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)
60 E. Sir Francis Drake Boulevard
Suite 306
Larkspur, CA 94939
(Address of principal executive offices) (Zip code)
Gregg B. Keeling
60 E. Sir Francis Drake Boulevard
Suite 306
Larkspur, CA 94939
(Name and address of agent for service)
registrant’s telephone number, including area code: 415-461-8770
Date of fiscal year end: June 30
Date of reporting period: June 30, 2013
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. | Reports to Stockholders. |
The Report to Shareholders is attached herewith.
MERIDIAN FUND, INC.
August 1, 2013
To Our Shareholders:
Stocks continued their positive performance during the quarter ended June 30, 2013. For the quarter, the S&P 500 gained 2.9%, the NASDAQ gained 4.2% and the Russell 2000, which includes smaller companies, gained 3.1%. Combined with the strong performance in the quarter ended March 31st 2013, stocks enjoyed a robust first half of 2013. Economic factors were mixed but relatively benign; optimism over the housing market continued to buoy the U.S., and economic declines in Europe appeared to be slowing if not stabilizing. Emerging markets fared poorly due to worries of slowing growth, particularly in China and Brazil, but did not appear to dampen the performance of U.S. domestic stocks. The yield on the ten-year U.S. Treasury bond jumped from 1.87% to 2.52% during the quarter as the economic outlook continued its gradual improvement and the market acknowledged potential endings for the Federal Reserve’s quantitative easing programs. The best performing sectors during the quarter were financials, consumer discretionary and healthcare. The worst performing sectors were utilities, basic materials and energy. Financials performed well as rising rates and a steepening yield should improve the profitability of lending products. However, these same circumstances pressured the value of utility shares as higher rates are likely to simultaneously increase the competition for yield and reduce the value of dividends paid by these low growth companies.
GDP grew at 1.1% during the first quarter of 2013. This represented a meaningful appreciation from 0.4% in the previous quarter, but lagged traditional levels of GDP growth for a recovering economy. The increase in GDP was driven primarily by personal consumption expenditures, private inventory investment and residential fixed investment. This was offset by declines in government spending and exports. We are currently in the midst of second quarter corporate earnings reports and results to date are modestly encouraging for most of our portfolio companies. However, we continue to be concerned about historically high corporate profit margins. Estimates for S&P 500 earnings show that the earnings of non-financial companies are expected to decline for the quarter ended June 30, 2013. This indicates that profit margins may have peaked, and if that is the case then we believe future earnings growth could be difficult to achieve without an acceleration in revenue growth.
We continue to follow our long-established investment strategies and our stock selection discipline remains unchanged. History clearly shows that long-term investment results are improved by buying good companies or mutual funds consistently over an extended period of time.
As discussed further in the accompanying shareholder report, Aster Investment Management Co., Inc., the investment adviser to the Meridian Funds, entered into an agreement to sell its assets, including its rights with respect to the management of the Funds, to Arrowpoint AIM LLC. As a result of this agreement, shareholders of the Meridian Funds as of June 18, 2013 are being asked to approve an investment management agreement between Arrowpoint Asset Management, LLC (“Arrowpoint”) and the Meridian Funds at a shareholder meeting scheduled for August 28, 2013. If the proposed management agreement is approved by shareholders, Arrowpoint would become the investment adviser to the Meridian Funds.
We welcome those new shareholders who joined the Meridian Funds during the quarter and appreciate the continued confidence of our existing shareholders.
Jamie England
William Tao
Larry Cordisco
Jim O’Connor
Meridian Equity Income Fund ® (MEIFX)
The Meridian Equity Income Fund’s net asset value per share at June 30, 2013 was $12.35. This represents an increase of 14.1% for the calendar year to date. The Fund’s total return and average annual compound rate of return since inception January 31, 2005 were 64.6% and 6.1%, respectively. At the close of the quarter, total net assets were $28,697,158 and were invested 1.0% in cash and other assets net of liabilities and 99.0% in stocks. At the close of the quarter, there were 431 shareholders in the Equity Income Fund.
The Fund continues to invest in companies that we believe have the potential for capital appreciation and the ability to grow dividends. The Fund is diversified, with 49 holdings representing 44 different industry groups at June 30, 2013. At the end of the quarter ended June 30, 2013, the portfolio’s average holding had a five-year average return on equity of 20.0% and an average dividend yield of 3.4%, both measures substantially higher than the average S&P 500 stock, with an average market capitalization of $46.2 billion and an average debt to capital ratio of 39.0%.
During the quarter, we purchased shares of Apple, Cisco Systems and Steelcase. We sold our shares in Cato, Digital Realty Trust and McDonalds.
Leggett & Platt is a leading manufacturer of engineered products and components. As the pioneer of steel coil springs found in mattresses and furniture, the company continues to supply a variety of components to bedding and furniture manufacturers. Additionally, Leggett & Platt’s broader product line includes retail store fixtures, office furniture components, automotive seating components and industrial steel wire and tubing. Customers choose Leggett & Platt as a supplier because the company’s manufacturing scale and processes result in lower costs than customers can produce themselves. We believe earnings should grow based on the contribution of new products, cost reduction efforts and the improving housing market. Moreover, future dividend growth appears likely based on a 42-year record of dividend increases. We believe Leggett & Platt is an attractive investment based on its 3.8% dividend yield and positive growth outlook.
Meridian Growth Fund® (MERDX)
The Meridian Growth Fund’s net asset value per share at June 30, 2013 was $44.31. This represents an increase of 11.4% for the calendar year to date. The Fund’s total return and average annual compound rate of return since inception August 1, 1984 were 3,016.8% and 12.6%, respectively. At the close of the quarter, total net assets were $2,112,945,125 and were invested 6.0% in cash, cash equivalents and other assets net of liabilities and 94.0% in stocks. At the close of the quarter, there were 78,795 shareholders in the Growth Fund.
We continue to follow the investment strategy that has served the Fund well for the past 29 years. Our portfolio remains diversified in mid-sized growth companies which in our opinion are predominantly market leaders, having strong returns on capital, solid growth prospects
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and that sell at reasonable valuations. The Fund is invested in 56 positions representing 31 industry groups along with Treasury Bills. Our heaviest areas of concentration continue to be the consumer and technology sectors.
During the quarter, we purchased shares of Brunswick, Genesee & Wyoming and QLIK Technologies. We sold our positions in Autodesk, Life Technologies, RPM International and Ritchie Bros.
Perrigo is a global manufacturer of over-the-counter (OTC) store brand and generic prescription pharmaceuticals, infant formulas, nutritional products and active pharma ingredients. The company is the dominant player in the OTC drug market with the largest distribution network and broadest range of product offerings. The OTC store brands have increased their market share by about 1-2% annually at the expense of national name product given their superior value proposition to both the consumer and retailers. Perrigo has numerous growth drivers over the next few years including the continued penetration of OTC store brands and introduction of new product categories. The stock sells at a reasonable valuation, in our opinion, given the company’s strong management team, financial returns and long-term growth prospects.
Meridian Value Fund® (MVALX)
The Meridian Value Fund’s net asset value per share at June 30, 2013 was $37.20. This represents an increase of 13.2% for the calendar year to date. The Fund’s total return and average annual compound rate of return since June 30, 1995 to date were 951.4% and 14.0%, respectively. At the close of the quarter, total net assets were $704,522,621 and were invested 5.2% in cash, cash equivalents and other assets net of liabilities and 94.8% in stocks. At the close of the quarter, there were 29,032 shareholders in the Value Fund.
We continue to seek out-of-favor companies, typically having experienced an extended period of declining earnings. Often these companies have experienced outsized declines in their stock prices as the market reacts to these earnings declines. We research these companies to determine the factors behind the earnings decline and evaluate the company’s response. Ideal investment candidates are those that are poised to resume sustainable growth and that are trading at a reasonable valuation based on potential earnings. The Fund is invested in 60 positions, representing 36 industry groups along with Treasury Bills. We continue to invest in companies of all market capitalizations and our largest areas of concentration are technology, industrials and transportation.
During the quarter, we purchased shares of Chiquita Brands, First Niagara Financial Group, Genesee & Wyoming, Informatica, Itron, National Instruments, Nvidia, Occidental Petroleum, Tempur-Pedic and Ubiquiti Networks. We sold our positions in Aecon Group, Corning, GATX, Monsanto, Newmont Mining, Ritchie Bros., Ultra Petroleum, UTI Worldwide and Zebra Technologies.
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Haemonetics is the market leader in blood management products for collection centers and hospitals. The company’s equipment and related consumables allow collection centers to separate blood into the components of plasma, red cells and white cells. Hospital-based products include blood diagnostics, devices to salvage patient blood during surgery and software to manage blood supply. Earnings temporarily declined due to two product quality issues that management of Haemonetics has stated have been remedied. In our opinion, earnings growth may be expected to accelerate in the next few years as Haemonetics rolls out its automated whole blood collection solution to collection centers. Relative to the existing manual process, the company’s automated solution speeds up the collection process and reduces discard rates. Cost and efficiency gains become more important to collection centers as hospitals better manage their blood supply. We believe the company is a compelling value at 12x our $3.50 estimate of earnings power.
Miscellaneous
You can sign up for E-mail Alerts on our website at www.meridianfund.com. When you sign up for E-mail Alerts, you will receive notification of news items, shareholder reports, SEC filings and other information regarding the Meridian Funds.
The Meridian Funds are no-load and there are no transaction fees or commissions charged when you purchase shares directly through our transfer agent, BNY Mellon Investment Servicing (U.S.), Inc. This is a very cost-effective way to purchase shares of the Meridian Funds if you do not need the services of a broker-dealer or if you make multiple purchases.
The information provided in this report should not be considered investment advice or a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in a particular Fund’s portfolio at the time you receive this report or that securities sold have not been repurchased. Securities discussed are presented as illustrations of companies that fit a particular Fund’s investment strategy and do not represent a Fund’s entire portfolio and in the aggregate may represent only a small percentage of a Fund’s portfolio holdings. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that investment decisions Fund management makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Management’s views presented herein and any discussion of a particular Fund’s portfolio holdings or performance are as of June 30, 2013 and are subject to change without notice.
