BOULDER TOTAL RETURN FUND, INC.
Semi-Annual Report
May 31, 2002
Dear Shareholder:
Your Boulder Total Return Fund achieved a 15.7% total return on net asset value
(NAV) for the 6 months ending 5/31/2002. This compares to the NEGATIVE 4.9%
total return for the S&P 500 Index for the same period. In terms of dollars,
your Fund started its fiscal period on December 1, 2001 with an NAV of $17.36
per share and ended on May 31, 2002 at $19.92 per share. We paid a $.14 dividend
in December 2001; so the total dollar return was $2.70 per share.
During the last 6 months, we've made a few new purchases and we've sold a few of
our holdings. Our complete list of holdings as of May 31, 2002 is included in
this report and will be posted on our website. Since last November, we've bought
several utility companies, including Xcel Energy, Northwestern, Alliant Energy,
and Aquila, and they now make up approximately 12% of our portfolio. We like
utilities for the dividends they are throwing off and for their long-term hedge
against inflation. Other notable purchases are three pharmaceutical companies -
Bristol-Myers, Merck, and Schering-Plough.
Regarding dividends, the Fund is earning more in dividend income than it is
spending on Fund expenses. In particular the cost of the Fund's Taxable Auction
Market Preferred Stock (AMPs) leverage has been very low (e.g., the interest
rate from our last auction was 1.90% on an annualized basis). Thus, we expect to
pay a dividend from the Fund's income in December, barring anything unforeseen.
While we don't necessarily see dividend paying stocks as the most tax-efficient
return on investing Fund assets, for the foreseeable future, we think that
collecting dividends on at least a portion of Fund assets will be more lucrative
than most of the investment options on our radar screen.
Some notable sales we made during the last six months are Dana Corporation and
The Limited (which we ended up with as a result of The Limited's acquisition of
Intimate Brands). We also sold a few REITs and RICs. We took some fairly
sizeable gains in these sales and, in fact, now have net realized gains for the
current year.
While we are pleased with the Fund's recent performance, there are 2 caveats you
should bear in mind:
First, not everything has come up roses for us in the equity markets. At the
time of this writing, some of the stocks we purchased have declined since the
May 31st date of this semi-annual report. If you track it, you've seen this
decline reflected in our NAV. The NAV as of 6/28/02 was $17.52, down from its
recent all time high of $20.55 in May. Since we've been fully invested in
equities, this is the first time we've seen any substantial decline in our NAV.
Most of the decline was due to our more recent purchases.
So, are we worried? No. We bought good companies at reasonable prices. We will
rarely, if ever, get lucky enough to buy at the bottom of the market (although
we like trying!!). We still like the companies we bought, and although we could
be buying them a little cheaper today, we felt we were getting a good value when
we did buy. Might we buy more when the prices of these good companies get lower
than where we bought? We might. As I have emphasized in the past, we are much
more concerned about where these companies will be valued 5 or 10 or even 20
years down the road, than where they are valued on a day-to-day and week-to-week
basis.
The second caveat is that the equities markets have changed dramatically over
the past 3 years and shareholders should not expect the same kind of returns
from the Fund going forward. Shareholders who've been with us for the past 3
years have been rewarded with fairly high returns. But currently in the market
place, we don't see the same opportunities we saw 3 years ago and certainly
don't see any stocks that have "home run" potential. Trying to hit a home run
with stocks in this market is like swinging at a bad pitch. Our objective is to
safely reach base each time we step up to bat and repeat that time and again.
Reaching base safely and consistently will keep our Fund at bat and ready at the
plate so that when a good "pitch" finally comes along, we can swing away.
With Warren Buffett and other savvy managers predicting overall returns in the
range of 7% over the next decade, we can't really expect to beat these
predictions by much. Moreover, I believe there exists a perverse relationship
between expectations and reality. I think that the harder someone tries to beat
the market, the more they will increase their risk, and thus almost always
produce a lower outcome than expected. Consequently, we won't be trying to beat
Mr. Buffett's prediction with most of our holdings or new purchases. And you
should not expect the Fund to achieve better than this prediction over the next
10 years or so. Most of our purchases for the foreseeable future will be focused
on companies with relatively safe, assured dividends, and hopefully some
appreciation over time. Of course we will always look for and take advantage of
companies that we think may do better, but we're not going to try to predict the
next hot fad or sector. I just don't have any ability to do that. So, instead we
intend to focus on keeping what we have, trying to earn a 7% or so return, and
sleeping well at night. If you understand and appreciate this approach, then you
will probably be content with this Fund. If you're trying to knock the cover off
the ball with your investments, then our Fund is probably the wrong place to
look.
We've changed our web address to www.boulderfunds.net and have included a new
section called "Things to consider when deciding whether to own the Boulder
Funds." We hope you find it useful.
Sincerely
/S/ SIGNATURE
Stewart R. Horejsi
July 1, 2002
------------
NOTHING IN THIS SEMI-ANNUAL REPORT SHOULD BE CONSIDERED AS INVESTMENT ADVICE.
THIS LETTER EXPLAINS THE MANAGERS' VIEWS AS OF ITS DATE, WHICH MAY HAVE
SUBSEQUENTLY CHANGED.
2
BOULDER TOTAL RETURN FUND, INC.
