-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AFkAG9UuB6EYwTDkW80zjMO1Nyv1NaFhoDCepXFyDZV2VKZUGkRhTLLVAyIJsjsm f/J5mT/BMpcUNzShNdl3VQ== 0001193125-05-139353.txt : 20050708 0001193125-05-139353.hdr.sgml : 20050708 20050708103313 ACCESSION NUMBER: 0001193125-05-139353 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050430 FILED AS OF DATE: 20050708 DATE AS OF CHANGE: 20050708 EFFECTIVENESS DATE: 20050708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLARION CMBS VALUE FUND INC CENTRAL INDEX KEY: 0000934588 IRS NUMBER: 043229433 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08920 FILM NUMBER: 05944837 BUSINESS ADDRESS: STREET 1: C/O REICH & TANG ASSET MANAGEMENT LP STREET 2: 600 FIFTH AVENUE 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020-2302 BUSINESS PHONE: 2128305200 MAIL ADDRESS: STREET 1: C/O REICH & TANG ASSET MANAGEMENT LP STREET 2: 600 FIFTH AVE 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020-2302 FORMER COMPANY: FORMER CONFORMED NAME: 13A COMMERCIAL MORTGAGE SECURITIES FUND INC DATE OF NAME CHANGE: 19980303 FORMER COMPANY: FORMER CONFORMED NAME: AEW COMMERCIAL MORTGAGE SECURITIES FUND INC DATE OF NAME CHANGE: 19941222 N-CSRS 1 dncsrs.txt CLARION VALUE FUND, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-8920 Clarion Value Fund, Inc. --------------------------------------------------- (Exact name of registrant as specified in charter) 230 Park Avenue New York, NY 10169 --------------------------------------------------- (Address of principal executive offices) (Zip code) Daniel Heflin Clarion Value Fund, Inc. 230 Park Avenue New York, NY 10169 --------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-212-883-2500 Date of fiscal year end: October 31, 2005 Date of reporting period: April 30, 2005 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. Item 1. Report(s) to Stockholders. - --------------------------------------- CLARION VALUE FUND, INC. - --------------------------------------- Officers and Directors Frank L. Sullivan, Jr. Chairman of the Board of Directors --------------------------------------- Daniel Heflin President, Chief Executive Officer and Director CLARION VALUE FUND, INC. Stephen Baines Vice President David N. Drinkwater Vice President and Secretary Joanne M. Vitale Vice President Yuriy Zubatyy Chief Compliance Officer --------------------------------------- Stephen C. Asheroff Director Steven N. Fayne Director I. Trevor Rozowsky Director - --------------------------------------- Investment Adviser ING Clarion Capital, LLC 230 Park Avenue New York, NY 10169 - --------------------------------------- Administrator The Bank of New York 101 Barclay Street Semi-Annual Report New York, NY 10286 April 30, 2005 (unaudited) - --------------------------------------- Custodian The Bank of New York 100 Colonial Center Parkway Lake Mary, FL 32746 - --------------------------------------- CLARION VALUE FUND, INC. c/o ING Clarion Capital / 230 Park Avenue / New York, NY 10169 Tel 212-883-2500 June 2005 CLARION VALUE FUND, INC Dear Shareholder, Enclosed is the Semi-annual Report for the Clarion Value Fund, Inc. (the "Fund"). This report covers the period from November 1, 2004 through April 30, 2005. As of April 30, 2005, the net asset value of the Clarion Value Fund Master, LLC (the "Master Fund"), wherein all assets of the Fund are invested was $365,629,182 which included investments in 105 fixed income securities, with a net investment value of $361,621,039. The Master Fund also has $4,008,143 of other assets (including cash and cash equivalents) net of liabilities. For the six months ending April 30, 2005, the Fund generated a net total return of 3.19% compared to a return of 0.98% for the Lehman Brothers Aggregate Bond Index and 0.63% for the CSFB High Yield Index. Since the inception of the Fund (December 21, 1994), the portfolio generated a net annual return of 10.42% compared to an annual return of 7.55% for the Lehman Brothers Aggregate Bond Index and 8.11% for the CSFB High Yield Index. Market Summary ING Clarion believes that CMBS issuance will remain very strong. According to Morgan Stanley, by year end it is expected that $100 billion of CMBS will have been issued in 2005, resulting in a record issuance. This is expected to bring the total size of the CMBS market to over $600 billion. Year to date April 30, 2005 issuance has been $39 billion. The recovery in real estate market fundamentals is broadening, although there are increasing property sector and regional differences. The retail sector has been the leader over the past two years. We expect favorable economic and demographic trends to continue supporting this sector over the near-term. The office sector is showing a strong recovery in occupancy levels. However, high levels of tenant improvements and leasing commissions associated with the increase in leasing activity are likely to impact cash flows over the next 12-18 months. The multifamily sector continues to struggle. Market fundamentals remain soft with vacancy well above the historically perceived market equilibrium rate of 5.0%. According to Property & Portfolio Research, as of first quarter 2005, the multifamily vacancy rate was 7.0% with rent growth of 0.2%. The multifamily sector faces sustained competition from continued low mortgage rates and the growing homeownership rate in the primary renter cohort. As a result, we anticipate the multifamily sector will continue to struggle in the near-term until occupancy improves and concessions burn-off. Portfolio Summary From a credit perspective, the average credit rating of the Master Fund is BBB-. Since November 1, 2004, nine securities have been upgraded and there have been no downgrades. For the six months ended April 30, 2005, the Fund made monthly distributions to shareholders at an annual rate of 13.05%. Since the inception of the Fund, it has made distributions at an average annual rate of 8.43%. With regard to term structure exposure versus the benchmark, as of April 30, 2005, the portfolio had a weighted average life of 6.66 years, while the Lehman Brothers Aggregate Index had a weighted average life of 6.98 years and the CSFB High Yield Index had a weighted average life of 7.56 years. The modified duration of the Fund was 4.81 years, while the Lehman Brothers Aggregate Index had a modified duration of 4.33 years and the CSFB High Yield Index had a modified duration of 4.33 years. As of April 