UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-01311
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The GAMCO Mathers Fund
---------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
---------------------------------------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2007
-----------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
GAMCO MATHERS FUND
ANNUAL REPORT
DECEMBER 31, 2007
TO OUR SHAREHOLDERS,
The Sarbanes-Oxley Act requires a fund's principal executive and financial
officers to certify the entire contents of the semi-annual and annual
shareholder reports in a filing with the Securities and Exchange Commission on
Form N-CSR. This certification would cover the portfolio manager's commentary
and subjective opinions if they are attached to or a part of the financial
statements. Many of these comments and opinions would be difficult or impossible
to certify.
Because we do not want our portfolio managers to eliminate their opinions
and/or restrict their commentary to historical facts, we have separated their
commentary from the financial statements and investment portfolio and have sent
it to you separately. Both the commentary and the financial statements,
including the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
Enclosed are the audited financial statements and the investment portfolio
as of December 31, 2007 with a description of the factors that affected the
performance during the past year.
PERFORMANCE DISCUSSION (UNAUDITED)
The GAMCO Mathers Fund total return for the year ended December 31, 2007
was 3.56% versus 5.49% for the Standard & Poor's 500 Index. The Fund earned
positive returns for each of the first three quarters and the calendar year
while generally maintaining a net short exposure against a rising market.
The Fund had a 7.4% average net short portfolio structure during 2007
(4.2% long minus 11.6% short based on the average of quarter end net assets) in
deference to the debt bubble and its macro-economic risks. At year end 2007,
stocks were 4.4% of net assets, with 0.3% in long and 4.1% in short stock
positions, resulting in a 3.8% net short exposure. The remainder of the
portfolio, as has been the case for an extended time period, was invested in
short-term U.S. Treasury bills and U.S. Treasury collateralized repurchase
agreements awaiting investment opportunities to initiate new long and short
positions. This compares to a 32.3% gross stock exposure (longs plus shorts) at
year end 2006, comprised of 12.6% long and 19.7% short with a 7.1% net short
exposure (longs minus shorts).
The individual long stocks segment of the portfolio and the fixed income
portion, which was limited to short-term U.S. Treasury bills and U.S. Treasury
collateralized repurchase agreements, added to the Fund's total return in 2007.
The short stocks and equity indices segment had a small negative return. The
portfolio remains conservatively positioned to potentially benefit both
absolutely and relatively from a declining stock market. The fixed income
portion, which is invested in short-term U.S. Treasury bills and U.S. Treasury
collateralized repos, has relatively high liquidity and safety of principal.
During the year, a portion of the Fund's long common stock segment was
invested in takeover target companies subject to friendly, all cash tender or
merger offers from an acquiring entity. The Fund purchases these event driven
stocks after the deals are publicly announced, generally by financially strong,
strategic or financial buyers. Deal arbitrage stocks typically earn relatively
attractive annualized returns, but are held for short time periods resulting in
a disproportionately high portfolio turnover rate, which can be misleading. This
occurs when the Fund's fixed income position is a relatively high proportion of
assets and has a maturity of less than one year, while the percent invested in
stocks is low. The Fund uses this defensive, non-market correlated strategy to
potentially increase cash returns above the prevailing level of short-term
interest rates.
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
Executive Vice President
February 22, 2008
GROWTH OF $10,000 INVESTMENT IN GAMCO MATHERS FUND (LOG SCALE)
[OBJECT OMITTED] [GRAPHIC OMITTED]
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
GAMCO Mathers Fund S&P 500 Index
$10,000 $10,000
65 12,122 10,768
12,632 9,685
24,332 12,007
30,868 13,335
29,016 12,200
70 29,588 12,688
35,455 14,504
41,173 17,256
25,877 14,731
17,957 10,832
75 28,201 14,863
40,716 18,408
46,496 17,071
53,496 18,194
78,404 21,550
80 109,990 28,535
101,473 27,135
116,548 32,942
135,388 40,360
131,890 42,888
85 168,124 56,518
191,625 67,095
243,431 70,614
276,841 82,310
305,644 108,360
90 337,510 105,007
369,381 136,922
380,867 147,334
389,017 162,159
366,092 164,281
95 391,770 225,952
391,477 277,826
403,249 370,512
382,225 476,899
404,074 577,321
00 424,366 524,741
442,406 462,376
390,400 360,187
382,816 463,522
378,843 513,924
05 383,484 539,178
394,531 624,340
408,583 658,636
PERCENT AVERAGE ANNUAL TOTAL RETURNS THROUGH DECEMBER 31, 2007*
1 YR 3 YRS 5 YRS 10 YRS 20 YRS 25 YRS 30 YRS 42 YRS+
------- ------- -------- --------- -------- -------- ------- --------
GAMCO MATHERS 3.56 2.55 0.91 0.13 2.62 5.15 7.51 9.15
Standard & Poor's 500 5.49 8.62 12.82 5.91 11.81 12.73 12.95 10.38
THE CURRENT EXPENSE RATIO IS 2.14%. + FROM COMMENCEMENT OF INVESTMENT OPERATIONS
ON AUGUST 19, 1965.
* AVERAGE ANNUAL TOTAL RETURNS REFLECT CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND ARE NET OF EXPENSES. 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. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PRESENTED.
PLEASE VISIT WWW.GABELLI.COM TO OBTAIN PERFORMANCE INFORMATION AS OF THE
MOST RECENT MONTH END. THE STANDARD & POOR'S 500 INDEX IS AN UNMANAGED
INDICATOR OF STOCK MARKET PERFORMANCE. INVESTORS SHOULD CAREFULLY CONSIDER
THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND BEFORE
INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER
MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING.
NOTE: The opinions expressed in this report reflect those of the Portfolio
Manager only through the date of the shareholder letter and are subject to
change at any time based on market and other conditions.
To obtain a copy of the Fund's prospectus, please contact Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422, by calling 800-GABELLI (800-422-3554) or
visit our website www.gabelli.com.