EXHIBIT 1
(UNAUDITED)
NET ASSET VALUE AND MARKET PERFORMANCE FOR A COMMON SHARE
FOR THE SIX MONTHS ENDING 05/31/02
NAV MARKET
------ ------
November 30, 2001........................... $17.36 $16.05
May 31, 2002................................ $19.92 $18.32
------ ------
Change................................... $ 2.56 $ 2.27
Dividends Paid.............................. $ 0.14 $ 0.14
------ ------
Net Increase in Value....................... $ 2.70 $ 2.41
Net Increase % (No Dividend Reinvestment)... 15.6% 15.0%
Low NAV in 6 mos. ending 5/31/02 was $17.51 on 12/14/01
High NAV in 6 mos. ending 5/31/02 was $20.55 on 5/3/02
Low Market in 6 mos. ending 5/31/02 was $15.55 on 12/13/01
High Market in 6 mos. ending 5/31/02 was $18.55 on 5/17/02
EXHIBIT 2
(UNAUDITED)
BTF TOTAL RETURNS FOR QTRS. AND YEAR ENDING 5/31/02 VS. S&P 500
DIVIDENDS REINVESTED ON DIVIDEND PAY DATE
BTF BTF
NAV MARKET S&P 500
------ ------- -------
Quarter Ending 5/31/02 ................... 4.35% 14.50% -2.48%
Quarter Ending 2/28/02 ................... 10.91% 0.55% -2.51%
Quarter Ending 11/30/01 .................. -1.20% -3.89% 0.86%
Quarter Ending 8/31/01 ................... -0.68% 10.74% -9.44%
------ ------- -------
Trailing 12 Months Ending 5/31/02......... 13.58% 22.53% -13.85%
3
BOULDER TOTAL RETURN FUND, INC.
EXHIBIT 3
(UNAUDITED)
CHANGE IN PRINCIPAL VALUE OF ASSET CLASSES 11/30/2001 TO 05/31/2002
COMMON STOCK INVESTMENTS
--------------------------------------------------------------------
RICS REITS INDUSTRIALS TOTAL
Beginning Market Value............... 11/30/01 $ 21,923,900 $56,596,770 $132,308,575 $210,829,245
------------- ----------- ------------ ------------
Cost of Purchases.................... 12/1/01-5/31/02 3,416,631 16,851,236 59,891,450 80,159,317
Proceeds from Sales.................. 12/1/01-5/31/02 17,475,156 15,397,676 18,145,458 51,018,290
------------- ----------- ------------ ------------
Net Purchase/(Sales)................. (14,058,525) 1,453,560 41,745,992 29,141,027
Beginning Market Value Plus
Net Purchases/(Sales)............. 7,865,375 58,050,330 174,054,567 239,970,272
Net Appreciation/(Depreciation)...... 746,628 5,979,137 17,114,103 23,839,868
------------- ----------- ------------ ------------
Ending Market Value.................. 5/31/02 $ 8,612,003 $64,029,467 $191,168,670 $263,810,140
Number of Issues Held................ 5/31/02 6 9 15
Cash and Other....................... $ 1,280,075
------------
Total........................... $265,090,215
============
EXHIBIT 4
(UNAUDITED)
PRO-FORMA ANNUAL NET INCOME FROM LEVERAGE
AND OTHER INCOME AS OF 5/31/2002
The pro-forma table below should only be considered as an example of how the
proceeds from the leverage are utilized, since such proceeds are not set aside
nor targeted for any particular investment(s).
INCOME FROM USE OF LEVERAGE SHARES COST ANNUAL INCOME YLD. ON COST
--------------------------- ------ ---- ------------- ------------
All RICs in BTF................................... $ 8,161,162 $ 549,628 6.73%
All REITs in BTF.................................. $55,554,547 $5,524,048 9.94%
Alliant Energy.................................... 400,000 $11,332,893 $ 800,000 7.06%
Xcel Energy....................................... 107,188 $ 2,451,398 $ 160,783 6.56%
----------- ----------
Total........................................ $77,500,000 $7,034,459 9.08%
AMPS DIVIDEND AND FUND EXPENSES RATE PRINCIPAL ANNUAL COST
------------------------------- ---- --------- -----------
AMPs (1) 1.90%....................................... 2.31% $ 77,500,000 $1,790,018
Fund Expenses (2).................................... 1.62% $265,000,000 $4,293,000
----------
Total Expenses.................................. $6,083,018
----------
NET INVESTMENT INCOME FROM LEVERAGE............. $ 951,441
OTHER INCOME
------------
Income from Common Stocks............................ $2,726,928
Income from Cash (less Cash income above)............ $ 21,760
----------
Total Other Income.............................. $2,748,688
----------
Total Net Investment Income..................... $3,700,129
--------------
(1) The June 18, 2002 AMPs auction rate of 1.90% + 0.4097% of Fixed Costs directly associated with the AMPs totaling 2.31%.
(2) The expense ratio of 1.62% is exclusive of the Fixed Costs directly associated with the AMPs.