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Meridian Equity Income Fund
Summary of Portfolio Holdings
June 30, 2013
Portfolio Holdings by Category (% of total net assets) | ||||||||
Chemicals - Specialty | 4.3% | $ | 1,240,418 | |||||
Software & Services | 4.0 | 1,161,207 | ||||||
Technology | 4.0 | 1,155,976 | ||||||
Semiconductors | 3.6 | 1,020,454 | ||||||
Energy | 3.4 | 983,058 | ||||||
Food | 2.9 | 843,413 | ||||||
Household - Home Furnishings | 2.5 | 709,629 | ||||||
Industrial Machinery | 2.5 | 706,799 | ||||||
Media | 2.5 | 705,960 | ||||||
Asset Management & Custody Banks | 2.4 | 693,495 | ||||||
Consumer Products - Household | 2.4 | 684,837 | ||||||
Retail - Drug Store | 2.4 | 680,680 | ||||||
Pharmaceuticals | 2.4 | 677,006 | ||||||
Office Services & Supplies | 2.3 | 656,100 | ||||||
Aerospace & Defense | 2.2 | 629,068 | ||||||
Retail | 2.2 | 623,137 | ||||||
Basic Materials | 2.2 | 617,069 | ||||||
Distribution & Wholesale | 2.1 | 607,775 | ||||||
Banking - Regional Banks | 2.1 | 600,930 | ||||||
Consumer Products | 2.1 | 599,044 | ||||||
Data Processing & Outsourced Services | 2.1 | 598,928 | ||||||
Health Care Products | 2.1 | 595,722 | ||||||
Air Freight & Logistics | 2.1 | 589,361 | ||||||
Tobacco | 2.0 | 587,696 | ||||||
Food Distributors | 2.0 | 587,552 | ||||||
Electrical Components & Equipment | 2.0 | 583,578 | ||||||
Electronic Equipment Manufacturing | 2.0 | 572,130 | ||||||
Brewers | 2.0 | 569,534 | ||||||
Oil & Gas - Storage & Transportation | 2.0 | 565,144 | ||||||
Industrial Conglomerates | 1.9 | 558,577 | ||||||
Banking - Commercial | 1.9 | 558,552 | ||||||
Telecommunication Services - Integrated | 1.9 | 555,072 |
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Meridian Equity Income Fund
Summary of Portfolio Holdings (continued)
June 30, 2013
Diversified Financial Services | 1.9% | $ | 552,864 | |||||
Soft Drinks | 1.9 | 551,160 | ||||||
Packaging | 1.8 | 521,433 | ||||||
Chemicals - Diversified | 1.8 | 513,450 | ||||||
Restaurants | 1.8 | 511,200 | ||||||
Utilities | 1.8 | 506,200 | ||||||
Railroads | 1.7 | 494,020 | ||||||
Diversified Operations | 1.7 | 492,085 | ||||||
REITs - Specialized | 1.7 | 490,450 | ||||||
Insurance Brokers | 1.7 | 487,024 | ||||||
REITs - Hotel & Lodging | 1.6 | 453,552 | ||||||
Metals | 1.1 | 314,475 | ||||||
Cash & Other Assets, Less Liabilities | 1.0 | 291,344 | ||||||
|
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| |||||
100.0% | $ | 28,697,158 | ||||||
|
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Meridian Growth Fund
Summary of Portfolio Holdings
June 30, 2013
Portfolio Holdings by Category (% of total net assets) | ||||||||
Retail | 12.3% | $ | 261,147,660 | |||||
Tech - Software | 7.0 | 147,296,975 | ||||||
Energy | 6.4 | 134,255,558 | ||||||
Technology | 5.5 | 117,194,241 | ||||||
Brokerage & Money Management | 4.9 | 102,868,424 | ||||||
Banking - Commercial | 4.3 | 91,180,130 | ||||||
Health Care Products | 3.6 | 75,501,760 | ||||||
Insurance Brokers | 3.5 | 74,358,336 | ||||||
Industrial | 3.1 | 65,221,212 | ||||||
Pharmaceuticals | 2.8 | 58,334,100 | ||||||
Distribution & Wholesale | 2.7 | 57,747,652 | ||||||
Flooring & Carpets | 2.7 | 57,471,141 | ||||||
Health Care Technology | 2.7 | 57,004,550 | ||||||
Environmental Facilities & Services | 2.6 | 54,795,366 | ||||||
Automotive Wholesale Services | 2.6 | 54,775,400 | ||||||
Real Estate Management & Services | 2.6 | 54,292,098 | ||||||
Chemicals - Specialty | 2.4 | 50,270,697 | ||||||
U.S. Government Obligations | 2.4 | 49,997,702 | ||||||
Health Care Information Services | 2.3 | 48,045,000 | ||||||
Electronic Equipment Manufacturing | 2.2 | 46,995,300 | ||||||
Building Products | 2.1 | 45,087,924 | ||||||
Industrial Conglomerates | 2.1 | 44,308,810 | ||||||
Cellular Communications | 2.0 | 42,033,452 | ||||||
Furniture & Fixtures | 1.9 | 40,297,079 | ||||||
Trucking | 1.8 | 38,698,968 | ||||||
Consumer Services | 1.7 | 36,539,513 | ||||||
Transportation | 1.6 | 33,804,500 | ||||||
Leisure Products | 1.3 | 26,675,055 | ||||||
Restaurants | 1.1 | 23,986,844 | ||||||
Railroads | 0.8 | 16,900,128 | ||||||
Leisure & Amusement | 0.7 | 14,751,283 | ||||||
Air Freight & Logistics | 0.7 | 13,968,675 | ||||||
Cash & Other Assets, Less Liabilities | 3.6 | 77,139,592 | ||||||
|
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100.0% | $ | 2,112,945,125 | ||||||
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Meridian Value Fund
Summary of Portfolio Holdings
June 30, 2013
Portfolio Holdings by Category (% of total net assets) | ||||||||
Technology | 10.0% | $ | 70,653,851 | |||||
Industrial | 5.1 | 36,051,949 | ||||||
Semiconductors | 4.6 | 32,564,831 | ||||||
Health Care Products | 4.4 | 31,086,457 | ||||||
Diversified Financial Services | 4.4 | 31,079,392 | ||||||
Energy | 4.2 | 29,828,157 | ||||||
Apparel | 4.2 | 29,528,628 | ||||||
Leisure & Amusement | 4.2 | 29,331,980 | ||||||
Aerospace & Defense | 3.7 | 25,873,065 | ||||||
Food | 3.3 | 22,922,124 | ||||||
Health Care Services | 3.0 | 20,894,594 | ||||||
Railroads | 3.0 | 20,842,948 | ||||||
Retail | 2.9 | 20,297,155 | ||||||
Consulting Services | 2.5 | 17,931,872 | ||||||
Utilities | 2.5 | 17,701,181 | ||||||
Insurance | 2.5 | 17,305,609 | ||||||
Real Estate | 2.3 | 16,345,200 | ||||||
Automotive Wholesale Services | 2.2 | 15,635,400 | ||||||
U.S. Government Obligations | 2.1 | 14,998,995 | ||||||
Office Services & Supplies | 2.0 | 14,317,560 | ||||||
Banking - Regional Banks | 2.0 | 14,296,379 | ||||||
Basic Materials | 1.9 | 13,693,860 | ||||||
Diversified Operations | 1.8 | 12,921,531 | ||||||
Banking - Commercial | 1.7 | 12,184,980 | ||||||
Packaging | 1.6 | 11,389,823 | ||||||
Consumer Products | 1.5 | 10,362,495 | ||||||
Home Improvement Retail | 1.6 | 10,242,800 | ||||||
Pharmaceuticals | 1.4 | 9,860,994 | ||||||
Industrial Conglomerates | 1.4 | 9,797,990 | ||||||
Storage | 1.3 | 9,263,370 | ||||||
Transportation | 1.3 | 8,870,000 | ||||||
Tech - Software | 1.3 | 8,868,510 |
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Meridian Value Fund
Summary of Portfolio Holdings (continued)
June 30, 2013
Restaurants | 1.2% | $ | 8,478,332 | |||||
Household - Home Furnishings | 1.1 | 7,581,530 | ||||||
Industrial Services | 1.0 | 7,161,912 | ||||||
Chemicals - Specialty | 0.9 | 6,594,366 | ||||||
Metals | 0.8 | 5,711,874 | ||||||
Cash & Other Assets, Less Liabilities | 3.1 | 22,050,927 | ||||||
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100.0% | $ | 704,522,621 | ||||||
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Meridian Fund, Inc.
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period January 1, 2013 to June 30, 2013
We believe it is important for you to understand the impact of fees and expenses on your investment. All mutual funds have operating expenses. As a shareholder of the Fund, you incur ongoing costs, which generally include costs for portfolio management and administrative services, and other Fund expenses. Operating expenses, which are deducted from a Fund’s gross income, directly reduce the investment return of the portfolio. A Fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples 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.
Beginning Account Value 1/1/13 | Ending Account Value 6/30/13 | Expense Ratio(1) | Expenses Paid During Period(2) | |||||||||||||
Actual Fund Return | ||||||||||||||||
( See explanation below) | ||||||||||||||||
Meridian Equity Income Fund | $ | 1,000.00 | $ | 1,141.40 | 1.25 | %(4) | $ | 6.64 | ||||||||
Meridian Growth Fund | $ | 1,000.00 | $ | 1,113.90 | 0.86 | % | $ | 4.51 | ||||||||
Meridian Value Fund | $ | 1,000.00 | $ | 1,132.10 | 1.14 | % | $ | 6.03 | ||||||||
Hypothetical 5% Return(3) | ||||||||||||||||
( See explanation below) | ||||||||||||||||
Meridian Equity Income Fund | $ | 1,000.00 | $ | 1,018.60 | 1.25 | %(4) | $ | 6.26 | ||||||||
Meridian Growth Fund | $ | 1,000.00 | $ | 1,020.53 | 0.86 | % | $ | 4.31 | ||||||||
Meridian Value Fund | $ | 1,000.00 | $ | 1,019.14 | 1.14 | % | $ | 5.71 |
(1) | Annualized, based on the Fund’s most recent fiscal half-year expenses. |
(2) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181, the number of days in the most recent fiscal half-year, then divided by 365. |
(3) | Before expenses. |
(4) | See note 2 to Financial Statements. |
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Meridian Fund, Inc.
Disclosure of Fund Expenses (Unaudited) (continued)
For the Six Month Period January 1, 2013 to June 30, 2013
The table above illustrates your Fund’s costs in two ways:
Actual Fund Return: This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, the third column shows the period’s annualized expense ratio, and the last column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund at the beginning of the period. You may use the information here, together with your account value, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period.”
Hypothetical 5% Return: This section is intended to help you compare your Fund’s costs with those of other mutual funds. It assumes that the Fund had a return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the Fund’s actual return, the results do not apply to your investment. You can assess your Fund’s costs by comparing this 5% Return hypothetical example with the 5% Return hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as short-term redemption and exchange fees or sales and service charges you may pay third party broker/dealers. Had these transactional costs been included, your costs would have been higher. Therefore, the hypothetical section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
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Management’s Discussion of Meridian Equity Income Fund® Performance
During the fiscal year ended June 30, 2013, the Meridian Equity Income Fund gained 18.28% compared to a gain of 20.59% for the S&P 500 with reinvested dividends, a gain of 24.21% for the Russell 2000 and a gain of 15.95% for the NASDAQ.
The Equity Income Fund is highly diversified. During the period the Fund was invested in individual companies comprising 76 sectors. During the fiscal year, each sector holding was typically weighted between 1.10% and 2.24% of net assets. As a result of this strategy, one sector cannot move the performance dramatically in any direction.
The Fund’s strongest performance was from companies in the food, industrial machinery, media, household–home furnishings, retail-drug store, asset management & custody banks, pharmaceutical, technology, chemicals-specialty, energy, software & services and semiconductor sectors. The Fund’s weakest performance was from companies in the metals, computer hardware, health care products, REITS specialized and multi-utilities sectors.
The Fund strategy emphasizes investments in companies that typically pay dividends or interest, have the potential for capital appreciation and which its investment adviser believes may have the capacity to raise dividends in the future.
Value of $10,000 invested in the Meridian Equity Income Fund and the S&P 500 Index
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.
* | Inception date. |
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Management’s Discussion of Meridian Growth Fund®
Performance
During the fiscal year ended June 30, 2013, the Meridian Growth Fund gained 15.54% compared to a gain of 20.59% for the S&P 500 with reinvested dividends, a gain of 24.21% for the Russell 2000 and a gain of 15.95% for the NASDAQ.
The Growth Fund’s performance reflected the strength of our holdings in the retail, technology, energy, commercial banking and brokerage & money management sectors (representing approximately sixteen, six, six, five and five percent of total portfolio holdings as of June 30, 2013, respectively), as well as the performance of individual stocks that may be the only issue we own in a particular sector. This was offset primarily by relative weakness in the tech-software and healthcare products sectors (representing approximately twelve and twelve percent of total portfolio holdings as of June 30, 2013, respectively), as well as the performance of individual stocks that may be the only issue we own in a particular sector.
Value of $10,000 invested in the Meridian Growth Fund, the Russell 2000 Index and the S&P 500 Index
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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Management’s Discussion of Meridian Value Fund®
Performance
During the fiscal year ended June 30, 2013, the Meridian Value Fund gained 21.98% compared to a gain of 20.59% for the S&P 500 with reinvested dividends, a gain of 24.21% for the Russell 2000 and a gain of 15.95% for the NASDAQ.
The Value Fund’s performance reflected the strength of our holdings in the leisure & amusement, office services and supplies, food, insurance, technology, railroads, retail, aerospace & defense, apparel, diversified financial services, energy, home improvement retail, healthcare services, semiconductor, and restaurant sectors (together representing approximately fifty-six percent of total portfolio holdings as of June 30, 2013), as well as the performance of individual stocks that may comprise the only holding in a particular sector. This was offset primarily by relative weakness in the chemicals-specialty, industrial products, metal, tech-software and utilities sectors (together representing approximately seven percent of total portfolio holdings as of June 30, 2013).
The Meridian Value Fund’s strategy is to invest in stocks, across a range of market capitalizations, which the Investment Adviser believes are undervalued in relation to the issuer’s long-term earnings power, asset value and/or the stock market in general. Investments include both smaller company equities and mid-to-large capitalization stocks. Based on this strategy, the Fund’s average compounded annual return for the ten-year period from June 30, 2003 to June 30, 2013 was an 8.66% gain compared to a 7.26% gain for the S&P 500, with reinvested dividends. The Meridian Value Fund’s average compounded annual return from inception to June 30, 2013 was a gain of 13.06%, compared to a gain of 8.96% for the S&P 500, with reinvested dividends. (Inception date: February 10, 1994. Prior to June 30, 1995 the Value Fund’s cash position was approximately 50%, as the Fund was in the start-up process of becoming fully invested).
Value of $10,000 invested in the Meridian Value Fund and the S&P 500 Index
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.
14
Meridian Equity Income Fund
Schedule of Investments
June 30, 2013
Shares | Value | |||||||
COMMON STOCKS - 99.0% |
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AEROSPACE & DEFENSE - 2.2% |
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Lockheed Martin Corp | 5,800 | $ | 629,068 | |||||
AIR FREIGHT & LOGISTICS - 2.1% |
| |||||||
United Parcel Service, Inc. | 6,815 | 589,361 | ||||||
ASSET MANAGEMENT & CUSTODY BANKS - 2.4% |
| |||||||
BlackRock, Inc. | 2,700 | 693,495 | ||||||
BANKING-COMMERCIAL - 1.9% |
| |||||||
Bank of Hawaii Corp. | 11,100 | 558,552 | ||||||
BANKING - REGIONAL BANKS - 2.1% |
| |||||||
Cullen/Frost Bankers, Inc. | 9,000 | 600,930 | ||||||
BASIC MATERIALS - 2.2% |
| |||||||
Compass Minerals International, Inc. | 7,300 | 617,069 | ||||||
BREWERS - 2.0% |
| |||||||
Molson Coors Brewing Co. Class B | 11,900 | 569,534 | ||||||
CHEMICALS-DIVERSIFIED - 1.8% |
| |||||||
EI du Pont de Nemours & Co. | 9,780 | 513,450 | ||||||
CHEMICALS-SPECIALTY - 4.3% |
| |||||||
Innophos Holdings, Inc. | 11,400 | 537,738 | ||||||
RPM International, Inc. | 22,000 | 702,680 | ||||||
|
| |||||||
1,240,418 | ||||||||
CONSUMER PRODUCTS - 2.1% |
| |||||||
Scotts Miracle-Gro Co. (The) Class A | 12,400 | 599,044 | ||||||
CONSUMER PRODUCTS - HOUSEHOLD - 2.4% |
| |||||||
Kimberly-Clark Corp. | 7,050 | 684,837 |
Shares | Value | |||||||
DATA PROCESSING & OUTSOURCED |
| |||||||
Paychex, Inc. | 16,400 | $ | 598,928 | |||||
DISTRIBUTION & WHOLESALE - 2.1% |
| |||||||
Genuine Parts Co. | 7,785 | 607,775 | ||||||
DIVERSIFIED FINANCIAL SERVICES - 1.9% |
| |||||||
Broadridge Financial Solutions, Inc. | 20,800 | 552,864 | ||||||
DIVERSIFIED OPERATIONS - 1.7% |
| |||||||
Koninklijke Philips N.V. (Netherlands) | 18,098 | 492,085 | ||||||
ELECTRICAL COMPONENTS & EQUIPMENT - 2.0% |
| |||||||
Emerson Electric Co. | 10,700 | 583,578 | ||||||
ELECTRONIC EQUIPMENT |
| |||||||
Molex, Inc. | 19,500 | 572,130 | ||||||
ENERGY - 3.4% |
| |||||||
Chevron Corp. | 4,700 | 556,198 | ||||||
Enbridge Energy Partners LP | 14,000 | 426,860 | ||||||
|
| |||||||
983,058 | ||||||||
FOOD - 2.9% |
| |||||||
Flowers Foods, Inc. | 38,250 | 843,413 | ||||||
FOOD DISTRIBUTORS - 2.0% |
| |||||||
SYSCO Corp. | 17,200 | 587,552 | ||||||
HEALTH CARE PRODUCTS - 2.1% |
| |||||||
Baxter International, Inc. | 8,600 | 595,722 | ||||||
HOUSEHOLD - HOME FURNISHINGS - 2.5% |
| |||||||
Leggett & Platt, Inc. | 22,825 | 709,629 |
The accompanying notes are an integral part of the financial statements.