30, 2005, the portfolio was constructed of 29.6% investment grade securities and 70.4% below-investment grade securities. The Fund's spread to Treasuries was 319 basis points, while the Lehman Brothers Aggregate Index spread to Treasuries was 72 basis points and the CSFB High Yield Index spread to Treasuries was 431 basis points. ING Clarion believes that the Fund will continue to outperform the Lehman Brothers Aggregate Index, as well as the CSFB High Yield Index, over full market cycles. If you have any questions regarding the Fund, please call me or Joseph Calderone at 212-883-2650. Daniel Heflin President Performance Information [GRAPHIC APPEARS HERE] Clarion Value Fund Growth in Value of a $10,000 Investment in the Clarion Value Fund, the Lehman Brothers Aggregate Bond Index and the CSFB High Yield Index Value of $10,000 Lehman Aggregate CSFB High Yield Date Fund Index Index - -------------------------------------------------------------- 12/31/94 $ 10,000 $ 10,000 $ 10,000 1/31/1995 $ 10,171 $ 10,198 $ 10,105 2/28/1995 $ 10,421 $ 10,441 $ 10,354 3/31/1995 $ 10,512 $ 10,504 $ 10,471 4/30/1995 $ 10,655 $ 10,651 $ 10,703 5/31/1995 $ 11,096 $ 11,064 $ 11,005 6/30/1995 $ 11,199 $ 11,144 $ 11,077 7/31/1995 $ 11,147 $ 11,120 $ 11,249 8/31/1995 $ 11,262 $ 11,254 $ 11,281 9/30/1995 $ 11,389 $ 11,364 $ 11,410 10/31/1995 $ 11,569 $ 11,511 $ 11,537 11/30/1995 $ 11,772 $ 11,684 $ 11,591 12/31/1995 $ 11,968 $ 11,848 $ 11,738 1/31/1996 $ 12,069 $ 11,926 $ 11,962 2/29/1996 $ 11,900 $ 11,718 $ 12,025 3/31/1996 $ 11,854 $ 11,636 $ 11,992 4/30/1996 $ 11,831 $ 11,571 $ 12,057 5/31/1996 $ 11,877 $ 11,548 $ 12,155 6/30/1996 $ 11,994 $ 11,703 $ 12,182 7/31/1996 $ 12,052 $ 11,734 $ 12,291 8/31/1996 $ 12,230 $ 11,714 $ 12,425 9/30/1996 $ 12,385 $ 11,918 $ 12,639 10/31/1996 $ 12,754 $ 12,183 $ 12,745 11/30/1996 $ 13,085 $ 12,391 $ 12,944 12/31/1996 $ 13,058 $ 12,276 $ 13,196 1/31/1997 $ 13,084 $ 12,314 $ 13,293 2/28/1997 $ 13,306 $ 12,345 $ 13,543 3/31/1997 $ 13,276 $ 12,208 $ 13,391 4/30/1997 $ 13,618 $ 12,391 $ 13,510 5/31/1997 $ 13,834 $ 12,509 $ 13,782 6/30/1997 $ 14,143 $ 12,657 $ 13,969 7/31/1997 $ 13,892 $ 12,999 $ 14,265 8/31/1997 $ 13,891 $ 12,889 $ 14,342 9/30/1997 $ 14,258 $ 13,079 $ 14,626 10/31/1997 $ 14,495 $ 13,269 $ 14,625 11/30/1997 $ 14,488 $ 13,330 $ 14,729 12/31/1997 $ 14,500 $ 13,465 $ 14,863 1/31/1998 $ 14,804 $ 13,637 $ 15,115 2/28/1998 $ 14,814 $ 13,626 $ 15,233 3/31/1998 $ 14,942 $ 13,672 $ 15,309 4/30/1998 $ 14,869 $ 13,744 $ 15,424 5/31/1998 $ 15,022 $ 13,874 $ 15,470 6/30/1998 $ 15,154 $ 13,992 $ 15,503 7/31/1998 $ 15,170 $ 14,021 $ 15,611 8/31/1998 $ 15,276 $ 14,250 $ 14,551 9/30/1998 $ 15,412 $ 14,583 $ 14,550 10/31/1998 $ 14,719 $ 14,506 $ 14,260 11/30/1998 $ 14,519 $ 14,589 $ 14,983 12/31/1998 $ 14,682 $ 14,633 $ 14,949 1/31/1999 $ 14,807 $ 14,736 $ 15,089 2/28/1999 $ 14,642 $ 14,479 $ 15,058 3/31/1999 $ 14,765 $ 14,558 $ 15,195 4/30/1999 $ 14,866 $ 14,605 $ 15,531 5/31/1999 $ 14,994 $ 14,476 $ 15,363 6/30/1999 $ 14,980 $ 14,430 $ 15,371 7/31/1999 $ 14,972 $ 14,369 $ 15,378 8/31/1999 $ 14,984 $ 14,362 $ 15,241 9/30/1999 $ 15,166 $ 14,529 $ 15,124 10/31/1999 $ 15,175 $ 14,583 $ 15,050 11/30/1999 $ 15,219 $ 14,581 $ 15,255 12/31/1999 $ 15,329 $ 14,511 $ 15,439 1/31/2000 $ 15,318 $ 14,463 $ 15,377 2/29/2000 $ 15,695 $ 14,638 $ 15,473 3/31/2000 $ 16,035 $ 14,831 $ 15,241 4/30/2000 $ 16,021 $ 14,788 $ 15,218 5/31/2000 $ 16,122 $ 14,781 $ 14,974 6/30/2000 $ 16,471 $ 15,088 $ 15,310 7/31/2000 $ 16,656 $ 15,226 $ 15,454 8/31/2000 $ 16,977 $ 15,447 $ 15,557 9/30/2000 $ 17,129 $ 15,544 $ 15,414 10/31/2000 $ 17,313 $ 15,646 $ 14,935 11/30/2000 $ 17,676 $ 15,903 $ 14,346 12/31/2000 $ 17,708 $ 16,199 $ 14,635 1/31/2001 $ 17,954 $ 16,463 $ 15,511 2/28/2001 $ 18,172 $ 16,606 $ 15,668 3/31/2001 $ 18,312 $ 16,689 $ 15,356 4/30/2001 $ 18,092 $ 16,619 $ 15,196 5/31/2001 $ 18,226 $ 16,719 $ 15,500 6/30/2001 $ 18,367 $ 16,782 $ 15,260 7/31/2001 $ 18,858 $ 17,158 $ 15,423 8/31/2001 $ 19,107 $ 17,356 $ 15,639 9/30/2001 $ 18,920 $ 17,557 $ 14,653 10/1/2001 $ 19,358 $ 17,924 $ 14,987 11/30/2001 $ 19,080 $ 17,676 $ 15,471 12/21/2001 $ 18,971 $ 17,563 $ 15,481 1/31/2002 $ 19,213 $ 17,706 $ 15,625 2/28/2002 $ 19,599 $ 17,877 $ 15,515 3/31/2002 $ 19,188 $ 17,581 $ 15,870 4/30/2002 $ 19,775 $ 17,922 $ 16,122 5/31/2002 $ 20,011 $ 18,074 $ 16,065 6/1/2002 $ 20,458 $ 18,231 $ 15,505 7/1/2002 $ 21,016 $ 18,452 $ 15,061 8/1/2002 $ 21,614 $ 18,764 $ 15,256 9/1/2002 $ 22,232 $ 19,068 $ 15,068 10/1/2002 $ 22,125 $ 18,980 $ 14,976 11/30/2002 $ 21,829 $ 18,974 $ 15,768 12/31/2002 $ 22,304 $ 19,367 $ 15,960 1/31/2003 $ 22,303 $ 19,384 $ 16,395 2/28/2003 $ 22,774 $ 19,652 $ 16,637 3/31/2003 $ 22,792 $ 19,636 $ 17,062 4/30/2003 $ 22,964 $ 19,799 $ 17,933 5/31/2003 $ 23,771 $ 20,167 $ 18,193 6/30/2003 $ 23,739 $ 20,127 $ 18,724 7/31/2003 $ 22,710 $ 19,451 $ 18,573 8/31/2003 $ 22,763 $ 19,579 $ 18,781 9/30/2003 $ 23,589 $ 20,098 $ 19,294 10/31/2003 $ 23,499 $ 19,911 $ 19,687 11/30/2003 $ 23,623 $ 19,959 $ 19,957 12/31/2003 $ 24,030 $ 20,162 $ 20,418 1/31/2004 $ 24,424 $ 20,324 $ 20,815 2/29/2004 $ 24,796 $ 20,543 $ 20,825 3/31/2004 $ 25,160 $ 20,697 $ 20,964 4/30/2004 $ 24,441 $ 20,159 $ 20,935 5/31/2004 $ 24,392 $ 20,079 $ 20,604 6/30/2004 $ 24,683 $ 20,193 $ 20,924 7/31/2004 $ 24,990 $ 20,393 $ 21,192 8/31/2004 $ 25,790 $ 20,782 $ 21,537 9/30/2004 $ 26,425 $ 20,838 $ 21,864 10/31/2004 $ 26,995 $ 21,014 $ 22,240 11/30/2004 $ 26,748 $ 20,845 $ 22,523 12/31/2004 $ 27,061 $ 21,037 $ 22,861 1/31/2005 $ 27,285 $ 21,170 $ 22,856 2/28/2005 $ 27,395 $ 21,045 $ 23,158 3/31/2005 $ 27,382 $ 20,937 $ 22,604 4/30/2005 $ 27,858 $ 21,220 $ 22,381 - -------------------------------------------------------------- The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. The CSFB High Yield Index is designed to mirror the investible universe of the U.S. dollar denominated high yield debt market. Unlike the returns of the Fund, the returns of the Lehman Brothers Aggregate Bond Index and the CSFB High Yield Index do not include the adverse effects of shareholder transactions costs and fund operating expenses. One Year Ended Five Years Ended Inception to April 30, 2005 April 30, 2005(a) April 30, 2005(b) -------------- ----------------- ----------------- Clarion Value Fund, Inc. 13.98% 11.70% 10.42% Lehman Brothers Aggregate Bond Index 5.26% 7.49% 7.55% CSFB High Yield Index 6.90% 8.02% 8.11% (a) Average annual total return (b) Average annual total return from commencement of Fund