N-CSR 1 f91952nvcsr.txt MERIDIAN FUND, INC. FORM N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4014 -------- Meridian Fund, Inc.(R) -------------------------------------------------- (Exact name of registrant as specified in charter) 60 E. Sir Francis Drake Boulevard Wood Island, Suite 306 Larkspur, CA 94939 -------------------------------------------------- (Address of principal executive offices) (Zip code) Richard F. Aster, Jr. 60 E. Sir Francis Drake Boulevard Wood Island, Suite 306 Larkspur, CA 94939 ------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 415-461-6237 ------------ Date of fiscal year end: June 30, 2003 -------------- Date of reporting period: June 30, 2003 -------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. Item 1. Reports to Stockholders MERIDIAN FUND, INC. August 6, 2003 To Our Shareholders: The stock market, as measured by the S&P 500 Index, posted its best quarterly performance since the end of 1998. We believe the end of the Iraqi war and the prospects of a stronger economy during the second half of the year are encouraging to investors. The S&P 500 advanced 14.9%, the NASDAQ 21.0% and the Russell 2000 23.0% during the second quarter. Internet, biotechnology and home construction were among the strongest performing sectors. Three of the weaker performing groups included mining, tires and insurance stocks. The slow economy appeared to benefit the bond market. The yield on the 30-year Treasury bond stood at 4.56% at the end of June versus 5.48% a year ago. Economic indicators improved during the quarter, but GDP growth and job growth remain lackluster. Private payrolls are still declining, consumer confidence remains at a low level and manufacturing is still weak. We believe the economy, while growing slowly, is headed in the right direction and that growth will pick up somewhat during the second half of 2003 and through 2004. Both monetary and fiscal policy, the government's two major economic weapons, are expansionary. Interest rates and inflation remain at low levels, productivity is increasing and the current tax cuts should stimulate spending and provide incentives for additional savings and investment. Profit growth may accelerate through 2004 and this, along with low interest rates, may lead to increased capital spending. Our market outlook is positive. We believe that economic growth combined with low interest rates and modest inflation is good for equities. Most stocks today are selling at reasonable valuations relative to alternative investments such as cash equivalents, bonds and real estate. The Wall Street Transcript recently featured the Meridian Growth Fund. The interview with Richard Aster is available on our web site at www.meridianfund.com. Go to the Meridian Growth Fund link and then go to Press. Please notice we have consolidated both our funds into one report in an effort to decrease printing and mailing expenses. We welcome those new shareholders who joined the Meridian Growth Fund and the Meridian Value Fund during the quarter and appreciate the continued confidence of our existing shareholders. MERIDIAN GROWTH FUND(R) The Meridian Growth Fund's net asset value per share at June 30, 2003 was $27.24. This represents an increase of 18.5% for the calendar year to date. The Fund's total return and average annual compound rate of return since inception, August 1, 1984, were 1,031.7% and 13.7%, respectively. The Fund's assets at the close of the quarter were invested 8.5% in cash and cash equivalents and 91.5% in stocks. Total net assets were $448,393,059 and there were 26,727 shareholders. Our strategy is unchanged. We continue to focus on small and medium-sized growth stocks that we believe are well positioned in their respective markets and that will benefit from a better economy during the next few years. More than ninety percent of our gains are long-term and are now taxed at the attractive rate of fifteen percent. During the June quarter, we purchased shares in Advent Software, Inc., Dollar Tree Stores, Inc., Herman Miller, Inc. and Ross Stores, Inc. We sold our positions in Kohl's Corporation and United States Cellular Corporation. Mercury General Corporation is a well-managed California auto insurer, which we believe has considerable growth prospects. Mercury has a reputation of underwriting discipline, exceptional claims service and a network of independent agents and brokers who proudly represent Mercury in a competitive market. The company has an exceptional long-term record based on competitive rates, but not at the expense of underwriting standards or service to policyholders. We believe growth will come from market share gains in California and geographical expansion. Mercury is moving into other major markets including Texas, Florida and Georgia. We understand that the management team plans to undertake this growth in an orderly and profitable manner, using the same formula that has been so successful in California. Mercury is well capitalized and the shares sell at approximately 12 times estimated earnings. We believe Mercury represents a good long-term investment. Sincerely, /s/ Richard F. Aster, Jr. Richard F. Aster, Jr. 2 MERIDIAN VALUE FUND(R) The Meridian Value Fund's net asset value per share at June 30, 2003 was $31.65. This represents an increase of 12.7% for the calendar year to date. The Fund's total return and average annual compounded rate of return for the eight years ended June 30, 2003, were 358.2% and 21.0%, respectively. The comparable period returns for the S&P 500 with dividends were 103.7% and 9.3%, respectively. The Fund's assets at the close of the quarter were invested 9.0% in cash and cash equivalents and 91.0% in stocks. Total net assets were $1,456,552,232 and there were 87,416 shareholders. There have been no major changes in our portfolio or our strategy. We continue to research out-of-favor companies with strong or improving balance sheets, which we believe are positioned to generate earnings growth even in a difficult economic environment. New positions during the quarter include AMVESCAP, AT&T Wireless Services, American Eagle Outfitters, American Greetings, BearingPoint, Bristol-Myers Squibb, Campbell Soup, Crane, Cummins, Embraer-Empresa Brasileira de Aeronautica, Inco, Keane, Koninklijke Phillips Electronics, Newfield Exploration, Packaging Corporation of