As filed with the Securities and Exchange Commission on March 7, 2008
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
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MATRIX ADVISORS VALUE FUND, INC.
--------------------------------
(Exact name of registrant as specified in charter)
747 THIRD AVENUE, 31ST FLOOR, NEW YORK, NY 10017
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(Address of principal executive offices) (Zip code)
David A. Katz
747 Third Avenue, 31st Floor
New York, NY 10017
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(Name and address of agent for service)
1(800) 366-6223
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Registrant's telephone number, including area code
Copies to:
Carol Gehl
Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, WI 53202
Date of fiscal year end: JUNE 30
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Date of reporting period: DECEMBER 31, 2007
-----------------
ITEM 1. REPORT TO STOCKHOLDERS.
SEMI-ANNUAL REPORT
MATRIX
ADVISORS
VALUE FUND, INC.
DECEMBER 31, 2007
747 THIRD AVENUE, 31ST FLOOR
NEW YORK, NY 10017
TICKER SYMBOL: MAVFX
CUSIP: 57681T102
MATRIX ADVISORS
VALUE FUND, INC.
February 5, 2008
Dear Fellow Shareholder:
The Fund posted a disappointing fourth quarter, declining -5.85%. After a strong
first half of the year, the Fund was adversely impacted by mortgage related
concerns in the second half of the year. As a result, the Fund had a modest
2007, posting a gain of +1.52% for the year. This performance lagged that of the
S&P 500 Index which declined by -3.33% for the fourth quarter and rose by +5.49%
in 2007. The Fund's Net Asset Value on 12/31/07 was $48.83.
Disclosure Note:
For your information, for the period ended December 31, 2007, the Fund's average
annual total returns for the one-year, five-years, ten-years and for the period
from July 1, 1996, the inception of Matrix Asset Advisors' involvement with the
Fund were 1.52%, 12.35%, 8.93% and 10.23%, respectively. For the same periods
the returns for the S&P 500 Index were 5.49%, 12.83%, 5.91% and 8.75%.
Gross Expense Ratio: 1.31%
Net Expense Ratio: 1.11%**
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; PAST PERFORMANCE 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 CALLING 800-366-6223 OR BY VISITING
WWW.MATRIXADVISORSVALUEFUND.COM. THE FUNDS IMPOSE A 1.00% REDEMPTION FEE ON
SHARES HELD FOR 60 DAYS OR LESS. PERFORMANCE DATA DOES NOT REFLECT THE
REDEMPTION FEE. IF REFLECTED, TOTAL RETURNS WOULD BE REDUCED.
- ----------
** The Advisor has contractually agreed to reimburse expenses for an
indefinite period. IN ADDITION, THE ADVISOR WILL VOLUNTARILY REIMBURSE THE
FUND FOR EXPENSES IN EXCESS OF 0.99%, INDEFINITELY. Investment performance
reflects fee waivers in effect. In the absence of such waivers, total
return would be reduced. 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.
As we have previously noted and have discussed further in the accompanying
Commentary, the Fund benefited from six profitable takeovers during the 6/30/06
to 6/30/07 fiscal year. These takeovers helped the Fund to increase by 30.54%
during the fiscal year ending 6/30/07, but also generated much larger than usual
capital gains.
AS A RESULT, THE FUND PAID TWO FOURTH QUARTER DISTRIBUTIONS, TOTALING $10.1776
PER SHARE. IN REVIEWING THE CURRENT NET ASSET VALUE VERSUS THE 12/31/06
VALUATION OF $57.50, IT IS IMPORTANT TO RECOGNIZE THAT THE TOTALITY OF THE
DECLINE IN THE NET ASSET VALUE OCCURRED SOLELY AS A RESULT OF THE DISTRIBUTIONS
AND WAS NOT DUE TO A LOSS IN PORTFOLIO VALUE.
Despite the disappointment of the past year, we would note that many of our
expectations for market performance rotations, either by size of company,
sector, or whether a stock was a Growth or Value stock, were realized last year.
We expect a number of these to continue in 2008.
We also believe that the overwhelming negative for the Fund last year -
financial stocks - might turn into one of its most favorable segments in 2008.
1
MATRIX ADVISORS
VALUE FUND, INC.
As we begin the New Year, there is considerable anxiety as to the direction of
the economy and its impact on the stock market. We urge you to read the market
commentary and the IDEAS ABOUT INVESTING which follow. Each of these pieces
focuses on current economic concerns and their investment implications.
All in all, while it reflects a contrarian mindset right now, we are actually
optimistic about the markets and very optimistic about the Fund's prospects in
2008.
We are pleased to report that MONEY Magazine has once again cited the Fund as
one of its recommended funds for 2008. This inclusion in what is now the "Money
70" marks the fourth consecutive year in which MONEY has included the Fund on
its recommended list.
Finally, as we have discussed in the past, Matrix partners, associates and
families have significant holdings in the Fund. We collectively continue to have
great confidence in its future and a great vested interest in its success. Thank
you for your patience, support and confidence. We wish you a healthy, happy and
prosperous 2008. Best regards.
Sincerely,
/s/ David A. Katz
David A. Katz, CFA
Fund Manager
In order to be named to the MONEY Magazine's "Money 70", a fund must demonstrate
the following attributes: below average operating expenses for its category, at
least $100 million in assets, low turnover, a consistent investment approach
beating 50% of their peers over the past 5 years and a history of management
integrity.
MUTUAL FUND INVESTING INVOLVES RISK. PRINCIPAL LOSS IS POSSIBLE.
2
MATRIX ADVISORS
VALUE FUND, INC.
CAPITAL MARKETS COMMENTARY AND SEMI-ANNUAL REPORT:
4TH QUARTER AND 2007 REVIEW
In retrospect, 2007 can be seen as the inverse of the previous year in the stock
market, and especially for the Matrix Advisors Value Fund. Last year, the Fund
rose strongly in the first half of 2007, powered largely by highly profitable
takeovers, as well as carryover appreciation from 2006.
However, the second half of the year proved to be quite different, as the
fallout from the housing slowdown, and in particular the mortgage market, led to
increasing concerns about the sustainability of the economy.
SEMI-ANNUAL REVIEW
The past six months were difficult ones for the Fund, as it was negatively
impacted by the steep declines in major financial companies. During this six
month period ending 12/31/2007, the Fund declined by -8.16%, compared with a
commensurate decline of -1.37% in the S&P 500 Index. This reversed the Fund's
strength in the first half of the year and resulted in an increase for the year
of +1.52% versus an increase of +5.49% for the S&P 500.