operations (December 21, 1994) "Total Return" is calculated including reinvestment of all dividends and distributions. Results represent past performance and do not indicate future results. The value of an investment in the Fund and the return on investment will fluctuate and redemption proceeds may be higher or lower than an investor's original cost. The performance information and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. CLARION VALUE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES April 30, 2005 (unaudited) Assets Investment in Clarion Value Fund Master, LLC ("Master Fund"), at Value $ 327,451,926 ------------- Total Assets 327,451,926 ------------- Liabilities Accrued Advisory Fee - Note C 488,430 Other Accrued Expenses 44,731 ------------- Total Liabilities 533,161 ------------- Net Assets $ 326,918,765 ============= Net Assets Consist of: Paid in Capital $ 310,801,871 Undistributed Net Investment Income 8,705,261 Accumulated Net Realized Gain (185,827) Unrealized Appreciation 7,597,460 ------------- Net Assets $ 326,918,765 ============= Net Assets $ 326,918,765 Common Stock Shares Issued and Outstanding ($0.01 par value) (Authorized 250,000,000) 35,495,884 Net Asset Value Per Share $ 9.21 ============= See Notes to Financial Statements and Attached Financial Statements of Clarion Value Fund Master, LLC. 3 CLARION VALUE FUND, INC. STATEMENT OF OPERATIONS For the Six Months Ended April 30, 2005 (unaudited) Investment Income Interest Income Allocated from the Master Fund $ 12,461,996 Expenses Allocated from the Master Fund (153,375) ------------- Total Investment Income 12,308,621 ------------- Expenses Advisory Fees - Note C 972,869 Audit Fees 17,530 Transfer Agent Fees - Note E 8,924 Directors' Fees 6,431 Administrative Fees - Note D 5,951 Other Fees 2,830 ------------- Total Expenses 1,014,535 ------------- Net Investment Income 11,294,086 ------------- Realized and Unrealized Loss on Investments Allocated From the Master Fund Net Realized Loss on Investments Allocated from the Master Fund (185,827) Net Change in Unrealized Depreciation on Investments Allocated from the Master Fund (1,066,239) ------------- Net Loss on Investments (1,252,066) ------------- Net Increase in Net Assets Resulting from Operations $ 10,042,020 ============= See Notes to Financial Statements and Attached Financial Statements of Clarion Value Fund Master, LLC. 4 CLARION VALUE FUND, INC. STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year April 30, 2005 Ended (unaudited) October 31, 2004 --------------- --------------- Increase (Decrease) in Net Assets from Operations Net Investment Income $ 11,294,086 $ 28,210,959 Net Realized Gain (Loss) (185,827) 10,170,917 Net Change in Unrealized Appreciation (Depreciation) (1,066,239) 10,814,376 --------------- --------------- Net Increase in Net Assets Resulting from Operations 10,042,020 49,196,252 --------------- --------------- Distributions from: Net Investment Income (19,099,750) (22,982,179) Capital Gains (9,045,918) (6,317,043) --------------- --------------- Total Distributions (28,145,668) (29,299,222) --------------- --------------- Capital Share Transactions: Issued 32,500,000 73,331,052 - In Lieu of Cash Distributions 20,336,063 14,913,312 Redeemed (10,906,515) (124,774,128) --------------- --------------- Net Increase (Decrease) from Capital Share Transactions 41,929,548 (36,529,764) --------------- --------------- Total Increase (Decrease) in Net Assets 23,825,900 (16,632,734) Net Assets: Beginning of Period 303,092,865 319,725,599 --------------- --------------- End of Period (including undistributed net investment income of $8,705,261 in 2005 and $16,510,925 in 2004, respectively) $ 326,918,765 $ 303,092,865 =============== =============== Shares Issued and Redeemed: Shares Issued 3,524,383 7,857,838 - In Lieu of Cash Distributions 2,218,048 1,599,941 Shares Redeemed (1,187,626) (12,954,004) --------------- --------------- Net Increase (Decrease) in Capital Share Transactions 4,554,805 (3,496,225) =============== ===============
See Notes to Financial Statements and Attached Financial Statements of Clarion Value Fund Master, LLC. 5 CLARION VALUE FUND, INC. STATEMENT OF CASH FLOWS For the Six Months Ended April 30, 2005 (unaudited) Cash Flows from Operating Activities: Net Increase in Net Assets Resulting from Operations $ 10,042,020 Adjustments to Reconcile Net Increase in Net Assets Resulting from Operations to Net Cash Used in Operating Activities: Net Investment Income Allocated from the Master Fund (12,308,621) Contributions to the Master Fund (54,917,336) Withdrawals from the Master Fund 43,734,066 Net Paydown Loss on Securities 254,669 Amortization of Premium And Accretion of Discount (1,713,420) Decrease in Accrued Advisory Fee (120,464) Decrease in Accrued Expenses (6,860) Net Change in Unrealized Depreciation 1,066,239 Net Realized Loss on Investments 185,827 --------------- Net Cash Used in Operating Activities (13,783,880) --------------- Cash Flows from Financing Activities:* Cash Subscriptions Received 32,500,000 Cash Redemptions Paid (10,906,515) Capital Gain Distributions Paid (9,045,918) Net Investment Income Distributions Paid 1,236,313 --------------- Net Cash Provided by Financing Activities 13,783,880 --------------- Net Change in Cash - Cash at Beginning of Period - --------------- Cash at End of Period $ - =============== .. Non-cash financing transactions not included herein consist of reinvestment of distributions of $20,336,063. See Notes to Financial Statements and Attached Financial Statements of Clarion Value Fund Master, LLC. 6 CLARION VALUE FUND, INC. FINANCIAL HIGHLIGHTS Per Share Operating Performance For a Share Outstanding throughout Each Period