15
Meridian Equity Income Fund
Schedule of Investments (continued)
June 30, 2013
Shares | Value | |||||||
COMMON STOCKS (continued) |
| |||||||
INDUSTRIAL CONGLOMERATES - 1.9% |
| |||||||
Air Products & Chemicals, Inc. | 6,100 | $ | 558,577 | |||||
INDUSTRIAL MACHINERY - 2.5% |
| |||||||
Eaton Corp. Plc (Ireland) | 10,740 | 706,799 | ||||||
INSURANCE BROKERS - 1.7% |
| |||||||
Marsh & McLennan Cos., Inc. | 12,200 | 487,024 | ||||||
MEDIA - 2.5% |
| |||||||
Meredith Corp. | 14,800 | 705,960 | ||||||
METALS - 1.1% |
| |||||||
Newmont Mining Corp. | 10,500 | 314,475 | ||||||
OFFICE SERVICES & SUPPLIES - 2.3% |
| |||||||
Steelcase, Inc. Class A | 45,000 | 656,100 | ||||||
OIL & GAS - STORAGE & TRANSPORTATION - 2.0% |
| |||||||
Spectra Energy Corp. | 16,400 | 565,144 | ||||||
PACKAGING - 1.8% |
| |||||||
Greif, Inc. Class A | 9,900 | 521,433 | ||||||
PHARMACEUTICALS - 2.4% |
| |||||||
Johnson & Johnson | 7,885 | 677,006 | ||||||
RAILROADS - 1.7% |
| |||||||
Norfolk Southern Corp. | 6,800 | 494,020 | ||||||
REITS - HOTEL & LODGING - 1.6% |
| |||||||
Chatham Lodging Trust REIT | 26,400 | 453,552 | ||||||
REITS - SPECIALIZED - 1.7% |
| |||||||
Campus Crest Communities, Inc. REIT | 42,500 | 490,450 |
Shares | Value | |||||||
RESTAURANTS - 1.8% |
| |||||||
Einstein Noah Restaurant Group, Inc. | 36,000 | $ | 511,200 | |||||
RETAIL - 2.2% |
| |||||||
Hasbro, Inc. | 13,900 | 623,137 | ||||||
RETAIL - DRUG STORE - 2.4% |
| |||||||
Walgreen Co. | 15,400 | 680,680 | ||||||
SEMICONDUCTORS - 3.6% |
| |||||||
Intel Corp. | 18,100 | 438,382 | ||||||
Linear Technology Corp. | 15,800 | 582,072 | ||||||
|
| |||||||
1,020,454 | ||||||||
SOFT DRINKS - 1.9% |
| |||||||
Dr Pepper Snapple Group, Inc. | 12,000 | 551,160 | ||||||
SOFTWARE & SERVICES - 4.0% |
| |||||||
CA, Inc. | 19,700 | 564,011 | ||||||
Microsoft Corp. | 17,295 | 597,196 | ||||||
|
| |||||||
1,161,207 | ||||||||
TECHNOLOGY - 4.0% |
| |||||||
Apple, Inc. | 1,200 | 475,296 | ||||||
Cisco Systems, Inc. | 28,000 | 680,680 | ||||||
|
| |||||||
1,155,976 | ||||||||
TELECOMMUNICATION |
| |||||||
AT&T, Inc. | 15,680 | 555,072 | ||||||
TOBACCO - 2.0% |
| |||||||
Reynolds American, Inc. | 12,150 | 587,696 |
The accompanying notes are an integral part of the financial statements.
16
Meridian Equity Income Fund
Schedule of Investments (continued)
June 30, 2013
Shares | Value | |||||||
COMMON STOCKS (continued) |
| |||||||
UTILITIES - 1.8% |
| |||||||
Hawaiian Electric Industries, Inc. | 20,000 | $ | 506,200 | |||||
TOTAL INVESTMENTS - 99.0% |
| 28,405,814 | ||||||
CASH AND OTHER ASSETS, LESS LIABILITIES - 1.0% |
| 291,344 | ||||||
|
| |||||||
NET ASSETS - 100.0% |
| $ | 28,697,158 | |||||
|
|
REIT - Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
17
Meridian Growth Fund
Schedule of Investments
June 30, 2013
Shares | Value | |||||||
COMMON STOCKS - 94.0% |
| |||||||
AIR FREIGHT & LOGISTICS - 0.7% |
| |||||||
Expeditors International of Washington, Inc. | 367,500 | $ | 13,968,675 | |||||
AUTOMOTIVE WHOLESALE SERVICES - 2.6% |
| |||||||
LKQ Corp.* | 2,127,200 | 54,775,400 | ||||||
BANKING - COMMERCIAL - 4.3% |
| |||||||
Bank of Hawaii Corp | 846,500 | 42,595,880 | ||||||
East West Bancorp, Inc | 1,766,700 | 48,584,250 | ||||||
|
| |||||||
91,180,130 | ||||||||
BROKERAGE & MONEY MANAGEMENT - 4.9% |
| |||||||
Affiliated Managers Group, Inc.* | 386,000 | 63,280,840 | ||||||
LPL Financial Holdings, Inc. | 1,048,400 | 39,587,584 | ||||||
|
| |||||||
102,868,424 | ||||||||
BUILDING PRODUCTS - 2.1% |
| |||||||
Valspar Corp. (The) | 697,200 | 45,087,924 | ||||||
CELLULAR COMMUNICATIONS - 2.0% |
| |||||||
SBA Communications | 567,100 | 42,033,452 | ||||||
CHEMICALS - SPECIALTY - 2.4% |
| |||||||
FMC Corp. | 823,300 | 50,270,697 | ||||||
CONSUMER SERVICES - 1.7% |
| |||||||
Rollins, Inc. | 1,410,792 | 36,539,513 | ||||||
DISTRIBUTION & WHOLESALE - 2.7% |
| |||||||
Watsco, Inc. | 469,900 | 39,452,804 | ||||||
World Fuel Services Corp. | 457,600 | 18,294,848 | ||||||
|
| |||||||
57,747,652 |
Shares | Value | |||||||
ELECTRONIC EQUIPMENT MANUFACTURING - 2.2% |
| |||||||
AMETEK, Inc. | 1,111,000 | $ | 46,995,300 | |||||
ENERGY - 6.4% |
| |||||||
Continental Resources, Inc.* | 370,200 | 31,859,412 | ||||||
Core Laboratories NV (Netherlands) | 227,000 | 34,426,820 | ||||||
FMC Technologies, Inc.* | 668,945 | 37,246,858 | ||||||
Noble Energy, Inc. | 511,700 | 30,722,468 | ||||||
|
| |||||||
134,255,558 | ||||||||
ENVIRONMENTAL FACILITIES & SERVICES - 2.6% |
| |||||||
Stericycle, Inc.* | 496,200 | 54,795,366 | ||||||
FLOORING & CARPETS - 2.7% |
| |||||||
Mohawk Industries, Inc.* | 510,900 | 57,471,141 | ||||||
FURNITURE & FIXTURES - 1.9% |
| |||||||
Herman Miller, Inc. | 1,488,625 | 40,297,079 | ||||||
HEALTH CARE INFORMATION SERVICES - 2.3% |
| |||||||
Cerner Corp.* | 500,000 | 48,045,000 | ||||||
HEALTH CARE PRODUCTS - 3.6% |
| |||||||
DENTSPLY International, Inc. | 1,012,000 | 41,451,520 | ||||||
Edwards Lifesciences Corp.* | 506,700 | 34,050,240 | ||||||
|
| |||||||
75,501,760 | ||||||||
HEALTH CARE TECHNOLOGY - 2.7% |
| |||||||
IDEXX Laboratories, Inc.* . | 360,000 | 32,320,800 | ||||||
PerkinElmer, Inc. | 759,500 | 24,683,750 | ||||||
|
| |||||||
57,004,550 |
The accompanying notes are an integral part of the financial statements.
18
Meridian Growth Fund
Schedule of Investments (continued)
June 30, 2013
Shares | Value | |||||||
COMMON STOCKS (continued) |
| |||||||
INDUSTRIAL - 3.1% |
| |||||||
Woodward, Inc. | 963,900 | $ | 38,556,000 | |||||
Xylem, Inc. | 989,800 | 26,665,212 | ||||||
|
| |||||||
65,221,212 | ||||||||
INDUSTRIAL CONGLOMERATES - 2.1% |
| |||||||
Pall Corp. | 667,000 | 44,308,810 | ||||||
INSURANCE BROKERS - 3.5% |
| |||||||
Brown & Brown, Inc. | 2,306,400 | 74,358,336 | ||||||
LEISURE & AMUSEMENT - 0.7% |
| |||||||
Royal Caribbean Cruises, Ltd. | 442,450 | 14,751,283 | ||||||
LEISURE PRODUCTS - 1.3% |
| |||||||
Brunswick Corp. | 834,900 | 26,675,055 | ||||||
PHARMACEUTICALS - 2.8% |
| |||||||
Perrigo Co. | 482,100 | 58,334,100 | ||||||
RAILROADS - 0.8% |
| |||||||
Genesee & Wyoming, Inc. Class A* | 199,200 | 16,900,128 | ||||||
REAL ESTATE MANAGEMENT & SERVICES - 2.6% |
| |||||||
Jones Lang LaSalle, Inc. | 595,700 | 54,292,098 | ||||||
RESTAURANTS - 1.1% |
| |||||||
Cracker Barrel Old Country Store, Inc. | 253,400 | 23,986,844 | ||||||
RETAIL - 12.3% |
| |||||||
AutoZone, Inc.* | 83,000 | 35,166,270 | ||||||
Bed Bath & Beyond, Inc.* | 435,000 | 30,841,500 | ||||||
Coach, Inc. | 353,000 | 20,152,770 | ||||||
Dollar Tree, Inc.* | 399,500 | 20,310,580 | ||||||
DSW, Inc. Class A | 481,000 | 35,339,070 | ||||||
Mattel, Inc. | 685,105 | 31,042,107 |
Shares | Value | |||||||
RETAIL (continued) |
| |||||||
PetSmart, Inc. | 457,215 | $ | 30,628,833 | |||||
Sally Beauty Holdings, Inc.* | 1,036,300 | 32,228,930 | ||||||
Tumi Holdings, Inc.* | 1,059,900 | 25,437,600 | ||||||
|
| |||||||
261,147,660 | ||||||||
TECHNOLOGY - 5.5% |
| |||||||
Avago Technologies, Ltd. (Singapore) | 1,167,600 | 43,644,888 | ||||||
Trimble Navigation, Ltd.* | 1,765,700 | 45,925,857 | ||||||
Zebra Technologies Corp. | 635,900 | 27,623,496 | ||||||
|
| |||||||
117,194,241 | ||||||||
TECH - SOFTWARE - 7.0% |
| |||||||
ANSYS, Inc.* | 450,500 | 32,931,550 | ||||||
Citrix Systems, Inc.* | 430,200 | 25,953,966 | ||||||
MICROS Systems, Inc.* . | 378,800 | 16,345,220 | ||||||
QLIK Technologies, Inc.* | 257,000 | 7,265,390 | ||||||
Solera Holdings, Inc | 571,600 | 31,809,540 | ||||||
Teradata Corp.* | 590,300 | 29,650,769 | ||||||
TIBCO Software, Inc.* | 156,100 | 3,340,540 | ||||||
|
| |||||||
147,296,975 | ||||||||
TRANSPORTATION - 1.6% |
| |||||||
Kirby Corp.* | 425,000 | 33,804,500 | ||||||
TRUCKING - 1.8% | ||||||||
J.B. Hunt Transport Services, Inc. | 535,700 | 38,698,968 | ||||||
TOTAL COMMON STOCKS - 94.0% |
| 1,985,807,831 | ||||||
|
|
The accompanying notes are an integral part of the financial statements.
19
Meridian Growth Fund
Schedule of Investments (continued)
June 30, 2013
Value | ||||||
U.S. GOVERNMENT OBLIGATIONS - 2.4% |
| |||||
U.S. Treasury Bill @ .035%** | $ | 34,998,707 | ||||
U.S. Treasury Bill @ .041%** | 14,998,995 | |||||
|
| |||||
TOTAL U.S. GOVERNMENT OBLIGATIONS | 49,997,702 | |||||
|
| |||||
TOTAL INVESTMENTS - 96.4% | 2,035,805,533 | |||||
CASH AND OTHER ASSETS, LESS | 77,139,592 | |||||
|
| |||||
NET ASSETS - 100.0% | $ | 2,112,945,125 | ||||
|
|
* | Non-income producing securities |
** | Annualized yield at date of purchase |
The accompanying notes are an integral part of the financial statements.
