December 21, 2000
Dear Fellow Shareholders:
The Meehan Focus Fund's results from its inception (December 10, 1999)
through its first fiscal year-end (October 31, 2000) are shown below with
comparable results for leading market indexes:
December 10, 1999 - Meehan S&P
October 31, 2000 Focus Fund 500 NASDAQ
---------------------- ---------- ----- ------
3.97% 1.88% (6.79%)
We certainly have been through a most volatile period. After our first
three months, our Fund had declined by more than 14% while the technology laden
NASDAQ had risen more than 24%. Since then our Fund has fully recovered and
moved into positive territory while NASDAQ has sustained major losses. We are
pleased that our Fund, after all expenses, continues to outperform the major
indexes, including dividends for the indexes.
Six months ago, in our semi-annual report, we noted "our belief that
serious money is rotating out of companies with no earnings and will be invested
in companies with solid earnings and strong franchises," and this appears to
have occurred throughout the Fall of 2000. In that same letter we noted that
"many dot.com companies with no earnings have been significantly overpriced,"
and many of those companies have lost 70%, 80%, even 90% of their value since
March 2000. In the future, we believe that investors are likely to invest in
companies with real earnings and strong prospects for increased earnings which
could result in the stocks we own becoming even more valuable.
Our Fund stayed fully invested throughout the year; we are not
market-timers. During the entire period, the Fund had no redemptions by
shareholders (except to pay small IRA fees) which allows the Fund to operate
more efficiently and is consistent with the Fund's goals to achieve long-term
capital appreciation for its shareholders. We also were able to manage our few
sales of portfolio securities this year so that there are no capital gains to
distribute at the end of the year, although the Fund has unrealized capital
gains. The Fund will distribute its net dividend income, after Fund expenses,
which will occur during the last week in December 2000 and is likely to be in
the range of $.07 per share.
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December 21, 2000
Page 2
This volatile year has reaffirmed our view that value investing makes good
sense. This does not mean that our Fund will not purchase technology; it simply
means that such companies must be purchased at reasonable prices based on
earnings and prospects for growth. Our Fund owns some technology companies now
and expects to own more in the future. For example, our Fund purchased Intel in
December 1999 at a reasonable price - before the explosive run-up in early 2000
- and we continue to hold the stock. Although our Fund will be affected by
market turmoil, we believe that our portfolio has less risk than stocks in
general and technology stocks in particular.
In short, we continue to believe that purchasing stocks with solid earnings
at attractive prices not only should produce long-term appreciation of capital
but also should reduce the risk of loss of capital. Our goal is to have strong
absolute and relative performance over the long-term, and we believe we are
positioned to do that.
PORTFOLIO REVIEW
At the end of the fiscal year, our Fund held twenty-nine positions and over
92% of the Fund's assets was invested in twenty-five stocks. Consistent with our
philosophy of focusing our investments more heavily in companies we believe have
the best prospects for long-term capital growth, the Fund's top ten holdings at
fiscal year-end represented more than 53% of the Fund. Eight of our top ten
holdings showed gains, and the net gains from these holdings more than offset
our losses in other stocks. In addition, we believe in the long-term prospects
for some of the stocks with losses. Our top ten holdings and their percentage of
the Fund at fiscal year-end were:
Company % of Fund
------- ---------
1. Berkshire Hathaway 8.12%
2. Progressive Corp. 6.90%
3. Catellus Dev. Corp. 5.89%
4. MONY, Inc. 5.03%
5. Goodyear Tire* 5.01%
6. Freddie Mac 4.82%
7. Burlington Northern Santa Fe 4.50%
8. Fleetwood Enterprises, Inc.* 4.43%
9. Kaufman & Broad Home Corp. 4.33%
10. Goodrich B F Co. 4.15%
*These two holdings are the only holdings in our top ten which show a loss; the
other eight all showed gains.
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December 21, 2000
Page 3
In our semi-annual report, we discussed Berkshire Hathaway, Goodyear Tire
and Progressive Corp. which were then our three largest holdings. Since then,
Berkshire and Progressive have continued to perform well and are two of the
Funds most successful investments. On the other hand, Goodyear's price has
declined significantly not only because of external events adversely affecting
the tire industry overall, including the Firestone problems and the oil price
increases which increased the cost to produce tires, but also because of
internal management problems which are being dealt with. We expect Goodyear to
perform better over the long-term. In the meantime, it continues to pay more
than a 6% dividend as we wait for this to occur.
Brief Discussion of Three of Our Larger Holdings
------------------- ----------------------------
CATELLUS - MONY - FREDDIE MAC
These three stocks were among the stocks we purchased on the Fund's first
day of operation, and we have continued to purchase additional shares as the
Fund has grown over the past year.
Below we show the average purchase price per share, the market price as of
October 31 and the percentage increase in the price in the shares purchased
during the past fiscal year as compared with the fiscal year-end price.