The overwhelming story of the overall stock market and certainly of the Fund was
the damage wrought by the unraveling of mortgage-related securities at major
financial institutions, and the concerns that such damage might have to the
wider economy.
The period ended with many of these companies moving assertively to address
these issues, and there should be an opportunity for them to have sharp rebounds
as 2008 unfolds.
QUARTERLY REVIEW AND 2007 OVERVIEW
The Fund posted negative results for the fourth quarter period for the first
time in a decade. (It was the first negative fourth quarter for the S&P 500
Index since 2000.) For the quarter, the fund declined by -5.85% compared to a
decrease of -3.33% for the S&P 500.
The culprits for this atypical performance were the continued concerns
surrounding the unraveling mortgage market. These particularly focused on the
scope and intensity of the fallout in mortgage-related fixed income securities.
Of greatest concern was the impact of these securities on the financial
institutions that created, and in many cases, continued to own them. In the
absence of easily determined market values, financial institutions took massive
write-downs on the value of these securities. While many expected that these
book-entry write-downs would greatly exceed the ultimate financial damage done
by these instruments, there was damage done by the mere fact of taking the
write-downs.
The resulting carnage to the entire financial sector was all too evident to
Value-oriented investors, such as the Fund, who had and currently has a
significant percentage of their portfolios in financial stocks.
3
MATRIX ADVISORS
VALUE FUND, INC.
The Fund managed to hold on to modest gains for the year, despite mid single
digit negative performance in the fourth quarter. Nevertheless, the Fund trailed
the S&P 500 Index for the both the quarter and for the overall year.
In many respects, financial stocks acted as a tsunami on the overall market,
just as mortgage-related losses offset strong gains from the other business
areas of financial institutions. Leaving this troubled sector aside, the Fund
benefited from its continuing barbell approach in which it holds many mega-cap
companies, as well as selected mid- cap and large-cap companies.
As noted previously, the mega-caps benefited from concerns about overall U.S.
economic growth, and their ability to find profits abroad. The smaller stocks
were the beneficiaries of several successful takeovers during the year. While
these areas were strong contributors to positive performance in 2007, their
impact was substantially neutralized by losses in financial stocks.
The silver lining in this performance cloud might very well turn out to be
regression to the mean. The very weakness in the financial stocks in 2007 could
well be, if history is a guide, a prelude to a potentially significant bounce
back in 2008.
THROUGH A GLASS CLEARLY: A LOOK BACK AT OUR PREDICTIONS FOR 2007
We had mixed success in our 2007 Fearless Forecast. We were correct on a number
of big picture calls like a slower growth economy, a Federal Reserve with a bias
to cutting interest rates, the trading range for bond yields, a struggling real
estate market and a stock market driven by large and mega-cap stocks. We missed
on our calls for slowdowns in the performance of Energy and Basic Material
stocks, and for higher returns from the overall market.
Our most disappointing call, however, was that the Fund would continue to build
on its 2006 performance momentum. While many drivers in the Fund worked, these
positives were not enough to offset the weakness in our financial holdings.
The disappointment in both the broad market and the Fund's returns stems from
the unforeseen gross lapses in risk management at many of the major banks and
brokerages; these lapses ultimately led to hundreds of billions of dollars of
write-downs and to a very weak financial sector.
BATTER UP! OUR FEARLESS FORECAST FOR 2008
With the concept of "no rest for the weary" in the forefront of our minds, we
offer the following forecast for 2008:
The economy should remain sluggish for the first half of the year but we believe
it will begin to re-emerge in the second half. We are ambivalent, and admittedly
on the fence, as to whether the economy slides into recession (and recognize
that we might already be in one). However, we do have much greater conviction
that, as a result of the Fed's growing willingness to substantively lower
interest rates, a healthy global economy and a slowdown which started in the
fourth quarter of 2007, the economy should exit the year renewed and modestly
growing.
The $64,000 question (we know, that dates us a bit) is the stock market. As we
write this letter, there is a lot of skepticism about the market's prospects
this year. In fact Bloomberg News recently noted that individual investor
sentiment is at a seventeen year low. These extremes in sentiment typically
slightly precede or coincide with inflection points in the market and are often
indicative of the opposite market outcome.
4
MATRIX ADVISORS
VALUE FUND, INC.
Ultimately, we believe that the market should surprise many by having a good
year, returning to an historic average of high single to low double digit
percentage returns. Expectations are low, and the financial stocks which have
been left for dead should, in our opinion, lead the market's recovery as
investors perceive that financial institutions are attempting to work through
their sub-prime issues.
Furthermore, the long-reviled U.S. stock market might start to look rather
appealing vis-a-vis foreign markets if international growth slows.
After a temporary set back in 2007, we believe the Fund is opportunistically
positioned to take advantage of the economic climate in 2008, as large and
mega-caps should be a good place to be, financial stocks try to recover, and the
potential exists for renewed takeover activity in our portfolio.
Treasury bonds are likely to be in a wide range of 3.5% to 5%, as the Fed's
willingness to cut rates in order to maintain economic growth should cause rates
to move lower early in the year. Should financial stocks stabilize and the
economy re-enters a period of growth, Treasury yields should begin to drift to
the higher end of the range.
Historically, stocks have been positive in Presidential election years, and
increasingly so in the back half of the year. This year, that history, combined
with reasonable valuations and improving economic fundamentals, should bode
quite well for the market in 2008.
FUND PERFORMANCE
It was a quarter of stark contrasts in performance. Despite well published fears
about the disappearing consumer, the Fund's retail stocks actually showed decent
positive strength, with Gap, Staples and Wal-Mart posting very healthy results,
more than offsetting the weakness in Office Depot.
Healthcare also showed strength, led by Covidien and Teva, as did Energy, where
Devon had a standout quarter.
After having had a strong nine months, technology stocks ran out of gas, but
were not materially negative for the quarter. Microsoft had a very strong
quarter, and Intel, Tyco Electronics, and the newly purchased Taiwan
Semiconductor had very respectable performance, offsetting negativity in Analog
Devices, Cisco, Dell and Symantec.
The widespread and extensive negativity in financials has been mentioned; the
only respite in the sector came from Western Union. Also noteworthy was the
decline in cable-related stocks such as Comcast and Time Warner, and industrial
stocks such as 3M, GE and Tyco. The combined effect of this was to drag down the
Old Economy part of the Fund's portfolio.
During the quarter, we began new positions in McGraw Hill and Taiwan
Semiconductor, the latter of which is the second foreign stock trading on a
domestic stock exchange currently in our portfolio (Teva is the other). The Fund
also sold its small position in H&R Block, which we had re-initiated during the
summer, as we had grown increasingly concerned about their balance sheet
strength, and because we felt there were more compelling alternatives to invest
in.