Six Months Ended Year Year Year Year Year April 30, Ended Ended Ended Ended Ended 2005 October 31, October 31, October 31, October 31, October 31, (unaudited) 2004 2003 2002(1)(2) 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Net Asset Value, Beginning of Period $ 9.80 $ 9.28 $ 9.37 $ 8.83 $ 8.55 $ 8.14 ---------- ---------- ---------- ---------- ---------- ---------- Income From Investment Operations Net Investment Income(7) 0.34 0.76 0.77 0.95 0.70 0.69 Net Realized and Unrealized Gain (Loss) (0.05) 0.55 (0.21) 0.25 0.27 0.41 ---------- ---------- ---------- ---------- ---------- ---------- Total Income from Investment Operations 0.29 1.31 0.56 1.20 0.97 1.10 ---------- ---------- ---------- ---------- ---------- ---------- Distributions Net Investment Income (0.59) (0.61) (0.64) (0.66) (0.69) (0.69) Capital Gains (0.29) (0.18) (0.01) - - - ---------- ---------- ---------- ---------- ---------- ---------- Total Distributions (0.88) (0.79) (0.65) (0.66) (0.69) (0.69) ---------- ---------- ---------- ---------- ---------- ---------- Net Asset Value, End of Period $ 9.21 $ 9.80 $ 9.28 $ 9.37 $ 8.83 $ 8.55 ---------- ---------- ---------- ---------- ---------- ---------- Total Investment Return Net Asset Value(3) 3.20% 14.88% 6.21% 14.30% 11.82% 14.08% ---------- ---------- ---------- ---------- ---------- ---------- Ratios and Supplemental Data Net Assets, End of Period (Thousands) $ 326,919 $ 303,093 $ 319,726 $ 338,105 $ 107,251 $ 103,755 Ratio of Net Expenses to Average Net Assets 0.76%(4)(5) 0.75%(4) 0.76%(4) 0.80%(4) 0.79% 0.80% Ratio of Net Investment Income to Average Net Assets 7.31%(4)(5) 8.06% 8.34% 8.69% 8.03% 8.34% Ratio of Voluntary Waived Fees and Expenses Assumed by the Adviser to Average Net Assets 0.00% 0.00% 0.00% 0.03% 0.00% 0.00% Portfolio Turnover Rate(6) - - - 45% 63% 45%
(1) Effective July 1, 2002, the Fund combined its two existing share classes into a single class. Each Fund shareholder received common shares of equal net asset value to their Class A or Class X shares. The financial highlights presented reflect historical financial information for Class X shares prior to July 1, 2002. (2) As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium and discount on debt securities. The effect of this change for the year ended October 31, 2002, was to increase net investment income per share by $0.15 and decrease net realized and unrealized gain per share by $0.15. Consequently, the ratio of net investment income to average net assets was increased from 7.28% to 8.69% on an annualized basis. Per share ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. (3) Total investment return based on per share net asset value reflects the effects of changes in net asset value on the performance of the Fund during the period, and assumes dividends and distributions, if any, were reinvested at net asset value. Total return would have been lower had certain fees not been waived during certain periods. (4) Includes the Fund's share of expenses allocated from the Master Fund. (5) Annualized. (6) Represents the Fund's portfolio turnover rate for the periods prior to the Fund's reorganization into a Feeder Fund as described in Note A to the Financial Statements. Portfolio turnover rate for the period subsequent to the Fund's reorganization is shown in the Financial Highlights section of the Financial Statements for the Clarion Value Fund Master, LLC. (7) Calculated based upon average shares outstanding throughout the year. See Notes to Financial Statements and Attached Financial Statements of Clarion Value Fund Master, LLC. 7 CLARION VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS April 30, 2005 (unaudited) A. Organization: The Clarion Value Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. Prior to July 8, 1999, the Fund was registered as a closed-end management investment company. The objective of the Fund is to provide high current income by investing primarily in commercial mortgage-backed securities. The Fund's common stock is not registered under the Securities Act of 1933. Through June 30, 2002 the Fund had two classes of shares, Class A and Class X. Class A Shares were offered on a private placement basis only. Class X Shares were owned by investors who purchased their interests in the Fund at the time the Fund was a closed-end Fund. Class A Shares were first issued on January 2, 2001. Effective July 1, 2002, the Fund combined the two existing share classes into a single class. Each Class A and Class X shareholder received common shares of equal net asset value to their Class A or Class X shares. For purposes of financial reporting, Class X shares have been treated as the accounting survivor. On July 31, 2002 the Fund reorganized into a "master fund/feeder fund" structure, and Clarion Value Fund Master, LLC (the "Master Fund") was set up as the Master Fund. The existing assets of the Fund, aggregating $250,797,492 as of July 31, 2002, were transferred into the Master Fund. The Fund invests substantially all of its investable assets in the Master Fund, which has the same investment objective as the Fund. As of April 30, 2005 the Fund's proportionate interest in the net assets of the Master Fund was 89.56%. The Master Fund utilizes the services of the Adviser, ING Clarion Capital, LLC, to invest the assets of the Fund, together with the assets of Clarion Fund PLC which is also managed by the Adviser following the same investment strategy described herein. The performance of the Fund is directly affected by the performance of the Master Fund. The financial statements of the Master Fund, including the Portfolio of Investments, are attached to this report and should be read in conjunction with the Fund's financial statements. B. Summary of Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles. Such policies are consistently followed by the Fund in the preparation of its financial statements. U.S. generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates. 1. Security Valuation: The Fund records its investment in the Master Fund at fair value. Valuation of the investments of the Master Fund is further discussed in note B1 to its financial statements which are attached herein. 2. Investment Income and Expenses: The Fund records its proportionate share of the Master Fund's income, expenses, and realized and unrealized gains and losses on a daily basis. Income and expenses that are directly attributable to the Fund are recorded on the accrual basis as incurred. 