received on such day but after the close of the Exchange, will be
executed by the Fund at the net asset value determined as of the earlier of
the close of business of the Exchange or 4:00 p.m., Eastern time, on the next
business day following the day of receipt of such order.

1(j). GCSF will use commercially reasonable efforts to provide GIAC
with the closing net asset value and income, dividend and capital gain
distribution information for the Fund, as of the close of the Exchange each
business day, by 6:00 p.m. Eastern time on such day. GIAC will send directly
to the Fund or its specified agent orders to purchase and/or redeem Fund
shares on the basis of such closing net asset value by 10:00 a.m. Eastern time
the following business day. Payment for purchases of Fund shares (net of
proceeds payable on contemporaneous redemptions of Fund shares) will be wired
by GIAC by 11:00 a.m. Eastern time on such business day to a custodial account
designated by the Fund for such purpose. Issuance and transfer of the Fund's
shares will be by book entry only and Fund shares will be recorded in an
appropriate title for each Separate Account or appropriate subaccount of each

<PAGE>8

Separate Account. GIAC hereby elects to receive all income, dividends and
capital gain distributions as are payable on the Fund shares in the form of
additional shares of the Fund.

1(k). Payment for net redemptions of shares of the Fund will be wired
by GCSF, from the Fund's custodial account to an account designated by GIAC in
writing, on the next business day after GIAC transmits the redemption order to
the Fund.

Section 2. Expenses and Administration

2(a). GIAC shall advance all costs in connection with the
organization of the Fund including legal and auditing fees,
registration fees and printing costs of the registration statement and other
documents necessary for the registration process. The Fund shall reimburse
GIAC for such costs when the Fund's total assets exceed $50,000,000 or when
the Fund has completed one year of operations, whichever is sooner.

2(b). All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with
applicable federal and state law prior to their sale. The Fund shall bear the
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus, registration statement, proxy
materials and reports, setting in type the Fund prospectus, setting in type
and printing the Fund's registration statement, proxy materials and reports to
shareholders, the preparation of

<PAGE>9

all statements and notices required by any federal or state law, all taxes on
the issuance or transfer of the Fund's shares and any expenses permitted to be
paid or assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under
the 1940 Act. The Fund, at its expense, shall provide GIAC with copies of its
proxy statements, reports to shareholders and other communications to
shareholders in such quantity as GIAC shall reasonably require for
distributing to Contractowners. GIAC shall bear the expense of any copies of
such statements, reports or communications which the Fund provides to GIAC at
GIAC's request in excess of such requirements. GIAC shall bear the expenses
of distributing the printed copies of the Fund's proxy materials and reports
to Contractowners.

2(c). Except as set forth below, GIAC shall bear the expenses of (i)
printing such copies of the Fund's prospectus as it shall require for existing
and prospective Contractowners and (ii) distributing the printed copies of the
Fund's prospectus to existing and prospective Contractowners. Notwithstanding
the previous sentence, G&C shall bear the expenses, at cost, of printing and
distributing all sales kits for the Contracts (consisting, among other items,
of prospectuses for the Contracts and the variable investment options offered
under the Contracts) which are used by G&C or its affiliates in their
activities related to selling the Contracts.

<PAGE>10

2(d). Except as set forth in Sections 2(b) and 2(c) above, GIAC shall
bear all expenses related to the design, development, production and printing
of all marketing materials related to the Contracts and the Fund, including
the design and development of all marketing materials relating to the
Contracts specifically for use by G&C, and shall make all such materials
available to G&C and its affiliates for their marketing activities relating to
the Contracts.

2(e). Administrative services for the Separate Accounts or for
Contractowners are the responsibility of GIAC and shall not be the
responsibility of GCSF, the Fund, G&C, GFI or their affiliates.
Administrative services for the Fund and for purchasers of Fund shares are the
responsibility of GFI and the Fund and their affiliates.

2(f). GCSF, G&C and GFI shall pay no fee or other compensation to
GIAC under this Agreement, except that if the Fund adopts and implements a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
expenses, then the Fund may make payments to GIAC, as permitted under
applicable law and pursuant to such plan.

Section 3. Representations and Warranties

3(a). GIAC represents and warrants that, if required, the Contracts
are or will be registered under the 1933 Act; that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws; and

<PAGE>11

that the sale of the Contracts shall comply in all material respects with
state insurance law requirements. GIAC further represents and warrants that
it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established each Separate
Account under the Delaware Insurance Code and has registered or, prior to any
issuance or sale of the Contracts, will register each Separate Account as a
unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.

3(b). G&C and GCSF represent and warrant that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with all applicable federal and
state securities laws and that GCSF is and shall remain registered under the
1940 Act so long as Fund shares are sold. GCSF shall amend the registration
statement for Fund shares under the 1933 Act and the 1940 Act from time to
time as required in order to permit the continuous offering of its shares.

