<PAGE> 1
--------------------------------------------------------------
[MATHERS LOGO]
MATHERS
FUND
SEMI-ANNUAL
REPORT
1996
--------------------------------------------------------------
MATHERS FUND, INC.
100 Corporate North - Bannockburn, Illinois 60015
800-962-FUND - 847-295-7400
DIRECTORS
KARL M. BECKER
TYLER R. CAIN
CHARLES G. FREUND
ROBERT J. REYNOLDS
HENRY G. VAN DER EB, JR.
EDWIN H. WATKINS
OFFICERS
HENRY G. VAN DER EB, JR., CFA
Chairman
ROBERT J. REYNOLDS, CFA
President
ANNE E. MORRISSY, CFA
Senior Vice President and Secretary
EDITH L. COOK
Vice President and Treasurer
LAWRENCE A. KENYON
Vice President and Controller
MARY ANNE KINNUCAN
Vice President
HEIDI M. STUBNER
Assistant Vice President
Investment Adviser
MATHERS AND COMPANY, INC.
Bannockburn, Illinois
Custodian
STATE STREET BANK AND TRUST CO.
Boston, Massachusetts
Transfer Agent
DST SYSTEMS, INC.
Kansas City, Missouri
Counsel
SIDLEY & AUSTIN
Chicago, Illinois
Auditors
ARTHUR ANDERSEN LLP
Chicago, Illinois
This report is submitted for the information of shareholders of the Fund.
It is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE> 2
MATHERS FUND
- - ----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT IN THE
MATHERS FUND SINCE AUGUST 19, 1965*
<TABLE>
<CAPTION>
Compound 6-30-96
Annual Return Value of
From 8-19-65 $1 Invested
To 6-30-96 8-19-65
- - ----------------------------------------------------------------
<S> <C> <C>
MATHERS FUND.............. 12.5% $37.92
- - ----------------------------------------------------------------
Standard & Poor's 500..... 11.0 24.88
- - ----------------------------------------------------------------
Value Line Composite...... 7.2 8.59
Dow Jones Industrial
Average.................. 10.7 22.96
Long Term U.S. Treasury
Bonds.................... 7.4 9.01
U.S. Treasury Bills....... 6.7 7.29
Consumer Price Index...... 5.3 4.96
*Date of public offering
Income Dividends and Capital Gains Distributions Reinvested
</TABLE>
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
MATHERS FUND Long-Term Performance Rank
20th out of 161 Funds ...............8/31/65 to 6/30/96
Source: Lipper Analytical
- - ------------------------------------------------------------
- - ---------------------------------- -----------------------------------
MATHERS FUND MATHERS FUND
RANKED #1 RANKED #1
GROWTH FUND GROWTH FUND
1 YEAR ENDED 1 YEAR ENDED
12-31-87 6-30-88
Source: Lipper Analytical Services Source: Lipper Analytical Services
12-31-87 "Growth Fund" Category 6-30-88 "Growth Fund" Category
Consists of 236 Funds. Consists of 235 Funds.
- - ---------------------------------- -----------------------------------
- - ----------------------------------
MATHERS FUND
RANKED #1
GROWTH FUND
1 YEAR ENDED
9-30-90
Source: Lipper Analytical Services
9-30-90 "Growth Fund" Category
Consists of 257 Funds.
