BOULDER GROWTH & INCOME FUND, INC.
Annual Report
November 30, 2002
Dear Fellow Shareholder:
Fiscal 2002 was a tough year for the market and for the Boulder Growth & Income
Fund ("BIF"). The Fund's total return on net asset value (NAV) for the 12 months
ending 11/30/2002 (the Fund's new fiscal year) was -20%. The total return on
market value was -34%. The reason for the disparity between the Fund's NAV and
its market return is that the Fund was trading at a 3.7% discount a year ago and
a 21% discount as of 11/30/02.
Obviously the Fund's loss for the year is very disappointing. The S&P 500 Index
over the same period posted total return of -16.5%. Not only did the Fund lose
money, it performed worse than an unmanaged index. Keep in mind that as
Advisers, we didn't assume management until the end of January, and the Fund's
change in objective wasn't approved until April. About 1/3 of the losses came
from the bonds we inherited. But we can't sugarcoat our performance, and we
won't try. Our goal is to make positive returns every year - that is - not to
lose money. And over the long term we hope to do better than an unmanaged equity
index fund. We picked the S&P 500 because it is well known and fairly
representative of the overall market. Unlike investment advisors of most funds,
we feel your pain in this loss. Our affiliates owned 1.2 million shares of BIF
as of November 30, 2002, so our paper loss for the year was about $2.3 million.
Most of the bonds in the portfolio at the beginning of the year were junk bonds.
We have sold nearly all of them, and we're glad we sold them when we did. We had
a feeling it would be a tough year for the market, so as we sold bonds, we
replaced them with what we thought at the time were relatively safe investments
- utility stocks. Good old utilities - you know, the investment your mom and dad
made. Safe and sound. No risk. Regular dividends. Regulated industry. Monopoly.
Today, in hindsight (which is always 20/20) we can use one word to describe the
performance of the utility sector - "lousy". From the beginning of this year,
the Philadelphia Utility Index (comprising 20 utility companies) is down 26%. As
of 11/30/02, 12% of the Fund's assets were in utilities.
Our objective in the utility sector was to earn a reasonable return through the
dividend payout, with the perception that a 7% to 9% return would outperform the
market. We were right that a 7% to 9% return would have beaten the market.
However, three of the four utilities we purchased either reduced or entirely
eliminated their dividend and the fourth likely will also. There is a perceived
liquidity risk in the utility industry that the market sees as a reason to sell
these companies. The utility industry is capital intensive and uses debt as a
financing tool. We knew this going in. But it also has a "captured" customer
base, which can't be infringed upon. Some utility companies ventured into
unregulated businesses, and overpaid for assets. But we feel the market is
over-reacting in some situations. Certainly, it's not unheard of for the market
to over-react. Nevertheless, in retrospect, our decision to go into utilities
was a bad one. The prices of the utilities we bought were at the low end of
their prices for the last business cycle, but continued to get much lower after
we bought them. We believe they will recover in price to give us decent returns
from the current level, but they will never give us anywhere close to the total
return that we expected when we bought them. We simply made a big mistake
investing in the utility sector.
We became the investment advisors in January of 2002, but the change in the
Fund's objective, which allowed us to invest in common stocks, didn't occur
until April of 2002. Take a look at the graph of the S&P 500 Index for the 11
months ending 11/30/02:
[GRAPHIC OMITTED-BLOOMBERG CHART]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
S&P 500 INDEX
DATE PX LAST
1/2/2002 1154.67
1/3/2002 1165.27
1/4/2002 1172.51
1/7/2002 1164.89
1/8/2002 1160.71
1/9/2002 1155.14
1/10/2002 1156.55
1/11/2002 1145.6
1/14/2002 1138.41
1/15/2002 1146.19
1/16/2002 1127.57
1/17/2002 1138.88
1/18/2002 1127.58
1/22/2002 1119.31
1/23/2002 1128.18
1/24/2002 1132.15
1/25/2002 1133.28
1/28/2002 1133.06
1/29/2002 1100.64
1/30/2002 1113.57
1/31/2002 1130.2
2/1/2002 1122.2
2/4/2002 1094.44
2/5/2002 1090.02
2/6/2002 1083.51
2/7/2002 1080.17
2/8/2002 1096.22
2/11/2002 1111.94
2/12/2002 1107.5
2/13/2002 1118.51
2/14/2002 1116.48
2/15/2002 1104.18
2/19/2002 1083.34
2/20/2002 1097.98
2/21/2002 1080.95
2/22/2002 1089.84
2/25/2002 1109.43
2/26/2002 1109.38
2/27/2002 1109.89
2/28/2002 1106.73
3/1/2002 1131.78
3/4/2002 1153.84
3/5/2002 1146.14
3/6/2002 1162.77
3/7/2002 1157.54
3/8/2002 1164.31
3/11/2002 1168.26
3/12/2002 1165.58
3/13/2002 1154.09
3/14/2002 1153.04
3/15/2002 1166.16
3/18/2002 1165.55
3/19/2002 1170.29
3/20/2002 1151.85
3/21/2002 1153.59
3/22/2002 1148.7
3/25/2002 1131.87
3/26/2002 1138.49
3/27/2002 1144.58
3/28/2002 1147.39
4/1/2002 1146.54
4/2/2002 1136.76
4/3/2002 1125.4
4/4/2002 1126.34
4/5/2002 1122.73
4/8/2002 1125.29
4/9/2002 1117.8
4/10/2002 1130.47
4/11/2002 1103.69
4/12/2002 1111.01
4/15/2002 1102.55
4/16/2002 1128.37
4/17/2002 1126.07
4/18/2002 1124.47
4/19/2002 1125.17
4/22/2002 1107.83
4/23/2002 1100.96
4/24/2002 1093.14
4/25/2002 1091.48
4/26/2002 1076.32
4/29/2002 1065.45
4/30/2002 1076.92
5/1/2002 1086.46
5/2/2002 1084.56
5/3/2002 1073.43
5/6/2002 1052.67
5/7/2002 1049.49
5/8/2002 1088.85
5/9/2002 1073.01
5/10/2002 1054.99
5/13/2002 1074.56
5/14/2002 1097.28
5/15/2002 1091.07
5/16/2002 1098.23
5/17/2002 1106.59
5/20/2002 1091.88
5/21/2002 1079.88
5/22/2002 1086.02
5/23/2002 1097.08
5/24/2002 1083.82
5/28/2002 1074.55
5/29/2002 1067.66
5/30/2002 1064.66
5/31/2002 1067.14
6/3/2002 1040.68
6/4/2002 1040.69
6/5/2002 1049.9
6/6/2002 1029.15
6/7/2002 1027.53
6/10/2002 1030.74
6/11/2002 1013.6
6/12/2002 1020.26
6/13/2002 1009.56
6/14/2002 1007.27
6/17/2002 1036.17
6/18/2002 1037.14
6/19/2002 1019.99
6/20/2002 1006.29
6/21/2002 989.14
6/24/2002 992.72
6/25/2002 976.14
6/26/2002 973.53
6/27/2002 990.64
6/28/2002 989.82
7/1/2002 968.65
7/2/2002 948.09
7/3/2002 953.99
7/5/2002 989.03
7/8/2002 976.98
7/9/2002 952.83
7/10/2002 920.47
