MERIDIAN FUND
                                                 January 24, 1997
 
To Our Shareholders:
 
The Meridian Fund's net asset value per share at December 31, 1996 was $30.08.
This represents an increase of 11.19% for the calendar year. The Fund's total
return and average annual compound rate of return since inception, August 1,
1984, were 466.82% and 15.00%, respectively. The Fund's assets at the close of
the quarter were invested 25.7% in cash and cash equivalents and 74.3% in
stocks. Total net assets were $377,619,765 and there were 14,031 shareholders.
 
After a strong year in 1995, stocks surged ahead again in 1996. There was not a
meaningful correction during the year. Investors approved of the stable interest
rates, modest economic growth and the fall election results. The S&P 500
advanced from 615.93 to 740.74, a gain of 20.3 percent. The NASDAQ
(over-the-counter) index gained 22.7 percent and the Russell 2000, representing
smaller companies, gained 14.7 percent. Large capitalization stocks were the
star performers and accounted for the majority of the S&P 500 and NASDAQ gains.
For Example, Coca Cola was up 42 percent, Gillette 49 percent, IBM 66 percent,
Cisco 71 percent, Microsoft 88 percent, and Intel 131 percent.
 
Interest rates moved modestly higher. The Dow Jones Bond Index declined from
105.36 to 103.78, a drop of 1.5 percent during 1996. The yield on the five-year
treasury bond increased from 5.4 percent to 6.2 percent.
 
Nineteen ninety-six was a solid year for the economy. Gross Domestic Product
increased approximately 2.5 percent, unemployment declined, consumer prices
increased 3.3 percent and interest rates rose slightly. The economy shows no
imminent signs of danger. The consensus forecast for 1997 is for slow growth,
moderate inflation and stable interest rates. We don't argue with this forecast,
but we are somewhat cautious. This economic cycle is in its sixty-ninth month.
The average post war expansion has averaged fifty months. This late in the
business cycle it becomes increasingly difficult to show adequate growth without
experiencing higher levels of inflation and interest rates or other negative
side effects.

<PAGE>
 
The past two years have been frustrating for us. Most of the best performing
large capitalization stocks, such as Intel, Microsoft and Cisco, were too big
for us to own. Furthermore, we have been unwilling to pay the price necessary to
own the rapidly growing small and medium-sized growth stocks in our universe. We
have carried a high cash position and postured the portfolio somewhat
defensively. The discipline of being price conscious, especially late in the
business cycle, has served us well over the years. We continue to believe that
price is an important consideration when investing and we do not plan a change
in strategy. We will continue to invest in small and medium-sized growth stocks
with above average earnings prospects, but only when the price offers a positive
risk/reward relationship.
 
We enter 1997 with stock prices at record levels and the economic expansion
about to enter its seventh year. Valuations are clearly above historical
averages. Performance during the new year will depend on continued growth in
corporate profits and stable or lower interest rates. It's hard for us to
imagine that the large capitalization growth stocks such as Intel, Microsoft,
and Cisco, will offer investors good returns, given current price levels. At
some point, investors will be forced to invest in other sectors of the market to
achieve performance. Good relative performance during the new year, in our
opinion, will shift to some of the less fashionable smaller and mid cap
companies.
 
We sold our positions in Cato Corporation, MFS Communications, Neuromedical
Systems and Riscorp, Inc. during the quarter. We purchased shares in Arden
Realty Group, Mazel Stores, Inc., Nu Skin Asia Pacific, Inc. and Verifone, Inc.
 
We have owned shares in Kohl's Corporation for some time. Kohl's unique
combination of discount and department store strengths has given the company an
edge in this competitive retail environment. Merchandise is more focused than in
department stores, pricing is aggressive and stores are more appealing than
discounters. The company has 150 large stores, primarily in the midwest. Plans
are for approximately 20 percent annual square foot expansion for the next few
years. Immediate expansion will include filling in existing markets and going
into Washington DC and Philadelphia. Kohl's is well managed, has an excellent
track record and good prospects. The shares sell at approximately 22 times our
1997 estimate.
 
