THE GABELLI MATHERS FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 2000
[Photo of Henry G. Van der Eb omitted]
Henry G. Van der Eb, CFA
TO OUR SHAREHOLDERS,
Over the last six years, rising stock prices have been the elixir for a
circular process of sequentially dependent events: stocks rally - sentiment
turns optimistic - expectations rise - spending increases - the economy grows -
corporate profits and personal incomes rise - stocks rally, and the cycle
repeats. During this time, the short-lived but intense Asian induced financial
crises of 1998 have been the only significant threats to the rising total market
value of U.S. stocks. When the Federal Reserve eased too aggressively in the
fall of that year, stock values quickly inflated, reaching an extraordinarily
high-risk record 177% of U.S. GDP in March of this year.
Now, a number of negative forces, with the potential to reverse the
positive loop outlined above, have again converged, putting significant downward
pressure on aggregate stock market values. These include: high energy prices,
rising Middle East tensions, a ten year high 6.5% Federal Funds interest rate, a
tightening biased U.S. Federal Reserve and other Central banks, slowing U.S. and
foreign economic growth, third quarter corporate earnings below estimates, a
weak Euro currency, election year uncertainties, deteriorating corporate and
consumer debt credit quality, new SEC corporate profit projection disclosure
rules, and record IPOs and unlocked restricted stock sales.
INVESTMENT PERFORMANCE AND PORTFOLIO HIGHLIGHTS
The Gabelli Mathers Fund total return for the three and nine month periods
ended September 30 was 0.90% and 2.85% vs. (0.97)% and (1.39)% for the Standard
& Poor's 500 Index, respectively. The Dow Jones Industrial Average ended the
third quarter with a nine month total return of (6.29)% and the Nasdaq Composite
with a return of (9.75)%, excluding dividends.
The Fund's portfolio was 25.5% invested in equity securities on September
30, with 87% of this segment 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
remainder of the equity segment is invested in companies with special situation
factors which have the potential to generate price appreciation. The returns
from both of these groups of stocks are unlikely to correlate with the movement
of the popular stock market indices.
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The Fund's cash reserves remain invested in very short maturity U.S.
Treasury bills and overnight repurchase agreements in order to take advantage of
the higher current yields provided by the short end of the inverted U.S.
Treasury yield curve.
EARNINGS GROWTH SLOWS
The number of U.S. companies reporting earnings and revenue
disappointments is increasing sharply, signaling slower growth for an expanding
list of industries, at least into early next year. Corporate profit margins are
being eroded by intense global competition, higher energy prices, Euro currency
translation losses, the inability to raise prices, and slowing unit sales
growth. Technology and internet stocks, which are heavily weighted in the Nasdaq
Composite, are particularly vulnerable to below forecast results, since
valuations and profit growth expectations for these companies continue to be
unrealistically high and earnings are overstated by liberal accounting.
FLASH POINT
For the moment, the Federal Reserve appears content to stay put and
observe unfolding events in the financial markets and the economy. However, if
stock market and other financial losses continue to mount, confidence erodes,
and economic deterioration accelerates, a 1998 type financial crisis could
quickly emerge. In this event, as shown on the chart below, the Federal Reserve
would likely lower short-term interest rates, as it has during the last nine
financial crises which have occurred over the last thirty years. However, after
a short initial relief bounce, the stock market and economy may not respond as
quickly and favorably to lower interest rates as in the past. The Japanese
experience over
FINANCIAL CRISES & SHORT-TERM INTEREST RATES
[U.S. FED FUNDS RATE GRAPH OMITTED]
All major Fed easing cycles in the past 30 years were preceded by a financial
crisis of some sort.
[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.]
Source: BCA Research
2
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the last ten years demonstrates that, once the total market value of a nation's
stock market reaches 160% of nominal GDP, even 0% short-term interest rates are
insufficient to spark sustained economic growth and rising stock prices until
the previously cumulated speculative excesses have been worked off. During this
transition period, the economy would be most vulnerable to a deflationary
contraction that could last several years.