America and Valero Energy. We sold our shares in Borders, Concord Camera, Gold Fields, InFocus, Mercury Computer Systems, Park Place Entertainment, Payless ShoeSource, RadioShack, Sensient Technologies, THQ, Viasys Healthcare and Yum Brands. We recently increased our position in Electronics for Imaging ("EFII"). EFII is the leading supplier of technology products to connect copiers, printers and digital presses to computer networks. From 1999 to 2002, the company's operating earnings declined from $1.49 to $0.31. Revenues declined almost 40% while operating margins declined from 22% to 5%; due principally to the weak economy and increased investments in new growth initiatives in the corporate, professional and mobile printing markets. Consequently, the stock dropped from a high of $70 to a low of $13. In 2003, EFII's investments are beginning to bear fruit as new products ramp up. We believe operating earnings will increase to $0.57 in 2003, and are projected to improve to $0.70 in 2004. With the stock price now at $19.50 and net available cash at $8.15, EFII's business is valued at 20 times estimated 2003 earnings and 16 times projected 2004 earnings. Sincerely, /s/ Richard F. Aster, Jr. /s/ Kevin O'Boyle /s/ James England Richard F. Aster, Jr. Kevin O'Boyle James England
3 MERIDIAN GROWTH FUND SCHEDULE OF INVESTMENTS JUNE 30, 2003 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Shares Value --------- ------------ COMMON STOCK - 91.5% BANKING & FINANCE - 3.0% Silicon Valley Bancshares............. 284,500 $ 6,773,945 UCBH Holdings, Inc.*..... 238,600 6,843,048 ------------ 13,616,993 BROKERAGE & MONEY MANAGEMENT - 3.2% Edwards (A.G.), Inc.*.... 210,450 7,197,390 T. Rowe Price Group, Inc.*.................. 190,200 7,180,050 ------------ 14,377,440 CELLULAR COMMUNICATIONS - 0.7% American Tower Corp. Class A................ 353,000 3,124,050 CONSTRUCTION - 2.6% Granite Construction, Inc.*.................. 600,925 11,513,723 CONSUMER SERVICES - 2.5% Regis Corp.*............. 389,000 11,300,450 EDUCATION - 2.0% DeVry, Inc. ............. 378,000 8,803,620 FURNITURE & FIXTURES - 1.1% Herman Miller, Inc.*..... 247,775 5,007,533 HEALTHCARE SERVICES - 12.0% DaVita, Inc. ............ 439,300 11,764,454 Health Management Associates, Inc. Class A*..................... 588,500 10,857,825 Lincare Holdings, Inc.... 357,650 11,269,551 Province Healthcare Co. ................... 762,700 8,443,089 Renal Care Group, Inc. .................. 328,800 11,577,048 ------------ 53,911,967 INDUSTRIAL PRODUCTS - 4.7% Dionex Corp. ............ 250,130 9,942,667 Tektronix, Inc. ......... 519,400 11,219,040 ------------ 21,161,707
Shares Value --------- ------------ INDUSTRIAL SERVICES - 6.1% Expeditors International of Washington, Inc.*... 134,200 $ 4,648,688 Paychex, Inc.*........... 153,400 4,496,154 Republic Services, Inc. .................. 513,800 11,647,846 United Rentals, Inc. .... 481,350 6,685,952 ------------ 27,478,640 INSURANCE - 2.5% Mercury General Corp.*... 240,300 10,969,695 RESTAURANTS - 7.2% Applebee's International, Inc.*.................. 294,950 9,270,279 P.F. Chang's China Bistro, Inc. .......... 92,000 4,527,320 Ruby Tuesday, Inc.*...... 465,800 11,519,234 Sonic Corp. ............. 273,950 6,966,548 ------------ 32,283,381 RETAIL - 17.0% Bed, Bath and Beyond, Inc. .................. 127,000 4,928,870 Borders Group, Inc. ..... 603,000 10,618,830 Claire's Stores, Inc.*... 325,700 8,259,752 Cost Plus, Inc. ......... 277,300 9,888,518 Dollar Tree Stores, Inc. .................. 197,100 6,253,983 Ethan Allen Interiors, Inc.*.................. 294,600 10,358,136 Men's Wearhouse, Inc. ... 508,400 11,108,540 Ross Stores, Inc.*....... 135,800 5,804,092 Tiffany & Co.*........... 271,600 8,875,888 ------------ 76,096,609 TECHNOLOGY - 22.6% Advent Software, Inc. ... 274,000 4,633,340 American Power Conversion Corp................... 569,700 8,881,623 Autodesk, Inc.*.......... 601,200 9,715,392 FileNET Corp. ........... 417,400 7,529,896 Getty Images, Inc. ...... 224,500 9,271,850 KEMET Corp. ............. 1,006,000 10,160,600 Molex, Inc. Class A *.... 433,800 10,055,050 Symbol Technologies, Inc.*.................. 818,500 10,648,685 Synopsys, Inc. .......... 171,400 10,601,090
The accompanying notes are an integral part of the financial statements 4 MERIDIAN GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) JUNE 30, 2003 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Shares Value --------- ------------ COMMON STOCK (continued) Vishay Intertechnology, Inc. .................. 801,400 $ 10,578,480 Zebra Technologies Corp. Class A................ 121,900 9,165,661 ------------ 101,241,667 TELECOMMUNICATIONS EQUIPMENT - 4.3% Andrew Corp. ............ 1,158,700 10,660,040 Plantronics, Inc. ....... 402,400 8,720,008 ------------ 19,380,048 TOTAL COMMON STOCK - 91.5% (Identified cost $353,390,606)...... 410,267,523 ------------ U.S. GOVERNMENT OBLIGATIONS - 4.2% (Identified cost $18,978,910) U.S. Treasury Bill @1.098% due 08/07/03 (Face Value $19,000,000)... 18,980,374 ------------ TOTAL INVESTMENTS - 95.7% (Identified cost $372,369,516)........ 429,247,897 CASH AND OTHER ASSETS LESS LIABILITIES - 4.3%.................... 19,145,162 ------------ NET ASSETS - 100%....................... $448,393,059 ============
* income producing security The accompanying notes are an integral part of the financial statements 5 MERIDIAN VALUE FUND SCHEDULE OF INVESTMENTS JUNE 30, 2003 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Shares Value --------- -------------- COMMON STOCK - 91.0% AEROSPACE/DEFENSE - 2.5% Empresa Brasileira De Aeronautica S.A. ADR*.................. 731,200 $ 13,965,920 Raytheon Co.*........... 428,400 14,068,656 Rockwell Collins, Inc.*................. 356,600 8,783,058 -------------- 36,817,634 AGRICULTURE - 1.9% Agrium, Inc.*........... 1,204,600 13,202,416 Potash Corp. of Saskatchewan, Inc.*... 227,200 14,540,800 -------------- 27,743,216 APPAREL - 1.0% V.F. Corp.*............. 405,100 13,761,247 BANKING/FINANCE - 0.6% Amvescap Plc ADR*....... 660,000 9,226,800 BASIC MATERIALS - 4.0% Inco Ltd. .............. 869,600 18,383,344 Newmont Mining Corp.*... 1,237,700 40,175,742 -------------- 58,559,086 CONSUMER PRODUCTS - 4.7% American Greetings Corp. Class A............... 677,100 13,298,244 Campbell Soup Co.*...... 408,600 10,010,700 Dial Corp.*............. 1,262,600 24,557,570 Kimberly-Clark Corp.*... 390,700 20,371,098 -------------- 68,237,612 CONSUMER SERVICES - 5.4% EchoStar Communications Corp. Class A......... 650,000 22,503,000 ServiceMaster Co.*...... 1,505,000 16,103,500 Waste Management, Inc.*................. 1,669,600 40,220,664 -------------- 78,827,164 ENERGY - 9.2% Arch Coal, Inc.*........ 982,000 22,566,360 Burlington Resources, Inc.*................. 511,300 27,645,991 FMC Technologies, Inc. ................. 960,300 20,214,315 Helmerich & Payne, Inc.*................. 106,100 3,098,120
