MERIDIAN VALUE FUND
July 24, 1996
To Our Shareholders:
The Meridian Value Fund's net asset value per share at June 28, 1996, was
$15.32. This represents an increase of 28.6% for the calendar year to date. The
Fund's total return for the fiscal year ended June 30, 1996 was 49.2%. The
Fund's assets at the close of the quarter were invested 5.7% in cash and cash
equivalents, and 94.3% in stocks. Total net assets were $3,471,507 and there
were 159 shareholders.
Stocks posted another solid performance during the second quarter. All of the
popular averages advanced. The S&P 500 with dividends gained 4.4 percent and the
NASDAQ composite increased 7.6 percent, as technology stocks rebounded from a
weak first quarter. This was the sixth straight quarterly advance for the S&P
500. At June 30, 1996, the S&P 500 with dividends was up 10.0 percent year to
date and the NASDAQ composite 12.6 percent. The Dow Jones Bond Index declined
from 103.25 to 101.71 during the quarter, a drop of 1.5 percent. The yield on
the five-year government bond increased from 6.1 percent on March 31 to 6.5
percent on June 30.
The economy continued to move forward at a moderate pace with a slight pick up
in the level of inflation and interest rates during the quarter. Industrial
production, employment, business productivity, new construction and retail sales
all reflect a growing economy. The high level of consumer debt is somewhat
troubling. Our forecast for the balance of the year is for continued growth
accompanied by modest increases in the level of interest rates and inflation.
Since the end of the quarter, there has been a meaningful correction in small
and medium-sized stocks. The NASDAQ has declined from a peak of 1249 on June 5
to 1062 at the time of this writing, a decline of 15 percent. The Russell 2000
has declined by a similar percentage. These declines have removed some of the
speculation and froth from the market. We have intensified our search for
companies that maintain strong competitive positions within their markets,
generate good returns on capital employed, maintain strong balance sheets,
possess strong management, face improving business prospects, and trade at
reasonable valuations.
<PAGE>
SMC Corporation, for example, is the second largest manufacturer of high-line
Class A motorcoaches and recently entered the middle-market Class C segment to
create a high-end niche within that market. Through design and manufacturing
innovations that enable it to provide custom coach features and service at lower
price levels, the company has captured 28% of the high-line Class A segment.
SMC's markets, which are less cyclical than the overall motorcoach industry, are
projected to grow almost 10% annually due to the increasing population of 45-64
year-olds. SMC expects to grow at least 20% annually going forward, yet the
stock trades at 10 times projected 1996 earnings.
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 O'Boyle
---------------------------
Kevin O'Boyle
2
<PAGE>
SCHEDULE OF INVESTMENTS AND NET ASSETS
JUNE 30, 1996
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ----------
<S> <C> <C>
COMMON STOCK - 94.3%
BANKING AND FINANCE - 2.6%
EZCORP, Inc. ........................................... 13,500 $91,125
CONSTRUCTION - 4.4%
BMC West Corporation.................................... 4,800 82,200
Griffon Corporation..................................... 8,600 69,875
CONSUMER PRODUCTS - 7.9%
Maxwell Shoe Company, Inc. - Class A.................... 12,600 97,650
Paragon Trade Brands, Inc. ............................. 3,900 83,850
Universal Electronics, Inc. ............................ 7,900 91,837
ENERGY - 12.2%
Apache Corporation...................................... 2,800 92,050
Lomak Petroleum, Inc. .................................. 6,400 91,200
Nabors Industries, Inc. ................................ 5,200 84,500
Oceaneering International, Inc. ........................ 4,300 65,037
Vintage Petroleum, Inc. ................................ 3,600 91,800
HEALTH SERVICES - 7.2%
Coventry Corporation.................................... 5,700 89,775
Safeguard Health Enterprises, Inc. ..................... 3,700 67,062
Zoll Medical Corporation................................ 5,700 91,200
INDUSTRIAL SERVICES - 5.1%
Angelica Corporation.................................... 3,900 92,137
Thomas Group, Inc. ..................................... 4,600 85,100
INDUSTRIAL PRODUCTS - 9.8%
Augat Inc. ............................................. 4,300 82,238
Bettis Corporation...................................... 16,500 85,594
Medar, Inc. ............................................ 8,700 90,263
Seda Specialty Packaging Corp. ......................... 4,800 86,400
INSURANCE - 5.1%
Integon Corp. .......................................... 4,400 88,550
Omni Insurance, Inc. ................................... 9,700 89,725
</TABLE>
3
<PAGE>
SCHEDULE OF INVESTMENTS AND NET ASSETS (CONTINUED)
JUNE 30, 1996
================================================================================
<TABLE>
<CAPTION>
Shares Value
------ ----------
COMMON STOCK (continued)
<S> <C> <C>
LEISURE & AMUSEMENT - 7.3%
Rawlings Sporting Goods Company, Inc.................... 8,700 $85,913
SMC Corporation......................................... 9,700 92,150
Sturm, Ruger & Company, Inc. ........................... 1,600 74,400
REAL ESTATE - 2.7%
Manufactured Home Communities, Inc. .................... 4,800 92,400
RESTAURANTS - 2.5%
CKE Restaurants, Inc. .................................. 3,400 86,700
RETAIL - 14.7%
Cato Corporation - Class A.............................. 11,700 70,200