2
GAMCO MATHERS FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from July 1, 2007 through December 31, 2007
EXPENSE TABLE
================================================================================
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of a fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of a fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section provides information about actual account
values and actual expenses. You may use this section to help you to estimate the
actual expenses that you paid over the period after any fee waivers and expense
reimbursements. The "Ending Account Value" shown is derived from the Fund's
ACTUAL return during the past six months, and the "Expenses Paid During Period"
shows the dollar amount that would have been paid by an investor who started
with $1,000 in the Fund. You may use this information, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period" to estimate
the expenses you paid during this period.
HYPOTHETICAL 5% RETURN: This section provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio. It assumes a hypothetical annualized return of 5% before expenses during
the period shown. In this case - because the hypothetical return used is NOT the
Fund's actual return - the results do not apply to your investment and you
cannot use the hypothetical account value and expense to estimate the actual
ending account balance or expenses you paid for the period. This example is
useful in making comparisons of the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as sales
charges (loads), redemption fees, or exchange fees, if any, which would be
described in the Prospectus. If these costs were applied to your account, your
costs would be higher. Therefore, the 5% hypothetical return is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. The "Annualized Expense Ratio" represents the
actual expenses for the last six months and may be different from the expense
ratio in the Financial Highlights which is for the year ended December 31, 2007.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
07/01/07 12/31/07 Ratio Period*
- --------------------------------------------------------------------------------
GAMCO MATHERS FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
GAMCO Mathers $1,000.00 $1,007.40 2.39% $12.16
HYPOTHETICAL 5% RETURN
GAMCO Mathers $1,000.00 $1,013.23 2.39% $12.19
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied by
the number of days in the most recent fiscal half-year, then divided by 365.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of December 31, 2007:
GAMCO MATHERS FUND - LONG POSITIONS PERCENT
U.S. Government Obligations .................... 94.8%
Repurchase Agreements .......................... 5.1%
Cable and Satellite ............................ 0.2%
Environmental Services ......................... 0.1%
Other Assets and Liabilities (Net) ............. 3.9%
GAMCO MATHERS FUND - SHORT POSITIONS PERCENT
Exchange Traded Funds .......................... (2.3)%
Equipment ...................................... (0.7)%
Entertainment .................................. (0.5)%
Consumer Products .............................. (0.4)%
Retail ......................................... (0.2)%
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED SEPTEMBER
30, 2007. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY
CALLING THE FUND AT 800-GABELLI (800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE
ON THE SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE
SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF
THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
PROXY VOTING
The Fund files Form N-PX with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. A description of the
Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities is available without charge, upon request, by
(i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC's website at
www.sec.gov.
4
GAMCO MATHERS FUND
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2007
================================================================================
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 0.3%
CABLE AND SATELLITE -- 0.2%
3,000 Comcast Corp., Cl. A+ ........ $ 55,560 $ 54,780
----------- -----------
ENVIRONMENTAL SERVICES -- 0.1%
1,000 Waste Management Inc. ........ 33,584 32,670
----------- -----------
TOTAL COMMON STOCKS .......... 89,144 87,450
----------- -----------
PRINCIPAL
AMOUNT
--------
SHORT-TERM OBLIGATIONS -- 99.9%
REPURCHASE AGREEMENTS -- 5.1%
$ 1,339,123 State Street Bank & Trust Co.,
1.000%, dated 12/31/07,
due 01/02/08, proceeds at
maturity, $1,339,197 (a) ... 1,339,123 1,339,123
----------- -----------
U.S. TREASURY BILLS -- 94.8%
25,000,000 U.S. Treasury Bill,
3.093%++, 01/17/08 (b) ..... 24,966,222 24,966,222
----------- -----------
TOTAL SHORT-TERM
OBLIGATIONS ................ 26,305,345 26,305,345
----------- -----------
TOTAL
INVESTMENTS -- 100.2% ...... $26,394,489 26,392,795
===========
SECURITIES SOLD SHORT -- (4.1)%
(Proceeds received $1,109,880) (1,076,820)
OTHER ASSETS AND LIABILITIES (NET) -- 3.9% 1,017,187
-----------
NET ASSETS -- 100.0% ..................... $26,333,162
===========
MARKET
SHARES PROCEEDS VALUE
------ -------- ------
SECURITIES SOLD SHORT -- (4.1)%
COMMON STOCKS SOLD SHORT -- (4.1)%
CONSUMER PRODUCTS -- (0.4)%
2,000 Harley-Davidson Inc. ......... $ 94,770 $ 93,420
----------- -----------
ENTERTAINMENT -- (0.5)%
1,000 Carnival Corp. ............... 45,193 44,490
1,000 Polaris Industries Inc. ...... 49,059 47,770
1,000 Royal Caribbean Cruises Ltd. . 42,943 42,440
----------- -----------
137,195 134,700
----------- -----------
EQUIPMENT -- (0.7)%
2,000 Black & Decker Corp. ......... 152,899 139,300
1,000 The Toro Co. ................. 55,039 54,440
----------- -----------
207,938 193,740
----------- -----------
EXCHANGE TRADED FUNDS -- (2.3)%
1,000 iShares FTSE/Xinhua China
25 Index Fund .............. 178,228 170,450
2,000 iShares Russell 2000 Index ... 154,958 151,840
2,000 iShares S&P SmallCap 600 Index 132,251 130,040
1,000 MidCap SPDR Trust, Ser. 1 .... 156,491 155,100
----------- -----------
621,928 607,430
----------- -----------
RETAIL -- (0.2)%
1,000 Wal-Mart Stores Inc. ......... 48,049 47,530
----------- -----------
TOTAL SECURITIES SOLD SHORT .. $ 1,109,880 $ 1,076,820
=========== ===========
- ----------------
(a) Collateralized by $1,165,000 U.S. Treasury Bond, 6.000%, due 02/15/26,
market value $1,371,788.
