As filed with Securities and Exchange Commission on September 29, 1999
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. 61 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 22
(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 Officers) (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)
Copies to:
Bruce N. Alpert James E. McKee, Esq.
Gabelli Funds, LLC Gabelli Funds, LLC
One Corporate Center One Corporate Center
Rye, New York 10580-1434 Rye, New York 10580-1434
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)
____ on (date) pursuant to paragraph (a) of rule 485
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Registration Statement becomes
effective.
The Registrant hereby amends this Registration Statement as may be
necessary to delay the effective date of Post-Effective Amendment No. 60 to this
Registration Statement filed September 17, 1999 until Post-Effective Amendment
No. 61 to this Registration Statement shall become effective in accordance with
Rule 485(a) under the Securities Act of 1933 or until Post-Effective Amendment
No. 61 to this Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a) of the Securities Act of 1933 or
otherwise, may determine.
Pursuant to Rule 414 under the Securities Act of 1933, The Gabelli
Mathers Fund, a business trust organized under the laws of the State of Delaware
pursuant to an Agreement and Declaration of Trust dated June 17, 1999, hereby
adopts as its own the Registration Statement on Form N-1A (as appropriately
modified) filed pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 (File Nos. 2-23727 and 811-1311) and the Notification of
Registration filed pursuant to the Investment Company Act of 1940 by its
predecessor, Mathers Fund, Inc., a Maryland corporation.
The Gabelli Mathers Fund The Gabelli Mathers Fund
One Corporate Center
Rye, NY 10580
Phone: 800-GABELLI
(800-422-3554)
PROSPECTUS
- --------------
October 1, 1999
- --------------
The Securities and Exchange Commission has not approved or disapproved the
shares described in this prospectus or determined whether this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
===============================================================================
TABLE OF CONTENTS
Page
Investment and Performance Summary...................................... 2-4
Investment and Risk Information......................................... 4-6
Management of the Fund................................................ 6-7
Purchasing, Selling and Exchanging Shares............................. 7
Pricing of Fund Shares................................................ 7-8
Dividends and Distributions........................................... 8
Tax Information....................................................... 8
Financial Highlights.................................................. 9
Additional Information.............................................. 10-11
<PAGE>
INVESTMENT AND PERFORMANCE SUMMARY
Investment Objective
The Gabelli Mathers Fund (the "Fund") seeks to achieve capital appreciation over
the long term in various market conditions without excessive risk of capital
loss. Capital is the amount of money you invest in the Fund and capital
appreciation is an increase in the value of your investment.
Principal Investment Strategies
The Fund pursues its objective by using the following principal strategies:
* investing primarily in common stocks, selected for their appreciation
potential
* engaging, within prescribed limits, in short sales of common stocks
whereby the Fund borrows and sells a security it does not own in order to
profit from the potential decline in the price of that security
* varying its common stock exposure by hedging, primarily with the purchase
or short sale of S&P 500 Index futures contracts
* investing all or a portion of its assets primarily in U.S. Treasury
securities when Gabelli Funds, LLC (the "Adviser") believes the risk of
loss from investing in stocks is high
No minimum or maximum percentage of the Fund's assets is required to be invested
in any type of security or investment strategy.
Principal Investment Risks
The Fund is subject to the risks associated with investing in both stocks and
U.S. Treasury securities. The Fund is also subject to certain additional risks
associated with stock index futures hedging and the higher risk investment
strategy of selling stocks short.
The Fund's share price will fluctuate with changes in the market value of its
portfolio securities. Stocks are subject to market, economic and business risks
that cause their prices to rise and fall. The Fund is also subject to the risks
that the value of its U.S. Treasury securities, stock index futures hedge
position, and stocks sold short will decline. When you sell your Fund shares,
you may receive less than you paid for them.
Who May Want to Invest
The Fund may appeal to you if:
* you seek long-term growth of capital and are skeptical of a fully
invested buy and hold equity investment strategy
* you seek a portfolio that generally may be long and/or short individual
stocks, and/or long U.S. Treasury securities and/or may employ hedging
techniques with respect to its common stock exposure
* you seek a portfolio that is flexibly managed to potentially take
advantage of a decline in the U.S. equity markets
You may not want to invest in the Fund if:
o you seek returns that typically move with the S&P 500 Index, in both up
and down markets o you seek a fully invested equity portfolio
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance
The return information below illustrates how the Fund's performance can vary and
gives some indication of the risks of investing in the Fund by comparing the
Fund's performance with two broad based stock indices. Please keep in mind that
the Fund's past performance does not represent how it will perform in the
future. The return data includes the reinvestment of all income dividends and
capital gains distributions.
BAR CHART (Graphic Omitted)
Calendar Year Total Return
------------- ------------
1989 10.41%
1990 10.43%
1991 9.45%
1992 3.11%
1993 2.13%
1994 (5.89)%
1995 7.01%
1996 (0.07)%
1997 3.01%
1998 (5.21)%
During the period shown in the bar chart, the highest quarterly return was 5.19%
for the quarter ended March 1989, and the lowest quarterly return was (3.21)%
for the quarter ended December 1998. For the six months ended June 30, 1999, the
Fund's total return was 1.62%.
Average Annual Total Returns
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since Inception
8-19-65
One Year Five Years Ten Years
The Gabelli Mathers Fund (5.21)% (0.35)% 3.28% 11.53%
S&P 500 Index* 28.72% 24.09% 19.21% 12.28%
Value Line Composite** (1.94)% 10.58% 9.32% 7.50%
</TABLE>
* The S&P 500 Index is an index of 500 stocks, with each stock weighted
according to its total market value. This means that companies having a
larger stock capitalization will have a larger impact on the index. The
performance of the Index does not reflect the expenses or fees of this
Fund.
** The Value Line Composite is an average comprised of approximately 1,617
stocks, with each stock having an equal weighting regardless of its total
market capitalization. This means that all companies whether they have a
large or small stock capitalization, have an equal impact of the average.
The performance of the average does not reflect the expenses or fees of
this Fund.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Fees (fees paid directly from your investment)
Exchange Fee...................................... None*
* The Fund is a no-load Fund, so you pay no sales charges (loads) to buy or
sell shares. However, you may pay a front-end sales load if you exchange
your shares of the Fund for shares of a fund which charges a sales load at
the time of purchase.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees1...................................................... 1.00%
Distribution (Rule 12b-1) Expenses2................................... 0.25%
Other Expenses3.......................... .......................... 0.30%
-----
Total Annual Operating Expenses ...................................... 1.55%
-----
Fee Waiver4........................................................... (0.20)%
------
Total Annual Operating Expenses (after the fee waiver) ................ 1.35%
=====
1 Effective October 1, 1999, Gabelli Funds, LLC became the investment adviser
to the Fund. The expense information above has been restated to reflect this
change in adviser. Under the terms of the investment advisory agreement dated
October 1, 1999, the Adviser is entitled to receive a fee for providing
advisory and administrative services equal to 1.00% of the Fund's average
daily net assets (before giving effect to the fee waiver referred to in
footnote 4 below).
2 The Fund adopted a Rule 12b-1 Plan on October 1, 1999 to provide distribution
and shareholder services. Pursuant to the Plan, long-term shareholders may
indirectly pay more than the equivalent of the maximum permitted front-end
sales charge.
3 "Other Expenses" is an estimated figure reflecting expenses the Fund expects
to incur when it joins the Gabelli family of funds on October 1, 1999.
4 For the first two years after the change in Adviser, the Adviser will waive a
portion of its advisory fee so that the fee is 0.75% on the first $100
million of the Fund's assets.
Expense Example:
This example is intended to help you compare the cost of investing in shares of
the Fund with the cost of investing in other mutual funds. The example assumes
(1) you invest $10,000 in the Fund for the time periods shown, (2) you redeem
your shares at the end of the period, (3) your investment has a 5% return and
(4) the Fund's operating expenses remain the same and reflect the advisory fee
waiver referred to in footnote 4 above. This example is for comparison only and
your actual costs may be higher or lower.
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
$142 $463 $830 $1,862
INVESTMENT AND RISK INFORMATION
The Fund's investment objective and principal investment strategies described on
page two and in this section are not fundamental policies and may be changed by
a vote of a majority of the Board of Trustees of the Fund at any time without a
vote of shareholders. The Fund is flexibly managed and can use a variety of
investment strategies in the pursuit of its investment objective, with no
minimum or maximum percentage of assets required to be invested in any type of
security or investment strategy.
The Adviser selects stocks using traditional fundamental analysis of both value
and growth data, in conjunction with standard technical analysis. Fundamental
analysis involves the use of various data, including but not limited to,
price/earnings, price/revenues, price/book value, and price/dividend ratios, and
various growth rate calculations for earnings, sales and other data. Technical
analysis includes, but is not limited to, the study of rates of change in stock
price movement, volume trends, moving averages, relative strength, and
overbought/oversold indicators.
The Adviser's stock selection process is not limited by the total market value
of a company's stock, so the Fund may select small, medium or large
capitalization issues. Stocks of companies with a relatively small number of
shares available for trading may be more risky because their share prices tend
to be more volatile, and their shares less liquid, than those of companies with
larger amounts of tradeable shares. In general, companies with small revenue
bases may have more limited management and financial resources and may face a
higher risk of business reversal than larger more established companies. As a
result, stocks of smaller companies may be more volatile than stocks of larger
companies. Additionally, stocks of companies with special situation
characteristics may decline in value if their unique circumstances do not
develop as anticipated. Special situation factors may include, but are not
limited to, potential and/or announced takeover targets, corporate restructuring
candidates, and companies involved in corporate reorganizations.
The Fund may make short sales of equity securities in amounts of up to 30% of
the value of the Fund's net assets as determined at the time of the 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.
The Fund may vary its equity exposure by hedging through the purchase or short
sale of stock index futures contracts. The Fund will not purchase or sell short
stock index futures contracts if immediately thereafter the aggregate initial
margin required to be deposited would exceed 5% of the value of the Fund's total
assets.
The Fund may invest all or any portion of its assets in U.S. Treasury bills,
notes or bonds when the Adviser believes financial market conditions warrant
such action and/or during periods when the Adviser believes that the risk
associated with owning equity securities is high due to various traditional
stock market valuation benchmarks approaching the upper limits of their long
term historical ranges. 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 the first six months of
1999, a majority of the Fund's assets were invested in U.S.
Treasury securities.
The Fund may also engage in other investment practices in order to achieve its
investment objective. These are briefly discussed in the Statement of Additional
Information which may be obtained by calling 800-GABELLI (800-422-3554). The
Fund does not currently utilize the other practices to any significant degree.
While the Fund's objective is to seek capital appreciation over the long term,
the Fund does not necessarily purchase or hold individual securities to qualify
for long-term capital gains treatment. The Adviser may consider a variety of
factors including, but not limited to, financial market conditions, individual
stock and aggregate equity valuation levels, corporate developments, other
investment opportunities, Fund redemptions, tax considerations, including the
Fund's tax loss carryforward (see "Tax Information"), and changed expectations,
in determining whether to sell a security held in the portfolio or to buy to
cover a short position. As a result, turnover in the Fund's portfolio may be
very high, since investments may be held for very short time periods when the
Adviser believes further capital appreciation of those investments is unlikely
or that a loss of capital may occur.
Portfolio turnover may be significantly increased due to the Fund holding a
substantial portion of its assets in U.S. Treasury securities with maturities of
less than one year in conjunction with the purchase and sale of long equity
positions and U.S. Treasury securities with maturities greater than one year.
There are market risks inherent in any investment and there is no assurance that
the objective of the Fund will be realized. Also, there is no assurance that the
Fund's portfolio will not decline in value or that the portfolio's various
investment segments will perform as expected. When you sell your investment, you
may receive more or less money than you originally invested. Investing in the
Fund also involves the following specific risks:
Equity Risk: To the extent that the Fund's portfolio has significant equity
exposure, long and/or short, the Fund is subject to the risks inherent in the
stock market and individual stocks, including but not limited to the following:
* unpredictable price volatility in individual stocks and various stock
indices
* changes in interest rates, inflation and corporate profits, currency
exchange rate volatility, and other economic factors
* individual company and/or industry developments
* national and international political events
Short positions in equity securities are generally considered to be more risky
than long positions since the theoretical potential loss in a short position is
unlimited, while the maximum loss from a long position is equal to its original
purchase price.
The Adviser invests the Fund's assets more conservatively than the managers of
most equity funds when the Adviser believes the risk of owning stocks is high.
If the adviser is incorrect in this judgment, the Fund's total return may
underperform more fully-invested equity funds.
Hedging Risk: The percentage fluctuation in the value of the Fund's hedge
positions in stock index futures contracts may be greater than those of the
underlying index, and positions in such futures are subject to certain other
risks, including but not limited to the following:
o an imperfect correlation between the change in market value of the Fund's
long stock positions relative to its short stock index futures hedge
position, limiting the effectiveness of the hedge
o possible temporary illiquidity in the markets for stock index futures
which may result in continuing exposure to adverse price movements
o the fact that the decision to hedge may prove incorrect and, in that
case, the Fund would have been better off not hedging
Interest Rate Risk: To the extent that the Fund's portfolio is invested in U.S.
Treasury securities, it is subject to certain risks which include a decrease in
principal value of the securities as interest rates rise. Generally, the longer
the maturity of a fixed income security, the greater the gain or loss of
principal value for a given change in interest rates. Additionally, there is the
credit risk of the issuer of the security being unable to make interest or
principal payments when due.
Management Risk: The Adviser's analysis and judgement regarding individual
stocks, the financial markets, the economy, and many other factors may prove
incorrect, resulting in the Fund's investments losing value. Additionally, if
stock prices increase, the Fund may lose the opportunity to benefit on that
portion of its portfolio invested in fixed income securities.
<PAGE>
MANAGEMENT OF THE FUND
The Adviser: Effective October 1, 1999, Gabelli Funds, LLC, with principal
offices located at One Corporate Center, Rye, New York 10580-1434, (800)
422-3554, entered into a set of strategic initiatives with Mathers and Company,
Inc. and now serves as investment adviser to the Fund. The Adviser makes
investment decisions for the Fund and continuously reviews and administers the
Fund's investment program under the supervision of the Fund's Board of Trustees.
The Adviser and its affiliates also manage other open-end and closed-end
investment companies in the Gabelli family of funds. The Adviser is a New York
limited liability company organized in 1999 as successor to Gabelli Funds, Inc.,
a New York corporation organized in 1980. The Adviser is a wholly-owned
subsidiary of Gabelli Asset Management Inc., a publicly traded company listed on
the New York Stock Exchange (Symbol: GBL). The Adviser is entitled to receive a
1.00% annual fee to provide investment advisory and administrative services to
the Fund, except that the Adviser has waived a portion of its advisory fee so
that the fee is 0.75% on the first $100 million of the Fund's assets until
October 1, 2001.
Prior to October 1, 1999, Mathers and Company, Inc., 100 Corporate North, Suite
201, Bannockburn, Illinois 60015, (847) 295-7400, served as investment adviser
to the Fund. Under its investment advisory agreement, Mathers and Company, Inc.
received a fee equal to 0.74% of the Fund's average net assets in 1998, before
giving effect to expense reimbursements. Mathers and Company, Inc. served as
investment adviser to the Fund from its inception in 1965 and as investment
adviser to other clients since 1961. Henry G. Van der Eb, President of Mathers
and Company, Inc. and Chairman and a Director of the Fund, owned all of the
outstanding shares and was the controlling person of Mathers and Company, Inc.
Portfolio Manager: Henry Van der Eb, CFA, of Gabelli Funds, LLC, is responsible
for the day to day management of the Fund and has been the Fund's portfolio
manager for more than the last 20 years. Mr. Van der Eb (54) is President, Chief
Executive Officer, and Trustee of the Fund, has served as President of The
Investment Analysts Society of Chicago for 1979-1980, is a Chartered Financial
Analyst (CFA), a Chartered Investment Counselor (CIC), and a member of the
Association for Investment Management and Research (AIMR). He received an MBA
from Northwestern University Graduate School of Management in 1970.
Year 2000: As the year 2000 approaches, concerns regarding the ability of
software used by the Fund's service providers to distinguish between the date
"2000" and the date "1900" have emerged . Failure to adequately address this
issue could result in major systems or process failures which could disrupt the
Fund's operations. The Adviser is working with the Fund's service providers to
prepare for the year 2000. Based on information currently available, the Adviser
does not expect that the Fund will incur significant operating expenses or be
required to incur material costs to be year 2000 compliant. The Fund cannot
guarantee, however, that all year 2000 issues will be identified and corrected
by January 1, 2000 and any non-compliant computer systems could hurt key Fund
operations, such as shareholder servicing, pricing and trading. In addition, the
year 2000 problem may adversely affect the companies in which the Fund invests,
which could lower the value of such companies' securities and negatively affect
the Fund's performance. For example, these companies may incur substantial costs
to correct the year 2000 problem.
Rule 12b-1 Plan: The Fund has adopted a plan under Rule 12b-1 (the "Plan") which
allows the Fund to pay for the sale and distribution of its shares at an annual
rate of 0.25% of the Fund's average daily net assets. The Fund may make payments
under the Plan for the purpose of financing any activity primarily intended to
result in the sale of the Fund's shares as determined by the Board of Trustees.
Because payments under the Plan are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. See "Distribution Plan"
in the Statement of Additional Information for more details regarding the Plan
and the expenses payable under the Plan. Prior to October 1, 1999, the Fund had
no distribution plan under Rule 12b-1 in place.
PURCHASING, SELLING AND EXCHANGING SHARES
Information about purchasing, selling and exchanging your shares is contained in
a separate document called the Owner's Manual, which has been delivered with
this Prospectus. The Owner's Manual is considered an integral part of this
Prospectus. The Owner's Manual also contains information about the Telephone
Investment Plan, Telephone Redemption Plan, Automatic Investment Plan,
Systematic Withdrawal Plan and Retirement Plans.
PRICING OF FUND SHARES
The net asset value per share is calculated on each day on which the New York
Stock Exchange ("NYSE") is open for trading. The NYSE is open Monday through
Friday, but currently is scheduled to be closed on New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day and on the preceding Friday
or subsequent Monday when a holiday falls on a Saturday or Sunday, respectively.
The net asset value per share is determined as of the close of regular trading
on the NYSE, normally 4:00 p.m., Eastern time. It is computed by dividing the
value of the Fund's net assets (i.e. the value of its securities and other
assets less its liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the total number of its shares outstanding at the
time the determination is made. The Fund uses market quotations in valuing its
portfolio securities. Short-term investments that mature in 60 days or less are
valued at amortized cost, which the Trustees of the Fund believe represents fair
value.