Fabri-Centers of America, Inc. - Class B................ 6,000 90,750
Heilig-Meyers Company................................... 3,700 88,800
Pier 1 Imports, Inc. ................................... 5,800 86,275
Toys "R" Us, Inc. ...................................... 3,000 85,500
Value City Department Stores, Inc. ..................... 8,000 88,000
TECHNOLOGY - 12.8%
CFI ProServices, Inc. .................................. 3,200 81,600
InaCom Corporation...................................... 4,700 88,125
MicroAge, Inc. ......................................... 6,600 89,925
Viewlogic Systems, Inc. ................................ 6,500 90,188
Western Digital Corporation............................. 3,600 94,050
-------
TOTAL COMMON STOCK
(Identified cost $2,800,769)....................................... 3,274,142
-------
CASH AND OTHER ASSETS LESS LIABILITIES - 5.7%........................ 197,363
-------
NET ASSETS - 100%.................................................... $3,471,505
=======
Shares of capital stock outstanding.................................. 226,673
=======
Net asset value per share............................................ $15.32
=======
</TABLE>
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments (Cost $2,800,769)........................................ $3,274,144
Cash and cash equivalents............................................ 140,766
Receivables for:
Securities sold................................................... 76,725
Reimbursement from Investment Advisor............................. 6,854
Dividends......................................................... 2,555
Interest.......................................................... 269
Prepaid expenses..................................................... 113
----------
TOTAL ASSETS...................................................... 3,501,426
----------
LIABILITIES
Payable for securities purchased..................................... 16,154
Accrued expenses..................................................... 13,765
----------
TOTAL LIABILITIES................................................. 29,919
----------
NET ASSETS............................................................. $3,471,507
==========
Shares of capital stock outstanding, par value $.01
(25,000,000 shares authorized)....................................... 226,673
==========
Net asset value per share (offering and redemption price).............. $15.32
==========
Net assets consist of:
Paid in capital...................................................... $2,726,897
Accumulated net realized gain........................................ 271,235
Net unrealized appreciation on investments........................... 473,375
----------
$3,471,507
==========
</TABLE>
5
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $16,839
Interest.................................................. 2,366
--------
Total investment income.............................. $19,205
EXPENSES
Transfer agent fees....................................... 25,620
Pricing fees.............................................. 24,156
Investment advisory fees.................................. 16,183
Registration and filing fees.............................. 11,455
Custodian fees............................................ 8,340
Legal..................................................... 7,062
Auditing fee.............................................. 6,204
Reports to shareholders................................... 2,873
Directors' fees and expenses.............................. 1,098
Taxes..................................................... 811
Insurance................................................. 762
Association dues.......................................... 73
--------
Total expenses....................................... 104,637
Less: Reimbursement by Investment Advisor............ (63,370)
--------
Net expenses.................................... 41,267
--------
Net investment loss....................................... (22,062)
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gain on investments.......................... 295,152
Net increase in unrealized appreciation on investments.... 421,643
--------
Net realized and unrealized gains on investments.......... 716,795
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $694,733
========
</TABLE>
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
For the Fiscal For the Fiscal
Year Ended Year Ended
June 30, 1996 June 30, 1995
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment loss...................................... ($22,062) ($3,396)
Net realized gain (loss) on investments.................. 295,152 (20,940)
Net increase in unrealized appreciation of investments... 421,643 54,235
---------- ---------
Net increase from operations........................... 694,733 29,899
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income..................... 0 0
Distributions from net realized capital gains............ 0 0
---------- ---------
Total distributions.................................... 0 0
---------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of stock.............................. 2,262,308 400,303
Reinvestment of distributions............................ 0 0
Less: redemptions........................................ (200,555) (106,719)
---------- ---------
Increase resulting from
capital share transactions.......................... 2,061,753 293,584
---------- ---------
Total increase in net assets............................. 2,756,486 323,483
NET ASSETS
Beginning of period...................................... 715,021 391,538