20
Meridian Value Fund
Schedule of Investments
June 30, 2013
Shares | Value | |||||||
COMMON STOCKS - 94.8% |
| |||||||
AEROSPACE & DEFENSE - 3.7% |
| |||||||
FLIR Systems, Inc. | 512,100 | $ | 13,811,337 | |||||
Orbital Sciences Corp.* . | 694,400 | 12,061,728 | ||||||
|
| |||||||
25,873,065 | ||||||||
APPAREL - 4.2% |
| |||||||
Gildan Activewear, Inc. (Canada) | 325,300 | 13,177,903 | ||||||
Maidenform Brands, Inc.* | 297,500 | 5,155,675 | ||||||
Wolverine World Wide, | 205,000 | 11,195,050 | ||||||
|
| |||||||
29,528,628 | ||||||||
AUTOMOTIVE WHOLESALE SERVICES - 2.2% |
| |||||||
LKQ Corp.* | 607,200 | 15,635,400 | ||||||
BANKING - COMMERCIAL - 1.7% |
| |||||||
Associated Banc-Corp. | 783,600 | 12,184,980 | ||||||
BANKING - REGIONAL BANKS - 2.0% |
| |||||||
First Niagara Financial Group, Inc. . | 1,419,700 | 14,296,379 | ||||||
BASIC MATERIALS - 1.9% |
| |||||||
Compass Minerals International, Inc. | 162,000 | 13,693,860 | ||||||
CHEMICALS - SPECIALTY - 0.9% |
| |||||||
Innophos Holdings, Inc. | 139,800 | 6,594,366 | ||||||
CONSULTING SERVICES - 2.5% |
| |||||||
Huron Consulting Group, Inc.* | 387,800 | 17,931,872 | ||||||
CONSUMER PRODUCTS - 1.5% |
| |||||||
Scotts Miracle-Gro Co. (The) Class A | 214,500 | 10,362,495 |
Shares | Value | |||||||
DIVERSIFIED FINANCIAL SERVICES - 4.4% |
| |||||||
Broadridge Financial Solutions, Inc. | 790,600 | $ | 21,014,148 | |||||
Equifax, Inc. | 170,800 | 10,065,244 | ||||||
|
| |||||||
31,079,392 | ||||||||
DIVERSIFIED OPERATIONS - 1.8% |
| |||||||
Koninklijke Philips Electronics N.V. (Netherlands) | 475,231 | 12,921,531 | ||||||
ENERGY - 4.2% |
| |||||||
Energen Corp. | 154,100 | 8,053,266 | ||||||
EOG Resources, Inc. | 110,000 | 14,484,800 | ||||||
Occidental Petroleum | 81,700 | 7,290,091 | ||||||
|
| |||||||
29,828,157 | ||||||||
FOOD - 3.3% |
| |||||||
Chiquita Brands International, Inc.* | 256,800 | 2,804,256 | ||||||
Flowers Foods, Inc. | 608,550 | 13,418,527 | ||||||
Lancaster Colony Corp. | 85,900 | 6,699,341 | ||||||
|
| |||||||
22,922,124 | ||||||||
HEALTH CARE PRODUCTS - 4.4% |
| |||||||
Haemonetics Corp.* | 439,500 | 18,173,325 | ||||||
Masimo Corp. | 609,110 | 12,913,132 | ||||||
|
| |||||||
31,086,457 | ||||||||
HEALTH CARE SERVICES - 3.0% |
| |||||||
Humana, Inc. | 118,300 | 9,982,154 | ||||||
ICON Plc ADR* (Ireland) | 308,000 | 10,912,440 | ||||||
|
| |||||||
20,894,594 | ||||||||
HOME IMPROVEMENT RETAIL - 1.6% |
| |||||||
Sherwin-Williams Co. (The) | 58,000 | 10,242,800 | ||||||
HOUSEHOLD - HOME FURNISHINGS - 1.1% |
| |||||||
Tempur Sealy International, Inc.* | 172,700 | 7,581,530 |
The accompanying notes are an integral part of the financial statements.
21
Meridian Value Fund
Schedule of Investments (continued)
June 30, 2013
Shares | Value | |||||||
COMMON STOCKS (continued) |
| |||||||
INDUSTRIAL - 5.1% |
| |||||||
Flowserve Corp. | 231,900 | $ | 12,524,919 | |||||
Lennox International, Inc. | 196,900 | 12,707,926 | ||||||
Xylem, Inc. | 401,600 | 10,819,104 | ||||||
|
| |||||||
36,051,949 | ||||||||
INDUSTRIAL CONGLOMERATES - 1.4% |
| |||||||
Air Products & Chemicals, | 107,000 | 9,797,990 | ||||||
INDUSTRIAL SERVICES - 1.0% |
| |||||||
W.W. Grainger, Inc. | 28,400 | 7,161,912 | ||||||
INSURANCE - 2.5% |
| |||||||
Arthur J Gallagher & Co. | 396,100 | 17,305,609 | ||||||
LEISURE & AMUSEMENT - 4.2% |
| |||||||
Bally Technologies, Inc.* | 269,000 | 15,176,980 | ||||||
Polaris Industries, Inc. | 149,000 | 14,155,000 | ||||||
|
| |||||||
29,331,980 | ||||||||
METALS - 0.8% | ||||||||
New Gold, Inc.* (Canada) | 889,700 | 5,711,874 | ||||||
OFFICE SERVICES & SUPPLIES - 2.0% |
| |||||||
Steelcase, Inc. Class A | 982,000 | 14,317,560 | ||||||
PACKAGING - 1.6% |
| |||||||
Aptargroup, Inc. | 206,300 | 11,389,823 | ||||||
PHARMACEUTICALS - 1.4% |
| |||||||
Hospira, Inc.* | 257,400 | 9,860,994 | ||||||
RAILROADS - 3.0% |
| |||||||
Genesee & Wyoming, Inc. Class A* | 75,100 | 6,371,484 | ||||||
Union Pacific Corp. | 93,800 | 14,471,464 | ||||||
|
| |||||||
20,842,948 | ||||||||
REAL ESTATE - 2.3% |
| |||||||
Alexander & Baldwin, Inc.* | 411,200 | 16,345,200 |
Shares | Value | |||||||
RESTAURANTS - 1.2% |
| |||||||
Denny’s Corp.* | 1,508,600 | $ | 8,478,332 | |||||
RETAIL - 2.9% |
| |||||||
Aeropostale, Inc.* | 457,900 | 6,319,020 | ||||||
Mattel, Inc. | 308,500 | 13,978,135 | ||||||
|
| |||||||
20,297,155 | ||||||||
SEMICONDUCTORS - 4.6% |
| |||||||
Linear Technology Corp. | 316,200 | 11,648,808 | ||||||
NVIDIA Corp. | 560,500 | 7,863,815 | ||||||
Power Integrations, Inc. | 321,800 | 13,052,208 | ||||||
|
| |||||||
32,564,831 | ||||||||
STORAGE - 1.3% |
| |||||||
Mobile Mini, Inc.* | 279,438 | 9,263,370 | ||||||
TECHNOLOGY - 10.0% |
| |||||||
Brocade Communications Systems, Inc.* | 1,183,600 | 6,817,536 | ||||||
Cree, Inc.* | 107,000 | 6,833,020 | ||||||
eBay, Inc.* | 191,000 | 9,878,520 | ||||||
Informatica Corp.* | 290,600 | 10,165,188 | ||||||
Itron, Inc.* | 181,200 | 7,688,316 | ||||||
National Instruments Corp. | 288,400 | 8,057,896 | ||||||
Ubiquiti Networks, Inc. | 215,500 | 3,779,870 | ||||||
Verint Systems, Inc.* | 491,500 | 17,433,505 | ||||||
|
| |||||||
70,653,851 | ||||||||
TECH - SOFTWARE - 1.3% |
| |||||||
Citrix Systems, Inc.* | 147,000 | 8,868,510 | ||||||
TRANSPORTATION - 1.3% |
| |||||||
Matson, Inc. | 354,800 | 8,870,000 | ||||||
UTILITIES - 2.5% |
| |||||||
Hawaiian Electric Industries, Inc. | 699,375 | 17,701,181 | ||||||
TOTAL COMMON STOCKS - 94.8% |
| 667,472,699 | ||||||
|
|
The accompanying notes are an integral part of the financial statements.
22
Meridian Value Fund
Schedule of Investments (continued)
June 30, 2013
Value | ||||||
U.S. GOVERNMENT OBLIGATIONS - 2.1% |
| |||||
U.S. Treasury Bill @ .041%** | $ | 14,998,995 | ||||
TOTAL U.S. GOVERNMENT OBLIGATIONS | 14,998,995 | |||||
|
| |||||
TOTAL INVESTMENTS - 96.9% | 682,471,694 | |||||
CASH AND OTHER ASSETS, LESS LIABILITIES - 3.1% | 22,050,927 | |||||
|
| |||||
NET ASSETS - 100.0% | $ | 704,522,621 | ||||
|
|
ADR - American Depositary Receipt
* | Non-income producing securities |
** | Annualized yield at date of purchase |
The accompanying notes are an integral part of the financial statements.
23
Meridian Fund, Inc.
Statements of Assets and Liabilities
June 30, 2013
Equity Income Fund | Growth Fund | Value Fund | ||||||||||
ASSETS | ||||||||||||
Investments (Cost $23,250,093, $1,599,214,044 and $523,078,163 respectively) | $ | 28,405,814 | $ | 2,035,805,533 | $ | 682,471,694 | ||||||
Cash | 372,958 | 69,009,400 | 23,691,197 | |||||||||
Receivable for: | ||||||||||||
Capital shares purchased | — | 448,291 | 93,799 | |||||||||
Securities sold | — | 23,017,598 | 8,573,935 | |||||||||
Dividends | 67,716 | 518,587 | 513,872 | |||||||||
Interest | 14 | 3,347 | 1,161 | |||||||||
Prepaid expenses | 31,196 | 30,260 | 9,090 | |||||||||
|
|
|
|
|
| |||||||
TOTAL ASSETS | 28,877,698 | 2,128,833,016 | 715,354,748 | |||||||||
|
|
|
|
|
| |||||||
LIABILITIES | ||||||||||||
Payable for: | ||||||||||||
Capital shares sold | 99,492 | 2,053,399 | 382,692 | |||||||||
Securities purchased | — | 12,021,406 | 9,624,293 | |||||||||
Accrued expenses: | ||||||||||||
Investment advisory fees | 10,599 | 1,319,027 | 582,998 | |||||||||
Professional fees | 62,669 | 271,010 | 139,685 | |||||||||
Other payables and accrued expenses | 7,780 | 223,049 | 102,459 | |||||||||
|
|
|
|
|
| |||||||
TOTAL LIABILITIES | 180,540 | 15,887,891 | 10,832,127 | |||||||||
|
|
|
|
|
| |||||||
NET ASSETS | $ | 28,697,158 | $ | 2,112,945,125 | $ | 704,522,621 | ||||||
|
|
|
|
|
| |||||||
Capital shares issued and outstanding, par value $0.01 (500,000,000, 500,000,000 and 500,000,000 shares authorized, respectively) | 2,322,939 | 47,682,084 | 18,940,452 | |||||||||
|
|
|
|
|
| |||||||
Net asset value per share (offering and redemption price) | $ | 12.35 | $ | 44.31 | $ | 37.20 | ||||||
|
|
|
|
|
| |||||||
Net Assets consist of: | ||||||||||||
Paid in capital | $ | 25,817,086 | $ | 1,477,038,861 | $ | 600,710,439 | ||||||
Accumulated net realized gain (loss) on investments and foreign currency translations | (2,724,972 | ) | 200,389,453 | (58,414,701 | ) | |||||||
Net unrealized appreciation on investments and foreign currency translations | 5,155,721 | 436,591,489 | 159,393,531 | |||||||||
Undistributed (distributions in excess of) net investment income | 449,323 | (1,074,678 | ) | 2,833,352 | ||||||||
|
|
|
|
|
| |||||||
$ | 28,697,158 | $ | 2,112,945,125 | $ | 704,522,621 | |||||||
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
24
Meridian Fund, Inc.
Statements of Operations
For the Year Ended June 30, 2013
Equity Income Fund | Growth Fund | Value Fund | ||||||||||
INVESTMENT INCOME | ||||||||||||
Dividends | $ | 915,927 | $ | 21,683,995 | $ | 10,926,582 | ||||||
Foreign tax withholding | (2,561 | ) | (107,692 | ) | (127,498 | ) | ||||||
Interest | 545 | 86,428 | 25,222 | |||||||||
|
|
|
|
|
| |||||||
Total investment income | 913,911 | 21,662,731 | 10,824,306 | |||||||||
|
|
|
|
|
| |||||||
EXPENSES | ||||||||||||
Investment advisory fees | 256,938 | 16,661,807 | 6,908,791 | |||||||||
Custodian fees | 7,627 | 200,481 | 67,834 | |||||||||
Directors’ fees and expenses | 1,000 | 306,163 | 97,176 | |||||||||
Pricing fees | 26,900 | 215,459 | 84,866 | |||||||||
Professional fees | 73,336 | 793,511 | 269,735 | |||||||||
Registration and filing fees | 35,843 | 59,472 | 42,510 | |||||||||
Reports to shareholders | 3,426 | 311,687 | 134,668 | |||||||||
Transfer agent fees | 13,053 | 524,013 | 362,626 | |||||||||
Miscellaneous expenses | 938 | 77,362 | 23,465 | |||||||||
|
|
|
|
|
| |||||||
Total expenses | 419,061 | 19,149,955 | 7,991,671 | |||||||||
Fees waived by Adviser (Note 2) | (75,932 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Net expenses | 343,129 | 19,149,955 | 7,991,671 | |||||||||
|
|
|
|
|
| |||||||
Net investment income | 570,782 | 2,512,776 | 2,832,635 | |||||||||
|
|
|
|
|
| |||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS | ||||||||||||
Net realized gain on investments | 1,655,567 | 363,025,066 | 101,658,219 | |||||||||
Net realized loss on foreign currency related transactions | — | — | 853 | |||||||||
Net change in unrealized appreciation/depreciation on investments | 2,402,213 | (55,210,405 | ) | 32,364,704 | ||||||||
|
|
|
|
|
| |||||||
Net realized and unrealized gain on investments and foreign currency related translations | 4,057,780 | 307,814,661 | 134,023,776 | |||||||||
|
|
|
|
|
| |||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 4,628,562 | $ | 310,327,437 | $ | 136,856,411 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
25
Meridian Fund, Inc.