Looking forward, we are cognizant of the uncertainties that face the economy and
the stock market as we begin the New Year. However, we are also mindful of the
fact that the stock market has arguably been in a bear market mode for the past
half year, and the consensus of more difficulties to come might actually be a
bullish indicator.
5
MATRIX ADVISORS
VALUE FUND, INC.
The stock market is famously counter-intuitive, and we believe that some
positive perceptual changes as to the direction of the economy should propel the
market higher in 2008. This is not wishful thinking, but is in our opinion,
rooted in our experience that there is more strength and resilience in the
economy than it is often credited with.
This contrarian and currently upbeat outlook in the face of widespread pessimism
has often availed the Fund well in the past, and we believe it may do so again
this year.
CAPITAL GAINS DISCUSSION
As we discussed in our 3rd quarter report, the 2007 fiscal year was atypical
since the Fund enjoyed a large number of very profitable mandatory cash
takeovers. One aspect of these profitable outcomes was that a much larger
percentage than usual of the Fund's capital gains was short term in nature.
IT IS ALSO IMPORTANT TO REMEMBER THAT THESE DISTRIBUTIONS APPLIED TO THE 12
MONTH PERIOD, JULY 1ST, 2006 TO JUNE 30TH 2007, A TIME PERIOD WHEN THE FUND HAD
POSITIVE PERFORMANCE OF 30.54%.
When the tax period ended on June 30, 2007, the Fund had very few holdings that
were being held at a loss. As a result, the Fund could not meaningfully offset
these larger than normal gains.
These significant gains, along with the Fund's typical dividend distribution,
resulted in a $10.1776 payout for the past year. Therefore the decline in the
NAV for the year versus the 12/31/06 valuation resulted from this distribution.
SINCE THERE WAS EITHER CASH OR ADDITIONAL SHARES ISSUED, THE NAV DECLINE DID NOT
REFLECT A LOSS IN PORTFOLIO VALUE.
The impact of the individual distributions is illustrated as follows, using a
hypothetical ownership of 1,000 shares as of 12/31/06 and the assumption that
all capital gains and dividends are reinvested:
- -------------------------------------------------------------------------------------------------
DATE 12/31/2006 10/1/2007 10/2/2007 12/6/2007 12/7/2007 12/31/2007
- -------------------------------------------------------------------------------------------------
NAV $ 57.50 $ 62.90 $ 54.87 $ 52.16 $ 50.05 $ 48.83
Distribution Amount -- -- $ 8.0588 -- $ 2.1188 --
Total Shares 1,000 1,000 1,146.871 1,146.871 1,195.422 1,195.422
Market Value $57,500.00 $62,900.00 $62,928.81 $59,820.79 $59,830.87 $58,372.46
- -------------------------------------------------------------------------------------------------
You will note that despite the significant change in the NAV of the Fund from
the day before the distribution to the day thereafter, the Market Value is only
slightly different, solely attributable to the movement of the Fund's stock on
the day the distribution was made.
The recent market volatility and the sell offs in select stocks and sectors that
began in the third quarter of 2007 has enabled the Fund to engage in tax
mitigation activities aimed at lowering capital gains in the 2008 fiscal year.
As a result, we expect the Fund's capital gains to return to more historic
levels in the current fiscal year.
* * *
6
MATRIX ADVISORS
VALUE FUND, INC.
This year we devote the year end installment of Ideas About Investing to the
most widely discussed current market-related question: is the economy heading
into a recession? And, if so, what are a recession's implications for the 2008
stock market?
As we write this letter, winter has arrived. Regardless of the date on the
calendar, the arrival of winter is empirical: one just feels it. There is
something very comforting, spiritually, if not thermally, about this, about
realizing that some of the most important things in life are just to be felt;
nothing more and nothing less.
We wish you only joyful feelings for 2008, as well as good health and
prosperity. Our own feelings for our clients are also rather uncomplicated:
gratitude and appreciation for the trust and confidence you have placed in us.
We resolve to do our utmost to continue to earn that in 2008. Best regards.
- ----------
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.
THE FUND MAY INVEST IN SMALLER COMPANIES WHICH INVOLVES ADDITIONAL RISKS SUCH AS
LIMITED LIQUIDITY AND GREATER VOLATILITY.
Please refer to the Schedule of Investments for details on fund holdings. Fund
holdings are subject to change at any time and are not recommendations to buy or
sell any security.
Opinions expressed are those of the Advisor and are subject to change, are not
guaranteed and should not be considered investment advice. (2/08)
7
MATRIX ADVISORS
VALUE FUND, INC.
IDEAS ABOUT INVESTING
A QUARTERLY QUEST FOR INVESTMENT ENLIGHTENMENT
SURVIVING AND THRIVING FROM CURRENT CHOPPINESS,
WHETHER OR NOT IT'S ACTUALLY A RECESSION
"COULD IT BE? YES IT COULD. SOMETHING'S COMING, SOMETHING GOOD. IF I CAN WAIT."
- Leonard Bernstein and Stephen Sondheim, WEST SIDE STORY
As the year ended, there was widespread concern that the market was teetering on
the precipice of recession. Typically, in such skittish periods there is not
much to like about the news, and there is also a sense that this bad news will
continue indefinitely.
There is often a sense that good news is fleeting and needs to be contextualized
("yes, but..."), while bad news is the true condition of things, and is here to
stay.
This mindset misconstrues both economic history and stock market movements.
Economic history shows that past recessions typically have been fairly
short-lived. The two most recent ones, 1989-90 and 2000-01 each lasted less than
a year.
Most interesting is how the market has acted as a leading indicator for both
entering and exiting recessions. According to our research friends at The
Leuthold Group, historically the market sells off about six months to nine
months ahead of entering a recession, and begins to rally about six months prior
to exiting a recession.
Therefore, based on past history, even if one is in the "we're going into
recession" camp, there is a decent possibility that we may already be there. And
the recent pain of the market would therefore be commensurate with an economy in
recession. In fact when all is said and done, the recession might be identified
as having started in the fourth quarter of 2007. If this is the case and we have
a recession of average duration, we could exit 2008 in economic recovery mode.
This of course also means that, using history as a guide, the market should
begin to rally somewhere between the Spring and Fall of this year, in
anticipation of the end of such a recession.
There is an encouraging qualifier as to the data concerning the market's acting
as a leading indicator of recessions: the data correlates most closely when the
market is not richly valued at the time of the recession. That is certainly true
today, and stands in distinct contrast to the then prevailing market environment
when the most recent recession began in late 2000.
