Solicitation of Proxies
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant{ X }
Check the appropriate box:
{ } Preliminary Proxy Statement
{ X } Definitive Proxy Statement
{ } Definitive Additional Materials
{ } Soliciting Material Pursuant to 240.14a-1(c) or 240.14a-12
Matthew 25 Fund, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Bernard B. Klawans
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
{ X } $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(3).
{ } $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
{ } Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursu-
ant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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{ } Check box if any part of thee fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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MATTHEW 25 FUND, INC.
NOTICE OF SPECIAL MEETING
TO BE HELD
July 8, 1996
Notice is hereby given that a Special Meeting of Shareholders of the Matthew 25
Fund, Inc. will be held July 8, 1996, at 8:00 PM at 1375 Anthony Wayne Drive,
Wayne, Pennsylvania, for the following purposes:
1 - To elect six new directors to serve until the next Annual Meeting or un-
til their successors are elected and qualified.
2 - To approve or disapprove a new Investment Advisory Agreement with a new
Investment Adviser, the Matthew 25 Management Corp.
3 - To consider and act upon any other matters that may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business June 3, 1996 as the re-
cord date for determination of the shareholders entitled to notice of and to
vote at the meeting.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON,
PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY.
PROMPT RETURN OF THE PROXY WILL BE APPRECIATED.
MATTHEW 25 FUND, INC.
1375 Anthony Wayne Dr.
Wayne, PA 19087
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
July 8, 1996
Enclosed herewith is a Notice of the first Meeting of Shareholders of the Mat-
thew 25 Fund (the"Fund") and a Proxy form solicited by the majority shareholders
of the Fund. The Proxy may be revoked at any time before it is exercised either
by mail notice to the Fund, a later dated Proxy or in person at the meeting, and
any shareholder attending the meeting in person may vote at the Meeting whether
or not he has previously filed the Proxy.
You are requested to insert your instructions on the enclosed Proxy and then
sign, date and return it. The cost of soliciting Proxies will be borne by the
Fund.
There is one class of capital stock of the Fund with equal voting rights. On
June 3, 1996, the date of record, there were four shareholders and 42,609.608
shares outstanding. In all matters each share has one vote per share and frac-
tional shares will have an equivalent fractional vote. The shareholders as of
June 3, 1996 were as follows:
NAME SHARES PERCENT
---- ------ -------
Mark & Ann Mulholland 42,516.150 99.78%
Bernard B. Klawans 46.729 0.11%
Nancy W. Klawans 46.729 0.11%
---------- -------
42,609.608 100.00%
Mark Mulholland has a B.A. in Economics from Lafayette College and became an ac-
count executive who started his career with Advest Inc. in February of 1983. He
moved to Paine Webber Inc. in 1988. He currently has built his practice to man-
age over $80,000,000.00 in assets for about 800 clients. He has now reached a
threshold where he wishes to apply his expertise towards managing a public no-
load mutual fund. He approached the management of the Valley Forge Fund, Inc.
and solicited their support to this end. He wanted a Fund structured essentially
identical to the Valley Forge Fund, Inc. except that he wished to place more em-
phasis in the pursuit of long-term capital gains as compared to protection of
capital. The Matthew 25 Fund, Inc. was formed by Bernard B. Klawans, for Mark
Mulholland. Mr. Klawans used Valley Forge Fund's Officers, Board of Directors,
Investment Adviser, with the intent to have Mr. Mulholland form his own Invest-
ment Adviser concern and select his own Board of Directors when he was prepared
to leave Paine Webber and operate the Fund. Mr. Mulholland formed the Matthew 25
Management Corp. on April 28, 1995 as a Pennsylvania corporation and is now pre-
pared to provide advisory and management services.
This first meeting of shareholders is a special meeting held to permit Mr. Mul-
holland's Investment Advisory company to take over as Adviser to the Matthew 25
Fund, Inc. and to install a new Board of Directors to oversee operations with
the complete cooperation and support of all Valley Forge Fund associated person-
nel. Mr. Klawans has received $500 for his services in this regard plus support
-2-
through the Fund's first year of operation. The Valley Forge Management Corp.
has received its contractural management fee and the Valley Forge Fund Direc-
tors, with the exception of Mr. Klawans, have received $99 for each Matthew 25
Fund, Inc. Directors meeting they attended from either the Matthew 25 Fund or
the Matthew 25 Management Corp. There have been no other financial arrangements
or benefits including services and/or "soft dollars" since the start of the fil-
ing process in January 1996.
