UNITED STATES
SECURITES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-03150
BMC FUND, INC.
(Exact name of registrant as specified in charter)
800 GOLFVIEW PARK (P. O. BOX 500)
LENOIR, NC 28645
(Address of principal executive offices) (Zip code)
CAROL FRYE
BMC FUND, INC.
P. O. BOX 500
LENOIR, NC 28645
(Name and address of agent for service)
Registrant's telephone number including area code: 828-758-6100
Date of fiscal year end: October 31, 2013
Date of reporting period: October 31, 2013
Item 1. Report to Stockholders.
BMC FUND, INC.
FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
Year Ended October 31, 2013
BMC FUND, INC.
TABLE OF CONTENTS
| | Page No. |
| | |
| Letter to Shareholders – Management’s Discussion of Fund Performance | 1 |
| | |
| Graphic Presentation of Portfolio Holdings and Sector Diversification | 5 |
| | |
| Supplemental Information | 6 |
| | |
| Report of Independent Registered Public Accounting Firm | 7 |
| | |
| Statement of Assets and Liabilities | 8 |
| | |
| Statement of Operations | 9 |
| | |
| Statements of Changes In Net Assets | 10 |
| | |
| Notes to Financial Statements | 11 |
| | |
| Directors and Officers | 20 |
| | |
| Additional Information | 24 |
| | |
| Financial Highlights | 25 |
| | |
| Schedule of Investments | 26 |
| | |
| Schedule of Open Written Option Contracts | 38 |
BMC FUND, INC.
LETTER TO SHAREHOLDERS –
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
Year Ended October 31, 2013
TO OUR SHAREHOLDERS: MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
For the fiscal year ending October 31, 2013, BMC Fund, Inc. (“BMC”) generated investment performance of 5.97%. At year end, BMC’s portfolio remains broadly diversified across investments in high quality global equities, fixed income, limited partnerships and other investments, and a substantial cash reserve. We discuss each of these allocations in greater detail below and provide commentary on short term performance, in addition to our longer term outlook.
Investment Overview & Performance
While BMC is up for the year, our returns have lagged equity markets in general, as we strive to find a happy medium between preserving and compounding our capital. Constructing a portfolio capable of delivering acceptable returns under various market conditions is an arduous endeavor. Experience suggests that the best results are achieved by consistently applying the discipline we’ve refined over decades and maintaining that discipline through periods of complacency and overvaluation. We believe today is one such period. While the surge in domestic equities may make investing look easy for the time being, we believe that a market that rises relentlessly in the face of challenging fundamentals is the riskiest environment of all. Our resolve in holding cash balances, absent compelling opportunities, can be a performance drag in the short term, but it is the price that must sometimes be paid for longer-term outperformance.
In his 1960 Letter to Partners, Warren Buffett explained that, “any superior record which might be accomplished should not be expected to be evidenced by a relatively constant advantage in performance compared to the Average. Rather it is likely that if such an advantage is achieved, it will be through better than average performance in stable or declining markets and average, or perhaps even poorer than average performance in rising markets.” Like Buffett, we have consistently expressed our expectations that performance should be relatively better in down or sideways markets, but generally speaking, our investment style will struggle to keep up with speculative advances. That being said, our returns have continued to meet our objectives throughout this aging bull market. Although we have lagged equity indices, BMC has generated a 52.42% total return over the past five years. More importantly, we expect our current positioning to dampen the downside when markets ultimately revert to reality, while keeping our powder dry to sow the seeds of future performance.
Fixed Income and the Flight from Safety
Last year, we noted that fixed income securities have historically served as the foundation of our asset allocation framework given the challenges facing the global economy and the elevated level of equity valuations. Central banks remain committed to low interest rates today, but this summer’s “taper tantrum” in response to a hint of diminishing accommodation should serve as a leading indicator of what’s to come. While our bond portfolio managed to squeak out a small gain for the year despite relentless selling pressure from institutional and retail investors alike,
BMC FUND, INC.
LETTER TO SHAREHOLDERS –
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
Year Ended October 31, 2013
the long term outlook for the majority of fixed income assets entails greater risk than reward at present.
BMC’s primary investment objectives are income generation and capital preservation. Bonds accomplished both over the past generation. We think they are unlikely to do the same for the next. There are certainly exceptions within this universe (short duration high-yield, stressed credits and segments of the mortgage market come to mind), but broadly speaking, it is safe to assume that our allocation to fixed income will be gradually reduced over time. This raises an important question faced by all investors today. If not bonds, then what?
The Value of External Managers
We do not attempt to time the markets. Rather, we aim to sell investments as they approach our estimate of intrinsic value and as a result, our allocation to cash and equivalents has gradually increased as the general price level of stock and bond markets have continued to rise. While we are quite comfortable holding cash absent compelling opportunities, we are constantly building an inventory of ideas that meet our investment requirements. At the same time, we believe flexibility is critical as value may emerge in various forms. As a result, we invest across the capital structure, and remain indifferent to investments in diverse asset classes, industries, and geographies, at the right price. Still, we focus keenly on what we know and relentlessly consider what we don’t know. The discipline to stay within our circle of competence is critical to success.
In this context, our external investments with like-minded, long-term investors complement our internal capabilities, expand our investable universe, and deepen our understanding of financial markets. Simply put, external managers expand our circle of competence. Our investments here are generally less correlated to traditional markets and thus, help us to achieve one of our primary investment objectives – the preservation of capital. With expected returns on traditional assets classes well below average and risks far above average, our current and planned investments in alternatives are largely a function of the opportunity set today. Many of our managers hedge risks on an ongoing basis so underperformance during bull markets should be expected. Nonetheless, recent investments have achieved our objectives as our limited partnerships have generated 8.81% and 19.21% returns over the past one and three years. From today’s starting point, we expect these investments to handily outperform traditional stocks and bonds over the next three to five years and consequently, we have committed increasing time and resources to expanding our already valuable industry network.
Quality with a Catalyst
BMC’s large cash position represented one of two significant challenges to performance this year and makes it almost certain that we will continue to lag the broader market if the current speculative rally continues. It is an unfortunate truth that long term investment success often requires the perseverance to look foolish in the short term. The second challenge was an equity portfolio tilted too heavily toward dividend yielding stocks, as these low-beta securities underperformed the market’s advance by a wide margin. Despite recent underperformance, we
BMC FUND, INC.
LETTER TO SHAREHOLDERS –
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
Year Ended October 31, 2013
believe high-dividend paying defensive equities remain among the most attractive investments available today. These businesses represent compelling investments in their own right, but more recently, we have identified a complement to our value-investing efforts - Quality with a Catalyst.
We believe our portfolio will be well served over the years by identifying high quality franchises which stand to benefit from the tailwind of active shareholders who serve as a catalyst for value-realization. Owning high quality securities with a catalyst for value realization can augment our margin of safety, while leveraging the structural competitive advantages inherent in these elite businesses. The emergence of a catalyst serves to reduce risk and augment returns as the gap between price and value can be closed more quickly. Anchoring the portfolio to undervalued, high quality franchises should result in smaller drawdowns, lower volatility and superior long term performance. That would be the historical precedent. The current backdrop looks even better. Global central banks represent the single greatest macro force influencing markets today as policy reflates asset prices by forcing investors to take risk. The result is increased capital flows into the developed world and the beginning of the second multiyear period of outperformance versus emerging markets. We believe this is an exceptional period for investment in high quality developed world brands.
Bottom Line
We have a long term objective of producing attractive returns, lightly correlated with highly volatile stock markets – a dual focus on income generation and capital preservation remain our priorities today as they always have. Over the short term, however, equities can and do exhibit periods of leadership. Our process does not attempt to catch every market twitch. Our discipline means we tend to be a provider of liquidity rather than a taker of liquidity, buying assets that others want to sell and selling assets that others are chasing higher. Today is a terrific time to be a seller of assets, but it is much more challenging to find compelling ideas that meet our return requirements. Tomorrow, we expect to be a buyer of assets as prices ultimately return to fair value and expected returns increase.
One of the most underappreciated keys to generating consistent long-term returns is to minimize losses. Losses are almost always caused by taking too much risk, as many investors feel forced to do today. If you avoid large losses, the gains take care of themselves. Our current positioning allows us to generate consistent income in a high risk environment, while keeping our powder dry to seize more attractive investments the next time opportunity knocks. “When you’re one step ahead of the crowd, you’re a genius. When you’re two steps ahead, you’re a crackpot.”
BMC FUND, INC.
LETTER TO SHAREHOLDERS –
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
Year Ended October 31, 2013
During the year ended October 31, 2013, the Company paid the following dividends per share:
| December 10, 2012 to shareholders of record November 25, 2012 | | $ | .32 | |
| March 10, 2013 to shareholders of record February 25, 2013 | | | .25 | |
| June 10, 2013 to shareholders of record May 25, 2013 | | | .25 | |
| September 10, 2013 to shareholders of record August 25, 2013 | | | .25 | |
| | | | | |
| Total | | $ | 1.07 | |
The Company paid a dividend of $0.25 per share on December 10, 2013 to shareholders of record November 25, 2013.
The attached Schedule of Investments is a listing of the entire Company’s diversified securities at October 31, 2013 with a total market value of $112,538,789.
| Paul H. Broyhill | M. Hunt Broyhill |
| Chairman and Chief Executive Officer | President |
BMC FUND, INC.
GRAPHIC PRESENTATION OF PORTFOLIO HOLDINGS AND
SECTOR DIVERSIFICATION
Year Ended October 31, 2013
BMC FUND, INC.
SUPPLEMENTAL INFORMATION
Year Ended October 31, 2013
SUPPLEMENTAL INFORMATION
Paul H. Broyhill, Chairman and Chief Executive Officer, M. Hunt Broyhill, President, and Christopher R. Pavese, CFA, Chief Investment Officer, are primarily responsible for the day-to-day management of the Company’s portfolio. Mr. Paul Broyhill has had such responsibility since the inception of the Company. Mr. Hunt Broyhill has had such responsibility since 2001. Mr. Hunt Broyhill has been engaged in asset management for various institutions and high net worth individuals for more than five years. Prior to joining the Company on March 1, 2005, Mr. Pavese was a Vice President and Portfolio Manager at JP Morgan Private Bank from January 1999 until February 2005. At JP Morgan, Mr. Pavese was engaged in asset management, portfolio strategy, and asset allocation for high net worth individuals, personal trusts, endowments and foundations.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of BMC Fund, Inc.
We have audited the accompanying statement of assets and liabilities of the BMC Fund, Inc. (the “Company”), including the schedule of investments, as of October 31, 2013 and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the years ended October 31, 2013, 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005, and 2004. These financial statements and financial highlights are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 October 31, 2013 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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.
As explained in note 2, the financial statements include investments valued at $20,758,738 (18.6 percent of net assets), whose fair values have been estimated by management in the absence of readily determinable fair values. Management’s estimates are based upon information provided by the funds’ managers or the general partners.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BMC Fund, Inc. as of October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for the each of the two years in the period then ended, and the financial highlights for each of the years ended October 31, 2013, 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005, and 2004, in conformity with accounting principles generally accepted in the United States of America.
/s/ Dixon Hughes Goodman LLP
Charlotte, North Carolina
December 17, 2013
BMC FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2013
| ASSETS AT MARKET VALUE: | | | | |
| Investment securities (cost - $107,269,394) | | $ | 112,538,789 | |
| Cash and short-term investments | | | 22,594 | |
| Receivables, accrued interest and dividends | | | 158,105 | |
| Receivable from hedge fund liquidation | | | 50,774 | |
| Other assets | | | 33,180 | |
| | | | | |
| Total assets | | | 112,803,442 | |
| | | | | |
| LIABILITIES: | | | | |
| Call and put options written, at fair value (premiums received $422,753) | | | 384,145 | |
| Accounts payable and accrued expenses | | | 549 | |
| Payable to broker | | | 974,843 | |
| Payable to custodian | | | 13,310 | |
| Accounts payable to affiliates | | | 73,076 | |
| | | | | |
| Total liabilities | | | 1,445,923 | |
| | | | | |
| NET ASSETS AT OCTOBER 31, 2013 - EQUIVALENT TO $22.57 PER SHARE ON 4,933,281 SHARES OF COMMON STOCK OUTSTANDING | | $ | 111,357,519 | |
| | | | | |
| SUMMARY OF SHAREHOLDERS' EQUITY: | | | | |
| Common stock, par value $5.00 per share - authorized 70,000,000 shares; outstanding, 4,933,281 shares | | $ | 24,666,405 | |
| Retained earnings prior to becoming investment company | | | 75,310,808 | |
| Undistributed net investment income | | | 376,140 | |
| Realized gain on investments | | | 501,449 | |
| Undistributed nontaxable gain | | | 5,194,714 | |
| Unrealized appreciation of investments | | | 5,308,003 | |
| | | | | |
| NET ASSETS APPLICABLE TO COMMON STOCK OUTSTANDING | | $ | 111,357,519 | |
See accompanying notes to financial statements.
BMC FUND, INC.
