MATHERS FUND INC, 485APOS, 1998-03-02

MATHERS FUND INC
485APOS, 1998-03-02

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<PAGE> 1
As filed with the Securities and Exchange Commission on March 2, 1998
1933 Act Registration No. 2-23727
1940 Act Registration No. 811-1311

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]

Pre-Effective Amendment No. [ ]
--
Post-Effective Amendment No. 57 [x]

and/or

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

Amendment No. 18

(Check appropriate box or boxes.)

MATHERS FUND, INC.
(Exact Name of Registrant as Specified in Charter)

100 Corporate North
Bannockburn, Illinois 60015
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code (847) 295-7400

Andrew H. Shaw, Sidley & Austin, One First National Plaza,
Chicago, Illinois 60603
(Name and Address of Agent for Service)

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

immediately upon filing pursuant to paragraph (b)
---
on (date) pursuant to paragraph (b)
---
x 60 days after filing pursuant to paragraph (a)
---
x on May 1, 1998 pursuant to paragraph (a) of rule 485
---

<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED MARCH 2, 1998

MATHERS FUND

100 CORPORATE NORTH, SUITE 201

BANNOCKBURN, ILLINOIS 60015

(800) 962-FUND (847) 295-7400

[email protected]

PROSPECTUS

MAY 1, 1998

Mathers Fund, Inc. is a pure no-load* mutual fund, the investment objective
of which is capital appreciation over the long term. The Fund may pursue its
objective by investing in common stocks and other equity securities and by
engaging in certain investment strategies designed to capitalize on potential
declines in the prices of equity securities. The Fund may also invest all or any
portion of its assets in fixed-income securities as described herein. See
"Investment Objective and Policies."

*A PURE NO-LOAD FUND

<S> <C>
-No Sales Charges -No 12b-1 Charges
-No Redemption Charges -No Reinvestment Charges
</TABLE>

This Prospectus should be read carefully and retained for future reference.
It sets forth concisely the information about the Fund that an investor should
know before investing. A Statement of Additional Information dated May 1, 1998
containing additional information about the Fund has been filed electronically
with the Securities and Exchange Commission (the "Commission") and is
incorporated by reference into this Prospectus. The Statement of Additional
Information is available without charge upon request made to the Fund at the
address and telephone number set forth above. The Commission also maintains a
web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
registrants (including the Fund) that file electronically with the Commission.

------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3

SYNOPSIS OF EXPENSE INFORMATION

The following table illustrates the Fund's expenses. The amounts shown are
based on the actual expenses and average net assets of the Fund for the fiscal
year ended December 31, 1997.

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases or Reinvested
Dividends.............................................. None
Deferred Sales Load....................................... None
Redemption Fee............................................ None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................... .74%
12b-1 Fees................................................ None
Other Expenses (principally transfer agent, legal,
auditing, custodian, taxes, registra-
tion and printing)..................................... .33%
----
Total Fund Operating Expenses................ 1.07%
====
</TABLE>

EXAMPLE:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return, and (2) redemp-
tion at the end of each time period. As noted in the table
above,
the Fund charges no redemption fees of any kind ............ $11 $34 $59 $130
</TABLE>

The purpose of the preceding tables and example is to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear, directly and indirectly. They should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of Mathers Fund, Inc. is capital appreciation over
the long term. The Fund may pursue its objective by investing in common stocks
and other equity securities and by engaging in certain investment strategies,
such as short sales of securities, designed to capitalize to a certain extent on
potential declines in the prices of equity securities. The Fund may also invest
all or any portion of its assets in fixed-income securities as
described below when, for instance, the adviser believes that the risk of owning
equity securities is high.

There are market risks inherent in any investment, and there is no assurance
that the objective of the Fund will be realized. Nor is there any assurance that
the Fund's portfolio will not decline in value or that the portfolio's various
investment segments will perform as expected.
(Continued on p. 4)

2
<PAGE> 4

FINANCIAL HIGHLIGHTS

The table below presents financial highlights for each of the eleven years in
the period ended December 31, 1997 based on the average number of shares of
capital stock outstanding throughout each year. This table has been derived from
the Fund's financial statements which have been audited by the Fund's
independent public accountants. The Fund's Annual Report to Shareholders, which
may be obtained upon request from the Fund without charge, contains further
information about the performance of the Fund.

<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value per share --
beginning of period.......... $ 13.27 $ 13.75 $ 13.55 $ 15.11 $ 15.02 $ 15.06 $ 14.95 $ 14.52
-------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income........ 0.53 0.40 0.601 0.563 0.21 0.500 0.84 0.95
Net realized and unrealized
gains (losses) on
investments................ (0.13) (0.41) 0.349 (1.448) 0.11 (0.035) 0.56 0.56
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.40 (0.01) 0.950 (0.885) 0.32 0.465 1.40 1.51
-------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income..................... (0.61) (0.47) (0.719) (0.675) (0.23) (0.505) (0.74) (0.84)
Distributions from net
realized capital gains..... 0.00 0.00 (0.031) 0.000 0.00 0.000 (0.55) (0.24)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions...... (0.61) (0.47) (0.750) (0.675) (0.23) (0.505) (1.29) (1.08)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value per share --
end of period................ $ 13.06 $ 13.27 $ 13.75 $ 13.55 $ 15.11 $ 15.02 $ 15.06 $ 14.95
======== ======== ======== ======== ======== ======== ======== ========
Ratio of total expenses to
average net assets........... 1.07% 1.03% 0.98% 0.93% 0.89% 0.88% 0.94% 0.98%
Ratio of net investment income
to average net assets........ 3.96% 2.96% 4.25% 3.86% 1.39% 3.33% 5.39% 6.29%
Portfolio turnover rate....... 50% 38% 58% 211% 136% 212% 80% 190%
Average commission rate paid
per share.................... $ 0.048 $ 0.051 -- -- -- -- -- --
Total return.................. 3.01% (0.07%) 7.01% (5.89%) 2.13% 3.11% 9.45% 10.43%
Net assets, end of period
(000s omitted)............... $138,404 $171,596 $232,303 $293,285 $435,862 $554,162 $516,670 $299,707

<CAPTION>
Year Ended December 31
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value per share --
beginning of period.......... $ 15.60 $ 14.46 $ 16.96
-------- -------- --------
Income from investment
operations:
Net investment income........ 0.89 0.34 0.43
Net realized and unrealized
gains (losses) on
investments................ 0.73 1.63 3.92
-------- -------- --------
Total from investment
operations............. 1.62 1.97 4.35
-------- -------- --------
Less distributions:
Dividends from net investment
income..................... (0.97) (0.33) (0.88)
Distributions from net
realized capital gains..... (1.73) (0.50) (5.97)
-------- -------- --------
Total distributions...... (2.70) (0.83) (6.85)
-------- -------- --------
Net asset value per share --
end of period................ $ 14.52 $ 15.60 $ 14.46
======== ======== ========
Ratio of total expenses to
average net assets........... 1.01% 0.98% 0.82%
Ratio of net investment income
to average net assets........ 5.45% 2.18% 2.37%
Portfolio turnover rate....... 303% 148% 202%
Average commission rate paid
per share.................... -- -- --
Total return.................. 10.41% 13.73% 27.04%
Net assets, end of period
(000s omitted)............... $214,608 $201,035 $151,528
</TABLE>

- --------------------------------------------------------------------------------

3
<PAGE> 5

Moreover, certain investment strategies of the Fund, such as selling securities
short and varying its equity exposure by hedging through the purchase of
exchange-traded put and call options on stock indices and/or the purchase or
sale of stock index futures contracts or options on such contracts, may entail
special risks, certain of which are described below.

The Fund is flexibly managed, with the ability to utilize either long and/or
short equity positions in the pursuit of its investment objective. The policy of
the Fund is generally to effect transactions in securities which are believed to
offer the possibility of increasing the Fund's net asset value per share. To the
extent that the Fund's portfolio has significant equity exposure, either long or
short, its net asset value per share may be subject to greater volatility than
when the portfolio contains a substantial amount of fixed-income securities.

However, no minimum or maximum percentage of the Fund's assets is required to
be invested in any type of security. The Fund may invest all or any portion of
its assets in U.S. Treasury bills, notes or bonds or, subject to certain
limitations, certificates of deposit, prime-rated commercial paper or repurchase
agreements (agreements under which the seller of a security agrees at the time
of sale to repurchase it at an agreed time and price) when general conditions
are believed to warrant such action or during periods when the adviser believes
that the risks associated with equity securities are high. At such times, which
may continue for extended periods, the Fund's equity exposure may represent a
relatively low percentage of the Fund's assets. For instance, during most of
1989 through 1997, a majority of the Fund's assets were invested in U.S.
Treasury securities. The equity securities held in the Fund's portfolio were
hedged to varying extents by short sales of Standard & Poor's 500 stock index
futures contracts throughout this period for the purpose of protecting the
Fund's assets from potential loss in a declining market. Fixed income
investments are subject to loss of principal as interest rates rise and may
entail other risks.

Securities of unseasoned companies, where the risks are considerably greater
than with common stock of more established companies, and securities of foreign
issuers, may be purchased by the Fund from time to time when the adviser
believes such investments offer the possibility of capital growth. However, not
more than 5% of the Fund's assets may be invested in securities of companies
which have a record of less than three years' 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), and not more than
10% of the Fund's assets may be invested in securities of foreign issuers which
are not publicly traded in the United States.

Effective May 1, 1998, the Fund may effect short sales of securities in
amounts of up to 30% of the value of the Fund's net assets (determined at the
time of short sale). A short sale is a transaction in which the Fund sells a
security which it does not then own in order to profit from the potential
decline in the market price of that security. To meet its settlement obligation,
the Fund borrows the security sold short for delivery to the buyer. The Fund is
then obligated to return the borrowed security typically at an unspecified
future date by purchasing the security at its market price at the time of
replacement. The transaction will be profitable to the Fund if the price of the
security at the time it is purchased is less than its price at the time the
short sale was effected. Conversely, if the price of the security is greater at
the time of purchase than at the time of the short sale, the

4
<PAGE> 6

transaction will result in a loss. The Fund will be obligated to reimburse the
lender for any dividends paid on the borrowed stock during the period of the
open short position and may have to pay a fee to borrow certain stocks.

The proceeds of the short sale are retained by the Fund's broker for the
purpose of meeting its collateral requirements until such time that the short
position is closed out. In general, the Fund will also be required to pledge
additional cash or liquid securities to the broker as collateral for its
obligations. Generally, brokers require initial collateral (including the short
sale proceeds) with a value equal to 150% of the value of the securities sold
short. The amount of collateral is adjusted daily upward to reflect increases in
the market value of the securities sold short and downward to reflect decreases
in the market value of the securities sold short. In addition, pursuant to the
Commission rules, until the Fund covers its short position, the Fund will be
required to maintain with its custodian a segregated account, containing cash or
liquid debt or equity securities such that the amount deposited in the
segregated account plus the amount deposited with the broker as collateral,
excluding initial proceeds from the short sale, equals the then current market
value of the security sold short.

The short sale of securities is generally considered a speculative investment
strategy, and there are risks associated with it. For instance, under certain
conditions, short sales of securities could increase the volatility of the Fund
or decrease its liquidity. If the Fund's investment adviser incorrectly
anticipates the price movements of securities and the price of a security sold
short increases between the date of the short sale and the date the borrowed
security is purchased, the Fund will incur losses which, unlike a long purchase,
where the investor cannot lose more than the purchase price, are theoretically
unlimited. The Fund could also experience losses if the Fund were to encounter
difficulty in liquidating its position.

The Fund may vary its equity exposure by hedging through the purchase of
exchange-traded put and call options on stock indices and/or the purchase or
sale of stock index futures contracts and options on such contracts. Stock index
options confer upon the holder the right to receive an amount of cash upon
exercise if the closing level of the underlying stock index is greater than, in
the case of a call, or less than, in the case of a put, the exercise price of
the option. A stock index futures contract provides that a person with an open
position in such a contract will be entitled to receive, or will be obligated to
pay, cash amounts on a daily basis during the period such position is held based
on the difference between the current price level of such contract and the price
at which the contract is originally made. An option on a stock index futures
contract gives the holder the right, but not the obligation, to acquire either a
long or short position in such futures contract at a specified price.

The percentage fluctuation in the value of the Fund's investments in stock
index options and futures may be many times greater than those of the underlying
index, and investments in such options and futures are subject to certain other
risk factors. The total cost of outstanding stock index options (determined as
of the time of purchase) held by the Fund may not exceed 5% of the Fund's net
assets, and the Fund will not enter into stock index futures contracts or
options on such contracts if immediately thereafter the aggregate initial margin
and premiums (less the amount by which any such options are "in-the-money" at
the time of purchase) would exceed 5% of the value of the Fund's total assets
after taking into account any unrealized profits and losses on such instruments.