CURRENT OFFICERS AND DIRECTORS OF THE FUND
Officers and Directors of the Fund, together with their addresses, principal oc-
cupations during the past five years are:
Occupation Expense Reimbursement
Name and Address Position Past 5 Years Matt25 VFF Total
Bernard B. Klawans President President $ 0 $ 0 $ 0
1375 Anthony Wayne Dr. Interested Valley Forge
Wayne, PA Director Fund Inc.
Dr. Gerd H. Dahl Secretary Director Ag. $297* $396* $ 693
679 Jefferson Rd. Interested Chem. Research
Bryn Mawr, PA Director Elf Atochem
Victor J. Belanger Non-Interested Vice Pres. $297* $495* $ 792
Box #96 Director Linearizer
Princeton Jct. NJ Technologies
Dr. Thomas A. Fosnocht Non-Interested Dr.of Dental $198* $495* $ 693
737 Hillview Rd. Director Surgery
Malvern, PA Paoli, PA
Dr. James P. King Non-Interested President $297* $495* $ 792
904 Breezewood Ln. Director Desilube
Lansdale, PA Technology Inc.
Dr. Lawrence C. Miller Non-Interested Dr. of Dental $198* $396* $ 594
13 Manor Rd. Director Medicine
Paoli, PA Paoli, PA
William A. Texter Non-Interested Manager, Corp. $297* $495* $ 792
9 Charter Oak Dr. Director Nuclear Quality
Newtown Square, PA PECO Energy
Nancy W. Klawans Treasurer Treasurer $297* $594* $ 891
1375 Anthony Wayne Dr. Wife of Valley Forge
Wayne, PA President Fund, Inc.
* Payments shown for the Matthew 25 Fund are payments for 1996. Matthew 25 Man-
agement Corp. paid $1188 and the Fund paid $693 of the Director and Officer ex-
penses. The payments under the VFF column are the actual payments made in 1995
for the Valley Forge Fund Inc. The officers and directors are the same for both
funds. The Fund does not compensate its officers and directors affiliated with
the Investment Adviser except as they may benefit through payment of the Advi-
sory fee.
-2-
ELECTION OF DIRECTORS
There are six (6) nominees listed below who consent to serve as directors, if so
elected, until the next Annual Meeting of Shareholders or until their successors
are elected and qualified. They are believed to complement Mr. Mulholland's ca-
pabilities admirably.
Nominees for Election of Directors for Matthew 25 Fund
Principal Occupation Fund Shares Percent
Name Age Past Five Years Owned 6/3/96 of class
Steven D. Buck 36 Partner Stevens & Lee 0 0.00%
Esq. Reading, PA
Dr.Philip J. Cinelli 36 Physician Family Practice 0 0.00%
D.O. Bangor, PA
Samuel B. Clement 38 Stockbroker Legg Mason 0 0.00%
Bryn Mawr, PA
Linda Guendelsberger 36 Partner Fishbein & Co P.C. 0 0.00%
CPA Elkins Park, PA
Mark Mulholland* 36 Stockbroker Paine Webber 42,516.150** 99.78%
Jenkintown, PA
Scott A. Satell 34 Partner BPI 0 0.00%
Manufacture's Rep Bala Cynwyd, PA
* Director of the Fund who would be considered "interested persons" as defined
by the Investment Company Act of 1940. Mark Mulholland will be an interested
person insofar as he is President and owner of the Fund's proposed Investment
Adviser.
** Mark Mulholland owns his stock jointly with his wife Ann Mulholland.
The Fund intends to hold Annual Meetings within 90 days of the Fund's Fiscal
Year End, December 31. Actual times and places will be announced. Shareholders
have one vote, per each share they own, for each of the six directors. All Prox-
ies returned to the Fund, except those specifically marked to indicate absten-
tion, will be cast for the nominees listed above. A majority of the votes cast,
when a quorum is present, will be required to elect each director.
Remuneration of Directors and Officers
As shown above, Directors and Officers of the Fund who are not affiliated with
Valley Forge Management Co.("VFMC"), the Fund's current Investment Adviser, re-
ceived fees totaling $1,881 for the current year as of July 8, 1996. No Officer
or Director affiliated with VFMC received fees apart from the Investment Adviser
Fees.
