As filed with the Securities and Exchange Commission on November 8, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
AMENDMENT NO. 2
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)
1(800) 366-6223
Registrant's telephone number, including area code
Copies to:
Gregory L. Ezor
Paul, Hastings, Janofsky & Walker, LLP
515 South Flower Street, 25th Floor,
Los Angeles, CA 90071
Date of fiscal year end: JUNE 30
Date of reporting period: JUNE 30, 2006
NOTE: This amended N-CSR makes changes to notes 2 of the Notes to the Financial
Statements on page 20 of the Fund's annual report section 1. These are no
changes to any financial statements contained in section 1, nor to any other
disclosures required by Form N-CSR.
1
ITEM 1. REPORT TO STOCKHOLDERS.
ANNUAL REPORT
MATRIX
ADVISORS
VALUE FUND, INC.
JUNE 30, 2006
747 THIRD AVENUE, 31ST FLOOR
NEW YORK, NY 10017
MATRIX ADVISORS
VALUE FUND, INC.
July 31, 2006
Dear Fellow Shareholder:
The Fund posted a decline for the quarter of -3.87%, and ended the quarter
and its fiscal year with a Net Asset Value of $51.89. This represents a gain for
the Fund's fiscal year of +4.09%. By contrast, the S&P 500 Index declined by
- -1.44% during the quarter, and rose by +8.63% over the 12 month period ending
June 30, 2006.
As we discuss in the enclosed market commentary, the quarter was a
frustrating one for the Fund, as the sell-off of the market that began in
mid-May was especially painful for the Fund's many growth-oriented, but
value-priced businesses.
The Fund has certainly been having a dry spell, largely attributable to
its significant weighting to some of the country's top companies, whose stocks
have been highly lackluster even though business has been strong. In addition,
the Fund has had significant under-representation in many leading areas of the
market, based on our concern that valuations do not warrant our investment in
them.
On a brighter note, the Fund has amassed a 10 year track record under
Matrix management, as of June 30. We are pleased to note that its 10 year
performance record is quite strong, and substantially ahead of the S&P 500
Index. This performance includes the recent period of weakness and, in our
opinion, makes the point that a more reliable way to judge a fund is over the
long haul, since anything can happen over the short term.
We continue to maintain a high conviction that our current focus on
leading companies whose stock prices are compellingly low should better position
the portfolio for our shareholders. We believe that time is soon to be upon us,
and believe that the calendar year ends far better - in absolute and relative
terms - than it currently stands.
Patience is a critical attribute in investing, and we believe that now is
a time for patience, based on what we feel are the sound fundamentals and
compelling valuations of our portfolio.
Best regards.
Sincerely,
/s/ David A. Katz
David A. Katz, CFA
Chief Investment Officer
MUTUAL FUND INVESTING INVOLVES RISK. PRINCIPAL LOSS IS POSSIBLE.
1
MATRIX ADVISORS
VALUE FUND, INC.
MATRIX ADVISORS VALUE FUND, INC.
Value of $10,000 vs S&P 500 Index
[The following table was represented as a line chart in the printed material.]
Matrix Advisors
Value Fund, Inc. S&P 500 Index
1-Jul-96 10,000 10,000
30-Jun-97 12,347 13,472
30-Jun-98 13,898 17,538
30-Jun-99 16,649 21,531
30-Jun-00 19,010 23,090
30-Jun-01 20,435 19,666
30-Jun-02 18,828 16,128
30-Jun-03 20,432 16,168
30-Jun-04 24,970 19,258
30-Jun-05 24,569 20,475
30-Jun-06 25,574 22,242
AVERAGE ANNUALIZED TOTAL RETURN
PERIODS ENDED JUNE 30, 2006
---------------------------------------
TEN YEARS/
SINCE
INCEPTION**
ONE YEAR FIVE YEARS (7/1/1996)
-------- ---------- ----------
Matrix Advisors Value Fund, Inc. 4.09% 4.59% 9.85%
S&P 500 Index* 8.63% 2.49% 8.32%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE
FUTURE RESULTS. 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. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH
END MAY BE OBTAINED BY VISITING WWW.MATRIXADVISORSVALUEFUND.COM. THE FUND
IMPOSES A REDEMPTION FEE OF 1.00% ON SHARES HELD FOR TWO MONTHS OR LESS. THE
PERFORMANCE CITED ABOVE DOES NOT REFLECT THIS REDEMPTION FEE; IF DEDUCTED THE
TOTAL RETURNS WOULD BE REDUCED. Performance figures reflect fee waiver in effect
and in the absence of fee waivers, total returns would be lower.
- ----------
* 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.
2
MATRIX ADVISORS
VALUE FUND, INC.
CAPITAL MARKETS COMMENTARY
AND 2006 ANNUAL REPORT
The second quarter was a tale of two markets, swinging from euphoria to panic as
the Fed dampened predictions for continued growth, particularly in the more
speculative areas of the market.
It was a particularly frustrating quarter for the Matrix Advisors Value Fund. We
participated, but lagged, in the strength of the early part of the quarter, and
then under-protected during the ensuing sell-off. The Fund declined -3.87% for
the quarter compared to a decrease of -1.44% for the S&P 500 Index and is down
- -1.52% for the first six months of 2006 compared to a gain of +2.71% for the S&P
500.
ANNUAL REVIEW
The disappointing result in the past quarter reduced the Fund's annual
performance for its fiscal year to +4.09%.
The Fund's annual performance during this period was a marked improvement from
the previous fiscal year, yet continued to underperform the S&P 500 Index. We
attribute most of that result to the following: 1) an under-representation in
the leading areas of the market during the past 12 months, such as energy,
utilities and materials based stocks; and 2) an over-representation in
economically sensitive areas such as financials, technology and health care that
lagged the market.
