BEXIL
CORPORATION
--------------------------------------------------------------------------------
ANNUAL REPORT
December 31, 2000
Independent Auditors American Stock
Tait, Weller & Baker Exchange Symbol:
BXL
11 Hanover Square
New York, NY 10005
1-888-847-4200
www.bexil.com
BEXIL CORPORATION American Stock BXL
Exchange Symbol:
================================================================================
11 Hanover Square, New York, NY 10005
www.bexil.com
January 18, 2001
Fellow Shareholders:
We are pleased to submit this Annual Report for the year 2000 and to
welcome our new shareholders who have made their investment since our last
Report. It is noteworthy that the Fund's investment manager, CEF Advisers, Inc.
and its affiliates now own in the aggregate approximately 23% of the Fund's
outstanding shares. The Fund's investment objective has been to provide
stockholders with an attractive rate of total return from capital appreciation
and income. In seeking this objective, the Fund invests at least 50% of the
value of its total assets in U.S. Government Securities, obligations of U.S.
Government agencies or instrumentalities, and money market instruments, with the
remainder of its total assets invested primarily in equities and other
securities. The Fund may also use leverage. At its December 2000 meeting, the
Board of Directors eliminated non-fundamental restrictions on Fund transactions
in futures and options on futures.
Intention to Operate Businesses Directly
At the November 28, 2000 Annual Meeting, stockholders approved a
proposal to change the nature of the Fund's business so as to cease to be an
investment company; to amend the Fund's fundamental investment restriction
regarding concentration so that the Fund may invest more than 25% of the value
of its total assets in the securities of issuers in the technology,
manufacturing and/or services industries; and to make certain conforming
amendments to the Fund's Articles of Incorporation. Accordingly, the Fund now
intends to operate businesses directly or through companies in which the Fund
has a majority or other controlling interest and seek approval of the SEC for
deregistration as an investment company.
Review and Outlook
After raising its Federal Funds rate target by one percentage point to
6.50% over the first half of the year to slow down the economy, the Federal
Reserve Bank just recently reversed its policy and boldly lowered interest rates
by one half a percentage point to 6.00% in an attempt to stimulate the slowing
economy and avoid a recession. Five and ten year Treasury note yields fell from
6.19% and 6.28% at the beginning of 2000 to end the year at 5.17% and 5.24%,
respectively. This decline in rates was beneficial for prices and total return,
as reflected by the Lehman Brothers Government Bond and Mortgage Backed
Securities Indices which had total returns of 10.47% and 11.14%, respectively,
during this period. Stock markets suffered during 2000, however, as the Dow
Jones Industrial Average, Standard & Poor's 500 Index, and the Nasdaq Composite
Index declined by 6.18%, 10.14% and 39.00%, respectively. The Fund's strategy in
2000 was to invest in a balanced mix of U.S. Government and other securities.
The Fund's market total return for the year was a negative 4.00% on a net asset
value return of 1.57%.
In 2001, our focus will be on the economy and the extent to which
growth in the economy slows from the torrid pace set earlier in 2000, and what
effect this slowdown will have on the financial markets.
Confirming the slowdown, the economy grew at an annualized rate of 1.4% in the
fourth quarter of 2000, the lowest rate in over five years. Recent reports show
weakness in the manufacturing sector and dramatic declines in consumer
confidence. On a positive note, recent declines in interest rates and proposed
tax cuts in Washington could give the economy much needed stimulus. Already in
early 2001, the Federal Reserve Bank has acted decisively to cut the Federal
Funds target rate and the markets are anticipating further cuts in the near
term.
8% Dividend Distribution Policy Continued
The managed 8% dividend distribution policy adopted by the Fund's Board
of Directors in 1997 continues to be well received. The objective is to provide
shareholders with a relatively stable cash flow and reduce or eliminate any
market price discount to the Fund's net asset value per share. Payments are made
primarily from ordinary income and any capital gains, with the balance
representing return of capital. For the year ending December 2000, actual
distributions were 8.24% of average net assets with approximately 68.10% derived
from net investment income including capital gains and the balance from return
of capital. We believe shares of the Fund are a sound value and an appealing
investment for portfolios seeking total return.
