BEXIL(R)
CORPORATION
================================================================================
..Insurance Services
ANNUAL REPORT
December 31, 2002
Independent Public Accountant American Stock
Tait, Weller & Baker Exchange Symbol:
BXL
11 Hanover Square
New York, NY 10005
Tel (212) 797-7625
www.bexil.com
[LETTER HEAD OF BEXIL CORPORATION]
February 20, 2003
Fellow Shareholders:
Bexil Corporation's operation at York Insurance Services Group, Inc. in
2002 enjoyed excellent results. York's audited results for 2002 show revenues of
approximately $40.3 million with net income of approximately $4.2 million. In
2000 and 2001, York's revenues were approximately $25.3 million in each year
with net income of approximately $2,015,000 in 2000 and $688,845 in 2001.
Since the 1930's, York's affiliates have served as both an independent
adjustment company and third party administrator providing claims, data, and
risk related services to insurers, insureds and intermediaries located
throughout the United States. More information about York may be found at its
web site http://www.yorkclaims.com/. Tom MacArthur, York's President, does a
remarkable job marketing York's excellent services and satisfying York's
customers. We expect that working with him to make the business grow further
will be a very fruitful undertaking.
Our goal over the year ahead will be to grow our insurance services
business. Bexil officers will be seeking to further expand York and develop
similar lines of business internally or through acquisition. Given industry
conditions, we think opportunities in these areas may arise that could be
rewarding to the Company and its shareholders. It should be noted that with the
York acquisition Bexil no longer qualifies to pass through to its shareholders
its net income, if any, free of corporate level tax.
The Company is pursuing the application it initially filed in 2002 with the
Securities and Exchange Commission to terminate its registration as an
investment company. While the SEC staff had advised the Company in the fall of
last year that it did not believe an order of de-registration was appropriate at
that time, the staff did agree to meet with representatives of the Company in
Washington, D.C. to discuss the application further. Based on that January 8,
2003 meeting and other correspondence we think the Company's request for an
order of de-registration has strong merit, although there can be no assurance
that its application will be successful.
As stated in our December 4, 2002 press release, the dividend distribution
for the quarter ending December 31, 2002 reflected the discontinuation of the
Company's managed 8% distribution policy. Under the discontinued policy,
payments had been made primarily from ordinary income and any capital gains,
with the balance from return of capital. Due to the Company's higher operating
expenses, for the twelve months ended December 31, 2002, actual distributions
were 100% from return of capital. This and other factors may result in the sharp
reduction or elimination of the dividend in 2003.
Sharing your optimism about the Company's potential, management and its
affiliates own approximately 24% of the Company's outstanding shares and may
seek to purchase additional shares from time to time over the years ahead.
Sincerely,
/s/ Bassett S. Winmill /s/ Thomas B. Winmill
Bassett S. Winmill Thomas B. Winmill
Executive Chairman President
This report contains forward-looking statements and similar expressions
that reflect Bexil's current expectations about its future performance, and
are subject to risks, uncertainties and other factors that could cause
Bexil's actual performance to differ materially from those expressed in, or
implied by, these forward-looking statements.
BEXIL CORPORATION
2
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Holdings at fair value
(cost: $9,029,616) (Note 1) ...................... $ 16,499,250
Interest receivable ............................... 49,963
Other assets ...................................... 1,100
------------
Total assets ................................. 16,550,313
============
LIABILITIES:
Deferred taxes (Note 7) .......................... 2,972,000
Accrued salary .................................... 451,365
Accrued expenses .................................. 132,338
Distributions payable ............................. 8,399
------------
Total liabilities ............................ 3,564,102
============
NET ASSETS: (applicable to 865,061 shares
outstanding:10,000,000 shares of $.01 par
value authorized) .................................. $ 12,986,211
============
NET ASSET VALUE PER SHARE ($12,986,211
/ 865,061 shares outstanding) ...................... $ 15.01
============
At December 31, 2002, net assets consisted
of:
Paid-in capital ................................... $ 9,244,608
Net unrealized appreciation on holdings ........... 7,469,635
Accumulated net realized loss on holdings ......... (104,522)
Accumulated deficit in net operating .............. (3,623,510)
income
------------
$ 12,986,211
============
STATEMENT OF OPERATIONS
Year Ended December 31, 2002
INCOME:
Interest .......................................... $ 257,141
Dividends ......................................... 9,533
------------
Total income ................................. 266,674
------------
EXPENSES:
Tax expense (Note 7) .............................. 2,988,00
Salary (Note 3) ................................... 665,317
Professional (Note 3) ............................. 86,865
Transfer agent .................................... 31,860
Directors ......................................... 30,866
Custodian ......................................... 18,086
Printing .......................................... 16,740
Registration (Note 3) ............................. 13,012
Other ............................................. 38,925
------------
Total operating expenses ..................... 3,889,671
Loan interest and fees (Note 5) .............. 513
------------
Total expenses ............................... 3,890,184
------------
Net operating loss ......................... (3,623,510)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
HOLDINGS:
Net realized gain on holdings .................... 429,658
Unrealized appreciation on holdings
during the period ............................... 7,071,972
------------
Net realized and unrealized gain on
holdings ..................................... 7,501,630
------------
Net increase in net assets resulting
from operations .............................. $ 3,878,120
============
See accompanying notes to financial statements.
