As filed with the Securities and Exchange Commission on May 31, 2005
Securities Act File No. 333-124369
U.S. SEC
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
[x] Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No.
(Check appropriate box or boxes)
GABELLI EQUITY SERIES FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
One Corporate Center
Rye, New York 10580-1422
(Address of Principal Executive Offices)
Telephone Number: (800) 422-3554
(Area Code and Telephone Number)
Bruce N. Alpert
Gabelli Equity Series Funds, LLC
One Corporate Center
Rye, New York 10580-1422
(Name and Address of Agent for Service)
Copies to:
Richard T. Prins, Esq. James E. McKee, Esq. Richard L. Teigen, Esq.
Skadden, Arps, Slate, Gabelli Equity Series Funds, Inc. Foley & Lardner LLP
Meagher & Flom LLP One Corporate Center 777 East Wisconsin Avenue
4 Times Square Rye, New York 10580-1422 Milwaukee, Wisconsin 53202
New York, New York 10036-6522
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No
filing fee is required because an indefinite number of shares have previously
been registered on Form N-1A (Registration No. 811-06367), pursuant to Rule 24f
under the 1940 Act, as amended. Pursuant to Rule 429 of the Securities Act of
1933, this Registration Statement relates to the shares previously registered
on the aforesaid Registration Statement on Form N-1A.
It is proposed that this filing will become effective on May 31, 2005
under the Securities Act of 1933.
EXPLANATORY NOTE
This Registration Statement is organized as follows:
1. Letter to Shareholders of FMI Woodland Small Capitalization Value
Fund.
2. Questions and Answers to Shareholders of FMI Woodland Small
Capitalization Value Fund.
3. Notice of Special Meeting of Shareholders of FMI Woodland Small
Capitalization Value Fund.
4. Combined Prospectus/Proxy Statement regarding the proposed
Reorganization of FMI Woodland Small Capitalization Value Fund, a
class of FMI Mutual Funds, Inc., into The Gabelli Woodland Small
Cap Value Fund, a class of Gabelli Equity Series Funds, Inc.
5. Statement of Additional Information regarding the proposed
Reorganization of FMI Woodland Small Capitalization Value Fund
into The Gabelli Woodland Small Cap Value Fund.
6. Part C Information
7. Exhibits
FMI MUTUAL FUNDS, INC.
100 East Wisconsin Avenue, Suite 2200
Milwaukee, Wisconsin 53202
May 31, 2005
Dear Shareholder:
You are cordially invited to attend a special shareholder meeting of the
FMI Woodland Small Capitalization Value Fund ("FMI Woodland Fund"), to be held
on June 28, 2005.
Before the meeting, I would like to provide you with additional background
and ask for your vote on an important proposal affecting your fund.
The proposal you will be asked to consider at the meeting, as described in
the enclosed Combined Prospectus/Proxy Statement, is the proposed
reorganization of all the assets of your fund into The Gabelli Woodland Small
Cap Value Fund (the "Gabelli Woodland Fund") and the subsequent termination of
your fund. The Gabelli Woodland Fund has an investment objective and investment
policies similar to those of your fund and is managed by Beth Lilly, one of the
portfolio managers of your fund. The transaction is being structured to be
tax-free to you and your fellow shareholders. The adviser of the Gabelli
Woodland Fund has agreed to pay all expenses of completing this transaction,
including proxy solicitation costs. As a result, you and your fellow
shareholders will not bear these costs.
The Board of Directors of FMI Mutual Funds, Inc. believes the transaction
is in the best interests of the FMI Woodland Fund and its shareholders, and
unanimously recommends that you vote "FOR" the proposed reorganization.
I encourage you to carefully review the enclosed materials, which explain
this proposal in more detail. As a shareholder, your vote is important, and we
hope that you will respond today to ensure that your shares will be represented
at the meeting. You may vote in one of the following ways:
o By returning the enclosed proxy card in the postage-paid envelope; or
o In person at the special meeting.
As always, we appreciate your support.
Sincerely,
Ted D. Kellner
President and Treasurer
FMI Woodland Small Capitalization Value Fund
QUESTIONS & ANSWERS
We recommend that you read the complete Combined Prospectus/Proxy Statement.
For your convenience, we have provided a brief overview of the issue to be
voted on.
Q: WHY IS A SHAREHOLDER MEETING BEING HELD?
A: You are being asked to approve a reorganization (the "Reorganization"),
pursuant to an Agreement and Plan of Reorganization (the "Plan of
Reorganization"), of FMI Woodland Small Capitalization Value Fund (the
"FMI Woodland Fund") into the Gabelli Woodland Small Cap Value Fund (the
"Gabelli Woodland Fund") and the subsequent termination of your fund. The
Gabelli Woodland Fund pursues an investment objective and investment
strategy similar to that of the FMI Woodland Fund and its portfolio
manager, Beth Lilly, is one of the portfolio managers of the FMI Woodland
Fund. If the Reorganization is approved and completed, an account at the
Gabelli Woodland Fund will be set up in your name, you will become a
shareholder of the Gabelli Woodland Fund and the FMI Woodland Fund will
be terminated. Holders of Gabelli Woodland Fund shares will have exchange
privileges among the Gabelli family of mutual funds. Please refer to the
Combined Prospectus/Proxy Statement for a detailed explanation of the
Reorganization and for a more complete description of the Gabelli
Woodland Fund.
Q: HOW DOES THE BOARD OF DIRECTORS SUGGEST THAT I VOTE?
A: After careful consideration, the Board of Directors of the FMI Mutual
Funds, Inc. (the "FMI Board") has determined that the proposed
Reorganization will benefit the shareholders of the FMI Woodland Fund and
recommends that you cast your vote "FOR" the proposed Reorganization. The
FMI Board anticipates that shareholders of the FMI Woodland Fund will
benefit from (i) the similarities between the investment objectives and
policies of the Gabelli Woodland Fund and the FMI Woodland Fund, (ii) the
fact that the transaction is being structured to be a tax-free
alternative to taxable liquidation for the holders of the FMI Woodland
Fund, (iii) the combined fund having access to the Gabelli organization's
investment professionals and related resources, and (iv) the shareholder
servicing capabilities of the Gabelli organization, in addition to a
broader array of options offered by a larger fund family.
Q: HOW WILL THE REORGANIZATION AFFECT ME?
A: Assuming shareholders of the FMI Woodland Fund approve the proposed
Reorganization, the assets and stated liabilities of the FMI Woodland Fund
will be transferred to the Gabelli Woodland Fund, an account will be set
up in your name at Gabelli Equity Series Funds, Inc. and you will receive
shares of the Gabelli Woodland Fund equal to the value of the FMI Woodland
Fund shares you own immediately prior to the sale.
Q: WHO WILL ADVISE THE GABELLI WOODLAND FUND ONCE THE REORGANIZATION IS
COMPLETED?
A: Gabelli Funds, LLC and the portfolio manager of the Gabelli Woodland Fund,
Beth Lilly, who is a portfolio manager of the FMI Woodland Fund, will
manage the portfolio of the combined fund.
Q: WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER SIMILAR FEE IN
CONNECTION WITH THE REORGANIZATION?
A: You will pay no sales load, commission or other similar fee in connection
with the Reorganization. For purposes of The Gabelli Woodland Fund's
redemption fee on redemptions within 60 days of purchase, you will be able
to add the length of time you held your FMI Woodland Fund shares to the
amount of time you held your Gabelli Woodland Fund shares. As a result,
the Gabelli redemption fee is unlikely to apply to you. Redemption fees
will be waived for the FMI Woodland Fund shareholders with respect to the
Gabelli Woodland Fund shares received in connection with the
Reorganization.
Q: WHAT WILL I HAVE TO DO TO OPEN AN ACCOUNT IN THE GABELLI WOODLAND FUND?
WHAT HAPPENS TO MY ACCOUNT IF THE REORGANIZATION IS APPROVED?
A: If the Reorganization is approved, an account will be set up in your name
and your shares automatically will be converted into Class AAA shares of
the Gabelli Woodland Fund, and we will send you written confirmation that
this change has taken place. The value of the shares you receive in the
Reorganization will be equal to the value of the shares you own
immediately prior to the Reorganization. No certificates for shares will
be issued. If you currently hold certificates representing your shares of
the FMI Woodland Fund, it will not be necessary to surrender such
certificates.
Q: WILL I HAVE TO PAY ANY FEDERAL TAXES AS A RESULT OF THE REORGANIZATION?
A: The Reorganization is expected to qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended. If it so qualifies, in general, your fund will not recognize any
gain or loss as a result of your fund's transfer of all of its assets and
stated liabilities in exchange solely for the shares of the Gabelli
Woodland Fund or as a result of its liquidation, and you will not
recognize any gain or loss upon your receipt solely of the shares of the
Gabelli Woodland Fund in connection with the Reorganization.
Q: WHAT IF I REDEEM OR EXCHANGE MY SHARES BEFORE THE REORGANIZATION TAKES
PLACE?
A: If you choose to redeem or exchange your shares before the Reorganization
takes place, the redemption or exchange will be treated as a normal
redemption or exchange of shares and, generally, will be a taxable
transaction.
Q: HOW DO I VOTE MY PROXY?
A: You may cast your vote by mail. To vote by mail, please mark your vote on
the enclosed proxy card and sign, date and return the card in the
postage-paid envelope provided.
Q: WHEN WILL THE REORGANIZATION OCCUR?
A: If approved by shareholders, the Reorganization is expected to occur on or
about June 30, 2005.
Q: WHOM DO I CONTACT FOR FURTHER INFORMATION?
A: You can contact your financial adviser for further information.
Important additional information about the proposal is set forth in the
accompanying Combined Prospectus/Proxy Statement. Please read it
carefully.
FMI WOODLAND SMALL CAPITALIZATION VALUE FUND
A CLASS OF
FMI MUTUAL FUNDS, INC.
100 East Wisconsin Avenue, Suite 2200
Milwaukee, Wisconsin 53202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 28, 2005
To the Shareholders:
This is to notify you that a Special Meeting of Shareholders of the FMI
Woodland Small Capitalization Value Fund (the "FMI Woodland Fund"), a class of
FMI Mutual Funds, Inc. (the "FMI Funds"), will be held on June 28, 2005 at
10:00 a.m., Central time, at the offices of Fiduciary Management, Inc., at 100
East Wisconsin Avenue, Milwuakee, Wisconsin 53202, for the following purposes:
1. To consider a proposal to approve an Agreement and Plan of
Reorganization (the "Reorganization Agreement") pursuant to which the
FMI Woodland Fund would transfer all of its assets and stated
liabilities to The Gabelli Woodland Small Cap Value Fund (the "Gabelli
Woodland Fund") in exchange solely for AAA shares of the Gabelli
Woodland Fund, which will be distributed by the FMI Woodland Fund to
the holders of its shares in complete liquidation thereof; and
2. To transact such other business as may properly be presented at the
Special Meeting or any adjournment or postponement thereof.
The Board of Directors of the FMI Funds has fixed the close of business on
May 23, 2005 as the record date for determination of shareholders of the FMI
Woodland Fund entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER
THAN JUNE 24, 2005. Instructions for shares held of record in the name of a
nominee, such as a broker-dealer or board member of an employee benefit plan,
may be subject to earlier cut-off dates established by such intermediaries for
receipt of such instructions.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE FMI
WOODLAND FUND. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
COMPLETE AND SIGN THE ENCLOSED PROXY FORM AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. CERTAIN SHAREHOLDERS MAY ALSO VOTE BY TELEPHONE OR OVER THE
INTERNET; PLEASE SEE PAGES 4 TO 6 FOR DETAILS. IF YOU VOTE BY PROXY AND THEN
DESIRE TO VOTE IN PERSON AT THE MEETING, YOU MAY REVOKE YOUR PROXY.
By Order of the Board of Directors
Donald S. Wilson
Vice President and Secretary
May 31, 2005
Date of Notice
COMBINED PROSPECTUS/PROXY STATEMENT
THE GABELLI WOODLAND SMALL CAP VALUE FUND
One Corporate Center
Rye, New York 10580-1422
(800) 422-3554
FMI WOODLAND SMALL CAPITALIZATION VALUE FUND
100 East Wisconsin Avenue, Suite 2200
Milwaukee, Wisconsin 53201
(414) 226-4555
This Combined Prospectus/Proxy Statement is furnished to you as a
shareholder of FMI Woodland Small Capitalization Value Fund (the "FMI Woodland
Fund"). A special meeting of shareholders of the FMI Woodland Fund (the
"Special Meeting") will be held at the offices of Fiduciary Management, Inc.,
at 100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 on June 27, 2005 at
10:00a.m., Central time, to consider the items that are listed below and
discussed in greater detail elsewhere in this Combined Prospectus/Proxy
Statement. Shareholders of record of the FMI Woodland Fund at the close of
business on May 23, 2005 (the "Record Date") are entitled to notice of, and to
vote at, the Special Meeting or any adjournments or postponements thereof.
This Combined Prospectus/Proxy Statement, Proxy Form and accompanying Notice
of Special Meeting of Shareholders were first sent or given to shareholders of
the FMI Woodland Fund on or about May 31, 2005. Whether or not you expect to
attend the Special Meeting or any adjournment thereof, the Board of Directors
of FMI Mutual Funds, Inc. (the "FMI Funds") requests that shareholders vote
their shares by completing and returning the enclosed proxy card.
The purposes of the Special Meeting are:
1. To consider a proposal to approve an Agreement and Plan of
Reorganization (the "Reorganization Agreement") pursuant to which the
FMI Woodland Fund would transfer all of its assets and stated
liabilities to The Gabelli Woodland Small Cap Value Fund (the "Gabelli
Woodland Fund") in exchange solely for Class AAA shares of the Gabelli
Woodland Fund, which will be distributed by the FMI Woodland Fund to
the holders of its shares in complete liquidation thereof (such
transaction, the "Reorganization"); and
2. To transact such other business as may properly be presented at the
Special Meeting or any adjournment or postponement thereof.
The Board of Directors of each of the FMI Funds and Gabelli Equity Series
Funds, Inc. (the "Gabelli Equity Series Funds") has approved the
Reorganization. The Gabelli Woodland Fund has an investment objective and
investment policies and practices similar to those of the FMI Woodland Fund.
The portfolio manager of the Gabelli Woodland Fund, Beth Lilly, is also a
co-portfolio manager of the FMI Woodland Fund. The FMI Woodland Fund and the
Gabelli Woodland Fund are sometimes referred to herein each as a "Fund" and
collectively as the "Woodland Funds."
If the FMI Woodland Fund shareholders approve the Reorganization, the FMI
Woodland Fund will transfer all of its assets to the Gabelli Woodland Fund.
The Gabelli Woodland Fund will assume the stated liabilities of the FMI
Woodland Fund. The Gabelli Woodland Fund will simultaneously issue shares to
the FMI Woodland Fund in an amount equal to the net asset value of the
outstanding shares of the FMI Woodland Fund. Immediately thereafter, the FMI
Woodland Fund will distribute these shares of the Gabelli Woodland Fund to its
shareholders. After distributing these shares, the FMI Woodland Fund will be
dissolved. When the Reorganization is complete, FMI Woodland Fund shareholders
will hold shares of the Gabelli Woodland Fund. The value of the Gabelli
Woodland Fund shares received in the Reorganization will equal the value of
the FMI Woodland Fund shares held immediately prior to the Reorganization.
After the Reorganization, the Gabelli Woodland Fund will continue to operate
as a separate class of Gabelli Equity Series Funds, a registered open-end
investment company.
This Combined Prospectus/Proxy Statement sets forth concisely the
information shareholders of the FMI Woodland Fund should know before voting on
the Reorganization and constitutes an offering of the Class AAA shares of the
Gabelli Woodland Fund only. Please read it carefully and retain it for future
reference. A Statement of Additional Information dated May 31, 2005 (the
"Reorganization SAI") relating to this Combined Prospectus/Proxy Statement has
been filed with the SEC (the "SEC") and is incorporated herein by reference. A
Prospectus (the "Gabelli Equity Series Funds Prospectus") and Statement of
Additional Information containing additional information about the Gabelli
Woodland Fund, dated January 31, 2005 (and as currently supplemented), have
been filed with the SEC and are incorporated herein by reference. A copy of
the Gabelli Equity Series Funds Prospectus, which also includes information
about other Gabelli Equity Series Funds, accompanies this Combined
Prospectus/Proxy Statement. A Prospectus and Statement of Additional
Information containing additional information about the FMI Woodland Fund,
dated October 9, 2004 (and as currently supplemented), have been filed with
the SEC and are incorporated herein by reference. These documents are on file
with the SEC. Both the Gabelli Woodland Fund and the FMI Woodland Fund are
subject to the informational requirements of the Securities Exchange Act of
1934 and the 1940 Act (the "1940 Act"), and in accordance therewith, file
reports and other information, including proxy materials and charter
documents, with the SEC.
Copies of the foregoing and any more recent reports filed after the date
hereof may be obtained without charge by calling or writing:
Gabelli Funds, LLC Fiduciary Management, Inc.
One Corporate Center 100 East Wisconsin Avenue
Rye, New York 10580 Milwaukee, Wisconsin 53202
(800) 422-3554 (800) 811-5311
If you wish to request the Reorganization SAI, please ask for the
"Reorganization SAI."
You also may view or obtain these documents from the SEC:
In Person: At the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549 and at the SEC's Northeast Regional
Office at 3 World Financial Center, Room 4300 New York NY
10281.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section
Officer of Consumer Affairs and Information Services SEC
450 5th Street, N.W.
Washington, DC 20549-0102
(duplicating fee required)
By Email: publicinfo@sec.gov
(duplicating fee required)
By Internet: www.sec.gov (no fee)
The Board of Directors of the FMI Funds knows of no business other than
that discussed above that will be presented for consideration at the Special
Meeting. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT AND,
IF SO GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS COMBINED PROSPECTUS/PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
NEITHER THE SEC ON OR ANY STATE REGULATOR HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS COMBINED PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Combined Prospectus/Proxy Statement is May 31, 2005.
MANNER OF VOTING PROXIES
If a proxy authorization ("Proxy") is properly given in time for a vote
at the Special Meeting (by returning the paper Proxy Form), the shares of the
FMI Woodland Fund represented thereby will be voted at the Special Meeting in
accordance with the shareholder's instructions. The Proxy grants discretion to
the persons named therein, as proxies, to take such further action as they may
determine appropriate in connection with any other matter which may properly
come before the Special Meeting or any adjournments or postponements thereof.
The Board of Directors of the FMI Funds (the "FMI Board") does not currently
know of any matter to be considered at the Special Meeting other than the
matters set forth in the Notice of Special Meeting of Shareholders.
The holders of a majority of the shares of the FMI Woodland Fund entitled
to be cast on the proposal that are outstanding at the close of business on
the record date and are present in person or represented by proxy will
constitute a quorum for the special meeting. Approval by the FMI Woodland Fund
of the proposed Reorganization will require that the votes cast in person or
by proxy at the Special Meeting in favor of the Reorganization exceed the
votes cast in person or by proxy against the Reorganization. Shareholders of
the FMI Woodland Fund are entitled to one vote for each share. Fractional
shares are entitled to proportional voting rights. For purposes of determining
the presence of a quorum for transacting business at the Special Meeting and
for determining whether sufficient votes have been received for approval of
the proposal to be acted upon at the meeting, abstentions and broker non-votes
(that is, proxies from brokers or nominees indicating that such persons have
not received instructions from the beneficial owner or other persons entitled
to vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary power) will be treated as shares that are
present at the meeting, but which have not been voted. For this reason,
abstentions and broker non-votes will assist the FMI Woodland Fund in
obtaining a quorum, but both have no effect for purposes of obtaining the
requisite vote for approval of the Reorganization. As a result, the
possibility exists that, in the event of substantial numbers of broker
non-votes, a relative few of the votes would dictate the result of such vote.
If the shareholders fail to approve the proposed Reorganization, the
Reorganization will not occur.
In the event that sufficient votes to approve the proposal have not been
received by the date scheduled for the Special Meeting, the persons named as
proxies may propose one or more adjournments or postponements of the Special
Meeting to permit further solicitation of proxies. Any such adjournment will
require that the votes cast in person or by proxy at the Special Meeting in
favor of adjournment exceed the votes cast in person or by proxy against
adjournment. In determining whether to adjourn the Meeting with respect to a
proposal, the following factors may be considered: the percentage of votes
actually cast, the percentage of negative votes actually cast, the nature of
any further solicitation and the information to be provided to shareholders
with respect to the reasons for the solicitation. Generally, votes cast in
favor of a proposal will be voted in favor of adjournment while votes cast
against a proposal will be voted against adjournment. The persons named as
proxies will vote upon such adjournment after consideration of the best
interests of all shareholders.
A shareholder may vote:
o by mail; or
o in person at the Special Meeting.
Any shareholder who has given a Proxy in written form has the right to
revoke it at any time prior to its exercise by submitting a written notice of
revocation or a later-dated Proxy, or by attending the Special Meeting and
voting his or her shares in person.
The Altman Group and its agents will assist with the mailing and
tabulation effort and may also solicit Proxies by contacting shareholders
agents will assist with the mailing and tabulation effort and may also solicit
Proxies by contacting shareholders by telephone. The costs of solicitation
will be borne by the Gabelli Funds, LLC. The cost for the Altman Group's
services in connection with reorganization of the FMI Woodland Fund into the
Gabelli Woodland Fund is not expected to exceed $1000 plus mailing expenses.
Brokerage firms and others will be reimbursed for their expenses in forwarding
solicitation material to the beneficial owners of shares of the FMI Woodland
Fund. Representatives of the FMI Funds may also solicit proxies. Questions
about the proposal should be directed to FMI Mutual Funds, Inc. at 100 East
Wisconsin Avenue, Suite 2200, Milwaukee, Wisconsin 53202, (800) 811-5311.
TABLE OF CONTENTS
Page
SUMMARY...................................................................................15
The Proposed Reorganization............................................................15
Background and Reasons for the Proposed Reorganization.................................15
Federal Tax Consequences...............................................................17
COMPARISON OF THE FMI WOODLAND FUND AND THE GABELLI WOODLAND FUND.........................18
Investment Objectives and Principal Investment Strategies..............................18
Principal Investment Risks.............................................................19
Management of the Funds................................................................26
Investment Advisory Agreements.........................................................27
Comparison of the Advisory Agreements..................................................31
Current and Pro Forma Operating Expenses...............................................31
Capitalization.........................................................................33
Performance Information................................................................34
Distributor............................................................................36
Distribution and Service Fees..........................................................36
Purchase, Valuation, Redemption and Exchange of Shares.................................37
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS.............................41
FINANCIAL HIGHLIGHTS......................................................................41
INFORMATION ABOUT THE REORGANIZATION......................................................44
General................................................................................44
Terms of the Agreement.................................................................44
Reasons for the Reorganization.........................................................45
Material U.S. Federal Income Tax Consequences of the Reorganization....................46
Expenses of the Reorganization.........................................................47
Continuation of Shareholder Accounts and Plans; Share Certificates.....................48
Legal Matters..........................................................................48
OTHER INFORMATION.........................................................................49
Shareholder Information................................................................49
Shareholder Proposals..................................................................50
Solicitation of Proxies................................................................51
VOTING INFORMATION AND REQUIREMENTS.......................................................52
APPENDICES...............................................................................A-1
SUMMARY
The following is a summary of certain information contained elsewhere in
this Combined Prospectus/Proxy Statement and is qualified in its entirety by
reference to the more complete information contained herein. Shareholders
should read the entire Combined Prospectus/Proxy Statement carefully.
The Gabelli Woodland Small Cap Value Fund (the "Gabelli Woodland Fund")
and the FMI Woodland Small Capitalization Value Fund (the "FMI Woodland Fund)
are classes of open-end management investment companies registered with the SEC
and organized as corporations under the laws of the states of Maryland and
Wisconsin, respectively. The investment objective of the Gabelli Woodland Fund
is to seek to provide a high level of capital appreciation. The investment
objective of the FMI Woodland Fund is to pursue long-term capital growth.
Shareholders of each Fund have the right to exchange their shares with other
funds managed by the same adviser, respectively, subject to certain
limitations. Additionally, each Fund permits its shareholders to redeem their
shares at any time upon proper notice.
The Proposed Reorganization
The Board of Directors of FMI Mutual Funds, Inc. (the "FMI Board"),
including any board members who are not "interested persons" of the FMI
Woodland Fund (as defined in the Investment Company Act of 1940), has
unanimously approved the Agreement and Plan of Reorganization (the
"Reorganization Agreement"). Additionally, the Board of Directors of Gabelli
Equity Series Funds, Inc. unanimously approved the Reorganization Agreement.
The Boards of both Funds reviewed a range of issues prior to approving the
Reorganization Agreement, including consideration of increased gross and net
fund expenses following the reorganization subject to the FMI Woodland Fund
shareholder approval, the Reorganization Agreement provides for:
o the transfer of all the assets of the FMI Woodland Fund to the Gabelli
Woodland Fund in exchange for Class AAA shares of the Gabelli Woodland
Fund and the assumption by Gabelli Equity Series Fund, Inc., on behalf
of the Gabelli Woodland Fund, of the stated liabilities of the FMI
Woodland Fund (the "Reorganization");
o the distribution of such shares to FMI Woodland Fund shareholders; and
o the termination of the FMI Woodland Fund.
If the proposed Reorganization is completed, FMI Woodland Fund
shareholders will hold shares of the Gabelli Woodland Fund with an aggregate
value equal to the aggregate value of FMI Woodland Fund shares owned
immediately prior to the Reorganization. Fiduciary Management, Inc. is the
investment adviser to the FMI Woodland Fund. Gabelli Funds, LLC (the "Gabelli
Adviser") is the investment adviser to the Gabelli Woodland Fund.
Background and Reasons for the Proposed Reorganization
On May 20, Gabelli Equity Series Funds, Inc. (the "Gabelli Fund") entered
into the Reorganization Agreement with FMI Mutual Funds, Inc, to acquire the
FMI Woodland Fund. Under the terms of the transaction, the Reorganization will
consist of: (i) the transfer of all of the assets of the FMI Woodland Fund in
exchange for Class AAA shares of the Gabelli Woodland Fund; (ii) the
assumption by the Gabelli Fund, on behalf of the Gabelli Woodland Fund, of the
stated liabilities of the FMI Woodland Fund; and (iii) the distribution, after
the Closing Date (as defined in the Reorganization Agreement), of the Gabelli
Woodland Fund shares to the shareholders of the FMI Woodland Fund and the
termination and complete liquidation for tax purposes of the FMI Woodland
Fund, all upon the terms and conditions set forth in the Reorganization
Agreement. The Gabelli Woodland Fund will be the accounting survivor following
the Reorganization, and the combined fund will be named The Gabelli Woodland
Small Cap Value Fund. The combined fund will assume the objective, policies,
and service arrangements of the Gabelli Woodland Fund and the performance
history of the Gabelli Woodland Fund at the closing of the Reorganization.
In approving the Reorganization Agreement, the FMI Board, including its
independent members of the Board, determined that participation in the
Reorganization is in the best interests of the FMI Woodland Fund and its
shareholders and that the interests of the shareholders of the FMI Woodland
Fund will not be diluted as a result of the Reorganization. Before reaching
these conclusions, the FMI Board and the independent members of the Board
engaged in a thorough review process relating to the Gabelli organization and
the proposed Reorganization. On May 20, 2005 the entire FMI Board approved
the Reorganization by consent resolution.
The factors considered by the FMI Board with regard to the Reorganization
include, but are not limited to, the following:
o In light of the determination by Fiduciary Management, Inc. (the "FMI
Adviser") to cease managing the FMI Woodland Fund and the substantial
unrealized appreciation in the FMI Woodland Fund, a liquidation or
similar transaction would have adverse tax consequences to taxable
investors of the FMI Woodland Fund. The Reorganization presents an
opportunity for shareholders of the FMI Woodland Fund to have their
investment in the FMI Woodland Fund converted into an investment in a
mutual fund having similar investment objectives and policies to the
FMI Woodland Fund, managed by an affiliate of the sub-adviser to the
FMI Woodland Fund in a transaction in which there will be no gain or
loss.
o The portfolio manager for the Gabelli Woodland Fund is Beth Lilly, one
of the portfolio managers for the FMI Woodland Fund.
o After the Reorganization the former shareholders of the FMI Woodland
Fund will have access to a larger fund family with a broader array of
investment options, and with no diminution of shareholder services.
o The costs associated with the Reorganization will be borne by the
Gabelli Adviser and will not be borne by the shareholders of the FMI
Woodland Fund.
o There will be no gain or loss recognized by shareholders for federal
income tax purposes as well as no gain or loss on the assets of the
FMI Woodland Fund transferred to the Gabelli Woodland Fund.
o The Reorganization appears to be the least disruptive alternative to
shareholders of the FMI Mutual Fund.
o The disadvantage of the higher expense ratio of the Gabelli Woodland
Fund was outweighed by the advantages identified above and by the
fact that each shareholder will have ample opportunity to redeem
shares in advance of the consummation of the Reorganization.
