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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 811-04014
Meridian Fund, Inc.®
(Exact name of registrant as specified in charter)
100 Fillmore Street, Suite 325
Denver, CO 80206
(Address of principal executive offices) (Zip code)
David J. Corkins
100 Fillmore Street, Suite 325
Denver, CO 80206
(Name and address of agent for service)
Registrant’s telephone number, including area code: 303-398-2929
Date of fiscal year end: June 30
Date of reporting period: June 30, 2015
Table of Contents
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
Table of Contents
Meridian
Fund, Inc.
Meridian Growth Fund
Meridian Contrarian Fund
Meridian Equity Income
Fund
Meridian Small Cap
Growth Fund
Table of Contents
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Meridian Growth Fund
Portfolio Performance and Composition (Unaudited)
Portfolio Performance and Composition (Unaudited)
Discussion of Fund
Performance
Our primary objective is to create an
“all-weather” small-cap growth portfolio that has the potential to outperform in a variety of market conditions. The 2014 market environment experienced several different weather patterns which resulted in notably higher volatility.
Given our focus on downside protection, we welcome more volatile market environments. To this end, we were able to capitalize on increased volatility to outpace the benchmark by 4.65% during the second half of 2014. Volatility has been more muted
for the first half of 2015 which has created a headwind to relative portfolio performance.
Against this backdrop, the Meridian Growth Fund Legacy Class
shares returned 11.85% for the one-year period ending June 30, 2015, compared with its benchmark, the Russell 2500 Growth Index, which returned 11.30%. We are pleased to have delivered both positive absolute and relative returns for the year.
Despite an underweight position, health care was a top
contributor to outperformance as strong stock selection was more than able to offset our underweight position. Our health care stocks were up 45% which outpaced the 33% gain for the benchmark’s health care stocks. We remain underweight as
health care valuations have become more demanding, and the benchmark’s biotechnology weighting has increased considerably. While we continue to find compelling long-term ideas, we believe a more cautious approach is justified given the
inherent risk and volatility associated with early stage drug development.
Our holdings in the energy sector were the primary detractor
from relative performance during the period while our holdings in consumer discretionary, information technology and financials contributed positively to relative performance. The industrials sector continues to be our largest overweight, as more
compelling valuations, strong competitive positioning and stable fundamentals have led to a much lower risk profile than other areas of the market.
The top three positive contributors to performance during the
period were Cimpress, Carter’s and SS&C.
| • | Cimpress provides marketing products and services through the Internet to small and micro businesses. The company returned 108% over the one-year period due to organic revenue growth, which has accelerated for each of the last
four quarters, and to the expansion of net margins. These factors, in addition to attractive acquisitions, have resulted in adjusted earnings-per-share doubling over the past two years even in the face of headwinds from currency exposures. We
reduced our position during the period as the risk-reward profile for the company has become less favorable. |
| • | Carter’s is a leading manufacturer and retailer of infant and toddler apparel. The company continues to benefit from stable demand and solid execution, which has led to double-digit earnings growth. Key drivers of performance for Carter’s include continued store growth, e-commerce initiatives, improved OshKosh fundamentals and international expansion. We reduced the position as the company returned 56% over the period. |
| • | SS&C Technologies is a technology provider to the financial services industry. The company returned 42% over the one-year period. SS&C has continued to create shareholder value through its acquisition strategy – with two acquisitions being announced in the last 12 months. The most recent acquisition, Advent Software, is the largest in the company’s history. We continue to like the stability of the company’s revenues, especially now that approximately 92% of total revenues are recurring in nature. We reduced the position size, as the earnings-per-share multiple has expanded and the share price has approached our estimate of fair value. |
The three largest detractors during the period were Stratasys, CHC Group and RigNet.
| • | Stratasys is a 3-D printing company that specializes in rapid prototyping and additive manufacturing solutions. The company continues to invest in channel development, which has put near-term pressure on margins and |
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Portfolio Performance and Composition (Unaudited) (continued)
Portfolio Performance and Composition (Unaudited) (continued)
| earnings. Given the nascent industry, we believe these investments will generate attractive long-term returns. Our investment thesis is supported by continued market share gains, a solid balance sheet and robust consumable revenue growth. We added to the position during the period. | |
| • | CHC Group is a helicopter service company that specializes in transportation to offshore oil and gas platforms. The company underperformed over the past year due to continued low oil prices and declining activity in the offshore
segment of the market. We believe the company is still well-positioned for the long term, but its exposure to large exploration and production companies will likely continue to be a drag on performance in the short term. We maintained our
position. |
| • | RigNet provides communication- and network-based services to the oil and gas industry, specifically offshore drilling rigs. The market’s concern with the decline in offshore drilling activity negatively impacted share price performance. The outlook this year for the oil and gas industry remains difficult to predict; however, we have conviction that RigNet can still grow at a positive rate based on the recurring revenue from service contracts. We added to the position during the period. |
OUTLOOK
We continue to find compelling long-term opportunities within
the small- and mid-cap universe, but this is tempered in part by more challenging valuations, especially within the health care and information technology sectors. Given our risk-first approach and focus on providing downside protection, we will
continue to maintain discipline and look to capitalize on opportunities created by market volatility. Our focus remains on finding companies with strong competitive positioning, attractive growth prospects, high-quality businesses and compelling
valuations.
Thank you for your continued
investment.
Chad Meade and Brian Schaub
Arrowpoint Asset Management LLC
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Portfolio Performance and Composition (Unaudited) (continued)
Portfolio Performance and Composition (Unaudited) (continued)
Total Return Based
on a $10,000 investment for the Period Ended June 30, 2015
This graph
shows the change in value of a hypothetical investment of $10,000 in Legacy Class Shares of the Fund over the past 10 years (or for the life of the Fund if shorter). Performance calculations are as of the end of June each year. For comparison, the
same investment is shown in the indicated indices.
Average Annual
Total Return as of 6.30.15
| Share Class | Inception | 1 Year | 5 Year | 10 Year | Since Inception |
| Legacy Class (MERDX) | 8/1/84 | 11.85% | 16.89% | 10.17% | 12.76% |
| Investor Class (MRIGX) | 11/15/13 | 11.56% | — | — | 10.84% |
| Advisor Class (MRAGX) | 11/15/13 | 11.08% | — | — | 10.44% |
| Institutional Class (MRRGX) | 12/24/14 | — | — | — | 3.70% |
| Russell 2500® Growth Index | 8/1/84 | 11.30% | 19.55% | 10.32% | N/A |
See “Disclosures Regarding
Fund Performance” on page 26 for important information regarding reported performance.
The statements and opinions expressed are those of the author
and are as of the date of this report. All information is historical and not indicative of future results and subject to change. It should not be assumed that an investment in the securities mentioned will be profitable in the future. This
information is not a recommendation to buy or sell.
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 and do not reflect the imposition of a 2% redemption
fee on shares held 60 days or less to deter market timers. If reflected, the taxes and fees would reduce the performance quoted. Net asset value, investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or
less than their original cost.
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Meridian Growth Fund
Portfolio Performance and Composition (Unaudited) (continued)
Portfolio Performance and Composition (Unaudited) (continued)
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Meridian Contrarian Fund
Portfolio Performance and Composition (Unaudited)
Portfolio Performance and Composition (Unaudited)
Discussion of Fund
Performance
During the one-year period ending June 30, 2015, the
Meridian Contrarian Fund Legacy Class shares returned 6.84%, which compares to a return of 5.92% for its primary benchmark, the Russell 2500 Index.
Performance in the period was aided by the strength of our
investments in the financial and energy sectors, as well as by avoiding the utility sector, which was among the weaker sectors in the benchmark.
Our financial holdings are mainly high-quality companies that
will benefit from higher interest rates. Interest rates have been near historic lows for an extended period of time, a condition that has hurt the earnings of many banks and certain financial markets, and the idea that interest rates will eventually
rise is largely a consensus view. We are “bottom-up” investors and believe that our competitive advantage lies in fundamental analysis of out-of-favor companies. As such, we do not make large investments based on macroeconomic factors
unless we believe that our bottom-up research has given us insight into macro trends that run counter to the prevailing market view. In this case, we have no such contrarian viewpoint about rates, per se, but our fundamental analysis of how rates
may improve the earnings power of financial services companies suggests to us that the market is not accurately discounting this possibility. This situation has created an asymmetric investment opportunity in financials that we find compelling.
Consistent with our overall investment strategy, within the financial sector, we focus on companies that we believe may not only benefit from a higher interest rate environment, but also are out of favor due to company-specific challenges that may
be better suited to our fundamental investment process.
One such recent investment is MetLife. The company
underperformed the broad market, as low rates have pressured earnings. Shareholder returns also have suffered due to the company’s designation as a Structurally Important Financial Institution (SIFI), which limits management’s ability to
return excess capital to shareholders. Resolution of either of these headwinds could unlock improved earnings-per-share growth and return on invested capital and support a valuation re-rating for the company. If neither of these headwinds are
resolved, we see very little risk to the status quo, as shares are currently valued at less than 10 times next year’s earnings.
Our performance in the period was hurt by our investments in
the energy and industrial sectors. Energy markets continue to be volatile, and we do not have a view on the timing of a rebound. Our strategy in this sector is to take advantage of the volatility by continuing to invest in what we believe are
high-quality energy companies that have attractive long-term growth opportunities.
The top three contributors to our performance for the fiscal
year were Neurocrine Biosciences, ServiceMaster and Denny’s.
| • | Neurocrine Biosciences is a pharmaceutical company with two development-stage programs focused on neurological and endocrine-based health problems. The company came to our attention after poor clinical trial results for one of its programs
resulted in a 40% reduction in the share price. We invested because the issues with the trial were related to trial design, not drug efficacy. Management presented a credible plan for addressing the design issues, and the company’s valuation
was capturing only a fraction of the potential cash flows that could be generated by both drug programs. Over the past year, both of Neurocrine’s drug programs have delivered strong clinical trial results and are on track for
commercialization, which may drive significant earnings and cash flow growth. We have reduced our position somewhat over the past year due to the strong appreciation in share price but continue to hold shares in Neurocrine Biosciences. |
| • | ServiceMaster Global Holdings is a leading provider of termite and pest control services, home warranties and other residential services. The company had problems with marketing and service missteps at its lawn care division, which is no longer part of the company. We invested in ServiceMaster because of its dominant positions in fragmented markets, including 40% market share in home warranties, and consistent sales growth, driven by 80% customer retention and share gains from smaller competitors. The stock outperformed over the past year, as earnings results showed continued revenue growth and much better than expected profit margins driven by cost- |
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Portfolio Performance and Composition (Unaudited) (continued)
| saving initiatives, lower fuel costs and product mix. We remain ServiceMaster shareholders as its business continues to improve and the sectors in which it operates remain attractive. We maintain a significant position in ServiceMaster though we have reduced our position, as the valuation multiple has increased significantly since our initial investment. | |
| • | Denny’s is an iconic casual dining chain with approximately 1,500 franchises and 160 company-owned restaurants. The company came across our contrarian screens repeatedly during years of decline under a series of previous management teams. We invested in 2011 when strong new management took over with a coherent turnaround plan. Denny’s made solid progress, stabilizing the business with menu and marketing improvements and using solid free-cash flow to pay down debt, repurchase shares and fund a successful restaurant remodel program, though sales growth remained subdued. An inflection point came in 2014 as sales improved significantly, aided by lower gas prices that alleviated pressure on Denny’s core customer. This is a trend that accelerated through the remainder of the year and has held up in 2015. We remain shareholders though we reduced our position significantly due to the rise in the stock. |
The top three detractors to performance for the year ending
June 30, 2015, were – unsurprisingly, given the historic drop in oil prices – energy companies: Halcon Resources, EOG Resources Corp and National Oilwell Varco. Energy remains volatile, and as such, we are proceeding with caution. Our current energy exposure lies in leading companies that we believe have strong balance sheets and growth prospects,
such as EOG, Helmrich & Payne, Corelabs and Occidental Petroleum. With the energy sector
deeply out of favor, we will opportunistically look to increase our exposure to the sector. We are monitoring several companies that we believe could be attractive holdings in a rebound scenario.
OUTLOOK
Equity markets are coming off several strong years, U.S.
unemployment has decreased and the strength of the dollar has improved. Prices of oil and other commodities have plummeted, which is hurting some areas of the industrial economy, and the financial markets are increasingly concerned about the timing
of an inevitable increase in interest rates. Our strategy is to monitor the macro picture without attempting to predict it, to be conscious of how macro may affect the performance of the businesses in which we invest, and to take advantage of
macro-induced market volatility to find opportunities in individual companies that have attractive business economics and improving fundamentals.
We thank you for your continued investment.
Jamie England, Larry Cordisco, & Jim O'Connor
Arrowpoint Asset Management LLC
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Portfolio Performance and Composition (Unaudited) (continued)
Portfolio Performance and Composition (Unaudited) (continued)
Total Return Based
on a $10,000 investment for the Period Ended June 30, 2015
This graph
shows the change in value of a hypothetical investment of $10,000 in Legacy Class Shares of the Fund over the past 10 years (or for the life of the Fund if shorter). Performance calculations are as of the end of June each year. For comparison, the
same investment is shown in the indicated indices.
Average Annual
Total Return as of 6.30.15
| Share Class | Inception | 1 Year | 5 Year | 10 Year | Since Inception |
| Legacy Class (MVALX) | 2/10/94 | 6.84% | 16.79% | 8.19% | 13.22% |
| Investor Class (MFCIX) | 11/15/13 | 6.67% | — | — | 8.54% |
| Advisor Class (MFCAX) | 11/15/13 | 6.38% | — | — | 8.26% |
| Russell 2500® Index | 2/10/94 | 5.92% | 17.85% | 9.09% | 10.46% |
| S&P 500® Index * | 2/10/94 | 7.41% | 17.33% | 7.89% | 9.12% |
See “Disclosures Regarding
Fund Performance” on page 26 for important information regarding reported performance.
The statements and opinions expressed are those of the author
and are as of the date of this report. All information is historical and not indicative of future results and subject to change. It should not be assumed that an investment in the securities mentioned will be profitable in the future. This
information is not a recommendation to buy or sell.
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 and do not reflect the imposition of a 2% redemption
fee on shares held 60 days or less to deter market timers. If reflected, the taxes and fees would reduce the performance quoted. Net asset value, investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or
less than their original cost.
*On November 1, 2013, the Fund's primary benchmark changed from the S&P 500 ® Index to the Russell 2500® Index. The S&P 500® Index now serves as the Fund's secondary index. The primary reason for the change is to compare the Fund to a primary benchmark that more closely aligns with the Fund's
current strategy.
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Meridian Contrarian Fund
Portfolio Composition (Unaudited)
Portfolio Composition (Unaudited)
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Meridian Equity Income Fund
Portfolio Performance and Composition (Unaudited)
Portfolio Performance and Composition (Unaudited)
Discussion of Fund
Performance
Fellow Meridian Equity Income Fund Investor:
Thank you for your continued investment in the Fund. Since
assuming management of the Fund in October 2014, performance versus the benchmark index - the S&P 500 - has improved. In the six month period ended June 30, 2015, the Meridian Equity Income Fund Legacy Class Shares returned 4.33%, beating the S&P 500 total return of 1.27%, by 306 basis points. For the full year, the Fund returned 4.46% lagging the S&P 500 return of 7.41%.
Past performance is no
guarantee of future results. Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, yield and return will vary, and you may
have a gain or loss when you sell your shares.
I
would also like to welcome the shareholders who came over with the merger with the Jordan Opportunity Fund, and use this Annual Letter to describe my investment process and strategy.
