THE GABELLI MATHERS FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
TO OUR SHAREHOLDERS,
The Standard & Poor's 500 Index, NASDAQ Composite, and Dow Jones
Industrial Average all reached record highs during the first half of 2000, but
were unable to hold their gains when a determined Federal Reserve, set on
slowing the economy, continued to raise the Federal funds rate to 6.5%, the
highest level in ten years. All three benchmarks ended the first half with a
loss.
[PHOTO OF HENRY G. VAN DER EB OMITTED]
HENRY G. VAN DER EB
[LINE GRAPH OF U.S. FEDERAL RESERVE POLICY INTEREST RATES OMITTED]
Contained here in paper format is a chart reflecting the U.S. Federal
Reserve Policy Interest Rates, both Federal Funds Rate Target as well as the
Discount Rate. This chart was prepared for Gabelli Mathers Fund by Dr. Edward
Yardeni of Duetsch Bank/Alex Brown. A hard copy is available by calling the Fund
at 800-962-3863. The chart's x-axis represents years, from 1987 through 2001 and
its y-axis shows percentage points, from 0 to 10. Year end 1998 is represented
with an arrow indicating "Asian Crisis", and the current rate levels are 6.5%
for Fed Funds Rate Target and 6.0% for the discount rate, which reflects 6 rate
hikes since 1998.
<PAGE>
INVESTMENT PERFORMANCE AND PORTFOLIO HIGHLIGHTS
The Gabelli Mathers Fund total return for the six month and one year
periods ended June 30 was 1.93% and 6.04% vs. (0.42)% and 7.24% for the Standard
& Poor's 500 Index, respectively. In an extraordinary display of volatility, the
high-risk NASDAQ Composite, sporting a bubble-bursting P/E ratio of 264 at its
all time high on March 10th, jumped 24.1% from year-end 1999, then plunged 37.3%
by May 23rd, rallied, and ended the first half with a return of (2.54)%,
excluding dividends. Similarly, the Dow Jones Industrial Average, though much
less volatile, set a record closing high of 11,723 on January 14th, ending the
first six months of 2000 in the red, with a total return of (8.44)%.
The Fund's portfolio was 36.4% invested in equity securities on June 30th,
with a majority of stocks concentrated in takeover target companies subject to
friendly all cash tender or merger offers from financially strong, strategic
acquirers. This type of investment is typically held for short time periods. The
remaining stocks, OfficeMax Inc. (OMX- NYSE), USA Networks Inc. (USAI- NASDAQ),
Seagram Co. (VO- NYSE), and CMS Energy Corp. (CMP- NYSE), all have special
situation catalysts in place which have the potential to generate price
appreciation by unlocking shareholder value. The returns from both of these
groups of stocks are unlikely to correlate with the movement of the popular
stock market indices. Additionally, the Fund had 1.4% and 0.9% short positions
in the S&P 500 and NASDAQ 100, respectively, on June 30th.
In order to take advantage of rising short term interest rates during the
first half of the year, the fixed income segment of the portfolio was invested
primarily in very short maturity U.S. Treasury bills. This approach minimized
the risk of principal loss which may occur with longer maturity notes and bonds
when the Federal Reserve is in a tightening mode.
MR. GREENSPAN VS. THE WEALTH EFFECT AND OTHER RISKS FOR STOCKS AND THE ECONOMY
At mid-year 2000, the primary risk factors for the U.S. economy and stock
market are rising short term interest rates, equity overvaluation, high consumer
and corporate debt levels, a low household savings rate, and the record U.S.
current account deficit.
The Fed has raised the Federal funds interest rate six times starting in
June of 1999. The most recent 1/2% increase to 61/2% occurred on May 16th of
this year, accompanied by a 1/2% increase in the discount rate to 6%. Over the
last 85 years, the discount rate has been raised to 6% only six times: January
1920, August 1929, April 1969, May 1973, October 1977 and September 1987.