Shares Value --------- -------------- Kerr-McGee Corp.*....... 416,500 $ 18,659,200 Newfield Exploration Co. .................. 192,700 7,235,885 Tom Brown, Inc. ........ 499,400 13,878,326 Valero Energy Corp.*.... 567,000 20,599,110 -------------- 133,897,307 HEALTHCARE PRODUCTS - 5.6% ArthroCare Corp. ....... 425,300 7,128,028 Becton, Dickinson & Co.*.................. 757,100 29,413,335 Boston Scientific Corp. ................ 471,900 28,833,090 Haemonetics Corp. ...... 862,000 16,119,400 -------------- 81,493,853 HEALTHCARE SERVICES - 8.8% DaVita, Inc. ........... 1,239,500 33,193,810 Lincare Holdings, Inc. ................. 912,800 28,762,328 Omnicare, Inc.*......... 1,257,000 42,474,030 PAREXEL International Corp. ................ 1,250,200 17,440,290 Tenet Healthcare Corp. ................ 586,000 6,826,900 -------------- 128,697,358 INDUSTRIAL PRODUCTS - 7.7% Crane Co.*.............. 217,800 4,928,814 Cummins, Inc.*.......... 254,000 9,116,060 Engelhard Corp.*........ 755,400 18,711,258 International Flavors & Fragrances, Inc.*....... 465,500 14,863,415 Packaging Corp. of America............... 452,700 8,343,261 Pall Corp.*............. 1,237,400 27,841,500 Thermo Electron Corp. ................ 606,100 12,740,222 Waters Corp. ........... 538,500 15,686,505 -------------- 112,231,035 INDUSTRIAL SERVICES - 4.3% ADVO, Inc. ............. 176,200 7,823,280 Genuine Parts Co.*...... 885,400 28,341,654 Valassis Communications, Inc. ................. 1,053,900 27,106,308 -------------- 63,271,242 INFORMATION TECHNOLOGY SERVICES - 0.5% BearingPoint, Inc. ..... 534,700 5,159,855 Keane, Inc. ............ 186,600 2,543,358 -------------- 7,703,213
The accompanying notes are an integral part of the financial statements 6 MERIDIAN VALUE FUND SCHEDULE OF INVESTMENTS (CONTINUED) JUNE 30, 2003 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Shares Value --------- -------------- COMMON STOCK (continued) INSURANCE - 3.5% Aetna, Inc.*............ 249,500 $ 15,019,900 SAFECO Corp.*........... 1,030,200 36,345,456 -------------- 51,365,356 PAPER/FOREST PRODUCTS - 1.6% Aracruz Celulose S.A. ADR*.................. 695,900 14,655,654 Sappi Ltd ADR*.......... 639,100 7,892,885 -------------- 22,548,539 PHARMACEUTICALS - 4.4% Bristol-Myers Squibb Co.*.................. 376,000 10,208,400 Mylan Laboratories, Inc.*................. 1,031,500 35,865,255 Serono S.A. ADR*........ 1,221,490 17,784,895 -------------- 63,858,550 REAL ESTATE - 1.0% Healthcare Realty Trust, Inc.*................. 480,900 14,018,235 RETAIL - 5.7% American Eagle Outfitters, Inc. ..... 485,000 8,894,900 Burlington Coat Factory Warehouse Corp.*...... 257,200 4,603,880 CVS Corp.*.............. 713,200 19,990,996 Men's Wearhouse, Inc. ................. 681,700 14,895,145 Office Depot, Inc. ..... 1,045,700 15,173,107 Zale Corp. ............. 488,200 19,528,000 -------------- 83,086,028 TECHNOLOGY - 10.5% American Power Conversion Corp. ..... 1,083,668 16,894,384 Cadence Design System, Inc. ................. 584,000 7,043,040 Coherent, Inc. ......... 323,667 7,745,351 Electronics for Imaging, Inc. ................. 719,300 14,594,597 Hyperion Solutions Corp. ................ 368,000 12,423,680 Koninklijke (Royal) Philips Electronics N.V. NY Shares........ 115,000 2,197,650
Shares Value --------- -------------- Power Integrations, Inc. ................. 1,083,000 $ 26,338,560 SERENA Software, Inc. ................. 861,000 17,977,680 Storage Technology Corp. ................ 1,192,700 30,700,098 Symbol Technologies, Inc.*................. 660,200 8,589,202 Synopsys, Inc. ......... 115,900 7,168,415 -------------- 151,672,657 TELECOMMUNICATIONS EQUIPMENT - 1.0% ADTRAN, Inc. ........... 273,855 14,046,023 TELECOMMUNICATIONS SERVICES - 4.4% AT&T Wireless Services, Inc. ................. 955,000 7,840,550 CenturyTel, Inc.*....... 793,200 27,643,020 Citizens Communications Co. .................. 2,240,500 28,880,045 -------------- 64,363,615 TRANSPORTATION - 2.7% Burlington Northern Santa Fe Corp.*....... 746,000 21,216,240 J.B. Hunt Transport Services, Inc. ....... 486,000 18,346,500 -------------- 39,562,740 TOTAL COMMON STOCK - 91.0% (Identified cost $1,110,353,282)... 1,324,988,510 -------------- U.S. GOVERNMENT OBLIGATIONS - 5.0% U.S. Treasury Bill @ 1.144% due 07/10/03 (Face Value $15,000,000)..................... 14,996,178 U.S. Treasury Bill @ 1.134% due 07/24/03 (Face Value $13,000,000)..................... 12,991,589 U.S. Treasury Bill @ 1.113% due 07/31/03 (Face Value $11,500,000)..................... 11,489,944 U.S. Treasury Bill @ 1.037% due 08/14/03 (Face Value $10,000,000)..................... 9,990,176 U.S. Treasury Bill @ 1.093% due 08/28/03 (Face Value $12,000,000)..................... 11,984,950 U.S. Treasury Bill @ 0.851% due 09/11/03 (Face Value $11,500,000)..................... 11,481,002 --------------
The accompanying notes are an integral part of the financial statements 7 MERIDIAN VALUE FUND SCHEDULE OF INVESTMENTS (CONTINUED) JUNE 30, 2003 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Value -------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Identified cost $72,923,572).......... $ 72,933,839 -------------- TOTAL INVESTMENTS - 96.0% (Identified cost $1,183,276,854)..... 1,397,922,349 CASH AND OTHER ASSETS LESS LIABILITIES - 4.0%................... 58,629,883 -------------- NET ASSETS - 100%...................... $1,456,552,232 ==============