For these and other reasons, the FMI Board unanimously concluded that,
based upon the factors and determinations summarized above, consummation of the
Reorganization is the least disruptive alternative to shareholders of the FMI
Mutual Fund and is in the best interest of the FMI Woodland Fund and its
shareholders. The approval determinations were made on the basis of each
director's business judgment after consideration of all of the factors taken as
a whole, though individual members of the Board may have placed different
weight on various factors and assigned different degrees of materiality to
various conclusions.
If the Reorganization does not occur, the FMI Board will be required to
consider other alternatives, which will include liquidation of the FMI Woodland
Fund. Any such liquidation will not be tax-free for shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
REORGANIZATION.
Federal Tax Consequences
The Reorganization is expected to qualify as a tax-free "reorganization"
for U.S. federal income tax purposes. If the Reorganization so qualifies, in
general, neither the FMI Woodland Fund, the Gabelli Woodland Fund, nor their
respective shareholders, will recognize gain or loss in the transactions
contemplated by the Reorganization. As a condition to the closing of the
Reorganization, each of the FMI Woodland Fund and the Gabelli Woodland Fund
will receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP to that
effect. No tax ruling from the Internal Revenue Service ("IRS") regarding the
Reorganization has been or will be requested. The opinion of counsel is not
binding on the IRS or any court and thus does not preclude the IRS from
asserting, or a court from rendering, a contrary position.
If any of the portfolio assets of the FMI Woodland Fund are sold by the
FMI Woodland Fund in connection with the Reorganization, the tax impact of such
sales will depend on the difference between the price at which such portfolio
assets are sold and the FMI Woodland Fund's cost basis in such assets. Any
gains will be distributed to the FMI Woodland Fund's shareholders as either
capital gain dividends (to the extent of long-term capital gains) or ordinary
dividends (to the extent of short-term capital gains) during or with respect to
the year of sale, and such distributions will be taxable to shareholders.
At any time prior to the consummation of the Reorganization, a shareholder
may redeem shares, likely resulting in recognition of gain or loss to such
shareholder for U.S. federal income tax purposes. For more information about
the U.S. federal income tax consequences of the Reorganization, see "Material
U.S. Federal Income Tax Consequences of the Reorganization."
COMPARISON OF THE FMI WOODLAND FUND
AND THE GABELLI WOODLAND FUND
Investment Objectives and Principal Investment Strategies
Investment Objectives. As its investment objective, the FMI Woodland Fund
seeks long-term growth of capital. The Gabelli Woodland Fund's investment
objective is to provide a high level of capital appreciation. The FMI Woodland
Fund's investment objective is not a fundamental policy and may be changed
without shareholder approval. The Gabelli Woodland Fund's investment objective
is a fundamental policy that cannot be changed without shareholder approval.
The combined fund will pursue the Gabelli Woodland Fund's stated investment
objective. The FMI Woodland Fund and the Gabelli Woodland Fund pursue similar
investment objectives and hold similar securities. As a result, the proposed
Reorganization is not expected to cause significant portfolio turnover or
transaction expense from the sale of securities held by the FMI Woodland Fund
that are incompatible with the investment objective of the Gabelli Woodland
Fund. The combined fund will be named The Gabelli Woodland Small Cap Value
Fund.
Principal Investment Strategies. The FMI Woodland Fund invests in
companies which its portfolio managers believe to be undervalued. The Fund
believes this investment approach has the potential to produce superior
portfolio returns if the market ultimately recognizes that investments held by
the Fund are undervalued. The FMI Woodland Fund primarily invests in small
capitalization companies (i.e., companies having a market capitalization of
$1.5 billion or less at the time of purchase). The portfolio managers look for
undervalued companies with shareholder oriented management teams that are
employing strategies to grow the company's value. These companies typically
include companies undergoing fundamental change through new management teams or
different strategies. See Appendix A for further information about the
investment restrictions applicable to the FMI Woodland Fund.
Under normal market conditions, the Gabelli Woodland Fund invests at least
80% of its net assets in equity securities of companies that are considered to
be small capitalization companies at the time the Fund makes the investment.
The Fund invests primarily in the common stocks of companies which the Fund's
portfolio manager believes are undervalued. The Fund's Adviser currently
characterizes small capitalization companies for this Fund as those with a
total market value of $1.5 billion or less at the time of investment. The
Adviser looks for undervalued companies with shareholder oriented management
teams that are employing strategies to grow the company's value. The goal is to
invest long term in the stocks of companies trading at reasonable valuations
relative to perceived economic worth. Frequently, companies in which the
Gabelli Woodland Fund invests exhibit one or more of the following traits:
o New products or technologies
o New distribution methods
o Rapid changes in industry conditions due to regulatory or other
developments
o Changes in management or similar characteristics that may result not
only in expected growth in revenues but in an accelerated or above
average rate of earnings growth, which would usually be reflected in
capital appreciation.
In addition, because smaller companies are less actively followed by stock
analysts and less information is available on which to base stock price
evaluations, the market may overlook favorable trends in particular smaller
growth companies and then adjust its valuation more quickly once investor
interest is gained.
See Appendix A for further information about the investment restrictions
applicable to the Gabelli Woodland Fund. The Gabelli Woodland Fund may also use
the following defensive investment technique: When adverse market or economic
conditions occur, the Fund may temporarily invest all or a portion of its
assets in defensive investments. Such investments include fixed income
securities or high quality money market instruments. When following this
defensive strategy, the Fund will be less likely to achieve its investment
goals.
The combined fund's principal investment strategy will be similar to that
of the Gabelli Woodland Fund.
What the Funds have in common. Both Funds attempt to realize capital
appreciation over time by investing in small-capitalization companies its
portfolio managers believe to be undervalued. The Funds are managed in the
same manner, and therefore we do not anticipate any Fund management changes to
which the FMI Woodland Fund's shareholders would be subjected.
How the Funds differ- The FMI Woodland Fund is a diversified fund,
whereas the Gabelli Woodland Fund is a non-diversified Fund. That is the only
distinction.
The FMI Woodland Fund may not invest more than 10% of its total assets in
securities of issuers which have a record of less than three years of
continuous operation, including the operation of any predecessor business of a
company which came into existence as a result of a merger, consolidation,
reorganization or purchase of substantially all of the assets of such
predecessor business. The Gabelli Woodland Fund is under no such restriction.
The Gabelli Woodland Fund is not subject to several fundamental investment
restrictions that do apply to the FMI Woodland Fund, including acquiring
securities of companies in which officers or directors of the Fund or an
affiliate is involved as an officer, director or significant investor,
purchasing restricted securities, purchasing interests in real estate
companies, selling securities short, borrowing money, purchasing commodities
or commodities contracts or investing in unsecured companies. The Gabelli
Woodland Fund has not entered into such transactions since it commenced
operations, however, and therefore no appreciable additional risks are
expected for future shareholders. For information about the fundamental
restrictions applicable to each Fund, see Appendix A.
Principal Investment Risks
The Gabelli Woodland Fund is a non-diversified investment company.
Because of the similar investment objectives, policies and practices, the FMI
Woodland Fund and the Gabelli Woodland Fund are subject to similar investment
risks. The following discussion describes the principal and certain other
risks that may affect the combined fund. You will find additional descriptions
of specific risks in the prospectuses for the FMI Woodland Fund and the
Gabelli Woodland Fund. Note that the following risks discussed in detail below
are not currently primary risks to which shareholders of the FMI Woodland Fund
are subject: short sales risks, unseasoned company risks, borrowing risks, and
restricted and illiquid securities risks.
Market Risk. The prices of the securities in which the combined fund will
invest may decline for a number of reasons. The price declines of common
stocks, in particular, may be steep, sudden and/or prolonged. Price changes may
occur in the market as a whole, or they may occur in only a particular company,
industry, or sector of the market. Should a company undergo bankruptcy, the
stocks of that company might have the least senior interest and could become
worthless. In addition, stocks of small-capitalization companies may under
perform the market as a whole.
Smaller Capitalization Companies Risk. Both the Gabelli Woodland Fund and
the FMI Woodland Fund primarily invest in companies with a market
capitalization of $1.5 billion or less. The combined fund will invest
primarily in smaller capitalization companies. Smaller capitalization
companies typically have relatively lower revenues, limited product lines and
lack of management depth, and may have a smaller share of the market for their
products or services, than larger capitalization companies. The stocks of
smaller capitalization companies tend to have less trading volume than stocks
of larger capitalization companies. Less trading volume may make it more
difficult for the portfolio manager to sell securities of smaller
capitalization companies at quoted market prices. Finally, there are periods
when investing in smaller capitalization stocks falls out of favor with
investors and the stocks of smaller capitalization companies underperform.
Value Investing Risk. The combined fund will primarily invest in "value"
stocks. The portfolio manager may be wrong in her assessment of a company's
value and the stocks the combined fund holds may not reach what she believes
are their full values. From time to time "value" investing falls out of favor
with investors. During those periods, the combined fund's relative performance
may suffer.
Equity Securities. Common stocks represent the residual ownership interest
in the issuer and holders of common stock are entitled to the income and
increase in the value of the assets and business of the issuer after all of its
debt obligations and obligations to preferred stockholders are satisfied.
Common stocks generally have voting rights. Common stocks fluctuate in price in
response to many factors including historical and prospective earnings of the
issuer, the value of its assets, general economic conditions, interest rates,
investor perceptions and market liquidity.
Equity securities also include preferred stock (whether or not convertible
into common stock) and debt securities convertible into or exchangeable for
common or preferred stock. Preferred stock has a preference over common stock
in liquidation (and generally dividends as well) but is subordinated to the
liabilities of the issuer in all respects. As a general rule the market value
of preferred stock with a fixed dividend rate and no conversion element varies
inversely with interest rates and perceived credit risk, while the market price
of convertible preferred stock generally also reflects some element of
conversion value. Because preferred stock is junior to debt securities and
other obligations of the issuer, deterioration in the credit quality of the
issuer will cause greater changes in the value of a preferred stock than in a
more senior debt security with similarly stated yield characteristics. Debt
securities that are convertible into or exchangeable for preferred common stock
are liabilities of the issuer but are generally subordinated to more senior
elements of the issuer's balance sheet. Although such securities also generally
reflect an element of conversion value, their market value also varies with
interest rates and perceived credit risk. The market value of preferred stock
will also generally reflect whether (and if so when) the issuer may force
holders to sell their preferred shares back to the issuer and whether (and if
so when) the holders may force the issuer to buy back their preferred shares.
Generally speaking the right of the issuer to repurchase the preferred stock
tends to reduce any premium that the preferred stock might otherwise trade at
due to interest rate or credit factors, while the right of the holders to
require the issuer to repurchase the preferred stock tend to reduce any
discount that the preferred stock might otherwise trade at due to interest rate
or credit factors.
The Gabelli Adviser believes that opportunities for capital appreciation
may be found in the preferred stock and convertible securities of companies.
This is particularly true in the case of companies that have performed below
expectations at the time the preferred stock or convertible security was
issued. If the company's performance has been poor enough, its preferred stock
and convertible debt securities will trade more like the common stock than like
a fixed income security and may result in above average appreciation once it
becomes apparent that performance is improving. Even if the credit quality of
the company is not in question, the market price of the convertible security
will often reflect little or no element of conversion value if the price of its
common stock has fallen substantially below the conversion price. This leads to
the possibility of capital appreciation if the price of the common stock
recovers. Many convertible securities are not investment grade, that is, not
rated BBB or better by Standard & Poor's FMI Funds ("S&P") or Baa or better by
Moody's Investors Service, Inc. ("Moody's") and not considered by the Adviser
to be of similar quality. There is no minimum credit rating for these
securities in which the Fund may invest. Preferred stocks and convertible
securities have many of the same characteristics and risks as nonconvertible
debt securities described below.
Nonconvertible Debt Securities. Under normal market conditions, the
combined fund may invest up to 20% of its total assets in lower quality
nonconvertible debt securities. These securities include preferred stocks,
bonds, debentures, notes, asset- and mortgage- backed securities and money
market instruments such as commercial paper and bankers' acceptances. There is
no minimum credit rating for these securities in which the combined fund may
invest. Accordingly, the combined fund could invest in securities in default
although the combined fund will not invest more than 5% of its assets in such
securities. The market values of lower quality fixed income securities tend to
be less sensitive to changes in prevailing interest rates than higher-quality
securities but more sensitive to individual corporate developments than
higher-quality securities. Such lower-quality securities also tend to be more
sensitive to economic conditions than are higher-quality securities.
Accordingly, these lower-quality securities are considered predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation and will generally
involve more credit risk than securities in the higher-quality categories. Even
securities rated Baa or BBB by Moody's and S&P respectively, which ratings are
considered investment grade, possess some speculative characteristics. There
are risks involved in applying credit ratings as a method for evaluating high
yield obligations in that credit ratings evaluate the safety of principal and
interest payments, not market value risk. In addition, credit rating agencies
may not change credit ratings on a timely basis to reflect changes in economic
or company conditions that affect a security's market value. The combined fund
will rely on the Gabelli Adviser's judgment, analysis and experience in
evaluating the creditworthiness of an issuer. In this evaluation, the Gabelli
Adviser will take into consideration, among other things, the issuer's
financial resources and ability to cover its interest and fixed charges,
factors relating to the issuer's industry and its sensitivity to economic
conditions and trends, its operating history, the quality of the issuer's
management and regulatory matters.
The risk of loss due to default by the issuer is significantly greater for
the holders of lower quality securities because such securities are generally
unsecured and are often subordinated to other obligations of the issuer. During
an economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress
and may not have sufficient revenues to meet their interest payment
obligations. An issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments, its inability to meet
specific projected business forecasts, or the unavailability of additional
financing.
Factors adversely affecting the market value of high yield and other
securities will adversely affect the combined fund's net asset value. In
addition, the combined fund may incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal of or
interest on its portfolio holdings.
From time to time, proposals have been discussed regarding new legislation
designed to limit the use of certain high yield debt securities by issuers in
connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such proposals, if
enacted into law, could reduce the market for such debt securities generally,
could negatively affect the financial condition of issuers of high yield
securities by removing or reducing a source of future financing, and could
negatively affect the value of specific high yield issues and the high yield
market in general. For example, under a provision of the Internal Revenue Code
of 1986, as amended (the "Code"), a corporate issuer may be limited from
deducting all of the original issue discount on high-yield discount obligations
(i.e., certain types of debt securities issued at a significant discount to
their face amount). The likelihood of passage of any additional legislation or
the effect thereof is uncertain.
The secondary trading market for lower-quality fixed income securities is
generally not as liquid as the secondary market for higher-quality securities
and is very thin for some securities. The relative lack of an active secondary
market may have an adverse impact on market price and the combined fund's
ability to dispose of particular issues when necessary to meet its liquidity
needs or in response to a specific economic event such as a deterioration in
the creditworthiness of the issuer. The relative lack of an active secondary
market for certain securities may also make it more difficult for the combined
fund to obtain accurate market quotations for purposes of valuing its
portfolio. Market quotations are generally available on many high yield issues
only from a limited number of dealers and may not necessarily represent firm
bids of such dealers or prices for actual sales. During such times, the
responsibility of the Gabelli Equity Series Funds's Board of Directors to value
the securities becomes more difficult and judgment plays a greater role in
valuation because there is less reliable, objective data available.
Securities Subject to Reorganization. Subject to the combined fund's
policy of investing at least 80% of its net assets in small company equity
securities, the combined fund may invest without limit in securities for which
a tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgment of the Gabelli Adviser, there
is a reasonable prospect of capital appreciation significantly greater than the
brokerage and other transaction expenses involved.
In general, securities which are the subject of such an offer or proposal
sell at a premium to their historic market price immediately prior to the
announcement of the offer or may also discount what the stated or appraised
value of the security would be if the contemplated transaction were approved
or consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of
the prospective portfolio company as a result of the contemplated transaction;
or fails adequately to recognize the possibility that the offer or proposal
may be replaced or superseded by an offer or proposal of greater value. The
evaluation of such contingencies requires unusually broad knowledge and
experience on the part of the Gabelli 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 offer or and the
dynamics and business climate when the offer of proposal is in process. In
making the investments the combined fund will not violate any of its
investment restrictions (see Appendix A - "Fundamental Investment
Restrictions"). The principal risk is that such offers or proposals may not be
consummated within the time and under the terms contemplated at the time of
the investment, in which case, unless such offers or proposals are replaced by
equivalent or increased offers or proposals which are consummated, the Fund
may sustain a loss. Since such investments are ordinarily short-term in
nature, they will tend to increase the turnover ratio of the Fund thereby
increasing brokerage and other transaction expenses.
Foreign Securities. The combined fund may invest without limit in the
securities of non-U.S. issuers. However, the combined fund does not currently
expect to invest a significant portion of assets in such securities. These
investments involve certain risks not ordinarily associated with investments in
securities of domestic issuers. These risks include fluctuations in foreign
exchange rates (which the combined fund will not seek to hedge), future
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. In addition, with
respect to certain countries, there is the possibility of expropriation of
assets, confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.
There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies. Non-U.S. securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets, and securities of many foreign companies are less
liquid and their prices more volatile than securities of comparable U.S.
companies. Transaction costs of investing in non-U.S. securities markets are
generally higher than in the U.S. There is generally less government
supervision and regulation of exchanges, brokers and issuers than there is in
the U.S. The combined 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 combined 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 combined fund or the investor.
Hedging Transactions.
Options. The combined fund may purchase or sell options on individual
securities as well as on indices of securities as a means of achieving
additional return or of hedging the value of the Fund's portfolio. A call
option is a contract that gives the holder of the option the right, in return
for a premium paid, to buy from the seller the security underlying the option
at a specified exercise price at any time during the term of the option or, in
some cases, only at the end of the term of the option. The seller of the call
option has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price. A put option is a
contract that gives the holder of the option the right, in return for a
premium paid, to sell to the seller the underlying security at a specified
price. The seller of the put option, on the other hand, has the obligation to
buy the underlying security upon exercise at the exercise price. If the
combined 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 combined fund so
desires.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unexercised but
foregoes any capital appreciation in excess of the exercise price in the case
of a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the combined fund the credit
risk that the counterparty will fail to honor its obligations. The combined
fund will not purchase options if, as a result, the aggregate cost of all
outstanding options exceeds 10% of its assets. To the extent that puts,
straddles and similar investment strategies involve instruments regulated by
the Commodity Futures Trading Commission ("CFTC") the combined fund is limited
to an investment not in excess of 5% of its total assets.
Futures Contracts. The combined fund may enter into futures contracts only
for certain bona fide hedging, yield enhancement and risk management purposes.
The combined fund may enter into futures contracts for the purchase or sale of
debt securities, debt instruments, or indices of prices thereof, stock index
futures, other financial indices, and U.S. Government Securities. A "sale" of a
futures contract (or a "short" futures position) means the assumption of a
contractual obligation to deliver the securities underlying the contract at a
specified price at a specified future time. A "purchase" of a futures contract
(or a "long" futures position) means the assumption of a contractual obligation
to acquire the securities underlying the contract at a specified price at a
specified future time. Certain futures contracts are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures contracts. U.S. futures contracts have been designed by exchanges
that have been designated as "contract markets" by the CFTC, an agency of the
U.S. Government, and must be executed through a futures commission merchant
(i.e., a brokerage firm) which is a member of the relevant contract market.
Futures contracts trade on these contract markets and the exchange's affiliated
clearing organization guarantees performance of the contracts as between the
clearing members of the exchange.
These contracts entail certain risks, including but not limited to the
following: no assurance that futures contracts transactions can be offset at
favorable prices, possible reduction of the combined 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 combined fund may enter into various currency
transactions, including forward foreign currency contracts, currency swaps,
foreign currency or currency index futures contracts and put and call options
on such contracts or on currencies. A forward foreign currency contract
involves an obligation to purchase or sell a specific currency for a set price
at a future date. A currency swap is an arrangement whereby each party
exchanges one currency for another on a particular date and agrees to reverse
the exchange on a later date at a specific exchange rate. Forward foreign
currency contracts and currency swaps are established in the interbank market
conducted directly between currency traders (usually large commercial banks or
other financial institutions) on behalf of their customers. Futures contracts
are similar to forward contracts except that they are traded on an organized
exchange and the obligations thereunder may be offset by taking an equal but
opposite position to the original contract, with profit or loss determined by
the relative prices between the opening and offsetting positions. The combined
fund expects to enter into these currency contracts and swaps in primarily the
following circumstances: to "lock in" the U.S. dollar equivalent price of a
security the combined 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 combined fund's portfolio
has exposure. The combined 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 Gabelli Adviser, such currency is essentially correlated to the currency
of the relevant portfolio security based on historic and expected exchange rate
patterns.
Unseasoned Companies. The combined fund may invest in securities of
unseasoned companies, which generally have limited liquidity, more speculative
prospects and price volatility.
When Issued, Delayed Delivery Securities and Forward Commitments. The
combined fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the combined fund will
only enter into a forward commitment with the intention of actually acquiring
the security, the combined 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 combined fund prior
to the settlement date. The combined fund will segregate with its custodian
cash or liquid securities in an aggregate amount at least equal to the amount
of its outstanding forward commitments.
Short Sales. The combined fund may make short sales of securities. A short
sale is a transaction in which the combined fund sells a security it does not
own in anticipation that the market price of that security will decline. The
combined 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 combined 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 combined 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 combined fund's obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealer, usually cash, U.S.
government securities or other highly liquid securities. The combined 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
combined fund on such security, the combined 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 combined fund replaces the borrowed security, the
combined fund will incur a loss; conversely, if the price declines, the
combined fund will realize a capital gain. Any gain will be decreased, and any
loss increased, by the transaction costs described above. Although the combined
fund's gain is limited to the price at which it sold the security short, its
potential loss is theoretically unlimited.
The combined fund will not make a short sale, if, after giving effect to
such sale, the market value of all securities sold short exceeds 25% of the
value of its assets or the combined fund's aggregate short sales of a
particular class of securities exceeds 25% of the outstanding securities of
that class. The combined 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 combined fund owns or has the immediate and unconditional right
to acquire at no additional cost the identical security.
Restricted and Illiquid Securities. The combined fund may invest up to 15%
of its net assets in securities the markets for which are illiquid. Illiquid
securities include most of the securities the disposition of which is subject
to substantial legal or contractual restrictions. The sale of illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the
over-the-counter markets. Restricted securities may sell at a price lower than
similar securities that are not subject to restrictions on resale. Securities
freely salable among qualified institutional investors under special rules
adopted by the Securities and Exchange Commission ("SEC") may be treated as
liquid if they satisfy liquidity standards established by the Board of
Directors. The continued liquidity of such securities is not as well assured as
that of publicly traded securities, and accordingly the Board of Directors will
monitor their liquidity.
Repurchase Agreements. The combined fund may invest in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the combined fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements
may be made with respect to any of the portfolio securities in which the
combined fund is authorized to invest. Repurchase agreements may be
characterized as loans secured by the underlying securities. The combined fund
may enter into repurchase agreements with (i) member banks of the Federal
Reserve System having total assets in excess of $500 million and (ii)
securities dealers, provided that such banks or dealers meet certain
creditworthiness standards ("Qualified Institutions"). The Gabelli Adviser will
monitor the continued creditworthiness of Qualified Institutions, subject to
the supervision of the Board of Directors. The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated
to the coupon rate or date of maturity of the purchased security. The
collateral is marked-to-market daily. Such agreements permit the combined fund
to keep all its assets earning interest while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature.
The use of repurchase agreements involves certain risks. For example, if
the seller of securities under a repurchase agreement defaults on its
obligation to repurchase the underlying securities, as a result of its
bankruptcy or otherwise, the combined fund will seek to dispose of such
securities, which action could involve costs or delays. If the seller becomes
insolvent and subject to liquidation or reorganization under applicable
bankruptcy or other laws, the combined fund's ability to dispose of the
underlying securities may be restricted. Finally, it is possible that the
combined fund may not be able to substantiate its interest in the underlying
securities. To minimize this risk, the securities underlying the repurchase
agreement will be held by the combined fund's custodian at all times in an
amount at least equal to the repurchase price, including accrued interest. If
the seller fails to repurchase the securities, the combined fund may suffer a
loss to the extent proceeds from the sale of the underlying securities are less
than the repurchase price. The combined fund will not enter into repurchase
agreements of a duration of more than seven days if taken together with all
other illiquid securities in its portfolio, more than 15% of its net assets
would be so invested.
Loans of Portfolio Securities. To increase income, the combined fund may
lend its portfolio securities to securities broker-dealers or financial
institutions if (1) the loan is collateralized in accordance with applicable
regulatory requirements including collateralization continuously at no less
than 100% by marking to market daily, (2) the loan is subject to termination by
the combined fund at any time, (3) the combined fund receives reasonable
interest or fee payments on the loan, (4) the combined fund is able to exercise
all voting rights with respect to the loaned securities and (5) the loan will
not cause the value of all loaned securities to exceed 33% of the value of the
combined fund's assets.
If the borrower fails to maintain the requisite amount of collateral, the
loan automatically terminates and the combined fund could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over the value of the collateral. As with any extension of
credit, there are risks of delay in recovery and in some cases even loss of
rights in collateral should the borrower of the securities fail financially.
Borrowing. The combined fund may not borrow money except for (1)
short-term credits from banks as may be necessary for the clearance of
portfolio transactions, and (2) borrowings from banks for temporary or
emergency purposes, including the meeting of redemption requests, which would
otherwise require the untimely disposition of portfolio securities. Borrowing
for purposes other than meeting redemptions may not exceed 5% of the value of
the combined fund's assets after giving effect to the borrowing. The combined
fund may mortgage, pledge or hypothecate assets to secure such borrowings.
Portfolio Turnover. The investment policies of the combined fund may lead
to frequent changes in investments, particularly in periods of rapidly
fluctuating interest or currency exchange rates. The Fund's portfolio turnover
is expected to be less than 100%.
Portfolio turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction costs on the
sale of securities and reinvestment in other securities. The portfolio turnover
rate is computed by dividing the lesser of the amount of the securities
purchased or securities sold by the average monthly value of securities owned
during the year (excluding securities whose maturities at acquisition were one
year or less).
Portfolio turnover may vary from year to year, as well as within a year.
For the fiscal year ended September 30, 2004, and for the fiscal period ended
September 30, 2003, the turnover rates were 45% and 39%, respectively, for the
Gabelli Woodland Fund. For the period from July 1, 2004 to March 31, 2005, the
portfolio turnover ratio for the FMI Woodland Fund was 23%.
Management of the Funds
Gabelli Woodland Fund. Gabelli Equity Series Funds, with principal offices at
One Corporate Center, Rye, New York 10580-1422, is an open-end management
investment company organized under the laws of the State of Maryland on July
25, 1991. The Gabelli Woodland Fund, classified as a "non-diversified"
investment company, is a class of the Gabelli Equity Series Funds and commenced
operations on December 31, 2002. The Gabelli Adviser is a New York limited
liability company which serves as adviser to 15 open-end investment companies
and 7 closed-end investment companies with aggregate assets in excess of $12.901
billion as of March 31, 2005. The Gabelli Adviser is a registered investment
adviser under the Investment Advisers Act of 1940, as amended.
Mr. Mario J. Gabelli may be deemed a "controlling person" of the Gabelli
Adviser on the basis of his controlling interest in Gabelli Asset Management,
Inc. ("GBL"), the parent company of the Gabelli Adviser. The Gabelli Adviser
has several affiliates that provide investment advisory services, including
GAMCO Investors, Inc. ("GAMCO").
Elizabeth M. Lilly is primarily responsible for the day-to-day management
of the Gabelli Woodland Fund's portfolio. From 1996 until the Gabelli Adviser
acquired it in 2002, Ms. Lilly was a principal in and portfolio manager for
Woodland Partners LLC.
The compensation of portfolio managers for the Gabelli Funds is
structured to enable the Gabelli Adviser to attract and retain highly
qualified professionals in a competitive environment. Ms. Lilly receives a
compensation package that includes a minimum draw or base salary, equity-based
incentive compensation via awards of stock option, and incentive-based
variable compensation based on a percentage of net revenue received by the
Gabelli Adviser for managing the Gabelli Woodland Fund and seperate accounts
to the extent that the amount exceeds a minimum level of compensation. Net
revenues are determined by deducting from gross investment management fees
certain of the firm's expenses (other than the respective portfolio manager's
compensation) allocable to the Gabelli Woodland Fund. This method of
compensation is based on the premise that superior long-term performance in
managing a portfolio should be rewarded with higher compensation as a result
of growth of assets through appreciation and net investment activity.
Equity-based incentive compensation is based on an evaluation by the Gabelli
Adviser's parent, Gabelli Asset Management Inc., of quantitative and
qualitative performance evaluation criteria. For further information, see the
Statement of Additional Information for the Gabelli Woodland Fund, which is
incorporated by reference.
FMI Woodland Fund. FMI Mutual Funds, Inc., with principal offices at 100
East Wisconsin Avenue, Suite 2200, Milwaukee, Wisconsin 53202, is an open-end
management investment company organized under the laws of the State of
Wisconsin. The FMI Woodland Fund is a series of FMI Mutual Funds, Inc.