The Fund may from time to time hold securities that are primarily listed on
foreign exchanges. Such securities may trade on days when the Fund does not
price its shares. Therefore, the net asset value of the Fund may change on days
when you are not able to purchase or redeem shares.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested for your account at
net asset value in additional shares of the Fund, unless you instruct the Fund
to either (i) pay all income dividends and capital gains distributions in cash
or (ii) reinvest capital gains distributions and pay income dividends in cash.
You may change your instructions by notifying the Fund in writing at any time
prior to the record date for a particular dividend or distribution. Dividends
from net investment income and distributions of net realized capital gains, if
any, will be paid at least annually. There are no sales or other charges in
connection with the reinvestment of dividends and capital gains distributions.
There is no fixed dividend rate, and there can be no assurance that the Fund
will pay any dividends or realize any capital gains.
TAX INFORMATION
The Fund expects that its distributions will consist primarily of net investment
income and capital gains, which may be taxable at different rates depending on
the length of time the Fund holds its assets. Dividends out of net investment
income and distributions of realized short-term capital gains are taxable to you
as ordinary income. Distributions of net long-term capital gains are taxable to
you at long-term capital gain rates. High portfolio turnover can indicate a high
level of short term capital gains that, when distributed to shareholders, are
taxed as ordinary income rather than at the lower capital gains tax rate.
However, as of the date of this prospectus, the Fund has a large capital loss
carryforward that is used to offset any current or future realized capital
gains. Until this carryforward expires or is offset completely by realized
capital gains, shareholders will not receive distributions of, or pay taxes on,
those capital gains. The Fund's distributions, whether you receive them in cash
or reinvest them in additional shares of the Fund, may be subject to federal,
state or local taxes. An exchange of the Fund's shares for shares of another
Fund will be treated for tax purposes as a sale of the Fund's shares; therefore,
any gain you realize on such a transaction may be taxable. Foreign shareholders
may be subject to special withholding requirements.
This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of your investment
in the Fund.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share, based on the average number
of Fund shares outstanding during the period. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund's shares. The full year information has been audited by Arthur
Andersen LLP, independent accountants, whose report, along with the Fund's
financial statements and related notes, is included in the Fund's annual report,
which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
June 30 Full Year Ended December 31
-------
-----------------------------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
Operating performance:
Net asset value, beginning of year $11.73 $13.06 $13.27 $13.75 $13.55 $15.11
------ ------ ------ ------ ------ ------
Net investment income/(loss) 0.22 0.58 0.53 0.40 0.60 0.56
Net realized and unrealized (0.03) (1.26) (0.13) (0.41) 0.35 (1.45)
------ ------ ------ ------ ---- ------
gain/(loss) on
investments
Total from investment operations 0.19 (0.68) 0.40 (0.01) 0.95 (0.89)
---- ------ ---- ------ ---- ------
Distributions to shareholders:
Net investment income --- (0.65) (0.61) (0.47) (0.72) (0.67)
Net realized gains --- --- --- --- (0.03) ---
Total distributions (0.65) (0.61) (0.47) (0.75) (0.67)
------- ------ ------ ------ ------ ------
---
Net asset value, end of period $11.92 $11.73 $13.06 $13.27 $13.75 $13.55
====== ====== ====== ====== ====== ======
Total return + 1.62% (5.21%) 3.01% (0.07%) 7.01% (5.89%)
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) $100,295 $108,548 $138,404 $171,596 $232,303 $293,285
Ratio of net investment income to 1.87% 4.56% 3.96% 2.96% 4.25% 3.86%
average net assets
Ratio of total expenses to 0.57% 1.16% 1.07% 1.03% 0.98% 0.93%
average net assets
Portfolio turnover rate 261% 67% 50% 38% 58% 211%
</TABLE>
+ Total return assumes the reinvestment of all dividends and capital gains.
Effective October 1, 1999, the Fund entered into a new investment advisory
agreement which revised the advisory fee previously payable to the Adviser,
and certain other expenses of the Fund were changed at that time. See
"Investment and Performance Summary - Fees and Expenses of the Fund" and
"Management of the Fund".
<PAGE>
The Gabelli Mathers Fund
For More Information:
For more information about the Fund, the following documents are available free
upon request:
Owner's Manual
Information about purchasing, selling and exchanging shares of the Fund is
included in a separate document entitled "Owner's Manual." The Owner's Manual is
incorporated by reference into this prospectus. If you have not received it,
please contact the Fund at the number listed below.
Annual/Semi-Annual Reports:
The Fund's semi-annual and audited annual reports to shareholders contain
detailed information on the Fund's investments. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
Statement of Additional Information (SAI):
The SAI provides more detailed information about the Fund, including its
operations and investments policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of these documents and prospectuses of other funds in
the Gabelli family, or request other information and discuss your questions
about the Fund by contacting:
The Gabelli Mathers Fund
One Corporate Center
Rye, NY 10580
Telephone: 800-GABELLI (800-422-3554)
www.gabelli.com
You can review the Fund's reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
* For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 800-SEC-0330.
* Free from the Commission's Website at http://www.sec.gov
(Investment Company Act file no. 811-1311)
The Gabelli Mathers Fund
One Corporate Center
Rye, New York 10580-1434
800-GABELLI
(800-422-3554)
fax: 914-921-5118
e-mail: [email protected]
Board of Trustees
<TABLE>
<CAPTION>
<S> <C>
Mario J. Gabelli, CFA Felix J. Christiana
Chairman and Chief Investment Officer, Former Senior Vice President
Gabelli Asset Management Inc. Dollar Dry Dock Savings Bank
Chairman, The Gabelli Mathers Fund
Anthony J. Colavita Vincent D. Enright
Attorney-at-Law Former Senior Vice President and Chief
Anthony J. Colavita, P.C. Financial Officer, KeySpan Energy Corp.
Charles G. Freund Jon P. Hedrich
Former Vice President, Secretary and Treasurer Former President and Partner
MidCon Corp. Steiner Diamond Institutional Services
Robert E. Kohnen Karl Otto Pohl
Former Vice President and Investment Manager Former President
Protection Mutual Insurance Company Deutsche Bundesbank
Anthony R. Pustorino, CPA Werner J. Roeder, MD
Professor of Accounting, Pace University Practicing Private Physician
Medical Director, Lawrence Hospital
Jack O. Vance Henry G. Van der Eb, CFA
Managing Director President and Chief Executive Officer
Management Research, Inc. The Gabelli Mathers Fund
Anthonie C. van Ekris
Managing Director
BALMAC International
</TABLE>
Officers
Mario J. Gabelli, CFA Henry G. Van der Eb, CFA
Chairman President and Chief Executive Officer
Bruce N. Alpert, CPA Anne E. Morrissy, CFA
Executive Vice President and Treasurer Executive Vice President
James E.McKee Lawrence A. Kenyon, CPA
Secretary Senior Vice President
Edith L. Cook
Vice President
Heidi M. Stubner
Vice President
THE GABELLI FAMILY OF FUNDS
- -------------------------------------------------------------------------
Owner's Manual
- ---------------------------------------------------------------------------
AAA Class - No-Load Class
Gabelli Global Series Funds, Inc.
Gabelli Gold Fund, Inc.
Gabelli International Growth Fund, Inc.
Gabelli ABC Fund
Gabelli Asset Fund
Gabelli Growth Fund
May 1, 1999
The information contained in the Owner's Manual is incorporated by reference
into, and is legally considered part of, the Prospectuses for the Gabelli family
of Funds. The Owner's Manual must be preceded or accompanied by a Gabelli Funds
Prospectus.
<PAGE>
Owner's Manual
Table of Contents
Purchasing Shares
---------------------------- --------------------------------------
3 Instructions for Opening or Adding to an Account
4 Telephone Investment Plan
4 Automatic Investment Plan
4 Retirement Plans
4 Minimum Investments
5 Dividends and Distributions
Selling Shares
---------------------------- -------------------------------------
5 Instructions for Selling Shares
5 By Bank Wire or Check via Telephone
5 By Bank Wire or Check via Mail
6 General Policies on Selling Shares
6 Signature Guarantees
6 Verifying Telephone Redemptions
6 Redemptions Within 15 Days of Investment
6 Refusal of Redemption Request
6 Closing of Small Accounts
6 Undeliverable Distribution Checks
Exchanging Shares
---------------------------------------------------------------------------
7 Instructions for Exchanging Shares
Pricing of Fund Shares
------ ---------------------------------------------------------------------
7 How NAV is Calculated
<PAGE>
PURCHASING SHARES
Instructions for Opening or Adding to an Account
Purchases through Brokers/Dealers:
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. Your should state
specifically which class of shares you are buying. For all other purchases
directly with the Fund, follow the instructions below.
Purchases directly from the Fund:
All investments made by regular mail or personal delivery, whether initial or
subsequent, should be sent to:
By Regular Mail By Overnight Delivery
The Gabelli Funds The Gabelli Funds
PO Box 8308 c/o BFDS Building, 6th Floor
Boston, MA 02266-8308 Two Heritage Drive
Quincy, MA 02171
For Initial Investment:
1. Carefully read and complete the application.
2. Make check, bank draft or money order payable to "[name of Fund]."
3. Mail or deliver application and payment to the address above.
For Subsequent Investments:
1. Make check, bank draft or money order payable to "[name of Fund]."
2. Provide the exact name and number of your account.
3. Mail or deliver payment to the address above.
By Wire Transfer
For Initial Investment:
Call 1-800-GABELLI (1-800-422-3554) to obtain a new account number. Promptly
mail the completed application to the
address shown above for regular mail, and
For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:
State Street Bank and Trust Company
ABA #011-0000-28 REF DDA# 9904-6187
Attn: Shareholder Services
Re: [Fund Name]
A/C#___________________________
Your name ______________________
225 Franklin Street, Boston, MA 02110
Note: Your bank may charge a wire transfer fee.
Call 1-800-GABELLI
or your investment representative.
<PAGE>
Purchasing Shares (continued)
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time upon
60 days notice to shareholders.
<TABLE>
<CAPTION>
<S> <C>
Telephone Investment Plan Automatic Investment Plan
You may purchase additional shares of the Funds by You can make automatic monthly investments in the Funds.
telephone as long as your bank is a member of the Details about this plan can be obtained from the Distributor on a
Automated Clearing House (ACH) system. You must also separate application by calling 1-800-GABELLI (800-422-3554).
have a completed, approved Investment Plan
application on file with the Fund's Transfer Agent.
There is a minimum of $100 for each telephone
investment. To initiate an ACH purchase, please call
1-800-GABELLI (1-800-422-3554) or 1-800-872-5365.
</TABLE>
Retirement Plans
You can invest in various types of retirement plans through the Fund. Details
about these plans can be obtained from the Distributor on a separate application
by calling 1-800-GABELLI (800-422-3554).
Minimum Investments
You may purchase Funds through the Distributor or participating
organizations, which may charge additional fees and may require higher or
lower minimum investments or impose other limitations on buying and selling
shares.
Minimum
Initial Minimum
Account type Investment Subsequent
................................ ..................... ......................
Regular (non-retirement) $ 1,000 $ 0
Retirement (IRA)
Traditional IRA $ 1,000 $ 0
Roth IRA $ 1,000 $ 0
Spousal IRA $ 250 $ 0
Education IRA $ 250 $ 0
................................ ..................... .....................
Automatic Investment Plan $ 0 $ 100
................................ ..................... .....................
Telephone Investment Plan $ 100 $ 100
................................ ..................... .....................
All purchases must be in U.S. dollars. A fee will be charged for any
checks that do not clear. Third-party checks are not accepted. Your
purchase of shares will be effective on the same business day if the
Fund's transfer agent receives your order by 4:00 p.m. (12 noon for a
money market fund), and receives Federal funds by 4:00 p.m., eastern time.
Otherwise, your purchase will be effective on the next business day. (See
"Pricing of Fund Shares.") Shares are held on account for you unless you
specify in writing that you would like to receive a stock certificate
(certificates are not available for money market funds). We can only issue
a certificate for whole shares.
The Distributor may reject a purchase order if it considers it in the best
interest of the Fund and its shareholders. A Fund may waive its minimum
purchase requirement.
Dividends and Distributions
All dividends and distributions will be automatically reinvested unless you
request otherwise.
SELLING SHARES
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares.
- -------------------------------------------------------------------------------
Withdrawing Money from Your Investment
- ------------------------------------------------------------------------
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. See section on "General Policies on Selling
Shares" below.
Systematic Withdrawal Plan
You can receive automatic payments from your account on a monthly, quarterly
or annual basis. You can obtain details from the Distributor.
- -----------------------------------------------------------------------------
Instructions for Selling Shares
The Fund accepts telephone requests for redemptions of unissued shares.
By Bank Wire or Check via Telephone
1. Call 1-800-GABELLI (1-800-422-3554) with your account number, the amount of
the redemption and instructions as to how you wish to receive your funds.
2. If you are unable to reach the Fund by telephone, you may telecopy your
redemption request to the Fund at 914-921-____.
NOTE: If you call by 4:00 p.m., eastern time, your payment will normally be
wired to your bank on the following business day. (For Money Market Funds: If
you call before 12:00 noon, eastern time, your payment will be wired to your
bank on that day.) If you call after that time, your payment will be wired to
your bank on the next business day. If you request your wire redemption by
telephone, it must be at least $1,000. Your bank may charge a fee for incoming
wires.
By Bank Wire or Check via Mail
Submit a redemption request to the Fund. Redemption requests may be made by
letter to the Transfer Agent. You must specify the name of the Fund, the dollar
amount or number of shares you wish to redeem and the account number. You must
sign the letter in exactly the same way the account is registered, and if there
is more than one owner of shares, all must sign. A signature guarantee is
required for most requests.
Selling Shares (continued)
General Policies on Selling Shares
Signature Guarantees
Signature guarantees are required on redemption requests for the following:
* The check is not being mailed to the address on your account
* The check is not being made payable to the owner of the account
* The redemption proceeds are being transferred to another person's Fund
account.
A signature guarantee can be obtained from most banks and securities dealers.
Notarized signatures are not considered a signature guarantee.
Verifying Telephone Redemptions
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. If appropriate
precautions have not been taken, the Fund may be liable for losses due to
unauthorized transactions.
Redemptions Within 15 Days of Investment
When you have made an investment by check or through the automatic investment
plan, your redemption proceeds will not be mailed until the Transfer Agent is
satisfied that the check has cleared (which may require up to 15 days). You can
avoid this delay by purchasing shares with a certified check or federal funds
wire.
Redemption In Kind
The Fund reserves the right to make a redemption in kind - payment in portfolio
securities rather than cash - for certain large redemption amounts that could
hurt fund operations.
Refusal of Redemption Request
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
Closing of Small Accounts
If your account (other than an IRA) falls below $500, the Fund may ask you to
increase your balance. If it is still below $500 after 30 days, the Fund may
close your account and send you the proceeds at the current NAV.
Undeliverable Distribution Checks
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the Fund at
the then current net asset value.
Call 1-800-GABELLI or
your investment representative.
Questions? Call 1-800-GABELLI or your investment
representative.
<PAGE>
EXCHANGING SHARES
You can exchange your shares in one Fund for shares of the same class of another
Fund managed by Gabelli Funds, LLC, or its affiliates, usually without paying
additional sales charges (see "Notes" below).
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable transactions.
Instructions for Exchanging Shares
- ------------------------------------------------------------------------------
Exchanges may be made by sending a written request to The Gabelli Funds,
PO Box 8308, Boston, MA 02266-8308 or by calling 1-800-GABELLI
(1-800-422-3554).
Please provide the following information:
* Your name and telephone number
* The exact name on your account and account number
* Taxpayer identification number (usually your Social Security number)
* Dollar value or number of shares to be exchanged o The names of the
Funds from/into which the exchange is to be made
See "Selling Shares" for important information about telephone
transactions.
Notes on exchanges
When exchanging from a Fund that
has no sales charge or a lower
sales charge to a Fund with a
higher sales charge, you will pay
the difference.
The registration
and tax identification numbers of
the two accounts must be identical.
This exchange privilege may be
changed or eliminated at any time
upon a 60-day notice to
shareholders.
Be sure to read the
prospectus carefully of any Fund
into which you wish to exchange
shares.
PRICING OF FUND SHARES
How NAV is Calculated
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
Total Assets - Liabilities
Number of Shares
Outstanding
You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers, or by calling 1-800-GABELLI (800-422-3554).
A Fund's net asset value, or NAV, is determined and its shares are priced
at the close of regular trading on the New York Stock Exchange, normally
at 4:00 p.m., eastern time, on days the New York Stock Exchange is open.
Your order for purchase, sale or exchange of shares is priced at the next
NAV calculated after your order is received by the Fund. This is what is
known as the offering price.
Fund securities are valued as of the close of trading on the primary
exchange on which they trade. Fund securities are generally valued at
current market prices. If market quotations are not available, prices
will be based on the average of the latest bid and asked quotations for
such securities prior to the valuation time, or the latest bid price if
asked prices are not available. Debt securities with remaining maturities
of 60 days or less will be valued at amortized cost, which the Board of
Directors believes represents fair value.
Some Fund securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when a Fund does not compute its NAV. This
could cause the value of a Fund's portfolio investments to be affected on
days when you cannot buy or sell shares.
Questions?
Call 800-GABELLI
or your investment representative.
THE GABELLI MATHERS FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
October 1, 1999
This Statement of Additional Information (the "SAI"), which is not a prospectus,
describes the Gabelli Mathers Fund. The SAI should be read in conjunction with
the Fund's Prospectus dated October 1, 1999. For a free copy of the Prospectus,
please contact the Fund at the address, telephone number or Internet Web site
printed below. The Fund's financial statements for its fiscal year ended
December 31, 1998, included in its 1998 Annual Report to Shareholders, are
incorporated by reference into this statement.
One Corporate Center
Rye, New York 10580-1434
Telephone 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
TABLE OF CONTENTS
General Information 2
Investment Strategies and Risks 2
Investment Restrictions 7
Trustees and Officers 10
Control Persons and Principal Shareholders 13
Investment Advisory and Other Services 14
Distribution Plan 17
Portfolio Transactions and Brokerage 18
Retirement Programs 20
Purchase and Redemption of Fund Shares 21
Computation of Net Asset Value 22
Dividends, Distributions and Taxes 23
Investment Performance Information 25
Description of the Fund's Shares 26
Financial Statements 26
<PAGE>
GENERAL INFORMATIONThe Gabelli Mathers Fund (the "Fund") was formed as a
Delaware business trust under the laws of the state of Delaware on June 17, 1999
and commenced operations on October 1, 1999 as the successor to Mathers Fund,
Inc., a Maryland corporation incorporated on March 31, 1965 that commenced
operations on August 19, 1965. Any reference herein to the Fund, including any
financial information and performance data relating to the period prior to
October 1, 1999, reflects the Fund as constituted prior to the commencement of
operations as a trust.