* income producing security ADR - American Depository Receipt The accompanying notes are an integral part of the financial statements 8 MERIDIAN FUND, INC. STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2003 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Growth Fund Value Fund ------------ -------------- ASSETS Investments (Cost $372,369,516 and $1,183,276,854)...... $429,247,897 $1,397,922,349 Cash and cash equivalents............................... 19,899,052 70,154,264 Receivable for: Capital shares....................................... 1,145,579 1,287,332 Dividends............................................ 165,938 1,004,547 Interest............................................. 8,681 28,893 Securities sold...................................... 1,388,936 9,618,511 Prepaid expenses........................................ 1,745 3,500 ------------ -------------- TOTAL ASSETS......................................... 451,857,828 1,480,019,396 ------------ -------------- LIABILITIES Payable for: Capital shares....................................... 65,449 930,614 Securities purchased................................. 2,987,051 21,023,214 Accrued expenses: Investment advisory fees............................. 291,893 1,227,313 Other payables and accrued expenses.................. 120,376 286,023 ------------ -------------- TOTAL LIABILITIES.................................... 3,464,769 23,467,164 ------------ -------------- NET ASSETS................................................ $448,393,059 $1,456,552,232 ============ ============== Capital shares issued and outstanding, par value $0.01 (25,000,000 and 50,000,000 shares authorized)........... 16,459,089 46,013,936 ============ ============== Net asset value per share (offering and redemption price).................................................. $27.24 $31.65 ============ ============== Net Assets consist of: Paid in capital......................................... $387,275,600 $1,355,188,790 Accumulated net realized gain (loss).................... 4,239,078 (113,282,053) Net unrealized appreciation on investments and foreign currency translations................................ 56,878,381 214,645,495 ------------ -------------- $448,393,059 $1,456,552,232 ============ ==============
The accompanying notes are an integral part of the financial statements 9 MERIDIAN FUND, INC. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2003 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Growth Fund Value Fund ----------- ------------ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $0 and $72,146, respectively)................................. $ 1,247,145 $ 10,751,702 Interest.................................................. 293,773 1,097,707 Other income.............................................. -- 136,799 ----------- ------------ Total Investment Income.............................. 1,540,918 11,986,208 ----------- ------------ EXPENSES Investment advisory fees.................................. 2,560,989 12,137,323 Transfer agent fees....................................... 201,800 450,313 Reports to shareholders................................... 108,904 415,665 Custodian fees............................................ 53,732 175,029 Pricing fees.............................................. 68,695 168,834 Registration and filing fees.............................. 38,502 38,700 Professional fees......................................... 36,865 36,865 Miscellaneous expenses.................................... 6,606 17,041 Directors' fees and expenses.............................. 881 4,154 ----------- ------------ Total expenses....................................... 3,076,974 13,443,924 ----------- ------------ Net investment loss....................................... (1,536,056) (1,457,716) ----------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments................... 4,243,657 (74,623,894) Net change in unrealized appreciation on investments and foreign currency translations.......................... 10,490,266 138,434,441 ----------- ------------ Net gain on investments................................... 14,733,923 63,810,547 ----------- ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $13,197,867 $ 62,352,831 =========== ============
The accompanying notes are an integral part of the financial statements 10 MERIDIAN FUND, INC. STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Growth Fund Value Fund ----------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002 ------------- ------------- -------------- -------------- OPERATIONS Net investment loss.............. $(1,536,056) $(1,369,673) $(1,457,716) $(2,323,438) Net realized gain (loss) on investments.................... 4,243,657 11,777,819 (74,623,894) (37,725,420) Net increase (decrease) in unrealized appreciation (depreciation) of investments.................... 10,490,266 (12,385,892) 138,434,441 7,171,686 ------------ ------------ -------------- -------------- Net increase (decrease) in net assets from operations...... 13,197,867 (1,977,746) 62,352,831 (32,877,172) ------------ ------------ -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS Distributions from ordinary income......................... (699,754) -- -- (1,007,532) Distributions from net realized capital gain................... (7,469,451) (17,227,660) -- (1,201,570) ------------ ------------ -------------- -------------- Net distributions.............. (8,169,205) (17,227,660) -- (2,209,102) ------------ ------------ -------------- -------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares.... 209,292,815 182,159,957 511,600,637 963,374,074 Reinvestment of distribution..... 7,510,696 16,327,450 -- 1,950,486 Less: redemptions................ (84,098,027) (50,740,320) (414,608,084) (401,590,408) ------------ ------------ -------------- -------------- Increase resulting from capital share transactions.......... 132,705,484 147,747,087 96,992,553 563,734,152 ------------ ------------ -------------- -------------- Total increase in net assets..... 137,734,146 128,541,681 159,345,384 528,647,878 NET ASSETS Beginning of year................ 310,658,913 182,117,232 1,297,206,848 768,558,970 ------------ ------------ -------------- -------------- End of year*..................... $448,393,059 $310,658,913 $1,456,552,232 $1,297,206,848 ============ ============ ============== ==============
* The end of year balance includes undistributed net investment (loss) of $0 and $0, respectively for the Growth Fund and $0 and $(148), respectively, for the Value Fund. The accompanying notes are an integral part of the financial statements 11 MERIDIAN GROWTH FUND FINANCIAL HIGHLIGHTS SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