(b) At December 31, 2007, $4,000,000 of the principal amount was pledged as
collateral for securities sold short.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
5
GAMCO MATHERS FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
================================================================================
ASSETS:
Investments, at value (cost $25,055,366) ............. $ 25,053,672
Repurchases agreements, at value (cost $1,339,123) ... 1,339,123
Receivable for investments sold ...................... 1,109,880
Dividends and interest receivable .................... 37
Prepaid expenses ..................................... 15,201
------------
TOTAL ASSETS ......................................... 27,517,913
------------
LIABILITIES:
Securities sold short (proceeds $1,109,880) .......... 1,076,820
Payable to brokers ................................... 1,393
Payable for investment advisory fees ................. 23,014
Payable for distribution fees......................... 5,754
Dividends payable on securities sold short ........... 1,365
Other accrued expenses ............................... 76,405
------------
TOTAL LIABILITIES .................................... 1,184,751
------------
NET ASSETS applicable to 2,519,555 shares outstanding $ 26,333,162
============
NET ASSETS CONSIST OF:
Paid-in capital, at $0.001 par value ................. $ 39,983,361
Accumulated distributions in excess of
net investment income .............................. (10,127)
Accumulated net realized loss on investments
and securities sold short .......................... (13,671,438)
Net unrealized depreciation on investments ........... (1,694)
Net unrealized appreciation on
securities sold short .............................. 33,060
------------
NET ASSETS ........................................... $ 26,333,162
============
NET ASSET VALUE, offering and redemption price
per share ($26,333,162 / 2,519,555 shares
outstanding; unlimited number of shares
authorized) ........................................ $10.45
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
================================================================================
INVESTMENT INCOME:
Dividends (net of foreign taxes of $639) ............. $ 35,316
Interest ............................................. 1,203,993
Other income ......................................... 120,200
----------
TOTAL INVESTMENT INCOME .............................. 1,359,509
----------
EXPENSES:
Investment advisory fees ............................. 299,571
Distribution fees .................................... 74,893
Dividends on securities sold short ................... 38,378
Legal and audit fees ................................. 98,930
Trustees' fees ....................................... 59,042
Shareholder communications expenses .................. 41,240
Shareholder services fees ............................ 36,886
Custodian fees ....................................... 9,298
Registration expenses ................................ 7,270
Interest expense ..................................... 3,854
Miscellaneous expenses ............................... 15,138
----------
TOTAL EXPENSES ....................................... 684,500
Less: Custodian fee credits .......................... (203)
----------
NET EXPENSES ......................................... 684,297
----------
NET INVESTMENT INCOME ................................ 675,212
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND SECURITIES SOLD SHORT:
Net realized gain on investments ..................... 1,265,416
Net realized loss on securities sold short ........... (405,906)
----------
Net realized gain on investments and securities
sold short ......................................... 859,510
----------
Net change in unrealized appreciation/depreciation
on investments ..................................... (636,796)
Net change in unrealized appreciation/depreciation
on securities sold short ........................... 175,766
----------
Net change in unrealized appreciation/depreciation
on investments and securities sold short ........... (461,030)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND SECURITIES SOLD SHORT .............. 398,480
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................... $1,073,692
==========
See accompanying notes to financial statements.
6
GAMCO MATHERS FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------- -----------------
OPERATIONS:
Net investment income ........................................................ $ 675,212 $ 1,004,654
Net realized gain (loss) on investments and securities sold short ............ 859,510 (1,137,490)
Net change in unrealized appreciation/depreciation on investments
and securities sold short .................................................. (461,030) 1,104,868
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................... 1,073,692 972,032
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ........................................................ (687,307) (1,015,302)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS .......................................... (687,307) (1,015,302)
----------- -----------
SHARES OF BENEFICIAL INTEREST TRANSACTIONS:
Net decrease in net assets from shares of beneficial interest transactions ... (5,156,485) (6,467,599)
----------- -----------
REDEMPTION FEES .............................................................. 1 --
----------- -----------
NET DECREASE IN NET ASSETS ................................................... (4,770,099) (6,510,869)
NET ASSETS:
Beginning of period .......................................................... 31,103,261 37,614,130
----------- -----------
End of period (including undistributed net investment income of
$0 and $0, respectively) ................................................... $26,333,162 $31,103,261
=========== ===========
See accompanying notes to financial statements.
7
GAMCO MATHERS FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. ORGANIZATION. GAMCO Mathers Fund (the "Fund"), was organized on June 17, 1999
as a Delaware statutory 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 United States ("U.S.") 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. Certain reclassifications have been made in the prior year
financial statements to conform to the current year presentation. 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 or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price 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. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Trustees (the "Board") so determines, by such other method as the Board
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 Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on a foreign market are generally valued
at the preceding closing values of such securities on the relevant market, but
may be fair valued pursuant to procedures established by the Board if market
conditions change significantly after the close of the foreign market but prior
to the close of business on the day the securities are being valued. Debt
instruments with remaining maturities of 60 days or less that are not credit
impaired are valued at amortized cost, unless the Board determines such amount
does not reflect the securities' fair value, in which case these securities will
be fair valued as determined by the Board. Debt instruments having a maturity
greater than 60 days for which market quotations are readily available are
valued at the average of the latest bid and asked prices. If there were no asked
prices quoted on such day, the security is valued using the closing bid price.
Futures contracts are valued at the closing settlement price of the exchange or
board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are
fair valued as determined by the Board. Fair valuation methodologies and
procedures may include, but are not limited to: analysis and review of available
financial and non-financial information about the company; comparisons to the
valuation and changes in valuation of similar securities, including a comparison
of foreign securities to the equivalent U.S. dollar value American Depository
Receipt ("ADR") securities at the close of the U.S. exchange; and evaluation of
any other information that could be indicative of the value of the security.