3(c). To the extent feasible and consistent with market conditions,
the Fund will adjust its investment objectives, diversification policies,
investment policies, investment restrictions, fees and expenses and
investments to comply with applicable insurance laws or regulations of the
various states, upon written notice from GISC or GIAC of any such
requirements.

<PAGE>12

3(d). GFI and GCSF represent and warrant that the Fund will make
every reasonable effort to qualify as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
and to maintain such qualification (under Subchapter M or any successor or
similar provision), and that GFI or GCSF will notify GIAC and GISC immediately
upon having a reasonable basis for believing that the Fund has ceased to so
qualify or that the Fund might not so qualify in the future.

3(e). The Fund will at all times comply with Section 817(h) of the
Code and all regulations issued thereunder so that the Contracts will be
treated as variable contracts under the Code. GFI or GCSF will notify GIAC
immediately upon having a reasonable basis for believing that the Fund has
ceased to so comply or that the Fund might not so qualify in the future. In
the event of a breach of this subsection by the Fund, GCSF will take all
reasonable steps to adequately diversify the Fund within the grace periods
provided by code regulations. To the extent feasible, the Fund will also
adjust its investments to comply with such other provisions of the Code and
regulations issued thereunder as necessary to ensure that the contracts will
be treated as variable contracts under the Code, upon written notice from GISC
or GIAC of any such requirements.

3(f). GISC represents and warrants that it is registered as an
investment adviser with the SEC under the Investment

<PAGE>13

Advisers Act of 1940. GISC has supplied GCSF, GFI and G&C with a true,
complete and correct copy of its current Form ADV and verifies the accuracy in
all material respects of all statements made therein. GISC represents and
warrants that it shall remain duly registered in all material respects under
all applicable federal and state securities laws as required to perform its
obligations under this Agreement.

3(g). G&C represents and warrants that it is a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD") and
is registered as a broker-dealer with the SEC. G&C further represents that it
will sell and distribute the Fund shares in accordance with all applicable
state and federal securities laws. G&C has supplied GIAC and GCSF with a
true, complete and correct copy of its current Form BD and verifies the
accuracy in all material respects of all statements made therein. G&C
represents and warrants that it shall remain duly registered in all material
respects under all applicable federal and state securities laws as required to
perform its obligations under this Agreement.

3(h). GFI represents and warrants that it is registered with the SEC
as an investment adviser under the Investment Advisers Act of 1940. GFI has
supplied the GIAC and GCSF with a true, complete and correct copy of its
current Form ADV and verifies the accuracy in all material respects of all
statements made therein. GFI represents and warrants that it shall remain

<PAGE>14

duly registered in all material respects under all applicable federal and
state securities laws as required to perform its obligations under this
Agreement.

3(i). Each party to this Agreement represents and warrants that it is
not aware of any pending or threatened litigation matter or claim or
regulatory proceeding, investigation or inquiry, involving such party or any
of its affiliates, the outcome of which could have a material adverse effect
on this Agreement or the transactions contemplated hereunder.

Section 4. Sales Materials; Filed Documents

4(a). GIAC shall furnish GCSF and G&C with a copy of each piece of
sales literature or other promotional material in which the Fund is named,
including "broker use only" pieces, for review at least five (5) business days
before any such piece is either submitted to the SEC or NASD for review or
used. GCSF and G&C agree to review any pieces submitted by GIAC on a prompt
and timely basis.

4(b). GIAC shall not give any information or make any representations
or statements concerning the Fund in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or prospectus for the Fund shares or in shareholder reports or proxy
statements for the Fund, or in sales literature or other promotional materials
which have been approved by GCSF or G&C or submitted for review without
objection pursuant to Section 4(a).

<PAGE>15

4(c). GCSF or G&C shall furnish to GIAC and GISC each piece of sales
literature or other promotional material in which GIAC, GISC, the Contracts,
the Separate Accounts or the Fund are named, including "broker use only"
pieces, for review by such parties at least five (5) business days before any
such piece is either submitted to the SEC or NASD for review or used. GIAC
and GISC agree to review any pieces submitted pursuant to this section on a
prompt and timely basis.

4(d). GCSF and G&C shall not give any information or make any
representations concerning GIAC, GISC, the Contracts, the Separate Accounts or
the Fund, other than the information or representations contained in the
registration statement or prospectuses for the applicable Contract or the
Fund, any proxy statement or reports to shareholders of the Fund or in reports
for the Separate Accounts which are approved by GIAC for distribution to
Contractowners or in sales literature or other promotional material which have
been approved by GIAC or GISC or submitted for review without objection
pursuant to Section 4(c).

4(e). GCSF will provide to GIAC at least one complete copy of all
registration statements, prospectuses, statements of additional information,
annual and semi-annual reports, proxy statements, no-action letters, exemptive
applications and all amendments or supplements to any of the above that relate
to the Fund promptly after the filing of such document with the SEC or other
regulatory authorities. GIAC will provide to G&C at least

<PAGE>16

one complete copy of all registration statements, prospectuses, statements of
additional information, annual and semi-annual reports, proxy statements, no-
action letters, exemptive applications and all amendments or supplements to
any of the above that relate to the Separate Accounts promptly after the
filing of such document with the SEC or other regulatory authorities.