- - ----------------------------------
<TABLE>
Calendar years
ending December 31
MATHERS FUND PLOTTING POINTS S&P 500 PLOTTING POINTS
<S> <C> <C> <C>
10000 INITIAL INVESTMENT 8-19-65 10000
"1965" 12089 "1965" 10768
"1966" 12597 "1966" 9685
"1967" 24265 "1967" 12007
"1968" 30783 "1968" 13335
"1969" 28936 "1969" 12200
"1970" 29507 "1970" 12688
"1971" 35358 "1971" 14504
"1972" 41059 "1972" 17256
"1973" 25806 "1973" 14727
"1974" 17908 "1974" 10830
"1975" 28124 "1975" 14859
"1976" 40604 "1976" 18404
"1977" 46368 "1977" 17082
"1978" 53349 "1978" 18202
"1979" 78188 "1979" 21558
"1980" 109687 "1980" 28548
"1981" 101193 "1981" 27143
"1982" 116227 "1982" 32952
"1983" 135015 "1983" 40372
"1984" 131529 "1984" 42900
"1985" 167682 "1985" 56534
"1986" 191108 "1986" 67115
"1987" 242780 "1987" 70635
"1988" 276110 "1988" 82334
"1989" 304849 "1989" 108392
"1990" 336643 "1990" 105037
"1991" 368441 "1991" 136961
"1992" 379883 "1992" 147380
"1993" 387977 "1993" 162206
"1994" 365253 "1994" 164328
"1995" 390861 "1995" 226017
"6/30/96" 379206 "6/30/96" 248847
</TABLE>
<PAGE> 3
LETTER TO SHAREHOLDERS JULY 26, 1996
- - --------------------------------------------------------------------------------
Until the July mini-crash, the most statistically high-risk stock market in
U.S. history (see chart #1 and Leuthold analysis below) continued to rise in
1996, ignoring decelerating earnings growth and rising interest rates. The
Mathers Fund, structured for a projected recessionary U.S. economy with falling
interest rates, corporate profits and stock prices, declined 2.98% for the
first six months of 1996 versus a gain of 10.10% for the S&P 500. While off to
a slow start in the first half, the Fund's net asset value per share has
increased both absolutely and relatively so far in July as stock prices have
fallen sharply due mostly to speculative exhaustion and loss of confidence in
future corporate profit estimates. All bear markets start out as "corrections"
and this price decline, on an intra-day basis, has taken both the Dow Jones
Industrial Average and the S&P 500 Composite down about 11%, and the NASDAQ
Composite down about 20% from their respective all-time highs reached in May
and June. Many individual stocks have fared worse, with some "bubble stocks"
and hot IPOs declining more than 50% from recent highs.
[Chart #1. Contained here in paper format is a chart reflecting the
Standard & Poor's 500 Stock Index-Trend Channel. The chart's X-axis reflects
years from 1926 to 6-30-96, and its Y-axis is on a log scale and extends from
5 to 659. The chart was prepared for Mathers Fund by Ned Davis Research,
Atlanta GA, and appeared in Stock Market Chart Watch, page S7 on July 19, 1996.
A hard copy is available by calling the Fund at 800-962-3863. The chart
depicts the level of the S&P 500. Trend lines have been drawn . The bottom
(support) line begins at the market low in 1932 and is formed by the market low
in 1982. The top (resistance) line extends from 1932 through the present and
is formed by market highs in 1937 and 1966.
Various market tops and bottoms that approach the two lines have been lettered,
A through J, and for each of these points, the valuation measures Price/Book,
Price/Dividend and Price/Earnings has been calculated. A table within the
chart reflects the following data:
<TABLE>
<CAPTION>
Price/ Price/ Price/
Book Dividend Earnings
<S> <C> <C> <C>
Average of Market Tops 2.2 33.8 20.0
Avg. of Market Bottoms 0.9 14.0 7.8
September 1929 Top 3.6 34.9 21.1
Current 6/30/96 4.0 45.5 19.7]
</TABLE>
One of the most original and thorough multi-variable analyses of long-term
stock market valuations has recently been published by the Leuthold Group in
Minneapolis. The paragraph, tables and glossary below have been excerpted and
condensed from this study.
"New Era" valuations make downside risk substantial from current levels since
today's market valuations are more extreme than 1987's, and far above
historical medians. At present, in the aggregate, the U.S. stock market has
surpassed all previous record-high stock market valuations, and accordingly
there is significant downside risk and negligible upside potential. A move
back to the 70-year (1926 to 1996) median valuation level implies a decline of
36%, a return to low quartile valuation implies a decline of 50%, and a return
to the bottom of the historical valuation range a decline of 65% from 6/30/96
levels.