Average Cost October 31, 2000
per Share Market Price Percent Increase
Catellus $12.96 $18.19 40%
MONY $27.91 $41.13 47%
Freddie Mac $46.86 $60.00 28%
Catellus is a diversified real estate company with a large portfolio of
unimproved land and rental properties. Catellus develops office buildings,
commercial business parks, residential property and mixed use sites. Its net
income increased 31% through the first nine months ending September 30, 2000.
Catellus is well-managed and has a number of major projects approved for
development in the San Francisco and Silicon Valley and has been successful in
pre-leasing its projects. We believe Catellus will continue to produce robust
growth in its earnings and cash flow.
MONY is engaged in the business of providing life insurance, annuity, and
investment products to high-income individuals. For the nine months ending
September 30, 2000, its revenues increased 22% and its net income, before
special items, rose 85%. We expect this
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December 21, 2000
Page 4
company which is selling at its book value, while many of its peers sell at
significantly higher than book, will be able to continue to increase its sales
and earnings. Its current price earnings ratio is under 7, and we believe that
the market eventually will reward MONY with a higher P/E, and, therefore, an
even higher stock price. We consider this stock an excellent long-term hold.
Freddie Mac is in the business of securitizing mortgages that it has
purchased and then resells them to investors. Freddie Mac because of its special
status with the government has had its stock price affected by the political
situation in Washington. However, it now appears unlikely that its status will
change in the immediate future which is good news for investors in Freddie Mac.
Its return on equity is excellent, and it appears to have the ability to produce
solid earnings growth in a variety of interest rate scenarios. Freddie Mac is a
solid, steady performer. We have been very pleased with its performance over the
past year, despite the fact it decreased more than 23% from the Fund's original
purchase price in December 1999 to early March 2000 at the peak of the dot.com
mania. As investors have changed their focus and begun investing in companies
with real earnings and prospects for solid growth in earnings, our Freddie Mac
stock performed very well. Superior long-term performance requires patience.
Conclusion
----------
We are pleased that in this difficult market, we had a positive return
through the end of our initial fiscal year since we, along with you, are
investors in the Fund. We appreciate your confidence in our management of the
Fund, and we look forward to continued growth and success in the future. Our
website (Meehanfocusfund.com) is up and running, and we regularly post our Net
Asset Value on it, and you can access it at your convenience.
Sincerely yours,
Thomas P. Meehan
President and Portfolio Manager
TPM/cim
<PAGE>
MEEHAN FOCUS FUND
SCHEDULE OF INVESTMENTS
October 31, 2000
--------------------------------------------------------------------------------
Number Market
of Shares Value
--------------------------------------------------------------------------------
COMMON STOCK -- 99.93%
AEROSPACE -- 4.16%
Goodrich, (B. F.), Co. 10,100 $ 413,469
------------
APPLIANCES -- 2.64%
Maytag Corp. 9,200 263,350
------------
BUILDING -- 10.91%
Fleetwood Enterprises, Inc. 33,500 441,781
Kaufman and Broad Home Corp. 14,500 431,375
USG Corp. 12,525 213,708
------------
1,086,864
------------
COMPUTER HARDWARE & ELECTRONIC EQUIPMENT -- 13.21%
Hubbell, Inc. 17,000 406,937
Intel Corp. 3,600 162,000
Micros Systems, Inc. 16,000 316,000
Vishay Intertechnology, Inc. 6,000 180,000
Seagate Technology, Inc.* 3,600 251,550
------------
1,316,487
------------
COMMERCIAL SERVICES -- 1.81%
Cendant Corp.* 15,000 180,000
------------
CONSULTING -- 1.52%
American Management Systems, Inc.* 7,000 151,375
------------
CONSUMER PRODUCTS -- 5.23%
Nabisco Group Holdings Corp. 11,000 317,625
Saks Holdings, Inc.* 20,000 203,750
------------
521,375
------------
DIVERSIFIED CONGLOMERATES -- 11.62%
Berkshire Hathaway, Inc. Cl B* 385 809,655
Illinois Tool Works, Inc. 4,650 258,366
Tenneco, Inc. 20,800 89,700
------------
1,157,721
------------
FINANCIAL SERVICES -- 8.22%
Federal Home Loan Mortgage Corp. 8,000 480,000
First Union Corp. 11,200 339,500
------------
819,500
------------
<PAGE>
FOREST & PAPER PRODUCTS -- 3.68%
International Paper Co. 10,000 366,250
------------
HOTELS -- 1.57%
Hilton Hotels Corp. 16,500 156,750
------------
INSURANCE -- 11.94%
MONY Group, Inc. 12,200 501,725
Progressive Corp. 7,000 687,750
------------
1,189,475
------------
MEDICAL PRODUCTS -- 3.03%
Boston Scientific Corp.* 18,950 302,016
------------
REAL ESTATE -- 5.89%
Catellus Development Corp.* 32,300 587,456
------------
RUBBER -- 5.01%
Goodyear Tire & Rubber Co. 27,000 499,500
------------
TELECOMMUNICATIONS -- 4.99%
A T & T Corp. 7,500 173,906
Verizon Communications 5,600 323,750
------------
497,656
------------
TRANSPORTATION -- 4.50%
Burlington Northern Railroad Co. 16,900 448,906
------------
TOTAL COMMON STOCK (Cost $9,580,126) 9,958,150
------------
MISCELLANEOUS ASSETS -- 0.09%
Evergreen Money Market Trust CL Y (Cost $8,743) 8,743 8,743
------------
TOTAL INVESTMENTS (Cost $9,588,869) -- (100.02%) 9,966,893
Liabilities in Excess of Other Assets -- (0.02)% (1,453)
------------
NET ASSETS -- 100.00% $ 9,965,440
============
* Non-income producing investment.
