UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04014
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Meridian Fund, Inc.(R)
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(Exact name of registrant as specified in charter)
60 E. Sir Francis Drake Boulevard.
Wood Island, Suite 306
Larkspur, CA 94939
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(Address of principal executive offices) (Zip code)
Richard F. Aster, Jr.
60 E. Sir Francis Drake Boulevard
Wood Island, Suite 306
Larkspur, CA 94939
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(Name and address of agent for service)
Registrant's telephone number, including area code: 415-461-6237
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Date of fiscal year end: June 30, 2004
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Date of reporting period: June 30, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
MERIDIAN FUND, INC.
July 6, 2004
To Our Shareholders:
Stocks experienced modest gains during the second quarter. Strong earnings
growth was partially offset by investor concerns over rising interest rates and
energy costs. The S&P 500 advanced 1.3%, the NASDAQ 2.7% and the Russell 2000
0.2%. Calendar year to date, the S&P 500 is up 2.6%, the NASDAQ 2.2% and the
Russell 2000 6.2%, as small cap stocks continue to outperform their larger
counterparts. The strongest performing sectors included coal, tires and
aerospace. Agriculture, precious metals and home construction represented three
of the weaker performing groups. The yield on the ten-year treasury bond
increased during the quarter to 4.59%, up from 3.85%, reflecting a pick up in
business activity.
The economy continues to perform well. GDP grew at a robust 3.9% in the first
quarter. Housing starts and retail sales continue to be strong. The high price
of energy, however, could moderate consumer spending. Manufacturing and capital
spending are improving, non-residential construction has bottomed out and job
growth has improved substantially during the past several months, leading to an
improved level of consumer confidence. Interest rates remain low and the level
of inflation is modest. Recent company surveys indicate that the increased cost
and risk of doing business under Sarbanes Oxley and other new regulations could
slow investment and future growth. This will be a gradual development, but worth
watching.
We welcome those new shareholders who recently joined the Meridian Funds and
appreciate the continued confidence of our existing shareholders.
/s/ Richard F. Aster, Jr.
Richard F. Aster, Jr.
MERIDIAN GROWTH FUND(R)
The Meridian Growth Fund's net asset value per share at June 30, 2004 was
$35.38. This represents an increase of 7.1% for the calendar year to date. The
Fund's total return and average annual compound rate of return since inception,
August 1, 1984, were 1,412.4% and 14.6%, respectively. The Fund's assets at the
close of the quarter were invested 5.7% in cash and cash equivalents and 94.3%
in stocks. At the close of the quarter, total net assets were $1,273,302,047 and
there were 61,681 shareholders.
Our market outlook remains unchanged. We are positive on the market and believe
that stock selection is the most important factor in determining investment
returns at this time. We continue to focus our research effort on small and
medium-sized growth stocks. We are looking for companies that have an important
market share in a growing market. Companies need to have a return on equity
sufficient to finance their growth and be well managed. Valuation is important
in our process. Our portfolio is balanced with approximately fifty positions.
Our largest areas of concentration include technology, retail, health care and
industrial services.
During the quarter, we established initial positions in Matthews International,
Edwards Lifesciences and Host Marriott Corp. We sold our shares in Bed Bath and
Beyond, A.G. Edwards and The Men's Wearhouse.
One of our holdings is Andrew Corp., a supplier of products to the
communications industry, primarily to the growing wireless transmission sector.
Products include power amplifiers, microwave antennas and base station
subsystems. Customers are cellular operators, governments and original equipment
manufacturers. International revenues, at 50% of total, are the fastest growing
part of the company's business, especially in underdeveloped countries. Andrew
appears to have an experienced management team, a low cost structure, a strong
balance sheet and emerged from the tech downturn with a leading market position
in all of its product categories. We believe the shares are attractively valued,
especially based on the company's earnings potential during the next several
years.
MERIDIAN VALUE FUND(R)
The Meridian Value Fund's net asset value per share at June 30, 2004 was $40.35.
This represents an increase of 6.6% for the calendar year to date. The Fund's
total return and average compounded annual rate of return since June 30, 1995,
were 484.1% and 21.7%, respectively. The comparable period returns for the S&P
500 with dividends were 142.6% and 10.3%, respectively. The Fund's assets at the
close of the quarter were invested 5.2% in cash and cash equivalents and 94.8%
in stocks. At the close of the quarter, total net assets were $2,226,589,761 and
there were 106,453 shareholders.
There have been no major changes in our portfolio or our strategy. We continue
to seek out-of-favor companies that have defensible positions in their
industries, strong or improving balance sheets, reasonable valuations and good
prospects for earnings growth. We believe that over the long term this strategy
will continue to outperform. Consumer products, technology and industrial
products represent our largest areas of concentration and we continue to invest
in companies of all market capitalizations.
New positions during the quarter include Allied Waste Industries, BJ's Wholesale
Club, Comcast, Conseco, El Paso, Greater Bay Bancorp, MGIC Investment, Northrup
Grumman, Sony, Smurfit-Stone Container, Tidewater, Tele Norte Leste
Participacoes SA and Washington Mutual. We sold our shares in Bristol-Meyers
Squibb, Rockwell Collins, EchoStar Communica-
2
tions, Davita, Millenium Chemicals, Raytheon, SAFECO, Serono S.A., Valero
Energy, Waters and Zale.
We recently increased our position in Leggett & Platt. The company is a leader
in designing, engineering and manufacturing a wide variety of products and
components for the residential furniture, office furniture, automotive, retail
display, industrial wire and aluminum die casting industries. Difficult economic
conditions hurt business across the company's end markets in recent years
causing earnings to decline from a high of $1.45 in 1999 to $1.05 in 2003.
During this period the stock declined from a high of $28.00 to a low of $18.25.
In response to the downturn, the company cut costs, rationalized capacity,
improved offshore manufacturing and invested in and acquired new businesses. We
believe these actions improved the company's competitive position and that it is
poised to perform well in the current, improved economy. We believe the company
is attractively valued at about 13 times potential 3-5 year earnings of $2.00
combined with a 2.25%+ dividend yield.
3
MERIDIAN GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2004
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- --------------------------------------------------------------------------------
<Table>
<Caption>
Shares Value
--------- --------------
COMMON STOCK - 94.3%
APPAREL - 3.0%
Fossil, Inc. ........... 735,482 $ 20,041,885
Polo Ralph Lauren
Corp.*................ 533,925 18,393,716
--------------
38,435,601
BANKING/FINANCE - 4.2%
Silicon Valley
Bancshares............ 852,800 33,813,520
UCBH Holdings, Inc.*.... 485,808 19,199,132
--------------
53,012,652
BROKERAGE & MONEY MANAGEMENT - 2.2%
T. Rowe Price Group,
Inc.*................. 559,173 28,182,319
CELLULAR COMMUNICATIONS - 2.3%
American Tower Corp.