BEXIL CORPORATION
3
STATEMENTS OF CHANGES IN NET ASSETS For the Years Ended December 31, 2002 and
2001
2002 2001
------------ -----------
OPERATIONS:
Net income (loss) ............................. $ (3,623,510) $ 212,262
Net realized gain from
security transactions ........................ 429,658 70,905
Unrealized appreciation
(depreciation) on holdings
during the period ............................ 7,071,972 (41,378)
------------ -----------
Net change in net assets
resulting from operations ................. 3,878,120 241,789
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to shareholders
($.35 per share) ............................. -- (283,167)
Tax return of capital to shareholders
($.87 and $.62 per share, respectively) ...... (737,240) (509,791)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from
reinvestment of distributions (28,260 and
30,390 shares, respectively) ................. 296,043 311,530
------------ -----------
Total change in net assets ................ 3,436,923 (239,639)
NET ASSETS:
Beginning of period ........................... 9,549,288 9,788,927
------------ -----------
End of period ................................. $ 12,986,211 $ 9,549,288
============ ===========
----------
SCHEDULE OF PORTFOLIO HOLDINGS - DECEMBER 31, 2002
PAR VALUE FAIR VALUE
---------- ------------
U.S. Government Obligations (28.40%)
$4,300,000 U.S. Treasury Note, 3.00%, due 2/29/04 ........ $ 4,387,010
250,000 U.S. Treasury Note, 6.50%, due 2/15/10 ........ 298,905
------------
Total U.S. Government Obligations (cost:
$4,534,141) ............................... 4,685,915
------------
SHARES Common Stocks (64.51%)
Services-Miscellaneous Business Services (64.51%)
100,000 Safety Intelligence Systems Corp./(1)/ /(2)/ .. 282,860
500 York Insurance Services Group, Inc./(1)//(2)/ . 10,360,000
------------
Total Common Stocks (cost: $3,325,000) ..... 10,642,860
------------
PAR VALUE
Short Term Investments (7.09%)
$1,170,475 Repurchase Agreement with State Street Bank
& Trust, 0.25%, due 1/02/03 (collateralized
by U.S. Treasury Notes) ...................... 1,170,475
------------
Total Short Term Investments (cost:
$1,170,475) ............................... 1,170,475
------------
Total Investments (cost:$9,029,616)
(100.00%) ................................. $ 16,499,250
============
/(1)/ Security is not publicly traded. Market value is determined in good
faith by or under the direction of the Board of Directors.
/(2)/ Non-income producing security.
BEXIL CORPORATION
See accompanying notes to financial statements.
4
NOTES TO FINANCIAL STATEMENTS
(1) Bexil Corporation (the "Company"), a Maryland corporation registered under
the Investment Company Act of 1940, as amended ("1940 Act"), is a
non-diversified, closed-end, management investment company. The Company has
filed an application with the SEC to de-register from the 1940 Act. The
Company's shares are listed on the American Stock Exchange. On September 8,
1999, the Board of Director's of the Company 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 Company 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 accounting principles generally accepted
in the United States of America, 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 Company did not comply with the requirements of the Internal Revenue
Code regarding asset diversification requirements applicable to regulated
investment companies during the year ended December 31, 2002. Thus, the Fund did
not qualify as a regulated investment company under subchapter M of the Internal
Revenue Code and is subject to income taxes. It is the intent of the Company to
continue to operate as such and not qualify as a regulated investment company.
The Fund accounts for income taxes by using the liability method, whereby
deferred tax assets and liabilities arise from the tax effect of temporary
differences between the financial statement and tax basis of assets and
liabilities, measured using presently enacted tax rates. For income tax
purposes, the Company had a net operating loss carryforward at December 31, 2002
of approximately $635,500 which is available to offset future net operating
income, if any, and which expires in 2017. In addition, the Company had an
unused capital loss carryforward of approximately $104,500 which expires in
2005. Based on Federal income tax cost of $9,029,616, gross unrealized
appreciation and gross unrealized depreciation were $7,511,775 and $42,140
respectively, at December 31, 2002.
