THE FORESTER FUNDS
ANNUAL REPORT
March 31, 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 - March 31, 2000
Dear Fellow Shareholder:
We are proud to have completed our first fiscal year as a public fund. The
past seven months have witnessed some extreme volatility in the markets,
while your funds grew steadily. The Small Cap Value Fund beat its
benchmark, the Russell 2000 Value Index since inception returning 2.58%
versus only 1.75% for the benchmark. The Value Fund beat its value
benchmark, the Russell 1000 Value since inception returning 2.58% versus
0.98% for the benchmark, but trailed the S&P 500 which returned 10.87%.
Currently the markets are at some of the highest valuations ever seen.
Many argue that they are overvalued and due for a correction. We do not
know when or if a market correction will occur, but this is the environment
for disasters. Like those who see funnel clouds, hear tornado warnings and
take cover, so we too go to cash when we see extremely high valuations. We
will wait until either earnings begin to catch up with valuations or the
valuations come down before we get invested in equities. I would hope to
see a pull back, then get fully invested sometime over the next 3-6 months.
Traditionally, price-to-earnings ratios for the S&P 500 have ranged from 6
times earnings to about 26 times earnings, with the average being around 16
times. Over the past seven months, the p/e for the S&P 500 has often been
over 30 times. The Nasdaq composite, where many of the companies do not
have earnings and may not for the foreseeable future, has p/e ratios for
those companies that have earnings of over 50 times. On this basis, the
markets look speculative indeed.
Sincerely,
/s/ Thomas H. Forester
Thomas H. Forester
President
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FORESTER FUNDS
THE FORESTER SMALL CAP VALUE FUND RETURNS
Since Inception (9/10/99) 2.6%
(Return not annualized)
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
The chart assumes an initial gross investment of $10,000 made on 9/10/99
(inception).
THE FORESTER VALUE FUND RETURNS
Since Inception (9/10/99) 2.6%
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
The chart assumes an initial gross investment of $10,000 made on 9/10/99
(inception).
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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 on 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.
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THE FORESTER SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
Market
Percent of Value
Par Value Net Assets (Note 1-A)
$48,000 U.S. Treasury Note
5.50%, due 5/31/00 93.47% $47,940
Total Investments (Cost $48,141)(a) 93.47% 47,940
Other Assets 6.53% 3,351
------- -------
Net Assets 100.00% $51,291
======= =======
(a) Aggregate cost for federal income tax purposes is $48,141.
At March 31, 2000, unrealized depreciation of securities for
federal income tax purposes is $201.
See accompanying notes to financial statements.
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THE FORESTER VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
Market
Percent of Value
Par Value Net Assets (Note 1-A)
$48,000 U.S. Treasury Note
5.50%, due 5/31/00 93.47% $47,940
Total Investments (Cost $48,141)(a) 93.47% 47,940
Other Assets 6.53% 3,351
------ -------
Net Assets 100.00% $51,291
======= =======
(a) Aggregate cost for federal income tax purposes is $48,141.
At March 31, 2000, unrealized depreciation of securities for
federal income tax purposes is $201.
See accompanying notes to financial statements.
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THE FORESTER FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
Forester
Small Cap Forester
Value Fund Value Fund
ASSETS
Investments at market value
(Identified cost $48,141 and $48,141) (Note 1) $47,940 $47,940
Cash 2,471 2,471
Interest receivable 880 880
Total assets 51,291 51,291
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LIABILITIES - -
------- -------
NET ASSETS
1,000,000,000 shares of $.0001 par value
authorized; 5,058 and 5,058 shares issued
and outstanding, respectively) $51,291 $51,291
======= =======
NET ASSET VALUE, OFFERING AND REPURCHASE
PRICE PER SHARE
($51,291 / 5,058 shares)
($51,291 / 5,058 shares) $10.14 $10.14
====== ======
NET ASSETS
At March 31, 2000, net assets consisted of:
Paid-in capital $50,580 $50,580
Undistributed net investment income 912 912
Net unrealized depreciation (201) (201)
$51,291 $51,291
======= =======
See accompanying notes to financial statements
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THE FORESTER FUNDS, INC.