We readily acknowledge our exasperation at holding a portfolio of stellar
businesses that have not enjoyed market success during the past 12 months. Many
of these elite companies have doubled their earnings over the past several
years, while their stocks have barely budged.
This state of market affairs, including the opportunity we see for the Fund, is
discussed in greater detail in this quarter's Ideas About Investing, which
follows this Commentary. We urge you to read it.
The bottom line for Matrix, as managers of the Fund, is that we remain confident
that our focus on the large and mega-cap companies (particularly many of the
Growth-oriented companies that dramatically fell from prominence as a result of
the tech bubble burst of 2000) should position the fund to perform well. It just
hasn't done so yet.
While we are very displeased with our short term results, these results must be
put into perspective. The Fund has lagged the market since December 31, 2003, a
period of two and a half years through June 30, 2006. Over this period, its
portfolio gained an anemic +3.24% cumulative return compared to the S&P 500
Index cumulative return of +19.48%, for a total lagging performance of -16.23%.
So, while the Fund has certainly been disappointing over this period, in our
opinion, the overall market itself, as represented by the S&P 500, has been
fairly lackluster. We believe the Fund has not missed out on a great market, nor
is the market running away from it.
3
MATRIX ADVISORS
VALUE FUND, INC.
By way of contrast, however, these disappointing returns (both absolute and
relative) are more than overshadowed by virtually any other measure of its
relative performance.
For example, in the five years prior to 2004 (December 31, 1998 through December
31, 2003), the Fund gained a cumulative +84.67% compared to a cumulative decline
of -2.82% for the S&P 500, a total of +87.49% of outperformance. When you
combine these two periods into December 31, 1998 through June 30, 2006, the Fund
rose +90.65% compared with a gain of +16.10% for the S&P 500 (a performance
advantage difference of +74.55 percentage points).
It is particularly important to note that as of June 30, the Fund has amassed a
10 year track record under Matrix management. The Fund has outpaced the S&P 500
during that time, gaining +9.85% to the index's gain of +8.32%.
This long term track record might be of little comfort to those shareholders who
have been with us only during the past two years, but we believe it is what
ultimately defines a Fund and its manager.
Long term records are rightfully viewed as the most important measure of
performance, because anyone can do well or poorly over the short-term. The
longer the time frame of performance excellence, the less the likelihood that it
is attributable to luck, or a single great investment, or a "lucky streak."
In our opinion, long-term excellence is usually attributable to a methodology
that works consistently and frequently. That well describes Matrix's experience
with the Fund, and we believe that it will continue to define it on a going
forward basis.
QUARTERLY REVIEW
The best performance for the Fund's holdings this quarter came from defensive
consumer-related sectors and stocks. Media stocks were attractive, with Comcast,
Time Warner and Walt Disney all posting solid gains. Wal-Mart, widely regarded
as a consumer staple stock, also rose.
On other fronts, the results were predominantly negative. Health care stocks
were led downward by Boston Scientific and MedImmune, and among financials, the
gains in our mega-bank holdings - Bank of America, Citigroup and JP Morgan Chase
- - were outweighed by declines in American International Group, Bank of New York
and Merrill Lynch.
Strength in Chevron was outweighed by greater weakness in Tidewater, as energy
service stocks were far more volatile to the downside than the integrated oil
companies. Technology was a mixed picture with some strength from semi-conductor
related holdings outweighed by other tech positions, including American Power
Conversion Systems and Microsoft.
During the quarter, we completed the successful sale of a profitable Walt Disney
& Company, as well as a modestly profitable General Mills. We also sold the
position in Interpublic Group for a loss after losing confidence in the timing
and degree of a recovery in the stock.
4
MATRIX ADVISORS
VALUE FUND, INC.
Our sale of Disney was particularly gratifying because while the position was a
very good investment, for much of the time the Fund owned it, it languished, and
appeared to be a non-starter. This is the nature of investing, however, where
one's return can happen in a fairly short time after a fairly long sideways (or
worse) stretch.
New positions were begun this past quarter in Dollar General and Johnson &
Johnson.
Looking forward, we believe that the Fund's focus on very strong businesses
trading at compelling prices is very timely. When we say timely, we mean not
only because of their overall position in the market, but especially in terms of
what is happening "on the ground" at the Fund's individual holdings.
Periodically, we at Matrix do a timeliness study of each of the holdings, with
the goal being to determine, as objectively as we can, a sense of when a stock
is ready to rally substantially.
The study we have just completed as of the end of June shows that more than 80%
of the Fund's portfolio should be positioned for gains in the next nine months.
That is a very front-end loaded posture, meaning a significant amount of the
portfolio should be ready for strong performance, based on internal fundamentals
and business prospects.
Again, while we are certainly frustrated, we continue to believe that the year
should unfold attractively for the Fund.
* * *
As mentioned earlier, in this quarter's installment of IDEAS ABOUT INVESTING, we
examine the current state of the market and lay out what we think is a
compelling case for the Fund's portfolio at this time.
Summer is the slow kick back time of year, a time for beaches, barbeques,
golfing and recharging batteries. How ever you are recharging your batteries, we
wish you all the pleasures of the season.
While we too will try to recharge our batteries, we don't do much in the way of
kicking back, since our efforts and dedication know no seasonality.
Best regards.
- ----------
THE FUND MAY INVEST IN SMALLER COMPANIES WHICH INVOLVES ADDITIONAL RISKS SUCH AS
LIMITED LIQUIDITY AND GREATER VOLATILITY.
The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is
widely recognized as representative of the equity market in general. You cannot
invest directly in an index.
Please refer to the Schedule of Investments in this report for details on fund
holdings. Fund holdings are subject to change at any time and are not
recommendations to buy or sell any security.