The Fund is an open-end, diversified management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). An
investment company combines the investments of its shareholders and purchases
various securities. Through ownership of shares in the investment company,
shareholders participate in the investment performance of such securities. As an
open-end investment company, the Fund has an obligation to redeem the shares of
any shareholder by paying such shareholder the net asset value next computed
after receipt of a request in proper form for a redemption of such shares.
INVESTMENT STRATEGIES AND RISKS
The Fund's investment objective, how the Fund seeks to achieve its investment
objective and the principal investment strategies by which the Fund will pursue
its objective are generally set forth in the Prospectus. This section describes
in more detail certain securities in which the Fund may invest and certain
investment practices and restrictions and is intended to augment the description
found in the Prospectus.
Fixed-Income Securities
As discussed in 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: * U.S. Treasury bills, notes or bonds; * 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; * 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 * repurchase agreements with respect to
the foregoing.
Repurchase Agreements
The Fund will not invest over 10% of its assets in repurchase agreements with
maturities of over seven days. Underlying securities subject to a repurchase
agreement are held in a segregated account in which the custodian holds assets
on behalf of the Fund and others. If the counterparty 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.
Short Sales of Securities
As discussed in the Prospectus, the Fund may, subject to the limitation
described in paragraph 10 under "Non-fundamental 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 purchases 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 Fund sold the security 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 Fund entered into the short sale. Conversely, if the price of
the security is greater at the time of purchase than at the time of the short
sale, the 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 Fund's broker retains the proceeds of the short sale for the purpose of
meeting collateral requirements until such time as the Fund closes out the short
position. In general, the Fund must also 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 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 sentences.
The Fund 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 Fund's
Investment Adviser, Gabelli Funds, LLC (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) the lender of a security borrowed
and sold short may call the security back, possibly causing a premature
close-out of the short position; and (vi) the amount of any gain will be
decreased, and the amount of any loss increased, by the amount of dividends or
interest the Fund may be required to pay in connection with a short sale.
Corporate Reorganizations
In general, securities of companies engaged in reorganization transactions sell
at a premium to their historic market price immediately prior to the
announcement of the tender offer or reorganization proposal. However, the
increased market price of such securities may also discount what the stated or
appraised value of the security would be if the contemplated transaction were
approved or consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of the
prospective portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial resources and
business motivation of the offeror as well as the dynamic of the business
climate when the offer or proposal is in progress.
Since such investments are ordinarily short term in nature, they will tend to
increase the Fund's portfolio turnover ratio thereby increasing its brokerage
and other transaction expenses. The Adviser intends to select investments of the
type described which, in its view, have a reasonable prospect of capital
appreciation which is significant in relation to both the risk involved and the
potential of available alternate investments.
Stock Index Options
As discussed in the Prospectus, the Fund may, subject to the limitation
described in paragraph 7 under "Non-fundamental 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.
Stock Index Futures Contracts and Options on Such Contracts
As discussed in the Prospectus, the Fund may, subject to the limitation
described in paragraph 8 under "Non-fundamental 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 has the right to receive, or has
the obligation to pay, cash amounts on a daily basis during the period such
position is open 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 has the obligation 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 clearinghouses, 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) has the right to
receive payments to the extent that the market price level of such futures
contract increases above the level at which such person acquired the 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.
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 securities (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 securities 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 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
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 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 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 contracts and options on such contracts. 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.
The price level of a stock index futures contract should correlate with 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 such
person otherwise would have had to use to acquire the stocks which comprise such
index but, at the same time, will receive no dividends on the futures position
as would have been the case if such person 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.
INVESTMENT RESTRICTIONS
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.
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 trustee of the Fund or an officer, director or other
affiliated person of its investment adviser.
Non-fundamental Policies
The Fund has adopted the following non-fundamental policies which may be changed
by the Fund's Board of Trustees 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 trustees 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.
5. Enter into repurchase agreements, except with authorized banks or dealers
meeting criteria established by the Trustees, 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 or short sale is made
and any subsequent change in any applicable percentage resulting from market
fluctuations does not require elimination of any security from or short position
in 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 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 non-fundamental policy
described in paragraph 6 under "Non-fundamental 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, 1998, 1.2%
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 valuation and/or special situation investment considerations, and
not, typically, solely on the basis of supply and demand considerations.
Generally, the Fund will participate only when the Adviser believes the
securities offered are consistent with the Fund's non-prospectus offering
security selections and investment risk profile.
TRUSTEES AND OFFICERS
The Board of Trustees of the Fund consists of thirteen individuals, ten of whom
are not "interested persons" of the Fund as defined in the Investment Company
Act. Under Delaware law, the Fund's Board of Trustees is responsible for
establishing the Fund's policies and for overseeing the management of the Fund.
The Board also elects the Fund's officers who conduct the daily business of the
Fund. The Trustees and principal officers of the Fund, their ages and their
principal occupations for the past five years are listed below. Unless otherwise
specified, the address of each person is One Corporate Center, Rye, New York
10580-1434. Trustees deemed to be "interested persons" of the Fund for purposes
of the 1940 Act are indicated by an asterisk (*).
Name, Age
Position(s) with Fund
Principal Occupations During Past Five Years
Mario J. Gabelli, CFA, 57 *
Chairman of te Board, Chief Executive Officer and Trustee.
Chairman and Chief Investment Officer of Gabelli Asset Management Inc. (since
February 1999) and Gabelli Funds Inc. Director or Trustee and/or Officer of
thirteen other Gabelli funds. Chairman of the Board and Chief of Lynch
Corporation (diversified manufacturing and communications services company) and
Director of East/West Communications Inc.
Felix J. Christiana, 73
Trustee
Formerly Senior Vice President of Dry Dock Savings Bank; Director or Trustee of
nine other Gabelli funds.
Anthony J. Colavita, 64
Trustee
President and Attorney at Law in the law firm of Anthony J. Colavita, P.C. since
1961; Director or Trustee of thirteen other Gabelli funds.
Vincent D. Enright, 55
Trustee
Former Senior Vice President and Chief Financial Officer of KeySpan Energy
Corp.; Director or Trustee of three other Gabelli funds.
Charles G. Freund, 75
Trustee
Director of Lincoln National Direct Placement Fund, Inc. and Lincoln
Convertible Securities Fund (registered closed-end investment companies)
and Success Bancshares Inc. Prior to his retirement in 1986, Mr. Freund was
Vice President, Secretary and Treasurer of MidCon Corp., a natural gas
pipeline company.
Jon P. Hedrich, 58
Trustee
Private investor. Prior to 1992, he was President and Partner of Steiner
Diamond Institutional Services.
Robert E. Kohnen, 65
Trustee
President of Bask Group LLC (investment management firm); prior to 1999, Vice
President and Investment Manager of Protection Mutual Insurance Company.
Karl Otto Pohl, 69 *+
Trustee
Member of the Shareholder Committee of Sal Oppenheim Jr. & Cie (private
investment bank). Director of Gabelli Asset Management Inc. (investment
management), Zurich Allied (insurance), and TrizecHahn Corp. Former
President of the Deutsche Bundesbank and Chairman of its Central Bank Council
from 1980 through 1991. Director or Trustee of all other mutual funds
advised by Gabelli Funds, LLC and its affiliates.
Anthony R. Pustorino, CPA, 73
Trustee
Certified Public Accountant; Professor of Accounting, Pace University; Director
or Trustee of nine other Gabelli funds.
Werner J. Roeder, M.D., 58
Trustee
Medical Director, Lawrence Hospital and practicing private physician; Director
or Trustee of seven other Gabelli funds.
Henry G. Van der Eb, CFA, 54 *
Trustee ++
President and Chief Executive Officer
Prior to October 1999, Chairman and Chief Executive Officer of Mathers Fund,
Inc. and President, Mathers and Company, Inc.
Anthonie C. van Ekris, 65
Trustee
Managing Director of BALMAC International. Director or Trustee of ten other
Gabelli funds.
Jack O. Vance,
74
Trustee
Managing Director of Management Research, Inc., a management consulting firm.
Director of International Rectifier Corporation (semi-conductors), Semtech Inc.
and FCG Enterprises, Inc. (management consulting)
Bruce N. Alpert, 47
Executive Vice President and Treasurer
Executive Vice President and Chief Operating Officer of the Adviser. President
and Director of Gabelli Advisers, Inc. and an officer of all funds advised by
Gabelli Funds, LLC and its affiliates.
James E. McKee, 36
Secretary
Vice President and General Counsel of the Adviser.
Vice President and General Counsel of GAMCO Investors, Inc. since 1993.
Secretary of all funds advised by Gabelli Funds, LLC and Gabelli Advisers, Inc.
since August 1995. Branch Chief with the U.S. Securities and Exchange
Commission in New York, 1992 through 1993.
Anne E. Morrissy, CFA, 38
Executive Vice President ++
Prior to October 1999, Executive Vice President, Secretary and Director,
Mathers Fund Inc. and Vice President, Mathers and Company, Inc.
Lawrence A. Kenyon, CPA, 34
Senior Vice President ++
Prior to October 1999, Senior Vice President and Chief Financial Officer,
Mathers Fund Inc. and Vice President and Treasurer, Mathers and Company, Inc.
Edith L. Cook, 58
Vice President ++
Prior to October 1999, Vice President and Treasurer, Mathers Fund Inc. and
Vice President, Mathers and Company, Inc.
Heidi M. Stubner, 31
Vice President ++
Prior to October 1999, Vice President, Mathers Fund Inc.
+ Mr. Pohl is a director of the parent company of the Adviser.
++ Address is 100 Corporate North, Suite 201, Bannockburn, IL 60015.
As of September 10, 1999, the Trustees and officers of the Fund, as a group,
beneficially owned 912,571.785 or 10.45% of the Fund's outstanding shares.
The Board of Trustees of the Fund has an audit committee consisting of Messrs.
Christiana and Pustorino. These Trustees are not "interested persons" of the
Fund (as defined in the 1940 Act). The audit committee is responsible for
recommending the selection of the Fund's independent accountants and reviewing
all audit as well as non-audit accounting services performed for the Fund. The
Fund also has a nominating committee consisting of Messrs. Colavita and Roeder.
These persons are not "interested persons" of the Fund (as defined in the 1940
Act). The nominating committee is responsible for recommending qualified
candidates to the Board of Trustees in the event that a position is vacated or
created.
No affiliated person of the Adviser receives any compensation from the Fund for
serving as an officer or Trustee of the Fund. The Fund pays each of its Trustees
who is not an affiliated person of the Adviser, $1,000 per meeting attended in
person and reimburses each Trustee for related travel and out-of-pocket
expenses. Additionally, Messrs. Freund, Hedrich, Kohnen and Vance receive an
annual retainer of $5,000. The Fund also pays each Trustee serving as a member
of the Audit or Nominating Committees a fee of $500 per committee meeting, if
held on a day other than a regularly scheduled board meeting. 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. For the fiscal year
ended December 31, 1998, the fees paid by the Fund to its Trustees who are not
"interested persons" of the Fund totaled $51,000 as set forth in the table
below:
Name of Non-Interested Aggregate Compensation
Trustees of the Fund from the Fund
Karl M. Becker $9,000
Tyler R. Cain $9,000
Charles G. Freund $9,000
Jon P. Hedrich $8,000
Robert E. Kohnen $8,000
Jack O. Vance $8,000
For the fiscal year ended December 31, 1998, none of the Trustees listed in the
table above served as a Director or Trustee of any other mutual fund in the
Gabelli Fund complex.
The following table sets forth certain information regarding the aggregate
compensation paid to certain persons who became Trustees of the Fund on October
1, 1999 from mutual funds in the Gabelli fund complex for the fiscal year ended
December 31, 1998 (the number in parentheses represents the number of such
mutual funds):
Name of Trustees Aggregate Compensation
from Gabelli Fund Complex
Felix J. Christiana $88,500 (9)
Anthony J. Colavita $82,000 (13)
Vincent D. Enright $18,000 (3)
Mario J. Gabelli $ 0 (13)
Karl Otto Pohl $102,466 (15)
Anthony R. Pustorino $100,500 (9)
Werner J. Roeder $25,500 (7)
Anthonie C. van Ekris $57,500 (10)
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of September 10, 1999, 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 17.1% of the Fund's outstanding shares as of such
date.
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
An investment advisory agreement (the "Current Agreement") between the Fund and
Gabelli Funds, LLC was approved by the shareholders of the Fund on October 1,
1999. The Adviser is a New York limited liability company which also serves as
adviser to fourteen other open-end investment companies and four closed-end
investment companies in the Gabelli fund complex. The principal office of the
Adviser is located at One Corporate Center, Rye, New York, 10580-1434. The
Adviser is a registered investment adviser under the Investment Advisers Act of
1940, as amended. Mr. Mario J. Gabelli may be deemed a "controlling person" of
the Adviser on the basis of his controlling interest of Gabelli Asset Management
Inc. ("Gabelli"), the parent company of the Adviser.
As compensation for its services and related expenses, the Adviser receives a
fee computed daily and payable monthly in an amount equal on an annualized basis
to 1.00% of the Fund's daily average net assets. The Adviser will waive a
portion of such fee equal to 0.25% of the Fund's daily net asset value during
the period prior to October 1, 2001 on the first $100 million of net assets of
the Fund.
Prior to October 1, 1999, under an investment advisory agreement between the
Fund and Mathers and Company, Inc., 100 Corporate North, Suite 201, Bannockburn,
Illinois (the "Prior Agreement"), Mathers and Company furnished continuous
investment advisory services and management to the Fund. Mathers and Company
received 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 Mathers and Company for 1998, 1997
and 1996 were $865,916, $1,123,610 and $1,451,059, respectively. Pursuant to an
expense reimbursement provision contained in the Prior Agreement, the fees paid
by the Fund to Mathers and Company for 1998 were reduced by $41,301. Absent such
expense reimbursement provision, the fees paid by the Fund to Mathers and
Company for 1998 would have been $907,217.
Mr. Henry G. Van der Eb, CFA, President and Chief Executive Officer, Trustee and
portfolio manager of the Fund, was President and a director of Mathers and
Company, Inc. Mr. Van der Eb owned all of the outstanding shares, and was the
controlling person, of Mathers and Company. Mr. Van der Eb has been primarily
responsible for the day-to-day management of the Fund's portfolio for more than
the last twenty years.
The Current Agreement provides that the 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 Adviser is 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 Adviser is permitted to
subcontract at its own expense these administrative responsibilities to persons
it believes are qualified to perform such services and expects to subcontract
certain of these administrative responsibilities to First Data Investor Services
Group, Inc. with respect to the Fund pursuant to a Sub-Administration Agreement,
as described below.
The Adviser bears all costs and expenses incurred in connection with its duties
under the Current Agreement, including the fees or salaries of Trustees or
officers of the Fund who are affiliated persons of the Adviser. Subject to the
foregoing, the Fund will be responsible for the payment of all of its other
expenses, including (i) payment of the fees payable to the Adviser under the
agreement; (ii) organizational expenses; (iii) brokerage fees and commissions;
(iv) taxes; (v) interest charges on borrowings; (vi) the cost of liability
insurance or fidelity bond coverage for the Fund's officers and employees, and
trustees' and officers' errors and omissions insurance coverage; (vii) legal,
auditing and accounting fees and expenses; (viii) charges of the Fund's
custodian, transfer agent and dividend disbursing agent; (ix) the Fund's pro
rata portion of dues, fees and charges of any trade association of which the
Fund is a member; (x) the expenses of printing, preparing and mailing proxies,
stock certificates and reports, including the Fund's prospectus and statement of
additional information, and notices to shareholders; (xi) filing fees for the
registration or qualification of the Fund and its shares under federal or state
securities law; (xii) the fees and expenses involved in registering and
maintaining registration of the Fund's shares with the Securities and Exchange
Commission; (xiii) the expenses of holding shareholder meetings; (xiv) the
compensation, including fees, of any of the Fund's Trustees, officers or
employees who are not affiliated persons of the Adviser; (xv) all expenses of
computing the Fund's net asset value per share, including any equipment or
services obtained solely for the purpose of pricing shares or valuing the Fund's
investment portfolio; (xvi) expenses of personnel performing shareholder
servicing functions and all other distribution expenses payable by the Fund; and
(xvii) litigation and other extraordinary or non-recurring expenses and other
expenses properly payable by the Fund.
The Current Agreement provides that in the course of the Adviser's execution of
portfolio transactions for the Fund, the Adviser may, subject to conditions as
may be specified by the Fund's Board of Trustees, (i) place orders for the
purchase or sale of the Fund's portfolio securities with the Adviser's
affiliate, Gabelli & Company, Inc.; (ii) pay commissions to brokers other than
its affiliate which are higher than might be charged by another qualified broker
to obtain brokerage and/or research services considered by the Adviser to be
useful or desirable in the performance of its duties hereunder and for the
investment management of other advisory accounts over which it or its affiliates
exercise investment discretion; and (iii) consider sales by brokers (other than
its affiliate distributor) of shares of the Fund and any other mutual fund for
which it or its affiliates act as investment adviser, as a factor in its
selection of brokers and dealers for Fund portfolio transactions.
The Current Agreement provides that absent willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her position, the Adviser and its employees, officers, directors, employees,
agents or controlling persons will not be liable for any act or omission or for
any loss sustained by the Fund. However, the agreement provides that the Fund is
not waiving any rights that it may have which cannot be waived. The agreement
also provides that the Fund will indemnify the Adviser and each of such persons
against any liabilities and expenses incurred in the defense or disposition of
any action or proceeding arising out of the agreement unless a court finds that
the person seeking indemnification did not act in good faith in the reasonable
belief that his or her action was in the best interest of the Fund (and, in a
criminal case, that the person had no reasonable cause to believe that his or
her action was unlawful). The agreement provides specific procedures and
standards for making advance payments and permits the Board to disallow
indemnification in certain situations.
The Current Agreement expressly permits the Adviser to act as investment adviser
to others and provides that the word "Gabelli" in the Fund's name is derived
from the name of Mario J. Gabelli and that such name may freely be used by the
Adviser for other investment companies, entities or products. The agreement also
provides that in the event that the Adviser ceases to be the Fund's investment
adviser, the Fund will, unless the Adviser otherwise consents in writing,
promptly take all steps necessary to change its name to a new name which does
not include "Gabelli."