7/11/2002 927.37
7/12/2002 921.39
7/15/2002 917.93
7/16/2002 901.05
7/17/2002 906.04
7/18/2002 881.56
7/19/2002 847.76
7/22/2002 819.85
7/23/2002 797.7
7/24/2002 843.42
7/25/2002 838.68
7/26/2002 852.84
7/29/2002 898.96
7/30/2002 902.78
7/31/2002 911.62
8/1/2002 884.66
8/2/2002 864.24
8/5/2002 834.6
8/6/2002 859.57
8/7/2002 876.77
8/8/2002 905.46
8/9/2002 908.64
8/12/2002 903.8
8/13/2002 884.21
8/14/2002 919.62
8/15/2002 930.25
8/16/2002 928.77
8/19/2002 950.72
8/20/2002 937.43
8/21/2002 949.36
8/22/2002 962.7
8/23/2002 940.86
8/26/2002 947.95
8/27/2002 934.82
8/28/2002 917.87
8/29/2002 917.8
8/30/2002 916.07
9/3/2002 878.02
9/4/2002 893.4
9/5/2002 879.15
9/6/2002 893.92
9/9/2002 902.96
9/10/2002 909.58
9/11/2002 909.45
9/12/2002 886.91
9/13/2002 889.81
9/16/2002 891.1
9/17/2002 873.52
9/18/2002 869.46
9/19/2002 843.32
9/20/2002 845.39
9/23/2002 833.7
9/24/2002 819.29
9/25/2002 839.66
9/26/2002 854.95
9/27/2002 827.37
9/30/2002 815.28
10/1/2002 847.91
10/2/2002 827.91
10/3/2002 818.95
10/4/2002 800.58
10/7/2002 785.28
10/8/2002 798.55
10/9/2002 776.76
10/10/2002 803.92
10/11/2002 835.32
10/14/2002 841.44
10/15/2002 881.27
10/16/2002 | 860.02|
10/17/2002 879.2
10/18/2002 884.39
10/21/2002 899.72
10/22/2002 890.16
10/23/2002 896.14
10/24/2002 882.5
10/25/2002 897.65
10/28/2002 890.23
10/29/2002 882.15
10/30/2002 890.71
10/31/2002 885.76
11/1/2002 900.96
11/4/2002 908.35
11/5/2002 915.39
11/6/2002 923.76
11/7/2002 902.65
11/8/2002 894.74
11/11/2002 876.19
11/12/2002 882.95
11/13/2002 882.53
11/14/2002 904.27
11/15/2002 909.83
11/18/2002 900.36
11/19/2002 896.74
11/20/2002 914.15
11/21/2002 933.76
11/22/2002 930.55
11/25/2002 932.88
11/26/2002 913.31
11/27/2002 938.87
11/29/2002 936.31
We started investing in equities beginning in May, after approval of the new
objective. The Index was above 1100 when we got started, and is about 15% below
that level on 11/30/02.
That brings us to our recent rights offering. The Fund issued 5,663,892 new
shares at the end of December (after our fiscal year end) at a discounted price
of $4.34 per share. This doubled the number of the Fund's outstanding shares.
Because we issued new shares at a discount to the Fund's market price (which at
the time of the offering was below the Fund's NAV), there was a decline in the
Fund's NAV after the rights offering.
We believe that the money raised in the rights offering will be beneficial to
the Fund's owners over time. Most funds that do rights offerings do them based
only on the Board's decision. This rights offering not only required an
affirmative vote from the Board, but also from the shareholders. The bulk of our
fellow owners apparently agreed, because a majority of the shares outstanding
and of the shareholders both approved the offering.
First, for any new shareholders who acquired Fund shares by purchasing rights,
we want to welcome you as fellow shareholders. To learn more about the Fund, you
should visit the Fund's website (www.boulderfunds.net) which has a lot of
relevant information about the Fund. Second, looking at the graph above, we
think this has been a better time to conduct a rights offering than if we had
done one when the market was strong and peaking. Third, if you look at the
Fund's expense ratio (see more below), spreading the Fund's fixed costs over a
greater amount of assets should reduce the Fund's expense ratio.
The Fund shows an expense ratio of 4.40%. This is much higher than we would
like. The reason for the higher expense ratio this year is three-fold: First,
the Fund incurred significant fees for the proxy relating to the rights
offering; second, it incurred significant legal fees related to both the rights
offering proxy and the proxy relating to changing the Fund's objective; and
third, these one-time expenses were jammed into a shortened 5-month period
because we changed our year end which, when annualized, magnifies the effect of
the higher expenses.
2
Now that the rights offering is complete, we are considering issuing leverage.
Currently, short-term rates are at historic lows. If we can borrow and earn
above the cost of the leverage, it goes into the pockets of the common
shareholders. Of course, leverage works the other way too. Any losses incurred
on the leverage come out of the pockets of the common shareholders. Issuing
leverage will give us an opportunity to take further advantage of investment
opportunities currently existing in the market.
We look forward to getting the proceeds of the rights offering invested, and the
year ahead.
Sincerely,
/S/ SIGNATURE
Stewart R. Horejsi
December 27, 2002
The information in the table below is unaudited.
FINANCIAL DATA
NYSE
NAV CLOSING PRICE
------- ------------
7/31/02 ....................... $6.82 $5.75
8/31/02 ....................... 6.87 5.91
9/30/02 ....................... 6.48 5.21
10/31/02 ....................... 6.31 5.16
11/30/02 ....................... 6.59 5.22
--------------------------------------
NOTHING IN THIS ANNUAL REPORT SHOULD BE CONSIDERED AS INVESTMENT ADVICE. THIS
LETTER EXPLAINS THE MANAGERS' VIEWS AS OF ITS DATE, WHICH MAY HAVE SUBSEQUENTLY
CHANGED.
3
QUESTIONS & ANSWERS REGARDING THE BOULDER GROWTH & INCOME FUND
Q: How did the Rights Offering end up?
A: The Rights Offering was fully subscribed. The Fund issued 5,663,892 new
shares at a price of $4.34. Total gross proceeds to the Fund were $24,581,291.
Q: Why did the Fund's net asset value drop so much after the Rights Offering?
A: As described in the Rights Offering Prospectus, when new shares are issued
below the Fund's net asset value, the result is a decrease in the net asset
value calculated after the shares are issued and the proceeds from the rights
offering received. Since the Fund's shares were trading at a discount of about
25%, and the subscription price was 95% of the market value, the proceeds from
the rights offering were $4.34 per share. The Fund's NAV on December 20, 2002,
the expiration of the rights offering, was $6.35. When the new shares were
issued on a one-for-one basis, the resulting NAV was the mean, or average, of
the NAV of $6.35, and the subscription price of $4.34. Had there been no other
changes to the value of the Fund's investments, the resulting NAV would have
been $5.35 per share.