Significant bear markets followed in all cases except 1977, after which the
market went sideways until August of 1982. Consistent with the 1929 U.S.
experience, when the Bank of Japan raised its discount rate to 6% in August of
1990, the Japanese stock market and economic bubble burst.
In a study comparing the median values for nine key financial measures -
including long term interest rates, dividend yields, P/E ratios, and inflation
rates during the prior seven cases of a 6% discount rate - with today's data,
Ned Davis Research determined that current conditions are potentially more
hostile to the stock market and economic growth in eight out of the nine
categories.
2
<PAGE>
In March, the total market value of U.S. stocks reached a record 177% of
nominal GDP, more than twice the peak level of 1929. Despite a sharp drop in
internet and technology stocks, this ratio only declined to 166% by the end of
June. Mr. Greenspan has stated his concern that aggregate stock values are too
high relative to the economy, and is raising interest rates in an attempt to
gradually deflate the stock market bubble. If successful, the stimulative
"wealth effect" of high stock and real estate prices on consumer spending will
be reduced, economic growth will slow, and the potential for inflation will
recede. The risk is that stocks decline too far too fast causing consumers -
with record low savings, record stock ownership, and record high debt relative
to disposable personal income - to abruptly stop spending, tipping the economy
into a recession. As a recent reference point, the total market value of
Japanese stocks relative to Japanese GDP topped out at 158% in 1989 as the
"economic miracle" began to unravel into a multi-year deflationary contraction.
U.S. STOCK MARKET CAPITALIZATION AS PERCENT OF NOMINAL GDP
[This chart was prepared for Mathers Fund by Topline Investment Graphics,
Boulder, CO. A hard copy is available by calling Mathers Fund at 800-962-3863.
The line is the ratio of stock market capitalization divided by nominal GDP. The
chart's X-axis represents years, from 1926 through 2000 and its Y-axis shows
percentage points, from 0 to 175. The average, since 1926, has been 52.2%. The
high points (August 1929, 81.4%; November 1968, 77.8%; December 1972, 78.10% and
March 2000, 177.1%) were all followed by severe bear markets. The current value
is 166.0%.
Three smaller charts appear in a box inset in the main chart. Each of
these charts shows a parabolic price rise, a top and the following sharp
decline. The first of the three charts reflects the price of the Tokyo Nikkei
stock index and begins in January 1985 at about 11,000 Yen, continues through
its peak in November 1989 near 39,000 Yen to its year-end 1992 level of 15,000
Yen. The second of the three charts shows the Dow Jones Industrial Average from
its 1925 level of 125, through the 1929 peak of around 375 to its year-end 1931
level of 60. The third of the three charts shows the NASDAQ Composite Index from
its 1990 level of 750, through the March 2000 peak of near 5,050 to its June
2000 level of around 3,966.]
If the U.S. economy cools, energy and labor cost inflation is contained,
and corporate profits hold up, then the stock market may not decline, thereby
becoming an exception to the one-sided bearish market probabilities implied by
the seven historical precedents of a 6% discount rate. Ironically, the U.S.
budget surplus and the U.S. Treasury's buy-back of its notes and bonds is
partially offsetting the Fed's effort to raise interest rates. This may prolong
the current credit tightening cycle and cause short term interest rates to rise
more than would otherwise be the case.
3
<PAGE>
Since the mid 1990s, the U.S. consumer and corporate America have been on
a debt financed spending spree which has pushed the levels of non Federal debt
to a record 150% of GDP, and total credit market debt (all sectors) to a highly
leveraged 269% of GDP. High debt levels do not seem burdensome during prosperity
since they can be serviced, paid down, and refinanced relatively easily.
However, there is a limit to how much debt can be carried. Debt financed
purchases - whether for cars, houses, clothes, capital spending, acquisitions,
or corporate stock buy-backs - borrow final demand from the future, which
creates a spending vacuum for some unpredictable future time period. Today's
record absolute and relative debt levels have clearly made the U.S. economy
increasingly vulnerable to an economic contraction of above average proportions.