Investment Process, Philosophy and Strategy
We are fundamental investors. This means that we believe in
closely examining a company's financial statements, not just the profit & loss statements, but also the balance sheet (especially the balance sheet) and cash flow statements. We rip apart these numbers to identify trends in the business: growth,
profit margins and inventory efficiency. But the quantitative analysis of the reported numbers divine only part of the story. At Arrowpoint, our style of fundamental investing also means investigating the intangible aspects of a company's value. As
a co-founder of Arrowpoint Partners, my personal experience of seeing how we run our firm from the inside has provided tremendous perspective to understand and appreciate how the best companies stay special. Whenever possible, we meet with the
management teams of our investments and follow up with visits to their facilities. Management teams matter because they set strategy, establish and promote culture. The field matters because these are the people on the front line who execute the
strategy. It is critical to check that the company is on the same page. Going into the field often uncovers challenges and opportunities which won't be apparent from formal company meetings.
My personal objectives for the Fund are to (1) beat the
S&P 500 total return (2) with similar or less risk than the index (3) while also generating a top-quartile dividend yield. I tend to favor growing businesses with attractive business models. While "growth-style" investing may carry risk due to
high multiples to sales and earnings, I balance the portfolio volatility by also buying stocks at cyclical lows.
The Equity Income Fund tends to focus on large-cap companies
with well-known brands. From time to time, the Fund may invest in smaller companies with attractive capital appreciation potential. For example, as of June 30, 2015, the portfolio holds 1% positions in OvaScience, Exact Sciences and Accelerate
Diagnostics.
The investment strategy is to uncover
unique business models using deep fundamental research. The sweet spot is finding growing companies with strong business models and favorable industry tailwinds.
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Portfolio Performance and Composition (Unaudited) (continued)
INVESTMENT THEMES
The underlying investment theme in the Meridian Equity Income
Fund is the digitization of our world. From the consumer perspective, I see this every evening when my wife watches TV in the background while focusing on her social media content and juggling between her iPhone and iPad. According to the Economist,
there could be one billion smartphones in use globally by 2020. It is mind shattering to imagine the vast abundance of personally generated user data which will be captured (with our consent) as we create more and more digital accounts of our
cherished analog experiences.
In our opinion, only a
handful of companies will earn the trust to be your concierge into this Digital World. We own these companies in the portfolio: Amazon, Apple, Facebook, Google, LinkedIn, Microsoft and Twitter. Facebook, LinkedIn and Twitter are the largest and most
valuable social networks (Facebook also owns Instagram and WhatsApp). Google and Microsoft are information productivity powerhouses. Apple and Google compete at the digital world gateway (although only Apple makes money on the hardware while it
remains a tight race on the software). The proliferation of mobile screens (the super computers in your pocket) increases the value of premium entertainment content as it is multicast into every possible viewing format. Our portfolio is invested in
Disney and Time Warner.
Digitization is also about
companies driving the modernization of legacy applications and enabling more collaborative workflows in the enterprise. Leading this trend is pure-play software as a service (SAAS)-based enterprise resource planning (ERP) provider Workday. We also
own highly profitable legacy enterprise software companies such as Oracle (and Microsoft) who are moving their customers and applications bundles to the cloud. There are also companies enabling this trend to digitization and consumer digital worlds.
NVIDIA develops super-fast computational chips which are increasingly deployed in large data centers. These chips outperform Intel CPU-based servers by 10x to 100x and in some cases 1000x better results as measured by price, performance and power
usage and has dramatic increased the ability to access computational power.
Finally, digitization includes companies who are on the
forefront of using these new technologies to amplify their businesses. Lifestyle brands (with high brand authenticity) are leading the trend offer omni-channel shopping experience. Nike, VF Corporation (The North Face, Timberland and Vans) and
Starbucks are digital marketing leaders, and they are owned in the Fund.
Other investment themes in the portfolio include:
| • | Health and Wellness |
| • | Defense / Homeland Security / Cyberwarfare |
(These themes may be discussed in future investment
letters)
COMMENTS ON THE MACROECONOMY
How the portfolio has been positioned to navigate macro-risks
this year
(1) Oil cut in half from $100 to $50
Black Friday is known as a major shopping holiday to usher in
the holiday shopping season, but in November 2014, the oil and gas industry had its own Black Friday. After a summer of softening oil prices, the market assumed that OPEC would announce supply cuts to support weakening oil prices. Instead, on the
Friday after Thanksgiving, Saudi Arabia announced that it would maintain – and even increase – its production to maintain global supply market share, and oil prices plunged 9% to $65 in a frenzied, shortened trading session. Energy
company stock prices responded with fury, with shares of fracking companies getting hit the hardest.
During the three month period ended March 31, 2015, we decided
to establish an overweight position in the Energy sector, primarily through holding senior bonds of Halcon Resources and buying call options on Continental Resources. The Fund outperformed the S&P with significant contribution coming from these
positions. Our analysis suggested that the market was using $65 oil to price these securities, and – at the time – it seemed like energy correction was too sharp and too fast.
Since Q1, we have reduced the Fund’s sector exposure to
Energy to equal weight with the S&P 500. The Fund’s energy investments are focused on oil and gas industry leaders with strong balance sheets. These holdings are National Oilwell Varco, the market share leader in oil gas equipment and EOG
Resources, the leading independent E&P. Holdings also include energy infrastructure companies Kinder Morgan and MarkWest Energy. These companies are paid for the pipeline
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Portfolio Performance and Composition (Unaudited) (continued)
transportation of oil and gas products and their businesses are less exposed
to oil price fluctuations. Finally, the Fund still holds Halcon Resource bonds as well as the call options on Continental Resources, but the position sizes have been significantly reduced.
(2) Greece Debt Crisis
In our opinion, the Greek debt crisis is likely contained,
because it seems that the Greek people do not have the political stamina and fight left to seriously threaten exit from the Euro. Time is the enemy for Greece. The country is insolvent, and both the IMF and the U.S. Treasury have publicly stated
that the country needs debt relief because it cannot repay EUR 360 billion in sovereign debt on its EUR 220 billion economy.
Meanwhile Greeks are split between the pain of ongoing
austerity and the fear of leaving the Euro, and the longer Greece waits to acquiesce to Europe’s terms for extending liquidity, the worse those conditions get. On July 5th, 2015, a strong 61% majority of the Greek people voted “no”
to the austerity conditions offered by Europe, yet days after failed negotiations, Prime Minister Tsipras returned with a bailout package carrying harsher conditions than the one just rejected by referendum. It remains unclear how Greece can get out
of this mess and Greece remains a known "Black Swan" risk.
In a long only investment strategy (such as this and most
mutual funds), there are few protective measures which can be deployed to protect against a catastrophic "40%"-type financial market crash similar to what we experience in the Dot Com Bubble and the Housing Crisis. In terms of your investment in the
Equity Income Fund, the portfolio is invested primarily in large, established industry leaders with strong balance sheets. At the moment we are also holding cash between 5% and 10%.
(3) Gold
And then there is the question of gold. As a professional
investor, I have researched gold since 2007 – and I can admit that I know no more now about how to predict the price of gold than I did then. I would have predicted gold to have traded at $2,000 per ounce long ago, and I would have been dead
wrong. In the aftermath of the (ongoing) Greek Debt Crisis and the bursting of the Chinese stock market bubble, gold continues to break down through technical lows and is now trading at $1,100 per ounce. From a risk management perspective, I still
believe gold functions as a reliable portfolio hedge during market turmoil. The Equity Income Fund holds a 2% position in Royal Gold.
QUARTERLY MOVERS
The following stocks (with greater than 1% weights in the
portfolio) were large positive quarterly contributors to fund performance.
Amazon is the category killer
in an industry that it invented: customer-centricity. Over the past 20 years, Amazon has made massive investments in technology to offer a personalized commerce experience. Amazon has also relentlessly invested in its vast distribution and
fulfillment infrastructure to introduce a game-changing customer relationship, the Amazon Prime subscription membership with free two-day delivery. And the company continues to push the envelope with a variety of same day delivery options, ever
shrinking the time gap from the order to physical delivery.
Amazon is also extending its customer-centric approach to the
business-to-business B2B marketplace with Amazon Web Services. AWS is a cloud computing platform that provides businesses with fast, cheap and flexible access to computing power. AWS is used by both big (including really big) and small companies
alike. As a business, AWS is big (over $7 billion in annual revenues), profitable (21% operating margin in Q2) and growing fast (AWS revenue could increase 65% this year) and it is large enough to positively skew all of Amazon into profitable
growth. With Prime and AWS, Amazon has built $12 – 13 billion in annual, recurring subscription based revenues.
Illumina is the leading
manufacturer of high-speed machines used to sequence, analyze and "unlock the power of the human genome". The latest flagship product, HiSeq X Ten can sequence DNA at a cost of $1,000 per genome, a five order of magnitude reduction from $100 million
cost when this industry was born 15 years ago.
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Source: Illumina, August
2015
However, at a cost of $1,000 per gene sequence, it
would cost $100 million to build a gene library from 100,000 volunteers, thereby pushing researchers to focus on only the most prevalent diseases. Looking ahead, as Illumina continues to drive down gene sequencing cost at a pace faster than Moore's
Law, drug companies will continue to assemble larger and larger genomic data sets and invest in increasingly powerful computing clusters to decipher the slightest genetic variations and systematically unlock new knowledge about the human
genome.
Note that the cost curve improvement accelerated
dramatically in 2007 which coincided with massive value creation in the biotechnology industry. Illumina is also positively impacted the broad move to digitization. Illumina acquired NextBio and is positioning to offer cloud-based delivery of DNA
sequencing as a service.
Here is a link to a Reuters
story discussing the expansion of DNA sequencing and the gathering of DNA data, called “precision medicine.” http://bit.ly/Precision-Medicine.
Source: Bloomberg. As of
June 30, 2015. NBI is the Nasdaq Biotechnology Index, which contains securities of NASDAQ-listed companies classified as either biotechnology or pharmaceuticals. Past performance is not a guarantee of future results.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, yield and return will vary, and you may have a gain or loss when you sell your shares.
The following stocks (with greater than 1% weights in the
portfolio) were large negative quarterly contributors to fund performance.
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Portfolio Performance and Composition (Unaudited) (continued)
Twitter is among the largest
social media platforms in the world, and it occupies a unique position in the social media environment because the communications platform is real-time and open to the public. We established the position in January 2015 – this purchase was
poorly timed because the company promptly missed Q4 expectations on revenue!
Our research has focused on advertising agencies to understand
why advertisers continue to increase spending on Twitter, despite public awareness that the platform is struggling to grow its user base. The agencies tell us that advertisers buy based on the size of the audience and that Twitter's 300 million
users provide enough reach for it to receive its fair share of the advertising dollars moving to digital marketing. This feedback provides tangible support to the hypothesis that Twitter is a fundamentally valuable advertising platform, and that it
is here to stay. Twitter remains in the portfolio, and we remain patient for new leadership and a new strategy.
Costco operates a
differentiated business model, which is membership-based warehouse clubs. The paid membership base exceeds 42 million paying households and (at $55 per year) generates $2.4 billion in annual membership fees. This revenue is visible, recurring in
nature, and over time, offers significant operating leverage as Costco gradually implements fee increases. Customers sign up because they receive significant value from Costco's ability to leverage its purchasing power to offer high quality brands
at discounted value. Costco has always protected its brand and reputation, and, in many ways, was the original big box to think about the strategic benefits of customer relationships as opposed to driving traffic and transaction counts. Although the
stock has recently lagged the broader S&P, Costco remains a core holding of the fund.
Thank you for your continued investment in the Fund.
Minyoung Sohn, CFA
Arrowpoint Asset Management LLC
Total Return Based
on a $10,000 investment for the Period Ended June 30, 2015
This graph
shows the change in value of a hypothetical investment of $10,000 in Legacy Class Shares of the Fund over the past 10 years (or for the life of the Fund if shorter). Performance calculations are as of the end of June each year. For comparison, the
same investment is shown in the indicated index.
Average Annual
Total Return as of 6.30.15
| Share Class | Inception | 1 Year | 5 Year | 10 Year | Since Inception |
| Legacy Class (MEIFX) | 1/31/05 | 4.46% | 14.24% | 7.41% | 7.21% |
| Investor Class (MRIEX) | 11/15/13 | 4.44% | — | — | 7.01% |
| Advisor Class (MRAEX) | 11/15/13 | 4.24% | — | — | 6.77% |
| S&P 500® Index | 1/31/05 | 7.41% | 17.33% | 7.89% | 7.73% |
See “Disclosures Regarding
Fund Performance” on page 26 for important information regarding reported performance.
The statements and opinions expressed are those of the author
and are as of the date of this report. All information is historical and not indicative of future results and subject to change. It should not be assumed that an investment in the securities mentioned will be profitable in the future. This
information is not a recommendation to buy or sell.
| Meridian Funds | 16 | www.meridianfund.com |
Table of Contents
Meridian Equity Income Fund
Portfolio Performance and Composition (Unaudited) (continued)
Portfolio Performance and Composition (Unaudited) (continued)
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 and do not reflect the imposition of a 2% redemption fee on shares held 60 days or less to deter market timers.
If reflected, the taxes and fees would reduce the performance quoted. Net asset value, investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost.
| Meridian Funds | 17 | www.meridianfund.com |
Table of Contents
Meridian Equity Income Fund
Portfolio Composition (Unaudited)
Portfolio Composition (Unaudited)
| Meridian Funds | 18 | www.meridianfund.com |
Table of Contents
Meridian Small Cap Growth Fund
Portfolio Performance and Composition (Unaudited)
Portfolio Performance and Composition (Unaudited)
Discussion of Fund
Performance
Our primary objective is to create an
“all-weather” small-cap growth portfolio that has the potential to outperform in a variety of market conditions. The 2014 market environment experienced several different weather patterns which resulted in notably higher volatility.
Given our focus on downside protection, we welcome more volatile market environments. To this end, we were able to capitalize on increased volatility to outpace the benchmark by 4.58% during the second half of 2014. Volatility has been more muted
for the first half of 2015, which has created a headwind to relative portfolio performance.
Against this backdrop, the Meridian Small Cap Growth Fund
Legacy Class shares returned 14.23%, for the one-year period ending June 30, 2015, compared with its benchmark, the Russell 2000 Growth Index, which returned 12.34%. We are pleased to have delivered both positive absolute and relative returns for
the period.
Despite an underweight position, health care
was a top contributor to outperformance as strong stock selection was more than able to offset our underweight position. Our health care stocks were up 46% which outpaced the 33% gain for the benchmark’s health care stocks. We remain
underweight as health care valuations have become more demanding, and the benchmark’s biotechnology weighting has increased considerably. While we continue to find compelling long-term ideas, we believe a more cautious approach is justified
given the inherent risk and volatility associated with early stage drug development.
Our holdings in the energy sector was the primary detractor of
performance during the period, while our holdings in consumer discretionary, information technology and financials contributed positively to performance. The industrials sector continues to be our largest overweight, as more compelling valuations,
strong competitive positioning and stable fundamentals have led to a much lower risk profile than other areas of the market.