<PAGE> 4
ESTIMATING THE DOWNSIDE: BACK TO THE MEDIANS
<TABLE>
<CAPTION>
1926
To Date Implied Downside
S&P 400 Industrials 6-30-96 Median S&P 400 Risk
------- ------ ------- ----
<S> <C> <C> <C> <C>
Normalized "Adjusted EPS" P/E 25.7 15.4 486 -40%
Non-Normalized Operating EPS P/E 20.1 14.0 553 -30
Return On Sales Implied EPS P/E 21.0 15.3 581 -27
Dividend Yield 1.9% 4.0% 371 -53
Price To Book (Adjusted) 3.1 1.5 395 -50
Price To Cash Flow 11.2 7.8 566 -30
Price To Sales 1.1 0.8 609 -24
Market Value/GDP (1957 To Date) 92% 58% 501 -37
---- -----
AVERAGE 508 -36%
<CAPTION>
1926
To Date Implied Downside
DOW JONES INDUSTRIAL AVERAGE 6-30-96 Median Dow Jones Risk
------- ------- --------- --------
<S> <C> <C> <C> <C>
Normalized "Adjusted EPS" P/E 22.7 15.0 3741 -34%
Non-Normalized Operating EPS P/E 16.4 13.4 4623 -18
Dividend Yield 2.2% 4.4% 2761 -51
Price To Book (Adjusted) 2.6 1.5 3189 -44
Market Value/GDP (1957 To Date) 92% 58% 3572 -37
---- ----
AVERAGE 3577 -37%
</TABLE>
[CAPTION]
ESTIMATING THE DOWNSIDE: TO MATCH LOW QUARTILE VALUATIONS
<TABLE>
<CAPTION>
1926
To Date
Low- Implied Downside
S&P 400 Industrials 6-30-96 Quartile S&P 400 Risk
------- -------- ------- --------
<S> <C> <C> <C> <C>
Normalized "Adjusted EPS" P/E 25.7 11.3 357 -56%
Non-Normalized Operating EPS P/E 20.1 11.2 442 -44
Return On Sales Implied EPS P/E 21.0 11.2 415 -47
Dividend Yield 1.9% 5.1% 291 -63
Price To Book (Adjusted) 3.1 1.2 311 -61
Price To Cash Flow 11.2 5.9 428 -46
Price To Sales 1.1 0.6 426 -47
Market Value/GDP (1957 To Date) 92% 49% 423 -47
---- ----
AVERAGE 387 -51%
<CAPTION>
1926
To Date
Low- Implied Downside
Dow Jones Industrial Average 6-30-96 Quartile Dow Jones Risk
------- -------- --------- --------
<S> <C> <C> <C> <C>
Normalized "Adjusted EPS" P/E 23.1 11.7 2918 -48%
Non-Normalized Operating EPS P/E 16.4 10.1 3485 -38
Dividend Yield 2.2% 5.4% 2250 -60
Price To Book (Adjusted) 2.6 1.2 2568 -55
Market Value/GDP (1957 To Date) 92% 49% 3018 -47
----- ----
AVERAGE 2848 -50%
</TABLE>
6-30-96 closing prices: S&P 400 Industrials 796,
Dow Jones Industrial Average 5655
<PAGE> 5
GLOSSARY
<TABLE>
<S> <C>
Normalized "Adjusted Five year arithmetically averaged annual earnings looking six
EPS" P/E months ahead and 54 months back (12/31/91 - 12/31/96).
Non-Normalized Based on estimated operating (not reported) earnings for the 12
Operating EPS P/E months ending 12/31/96 ... the most positive P/E measure.
Return On Sales Based on five year arithmetically averaged return on sales,
Implied EPS P/E multiplied by estimated sales for the 12 months ending 12/31/96.
Dividend Yield Based on indicated 12 months' dividends as calculated by Barrons.
Price to Book Based on Leuthold "adjusted" book value calculations which adds back
(Adjusted) about 25% of big write-offs (1985 to present) to improve comparability.
Price to Cash Flow Based on estimated 12 months' cash flow for the period ending
12/31/96. Net income plus depreciation.
Price To Sales Based on 12 months' estimated sales for the period ending 12/31/96.
Market Value/GDP Employs current projections of GDP, assuming straight-line movement
from 1995 year end GDP to the 1996 estimated year end value.
</TABLE>
* * *
One of the forces driving stock prices higher in the first half of 1996 has
been record stock mutual fund cash inflows, which through May had been running
at twice the annual rate of 1995's record total. A remarkable 27% of all-time
equity mutual fund net inflows, much from inexperienced first-time buyers who
may bolt in a market decline, have been received since July 1995 and have a
dollar-weighted breakeven price equivalent to 1076 on the NASDAQ Composite and
616 on the S&P 500, not far from current levels. As shown on chart #2 below, a
massive stampede of inflows (net of IPOs and secondaries) in early 1996 turned
negative by June, setting up the volatile sell-off in July. With equity mutual
fund cash positions at a 19 year low of 6.6%, a quick return to net demand for
stocks will be increasingly critical for the bulls.