THE BUBBLE IN STOCKS: AN HISTORICAL PERSPECTIVE
[Contained here in paper format is a chart reflecting the Standard & Poor's 500
stock index adjusted for inflation. The X-axis reflects the years from 1871
through 2000 and its Y-axis is on a logarithmic scale and extends from 15 to
250. The long-term least squares trend line from 1871 through June 2000 is also
on the chart. The chart was prepared by The Bank Credit Analyst. A hard copy is
available by calling Mathers Fund at 800-962-3863. The chart is a line chart
with monthly data and shows the extreme overevaluation (measured as the
divergence above the trend line) in the S&P 500 Index.
Also contained within the chart is a table of data as follows:
S&P 500 PRICE DIVIDEND P/E
1928 TO 1999 BOOK YIELD % RATIO
----------------- ----- -------- -----
5 MAJOR BOTTOMS 0.9 7.14 7.8
LONG-TERM AVERAGE 1.9 3.82 14.7
6 MAJOR TOPS 2.4 2.94 20.2
SEPT. '29 TOP 3.6 2.86 21.1
AUG. '87 TOP 2.5 2.58 22.9
JULY '99 HIGH * 7.5 1.18 37.0
MAR. '00 HIGH 7.3 1.10 31.7
*Record Overvaluation]
The success of the "soft landing" scenario appears to depend on the
optimistic assumption that consumers will continue to spend beyond their incomes
at a time when the personal savings rate is at a record low, household debt
service payments as a percentage of disposable income are at levels which have
reversed debt accumulation in the past, and credit quality ratings are
deteriorating.
Finally, the biggest threat to financial market stability is the
billion-plus dollar a day current account deficit, which represents the increase
in foreign net claims against U.S. residents. Clearly this imbalance, which is a
record 4% of GDP, cannot continue at its current rate. The last major
interruption of capital inflows was in 1987 when the dollar plunged, stocks
crashed, and interest rates spiked. For now, the markets are saying " it's okay
until it's not okay."
4
<PAGE>
IN CONCLUSION
The period ahead is likely to be unusually challenging, but potentially
rewarding, for investors as the speculative excesses that have cumulated during
recent years of unsustainable stock market gains and above trend, debt-driven
economic growth are unwound. We will endeavor to position the Fund's portfolio
to take advantage of the investment opportunities which will be presented by
this once-in-a-generation financial backdrop, while keeping the overall level of
risk within conservative limits.
Sincerely,
/s/signature omitted
HENRY G. VAN DER EB, CFA
President and Portfolio Manager
July 21, 2000
WWW.GABELLI.COM
Please visit us on the Internet. The Gabelli home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can e-mail us at [email protected].
MINIMUM INITIAL INVESTMENT
The Fund's minimum initial investment is $1000 and $250 for regular and
all retirement accounts respectively, with no subsequent minimums. No initial
minimum is required for accounts starting an Automatic Investment Plan. The
Gabelli Mathers Fund and other Gabelli Mutual Funds are available through the
no-transaction fee programs at many major discount brokerage firms.
AVERAGE ANNUAL RETURNS *
1 YR 5 YRS 10 YRS 34 YRS **
---- ----- ------ ---------
GABELLI MATHERS FUND 6.04% 1.08% 2.39% 11.25%
Standard & Poor's 500 7.24% 23.80% 17.79% 12.32%
* All periods ended 6-30-00. Total returns and average annual returns reflect
changes in share price and reinvestment of dividends and are net of
expenses. Of course, returns represent past performance and do not guarantee
future results. Investment returns and the principal value of an investment
will fluctuate. When shares are redeemed they may be worth more or less than
their original cost. The S&P 500 Index is an unmanaged index of stock market
performance.