Q: At the April 26, 2002 shareholder meeting, shareholders approved a proposal
permitting the Fund to leverage itself. Has it done so?
A: We put the idea of leveraging on the back burner for a while and, in
hindsight, we're glad we did. We will pick up the idea again early in 2003.
Q: What happened to the dividend?
A: Prior to 2002, the Fund had been paying a quarterly dividend. When
shareholders approved the change in objective from "Income" to "Total Return" in
April, the Board changed the dividend policy to annual payouts. Typically we
will pay any income dividend or capital gain dividend in the month of December.
However, because the Rights Offering occurred in December 2002, we will pay any
dividend we have in the first quarter of 2003. Any net investment income the
Fund earns through November 30, 2003, will be paid out in December 2003. Because
of the significant capital loss carry-forwards from losses that the Fund has
already realized, it will probably be some time until the Fund will have a
capital gain to pay out.
4
BOULDER GROWTH & INCOME FUND, INC.
EXHIBIT 1
(UNAUDITED)
NET ASSET VALUE AND MARKET PERFORMANCE FOR A COMMON SHARE FOR THE 10 MONTHS
ENDING 11/30/02
NAV MARKET
------- -------
January 31, 2002............................. $ 8.30 $ 7.77
November 30, 2002............................ $ 6.59 $ 5.22
------- -------
Change.................................... $ (1.71) $ (2.55)
Dividends Paid............................... $ 0.25 $ 0.25
------- -------
Net Decrease in Value........................ $ (1.46) $ (2.30)
Net Decrease % (No Dividend Reinvestment).... -17.6% -29.6%
EXHIBIT 2
(UNAUDITED)
BIF TOTAL RETURNS FOR QTRS AND PERIOD ENDING 11/30/02 VS. S&P 500
DIVIDENDS REINVESTED ON DIVIDEND PAY DATE
BIF BIF
NAV MARKET S&P 500
------- -------- --------
Quarter Ending 11/30/02 .................... -4.1% -11.7% 2.7%
Quarter Ending 8/31/02 ..................... -12.6% -19.4% -13.8%
Quarter Ending 5/31/02 ..................... -2.3% -2.0% -3.3%
------- -------- --------
Trailing 10 Months Ending 11/30/02.......... -17.9% -30.5% -17.2%
5
BOULDER GROWTH & INCOME FUND, INC.
EXHIBIT 3
(UNAUDITED)
COMMON STOCK INVESTMENTS
---------------------------------------
BONDS/
FORIEGN STOCK &
RICS REITS INDUSTRIALS PREFERRED STOCK TOTAL
---- ----- ----------- --------------- -----
Beginning Market Value............. 01/31/02 $ 0 $ 0 $ 0 $45,718,827 $ 45,718,827
--------- ---------- ----------- ----------- ------------
Cost of Purchases.................. 01/31/02- 11/30/02 3,206,592 7,853,769 34,826,608 -- 45,886,969
Proceeds from Sales................ 01/31/02- 11/30/02 3,198,124 -- 1,473,237 40,698,000 45,369,361
--------- ---------- ----------- ----------- ------------
Net Purchase/(Sales)............... 8,468 7,853,769 33,353,371 (40,698,000) 517,608
Beginning Market Value
Net Purchase/(Sales)............... 8,468 7,853,769 33,353,371 5,020,827 46,236,435
Net Appreciation/(Depreciation).... (8,468) (882,476) (5,974,681) (3,100,207) (9,965,832)
Ending Market Value................ 11/30/02 $ 0 $6,971,293 $27,378,690 $ 1,920,620 $ 36,270,603
--------- ---------- ----------- ----------- ------------
Number of Issues Held.............. 11/30/02 0 5 12 25
Cash and Other Assets and
Liabilities..................... 11/30/02 1,038,434
------------
Total Net Assets................ $ 37,309,037
============
6
BOULDER GROWTH & INCOME FUND, INC. PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 2002
-----------------------------------------------------------------------------------------------------------------------------
SHARES VALUE
------ -------
DOMESTIC COMMON STOCKS - 92.1%
BUILDING MATERIALS - 6.3% USG Corporation+ ..................................... 300,000 $ 2,355,000
------------
DIVERSIFIED - 27.9% Berkshire Hathaway Inc., Class A+ .................... 144 10,411,200
------------
FINANCIAL SERVICES - 5.3% MGIC Investment Corporation .......................... 25,000 1,166,750
Providian Financial Corporation+ ..................... 130,000 790,400
------------
TOTAL FINANCIAL SERVICES 1,957,150
------------
MEDICAL-DRUG/
DIVERSIFIED - 17.4% Bristol-Meyers Squibb Company ........................ 82,000 2,173,000
Merck & Company, Inc. ................................ 40,000 2,376,400
Schering-Plough Corporation .......................... 86,000 1,948,760
------------
TOTAL MEDICAL-DRUG/DIVERSIFIED 6,498,160
------------
REITS - 18.7% HRPT Properties Trust ................................ 260,000 2,176,200
JDN Realty Corporation ............................... 170,000 1,900,600
Post Properties, Inc. ................................ 71,000 1,810,500
Thornburg Mortgage, Inc. ............................. 5,100 93,993
Trizec Properties, Inc. .............................. 100,000 990,000
------------
TOTAL REITS 6,971,293
------------
RETAIL-SUPERMARKETS - 4.3% Safeway Inc.+ ........................................ 68,000 1,617,040
------------
UTILITY - 12.2% Alliant Energy Corporation ........................... 83,800 1,364,264
Aquila Inc. .......................................... 217,000 438,340
Northwestern Corporation ............................. 202,400 1,627,296
TXU Corporation ...................................... 72,000 1,110,240
------------
TOTAL UTILITY 4,540,140
------------
TOTAL DOMESTIC COMMON
STOCKS
(Cost $39,116,794) ...................................................................... 34,349,983
------------
FOREIGN COMMON STOCK - 0.0%**
TELEPHONE - 0.0%** Versatel Telecom International NV .................... 44,412 12,370
------------
TOTAL FOREIGN COMMON
STOCK
(Cost $151,295) ...................................................................... 12,370
------------
CORPORATE BONDS - 4.1% PAR
AIRLINES - 0.3% American Airlines Inc., Pass-through Certificates, -----------
7.800% due 10/01/06 ................................ $ 120,000 81,688
Atlas Air Inc., Senior Notes, 9.250% due 04/15/08 .... 100,000 33,500
------------
TOTAL AIRLINES 115,188
------------
BUILDING PRODUCTS - WOOD
- 0.6% Koppers Industry, Inc., Senior Subordinated Notes,
9.875% due 12/01/07 ................................ 225,000 216,000
------------
CABLE TELEVISION - 0.1% Pegasus Communications Corporation, Senior Notes,
9.750% due 12/01/06 ................................ 90,000 42,075
------------
ELECTRONICS (DEFENSE) - 0.2% Condor Systems Inc., Series B, Company
Guarantee, (in default), 11.875% due 05/01/09 ...... 400,000 90,000
------------
FINANCIAL SERVICES - 0.4% Dana Credit Corporation, MTN,
7.250% due 12/16/02 ++ ............................. 150,000 150,000
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
7
BOULDER GROWTH & INCOME FUND, INC. PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 2002
-----------------------------------------------------------------------------------------------------------------------------
PAR VALUE
------ -------
CORPORATE BONDS - (CONTINUED)
MACHINERY-CONSTRUCTION/
MINING - 0.1% National Equipment Services Inc., Series B,
Senior Subordinated Notes, 10.000% due 11/30/04 .... $ 50,000 $ 16,000
National Equipment Services Inc., Series D,
Company Guarantee, 10.000% due 11/30/04 ............ 80,000 25,600
------------
TOTAL MACHINERY-CONSTRUCTION/MINING 41,600
------------
MANUFACTURING
(DIVERSIFIED) - 0.1% Grey Wolf, Inc., Senior Notes,
8.875% due 07/01/07 ................................ 40,000 41,200
Polymer Group Inc., Series B, Company
Guarantee, (in default), 9.000% due 07/01/07 ....... 25,000 4,625
------------
TOTAL MANUFACTURING (DIVERSIFIED) 45,825
------------
PHARMACEUTICALS - 0.3% Pharmerica Inc., Senior Subordinated Notes,
