As filed with the Securities and Exchange Commission on September 8, 2003
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 811-03758
MATRIX ADVISORS VALUE FUND, INC.
(Exact name of registrant as specified in charter)
747 Third Avenue, 31st Floor, New York, NY 10017
(Address of principal executive offices) (Zip code)
David A. Katz
747 Third Avenue, 31st Floor
New York, NY 10017
(Name and address of agent for service)
(212) 486-2004
Registrant's telephone number, including area code
Date of fiscal year end: June 30, 2003
Date of reporting period: June 30, 2003
Item 1. Reports to Stockholders
Annual Report
MATRIX
ADVISORS
VALUE FUND, INC.
June 30, 2003
747 Third Avenue, 31st Floor
New York, NY 10017
MATRIX ADVISORS
VALUE FUND, INC.
===============
August 19, 2003
Dear Fellow Shareholder:
I am pleased to enclose our annual report and commentary concerning the
Fund for the period ending June 30, 2003.
The Fund posted one of its strongest quarters since Matrix began
managing the Fund in 1996. The Net Asset Value of the Fund ended the quarter at
44.39, a gain of +25.11% for the quarter. For the calendar year to date the Fund
has increased by +19.26%. For the fiscal year ending June 30, 2003, the Fund had
an increase of +8.52%.
As we go to print, we are pleased to note that we have sewn further
gains for the Fund into the third quarter, with the Net Asset Value climbing to
$47.02 as of August 19, an increase of +5.92% from the end of June and an
increase of +26.33% for calendar year 2003.
A highly important development for the Fund is the decision by its
Board of Directors, subject to shareholder approval, to transfer its assets to
Strong Capital Management, where it will be re-named the Strong Matrix Large Cap
Value Fund. Matrix Asset Advisors will continue to manage this Fund, in the
capacity of sub-advisor to Strong. More complete information about the
contemplated reorganization of the Fund, scheduled to take place in late October
2003, is contained in the following annual report.
We believe that Strong's interest in the Fund serves as a powerful
validation of its distinct attractiveness. We are excited about the prospect of
working with the Strong team, and are particularly pleased that we will be able
to continue to manage the Fund, while simultaneously availing ourselves of the
many advantages Strong has to offer.
Above all, we believe that shareholder interests will be very well
served by having the Fund join the Strong family of mutual funds. Strong will
provide state-of-the-industry investor services, while enhancing the
administrative effectiveness of the Fund.
We are highly confident that all of us will be in good hands with
Strong. For our part, we look forward to continuing to work on behalf of
shareholders old and new for many years to come, and greatly appreciate the
confidence that has been placed in us.
-1-
MATRIX ADVISORS
VALUE FUND, INC.
===============
If you have any questions on the enclosed or would like to discuss the
Fund's proposed reorganization, or our future outlook, please feel free to call
us at (800) 366-6223 or e-mail us at matrix@matrixadvisorsvalue-fund.com. You
might also enjoy visiting our website at www.matrixadvisorsvaluefund.com.
Thank you for your continuing confidence and best regards.
/S/ DAVID KATZ
- --------------
Sincerely,
David A. Katz, CFA
Chief Investment Officer
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Please refer to the
accompanying report for the Fund's standardized annual returns.
-2-
MATRIX ADVISORS
VALUE FUND, INC.
===============
- --------------------------------------------------------------------------------
MATRIX ADVISORS VALUE FUND, Value of $10,000 vs S&P 500 Index
- --------------------------------------------------------------------------------
3-Jul-96 10,000 10,000 8,000 10,000.00
- --------------------------------------------------------------------------------
30-Jun-97 12,347 13,472 8,000 34.72% 13,472.00
- --------------------------------------------------------------------------------
30-Jun-98 13,898 17,538 8,000 30.18% 17,537.85
- --------------------------------------------------------------------------------
30-Jun-99 16,648 21,531 8,000 22.77% 21,531.22
- --------------------------------------------------------------------------------
30-Jun-00 19,009 23,090 8,000 7.24% 23,090.08
- --------------------------------------------------------------------------------
30-Jun-01 20,435 19,666 8,000 -14.83% 19,665.82
- --------------------------------------------------------------------------------
30-Jun-02 18,828 16,128 8,000 -17.99% 18,936.17
- --------------------------------------------------------------------------------
30-Jun-03 20,437 16,168 8,000 0.25% 18,983.51
- --------------------------------------------------------------------------------
AVERAGE ANNUALIZED TOTAL RETURN
PERIODS ENDED JUNE 30, 2003
---------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION**
-------- ---------- -----------
Matrix Advisors Value Fund, Inc. 8.52% 8.01% 10.74%
S&P 500 Index* 0.25% (1.61%) 7.06%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance figures reflect fee waivers, in effect and in the absence of fee
waivers, total returns would be lower. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
- ------------
* The S&P 500 is an unmanaged index which is widely regarded as the standard
for measuring large-cap U.S. stock market performance. The index does not
incur expenses and is not available for investment.
** Matrix Asset Advisors became the Sub-Advisor on July 1, 1996 and Advisor to
the Fund on May 11, 1997. Prior to those dates the Fund was managed by
another Advisor.