The Current Agreement is terminable without penalty by the Fund on not more than
sixty days' written notice when authorized by the Trustees (or, with respect to
the provisions relating to the Fund's Plan of Distribution, by a majority of the
Trustees who are not "interested persons" and who have no direct or indirect
financial interest in the operation of the Plan of Distribution or any related
agreements) by the holders of the same proportion of shares required to
authorize the agreement or by the Adviser. The agreement will automatically
terminate in the event of its assignment, as defined in the 1940 Act and the
rules thereunder. The agreement provides that unless terminated it will remain
in effect for a period of two years, and from year to year thereafter, so long
as continuation of the agreement is approved annually by the Trustees of the
Fund or the shareholders of the Fund and, in either case, by a majority of the
Trustees who are not parties to the agreement or "interested persons" as defined
in the 1940 Act of any such person.
Sub-Administrator
Effective October 1, 1999, First Data Investor Services Group, Inc. (the
"Sub-Administrator"), a subsidiary of First Data Corporation, serves as
Sub-Administrator to the Fund pursuant to a Sub-Administration Agreement with
the Adviser (the "Sub-Administration Agreement"). Under the Sub-Administration
Agreement, the Sub-Administrator (a) assists in supervising all aspects of the
Fund's operations except those performed by the Adviser under its advisory
agreement with the Fund; (b) supplies the Fund with office facilities (which may
be in the Sub-Administrator's own offices), statistical and research data, data
processing services, clerical, accounting and bookkeeping services, including,
but not limited to, the calculation of the net asset value of shares in the
Fund, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; (c) prepares and
distributes materials for all Fund Board of Trustees' meetings including the
mailing of all Board materials and collates the same materials into the Board
books and assists in the drafting of minutes of the Board Meetings; (d) prepares
reports to Fund shareholders, tax returns and reports to and filings with the
SEC and state "Blue Sky" authorities; (e) calculates the Fund's net asset value
per share, provides any equipment or services necessary for the purpose of
pricing shares or valuing the Fund's investment portfolio and, when requested,
calculates the amounts permitted for the payment of distribution expenses under
any distribution plan adopted by the Fund; (f) provides compliance testing of
all Fund activities against applicable requirements of the 1940 Act and the
rules thereunder, the Internal Revenue Code of 1986, as amended ("the Code"),
and the Fund's investment restrictions; (g) furnishes to the Adviser such
statistical and other factual information and information regarding economic
factors and trends as the Adviser from time to time may require; and (h)
generally provides all administrative services that may be required for the
ongoing operation of the Fund in a manner consistent with the requirements of
the 1940 Act.
For the services it provides, the Adviser pays the Sub-Administrator an annual
fee based on the value of the aggregate average daily net assets of all funds
under its administration managed by the Adviser as follows: up to $10 billion -
0.0275%; $10 billion to $15 billion - 0.0125%; over $15 billion - 0.001%. The
sub-administrator's fee is paid by the Adviser and will result in no additional
expenses to the Fund.
Counsel
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022, serves as the Fund's legal counsel.
Independent Accountants
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, independent
accountants, have been selected to audit and express their opinion on the Fund's
annual financial statements.
Custodian, Transfer Agent and Dividend Disbursing Agent
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, is the Custodian for the Fund's cash and securities
as well as the Transfer and Dividend Disbursing Agent for its shares. Boston
Financial Data Services, Inc. ("BFDS"), an affiliate of State Street, performs
the shareholder services on behalf of State Street and is located at the BFDS
Building, Two Heritage Drive, Quincy, Massachusetts 02171. Neither State Street
nor BFDS assists in or is responsible for investment decisions involving assets
of the Fund.
Distributor
To implement the Fund's 12b-1 Plan (see "Distribution Plan" below), effective
October 1, 1999, the Fund entered into a Distribution Agreement with Gabelli &
Company, Inc. (the "Distributor"), a New York corporation which is an affiliate
of Gabelli Asset Management Inc., having principal offices located at One
Corporate Center, Rye, New York 10580-1434. The Distributor acts as agent of the
Fund for the continuous offering of its shares on a best efforts basis.
DISTRIBUTION PLAN
As approved by shareholders and effective October 1, 1999, the Fund adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. The
Plan provides that the Fund will pay the Distributor, in consideration of the
services to be provided and the expenses to be incurred by the Distributor,
distribution payments of .25% per year of the average daily net assets of the
Fund. The payments made by the Fund under the Plan of Distribution will be used
by the Distributor for the purpose of financing activities which are primarily
intended to result in the sale of shares of the Fund, including, but not limited
to, advertising the shares or Gabelli's mutual fund activities; compensating
underwriters, dealers, brokers, banks and other selling entities (including the
Distributor and its affiliates), and sales and marketing personnel of any of
them, for sales of shares of the Fund, whether in a lump sum or on a continuous,
periodic, contingent, deferred or other basis; compensating underwriters,
dealers, brokers, banks and other servicing entities and servicing personnel
(including Gabelli and its personnel) for providing services to shareholders of
the Fund relating to their investment in the Fund, including assistance in
connection with inquiries relating to shareholder accounts; the production and
dissemination of prospectuses (including statements of additional information)
of the Fund and the preparation, production and dissemination of sales,
marketing and shareholder servicing materials; the ordinary or capital expenses,
such as equipment, rent, fixtures, salaries, bonuses, reporting and record
keeping and third party consultancy or similar expenses relating to any activity
for which payment is authorized by the Board; and the financing of any activity
for which payment is authorized by the Board. To the extent any activity is one
which the Fund may finance without a Distribution Plan, the Fund may also make
payments to finance such activity outside of the Plan and not be subject to its
limitations.
The Plan does not require the Distributor to perform any specific type or level
of distribution activities or shareholder services or to incur any specific
level of expenses. Accordingly, it is possible that the Distributor could
receive compensation under the Plan that exceeds the Distributor's costs and
related distribution expenses, thus resulting in a profit to the Distributor. On
the other hand, during periods when it believes the Fund's shares will be
attractive to investors, the Distributor may, but is not required to, spend more
on distribution activities than it receives under the Plan.
The Plan contains a number of provisions relating to reporting obligations and
to its continuation, amendment and termination as required by Rule 12b-1. The
Plan will continue in effect for longer than one year only as long as its
continuation is specifically approved at least annually by a majority of the
Board of Trustees, including a majority of the Rule 12b-1 Trustees (Trustees who
are not "interested persons" of the Fund), by a vote cast in person at a meeting
called for the purpose of voting on the Plan. All material amendments to the
Plan must be approved by a majority of the Board of Trustees and the Rule 12b-1
Trustees, and the Plan may not be amended to increase the maximum level of
payments by the Fund without such approvals and, further, the approval of a
majority of the outstanding shares of the Fund. The Plan may be terminated at
any time by a vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the outstanding shares of the Fund. The Plan requires that the Board
of Trustees receive, at least quarterly, a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made. As required by the Rule, while the Plan is in effect, the selection and
nomination of those Trustees who are not "interested persons" shall be at the
discretion of the non-interested Trustees then in office.
No interested person of the Fund or any Trustee of the Fund had a direct or
indirect financial interest in the operation of the Plan or related agreements.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser currently serves as adviser to a number of investment company
clients and may in the future act as adviser to others. Affiliates of the
Adviser act as investment adviser to numerous private accounts. It is the
practice of the Adviser and its affiliates to cause purchase and sale
transactions to be allocated among the Fund and others whose assets they manage
in such manner as they deem equitable. In making such allocations among the Fund
and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for such investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
The Adviser is authorized on behalf of the Fund to employ brokers to effect the
purchase or sale of portfolio securities with the objective of obtaining prompt,
efficient and reliable execution and clearance of such transactions at the most
favorable price obtainable ("best execution") at reasonable expense.
Transactions in securities other than those for which a securities exchange is
the principal market are generally done through a principal market maker.
However, such transactions may be effected through a brokerage firm and a
commission is paid whenever it appears that the broker can obtain a more
favorable overall price. In general, there may be no stated commission in the
case of securities traded on the over-the-counter markets, but the prices of
those securities may include undisclosed commissions or markups. Options
transactions will usually be effected through a broker and a commission will be
charged. The Fund also expects that securities will be purchased at times in
underwritten offerings where the price includes a fixed amount of compensation
generally referred to as the underwriter's concession or discount.
The policy of the Fund regarding purchases and sales of portfolio securities is
that primary consideration will be given to obtaining the most favorable prices
and efficient execution of transactions. In seeking to implement the Fund's
policies, the Adviser effects transactions with those brokers and dealers who
the Adviser believes provide the most favorable prices and are capable of
providing efficient executions. If the Adviser believes such price and execution
are obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Adviser of the type described in
Section 28(e) of the Securities Exchange Act of 1934. In doing so, the Fund may
also pay higher commission rates than the lowest available when the Adviser
believes it is reasonable to do so in light of the value of the brokerage and
research services provided by the broker effecting the transaction. Such
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities.
Research services furnished by brokers or dealers through which the Fund effects
securities transactions are used by the Adviser and its advisory affiliates in
carrying out their responsibilities with respect to all of the accounts over
which they exercise investment discretion. Such investment information may be
useful only to one or more of the other accounts of the Adviser and its advisory
affiliates, and research information received for the commissions of those
particular accounts may be useful both to the Fund and one or more of such other
accounts. The purpose of this sharing of research information is to avoid
duplicative charges for research provided by brokers and dealers.
Neither the Fund nor the Adviser has any legally binding agreement with any
broker or dealer regarding any specific amount of brokerage commissions which
will be paid in recognition of such services. However, in determining the amount
of portfolio commissions directed to such brokers or dealers, the Adviser does
consider the level of services provided. During 1998, the total amount of Fund
brokerage transactions and related brokerage commissions directed in
onsideration of research services provided to Mathers and Company, Inc. (the
"Prior Adviser") were $25,931,777 and $72,997, respectively, exclusive of dealer
concessions from underwritten offerings.
Shortly after October 1, 1999 it is anticipated that the Board will consider a
proposal for the Adviser to place orders with Gabelli & Company, Inc. ("Gabelli
& Company"), an affiliate of the Adviser and a broker-dealer member of the
National Association of Securities Dealers, Inc. Assuming the Trustees approve,
the Adviser may also place orders for the purchase or sale of portfolio
securities with Gabelli & Company when it appears that, as an introducing broker
or otherwise, Gabelli & Company can obtain a price and execution which is at
least as favorable as that obtainable by other qualified brokers. The Adviser
may also consider sales of shares of the Fund and any other registered
investment companies managed by the Adviser and its affiliates by brokers and
dealers other than the Distributor as a factor in its selection of brokers and
dealers to execute portfolio transactions of the Fund.
To obtain the best execution of portfolio trades on the New York Stock Exchange
("Exchange"), Gabelli & Company controls and monitors the execution of such
transactions on the floor of the Exchange through independent "floor brokers" or
through the Designated Order Turnaround System of the Exchange. Such
transactions are then cleared, confirmed to the Fund for the account of Gabelli
& Company, and settled directly with the Custodian of each fund by a clearing
house member firm which remits the commission less its clearing charges to
Gabelli & Company Gabelli & Company may also effect portfolio transactions on
behalf of the Fund in the same manner and pursuant to the same arrangements on
other national securities exchanges which adopt direct access rules similar to
those of the Exchange.
Under the prior Adviser, during 1998, 1997 and 1996, the Fund paid total
brokerage commissions of $551,077, $291,860 and $532,849, respectively,
virtually all of which was paid to firms providing research as well as brokerage
services. None of the commissions paid by the Fund in 1998, 1997 or 1996 were
paid to Gabelli & Company The Fund's annual portfolio turnover rate is set forth
in the Prospectus under "Financial Highlights". Portfolio turnover may be high
in certain years. Several factors may contribute to this, including (i) the
volatility of the markets, 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, and (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.
RETIREMENT PROGRAMS
Under the Code, individuals may make wholly or partly tax deductible IRA
contributions of up to $2,000 annually, depending on whether they are active
participants in an employer-sponsored retirement plan and on their income level.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a combined maximum of $4,000 annually to both IRAs
provided that no more than $2,000 may be contributed to the IRA of either
spouse. Other provisions permit additional IRA contributions which are not tax
deductible but the tax on reinvested dividends and distributions is deferred
while held in the account. There are also rules on the amount of tax deductible
contributions which may be made to other retirement plans.
Investors may be eligible to make contributions to a new type of individual
retirement account (a "Roth IRA"). An investor can open a Roth IRA if he or she
meets certain income limits specified in the Code. Any contributions made by an
investor to a Roth IRA are nondeductible for U.S. Federal income tax purposes.
Distributions from a Roth IRA are not included in the investor's gross income
and are not subject to a 10% penalty for early withdrawal if the distributions
are made after the end of the five-year period beginning with the first tax year
in which the investor made a contribution to the Roth IRA and the distributions
meet other criteria set forth in the Code. The maximum annual aggregate
contribution that can be made to IRAs and Roth IRAs is $2,000. In addition,
certain low and middle-income investors may open an education individual
retirement account (an "Education IRA"). Eligible individuals are permitted to
contribute up to $500 per year per beneficiary under 18 years old to an
Education IRA. The minimum initial investment for an Education IRA through the
Fund is $250. A distribution from an Education IRA is generally excludable from
gross income to the extent that such distribution does not exceed qualified
higher education expenses incurred by the beneficiary during the year in which
the distribution is made.
Self-employed investors may purchase shares of the Fund through tax-deductible
contributions to existing retirement plans for self-employed persons, known as
Keogh or H.R. 10 plans. However, the Fund does not currently act as sponsor to
such plans. Fund shares may be a suitable investment for other types of
qualified pension or profit-sharing plans which are employer sponsored,
including deferred compensation or salary reduction plans known as "401(k)
Plans" which give participants the right to defer portions of their compensation
for investment on a tax-deferred basis until distributions are made from the
plans. The minimum initial investment for an individual under such plans is
$1,000 and there is no minimum for additional investments.
Investors should be aware that they may be subject to penalties or additional
tax on contributions to or withdrawals from IRAs or other retirement plans which
are not permitted by the applicable provisions of the Code and prior to a
withdrawal, shareholders may be required to certify their age and awareness of
such restrictions in writing. Persons desiring information concerning
investments through IRAs or other retirement plans should write or telephone the
Distributor.
PURCHASE AND REDEMPTION OF FUND SHARES
The Fund issues shares directly through its distributor. The purchase price per
share is the next determined net asset value after acceptance of an application.
See "Computation of Net Asset Value". Information about purchasing, selling and
exchanging shares is contained in a separate document called the Owner's Manual,
which has been delivered with the Prospectus. The Owner's Manual is considered
an integral part of the Prospectus. The Owner's Manual also contains information
about the Telephone Investment Plan, Telephone Redemption Plan, Automatic
Investment Plan, Systematic Withdrawal Plan and Retirement Plans.
Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected at the discretion of the Adviser and taken
at the value used in determining the Fund's net asset value per share as
described under "Computation of Net Asset Value"), or partly in cash and partly
in portfolio securities. However, payments will be made wholly in cash unless
the Adviser believes that economic conditions exist which would make such a
practice detrimental to the best interests of the Fund. If payment for shares
redeemed is made wholly or partly in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to cash. The Fund will
not distribute in-kind portfolio securities that are not readily marketable. The
Fund has filed a formal election with the SEC pursuant to which the Fund will
only effect a redemption in portfolio securities where the particular
shareholder of record is redeeming more than $250,000 or 1% of the Fund's total
net assets, whichever is less, during any 90 day period. In the opinion of the
Fund's management, however, the amount of a redemption request would have to be
significantly greater than $250,000 before a redemption wholly or partly in
portfolio securities would be made.
<PAGE>
COMPUTATION OF NET ASSET VALUE
For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the NYSE are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the NYSE on the business day such value is being determined.
If there has been no sale on such day, the securities are valued at the average
of the closing bid and asked prices on such day. If no asked prices are quoted
on such day, then the security is valued at the closing bid price on such day.
If no bid or asked prices are quoted on such day, then the security is valued by
such method as the Board of Trustees shall determine in good faith to reflect
its fair market value. Readily marketable securities not listed on the NYSE but
listed on other national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automated Quotations, Inc. ("NASDAQ")
National List are valued in like manner.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Trustees deems appropriate to reflect their fair value. If no asked prices are
quoted on such day, then the security is valued at the closing bid price on such
day. If no bid or asked prices are quoted on such day, then the security is
valued by such method as the Board of Trustees shall determine in good faith to
reflect its fair market value.
Portfolio securities traded on more than one national securities exchange or
market are valued according to the broadest and most representative market as
determined by the Adviser. Securities traded primarily on foreign exchanges are
valued at the closing price on such foreign exchange immediately prior to the
close of the NYSE.
United States Government obligations and other short-term debt instruments
having sixty days or less remaining until maturity are stated at amortized cost.
Short-term debt instruments having a greater remaining maturity will be valued
at the highest bid price obtained from a dealer maintaining an active market in
that security or on the basis of prices obtained from a pricing service approved
as reliable by the Board of Trustees. All other investment assets, including
restricted and not readily marketable securities, are valued under procedures
established by and under the general supervision and responsibility of the
Fund's Board of Trustees designed to reflect in good faith the fair value of
such securities.
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. 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.
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund has qualified, and intends to remain qualified, as a "regulated
investment company" under Subchapter M of the Code. In order to remain
qualified, 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, and (ii)
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).
As a regulated investment company, the Fund is generally not subject to 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. In the
event the Fund does not qualify in any year as a regulated investment company,
its income would be taxed to the Fund whether or not distributed, and
distributions would generally be taxable to shareholders as ordinary dividend
income.
A non-deductible 4% excise tax will be imposed on the Fund to the extent the
Fund does not distribute during each calendar year at least (i) 98% of its
ordinary income for such calendar year, (ii) 98% of its capital gain net income
for such calendar year, 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.
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. 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 investment income will be taxable as ordinary
income. In addition, distributions of net capital gain (i.e., the Fund's net
long-term capital gains in excess of its net short-term capital losses and
available capital loss carryover), when designated as such by the Fund,
generally are treated as gain recognized from the sale or exchange of a capital
asset held for more than one year, regardless of how long you have held your
Fund shares. In general, among other circumstances, the Fund will generate
capital gain or loss upon liquidating an investment in order to change the
composition of its investment portfolio.
If the net asset value of shares is reduced below your 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 original cost continues as the tax basis and on redemption the
gain or loss is the difference between such basis and the redemption price.
Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, unless you have elected otherwise, be paid on the
payment date fixed by the Board of Trustees in additional shares of the Fund
having an aggregate net asset value as of the ex-dividend date of such dividend
or distribution equal to the cash amount of such distribution. An election to
receive dividends and distributions may be changed by notifying the Fund in
writing at any time prior to the record date for a particular dividend or
distribution. There are no sales or other charges in connection with the
reinvestment of dividends and capital gains distribution. There is no fixed
dividend rate, and there can be no assurance that the Fund will pay any
dividends or realize any capital gains.
