THE FORESTER FUNDS
SEMI-ANNUAL REPORT
September 30, 2000
This report is submitted for the general information of shareholders of The
Forester Funds. It is not authorized for distribution to prospective
investors unless accompanied or preceded by an effective Prospectus for the
Funds, which contains more information concerning the Funds' investment
policies, as well as fees and expenses and other pertinent information.
Read the Prospectus carefully before you invest or send money.
<PAGE>
FORESTER FUNDS
Letter to Shareholders
Dear Fellow Shareholder:
The past six months have witnessed more extreme volatility in the markets,
while your funds grew steadily. The Small Cap Value Fund returned 2.8% for
the six months trailing its benchmark, the Russell 2000 Value Index which
returned 9.4%. The Value Fund beat both of its benchmarks for the six months,
returning 2.82% versus 2.80% for the Russell 1000 Value and -4.14% for the
S&P 500. Currently the markets remain at some of the highest valuations ever
seen. While there has been a correction since the March highs in the broader
markets, it appears that the economy is slowing and with it, earnings, as
well. Given the high valuations and lowered prospects for earnings, we are
waiting patiently for a better risk reward profile before getting fully
invested.
Small cap value stocks in general have been beaten up over the last two to
three years. It has been very tempting to buy these over the past six months.
However, we believed that as the overall market pulled back, investors would
sit on the sidelines in cash and all stocks would go down. This was not the
case as investors stayed fully invested and merely shifted from expensive
growth stocks to inexpensive value stocks.
Large cap value stocks have not been beaten down like their small cap
brethren. Instead, they merely did not climb as high as large cap growth
stocks. A slow down in earnings would not hurt the large value stocks as
much as the large growth stocks, but should hurt them none the less.
Therefore, we will continue to patiently wait before investing.
Sincerely,
/s/ Thomas H. Forester
Thomas H. Forester
President
<PAGE>
FORESTER FUNDS
THE FORESTER SMALL CAP VALUE FUND RETURNS
SINCE
FUND/INDEX 1-YEAR INCEPTION
Forester Small Cap Value Fund 5.4% 5.2%
Russell 2000 Value Index 15.4 10.7
FORESTER RUSSELL
SMALL CAP 2000 VALUE
VALUE FUND INDEX
---------- ----------
9/10/99 $10,000 $10,000
9/30/99 10,006 9,652
12/31/99 10,121 9,800
3/31/00 10,258 10,175
6/30/00 10,406 10,373
9/30/00 10,548 11,135
The chart assumes an initial gross investment of $10,000 made on 9/10/99
(inception).
THE FORESTER VALUE FUND RETURNS
SINCE
FUND/INDEX 1-YEAR INCEPTION
Forester Value Fund 5.4% 5.2%
Russell 1000 Value Index 8.9 3.6
S&P 500 Stock Index 12.0 5.9
RUSSELL S&P 500
FORESTER 1000 VALUE STOCK
VALUE FUND INDEX INDEX
---------- ---------- -------
9/10/99 $10,000 $10,000 $10,000
9/30/99 10,006 9,532 9,488
12/31/99 10,121 10,050 10,870
3/31/00 10,258 10,098 11,087
6/30/00 10,406 9,624 10,762
9/30/00 10,548 10,381 10,628
The chart assumes an initial gross investment of $10,000 made on 9/10/99
(inception).
PERFORMANCE IS HISTORICAL AND DOES NOT GUARANTEE FUTURE RESULTS. AN
INVESTMENT IN A MUTUAL FUND THAT CONCENTRATES ITS PORTFOLIO IN THE STOCKS
OF SMALLER COMPANIES MAY PRESENT ADDITIONAL RISKS INCLUDING A SHORTER
HISTORY OF OPERATION, HIGHER VOLATILITY AND LESS LIQUIDITY, ALL OF WHICH
ARE DISCUSSED IN THE PROSPECTUS. PLEASE READ IT CAREFULLY BEFORE YOU
INVEST OR SEND MONEY.
Investment return and principal value will fluctuate so that an investor's
shares in the Funds, when redeemed, may be worth more or less than their
original cost. Returns shown include the reinvestment of all dividends.