Statements of Changes in Net Assets
Equity Income Fund | Growth Fund | |||||||||||||||
Year Ended June 30, 2013 | Year Ended June 30, 2012 | Year Ended June 30, 2013 | Year Ended June 30, 2012 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income | $ | 570,782 | $ | 716,129 | $ | 2,512,776 | $ | 5,425,699 | ||||||||
Net realized gain on investments | 1,655,567 | 1,247,536 | 363,025,066 | 182,254,242 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments | 2,402,213 | (1,059,666 | ) | (55,210,405 | ) | (132,481,769 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets from operations | 4,628,562 | 903,999 | 310,327,437 | 55,198,172 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
DISTRIBUTIONS TO SHAREHOLDERS |
| |||||||||||||||
Distributions from ordinary income | (639,477 | ) | (666,723 | ) | (6,998,656 | ) | (3,952,996 | ) | ||||||||
Distributions from net realized capital gains | — | — | (312,972,771 | ) | (179,546,182 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions | (639,477 | ) | (666,723 | ) | (319,971,427 | ) | (183,499,178 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Proceeds from sales of shares | 525,065 | 1,755,274 | 222,874,783 | 606,354,021 | ||||||||||||
Reinvestment of distributions | 626,539 | 661,090 | 308,104,009 | 177,474,961 | ||||||||||||
Redemption fees. | — | 3,282 | 78,376 | 172,598 | ||||||||||||
Less: redemptions of shares | (7,187,267 | ) | (7,556,784 | ) | (892,551,886 | ) | (786,698,568 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Decrease resulting from capital share transactions. | (6,035,663 | ) | (5,137,138 | ) | (361,494,718 | ) | (2,696,988 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total decrease in net assets | (2,046,578 | ) | (4,899,862 | ) | (371,138,708 | ) | (130,997,994 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
NET ASSETS | ||||||||||||||||
Beginning of year | 30,743,736 | 35,643,598 | 2,484,083,833 | 2,615,081,827 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of year | $ | 28,697,158 | $ | 30,743,736 | $ | 2,112,945,125 | $ | 2,484,083,833 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Undistributed (distributions in excess of) net investment income at end of year | $ | 449,323 | $ | 518,016 | $ | (1,074,678 | ) | $ | 2,165,221 | |||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
26
Meridian Fund, Inc.
Statements of Changes in Net Assets
Value Fund | ||||||||
Year Ended June 30, 2013 | Year Ended June 30, 2012 | |||||||
OPERATIONS | ||||||||
Net investment income | $ | 2,832,635 | $ | 2,282,603 | ||||
Net realized gain on investments and foreign currency related transactions | 101,659,072 | 67,572,308 | ||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency related translations | 32,364,704 | (51,595,129 | ) | |||||
|
|
|
| |||||
Net increase in net assets from operations | 136,856,411 | 18,259,782 | ||||||
|
|
|
| |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
Distributions from ordinary income | (2,282,630 | ) | (3,256,492 | ) | ||||
|
|
|
| |||||
Net distributions | (2,282,630 | ) | (3,256,492 | ) | ||||
|
|
|
| |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from sales of shares | 12,805,749 | 17,262,910 | ||||||
Reinvestment of distributions | 2,219,386 | 3,188,208 | ||||||
Redemption fees | 2,031 | 8,236 | ||||||
Less: redemptions of shares | (133,725,786 | ) | (216,127,160 | ) | ||||
|
|
|
| |||||
Decrease resulting from capital share transactions | (118,698,620 | ) | (195,667,806 | ) | ||||
|
|
|
| |||||
Total increase (decrease) in net assets | 15,875,161 | (180,664,516 | ) | |||||
|
|
|
| |||||
NET ASSETS | ||||||||
Beginning of year | 688,647,460 | 869,311,976 | ||||||
|
|
|
| |||||
End of year | $ | 704,522,621 | $ | 688,647,460 | ||||
|
|
|
| |||||
Undistributed net investment income at end of year | $ | 2,833,352 | $ | 2,282,494 | ||||
|
|
|
|
The accompanying notes are an integral part of the financial statements.
27
Meridian Equity Income Fund
Financial Highlights
Selected data for each share of capital stock outstanding throughout each period
For the Fiscal Year Ended June 30, | For the fiscal period from January 31, 2005 through June 30, 2005+ | |||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||
Net Asset Value - Beginning of Period | $ | 10.71 | $ | 10.61 | $ | 8.51 | $ | 6.88 | $ | 10.37 | $ | 13.14 | $ | 11.05 | $ | 10.10 | $ | 10.00 | ||||||||||||||||||
|
|
|
|
|
|
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|
|
|
|
|
|
|
| |||||||||||||||||||
Income (Loss) from Investment Operations | ||||||||||||||||||||||||||||||||||||
Net Investment Income | 0.24 | 1 | 0.22 | 1 | 0.20 | 1 | 0.19 | 1 | 0.22 | 1 | 0.24 | 1 | 0.18 | 0.15 | 0.06 | |||||||||||||||||||||
Net Gains (Losses) on Investments (both realized and unrealized) | 1.68 | 0.09 | 2.11 | 1.63 | (2.96 | ) | (2.25 | ) | 2.19 | 0.93 | 0.04 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total From Investment Operations | 1.92 | 0.31 | 2.31 | 1.82 | (2.74 | ) | (2.01 | ) | 2.37 | 1.08 | 0.10 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less Distributions | ||||||||||||||||||||||||||||||||||||
Distributions from Net Investment Income | (0.28 | ) | (0.21 | ) | (0.21 | ) | (0.19 | ) | (0.22 | ) | (0.22 | ) | (0.17 | ) | (0.12 | ) | 0.00 | |||||||||||||||||||
Distributions from Net Realized Capital Gains | 0.00 | 0.00 | 0.00 | 0.00 | (0.53 | ) | (0.54 | ) | (0.11 | ) | (0.01 | ) | 0.00 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Distributions | (0.28 | ) | (0.21 | ) | (0.21 | ) | (0.19 | ) | (0.75 | ) | (0.76 | ) | (0.28 | ) | (0.13 | ) | 0.00 | |||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||
Net Asset Value - End of Period | $ | 12.35 | $ | 10.71 | $ | 10.61 | $ | 8.51 | $ | 6.88 | $ | 10.37 | $ | 13.14 | $ | 11.05 | $ | 10.10 | ||||||||||||||||||
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| |||||||||||||||||||
Total Return | 18.28% | 3.09% | 27.30% | 26.44% | (26.75% | ) | (15.84% | ) | 21.61% | 10.75% | 1.00% | 2 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||||||||||
Net Assets, End of Period (000’s) | $ | 28,697 | $ | 30,744 | $ | 35,644 | $ | 24,937 | $ | 20,719 | $ | 33,519 | $ | 43,188 | $ | 25,451 | $ | 8,412 | ||||||||||||||||||
Ratio of Expenses to Average Net Assets |
| |||||||||||||||||||||||||||||||||||
Before fees waived | 1.53% | 1.41% | 1.25% | 1.30% | 1.43% | 1.25% | 4 | 1.29% | 1.67% | 3.96% | 5 | |||||||||||||||||||||||||
After fees waived6 | 1.25% | 1.25% | 1.25% | 3 | 1.25% | 1.25% | 1.25% | 1.25% | 1.25% | 1.25% | 5 | |||||||||||||||||||||||||
Ratio of Net Investment Income to Average Net Assets |
| |||||||||||||||||||||||||||||||||||
After fees waived | 2.08% | 2.17% | 2.04% | 2.27% | 2.73% | 2.02% | 1.64% | 1.80% | 2.11% | 5 | ||||||||||||||||||||||||||
Portfolio Turnover Rate | 44% | 31% | 29% | 63% | 49% | 62% | 37% | 60% | 25% | 2 |
+ | The Fund commenced investment operations on January 31, 2005. |
1 | Per share net investment income has been calculated using the average daily shares method. |
2 | Not Annualized. |
3 | Includes fees waived, which were less than 0.01%. |
4 | The Advisor recouped $4,849 during the fiscal year ended June 30, 2008, representing previously reimbursed expenses. Had such payment not been made, the expense ratio would have been 1.24%. |
5 | Annualized. |
6 | See note 2 to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
28
Meridian Growth Fund
Financial Highlights
Selected data for each share of capital stock outstanding throughout each period
For the Fiscal Year Ended June 30, | ||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||||||||||||||
Net Asset Value - Beginning of Year | $ | 45.06 | $ | 47.61 | $ | 33.94 | $ | 27.89 | $ | 33.60 | $ | 42.74 | $ | 38.54 | $ | 35.77 | $ | 35.38 | $ | 27.24 | ||||||||||||||||||||
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|
| |||||||||||||||||||||
Income (Loss) from Investment Operations | ||||||||||||||||||||||||||||||||||||||||
Net Investment Income (Loss) | 0.05 | 1 | 0.10 | 1 | 0.08 | 1 | 0.08 | 1 | 0.15 | 1 | 0.05 | 1 | 0.04 | (0.01 | ) | (0.07 | ) | (0.04 | ) | |||||||||||||||||||||
Net Gains (Losses) on Investments (both realized and unrealized) | 6.23 | 0.69 | 13.67 | 6.11 | (4.68 | ) | (5.56 | ) | 7.29 | 3.58 | 1.02 | 9.10 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total From Investment Operations | 6.28 | 0.79 | 13.75 | 6.19 | (4.53 | ) | (5.51 | ) | 7.33 | 3.57 | 0.95 | 9.06 | ||||||||||||||||||||||||||||
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|
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|
| |||||||||||||||||||||
Less Distributions | ||||||||||||||||||||||||||||||||||||||||
Distributions from Net Investment Income | (0.15 | ) | (0.07 | ) | (0.07 | ) | (0.12 | ) | (0.09 | ) | (0.05 | ) | (0.01 | ) | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||||
Distributions from Net Realized Capital Gains | (6.88 | ) | (3.27 | ) | (0.01 | ) | 0.00 | (1.09 | ) | (3.58 | ) | (3.12 | ) | (0.80 | ) | (0.56 | ) | (0.92 | ) | |||||||||||||||||||||
Distributions from Paid in Capital Distribution | 0.00 | 0.00 | 0.00 | (0.02 | ) | (0.00 | )2 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||
Total Distributions | (7.03 | ) | (3.34 | ) | (0.08 | ) | (0.14 | ) | (1.18 | ) | (3.63 | ) | (3.13 | ) | (0.80 | ) | (0.56 | ) | (0.92 | ) | ||||||||||||||||||||
|
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|
| |||||||||||||||||||||
Net Asset Value - End of Year | $ | 44.31 | $ | 45.06 | $ | 47.61 | $ | 33.94 | $ | 27.89 | $ | 33.60 | $ | 42.74 | $ | 38.54 | $ | 35.77 | $ | 35.38 | ||||||||||||||||||||
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| |||||||||||||||||||||
Total Return | 15.54% | 2.45% | 40.51% | 22.18% | (13.01% | ) | (13.80% | ) | 19.69% | 10.08% | 2.65% | 33.65% | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||||||||||||||
Net Assets, End of Year (000’s) | $ | 2,112,945 | $ | 2,484,084 | $ | 2,615,082 | $ | 1,438,266 | $ | 1,197,656 | $ | 1,516,015 | $ | 2,066,750 | $ | 1,689,374 | $ | 1,693,564 | $ | 1,273,302 | ||||||||||||||||||||
Ratio of Expenses to Average Net Assets | 0.87% | 0.85% | 0.81% | 0.84% | 0.86% | 0.84% | 0.84% | 0.85% | 0.86% | 0.88% | ||||||||||||||||||||||||||||||
Ratio of Net Investment Income (Loss) | ||||||||||||||||||||||||||||||||||||||||
to Average Net Assets | 0.11% | 0.22% | 0.18% | 0.24% | 0.52% | 0.13% | 0.11% | (0.03% | ) | (0.21% | ) | (0.21% | ) | |||||||||||||||||||||||||||
Portfolio Turnover Rate | 37% | 25% | 26% | 37% | 35% | 39% | 40% | 29% | 32% | 19% |
1 | Per share net investment income (loss) has been calculated using the average daily shares method. |
2 | Distribution includes a return of capital that rounds that rounds to less than $.01 per share. |
The accompanying notes are an integral part of the financial statements.