-3-
MATRIX ADVISORS
VALUE FUND, INC.
===============
CAPITAL MARKETS COMMENTARY AND ANNUAL REPORT:
2003
"I'm back!" -
CHUCKIE (THE DEMENTED DOLL OF SEVERAL FORGETTABLE HORROR FILMS)
While Chuckie might not be particularly memorable, the past quarter of
the stock market most certainly was. Following the negativity of 2002 and the
paralysis of the first quarter of 2003, the second quarter represented a sigh of
geo-political relief and a vote of confidence in the economy's future.
Several positive factors contributed to the favorable results of the
quarter. Investors seized upon the fact that the worst "what ifs" in Iraq did
not play out. However, the initial euphoria following the decisive conclusion to
the war was followed by a concern that a return to a focus on the economy would
prove to be a disappointing exercise.
In fact, first quarter earnings substantially exceeded expectations. In
addition, macro economic data metrics showed firming and modest improvements in
the economy, including the elusive business spending area.
Various stimulants including the tax cut on capital gains and dividend
income, and a further rate cut from the Federal Reserve fueled optimism for
continued improvement. Finally, investors started returning to equities,
reflecting both a sense that the worst was over, and a frustration with
alternative asset classes.
The result was a throwback to the good old, bad old days of the late
1990's, as the S&P 500 Index registered its strongest quarter since the end of
1998. Strength was widespread across economic sectors and the capitalization
spectrum of stocks. Technology stocks, which had been the scourge of the market
for the past three years led market gains, as they did during the first quarter.
The tech-heavy NASDAQ Composite led the major indexes with a +21.11% rise as
investors re-discovered their spurned love of Internet stocks.
The Matrix Advisors Value Fund performed very strongly during the
quarter, significantly outpacing the S&P 500 Index. In fact it was one of the
very strongest quarters in the Fund's history. Many of the stocks acquired last
year amidst market carnage, rebounded heroically this past quarter, as investors
found renewed appreciation for industry-leading economically sensitive stocks.
The strong quarter for our portfolios erased the cumulative negative
impact of the entire bear market (which we believe began on March 24, 2000) on
the Fund's performance, as shown in the following chart:
-4-
MATRIX ADVISORS
VALUE FUND, INC.
===============
"BEAR MARKET" CUMULATIVE
NET PERFORMANCE
(3/24/00-6/30/03)
Matrix Advisors
Value Fund S&P 500 Index
--------------- -------------
7.83% -33.02%
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
*PLEASE SEE PERFORMANCE DISCLOSURE AT THE END OF COMMENTARY.
While the quarter also seems to have put to rest concerns about the
market revisiting the lows of last October, the above chart shows how much
ground has to be made back for the major indexes since the onset of the bear
market (And remember: to make back -33.02% of declines you have to have +49.30%
of gains going forward).
Incidentally, even from its highest point during the bear market, the
decline in the Fund has been modest. From its approximate peak, at year end
2001, through 6/30/03, performance has declined by mid single digits.
Looking ahead, we continue to maintain a moderately optimistic outlook
for both the economy and the stock market. We believe that while much of the
positive performance for the year has likely been made, we feel there is still a
good likelihood that the market will post additional gains in the second half of
the year. In that regard we refer you to the market study discussed in the
current issue of Ideas About Investing, which follows this commentary.
Certainly, the degree of additional market gains is likely to hinge on
the perception of the intensity of economic recovery. In this regard we offer no
profound wisdom other than a belief that owning strong individual businesses at
attractive prices will be the best way to benefit from that recovery. While
there will continue to be market volatility, we believe there is still more
positive performance to be had by year end.
-5-
MATRIX ADVISORS
VALUE FUND, INC.
===============
FUND PERFORMANCE
Performance this past quarter was uniformly strong across all sectors
of the Fund's portfolio. As with the overall market, our technology stocks were
particularly robust, with Adaptec, LAM Research, Novellus Systems and Symbol
Technologies very strong.
Our retail stocks were impressive in both absolute as well as relative
terms. Financials and health care stocks were very attractive, as were our Old
Economy stocks. In fact, with the exception of Freddie Mac, virtually every
stock held in the portfolio at quarter end rose during the quarter, with the
vast majority increasing by more than 10%.
The only new position begun during the quarter was the previously owned
Kyocera Corp., which rose sharply and quickly.
Defensive sales during the quarter included Advanced Micro Devices,
Interpublic Group and Schlumberger, each of which was sold because of concerns
as to corporate fundamentals. We also sold our profitable position in Wachovia
early in the quarter to more heavily focus on money center, as opposed to
regional banks. Towards the end of the quarter, we pared back profitable
positions in Dollar General, LAM Research and Symbol Technologies.
Looking forward, we continue to see embedded profit potential in the
vast majority of our holdings. We are very comfortable with the quality of our
portfolio and continue to believe that we are well positioned for economic
recovery.
Accordingly, we would expect to see less turnover over the near term,
especially if the market takes a bit of a breather in the third quarter. Of
course, we are always monitoring individual stocks, and will take profits as a
holding meets its fair valuation.