The Russell 2000 Value Index is an unmanaged, market-weighted index of the
lower price-to-book value stocks in the Russell 2000 Index of 2000 smaller
companies. The Russell 1000 Value Index is an unmanaged, market-weighted
index of the lower price-to-book value stocks in the Russell 1000 Index of
1000 larger companies. The S&P 500 Stock Index is an unmanaged, market-
weighted index of large stocks which is a commonly used measure of common
stock total return performance.
<PAGE>
THE FORESTER SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
September 30, 2000 (Unaudited)
Percent of Market
Par Value Net Assets Value
Other Assets (Cash) 100.00% $52,738
------ -------
Net Assets 100.00% $52,738
====== =======
At September 30, 2000, unrealized appreciation of securities for
federal income tax purposes is $0.
See accompanying notes to financial statements.
THE FORESTER VALUE FUND
PORTFOLIO OF INVESTMENTS
September 30, 2000 (Unaudited)
Percent of Market
Par Value Net Assets Value
Other Assets (Cash) 100.00% $52,738
------ -------
Net Assets 100.00% $52,738
====== =======
At September 30, 2000, unrealized appreciation of securities for
federal income tax purposes is $0.
See accompanying notes to financial statements.
<PAGE>
THE FORESTER FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000 (Unaudited)
The Forester
Small Cap The Forester
Value Fund Value Fund
ASSETS
Cash $52,738 $52,738
------- -------
Total assets 52,738 52,738
======= =======
LIABILITIES - -
------- -------
NET ASSETS
1,000,000,000 shares of $.0001 par value
authorized; 5,058 and 5,058 shares issued
and outstanding, respectively) $52,738 $52,738
======= =======
NET ASSET VALUE, OFFERING AND REPURCHASE
PRICE PER SHARE
($52,738 / 5,058 shares)
($52,738 / 5,058 shares) $10.43 $10.43
====== ======
NET ASSETS
At September 30, 2000, net assets consisted of:
Paid-in capital $50,580 $50,580
Undistributed net investment income 2,299 2,299
Accumulated net realized loss
on investments (141) (141)
------- -------
$52,738 $52,738
======= =======
See accompanying notes to financial statements
<PAGE>
THE FORESTER FUNDS, INC.
STATEMENT OF OPERATIONS
Six months ended September 30, 2000 (Unaudited)
The Forester
Small Cap The Forester
Value Fund Value Fund
INVESTMENT INCOME
Interest income $1,387 $1,387
------ ------
Total income 1,387 1,387
------ ------
EXPENSES
Investment advisory fees (Note 2) 260 260
------ ------
Total expenses 260 260
Less: expenses waived by Advisor (Note 2) (260) (260)
------ ------
Net expenses - -
------ ------
Net investment income 1,387 1,387
------ ------
UNREALIZED GAIN (LOSS) ON INVESTMENTS
Change in unrealized depreciation
of investments 201 201
Realized loss on sale of investments (141) (141)
------ ------
Net gain on investments 60 60
------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,447 $ 1,447
======= =======
See accompanying notes to financial statements
<PAGE>
<TABLE>
THE FORESTER FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
The Forester Small The Forester
Cap Value Fund Value Fund
------------------------ -----------------------
Six Months Period* Six Months Period*
Ended Ended Ended Ended
Sep 30, 2000 March 31, Sep 30, 2000 March 31,
(Unaudited) 2000 (Unaudited) 2000
------------------------ -----------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
Operations
Net investment income $ 1,387 $1,492 $ 1,387 $1,492
Change in unrealized
depreciation of investments 201 (201) 201 (201)
Net realized loss on investments (141) - (141) -
------- ------ ------- ------
Net increase in net assets
resulting from operations 1,447 1,291 1,447 1,291
Distributions to shareholders
Net investment income - (580) - (580)
Capital share transactions (a)
Increase in net assets resulting
from capital share transactions - 580 - 580
------ ----- ------ -----
Total increase in net assets 1,447 1,291 1,447 1,291
NET ASSETS
Beginning of period 51,291 50,000 51,291 50,000
------ ------ ------ ------
End of period
(Including undistributed net
investment income of $2,299, $912
$2,299 and $912, respectively) $52,738 $51,291 $52,738 $51,291
======= ======= ======= =======
(a) Summary of capital share activity follows:
Shares issued in reinvestment
of distributions - 58 - 58
Value of shares issued in rein-
Vestment of distributions $ - $ 580 $ - $ 580
Net increase in shares - 58 - 58
Net increase in value of shares $ - $ 580 $ - $ 580
* Commencement of operations was September 10, 1999.