We wish everyone a happy and prosperous New Year.
 
                                       Sincerely,
 
                                       /s/ Richard F. Aster, Jr.
                                       Richard F. Aster, Jr.
 
                                       President
 
                                        2

<PAGE>
 
SCHEDULE OF INVESTMENTS AND NET ASSETS
DECEMBER 31, 1996
================================================================================
 
<TABLE>
<CAPTION>
                                                                 Shares         Value
                                                                 -------     ------------
     <S>                                                         <C>         <C>
     COMMON STOCK - 74.3%
       BANKING AND FINANCE - 2.2%
          Bancorp Hawaii, Inc. ................................  200,000       $8,400,000
       CELLULAR COMMUNICATIONS - 4.4%
          AirTouch Communications, Inc. .......................  358,000        9,039,500
          Vanguard Cellular Systems, Inc. - Class A............  470,000        7,402,500
       CONSUMER PRODUCTS - 2.8%
          Nu Skin Asia Pacific, Inc. ..........................  265,000        8,181,875
          The York Group, Inc. ................................  120,000        2,340,000
       CONSUMER SERVICES - 7.9%
          Service Corp. International..........................  440,000       12,320,000
          Sotheby's Holdings, Inc. - Class A...................  480,000        8,940,000
          Stewart Enterprises, Inc. - Class A..................  255,000        8,670,000
       ENERGY - 2.6%
          Belden & Blake Corp. ................................  265,000        6,757,500
          Lomak Petroleum, Inc. ...............................  172,000        2,945,500
       HEALTH SERVICES - 12.2%
          American Medical Response, Inc. .....................  236,000        7,670,000
          Beverly Enterprises, Inc. ...........................  490,000        6,247,500
          Health Management Associates, Inc. ..................  380,000        8,550,000
          Quorum Health Group, Inc. ...........................  435,000       12,941,250
          Vivra, Inc. .........................................  395,000       10,911,875
       INDUSTRIAL SERVICES - 2.3%
          Paychex, Inc. .......................................  170,000        8,744,375
       MEDIA - 2.3%
          British Sky Broadcasting Group plc...................  165,000        8,662,500
       REAL ESTATE INVESTMENT TRUSTS - 12.9%
          Arden Realty Group, Inc. ............................  355,000        9,851,250
          Equity Residential Properties Trust..................  210,000        8,662,500
          Oasis Residential, Inc. .............................  270,000        6,142,500
          Spieker Properties, Inc. ............................  285,000       10,260,000
          Tanger Factory Outlet Centers, Inc. .................  220,000        5,967,500
          The Town and Country Trust...........................  540,000        7,897,500
</TABLE>
 
                                  (unaudited)
 
                                        3

<PAGE>
 
SCHEDULE OF INVESTMENTS AND NET ASSETS (CONTINUED)
DECEMBER 31, 1996
================================================================================
 
<TABLE>
<CAPTION>
                                                                 Shares         Value
                                                                 -------     ------------
 
     COMMON STOCK (continued)
     <S>                                                         <C>         <C>
       RESTAURANTS - 2.4%
          Buffets, Inc. .......................................  550,000       $5,018,750
          Cracker Barrel Old Country Store, Inc. ..............  164,000        4,161,500
       RETAIL - 14.0%
          Bed, Bath and Beyond, Inc. ..........................  340,000        8,245,000
          Heilig-Meyers Company................................  354,600        5,762,250
          Kohl's Corporation...................................  310,000       12,167,500
          Mac Frugals Bargains * Closeouts Inc. ...............  340,200        8,887,725
          Mazel Stores, Inc. ..................................   82,000        1,845,000
          The Gymboree Corporation.............................  260,000        5,947,500
          Value City Department Stores, Inc. ..................  400,000        4,200,000
          Williams-Sonoma, Inc. ...............................  155,000        5,638,125
       TECHNOLOGY - 8.3%
          Molex Inc. - Class A.................................  226,250        8,060,156
          National Data Corp. .................................  200,000        8,700,000
          VeriFone, Inc. ......................................  225,000        6,637,500
          Xilinx, Inc. ........................................  210,000        7,730,625
                                                                             ------------
       TOTAL COMMON STOCK
          (Identified cost $213,323,548)................................      280,507,256
       U.S. GOVERNMENT OBLIGATIONS
          (Identified cost $83,927,843) - 22.5%
       U.S. Treasury Bills @ 5.120% due 01/09/97........................       84,905,745
                                                                             ------------
       TOTAL INVESTMENTS (Identified Cost $297,251,391).................      365,413,001
     CASH AND OTHER ASSETS LESS LIABILITIES - 3.2%......................       12,206,764
                                                                             ------------
     NET ASSETS - 100%..................................................     $377,619,765
                                                                             ============
     Shares of capital stock outstanding................................       12,553,460
                                                                             ============
     Net asset value per share..........................................           $30.08
                                                                             ============
</TABLE>
 
