MATTHEW 25 FUND, INC.
605 Cloverly Avenue
Jenkintown, PA 19046
215-884-4458
888-M25-FUND
MATTHEW 25 FUND, INC.
605 Cloverly Avenue
Jenkintown, PA 19046
215-884-4458
888-M25-FUND
Dear Shareholders of Matthew 25 Fund, Inc.,
Thank you for being a part of the Matthew 25 Fund and for allowing it to
grow to its current level. On July 15, 1999, our Fund reached $25 million in
assets. This is an important benchmark because it qualifies our Fund to be
listed in the Mutual Fund Section of the daily newspapers. In addition, our
Fund's symbol for quotes on the internet will be MXXVX and should be available
within a few weeks.
For new and old shareholders alike, there are a few principals I wish to
state. First, I appreciate and want the responsibility you give me to make the
investment decisions for your Fund. One way that I try to show my faith in this
duty is by placing nearly all my family's assets along with yours. The only
money we don't have in our Fund is our checking account and a 401K at Boenning
& Scattergood. The Mulholland's currently own 108,116.86 shares of Matthew 25
Fund and any money left after bills get paid goes directly into our Fund each
month. As part of this responsibility, please be assured that every investment
decision made for our Fund will balance two questions; "How much can we make,
and How much can we lose?" This balance may keep us from some more aggressive
stocks, however, when I find an investment that I confidently feel offers high
upside potential with low downside risk, then we will own a high percentage of
that security in our Fund. In other words, our selections may be conservative
but our ownership will be aggressive.
Aristotle once said "...theory is general knowledge...experience is
knowledge of particulars...," so let us get to the particulars. Our Fund was up
6.3% for the first six months of 1999. The following list will show the perform-
ance of each of the stocks held in our Fund and then I will provide an outlook
on several holdings.
Security Six Months Price Change
_____________ ________________________
Advanta + 37.6%
Franklin Resources + 34.4%
Berkshire Hathaway A - 1.6%
Berkshire Hathaway B - 4.7%
Commonwealth + 15.3%
Disney + 2.7%
Freddie Mac - 10.0%
Harris Fin'l - 18.1%
Home Depot + 5.3%
Intel + 0.3%
Lindsay Mfg. + 18.6%
MBIA - 1.2%
Nike + 56.2%
Niagara Mohawk - 0.4%
Polaris + 11.0%
AT&T + 16.4%
Tokio M&F Insur. - 7.1%
MCI Worldcom + 19.9%
Willow Grove Bancorp - 4.2%
Wrigley's + 0.9%
The only stock that I have short-term concerns for is Harris Financial.
This is because the value of some comparable savings banks, such as Willow
Grove Bancorp are more under valued than Harris. However, Harris Financial will
become a better value as soon as it issues its remining shares, which are
currently held in a Mutual Holding Corp., to its depositors.
The stocks that offer the best potential in the next 12 to 24 months are:
Intel, Freddie Mac, Advanta, Polaris, and Niagara Mohawk. These businesses are
either in the midst of earnings growth and/or valuation change. Other stocks
which have the potential for high returns at any time in the next couple years,
but need to show a better trend in their earnings, intrinsic values or stock
prices are: Berkshire Hathaway, Commonwealth, Disney, Franklin Resources, MBIA,
AT&T, and Tokio Marine. The three stocks which I feel are great but values but
may take three years or longer to achieve their full appreciation are: Lindsay
Mfg., Willow Grove Bancorp and Harris Financial. Nike, Home Depot, and MCI
Worldcom are more fully priced than your other investments; I have reduced our
holdings in each.
There is a time to sow and a time to reap. I believe that it is still a
time to sow and that we should reap more appreciation from our portfolio. If
your finances allow you, then please continue to purchase more shares of the
MATTHEW 25 FUND. Thank you!