The top three positive contributors to performance during the
period were Cimpress, 2U and ServiceMaster.
| • | Cimpress provides marketing products and services through the Internet to small and micro businesses. The company returned 108% over the one-year period due to organic revenue growth, which has accelerated for each of the last
four quarters, and to the expansion of net margins. These factors, in addition to attractive acquisitions, have resulted in adjusted earnings-per-share doubling over the past two years even in the face of headwinds from currency exposures. We
reduced our position over the period as the risk-reward profile for the company has become less favorable. |
| • | 2U Inc. is a leading technology company that helps enable top colleges and universities to develop and deliver online degree programs. 2U’s business development, growth and profit targets continue to track at or ahead of
plan and should continue to scale higher as the company delivers on its expansion strategy. We increased our position during the year given the company’s large addressable market, limited competition and solid execution. |
| • | ServiceMaster provides essential residential and commercial services primarily through its Terminix (termite and pest control) and American Home Shield (home warranty) brands. We like the stability and pricing power in both of these businesses which provide essential services for homeowners. In its first year as a public company, ServiceMaster executed well, with revenue up 7% and EBITDA up 16% in the most recently reported quarter. We increased our position over the past 12 months and the company returned 98% over the period. |
The three largest detractors during the period were RigNet, Stratasys and Evolution Petroleum.
| • | RigNet provides communication- and network-based services to the oil and gas industry, specifically offshore drilling rigs. The market’s concern with the decline in offshore drilling activity negatively impacted share
price performance. The outlook this year for the oil and gas industry remains difficult to predict; however, we have conviction that RigNet can still grow at a positive rate based on the recurring revenue from service contracts. We added to the
position during the period. |
| • | Stratasys is a 3-D printing company that specializes in rapid prototyping and additive manufacturing solutions. The company continues to invest in channel development, which has put near-term pressure on margins and |
| Meridian Funds | 19 | www.meridianfund.com |
Table of Contents
Meridian Small Cap Growth Fund
Portfolio Performance and Composition (Unaudited) (continued)
Portfolio Performance and Composition (Unaudited) (continued)
| earnings. Given the nascent industry, we believe these investments will generate attractive long-term returns. Our investment thesis is supported by continued market share gains, a solid balance sheet and robust consumable revenue growth. We added to the position during the period. | |
| • | Evolution Petroleum is a small oil exploration and production company that uses technology to increase production rates for established oil and natural gas wells. The company declined 37% over the 12-month period, primarily due to the impact of the rapid decline in oil prices in late 2014. Despite the decline, we continue to like the company’s strong balance sheet, which has no debt. Unlike most exploration and production companies, Evolution Petroleum has positive free-cash flow even at these depressed commodity prices. We added to the position during the year. |
OUTLOOK
We continue to find compelling long-term opportunities within
the small-cap universe, but this is tempered in part by more challenging valuations, especially within the health care and information technology sectors. Given our risk-first approach and focus on providing downside protection, we will continue to
maintain discipline and look to capitalize on opportunities created by market volatility. Our focus remains on finding companies with strong competitive positioning, attractive growth prospects, high-quality businesses and compelling
valuations.
Thank you for your continued
investment.
Chad Meade and Brian Schaub
Arrowpoint Asset Management LLC
| Meridian Funds | 20 | www.meridianfund.com |
Table of Contents
Meridian Small Cap Growth Fund
Portfolio Performance and Composition (Unaudited) (continued)
Portfolio Performance and Composition (Unaudited) (continued)
Total Return Based
on a $10,000 investment for the Period Ended June 30, 2015
This graph
shows the change in value of a hypothetical investment of $10,000 in Legacy Class Shares of the Fund over the past 10 years (or for the life of the Fund if shorter). Performance calculations are as of the end of June each year. For comparison, the
same investment is shown in the indicated index.
Average Annual
Total Return as of 6.30.15
| Share Class | Inception | 1 Year | Since Inception |
| Legacy Class (MSGGX) | 12/16/13 | 14.23% | 20.43% |
| Investor Class (MISGX) | 12/16/13 | 14.14% | 20.37% |
| Advisor Class (MSGAX) | 12/16/13 | 13.82% | 20.01% |
| Institutional Class (MSGRX) | 12/24/14 | — | 6.13% |
| Russell 2000® Growth Index | 12/16/13 | 12.34% | 12.45% |
See “Disclosures Regarding
Fund Performance” on page 26 for important information regarding reported performance.
The statements and opinions expressed are those of the author
and are as of the date of this report. All information is historical and not indicative of future results and subject to change. It should not be assumed that an investment in the securities mentioned will be profitable in the future. This
information is not a recommendation to buy or sell.
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 and do not reflect the imposition of a 2% redemption
fee on shares held 60 days or less to deter market timers. If reflected, the taxes and fees would reduce the performance quoted. Net asset value, investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or
less than their original cost.
| Meridian Funds | 21 | www.meridianfund.com |
Table of Contents
Meridian Small Cap Growth Fund
Portfolio Composition (Unaudited)
Portfolio Composition (Unaudited)
| Meridian Funds | 22 | www.meridianfund.com |
Table of Contents
* Inception
Table of Contents
Meridian Growth Fund
Fund Expenses
June 30, 2015 (Unaudited)
Expense
Example
| Actual | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MERDX) | 0.84% | $1,000.00 | $1,039.30 | $4.25 |
| Investor Class (MRIGX) | 1.18% | $1,000.00 | $1,037.80 | $5.96 |
| Advisor Class (MRAGX) | 1.55% | $1,000.00 | $1,035.80 | $7.82 |
| Institutional Class (MRRGX) | 0.90% | $1,000.00 | $1,038.80 | $4.55 |
| Hypothetical 2 | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MERDX) | 0.84% | $1,000.00 | $1,020.63 | $4.21 |
| Investor Class (MRIGX) | 1.18% | $1,000.00 | $1,018.94 | $5.91 |
| Advisor Class (MRAGX) | 1.55% | $1,000.00 | $1,017.11 | $7.75 |
| Institutional Class (MRRGX) | 0.90% | $1,000.00 | $1,020.33 | $4.51 |
| 1 | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days, the number of days in the most recent fiscal half-year, then divided by 365. |
| 2 | Hypothetical 5% return before expenses. |
The
above “Annualized Expense Ratios” reflect waivers and/or reimbursements of expenses by the Fund’s Adviser. Such waivers and/or reimbursements may not be withdrawn earlier than one year after the date of the current prospectus. The
“Financial Highlights” included within the Fund’s financial statements shows the gross expense ratios for each share class.
See “Disclosure Regarding Fund Expenses” on page
26 for further information on how the above examples were calculated.
Meridian Contrarian Fund
Fund Expenses
June 30, 2015 (Unaudited)
Expense
Example
| Actual | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MVALX) | 1.10% | $1,000.00 | $1,042.50 | $5.57 |
| Investor Class (MFCIX) | 1.35% | $1,000.00 | $1,041.20 | $6.83 |
| Advisor Class (MFCAX) | 1.60% | $1,000.00 | $1,039.80 | $8.09 |
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Table of Contents
Meridian
Contrarian Fund
Fund Expenses (continued)
June 30, 2015 (Unaudited)
| Hypothetical 2 | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MVALX) | 1.10% | $1,000.00 | $1,019.34 | $5.51 |
| Investor Class (MFCIX) | 1.35% | $1,000.00 | $1,018.10 | $6.76 |
| Advisor Class (MFCAX) | 1.60% | $1,000.00 | $1,016.86 | $8.00 |
| 1 | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days, the number of days in the most recent fiscal half-year, then divided by 365. |
| 2 | Hypothetical 5% return before expenses. |
The
above “Annualized Expense Ratios” reflect waivers and/or reimbursements of expenses by the Fund’s Adviser. Such waivers and/or reimbursements may not be withdrawn earlier than one year after the date of the current prospectus. The
“Financial Highlights” included within the Fund’s financial statements shows the gross expense ratios for each share class.
See “Disclosure Regarding Fund Expenses” on page
26 for further information on how the above examples were calculated.
Meridian Equity Income Fund
Fund Expenses
June 30, 2015 (Unaudited)
Expense
Example
| Actual | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MEIFX) | 1.25% | $1,000.00 | $1,038.20 | $6.32 |
| Investor Class (MRIEX) | 1.35% | $1,000.00 | $1,038.10 | $6.82 |
| Advisor Class (MRAEX) | 1.60% | $1,000.00 | $1,037.40 | $8.08 |
| Hypothetical 2 | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MEIFX) | 1.25% | $1,000.00 | $1,018.60 | $6.26 |
| Investor Class (MRIEX) | 1.35% | $1,000.00 | $1,018.10 | $6.76 |
| Advisor Class (MRAEX) | 1.60% | $1,000.00 | $1,016.86 | $8.00 |
| 1 | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days, the number of days in the most recent fiscal half-year, then divided by 365. |
| 2 | Hypothetical 5% return before expenses. |
The
above “Annualized Expense Ratios” reflect waivers and/or reimbursements of expenses by the Fund’s Adviser. Such waivers and/or reimbursements may not be withdrawn earlier than one year after the date of the current prospectus. The
“Financial Highlights” included within the Fund’s financial statements shows the gross expense ratios for each share class.
See “Disclosure Regarding Fund Expenses” on page
26 for further information on how the above examples were calculated.
| Meridian Funds | 24 | www.meridianfund.com |
Table of Contents
Meridian Small Cap Growth Fund
Fund Expenses
June 30, 2015 (Unaudited)
Expense
Example
| Actual | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MSGGX) | 1.20% | $1,000.00 | $1,058.70 | $6.13 |
| Investor Class (MISGX) | 1.33% | $1,000.00 | $1,057.90 | $6.79 |
| Advisor Class (MSGAX) | 1.60% | $1,000.00 | $1,056.50 | $8.16 |
| Institutional Class (MSGRX) | 1.10% | $1,000.00 | $1,058.70 | $5.61 |
| Hypothetical 2 | Annualized
Expense Ratio |
Beginning
Account Value January 1, 2015 |
Ending
Account Value June 30, 2015 |
Expenses
Paid During the Period 1 |
| Legacy Class (MSGGX) | 1.20% | $1,000.00 | $1,018.84 | $6.01 |
| Investor Class (MISGX) | 1.33% | $1,000.00 | $1,018.20 | $6.66 |
| Advisor Class (MSGAX) | 1.60% | $1,000.00 | $1,016.86 | $8.00 |
| Institutional Class (MSGRX) | 1.10% | $1,000.00 | $1,019.34 | $5.51 |
| 1 | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days, the number of days in the most recent fiscal half-year, then divided by 365. |
| 2 | Hypothetical 5% return before expenses. |
The
above “Annualized Expense Ratios” reflect waivers and/or reimbursements of expenses by the Fund’s Adviser. Such waivers and/or reimbursements may not be withdrawn earlier than one year after the date of the current prospectus. The
“Financial Highlights” included within the Fund’s financial statements shows the gross expense ratios for each share class.
See “Disclosure Regarding Fund Expenses” on page
26 for further information on how the above examples were calculated.
| Meridian Funds | 25 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Performance and Expense Disclosures
Performance and Expense Disclosures
June 30,
2015
Disclosures
Regarding Fund Performance
Past performance is not predictive of future
performance. Current performance may be lower or higher than the quoted past performance. Reported performance assumes reinvestment of Fund distributions. Reported performance does not reflect the deduction of taxes
that a shareholder would pay on Fund distributions or the redemption of Fund shares, nor does it reflect the 2% redemption fee on shares sold within 60 days of original purchase date. If reflected, the taxes and fees would reduce the performance
quoted. Net asset value, investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. You can obtain the most current month-end performance at www.meridianfund.com.
Performance prior to September 5, 2013 reflects the
Fund’s performance under the management of Aster Investment Management Co. using similar investment strategies.
Legacy class shares are no longer offered to the public
effective March 1, 2014, except under certain limited circumstances.
Indices are typically unmanaged, and do not reflect deductions
for fees or expenses. You cannot invest directly in an index.
Disclosures
Regarding Fund Expenses
As a shareholder of the Fund, you incur certain
costs which include: 1) transaction related costs, such as redemption fees for sales made within 60 days of original purchase; and 2) operating costs, such as investment advisory fees, administrative fees, service and distribution (12b-1) fees, and
other Fund expenses.
Operating costs, which are deducted
from a Fund’s gross income, directly reduce the investment return of the portfolio. The Fund Expense examples reported on the previous pages are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds.
The examples are based on an investment of $1,000 made at the
beginning of the period shown and held for the entire period and assume reinvestment of all dividends and distributions.
The first section of the example describes actual expenses and
account values for the 6 month period reported. To use this information to calculate the expenses you paid for your investment in the Fund, divide your account value by $1,000 then multiply the result by the number reported under “Expenses
Paid During the Period”.
The second section of the
example describes hypothetical expenses and account values using the Fund’s actual expense ratio and an assumed 5% return. These hypothetical expenses and returns should be used to compare the Fund’s expenses to other mutual funds’
reported hypothetical expenses and not to calculate your actual expenses paid during the period.
The expense examples do not reflect any transactional costs,
such as the 2% redemption fee charged on sales made within 60 days of original purchase. Therefore, the information reported within these expense examples are meant to highlight on- going costs of owning Fund shares and will not reflect the total
relative costs of owning different mutual funds. If these transactional costs were included, the reported expenses would have been higher.
Investors should consider the investment objective and policies,
risk considerations, charges and ongoing expenses of an investment carefully before investing. The prospectus contains this and other information relevant to an investment in any of the Meridian Funds. Please read the prospectus carefully before you
invest. To obtain a prospectus, please contact your investment representative or Destra Capital Investments LLC at 877.796.3434 or access our website at www.meridianfund.com.
| Meridian Funds | 26 | www.meridianfund.com |
Table of Contents
Meridian Growth
Fund
Schedule of Investments
Schedule of Investments
June 30, 2015
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 27 | www.meridianfund.com |
Table of Contents
Meridian Growth
Fund
Schedule of Investments (continued)
Schedule of Investments (continued)
June 30, 2015
| N.V.—Naamloze Vennootschap is the Dutch term for limited liability company |
| Plc—Public Limited Company |
| * | Non-income producing securities |
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 28 | www.meridianfund.com |
Table of Contents
Meridian
Contrarian Fund
Schedule of Investments
Schedule of Investments
June 30, 2015
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 29 | www.meridianfund.com |
Table of Contents
Meridian
Contrarian Fund
Schedule of Investments (continued)
Schedule of Investments (continued)
June 30,
2015
| N.V.—Naamloze Vennootschap is the Dutch term for limited liability company |
| Plc—Public Limited Company |
| * | Non-income producing securities |
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 30 | www.meridianfund.com |
Table of Contents
Meridian Equity
Income Fund
Schedule of Investments
Schedule of Investments
June 30, 2015
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 31 | www.meridianfund.com |
Table of Contents
Meridian Equity
Income Fund
Schedule of Investments (continued)
Schedule of Investments (continued)
June 30, 2015
| ADR—American Depositary Receipt. |
| Plc—Public Limited Company |
| ^ | Securities, or a portion thereof, were pledged as collateral for call options written by the Fund. |
| * | Non-income producing securities |
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 32 | www.meridianfund.com |
Table of Contents
Meridian Small
Cap Growth Fund
Schedule of Investments
Schedule of Investments
June 30, 2015
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 33 | www.meridianfund.com |
Table of Contents
Meridian Small
Cap Growth Fund
Schedule of Investments (continued)
Schedule of Investments (continued)
June 30,
2015
The accompanying notes are an integral part of the financial
statements.