Fiduciary Management, Inc. (the "FMI Adviser") is the investment adviser to
the FMI Woodland Fund. As the investment adviser to the FMI Woodland Fund, the
FMI Adviser provides or oversees the provision of all general management and
administration, investment advisory and portfolio management, and general
services for the FMI Woodland Fund and develops the investment programs,
selects and monitors the investment programs and results. The subadviser has
complete discretion to purchase and sell portfolio securities for the fund for
which it is acting as portfolio manager within such fund's investment
objectives, restrictions and policies, and specific strategies, if any,
developed by the FMI Adviser. The FMI Adviser's employment and termination of
subadvisers is subject to approval of the Board of Directors of FMI Mutual
Funds, Inc. The employment of a new subadviser for the Fund currently requires
the prior approval of the shareholders of that Fund. The FMI Adviser was
organized in 1980 and is an investment adviser to individuals and
institutional clients. The FMI Adviser is controlled by Ted D. Kellner. The
FMI Adviser has selected GAMCO as the subadviser to the FMI Woodland Fund. At
GAMCO, Ms. Lilly and Mr. Richard W. Jensen are the portfolio managers with
with day-to-day responsibility for the portfolio of the FMI Woodland Fund.
During the last fiscal year, the FMI Woodland Fund paid an annual
investment advisory fee equal to 1.00% of its average net assets. Out of that
amount, the FMI Adviser paid 0.75% of the FMI Woodland Fund's average net
assets to GAMCO.
Combined Fund. Following the Reorganization the combined fund will be
managed by Ms. Lilly, a co-portfolio manager of the FMI Woodland Fund, who is
also the portfolio manager of the Gabelli Woodland Fund.
Investment Advisory Agreements
Gabelli Woodland Fund. Pursuant to the investment advisory contract
("Investment Advisory Contract") initially approved by the Gabelli Woodland
Fund's sole shareholder for the Fund on December 31, 2002 and most recently
approved by the Board of Directors in February, 2005, the Gabelli 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 Gabelli Equity Series Funds. As
compensation for its services and related expenses borne by the Gabelli
Adviser, the Fund is contractually obligated to pay the Gabelli Adviser a fee
equal to 1.00% per year of the value of the Fund's average daily net assets.
Advisory Fees
For the Year Ended September 30
2004 2003
Gabelli Woodland Fund $29,230(1) $9,547(1)(2)
______________________
(1) Amount reflects advisory fees prior to reimbursement of expenses
by the Gabelli Advisor.
(2) From commencement of operations on December 31, 2002.
The Gabelli Adviser has contractually agreed to waive its investment
advisory fee and/or to reimburse expenses of the Gabelli Woodland Fund to the
extent necessary to maintain the Fund's Total Annual Fund Operating Expenses
(excluding brokerage, interest, taxes and extraordinary expenses) at certain
specified levels, which are 2.00% of average daily net assets with respect to
Class AAA shares. Pursuant to this agreement, the Gabelli Adviser reimbursed
expenses of the Fund in the amount of $115,018 for the fiscal year ended
September 30, 2004, and $124,599 for the period from the Fund's commencement of
operations on December 31, 2002 through September 30, 2003. This arrangement
will continue until at least through September 30, 2005. In addition, the Fund
has agreed, during the two-year period following any waiver or reimbursement by
the Gabelli Adviser, to repay such amount to the extent, after giving effect to
the repayment, such adjusted Total Annual Fund Operating Expenses would not
exceed 2.00% on an annualized basis for Class AAA shares.
The Investment Advisory Contract was most recently approved by the
Directors, including a majority of the Directors who are not parties to the
Investment Advisory Contract or "interested persons" (as such term is defined
in the 1940 Act) of any party thereto in February, 2005. At that meeting,
the Board of Directors reviewed the written and oral presentations provided by
the Gabelli Adviser in connection with the Directors' consideration of the
Investment Advisory Contract. The Directors also reviewed their
responsibilities under applicable law. The Directors considered, in particular,
the level of the Fund's contractual advisory fee rate and the actual total
expense ratio borne by the Fund and compared the information on these matters
to similar information for unrelated mutual funds of a comparable size and
investment program. The Board also reviewed the profitability of the contract
to the Gabelli Adviser, the Fund's absolute and comparative investment
performance and the nature and quality of the services provided to the Fund by
the Gabelli Adviser and its affiliates. The independent Directors met
separately to discuss this information. Based on their consideration of all of
the above factors, the independent Directors recommended to the full Board, and
each of the Directors present at the meeting determined, that renewal the
Investment Advisory Contract was in the best interest of the Fund and its
shareholders. In the course of arriving at such determination, the independent
Directors noted in particular the comparative investment performance of the
Fund, the experience of the Fund's portfolio manager and the level of services
provided by the Gabelli Adviser.
Under the Investment Advisory Contract, the Gabelli Adviser (1) provides
the Fund with the services of persons competent to perform such supervisory,
administrative, and clerical functions as are necessary to provide efficient
administration of the Fund, including maintaining certain books and records and
overseeing the activities of the Fund Custodian and Transfer Agent; (2)
oversees the performance of administrative and professional services provided
to the Fund by others, including the Fund's Custodian, Transfer Agent and
Dividend Disbursing Agent, as well as legal, accounting, auditing and other
services performed for the Fund; (3) provides the Fund, if requested, with
adequate office space and facilities; (4) prepares, but does not pay for,
periodic updating of the Fund's registration statement, Prospectus and SAI,
including the printing of such documents for the purpose of filings with the
SEC; (5) supervises, but does not pay for, the calculation of the net asset
value of shares of the Fund; (6) supervises the preparation of, but does not
pay for, all filings under state "Blue Sky" laws of such states or countries as
are designated by the Distributor, which may be required to register or
qualify, or continue the registration or qualification, of the Fund and/or
their shares under such laws; and (7) prepares notices and agendas for meetings
of the Board of Directors and minutes of such meetings in all matters required
by the 1940 Act to be acted upon by the Board.
The cost of calculating the Fund's net asset value is an expense payable
by the Gabelli Woodland Fund pursuant to the Investment Advisory Contract. To
the extent that a portion of the sub-administration fee is used to pay for
personnel and equipment related to calculating the net asset value, the Fund
will reimburse the Gabelli Adviser for such expenses. During the fiscal year
ended September 30, 2004, the Fund reimbursed the Gabelli Adviser $0 in
connection with the cost of computing the Fund's net asset value.
The Investment Advisory Contract provides that absent willful misfeasance,
bad faith, gross negligence or reckless disregard of its duty, the Gabelli
Adviser and its employees, officers, directors and controlling persons are not
liable to the Fund or any of its investors for any act or omission by the
Gabelli Adviser or for any error of judgment or for losses sustained by the
Fund. However, the Contract provides that the Fund is not waiving any rights it
may have with respect to any violation of law which cannot be waived. The
Contract also provides indemnification for the Gabelli Adviser and each of
these persons for any conduct for which they are not liable to the Fund. The
Investment Advisory Contract in no way restricts the Gabelli Adviser from
acting as adviser to others. The Fund has agreed by the terms of the Investment
Advisory Contract that the word "Gabelli" in its name is derived from the name
of the Gabelli Adviser which in turn is derived from the name of Mario J.
Gabelli; that such name is the property of the Gabelli Adviser for copyright
and/or other purposes; and that therefore, such name may freely be used by the
Gabelli Adviser for other investment companies, entities or products. The Fund
has further agreed that in the event that for any reason, the Gabelli Adviser
ceases to be its investment adviser, the Fund will, unless the Gabelli Adviser
otherwise consents in writing, promptly take all steps necessary to change its
name to one which does not include "Gabelli."
The Investment Advisory Contract is terminable without penalty by the
Gabelli Woodland Fund on not more than sixty days' written notice when
authorized by the Directors of the Gabelli Equity Series Fund, by the holders
of a majority, as defined in the 1940 Act, of the outstanding shares of the
Gabelli Woodland Funds, or by the Gabelli Adviser. The Investment Advisory
Contract will automatically terminate in the event of its assignment, as
defined in the 1940 Act and rules thereunder except to the extent otherwise
provided by order of the Commission or any rule under the 1940 Act and except
to the extent the 1940 Act no longer provides for automatic termination, in
which case the approval of a majority of the disinterested directors is
required for any "assignment." The Investment Advisory Contract provides in
effect, that unless terminated it will remain in effect initially for two years
and then from year to year so long as continuance of the Investment Advisory
Contract is approved annually by the Directors of the Gabelli Equity Series
Funds or the shareholders of the Gabelli Woodland Fund and in either case, by a
majority vote of the Directors who are not parties to the Investment Advisory
Contract or "interested persons" as defined in the 1940 Act of any such person
cast in person at a meeting called specifically for the purpose of voting on
the continuance of the Investment Advisory Contract.
The Sub-Administrator. The Gabelli Adviser has entered into a
Sub-Administration Agreement (the "Sub-Administration Agreement") with PFPC
Inc. (the "Sub-Administrator"), which is located at 760 Moore Road, King of
Prussia, Pennsylvania 19406. Under the Sub-Administration Agreement, the
Sub-Administrator (a) assists in supervising all aspects of the Gabelli Equity
Series Fund's operations except those performed by the Gabelli Adviser under
its advisory agreement with the Gabelli Woodland Fund; (b) supplies the Gabelli
Woodland Fund with office facilities (which may be in the Sub-Administrator's
own offices), statistical and research data, data processing services,
clerical, accounting and bookkeeping services, including, but not limited to,
the calculation of the net asset value of shares in the Gabelli Woodland Fund,
internal auditing and regulatory administration services, internal executive
and administrative services, and stationery and office supplies; (c) prepares
and distributes materials for all Gabelli Equity Series Funds Board of
Directors' Meetings including the mailing of all Board materials and collates
the same materials into the Board books and assists in the drafting of minutes
of the Board Meetings; (d) prepares reports to Gabelli Woodland Fund
shareholders, tax returns and reports to and filings with the SEC and state
"Blue Sky" authorities; (e) calculates the Gabelli Woodland Fund's net asset
value per share and provides any equipment or services necessary for the
purpose of pricing shares or valuing the Fund's investment portfolios; (f)
provides compliance testing of all Fund activities against applicable
requirements of the 1940 Act and the rules thereunder, the Code, and the
Gabelli Woodland Fund's investment restrictions; (g) furnishes to the Gabelli
Adviser such statistical and other factual information and information
regarding economic factors and trends as the Gabelli Adviser from time to time
may require; and (h) generally provides all administrative services that may be
required for the ongoing operation of the Gabelli Woodland Fund in a manner
consistent with the requirements of the 1940 Act.
For the services it provides, the Gabelli Adviser pays the
Sub-Administrator an annual fee based on the value of the aggregate average
daily net assets of all funds under its administration managed by the Gabelli
Adviser as follows: up to $10 billion: -.0275%; $10 billion to $15 billion:
-.0125%; over $15 billion: -.0100%. The Sub-Administrator's fee is paid by the
Gabelli Adviser.
FMI Woodland Fund.
Investment Advisory Agreement. Pursuant to an investment advisory
agreement entered into between FMI Mutual Funds, Inc., on behalf of the FMI
Woodland Fund, and the FMI Adviser (the "Management Agreement"), the FMI
Adviser provides consulting, investment and administrative services to the FMI
Woodland Fund. The specific investments for the FMI Woodland Fund will be made
by the FMI Adviser or one or more portfolio managers selected for such Fund by
the FMI Adviser. The FMI Adviser has overall responsibility for assets under
management, provides overall investment strategies and programs for the FMI
Woodland Fund, selects subadvisors, allocates assets among the portfolio
managers and monitors and evaluates the subadvisers' performance. The FMI
Adviser and each of the FMI Funds, including the FMI Woodland Fund, enter into
separate sub-advisory agreements with such Fund's subadvisers. The FMI Adviser
pays the FMI Woodland Fund's portfolio managers a fee equal to 0.75% of the
average net assets of the Fund. The FMI Adviser also provides the FMI Woodland
Fund with office space, equipment and personnel necessary to operate and
administer such Fund's business and to supervise the provision of services by
third parties such as the transfer agent and the custodian. The FMI Adviser
receives an annual investment advisory fee equal to 1.00% of the Woodland
Fund's average net assets. During the fiscal years ended June 30, 2004, 2003
and 2002, the FMI Woodland Fund paid advisory fees of $287,027, $326,812 and
$394,483, respectively, pursuant to the Management Agreement or an investment
advisory agreement substantially identical to the Management Agreement. The FMI
Woodland Fund pays all of its own expenses not assumed by the FMI Adviser or
its administrator including, without limitation, the cost of preparing and
printing its registration statements required under the Securities Act of 1933
and the Act and any amendments thereto, the expense of registering its shares
with the SEC and in the various states, the printing and distribution costs of
prospectuses mailed to existing investors, reports to investors, reports to
government authorities and proxy statements, fees paid to directors who are not
interested persons of the FMI Adviser, interest charges, taxes, legal expenses,
association membership dues, auditing services, insurance premiums, brokerage
commissions and expenses in connection with portfolio transactions, fees and
expenses of the custodian of the FMI Woodland Fund's assets, printing and
mailing expenses and charges and expenses of dividend disbursing agents,
accounting services agents, registrars and stock transfer agents. The FMI
Adviser has undertaken to reimburse the Fund to the extent that the aggregate
annual operating expenses exceed 1.3%.
Set forth below is a table showing the ratio of expenses after
reimbursements to net assets for the past three fiscal years:
Ratio of Expenses After Reimbursement to Average Net Assets
-----------------------------------------------------------
FMI Woodland Fund (2004) 1.30% (2003) 1.30% (2002) 1.29%
GAMCO, the FMI Woodland Fund's sole sub-adviser, has agreed to reimburse
the FMI Adviser in an amount equal to 75% of the reimbursement made by the FMI
Adviser with respect to the FMI Woodland Fund. The FMI Woodland Fund monitors
its expense ratio on a monthly basis. If the accrued amount of the expenses of
the Fund exceeds the expense limitation, such Fund creates an account
receivable from the FMI Adviser for the amount of such excess. In such a
situation the monthly payment of the FMI Adviser's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of such Fund's fiscal year if accrued expenses thereafter fall below this
limit. During the fiscal years ended June 30, 2004, 2003 and 2002, the FMI
Woodland Fund was reimbursed $53,089, $66,610 and $61,807, respectively, for
excess expenses.
In approving the existing investment advisory agreement and sub-advisory
agreement, the FMI Board of Directors considered a number of factors,
including, but not limited to, the following: the nature and quality of the
services offered by the FMI Adviser and GAMCO as sub-adviser; the
reasonableness of the compensation payable to the FMI Adviser and GAMCO; the
personnel, operations and financial condition of the FMI Advisers and GAMCO;
and the investment management capabilities, methodologies and performance of
the FMI Adviser and GAMCO; and the FMI Woodland Fund's expense ratio. Based
upon its review, the Board concluded that the investment methodologies of the
FMI Adviser and GAMCO would fit with the FMI Woodland Fund's investment
policies, and that the FMI Adviser and the sub-advisers had the capabilities,
resources and personnel necessary to manage the Fund effectively. Further, the
Board concluded that based on the services the FMI Adviser and GAMCO would be
required to render under the investment advisory agreement and the sub-advisory
agreement, that the compensation to be paid to the FMI Adviser and GAMCO was
fair and reasonable. Thus, the Board of Directors concluded that it would be in
the best interests of the Fund to continue the investment advisory agreement
and the sub-advisory agreement.
Sub-Advisory and Administration Agreements. GAMCO, operating through its
Woodland Partners division ("WP"), is the sole portfolio manager of the FMI
Woodland Fund. GAMCO has entered into a separate sub-advisory contract with the
Fund and the FMI Adviser (the "Sub-Advisory Agreement"). Pursuant to the
Sub-Advisory Agreement, GAMCO makes specific portfolio investments in
accordance with such Fund's investment objective and GAMCO's investment
approach and strategies. GAMCO may be terminated by the FMI Adviser subject to
prior approval by the Board of Directors of the FMI Funds. GAMCO is paid by the
FMI Adviser (not the Fund). GAMCO's activities for the Fund are subject to
general supervision by the FMI Adviser and the Board of Directors of the FMI
Funds. Although the FMI Adviser and the Board do not evaluate the investment
merits of GAMCO's specific securities selections, they do review the
performance of each portfolio manager relative to the selection criteria.
The FMI Adviser is also the Administrator to the FMI Woodland Fund.
Pursuant to a separate administration agreement entered into between the Fund
and the FMI Adviser (the "Administration Agreement"), the FMI Adviser prepares
and maintains the books, accounts and other documents required by the Act,
calculates the Fund's net asset value, responds to shareholder inquiries,
prepares the Fund's financial statements, prepares reports and filings with the
SEC and with state Blue Sky authorities, furnishes statistical and research
data, clerical, accounting and bookkeeping services and stationery and office
supplies, keeps and maintains the Fund's financial accounts and records and
generally assists in all aspects of the Fund's operations. The FMI Adviser at
its own expense and without reimbursement from the Fund, furnishes office space
and all necessary office facilities, equipment and executive personnel for
performing the services required to be performed by it under the Administration
Agreement. For the foregoing, the FMI Adviser receives from the Fund a fee of
0.2% per annum on the first $25,000,000 of the daily net assets of such Fund,
0.1% per annum on the next $20,000,000 of the daily net assets of such Fund and
0.05% per annum of the daily net assets of such Fund over $45,000,000, subject
to a fiscal year minimum of $20,000. The FMI Adviser separately charges the
Fund varying fees for blue sky filings. During the fiscal years ended June 30,
2004, 2003 and 2002, the FMI Woodland Fund paid the FMI Adviser $55,179,
$61,876 and $71,306, respectively pursuant to such Fund's Administration
Agreement.
The FMI Woodland Fund's Sub-Advisory Agreement will continue in effect for
as long as the continuance is specifically approved at least annually (i) by
the Board of Directors of the FMI Funds, or, in the case of the Management
Agreement, by the vote of a majority (as defined in the Act) of the outstanding
shares of the a Fund, and (ii) by the vote of a majority of the directors of
the FMI Funds who are not parties to the Management Agreement or Sub-Advisory
Agreement relating to the FMI Woodland Fund or interested persons of the FMI
Adviser or GAMCO, cast in person at a meeting called for the purpose of voting
on such approval. The Administration Agreements will remain in effect until
terminated. The Management Agreement provides that it may be terminated at any
time without the payment of any penalty, by the Board of Directors of the FMI
Funds or by vote of a majority of the FMI Woodland Fund's shareholders, on 60
days written notice to the FMI Adviser and by the FMI Adviser on the same
notice to the Fund, and that it shall be automatically terminated if it is
assigned. The Sub-Advisory Agreement provides that it may be terminated by any
party upon giving 30 days written notice to the other parties and that it shall
be automatically terminated if it is assigned. The Administration Agreement
provides that it may be terminated at any time without the payment of any
penalty by the Board of Directors of the FMI Funds on 90 days written notice to
the FMI Adviser and by the FMI Adviser on the same notice to the FMI Woodland
Fund. The Management Agreement, the Sub-Advisory Agreement and the
Administration Agreement provide that the FMI Adviser and GAMCO shall not be
liable to either of the FMI Woodland Fund or its shareholders for anything
other than willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties. The Management Agreement, the
Sub-Advisory Agreement and the Administration Agreement also provide that the
FMI Adviser and GAMCO and their respective officers, directors and employees,
may engage in other businesses, devote time and attention to any other business
whether of a similar or dissimilar nature, and render services to others.
Comparison of the Advisory Agreements
Following the Reorganization, the combined fund will be managed by the
Gabelli Adviser pursuant to the investment advisory agreement currently in
place for the Gabelli Woodland Fund, the major elements of which are described
above. The following discussion offers a summary of key similarities and
differences between the Gabelli and the FMI advisory agreements.
As discussed above, under each of the Gabelli Advisory Agreement and FMI
Advisory Agreement, the Gabelli Adviser and FMI Adviser charge the same fee.
Following the Reorganization, the Gabelli Woodland Fund fee structure will
apply.
The Gabelli Adviser performs its services directly to the Gabelli Woodland
Fund, whereas the FMI Advisor performs manager supervision services for the FMI
Woodland Fund and contracts with GAMCO for portfolio advisory services. Both
the Gabelli Adviser and the FMI Adviser are responsible for administration
services to their respective funds although the Gabelli Adviser subcontracts a
portion of such services to PFPC, Inc. at its own expense whereas the FMI
Adviser charges an additional 0.2% of average daily net assets for
administration services.
Current and Pro Forma Operating Expenses
The following comparative fee tables describe the fees that you may incur
for buying and holding Class AAA Shares of the Gabelli Woodland Fund versus
shares of the FMI Woodland Fund and of the Combined Fund as of March 31, 2005.
The pro forma tables show the combined fund's fees and expenses assuming that
the Reorganization is approved by the shareholders of the FMI Woodland Fund.
Gabelli FMI Combined
Woodland Woodland Fund
Fund Fund (pro forma) (5)
--------- --------- --------------
Redemption Fees (for shares held less than 7 days) payable to the Fund(1)...... 2.00% - 2.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees................................................................ 1.00% 1.00% 1.00%
Distribution (Rule 12b-1) Expenses(2).......................................... 0.25% 0% 0.25%
Other Expenses................................................................. 2.76% 0.75% 0.75% (4)
Total Annual Fund Operating Expenses........................................... 4.01% (3) 1.75% 2.00% (3)
Fee Waiver and Expense Reimbursement........................................... (2.01)%(3) (0.45)% (3) -
Net Annual Operating Expenses.................................................. 2.00% (3) 1.30% 2.00% (3)
_______________
(1) The redemption fee applies to Gabelli Woodland Fund shares purchased on or
after November 1, 2004. The FMI transfer agent charges a fee of $15.00 for
each wire redemption.
(2) Due to the payment of Rule 12b-1 fees, long-term shareholders may
indirectly pay more than the equivalent of the maximum permitted front-end
sales charge.
(3) The Gabelli Adviser has contractually agreed to waive its investment
advisory fee and/or to reimburse expenses of the Fund to the extent
necessary to maintain the Fund's Total Annual Fund Operating Expenses
(excluding brokerage, interest, taxes and extraordinary expenses) at 2.00%
on an annualized basis for Class AAA shares. This arrangement will
continue until at least through September 30, 2005. In addition, the Fund
has agreed, during the two-year period following any waiver or
reimbursement by the Gabelli Adviser, to repay such amount to the extent,
after giving effect to the repayment, such adjusted Total Annual Fund
Operating Expenses would not exceed 2.00% on an annualized basis for Class
AAA shares. During the fiscal year ended June 30, 2004, Fiduciary
Management Inc. reimbursed the FMI Woodland Fund to the extent necessary
to ensure that Total Annual Fund Operating Expenses did not exceed 1.30%.
(4) Amount reduced to current Gabelli Woodland Fund rate due to incremental
assets reducing the percentage of fixed costs to new average assets.
(5) The Gabelli Woodland Fund will be the accounting survivor of the
Reorganization.
Gabelli Woodland Fund Expense Example:
This example is intended to help you compare the cost of investing in
Class AAA Shares of the Fund with the cost of investing in other mutual funds.
The example assumes (1) you invest $10,000 in the Fund for the time periods
shown, (2) you redeem your shares at the end of those periods, (3) your
investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------ ------- --------
Gabelli Woodland Fund $203 $1,037 $1,888 $4,090
For more detailed information, please see the Gabelli Equity Series Funds
Prospectus incorporated herein by reference.
_______________
This Example assumes the expense reimbursement obligations of the
investment adviser are in effect for only the first year. Thereafter
this Example does not reflect any expense reimbursement obligations.
FMI Woodland Fund Expense Example:
This Example is intended to help you compare the cost of investing in the
FMI Woodland Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the FMI Woodland Fund for
the time periods indicated and then redeem all of your shares at the end of
these periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
FMI Woodland Fund $132 $506 $904 $2,018
_______________
This Example assumes the expense reimbursement obligations of the
investment adviser are in effect for only the first year. Thereafter
this Example does not reflect any expense reimbursement obligations.
Combined Fund Expense Example:
This example is intended to help you compare the cost of investing in
Class AAA Shares of the Fund with the cost of investing in other mutual funds.
The example assumes (1) you invest $10,000 in the Fund for the time periods
shown, (2) you redeem your shares at the end of those periods, (3) your
investment has a 5% return each year and (4) the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Combined Fund $203 $627 $1,078 $2,327
Capitalization
The following table sets forth as of March 31, 2005: (i) the unaudited
capitalization of the Gabelli Woodland Fund; (ii) the unaudited capitalization
of the FMI Woodland Fund; and (iii) the unaudited pro forma combined
capitalization of the Gabelli Woodland Fund assuming the Reorganization has
been completed. The capitalizations are likely to be different at the time of
effectiveness of the Reorganization as a result of daily share purchase and
redemption activity.
Pro Forma
FMI Woodland Gabelli Woodland Combined
Fund Fund Fund (2)
---------------- ---------------- --------------
Fund Total Net Assets $ 9,507,415 $ 4,563,638 $ 14,071,053
---------------------
9,507,415 Class AAA 4,442,950 13,950,365
Class A 74,877 74,877
Class B 146 146
Class C 45,665 45,665
Fund Shares Outstanding 693,212
-----------------------
701,137(1) Class AAA 327,579 1,028,716
Class A 5,524 5,524
Class B 11 11
Class C 3,418 3,418
Fund Net Asset Value Per Share $13.72
------------------------------
Class AAA $ 13.56 $ 13.56
Class A 13.55 13.55
Class B 13.84 13.84
Class C 13.36 13.36
(1) Number represents the adjusted shares of the FMI Woodland based on the NAV of Gabelli
Woodland Class AAA shares.
(2) The Gabelli Woodland Fund will be the accounting survivor of the Reorganization.
Performance Information
The following tables represents the average total returns for the FMI Woodland
Fund and for the Gabelli Woodland Fund.
Gabelli Woodland Fund. The performance table below illustrates the past
performance of an investment in the Gabelli Woodland Fund. The Fund's past
performance does not necessarily indicate how the Gabelli Woodland Fund will
perform in the future.
GABELLI WOODLAND FUND (for the Period Ended December 31)
[GRAPHIC OMITTED]
During the period shown in the bar chart, the highest return for a quarter was
14.11% (quarter ended December 31, 2003) and the lowest return for a quarter
was (8.00)% (quarter ended March 31, 2003).
Average Annual Total Returns Past Since December 31,
(for the period ended December 31, 2004) One Year 2002*
------------------------------------------------------------- ------------ ------------------
The Gabelli Woodland Fund Class AAA Shares
Return Before Taxes..................................... 20.57% 20.59%
Return After Taxes on Distributions..................... 18.35% 19.47%
Return After Taxes On Distributions
and Sale of Fund Shares............................. 15.47% 16.26%
Russell 2002 Index**......................................... 18.33% 32.10%
_______________
* From December 31, 2002, the date that the Fund commenced investment
operations.
** The Russell 2000 Index is an unmanaged index consisting of a broad base of
common stocks. The performance of the index does not include expenses or
fees.
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. In some instances, the "Return After Taxes on Distributions and
Sale of Fund Shares" may be greater than "Return Before Taxes" because the
investor is assumed to be able to use the capital loss of the sale of Fund
shares to offset other taxable gains. Actual after-tax returns depend on the
investor's tax situation and may differ from those shown. After-tax returns
shown are not relevant to investors who hold their Fund shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts.
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on the investor's tax situation
and may differ from those shown, and the after-tax returns shown are not
relevant to investors who hold their shares through tax-deferred arrangements
such as 401(k) plans or individual retirement accounts.
FMI Woodland Fund. The performance table below illustrates the past
performance of an investment in the FMI Woodland Fund. The Fund's past
performance does not necessarily indicate how the FMI Woodland Fund will
perform in the future.
FMI Woodland Fund
(Total return per calendar year)
[GRAPHIC OMITTED]
_______________
Note: During the seven year period shown on the bar chart, the Fund's highest
total return for a quarter was 22.26% (quarter ended December 31, 1998)
and the lowest total return for a quarter was -24.09% (quarter ended
September 30, 1998).
The Fund's 2004 year to date total return is 6.84% (January 1, 2004
through the quarter ended September 30, 2004).
For the 1997-2000 calendar years, Resource Capital Advisers, Inc. was
the investment adviser to the FMI Woodland Fund. On October 15, 2001,
Fiduciary Management, Inc. became the investment adviser to the Fund.
From 1997 to December 2002, the portfolio manager to the FMI Woodland
Fund was Woodland Partners LLC. In December 2002, GAMCO Investors, Inc.,
operating through its Woodland Partners division, became the portfolio
manager to the Fund when GAMCO Investors acquired the mutual fund
investment advisory business of Woodland Partners LLC.
Since the inception
Average Annual Total Returns Past Past of the Fund
(for the periods ending December 31, 2004) Year 5 Years (September 16, 1996)
------------------------------------------------------- ---------- ----------- ----------------------
FMI Woodland Fund (before taxes) 22.07% 10.91% 9.56%
FMI Woodland Fund (after taxes on distributions)(1) 18.03% 9.18% 8.42%
FMI Woodland Fund (after taxes on distributions
and sale of Fund shares)(1) 18.56% 8.69% 7.89%
Russell 2000 Index 18.33% 6.61% 9.49%
_______________
(1) The after-tax returns are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an investor's
tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Fund shares through tax deferred
arrangements, such as 401(k) plans or individual retirement accounts. The
Fund's return after taxes on distributions and sale of Fund shares may be
higher than its return before taxes and after taxes on distributions
because it may include a tax benefit resulting from capital losses that
would have been incurred.