Mark Mulholland
President
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND,INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
ASSETS
Investments in securities at value (cost $17,634,087) $ 24,264,237
Cash 273,692
Receivable for dividends 21,265
___________
TOTAL ASSETS $ 24,559,194
LIABILITIES 44,188
COMMITMENTS & CONTINGENCIES _
___________
NET ASSETS: (Equivalent to $11.157 per share based on
2,197,305 shares of capital stock 100,000,000 shares
authorized, $0.1 par value) $ 24,515,006
============
COMPOSITION OF NET ASSETS
Shares of common stock $ 21,973
Paid-in capital 17,498,998
Net unrealized appreciation of investments 6,630,150
Retained Earnings 363,885
___________
NET ASSETS, JUNE 30, 1999 $ 24,515,006
============
MATTHEW 25 FUND, INC.
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1999
INVESTMENT INCOME
Dividends $ 95,003
Interest 5,276
Short-Term Gains 69,621
________
TOTAL INVESTMENT INCOME 169,900
EXPENSES
Investment Advisory Fee 110,989
Other Expenses 30,594
____________
TOTAL EXPENSES 141,583
____________
INVESTMENT INCOME, NET 28,317
____________
NET REALIZED LONG-TERM GAIN ON SECURITY TRANSACTIONS 335,568
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 1,061,521
____________
NET GAIN ON INVESTMENTS 1,397,089
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,425,406
============
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
FOR THE SIX MONTHS ENDED JUNE 30, 1999
Number of Shares Historical Cost Value
________________ _______________ ____________
COMMON STOCKS, 98.80%
Banks & finance, 17.00%
Advanta Corporation 64,000 $ 1,044,375 $1,156,000
Commonwealth Bancorp, Inc. 60,000 833,029 1,076,250
Harris Financial 98,000 1,217,893 1,053,500
Willow Grove Bancorp, Inc.* 90,000 924,728 888,750
_______________ ____________
4,020,025 4,174,500
Communications, 11.47%
MCI WorldCom, Inc. 12,000 332,342 1,032,000
AT&T 32,000 774,896 1,786,000
_______________ ____________
1,107,238 2,818,000
Entertainment, 5.08%
Walt Disney Co. 40,500 1,119,802 1,247,906
_______________ ____________
1,119,802 1,247,906
Foreign Insurance, 2.92%
Tokio Marine & Fire
Insurance Co. 12,850 673,898 716,388
_______________ ____________
673,898 716,388
Insurance, 5.27%
MBIA, Inc. 20,000 1,135,898 1,295,000
_______________ ____________
1,135,898 1,295,000
Manufacturing, 18.71%
Intel Corp. 33,500 1,529,979 1,991,156
Lindsay Manufacturing Co. 27,000 409,634 474,187
NIKE, Inc., Class B 19,300 888,563 1,223,137
Polaris Industries, Inc. 20,000 657,179 870,000
Wm. Wrigley Jr. Co., Class B 400 20,580 35,675
______________ _____________
3,505,935 4,594,155
Mortgage securities, 14.88%
Freddie Mac 63,000 2,077,792 3,654,000
______________ _____________
2,077,792 3,654,000
Mutual fund investment advisor, 7.11%
Franklin Resources, Inc. 43,000 1,455,139 1,746,875
______________ _____________
1,455,139 1,746,875
Miscellaneous, 5.30%
Berkshire Hathaway* 14 697,754 964,600
Berkshire Hathaway, Class B* 150 257,352 336,000
______________ _____________
955,106 1,300,600
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
Number of Shares Historical Cost Value
________________ _______________ ____________
Retail, 3.15%
Home Depot, Inc. 12,000 203,255 773,250
_______________ ____________
203,255 773,250
_______________ ____________
Utilities, 7.91%
Niagara Mohawk Power Corp. 121,000 1,379,999 1,943,563
_______________ ____________
TOTAL COMMON STOCK $ 1,379,999 $ 1,943,563
______________ ____________
TOTAL SECURITIES $ 17,634,087 $ 24,264,237
============== ============
* Non-income producing security
MATTHEW 25 FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30,1999 and 1998
1999 1998
__________________ __________________
INCREASE IN NET ASSETS FROM OPERATIONS
Investment (loss) income, net $ 28,317 $ (39,335)
Net realized gain on securities
transactions 335,568 456,729
Net change in unrealized appreciation
on investments 1,061,521 3,477,313
__________________ __________________
NET INCREASE IN SALES RESULTING
FROM OPERATIONS 1,425,406 3,894,707