| Meridian Funds | 34 | www.meridianfund.com |
Table of Contents
Meridian Small
Cap Growth Fund
Schedule of Investments (continued)
Schedule of Investments (continued)
June 30,
2015
| Shares | Value | |
| Materials - 1.5% | ||
| Chemicals - 1.5% | ||
| Balchem Corp. | 65,264 | $ 3,636,510 |
| Total Materials | 3,636,510 | |
| Total
Investments - 90.0% (Cost $208,164,264) |
224,066,114 | |
| Cash and Other Assets, Less Liabilities - 10.0% | 24,824,505 | |
| Net Assets - 100.0% | $248,890,619 | |
| ADR—American Depositary Receipt. |
| N.V.—Naamloze Vennootschap is the Dutch term for limited liability company |
| Plc—Public Limited Company |
| * | Non-income producing securities |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 35 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Statements of Assets and Liabilities
Statements of Assets and Liabilities
| June 30, 2015 | Meridian
Growth Fund |
Meridian
Contrarian Fund |
Meridian
Equity Income Fund |
Meridian
Small Cap Growth Fund |
| Assets | ||||
|
Investments, at
value1 |
$1,819,512,500 | $620,831,849 | $42,099,048 | $224,066,114 |
|
Cash and cash
equivalents |
193,145,586 | 51,920,165 | 11,871,945 | 27,068,566 |
| Receivables and other assets: | ||||
|
Fund shares
purchased |
438,450 | 9,156 | 14,250 | 2,030,816 |
|
Investments
sold |
— | 10,348,317 | — | — |
|
Dividends and
Interest |
241,281 | 291,110 | 61,602 | 88,419 |
|
Prepaid
expenses |
74,616 | 52,018 | 53,876 | 44,135 |
|
Total
Assets |
2,013,412,433 | 683,452,615 | 54,100,721 | 253,298,050 |
| Liabilities | ||||
| Payables and other accrued expenses: | ||||
|
Call options
written2 |
— | — | 18,390 | — |
|
Fund shares
sold |
708,371 | 261,230 | 48,500 | 124,948 |
|
Investments
purchased |
3,302,568 | 3,719,797 | — | 4,011,940 |
|
Investment advisory
fees |
1,257,740 | 570,339 | 38,955 | 188,356 |
|
Distribution
fees |
331 | — | 216 | 31 |
|
Service plan
fees |
12,945 | 298 | 406 | 16,507 |
|
Professional
fees |
140,153 | 49,289 | 17,066 | 18,924 |
|
Directors'
fees |
1,322 | 491 | 22 | 10 |
|
Transfer agent
fees |
48,926 | 28,756 | 1,109 | 21,686 |
|
Other |
144,774 | 54,514 | 14,712 | 25,029 |
|
Total
liabilities |
5,617,130 | 4,684,714 | 139,376 | 4,407,431 |
|
Net
Assets |
$2,007,795,303 | $678,767,901 | $53,961,345 | $248,890,619 |
| Net Assets Consist of | ||||
|
Paid in
capital |
$1,622,969,651 | $496,796,884 | $50,155,426 | $229,061,124 |
|
Accumulated net realized gain on investments, written options, and foreign currency
transactions |
176,354,229 | 78,329,598 | 1,906,298 | 3,927,645 |
|
Net unrealized appreciation on investments and foreign currency
translations |
208,471,423 | 104,418,723 | 1,862,180 | 15,901,850 |
|
Net unrealized appreciation on written
options |
— | — | 37,441 | — |
|
Undistributed (distributions in excess of) net investment
income |
— | (777,304) | — | — |
|
Net
Assets |
$2,007,795,303 | $678,767,901 | $53,961,345 | $248,890,619 |
|
1 Investments at
cost |
1,611,041,077 | 516,413,126 | 40,236,868 | 208,164,264 |
| 2 | Written options, premium received of $—, $—, $55,831, and $—, respectively. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 36 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Statements of Assets and Liabilities (continued)
Statements of Assets and Liabilities (continued)
| June 30, 2015 | Meridian
Growth Fund |
Meridian
Contrarian Fund |
Meridian
Equity Income Fund |
Meridian
Small Cap Growth Fund |
| Net Asset Value | ||||
| Legacy Class | ||||
|
Net
Assets |
$1,937,346,211 | $677,138,489 | $53,125,370 | $ 59,459,125 |
|
Shares
outstanding3 |
51,250,824 | 16,744,278 | 4,245,176 | 4,581,136 |
|
Net Asset value per share (offering and redemption
price) |
$ 37.80 | $ 40.44 | $ 12.51 | $ 12.98 |
| Investor Class | ||||
|
Net
Assets |
$ 42,061,714 | $ 1,007,592 | $ 335,310 | $131,210,528 |
|
Shares
outstanding3 |
1,118,405 | 24,943 | 26,762 | 10,113,611 |
|
Net Asset value per share (offering and redemption
price) |
$ 37.61 | $ 40.40 | $ 12.53 | $ 12.97 |
| Advisor Class | ||||
|
Net
Assets |
$ 8,812,689 | $ 621,820 | $ 500,665 | $ 45,185,955 |
|
Shares
outstanding3 |
235,817 | 15,459 | 40,059 | 3,500,581 |
|
Net Asset value per share (offering and redemption
price) |
$ 37.37 | $ 40.22 | $ 12.50 | $ 12.91 |
| Institutional Class | ||||
|
Net
Assets |
$ 19,574,689 | $ — | $ — | $ 13,035,011 |
|
Shares
outstanding3 |
517,924 | — | — | 1,003,966 |
|
Net Asset value per share (offering and redemption
price) |
$ 37.79 | $ — | $ — | $ 12.98 |
| 3 | 500,000,000 shares authorized, $0.01 par value. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 37 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Statements of Operations
Statements of Operations
| For the Year Ended June 30, 2015 | Meridian
Growth Fund |
Meridian
Contrarian Fund |
Meridian
Equity Income Fund |
Meridian
Small Cap Growth Fund |
| Investment Income | ||||
|
Dividends |
$ 8,986,325 | $ 7,930,418 | $ 442,208 | $ 642,401 |
|
Foreign taxes
withheld |
(100,496) | (81,522) | (2,011) | (7,279) |
|
Interest
Income |
— | — | 52,300 | — |
|
Total investment
income |
8,885,829 | 7,848,896 | 492,497 | 635,122 |
| Expenses | ||||
|
Investment advisory
fees |
15,283,202 | 7,097,226 | 215,449 | 1,242,499 |
|
Custodian
fees |
185,800 | 72,219 | 11,741 | 30,784 |
| Distribution and service plan fees: | ||||
|
Investor
Class |
74,240 | 550 | 212 | 30,745 |
|
Advisor
Class |
30,518 | 2,014 | 1,185 | 77,401 |
|
Directors' fees
|
258,608 | 91,646 | 2,776 | 15,321 |
|
Pricing
fees |
195,531 | 82,758 | 22,598 | 31,350 |
|
Audit and tax
fees |
133,248 | 38,295 | 3,080 | 6,884 |
|
Legal
fees |
91,484 | 32,128 | 1,218 | 3,925 |
|
Registration and filing
fees |
99,881 | 70,425 | 55,645 | 100,039 |
|
Shareholder
communications |
200,508 | 62,766 | 1,967 | 20,182 |
|
Transfer agent
fees |
516,358 | 312,641 | 11,736 | 143,872 |
|
Recoupment of investment advisory fees previously
waived |
— | — | — | 11,972 |
|
Miscellaneous
expenses |
162,094 | 53,286 | 7,602 | 9,822 |
|
Total
expenses |
17,231,472 | 7,915,954 | 335,209 | 1,724,796 |
|
Less waivers and/or reimbursements (Note
5) |
(18,313) | (23,426) | (44,499) | (51,290) |
|
Net
expenses |
17,213,159 | 7,892,528 | 290,710 | 1,673,506 |
|
Net investment income
(loss) |
(8,327,330) | (43,632) | 201,787 | (1,038,384) |
| Realized and Unrealized Gain (Loss) | ||||
|
Net realized gain on investments and foreign currency
transactions |
256,624,172 | 98,718,841 | 7,924,649 | 6,225,848 |
|
Net realized loss on written
options |
— | — | (12,559) | — |
|
Net change in unrealized appreciation(depreciation) on investments and foreign currency
translations |
(15,775,934) | (53,402,467) | (6,192,919) | 15,017,109 |
|
Net change in unrealized appreciation on written
options |
— | — | 37,441 | — |
|
Total realized and unrealized
gain |
240,848,238 | 45,316,374 | 1,756,612 | 21,242,957 |
|
Net Increase in net assets resulting from
operations |
$232,520,908 | $ 45,272,742 | $ 1,958,399 | $20,204,573 |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 38 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Statements of Changes in Net Assets
Statements of Changes in Net Assets
| Meridian Growth Fund | Meridian Contrarian Fund | ||||
| Changes in Net Assets From: | Year
Ended June 30, 2015 |
Year
Ended June 30, 2014 |
Year
Ended June 30, 2015 |
Year
Ended June 30, 2014 | |
| Operations | |||||
|
Net investment
income/(loss) |
$ (8,327,330) | $ (5,858,482) | $ (43,632) | $ 109,511 | |
|
Net realized gain on investments, written options, and foreign currency
transactions |
256,624,172 | 556,304,765 | 98,718,841 | 157,634,506 | |
|
Net change in unrealized appreciation (depreciation) on investments, written options, and foreign currency
translations |
(15,775,934) | (212,344,132) | (53,402,467) | (1,572,341) | |
|
Net increase in net assets resulting from operations and foreign currency
translations |
232,520,908 | 338,102,151 | 45,272,742 | 156,171,676 | |
| Distributions to Shareholders From: | |||||
| Net Investment income: | |||||
|
Legacy
Class |
— | (1,246) | (1,287,678) | (3,275,946) | |
|
Investor
Class |
— | — | — | (41) | |
|
Advisor
Class |
— | — | — | (51) | |
|
Institutional
Class |
— | — | — | — | |
| Net Realized Gains: | |||||
|
Legacy
Class |
(219,516,396) | (598,507,009) | (115,863,711) | (2,568,833) | |
|
Investor
Class |
(3,083,406) | — | (174,302) | — | |
|
Advisor
Class |
(595,614) | — | (155,510) | — | |
|
Institutional
Class |
— | — | — | — | |
|
Decrease in net assets from
distributions |
(223,195,416) | (598,508,255) | (117,481,201) | (5,844,871) | |
| Fund Share Transactions | |||||
|
Net increase (decrease) in net assets resulting from fund share transactions (Note
2) |
(46,379,756) | 192,310,546 | (15,931,502) | (87,941,564) | |
|
Total increase (decrease) in net
assets |
(37,054,264) | (68,095,558) | (88,139,961) | 62,385,241 | |
| Net Assets | |||||
|
Beginning of
Year |
2,044,849,567 | 2,112,945,125 | 766,907,862 | 704,522,621 | |
|
End of
Year* |
$2,007,795,303 | $2,044,849,567 | $ 678,767,901 | $766,907,862 | |
|
*Includes accumulated undistributed (distributions in excess of) net investment
income |
$ — | $ — | $ (777,304) | $ 150,000 | |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 39 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Statements of Changes in Net Assets (continued)
Statements of Changes in Net Assets (continued)
| Meridian Equity Income Fund | Meridian Small Cap Growth Fund | ||||
| Changes in Net Assets From: | Year
Ended June 30, 2015 |
Year
Ended June 30, 2014 |
Year
Ended June 30, 2015 |
For
the Period December 16, 2013 to June 30, 2014 | |
| Operations | |||||
|
Net investment
income/(loss) |
$ 201,787 | $ 553,968 | $ (1,038,384) | $ (49,643) | |
|
Net realized gain on investments, written options, and foreign currency
transactions |
7,912,090 | 2,242,362 | 6,225,848 | 1,120,438 | |
|
Net change in unrealized appreciation (depreciation) on investments, written options, and foreign currency
translations |
(6,155,478) | 2,899,378 | 15,017,109 | 884,741 | |
|
Net increase in net assets resulting from operations and foreign currency
translations |
1,958,399 | 5,695,708 | 20,204,573 | 1,955,536 | |
| Distributions to Shareholders From: | |||||
| Net Investment income: | |||||
|
Legacy
Class |
(664,498) | (500,908) | — | — | |
|
Investor
Class |
(876) | (148) | — | — | |
|
Advisor
Class |
(2,071) | (145) | — | — | |
|
Institutional Class
|
— | — | — | — | |
| Net Realized Gains: | |||||
|
Legacy
Class |
(5,535,693) | — | (836,030) | — | |
|
Investor
Class |
(7,536) | — | (939,505) | — | |
|
Advisor
Class |
(19,039) | — | (556,328) | — | |
|
Institutional Class
|
— | — | — | — | |
|
Decrease in net assets from
distributions |
(6,229,713) | (501,201) | (2,331,863) | — | |
| Fund Share Transactions | |||||
|
Net increase (decrease) in net assets resulting from fund share transactions (Note
2) |
24,525,359 | (184,365) | 212,520,461 | 16,541,912 | |
|
Total increase in net
assets |
20,254,045 | 5,010,142 | 230,393,171 | 18,497,448 | |
| Net Assets | |||||
|
Beginning of
Year |
33,707,300 | 28,697,158 | 18,497,448 | — | |
|
End of
Year* |
$53,961,345 | $33,707,300 | $248,890,619 | $18,497,448 | |
|
*Includes accumulated undistributed net investment
income |
$ — | $ 481,813 | $ — | $ — | |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 40 | www.meridianfund.com |
Table of Contents
Meridian Growth
Fund
Financial Highlights
Financial Highlights
| For the Fiscal Year Ended June 30, | |||||
| Legacy Class | 2015 | 2014 | 2013 | 2012 | 2011 |
| Per Share Operating Performance | |||||
|
Net asset value, beginning of
period |
$ 37.86 | $ 44.31 | $ 45.06 | $ 47.61 | $ 33.94 |
| Income from investment operations | |||||
|
Net investment income
(loss)1 |
(0.15) | (0.11) | 0.05 | 0.10 | 0.08 |
|
Net realized and unrealized
gain |
4.37 | 6.89 | 6.23 | 0.69 | 13.67 |
|
Net increase from investment
operations |
4.22 | 6.78 | 6.28 | 0.79 | 13.75 |
| Less distributions to shareholders: | |||||
|
Distributions from net investment
income |
0.00 | (0.00) 2 | (0.15) | (0.07) | (0.07) |
|
Distributions from net realized capital
gains |
(4.28) | (13.23) | (6.88) | (3.27) | (0.01) |
|
Total distributions to
shareholders |
(4.28) | (13.23) | (7.03) | (3.34) | (0.08) |
|
Redemption
fees |
0.00 2 | 0.00 | 0.00 | 0.00 | 0.00 |
|
Net asset value, end of
period |
$ 37.80 | $ 37.86 | $ 44.31 | $ 45.06 | $ 47.61 |
|
Total
return |
11.85% | 17.31% | 15.54% | 2.45% | 40.51% |
| Ratios to Average Net Assets | |||||
|
Ratio of net investment income (loss) to average net
assets |
(0.41)% | (0.27)% | 0.11% | 0.22% | 0.18% |
|
Ratio of expenses to average net
assets: |
0.84% | 0.86% | 0.87% | 0.85% | 0.81% |
| Supplemental Data | |||||
|
Net Assets, End of Period
(000's) |
$1,937,346 | $2,021,197 | $2,112,945 | $2,484,084 | $2,615,082 |
|
Portfolio Turnover
Rate |
46% | 96% | 37% | 25% | 26% |
| 1 | Per share net investment income has been calculated using the average daily shares method. |
| 2 | Less than $0.005 per share. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 41 | www.meridianfund.com |
Table of Contents
Meridian Growth
Fund
Financial Highlights
Financial Highlights
| For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 |
For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 | ||||
| Investor
Class |
Investor
Class1 |
Advisor
Class |
Advisor
Class1 | ||||
| Per Share Operating Performance | |||||||
|
Net asset value, beginning of
period |
$ 37.78 | $ 35.67 | $ 37.72 | $ 35.67 | |||
| Income from investment operations | |||||||
|
Net investment
loss2 |
(0.27) | (0.16) | (0.41) | (0.21) | |||
|
Net realized and unrealized
gain |
4.37 | 2.27 | 4.33 | 2.26 | |||
|
Net increase from investment
operations |
4.10 | 2.11 | 3.92 | 2.05 | |||
| Less distributions to shareholders: | |||||||
|
Distributions from net realized capital
gains |
(4.28) | (0.00) 3 | (4.28) | (0.00) 3 | |||
|
Total distributions to
shareholders |
(4.28) | (0.00) 3 | (4.28) | (0.00) 3 | |||
|
Redemption
fees |
0.01 | 0.00 | 0.01 | 0.00 | |||
|
Net asset value, end of
period |
$ 37.61 | $ 37.78 | $ 37.37 | $ 37.72 | |||
|
Total
return |
11.56% | 5.92% 4 | 11.08% | 5.75% 4 | |||
| Ratios to Average Net Assets | |||||||
|
Ratio of net investment loss to average net
assets |
(0.73)% | (0.70)% 5 | (1.11)% | (0.93)% 5 | |||
|
Ratio of expenses to average net
assets: |
|||||||
|
Before fees
waived |
1.16% | 1.30% 5 | 1.69% | 2.00% 5 | |||
|
After fees
waived6 |
1.16% | 1.30% 5 | 1.55% | 1.55% 5 | |||
| Supplemental Data | |||||||
|
Net Assets, End of Period
(000's) |
$ 42,062 | $ 18,749 | $ 8,812 | $ 4,904 | |||
|
Portfolio Turnover
Rate |
46% | 96% 4 | 46% | 96% 4 | |||
| 1 | Commenced operations on November 15, 2013. |
| 2 | Per share net investment income has been calculated using the average daily shares method. |
| 3 | Less than $0.005 per share. |