AN IMPORTANT ANNOUNCEMENT CONCERNING THE FUTURE OF THE FUND
On August 1, 2003, the Board of Directors of the Fund approved an
Agreement and Plan of Reorganization (the "Plan") which contemplates the
transfer of all of the assets and liabilities of the Fund in exchange for
Institutional Class shares of the Strong Matrix Large Cap Value Fund, a new
series of Strong Equity Funds II, Inc. (the "New Fund"). Following such
transfer, Institutional Class shares of the New Fund will be distributed to
shareholders of the Fund and the Fund will be subsequently dissolved. As a
result of the proposed transaction, each shareholder of the Fund will receive a
number of full and fractional Institutional Class shares of the New Fund equal
in value at the time of the exchange to the value of such shares of the Fund.
The New Fund will have substantially the same investment objectives,
policies, and strategies as the existing Fund, and will be managed by the same
personnel who currently manage the Fund. Strong Capital Management, Inc.
("Strong Capital") will be the investment adviser to the New Fund and Matrix
Asset Advisors, Inc. will be the sub-adviser to the New Fund. Strong Capital has
agreed to limit the total operating expenses for the New Fund, until at least
May 1, 2006, to the same level as the current limit on the expenses of the Fund.
-6-
MATRIX ADVISORS
VALUE FUND, INC.
===============
Since 1974, Strong Capital has provided investment advice for
individuals and institutional accounts, such as pension and profit-sharing
plans, as well as mutual funds, some of which are available through variable
insurance products. Strong Capital provides investment management services for
portfolios representing assets, as of June 30, 2003, of approximately $41.9
billion.
The Plan is subject to the approval of the shareholders of the Fund. A
shareholder meeting for this purpose is scheduled to be held on October 14,
2003. Further details will be provided in the proxy statement for the meeting.
WE WOULD LIKE TO STRESS THAT THIS EXCITING DEVELOPMENT WILL NOT
DIMINISH IN THE LEAST OUR COMMITMENT TO THE FUND AND ITS SHAREHOLDERS. AS THE
ABOVE ANNOUNCEMENT MAKES CLEAR, OUR INVOLVEMENT WITH THE FUND CONTINUES
UNABATED. The changes are positive ones for shareholders, primarily focused on
the extraordinary servicing capabilities Strong offers to its many clients.
We look forward to many more years of service to the Fund.
* * *
Even though its summertime, we can still go to school on the subject of
investing. In this quarterly installment of IDEAS ABOUT INVESTING, we revisit
the study we have presented in the not-too-distant past concerning how markets
rebound after bad periods. We also put the increasingly prevalent question of
what the second half of this year will look like in a historical context.
New York has gone overnight from record breaking rains to typical
summer heat. Normally, people would be wilting, but the thrill of having the sun
out seems to outweigh the heat. So should it be for all of us. We count our
blessings, whether it is for our health, our families, or our investments.
No matter where this finds you, we hope you are having the opportunity
to count your own blessings and to find some summer repose.
Best regards.
COMPLIANCE STATEMENT:
- ---------------------
Matrix Asset Advisors became Sub-Advisor on July 1, 1996 and Advisor to the Fund
on May 11, 1997. Prior to those dates, the Fund was managed by another advisor.
Performance figures reflect fee waivers in effect and in the absence of fee
waivers, total returns would be lower. Indices shown are broad-based, unmanaged
indices which are measures of large, mid and smaller company stocks. These
indices do not incur expenses and are not available for investment. The Fund may
invest in smaller companies, which may involve additional risks such as limited
liquidity and greater volatility. The Fund's holdings may change at any time due
to ongoing portfolio management. References to specific investments should not
be construed as a recommendation by the Fund or Matrix Asset Advisors to buy or
sell the securities. No individual holding discussed herein constitutes more
than 5% of the Fund's assets.
-7-
MATRIX ADVISORS
VALUE FUND, INC.
===============
IDEAS ABOUT INVESTING
QUEST FOR INVESTING ENLIGHTENMENT
1. ONCE AGAIN, IT'S NOT DIFFERENT THIS TIME. THE RECENT MARKET RECOVERY FITS THE
HISTORICAL PATTERN.
Back in the middle of 2002, when the market was in a particularly ugly
funk, we referred to a historical market study by Salomon Smith Barney that
examined the recovery of the market after reaching cyclical bottoms.
The study examined nine previous bear markets and the short and
intermediate term progress of the market following the reaching of bear market
low points. Recovery was fast and furious, particularly in the immediate
aftermath of reaching the low point, as follows:
Period following market low % Gain
--------------------------------------
First 3 months 16.94%
First 12 months 35.31
First 18 months 44.72
Referring to the study was intended to provide much needed perspective
during a bleak period. After all, it is easy enough to look back after the fact,
but market recoveries do not announce themselves. So the only way to take
advantage of the historical pattern would be to be there for the recovery,
whenever it began.
Much of the reaction we received from responding clients was indeed
reassurance. However, some clients believed that the intensity of the bear
market made such a study an exercise in wishful thinking. The issue of the
pattern of market recovery was moot: there would be no recovery, at least not
for the foreseeable future.