4
BOULDER TOTAL RETURN FUND, INC. PORTFOLIO OF INVESTMENTS
MAY 31, 2002 (UNAUDITED)
SHARES COST VALUE
------ ------- -------
COMMON STOCKS - 99.5%
BUILDING MATERIALS - 0.7% USG Resources Corporation+ .............. 300,000 $ 5,483,729 $ 1,854,000
------------ ------------
DIVERSIFIED - 29.5% Berkshire Hathaway Inc., Class A+ ....... 750 41,005,360 55,950,000
Berkshire Hathaway Inc., Class B+ ....... 9,010 17,971,270 22,272,720
------------ ------------
TOTAL DIVERSIFIED ............ 58,976,630 78,222,720
------------ ------------
FINANCIAL SERVICES - 6.6% Citigroup, Inc. ......................... 293,360 6,806,230 12,667,285
Providian Financial Corporation ......... 600,000 2,918,893 4,890,000
------------ ------------
TOTAL FINANCIAL SERVICES ............ 9,725,123 17,557,285
------------ ------------
INSURANCE - 5.1% The Progressive Corporation ............ 180,000 4,156,018 10,657,800
Wesco Financial Corporation ............. 9,000 2,187,680 2,781,000
------------ ------------
TOTAL INSURANCE ............ 6,343,698 13,438,800
------------ ------------
INVESTMENT COMPANIES - 3.2% Blackrock Advantage Terminal Trust ...... 59,000 663,845 670,240
Hyperion 2005 Investor Grade Opportunity
Term Trust ............................ 60,000 582,558 594,000
Morgan Stanley Emerging Markets Debt Fund 139,000 981,124 1,189,840
TCW/DW Term Trust 2002 .................. 123,000 1,306,952 1,308,720
TCW/DW Term Trust 2003 .................. 339,900 3,650,134 3,660,723
Templeton Emerging Market Income Fund ... 96,000 976,549 1,188,480
------------ ------------
TOTAL INVESTMENT COMPANIES ............ 8,161,162 8,612,003
------------ ------------
MEDICAL - DRUG/
DIVERSIFIED - 4.9% Bristol-Meyers Squibb Company ........... 125,000 3,993,400 3,890,000
Merck & Company, Inc. ................... 75,000 4,106,602 4,282,500
Schering-Plough Corporation ............. 178,000 5,074,101 4,708,100
------------ ------------
TOTAL MEDICAL-DRUG/DIVERSIFIED ............ 13,174,103 12,880,600
------------ ------------
REITS - 24.2% Boykin Lodging Company .................. 300,000 3,128,986 2,853,000
First Industrial Realty Trust Inc. ...... 400,000 11,057,125 13,724,000
Hospitality Property Trust .............. 400,000 9,713,522 14,132,000
HRPT Properties Trust ................... 1,300,000 11,115,584 11,466,000
JDN Realty Corporation .................. 460,100 4,999,840 5,691,437
Pennsylvania Real Estate Investment Trust 100,000 1,730,030 2,590,000
Post Properties, Inc. ................... 320,000 10,639,453 9,920,000
Tanger Factory Outlet Centers, Inc. ..... 110,000 2,570,864 2,981,000
Thornburg Mortgage, Inc. ................ 34,200 599,143 672,030
------------ ------------
TOTAL REITS ............ 55,554,547 64,029,467
------------ ------------
RETAIL-RESTAURANTS - 8.9% Yum! Brands Inc.+ ....................... 370,000 10,220,446 23,643,000
------------ ------------
UTILITIES - 16.4% Alliant Energy Corporation .............. 400,000 11,332,893 11,008,000
Aquila Inc. ............................. 895,000 13,068,183 11,590,250
Northwestern Corporation ................ 470,500 8,821,866 8,294,915
Xcel Energy, Inc. ....................... 590,000 13,494,406 12,679,100
------------ ------------
TOTAL UTILITIES ............ 46,717,348 43,572,265
------------ ------------
TOTAL COMMON STOCKS ............ 214,356,786 263,810,140
------------ ------------
REPURCHASE AGREEMENT - 1.0% Agreement with PNC Capital Markets, 1.750% PAR
dated 05/31/02, to be repurchased at $2,662,388 ------
on 06/03/02, collateralized by $2,480,000 U.S.
Treasury Note, 7.250% due 05/15/04
(value $2,670,650) ............................ 2,662,000 2,662,000 2,662,000
------------ ------------
TOTAL INVESTMENTS - 100.5% .................................................................. $217,018,786* 266,472,140
============
OTHER ASSETS AND LIABILITIES - (0.5)% ...................................................................... (1,381,925)
------------
NET ASSETS - 100.0% ........................................................................................ $265,090,215
============
-----------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
BOULDER TOTAL RETURN FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
MAY 31, 2002 (UNAUDITED)
ASSETS:
Investments, at value (Cost $217,018,786) (Note 1)
See accompanying schedule ...................................................................... $ 266,472,140
Cash ............................................................................................. 381
Receivable for investment securities sold ........................................................ 611,194
Dividends and interest receivable ................................................................ 418,238
Prepaid expenses ................................................................................. 44,775
---------------
TOTAL ASSETS ............................................................................... 267,546,728
LIABILITIES
Payable for investment securities purchased ..................................... $ 1,999,290
Investment co-advisory fees payable (Note 2) .................................... 284,808
Administration fee and co-administration fee payable (Note 2) ................... 41,551
Directors' fees and expenses payable (Note 2) ................................... 19,540
Accrued expenses and other payables ............................................. 111,324
---------------
TOTAL LIABILITIES .......................................................................... 2,456,513
---------------
NET ASSETS .......................................................................................... $ 265,090,215
===============
NET ASSETS consist of:
Undistributed net investment income ............................................................ $ 760,559
Accumulated net realized gain on investments sold .............................................. 8,547,944
Unrealized appreciation of investments ......................................................... 49,453,354
Par value of Common Stock ...................................................................... 94,167
Paid-in capital in excess of par value of Common Stock ......................................... 128,734,191
Taxable Auction Market Cumulative Preferred Stock (Note 5) ..................................... 77,500,000