29
Meridian Value Fund
Financial Highlights
Selected data for each share of capital stock outstanding throughout each period
For the Fiscal Year Ended June 30, | ||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||||||||||||||
Net Asset Value - Beginning of Year | $ | 30.60 | $ | 29.59 | $ | 22.80 | $ | 20.53 | $ | 29.43 | $ | 38.79 | $ | 36.14 | $ | 38.11 | $ | 40.35 | $ | 31.65 | ||||||||||||||||||||
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|
| |||||||||||||||||||||
Income (Loss) from Investment Operations | ||||||||||||||||||||||||||||||||||||||||
Net Investment Income (Loss) | 0.14 | 1 | 0.09 | 1 | 0.10 | 1 | 0.07 | 1 | 0.22 | 1 | 0.15 | 1 | 0.41 | 0.18 | 0.19 | 0.00 | ||||||||||||||||||||||||
Net Gains (Losses) on Investments (both realized and unrealized) | 6.57 | 1.05 | 2 | 6.77 | 2.45 | (7.80 | ) | (3.12 | ) | 7.74 | 2.45 | 2.96 | 8.70 | |||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total From Investment Operations | 6.71 | 1.14 | 6.87 | 2.52 | (7.58 | ) | (2.97 | ) | 8.15 | 2.63 | 3.15 | 8.70 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Less Distributions | ||||||||||||||||||||||||||||||||||||||||
Distributions from Net Investment Income | (0.11 | ) | (0.13 | ) | (0.08 | ) | (0.25 | ) | 0.00 | (0.35 | ) | (0.41 | ) | (0.32 | ) | (0.28 | ) | 0.00 | ||||||||||||||||||||||
Distributions from Net Realized Capital Gains | 0.00 | 0.00 | 0.00 | 0.00 | (1.32 | ) | (6.04 | ) | (5.09 | ) | (4.28 | ) | (5.11 | ) | 0.00 | |||||||||||||||||||||||||
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| |||||||||||||||||||||
Total Distributions | (0.11 | ) | (0.13 | ) | (0.08 | ) | (0.25 | ) | (1.32 | ) | (6.39 | ) | (5.50 | ) | (4.60 | ) | (5.39 | ) | 0.00 | |||||||||||||||||||||
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Net Asset Value - End of Year | $ | 37.20 | $ | 30.60 | $ | 29.59 | $ | 22.80 | $ | 20.53 | $ | 29.43 | $ | 38.79 | $ | 36.14 | $ | 38.11 | $ | 40.35 | ||||||||||||||||||||
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Total Return | 21.98% | 3.89% | 2 | 30.13% | 12.20% | (25.72% | ) | (8.82% | ) | 23.90% | 7.35% | 8.00% | 27.49% | |||||||||||||||||||||||||||
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Ratios/Supplemental Data | ||||||||||||||||||||||||||||||||||||||||
Net Assets, End of Year (000’s) | $ | 704,523 | $ | 688,647 | $ | 869,312 | $ | 802,936 | $ | 831,572 | $ | 1,319,186 | $ | 1,819,440 | $ | 1,686,874 | $ | 2,271,478 | $ | 2,226,590 | ||||||||||||||||||||
Ratio of Expenses to Average Net Assets | 1.16% | 1.14% | 1.09% | 1.09% | 1.12% | 1.09% | 1.08% | 1.09% | 1.08% | 1.09% | ||||||||||||||||||||||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.41% | 0.31% | 0.37% | 0.27% | 0.97% | 0.44% | 0.59% | 0.49% | 0.48% | 0.01% | ||||||||||||||||||||||||||||||
Portfolio Turnover Rate | 55% | 20% | 38% | 45% | 87% | 61% | 75% | 58% | 59% | 81% |
1 | Per share net investment income (loss) has been calculated using the average daily shares method. |
2 | 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 return would have been 3.69%. |
The accompanying notes are an integral part of the financial statements.
30
Meridian Fund, Inc.
Notes to Financial Statements
For the Year Ended June 30, 2013
1. | Organization and Significant Accounting Policies: Meridian Fund, Inc. (“Meridian”) is comprised of the Meridian Equity Income Fund (the “Equity Income Fund”), the Meridian Growth Fund (the “Growth Fund”) and the Meridian Value Fund (the “Value Fund”). The Equity Income Fund, the Growth Fund and the Value Fund (each, a “Fund” and collectively, the “Funds”) are registered under the Investment Company Act of 1940, as no-load, diversified, open-end management investment companies. The Equity Income Fund began operations and was registered on January 31, 2005. The Growth Fund began operations and was registered on August 1, 1984. The Value Fund began operations on February 10, 1994 and was registered on February 7, 1994. |
The primary investment objective of the 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 Growth Fund is to seek long-term growth of capital.
The primary investment objective of the Value Fund is to seek long-term growth of capital.
The following is a summary of significant accounting policies for all of the Funds:
a. | Investment Valuations: All equity securities are valued at the close of business of the New York Stock Exchange (NYSE), which is usually 4:00 p.m. (Eastern Time). 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. Foreign securities shall be valued in U.S. dollars utilizing spot exchange rates at the close of regular trading on the NYSE. However, many securities markets and exchanges outside the U.S. close prior to the close of the NYSE; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE. In those situations, foreign securities will be fair valued pursuant to the policy adopted by the Board of Directors of Meridian (the “Board”), including utilizing a third party pricing service to determine these fair values (as described below). |
Fixed income (debt) securities with original or remaining maturities of more than 60 days are typically valued at the mean of representative quoted bid and asked prices or, if such prices are not available, quoted bid and asked prices for securities of comparable maturity, quality and type. Fixed income securities of sufficient credit quality with 60 days or less to maturity are typically amortized to maturity based on their cost to the Fund if acquired within 60 days of maturity or, if already held by the Fund on the 60th day, based on the value determined on the 61st day.
Securities and other assets for which reliable market quotations are not readily available will be valued at their fair value as determined by Aster Investment Management Co., Inc., the investment adviser to the Funds (the “Adviser”), pursuant to the policy and procedures adopted by, and under the general supervision of, the Board. The Adviser may determine that fair value
31
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
pricing is appropriate for securities that, for example, are thinly traded or illiquid, or where the Adviser believes that the prices provided by a pricing service are not accurate or where such prices are not available. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published prices for the security.
The determination of fair value often requires significant judgment. To determine fair value, management may use assumptions including, but not limited to, future cash flows and estimated risk premiums. Multiple inputs from various sources may be used to determine fair value.
b. | 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. |
c. | Security Transactions: Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses on security transactions are determined on the basis of specific identification for both financial statement and federal income tax purposes. Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. |
d. | Cash and Cash Equivalents: All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Available funds are automatically swept into a cash reserve account, which preserves capital with a consistently competitive rate of return. Interest accrues daily and is credited by the third business day of the following month. |
e. | Expenses: Expenses arising in connection with a Fund are charged directly to that Fund. Expenses common to the Funds are generally allocated to each Fund in proportion to their relative net assets. |
f. | Use of Estimates: The preparation of financial statements in accordance with accounting principals generally accepted in the 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. |
g. | 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. |
32
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
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.
h. | 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. |
i. | 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, which, as indicated above, is typically the close of the NYSE. 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. Foreign securities and currency transactions may involve risks not associated with U.S. securities and currency. 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. |
j. | Fair Value Measurements: As described in Note 1.a. above, the Funds utilize various methods to determine and 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). 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).
33
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
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, 2013 is as follows:
Valuation Inputs | Equity Income Fund | Growth Fund | Value Fund | |||||||||
Level 1 - Quoted Prices* | $ | 28,405,814 | $ | 1,985,807,831 | $ | 667,472,699 | ||||||
Level 2 - Other Significant Observable Inputs** | — | 49,997,702 | 14,998,995 | |||||||||
Level 3 - Significant Unobservable Inputs | — | — | — | |||||||||
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| |||||||
Total Market Value of Investments | $ | 28,405,814 | $ | 2,035,805,533 | $ | 682,471,694 | ||||||
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* | Level 1 investments are comprised of common stock with industry classifications as defined on the Schedule of Investments. |
** | Level 2 investments are comprised of U.S. Treasury Securities. |
During the fiscal year ended June 30, 2013 there were no reportable transfers between levels.
2. | Related Parties: Effective July 13, 2012, Meridian, on behalf of each Fund, entered into a new Investment Management Agreement and Service Agreement with the Adviser (the “Management Agreement”). The Funds’ Board, and each Fund’s shareholders, approved, among other matters, the Management Agreement with the Adviser. |
Prior to his death on February 16, 2012, Richard F. Aster, Jr. owned approximately 96% of the Adviser. In connection with his death, Mr. Aster’s ownership interest in the Adviser, among other assets, was transferred (the “Transfer”) to a trust (the “Trust”). First Republic Trust Company (“First Republic”), as a co-trustee of the Trust, has sole authority to act under the Trust agreement with respect to the Trust’s ownership interest in the Adviser. In this regard, First Republic has the authority, on behalf of the Trust, without limitation, to make all decisions regarding the Trust’s ownership interest in the Adviser, as well as the administration, management and operations of the Adviser. The Transfer constituted a change of control, under the 1940 Act, which required a new investment management agreement to be approved by the Board and Fund shareholders. In immediate response to Mr. Aster’s death, the Board approved interim investment management agreements with the Adviser, which were in place until the Board and shareholders approved the Management Agreement.
Prior to the Transfer, the Funds were managed by the Adviser under an Investment Management Agreement, Power of Attorney and Service Agreement, dated November 1, 2000 (for the Growth Fund and the Value Fund), and an Investment Management Agreement, dated January 31, 2005 (for the Equity Income Fund) (together, the “Previous Management Agreements”). The Management Agreement has the same fee rates as, and is otherwise substantially similar to, the Previous Management Agreements for each Fund. None of the differences between the Management Agreement and the Previous Management Agreements are considered to be material in nature.
34
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
On May 15, 2013, the Adviser entered into an agreement to sell substantially all of its assets, including its rights with respect to the Management Agreement, and transfer certain liabilities to Arrowpoint AIM LLC, a wholly-owned subsidiary of Arrowpoint Asset Management, LLC (“Arrowpoint”) (the “Transaction”). The closing of the Transaction is subject to certain conditions, including, among others, approval of an investment management agreement (the “Proposed Management Agreement”) between Arrowpoint and Meridian, on behalf of each of the Funds, by the Board and shareholders of each Fund. There are no material differences between the Management Agreement and the Proposed Management Agreement. In this regard, the Management Agreement and the Proposed Management Agreement contain the same terms, conditions, and fee rates, including applicable breakpoints, and provide for the same management services. The Board has approved the Proposed Management Agreement and has recommended that shareholders approve the Proposed Management Agreement. In this regard, shareholders of the Funds as of June 18, 2013 have received a proxy statement requesting approval of the Proposed Management Agreement, as well as certain other changes to each Fund’s fundamental investment restrictions. The shareholder meeting to consider these proposals is scheduled for August 28, 2013. Please see the proxy statement for additional information.
The Adviser receives from the Equity Income Fund, as compensation for its services, an annual fee of 1% of the first $10,000,000 of the Equity Income Fund’s net assets, 0.90% of the next $20,000,000 of the Equity Income Fund’s net assets, 0.80% of the next $20,000,000 of the Equity Income Fund’s net assets and 0.70% of the Equity Income Fund’s net assets in excess of $50,000,000. The fee is paid monthly in arrears and calculated based on that month’s daily average net assets.
The Adviser receives from the Growth Fund, as compensation for its services, an annual fee of 1% of the first $50,000,000 of the Growth Fund’s net assets and 0.75% of the Growth Fund’s net assets in excess of $50,000,000. The fee is paid monthly in arrears and calculated based on that month’s daily average net assets.
The Adviser receives from the Value Fund, as compensation for its services, an annual fee of 1% of the Value Fund’s net assets. The fee is paid monthly in arrears and calculated based on that month’s daily average net assets.
The Adviser voluntarily agreed to waive its fee and reimburse expenses, to the extent that total annual operating expenses for the Equity Income Fund exceeds 1.25%. With respect to these limits, the Adviser waived fees in the amount of $75,932 for the Equity Income Fund during the fiscal year ended June 30, 2013.
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 Equity Income Fund will carry forward, and may repay the Adviser such amounts; provided the Fund is able to effect such reimbursement and maintain the expense limitation.
35
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
At June 30, 2013, the balance of carried forward recoupable expenses along with the year of expiration for the Equity Income Fund was:
Amount | Expiration | |||
$1,193 | 2014 | |||
52,027 | 2015 | |||
75,932 | 2016 |
Subject to the approval of the Board, the Fund may repay the Adviser the amount of its reimbursement for the Equity Income Fund for up to three years following the reimbursement to the extent the Equity Income Fund’s expenses drop below 1.25%, after giving effect to repayment by the Fund. Either the Fund or the Adviser can modify or terminate this arrangement at any time.
As indicated above, the Richard F. Aster, Jr. Trust owns the majority of the shares of the Adviser. In addition, beneficial ownership in the Funds by the Richard F. Aster, Jr. Trust as of June 30, 2013 were as follows:
Equity Income Fund | 73.31 | % | ||
Growth Fund | 0.94 | % | ||
Value Fund | 2.74 | % |
Please see Note 8, Concentration and Market Risk, for additional information regarding significant shareholders.
3. | Capital Shares Transactions: Transactions in capital shares for the fiscal year ended June 30, 2013 and the fiscal year ended June 30, 2012 were as follows: |
Equity Income Fund | ||||||||
June 30, 2013 | June 30, 2012 | |||||||
Increase in Fund shares: | ||||||||
Shares sold | 44,994 | 168,446 | ||||||
Shares issued from reinvestment of distributions | 57,322 | 66,844 | ||||||
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| |||||
102,316 | 235,290 | |||||||
Shares redeemed | (650,572 | ) | (722,117 | ) | ||||
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Net decrease | (548,256 | ) | (486,827 | ) | ||||
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36
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
Growth Fund | ||||||||
June 30, 2013 | June 30, 2012 | |||||||
Increase in Fund shares: | ||||||||
Shares sold | 5,089,627 | 13,733,443 | ||||||
Shares issued from reinvestment of distributions | 7,664,279 | 4,381,018 | ||||||
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12,753,906 | 18,114,461 | |||||||
Shares redeemed | (20,199,677 | ) | (17,918,599 | ) | ||||
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Net increase (decrease) | (7,445,771 | ) | 195,862 | |||||
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Value Fund | ||||||||
June 30, 2013 | June 30, 2012 | |||||||
Increase in Fund shares: | ||||||||
Shares sold | 377,414 | 601,947 | ||||||
Shares issued from reinvestment of distributions | 67,213 | 117,473 | ||||||
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444,627 | 719,420 | |||||||
Shares redeemed | (4,011,043 | ) | (7,589,319 | ) | ||||
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Net decrease | (3,566,416 | ) | (6,869,899 | ) | ||||
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4. | Directors and Officers: Certain Directors and/or Officers of the Funds are also Directors and/or Officers of the Adviser. The sole Director and acting Chief Executive Officer of the Adviser is a Director of the Funds and is a minority shareholder 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.