In September 2006, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") 157, Fair Value
Measurements, which clarifies the definition of fair value and requires
companies to expand their disclosure about the use of fair value to measure
assets and liabilities in interim and annual periods subsequent to initial
recognition. Adoption of SFAS 157 requires the use of the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market
8
GAMCO MATHERS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
participants at the measurement date. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. As of December 31, 2007, the Fund
does not believe the adoption of SFAS 157 will impact the amounts reported in
the financial statements.
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. 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 102% 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 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. At December
31, 2007, the Fund had an investment of $1,339,123 in a repurchase agreement.
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 fluctuations in the
value of the contract, which are included in unrealized
appreciation/depreciation on investments and futures contracts. The Fund
recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging instrument. 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. At December 31, 2007, there were no
open futures contracts.
SECURITIES SOLD SHORT. The Fund may enter into short sale transactions. Short
selling involves selling securities that may or may not be owned and, at times,
borrowing the same securities for delivery to the purchaser, with an obligation
to replace such borrowed securities at a later date. The proceeds received from
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 an 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 the 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 sold short at December 31, 2007 are reported in the
Schedule of Investments.
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 on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is
9
GAMCO MATHERS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
recorded on the ex-dividend date except for certain dividends which are recorded
as soon as the Fund is informed of the dividend.
EXPENSES. Certain administrative expenses are common to, and allocated among,
various affiliated funds. Such allocations are made on the basis of each fund's
average net assets or other criteria directly affecting the expenses as
determined by the Adviser pursuant to procedures established by the Board.
CUSTODIAN FEE CREDITS AND INTEREST EXPENSE. When cash balances are maintained in
the custody account, the Fund receives credits which are used to offset
custodian fees. The gross expenses paid under the custody arrangement are
included in custodian fees in the Statement of Operations with the corresponding
expense offset, if any, shown as "custodian fee credits." When cash balances are
overdrawn, the Fund is charged an overdraft fee of 2.00% above the federal funds
rate on outstanding balances. This amount, if any, would be shown as "interest
expense" in the Statement of Operations.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on the
ex-dividend date. Distributions to shareholders are based on income and capital
gains as determined in accordance with federal income tax regulations, which may
differ from income and capital gains as determined under U.S. 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 characterizations of distributions made
by the Fund. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, adjustments are made to
the appropriate capital accounts in the period when the differences arise. These
reclassifications have no impact on the net asset value ("NAV") per share of the
Fund. For the fiscal year ended December 31, 2007, reclassifications were made
to decrease accumulated distributions in excess of net investment income by
$12,616 and to increase accumulated net realized loss on investments and
securities sold short by $12,616.
The tax character of distributions paid during the fiscal years ended December
31, 2007 and December 31, 2006 were $687,307 and $1,015,302 of ordinary income.
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 (the "Code"). It is the policy of the Fund to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for federal income taxes is required.
At December 31, 2007, the Fund had net capital loss carryforwards for federal
income tax purposes of $13,671,438, which are available to reduce future
required distributions of net capital gains to shareholders. $11,623,877 is
available through 2010; $670,201 is available through 2011; $280,466 is
available through 2012; and $1,096,894 is available through 2014.
As of December 31, 2007, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed ordinary income ........................... $ 2,443
Accumulated capital loss carryforward ................... (13,671,438)
Net unrealized depreciation on investments .............. (1,694)
Net unrealized appreciation on securities sold short .... 33,060
Other temporary differences ............................. (12,570)
------------
Total ................................................... $ 13,650,199
============
10
GAMCO MATHERS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
During the fiscal year ended December 31, 2007, the GAMCO Mathers Fund utilized
capital loss carryforwards of $806,298.
The following summarizes the tax cost of investments, proceeds of short sales,
and the related unrealized appreciation/(depreciation) at December 31, 2007:
GROSS GROSS NET UNREALIZED
COST/ UNREALIZED UNREALIZED APPRECIATION/
(PROCEEDS) APPRECIATION DEPRECIATION (DEPRECIATION)
---------- ------------ ------------ --------------
Investments .............. $25,055,366 -- $(1,694) $ (1,694)
Short sales .............. 1,109,880 $33,060 -- 33,060
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109" (the "Interpretation") established a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether the Fund is taxable in
a particular jurisdiction) and required certain expanded tax disclosures.
For the fiscal year ended December 31, 2007, the Fund did not have any liability
for any unrecognized tax benefits. The Fund recognizes interest and penalties,
if any, related to unrecognized tax benefits as income tax expenses in the
Statement of Operations. The Fund is not subject to examination by U.S. federal
tax authorities for tax years before 2003 and by state tax authorities for tax
years before 2002.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS. 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 1.00% of the value of its 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 affiliated persons
of the Adviser.
The Fund pays each Trustee who is not considered an affiliated person an annual
retainer of $5,000 plus $1,000 for each Board meeting attended and they are
reimbursed for any out of pocket expenses incurred in attending meetings. All
Board committee members receive $500 per meeting attended. Trustees who are
directors or employees of the Adviser or an affiliated company receive no
compensation or expense reimbursement from the Fund.
4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. For the fiscal year ended
December 31, 2007, the Fund incurred distribution costs payable to Gabelli &
Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser, of $74,893, or
0.25% of its average daily net assets, the annual limitation under the Plan.
Such payments are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the fiscal year ended December 31, 2007, other than short-term securities,
aggregated $4,293,799 and $8,488,968, respectively.
6. LINE OF CREDIT. Effective June 20, 2007, the Fund participates in an
unsecured line of credit of up to $75,000,000, and may borrow up to 10% of its
net assets from the custodian for temporary borrowing purposes. Prior to June
20, 2007, the line of credit was $25,000,000. Borrowings under this arrangement
bear interest at 0.75% above the federal funds rate on outstanding balances.
This amount, if any, would be shown as "interest expense" in the Statement of
Operations. During the fiscal year ended December 31, 2007, there were no
borrowings outstanding under the line of credit.