The Fund does not intend to pay fees to the proposed directors until such time
that the Fund's assets exceed $ 2,500,000.00, although the Fund will reimburse
directors for their expenses. The Fund intends to pay Independent Directors $50
plus expenses per meeting, as long as the Fund's Assets exceed the threshold.
Mark Mulholland will receive benefit from the investment advisory fees payable
to Matthew 25 Management Corp. and therefore will not be eligible to receive di-
rectors fees as long as his firm acts as the Investment Adviser.
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BROKERAGE
The Fund requires all brokers to effect transactions of portfolio securities in
such a manner as to get prompt execution of the orders at the most favorable
price. The Fund will place all orders for purchases and sales of its portfolio
securities through the Fund's President who is answerable to the Fund's Board of
Directors. In accordance with Rule 17E-1, if the Fund's President is also a reg-
istered representative of a New York Stock Exchange or NASDAQ Member Firm, he
may place orders through his concern at as low commission rates as possible but
never to exceed rates that are higher than would be available through any other
national brokerage firm. The Directors will review each transaction when a com-
mission is generated at a brokerage firm which is affiliated with the Fund's
President or Adviser and determine if the commission paid appears reasonable.
In the event that the Board determines that any or all of the commissions paid
are higher than what they determine as reasonable, then the Board will reduce
the fees paid to the Adviser by an amount equal to the commissions deemed un-
reasonable. This review must be done at least quarterly. The Fund's President
may select other brokers who in addition to meeting the primary requirements of
execution and price, have furnished statistical or other factual information and
services, which, in the opinion of management, are helpful or necessary to the
Fund's normal operations. No effort will be made in any given circumstances to
determine the value of these services or the amount they might have reduced Ad-
viser expenses.
Other than as set forth above, the Fund has no fixed policy, formula, method or
criteria which it uses in allocating brokerage business to brokers furnishing
these materials and services. The Board of Directors will evaluate and review
the reasonableness of brokerage commissions paid to brokers not affiliated with
the President or Adviser at least semiannually.
PROPOSAL TO RATIFY NEW INVESTMENT ADVISORY AGREEMENT
Bernard B. Klawans is the owner, president and only shareholder of the Valley
Forge Management Corp. the present Investment Adviser to the Matthew 25 Fund,
Inc.. He supports the effort to terminate his adviser services and transfer the
responsibilities to the Matthew 25 Management Corp. which is owned by Mr. Mark
Mulholland who is also its president and only shareholder. The terms and agree-
ment of the new Advisory Contract are virtually identical to the current con-
tract and the management fee will remain the same. The only differences will be
that the Adviser will have full discretion and responsibility for the investment
decisions in the Fund, and that the investment philosophy emphasizes long-term
appreciation more strongly as stated above.
Mr. Mark Mulholland is the President of the Adviser as well as being the largest
shareholder of the Fund. Mr. Mulholland intends to work as a stockbroker for
Boenning and Scattergood a Pennsylvania concern while acting as President of the
Fund and the Adviser.
The Valley Forge Management Corp. and the Fund's Officers and Directors agree to
continue to perform all required duties until this proxy is filed, approved by
the Securities and Exchange Commission and voted on affirmatively to elect the
proposed Directors and Adviser. There have been no public offerings of Fund se-
curities to anyone and will be none until the Securities and Exchange Commission
reviews and approves the revised Prospectus.
This new Advisory Agreement, if accepted, will continue until the Annual Meeting
and then will be on a annual basis provided that approval is voted at least an-
-4-
nually by specific approval of the Board of Directors of the Fund or by vote of
the holders of a majority of the outstanding voting securities of the Fund, but,
in either event, it must also be approved by a majority of the directors of the
Fund who are neither parties to the agreement nor interested persons as defined
in the Investment Company Act of 1940 at a meeting called for the purpose of
voting on such approval. Under the Agreement, the Matthew 25 Management Corpor-
ation will make investment decisions for the Fund and continually review the
portfolio in order to decide as to when and to what should be purchased, held
or sold. The Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Directors or by vote of a majority of the outstand-
ing voting shares of the Fund on not more than sixty days written notice to the
Matthew 25 Management Corp. In the event of its assignment, the Agreement will
terminate automatically. Ultimate decisions as to the investment policy and as
to specific purchases and sales of securities can be made by the Fund's Officers
and Directors. The Fund agrees to pay the Adviser a fee of 1% per year on the
net assets of the Fund for the services provided by the Adviser. All fees are
computed daily on the closing net asset value of the Fund and are payable month-
ly. The Investment Adviser will forgo sufficient fees in order to hold total
expenses of the Fund to less than 2% of the first $10,000,000.00 in averaged as-
sets and 1.5% of the next $20,000,000.00. These ratios were selected by the
Board of Directors because they are believed to meet the most restrictive state
requirements.