** From commencement of investment operations on August 19, 1965.
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period covered in this report. The manager's views
are subject to change at any time based on market and other conditions.
5
<PAGE>
THE GABELLI MATHERS FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- --------
COMMON STOCKS -- 35.6%
BUSINESS SERVICES -- 5.8%
70,000 Primark Corp. ................. $ 2,615,375 $ 2,607,500
60,000 Verio Inc.+ ................... 3,491,252 3,329,062
------------ -------------
6,106,627 5,936,562
------------ -------------
COMPUTER SOFTWARE AND SERVICES -- 0.8%
50,000 Policy Management
Systems Corp.+ ............... 752,075 768,750
------------ -------------
EDUCATIONAL SERVICES -- 0.5%
30,000 Quest Education Corp.+ ........ 543,125 541,875
------------ -------------
ENERGY AND UTILITIES -- 6.2%
76,000 CMP Group Inc. ................ 2,206,319 2,227,750
400 Eastern Enterprises ........... 24,870 25,200
117,300 United Water Resources Inc. ... 4,053,300 4,090,837
------------ -------------
6,284,489 6,343,787
------------ -------------
ENTERTAINMENT -- 5.8%
80,000 Seagram Co. ................... 4,772,127 4,640,000
60,000 USA Networks Inc.+ ............ 1,378,438 1,297,500
------------ -------------
6,150,565 5,937,500
------------ -------------
FINANCIAL SERVICES -- 2.7%
15,000 Financial Security
Assurance Holdings Ltd. ...... 1,132,312 1,138,125
30,000 ReliaStar Financial Corp. ..... 1,576,500 1,573,125
------------ -------------
2,708,812 2,711,250
------------ -------------
FOOD AND BEVERAGE -- 5.8%
70,000 Bestfoods Inc. ................ 4,858,887 4,847,500
40,000 Nabisco Group Holdings Corp. .. 1,070,752 1,037,500
------------ -------------
5,929,639 5,885,000
------------ -------------
HEALTH CARE -- 3.9%
25,000 Shared Medical
Systems Corp. ................ 1,716,250 1,823,438
75,000 Summit Technology Inc.+ ....... 1,392,967 1,415,625
20,000 Wesley Jessen
VisionCare Inc.+ ............. 746,650 751,250
------------ -------------
3,855,867 3,990,313
------------ -------------
RETAIL -- 4.1%
835,000 OfficeMax Inc.+ ............... 5,013,882 4,175,000
------------ -------------
TOTAL COMMON STOCKS 37,345,081 36,290,037
------------ -------------
PREFERRED STOCKS -- 0.8%
ENERGY AND UTILITIES -- 0.8%
30,000 CMS Energy Corp.,
8.75% Cv. Pfd. ............... 845,003 840,000
------------ -------------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- -------
U.S. GOVERNMENT OBLIGATIONS -- 58.5%
$60,000,000 U.S. Treasury Bills,
5.38% to 5.51%++,
due 07/20/00 to 08/17/00 ..... $ 59,592,256 $ 59,592,256
------------ -------------
REPURCHASE AGREEMENTS -- 5.7%
1,000,000 Agreement with ABN Amro,
6.40%, dated 06/30/00, due 07/03/00,
proceeds at maturity
$1,000,533 (a) ............... 1,000,000 1,000,000
4,782,384 Agreement with State Street
Bank & Trust Co., 6.50%,
dated 06/30/00,
due 07/03/00, proceeds
at maturity $4,784,975 (b) ... 4,782,384 4,782,384
------------ -------------
TOTAL REPURCHASE
AGREEMENTS ................... 5,782,384 5,782,384
------------ -------------
TOTAL
INVESTMENTS -- 100.6% ........ $103,564,724 102,504,677
============
OTHER ASSETS AND
LIABILITIES (NET) -- (0.6%) .................. (625,602)
------------
NET ASSETS -- 100.0%
(8,371,919 shares outstanding) ............... $101,879,075
============
-----------------
MARKET
SHARES PROCEEDS VALUE
-------- -------------- --------------
SECURITIES SOLD SHORT
COMMON STOCK
NASDAQ 100 Trust ............. 10,000 (946,968.41) (931,875.00)
S&P 500 Depositary Receipts .. 10,000 (1,466,951.08) (1,452,812.50)
------------ ------------
TOTAL SECURITIES
SOLD SHORT (2,413,919.49) (2,384,687.50)
============= ==============
-----------------
For Federal tax purposes:
Aggregate cost ................................ $103,564,724
============
Gross unrealized appreciation ................. $ 216,232
Gross unrealized depreciation ................. (1,276,279)
------------
Net unrealized depreciation ................... $ (1,060,047)
============
-----------------
(a) Collateralized by U.S. Treasury Bond, 12.50%, due 08/15/14, market value
$1,022,195.