3. Federal Income Taxes: The Fund is a regulated investment company under Subchapter M of the Internal Revenue Code and distributes all of its taxable income. Accordingly, no provision for Federal income taxes is required in the financial statements. See Attached Financial Statements of Clarion Value Fund Master, LLC. 8 CLARION VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (Continued) April 30, 2005 (unaudited) B. Summary of Significant Accounting Policies (continued): 4. Distributions to Shareholders: The Fund distributes substantially all of its net investment income monthly. Any net realized capital gains are distributed annually. All distributions are recorded on the ex-dividend date. Under the Fund's Automatic Dividend Reinvestment Plan, all dividends and capital gain distributions are automatically reinvested in additional shares at net asset value. Shareholders who do not elect to participate in such Plan will receive their dividends and distributions in cash unless the Board of Directors elects to pay such distributions in shares of the Fund's common stock. The amount and character of income and capital gain distributions to be paid are determined in accordance with Federal income tax regulations which may differ from U.S. generally accepted accounting principles. 5. Other: Security transactions are accounted for on the trade date, the date the trade was executed. Costs used in determining realized gains and losses on the sale of investment securities are based on the specific identification method. Interest income is recognized on an accrual basis. C. Advisory Services: Pursuant to an Investment Advisory Agreement between the Fund and the Adviser (the "Advisory Agreement"), the Adviser receives an annual advisory fee of 0.63% of the monthly average net assets of the Fund. The Adviser has agreed to waive a portion of its fee such that the total annual operating expenses of the Fund (including management fees) do not exceed 0.80% of the Fund's net asset value. Any out-of-pocket due diligence and other expenses incurred by the Adviser in directly managing the Fund's investments (which may include, but will not be limited to legal, appraisal, environmental and site visit expenses) will not be included as fund operating expenses for purposes of calculating a management fee waiver. For the six months ended April 30, 2005, there were no waivers by the Adviser pursuant to this provision. Prior to December 1, 2001 the advisory fee was 0.65% of the Fund's average monthly net assets. D. Administration and Custodian Services: The Bank of New York serves as the Fund Administrator and Custodian pursuant to separate administration and accounting and custody agreements. E. Transfer Agent: Unified Fund Services, Inc. serves as the Fund's Transfer Agent pursuant to a mutual fund services agreement. F. Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. The Fund does not anticipate recognizing any loss relating to these arrangements. See Attached Financial Statements of Clarion Value Fund Master, LLC. 9 CLARION VALUE FUND MASTER, LLC PORTFOLIO OF INVESTMENTS April 30, 2005 (unaudited)
Principal Amount Value (a) ------------ ------------ COMMERCIAL MORTGAGE-BACKED SECURITIES (85.19%) CS First Boston Mortgage Securities Corp. 6.000% due 07/15/12(b) $ 19,196,000 $ 17,858,190 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.056% due 01/12/13(b) 16,726,000 14,602,596 Wachovia Bank Commercial Mortgage Trust 4.932% due 04/15/13(b) 16,983,000 14,596,178 LB UBS Commercial Mortgage Trust 5.224% due 08/15/13(b) 14,287,000 12,426,486 Mortgage Capital Funding, Inc. 7.214% due 11/20/07(b) 12,000,000 12,170,626 Bank of America First Union National Bank Commercial Mortgage, Inc. 6.250% due 10/11/11(b) 12,300,000 11,659,535 Commercial Mortgage Acceptance Corp. 5.440% due 05/15/13(b) 12,050,000 10,880,774 Commercial Mortgage Pass-Through Certificates 7.237% due 10/15/08 8,000,000 8,661,440 Wachovia Bank Commercial Mortgage Trust 5.031% due 11/15/13(b) 9,596,000 8,350,768 Mortgage Capital Funding, Inc. 6.000% due 02/18/08(b) 8,488,000 8,277,907 Mortgage Capital Funding, Inc. 5.750% due 12/21/26 8,000,000 7,905,625 Morgan Stanley Capital I 7.542% due 02/15/08 7,275,000 7,808,767 GS Mortgage Securities Corp. II 6.624% due 05/03/11(b) 7,000,000 7,782,460 DLJ Commercial Mortgage Corp. 5.750% due 02/10/09(b) 8,200,000 7,643,937 Chase Commercial Mortgage Securities Corp. 6.600% due 08/09/12(b) 7,800,000 7,538,882 CS First Boston Mortgage Securities Corp. 6.380% due 12/18/10 6,440,000 6,970,914 Chase Commercial Mortgage Securities Corp. 6.390% due 07/18/13(b) 7,000,000 6,722,461 LB UBS Commercial Mortgage Trust 7.585% due 10/15/10(b) 6,091,000 6,235,661 CS First Boston Mortgage Securities Corp. 6.080% due 11/15/11(b) 6,025,000 5,688,775 CS First Boston Mortgage Securities Corp. 5.226% due 11/15/14(b) 6,460,000 5,581,339 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.015% due 10/15/15(b) 6,513,000 5,455,909 Chase Commercial Mortgage Securities Corp. 6.390% due 11/18/08 5,022,043 5,218,706 Merrill Lynch Mortgage Investors, Inc. 6.250% due 04/10/17(b) 6,000,000 5,097,188 Wachovia Bank Commercial Mortgage Trust 0.286% due 02/15/35(b) 147,813,088(d) 4,800,555 J.P. Morgan Chase Commercial Mortgage Securities Corp. 6.150% due 01/15/12(b) 4,954,500 4,717,226 Wachovia Bank Commercial Mortgage Trust 5.358% due 10/15/13(b) 5,189,000 4,603,211 J.P. Morgan Chase Commercial Mortgage Securities Corp. 0.272% due 01/12/37(b) 116,942,377(d) 4,525,963 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.626% due 12/12/11(b) 4,469,750 4,001,474 Commercial Mortgage Pass-Through Certificates 4.049% due 12/15/09 4,000,000 3,941,496 Wachovia Bank Commercial Mortgage Trust 0.334% due 11/15/34(b) 89,585,491(d) 3,873,354 LB UBS Commercial Mortgage Trust 6.270% due 10/15/10 3,672,928 3,855,215 DLJ Commercial Mortgage Corp. 6.410% due 11/15/17(b) 12,500,000 3,795,410 Commercial Mortgage Acceptance Corp. 7.260% due 06/15/10 3,369,000 3,721,431 Mortgage Capital Funding, Inc. 7.060% due 02/18/08(b) 3,250,000 3,409,707 Merrill Lynch Mortgage Trust 5.421% due 05/12/14(b) 3,675,000 3,247,064 Bear Stearns Commercial Mortgage Securities, Inc. 6.000% due 09/11/12(b) 3,099,999 2,909,882 GS Mortgage Securities Corp. II 6.213% due 02/14/16(b) 2,679,892 2,816,608 CS First Boston Mortgage Securities Corp. 6.103% due 09/15/10 2,644,570 2,770,109 CS First Boston Mortgage Securities Corp. 4.783% due 08/15/14(b) 3,198,000 2,678,575 Wachovia Bank Commercial Mortgage Trust 4.260% due 04/15/09 2,500,000 2,487,533 Merrill Lynch Mortgage Trust 5.019% due 09/12/42 3,107,000 2,474,798 Wachovia Bank Commercial Mortgage Trust 5.382% due 06/15/15(b) 2,827,000 2,443,478 CS First Boston Mortgage Securities Corp. 6.000% due 07/15/17(b)(c) 15,675,612 2,330,523 GS Mortgage Securities Corp. II 6.771% due 05/03/11(b) 2,000,000 2,230,920 DLJ Commercial Mortgage Corp. 7.600% due 01/15/13(b) 2,100,000 2,121,246 Chase Commercial Mortgage Securities Corp. 7.480% due 02/14/11(b) 2,000,000 2,071,484 CS First Boston Mortgage Securities Corp. 2.150% due 