[ Chart #2. Contained here in paper format is a chart reflecting the Standard
& Poors 500 Index (consists of 2 clips). The X-axis of each represents the
months from January 1995 through July 17, 1996. Chart was obtained by Mathers
Fund from Ned Davis Research, Atlanta GA, and appeared in Stock Market Chart
Watch, page S0515 on July 19, 1996. A hard copy is available by calling the
Fund at 800-962-3863.
Top Clip: shows the S&P 500 index , Y-axis is on an arithmetic scale and ranges
from 465 to 675. Weekly bar chart containing the price data for the S&P 500.
Shows a steep decline beginning in mid-June 1996.
Bottom Clip: shows the mutual fund net inflows minus IPO's and secondary
offerings, in billions of dollars, monthly totals are estimated by Ned Davis
Research to approximate quarterly data Investment Company Institute data.
Positive numbers indicate Net Demand, and negative numbers indicate net supply.
Shows that the flows became negative in June of 1996.]
<PAGE> 6
The Economic Momentum Index (chart #3) was developed by Merrill Lynch
Investment Strategy to forecast the direction of the U.S. economy. This index
is a composite of 30 different measures of economic activity, including
industrial production, personal income, durable goods orders, consumer
sentiment, the NAPM index, railcar loadings, the consumer price index, retail
sales, the producer price index, consumer credit, non-farm payroll employment
and inventories. Each component is computed on a change in the rate of change
basis (second differential), which performs as a leading indicator for each
series.
The EMI fell sharply during 1995 to a recessionary -1.2, upticked in early 1996
to a weak -.75 and turned down, portending a reversal of the first-half 1996
growth bounce followed by an economic contraction, lower interest rates and
corporate profits in the months ahead. A sustained rise in the index above the
zero level would indicate a renewed economic advance. At present, this is
unlikely to occur since production is exceeding demand; growth in retail sales,
capital spending and credit is decelerating; and industrial prices are soft.
Additionally, the 7% yield on 30-year U.S. Treasury bonds is 75% above first
quarter year/year nominal GDP growth of 4%. This is abnormally high and acts
as a drag on economic growth by attracting capital to bonds. At 7%, money
doubles in value in about 10 years.
[Chart #3. Contained here in paper format is a chart reflecting the normalized
Economic Momentum Index developed by Merrill Lynch Investment Strategy Group
and was published in "Investment Strategy--Monthly Chart Perspectives" on June
28, 1996 by Merrill Lynch. A hard copy is available by calling the Fund at
800-962-3863. The X-axis represents the years from 1965 through March of
1996. The Y-axis is an arithmetic scale from -1.5 to +2.0. The Economic
Momentum Index is a composite of 30 measures of economic activity, calculated
on a second differential (change in the rate of change) basis. A second
differential measure provide a leading indicator of each of the series. ]
Total credit market debt (all sectors: business + government + consumer) is a
staggering 2.5X GDP (chart #4) and has limited overall credit growth during the
current business cycle to the lowest sustained post-war level on record (chart
#5) and restrained average annual real GDP growth so far to 1.9% for the 1990s,
well below the 3.2% and 2.7% of the 1970s and 1980s, respectively. The cost of
carry and repayment of this debt load is a powerful secular deflationary force
which is anti-growth but pro-low inflation and low interest rates. In a
recession, this immense debt burden would be increasingly difficult to manage.
Over the last five years the overall economic balance has tilted slightly to
the side of growth, primarily due to consumer purchases financed by record
amounts of debt, both in total dollars and as a percentage of disposable
personal income (chart #6). However, the savings rate is historically low, and
credit card delinquency rates and personal bankruptcy filings are indicating
high financial stress and are at levels where borrowing and spending have
topped out in the past. Also, the reverse wealth effect caused by a decline
in stock prices could fracture consumer sentiment, putting an additional chill
on spending.
<PAGE> 7
CHART #4
Total credit market debt (all sectors) as a percentage of the economy as
measured by GDP. Quarterly data from 3-31-59 thru 3-31-96.
3-31-96 Debt $18.8 Trillion
- - ------------ = ------------------ = 253.7%
3-31-96 GDP $7.4 Trillion
[Chart #4. Contained here in paper format is a chart reflecting the ratio of
total credit market debt divided by GDP. The chart was obtained by Mathers
Fund from Ned Davis Research, Atlanta GA, and appeared in Stock Market Chart
Watch, page E501 on July 19, 1996. A hard copy is available by calling the
Fund at 800-962-3863. The X-axis represents years from 1960 through 3-31-96.