11
GAMCO MATHERS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
7. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ ---------- ------------
Shares sold ........................................ 49,331 $ 522,727 321,631 $ 3,346,542
Shares issued upon reinvestment of distributions ... 60,396 631,134 89,008 920,344
Shares redeemed .................................... (593,221) (6,310,346) (1,011,815) (10,734,485)
------- ----------- ---------- ------------
Net decrease ..................................... (483,494) $(5,156,485) (601,176) $ (6,467,599)
======= =========== ========== ============
The Fund imposes a redemption fee of 2.00% on shares that are redeemed or
exchanged on or before the seventh day after the date of a purchase. The
redemption fee is deducted from the proceeds otherwise payable to the redeeming
shareholders and is retained by the Fund. The redemption fees retained by the
Fund during the fiscal years ended December 31, 2007 and December 31, 2006
amounted to $1 and $0, respectively.
The redemption fee does not apply to redemptions of shares where (i) the shares
were purchased through automatic reinvestment of dividends or other
distributions, (ii) the redemption was initiated by the Fund, (iii) the shares
were purchased through programs that collect the redemption fee at the program
level and remit them to the Fund, or (iv) the shares were purchased through
programs that the Adviser determines to have appropriate anti-short-term trading
policies in place or as to which the Adviser has received assurances that
look-through redemption fee procedures or effective anti-short-term trading
policies and procedures are in place.
8. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
9. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund share trading practices involving certain funds managed by the
Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company,
responded to these requests for documents and testimony. In June 2006, GAMCO
began discussions with the SEC regarding a possible resolution of their inquiry.
In February 2007, the Adviser made an offer of settlement to the staff of the
SEC for communication to the Commission for its consideration to resolve this
matter. This offer of settlement is subject to agreement regarding the specific
language of the SEC's administrative order and other settlement documents. On a
separate matter, in September 2005, the Adviser was informed by the staff of the
SEC that the staff may recommend to the Commission that an administrative remedy
and a monetary penalty be sought from the Adviser in connection with the actions
of two of nine closed-end funds managed by the Adviser relating to Section 19(a)
and Rule 19a-1 of the 1940 Act. These provisions require registered investment
companies to provide written statements to shareholders when a dividend is made
from a source other than net investment income. While the two closed-end funds
sent annual statements and provided other materials containing this information,
the funds did not send written statements to shareholders with each distribution
in 2002 and 2003. The Adviser believes that all of the funds are now in
compliance. The Adviser believes that these matters would have no effect on the
Fund or any material adverse effect on the Adviser or its ability to manage the
Fund.
12
GAMCO MATHERS FUND
FINANCIAL HIGHLIGHTS
================================================================================
Selected data for a share of beneficial interest outstanding throughout each
period:
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2007 2006 2005 2004 2003
---- ---- ---- ---- ----
OPERATING PERFORMANCE:
Net asset value, beginning of period ................ $ 10.36 $ 10.44 $ 10.49 $ 10.60 $ 10.81
------- ------- ------- ------- -------
Net investment income (loss) (a) .................... 0.24 0.32 0.13 (0.06) (0.07)
Net realized and unrealized gain (loss) on investments
and securities sold short ......................... 0.13 (0.02) -- (0.05) (0.14)
------- ------- ------- ------- -------
Total from investment operations .................... 0.37 0.30 0.13 (0.11) (0.21)
------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................... (0.28) (0.38) (0.18) -- --
------- ------- ------- ------- -------
Total distributions ................................. (0.28) (0.38) (0.18) -- --
------- ------- ------- ------- -------
REDEMPTION FEES ..................................... 0.00(b) -- 0.00(b) -- --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ...................... $ 10.45 $ 10.36 $ 10.44 $ 10.49 $ 10.60
======= ======= ======= ======= =======
Total return + ...................................... 3.56% 2.88% 1.23% (1.04)% (1.94)%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................ $26,333 $31,103 $37,614 $41,258 $60,846
Ratio of net investment income (loss) to
average net assets ................................ 2.25% 2.99% 1.27% (0.61)% (0.61)%
Ratio of operating expenses to average net assets ... 2.28% 2.14% 2.14% 1.90% 1.67%
Ratio of operating expenses to average net assets
excluding the effect of dividends on securities
sold short ........................................ 2.15% 1.87% 1.85% 1.77% 1.64%
Portfolio turnover rate ............................. 226% 121% 149% 176% 244%
- ------------------
+ 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 distributions.
(a) Per share data is calculated using the average shares outstanding method.
(b) Amount represents less than $0.005 per share.
- --------------------------------------------------------------------------------
2007 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended December 31, 2007, the Fund paid to shareholders an
ordinary income dividend (comprised of net investment income) totaling $0.279.
For the fiscal year ended December 31, 2007, 4.08% of the ordinary income
distribution qualifies for the dividends received deduction available to
corporations, and 4.77% of the ordinary income distribution was qualified
dividend income.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
year 2007 which was derived from U.S. Treasury securities was 82.42%. Such
income is exempt from state and local tax in all states. However, many states,
including New York and California, allow a tax exemption for a portion of the
income earned only if a mutual fund has invested at least 50% of its assets at
the end of each quarter of the Fund's fiscal year in U.S. Government
securities. GAMCO Mathers Fund met this strict requirement in 2007. Due to the
diversity in state and local tax law, it is recommended that you consult your
personal tax adviser as to the applicability of the information provided to
your specific situation.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
GAMCO MATHERS FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
================================================================================
To the Shareholders and Board of Trustees of
GAMCO Mathers Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of GAMCO Mathers Fund (the "Fund"), as of December
31, 2007, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the Fund's
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of GAMCO
Mathers Fund at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 21, 2008
14
GAMCO MATHERS FUND
BOARD CONSIDERATION AND RE-APPROVAL OF MANAGEMENT AGREEMENT (UNAUDITED)
At its meeting on August 14, 2007, the Board of Trustees ("Board") of the Fund
approved the continuation of the investment advisory agreement with the Adviser
for the Fund on the basis of the recommendation by the trustees who are not
"interested persons" (the "independent trustees") of the Fund. The following
paragraphs summarize the material information and factors considered by the
independent trustees as well as their conclusions relative to such factors.