Section 5. Voting

5(a). If and to the extent required by law and so long as and to the
extent that the SEC continues to interpret the 1940 Act to require pass-
through voting privileges for variable contractowners, GIAC shall, in
connection with any Fund shareholder meeting, (i) solicit voting instructions
from Contractowners; (ii) vote Fund shares in accordance with instructions
received from Contractowners; and (iii) vote Fund shares for which no
instructions have been received in the same proportion as Fund shares for
which instructions have been received. GIAC reserves the right to vote Fund
shares held in any Separate Account in its own right, to the extent permitted
by law.

5(b). GCSF agrees that the Fund will comply with all provisions of
the 1940 Act requiring voting by shareholders, and in particular that the Fund
will either provide for annual meetings or take steps to comply with Section
16 of the 1940 Act. Further, GCSF agrees that the Fund will act in accordance
with the SEC's interpretation of the requirements of Section 16(a) with

<PAGE>17

respect to periodic elections of directors and with whatever rules the SEC may
promulgate with respect thereto.

Section 6. Indemnification

6(a). Indemnification By GIAC
GIAC agrees to indemnify and hold harmless GCSF, GFI and G&C and
each of such parties' directors, officers, employees or agents and each
person, if any, who controls or is associated with GCSF, GFI or G&C within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 6(a)) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of GIAC) or litigation (including legal and other
expenses), to which the indemnified parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares and:

(i) arise out of or are based upon untrue statements or alleged untrue
statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made; provided that this agreement to indemnify
shall not apply as to any indemnified party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity

<PAGE>18

with information furnished in writing to GIAC by or on behalf of
G&C, GFI or GCSF expressly for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or representations by or
on behalf of GIAC (other than statements or representations
contained in the Contract or Fund registration statement, the
Contract or Fund prospectus or sales literature for the Contracts or
the Fund not supplied by GIAC or persons under its control or not
submitted for review without objection or approved for use by GIAC
pursuant to Section 4 hereof) or wrongful conduct of GIAC or persons
under its control, with respect to the sale or distribution of the
Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made, if such a statement or omission was made in
reliance upon and in conformity with information furnished to the
Fund by or on behalf of GIAC; or

(iv) arise as a result of any failure by GIAC to provide the services and
furnish the materials or to make any payments under the terms of
this Agreement; or

(v) arise out of any material breach of any representation or warranty
made by GIAC in this Agreement or arise out of or result from any
other material breach by GIAC of this Agreement;
except to the extent provided in the next paragraph. This indemnification
shall be in addition to any liability which GIAC may otherwise have.

GIAC shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities

<PAGE>19

or litigation to which an indemnified party would otherwise be subject by
reason of (i) willful misfeasance, bad faith, or gross negligence by the
indemnified party in the performance of its duties or by reason of its
reckless disregard of obligations or duties under this Agreement; (ii) the use
of sales literature or other promotional materials which have not been
approved for use by GIAC or submitted for review without objection pursuant to
Section 4 hereof; or (iii) wrongful conduct by directors, officers, employees
or agents of GCSF, G&C, GFI or any affiliated seller of the Contracts with
respect to the sale or distribution of the Contracts or Fund shares.

The indemnified parties will promptly notify GIAC of the
commencement of any litigation or proceedings against GIAC in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of
the Fund, or otherwise related to this Agreement.

6(b). Indemnification By GISC
GISC agrees to indemnify and hold harmless GCSF, GFI and G&C and
each of such parties' directors, officers, employees or agents and each
person, if any, who controls or is associated with GCSF, GFI or G&C within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 6(b)) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of GISC) or litigation (including legal

<PAGE>20

and other expenses), to which the indemnified parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares and:

(i) arise out of or are based upon untrue statements or alleged untrue
statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished in writing to GIAC by or on behalf of
GISC expressly for use in the registration statement or prospectus
for the Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or representations by or
on behalf of GISC (other than statements or representations
contained in the Contract or Fund registration statement, the
Contract or Fund prospectus or sales literature for the Contracts or
the Fund not supplied by GISC or persons under its control or not
submitted for review without objection or approved for use by GISC
pursuant to Section 4 hereof) or wrongful conduct of GISC or persons
under its control, with respect to the sale or distribution of the
Contracts or Fund shares; or

<PAGE>21

were made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund by or
on behalf of GISC; or

(iv) arise as a result of any failure by GISC to provide the services and
furnish the materials or to make any payments under the terms of
this Agreement; or

(v) arise out of any material breach of any representation or warranty
made by GISC in this Agreement or arise out of or result from any
other material breach by GISC of this Agreement;

except to the extent provided in the next paragraph. This indemnification
shall be in addition to any liability which GISC may otherwise have.