The information provided herein represents the opinion of the author and is not
intended to be a forecast of future events, a guarantee of future results, nor
investment advice. (8/06)
5
MATRIX ADVISORS
VALUE FUND, INC.
IDEAS ABOUT INVESTING
A QUARTERLY QUEST FOR INVESTMENT ENLIGHTENMENT
Where the Market Stands and Where We are Going:
THE OPPORTUNITY THAT THE FUND'S PORTFOLIO CURRENTLY REPRESENTS.
WE BELIEVE THAT THE RECENT SELL-OFF OF THE MARKET COULD AND SHOULD BE THE
CATALYST TO USHER IN THE RE-EMERGENCE OF THE LARGE/MEGA-CAP HIGH QUALITY
BUSINESSES, OFTEN REFERRED TO AS BLUE CHIPS. THE FOLLOWING PAPER LAYS OUT THAT
POSITION.
This paper is written with the recognition that over the last two years, the
Fund's focus on this asset class, along with other attractive individual
holdings, has not produced impressive results, neither in absolute nor relative
terms.
This recent performance drought stands in stark contrast to our performance
record over most any other time horizon. However, it is important to remember
that the same discipline and mindset that produced those attractive results are
still operative.
* * *
Like much of life, the stock market works cyclically. Not just in rising and
declining, but in the form of what leads/lags the market, whether it is a
sector, an industry, a country, a size range of stocks, etc.
The cataclysmic market downturn that began in 2000 ushered out one cycle and
ushered in another. Out went, among other things, large, American, Growth and
tech stocks, and in came small, International, deep Value, energy, industrial,
commodities-based and utility stocks.
What cycle changes tend to have in common is that they begin when no one is
expecting them to; indeed, when the feeling is that the STATUS QUO never looked
better.
Cycle changes often take place much later than they "should." This means that
fundamentals-oriented, analytic types such as us might perceive imbalances,
anomalies and severe over/under-valuations that should precipitate market
change. It doesn't mean that the market actually then changes. At least not when
we say it ought to.
In the late `90's we at Matrix sounded a Chicken Little cry on the
Internet/large tech sector for two plus years before the market finally saw it
the same way. During that frustrating period of time, we were often reminded
that we had been singing the same song for a long time; everybody knew the
words, but it seemed like nobody wanted to dance.
6
MATRIX ADVISORS
VALUE FUND, INC.
Perhaps it is an occupational hazard of being the type of investors that we are
that we are occasionally early in divining the eventual course of the stock
market. Why? Because we are not nearly as astute in assessing market momentum,
the emotional, some would say irrational, component of the market, as we are at
understanding the analytic, factual, historical and rational aspects of markets.
Since the beginning of 2005 we have perceived a growing anomaly in the current
market cycle: the leadership has less and less fundamental justification to it,
while the laggards appear to be increasingly attractive from a fundamental
perspective.
Specifically, we have watched as historically cyclical, low growth and
economically secondary areas such as utilities, materials and energy stocks have
dominated the markets. Even allowing for macro-economic and geopolitical
uncertainty, these sectors are trading at levels that cannot be easily justified
on a fundamental, business by business basis.
Conversely, many financial, media, technology and pharmaceutical stocks have
been ignored, although the underlying businesses of their companies have been
robust. There has been an almost complete reversal of what the market liked in
the late 1990's from what it likes today.
However, one area where the two periods are very much the same has been in
assessing risk. There seems to be an identical double standard then and now: for
the darlings, there really was no risk because the long term business conditions
would inevitably justify the risks. For the laggards, the risks were everywhere,
because there were effectively no real opportunities for growth or success.
So, in the past year, we have heard intelligent market analysts point out that
home prices could not go down in hot areas because of favorable long-term
demographics; that emerging countries were ramping up at such fast rates as to
make a compelling "got to be there" growth story, regardless of any other
considerations; and that the likes of most of the country's biggest and most
successful companies had basically lost their groove, perhaps forever.
The past two months have brought a sobering reality check to the market. Areas
once thought to be impregnable have been drubbed. Part of the aftermath of that
experience is likely to be a reassessment of the assumptions that went into
those choices, as well as a reassessment of the assumptions surrounding the
unloved areas of the market.
What this means is that, increasingly, other investors will start to perceive
what we do. And when it comes to the stocks that we like, here is what they
should find;
Despite the inattention and even hostility of the stock market, the blue chip
giants have grown their profits very substantially. They have used the huge cash
flow that has come from business success to raise their dividends and to buy
back their stock. The price/earnings ratio of their stocks has fallen to levels
not seen in more than a decade. And amazingly, those ratios are now lower than
the overall market itself!
7
MATRIX ADVISORS
VALUE FUND, INC.
The opportunity for these stocks is simply that their businesses are most likely
to hold strong in the face of increasingly visible downward macro-economic
pressures. As investors more and more realize that taking greater risks may not
be yielding greater rewards, we feel there will inevitably be gravitation to
those stocks where relatively greater rewards can be found with much lower risk.
The favorable positioning of these corporate leaders is not necessarily industry
specific. What these companies have in common is tremendous business
positioning, strong balance sheets and huge cash flow at their disposal. So, it
is their inherent strength and flexibility that makes them increasingly
compelling opportunities as economic waters get choppier.
One question posed when the case for the blue chips has been put forward, is
why? Why do they need to rally strongly, when they seem to be too big to soar?
This commonly voiced sentiment reflects both some ignorance, and a bias. The
ignorance relates to how well the companies themselves are doing, in many cases
growing at or near the top of their historical ranges of earnings growth.
The bias is that small companies are now, and may well always be, stronger
growers and therefore more worthy of higher multiples and prices. (Of course a
decade ago, many of these same people had no interest in owning small-caps, as
they badly lagged large caps.) But this perception might be based on yesterday's
news.
