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BOYAR VALUE FUND, INC.
----------------------
SEMI-ANNUAL REPORT
June 30, 1999
(Unaudited)
FUND MANAGER
------------
LADENBURG THALMANN FUND MANAGEMENT INC.
590 Madison Avenue
New York, NY 10022
INVESTMENT ADVISER ADMINISTRATOR
------------------ -------------
BOYAR ASSET MANAGEMENT, INC. COUNTRYWIDE FUND SERVICES, INC.
35 East 21st Street 312 Walnut Street
New York, NY 10010 P.O. Box 5354
1.212.995.8300 Cincinnati, OH 45201-5354
1.800.266.5566
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<PAGE>
August 30, 1999
Dear Shareholder:
A LOOK BACK AT THE QUARTER AND THE FIRST SIX MONTHS OF THE YEAR WITH A WORD OF
CAUTION
- --------------------------------------------------------------------------------
- - Just when you thought you had the stock market all figured out, the rules
changed.
- - For the past few years, all you had to do was invest in the common shares
of big U.S. enterprises. The faster the businesses were growing, the better
the performance. Many investors concluded that large capitalization growth
investing was the only way to go. After all, during that time frame most
other investment strategies turned in stone-cold performances.
- - But everything is now topsy-turvy, as a dramatic shift in market sentiment
has begun to unfold. Since April, fast growing megasize companies such as
software leader Microsoft and Internet company America Online can no longer
claim to be the dominant drivers of the stock market. Instead, cyclical
companies including long-shunned chemical stocks and metals companies are
shining, as are those in some long-suffering overseas markets.
- - The returns captured by the leading indices during the first six months of
the current year ranged from a high of 22.7% for the technology laden
NASDAQ to 9.3% for the small-capitalization Russell 2000. During the second
quarter, however, the Russell 2000 put on a spectacular show, besting all
the indices and returning a stellar 15.6%. What makes the Russell 2000's
performance during the second quarter even more remarkable, is that it
reversed a -5.4% return garnered during the initial quarter of the year.
- - Every so often I must remind our clients that even the best companies can
get temporarily overvalued, and it may take some time for the fundamentals
to play catch up. Furthermore, the 20% returns captured by the leading
indices during the past four years are clearly unsustainable. It is our
expectation that in the not too distant future these types of results will
regress to the mean of the past 65 years, which approximates 11%. In fact,
it is not inconceivable and quite probable that stock market returns, as
measured by the leading indices, could even fall short of that number for a
few years.
- - Boyar Value Fund experienced favorable comparative results for the first
six months of the current calendar year:
SIX MONTHS ENDED JUNE 30TH COMPARATIVE RESULTS
----------------------------------------------
Russell 2000 Russell Midcap Russell 2000
Boyar Value Fund Index Value Value Index
---------------- ----- ----- -----------
+14.2% +9.3% +7.7% +5.3%
HOW INVESTORS SHOULD VIEW STOCK MARKET CORRECTIONS
- --------------------------------------------------
- - The short quiz that follows was created by investor extraordinaire, Warren
Buffett, and appeared in Berkshire Hathaway's 1997 Annual Report...
- - A short quiz: If you plan to eat hamburgers throughout your life and are
not a cattle producer, should you wish for higher or lower prices for beef?
Likewise, if you are going to buy a car from time to time,
<PAGE>
but are not an auto manufacturer, should you prefer higher or lower car
prices? These questions, of course, answer themselves.
- - But now for the final exam: if you expect to be a net saver during the next
five years, should you hope for a higher or lower stock market during that
period? Many investors get this one wrong. Even though they are going to be
net buyers of stocks for many years to come, they are elated when stock
prices rise and depressed when they fall. In effect, they rejoice because
prices have risen for the "hamburgers" they will soon be buying. This
reaction makes no sense. Only those who will be net sellers of equities in
the near future should be happy at seeing stocks rise. Prospective
purchasers much prefer sinking prices.
- - So smile when you read a headline that says "Investors Lose as Market
Falls." Edit it in your mind to "Disinvestors Lose as Market Falls - but
Investors Gain." Though financial writers often forget this truism, there
is a buyer for every seller and what hurts one necessarily helps the other.
- - Virtually all investors gained enormously from the low prices placed on
many equities and businesses in the 1970's and 1980's. Markets that then
were hostile to investment transients were friendly to those taking up
permanent residence. In recent years the actions taken by virtually any
long-term investor during those decades have been validated, but of late it
has become increasingly more difficult to find new opportunities. We
continue to search each and every day for new investments, but it may take
quite some time to find the enormous number of opportunities that so
excited us in the prior two decades.
