MERIDIAN VALUE FUND
January 22, 1996
To Our Shareholders:
The Meridian Value Fund's net asset value per share at December 29, 1995 was
$11.91. This represents an increase of 23.80% for the calendar year and 19.10%
from inception, February 5, 1994. The Fund's assets at the close of the quarter
were invested 7.3% in cash and cash equivalents, and 92.7% in stocks. Total net
assets were $1,199,114 and there were 134 shareholders.
Stocks experienced a strong year in 1995. Low interest rates, low inflation,
strong corporate profits and the prospect of deficit reduction propelled most of
the popular averages into record territory. The S&P 500 advanced 34 percent, its
best performance since 1958. The NASDAQ gained 40 percent, the Russell 2000 26
percent and the Value Line 19 percent. There were no major bumps or corrections
along the way. The year will be remembered for the strong performance of
technology stocks, especially those related to semiconductors and the Internet.
It was a difficult year for many retail stocks. Merchandisers of women's apparel
were particularly hard hit.
Bonds had an exceptional year also in 1995. The thirty year treasury bond began
the year at 7.9 percent and closed the year at 5.95 percent, its lowest yield
since October, 1993. The Dow Jones Bond Index finished the year at 105.3, up
from 93.6 a year ago, reflecting the lower rates.
The economy grew at a steady, if not spectacular pace during 1995. The current
expansion will move into its sixth year this spring and we expect continued but
modest growth during 1996 with stable interest rates and moderate rates of
inflation. Consumer credit is somewhat high, but other than that there are no
major excesses or areas of concern that we see at this time. Inventories are in
line, plant expansion is modest and major corporations continue to streamline
and cut costs to become more competitive, both domestically and internationally.
Most important, the low level of inflation gives the Federal Reserve room to cut
interest rates should the economy weaken. It's difficult to imagine a recession
in 1996, given the economic landscape as described above and the fact that it's
a presidential election year.
<PAGE>
The Value Fund increased its investment in equities from nine stocks and 43% at
the beginning of 1995 to thirty-nine positions and 93% at year-end. Purchases
during the December quarter included Darden Restaurants, EZCorp, Elcor, Paragon
Trade Brands, Spartan Motors, and the TJX Companies. We continue to research
companies that generate good returns on capital employed, maintain strong
balance sheets, possess strong management, face improving business prospects and
trade at reasonable valuations.
Elcor Corporation, for example, is the leading manufacturer of premium laminated
fiberglass asphalt shingles for residential roofs, a market that is projected to
grow at least 10-15% annually for the next five years. Elcor has such a strong
reputation for quality, innovation, and service that the company commands
premium prices for its products. For two years, beginning in mid-1993, the
company's earnings declined due to an easing of demand, higher transportation
costs, pricing pressures and expenses associated with an $80 million investment
in two new manufacturing plants. During this period Elcor's stock dropped from a
high of $36 to a low of $13. The company's investment program is now almost
complete, transportation costs have come down, and growth in demand has
returned. As a result earnings growth has resumed and Elcor has the
manufacturing capacity in place to meet the demands of a growing market over the
next few years.
We welcome those new shareholders who joined the Meridian Value Fund during the
quarter and appreciate the continued confidence of our existing shareholders.
Sincerely,
/s/ Richard F. Aster, Jr.
Richard F. Aster, Jr.
/s/ Kevin C. O'Boyle
Kevin C. O'Boyle
2
<PAGE>
SCHEDULE OF INVESTMENTS AND NET ASSETS
DECEMBER 29, 1995
================================================================================
<TABLE>
<CAPTION>
Shares Value
----- ----------
<S> <C> <C>
COMMON STOCK - 92.7%
BANKING AND FINANCE - 6.9%
Bancorp Hawaii, Inc. .................................... 700 $25,113
First Commerce Corporation............................... 900 28,800
Washington Mutual, Inc. ................................. 1,000 28,875
CONSUMER PRODUCTS - 5.4%
Liz Claiborne, Inc. ..................................... 1,000 27,750
Paragon Trade Brands, Inc. .............................. 1,600 37,400
ENERGY - 8.0%
Lomak Petroleum, Inc. ................................... 3,400 33,150
Nabors Industries, Inc. ................................. 3,100 34,488
Schlumberger, Ltd. ...................................... 400 27,700
FOOD CHAINS - 2.6%
The Vons Companies, Inc. ................................ 1,100 31,075
HEALTH SERVICES - 2.6%
Capstone Pharmacy Services, Inc. ........................ 4,100 30,750
INDUSTRIAL SERVICES - 3.2%
Thomas Group, Inc. ...................................... 2,800 37,800
INDUSTRIAL PRODUCTS - 10.2%
Bettis Corporation....................................... 6,300 32,288
Elcor Corporation........................................ 1,300 28,275
Seda Specialty Packaging................................. 2,300 28,463
Spartan Motors, Inc. .................................... 3,000 33,000
INSURANCE - 9.4%
Integon Corporation...................................... 1,600 33,000
Mercury General Corporation.............................. 550 26,263
Omni Insurance Group..................................... 3,800 31,825
SAFECO Corporation....................................... 600 20,700
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
3
<PAGE>