See notes to financial statements
<PAGE>
MEEHAN FOCUS FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at market (identified
cost $9,588,869) (note 1) $ 9,966,893
Receivables:
Dividends and interest 10,093
------------
Total assets 9,976,986
------------
LIABILITIES:
Payables:
Due to Advisor (Note 4) 11,546
------------
Total liabilities 11,546
------------
NET ASSETS $ 9,965,440
============
NET ASSETS CONSIST OF:
Common stock (100,000,000 shares of $.0001 par value
authorized, 799,470 shares outstanding) (note 2) $ 80
Additional capital paid-in 9,546,739
Undistributed net investment income 40,963
Accumulated net realized loss on investments (366)
Net unrealized appreciation on investments 378,024
------------
Net Assets, for 799,470 shares outstanding $ 9,965,440
============
Net Asset Value, offering and redemption price per share $ 12.47
============
See notes to financial statements.
<PAGE>
MEEHAN FOCUS FUND
STATEMENT OF OPERATIONS
For the Period Ended October 31, 2000*
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 9,357
Dividends 132,203
------------
Total investment income 141,560
------------
EXPENSES:
Investment advisory fees (note 4) 66,626
Service fees (note 4) 33,313
------------
Total expensess 99,939
------------
Net investment income 41,621
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (366)
Net change in unrealized appreciation on investments 378,024
------------
377,658
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 419,279
============
* The Meehan Focus Fund commenced operations on December 10, 1999.
See notes to financial statements.
<PAGE>
MEEHAN FOCUS FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended October 31, 2000*
--------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations:
Net investment income $ 41,621
Net realized loss on investments (366)
Net change in unrealized appreciation on investments 378,024
------------
Net increase in net assets resulting from operations 419,279
------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (658)
------------
Increase in net assets from Fund share transactions (note 2) 9,446,819
------------
Increase in net assets 9,865,440
NET ASSETS:
Beginning of period 100,000
------------
End of period** $ 9,965,440
============
* The Meehan Focus Fund commenced operations on December 10, 1999.
** Including undistributed net investment income of $40,963.
See notes to financial statements.
<PAGE>
MEEHAN FOCUS FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Per Share Data (For a Share Outstanding Throughout the Period)
For the Period
Ended
October 31, 2000*
------------
Net Asset Value, Beginning of Period $ 12.00
------------
Investment Operations:
Net investment income 0.06
Net realized and unrealized gain on
investments 0.42
------------
Total from investment operations 0.48
------------
Distributions:
From net investment income (0.01)
------------
Total distributions (0.01)
------------
Net Asset Value, End of Period $ 12.47
============
Total Return 3.97% 1
Ratios/Supplemental Data
Net assets, end of period (in 000's) $ 9,965
Ratio of expenses to average net assets 1.50% 2
Ratio of net investment income
to average net assets 0.62% 2
Portfolio turnover rate 20.57%
1 Not Annualized
2 Annualized
* The Meehan Focus Fund commenced operations on December 10, 1999.
See notes to financial statements.
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MEEHAN FOCUS FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
October 31, 2000
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Meehan Mutual Funds, Inc. (the "Company") was incorporated under the laws
of the state of Maryland on September 3, 1999, and consists solely of the Meehan
Focus Fund (the "Fund"). The Company is registered as a no-load, open-end
management investment company of the series type under the Investment Company
Act of 1940 (the "1940 Act"). The Fund's investment objective is long-term
growth of capital. The Fund commenced operations on December 10, 1999.
The costs incurred in connection with the organization, initial
registration and public offering of shares have been paid by Edgemoor Capital
Management, Inc. (the "Advisor"). Accordingly, no organization costs have been
recorded by the Fund.