---------- ---------
End of period............................................ $3,471,507 $715,021
========== =========
</TABLE>
7
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
<TABLE>
<CAPTION>
For the fiscal For the fiscal For the period
year ended year ended ended
June 30, 1996 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 (Loss) Income..................... (0.10) (0.04) 0.00
Net Gains or Losses on Securities
(both realized and unrealized)................. 5.15 0.44 (0.13)
---------- ------- -------
Total From Investment Operations................. 5.05 0.40 (0.13)
---------- ------- -------
Less Dividends and Distributions
-----------------------------------
Dividends from net investment income............. 0.00 0.00 0.00
Distribution from net realized capital gains..... 0.00 0.00 0.00
---------- ------- -------
Total Dividends and Distributions................ 0.00 0.00 0.00
---------- ------- -------
Net Asset Value - End of Period.................. $15.32 $10.27 $9.87
========== ======= =======
Total Return..................................... 49.17% 4.05% (1.30%)
========== ======= =======
Ratios/Supplemental Data
----------------------------
Net Assets, End of Period (in thousands)......... $3,471,507 $715,021 $391,538
Ratio of Expenses to Average Net Assets.......... 2.55%+ 2.78%+ 1.28%+
Ratio of Net Investment Loss
to Average Net Assets.......................... (1.36%)+ (.58%)+ (.07%)+
Portfolio Turnover Rate.......................... 125% 77% 194%
Average Commission Paid Per Share................ $0.0559 -- --
+ 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
6.47%, 14.64%, and 11.22%, and the ratio of net investment income to average net assets
would have been a loss of 5.28%, 12.44% and 10.02%, respectively.
* From commencement of operations on February 10, 1994.
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996
================================================================================
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. The primary investment objective of the fund
is to seek long-term growth of capital. 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
$2,800,769, the aggregate gross unrealized appreciation is $537,102 and
the aggregate gross unrealized depreciation is $63,727 resulting in net
unrealized appreciation of $473,375.
c. SECURITY TRANSACTIONS: 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 in proportion to their relative net
assets.
f. USE OF ESTIMATES: The preparation of financial statements requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities at the date of the financial statements.
Actual amounts could differ from the estimates.
g. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary
or permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based
on their federal tax-basis treatment; temporary differences do not
require reclassification. Dividends and distributions which exceed net
investment income and net realized capital gain for financial reporting
purposes but not for tax purposes are reported as dividends in excess of
net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized
capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 1996
================================================================================
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 June 30, 1996, was
17.48%.
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
next $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 $63,370 for the year
ended June 30, 1996.
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 June 30, 1996 and June 30, 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Shares sold 173,212 40,863
Shares issued on reinvestment of distributions 0 0
------- ------
173,212 40,863
Shares redeemed 16,140 10,934
------- ------
Net increase 157,072 29,929
======= ======
</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 and 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 as of June 30, 1996 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 June 30, 1996 were $4,009,140 and $1,961,655
respectively.
b. INCOME PRODUCING INVESTMENTS: At June 30, 1996, those investments in
securities which produce investment income (cash dividends) are Angelica
Corporation, Apache Corporation, Augat, Inc., Cato Corporation - Class
A., CKE Restaurants, Inc., Integon Corp., Lomak Petroleum Inc.,
Manufactured Home Communities, Inc., Pier 1 Imports, Inc., and Sturm,
Ruger & Company, Inc. All other investments in securities are non-income
producing.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Directors and Shareholders
of Meridian Value Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments and net assets, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Meridian Value Fund
(one of the portfolios constituting Meridian Fund, Inc., hereafter referred to
as the "Fund") at June 30, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the two years in the period
then ended and for the period February 10, 1994 (commencement of operations)
through June 30, 1994, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as the "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1996 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
July 31, 1996
11
<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) 446-6662
Counsel
MORRISON & FOERSTER
San Francisco, California
Auditors
PRICE WATERHOUSE
San Francisco, California
ANNUAL REPORT
LOGO
60 E. Sir Francis Drake Blvd.
Wood Island, Suite 306
Larkspur, CA 94939
(415) 461-6237
Telephone (800) 446-6662
JUNE 30, 1996
<PAGE>