Reinvestment Plan Attractive
Given the Fund's recent net asset value of $12.27 per share and a
recent closing price on the American Stock Exchange of $9.63 per share, we
believe there is currently an important opportunity to purchase shares at an
attractive discount from their underlying value. The Fund's Dividend
Reinvestment Plan is a very effective way to add to your holding because
quarterly dividend distributions are reinvested without charge at the lower of
net asset value per share or market price, which can contribute importantly to
growing your investment over time. Please call 1-888-847-4200, and an Investor
Service Representative will be happy to assist you.
We appreciate your support and look forward to continuing to serve your
investment needs.
Sincerely,
/s/ Thomas B. Winmill /s/ Marion E. Morris
Thomas B. Winmill Marion E. Morris Senior Vice
President President Portfolio Manager
2
BEXIL CORPORATION
Schedule of Portfolio Investments - December 31, 2000
Par Value Market Value
--------- ------------
U.S. Government Obligations (67.47%)
$ 500,000 U.S. Treasury Note, 4.75%, due 2/15/04 .................... $ 494,353
5,500,000 U.S. Treasury Note, 6.50%, due 2/15/10 .................... 6,021,207
----------
Total U.S. Government Obligations (cost: $6,148,183) .... 6,515,560
----------
U.S. Government Agencies (25.75%)
420,378 Government National Mortgage Assn., 6.50%, due 7/15/08 .... 422,554
998,055 Government National Mortgage Assn., 7.00%, due 11/15/10 ... 1,014,450
365,270 Government National Mortgage Assn., 7.00%, due 6/15/23 .... 366,933
85,396 Government National Mortgage Assn., 7.00%, due 5/15/24 .... 85,784
590,867 Government National Mortgage Assn., 7.25%, due 1/15/27 .... 597,157
----------
Total U.S. Government Agencies (cost: $2,418,937) ....... 2,486,878
----------
Shares Common Stocks (6.78%)
------ Investment Advice (3.98%)
5,100 Alliance Capital Management Holding L.P. .................. 258,187
3,200 Stilwell Financial, Inc ................................... 126,200
----------
384,387
----------
Petroleum Refining (1.44%)
Exxon Mobil Corp. ......................................... 139,100
----------
1,600 Real Estate Investment Trusts (1.36%)
Mills Corp ................................................ 130,844
----------
7,900 Total Common Stocks (cost: $650,608) .................... 654,331
----------
Total Investments (cost: $9,217,728) (100.0%) ......... $9,656,769
==========
See accompanying notes to financial statements
3
BEXIL CORPORATION
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2000
ASSETS:
Investments at market value
(cost: $9,217,728) (note 1) ........................... $ 9,656,769
Interest receivable ..................................... 158,302
------------
Other assets ............................................... 25,705
------------
Total assets .......................................... 9,840,776
------------
LIABILITIES:
Demand note payable (note 5) ............................ 22,448
Accrued expense ......................................... 23,405
Accrued management fees ................................. 5,763
Other liabilities ....................................... 233
------------
Total liabilities .................................. 51,849
------------
NET ASSETS: (applicable to 806,411
shares outstanding : 250,000,000 shares
of $.01 par value authorized) ........................... $ 9,788,927
============
NET ASSET VALUE PER SHARE:
($9,788,927 / 806,411 shares outstanding) ............... $ 12.14
============
At December 31, 2000, net assets consisted of:
Paid-in capital ......................................... $ 10,504,717
Accumulated net realized loss
on investments ........................................ (1,154,831)
Net unrealized appreciation on investments............... 439,041
------------
$ 9,788,927
============
STATEMENT OF OPERATIONS
Year Ended December 31, 2000
INVESTMENT INCOME:
Interest .................................................... $ 583,093
Dividends (net of foreign taxes of $532) .................... 15,685
Other Income-reimbursements (note 7) ........................ 98,590
---------
Total investment income ................................... 697,368
---------
EXPENSES:
Investment management (note 3) .............................. 66,765
Interest (note 5) ........................................... 35,713
Professional (note 3) ....................................... 33,464
Directors ................................................... 22,360
Custodian ................................................... 21,541
Printing .................................................... 20,174
Transfer agent .............................................. 10,734
Registration (note 3) ....................................... 9,276
Other ....................................................... 2,477
---------
Total expenses ............................................ 222,504
---------
Net investment income ..................................... 474,864
---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ........................... 60,534
Unrealized depreciation of investments
during this period ........................................ (28,214)
---------
Net realized and unrealized loss on
investment .................................... 32,320
---------
Net decrease in net assets resulting
from operations ............................... $ 507,184
=========
See accompanying notes to financial statements.