5
<PAGE> 7

The Fund may also purchase corporate debentures or notes (without limitation
as to rating) and preferred stocks, particularly those which are convertible
into or carry rights to acquire common stock, and warrants when such investments
appear to offer the possibility of appreciation in value.

The Fund will not enter into repurchase agreements except with State Street
Bank and Trust Company or invest over 10% of its assets in repurchase agreements
with maturities of over seven days. Underlying securities subject to a
repurchase agreement between the Fund and State Street are held in a segregated
account in which State Street holds assets on behalf of the Fund and others. If
State Street fails to repurchase any such securities, the Fund could experience
losses that include possible decline in their value while the Fund seeks to
enforce its rights, possible loss of all or a part of the income or proceeds of
the repurchase, possible loss of rights in such securities, and additional
expenses to the Fund in enforcing its rights.

While the Fund's objective is to seek capital appreciation over the long term,
individual securities are not necessarily purchased or held to qualify for
long-term capital gains treatment. A variety of factors other than the holding
period, including but not limited to financial market conditions, corporate
developments, other investment opportunities, Fund redemptions, tax
considerations and changed expectations, may be considered in determining
whether to sell a security. As a result, turnover in the Fund's portfolio may be
high.

The investment objective and the other policies described under this caption
are not fundamental policies and may be changed without shareholder approval.

MANAGEMENT AND OPERATION OF THE FUND

The business and affairs of the Fund are managed under the direction of its
Board of Directors. MATHERS AND COMPANY, INC., 100 CORPORATE NORTH, SUITE 201,
BANNOCKBURN, ILLINOIS 60015, (847) 295-7400, serves as investment adviser to the
Fund. The adviser is an investment counselling firm which has served as
investment adviser to the Fund since its inception in 1965 and as investment
adviser to pension and profit sharing funds, charitable foundations, insurance
company separate accounts and others since 1961. Henry G. Van der Eb, Jr.,
President of the adviser and Chairman and a Director of the Fund, owns a
majority of the outstanding shares of the adviser and is thus the controlling
person of the adviser.

Mr. Van der Eb, CFA, has been primarily responsible for the day-to-day
management of the Fund's portfolio for more than the last ten years. Robert J.
Reynolds, CFA, Senior Vice President of the adviser and President and a Director
of the Fund, and Anne E. Morrissy, CFA, Vice President of the adviser and
Executive Vice President, Secretary and a Director of the Fund, also play
significant roles in such management.

Under its investment advisory agreement with the Fund, the adviser furnishes
continuous investment advisory services and management to the Fund, subject to
the authority of the Fund's Board of Directors. The adviser receives an annual
fee of 0.75% of the first $200,000,000 of the Fund's average net asset value,
plus 0.625% of such value in excess of $200,000,000 but not exceeding
$500,000,000, plus 0.50% of such value in excess of $500,000,000, payable
monthly and determined by valuations made as of the close of the previous month.
For 1997, the fee approximated 0.74% of the Fund's average net assets.

6
<PAGE> 8

The Fund's total operating expenses for 1997 were approximately 1.07% of its
average net assets.

DST SYSTEMS, INC., P.O. BOX 419103, KANSAS CITY, MISSOURI 64141, serves as
transfer agent and dividend paying agent and performs shareholder accounting
services for the Fund.

The management services provided to the Fund by the adviser, and the services
provided by the Fund's transfer agent and the custodian, in part, depend on the
reasonably consistent operations of their computer systems. Many software
programs and, to a lesser extent, computer hardware in use today cannot
distinguish the year 2000 from the year 1900 because of the way dates are
encoded and calculated. This design flaw may have a negative impact on the
handling of securities trades, pricing and accounting services. All of the
software used by the adviser is current and is prepared for the year 2000. The
transfer agent and the custodian have been actively working on necessary changes
to their computer systems to deal with the year 2000 and have informed the Fund
that they reasonably believe that their systems will be year 2000 compliant in
time for that event.

DETERMINATION OF NET ASSET VALUE

The per share net asset value of the Fund is determined by dividing the total
value of its net assets (meaning its assets less its liabilities excluding
capital) by the total number of its shares outstanding at that time. The net
asset value is determined as of the close of regular trading on the New York
Stock Exchange on each day it is open for trading and on any other day such
determination is required by the rules and regulations of the Commission. This
determination is applicable to all share transactions prior to that time and
after the previous time of determination of net asset value. Accordingly,
purchase orders accepted or shares tendered for redemption prior to the close of
trading on a day the Exchange is open for trading will be valued as of the close
of trading, and purchase orders accepted or shares tendered for redemption after
that time will be valued as of the close of the next trading day.

Securities traded on any stock exchange or in the NASDAQ National Market
System will ordinarily be valued on the basis of the last sale price as of the
close of the New York Stock Exchange on the date of valuation, or, in the
absence of any sale on that date, the last reported bid price. Other securities
will generally be valued at the current bid price, if market quotations are
readily available. Short-term securities are valued at amortized cost. Any
securities for which there are no readily available market quotations and other
assets will be valued at their fair value as determined in good faith by the
Board of Directors.

7
<PAGE> 9

PURCHASE OF SHARES

Shares are issued directly by the Fund. The price per share is the next
determined net asset value after acceptance of an application. See
"Determination of Net Asset Value".

A purchase application is enclosed on page 11. (A special application is
required for IRA and Keogh Plan accounts. See "Retirement Plans.") Purchase
applications should be mailed directly to:

MATHERS FUND, INC.
C/O DST SYSTEMS, INC.
P.O. BOX 419103
KANSAS CITY, MISSOURI 64141

or, if next-day delivery is desired, express mailed to:

MATHERS FUND, INC.
C/O DST SYSTEMS, INC.

210 WEST 10TH STREET, 8TH FLOOR

KANSAS CITY, MISSOURI 64105

All applications must be accompanied by payment and are subject to acceptance
by the Fund. Payment for shares may be made by check, payable to Mathers Fund,
Inc., or, if a completed purchase application has been received and an account
established, by federal funds wire transfer. Funds may be wire transferred
directly to Investors Fiduciary Trust Company, Kansas City, MO., using the
following instructions: INV/FID/KC, ABA No. 101003621, Mathers Fund A/C No. 750-
123-4, for credit to (shareholder's name and account number). The Fund does not
accept telephone orders and reserves the right to reject applications in whole
or in part. The Board of Directors of the Fund has established $1,000 as the
minimum initial purchase and $200 as the minimum for any subsequent purchase
(except through dividend reinvestment or participation in the automatic
investment program); these minimum amounts are subject to change at any time.
Stock certificates are not issued unless requested in writing. Requests for
certificates should be directed to DST at the above address.

AUTOMATIC INVESTMENT PROGRAM

Once the minimum initial purchase requirement is satisfied, a shareholder may
establish an automatic investment program whereby periodic investments (minimum
$50) may be made in shares of the Fund by the automatic debit of the
shareholder's bank account. Shareholders will be notified of the number of
shares purchased and the price following each investment. There is no obligation
to continue periodic investments and the shareholder may withdraw from the plan
at any time by giving written notice to the Fund or DST at their respective
addresses. No charge is made in connection with this service. An application
form for participation in the automatic investment program may be obtained from
the Fund by calling (800) 962-FUND.

RETIREMENT PLANS

The Fund makes available a retirement plan for self-employed individuals
(Keogh Plan), simplified employee pension plans (SEPs), and both regular and
Roth individual retirement accounts (IRAs) for all individuals. The minimum
initial investment to establish an IRA, SEP or Keogh Plan account is $200.
Unless a different custodian is specified, Investors Fiduciary Trust Company,
Kansas City, Missouri, provides the custodial service for these accounts for an
annual maintenance fee which is currently $12.00 per account and is payable by
the shareholder. If the fee is not prepaid, it will be deducted from the
shareholder's account.

Applications and additional information concerning these plans and accounts
may be

8
<PAGE> 10

obtained from the Fund by calling (800) 962-FUND.

\ HOW TO REDEEM SHARES

A shareholder may request the Fund to redeem his shares in whole or in part on
any business day prior to the close of the market on the New York Stock
Exchange. Redemption requests must be made in writing and mailed to:

MATHERS FUND, INC.
C/O DST SYSTEMS, INC.
P.O. BOX 419103
KANSAS CITY, MISSOURI 64141

or, if next-day delivery is desired, express mailed to:

MATHERS FUND, INC.
C/O DST SYSTEMS, INC.

210 WEST 10TH STREET, 8TH FLOOR

KANSAS CITY, MISSOURI 64105

If a redemption request is inadvertently sent to the Fund at its Bannockburn,
Illinois address, the request will be forwarded to DST but the effective date of
redemption will be delayed until the request is received by DST. Requests for
redemption by telephone, telegram, facsimile or e-mail and requests which are
subject to any special conditions or which specify an effective date other than
as provided herein cannot be honored. A request for redemption must be signed by
each shareholder exactly as the shares are registered, including the signature
of each joint owner. Signatures must be guaranteed if (i) the redemption request
is received within 30 days after an address change, (ii) the amount being
redeemed is $25,000 or greater, or (iii) the proceeds of redemption are
requested to be paid or sent to a person other than the registered holder or
holders of the shares to be redeemed or to an address other than the address of
record. In such cases, each signature on the redemption request should be
guaranteed. A signature guarantee may be obtained from a commercial bank or
trust company in the United States or a member firm of the New York Stock
Exchange. If certificates have been issued for any of the shares to be redeemed,
the certificates, properly endorsed or accompanied by a properly executed stock
power, must accompany the request for redemption. Additional documentation may
be required for redemptions by corporations, executors, administrators,
trustees, guardians or others who hold shares in a fiduciary or representative
capacity or are not natural persons. In case of any question concerning the
nature of such documentation, please call DST at (800) 235-7458 or the Fund at
(800) 962-FUND. Redemptions will not be effective or complete until all of the
foregoing conditions have been satisfied and documents received.

The redemption price is the net asset value per share next determined after
receipt by DST of the written request in proper form with all required
documentation. The amount received will depend on the market value of the Fund's
investments at the time of determination of net asset value, and may be more or
less than the original cost of the shares redeemed. A check in payment for
shares redeemed will be mailed to the holder no later than the seventh day after
receipt by DST of the redemption request in proper form and all required
documentation. However, payment of redemption proceeds may be delayed for a
period of up to 20 days after purchase pending clearance of any check delivered
in connection with the purchase of such shares.

The right to redeem shares of the Fund will be suspended for any period during
which the New York Stock Exchange is closed because of financial conditions or
any other extraordinary reason and may be suspended for any period during which
(i) trading on the Exchange is restricted, (ii) the Commission has

9
<PAGE> 11

by order permitted such suspension or (iii) an emergency, as defined by rules
and regulations of the Commission, exists as a result of which it is not
reasonably practicable for the Fund to dispose of its securities or fairly to
determine the value of its net assets.

If the value of a shareholder's account (other than a retirement account)
drops to less than $1,000 (except as a result of market fluctuations), the Fund
reserves the right to redeem the shares in that account at net asset value after
providing 30 days' written notice to the shareholder.

SYSTEMATIC WITHDRAWAL PLAN

A systematic withdrawal plan is available to any shareholder who wishes to
withdraw a fixed sum or percentage (minimum $200 except for IRA, SEP or Keogh
Plan accounts) monthly, quarterly, semiannually or annually. Shares are redeemed
at the net asset value per share on or about the fifteenth day of any month
specified for a withdrawal and sent by check to the shareholder's address of
record. Alternatively, the proceeds may be wired to the shareholder's bank
account on any business day of the month. The initial withdrawal request must
meet all requirements for redemption as described under "How to Redeem Shares".
There is no charge for this service.

A form for participating in this withdrawal plan may be obtained by calling
the Fund at (800) 962-FUND.

DIVIDEND REINVESTMENT

Unless a shareholder otherwise directs, all income dividends and capital gains
distributions are automatically reinvested in full and fractional shares of the
Fund, calculated to the nearest 1,000th of a share. Shares are purchased at the
net asset value per share next determined after the dividend declaration and are
credited to the shareholder's account. Stock certificates are not issued unless
requested in writing. Shareholders will be advised of the number of shares
purchased and the purchase price following each investment. A shareholder may
instead elect to receive all income dividends and capital gains distributions in
cash or to reinvest capital gains distributions and receive income dividends in
cash.