Class A............... 1,948,900 29,623,280
CONSTRUCTION - 2.2%
Granite Construction,
Inc.*................. 1,502,035 27,382,098
CONSUMER DURABLES - 0.9%
Matthews International
Corp.*................ 365,200 12,029,688
CONSUMER SERVICES - 3.6%
Life Time Fitness,
Inc. ................. 1,000 21,000
Regis Corp.*............ 610,300 27,213,277
Salesforce.com, Inc. ... 1,000 16,070
Weight Watchers
International,
Inc. ................. 466,510 18,259,201
--------------
45,509,548
EDUCATION - 2.1%
DeVry, Inc. ............ 983,600 26,970,312
FURNITURE/FIXTURES - 2.5%
Herman Miller, Inc.*.... 1,086,185 31,434,194
</Table>
<Table>
<Caption>
Shares Value
--------- --------------
HEALTHCARE PRODUCTS - 2.4%
Edwards Lifesciences
Corp. ................ 354,985 $ 12,371,227
Steris Corp. ........... 816,010 18,409,186
--------------
30,780,413
HEALTHCARE SERVICES - 10.1%
DaVita, Inc. ........... 988,972 30,490,007
Laboratory Corporation
of America Holdings... 725,200 28,790,440
LifePoint Hospitals,
Inc. ................. 512,503 19,075,362
Province Healthcare
Co. .................. 1,149,800 19,719,070
Renal Care Group,
Inc. ................. 922,550 30,564,081
--------------
128,638,960
INDUSTRIAL PRODUCTS - 3.7%
Dionex Corp. ........... 358,830 19,796,651
Tektronix, Inc.*........ 787,800 26,800,956
--------------
46,597,607
INDUSTRIAL SERVICES - 7.1%
EGL, Inc. .............. 999,278 26,580,795
Expeditors International
of Washington,
Inc.*................. 144,200 7,124,922
Republic Services,
Inc.*................. 968,300 28,022,602
United Rentals, Inc. ... 1,615,600 28,903,084
--------------
90,631,403
INSURANCE - 2.1%
Mercury General
Corp.*................ 549,500 27,282,675
REAL ESTATE - 1.0%
Host Marriott Corp. .... 1,037,150 12,819,174
RESTAURANTS - 5.3%
Applebee's
International,
Inc.*................. 1,137,335 26,181,452
CBRL Group, Inc.*....... 463,088 14,286,265
Ruby Tuesday, Inc.*..... 967,300 26,552,385
--------------
67,020,102
</Table>
The accompanying notes are an integral part of the financial statements
4
MERIDIAN GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2004
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- --------------------------------------------------------------------------------
<Table>
<Caption>
Shares Value
--------- --------------
COMMON STOCK (continued)
RETAIL - 11.5%
Claire's Stores,
Inc.*................. 1,260,600 $ 27,355,020
Cost Plus, Inc. ........ 842,624 27,343,149
Dollar Tree Stores,
Inc. ................. 918,600 25,197,198
Ethan Allen Interiors,
Inc.*................. 767,500 27,560,925
Ross Stores, Inc.*...... 976,300 26,125,788
Tuesday Morning Corp. .. 429,992 12,469,768
--------------
146,051,848
TECHNOLOGY - 21.6%
Advent Software,
Inc. ................. 1,056,838 19,097,063
American Power
Conversion Corp. ..... 1,488,073 29,240,634
Autodesk, Inc.*......... 692,200 29,633,082
FileNET Corp. .......... 718,800 22,692,516
Getty Images, Inc. ..... 440,000 26,400,000
KEMET Corp. ............ 2,187,600 26,732,472
Molex, Inc. Class A*.... 949,475 25,901,678
Symbol Technologies,
Inc.*................. 1,908,900 28,137,186
Synopsys, Inc. ......... 845,200 24,029,036
Vishay Intertechnology,
Inc. ................. 1,540,400 28,620,632
Zebra Technologies Corp.
Class A............... 163,650 14,237,550
--------------
274,721,849
</Table>
<Table>
<Caption>
Shares Value
--------- --------------
TELECOMMUNICATIONS EQUIPMENT - 6.5%
Andrew Corp. ........... 1,617,625 $ 32,368,676
Plantronics, Inc. ...... 720,900 30,349,890
Tellabs, Inc. .......... 2,311,410 20,201,723
--------------
82,920,289
TOTAL COMMON STOCK - 94.3%
(Identified cost $991,333,907)..... 1,200,044,012
--------------
U.S. GOVERNMENT OBLIGATIONS - 0.7%
(Identified cost $9,010,924)
U.S. Treasury Bill @1.055% due
08/05/04 (Face Value $9,020,000)... 9,010,907
--------------
TOTAL INVESTMENTS - 95.0%
(Identified cost $1,000,344,831)..... 1,209,054,919
CASH AND OTHER ASSETS LESS
LIABILITIES - 5.0%................... 64,247,128
--------------
NET ASSETS - 100%...................... $1,273,302,047
==============
</Table>
* income producing
The accompanying notes are an integral part of the financial statements
5
MERIDIAN VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
Shares Value
--------- --------------
COMMON STOCK - 94.8%
AEROSPACE/DEFENSE - 2.3%
Empresa Brasileira de
Aeronautica S.A.
ADR*.................. 1,073,900 $ 30,702,801
Northrop Grumman
Corp.*................ 398,800 21,415,560
--------------
52,118,361
AGRICULTURE - 1.1%
Agrium, Inc.*........... 1,691,600 24,612,780
BANKING/FINANCE - 3.9%
Annaly Mortgage
Management, Inc.*..... 1,321,700 22,416,032
Greater Bay Bancorp*.... 772,385 22,321,927
SunTrust Banks, Inc.*... 347,000 22,551,530
Washington Mutual,
Inc.*................. 511,500 19,764,360
--------------
87,053,849
BASIC MATERIALS - 0.8%
Newmont Mining Corp.*... 473,500 18,352,860
CONSUMER PRODUCTS - 14.5%
Activision, Inc. ....... 2,004,061 31,864,570
American Greetings Corp.
Class A............... 1,296,200 30,045,916
Avery Dennison Corp.*... 334,000 21,379,340
Del Monte Foods Co. .... 3,045,400 30,941,264
Eastman Kodak Co.*...... 1,214,200 32,759,116
Fomento Economico
Mexicano S.A. de C.V.