Ironically, at least for the past three quarters earnings growth momentum has
actually been stronger among large cap stocks than for small caps. Rising
interest rates and a slowing economy are historically better environments for
the larger companies, who have less dependence on debt financing and often enjoy
a less economically sensitive cycle in their respective businesses.
Currently, more than half of the weight of the Fund's portfolios is in mega cap
blue chip stocks. Another 25% is in large cap industry leaders, which should
benefit from many of the same forces that should positively impact the
mega-caps.
The balance of the portfolio is invested in companies that might be depicted as
mid-cap or smaller large-cap stocks, depending on your measurement scale. They
too, are leaders in their respective industries and also boast attractive
business prospects, and compelling valuations.
The environment that we recently have been in, and the one which we believe we
will be entering, should reward the Fund. We are confident that the Fund is well
positioned and that the balance of the year should reflect that favorable
posture.
Price/Earnings (P/E): The Price to earnings ratio is a common tool for comparing
the prices of different common stocks and is calculated by dividing the current
market price of a stock by the earnings per share.
Cash Flow: Measures the cash generating capability of a company by adding
non-cash charges (e.g. depreciation) and interest expense to pretax income.
8
MATRIX ADVISORS
VALUE FUND, INC.
EXPENSE EXAMPLE (UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs; and (2) ongoing costs, including management fees; and other Fund
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period indicated and held for the entire period from January 1, 2006 to June 30,
2006.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in these columns together with the amount you invested, to estimate
the expenses that you paid over the period. 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 row entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratios and assumed
rates of return of 5% per year before expenses, which are not the Fund's actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as redemption
fees. Therefore, the information under the heading "Hypothetical Performance (5%
return before expenses)" is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher.
9
MATRIX ADVISORS
VALUE FUND, INC.
ACTUAL HYPOTHETICAL PERFORMANCE
EXPENSE EXAMPLE PERFORMANCE (5% RETURN BEFORE EXPENSES)
- --------------------------------------------------------------------------------
Beginning Account Value (01/01/06) $1,000.00 $1,000.00
Ending Account Value (06/30/06) $984.80 $1,019.89
Expenses Paid During Period(1) $4.87 $4.96
- --------------------------------------------------------------------------------
(1) Expenses are equal to the Fund's annualized expense ratio 0.99% multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
SECTOR BREAKDOWN(2)
-----------------------------------------------
Consumer Durables 17.8%
Consumer Non-durables 3.9%
Energy 4.9%
Finance 30.3%
Industrial 7.6%
Medical 12.8%
Technology 22.3%
-----
99.6%
Cash 0.4%
-----
Total Investments 100.0%
=====
-----------------------------------------------
(2) % of Total Investments as of June 30, 2006.
10
MATRIX ADVISORS
VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2006
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.3%
BANK (MONEY CENTER): 7.1%
130,000 Citigroup, Inc. ................................... $ 6,271,200
122,500 JP Morgan Chase & Co. ............................. 5,145,000
------------
11,416,200
------------
BANK (PROCESSING): 3.3%
166,000 Bank of New York Co., Inc. ........................ 5,345,200
------------
BANK (SUPER REGIONAL): 4.1%
135,484 Bank of America Corp. ............................. 6,516,781
------------
BIOTECHNOLOGY: 3.8%
222,500 Medimmune, Inc.* .................................. 6,029,750
------------
COMPUTERS AND PERIPHERALS: 3.7%
302,000 American Power Conversion Corp. ................... 5,885,980
------------
DRUG: 7.1%
258,896 Pfizer, Inc. ...................................... 6,076,289
119,000 Wyeth ............................................. 5,284,790
------------
11,361,079
------------
ELECTRICAL EQUIPMENT: 7.6%
195,000 General Electric Co. .............................. 6,427,200
210,000 Tyco International Ltd. ........................... 5,775,000
------------
12,202,200
------------
ELECTRONICS: 8.1%
581,260 Symbol Technologies, Inc. ......................... 6,271,796
424,100 Vishay Intertechnology, Inc.* ..................... 6,671,093
------------
12,942,889
------------
FINANCIAL SERVICES: 1.0%
36,000 First Data Corp. .................................. 1,621,440
------------
INSURANCE (DIVERSIFIED): 7.2%
104,000 American International Group, Inc. ................ 6,141,200
199,000 Marsh & McLennan Companies, Inc. .................. 5,351,110
------------
11,492,310
------------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS
SCHEDULE.
11
MATRIX ADVISORS
VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2006
SHARES VALUE
- --------------------------------------------------------------------------------
MEDIA: 8.1%
200,000 Comcast Corp.* .................................... $ 6,556,000
375,000 Time Warner, Inc. ................................. 6,487,500
------------
13,043,500
------------
MEDICAL INSTRUMENTS: 0.8%
73,000 Boston Scientific Corp.* .......................... 1,229,320
------------
MEDICAL PRODUCTS: 1.1%
30,000 Johnson & Johnson ................................. 1,797,600
------------
OIL & GAS SERVICES: 4.8%
48,000 ChevronTexaco Corp. ............................... 2,978,880
97,800 Tidewater, Inc. ................................... 4,811,760
------------
7,790,640
------------
RETAIL STORE: 13.5%
355,000 Dollar General Corp. .............................. 4,962,900
302,000 Gap, Inc. ......................................... 5,254,800
185,000 Ross Stores, Inc. ................................. 5,189,250
131,000 Wal-Mart Stores, Inc. ............................. 6,310,270
------------
21,717,220
------------
SECURITIES BROKERAGE: 7.0%
67,200 Merrill Lynch & Co, Inc. .......................... 4,674,432
105,000 Morgan Stanley Dean Witter & Co. .................. 6,637,050
------------
11,311,482
------------
SEMICONDUCTOR: 1.3%
108,000 Intel Corp. ....................................... 2,046,600
------------
SEMICONDUCTOR (CAPITAL EQUIPMENT): 3.7%
238,500 Novellus Systems, Inc.* ........................... 5,890,950
------------
SOFTWARE: 3.7%
255,000 Microsoft Corp. ................................... 5,941,500
------------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS
SCHEDULE.