In the case of corporate shareholders, such distributions are eligible for the
dividends received deduction only to the extent of the aggregate qualifying
dividends received by the Fund from domestic corporations in any year.
Distributions of long-term capital gains are taxable to the corporate
shareholder as long-term capital gains and are not eligible for the dividends
received deduction.
For purposes of determining your taxable income each year, dividends declared by
the Fund in October, November or December of a year, payable to you 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.
Income tax withholding at a rate of 20% is applicable to any distribution from a
qualified retirement 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 Code
and current Treasury regulations applicable to the Fund and its shareholders.
The 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 you 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.
INVESTMENT 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 your shares, when
redeemed, may be worth more or less than their original cost. You should not
consider past results to be representative of future performance. Factors
affecting the Fund's performance include, among other things, general market
conditions, the composition of the Fund's portfolio, and operating expenses. 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.
The compound annual rates of return of the Fund for the one, five and ten year
periods ended June 30, 1999, and since inception (August 19, 1965) through June
30, 1999, were -1.10%, 0.94%, 2.82% and 11.40%, 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 in the
third preceding paragraph 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 and
no deferred sales load or redemption fee, no adjustments are made for such items
in calculating performance.
<PAGE>
DESCRIPTION OF THE FUND'S SHARES
The Fund is a Delaware business trust formed on June 17, 1999. It is authorized
to issue an unlimited number of shares of beneficial interest. Subject to
approval by the Trustees of a plan under Rule 18f-3 of the 1940 Act, the
Trustees of the Fund may, at any time and from time to time, by resolution,
authorize the division of shares into an unlimited number of series and the
division of any series into two or more classes. There is currently a single
series with a single class of shares designated as AAA.
Shareholders are entitled to one vote for each share held (and fractional votes
for fractional shares) and may vote on the election of Trustees and on other
matters submitted to meetings of shareholders. As a Delaware business trust, the
Fund is not required, and does not intend, to hold regular annual shareholder
meetings but may hold special meetings for the consideration of proposals
requiring shareholder approval such as changing fundamental policies. In
addition, if the Trustees have not called an annual meeting of shareholders for
any year by May 31 of that year, the Trustees will call a meeting of
shareholders upon the written request of shareholders holding in excess of 50%
of the affected shares for the purpose of removing one or more Trustees or the
termination of any investment advisory agreement. The Declaration of Trust
provides that the Fund's shareholders have the right, upon the vote of more than
two-thirds of its outstanding shares, to remove a Trustee. Except as may be
required by the 1940 Act or any other applicable law, the Trustees may amend the
Declaration of Trust in any respect without any vote of shareholders to make any
change that does not (i) impair the exemptions from personal liability as
provided therein or (ii) permit assessments on shareholders. Shareholders have
no preemptive or conversion rights except with respect to shares that may be
denominated as being convertible or as otherwise provided by the Trustees or
applicable law. The Fund may be (i) terminated upon the affirmative vote of a
majority of the Trustees or (ii) merged or consolidated with, or sell all or
substantially all of its assets to another issuer, if such transaction is
approved by the vote of two-thirds of the Trustees without any vote of the
shareholders, in each case except as may be required by the 1940 Act or any
other applicable law. If not so terminated, the Fund intends to continue
indefinitely.
FINANCIAL STATEMENTS
The Fund's audited balance sheet and schedule of investments as of December 31,
1998, 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, 1998, and the auditors' report of Arthur Andersen LLP, the
Fund's former independent auditor, dated January 15, 1999 relating to such
financial statements, are incorporated herein by reference to the Fund's 1998
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 with this Statement of
Additional Information 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.
The Fund's unaudited balance sheet and schedule of investments as of June 30,
1999, and the related statement of operations for the six months then ended and
statements of changes in net assets for the last six months and the last fiscal
year are incorporated herein by reference to the Fund's 1999 Semi-Annual Report
to Shareholders. No other portion of such Semi-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 Semi-Annual Report
to Shareholders referred to above is provided with this Statement of Additional
Information 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.
PART C
OTHER INFORMATION
Item 23. Exhibits
(a)(1) Agreement and Declaration of Trust of The Gabelli Mathers Fund
(the "Fund") *
(a)(2) Resolutions Authorizing Initial Series of Shares of the Fund *
(b) By-Laws of the Fund *
(c) Not Applicable
(d) Investment Advisory Agreement between the Fund and Gabelli Funds, LLC (the
"Adviser") *
(e) Distribution Agreement between the Fund and Gabelli & Company, Inc.
(the "Distributor") *
(f) Not Applicable
(g) Custodian Agreement between the Fund and State Street Bank and Trust
Company
(h)(1) Service Agreement between Registrant and DST, Inc. **
(h)(2) Transfer Agency and Service Agreement between the Fund and State
Street Bank and Trust Company
(h)(3) Sub-Administration Agreement between the Adviser and First Data
Investor Services Group, Inc. *
(h)(4) Amendment No. 2 to Sub-Administration Agreement between the
Adviser and First Data Investor Services Group, Inc. *
(i) Opinion and Consent of counsel concerning the legality of the
securities to be issued by the Fund
(j) Consent of Independent Accountants
(k) Not Applicable
(l) Not Applicable
(m) Plan of Distribution pursuant to Rule 12b-1 *
(n) Not Applicable
(o) Not Applicable
* Previously filed in Post-Effective Amendment No. 59 on July 22, 1999 and
hereby incorporated by reference.
** Previously filed in Post-Effective Amendment No. 55 on April 30, 1996 and
hereby incorporated by reference.
Item 24. Persons Controlled by or under Common Control with the Fund Insofar as
the following have substantially identical or similar boards of directors
or trustees they may be deemed with the Fund to be under common control:
The Gabelli ABC Fund, The Gabelli Asset Fund, Gabelli Gold Fund, Inc., The
Gabelli Growth Fund, The Gabelli Value Fund Inc., The Gabelli Capital
Asset Fund, The Gabelli Small Cap Growth Fund, Gabelli Equity Income Fund,
The Gabelli Westwood Funds, The Gabelli Global Series Funds, Inc., The
Gabelli U.S. Treasury Money Market Fund, Gabelli Equity Trust Inc.,
Gabelli Global Multimedia Trust Inc., Gabelli Convertible Securities Fund,
Inc., Gabelli Utility Trust, Gabelli International Growth Fund, Inc., The
Treasurers Fund, Inc., Gabelli Utilities Fund and Gabelli Blue Chip Value
Fund.
Item 25. Indemnification
See Article IV of the Fund's Agreement and Declaration of Trust, filed as
Exhibit (a)(1) to this Registration Statement, which provision is
incorporated herein by reference. Insofar as indemnification of
liabilities arising under the 1933 Act may be permitted to trustees,
officers and controlling persons of the Fund pursuant to the foregoing
provisions, or otherwise, the Fund has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in that Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Fund of expenses incurred or paid by a
trustee, officer or controlling person of the Fund in the successful
defense of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities being
registered, the Fund will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
The Fund hereby undertakes that it will apply the indemnification
provisions of its Declaration of Trust, its By-laws, the Investment
Advisory Agreement, the Sub-Administration Agreement and the Distribution
Agreement in a manner consistent with Release No. 11330 of the Securities
and Exchange Commission under the 1940 Act.
Item 26. Business and Other Connections of Investment Adviser
The Adviser is a registered investment adviser providing investment
management and administrative services to the Fund. The Adviser also
provides similar services to other mutual funds.
The information required by this Item 26 of directors, officers or
partners of the Adviser, together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by the Adviser or such directors, officers or partners during
the past two years, is incorporated by reference to Form ADV filed by the
Adviser under 1940 Act (SEC File No. 801-37706).
Item 27. Principal Underwriters
(a)The Distributor, Gabelli & Company, Inc., is also the principal
underwriter for The Gabelli ABC Fund, The Gabelli Growth Fund, The
Gabelli Asset Fund, The Gabelli Value Fund, Inc., The Gabelli Capital
Asset Fund, The Gabelli Small Cap Growth Fund, Gabelli Equity Income
Fund, Gabelli Gold Fund, Inc., The Gabelli International Growth Fund,
Inc., The Gabelli Westwood Funds, The Gabelli Global Series Funds,
Inc., The Gabelli U.S. Treasury Money Market Fund, Gabelli Utilities
Fund and Gabelli Blue Chip Value Fund.
(b)The information required by this Item 27 with respect to each director,
officer or partner of Gabelli & Company is incorporated by reference to
Schedule A of Form BD filed by Gabelli & Company under the Securities
Exchange Act of 1934, as amended (SEC File No. 8-21373).
(c)Not applicable. The Registrant's only principal underwriter is an
affiliated person of an affiliated person of the Registrant.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of the Sub-Administrator,
First Data Investor Services Group, 101 Federal Street, Boston,
Massachusetts 02110, at the offices of the Fund's Custodian, State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts, at the
offices of the Fund's Transfer Agent and Dividend Disbursing Agent, State
Street Bank & Trust Company, c/o Boston Financial Data Services, Two
Heritage Drive, North Quincy, Massachusetts 02171 or at the offices of the
Adviser, Gabelli Funds, LLC, One Corporate Center, Rye, New York
10580-1434 and 100 Corporate North, Suite 201, Bannockburn, IL 60015.
Item 29. Management Services
Not Applicable
Item 30. 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.
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 ____ day of July,
1999.
MATHERS FUND, INC.
By /s/ Henry G. Van der Eb
Henry G. Van der Eb
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below on July ____, 1999 by the
following persons in the capacities indicated:
Signature Capacity
/s/ Henry G. Van der Eb Chairman and Director,
Principal Executive Officer
Henry G. Van der Eb
/s/ Lawrence A. Kenyon Senior Vice President and
Chief Financial Officer
Lawrence A. Kenyon
Director
Tyler R. Cain
* Director
Charles G. Freund
* Director
Jon P. Hedrich
* Director
Robert E. Kohnen
* Director
Anne E. Morrissy
* Director
Robert J. Reynolds
* Director
Jack O. Vance
* By /s/ Henry G. Van der Eb
Henry G. Van der Eb
Attorney-in-Fact
INDEX OF EXHIBITS TO FORM N-1A
Exhibit (g) Custodian Agreement between the Fund and State Street Bank and
Trust Company
Exhibit (h)(1) Service Agreement between Registrant and DST, Inc.*.
Exhibit (h)(2) Transfer Agency and Service Agreement between the Fund and State
Street Bank and Trust Company
Exhibit (i) Opinion and Consent of counsel concerning the legality of the
securities to be issued by the Fund
Exhibit (j) Consent of Independent Accountants
- ---------------
*Previously filed.
FORM OF
CUSTODIAN AGREEMENT
This Agreement between GABELLI MATHERS FUND, a business trust organized
and existing under the laws of the State of Delaware (the "Fund"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company (the "Custodian"),
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of its assets,
including securities which the Fund desires to be held in places within the
United States ("domestic securities") and securities it desires to be held
outside the United States ("foreign securities"). The Fund agrees to deliver to
the Custodian all securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by it from time to time, and the cash consideration
received by it for such new or treasury shares of beneficial interest of the
Fund ("Shares") as may be issued or sold from time to time. The Custodian shall
not be responsible for any property of the Fund held or received by the Fund and
not delivered to the Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in
Section 6 hereof), the Custodian shall from time to time employ one or more
sub-custodians located in the United States, but only in accordance with an
applicable vote by the Board of Trustees of the Fund (the "Board"), and provided
that the Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities the foreign banking institutions
and foreign securities depositories designated in Schedules A and B hereto but
only in accordance with the applicable provisions of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to be held by it in
the United States including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section 2.8 in a clearing
agency registered with the United States Securities and Exchange Commission (the
"SEC") under Section 17A of the Securities Exchange Act of 1934 (the "Exchange
Act"), which acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "U.S. Securities System" and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct Paper System") pursuant to
Section 2.9.
<PAGE>
3
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by the Fund held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct Paper
book entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt of
payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
4) To the depository agent in connection with tender or other similar offers for
securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.7 or into the name or nominee
name of any sub-custodian appointed pursuant to Section 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
<PAGE>
24
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the Fund,
but only against receipt of adequate collateral as agreed upon from time to time
by the Custodian and the Fund, which may be in the form of cash or obligations
issued by the United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is to be credited
to the Custodian's account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Fund prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowing by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Exchange Act and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission ("CFTC") and/or any contract
market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information (the "Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption;
and
15) For any other proper purpose, but only upon receipt of Proper
Instructions from the Fund specifying the securities of the
Fund to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
trust purpose, and naming the person or persons to whom
delivery of such securities shall be made.
<PAGE>
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund, unless the
Fund has authorized in writing the appointment of a nominee to be used in common
with other registered investment companies having the same investment adviser as
the Fund, or in the name or nominee name of any agent appointed pursuant to
Section 2.7 or in the name or nominee name of any sub-custodian appointed
pursuant to Section 1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Agreement shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best efforts only
to timely collect income due the Fund on such securities and to notify the Fund
on a best efforts basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian acting pursuant to the terms of
this Agreement, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"). Funds held by the Custodian for the Fund may be deposited by
it to its credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem necessary
or desirable; provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments with
respect to bearer domestic securities if, on the date of payment by the issuer,
such securities are held by the Custodian or its agent thereof and shall credit
such income, as collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for payment
all coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held hereunder.
Income due the Fund on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which the
Fund is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Fund in the following
cases only:
<PAGE>
1) Upon the purchase of domestic securities, options, futures contracts or
options on futures contracts for the account of the Fund but only (a) against
the delivery of such securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or any bank, banking
firm or trust company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set forth in Section
2.8 hereof; (c) in the case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.9; (d) in the case of
repurchase agreements entered into between the Fund and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund of securities
owned by the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Fund or (e) for transfer to a
time deposit account of the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from a broker and/or
the applicable bank pursuant to Proper Instructions from the Fund as defined
herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set forth in Section 5
hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to the governing
documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper trust purpose, but only upon receipt of
Proper Instructions from the Fund specifying the amount of
such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom such payment
is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
<PAGE>
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by the Fund in a U.S.
Securities System in accordance with applicable Federal Reserve Board and SEC
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. Securities System Account") which
account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of the Fund
upon (i) receipt of advice from the U.S. Securities System that such securities
have been transferred to the U.S. Securities System Account, and (ii) the making
of an entry on the records of the Custodian to reflect such payment and transfer
for the account of the Fund. The Custodian shall transfer securities sold for
the account of the Fund upon (i) receipt of advice from the U.S. Securities
System that payment for such securities has been transferred to the U.S.
Securities System Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the U.S. Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice and shall furnish
to the Fund copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the Fund;
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) Anything to the contrary in this Agreement notwithstanding, the Custodian
shall be liable to the Fund for any loss or damage to the Fund resulting from
use of the U.S. Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S. Securities System; at
the election of the Fund, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the U.S. Securities System or
any other person which the Custodian may have as a consequence of any such loss
or damage if and to the extent that the Fund has not been made whole for any
such loss or damage.
<PAGE>
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by the Fund in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will be
effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in the
Direct Paper System Account, which account shall not include
any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transaction in the Direct Paper System for the account of the
Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
<PAGE>
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.8 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the CFTC or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release SEC, or interpretive opinion of the staff of the SEC,
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper purposes, but only, in the case of clause
(iv), upon receipt of Proper Instructions the purpose or purposes of such
segregated account and declaring such purpose(s) to be a proper trust purpose.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of the Fund held by it and in connection
with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without indication
of the manner in which such proxies are to be voted, and shall promptly deliver
to the Fund such proxies, all proxy soliciting materials and all notices
relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO FUND SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the Fund
and the maturity of futures contracts purchased or sold by the Fund) received by
the Custodian from issuers of the securities being held for the Fund. With
respect to tender or exchange offers, the Custodian shall transmit promptly to
the Fund all written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires to take action with
respect to any tender offer, exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
SECTION 3.1. DEFINITIONS. Capitalized terms in this Section 3 shall have the
following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
<PAGE>
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with prevailing or
developing custodial or market practices.
SECTION 3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board, hereby delegates to the Custodian,
subject to Section (b) of Rule 17f-5, the responsibilities set forth in this
Section 3 with respect to Foreign Assets held outside the United States, and the
Custodian hereby accepts such delegation, as Foreign Custody Manager of each
Portfolio.
SECTION 3.3. COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Contract, which list of countries may be amended
from time to time by the Fund with the agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of
each Portfolio, which list of Eligible Foreign Custodians may be amended from
time to time in the sole discretion of the Foreign Custody Manager. Mandatory
Securities Depositories are listed on Schedule B to this Contract, which
Schedule B may be amended from time to time by the Foreign Custody Manager. The
Foreign Custody Manager will provide amended versions of Schedules A and B in
accordance with Section 3.7 of this Section 3.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account, or to place or maintain Foreign Assets, in a country listed on
Schedule A, and the fulfillment by the Fund of the applicable account opening
requirements for such country, the Foreign Custody Manager shall be deemed to
have been delegated by the Board responsibility as Foreign Custody Manager with
respect to that country and to have accepted such delegation. Following the
receipt of Proper Instructions directing the Foreign Custody Manager to close
the account of a Portfolio with the Eligible Foreign Custodian selected by the
Foreign Custody Manager in a designated country, the delegation by the Board to
the Custodian as Foreign Custody Manager for that country shall be deemed to
have been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager of the Portfolio with respect to that country.
<PAGE>
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to a Portfolio with respect
to the country as to which the Custodian's acceptance of delegation is
withdrawn.
SECTION 3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
SECTION 3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS.
Subject to the provisions of this Section 3, the Foreign Custody
Manager may place and maintain the Foreign Assets in the care of the
Eligible Foreign Custodian selected by the Foreign Custody Manager in
each country listed on Schedule A, as amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager
to place or maintain Foreign Assets with an Eligible Foreign Custodian,
the Foreign Custody Manager shall determine that the Foreign Assets
will be subject to reasonable care, based on the standards applicable
to custodians in the country in which the Foreign Assets will be held
by that Eligible Foreign Custodian, after considering all factors
relevant to the safekeeping of such assets, including, without
limitation the factors specified in Rule 17f-5(c)(1).
SECTION 3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The
Foreign Custody Manager shall determine that the contract (or the rules
or established practices or procedures in the case of an Eligible
Foreign Custodian that is a foreign securities depository or clearing
agency) governing the foreign custody arrangements with each Eligible
Foreign Custodian selected by the Foreign Custody Manager will satisfy
the requirements of Rule 17f-5(c)(2).