12/15/35 2,350,000 2,046,244 Banc of America Commercial Mortgage, Inc. 4.772% due 07/11/11 2,000,000 2,024,800 Bear Stearns Commercial Mortgage Securities, Inc. 5.817% due 05/14/09(b) 2,000,000 2,009,240 GMAC Commercial Mortgage Securities, Inc. 4.576% due 05/10/13 1,918,559 1,929,226 Merrill Lynch Mortgage Trust 5.595% due 09/12/42 2,000,000 1,929,219 CS First Boston Mortgage Securities Corp. 4.231% due 05/15/13(b) 2,000,000 1,648,047 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.056% due 12/12/22(b)(c) 16,770,351 1,562,395 CS First Boston Mortgage Securities Corp. 6.000% due 07/15/12(b)(c) 4,478,000 1,527,068 Bear Stearns Commercial Mortgage Securities, Inc. 4.361% due 04/11/10 1,514,239 1,516,055 First Union National Bank Commercial Mortgage Corp. 6.155% due 08/15/11(b) 1,480,000 1,400,450 J.P. Morgan Chase Commercial Mortgage Securities Corp. 5.056% due 01/12/13(b)(c) 4,658,000 1,382,298 J.P. Morgan Chase Commercial Mortgage Securities Corp. 4.275% due 07/12/12 1,347,165 1,339,978 Chase Commercial Mortgage Securities Corp. 7.370% due 10/19/11(b) 1,250,000 1,259,326 GE Capital Commercial Mortgage Corp. 0.256% due 11/10/14(b) 40,008,379(d) 1,122,111 CS First Boston Mortgage Securities Corp. 5.226% due 11/15/14(b) 1,307,000 1,105,487 CS First Boston Mortgage Securities Corp. 0.227% due 11/10/14(b) 26,124,917(d) 1,074,745 GE Capital Commercial Mortgage Corp. 0.044% due 07/10/39(b) 107,133,780(d) 1,073,202 CS First Boston Mortgage Securities Corp. 4.050% due 12/15/06(b) 1,000,000 1,001,590 CS First Boston Mortgage Securities Corp. 5.340% due 11/15/06(b) 1,000,000 1,000,850 DR Structured Finance Corp. 9.350% due 08/15/19 950,070 969,071 J.P. Morgan Chase Commercial Mortgage Securities Corp. 4.128% due 10/12/10 850,000 838,630 J.P. Morgan Chase Commercial Mortgage Securities Corp. 0.260% due 06/12/24(b) 61,993,105(d) 747,066 ------------ Total Commercial Mortgage-Backed Securities (Cost $303,667,160) 311,469,484 ------------
See Notes to Financial Statements. 10 CLARION VALUE FUND MASTER, LLC PORTFOLIO OF INVESTMENTS (Continued) April 30, 2005 (unaudited)
Principal Amount Value (a) ----------- ------------- CORPORATE BONDS (10.33%) Senior Housing Properties Trust 7.875% due 04/15/15 $ 3,740,000 $ 3,917,650 K. Hovnanian Enterprises, Inc. 7.750% due 05/15/13 3,410,000 3,469,675 Standard-Pacific Corp. 9.250% due 04/15/12 3,100,000 3,410,000 WCI Communities, Inc. 9.125% due 05/01/12 3,000,000 3,120,000 La Quinta Inns 7.330% due 04/01/08, MTN 2,345,000 2,398,583 William Carter Co., Series B 10.875% due 08/15/11 1,928,000 2,120,800 Vicar Operating, Inc. 9.875% due 12/01/09 1,850,000 1,998,000 K. Hovnanian Enterprises, Inc. 6.000% due 01/15/10 1,900,000 1,843,000 Leslie's Poolmart 7.750% due 02/01/13(b) 1,845,000 1,817,325 Standard-Pacific Corp. 5.125% due 04/01/09 1,800,000 1,714,500 O'Charleys, Inc. 9.000% due 11/01/13 1,500,000 1,593,750 WCI Communities, Inc. 10.625% due 02/15/11 1,390,000 1,473,400 Jo-Ann Stores, Inc. 7.500% due 03/01/12 1,450,000 1,450,000 Delhaize America, Inc. 8.050% due 04/15/27 1,000,000 1,092,500 La Quinta Properties, Inc. 8.875% due 03/15/11 1,000,000 1,076,250 La Quinta Properties, Inc. 7.000% due 08/15/12 1,000,000 1,017,500 Jean Coutu Group, Inc. 8.500% due 08/01/14 1,000,000 942,500 Forest City Enterprises, Inc. 7.625% due 06/01/15 750,000 791,250 Highwoods Properties, Inc. 7.000% due 12/01/06 555,000 573,081 La Quinta Corp. 7.300% due 01/16/06, MTN 500,000 504,455 Jean Coutu Group, Inc. 7.625% due 08/01/12 500,000 495,000 Petro Stopping Centers LP 9.000% due 02/15/12 500,000 491,250 Stater Brothers Holdings 8.125% due 06/15/12 500,000 465,000 ------------- Total Corporate Bonds (Cost $38,793,772) 37,775,469 ------------- UNITED STATES GOVERNMENT AGENCIES & OBLIGATIONS (3.38%) Government National Mortgage Association 5.944% due 01/16/47 3,262,864 3,544,414 Government National Mortgage Association 5.105% due 01/16/45 2,212,580 2,086,134 Government National Mortgage Association 5.473% due 09/16/44 1,990,678 2,027,069 Government National Mortgage Association 5.481% due 03/16/46 1,628,333 1,631,959 Government National Mortgage Association 5.108% due 11/16/45 1,633,320 1,485,108 Government National Mortgage Association 5.559% due 03/16/44 1,057,020 1,082,125 Government National Mortgage Association 5.314% due 01/16/44 531,909 519,277 ------------- Total United States Government Agencies & Obligations (Cost $11,397,903) 12,376,086 ------------- TOTAL SECURITIES (98.9%) (Cost $353,858,835)(e) 361,621,039 ------------- OTHER ASSETS, NET OF LIABILITIES (1.1%) 4,008,143 ------------- NET ASSETS (100.00%) $ 365,629,182 =============
MTN - Medium Term Note. (a) See Note B to Financial Statements. (b) 144A Securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The value of these securities at April 30, 2005 was $246,806,778 or 67.5% of net assets. See Note B4. (c) Security is deemed illiquid at April 30, 2005 and has been fair valued. (d) Represents notional amount of interest-only security. (e) The cost for federal income tax purposes was $353,858,835. At April 30, 2005 net unrealized appreciation for all securities based on tax cost was $7,762,204. This consisted of aggregate gross unrealized appreciation for all securities (swaps excluded) of $19,041,713 and aggregate gross unrealized depreciation for all securities of $11,279,509. See Notes to Financial Statements. 11 CLARION VALUE FUND MASTER, LLC PORTFOLIO OF INVESTMENTS (Continued) April 30, 2005 (unaudited) Swap agreements outstanding at April 30, 2005:
Notional Unrealized Appreciation/ Type Amount Upfront Payment* Depreciation - -------------------------------------------------------------------------------------------------------------------- Pay a fixed rate equal to 4.915% and receive floating rate based on 3 Month USD-LIBOR Broker: Deutche Bank 10,000,000 $ - $ (243,449) Effective date 3/17/05, Exp. 3/17/15 ---------------- ------------------------ Total $ - $ (243,449) ================ ========================