SCHEDULE OF INVESTMENTS AND NET ASSETS (CONTINUED)
DECEMBER 29, 1995
================================================================================
<TABLE>
<CAPTION>
Shares Value
----- ----------
COMMON STOCK (continued)
<S> <C> <C>
REAL ESTATE - 13.4%
Felcor Suite Hotels, Inc. ............................... 700 $19,425
Health Care Property Investors, Inc. .................... 900 31,613
Manufactured Homes Communities, Inc. .................... 1,800 31,500
Oasis Residential, Inc. ................................. 1,300 29,575
Spieker Properties, Inc. ................................ 800 20,100
The Town and Country Trust............................... 2,200 28,600
RESTAURANTS - 7.6%
CKE Restaurants, Inc. ................................... 1,900 30,400
Darden Restaurants, Inc. ................................ 2,400 28,500
Longhorn Steaks, Inc. ................................... 1,800 31,950
RETAIL - 13.1%
EZCORP, Inc. ............................................ 6,000 28,500
Fabri-Centers of America, Inc. - Class B................. 2,500 26,875
Goody's Family Clothing, Inc. ........................... 2,700 23,625
Pier 1 Imports, Inc. .................................... 1,785 20,304
Price/Costco, Inc. ...................................... 1,700 25,925
The TJX Companies, Inc. ................................. 1,700 32,088
TECHNOLOGY - 8.1%
Comverse Technology, Inc. ............................... 1,200 24,000
InaCom Corporation....................................... 2,500 35,313
TRO Learning, Inc. ...................................... 2,500 37,344
TRANSPORTATION - 2.4%
Mesa Air Group, Inc. .................................... 3,200 28,800
----------
TOTAL COMMON STOCK
(Identified cost $957,545)......................................... 1,111,148
----------
CASH AND RECEIVABLES LESS LIABILITIES - 7.3%......................... 87,966
----------
TOTAL NET ASSETS - 100%.............................................. $1,199,114
==========
Shares of capital stock outstanding.................................. 100,684
==========
Net asset value per share............................................ $11.91
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 29, 1995
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments (Cost $957,545).......................................... $1,111,148
Cash and cash equivalents............................................ 85,581
Receivables
Interest.......................................................... 103
Dividends......................................................... 1,862
Receivable for securities sold.................................... 0
Subscriptions receivable.......................................... 0
Due from manager.................................................. 5,348
Prepaid expenses..................................................... 417
----------
TOTAL ASSETS...................................................... 1,204,459
----------
LIABILITIES
Payables
Payable for securities purchased.................................. 0
Accrued expenses..................................................... 5,345
----------
TOTAL LIABILITIES................................................. 5,345
----------
TOTAL NET ASSETS....................................................... $1,199,114
==========
Shares of capital stock outstanding, par value $.01
(25,000,000 shares authorized)....................................... 100,684
==========
Net asset value per share (offering and redemption price).............. $11.91
==========
Net assets consist of:
Paid in capital...................................................... $1,043,959
Undistributed Net Investment Income (Loss)........................... (3,362)
Accumulated net realized gain........................................ 4,913
Net unrealized appreciation on investments........................... 153,603
----------
$1,199,114
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
5
<PAGE>
STATEMENT OF OPERATIONS
FOR PERIOD ENDED DECEMBER 29, 1995
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend income........................................... $7,119
Interest income........................................... 1,073
--------
Total investment income.............................. $8,192
EXPENSES
Transfer agent fees....................................... 12,740
Administrative fees....................................... 12,012
Investment advisory fees.................................. 4,299
Legal..................................................... 4,004
Registration and filing fees.............................. 3,920
Custodian fees............................................ 3,070
Auditing fee.............................................. 2,892
Taxes..................................................... 806
Directors' fees and expenses.............................. 546
Insurance................................................. 318
Shareholder Communications and Reports.................... 170
Association dues.......................................... 36
--------
Total expenses....................................... 44,813
Less: Reimbursement by manager....................... (33,260)
--------
Net expenses.................................... 11,554
--------
Net investment loss....................................... (3,362)
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gain on investments.......................... 28,830
Net increase in unrealized appreciation on investments.... 101,872
--------
Net realized and unrealized gains on investments.......... 130,702
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $127,340
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Period Ended Year Ended
December 29, 1995 June 30, 1995
------------------ -------------