(3) The Company retained CEF Advisers, Inc. ("CEF") as its investment manager
pursuant to an investment management agreement. As compensation for the service
provided pursuant to such agreement, the Company paid to CEF 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
$500 million, and 1/2 of 1% over $500 million. This fee was calculated by
determining net assets on each Friday and applying the applicable rate to such
amount for the number of days in the week. Certain officers and directors of the
Company are officers and directors of CEF. At a meeting of the Board of
Directors of the Company on June 13, 2001, the Board of Directors approved
terminating the investment management
BEXIL CORPORATION
5
agreement with CEF, effective at the end of business on July 31, 2001.
Commencing August 1, 2001, the Company's officers (who are substantially
identical to those of CEF) assumed the management of the Company's affairs,
including portfolio management, subject to the oversight and final direction of
the Board of Directors. Compensation of Company personnel was set in the
aggregate amount of $200,000 per year effective August 1, 2001, $365,000 per
year effective January 1, 2003, and may be further changed from time to time at
the discretion of the Board of Directors. In addition, bonuses of $412,500 were
accrued in 2002.
(4) Purchases and proceeds of sales of investment securities other than short
term investments aggregated $7,973,416 and $10,356,772, respectively, for the
year ended December 31, 2002.
(5) In January 2002, the Company terminated its committed bank line of credit.
The interest rate was equal to the Federal Reserve Funds Rate plus 1.00
percentage point. For the year ended December 31, 2002, the weighted average
interest rate was 2.56% based on the balances outstanding from the line of
credit during the period and the weighted average amount outstanding was
$15,840. The maximum amount of debt outstanding during the period was $808,084.
In connection with its acquisition of 50% of the common stock of York Insurance
Services Group, Inc., the Company provided a limited guaranty of up to $3
million to the lender of senior debt.
(6) The tax character of distributions paid to shareholders for the years ended
December 31, 2002 and 2001 was as follows:
2002 2001
--------- ---------
Distributions paid from:
Ordinary income $ -- $ 283,167
Return of capital 737,240 509,791
--------- ---------
$ 737,240 $ 792,958
========= =========
(7) The provision for income tax expense was as follows:
2002
------------
Current
Federal $ --
State and local 16,000
------------
$ 16000
============
Deferred
Federal 2,597,000
State and local 375,000
------------
2,972,000
------------
$ 2,988,000
============
Deferred tax liabilities (assets) are comprised of the following at December 31,
2002:
Unrealized appreciation
on holdings $ 3,312,000
Net operating and capital
loss carryforwards (340,000)
------------
Net deferred taxes $ 2,972,000
============
BEXIL CORPORATION
6
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED JUNE 30,
------------------------------------- ------------ ---------------------
2002 2001 2000 1999 1999 1998
--------- ---------- ---------- ------------ ---------- --------
PER SHARE DATA*
Net asset value at
beginning of period ............ $ 11.41 $ 12.14 $ 16.62 $ 12.83 $ 14.45 $ 14.74
--------- ---------- ---------- ------------ ---------- --------
Income from operations:
Net income (loss) ............ (4.65) .26 .60 .18 .07 .25
Net realized and unrealized
gain (loss) on investments .. 9.12 (.02) (.08) .21 (.49) .55
--------- ---------- ---------- ------------ ---------- --------
Total from operations ..... 4.47 .24 .52 .39 (.42) .80
Less distributions:
Distributions to
shareholders ................ -- (.35) (.68) (.18) (.07) (.67)
Tax return of capital to
shareholders ................ (.87) (.62) (.32) (.42) (1.13) (.42)
--------- ---------- ---------- ------------ ---------- --------
Increase (decrease) in net
asset value .............. 3.60 (.73) (.48) (.21) (1.62) (.29)
--------- ---------- ---------- ------------ ---------- --------
Net asset value at end of
period ......................... $ 15.01 $ 11.41 $ 12.14 $ 12.62 $ 12.83 $ 14.45
========= ========== ========== ============ ========== ========
Per share market value at
end of period .................. $ 10.80 $ 10.21 $ 8.88 $ 9.50 $ 12.13 $ 13.13
========= ========== ========== ============ ========== ========
TOTAL RETURN ON NET ASSET
VALUE BASIS .................... 42.81% 3.20% 1.57% 4.60% (2.64)% 6.43%
========= ========== ========== ============ ========== ========
TOTAL RETURN ON MARKET
VALUE BASIS (a) ................ 14.84% 26.25% (4.00)% (16.68)% 1.26% 2.87%
========= ========== ========== ============ ========== ========
RATIOS /SUPPLEMENTAL DATA
Ratio of expenses to
average net assets (b) (c)
(d) ............................ 41.28% 3.43% 2.33% 3.05%** 6.33% 5.77%
========= ========== ========== ============ ========== ========
Ratio of net income (loss)
to average net assets .......... (38.45)% 2.18% 4.98% 2.87%** 0.49% 1.69%
========= ========== ========== ============ ========== ========
Portfolio turnover rate ......... 83% 33% 182% 88% 112% 168%
========= ========== ========== ============ ========== ========
* Per share net income (loss) and net realized and unrealized gain (loss) on
holdings have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share.