In deference to this developing high-risk financial backdrop, the Fund
will continue to seek capital gains while keeping the overall level of portfolio
risk within conservative limits and a focus on the preservation of capital.
Sincerely,
/s/ signature
HENRY G. VAN DER EB, CFA
President and Portfolio Manager
October 16, 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 5.59% 0.87% 2.40% 11.19%
Standard & Poor's 500 13.28% 21.70% 19.44% 12.20%
* All periods ended 9-30-00. 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.
3
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THE GABELLI MATHERS FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 24.5%
BUILDING AND CONSTRUCTION -- 1.5%
10,000 Louisiana-Pacific Corp. .................... $ 91,875
20,000 Southdown Inc. ............................. 1,425,000
-----------
1,516,875
-----------
BUSINESS SERVICES -- 0.3%
25,000 Engineering Animation Inc.+ ................ 339,062
-----------
COMPUTER SOFTWARE AND SERVICES -- 1.8%
135,000 Policy Management Systems Corp.+ ........... 1,822,500
-----------
ENERGY AND UTILITIES -- 1.3%
4,000 E'Town Corp. ............................... 267,500
15,500 Eastern Enterprises ........................ 989,094
-----------
1,256,594
-----------
FINANCIAL SERVICES -- 2.2%
25,000 Donaldson, Lufkin & Jenrette Inc. .......... 2,235,938
-----------
FOOD AND BEVERAGE -- 10.1%
70,000 Bestfoods Inc. ............................. 5,092,500
5,000 Heinz (H.J.) Co. ........................... 185,313
170,000 Nabisco Group Holdings Corp. ............... 4,845,000
-----------
10,122,813
-----------
HEALTH CARE -- 3.1%
79,800 Wesley Jessen VisionCare Inc.+ ............. 3,067,312
-----------
RETAIL -- 3.0%
840,000 OfficeMax Inc.+ ............................ 2,992,500
-----------
SPECIALTY CHEMICALS -- 1.2%
35,000 Lilly Industries Inc., Cl. A ............... 1,032,500
5,400 Sybron Chemicals Inc.+ ..................... 187,312
-----------
1,219,812
-----------
TOTAL COMMON STOCKS ........................ 24,573,406
-----------
PREFERRED STOCKS -- 0.9%
ENERGY AND UTILITIES -- 0.9%
30,000 CMS Energy Corp., 8.75% Cv. Pfd. 956,250
-----------
PRINCIPAL MARKET
AMOUNT VALUE
------ -----
U.S. GOVERNMENT OBLIGATIONS -- 59.5%
$60,000,000 U.S. Treasury Bills,
5.96%++,
due 10/12/00 to 11/09/00 $ 59,649,378
------------
REPURCHASE AGREEMENTS -- 15.1%
5,164,015 Agreement with State Street Bank &
Trust Co., 6.46%, dated 09/29/00,
due 10/02/00, proceeds at
maturity $5,166,795 (a) 5,164,015
5,000,000 Agreement with Warburg Dillon Reed,
6.48%, dated 09/29/00,
due 10/02/00, proceeds at
maturity $5,002,700 (b) 5,000,000
5,000,000 Agreement with ABN Amro, 6.48%,
dated 09/29/00, due 10/02/00,
proceeds at maturity $5,002,700 (c) 5,000,000
------------
TOTAL REPURCHASE AGREEMENTS 15,164,015
------------
TOTAL INVESTMENTS -- 100.0%
(Cost $101,849,904) 100,343,049
OTHER ASSETS AND
LIABILITIES (NET) -- 0.0% (48,404)
------------
NET ASSETS -- 100.0%
(8,167,962 shares outstanding) $100,294,645
============
------------------------
(a) Collateralized by U.S. Treasury Bond, 14.00%, due 11/15/11, market value
$5,268,038.
(b) Collateralized by U.S. Treasury Bond, 13.38%, due 08/15/01, market value
$5,100,875.