1) THE NATURE, EXTENT, AND QUALITY OF SERVICES PROVIDED BY THE ADVISER.
The Board reviewed in detail the nature and extent of the services provided by
the Adviser under the Agreement and the quality of those services over the past
year. The Board noted that these services included managing the investment
program of the Fund, including the purchase and sale of portfolio securities, as
well as the provision of general corporate services. The Board considered that
the Adviser also provided, at its expense, office facilities for use by the Fund
and supervisory personnel responsible for supervising the performance of
administrative, accounting, and related services including, for the Fund, net
asset value determinations, yield calculations, and monitoring to assure
compliance with stated investment policies and restrictions under the 1940 Act
and related securities regulations. The Board noted that, in addition to
managing the investment program for the Fund, the Adviser provided certain
non-advisory and compliance services, including services under the Fund's Rule
38a-1 compliance program.
The Board also considered that the Adviser paid for all compensation of Officers
and Board Members of the Fund that were affiliated with the Adviser and that the
Adviser further provided a substantial level of services to shareholders of the
Fund who had invested through various programs offered by third party financial
intermediaries ("Participating Organizations"). The Board evaluated these
factors based on its direct experience with the Adviser and in consultation with
Fund Counsel. The Board noted that the Adviser had engaged, at its expense, PFPC
Inc. to assist it in performing certain of its administrative functions. The
Board concluded that the nature and extent of the services provided was
reasonable and appropriate in relation to the advisory fee, that the level of
services provided by the Adviser, either directly or through PFPC Inc., had not
diminished over the past year and that the quality of service continued to be
high.
The Board reviewed the personnel responsible for providing services to the Fund
and concluded, based on their experience and interaction with the Adviser, that
(i) the Adviser was able to retain quality personnel, (ii) the Adviser and its
agents exhibited a high level of diligence and attention to detail in carrying
out their advisory and administrative responsibilities under the Agreement,
(iii) the Adviser was responsive to requests of the Board, (iv) the scope and
depth of the Adviser's resources was adequate, and (v) the Adviser had kept the
Board apprised of developments relating to the Fund and the industry in general.
The Board also focused on the Adviser's reputation and long standing
relationship with the Fund. The Board also believed that the Adviser had devoted
substantial resources and made substantial commitments to address new regulatory
compliance requirements applicable to the Fund.
15
GAMCO MATHERS FUND
BOARD CONSIDERATION AND RE-APPROVAL OF
MANAGEMENT AGREEMENT (UNAUDITED) (CONTINUED)
2) THE PERFORMANCE OF THE FUND, THE ADVISER.
The Board reviewed the performance of the Fund since inception. In reviewing the
Fund's performance, the Board took into account that there appeared to be no
comparable universe of Funds with similar investment strategies and styles as
the Fund. As a result, the Board reviewed the Fund's performance against a
number of different universes and types of Funds. These classifications included
a universe of funds classified by Lipper as Specialty Diversified Equity, Equity
Market Neutral, Long/Short Equity, and Dedicated Short Bias Funds. In reviewing
these categories, the Board concluded that the Dedicated Short Bias Lipper
category (the "Performance Peer Group"), while imprecise and not fully
comparable, was more closely comparable to the Fund than the other Lipper
groupings. The Board considered the Fund's one, three, five, and ten year
average annual total return for the periods ended June 30, 2007, but placed
greater emphasis on the Fund's longer term performance. The Fund's performance
against the Performance Peer Group was considered by the Board as providing an
objective comparative benchmark against which the performance could be assessed.
In general, the Board considered these comparisons helpful in their assessment
as to whether the Adviser was obtaining for the Fund's shareholders the total
return performance that was available in the marketplace, given the Fund's
investment objective, strategy, limitations, and restrictions. The Board also
considered that the Portfolio Manager believes that U.S. equity markets were
highly overvalued and as a result, as described in the prospectus, the portfolio
manager has invested the Fund's assets more conservatively than most other
equity funds. In this regard, the Board considered the Fund's performance
against a smaller universe of actively managed bear funds developed by the
Adviser. The Board concluded that the Fund's performance was reasonable in
comparison to that of the Performance Peer Group category and the Adviser's
actively managed bear fund grouping. The Board further considered that the
portfolio manager, along with accounts related to him, were the largest
shareholders of the Fund.
In connection with its assessment of the performance of the Adviser, the Board
considered the Adviser's financial condition and whether it had the resources
necessary to continue to carry out its functions under the Agreement. The Board
concluded that the Adviser had the financial resources necessary to continue to
perform its obligations under the Agreement and to continue to provide the high
quality services that it has provided to the Fund to date.
3) THE COST OF THE ADVISORY SERVICES AND THE PROFITS TO THE ADVISER AND ITS
AFFILIATES FROM THE RELATIONSHIP WITH THE FUND.
In connection with the Board's consideration of the cost of the advisory
services and the profits to the Adviser and its affiliates from the relationship
with the Fund, the Board considered a number of factors. First, the Board
compared the level of the advisory fee for the Fund against comparative Lipper
expense peer groups ("Expense Peer Group"). The Board also considered
comparative non-management fee expenses and comparative total fund expenses of
the Fund and the Expense Peer Group. The Board considered this information as
useful in assessing whether the Adviser was providing services at a cost that
was competitive with other similar funds. In assessing this information, the
Board considered both the comparative contract rates as well as the level of the
advisory fees after waivers and/or reimbursements. The Board noted that the
Fund's advisory fee was average compared to those of the Expense Peer Group for
the Fund, but the Fund's expense ratio was higher than those of the Expense Peer
Group for the Fund.
16
GAMCO MATHERS FUND
BOARD CONSIDERATION AND RE-APPROVAL OF
MANAGEMENT AGREEMENT (UNAUDITED) (CONTINUED)
The Board Members also reviewed the fees charged by the Adviser to provide
similar advisory services to other registered investment companies or accounts
with similar investment objectives noting that in some cases the fees charged by
the Adviser were higher and in other cases the same or lower, than the fees
charged to the Fund.