For the fiscal year ended June 30, --------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 -------- -------- -------- -------- -------- -------- Net Asset Value - Beginning of period...... $28.10 $31.30 $29.45 $26.28 $33.26 $33.20 -------- -------- -------- -------- -------- -------- Income from Investment Operations -------------------------------- Net Investment Income (Loss)*.............. (0.08) (0.12) 2.26 0.11 0.16 0.27 Net Gains (Losses) on Securities (both realized and unrealized).................. (0.11) (0.24) 3.89 4.99 (0.50) 4.92 -------- -------- -------- -------- -------- -------- Total From Investment Operations........... (0.19) (0.36) 6.15 5.10 (0.34) 5.19 -------- -------- -------- -------- -------- -------- Less Distributions ------------------ Distributions from net investment income... (0.06) 0.00 (2.44) (0.15) (0.14) (0.32) Distribution from Net Realized Capital Gains..................................... (0.61) (2.84) (1.86) (1.78) (6.50) (4.81) -------- -------- -------- -------- -------- -------- Total Distributions........................ (0.67) (2.84) (4.30) (1.93) (6.64) (5.13) -------- -------- -------- -------- -------- -------- Net Asset Value - End of Period............ $27.24 $28.10 $31.30 $29.45 $26.28 $33.26 ======== ======== ======== ======== ======== ======== Total Return............................... (0.20%) 0.42% 23.34% 21.45% 3.05% 16.92% ======== ======== ======== ======== ======== ======== Ratios/Supplemental Data ------------------------ Net Assets, End of Period (000's).......... $448,393 $310,659 $182,117 $140,990 $185,683 $296,803 Ratio of Expenses to Average Net Assets.... 0.95% 1.02% 1.04% 1.09% 1.01% 0.95% Ratio of Net Investment Income (Loss) to Average Net Assets........................ (0.47%) (0.62%) (0.26%) 0.31% 0.49% 0.76% Portfolio Turnover Rate.................... 27% 26% 43% 28% 51% 38% For the fiscal year ended June 30, ----------------------------------------- 1997 1996 1995 1994 -------- -------- -------- -------- Net Asset Value - Beginning of period...... $32.21 $27.29 $24.27 $23.87 -------- -------- -------- -------- Income from Investment Operations -------------------------------- Net Investment Income (Loss)*.............. 0.40 0.30 0.27 0.09 Net Gains (Losses) on Securities (both realized and unrealized).................. 3.71 5.47 3.63 0.76 -------- -------- -------- -------- Total From Investment Operations........... 4.11 5.77 3.90 0.85 -------- -------- -------- -------- Less Distributions ------------------ Distributions from net investment income... (0.36) (0.31) (0.18) (0.02) Distribution from Net Realized Capital Gains..................................... (2.76) (0.54) (0.70) (0.43) -------- -------- -------- -------- Total Distributions........................ (3.12) (0.85) (0.88) (0.45) -------- -------- -------- -------- Net Asset Value - End of Period............ $33.20 $32.21 $27.29 $24.27 ======== ======== ======== ======== Total Return............................... 13.92% 21.40% 16.44% 3.48% ======== ======== ======== ======== Ratios/Supplemental Data ------------------------ Net Assets, End of Period (000's).......... $353,029 $384,087 $328,153 $199,191 Ratio of Expenses to Average Net Assets.... 0.96% 0.96% 1.06% 1.22% Ratio of Net Investment Income (Loss) to Average Net Assets........................ 1.23% 0.99% 1.18% 0.38% Portfolio Turnover Rate.................... 37% 34% 29% 43%
* Net Investment Income (Loss) per share has been computed before adjustments for book/tax differences. The accompanying notes are an integral part of the financial statements 12 MERIDIAN VALUE FUND FINANCIAL HIGHLIGHTS SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
For the fiscal year ended June 30, ---------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 1997 1996 1995(1) ---------- ---------- -------- ------- ------- ------- ------- ------- ------- Net Asset Value - Beginning of Period.......................... $30.34 $30.98 $25.88 $22.29 $19.30 $17.40 $15.32 $10.27 $9.87 ---------- ---------- -------- ------- ------- ------- ------- ------- ------ Income from Investment Operations -------------------------------- Net Investment Income (Loss)**... (0.03) (0.05) 1.12 0.05 (0.10) (0.19) (0.26) (0.10) (0.04) Net Gains (Losses) on Securities (both realized and unrealized)..................... 1.34 (0.51) 5.75 5.91 3.56 4.32 3.20 5.15 0.44 ---------- ---------- -------- ------- ------- ------- ------- ------- ------ Total From Investment Operations...................... 1.31 (0.56) 6.87 5.96 3.46 4.13 2.94 5.05 0.40 ---------- ---------- -------- ------- ------- ------- ------- ------- ------ Less Distributions ------------------ Distribution from Net Investment Income.......................... 0.00 (0.04) (1.09) 0.00 0.00 0.00 0.00 0.00 0.00 Distribution from Net Realized Capital Gains................... 0.00 (0.04) (0.68) (2.37) (0.47) (2.23) (0.86) 0.00 0.00 ---------- ---------- -------- ------- ------- ------- ------- ------- ------ Total Distributions.............. 0.00 (0.08) (1.77) (2.37) (0.47) (2.23) (0.86) 0.00 0.00 Net Asset Value - End of Period.......................... $31.65 $30.34 $30.98 $25.88 $22.29 $19.30 $17.40 $15.32 $10.27 ========== ========== ======== ======= ======= ======= ======= ======= ====== Total Return..................... 4.32% (1.78%) 27.95% 29.63% 18.92% 26.05% 20.55%+ 49.17%+ 4.05%+ ========== ========== ======== ======= ======= ======= ======= ======= ====== Ratios/Supplemental Data ------------------------ Net Assets, End of Period (000's)......................... $1,456,552 $1,297,207 $768,559 $87,930 $24,912 $12,196 $7,340 $3,472 $715 Ratio of Expenses to Average Net Assets.......................... 1.11% 1.12% 1.10% 1.41% 1.63% 2.16% 2.51%* 2.55%* 2.78%* Ratio of Net Investment Income (Loss) to Average Net Assets.... (0.12%) (0.22%) 0.60% 0.39% (0.65%) (1.35%) (1.96%)* (1.36%)* (0.58%)* Portfolio Turnover Rate.......... 60% 54% 76% 86% 124% 133% 144% 125% 77%