SECTION 3.4.3. MONITORING. In each case in which the Foreign
Custody Manager maintains Foreign Assets with an Eligible Foreign
Custodian selected by the Foreign Custody Manager, the Foreign Custody
Manager shall establish a system to monitor (i) the appropriateness of
maintaining the Foreign Assets with such Eligible Foreign Custodian and
(ii) the contract governing the custody arrangements established by the
Foreign Custody Manager with the Eligible Foreign Custodian (or the
rules or established practices and procedures in the case of an
Eligible Foreign Custodian selected by the Foreign Custody Manager
which is a foreign securities depository or clearing agency that is not
a Mandatory Securities Depository). In the event the Foreign Custody
Manager determines that the custody arrangements with an Eligible
Foreign Custodian it has selected are no longer appropriate, the
Foreign Custody Manager shall notify the Board in accordance with
Section 3.7 hereunder.
<PAGE>
SECTION 3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of a Portfolio, and the Board shall be deemed to be monitoring
on a continuing basis such Country Risk to the extent that the Board considers
necessary or appropriate. The Fund, on behalf of the Portfolios, and the
Custodian each expressly acknowledge that the Foreign Custody Manager shall not
be delegated any responsibilities under this Section 3 with respect to Mandatory
Securities Depositories.
SECTION 3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A
PORTFOLIO. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
SECTION 3.7. REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board amended Schedules A or B at the end of the calendar
quarter in which an amendment to either Schedule has occurred. The Foreign
Custody Manager shall make written reports notifying the Board of any other
material change in the foreign custody arrangements of the Portfolios described
in this Section 3 after the occurrence of the material change.
SECTION 3.8. REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5.
The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Contract to the Custodian as the
Foreign Custody Manager of each Portfolio.
SECTION 3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody
Manager of a Portfolio shall be effective as of the date hereof and shall remain
in effect until terminated at any time, without penalty, by written notice from
the terminating party to the non-terminating party. Termination will become
effective thirty days after receipt by the non-terminating party of such notice.
The provisions of Section 3.3 hereof shall govern the delegation to and
termination of the Custodian as Foreign Custody Manager of the Fund with respect
to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE THE UNITED STATES.
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have the
following meanings: -----------
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
<PAGE>
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Contract.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
SECTION 4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a
Foreign Sub-Custodian shall release and deliver foreign securities of a
Portfolio held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolio in
accordance with commercially reasonable market practice in the
country where such Assets are held or traded, including,
without limitation: (A) delivery against expectation of
receiving later payment; or (B) in the case of a sale effected
through a Foreign Securities System, in accordance with the
rules governing the operation of the Foreign Securities
System;
(ii) in connection with any repurchase agreement related to foreign securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolio;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
<PAGE>
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; provided that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by
the Fund requiring a pledge of assets by the Portfolio;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a copy of a resolution of the
Board or of an Executive Committee of the Board so authorized
by the Board, signed by an officer of the Fund and certified
by its Secretary or an Assistant Secretary that the resolution
was duly adopted and is in full force and effect (a "Certified
Resolution"), specifying the Foreign Assets to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom delivery of such Assets
shall be made.
SECTION 4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities
System to pay out, monies of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer therefor
(or an agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the operation
of such Foreign Securities System;
<PAGE>
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Contract, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign securities; and
(viii) for any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a Certified Resolution
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper trust purpose, and naming the person or
persons to whom such payment is to be made.
SECTION 4.4.3. MARKET CONDITIONS; MARKET INFORMATION.
Notwithstanding any provision of this Contract to the contrary,
settlement and payment for Foreign Assets received for the account of a
Portfolio and delivery of Foreign Assets maintained for the account of
a Portfolio may be effected in accordance with the customary
established securities trading or processing practices and procedures
in the country or market in which the transaction occurs, including,
without limitation, delivering Foreign Assets to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) with
the expectation of receiving later payment for such Foreign Assets from
such purchaser or dealer.
The Custodian shall provide to the Board the information with respect
to custody and settlement practices in countries in which the Custodian
employs a Foreign Sub-Custodian, including without limitation
information relating to Foreign Securities Systems, described on
Schedule C hereto at the time or times set forth on such Schedule. The
Custodian may revise Schedule C from time to time, provided that no
such revision shall result in the Board being provided with
substantively less information than had been previously provided
hereunder.
<PAGE>
SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Custodian (other than bearer securities)
shall be registered in the name of the Fund (on behalf of the applicable
Portfolio) or in the name of the Custodian or in the name of any Foreign
Sub-Custodian or in the name of any nominee of the foregoing, and the Fund
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of the Fund (on behalf of
the applicable Portfolio) under the terms of this Contract unless the form of
such securities and the manner in which they are delivered are in accordance
with reasonable market practice.
SECTION 4.6. BANK ACCOUNTS. The Custodian shall identify on its books
as belonging to a Portfolio cash (including cash denominated in foreign
currencies) deposited with the Custodian. Where the Custodian is unable to
maintain, or market practice does not facilitate the maintenance of, cash on the
books of the Custodian, a bank account or bank accounts opened and maintained
outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian
shall be subject only to draft or order by the Custodian or such Foreign
Sub-Custodian, acting pursuant to the terms of this Contract to hold cash
received by or from or for the account of the Portfolio.
SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which a Portfolio shall be entitled and shall
credit such income, as collected, to the Portfolio. In the event that
extraordinary measures are required to collect such income, the Fund and the
Custodian shall consult as to such measures and as to the compensation and
expenses of the Custodian relating to such measures.
SECTION 4.8. SHAREHOLDER RIGHTS. With respect to the foreign securities
held under this Section 4, the Custodian will use reasonable commercial efforts
to facilitate the exercise of voting and other shareholder rights, subject
always to the laws, regulations and practical constraints that may exist in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of a Portfolio. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Fund written information so received by the
Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolio at any time held by it unless (i) the Custodian or the
respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three business days prior to the date on which the Custodian is to take
action to exercise such right or power.
<PAGE>
SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN
SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs a
Foreign Sub-Custodian shall, to the extent possible, require the Foreign
Sub-Custodian to exercise reasonable care in the performance of its duties and,
to the extent possible, to indemnify, and hold harmless, the Custodian from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with such Foreign Sub-Custodian's performance of such obligations. At
the election of the Fund, the Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a Foreign
Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund and any applicable
Portfolio has not been made whole for any such loss, damage, cost, expense,
liability or claim.
SECTION 4.11. TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the
Custodian as custodian of the Portfolios by the tax law of the United States or
of any state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund with
respect to the Portfolios or the Custodian as custodian of such Portfolios by
the tax law of countries other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4.12. CONFLICT. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of Section 3
hereof, in the event of any conflict between the provisions of Sections 3 and 4
hereof, the provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the Fund's account such payments as are
received for Shares issued or sold from time to time by the Fund. The Custodian
will provide timely notification to the Fund and the Transfer Agent of any
receipt by it of payments for Shares of the Fund.
From such funds as may be available for the purpose, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
<PAGE>
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Fund and the
Custodian agree to security procedures, including but not limited to, the
security procedures selected by the Fund in the Funds Transfer Addendum attached
hereto. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts and other
negotiable instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the securities and property of the Fund except as
otherwise directed by the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a Certified Resolution as conclusive
evidence (a) of the authority of any person to act in accordance with such
resolution or (b) of any determination or of any action by the Board as
described in such resolution, and such resolution may be considered as in full
force and effect until receipt by the Custodian of written notice to the
contrary.
<PAGE>
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board to keep the books of account of
the Fund and/or compute the net asset value per Share of the outstanding Shares
or, if directed in writing to do so by the Fund, shall itself keep such books of
account and/or compute such net asset value per Share. If so directed, the
Custodian shall also calculate daily the net income of the Fund as described in
the Prospectus and shall advise the Fund and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an officer of
the Fund to do so, shall advise the Transfer Agent periodically of the division
of such net income among its various components. The calculations of the net
asset value per Share and the daily income of the Fund shall be made at the time
or times described from time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the SEC. The Custodian shall, at
the Fund's request, supply the Fund with a tabulation of securities owned by the
Fund and held by the Custodian and shall, when requested to do so by the Fund
and for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the SEC and with respect to any other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a U.S. Securities System or a Foreign
Securities System, relating to the services provided by the Custodian under this
Agreement; such reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund to provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall be
without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by anything which is (A) part of Country Risk (as
defined in Section 3 hereof), including without limitation nationalization,
expropriation, currency restrictions, or acts of war, revolution, riots or
terrorism, or (B) part of the "prevailing country risk" of the Fund, as such
term is used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such
term or other similar terms are now or in the future interpreted by the SEC or
by the staff of the Division of Investment Management thereof.
<PAGE>
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund's assets
to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any provision
of the Fund's Declaration of Trust, and further provided, that the Fund may at
any time by action of its Board (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
<PAGE>
Upon termination of the Agreement, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund shall be appointed by the Board,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities held in a Securities System. If no
such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of a copy of a Certified Resolution, deliver at the office
of the Custodian and transfer such securities, funds and other properties in
accordance with such resolution. In the event that no written order designating
a successor custodian or copy of a Certified Resolution shall have been
delivered to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the 1940 Act, doing business
in Boston, Massachusetts, or New York, New York, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Agreement, and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Fund's Declaration of Trust. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.
<PAGE>
SECTION 18. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
SECTION 19. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all
prior Agreements between the Fund and the Custodian relating to the custody of
the Fund's assets.
SECTION 20. NOTICES.
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: GABELLI MATHERS FUND
One Corporate Center
Rye, New York 10580-1434
Attention: Bruce N. Alpert
Telephone: 914-921-5104
Telecopy: 914-921-5118
To the Custodian: STATE STREET BANK AND TRUST COMPANY
One Heritage Drive/JPB 2N
North Quincy, Massachusetts 02171
Attention: Charles R. Whittemore, Jr.
Telephone: 617-985-7809
Telecopy: 617-537-5152
Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the
next time after delivery when normal business hours commence and in the case of
cable, telex or telecopy on the business day after the receipt thereof. Evidence
that the notice was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
<PAGE>
SECTION 21. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 23. DATA ACCESS SERVICES ADDENDUM
The Custodian and the Fund agree to be bound by the terms of the Data
Access Services Addendum attached hereto.
SECTION 24. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf of its duly authorized representative and
its seal to be hereunder affixed as of October 1, 1999.
GABELLI MATHERS FUND FUND SIGNATURE ATTESTED TO BY:
By: By:
Name: Name:
Title: Title: *(secretary/ass't secretary)
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: By:
Name: Ronald E. Logue Name: Marc L. Parsons
Title: Vice Chairman Title: A.V.P. and Assoc. Counsel
FUNDS TRANSFER ADDENDUM
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
ADDENDUM TO CUSTODIAN AGREEMENT between The Gabelli Mathers Fund (the
"Customer") and State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets
of the Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") dated as of October 1, 1999;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZONSM
Accounting System, in its role as custodian of the Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain Data
Access Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
(a) System. Subject to the terms and conditions of this Agreement,
State Street hereby agrees to provide the Customer with access to State Street's
Multicurrency HORIZONSM Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports and information, solely on computer hardware,
system software and telecommunication links as listed in Attachment B (the
"Designated Configuration") of the Customer, or certain third parties approved
by State Street that serve as investment advisors or investment managers or in
other service capacities to the Customer such as the Customer's independent
auditors (each, an "Investment Advisor"), solely with respect to the Customer,
or on any designated substitute or back-up equipment configuration with State
Street's written consent, such consent not to be unreasonably withheld.
(b) Data Access Services. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
(c) Additional Services. State Street may from time to time agree to
make available to the Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, the Customer's access to and use of any additional
System made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the
Data Access Services provided under this Agreement, the Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data Access
Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Customer or the Investment Advisor located
in New York, New York ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable both
parties to perform their respective obligations under this Agreement. State
Street agrees to use commercially reasonable efforts to maintain the System so
that it remains serviceable, provided, however, that State Street does not
guarantee or assure uninterrupted remote access use of the System.
c. Scope of Use. The Customer will use the System and the Data Access Services
only for the processing of securities transactions, the keeping of books of
account for the Customer and accessing data for purposes of reporting and
analysis. The Customer shall not, and shall cause its employees and agents not
to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned System
shutdown, the Customer's access to services performed by the System or to Data
Access Services at the Designated Location may be transferred to a different
location only upon the prior written consent of State Street. In the event of an
emergency or System shutdown, the Customer may use any back-up site included in
the Designated Configuration or any other back-up site agreed to by State
Street, which agreement will not be unreasonably withheld. The Customer may
secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, the
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
g. Security Procedures. The Customer shall comply with data access operating
standards and procedures and with user identification or other password control
requirements and other security procedures as may be issued from time to time by
State Street for use of the System on a remote basis and to access the Data
Access Services. The Customer shall have access only to the Customer Data and
authorized transactions agreed upon from time to time by State Street and, upon
notice from State Street, the Customer shall discontinue remote use of the
System and access to Data Access Services for any security reasons cited by
State Street; provided, that, in such event, State Street shall, for a period
not less than 180 days (or such other shorter period specified by the Customer)
after such discontinuance, assume responsibility to provide accounting services
under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of the
System and the Data Access Services by the Customer and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to the Customer and the Investment Advisor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Customer agrees that it will hold such
Proprietary Information in the strictest confidence and secure and protect it in
a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder. The Customer further
acknowledges that State Street shall not be required to provide the Investment
Advisor with access to the System unless it has first received from the
Investment Advisor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C to this Agreement. The Customer shall
use all commercially reasonable efforts to assist State Street in identifying
and preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.
b. Cooperation. Without limitation of the foregoing, the Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and the Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief. The Customer acknowledges that the disclosure of any
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the termination of
this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. The Customer agrees that
any liability of State Street to the Customer or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount of custody fees paid by the Customer
for the preceding 24 months. In no event shall State Street be liable to the
Customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
b. Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET.
c. Third-Party Data. Organizations from which State Street may obtain certain
data included in the System or the Data Access Services are solely responsible
for the contents of such data, and State Street shall have no liability for
claims arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and the Customer, the
Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. Force Majeure. Neither party shall be liable for any costs or damages due to
delay or nonperformance under this Agreement arising out of any cause or event
beyond such party's control, including without limitation, cessation of services
hereunder or any damages resulting therefrom to the other party, or the Customer
as a result of work stoppage, power or other mechanical failure, computer virus,
natural disaster, governmental action, or communication disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from any loss,
damage or expense including reasonable attorney's fees, (a "loss") suffered by
State Street arising from (i) the negligence or willful misconduct in the use by
the Customer of the Data Access Services or the System, including any loss
incurred by State Street resulting from a security breach at the Designated
Location or committed by the Customer's employees or agents or the Investment
Advisor and (ii) any loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely on the validity
and authenticity of Client Originated Electronic Financial Instructions without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by the Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated State
Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. The Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. The Customer shall have the following responsibilities
in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely
acquisition and maintenance of the hardware and software that
attach to the Designated Configuration in order to use the
Data Access Services at the Designated Location.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the
Installation and Conversion phase of the System implementation
to enable both parties to perform their respective obligations
under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Agreement. Either party may terminate this Agreement
(i) for any reason by giving the other party at least one-hundred and eighty
days' prior written notice in the case of notice of termination by State Street
to the Customer or thirty days' notice in the case of notice from the Customer
to State Street of termination; or (ii) immediately for failure of the other
party to comply with any material term and condition of the Agreement by giving
the other party written notice of termination. In the event the Customer shall
cease doing business, shall become subject to proceedings under the bankruptcy
laws (other than a petition for reorganization or similar proceeding) or shall
be adjudicated bankrupt, this Agreement and the rights granted hereunder shall,
at the option of State Street, immediately terminate with notice to the
Customer. This Agreement shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. Termination of the Right to Use. Upon termination of this Agreement for any
reason, any right to use the System and access to the Data Access Services shall
terminate and the Customer shall immediately cease use of the System and the
Data Access Services. Immediately upon termination of this Agreement for any
reason, the Customer shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either party terminates this Agreement or the Custodian Agreement
for any reason other than the Customer's breach, State Street shall provide the
Data Access Services for a period of time and at a price to be agreed upon by
the parties.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations of the
Customer and State Street hereunder shall not be assigned by either party
without the prior written consent of the other party, except that State Street
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. Entire Agreement. This Agreement and the attachments hereto
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersedes any and all prior
or contemporaneous representations or agreements, whether oral or written,
between the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing duly executed by
the parties. This Agreement is not intended to supersede or modify the duties
and liabilities of the parties hereto under the Custodian Agreement or any other
agreement between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the System. No
single waiver of any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall be held
to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
<PAGE>
ATTACHMENT A
Multicurrency HORIZONSM Accounting System
System Product Description
I. The Multicurrency HORIZONSM Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The Undersigned understands that in the course of its employment as
Investment Advisor to The Gabelli Mathers Fund (the "Customer") it will have
access to State Street Bank and Trust Company's ("State Street") Multicurrency
HORIZONSM Accounting System and other information systems (collectively, the
"System").
The Undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation and other information made available to the
Undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade secret,
or other proprietary information of substantial value to State Street. Any and
all such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
GABELLI FUNDS, LLC
By:
Title:
Date:
<PAGE>
Undertaking
The Undersigned understands that in the course of its employment as
Independent Accountants to The Gabelli Mathers Fund (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZONSM Accounting System and other information systems
(collectively, the "System").
The Undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation and other information made available to the
Undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade secret,
or other proprietary information of substantial value to State Street. Any and
all such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
ERNST & YOUNG LLP
By:
Title:
Date:
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's Multicurrency HORIZONSM Help Desk and Customer Assistance Center
between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for
the purpose of obtaining answers to questions about the use of the System, or to
report apparent problems with the System. From time to time, the Customer shall
provide to State Street a list of persons, not to exceed five in number, who
shall be permitted to contact State Street for assistance (such persons being
referred to as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
support the Customer's use of the System: (i) for use on any computer equipment
or telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Agreement.
<PAGE>
(State Street Graphic Omitted)
FUNDS TRANSFER ADDENDUM
OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit
Client's (as named below) account(s) upon the receipt of a payment order in
compliance with the selected Security Procedure chosen for funds transfer and in
the amount of money that State Street has been instructed to transfer. State
Street shall execute payment orders in compliance with the Security Procedure
and with the Client's instructions on the execution date provided that such
payment order is received by the customary deadline for processing such a
request, unless the payment order specifies a later time. All payment orders and
communications received after this time will be deemed to have been received on
the next business day.
2. SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it
has designated on the Selection Form was selected by the Client from Security
Procedures offered by State Street. The Client shall restrict access to
confidential information relating to the Security Procedure to authorized
persons as communicated in writing to State Street. The Client must notify State
Street immediately if it has reason to believe unauthorized persons may have
obtained access to such information or of any change in the Client's authorized
personnel. State Street shall verify the authenticity of all instructions
according to the Security Procedure.