Pursuant to its contract with the Fund, the Adviser is required to render re-
search and Advisory services to the Fund; to make specific recommendations based
on the Fund's investment requirements; and to pay the salaries of the Fund's em-
ployees who are officers, directors or employees of the Adviser as well. Fees
of the custodian, registrar or transfer agents shall be paid by the Fund. The
Fund pays all other expenses, including fees and expenses of directors not af-
filiated with the Adviser; legal and accounting fees; interest, taxes and bro-
kerage commissions, bookkeeping and the expenses of operating its offices. The
Matthew 25 Management Corp. has paid the initial organization costs of the Fund.
There were no soft dollar payments made to the Fund or to VFMC and no such pay-
ments are intended for the Fund or the new Adviser.
OTHER MATTERS
Management knows of no other matters to be presented at the Meeting other than
those mentioned above. Should other business come before the Meeting, the prox-
ies will be voted in accordance with the view of Management.
-5-
PROXY - SOLICITED BY MAJORITY SHAREHOLDERS
MATTHEW 25 FUND INC. SPECIAL MEETING OF SHAREHOLDERS
July 8, 1996
The Special Meeting of the Matthew 25 Fund will be held July 8, 1996 at 1375
Anthony Wayne Dr., Wayne, PA at 8:00 PM. The undersigned hereby appoints Mark
Mulholland as proxy to represent and to vote all shares of the undersigned at
the Special Meeting of Shareholders and all adjournments thereof, with all pow-
ers the undersigned would posses if personally present, upon the matters speci-
fied below.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED: IF NO DIRECTION IS
INDICATED AS TO A PROPOSAL, THE PROXY SHALL VOTE FOR SUCH PROPOSAL. THE PROXY
MAY VOTE AT HIS DISCRETION ON ANY MATTER WHICH MAY PROPERLY COME BEFORE THE
MEETING.
The former Board of Directors recommends that you vote FOR on all items.
1. Election of Directors
____ FOR all nominees except as marked to the contrary below.
____ WITHHOLD AUTHORITY to vote for all nominees.
To withhold authority to vote for nominees, strike a line through his/
their name(s)
Mark Mulholland Steven D. Buck Dr. Philip J. Cinelli
Samuel B. Clement Linda Guendelsberger Scott A. Satell
2. Proposal to initiate a new Investment Advisory Agreement with Matthew 25 Man-
agement Corp. and to simultaneously terminate the current Investment Advisory
Agreement with Valley Forge Management Corp.
____ FOR ____AGAINST ____ABSTAIN
Please mark, date, sign and return the proxy promptly. For joint registrations,
both parties should sign.
Dated__________________, 1996
_________________________________________
Shareholder's Signature
_____________________________
No. of shares as of 6/3/96
_________________________________________
Shareholder's Signature
LANDSBURG PLATT RASCHIATORE & DALTON
Certified Public Accountants
117 South 17th Street 13th Floor
Philadelphia, PA 19103
215-561-6633
Fax 215-561-2070
Independent Auditor's Report
To the Shareholders and Board of Directors of Matthew 25 Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Matthew
25 Fund, Inc., including the schedule of investments in securities as of Febru-
ary 5, 1996 and the related statement of operations for the period from January
1, 1996 through February 5, 1996, the statement of changes in net assets and
the financial highlights and related ratios/supplemental data for each of the
periods indicated. These financial statements and financial highlights and re-
lated ratios/supplemental data are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights and related ratios/supplemental data based on our au-
dit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial highlights
and related ratios/supplemental data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements. Our procedures included confirmation of
securities owned as of February 5, 1996, by correspondence with the custodian
and brokers. An audit includes assessing the accounting principles used and sig-
nificant estimates made by management, as well as evaluating the overall finan-
cial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and the financial highlights and re-
lated ratios/supplemental data referred to above present fairly, in all material
respects, the financial position of Matthew 25 Fund, Inc., as of February 5,
1996, the results of its operations from January 1, 1996 through February 5,
1996, the changes in its net assets and the financial highlights and related ra-
tios/supplemental data for each of the periods indicated, in conformity with
generally accepted accounting principles.