                                  (unaudited)
 
                                        4

<PAGE>
 
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
================================================================================
 
<TABLE>
     <S>                                                                     <C>
     ASSETS
       Investments (Cost $297,251,391)....................................   $365,413,001
       Cash and cash equivalents..........................................     13,215,791
       Receivables for:
          Sales of captial stock..........................................        159,218
          Dividends.......................................................        385,814
          Interest........................................................         26,072
       Prepaid expenses...................................................         11,821
                                                                             ------------
          TOTAL ASSETS....................................................    379,211,717
                                                                             ------------
 
     LIABILITIES
       Payables for:
          Capital stock repurchased.......................................        466,500
          Distributions...................................................        735,682
       Accrued expenses...................................................        389,770
                                                                             ------------
          TOTAL LIABILITIES...............................................      1,591,952
                                                                             ------------
     NET ASSETS...........................................................   $377,619,765
                                                                             ============
     Shares of capital stock outstanding, par value $.01 (25,000,000
       shares authorized).................................................     12,553,460
                                                                             ============
     Net asset value per share (offering and redemption price)............         $30.08
                                                                             ============
     Net assets consist of:
       Paid in capital....................................................   $304,187,510
       Accumulated net realized gain......................................      6,180,290
       Net unrealized appreciation on investments.........................     67,183,708
       Undistributed net investment income................................         68,257
                                                                             ------------
                                                                             $377,619,765
                                                                             ============
</TABLE>
 
                                  (unaudited)
 
                                        5

<PAGE>
 
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1996
================================================================================
 
<TABLE>
     <S>                                                       <C>             <C>
     INVESTMENT INCOME
       Dividends............................................    $2,004,353
       Interest.............................................     2,561,501
                                                               -----------
            Total investment income.........................                    $4,565,854
     EXPENSES
       Investment advisory fees.............................     1,495,083
       Transfer agent fees..................................       164,775
       Registration and filing fees.........................        43,812
       Pricing fees.........................................        36,800
       Reports to shareholders..............................        34,960
       Custodian fees.......................................        32,200
       Auditing fee.........................................        12,880
       Association dues.....................................        11,592
       Insurance............................................         9,397
       Directors' fees and expenses.........................         3,419
       Legal................................................           920
       Taxes................................................           806
                                                               -----------
            Total expenses..................................                     1,846,644
       Net investment income................................                     2,719,210
                                                                               -----------
     NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS
       Net realized gain on investments.....................    15,030,598
       Net decrease in unrealized appreciation on
          investments.......................................    (5,807,805)
                                                               -----------
       Net realized and unrealized gains on investments.....                     9,222,793
                                                                               -----------
     NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................     $11,942,003
                                                                               ===========
</TABLE>
 
                                  (unaudited)
 