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income, net 0 0
Net realized gain on investments 0 (417,394)
Capital share transactions 1,761,880 7,270,981
__________________ ___________________
NET INCREASE IN NET ASSETS 3,187,286 10,748,294
NET ASSETS, BEGINNING OF YEAR 21,327,720 10,579,426
__________________ ___________________
NET ASSETS, END OF YEAR $ 24,515,006 $ 21,327,720
================== ===================
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Matthew 25 Fund, Inc.("the Fund") was incorporated on August 28, 1995 and
commenced operations on October 16, 1995. The Fund had no operations
prior to the commencement of operations, other than matters relating to
its organization and registration as an open-end, non-diversified manage-
ment investment company under the Investment Company Act of 1940 and its
share under the Security Act of 1933. The following is a summary of sig-
nificant accounting policies consistently followed by the Fund in the
preparation of its financial statements. These policies are in conformity
with generally accepted accounting principles.
SECURITY VALUATIONS
The Fund values investment securities, where market quotations are
available, at market value based on the last recorded sales price as
reported by the principal 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.
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 its shareholders substantially all of
its net investment income, if any, and net realized capital gains,if any,
at year end.
ORGANIZATIONAL COSTS
Organizational costs were borne by the Fund's Investment Adviser.
REGISTRATION FEES
Initial registration fees were borne by the Fund's Investment Adviser.
OTHER
The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determin-
ing gains or losses for financial statements and income tax purposes.
Dividend income is recorded on the ex-dividend date and interest income
is recorded on an accrual basis.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses dur-
ing the reporting period. Actual results could differ from those
estimates.
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 INVESTMENT ADVISORY AGREEMENT AND OTHER RELATED TRANSACTIONS
The Fund has an investment advisory agreement with The Matthew 25 Management
Corporation, whereby Matthew 25 Management Corp. 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. Matthew 25
Management Corp. has agreed to decrease the investment advisory fee or, if
necessary, to reimburse the Fund if and to the extent that the Fund's aggregate
annual operating expenses exceed 2.0% of the first $10,000,000 and 1.5% of the
next $20,000,000.
The management fee for the first six months of 1999, as computed pursuant to
the investment advisory agreement, totaled $113,267. The amount paid to The
Matthew 25 Management Corp. has agreed to was $110,989. as of June 30, 1999.
Mr. Mark Mulholland is the sole owner, director and officer of Matthew 25
Management Corporation and is also the president of the Fund.
In addition, Mr. Mulholland is a broker at Boenning and Scattergood, Inc.
During the six months ending June 30, 1999, the Fund paid brokerage
commission of $7,520 to Boenning & Scattergood, Inc. of which Mr.
Mulholland received compensation totaling $3,551. Boenning & Scattergood,
Inc. is not otherwise associated with Matthew 25 Fund, Inc. or Matthew 25
Management Corp. and is not responsible for any of the investment advice
rendered to the Fund by Matthew 25 Management Corporation or Mr. Mulholland.
NOTE 3 INVESTMENTS
For the six months ending June 30,1999, purchases and sales of investment
securities other than short-term investments aggregated $3,542,611 and
$1,207,305, respectively. At June 30, 1999, the gross unrealized
appreciation for all securities totaled $6,666,128 and the gross unrealized
depreciation for all securities totaled $35,978 or a net unrealized
appreciation of $6,630,150. The aggregate cost of securities for federal income
tax purposes at June 30, 1999 was $17,634,087.