Landsburg Platt Reschiatore & Dalton
February 29, 1996
MATTHEW 25 FUND, INC. MATTHEW 25 FUND, INC.
Statement of Assets and Liabilities Schedule of Investments in Securities
February 5, 1996 February 5, 1996
ASSETS Number of
------ shares or
Investments in securities, $ 114,528 principal Market
at value (cost $108,382) --------- amount Value
--------- --------
TOTAL ASSETS $ 114,528 COMMON STOCK - 80.54%
--------- ------------
FINANCIAL - 26.18%
LIABILITIES ---------
-----------
Accounts Payable $ 496 Franklin Resources 200 $ 10,600
--------- Harris Savings 1,000 19,250
TOTAL LIABILITIES $ 496 ---------
--------- 29,850
---------
NET ASSETS MANUFACTURERS - 34.24%
---------- -------------
Net assets $ 114,032
(equivalent to $5.28 per ========= Rubbermaid Inc. 800 22,300
share based on 21,585 shares Stride Rite Corp. 2,000 16,750
of capital stock outstanding) ---------
39,050
Composition of net assets: ---------
Shares of common stock 216 MISCELLANEOUS - 20.12%
Paid in capital 107,919 -------------
Accumulated net investment (249)
loss Home Depot Inc. 500 22,938
Net unrealized appreciation 6,149 ---------
of investments -------- TOTAL COMMON STOCKS 91,838
(Cost $85,692) ---------
NET ASSETS 2/5/96 $ 114,032
========= SHORT TERM INVESTMENTS - 19.90%
----------------------
First Montauk 9,403 9,403
Money Market
Royal Bank Gold 13,287 13,287
Money Market ---------
TOTAL SHORT TERM INVESTMENTS
(Cost $22,690) 22,690
---------
TOTAL SECURITIES
(Cost $108,382) $ 114,528
=========
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND, INC. MATTHEW 25 FUND, INC.
STATEMENT OF OPERATIONS STATEMENT OF CHANGES IN NET ASSETS
For the period January 1, 1996 Period from
through February 5, 1996 October 26,
1995 ( com-
Period from mencement of
INVESTMENT INCOME: January 1, operations )
- ------------------ 1996 through through De-
February 5, cember 31,
Interest $ 38 1996 1995
Miscellaneous 6 ------------ ------------
------- INCREASE IN
NET ASSETS
Total investment income 44 FROM OPERA-
------- TIONS:
------------
EXPENSES: Investment $ (49) $ (200)
- --------- loss - net
Investment advisor 89 Net realized 0 0
Miscellaneous 4 gain (loss)
------- on securi-
Total Expenses 93 ties trans-
------- actions
Net change 2,738 3,408
Investment loss - net (49) in unreal-
------- ized appre-
Net realized gain (loss) 0 ciation of
on securities transactions investments --------- ---------
Net change in unrealized 2,738 Net Increase 2,689 3,208
appreciation of investments ------- in net as-
sets from
Net gain on investments 2,738 operations --------- ---------
------- Distributions
to sharehold-
ers from
Net increase in net assets $ 2,689 Investment 0 0
resulting from operations ======= income-net
Net realized 0 0
gain on in-
vestments
Capital share 5,136 2,999
transactions --------- ---------
Net increase 7,825 6,207
in net assets --------- ---------
NET ASSETS:
----------
Beginning of 106,207 100,000
period --------- ---------
End of period $ 114,032 $ 106,207
========= =========
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND, INC.
Notes to the Statement of Assets and Liabilities
February 5, 1996
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Matthew 25 Fund, Inc. (the "Fund") was incorporated on August 28, 1995 and com-
menced operations on October 26, 1995. The Fund has no operations prior to the
commencement of operations other than matters relating to its organization and
registration as an open-end non-diversified management investment company under
the Investment Company Act of 1940 and its securities under the Securities Act
of 1933, the sale & issuance of 20,000 shares of common stock ("initial shares")
to its initial, joint tenant investors on October 16, 1995. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. These policies are in conformity
with generally accepted accounting principles. Significant accounting policies
of the Fund are as follows:
Security valuations
The Fund values investment securities, where market quotations are available, at
market value based on the last recorded sales prices as reported by the princi-
pal securities exchange on which the security is traded, or if the security is
not traded on an exchange, market value is based on the latest bid price. Short-
term investments are valued at cost, approximately market value.