BOYAR VALUE FUND'S INVESTMENT MISSION
- -------------------------------------
- - The Boyar Value Fund strives to be a risk-averse, tax-efficient,
value-oriented domestic common stock portfolio consisting primarily of
various equities of public companies which we feel the stock market has
unduly discounted. Our goal is, through extensive fundamental research, to
ferret out intrinsically undervalued U.S. corporations and purchase their
shares at low prices relative to what we perceive as their inherent worth.
We believe that this can lead to the potential for significant capital
appreciation, as well as create a "margin of safety" for our investments.
- - The intrinsic value of a corporation, as we define it, is the estimated
current worth that would accrue to the stockholders of a company, either
through liquidation of corporate assets upon termination of operations, or
through the sale or merger of the entire enterprise as a continuing
business. In our opinion and experience, over an investment time horizon of
three to five years, these undervalued corporations often will be
re-evaluated upward by the stock market or the assets of the company will
be acquired by a third party.
- - At the same time, this long-term "buy and hold" strategy allows capital to
compound without the return-eroding effects of commissions and capital
gains taxes. Such an orientation may sound stodgy, but we firmly believe
this approach is as important to investment success as picking the right
stocks at the right price and the right time.
If you have any questions please do not hesitate to call (212) 995-8300.
Very truly yours,
/s/ Mark A. Boyar
Mark A. Boyar
Chief Investment Officer
<PAGE>
BOYAR VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(Unaudited)
ASSETS
Investment securities:
At acquisition cost $ 3,599,406
===========
At market value (Note 1) $ 3,887,043
Dividends receivable 4,360
Receivable for capital shares sold 10,000
Receivable from Adviser (Note 3) 16,022
Organization expenses, net (Note 1) 68,159
Other assets 24,072
-----------
TOTAL ASSETS 4,009,656
-----------
LIABILITIES
Payable for securities purchased 104,859
Payable for capital shares redeemed 150
Payable to affiliates (Note 3) 4,200
Other accrued expenses and liabilities 2,812
-----------
TOTAL LIABILITIES 112,021
-----------
NET ASSETS $ 3,897,635
===========
NET ASSETS CONSIST OF:
Paid-in capital $ 3,563,802
Accumulated net investment loss (175)
Accumulated net realized gains from security transactions 46,371
Net unrealized appreciation on investments 287,637
-----------
NET ASSETS $ 3,897,635
===========
Shares of beneficial interest outstanding (1,000,000,000
shares authorized, $0.001 par value) 351,173
===========
Net asset value, offering price, and redemption $ 11.10
price per share (Note 1) ===========
See accompanying notes to financial statements.
<PAGE>
BOYAR VALUE FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Unaudited)
INVESTMENT INCOME
Dividends $ 23,709
-----------
EXPENSES
Accounting services fees (Note 3) 12,000
Amortization of organization expenses (Note 1) 8,890
Insurance expense 7,350
Transfer agent fees (Note 3) 7,200
Investment advisory fees (Note 3) 6,824
Management fees (Note 3) 6,824
Directors' fees and expenses 6,000
Administrative services fees (Note 3) 6,000
Custodian fees 4,149
Distribution expenses (Note 3) 3,412
Shareholder report costs 2,386
Postage and supplies 2,298
Registration fees 2,256
Professional fees 2,250
Other expenses 349
-----------
TOTAL EXPENSES 78,188
Fees waived and expenses reimbursed (Note 3) (54,304)
-----------
NET EXPENSES 23,884
-----------
NET INVESTMENT LOSS (175)
-----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 46,371
Net change in unrealized appreciation/depreciation
on investments 300,877
-----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 347,248
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 347,073
===========
See accompanying notes to financial statements.
<PAGE>
BOYAR VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Period
Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998 (a)
----------- -----------
FROM OPERATIONS
Net investment income (loss) $ (175) $ 4,938
Net realized gains from security 46,371 -
transactions
Net change in unrealized appreciation/
depreciation on investments 300,877 (13,240)
----------- -----------
Net increase (decrease) in net assets 347,073 (8,302)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income - (4,938)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 2,176,705 1,324,959
Net asset value of shares issued in
reinvestment of distributions
to shareholders - 4,409
Payments for shares redeemed (41,970) (301)
----------- -----------
Net increase in net assets from capital
share transactions 2,134,735 1,329,067
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TOTAL INCREASE IN NET ASSETS 2,481,808 1,315,827
NET ASSETS
Beginning of period (Note 1) 1,415,827 100,000
----------- -----------
End of period $ 3,897,635 $ 1,415,827
=========== ===========
CAPITAL SHARE ACTIVITY
Sold 209,605 135,214
Reinvested - 453
Redeemed (4,066) (33)
----------- -----------
Net increase in shares outstanding 205,539 135,634
Shares outstanding, beginning of
period (Note 1) 145,634 10,000
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Shares outstanding, end of period 351,173 145,634
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(a) Represents the period from the commencement of operations (May 5, 1998)
through December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
BOYAR VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding
Throughout Each Period
<TABLE>
<CAPTION>
Six Months Period
Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998 (a)
----------- -----------
<S> <C> <C>
Net asset value at beginning of period $ 9.72 $ 10.00
----------- -----------
Income (loss) from investment operations:
Net investment income (loss) -- 0.03
Net realized and unrealized gains 1.38 (0.28)
(losses) on investments
----------- -----------
Total from investment operations 1.38 (0.25)
----------- -----------
Less distributions:
From net investment income -- (0.03)
----------- -----------
Net asset value at end of period $ 11.10 $ 9.72
=========== ===========
Total return 14.20% (2.46%)
=========== ===========
Net assets at end of period $ 3,897,635 $ 1,415,827
=========== ===========
Ratio of net expenses to average net assets (b) 1.75%(c) 1.75%(c)
Ratio of net investment income (loss) to (0.01%)(c) 0.66%(c)
average net assets
Portfolio turnover rate 13%(c) 0%
</TABLE>
(a) Represents the period from the commencement of operations (May 5, 1998)
through December 31, 1998.