8.375% due 04/01/08 ................................ 125,000 125,000
------------
RETAIL-MISCELLANEOUS/
DIVERSIFIED - 0.1% MTS, Inc., Senior Subordinated Notes,
9.375% due 05/01/05 ................................ 100,000 25,500
------------
TELECOMMUNICATIONS - 0.8% American Cellular Corporation, Company
Guarantee, 9.500% due 10/15/09 ..................... 200,000 38,000
GCI Inc., Senior Notes, 9.750% due 08/01/07 .......... 325,000 242,125
------------
TOTAL TELECOMMUNICATIONS 280,125
------------
TELEPHONE - 0.7% WorldCom, Inc., Notes, (in default),
7.500% due 05/15/11 ................................ 1,000,000 255,000
------------
UTILITY-ELECTRIC POWER -
0.4% Calpine Canada Energy Finance, Company
Guarantee, 8.500% due 05/01/08 ..................... 200,000 93,000
Calpine Corporation, Senior Notes,
8.750% due 07/15/07 ................................ 150,000 67,500
------------
TOTAL UTILITY-ELECTRIC POWER 160,500
------------
WEB HOSTING/DESIGN - 0.0%** PSInet Inc., Senior Notes, (in default),
11.000% due 08/01/09 ............................... 10,000 450
------------
TOTAL CORPORATE BONDS
(Cost $3,156,573) ...................................................................... 1,547,263
------------
FOREIGN BONDS - 1.0%
CABLE TELEVISION - 0.3% Callahan Nordrhein-Westfalen GMBH,
Senior Notes, (in default), 14.000% due 07/15/10 ... 350,000 11,812
Ono Finance PLC, Company Guarantee,
13.000% due 05/01/09 ............................... 250,000 63,750
United Pan-Europe Communications N.V.,
Senior Notes, (in default), 11.250% due 02/01/10 ++ 350,000 15,750
------------
TOTAL CABLE TELEVISION 91,312
------------
TELECOMMUNICATIONS-
EQUIPMENT - 0.4% Marconi Corporation PLC, Company Guarantee,
7.750% due 09/15/10 ................................ 1,125,000 163,125
------------
UTILITY - 0.3% AmeriGas Partners Apu, Series D, Senior Notes,
10.000% due 04/15/06 ............................... 100,000 105,500
------------
TOTAL FOREIGN BONDS
(Cost $2,037,506) ...................................................................... 359,937
------------
8
BOULDER GROWTH & INCOME FUND, INC. PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 2002
-----------------------------------------------------------------------------------------------------------------------------
PAR VALUE
------ -------
PREFERRED STOCKS - 0.0%**
CABLE TELEVISION - 0.0%** Adelpia Communications Corporation+ .................. 3,500 $ 1,050
TOTAL PREFERREDSTOCKS
(Cost $349,125) ...................................................................... 1,050
------------
SHORT TERM OBLIGATIONS - 3.2%
(Cost $1,200,000)
Agreement with PNC Capital Markets, 1.22%
dated 11/29/02, to be repurchased at
$1,200,222 on 12/02/02, collateralized
by $1,195,000 SLMA,
3.375% due 07/15/04 (value $1,237,198) ............. $ 1,200,000 1,200,000
------------
TOTAL INVESTMENTS (COST $46,011,293*) - 100.4% ............................................................. 37,470,603
OTHER ASSETS AND LIABILITIES - (0.4%) ...................................................................... (161,566)
------------
NET ASSETS - 100.0% ........................................................................................ $ 37,309,037
============
-----------
* Aggregate cost for Federal tax purposes is $47,724,538
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1993.
** Amount represents less than 0.1% of net assets.
Glossary of Terms
GMBH Gesellschaft mit beschrankter Halftung (West German Limited Liability
Company)
MTN Medium Term Note
N.V. Naamloze Vennoolschap (Dutch Corporation)
PLC Public Liability Company
9
BOULDER GROWTH & INCOME FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2002
ASSETS:
Investments, at value (Cost $46,011,293) (Note 1)
See accompanying schedule ...................................................................... $ 37,470,603
Cash ............................................................................................. 485
Receivable for offering rights ................................................................... 229,000
Dividends and interest receivable ................................................................ 90,353
Prepaid expenses ................................................................................. 68,319
---------------
TOTAL ASSETS ............................................................................... 37,858,760
LIABILITIES:
Payable for offering rights ................................................. $ 229,000
Deferred compensation-director (Note 10) .................................... 158,383
Investment co-advisory fees payable (Note 2) ................................ 56,886
Legal and audit fees payable ................................................ 50,111
Administration fee payable (Note 2) ......................................... 9,015
Accrued expenses and other payables (Note 2) ................................ 46,328
---------------
TOTAL LIABILITIES .......................................................................... 549,723
---------------
NET ASSETS .......................................................................................... $ 37,309,037
===============
NET ASSETS consist of:
Undistributed net investment income .............................................................. $ 372,109
Accumulated net realized loss on investments sold ................................................ (12,763,988)
Unrealized depreciation of investments ........................................................... (8,540,690)
Par value of Common Stock ........................................................................ 56,639
Paid-in capital in excess of par value of Common Stock ........................................... 58,184,967
---------------
TOTAL NET ASSETS ........................................................................... $ 37,309,037
===============
NET ASSET VALUE, (Net Asset Value, $37,309,037 / 5,663,892 shares outstanding) ...................... $ 6.59
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10
BOULDER GROWTH & INCOME FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE FIVE MONTH FOR THE
PERIOD ENDED YEAR ENDED
NOVEMBER 30, 2002* JUNE 30, 2002
--------------------- ----------------
INVESTMENT INCOME:
Dividends ................................................................... $ 627,075 $ 252,118
Interest (net of foreign withholding taxes of 0, $384) ...................... 190,587 3,945,417
---------------- ----------------
TOTAL INVESTMENT INCOME ............................................... 817,662 4,197,535
---------------- ----------------
EXPENSES:
Investment co-advisory fees (Note 2) ........................................ $ 195,227 $ 362,370
Legal fees .................................................................. 129,179 147,576
Proxy fees .................................................................. 126,562 144,097
Administration fee (Note 2) ................................................. 46,873 82,880
Directors' fees and expenses (Note 2) ....................................... 29,931 51,198
Printing fees ............................................................... 27,533 29,019
Audit fees .................................................................. 24,500 19,007
Insurance fees .............................................................. 17,268 19,789
NYSE fees ................................................................... 10,508 24,893
Other ....................................................................... 86,226 38,699