4
BEXIL CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 2000, Six Months
Ended December 31, 1999 and Year Ended June 30, 1999
Year Six Months Year
Ended Ended Ended
December 31, December 31, June 30,
2000 1999 1999
-------------- -------------- ------------
OPERATIONS:
Net investment income ......................................... $ 474,864 $ 139,519 $ 53,037
Net realized gain (loss) from security transactions ........... 60,534 (314,553) (108,195)
Unrealized appreciation (depreciation) of investments during
the period .................................................... (28,214) 513,382 (251,586)
------------ ------------ ------------
Net change in net assets resulting from operations .......... 507,184 338,348 (306,744)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.60,$0.18 and $0.07
per share, respectively) .................................... (474,864) (139,519) (53,037)
Distribution in excess of realized gains ($0.08 per share) .... (60,534) -- --
Distributions from paid in capital ($0.32, $0.42, and $1.13
per share, respectively) .................................... (250,501) (318,852) (850,487)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from reinvestment of
distributions (32,219, 12,239, and 14,718 shares, respectively)
(note 6) ...................................................... 296,271 117,165 190,372
------------ ------------ ------------
Total change in net assets ............................... 17,556 (2,858) (1,019,896)
NET ASSETS:
Beginning of year ............................................. 9,771,371 9,774,229 10,794,125
End of year ................................................... $ 9,788,927 $ 9,771,371 $ 9,774,229
============ ============ ============
See accompanying notes to financial statements.
5
Notes to Financial Statements
(1) Bexil Corporation (the "Fund"), a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as a non-diversified closed-end
management investment company (see Note 8 below). The Fund's shares are listed
on the American Stock Exchange. The Fund's investment objective is to provide
stockholders with an attractive rate of total return from capital appreciation
and income. To seek this objective, the Fund's investment policy is to invest at
least 50% of the value of its total assets in U.S. Government Securities,
obligations of other U.S. Government agencies or instrumentalities, and money
market instruments, and the remainder of its total assets primarily in equity
and other securities of selected growth companies and in companies that invest
or deal in natural resources or commodities. The Fund also may use leverage and
futures transactions. The investment objective and policy are non-fundamental
and subject to change by the Board of Directors without shareholder approval. On
September 8, 1999, the Board of Director's of the Fund approved a change in the
fiscal year end to December 31. Previously, the fiscal year end was June 30. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. With respect to
security valuation, securities listed or traded on a national securities
exchange or the Nasdaq National Market System ("NMS") are valued at the last
quoted sales price on the day the valuations are made. Such listed securities
that are not traded on a particular day and securities traded in the
over-the-counter market that are not on the NMS are valued at the mean between
the current bid and asked prices. Securities for which quotations from the
national securities exchange or the NMS are not readily available or reliable
and other assets may be valued based on over-the-counter quotations or at fair
value as determined in good faith by or under the direction of the Board of
Directors. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of discounts.
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis. In
preparing financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At December 31, 2000, the
Fund had an unused capital loss carryforward of approximately $1,154,800, of
which $361,000 expires in 2003, $202,000 in 2004, $229,800 in 2005, $230,400 in
2007 and $131,600 in 2008. Based on Federal income tax cost of $9,217,728, gross
unrealized appreciation and gross unrealized depreciation were $457,702 and
$18,661, respectively, at December 31, 2000.
(3) The Fund retains CEF Advisers, Inc. as its Investment Manager pursuant to an
Investment Management Agreement. As compensation for the service provided
pursuant to such agreement, the Fund pays to the Investment Manager a fee from
its assets, such fee to be computed weekly and paid monthly in arrears at the
annual rate of 7/10 of 1% of the first $250 million, 5/8 of 1% from $250 million
to
6
$500 million, and 1/2 of 1% over $500 million. This fee is calculated by
determining net assets on each Friday and applying the applicable rate to such
amount for the number of days in the week. The Investment Manager has agreed to
waive all or part of its fee or reimburse the Fund monthly if and to the extent
the aggregate operating expenses of the Fund exceed the most restrictive limit
imposed by any state in which shares of the Fund are qualified for sale,
although currently the Fund is not subject to any such limits. Certain officers
and directors of the Fund are officers and directors of the Investment Manager.
The Fund reimbursed the Investment Manager $6,693 for providing certain
administrative and accounting services at cost for the year ended December 31,
2000.