(1) Commenced Operations on Feb 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 2, the Investment Manager may reduce a portion of its fee and absorb 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%, for the periods ended June 30, 1997 through June 30, 1995, respectively. ** Net Investment Income (Loss) per share has been computed before adjustments for book/tax differences. The accompanying notes are an integral part of the financial statements 13 MERIDIAN FUND, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2003 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: Meridian Fund, Inc., (the "Company"), is comprised of the Meridian Growth Fund (the "Growth Fund") and the Meridian Value Fund (the "Value Fund"). The Growth Fund and the Value Fund (each a "Fund" and collectively, the "Funds") are registered under the Investment Company Act of 1940, as amended, as no-load, diversified, open-end management investment companies. The Growth Fund began operations and was registered on August 1, 1984. The Value Fund began operations on February 10, 1994 and was registered on February 7, 1994. The primary investment objective of the Growth Fund is to seek long-term growth of capital. Originally named Meridian Fund, the name was changed effective April 20, 2001 to Meridian Growth Fund, to more closely reflect the investment style. There was no change in how the Fund is managed. The primary investment objective of the Value Fund is to seek long-term growth of capital. The following is a summary of significant accounting policies for both Funds: a. INVESTMENT VALUATIONS: Marketable securities are valued at the closing price or 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. b. FEDERAL INCOME TAXES: It is the Funds' policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the "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 as follows:
Aggregate Gross Aggregate Gross Unrealized Unrealized Net Unrealized Aggregate Cost Appreciation Depreciation Appreciation -------------- --------------- --------------- -------------- Growth Fund................. $ 372,484,442 $ 71,916,937 $(15,153,482) $ 56,763,455 Value Fund.................. 1,188,020,703 238,553,832 (28,652,186) 209,901,646
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. Available funds are automatically swept into a Cash Reserve account which preserves capital with a consistently competitive rate of return. 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 the Funds are allocated to each Fund in proportion to their relative net assets. f. USE OF ESTIMATES: The preparation of financial statements in accordance with accounting principals generally accepted in the United States of America requires management to make estimates and 14 MERIDIAN FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2003 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 Funds record distributions to its shareholders on the ex-date. The amount of 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. 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. Permanent book-tax differences, if any, are not included in ending undistributed net investment income (loss) for the purposes of calculating net investment income (loss) per share in the Financial Highlights. h. GUARANTEES AND INDEMNIFICATIONS: Under the Funds' organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 2. RELATED PARTIES: The Funds have entered into a management agreement with Aster Investment Management Company, Inc. (the "Investment Adviser"). Certain Officers and/or Directors of the Funds are also Officers and/or Directors of the Investment Adviser. Beneficial ownership in the Funds by Richard F. Aster, Jr., President, as of June 30, 2003 was as follows: Growth Fund............................... 2.7% Value Fund................................ 0.6%
The Investment Adviser receives from the Growth Fund as compensation for its services an annual fee of 1% of the first $50,000,000 of the Growth Fund's net assets and 0.75% of the Growth Fund's net assets in excess of $50,000,000. The fee is paid monthly and calculated based on that month's daily average net assets. The Investment Adviser receives from the Value Fund as compensation for its services an annual fee of 1% of the Value Fund's net assets. The fee is paid monthly and calculated based on that month's daily average net assets. The investment adviser has agreed to voluntarily limit the expenses of the Value Fund to 2.50%. 15 MERIDIAN FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2003 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- With respect to this voluntary limit, the Investment Adviser did not reimburse the Value Fund during 2003. 3. CAPITAL SHARES TRANSACTIONS: The Growth Fund and Value Fund have authorized 25,000,000 and 50,000,000 common shares at a par value of $.01 per share, respectively. Transactions in capital shares for the years ended June 30, 2003 and 2002 were as follows:
Growth Fund Value Fund ------------------------ -------------------------- 2003 2002 2003 2002 ---------- ---------- ----------- ----------- Shares sold.................... 8,611,562 6,337,280 18,083,824 30,893,853 Shares issued on reinvestment of distributions............. 333,958 672,857 -- 72,027 ---------- ---------- ----------- ----------- 8,945,520 7,010,137 18,083,824 30,965,880 Shares redeemed................ (3,541,670) (1,773,803) (14,832,550) (13,007,941) ---------- ---------- ----------- ----------- Net increase................... 5,403,850 5,236,334 3,251,274 17,957,939 ========== ========== =========== ===========
4. COMPENSATION OF DIRECTORS AND OFFICERS: Directors and officers of the Funds who are directors and/or officers of the Investment Adviser receive no compensation from the Funds. Directors of the Funds 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 Growth Fund or Meridian Value Fund shares, plus expenses for each Board of Directors meeting attended. The aggregate compensation due the unaffiliated Directors of the Funds as of June 30, 2003, were as follows: Growth Fund.............................. $2,500 Value Fund............................... 3,695
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, 2003, were as follows:
Purchases Proceeds from Sales ------------ ------------------- Growth Fund............................................ $193,239,876 $ 80,614,623 Value Fund............................................. 751,543,638 672,638,862
The cost of purchases, redemptions at maturity, and proceeds from sales of U.S. Government securities were as follows:
Purchase Redeemed at Maturity Proceeds from Sales ------------ -------------------- ------------------- Growth Fund........................... $ 62,810,914 $ 57,400,000 $ -- Value Fund............................ 267,747,938 277,100,000 9,989,856