Unless a federal funds wire transfer is requested in writing, all cash
distributions will be made by check delivered by U.S. mail. If the U.S. Postal
Service cannot deliver the check, or if it remains uncashed for six months, it,
as well as future dividends and distributions, may at the option of the Fund
thereafter be reinvested in additional shares at the net asset value per share
on the day such shares are purchased. No interest will accrue on amounts
represented by uncashed distribution or redemption checks. If a shareholder
elects to have cash distributions sent to an address other than the address of
record or wire transferred, a written request to such effect must be made
(including wire transfer instructions, if appropriate), and the shareholder's
signature should be guaranteed. A signature guarantee may be obtained from a
commercial bank or trust company in the United States or a member firm of the
New York Stock Exchange. An election to reinvest or receive dividends and
distributions in cash will apply to all shares of the Fund registered under the
same account number, including those previously purchased.

10
<PAGE> 12

Shareholders may withdraw from the dividend reinvestment program and elect to
receive income dividends or all distributions in cash at any time. Any
shareholder who is not participating may elect to do so by giving written notice
to DST. If an election to withdraw from or participate in the dividend
reinvestment program is received between a dividend declaration date and payment
date, it will become effective on the day following the payment date. The Fund
may modify or terminate its dividend reinvestment program at any time on 30
days' notice to participants.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Fund intends to distribute substantially all of its net investment income
(i.e., net income and gains exclusive of net capital gains) and net capital
gains, if any (computed after taking into account any available capital loss
carryover) to its shareholders each year. The Fund qualified in 1997, and
intends to remain qualified, as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. As a regulated investment company,
the Fund is not subject to federal income tax on its income and gains
distributed to shareholders. If the Fund were to fail in any year to so qualify
under Subchapter M of the Code, it would become subject to a corporate-level tax
and distributions to shareholders would generally be treated as ordinary income.

Shareholders (except those who are not subject to tax on their income) are
subject to federal income tax on distributions of net investment income and net
capital gains, regardless of whether such distributions are paid in cash or
reinvested in shares of the Fund. Distributions by the Fund of its net
investment income will be taxable to shareholders as ordinary income, and will
qualify for the 70% dividends received deduction available to corporations to
the extent the Fund's net investment income consists of qualifying dividend
income from U.S. corporations. In general, distributions by the Fund of its net
capital gains will be taxable to shareholders as gain from the sale or exchange
of a capital asset held for more than one year, regardless of the length of time
a shareholder has owned shares of the Fund, and will not qualify for the
dividends received deduction. In the case of a non-corporate taxpayer, the
Taxpayer Relief Act of 1997 provides in general that, relative to tax rates
applicable to ordinary income, preferential tax rates would apply to gains from
the sales of capital assets held for more than one year but not more than 18
months (so-called "mid-term gains") and even more preferential tax rates would
apply to gains from the sales of capital assets held for more than 18 months
(so-called "long-term gains"). For purposes of characterizing net capital gains
distributed to non-corporate shareholders, net capital gain distributions will
be treated in part as mid-term gains and in part as long-term gains, depending
on the extent to which the Fund recognizes mid-term and long-term gains.
Distributions designated as net capital gains may be offset by certain capital
losses of the shareholder in determining the shareholder's net capital gains.
There can be no assurance that mid-term or long-term gains treatment will be
achieved with respect to any portion of realized capital gains for any given tax
year. Shareholders are advised of the amount and nature of any income or gains.
Distributions may also be subject to state and local tax.

For federal income tax purposes, realized gains and losses of the Fund from
its short sales, regardless of the period the Fund held the security used to
close the short sale, are generally expected to be treated as short-term capital
gains or losses. Different rules would apply if at the time of the short sale,
the Fund

11
<PAGE> 13

held securities that were substantially identical to the securities used to
close the short sale.

In the case of non-corporate taxpayers, the tax rate applicable to net gain on
the sale of shares will depend on whether the holding period is more than 18
months, more than 12 months and not more than 18 months, or 12 months or less.
For sales of shares by corporate shareholders, net gains and losses will be
taxed to corporate shareholders under rules traditionally applicable to net
gains realized by a corporation. Any loss realized on the sale or exchange of
shares of the Fund will be disallowed to the extent the shares disposed of are
replaced, through the reinvestment of dividends or otherwise, during the 61-day
period beginning 30 days before and ending 30 days after the shares are sold or
exchanged.

PERFORMANCE INFORMATION

From time to time, the Fund may report its historical performance for various
periods on a total return basis in reports or other communications to
shareholders or in advertising material. Total return combines principal changes
and dividends for the periods shown. Principal changes are the difference
between the beginning and ending net asset values for a given period and assume
reinvestment of dividends. Dividends include income dividends and capital gains
distributions paid during the period. Percentage changes are determined by
subtracting the beginning net asset value from ending net asset value (computed
on a total return basis) and dividing the remainder by the beginning net asset
value.

The Fund's performance will vary from time to time and an investor's shares,
when redeemed, may be worth more or less than their original cost. Past results
should not be considered representative of future performance. Factors affecting
the Fund's performance include, among other things, general market conditions,
the composition of its portfolio, and operating expenses. See "Investment
Objective and Policies" and "Management and Operation of the Fund." No
adjustment is made in reporting performance for taxes payable by shareholders on
reinvested income dividends and capital gains distributions.

Comparative performance information or rankings may be used from time to time
in reports or other communications to shareholders or in advertising material.

(Continued on p. 15)

12
<PAGE> 14

MATHERS FUND, INC. PURCHASE APPLICATION

(THIS APPLICATION IS NOT VALID FOR IRA OR KEOGH ACCOUNTS)

LOGO

<S> <C> <C>
Regular mail: Express or overnight mail: Call (800) 962-FUND
Mathers Fund, Inc. Mathers Fund, Inc. with any questions
c/o DST Systems, Inc. c/o DST Systems, Inc.
P.O. Box 419103 210 West 10th Street, 8th Floor Minimum Initial Investment $1,000
Kansas City, MO 64141 Kansas City, MO 64105
</TABLE>

I hereby apply for the purchase of $ ________ in full and fractional shares
of Mathers Fund, Inc. Capital Stock, in accordance with your current prospectus
dated May 1, 1998 (a copy of which I have received) and the terms and
instructions below and on the reverse side of this application (which I have
read). ALL

APPLICATIONS MUST BE ACCOMPANIED BY PAYMENT. CHECKS SHOULD BE MADE PAYABLE
TO MATHERS FUND, INC.
- --------------------------------------------------------------------------------

1. REGISTRATION--Please Print:

<S> <C> <C>
[ ] Individual or
Joint Owners ----------------------------------------------------- ------------------------------
Name Social security number
-----------------------------------------------------
Name of joint owner (see note below)
[ ] Gift to
Minors ----------------------------------------------------- ------------------------------
Name of custodian (one name only) Minor's social security number
----------------------------------------------------- ------------------------------
Name of minor (one name only) Minor's state of residence
[ ] Corporation,
Partnership, ----------------------------------------------------- ------------------------------
Trust, Other Name of corporation or other entity Social security or tax I.D. number
(circle one)
----------------------------------------------------- ------------------------------
Name(s) of trustees If a trust, include date of
trust
Street or P.O. Box [ ] U.S. citizen/resident alien
or
City State Zip Code [ ] Non-resident alien:
( ) ------------------------------
Daytime telephone number (Please specify country of tax
residency.)
</TABLE>

- --------------------------------------------------------------------------------

2. DISTRIBUTIONS--Please Check One:
[ ] Income dividends and capital gains distributions automatically
reinvested in additional shares.

[ ] Income dividends in cash with capital gains distributions
reinvested.

[ ] Income dividends and capital gains distributions in cash.

(If no election is checked, all income dividends and capital gains
distributions will be reinvested.)
- --------------------------------------------------------------------------------

3. SIGNATURES AND CERTIFICATIONS
NOTE: If shares are to be registered jointly, all owners must sign but only one
social security number should be given. Any registration in the names of two or
more co-owners will, unless otherwise specified, be as joint tenants with right
of survivorship and not as tenants in common. Shares may be registered in the
name of a custodian for a minor in accordance with the Uniform Gift to Minors
Act (UGMA) and any applicable state law. For a custodian registration, give
social security number of minor. If signing in other than individual capacity,
please indicate title or capacity.

Under penalties of perjury, I certify that: (1) The number shown on this
form is my correct social security number or taxpayer identification number, and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the Internal Revenue Service has notified me that
I am no longer subject to backup withholding. (Cross out (2) above if you have
been notified by the Internal Revenue Service that you are currently subject to
backup withholding because of underreporting interest or dividends on your tax
return.) The Internal Revenue Service does not require your consent to any
provision of this document other than certifications required to avoid backup
withholding.

<S> <C> <C>
Date
Signature Signature of Joint Owner (If Any)
</TABLE>

CONTINUED ON THE REVERSE SIDE.

13
<PAGE> 15

GENERAL TERMS

This application is subject to acceptance by the Fund in Bannockburn,
Illinois. The passage of title to and delivery of shares purchased (including
shares hereafter purchased through dividend reinvestment or otherwise), whether
or not certificates are issued, shall be deemed to take place in Illinois. The
applicant certifies that the applicant has full capacity to enter into this
subscription agreement. The purchase price shall be the net asset value next
determined after the time this application is accepted by the Fund.

INSTRUCTIONS RELATING TO IRS CERTIFICATIONS

The Fund is required by law to withhold Federal income tax at a rate of 31%
("backup withholding") from your dividends, capital gain distributions and
redemption payments if you do not provide the Fund with your social security or
other taxpayer identification number ("TIN") and certify that such number is
your correct TIN. In addition, the Fund is required to withhold from your
dividends and capital gain distributions (but not redemption payments) if you
fail to certify to the Fund that you are not subject to backup withholding.
Under the law, you are entitled to certify that you are not subject to backup
withholding unless the Internal Revenue Service (the "IRS") has notified you
that you are subject to backup withholding for failure to report interest or
dividends (and the IRS has not thereafter notified you that you are no longer
subject to backup withholding). Any such withholding applies to all dividends
and distributions, including those which would otherwise be invested in
additional shares of the Fund.

If you do not supply the Fund with your correct TIN, you may be subject to
a $50 penalty. If you falsify information on this form or make any other false
statement which results in a failure to implement backup withholding on an
account which should be subject to backup withholding, you may be subject to a
$500 penalty and to certain criminal penalties, including fines and
imprisonment.

14
<PAGE> 16

CAPITAL STRUCTURE

The Fund is an open-end, diversified management investment company
incorporated in Maryland on March 31, 1965.

The Fund has only one class of authorized stock--Capital Stock, $1.00 par
value. Shareholders are entitled to one vote per full share, to such
distributions per share as may be declared by the Fund's Board of Directors out
of funds legally available therefor and upon liquidation to participate ratably
in the assets available for distribution. There are no conversion or sinking
fund provisions applicable to the shares, and the holders have no preemptive
rights and may not cumulate their votes in the election of directors. The shares
are redeemable (as described under "How to Redeem Shares" and "Determination of
Net Asset Value") and are transferable. All shares issued and sold by the Fund
will be fully paid and non-assessable.

The Fund is not required to hold annual meetings of shareholders in each year.
Under certain circumstances shareholders have the right to call for a meeting of
shareholders to consider the removal of one or more directors or for other
purposes.

SHAREHOLDER INQUIRIES

Shareholder inquiries relating to the status of a shareholder's account or to
the requirements for purchase or redemption of shares may be directed to:

MATHERS FUND, INC.
C/O DST SYSTEMS, INC.
P.O. BOX 419103
KANSAS CITY, MISSOURI 64141
(800) 235-7458

Other inquiries may be directed to:

MATHERS FUND, INC.
100 CORPORATE NORTH, SUITE 201
BANNOCKBURN, ILLINOIS 60015
(800) 962-FUND

Those shareholders who wish to obtain a Mathers Fund daily price and asset mix
via recorded message may call (800) 962-FUND after 4:30 p.m., Central time,
Monday through Friday.

15
<PAGE> 17

- --------------------------------------------------------------------------------

MATHERS FUND, INC.