See accompanying notes to financial statements
THE FORESTER FUNDS, INC.
FINANCIAL HIGHLIGHTS
The Forester Small The Forester
Cap Value Fund Value Fund
------------------------ -----------------------
Six Months Period* Six Months Period*
Ended Ended Ended Ended
(For a share outstanding Sep 30, 2000 March 31, Sep 30, 2000 March 31,
throughout each period) (Unaudited) 2000 (Unaudited) 2000
------------------------ -----------------------
NET ASSET VALUE
Beginning of period $10.14 $10.00 $10.14 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .27 .30 .27 .30
Net gains on securities
(both realized and unrealized) .01 (.04) .01 (.04)
------ ------ ------ ------
Total from investment operations .28 .26 .28 .26
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net investment income) - (.12) - (.12)
------ ------ ------ ------
Total distributions - (.12) - (.12)
------ ------ ------ ------
NET ASSET VALUE
End of period $10.43 $10.14 $10.43 $10.14
====== ====== ====== ======
TOTAL RETURN 2.82% 2.58% 2.82% 2.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $52,738 $51,291 $52,738 $51,291
Ratio of expenses to average
net assets
After waiver 0% 0% 0% 0%
Before waiver 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to
average net assets 5.33% 5.26% 5.33% 5.26%
Portfolio turnover rate 0% 0% 0% 0%
*Commencement of operations was September 10, 1999.
See accompanying notes to financial statements
</TABLE>
THE FORESTER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 (Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Forester Funds, Inc. (the "Company") is an open-end diversified
investment company currently offering two series of shares: The
Forester Small Cap Value Fund and The Forester Value Fund (each a
"Fund"). The Funds commenced operations on September 10, 1999.
The objective of the Funds is to seek long-term growth of capital.
SECURITY VALUATION
Portfolio securities that are listed on national securities exchanges
or the NASDAQ National Market System are valued at the last sale
price as of 4:00 p.m. Eastern time, or in the absence of recorded
sales, at the average of readily available closing bid and asked
prices on such exchanges or such System. Unlisted securities that
are not included in such System are valued at the mean of the quoted
bid and asked prices in the over-the-counter-market. Securities and
other assets for which market quotations are not readily available
are valued at fair value as determined in good faith by the Advisor
under procedures established by and under the general supervision and
responsibility of the Funds' Board of Directors. Short-term
investments are valued at amortized cost, if their original maturity
was 60 days or less, or by amortizing the values as of the 61st day
prior to maturity, if their original term to maturity exceeded 60
days.
FEDERAL INCOME TAXES
The Funds intend to comply with the requirements of the Internal
Revenue Code necessary to qualify as regulated investment companies
and as such will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is
distributed to shareholders.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS TO
SHAREHOLDERS
As is common in the industry, security transactions are accounted for
on the trade date (the date the securities are purchased or sold).
Interest income is recorded on the accrual basis. Bond premiums and
discounts are amortized in accordance with Federal income tax
regulations. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
THE FORESTER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 2000 (Unaudited)
(2) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS
For the six months ended September 30, 2000, Forester Capital
Management, Ltd. (the "Advisor") provided the Funds with investment
management services under an Investment Advisory Agreement. The
Advisor furnished all investment advice, office space and certain
administrative services, and personnel needed by the Funds. As
compensation for its services, the Advisor was entitled to a
monthly fee at the annual rate of 1.00% per Fund based upon the
average daily net assets of the Funds. For the six months ended
September 30, 2000, the Advisor voluntarily waived advisory fees in
the amounts of $260 and $260 for The Forester Small Cap Value Fund
and The Forester Value Fund. There were no other operating
expenses of the Funds for the six months ended September 30, 2000.
DISTRIBUTION AGREEMENT AND PLAN
The Funds have adopted Distribution Plans pursuant to which the
Funds reimburse the Advisor for marketing expenses incurred in
distributing shares of the Funds, primarily the cost of printing
sales material. This expense is limited to 1/4 of 1% of the
Funds' average net assets. For the six months ended September 30,
2000, no such reimbursements were made.
(3) PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term
investments, aggregated $0 and $48,000, respectively, in each Fund.