37
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
5. | 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 fiscal year ended June 30, 2013, were as follows: |
Purchases | Proceeds from Sales | |||||||
Equity Income Fund | $ | 11,557,837 | $ | 16,623,483 | ||||
Growth Fund | 756,041,862 | 1,436,045,737 | ||||||
Value Fund | 351,982,370 | 451,906,814 |
6. | 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 years ended June 30, 2013 and June 30, 2012 were as follows: |
2013 Taxable Distributions | ||||||||||||
Ordinary Income | Net Long-Term Capital Gain | Total Distributions | ||||||||||
Equity Income Fund | $ | 639,477 | $ | — | $ | 639,477 | ||||||
Growth Fund | 5,752,675 | 314,218,752 | 319,971,427 | |||||||||
Value Fund | 2,282,630 | — | 2,282,630 |
2012 Taxable Distributions | ||||||||||||
Ordinary Income | Net Long-Term Capital Gain | Total Distributions | ||||||||||
Equity Income Fund | $ | 666,723 | $ | — | $ | 666,723 | ||||||
Growth Fund | 4,922,849 | 178,576,329 | 183,499,178 | |||||||||
Value Fund | 3,256,492 | — | 3,256,492 |
7. | 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. During the fiscal year ended June 30, 2013, the Funds did not incur any interest or penalties related to unrecognized tax benefits. |
38
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
Permanent differences, incurred during the year ended June 30, 2013, 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:
Increase/(Decrease) Paid-in-Capital | Increase/(Decrease) Undistributed Net Investment Income/(Loss) | Increase/(Decrease) Accumulated Realized Gain/(Loss) | ||||||||||
Equity Income Fund | $ | — | $ | 2 | $ | (2 | ) | |||||
Growth Fund | — | 1,245,981 | (1,245,981 | ) | ||||||||
Value Fund | — | 853 | (853 | ) |
The aggregate cost of investments, unrealized appreciation and depreciation, for federal income tax purposes, at June 30, 2013 is as follows:
Aggregate Cost | Aggregate Gross Unrealized Appreciation | Aggregate Gross Unrealized Depreciation | Net Unrealized Appreciation | |||||||||||||
Equity Income Fund | $ | 23,232,684 | $ | 5,501,693 | $ | (328,563 | ) | $ | 5,173,130 | |||||||
Growth Fund | 1,600,182,122 | 449,743,552 | (14,120,141 | ) | 435,623,411 | |||||||||||
Value Fund | 523,310,181 | 162,860,107 | (3,698,594 | ) | 159,161,513 |
Components of Accumulated Earnings on a Tax Basis |
| |||||||||||
Equity Income Fund | Growth Fund | Value Fund | ||||||||||
Undistributed ordinary income | $ | 426,476 | $ | — | $ | 2,833,352 | ||||||
Capital loss carry forward | (2,717,970 | ) | — | (56,006,510 | ) | |||||||
Undistributed long-term capital gains | — | 201,357,531 | — | |||||||||
Unrealized appreciation | 5,173,130 | 435,623,411 | 159,161,513 | |||||||||
Qualified Late-Year Deferred Losses | (1,564 | ) | (1,074,678 | ) | (2,176,173 | ) | ||||||
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Total Accumulated Earnings | $ | 2,880,072 | $ | 635,906,264 | $ | 103,812,182 | ||||||
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The differences between book and tax-basis unrealized appreciations are attributable to the tax deferral of losses on wash sales.
As of June 30, 2013 the Funds had capital loss carry forwards available to offset future realized capital gains through the indicated expiration dates:
Amount | Expires | |||||||
Equity Income Fund | $ | 2,717,970 | 2018 | |||||
Value Fund | 56,006,510 | 2018 |
Capital loss carryforwards utilized in the current year were $1,652,009 and $100,957,319 for Equity Income Fund and Value Fund, respectively.
39
Meridian Fund, Inc.
Notes to Financial Statements (continued)
For the Year Ended June 30, 2013
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.
8. | Concentration and Market Risk: Investing in the Funds may involve certain risks, as discussed in the Funds’ prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money. |
The value of a Fund’s stock investments will fluctuate in response to the activities of individual companies and general stock market and economic conditions.
From time to time, the Funds may have individual shareholders holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Funds. In this regard, as indicated in Note 2 Related Parties, the Richard F. Aster, Jr. Trust owned 73.31% of the Meridian Equity Income Fund as of June 30, 2013.
9. | Subsequent Events: 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. |
40
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 the Meridian Equity Income Fund, Meridian Growth Fund and Meridian Value Fund (constituting Meridian Fund, Inc., hereafter referred to as the “Funds”) at June 30, 2013, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 21, 2013
41
Board Consideration of Proposed Management
Agreement with Arrowpoint Asset Management, LLC
(unaudited)
The Board of Directors (the “Board”) of Meridian Fund, Inc. (the “Corporation”), including all of the Directors who have no direct or indirect interest in the Proposed Management Agreement (as defined below) and are not “interested persons” of the Corporation, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”), unanimously approved a new investment management agreement (“Proposed Management Agreement”) between Arrowpoint Asset Management, LLC (“Arrowpoint”) and the Corporation, on behalf of Meridian Equity Income Fund, Meridian Growth Fund and Meridian Value Fund (each, a “Fund” and collectively, the “Funds”), at a meeting held on June 11, 2013. As detailed below, the Directors met on multiple occasions, telephonically and in-person, in advance of the June 11, 2013 meeting, held numerous other meetings and discussions with management of Arrowpoint and representatives from Aster Investment Management Co., Inc. (the “Current Adviser”), including on-site visits to Arrowpoint, and reviewed and considered a variety of information in connection with the approval of the Proposed Management Agreement.
Specifically, the Board, including the Independent Directors, reviewed and approved the Proposed Management Agreement for each Fund. Prior to approving the Proposed Management Agreement, the Directors were presented with, and requested, received and evaluated, extensive information and materials about Arrowpoint, the transaction regarding the Current Adviser’s agreement to sell substantially all of its assets, including its rights with respect to the current investment management agreement between the Current Adviser and the Corporation, on behalf of each of the Funds (the “Current Management Agreement”), and transfer certain liabilities to Arrowpoint AIM LLC, a wholly-owned subsidiary of Arrowpoint (the “Transaction”), and related matters from Arrowpoint and the Current Adviser. Upon the closing of the Transaction (the “Closing”), the Current Management Agreement will automatically terminate. In this connection, the Directors reviewed, among other information, Arrowpoint’s responses to a series of detailed requests submitted by the Independent Directors’ independent legal counsel (“Independent Counsel”). The Directors also consulted with Independent Counsel, who advised on the legal standards for consideration by the Directors, and otherwise assisted the Directors in their deliberations.
As noted above, prior to the meeting on June 11, 2013, the Directors held several meetings to discuss the potential Transaction, including a telephonic meeting of the Independent Directors held on April 5, 2013 and a meeting held in-person with representatives from Arrowpoint on May 14, 2013. In addition, at several meetings since Richard Aster’s passing in February 2012, the Directors met with representatives from the Current Adviser to discuss the status of the potential sale of the Current Adviser and its implications for the Funds.
The Board considered a variety of factors and reviewed a significant amount of information in connection with its consideration of the Transaction and the approval of the Proposed Management Agreement. The summary set forth below of the Board’s deliberations and considerations of various factors is not intended to be exhaustive but, rather, to highlight some of the key factors considered. The approval determinations were made on the basis of each Director’s business judgment after consideration
42
Board Consideration of Proposed Management
Agreement with Arrowpoint Asset Management, LLC (unaudited) (continued)
of all of the information presented and reviewed by the Directors. In their deliberations, the Directors did not identify any single item that was paramount or controlling and individual Directors may have attributed different weights to various factors. The Directors also evaluated all information available to them on a Fund-by-Fund basis, and their determinations were made separately in respect of each Fund.
The following summarizes a number of the key factors considered by the Directors in reaching their approvals and determinations with respect to the Proposed Management Agreement, which is followed by a more detailed discussion of the Directors’ consideration of these and other factors considered relevant by the Directors in their evaluation of the Proposed Management Agreement:
(i) | the terms and conditions of the Proposed Management Agreement compared to the terms and conditions of the Current Management Agreement, as described below; |
(ii) | the fact that each Fund’s advisory fee rate(s) payable under the Proposed Management Agreement would remain the same as the fee rate(s) under the Current Management Agreement and that existing shareholders would continue to enjoy the current fee rates with respect to their investments in the Funds; |
(iii) | that there is an expectation that the nature, quality and extent of services to be provided to the Funds under the Proposed Management Agreement will meet or exceed the level provided by the Current Adviser under the Current Management Agreement; |
(iv) | the qualifications of the personnel of Arrowpoint expected to provide advisory and other services to each Fund, including representations by Arrowpoint with respect to its intention to assign Messrs. Schaub and Meade to manage the Meridian Growth Fund and to assign the Current Adviser’s existing portfolio management team, led by Mr. England, to manage the Meridian Value Fund and the Meridian Equity Income Fund and that other members of Arrowpoint’s senior management team, including its principals, have substantial experience in managing equity mutual funds; |
(v) | the resources, reputation, financial strength, regulatory and compliance program of Arrowpoint, and the potential benefits to the Funds of the combination of Arrowpoint and the existing personnel and resources of the Current Adviser; |
(vi) | that the Funds are expected to have access to enhanced distribution channels, with the potential for expanded sales of Fund shares and resulting increases in Fund assets; |
(vii) | the potential for the realization of additional economies of scale over time and the potential of the Funds to share in, and benefit from, these economies, if any are realized; |
(viii) | that Arrowpoint has committed to refrain from imposing or seeking to impose, for a period of not less than two years after the Closing, any “unfair burden” (within the meaning of Section 15(f) of the 1940 Act) on any Fund; and |
43
Board Consideration of Proposed Management
Agreement with Arrowpoint Asset Management, LLC (unaudited) (continued)
(ix) | that Arrowpoint and the Current Adviser will bear the costs of obtaining the approval by shareholders of the Funds of the Proposed Management Agreement. |
Nature, Extent and Quality of Services to be Provided
The Directors received and considered substantial information and data regarding the nature, extent and quality of services to be provided to the Funds by Arrowpoint under the Proposed Management Agreement. The most recent investment adviser registration form filed with the Securities and Exchange Commission (Form ADV) for Arrowpoint was made available to and reviewed by the Board and Independent Counsel, as well as extensive materials presented by and requested from Arrowpoint, the Current Adviser and Lipper, Inc., an independent provider of investment company data (“Lipper”). The Directors reviewed and analyzed these materials, which included, among other things, information about the background, experience and capabilities of senior management and other investment and administrative personnel of Arrowpoint. The Directors considered, among other factors, the capabilities and quality of Arrowpoint’s investment management, research and trade execution personnel and other resources that would be dedicated to performing services for the Funds. The Directors also considered Arrowpoint’s ability to provide administrative and operational services to the Funds. In addition, the Directors considered matters related to Arrowpoint’s compliance programs and its compliance history. The Directors also discussed the ability of Arrowpoint to administer and oversee outside service providers to the Funds and were satisfied with Arrowpoint’s capabilities for providing services and overseeing and reviewing services to be rendered by outside providers.
In evaluating the services to be provided under the Proposed Management Agreement, the Directors considered their discussions with representatives of Arrowpoint and the Current Adviser at the meetings referenced above regarding the management of each Fund. In this connection, the Directors considered representations by Arrowpoint that there would be no diminution in the nature and quality of services provided to the Funds and that Arrowpoint believed that the combined resources of Arrowpoint and the Current Adviser would result in enhanced services to the Funds. The Directors received and considered information describing how the Transaction is expected to impact the Current Adviser’s personnel that service the Funds, including actions proposed to be taken by Arrowpoint to minimize the likelihood of departures of key personnel.
With respect to portfolio management, the Directors reviewed information regarding Arrowpoint’s plans for designating portfolio management personnel to service the Funds after the Closing. The Directors considered Arrowpoint’s representation that the existing portfolio management team from the Current Adviser, led by Mr. England, will continue to manage the Meridian Value Fund and the Meridian Equity Income Fund following the Closing and that Messrs. Schaub and Meade would assume lead portfolio management responsibility for the Meridian Growth Fund following the Closing. The Directors considered information relating to the qualifications of Messrs. Schaub and Meade, including that each of these individuals brings over 14 years of investment experience, most recently as portfolio managers for Janus Capital Group where they collectively managed over $8 billion, including the Janus Triton and
44
Board Consideration of Proposed Management
Agreement with Arrowpoint Asset Management, LLC (unaudited) (continued)
Janus Venture Funds, in addition to institutional separate accounts in the small and small/mid cap growth disciplines. The Directors considered information regarding Arrowpoint’s overall investment capabilities, experiences and resources, including that its senior management team, including its principals, had substantial prior experience at another firm managing several equity mutual funds with approximately $50 billion in assets. Similarly, the Directors evaluated the ability of Arrowpoint, based on its resources, reputation and other attributes, to attract and retain qualified investment professionals. In this regard, the Directors considered information regarding the nature of the compensation structure applicable to portfolio managers and other key investment personnel, including as it relates to the alignment of the interests of portfolio management personnel with those of Fund shareholders.