Well, there are two good things to report. One is that there has in
fact been a market recovery, and two is that it is following the historical
pattern true to form. The market hit bottom on October 9, 2002, and here are the
relevant statistics:
MATRIX COMPOSITE S&P 500
------ -----------------
Recovery during the first 3 months 35.33% 19.95%
Recovery through 6/30/03
(approx. 8 1/2months) 49.92% 26.96%
Part of the pattern is that market lows typically occur at moments of
intense negativity. The beginnings of the recovery are ignored or dismissed as a
"head fake." The negativity does not subside until the market has made a
substantial move, which of course no one is expecting.
-8-
MATRIX ADVISORS
VALUE FUND, INC.
===============
We mention this not to debunk the concerns of our clients and others
who were focused on the recent negativity of the markets. Rather, our point is
to re-iterate the cyclicality of markets and to reinforce the point that while
every market cycle seems unique while it runs, it usually works according to
tried and true patterns. Finally, we mention it once again to point out the
ill-advisedness of market timing.
It is certainly counter-intuitive, but it is the way the market works.
2. WHILE WE'RE ON THE SUBJECT OF MARKET STUDIES, HERE'S ANOTHER ONE THAT MIGHT
PROVIDE SOME INSIGHT INTO THE SECOND HALF OF 2003.
Like the stock market itself, human nature dictates that we quickly
assimilate current events, and then inevitably ask, "What's next?" In that
regard, questions abound as to prognostications for the second half following
the strong first half.
Can the market continue to rally? Is a retreat inevitable? Should we
take pre-emptive action?
Well, we believe that our optimism for the second half of the year is
not only rooted in our perception of the direction of the economy and of market
fundamentals, but also, as it turns out, in market history.
A recent study by one of our favorite third-party research gurus, The
Leuthold Group shows that in the vast majority of years in which the S&P 500
Index posted strong first half results, the second half is positive as well.
Since 1926, the S&P 500 has had 24 out of 76 years in which first half
performance was equal to or greater than +10%. In 17 of these years, or 71% of
the time, the Index was positive in the second half as well, with performance in
those years averaging +10.8% for the second half.
In the 7 years in which the S&P 500 declined, the average decline was
- -9.2%. The average return for all 24 years was +5.2% (Source: The Leuthold
Group, Perception, July, 2003).
This happens to correlate with our belief that, given the first study
referred to above, an additional 5% rise in the S&P 500 Index for the balance of
the year should be well within the realm of expectation.
After the severe punishment endured by the markets during the past
three years, a little success should not be seen as all that the market has to
offer.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Mutual fund investing
involves risk and loss of principal is possible.
-9-
MATRIX ADVISORS
VALUE FUND, INC.
===============
SCHEDULE OF INVESTMENTS AT JUNE 30, 2003
---------------------------------------------
COMMON STOCKS: 96.8%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
BANK (MONEY CENTER): 5.4%
Citigroup, Inc. 84,000 $3,595,200
JP Morgan Chase & Co. 64,000 2,187,520
----------
5,782,720
----------
BANK (PROCESSING): 3.0%
Bank of New York Co., Inc. 111,000 3,191,250
----------
BANK (REGIONAL): 1.2%
Comerica, Inc. 27,000 1,255,500
----------
BANK (SUPER REGIONAL): 3.6%
Bank of America Corp. 23,000 1,817,690
FleetBoston Financial Corp. 70,000 2,079,700
----------
3,897,390
----------
BROADCASTING/PROGRAM: 1.3%
Liberty Media Corp.* 123,000 1,421,880
----------
COMPUTER SOFTWARE AND SERVICES: 0.9%
Computer Sciences Corp.* 25,000 953,000
----------
COMPUTERS AND PERIPHERALS: 2.7%
American Power Conversion Co. 183,000 2,856,630
----------
DRUG: 11.9%
Bristol-Myers Squibb Co. 120,000 3,258,000
Merck & Co. 45,000 2,724,750
Pfizer, Inc. 97,340 3,324,161
Wyeth 75,000 3,416,250
----------
12,723,161
----------
DRUGSTORE: 3.4%
CVS Corp. 130,000 3,643,900
----------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THIS SCHEDULE.
-10-
MATRIX ADVISORS
VALUE FUND, INC.
===============
COMMON STOCKS, CONTINUED
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT: 3.4%
General Electric Co. 128,000 $3,671,040
----------
ELECTRONICS: 6.3%
Symbol Technologies, Inc. 245,000 3,187,450
Vishay Intertechnology, Inc.* 265,000 3,498,000
----------
6,685,450
----------
FINANCIAL SERVICES: 2.3%
American Express Co. 59,000 2,466,790
----------
FURN/HOME FURNISHING: 1.8%
Leggett & Platt, Inc. 95,000 1,947,500
----------
INDUSTRIAL SERVICES: 2.6%
Manpower, Inc. 74,000 2,744,660
----------
INSURANCE (DIVERSIFIED): 3.5%
American International Group, Inc. 68,000 3,752,240
----------
MEDICAL INSTRUMENTS: 3.6%
Guidant Corp. 88,000 3,906,320
----------
MEDICAL SUPPLIES: 6.2%
Abbott Laboratories 66,000 2,888,160
Baxter International, Inc. 145,000 3,770,000
----------
6,658,160
----------
RECREATION: 3.5%
Walt Disney Co. 189,000 3,732,750
----------
RETAIL (SPECIAL LINES): 3.1%
Office Depot, Inc.* 232,000 3,366,320
----------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
-11-
MATRIX ADVISORS
VALUE FUND, INC.