3. ACCOUNT NUMBERS: State Street shall process all payment orders on the basis
of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern.
4. REJECTION: State Street reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of State Street's receipt of such payment
order; (b) if initiating such payment order would cause State Street, in State
Street's sole judgment, to exceed any volume, aggregate dollar, network, time,
credit or similar limits upon wire transfers which are applicable to State
Street; or (c) if State Street, in good faith, is unable to satisfy itself that
the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act
on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are received
in a timely manner affording State Street reasonable opportunity to act.
However, State Street assumes no liability if the request for amendment or
cancellation cannot be satisfied.
6. ERRORS: State Street shall assume no responsibility for failure to detect any
erroneous payment order provided that State Street complies with the payment
order instructions as received and State Street complies with the Security
Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
7. INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility
for lost interest with respect to the refundable amount of any unauthorized
payment order, unless State Street is notified of the unauthorized payment order
within thirty (30) days of notification by State Street of the acceptance of
such payment order. In no event shall State Street be liable for special,
indirect or consequential damages, even if advised of the possibility of such
damages and even for failure to execute a payment order.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When a
Client initiates or receives ACH credit and debit entries pursuant to these
Guidelines and the rules of the National Automated Clearing House Association
and the New England Clearing House Association, State Street will act as an
Originating Depository Financial Institution and/or Receiving Depository
Institution, as the case may be, with respect to such entries. Credits given by
State Street with respect to an ACH credit entry are provisional until State
Street receives final settlement for such entry from the Federal Reserve Bank.
If State Street does not receive such final settlement, the Client agrees that
State Street shall receive a refund of the amount credited to the Client in
connection with such entry, and the party making payment to the Client via such
entry shall not be deemed to have paid the amount of the entry.
9. CONFIRMATION STATEMENTS: Confirmation of State Street's execution of payment
orders shall ordinarily be provided within 24 hours notice which may be
delivered through State Street's proprietary information systems, such as, but
not limited to Horizon and GlobalQuest(R), or by facsimile or callback. The
Client must report any objections to the execution of a payment order within 30
days.
<PAGE>
Security Procedure(s) Selection Form
Please select one or more of the funds transfer security procedures indicated
below.
SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions.
Selection of this security procedure would be most appropriate for existing
SWIFT members.
Standing Instructions
Standing Instructions may be used where funds are transferred to a broker on the
Client's established list of brokers with which it engages in foreign exchange
transactions. Only the date, the currency and the currency amount are variable.
In order to establish this procedure, State Street will send to the Client a
list of the brokers that State Street has determined are used by the Client. The
Client will confirm the list in writing, and State Street will verify the
written confirmation by telephone. Standing Instructions will be subject to a
mutually agreed upon limit. If the payment order exceeds the established limit,
the Standing Instruction will be confirmed by telephone prior to execution.
Remote Batch Transmission
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and State Street. Security procedures include
encryption and or the use of a test key by those individuals authorized as
Automated Batch Verifiers. Clients selecting this option should have an existing
facility for completing CPU-CPU transmissions. This delivery mechanism is
typically used for high-volume business.
Global Horizon Interchangesm Funds Transfer Service
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients to
electronically transmit authenticated Fedwire, CHIPS or internal book transfer
instructions to State Street. This delivery mechanism is most appropriate for
Clients with a low-to-medium number of transactions (5-75 per day), allowing
Clients to enter, batch, and review wire transfer instructions on their PC prior
to release to State Street.
Telephone Confirmation (Callback)
Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the signature
of an authorized person and prior to execution, will contact someone other than
the originator at the Client's location to authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.
Repetitive Wires
For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires will
be subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the instruction will be confirmed by telephone prior to
execution. Telephone confirmation is used to establish this process. Repetitive
wire instructions must be reconfirmed annually. This alternative is recommended
whenever funds are frequently transferred between the same two accounts.
Transfers Initiated by Facsimile
The Client faxes wire transfer instructions directly to State Street Mutual Fund
Services. Standard security procedure requires the use of a random number test
key for all transfers. Every six months the Client receives test key logs from
State Street. The test key contains alpha-numeric characters, which the Client
puts on each document faxed to State Street. This procedure ensures all wire
instructions received via fax are authorized by the Client. We provide this
option for Clients who wish to batch wire instructions and transmit these as a
group to State Street Mutual Fund Services once or several times a day.
Automated Clearing House (ACH)
State Street receives an automated transmission or a magnetic tape from a Client
for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. Clients using ACH must select one or more
of the following delivery options:
Global Horizon Interchange Automated Clearing House Service
Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.
Transmission from Client PC to State Street Mainframe with Telephone Callback
Transmission from Client Mainframe to State Street Mainframe with Telephone
Callback
Transmission from DST Systems to State Street Mainframe with Encryption
Magnetic Tape Delivered to State Street with Telephone Callback
State Street is hereby instructed to accept funds transfer instructions only via
the delivery methods and security procedures indicated. The selected delivery
methods and security procedure(s) will be effective for payment orders initiated
by our organization.
Key Contact Information
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
Name Name
Address Address
City/State/Zip Code City/State/Zip Code
Telephone Number Telephone Number
Facsimile Number Facsimile Number
SWIFT Number
Telex Number
Exhibit h(2)
FORM OF
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE GABELLI MATHERS FUND
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Terms of Appointment and Duties..........................................1
2. Third Party Administrators for Defined Contribution Plans ...............4
3. Fees and Expenses........................................................5
4. Representations and Warranties of the Transfer Agent.....................6
5. Representations and Warranties of the Fund...............................6
6. Wire Transfer Operating Guidelines.......................................7
7. Data Access and Proprietary Information..................................8
8. Indemnification.........................................................10
9. Standard of Care........................................................11
10. Year 2000...............................................................12
11. Confidentiality ........................................................12
12. Covenants of the Fund and the Transfer Agent............................13
13. Termination of Agreement................................................13
14. Assignment and Third Party Beneficiaries................................14
15. Subcontractors..........................................................14
16. Miscellaneous...........................................................15
17. Additional Funds........................................................16
18. Limitations of Liability of the Trustees and Shareholders...............16
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1999, by and between THE GABELLI MATHERS FUND
, a Delaware business trust, having its principal office and place of business
at One Corporate Center, Rye, New York 10580 (the "Fund"), and STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company having its principal office and
place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the
"Transfer Agent").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund intends to initially offer shares in [ ] series, such series
shall be named in the attached Schedule A which may be amended by the parties
from time to time (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Section 17, being herein referred to as a "Portfolio", and collectively as the
"Portfolios"); and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Transfer
Agent as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Transfer Agent desires to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. Terms of Appointment and Duties
1.1 Transfer Agency Services. Subject to the terms and conditions set forth
in this Agreement, the Fund, on behalf of the Portfolios, hereby
employs and appoints the Transfer Agent to act as, and the Transfer
Agent agrees to act as its transfer agent for the Fund's authorized and
issued shares of its beneficial interest, $ [.001] par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plan provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program. In accordance with procedures established from time
to time by agreement between the Fund on behalf of each of the
Portfolios, as applicable and the Transfer Agent, the Transfer Agent
agrees that it will perform the following services:
(a) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of Trust
of the Fund (the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(c) Receive for acceptance redemption requests and redemption directions and
deliver the appropriate documentation thereof to the Custodian;
(d) In respect to the transactions in items (a), (b) and (c) above, the
Transfer Agent shall execute transactions directly with broker-dealers
authorized by the Fund;
(e) At the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(f) Effect transfers of Shares by the registered owners thereof upon receipt of
appropriate instructions;
(g) Prepare and transmit payments for dividends and distributions declared by
the Fund on behalf of the applicable Portfolio;
(h) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Transfer Agent
of indemnification satisfactory to the Transfer Agent and protecting
the Transfer Agent and the Fund, and the Transfer Agent at its option,
may issue replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such indemnity;
(i) Maintain records of account for and advise the Fund and its Shareholders as
to the foregoing; and
(j) Record the issuance of Shares of the Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record of the total number of Shares of the Fund
which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Transfer Agent shall also provide the Fund
on a regular basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation, when recording
the issuance of Shares, to monitor the issuance of such Shares or to
take cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the Fund.
1.2 Additional Services. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph, the
Transfer Agent shall perform the following services:
(a) Other Customary Services. Perform the customary services of a
transfer agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plan (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing Shareholder
proxies, Shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts,
preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions
by federal authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for all
purchases and redemptions of Shares and other confirmable transactions
in Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(b) Control Book (also known as "Super Sheet"). Maintain a daily record
and produce a daily report for the Fund of all transactions and
receipts and disbursements of money and securities and deliver a copy
of such report for the Fund for each business day to the Fund no later
than 9:00 AM Eastern Time, or such earlier time as the Fund may
reasonably require, on the next business day.
(c) "Blue Sky" Reporting. The Fund shall (i) identify to the Transfer
Agent in writing those transactions and assets to be treated as exempt
from blue sky reporting for each State; and (ii) verify the
establishment of transactions for each State on the system prior to
activation and thereafter monitor the daily activity for each State.
The responsibility of the Transfer Agent for the Fund's blue sky State
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and providing a
system which will enable the Fund to monitor the total number of Shares
sold in each State.
(d) National Securities Clearing Corporation (the "NSCC"). (i) accept
and effectuate the registration and maintenance of accounts through
Networking and the purchase, redemption, transfer and exchange of
shares in such accounts through Fund/SERV (networking and Fund/SERV
being programs operated by the NSCC on behalf of NSCC's participants,
including the Fund), in accordance with, instructions transmitted to
and received by the Transfer Agent by transmission from NSCC on behalf
of broker-dealers and banks which have been established by, or in
accordance with the instructions of authorized persons, as hereinafter
defined on the dealer file maintained by the Transfer Agent; (ii) issue
instructions to Fund's banks for the settlement of transactions between
the Fund and NSCC (acting on behalf of its broker-dealer and bank
participants); (iii) provide account and transaction information from
the affected Fund's records on DST Systems, Inc. computer system TA2000
("TA2000 System") in accordance with NSCC's Networking and Fund/SERV
rules for those broker-dealers; and (iv) maintain Shareholder accounts
on TA2000 System through Networking.
(e) New Procedures. New procedures as to who shall provide certain of
these services in Section 1 may be established in writing from time to
time by agreement between the Fund and the Transfer Agent. The Transfer
Agent may at times perform only a portion of these services and the
Fund or its agent may perform these services on the Fund's behalf.
<PAGE>
(f) Additional Telephone Support Services. If the parties elect to have
the Transfer Agent provide additional telephone support services under
this Agreement, the parties will agree to such services, fees and
sub-contracting as stated in Schedule 1.2(f) entitled "Telephone
Support Services" attached hereto.
2. Third Party Administrators for Defined Contribution Plans
2.1 The Fund may decide to make available to certain of its customers, a
qualified plan program (the "Program") pursuant to which the customers
("Employers") may adopt certain plans of deferred compensation ("Plan
or Plans") for the benefit of the individual Plan participant (the
"Plan Participant"), such Plan(s) being qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended ("Code") and
administered by third party administrators which may be plan
administrators as defined in the Employee Retirement Income Security
Act of 1974, as amended)(the "TPA(s)").
2.2 In accordance with the procedures established in the initial Schedule
2.1 entitled "Third Party Administrator Procedures", as may be amended
by the Transfer Agent and the Fund from time to time ("Schedule 2.1"),
the Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in the name of the
Trustees, Plans or TPAs as the case may be as omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of the TPA or its
designee as the Trustee for the benefit of the Plan; and
(c) Perform all services under Section 1 as transfer agent of the Funds and not
as a --------- record-keeper for the Plans.
2.3 Transactions identified under Section 2 of this Agreement shall be
deemed exception services ("Exception Services") when such
transactions:
(a) Require the Transfer Agent to use methods and procedures
other than those usually employed by the Transfer Agent to perform
services under Section 1 of this Agreement;
(b) Involve the provision of information to the Transfer Agent after the
commencement of the nightly processing cycle of the TA2000 System; or
(c) Require more manual intervention by the Transfer Agent, either in
the entry of data or in the modification or amendment of reports
generated by the TA2000 System than is usually required by
non-retirement plan and pre-nightly transactions.
<PAGE>
3. Fees and Expenses
3.1 Fee Schedule. For the performance by the Transfer Agent pursuant to
this Agreement, the Fund agrees to pay the Transfer Agent an annual
maintenance fee for each Shareholder account as set forth in the
attached fee schedule ("Schedule 3.1"). Such fees and out-of-pocket
expenses and advances identified under Section 3.2 below may be changed
from time to time subject to mutual written agreement between the Fund
and the Transfer Agent.
3.2 Out-of-Pocket Expenses. In addition to the fee paid under Section 3.1
above, the Fund agrees to reimburse the Transfer Agent for
out-of-pocket expenses, including but not limited to confirmation
production, postage, forms, telephone, microfilm, microfiche, mailing
and tabulating proxies, records storage, or advances incurred by the
Transfer Agent for the items set out in Schedule 3.1 attached hereto.
In addition, any other expenses incurred by the Transfer Agent at the
request or with the consent of the Fund, will be reimbursed by the
Fund.
3.3 Postage. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all shareholder accounts shall be advanced to the
Transfer Agent by the Fund at least seven (7) days prior to the mailing
date of such materials.
3.4 Invoices. The Fund agrees to pay all fees and reimbursable expenses
within thirty (30) days following the receipt of the respective billing
notice, except for any fees or expenses which are subject to good faith
dispute. In the event of such a dispute, the Fund may only withhold
that portion of the fee or expense subject to the good faith dispute.
The Fund shall notify the Transfer Agent in writing within twenty-one
(21) calendar days following the receipt of each billing notice if the
Fund is disputing any amounts in good faith. If the Fund does not
provide such notice of dispute within the required time, the billing
notice will be deemed accepted by the Fund.
4. Representations and Warranties of the Transfer Agent
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
4.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
5. Representations and Warranties of the Fund
The Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
5.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
5.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
5.4 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as amended
is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale.
6. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial Code
6.1 The Transfer Agent is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for funds
transfer and in the amount of money that the Transfer Agent has been
instructed to transfer. The Transfer Agent shall execute payment orders
in compliance with the Security Procedure and with the Fund
instructions on the execution date provided that such payment order is
received by the customary deadline for processing such a request,
unless the payment order specifies a later time. All payment orders and
communications received after this the customary deadline will be
deemed to have been received the next business day.
6.2 The Fund acknowledges that the Security Procedure it has designated on
the Fund Selection Form was selected by the Fund from security
procedures offered by the Transfer Agent. The Fund shall restrict
access to confidential information relating to the Security Procedure
to authorized persons as communicated to the Transfer Agent in writing.
The Fund must notify the Transfer Agent immediately if it has reason to
believe
<PAGE>
unauthorized persons may have obtained access to such information or of any
change in the Fund's authorized personnel. The Transfer Agent shall
verify the authenticity of all Fund instructions according to the
Security Procedure.
6.3 The Transfer Agent shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the
account number, the account number shall take precedence and govern.
6.4 The Transfer Agent reserves the right to decline to process or delay
the processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of the
Transfer Agent's receipt of such payment order; (b) if initiating such
payment order would cause the Transfer Agent, in the Transfer Agent's
sole judgement, to exceed any volume, aggregate dollar, network, time,
credit or similar limits which are applicable to the Transfer Agent; or
(c) if the Transfer Agent, in good faith, is unable to satisfy itself
that the transaction has been properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are
received in a timely manner affording the Transfer Agent reasonable
opportunity to act. However, the Transfer Agent assumes no liability if
the request for amendment or cancellation cannot be satisfied.
6.6 The Transfer Agent shall assume no responsibility for failure to detect
any erroneous payment order provided that the Transfer Agent complies
with the payment order instructions as received and the Transfer Agent
complies with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders only and
not for the detection of errors in payment orders.
6.7 The Transfer Agent shall assume no responsibility for lost interest
with respect to the refundable amount of any unauthorized payment
order, unless the Transfer Agent is notified of the unauthorized
payment order within thirty (30) days of notification by the Transfer
Agent of the acceptance of such payment order. In no event (including
failure to execute a payment order) shall the Transfer Agent be liable
for special, indirect or consequential damages, even if advised of the
possibility of such damages.
6.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the
National Automated Clearing House Association and the New England
Clearing House Association, the Transfer Agent will act as an
Originating Depository Financial Institution and/or receiving
depository Financial Institution, as the case may be, with respect to
such entries. Credits given by the Transfer Agent with respect to an
ACH credit entry are provisional until the Transfer Agent receives
final settlement for such entry from the Federal Reserve Bank. If the
Transfer Agent does not receive such final settlement, the Fund agrees
that the Transfer Agent shall receive a refund of the amount credited
to the Fund in connection with such entry, and the party making payment
to the Fund via such entry shall not be deemed to have paid the amount
of the entry.
6.9 Confirmation of Transfer Agent's execution of payment orders shall
ordinarily be provided within twenty four (24) hours notice of which
may be delivered through the Transfer Agent's proprietary information
systems, or by facsimile or call-back. Fund must report any objections
to the execution of an order within thirty (30) days.
7. Data Access and Proprietary Information
7.1 The Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Transfer Agent as
part of the Fund's ability to access certain Fund-related data
("Customer Data") maintained by the Transfer Agent on databases under
the control and ownership of the Transfer Agent or other third party
("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of
substantial value to the Transfer Agent or other third party. In no
event shall Proprietary Information be deemed Customer Data. The Fund
agrees to treat all Proprietary Information as proprietary to the
Transfer Agent and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents to:
(a) Use such programs and databases (i) solely on the Fund's computers,
or (ii) solely from equipment at the location agreed to between the
Fund and the Transfer Agent and (iii) solely in accordance with the
Transfer Agent's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in the
normal course of performing processing on the Fund's computer(s)), the
Proprietary Information;
(c) Refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted from the
Transfer Agent's computer to the Fund's terminal to be retransmitted to
any other computer terminal or other device except as expressly
permitted by the Transfer Agent (such permission not to be unreasonably
withheld);
(e) Allow the Fund to have access only to those authorized transactions
as agreed to between the Fund and the Transfer Agent; and
<PAGE>
(f) Honor all reasonable written requests made by the Transfer
Agent to protect at the Transfer Agent's expense the rights of the
Transfer Agent in Proprietary Information at common law, under federal
copyright law and under other federal or state law.