| 4 | Not Annualized. |
| 5 | Annualized. |
| 6 | See Note 5 to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 42 | www.meridianfund.com |
Table of Contents
Meridian Growth
Fund
Financial Highlights
Financial Highlights
| Institutional Class | For
the Period Ended June 30, 20151 |
| Per Share Operating Performance | |
|
Net asset value, beginning of
period |
$ 36.44 |
| Income from investment operations | |
|
Net investment
loss2 |
(0.04) |
|
Net realized and unrealized
gain |
1.39 |
|
Net increase from investment
operations |
1.35 |
| Less distributions to shareholders: | |
|
Distributions from net investment
income |
0.00 |
|
Distributions from net realized capital
gains |
0.00 |
|
Total distributions to
shareholders |
0.00 |
|
Net asset value, end of
period |
$ 37.79 |
|
Total
return |
3.70% 3 |
| Ratios to Average Net Assets | |
|
Ratio of net investment loss to average net
assets |
(0.21)% 4 |
|
Ratio of expenses to average net
assets: |
|
|
Before fees
waived |
1.15% 4 |
|
After fees
waived5 |
0.90% 4 |
| Supplemental Data | |
|
Net Assets, End of Period
(000's) |
$ 19,575 |
|
Portfolio Turnover
Rate |
46% 3 |
| 1 | Commenced operations on December 24, 2014. |
| 2 | Per share net investment income has been calculated using the average daily shares method. |
| 3 | Not Annualized. |
| 4 | Annualized. |
| 5 | See Note 5 to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 43 | www.meridianfund.com |
Table of Contents
Meridian
Contrarian Fund
Financial Highlights
Financial Highlights
| For the Fiscal Year Ended June 30, | |||||
| Legacy Class | 2015 | 2014 | 2013 | 2012 | 2011 |
| Per Share Operating Performance | |||||
|
Net asset value, beginning of
period |
$ 45.52 | $ 37.20 | $ 30.60 | $ 29.59 | $ 22.80 |
| Income from investment operations | |||||
|
Net investment income
(loss)1 |
(0.00) 2 | 0.01 | 0.14 | 0.09 | 0.10 |
|
Net realized and unrealized
gain |
2.66 | 8.63 | 6.57 | 1.05 3 | 6.77 |
|
Net increase from investment
operations |
2.66 | 8.64 | 6.71 | 1.14 | 6.87 |
| Less distributions to shareholders: | |||||
|
Distributions from net investment
income |
(0.09) | (0.18) | (0.11) | (0.13) | (0.08) |
|
Distributions from net realized capital
gains |
(7.65) | (0.14) | 0.00 | 0.00 | 0.00 |
|
Total distributions to
shareholders |
(7.74) | (0.32) | (0.11) | (0.13) | (0.08) |
|
Redemption
fees |
0.00 2 | 0.00 | 0.00 | 0.00 | 0.00 |
|
Net asset value, end of
period |
$ 40.44 | $ 45.52 | $ 37.20 | $ 30.60 | $ 29.59 |
|
Total
return |
6.84% | 23.31% | 21.98% | 3.89% 3 | 30.13% |
| Ratios to Average Net Assets | |||||
|
Ratio of net investment income (loss) to average net
assets |
(0.01)% | 0.01% | 0.41% | 0.31% | 0.37% |
|
Ratio of expenses to average net
assets: |
1.11% | 1.13% | 1.16% | 1.14% | 1.09% |
| Supplemental Data | |||||
|
Net Assets, End of Period
(000's) |
$677,138 | $764,882 | $704,523 | $688,467 | $869,312 |
|
Portfolio Turnover
Rate |
76% | 67% | 55% | 20% | 38% |
| 1 | Per share net investment income has been calculated using the average daily shares method. |
| 2 | Less than $0.005 per share. |
| 3 | Includes a gain resulting from litigation payments on securities owned in a prior year. Without these gains, the net realized gains on investments per share would have been $0.99, and the total return would have been 3.69%. |
The accompanying notes are an
integral part of the financial statements.
| Meridian Funds | 44 | www.meridianfund.com |
Table of Contents
Meridian
Contrarian Fund
Financial Highlights
Financial Highlights
| For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 |
For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 | ||||
| Investor
Class |
Investor
Class1 |
Advisor
Class |
Advisor
Class1 | ||||
| Per Share Operating Performance | |||||||
|
Net asset value, beginning of
period |
$ 45.47 | $ 42.64 | $ 45.41 | $ 42.64 | |||
| Income from investment operations | |||||||
|
Net investment
loss2 |
(0.09) | (0.02) | (0.22) | (0.08) | |||
|
Net realized and unrealized
gain |
2.66 | 3.03 | 2.68 | 3.02 | |||
|
Net increase from investment
operations |
2.57 | 3.01 | 2.46 | 2.94 | |||
| Less distributions to shareholders: | |||||||
|
Distributions from net investment
income |
0.00 | (0.18) | 0.00 | (0.17) | |||
|
Distributions from net realized capital
gains |
(7.65) | (0.00) | (7.65) | (0.00) | |||
|
Total distributions to
shareholders |
(7.65) | (0.18) | (7.65) | (0.17) | |||
|
Redemption
fees |
0.01 | 0.00 | 0.00 | 0.00 | |||
|
Net asset value, end of
period |
$ 40.40 | $ 45.47 | $ 40.22 | $ 45.41 | |||
|
Total
return |
6.67% | 7.08% 3 | 6.38% | 6.91% 3 | |||
| Ratios to Average Net Assets | |||||||
|
Ratio of net investment loss to average net
assets |
(0.21)% | (0.09)% 4 | (0.52)% | (0.30)% 4 | |||
|
Ratio of expenses to average net
assets: |
|||||||
|
Before fees
waived |
2.34% | 3.51% 4 | 3.46% | 7.46% 4 | |||
|
After fees
waived5 |
1.35% | 1.35% 4 | 1.60% | 1.60% 4 | |||
| Supplemental Data | |||||||
|
Net Assets, End of Period
(000's) |
$ 1,008 | $ 1,564 | $ 622 | $ 462 | |||
|
Portfolio Turnover
Rate |
76% | 67% 3 | 76% | 67% 3 | |||
| 1 | Commenced operations on November 15, 2013. |
| 2 | Per share net investment income has been calculated using the average daily shares method. |
| 3 | Not Annualized. |
| 4 | Annualized. |
| 5 | See Note 5 to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 45 | www.meridianfund.com |
Table of Contents
Meridian Equity
Income Fund
Financial Highlights
Financial Highlights
| For the Fiscal Year Ended June 30, | |||||
| Legacy Class | 2015 | 2014 | 2013 | 2012 | 2011 |
| Per Share Operating Performance | |||||
|
Net asset value, beginning of
period |
$ 14.59 | $ 12.35 | $ 10.71 | $ 10.61 | $ 8.51 |
| Income from investment operations | |||||
|
Net investment income
(loss)1 |
0.12 | 0.24 | 0.24 | 0.22 | 0.20 |
|
Net realized and unrealized
gain |
0.47 | 2.22 | 1.68 | 0.09 | 2.11 |
|
Net increase from investment
operations |
0.59 | 2.46 | 1.92 | 0.31 | 2.31 |
| Less distributions to shareholders: | |||||
|
Distributions from net investment
income |
(0.25) | (0.22) | (0.28) | (0.21) | (0.21) |
|
Distributions from net realized capital
gains |
(2.42) | 0.00 | 0.00 | 0.00 | 0.00 |
|
Total distributions to
shareholders |
(2.67) | (0.22) | (0.28) | (0.21) | (0.21) |
|
Redemption
fees |
0.00 2 | 0.00 2 | 0.00 | 0.00 | 0.00 |
|
Net asset value, end of
period |
$ 12.51 | $ 14.59 | $ 12.35 | $ 10.71 | $ 10.61 |
|
Total
return |
4.46% | 20.04% | 18.28% | 3.09% | 27.30% |
| Ratios to Average Net Assets | |||||
|
Ratio of net investment income to average net
assets |
0.88% | 1.75% | 2.08% | 2.17% | 2.04% |
|
Ratio of expenses to average net
assets: |
|||||
|
Before fees
waived |
1.33% | 1.37% | 1.53% | 1.41% | 1.25% |
|
After fees
waived3 |
1.25% | 1.25% | 1.25% | 1.25% | 1.25% 4 |
| Supplemental Data | |||||
|
Net Assets, End of Period
(000's) |
$53,125 | $ 33,649 | $ 28,697 | $30,744 | $ 35,644 |
|
Portfolio Turnover
Rate |
266% | 35% | 44% | 31% | 29% |
| 1 | Per share net investment income has been calculated using the average daily shares method. |
| 2 | Less than $0.005 per share. |
| 3 | See Note 5 to Financial Statements. |
| 4 | Includes fees waived, which were less than 0.01%. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 46 | www.meridianfund.com |
Table of Contents
Meridian Equity
Income Fund
Financial Highlights
Financial Highlights
| For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 |
For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 | ||||
| Investor
Class |
Investor
Class1 |
Advisor
Class |
Advisor
Class1 | ||||
| Per Share Operating Performance | |||||||
|
Net asset value, beginning of
period |
$ 14.60 | $ 13.87 | $ 14.58 | $ 13.87 | |||
| Income from investment operations | |||||||
|
Net investment income
(loss)2 |
(0.02) | 0.15 | (0.02) | 0.13 | |||
|
Net realized and unrealized
gain |
0.61 | 0.79 | 0.58 | 0.78 | |||
|
Net increase from investment
operations |
0.59 | 0.94 | 0.56 | 0.91 | |||
| Less distributions to shareholders: | |||||||
|
Distributions from net investment
income |
(0.24) | (0.21) | (0.22) | (0.20) | |||
|
Distributions from net realized capital
gains |
(2.42) | (0.00) | (2.42) | (0.00) | |||
|
Total distributions to
shareholders |
(2.66) | (0.21) | (2.64) | (0.20) | |||
|
Net asset value, end of
period |
$ 12.53 | $ 14.60 | $ 12.50 | $ 14.58 | |||
|
Total
return |
4.44% | 6.87% 3 | 4.24% | 6.69% 3 | |||
| Ratios to Average Net Assets | |||||||
|
Ratio of net investment income (loss) to average net
assets |
(0.13)% | 1.72% 4 | (0.11)% | 1.55% 4 | |||
|
Ratio of expenses to average net
assets: |
|||||||
|
Before fees
waived |
16.83% | 39.23% 4 | 7.46% | 132.38% 4 | |||
|
After fees
waived5 |
1.35% | 1.35% 4 | 1.60% | 1.60% 4 | |||
| Supplemental Data | |||||||
|
Net Assets, End of Period
(000's) |
$ 335 | $ 45 | $ 501 | $ 13 | |||
|
Portfolio Turnover
Rate |
266% | 35% 3 | 266% | 35% 3 | |||
| 1 | Commenced operations on November 15, 2013. |
| 2 | Per share net investment income has been calculated using the average daily shares method. |
| 3 | Not Annualized. |
| 4 | Annualized. |
| 5 | See Note 5 to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 47 | www.meridianfund.com |
Table of Contents
Meridian Small
Cap Growth Fund
Financial Highlights
Financial Highlights
| For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 |
For
the Fiscal Year Ended June 30,2015 |
For
the Period Ended June 30,2014 | ||||
| Legacy
Class |
Legacy
Class1 |
Investor
Class |
Investor
Class1 | ||||
| Per Share Operating Performance | |||||||
|
Net asset value, beginning of
period |
$ 11.65 | $ 10.00 | $ 11.65 | $ 10.00 | |||
| Income from investment operations | |||||||
|
Net investment
loss2 |
(0.09) | (0.04) | (0.10) | (0.04) | |||
|
Net realized and unrealized
gain |
1.72 | 1.69 | 1.73 | 1.69 | |||
|
Net increase from investment
operations |
1.63 | 1.65 | 1.63 | 1.65 | |||
| Less distributions to shareholders: | |||||||
|
Distributions from net investment
income |
0.00 | 0.00 | (0.01) | 0.00 | |||
|
Distributions from net realized capital
gains |
(0.30) | 0.00 | (0.30) | 0.00 | |||
|
Total distributions to
shareholders |
(0.30) | 0.00 | (0.31) | 0.00 | |||
|
Redemption
fees |
0.00 3 | 0.00 | 0.00 | 0.00 | |||
|
Net asset value, end of
period |
$ 12.98 | $ 11.65 | $ 12.97 | $ 11.65 | |||
|
Total
return |
14.23% | 16.50% 4 | 14.14% | 16.50% 4 | |||
| Ratios to Average Net Assets | |||||||
|
Ratio of net investment loss to average net
assets |
(0.69)% | (0.61)% 5 | (0.83)% | (0.70)% 5 | |||
|
Ratio of expenses to average net
assets: |
|||||||
|
Before fees
waived |
1.24% | 2.35% 5 | 1.33% | 3.63% 5 | |||
|
After fees
waived6 |
1.20% | 1.20% 5 | 1.33% | 1.35% 5 | |||
| Supplemental Data | |||||||
|
Net Assets, End of Period
(000's) |
$ 59,459 | $ 9,839 | $131,211 | $ 2,135 | |||
|
Portfolio Turnover
Rate |
45% | 78% 4 | 44% | 78% 4 | |||
| 1 | Commenced operations on December 16, 2013. |
| 2 | Per share net investment income has been calculated using the average daily shares method. |
| 3 | Less than $0.005 per share. |
| 4 | Not Annualized. |
| 5 | Annualized. |
| 6 | See Note 5 to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 48 | www.meridianfund.com |
Table of Contents
Meridian Small
Cap Growth Fund
Financial Highlights
Financial Highlights
| For
The Fiscal Year Ended June 30,2015 |
For
The Period Ended June 30,2014 |
For
The Period Ended June 30,2015 | |||
| Advisor
Class |
Advisor
Class1 |
Institutional
Class2 | |||
| Per Share Operating Performance | |||||
|
Net asset value, beginning of
period |
$ 11.63 | $ 10.00 | $ 12.23 | ||
| Income from investment operations | |||||
|
Net investment income
(loss)3 |
(0.13) | (0.06) | (0.02) | ||
|
Net realized and unrealized
gain |
1.71 | 1.69 | 0.77 | ||
|
Net increase from investment
operations |
1.58 | 1.63 | 0.75 | ||
| Less distributions to shareholders: | |||||
|
Distributions from net realized capital
gains |
(0.30) | 0.00 | 0.00 | ||
|
Total distributions to
shareholders |
(0.30) | 0.00 | 0.00 | ||
|
Redemption
fees |
0.00 4 | 0.00 | 0.00 | ||
|
Net asset value, end of
period |
$ 12.91 | $ 11.63 | $ 12.98 | ||
|
Total
return |
13.82% | 16.30% 5 | 6.13% 5 | ||
| Ratios to Average Net Assets | |||||
|
Ratio of net investment loss to average net
assets |
(1.09)% | (1.01)% 6 | (0.29)% 6 | ||
|
Ratio of expenses to average net
assets: |
|||||
|
Before fees
waived |
1.69% | 2.99% 6 | 2.03% 6 | ||
|
After fees
waived7 |
1.60% | 1.60% 6 | 1.10% 6 | ||
| Supplemental Data | |||||
|
Net Assets, End of Period
(000's) |
$ 45,186 | $ 6,524 | $ 13,035 | ||
|
Portfolio Turnover
Rate |
44% | 78% 5 | 44% 5 | ||
| 1 | Commenced operations on December 16, 2013. |
| 2 | Commenced operations on December 24, 2014. |
| 3 | Per share net investment income has been calculated using the average daily shares method. |
| 4 | Less than $0.005 per share. |
| 5 | Not Annualized. |
| 6 | Annualized. |
| 7 | See Note 5 to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
| Meridian Funds | 49 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements
Notes to Financial Statements
For the Year ended
June 30, 2015
| 1. | Organization and Significant Accounting Policies: Meridian Fund, Inc. (the “Meridian Funds” or the “Company”) comprises the following separate series: the Meridian Growth Fund (the “Growth Fund”), the Meridian Contrarian Fund (the “Contrarian Fund”), the Meridian Equity Income Fund (the “Equity Income Fund”), and the Meridian Small Cap Growth Fund (the “Small Cap Growth Fund”) (each a “Fund” and collectively, the “Funds”). The Company is registered as an open-end investment company under the Investment Company Act of 1940 and is organized as a Maryland Corporation. |
| The Meridian Funds offer four share classes: Legacy Class Shares, Investor Class Shares, Advisor Class Shares and Institutional Class Shares. As of June 30, 2015, Institutional Class Shares of the Meridian Equity Income Fund and Meridian Contrarian Fund are not currently being offered for sale. Legacy Class Shares are available to investors who have continuously held an investment in any Meridian Fund prior to November 15, 2013. Institutional Class Shares are available to certain eligible investors including endowments, foundations and qualified retirement plans. Advisor Class and Investor Class Shares are available for purchase through financial intermediary platforms. All Classes are sold without a sales charge and have identical rights and privileges with respect to the Fund in general, and exclusive voting rights with respect to Class specific matters. Net Asset Value per share may differ by class due to each class having its own expenses directly attributable to that class. Investor Class and Advisor Class Shares are subject to shareholder servicing and sub-transfer agent fees. Advisor Class Shares are also subject to certain expenses related to the distribution of these shares. See Note 11 for further information on additional share classes and changes to shareholder servicing and distribution plans. | |