---------------- ----------------
TOTAL EXPENSES ........................................................ 693,807 919,528
---------------- ----------------
NET INVESTMENT INCOME .......................................................... 123,855 3,278,007
---------------- ----------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments sold during the period ..................... (2,706,714) (5,632,874)
Change in unrealized depreciation of investments during the period .......... (621,771) (2,770,396)
---------------- ----------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS ................................ (3,328,485) (8,403,270)
---------------- ----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $ (3,204,630) $ (5,125,263)
================ ================
-----------
* Fiscal year end changed to November 30. Prior to this, the fiscal year end was June 30.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11
BOULDER GROWTH & INCOME FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FIVE MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, 2002 JUNE 30, 2002 JUNE 30, 2001
------------------- ------------- -------------
OPERATIONS:
Net investment income ................................................... $ 123,855 $ 3,278,007 $ 3,994,351
Net realized loss on investments sold during the period ................. (2,706,714) (5,632,874) (2,913,272)
Change in unrealized appreciation/(depreciation) of investments
during the period .................................................... (621,771) (2,770,396) 1,152,798
------------- ------------- -------------
Net increase/(decrease) in net assets resulting from operations ......... (3,204,630) (5,125,263) 2,233,877
DISTRIBUTIONS:
Dividends paid from net investment income to Shareholders ............... -- (3,351,050) (4,010,505)
------------- ------------- -------------
TOTAL DISTRIBUTIONS .................................................. -- (3,351,050) (4,010,505)
CAPITAL TRANSACTIONS:
Proceeds from capital stock issued for distributions reinvested ......... -- -- 175,683
------------- ------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS .......... -- -- 175,683
NET DECREASE IN NET ASSETS FOR THE PERIOD ............................... (3,204,630) (8,476,313) (1,600,945)
NET ASSETS:
Beginning of period ..................................................... 40,513,667 48,989,980 50,590,925
------------- ------------- -------------
End of period (including undistributed net investment income of
$372,109, $334,970 and $488,277, respectively) ....................... $ 37,309,037 $ 40,513,667 $ 48,989,980
============= ============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
12
BOULDER GROWTH & INCOME 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. This
information has been derived from information provided in the financial
statements and market price data for the Fund's shares.
FIVE MONTH
PERIOD ENDED YEAR ENDED JUNE 30,
NOVEMBER 30, -------------------------------------------------------------
2002(B) 2002 2001 2000 1999 1998
---------- --------- --------- --------- --------- ---------
OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 7.15 $ 8.65 $ 8.96 $ 10.07 $ 10.75 $ 10.17
---------- --------- --------- --------- --------- ---------
Net investment income................................. 0.02 0.58 0.70 0.67 0.78 0.75
Net realized and unrealized gain/(loss) on investments (0.58) (1.49) (0.31) (1.02) (0.70) 0.59
---------- --------- --------- --------- --------- ---------
Total from investment operations...................... (0.56) (0.91) 0.39 (0.35) 0.08 1.34
---------- --------- --------- --------- --------- ---------
DISTRIBUTIONS:
Dividends paid from net investment income to
shareholders...................................... -- (0.59) (0.70) (0.76) (0.76) (0.76)
---------- --------- --------- --------- --------- ---------
Total distributions................................... -- (0.59) (0.70) (0.76) (0.76) (0.76)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period........................ $ 6.59 $ 7.15 $ 8.65 $ 8.96 $ 10.07 $ 10.75
========== ========= ========= ========= ========= =========
Market value, end of period........................... $ 5.22 $ 6.78 $ 8.50 $ 8.25 $ 9.63 $ 9.63
========== ========= ========= ========= ========= =========
Total investment return based on net asset value(a)... (7.83)%+++ (11.36)% 4.41% (3.70)% 0.64% 13.57%
========== ========= ========= ========= ========= =========
Total investment return based on market value(a)...... (23.01)%+++ (14.47)% 11.77% (6.81)% 7.85% 14.01%
========== ========= ========= ========= ========= =========
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............... 4.40%++(c) 1.95%+ 1.82%+ 2.51%+ 1.12% 1.12%
Ratio of net investment income to average net assets 0.79%(c) 6.96% 8.03% 7.08% 7.46% 7.11%
SUPPLEMENTAL DATA:
Portfolio turnover rate............................... 21% 180% 83% 53% 58% 73%
Net assets, end of period (in 000's).................. $ 37,309 $ 40,514 $ 48,990 $ 50,591 $ 56,841 $ 60,670
Number of shares outstanding at end of period (in 000's) 5,664 5,664 5,664 5,644 5,644 5,644
--------------------------------------
(a) Assumes reinvestment of distributions at the price obtained by the Fund's Dividend Reinvestment Plan.
+ For the years ended June 30, 2002, 2001 and 2000, the ratio of expenses to average net assets excluding the costs
attributable to a proxy contest and related matters was 1.65%, 1.26% and 1.55%, respectively.
++ For the period ended November 30, 2002, the ratio of expenses to average net assets excluding the costs
attributable to a proxy contest and related matters was 3.60%.
+++ Returns are based on a five month period.
(b) Fiscal year end changed to November 30. Prior to this, the fiscal year end was June 30.
(c) Ratios are annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
13
BOULDER GROWTH & INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Boulder Growth & Income Fund, Inc. (the "Fund"), is registered under the
Investment Company Act of 1940, as amended, as a closed-end, non-diversified
management investment company. 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 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
by the number of shares of Common Stock outstanding. The value of the Fund's net
assets is deemed to equal the value of the Fund's total assets less the Fund's
liabilities. 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, or based on a matrix
system which utilizes information (such as credit ratings, yields and
maturities) from independent sources. 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, with
premiums and discounts being amortized or accreted, respectively.
Cash distributions received from the Fund's investment in real estate
investment trust ("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 capital, 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 possibility 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 from net investment
income, if any, are expected to be declared and paid annually. The Fund had been
declaring and paying dividends quarterly, however the Fund's Board of Directors
changed this policy to an annual payout rather than quarterly at the April 2002
Board of Directors meeting. Distributions to shareholders are recorded on the
ex-dividend date. Any net realized short-term capital gains will be distributed
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
distribute 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.
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.