---------------
TOTAL NET ASSETS ........................................................................... $ 265,090,215
===============
PER SHARE
---------
NET ASSETS AVAILABLE TO:
Taxable Auction Market Preferred Stock (775 shares outstanding) redemption
value (Note 5) ............................................................ $ 100,000.00 $ 77,500,000
Accumulated undeclared dividends on Taxable Auction Market Preferred
Stock (Note 5) ............................................................ 50.56 39,182
--------------- ---------------
$ 100,050.56 77,539,182
===============
Common Stock (9,416,743 shares outstanding) ................................... $ 19.92 187,551,033
============
TOTAL NET ASSETS .................................................................................... $ 265,090,215
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
6
BOULDER TOTAL RETURN FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED MAY 31, 2002 (UNAUDITED)
INVESTMENT INCOME:
Dividends ........................................................................................ $ 4,241,859
Interest ......................................................................................... 179,465
----------------
TOTAL INVESTMENT INCOME .................................................................... 4,421,324
EXPENSES:
Investment co-advisory fees (Note 2) .......................................... $ 1,608,409
Administration fee and co-administration fee (Note 2) ......................... 235,794
Preferred Stock broker commissions and Auction Agent fees . . ................. 99,005
Directors' fees and expenses (Note 2) ......................................... 52,144
Insurance expense (Note 2) .................................................... 19,156
Custodian fees ................................................................ 16,959
Legal fees .................................................................... 7,233
Shareholder servicing agent fees .............................................. 5,841
Other ......................................................................... 57,790
---------------
TOTAL EXPENSES ............................................................................. 2,102,331
----------------
NET INVESTMENT INCOME ............................................................................... 2,318,993
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold during the period .......................................... 10,942,790
Unrealized appreciation of investments during the period ......................................... 12,869,489
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ..................................................... 23,812,279
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................................ $ 26,131,272
----------------
LESS: PREFERRED STOCK DIVIDENDS ..................................................................... (842,379)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
APPLICABLE TO COMMON SHARES .................................................................... $ 25,288,893
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
7
BOULDER TOTAL RETURN FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
SIX MONTHS ENDED
MAY 31, 2002 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 2001
------------------ -------------------
OPERATIONS:
Net investment income .......................................................... $ 2,318,993 $ 5,975,939
Net realized gain on investments sold during the period ........................ 10,942,790 6,539,577
Unrealized appreciation of investments during the period ....................... 12,869,489 15,522,133
-------------- ---------------
Net increase in net assets resulting from operations ........................... 26,131,272 28,037,649
DISTRIBUTIONS: PREFERRED STOCK DIVIDENDS ....................................... (842,379) (3,757,115)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
APPLICABLE TO COMMON SHARES ............................................... 25,288,893 24,280,534
DISTRIBUTIONS:COMMON SHARES FROM NET INVESTMENT
INCOME .................................................................... (1,318,356) (470,846)
NET INCREASE IN NET ASSETS FOR THE PERIOD ...................................... 23,970,537 23,809,688
NET ASSETS:
Beginning of period ............................................................ 241,119,678 217,309,990
-------------- ---------------
End of period (including undistributed net investment income of $760,559 and
$602,301, respectively) ................................................... $ 265,090,215 $ 241,119,678
============== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
8
BOULDER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Contained below is per share operating performance data, total investment
returns, ratios to average net assets and other supplemental data. On August 27,
1999 the Fund changed its objective from income to total return. This
information has been derived from information provided in the financial
statements and market price data for the Fund's shares.
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2002 ------------------------------------------------------------
(UNAUDITED) 2001 2000 1999 1998 1997
--------- --------- --------- --------- --------- ---------
OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 17.36 $ 14.81 $ 13.32 $ 16.06 $ 16.33 $ 15.31
--------- --------- --------- --------- --------- ---------
Net investment income.................................. 0.25 0.63 0.75 1.29 1.33 1.36
Net realized and unrealized gain/(loss) on investments 2.53 2.35 1.50 (1.93) 0.13 1.10
--------- --------- --------- --------- --------- ---------
Total from investment operations....................... 2.78 2.98 2.25 (0.64) 1.46 2.46
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS: PREFERRED STOCK
Dividends paid from net investment income to
MMP* Shareholders.................................. -- -- (0.42) (0.35) (0.25) (0.26)
Distributions paid from net realized capital gains to
MMP* Shareholders ................................. -- -- -- (0.03) (0.14) (0.06)
Dividends paid from net investment income to
AMPs** Shareholders ............................... (0.09) (0.40) (0.13) -- -- --