16 MERIDIAN FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2003 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 6. DISTRIBUTION INFORMATION: Income and long-term capital gains distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles accepted in the United States. The tax character of distributions made during the fiscal years ended June 30, 2002 and June 30, 2003 were as follows:
2002 TAXABLE DISTRIBUTIONS Net Ordinary Long-Term Total Fund Income Capital Gains Distributions ---- ---------- ------------- ------------- Growth Fund........................................... $ 517,816 $16,709,844 $17,227,660 Value Fund............................................ 1,007,532 1,201,570 2,209,102
2003 TAXABLE DISTRIBUTIONS Net Ordinary Long-Term Total Fund Income Capital Gains Distributions ---- ---------- ------------- ------------- Growth Fund........................................... $ 699,328 $ 7,469,877 $ 8,169,205 Value Fund............................................ -- -- --
7. FEDERAL INCOME TAXES: Permanent differences, incurred during the year ended June 30, 2003, resulting from differences in book and tax accounting have been reclassified at year end to undistributed net investment income, accumulated realized gain/(loss) and paid-in capital as follows:
Increase/Decrease Increase/Decrease Increase/Decrease Undistributed Net Accumulated Realized Fund Paid-In Capital Investment Income Gain/(Loss) ---- ----------------- ----------------- -------------------- Growth Fund............................... $(1,536,056) $2,235,810 $(699,754) Value Fund................................ (1,457,864) 1,457,864 --
17 MERIDIAN FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2003 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- As of June 30, 2003, the Funds had available for federal tax purposes unused capital loss carryforwards as follows:
Expiring in 2010 Expiring in 2011 ---------------- ---------------- Value Fund.............................................. $13,013,923 $91,589,259
COMPONENTS OF ACCUMULATED EARNINGS (LOSSES) ON A TAX BASIS Growth Fund Value Fund ----------- ------------- Undistributed long-term capital gains..................... $ 4,354,004 $ -- Capital loss carryforwards................................ -- (104,603,182) Post-October losses....................................... -- (3,935,022) Unrealized appreciation/(depreciation).................... 56,763,455 209,901,646 ----------- ------------- Total Accumulated Earnings (Losses)................... $61,117,459 $ 101,363,442 =========== =============
Post-October losses represent losses realized on investment transactions from November 1, 2002 through June 30, 2003 that, in accordance with Federal income tax regulations, the Funds have elected to defer and treat as having arisen in the following fiscal year. 18 REPORT OF INDEPENDENT AUDITORS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of Meridian Fund, Inc. In our opinion, the accompanying statements of assets and liabilities, including the schedules 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 Growth Fund and Meridian Value Fund (hereafter referred to as the "Funds") at June 30, 2003, the results of each of their operations for the year then ended, the changes in each of their 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 accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' 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 auditing standards generally accepted in the United States of America, which require that we plan and perform the audits 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP San Francisco, California August 8, 2003 19 INFORMATION ABOUT THE DIRECTORS AND OFFICERS OF MERIDIAN FUND, INC. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The individuals listed below serve as directors or officers of Meridian Fund, Inc. ( the "Meridian Funds"). Each director of the Meridian Funds serves until a successor is elected and qualified or until resignation. Each officer of the Meridian Funds is elected annually by the Board of Directors. The address of all officers and directors is 60 East Sir Francis Drake Blvd., Wood Island, Suite 306, Larkspur, CA 94939. The Meridian Funds' Statement of Additional Information (SAI) includes more information about the Directors. To request a free copy, call Meridian at 1-800-446-6662. INTERESTED DIRECTORS * -------------------------------------------------------------------------------- Richard F. Aster, Jr. (63) Positions(s) Held with Fund: President, Chairman of the Board, Portfolio Manager Length of Service (Beginning Date): May 3, 1985 Principal Occupation(s) During Past 5 Years: President, Aster Investment Management, Inc.; President, Aster Capital Management, Inc. Number of Portfolios Overseen: 2 Other Directorships: N/A Michael Stolper (58) Positions(s) Held with Fund: Director Length of Service (Beginning Date): May 3, 1985 Principal Occupation(s) During Past 5 Years: Investment Adviser and Broker - Dealer, Stolper & Company, Inc. Number of Portfolios Overseen: 2 Other Directorships: Pasadena Capital, Kane-Miller Publishing -------------------------------------------------------------------------------- * Aster Investment Management, Inc. is the investment adviser to the Meridian Funds. Mr. Stolper is a minority owner of Aster Investment Management, Inc. 20 INFORMATION ABOUT THE DIRECTORS AND OFFICERS OF MERIDIAN FUND, INC. (CONTINUED) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- INDEPENDENT DIRECTORS -------------------------------------------------------------------------------- Michael S. Erickson (51) Positions(s) Held with Fund: Director Length of Service (Beginning Date): May 3, 1985 Principal Occupation(s) During Past 5 Years: Private Investor; Former Chairman & Current CFO, AeroAstro Number of Portfolios Overseen: 2 Other Directorships: AeroAstro James Bernard Glavin (68) Positions(s) Held with Fund: Director Length of Service (Beginning Date): May 3, 1985 Principal Occupation(s) During Past 5 Years: Chairman of the Board, The Immune Response Corp. Number of Portfolios Overseen: 2 Other Directorships: N/A Herbert Charles Kay (66) Positions(s) Held with Fund: Director Length of Service (Beginning Date): May 3, 1985 Principal Occupation(s) During Past 5 Years: Private Investor