100 Corporate North, Suite 201
Bannockburn, Illinois 60015

Investment Adviser

MATHERS AND COMPANY, INC.
Bannockburn, Illinois

Custodian

STATE STREET BANK AND TRUST COMPANY
Boston, Massachusetts

Transfer Agent

DST SYSTEMS, INC.
Kansas City, Missouri

Counsel

SIDLEY & AUSTIN
Chicago, Illinois

Auditors

ARTHUR ANDERSEN LLP
Chicago, Illinois
Logo

MATHERS FUND

PROSPECTUS

MAY 1, 1998

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Synopsis of Expense Information........ 2
Investment Objective and Policies...... 2
Financial Highlights................... 3
Management and Operation of the Fund.. 6
Determination of Net Asset Value....... 7
Purchase of Shares..................... 8
Automatic Investment Program........... 8
Retirement Plans....................... 8
How to Redeem Shares................... 9
Systematic Withdrawal Plan............. 10
Dividend Reinvestment.................. 10
Dividends, Distributions and Taxes..... 11
Performance Information................ 12
Purchase Application................... 13
Capital Structure...................... 15
Shareholder Inquiries.................. 15
</TABLE>

<PAGE> 18

SUBJECT TO COMPLETION

PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED

MARCH 2, 1998

MATHERS FUND, INC.
Suite 201
100 Corporate North
Bannockburn, Illinois 60015
(800) 962-FUND
(847) 295-7400

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information is not a prospectus. A copy of
the Prospectus dated May 1, 1998 (the "Prospectus") of the Fund may be obtained
without charge by writing or telephoning the Fund at the address and telephone
number set forth above. The Prospectus provides basic information about the
Fund. This Statement of Additional Information contains information in
addition to and more detailed than that set forth in the Prospectus, and should
be read in conjunction with the Prospectus.

TABLE OF CONTENTS

PAGE NO.
--------

INVESTMENT PRACTICES AND RESTRICTIONS..........................................2
Fixed-Income Securities.....................................................2
Short Sales of Securities...................................................2
Stock Index Options.........................................................4
Stock Index Futures Contracts and
Options on Such Contracts..............................................5
Fundamental Policies........................................................8
Nonfundamental Policies.....................................................9
General....................................................................10
DIRECTORS AND OFFICERS OF THE FUND............................................11
CODE OF ETHICS................................................................13
PRINCIPAL HOLDERS OF THE FUND'S SHARES........................................14
INVESTMENT ADVISER............................................................14
INVESTMENT ADVISORY AGREEMENT.................................................14
BROKERAGE.....................................................................15
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................17
RETIREMENT PROGRAMS...........................................................18
TAX STATUS....................................................................20
DESCRIPTION OF SHARES.........................................................23
CUSTODIAN AND INDEPENDENT ACCOUNTANTS.........................................24
PERFORMANCE INFORMATION.......................................................24
FINANCIAL STATEMENTS..........................................................25

May 1, 1998

<PAGE> 19

INVESTMENT PRACTICES AND RESTRICTIONS

A general discussion of the Fund's investment objective and policies
appears in the Prospectus under "Investment Objective and Policies."

Fixed-Income Securities

As discussed on pages 3-4 of the Prospectus, the Fund may, subject to the
limitation described in paragraph 3 under "Fundamental Policies" below, invest
all or any portion of its assets in high quality fixed-income securities which
may include the following: (1) U.S. treasury bills, notes or bonds; (2)
banker's acceptances and certificates of deposit of the 50 largest commercial
banks in the United States, measured by total assets as shown by their most
recent annual financial statements; (3) commercial paper rated A-l or A-2 by
Standard & Poor's, Inc. ("S&P") or P-l or P-2 by Moody's Investors Service,
Inc. ("Moody's"), or, if not rated, issued by companies having an outstanding
debt issue rated AA or better by S&P or Aa or better by Moody's; and (4)
repurchase agreements with respect to the foregoing.

Short Sales of Securities

As discussed on page 4 of the Prospectus, the Fund may, subject to the
limitation described in paragraph 10 under "Nonfundamental Policies" below,
effect short sales of securities. A short sale is a transaction in which the
Fund sells a security which it does not then own in order to profit from the
potential decline in the market price of that security. To meet its settlement
obligation, the Fund borrows the security sold short from a broker and delivers
that security to the buyer. The Fund is then obligated to return the borrowed
security to the broker, typically at an unspecified future date. At that time,
the Fund would purchase an equivalent number of shares of the same shorted
security at its then current market price in order to cover the short position
and effect the return. The price at such time may be more or less than the
price at which the security was sold short. The transaction will be profitable
to the Fund if the price of the security at the time it is purchased is less
than its price at the time the short sale was effected. Conversely, if the
price of the security is greater at the time of purchase than at the time of the
short sale, the transaction would result in a loss. The Fund will be obligated
to reimburse the lender for any dividends paid on the borrowed stock during the
period of the open short position and may have to pay a fee to borrow certain
stocks.

The proceeds of the short sale are retained by the Fund's broker for the
purpose of meeting its collateral requirements until such time as the short
position is closed out. In general, the Fund will also be required to pledge
additional cash or liquid

<PAGE> 20

securities to the broker as collateral for its obligations. Generally, brokers
require initial collateral (including the short sale proceeds) with a value
equal to 150% of the value of the securities sold short. The amount of
collateral is adjusted daily upward to reflect increases in the market value of
the securities sold short and downward to reflect decreases in the market value
of the securities sold short. In addition, pursuant to rules imposed by the
Securities and Exchange Commission (the "SEC"), until the Fund covers its short
position, the Fund will be required to maintain with its custodian a segregated
account, containing cash or liquid debt or equity securities, such that the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral (excluding initial proceeds from the short sale) equals
the current market value of the security sold short. It is possible that up to
100% of the Fund's assets will be held in such a segregated account (or a
segregated account as described under "Stock Index Futures Contracts and
Options on Such Contracts" below) or deposited with a broker as collateral as
described in the preceding sentence.

The Fund's investment adviser may sell securities short when it believes
that prices of such securities are likely to decline, thereby giving the Fund
the opportunity to potentially profit from any such decline. The Fund
anticipates that its short sales will generally involve individual equity
securities and will generally not involve short sales "against the box," which
is the sale of a security that the seller contemporaneously owns or has a right
to obtain at no added cost. The asset segregation procedures described in the
preceding paragraph need not be applied to short sales to the extent they are
"against the box."

The short sale of securities is generally considered a speculative
investment strategy, and there are risks associated with it, including but not
limited to the following: (i) the decision of whether, when and how to utilize
short selling involves the exercise of skill and judgement and, unless the
adviser correctly anticipates the price movements of securities, it is possible
that, for at least certain short sales, the Fund would have been better off if
the short sale had not been made, (ii) unlike a long purchase, where the
investor cannot lose more than the purchase price, there is no theoretical
limit to potential losses on a short sale; (iii) under certain conditions,
short sales of securities could increase the volatility of the Fund or decrease
its liquidity; (iv) possible volatility or illiquidity in the markets which
could result in difficulty in closing out an existing short position, causing a
continuing exposure to adverse price movements until the position is covered;
(v) a security borrowed and sold short may be called back by the lender,
possibly causing the short position to be closed out prematurely; and (vi) the
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of

<PAGE> 21

the premium, dividends, interest or expenses the Fund may required to pay in
connection with a short sale.

Stock Index Options

As discussed on pages 4-5 of the Prospectus, the Fund may, subject to the
limitation described in paragraph 7 under "Nonfundamental Policies" below,
purchase put and call options on stock indices for hedging purposes in
circumstances believed appropriate by the adviser. Stock index options are
issued by the Options Clearing Corporation ("OCC"). The Fund will only
purchase stock index options which are traded on a national securities exchange
such as the Chicago Board Options Exchange, Inc. Upon purchase of a stock
index option, the Fund will pay a purchase price (the "premium") and brokerage
commissions and fees (collectively, together with the premium, "transaction
costs"). Such options confer upon the holder the right to receive upon
exercise an amount of cash which is based on the difference between the
exercise price of the option and the closing level of the underlying stock
index on the exercise date multiplied by a specified dollar amount. The right
to receive any cash amount depends on the closing level of the stock index upon
which the option is based being greater than (in the case of a call) or less
than (in the case of a put) the exercise price of the option.

A stock index option may be exercised only during its remaining life and
may be sold prior to expiration. The value of an option will generally vary
directly in the case of a call, and inversely in the case of a put, with
movements in the underlying index, and the percentage fluctuations in the value
of an option may be many times greater than those of the underlying index. The
adviser may purchase call index options as a hedge against an increase in the
price of securities generally in connection with either sales of portfolio
securities or deferrals to a later date of purchases of securities it may
desire to purchase. Put index options may be purchased as a hedge against a
decline in the price of securities generally rather than selling portfolio
securities.

Any protection provided by stock index options is effective only against
changes in the level of a stock index and not necessarily against a change in
the value of individual securities. Thus, the effectiveness of the use of
stock index options as a hedge is dependent on the extent to which price
movements of individual securities which are being hedged correlate with price
movements in the underlying stock index. Unless a stock index option can be
sold or can be exercised at a profit prior to expiration, the Fund will forfeit
the entire amount of its transaction costs, often in a relatively short period
of time. Any profit that may be realized from the sale or exercise of stock
index options will be reduced by related transaction costs.

<PAGE> 22

Stock Index Futures Contracts and Options on Such Contracts

As discussed on pages 3-4 of the Prospectus, the Fund may, subject to the
limitation described in paragraph 8 under "Nonfundamental Policies" below,
purchase or sell stock index futures contracts and options on such contracts
for hedging purposes in circumstances believed to be appropriate by the
adviser, thereby altering the Fund's equity exposure without actually buying or
selling underlying equity securities. A stock index futures contract provides
that a person with an open position in such a contract will be entitled to
receive, or will be obligated to pay, cash amounts on a daily basis during the
period such position is held based on the daily changes in the difference
between the price at which the contract is originally made and the current
level of the underlying stock index multiplied by a specified dollar amount.
An option on a stock index futures contract gives the holder (purchaser) the
right, but not the obligation, in return for payment of the premium (option
price), to acquire either a long or a short position (a long position if the
option is a call and a short position if the option is a put) in such futures
contract at a specified exercise price at any time during the option exercise
period. The writer of the stock index futures option is required upon exercise
to assume the opposite position on the stock index futures contract.

The Fund's transactions in stock index futures contracts will be executed
on U.S. boards of trade designated by the Commodity Futures Trading Commission
("CFTC") as contract markets ("contract markets") through a futures commission
merchant (an "FCM") which is a member of the relevant contract market. The
contract markets, through their clearing houses, effectively guarantee that the
payments due with respect to stock index futures contracts will be made so that
traders need not rely solely on the solvency of individual traders or brokers
for the satisfaction of the obligations under open positions. However, in the
event of a bankruptcy of the Fund's broker, the Fund may be unable to recover
its assets -- even assets directly traceable to the Fund -- from such broker.

At the time the Fund enters into a stock index futures contract, it is
required to deposit as "initial margin" a specified amount of cash or cash
equivalents per contract. Thereafter, subsequent payments of "variation
margin" are made daily to or from the FCM based upon daily changes in the value
of the contract (a process known as "marking to market"). Initial margin is in
the nature of a performance deposit which is returned to the Fund unless it
defaults in making variation margin payments. Variation margin is the
settlement made each day between the Fund and the FCM based upon fluctuations
in the price level of such contracts, which under normal market conditions
directly reflect fluctuations in the level of the stock index on which the
contract is based. A person with a long position in a stock index futures
contract (purchaser) will be entitled to

<PAGE> 23

receive payments to the extent that the market price level of such futures
contract increases above the level at which he acquired his long position, and
will be obligated to make payments to the extent that such market price level
falls below the acquisition price level. The converse is the case for a person
with a short position in a stock index futures contract (seller).

Upon exercise of a stock index futures option, the simultaneous
acquisition of open positions in the underlying stock index futures contract by
the person exercising the option and the writer is accomplished by delivery for
the account of the person exercising the option of the accumulated cash balance
in the writer's futures margin account which represents the amount by which the
market price of the stock index futures contract, at exercise, exceeds (in the
case of a call) or is less than (in the case of a put) the strike price of the
stock index futures option. If the stock index futures option is exercised on
the last trading day for such option, the writer delivers to the holder cash in
an amount equal to the difference between the option strike price and the
closing level of the relevant stock index on the date the option expires.

Pursuant to limitations imposed by the SEC, the Fund will not sell stock
index futures contracts if, immediately thereafter, the aggregate underlying
value of all such stock index futures contracts would exceed the total market
value (or, if higher, a volatility-adjusted value) of the Fund's portfolio of
equity investments (although it is possible that the value of all such futures
contracts could exceed such total market value or such volatility-adjusted
value of portfolio equity investments due to subsequent market movements), and
the Fund will not purchase stock index futures contracts unless it maintains
with its custodian in a segregated account cash or liquid securities in an
amount equal to the market value of all such stock index futures contracts
(less the amount of initial margin deposits in respect thereof).