The combined fund will be named The Gabelli Woodland Small Cap Value Fund
following the Reorganization. The Gabelli Woodland Fund will be the accounting
survivor following the Reorganization. The combined fund will assume the
objective, policies, and service arrangements of the Gabelli Woodland Fund and
the performance history of the Gabelli Woodland Fund at the closing of the
Reorganization.
Distributor
FMI Woodland Fund. The FMI Woodland Fund does not currently employ a
distributor.
Gabelli Woodland Fund. The Gabelli Woodland Fund has entered into a
Distribution Agreement with Gabelli & Company, Inc., a New York corporation
which is an indirect majority owned subsidiary of GAMI, having principal
offices located at One Corporate Center, Rye, New York 10580-1422.
Distribution and Service Fees
Gabelli Woodland Fund. The Gabelli Woodland Fund has adopted a Plan of
Distribution (a "Plan") pursuant to Rule 12b-1 under the 1940 Act on behalf of
the Fund's Class AAA Shares. Payments may be made by the Fund under the Plan
for the purpose of financing any activity primarily intended to result in the
sales of shares in the class to which such Plan relates as determined by the
Board of Directors. Such activities typically include advertising; compensation
for sales and marketing activities of the Distributor and other banks,
broker-dealers and service providers; shareholder account servicing; production
and dissemination of prospectuses and sales and marketing materials; and
capital or other expenses of associated equipment, rent, salaries, bonuses,
interest and other overhead. To the extent any activity is one which the Fund
may finance without a distribution plan, the Fund may also make payments to
finance such activity outside of the Plan and not subject to their limitations.
Payments under the Plan are not dependent on distribution expenses actually
incurred by the Distributor. The distribution and service fees for Gabelli AAA
shares is 25 basis points.
The Plan has been implemented by written agreement between the Fund and/or
the Distributor and each person (including the Distributor) to which payments
may be made. Administration of the Plan is regulated by Rule 12b-1 under the
1940 Act which includes requirements that the Board of Directors receive and
review, at least quarterly, reports concerning the nature and qualification of
expenses for which payments are made, that the Board of Directors approves all
agreements implementing the Plan and that the Plan may be continued from year
to year only if the Board of Directors concludes, at least annually, that
continuation of the Plan is likely to benefit shareholders. To the extent any
of these payments are based on allocations by the Distributor, the Fund may be
considered to be participating in joint distribution activities with other
funds distributed by the Distributor. For the fiscal year ended September 30,
2004, the Gabelli Woodland Fund incurred distribution costs of $7,876 to the
Distributor for underwriting. The Plan compensates the Distributor regardless
of its expense. For the fiscal year ended September 30, 2004, the Distributor
identified expenditures for the Gabelli Woodland Fund of approximately $2,200
for advertising and promotion, $11,900 for printing, postage and stationery,
$3,300 for overhead support expenses, $48,800 for salaries of personnel of the
Distributor and $2,000 for third party servicing fees. Due to the possible
continuing nature of Rule 12b-1 payments, long-term investors may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
NASD, Inc.
The amounts included in the previous paragraph as third party servicing
fees include amounts paid to the providers of various programs that make shares
available to their customers. Subject to tax limitations and approvals by the
Board of Directors on a Fund-by-Fund basis, the Fund also makes payments to the
providers of these programs, out of its assets other than 12b-1 payments, in
amounts not greater than savings of expenses the Fund would otherwise incur in
maintaining shareholder accounts for those who invest in the Fund directly
rather than through these programs. The Gabelli Adviser and its affiliates may
also pay for all or a portion of these program's charges out of their financial
resources other than 12b-1 fees.
No independent Director had a direct or indirect financial interest in the
operation of the Plan or related agreements. Those interested persons who
beneficially own stock in affiliates of the Gabelli Adviser or the Distributor
or are employed by the Gabelli companies may be deemed to have an indirect
financial interest.
FMI Woodland Fund. The FMI Woodland Fund has adopted a plan of
distribution pursuant to Rule 12b-1 under the 1940 Act (the "Plan") in
anticipation that such Fund will benefit from the Plan through increased sales
of shares, thereby reducing such Fund's expense ratio and providing an asset
size that allows the FMI Adviser greater flexibility in management. The Plan
provides that the Fund may incur certain costs which may not exceed a maximum
amount equal to 0.25% per annum of such Fund's average daily net assets.
However, the Fund does not intend to utilize the Plan or pay any 12b-1 fees
during the fiscal year ending June 30, 2005. Payments made pursuant to the Plan
may only be used to pay distribution expenses incurred in the current year.
Amounts paid under the Plan by the Fund may be spent by such Fund on any
activities or expenses primarily intended to result in the sale of shares of
such Fund, including but not limited to, advertising, compensation for sales
and sales marketing activities of financial institutions and others, such as
dealers or distributors, shareholder account servicing, the printing and
mailing of prospectuses to other than current shareholders, and the printing
and mailing of sales literature. Distribution expenses will be authorized by
the officers of the Corporation as the Fund does not currently employ a
distributor. To the extent any activity financed by the Plan is one which the
Fund may finance without a 12b-1 plan, such Fund may also make payments to
finance such activity outside of the Plan and not be subject to its
limitations.
The Plan may be terminated by the FMI Woodland Fund at any time by a vote
of the directors of the Corporation who are not interested persons of the
Corporation and who have no direct or indirect financial interest in the Plan
or any agreement related thereto (the "Rule 12b-1 Directors") or by a vote of a
majority of the outstanding shares of such Fund. Messrs. Allen, Dalton,
Gunnlaugsson and Shain are currently the Rule 12b-1 Directors. Any change in
the Plan that would materially increase the distribution expenses of a
particular Fund provided for in the Plan requires approval of the shareholders
of such Fund and the Board of Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of directors who are
not interested persons of the Corporation will be committed to the discretion
of the directors of the Corporation who are not interested persons of the
Corporation. The Board of Directors of the Corporation must review the amount
and purposes of expenditures pursuant to the Plan quarterly as reported to it
by a distributor, if any, or officers of the Corporation. The Plan will
continue in effect for as long as its continuance is specifically approved at
least annually by the Board of Directors, including the Rule 12b-1 Directors.
The Fund did not incur any distribution costs pursuant to the Plan during the
fiscal year ended June 30, 2004.
Following the Reorganization, the combined fund will use the Gabelli
Woodland Fund Distribution Plan, as described above.
Purchase, Valuation, Redemption and Exchange of Shares
Procedures for the purchase, exchange and redemption of shares of the FMI
Woodland Fund and the Gabelli Woodland Fund are similar. You should refer to
the Gabelli Woodland Fund's Class AAA shares prospectus (a copy accompanies
this Combined Prospectus/Proxy Statement) and SAI and the FMI Woodland Fund's
prospectus and SAI for the specific procedures applicable to purchases,
exchanges and redemptions of shares. In addition to the policies described
below, certain fees may be assessed in connection with the purchase, redemption
and exchange of shares. (See "Comparison of the FMI Woodland Fund and the
Gabelli Woodland Fund--Current and Pro Forma Operating Expenses.")
Purchasing Shares
Gabelli Woodland Fund. Shareholders of the Gabelli Woodland Fund may
purchase shares of the Gabelli Woodland Fund on any day the NYSE is open for
trading. Shares may be purchased through the distributor; directly from the
transfer agent by means of mailing a completed subscription form along with a
check, money order or wire transfer; or through registered broker-dealers that
have entered into selling agreements with the distributor.
FMI Woodland Fund. Shareholders of the FMI Woodland Fund may purchase
shares of the FMI Woodland Fund through a financial intermediary or directly
from the transfer agent by means of a purchase application which may be mailed
to the transfer agent along with a check or wire transfer.
The Gabelli Woodland Fund shares and the FMI Woodland Fund shares may be
purchased in a similar manner. Following the Reorganization, shareholders may
purchase shares of the combined fund using the same procedures currently
applicable to the Gabelli Woodland Fund, as described above.
Exchanging Shares
Gabelli Woodland Fund. Shares of the Gabelli Woodland Fund may be
exchanged for shares of the same class of another fund or shares of a money
market fund managed by the Gabelli Adviser or its affiliates based on their
relative net asset values. Exchanges are not subject to a minimum, but an
initial purchase of another fund must meet that fund's minimum initial
investment.
FMI Woodland Fund. Shares of the FMI Woodland Fund may be exchanged for
shares of the FMI Common Stock Fund, FMI Focus Fund, FMI Large Cap Fund, FMI
Provident Trust Strategy Fund, and First American Prime Obligations Fund at
their relative net asset values. FMI Common Stock Fund, FMI Focus Fund, FMI
Provident Trust Strategy Fund and FMI Large Cap Fund are other mutual funds
advised by the FMI Adviser. An affiliate of U.S. Bancorp Fund Services, LLC
advises First American Prime Obligations Fund, a money market mutual fund.
Neither U.S. Bancorp Fund Services, LLC nor First American Prime Obligations
Fund is affiliated with the Fund or the FMI Adviser. Exchanges are subject to a
$1000 minimum.
Following the Reorganization, shareholders may redeem their shares of the
Gabelli Woodland Fund using the same procedures currently applicable to the
Gabelli Woodland Fund, as described above. Redemption fees will be waived for
the FMI Woodland Fund shareholders with respect to the Gabelli Woodland Fund
shares received in connection with the Reorganization.
Redeeming Shares
Gabelli Woodland Fund shareholders may place redemption orders on any day
the NYSE is open for trading. Shares may be redeemed by contacting the Gabelli
distributor, by sending a letter of instruction to the transfer agent or by
telephone (800-GABELLI) or internet (www.gabelli.com). Redemption fees for
shares purchased and held for less than 7 days are 2.00%. The Fund redeems its
shares at the net asset value next determined after the Fund receives a
redemption request in proper form.
FMI Woodland Fund shareholders may redeem their shares by sending a letter
of instruction directly to the Fund's transfer agent, along with share
certificates (if any) and a stock power. If the shares were held by a financial
intermediary, the shares must be redeemed by contacting such intermediary.
Following the Reorganization, shareholders may redeem their shares of the
combined fund using the same procedures currently applicable to the Gabelli
Woodland Fund, as described in the Gabelli Equity Series Funds Prospectus.
Determining Net Asset Value
The price at which investors purchase shares of each Fund and at which
shareholders redeem shares of each Fund is called its net asset value.
Gabelli Woodland Fund. The net asset value per share of the Gabelli
Woodland Fund's Class AAA Shares is calculated on each day the NYSE is open for
trading. The net asset value per share of the Fund's Class AAA Shares is
determined as of the close of regular trading on the NYSE, normally 4:00 p.m.,
Eastern Time. Net asset value per share is computed by dividing the value of a
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) attributable to its Class AAA shares by the total number of Class
AAA Shares outstanding at the time the determination is made. The Fund uses
market quotations in valuing its portfolio securities. Short-term investments
that mature in 60 days or less are valued at amortized cost, which the
Directors believe represents fair value. The price of Fund shares for the
purpose of purchase and redemption orders will be based upon the calculation of
net asset value per share next made as of a time after the time as of which the
purchase or redemption order is received in proper form.
FMI Woodland Fund. The FMI Woodland Fund normally calculates its net asset
value as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern Time) on each day the New York Stock Exchange is
open for trading. The New York Stock Exchange is closed on holidays and
weekends. The Fund calculates its net asset value based on the market prices of
the securities (other than money market instruments) it holds. The Fund values
most money market instruments it holds at their amortized cost. The Fund will
process purchase and redemption orders that it receives prior to the close of
regular trading on a day that the New York Stock Exchange is open at the net
asset value determined later that day. It will process purchase and redemption
orders that it receives after the close of regular trading at the net asset
value determined at the close of regular trading on the next day the New York
Stock Exchange is open.
The Funds calculate NAV in a substantially similar manner. However, for
purposes of valuation, the FMI Woodland Fund uses the latest bid price if no
last sale is available, whereas the Gabelli Woodland Fund uses the average of
the closing bid and asked prices, i.e. the mean price. The FMI Woodland Fund
uses the latest bid price for over-the-counter securities, whereas, for all
securities (including U.S. over-the-counter market holdings), the Gabelli
Woodland Fund uses the last quoted sale price or if there are no sales that
day, the average of the closing bid and asked prices, i.e. the mean price. The
difference in valuation policies for the FMI Woodland Fund and the Gabelli
Woodland Fund did not have any impact on the NAV calculated as of March 31,
2005 although such difference could have an impact on the NAV calculated for
purposes of the Reorganization.
Portfolio turnover for the Gabelli Woodland Fund was 15.4 for the six
months ended March 2005. Portfolio turnover for the FMI Woodland Fund was
22.65% for the period from July to March 31, 2005.
Following the Reorganization, NAV will be determined in a manner
consistent with the Gabelli Woodland Fund's procedures, as described above.
Other Service Providers
Gabelli Woodland Fund. State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, is the custodian for the Gabelli Woodland
Fund's cash and securities. Boston Financial Data Services, Inc., an affiliate
of State Street, located at The BFDS Building, 66 Brooks Drive, Braintree, MA
02184, performs the shareholder services on behalf of the custodian and acts
as the Fund's transfer agent and dividend disbursing agent. Skadden, Arps,
Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036, serves
as Gabelli Equity Series Funds, Inc.'s legal counsel. Ernst & Young LLP has
been appointed independent registered public accounting firm for the Fund, and
is located at 5 Times Square, New York, NY 10036. To implement the Fund's
12b-1 Plans, the Fund has entered into a Distribution Agreement with Gabelli &
Company, Inc., a New York corporation which is an indirect majority owned
subsidiary of GBL, having principal offices located at One Corporate Center,
Rye, New York 10580-1422.
FMI Woodland Fund. U.S. Bank, N.A., 425 Walnut Street, Cincinnati, OH
45202, acts as custodian for the Fund. U.S. Bancorp Fund Services LLC, an
affiliate of U.S. Bank, also acts as the Fund's transfer agent and dividend
disbursing agent. Its address is 615 East Michigan Street, Milwaukee, Wisconsin
53202. PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Suite 1500,
Milwaukee, Wisconsin 53202, currently serves as the independent auditors for
the Corporation and has so served since the fiscal year ended September 30,
1989.
Following the Reorganization, the Gabelli Woodland Fund's current service
providers will service the combined fund.
COMPARATIVE INFORMATION ON SHAREHOLDER
RIGHTS AND OBLIGATIONS
While the FMI Woodland Fund and the Gabelli Woodland Fund are classes of
different entities organized under the law of different states and, thus,
governed by different organizational documents and different state laws, the
Reorganization will not result in material differences in shareholder rights.
The shares of the Gabelli Woodland Fund to be distributed to shareholders of
the FMI Woodland Fund will generally have the same legal characteristics as the
shares of the FMI Woodland Fund with respect to such matters as voting rights,
accessibility, and transferability.
Additional information concerning the attributes of the shares issued by
each of the Funds is included in their respective Prospectuses and statements
of additional information, which are incorporated herein by reference.
The FMI Woodland Fund is a class of shares of a Wisconsin business
corporation, and the Gabelli Woodland Fund is a class of shares of a Maryland
business corporation. Each is governed by its own separate charter. Under their
charters, the Gabelli Woodland Fund and the FMI Woodland Fund are each
authorized to issue an unlimited number of common shares with a par value of
$0.001 per share. The Boards of the corporations of which the FMI Woodland Fund
and Gabelli Woodland Fund are separate classes may, without limitation,
classify or reclassify any unissued shares of the FMI Woodland Fund or the
Gabelli Woodland Fund into any number of additional classes of shares. The
Boards of the two corporations may also, without limitation, classify or
reclassify any unissued shares into one or more additional classes, each with
its own assets and liabilities. The Gabelli Woodland Fund offers five classes
of shares (designated as AAA, A, B, C and I shares). The FMI Woodland Fund
offers a single class of shares.
Each of the FMI Woodland Fund and the Gabelli Woodland Fund will continue
indefinitely until terminated.
With respect to each class of shares of the two corporations, shares of
the same class within such class have equal dividend, distribution,
liquidation, and voting rights, and fractional shares have those rights
proportionately. Each class of shares of the two corporations bears its own
expenses related to its distribution of shares (and other expenses such as
shareholder or administrative services). The voting requirements on mergers,
sales of assets, amendments to the charter and other extraordinary matters are
similar.
Unless (i) a matter only affects the interests of one or more class or
classes (in which case only shareholders of the affected class or classes are
entitled to vote) or (ii) required by applicable federal or state law, all
shares entitled to vote on any matter submitted to a vote of any class of
shareholders of the Gabelli Woodland Fund or of the FMI Woodland Fund are voted
in the aggregate and not by class.
There are no preemptive rights in connection with shares of either
corporation. When issued in accordance with the provisions of their respective
prospectuses (and, in the case of shares of the Gabelli Woodland Fund issued in
the provisions of the Reorganization Plan), all shares are fully paid and
non-assessable.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN RIGHTS OF SHAREHOLDERS UNDER
THE CHARTER DOCUMENTS GOVERNING THE FMI WOODLAND FUND AND THE GABELLI WOODLAND
FUND AND APPLICABLE STATE LAW, AND IS NOT A COMPLETE DESCRIPTION OF PROVISIONS
CONTAINED IN THOSE SOURCES. SHAREHOLDERS SHOULD REFER TO THE PROVISIONS OF
THOSE DOCUMENTS AND STATE LAW DIRECTLY FOR A MORE THOROUGH DESCRIPTION.
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about the Gabelli
Woodland Fund. This information is intended to help you understand the Fund's
financial performance for the life of the fund. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an
investment in the Gabelli Woodland Fund (assuming reinvestment of all dividends
and distributions). The year end information has been audited by Ernst & Young
LLP, whose report, along with the Gabelli Woodland Fund's financial statements,
are included in the SAI or annual report, which is available upon request.
The Gabelli Woodland Fund
Financial Highlights
-------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
Income from
Investment Operations Distributions
----------------------------------------------- ---------------------------
Net Asset Net Realized Total Net Net Asset
Period Value, Net and Unrealized from Realized Value,
Ended Beginning Investment Gain/(Loss) on Investment Gain on Total End of Total
September 30 of Period Income/(Loss)(d) Investments Operations Investments Distributions Period Return+
------------ --------- ---------------- ----------- ---------- ----------- ------------- ------ -------
Class AAA
2004 $10.58 $(0.14) $2.38 $2.24 $(0.03) $(0.03) $12.79 21.22%
2003(a) 10.00 (0.07) 0.65 0.58 -- -- 10.58 5.80
(CONTINUATION OF TABLE)
Ratios to Average Net Assets/Supplemental Data
-------------------------------------------------------
Net Assets Expenses
Period End Net Net of Expenses Before Portfolio
Ended of Period Investment Waivers/ Waivers/ Turnover
September 30 (in 000's) Income/(Loss) Reimbursements Reimbursements(c) Rate
------------ ---------- ------------- -------------- ----------------- ----
Class AAA
2004 $3,388 (1.14)% 2.00% 5.94% 45%
2003(a) 2,323 (0.97)(b) 2.00(b) 15.05(b) 39
__________________
+ Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning
of the period and sold at the end of the period including reinvestment of dividends. Total return
for the period of less than one year is not annualized.
(a) From commencement of investment operations on December 31, 2002 through September 30, 2003.
(b) Annualized.
(c) During the period, expenses were voluntarily reduced and/or reimbursed. If such fee reductions
and/or reimbursements had not occurred, the ratio would have been as shown.
(d) Per share amounts have been calculated using the average shares method.
The tables that follow present performance information about the FMI
Woodland Fund. This information is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an
investment in the FMI Woodland Fund (assuming reinvestment of all dividends and
distributions). The year end information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the FMI Woodland Fund's
financial statements, are included in the SAI or annual report, which is
available upon request.
FMI WOODLAND FUND
For the Years Ended June 30,
----------------------------------------------------
2004 2003 2002 2001 2000
-------- -------- -------- -------- ---------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year..................... $ 11.87 $ 15.70 $ 13.96 $ 11.62 $ 13.28
Income from investment operations:
Net investment (loss) income(1)..................... (0.05) (0.03) -- 0.05 0.01
Net realized and unrealized gain (loss)
on investments.................................... 3.94 (2.23) 2.03 2.49 (1.58)
-------- -------- -------- -------- ---------
Total from Investment Operations....................... 3.89 (2.26) 2.03 2.54 (1.57)
Less distributions::
Dividends from net investment income................ -- (0.00) -- (0.03) --
Distributions from net realized gains............... -- (1.57) (0.29) (0.17) (0.09)
-------- -------- -------- -------- ---------
Total from distributions............................... -- (1.57) (0.29) (0.20) (0.09)
-------- -------- -------- -------- ---------
Net asset value, end of year........................... $ 15.76 $ 11.87 $ 15.70 $ 13.96 $ 11.62
======== ======== ======== ======== =========
Total return........................................... 32.77% (14.91%) 14.73% 22.16% (11.82%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 18,357 31,610 42,964 38,249 36,731
Ratio of expenses (after reimbursement)
To average net assets(2)............................ 1.30% 1.30% 1.29% 1.30% 1.25%
Ratio of net investment (loss) income
To average net assets(3)............................ (0.36%) (0.22%) 0.01% 0.16% 0.10%
Portfolio turnover rate................................ 44.65% 40.02% 56.79% 65.37% 57.31%
_______________
(1) Net investment (loss) income per share is calculated using average shares
outstanding.
(2) Computed after giving effect to FMI Adviser's expense limitation
undertaking. If the Fund had paid all of its expenses for the years ending
June 30, 2004, 2003, 2002, 2001 and 2000, the ratios would have been 1.49%,
1.50%, 1.44%, 1.42% and 1.33%, respectively.
(3) If the Fund had paid all of its expenses for the years ending June 30,
2004, 2003, 2002, 2001 and 2000, the ratios would have been (0.55%),
(0.42%), (0.14%), 0.04% and 0.02%, respectively.
INFORMATION ABOUT THE REORGANIZATION
General
Under the Reorganization Agreement, the FMI Woodland Fund will transfer
all of its assets to the Gabelli Woodland Fund, and the Gabelli Woodland Fund
will assume the stated liabilities of the FMI Woodland Fund, in exchange for
Class AAA shares of the Gabelli Woodland Fund. For more details about the
Reorganization Agreement, see Appendix C "Form of Agreement and Plan of
Reorganization." The shares of the Gabelli Woodland Fund issued to the FMI
Woodland Fund will have an aggregate net asset value equal to the aggregate
net asset value of the FMI Woodland Fund shares immediately prior to the
Reorganization. Upon receipt by the FMI Woodland Fund of the shares of the
Gabelli Woodland Fund, the FMI Woodland Fund will distribute the shares to FMI
Woodland Fund shareholders. Then, as soon as practicable after the Closing
Date (as defined in Appendix C), the FMI Woodland Fund will be terminated
under applicable state law.
Such distribution will be accomplished by opening new accounts on the
books of the Gabelli Woodland Fund in the names of the FMI Woodland Fund
shareholders and transferring to those shareholder accounts the shares of the
Gabelli Woodland Fund. Such newly-opened accounts on the books of the Gabelli
Woodland Fund will represent the respective pro rata number of shares of the
same or similar class of the Gabelli Woodland Fund that the FMI Woodland Fund
receives under the terms of the Reorganization Agreement. See "Terms of the
Agreement."
Accordingly, as a result of the Reorganization, each FMI Woodland Fund
shareholder will own a similar class of shares of the Gabelli Woodland Fund.
The Reorganization will not result in dilution of either Fund's net asset
value. However, as a result of the Reorganization, a shareholder of either the
FMI Woodland Fund or the Gabelli Woodland Fund will hold a reduced percentage
of ownership in the larger combined fund than the shareholder did in either of
the separate Funds.
No sales charge or fee of any kind will be assessed to the FMI Woodland
Fund shareholders in connection with their receipt of shares of the Gabelli
Woodland Fund in the Reorganization.
Terms of the Agreement
Pursuant to the Reorganization Agreement, the Gabelli Woodland Fund will
acquire all of the assets and will assume the stated liabilities of the FMI
Woodland Fund on the Closing Date in consideration for shares of the Gabelli
Woodland Fund.
On the Closing Date, the FMI Woodland Fund will transfer to the Gabelli
Woodland Fund all of its assets in exchange solely for Class AAA shares of the
Gabelli Woodland Fund that are equal in value to the value of the net assets of
the FMI Woodland Fund transferred to the Gabelli Woodland Fund as of the
Closing Date, as determined in accordance with Gabelli Woodland Fund's
valuation procedures or such other valuation procedures as shall be mutually
agreed upon by the parties, and the assumption by the Gabelli Woodland Fund of
the stated liabilities of the FMI Woodland Fund provided for in an agreed upon
schedule prior to the Closing Date. In order to minimize any potential for
undesirable federal income and excise tax consequences in connection with the
Reorganization, the FMI Woodland Fund will distribute on or before the Closing
Date all of its undistributed net investment income (including net capital
gains) as of such date.
The FMI Woodland Fund expects to distribute the shares of the Gabelli
Woodland Fund to the shareholders of the FMI Woodland Fund promptly after the
Closing Date and then dissolve pursuant to applicable law.
The corporations of which the Gabelli Woodland Fund and the FMI Woodland
Fund are classes have made certain standard representations and warranties to
each other regarding capitalization, status and conduct of business.
Unless waived in accordance with the Reorganization Agreement, the
obligations of the parties to the Reorganization Agreement are conditioned
upon, among other things:
o the approval of the Reorganization by the FMI Woodland Fund's
shareholders;
o the absence of any rule, regulation, order, injunction or proceeding
preventing or seeking to prevent the consummation of the transactions
contemplated by the Reorganization Agreement;
o the receipt of all necessary approvals, consents, registrations and
exemptions under federal, state and local laws;
o the truth in all material respects as of the Closing Date of the
representations and warranties of the parties and performance and
compliance in all material respects with the parties' agreements,
obligations and covenants required by the Reorganization Agreement;
o the effectiveness under applicable law of the registration statement
of the Gabelli Woodland Fund of which this Combined Prospectus/Proxy
Statement forms a part and the absence of any stop orders under the
Securities Act of 1933 pertaining thereto;
o the declaration of a dividend by the FMI Woodland Fund to distribute
all of its undistributed net investment income and net capital gains;
and
o the receipt of opinions of counsel relating to, among other things,
the tax free nature of the Reorganization.
The Reorganization Agreement may be terminated or amended by the mutual
consent of the parties either before or after approval thereof by the
shareholders of the FMI Woodland Fund.
The FMI Board recommends that you vote to approve the Reorganization
Agreement, as it believes the transactions contemplated by the Reorganization
Agreements are in the best interests of the FMI Woodland Fund's shareholders
(as described more fully in "Reasons for the Reorganization") and that the
interests of the FMI Woodland Fund's existing shareholders will not be diluted
as a result of consummation of the proposed Reorganization.
Reasons for the Reorganization
The factors considered by the FMI Board with regard to the Reorganization
include, but are not limited to, the following:
o In light of the determination by Fiduciary Management, Inc. (the "FMI
Adviser") to cease managing the FMI Woodland Fund and the substantial
unrealized appreciation in the FMI Woodland Fund, a liquidation or
similar transaction would have adverse tax consequences to taxable
investors of the FMI Woodland Fund. The Reorganization presents an
opportunity for shareholders of the FMI Woodland Fund to have their
investment in the FMI Woodland Fund converted into an investment in a
mutual fund having similar investment objectives and policies to the
FMI Woodland Fund, managed by an affiliate of the sub-adviser to the
FMI Woodland Fund in a transaction in which there will be no gain or
loss.
o The portfolio manager for the Gabelli Woodland Fund is Beth Lilly, one
of the portfolio managers for the FMI Woodland Fund.
o After the Reorganization the former shareholders of the FMI Woodland
Fund will have access to a larger fund family with a broader array of
investment options, and with no diminution of shareholder services.
o The costs associated with the Reorganization will be borne by the
Gabelli Adviser and will not be borne by the shareholders of the FMI
Woodland Fund.
o There will be no gain or loss recognized by shareholders for federal
income tax purposes as well as no gain or loss on the assets of the
FMI Woodland Fund transferred to the Gabelli Woodland Fund.
o The Reorganization appears to be the least disruptive alternative to
shareholders of the FMI Mutual Fund.
o The disadvantage of the higher expense ratio of the Gabelli Woodland
Fund was outweighed by the advantages identified above and by the
fact that each shareholder will have ample opportunity to redeem
shares in advance of the consummation of the Reorganization.
For these and other reasons, the FMI Board unanimously concluded that,
based upon the factors and determinations summarized above, consummation of the
Reorganization is the least disrcuptive alternative to shareholders of the FMI
Mutual Fund and is in the best interest of the FMI Woodland Fund and its
shareholders. The approval determinations were made on the basis of each
director's business judgment after consideration of all of the factors taken as
a whole, though individual directors may have placed different weight to
various factors and assigned different degrees of materiality to various
conclusions.