Number of Portfolios Overseen: 2 Other Directorships: N/A -------------------------------------------------------------------------------- OFFICERS -------------------------------------------------------------------------------- Gregg B. Keeling (48) Positions(s) Held with Fund: Treasurer, Secretary, Principal Financial and Accounting Officer Length of Service: (Beginning Date): April 1999 Principal Occupation(s) During Past 5 Years: Aster Investment Management, Inc., Vice President of Operations; Aster Capital Management, Inc., Vice President of Operations; IPEO, Inc., CFO; Deloitte & Touche, LLP, Certified Public Accountant 21 MANAGEMENT'S DISCUSSION OF MERIDIAN GROWTH FUND(R) PERFORMANCE -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Meridian Growth Fund's investment performance declined 0.20% during the fiscal year ended June 30, 2003. This reflected the strength in the financial, industrial products, restaurants, retail and technology sectors, as well as selective stocks that may be the only issue we own in a particular sector. Our positive performance was offset, primarily by weakness in the healthcare services and industrial services sectors. These market conditions materially affected the Fund's performance. The Russell 2000 Index declined 1.64% during the period while the S&P 500 gained 0.25%. The Fund's investments include companies that are relatively small in terms of total assets, revenues and earnings, that the Investment Adviser believes may have prospects for above average growth in revenue and earnings. Of a total of 58 investments, 38 advanced and 20 declined. VALUE OF $10,000 INVESTED IN THE MERIDIAN GROWTH FUND, THE S&P 500 AND THE RUSSELL 2000 [PERFORMANCE LINE GRAPH]
MERIDIAN GROWTH FUND S&P 500 RUSSELL 2000 -------------------- ------- ------------ 6/30/93 10000 10000 10000 6/30/94 10348 10145 10434 6/30/95 12049 12779 12532 6/30/96 14628 16099 15526 6/30/97 16664 21685 18062 6/30/98 19483 28221 21044 6/30/99 20078 34643 21359 6/30/00 24384 37155 24418 6/30/01 30076 31649 24557 6/30/02 30202 25958 22445 6/30/03 30142 26023 22077
MERIDIAN GROWTH FUND AVERAGE ANNUAL TOTAL RETURN One Year -0.20% Five Years 9.12% Ten Years 11.67%
Past performance is not predictive of future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Net asset value, investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. 22 MANAGEMENT'S DISCUSSION OF MERIDIAN VALUE FUND(R) PERFORMANCE -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- During the fiscal year ended June 30, 2003, the Meridian Value Fund gained 4.32% compared to a gain of 0.25% for the S&P 500 with reinvested dividends, a loss of 1.64% for the Russell 2000, and a gain of 10.91% for the NASDAQ. The relatively strong performance of the NASDAQ compared to the other indices, reflected a rebound in the biotechnology, technology, and telecommunications sectors after two years of dramatic declines. Approximately 17% of the Fund's investments were in the aforementioned sectors, and contributed meaningfully to performance. During the fiscal year ended June 30, 2003, the Fund's strongest performing investments were in the telecommunications, technology, healthcare, basic materials, and energy sectors. The worst performing investments were in the retail and leisure sectors. The Meridian Value Fund's strategy is to invest in stocks, across a range of market capitalizations, that the Investment Adviser believes are undervalued in relation to the issuer's long-term earnings power, asset value and/or stock market in general. Investments include both smaller company equities and mid-to-large capitalization stocks. Based on following this strategy, the Fund's average compounded annual return for the eight-year period from June 30, 1995 to June 30, 2003 was 20.96% compared to 9.30% for the S&P 500 with reinvested dividends. The Fund did not approach full investment status until June 30, 1995, with cash comprising approximately 45-50% of the Fund's total portfolio from inception until June 30, 1995. The Meridian Value Fund's average compounded annual return from inception to June 30, 2003 was 17.95% compared to 10.15% for the S&P 500 with reinvested dividends. VALUE OF $10,000 INVESTED IN THE MERIDIAN VALUE FUND AND THE S&P 500 [PERFORMANCE LINE GRAPH]
S&P 500 MERIDIAN VALUE FUND ------- ------------------- 2/10/94 10000 10000 6/30/94 9579 9870 6/30/95 12066 10270 6/30/96 15200 15319 6/30/97 20475 18467 6/30/98 26646 23278 6/30/99 32711 27683 6/30/00 35082 35885 6/30/01 29883 45918 6/30/02 24510 45101 6/30/03 24571 47049
MERIDIAN VALUE FUND AVERAGE ANNUAL TOTAL RETURN One Year 4.32% Five Years 15.11% Since Inception 17.95%
Past performance is not predictive of future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Net asset value, investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. 23 MERIDIAN FUND, INC. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 PFPC TRUST COMPANY Philadelphia, Pennsylvania Transfer Agent and Disbursing Agent PFPC, INC. King of Prussia, Pennsylvania (800) 446-6662 Counsel MORRISON & FOERSTER LLP Washington, D.C. Auditors PRICEWATERHOUSECOOPERS LLP San Francisco, California MERIDIAN GROWTH FUND(R) MERIDIAN VALUE FUND(R) ANNUAL REPORT [MERIDIAN FUND LOGO] 60 E. Sir Francis Drake Blvd. Wood Island, Suite 306 Larkspur, CA 94939 www.meridianfund.com Telephone (800) 446-6662 JUNE 30, 2003 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Meridian Fund, Inc.(R) ------------------------------------------------------------------- By (Signature and Title)* /s/ Richard F. Aster, Jr. ------------------------------------------------------- Richard F. Aster, Jr., Director & Principal Executive Officer (principal executive officer) Date August 22, 2003 --------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Richard F. Aster, Jr. ------------------------------------------------------- Richard F. Aster, Jr., Director & Principal Executive Officer (principal executive officer) Date August 22, 2003 --------------------------------------------------------------------------- By (Signature and Title)* /s/ Gregg B. Keeling ------------------------------------------------------- Gregg B. Keeling, Principal Financial Officer, Principal Accounting Officer, Treasurer & Secretary (principal financial officer) Date August 22, 2003 --------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.