The Directors reviewed and compared information from Arrowpoint regarding various contemplated service provider arrangements, including information regarding both immediate and potential future plans in respect of these arrangements. In this connection, the Directors considered information regarding a potential distribution arrangement with an affiliate of Arrowpoint intended to increase the distribution of the Funds, as well as the possibility that the Funds will add certain share classes in the future in support of Arrowpoint’s plans for enhanced distribution.
In addition, the Directors reviewed and compared materials and information regarding the compliance and operational capabilities of Arrowpoint and the Current Adviser as they relate to the Funds, including their respective compliance policies and procedures and reporting standards. The Directors considered representations from Arrowpoint regarding its intention to enhance trading, operational, and compliance systems for the Funds. The Directors noted that the Funds’ compliance policies and procedures will be reviewed and, as necessary, updated and enhanced to reflect the integrated operations of the Current Adviser and Arrowpoint.
The Directors reviewed information about the financial condition of Arrowpoint and were satisfied that Arrowpoint had adequate financial capabilities to perform the services required under the Proposed Management Agreement. The Directors also considered Arrowpoint’s representation that it is not the subject of any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the ability of Arrowpoint to provide services to the Funds.
Based on the foregoing and other information considered relevant, the Directors concluded that, on an overall basis, they were satisfied as to the expected nature, extent and quality of services to be provided to each Fund by Arrowpoint under the Proposed Management Agreement.
Investment Management Fee Rates and Other Expenses
The Directors reviewed and considered the proposed contractual investment advisory fee rates to be paid by each Fund to Arrowpoint for investment management services, which are the same as the fee rates currently paid by each Fund to the Current Adviser under the Current Management Agreement.
The Directors also reviewed and considered information regarding each Fund’s total expense ratio and its various components, including contractual management fees, actual management fees, actual non-
45
Board Consideration of Proposed Management
Agreement with Arrowpoint Asset Management, LLC (unaudited) (continued)
management fees, custody fees and transfer agency fees. The Directors reviewed comparisons of these fees to fee information for a group of Funds that was determined by Lipper to be the most similar to a given Fund (the “Peer Group”) and to the performance of a broader universe of relevant funds as determined by Lipper (the “Universe”), which comparative data was provided by Lipper. The Directors were provided with a description of the methodology used by Lipper to select the mutual funds in each Fund’s Peer Group and Universe. With respect to comparable accounts managed by Arrowpoint, the Directors noted that Arrowpoint did not currently manage any funds comparable to the Funds that would provide an appropriate fee comparison.
For each Fund, the Directors concluded that the contractual investment advisory fee rates to be paid by each Fund and the total expense ratio were at acceptable levels in light of the quality of services provided to the Fund. The Directors noted that the voluntary expense reimbursements applicable to Meridian Equity Income Fund would be maintained, but, as is currently the case, could be changed or terminated at any time by Arrowpoint given that this is a voluntary commitment.
Fund Performance
The Directors reviewed detailed performance information for each Fund at various Board meetings during the year in addition to the additional performance information that they reviewed and evaluated in connection with the Transaction. The Directors considered the performance results for each of the Funds over multiple measurement periods. They also considered these results in comparison to the performance results of each Fund’s Peer Group and Universe, as well as to each Fund’s benchmark index. The Board also noted certain risk-adjusted performance data.
The Directors also reviewed and evaluated information and data regarding the investment performance record of Arrowpoint and the performance of the Janus Triton Fund, which, as noted above was managed by Messrs. Schaub and Meade prior to their joining Arrowpoint earlier in 2013. In this regard, the Directors reviewed a comparison of the characteristics, including investment objectives and strategies, of the Meridian Growth Fund and the Janus Triton Fund and concluded that, on balance, this was a relevant comparison. The Directors also considered how the Fund would be managed by Arrowpoint after the Closing.
The Directors recognized that for each Fund, it is not possible to predict with certainty what effect, if any, consummation of the Transaction will have on the future performance of the Funds, noting in particular that past investment performance is no assurance of future results.
Costs of Services to be Provided and Profitability
The Board noted its review of the Current Adviser’s costs and profitability during its most recent review and approval of the Current Management Agreement. The Board also reviewed information provided to them by Arrowpoint that described the anticipated effect that the Transaction would have on
46
Board Consideration of Proposed Management
Agreement with Arrowpoint Asset Management, LLC (unaudited) (continued)
profitability. In this regard, the Board considered Arrowpoint’s representations that it intended to invest significantly in the systems, processes and related infrastructure supporting the management of the Funds and noted Arrowpoint’s representation that, as a result, Arrowpoint expected its projected level of profitability to be lower than that of the Current Adviser. The Board acknowledged that any projection regarding Arrowpoint’s profitability would depend on many factors and assumptions and therefore was speculative. The Board noted that it would have on-going opportunities to assess Arrowpoint’s profitability in the future based on actual results.
In considering the costs of services to be provided by Arrowpoint under the Proposed Management Agreement from its relationship with the Funds, the Directors considered, among other things, that there would be no increase in fee rates under the Proposed Management Agreement.
Economies of Scale
The Directors received and evaluated information regarding the potential to realize economies of scale with respect to management of the Funds, whether the Funds would appropriately benefit from any economies of scale and whether there was any potential for realization of further economies of scale in connection with the Transaction. The Directors noted that the current and proposed investment advisory fee rates for the Meridian Growth Fund and the Meridian Equity Income Fund contain breakpoints that reduce the fee rate on assets above specified levels and that those breakpoints would be retained under the Proposed Management Agreement. The Directors also recognized that the Funds may benefit from certain economies of scale over time, based on potential opportunities for enhanced distribution, synergies with Arrowpoint’s existing operations and other improvements to Fund operations, including further automating certain trading and compliance monitoring functions. The Directors noted that they expect to continue to consider economies of scale from time-to-time following the Closing and thus be in a position to evaluate any additional economies of scale.
The Directors acknowledged the inherent limitations of any analysis of an investment adviser’s economies of scale, stemming largely from the Directors’ understanding that economies of scale are generally realized, if at all, by an investment adviser across a variety of products and services, not just with respect to a single fund or a limited number of funds.
Other Benefits to Arrowpoint
The Directors received and reviewed information regarding any expected “fall-out” or ancillary benefits to be received by Arrowpoint and its affiliates as a result of their relationships with the Funds.
Among other things, the Directors noted that Arrowpoint would benefit from soft dollar arrangements using portfolio brokerage of each Fund that invests in equity securities. The Directors also noted that a broker-dealer affiliate of Arrowpoint was expected to be proposed to be the principal underwriter of the Funds and, if engaged by the Funds, could, in the future, retain a portion of the distribution-related fees
47
Board Consideration of Proposed Management
Agreement with Arrowpoint Asset Management, LLC (unaudited) (continued)
from the Funds. The Directors noted that Arrowpoint has indicated that it intends to propose new share classes of the Funds to facilitate expanded distribution opportunities in the future and that certain of these share classes could include Rule 12b-1 and/or other shareholder servicing arrangements. The Directors considered, however, that existing shareholders would continue to enjoy the current fee rates with respect to existing investments in the Funds, as well as additional investments made to their existing accounts and noted that the Board would have an opportunity to review and approve any proposed new share classes, including the impact on the Fund as a whole, prior to launching any such classes. The Directors also considered that Arrowpoint may derive reputational benefits from their association with the Funds.
Summary
After an evaluation of the above-described factors and based on its deliberations and analysis of the information provided and alternatives considered, the entire Board, including all of the Independent Directors, concluded that approval of the Proposed Management Agreement was in the best interests of each of the Funds and its shareholders. Accordingly, the Board unanimously approved the Proposed Management Agreements and has recommended that shareholders of each Fund vote for the approval of the Proposed Management Agreement at an upcoming shareholder meeting.
48
Meridian Fund, Inc.
Additional Information (unaudited)
For the Year Ended June 30, 2013
1. | Proxy Voting Record and Proxy Voting Policies and Procedures: A description of the policies and procedures that each Fund uses to determine how to vote proxies relating to portfolio securities along with information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12 month period ended June 30, 2013 is available (i) without charge, upon request, by calling (800) 446-6662; (ii) on our website at http://www.meridianfund.com; and (iii) on the Securities and Exchange Commission (“SEC”) website at http://www.sec.gov. |
2. | Information on Form N-Q: The Company files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Company’s Form N-Q is available on the SEC’s website at http://www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) 732-0330. |
49
Information About the Directors and
Officers of Meridian Fund, Inc. (unaudited)
The individuals listed below serve as directors or officers of Meridian Fund, Inc. (the “Meridian Funds”). Each director of the Meridian Funds serves until a successor is elected and qualified or until resignation. Each officer of the Meridian Funds is elected annually by the Board of Directors. The address of all officers and directors is 60 East Sir Francis Drake Blvd., Suite 306, Larkspur, CA 94939. The Meridian Funds’ Statement of Additional Information (SAI) includes more information about the Directors. To request a free copy, call Meridian at 1-800-446-6662.
Interested Directors *
Michael Stolper (68)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: Investment Adviser, Stolper & Company, Inc.; Acting Chief Executive Officer. Aster Investment Management, Inc. since June 2012
Number of Portfolios Overseen: 3
Other Directorships: Window Pane Funds
* | Aster Investment Management, Inc. is investment adviser to the Meridian Funds. |
Mr. | Stolper is a minority owner of Aster Investment Management, Inc. |
50
Information About the Directors and
Officers of Meridian Fund, Inc. (unaudited) (continued)
Independent Directors
Ronald Rotter (70)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): May 2, 2007
Principal Occupation(s) During Past 5 Years: Private Investor
Number of Portfolios Overseen: 3
Other Directorships: N/A
Michael S. Erickson (61)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: Private Investor
Number of Portfolios Overseen: 3
Other Directorships: N/A
James Bernard Glavin (78)
Positions(s) Held with Fund: Chairman of the Board
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: Private Investor
Number of Portfolios Overseen: 3
Other Directorships: N/A
John S. Emrich, CFA (45)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): October 6, 2010
Principal Occupation(s) During Past 5 Years: Co-founder and Portfolio Manager, Ironworks Capital Management; Member and Manager, Iroquois Valley Farms, LLC
Number of Portfolios Overseen: 3
Other Directorships: N/A
Officers
Gregg B. Keeling, CPA (58)
Positions(s) Held with Fund: Chief Financial Officer, Treasurer, Secretary and Chief Compliance Officer
Length of Service: (Beginning Date) April 1999;
Acting President, (Principal Executive Officer), since February 2012
Principal Occupation(s) During Past 5 Years: Aster Investment Management, Inc.,
Chief Financial Officer, Vice President of Operations and Chief Compliance Officer
51
2013 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 2014. Please consult your tax advisor for proper treatment of this information.
For the period July 1, 2012 to June 30, 2013 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 reported the amount $314,218,752 as a long-term capital gain distribution for the year ended June 30, 2013.
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, 2013 as qualifying for the corporate dividends-received deduction:
Equity Income Fund | 100.00 | % | ||
Growth Fund | 100.00 | % | ||
Value Fund | 100.00 | % |
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, 2013 as qualified dividend income (QDI):
Equity Income Fund | 100.00 | % | ||
Growth Fund | 100.00 | % | ||
Value Fund | 100.00 | % |
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:
Equity Income Fund | 0.00 | % | ||
Growth Fund | 0.14 | % | ||
Value Fund | 0.03 | % |
52
MERIDIAN FUND, INC.
This report is submitted for
the information of shareholders of
Meridian Fund, Inc. It is not
authorized for distribution to
prospective investors unless
preceded or accompanied by an
effective prospectus.
Officers and Directors
JOHN EMRICH
MICHAEL S. ERICKSON
JAMES B. GLAVIN
RONALD ROTTER
MICHAEL STOLPER
Directors
GREGG B. KEELING
Acting President
Chief Financial Officer
Treasurer, Secretary and
Chief Compliance Officer
Custodian
THE BANK OF NEW YORK MELLON
New York, New York
Transfer Agent and Disbursing Agent
BNY MELLON INVESTMENT SERVICING (US) INC.
King of Prussia, Pennsylvania
(800) 446-6662
Counsel
GOODWIN PROCTER LLP
Washington, D.C.
Independent Registered Public Accounting Firm
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
MERIDIAN EQUITY INCOME FUND®
MERIDIAN GROWTH FUND®
MERIDIAN VALUE FUND®
ANNUAL REPORT
60 E. Sir Francis Drake Blvd.
Wood Island, Suite 306
Larkspur, CA 94939
www.meridianfund.com
Telephone (800) 446-6662
June 30, 2013
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. |
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 $99,800 in 2013 and $95,100 in 2012. |
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 2013 and $0 in 2012. |
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 $22,665 in 2013 and $21,900 in 2012. |
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 2013 and $0 in 2012. |
(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).
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) | 100% |
(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 2013 and $0 in 2012. |
(h) | Not applicable. |
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)). |
(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 that is the subject of disclosure required by Item 2 was included as Exhibit (a)(1) of the registrant’s Form N-CSR filed on August 31, 2009 (Accession No. 0000950123-09-039788), and is hereby incorporated by reference. |
(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. |
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/ Gregg B. Keeling | |
Gregg B. Keeling, Acting President, CFO & Treasurer (principal executive officer and principal financial officer) | ||
Date | 8/28/13 |
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/ Gregg B. Keeling | |
Gregg B. Keeling, Acting President, CFO & Treasurer (principal executive officer and principal financial officer) | ||
Date | 8/28/13 |
* | Print the name and title of each signing officer under his or her signature. |