Federal income taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
all its taxable income to its shareholders. Therefore, no federal income tax
provision is required.
Distribution to shareholders
The Fund intends to distribute to shareholders substantially all of its net in-
vestment income, if any, and net realized capital gains, if any, at year end.
Organizational costs
Organizational costs were borne by the Fund's Investment Advisor.
Registration fees
Registration fees were borne by the Fund's investment advisor.
Other
The Fund follows industry practice and records security transactions on the
trade date. The specific identification method is used for determining gains or
losses for financial statements and income tax purposes. Dividend income is re-
corded on the ex-dividend date and interest income is recorded on an accrual ba-
sis.
NOTE 2 INVESTMENT ADVISORY AGREEMENT AND OTHER RELATED TRANSACTIONS
The Fund has an investment advisory agreement with The Valley Forge Management
Corp., (VFMC), whereby VFMC receives a fee of 1% per year on the net assets of
the Fund. All fees are computed on the average daily closing net asset value of
the Fund and are payable monthly. In accordance with State Regulations, VFMC
has agreed to decrease the investment advisory fee or, if necessary, to reim-
burse the fund if and to the extent that the Fund's aggregate annual operating
expenses exceed specified percentages of the Fund's net assets. The percentages
are 2.0% of the first $10,000,000 and 1.5% of the average net assets in excess
of $10,000,000.
Mr. Bernard Klawans is the sole owner, director and officer of VFMC and is also
president of the Fund.
NOTE 3 INVESTMENTS
For the period from October 26, 1995 (commencement of operations) through Feb-
ruary 5, 1996, purchases and sales of investment securities other than short-
term investments aggregated $85,692 and $-0-, respectively. The gross unreal-
ized appreciation for all securities totaled $6,414 and the gross unrealized
depreciation for all securities totaled $268, or a net unrealized appreciation
of $6,146. The aggregate cost of securities for federal income tax purposes at
February 5, 1996 was $108,382.
NOTE 4 CAPITAL SHARE TRANSACTIONS
As of February 5, 1996 there were 1,500,000 shares of $.01 par value capital
stock authorized and capital paid in aggregated $108,135.
Transactions in capital stock were as follows:
For the period from Oc-
For the period from Jan- tober 26, 1995 (commence-
uary 1, 1996 through Feb- ment of operations )
ruary 5, 1996. through December 31, 1995
Shares Amount Shares Amount
-------- -------- -------- --------
Shares Sold* 995 $ 5,136 590 $ 2,999
Shares issued in rein- 0 0 0 0
vestment of dividends
Shares redeemed 0 0 0 0
-------- -------- -------- --------
Net increase 995 $ 5,136 590 $ 2,999
======== ======== ======== ========
*The Fund sold all shares to initial joint tenant investors as of February 5,
1996.
MATTHEW 25 FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED RATIOS/SUPPLEMENTAL DATA
For a Share Outstanding throughout each Period
For the period from Oc-
For the period from Jan- tober 26, 1995 (commence-
uary 1, 1996 through Feb- ment of operations )
ruary 5, 1996. through December 31, 1995
------------------------ -------------------------
Net asset value, begin- $ 5.16 $ 5.00
ning of period
Income from investment
operations
Net investment income - (.01)
Net gains or (losses) .12 .17
on securities both
realized & unrealized ----------- -----------
Total from investment $ 5.28 $ 5.16
operations
Less distributions
Dividends (from net in- - -
vestment income)
Distributions(from cap- - -
ital gains) ----------- -----------
Net Asset value, end of $ 5.28 $ 5.16
period =========== ===========
Net assets, end of period $ 114,032 $ 106,207
Ratio of expenses to av- 1.04%* 2.00%*
erage net assets
Ratio of net investment .49%* .96%*
income to average net
assets
Portfolio turnover rate 0% 0%
*annualized
The accompanying notes are an integral part of these financial statements.