(b) Collateralized by U.S. Treasury Bond, 9.00%, due 11/15/18,
market value $4,884,406.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
6
<PAGE>
THE GABELLI MATHERS FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------
ASSETS:
Investments, at value (Cost $103,564,724) .. $102,504,677
Cash ....................................... 381,134
Dividends and interest receivable .......... 111,598
Receivable for investments sold ............ 2,413,919
------------
TOTAL ASSETS ............................... 105,411,328
------------
LIABILITIES:
Payable for investments purchased .......... 1,019,020
Payable for Fund shares redeemed ........... 132
Payable for investment advisory fees ....... 63,480
Payable for distribution fees .............. 20,993
Securities sold short, at value
(Proceeds $2,413,919) .................... 2,384,687
Payable to custodian ....................... 5,200
Other accrued expenses and liabilities ..... 38,741
------------
TOTAL LIABILITIES .......................... 3,532,253
------------
NET ASSETS applicable to 8,371,919
shares outstanding ....................... $101,879,075
============
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value $ 8,371,919
Additional paid-in capital ................. 130,563,189
Accumulated net investment income .......... 1,901,333
Accumulated net realized loss on investments
and futures contracts .................... (37,926,551)
Net unrealized appreciation on investments . (1,030,815)
------------
TOTAL NET ASSETS ........................... $101,879,075
============
NET ASSET VALUE, offering and redemption
price per share ($101,879,075 / 8,371,919
shares outstanding; 100,000,000 shares
authorized of $1.00 par value) ........... $12.17
======
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------
INVESTMENT INCOME:
Dividends .................................. $ 388,952
Interest ................................... 2,153,810
------------
TOTAL INVESTMENT INCOME .................... 2,542,762
------------
EXPENSES:
Investment advisory fees ................... 389,424
Distribution fees .......................... 128,435
Trustees' fees ............................. 34,166
Legal and audit fees ....................... 29,275
Custodian fees ............................. 25,849
Registration fees .......................... 15,534
Shareholder services fees .................. 14,485
Shareholder communications expenses ........ 4,018
Dividends on securities sold short ......... 23,484
Miscellaneous expenses ..................... 10,381
------------
TOTAL EXPENSES ............................. 675,051
------------
NET INVESTMENT INCOME ...................... 1,867,711
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments and
futures contracts ........................ 3,502,981
Net realized loss on securities sold short . (2,202,695)
Net change in unrealized depreciation on
investments and securities sold short .... (1,202,496)
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FUTURES CONTRACTS ..... 97,790
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .......................... $ 1,965,501
============
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................... $ 1,867,711 $ 3,656,655
Net realized gain on investments and futures contracts .................. 3,502,981 4,428,251
Net realized loss on securities sold short .............................. (2,202,695) (1,893,870)
Net change in unrealized depreciation on investments .................... (1,202,496) (445,493)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... 1,965,501 5,745,543
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................................... -- (3,638,301)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ..................................... -- (3,638,301)
------------ ------------
SHARE TRANSACTIONS:
Net decrease in net assets from shares of beneficial interest transactions (4,779,799) (5,961,454)
------------ ------------
NET DECREASE IN NET ASSETS .............................................. (2,814,298) (3,854,212)
NET ASSETS:
Beginning of period ...................................................... 104,693,373 108,547,585
------------ ------------
End of period ........................................................... $101,879,075 $104,693,373
============ ============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE GABELLI MATHERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Mathers Fund (the "Fund") was organized on June 17,