The Fund has obtained from the Commodity Futures Trading Commission (the
"CFTC") an exclusion from falling within the definition of a "commodity pool
operator" pursuant to the regulations under the Commodity Exchange Act and thus
has not registered as such with the CFTC.

The Fund may purchase and sell stock index futures contracts and options
on such contracts as a hedge against market fluctuations in its portfolio of
equity investments or as a means of quickly and efficiently converting the
Fund's cash into an equity position. For example, the Fund might use stock
index futures contracts to hedge against fluctuations in the general level of
stock prices which might adversely affect either the value of the Fund's
portfolio securities or the price of securities which the Fund intends to
purchase. The Fund's

<PAGE> 24

hedging may include sales of stock index futures contracts as an offset against
the effect of expected declines in stock prices and purchases of stock index
futures contracts as an offset against the effect of expected increases in
stock prices.

In its purchase of stock index futures contracts or options on such
contracts, the Fund may not necessarily have the contemporaneous intention of
converting such positions into specific equity securities by means of the
purchase of such securities for the Fund's portfolio, and in its sale of stock
index futures contracts or options on such contracts, the Fund may not
necessarily have the contemporaneous intention of converting such positions
into non-equity holdings by means of the sale of equity securities then held in
the Fund's portfolio.

Several risk factors are associated with trading stock index futures
contracts and options on such contracts. These risks include: (i) an imperfect
correlation, limiting the effectiveness of any hedge the Fund may attempt in
the futures markets, between the change in market value of the stocks in the
Fund's portfolio and the prices of stock index futures contracts and options on
such contracts in the Fund's portfolio due to the stocks held by the Fund not
fully replicating the stocks underlying the relevant stock index; (ii) possible
illiquidity in the markets for stock index futures contracts and options on
such contracts which could result in the Fund's inability to close out an
existing position resulting in a continuing exposure to adverse price
movements; (iii) the highly leveraged nature of stock index futures contracts
and options on such contracts, resulting in extreme volatility in the value of
such contracts as a percentage of the Fund's assets committed to such positions
in the form of futures margins or option premiums; (iv) the fact that the
decision of whether, when and how to hedge involves the exercise of skill and
judgment, and unless the Fund's investment adviser correctly predicts market
movements it is possible that as to a particular hedge the Fund would have been
better off had a decision to hedge not been made; and (v) the possibility that
a stock index futures option purchased by the Fund may expire worthless, in
which case the Fund would lose the premium paid for it as well as related
transaction costs. In addition, in response to the market turbulence in
October 1987, certain contract markets have adopted rules requiring the
cessation of trading for specified periods in the event of certain substantial
intra-day price changes and overall daily price fluctuation limits (the maximum
amount that the price of a stock index futures contract may vary up or down
from the previous day's settlement price). The Federal Reserve Board has the
authority to oversee the levels of required margin on stock index futures and
options. The Federal Reserve Board or the CFTC, acting pursuant to delegated
authority, could require that minimum margin levels be set at levels which
exceed those historically applied by the contract markets.

<PAGE> 25

The price level of a stock index futures contract should be determined by
the current level of the related stock index, after adjustment to reflect that
a person with a long open futures position will receive interest on the funds
he otherwise would have had to use to acquire the stocks which comprise such
index but, at the same time, will receive no dividends on his futures position
as he would have if he had actually acquired such stocks. In turbulent market
conditions, however, the price level of stock index futures contracts can
become disassociated from the level of the related stock index (as, in fact,
happened during October 1987), materially impairing the usefulness of the stock
index futures markets for hedging stock positions.

Fundamental Policies

The Fund has adopted certain fundamental investment restrictions which may
not be changed without approval of the holders of the lesser of: (i) 67% of
the Fund's shares present or represented at a shareholders meeting at which the
holders of more than 50% of such shares are present or represented, or (ii)
more than 50% of the outstanding shares of the Fund. Under its fundamental
investment restrictions, the Fund may not:

1. Purchase securities on margin (except that the Fund may make margin
payments in connection with transactions in stock index futures contracts and
options on such contracts and in connection with short sales of securities),
participate in a joint-trading account (the bunching of securities transaction
orders with orders of other accounts managed by the adviser not being
considered participation in a joint-trading account for this purpose), act as
an underwriter or distributor of securities other than shares of the Fund, lend
money (except by purchasing publicly distributed debt securities or entering
into repurchase agreements) or purchase or sell commodities or commodity
futures (except that the Fund may purchase or sell stock index futures
contracts and options on such contracts) or real estate (marketable securities
of companies whose business involves the purchase or sale of real estate,
including real estate investment trusts, not being considered real estate for
this purpose).

2. Borrow money or issue senior securities, except for temporary bank
borrowings (not in excess of 5% of the value of its assets) for emergency or
extraordinary purposes, or pledge any of its assets (collateral arrangements
with respect to margin for stock index futures contracts and options on such
contracts and with respect to short sales of securities not being considered a
pledge of assets for this purpose), except to secure such borrowings and only
to an extent not greater than 10% of the value of the Fund's net assets. The
Fund has not, however, employed the practices of borrowing money, issuing
senior securities or pledging any of its assets nor does it intend to employ
such practices in the absence of unforeseen circumstances.

<PAGE> 26

3. Purchase debt securities other than those which are publicly held
(repurchase agreements not being considered debt securities for this purpose).

4. Purchase securities of other investment companies, except on the open
market where no profit or commission results other than the broker's
commission, or as part of a plan of merger, consolidation or reorganization
approved by the shareholders of the Fund.

5. Make investments for the purpose of exercising control or management of
any company.

6. Purchase securities of any issuer (other than the United States or an
instrumentality of the United States) if, as a result of such purchase, the
Fund would hold more than 10% of the voting securities of any class of such
issuer or more than 5% of the Fund's assets would be invested in securities of
such issuer.

7. Concentrate more than 25% of the value of its assets, exclusive of
government securities, in securities issued by companies primarily engaged in
the same industry.

8. Acquire or retain any security issued by a company, an officer or
director of which is an officer or director of the Fund or an officer, director
or other affiliated person of its investment adviser.

Nonfundamental Policies

The Fund has adopted the following nonfundamental policies which may be
changed without shareholder approval. The Fund will not:

1. Purchase any securities which are restricted from sale to the public
without registration under the Securities Act of 1933.

2. Purchase any interest in any oil, gas or any other mineral exploration
or development program or, except for options on stock indices as set forth in
paragraph 7 below, invest in put and call options.

3. Purchase any security if, as a result of such purchase, the Fund would
hold more than 10% of any class of the securities of an issuer.

4. Acquire or retain any security issued by a company if the directors or
officers of the Fund or directors, officers or other affiliated persons of its
investment adviser beneficially owning more than 1/2% of such company's
securities together own more than 5% of its securities.

<PAGE> 27

5. Enter into repurchase agreements, except with State Street Bank and
Trust Company, or invest over 10% of its assets in repurchase agreements with
maturities of more than seven days.

6. Invest over 10% of its net assets in securities of foreign issuers
which are not publicly traded in the United States.

7. Purchase put and call options on stock indices if the total cost
(determined as of the time of purchase) of all such options held by the Fund
would exceed 5% of the value of the Fund's net assets considered each time such
an option is acquired.

8. Enter into stock index futures contracts or options on such contracts
if immediately thereafter the aggregate initial margin and premiums (less the
amount by which any such options are "in-the-money" at the time of purchase)
would exceed 5% of the value of the Fund's total assets after taking into
account any unrealized profits and losses on such instruments.

9. Invest more than 5% of its net assets in warrants (valued at the lower
of cost or market value) or more than 2% of its net assets in warrants not
listed on the New York or American Stock Exchange (warrants acquired by the
Fund in units or attached to securities to be considered without value for
these purposes).

10. (i) Sell any securities short if immediately thereafter the market
value of all securities sold short by the Fund would exceed 30% of the value of
the Fund's net assets, or (ii) sell securities of any single issuer short if
immediately thereafter the market value of the securities of that issuer that
have been sold short by the Fund would exceed 3% of the Fund's net assets or if
the securities sold short would constitute more than 2% of a class of the
issuer's outstanding securities.

General

Any percentage limitations referred to in the above investment
restrictions are determined at the time a purchase or initial investment is
made and any subsequent change in any applicable percentage resulting from
market fluctuations does not require elimination of any security from the
Fund's portfolio.

The Fund's fundamental investment restriction as to concentration
described in paragraph 7 under "Fundamental Policies" above, does not apply to
investments in government securities (e.g., U.S. Treasury securities) since
their issuers are not members of any industry. The Fund includes government
securities in determining the value of all of its assets for

<PAGE> 28

purposes of calculating the percentage of the value of its assets invested in
issuers primarily engaged in an industry.

The Fund may invest, without limitation under the nonfundamental policy
described in paragraph 6 under "Nonfundamental Policies" above, in foreign
securities that are U.S. dollar denominated and are publicly traded in the
United States and in U.S. dollar denominated American Depositary Receipts
(receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer). As of December 31, 1997,
3.5% of the Fund's net assets were invested in securities of foreign issuers.
Dividends and interest on securities of foreign issuers may be subject to
foreign withholding tax, which would reduce the Fund's income without providing
a tax credit for the Fund's shareholders. Other risks of investing in foreign
securities include political, social or economic instability in the country
where the issuer is domiciled, the difficulty of predicting international trade
patterns, exchange rate fluctuations, and, in certain countries, the
possibility of expropriation or diplomatic developments that could affect
investments in those countries. In addition, less information may be publicly
available about a foreign company than about a domestic company, foreign
companies may not be subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies, and
securities of some foreign companies may be less liquid and more volatile than
securities of comparable U.S. companies.

The Fund may purchase securities in underwritten prospectus offerings,
including so-called "hot" initial public offerings, but will generally do so on
the basis of fundamental investment considerations, not supply and demand
considerations.

DIRECTORS AND OFFICERS OF THE FUND

<TABLE>
<S> <C>
Name and Address Position(s) held with Fund
----------------------------- ---------------------------

Henry G. Van der Eb, Jr., CFA Chairman and Director*
100 Corporate North
Bannockburn, Illinois 60015

Robert J. Reynolds, CFA President and Director*
100 Corporate North
Bannockburn, Illinois 60015

Anne E. Morrissy, CFA Executive Vice President
100 Corporate North and Secretary and Director*
Bannockburn, Illinois 60015

Karl M. Becker Director
31 Hearthwood Drive
Hilton Head Island, SC 29928

</TABLE>

<PAGE> 29

<TABLE>
<S> <C>
Tyler R. Cain Director
3 Market Square Court
Lake Forest, Illinois 60045

Charles G. Freund Director
30 Plymouth Court
Lincolnshire, Illinois 60069

Jon P. Hedrich Director
1240 Thornapple Lane
Northbrook, Illinois 60062

Robert E. Kohnen Director
5733 Fairmount Avenue
Downers Grove, Illinois 60516

Jack O. Vance Director
Management Research, Inc.
3592 Venture Drive
Huntington Beach, CA 92649

Lawrence A. Kenyon Senior Vice President and
100 Corporate North Chief Financial Officer
Bannockburn, Illinois 60015

Edith L. Cook Vice President and Treasurer
100 Corporate North
Bannockburn, Illinois 60015

Mary Anne Kinnucan Vice President
100 Corporate North
Bannockburn, Illinois 60015

Heidi M. Stubner Vice President
100 Corporate North
Bannockburn, Illinois 60015
</TABLE>

* Interested director under the Investment Company Act of 1940.

Mr. Van der Eb, Mr. Reynolds and Ms. Morrissy have been employed by Mathers and
Company, Inc. since 1970, 1982, and 1983, respectively. Mr. Kenyon, Ms. Cook
and Ms. Kinnucan have each been employed by Mathers and Company, Inc. for more
than five years. Ms. Stubner has been employed by Mathers and Company, Inc.
since January 1994. For more than four years prior thereto, she was an
administrative assistant with Video Jet Systems International, a manufacturer
of ink-jet equipment.

Mr. Becker is an attorney. He served as Senior Vice President and General
Counsel of Beatrice Company, a food company, from 1988 to 1990. Mr. Cain has
been president and sole

<PAGE> 30

shareholder of TRC Trading, Inc., a private investment company, for more than
the last five years. Mr. Freund is a director of Lincoln National Direct
Placement Fund, Inc. and Lincoln Convertible Securities Fund (registered
closed-end investment companies) and Success Bancshares Inc. For more than
five years prior to his retirement in 1986, Mr. Freund was Vice President,
Secretary and Treasurer of MidCon Corp., a natural gas pipeline company.

