<PAGE> 1
MERIDIAN VALUE FUND(SM)
January 27, 2000
To Our Shareholders:
The Meridian Value Fund's net asset value per share at December 31, 1999 was
$22.69. This represents an increase of 38.28% for the calendar year 1999. The
Fund made dividend distributions of $.46 per share on December 30, 1999, and
$1.90 on September 30, 1999. The Fund's total return and average compounded
annual rate of return since June 30, 1995, were 206.4% and 28.2%, respectively.
The comparable period returns for the S&P 500 with dividends were 192.0% and
26.9%, 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 17.2% in cash and
cash equivalents and 82.8% in stocks. Total net assets were $34,932,040 and
there were 397 shareholders.
All of the popular averages posted big gains in 1999. The S&P 500 gained 19.5%,
the NASDAQ an astounding 85.5% and the Russell 2000, 19.6%. This doesn't tell
the entire story, however. Internet-driven technology stocks were responsible
for the lion's share of the market's advance. A significant part of the market,
responding to higher interest rates, actually declined. Over half of the stocks
on the NASDAQ ended down for the year. It was the same story for small-cap
stocks. The twenty largest companies comprising the Russell 2000 Index are now
mostly Internet related. Seven of the twenty have no earnings and the balance
sell at an average of 351 times earnings. A recent study showed that companies
in the Russell 2000 with no earnings were up, on average, in excess of 50%
during 1999.
The Dow Jones Bond Index declined from 106.42 to 97.17 during 1999, a
significant drop of 8.7%. The yield on the thirty-year government bond climbed
to 6.46% from 5.12% at the beginning of the year.
The economy experienced strong growth during 1999. Retail sales, employment,
industrial production, corporate profits, and housing starts all showed solid
gains. There were no Y2K disruptions and the federal government is now
experiencing budget surpluses. There were a few disturbing signs. Energy prices
doubled, the rate of inflation picked up modestly, long-term interest rates
moved up considerably and labor markets remained tight. We expect continued
growth in the economy during the year 2000. The stock market is at record
levels, leading indicators are pointing upward and consumer confidence is at an
all time high. We look for higher corporate profits and modestly higher rates of
inflation and interest rates in the coming year.
As we enter the new millennium, the S&P 500 sells at close to 30 times projected
2000 earnings, large technology companies sell from fifty to several hundred
times earnings and Internet stocks sell at even greater multiples of revenues.
Internet stock valuations are astronomical despite limited revenues, significant
losses, unproven business models, and a number of competitive start-ups on the
horizon. During the past four and a half years, the Meridian Value Fund has
generated a cumulative return in excess of the S&P 500 even though it has been a
difficult period for value investing. In our opinion, the run-up in
large-capitalization and Internet stock valuations leave these stocks with
significant downside risk relative to potential future rewards.
<PAGE> 2
It is important to note that many stocks have not participated fully in the long
bull market, and have much lower valuations. At December 31, 1999, the average
P/E ratio for the Meridian Value Fund was seventeen times projected 2000
earnings. Moreover, the earnings growth prospects for the portfolio companies,
on average, are at least as strong as for the S&P 500. We believe that the Fund
is well positioned relative to the S&P 500 going forward.
Purchases during the quarter included Arrow Electronics, Inc., FileNet
Corporation, Healthcare Realty Trust, Lakehead Pipe Line Partners, L.P., Network
Equipment Technologies, Inc., and REMEC, Inc. Sales included Anadigics, Inc.,
DuPont Photomasks, Inc., Lockheed Martin Corp., Natural Microsystems Corp.,
PETsMART, Inc., and Zoll Medical Corporation. Illinova Corporation was the
subject of an acquisition bid, and we sold our shares.