Change in accumulated undeclared dividends on
MMP*/AMPs** Shareholders .......................... 0.01 0.02 0.04 (0.06)+ 0.02 (0.02)
--------- --------- --------- --------- --------- ---------
Net increase/(decrease) from operations applicable to
common shares...................................... 2.70 2.60 1.74 (1.08) 1.09 2.12
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS: COMMONSHARES
Dividends paid from net investment income to Common
Shareholders ...................................... (0.14) (0.05) (0.19) (1.02) (1.07) (1.05)
Distributions paid from net realized capital gains to
Common Shareholders ............................... -- -- -- (0.64) (0.29) (0.05)
--------- --------- --------- --------- --------- ---------
Net Increase/(Decrease) in Common Net Asset Value...... 2.56 2.55 1.55 (2.74) (0.27) 1.02
--------- --------- --------- --------- --------- ---------
Costs of AMPs** Stock issued (Note 5).............. -- -- (0.06) -- -- --
--------- --------- --------- --------- --------- ---------
Net asset value, end of period..................... $ 19.92 $ 17.36 $ 14.81 $ 13.32+ $ 16.06 $ 16.33
========= ========= ========= ========= ========= =========
Market value, end of period........................ $ 18.3200 $ 16.0500 $ 12.0000 $ 10.1875 $ 13.6250 $ 15.6250
========= ========= ========= ========= ========= =========
Total investment return based on net asset value(a) 15.74% 17.68% 13.27% (5.17)% 7.65% 14.66%
========= ========= ========= ========= ========= =========
Total investment return based on market value(a)... 15.14% 34.27% 20.00% (14.51)% (4.55)% 14.84%
========= ========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS AVAILABLE
TO COMMON STOCK SHAREHOLDERS:
Operating expenses ............................. 2.33%++ 2.47% 2.55% 1.97% 1.83% 1.60%
Net investment income (b)....................... 1.54%++ 1.52% 1.82% 6.08% 5.92% 6.51%
SUPPLEMENTAL DATA:
Portfolio turnover rate......................... 22% 16% 85% 69% 86% 77%
Net assets, end of period (in 000's)............ $ 265,090 $ 241,120 $ 217,310 $ 203,609 $ 228,829 $ 231,572
---------------------------------------
Ratio of operating expenses to Total Average Net Assets
including MMP*/AMPs** (a)......................... 1.63%++ 1.66% 1.57% 1.26% 1.22% 1.05%
* Money Market Cumulative Preferred(TM)Stock.
** Taxable Auction Market Preferred Stock.
(a) Assumes reinvestment of distributions at the price obtained by the Fund's Dividend Reinvestment Plan.
(b) The net investment income ratios reflect income net of operating expenses and payments and change in undeclared dividends to
MMP*/AMPs** Shareholders.
+ Includes effect of additional distribution available to MMP* Shareholders ($0.04 per Common share).
++ Annualized for the six months ended May 31, 2002.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
9
BOULDER TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS--(CONTINUED)
The table below sets out information with respect to Taxable Auction Market
Preferred Stock currently and Money Market Cumulative Preferred Stock previously
outstanding (1).
INVOLUNTARY AVERAGE
ASSET LIQUIDATING MARKET
TOTAL SHARES COVERAGE PREFERENCE VALUE
OUTSTANDING PER SHARE PER SHARE (2) PER SHARE (2)
----------- --------- ------------ ------------
05/31/02*............................. 775 $342,052 $100,000 $100,000
11/30/01.............................. 775 311,122 100,000 100,000
11/30/00.............................. 775 280,400 100,000 100,000
11/30/99.............................. 775 262,722 100,000 100,000
11/30/98.............................. 775 295,263 100,000 100,000
11/30/97.............................. 775 298,802 100,000 100,000
---------
(1) See Note 5.
(2) Excludes accumulated undeclared dividends.
* Unaudited.
The following information below is unaudited.
FINANCIAL DATA
PER SHARE OF
COMMON STOCK
-----------------------
NYSE
NAV CLOSING PRICE
------- ------------
12/31/01.......................... $18.32 $16.24
1/31/02.......................... 18.65 16.25
2/28/02.......................... 19.09 16.00
3/31/02.......................... 19.98 16.80
4/30/02.......................... 20.16 18.29
5/31/02.......................... 19.92 18.32
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10
BOULDER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Boulder Total Return Fund, Inc. (the "Fund") is a diversified, closed-end
management investment company organized as a Maryland corporation and is
registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with accounting principles generally accepted
in the United States of America.
PORTFOLIO VALUATION: The net asset value of the Fund's Common Stock is
determined by the Fund's administrator no less frequently than on the last
business day of each week and month. It is determined by dividing the value of
the Fund's net assets attributable to common shares by the number of shares of
Common Stock outstanding. The value of the Fund's net assets attributable to
common shares is deemed to equal the value of the Fund's total assets less (i)
the Fund's liabilities, (ii) the aggregate liquidation value of the outstanding
Taxable Auction Market Preferred Stock and (iii) accumulated and unpaid
dividends on the outstanding Taxable Auction Market Preferred Stock. Securities
listed on a national securities exchange are valued on the basis of the last
sale on such exchange on the day of valuation. In the absence of sales of listed
securities and with respect to securities for which the most recent sale prices
are not deemed to represent fair market value and unlisted securities (other
than money market instruments), securities are valued at the mean between the
closing bid and asked prices when quoted prices for investments are readily
available. Investments for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors of the Fund, including reference to valuations of other
securities which are considered comparable in quality, maturity and type.
Investments in money market instruments, which mature in 60 days or less at the
time of purchase, are valued at amortized cost.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities sold
are recorded on the identified cost basis. Dividend income is recorded on
ex-dividend dates. Interest income is recorded on the accrual basis.