===============
COMMON STOCKS, CONTINUED
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL STORE: 5.7%
Dollar General Corp. 158,400 $ 2,892,384
Gap, Inc. 170,000 3,189,200
-----------
6,081,584
-----------
SECURITIES BROKERAGE: 6.9%
Merrill Lynch & Co. 81,000 3,781,080
Morgan Stanley Dean Witter & Co. 84,000 3,591,000
-----------
7,372,080
-----------
SEMICONDUCTOR: 4.0%
Adaptec, Inc.* 300,000 2,385,000
Intel Corp. 93,000 1,935,330
-----------
4,320,330
-----------
SEMICONDUCTORS (CAPITAL EQUIPMENT): 4.5%
Lam Research Corp.* 81,000 1,479,060
Novellus Systems, Inc.* 90,000 3,295,800
-----------
4,774,860
-----------
TECHNOLOGY: 2.3%
Kyocera Corp. 44,000 2,508,000
-----------
TELECOMMUNICATIONS (EQUIPMENT): 2.6%
Nokia Corp. 168,000 2,760,240
-----------
THRIFT: 1.1%
Federal Home Loan Mortgage Co. 24,000 1,218,480
-----------
TOTAL COMMON STOCKS
(cost $91,664,878) 103,692,235
--------------------------------------------------------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
-12-
MATRIX ADVISORS
VALUE FUND, INC.
===============
SHORT-TERM INVESTMENT: 5.0%
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
Federated Cash Trust
Treasury Money Market $5,326,060 $ 5,326,060
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,326,060)
------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(cost $96,990,938): 101.8% $109,018,295
Liabilities in excess of
Other Assets: (1.8)% (1,942,527)
------------------------------------------
NET ASSETS: 100.0% $107,075,768
==========================================
- ---------
* Non-income producing security.
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
-13-
MATRIX ADVISORS
VALUE FUND, INC.
===============
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003
-----------------------------------------------------
ASSETS
Investments in securities, at value:
Common stocks (cost $91,664,878) ...................... $ 103,692,235
Short-term investments (cost $5,326,060) ...................... 5,326,060
Receivables:
Fund shares sold ...................................... 1,139,282
Dividends and interest ................................ 82,083
Prepaid expenses and other assets ............................. 13,599
----------------------------------------------------
TOTAL ASSETS 110,253,259
----------------------------------------------------
LIABILITIES
Payables:
Advisory fee .......................................... 59,297
Fund shares redeemed .................................. 2,649
Securities purchased .................................. 3,070,820
Accrued expenses .............................................. 44,725
----------------------------------------------------
TOTAL LIABILITIES 3,177,491
----------------------------------------------------
NET ASSETS $ 107,075,768
====================================================
COMPOSITION OF NET ASSETS
Paid-in capital ............................................... $ 99,205,605
Undistributed net investment income ........................... 384,059
Accumulated net realized loss on investments .................. (4,541,253)
Net unrealized appreciation on investments .................... 12,027,357
----------------------------------------------------
NET ASSETS $ 107,075,768
====================================================
Number of shares, $0.01 par value, issued
and outstanding (unlimited shares authorized) ......... 2,412,050
----------------------------------------------------
NET ASSET VALUE PER SHARE $ 44.39
====================================================
The accompanying notes to financial statements are an
integral part of this schedule.
-14-
MATRIX ADVISORS
VALUE FUND, INC.
===============
FOR THE
YEAR ENDED
STATEMENT OF OPERATIONS JUNE 30, 2003
-----------------------------------------------------
INVESTMENT
INCOME
Dividend income
(Net of foreign tax withheld of $5,829) ............... $ 1,070,581
Interest income ............................................... 14,780
----------------------------------------------------
TOTAL INCOME 1,085,361
----------------------------------------------------
EXPENSES
Advisory fees ................................................. 708,380
Administration fees ........................................... 106,257
Fund Accounting fees .......................................... 32,351
Custodian fees ................................................ 19,498
Registration fees ............................................. 16,480
Reports to shareholders ....................................... 15,714
Transfer agent fees ........................................... 15,336
Audit fees .................................................... 13,847
Legal fees .................................................... 9,519
Miscellaneous ................................................. 6,001
Trustee fees .................................................. 2,957
----------------------------------------------------
TOTAL EXPENSES 946,340
LESS: Advisory fees waived (245,044)
----------------------------------------------------
NET EXPENSES 701,296
----------------------------------------------------
NET INVESTMENT INCOME 384,065
----------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions .................. (4,541,253)
Net change in unrealized
appreciation on investments ........................... 13,206,258
----------------------------------------------------
Net realized and unrealized gain on investments ............... 8,665,005
----------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 9,049,070
====================================================
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
-15-
MATRIX ADVISORS
VALUE FUND, INC.