GISC shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
indemnified party would otherwise be subject by reason of (i) willful
misfeasance, bad faith, or gross negligence by the indemnified party in the
performance of its duties or by reason of its reckless disregard of
obligations or duties under this Agreement; (ii) the use of sales literature
or other promotional materials which have not been approved for use by GISC or
submitted for review without objection pursuant to Section 4 hereof; or
(iii) wrongful conduct by directors, officers, employees or agents of GCSF,
G&C, GFI or any affiliated seller of the Contracts with respect to the sale or
distribution of the Contracts or Fund shares.

The indemnified parties will promptly notify GISC of the
commencement of any litigation or proceedings against GISC in connection with
the issuance or sale of the Fund shares or the

<PAGE>22

Contracts or the operation of the Fund, or otherwise related to this
Agreement.

6(c). Indemnification By GCSF
GCSF agrees to indemnify and hold harmless GIAC, GISC and each of
their directors, officers, employees or agents and each person, if any, who
controls or is associated with GIAC or GISC within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
the purpose of this Section 6(c)) against any and all losses, claims, damages
or liabilities (including amounts paid in settlement with the written consent
of GCSF) or litigation (including legal and other expenses) to which they are
or any of them may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expense (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares and:

(i) arise out of or are based upon untrue statements or alleged untrue
statements of any material fact contained in the registration
statement or prospectus for the Fund or sales literature of the Fund
(or any amendment or supplement thereto), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made; provided that this agreement to indemnify
shall not apply if such statement or omission or alleged statement
or alleged omission was made in reliance upon and in conformity with
information furnished in writing to GCSF by or on behalf of GIAC,
GISC, GFI or G&C expressly for use in the registration statement or
prospectus for the Fund or sales literature for the Fund (or any
amendment or supplement

<PAGE>23

thereto) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or

(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Contracts or the
Contract or Fund registration statement, or the Contract or Fund
prospectus or sales literature for the Contract or the Fund not
supplied by GCSF or persons under its control or not submitted for
review without objection or approved for use by GCSF) or wrongful
conduct of GCSF or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement or prospectus or
sales literature covering the Contracts (or any amendment thereto),
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they
were made, if such a statement or omission was made in reliance upon
and in conformity with written information furnished by or on behalf
of GCSF or the Fund to GIAC or GISC expressly for use in the
registration statement or sales literature covering the Contract; or

(iv) arise as a result of any failure by GCSF or the Fund to provide the
services and furnish the materials under the terms of this
Agreement; or

(v) arise out of any material breach of any representation or warranty
made by GCSF or the Fund in this Agreement or arise out of or result
from any other material breach by GCSF or the Fund of this
Agreement;

except to the extent provided in the next paragraph. This indemnification
shall be in addition to any liability which the Fund may otherwise have.

<PAGE>24

GCSF and the Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an indemnified party would otherwise be subject by reason
of (i) willful misfeasance, bad faith, or gross negligence by the indemnified
party in the performance of the indemnified party's duties or by reason of the
indemnified party's reckless disregard of obligations or duties under this
Agreement or to GIAC, GISC or the Separate Accounts; (ii) the use of sales
literature or other promotional materials relating to the Fund which have not
been submitted for review without objection or approved for use by GCSF or the
Fund pursuant to Section 4 hereof; or (iii) wrongful conduct by directors,
officers, employees or agents of GIAC, GISC or any affiliated seller of the
Contracts with respect to the sale or distribution of the Contracts or Fund
shares.

The indemnified parties will promptly notify GCSF and the Fund of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Contracts or the operation
of the Fund.

6(d). Indemnification By GFI
GFI agrees to indemnify and hold harmless GIAC, GISC and each of
their directors, officers, employees or agents and each person, if any, who
controls or is associated with GIAC or GISC within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
the purpose of

<PAGE>25

this Section 6(d)) against any and all losses, claims, damages or liabilities
(including amounts paid in settlement with the written consent of GFI) or
litigation (including legal and other expenses) to which they are or any of
them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expense (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares and:

(i) arise out of or are based upon untrue statements or alleged untrue
statements of any material fact contained in the registration
statement or prospectus for the Fund or sales literature of the Fund
(or any amendment or supplement thereto), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission or alleged
statement or alleged omission was made in reliance upon and in
conformity with information furnished in writing to GCSF by or on
behalf of GFI expressly for use in the registration statement or
prospectus for the Fund or sales literature for the Fund (or any
amendment or supplement thereto) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Contracts or the
Contract or Fund registration statement, or the Contract or Fund
prospectus or sales literature for the Contract or the Fund not
supplied by GFI or persons under its control or not submitted for
review without objection or approved for use by GFI) or wrongful
conduct of GFI or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement or prospectus or
sales literature covering the Contracts (or any amendment

<PAGE>26

thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances
in which they were made, if such a statement or omission was made
in reliance upon and in conformity with written information
furnished by or on behalf of GFI to GIAC or GISC expressly for use
in the registration statement or sales literature covering the
Contract; or

(iv) arise as a result of any failure by GFI to provide the services and
furnish the materials under the terms of this Agreement; or

(v) arise out of any material breach of any representation or warranty
made by GFI in this Agreement or arise out of or result from any
other material breach by GFI of this Agreement;

except to the extent provided in the next paragraph. This indemnification
shall be in addition to any liability which the Fund may otherwise have.

