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SUPPLEMENT DATED JUNE 21, 1999 TO PROSPECTUS DATED APRIL 30, 1999
FOR MATHERS FUND, INC.
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INTRODUCTION
On June 21, 1999, the Board of Directors of the Mathers Fund, Inc. (the
"Fund") unanimously approved, subject to shareholder approval, proposals to
engage affiliates of Gabelli Asset Management, Inc. ("Gabelli"), One Corporate
Center, Rye, New York 10580, as investment adviser and distributor for the Fund
and to reorganize the Fund from a Maryland corporation to a Delaware business
trust named "The Gabelli Mathers Fund" (the "Proposed Reorganization").
The Board's actions follow a letter of understanding (the "Letter")
recently entered into by the Fund's investment adviser, Mathers and Company,
Inc. (the "Current Adviser"), and the Current Adviser's sole shareholder, Henry
G. Van der Eb, Jr. (who currently serves as chief executive officer and
portfolio manager of the Fund), with Gabelli. This Letter calls for, among other
things:
(i) Gabelli Funds, LLC (the "Proposed Adviser"), a subsidiary of
Gabelli, to enter into a new investment advisory agreement
(the "Proposed New Advisory Agreement") with the Fund;
(ii) Mr. Van der Eb to continue to serve as chief executive officer
and portfolio manager and to become an employee of Gabelli,
and the Current Adviser to sell its fixed assets and equipment
to Gabelli; and
(iii) Gabelli & Company, Inc. (the "Distributor"), a subsidiary of
Gabelli, to develop a marketing and distribution strategy to
increase the Fund's assets pursuant to a .25% per year Rule
12b-1 plan of distribution of the Fund (the "Proposed Plan of
Distribution") as well as to enable the Fund's shareholders to
participate in new and enhanced shareholder services provided
by Gabelli and its affiliates.
The Board of Directors of the Fund also approved, subject to
shareholder approval: (i) an increase in the size of the Fund's Board to
thirteen members, with Gabelli recommending eight members and five current
members, including Mr. Van der Eb, remaining on the Board; and (ii) the
selection of Ernst & Young, LLC, which currently serves as independent auditor
for nine funds in the Gabelli fund family, as the Fund's independent auditor.
Proxy materials describing the Proposed New Advisory Agreement,
Proposed Plan of Distribution, Proposed Reorganization, proposed Board
restructuring, and other items, as well as soliciting the necessary shareholder
approvals, will be mailed in advance of the shareholder meeting, which is
expected to be held in September 1999. Such changes, if approved by
shareholders, are expected to become effective soon thereafter.
PROPOSED NEW ADVISORY AGREEMENT
The Proposed New Advisory Agreement provides that the Proposed Adviser
will act as investment adviser to the Fund, supervise and manage the Fund's
investment activities on a discretionary basis and oversee the administration of
the Fund's business and affairs. In this connection, the Proposed Adviser will
be responsible for maintaining certain of the Fund's books and records and
performing other administrative aspects of the Fund's operations to the extent
not performed by the Fund's custodian, transfer agent and dividend disbursing
agent. The Proposed Adviser will be permitted to subcontract, at its own
expense, these administrative responsibilities to persons it believes are
qualified to perform such services. It is expected that the Proposed Adviser
will subcontract certain administration responsibilities to First Data Investor
Services Group, Inc. pursuant to a sub-administration agreement.
As compensation for the services to be provided by the Proposed
Adviser, the Fund will pay the Proposed Adviser a fee in an amount equal on an
annualized basis to 1% of the Fund's daily average net asset value; provided,
however, that the Proposed Adviser will agree in the Proposed New Advisory
Agreement to waive a portion of such fee equal to .25% on an annualized basis of
the Fund's daily net asset value during the period prior to the second
anniversary of the date of the Proposed New Advisory Agreement on net assets of
the Fund of $100 million or less.