Cash distributions received from the Fund's investment in real estate
investment trusts ("REITs") and registered investment companies ("RICs") are
recorded as income. If the Fund is subsequently informed that such distributions
received or a portion thereof are designated as returns of captial, the Fund
will reclassify such amounts from income and reduce the cost basis of such
securities.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase agreement
transactions. The Fund's Management reviews and approves periodically the
eligibility of the banks and dealers with which the Fund enters into repurchase
agreement transactions. The value of the collateral underlying such transactions
is at least equal at all times to the total amount of the repurchase
obligations, including interest. The Fund maintains possession of the collateral
and, in the event of counterparty default, the Fund has the right to use the
collateral to offset losses incurred. There is the possiblity of loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends to Common
shareholders will be declared in such a manner as to avoid the imposition of the
4% excise tax described in "Federal income taxes" below. The shareholders of
Taxable Auction Market Preferred Stock are entitled to receive cumulative cash
dividends as declared by the Fund's Board of Directors. Distributions to
shareholders are recorded on the ex-dividend date. Any net realized short-term
capital gains will be disributed to shareholders at least annually. Any net
realized long-term capital gains may be distributed to shareholders at least
annually or may be retained by the Fund as determined by the Fund's Board of
Directors. Capital gains retained by the Fund are subject to tax at the
corporate tax rate. Subject to the Fund qualifying as a registered investment
company, any taxes paid by the Fund on such net realized long-term gains may be
used by the Fund's Shareholders as a credit against their own tax liabilities.
FEDERAL INCOME TAXES: The Fund intends to qualify as a registered
investment company by complying with the requirements under subchapter M of the
Internal Revenue Code of 1986, as amended, applicable to RICs and intends to
disribute substantially all of its taxable net investment income to its
shareholders. Therefore, no Federal income tax provision is required.
Income and capital gain distributions are determined and characterized in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. These differences are primarily due to (1) differing
treatments of income and gains on various investment securities held by the
Fund, including timing differences, (2) the attribution of expenses against
certain components of taxable investment income, and (3) federal regulations
requiring proportional allocation of income and gains to all classes of
Shareholders. The Internal Revenue Code of 1986, as amended, imposes a 4%
nondeductible excise tax on the Fund to the extent the Fund does not distribute
by the end of any calendar year at least (1) 98% of the sum of its net
investment income for that year and its capital gains (both long term and short
term) for its fiscal year and (2) certain undistributed amounts from previous
years.
11
BOULDER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
OTHER: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
2. INVESTMENT CO-ADVISORY FEES, DIRECTORS' FEES, ADMINISTRATION FEE, CO-
ADMINISTRATION FEE AND TRANSFER AGENT FEE
Boulder Investment Advisers, L.L.C. ("BIA") and Stewart Investment Advisers
("SIA") serve as the Fund's Co-Investment Advisers ("Advisers"). The Fund pays
the Advisers a monthly fee at an annual rate of 1.25% of the value of the Fund's
average monthly net assets. The equity owners of BIA are Evergreen Atlantic,
LLC, a Colorado limited liability company ("EALLC"), and the Lola Brown Trust
No. 1B (the "Lola Trust"), each of which is a shareholder of the Fund and
considered to be an "affiliated person" of the Fund as that term is defined in
the 1940 Act. Stewart West Indies Trading Company, Ltd. is a Barbados
international business company doing business as Stewart Investment Advisers.
Beginning February 1, 2002, SIA receives a monthly fee equal to 75% of the fees
earned by the Advisers, and BIA receives 25% of the fees earned by the Advisers.
Prior to February 1, 2002, SIA received a monthly fee equal to 65% of the fees
earned by the Advisers, and BIA received 35% of the fees earned by the Advisers.
The equity owner of Stewart Advisers is the Stewart West Indies Trust, a
shareholder of the Fund considered to be an "affiliated person" of the Fund as
that term is defined in the 1940 Act.
Fund Administrative Services, LLC ("FAS"), serves as the Fund's
Co-Administrator. Under the Co-Administration Agreement, FAS provides certain
administrative and executive management services to the Fund including:
providing the Fund's principal offices and executive officers, overseeing and
administering all contracted service providers, making recommendations to the
Board regarding policies of the Fund, conducting shareholder relations,
authorizing expenses and other administrative tasks. Under the Co-Administration
Agreement, the Fund pays FAS a monthly fee, calculated at an annual rate of
0.10% of the value of the Fund's average monthly net assets. The equity owners
of FAS are EALLC and the Lola Trust, each of which is a shareholder of the Fund
considered to be an "affiliated person" of the Fund as that term is defined in
the 1940 Act.
The Fund pays each Director who is not a director, officer or employee of
the Advisers or FAS a fee of $6,000 per annum, plus $4,000 for each in-person
meeting of the Board of Directors and $500 for each telephone meeting. In
addition, the Fund will reimburse all Directors for travel and out-of-pocket
expenses incurred in connection with such meetings.
PFPC Inc. ("PFPC"), an indirect, majority-owned subsidiary of The PNC
Financial Services Group Inc., serves as the Fund's Administrator and Transfer
Agent. As Administrator, PFPC calculates the net asset value of the Fund's
shares and generally assists in all aspects of the Fund's administration and
operation. The Fund pays PFPC a fee on a monthly basis based on average net
assets. PFPC Trust Company, an indirect subsidiary of The PNC Financial Services
Group Inc., serves as the Fund's Custodian. As compensation to PFPC Trust
Company, the Fund pays PFPC Trust Company a monthly fee based on the Fund's
average monthly gross assets. PFPC also serves as the Fund's Common Stock
servicing agent (transfer agent), dividend-paying agent and registrar, and as
compensation for PFPC's services as such, the Fund pays PFPC a monthly fee plus
certain out-of-pocket expenses.