GFI shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
indemnified party would otherwise be subject by reason of (i) willful
misfeasance, bad faith, or gross negligence by the indemnified party in the
performance of the indemnified party's duties or by reason of the indemnified
party's reckless disregard of obligations or duties under this Agreement or to
GIAC, GISC or the Separate Accounts; (ii) the use of sales literature or other
promotional materials relating to GFI which have not been submitted for review
without objection or approved for use by GFI pursuant to Section 4 hereof; or
(iii) wrongful conduct by directors, officers, employees or agents of GIAC,
GISC

<PAGE>27

or any affiliated seller of the Contracts with respect to the sale or
distribution of the Contracts or Fund shares.

The indemnified parties will promptly notify GFI of the commencement
of any litigation or proceedings against GFI in connection with the issuance
or sale of the Fund shares or the Contracts or the operation of the Fund.

6(e). Indemnification By G&C
G&C agrees to indemnify and hold harmless GIAC, GISC and each of
their directors, officers, employees or agents and each person, if any, who
controls or is associated with GIAC or GISC within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
the purpose of this Section 6(e)) against any and all losses, claims, damages
or liabilities (including amounts paid in settlement with the written consent
of G&C) or litigation (including legal and other expenses) to which they are
or any of them may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expense (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares and:

<PAGE>28

statement or alleged omission was made in reliance upon and in
conformity with information furnished in writing to GCSF by or on
behalf of G&C expressly for use in the registration statement or
prospectus for the Fund or sales literature for the Fund (or any
amendment or supplement thereto) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Contracts or the
Contract or Fund registration statement, or the Contract or Fund
prospectus or sales literature for the Contract or the Fund not
supplied by G&C or persons under its control or not submitted for
review without objection or approved for use by G&C) or wrongful
conduct of G&C or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement or prospectus or
sales literature covering the Contracts (or any amendment thereto),
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they
were made, if such a statement or omission was made in reliance upon
and in conformity with written information furnished by or on behalf
of G&C to GIAC or GISC expressly for use in the registration
statement or sales literature covering the Contract; or

(iv) arise as a result of any failure by G&C to provide the services and
furnish the materials under the terms of this Agreement; or

(v) arise out of any material breach of any representation or warranty
made by G&C in this Agreement or arise out of or result from any
other material breach by G&C of this Agreement;

except to the extent provided in the next paragraph. This indemnification
shall be in addition to any liability which the Fund may otherwise have.

<PAGE>29

G&C shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
indemnified party would otherwise be subject by reason of (i) willful
misfeasance, bad faith, or gross negligence by the indemnified party in the
performance of the indemnified party's duties or by reason of the indemnified
party's reckless disregard of obligations or duties under this Agreement or to
GIAC, GISC or the Separate Accounts; (ii) the use of sales literature or other
promotional materials relating to G&C which have not been submitted for review
without objection or approved for use by G&C pursuant to Section 4 hereof; or
(iii) wrongful conduct by directors, officers, employees or agents of GIAC,
GISC or any affiliated seller of the Contracts with respect to the sale or
distribution of the Contracts or Fund shares.

The indemnified parties will promptly notify G&C of the commencement
of any litigation or proceedings against it in connection with the issuance or
sale of the Fund shares or the Contracts or the operation of the Fund.

6(f). Promptly after receipt by an indemnified party under this
Section 6 of commencement of action, such indemnified party will, if a claim
in respect thereof is to be made against the indemnifying party under this
section, notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party

<PAGE>30

otherwise than under this section. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, assume the defense thereof, with
counsel satisfactory to such indemnified party. After notice from the
indemnifying party of its intention to assume the defense of an action, the
indemnified party shall bear the expenses of any additional counsel obtained
by it, and the indemnifying party shall not be liable to such indemnified
party under this section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.

6(g). Each of the parties agrees promptly to notify the other parties
of the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or control person (as
defined in the federal securities laws) in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Separate Accounts, or
the sale or acquisition of Fund shares.

6(h). A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Section.
The indemnification provisions contained in this Section shall survive any
termination of this Agreement.