The following is a summary of significant accounting policies consistently
followed by the Fund.
a) Investment Valuation--Common stocks and other equity-type securities listed
on a securities exchange are valued at the last quoted sales price on the day of
the valuation. Price information on listed stocks is taken from the exchange
where the security is primarily traded. Securities that are listed on an
exchange but which are not traded on the valuation date are valued at the most
recent bid prices. Other assets and securities for which no quotations are
readily available are valued at fair value as determined in good faith by the
investment advisor under the supervision of the Board of Directors. Short-term
instruments (those with remaining maturities of 60 days or less) are valued at
amortized cost, which approximates market value.
b) Federal Income Taxes--No provision for federal income taxes has been made
since the Fund has complied to date with the provision of the Internal Revenue
Code applicable to regulated investment companies and intends to so comply in
the future and to distribute substantially all of its net investment income and
realized capital gains in order to relieve the Fund from all federal income
taxes.
c) Distributions to Shareholders--Dividends from net investment income and
distributions of net realized capital gains, if any, will be declared and paid
at least annually. Income and capital gain distributions are determined in
accordance with income tax regulations that may differ from generally accepted
accounting principles.
d) Use of 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 and
disclosure of contingent assets and
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MEEHAN FOCUS FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
October 31, 2000
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES-(continued)
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
e) Other--Investment and shareholder transactions are recorded on trade date.
The Fund determines the gain or loss realized from the investment transactions
by comparing the original cost of the security lot sold with the net sales
proceeds. Dividend income is recognized on the ex-dividend date or as soon as
information is available to the Fund, and interest income is recognized on an
accrual basis.
2. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund for the period ended October 31, 2000
were as follows:
Shares Amount
------------ ------------
Sold ................................... 791,084 $ 9,446,161
Reinvestments .......................... 53 658
------------ ------------
Net Increase ........................... 791,137 $ 9,446,819
============ ============
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Fund for the period ended October 31, 2000, were as follows:
Purchases ............................................ 11,132,591
Sales ................................................ 1,552,099
At October 31, 2000, unrealized appreciation of investments for tax
purposes was as follows:
Appreciation .......................................... $ 1,509,782
Depreciation .......................................... (1,131,758)
-----------
Net appreciation on investments ....................... $ 378,024
===========
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MEEHAN FOCUS FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
October 31, 2000
3. INVESTMENT TRANSACTIONS- (continued)
At October 31, 2000, the cost of investments for federal income tax
purposes was $9,588,869.
4. ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
The Fund has entered into an Advisory Agreement with Edgemoor Capital
Management, Inc. (the "Advisor") to provide investment management services to
the Fund. Pursuant to the Advisory Agreement, the Advisor is entitled to receive
a fee, calculated daily and payable monthly at the annual rate of 1.00% as
applied to the Fund's average daily net assets. For the period ended October 31,
2000, the Advisor received fees of $66,626.
The Fund has entered into an Operating Services Agreement (the "Servicing
Agreement") with the Advisor to provide or arrange for day-to-day operational
services to the Fund. Pursuant to the Servicing Agreement, the Advisor is
entitled to receive a fee, calculated daily and payable monthly at the annual
rate of 0.50% as applied to the Fund's average daily net assets. For the period
ended October 31, 2000 the advisor received fees of $33,313.
The Fund and the Advisor have entered into an Investment Company Services
Agreement (the "ICSA") with Declaration Service Company to provide day-to-day
operational services to the Fund including, but not limited to, accounting,
administrative, transfer agent, dividend disbursing, registrar and recordkeeping
services.
The effect of the Advisory Agreement and the Servicing Agreement is to
place a "cap" on the Fund's normal operating expenses at 1.50%. The only other
expenses incurred by the Fund are distribution fees, brokerage fees, taxes, if
any, legal fees relating to Fund litigation, and other extraordinary expenses.
The Fund and the Advisor have entered into a Distribution Agreement with
Declaration Distributors, Inc. to provide distribution services to the Fund.
Declaration Distributors, Inc. serves as the principal underwriter of the Fund.
The Fund has adopted a Plan of Distribution under which it may finance
activities primarily intended to sell shares. The Plan has not been implemented
and the Fund has no intention of implementing the Plan during the period through
December 31, 2000.
One of the directors and officers of the Fund is a director and officer of
the Advisor.
<PAGE>
MEEHAN FOCUS FUND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Meehan Mutual Funds, Inc.
Washington, D.C.
We have audited the accompanying statement of assets and liabilities of the
Meehan Mutual Funds, Inc. (consisting of the Meehan Focus Fund), including the
schedule of investments, as of October 31, 2000, and the related statements of
operations and changes in net assets and the financial highlights for the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
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 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 October 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above presents fairly, in all material respects, the financial position of the
Meehan Focus Fund as of October 31, 2000, the results of its operations, the
changes in its net assets and the financial highlights for the period then
ended, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania Tait, Weller & Baker
November 15, 2000