If the Reorganization does not occur, the Board will be required to
consider other alternatives, which includes liquidation of the Fund. Any such
liquidation will not be tax-free for shareholders.
Material U.S. Federal Income Tax Consequences of the Reorganization
The following is a general summary of the material anticipated U.S.
federal income tax consequences of the Reorganization. The discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, court decisions, published positions of the IRS and other
applicable authorities, all as in effect on the date hereof and all of which
are subject to change or differing interpretations (possibly with retroactive
effect). The discussion is limited to U.S. persons who hold shares of the FMI
Woodland Fund as capital assets for U.S. federal income tax purposes. This
summary does not address all of the U.S. federal income tax consequences that
may be relevant to a particular shareholder or to shareholders who may be
subject to special treatment under federal income tax laws. No ruling has been
or will be obtained from the IRS regarding any matter relating to the
Reorganization. No assurance can be given that the IRS would not assert, or
that a court would not sustain, a position contrary to any of the tax aspects
described below. Shareholders must consult their own tax advisers as to the
U.S. federal income tax consequences of the Reorganization, as well as the
effects of state, local and non-U.S. tax laws.
It is a condition to closing the Reorganization that each of the FMI
Woodland Fund and the Gabelli Woodland Fund receives an opinion from Skadden,
Arps, Slate, Meagher & Flom LLP, special counsel to the Gabelli Woodland Fund,
dated as of the Closing Date, that the Reorganization will be a
"reorganization" within the meaning of Section 368(a) of the Code. As such a
reorganization, the federal income tax consequences of the Reorganization can
be summarized as follows:
o No gain or loss will be recognized by the FMI Woodland Fund or the
Gabelli Woodland Fund upon the transfer of all of the assets of the
FMI Woodland Fund to the Gabelli Woodland Fund solely in exchange for
the shares of the Gabelli Woodland Fund and the assumption by the
Gabelli Woodland Fund of the stated liabilities of the FMI Woodland
Fund, or upon the distribution of the shares of the Gabelli Woodland
Fund by the FMI Woodland Fund to its shareholders in the subsequent
liquidation of the FMI Woodland Fund.
o No gain or loss will be recognized by a shareholder of the FMI
Woodland Fund who exchanges all of his, her or its shares of the FMI
Woodland Fund solely for the shares of the Gabelli Woodland Fund
pursuant to the Reorganization.
o The aggregate tax basis of the shares of the Gabelli Woodland Fund
received by a shareholder of the FMI Woodland Fund pursuant to the
Reorganization will be the same as the aggregate tax basis of the
shares of the FMI Woodland Fund surrendered in exchange therefor.
o The holding period of the shares of the Gabelli Woodland Fund received
by a shareholder of the FMI Woodland Fund pursuant to the
Reorganization will include the holding period of the shares of the
FMI Woodland Fund surrendered in exchange therefor.
o The Gabelli Woodland Fund's tax basis in the FMI Woodland Fund's
assets received by the Gabelli Woodland Fund pursuant to the
Reorganization will, in each instance, equal the tax basis of such
assets in the hands of the FMI Woodland Fund immediately prior to the
Reorganization, and the Gabelli Woodland Fund's holding period of such
assets will, in each instance, include the period during which the
assets were held by the FMI Woodland Fund.
o The holding period of the assets of the FMI Woodland Fund in the hands
of the Gabelli Woodland Fund will include the period during which
those assets were held by the FMI Woodland Fund.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP will be based on
U.S. federal income tax law in effect on the Closing Date. In rendering its
opinion, Skadden, Arps, Slate, Meagher & Flom LLP will also rely upon certain
representations of the management of the Gabelli Woodland Fund and the FMI
Woodland Fund and assume, among other things, that the Reorganization will be
consummated in accordance with the operative documents. An opinion of counsel
is not binding on the IRS or any court.
The Gabelli Woodland Fund intends to continue to be taxed under the rules
applicable to regulated investment companies as defined in Section 851 of the
Code, which are the same rules currently applicable to the FMI Woodland Fund
and its shareholders.
Prior to the Closing Date, the FMI Woodland Fund will declare a
distribution to its shareholders, which together with all previous
distributions, will have the effect of distributing to its shareholders all of
its investment company taxable income (computed without regard to the deduction
for dividends paid) and net realized capital gains, if any, through the Closing
Date.
A portion of the portfolio assets of the FMI Woodland Fund may be sold in
connection with the Reorganization. The tax impact of such sales will depend on
the difference between the price at which such portfolio assets are sold and
the FMI Woodland Fund's basis in such assets. Any capital gains recognized in
these sales on a net basis will be distributed to the FMI Woodland Fund's
shareholders as capital-gain dividends (to the extent of net realized long-term
capital gains) and/or ordinary dividends (to the extent of net realized
short-term capital gains) during or with respect to the year of sale, and such
distributions will be taxable to shareholders.
As noted above, shareholders of the FMI Woodland Fund may redeem their
shares or exchange their shares for shares of certain other funds distributed
by the distributor at any time prior to the closing of the Reorganization. (See
"Purchase, Valuation, Redemption and Exchange of Shares" above.) Redemptions
and exchanges of shares generally are taxable transactions, unless your account
is not subject to taxation, such as an individual retirement account or other
tax-qualified retirement plan. Shareholders should consult with their own tax
advisers regarding potential transactions.
Expenses of the Reorganization
The Gabelli Adviser will bear the direct and indirect expenses incurred by
the Gabelli Woodland Fund and the FMI Woodland Fund in connection with the
Reorganization. The costs of the Reorganization include, but are not limited
to, costs associated with obtaining any necessary order of exemption from the
1940 Act, preparation and filing of this combined Proxy/Registration Statement
and printing and distribution of the Proxy Form, legal fees, accounting fees,
securities registration fees, and expenses of holding a shareholders meeting of
the FMI Woodland Fund.
Neither of the Funds nor the Gabelli Adviser will pay any expenses of
shareholders arising out of or in connection with the Reorganization.
Continuation of Shareholder Accounts and Plans; Share Certificates
If the Reorganization is approved, the Gabelli Woodland Fund will
establish an account for each FMI Woodland Fund shareholder containing the
appropriate number of shares of the Gabelli Woodland Fund. Shareholders of the
FMI Woodland Fund who are accumulating FMI Woodland Fund shares under the
dividend reinvestment plan or automatic investment plan, who are receiving
payment under the systematic withdrawal plan, or who benefit from special
sales programs with respect to FMI Woodland Fund shares will retain the same
rights and privileges after the Reorganization in connection with the shares
of the Gabelli Woodland Fund received in the Reorganization through similar
plans maintained by the Gabelli Woodland Fund. It will not be necessary for
shareholders of the FMI Woodland Fund to whom certificates have been issued to
surrender their certificates. Upon termination of the FMI Woodland Fund, such
certificates will become null and void. Generally, no certificates for the
Gabelli Woodland Fund will be issued.
Legal Matters
Certain legal matters concerning the federal income tax consequences of
the Reorganization will be passed on by Skadden, Arps, Slate, Meagher & Flom
LLP, which serves as special counsel to the Gabelli Woodland Fund.
OTHER INFORMATION
Shareholder Information
Gabelli Woodland Fund. As of May 19, 2005, the Gabelli Woodland Fund had
outstanding 334,137.056 shares. As of January 3, 2005, the Officers and
Directors of the Gabelli Equity Series Funds, as a group, owned 2.5% of the
Gabelli Woodland Fund. As of January 3, 2005, no person was known by the
Gabelli Woodland Fund to own beneficially or of record 5% or more of any class
of the shares of the Gabelli Woodland Fund except as follows:
Name and Address of Owner % Ownership Nature of Ownership
Class AAA Bear Stearns Securities Corp 6.60% Record
1 Metrotech Center North
Brooklyn, NY 11201-3870
Class A Susan S. Oblon, Trustee 46.93%* Record
Susan S. Oblon Revoc. Trust
Norman Oblon POA
11201 Tara Rd.
Potomac, MD 20854-13451
State Street Bank & Trust Co. 23.55% Record
Cust for the Sep IRA A/C
Kenneth A. Hritz
9166 Shetter Rd.
Lima, NY 14485-9311
First Clearing, LLC 10.44% Record
Nicholas A. Shiftan
P.O. Box 2602
La Jolla, CA 92038-2602
Jones (Edward D.) and Company 6.30% Record
FBO Cheryl L. Paris
P.O. Box 2500
Maryland Heights, MD 63043-8500
Keith M. Hladek 5.19% Record
Class B Gabelli Asset Management Inc 100.00% Beneficial
Attn: Chief Financial Officer
One Corporate Center
Rye, NY 10580-1422
Class C Southwest Securities Inc 71.59%* Record
Carl V. Bostrom
Southwest Securities Inc. FBO 18.00% Record
Joseph E. Pitoniak
As Rollover IRA Custodian
P.O. Box 509002
Dallas, TX 75250-9002
Southwest Securities Inc. FBO 10.10% Record
Joseph F. Savelli
US Banks
As Rollover IRA Custodian
P.O. Box 509002
Dallas, TX 75250-9002
___________________________________
* Beneficial ownership is disclaimed. Beneficial ownership of shares
representing 25% or more of the outstanding shares of the Funds may be deemed
to have control, as that term is defined in the 1940 Act.
The FMI Woodland Fund. As of May 19, 2005, there were 667,247.739 shares
of the FMI Woodland Fund outstanding. As of such date, the members of the
board and officers of the FMI Woodland Fund as a group owned less than 1% of
the shares of the FMI Woodland Fund. Set forth below are the names and
addresses of all holders of each of the Fund's shares who as of April 30, 2005
beneficially owned more than 5% of such Fund's then outstanding shares, as
well as the number of shares of such Fund beneficially owned by all officers
and directors of such Fund as a group.
Name and Address of Beneficial Owner Beneficial Ownership % Ownership
National Financial Services LLC** 247,061 37.08%
FBO The Exclusive Benefit of our Customers
200 Liberty Street
New York, NY 10281
Atwell & Co.* 85,604 12.85%
P.O. Box 2044
Peck Slip Station
New York, NY 10036
Officers and directors as a group (8 persons) 0 0%
* Owned beneficially.
** Owned of record.
Persons with sole or shared power to vote more than 25% of the
outstanding shares of the FMI Woodland Fund may be deemed to control such
Fund, as that term is defined in the 1940 Act, and may be able to greatly
affect (if not determine) the outcome of any shareholder vote brought solely
before the shareholders of such Fund.
Shareholder Proposals
Neither of the Funds holds regular annual meetings of shareholders. As a
general matter, the Gabelli Woodland Fund does not intend to hold future
regular annual or special meetings of its shareholders unless required by the
1940 Act. In the event the Reorganization is not completed, the FMI Woodland
Fund does not intend to hold future regular annual or special meetings of its
shareholders unless required by the 1940 Act. Any shareholder who wishes to
submit proposals for consideration at a meeting of shareholders of the FMI
Woodland Fund should send such proposal to the Secretary of the FMI Mutual
Funds, Inc., 100 East Wisconsin Avenue, Suite 2200, Milwaukee, Wisconsin 53202.
To be considered for presentation at a shareholders' meeting, rules promulgated
by the SEC require that, among other things, a shareholder's proposal must be
received at the offices of the Fund a reasonable time before a solicitation is
made. Timely submission of a proposal does not necessarily mean that such
proposal will be included.
Solicitation of Proxies
Solicitation of proxies is being made primarily by the mailing of this
Notice and Combined Prospectus/Proxy Statement with its enclosures on or about
May 31, 2005. FMI Woodland Fund shareholders whose shares are held by nominees
such as brokers can vote their proxies by contacting their respective nominee.
In addition to the solicitation of proxies by mail, employees of the FMI
Woodland Fund and its affiliate as well as dealers or their representatives
may, without additional compensation, solicit proxies in person or by mail,
telephone, facsimile or oral communication. The Gabelli Woodland Fund has
retained The Altman Group, a professional proxy solicitation firm, to assist
with any necessary solicitation of proxies. FMI Woodland Fund shareholders may
receive a telephone call from The Altman Group asking them to vote. The proxy
solicitation expenses in connection with the Reorganization are estimated to
be approximately $1000 plus mailing expenses, all of which will be borne by
the Gabelli Adviser.
VOTING INFORMATION AND REQUIREMENTS
The FMI Board has fixed the close of business on May 23, 2005 as the
Record Date for the determination of shareholders entitled to notice of, and to
vote at, the Special Meeting. FMI Woodland Fund shareholders on the Record Date
are entitled to one vote for each share held, with no shares having cumulative
voting rights. FMI Woodland Fund shareholders may vote by appearing in person
at the Special Meeting, by returning the enclosed proxy card or by casting
their vote via telephone or the internet using the instructions provided on the
enclosed proxy card. Any person giving a proxy may revoke it at any time prior
to its exercise by executing a superseding proxy, by giving written notice of
the revocation to the secretary of the FMI Woodland Fund or by voting in person
at the Special Meeting.
If a Proxy is properly given in time for a vote at the Special Meeting
(either by returning the paper Proxy Form or by submitting a Proxy by telephone
or over the Internet), the shares of the FMI Woodland Fund represented thereby
will be voted at the Special Meeting in accordance with the shareholder's
instructions. The Proxy grants discretion to the persons named therein, as
proxies, to take such further action as they may determine appropriate in
connection with any other matter which may properly come before the Special
Meeting or any adjournments thereof. The FMI Board does not currently know of
any matter to be considered at the Special Meeting other than the matters set
forth in the Notice of Special Meeting of Shareholders.
The holders of a majority of the shares of the FMI Woodland Fund entitled
to be cast on the proposed Reorganization that are outstanding at the close of
business on the record date and are present in person or represented by proxy
will constitute a quorum for the special meeting. Approval by the FMI Woodland
Fund of the Reorganization Agreement will require that the votes cast in
person or by proxy at the Special meeting in favor of the Reorganization
Agreement exceed the votes cast in person or by proxy against the
Reorganization Agreement. Shareholders of the FMI Woodland Fund are entitled
to one vote for each share. Fractional shares are entitled to proportional
voting rights. For purposes of determining the presence of a quorum for
transacting business at the Special Meeting and for determining whether
sufficient votes have been received for approval of the proposal to be acted
upon at the meeting, abstentions and broker non-votes (that is, proxies from
brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote
shares on a particular matter with respect to which the brokers or nominees do
not have discretionary power) will be treated as shares that are present at
the meeting, but which have not been voted. For this reason, abstentions and
broker non-votes will assist the FMI Woodland Fund in obtaining a quorum, but
both have no effect for purposes of obtaining the requisite vote for approval
of the Reorganization. If the shareholders fail to approve the proposed
Reorganization Agreement, the Reorganization will not occur.
In the event that sufficient votes to approve the proposal are not
received, the persons named as proxies may propose one or more adjournments of
the Special Meeting to permit further solicitation of proxies. Any such
adjournment will require that the votes cast in person or by proxy at the
Special Meeting in favor of adjournment exceed the votes cast in person or by
proxy against adjournment. In determining whether to adjourn the Meeting with
respect to a proposal, the following factors may be considered: the percentage
of votes actually cast, the percentage of negative votes actually cast, the
nature of any further solicitation and the information to be provided to
shareholders with respect to the reasons for the solicitation. Generally, votes
cast in favor of a proposal will be voted in favor of adjournment while votes
cast against the Reorganization Agreement will be voted against adjournment. The
persons named as proxies will vote upon such adjournment after consideration of
the best interests of all shareholders.
You are requested to fill in, sign and return the enclosed proxy card
promptly even if you expect to be present in person at the meeting since you
can always reverse your vote at the meeting and unexpected circumstances might
prevent you from attending. No postage is necessary if mailed in the United
States.
May 31, 2005
A COMMENT
APPENDICES
APPENDIX A
FUNDAMENTAL RESTRICTIONS
Each of the Funds' investment objective and the following investment
restrictions are fundamental and cannot be changed without the approval of the
lesser (1) 67% of the Fund's shares present at a meeting if the holders of more
than 50% of the outstanding shares are represented in person or by proxy, or
(2) more than 50% of the Fund's outstanding shares. All other investment
policies or practices are considered not to be fundamental and accordingly may
be changed without shareholder approval. If a percentage restriction on
investment or use of assets set forth below is adhered to at the time a
transaction is effected, later changes in percentage resulting from changing
market values or total assets of a Fund will not be considered a deviation from
policy.
The FMI Woodland Fund
The FMI Woodland Fund may not:
(1) purchase securities on margin, participate in a joint-trading
account, or sell securities short;
(2) borrow money or issue senior securities, except for temporary bank
borrowings (not in excess of 5% of the value of its net assets) or for
emergency or extraordinary purposes, and pledge any of its assets, except to
secure borrowings and only to an extent not greater than 10% of the value of
its net assets;
(3) lend money (except by purchasing publicly distributed debt
securities or entering into repurchase agreements provided that repurchase
agreements maturing in more than seven days plus all other illiquid securities
will not exceed 10% of its net assets) or will lend its portfolio securities. A
repurchase agreement involves a sale of securities to the FMI Woodland Fund
with the concurrent agreement of the seller to repurchase the securities at the
same price plus an amount equal to an agreed upon interest rate, within a
specified time. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, such Fund could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in value of
the collateral during the period while such Fund seeks to enforce its rights
thereto; (b) possible decreased levels of income during this period; and (c)
expenses of enforcing its rights;
(4) make investments for the purpose of exercising control or
management of any company;
(5) purchase securities of any issuer (other than the United States or
an agency or instrumentality of the United States) if, as a result of such
purchase, it would hold more than 10% of any class of securities, including
voting securities, of such issuer or more than 5% of its assets, taken at
current value, would be invested in securities of such issuer, except that up
to 25% of the Fund's assets may be invested without regard to these
limitations;
(6) concentrate more than 25% of the value of its net assets,
determined at the time an investment is made, exclusive of government
securities, in securities issued by companies primarily engaged in the same
industry;
(7) acquire or retain any security issued by a company, an officer or
director of which is an officer or director of the FMI Funds or an officer,
director or other affiliated person of its investment adviser;
(8) acquire or retain any security issued by a company if any of the
directors or officers of the FMI Funds, or directors, officers or other
affiliated persons of its investment adviser, beneficially own more than 1/2%
of such company's securities and all of the above persons owning more than 1/2%
own together more than 5% of its securities;
(9) act as an underwriter or distributor of securities other than
shares of the FMI Funds, nor may purchase any securities which are restricted
from sale to the public without registration under the Securities Act;
(10) purchase oil, gas or other mineral leases or any interest in any
oil, gas or any other mineral exploration or development program;
(11) purchase or sell real estate, real estate mortgage loans or real
estate limited partnerships;
(12) purchase or sell commodities or commodities contracts; or
(13) invest more than 10% of its total assets in securities of issuers
which have a record of less than three years of continuous operation, including
the operation of any predecessor business of a company which came into
existence as a result of a merger, consolidation, reorganization or purchase of
substantially all of the assets of such predecessor business.
The Gabelli Woodland Fund
The Gabelli Woodland Fund may not:
(1) invest 25% or more of the value of its total assets in any one
industry;
(2) issue senior securities (including borrowing money, including on
margin if margin securities are owned and through entering into reverse
repurchase agreements) in excess of 33-1/3% of its total (including the amount
of senior securities issued but excluding any liabilities and indebtedness not
constituting senior securities) except that the Fund may borrow up to an
additional 5% of its total assets for temporary purposes; or pledge its assets
other than to secure such issuances or in connection with hedging transactions,
short sales, when-issued and forward commitment transactions and similar
investment strategies. The Fund's obligations under the foregoing types of
transactions and investment strategies are not treated as senior securities;
(3) make loans of money or property to any person, except through
loans of portfolio assets, the purchase of debt instruments or the acquisition
of assets subject to repurchase agreements;
(4) underwrite the securities of other issuers, except to the extent
that in connection with the disposition of portfolio securities the Fund may be
deemed to be an underwriter;
(5) invest for the purpose of exercising day-to-day operating control
over management of any company;
(6) purchase real estate or interests therein, which does not include
securities or other instruments issued by companies that invest primarily in
real estate; or
(7) purchase or sell commodities or commodity contracts or invest in
any oil, gas or mineral interests except in each case to the extent the Fund
would not be required to register as a commodity pool.
COMMENT
APPENDIX B
Set forth in the table below is the dollar range of equity securities in
the Gabelli Woodland Fund beneficially owned by each Gabelli Equity Series
Funds director- as of December 31, 2004:
Dollar Range of
Equity
Securities Held
Name of Director Fund in each Fund*
---------------- ---- ---------------
INTERESTED
DIRECTORS:
Mario J. Gabelli The Gabelli Woodland Small Cap Value Fund E
John D. Gabelli The Gabelli Woodland Small Cap Value Fund D
Karl Otto Pohl The Gabelli Woodland Small Cap Value Fund A
Dollar Range of
Equity
Securities Held
Name of Director Fund in each Fund*
---------------- ---- ---------------
NON-INTERESTED
DIRECTORS:
Anthony J. Colavita** The Gabelli Woodland Small Cap Value Fund B
Vincent D. Enright The Gabelli Woodland Small Cap Value Fund B
Robert J. Morrissey The Gabelli Woodland Small Cap Value Fund A
Anthony R. Pustorino** The Gabelli Woodland Small Cap Value Fund C
Anthonie C. van Ekris** The Gabelli Woodland Small Cap Value Fund A
Salvatore J. Zizza The Gabelli Woodland Small Cap Value Fund A
---------------------------------
* Key to Dollar Ranges- Information as of December 31, 2004
---------------------------------------------------------
A. None
B. $1 - $10,000
C. $10,001 - $50,000
D. $50,001 - $100,000
E. Over $100,000
** Mr. Colavita and Mr. Pustorino each beneficially owns less than 1% of the
common stock of Lynch Corporation having a value of $14,500 as of December
31, 2004. Mr. Van Ekris beneficially owns less than 1% of the common stock
of (1) Lynch Corporation having a value of $17,400 as of December 31, 2004
and (ii) Lynch Interactive Corporation having a value of $76,800 as of
December 31, 2004. Lynch Corporation and Lynch Interactive Corporation may
be deemed to be controlled by Mario J. Gabelli and in that event would be
deemed to be under common control with the Gabelli Woodland Fund's
Advisor.
The directors and principal executive officers of Gabelli Equity Series
Funds, and their addresses and principal occupations are:
Number of
Term of Funds in
Office and Fund
Length of Complex
Name, Position(s) Time Overseen Principal Occupation(s) Other Directorships
Address(1) and Age Served(2) by Director During Past Five Years Held by Director(3)
------------------ ---------- ----------- ---------------------- -------------------
INTERESTED DIRECTORS(4):
Mario J. Gabelli Since 24 Chairman of the Board, Chief Director of Morgan
Director and Chairman of the 1991 Executive Officer of Gabelli Asset Group Holdings, Inc.
Board Management Inc. and Chief (holding company)
Age: 62 Investment Officer of Gabelli
Funds, LLC and GAMCO Investors,
Inc.; Vice-Chairman and Chief
Executive Officer of Lynch
Interactive Corporation
(multimedia and services)
John D. Gabelli Since 10 Senior Vice President of Gabelli & ---
Director 1991 Company, Inc.; Director of Gabelli
Age: 60 Advisers, Inc.
Karl Otto Pohl Since 34 Member of the Shareholder Director of Gabelli
Director 1992 Committee of Sal Oppenheim Jr. & Asset Management
Age: 75 Cie (private investment bank); Inc. (investment
Former President of the Deutsche management);
Bundesbank and Chairman of its Chairman, Incentive
Central Bank Council (1980-1991) Capital and
Incentive Asset
Management (Zurich);
Director at Sal
Oppenheim Jr. & Cie,
Zurich
NON-INTERESTED DIRECTORS:
Anthony J. Colavita Since 1991 36 President and Attorney at Law in ---
Director the law firm of Anthony J.
Age: 69 Colavita, P.C.
Vincent D. Enright Since 1991 13 Former Senior Vice President and Director of Aphton
Director Chief Financial Officer of KeySpan Corporation
Age: 61 Energy FMI Funds (biopharmaceuticals)
Robert J. Morrissey Since 1991 10 Partner in the law firm of ---
Director Morrissey, Hawkins & Lynch
Age: 65
Anthony R. Pustorino Since 1991 17 Certified Public Accountant; Director of Lynch
Director Professor Emeritus, Pace Corporation
Age: 79 University (diversified
manufacturing)
Anthonie C. van Ekris Since 1991 20 Managing Director of BALMAC Director of Aurado
Director International, Inc. (commodities) Exploration Inc. (oil
Age: 70 and gas operations)
Salvatore J. Zizza Since 2001 24 Chairman, Hallmark Electrical Director of Hollis
Director Suppliers Corp. Eden Pharmaceuticals;
Age: 59 Director of Earl
Scheib, Inc.
(automotive services)
Name, Position(s) Term of Office Principal Occupation(s)
During Past Five Years
OFFICERS:
Bruce N. Alpert Since 2003 Executive Vice President and Chief Operating Officer of Gabelli Funds,
President and Principal LLC since 1988 and an officer of all mutual funds advised by Gabelli
Financial Officer Funds, LLC and its affiliates. Director and President of Gabelli
Age: 53 Advisers, Inc.
James E. McKee Since 1995 Vice President, General Counsel and Secretary of Gabelli Asset
Secretary Management Inc. since 1999 and GAMCO Investors, Inc. since 1993;
Age: 41 Secretary of all mutual funds advised by Gabelli Advisers, Inc. and
Gabelli Funds, LLC
SPECIAL POSITIONS:
Peter Goldstein Since 2004 Director of Regulatory Affairs at Gabelli Asset Management Inc. since
Chief Compliance Officer February 2004; Vice President of Goldman Sachs Asset Management from
Age: 51 November 2000 through January 2004; Deputy General Counsel at Gabelli
Asset Management Inc. from February 1998 through November 2000.
(1) Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
(2) Each Director will hold office for an indefinite term until the earliest of
(i) the next meeting of shareholders if any, called for the purpose of
considering the election or re-election of such Director and until the
election and qualification of his or her successor, if any, elected at
such meeting, or (ii) the date a Director resigns or retires, or a
Director is removed by the Board of Directors or shareholders, in
accordance with the Gabelli Equity Series Funds' By-Laws and Articles of
Incorporation. Each officer will hold office for an indefinite term until
the date he resigns or retires or until his successor is elected and
qualified.
(3) This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934, (i.e. public companies)
or other investment companies registered under the 1940 Act.
(4) "Interested person" of the Fund as defined in the 1940 Act. Mario J.
Gabelli, John D. Gabelli and Karl Otto Pohl are each considered an
"interested person" because of their affiliation with Gabelli Funds, LLC,
which acts as investment adviser to the Fund. Mario J. Gabelli and John D.
Gabelli are brothers.
APPENDIX C
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of this 20th day of May, 2005, by and among Gabelli Equity Series Funds,
Inc., a registered investment company and a Maryland corporation (the
"Acquiror"), with respect to The Gabelli Woodland Small Cap Value Fund, a
separate class of the Acquiror (the "Acquiring Fund"), and FMI Mutual Funds,
Inc., a registered investment company and a Wisconsin corporation (the
"Seller"), with respect to FMI Woodland Small Capitalization Value Fund, a
separate class of the Seller (the "FMI Woodland Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations promulgated thereunder. The reorganization will consist of: (i)
the transfer of all of the assets of the FMI Woodland Fund in exchange for
Class AAA shares of the Acquiring Fund ("Acquiring Fund Shares"); (ii) the
assumption by the Acquiror, on behalf of the Acquiring Fund, of the Stated
Liabilities (as defined in paragraph 1.3) of the FMI Woodland Fund; and (iii)
the distribution, after the Closing Date (as defined in paragraph 3.1), of the
Acquiring Fund Shares to the shareholders of the FMI Woodland Fund and the
termination, dissolution and complete liquidation for tax purposes of the FMI
Woodland Fund, all upon the terms and conditions set forth in this Agreement
(the "Reorganization").