** Annualized
(a) The Company has calculated total return based upon purchases and sales of
shares of the Company at current market values and reinvestment of
dividends and distributions at prices obtained under the Dividend
Reinvestment Plan. The calculation does not reflect brokerage commissions,
if any.
(b) The ratio for the six months ended December 31, 1999 and the years ended
June 30, 1999 after custodian fee credits was 3.05%, and 6.33%,
respectively. There were no custodian fee credits for years ended December
31, 2002, 2001 and 2000 and June 30, 1998.
(c) Ratio excluding interest and tax expense was 9.57%, 3.38%, 1.96%, 2.86%**,
5.80% and 4.93% for the years ended December 31, 2002, 2001 and 2000, the
six months ended December 31, 1999 and the years ended June 30, 1999 and
1998, respectively. (d) Ratio prior to reimbursements was 3.18%**, 7.03%
and 5.82% for the six months ended December 31, 1999 and for the years
ended June 30, 1999 and 1998, respectively.
BEXIL CORPORATION
7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
To 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 holdings as of December 31,
2002, and the related statement of operations for the year then ended, the
statement of changes in net assets for the two years then ended, and the
financial highlights for the years ended December 31, 2002, 2001 and 2000, the
six months ended December 31, 1999 and the year ended June 30, 1998. 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 audit. The financial
highlights for the year ended June 30, 1999 were audited by other auditors whose
report, dated August 9, 1999, expressed an unqualified opinion on this
information.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform 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, 2002, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Bexil
Corporation as of December 31, 2002, the results of its operations, the changes
in its net assets, and the financial highlights for the periods noted above, in
conformity with accounting principles generally accepted in the United States of
America.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 17, 2003
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DIRECTORS AND OFFICERS
DIRECTORS OFFICERS
BASSETT S. WINMILL THOMAS B. WINMILL, Esq.
Executive Chairman President
RUSSELL E. BURKE III/1/ WILLIAM G. VOHRER
FREDERICK A. PARKER, JR./1/ Treasurer
THOMAS B. WINMILL, Esq. MONICA PELAEZ, Esq.
DOUGLAS WU/1/ Vice President, Secretary
/1/Member, Audit Committee
BEXIL CORPORATION
8
RESULTS OF THE ANNUAL MEETING
The Company's annual meeting of stockholders was held on October 2,
2002.
1. To elect the following directors to serve as follows:
Director Class Term Expiring Votes For Votes Abstained
------------------ -------- ------- -------- --------- ---------------
Bassett S. Winmill V 5 years 2007 713,717 28,571
Directors whose term of office continued after the meeting are Frederick A.
Parker, Jr., Douglas Wu, Russell E. Burke III and Thomas B. Winmill.
================================================================================
DIVIDEND REINVESTMENT PLAN
The Company has adopted a Dividend Reinvestment Plan (the "Plan"). Under the
Plan, each dividend and capital gain distribution, if any, declared by the
Company on outstanding shares will, unless elected otherwise by each shareholder
by notifying the Company 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 )
the "Valuation Date"), participants will be issued additional shares equal to
the amount of such dividend by the Company'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 day before the
dividend or distribution payment date or, if that day is not an American Stock
Exchange trading day, the next trading day. For all purposes of the Plan: (a)
The Market Price of the s hares 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 Company.
================================================================================
PRIVACY POLICY
Bexil Corporation recognizes the importance of protecting the personal and
financial information of its shareholders. We consider each shareholder's
personal information to be private and confidential. This describes the
practices followed by us to protect our shareholders' privacy. We may obtain
information about you from the following sources: (1) information we receive
from you on forms and other information you provide to us whether in writing, by
telephone, electronically or by any other means; (2) information regarding your
transactions with us, our corporate affiliates, or others. We do not sell
shareholder personal information to third parties. We will collect and use
shareholder personal information only to service shareholder accounts. This
information may be used by us in connection with providing services or financial
products requested by shareholders. We will not disclose shareholder personal
information to any nonaffiliated third party except as permitted by law. We take
steps to safeguard shareholder information. We restrict access to nonpublic
personal information about you those employees and service providers who need to
know that information to provide products or services to you. With our service
providers we maintain physical, electronic, and procedural safeguards to guard
your nonpublic personal information. Even if you are no longer a shareholder,
our Privacy Policy will continue to apply to you. We reserve the right to
modify, remove or add portions of this Privacy Policy at any time.
BEXIL CORPORATION
9
BEXIL CORPORATION
11 Hanover Square
New York, NY 10005