The Y-axis is an arithmetic scale from 140 to 252. The line defined by the
ratio has been sloping sharply upward since 1981 and as of 3-31-96 was 253.7%,
near its all time high.]
CHART #5
Total debt growth (business + government + consumer) year over year percentage
change. Quarterly data from 3-31-55 thru 3-31-96.
[Chart 5. Contained here in paper format is a chart reflecting the growth of
total debt (business, government and consumer) year-over-year percentage
change. This chart was obtained by Mathers Fund from ISI Group, New York, NY.
A hard copy is available by calling the Fund at 800-962-3863. The X-axis
represents the years from 1955 through 3-31-96. The Y-axis is an arithmetic
scale from 4% to 18%. The line peaked in 1987 and has been in a range
between 4.5% and 6% since 1991. As of 3-31-96 the level was 5.5%.]
CHART #6
Total consumer debt as a percentage of disposable personal income. Quarterly
data from 12-31-59 thru 3-31-96.
As of 3-31-96, 92.7%.
[Chart #6. Contained here in paper format is a chart reflecting Total
Consumer Debt as a percentage of Disposable Personal Income. This chart was
prepared for Mathers Fund by ISI Group, New York, NY. A hard copy is
available by calling the Fund at 800-962-3863. The chart's X-axis reflects
the years from 1960 through 3-31-96 and its Y-axis is from 50 to 95. The
line begins around 54% and ends at 92.7%, near its record high. This chart
shows that the consumer is leveraged more than at any time in the past and
suggests that further economic growth will not be fueled by the consumer.]
<PAGE> 8
The Profit Indicator shown in the chart to the right is constructed to forecast
the probable trend of S&P 500 earnings. Data above the zero line projects a
positive trend and below zero the profit outlook is negative, as is the case
today. S&P 500 earnings growth has been decelerating for several quarters and
is entering the high-risk zone with regard to stocks. Prices of individual
stocks and entire industry groups have collapsed when earnings fell short of
estimates, and in some cases stock prices declined even when earnings were
above expectations. As sales growth slows, profit margins will narrow quickly
since the easy cost reductions have already been restructured. Additionally,
earnings of multi-national companies are penalized by a stronger U.S. dollar.
Both profits and free cash flow may have already reached cyclical peaks,
reducing funds available to support the market via corporate stock repurchases.
Going forward, P/Es on estimated earnings may be much higher than they now
appear. Risks for both earnings and stock prices are clearly on the downside.
[Chart #7. Contained here in paper format is a chart reflecting the S&P 500
earnings growth (solid line) superimposed on the Composite Profit Indicator
(dotted line). This chart was published in " Investment Strategy--Monthly
Chart Perspectives" on June 28, 1996 by Merrill Lynch. A hard copy is
available by calling the Fund at 800-962-3863. The X-axis represents the
years from 1965 through March of 1996. The left Y-axis is an arithmetic scale
from .60 to 1.60 and relates to S&P earnings growth. The right Y-axis is an
arithmetic scale from -2.0 to +3.0 and relates to the Composite Profit
Indicator. The Composite Profit Indicator, which measures growth in loan
demand, capital goods backlog and industrial prices, is a leading indicator and
is pointing to a coming drop in earnings and profits.]
Ronald Reagan was considered "brash and reckless" when he made the "wacky"
suggestion that part of the Social Security Trust Fund be put into stocks.
Stocks were cheap back then, but after a six-fold price increase and the
highest valuations in history, it's now a "good idea". Over the past several
years the stock market has defied traditional valuation analysis by making
time-tested benchmarks seem of little or no significance. Bull market
rationales for benchmark obsolescence have generally been developed with clear
hindsight. However, a final judgment on today's "New Era" prices cannot be
made until the next bear market is over. Since the market is "always right",
one must justify its actions to retain credibility, but when the market changes
course abruptly, the experts and media quickly dust off the history books.
Risk is what it's all about, so even if 2+2=7 for a while, after a 50% decline,
an investment still has to double just to break even.