Deutsche Bank Trust Company Americas, a wholly owned subsidiary of Deutsche
Bank AG ("Auction Agent"), serves as the Fund's Taxable Auction Market Preferred
Stock transfer agent, registrar, dividend disbursing agent and redemption agent.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities for the six months
ended May 31, 2002, excluding short-term investments, aggregated $80,187,717 and
$51,018,289, respectively.
On May 31, 2002, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost was $57,693,004 and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over value was $8,239,650.
12
BOULDER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
4. COMMON STOCK
At May 31, 2002, 240,000,000 of $0.01 par value Common Stock were
authorized. There were no Common Stock transactions for the six months ended May
31, 2002 and for the year ended November 30, 2001.
5. TAXABLE AUCTION MARKET PREFERRED STOCK
The Fund's Articles of Incorporation authorize the issuance of up to
10,000,000 shares of $0.01 par value preferred stock. On April 30, 1993, the
Fund received proceeds from the public offering of 775 shares of Money Market
Cumulative PreferredTM Stock of $77,500,000 before offering costs of $171,219
and commissions paid directly to Lehman Brothers Inc. of $1,356,250. On August
15, 2000, the Money Market Cumulative PreferredTM Stock was retired and 775
shares of Taxable Auction Market Preferred Stock were issued. Offering costs of
$293,843 and commissions paid directly to Merrill Lynch, Pierce Fenner & Smith
Inc. of $290,625 were charged to capital to complete the transaction. Taxable
Auction Market Preferred Stock is senior to the Common Stock and results in the
financial leveraging of the Common Stock. Such leveraging tends to magnify both
the risks and opportunities to Common Stock Shareholders. Dividends on shares of
Taxable Auction Market Preferred Stock are cumulative.
The Fund is required to meet certain asset coverage tests with respect to
the Taxable Auction Market Preferred Stock. If the Fund fails to meet these
requirements and does not correct such failure, the Fund may be required to
redeem, in part or in full, Taxable Auction Market Preferred Stock at a
redemption price of $100,000 per share plus an amount equal to the accumulated
and unpaid dividends on such shares in order to meet these requirements.
Additionally, failure to meet the foregoing asset requirements could restrict
the Fund's ability to pay dividends to Common Stock Shareholders and could lead
to sales of portfolio securities at inopportune times.
An auction of the Taxable Auction Market Preferred Stock is generally held
every 28 days. Existing shareholders may submit an order to hold, bid or sell
such shares at par value on each auction date. Taxable Auction Market Preferred
Stock Shareholders may also trade shares in the secondary market between auction
dates.
On May 31, 2002, 775 shares of Taxable Auction Market Preferred Stock were
outstanding at the annual rate of 1.82%. The dividend rate, as set by the
auction process, is generally expected to vary with short-term interest rates.
These rates may vary in a manner unrelated to the income received on the Fund's
assets, which could have either a beneficial or detrimental impact on net
investment income and gains available to Common Stock Shareholders. While the
Fund expects to earn a higher return on its assets than the cost associated with
the Taxable Auction Market Preferred Stock, including expenses, there can be no
assurance that such results will be attained.
6. PORTFOLIO INVESTMENTS, CONCENTRATION AND INVESTMENT QUALITY
The Fund operates as a "diversified" management investment company, as
defined in the 1940 Act. Under this definition, at least 75% of the value of the
Fund's total assets must at the time of investment consist of cash and cash
items (including receivables), U.S. Government securities, securities of other
investment companies, and other securities limited in respect of any one issuer
to an amount not greater in value than 5% of the value of the Fund's total
assets and to not more than 10% of the voting securities of a single issuer.
This limit does not apply, however, to 25% of the Fund's assets, which may be
invested in a single issuer.
The Fund intends to concentrate its common stock investments in a few
issuers and to take large positions in those issuers, consistent with being a
"diversified" fund. As a result, the Fund is subject to a greater risk of loss
than a fund that diversifies its investments more broadly. Taking larger
positions is also likely to increase the volatility of the Fund's net asset
value reflecting fluctuation in the value of its large holdings. Under normal
market conditions, the Fund intends to invest in a portfolio of common stocks.
The portion of the Fund's assets invested in each can vary depending on market
conditions. The term "common stocks" includes both stocks acquired primarily for
their appreciation potential and stocks acquired for their income potential,
such as dividend-paying RICs and REITs. The term "income securities" includes
bonds, U.S. Government securities, notes, bills, debentures, preferred stocks,
convertible securities, bank debt obligations, repurchase agreements and
short-term money market obligations.
13
BOULDER TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
7. SIGNIFICANT SHAREHOLDERS
On May 31, 2002, trusts and other entities affiliated with the Horejsi
family owned 3,940,435 shares of Common Stock of the Fund, representing
approximately 41.84% of the total Fund shares.
8. SHARE REPURCHASE PROGRAM:
In accordance with Section 23(c) of the Investment Company Act of 1940, as
amended, the Fund hereby gives notice that it may from time to time repurchase
shares of the Fund in the open market at the option of the Board of Directors
and upon such terms as the Directors shall determine.