(c Collateralized by U.S. Treasury Bond, 7.25%, due 05/15/16, market value
$5,105,009.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
4
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GABELLI FAMILY OF FUNDS
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GABELLI ASSET FUND ________________________
Seeks to invest primarily in a diversified portfolio of common stocks selling at
significant discounts to their private market value. The Fund's primary
objective is growth of capital. (NO-LOAD)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI GROWTH FUND _______________________
Seeks to invest primarily in large cap stocks believed to have favorable, yet
undervalued, prospects for earnings growth. The Fund's primary objective is
capital appreciation. (NO-LOAD)
PORTFOLIO MANAGER: HOWARD F. WARD, CFA
GABELLI WESTWOOD EQUITY FUND _____________
Seeks to invest primarily in the common stock of seasoned companies believed to
have proven records and above average historical earnings growth. The Fund's
primary objective is capital appreciation. (NO-LOAD)
PORTFOLIO MANAGER: SUSAN M. BYRNE
GABELLI SMALL CAP GROWTH FUND ____________
Seeks to invest primarily in common stock of smaller companies (market
capitalizations less than $500 million) believed to have rapid revenue and
earnings growth potential. The Fund's primary objective is capital appreciation.
(NO-LOAD)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI BLUE CHIP VALUE FUND ______________
Seeks long-term growth of capital through investment primarily in the common
stocks of well-established, high quality companies that have market
capitalizations of greater than $5 billion.
(NO-LOAD) PORTFOLIO MANAGER: BARBARA MARCIN, CFA
GABELLI WESTWOOD SMALLCAP EQUITY FUND ________________
Seeks to invest primarily in smaller capitalization equity securities - market
caps of $1 billion or less. The Fund's primary objective is long-term capital
appreciation. (NO-LOAD)
PORTFOLIO MANAGER: LYNDA CALKIN, CFA
GABELLI WESTWOOD INTERMEDIATE BOND FUND _________________
Seeks to invest in a diversified portfolio of bonds with various maturities. The
Fund's primary objective is total return. (NO-LOAD)
PORTFOLIO MANAGER: PATRICIA FRAZE
GABELLI EQUITY INCOME FUND ________________
Seeks to invest primarily in equity securities with above market average yields.
The Fund pays quarterly dividends and seeks a high level of total return with an
emphasis on income. (NO-LOAD)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI WESTWOOD BALANCED FUND __________
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The
Fund's primary objective is both capital appreciation and current income.
(NO-LOAD)
PORTFOLIO MANAGERS: SUSAN M. BYRNE & PATRICIA FRAZE
GABELLI WESTWOOD MIGHTY MITES (SERVICE MARK) FUND ___________
Seeks to invest in micro-cap companies that have market capitalizations of $300
million or less. The Fund's primary objective is long-term capital appreciation.
(NO-LOAD)
TEAM MANAGED: MARIO J. GABELLI, CFA,
MARC J. GABELLI, LAURA K. LINEHAN AND
WALTER K. WALSH
GABELLI VALUE FUND ________________________
Seeks to invest in securities of companies believed to be undervalued. The
Fund's primary objective is long-term capital appreciation.
MAX. SALES CHARGE: 51/2%
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI UTILITIES FUND ______________________
Seeks to provide a high level of total return through a combination of capital
appreciation and current income. (NO-LOAD)
PORTFOLIO MANAGER: TIMOTHY O'BRIEN, CFA
GABELLI ABC FUND _________________________
Seeks to invest in securities with attractive opportunities for appreciation or
investment income. The Fund's primary objective is total return in various
market conditions without excessive risk of capital loss. (NO-LOAD)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI MATHERS FUND _____________________
Seeks long-term capital appreciation in various market conditions without
excessive risk of capital loss. (NO-LOAD)
PORTFOLIO MANAGER: HENRY VAN DER EB, CFA
GABELLI U.S. TREASURY MONEY MARKET FUND ___
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's
primary objective is to provide high current income consistent with the
preservation of principal and liquidity.