12
MATRIX ADVISORS
VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2006
SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (EQUIPMENT): 1.8%
152,000 Cisco Systems, Inc.* .............................. $ 2,968,560
------------
THRIFT: 0.5%
14,000 Federal Home Loan Mortgage Co. .................... 798,140
------------
TOTAL COMMON STOCKS (cost $140,702,146) ......................... $159,349,341
------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS: 0.3%
$ 564,784 Fidelity Institutional Money Market Portfolio ..... $ 564,784
------------
TOTAL SHORT TERM INVESTMENTS (cost $564,784)
TOTAL INVESTMENTS IN SECURITIES (cost $141,266,930): 99.6% ...... $159,914,125
Other Assets less Liabilities: 0.4% ............................. 607,549
------------
TOTAL NET ASSETS: 100.0% ........................................ $160,521,674
============
- ----------
* 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, 2006
ASSETS
Investments in securities, at value:
Common stocks (cost $141,266,930) ........................... $159,914,125
Receivables:
Securities sold ............................................. 1,793,863
Fund shares sold ............................................ 65,224
Dividends and interest ...................................... 105,358
Prepaid expenses and other assets ............................. 9,432
------------
Total assets .................................................. 161,888,002
------------
LIABILITIES
Payables:
Securities purchased ........................................ 574,513
Fund shares redeemed ........................................ 603,705
Advisory fees ............................................... 91,926
Administration fees ......................................... 17,487
Chief Compliance Officer fees ............................... 12,529
Transfer Agent fees ......................................... 12,245
Fund Accounting fees ........................................ 8,273
Directors fees .............................................. 7,499
Custodian fees .............................................. 4,412
Accrued expenses .............................................. 33,739
------------
Total liabilities ............................................. 1,366,328
------------
NET ASSETS ...................................................... $160,521,674
============
Number of shares, $0.01 par value, issued
and outstanding (unlimited shares authorized) ............... 3,093,445
============
NET ASSET VALUE PER SHARE ....................................... $ 51.89
============
COMPOSITION OF NET ASSETS
Paid-in capital ............................................... $131,399,181
Undistributed net investment income ........................... 1,043,199
Accumulated net realized gain on investments .................. 9,432,099
Net unrealized appreciation on investments .................... 18,647,195
------------
Net assets .................................................. $160,521,674
============
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS
SCHEDULE.
14
MATRIX ADVISORS
VALUE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2006
INVESTMENT INCOME
INCOME
Dividend income (Net of foreign tax withheld of $135) ...... $ 3,069,919
Interest income ............................................ 64,924
------------
Total income ............................................... 3,134,843
------------
EXPENSES
Advisory fees .............................................. 1,974,305
Administration fees ........................................ 247,429
Transfer Agent fees ........................................ 79,973
Chief Compliance Officer fees .............................. 49,998
Legal fees ................................................. 47,244
Fund Accounting fees ....................................... 46,194
Reports to shareholders .................................... 41,070
Custodian fees ............................................. 38,552
Registration fees .......................................... 23,330
Directors fees ............................................. 21,079
Audit fees ................................................. 18,799
Miscellaneous fees ......................................... 8,502
Insurance expense .......................................... 4,000
Interest expense ........................................... 3,736
------------
Total expenses ............................................... 2,604,211
Less: Advisory fees waived ................................... (649,605)
------------
Net expenses ................................................. 1,954,606
------------
NET INVESTMENT INCOME ........................................ 1,180,237
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions ................. 9,432,351
Net change in unrealized appreciation on investments ......... (534,035)
------------
Net realized and unrealized gain on investments ............ 8,898,316
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 10,078,553
============
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS
SCHEDULE.
15
MATRIX ADVISORS
VALUE FUND, INC.
YEAR YEAR
ENDED ENDED
STATEMENT OF CHANGES IN NET ASSETS JUNE 30, 2006 JUNE 30, 2005
- ------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ............................................ $ 1,180,237 $ 2,751,680
Net realized gain on investments ................................. 9,432,351 6,914,505
Net change in unrealized appreciation of investments ............. (534,035) (14,415,761)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .... 10,078,553 (4,749,576)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ............................................ (1,307,762) (2,333,203)
Realized gain on investments ..................................... (6,914,757) (4,469,059)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................................ (8,222,519) (6,802,262)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................................ 18,640,355 59,455,802
Proceeds from reinvestment of distribution ....................... 8,021,267 6,594,731
Cost of shares redeemed .......................................... (108,355,157) (130,051,935)
Redemption fees .................................................. 6,815 5,158
------------- -------------
NET DECREASE FROM CAPITAL SHARE TRANSACTIONS ....................... (81,686,720) (63,996,244)
------------- -------------
TOTAL DECREASE IN NET ASSETS ....................................... (79,830,686) (75,548,082)
NET ASSETS
Beginning of year .................................................. 240,352,360 315,900,442
------------- -------------
End of year ........................................................ $ 160,521,674 $ 240,352,360
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ................................ $ 1,043,199 $ 1,170,724
============= =============
CHANGE IN SHARES
Shares sold ........................................................ 351,145 1,145,831
Shares issued on reinvestment of distributions ..................... 155,240 125,351
Shares redeemed .................................................... (2,040,103) (2,492,300)
------------- -------------
NET DECREASE ....................................................... (1,533,718) (1,221,118)
============= =============
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS
SCHEDULE.