Healthcare Realty Trust is a Healthcare Real Estate Investment Trust (REIT). The
trust owns and operates a $1.7 billion real estate portfolio consisting of
hospital and other types of outpatient facilities (56% of properties), assisted
living facilities (19%), nursing homes (15%), and inpatient rehabilitation
facilities (10%). Its largest tenants are HealthSouth, Columbia/ HCA, Tenet, and
Life Care Centers (a solidly-performing nursing home operator). Healthcare REIT
stocks declined more than 30% in 1999 due to poor performance of the REIT sector
in general, and due to concerns regarding the financial outlook for healthcare
providers. As a result, the stock of Healthcare Realty Trust declined from $22
to $15.50. The Trust's balance sheet is strong, its fundamentals remain solid,
and it yields 12.8%. Should the yield drop back to 10% over the next two years,
our annual return would approximate 30%.
We wish everyone a happy and prosperous New Year.
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> 3
MERIDIAN VALUE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
COMMON STOCK - 82.8%
APPAREL/SHOE - 2.5%
Wolverine World Wide, Inc.*............................ 80,000 $875,000
CONSUMER FINANCE - 1.7%
Pacific Century Financial Corporation*................. 32,500 607,344
CONSUMER PRODUCTS - 5.8%
Aftermarket Technology Corporation..................... 70,000 835,625
Lancaster Colony Corporation*.......................... 25,800 854,625
Universal Electronics, Inc. ........................... 7,500 345,000
ENERGY - 7.2%
Burlington Resources, Inc.*............................ 25,300 836,481
Lakehead Pipe Line Partners, L.P.*..................... 23,500 818,094
Tom Brown, Inc. ....................................... 63,500 849,313
FOOD CHAINS - 2.4%
Great Atlantic & Pacific Tea Company, Inc.*............ 30,400 847,400
HEALTH SERVICES - 3.8%
Haemonetics Corporation................................ 39,000 928,688
STAAR Surgical Company................................. 40,000 390,000
INDUSTRIAL PRODUCTS - 12.2%
AVX Corporation*....................................... 18,100 903,869
Airgas, Inc. .......................................... 55,000 522,500
ITI Technologies, Inc. ................................ 22,000 660,000
Magnetek, Inc. ........................................ 85,000 653,438
Pall Corporation*...................................... 33,700 726,656
Tektronix, Inc.*....................................... 20,000 777,500
INDUSTRIAL SERVICES - 9.0%
Arrow Electronics, Inc. ............................... 39,700 1,007,388
Avnet, Inc.*........................................... 17,600 1,064,800
Convergys Corp. ....................................... 35,000 1,076,250
LEISURE & AMUSEMENT - 0.9%
Scientific Games Holdings Corp. ....................... 20,000 331,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
3
<PAGE> 4
MERIDIAN VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----------
COMMON STOCK (continued)
<S> <C> <C>
REAL ESTATE - 2.5%
Healthcare Realty Trust*............................... 55,700 $870,313
RESTAURANTS - 2.7%
Buffets, Inc. ......................................... 95,000 950,000
RETAIL - 6.2%
Burlington Coat Factory Warehouse Corp.*............... 50,000 693,750
Discount Auto Parts, Inc. ............................. 24,500 442,531
Shoe Carnival, Inc. ................................... 29,000 291,813
West Marine, Inc. ..................................... 87,500 721,875
TECHNOLOGY - 12.2%
Cabletron Systems...................................... 31,500 819,000
Coherent............................................... 31,500 842,625
FileNET Corporation.................................... 42,000 1,071,000
International Rectifier Corporation.................... 33,600 873,600
SpeedFam-IPEC, Inc. ................................... 50,000 646,875
TELECOMMUNICATIONS/CABLE EQUIPMENT - 12.0%
ANTEC Corporation...................................... 12,500 456,250
Active Voice Corporation............................... 38,000 1,104,375
Commscope, Inc. ....................................... 16,500 665,156
Network Equipment Technologies, Inc. .................. 30,000 354,375
REMEC, Inc. ........................................... 30,000 765,000
Teltrend, Inc. ........................................ 27,500 831,875
TRANSPORTATION - 1.7%
Fritz Companies, Inc. ................................. 57,700 605,850
-----------
TOTAL COMMON STOCK (Identified cost $23,070,117).................. 28,917,481
CASH AND OTHER ASSETS LESS LIABILITIES - 17.2%...................... 6,014,559
-----------
NET ASSETS - 100%................................................... $34,932,040
===========
Shares of capital stock outstanding................................. 1,539,720