===============
STATEMENT OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2003
---------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS:
Net investment income ................................... $ 384,065 $ 145,239
Realized gain (loss) on investments - net ............... (4,541,253) 238,704
Change in unrealized appreciation
(depreciation) of investments - net ............. 13,206,258 (6,339,797)
----------------------------------------------------------------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS 9,049,070 (5,955,854)
----------------------------------------------------------------
DISTRIBUTIONS
TO SHAREHOLDERS
Net investment income ................................... (145,072) (151,917)
Realized gain on investments ............................ (238,418) (1,038,961)
----------------------------------------------------------------
TOTAL DISTRIBUTIONS
TO SHAREHOLDERS (383,490) (1,190,878)
----------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS:
Shares sold ............................................. 59,643,979 36,287,820
Shares issued in connection with
reinvestment of dividends ....................... 378,713 1,174,310
Shares redeemed ......................................... (22,485,467) (12,054,662)
----------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS 37,537,225 25,407,468
----------------------------------------------------------------
TOTAL INCREASE IN
NET ASSETS 46,202,805 18,260,736
NET ASSETS
Beginning of year ....................................... 60,872,963 42,612,227
----------------------------------------------------------------
END OF YEAR $ 107,075,768 $ 60,872,963
================================================================
UNDISTRIBUTED
NET INVESTMENT
INCOME $ 384,059 $ 145,056
================================================================
CHANGE IN SHARES
Shares sold 1,503,533 784,420
Shares issued in connection with
reinvestment of dividends ....................... 9,806 25,390
Shares redeemed ......................................... (581,004) (260,651)
----------------------------------------------------------------
NET INCREASE 932,335 549,159
================================================================
The accompanying notes to financial statements are
an integral part of this schedule.
-16-
MATRIX ADVISORS
VALUE FUND, INC.
===============
NOTES TO FINANCIAL STATEMENTS
------------------------------------------------
NOTE 1 -
ORGANIZATION
Matrix Advisors Value Fund, Inc. (the "Fund") is a Maryland corporation
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company. The Fund commenced
operations September 16, 1983. The objective of the Fund is to achieve a total
rate of return composed of capital appreciation and current income.
NOTE 2 -
SIGNIFICANT ACCOUNTING POLICIES
The Fund consistently follows the accounting policies set forth below which are
in conformity with accounting principles generally accepted in the United States
of America.
A. Security Valuation.
Portfolio securities which are traded on national securities exchange are valued
at the last sale price. Portfolio Securities which are traded on NASDAQ are
valued at the Official Closing Price. If there were no transactions in a
security on that day, the security is generally valued using the mean between
the bid and asked price. If no quotations are available for a security, of if
the Board of Directors (or committee of the Board of Directors appointed for
that purpose) believes that the latest bid price of a security which has not
traded on the date in question does not fairly reflect its market value, it is
valued in manner determined in good faith by the Board of Directors, or its
delegates, to reflect its fair value.
B. Shares Valuation.
The net asset value ("NAV") per share of the Fund is calculated by dividing the
sum of the value of the securities held by the Fund, plus cash or other assets,
minus all liabilities (including estimated accrued expenses) by the total number
of shares outstanding of the Fund, rounded to the nearest cent. The Fund's
shares will not be priced on the days on which the NYSE is closed for trading.
The offering and redemption price per share of the Fund is equal to the Fund's
net asset value per share. The Fund charge a 0.75% redemption fee on shares
redeemed or exchanged within two months of purchase. These fees are deducted
from the redemption proceeds otherwise payable to the shareholder. The Fund will
retain the fee charged as paid-in capital and such fees become part of that
Fund's daily NAV calculation.
C. Federal Income Taxes.
The Fund has elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. The Fund intends to distribute
substantially all of its taxable income and any capital gains less any
applicable capital loss carryforwards. Accordingly, no provision for Federal
income taxes has been made in the accompanying financial statements. At June 30,
2003, the Fund had a capital loss carryforward of $244,196 that will expire in
2011. As of June 30, 2003, there was a post-October capital loss deferral of
$4,297,057 which will be recognized the following tax year.
-17-
MATRIX ADVISORS
VALUE FUND, INC.
===============
D. Portfolio Transactions.
Security transactions are accounted for on the trade date, the date the order to
buy or sell is executed. Security gains and losses are computed on an identified
cost basis.
E. Use of Estimates.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
F. Other.
Interest income is recorded on the accrual basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
NOTE 3 -
COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
The Fund has a management agreement with Matrix Asset Advisors, Inc. (the
"Advisor", "Matrix") to serve as investment advisor. Certain officers of the
Advisor are also officers of the Fund. Under the terms of the agreement, the
Fund has agreed to pay the Advisors as compensation for all services rendered,
staff and facilities provided and expenses paid or assumed, an annual fee,
accrued daily, paid monthly, of 1.00% of the Fund's average daily net assets.
For the year ended June 30, 2003, Matrix expense reimbursed and/or waived
$245,044.