| The primary investment objectives of the Growth Fund and Contrarian Fund are to seek long-term growth of capital. | |
| The primary investment objective of the Equity Income Fund is to seek long-term growth of capital along with income as a component of total return. | |
| The primary investment objective of the Small Cap Growth Fund is to seek long-term growth of capital by investing primarily in equity securities of small capitalization companies. | |
| The Funds’ Board of Directors (the “Board”), and the Board and shareholders of Jordan Opportunity Fund (the “Target Fund”), approved the reorganization of the Target Fund into the Equity Income Fund pursuant to which the Equity Income Fund acquired substantially all of the assets and assumed substantially all of the liabilities of the Target Fund in exchange for an equal aggregate value of newly-issued Legacy Class shares of the Equity Income Fund. | |
| Each shareholder of the Target Fund received Legacy Class shares of the Equity Income Fund in an amount equal to the aggregate net asset value of such shareholder’s Target Fund shares, as determined at the close of business on June 12, 2015, less the costs of the Target Fund’s reorganization. | |
| The reorganization was accomplished by a tax-free exchange of shares of the Equity Income Fund in the following amounts and at the following conversion ratios: |
| Target Fund | Shares
Prior To Reorganization |
Conversion
Ratio |
Shares
of Equity Income Fund | ||
| Jordan Opportunity Fund | 2,510,536 | 1.327805 | 3,333,502 |
The Target
Fund’s net assets and composition of net assets on June 12, 2015, the date of the reorganization, were as follows:
| Target Fund | Paid-In
Capital |
Distributions
in Excess of Net Investment Income |
Realized
Gain/Loss |
Net
Unrealized Appreciation/ Depreciation |
Net Assets | ||||
| Jordan Opportunity Fund | $40,461,298 | $(312,518) | $324,647 | $1,636,531 | $42,109,958 |
For financial
reporting purposes, assets received and shares issued by the Equity Income Fund were recorded at fair value. However, cost basis of the investments being received from the Target Fund were carried forward to align ongoing reporting of the Equity
Income Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
| Meridian Funds | 50 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
The net assets of the Equity Income Fund
before the acquisition were $12,805,664. The aggregate net assets of the Equity Income Fund immediately after the acquisition amounted to $54,027,472. The Target Fund’s fair value and cost of investments prior to the reorganization were as
follows:
| Target Fund | Fair Value of Investments | Cost of Investments | |
| Jordan Opportunity Fund | $42,122,077 | $40,485,547 |
The purpose of
this transaction was to combine two separately managed funds with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was
effective on June 15, 2015.
Assuming
the acquisition had been completed on July 1, 2014 the beginning of the fiscal reporting period of the Equity Income Fund, the pro forma results of operations for the period ended June 30, 2015, are as follows:
| • | Net investment loss: $(149,432) |
| • | Net realized and change in unrealized gain/loss on investments: $4,396,282 |
| • | Net increase in net assets resulting from operations: $4,246,850 |
Because the combined investment portfolio
has been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate amounts of revenue and earnings of the Target Fund that have been included in the Equity Income Fund’s Statement of
Operations since June 12, 2015.
Reorganization costs incurred by the Equity
Income Fund in connection with the reorganization were paid by Arrowpoint Asset Management, LLC (the “Adviser”).
The following significant accounting
policies are consistently followed by the Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Each Fund is considered an
investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
| a. | Share Valuation: The NAV of each Fund is calculated by dividing the sum of the value of the securities held by each Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses), by the total number of shares outstanding of each Fund. The result is rounded to the nearest cent. Each Funds’ shares will not be priced on the days in which the New York Stock Exchange (NYSE) is closed for trading. |
| b. | Investment Valuations: Equity 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. |
| Fixed income (debt) securities with original or remaining maturities in excess of 60 days are valued at the mean of their quoted bid and asked prices. Short-term debt securities with 60 days or less to maturity are valued at amortized cost which approximates fair market value. | |
| Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. | |
| Securities and other assets for which reliable market quotations are not readily available or for which a significant event has occurred since the time of the most recent market quotation, will be valued based upon other available factors deemed relevant by the Adviser under the guidelines established by, and under the general supervision and responsibility of, the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis. | |
| c. | Fair Value Measurements: As described in Note 1.b. above, the Funds utilize various methods to determine and |
| Meridian Funds | 51 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| measure the fair value of investment securities on a recurring basis. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3) that are significant to the fair value instrument. The three levels of the fair value hierarchy are described below: | |
| Level 1 - quoted prices in active markets for identical securities; | |
| Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | |
| Level 3 - significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). | |
| The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. The summary of inputs used to value the Funds’ securities as of June 30, 2015 is as follows: |
| Valuation Inputs | Growth
Fund |
Contrarian
Fund |
Equity
Income Fund |
Small
Cap Growth Fund | ||||
|
Level 1 - Quoted
Prices* |
$1,819,512,500 | $620,831,849 | $41,594,673 | $224,066,114 | ||||
|
Level 2 - Other Significant Observable
Inputs |
— | — | 504,375 | — | ||||
|
Level 3 - Significant Unobservable
Inputs |
— | — | — | — | ||||
|
Total Market Value of
Investments |
$1,819,512,500 | $620,831,849 | $42,099,048 | $224,066,114 | ||||
|
Call Options Written (Level
1) |
$ — | $ — | $ (18,390) | $ — |
| * | Level 1 investments are comprised of common stock with industry classifications as defined on the Schedule of Investments. |
The Funds recognize transfers between
levels as of the end of the period. During the fiscal year ended June 30, 2015 there were no reportable transfers between levels.
| d. | Investment Transactions and Investment Income: 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. |
| e. | Option writing: When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option. |
| Meridian Funds | 52 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| f. | Allocation of Income, Expenses, Gains and Losses: Income, gains and losses are allocated on a daily basis to each share class based on the relative proportion of the net assets of the class to each Fund’s total net assets. Expenses are allocated on the basis of relative net assets of the class to the Fund, or if an expense is specific to a share class, to that specific share class. |
| g. | Use of Estimates: The preparation of financial statements in accordance with accounting principals generally accepted in the U.S. (“GAAP”) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and revenue and expenses at the date of the financial statements. Actual amounts could differ from those estimates, and such differences could be significant. |
| h. | Foreign Currency Translation: Securities denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of such securities and related dividend and interest income are converted into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such translations. The Funds do not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments as reported in the Statement of Operations. |
| i. | Federal Income Taxes: It is the Funds’ policy to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute all of their taxable income to their shareholders; therefore, no federal income tax provision is required. |
| j. | Distributions to Shareholders: The Funds record distributions to shareholders on the ex-dividend 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 GAAP. 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. | |
| k. | Guarantees and Indemnification: 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. | Capital Shares Transactions: Transactions in capital shares were as follows: |
| Meridian Funds | 53 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| Year
Ended June 30, 20151 |
Year
Ended June 30, 20142 | |||||
| Shares | Amount | Shares | Amount | |||
| Growth Fund: | ||||||
| Legacy Class | ||||||
|
Shares
sold |
6,497,797 | $ 240,532,008 | 10,014,988 | $ 393,045,340 | ||
|
Shares issued from reinvestment of
distributions |
6,062,601 | 215,889,243 | 16,379,845 | 581,156,891 | ||
|
Redemption
fees |
— | 20,823 | — | 57,692 | ||
|
Shares
redeemed |
(14,697,527) | (549,202,740) | (20,688,964) | (804,765,033) | ||
|
Net
increase/(decrease) |
(2,137,129) | $ (92,760,666) | 5,705,869 | $ 169,494,890 | ||
| Investor Class | ||||||
|
Shares
sold |
920,727 | $ 34,143,889 | 544,259 | $ 20,321,746 | ||
|
Shares issued from reinvestment of
distributions |
83,780 | 2,973,367 | — | — | ||
|
Redemption
fees |
— | 9,917 | — | 3,821 | ||
|
Shares
redeemed |
(382,401) | (14,102,596) | (47,960) | (2,225,053) | ||
|
Net
increase |
622,106 | $ 23,024,577 | 496,299 | $ 18,100,514 | ||
| Advisor Class | ||||||
|
Shares
sold |
176,885 | $ 6,547,088 | 146,597 | $ 5,320,397 | ||
|
Shares issued from reinvestment of
distributions |
15,188 | 536,592 | — | — | ||
|
Redemption
fees |
— | 1,509 | — | 1,301 | ||
|
Shares
redeemed |
(86,276) | (3,194,129) | (16,577) | (606,556) | ||
|
Net
increase |
105,797 | $ 3,891,060 | 130,020 | $ 4,715,142 | ||
| Institutional Class | ||||||
|
Shares
sold |
521,290 | $ 19,592,273 | — | $ — | ||
|
Shares issued from reinvestment of
distributions |
— | — | — | — | ||
|
Shares
redeemed |
(3,366) | (127,000) | — | — | ||
|
Net
increase |
517,924 | $ 19,465,273 | — | $ — | ||
| Meridian Funds | 54 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| Year
Ended June 30, 20151 |
Year
Ended June 30, 20142 | |||||
| Shares | Amount | Shares | Amount | |||
| Contrarian Fund: | ||||||
| Legacy Class | ||||||
|
Shares
sold |
126,877 | $ 5,277,730 | 241,010 | $ 10,132,026 | ||
|
Shares issued from reinvestment of
distributions |
2,985,897 | 113,941,819 | 134,284 | 5,700,050 | ||
|
Redemption
fees |
— | 8,643 | — | 10,129 | ||
|
Shares
redeemed |
(3,171,397) | (134,972,919) | (2,512,845) | (105,721,357) | ||
|
Net
decrease |
(58,623) | $ (15,744,727) | (2,137,551) | $ (89,879,152) | ||
| Investor Class | ||||||
|
Shares
sold |
3,360 | $ 141,443 | 34,399 | $ 1,500,479 | ||
|
Shares issued from reinvestment of
distributions |
3,732 | 142,308 | 1 | 54 | ||
|
Redemption
fees |
— | 139 | — | — | ||
|
Shares
redeemed |
(16,549) | (727,305) | — | — | ||
|
Net
increase/(decrease) |
(9,457) | $ (443,415) | 34,400 | $ 1,500,533 | ||
| Advisor Class | ||||||
|
Shares
sold |
13,232 | $ 582,725 | 10,182 | $ 438,766 | ||
|
Shares issued from reinvestment of
distributions |
2,821 | 107,325 | 1 | 39 | ||
|
Shares
redeemed |
(10,759) | (433,410) | (18) | (1,750) | ||
|
Net
increase |
5,294 | $ 256,640 | 10,165 | $ 437,055 | ||
| Equity Income Fund: | ||||||
| Legacy Class | ||||||
|
Shares
sold |
3,698,867 3 | $45,005,167 3 | 53,466 | $ 735,117 | ||
|
Shares issued from reinvestment of
distributions |
490,554 | 6,112,916 | 36,708 | 494,457 | ||
|
Redemption
fees |
— | 198 | — | 542 | ||
|
Shares
redeemed |
(2,249,917) | (27,399,494) | (107,442) | (1,469,985) | ||
|
Net
increase/(decrease) |
1,939,504 | $ 23,718,787 | (17,268) | $ (239,869) | ||
| Investor Class | ||||||
|
Shares
sold |
22,979 | $ 291,957 | 3,098 | $ 43,105 | ||
|
Shares issued from reinvestment of
distributions |
674 | 8,412 | 11 | 148 | ||
|
Shares
redeemed |
— | — | — | — | ||
|
Net
increase |
23,653 | $ 300,369 | 3,109 | $ 43,253 | ||
| Advisor Class | ||||||
|
Shares
sold |
48,390 | $ 634,811 | 885 | $ 12,285 | ||
|
Shares issued from reinvestment of
distributions |
1,696 | 21,110 | 11 | 145 | ||
|
Redemption
fees |
— | — | — | 2 | ||
|
Shares
redeemed |
(10,910) | (149,718) | (13) | (181) | ||
|
Net
increase |
39,176 | $ 506,203 | 883 | $ 12,251 | ||
| Meridian Funds | 55 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| Year
Ended June 30, 20151 |
Year
Ended June 30, 20142 | |||||
| Shares | Amount | Shares | Amount | |||
| Small Cap Growth Fund: | ||||||
| Legacy Class | ||||||
|
Shares
sold |
3,852,242 | $ 46,370,426 | 844,877 | $8,575,976 | ||
|
Shares issued from reinvestment of
distributions |
70,018 | 835,314 | — | — | ||
|
Redemption
fees |
— | 1,241 | — | — | ||
|
Shares
redeemed |
(185,662) | (2,261,922) | (339) | (3,739) | ||
|
Net
increase |
3,736,598 | $ 44,945,059 | 844,538 | $8,572,237 | ||
| Investor Class | ||||||
|
Shares
sold |
11,475,007 | $138,940,112 | 183,546 | $1,977,647 | ||
|
Shares issued from reinvestment of
distributions |
65,822 | 784,601 | — | — | ||
|
Redemption
fees |
— | 58,412 | — | — | ||
|
Shares
redeemed |
(1,610,523) | (20,312,792) | (241) | (2,514) | ||
|
Net
increase |
9,930,306 | $119,470,333 | 183,305 | $1,975,133 | ||
| Advisor Class | ||||||
|
Shares
sold |
3,469,892 | $ 41,768,471 | 606,032 | $6,471,230 | ||
|
Shares issued from reinvestment of
distributions |
45,993 | 546,859 | — | — | ||
|
Redemption
fees |
— | 4,039 | — | 588 | ||
|
Shares
redeemed |
(576,238) | (7,063,995) | (45,099) | (477,276) | ||
|
Net
increase |
2,939,647 | $ 35,255,374 | 560,933 | $5,994,542 | ||
| Institutional Class | ||||||
|
Shares
sold |
1,008,763 | $ 12,908,934 | — | $ — | ||
|
Shares issued from reinvestment of
distributions |
— | — | — | — | ||
|
Shares
redeemed |
(4,797) | (59,239) | — | — | ||
|
Net
increase |
1,003,966 | $ 12,849,695 | — | $ — | ||
| 1 | For the twelve months ending June 30, 2015 for Legacy, Investor, and Advisor Class Shares of all Funds. For the period from December 24, 2014 for the Institutional Class Shares for the Growth and Small Cap Growth Funds. |
| 2 | For the twelve month period ending June 30, 2014 for Legacy Class Shares of the Growth, Contrarian, and Equity Income Funds. For the period from November 15, 2013 for Institutional and Advisor Class Shares for the Growth, Contrarian, and Equity Income Funds. For the period from December 16, 2013 for all Classes of Small Cap Growth Fund. |