(4) Purchases and proceeds of sales of investment securities other than short
term investments aggregated $17,692,502 and $18,483,589, respectively, for the
year ended December 31, 2000.
(5) The Fund has a committed bank line of credit. At December 31, 2000, there
was a balance outstanding of $22,448 and the interest rate was equal to the
Federal Reserve Funds Rate plus 1.00 percentage point. For the year ended
December 31, 2000, the weighted average interest rate was 5.51% based on the
balances outstanding from the line of credit and the reverse repurchase
agreement during the year and the weighted average amount outstanding was
$648,727. The maximum amount of debt outstanding during the period was
$1,024,618. The Fund participates in repurchase agreements with the Fund's
custodian. The custodian takes possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is
marked-to-market daily to ensure that its value, including accrued interest, is
at least equal to the repurchase price. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, realization and/or retention of the collateral may be subject to
legal proceedings.
(6) The Fund has adopted a Dividend Reinvestment Plan (the "Plan"). Under the
Plan, each dividend and capital gain distribution, if any, declared by the Fund
on outstanding shares will, unless elected otherwise by each shareholder by
notifying the Fund in writing at any time prior to the record date for a
particular dividend or distribution, be paid on the payment date fixed by the
Board of Directors or a committee thereof in additional shares. If the Market
Price (as defined below) per share is equal to or exceeds the net asset value
per share at the time shares are valued for the purpose of determining the
number of shares equivalent to the cash dividend or capital gain distribution on
the Valuation Date, participants will be issued additional shares equal to the
amount of such dividend divided by the Fund's net asset value per share. If the
Market Price per share is less than such net asset value on the Valuation Date,
participants will be issued additional shares equal to the amount of such
dividend divided by the Market Price. The Valuation Date is the dividend or
distribution payment date or, if that date is not an American Stock Exchange
trading day, the next trading day. For all purposes of the Plan: (a) the Market
Price of the shares on a particular date shall be the average closing market
price on the five trading days the shares traded ex-dividend on the Exchange
prior to such date or, if no sale occurred on any of these days, then the mean
between the closing bid and asked quotations for the shares on the Exchange on
such day, and (b) net asset value per share on a particular date shall be as
determined by or on behalf of the Fund.
(7) A group called Karpus Investment Management ("KIM") at the 1997 annual
meeting of the Fund sought to elect its slate of nominees in opposition to
management and at the 1998 annual meeting of the Fund made a
counter-solicitation on all management proposals and a solicitation to terminate
the investment management agreement. On February 19, 1998, KIM filed a lawsuit
against the Fund in the Circuit Court
7
for Baltimore City, Maryland, Case No. 9805005, which was dismissed with
prejudice on October 1, 1998. On February 19, 1998, the Fund filed a lawsuit
against KIM in the United States District Court for the Southern District of New
York, 98 Civ. 1190. On December 22, 1998, KIM filed a lawsuit against the Fund
in the United States District Court for the District of Maryland Court,
98-CV-4161 and the Fund made coun-terclaims. On May 25, 1999, the Fund and KIM
announced that they had entered into a settlement of all litigation in the
United States District Court for the Southern District of New York and in the
United States District Court for the District of Maryland. In connection with
the settlement, KIM sold its 12.7% stake in the Fund of 95,175 shares to an
affiliate of the Investment Manager for $12.875 per share in July and August
1999. The Fund received an insurance settlement of $98,590 during the year ended
December 31, 2000 for legal expenses incurred previously.
(8) At the November 28, 2000 Annual Meeting, stockholders approved a proposal to
change the nature of the Company's business so as to cease to be an investment
company, to amend the Company's fundamental investment restriction regarding
concentration so that the Company may invest more than 25% of the value of its
total assets in the securities of issuers in the technology, manufacturing
and/or services industries, and to make certain amendments to the Company's
Articles of Incorporation. Accordingly, the Company now intends to operate
businesses directly or through companies in which the Company has a majority or
other controlling interest and to seek approval of the SEC for deregistration as
an investment company. Company management currently anticipates conducting a
business review, development, and acquisition program for operating businesses,
which may include privately owned companies and startups, to be undertaken
directly or through companies in which the Company has a majority or other
controlling interest.