                                        6

<PAGE>
 
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
 
<TABLE>
<CAPTION>
                                                               Period Ended       Year Ended
                                                            December 31, 1996    June 30, 1996
                                                            ------------------   -------------
     <S>                                                    <C>                  <C>
     OPERATIONS
     Net investment income...............................        $2,719,210         $3,658,897
     Net realized gains on investments...................        15,030,598         36,920,382
     Net increase (decrease) in unrealized appreciation
       of investments....................................        (5,807,805)        29,588,487
                                                                -----------        -----------
       Net increase from operations......................        11,942,003         70,167,766
     DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
     Dividends from net investment income................        (4,397,895)        (3,746,716)
     Distributions from net realized capital gains.......       (33,152,104)        (6,610,825)
                                                                -----------        -----------
       Total distributions...............................       (37,549,999)       (10,357,541)
                                                                -----------        -----------
     CAPITAL SHARE TRANSACTIONS
     Proceeds from sale of stock.........................        31,782,376         82,130,543
     Reinvestment of distributions.......................        35,326,505          9,581,641
     Less: redemptions...................................       (47,968,140)       (95,588,642)
                                                                -----------        -----------
       Increase (decrease) resulting from capital share
          transactions...................................        19,140,741         (3,876,458)
                                                                -----------        -----------
     Total decrease in net assets........................        (6,467,255)        55,933,767
     NET ASSETS
     Beginning of period.................................       384,087,020        328,153,253
                                                                -----------        -----------
     End of period (includes undistributed net investment
       income of $68,257 and $1,746,942, respectively)...      $377,619,765       $384,087,020
                                                                ===========        ===========
</TABLE>
 
                                  (unaudited)
 
                                        7

<PAGE>
 
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
 
<TABLE>
<CAPTION>
                 For the
                six months
                  ended                                       For the fiscal year ended June 30,
               December 31,   ---------------------------------------------------------------------------------------------------
                   1996         1996       1995       1994      1993      1992      1991      1990      1989     1988      1987
               ------------   --------   --------   --------   -------   -------   -------   -------   ------   -------   -------
<S>            <C>            <C>        <C>        <C>        <C>       <C>       <C>       <C>       <C>      <C>       <C>
Net Asset
Value - Beginning
 of Period.....     $32.21      $27.29     $24.27     $23.87    $18.97    $17.24    $17.71    $15.93   $13.65    $15.29    $17.02
                 --------     --------   --------   --------   -------   -------   -------   -------   ------   -------   -------
Income from
Investment
 Operations
---------------
Net Investment
 Income
 (loss)........        .22         .30        .27        .09      (.01)      .07       .20       .06      .41      (.11)      .02
Net Gains
 (Losses) on
 Securities
 (both realized
 and
 unrealized)
 ..............        .77        5.47       3.63        .76      5.51      3.45       .49      2.84     1.87      (.29)     (.52)
                 --------     --------   --------   --------   -------   -------   -------   -------   ------   -------   -------
Total From
 Investment
 Operations....        .99        5.77       3.90        .85      5.50      3.52       .69      2.90     2.28      (.40)     (.50)
                 --------     --------   --------   --------   -------   -------   -------   -------   ------   -------   -------
Less Dividends
and
Distributions
---------------
Dividends from
 net investment
 income........      (0.36)       (.31)      (.18)      (.02)     (.04)     (.09)     (.12)     (.48)     .00      (.02)     (.07)
Distributions
 from net
 realized
 capital
 gains.........      (2.76)       (.54)      (.70)      (.43)     (.56)    (1.70)    (1.04)     (.64)     .00     (1.22)    (1.16)
                 --------     --------   --------   --------   -------   -------   -------   -------   ------   -------   -------
Total Dividends
 and
 Distributions...      (3.12)     (.85)      (.88)      (.45)     (.60)    (1.79)    (1.16)    (1.12)     .00     (1.24)    (1.23)
                 --------     --------   --------   --------   -------   -------   -------   -------   ------   -------   -------
Net Asset
 Value - End of
 Period........     $30.08      $32.21     $27.29     $24.27    $23.87    $18.97    $17.24    $17.71   $15.93    $13.65    $15.29
                 ========     ========   ========   ========   =======   =======   =======   =======   ======   =======   =======
Total Return...      3.12%      21.40%     16.44%      3.48%    29.50%    21.00%     5.62%    19.71%   16.70%    (2.99%)   (2.57%)
                 ========     ========   ========   ========   =======   =======   =======   =======   ======   =======   =======
Ratios/Supplemental
Data
---------------
Net Assets, End
 of Period (in
 thousands)....   $377,620    $384,087   $328,153   $199,191   $78,581   $18,363   $12,350   $11,058   $9,598   $10,706   $18,701
Ratio of
 Expenses to
 Average Net
 Assets........      0.97%*      0.96%      1.06%      1.22%     1.47%     1.75%     1.68%     2.08%    2.01%+    1.85%+    1.72%
Ratio of Net
 Investment
 Income (Loss)
 to Average Net
 Assets........      1.42%*      0.99%      1.18%       .38%     (.01%)     .24%      .98%      .14%    2.83%+    (.59%)+    .15%
Portfolio
 Turnover
 Rate..........        32%*        34%        29%        43%       61%       61%       85%       66%      62%       58%       88%
Average
 Commission
 Paid per
 Share.........    $0.0592     $0.0588         --         --        --        --        --        --       --        --        --
</TABLE>
 