The material terms of the Proposed New Advisory Agreement differ in
certain respects from those of the investment advisory agreement between the
Fund and the Current Adviser (the "Current Advisory Agreement"). In
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particular, the investment advisory fee rate of 1% of the Fund's average daily
net assets on an annualized basis is higher than the highest rate (.75% of the
Fund's average monthly net asset value on an annualized basis, without giving
effect to expense reimbursements) to which the Fund is subject under the Current
Advisory Agreement. As noted above, however, during the first two years of the
Proposed New Advisory Agreement, such higher advisory fee rate will apply only
on average daily net assets of the Fund over $100 million. The Fund's net assets
as of May 31, 1999 were approximately $102 million.
Under the Proposed New Advisory Agreement, the Proposed Adviser will
assume certain duties at its expense, including state blue sky filing
responsibilities, which are currently performed at the Fund's expense. Certain
other of the Fund's expenses are expected to be reduced due to Gabelli's
purchasing power for certain services. The Fund's expense ratio is also expected
to be reduced due to the economies-of-scale that are anticipated to develop
should the Fund grow in assets.
Under the Proposed New Advisory Agreement, there will be no expense
reimbursement provision, whereas the Current Advisory Agreement requires the
Current Adviser to reimburse the Fund annually if the Fund's expenses exceed
certain levels. Expense reimbursements for the Fund's fiscal year ended December
31, 1998 reduced the effective advisory fee rate (and thus the Fund's expense
ratio) by approximately .03% of average net assets.
PROPOSED PLAN OF DISTRIBUTION
The Proposed Plan of Distribution will provide that the Fund will pay
the Distributor distribution payments of .25% on an annualized basis of the
average daily net assets of the Fund. The Distributor will use such payments to
finance activities which are primarily intended to result in the sale of shares
of the Fund and also to enable the Fund's existing shareholders to participate
in new and enhanced shareholder services.
PROPOSED REORGANIZATION
In order to accomplish the Proposed Reorganization, The Gabelli Mathers
Fund (the "Trust") has been formed as a Delaware business trust pursuant to an
Agreement and Declaration of Trust (the "Declaration of Trust"). Shares of the
Trust may be divided into separate series, with one initial series to correspond
to the Fund. On the closing date of the Proposed Reorganization, the Fund will
transfer all of its assets and liabilities to the corresponding initial series
of the Trust in exchange for the assumption by such series of the Trust of all
the liabilities of the Fund and the issuance of full and fractional shares of
beneficial interest of that initial corresponding series of the Trust ("Trust
Shares") to the Fund. The Trust Shares issued to the Fund will have an aggregate
net asset value (as determined by using the procedures set forth in the Fund's
Prospectus) equal to the aggregate net asset value of the Fund's capital stock
as of the time as of which such Trust Shares are issued.
Immediately thereafter, the Fund will distribute the Trust Shares
received by it to its shareholders pro rata, in proportion to each shareholder's
respective interest in the Fund (as represented by shares of capital stock of
the Fund) in liquidation of that interest. Following distribution of Trust
Shares to the shareholders of the Fund, and as soon as practicable thereafter,
the Fund will take all actions necessary to effect its dissolution and to have
its corporate existence terminated. Upon completion of the Proposed
Reorganization, and as a result thereof, each shareholder of the Fund will
become the owner of full and fractional Trust Shares equal in number,
denomination and aggregate net asset value to the shareholder's Fund shares
immediately prior to the Proposed Reorganization. All certificates representing
shares of capital stock of the Fund shall automatically be canceled upon the
Proposed Reorganization. Trust Shares will be issued in uncertificated form
except as the Trustees may otherwise determine from time to time.
The Proposed Reorganization itself will have no immediate material
impact on the economic interests of the shareholders of the Fund: the economic
interest of a shareholder in the Fund will be virtually identical to that
shareholder's interest in the Trust at the time the Proposed Reorganization is
effected and the transfer of the assets and liabilities of the Fund to the Trust
will be done in a tax-free exchange.
The Proposed Reorganization is being proposed in order to make the Fund
more compatible with the other mutual fund clients of Gabelli and to confer upon
the Fund the flexibility to offer in the future additional classes of shares
with varying distribution fees through multiple distribution channels.
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