<PAGE>31

Section 7. Potential Conflicts

7(a). In accordance with the conditions set forth in an exemptive
application pursuant to which the SEC has granted exemptive relief to permit
"mixed" funding for GIAC and the Separate Accounts (the "Order"), GCSF and the
Fund agree that the Board, constituted with a majority of persons who are not
"interested persons" of the Fund as defined in the 1940 Act ("disinterested
directors"), will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the variable annuity
Contractowners and the variable life Contractowners of all Separate Accounts
investing in the Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by
insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Fund are being managed; (e) a difference in voting
instructions given by the owners of variable annuity contracts and variable
life insurance contracts; or (f) a decision by an insurer to disregard the
voting instructions of Contractowners. The Board shall promptly inform GIAC
if it determines that an irreconcilable material conflict exists and the
implications thereof.

<PAGE>32

7(b). GIAC will report any potential or existing conflicts of which
it is aware to the Board. GIAC will assist the Board in carrying out its
responsibilities under the Order, by providing the Board will all information
reasonably necessary for the Board to consider any issues raised. This
includes, but is not limited to, an obligation by GIAC to inform the Board
whenever Contractowner voting instructions are disregarded.

7(c). If it is determined by a majority of the Board, or a majority
of its disinterested directors or by GIAC, on behalf of the Separate Accounts,
that a material irreconcilable conflict exists, GIAC shall, at its expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including:
(1) establishing a new registered management investment company or managed
separate account; (2) withdrawing the assets allocable to some or all of the
Separate Accounts from the Fund and reinvesting such assets in a different
investment medium, including (but not limited to) another series of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected Contractowners and, as appropriate, segregating the
assets of the appropriate group (i.e., variable annuity Contractowners or
variable life insurance Contractowners) that votes in favor of such
segregation, or

<PAGE>33

offering to the affected Contractowners the option of making such a change.

7(d). A majority of the disinterested directors shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. GIAC shall not be required by subsection (c) above
to establish a new funding medium for Contracts if any offer to do so has been
declined by vote of a majority of Contractowners materially adversely affected
by the irreconcilable material conflict. In the event that the Board
determines that any proposed action does not adequately remedy an
irreconcilable material conflict, then GIAC will withdraw from investment in
the Fund the interests of each of the Separate Accounts designated by the
disinterested directors provided, however, that such withdrawal shall be
limited to the extent required to remedy any such material irreconcilable
conflict as determined by a majority of the disinterested members of the
Board.

7(e). If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with respect to
mixed funding on terms and conditions materially different from those
contained in the Order, then (a) the Fund and/or GIAC, as appropriate, shall
take such steps as may be necessary to comply with such amended or adopted
rules, to

<PAGE>34

the extent such rules are applicable and (b) Sections 5 and 7 of the Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to the provisions of such Sections are contained in
such amended or adopted Rules.

Section 8. Applicable Law

8(a). This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Delaware.

8(b). This Agreement shall be subject to the provisions of the
federal securities laws, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Order) and the terms hereof
shall be interpreted and construed in accordance therewith.

Section 9. Termination

9(a). This Agreement shall terminate:

(i) after the expiration of the initial Restricted Period
described in Section 1(e), at the option of any party, with or without cause,
upon one-year's advance written notice to the other parties; or

(ii) at the option of GIAC, if GIAC reasonably determines in good
faith that shares of the Fund are not registered, issued or sold in accordance
with applicable federal or state law in such a way as to be reasonably
available to meet the requirements of the Contracts, or if GIAC reasonably

<PAGE>35

determines in good faith that it is no longer appropriate, in the best
interests of Contractowners or consistent with the purpose of the Contracts,
to continue to offer the Fund as a funding vehicle or investment option under
the Contracts. Without limiting the generality of the foregoing, shares of
the Fund would no longer be considered an appropriate funding vehicle if, for
example, the Fund did not meet the diversification or other requirements
specified to in Section 1 of this Agreement or if any applicable state
insurance law prohibits the use of Fund shares as an underlying allocation
option under the Contracts. Modest performance results shall not be
considered as proper cause for GIAC to terminate this Agreement pursuant to
this subsection.

(iii) at the option of G&C, GCSF or the Fund, upon institution of
formal proceedings against GIAC or GISC by the NASD, the SEC, any state
securities or insurance department or any other regulatory body regarding
GIAC's duties under this Agreement or related to the sale of the Contracts,
the operation of the Separate Accounts, or the purchase of Fund shares; or

(iv) at the option of GIAC, upon institution of formal proceedings
against G&C, GCSF, the Fund or any of their affiliates by the NASD, the SEC,
or any state securities or insurance departments or any other regulatory body,
which, if determined adversely to such party, would have a material adverse
effect on its ability to perform this Agreement; or

<PAGE>36

(v) at the option of GIAC or GCSF, upon receipt of any necessary
regulatory approvals and/or the vote of the Contractowners to substitute the
shares of another investment company for the corresponding shares of the Fund
in accordance with the terms of the Contracts for which such shares had been
selected to serve as the underlying investment media. GIAC will give 30 days
prior written notice to G&C, GCSF and the Fund of the date of any proposed
vote or other action taken to replace the Fund's shares; or