See Notes to Financial Statements. 12 CLARION VALUE FUND MASTER, LLC STATEMENT OF ASSETS AND LIABILITIES April 30, 2005 (unaudited) Assets Investments, at Value (Cost $353,858,835) $ 361,621,039 Cash 186,223 Receivable for Securities Sold 10,894,516 Interest Receivable 2,595,241 Receivable for Shares Issued 1,500,000 Other Assets 100,744 ------------- Total Assets 376,897,763 ------------- Liabilities Payable for Securities Purchased 5,338,653 Payable for Shares Redeemed 5,000,000 Cash Distribution Payable 544,522 Unrealized Depreciation on Swap Agreements 265,646 Accrued Expenses 119,760 ------------- Total Liabilities 11,268,581 ------------- Net Assets $ 365,629,182 ============= See Notes to Financial Statements. 13 CLARION VALUE FUND MASTER, LLC STATEMENT OF OPERATIONS For the Six Months Ended April 30, 2005 (unaudited) Investment Income Interest $ 13,956,608 ------------ Expenses Administrative Fees - Note D 71,111 Audit Fees 40,068 Legal Fees 21,332 Custodian Fees - Note D 16,084 Insurance Fees 12,544 Directors' Fees 7,555 Other 2,805 ------------ Total Expenses 171,499 ------------ Net Investment Income 13,785,109 ------------ Realized and Unrealized Loss on Investments: Net Realized Loss on Investments (207,792) ------------ Net Change in Unrealized Depreciation on: Swaps (265,646) ------------ Investments (944,435) ------------ Net Change in Unrealized Depreciation on Investments and Swaps (1,210,081) ------------ Net Loss on Investments (1,417,873) ------------ Net Increase in Net Assets Resulting from Operations $ 12,367,236 ============ See Notes to Financial Statements. 14 CLARION VALUE FUND MASTER, LLC STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 2005 Year Ended (unaudited) October 31, 2004 --------------- ---------------- Increase (Decrease) in Net Assets Resulting from Operations: Net Investment Income $ 13,785,109 $ 33,098,096 Net Realized Gain (Loss) on Investments (207,792) 11,002,601 Net Change in Unrealized Appreciation (Depreciation) on Investments and Swaps (1,210,081) 11,698,262 --------------- ---------------- Net Increase in Net Assets Resulting from Operations 12,367,236 55,798,959 --------------- ---------------- Contributions/Withdrawals: Contributions 44,508,990 91,092,968 Withdrawals (30,833,781) (148,543,279) --------------- ---------------- Net Withdrawals 13,675,209 (57,450,311) --------------- ---------------- Total Increase (Decrease) in Net Assets 26,042,445 (1,651,352) --------------- ---------------- Net Assets: Beginning of Period 339,586,737 341,238,089 --------------- ---------------- End of Period $ 365,629,182 $ 339,586,737 =============== ================
See Notes to Financial Statements. 15 CLARION VALUE FUND MASTER, LLC STATEMENT OF CASH FLOWS For the Six Months Ended April 30, 2005 (unaudited) Cash Flows from Operating Activities: Net Increase in Net Assets Resulting from Operations $ 12,367,236 Adjustments to Reconcile Net Increase in Net Assets Resulting from Operations to Net Cash Used in Operating Activities: Cost of Securities Purchased (115,247,567) Proceeds from Sale of Securities 90,329,314 Net Amortization of Premium and Accretion of Discount (1,915,864) Increase in Receivable for Securities Sold (7,336,265) Increase in Receivable for Shares Issued (1,500,000) Increase in Interest Receivable (307,535) Increase in Other Assets (88,199) Increase in Payable for Securities Purchased 3,184,866 Increase in Payable for Shares Redeemed 5,000,000 Increase in Cash Distribution Payable 544,522 Decrease in Accrued Expenses (38,899) Net Paydown Loss on Securities 284,759 Net Change in Unrealized Depreciation on Investments 944,435 Net Change in Unrealized Depreciation on Swaps 265,646 Net Realized Loss on Investments 207,792 ---------------- Net Cash Used in Operating Activities (13,305,759) ---------------- Cash Flows from Financing Activities: Contributions 44,508,990 Withdrawals (30,833,781) Net Decrease in Due to Custodian (183,227) ---------------- Net Cash Provided by Financing Activities 13,491,982 ---------------- Net Increase in Cash - Cash at Beginning of Period - ---------------- Cash at End of Period $ 186,223 ================
See Notes to Financial Statements. 16 CLARION VALUE FUND MASTER, LLC FINANCIAL HIGHLIGHTS
For the Six Months Ended April 30, 2005 Year Ended Year Ended Period Ended (unaudited) October 31, 2004 October 31, 2003 October 31, 2002(1) -------------- ---------------- ---------------- ------------------- Total Investment Return Net Asset Value (2) 3.60%(3) 15.67% 6.65% 5.32%(3) ------- ------------- ------------- ------- Ratios and Supplemental Data Net Assets, End of Period (Thousands) 365,629 $ 339,587 $ 341,238 359,981 Ratio of Expenses to Average Net Assets 0.10%(4) 0.09% 0.11% 0.25%(4) Ratio of Net Investment Income to Average Net Assets 7.97%(4) 8.71% 8.97% 7.69%(4) Portfolio Turnover Rate 26%(3) 87% 57% 25%(3) ------- ------------- ------------- -------
(1) Commencement of investment operations was August 1, 2002. (2) Total investment return is based on net increase in net assets resulting from operations and reflects the effects of changes in the Fund's net assets adjusted for contributions and withdrawals on the performance of the Fund during the period. (3) Not annualized. (4) Annualized. See Notes to Financial Statements. 17 CLARION VALUE FUND MASTER, LLC NOTES TO FINANCIAL STATEMENTS April 30, 2005 (unaudited) A. Organization. Clarion Value Fund Master, LLC (the "Master Fund") was formed on June 20, 2002 and is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The primary objective of the Master Fund is to provide high current income by investing primarily in commercial mortgage-backed securities. The Master Fund operates under a "Master/Feeder Fund" structure and, accordingly, certain of its investors are other investment funds (referred to as "feeder funds") investing all or a substantial portion of their assets in the Master Fund. For federal income tax purposes the Master Fund is treated as a partnership, and each investor in the Master Fund is treated as the owner of its proportionate share of the net assets, income, expenses, and realized and unrealized gains and losses of the Master Fund. Accordingly, as a "pass-through" entity, the Master Fund pays no income dividends or capital gain distributions. The Master Fund commenced operations August 1, 2002 upon the in-kind contribution by Clarion Value Fund, Inc. of its net assets of $250,797,492, including unrealized appreciation of $3,729,030. B. Summary of Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles. Such policies are consistently followed by the Master Fund in the preparation of its financial statements. U.S. generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates. 1. Security Valuation: Fixed income securities' valuations are based on information from one or more of the following sources: quotations from dealers, third party pricing services, market transactions in comparable securities and various relationships between security values and yield to maturity. The value of securities for which market quotations are not readily available are determined in good faith at fair value using methods approved by the Board of Directors. These prices may differ from the value that would have been used had a broader market for the securities existed and the differences could be material to the financial statements. Short-term investments that have remaining maturities of sixty days or less at time of purchase are valued at amortized cost, if it approximates market value. 