ADDITIONAL INFORMATION
PRIVACY STATEMENT
Pursuant to SEC Regulation S-P (Privacy of Consumer Financial Information)
the Directors of the Boulder Total Return Fund, Inc. have established the
following policy regarding information about the Fund's shareholders. We
consider all shareholder data to be private and confidential, and we hold
ourselves to the highest standards in its safekeeping and use. The Fund collects
nonpublic information (e.g., your name, address, Social Security Number, Fund
holdings) about shareholders from transactions in Fund shares. The Fund will not
release information about current or former shareholders (except as permitted by
law) unless one of the following conditions is met: (i) we receive your prior
written consent; (ii) we believe the recipient to be you or your authorized
representative; or (iii) we are required by law to release information to the
recipient. The Fund has not and will not in the future give or sell information
about its current or former shareholders to any company, individual, or group
(except as permitted by law). The Fund will only use information about its
shareholders as necessary to service or maintain shareholder accounts in the
ordinary course of business. Internally, we also restrict access to shareholder
personal data to those who have a specific need for the records. We maintain
physical, electronic and procedural safeguards that comply with Federal
standards to guard your personal data.
14
BOULDER TOTAL RETURN FUND, INC.
MEETING OF SHAREHOLDERS (UNAUDITED)
On April 26, 2002, the Fund held its Annual Meeting of Shareholders to (1)
elect Richard I. Barr, Susan L. Ciciora, and Stephen C. Miller as Directors of
the Fund, (2) to approve or disapprove a proposed amendment to the Fund's
Investment Advisory Agreement with Boulder Investment Advisers, L.L.C. to make
it a Co-Investment Advisory Agreement and (3) to approve or disapprove a
proposed amendment to the Fund's Investment Sub-Advisory Agreement with Stewart
Investment Advisers to make it a Co-Investment Advisory Agreement.
PROPOSAL 1 (COMMON STOCK VOTING AS A SINGLE CLASS):
ELECTION OF DIRECTOR
--------------------
STEPHEN C. MILLER # OF VOTES CAST % OF VOTES CAST
----------------- --------------- ---------------
Affirmative ............................................................... 9,141,056 98.8
Withheld .................................................................. 106,583 1.2
--------- -----
TOTAL ............................................................ 9,247,639 100.0
========= =====
SUSAN L. CICIORA # OF VOTES CAST % OF VOTES CAST
----------------- --------------- ---------------
Affirmative ............................................................... 9,141,056 98.8
Withheld .................................................................. 106,583 1.2
--------- -----
TOTAL ............................................................ 9,247,639 100.0
========= =====
RICHARD I. BARR (AMPS* VOTING AS A SINGLE CLASS): # OF VOTES CAST % OF VOTES CAST
----------------------------------------------- --------------- ---------------
Affirmative ............................................................... 695 100.0
Withheld .................................................................. 0 0
--------- -----
TOTAL ............................................................ 695 100.0
========= =====
PROPOSAL 2 (COMMON STOCK AND AMPS* VOTING TOGETHER AS A SINGLE CLASS):
APPROVE AN AMENDMENT TO THE FUND'S INVESTMENT
ADVISORY AGREEMENT WITH BOULDER INVESTMENT ADVISERS,
LLC TO MAKE IT A CO-INVESTMENT ADVISORY AGREEMENT
--------------------------------------------------
# OF COMBINED VOTES CAST % OF COMBINED VOTES CAST
------------------------ ------------------------
Affirmative ........................................................... 9,068,401 98.1
Against ............................................................... 135,340 1.5
Abstain ............................................................... 44,593 .4
----------- ----------
TOTAL ........................................................ 9,248,334 100.0
=========== ==========
PROPOSAL 3 (COMMON STOCK AND AMPS* VOTING TOGETHER AS A SINGLE CLASS):
APPROVE AN AMENDMENT TO THE FUND'S INVESTMENT SUB-
ADVISORY AGREEMENT WITH STEWART INVESTMENT ADVISERS
TO MAKE IT A CO-INVESTMENT ADVISORY AGREEMENT
--------------------------------------------------
# OF VOTES CAST % OF VOTES CAST
--------------- ---------------
Affirmative ................................................................ 9,068,066 98.0
Against .................................................................... 136,014 1.5
Abstain .................................................................... 44,254 .5
--------- -----
TOTAL ............................................................. 9,248,334 100.0
========= =====
----------
* Auction Market Preferred Stock.
15
BOULDER TOTAL RETURN FUND, INC.
P.O. Box 43027
Providence, RI 02940-3027
[GRAPHIC OMITTED]
MOUNTAIN ARTWORK
BOULDER
TOTAL RETURN
FUND, INC.
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
MAY 31, 2002
DIRECTORS
Brig. Gen (Ret.) Alfred G. Aldridge Jr.
Richard I. Barr
Susan L. Ciciora
Joel W. Looney
Stephen C. Miller
OFFICERS
Stephen C. Miller
President
Carl D. Johns
Vice President and Treasurer
Stephanie J. Kelley
Secretary
Nicole L. Murphey
Assistant Secretary
WWW.BOULDERFUNDS.NET
If you have questions regarding shares you held in a brokerage account contact
your broker, or, if you have physical possession of your shares in certificate
form, contact the Fund's Transfer Agent & Shareholder Servicing Agent -- PFPC
Inc., at:
P.O. Box 43027
Providence, RI 02940-3027
1-800-331-1710
This report is sent to shareholders of Boulder Total Return Fund, Inc. for
their information. It is not a prospectus, circular or representation intended
for use in the purchase or sale of shares of the Fund or of any securities
mentioned in this report.