Henry Van der Eb
Chairman
<PAGE> 9
[CAM. READY GRAPH]
SCHEDULE OF INVESTMENTS June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS 45.1%
Shares Market Value
- - ------------- ------------
<S> <C> <C>
ELECTRONICS 0.4%
50,000 Teradyne Inc.* ............ $ 862,500
ENVIRONMENTAL SERVICES 2.8%
400,000 Air and Water Technologies
Corp.* .................. 2,400,000
900,000 ICF Kaiser International,
Inc.* .................... 2,925,000
------------
5,325,000
GOLD 6.9%
1,100,000 Battle Mountain Gold
Co. .................... 7,975,000
300,000 Homestake Mining Co. ..... 5,137,500
------------
13,112,500
HEALTH FOODS 7.1%
200,000 General Nutrition Cos.,
Inc.* ................... 3,500,000
1,000,000 NBTY, Inc.* ............... 10,062,500
------------
13,562,500
INSURANCE 9.3%
350,000 Conseco, Inc. ............ 14,000,000
200,000 Western National Corp. ... 3,675,000
------------
17,675,000
MARITIME 3.8%
400,000 Avondale Industries,
Inc.* ................... 7,200,000
MEDICAL PRODUCTS 1.3%
200,000 Isolyser, Inc.* ........... 2,400,000
PHARMACEUTICAL 6.1%
500,000 ICN Pharmaceuticals,
Inc. ................... 11,625,000
POWER GENERATION 0.6%
40,000 AES Corp. ................ 1,130,000
SPECIALTY RETAIL 1.8%
200,000 Michaels Stores, Inc.* .... 3,400,000
<CAPTION>
Shares Market Value
- - ------------- -------------
<S> <C> <C>
TECHNOLOGY 5.0%
2,700,000 Aura Systems, Inc.* ....... $ 9,618,750
------------
Total Common Stocks (Cost $84,368,770)...... $ 85,911,250
------------
<CAPTION>
SHORT-TERM NOTES 2.5%
Par Value
- - -------------
<S> <C> <C>
$ 4,701,000 State Street Bank Repo,
4.75%, due 7-1-96**
Total Short-Term Notes (Cost $4,701,000).... $ 4,701,000
------------
<CAPTION>
U.S. GOVERNMENTS 52.6%
<S> <C> <C>
$ 84,000,000 U.S. Treasury Notes,
7 7/8%, due 11-15-04.... $ 90,247,500
5,000,000 U.S. Treasury Bills
due 8-22-96 (+)......... 4,961,578
5,000,000 U.S. Treasury Bills
due 7-25-96............. 4,979,548
------------
TOTAL U.S. GOVERNMENTS (Cost $93,862,376)... $100,188,626
------------
Total Investments (Cost $182,932,146)....... $190,800,876
------------
<CAPTION>
FUTURES (0.3%)
Contracts
- - -------------
<S> <C> <C>
300 Short, S&P 500 Stock Index
Futures, Expiration
9-20-96................ (558,771)
OTHER ASSETS (Net) 0.1%..................... 217,486
------------
TOTAL NET ASSETS -- 100%.................... $190,459,591
============
* Non-Income Producing ** Collateralized by a U.S. Treasury Note
+ Pledged to cover S&P Futures margin.
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
schedule.
<PAGE> 10
BALANCE SHEET
June 30, 1996
(Unaudited)
- - ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
INVESTMENTS AT MARKET VALUE:
Common Stocks
(Cost $84,368,770)....... $85,911,250
U.S. Treasuries:
Notes
(Cost $83,921,250)..... 90,247,500
Bills (Amortized
Cost $9,941,126)....... 9,941,126
Repurchase Agreement
(Cost $4,701,000)........ 4,701,000 $190,800,876
----------- ------------
CASH......................... 517
RECEIVABLES FOR:
Dividends and Accrued
Interest................. $ 841,133
Subscriptions to Capital
Stock.................... 3,155 844,288
----------- ------------
TOTAL ASSETS................. $191,645,681
============
LIABILITIES:
PAYABLES FOR:
Redemptions of Capital Stock............ $ 438,590
Accrued Expenses........................ 185,000
Other................................... 562,500
-------------
TOTAL LIABILITIES......................... $ 1,186,090
-------------
CAPITAL:
Capital Stock, $1.00 par value;
14,282,150 shares outstanding
(100 million shares authorized)....... $ 14,282,150
Paid-In Surplus......................... 203,184,320
Accumulated Undistributed Net Investment
Income................................ 2,979,928
Accumulated Undistributed Net Realized
Loss on Investments................... (37,296,765)
Net Unrealized Appreciation on
Investments........................... 7,309,958
-------------
TOTAL CAPITAL (NET ASSETS)................ $ 190,459,591
-------------
TOTAL LIABILITIES AND CAPITAL............. $ 191,645,681
=============
Net Asset Value (Capital) Per Share at
June 30, 1996......................... $13.34
</TABLE> =============
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(Unaudited)
- - ---------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest.................... $3,805,076
Dividends................... 147,280
Other....................... 12,208 $ 3,964,564
---------- ------------
OPERATING EXPENSES:
Management Fee.............. $ 771,517
Transfer Agent.............. 153,294
Legal and Auditing.......... 100,220
Other....................... 45,126
Printing.................... 25,000
Custodian................... 20,533
Registration................ 16,947
Taxes....................... 13,581 1,146,218
---------- ------------
NET INVESTMENT INCOME......... $ 2,818,346
------------
REALIZED AND UNREALIZED
GAINS ON INVESTMENTS:
Net Realized Loss on Investments Sold..... $ (20,471,612)
Net Change in Unrealized Appreciation on
Investments............................. 11,435,535
-------------
Net Realized and Unrealized Loss on
Investments............................. (9,036,077)
-------------
Net Decrease in Net Assets Resulting from
Operations.............................. $ (6,217,731)
=============
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of these statements.