(vi) at the option of GIAC or GCSF, upon a determination by a
majority of the Board, or a majority of the disinterested directors, that an
irreconcilable material conflict exists among the interests of all
Contractowners of variable insurance products of all Separate Accounts; or

(vii) at the option of (i) GIAC or GISC, upon termination of the
Investment Management Agreement between GCSF (on behalf of the Fund) and GISC
or (ii) GIAC, GISC, G&C or GCSF, upon termination of the Sub-Investment
Management Agreement between GISC and GFI, provided, however, that this
subsection shall not be deemed to apply if contemporaneously with any such
termination a new contract having the same parties and substantially similar
terms is entered into; or

(viii) at the option of GIAC, if Mario J. Gabelli is no longer
performing the duties of day-to-day portfolio management for the Fund; or

<PAGE>37

(ix) at the option of GIAC, if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code
of 1986, or under any successor or similar provision, or if GIAC reasonably
believes that the Fund may fail to so qualify; or

(x) at the option of GIAC, if the Fund fails to meet the
diversification requirements specified in this Agreement; or (xi) at the
option of any party to this Agreement, upon another party's breach of any
material provision of this Agreement.

9(b). Except as necessary to implement Contractowner-initiated
transactions, or as required by state insurance laws or regulations, GIAC
shall not redeem the Fund shares attributable to the Contracts and GIAC shall
not prevent Contractowners from allocating payments to the Fund until sixty
(60) days after GIAC shall have notified GCAF of its intention to do so.

9(c). Notwithstanding any termination of this Agreement, GCSF shall,
at the option of GIAC, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement (the
"Existing Contracts"), except as otherwise provided under Section 5 of this
Agreement, for a reasonable period of time not to exceed one year after the
date of notice of termination, in order to permit GIAC to obtain all
regulatory and/or Contractowner approvals deemed appropriate to transfer
Contractowner monies from the Fund to another

<PAGE>38

allocation option available under the applicable Contracts. Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
transfer or reallocate investments under the Contracts, redeem investments in
the Fund and/or invest in the Fund upon the making of additional purchase
payments under the existing Contracts during such time period.

Section 10. Notices

Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.

If to GCAF, the Fund or GFI:

Mr. Bruce N. Alpert
Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580

If to GIAC or GISC:

Mr. John M. Smith
The Guardian Insurance
& Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003

Section 11. Miscellaneous

11(a). Subject to law and regulatory authority, each party hereto
shall treat as confidential all information reasonably identified as such in
writing by any other party hereto (including without limitation the names and
addresses of the Contractowners) and, except as contemplated by this
Agreement, shall not disclose,

<PAGE>39

disseminate or utilize such confidential information until such time as it may
come into the public domain without the express prior written consent of the
affected party.

11(b). The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.

11(c). This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

11(d). If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.

11(e). This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.

11(f). Schedule A attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.

11(g). Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.

<PAGE>40

11(h). The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.

11(i). Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative as of the date specified above.

THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.

By:

Name:

Title:

GUARDIAN INVESTOR SERVICES
CORPORATION

By:

Name:

Title:

<PAGE>41

GABELLI & COMPANY, INC.

By:

Name:

Title:

GABELLI FUNDS, INC.

By:

Name:

Title:

GABELLI CAPITAL SERIES FUNDS, INC.
for itself and on behalf of
GABELLI CAPITAL ASSET FUND

By:

Name:

Title:

<PAGE>42

Schedule A

The Guardian Separate Account A

The Guardian Separate Account D

The Guardian Separate Account H

<PAGE>1

[LETTERHEAD OF WILLKIE FARR & GALLAGHER]

April 28, 1995

Gabelli Capital Series Funds, Inc.
c/o Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580

Gentlemen:

We have acted as counsel to Gabelli Capital Series Funds, Inc. (the
"Company"), a corporation organized under the laws of the State of Maryland,
in connection with the preparation of a Registration Statement on Form N-1A
(Securities Act File No. 33-61254 and Investment Company Act File No. 811-
7644) (as amended, the "Registration Statement"), relating to the offer and
sale of an indefinite number of shares of the Company's Gabelli Capital Asset
Fund common stock, par value $.001 per share (the "Shares").

We have examined copies of the Articles of Amendment and Restatement (the
"Articles") and the Amended and Restated By-Laws of the Company, the
Registration Statement, all resolutions adopted by the Company's Board of
Directors (the "Board") and stockholder, consents of the Board and other
records and documents that we have deemed necessary for the purpose of this
opinion. We have also examined such other documents, papers, statutes and
authorities as we have deemed necessary to form a basis for the opinion
hereinafter expressed.

In our examination of material, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us. As to various questions of fact material to our opinion, we have relied
on statements and certificates of officers and representatives of the Company
and others. As to matters governed by the laws of the State of Maryland, we
have relied on the opinion of Venable, Baetjer and Howard LLP that is attached
to this opinion.