1999 as a Delaware business trust. The Fund commenced investment operations on
October 1, 1999 as the successor to the Mathers Fund, Inc. (the "Mathers Fund")
which was organized on March 31, 1965 as a Maryland corporation. The Mathers
Fund commenced investment operations on August 19, 1965. The Fund is a
diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund's primary
objective is long-term capital appreciation.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day, except for open short positions, which are
valued at the last asked price). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. 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 Gabelli Funds, LLC
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Trustees. Short-term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Trustees determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Trustees. Debt instruments
having a maturity greater than 60 days are valued at the highest bid price
obtained from a dealer maintaining an active market in those securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the Board
of Trustees. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 100% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the
8
<PAGE>
THE GABELLI MATHERS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
--------------------------------------------------------------------------------
collateral. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin." Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. At June 30, 2000, there were no open futures contracts.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
SECURITIES SOLD SHORT. A short sale involves selling a security which the Fund
does not own. The proceeds received for short sales are recorded as liabilities
and the Fund records an unrealized gain or loss to the extent of the difference
between the proceeds received and the value of the open short position on the
day of determination. The Fund records a realized gain or loss when the short
position is closed out. By entering into a short sale, the Fund bears the market
risk of an unfavorable change in price of the security sold short. Dividends on
short sales are recorded as an expense by the Fund on the ex-dividend date and
interest expense is recorded on the accrual basis.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a result, a Federal income tax provision is not required.
9
<PAGE>
THE GABELLI MATHERS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
--------------------------------------------------------------------------------
The Fund has a net capital loss carryforward for Federal income tax purposes at
December 31, 1999 of $39,220,871. This capital loss carryforward is available to
reduce future distributions of net capital gains to shareholders. $9,124,017 of
the loss carryforward is available through 2003; $22,226,886 is available
through 2004; and $7,869,968 is available through 2006.
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 0.75% of the first $100,000,000 of the Fund's average daily
net assets plus 1.00% of average daily net assets over $100,000,000 until
September 30, 2001. After September 30, 2001, the Fund will pay the Adviser a
fee, computed daily and paid monthly, at the annual rate of 1.00% on all average
daily net assets. In accordance with the Advisory Agreement, the Adviser
provides a continuous investment program for the Fund's portfolio, oversees the
administration of all aspects of the Fund's business and affairs and pays the
compensation of all Officers and Trustees of the Fund who are its affiliates.
4. DISTRIBUTION PLAN. On October 1, 1999, the Fund's Board of Trustees adopted a
distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For
the six months ended June 30, 2000, the Fund incurred distribution costs payable
to Gabelli & Company, Inc., an affiliate of the Adviser, of $128,435, or 0.25%
of average daily net assets, the annual limitation under the Plan. Such payments
are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the six months
ended June 30, 2000, other than short-term securities, aggregated $112,088,263
and $108,776,288, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the six months ended June 30, 2000, the
Fund paid brokerage commissions of $204,291 to Gabelli & Company, Inc.
7. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold ....................................... 266,430 $ 3,202,784 1,778,384 $ 21,299,727
Shares issued upon reinvestment of dividends ...... -- -- 274,885 3,271,129
Shares redeemed ................................... (663,384) (7,982,583) (2,536,839) (30,532,310)
------- ----------- ---------- ------------
Net decrease .................................. (396,954) $(4,779,799) (483,570) $ (5,961,454)
======= =========== ========== ============
</TABLE>
10
<PAGE>
THE GABELLI MATHERS FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.94 $ 11.73 $ 13.06 $ 13.27 $ 13.75 $ 13.55
-------- -------- -------- -------- -------- --------
Net investment income 0.22 0.46 0.58 0.53 0.40 0.60
Net realized and unrealized
gain (loss) on investments
and securities sold short 0.01 0.21 (1.26) (0.13) (0.41) 0.35
-------- -------- -------- -------- -------- --------
Total from investment operations 0.23 0.67 (0.68) 0.40 (0.01) 0.95
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- (0.46) (0.65) (0.61) (0.47) (0.72)
Net realized gain on investments -- -- -- -- -- (0.03)
-------- -------- -------- -------- -------- --------
Total distributions -- (0.46) (0.65) (0.61) (0.47) (0.75)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 12.17 $ 11.94 $ 11.73 $ 13.06 $ 13.27 $ 13.75
======== ======== ======== ======== ======== ========
Total return+ 1.93% 5.73% (5.21)% 3.01% (0.07)% 7.01%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $101,879 $104,693 $108,548 $138,404 $171,596 $232,303
Ratio of net investment income
to average net assets 3.63%(b) 3.50% 4.56% 3.96% 2.96% 4.25%
Ratio of operating expenses
to average net assets (a) 1.31%(b) 1.24% 1.16% 1.07% 1.03% 0.98%
Portfolio turnover rate 424% 922% 67% 50% 38% 58%
</TABLE>
--------------------------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period of less
than one year is not annualized.
(a) The Fund incurred dividend expense on securities sold short for the six
months ended June 30, 2000 and the years ended December 31, 1999 and 1998.
If the dividend expense had not been incurred, the ratios of operating
expenses to average net assets would have been 1.27%, 1.24% and 1.12%,
respectively.
(b) Annualized.
See accompanying notes to financial statements.
11
<PAGE>
THE GABELLI MATHERS FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI AFTER 6:00 P.M.)
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Karl Otto Pohl
CHAIRMAN AND CHIEF FORMER PRESIDENT
INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI ASSET MANAGEMENT INC.
Felix J. Christiana Anthony R. Pustorino
FORMER SENIOR VICE PRESIDENT CERTIFIED PUBLIC ACCOUNTANT
DOLLAR DRY DOCK SAVINGS BANK PROFESSOR, PACE UNIVERSITY
Anthony J. Colavita Werner J. Roeder, MD
ATTORNEY-AT-LAW MEDICAL DIRECTOR
ANTHONY J. COLAVITA, P.C. LAWRENCE HOSPITAL
Vincent D. Enright Jack O. Vance
FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR
AND CHIEF FINANCIAL OFFICER MANAGEMENT RESEARCH INC.
KEYSPAN ENERGY CORP.
Jon P. Hedrich Henry G. Van der Eb, CFA
FORMER PRESIDENT AND PARTNER PRESIDENT AND CHIEF
STEINER DIAMOND INSTITUTIONAL EXECUTIVE OFFICER
SERVICES THE GABELLI MATHERS FUND
Robert E. Kohnen Anthonie C. van Ekris
FORMER VICE PRESIDENT AND MANAGING DIRECTOR
INVESTMENT MANAGER BALMAC INTERNATIONAL, INC.
PROTECTION MUTUAL INSURANCE
OFFICERS AND PORTFOLIO MANAGERS
Henry G. Van der Eb, CFA Anne E. Morrissy, CFA
PRESIDENT AND EXECUTIVE VICE PRESIDENT
PORTFOLIO MANAGER
Bruce N. Alpert James E. McKee
EXECUTIVE VICE PRESIDENT SECRETARY
AND TREASURER
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
--------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Mathers Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
--------------------------------------------------------------------------------
GAB1726Q200SR
[Photo of Mario Gabelli omitted]
THE
GABELLI
MATHERS
FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