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
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<TABLE>
<CAPTION>
6 MOS. ENDED FULL YEAR ENDED
JUNE 30, 1996 DEC. 31, 1995
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<S> <C> <C>
OPERATIONS:
Net Investment Income...................................................... $ 2,818,346 $ 11,368,311
Net Realized Losses on Investments Sold.................................... (20,471,612) (16,420,847)
Increase in Unrealized Appreciation........................................ 11,435,535 24,137,764
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Net Increase/(Decrease) in Net Assets Resulting from
Operations.................................................... (6,217,731) 19,085,228
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DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from Net Investment Income....................................... 0 (11,425,632)
Distributions of Realized Capital Gains.................................... 0 (492,591)
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Total Distributions to Shareholders............................. 0 (11,918,223)
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CAPITAL STOCK ISSUED AND REDEEMED:
Net Proceeds from Sales of Shares, 193,987 and 643,947 shares,
respectively............................................................. 2,640,870 9,020,429
Net Proceeds from Dividend Reinvestment Plan, 0 and 799,972 shares,
respectively............................................................. 0 10,999,615
Cost of Shares Redeemed, 2,807,671 and 6,199,475 shares, respectively...... (38,266,439) (88,169,337)
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Decrease in Net Assets Derived from Capital Stock Transactions,
(2,613,684) and (4,755,556) shares, respectively.............. (35,625,569) (68,149,293)
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Net Decrease in Net Assets...................................... (41,843,300) (60,982,288)
TOTAL NET ASSETS:
Beginning of Period........................................................ 232,302,891 293,285,179
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End of Period (including undistributed net investment income of $2,979,928
and $161,582, respectively).............................................. $190,459,591 $ 232,302,891
============ ==============
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
NOTES TO FINANCIAL STATEMENTS
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1. The following is a summary of the significant accounting policies of the
Fund:
(a) The Fund intends to distribute all taxable income to its shareholders
and otherwise comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. Therefore, no provision
has been made for Federal income taxes since the Fund has elected to be
taxed as a regulated investment company. The Fund intends to utilize
provisions of the Federal income tax laws which allow it to carry a
realized capital loss forward to eight years following the year of the
loss and offset such losses against any future realized gains. At
December 31, 1995, the Fund had capital loss carryforwards of
$15,267,420 which expire December 31, 2003.
(b) Common stocks traded on securities exchanges and stocks traded on the
NASDAQ National Market are valued at the last sales price as of the
close of the New York Stock Exchange on the day of valuation. In the
event a security does not trade on a given date, the current bid price
is used as the valuation. Fixed income securities with a maturity of
greater than 60 days are valued at the current bid price, and those of
60 days or less are carried at amortized cost which approximates market
value. Financial futures are valued at the settlement price established
each day by the exchange on which they are traded.
(c) During the six months ended June 30, 1996, the Fund entered into S&P
500 index futures contracts to hedge against possible declines of its
portfolio securities. Risks of entering into futures contracts include
the possibility that changes in the value of the futures contract may
not correlate with changes in the value of the portfolio securities
being hedged. Upon entering into a futures contract, the Fund
deposits with its custodian, in a segregated account, a U.S. Treasury
Bill to cover margin requirements. Subsequent payments are made or
received by the Fund equal to the daily change in the contract value and
are recorded as unrealized gains or losses. The Fund recognizes a
realized gain or loss when the contract is closed or expires.