Mr. Hedrich is a private investor. Prior to 1992, he was President and
Partner of Steiner Diamond Institutional Services. Mr. Kohnen is Vice
President and Investment Manager of Protection Mutual Insurance Company.
Mr. Vance is Managing Director of Management Research, Inc., a management
consulting firm, and a director of International Rectifier Corporation
(semi-conductors), Semtech, Inc. and FCG Enterprises, Inc. (management
consulting). Prior to 1990, he served as Managing Director of McKinsey
and Company, a management consulting firm.

The Fund does not pay any fees to its directors who are considered
"interested persons" of the Fund or the adviser, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). The aggregate compensation
paid by the Fund during its fiscal year ended December 31, 1997 to the members
of the board who are non-interested directors is set forth below. The adviser
does not provide investment advisory services to any other registered
investment company, and therefore the Fund's directors receive compensation
only from the Fund. The Fund does not maintain any deferred compensation,
pension or retirement plans, and no pension or retirement benefits are accrued
as part of Fund expenses.

<TABLE>
Aggregate
Name of Non-Interested Compensation
Director of the Fund from the Fund
---------------------- -------------
<S> <C>
Karl M. Becker $9,000
Tyler R. Cain $9,000
Charles G. Freund $8,000
</TABLE>

As of February 27, 1998, the directors and officers of the Fund, as a
group, beneficially owned 341,114, or 3.32% of the Fund's outstanding
shares, including the shares held in the Employees' Profit Sharing and Savings
Trust of the adviser.

CODE OF ETHICS

The Fund and the adviser have adopted a Code of Ethics which is designed
to restrict their affiliated personnel from engaging in personal investment
activities in conflict with the interests of the Fund. The Code of Ethics
complies in all material respects with the recommendations set forth in the May
9, 1994 Report of the Advisory Group on Personal Investing of the Investment
Company Institute.

<PAGE> 31

PRINCIPAL HOLDERS OF THE FUND'S SHARES

As of February 27, 1998, no person owned of record or was known by the
Fund to own beneficially more than 5% of the Fund's outstanding shares except
for Edward Pauls, who owned of record 13.82% of the Fund's outstanding shares
as of such date.

INVESTMENT ADVISER

Under an investment advisory agreement with the Fund, Mathers and Company,
Inc., 100 Corporate North, Suite 201, Bannockburn, Illinois, furnishes
continuous investment advisory services and management to the Fund. The
adviser receives an annual fee of 0.75% of the first $200,000,000 of the Fund's
average net asset value, plus 0.625% of such value in excess of $200,000,000
but not exceeding $500,000,000, plus 0.50% of such value in excess of
$500,000,000, payable monthly and determined by valuations made as of the close
of the previous month. The fees paid by the Fund to the adviser for 1997, 1996
and 1995 were $1,123,610, $1,451,059 and $1,906,941, respectively.

Mr. Van der Eb, CFA, an officer and director of the Fund, is President and
a director of the adviser, and Mr. Reynolds, CFA, is Senior Vice President and
Secretary, Ms. Morrissy, CFA, is Vice President, Mr. Kenyon, is Vice President,
Treasurer and Assistant Secretary, and Ms. Cook is Vice President and Assistant
Treasurer of the adviser. Mr. Van der Eb owns a majority of the outstanding
shares of the adviser and is the controlling person of the adviser. Gabelli
Funds, Inc. ("Gabelli") owns a non-controlling interest in the adviser. Such
interest is subject to certain put and call options between Gabelli and the
adviser which may be exercised at future dates.

Mr. Van der Eb has been primarily responsible for the day-to-day
management of the Fund's portfolio for more than the last ten years. Mr.
Reynolds and Ms. Morrissy also play significant roles in such management.

INVESTMENT ADVISORY AGREEMENT

The investment advisory agreement was approved by the shareholders of the
Fund on April 20, 1988. The directors last approved the continuation of the
investment advisory agreement on April 20, 1998, by the votes of directors
described in the following paragraph. Under the agreement, the adviser, at its
own expense and without reimbursement from the Fund, furnishes office space,
office facilities, equipment, personnel (including executive officers but
excluding the services of directors who are not affiliated persons of the
adviser) and clerical and

<PAGE> 32

bookkeeping services for managing the assets of the Fund, and bears all sales
and promotional expenses of the Fund, other than expenses incurred in complying
with laws regulating the issuance or sale of securities. The Fund bears all
other expenses of its operations (principally transfer agent, legal, auditing,
custodian, taxes, shareholder communication expenses, registration and printing
proxy material, shareholder reports, prospectuses sent to existing shareholders
and filed with regulatory authorities, and toll-free telephone expense for use
by existing shareholders), but is entitled to be reimbursed annually by the
adviser for any expenses, other than taxes, in excess of 1-1/2% of the first
$30,000,000 of its average net asset value plus 1% of such value in excess of
$30,000,000 for each year, in each case as determined by evaluations made as of
the close of each month of the year. Brokerage commissions are not treated as
expenses for purposes of this limitation.

The agreement is not assignable and may be terminated by either party,
without penalty, on 60 days' notice. Otherwise, the agreement will continue in
effect until April 30, 1999 (unless sooner terminated), and thereafter from
year to year so long as it is approved annually (a) by vote of a majority of
the directors of the Fund who are not "interested persons" of the Fund or of
the adviser, as defined in the 1940 Act, cast in person at a meeting called for
the purpose of voting on such approval, and (b) either by the Board of
Directors or by the vote of shareholders described in the first paragraph under
"Investment Practices and Restrictions -- Fundamental Policies."

The agreement provides that the services of the adviser to the Fund are
not to be deemed exclusive and that the adviser may furnish similar services to
others so long as the services to the Fund are not impaired thereby. The
adviser currently serves as investment adviser to other accounts, primarily
long-term investment accounts, including pension funds, insurance company
separate accounts, individuals and others. The adviser maintains investment
allocation policies intended to afford each of its accounts fair treatment over
time.

BROKERAGE

In placing purchase and sale orders of portfolio securities for the Fund,
the adviser's policy is to seek the best execution of orders at the most
favorable prices in light of the overall quality of brokerage and research
services provided, as described in this and the following paragraphs. In
selecting brokers to effect portfolio transactions, the determination of what
is expected to result in best execution at the most favorable price involves a
number of largely judgmental considerations. Among these are the adviser's
evaluation of the broker's efficiency and reliability in executing and clearing
transactions, block trading capability (including the broker's

<PAGE> 33

willingness to position securities) and the broker's financial strength and
stability. The most favorable price to the Fund means the best net price
without regard to the mix between purchase or sale price and commission, if
any. Primary market makers are generally used for transactions in the
over-the-counter market except in those instances where the adviser believes
better execution or a more favorable price is obtainable elsewhere, such as
through Instinet or other non-NASDAQ execution services. The Fund's orders for
the purchase and sale of a particular security may be aggregated with
contemporaneous orders for the accounts of other clients of the adviser for
execution as a single transaction with a broker or a dealer.

In allocating brokerage business for the Fund, the adviser also takes into
consideration the research, analytical, statistical and other information and
services provided by the broker, including but not limited to general economic
reports, performance measurement and portfolio analysis reports, computer-based
equity valuation models, reports or analyses of particular companies or
industry groups, market timing and technical information and the availability
of the brokerage firm's analysts for consultation. Consistent with the safe
harbor provided by Section 28(e) of the Securities Exchange Act of 1934, a
higher brokerage commission than might be negotiated or be available from
another broker may be paid where the adviser believes the amount is reasonable
in recognition of the overall quality and value of the brokerage and research
services provided by the broker. While the adviser believes these services
have substantial value, they are considered supplemental to the adviser's own
efforts in the performance of its duties under the investment advisory
agreement.

Arrangements exist with broker-dealers whereby the adviser obtains
computerized stock quotation and news services, performance and ranking
services, portfolio analysis services and other research services in exchange
for the direction of portfolio transactions which generate dealer concessions
or brokerage (agency) commissions for such broker-dealers. From time to time,
the adviser may make other similar arrangements with brokers or dealers which
agree to provide research services in consideration of dealer concessions or
brokerage commissions. Although the adviser has not done so in the past, the
adviser may also allocate brokerage to brokers or dealers who recommend the
purchase of shares of the Fund to their clients. Consistent with the adviser's
fiduciary duties to the Fund, brokerage will be directed to such brokers or
dealers pursuant to any such arrangement only when the adviser believes that
the commissions charged are reasonable in relation to the value and overall
quality of the brokerage and research services provided. During 1997, the
total amount of Fund brokerage transactions and related brokerage commissions
directed in consideration of research services provided to the adviser were
$17,395,623 and $63,904,

<PAGE> 34

respectively, exclusive of dealer concessions from underwritten offerings.

Some research services furnished by brokers and dealers through whom the
adviser effects securities transactions may be used in servicing all of its
accounts and not all such services may be used in connection with the accounts
which paid commissions to the broker providing such services.

During 1997, 1996 and 1995, the Fund paid total brokerage commissions of
$291,860, $532,849 and $376,212, respectively, virtually all of which was paid
to firms providing research as well as brokerage services. The Fund's annual
portfolio turnover rate is set forth in the Prospectus under "Financial
Highlights." Portfolio turnover has tended to be high in certain years over
the past decade. Several factors have contributed to this, including (i) a
volatile market, combined with a willingness of the adviser to respond to
certain market conditions believed by the adviser to warrant holding a security
for a period shorter than the long-term, (ii) the adviser's willingness to
invest in fixed income securities with maturities greater than one year (which,
unlike short-term debt instruments, are included in calculating portfolio
turnover) under the circumstances described in the Prospectus and (iii) the
requirement through December 31, 1997 that more than 70% of the Fund's gains
from the sale of securities be from securities held three months or more (see
"Tax Status").

PURCHASE, REDEMPTION AND PRICING OF SHARES

For a general discussion of how shares of the Fund are purchased and
redeemed and how the Fund values such shares for such purposes, see
"Determination of Net Asset Value," "Purchase of Shares," "Automatic Investment
Program," "How to Redeem Shares" and "Systematic Withdrawal Plan" in the
Prospectus. Such discussions are incorporated herein by reference.

Stock index futures contracts held by the Fund are valued at the
close-of-trading settlement price established each day by the exchange on which
they are traded, and options on stock index futures and options on cash stock
indices are valued at their daily end-of-trading closing prices on the
exchanges on which they are traded.

The Fund does not consider the U.S. Postal Service or express mail
delivery services to be its agents. Therefore, deposit in the mail or with
such services, or receipt at the post office box of DST Systems Inc., the
Fund's transfer agent, of purchase applications (or redemption requests) does
not constitute receipt by DST or the Fund.

<PAGE> 35

The Fund, at its discretion, may permit an investor to purchase shares of
the Fund at net asset value in exchange for securities held by the investor,
provided that the Fund's acquisition of such securities is consistent with its
investment policies. For purposes of determining the number of Fund shares to
be received in exchange for any accepted securities, the Fund will value such
securities in the same manner as is used by the Fund to value its own assets.
For more information on this method of purchase, please contact the Fund at 100
Corporate North, Suite 201, Bannockburn, Illinois 60015, (800) 962-FUND.

Broker-dealers which effect purchases or sales of shares of the Fund on
behalf of their customers may impose a transaction charge on such customers for
performing such services. No such transaction charge is imposed if shares are
purchased directly from the Fund, without the employment of the services of a
broker-dealer.

RETIREMENT PROGRAMS

The Fund makes available a Retirement Plan for Self-Employed Individuals
("Keogh Plan") with both money purchase pension plan and profit sharing plan
options, Simplified Employee Pension Plans ("SEPs") and both regular and Roth
Individual Retirement Accounts ("IRAs"). Contributions to each are invested,
and dividends and distributions are automatically reinvested, in shares of the
Fund. Generally, the maximum contribution allowable each year to an IRA is the
lesser of $2,000 and 100% of compensation includible in gross income for the
year. For a married couple, each spouse may contribute up to $2,000 to his or
her IRA for a year if the combined compensation of both spouses for the year
(as shown on their joint income tax return) is at least $4,000. The maximum
annual contribution which can be made for an employee or self-employed
individual to a Keogh Plan is the lesser of (i) $30,000 and (ii) 25% of an
employee's compensation or a self-employed individual's earned income (net
earnings reduced by Keogh Plan contributions) for the year. However, the
maximum deduction allowable each year for contributions to the profit sharing
plan option of a Keogh Plan is, generally, 15% of an employee's compensation or
a self-employed individual's earned income (net earnings reduced by Keogh Plan
contributions) for the year. Under a SEP, an employer, or self-employed
individual, is permitted to contribute a discretionary amount each year up to
the lesser of $30,000 or 15% of an employee's compensation for the year, or a
self-employed individual's earned income (net earnings reduced by SEP
contributions) for the year, into an individual IRA for each employee or
self-employed individual. The annual compensation of each employee and the
earned income of each self-employed individual which can be taken into account
under the Keogh Plan and a SEP cannot exceed $160,000 for 1998 as increased by
the cost-of-living adjustments for the calendar years after 1998 as

<PAGE> 36

determined by the Internal Revenue Service. A self-employed individual may
contribute to either a Keogh Plan or a SEP and, in either case, may also
contribute to an IRA. The custodial agreements for the Keogh Plan and IRAs
provide that Investors Fiduciary Trust Company, Kansas City, Missouri, will
provide the custodial service unless a different custodian is specified.