14
BOULDER GROWTH & INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. INVESTMENT CO-ADVISORY FEES, DIRECTORS' FEES, ADMINISTRATION FEE, CUSTODY 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 (the "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 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. 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. The equity owner of SIA is the Stewart West Indies
Trust, 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
Administrator. Under the 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 Administration
Agreement, the Fund pays FAS a monthly fee, calculated at an annual rate of
0.30% of the value of the Fund's average monthly net assets out of which FASis
required to pay any fees for outsourcing any administrative, custodial or
transfer agency services, which it has done. The equity owners of FAS are EALLC
and the Lola Trust, each of which is considered to be an "affiliated person" of
the Fund as that term is defined in the 1940 Act.
Effective January 28, 2002, the Fund pays each Director who is not a
director, officer or employee of the Advisers or FAS a fee of $3,000 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.
FAS has hired PFPC Inc. ("PFPC"), an indirect, majority-owned subsidiary of
The PNC Financial Services Group, to serve as a sub-administrator.
Mellon Investor Services, LLC ("Mellon"), serves as the Fund's Transfer
Agent. FAS pays Mellon an annual Transfer Agent fee as well as certain expenses.
The Fund may also pay for certain out-of-pocket expenses.
State Street Bank and Trust Company ("State Street"), serves as the Fund's
Custodian. FAS pays State Street a monthly maintenance fee as well as certain
expenses. The Fund may also pay for certain out-of-pocket expenses.
3. CHANGE IN THE FUND'S INVESTMENT POLICIES, INVESTMENT ADVISERS AND RISKS
INVOLVED
CHANGE IN INVESTMENT POLICIES
At a meeting held January 23, 2002, the Board of Directors voted to
eliminate the Fund's non-fundamental investment policy which prohibited the Fund
from investing for purposes of control or management of any company. Removal of
this restriction provides the Fund with flexibility to consider a full range of
reasonable investment options when the Advisers consider a particular
investment. The Advisers currently do not intend to pursue this type of
investment in most circumstances.
The Board also voted to eliminate the Fund's non-fundamental investment
policy which prohibited the Fund from investing in other registered investment
companies. Under current law, the Fund is able to purchase up to 3% of the
voting securities of any one RIC and invest up to an aggregate of 10% of the
Fund's assets in RICs.
CHANGE IN PORTFOLIO MANAGER
On April 26, 2002, shareholders approved new advisory agreements with BIA
and SIA, resulting in a change to the persons who are primarily responsible for
the day-to-day management of the Fund's portfolio. Stewart R. Horejsi is the
primary portfolio manager for SIA and is the Fund's primary portfolio manager.
He is responsible for the day-to-day strategic management of the Fund's assets.
Mr. Horejsi has full discretion regarding specific investment decisions and the
Fund's asset allocation among cash, common stocks and fixed income investments.
In addition to the Fund, Mr. Horejsi has also managed the Boulder Total Return
Fund, Inc. ("BTF") since August 1999. BTF is a closed-end registered investment
company traded on the NYSE. Mr. Horejsi was General Manager of Brown Welding
Supply, LLC, from April 1994 until the company's sale in 1999; and the President
or Manager of various subsidiaries associated with the Horejsi family since the
early 1980's. Mr. Horejsi has been the investment adviser for the Horejsi family
trusts (i.e., the Lola Brown Trust, the Ernest Horejsi Trust No. 1B, the Stewart
R. Horejsi Trust No. 2 and certain other related trusts and
15
BOULDER GROWTH & INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
affiliates) since the early 1980's. As of July 31, 2002, the size of these
trusts' and affiliates' common stock portfolio was approximately $574 million.
Mr. Horejsi has been the Director and President of the Horejsi Family Charitable
Foundation, Inc. since 1997. Mr. Horejsi received a Masters Degree in Economics
from Indiana University in 1961 and a Bachelor of Science Degree in Industrial
Management from the University of Kansas in 1959.
Carl D. Johns, the Fund's Vice President and Treasurer, is responsible for
managing the bonds in the Fund's portfolio. Mr. Johns has assisted in the
management of BTF since August 1999. Prior to joining BIA, he worked at Flaherty
& Crumrine Incorporated, an investment adviser, from 1992 to 1998. During that
period he was an Assistant Treasurer for three NYSE-listed investment companies.
Mr. Johns received a Bachelors Degree in Mechanical Engineering at the
University of Colorado in 1985, and a Masters Degree in Finance from the
University of Colorado in 1991.
CHANGES IN RISK
Risk is inherent in all investing. Investing in any investment company
security involves risk, including the risk that you may receive little or no
return on your investment or that you may lose part or all of your investment.
Therefore, before investing you should consider carefully the following risks
that you assume when you invest.
On April 26, 2002, the Fund's shareholders approved changes to the Fund's
investment objective and certain investment restrictions. As a result of the
changes to the Fund, the primary risks of investing in the Fund have changed.
The Fund formerly held a substantial amount of non-investment grade bonds
("junk bonds"), many of which the Advisers believe are risky investments. The
Fund has substantially transitioned away from these investments and has made
substantial investment in common stocks, for capital appreciation, as well as
common stocks that pay dividends, including real estate investment trusts
("REITs") and other closed-end investment companies ("RICs"). Investing in
common stocks may subject shareholders to more risk than investing in
bonds.While both bonds and common stocks are subject to market risk (i.e., the
risk that the price of a security (a stock or bond) will rise or fall due to
various unpredictable market conditions), common stock price variability has
been historically greater than that of bonds.
The Fund is now a "non-diversified management company" as defined by the
Investment Company Act of 1940, as amended (the "1940 Act"). This permits the
Fund to buy significant positions in stocks of companies that the Advisers find
attractive, resulting in the Fund holding larger positions in fewer companies. A
more concentrated portfolio may cause the Fund's net asset value to be more
volatile than it has been historically and thus may subject shareholders to more
risk. The Fund may hold a substantial position (up to 25% of its assets) in the
common stock of a single issuer. As of November 30, 2002, the Fund held a
significant position in Berkshire Hathaway, Inc., and thus, the volatility of
the Fund's common stock, and the Fund's net asset value and its performance in
general, depends disproportionately more on the performance of this single
issuer than that of a more diversified fund.
The Fund may now invest in real estate, REITs (real estate investment
trusts) and other real estate securities. REITs are securities of companies
whose primary objective is investment in real property or providing services to
real property interests. The Fund may invest up to 25% of its assets in REIT
securities. The Fund intends to invest in REIT securities primarily for income.
Risks associated with investing in REITs include the potential for loss of value
if there is an underlying decline in value of the properties in which the REIT
invests. Property valuations may rise and fall with either local economic
conditions or with the national economy. Furthermore, the dividend income paid
by a REIT may be reduced or eliminated. In addition, the Fund bears its ratable
share of REIT expenses while still paying management fees on the Fund assets so
invested.