8
BEXIL CORPORATION
FINANCIAL HIGHLIGHTS
Year Six Months
Ended Ended Years Ended June 30,
December 31, December 31, -------------------------------------------------
2000 1999 1999 1998 1997 1996
--------- -------- --------- -------- -------- --------
PER SHARE DATA
Net asset value at beginning of year ........ $ 12.62 $ 12.83 $ 14.45 $ 14.74 $ 14.74 $ 15.20
--------- -------- --------- -------- -------- --------
Income from investment operations:
Net investment income .................... .60 .18 .07 .25 .70 .64
Net realized and unrealized gain (loss)
on investments .......................... (.08) .21 (.49) .55 .01 (.46)
--------- -------- --------- -------- -------- --------
Total from investment operations .... .52 .39 (.42) .80 .71 .18
Less distributions:
Distributions from net investment
income ............................... (.60) (.18) (.07) (.25) (.71) (.64)
Distributions in excess of net
realized gains ....................... (.08) - - (.42) - -
Distributions from paid in capital ..... (.32) (.42) (1.13) (.42) - -
--------- -------- --------- -------- -------- --------
Increase (decrease) in net asset
value ............................... (.48) (.21) (1.62) (.29) - (.46)
--------- -------- --------- -------- -------- --------
Net asset value at end of year ........... $ 12.14 $ 12.62 $ 12.83 $ 14.45 $ 14.74 $ 14.74
========= ======== ========= ======== ======== ========
Per share market value at end of year ....... $ 8.88 $ 9.50 $ 12.13 $ 13.13 $ 12.63
========= ======== ========= ======== ========
TOTAL RETURN ON NET ASSET VALUE BASIS ....... 1.57% 4.60% (2.64)% 6.43% 5.58% 1.18%
========= ======== ========= ======== ======== ========
TOTAL RETURN ON MARKET VALUE BASIS (a) ...... (4.00)% (16.68)% 1.26% 12.87% (9.57)%
========= ======== ========= ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted) ... $ 9,789 $ 9,771 $ 9,774 $ 10,794 $ 10,791 $ 13,035
========= ======== ========= ======== ======== ========
Ratio of expenses to average net
assets (b)(c)(d) .......................... 2.33% 3.05%* 6.33% 5.77% 2.13% 2.10%
========= ======== ========= ======== ======== ========
Ratio of net investment income to
average net assets ........................ 4.98% 2.87%* 0.49% 1.69% 4.48% 4.25%
========= ======== ========= ======== ======== ========
Portfolio turnover rate ..................... 182% 88% 112% 168% 246% 762%
========= ======== ========= ======== ======== ========
* Annualized.
(a) Effective October 4, 1996, the Fund converted from an open-end management
investment company to a closed-end management investment company. The Fund has
calculated total return based upon purchases and sales of shares of the Fund at
current market values and reinvestment of dividends and distributions at the
lower of the per share net asset value on the payment date or the average of the
closing market price for the five days preceding the payment date.
(b) The ratio for the six months ended December 31, 1999 and the years ended
June 30, 1999 and 1997 after custodian fee cred its were 3.05%*, 6.33% and
2.07%, respectively. Prior to July 1, 1996, there was no reduction of custodian
fees. There were no custodian fee credits for the year ended December 31, 2000
and for the year ended June 30, 1998.
(c) Ratio excluding interest expense was 1.96%, 2.86%*, 5.80%, 4.93% and 1.94%
for the year ended December 31, 2000, the six months ended December 31, 1999 and
the years ended June 30, 1999, 1998 and 1997, respectively.
(d) Ratio prior to reimbursement was 3.18%*, 7.03% and 5.82% for the six months
ended December 31, 1999 and the years ended June 30, 1999 and 1998,
respectively.
9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Bexil Corporation:
We have audited the accompanying statement of assets and liabilities of
Bexil Corporation, including the schedule of portfolio investments as of
December 31, 2000, and the related statement of operations for the year then
ended, the statement of changes in net assets for the year ended December 31,
2000 and the six months ended December 31, 1999 and the financial highlights for
the year ended December 31, 2000, the six months ended December 31, 1999 and the
years ended June 30, 1998, 1997 and 1996. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
and the financial highlights for the year ended June 30, 1999 was audited by
other auditors whose report, dated August 9, 1999 expressed an unqualified
opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2000, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bexil Corporation as of December 31, 2000, the results of its operations, the
changes in its net assets, and the financial highlights for the periods noted
above, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Certified Public Accountants
Philadelphia, Pennsylvania
January 12, 2001
10
BEXIL CORPORATION
=================
11 Hanover Square New York, NY
10005
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