(b) Absent fees waived and expenses reimbursed, the ratio of expenses to
average net assets would have been 5.73% (c) and 13.19% (c) for the periods
ended June 30, 1999 and December 31, 1998, respectively (Note 3).
(c) Annualized.
See accompanying notes to financial statements.
<PAGE>
BOYAR VALUE FUND, INC.
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS - 65.9%
CONSUMER, CYCLICAL - 38.0%
1,800 CBS Corp. $ 78,187
3,060 Chris-Craft Industries, Inc. (a) 144,202
1,900 Dow Jones & Company, Inc. 100,819
15,000 Hanover Direct, Inc. 42,187
3,600 Hilton Hotels Corp. 51,075
200 IMS Health, Inc. 6,250
7,900 Loehmann's, Inc. (a) 869
1,500 Meredith Corp. 51,937
2,100 Midas, Inc. 59,588
6,000 Mirage Resorts, Inc. (a) 100,500
4,000 Neiman Marcus Group, Inc. (The) 102,750
33 Nielsen Media Research, Inc. 965
9,500 Olsten Corp. 59,969
1,300 Park Place Entertainment Corp. (a) 12,594
15,000 Pier 1 Imports, Inc. 168,750
2,400 Playboy Enterprises, Inc. - Class B (a) 63,750
1,100 Reader's Digest Association, Inc. (The) - Class A 43,725
17,100 Spiegel, Inc. (a) 151,763
2,000 Time Warner, Inc. 147,000
4,600 Toys "R" Us, Inc. (a) 95,162
-----------
1,482,042
-----------
CONSUMER, NON-CYCLICAL - 9.6%
4,800 Cross (A.T.) Co. - Class A 26,700
2,500 Seagram Company Ltd. (The) 125,938
4,500 Service Corporation International 86,625
2,000 Tupperware Corp. 51,000
4,600 Whitman Corp. 82,800
-----------
373,063
-----------
FINANCIAL SERVICES - 13.1%
500 Chase Manhattan Corp. (The) 43,313
3,450 Citigroup, Inc. 163,875
5,800 CoVest Bancshares, Inc. 86,275
3,500 Lehman Brothers Holdings, Inc. 217,875
-----------
511,338
-----------
INDUSTRIAL - 2.9%
4,000 Diebold, Inc. 115,000
-----------
<PAGE>
BOYAR VALUE FUND, INC.
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS - 65.9% (Continued)
TECHNOLOGY - 2.3%
2,000 Boeing Co. (The) $ 88,375
-----------
TOTAL COMMON STOCKS (COST $2,282,181) $ 2,569,818
-----------
MONEY MARKET FUND - 33.8%
1,317,225 Firstar Stellar Treasury Fund (Cost $1,317,225) $ 1,317,225
-----------
TOTAL INVESTMENT SECURITIES - 99.7% (COST $3,599,406) $ 3,887,043
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.3% 10,592
-----------
NET ASSETS - 100.0% $ 3,897,635
===========
(a) Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
BOYAR VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Boyar Value Fund, Inc. (the Fund), is registered as a no-load, open-end,
diversified management investment company under the Investment Company Act of
1940 (the 1940 Act), and was incorporated on February 28, 1997 under the laws of
the State of Maryland. The Fund was capitalized on November 19, 1997, when the
initial 10,000 shares of the Fund were purchased at $10.00 per share. Except for
the initial purchase of shares, the Fund had no operations prior to the
commencement of operations on May 5, 1998.