NOTE 4 CAPITAL SHARE TRANSACTIONS
As of June 30, 1999,there were 100,000,000 shares of $.01 per value capital
stock authorized. The total par value and paid-in capital totaled
$17,520,971.
Transactions in capital stock were as follows for the six months ended June 30,
1999 and 1998: 1999 1998
_______________________ _____________________
Shares Amount Shares Amount
__________ __________ __________ ___________
Shares sold 226,726 $2,425,583 818,300 $7,505,090
Shares issued in reinvestment
of dividends 0 0 39,322 413,745
Shares redeemed (61,995) (663,703) (69,823) (674,854)
__________ __________ __________ ___________
Net Increase 164,731 $1,761,880 787,799 $7,270,981
========== ========== ========== ===========
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED RATIOS/SUPPLEMENTAL DATA
For a Share Outstanding throughout each Period Ended:
June 30,1999 1998 and 1997
For the
Period
June 30 December 31 10/16/95
______________________________________________ through
1999 1998 1997 1996 12/31/95
_________ ________ _________ _________ _________
Net asset value, $ 10.49 $ 8.50 $ 6.11 $ 5.16 $ 5.00
beginning of period
Income from
investment operations
Net investment income 0.01 (0.02) 0.01 0.01 (0.01)
(loss)
Net gains on
securities both
realized and
unrealized 0.66 2.22 2.41 0.95 0.17
________ _______ _________ _________ ________
Total from investment 11.16 10.70 8.53 6.12 5.16
operations
Less, distributions
Net investment
income 0 (0.02) (0.01) (0.01)
Net realized gains
on investments 0 (0.19) (0.02)
_______ ________ _______ ______ _______
Net Asset value,
end of period $ 11.16 $ 10.49 $ 8.50 $ 6.11 $ 5.16
======== ======= ======= ======= =======
Total return 12.66%* 25.93% 39.65% 18.63% 17.43%*
*Annualized
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
MATTHEW 25 FUND INC.
PERFORMANCE SUMMARY
The graph below represents the changes in value for a $10,000.00 investment
in the Matthew 25 Fund from its inception, October 16,1995, to years ending
December 31st for 1995, 1996, 1997, 1998 and six months ending June 30th for
1999. These changes are then compared to a
$10,000.00 investment in the Value Line Index, which is an index comprising of
1,617 stocks, for the same period.
Incept. Year Ended Year Ended Year Ended Year Ended 6 Mos. End
10/16/95 12/31/95 12/31/96 12/31/97 12/31/98 6/30/99
M25 FUND $10,000 $10,320 $12,247.58 $17,103.14 $21,537.72 $22,901.06
Value Line $10,000 $10,287 $12,321.77 $15,827.31 $16,748.46 $18.907.33
_____________________________________________________________________________
Matthew 25 Fund, Inc.
22,910 - . . . . . (*)
- (*)
21,619 - . . . . . .
-
V 20,328 - . . . . . .
-
a 19,037 - . . . . . [*]
-
l 17,746 - . . . (*) . .
- [*]
u 16,455 - . . . [*] . .
-
e 15,164 - . . . . . .
-
13,873 - . . . . . .
-
12,582 - . . [*] . . .
-
11,291 - . . . . . .
- [*]
10,000 - [*]
_________________________________________________________________
10/16/95 12/31/95 12/31/96 12/31/97 12/31/98 6/30/99
Category
(*)Matthew 25 Fund [*]Value Line Index
_____________________________________________________________________________
76 days 1 year 1 year 1 year 6 Mos. Average
12/31/95 12/31/96 12/31/97 12/31/98 6/30/99 Annual Rate
________ ________ ________ ________ _______ ___________
M25 Fund 3.60% 18.63% 39.65% 25.93% 6.33% 25.39%
Value Line 2.87% 19.78% 28.45% 5.82% 12.89% 18.83%
THIS IS AN UNAUDITED STATEMENT.
The accompanying notes are an integral part of these financial statements.
