Associates Limited

Fund Investment Objectives

The primary investment objective of the Fund is capital appreciation. The Fund will attempt to achieve its objective by investing in risk arbitrage transactions, and in particular, announced takeovers and other workout situations. Investment decisions for the Fund will be made by the Investment Manager and the Fund's investment officer, Mario J. Gabelli. References to the Investment Manager below shall be deemed to include the Fund's investment officer. Investment Approach and Policies The Fund's investments will generally be made in arbitrage transactions which include (i) risk arbitrage transactions in connection with mergers, acquisitions, sales of assets, exchange offers, cash tender offers, recapitalizations, liquidations and other similar transactions, (ii) convertible securities arbitrage and hedge transactions involving a long or short position in one security and a long or short position in another security entitling the holder of such other security to acquire or sell the first security and (iii) traditional bona fide time and place and domestic-foreign arbitrage transactions in securities, including the writing of and investing in put and call options (both covered and naked) on securities (both listed and over-the-counter). The Fund may also make other types of securities investments, including the purchase of securities in entities which appear to be substantially undervalued. Please note that any shareholder redeeming shares which have been held by the shareholder for less than one year will be subject to a redemption charge of 2% of the Redemption Price. A redemption charge of 1% of the Redemption Price may be imposed by the Fund, in its sole discretion, on any shareholder redeeming shares which have been held by the shareholder for one year or more.