ADR*.................. 621,100 28,471,224
Kimberly-Clark Corp.*... 650,100 42,828,588
Leggett & Platt,
Inc.*................. 1,479,700 39,522,787
Newell Rubbermaid,
Inc.*................. 1,399,200 32,881,200
Scholastic Corp. ....... 378,700 11,342,065
Sony Corp. ADR*......... 567,400 21,589,570
--------------
323,625,640
CONSUMER DURABLES - 1.9%
General Motors Corp.*... 425,000 19,800,750
Whirlpool Corp.*........ 325,000 22,295,000
--------------
42,095,750
</Table>
<Table>
<Caption>
Shares Value
--------- --------------
CONSUMER SERVICES - 2.0%
ServiceMaster Co.*...... 3,606,200 $ 44,428,384
ENERGY - 4.6%
Arch Coal, Inc.*........ 1,133,300 41,467,447
El Paso Corp.*.......... 250,000 1,970,000
National-Oilwell,
Inc. ................. 1,374,100 43,270,409
Tidewater, Inc.*........ 568,400 16,938,320
--------------
103,646,176
FURNITURE & FIXTURES - 1.5%
Furniture Brands
International,
Inc.*................. 1,298,300 32,522,415
HEALTHCARE PRODUCTS - 1.0%
Haemonetics Corp. ...... 791,000 23,453,150
HEALTHCARE SERVICES - 2.6%
HCA, Inc.*.............. 815,000 33,895,850
Omnicare, Inc.*......... 285,100 12,205,131
PAREXEL International
Corp. ................ 615,500 12,186,900
WellCare Group, Inc. ... 2,000 34,000
--------------
58,321,881
INDUSTRIAL PRODUCTS - 10.0%
ArvinMeritor, Inc.*..... 1,474,300 28,852,051
Crane Co.*.............. 640,600 20,108,434
Cummins, Inc.*.......... 502,900 31,431,250
Eastman Chemical Co.*... 485,800 22,458,534
Manitowoc Co., Inc.*.... 864,000 29,246,400
Mettler-Toledo
International,
Inc. ................. 883,300 43,405,362
Packaging Corp. of
America*.............. 894,700 21,383,330
Smurfit-Stone Container
Corp. ................ 1,306,300 26,060,685
--------------
222,946,046
INDUSTRIAL SERVICES - 6.4%
ADVO, Inc.*............. 620,850 20,438,382
Allied Waste Industries,
Inc. ................. 2,540,100 33,478,518
</Table>
The accompanying notes are an integral part of the financial statements
6
MERIDIAN VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
Shares Value
--------- --------------
COMMON STOCK (continued)
Lamar Advertising Co.
Class A............... 1,007,300 $ 43,666,455
Waste Management,
Inc.*................. 1,451,600 44,491,540
--------------
142,074,895
INFORMATION TECHNOLOGY SERVICES - 1.8%
Automatic Data
Processing, Inc.*..... 516,600 21,635,208
BearingPoint, Inc. ..... 2,079,900 18,448,713
--------------
40,083,921
INSURANCE - 3.1%
Conseco, Inc. .......... 1,131,200 22,510,880
MGIC Investment Corp.*.. 313,800 23,804,868
Nationwide Financial
Services, Inc. Class
A*.................... 603,100 22,682,591
--------------
68,998,339
LEISURE & AMUSEMENT - 2.8%
Boyd Gaming Corp.*...... 998,600 26,532,802
Royal Caribbean Cruises
Ltd.*................. 807,000 35,031,870
--------------
61,564,672
MEDIA - 2.3%
Hearst-Argyle
Television, Inc.*..... 693,800 17,886,164
Time Warner, Inc. ...... 1,860,000 32,698,800
--------------
50,584,964
PAPER/FOREST PRODUCTS - 1.3%
Aracruz Celulose S.A.
ADR*.................. 890,800 29,093,528
PHARMACEUTICALS - 1.5%
AstraZeneca Plc ADR*.... 713,000 32,541,320
REAL ESTATE - 2.8%
Healthcare Realty Trust,
Inc.*................. 508,900 19,073,572
Host Marriott Corp. .... 3,418,700 42,255,132
--------------
61,328,704
</Table>
<Table>
<Caption>
Shares Value
--------- --------------
RESTAURANTS - 1.0%
McDonald's Corp.*....... 868,000 $ 22,568,000
RETAIL - 5.1%
American Eagle
Outfitters, Inc. ..... 778,850 22,516,554
BJ's Wholesale Club,
Inc. ................. 880,200 22,005,000
Cabela's, Inc. Class
A..................... 5,000 134,750
Office Depot, Inc. ..... 1,257,700 22,525,407
Talbots, Inc.*.......... 616,500 24,135,975
Too, Inc. .............. 1,276,000 21,309,200
--------------
112,626,886
TECHNOLOGY - 14.0%
AVX Corp.*.............. 763,600 11,034,020
Cadence Design System,
Inc. ................. 764,000 11,177,320
Celestica, Inc. ........ 1,299,600 25,927,020
Coherent, Inc. ......... 958,750 28,618,687
Credence Systems
Corp. ................ 2,121,764 29,280,343
Electronics for Imaging,
Inc. ................. 998,600 28,220,436
Hyperion Solutions
Corp. ................ 736,700 32,208,524
Koninklijke (Royal)
Philips Electronics
N.V. NY Shares*....... 682,000 18,550,400
McAfee, Inc. ........... 2,000,000 36,260,000
Storage Technology
Corp. ................ 776,500 22,518,500
Symbol Technologies,
Inc.*................. 1,407,000 20,739,180
Synopsys, Inc. ......... 1,174,900 33,402,407
VeriSign, Inc. ......... 715,236 14,233,196
--------------
312,170,033
TELECOMMUNICATIONS EQUIPMENT - 1.6%
Tellabs, Inc. .......... 4,103,600 35,865,464
</Table>
The accompanying notes are an integral part of the financial statements
7
MERIDIAN VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
Shares Value
--------- --------------
COMMON STOCK (continued)
TELECOMMUNICATIONS SERVICES - 3.0%
Citizens Communications
Co. .................. 2,015,500 $ 24,387,550
Comcast Corp. Special
Class A............... 775,000 21,397,750
Tele Norte Leste
Participacoes S.A.