16
MATRIX ADVISORS
VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEARS ENDED JUNE 30,
------------------------------------------------------------
2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $ 51.94 $ 54.02 $ 44.39 $ 41.14 $ 45.79
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................... 0.43 0.54 0.18 0.14 0.09
Net realized and unrealized
gain (loss) on investments ........................ 1.69 (1.39) 9.65 3.32 (3.59)
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.12 (0.85) 9.83 3.46 (3.50)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ................ (0.35) (0.42) (0.21) (0.08) (0.15)
Distributions from realized gains ................... (1.82) (0.81) 0.00 (0.14) (1.03)
-------- -------- -------- -------- --------
Total distributions ................................... (2.17) (1.23) (0.21) (0.22) (1.18)
-------- -------- -------- -------- --------
Paid-in capital from redemption fees (Note 2) ......... --(a) --(a) 0.01 0.01 0.03
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 51.89 $ 51.94 $ 54.02 $ 44.39 $ 41.14
======== ======== ======== ======== ========
Total return .......................................... 4.09% (1.61%) 22.21% 8.52% (7.87%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) .................. $ 160.5 $ 240.4 $ 315.9 $ 107.1 $ 60.9
RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS:
Before expense reimbursement ........................ 1.32% 1.29% 1.26% 1.33% 1.37%
After expense reimbursement ......................... 0.99% 0.99% 0.99% 0.99% 0.99%
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS:
Before expense reimbursement ........................ 0.27% 0.69% 0.24% 0.20% (0.09%)
After expense reimbursement ......................... 0.60% 0.99% 0.51% 0.54% 0.29%
Portfolio turnover rate ............................... 28% 18% 17% 30% 51%
- ----------
(a) less than 0.01.
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS
SCHEDULE.
17
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE 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 listed on a national securities exchange are
valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such
exchange on such day, the security is valued at the mean between the
bid and asked price. All equity securities that are traded using the
National Association of Securities Dealers' Automated Quotation
System ("NASDAQ") are valued using the NASDAQ Official Closing Price
("NOCP"). Readily marketable securities traded only in the
over-the-counter market and not on NASDAQ are valued at the current
or last bid price. If no bid is quoted on such day, the security is
valued by such method as the Board of Directors of the Fund shall
determine in good faith to reflect the security's fair value. All
other assets of the Fund are valued in such manner as the Board of
Directors in good faith deems appropriate to reflect their 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 will
assess a 1.00% fee on redemption of Fund shares purchased and held
for two months or less. 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.
18
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in
Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain
tax positions should be recognized, measured, presented and
disclosed in the financial statements. FIN 48 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the
tax positions are "more-likely-than-not" of being sustained by the
applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or
expense in the current year. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Management believes
that the adoption of FIN 48 will have no impact on the financial
statements.
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. RECLASSIFICATION OF CAPITAL ACCOUNTS.
Accounting principles generally accepted in the United States of
America require that certain components of net assets relating to
permanent differences be reclassified between financial and tax
reporting. These reclassifications have no effect on net assets or
net asset value per share. For the year ended June 30, 2006, the
Fund had no permanent differences.
G. OTHER.
Interest income is recorded on the accrual basis. Dividend income
and distributions to shareholders are recorded on the ex-dividend
date.
H. INDEMNIFICATION OBLIGATIONS.
Under the Fund's organizational documents, its current and former
Officers and Directors are indemnified against certain liabilities
arising out of the performance of their duties to the Fund. In
addition, in the normal course of business, the Fund enters into
contracts that contain a variety of representations and warranties
that provide general indemnifications. The Fund's maximum exposure
under these arrangements is unknown as this would involve future
claims that may be made against the Fund that has not yet occurred
or that would be covered by other parties.
19
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
I. LINE OF CREDIT.
The Fund has a Loan Agreement with U.S. Bank N.A. Under the terms of
the Loan Agreement, the Fund's borrowings cannot exceed the lesser
of $15,000,000 or 33 1/3% of the net assets of the Fund. The
interest rate paid on the Loan equals the prime rate per annum,
payable monthly.
Borrowing activity under the Loan Agreement for the year ended June
30, 2006, was as follows:
MAXIMUM AMOUNT AVERAGE
AMOUNT INTEREST OUTSTANDING AT AMOUNT AVERAGE
OUTSTANDING EXPENSE JUNE 30, 2006 OUTSTANDING INTEREST RATE
--------------------------------------------------------------------
$4,409,000 $3,736 $0 $506,303 6.947%
J. REVISION TO FINANCIAL INFORMATION
The financial statements for the fiscal year ended June 30, 2004
have been adjusted to reclassify items previously classified as
income to capital gains. The changes to the Financial Highlights are
as follows:
Year Ended June 30, 2004
------------------------
For a capital share outstanding
throughout the period Previously Reported: As Revised:
--------------------- -------------------- -----------
Net investment income $ 0.94 $ 0.18
Net realized and unrealized
gain on investments 8.89 9.65
Total from investment operations $ 9.83 $ 9.83
These reclassifications had no effect on the Fund's net assets, net
asset value per share, total return, the net increase in net assets
resulting from investment operations, or amounts reported for income
tax purposes.
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 Advisor 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.
The Advisor has contractually agreed to reduce its fees and/or pay expenses of
the Fund to ensure that the Fund's total annual operating expenses (excluding
interest and tax expenses) will not exceed 1.10% of the Fund's average daily net
assets. For the year ended June 30, 2006, the Advisor voluntarily reimbursed the
Fund for expenses in excess of 0.99%. Matrix voluntarily waived $649,605. Any
reduction in advisory fees or payment of expenses made by the Advisor may be
reimbursed by the Fund if the Advisor requests in subsequent fiscal years. This
reimbursement may be requested if the aggregate amount actually paid by the Fund
toward operating expenses for such fiscal year (taking into account the
reimbursement) does not exceed the applicable limitation on Fund expenses. The
Advisor is permitted to be reimbursed for fee reductions and/or expense payments
made in the prior three fiscal years. Any such reimbursement will be reviewed by
the Directors. The Fund must pay its current ordinary operating expenses before
the Advisor is entitled to any reimbursement of fees and/or expenses.