<S> <C> <C>
OPERATIONS
Net investment loss................................... ($3,362) ($3,396)
Net realized gain (loss) on investments............... 28,830 (20,940)
Net increase (decrease) in unrealized appreciation of
investments......................................... 101,872 54,235
---------- ---------
Net increase (decrease) from operations............. 127,340 29,899
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................................. 0 0
Net realized gains from investments................... 0 0
---------- ---------
Total distributions................................. 0 0
---------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of stock........................... 457,226 400,303
Reinvestment of distributions......................... 0 0
Less: redemptions..................................... (100,473) (106,719)
---------- ---------
Increase resulting from
capital share transactions....................... 356,753 293,584
---------- ---------
Total increase in net assets.......................... 484,093 323,483
NET ASSETS
Beginning of period................................... 715,021 391,538
---------- ---------
End of period......................................... $1,199,114 $715,021
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
7
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
<TABLE>
<CAPTION>
For the
For the period fiscal For the fiscal
ended year ended period ended
December 29, 1995 June 30, 1995 June 30, 1994*
----------------- ------------- --------------
<S> <C> <C> <C>
Net Asset Value - Beginning of Period.......... $10.27 $9.87 $10.00
---------- ------- -------
Income from Investment Operations
---------------------------------------
Net Investment Income (loss)................... (0.03) (0.04) 0.00
Net Gains or Losses on Securities
(both realized and unrealized)............... 1.67 0.44 (0.13)
---------- ------- -------
Total From Investment Operations............... 1.64 0.40 (0.13)
---------- ------- -------
Less Distributions
-------------------
Dividends from net investment income........... 0.00 0.00 0.00
Distribution from capital gains................ 0.00 0.00 0.00
---------- ------- -------
Total Distributions............................ 0.00 0.00 0.00
---------- ------- -------
Net Asset Value - End of Period................ $11.91 $10.27 $9.87
========== ======= =======
Total Return................................... 15.97% 4.05% (1.30%)*
========== ======= =======
Ratios/Supplemental Data
----------------------------
Net Assets, End of Period (in thousands)....... $1,199,114 $715,021 $391,538
Ratio of Expenses to Average Net Assets........ 2.69%+** 2.78%+ 1.28%+
Ratio of Net Investment Income
to Average Net Assets........................ (.78%)+** (.58%)+ (.07%)+
Portfolio Turnover Rate........................ 81%** 77% 194%
+ Not representative of expenses incurred by the Fund as the Adviser waived its fee and/or
paid certain expenses of the Fund. As indicated in Note 3, the Investment Manager reduced a
portion of its fee and absorbed certain expenses of the Fund. Had these fees and expenses
not been reduced and absorbed, the ratio of expenses to average net assets would have been
10.45%, 14.64%, and 11.22%, and the ratio of net investment income to average net assets
would have been a loss of 8.54%, 12.44% and 10.02% respectively.
* From commencement of operations on February 10, 1994.
** Figures are annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 29, 1995
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES: Meridian Value Fund (the "Fund") a series
of Meridian Fund, Inc., (the "Company"), began operations on February 10,
1994. The Fund was registered on February 7, 1994, under the Investment
Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company. In addition to the Meridian Value Fund, the
Company also offers the Meridian Fund. The following is a summary of
significant accounting policies:
a. SECURITY VALUATIONS: Investments are stated at market value based on
latest quoted prices. Short-term securities with maturity dates of 60
days or less are valued at amortized cost (premiums and discounts are
amortized on a straight-line basis) which has been determined by the
Fund's Board of Directors to represent fair value.
b. FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders; therefore, no federal income tax provision is required. The
aggregate cost of investments for federal income tax purposes is
$957,545, the aggregate gross unrealized appreciation is $175,653 and the
aggregate gross unrealized depreciation is $22,050 resulting in net
unrealized appreciation of $153,603.
c. SECURITY TRANSACTIONS: As is common in the industry, security
transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions
are determined on the basis of specific identification for both financial
statement and federal income tax purposes. Dividend income is recorded on
the ex-dividend date. Interest income is accrued daily.
d. CASH AND CASH EQUIVALENTS: All highly liquid investments with an original
maturity of three months or less are considered to be cash equivalents.
e. EXPENSES: Expenses arising in connection with the Fund are charged
directly to the Fund. Expenses common to both series of Meridian Fund,
Inc. are allocated to each series based on the guidelines established by
the Board of Directors.
f. CAPITAL ACCOUNTS: In accordance with accounting pronouncements, the Fund
has recorded a reclassification in the capital accounts. The
reclassification has no impact on the net asset value of the Fund and is
designed generally to present undistributed loss and realized gains on a
tax basis which is considered to be more informative to the shareholder.