STATEMENT OF OPERATIONS
Year Ended October 31, 2013
| INVESTMENT INCOME: | | | | |
| Income: | | | | |
| Interest - fixed income | | $ | 138,791 | |
| Other interest and dividends | | | 3,202,363 | |
| | | | | |
| Total income | | | 3,341,154 | |
| | | | | |
| Expenses: | | | | |
| Legal and professional fees | | | 59,565 | |
| Directors' fees (Note 8) | | | 67,000 | |
| Investment expense | | | 81,048 | |
| Salaries | | | 573,667 | |
| Property and liability insurance | | | 52,972 | |
| Depreciation expense | | | 5,730 | |
| Taxes and licenses | | | 62,671 | |
| Rent | | | 36,669 | |
| Office supplies and expense | | | 58,158 | |
| Dues and subscriptions | | | 52,415 | |
| Travel and entertainment | | | 14,735 | |
| | | | | |
| Total expenses | | | 1,064,630 | |
| | | | | |
| Investment income, net | | | 2,276,524 | |
| | | | | |
| REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | | | | |
| Realized gain from investments sold | | | 831,525 | |
| Realized gain from expiration or closing of options contracts written | | | 826,951 | |
| Change in unrealized appreciation of investments for the period | | | 1,322,569 | |
| | | | | |
| Net gain on investments | | | 2,981,045 | |
| | | | | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 5,257,569 | |
See accompanying notes to financial statements.
BMC FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended October 31, 2013 and 2012
| | | 2013 | | | 2012 | |
| | | | | | | |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
| Net investment income | | $ | 2,276,524 | | | $ | 1,731,148 | |
| Realized gains from investment securities sold | | | 1,658,476 | | | | 2,324,887 | |
| Change in unrealized appreciation of investments for the year | | | 1,322,569 | | | | 3,482,704 | |
| | | | | | | | | |
| Net increase in net assets resulting from operations | | | 5,257,569 | | | | 7,538,739 | |
| | | | | | | | | |
| Distributions to shareholders from: | | | | | | | | |
| Net realized gain on investment securities | | | (1,637,601 | ) | | | (2,389,871 | ) |
| Net investment income | | | (2,301,668 | ) | | | (2,760,969 | ) |
| Retained earnings prior to becoming an investment company | | | (1,339,342 | ) | | | (78,438 | ) |
| | | | | | | | | |
| TOTAL INCREASE (DECREASE) IN NET ASSETS | | | (21,042 | ) | | | 2,309,461 | |
| | | | | | | | | |
| NET ASSETS AT BEGINNING OF PERIOD | | | 111,378,561 | | | | 109,069,100 | |
| | | | | | | | | |
| NET ASSETS AT END OF PERIOD (Including undistributed net investment income: | | | | | | | | |
| 2013 - $376,140, 2012 - $401,284) | | $ | 111,357,519 | | | $ | 111,378,561 | |
See accompanying notes to financial statements.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
BMC Fund, Inc. (the “Company”) is a closed-end, diversified investment company registered under the Investment Company Act of 1940, as amended. Prior to becoming a regulated investment company on April 1, 1981, BMC Fund, Inc. operated as a regular corporation. The following is a summary of significant accounting policies followed by the Company in the preparation of its financial statements.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuations – The investment securities are stated at fair value as determined by closing prices on national securities exchanges. Investment securities include corporate bonds, mutual funds, and common and preferred stocks.
The investments in limited partnerships, other investments and venture capital are stated at estimated fair value as determined by the management of these investments and are approved by the Company’s Valuation Committee after giving consideration to historical and projected financial results, economic conditions, financial condition of investee and other factors and events subject to change, and ratified by the Company’s Board of Directors. Because of the inherent uncertainty of those valuations, the estimated values may differ significantly from the values that would have been used had a ready market value for the investments existed, and these differences could be material.
B. Basis of Presentation - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as detailed in the Financial Accounting Standards Board’s Accounting Standards Codification. The Company evaluates subsequent events through the date of filing with the Securities and Exchange Commission (“SEC”).
C. Investment Transactions – Investment transactions are accounted for on the date the order to buy or sell is executed. Realized gains and losses on investments are determined on the basis of specific identification of issues sold or matured. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on securities purchased are amortized over the lives of the respective securities.
For the year ended October 31, 2013, the Company purchased and sold securities in the amount of $36,728,797 and $40,041,990 (excluding short-term investments and options), respectively.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
| 2. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
D. Option Writing – When the Company writes an option, an amount equal to the premium received by the Company is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Company on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Company has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Company. The Company as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.
E. Income Taxes – No federal tax provision is required as it is the Company’s policy to comply with the provisions of Subchapter M of the Internal Revenue Code of 1954, as amended, including the distribution to its shareholders of substantially all of its income and any capital gains not offset by capital losses. Also, no state income tax provision has been provided because the states in which the Company has income recognize the tax exempt status of a regulated investment company.
The Company did not have an accrual for uncertain tax positions as deductions taken and benefits accrued are based on widely understood administrative practices and procedures, and are based on clear and unambiguous tax law. Tax returns for all years 2009 and thereafter are subject to possible future examinations by tax authorities.
F. Dividend Policy – It is the Company’s policy to pay dividends during the year in sufficient amounts to meet the requirements to maintain its status as a regulated investment company.
G. Cash and Short-Term Investments – For purposes of financial reporting, the Company considers all investments at financial institutions with original maturities of three months or less to be equivalent to cash. Short-term money market investments managed by third party investors are included in investment securities.
H. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
| 2. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
I. Fair Value Measurements – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation techniques. A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available. Valuation techniques that are consistent with the market or income approach are used to measure fair value. The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 - Valuations based on inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Fair value is a market-based measure, based on assumptions of prices and inputs considered from the perspective of a market participant that are current as of the measurement date, rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date.
The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for investments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
| 2. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
J. Investments in Limited Partnerships - Investments in limited partnerships are valued, as a practical expedient, utilizing the net asset valuations provided by the underlying limited partnerships when the net asset valuations of the investments are calculated (or adjusted by the Company if necessary) in a manner consistent with GAAP for investment companies. The Company applies the practical expedient to its investments in limited partnerships on an investment-by-investment basis, and consistently with the Company's entire position in a particular investment, unless it is probable that the Company will sell a portion of an investment at an amount different from the net asset valuation.
Investments in limited partnerships are included in Level 3 of the fair value hierarchy. In determining the level, the Company considers the length of time until the investment is redeemable, including notice and lock-up periods or any other restriction on the disposition of the investment. The Company also considers the nature of the portfolios of the underlying limited partnership and their ability to liquidate their underlying investments. If the Company does not know when it will have the ability to redeem the investment or it does not have the ability to redeem its investment in the near term, the investment is included in Level 3 of the fair value hierarchy. In addition, investments which are not valued using the practical expedient are included in Level 3 in the fair value hierarchy.
K. Fair Value-Valuation Processes - The Company establishes valuation processes and procedures to ensure that the valuation techniques are fair, consistent, and verifiable. The Company has designated a valuation subcommittee, that is comprised of senior management employees of the Company, that meets on a quarterly basis, or more frequently as needed, to approve the valuations of the Fund's investments. The valuation subcommittee establishes valuations which are then provided to the Company’s valuation committee, which is comprised of disinterested directors, who review and recommend the valuations to the Company’s Board of Directors to ratify. The Company’s valuations committee is responsible for developing the Company’s written valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating the overall fairness and consistent application of the valuation processes.
The valuations of investments in limited partnerships are supported by information received from the limited partnerships, such as monthly net asset values, investor reports, and audited financial statements, when available. If it is probable that the Company will sell an investment at an amount different from the net asset valuation or in other situations where the practical expedient is not available, or when the Company believes alternative valuation techniques are more appropriate, the valuation committee may consider other factors, including subscription and redemption rights, expected discounted cash flows, transactions in the secondary market, bids received from potential buyers, and overall market conditions in its determination of fair value.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
| 2. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
The Company's Level 3 investments have been valued using the unadjusted net asset value of investments in limited partnerships. As a result, there were no unobservable inputs that have been internally developed by the Company in determining the fair values of its investments as of October 31, 2013.
The following is a summary of the inputs used to value the Company’s investments as of October 31, 2013.
| Asset Description | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | |
| Fixed Income | | $ | 3,340,566 | | | $ | - | | | $ | - | | | $ | 3,340,566 | |
| Mutual Funds | | | | | | | | | | | | | | | | |
| Bond Mutual Funds | | | 26,117,998 | | | | - | | | | - | | | | 26,117,998 | |
| Stock Mutual Funds | | | 7,502,947 | | | | - | | | | - | | | | 7,502,947 | |
| Other Investments | | | | | | | | | | | | | | | | |
| Limited Partnerships | | | - | | | | - | | | | 20,758,738 | | | | 20,758,738 | |
| Common Stocks | | | | | | | | | | | | | | | | |
| Common Stocks – Publicly Traded | | | 28,111,066 | | | | - | | | | - | | | | 28,111,066 | |
| Call Options | | | (137,595 | ) | | | - | | | | - | | | | (137,595 | ) |
| Put Options | | | (246,550 | ) | | | - | | | | - | | | | (246,550 | ) |
| Cash and Cash Equivalents | | | 26,707,474 | | | | - | | | | - | | | | 26,707,474 | |
| Total Investments | | $ | 91,395,906 | | | $ | - | | | $ | 20,758,738 | | | $ | 112,154,644 | |
The table below presents a reconciliation for the year ended October 31, 2013, for all Level 3 assets that are measured at fair value on a recurring basis.
| | | Balance | | | Accrued | | | Unrealized | | | Realized | | | | | | | | | Net
Transfers | | | Balance | |
| | | as of | | | Discounts/ | | | Gains & | | | Gains & | | | Net | | | Net | | | in (out of) | | | as of | |
| Level 3 Assets | | 10/31/2012 | | | Premiums | | | Losses | | | Losses | | | Purchases | | | Sales | | | Level 3 | | | 10/31/2013 | |
| Other Investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Limited Partnerships | | $ | 18,308,442 | | | $ | - | | | $ | 901,684 | | | $ | 761,540 | | | $ | 3,462,708 | | | $ | (2,675,636 | ) | | $ | - | | | $ | 20,758,738 | |
| Total Investments | | $ | 18,308,442 | | | $ | - | | | $ | 901,684 | | | $ | 761,540 | | | $ | 3,462,708 | | | $ | (2,675,636 | ) | | $ | - | | | $ | 20,758,738 | |
Realized gains and losses are included in the realized gain from investments sold on the Statement of Operation. Unrealized gains and losses are included in the change in unrealized appreciation of investments on the Statement of Operations.
L. Investments in Limited Partnerships - As of October 31, 2013, the Company was invested in limited partnerships. Each of these investments has certain restrictions with respect to rights of withdrawal by the Company as specified in the respective agreements. Generally, the Company is required to provide notice of its intent to withdraw after the investment has been maintained for a certain period of time. The management agreements of the limited partnerships provide for compensation to the managers in the form of fees ranging from 1% to 2% annually of net assets and performance incentive allowances or fees ranging from 10% to 20% of net profits earned.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
| 2. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
The following table summarizes the Company's investments in other limited partnership as of October 31, 2013. The Company's investments in limited partnerships have certain redemption and liquidity restrictions which are described in the below table.
| Investment | | Redemptions
Notice Period | | | Redemptions
Permitted | | | Liquidity
Restrictions |
| Limited Partnerships | | | | | | | | | | |
| Stark Investments LP | | | N/A | | | | N/A | | | See below (1) |
| Stark Structured Finance Onshore LP | | | N/A | | | | N/A | | | See below (1) |
| Elliott Associates, LP | | | 60 days | | | | January 1 or July 1 | | | See below (2) (3) |
| RiverNorth Capital Partners, LP | | | 60 days | | | | Monthly | | | See below (4) |
| Greenlight Masters Qualified, LP | | | 105 days | | | | December 31 | | | See below (5) |
| Hayman Capital Partners, LP | | | 45 days | | | | Quarterly | | | See below (6) (7) |
| Morrocroft Special Opportunity Fund II, LP | | | 90 days | | | | Quarterly | | | See below (5) (8) |
| Privet Fund LP | | | 90 days | | | | Quarterly | | | See below (9) |
| Smith Breeden Securitized Credit Opportunities LLC | | | 60 days | | | | Monthly | | | See below (10) |
| Civic Capital Currency Fund, LP | | | 15 days | | | | Monthly | | | None |
| 400 Capital Credit Opportunities Fund LP | | | 60 days | | | | Quarterly | | | See below (11) |
| Virgo Societas Partnership III (Onshore), LP | | | N/A | | | | N/A | | | See below (12) |
| Serengeti Multi-Series, LP | | | 87 days | | | | Quarterly | | | See below (13) |
| Passport Long Short Fund, LP | | | 15 days | | | | Monthly | | | See below (14) |
| Walnut Investment Partners, LP | | | N/A | | | | N/A | | | See below (15) |
(1) In liquidation.
(2) There is a gate provision if requests for redemptions would cause a decline in aggregate net asset value of 20%. Investors shall be required to submit a new withdrawal request until the intended payout is achieved.