<PAGE>2

Based on the foregoing, we are of the opinion that:

1. The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of
Maryland.

2. The 10,000 presently issued and outstanding Shares of the
Company have been validly and legally issued and are fully paid
and nonassessable.

3. The Shares to be offered for sale pursuant to the Prospectus
included in the Registration Statement are, to the extent of the
number of Shares authorized to be issued by the Company in its
Articles, duly authorized and, when sold, issued and paid for as
contemplated by the Prospectus, will have been validly and
legally issued and will be fully paid and nonassessable.

We are members of the Bar of the State of New York only and do not opine as to
the laws of any jurisdiction other than the laws of the State of New York and
the laws of the United States, and the opinions set forth above are
accordingly, limited to the laws of those jurisdictions.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Statement of
Additional Information included in the Registration Statement. We consent to
the filing of this opinion as an exhibit to the Registration Statement.

Very truly yours,

WILLKIE FARR & GALLAGHER

94370128

<PAGE>1

[LETTERHEAD OF VENABLE, BAETJER AND HOWARD]

April 28, 1995

Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022

Re: Gabelli Capital Series Funds, Inc.

Ladies and Gentlemen:

We have acted as special Maryland counsel for Gabelli Capital Series
Funds, Inc., a Maryland corporation (the "Fund"), in connection with the
organization of the Fund and the issuance of shares of its Gabelli Capital
Asset Fund Common Stock, par value $.001 per share (the "Common Stock").

As special Maryland counsel for the Fund, we are familiar with its
Charter and Amended and Restated Bylaws. We have examined the prospectus
included in its Registration Statement on Form N-1A, Security Act File No. 33-
61254 and Investment Company Act File No. 811-7644 (the "Registration
Statement"), substantially in the form in which it is to become effective (the
"Prospectus"). We have further examined and relied upon a certificate of the
Maryland State Department of Assessments and Taxation to the effect that the
Fund is duly incorporated and existing under the laws of the State of Maryland
and is in good standing and duly authorized to transact business in the State
of Maryland.

We have also examined and relied upon such corporate records of the
Fund and other documents and certificates with respect to factual matters as
we have deemed necessary to render the opinion expressed herein. We have
assumed, without independent verification, the genuineness of all signatures
and the conformity with originals of all documents submitted to us as copies.

Based on such examination, we are of the opinion and so advise you
that:

1. The Fund is duly organized and validly existing as a
corporation in good

<PAGE>2

standing under the laws of the State of Maryland.

2. The 10,000 presently issued and outstanding Shares have
been validly and legally issued and are fully paid and
nonassessable.

3. The Shares to be offered for sale pursuant to the
Prospectus are, to the extent of the number of Shares
authorized to be issued by the Fund in its Charter, duly
authorized and, when sold, issued and paid for as
contemplated by the Prospectus, will have been validly and
legally issued and will be fully paid and nonassessable.

This letter expresses our opinion with respect to the Maryland
General Corporation Law governing matters such as due organization and the
authorization and issuance of stock. It does not extent to the securities or
"blue sky" laws of Maryland, to federal securities laws or to other laws.

You may rely on this opinion in rendering your opinion to the
Fund which is to be filed as an exhibit to the Registration Statement. We
consent to the filing of this opinion as an exhibit to the Registration
Statement.

Very truly yours,

VENABLE, BAETJER AND HOWARD LLP

94370128

<PAGE>1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference made to our firm under the caption "Counsel and
Independent Auditors" and to the use of our report dated April 27, 1995 in
this Registration Statement (Form N-1A No.33-61254) of the Gabelli Capital
Series Funds, Inc.

ERNST & YOUNG LLP

New York, New York
April 27, 1995

<PAGE>1

PURCHASE AGREEMENT

Gabelli Capital Series Funds, Inc., a corporation organized under
the laws of the State of Maryland (the "Company"), and The Guardian Insurance
& Annuity Company, Inc. ("GIAC"), a corporation organized under the laws of
the State of Maryland, hereby agree as follows:

1. The Company offers to GIAC and GIAC hereby purchases from the
Company 10,000 shares of common stock, par value $.001 per share, of the
Company, representing shares of Gabelli Capital Asset Fund (the "Shares"), at
a price of $10 per Share. GIAC hereby acknowledges that it has been advised
that the Shares, which are not represented by certificates, have been recorded
for the account of GIAC in the records of the Company's transfer agent, and
the Company hereby acknowledges receipt from GIAC of $100,000 in full payment
for the Shares.

2. GIAC represents and warrants to the Company that the Shares are
being acquired for investment purposes and not for the purpose of
distribution.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the ____ day of April 1995.

GABELLI CAPITAL SERIES FUNDS,
INC.

Attest: By: /s/ Bruce N. Alpert
Name: Bruce N. Alpert
/s/ J. Hamilton Crawford, Jr. Title: Vice President and Treasurer

THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.

Attest: By: /s/ John M. Smith
Name: John M. Smith
/s/ Richard T. Potter, Jr. Title: Executive Vice President