| 3 | Includes shares and dollars issued in connection with reorganization of the Target Fund in the amount of 3,333,502 shares and $42,122,077, respectively. |
| 3. | Investment Transactions: The cost of investments purchased and the proceeds from sales of investments, excluding short-term securities and U.S. government obligations, for the year ended June 30, 2015, were as follows: |
| Purchases | Proceeds from Sales | ||
|
Growth
Fund |
$843,925,650 | $1,154,056,746 | |
|
Contrarian
Fund |
$499,900,865 | $ 630,708,056 | |
|
Equity Income
Fund |
$ 63,350,817 | $ 60,041,566 | |
|
Small Cap Growth
Fund |
$233,786,260 | $ 47,536,966 |
| Meridian Funds | 56 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| 4. | Options: Certain Funds purchase and write call and put options to increase or decrease their exposure to underlying instruments (including equity risk, interest rate risk and/or commodity price risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Funds purchase (write) an option, an amount equal to the premium paid (received) by the Funds is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Funds enter into a closing transaction), the Funds realize a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Funds write a call option, such option is “covered,” meaning that the Funds hold the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation. |
| In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Funds may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security when it otherwise would not, or at a price different from the current market value. | |
| Transactions in options written during the year ended June 30, 2015, were as follows: |
| Meridian Equity Income Fund | Number
of Contracts |
Premiums
Received | |
|
Options outstanding at June 30,
2014 |
— | $ — | |
|
Options
written |
567 | 250,571 | |
|
Options terminated in closing purchase
transactions |
(486) | (193,507) | |
|
Options
expired |
(9) | (1,233) | |
|
Options
exercised |
— | — | |
|
Options outstanding at June 30,
2015 |
72 | $ 55,831 |
As of June 30, 2015, the value of equity
option positions written can be found in the Statement of Assets and Liabilities under Liabilities, Call options written. For the year ended June 30, 2015, the effect of equity option positions written can be found in the Statement of Operations
under Realized and Unrealized Gain (Loss), Net realized loss on written options and Net change in unrealized appreciation on written options.
| 5. | Market and Debt Securities Risk |
| In the normal course of business, each Funds’ investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and debt securities risk. Each Fund’s prospectus provides details of these and other types of risk. | |
| Market Risk: Market risk refers to the possibility that the market values of securities or other investments that a Fund holds will fall, sometimes rapidly or unpredictably, or fail to rise. Security values may fall or fail to rise because of a variety of factors affecting (or the market’s perception of) individual companies or other issuers (e.g., an unfavorable earnings report), industries or sectors, or the market as a whole, reducing the value of an investment in a Fund. Accordingly, an investment in the Fund could lose money over short or even long periods. The market values of the securities the Fund holds also can be affected by changes (or perceived changes) in U.S. or foreign economies and financial markets, and the liquidity of these securities, among other factors. In general, equity securities tend to have greater price volatility than debt securities. In addition, stock prices may be sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. As a result, the value of your investments in a Fund may be more or less than the value of your purchase price. |
| Meridian Funds | 57 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| Debt Securities Risk: Each Fund may invest in debt securities of both governmental and corporate issuers. A decline in prevailing levels of interest rates generally increases the value of debt securities in a Fund’s portfolio, while an increase in rates usually reduces the value of those securities. The value of a Fund’s debt securities, including bonds and convertible securities, are affected by movements in interest rates; if interest rates rise, the value of these securities may fall. Generally, the longer the average maturity of a debt security, the greater the change in its value. As a result, to the extent that a Fund invests in debt securities, interest rate fluctuations will affect the Fund’s net asset value, but not the income it receives from debt securities it owns. Debt securities are also subject to credit, liquidity risk and prepayment and extension risk. Credit risk is the risk that the entity that issued a debt security may become unable to make payments of principal and interest, and includes the risk of default. Liquidity risk is the risk that a Fund may not be able to sell portfolio securities because there are too few buyers for them. Prepayment and extension risk is the risk that a loan, bond or other security might be called or otherwise converted, prepaid or redeemed before maturity. If a loan or security is converted, prepaid or redeemed before maturity, particularly during a time of declining interest rates or spreads, the portfolio managers may not be able to invest the proceeds in securities or loans providing as high a level of income, resulting in a reduced yield to a Fund. Conversely, as interest rates rise or spreads widen, the likelihood of prepayment decreases. The portfolio managers may be unable to capitalize on securities with higher interest rates or wider spreads because a Fund’s investments are locked in at a lower rate for a longer period of time. |
| 6. | Affiliate Transactions and Fees |
| Management Fees: Under the Investment Management Agreement, the Adviser receives the following fees for providing certain investment management and other services necessary for managing each Fund. The fee is paid monthly in arrears and calculated based on that month’s daily average net assets. |
| Growth Fund: | Contrarian and Small Cap Growth Funds: | |||||
| Average Daily Net Assets | Investment
Management Fee |
Average Daild Net Assets | Investment
Management Fee | |||
|
Up to
$50,000,000 |
1.00% |
Greater than
$0 |
1.00% | |||
|
Greater than
$50,000,000 |
0.75% | |||||
| Equity Income Fund: | ||
| Average Daily Net Assets | Investment
Management Fee | |
|
Up to
$10,000,000 |
1.00% | |
|
$10,000,001 to
$30,000,000 |
0.90% | |
|
$30,000,001 to
$50,000,000 |
0.80% | |
|
Greater than
$50,000,000 |
0.70% | |
Distribution Plan
for Advisor shares: Each Fund has entered into and adopted a Distribution Plan for Advisor Class shares. Under the Distribution Plan, the Funds may pay Destra Capital Investments LLC (the “Distributor”),
an affiliate of the Adviser, and/or eligible financial intermediaries a fee for services and expenses related to the sale and distribution of the Funds’ Advisor Class at an annual rate of up to 0.25% of average daily net assets for Advisor
Class Shares.
Shareholder
Servicing Plan for Investor and Advisor Class shares: Each Fund has entered into and adopted a Shareholder Services Plan for Investor Class and Advisor Class shares. Under the Shareholder Services Plan, Destra
Capital Investments LLC may be paid up to 0.25% of the average daily net assets attributable to the Investor Class and Advisor Class of the Funds, for personal/liaison and related shareholder servicing and support services. With respect to the
Contrarian and Small Cap Growth Funds, the Board has determined that the Investor Class and Advisor Class will pay 0.05% of the average daily net assets. See Note 11 for further information on additional share classes and changes to shareholder
servicing and distribution plans.
Waivers and Reimbursements of Expenses: The Adviser voluntarily agreed to waive its investment advisory fees and reimburse operating expenses, to the extent that total annual operating expenses for the Funds exceeds the expense limitations listed below. With
respect to these limits, the Adviser waived the fees listed below during the year ended June 30, 2015.
| Meridian Funds | 58 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| Expense
Limitation |
Total
Waivers and Reimbursements for the year ended June 30, 2015 | ||
| Growth Fund | |||
|
Investor
Class |
1.30% | $ — | |
|
Advisor
Class |
1.55% | $ 8,383 | |
|
Institutional
Class |
0.90% | $ 9,930 | |
| Contrarian Fund | |||
|
Investor
Class |
1.35% | $10,946 | |
|
Advisor
Class |
1.60% | $12,480 | |
| Equity Income Fund | |||
|
Legacy
Class |
1.25% | $17,471 | |
|
Investor
Class |
1.35% | $13,130 | |
|
Advisor
Class |
1.60% | $13,898 | |
| Small Cap Growth Fund | |||
|
Legacy
Class |
1.20% | $14,331 | |
|
Investor
Class |
1.35% | $ — | |
|
Advisor
Class |
1.60% | $22,327 | |
|
Institutional
Class |
1.10% | $14,632 |
For a period not
to exceed three years from the date on which a waiver or reimbursement of expenses in excess of the expense limitation is made by the Adviser, the Funds will carry forward, and may repay the Adviser such amounts; provided the Funds are able to
effect such reimbursement and maintain the expense limitation.
At June 30, 2015, the balance of carried
forward recoupable expenses along with the year of expiration for each Fund and Class of shares were as follows:
| Expiration June 30, 2015, | |||||
| 2016 | 2017 | 2018 | |||
|
Growth
Fund |
— | $ 7,178 | $18,313 | ||
|
Contrarian
Fund |
— | 16,794 | 23,426 | ||
|
Equity Income
Fund |
$75,932 | 54,486 | 44,499 | ||
|
Small Cap Growth
Fund |
— | 77,336 | 51,290 | ||
Subject to the
approval of the Board, the Funds may repay the Adviser the amount of its reimbursement for the Funds for up to three years following the reimbursement to the extent the Funds’ expenses drop below the expense limitations, after giving effect to
repayment by the Fund. Either the Fund or the Adviser can modify or terminate this arrangement after one year from the date of the current prospectus. For the year ended June 30, 2015, the Adviser recouped $11,972 from the Small Cap Growth Investor
Class.
| 7. | Directors and Officers: Certain Directors and/or Officers of the Funds are also Directors and/or Officers of the Adviser. Directors and Officers of the Funds who are Directors and/or Officers of the Adviser receive no compensation from the Funds. Each Non-Interested Director is paid an annual fee set at $40,000. An additional $5,000 is paid to each Non-Interested Director for attendance at each in-person meeting of the Board and an additional $1,000 is paid to each Non-Interested Director for participating in a telephonic meeting of the Board. An additional $3,000 is paid to each member of the Audit or Governance Committee of the Board for attendance at an in-person Audit or Governance Committee meeting and an additional $1,000 is paid to each member of the Audit or Governance Committee of the Board for participating in a telephonic Audit or Governance Committee meeting. |
| An additional $10,000 is paid to the Chairman of the Board and the Chairman of a Committee of the Board. The Chairman of the Board also receives an additional $2,500 for attending each in-person meeting of the Board. The Chairman of a Committee receives an additional $2,000 for attending each in person Committee meeting. |
| Meridian Funds | 59 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
| 8. | Distribution Information: Income and long-term capital gains distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. The tax character of distributions made during the fiscal year ended June 30, 2015 is as follows: |
| 2015 Taxable Distributions | |||||
| Ordinary Income | Net
Long-Term Capital Gain |
Total
Distributions | |||
|
Growth
Fund |
$77,347,939 | $145,847,477 | $223,195,416 | ||
|
Contrarian
Fund |
880,964 | 116,600,237 | 117,481,201 | ||
|
Equity Income
Fund |
635,031 | 5,594,682 | 6,229,713 | ||
|
Small Cap Growth
Fund |
2,331,863 | — | 2,331,863 | ||
| 9. | Federal Income Taxes Information: Management has analyzed the Funds’ tax positions taken on federal income tax returns for all open tax years (current and prior three tax years), and has concluded that no provision for federal income tax is required in the Funds’ financial statements. The Funds’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year ended June 30, 2015, the Funds did not incur any interest or penalties. |
| Permanent differences, incurred during the year ended June 30, 2015, resulting from differences in book and tax accounting have been reclassified at year end to undistributed net investment income and accumulated realized gain/(loss) as follows: |
| (Decrease)
Paid-in-Capital |
Increase/(Decrease)
Undistributed Net Investment Income/(Loss) |
Increase/(Decrease)
Accumulated Realized Gain/(Loss) | |||
|
Growth
Fund |
— | $8,327,330 | $(8,327,330) | ||
|
Contrarian
Fund |
— | 404,006 | (404,006) | ||
|
Equity Income
Fund |
$(2,654) | (16,155) | 18,809 | ||
|
Small Cap Growth
Fund |
— | 1,038,384 | (1,038,384) |
The aggregate
cost of investments, unrealized appreciation and depreciation, for federal income tax purposes, at June 30, 2015 is as follows:
| Aggregrate Cost | Aggregrate
Gross Unrealized Appreciation |
Aggregrate
Gross Unrealized Depreciation |
Net
Unrealized Appreciation | ||||
|
Growth
Fund |
$1,616,183,480 | $312,579,083 | $(109,250,063) | $203,329,020 | |||
|
Contrarian
Fund |
517,018,297 | 115,023,405 | (11,209,853) | 103,813,552 | |||
|
Equity Income
Fund |
40,287,957 | 2,768,013 | (956,922) | 1,811,091 | |||
|
Small Cap Growth
Fund |
208,547,823 | 24,332,566 | (8,814,275) | 15,518,291 |
| Components of Accumulated Earnings (Losses) on a Tax Basis | |||||||
| Growth
Fund |
Contrarian
Fund |
Equity
Income Fund |
Small
Cap Growth Fund | ||||
|
Undistributed ordinary
income |
$ 38,193,978 | — | — | $ 3,839,170 | |||
|
Capital loss carry
forward |
— | — | — | — | |||
|
Undistributed long-term capital
gains |
143,302,654 | $ 78,934,769 | $1,957,387 | 472,034 | |||
|
Unrealized
appreciation/(depreciation) |
203,329,020 | 103,813,552 | 1,848,532 | 15,518,291 | |||
|
Qualified late year deferred
losses |
— | (777,304) | — | — | |||
|
Total Accumulated
Earnings/(Losses) |
$384,825,652 | $181,971,017 | $3,805,919 | $19,829,495 | |||
| Meridian Funds | 60 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
For the
Year ended June 30, 2015
The differences between book and tax-basis
unrealized appreciations are attributable to the tax deferral of losses on wash sales and straddles and investment adjustments in partnerships.