(3) There is a capital surcharge of 1 3/4% for a partial or full withdrawal which may be waived in whole or in part.
(4) There is a gate provision if requests for redemptions would cause a decline in aggregate net asset value of 15%.
(5) There is a gate provision regarding requests for redemptions, subject to various unspecified terms.
(6) There is a redemption provision stating the general partner may disallow a partial withdrawal if the investor would not have a capital account balance at least equal to $1,000,000 thereafter.
(7) There is a gate provision if requests for redemptions would cause a decline in aggregate net asset value of 20%. Investors subject to this provision in any calendar quarter (i) shall have no priority in the next calendar quarter or in subsequent calendar quarters, and (ii) they shall receive the full amount of their requested withdrawal no later than the last business day of the fourth calendar quarter following the withdrawal date.
(8) Minimum withdrawal is $100,000, and subsequent withdrawals may only be made in increments of $100,000. Withdrawal maximum limits: up to 1/5 of investment on initial withdrawal date, up to 1/4 of the remainder as of any subsequent withdrawal date, up to 1/3 of the remainder as of any subsequent withdrawal date, up to 1/2 of the remainder as of any subsequent withdrawal date, and up to the remainder as of any subsequent withdrawal date.
(9) Redemptions from portions of capital balance attributable to special investments are permitted only in the general partner's discretion.
(10) Partial redemption may not reduce capital account below the lesser of $100,000 or 1% of the capital accounts of all investors.
(11) Withdrawal proceeds are available as follows: 25% at withdrawal date; 33 1/3% of the remaining account three months after withdrawal date; 50% of the remaining amount six months after withdrawal date, and the remaining balance nine months after withdrawal date.
(12) Redemptions are not permitted. Unless the general partner elects an earlier date, the partnership expires April 17, 2019, which is the seventy-two month anniversary date of the initial closing of April 17, 2013, subject to a discretionary extension by the general partner of up to two consecutive additional one-year periods.
(13) There is a three-year lock-up period for the contribution to the underlying fund which expires May 31, 2016.
(14) There is a gate provision if aggregate requested withdrawal amounts exceed 65% of the net asset value. Withdrawals to investors subject to this provision may be reduced pro rata based on their respective withdrawal requests. Any unpaid withdrawal amounts will be automatically submitted for the next withdrawal date.
(15) Redemptions are not permitted.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
| 2. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
The Company is subject to credit risk to the extent that the investment managers of the underlying limited partnerships are unable to fulfill their obligations according to their organizational documents. The Company, through its investments in limited partnerships, is subject to risk inherent when investing in securities and private investments. In connection with its investments, the Company is subject to the market and credit risk of those investments held or sold short by the limited partnerships. Due to the nature of the Company's investments, the above described risks are limited to the Fund's investment balances and unfunded commitments to limited partnerships.
| 3. | UNREALIZED APPRECIATION AND DEPRECIATION ON INVESTMENTS |
(tax basis)
The amount of net unrealized appreciation (depreciation) and the cost of investment securities for tax purposes, including short-term securities as October 31, 2013, were as follows:
| Gross appreciation (excess of value over tax cost) | | $ | 12,747,640 | |
| Gross depreciation (excess of tax cost over value) | | | (7,478,245 | ) |
| Net unrealized appreciation | | $ | 5,269,395 | |
| Cost of investments for income tax purposes | | $ | 107,269,394 | |
As of October 31, 2013, portfolio securities valued at $2,998,695 were held in escrow by the custodian as cover for call options written by the Company.
Transactions in options written during the year ended October 31, 2013 were as follows:
| | | Number of
Contracts | | | Premiums
Received | |
| Options outstanding at October 31, 2012 | | | 4,952 | | | $ | 696,077 | |
| Options written | | | 6,637 | | | | 881,014 | |
| Options terminated in closing purchase transactions | | | (1,884 | ) | | | (235,138 | ) |
| Options expired | | | (5,161 | ) | | | (710,226 | ) |
| Options exercised | | | (954 | ) | | | (208,974 | ) |
| Options outstanding at October 31, 2013 | | | 3,590 | | | $ | 422,753 | |
As of October 31, 2013, short-term investments in the amount of $5,355,000 were pledged as collateral for put options sold by the Company.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
| 6. | DISTRIBUTIONS TO SHAREHOLDERS |
Classifications of distributions, net investment income/(loss) and net realized gain/(loss) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Company.
On December 10, 2012, a distribution of $0.32 per share was paid to shareholders of record on November 25, 2012.
On March 10, 2013, a distribution of $0.25 per share was paid to shareholders of record on February 25, 2013.
On June 10, 2013, a distribution of $0.25 per share was paid to shareholders of record on May 25, 2013.
On September 10, 2013, a distribution of $0.25 per share was paid to shareholders of record on August 25, 2013.
The tax character of distributions paid during 2013 and 2012 was as follows:
| | | 2013 | | | 2012 | |
| Distributions paid from: | | | | | | | | |
| Ordinary income | | $ | 3,144,373 | | | $ | 1,191,003 | |
| Long-term capital gains | | | 1,935,324 | | | | 2,735,989 | |
| Retained earnings prior to becoming an investment company | | | 198,914 | | | | 1,302,286 | |
| | | $ | 5,278,611 | | | $ | 5,229,278 | |
As of October 31, 2013, there were no distributable earnings on a tax basis.
The tax components of distributable earnings are determined in accordance with income tax regulations, which may differ from composition of net assets reported under generally accepted accounting principles. The difference for the period ended October 31, 2013 reflects $376,140 of undistributed net investment income and $501,149 of realized gains on investments under generally accepted accounting principles.
BMC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended October 31, 2013
On April 22, 2010, (renewed April 21, 2013), the Company entered into an agreement with a bank for an unsecured line of credit in the amount of $3,500,000 to provide the Company more flexibility in its payment of dividends and management of its investments. The interest rate on any borrowings is at the one month LIBOR market index rate plus 150 basis points, with a floor of 3.00 percent. The Company will pay a commitment fee of 35 basis points on any unused balance. As of October 31, 2013, the Company had no borrowings from this line of credit, which expires on April 21, 2016.
| 8. | ADVISORY BOARD AND REMUNERATION OF DIRECTORS |
The Company does not have an advisory board. The independent directors are paid an annual fee of $3,000 plus $1,000 for each meeting attended in person or $500 for each meeting attended by telephone. Each such independent director is paid an additional $1,000 for each day attending a committee meeting in person or $500 by telephone other than on the date of a board meeting. In addition, all directors are reimbursed for their reasonable expenses incurred in attending meetings.
The Company leases office space from Broyhill Investments, Inc., which is controlled by Paul H. Broyhill and M. Hunt Broyhill, both officers of BMC Fund, Inc. The expense associated with this related party lease for the year ended October 31, 2013 amounted to $36,669. Broyhill Investments, Inc. also acts as a common paymaster for payroll and other shared services. This service is provided at no cost to the Company. All amounts paid by Broyhill Investments, Inc. on behalf of the Company are reimbursed by the Company. The outstanding payable related to these transactions at October 31, 2013 was $73,076.
Selected securities at the end of the year have significant investment impairment issues. These selected securities have an aggregate cost basis of $5,660,042 and have been assigned no value at October 31, 2013.
BMC FUND, INC.
DIRECTORS AND OFFICERS
Year Ended October 31, 2013 (Unaudited)
The directors of the Fund were elected for a one-year term at the 2013 annual meeting of shareholders of the Fund.
The following table provides information about the directors and the officers of the Fund:
Directors Who Are Interested Persons
Name,
Address and Age | | Position(s)
Held
with Fund | | Term of
Office and
Length of
Time Served | | Principal
Occupation(s)
During Past
5 Years | | Other
Directorships Held
by Director
During at Least
the Past 5 Years |
| | | | | | | | | |
James T. Broyhill (86) 1930 Virginia Road Winston-Salem, NC 27104 | | Director Vice Chairman | | Since 1976 Since 2005 | | Retired; Director of Shepherd Street Equity Fund (1998-2008); Vice President of Old Clemmons School Properties, Inc. (2006-present); President of Old Clemmons School Properties, Inc. (1998-2006); former Secretary of the North Carolina Department of Commerce (1989-1991); former Chairman of the North Carolina Economic Development Board (1987-1989); former member, U. S. Senate (1986); former member, U.S. House of Representatives (1963-1986) | | None |
| | | | | | | | | |
M. Hunt Broyhill (49) 1870 9th Street Court, NW Hickory, NC 28601 | | Director President Vice President | | Since 2008 Since 2007 2001-2007 | | President of the Fund since February 2007; former Vice President of the Fund (2001-2007); Chief Executive of Broyhill Asset Management, LLC and Broyhill Wakin General Partners, LLC (1997-present); Director and President of Broyhill Investments, Inc. (1988-present); Director (1983-present) and President of Broyhill Family Foundation, Inc. (1988-present); Senior Managing Partner and Director of Flagship Capital Partners, LLC (2007-present); Manager and Vice President of P. B. Realty, LLC (formerly P. B. Realty, Inc.) (1995-present) | | Capitala Finance Corp. (Sept. 2013-present) |
BMC FUND, INC.
DIRECTORS AND OFFICERS
Year Ended October 31, 2013 (Unaudited)
Directors Who Are Interested Persons
Name,
Address and Age | | Position(s)
Held
with Fund | | Term of
Office and
Length of
Time Served | | Principal
Occupation(s)
During Past
5 Years | | Other
Directorships Held
by Director
During at Least
the Past 5 Years |
| | | | | | | | | |
Paul H. Broyhill (89) 135 Claron Place, SE Lenoir, NC 28645 | | Director Chief Executive Officer Chairman | | Since 1976 Since 2001 Since 1976 | | Director, Chairman and Chief Executive Officer of the Fund; former President of the Fund (2001-2007); Director (1972-present) and Chairman of Broyhill Investments, Inc. (1988-present); Director (1946-present) and Chairman of Broyhill Family Foundation, Inc. (1989-present); former President of Broyhill Family Foundation, Inc. (1980-1988); Manager and President of P. B. Realty, LLC (formerly P. B. Realty, Inc.) (1983-present) | | None |
| | | | | | | | | |
W. Charles Campbell (47) 1031 Huntington Park Drive Charlotte, NC 28211 | | Director | | Since August 2011 | | President and Chief Executive Officer of Flagship Capital Partners, LLC, a private investment real estate firm (2005-present); Co-manager of Brackett Flagship Properties, LLC, a commercial real estate firm (2010-present) | | None |
| | | | | | | | | |
Allene B. Stevens (91) 153 Hillhaven Place SE Lenoir, NC 28645 | | Director | | Since 1983 | | Private Investor | | None |
BMC FUND, INC.
DIRECTORS AND OFFICERS
Year Ended October 31, 2013 (Unaudited)
Directors Who Are Not Interested Persons
Name,
Address and Age | | Position(s)
Held
with Fund | | Term of
Office and
Length of
Time Served | | Principal
Occupation(s)
During Past
5 Years | | Other
Directorships Held
by Director
During at Least
the Past 5 Years |
| | | | | | | | | |
Kevin P. Boudreau (50) 117 Shannon Court Rocky Mount, NC 27804 | | Director | | Since August 2011 | | Vice President of Tax and Risk Management, Boddie-Noell Enterprises, Inc., a diversified company with interests in restaurant and land-development projects (2005-present) | | None |
| | | | | | | | | |
R. Donald Farmer (66) 273 Leeward Point Loop Taylorsville, NC 28681 | | Director | | Since 2008 | | President of Don Farmer, CPA, PA, an independent public accounting firm and producer of federal income tax seminars and seminar materials (1984-present) | | None |
| | | | | | | | | |
Robert G. Fox, Jr. (64) 330 Lams Way Vilas, NC 28692 | | Director | | Since 2008 | | Former President and Chief Banking Officer of NewDominion Bank (2005-April 2010); Executive Vice President of First Charter Bank/First Charter Corporation (1993-2005) | | None |
| | | | | | | | | |
Jan E. Gordon (62) 3075 Rolling Woods Drive Palm Harbor, FL 34683 | | Director | | Since 2001 | | Retired; former election assistant, Pinellas County, FL Supervisor of Elections (1992-2005) | | None |
| | | | | | | | | |
Brent B. Kincaid (82) 2703 Lakeview Drive Lenoir, NC 28645 | | Director | | Since 2005 | | Retired since 1998; former President and CEO of Broyhill Furniture Industries, Inc. | | None |
| | | | | | | | | |
John S. Little (82) 4601 Gulf Shore Blvd. N. #18 Naples, FL 34103 | | Director | | Since 2001 | | Retired; former Managing Director and Chief Executive, Associated Octel, London (1989-1995); former Senior Vice President of Corporate Technology, Great Lakes Chemical Corporation (1981-1989) | | None |
| | | | | | | | | |
L. Glenn Orr, Jr. (73) 2735 Forest Drive Winston-Salem, NC 27104 | | Director | | Since 1999 | | President and Chief Executive Officer, Orr Holdings, LLC, a private investment company (since 2007); President and Chief Executive Officer, The Orr Group, an investment banking firm (1995 – 2006) | | Highwoods Properties, Inc. (1995-present); Medical Properties Trust (2005-present) |
BMC FUND, INC.