At June 30, 2006, the cumulative amount available for reimbursement that has
been paid and/or waived is $2,091,917. The advisor may recapture a portion of
this amount no later than the dates stated below:
JUNE 30,
--------------------------------------------
2007 2008 2009
--------------------------------------------
$607,410 $834,902 $649,605
--------------------------------------------
U.S. Bancorp Fund Services, LLC (the "Administrator") 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
20
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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% thereafter of average daily net assets For the year ended June 30,
2006, the Fund allocated $49,998 to the Chief Compliance Officer.
NOTE 4 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, other than
short-term obligations and U.S. Government securities, for the year ended June
30, 2006, are as follows:
PURCHASES SALES
-----------------------------------------------------
Common Stock $55,319,982 $143,681,913
-----------------------------------------------------
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
As of June 30, 2006, the components of distributable earnings on a tax basis
were as follows:
COST OF INVESTMENTS FOR TAX PURPOSES $141,269,558
============
Gross tax unrealized appreciation 22,879,396
Gross tax unrealized depreciation (4,234,829)
------------
Net tax unrealized appreciation on investments $ 18,644,567
============
Undistributed ordinary income $ 1,183,871
------------
Undistributed long-term capital gains $ 9,294,055
------------
Total Distributable Earnings $ 29,122,493
============
The difference between book basis and tax basis unrealized
appreciation(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
On November 11, 2005, a distribution of $2.166 per share was declared. The
dividend was paid on November 14, 2005 to shareholders of record on November 10,
2005.
The tax character of distributions paid during the year ended June 30, 2006 and
2005 were as follows:
2006 2005
Distributions Paid From:
Ordinary Income $ 3,172,070 $ 6,802,262
Long-Term Capital Gain $ 5,050,449 --
------------ ------------
$ 8,222,519 $ 6,802,262
============ ============
21
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - PROXY VOTING PROCEDURES (UNAUDITED)
The Advisor votes proxies relating to portfolio securities in accordance with
procedures that have been approved by the Board of Directors of the Fund. You
may obtain a description of these procedures without charge (i) by calling a
toll-free, 1-800-366-6223; or (ii) on the SEC's website at http://www.sec.gov.
NOTE 7 - FORM N-Q DISCLOSURE (UNAUDITED)
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Form N-Q is available on the Securities and Exchange
Commission's website at http://www.sec.gov. The Fund's Form N-Q may be reviewed
and copied at the Commission's Public Reference Room in Washington, DC, and
information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. This information is also available, without charge, by
calling toll-free, 1-800-366-6223.
TAX NOTICE (UNAUDITED)
The percentage of dividend income distributed for the year ended
June 30, 2006, which is designated as qualified dividend income
under the Jobs and Growth Tax Relief Reconciliation Act of 2003, is
100%.
The percentage of dividend income distributed for the year ended
June 30, 2006 designated as qualified dividends received deduction
available to corporate shareholders, is 100%.
ADDITIONAL INFORMATION APPLICABLE TO FOREIGN SHAREHOLDERS ONLY:
The Fund hereby designates 0.59% of its ordinary income
distributions for the fiscal year as interest-related dividends
under Internal Revenue Code Section 871(k)(1)(c).
The Fund hereby designates 58.77% of its ordinary income
distributions under Internal Revenue Code Section 871(k)(2)(c).
22
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - DIRECTOR AND OFFICER INFORMATION (UNAUDITED)
The Board of Directors is responsible for the overall management of the Fund's
business. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to it, including the agreements with
the Advisor, Administrator, Custodian and Transfer Agent. The Board of Directors
delegates the day-to-day operations of the Fund to its Officers, subject to the
Fund's investment objective and policies and to general supervision by the
Board. The Statement of Additional Information includes additional information
about the Fund's Directors and is available, without charge, by calling
1-800-366-6223.
The Directors and Officers of the Fund, their business addresses and principal
occupations during the past five
Number
of Portfolios
Principal In Fund Other
Name, Position(s) Occupation(s) Complex Directorships
Address, Held with Date During the Overseen Held by
and Year of Birth the Fund Elected+ Past 5 Years by Director Director
- -----------------------------------------------------------------------------------------------------------------------------------
David A. Katz, CFA Director; Since President and Chief Investment 1 None
747 Third Avenue President, and 1997 Officer of Matrix Asset Advisors,
New York, NY 10017 Treasurer the Fund's Advisor, and portfolio
(Born 1962) manager of the Fund (1996 to
present).
Douglas S. Altabef Executive Vice Since Senior Managing Director of Matrix N/A N/A
747 Third Avenue President and 2000 Asset Advisors, the Fund's Advisor
New York, NY 10017 Secretary (1996 to present).
(Born 1951)
Steven G. Roukis, CFA Senior Vice Since Managing Director of Matrix Asset N/A N/A
747 Third Avenue President 2000 Advisors (2005 to present);
New York, NY 10017 formerly, Director of Research,
(Born 1967) Senior Vice President-Equity
Research of Matrix Asset Advisors,
the Fund's Advisor and various
other positions within research
(1994 - 2005).
23
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Number
of Portfolios
Principal In Fund Other
Name, Position(s) Occupation(s) Complex Directorships
Address, Held with Date During the Overseen Held by
and Year of Birth the Fund Elected+ Past 5 Years by Director Director
- -----------------------------------------------------------------------------------------------------------------------------------
Jordan F. Posner Senior Vice Since Managing Director of Matrix Asset N/A N/A
747 Third Avenue President 2006 Advisors, the Fund's Advisor (2005
New York, NY 10017 to present); formerly, Partner of
(Born 1957) David J. Greene & Co. (1993 -
2005).