+ Not representative of expenses incurred by the Fund as the Adviser waived its
fee and/or paid certain expenses of the Fund.
 
* annualized
      The accompanying notes are an integral part of the financial statements.
                                  (unaudited)
 
                                        8

<PAGE>
 
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 1996
================================================================================
 
1. SIGNIFICANT ACCOUNTING POLICIES: Meridian Fund (the "Fund") a series of
   Meridian Fund, Inc. (the "Company"), began operations on August 1, 1984. The
   Fund was registered on August 1, 1984, under the Investment Company Act of
   1940, as amended, as a no-load, diversified, open-end management investment
   company. The primary investment objective of the fund is to seek long-term
   growth of capital. In addition to the Meridian Fund, the Company also offers
   the Meridian Value Fund. The following is a summary of significant accounting
   policies:
 
    a.  SECURITY VALUATIONS: Investments are stated at market value based on
        latest quoted prices. Short-term securities with maturity dates of 60
        days or less are valued at amortized cost (premiums and discounts are
        amortized on a straight-line basis) which has been determined by the
        Fund's Board of Directors to represent fair value.
 
    b.  FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
        requirements of the Internal Revenue 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.
        The aggregate cost of investments for federal income tax purposes is
        $297,251,391, the aggregate gross unrealized appreciation is $76,146,653
        and the aggregate gross unrealized depreciation is $8,962,945 resulting
        in net unrealized depreciation of $67,183,708.
 
    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.
 
    e.  EXPENSES: Expenses arising in connection with the Fund are charged
        directly to the Fund. Expenses common to both series of Meridian Fund,
        Inc. are allocated to each series in proportion to their relative net
        assets.
 
    f.  USE OF ESTIMATES: The preparation of financial statements 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 the estimates.
 
    g.  DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund records dividends
        and distributions to its shareholders on the record date. The amount of
        dividends and 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 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. Dividends and distributions which exceed net
        investment income and net realized capital gains for
 
                                        9

<PAGE>
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED DECEMBER 31, 1996
================================================================================
 
        financial reporting purposes but not for tax purposes are reported as
        dividends in excess of net investment income or distributions in excess
        of net realized capital gains. 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.
 
2. RELATED PARTIES: The Fund has entered into a management agreement (the
   Investment Advisory Fee) with Aster Capital Management, Inc. ("Aster
   Capital") for calendar 1996. Certain Officers and/or Directors of the Fund
   are also Officers and/or Directors of Aster Capital.
 