DIRECTORS AND OFFICERS
Year Ended October 31, 2013 (Unaudited)
Other Executive Officers
Name,
Address and Age | | Positions
Held
with Fund | | Length of
Time Served | | Principal
Occupation
During Past
5 Years | | Directorships Held
by Officer
During at Least
the Past 5 Years |
| | | | | | | | | |
Boyd C. Wilson, Jr. (61) 646 Pleasant Hill Road Lenoir, NC 28645 | | Vice President and Chief Financial Officer | | Since 2006 | | Vice President and Chief Financial Officer of the Fund since February 2006; Director (2007-present) and Executive Vice President of Broyhill Investments, Inc. (2005-present); Vice President of Broyhill Family Foundation, Inc. (2007-present); Treasurer of Broyhill Wakin General Partners, LLC (2008-present); Manager and Vice President of P. B. Realty, LLC (formerly P. B. Realty, Inc.) (2006-present); Vice President – Finance & Administration of Kincaid Furniture Company, Incorporated (1990-2005) | | CommunityOne Bancorp (2011-present); Bank of Granite Corp. (1996-2013) |
| | | | | | | | | |
Carol Frye (56) 210 Beall Street, NW Lenoir, NC 28645 | | Secretary and Treasurer | | Since 2001 | | Secretary and Treasurer of the Fund since 2001; Secretary and Treasurer of Broyhill Investments, Inc. (2000-present); Director (2001-present), Secretary and Treasurer of Broyhill Family Foundation, Inc. (2003-present); Secretary of Broyhill Wakin General Partners, LLC (1997-present); Secretary and Treasurer of P. B. Realty, LLC (formerly P. B. Realty, Inc.) (2001-present) | | None |
BMC FUND, INC.
ADDITIONAL INFORMATION
Year Ended October 31, 2013 (Unaudited)
Proxy Voting - The policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available without charge, upon request, by calling 828-758-6100; on the Fund’s website at http://www.bmcfund.com; and on the Securities and Exchange Commission’s website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 828-758-6100, and on the SEC’s website at http://www.sec.gov (see Form N-PX).
Portfolio Holdings - The Fund files a complete schedule of its portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-202-551-8090.
BMC FUND, INC.
FINANCIAL HIGHLIGHTS
Years Ended October 31, 2013, 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005 and 2004
The following table presents financial information divided into three parts: per share operating performance, total investment return and ratios and supplemental data for the years ended October 31, 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005 and 2004. The first part, per share operating performance, details the changes on a per share basis of the Company's beginning net asset value to its ending net asset value. The second part, total investment return, is based on the market price of the Company's shares of stock. Part three, ratios and supplemental data, provides additional financial information related to the Company's performance.
| PER SHARE OPERATING | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PERFORMANCE | | 2013 | | | 2012 | | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | | | 2004 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net asset value, beginning of period | | $ | 22.58 | | | $ | 22.11 | | | $ | 22.41 | | | $ | 21.20 | | | $ | 20.79 | | | $ | 36.28 | | | $ | 33.55 | | | $ | 32.84 | | | $ | 30.94 | | | $ | 29.17 | |
| Net investment income | | | 0.46 | | | | 0.35 | | | | 0.49 | | | | 0.46 | | | | 0.48 | | | | 0.73 | | | | 0.78 | | | | 1.06 | | | | 0.88 | | | | 0.82 | |
| Net gains (losses) on investments | | | 0.60 | | | | 1.18 | | | | 0.21 | | | | 1.70 | | | | 1.65 | | | | (10.98 | ) | | | 4.25 | | | | 2.43 | | | | 2.48 | | | | 2.08 | |
| Total from investment operations | | | 1.06 | | | | 1.53 | | | | 0.70 | | | | 2.16 | | | | 2.13 | | | | (10.25 | ) | | | 5.03 | | | | 3.49 | | | | 3.36 | | | | 2.90 | |
| Less distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | 0.47 | | | | 0.56 | | | | 0.27 | | | | 0.46 | | | | 0.92 | | | | 1.04 | | | | 2.03 | | | | 2.37 | | | | - | | | | 0.65 | |
| Distributions from capital gains | | | 0.33 | | | | 0.48 | | | | 0.53 | | | | - | | | | - | | | | 1.42 | | | | 0.27 | | | | 0.41 | | | | 1.46 | | | | 0.48 | |
| Distributions from retained earnings | | | 0.27 | | | | 0.02 | | | | 0.20 | | | | 0.49 | | | | 0.80 | | | | - | | | | - | | | | - | | | | - | | | | - | |
| P. B. Realty, Inc. Spin-off | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2.78 | | | | - | | | | - | | | | - | | | | - | |
| Total distributions | | | 1.07 | | | | 1.06 | | | | 1.00 | | | | 0.95 | | | | 1.72 | | | | 5.24 | | | | 2.30 | | | | 2.78 | | | | 1.46 | | | | 1.13 | |
| Net asset value, end of period | | $ | 22.57 | | | $ | 22.58 | | | $ | 22.11 | | | $ | 22.41 | | | $ | 21.20 | | | $ | 20.79 | | | $ | 36.28 | | | $ | 33.55 | | | $ | 32.84 | | | $ | 30.94 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Per share market value, end of period1 | | $ | 18.00 | | | $ | 18.00 | | | $ | 18.45 | | | $ | 18.00 | | | $ | 16.75 | | | $ | 26.00 | | | $ | 26.00 | | | $ | 26.00 | | | $ | 26.00 | | | $ | 26.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL INVESTMENT RETURN2 | | | 5.89 | % | | | 8.50 | % | | | 3.79 | % | | | 11.83 | % | | | 12.72 | % | | | (39.42 | )% | | | 19.35 | % | | | 13.40 | % | | | 12.95 | % | | | 11.14 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| RATIOS/SUPPLEMENTAL DATA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (in thousands) | | $ | 111,358 | | | $ | 111,379 | | | $ | 109,069 | | | $ | 110,576 | | | $ | 104,603 | | | $ | 102,574 | | | $ | 178,975 | | | $ | 165,500 | | | $ | 162,027 | | | $ | 152,623 | |
| Ratio of expenses to average net assets3 | | | 0.95 | % | | | 1.01 | % | | | 0.97 | % | | | 1.11 | % | | | 1.18 | % | | | 1.02 | % | | | 0.75 | % | | | 0.73 | % | | | 0.60 | % | | | 0.73 | % |
| Ratio of net investment income to average net assets3 | | | 2.04 | % | | | 1.57 | % | | | 2.15 | % | | | 2.11 | % | | | 2.40 | % | | | 2.37 | % | | | 2.26 | % | | | 3.20 | % | | | 2.77 | % | | | 2.70 | % |
| Portfolio turnover rate | | | 33.12 | % | | | 32.90 | % | | | 60.41 | % | | | 38.08 | % | | | 69.62 | % | | | 67.44 | % | | | 51.23 | % | | | 48.22 | % | | | 57.54 | % | | | 40.10 | % |
1Unaudited - Based on stock trades, which are very limited, during that year.
2Unaudited - Computed as follows: income from investment operations divided by per share market value.
3Average is computed on a quarterly basis.
*Annualized
BMC FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 2013
| | | | | | Coupon | | | | | | | | | | | | | | | Percent | |
| | | | | | Interest | | | Maturity | | | Face | | | | | | Market | | | of Net | |
| Debt Issuer | | | | | Rate | | | Date | | | Amount | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | | | | | |
| FIXED INCOME: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORP NEW | | | | | | | 3.625 | % | | | 9/15/2015 | | | $ | 250,000 | | | $ | 252,201 | | | $ | 259,022 | | | | | |
| XEROX CORP MEDIUM TERM | | | | | | | 7.200 | % | | | 4/1/2016 | | | | 500,000 | | | | 541,973 | | | | 564,967 | | | | | |
| EXPRESS SCRIPTS INC | | | | | | | 3.125 | % | | | 5/15/2016 | | | | 250,000 | | | | 251,164 | | | | 262,354 | | | | | |
| HUMANA INC | | | | | | | 6.450 | % | | | 6/1/2016 | | | | 250,000 | | | | 268,103 | | | | 280,188 | | | | | |
| HEWLETT PACKARD CO | | | | | | | 3.000 | % | | | 9/15/2016 | | | | 250,000 | | | | 249,671 | | | | 258,707 | | | | | |
| TRANSOCEAN INC | | | | | | | 5.050 | % | | | 12/15/2016 | | | | 250,000 | | | | 252,197 | | | | 275,380 | | | | | |
| AMBEV INTL FIN CO LTD | | | | | | | 9.500 | % | | | 7/24/2017 | | | | 430,769 | | | | 469,008 | | | | 390,417 | | | | | |
| ICAHN ENTERPRISES LP CORP | | | | | | | 8.000 | % | | | 1/15/2018 | | | | 500,000 | | | | 534,202 | | | | 524,375 | | | | | |
| AVON PRODUCTS INC | | | | | | | 4.200 | % | | | 7/15/2018 | | | | 500,000 | | | | 502,317 | | | | 525,156 | | | | | |
| LEHMAN BROTHERS HLDGS NIKKEI INDEX | | | 1,2,3 | | | | 0.000 | % | | | 9/29/2008 | | | | 3,000,000 | | | | 2,383,504 | | | | - | | | | | |
| LEHMAN BROTHERS HLDGS EAFE INDEX | | | 1,2,3 | | | | 0.000 | % | | | 11/15/2008 | | | | 1,000,000 | | | | 790,817 | | | | - | | | | | |
| LEHMAN BROTHERS HLDGS MEDIUM TERM NOTE | | 1,2,3 | | | | 0.000 | % | | | 3/15/2011 | | | | 2,500,000 | | | | 1,985,721 | | | | - | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL INVESTMENTS IN FIXED INCOME | | | | | | | | | | | | | | $ | 9,680,769 | | | $ | 8,480,878 | | | $ | 3,340,566 | | | | 3.00 | % |
BMC FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
October 31, 2013
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent | |
| | | | | | Shares | | | | | | Market | | | of Net | |
| Company Name | | | | | Held | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | |
| MUTUAL FUNDS: | | | | | | | | | | | | | | | | | | | | |
| BOND MUTUAL FUNDS: | | | | | | | | | | | | | | | | | | | | |
| AVENUE INCOME CREDIT STRATEGIES COM | | | | | | | 34,329.00 | | | $ | 581,083 | | | $ | 590,459 | | | | | |
| COOK & BYNUM FUND | | | | | | | 16,361.26 | | | | 250,000 | | | | 250,000 | | | | | |
| DOUBLELINE CORE FIXED INCOME I | | | | | | | 89,216.29 | | | | 1,000,000 | | | | 972,458 | | | | | |
| DOUBLELINE TOTAL RETURN BOND I | | | | | | | 226,010.04 | | | | 2,500,000 | | | | 2,481,590 | | | | | |
| EATON VANCE FLOATING RATE A | | | | | | | 26,315.79 | | | | 250,000 | | | | 249,474 | | | | | |
| EATON VANCE TAX-MANAGED GLOBAL | | | | | | | 2,500.00 | | | | 23,813 | | | | 24,700 | | | | | |
| FAIRHOLME FOCUSED INCOME FUND | | | | | | | 68,685.46 | | | | 750,000 | | | | 807,054 | | | | | |
| FLAHERTY & CRUMRINE PREFERRED I | | | | | | | 11,833.00 | | | | 87,440 | | | | 150,989 | | | | | |
| FPA NEW INCOME INC COM | | | | | | | 716,128.81 | | | | 7,500,000 | | | | 7,419,095 | | | | | |
| LOOMIS SAYLES BOND INSTITUTIONAL | | | | | | | 120,930.18 | | | | 1,612,500 | | | | 1,853,860 | | | | | |
| OSTERWEIS STRATEGIC INCOME | | | | | | | 19,861.83 | | | | 230,000 | | | | 236,157 | | | | | |
| PIMCO DYNAMIC CREDIT INCOME FUND | | | | | | | 25,000.00 | | | | 565,060 | | | | 566,750 | | | | | |
| PIMCO DYNAMIC INCOME FUND COM | | | | | | | 25,000.00 | | | | 715,425 | | | | 745,500 | | | | | |
| PIMCO FDS INCOME FUND INSTL | | | | | | | 128,944.70 | | | | 1,500,000 | | | | 1,596,335 | | | | | |
| PIMCO ALL ASSET INSTITUTIONAL | | | | | | | 154,782.72 | | | | 1,942,500 | | | | 1,931,688 | | | | | |
| PIMCO ALL ASSET ALL AUTHORITY INST | | | | | | | 219,641.25 | | | | 2,442,500 | | | | 2,293,055 | | | | | |
| PIMCO FUNDAMENTAL ADVTG ABS RET STRAT I | | | | | | | 248,756.22 | | | | 1,000,000 | | | | 1,037,313 | | | | | |
| PIMCO REAL RETURN INSTL | | | | | | | 81,159.11 | | | | 960,112 | | | | 921,156 | | | | | |