So, assuming there is a recession, there is also good reason to believe that it
should be mild and short lived. Why? Maybe because everyone is expecting one,
and is geared up accordingly. This would especially apply to the Federal
Reserve, which has announced its determination to help keep the economy growing.
8
MATRIX ADVISORS
VALUE FUND, INC.
But there are also more fundamental reasons why a recession might be relatively
painless. Currently, corporate balance sheets are not overleveraged and
inventories are at manageable levels. There is still growth in other parts of
the world, which should help both multi-nationals and exporters. Finally, while
it is very much in the headlines, the housing slowdown is not new; in several
markets it is going into its' third year. This means that it may be that much
closer to normalization.
Fair enough, but what does one do between now and then? Does it make sense to
just grin and bear it?
Well, no one we know is grinning, but bearing it is absolutely essential. For
all the attention paid to macroeconomics and to the historic relationships
between the economy, corporate earnings, and stock returns, over shorter periods
stock price movements tend to be unpredictable. It seems that when everybody has
decided the direction of stocks, they tend to move otherwise. Further, the
greatest moves, both up and down, come when they are least expected.
As such, we at Matrix try to focus on quantifiable factors that we can analyze
and act on with greater certainty. Typically, these are centered around the
intermediate and long term business prospects and valuations of individual
businesses. How well will a certain company or industry withstand slower growth?
Are they somewhat recession resistant? And will they likely be major
beneficiaries of economic recovery, or not?
These are the questions we always ask. Often they lead us to make additions or
changes to the Fund. When the Fund is chock full of what we believe are very
good businesses at great prices, we have tended to do quite well relative to the
general markets, regardless of near term market negativity (real or perceived).
We believe we are at one of those points now. That is, we recognize the
negativity that pervades the market, and is likely to do so for a while. But we
also believe that we are well situated not only for that period, but also for
the market environment that will follow it. And it is that subsequent period
that should ultimately tell the story of the stock market in 2008.
9
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 July 1, 2007 to December
31, 2007.
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.
ACTUAL HYPOTHETICAL PERFORMANCE
EXPENSE EXAMPLE PERFORMANCE (5% RETURN BEFORE EXPENSES)
- --------------------------------------------------------------------------------
Beginning Account Value (07/01/07) $1,000.00 $1,000.00
Ending Account Value (12/31/07) $918.40 $1,020.82
Expenses Paid During Period(1) $4.80 $5.05
- --------------------------------------------------------------------------------
1 Expenses are equal to the Fund's annualized expense ratio 0.99% multiplied
by the average account value over the period, multiplied by 184/366 (to
reflect the one-half year period).
10
MATRIX ADVISORS
VALUE FUND, INC.
SECTOR BREAKDOWN
- -------------------------------------------------------------------------------
Consumer Durables 14.0%
Consumer Non-durables 4.0%
Energy 12.0%
Finance 24.7%
Industrial 9.5%
Medical 13.1%
Technology 21.4%
-----
98.7%
Cash 1.3%
-----
Total Investments 100.0%
=====
- -------------------------------------------------------------------------------
The table above lists sector allocations as a percentage of the Fund's total
investments as of December 31, 2007.
11
MATRIX ADVISORS
VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007 - (UNAUDITED)
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCK - 98.7%
BANK (MONEY CENTER): 6.3%
165,000 Citigroup, Inc. ................................... $ 4,857,600
125,000 J.P. Morgan Chase & Co. ........................... 5,456,250
------------
10,313,850
------------
BANK (SUPER REGIONAL): 3.4%
133,084 Bank of America Corp. ............................. 5,491,046
------------
COMPUTERS AND PERIPHERALS: 3.2%
215,000 Dell, Inc. * ...................................... 5,269,650
------------
CONSUMER FINANCE: 0.7%
70,000 Discover Financial Services ....................... 1,055,600
------------
DIVERSIFIED OPERATIONS: 9.5%
46,000 3M Co. ............................................ 3,878,720
160,000 General Electric Co. .............................. 5,931,200
142,000 Tyco International Ltd. ........................... 5,630,300
------------
15,440,220
------------
DRUG: 6.3%
235,000 Pfizer, Inc. ...................................... 5,341,550
109,000 Wyeth ............................................. 4,816,710
------------
10,158,260
------------
DRUG (GENERIC): 3.1%
108,000 Teva Pharmaceutical Industries, Ltd. - ADR ........ 5,019,840
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS: 1.9%
83,075 Tyco Electronics Ltd. ............................. 3,084,574
------------
FINANCIAL SERVICES: 3.4%
228,000 Western Union Co. ................................. 5,535,840
------------
HEALTH CARE EQUIPMENT & SUPPLIES: 3.8%
139,500 Covidien Ltd. ..................................... 6,178,455
------------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
12
MATRIX ADVISORS
VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007 - (UNAUDITED), CONTINUED
SHARES VALUE
- -------------------------------------------------------------------------------
HYPERMARKETS & SUPERCENTERS: 4.0%
136,000 Wal-Mart Stores, Inc. ............................. $ 6,464,080
------------
INSURANCE (DIVERSIFIED): 4.0%
112,000 American International Group, Inc. ................ 6,529,600
------------
MEDIA: 8.6%
294,000 Comcast Corp. * ................................... 5,327,280
56,000 The McGraw-Hill Companies, Inc. ................... 2,453,360
380,000 Time Warner, Inc. ................................. 6,273,800
------------
14,054,440
------------
PETROLEUM (INTEGRATED): 12.0%
68,000 ChevronTexaco Corp. ............................... 6,346,440
75,000 ConocoPhillips .................................... 6,622,500
73,500 Devon Energy Corp. ................................ 6,534,885
------------
19,503,825
------------
RETAIL STORE: 1.0%
80,000 Gap, Inc. ......................................... 1,702,400
------------
SECURITIES BROKERAGE: 6.9%
99,000 Merrill Lynch & Co, Inc. .......................... 5,314,320
112,000 Morgan Stanley .................................... 5,948,320
------------
11,262,640
------------
SEMICONDUCTOR: 5.3%
123,000 Analog Devices, Inc. .............................. 3,899,100
150,000 Intel Corp. ....................................... 3,999,000
65,000 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 647,400
------------
8,545,500
------------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
13
MATRIX ADVISORS
VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007 - (UNAUDITED), CONTINUED
SHARES VALUE
- -------------------------------------------------------------------------------
SEMICONDUCTOR (CAPITAL EQUIPMENT): 2.7%
162,000 Novellus Systems, Inc. * .......................... $ 4,466,340
------------
SOFTWARE: 5.8%
175,000 Microsoft Corp. ................................... 6,230,000
200,000 Symantec Corp. * .................................. 3,228,000
------------
9,458,000
------------
SPECIALTY RETAIL: 4.4%
165,000 Office Depot, Inc. * .............................. 2,295,150
207,500 Staples, Inc. ..................................... 4,787,025
------------
7,082,175
------------
TELECOMMUNICATIONS (EQUIPMENT): 2.4%
145,300 Cisco Systems, Inc. * ............................. 3,933,271
------------
TOTAL COMMON STOCKS (Cost $147,863,255) ........................ 160,549,606
------------
SHORT TERM INVESTMENTS: 0.2%
261,125 Fidelity Institutional Money Market Portfolio ..... 261,125
------------
TOTAL SHORT TERM INVESTMENTS (Cost $261,125)
TOTAL INVESTMENTS (Cost $148,124,380): 98.9% 160,810,731
OTHER ASSETS IN EXCESS OF LIABILITIES: 1.1% 1,774,581
------------
TOTAL NET ASSETS: 100.0% $162,585,312
============
- ----------
* Non-Income Producing.