===========
Net asset value per share........................................... $22.69
===========
</TABLE>
<TABLE>
<S> <C>
* income producing
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
4
<PAGE> 5
MERIDIAN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments (Cost $23,070,117)............................ $28,917,482
Cash and cash equivalents................................. 5,823,517
Receivables for:
Dividends.............................................. 8,065
Interest............................................... 20,276
Sales of Investments................................... 223,742
Prepaid expenses.......................................... 914
-----------
TOTAL ASSETS........................................... 34,993,996
-----------
LIABILITIES
Payables For:
Purchase of Investments................................ 33,269
Accrued expenses....................................... 28,687
-----------
TOTAL LIABILITIES...................................... 61,956
-----------
NET ASSETS.................................................. $34,932,040
===========
Shares of capital stock outstanding, par value $.01
(25,000,000 shares authorized)............................ 1,539,720
===========
Net asset value per share (offering and redemption price)... $22.69
===========
Net assets consist of:
Paid in capital........................................... $27,021,672
Undistributed Net Investment Loss......................... (1,036,038)
Accumulated net realized gain............................. 3,099,042
Net unrealized appreciation on investments................ 5,847,364
-----------
$34,932,040
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
5
<PAGE> 6
MERIDIAN VALUE FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $71,211
Interest............................................... 80,988
----------
Total investment income........................... $152,199
EXPENSES
Investment advisory fees............................... 142,068
Professional fees...................................... 28,000
Pricing fees........................................... 13,800
Transfer agent fees.................................... 11,720
Registration and filing fees........................... 8,363
Custodian fees......................................... 5,520
Reports to shareholders................................ 4,600
Directors' fees and expenses........................... 1,104
Miscellaneous expenses................................. 865
----------
Total expenses.................................... 216,040
----------
Net investment loss.................................... (63,841)
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gain on investments....................... 2,815,578
Net increase in unrealized appreciation on
investments......................................... 1,300,135
----------
Net realized and unrealized gains on investments....... 4,115,713
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,051,872
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
6
<PAGE> 7
MERIDIAN VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended
December 31, 1999 June 30, 1999
----------------- -------------
<S> <C> <C>
OPERATIONS
Net investment loss................................... ($63,841) ($114,781)
Net realized gain on investments...................... 2,815,578 2,503,550
Net increase in unrealized appreciation of
investments......................................... 1,300,135 2,273,627
----------- -----------
Net increase from operations........................ 4,051,872 4,662,396
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income.............. (857,416) 0
Distributions from net realized capital gains......... (2,220,086) (383,710)
----------- -----------
Total distributions................................. (3,077,502) (383,710)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of stock........................... 9,428,173 13,409,356
Reinvestment of distributions......................... 2,661,055 274,369
Less: redemptions..................................... (3,044,013) (5,246,335)
----------- -----------
Increase resulting from capital share
transactions..................................... 9,045,215 8,437,390
----------- -----------
Total increase in net assets.......................... 10,019,585 12,716,076
NET ASSETS
Beginning of period................................... 24,912,455 12,196,379
----------- -----------
End of period......................................... $34,932,040 $24,912,455
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
7
<PAGE> 8
MERIDIAN VALUE FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six months For the fiscal year ended June 30,
ended ---------------------------------------------------------------