| PIMCO TOTAL RETURN INSTL | | | | | | | 122,128.55 | | | | 1,249,375 | | | | 1,331,201 | | | | | |
| PUTMAN HIGH INC SECURITIES FUND | | | | | | | 5,000.00 | | | | 40,837 | | | | 41,150 | | | | | |
| RIVERNORTH/OAKTREE HIGH INCOME I | | | | | | | 24,533.86 | | | | 250,000 | | | | 249,264 | | | | | |
| TEMPLETON EMERGING MKTS INCOME | | | | | | | 25,000.00 | | | | 337,318 | | | | 368,750 | | | | | |
| TOTAL BOND MUTUAL FUNDS | | | | | | | | | | | 25,787,963 | | | | 26,117,998 | | | | 23.45 | % |
BMC FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
October 31, 2013
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Percent | |
| | | | | | | | | Shares | | | | | | Market | | | of Net | |
| Company Name | | | | | | | | Held | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | | |
| MUTUAL FUNDS: | | | | | | | | | | | | | | | | | | |
| STOCK MUTUAL FUNDS: | | | | | | | | | | | | | | | | | | | | | | | | |
| INTERNATIONAL EQUITIES | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Large Blend | | | | | | | | | | | | | | | | | | | | | | | | |
| MATTHEWS ASIA DIV FUND INVestor | | | | | | | | | | | 4,972.03 | | | | 80,000 | | | | 79,851 | | | | | |
| VANGUARD TOTAL INTL STOCK INDEX INV | | | | | | | | | | | 3,501.49 | | | | 51,962 | | | | 58,370 | | | | | |
| | | | | | | | | | | | | | | | 131,962 | | | | 138,221 | | | | 0.12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Large Growth | | | | | | | | | | | | | | | | | | | | | | | | |
| MATTHEWS PACIFIC TIGER INVESTOR | | | | | | | | | | | 5,850.23 | | | | 150,000 | | | | 150,292 | | | | 0.13 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Large Value | | | | | | | | | | | | | | | | | | | | | | | | |
| OAKMARK INTERNATIONAL FUND I | | | | | | | | | | | 2,531.26 | | | | 44,019 | | | | 67,635 | | | | 0.06 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Small/Mid Growth | | | | | | | | | | | | | | | | | | | | | | | | |
| JANUS TRITON FUND T SHARES | | | | | | | | | | | 2,916.88 | | | | 31,006 | | | | 66,388 | | | | 0.06 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Asia Ex-Japan Stock | | | | | | | | | | | | | | | | | | | | | | | | |
| ISHARES INC MSCI SINGAPORE | | | | | | | | | | | 20,000.00 | | | | 255,572 | | | | 276,200 | | | | | |
| TEMPLETON DRAGON FD COM | | | | | | | | | | | 7,000.00 | | | | 190,850 | | | | 189,070 | | | | | |
| | | | | | | | | | | | | | | | 446,422 | | | | 465,270 | | | | 0.42 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL INTERNATIONAL EQUITIES | | | | | | | | | | | | | | | 803,409 | | | | 887,806 | | | | 0.80 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| SPECIALTY FUNDS | | | | | | | | | | | | | | | | | | | | | | | | |
| Energy | | | | | | | | | | | | | | | | | | | | | | | | |
| NUVEEN ENERGY MLP TOTAL RETURN | | | | | | | | | | | 10,295.00 | | | | 138,065 | | | | 198,282 | | | | 0.18 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Pharmaceuticals & Biotechnology | | | | | | | | | | | | | | | | | | | | | | | | |
| ISHARES NASDAQ BIOTECHNOLOGY | | | | | | | | | | | 500.00 | | | | 45,278 | | | | 102,665 | | | | 0.09 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Utilities | | | | | | | | | | | | | | | | | | | | | | | | |
| UTILITIES SELECT SECTOR SPDR | | | | | | | | | | | 23,000.00 | | | | 734,317 | | | | 891,940 | | | | 0.80 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Large Cap Blend | | | | | | | | | | | | | | | | | | | | | | | | |
| SELECTED AMERICAN SHARES D | | | | | | | | | | | 2,059.31 | | | | 100,000 | | | | 101,627 | | | | | |
| T ROWE PRICE PERSONAL STRATEGY GROWTH | | | | | | | | | | | 4,370.83 | | | | 90,476 | | | | 134,665 | | | | | |
| WISDOMTREE LARGECAP DIVIDEND | | | | | | | | | | | 1,500.00 | | | | 63,692 | | | | 96,150 | | | | | |
| YACKTMAN FUND SVC | | | | | | | | | | | 14,258.04 | | | | 256,985 | | | | 337,773 | | | | | |
| | | | | | | | | | | | | | | | 511,153 | | | | 670,215 | | | | 0.60 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Mid Cap Growth | | | | | | | | | | | | | | | | | | | | | | | | |
| MERIDIAN GROWTH LEGACY | | | | | | | | | | | 2,009.07 | | | | 93,000 | | | | 97,038 | | | | 0.09 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Large Value | | | | | | | | | | | | | | | | | | | | | | | | |
| ISHARES INTL SELECT DIV | | | | | | | | | | | 2,500.00 | | | | 84,611 | | | | 95,075 | | | | 0.09 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial | | | | | | | | | | | | | | | | | | | | | | | | |
| FRANKLIN INCOME FUND ADVIS | | | | | | | | | | | 119,047.62 | | | | 250,000 | | | | 282,143 | | | | 0.25 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Precious Metals | | | | | | | | | | | | | | | | | | | | | | | | |
| MARKET VECTORS GOLD MINERS | | | | | | | | | | | 29,000.00 | | | | 1,466,117 | | | | 727,900 | | | | | |
| SPDR GOLD SHARES | | | | | | | 3 | | | | 10,000.00 | | | | 969,549 | | | | 1,277,400 | | | | | |
| | | | | | | | | | | | | | | | 2,435,666 | | | | 2,005,300 | | | | 1.80 | % |
BMC FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
October 31, 2013
| | | | | | | | | | | | | | | | | | Percent | |
| | | | | | | | | Shares | | | | | | Market | | | of Net | |
| Company Name | | | | | | | | Held | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | | |
| MUTUAL FUNDS: | | | | | | | | | | | | | | | | | | |
| Conservative Allocation | | | | | | | | | | | | | | | | | | | | | | | | |
| VANGUARD WELLESLEY INCOME INV | | | | | | | | | | | 20,045.04 | | | | 422,892 | | | | 507,941 | | | | 0.46 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Moderate Allocation | | | | | | | | | | | | | | | | | | | | | | | | |
| FPA CRESCENT PORTFOLIO | | | | | | | | | | | 18,462.15 | | | | 525,303 | | | | 609,066 | | | | | |
| OAKMARK EQUITY & INCOME I | | | | | | | | | | | 8,920.47 | | | | 263,600 | | | | 302,761 | | | | | |
| SEQUOIA FD INC COM | | | | | | | 3 | | | | 740.54 | | | | 108,371 | | | | 158,468 | | | | | |
| | | | | | | | | | | | | | | | 897,274 | | | | 1,070,295 | | | | 0.96 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| World Allocation | | | | | | | | | | | | | | | | | | | | | | | | |
| WELLS FARGO ADVANTAGE ASSET ALLOC ADM | | | | | | | | | | | 40,217.43 | | | | 510,000 | | | | 572,696 | | | | | |
| WINTERGREEN FD INVESTOR | | | | | | | | | | | 7,005.79 | | | | 102,985 | | | | 121,551 | | | | | |
| | | | | | | | | | | | | | | | 612,985 | | | | 694,247 | | | | 0.62 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL SPECIALTY FUNDS | | | | | | | | | | | | | | | 6,225,241 | | | | 6,615,141 | | | | 5.94 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL STOCK MUTUAL FUNDS | | | | | | | | | | | | | | | 7,028,650 | | | | 7,502,947 | | | | 6.74 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL INVESTMENTS IN MUTUAL FUNDS | | | | | | | | | | | | | | $ | 32,816,613 | | | $ | 33,620,945 | | | | 30.19 | % |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Continued) |
| October 31, 2013 |
| | | | | | | | Market | | | Percent of | |
| Company Name | | | | | Cost | | | Value | | | Net Assets | |
| | | | | | | | | | | | | |
| OTHER INVESTMENTS: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| LIMITED PARTNERSHIPS: | | | | | | | | | | | | | | | | |
| 400 CAPITAL CREDIT OPPORTUNITIES FUND LP | | | 2, 3 | | | $ | 500,000 | | | $ | 563,188 | | | | | |
| CIVIC CAPITAL CURRENCY FUND LP | | | 2, 3 | | | | 1,500,000 | | | | 1,573,453 | | | | | |
| ELLIOTT ASSOCIATES LP | | | 2, 3 | | | | 2,000,000 | | | | 3,413,473 | | | | | |
| GREENLIGHT MASTERS QUALIFIED LP | | | 2, 3 | | | | 2,500,000 | | | | 3,099,069 | | | | | |
| HAYMAN CAPITAL PARTNERS LP | | | 2, 3 | | | | 2,501,138 | | | | 3,039,384 | | | | | |
| MORROCROFT SPECIAL OPPORTUNITY FUND II, LP | | | 2, 3 | | | | 1,000,000 | | | | 1,288,333 | | | | | |
| PASSPORT LONG SHORT FUND | | | 2, 3 | | | | 1,000,000 | | | | 992,678 | | | | | |
| PRIVET FUND LP | | | 2, 3 | | | | 1,000,000 | | | | 1,345,232 | | | | | |
| RIVERNORTH CAPITAL PARTNERS, LP | | | 2, 3 | | | | 2,000,000 | | | | 2,662,386 | | | | | |
| SERENGETI MULTI SERIES LLC | | | 2, 3 | | | | 1,000,000 | | | | 1,013,354 | | | | | |
| SMITH BREEDEN SECURITIZED CREDIT OPPORTUNITIES LLC | | | 2, 3 | | | | 500,000 | | | | 556,505 | | | | | |
| STARK INVESTMENTS LP | | | 2, 3 | | | | 231,609 | | | | 637,300 | | | | | |
| STARK STRUCTURED FINANCE ONSHORE FUND | | | 2, 3 | | | | 93,529 | | | | 87,661 | | | | | |
| VIRGO SOCIETAS III (ONSHORE) LP | | | 2, 3 | | | | 462,708 | | | | 443,502 | | | | | |
| WALNUT INVESTMENT PARTNERS | | | 2, 3 | | | | 235,567 | | | | 43,220 | | | | | |
| TOTAL LIMITED PARTNERSHIPS | | | | | | | 16,524,551 | | | | 20,758,738 | | | | 18.64 | % |
| | | | | | | | | | | | | | | | | |
| TOTAL OTHER INVESTMENTS | | | | | | $ | 16,524,551 | | | $ | 20,758,738 | | | | 18.64 | % |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Continued) |
| October 31, 2013 |
| | | | | | | | | | | | | | | | | Percent | |
| Sectors and | | Shares | | | | | | | | | | | Market | | | of Net | |
| Industries | | Held | | | Company Name | | | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | |
| COMMON STOCKS: | | | | | | | | | | | | | | | | | | | | | | |
| CONSUMER DISCRETIONARY | | | | | | | | | | | | | | | | | | | | | | |
| Consumer Services | | | 5,000.00 | | | COMPANHIA DE BEBIDAS DAS A | | | | | | $ | 142,690 | | | $ | 186,000 | | | | | |
| | | | 10,000.00 | | | HERTZ GLOBAL HOLDINGS INC COM | 3 | | | $ | 223,244 | | | $ | 229,600 | | | | | |
| | | | 1,000.00 | | | MCDONALDS CORP COM | | | | | | | 95,695 | | | | 96,520 | | | | | |
| | | | 1,500.00 | | | RENT A CENTER INC NEW COM | | | | | | | 51,495 | | | | 51,360 | | | | | |
| | | | 1,000.00 | | | THE ADT CORP COM | | | | | | | 42,194 | | | | 43,370 | | | | | |
| | | | | | | | | | | | | | 555,318 | | | | 606,850 | | | | 0.54 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Retailing | | | 1,500.00 | | | PANERA BREAD CO CL A | | | 3 | | | | 235,356 | | | | 236,880 | | | | 0.21 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Household & Personal Products | | | 3,600.00 | | | COACH INC COM | | | | | | | 190,124 | | | | 182,448 | | | | 0.16 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Recreation | | | 15,000.00 | | | CEDAR FAIR LP | | | | | | | 446,330 | | | | 687,750 | | | | 0.62 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL CONSUMER DISCRETIONARY | | | | | | | | | | | | | 1,427,128 | | | | 1,713,928 | | | | 1.54 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| CONSUMER STAPLES | | | | | | | | | | | | | | | | | | | | | | |
| Food & Staples Retailing | | | 40,000.00 | | | DANONE SPONSORED ADR | | | | | | | 544,985 | | | | 595,600 | | | | 0.53 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Food, Beverage & Tobacco | | | 3,500.00 | | | GENERAL MILLS INC COM | | | | | | | 122,082 | | | | 176,470 | | | | | |