ADR - American Depository Receipt.
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
14
MATRIX ADVISORS
VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AT DECEMBER 31, 2007 (UNAUDITED)
ASSETS
Investments in securities, at value (cost $148,124,380) ....... $160,810,731
Receivables:
Securities sold ............................................. 1,786,489
Fund shares sold ............................................ 200,408
Dividends and interest ...................................... 109,378
Prepaid expenses and other assets ............................. 11,658
------------
Total assets .................................................. 162,918,664
------------
LIABILITIES
Payable to Advisor ............................................ 95,858
Payable for Fund shares repurchased ........................... 142,768
Accrued expenses and other liabilities ........................ 94,726
------------
Total liabilities ............................................. 333,352
------------
NET ASSETS ...................................................... $162,585,312
============
Number of shares, $0.01 par value, issued
and outstanding (unlimited shares authorized) ............... 3,329,624
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE .. $ 48.83
============
COMPOSITION OF NET ASSETS
Paid-in capital ............................................... $147,624,976
Undistributed net investment income ........................... (8,098)
Accumulated net realized gain on investments .................. 2,282,083
Net unrealized appreciation on investments .................... 12,686,351
------------
NET ASSETS ...................................................... $162,585,312
============
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
15
MATRIX ADVISORS
VALUE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2007 (UNAUDITED)
INVESTMENT INCOME
INCOME
Dividend income (Net of foreign tax withheld of $5,213) ..... $ 1,750,983
Interest income ............................................. 47,570
------------
Total income ................................................ 1,798,553
------------
EXPENSES
Advisory fees ............................................... 992,379
Administration fees ......................................... 124,409
Shareholder servicing fees and accounting fees .............. 57,826
Professional fees ........................................... 23,768
Chief Compliance Officer fees ............................... 24,608
Custodian fees .............................................. 20,061
Reports to shareholders ..................................... 15,142
Federal and State registration fees ......................... 13,770
Directors fees and expenses ................................. 14,128
Other expenses .............................................. 4,934
------------
Total operating expenses ...................................... 1,291,025
Less: Expense reimbursement by Advisor ........................ (313,329)
------------
Net operating expenses ........................................ 977,696
Interest Expense ............................................ 9,260
------------
Net expenses .................................................. 986,956
------------
NET INVESTMENT INCOME ......................................... 811,597
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions .................. 8,435,102
Net change in unrealized appreciation (depreciation)
on investments .............................................. (25,878,164)
------------
Net realized and unrealized gain on investments ............... (17,443,062)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $(16,631,465)
============
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
16
MATRIX ADVISORS
VALUE FUND, INC.
SIX MONTHS YEAR
ENDED ENDED
STATEMENT OF CHANGES IN NET ASSETS DECEMBER 31, 2007 JUNE 30, 2007
- -------------------------------------------------------------------------------------------------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income .................................. $ 811,597 $ 1,260,058
Net realized gain on investments ....................... 8,435,102 26,707,040
Net change in unrealized appreciation (depreciation)
of investments ....................................... (25,878,164) 19,917,320
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... (16,631,465) 47,884,418
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................................. (1,569,759) (1,553,193)
Realized gain on investments ........................... (32,230,798) (10,061,360)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ...................... (33,800,557) (11,614,553)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .............................. 18,446,663 78,583,712
Proceeds from reinvestment of distribution ............. 32,934,320 11,040,445
Cost of shares redeemed ................................ (68,614,835) (56,188,748)
Redemption fees ........................................ 13,988 10,250
------------ ------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS .. (17,219,864) 33,445,659
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. (67,651,886) 69,715,524
NET ASSETS
Beginning of period ...................................... 230,237,198 160,521,674
------------ ------------
End of period (includes Undistributed net investment
income of ($8,098) and $750,064, respectively) ......... $162,585,312 $230,237,198
============ ============
CHANGE IN SHARES
SHARES OUTSTANDING, BEGINNING OF PERIOD .................. 3,622,534 3,093,445
------------ ------------
Shares sold ............................................ 316,695 1,308,770
Shares issued on reinvestment of distributions ......... 612,178 199,035
Shares redeemed ........................................ (1,221,783) (978,716)
------------ ------------
SHARES OUTSTANDING, END OF PERIOD ........................ 3,329,624 3,622,534
============ ============
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
17
MATRIX ADVISORS
VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED YEARS ENDED JUNE 30,
DECEMBER 31, ------------------------------------------------------------
2007 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
Net asset value, beginning of year .................. $ 63.56 $ 51.89 $ 51.94 $ 54.02 $ 44.39 $ 41.14
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.23 0.36 0.43 0.54 0.18(c) 0.14
Net realized and unrealized
gain (loss) on investments ...................... (4.78) 14.96 1.69 (1.39) 9.65(c) 3.32
------- ------- ------- ------- ------- -------
Total from investment operations .................... (4.55) 15.32 2.12 (0.85) 9.83 3.46
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .............. (0.48) (0.49) (0.35) (0.42) (0.21) (0.08)
Distributions from realized gains ................. (9.70) (3.16) (1.82) (0.81) 0.00 (0.14)
------- ------- ------- ------- ------- -------
Total distributions ................................. (10.18) (3.65) (2.17) (1.23) (0.21) (0.22)
------- ------- ------- ------- ------- -------
Paid-in capital from redemption fees (Note 2) ....... --(a) --(a) --(a) --(a) 0.01 0.01
------- ------- ------- ------- ------- -------
Net asset value, end of year ........................ $ 48.83 $ 63.56 $ 51.89 $ 51.94 $ 54.02 $ 44.39
======= ======= ======= ======= ======= =======
Total return ........................................ (8.16%)** 30.54% 4.09% (1.61%) 22.21% 8.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) ................ $ 162.6 $ 230.2 $ 160.5 $ 240.4 $ 315.9 $ 107.1
RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS:
Before expense reimbursement ...................... 1.31%* 1.30% 1.32% 1.29% 1.26% 1.33%
After expense reimbursement ....................... 0.99%* 0.99% 0.99% 0.99% 0.99% 0.99%
Interest Expense .................................. 0.01% 0.00%(b) -- -- -- --
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS:
Before expense reimbursement ...................... 0.51%* 0.37% 0.27% 0.69% 0.24% 0.20%
After expense reimbursement ....................... 0.82%* 0.68% 0.60% 0.99% 0.51% 0.54%
Portfolio turnover rate ............................. 22%** 52% 28% 18% 17% 30%
(a) less than 0.01.