U.S. Bancorp Fund Services, LLC (the "Administrator") (formerly Investment
Company Administration, LLC) acts as the Fund's Administrator under an
Administration Agreement. The Administrator prepares various federal and state
regulatory filings, reports and returns for the Fund; prepares reports and
materials to be supplied to the directors; monitors the activities of the Fund's
custodian, transfer agent and accountants; coordinates the preparation and
payment of Fund expenses and reviews the Fund's expense accruals. For its
services, the Administrator receives a monthly fee from the Fund based on the
greater of an annual minimum $25,000 or the annual rate of:
0.15% of first $100 million of average daily net assets
0.10% of next $100 million of average daily net assets
NOTE 4 -
INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, other than
short-term investments, for the year ended June 30, 2003, are as follows:
Proceeds from
Sales (Including
Purchases Maturities)
---------------------------------------
Common Stock $57,400,642 $20,789,552
-18-
MATRIX ADVISORS
VALUE FUND, INC.
===============
NOTE 5 -
DISTRIBUTIONS TO SHAREHOLDERS
As of June 30, 2003, the components of distributable earnings on a tax basis
were as follows:
COST OF INVESTMENTS
FOR TAX PURPOSES $96,990,938
------------------------------------------
Gross tax unrealized appreciation .............................. 13,009,963
Gross tax unrealized depreciation .............................. (982,606)
------------------------------------------
Net tax unrealized appreciation
on investments ......................................... 12,027,357
------------------------------------------
UNDISTRIBUTED
ORDINARY INCOME 384,059
------------------------------------------
CAPITAL LOSS CARRYFORWARD (244,196)
POST-OCTOBER LOSS (4,297,057)
==========================================
On November 15, 2002, a distribution of $0.2228 per share was declared. The
dividend was paid on November 18, 2002 to shareholders of record on November 14,
2002.
The tax character of distributions paid during the year ended June 30, 2003 and
2002 were as follows:
2003 2002
-----------------------------
Distributions Paid From:
Ordinary Income $ 145,072 $ 151,917
Long-Term Capital Gain 238,418 1,038,961
-----------------------------
$ 383,490 $1,190,878
=============================
The Matrix Advisors Value Fund, Inc. designate 88.11% of dividends declared
after December 31, 2002 from net investment income as qualified dividend income
under the Jobs and Growth Tax Relief Reconciliation Act of 2003.
NOTE 6 - SPECIAL MEETING OF SHAREHOLDERS
AND SUBSEQUENT EVENTS (UNAUDITED)
A special meeting of shareholders of the Matrix Advisors Value Fund was held at
the office of Matrix Asset Advisors, Inc. on April 28, 2003 to ratify the
selection of Tait, Weller & Baker as independent accountants of the Fund for the
fiscal year ending June 2003.
For Against Abstained
--- ------- ---------
Ratify the selection of
Tait, Weller & Baker 1,651,710 4,529 3,282
On August 1, 2003, the Board of Directors of Matrix Advisors Value Fund, Inc.
(the "Fund") approved an Agreement and Plan of Reorganization (the "Plan") which
contemplates the transfer of all of the assets and liabilities of the Fund in
exchange for Institutional Class shares of the Strong Matrix Large Cap Value
Fund, a new series of Strong Equity Funds II, Inc. (the "New Fund"). The New
Fund will have substantially the same investment objectives, policies, and
-19-
MATRIX ADVISORS
VALUE FUND, INC.
===============
strategies as the existing Fund, and will be managed by the same personnel who
currently manage the Fund. The Plan is subject to the approval of the
shareholders of the Fund. A shareholder meeting for this purpose is scheduled to
be held on October 14, 2003.
NOTE 7 - DIRECTOR AND OFFICER
INFORMATION (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
Number of
Position(s) Portfolios
Held with In Fund Other
Complex Directorships
Name, Address, the Date Principal Occupation(s) Overseen by Held
and Age Corporation Elected + During the Past 5 Years Trustee by Director
- ---------------------------------------------------------------------------------------------------------------------------------
David A. Katz, CFA Chairman, 1997 Mr. Katz is President and Chief Investment 1
747 Third Avenue President, and Officer of Matrix Asset Advisors, the Fund's
New York, NY 10017 Treasurer Advisor, and portfolio manager of the Fund.
(41) He has been associated with the Advisor and
its predecessor since its founding in 1986.
Douglas S. Altabef Executive Vice 2000 Mr. Altabef is the Managing Director of 1
747 Third Avenue President, and Matrix Asset Advisors, the Fund's Advisor.
New York, NY 10017 Secretary He has been associated with the Advisor
(52) since 1996. From 1993 to 1996, he was
President and Chief Executive Officer of
Varsity Recreational Holdings
Steven G. Roukis, CFA Senior Vice 2000 Mr. Roukis is Senior Vice President-Equity 1
747 Third Avenue President Research of Matrix Asset Advisors, the
New York, NY 10017 Fund's Advisor. He has been associated with
(35) the Advisor since 1994.
Robert M. Rosencrans *Director 1985 Mr. Rosencrans has been President of 1 None
747 Third Avenue Columbia International, Inc. since 1984.
New York, NY 10017 From 1962 to 1984 he was President and
(76) Chief Executive Officer of United Artists
Cablesystems Corporation.
T. Michael Tucker *Director 1997 Mr. Tucker is the owner of T. Michael 1 None
747 Third Avenue Tucker, a certified public accounting firm
New York, NY 10017 which he established in 1977.