The Fund seeks to provide long-term capital appreciation through investment in
equity securities which are believed by the Adviser to be intrinsically
undervalued.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(normally 4:00 p.m., Eastern Time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued at their closing sales price on the
principal exchange where the security is traded or, if not traded on a
particular day, at their closing bid price. Securities for which market
quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Directors.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per share
of the Fund is equal to the net asset value per share.
Investment income and distributions to shareholders -- Interest income is
accrued as earned. Dividend income is recorded on the ex-dividend date.
Dividends arising from net investment income are declared and paid annually. Net
realized short-term capital gains, if any, may be distributed throughout the
year and net realized long-term capital gains, if any, are distributed at least
once each year. Income dividends and capital gain distributions are determined
in accordance with income tax regulations.
Organization expenses -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are determined on a specific identification basis.
<PAGE>
BOYAR VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
As of June 30, 1999, based upon a federal income tax cost of portfolio
investments of $3,599,406, the Fund had net unrealized appreciation of $287,637,
consisting of $418,403 of gross unrealized appreciation and $130,766 of gross
unrealized depreciation.
2. INVESTMENT TRANSACTIONS
For the six months ended June 30, 1999, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$1,331,570 and $119,252, respectively.
3. TRANSACTIONS WITH AFFILIATES
The business activities of the Fund are supervised under the direction of the
Board of Directors, which is responsible for the overall management of the Fund.
Ladenburg Thalmann Fund Management Inc. (the Manager) is responsible for
managing the daily business operations of the Fund. Boyar Asset Management, Inc.
(the Adviser) provides continuous advisory services to the Fund and Ladenburg
Thalmann & Co. Inc. (LTCI) acts as distributor of the Fund's shares. The Fund
has employed Countrywide Fund Services, Inc. (CFS) to provide administration,
accounting and transfer agent services. Certain Directors and officers of the
Fund are also officers of the Manager, the Adviser, LTCI or CFS.
<PAGE>
BOYAR VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT
Pursuant to a Management Agreement with the Fund, the Manager, under the
supervision of the Board of Directors, oversees the daily operations of the Fund
and supervises the performance of administrative and professional services
provided by others, including the Adviser. As compensation for its services and
the related expenses borne by the Manager, the Fund pays the Manager a
management fee, computed and accrued daily and paid monthly, at an annual rate
of 0.50% of its average daily net assets.
Pursuant to an Investment Advisory Agreement with the Manager, the Adviser and
the Fund, the Adviser agrees to furnish continuous investment advisory services
to the Fund. For these services, the Fund pays the Adviser an investment
advisory fee, which is computed and accrued daily and paid monthly, at an annual
rate of 0.50% of its average daily net assets.
The Manager currently intends to waive its management fees and reimburse other
operating expenses of the Fund, and the Adviser currently intends to waive its
investment advisory fees, to the extent necessary to limit the total operating
expenses of the Fund to 1.75% of average daily net assets. In accordance with
the above limitation, the Manager voluntarily waived its management fees of
$6,824 and reimbursed the Fund for $40,656 of other operating expenses, and the
Adviser voluntarily waived its investment advisory fees of $6,824 for the six
months ended June 30, 1999.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement between the Fund and CFS, CFS
supplies non-investment related statistical and research data, internal
regulatory compliance services and executive and administrative services for the
Fund. CFS supervises the preparation of tax returns, reports to shareholders of
the Fund, reports to and filings with the Securities and Exchange Commission and
state securities commissions, and materials for meetings of the Board of
Directors. For these services, CFS receives a monthly fee at an annual rate of
0.15% of the Fund's average daily net assets up to $50 million; 0.125% of such
assets from $50 million to $100 million; and 0.10% of such assets in excess of
$100 million, subject to a monthly minimum fee of $1,000.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer Agent, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement between the Fund and CFS, CFS maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, CFS receives a monthly fee at an annual
rate of $18 per shareholder account, subject to a monthly minimum fee of $1,200.
In addition, the Fund pays CFS out-of-pocket expenses including, but not limited
to, postage and supplies.
<PAGE>
BOYAR VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement between the Fund and CFS,
CFS calculates the daily net asset value per share and maintains the financial
books and records of the Fund. For these services, CFS receives a monthly fee,
based on current net assets, of $2,000 from the Fund. In addition, the Fund pays
CFS certain out-of-pocket expenses incurred by CFS in obtaining valuations of
the Fund's portfolio securities.
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
The Fund has adopted a Shareholder Servicing and Distribution Plan (the Plan)
pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that a monthly
service fee is calculated by the Fund at an annual rate of 0.25% of its average
daily net assets and is paid to LTCI, as distributor, to provide compensation
for ongoing services and/or maintenance of the Fund's shareholder accounts, not
otherwise required to be provided by the Adviser or CFS. For the six months
ended June 30, 1999, the Fund incurred $3,412 of distribution expenses under the
Plan.