| | | | 1,000.00 | | | HERSHEY CO COM | | | | | | | 61,459 | | | | 99,240 | | | | | |
| | | | 10,000.00 | | | NESTLE S A SPONSORED ADR | | | 3 | | | | 396,900 | | | | 724,100 | | | | | |
| | | | 4,000.00 | | | REYNOLDS AMERICAN INC COM | | | | | | | 143,516 | | | | 205,480 | | | | | |
| | | | 2,000.00 | | | SMUCKER J M CO COM NEW | | | | | | | 121,939 | | | | 222,420 | | | | | |
| | | | | | | | | | | | | | 845,896 | | | | 1,427,710 | | | | 1.28 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Household & Personal Products | | | 1,000.00 | | | KIMBERLY CLARK CORP COM | | | | | | | 90,956 | | | | 108,000 | | | | | |
| | | | 11,500.00 | | | PROCTER & GAMBLE CO COM | | | | | | | 840,716 | | | | 928,625 | | | | | |
| | | | | | | | | | | | | | 931,672 | | | | 1,036,625 | | | | 0.93 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL CONSUMER STAPLES | | | | | | | | | | | | | 2,322,553 | | | | 3,059,935 | | | | 2.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| ENERGY | | | 2,000.00 | | | ATLAS PIPELINE PRTNS UNIT | | | | | | | 75,028 | | | | 77,120 | | | | | |
| | | | 3,000.00 | | | BP PRUDHOE BAY ROYALTY TRU | | | | | | | 256,047 | | | | 237,060 | | | | | |
| | | | 2,000.00 | | | BUCKEYE PARTNERS L P UNIT | | | | | | | 124,792 | | | | 134,540 | | | | | |
| | | | 1,000.00 | | | CHEVRON CORP | | | | | | | 106,870 | | | | 119,960 | | | | | |
| | | | 4,500.00 | | | CPFL ENERGIA S A SPONSORED | | | | | | | 103,020 | | | | 75,960 | | | | | |
| | | | 750.00 | | | DEVON ENERGY CORP NEW COM | | | | | | | 59,334 | | | | 47,415 | | | | | |
| | | | 250.00 | | | ENCANA CORP COM | | | | | | | 6,581 | | | | 4,480 | | | | | |
| | | | 4,000.00 | | | ENERGY TRANSFER EQUITY LP | | | | | | | 150,093 | | | | 270,360 | | | | | |
| | | | 1,000.00 | | | ENSCO INTL | | | | | | | 51,645 | | | | 57,650 | | | | | |
| | | | 17,440.00 | | | ENTERPRISE PRODS PARTN COM | | | | | | | 463,200 | | | | 1,103,603 | | | | | |
| | | | 2,004.00 | | | EXXON MOBIL CORP COM | | | | | | | 151,432 | | | | 179,599 | | | | | |
| | | | 8,000.00 | | | KINDER MORGAN ENERGY PARTNERS LP | | | | 491,126 | | | | 645,600 | | | | | |
| | | | 5,000.00 | | | KINDER MORGAN INC COM | | | | | | | 173,187 | | | | 176,550 | | | | | |
| | | | 227.94 | | | KINDER MORGAN MANAGEMENT L | | | 3 | | | | 7,918 | | | | 17,168 | | | | | |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Continued) |
| October 31, 2013 |
| | | | | | | | | | | | | | | | Percent | |
| Sectors and | | Shares | | | | | | | | | | | Market | | | of Net | |
| Industries | | Held | | | Company Name | | | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | | | | | | |
| COMMON STOCKS: | | | | | | | | | | | | | | | | | | | | | | |
| | | 7,500.00 | | | MARKWEST ENERGY PARTNERS L | | | | | | | 95,426 | | | | 557,100 | | | | | |
| | | 7,500.00 | | | NORTHERN TIER ENERGY LP | | | | | | | 144,430 | | | | 174,450 | | | | | |
| | | 1,000.00 | | | OCCIDENTAL PETROLEUM COM | | | | | | | 88,813 | | | | 96,080 | | | | | |
| | | 5,000.00 | | | ONEOK INC COM | | | | | | | 107,537 | | | | 282,500 | | | | | |
| | | 750.00 | | | PEABODY ENERGY CORP COM | | | | | | | 45,175 | | | | 14,610 | | | | | |
| | | 2,500.00 | | | PENN WEST PETROLEUM LTD | | | | | | | 45,428 | | | | 27,975 | | | | | |
| | | 2,000.00 | | | PETROLEO BRASILEIRO SA SPO | | | | | | | 76,714 | | | | 34,860 | | | | | |
| | | 10,000.00 | | | PLAINS ALL AMERICAN PIPELINE | | | | | | | 245,274 | | | | 512,200 | | | | | |
| | | 7,000.00 | | | SEADRILL LIMITED SHS | | | | | | | 263,034 | | | | 326,340 | | | | | |
| | | 5,000.00 | | | TARGA RESOURCES PARTNERS, | | | | | | | 134,173 | | | | 260,550 | | | | | |
| | | 4,500.00 | | | TRANSMONTAIGNE PARTNERS LP | | | | | | | 122,500 | | | | 191,835 | | | | | |
| | | 4,500.00 | | | TRANSOCEAN INC NEW SHS | | | | | | | 239,680 | | | | 211,815 | | | | | |
| | | | 3,000.00 | | | WILLIAMS COMPANIES INC COM | | | | | | | 109,004 | | | | 107,130 | | | | | |
| TOTAL ENERGY | | | | | | | | | | | | | 3,937,461 | | | | 5,944,510 | | | | 5.34 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| FINANCIALS | | | | | | | | | | | | | | | | | | | | | | |
| Banks | | | 1,300.00 | | | BANK N S HALIFAX COM | | | | | | | 66,388 | | | | 79,001 | | | | | |
| | | | 2,500.00 | | | WELLS FARGO & CO DEL COM | | | | | | | 104,688 | | | | 106,725 | | | | | |
| | | | | | | | | | | | | | 171,076 | | | | 185,726 | | | | 0.17 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Diversified Financials | | | 2,500.00 | | | BERKSHIRE HATHAWAY INC CL | | | 3 | | | | 185,406 | | | | 287,725 | | | | | |
| | | | 1,300.00 | | | CME GROUP | | | | | | | 71,797 | | | | 96,473 | | | | | |
| | | | 500.00 | | | NYSE EURONEXT | | | | | | | 13,693 | | | | 22,010 | | | | | |
| | | | | | | | | | | | | | 270,896 | | | | 406,208 | | | | 0.36 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Financial | | | 800.00 | | | AMERICAN EXPRESS CO COM | | | | | | | 35,211 | | | | 65,440 | | | | | |
| | | | 5,000.00 | | | ANNALY CAPITAL MGMT INC | | | | | | | 82,125 | | | | 58,950 | | | | | |
| | | | 10,000.00 | | | APOLLO GLOBAL MGMT LLC | | | | | | | 230,401 | | | | 322,600 | | | | | |
| | | | 20,000.00 | | | ARES CAPITAL CORP COM | | | | | | | 337,981 | | | | 347,400 | | | | | |
| | | | 10,000.00 | | | BLACKROCK KELSO CAP COM | | | | | | | 100,715 | | | | 93,950 | | | | | |
| | | | 10,000.00 | | | BLUEHARBOR BANK NC COM | | | 3 | | | | 90,150 | | | | 76,000 | | | | | |
| | | | 3,000.00 | | | DBS GROUP HLDGS LTD SPONS | | | | | | | 160,845 | | | | 162,000 | | | | | |
| | | | 15,000.00 | | | GOLUB CAPITAL BDC INC COM | | | | | | | 226,480 | | | | 264,000 | | | | | |
| | | | 15,000.00 | | | OAKTREE CAPITAL GROUP LLC UNIT | | | | 616,307 | | | | 853,800 | | | | | |
| | | | 10,000.00 | | | THL CREDIT INC COM | | | | | | | 156,142 | | | | 162,500 | | | | | |
| | | | 50,000.00 | | | TWO HARBORS INVT CORP COM | | | | | | | 569,600 | | | | 466,500 | | | | | |
| | | | 25,000.00 | | | WESTERN UNION CO COM | | | | | | | 411,375 | | | | 425,500 | | | | | |
| | | | | | | | | | | | | | 3,017,332 | | | | 3,298,640 | | | | 2.96 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Insurance | | | 1,500.00 | | | AON PLC SHS CL A | | | | | | | 102,331 | | | | 118,635 | | | | | |
| | | | 1,000.00 | | | METLIFE INC COM | | | | | | | 32,265 | | | | 47,310 | | | | | |
| | | | 2,000.00 | | | TRAVELERS COMPANIES COM | | | | | | | 161,841 | | | | 172,600 | | | | | |
| | | | | | | | | | | | | | 296,437 | | | | 338,545 | | | | 0.30 | % |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Continued) |
| October 31, 2013 |
| | | | | | | | | | | | | | | | | Percent | |
| Sectors and | | Shares | | | | | | | | | | | Market | | | of Net | |
| Industries | | Held | | | Company Name | | | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | �� | | | | | | | | | | |
| COMMON STOCKS: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Real Estate | | | 5,000.00 | | | CHEUNG KONG HLDGS LTD ADR | | | | | | | 70,725 | | | | 78,400 | | | | | |
| | | 15,000.00 | | | CORRECTIONS CORP AMER NEW COM | | | | 377,635 | | | | 555,000 | | | | | |
| | | 1,000.00 | | | GEO GROUP INC COM | | | | | | | 32,717 | | | | 35,270 | | | | | |
| | | 35,000.00 | | | MEDICAL PPTYS TR INC COM | | | | | | | 370,003 | | | | 456,400 | | | | | |
| | | 3,000.00 | | | TOLL BROTHERS INC COM | | | 3 | | | | 106,119 | | | | 98,640 | | | | | |
| | | 2,000.00 | | | VENTAS INC | | | | | | | 91,107 | | | | 130,480 | | | | | |
| | | | | | | | | | | | | 1,048,306 | | | | 1,354,190 | | | | 1.22 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL FINANCIALS | | | | | | | | | | | | | 4,804,047 | | | | 5,583,309 | | | | 5.01 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| HEALTH CARE | | | | | | | | | | | | | | | | | | | | | | |
| Health Care Equipment & Services | | | 2,000.00 | | | AMERISOURCEBERGEN CORP COM | | | | | | | 57,550 | | | | 130,660 | | | | | |
| | | | 5,000.00 | | | DAVITA HEALTHCARE PART COM | | | 3 | | | | 308,926 | | | | 281,050 | | | | | |
| | | | 50.00 | | | LABORATORY CORP AMER HLDGS | | | 3 | | | | 3,536 | | | | 5,045 | | | | | |
| | | | 2,000.00 | | | ROCHE HLDG LTD SPONS ADR | | | 3 | | | | 129,261 | | | | 138,680 | | | | | |
| | | | 1,500.00 | | | VARIAN MEDICAL SYSTEMS INC | | | 3 | | | | 68,108 | | | | 108,870 | | | | | |
| | | | | | | | | | | | | | 567,381 | | | | 664,305 | | | | 0.60 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Pharmaceuticals & Biotechnology | | | 5,000.00 | | | ASTRAZENECA PLC SPONSORED | | | | | | | 235,531 | | | | 264,300 | | | | | |
| | | | 2,000.00 | | | CUBIST PHARMACEUTICALS | | | 3 | | | | 60,030 | | | | 124,000 | | | | | |
| | | | 10,000.00 | | | HOSPIRA INC | | | 3 | | | | 315,677 | | | | 405,200 | | | | | |
| | | | 500.00 | | | IMMUNOGEN INC COM | | | 3 | | | | 5,722 | | | | 8,225 | | | | | |
| | | | 3,000.00 | | | ELI LILLY & CO COM | | | | | | | 132,158 | | | | 149,460 | | | | | |
| | | | 26,500.00 | | | PFIZER INC COM | | | | | | | 533,833 | | | | 813,285 | | | | | |
| | | | 10,000.00 | | | SANOFI SPONSORED ADR | | | | | | | 337,248 | | | | 534,800 | | | | | |
| | | | 1,000.00 | | | SEATTLE GENETICS INC COM | | | 3 | | | | 17,684 | | | | 38,650 | | | | | |
| | | | 1,000.00 | | | TEVA PHARMACEUTCL INDS ADR | | | | | | | 50,285 | | | | 37,090 | | | | | |
| | | | | | | | | | | | | | 1,688,168 | | | | 2,375,010 | | | | 2.13 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL HEALTH CARE | | | | | | | | | | | | | 2,255,549 | | | | 3,039,315 | | | | 2.73 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| INDUSTRIALS | | | | | | | | | | | | | | | | | | | | | | |
| Capital Goods | | | 4,500.00 | | | AMERICAN RAILCAR INDS COM | | | | | | | 149,453 | | | | 184,320 | | | | | |
| | | | 10,000.00 | | | TEEKAY LNG PARTNERS LP | | | | | | | 384,775 | | | | 415,000 | | | | | |
| | | | 1,000.00 | | | WABTEC CORP COM | | | | | | | 59,525 | | | | 65,190 | | | | | |
| | | | | | | | | | | | | | 593,753 | | | | 664,510 | | | | 0.60 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Commercial Services & Supplies | | | 1,000.00 | | | STERICYCLE INC COM | | | 3 | | | | 85,105 | | | | 116,200 | | | | | |
| | | | 6,000.00 | | | US ECOLOGY INC COM | | | | | | | 122,962 | | | | 213,300 | | | | | |
| | | | 500.00 | | | WASTE MGMT INC DEL COM | | | | | | | 17,412 | | | | 21,770 | | | | | |
| | | | | | | | | | | | | | 225,479 | | | | 351,270 | | | | 0.32 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Transportation | | | 1,000.00 | | | NORFOLK SOUTHERN CORP COM | | | | | | | 73,330 | | | | 86,020 | | | | 0.08 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL INDUSTRIALS | | | | | | | | | | | | | 892,562 | | | | 1,101,800 | | | | 0.99 | % |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Continued) |
| October 31, 2013 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Percent | |