December 31, 1999 1999 1998 1997 1996 1995
------------------ ----------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of
year.......................... $22.29 $19.30 $17.40 $15.32 $10.27 $9.87
----------- ----------- ----------- ----------- ---------- --------
Income from Investment
Operations
- -------------------------------
Net Investment (Loss) Income.... (0.01) (0.10) (0.19) (0.26) (0.10) (0.04)
Net Gains or Losses on
Securities (both realized and
unrealized)................... 2.78 3.56 4.32 3.20 5.15 0.44
----------- ----------- ----------- ----------- ---------- --------
Total From Investment
Operations.................... 2.77 3.46 4.13 2.94 5.05 0.40
----------- ----------- ----------- ----------- ---------- --------
Less Distributions
- ---------------
Distribution from net realized
capital gains................. (2.37) (0.47) (2.23) (0.86) 0.00 0.00
----------- ----------- ----------- ----------- ---------- --------
Net Asset Value - End of
Period........................ $22.69 $22.29 $19.30 $17.40 $15.32 $10.27
=========== =========== =========== =========== ========== ========
Total Return.................... 11.34%** 18.92% 26.05% 20.55%+ 49.17%+ 4.05%+
=========== =========== =========== =========== ========== ========
Ratios/Supplemental Data
- ----------------------
Net Assets, End of Period....... $34,932,040 $24,912,455 $12,196,379 $7,340,110 $3,471,507 $715,021
Ratio of Expenses to Average
Net Assets.................... 1.52%++ 1.63% 2.16% 2.51%* 2.55%* 2.78%*
Ratio of Net Investment Loss to
Average Net Assets............ (0.45%)++ (0.65%) (1.35%) (1.96%)* (1.36%)* (.58%)*
Portfolio Turnover Rate......... 83%++ 124% 133% 144% 125% 77%
</TABLE>
<TABLE>
<S> <C>
+ 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%, and 14.64%, and the ratio of net
investment income to average net assets would have been a
loss of 2.25%, 5.28%, and 12.44%, respectively.
** Figure not annualized.
++ Figures are annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
(unaudited)
8
<PAGE> 9
MERIDIAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 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 market 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
$23,070,117, the aggregate gross unrealized appreciation is $6,805,642,
and the aggregate gross unrealized depreciation is $958,278, resulting in
net unrealized appreciation of $5,847,364.
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 the 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 reclassifica-
9
<PAGE> 10
MERIDIAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
tion. 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 AND ADVISORY FEE AND EXPENSE LIMITATION: The Fund has
entered into a management agreement (the Investment Advisory Fee) with
Aster Capital Management, Inc. ("Aster Capital") for the 12 month period
beginning November 1, 1999 through October 31, 2000. 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 31, 1999, was 14.65%.
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.
During the previous fiscal year 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 continues to
use the most stringent state expense limitation of 2 1/2% and will do so in
the future as the Advisor has agreed to continue this practice. The
Investment Adviser did not reimburse the Fund during 1998.
3. 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 31, 1999, and the year ended June 30,
1999, were as follows:
<TABLE>
<CAPTION>
December June
1999 1999
-------- --------
<S> <C> <C>
Shares sold 432,369 760,797
Shares issued on reinvestment of
distributions 127,423 17,299
-------- --------
559,792 778,096
Shares redeemed (137,658) (292,605)
-------- --------
Net increase 422,134 485,491
======== ========
</TABLE>
4. COMPENSATION OF DIRECTORS AND OFFICERS: Directors and officers of the Fund
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 December 31, 1999, was $1,104.
5. COST OF INVESTMENTS: The cost of investments purchased and the proceeds
from sales of investments, excluding short-term obligations, for the period
ended December 31, 1999, were $12,687,151 and $10,250,356, respectively.
10
<PAGE> 11
[This page intentionally left blank.]
<PAGE> 12
MERIDIAN VALUE FUND(SM)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report is submitted for
the information of shareholders of
Meridian Value Fund. 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
PFPC, INC.
King of Prussia, Pennsylvania
(800) 446-6662
Counsel
MORRISON & FOERSTER
Washington D.C.
Auditors
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
SEMI ANNUAL REPORT
[MERIDIAN FUND INCORPORATED LOGO]
60 E. SIR FRANCIS DRAKE BLVD.
WOOD ISLAND, SUITE 306
LARKSPUR, CA 94939
(415) 461-6237
TELEPHONE (800) 446-6662
DECEMBER 31, 1999
