MERIDIAN VALUE FUND
July 20, 1999
To Our Shareholders:
The Meridian Value Fund's net asset value per share at June 30, 1999 was $22.29.
This represents an increase of 21.67% for the calendar year to date. The Fund's
total return and average annual compounded rate of return for the four years
ended June 30, 1999, were 169.5% and 28.1%, respectively. Prior to June 30,
1995, the Fund's cash position was approximately 50%, as it was in the start-up
process of becoming fully invested. The Fund's assets at the close of the
quarter were invested 10.2% in cash and cash equivalents and 89.8% in stocks.
Total net assets were $24,912,455 and there were 266 shareholders.
Stocks performed well during the calendar second quarter. Strong economic growth
domestically and a more stable economic landscape throughout most of Asia proved
reassuring to investors. The advance was broad and included smaller and
medium-sized companies. The S&P 500 gained 6.7 percent while the Russell 2000,
after a dismal first quarter, surged 15.1 percent. The best performing sectors,
in addition to the large technology stocks, included classic cyclicals such as
steel, aluminum and construction. The worst performing groups consisted of
cosmetics, consumer services, and savings and loans. Year to date, the S&P 500
is up 11.67 percent, while the Russell 2000 has gained 8.47 percent.
The Dow Jones Bond Index dropped to 100.81 from 104.07 at the end of March. The
yield on the closely watched 30-year government bond increased from 5.62 percent
to 5.97 percent.
The economy continues to grow at a strong pace. It is estimated that GDP grew at
almost 4 percent during the second quarter. Retail sales, home sales, industrial
production and employment are all strong. Consumer confidence remains near
record levels. The economic recovery throughout Asia is important also. The
primary concerns are inflation and interest rates. Inflation has accelerated
somewhat and interest rates, as pointed out above, have moved higher this year.
The Federal Reserve Board recently raised the federal funds rate one-quarter of
a point to 5 percent, possibly indicating a change in policy. Our outlook is for
a strong economy with modest increases in interest rates and the rate of
inflation during the balance of 1999.
The Meridian Value Fund's strong performance in the June quarter was driven
primarily by our investments in the telecom/cable equipment, retail, technology,
and industrial products sectors. Our investment strategy remains unchanged. The
portfolio continues to consist predominately of small and medium-capitalization
stocks that, in our opinion, are attractively valued and face improving business
prospects. The valuations of small and medium-cap stocks remain compelling
relative to large capitalization stocks, and projected earnings growth is far
superior to that of the S&P 500.
<PAGE>
Purchases during the quarter included Airgas, Cabletron, DuPont Photomasks,
Fritz Companies, Illinova, International Rectifier, Lockheed Martin, Northwest
Airlines, and Staar Surgical. We sold Adaptec, Agrium, American Management
Systems, Imation, Newbridge Networks, Pharmacia & Upjohn, Sanderson Farms,
Sunglass Hut, and Xircom. Wang Global was the subject of an acquisition bid, and
we tendered our shares.
Haemonetics, a fund holding for a year, is the dominant supplier of proprietary
automated systems for the collection, processing, and surgical salvage of blood
platelets and plasma. Almost all of the company's $285 million in revenues come
from the sale of disposable kits, which recur annually. Recently, Haemonetics
introduced the first FDA-approved automated system for the collection of red
blood cells (RBCs). This represents a $300-$500 million market opportunity for
the company. Haemonetics' earnings growth stalled in 1996 and then dropped by
half in 1997. The stock price dropped from $26 to $14. The earnings downturn
resulted from increased competition and from diversification into the operation
of blood banks. In early 1998, management was replaced, a plan to exit the blood
bank business was announced, and cost reduction programs were implemented.