The net operating losses for the period ending June 30, 1994 and the
fiscal year ending June 30, 1995 of $3,396 and $182 can not be carried
forward under Federal tax rules, and were reclassified to additional
paid-out in capital.
2. RELATED PARTIES: The Fund has entered into a management agreement (the
Investment Advisory Fee) with Aster Capital Management, Inc. ("Aster
Capital") for calendar 1996. Certain Officers and/or Directors of the Fund
are also Officers and/or Directors of Aster Capital. Beneficial ownership in
the Fund by Richard F. Aster, Jr., President, as of December 29, 1995, was
28.4%.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED DECEMBER 29, 1995
================================================================================
3. ADVISORY FEE AND EXPENSE LIMITATION: The investment adviser receives from
the Fund as compensation for its services an annual fee of 1% of the Fund's
net assets. The fee is paid monthly and calculated based on that month's
average net assets. The Investment Adviser has agreed to reimburse the Fund
for any fiscal year's expenses, including advisory fees, which exceed the
most stringent limits prescribed by any state in which the Fund's shares are
offered for sale. Although state requirements may change, the most stringent
state expense limitations currently require the Investment Adviser to
reimburse the Fund for operating expenses incurred in any fiscal year which
exceed 2 1/2% of the first $30 million of the average net assets, 2% of the
first $70 million of the average net assets and 1 1/2% of the remaining
average net assets. Reimbursement, if any, will be on a monthly basis,
subject to year-end adjustment. Reimbursements were $33,260 for the period
ending December 29, 1995.
4. CAPITAL STOCK TRANSACTIONS: The Fund has authorized 25,000,000 shares of
common stock at a par value of $.01 per share. Transactions in capital stock
for the period ended December 29, 1995, were as follows:
<TABLE>
<CAPTION>
Shares
------
<S> <C>
Shares sold 40,484
Shares issued on reinvestment of distributions 0
------
40,484
Shares redeemed (9,400)
------
Net increase 31,084
======
</TABLE>
5. COMPENSATION OF DIRECTORS AND OFFICERS: Directors and officers of the
Company who are directors and/or officers of Aster Capital Management, Inc.
receive no compensation from the Fund. Directors of the Company who are not
interested persons as defined in the Investment Company Act of 1940 receive
compensation in the amount of $1,000 per annum plus a $1,000 purchase of
Meridian Fund or Meridian Value Fund stock, plus expenses for each Board of
Directors meeting attended. The aggregate compensation due the unaffiliated
Directors of the Fund for the period ended December 29, 1995 was $1,000.
6. INVESTMENTS:
a. COST OF INVESTMENTS: The cost of investments purchased, excluding
short-term obligations, and the proceeds from sales of investments for
the period ended December 29, 1995 were $784,774 and $316,567,
respectively.
b. INCOME PRODUCING INVESTMENTS: At December 29, 1995, those investments in
securities which produce investment income (cash dividends) are Bancorp
Hawaii, Inc., CKE Restaurants, Inc., Fabri-Centers of America (Class B),
Felcor Suite Hotels, Inc., First Commerce Corporation, Health Care
Property Investment, Inc., Integon Corporation, Liz Claiborne, Inc.,
Lomak Petroleum Inc., Manufactured Home Communities, Inc., Mercury
General Corporation, Oasis Residential Inc., Pier 1 Imports, Inc., SAFECO
Corporation, Schlumberger Ltd., Spieker Properties, Inc., Town and
Country Trust, and Washington Mutual, Inc. All other investments in
securities are non-income producing.
10
<PAGE>
[This page intentionally left blank.]
<PAGE>
MERIDIAN VALUE FUND
================================================================================
This report is submitted for
the information of shareholders of
Meridian Fund, Inc. It is not
authorized for distribution to
prospective investors unless
preceded or accompanied by an
effective prospectus.
-----------------------------------------------------------------
Officers and Directors
RICHARD F. ASTER, JR.
President and Director
MICHAEL S. ERICKSON
HERBERT C. KAY
JAMES B. GLAVIN
MICHAEL P. MORK
MICHAEL STOLPER
Directors
PAUL A. ROBINSON
Treasurer and Secretary
Custodian
BANK OF NEW YORK
New York, New York
Transfer Agent and Disbursing Agent
FUND/PLAN SERVICES, INC.
Conshohocken, Pennsylvania
(800) 441-6580
Counsel
MORRISON & FOERSTER
San Francisco, California
Auditors
PRICE WATERHOUSE
San Francisco, California
SEMI ANNUAL REPORT
[LOGO]
(R)
60 E. Sir Francis Drake Blvd.
Wood Island, Suite 306
Larkspur, CA 94939
(415) 461-6237
Telephone (800) 446-6662
DECEMBER 29, 1995
<PAGE>