(b) Interest expense was less than 0.01%
(c) Numbers have been restated from $0.94 to $0.18 and fro $8.89 to $9.65,
respectively. This has no impact on the Fund's net assets, net asset value
or total return.
* Annualized.
** Not Annualized.
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THIS SCHEDULE.
18
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
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.
Securities traded on a national securities exchange are valued at the last
reported sales price at the close of regular trading on each day the
exchanges are open for trading. Securities listed on the NASDAQ Global
Market and the NASDAQ Global Select Market and the NASDAQ Capital Market
are valued using the NASDAQ Official Closing Price, which may not
necessarily represent the last sale price. Quotations of foreign
securities in a foreign currency shall be valued daily in U.S. dollars on
the basis of the foreign currency exchange rates prevailing at the time
such valuation is determined. Foreign currency exchange rates generally
shall be determined prior to the close of the New York Stock Exchange (the
"NYSE"). Securities traded on an exchange for which there have been no
sales are valued at the mean between the bid and asked price. Securities
for which quotations are not readily available are stated at their
respective fair values as determined in good faith by a valuation
committee of the Investment Advisor in accordance with procedures approved
by the Board of Directors of the Fund. In determining fair value, the Fund
takes into account all relevant factors and available information.
Consequently, the price of the security used by the Fund to calculate its
NAV may differ from quoted or published prices for the same security. Fair
value pricing involves subjective judgments and there is no single
standard for determining a security's fair value. As a result, different
mutual funds could reasonably arrive at a different fair value for the
same security. It is possible that the fair value determined for a
security is materially different from the value that could be realized
upon the sale of that security or from the values that other mutual funds
may determine. Investments in other funds are valued at their respective
net asset values as determined by those funds, in accordance with the
Investment Company Act of 1940.
Foreign securities are recorded in the financial statements after
translation to U.S. dollars based on the applicable exchange rate at the
end of the period. The Fund does not isolate that portion of the results
of operations arising as a result of changes in the currency exchange rate
from the fluctuations arising as a result of changes in the market prices
of investments during the period.
19
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
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 60 days 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.
D. 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.
E. 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. Because these tax adjustments are made on an annual basis only, for
the six months ended December 31, 2007, the Fund had no permanent
book-to-tax differences.
F. SECURITY TRANSACTIONS, INVESTMENT INCOME, AND DISTRIBUTIONS.
Security transactions are accounted for on the trade date. Dividend income
and distributions to shareholders are recorded on the ex-dividend date,
and interest income is recognized on the accrual basis. Realized gains and
losses are evaluated on the basis of identified costs. Premiums and
discounts on the purchase of securities are amortized/accreted using the
effective interest method. Accounting principles generally accepted in the
United States of America require that permanent financial reporting and
tax differences be reclassified in the capital accounts.
20
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
G. 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.
H. 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 six months ended
December 31, 2007, was as follows:
MAXIMUM AMOUNT AVERAGE
AMOUNT INTEREST OUTSTANDING AT AMOUNT AVERAGE
OUTSTANDING EXPENSE DECEMBER 31, 2007 OUTSTANDING INTEREST RATE
- --------------------------------------------------------------------------------
$6,826,000 $9,260 $0 $236,516 7.79%
NOTE 3 - INVESTMENT ADVISORY AND OTHER AGREEMENTS
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 six months ended December 31, 2007, the Advisor voluntarily
reimbursed the Fund for expenses in excess of 0.99%. Matrix voluntarily waived
$313,329. 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.
21
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
At December 31, 2007, the cumulative amount available for reimbursement that has
been paid and/or waived is $2,370,711. CURRENTLY, THE ADVISOR HAS AGREED NOT TO
SEEK REIMBURSEMENT OF SUCH FEE REDUCTIONS AND/OR EXPENSE PAYMENTS. The advisor
may recapture a portion of this amount no later than the dates stated below:
JUNE 30,
--------------------------------------------------
2008 2009 2010 2011
--------------------------------------------------
$834,902 $649,605 $582,135 $313,329
--------------------------------------------------
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 reviews the Fund's expense
accruals. For the six months ended December 31, 2007, U.S. Bancorp Fund
Services, LLC was paid $124,409, in its capacity as Fund Administrator. U.S.
Bancorp Fund Services, LLC also serves as the Fund Accountant and Transfer
Agent. U.S. Bank, N.A. serves as the Fund's Custodian. Quasar Distributors, LLC,
an affiliate of U.S. Bancorp Fund Services, LLC and U.S. Bank, N.A. serves as
the Fund's principal underwriter.
An employee of U.S. Bancorp Fund Services, LLC serves as the Fund's Chief
Compliance Officer. The Chief Compliance Officer receives no compensation from
the Fund for his services; however, the Administrator was paid $24,608 for six
months ended December 31, 2007 for the services of the CCO.