Haemonetics expects to earn $0.95 per share in FY'00 (March), then $1.20 in
FY'01 (March). Thereafter, the new RBC collection system should enable sustained
double-digit EPS growth. The stock now trades at 19X estimated FY'00 (March)
earnings, and less than 15X projected FY'01 (March) 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>
MERIDIAN VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
COMMON STOCK - 89.8%
CONSUMER FINANCE - 2.4%
Pacific Century Financial Corporation*................. 27,500 $ 592,969
CONSUMER PRODUCTS - 2.6%
Tyson Foods, Inc. Class A*............................. 29,100 654,750
DEFENSE - 2.5%
Lockheed Martin*....................................... 17,000 633,250
ENERGY - 4.9%
Tom Brown, Inc. New.................................... 45,800 712,762
Ultramar Diamond Shamrock Corporation*................. 23,000 501,688
FOOD CHAINS - 2.2%
Great Atlantic & Pacific Tea Company, Inc. ............ 16,000 541,000
HEALTH SERVICES - 7.7%
American Healthcorp, Inc. ............................. 39,300 326,681
Haemonetics Corporation................................ 39,000 782,438
STAAR Surgical Company................................. 20,000 265,000
Zoll Medical Corporation............................... 45,000 540,000
INDUSTRIAL PRODUCTS - 11.3%
AVX Corporation........................................ 23,500 572,812
Airgas, Inc. .......................................... 50,000 612,500
ITI Technologies, Inc. ................................ 17,300 391,413
Pall Corp. ............................................ 24,700 548,031
Tektronix, Inc.*....................................... 22,500 679,219
INDUSTRIAL SERVICES - 2.6%
Convergys Corp. ....................................... 33,500 644,875
LEISURE & AMUSEMENT - 2.3%
Scientific Games Holdings Corp. ....................... 28,800 561,600
RESTAURANTS - 4.6%
Buffets, Inc. ......................................... 100,000 1,150,000
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE>
MERIDIAN VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----------
COMMON STOCK (continued)
<S> <C> <C>
RETAIL - 13.1%
Burlington Coat Factory Warehouse Corp. ............... 49,300 $ 952,106
Discount Auto Parts, Inc. ............................. 24,500 591,063
PETsMART, Inc. ........................................ 54,900 562,725
Shoe Carnival, Inc. ................................... 29,000 493,000
West Marine, Inc. ..................................... 45,000 655,312
TECHNOLOGY - 14.9%
Anadigics, Inc. ....................................... 21,100 780,700
Cabletron Systems...................................... 35,000 455,000
Coherent............................................... 34,500 642,562
DuPont Photomasks, Inc. ............................... 13,600 651,100
International Rectifier Corporation.................... 45,000 599,063
Mentor Graphics Corporation............................ 46,000 589,375
TELECOMMUNICATIONS/CABLE EQUIPMENT - 11.7%
ANTEC Corporation...................................... 17,400 557,887
Active Voice Corporation............................... 40,000 580,000
Commscope, Inc. ....................................... 20,500 630,375
Teltrend, Inc. ........................................ 27,500 584,375
Universal Electronics, Inc. ........................... 20,500 575,281
TRANSPORTATION - 4.8%
Fritz Companies, Inc. ................................. 52,000 559,000
Northwest Airlines..................................... 19,500 633,750
UTILITIES - 2.2%
Illinova Corporation*.................................. 20,600 561,350
-----------
TOTAL COMMON STOCK
(Identified cost $17,817,783)..................................... 22,365,012
-----------
CASH AND OTHER ASSETS LESS LIABILITIES - 10.2%...................... 2,547,443
-----------
NET ASSETS - 100%................................................... $24,912,455
===========
</TABLE>
* income producing
The accompanying notes are an integral part of the financial statements
4
<PAGE>
MERIDIAN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments (Cost $17,817,783)............................ $22,365,012
Cash and cash equivalents................................. 2,584,234
Receivables for:
Capital shares......................................... 2,500
Interest............................................... 6,670
Prepaid expenses.......................................... 113
-----------
TOTAL ASSETS........................................... 24,958,529
-----------
LIABILITIES
Payables For:
Capital shares......................................... 13,084
Accrued expenses....................................... 32,990
-----------
TOTAL LIABILITIES...................................... 46,074
-----------
NET ASSETS.................................................. $24,912,455
===========
Capital shares issued and outstanding, par value $.01
(25,000,000 shares authorized)............................ 1,117,589
===========