WHEREAS, the Acquiring Fund is a separate class of the Acquiror, and
the FMI Woodland Fund is a separate class of the Seller; the Acquiror and the
Seller are open-end, registered management investment companies within the
meaning of the Investment Company Act of 1940 (the "1940 Act"), and the FMI
Woodland Fund owns securities that generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, each of the Acquiring Fund and the FMI Woodland Fund is
properly treated as a "regulated investment company" under Subchapter M of the
Code;
WHEREAS, the Acquiring Fund is authorized to issue its shares of
Class AAA common stock;
WHEREAS, the Board of Directors of the Acquiror has determined that
the Reorganization is in the best interests of the Acquiring Fund and that the
interests of the existing shareholders of the Acquiring Fund will not be
diluted as a result of the Reorganization;
WHEREAS, the Board of Directors of the Seller has determined that the
Reorganization is in the best interests of the FMI Woodland Fund and that the
interests of the existing shareholders of the FMI Woodland Fund will not be
diluted as a result of the Reorganization;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE FMI WOODLAND FUND IN EXCHANGE FOR ACQUIRING
FUND SHARES AND THE ASSUMPTION OF FMI WOODLAND FUND STATED LIABILITIES
AND LIQUIDATION OF THE FMI WOODLAND FUND
1.1 The Exchange. Subject to the terms and conditions contained
herein and on the basis of the representations and warranties contained
herein, the FMI Woodland Fund agrees to convey, transfer and deliver the
assets of the FMI Woodland Fund described in paragraph 1.2 to the Acquiring
Fund free and clear of all liens, encumbrances and claims whatsoever. In
exchange, the Acquiring Fund agrees: (a) to deliver to the FMI Woodland Fund
the number of full and fractional shares of Acquiring Fund Shares, determined
by dividing: (i) the aggregate value of the FMI Woodland Fund's assets, net of
the liabilities of the FMI Woodland Fund, attributable to shares of the FMI
Woodland Fund (as set forth below), computed in the manner and as of the time
and date set forth in paragraph 2.1, by (ii) the net asset value of one
Acquiring Fund Share (as set forth below) computed in the manner and as of the
time and date set forth in paragraph 2.2; and (b) to assume the Stated
Liabilities of the FMI Woodland Fund described in paragraph 1.3. Such
transactions shall take place at the closing (the "Closing") provided for in
paragraph 3.1.
1.2 Assets to be Acquired. The assets of the FMI Woodland Fund to be
acquired by the Acquiring Fund shall consist of all property owned by the FMI
Woodland Fund, including, without limitation, all cash, securities,
commodities, interests in futures and other financial instruments, claims
(whether absolute or contingent, known or unknown), receivables (including
dividends, interest, principal, subscriptions and other receivables), goodwill
and other intangible property, all books and records belonging to the FMI
Woodland Fund, any deferred or prepaid expenses shown as an asset on the books
of the FMI Woodland Fund on the Closing Date, and all interests, rights,
privileges and powers, other than cash in an amount necessary to pay dividends
and distributions as provided in paragraph 7.3 and other than the FMI Woodland
Fund's rights under this Agreement (the "Assets").
The FMI Woodland Fund will, within 7 days prior to the Closing Date,
furnish the Acquiring Fund with (a) a list of the FMI Woodland Fund's
portfolio securities and other investments and (b) a list of the FMI Woodland
Fund's "historic business assets," which are defined for this purpose as (i)
those assets that were acquired by the FMI Woodland Fund prior to the date of
the approval of the Reorganization by the Board of Directors of the Seller,
and (ii) those assets that were acquired subsequent to such board approval but
in accordance with the FMI Woodland Fund's investment objectives and not with
a view to, or in anticipation or as part of, the Reorganization. The Acquiring
Fund will, within 3 days prior to the Closing Date, furnish the FMI Woodland
Fund with a list of the securities and other instruments, if any, on the FMI
Woodland Fund's list referred to above that do not conform to the Acquiring
Fund's investment objectives, policies and restrictions. If requested in
writing by the Acquiring Fund within 3 business days prior to the Closing
Date, the FMI Woodland Fund will dispose of securities and other instruments
on the Acquiring Fund's list before the Closing Date. In addition, if it is
determined that the portfolios of the FMI Woodland Fund and the Acquiring
Fund, when aggregated, would contain investments exceeding certain percentage
limitations imposed upon the Acquiring Fund with respect to such investments,
the FMI Woodland Fund, if requested in writing by the Acquiring Fund within 3
business days prior to the Closing Date, will dispose of a sufficient amount
of such investments as may be necessary to avoid violating such limitations as
of the Closing Date. After the FMI Woodland Fund furnishes the Acquiring Fund
with the list described above, the FMI Woodland Fund will not, without the
prior approval of the Acquiror on behalf of the Acquiring Fund, acquire any
additional securities other than securities which the Acquiring Fund is
permitted to purchase, pursuant to its investment objective and policies or
otherwise (taking into consideration its own portfolio composition as of such
date). Notwithstanding the foregoing, (a) nothing herein will require the FMI
Woodland Fund to dispose of any portfolios, securities or other investments,
if, in the reasonable judgment of the FMI Woodland Fund's directors or
investment adviser, such disposition would adversely affect the tax-free
nature of the Reorganization for federal income tax purposes or would
otherwise not be in the best interests of the FMI Woodland Fund and (b)
nothing will permit the FMI Woodland Fund to dispose of any portfolio
securities or other investments if, in the reasonable judgment of the
Acquiring Fund's directors or investment adviser, such disposition would
adversely affect the tax-free nature of the Reorganization for federal income
tax purposes or would otherwise not be in the best interests of the FMI
Woodland Fund.
1.3 Liabilities to be Assumed. The FMI Woodland Fund will endeavor to
identify and discharge, to the extent practicable, all of its liabilities and
obligations, including all liabilities relating to operations, before the
Closing Date. The Acquiring Fund shall assume only those accrued and unpaid
liabilities of the FMI Woodland Fund set forth in the FMI Woodland Fund's
statement of assets and liabilities as of the Closing Date delivered by the
FMI Woodland Fund to the Acquiring Fund pursuant to paragraph 5.2 (the "Stated
Liabilities"). The Acquiring Fund shall assume only the Stated Liabilities and
shall not assume any other debts, liabilities or obligations of the FMI
Woodland Fund.
1.4 State Filings. Prior to the Closing Date, the Seller shall make
any filings with the State of Wisconsin that are required under the laws of
the State of Wisconsin to be made prior to the Closing Date.
1.5 Liquidation and Distribution. On or as soon as practicable after
the Closing Date the FMI Woodland Fund will distribute in complete liquidation
of the FMI Woodland Fund, pro rata to its shareholders of record, determined
as of the close of business on the Closing Date (the "FMI Woodland Fund
Shareholders"), all of the Acquiring Fund Shares received by the FMI Woodland
Fund. Upon completion of the distribution of all of the Acquiring Fund shares
in accordance with the prior sentence, the FMI Woodland Fund will thereupon
proceed to dissolve and terminate as set forth in paragraph 1.9 below. Such
distribution will be accomplished by the transfer on the books of the
Acquiring Fund of Acquiring Fund Shares credited to the account of the FMI
Woodland Fund to open accounts on the share records of the Acquiring Fund in
the name of the FMI Woodland Fund Shareholders, and representing the
respective pro rata number of Acquiring Fund Shares due FMI Woodland Fund
Shareholders. All issued and outstanding shares of the FMI Woodland Fund will,
simultaneously with the distribution, be cancelled on the books of the FMI
Woodland Fund and will be null and void. The Acquiring Fund shall not issue
certificates representing Acquiring Fund Shares in connection with such
transfer.
1.6 Ownership of Shares. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent.
1.7 Transfer Taxes. Any transfer taxes payable upon the issuance of
Acquiring Fund Shares in a name other than the registered holder of the FMI
Woodland Fund shares on the books of the FMI Woodland Fund as of that time
shall, as a condition of such transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Reporting Responsibility. Any reporting responsibility of the FMI
Woodland Fund, including, without limitation, the responsibility for filing of
regulatory reports, tax returns or other documents with the Securities and
Exchange Commission (the "Commission"), any state securities commission, and
any federal, state or local tax authorities or any other relevant regulatory
authority, is and shall remain the responsibility of the FMI Woodland Fund, or
the Seller on behalf of the FMI Woodland Fund.
1.9 Termination and Dissolution. The FMI Woodland Fund shall be
liquidated and dissolved promptly following all distributions made pursuant to
paragraph 1.5 in accordance with the laws of the State of Wisconsin and the
federal securities laws.
1.10 Books and Records. Immediately after the Closing Date, the share
transfer books relating to the FMI Woodland Fund shall be closed and no
transfer of shares shall thereafter be made on such books. All books and
records of the FMI Woodland Fund, including all books and records required to
be maintained under the 1940 Act and the rules and regulations thereunder
transferred to the Acquiring Fund, shall be made available to the FMI Woodland
Fund from and after the Closing Date at the Acquiring Fund's cost of producing
such books and records until at least the date through which such books and
records must be maintained under applicable law.
1.11 Actions on Behalf of Funds. The Acquiror shall take all actions
expressed herein as being the obligations of the Acquiring Fund on behalf of
the Acquiring Fund. The Seller shall take on behalf of the FMI Woodland Fund
all actions expressed herein as being the obligations of the FMI Woodland
Fund.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The gross value of the Assets to be acquired
by the Acquiring Fund hereunder shall be the gross value of such Assets as of
the close of regular trading on the New York Stock Exchange ("NYSE") on the
Closing Date, after the payment of the dividends pursuant to Section 7.3,
using the Acquiring Fund's valuation procedures or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 Valuation of Shares. The net asset value per share of the
Acquiring Fund Shares shall be the net asset value per share computed on the
Closing Date, using the Acquiring Fund's valuation procedures or such other
valuation procedures as shall be mutually agreed upon by the parties.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 Closing Date. Subject to the terms and conditions set forth
herein, the Closing shall occur on June 30, 2005, or such other date as the
parties may agree to in writing (the "Closing Date"). Unless otherwise
provided, all acts taking place at the Closing shall be deemed to take place
as of immediately after the close of regular trading on the New York Stock
Exchange ("NYSE") on the Closing Date. The Closing shall be held at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP at Four Times Square, New
York NY 10036, or at such other time and/or place as the parties may agree.
The parties may close via overnight courier immediately following the Closing.
3.2 Custodian's Certificate. The FMI Woodland Fund shall instruct its
Custodian, U.S. Bank, N.A. (the "Custodian"), to deliver at the Closing a
certificate of an authorized officer stating that: (a) the Assets have been
delivered in proper form to the Acquiring Fund on the Closing Date; and (b)
all necessary taxes including all applicable federal and state stock transfer
stamps, if any, have been paid, or provision for payment shall have been made,
in conjunction with the delivery of portfolio securities by the FMI Woodland
Fund. The FMI Woodland Fund's portfolio securities represented by a
certificate or other written instrument shall be presented by the Custodian to
the custodian for the Acquiring Fund, State Street Bank and Trust Company, for
examination no later than five (5) business days preceding the Closing Date
and transferred and delivered by the FMI Woodland Fund as of the Closing Date
for the account of the Acquiring Fund, duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof free and
clear of all liens, encumbrances and claims whatsoever, in accordance with the
custom of brokers. The FMI Woodland Fund's securities and instruments
deposited with a securities depository (as defined in Rule 17f-4 under the
1940 Act) or other permitted counterparties or a futures commission merchant
(as defined in Rule 17f-6 under the 1940 Act) shall be delivered as of the
Closing Date by book entry in accordance with the customary practices of such
depositories and futures commission merchants and the Custodian. The cash to
be transferred by the FMI Woodland Fund shall be transferred and delivered by
the FMI Woodland Fund as of the Closing Date for the account of the Acquiring
Fund.
3.3 Effect of the Suspension in Trading. In the event that, on the
Closing Date, either: (a) the NYSE or another primary exchange on which the
portfolio securities of the Acquiring Fund or the FMI Woodland Fund are
purchased or sold shall be closed to trading or trading on such exchange shall
be restricted; or (b) trading or the reporting of trading on the NYSE or
elsewhere shall be disrupted so that accurate appraisal of the value of the
net assets of the Acquiring Fund or the FMI Woodland Fund is impracticable,
the Closing shall be postponed until the first business day after the day when
trading is fully resumed and reporting is restored or such other date as the
parties may agree to.
3.4 Transfer Agent's Certificate. The FMI Woodland Fund shall
instruct its transfer agent, U.S. Bancorp Fund Services, LLC, to deliver at
the Closing a certificate of an authorized officer stating that its records
contain the names, addresses and tax identification numbers of FMI Woodland
Fund Shareholders as of the Closing Date, and the number and percentage
ownership (to four decimal places) of outstanding shares owned by each FMI
Woodland Fund Shareholder immediately prior to the Closing. The Acquiring Fund
shall issue and deliver, or instruct its transfer agent to issue and deliver,
a confirmation evidencing Acquiring Fund Shares to be credited on the Closing
Date to the FMI Woodland Fund, or provide evidence reasonably satisfactory to
the FMI Woodland Fund that such Acquiring Fund Shares have been credited to
the FMI Woodland Fund's account on the books of the Acquiring Fund.
3.5 Delivery of Additional Items. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, assumptions of
liabilities, receipts and other documents, if any, as such other party or its
counsel may reasonably request.
3.6 Failure to Deliver Assets. If the FMI Woodland Fund is unable to
make delivery pursuant to paragraph 3.2 hereof to the custodian for the
Acquiring Fund of any of the Assets of the FMI Woodland Fund for the reason
that any of such Assets have not yet been delivered to it by the FMI Woodland
Fund's broker, dealer or other counterparty, then, in lieu of such delivery,
the FMI Woodland Fund shall deliver, with respect to said Assets, executed
copies of an agreement of assignment and due bills executed on behalf of said
broker, dealer or other counterparty, together with such other documents as
may be required by the Acquiring Fund or its custodian, including brokers'
confirmation slips.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations of the FMI Woodland Fund. The Seller, on behalf
of the FMI Woodland Fund, represents and warrants to the Acquiror, on behalf
of the Acquiring Fund, as follows:
(a) The Seller is a corporation that is duly organized and
validly existing under the laws of the State of Wisconsin. The Seller
has filed with the Wisconsin Department of Financial Institutions all
necessary reports and has not filed articles of dissolution. The FMI
Woodland Fund is a legally designated, separate class of the Seller.
The Seller is duly authorized to transact business in the State of
Wisconsin and is qualified to do business in all jurisdictions in
which it is required to be so qualified, except jurisdictions in
which the failure to so qualify would not have a material adverse
effect on the FMI Woodland Fund. The Seller, on behalf of the FMI
Woodland Fund, has all material federal, state and local
authorizations necessary to own all of the properties and the Assets
and to carry on its business as now being conducted, except
authorizations which the failure to so obtain would not have a
material adverse effect on the FMI Woodland Fund.
(b) The Seller is registered as an open-end management
investment company under the 1940 Act, and its registration with the
Commission as an investment company under the 1940 Act is in full
force and effect. The Seller is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder
with respect to the FMI Woodland Fund.
(c) Any written information furnished by the Seller with
respect to the Seller and the FMI Woodland Fund for use in the
Registration Statement on Form N-14 and the Combined Prospectus/Proxy
Statement contained therein as so amended or supplemented (the
"Registration Statement"), or any other materials provided in
connection with the Reorganization, as of the effective date of the
Registration Statement and at all times subsequent thereto up to and
including the Closing Date, does not and will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated or necessary to make the statements, in light
of the circumstances under which such statements were made, not
misleading. The Proxy Statement contained in the Registration
Statement, insofar as it relates to the FMI Woodland Fund, will, on
the effective date of the Proxy Statement and at all times prior to
the conclusion of the shareholder meeting to which the Proxy
Statement relates (i) not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially
misleading, provided, however, that the representations and
warranties of this subparagraph (c) shall not apply to statements in
or omissions from the Proxy Statement made in reliance upon and in
conformity with information that was furnished by the Acquiring Fund
for use therein, and (ii) comply in all material respects with the
provisions of the Securities Exchange Act of 1934 and the 1940 Act
and the rules and regulations thereunder.
(d) The FMI Woodland Fund's prospectus, statement of
additional information and shareholder reports, each to the extent
incorporated by reference in the Registration Statement, as of their
respective dates, are accurate and complete in all material respects
and comply in all material respects with federal securities and other
laws and regulations, and do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
or necessary to make the statements, in light of the circumstances in
which such statements were made, not misleading.
(e) The FMI Woodland Fund is not in violation of, and the
execution, delivery and performance of this Agreement in accordance
with its terms by the Seller on behalf of the FMI Woodland Fund will
not result in the violation of, Wisconsin law or any provision of the
Seller's articles of incorporation or bylaws or of any material
agreement, indenture, note, mortgage, instrument, contract, lease or
other undertaking to which the Seller (with respect to the FMI
Woodland Fund) or the FMI Woodland Fund is a party or by which it is
bound, nor will the execution, delivery and performance of this
Agreement by the Seller on behalf of the FMI Woodland Fund, result in
the acceleration of any obligation, or the imposition of any penalty,
under any material agreement, indenture, instrument, contract, lease
or other undertaking to which the Seller or the FMI Woodland Fund is
a party or by which it is bound.
(f) The FMI Woodland Fund has no material contracts,
agreements or other commitments that will not be terminated without
liability to it before the Closing Date, other than liabilities, if
any, to be discharged prior to the Closing Date or reflected as
Stated Liabilities in the statement of assets and liabilities as
provided in paragraph 5.2 hereof.
(g) No litigation, claims, actions, suits proceeding or
investigation of or before any court or governmental body is pending
or to the Seller's knowledge threatened against the FMI Woodland Fund
or any of its properties or Assets which, if adversely determined,
would materially and adversely affect the Seller or the FMI Woodland
Fund's financial condition, the conduct of its business or which
would prevent or hinder the ability of the FMI Woodland Fund to carry
out the transactions contemplated by this Agreement. The FMI Woodland
Fund knows of no facts that might form the basis for the institution
of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its business
or its ability to consummate the transactions contemplated herein.
(h) The audited financial statements of the FMI Woodland
Fund for the fiscal years ended June 30, 2003 and June 30, 2004, have
been prepared in accordance with accounting principles generally
accepted in the United States of America consistently applied and
have been audited by PricewaterhouseCoopers LLP, and such statements
(true and complete copies of which have been furnished to the
Acquiring Fund) fairly reflect, in all material respects, the
financial condition and the results of operations of the FMI Woodland
Fund as of such date and the results of operations and changes in net
assets for the periods indicated, and there are no liabilities of the
FMI Woodland Fund whether actual or contingent and whether or not
determined or not determined or determinable as of such date that are
required to be disclosed but are not disclosed in such statements.
The unaudited financial statements of the FMI Woodland Fund for the
six months ended December 31, 2004 have been prepared in accordance
with accounting principles generally accepted in the United States of
America consistently applied by the FMI Woodland Fund, and such
statements (true and complete copies of which have been furnished to
the Acquiring Fund) fairly reflect, in all material respects, the
financial condition and the results of operations of the FMI Woodland
Fund as of such date and the results of operations and changes in net
assets for the periods indicated, and there are no liabilities of the
FMI Woodland Fund whether actual or contingent and whether or not
determined or determinable as of such date that are required to be
disclosed but are not disclosed in such statements.
(i) There have been no changes in the financial position of
the FMI Woodland Fund as reflected in the audited financial
statements for the fiscal years ended June 30, 2003 and June 30,
2004, and the unaudited financial statements of the FMI Woodland Fund
for the six months ended December 31, 2004, other than those
occurring in the ordinary course of business consistent with past
practice in connection with the purchase and sale of portfolio
assets, the issuance and redemption of FMI Woodland Fund shares and
the payment of normal operating expenses, dividends and capital gains
distributions. Since the date of the financial statements referred to
in paragraph 4.1(h) above, there have been no material adverse
changes in the FMI Woodland Fund's financial condition, assets,
liabilities or business, results of operations or the manner of
conducting business of the FMI Woodland Fund (other than changes
occurring in the ordinary course of business), or any incurrence by
the FMI Woodland Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted in writing by the Acquiring Fund. For the
purposes of this paragraph 4.1(i), a decline in the net asset value
of the FMI Woodland Fund due to declines in the value of FMI Woodland
Fund's Assets, the discharge of FMI Woodland Fund liabilities or the
redemption of FMI Woodland Fund shares by FMI Woodland Fund
Shareholders shall not constitute a material adverse change.
(j) Since the date of the financial statements referred to
in paragraph 4.1(h) above, there has not been (i) any change in the
business, results of operations, assets or financial condition or the
manner of conducting the business of the FMI Woodland Fund other than
changes in the ordinary course of its business, or any pending or
threatened litigation, which has had or may have a material adverse
effect on such business, results of operations, assets or financial
condition; (ii) issued any option to purchase or other right to
acquire shares of the FMI Woodland Fund granted by or on behalf of
the FMI Woodland Fund to any person other than subscriptions to
purchase shares at net asset value in accordance with the terms in
the prospectus for the FMI Woodland Fund; (iii) any entering into,
amendment or termination of any contract or agreement by or on behalf
of the FMI Woodland Fund, except as otherwise contemplated by this
Agreement; (iv) any indebtedness incurred, other than in the ordinary
course of business, by or on behalf of the FMI Woodland Fund for
borrowed money or any commitment to borrow money by or on behalf of
the FMI Woodland Fund; (v) any amendment of the Seller's
organizational documents in a manner materially affecting the FMI
Woodland Fund; and (vi) any grant or imposition of any lien, claim,
charge or encumbrance (other than encumbrances arising in the
ordinary course of business with respect to covered options) upon any
asset of the FMI Woodland Fund other than a lien for taxes not yet
due and payable.
(k) As of the date hereof and at the Closing Date, all
federal and other tax returns and reports of the FMI Woodland Fund
required by law to be filed have or shall have been timely and duly
filed by such dates (including any extensions) and are or will be
correct in all material respects, and all federal and other taxes
required to be paid pursuant to such returns and reports have been
paid. To the best of the FMI Woodland Fund's knowledge after
reasonable investigation, no such return is currently under audit or
examination, and no assessment or deficiency has been asserted with
respect to any such returns.
(l) The Seller's authorized capital stock consists of
10,000,000,000 shares of common stock of which 300,000,000 are
allocated to the FMI Woodland Fund. There were outstanding
667,247.739 shares of the FMI Woodland Fund, as of May 19, 2005, and
no shares of the FMI Woodland Fund were held in the treasury of the
Seller. All issued and outstanding shares of stock of the FMI
Woodland Fund have been offered and sold in compliance in all
material respects with applicable registration requirements of the
Securities Act of 1933 (the "1933 Act") and applicable state
securities laws and are, and on the Closing Date will be, duly
authorized and validly issued and outstanding, fully paid and
nonassessable (except to the extent provided by Section
180.0622(2)(b) of the Wisconsin Business Corporation Law, and are not
subject to preemptive or dissenter's rights. All of the issued and
outstanding shares of the FMI Woodland Fund will, at the time of the
Closing Date, be held by the persons and in the amounts set forth in
the records of the FMI Woodland Fund's transfer agent as provided in
paragraph 3.4. The FMI Woodland Fund has no outstanding options,
warrants or other rights to subscribe for or purchase any of the FMI
Woodland Fund shares and has no outstanding securities convertible
into any of the FMI Woodland Fund shares.
(m) At the Closing Date, the Seller, on behalf of the FMI
Woodland Fund, will have good and marketable title to the Assets to
be transferred to the Acquiring Fund pursuant to paragraph 1.2, and
full right, power and authority to sell, assign, transfer and deliver
such Assets hereunder, free of any lien or other encumbrance, except
those liens or encumbrances as to which the Acquiring Fund has
received notice and which have been taken into account in the net
asset valuation of the FMI Woodland Fund, and, upon delivery of the
Assets and the filing of any documents that may be required under
Wisconsin state law, the Acquiring Fund will acquire good and
marketable title to the Assets, subject to no restrictions on their
full transfer, other than such restrictions as might arise under the
1933 Act, and other than as disclosed to and accepted by the
Acquiring Fund.
(n) The Seller, on behalf of the FMI Woodland Fund, has the
power to enter into this Agreement and to consummate the transactions
contemplated herein. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated herein
have been duly authorized by all necessary action on the part of the
directors of the Seller. Subject to approval by the FMI Woodland Fund
Shareholders, this Agreement constitutes a valid and binding
obligation of the Seller, enforceable in accordance with its terms
and no other corporate action or proceedings by the FMI Woodland Fund
are necessary to authorize this Agreement and the transactions
contemplated herein, subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles.
(o) The information to be furnished by the FMI Woodland Fund
for use in no-action letters, applications for orders, registration
statements, proxy materials and other documents that may be necessary
in connection with the transactions contemplated herein shall be
accurate and complete in all material respects and shall comply in
all material respects with federal securities and other laws and
regulations.
(p) The FMI Woodland Fund has elected to qualify and has
qualified as a "regulated investment company" under the Code (a
"RIC") as of and since its first taxable year; has been a RIC under
the Code at all times since the end of its first taxable year when it
so qualified; qualifies and will continue to qualify as a RIC under
the Code for its taxable year ending upon its liquidation; and has
satisfied the distribution requirements imposed by the Code for each
of its taxable years ending on or before the Closing Date.
(q) Except for the Registration Statement and the approval
of this Agreement by the FMI Woodland Fund's Shareholders, no
consent, approval, authorization or order under any federal or state
law or of any court or governmental authority is required for the
consummation by the Seller, on behalf of the FMI Woodland Fund, of
the transactions contemplated herein. No consent of or notice to any
third party or entity other than the shareholders of the FMI Woodland
Fund as described in paragraph 4.1(r) is required for the
consummation by the Seller, on behalf of the FMI Woodland Fund, of
the transactions contemplated by this Agreement.
(r) The Seller has called a special meeting of FMI Woodland
Fund Shareholders to consider and act upon this Agreement (or
transactions contemplated hereby) and to take all other appropriate
action necessary to obtain approval of the transactions contemplated
herein.
4.2 Representations of the Acquiring Fund. The Acquiror, on behalf of
the Acquiring Fund, represents and warrants to the Seller on behalf of the FMI
Woodland Fund, as follows:
(a) The Acquiror is a corporation that is duly organized,
validly existing and in good standing under laws of the State of
Maryland. The Acquiring Fund is a legally designated, separate class
of the Acquiror. The Acquiror is duly authorized to transact business
in the State of Maryland and is qualified to do business in all
jurisdictions in which it is required to be so qualified, except
jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Acquiring Fund. The Acquiror, on
behalf of the Acquiring Fund, has all material federal, state and
local authorizations necessary to own all of its properties and
assets and to carry on its business as now being conducted, except
authorizations which the failure to so obtain would not have a
material adverse effect on the Acquiring Fund.
(b) The Acquiror is registered as an open-end management
investment company under the 1940 Act, and its registration with the
Commission as an investment company under the 1940 Act is in full
force and effect. The Acquiror is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder
with respect to the Acquiring Fund.
(c) The Registration Statement as of its effective date and
at all times subsequent thereto up to and including the Closing Date,
conforms and will conform, as it relates to the Acquiror and the
Acquiring Fund, in all material respects to the requirements of the
federal and state securities laws and the rules and regulations
thereunder and does not and will not include, as it relates to the
Acquiror and the Acquiring Fund, any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that
no representations and warranties in this paragraph 4.2 apply to
statements or omissions made in reliance upon and in conformity with
written information concerning the FMI Woodland Fund furnished to the
Acquiring Fund by the FMI Woodland Fund. From the effective date of
the Registration Statement through the time of the meeting of the FMI
Woodland Fund Shareholders and on the Closing Date, any written
information furnished by the Acquiror with respect to the Acquiror
and the Acquiring Fund for use in the Registration Statement or any
other materials provided in connection with the Reorganization, as of
the effective date of the Registration Statement and at all times
subsequent thereto up to and including the Closing Date, does not and
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated or necessary to make the
statements, in light of the circumstances under which such statements
were made, not misleading.
(d) The Acquiring Fund's prospectus, statement of additional
information and shareholder reports, each to the extent incorporated
by reference in the Registration Statement, are accurate and complete
in all material respects and comply in all material respects with
federal securities and other laws and regulations, and do not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated or necessary to make the statements, in
light of the circumstances in which such statements were made, not
misleading.
(e) The Acquiring Fund is not in violation of, and the
execution, delivery and performance of this Agreement in accordance
with its terms by the Acquiror on behalf of the Acquiring Fund will
not result in the violation of, Maryland law or any provision of the
Acquiror's articles of incorporation or bylaws or of any material
agreement, indenture, note, mortgage, instrument, contract, lease or
other undertaking to which the Acquiror (with respect to the
Acquiring Fund) or the Acquiring Fund is a party or by which it is
bound, nor will the execution, delivery and performance of this
Agreement by the Acquiror on behalf of the Acquiring Fund, result in
the acceleration of any obligation, or the imposition of any penalty,
under any material agreement, indenture, instrument, contract, lease
or other undertaking to which the Acquiror or the Acquiring Fund is a
party or by which it is bound.
(f) No litigation, claims, actions, suits proceeding or
investigation of or before any court or governmental body is pending
or to the Acquiror's knowledge threatened against the Acquiring Fund
or any of its properties or its assets which, if adversely
determined, would materially and adversely affect the Acquiror or the
Acquiring Fund's financial condition, the conduct of its business or
which would prevent or hinder the ability of the Acquiring Fund to
carry out the transactions contemplated by this Agreement. The
Acquiring Fund knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its business
or its ability to consummate the transactions contemplated herein.