3. ADVISORY FEE AND EXPENSE LIMITATION: The Investment Adviser receives from the
   Fund as compensation for its services an annual fee of 1% of the first
   $50,000,000 of the Fund's net assets and 0.75% of the Fund's net assets in
   excess of $50,000,000. The fee is paid monthly and calculated based on that
   month's average net assets. The Investment Adviser has agreed to reimburse
   the Fund for any fiscal year's expenses, including advisory fees, which
   exceed the most stringent limits prescribed by any state in which the Fund's
   shares are offered for sale. Although state requirements may change, the most
   stringent state expense limitations currently require the Investment Adviser
   to reimburse the Fund for operating expenses incurred in any fiscal year
   which exceed 2 1/2% of the first $30 million of average net assets, 2% of the
   next $70 million of average net assets and 1 1/2% of the remaining average
   net assets. Reimbursement, if any, will be on a monthly basis, subject to
   year-end adjustment.
 
4. CAPITAL STOCK TRANSACTIONS: The Fund has authorized 25,000,000 shares of
   common stock at a par value of $.01 per share. Transactions in capital stock
   for the period ended December 31, 1996 and June 30, 1996, were as follows:
 
<TABLE>
<CAPTION>
                                                      December         June
                                                        1996           1996
                                                     ----------     ----------
        <S>                                          <C>            <C>
        Shares sold                                   1,009,660      2,717,761
        Shares issued on reinvestment of
          distributions                               1,166,025        322,055
                                                     -----------    -----------
                                                      2,175,685      3,039,816
        Shares redeemed                              (1,546,455)    (3,138,480)
                                                     -----------    -----------
        Net increase (decrease)                         629,230        (98,664)
                                                     ===========    ===========
</TABLE>
 
5. COMPENSATION OF DIRECTORS AND OFFICERS: Directors and officers of the Company
   who are directors and/or officers of Aster Capital Management, Inc. receive
   no compensation from the Fund. Directors of the Company who are not
   interested persons as defined in the Investment Company Act of 1940 receive
   compensation in the amount of $1,000 per annum and a $1,000 purchase of
   Meridian Fund or Meridian Value Fund stock, plus expenses for each Board of
   Directors meeting attended. The aggregate compensation due the unaffiliated
   Directors of the Fund as of December 31, 1996 was $2,000.
 
                                       10

<PAGE>
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED DECEMBER 31, 1996
================================================================================
 
6.  INVESTMENTS:
 
   a. COST OF INVESTMENTS: The cost of investments purchased, excluding
      short-term obligations, and the proceeds from sales of investments for the
      period ended December 31, 1996 were $44,330,382 and $66,105,663,
      respectively.
 
   b. INCOME PRODUCING INVESTMENTS: At December 31, 1996, those investments in
      securities which produce investment income (cash dividends) are Arden
      Realty Group, Bancorp Hawaii, Inc., British Sky Broadcasting Group plc,
      Cracker Barrel Old Country Store, Inc., Equity Residential Properties
      Trust, Heilig-Meyers Company, Kohl's Corporation, Lomak Petroleum, Inc.,
      Molex, Inc. - Class A, National Data Corp., Oasis Residential, Inc.,
      Paychex, Inc., Service Corp. International, Sotheby's Holdings, Inc.,
      Spieker Properties, Inc., Stewart Enterprises, Inc., Tanger Factory Outlet
      Centers, Inc., The Town and Country Trust and The York Group, Inc. All
      other investments in securities are non-income producing.
 
                                       11

<PAGE>
 
                                                     MERIDIAN FUND
================================================================================
 
                          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
 
                                PAUL A. ROBINSON
                            Treasurer and Secretary
                                   Custodian
                                BANK OF NEW YORK
                               New York, New York
                      Transfer Agent and Disbursing Agent
                               FPS SERVICES, INC.
                         King of Prussia, Pennsylvania
                                 (800) 446-6662
                                    Counsel
                              MORRISON & FOERSTER
                           San Francisco, California
                                    Auditors
                                PRICE WATERHOUSE
                           San Francisco, California
 
                               SEMI ANNUAL REPORT
                                     [LOGO]
                         60 E. SIR FRANCIS DRAKE BLVD.
                             WOOD ISLAND, SUITE 306
                               LARKSPUR, CA 94939
                                 (415) 461-6237
 
                            TELEPHONE (800) 446-6662
 
                               DECEMBER 31, 1996

<PAGE>