(NO-LOAD) PORTFOLIO MANAGER: JUDITH A. RANERI
GABELLI CASH MANAGEMENT SHARES OF
THE TREASURER'S FUND ______________________
Three money market portfolios designed to generate superior returns without
compromising portfolio safety. U.S. Treasury Money Market seeks to invest in
U.S. Treasury bills, notes and bonds. Tax Exempt Money Market seeks to invest in
municipal securities. Domestic Prime Money Market seeks to invest in prime
quality, domestic money market instruments. (NO-LOAD)
PORTFOLIO MANAGER: JUDITH A. RANERI
AN INVESTMENT IN THE ABOVE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY. ALTHOUGH
THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
GLOBAL SERIES
GABELLI GLOBAL TELECOMMUNICATIONS FUND
Seeks to invest in telecommunications companies throughout the world -
targeting undervalued companies with strong earnings and cash flow dynamics.
The Fund's primary objective is capital appreciation. (NO-LOAD)
TEAM MANAGED: MARIO J. GABELLI, CFA, MARC J. GABELLI AND IVAN ARTEAGA, CFA
GABELLI GLOBAL CONVERTIBLE SECURITIES FUND
Seeks to invest principally in bonds and preferred stocks which are
convertible into common stock of foreign and domestic companies. The Fund's
primary objective is total return through a combination of current income and
capital appreciation. (NO-LOAD)
PORTFOLIO MANAGER: HART WOODSON
GABELLI GLOBAL GROWTH FUND
Seeks capital appreciation through a disciplined investment program focusing
on the globalization and interactivity of the world's marketplace. The Fund
invests in companies at the forefront of accelerated growth. The Fund's
primary objective is capital appreciation. (NO-LOAD)
PORTFOLIO MANAGER: MARC J. GABELLI
GABELLI GLOBAL OPPORTUNITY FUND
Seeks to invest in common stock of companies which have rapid growth in
revenues and earnings and potential for above average capital appreciation or
are undervalued. The Fund's primary objective is capital appreciation.
(NO-LOAD)
PORTFOLIO MANAGERS: MARC J. GABELLI
AND CAESAR BRYAN
GABELLI GOLD FUND _________________________
Seeks to invest in a global portfolio of equity securities of gold mining and
related companies. The Fund's objective is long-term capital appreciation.
Investment in gold stocks is considered speculative and is affected by a variety
of world-wide economic, financial and political factors.(NO-LOAD)
PORTFOLIO MANAGER: CAESAR BRYAN
GABELLI INTERNATIONAL GROWTH FUND __________
Seeks to invest in the equity securities of foreign issuers with long-term
capital appreciation potential. The Fund offers investors global
diversification. (NO-LOAD) PORTFOLIO MANAGER: CAESAR BRYAN
THE SIX FUNDS ABOVE INVEST IN FOREIGN SECURITIES WHICH INVOLVES RISKS NOT
ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY
FLUCTUATION, ECONOMIC AND POLITICAL RISKS. THE FUNDS LISTED ABOVE ARE
DISTRIBUTED BY GABELLI & COMPANY, INC.
--------------------------------------------------------------------------------
TO RECEIVE A PROSPECTUS, CALL 1-800-GABELLI (422-3554). THE
PROSPECTUS GIVES A MORE COMPLETE DESCRIPTION OF THE FUND,
INCLUDING FEES AND EXPENSES. READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
VISIT OUR WEBSITE AT:
www.gabelli.com
OR, CALL:
1-800-GABELLI
1-800-422-3554 (BULLET) 914-921-5100 (BULLET) FAX: 914-921-5118
(BULLET) [email protected]
ONE CORPORATE CENTER, RYE, NEW YORK 10580
<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
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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.
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GAB1726Q300SR
[Photo of Mario Gabelli omitted]
THE
GABELLI
MATHERS
FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 2000