STATEMENT OF OPERATIONS
Period ended March 31, 2000*
Forester
Small Cap Forester
Value Fund Value Fund
INVESTMENT INCOME
Interest income $1,492 $1,492
Total income 1,492 1,492
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EXPENSES
Investment advisory fees (Note 2) 283 283
------ ------
Total expenses 283 283
Less: expenses waived by Advisor (Note 2) (283) (283)
------ ------
Net expenses - -
------ ------
Net investment income 1,492 1,492
------ ------
UNREALIZED LOSS ON INVESTMENTS
Change in unrealized depreciation
of investments (201) (201)
------ ------
Net loss on investments (201) (201)
------ ------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,291 $ 1,291
======= =======
* Commencement of operations was September 10, 1999.
See accompanying notes to financial statements
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THE FORESTER FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
Period ended March 31, 2000*
Forester
Small Cap Forester
Value Fund Value Fund
INCREASE IN NET ASSETS FROM
Operations
Net investment income $ 1,492 $ 1,492
Increase in unrealized
depreciation of investments (201) (201)
------- -------
Net increase in net assets
resulting from operations 1,291 1,291
Distributions to shareholders
Net investment income
($0.12 and $0.12 per share, respectively) (580) (580)
Capital share transactions (a)
Increase in net assets resulting
from capital share transactions 580 580
------- -------
Total increase in net assets 1,291 1,291
NET ASSETS
Beginning of period 50,000 50,000
------- -------
End of period
(Including undistributed net investment
income of $912 and $912, respectively) $51,291 $51,291
======= =======
(a) Summary of capital share activity follows:
Period Ended Period Ended
March 31, 2000 March 31, 2000
Shares Value Shares Value
Shares issued in reinvestment
of distributions 58 $580 58 $580
-- ---- -- ----
Net increase 58 $580 58 $580
== ==== == ====
* Commencement of operations was September 10, 1999.
See accompanying notes to financial statements
<PAGE>
THE FORESTER FUNDS, INC.
FINANCIAL HIGHLIGHTS
Period ended March 31, 2000* (For a share outstanding throughout each
period)
Forester
Small Cap Forester
Value Fund Value Fund
NET ASSET VALUE
Beginning of period $10.00 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .30 .30
Net losses on securities
(both realized and unrealized) (.04) (.04)
------ ------
Total from investment operations .26 .26
------ ------
LESS DISTRIBUTIONS
Dividends (from net investment income) (.12) (.12)
------ ------
Total distributions (.12) (.12)
------ ------
NET ASSET VALUE
End of period $10.14 $10.14
====== ======
TOTAL RETURN 2.58% 2.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $51,291 $51,291
Ratio of expenses to average net assets
After waiver 0% 0%
Before waiver 1.00% 1.00%
Ratio of net investment income to
average net assets 5.26% 5.26%
Portfolio turnover rate 0% 0%
* Commencement of operations was September 10, 1999.
See accompanying notes to financial statements
<PAGE>
THE FORESTER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(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.
<PAGE>
THE FORESTER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
March 31, 2000
(2) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS
For the period ended March 31, 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 period ended
March 31, 2000, the Advisor voluntarily waived advisory fees in
the amounts of $283 and $283 for The Forester Small Cap Value Fund
and The Forester Value Fund. There were no other operating
expenses of the Funds for the period ended March 31, 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 period ended March 31, 2000,
no such reimbursements were made.
(3) PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term
investments, aggregated $48,141 and $0, respectively, in each Fund.
<PAGE>
THE FORESTER FUNDS, INC.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
The Forester Funds, Inc.
Libertyville, Illinois
We have audited the accompanying statements of assets and liabilities of The
Forester Small Cap Value Fund and The Forester Value Fund, each a series of
shares of common stock of The Forester Funds, Inc., including the portfolios
of investments as of March 31, 2000, and the related statements of
operations, statements of changes in net assets and the financial highlights
for the period September 10, 1999 to March 31, 2000. These financial
statements and financial highlights are the responsibility of the Funds'
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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2000 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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 The Forester Small Cap Value Fund and The Forester Value Fund as of
March 31, 2000, the results of their operations, the changes in their net
assets and the financial highlights for the period September 10, 1999 to
March 31, 2000, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
May 10, 2000
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FOR FUND INFORMATION AND
SHAREHOLDER SERVICES, CALL
1-847-573-8399
THE FORESTER FUNDS, INC.
Shareholder Services Center
612 Paddock
Libertyville, IL 60048