The Board also considered an analysis prepared by the Adviser of the estimated
profitability to the Adviser of its relationship with the Fund and reviewed with
the Adviser its cost allocation methodology in connection with its
profitability. In this regard, the Board reviewed Pro-forma Income Statements of
the Adviser for the year ended December 31, 2006. The Board considered one
analysis for the Adviser as a whole, and a second analysis for the Adviser with
respect to the Fund. With respect to the Fund analysis, the Board received an
analysis based on the Fund's average net assets during the period as well as a
pro-forma analysis of profitability at higher and lower asset levels. The Board
concluded that the profitability of the Fund to the Adviser under either
analysis was not excessive.
4) THE EXTENT TO WHICH ECONOMIES OF SCALE WILL BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS REFLECT THOSE ECONOMIES OF SCALE.
With respect to the Board's consideration of economies of scale, the Board
discussed whether economies of scale would be realized by the Fund at higher
asset levels. The Board also reviewed data from the Expense Peer Group to assess
whether the Expense Peer Group funds had advisory fee breakpoints and, if so, at
what asset levels. The Board also assessed whether certain of the Adviser's
costs would increase if asset levels rise. The Board noted that the Fund had a
very small asset size and concluded that under foreseeable conditions, they were
unable to assess at this time whether economies of scale would be realized if
the Fund was to experience significant asset growth. In the event there were to
be significant asset growth in the Fund, the Board determined to reassess
whether the advisory fee appropriately took into account any economies of scale
that had been realized as a result of that growth.
5) OTHER FACTORS.
In addition to the above factors, the Board also discussed other benefits
received by the Adviser from their management of the Fund. The Board considered
that the Adviser did not use soft dollars in connection with its management of
the Fund.
Based on a consideration of all these factors in their totality, the Board
Members, including all of the Independent Board Members, determined that the
Fund's advisory fee was fair and reasonable with respect to the quality of
services provided and in light of the other factors described above that the
Board deemed relevant. Accordingly, the Board Members determined to approve the
continuation of the Fund's advisory agreement. The Board based its decision on
evaluations of all these factors as a whole and did not consider any one factor
as all important or controlling.
17
GAMCO MATHERS FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
================================================================================
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees. Information pertaining to the Trustees and Officers of
the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about the Fund's Trustees and is available,
without charge, upon request, by calling 800-GABELLI (800-422-3554) or by
writing to GAMCO Mathers Fund at One Corporate Center, Rye, NY 10580-1422.
TERM OF NUMBER OF
NAME, POSITION(S) OFFICE AND FUNDS IN FUND
ADDRESS(1) LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED(2) BY TRUSTEE DURING PAST FIVE YEARS HELD BY TRUSTEE(5)
------- -------------- ---------- ---------------------- ------------------
INTERESTED TRUSTEES:(3)
- -----------------------
MARIO J. GABELLI, CFA Since 1999 26 Chairman and Chief Executive Officer of Director of Morgan Group
Trustee and Chairman GAMCO Investors, Inc. and Chief Investment Holdings, Inc. (holding company);
Age: 65 Officer - Value Portfolios of Gabelli Chairman of the Board of LICT
Funds, LLC and GAMCO Asset Management Corp.(multimedia and
Director/Trustee or Inc.; Chief Investment communication services
Officer of other registered investment company)
companies in the Gabelli/GAMCO Funds
complex; Chairman Chief Executive
Officer of GGCP, Inc.
HENRY G. VAN DER EB, CFA(4) Since 1976 3 Senior Vice President of GAMCO Investors,Inc. --
Trustee, President and since August 2004; President and CEO of
Chief Executive Officer GAMCO Mathers Fund since 1999;
Age: 62 Senior Vice President and Portfolio
Manager of Gabelli Funds, LLC and GAMCO
Asset Management Inc. since 1999
INDEPENDENT TRUSTEES(6):
- ------------------------
E. VAL CERUTTI Since 2001 7 Chief Executive Officer of Cerutti Director of The LGL Group,Inc.
Trustee Consultants, Inc. (diversified manufacturing)
Age: 68
ANTHONY J. COLAVITA Since 1999 35 Partner in the law firm of --
Trustee Anthony J. Colavita, P.C.
Age: 72
VINCENT D. ENRIGHT Since 1999 15 Former Senior Vice President and Chief --
Trustee Financial Officer of KeySpan
Age: 64 Corporation (public utility)
ANTHONY R. PUSTORINO Since 1999 14 Certified Public Accountant; Director of The LGL Group,Inc.