The Equity Income Fund utilized capital
loss carryover of $356,142.
Under the
Regulated Investment Company Modernization Act of 2010, the eight-year limit on the carry forward and use of capital losses was eliminated and capital losses incurred by the Funds after June 30, 2011 will not be subject to expiration. In addition,
losses incurred after June 30, 2011 will retain their character as either a short-term or long-term capital loss on the first day of the next taxable year and must be utilized prior to the losses incurred in pre-enactment taxable years.
| 10. | Other Matters: As of April 9, 2010, the Adviser and certain affiliated entities became defendants in a lawsuit brought by another company alleging trademark infringement, unfair competition and related claims. The complaint alleges that the Adviser’s and affiliated entities’ use of their Arrowpoint trademark and the Arrowpoint logo infringes the rights of the plaintiff in various trademarks that it uses. The complaint seeks injunctive relief requiring the Adviser and the affiliated entities to cease use of the Arrowpoint trademark and logo and unspecified monetary damages, which the plaintiff claims to be unable to quantify. The Adviser has responded to the lawsuit in the United States District Court for the District of Delaware by denying the material allegations of the compliant and opposing the plaintiff’s motion for a preliminary injunction, which is now pending before the Court. |
| The Adviser believes the complaint to be without legal merit and intends to defend against it vigorously. Any legal costs associated with the compliant will be borne by the Adviser, and not the Meridian Funds. While an outcome regarding the complaint is unknown at this time, the Adviser believes that this complaint should not have a material effect on its operations or impair its ability to perform its duties to the Meridian Funds. |
| 11. | Subsequent Events: On July 1, 2015, the Funds launched two new classes of shares: Class A Shares (formerly known as the Advisor Class Shares) and Class C Shares. |
| Also effective July 1, 2015, the shareholder servicing fees was reduced for the Investor Class Shares and the Adviser Class Shares (now Class A) from 0.25% to 0.05%. Going forward, the Investor Class Shares, Class A Shares and Class C Shares will be charged an annual shareholding servicing fee of 0.05% under the revised Shareholder Servicing Plan. Class A Shares and Class C Shares will additionally incur charges under a Distribution Plan at annual rates of 0.25% and 1.00%, respectively. | |
| Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has noted no additional events that require recognition or disclosure in the financial statements. |
| Meridian Funds | 61 | www.meridianfund.com |
Table of Contents
Report of
Independent Registered Public Accounting Firm
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,
Meridian Contrarian Fund, Meridian Equity Income Fund, and Meridian Small Cap Growth Fund (constituting Meridian Fund, Inc., hereafter referred to as the “Funds”) at June 30, 2015, the results of each of their operations for the year
then ended, and the changes in each of their net assets and their 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 26, 2015
| Meridian Funds | 62 | www.meridianfund.com |
Table of Contents
Meridian Fund, Inc.
Information About the Directors and Officers
Information About the Directors and Officers
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 100 Fillmore Street, Suite 325, Denver, CO 80206. 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* | Positions(s)
Held with Fund: |
Length
of Service (Beginning Date) |
Principal
Occupation(s) During Past 5 Years |
Number
of Portfolios Overseen |
Other
Directorships |
| Michael Stolper* (70) | Director | Indefinite
term since May 3, 1985 |
President,
Stolper & Company, Inc. (an investment adviser), September 1975 to present; Managing Director, Windowpane Advisors, LLC (an investment adviser), January 1, 2005 to present; Trustee, Ewing Marion Kauffman Foundation, March 2010 to present. |
4 | Window
Pane Funds (one portfolio) |
| * Mr. Stolper is treated as an “interested” person of the Funds, as such term is defined in the 1940 Act, because, as a result of his prior ownership interest in Aster Investment Management, Inc. (the “Previous Investment Adviser”, the previous investment adviser to the Meridian Equity Income Fund, Meridian Growth Fund, and Meridian Contrarian Fund.) | |||||
| Non-Interested Directors | Position(s) Held with Fund: | Length
of Service (Beginning Date) |
Princiapl
Occupation(s) During Past 5 Years |
Number of Portfolios Overseen | Other Directorships |
| Guy M. Arnold, CFA (47) | Director | Indefinite
term since May 12, 2015 |
President
of Hunt Development Group from July 2015 to present; Owner/Manager of GMA Holdings, LLC from January 2013 to July 2015; President of Dividend Capital Diversified Property Fund from January 2008 to January 2013. |
4 | MidFirst
Bank –Colorado Advisory Member, The Children's Hospital of Colorado Finance Committee |
| John S. Emrich, CFA (47) | Director | Indefinite
term since October 6, 2010 |
Private
Investor, January 2011 to present; Co- Founder and Portfolio Manager, Ironworks Capital Management (an investment adviser), April 2005 to December 2010; Member and Manager, Iroquois Valley Farms, LLC, June 2012 to present. |
4 | None |
| Michael S. Erickson (63) | Director | Indefinite
term since May 3, 1985 |
Private
Investor, August 2007 to present. |
4 | None |
| James Bernard Glavin (80) | Director
and Chairman of the Board |
Indefinite
term since May 3, 1985 |
Retired;
previously Chairman of the Board, Orchestra Theraputics, Inc. |
4 | None |
| Edward F. Keely (48) | Director | Indefinite
term since February 13, 2015 |
Chief
Investment Officer/Portfolio Manager at Borgen Investment Group, 2008 to present. |
4 | None |
| Officers | Position(s)
Held with Fund: |
Length of Service | Principal
Occupation(s) During Past 5 Years |
| David Corkins (48) | President
(Principal Executive Officer) |
Indefinite;
Since September 5, 2013 |
Co-Founder, Principal and Portfolio Manager, Arrowpoint Asset Management, LLC |
| Rick Grove (46) | Vice
President, Secretary and Chief Compliance Officer |
Indefinite;
Since September 5, 2013 |
Chief Operating Officer and Chief Compliance Officer, Arrowpoint Asset Management, LLC |
| Derek Mullins (41) | Chief
Financial Officer (Principal Financial Officer) and Treasurer |
Indefinite;
Since September 5, 2013 |
Director
of Operations, Arrowpoint Asset Management, LLC |
| Katie Jones (31) | Assistant Treasurer | Indefinite;
Since August 12, 2014 |
Controller, Arrowpoint Asset Management, LLC; formerly, Assistant Controller and Alternative Investment Accounting Supervisor, ALPS Fund Services |
| Meridian Funds | 63 | www.meridianfund.com |
Table of Contents
Meridian Fund,
Inc.
2015 TAX NOTICE TO SHAREHOLDERS (Unaudited)
2015 TAX NOTICE TO SHAREHOLDERS (Unaudited)
The information set forth below is for each Fund’s
fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information
needed by shareholders for income tax purposes will be sent to them in early 2016. Please consult your tax advisor for proper treatment of this information.
For the period July 01, 2014 to June 30, 2015, the Funds
reported the following terms with regard to distributions paid during the period. All information is based on financial information available as of the date of this annual report and, accordingly, is subject to change. For each item, it is the
intention of each Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
Pursuant to Internal Revenue Code Section 852(b)(3), the
Growth Fund, Contrarian Fund, and Equity Income Fund reported $145,847,477, $116,600,237, and $5,594,682, respectively, as long-term capital gain distribution for the year ended June 30, 2015.
Pursuant to Internal Revenue Code Section 854(b)(2), the Funds
listed below report a percentage of their ordinary income dividends distributed during the year ended June 30, 2015 as qualifying for the corporate dividends-received deduction:
| Growth Fund | 12.81% |
| Contrarian Fund | 100.00% |
| Equity Income Fund | 100.00% |
| Small Cap Growth Fund | 6.81% |
Pursuant to Section 1 (h)(11) of
the Internal Revenue Code, the Funds listed below report the following amounts of their income dividends paid during the year ended June 30, 2015 as qualified dividend income (QDI):
| Growth Fund | 13.59% |
| Contrarian Fund | 100.00% |
| Equity Income Fund | 100.00% |
| Small Cap Growth Fund | 6.96% |
U.S. Government interest represents
the amount of interest that was derived from direct U.S. Government obligations and distributed during the fiscal year. This amount is reflected as a percentage of total ordinary income distributions (the total of short-term capital gain and net
investment income distributions). Generally, interest from direct U.S. Government obligations is exempt from state income tax. However, for residents of California, Connecticut and New York, the statutory threshold requirements were not satisfied to
permit exception of these amounts from state income for the Funds.
U.S. Government interest:
| Growth Fund | 0.00% |
| Contrarian Fund | 0.00% |
| Equity Income Fund | 0.00% |
| Small Cap Growth Fund | 0.00% |
| Meridian Funds | 64 | www.meridianfund.com |
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Meridian
Fund, Inc.
Glossary of Terms Used in this Report (Unaudited)
Glossary of Terms Used in this Report (Unaudited)
Average Annual Total Return:
This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative
performance (including change in NAV or offer price and reinvested distributions and capital gains, if any) over the time period being considered.
Basis Point (or bp): A common
unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001), and is used to denote the percentage change in a financial instrument.
Black Swan: An event or
occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. This term was popularized by Nassim Nicholas Taleb, a finance professor and former Wall Street trader.
Call Option: An agreement that
gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.
Dividend Yield: A financial
ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock.
Earnings Per Share: The
portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
EBITDA: An acronym for
"earnings before interest, taxes, depreciation and amortization." EBITDA is most commonly used when equating profitability and efficiency ratios for firms because it eliminates the effects of financing and accounting decisions.
Free Cash Flow: A measure of
financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.
Moore’s Law: An
observation made by Intel co-founder Gordon Moore in 1965. He noticed that the number of transistors per square inch on integrated circuits had doubled every year since their invention. Moore's law predicts that this trend will continue into the
foreseeable future.
Market Capitalization: The market capitalization of a company is equal to the number of the company’s common shares outstanding multiplied by the current price of the company’s stock.
Russell 2000® Growth Index: An index that measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher
forecasted growth values. The index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.
Russell 2500® Growth Index: Measures the performances of the small to mid-cap growth segment of the U.S. equity universe. It includes those Russell
2500 Index companies with higher price-to-book ratios and higher forecasted growth values.
Russell 2500® Index: Measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as "smid" cap. The
Russell 2500™ is a subset of the Russell 3000® Index.
S&P 500® Index: A commonly recognized market-capitalization-weighted index of 500 widely held equity securities, designed to measure broad U. S.
equity performance.
| Meridian Funds | 65 | www.meridianfund.com |
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Meridian Fund,
Inc.
Other Information (Unaudited)
Other Information (Unaudited)
December 31,
2014
Proxy Voting Guidelines
The Adviser is responsible for exercising the voting rights
associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Adviser uses in fulfilling this responsibility and information regarding how those proxies were voted during the most recent
12-month period ended June 30 are available without charge upon request by calling toll free (800) 446-6662. These items are also available on the Securities and Exchange Commission’s website at http://www.sec.gov.
Quarterly Portfolio Disclosure
The Adviser files a complete listing of portfolio holdings
for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q. The complete listing (i) is available on the Commission’s website; (ii) may be reviewed and copied at the Commission’s Public Reference Room in
Washington, DC; and (iii) will be made available to shareholders upon request by calling (800) 446-6662. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Contact Us
By phone from 9:00 AM to 6:00 PM EST on any business day at
the following if you are an:
Key Information
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Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
| (f) | A copy of the registrant’s code of ethics is filed as Exhibit 12(a)(1) to this report. |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of directors has determined that James Glavin is qualified to serve as an audit committee financial expert serving on its audit committee and that he is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Audit Fees
| (a) | The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $137,800 in 2015 and $122,800 in 2014. |
Audit-Related Fees
| (b) | The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item are $0 in 2015 and $0 in 2014. |
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Tax Fees
| (c) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $32,480 in 2015 and $31,220 in 2014. |
All Other Fees
| (d) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 in 2015 and $0 in 2014. |
| (e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES PROVIDED TO THE COMPANY
| 1. | Pre-Approval Requirements. The Committee shall pre-approve all auditing services and permissible non-audit services (e.g., tax services) to be provided to the Company by the Auditor, including the fees therefore. The Committee may delegate to one or more of its members the authority to grant pre-approvals. In connection with such delegation, the Committee shall establish pre-approval policies and procedures, including the requirement that the decisions of any member to whom authority is delegated under this section shall be presented to the full Committee at each of its scheduled meetings. |
| 2. | De Minimis Exception to Pre-Approval: Pre-approval for a permitted non-audit service shall not be required if: |
| a. | the aggregate amount of all such non-audit services is not more than 5% of the total revenues paid by the Company to the Auditor in the fiscal year in which the non-audit services are provided; |
| b. | such services were not recognized by the Company at the time of the engagement to be non-audit services; and |
| c. | such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee to whom authority to grant such approvals has been delegated by the Committee. |
Additionally, the Committee shall pre-approve the Auditor’s engagements for non-audit services with the Adviser and any affiliate of the Adviser that provides ongoing services to the Company in accordance with the foregoing, if the engagement relates directly to the operations and financial reporting of the Company, unless the aggregate amount of all services provided constitutes no more than 5% of the total amount of revenues paid to the Auditor by the Company, the Adviser and any affiliate of the Adviser that provides ongoing services to the Company during the fiscal year in which the services are provided that would have to be pre-approved by the Committee pursuant to this paragraph (without regard to this exception).
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PROHIBITED SERVICES
The Committee shall confirm with the Auditor engaged to perform the audit of the Company that the Auditor is not performing contemporaneously any of the following non-audit services for the Company, the Adviser, or any affiliates of the Company or Adviser:
| 1. | bookkeeping or other services related to the accounting records or financial statements of the Company; |
| 2. | financial information systems design and implementation; |
| 3. | appraisal or valuation services, fairness opinions, or contribution-in-kind reports; |
| 4. | actuarial services; |
| 5. | internal audit outsourcing services; |
| 6. | management functions or human resources; |
| 7. | broker or dealer, investment adviser, or investment banking services; |
| 8. | legal services and expert services unrelated to the audit; and |
| 9. | any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible. |
The Auditor is responsible for informing the Committee of whether it believes that a particular service is permissible or prohibited pursuant to applicable regulations and standards.
| (e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: |
| (b) | N/A |
| (c) | N/A |
| (d) | N/A |
| (f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
| (g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $0 in 2015 and $0 in 2014. |
| (h) | Not applicable. |
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Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. 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 Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
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| (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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
| (a)(1) | Code of Ethics, or any amendment thereto, that is subject of disclosure required by Item 2 is attached hereto. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (a)(3) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
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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.® |
|||||
| By (Signature and Title)* | /s/ David J. Corkins |
|||||
| David J. Corkins | ||||||
| Principal Executive Officer and President | ||||||
| Date |
August 26, 2015 |
|||||
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/ David J. Corkins |
|||||
| David J. Corkins | ||||||
| Principal Executive Officer and President | ||||||
| Date |
August 26, 2015 |
|||||
| By (Signature and Title)* | /s/ Derek J. Mullins |
|||||
| Derek J. Mullins | ||||||
| Principal Financial Officer and Treasurer | ||||||
| Date |
August 26, 2015 |
|||||
| * | Print the name and title of each signing officer under his or her signature. |