Net asset value per share (offering and redemption price)... $22.29
===========
Net assets consist of:
Paid in capital........................................... $17,976,457
Accumulated net investment loss and realized gain......... 2,388,769
Net unrealized appreciation on investments................ 4,547,229
-----------
$24,912,455
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE>
MERIDIAN VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $66,693
Interest................................................ 106,472
---------
Total investment income............................ $173,165
EXPENSES
Investment advisory fees................................ 176,137
Transfer agent fees..................................... 29,200
Pricing fees............................................ 24,630
Professional fees....................................... 22,135
Registration and filing fees............................ 11,826
Custodian fees.......................................... 10,185
Reports to shareholders................................. 9,585
Directors' fees and expenses............................ 2,190
Miscellaneous expenses.................................. 2,058
---------
Total expenses..................................... 287,946
----------
Net investment loss..................................... (114,781)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments........................ 2,503,550
Net increase in unrealized appreciation on
investments.......................................... 2,273,627
---------
Net gain on investments................................. 4,777,177
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,662,396
==========
</TABLE>
The accompanying notes are an integral part of the financial statements
6
<PAGE>
MERIDIAN VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment loss.................................... ($114,781) ($122,654)
Net realized gain on investments....................... 2,503,550 1,155,399
Net increase in unrealized appreciation of
investments.......................................... 2,273,627 994,456
----------- -----------
Net increase in net assets from operations........... 4,662,396 2,027,201
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized capital gains.......... (383,710) (1,049,358)
----------- -----------
Total distributions.................................. (383,710) (1,049,358)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares.......................... 13,409,356 4,793,097
Reinvestment of distributions.......................... 274,369 1,027,567
Less: redemptions...................................... (5,246,335) (1,942,238)
----------- -----------
Increase resulting from capital share transactions... 8,437,390 3,878,426
----------- -----------
Total increase in net assets........................... 12,716,076 4,856,269
NET ASSETS
Beginning of year...................................... 12,196,379 7,340,110
----------- -----------
End of year............................................ $24,912,455 $12,196,379
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
7
<PAGE>
MERIDIAN VALUE FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the fiscal year ended June 30,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994(+)
----------- ----------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of
Period............................. $19.30 $17.40 $15.32 $10.27 $9.87 $10.00
----------- ----------- ---------- ---------- -------- --------
Income from Investment Operations
- -----------------------------------
Net Investment Loss.................. (0.10) (0.19) (0.26) (0.10) (0.04) 0.00
Net Gains or Losses on Securities
(both realized and unrealized)..... 3.56 4.32 3.20 5.15 0.44 (0.13)
----------- ----------- ---------- ---------- -------- --------
Total From Investment Operations..... 3.46 4.13 2.94 5.05 0.40 (0.13)
----------- ----------- ---------- ---------- -------- --------
Less Distributions
- -----------------
Distribution from Net Realized
Capital Gains...................... (0.47) (2.23) (0.86) 0.00 0.00 0.00
----------- ----------- ---------- ---------- -------- --------
Net Asset Value - End of Period...... $22.29 $19.30 $17.40 $15.32 $10.27 $9.87
=========== =========== ========== ========== ======== ========
Total Return......................... 18.92% 26.05% 20.55%+ 49.17%+ 4.05%+ (1.30%)+
=========== =========== ========== ========== ======== ========
Ratios/Supplemental Data
- -------------------------
Net Assets, End of Period............ $24,912,455 $12,196,379 $7,340,110 $3,471,507 $715,021 $391,538
Ratio of Expenses to Average Net
Assets............................. 1.63% 2.16% 2.51%* 2.55%* 2.78%* 1.28%*
Ratio of Net Investment Loss to
Average Net Assets................. (0.65%) (1.35%) (1.96%)* (1.36%)* (.58%)* (.07%)*
Portfolio Turnover Rate.............. 124% 133% 144% 125% 77% 194%
</TABLE>
<TABLE>
<S> <C>
(+) From commencement of operations on February 10, 1994.