(d) Realized gains or losses are determined on the specific identification
method. Dividends from investments are recognized as income on the
ex-dividend date.
(e) Dividends to shareholders are recorded on the declaration date which
coincides with the ex-dividend date.
(f) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in these financial
statements. Actual results could differ from those estimates.
2. The Fund has an agreement dated May 1, 1988 with Mathers and Company, Inc.,
of which certain officers and directors of the Fund are officers, directors
and shareholders, to serve as its investment adviser and manager. Under the
agreement, the Fund pays an annual management fee of 0.75% of the first
$200,000,000 of the Fund's average monthly net asset value plus 0.625% of
any excess over $200,000,000 but not exceeding $500,000,000, plus 0.50% of
any excess over $500,000,000. The adviser is required to reimburse the Fund
to the extent expenses, other than taxes but including the management fee,
in any year exceed the sum of 1 1/2% of the first $30,000,000 of the Fund's
average monthly net asset value plus 1% of such value in excess of
$30,000,000. Under the agreement, Mathers and Company, Inc. also provides
office facilities and bookkeeping services to the Fund.
3. Cost of U.S. Government obligations and of other investment securities
purchased during the six months ended June 30, 1996, amounted to $34,758,261
and $36,908,764, respectively. Proceeds of U.S. Government obligations and
other investment securities sold or matured during the six months were
$68,405,399 and $44,181,755, respectively. The cost of investments is the
same for financial statement and Federal income tax purposes. At June 30,
1996, gross unrealized appreciation on investments was $19,178,367 and gross
unrealized depreciation of investments was $11,868,409.
<PAGE> 12
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MATHERS FUND
TOTAL RETURN INVESTMENT PERFORMANCE
(All Periods Ended 6-30-96)
PERCENT CHANGE
<TABLE>
<CAPTION>
1 YR. 5 YR. 10 YR. 20 YR. 31 YR.+
----- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
MATHERS FUND................................... (2.64) 7.57 96.40 958.86 3692.06
Standard & Poor's 500.......................... 26.00 107.38 264.29 1329.77 2388.47
Value Line Composite*.......................... 16.54 72.04 91.15 719.41 759.30
Dow Jones Industrial Average................... 27.09 123.50 312.73 1236.57 2196.34
Long-Term U.S. Treasury Bonds.................. 2.59 66.47 138.23 549.41 801.44
30-Day U.S. Treasury Bills..................... 5.23 22.80 70.22 307.07 629.32
Consumer Price Index........................... 2.75 15.21 43.16 175.92 395.85
</TABLE>
COMPOUND ANNUAL RETURNS
<TABLE>
<CAPTION>
1 YR. 5 YR. 10 YR. 20 YR. 31 YR.+
----- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
MATHERS FUND................................... (2.64) 1.47 6.98 12.52 12.50
Standard & Poor's 500.......................... 26.00 15.70 13.80 14.23 10.98
Value Line Composite*.......................... 16.54 11.46 6.69 11.09 7.22
Dow Jones Industrial Average................... 27.09 17.45 15.23 13.84 10.69
Long-Term U.S. Treasury Bonds.................. 2.59 10.73 9.07 9.81 7.38
30-Day U.S. Treasury Bills..................... 5.23 4.19 5.46 7.27 6.65
Consumer Price Index........................... 2.75 2.87 3.65 5.21 5.32
</TABLE>
* Unweighted average of 1,627 stocks + From date of initial
public offering: 8-19-65
THE FUND'S DAILY PRICE AND ASSET MIX PERCENTAGES ARE
AVAILABLE VIA RECORDED MESSAGE
(AFTER 4:30 P.M. CENTRAL TIME) MONDAY THROUGH FRIDAY AT 800-962-FUND.
SHAREHOLDER ACCOUNT BALANCES MAY BE OBTAINED
FROM THE FUND'S TRANSFER AGENT AT
800-235-7458 BETWEEN 8:00 A.M. AND 4:30 P.M. CENTRAL TIME.
The results shown reflect past performance and should not be considered
representative of future performance. The investment return and principal value
of an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Results
reflect income dividends reinvested and capital gains distributions accepted in
shares.
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