| Sectors and | | Shares | | | | | | | | | | | Market | | | of Net | |
| Industries | | Held | | | Company Name | | | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | | | | | | |
| COMMON STOCKS: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| INFORMATION TECHNOLOGY | | | | | | | | | | | | | | | | | | | | | | |
| Software & Services | | | 8,500.00 | | | MICROSOFT CORP COM | | | | | | | 242,537 | | | | 300,942 | | | | | |
| | | | 4,000.00 | | | ORACLE CORP COM | | | | | | | 110,847 | | | | 134,000 | | | | | |
| | | | | | | | | | | | | | 353,384 | | | | 434,942 | | | | 0.39 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Technology Hardware & Equipment | | 3,000.00 | | | APPLE INC COM | | | | | | | 1,520,114 | | | | 1,568,106 | | | | | |
| | | | 5,700.00 | | | CISCO SYSTEMS INC COM | | | | | | | 111,360 | | | | 128,592 | | | | | |
| | | | 5,000.00 | | | EMC CORP MASS COM | | | | | | | 123,828 | | | | 120,355 | | | | | |
| | | | 1,500.00 | | | QUALCOMM INC COM | | | | | | | 71,275 | | | | 104,235 | | | | | |
| | | | | | | | | | | | | | 1,826,577 | | | | 1,921,288 | | | | 1.73 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Semiconductors & | | | 3,500.00 | | | INTEL CORP COM | | | | | | | 73,337 | | | | 85,645 | | | | | |
| Semiconductor Equipment | | | 2,000.00 | | | KLA-TENCOR CORP | | | | | | | 112,556 | | | | 131,200 | | | | | |
| | | | | | | | | | | | | | 185,893 | | | | 216,845 | | | | 0.19 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL INFORMATION TECHNOLOGY | | | | | | | | | | | | | 2,365,854 | | | | 2,573,075 | | | | 2.31 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| MATERIALS | | | 5,000.00 | | | BROOKFIELD INFRASTRUCTURE | | | | | | | 143,842 | | | | 196,850 | | | | | |
| | | | 2,000.00 | | | MOSAIC CO | | | | | | | 93,287 | | | | 91,700 | | | | | |
| | | | 1,000.00 | | | POTASH CORP | | | | | | | 42,081 | | | | 31,100 | | | | | |
| | | | 2,000.00 | | | RPM INTL INC COM | | | | | | | 42,340 | | | | 77,440 | | | | | |
| | | | 7,000.00 | | | WILLIAMS PARTNERS LP COM | | | | | | | 349,516 | | | | 359,940 | | | | | |
| TOTAL MATERIALS | | | | | | | | | | | | | 671,066 | | | | 757,030 | | | | 0.68 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TELECOMMUNICATION SERVICES | | | | | | | | | | | | | | | | | | | | | | |
| Telecom Services | | | 2,000.00 | | | AMERICA MOVIL SA DE CV SPO | | | | | | | 55,017 | | | | 42,820 | | | | | |
| | | | 7,000.00 | | | AT&T CORP COM | | | | | | | 226,225 | | | | 253,400 | | | | | |
| | | | 4,500.00 | | | BCE INC COM | | | | | | | 191,785 | | | | 195,885 | | | | | |
| | | | 5,500.00 | | | CONSOLIDATED COMM HLDG COM | | | | 102,683 | | | | 102,465 | | | | | |
| | | | 5,000.00 | | | SINGAPORE TELECOMM LTD ADR | | | | | | | 121,425 | | | | 152,250 | | | | | |
| | | | 2,000.00 | | | SK TELECOM LTD SPONSORED A | | | | | | | 27,904 | | | | 48,960 | | | | | |
| | | | 2,000.00 | | | TELECOM ARGENTINA SA | | | 3 | | | | 36,419 | | | | 39,140 | | | | | |
| | | | 6,500.00 | | | TELEFONICA S A SPONSORED A | | | | | | | 108,424 | | | | 113,555 | | | | | |
| | | | 6,000.00 | | | TELEFONICA BRASIL S.A. | | | | | | | 146,002 | | | | 133,080 | | | | | |
| | | | 20,000.00 | | | VODAFONE GROUP | | | | | | | 524,169 | | | | 737,100 | | | | | |
| | | | | | | | | | | | | | 1,540,053 | | | | 1,818,655 | | | | 1.63 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Telecom Technology | | | 20,000.00 | | | RELM WIRELESS CORP COM | | | 3 | | | | 53,773 | | | | 52,600 | | | | 0.05 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL TELECOMMUNICATION SERVICES | | | | | | | | | | | | | 1,593,826 | | | | 1,871,255 | | | | 1.68 | % |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Continued) |
| October 31, 2013 |
| | | | | | | | | | | | | | | | | Percent | |
| Sectors and | | Shares | | | | | | | | | | | Market | | | of Net | |
| Industries | | Held | | | Company Name | | | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | |
| COMMON STOCKS: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| UTILITIES | | | 2,000.00 | | | AMERICAN ELEC PWR INC COM | | | | | | | 79,050 | | | | 93,680 | | | | | |
| | | | 5,000.00 | | | AMERIGAS PARTNERS LP COM | | | | | | | 212,399 | | | | 225,350 | | | | | |
| | | | 6,500.00 | | | DOMINION RES INC VA COM | | | | | | | 330,756 | | | | 414,375 | | | | | |
| | | | 10,187.00 | | | DUKE ENERGY CORP COM | | | | | | | 542,356 | | | | 730,714 | | | | | |
| | | | 2,500.00 | | | ENERSIS | | | | | | | 49,539 | | | | 41,250 | | | | | |
| | | | 1,000.00 | | | ENTERGY CORP NEW COM | | | | | | | 69,388 | | | | 64,720 | | | | | |
| | | | 2,000.00 | | | INTEGRYS ENERGY GRP COM | | | | | | | 104,066 | | | | 117,360 | | | | | |
| | | | 1,000.00 | | | NATIONAL GRID PLC SPON ADR | | | | | | | 49,641 | | | | 62,930 | | | | | |
| | | | 8,000.00 | | | ONEOK PARTNERS LP COM | | | | | | | 256,917 | | | | 430,160 | | | | | |
| | | | 7,000.00 | | | SOUTHERN CO COM | | | | | | | 275,720 | | | | 286,370 | | | | | |
| TOTAL UTILITIES | | | | | | | | | | | | | 1,969,832 | | | | 2,466,909 | | | | 2.22 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL INVESTMENTS IN COMMON STOCKS | | | | | | | | | | | | $ | 22,239,878 | | | $ | 28,111,066 | | | | 25.24 | % |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Continued) |
| October 31, 2013 |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percent | |
| | | | | | Shares | | | | | | Market | | | of Net | |
| Company Name | | | | | Held | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | | | | | | |
| PREFERRED STOCKS: | | | | | | | | | | | | | | | | | | | | |
| LEARNINGSTATION.COM | | | 2,3 | | | | 1,224,661.00 | | | $ | 500,000 | | | $ | - | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| TOTAL INVESTMENTS IN PREFERRED STOCKS | | | | | | | | | | $ | 500,000 | | | $ | - | | | | 0.00 | % |
| BMC FUND, INC. |
| SCHEDULE OF INVESTMENTS (Concluded) |
| October 31, 2013 |
| | | | | | | | Market | | | Percent of | |
| | Company Name | | Cost | | | Value | | | Net Assets | |
| | | | | | | | | | | | |
| Short-term Investments | | MFB NI Treasury Money Market Fund | | $ | 26,707,474 | | | $ | 26,707,474 | | | | 23.98 | % |
| | | | | | | | | | | | | | | |
| TOTAL INVESTMENTS - MARKET VALUE | | | | | | | | | 112,538,789 | | | | 101.06 | % |
| | | | | | | | | | | | | | | |
| TOTAL OTHER ASSETS IN EXCESS OF LIABILITIES | | | | | | | | | (1,181,270 | ) | | | -1.06 | % |
| | | | | | | | | | | | | | | |
| TOTAL NET ASSETS | | | | | | | | $ | 111,357,519 | | | | 100.00 | % |
1In default
2Market value determined by the Fund's Board of Directors
3Non-income producing security
| BMC FUND, INC. |
| SCHEDULE OF OPEN WRITTEN OPTION CONTRACTS |
| October 31, 2013 |
| | | | | | | | | | | | | | | Percent | |
| | | | | | Contracts | | | | | | Market | | | of Net | |
| Company Name | | | | | Held | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | |
| CALL OPTIONS: | | | | | | | | | | | | | | | |
| AMERICAN RAIL CALL OPTION, $45 EXP 3/22/14 | | | 3 | | | | (25.00 | ) | | $ | (3,961 | ) | | $ | (5,000 | ) | | | | |
| AMERICAN RAIL CALL OPTION, $40 EXP 12/21/13 | | | 3 | | | | (10.00 | ) | | | (939 | ) | | | (2,550 | ) | | | | |
| AON PLC CALL OPTION, $75 EXP 1/18/14 | | | 3 | | | | (15.00 | ) | | | (1,176 | ) | | | (7,950 | ) | | | | |
| APPLE INC CALL OPTION, $500 EXP 11/16/13 | | | 3 | | | | (5.00 | ) | | | (5,660 | ) | | | (12,400 | ) | | | | |
| APPLE INC CALL OPTION, $510 EXP 1/18/14 | | | 3 | | | | (5.00 | ) | | | (8,885 | ) | | | (14,625 | ) | | | | |
| DUKE ENERGY CO CALL OPTION, $70 1/18/14 | | | 3 | | | | (50.00 | ) | | | (6,172 | ) | | | (12,000 | ) | | | | |
| HOSPIRA INC CALL OPTION, $35 EXP 1/18/14 | | | 3 | | | | (50.00 | ) | | | (6,671 | ) | | | (27,000 | ) | | | | |
| KIMBERLY CLARK CALL OPTION, $100 EXP 4/19/14 | | | 3 | | | | (10.00 | ) | | | (2,084 | ) | | | (9,200 | ) | | | | |
| PANERA BREAD CALL OPTION, $170 1/18/14 | | | 3 | | | | (10.00 | ) | | | (4,384 | ) | | | (1,950 | ) | | | | |
| PANERA BREAD CALL OPTION, $180 EXP 5/17/14 | | | 3 | | | | (5.00 | ) | | | (3,085 | ) | | | (2,300 | ) | | | | |
| SOUTHERN CO CALL OPTION, $43 EXP 5/17/14 | | | 3 | | | | (20.00 | ) | | | (1,369 | ) | | | (1,460 | ) | | | | |
| SOUTHERN CO CALL OPTION, $44 EXP 5/17/14 | | | 3 | | | | (20.00 | ) | | | (1,029 | ) | | | (920 | ) | | | | |
| THE ADT CORP CALL OPTION, $48 EXP 4/19/14 | | | 3 | | | | (10.00 | ) | | | (1,234 | ) | | | (1,550 | ) | | | | |
| TOLL BROTHERS CALL OPTION, $36 EXP 1/18/14 | | | 3 | | | | (30.00 | ) | | | (3,403 | ) | | | (3,060 | ) | | | | |
| VODAFONE GROUP CALL OPTION, $34 EXP 1/18/14 | | | 3 | | | | (100.00 | ) | | | (9,343 | ) | | | (32,000 | ) | | | | |
| WELLS FARGO & CO CALL OPTION, $44 EXP 1/18/14 | | | 3 | | | | (20.00 | ) | | | (1,989 | ) | | | (1,440 | ) | | | | |
| WESTERN UNION CO CALL OPTION, $19 EXP 11/16/13 | | | 3 | | | | (250.00 | ) | | | (8,983 | ) | | | (1,250 | ) | | | | |
| WILLIAMS COMPANIES CALL OPTION, $40 EXP 1/18/14 | | | 3 | | | | (20.00 | ) | | | (1,630 | ) | | | (540 | ) | | | | |
| WILLIAMS PARTNERS CALL OPTION, $55 EXP 1/18/14 | | | 3 | | | | (10.00 | ) | | | (634 | ) | | | (400 | ) | | | | |
| TOTAL CALL OPTIONS - LIABILITIES | | | | | | | | | | | (72,631 | ) | | | (137,595 | ) | | | -0.12 | % |
| BMC FUND, INC. |
| SCHEDULE OF OPEN WRITTEN OPTION CONTRACTS (Concluded) |
| October 31, 2013 |
| | | | | | | | | | | | | | | Percent | |
| | | | | | Contracts | | | | | | Market | | | of Net | |
| Company Name | | | | | Held | | | Cost | | | Value | | | Assets | |
| | | | | | | | | | | | | | | | |
| PUT OPTIONS: | | | | | | | | | | | | | | | |
| ACCENTURE PLC PUT OPTION, $70 EXP 2/22/14 | | | 3 | | | | (30.00 | ) | | | (9,253 | ) | | | (5,250 | ) | | | | |
| ANHEUSER BUSCH PUT OPTION, $90 EXP 3/22/14 | | | 3 | | | | (20.00 | ) | | | (8,568 | ) | | | (2,100 | ) | | | | |
| ASTRAZENECA PUT OPTION, $45 EXP 4/19/14 | | | 3 | | | | (25.00 | ) | | | (3,481 | ) | | | (1,125 | ) | | | | |
| AVON PRODUCTS PUT OPTION, $15 EXP 4/19/14 | | | 3 | | | | (500.00 | ) | | | (26,716 | ) | | | (30,000 | ) | | | | |
| BIOGEN IDEC PUT OPTION, $220 EXP 4/19/14 | | | 3 | | | | (10.00 | ) | | | (13,794 | ) | | | (12,500 | ) | | | | |
| CISCO SYSTEMS PUT OPTION, $22 EXP 1/18/14 | | | 3 | | | | (250.00 | ) | | | (16,868 | ) | | | (19,500 | ) | | | | |
| CISCO SYSTEMS PUT OPTION, $24 EXP 1/18/14 | | | 3 | | | | (125.00 | ) | | | (18,004 | ) | | | (25,000 | ) | | | | |
| DUKE ENERGY CO PUT OPTION, $62.50 EXP 1/18/14 | | | 3 | | | | (30.00 | ) | | | (6,253 | ) | | | (600 | ) | | | | |
| GEO GROUP INC PUT OPTION, $30 EXP 3/22/14 | | | 3 | | | | (25.00 | ) | | | (3,836 | ) | | | (625 | ) | | | | |
| HERTZ GLOBAL PUT OPTION, $20 EXP 1/18/14 | | | 3 | | | | (250.00 | ) | | | (22,108 | ) | | | (12,500 | ) | | | | |