ADR*.................. 1,636,100 20,827,553
--------------
66,612,853
TRANSPORTATION - 1.9%
Burlington Northern
Santa Fe Corp.*....... 634,900 22,265,943
SkyWest, Inc.*.......... 1,139,079 19,831,365
--------------
42,097,308
TOTAL COMMON STOCK - 94.8%
(Identified cost $1,825,758,293)....... 2,111,388,179
--------------
TOTAL INVESTMENTS - 94.8%
(Identified cost $1,825,758,293)..... 2,111,388,179
CASH AND OTHER ASSETS LESS
LIABILITIES - 5.2%................... 115,201,582
--------------
NET ASSETS - 100%...................... $2,226,589,761
==============
</Table>
* income producing
ADR - American Depository Receipt
The accompanying notes are an integral part of the financial statements
8
MERIDIAN FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
Growth Fund Value Fund
-------------- --------------
ASSETS
Investments (Cost $1,000,344,831 and $1,825,758,293)... $1,209,054,919 $2,111,388,179
Cash and cash equivalents.............................. 63,246,384 119,117,749
Receivable for:
Capital shares...................................... 6,738,372 3,447,201
Dividends........................................... 528,405 2,510,322
Interest............................................ 21,103 31,207
Securities sold..................................... 1,464,673 9,733,974
Prepaid expenses....................................... 1,947 5,488
-------------- --------------
TOTAL ASSETS........................................ 1,281,055,803 2,246,234,120
-------------- --------------
LIABILITIES
Payable for:
Capital shares...................................... 1,916,962 572,068
Securities purchased................................ 4,851,603 16,837,793
Accrued expenses:
Investment advisory fees............................ 830,042 1,946,557
Other payables and accrued expenses................. 155,149 287,941
-------------- --------------
TOTAL LIABILITIES................................... 7,753,756 19,644,359
-------------- --------------
NET ASSETS............................................... $1,273,302,047 $2,226,589,761
============== ==============
Capital shares issued and outstanding, par value $0.01
(500,000,000 and 500,000,000 shares authorized)........ 35,988,186 55,176,219
============== ==============
Net asset value per share (offering and redemption
price)................................................. $35.38 $40.35
============== ==============
Net Assets consist of:
Paid in capital........................................ $1,040,996,278 $1,693,621,832
Accumulated net realized gain.......................... 23,595,681 247,241,080
Net unrealized appreciation on investments and foreign
currency translations............................... 208,710,088 285,629,886
Accumulated undistributed net investment income........ -- 96,963
-------------- --------------
$1,273,302,047 $2,226,589,761
============== ==============
</Table>
The accompanying notes are an integral part of the financial statements
9
MERIDIAN FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
Growth Fund Value Fund
------------ ------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $0 and
$185,227, respectively)................................ $ 4,961,804 $ 19,587,916
Interest.................................................. 436,452 961,098
Other income.............................................. 7,693 --
------------ ------------
Total Investment Income.............................. 5,405,949 20,549,014
------------ ------------
EXPENSES
Investment advisory fees.................................. 6,145,515 18,629,479
Transfer agent fees....................................... 292,669 567,102
Custodian fees............................................ 210,175 466,020
Reports to shareholders................................... 109,903 270,528
Pricing fees.............................................. 109,877 229,777
Registration and filing fees.............................. 127,063 92,683
Professional fees......................................... 48,559 43,559
Miscellaneous expenses.................................... 7,001 15,860
Directors' fees and expenses.............................. 3,518 8,738
------------ ------------
Total expenses....................................... 7,054,280 20,323,746
------------ ------------
Net investment income (loss).............................. (1,648,331) 225,268
------------ ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.......................... 40,400,086 360,394,828
Net change in unrealized appreciation on investments and
foreign currency translations.......................... 151,831,707 70,984,391
------------ ------------
Net gain on investments................................... 192,231,793 431,379,219
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $190,583,462 $431,604,487
============ ============
</Table>
The accompanying notes are an integral part of the financial statements
10
MERIDIAN FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
Growth Fund Value Fund
------------------------------ -------------------------------
Year Ended Year Ended Year Ended Year Ended
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
-------------- ------------- -------------- --------------
OPERATIONS
Net investment income (loss)... $ (1,648,331) $ (1,536,056) $ 225,268 $ (1,457,716)
Net realized gain (loss) on
investments.................. 40,400,086 4,243,657 360,394,828 (74,623,894)
Net increase in unrealized
appreciation of
investments.................. 151,831,707 10,490,266 70,984,391 138,434,441
-------------- ------------ -------------- --------------
Net increase in net assets
from operations........... 190,583,462 13,197,867 431,604,487 62,352,831
-------------- ------------ -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from ordinary
income....................... -- (699,754) -- --
Distributions from net realized
capital gain................. (19,395,152) (7,469,451) -- --
-------------- ------------ -------------- --------------
Net distributions............ (19,395,152) (8,169,205) -- --
-------------- ------------ -------------- --------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of
shares....................... 778,885,562 209,292,815 696,646,284 511,600,637
Reinvestment of distribution... 17,050,957 7,510,696 -- --
Less: redemptions.............. (142,215,841) (84,098,027) (358,213,242) (414,608,084)
-------------- ------------ -------------- --------------
Increase resulting from
capital share
transactions.............. 653,720,678 132,705,484 338,433,042 96,992,553
-------------- ------------ -------------- --------------
Total increase in net assets... 824,908,988 137,734,146 770,037,529 159,345,384
NET ASSETS
Beginning of year.............. 448,393,059 310,658,913 1,456,552,232 1,297,206,848
-------------- ------------ -------------- --------------
End of year.................... $1,273,302,047 $448,393,059 $2,226,589,761 $1,456,552,232
============== ============ ============== ==============
</Table>
The accompanying notes are an integral part of the financial statements
11
MERIDIAN GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
For the fiscal year ended June 30,
-----------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------- -------- -------- -------- -------- --------
Net Asset Value - Beginning of period.... $27.24 $28.10 $31.30 $29.45 $26.28 $33.26
---------- -------- -------- -------- -------- --------
Income from Investment Operations
- --------------------------------
Net Investment Income (Loss)*............ (0.04) (0.08) (0.12) 2.26 0.11 0.16
Net Gains (Losses) on Securities (both
realized and unrealized)................ 9.10 (0.11) (0.24) 3.89 4.99 (0.50)
---------- -------- -------- -------- -------- --------
Total From Investment Operations......... 9.06 (0.19) (0.36) 6.15 5.10 (0.34)
---------- -------- -------- -------- -------- --------
Less Distributions
- ------------------
Distributions from Net Investment
Income.................................. 0.00 (0.06) 0.00 (2.44) (0.15) (0.14)
Distribution from Net Realized Capital
Gains................................... (0.92) (0.61) (2.84) (1.86) (1.78) (6.50)
---------- -------- -------- -------- -------- --------
Total Distributions...................... (0.92) (0.67) (2.84) (4.30) (1.93) (6.64)
---------- -------- -------- -------- -------- --------
Net Asset Value - End of Period.......... $35.38 $27.24 $28.10 $31.30 $29.45 $26.28
========== ======== ======== ======== ======== ========
Total Return............................. 33.65% (0.20%) 0.42% 23.34% 21.45% 3.05%
========== ======== ======== ======== ======== ========
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's)........ $1,273,302 $448,393 $310,659 $182,117 $140,990 $185,683
Ratio of Expenses to Average Net
Assets.................................. 0.88% 0.95% 1.02% 1.04% 1.09% 1.01%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... (0.21%) (0.47%) (0.62%) (0.26%) 0.31% 0.49%
Portfolio Turnover Rate.................. 19% 27% 26% 43% 28% 51%
<Caption>
For the fiscal year ended June 30,
-----------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
Net Asset Value - Beginning of period.... $33.20 $32.21 $27.29 $24.27
-------- -------- -------- --------
Income from Investment Operations
- --------------------------------
Net Investment Income (Loss)*............ 0.27 0.40 0.30 0.27
Net Gains (Losses) on Securities (both
realized and unrealized)................ 4.92 3.71 5.47 3.63
-------- -------- -------- --------
Total From Investment Operations......... 5.19 4.11 5.77 3.90
-------- -------- -------- --------
Less Distributions
- ------------------
Distributions from Net Investment
Income.................................. (0.32) (0.36) (0.31) (0.18)
Distribution from Net Realized Capital
Gains................................... (4.81) (2.76) (0.54) (0.70)
-------- -------- -------- --------
Total Distributions...................... (5.13) (3.12) (0.85) (0.88)
-------- -------- -------- --------
Net Asset Value - End of Period.......... $33.26 $33.20 $32.21 $27.29
======== ======== ======== ========
Total Return............................. 16.92% 13.92% 21.40% 16.44%
======== ======== ======== ========
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's)........ $296,803 $353,029 $384,087 $328,153
Ratio of Expenses to Average Net
Assets.................................. 0.95% 0.96% 0.96% 1.06%
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.76% 1.23% 0.99% 1.18%
Portfolio Turnover Rate.................. 38% 37% 34% 29%
</Table>
* Net Investment Income (Loss) per share has been computed before adjustments
for book/tax differences.