7.2 Proprietary Information shall not include all or any portion of any of
the foregoing items that: (i) are or become publicly available without
breach of this Agreement; (ii) are released for general disclosure by a
written release by the Transfer Agent; or (iii) are already in the
possession of the receiving party at the time or receipt without
obligation of confidentiality or breach of this Agreement.
7.3 The Fund acknowledges that its obligation to protect the Transfer
Agent's Proprietary Information is essential to the business interest
of the Transfer Agent and that the disclosure of such Proprietary
Information in breach of this Agreement would cause the Transfer Agent
immediate, substantial and irreparable harm, the value of which would
be extremely difficult to determine. Accordingly, the parties agree
that, in addition to any other remedies that may be available in law,
equity, or otherwise for the disclosure or use of the Proprietary
Information in breach of this Agreement, the Transfer Agent shall be
entitled to seek and obtain a temporary restraining order, injunctive
relief, or other equitable relief against the continuance of such
breach.
7.4 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Transfer Agent shall
endeavor in a timely manner to correct such failure. Organizations from
which the Transfer Agent may obtain certain data included in the Data
Access Services are solely responsible for the contents of such data
and the Fund agrees to make no claim against the Transfer Agent arising
out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY
DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.5 If the transactions available to the Fund include the ability to
originate electronic instructions to the Transfer Agent in order to:
(i) effect the transfer or movement of cash or Shares; or (ii) transmit
Shareholder information or other information, then in such event the
Transfer Agent shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further
inquiry as long as such instruction is undertaken in conformity with
security procedures established by the Transfer Agent from time to
time.
7.6 Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Section 7. The obligations of this
Section shall survive any earlier termination of this Agreement.
8. Indemnification
8.1 The Transfer Agent shall not be responsible for, and the Fund shall
indemnify and hold the Transfer Agent harmless from and against, any
and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or willful
misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct;
(c) The reliance upon, and any subsequent use of or action taken or
omitted, by the Transfer Agent, or its agents or subcontractors on: (i)
any information, records, documents, data, stock certificates or
services, which are received by the Transfer Agent or its agents or
subcontractors by machine readable input, facsimile, CRT data entry,
electronic instructions or other similar means authorized by the Fund,
and which have been prepared, maintained or performed by the Fund or
any other person or firm on behalf of the Fund including but not
limited to any previous transfer agent or registrar; (ii) any
instructions or requests of the Fund or any of its officers; (iii) any
instructions or opinions of legal counsel with respect to any matter
arising in connection with the services to be performed by the Transfer
Agent under this Agreement which are provided to the Transfer Agent
after consultation with such legal counsel; or (iv) any paper or
document, reasonably believed to be genuine, authentic, or signed by
the proper person or persons;
(d) The offer or sale of Shares in violation of federal or
state securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other determination or
ruling by any federal or any state agency with respect to the offer or
sale of such Shares;
(e) The negotiation and processing of any checks including
without limitation for deposit into the Fund's demand deposit account
maintained by the Transfer Agent; or
(f) Upon the Fund's request entering into any agreements
required by the National Securities Clearing Corporation (the "NSCC")
for the transmission of Fund or Shareholder data through the NSCC
clearing systems.
8.2 In order that the indemnification provisions contained in this Section
8 shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Transfer Agent, the Transfer Agent shall
promptly notify the Fund of such assertion, and shall keep the Fund
advised with respect to all developments concerning such claim. The
Fund shall have the option to participate with the Transfer Agent in
the defense of such claim or to defend against said claim in its own
name or in the name of the Transfer Agent. The Transfer Agent shall in
no case confess any claim or make any compromise in any case in which
the Fund may be required to indemnify the Transfer Agent except with
the Fund's prior written consent.
9. Standard of Care
9.1 The Transfer Agent shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of
all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct or that of its employees, except as provided in Section 9.2
below.
9.2 In the case of Exception Services as defined in Section 2.3 herein, the
Transfer Agent shall be held to a standard of gross negligence and
encoding and payment processing errors shall not be deemed negligence.
10. Year 2000
The Transfer Agent will take reasonable steps to ensure that its
products (and those of its third-party suppliers) reflect the available
technology to offer products that are Year 2000 ready, including, but
not limited to, century recognition of dates, calculations that
correctly compute same century and multi century formulas and date
values, and interface values that reflect the date issues arising
between now and the next one-hundred years, and if any changes are
required, the Transfer Agent will make the changes to its products at a
price to be agreed upon by the parties and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
11. Confidentiality
11.1 The Transfer Agent and the Fund agree that they will not, at any time
during the term of this Agreement or after its termination, reveal,
divulge, or make known to any person, firm, corporation or other
business organization, any customers' lists, trade secrets, cost
figures and projections, profit figures and projections, or any other
secret or confidential information whatsoever, whether of the Transfer
Agent or of the Fund, used or gained by the Transfer Agent or the Fund
during performance under this Agreement. The Fund and the Transfer
Agent further covenant and agree to retain all such knowledge and
information acquired during and after the term of this Agreement
respecting such lists, trade secrets, or any secret or confidential
information whatsoever in trust for the sole benefit of the Transfer
Agent or the Fund and their successors and assigns. In the event of
breach of the foregoing by either party, the remedies provided by
Section 7.3 shall be available to the party whose confidential
information is disclosed. The above prohibition of disclosure shall not
apply to the extent that the Transfer Agent must disclose such data to
its sub-contractor or Fund agent for purposes of providing services
under this Agreement.
11.2 In the event that any requests or demands are made for the inspection
of the Shareholder records of the Fund, other than request for records
of Shareholders pursuant to standard subpoenas from state or federal
government authorities (i.e., divorce and criminal actions), the
Transfer Agent will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such
inspection. The Transfer Agent expressly reserves the right, however,
to exhibit the Shareholder records to any person whenever it is advised
by counsel that it may be held liable for the failure to exhibit the
Shareholder records to such person or if required by law or court
order.
12. Covenants of the Fund and the Transfer Agent
12.1 The Fund shall promptly furnish to the Transfer Agent the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Transfer Agent and the
execution and delivery of this Agreement; and
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
12.3 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable.
To the extent required by Section 31 of the Investment Company Act of
1940, as amended, and the Rules thereunder, the Transfer Agent agrees
that all such records prepared or maintained by the Transfer Agent
relating to the services to be performed by the Transfer Agent
hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in
accordance with its request.
<PAGE>
13. Termination of Agreement
13.1 This Agreement may be terminated by either party upon one-hundred twenty
(120) days written notice to the other.
13.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund. Additionally, the Transfer Agent reserves the right
to charge for any other reasonable expenses associated with such
termination and a charge equivalent to the average of three (3) months'
fees. Payment of such expenses or costs shall be in accordance with
Section 3.4 of this Agreement.
13.3 Upon termination of this Agreement, each party shall return to the
other party all copies of confidential or proprietary materials or
information received from such other party hereunder, other than
materials or information required to be retained by such party under
applicable laws or regulations.
14. Assignment and Third Party Beneficiaries.
14.1 Except as provided in Section 15.1 below and the Additional Telephone
Support Services Schedule 1.2(f) attached, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party. Any attempt to do so in
violation of this Section shall be void. Unless
<PAGE>
specifically stated to the contrary in any written consent to an assignment,
no assignment will release or discharge the assignor from any duty or
responsibility under this Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits in
this Agreement to anyone other than the Transfer Agent and the Fund,
and the duties and responsibilities undertaken pursuant to this
Agreement shall be for the sole and exclusive benefit of the Transfer
Agent and the Fund. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns.
14.3 This Agreement does not constitute an agreement for a partnership or
joint venture between the Transfer Agent and the Fund. Other than as
provided in Section 15.1 and Schedule 1.2(f), neither party shall make
any commitments with third parties that are binding on the other party
without the other party's prior written consent.
15. Subcontractors
15.1 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial
Data Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended, (ii) a BFDS subsidiary
duly registered as a transfer agent or (iii) a BFDS affiliate duly
registered as a transfer agent; provided, however, that the Transfer
Agent shall be fully responsible to the Fund for the acts and omissions
of BFDS or its subsidiary or affiliate as it is for its own acts and
omissions.
15.2 Nothing herein shall impose any duty upon the Transfer Agent in
connection with or make the Transfer Agent liable for the actions or
omissions to act of unaffiliated third parties such as by way of
example and not limitation, Airborne Services, Federal Express, United
Parcel Service, the U.S. Mails, the NSCC and telecommunication
companies, provided, if the Transfer Agent selected such company, the
Transfer Agent shall have exercised due care in selecting the same.
16. Miscellaneous
16.1 Amendment. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
16.2 Massachusetts Law to Apply. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
16.3 Force Majeure. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond
its control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
16.4 Consequential Damages. Neither party to this Agreement shall be liable
to the other party for consequential damages under any provision of
this Agreement or for any consequential damages arising out of any act
or failure to act hereunder.
16.5 Survival. All provisions regarding indemnification, warranty,
liability, and limits thereon, and confidentiality and/or protections
of proprietary rights and trade secrets shall survive the termination
of this Agreement.
16.6 Severability. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
16.7 Priorities Clause. In the event of any conflict, discrepancy or
ambiguity between the terms and conditions contained in this Agreement
and any Schedules or attachments hereto, the terms and conditions
contained in this Agreement shall take precedence.
16.8 Waiver. No waiver by either party or any breach or default of any of
the covenants or conditions herein contained and performed by the other
party shall be construed as a waiver of any succeeding breach of the
same or of any other covenant or condition.
16.9 Merger of Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
16.10 Counterparts. This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
16.11. Reproduction of Documents. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process. The parties hereto each agree
that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether
or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and
that any enlargement, facsimile or further reproduction shall likewise
be admissible in evidence.
16.12 Notices. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other.
(a) If to State Street Bank and Trust Company, to:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, Massachusetts 02171
Attention: Legal Department
Facsimile: (617) 774-2287
(b) If to the Fund, to:
Attention:
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the attached Schedule A with respect to which it desires to
have the Transfer Agent render services as transfer agent under the
terms hereof, it shall so notify the Transfer Agent in writing, and if
the Transfer Agent agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
18. Limitations of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or Shareholders
individually but are binding only upon the assets and property of the
Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
THE GABELLI MATHERS FUND
BY: ___________________________________
ATTEST:
- --------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: _______________________________
Vice Chairman
ATTEST:
- --------------------------------
SCHEDULE A
[Fund List]
THE GABELLI MATHERS FUND STATE STREET BANK AND TRUST COMPANY
BY:_________________________________ BY:__________________________________
SCHEDULE 1.2(f)
ADDITIONAL TELEPHONE SUPPORT FEES AND SERVICES
Dated ____________
I. SERVICES
1. Transfer Agent and Telephone Support Functions
a. Answer telephone inquiries from [XXX 8 a.m. to 8 p.m. Boston time
Monday through Friday except Christmas Day XXX] [XXX OTHER HOLIDAY
COVERAGE AVAILABLE?XXX] from [XXX existing customers and prospective
customers XXX] of the Fund [XXX for sales literature XXX] in accordance
with the telephone script provided by the Fund.
b. Answer questions pertaining thereto the extent that such questions are
answerable based upon the information supplied to the Transfer Agent by
the Fund.
c. [XXX As the Fund and the Transfer Agent may agree in writing, the
Transfer Agent will receive calls and take written transaction requests
from shareholders of the Fund. Transfer Agent transactions include:
[XXX telephone redemptions, account maintenance, exchanges, transfers,
confirmed purchases, account balances and general inquiries XXX]. Some
transactions may result in research which will be done by the Fund.
Other calls may be referred directly to the Fund. Fax any referrals to
[XXX name of company XXX] on the same day the telephone call is
received.XXX];
2.Incorporate new information into the above referenced script upon written
instructions from the Fund;
3.Maintain prospect detail information for six (6) months thereafter, provide
such information to the Fund in the form that the Fund may reasonably
request;
4.Sendall literature orders for information from BFDS/DST [XXX [how?] [to
whom?] XXX] a minimum of [XXX one XXX] transmission per day;
5.Provide the Fund with a [XXX daily/weekly/monthly XXX] telephone report
detailing the calls received during the [XXX day/week/month XXX];
6.[XXX Provide the Fund with monthly conversion reports as selected by the Fund
from DST's standard report package. XXX]
<PAGE>
7.TARGET SERVICE LEVELS: Average speed of answer is fifteen (15) seconds,
abandon rate of no more than 2%, and an overall service level of 85%.
The averages will be calculated on a weekly basis.
II. SUBCONTRACTORS
1. The Transfer Agent may, without further consent on the part of the
Fund, subcontract ministerial telephone support services for the
performance hereof.
III. FEES
THE GABELLI MATHERS FUND STATE STREET BANK AND TRUST COMPANY
BY:_______________________________ BY:______________________________
<PAGE>
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated ____________
1. On each Business Day, the TPA(s) shall receive, on behalf of and as
agent of the Fund(s), Instructions (as hereinafter defined) from the
Plan. Instructions shall mean as to each Fund (i) orders by the Plan
for the purchases of Shares, and (ii) requests by the Plan for the
redemption of Shares; in each case based on the Plan's receipt of
purchase orders and redemption requests by Participants in proper form
by the time required by the term of the Plan, but not later than the
time of day at which the net asset value of a Fund is calculated, as
described from time to time in that Fund's prospectus. Each Business
Day on which the TPA receives Instructions shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such Instructions, to
the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it
accepted Instructions for the purchase and redemption of Shares, (TD+1), the
TPA(s) shall notify the Transfer Agent of the net amount of such purchases or
redemptions, as the case may be, for each of the Plans. In the case of net
purchases by any Plan, the TPA(s) shall instruct the Trustees of such Plan to
transmit the aggregate purchase price for Shares by wire transfer to the
Transfer Agent on (TD+1). In the case of net redemptions by any Plan, the TPA(s)
shall instruct the Fund's custodian to transmit the aggregate redemption
proceeds for Shares by wire transfer to the Trustees of such Plan on (TD+1). The
times at which such notification and transmission shall occur on (TD+1) shall be
as mutually agreed upon by each Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan, which record
shall reflect Shares purchased and redeemed, including the date and
price for all transactions, and Share balances. The TPA(s) shall
maintain on behalf of each of the Plans a single master account with
the Transfer Agent and such account shall be in the name of that Plan,
the TPA(s), or the nominee of either thereof as the record owner of
Shares owned by such Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of
Shares and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that
Plan as of the statement closing date, purchases and redemptions of
Shares by the Plan during the period covered by the statement, and the
dividends and other distributions paid to the Plan on Shares during the
statement period (whether paid in cash or reinvested in Shares).
7. The TPA(s) shall, at the request and expense of each Fund, transmit to
the Plans prospectuses, proxy materials, reports, and other information
provided by each Fund for delivery to its shareholders.
8. The TPA(s) shall, at the request of each Fund, prepare and transmit to
each Fund or any agent designated by it such periodic reports covering
Shares of each Plan as each Fund shall reasonably conclude are
necessary to enable the Fund to comply with state Blue Sky
requirements.
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders
and redemption requests placed by the Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account balance
information for the Plan(s) and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses,
proxy materials, periodic reports and other materials relating to each
Fund be furnished to Participants in which event the Transfer Agent or
each Fund shall mail or cause to be mailed such materials to
Participants. With respect to any such mailing, the TPA(s) shall, at
the request of the Transfer Agent or each Fund, provide at the TPA(s)'s
expense complete and accurate set of mailing labels with the name and
address of each Participant having an interest through the Plans in
Shares.
THE GABELLI MATHERS FUND STATE STREET BANK AND TRUST COMPANY
BY:__________________________________ BY:_________________________________
<PAGE>
SCHEDULE 3.1
FEES
Dated ____________
THE GABELLI MATHERS FUND STATE STREET BANK AND TRUST COMPANY
BY:_________________________________ BY:__________________________________
Exhibit (i)
The Gabelli Mathers Fund
September 27, 1999
The Gabelli Mathers Fund
One Corporate Center
Rye, NY 10580
Re: The Gabelli Mathers Fund
Registration on Form N-1A
Ladies and Gentlemen:
We have acted as special counsel to The Gabelli Mathers Fund, a business trust
formed under the Delaware Business Trust Act (the "Fund"), in connection with
the issuance and sale by the Fund of an indefinite number of shares of the
Fund's common shares of beneficial interest, par value $.001 per share (the
"Shares").
This opinion is being furnished in accordance with the requirements of Item
23(i) of Form N-1A.
In connection with this opinion, we have examined originals or copies (including
facsimile transmission), certified or otherwise identified to our satisfaction,
of (i) the Certificate of Trust of the Fund, dated as of June 17, 1999; (ii)
Post-Effective Amendment No. 61 to the Registration Statement on Form N-1A of
Mathers Fund, Inc. (as proposed to be adopted by the Fund) in the form to be
filed with the Securities and Exchange Commission (the "Commission") on the date
hereof (the "Registration Statement"); (iii) the Agreement and Declaration of
Trust of the Fund, as currently in effect; (iv) the By-Laws of the Fund, as
currently in effect; (v) the form of Agreement and Plan of Reorganization
providing for the reincorporation of Mathers Fund, Inc. as a business trust
formed under the Delaware Business Trust Act (the "Agreement and Plan of
Reorganization") approved by the Board of Trustees of the Fund at the
organizational meeting of the Fund on June 21, 1999 (the "Organizational
Meeting"); (vi) the form of Distribution Agreement between the Fund and Gabelli
& Company, Inc. (the "Distribution Agreement") approved by the Board of Trustees
of the Fund at the Organizational Meeting; and (vii) certain resolutions of the
Board of Trustees of the Fund relating to the issuance and sale of the Shares
and related matters. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Fund and such
agreements, certificates of public officials, certificates of officers or other
representatives of the Fund and others, and such other documents, certificates
and records as we have deemed necessary or appropriate as a basis for the
opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural persons,
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, conformed, facsimile or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Fund, we have assumed that such parties had or will have the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives of the
Fund and others.
Members of our firm are admitted to the bar in the States of New York and
Delaware, and we do not express any opinion as to any laws other than the
Delaware Business Trust Act.
Based upon and subject to the foregoing, we are of the opinion that when the
Registration Statement becomes effective, the issuance and sale of the Shares by
the Fund under the Registration Statement on and after the date of effectiveness
will have been validly authorized and when issued and delivered against payment
therefor as provided in the Agreement and Plan of Reorganization and the
Distribution Agreement, the Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. In giving this consent, we do not thereby
admit that we are included in the category of persons whose consent is required
under Section 7 of the 1933 Act or the rules and regulations of the Commission.
Very truly yours,
/S/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Exhibit (j)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 15, 1999,
and to all references to our Firm included in or made a part of this
registration statement on Form N-1A of The Gabelli Mathers Fund, Inc. (formerly
Mathers Fund, Inc.).
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 24, 1999