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
December 31, 2007, are as follows:
PURCHASES SALES
--------------------------------------------------
Common Stock $43,510,852 $88,529,482
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
As of June 30, 2007, the components of distributable earnings on a tax basis
were as follows:
Cost of investments for tax purposes $193,238,625
============
Gross tax unrealized appreciation 40,596,620
Gross tax unrealized depreciation (2,032,105)
------------
Net tax unrealized appreciation on investments $ 38,564,515
============
Undistributed ordinary income $ 4,327,632
Undistributed long-term capital gains $ 22,500,211
------------
Total Distributable Earnings $ 26,827,843
============
Total Accumulated Earnings $ 65,392,358
22
MATRIX ADVISORS
VALUE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
The tax character of distributions paid during the six months ended December 31,
2007 and the year ended June 30, 2007 were as follows:
December 31, 2007 June 30, 2007
----------------- -------------
Distributions Paid From:
Ordinary Income $ 7,902,169 $ 1,693,929
Long-Term Capital Gain $25,898,388 $ 9,920,624
$33,800,557 $11,614,553
NOTE 6 - ACCOUNTING PRONOUNCEMENTS
In September, 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements", which will expand the disclosure requirements for fair value
measurements. The new standard defines fair value as the price that would be
received upon the sale of an asset or transfer of a liability in an orderly
transaction between market participants. As a basis for considering market
participant assumptions in fair value measurements, this Statement also
establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from sources
independent of the reporting entity (observable inputs) and (2) the reporting
entity's own assumptions about market participant assumptions developed based on
the best information available in the circumstances (unobservable inputs). SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and earlier adoption is permitted. Management is
currently evaluating the impact of adoption of SFAS No. 157 on its financial
statements.
Effective June 29, 2007, the Fund adopted Financial Accounting Standards Board
(FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes, a clarification of FASB Statement No. 109, Accounting for Income Taxes.
FIN 48 establishes financial reporting rules regarding recognition and
measurement of tax positions taken or expected to be taken on a tax return. The
adoption of FIN 48 had no impact on the Fund's net assets or results of
operations.
23
MATRIX ADVISORS
VALUE FUND, INC.
ADDITIONAL INFORMATION (UNAUDITED)
PROXY VOTING INFORMATION
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 and how the Fund voted proxies
relating to the portfolio securities during the most recent 12-month period
ended June 30, free of charge, by calling toll-free 1-800-366-6223. This
information is also available through the Securities and Exchange Commission's
(SEC) website at http://www.sec.gov.
FORM N-Q DISCLOSURE
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.
BOARD CONSIDERATION OF THE CONTINUATION OF THE INVESTMENT ADVISORY AGREEMENT
The Investment Advisory Agreement between the Fund and Matrix Asset Advisors,
Inc. (the "Advisor") continues in effect from year to year, if such continuation
is approved at least annually by the Fund's Board of Directors at a meeting
called for that purpose, or by vote of the holders of a majority of the Fund's
shares, and in either case, also by a vote of a majority of directors who are
not "interested persons" of the Fund within the meaning of the Investment
Company Act of 1940 (the "Independent Directors").
At a meeting held on August 16, 2007, the Board reviewed and discussed numerous
documents that had been requested and provided prior to the meeting, including
the Investment Advisory Agreement, a memorandum prepared by Fund counsel
discussing in detail the Board's fiduciary obligations and the factors they
should assess in considering the renewal of the Investment Advisory Agreement,
information about the Advisor, including its Form ADV, and comparative
information about the Fund's performance, management fee and expense ratio, and
other pertinent information. In addition, the Board received information
periodically throughout the year that was relevant to the Investment Advisory
Agreement renewal process, including performance, management fee and other
expense information.
The Independent Directors met separately in executive session with counsel to
consider the Investment Advisory Agreement. Based on its evaluation of
information provided by the Advisor, in conjunction with the Fund's other
service providers, the Board, including a majority of the Independent Directors,
approved the continuation of the Investment Advisory Agreement for an additional
one-year period.
In considering the Investment Advisory Agreement and reaching its conclusions,
the Board reviewed and analyzed various factors that it determined were
relevant, including the factors noted below.
1) The nature, extent and quality of services provided by the Advisor.
The Directors reviewed the nature and extent of the services provided by
the Advisor under the terms of the Fund's Advisory Agreement and the
quality of those services over the past year. The Directors noted that the
services include managing the investment and reinvestment of the Fund's
assets; the provision of
24
MATRIX ADVISORS
VALUE FUND, INC.
ADDITIONAL INFORMATION (UNAUDITED), CONTINUED
reports to the Board regarding the Advisor's performance of its
obligations under the Advisory Agreement; and the compensation of officers
and directors of the Fund who are affiliated persons of the Advisor. The
Independent Directors evaluated these factors based on their direct
experience with the Advisor and in consultation with Fund counsel. The
Independent Directors concluded that the nature and extent of the services
provided under the Investment Advisory Agreement were reasonable and
appropriate in relation to the advisory fee and that the quality of
services provided by the Advisor continues to be high. The Independent
Directors reviewed the personnel responsible for providing advisory
services to the Fund and concluded, based on their experience and
interaction with the Advisor, that (i) the Advisor was able to retain
quality investment personnel; (ii) the Advisor exhibited a high level of
diligence and attention to detail in carrying out its advisory
responsibilities under the Investment Advisory Agreement; (iii) the
Advisor was responsive to requests of the Directors; and (iv) the Advisor
had kept the Independent Directors apprised of developments relating to
the Fund and the industry in general. The Independent Directors also
focused on the Advisor's reputation, long-standing relationship with the
Fund, and overall culture of compliance.
2) The performance of the Fund and the Advisor.
The Board reviewed the investment performance of the Fund, both on an
absolute basis and as compared to a peer group for the one-year,
three-year, five-year and ten-year periods ended June 30, 2007. The peer
group was selected using data from Lipper, Inc. based on a range of
criteria including investment policy, primary distribution channel,
structure (no-load funds not charging a 12b-1 fee), and asset size. This
peer group was compiled by the Fund's administrator. The Independent
Directors observed that the performance was very favorable for the
one-year, five-year and ten-year periods, but was below the median for the
three-year period. The Board also reviewed the performance of the Fund
compared to the S&P 500 Index(R), an unmanaged index. The Board noted that
the Fund outperformed the Index during the one-year, five-year and
ten-year periods, but lagged the Index during the three-year period. After
considering all factors related to the performance of the Fund, including
the Advisor's commentary at regular quarterly Board meetings, the Board
concluded the Fund's performance was satisfactory.
3) The cost of the advisory services and the profits to the Advisor from the
relationship with the Fund.
In connection with the Director's consideration of the level of the
advisory fee, the Directors considered a number of factors. The Directors
compared the level of the advisory fee for the Fund against the advisory
fees charged (i) by funds in the Peer Group, (ii) other funds with an
investment policy similar to the Fund's, that are advised or sub-advised
by the Advisor, and (iii) other types of accounts, such as institutional
and pension accounts, with a similar investment policy to the Fund's that
are advised or sub-advised by the Advisor. The Directors also considered
comparative total fund expenses of the Fund and the peer group. The
Directors acknowledged that it was difficult to make precise comparisons
with other funds since the exact nature of services provided under the
peer group fund agreements is often not apparent. In assessing this
information, the Board considered both the comparative contract rates as
well as the level of the advisory fees after waivers and/or
reimbursements.