The accompanying notes are an integral part of the financial statements
12
MERIDIAN VALUE FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
For the fiscal year ended June 30,
-------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------- ---------- ---------- -------- ------- -------
Net Asset Value - Beginning of
Period............................ $31.65 $30.34 $30.98 $25.88 $22.29 $19.30
---------- ---------- ---------- -------- ------- -------
Income from Investment Operations
- --------------------------------
Net Investment Income (Loss)**..... 0.00 (0.03) (0.05) 1.12 0.05 (0.10)
Net Gains (Losses) on Securities
(both realized and unrealized).... 8.70 1.34 (0.51) 5.75 5.91 3.56
---------- ---------- ---------- -------- ------- -------
Total From Investment Operations... 8.70 1.31 (0.56) 6.87 5.96 3.46
---------- ---------- ---------- -------- ------- -------
Less Distributions
- ------------------
Distribution from Net Investment
Income............................ 0.00 0.00 (0.04) (1.09) 0.00 0.00
Distribution from Net Realized
Capital Gains..................... 0.00 0.00 (0.04) (0.68) (2.37) (0.47)
---------- ---------- ---------- -------- ------- -------
Total Distributions................ 0.00 0.00 (0.08) (1.77) (2.37) (0.47)
Net Asset Value - End of Period.... $40.35 $31.65 $30.34 $30.98 $25.88 $22.29
========== ========== ========== ======== ======= =======
Total Return....................... 27.49% 4.32% (1.78%) 27.95% 29.63% 18.92%
========== ========== ========== ======== ======= =======
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000's)........................... $2,226,590 $1,456,552 $1,297,207 $768,559 $87,930 $24,912
Ratio of Expenses to Average Net
Assets............................ 1.09% 1.11% 1.12% 1.10% 1.41% 1.63%
Ratio of Net Investment Income
(Loss) to Average Net Assets...... 0.01% (0.12%) (0.22%) 0.60% 0.39% (0.65%)
Portfolio Turnover Rate............ 81% 60% 54% 76% 86% 124%
<Caption>
For the fiscal year ended June 30,
------------------------------------
1998 1997 1996 1995
------- ------- ------- ------
Net Asset Value - Beginning of
Period............................ $17.40 $15.32 $10.27 $9.87
------- ------- ------- ------
Income from Investment Operations
- --------------------------------
Net Investment Income (Loss)**..... (0.19) (0.26) (0.10) (0.04)
Net Gains (Losses) on Securities
(both realized and unrealized).... 4.32 3.20 5.15 0.44
------- ------- ------- ------
Total From Investment Operations... 4.13 2.94 5.05 0.40
------- ------- ------- ------
Less Distributions
- ------------------
Distribution from Net Investment
Income............................ 0.00 0.00 0.00 0.00
Distribution from Net Realized
Capital Gains..................... (2.23) (0.86) 0.00 0.00
------- ------- ------- ------
Total Distributions................ (2.23) (0.86) 0.00 0.00
Net Asset Value - End of Period.... $19.30 $17.40 $15.32 $10.27
======= ======= ======= ======
Total Return....................... 26.05% 20.55%+ 49.17%+ 4.05%+
======= ======= ======= ======
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000's)........................... $12,196 $7,340 $3,472 $715
Ratio of Expenses to Average Net
Assets............................ 2.16% 2.51%* 2.55%* 2.78%*
Ratio of Net Investment Income
(Loss) to Average Net Assets...... (1.35%) (1.96%)* (1.36%)* (0.58%)*
Portfolio Turnover Rate............ 133% 144% 125% 77%
</Table>
+ The total returns would have been lower had certain expenses not been reduced
during the periods shown.
* Not representative of expenses incurred by the Fund as the Adviser waived its
fee and/or paid certain expenses of the Fund. As indicated in Note 2, the
Investment Advisor has agreed to reduce a portion of its fee and absorb
certain expenses of the Fund. Had these fees and expenses not been reduced
and absorbed, the ratio of expenses to average net assets would have been
2.80%, 6.47% and 14.64%, and the ratio of net investment income to average
net assets would have been a loss of 2.25%, 5.28% and 12.44%, for the periods
ended June 30, 1997 through June 30, 1995, respectively.
** Net Investment Income (Loss) per share has been computed before adjustments
for book/tax differences.
The accompanying notes are an integral part of the financial statements
13
MERIDIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: Meridian Fund, Inc., (the
"Company"), is comprised of the Meridian Growth Fund (the "Growth Fund") and
the Meridian Value Fund (the "Value Fund"). The Growth Fund and the Value
Fund (each a "Fund" and collectively, the "Funds") are registered under the
Investment Company Act of 1940, as no-load, diversified, open-end management
investment companies. The Growth Fund began operations and was registered on
August 1, 1984. The Value Fund began operations on February 10, 1994 and was
registered on February 7, 1994.
The primary investment objective of the Growth Fund is to seek long-term
growth of capital. Originally named Meridian Fund, the name was changed
effective April 20, 2001 to Meridian Growth Fund, to more closely reflect
the investment style. There was no change in how the Fund is managed.
The primary investment objective of the Value Fund is to seek long-term
growth of capital.
The following is a summary of significant accounting policies for both
Funds:
a. INVESTMENT VALUATIONS: Marketable securities are valued at the closing
price or last sales price on the principal exchange or market on which
they are traded; or, if there were no sales that day, at the last
reported bid price.
b. FEDERAL INCOME TAXES: It is the Funds' policy to comply with the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders; therefore, no
federal income tax provision is required.
c. SECURITY TRANSACTIONS: Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Realized gains
and losses on security transactions are determined on the basis of
specific identification for both financial statement and federal income
tax purposes. Dividend income is recorded on the ex-dividend date.