(61)
Larry D. Kieszek * Director 1997 Mr. Kieszek is Managing partner of Purvis, 1 None
747 Third Avenue Gray & Company, a certified public
New York, NY 10017 accounting firm with which he has been
(52) associated since 1974.
<FN>
- ----------
* Not an "interested person", as that is defined by the 1940 Act.
+ Directors and officers of the Fund serve until their resignation, removal or
retirement.
</FN>
-20-
MATRIX ADVISORS
VALUE FUND, INC.
===============
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEARS ENDED JUNE 30,
----------------------------------------------------
2003 2002 2001 2000 1999
----------------------------------------------------
Net asset value, beginning of year ............... $ 41.14 $ 45.79 $ 43.49 $ 38.40 $ 32.90
Income from investment operations:
Net investment income ............................ 0.14 0.09 0.20 0.11 0.03
Net realized and unrealized gain (loss)
on investments ................................... 3.32 (3.59) 3.03 5.30 6.26
----------------------------------------------------
Total from investment operations ................. 3.46 (3.50) 3.23 5.41 6.29
----------------------------------------------------
Less distributions:
Dividends from net investment
income ........................................... (0.08) (0.15) (0.15) 0.00 (0.09)
Distributions from realized gains ................ (0.14) (1.03) (0.78) (0.32) (0.70)
----------------------------------------------------
Total distributions .............................. (0.22) (1.18) (0.93) (0.32) (0.79)
----------------------------------------------------
Paid-in capital from redemption
fees (Note 2) .................................... 0.01 0.03 -- -- --
----------------------------------------------------
Net asset value, end of year ..................... $ 44.39 $ 41.14 $ 45.79 $ 43.49 $ 38.40
====================================================
Total return ..................................... 8.52% (7.87%) 7.50% 14.18% 19.79%
Ratios/supplemental data:
Net assets, end of year (millions) ............... $ 107.1 $ 60.9 $ 42.6 $ 18.1 $ 11.1
Ratio of operating expenses to average net assets:
Before expense reimbursement ..................... 1.33% 1.37% 1.37% 1.65% 1.83%
After expense reimbursement ...................... 0.99% 0.99% 0.99% 0.99% 1.25%
Ratio of net investment income
(loss) to average net assets:
Before expense reimbursement ..................... 0.20% (0.09%) 0.22% (0.35%) (0.48%)
After expense reimbursement ...................... 0.54% 0.29% 0.60% 0.31% 0.10%
Portfolio turnover rate .......................... 30% 51% 55% 40% 33%
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
-21-
MATRIX ADVISORS
VALUE FUND, INC.
===============
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS and
SHAREHOLDERS OF MATRIX ADVISORS VALUE FUND, INC.
NEW YORK, NEW YORK
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Matrix Advisors Value Fund, Inc. as of June 30,
2003, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of June 30, 2003, by correspondence
with the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Matrix
Advisors Value Fund, Inc. as of June 30, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended in conformity with auditing standards generally accepted
in the United States of America.
TAIT WELLER & BAKER
Philadelphia, Pennsylvania
August 1, 2003
-22-
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BOARD OF DIRECTORS
Leonard M. Heine, Jr., Director Emeritus
David A. Katz, CFA
Larry D. Kieszek
Robert M. Rosencrans
T. Michael Tucker
o
INVESTMENT ADVISOR
Matrix Asset Advisors, Inc.
747 Third Avenue, 31st Floor
New York, NY 10017
(800) 366-6223
o
CUSTODIAN
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
o
TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
o
ADMINISTRATOR
U.S. Bancorp Fund Services, LLC
2020 East Financial Way, Ste. 100
Glendora, CA 91741
o
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202-5207
o
INDEPENDENT ACCOUNTANTS
Tait, Weller & Baker
1818 Market Street, Ste. 24
Philadelphia, PA 19103
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
Item 2. Code of Ethics.
Not applicable to annual reports filed for periods ending before July 15, 2003.
Item 3. Audit Committee Financial Expert.
Not applicable to annual reports filed for periods ending before July 15, 2003.
Item 4. Principal Accountant Fees and Services.
Not required for annual reports filed for periods ending before December 15,
2003.
Item 5. Audit Committee of Listed Registrants.
Not applicable to open-end investment companies.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) Based on their evaluation of the Registrant's Disclosure Controls and
Procedures as of a date within 90 days of the Filing Date, the Registrant's
President/Treasurer have determined that the Disclosure Controls and
Procedures (as defined in Rule 30a-2(c) under the Act) are designed to
ensure that information required to be disclosed by the Registrant is
recorded, processed, summarized and reported by the filing Date, and that
information required to be disclosed in the report is communicated to the
Registrant's management, as appropriate, to allow timely decisions
regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their evaluation, and there were no corrective actions with
regard to significant deficiencies and material weaknesses.
Item 10. Exhibits.
(a) Any code of ethics or amendment thereto. Not applicable to annual reports
for periods ending before July 15, 2003.
(b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
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) Matrix Advisors Value Fund, Inc.
By (Signature and Title) /s/ David A. Katz
------------------
David A. Katz, President/Treasurer
Date: 9/02/03
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ David A. Katz
------------------
David A. Katz, President/Treasurer
Date: 9/02/03
-------------
-26-