The Fund may now invest up to 10% of its assets in other investment
companies registered under the 1940 Act. The Fund may invest in other closed-end
RICs when they are trading at a discount, and when market conditions seem
appropriate to the Advisers. The Fund intends to normally invest in RICs that
pay dividends. The risks associated with investments in RICs include the risk
that the dividend paid by the RIC could be reduced or eliminated. As a
shareholder in another fund, the Fund will bear its ratable share of that fund's
expenses, including management fees, and remains subject to the Fund's advisory
and administrative fees with respect to the assets so invested.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities for the period
ended November 30, 2002, excluding short-term investments, aggregated $8,270,142
and $7,449,875 respectively.
At November 30, 2002, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $1,250,635 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $11,504,570.
16
BOULDER GROWTH & INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. COMMON STOCK
At November 30, 2002, 250,000,000 of $0.01 par value Common Stock were
authorized. There were no Common Stock transactions for the five month period
November 30, 2002, or for the year ended June 30, 2002.
6. SIGNIFICANT SHAREHOLDERS
On November 30, 2002, trusts and other entities affiliated with the Horejsi
family owned 1,171,400 shares of Common Stock of the Fund, representing
approximately 20.68% of the total Fund shares.
7. 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.
8. TAX BASIS DISTRIBUTIONS
Income distributions and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. The character of distributions paid on a tax basis during
the period ending November 30, 2002 and the year ended June 30, 2002 is as
follows:
PERIOD ENDING YEAR ENDED
NOVEMBER JUNE 30,
2002 2002
---- ----
Distributions paid from:
Ordinary Income ..................... $ -- $3,351,050
Short-Term Capital Gain ............. -- --
Long-Term Capital Gain .............. -- --
-------- ----------
$ -- $3,351,050
======== ==========
As of November 30, 2002, the components of distributable earnings on a tax
basis were as follows:
Ordinary Income .................................. $ 734,464
Unrealized Depreciation .......................... (10,253,935)
------------
$ (9,519,471)
============
The Fund had available for tax basis distributions purposes accumulated
capital and other losses of $11,050,743, of which $1,114,468 will expire in
11/30/2008 and $9,936,275 will expire in 11/30/2010.
Net investment income and realized gain and loss for federal income tax
purposes differ from that reported in the financial statements because of
permanent and temporary book and tax differences. These differences are
primarily related to differing treatment of long-term capital gains dividends
and excess ordinary distributions received from Real Estate Investment Trusts
and wash sales. Permanent book and tax basis differences of $(86,716) and
$86,716 were reclassified at November 30, 2002 between undistributed net
investment income and accumulated net realized loss on investments,
respectively, for the Boulder Growth & Income Fund, Inc.
17
BOULDER GROWTH & INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. RIGHTS OFFERING
On October 15, 2002 the Fund's shareholders approved a transferable rights
offering which would permit shareholders to acquire one new share for each share
held. The rights were transferable, which allowed shareholders who did not wish
to exercise their rights to sell them on the New York Stock Exchange. The record
date for determining shareholders eligible to participate in the rights offering
was November 29, 2002. The subscription period was from December 2, 2002 to
December 20, 2002. The market price for the shares issued through the rights
offering was calculated based on the volume-weighted average closing price of
the Fund's shares from December 16 through December 20, 2002. The rights
offering was fully subscribed and the Fund issued 5,663,892 new shares at a
price of $4.34 each. The total gross proceeds to the Fund were $24,581,291.
10. DEFERRED COMPENSATION
At November 30, 2002, the Fund had a deferred compensation liability to a
former Director of the Fund which totaled $158,383, including any accrued
interest.
ADDITIONAL INFORMATION (UNAUDITED)
AUTOMATIC DIVIDEND REINVESTMENT PLAN
On July 22, 2002 the Board of Directors determined to eliminate the Fund's
Automatic Dividend Reinvestment Plan.
PRIVACY STATEMENT
Pursuant to SEC Regulation S-P (Privacy of Consumer Financial Information)
the Directors of the Boulder Growth & Income 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.
18
BOULDER GROWTH & INCOME FUND, INC.
MEETING OF SHAREHOLDERS -- VOTING RESULTS (UNAUDITED)
On October 15, 2002, the Fund held its Annual Meeting of Shareholders to
(1) elect Stephen C. Miller as Director of the Fund, (2) to approve or
disapprove a transferable rights offering, (3) to approve or disapprove a
proposed amendment to the Fund's charter to permit the Board, without
shareholder approval, to increase or decrease the Fund's authorized capital and
(4) to approve or disapprove an amendment to the Fund's charter to permit the
issuance of preferred stock.
PROPOSAL 1:
ELECTION OF STEPHEN C. MILLER AS DIRECTOR OF THE FUND
-----------------------------------------------------
# OF VOTES CAST % OF VOTES CAST
----------------- -----------------
Affirmative ................................................................ 4,913,345 89.5
Withheld ................................................................... 577,753 10.5
--------- -----
TOTAL ............................................................. 5,491,098 100.0
========= =====
PROPOSAL 2 (VOTING BY SHAREHOLDERS):
APPROVE OR DISAPPROVE A TRANSFERABLE RIGHTS OFFERING
-----------------------------------------------------
# OF VOTES CAST % OF VOTES CAST
----------------- -----------------
Affirmative ................................................................ 3,497,984 79.9
Against .................................................................... 701,124 16.0
Abstain .................................................................... 179,928 4.1
--------- -----
TOTAL ............................................................. 4,379,036 100.0
========= =====
PROPOSAL 2 (VOTING BY ACCOUNTS):
APPROVE OR DISAPPROVE A TRANSFERABLE RIGHTS OFFERING
----------------------------------------------------
# OF VOTES CAST % OF VOTES CAST
----------------- -----------------
Affirmative ................................................................ 2,247 76.7
Against .................................................................... 503 17.1
Abstain .................................................................... 181 6.2
--------- -----
TOTAL ............................................................. 2,931 100.0
========= =====
PROPOSAL 3:
APPROVE OR DISAPPROVE AN AMENDMENT TO THE FUND'S CHARTER TO PERMIT THE
BOARD, WITHOUT SHAREHOLDER APPROVAL, TO INCREASE OR DECREASE THE FUND'S
AUTHORIZED CAPITAL
-----------------------------------------------------------------------
# OF VOTES CAST % OF VOTES CAST
----------------- -----------------
Affirmative ................................................................ 3,298,345 76.2
Against .................................................................... 843,389 19.5
Abstain .................................................................... 184,452 4.3
--------- -----
TOTAL ............................................................. 4,326,186 100.0
========= =====
19
BOULDER GROWTH & INCOME FUND, INC.