Trustee Professor Emeritus, Pace University (diversified manufacturing)
Age: 82
WERNER J. ROEDER, MD Since 1999 23 Medical Director of Lawrence Hospital --
Trustee and practicing private physician
Age: 67
ANTHONIE C. VAN EKRIS Since 1999 19 Chairman of BALMAC International, Inc. --
Trustee (commodities and futures trading)
Age: 73
18
GAMCO MATHERS FUND
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
================================================================================
TERM OF
NAME, POSITION(S) OFFICE AND
ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S)
AND AGE TIME SERVED(2) DURING PAST FIVE YEARS
------- -------------- ----------------------
OFFICERS:
- ---------
BRUCE N. ALPERT Since 1999 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since
Executive Vice President 1988 and an officer of most of the registered investment companies in the Gabelli/GAMCO
Age: 56 Funds complex. Director and President of Gabelli Advisers, Inc. since 1998
EDITH L. COOK(4) Since 1984 Vice President of GAMCO Mathers Fund since 1999
Vice President
Age: 66
HEIDI M. KOONTZ(4) Since 1995 Vice President of GAMCO Mathers Fund since 1999
Vice President
Age: 39
JAMES E. MCKEE Since 1999 Vice President, General Counsel, and Secretary of GAMCO Investors, Inc. since 1999
Vice President and and GAMCO Asset Management Inc. since 1993; Secretary of all of the registered
Secretary investment companies in the Gabelli/GAMCO Funds complex
Age: 44
AGNES MULLADY Since 2006 Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered
Treasurer investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President of
Age: 49 U.S. Trust Company, N.A. and Treasurer and Chief Financial Officer of Excelsior Funds
from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from
2002 through 2004; Controller of Reserve Management Corporation and Reserve Partners,
Inc. and Treasurer of Reserve Funds from 2000 through 2002
ANNE E. MORRISSY, CFA(4) Since 1987 Executive Vice President of GAMCO Mathers Fund and Vice President of GAMCO
Executive Vice President Investors, Inc. since 1999
Age: 45
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance
Chief Compliance Officer Officer of all of the registered investment companies in the Gabelli/GAMCO Funds
Age: 54 complex; Vice President of Goldman Sachs Asset Management from 2000 through 2004
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1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
2 Each Trustee will hold office for an indefinite term until the earliest of
(i) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Trustee and until the
election and qualification of his or her successor, if any, elected at such
meeting, or (ii) the date a Trustee resigns or retires, or a Trustee is
removed by the Board of Trustees or shareholders, in accordance with the
Fund's By-Laws and Declaration of Trust. Each officer will hold office for
an indefinite term until the date he or she resigns or retires or until his
or her successor is elected and qualified.
3 "Interested person" of the Fund as defined in the 1940 Act. Messrs. Gabelli
and Van der Eb are each considered an "interested person" because of their
affiliation with Gabelli Funds, LLC which acts as the Fund's investment
adviser.
4 Address: 2801 Lakeside Drive, Suite 201, Bannockburn, IL 60015.
5 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934, as amended (i.e. public
companies) or other investment companies registered under the 1940 Act.
6 Trustees who are not interested persons are considered "Independent"
Trustees.
19
GAMCO MATHERS FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value per share available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Anthony R. Pustorino
CHAIRMAN AND CHIEF CERTIFIED PUBLIC ACCOUNTANT,
EXECUTIVE OFFICER PROFESSOR EMERITUS
GAMCO INVESTORS, INC. PACE UNIVERSITY
E. Val Cerutti Werner J. Roeder, MD
CHIEF EXECUTIVE OFFICER MEDICAL DIRECTOR
CERUTTI CONSULTANTS, INC. LAWRENCE HOSPITAL
Anthony J. Colavita Henry G. Van der Eb, CFA
ATTORNEY-AT-LAW PRESIDENT AND CHIEF
ANTHONY J. COLAVITA, P.C. EXECUTIVE OFFICER
GAMCO MATHERS FUND
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT Anthonie C. van Ekris
AND CHIEF FINANCIAL OFFICER CHAIRMAN
KEYSPAN CORP. BALMAC INTERNATIONAL, INC.
OFFICERS AND PORTFOLIO MANAGER
Henry G. Van der Eb, CFA Anne E. Morrissy, CFA
PRESIDENT AND EXECUTIVE VICE PRESIDENT
PORTFOLIO MANAGER
Heidi M. Koontz
Bruce N. Alpert VICE PRESIDENT
EXECUTIVE VICE PRESIDENT
Edith L. Cook
Agnes Mullady VICE PRESIDENT
TREASURER
Peter D. Goldstein
James E. McKee CHIEF COMPLIANCE OFFICER
VICE PRESIDENT
AND SECRETARY
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
GAMCO Mathers Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB1726Q407SR
GAMCO
GAMCO
MATHERS
FUND
ANNUAL REPORT
DECEMBER 31, 2007
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Trustees has determined that Anthony R. Pustorino is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$29,500 for 2006 and $30,700 for 2007.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $0 for 2006 and $0 for 2007.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $3,900 for 2006 and $4,100
for 2007. Tax fees represent tax compliance services provided in
connection with the review of the Registrant's tax returns.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2006 and $0 for 2007.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee ("Committee")
of the registrant is responsible for pre-approving (i) all audit and
permissible non-audit services to be provided by the independent
registered public accounting firm to the registrant and (ii) all
permissible non-audit services to be provided by the independent
registered public accounting firm to the Adviser, Gabelli Funds, LLC,
and any affiliate of Gabelli Funds, LLC ("Gabelli") that provides
services to the registrant (a "Covered Services Provider") if the
independent registered public accounting firm's engagement related
directly to the operations and financial reporting of the registrant.
The Committee may delegate its responsibility to pre-approve any such
audit and permissible non-audit services to the Chairperson of the
Committee, and the Chairperson must report to the Committee, at its
next regularly scheduled meeting after the Chairperson's pre-approval
of such services, his or her decision(s). The Committee may also
establish detailed pre-approval policies and procedures for
pre-approval of such services in accordance with applicable laws,
including the delegation of some or all of the Committee's pre-approval
responsibilities to the other persons (other than Gabelli or the
registrant's officers). Pre-approval by the Committee of any
permissible non-audit services is not required so long as: (i) the
permissible non-audit services were not recognized by the registrant at
the time of the engagement to be non-audit services; and (ii) such
services are promptly brought to the attention of the Committee and
approved by the Committee or Chairperson prior to the completion of the
audit.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) Not applicable
(c) 100%
(d) Not applicable
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was (0%) zero percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $100,900 for 2006 and $69,100 for 2007.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The GAMCO Mathers Fund
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By (Signature and Title)* /s/ Henry G. Van der Eb
-------------------------------------------------------
Henry G. Van der Eb, Chief Executive Officer
Date 03/05/08
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Henry G. Van der Eb
-------------------------------------------------------
Henry G. Van der Eb, Chief Executive Officer
Date 03/05/08
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By (Signature and Title)* /s/ Agnes Mullady
-------------------------------------------------------
Agnes Mullady,
Principal Financial Officer and Treasurer
Date 03/05/08
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* Print the name and title of each signing officer under his or her signature.