Interest income is accrued daily.
d. CASH AND CASH EQUIVALENTS: All highly liquid investments with an
original maturity of three months or less are considered to be cash
equivalents. Available funds are automatically swept into a Cash Reserve
account, which preserves capital with a consistently competitive rate of
return. Interest accrues daily and is credited by the third business day
of the following month.
e. EXPENSES: Expenses arising in connection with the Fund are charged
directly to the Fund. Expenses common to the Funds are generally
allocated to each Fund in proportion to their relative net assets.
f. USE OF ESTIMATES: The preparation of financial statements in accordance
with accounting principals generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements. Actual amounts could differ from those estimates.
g. DISTRIBUTIONS TO SHAREHOLDERS: The Funds record distributions to
shareholders on the ex-date. The amount of distributions from net
investment income and net realized capital gains are determined in
accordance with federal income tax regulations which may differ from
generally accepted accounting principles. These "book/tax" differences
are either considered temporary or permanent in nature. To
14
MERIDIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require
reclassification.
Distributions which exceed net investment income and net realized
capital gains are reported as distributions in excess of net investment
income or distributions in excess of net realized capital gains for
financial reporting purposes but not for tax purposes. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income (loss) for the purposes of
calculating net investment income (loss) per share in the Financial
Highlights.
h. GUARANTEES AND INDEMNIFICATION: Under the Funds' organizational
documents, its Officers and Directors are indemnified against certain
liability arising out of the performance of their duties to the Funds.
Additionally, in the normal course of business, the Funds enter into
contracts with service providers that contain general indemnification
clauses. The Funds' maximum exposure under these arrangements is unknown
as this would involve future claims that may be made against the Funds
that have not yet occurred. However, based on experience, the Funds
expect the risk of loss to be remote.
2. RELATED PARTIES: The Funds have entered into a management agreement with
Aster Investment Management Company, Inc. (the "Investment Adviser").
Certain Officers and/or Directors of the Funds are also Officers and/or
Directors of the Investment Adviser. Beneficial ownership in the Funds by
Richard F. Aster, Jr., President, as of June 30, 2004 were as follows:
<Table>
Growth Fund............................... 1.2%
Value Fund................................ 0.5%
</Table>
The Investment Adviser receives from the Growth Fund, as compensation for
its services, an annual fee of 1% of the first $50,000,000 of the Growth
Fund's net assets and 0.75% of the Growth Fund's net assets in excess of
$50,000,000. The fee is paid monthly and calculated based on that month's
daily average net assets. The Investment Adviser receives from the Value
Fund, as compensation for its services, an annual fee of 1% of the Value
Fund's net assets. The fee is paid monthly and calculated based on that
month's daily average net assets. The Investment Adviser has agreed to limit
the expenses of both Funds to 2.50% with respect to this limit, the
Investment Adviser did not reimburse either fund during 2004.
15
MERIDIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. CAPITAL SHARES TRANSACTIONS: The Growth Fund and Value Fund have authorized
500,000,000 and 500,000,000 common shares at a par value of $.01 per share,
respectively. Transactions in capital shares for the year ended June 30,
2003 and the year ended June 30, 2004 were as follows:
<Table>
<Caption>
Growth Fund Value Fund
------------------------ -------------------------
2004 2003 2004 2003
---------- ---------- ---------- -----------
Shares sold..................... 23,312,706 8,611,562 18,921,842 18,083,824
Shares issued on reinvestment of
distributions................. 533,742 333,958 -- --
---------- ---------- ---------- -----------
23,846,448 8,945,520 18,921,842 18,083,824
Shares redeemed................. (4,317,352) (3,541,670) (9,759,558) (14,832,550)
---------- ---------- ---------- -----------
Net increase.................... 19,529,096 5,403,850 9,162,284 3,251,274
========== ========== ========== ===========
</Table>
4. COMPENSATION OF DIRECTORS AND OFFICERS: Directors and Officers of the Funds
who are Directors and/or Officers of the Investment Adviser receive no
compensation from the Funds. Directors of the Funds who are not interested
persons as defined in the Investment Company Act of 1940 receive
compensation in the amount of $3,000 per annum and a $2,000 purchase of
Meridian Growth Fund or Meridian Value Fund shares, plus expenses and a
$1,000 purchase in one of the funds for each additional Board of Directors
meeting attended other than the annual meeting.
5. COST OF INVESTMENTS: The cost of investments purchased and the proceeds from
sales of investments, excluding short-term obligations, for the year ended
June 30, 2004, were as follows:
<Table>
<Caption>
Purchases Proceeds from Sales
-------------- -------------------
Growth Fund.......................................... $ 742,796,640 $ 145,253,426
Value Fund........................................... 1,745,800,943 1,389,577,441
</Table>
The cost of purchases and redemptions at maturity of U.S. Government
securities were as follows:
<Table>
<Caption>
Purchases Redeemed at Maturity
------------ --------------------
Growth Fund.......................................... $ 79,841,612 $ 90,000,000
Value Fund........................................... 172,222,155 245,600,000
</Table>
6. DISTRIBUTION INFORMATION: Income and long-term capital gains distributions
are determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles accepted in the United
States. The tax character of distributions made during the fiscal years
ended June 30, 2003 and June 30, 2004 were as follows:
<Table>
<Caption>
2003 TAXABLE DISTRIBUTIONS
Net
Ordinary Long-Term Total
Fund Income Capital Gains Distributions
---- -------- ------------- -------------
Growth Fund............................................. $699,328 $ 7,469,877 $ 8,169,205
Value Fund.............................................. -- -- --
</Table>
16
MERIDIAN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2004 TAXABLE DISTRIBUTIONS
<Table>
<Caption>
Net
Ordinary Long-Term Total
Fund Income Capital Gains Distributions
---- -------- ------------- -------------
Growth Fund............................................. $ -- $19,395,152 $19,395,152
Value Fund.............................................. -- -- --
</Table>
7. FEDERAL INCOME TAXES: Permanent differences, incurred during the year ended
June 30, 2004, resulting from differences in book and tax accounting have
been reclassified at year end to undistributed net investment income,
accumulated realized gain/(loss) and paid-in capital were as follows:
<Table>
<Caption>
Increase/Decrease Increase/Decrease
Undistributed Net Accumulated Realized
Fund Investment Income Gain/(Loss)
---- ----------------- --------------------
Growth Fund.............................................. $1,648,331 $(1,648,331)
Value Fund............................................... (128,305) 128,305
</Table>
The aggregate cost of investments for federal income tax purposes were as
follows:
<Table>
<Caption>
Aggregate Gross Aggregate Gross
Unrealized Unrealized Net Unrealized
Aggregate Cost Appreciation Depreciation Appreciation
-------------- --------------- --------------- --------------
Growth Fund........................ $1,000,480,264 $225,375,450 $(16,800,795) $208,574,655
Value Fund......................... 1,828,534,939 307,606,208 (24,752,968) 282,853,240
</Table>
COMPONENTS OF ACCUMULATED EARNINGS (LOSSES) ON A TAX BASIS
<Table>
<Caption>
Growth Fund Value Fund
------------ ------------
Undistributed ordinary income............................... $ 10,056,382 $ 96,963
Undistributed long-term capital gains....................... 13,674,732 250,017,726
Unrealized appreciation..................................... 208,574,655 282,853,240
------------ ------------
Total Accumulated Earnings.............................. $232,305,769 $532,967,929
============ ============
</Table>
Post-October losses represent losses realized on investment transactions from
November 1, 2003 through June 30, 2004 that, in accordance with Federal
income tax regulations, the Funds have elected to defer and treat as having
arisen in the following fiscal year. As of June 30, 2004, there were no
Post-October losses in the current year for either fund.