Lon F. Birnholz Senior Vice Since Managing Director of Matrix Asset N/A N/A
747 Third Avenue President 2006 Advisors, the Fund's Advisor (1999
New York, NY 10017 to present).
(Born 1960)
Robert M. Slotky Vice President and Since Vice President, U.S. Bancorp Fund N/A N/A
2020 E. Financial Way Chief Compliance 2004 Services, LLC since July 2001;
Glendora, CA 91741 Officer formerly, Senior Vice President,
(Born 1947) Investment Company Administration,
LLC (mutual fund administrator and
the Fund's former administrator)
(May 1997 - July 2001).
Robert M. Rosencrans * Director Since Retired; formerly, President of 1 None
747 Third Avenue 1985 Columbia International, Inc.
New York, NY 10017 (cable television developer and
(Born 1927) operator) (1984 to 2005).
T. Michael Tucker * Chairman and Since Consultant, Carr Riggs & Ingram, 1 None
747 Third Avenue Director 1997 LLP (2005 to present); formerly,
New York, NY 10017 Owner of T. Michael Tucker, a
(Born 1942) certified public accounting firm
(1977 to 2005).
24
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Number
of Portfolios
Principal In Fund Other
Name, Position(s) Occupation(s) Complex Directorships
Address, Held with Date During the Overseen Held by
and Year of Birth the Fund Elected+ Past 5 Years by Director Director
- -----------------------------------------------------------------------------------------------------------------------------------
Larry D. Kieszek * Director Since Managing Partner of Purvis, Gray 1 None
747 Third Avenue 1997 & Company, a certified public
New York, NY 10017 accounting firm (1974 to present).
(Born 1950)
* 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.
25
MATRIX ADVISORS
VALUE FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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,
2006 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 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 and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of June 30, 2006, by correspondence with the
custodian and brokers. We believe that our audit provides 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, 2006, 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 LLP
Philadelphia, Pennsylvania
August 7, 2006
26
BOARD OF DIRECTORS
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
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & Baker
1818 Market Street, Ste. 2400
Philadelphia, PA 19103
o
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202-5207
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.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the period covered by this
report. The registrant has not granted any waivers from any provisions of the
code of ethics during the period covered by this report.
THE REGISTRANT UNDERTAKES TO PROVIDE TO ANY PERSON WITHOUT CHARGE, UPON REQUEST,
A COPY OF ITS CODE OF ETHICS BY MAIL WHEN THEY CALL THE REGISTRANT AT
1-800-366-6223.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has determined that there are two audit
committee financial experts serving on its audit committee. Messrs. Kieszek and
Tucker are the "audit committee financial experts" and are considered to be
"independent" as each term are defined in Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The registrant has engaged its principal accountant to perform audit services,
audit-related services, tax services and other services during the past two
fiscal years. "Audit services" refer to performing an 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. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning.
The following table details the aggregate fees billed for each of the last two
fiscal years for audit fees, audit-related fees, tax fees and other fees by the
principal accountant.
- ----------------------------- ----------------------- -----------------------
FYE 6/30/2006 FYE 6/30/2005
- ----------------------------- ----------------------- -----------------------
Audit Fees $15,500 $15,500
Audit-Related Fees -- --
Tax Fees $2,500 $2,500
All Other Fees -- --
- ----------------------------- ----------------------- -----------------------
The audit committee has adopted pre-approval policies and procedures that
require the audit committee to pre-approve all audit and non-audit services of
the registrant, including services provided to any entity affiliated with the
registrant. All of the principal accountant's hours spent on auditing the
registrant's financial statements were attributed to work performed by full-time
permanent employees of the principal accountant. (If more than 50 percent of the
accountant's hours were spent to audit the registrant's financial statements for
the most recent fiscal year, state how many hours were attributed to work
performed by persons other than the principal accountant's full-time, permanent
employees.)
The following table indicates the non-audit fees billed by the registrant's
accountant for services to the registrant and to the registrant's investment
adviser (and any other controlling entity, etc.--not sub-adviser) for the last
two years. The audit committee of the board of trustees/directors has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser is compatible with maintaining the principal
accountant's independence and has concluded that the provision of such non-audit
services by the accountant has not compromised the accountant's independence.
- ----------------------------------- --------------------- -------------------
Non-Audit Related Fees FYE 6/30/2006 FYE 6/30/2005
- ----------------------------------- --------------------- -------------------
Registrant -- --
Registrant's Investment Adviser -- --
- ----------------------------------- --------------------- -------------------
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to registrants who are not listed issuers (as defined in Rule
10A-3 under the Securities Exchange Act of 1934).
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments is included as part of the report to shareholders filed
under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to open-end investment companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASES.
Not applicable to open-end investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's President and Treasurer has reviewed the Registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under
the Investment Company Act of 1940 (the "Act")) as of a date within 90
days of the filing of this report, as required by Rule 30a-3(b) under
the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange
Act of 1934. Based on his review, such officer has concluded that the
disclosure controls and procedures are effective in ensuring that
information required to be disclosed in this report is appropriately
recorded, processed, summarized and reported and made known to him by
others within the Registrant and by the Registrant's service provider.
(b) There were no significant changes in the Registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act)
that occurred during the 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) Any code of ethics or amendment thereto, that is subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy Item 2 requirements through filing an exhibit. Incorporate by
reference to previous form N-CSR filing.
(2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the registrant to 10 or more persons. Not applicable to open-end
investment companies.
(b) 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
Date November 8, 2006
------------------
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 November 8, 2006
------------------
* PRINT THE NAME AND TITLE OF EACH SIGNING OFFICER UNDER HIS OR HER SIGNATURE.