MEETING OF SHAREHOLDERS -- VOTING RESULTS (UNAUDITED) (CONTINUED)
PROPOSAL 4:
APPROVE OR DISAPPROVE AN AMENDMENT TO THE FUND'S CHARTER TO PERMIT THE
ISSUANCE OF PREFERRED STOCK
-----------------------------------------------------------------------
# OF VOTES CAST % OF VOTES CAST
----------------- -----------------
Affirmative ................................................................ 3,350,158 77.4
Against .................................................................... 792,409 18.3
Abstain .................................................................... 183,619 4.3
--------- -----
TOTAL ............................................................. 4,326,186 100.0
========= =====
20
BOULDER GROWTH & INCOME FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Boulder Growth & Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of the Boulder Growth & Income Fund, Inc., as of
November 30, 2002, and the related statements of operations, statements of
changes in net assets and financial highlights for the five-month period then
ended and the year ended June 30, 2002. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The statement of changes in net assets for the year ended
June 30, 2001 and the financial highlights for each of the years in the
four-year period ended June 30, 2001 were audited by other auditors whose report
dated August 1, 2001 expressed an unqualified opinion on those statements and
financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform our audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 2002 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Boulder Growth & Income Fund, Inc. as of November 30, 2002, and the results of
its operations, changes in its net assets, and financial highlights for each of
the years or periods described above in conformity with accounting principles
generally accepted in the United States of America.
[GRAPHIC OMITTED]
KPMG LLP LOGO
Boston, Massachusetts
December 31, 2002
21
BOULDER GROWTH & INCOME FUND, INC.
INFORMATION ABOUT DIRECTORS AND OFFICERS
Set forth in the following table is information about the Directors of the Fund,
together with their address, age, position with the Fund, term of office, length
of time served and principal occupation during the last five years.
NAME, ADDRESS*, AGE POSITION, LENGTH OF PRINCIPAL OCCUPATION(S) AND OTHER NUMBER OF
TERM SERVED, AND DIRECTORSHIPS HELD FUNDS IN FUND
TERM OF OFFICE DURING THE PAST FIVE YEARS COMPLEX
OVERSEEN BY
DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
ALFRED G. ALDRIDGE, JR. Director of the Fund Retired; from 1982-2002, Sales 2
BRIG. GEN. (RETIRED) since January 2002. Manager of Shamrock Foods Company;
CAL. AIR NATIONAL GUARD Current term expires Director of the Fiesta Bowl, Tempe, AZ
Age: 65 at Annual Meeting since 1997. Director, Boulder Total
for 2004 Return Fund, Inc., since 1999.
------------------------------------------------------------------------------------------------------------------------------------
RICHARD I. BARR Director of the Fund Retired; from 1963-2001, Manager of 2
Age: 64 since January 2002. Advantage Sales and Marketing, Inc.
Current term expires Director, Boulder Total Return Fund,
at Annual Meeting Inc., since 1999; Director, First Financial
for 2004 Fund, Inc., since 2001.
------------------------------------------------------------------------------------------------------------------------------------
JOEL W. LOONEY Director of the Fund Partner, Financial Management Group, 2
Age: 40 since January, 2002. LLC since July 1999; Director, Boulder
Current term expires Total Return Fund, Inc., since January
at Annual Meeting 2001.
for 2003
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS**
------------------------------------------------------------------------------------------------------------------------------------
SUSAN L. CICIORA Director of the Fund Owner, Superior Interiors (interior 2
Age: 38 since January 2002. design for custom homes) since 1995;
Current term expires at Corporate Secretary, Ciciora Custom
Annual Meeting Builders, LLC since 1995; Trustee of the
for 2003 Brown Trust and the EH Trust. Director,
Boulder Total Return Fund, Inc., since
November 2001.
------------------------------------------------------------------------------------------------------------------------------------
STEPHEN C. MILLER Director and President and General Counsel of 2
Age: 50 Chairman of the Boulder Investment Advisers, LLC ("BIA");
Board since January Manager, Fund Administrative Services,
2002. President of LLC ("FAS"); Vice President of Stewart
the Fund. Current Investment Advisers ("SIA"); Director,
term expires at Chairman of the Board and President of
Annual Meeting for Boulder Total Return Fund, Inc., since
2005 1999. President and General Counsel,
Horejsi, Inc. (liquidated in 1999);
General Counsel, Brown Welding Supply,
LLC (sold in 1999); Of Counsel, Krassa
& Miller, LLC since 1991.
------------------------------------------------------------------------------------------------------------------------------------
* Unless otherwise specified, the Directors' respective addresses are c/o Boulder Growth & Income Fund, Inc., 1680
38th Street, Suite 800, Boulder, Colorado 80301.
** Mr. Miller is an "interested person" because he is an officer of BIA and SIA, the Fund's investment advisers. Ms.
Ciciora is an "interested person" as a result of the extent of her beneficial ownership of Fund shares and by
virtue of her indirect beneficial ownership of the BIA and FAS.
22
BOULDER GROWTH & INCOME FUND, INC.
INFORMATION ABOUT DIRECTORS AND OFFICERS--(CONTINUED)
The names of the executive officers of the Fund (other than Mr. Miller, who is
described above) are listed in the table below. Each officer was elected to
office by the Board at a meeting held on January 23, 2002. This table also shows
certain additional information. Each officer will hold such office until a
successor has been elected by the Board.
NAME, ADDRESS, AGE POSITION, LENGTH OF PRINCIPAL OCCUPATION(S) AND OTHER DIRECTORSHIPS
TERM SERVED, AND HELD
TERM OF OFFICE DURING THE PAST FIVE YEARS
------------------------------------------------------------------------------------------------------------------------------------
CARL D. JOHNS Chief Financial Officer, Vice President and Treasurer of BIA and Assistant
1680 38th Street, Chief Accounting Manager of FAS, since April, 1999; Vice President,
Suite 800 Officer, Vice President Chief Financial Officer and Chief Accounting Officer,
Boulder, CO 80301 and Treasurer since Boulder Total Return Fund, Inc., since 1999;
Age: 39 January 2002. Employee of Flaherty & Crumrine Incorporated prior
Appointed annually. to December 31, 1998; Assistant Treasurer of
Preferred Income Management Fund Incorporated,
Preferred Income Fund Incorporated and Preferred
Income Opportunity Fund Incorporated prior to
December 31, 1998.
------------------------------------------------------------------------------------------------------------------------------------
STEPHANIE J. KELLEY Secretary since January Secretary, Boulder Total Return Fund, Inc., since
1680 38th Street, 2002. Appointed October 27, 2000; Assistant Secretary and Assistant
Suite 800 annually. Treasurer of various Horejsi Affiliates; employee of
Boulder, CO 80301 FAS since March 1999.
Age: 46
------------------------------------------------------------------------------------------------------------------------------------
NICOLE L. MURPHEY Assistant Secretary Assistant Secretary, Boulder Total Return Fund, Inc.,
1680 38th Street, since January 2002. since October 27, 2000; employee of FAS since July
Suite 800 Appointed annually. 1999.
Boulder, CO 80301
Age: 25
------------------------------------------------------------------------------------------------------------------------------------
23
BOULDER GROWTH & INCOME FUND, INC.
85 Challenger Road
Ridgefield Park, NJ 07660
[GRAPHIC OMITTED]
MOUNTAIN ART
BOULDER
GROWTH & INCOME
FUND, INC.
(NYSE: BIF)
--------------------------------------------------------------------------------
ANNUAL REPORT
NOVEMBER 30, 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 --
Mellon Investor Services LLC, at:
85 Challenger Road
Ridgefield Park, NJ 07660
This report is sent to shareholders of Boulder Growth & Income 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.