The Value Fund utilized $104,603,182 of the 2003 capital loss carryover to
offset current year capital gains. There was no capital loss carryover in the
Growth Fund.
8. PROXY VOTING POLICIES AND PROCEDURES: A statement that information regarding
how the fund voted proxies relating to portfolio securities during the most
recent 12 month period ended June 30, 2004 is available (i) without charge,
upon request, by calling (800) 446-6662; or on our website at
http://www.meridianfund.com; and (ii) on the Securities and Exchange
Commission ("SEC") website at http://www.sec.gov.
17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
of Meridian Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Meridian Growth Fund and Meridian
Value Fund (hereafter referred to as the "Funds") at June 30, 2004, the results
of each of their operations for the year then ended, the changes in each of
their net assets for each of the two years in the period then ended and the
financial highlights for each of the ten years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 20, 2004
18
INFORMATION ABOUT THE DIRECTORS AND
OFFICERS OF MERIDIAN FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The individuals listed below serve as directors or officers of Meridian Fund,
Inc. ( the "Meridian Funds"). Each director of the Meridian Funds serves until a
successor is elected and qualified or until resignation. Each officer of the
Meridian Funds is elected annually by the Board of Directors. The address of all
officers and directors is 60 East Sir Francis Drake Blvd., Suite 306, Larkspur,
CA 94939. The Meridian Funds' Statement of Additional Information (SAI) includes
more information about the Directors. To request a free copy, call Meridian at
1-800-446-6662.
INTERESTED DIRECTORS *
- --------------------------------------------------------------------------------
Richard F. Aster, Jr. (64)
Positions(s) Held with Fund: President, Chairman of the Board, Portfolio Manager
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: President, Aster Investment
Management, Inc.; President, Aster Capital Management, Inc.
Number of Portfolios Overseen: 2
Other Directorships: N/A
Michael Stolper (59)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: Investment Adviser and Broker -
Dealer, Stolper & Company, Inc.
Number of Portfolios Overseen: 2
Other Directorships: Kane-Miller Publishing
- --------------------------------------------------------------------------------
* Aster Investment Management, Inc. is investment adviser to the Meridian Funds.
Mr. Stolper is a minority owner of Aster Investment Management, Inc.
19
INFORMATION ABOUT THE DIRECTORS AND
OFFICERS OF MERIDIAN FUND, INC. (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
Michael S. Erickson (52)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: Private Investor
Number of Portfolios Overseen: 2
Other Directorships: AeroAstro, Decimal, Inc.
James Bernard Glavin (69)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: Chairman of the Board, The Immune
Response Corp.
Number of Portfolios Overseen: 2
Other Directorships: N/A
Herbert Charles Kay (67)
Positions(s) Held with Fund: Director
Length of Service (Beginning Date): May 3, 1985
Principal Occupation(s) During Past 5 Years: Private Investor
Number of Portfolios Overseen: 2
Other Directorships: N/A
- --------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------
Gregg B. Keeling, CPA (49)
Positions(s) Held with Fund: Treasurer, Secretary, Principal Financial and
Accounting Officer
Length of Service: (Beginning Date) April 1999
Principal Occupation(s) During Past 5 Years: Aster Investment Management, Inc.,
Vice President of Operations; Aster Capital Management, Inc., Vice President of
Operations
20
MANAGEMENT'S DISCUSSION OF MERIDIAN GROWTH FUND(R) PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Meridian Growth Fund's investment performance produced a gain of 33.65%
during the fiscal year ended June 30, 2004. This reflected the strength in the
financial, healthcare services, industrial products and services, retail,
technology and telecommunications equipment sectors, as well as selective stocks
that may be the only issue we own in a particular sector. Our positive
performance was offset primarily by weakness in the restaurant and healthcare
products sectors, as well as selective stocks that may be the only issue we own
in a particular sector. These market conditions materially affected the Fund's
performance. The Russell 2000 Index gained 33.37% during the period while the
S&P 500 gained 19.11%. The Fund's investments include companies that are
relatively small in terms of total assets, revenues and earnings, that the
Investment Adviser believes may have prospects for above average growth in
revenue and earnings. Of a total of 61 investments, 46 advanced and 15 declined.
VALUE OF $10,000 INVESTED IN THE MERIDIAN GROWTH FUND, THE S&P 500 AND THE
RUSSELL 2000
[PERFORMANCE LINE GRAPH]
<Table>
<Caption>
MERIDIAN GROWTH FUND S&P 500 RUSSELL 2000
-------------------- ------- ------------
6/30/94 10000 10000 10000
6/30/95 11644 12596 12011
6/30/96 14136 15868 14880
6/30/97 16104 21375 17310
6/30/98 18828 27817 20168
6/30/99 19402 34148 20471
6/30/00 23564 36624 23402
6/30/01 29064 31196 23536
6/30/02 29186 25587 21512
6/30/03 29128 25651 21159
6/30/04 38930 30553 28220
</Table>
MERIDIAN GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN
<Table>
One Year 33.65%
Five Years 14.94%
Since Inception 14.56%
</Table>
Past performance is not predictive of future performance. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Net asset value, investment
return and principal value will fluctuate, so shares, when redeemed, may be
worth more or less than their original cost.
21
MANAGEMENT'S DISCUSSION OF MERIDIAN VALUE FUND(R) PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
During the fiscal year ended June 30, 2004, the Meridian Value Fund gained
27.49% compared to a gain of 19.11% for the S&P 500 with reinvested dividends, a
gain of 33.37% for the Russell 2000, and a gain of 26.19% for the NASDAQ. During
the fiscal year ended June 30, 2004, the Fund's strongest performing investments
were in the basic materials, leisure, healthcare, and agriculture sectors. The
worst performing investments were in the telecommunications services and
consumer durables sectors.
The Meridian Value Fund's strategy is to invest in stocks, across a range of
market capitalizations, that the Investment Adviser believes are undervalued in
relation to the issuer's long-term earnings power, asset value and/or stock
market in general. Investments include both smaller company equities and
mid-to-large capitalization stocks. Based on following this strategy, the Fund's
average compounded annual return for the nine-year period from June 30, 1995 to
June 30, 2004 was 21.66% compared to 10.34% for the S&P 500 with reinvested
dividends. The Fund did not approach full investment status until June 30, 1995,
with cash comprising approximately 45-50% of the Fund's total portfolio from
inception until June 30, 1995. The Meridian Value Fund's average compounded
annual return from inception to June 30, 2004 was 18.83% compared to 10.98% for
the S&P 500 with reinvested dividends.