(g) The audited financial statements of the Acquiring Fund
as of September 30, 2003 and September 30, 2004, and for the fiscal
years then ended, have been prepared in accordance with accounting
principles generally accepted in the United States of America
consistently applied and have been audited by Ernst & Young LLP, and
such statements (true and complete copies of which have been
furnished to the FMI Woodland Fund) fairly reflect the financial
condition and the results of operations of the Acquiring Fund as of
such date and the results of operations and changes in net assets for
the periods indicated, and there are no liabilities of the Acquiring
Fund whether actual or contingent and whether or not determined or
determinable as of such date that are required to be disclosed but
are not disclosed in such statements. The unaudited financial
statements of the Acquiring Fund for the six months ended March 31,
2004 have been prepared in accordance with accounting principles
generally accepted in the United States of America consistently
applied by the Acquiring Fund, and such statements (true and complete
copies of which have been furnished to the FMI Woodland Fund) fairly
reflect the financial condition and the results of operations of the
Acquiring Fund as of such date and the results of operations and
changes in net assets for the periods indicated, and there are no
liabilities of the Acquiring Fund whether actual or contingent and
whether or not determined or determinable as of such date that are
required to be disclosed but are not disclosed in such statements.
(h) There have been no changes in the financial position of
the Acquiring Fund as reflected in the audited financial statements
of the Acquiring Fund as of September 30, 2004 and for the fiscal
year then ended, other than those occurring in the ordinary course of
business consistent with past practice in connection with the
purchase and sale of portfolio assets, the issuance and redemption of
Acquiring Fund shares and the payment of normal operating expenses,
dividends and capital gains distributions. Since September 30, 2004,
there have been no material adverse changes in the Acquiring Fund's
financial condition, assets, liabilities or business, results of
operations or the manner of conducting business of the Acquiring Fund
(other than changes occurring in the ordinary course of business), or
any incurrence by the Acquiring Fund of indebtedness maturing more
than one year from the date such indebtedness was incurred, except as
otherwise disclosed to and accepted in writing by the Acquiring Fund.
For the purposes of this paragraph 4.2 (h), a decline in the net
asset value of the Acquiring Fund due to declines in the value of
Acquiring Fund's Assets, the discharge of the Acquiring Fund
liabilities or the redemption of Acquiring Fund shares by Acquiring
Fund Shareholders shall not constitute a material adverse change.
(i) As of the date hereof and at the Closing Date, all
federal and other tax returns and reports of the Acquiring Fund
required by law to be filed have or shall have been timely and duly
filed by such dates (including any extensions) and are or will be
correct in all material respects, and all federal and other taxes
required to be paid pursuant to such returns and reports have been
paid. To the best of the Acquiring Fund's knowledge after reasonable
investigation, no such return is currently under audit or
examination, and no assessment or deficiency has been asserted with
respect to any such returns.
(j) The Acquiror's authorized capital stock consists of one
billion shares of stock having a par value of one tenth of one cent
($.001) per share. There were outstanding 334,137.056 shares of the
Acquiring Fund as of May 19, 2005, and no shares of the Acquiring
Fund were held in the treasury of the Acquiror. All issued and
outstanding shares of common stock of the Acquiring Fund have been
offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and applicable
state securities laws and are, and on the Closing Date will be, duly
authorized and validly issued and outstanding, fully paid and
nonassessable, and are not subject to preemptive or dissenter's
rights. All of the issued and outstanding shares of the Acquiring
Fund will, at the time of the Closing Date, be held by the persons
and in the amounts set forth in the records of the Acquiring Fund's
transfer agent as provided in paragraph 3.4. The Acquiring Fund has
no outstanding options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund shares and has no outstanding
securities convertible into any of the Acquiring Fund shares.
(k) At the Closing Date, the Acquiror, on behalf of the
Acquiring Fund, will have good and marketable title to all of its
assets, and full right, power and authority to sell, assign, transfer
and deliver such assets hereunder, free of any lien or other
encumbrance, except those liens or encumbrances as to which the
Seller has received notice at or prior to the Closing Date.
(l) The Acquiror, on behalf of the Acquiring Fund, has the
power to enter into this Agreement and to consummate the transactions
contemplated herein. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated herein
have been duly authorized by all necessary action on the part of the
directors of the Acquiror. This Agreement constitutes a valid and
binding obligation of the Acquiror, enforceable in accordance with
its terms and no other corporate action or proceedings by the
Acquiring Fund are necessary to authorize this Agreement and the
transactions contemplated herein, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity
principles.
(m) The Acquiring Fund Shares to be issued and delivered to
the FMI Woodland Fund for the account of the FMI Woodland Fund
Shareholders pursuant to the terms of this Agreement will, at the
Closing Date, have been duly authorized. When so issued and
delivered, the Acquiring Fund Shares will be duly and validly issued
and will be fully paid and nonassessable.
(n) The information to be furnished by the Acquiring Fund
for use in no-action letters, applications for orders, registration
statements, proxy materials and other documents that may be necessary
in connection with the transactions contemplated herein shall be
accurate and complete in all material respects and shall comply in
all material respects with federal securities and other laws and
regulations.
(o) The Acquiring Fund has elected to qualify and has
qualified as a RIC as of and since its first taxable year; has been a
RIC under the Code at all times since the end of its first taxable
year when it so qualified; qualifies and will continue to qualify as
a RIC under the Code; and has satisfied the distribution requirements
imposed by the Code for each of its taxable years.
(p) No consent, approval, authorization or order under any
federal or state law or of any court or governmental authority is
required for the consummation by the Acquiror, on behalf of the
Acquiring Fund, of the transactions contemplated herein. No consent
of or notice to any third party or entity other than the shareholders
of the FMI Woodland Fund as described in paragraph 4.1(q) is required
for the consummation by the Acquiror, on behalf of the Acquiring
Fund, of the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE FMI WOODLAND FUND
5.1 Operation in Ordinary Course. Subject to paragraph 7.3, each of
the Acquiring Fund and FMI Woodland Fund will operate its business in the
ordinary course of business between the date of this Agreement and the Closing
Date, it being understood that such ordinary course of business will include
customary dividends and shareholder purchases and redemptions. No party shall
take any action that would, or would reasonably be expected to, result in any
of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect.
5.2 Delivery of Statement of Assets and Liabilities. The Seller will
prepare and deliver to the Acquiror on the second business day prior to the
Closing Date a statement of the assets and Stated Liabilities of the FMI
Woodland Fund as of such date for review and agreement by the parties to
determine that the assets and Stated Liabilities of the FMI Woodland Fund are
being correctly determined in accordance with the terms of this Agreement. The
Seller will deliver at the Closing (1) an updated statement of assets and
Stated Liabilities of the FMI Woodland Fund and (2) a list of the FMI Woodland
Fund's portfolio showing the tax costs of each of its assets by lot and the
holding periods of such assets, each of (1) and (2) as of the Closing Date,
and certified by the Treasurer of the Seller.
5.3 Access to Books and Records. Upon reasonable notice, the Seller
shall make available to the Acquiror's officers and agents all books and
records of the Seller relating to the FMI Woodland Fund.
5.4 Additional Information. The FMI Woodland Fund will assist the
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the FMI Woodland Fund's
shares.
5.5 Contract Termination. The FMI Woodland Fund will terminate all
agreements to which it is a party (other than this Agreement), effective as of
the Closing Date without any liability not paid prior to the Closing Date
other than as accrued as part of the Stated Liabilities.
5.6 Further Action. Subject to the provisions of this Agreement, the
Acquiring Fund and the FMI Woodland Fund will take or cause to be taken all
action and do or cause to be done all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement, including any actions required to be taken after the Closing
Date. In particular, each of the Seller and the FMI Woodland Fund covenants
that it will, as and when reasonably requested by the Acquiring Fund, execute
and deliver or cause to be executed and delivered all such assignments and
other instruments and will take or cause to be taken such further action as
the Acquiring Fund may reasonably deem necessary or desirable in order to vest
in and confirm the Acquiring Fund's title to and possession of all the Assets
and otherwise to carry out the intent and purpose of this Agreement.
5.7 Statement of Earnings and Profits. As promptly as practicable,
but in any case within thirty (30) days after the Closing Date, the FMI
Woodland Fund shall furnish to the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement of the earnings and
profits of the FMI Woodland Fund for federal income tax purposes, as well as
any capital loss carryovers and items that Acquiring Fund will succeed and
take into account as a result of Section 381 of the Code, and which will be
certified by the Treasurer of the Seller.
5.8 Preparation of the Registration Statement. The Acquiror will
prepare and file with the Commission the Registration Statement relating to
the Acquiring Fund Shares to be issued to shareholders of the FMI Woodland
Fund. The Registration Statement shall include a combined prospectus/proxy
statement relating to the transactions contemplated by this Agreement. At the
time the Registration Statement becomes effective, at the time of the FMI
Woodland Fund shareholder meeting and at the Closing Date, the Registration
Statement shall be in compliance in all material respects with the 1933 Act,
the 1934 Act and the 1940 Act, as applicable. Each party will provide the
materials and information necessary to prepare the Registration Statement, for
inclusion therein, in connection with the meeting of the FMI Woodland Fund
Shareholders to consider the approval of this Agreement and the transactions
contemplated herein, including in the case of the FMI Woodland Fund any
special interim financial information necessary for inclusion therein. If at
any time prior to the Closing Date a party becomes aware of any untrue
statement of material fact or omission to state a material fact required to be
stated therein or necessary to make the statements made not misleading in
light of the circumstances under which they were made, the party discovering
the item shall notify the other parties and the parties shall cooperate in
prompt preparing, filing and clearing the Commission and, if appropriate,
distributing to shareholders appropriate disclosure with respect to the item.
5.9 Tax Status of Reorganization. The intention of the parties is
that the transaction contemplated by this Agreement will qualify as a
reorganization within the meaning of Section 368(a) of the Code. Neither the
Acquiror nor the Seller shall take any action or cause any action to be taken
(including, without limitation, the filing of any tax return) that is
inconsistent with such treatment or results in the failure of the transaction
to qualify as a reorganization within the meaning of Section 368(a) of the
Code. At or prior to the Closing Date, the Acquiring Fund and the FMI Woodland
Fund will take such action, or cause such action to be taken, as is reasonably
necessary to enable Skadden, Arps, Slate, Meagher & Flom LLP, special counsel
to the Acquiror, to render the tax opinion required herein (including, without
limitation, each party's execution of representations reasonably requested by
and addressed to Skadden, Arps, Slate, Meagher & Flom LLP).
5.10 Reasonable Best Efforts. Each of the Acquiror, the Acquiring
Fund, the Seller and the FMI Woodland Fund shall use its reasonable best
efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement.
5.11 Authorizations. The Acquiring Fund agrees to use all reasonable
efforts to obtain the approvals and authorizations required by the 1933 Act,
the 1940 Act and any state blue sky or securities laws as it may deem
appropriate in order to operate in the normal course of business after the
Closing Date.
5.12 No Restriction of Permitted Investments. The Acquiring Fund
shall not change its articles of incorporation, prospectus or statement of
additional information prior to Closing so as to restrict permitted
investments for the Acquiring Fund prior to the Closing, except as required by
the Commission.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FMI WOODLAND FUND
The obligations of the FMI Woodland Fund to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by the Acquiring Fund of all the obligations to be performed by
the Acquiring Fund pursuant to this Agreement on or before the Closing Date
and, in addition, subject to the following condition that all representations,
covenants and warranties of the Acquiror, on behalf of itself and the
Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date. The Acquiring
Fund shall have delivered to the FMI Woodland Fund a certificate executed in
the Acquiring Fund's name by the Acquiror's President and its Treasurer, in
form and substance satisfactory to the FMI Woodland Fund and dated as of the
Closing Date, to such effect and as to such other matters as the FMI Woodland
Fund shall reasonably request. The FMI Woodland Fund shall have received
certified copies of the resolutions adopted by the Board of Directors of the
Acquiror approving this Agreement and the transactions contemplated herein.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the FMI Woodland Fund of all the obligations to be performed by the FMI
Woodland Fund pursuant to this Agreement on or before the Closing Date and, in
addition, shall be subject to the following conditions:
7.1 All representations, covenants and warranties of the Seller, on
behalf of itself and the FMI Woodland Fund, contained in this Agreement shall
be true and correct in all material respects as of the date hereof and as of
the Closing Date, with the same force and effect as if made on and as of the
Closing Date. The FMI Woodland Fund shall have delivered to the Acquiring Fund
on the Closing Date a certificate executed in the FMI Woodland Fund's name by
the Seller's President and the Treasurer, in form and substance satisfactory
to the Acquiring Fund and dated as of the Closing Date, to such effect and as
to such other matters as the Acquiring Fund shall reasonably request. The
Acquiring Fund shall have received certified copies of the resolutions adopted
by the Board of Directors of the Seller approving this Agreement and the
transactions contemplated herein.
7.2 The FMI Woodland Fund shall have delivered to the Acquiring Fund
(1) a statement as of the Closing Date of the FMI Woodland Fund's assets and
Stated Liabilities, in accordance with paragraph 5.2, and (2) a list of the
FMI Woodland Fund's portfolio showing the tax costs of each of its assets by
lot and the holding periods of such assets, as of the Closing Date, certified
by the Treasurer of the Seller.
7.3 Except to the extent prohibited by Rule 19b-1 under the 1940 Act,
prior to the valuation of the Assets on the Closing Date, the FMI Woodland
Fund shall have declared a dividend or dividends, with a record and
ex-dividend date prior to the valuation of the Assets, which, together with
all previous dividends, shall have the effect of distributing to the FMI
Woodland Fund shareholders all of the FMI Woodland Fund's investment company
taxable income for all taxable periods ending on or before the Closing Date
(computed without regard to any deduction for dividends paid), if any, plus
the excess of its interest income, if any, excludable from gross income under
Section 103(a) of the Code over its deductions disallowed under Sections 265
and 171(a)(2) of the Code for all taxable periods ending on or before the
Closing Date and all of its net capital gains realized in all taxable periods
ending on or before the Closing Date (after reduction for any capital loss
carry forward).
7.4 As of the Closing Date, there shall have been no material change
in the investment objective, policies and restrictions nor any material
increase in the investment management fees, fee levels payable pursuant to any
12b-1 plan of distribution or shareholder servicing plan or agreement, or
other fees payable for services provided to the FMI Woodland Fund, nor any
material reduction in the fee waiver or expense reduction undertakings from
those described in the Registration Statement.
7.5 The Seller shall have taken all steps required to terminate all
agreements to which it is a party (other than this Agreement), other than as
accrued as part of the Stated Liabilities.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE
ACQUIRING FUND AND FMI WOODLAND FUND
If any of the conditions set forth below shall not have been
satisfied on or before the Closing Date or shall not remain satisfied with
respect to the FMI Woodland Fund or the Acquiring Fund, the other party to
this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein, with
respect to the FMI Woodland Fund, shall have been approved by the requisite
vote of the holders of the outstanding shares of the FMI Woodland Fund in
accordance with the provisions of the Seller's charter and bylaws, applicable
Wisconsin law and the 1940 Act. Evidence of such approval shall have been
delivered to the Acquiring Fund, in such form as shall be reasonably
acceptable to the Acquiring Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the FMI Woodland Fund may waive the
conditions set forth in this paragraph 8.1.
8.2 The Commission shall not have issued an unfavorable report under
Section 25(b) of the 1940 Act, or instituted any proceeding seeking to enjoin
the consummation of the transactions contemplated by this Agreement under
Section 25(c) of the 1940 Act.
8.3 All third party consents and all consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state securities authorities, including any necessary
"no-action" positions and exemptive orders from such federal authorities) in
each case required to permit consummation of the transactions contemplated
herein shall have been obtained, except where failure to obtain any such
consent, order or permit would not reasonably be expected to have a material
adverse effect on the assets or properties of the Acquiring Fund or the FMI
Woodland Fund, provided that either party hereto may waive any such conditions
for itself.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued. To the best knowledge of the parties to this Agreement, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act. The registration
statement of the Acquiror on Form N-1A under the 1940 Act covering the sale of
shares of the Acquiring Fund shall be effective.
8.5 As of the Closing Date, there shall be no pending litigation
brought by any person against the Seller, the FMI Woodland Fund, the Acquiror
or the Acquiring Fund or any of the investment advisers, directors or officers
of the foregoing, arising out of, or seeking to prevent completion of the
transactions contemplated by, this Agreement. Furthermore, no action, suit or
other proceeding shall be pending before any court or governmental agency in
which it is sought to restrain or prohibit, or obtain damages or other relief
in connection with, this Agreement or the transactions contemplated herein.
8.6 The Acquiror and the Seller each shall have received an opinion
of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Acquiring
Fund substantially to the effect that, based on certain facts, assumptions and
representations of the parties, the Reorganization will be treated as a
reorganization within the meaning of Section 368(a) of the Code. Such opinion
shall be based on customary assumptions and such representations as Skadden,
Arps, Slate, Meagher & Flom LLP may reasonably request, and each FMI Woodland
Fund and Acquiring Fund will cooperate to make and certify the accuracy of
such representations. Notwithstanding anything herein to the contrary, neither
the Acquiring Fund nor the FMI Woodland Fund may waive the condition set forth
in this paragraph 8.6.
ARTICLE IX
EXPENSES
Except as otherwise expressly provided in this Agreement, Gabelli
Funds, LLC, the investment adviser to the Acquiring Fund, shall bear the
direct and indirect expenses incurred by the Acquiring Fund and the FMI
Woodland Fund, each in connection with the Reorganization. The costs of the
Reorganization shall include, but not be limited to, costs associated with
obtaining any necessary order of exemption from the 1940 Act, preparation and
filing of the Registration Statement and printing and distribution of the
Proxy Statement, legal fees (including those relating to the opinion described
in paragraph 8.6), accounting fees, securities registration fees, and expenses
of holding a shareholders' meeting of the FMI Woodland Fund.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiror, on behalf of the Acquiring Fund, and the Seller,
on behalf of the FMI Woodland Fund, agree that no party has made to the other
party any representation, warranty and/or covenant not set forth herein and
that this Agreement constitutes the entire agreement between the parties.
10.2 The representations and warranties of the parties hereto set
forth in this Agreement shall not survive the consummation of the transactions
contemplated herein.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiror and the Seller. In addition, either the Acquiror or the Seller may at
their option terminate this Agreement at or before the Closing Date due to:
(a) a material breach by the other of any representation,
warranty or agreement contained herein to be performed at or before
the Closing Date, if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party or both parties that has not
been met if it reasonably appears that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the FMI Woodland Fund, the Acquiror or the Seller, or their
respective Boards of Directors or officers, to the other party or its Board of
Directors. In the event of willful default, all remedies at law or in equity
of the party adversely affected shall survive.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the officers of the
Acquiror and the Seller as specifically authorized by their respective Board
of Directors; provided, however, that, following the meeting of the FMI
Woodland Fund Shareholders called by the FMI Woodland Fund pursuant to
paragraph 4.1(r) of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of Acquiring Fund Shares to
be issued to the FMI Woodland Fund Shareholders under this Agreement to the
detriment of such FMI Woodland Fund Shareholders without their further
approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
13.1 The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland.
13.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but, except as
provided in this paragraph, no assignment or transfer hereof or of any rights
or obligations hereunder shall be made by any party without the written
consent of the other party. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, firm or corporation,
other than the parties hereto and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
ARTICLE XIV
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly
given if delivered by hand (including by FedEx or similar express courier) or
transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
applicable party: to the Seller, in each case to the attention of Donald S.
Wilson at 100 East Wisconsin Avenue, Suite 2200, Milwaukee, Wisconsin 53202
(facsimile (414) 226-4530), with a copy to Foley & Lardner LLP, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, attn: Richard L. Teigen
(facsimile (414) 297-4900), or to the Acquiror, in each case to the attention
of Bruce N. Alpert at One Corporate Center, Rye, New York 10580, with a copy
to Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New
York 10036, attn: Richard Prins (facsimile (917) 777-2790), or to any other
address that the Acquiror or the Seller shall have last designated by notice
to the other party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement,
all as of the date first written above.
GABELLI EQUITY SERIES FUNDS, INC.
on behalf of its class,
The Gabelli Woodland Small Cap Value
Fund
By: /s/ Bruce N. Alpert
----------------------------
Name: Bruce N. Alpert
Title: President
ACKNOWLEDGED:
By: /s/ James McKee
------------------------
Name: James McKee
Title: Secretary
FMI MUTUAL FUNDS, INC.
on behalf of its class,
FMI Woodland Small Capitalization
Value Fund
By: /s/ Donald S. Wilson
-----------------------------
Name: Donald S. Wilson
Title: Vice President & Secretary
ACKNOWLEDGED:
By: /s/ Camille F. Wildes
------------------------
Name: Camille F. Wildes
Title: Vice President
GABELLI EQUITY SERIES FUNDS, INC.
FMI MUTUAL FUNDS, INC.
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
May 31, 2005
This Statement of Additional Information (the "SAI") relates to the
proposed reorganization (the "Reorganization") of the FMI Woodland Small
Capitalization Fund (the "FMI Woodland Fund"), a class of FMI Mutual Funds,
Inc., a Wisconsin corporation, into the Gabelli Woodland Small Cap Value Fund
(the "Gabelli Woodland Fund"), a class of Gabelli Equity Series Funds, Inc., a
Maryland corporation.
This SAI contains information which may be of interest to shareholders
relating to the Reorganization, but which is not included in the Combined
Prospectus/Proxy Statement dated May 31, 2005 (the "Combined Prospectus/Proxy
Statement") of the Gabelli Equity Series Funds, Inc. As described in the
Combined Prospectus/Proxy Statement, the Reorganization would involve the
transfer of all the assets of, and the assumption of stated liabilities of, the
FMI Woodland Fund, in exchange for shares of the Gabelli Woodland Fund. The FMI
Woodland Fund would distribute the Gabelli Woodland Fund shares it receives to
its shareholders in complete liquidation of the FMI Woodland Fund.
This SAI is not a prospectus, and should be read in conjunction with the
Combined Prospectus/Proxy Statement. The Combined Prospectus/Proxy Statement
has been filed with the SEC, and is available upon request and without charge
by writing to Gabelli Equity Series Funds, Inc.
TABLE OF CONTENTS
I. Additional Information about the Gabelli Woodland Fund and the
FMI Woodland Fund 1
II. Financial Statements 1
a. Pro Forma Gabelli Woodland Fund Portfolio of Investments as
of March 31, 2005
b. Pro Forma Gabelli Woodland Fund Statement of Assets and
Liabilities as of March 31, 2005
c. Pro Forma Gabelli Woodland Fund Statement of Operations
as of March 31, 2005
III. Notes to Pro Forma Financial Statements (Unaudited) 26
* THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE PRO FORMA FINANCIAL
STATEMENTS AND SCHEDULES
I. ADDITIONAL INFORMATION ABOUT THE GABELLI WOODLAND FUND AND THE FMI WOODLAND
FUND
FOR THE GABELLI WOODLAND FUND: Incorporates by reference the portions of
the Statement of Additional Information in the N-1A for the Gabelli Equity
Series Funds, Inc., as filed with the SEC on January 31, 2005, that relate to
the Gabelli Woodland Fund.
FOR THE FMI WOODLAND FUND: Incorporates by reference the portions of the
Statement of Additional Information in the N-1A for the FMI Mutual Funds,
Inc., as filed with the SEC on October 8, 2004 (as supplemented), that relate
to the FMI Woodland Fund.
II. FINANCIAL STATEMENTS
This SAI incorporates by reference (i) the Annual Report of the Gabelli
Woodland Fund for the year ended September 30, 2004, (ii) the Annual Report of
the FMI Woodland Fund for the year ended June 30, 2004, and (iii) the
Semi-annual Report of the FMI Woodland Fund for the six months ended December
31, 2004. Each of these reports contains historical financial information
regarding the Funds and have been filed with the SEC. The financial statements
therein, and, in the case of the Annual Reports, the report of independent
accountants therein, are incorporated herein by reference.
Pro forma financial statements of the FMI Woodland Fund and Gabelli
Woodland Fund are provided on the following pages.