2. Federal Income Taxes: The Master Fund is treated as a partnership for federal income tax purposes. As such, each investor in the Master Fund is subject to taxation on its share of the Master Fund's ordinary income and capital gains. The Master Fund's assets will be managed so an investor in the Master Fund can satisfy the requirements of Subchapter M of the Internal Revenue Code. 3. Repurchase Agreements: In connection with transactions involving repurchase agreements, the Master Fund's custodian takes possession of the underlying securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is monitored on a daily basis to determine the adequacy of the collateral. In the event of default on the obligation to repurchase, the Master Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. 4. Restricted Securities: The Master Fund is permitted to invest in privately placed restricted securities. These securities may be resold in transactions exempt from registration. Disposal of these securities may involve time consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. 18 CLARION VALUE FUND MASTER, LLC NOTES TO FINANCIAL STATEMENTS (Continued) April 30, 2005 (unaudited) B. Summary of Significant Accounting Policies (continued): 5. Other: Security transactions are accounted for on the trade date, the date the trade was executed. Costs used in determining realized gains and losses on the sale of investment securities are based on the specific identification method. Interest income, adjusted for amortization of premium and accretion of discount, is recognized on an accrual basis. C. Advisory Services: ING Clarion Capital, LLC (the "Adviser") is the investment adviser for the Master Fund. The Adviser receives no asset-based fees from the Master Fund in connection with its services under the Advisory Agreement, but may receive reimbursements for out-of-pocket due diligence and other expenses incurred in managing the Master Fund's investments. Management fees are, however, charged at the feeder funds' level. D. Administration and Custodian Services: The Bank of New York serves as the Master Fund Administrator and Custodian pursuant to separate administration and accounting and custody agreements. E. Purchases and Sales: For the six months ended April 30, 2005 the Master Fund made purchases of $84,952,606 and sales of $51,853,606 of investment securities other than long-term U.S. Government and short-term securities. There were purchases of $30,157,664 and sales of $38,475,708 of long-term U.S. Government securities during the year. F. Indemnifications: In the normal course of business, the Master Fund enters into contracts that contain a variety of indemnifications. The Master Fund's maximum exposure under these arrangements is unknown. The Master Fund does not anticipate recognizing any loss relating to these arrangements. G. Other: At April 30, 2005, Clarion Value Fund, Inc. and Clarion Fund PLC are the only investors invested in the Master Fund, and own 89.6% and 10.4% of the net assets of the Master Fund, respectively. 19 Item 2. Code of Ethics. Not applicable for a semi-annual reporting period. Item 3. Audit Committee Financial Expert. Not applicable for a semi-annual reporting period. Item 4. Principal Accountant Fees and Services. Not applicable for a semi-annual reporting period. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. The Schedule of Investments is included as part of Item 1. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable. Item 10. Controls and Procedures. (a) The President and Treasurer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing date of this report and have concluded that these controls and procedures are effective. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Item 11. Exhibits. (a) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Investment Company Act (17 CFR 270.30a-2) in the exact form set forth below: Attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Clarion Value Fund, Inc. By: /s/ Daniel Heflin ------------------------- Name: Daniel Heflin Title: President and Chief Executive Officer Date: July 8, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Daniel Heflin ------------------------- Name: Daniel Heflin Title: President and Chief Executive Officer Date: July 8, 2005 By: /s/ Yuriy Zubatyy ------------------------- Name: Yuriy Zubatyy Title: Chief Financial Officer Date: July 8, 2005 EX-99.CERT 2 dex99cert.txt CERTIFICATIONS PURSUANT TO SECTION 302 EXHIBIT (a) Rule 30a-2(a) CERTIFICATIONS I, Daniel Heflin, certify that: 1. I have reviewed this report on Form N-CSR of Clarion Value Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: July 8, 2005 /s/ Daniel Heflin ---------------------------- Daniel Heflin, President and Chief Executive Officer Rule 30a-2(a) CERTIFICATIONS I, Yuriy Zubatyy, certify that: 1. I have reviewed this report on Form N-CSR of Clarion Value Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: July 8, 2005 /s/ Yuriy Zubatyy ------------------------- Yuriy Zubatyy, Chief Financial Officer EX-99.906CERT 3 dex99906cert.txt CERTIFCATION PURSUANT TO SECTION 906 EXHIBIT (b) Rule 30a-2(b) CERTIFICATIONS Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Clarion Value Fund, Inc. (the Registrant), do hereby certify, to such officer's knowledge, that: (1) The Clarion Value Fund, Inc. on Form N-CSR of the Registrant for the period ended April 30, 2005 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: July 8, 2005 /s/ Daniel Heflin ------------------------- Name: Daniel Heflin Title: President and Chief Executive Officer Dated: July 8, 2005 /s/ Yuriy Zubatyy ------------------------- Name: Yuriy Zubatyy Title: Chief Financial Officer This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----