25
MATRIX ADVISORS
VALUE FUND, INC.
ADDITIONAL INFORMATION (UNAUDITED), CONTINUED
The Board noted that the contract rate of the Fund's advisory fee was
reasonable, but above the median, when compared to the fees of the peer
group. However, the Board noted that the Advisor paid significant
subsidies to the Fund by limiting the expenses to 0.99%. The Board
considered that through these subsidies, the Advisor had reimbursed the
Fund significant amounts during the previous three fiscal years.
Ultimately, the Board noted that the Fund's shareholders paid total
expenses that were below the median of the peer group. The Board also
reviewed the schedules of fees charged to other advisory clients. While
the Board noted that the fees the Advisor charges for the funds it
sub-advises and for its managed accounts are generally lower than the
Fund's advisory fee, the Board recognized that the level of services
required and risks involved in managing registered investment companies
such as the Fund are significantly different from those for funds where
the Advisor serves only as a sub-adviser and for its managed accounts.
The Independent Directors also considered the profitability to the Advisor
arising out of its relationship with the Fund. In this regard, the
Directors reviewed profitability data relating to the Advisor for the year
ended June 30, 2007. The Independent Directors concluded that the
profitability of the Fund to the Advisor was not excessive. In light of
all of these factors, the Board concluded that the level of the advisory
fee was fair and reasonable.
4) The extent to which economies of scale will be realized as the Fund grows
and whether fee levels reflect those economies of scale.
With respect to the Board's consideration of economies of scale, the
Independent Directors reviewed the fee schedules of other Funds in the
peer group and noted that few funds had access to breakpoints at the
Fund's current asset levels, though some agreements included breakpoints
at higher asset levels. The Independent Directors considered that through
fee waivers, the Advisor was in effect providing access to economies of
scale to the Fund and its shareholders that it may not have achieved until
the Fund reached much higher asset levels. The Directors determined to
periodically reassess whether the advisory fee appropriately takes into
account any such economies of scale.
5) Other Factors.
The Board also discussed the Advisor's practices regarding the selection
and compensation of brokers and dealers that execute portfolio
transactions for the Fund and the brokers' and dealers' provision of
brokerage and research services to the Advisor. The Independent Directors
further discussed that although the Advisor, from time to time, and in
accordance with its policy to seek best execution for its client trades,
may utilize a particular broker/dealer in recognition of research
services, the Fund and the Advisor have not entered into any "third party"
soft dollar arrangements with brokers whereby the Fund's brokerage is
directed to such brokers in return for research.
Based on a consideration of all these factors in their totality, the
Board, including all of the Independent Directors, determined that the
Fund's advisory fee was fair and reasonable with respect to the quality of
services that the Advisor provides and in light of the other factors
described above that the Board deemed relevant. The Board and the
Independent Directors based their decision on evaluations of all these
factors as a whole and did not consider any one factor as all-important or
controlling.
26
MATRIX ADVISORS
VALUE FUND, INC.
ADDITIONAL INFORMATION (UNAUDITED), CONTINUED
DIRECTOR AND OFFICER INFORMATION
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 years are:
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 Chief Investment Officer 1 None
747 Third Avenue President, 1997 (1986 to present) and
New York, NY 10017 and Treasurer President (1990 to present)
(Born 1962) of Matrix Asset Advisors, the
Fund's Advisor, and portfolio
manager of the Fund (1996
to present).
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 * Director Since Consultant, Carr Riggs & 1 None
747 Third Avenue 1997 Ingram, LLP (2005 to
New York, NY 10017 present); formerly, Owner of
(Born 1942) T. Michael Tucker, a certified
public accounting firm (1977
to 2005).
Larry D. Kieszek * Director and Since Managing Partner of Purvis, 1 None
747 Third Avenue Chairman 1997 Gray & Company, a certified
New York, NY 10017 public accounting firm (1974
(Born 1950) to present).
27
MATRIX ADVISORS
VALUE FUND, INC.
ADDITIONAL INFORMATION (UNAUDITED), 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
- ----------------------------------------------------------------------------------------------------------------------------
Douglas S. Altabef Executive Since Senior Managing Director N/A N/A
747 Third Avenue Vice 2000 of Matrix Asset Advisors,
New York, NY 10017 President and the Fund's Advisor (1996 to
(Born 1951) Secretary present).
Steven G. Roukis, CFA Senior Vice Since Managing Director of Matrix N/A N/A
747 Third Avenue President 2000 Asset Advisors, the Fund's
New York, NY 10017 Advisor (2005 to present);
(Born 1967) formerly, Director of
Research, Senior Vice
President-Equity Research
of Matrix Asset Advisors and
various other positions within
research (1994 - 2005).
Jordan F. Posner Senior Vice Since Managing Director of Matrix N/A N/A
747 Third Avenue President 2006 Asset Advisors, the Fund's
New York, NY 10017 Advisor (2005 to present);
(Born 1957) formerly, Partner of David J.
Greene & Co., an investment
firm (1993 - 2005).
Lon F. Birnholz Senior Vice Since Managing Director of Matrix N/A N/A
747 Third Avenue President 2006 Asset Advisors, the Fund's
New York, NY 10017 Advisor (1999 to present).
(Born 1960)
Conall Duffin Assistant Vice Since Marketing Associate, Matrix N/A N/A
747 Third Avenue President and 2002 Asset Advisors, the Fund's
New York, NY 10017 Assistant Advisor (2001 to present).
(Born 1975) Secretary
28
MATRIX ADVISORS
VALUE FUND, INC.
ADDITIONAL INFORMATION (UNAUDITED), 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
- ----------------------------------------------------------------------------------------------------------------------------
Robert M. Slotky Vice Since Vice President, U.S. Bancorp N/A N/A
2020 E. Financial Way President, 2004 Fund Services, LLC since
Glendora, CA 91741 Chief July 2001.
(Born 1947) Compliance
Officer
AML Since
Compliance 2006
Officer
* 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.
29
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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.
1555 N. River Center Drive, Ste. 302
Milwaukee, WI 53212
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, LLP
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.
NOT APPLICABLE FOR SEMI-ANNUAL REPORTS.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE FOR SEMI-ANNUAL REPORTS.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE FOR SEMI-ANNUAL REPORTS.
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 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.
MATRIX ADVISORS VALUE FUND, INC.
By /s/ David A. Katz
-----------------------------------------------------
David A. Katz, President/Treasurer
Date 3/4/2008
----------------------------------------
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 /s/ David A. Katz
---------------------------------------------------------
David A. Katz, President/Treasurer
Date 3/4/2008
----------------------------------------