The Gabelli Woodland Small Cap Value Fund
PRO FORMA
Portfolio of Investments
(1) 3/31/2005
(Unaudited)
The FMI Woodland The FMI Woodland The Gabelli The Gabelli
Small Capitalization Small Capitalization Woodland Small Woodland Small
Value Fund Value Fund Cap Value Fund Cap Value Fund
Shares/Par Market Value Shares/Par Market Value
Security Name Historical Historical Historical Historical
---------------------------------------------------------------------------------------------
COMMON STOCKS
Aerospace
Alliant Techsystems Inc. 2,935 $209,706 1,220 $87,169
---------------------------- -----------------------------
Agriculture
Delta & Pine Land Co. 2,540 68,580 940 25,380
---------------------------- -----------------------------
Automotive: Parts and Accessories
Modine Manufacturing Co. 1,010 29,623 1,480 43,408
---------------------------- -----------------------------
Business Services
Acxiom Corp. 5,350 111,975 2,180 45,628
Adesa Inc. 8,680 202,765 3,690 86,198
Bowne & Co. Inc. 12,000 180,480 5,370 80,765
Fair Isaac Corp. 4,470 153,947 1,910 65,780
HNI Corp. 4,760 213,962 1,960 88,102
The Brink's Co. 4,710 162,966 2,180 75,428
---------------------------- -----------------------------
1,026,095 441,901
---------------------------- -----------------------------
Computer Software and Services
Harland Co., John H. 3,110 106,860 1,290 44,324
Intergraph Corp.+ 10,639 306,510 4,347 125,237
Stellent Inc.+ 19,690 165,593 8,370 70,392
Tyler Technologies Inc.+ 10,940 83,253 4,650 35,387
---------------------------- -----------------------------
662,216 275,340
---------------------------- -----------------------------
Consumer Products
Alberto-Culver Co. 3,590 171,817 1,740 83,276
Brunswick Corp. 4,570 214,104 2,030 95,106
Church & Dwight Co. Inc. 4,210 149,329 1,825 64,733
CNS Inc. 10,930 194,554 8,230 146,494
Jarden Corp.+ 4,200 192,696 1,750 80,290
---------------------------- -----------------------------
922,500 469,899
---------------------------- -----------------------------
Consumer Services
Insurance Auto Auctions Inc.+ 12,170 338,935 5,120 142,592
---------------------------- -----------------------------
Diversified Industrial
Albany International Corp., Cl. A 3,850 118,888 1,970 60,834
Apogee Enterprises Inc. 15,420 220,198 7,380 105,386
Carlisle Companies Inc. 2,850 198,844 1,340 93,492
EnPro Industries Inc.+ 4,190 115,225 2,000 55,000
ESCO Technologies Inc.+ 700 56,245 290 23,301
Griffon Corp.+ 7,300 156,293 3,060 65,515
Material Sciences Corp.+ 10,455 140,620 4,530 60,928
Pentair Inc. 8,560 333,840 3,720 145,080
Texas Industries Inc. 2,700 145,125 1,120 60,200
---------------------------- -----------------------------
1,485,278 669,736
---------------------------- -----------------------------
Energy and Utilities
ALLETE Inc. 2,853 119,398 1,096 45,868
---------------------------- -----------------------------
Entertainment
Alloy Inc.+ 30,920 181,810 14,790 86,965
Topps Co. Inc. 14,020 129,124 5,890 54,247
---------------------------- -----------------------------
310,934 141,212
---------------------------- -----------------------------
Equipment and Supplies
Tennant Co. 5,240 202,736 2,440 94,404
Toro Co. 3,130 277,005 1,240 109,740
---------------------------- -----------------------------
479,741 204,144
---------------------------- -----------------------------
Financial Services
BISYS Group Inc.+ 8,040 126,067 3,850 60,368
NewAlliance Bancshares Inc. 9,990 139,860 4,310 60,340
TCF Financial Corp. 9,820 266,613 4,190 113,758
---------------------------- -----------------------------
532,540 234,466
---------------------------- -----------------------------
Food and Beverage
Del Monte Foods Co.+ 16,380 177,723 7,370 79,965
PepsiAmericas Inc. 5,710 129,389 2,350 53,251
Triarc Companies Inc., Cl. A 9,040 128,368 3,490 49,558
Triarc Companies Inc., Cl. B 18,400 254,472 7,070 97,778
---------------------------- -----------------------------
689,952 280,552
---------------------------- -----------------------------
Health Care
Fisher Scientific International Inc.+ 1,710 97,333 783 44,568
Laboratory Corporation of America 4,780 230,396 1,970 94,954
Holdings+
Lifecore Biomedical Inc.+ 7,450 132,387 3,550 63,083
NeighborCare Inc.+ 1,710 50,018
- -
PolyMedica Corp. 5,380 170,869 2,260 71,778
Possis Medical Inc.+ 7,720 64,616 3,750 31,388
SurModics Inc.+ 5,840 186,354 2,530 80,732
West Pharmaceutical Services Inc. 3,900 93,210 2,100 50,190
---------------------------- -----------------------------
975,165 486,711
---------------------------- -----------------------------
Hotels and Gaming
Gaylord Entertainment Co.+ 7,470 301,788 3,580 144,632
Vail Resorts Inc.+ 6,940 175,235 2,810 70,952
---------------------------- -----------------------------
477,023 215,584
---------------------------- -----------------------------
Manufactured Housing and Recreational
Vehicles
Champion Enterprises Inc.+ 12,730 119,662 5,450 51,230
---------------------------- -----------------------------
Publishing
Hollinger International Inc., Cl. A 8,260 90,034 3,340 36,406
Journal Communications Inc., Cl. A 6,140 101,617 2,470 40,878
---------------------------- -----------------------------
191,651 77,284
---------------------------- -----------------------------
Retail
Gander Mountain Co.+ 5,070 66,417 2,410 31,571
Office Depot Inc.+ 7,540 167,237 3,360 74,525
---------------------------- -----------------------------
233,654 106,096
---------------------------- -----------------------------
Specialty Chemicals
Cytec Industries Inc. 2,490 135,082 1,210 65,643
Fuller (H.B.) Co. 3,410 98,890 1,400 40,600
---------------------------- -----------------------------
233,972 106,243
---------------------------- -----------------------------
Transportation
Laidlaw International Inc.+ 8,170 169,936 3,470 72,176
---------------------------- -----------------------------
U.S. GOVERNMENT OBLIGATIONS
U.S. Treasury Bills, 2.454% to 2.823%++,
04/21/05 to 06/23/05 376,000 374,115
-
---------------------------- -----------------------------
CASH EQUIVALENTS
US Bancorp NA DN+++ 233,161 233,161
- -
---------------------------- -----------------------------
Total Investments at Market Value $9,509,722 $4,551,106
============================ =============================
---------------------------- -----------------------------
Total Investments at Cost $6,144,015 $3,721,965
============================ =============================
The Gabelli Woodland Small Cap Value Fund
PRO FORMA
Portfolio of Investments
(1) 3/31/2005
(Unaudited)
Continued
Pro Forma Pro Forma
Combined (1) Combined (1)
Shares/Par Market Value
Security Name
---------------------------------
COMMON STOCKS
Aerospace
Alliant Techsystems Inc.+ 4,155 $296,875
--------------------
Agriculture
Delta & Pine Land Co. 3,480 93,960
-------------------
Automotive: Parts and Accessories
Modine Manufacturing Co. 2,490 73,031
Business Services
Acxiom Corp. 7,530 157,603
Adesa Inc. 12,370 288,963
Bowne & Co. Inc. 17,370 261,245
Fair Isaac Corp. 6,380 219,727
HNI Corp. 6,720 302,064
The Brink's Co. 6,890 238,394
-------------------
1,467,996
-------------------
Computer Software and Services
Harland Co., John H. 4,400 151,184
Intergraph Corp.+ 14,986 431,747
Stellent Inc.+ 28,060 235,985
Tyler Technologies Inc.+ 15,590 118,640
-------------------
937,556
-------------------
Consumer Products
Alberto-Culver Co. 5,330 255,093
Brunswick Corp. 6,600 309,210
Church & Dwight Co. Inc. 6,035 214,062
CNS Inc. 19,160 341,048
Jarden Corp.+ 5,950 272,986
-------------------
1,392,399
-------------------
Consumer Services
Insurance Auto Auctions Inc.+ 17,290 481,527
-------------------
Diversified Industrial
Albany International Corp., Cl. A 5,820 179,722
Apogee Enterprises Inc. 22,800 325,584
Carlisle Companies Inc. 4,190 292,336
EnPro Industries Inc.+ 6,190 170,225
ESCO Technologies Inc.+ 990 79,546
Griffon Corp.+ 10,360 221,808
Material Sciences Corp.+ 14,985 201,548
Pentair Inc. 12,280 478,920
Texas Industries Inc. 3,820 205,325
-------------------
2,155,014
-------------------
Energy and Utilities
ALLETE Inc. 3,949 165,266
Entertainment
Alloy Inc.+ 45,710 268,775
Topps Co. Inc. 19,910 183,371
-------------------
452,146
-------------------
Equipment and Supplies
Tennant Co. 7,680 297,140
Toro Co. 4,370 386,745
-------------------
683,885
-------------------
Financial Services
BISYS Group Inc.+ 11,890 186,435
NewAlliance Bancshares Inc. 14,300 200,200
TCF Financial Corp. 14,010 380,371
-------------------
767,006
-------------------
Food and Beverage
Del Monte Foods Co.+ 23,750 257,688
PepsiAmericas Inc. 8,060 182,640
Triarc Companies Inc., Cl. A 12,530 177,926
Triarc Companies Inc., Cl. B 25,470 352,250
-------------------
970,504
-------------------
Health Care
Fisher Scientific International Inc.+ 2,493 141,901
Laboratory Corporation of America 6,750 325,350
Holdings+
Lifecore Biomedical Inc.+ 11,000 195,470
NeighborCare Inc.+ 1,710 50,018
PolyMedica Corp. 7,640 242,647
Possis Medical Inc.+ 11,470 96,004
SurModics Inc.+ 8,370 267,086
West Pharmaceutical Services Inc. 6,000 143,400
-------------------
1,461,876
-------------------
Hotels and Gaming
Gaylord Entertainment Co.+ 11,050 446,420
Vail Resorts Inc.+ 9,750 246,187
-------------------
692,607
-------------------
Manufactured Housing and Recreational Vehicles
Champion Enterprises Inc.+ 18,180 170,892
-------------------
Publishing
Hollinger International Inc., Cl. A 11,600 126,440
Journal Communications Inc., Cl. A 8,610 142,495
-------------------
268,935
-------------------
Retail
Gander Mountain Co.+ 7,480 97,988
Office Depot Inc.+ 10,900 241,762
-------------------
339,750
-------------------
Specialty Chemicals
Cytec Industries Inc. 3,700 200,725
Fuller (H.B.) Co. 4,810 139,490
-------------------
340,215
-------------------
Transportation
Laidlaw International Inc.+ 11,640 242,112
-------------------
U.S. GOVERNMENT OBLIGATIONS
U.S. Treasury Bills, 2.454% to 2.823%++,
04/21/05 to 06/23/05 376,000 374,115
-------------------
CASH EQUIVALENTS
US Bancorp NA DN+++ 233,161 233,161
-------------------
Total Investments at Market Value $14,060,828
===================
-------------------
Total Investments at Cost $9,865,980
===================
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
+++ DN represents Discount Note.
ADR - American Depository Receipt.
(1) All securities are consistent with the survivor fund's strategy. Therefore,
no securities will be sold prior to the Reorganization due to inconsistency
with the pro forma combined fund's strategy.
(1) The Gabelli Woodland Fund will be the accounting survivor of the
Reorganization.
The Gabelli Woodland Small Cap Value Fund
PRO FORMA
Statement of Assets and Liabilities
March 31, 2005
(Unaudited)
The FMI Woodland
Small Capitalization The Gabelli Woodland Pro Forma Pro Forma
Value Fund Small Cap Value Fund Adjustments Combined
Historical Historical
---------------------------------------------------------------------------------
Assets:
Investments, at value $ 9,509,722 $ 4,551,106 $ 14,060,828
Cash 5,194 34,689 39,883
Dividends and interest receivable 1,522 506 2,028
Receivable from Adviser 14,593 3,275 17,868
Receivable for Fund shares sold 9,000 0 9,000
Other assets 1,110 1,110
----------------------- ----------------------- ------------- -------------
Total Assets 9,540,031 4,590,686 0 14,130,717
----------------------- ----------------------- ------------- -------------
Liabilities:
Payable for investments purchased 0 0 0
Management fee 8,243 0 8,243
Administration fee 1,649 0 1,649
Payable for distribution fees 0 1,011 1,011
Payable for shareholder services fees 0 3,913 3,913
Payable for shareholder communication fees 0 11,361 11,361
BOD Deferred Comp. Plan 5,272 0 5,272
Shareholder Gain/Loss Account 2,954 0 2,954
Other accrued expenses 14,498 10,763 25,261
----------------------- ----------------------- ------------- -------------
Total Liabilities 32,616 27,048 0 59,664
----------------------- ----------------------- ------------- -------------
Net Assets $ 9,507,415 $ 4,563,638 $ - $ 14,071,053
======================= ======================= ============= =============
Net Assets Consist of:
Capital stock, at par value $ - $ 337 $ 1,038 $ 1,375
Additional paid-in capital 2,528,883 3,686,739 (1,038) 6,214,584
Accumulated net investment gain (loss) 10,639 (4,946) 5,693
Accumulated net realized gain on investments 3,602,186 52,367 3,654,553
Net unrealized appreciation on investments 3,365,707 829,141 4,194,848
----------------------- ----------------------- ------------- -------------
Total Net Assets $ 9,507,415 $ 4,563,638 $ - $ 14,071,053
======================= ======================= ============= =============
Outstanding Shares:
Class AAA (A) 693,212 327,579 7,925 1,028,716
----------------------- ----------------------- -------------
Class A 5,524 5,524
----------------------- -------------
Class B 11 11
-----------------------
Class C 3,418 3,418
-----------------------
Net Asset Value per Share:
Class AAA (A) $13.72 $13.56 $13.56
----------------------- ----------------------- -------------
Class A $13.55 $13.55
----------------------- -------------
Class B $13.84 (a) $13.84 (a)
----------------------- -------------
Class C $13.36 (a) $13.36 (a)
----------------------- -------------
Class A (Maximum offering price per share) $14.38 $14.38
----------------------- -------------
-------------------------------------------------
(a) Redemption price varies based on length of time held.
(A) Common Shares of FMI Woodland are exchanged for Class AAA shares of
Gabelli Woodland to be established upon consummation of the merger.
(1) The Gabelli Woodland Fund will be the accounting survivor of the
Reorganization.
See accompanying notes to pro forma financial statements.
The Gabelli Woodland Small Cap Value Fund
PRO FORMA
Statement of Operations
For the Twelve Months Ended March 31, 2005
(Unaudited)
The FMI Woodland
Small Capitalization The Gabelli Woodland Pro Forma Pro Forma
Value Fund Small Cap Value Fund Adjustments Combined
Historical Historical
---------------------------------------------------------------------------------
Investment Income:
Dividends $ 193,545 $ 47,184 $240,729
Interest 5,526 3,690 9,216
---------------------- ---------------------- ------------- -----------
Total Investment Income 199,071 50,874 0 249,945
---------------------- ---------------------- ------------- -----------
Expenses:
Investment advisory fees 160,666 36,695 197,361
Recovery of reimbursed expenses (see Note 5) 22,742 A 22,942 A
Distribution fees - Class AAA 8,941 39,842 A 48,783
Distribution fees - Class A 126 126
Distribution fees - Class B 1 1
Distribution fees - Class C 430 430
Administration fee 36,091 (36,091) A 0
Legal and audit fees 25,618 29,819 (20,618) B 34,819
Shareholder communications expenses 0 30,004 (10,612) B 19,392
Registration fees 16,512 16,967 (16,000) B 17,479
Shareholder services fees 15,853 18,049 (11,853) B 22,049
Custodian fees 8,533 2,839 2,087 B 13,459
Directors' fees 4,262 231 (3,400) C 1,093
Miscellaneous expenses 13,773 3,215 16,988
---------------------- ---------------------- ------------- -----------
Total Expenses Before Fees Waived and
Expenses Reimbursed by Manager 281,308 147,317 (33,903) 394,722
---------------------- ---------------------- ------------- -----------
Fees Waived and Expenses Reimbursed by Manager (71,457) (73,576) 145,033 0
---------------------- ---------------------- ------------- -----------
Total Expenses - Net 209,851 73,741 111,130 394,722
---------------------- ---------------------- ------------- -----------
Net Investment Loss (10,780) (22,867) (111,130) (144,777)
---------------------- ---------------------- ------------- -----------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments 4,330,652 122,048 4,452,700
Net change in unrealized
appreciation/depreciation on investments (2,214,137) 373,889 (1,840,248)
---------------------- ---------------------- ------------- -----------
Net Realized and Unrealized Gain on Investments 2,116,515 495,937 0 2,612,452
---------------------- ---------------------- ------------- -----------
Net Increase in Net Assets Resulting from
Operations $ 2,105,735 $ 473,070 $ (111,130) $2,467,675
====================== ====================== ============= ===========
A Based on contract in effect for The Gabelli Woodland Fund.
B Increase/Decrease due to elimination of duplicative expenses achieved by
merging the Funds.
C Based on Director compensation plan for the Gabelli
Woodland Fund.
(1) The Gabelli Woodland Fund will be the accounting survivor of the
Reorganization.
See accompanying notes to pro forma financial statements.
III. NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)
Pro Forma Notes of Merger between FMI Woodland Small Capitalization Value Fund
and Gabelli Woodland Small Cap Value Fund March 31, 2005.
1. General
The accompanying pro forma financial statements are presented to show the
effect of the proposed acquisition of FMI Woodland Small Capitalization
Value Fund by The Gabelli Woodland Small Cap Value Fund, as if such
acquisition had taken place as of March 31, 2005.
Under the terms of the Agreement and Plan of Reorganization, the
combination of The Gabelli Woodland Small Cap Value Fund and FMI Woodland
Small Capitalization Value Fund will be a tax free business combination
and accordingly will be accounted for by a method of accounting for tax
free mergers of investment companies. The acquisition will be
accomplished by the acquisition of the net assets of the FMI Woodland
Small Capitalization Value Fund in exchange for shares of The Gabelli
Woodland Small Cap Value Fund at net asset value. The statement of assets
and liabilities and the related statement of operations of The Gabelli
Woodland Small Cap Value Fund and FMI Woodland Small Capitalization Value
Fund have been combined as of and for the period ended March 31, 2005.
The accompanying pro forma financial statements should be read in
conjunction with the financial statements and schedules of investments of
Gabelli Woodland Small Cap Value Fund and FMI Woodland Small
Capitalization Value Fund which are included in their respective annual
reports.
The following notes refer to the accompanying pro forma financial
statements as if the above mentioned acquisition of FMI Woodland Small
Capitalization Value Fund by The Gabelli Woodland Small Cap Value had
taken place as of March 31, 2005.
2. Organization
The Gabelli Woodland Small Cap Value Fund (the "Fund") is a series of
Gabelli Equity Series Funds, Inc. (the "Corporation"), which was
organized on July 25, 1991 as a Maryland corporation. The Fund is a
non-diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), and one
of three separately managed investment portfolios (collectively, the
"Portfolios") of the Corporation, each with four separate classes of
shares known as Class AAA, Class A, Class B and Class C. The Fund's
primary objective is capital appreciation. The Fund commenced investment
operations on December 31, 2002.
The FMI Woodland Small Capitalization Value Fund is a portfolio of FMI
Mutual Funds, Inc., a Wisconsin open-end management investment company
incorporated on May 23, 1986. FMI Mutual Funds, Inc. is registered under
the Investment Company Act of 1940.
3. Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
The following Significant Accounting Policies reflect the policies of the
Fund, which will be the accounting survivor subsequent to the
consummation of the tax-free business combination of the Fund and FMI
Woodland Small Capitalization Value Fund.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter
market for which market quotations are readily available are valued at
the last quoted sale price or a market's official closing price as of the
close of business on the day the securities are being valued. If there
were no sales that day, the security is valued at the average of the
closing bid and asked prices or, if there were no asked prices quoted on
that day, then the security is valued at the closing bid price on that
day. If no bid or asked prices are quoted on such day, the security is
valued at the most recently available price or, if the Board of Directors
(the "Board") so determines, by such other method as the Board shall
determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market
are valued according to the broadest and most representative market, as
determined by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on foreign markets are generally
valued at the preceding closing values of such securities on their
respective exchanges or if after the close of the foreign markets, but
prior to the close of business on the day the securities are being
valued, market conditions change significantly, certain foreign
securities may be fair valued pursuant to procedures established by the
Board. Debt instruments that are not credit impaired with remaining
maturities of 60 days or less are valued at amortized cost, unless the
Board determines such does not reflect the securities' fair value, in
which case these securities will be valued at their fair value as
determined by the Board. Debt instruments having a maturity greater than
60 days for which market quotations are readily available are valued at
the latest average of the bid and asked prices. If there were no asked
prices quoted on such day, the security is valued using the closing bid
price. Futures contracts are valued at the closing settlement price of
the exchange or board of trade on which the applicable contract is
traded.
Securities and assets for which market quotations are not readily
available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Board. Fair valuation methodologies and procedures may include, but are
not limited to: analysis and review of available financial and
non-financial information about the company; comparisons to the valuation
and changes in valuation of similar securities, including a comparison of
foreign securities to the equivalent U.S. dollar value ADR securities at
the close of the U.S. exchange; and evaluation of any other information
that could be indicative of the value of the security.
Repurchase Agreements. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System or with other
brokers or dealers that meet credit guidelines established by the Adviser
and reviewed by the Board. Under the terms of a typical repurchase
agreement, the Fund takes possession of an underlying debt obligation
subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. The Fund will
always receive and maintain securities as collateral whose market value,
including accrued interest, will be at least equal to 102% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment
for such securities only upon physical delivery or upon evidence of book
entry transfer of the collateral to the account of the custodian. To the
extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to maintain
the adequacy of the collateral. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by
the Fund may be delayed or limited. At March 31, 2005, there were no open
repurchase agreements.
Securities Transactions and Investment Income. Securities transactions
are accounted for on the trade date with realized gain or loss on
investments determined by using the identified cost method. Interest
income (including amortization of premium and accretion of discount) is
recorded as earned. Dividend income is recorded on the ex-dividend date.
Dividends and Distributions to Shareholders. Dividends and distributions
to shareholders are recorded on the ex-dividend date. Income dividends
and capital gain distributions are determined in accordance with Federal
income tax regulations which may differ from U.S. generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by
the Fund, timing differences and differing characterization of
distributions made by the Fund.
Expenses. Certain administrative expenses are common to, and allocated
among, the Portfolios and then among the Classes of Shares. Such
allocations are made on the basis of each Portfolio's and Class' average
net assets or other criteria directly affecting the expenses as
determined by the Adviser pursuant to procedures established by the
Board.
Provision for Income Taxes. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). It is the Fund's policy to comply
with the requirements of the Code applicable to regulated investment
companies and to distribute substantially all of its net investment
company taxable income and net capital gains. Therefore, no provision for
Federal income taxes is required.
Dividends and interest from non-U.S. sources received by the Fund are
generally subject to non-U.S. withholding taxes at rates ranging up to
30%. Such withholding taxes may be reduced or eliminated under the terms
of applicable U.S. income tax treaties, and the Fund intends to undertake
any procedural steps required to claim the benefits of such treaties.
The difference between book and tax basis unrealized appreciation is
primarily due to deferral of losses from wash sales for tax purposes.
4. Pro Forma Adjustments
The accompanying pro forma financial statements reflect changes in fund
shares as if the merger had taken place on March 31, 2005. Adjustments
have been made to expenses for duplicated services that would not have
been incurred if the merger took place on March 31, 2005, and to report
certain expenses pursuant to the terms of the surviving fund as if such
terms had been in effect for the entire fiscal year.
5. Investment Advisory Agreement
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with the Adviser which provides that the Fund will pay the
Adviser a fee, computed daily and paid monthly, at the annual rate of
1.00% of the value of the Fund's average daily net assets. In accordance
with the Advisory Agreement, the Adviser provides a continuous investment
program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of
all Officers and Directors of the Fund who are its affiliates. The
Adviser has agreed to waive its fees and reimburse expenses of the Fund
to the extent necessary to maintain the annualized total operating
expenses at 2.00%, 2.00%, 2.75% and 2.75% of average daily net assets for
Class AAA, Class A, Class B and Class C Shares, respectively. For the
fiscal year ended September 30, 2004 and the six months ended March 31,
2005, the Adviser reimbursed the Fund in the amount of $115,018 and
$31,551, respectively. The Fund is obliged to repay the Adviser for a
period of two fiscal years following the fiscal year in which the Adviser
reimbursed the Fund only to the extent that the operating expenses of the
Fund fall below 2.00%, 2.00%, 2.75% and 2.75% on an annualized basis of
average daily net assets for Class AAA, Class A, Class B and Class C,
respectively. The cumulative amount for which the Fund may repay the
adviser is $271,168.
6. Distribution Plan
The Fund's Board of Directors has adopted a distribution plan (the
"Plan") for each class of shares pursuant to Rule 12b-1 under the 1940
Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the
Adviser, serves as distributor of the Fund. Under the Class AAA, Class A,
Class B and Class C Share Plans, payments are authorized to Gabelli &
Company at annual rates of 0.25%, 0.25%, 1.00% and 1.00%, respectively,
of the average daily net assets of those Classes, the annual limitations
under each Plan. Such payments are accrued daily and paid monthly.
7. Investments
At March 31, 2005, The Gabelli Woodland Small Cap Value Fund and FMI
Woodland Small Capitalization Value Fund had no capital loss carryovers.
8. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
The Gabelli Woodland Small Cap Value Fund that would have been issued at
March 31, 2005, in connection with the proposed reorganization. The
number of shares assumed to be issued is equal to the net asset value of
shares of FMI Woodland Small Capitalization Value Fund as of March 31,
2005, divided by the net asset value per share of the shares of The
Gabelli Woodland Small Cap Value Fund as of March 31, 2005. The pro forma
number of shares outstanding, by class, for the combined Fund consists of
the following at March 31, 2005:
Shares of The Gabelli
Woodland Small Cap Additional Shares Total Outstanding
Value Fund Assumed Issued In Shares
Class of Shares Pre-Combination Reorganization Post-Combination
---------------------------------------------------------------------------------------------------
Class AAA 327,579 701,137 1,028,716
Class A 5,524 0 5,524
Class B 11 0 11
Class C 3,418 0 3,418
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Indemnification of Representatives and Employees. Indemnification or
limitation of liability of the Gabelli Equity Series Funds, Inc. custodian,
transfer agent and distributor is provided for, respectively, in Section
4.10-4.12 of the Custodian Agreement filed herewith as Exhibit 9, Article 5 of
the Transfer Service Agreement filed herewith as Exhibit 10, and Section 10 of
the Distribution Agreement filed herewith as Exhibit 7(c).
Indemnification of Officers and Directors. The basic effect of the
respective indemnification provisions of the Registrant's By-Laws, the
Investment Advisory Agreement with Gabelli Funds, LLC for The Gabelli Woodland
Small Cap Value Fund and Section 2-418 of the Maryland General Corporation Law
is to indemnify each officer and director of both the Registrant and Gabelli
Funds, LLC to the full extent permitted under the General Laws of the State of
Maryland, except that such indemnity shall not protect any such person against
any liability to which such person would otherwise be subject by reason or
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
In addition, Article VI, Section 3 of the Gabelli Equity Series Funds,
Inc.'s charter incorporated by reference herein as Exhibit 1(a) provides as
follows:
Each director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the Maryland
General Corporation Law, subject to the requirements of the 1940 Act
that such indemnity shall not protect such person against any
liability to the Corporation or a stockholder to which such person
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office.
ITEM 16. EXHIBITS
Ex. Number Description
---------- -----------
(1)(a) Articles of Incorporation of the Registrant, dated July 25,
1991, are incorporated by reference to Post-Effective Amendment
No. 7 to the Registration Statement as filed with the SEC via
EDGAR on January 28, 1998 (Accession No.
0000950152-98-000-527)("Post-Effective Amendment No. 7").
(b) Articles of Amendment, dated January 28, 2000, are incorporated
by reference to Post-Effective Amendment No. 10 to the
Registration Statement as filed with the SEC via EDGAR on
January 31, 2000 (Accession No. 0000927405-00-000032)
("Post-Effective Amendment No. 10").
(c) Articles Supplementary, dated December 27, 2002, with respect
to Gabelli Equity Series Funds, Inc. are incorporated by
reference to Post-Effective Amendment No. 14 to the
Registration Statement as filed with the SEC via EDGAR on
January 31, 2003 (Accession No. 0000935069-03-000085)
("Post-Effective Amendment No. 14").
(d) Articles Supplementary with respect to Gabelli Equity Series
Funds, Inc. are incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement as filed with
the SEC via EDGAR on January 31, 2005 ("Post-Effective
Amendment No. 17").
(2) Registrant's By-laws are incorporated by reference to
Post-Effective Amendment No. 7.
(3) None.
(4) Agreement and Plan of Reorganization, dated as of May 20,
2005, by and among Gabelli Equity Series Funds, Inc., with
respect to Gabelli Woodland Small Capitalization Value Fund,
and FMI Mutual Funds, Inc., with respect to FMI Woodland Small
Capitalization Value Fund.
(5) See Exhibit 1.
(6)(a) Investment Advisory Agreement with Gabelli Funds, Inc., with
respect to The Gabelli Small Cap Growth Fund, dated October 1,
1991, is incorporated by reference to Post-Effective Amendment
No. 11 to the Registration Statement as filed with the SEC via
EDGAR on January 31, 2001 (Accession No. 0000935069-01-000048)
("Post-Effective Amendment No. 11").
(b) Investment Advisory Agreement with Gabelli Funds, Inc., with
respect to The Gabelli Equity Income Fund, dated October 1,
1991, is incorporated by reference to Post-Effective Amendment
No. 11.
(c) Investment Advisory Agreement with Gabelli Funds, LLC, with
respect to The Gabelli Woodland Small Cap Value Fund, dated
December 31, 2002, is incorporated by reference to
Post-Effective Amendment No. 14.
(d) Amendment No. 1 to the Investment Advisory Agreement, with
respect to The Gabelli Small Cap Growth Fund, dated February
17, 1999, is incorporated by reference to Post-Effective
Amendment No. 11.
(e) Amendment No. 1 to the Investment Advisory Agreement, with
respect to The Gabelli Equity Income Fund, dated February 17,
1999, is incorporated by reference to Post-Effective Amendment
No. 11.
(f) Contractual Management Fee Waiver and Expense Reimbursement
Agreement, dated October 1, 2004, with respect to The Gabelli
Woodland Small CapValue Fund is filed with reference to
Post-Effective Amendment No. 17 to the Registration Statement
as filed with the SEC via EDGAR on January 31, 2005
("Post-Effective Amendment No. 17").
(7)(a) Amended and Restated Distribution Agreement, dated January 28,
2000, with respect to The Gabelli Equity Income Fund, is
incorporated by reference to Post-Effective Amendment No. 10.
(b) Amended and Restated Distribution Agreement, dated January 28,
2000, with respect to The Gabelli Small Cap Growth Fund, is
incorporated by reference to Post-Effective Amendment No. 10.
(c) Distribution Agreement, dated December 31, 2002, with respect
to The Gabelli Woodland Small Cap Value Fund, is incorporated
by reference to Post-Effective Amendment No. 14.
(8) None.
(9) Amended and Restated Master Custodian Agreement, dated July 2,
2001, is incorporated by reference to Post-Effective Amendment
No. 12 to the Registration Statement as filed with the SEC via
EDGAR on January 29, 2002 (Accession No. 0000935069-02-000046)
("Post-Effective Amendment No. 12").
(10) Transfer Agency Agreement is incorporated by reference to
Post-Effective Amendment No. 7.
(11) Opinion and Consent of counsel - Miles & Stockbridge LLP
(12) Opinion and Consent of counsel - Skadden, Arps, Slate, Meagher
& Flom LLP, regarding certain tax matters.*
(13) None.
(14)(a) Consent of PricewaterhouseCoopers LLP is filed herewith.
(b) Consent of Ernst & Young LLP is filed herewith.
(15) None.
(16) Powers of Attorney are filed herewith.
(17) Form of Proxy Ballot is filed herewith.
____________
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(1) the undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a party
to this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by person who may be deemed
underwriters, in addition to the information called for by other items of
the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial
bona fide offering of them.
(3) The undersigned registrant agrees to file, by post-effective amendment, an
opinion of counsel supporting the tax consequences of the Reorganization
within a reasonably prompt time after receipt of such opinion, but in any
event no later than one business day after consummation of the
Reorganization.
SIGNATURES
As required by the Securities Act of 1933, this registration statement has
been signed on behalf of the registrant in the City of New York and the State
of New York, on the 31st day of May, 2005.
GABELLI EQUITY SERIES FUNDS, INC.
By: /s/Bruce N. Alpert
------------------------------
Bruce N. Alpert
President and Treasurer
(Principal Executive Officer
and
Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on the dates indicated.
Signature Title Date
/s/Bruce N. Alpert President May 31, 2005
_________________________
Bruce N. Alpert
Mario J. Gabelli* Director and Chairman May 31, 2005
_________________________
Mario J. Gabelli of the Board
John D. Gabelli* Director May 31, 2005
_________________________
John D. Gabelli
Anthony J. Colavita* Director May 31, 2005
_________________________
Anthony J. Colavita
Vincent D. Enright* Director May 31, 2005
_________________________
Vincent D. Enright
Robert J. Morrissey* Director May 31, 2005
_________________________
Robert J. Morrissey
Karl Otto Pohl* Director May 31, 2005
_________________________
Karl Otto Pohl
Anthony R. Pustorino* Director May 31, 2005
_________________________
Anthony R. Pustorino
Anthonie C. van Ekris* Director May 31, 2005
_________________________
Anthonie C. van Ekris
Salvatore J. Zizza* Director May 31, 2005
_________________________
Salvatore J. Zizza
*By: /s/ Bruce N. Alpert
_________________________
Bruce N. Alpert
Attorney-in-fact
SCHEDULE OF EXHIBITS TO FORM N-14
Ex. Number Description
---------- ------------
(11) Opinion of Miles & Stockbridge filed herewith.
(14)(a) Consent of Pricewaterhouse Coopers is filed herewith.
(14)(b) Consent of Ernst & Young LLP is filed herewith.
(16) Powers of Attorney are filed herewith.
(17) Form of Proxy Ballot is filed herewith.