VALUE OF $10,000 INVESTED IN THE MERIDIAN VALUE FUND AND THE S&P 500
[PERFORMANCE LINE GRAPH]
<Table>
<Caption>
MERIDIAN VALUE FUND S&P 500
------------------- -------
6/30/94 10000 10000
6/30/95 10405 12596
6/30/96 15521 15868
6/30/97 18711 21375
6/30/98 23585 27817
6/30/99 28047 34148
6/30/00 36358 36624
6/30/01 46523 31196
6/30/02 45695 25587
6/30/03 47669 25651
6/30/04 60773 30553
</Table>
MERIDIAN VALUE FUND
AVERAGE ANNUAL TOTAL RETURN
<Table>
One Year 27.49%
Five Years 16.73%
Since Inception 19.78%
</Table>
Past performance is not predictive of future performance. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Net asset value, investment
return and principal value will fluctuate, so shares, when redeemed, may be
worth more or less than their original cost.
22
2004 TAX NOTICE TO SHAREHOLDERS (UNAUDITED)
The information set forth below is for the Fund's fiscal year as required by
Federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2005. Please
consult your tax advisor for proper treatment of this information.
Pursuant to Internal Revenue Code Section 852(b)(3), the amounts of long-term
capital gains designated for the fiscal year ended June 30, 2004 were as
follows:
<Table>
Growth Fund................................................. $19,395,152
Value Fund.................................................. $ --
</Table>
23
MERIDIAN FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report is submitted for
the information of shareholders of
Meridian Fund, Inc. It is not
authorized for distribution to
prospective investors unless
preceded or accompanied by an
effective prospectus.
---------------------------------------------------------
Officers and Directors
RICHARD F. ASTER, JR.
President and Director
MICHAEL S. ERICKSON
HERBERT C. KAY
JAMES B. GLAVIN
MICHAEL STOLPER
Directors
GREGG B. KEELING
Treasurer and Secretary
Custodian
PFPC TRUST COMPANY
Philadelphia, Pennsylvania
Transfer Agent and Disbursing Agent
PFPC, INC.
King of Prussia, Pennsylvania
(800) 446-6662
Counsel
MORRISON & FOERSTER LLP
Washington, D.C.
Auditors
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
MERIDIAN GROWTH FUND(R)
MERIDIAN VALUE FUND(R)
ANNUAL REPORT
[MERIDIAN FUND LOGO]
60 E. Sir Francis Drake Blvd.
Wood Island, Suite 306
Larkspur, CA 94939
www.meridianfund.com
Telephone (800) 446-6662
JUNE 30, 2004
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code
of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that James Glavin is qualified to serve as an audit
committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit
of the registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years are $85,540
($49,140 in 2004 and $36,400 in 2003).
Audit-Related Fees
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $ 0.00. ($0.00 in 2004 and $0.00 in 2003).
Tax Fees
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $16,600 ($8,400 in 2004 and
$8,200 in 2003).
Tax fees represent tax excise distributions and compliance services provided
in connection with the review of the Registrant's tax returns.
All Other Fees
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $
0.00. ($0.00 in 2004 and $0.00 in 2003).
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES PROVIDED TO THE COMPANY
1. Pre-Approval Requirements. The Committee shall pre-approve all
auditing services and permissible non-audit services (e.g., tax
services) to be provided to the Company by the Auditor,
including the fees therefore. The Committee may delegate to one
or more of its members the authority to grant pre-approvals. In
connection with such delegation, the Committee shall establish
pre-approval policies and procedures, including the requirement
that the decisions of any member to whom authority is delegated
under this section shall be presented to the full Committee at
each of its scheduled meetings.
2. De Minimis Exception to Pre-Approval: Pre-approval for a
permitted non-audit service shall not be required if:
a. the aggregate amount of all such non-audit services is
not more than 5% of the total revenues paid by the
Company to the Auditor in the fiscal year in which the
non-audit services are provided;
b. such services were not recognized by the Company at the
time of the engagement to be non-audit services; and
c. such services are promptly brought to the attention of
the Committee and approved prior to the completion of
the audit by the Committee or by one or more members of
the Committee to whom authority to grant such approvals
has been delegated by the Committee.
Additionally, the Committee shall pre-approve the Auditor's engagements for
non-audit services with the Adviser and any affiliate of the Adviser that
provides ongoing services to the Company in accordance with the foregoing,
if the engagement relates directly to the operations and financial reporting of
the Company, unless the aggregate amount of all services provided constitutes no
more than 5% of the total amount of revenues paid to the Auditor by the Company,
the Adviser and any affiliate of the Adviser that provides ongoing services to
the Company during the fiscal year in which the services are provided that would
have to be pre-approved by the Committee pursuant to this paragraph (without
regard to this exception).
PROHIBITED SERVICES
The Committee shall confirm with the Auditor engaged to perform the audit of the
Company that the Auditor is not performing contemporaneously any of the
following non-audit services for the Company, the Adviser, or any affiliates of
the Company or Adviser:
1. bookkeeping or other services related to the accounting records
or financial statements of the Company;
2. financial information systems design and implementation;
3. appraisal or valuation services, fairness opinions, or
contribution-in-kind reports;
4. actuarial services;
5. internal audit outsourcing services;
6. Management functions or human resources;
7. broker or dealer, investment adviser, or investment banking
services;
8. legal services and expert services unrelated to the audit; and
9. any other service that the Public Company Accounting Oversight
Board determines, by regulation, is impermissible.
The Auditor is responsible for informing the Committee of whether it believes
that a particular service is permissible or prohibited pursuant to applicable
regulations and standards.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are
as follows:
(b) N/A
(c) 100.00%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees was
zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $($0.00 in 2004 and $0.00 in 2003).
(h) The registrant's audit committee of the board of directors HAS
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant that
were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not yet applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required
by this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b))
and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of
1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Meridian Fund, Inc.(R)
------------------------------------------------------------
By (Signature and Title)* /s/ Richard F. Aster, Jr.
-----------------------------------------------
Richard F. Aster, Jr., Director & Principal
Executive Officer
(principal executive officer)
Date September 7, 2004
----------------------------------------------------------------------------
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/ Richard F. Aster, Jr.
-------------------------------------------------------
Richard F. Aster, Jr., Director & Principal
Executive Officer
(principal executive officer)
Date September 7, 2004
--------------------------------------------------------------------
By (Signature and Title)* /s/ Gregg B. Keeling
-------------------------------------------------------
Gregg B. Keeling, Principal Financial Officer,
Principal Accounting Officer, Treasurer & Secretary
(principal financial officer)
Date September 7, 2004
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.