Investors Fiduciary Trust Company receives as compensation from the
participant under the Keogh Plan an annual maintenance fee of $12.00 per
participant. Special services not contemplated in the annual maintenance fee
will be rendered by Investors Fiduciary Trust Company for such additional
charges as will reasonably compensate it for the services provided. Fees may
be changed with at least 45 days' prior written notice. The annual maintenance
fee payable to Investors Fiduciary Trust Company with respect to an IRA,
including each individual IRA established under a SEP, is presently $12.00 per
IRA and may be changed at any time. Fees under any of these types of accounts
remaining unpaid may be charged against the accounts. If a custodian other
than Investors Fiduciary Trust Company is specified, fees will be determined by
such custodian.

The Keogh Plan has been approved by the Internal Revenue Service for use
by self-employed persons as a plan qualified under Section 401(a) of the
Internal Revenue Code. The Internal Revenue Service has also approved the money
purchase pension plan and profit sharing plan options of the Keogh Plan as
paired plans with the result that self-employed persons may adopt either or
both of such plans. Copies of the Keogh Plan may be obtained from the Fund at
the address indicated below. The IRA Custodial Agreements have not been
submitted to the IRS for approval because for the regular IRA it incorporates
IRS Form 5305-A and for the Roth IRA it incorporates IRS Form 5305-RA, which
makes such submission unnecessary. The Fund makes available IRS Form 5305-SEP
for employers or self-employed persons who want to establish a SEP.

The employer or individual, as the case may be, should consult his or her
tax adviser or attorney as to the applicability of the Keogh Plan, SEP or a
regular or Roth IRA to his or her particular circumstances. Additionally,
since these retirement programs involve commitments covering future years, the
investment objectives of the Fund, as described in the Prospectus and in this
Statement of Additional Information, should be carefully considered.

For further details, including the right to appoint a successor custodian,
see the Keogh Plan, Custodial Agreement and Application Form and the regular
and Roth IRA Application Form, Custodial Agreement and Disclosure Statement
which are available from the Fund, 100 Corporate North, Suite 201, Bannockburn,
Illinois 60015, (800) 962-FUND.

<PAGE> 37

For a discussion of income tax withholding on certain distributions from
qualified retirement plans or tax-sheltered annuity plans, see "Tax Status"
below.

TAX STATUS

The Fund has qualified, and intends to remain qualified, as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a regulated investment company, the Fund is generally
not subject to U.S. Federal income tax on its income and gains distributed to
shareholders, provided the Fund distributes to its shareholders at least 90% of
its net investment income (i.e., net income and gains exclusive of net capital
gains) each year.

To qualify for favorable tax treatment as a regulated investment company,
the Fund must, among other things, (i) derive in each taxable year at least 90%
of its gross income from dividends, interest, gains from the sale or other
disposition of stock or securities and certain other income (including, but not
limited to, gains from options and futures contracts) derived with respect to
its business of investing in stocks and securities, (ii) derive in each taxable
year ending December 31, 1997 or before less than 30% of its gross income from
gains (without, in most cases, deduction for losses) from the sale or other
disposition of stock, securities, options, and futures contracts, held for
less than three months and (iii) diversify its holdings so that, at the end of
each quarter of its taxable year, (a) at least 50% of the value of its assets
is represented by cash, cash items, U.S. Government securities, and other
securities limited, in respect of any one issuer, to a value not greater than
5% of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer and (b) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than the U.S.
Government).

In the event the Fund does not qualify in any year as a regulated
investment company under Subchapter M of the Code, its income would be taxed to
the Fund whether or not distributed, and distributions to shareholders would
generally be treated as ordinary dividend income.

Under the "mark-to-market" rules of the Code, most stock index options,
stock index futures contracts and options on such contracts will be treated for
Federal income tax purposes as having been sold for their fair market value on
the last business day of the Fund's taxable year. Any gain or loss resulting
from such deemed sales, and from actual sales of such options and futures
contracts, will be treated as 60% long-term capital gain or loss and 40%
short-term capital gain or loss. The mark-to-market rules of the Code may
cause the Fund to have taxable gains

<PAGE> 38

which, due to subsequent declines in value, are never actually realized.

If the Fund engages in certain hedged transactions, the Code may treat the
transaction as a deemed sale of the appreciated property which may accelerate
the gain on the hedged transaction.

In general, distributions of net capital gain, when designated as such by
the Fund, are taxable to shareholders as long-term capital gains, regardless of
how long the shareholders have held their Fund shares. However, net capital
gains distributed to non-corporate shareholders are subject to special rules.
Under the Taxpayer Relief Act of 1997, capital gains of non-corporate taxpayers
are generally taxed as one of three classes of gain (short-term, long-term, or
mid-term) depending on the holding period of the relevant asset (holding
periods are designated as follows: short-term applies to capital assets held
for one year or less, mid-term applies to capital assets held more than one
year and not more than 18 months, and long-term applies to capital assets that
have been held for more than 18 months). Maximum net gain on the sale of
shares held for more than 18 months is subject to the long-term rate of 20%.
Maximum net gain on the sale of shares held for more than 12 months and less
than 18 months is subject to a mid-term rate of 28% (although under a
transitional rule, the tax rate is 20% for net gains on capital assets held for
more than one year that were sold after May 6, 1997 and before July 29, 1997).
Net gain on shares held for 12 months or less is subject to tax at the same
rates as ordinary income. For sales of shares by corporate shareholders, the
provisions of the Taxpayer Relief Act of 1997 described above do not apply, and
net gains and losses will be taxed to corporate shareholders under rules
traditionally applicable to net gains realized by a corporation. For purposes
of characterizing net capital gain distributions to non-corporate shareholders,
capital gains recognized by the Fund after May 7, 1997 will fall into these
three classes based on the Fund's holding period for the relevant asset.
Generally, long-term and mid-term gains of the Fund will flow through to
non-corporate shareholders of the Fund as described below, regardless of how
long the shareholders have held shares of the Fund. For taxable years ending
after May 7, 1997, the Fund will designate each capital gain distribution as
consisting of long-term and mid-term gain based on the gain recognized by the
Fund. If the Fund sells an asset which it has held for one year or less, the
gain will be characterized as short-term gain. However, the Fund can choose to
designate any non-short-term gain as either long-term gain or mid-term gain.
Any gain will be taxed at the mid-term gain rate unless the Fund provides
written notification to the dividend recipients that the gain is long-term
gain. The maximum aggregate amount of long-term gain that the Fund can
allocate as such is the aggregate amount of capital gain that is derived from
sales of capital assets that the Fund has held for more than 18 months (so long
as

<PAGE> 39

the sales are treated as occurring after May 7, 1997). In addition, the Fund
may treat the sale of any capital asset held for more than one year as
long-term gain if the asset was sold after May 6, 1997 and before July 29,
1997. Non-corporate shareholders who are not dealers in securities will be
taxed on the flow-through gains according to the class of gain designated by
the Fund.

If the net asset value of shares is reduced below a shareholder's cost by
a distribution, such distribution would be taxable as described in the
Prospectus even though it might be viewed in economic terms as a return of
capital. For Federal income tax purposes the shareholder's original cost
continues as his tax basis and on redemption his gain or loss is the difference
between such basis and the redemption price.

A non-deductible 4% excise tax will be imposed on the Fund to the extent
the Fund does not distribute during each calendar year (i) 98% of its ordinary
income for such calendar year, (ii) 98% of its capital gain net income for the
one-year period ending October 31 of such calendar year (or the Fund's actual
taxable year ending December 31, if elected) and (iii) certain other amounts
not distributed in previous years. The Fund intends to distribute its income
and gains in a manner so as to avoid the imposition of such 4% excise tax.

In connection with short sales by the Fund, the Fund will be subject to
certain rules which may affect the character and timing of gain or loss
recognized by the Fund for federal income tax purposes. Under these rules a
short sale remains open until the Fund (as the short seller), delivers the
security to the broker (as the lender), and closes the transaction. Any gain
or loss realized by the Fund from closing a short sale will be short-term
capital gain or loss if the Fund acquires substantially identical securities
after the time the short sale is entered into but prior to closing such short
sale. The Fund expects to close out all of its short sales with such
after-acquired securities. Special rules may affect the character of any gains
or losses, in certain circumstances, if the Fund were to hold substantially
identical securities at the time that it enters into a short sale. However,
the Fund does not intend to enter into short sales with respect to securities
that it holds at the time of entering a short sale.

For purposes of applying the distribution requirements described above,
and for purposes of determining the taxable income of shareholders each year,
dividends declared by the Fund in October, November or December of a year,
payable to shareholders as of a record date in any such month, and paid during
the following January, will be treated for federal income tax purposes as paid
by the Fund and received by shareholders as of December 31 of the calendar year
declared.

<PAGE> 40

Income tax withholding at a rate of 20% is applicable to any distribution
from a qualified retirement plan, such as the Keogh Plan, or a tax-sheltered
annuity plan where the distribution is eligible for tax-free rollover treatment
but is not transferred directly to a specified retirement vehicle such as
another qualified plan or an IRA. Also, all qualified plans must provide
participants and certain other distributees with an election to have an
eligible rollover distribution transferred directly to certain specified
retirement vehicles. If a shareholder receives a distribution which is subject
to the 20% withholding requirement and wishes to roll the distribution into
another vehicle such as an IRA within 60 days, the shareholder will have to
contribute to the IRA the amount of the distribution (after withholding) plus
an amount equal to the amount withheld. The amount withheld can be applied to
reduce the shareholder's Federal income tax liability and may be refunded to
the shareholder upon filing a Federal income tax return if it exceeds such tax
liability. If the amount withheld is not rolled over into the IRA, it will be
subject to income taxes and, if the shareholder has not attained age 59 1/2, an
additional 10% penalty tax may apply.

The rules broadly define distributions which qualify for rollover
treatment. Shareholders who expect to receive distributions which may qualify
for rollover treatment and therefore may be subject to 20% withholding should
consult their tax advisers for a complete discussion on the impact of these
rules on such distributions.

The foregoing is only a general summary of the certain provisions of the
Internal Revenue Code and current Treasury regulations applicable to the Fund
and its shareholders. The Internal Revenue Code and such regulations are
subject to change by legislative or administrative action.

The tax consequences to a foreign shareholder of the Fund may be different
from those described herein. Foreign shareholders are advised to consult their
tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

Distributions to shareholders may also be subject to state and local
taxes. Investors are urged to consult their tax advisers regarding the
application of Federal, state and local tax laws.

DESCRIPTION OF SHARES

As a general matter, the Fund is not required to hold annual meetings of
shareholders. Under the Fund's By-Laws, an annual meeting of shareholders is
not required to be held in any year in which the Fund is not required under the
Investment

<PAGE> 41

Company Act of 1940 to submit for shareholder approval (i) the election of
directors, (ii) any investment advisory agreement, (iii) the selection of the
Fund's independent public accountants or (iv) any distribution agreement. Each
director serves until the next meeting of shareholders called for the purpose
of electing directors and until the election and qualification of his
successor. Under certain circumstances, shareholders have the right to call
for a meeting of shareholders to consider the removal of one or more directors.
The Fund will assist in shareholder communication in such matters.

CUSTODIAN AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, acts as Custodian of the Fund. As such, the Bank holds
all securities and cash of the Fund, delivers and receives payment for
securities sold, receives and pays for securities purchased, collects income
from investments and performs other duties, all as directed by officers of the
Fund. The Bank does not exercise any supervisory function over the management
of the Fund, the purchase and sale of securities or the payment of
distributions to shareholders.

Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603,
Certified Public Accountants, serves as the auditors of the Fund. The auditors
are responsible for auditing the financial statements of the Fund. The
independent accountants are selected by the vote of a majority of directors of
the Fund who are not interested persons of the Fund or the adviser. Such
selection is subject to ratification by the Fund's shareholders in such years
as the Fund is required to hold a meeting of shareholders. See "Description of
Shares."

PERFORMANCE INFORMATION

The compound annual rates of return of the Fund for the one, five and ten
year periods ended December 31, 1997 were 3.01%, 1.15% and 5.18%, respectively,
computed in accordance with the rules for standardized computation of
performance as established by the SEC. Such rules for standardized computation
of performance provide for determining compound annual rates of return by
taking the total return of the Fund over the period in question calculated as
described under "Performance Information" in the Prospectus and "annualizing"
such total return -- i.e., computing the annual rate of return which, if earned
in each year of such period, would produce the total return actually earned
over such period.

Inasmuch as the Fund has no sales load on purchases or reinvested
dividends, no deferred sales load or redemption fee

<PAGE> 42

and no 12b-1 fees, no adjustments are made for such items in calculating
performance.

FINANCIAL STATEMENTS

The Fund's audited balance sheet and schedule of investments as of
December 31, 1997, and the related statement of operations for the year then
ended and statements of changes in net assets for each of the two years in the
period ended December 31, 1997, and the auditors' report of Arthur Andersen LLP
dated January 13, 1998 relating to such financial statements, are incorporated
herein by reference to the Fund's 1997 Annual Report to Shareholders. No other
portion of such Annual Report is incorporated by reference herein or is a part
of the registration statement of which this Statement of Additional Information
is a part. A copy of the Annual Report to Shareholders referred to above is
provided herewith to each person who is not a shareholder of the Fund and has
not otherwise received a copy of such Report. Shareholders of the Fund may
obtain a copy of the Report without charge by writing or telephoning the Fund
at the address and telephone number set forth on the cover page of this
Statement of Additional Information.

<PAGE> 43

[Letterhead of Arthur Andersen LLP]

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

We have previously audited, in accordance with generally accepted auditing
standards, the balance sheets and schedules of investments of MATHERS FUND,
INC. as of December 31 for each of the years 1987 through 1997 and the related
statements of operations and changes in net assets for each of the eleven years
in the period ended December 31, 1997 (none of which are presented herein), and
expressed an unqualified opinion on those statements. The information set
forth in the table entitled "Financial Highlights" for each of the eleven years
in the period ended December 31, 1997, as presented in the Prospectus of
Mathers Fund, Inc. dated May 1, 1998, is fairly stated in all material
respects in relation to the financial statements from which it has been derived.

/s/ Arthur Andersen LLP
Chicago, Illinois,
February 24, 1998

<PAGE> 44

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

The following financial statements are included in Part B (by
incorporation by reference):

Report of Independent Public Accountants

Balance Sheet--December 31, 1997

Schedule of Investments--December 31, 1997

Statement of Operations for the Year Ended December 31, 1997

Statements of Changes in Net Assets for the Years Ended
December 31, 1997 and 1996

(b) Exhibits:

1.1 Articles of Incorporation***
1.2 Articles of Amendment, filed July 21, 1967***
1.3 Articles of Amendment, filed July, 1968***
1.4 Articles of Amendment, filed December 26, 1968***
1.5 Articles of Amendment, filed July 22, 1969***
1.6 Change of Principal Office and Change of Address
of Resident Agent***
1.7 Notice of Change of Resident Agent's Address and
Principal Office***
1.8 Articles Supplementary***
1.9 Articles Supplementary***
2.1 Amended and Restated By-Laws of the Registrant***
2.2 Amendment to Amended and Restated By-Laws,
adopted March 4, 1991***
2.3 Amendment to Amended and Restated By-Laws,
adopted November 2, 1992***
2.4 Amendment to Amended and Restated By-Laws,
adopted April 27, 1993***
2.5 Amendment to Amended and Restated By-Laws,
adopted August 9, 1993***
2.6 Amendment to Amended and Restated By-Laws,
adopted April 21, 1995***
2.7 Amendment to Amended and Restated By-Laws,
adopted February 4, 1997****
2.8 Amendment to Amended and Restated By-Laws,
adopted April 14, 1997
2.9 Amendment to Amended and Restated By-Laws,
adopted February 27, 1998
3. Not Applicable
4. Not Applicable
5. Investment Advisory Agreement between the
Registrant and Mathers and Company, Inc.***
6. Not Applicable
7. Not Applicable

C-1

<PAGE> 45

8. Custodian Agreement between the Registrant and
State Street Bank and Trust Company and the Schedule of
Remuneration***
9. Service Agreement between the Registrant and DST,
Inc.***
10. Opinion and Consent of Leibman, Williams,
Bennett, Baird and Minow*
11. Consent of Independent Accountants
12. Not Applicable
13. Not Applicable
14.1 Revised Individual Retirement Account Package**
14.2 Revised Retirement Plan for Self-Employed
Individuals and related documents**
15. Not Applicable
16. Schedule for Computation of Performance Quotations
17. Financial Data Schedule
18. Not Applicable

__________

* Previously filed

** Previously filed in Post-Effective Amendment No. 53 on April 29, 1994 and
hereby incorporated by reference.

*** Previously filed in Post-Effective Amendment No. 55 on April 30, 1996 and
hereby incorporated by reference.

**** Previously filed in Post-Effective Amendment No. 56 on April 30, 1997 and
hereby incorporated by reference.

The consent of Arthur Andersen LLP is filed herewith.

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

None.

Item 26. Number of Holders of Securities

(1) (2)
Title of Class Number of Record
-------------- as of January 31, 1998
----------------------

Capital Stock,
$1 par value 7,257

Item 27. Indemnification
---------------

As authorized by Section 2-418 of the General Corporation Law
of the State of Maryland, directors and officers of the Registrant
are indemnified against

C-2

<PAGE> 46

liability under certain circumstances. Reference is made to
Section 7 of Article VII of the Registrant's By-Laws.

The Registrant has obtained an investment trust errors and
omissions policy, effective May 15, 1996, which (subject to certain
limits and deductibles) insures the Registrant and its officers and
directors against loss arising from certain claims if made against
them for actions taken as such.

Item 28. Business and Other Connections
of Investment Adviser
------------------------------

Mathers and Company, Inc., Registrant's investment adviser,
provides investment advisory services to pension and profit-sharing
funds, charitable foundations, insurance company separate accounts
and others, as well as to Registrant.

Item 29. Principal Underwriters
----------------------

Inapplicable.

Item 30. Location of Accounts and Records
--------------------------------

Such records are located at:

1. Mathers Fund, Inc.
100 Corporate North
Suite 201
Bannockburn, IL 60015

2. State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02101

3. DST Systems, Inc.
210 West 10th Street, 8th Floor
Kansas City, MO 64105

4. Sidley & Austin
One First National Plaza
Chicago, IL 60603

Item 31. Management Services
-------------------

Inapplicable.

C-3

<PAGE> 47

Item 32. Undertakings
------------

Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a copy
of Registrant's latest annual report to shareholders,
upon request and without charge.

C-4

<PAGE> 48
SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Bannockburn, Illinois, on the 2nd day of March,
1998.

MATHERS FUND, INC.

By /s/ Henry G. Van der Eb, Jr.
-------------------------------
Henry G. Van der Eb, Jr.
Chairman

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below on March 2, 1998 by the
following persons in the capacities indicated:

Signature Capacity
---------------------------- ---------------------------

/s/ Henry G. Van der Eb, Jr. Chairman and Director,
---------------------------- principal executive officer
Henry G. Van der Eb, Jr.

/s/ Lawrence A. Kenyon Senior Vice President and
---------------------------- Chief Financial Officer
Lawrence A. Kenyon

*
---------------------------- Director
Karl M. Becker

*
---------------------------- Director
Tyler R. Cain

*
---------------------------- Director
Charles G. Freund

*
---------------------------- Director
Robert J. Reynolds

*By /s/ Henry G. Van der Eb, Jr.
----------------------------
Henry G. Van der Eb, Jr.
Attorney-in-Fact

<PAGE> 49

INDEX TO EXHIBITS

EDGAR
Exhibit Exhibit
Number Description of Document Number
- ------- --------------------------------- -------

2.8 Amendment to Amended and Restated
By-Laws, adopted April 14, 1997

2.9 Amendment to Amended and Restated
By-Laws adopted February 27, 1998

11. Consent of Independent Accountants

16. Schedule for Computation of
Performance Quotations

17. Financial Data Schedule

<PAGE> 1
EXHIBIT 2.8

MATHERS FUND, INC.

AMENDMENT TO AMENDED
AND RESTATED BY-LAWS

FURTHER RESOLVED, that ARTICLE III, Sections 6 and 8, of the Amended and
Restated By-laws of the corporation be, and they hereby are, amended to read in
their entirety as follows:

Section 6. Vice Presidents. The vice president, or, if there be more
than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall have such
other duties and powers as the board may from time to time prescribe or
the president delegate. One vice president shall be designated as the
principal financial and accounting officer of the corporation. He shall
be responsible for the custody and supervision of the corporation's books
of account and subsidiary accounting records.

Section 8. Treasurer and Assistant Treasurers. The Treasurer shall
have such duties and powers as are incident to his office or as the board
of directors may from time to time prescribe. The assistant treasurer, if
any, or if there be more than one, the assistant treasurers in the order
determined by the board of directors, shall, in the absence or disability
of the treasurer, perform the duties and exercise the powers of the
treasurer, and shall have such other duties and powers as the board may
from time to time prescribe or the treasurer delegate.

FURTHER RESOLVED, that ARTICLE III, Section 9 of the Amended and
Restated By-laws of the corporation be, and it hereby is, deleted in its
entirety.

Adopted April 14, 1997

<PAGE> 1
EXHIBIT 2.9

MATHERS FUND, INC.

AMENDMENT TO AMENDED AND RESTATED BY-LAWS

RESOLVED, that the sixth sentence of Article I, Section 7, of
the By-laws of the corporation be, and it hereby is, amended to read as
follows:

"A plurality of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present,
shall be sufficient to elect directors and a majority of the
votes cast at a meeting of stockholders, duly called and at
which a quorum is present, shall be sufficient to take or
authorize any other action which may properly come before the
meeting, unless a greater number is required by the statute or
by the charter."

Adopted February 27, 1998

<PAGE> 1
EXHIBIT 11

[ARTHUR ANDERSEN LLP LETTERHEAD]

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
dated January 13, 1998, and to all references to our Firm included in or made a
part of this Registration Statement on Form N-1A of Mathers Fund, Inc.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Chicago, Illinois
February 24, 1998

<PAGE> 1
EXHIBIT 16

SCHEDULE FOR COMPUTATION
OF PERFORMANCE QUOTATIONS
(Unaudited)

One Year
- --------
1
$1,000 $1,000 (1 + .0301) = $1,030.10

Five Years
- ----------
5
$1,000 $1,000 (1 + .0115) = $1,058.84

Ten Years
- ---------
10
$1,000 $1,000 (1 + .0518) = $1,657.03

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXHIBIT 27
OF N-SAR FILING FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH N-SAR.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 133,605,856
<INVESTMENTS-AT-VALUE> 138,438,774
<RECEIVABLES> 4,929,091
<ASSETS-OTHER> 530
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,368,395
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,964,580
<TOTAL-LIABILITIES> 4,964,580
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,654,313
<SHARES-COMMON-STOCK> 10,594,606
<SHARES-COMMON-PRIOR> 12,929,841
<ACCUMULATED-NII-CURRENT> 201,267
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (34,053,906)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,007,535
<NET-ASSETS> 138,403,815
<DIVIDEND-INCOME> 115,012
<INTEREST-INCOME> 7,493,055
<OTHER-INCOME> 0
<EXPENSES-NET> 1,616,573
<NET-INVESTMENT-INCOME> 5,991,494
<REALIZED-GAINS-CURRENT> 3,088,393
<APPREC-INCREASE-CURRENT> (4,616,313)
<NET-CHANGE-FROM-OPS> 4,463,574
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,033,168
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 752,707
<NUMBER-OF-SHARES-REDEEMED> 3,507,039
<SHARES-REINVESTED> 419,098
<NET-CHANGE-IN-ASSETS> (33,191,849)
<ACCUMULATED-NII-PRIOR> 242,940
<ACCUMULATED-GAINS-PRIOR> (20,317,145)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,123,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,616,573
<AVERAGE-NET-ASSETS> 151,336,894
<PER-SHARE-NAV-BEGIN> 13.27
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> (0.13)
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.06
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>