+ The total returns would have been lower had certain expenses
not been reduced during the periods shown.
* 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 2.80%, 6.47%, 14.64% and 11.22%, and the ratio of
net investment income to average net assets would have been
a loss of 2.25%, 5.28%, 12.44% and 10.02%, for the period
ended June 30, 1997 through June 30, 1994, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements
8
<PAGE>
MERIDIAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION AND 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. INVESTMENT VALUATIONS: Marketable securities are valued at the last sales
price on the principal exchange or market on which they are traded; or,
if there were no sales that day, at the last reported bid price.
Short-term investments that will mature in 60 days or less are stated at
amortized cost, which approximates 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
$17,817,783, the aggregate gross unrealized appreciation is $4,854,355,
and the aggregate gross unrealized depreciation is ($307,126), resulting
in net unrealized appreciation of $4,547,229.
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.
Funds are automatically swept into a Cash Reserve account which preserves
capital with a consistently competitive rate of return. Earnings are
indexed to the Federal Reserve "Fed Funds Rate." Interest accrues daily
and is credited by the third business day of the following month.
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 those estimates.
g. DISTRIBUTIONS TO SHAREHOLDERS: The Fund records distributions to its
shareholders on the ex-date. The amount of distributions from net
investment income and net realized capital gain 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.
9
<PAGE>
MERIDIAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributions which exceed net investment income and net realized capital
gains are reported as distributions in excess of net investment income or
distributions in excess of net realized capital gains for financial
reporting purposes but not for tax purposes. 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.
2. RELATED PARTIES: The Fund has entered into a management agreement with Aster
Capital Management, Inc. (the "Investment Advisor"). Certain Officers and/or
Directors of the Fund are also Officers and/or Directors of the Investment
Advisor. Beneficial ownership in the Fund by Richard F. Aster, Jr.,
President, as of June 30, 1999 was 17.36%.
The Investment Advisor 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 Advisor 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. The
federal government pre-empted the state's right to impose expense
limitations as a result of the National Securities Markets Improvement Act
of 1996. However, the Fund uses the most stringent state expense limitation
of 2 1/2% and will do so in the future as the Investment Advisor has agreed
to continue this practice. The Investment Advisor did not reimburse the Fund
during 1999.
3. CAPITAL SHARES TRANSACTIONS: The Fund has authorized 25,000,000 common
shares at a par value of $.01 per share. Transactions in capital shares for
the year ended June 30, 1999 and June 30, 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Shares sold 760,797 261,800
Shares issued on reinvestment of distributions 17,299 61,393
-------- --------
778,096 323,193
Shares redeemed (292,605) (112,937)
-------- --------
Net increase 485,491 210,256
======== ========
</TABLE>
4. COMPENSATION OF DIRECTORS AND OFFICERS: Directors and officers of the Fund
who are directors and/or officers of the Investment Advisor 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 shares, plus expenses for each Board of
Directors meeting attended. The aggregate compensation due the unaffiliated
Directors of the Fund as of June 30, 1999, was $1,323.
5. COST OF INVESTMENTS: The cost of investments purchased and the proceeds from
sales of investments, excluding short-term obligations, for the year ended
June 30, 1999, were $25,543,868 and $18,852,496, respectively.
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 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 (the "Fund") at
June 30, 1999, 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 periods presented, 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
July 26, 1999
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 STOLPER
Directors
GREGG B. KEELING
Treasurer and Secretary
Custodian
BANK OF NEW YORK
New York, New York
Transfer Agent and Disbursing Agent
FIRST DATA
King of Prussia, Pennsylvania
(800) 446-6662
Counsel
MORRISON & FOERSTER LLP
Washington, D.C.
Auditors
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
ANNUAL REPORT
[MERIDIAN FUND INCORPORATED(R) LOGO]
60 E. Sir Francis Drake Blvd.
Wood Island, Suite 306
Larkspur, CA 94939
(415) 461-6237
Telephone (800) 446-6662
JUNE 30, 1999
<PAGE>