| INTEL CORP PUT OPTION, $22 EXP 11/16/13 | | | 3 | | | | (250.00 | ) | | | (20,358 | ) | | | (750 | ) | | | | |
| KOHLS CORP PUT OPTION, $50 EXP 1/18/14 | | | 3 | | | | (100.00 | ) | | | (22,843 | ) | | | (6,000 | ) | | | | |
| MICROSOFT CORP PUT OPTION, $30 EXP 1/18/14 | | | 3 | | | | (250.00 | ) | | | (33,358 | ) | | | (3,750 | ) | | | | |
| POTASH CORP SA PUT OPTION, $30 EXP 12/21/13 | | | 3 | | | | (100.00 | ) | | | (24,733 | ) | | | (6,100 | ) | | | | |
| QUEST DIAGNOSTICS PUT OPTION, $60 EXP 5/17/14 | | | 3 | | | | (20.00 | ) | | | (6,568 | ) | | | (8,200 | ) | | | | |
| SPIRIT AEROSYSTEMS PUT OPTION, $20 EXP 1/18/14 | | | 3 | | | | (10.00 | ) | | | (484 | ) | | | (50 | ) | | | | |
| TEMPUR SEALY PUT OPTION, $35 EXP 12/21/13 | | | 3 | | | | (150.00 | ) | | | (37,069 | ) | | | (26,250 | ) | | | | |
| THE ADT CORP PUT OPTION, $40 EXP 4/19/14 | | | 3 | | | | (30.00 | ) | | | (7,003 | ) | | | (6,000 | ) | | | | |
| WEIGHT WATCHERS PUT OPTION, $30 EXP 4/19/14 | | | 3 | | | | (250.00 | ) | | | (38,358 | ) | | | (50,250 | ) | | | | |
| WESTERN UNION CO PUT OPTION, $15 EXP 5/17/14 | | | 3 | | | | (500.00 | ) | | | (30,467 | ) | | | (30,000 | ) | | | | |
| TOTAL PUT OPTIONS - LIABILITIES | | | | | | | | | | | (350,122 | ) | | | (246,550 | ) | | | -0.22 | % |
| | | | | | | | | | | | | | | | | | | | | |
| TOTAL CALL AND PUT OPTIONS - LIABILITIES | | | | | | | | | | $ | (422,753 | ) | | $ | (384,145 | ) | | | -0.34 | % |
Item. 2. Code of Ethics.
On July 26, 2003, the Board of Directors of the Registrant adopted a Code of Ethics for the principal executive officer and principal financial and accounting officer. The Code was amended by the Board of Directors on February 24, 2007.
(c)-(e) N/A
(f) A copy of the Code of Ethics is attached as an exhibit.
Item 3. Audit Committee Financial Expert.
The Board of Directors of the Registrant has determined that R. Donald Farmer, a member of its Audit Committee, is an audit committee financial expert. Mr. Farmer is an independent director of the Registrant.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees: $42,600.00 for the fiscal year ended October 31, 2012; $44,600.00 for the fiscal year ended October 31, 2013.
(b) Audit-Related Fees: $2,025.00 for the fiscal year ended October 31, 2012; $2,050.00 for the fiscal year ended October 31, 2013. These fees were incurred for travel-related expenses.
(c) Tax Fees: $0.00 for the fiscal year ended October 31, 2012; $0.00 for the fiscal year ended October 31, 2013. These fees were incurred for review of the tax returns.
(d) All Other Fees: $7000.00 for the fiscal year ended October 31, 2012; $0.00 for the fiscal year ended October 31, 2013. These fees were incurred for report production and printing.
(e)(1) A copy of the Audit Committee's pre-approval policies and procedures is attached as an exhibit.
(e)(2) One hundred percent of the services described in Items 4(b) through 4(d) were approved in accordance with the Audit Committee Pre-Approval Policy. As a result, none of such services was approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) None of the hours expended on the principal accountant's engagement to audit the Registrant's financial statements for the fiscal year ended October 31, 2013 was attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
(g) N/A
(h) N/A
Item 5. Audit Committee of Listed Registrants.
N/A
Item 6. Schedule of Investments.
Included as a part of the report to shareholders filed under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The Board of Directors of the Registrant adopted Proxy Voting Policies and Procedures on July 26, 2003 and amended them October 30, 2003, April 5, 2004 and May 26, 2005. A copy as amended is attached as an exhibit.
Item 8. Portfolio Managers of Closed-End Investment Companies.
(a)(1) As of the date of filing of this report, Paul H. Broyhill, Chairman and Chief Executive Officer, M. Hunt Broyhill, President, and Christopher R. Pavese, CFA, Chief Investment Officer, are primarily responsible for the day-to-day management of the Registrant’s portfolio. Mr. Paul Broyhill has served in such capacity since the inception of the Registrant in 1982. Mr. Hunt Broyhill has had such responsibility since 2001. Mr. Hunt Broyhill has been engaged in asset management for various institutions and high net worth individuals for more than five years. Prior to joining the Registrant on March 1, 2005, Mr. Pavese was a Vice President and Portfolio Manager at JP Morgan Private Bank from January 1999 until February 2005. At JP Morgan, Mr. Pavese was engaged in asset management, portfolio strategy, and asset allocation for high net worth individuals, personal trusts, endowments and foundations.
(a)(2) The following tables provide information regarding registered investment companies other than the Registrant, other pooled investment vehicles, and other accounts over which the Registrant’s portfolio managers also have day-to-day management responsibilities. The tables provide the numbers of such accounts, the total assets in such accounts and the number of accounts and the total assets in the accounts with respect to which the fees are based on performance. The information is provided as of the Registrant’s fiscal year ended October 31, 2013.
Paul H. Broyhill
| | Other Registered
Investment
Companies | Other Pooled
Investment
Vehicles | Other
Accounts |
Number of Accounts Managed | None | None | 4 |
Number of Accounts Managed with Performance-Based Advisory Fees | None | None | None |
| Assets Managed | $0 | $0 | $26,566,545 |
Assets Managed with Performance-Based Advisory Fees | $0 | $0 | $0 |
M. Hunt Broyhill
| | Other Registered
Investment
Companies | Other Pooled
Investment
Vehicles | Other
Accounts |
Number of Accounts Managed | None | 2 | 14 |
Number of Accounts Managed with Performance-Based Advisory Fees | None | 1 | None |
| Assets Managed | $0 | $5,651,076 | $20,744,927 |
Assets Managed with Performance-Based Advisory Fees | $0 | $6,680,091 | $0 |
Christopher R. Pavese
| | Other Registered
Investment
Companies | Other Pooled
Investment
Vehicles | Other
Accounts |
Number of Accounts Managed | None | None | 42 |
Number of Accounts Managed with Performance-Based Advisory Fees | None | None | None |
| Assets Managed | $0 | $0 | $15,064,757 |
Assets Managed with Performance-Based Advisory Fees | $0 | $0 | $0 |
Material Conflicts of Interest
The Fund recognizes that actual or potential conflicts of interest are inherent in our business. These actual or potential conflicts may arise when a portfolio manager has day-to-day portfolio management responsibilities with respect to more than one fund or account. Certain investments may be appropriate for the Fund and also for other clients advised by the portfolio manager. Investment decisions for the Fund and other clients are made with a view to achieving their respective investment objectives and after consideration of such factors as their current holdings, availability of cash for investment and the size of their investments generally. Therein lies the possibility that a particular security could be bought or sold for the Fund and also for other clients, along with the possibility that a particular security could be bought or sold for the Fund while the opposite transaction could be occurring for other clients due to their investment strategy.
To the extent that a portfolio manager has responsibilities for managing accounts in addition to the Fund, the portfolio manager will need to divide his time and attention among relevant accounts.
The Fund also recognizes that in some cases, an actual or potential conflict may arise where a portfolio manager may have an incentive, such as a performance-based fee.
The Fund is in the process of developing written policies and procedures designed to address conflicts of interest its portfolio managers may face.
(a)(3)
Compensation Structure of Portfolio Managers
The compensation structure for each portfolio manager is based upon a fixed salary as well as a discretionary bonus determined by the senior management of the Registrant. Salaries are determined by the senior management and are based upon an individual’s position and overall value to the Registrant. Bonuses are also determined by management and are based upon an individual’s overall contribution to the success of the Fund and the profitability of the Registrant. Salaries and bonuses for portfolio managers are not based upon criteria such as performance of the Fund or the value of assets of the Registrant. Portfolio managers also have the opportunity to participate in other employee benefits available to all of the employees of the Registrant.
(a)(4) The dollar range of the Registrant’s equity securities owned beneficially by the Registrant’s portfolio managers as of the Registrant’s fiscal year ended October 31, 2013 is set forth below:
| Name of Portfolio Manager | Dollar ($) Range of
Registrant’s Shares
Beneficially Owned |
| Paul H. Broyhill | Over $1,000,000 |
| M. Hunt Broyhill | Over $1,000,000 |
| Christopher R. Pavese | $1-$10,000 |
(b) N/A
Item 9. Purchases of Equity Securities by Closed-End
Management Investment Company and Affiliated Purchasers.
None
Item 10. Submission of Matters to a Vote of Security Holders.
N/A
Item 11. Controls and Procedures.
Within the 90 days prior to the date of this report, the Registrant's management carried out an evaluation, under the supervision and with the participation of Registrant's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Registrant's disclosure controls and procedures pursuant to Rule 30a-3(b) of the Investment Company Act of 1940. Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of a date within 90 days of the filing of this report that the Registrant's disclosure controls and procedures are effective in timely alerting them to material information relating to the Registrant required to be included in the Registrant's periodic SEC filings.
There were no significant changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by the report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The Registrant's Code of Ethics is attached as Exhibit 12(a)(1).
(a)(2) Certifications.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | BMC Fund, Inc. |
| | | |
| | By | |
| | | |
| | | /s/ Boyd C. Wilson, Jr. |
| | | Boyd C. Wilson, Jr. |
| | | Vice President and |
| | | Chief Financial Officer |
Date: December 17, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | By | |
| | | |
| | | /s/ Paul H. Broyhill |
| | | Paul H. Broyhill |
| | | Chairman and Chief Executive Officer |
Date: December 17, 2013
| | By | |
| | | |
| | | /s/ Boyd C. Wilson, Jr. |
| | | Boyd C. Wilson, Jr. |
| | | Vice President and |
| | | Chief Financial Officer |
Date: December 17, 2013
