BEXIL(R)
CORPORATION
SEMI-ANNUAL REPORT
June 30, 2001
American Stock
Exchange Symbol:
BXL
11 Hanover Square
New York, NY 10005
Tel (212) 797-7625
Fax (212) 785-0400
www.bexil.com
[LETTERHEAD OF BEXIL CORPORATION]
July 24, 2001
Fellow Shareholders:
We are pleased to submit this Semi-Annual Report for the six months ending
June 30, 2001 and to welcome our new shareholders who have made their investment
since our last Report. The Company'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 Company 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 Company may also employ leverage, transactions in futures, and
options on futures. At June 30, 2001, approximately 69% of the Company's assets
were invested in government securities and 31% in equity and other securities.
Intention to Operate Businesses Directly
As discussed in our previous Report, approval was received to change the
nature of the Company's business so as to cease to be an investment company and
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. Accordingly, the Company now intends to operate
businesses directly or through companies in which the Company has a majority or
other controlling interest and seek approval of the Securities and Exchange
Commission for deregistration as an investment company. At the June meeting of
the Board of Directors, approval was given to operate with internal management
and terminate the investment management agreement with the external manager, CEF
Advisers, Inc. It is noteworthy that CEF and its affiliates, whose personnel
also comprise the internal management of the Company, own in the aggregate
approximately 23% of the Company's outstanding shares. Company management is
conducting a business review, development, and acquisition program for operating
businesses, which may include privately owned companies and start-ups.
Review and Outlook
Six times in the first six months of the year the Federal Reserve Bank cut
the Federal Funds interest rate, lowering it over the period from 6.50% to
3.75%, to revive the slumping economy. During this period, the Lehman Brothers
Intermediate Government Bond Index had a return of +3.42%, while the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, and the Nasdaq
Composite Index had negative returns of -1.85%, -6.69% and -12.55%,
respectively. We are pleased to report that with its balanced approach the
Company's total market return for the six months of 2001 was +27.04% on a net
asset value return of +0.99%.
All year long, economists have predicted that lower interest rates would
have the desired effect of stimulating the economy. However, many factors have
delayed the hoped for recovery, such as disappointing corporate earnings and
increased layoffs, as well as the anticipation of more layoffs to come. Further,
concerns that inflation might return next year have caused longer maturing bonds
to have higher yields than existed before the Federal Reserve started cutting
rates in January 2001, dampening business expansion.
Looking ahead, while the U.S. index of leading economic indicators rose for
the third consecutive month in June, suggesting the potential for a rebounding
economy, manufacturing inventories, although decreasing, remain high and we feel
that these inventories must fall still further to stimulate new manufacturing
output. Consequently, we expect that more Federal Reserve rate cuts may be
possible in the near future, but we anticipate that they will be fewer and
smaller in amount than those in the first half of the year.
8% Dividend Distribution Policy Continued
The Company's managed 8% dividend distribution policy is intended to
provide shareholders with a relatively stable cash flow and reduce or eliminate
any market price discount to the Company's net asset value per share. Payments
are made primarily from ordinary income and any capital gains, with the balance
representing return of capital.
Purchase Shares at an Attractive Discount
Given the Company's recent net asset value of $11.84 per share and a recent
closing price on the American Stock Exchange of $10.80 per share, we believe
there is currently an important opportunity to purchase shares at an attractive
discount from their underlying value. The Company's Dividend Reinvestment Plan
is also 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 optimism for the Company's future.
Sincerely,
/s/ Thomas B. Winmill /s/ Marion E. Morris
Thomas B. Winmill Marion E. Morris
President Senior Vice President
Portfolio Manager
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BEXIL CORPORATION
Schedule of Portfolio Investments - June 30, 2001 (Unaudited)
Par Value Market Value
--------- ------------
U.S. Government Obligations (67.99%)
$ 500,000 U.S. Treasury Note, 4.75%, due 2/15/04.......................................... $ 502,866
5,500,000 U.S. Treasury Note, 6.50%, due 2/15/10.......................................... 5,910,350
----------
Total U.S. Government Obligations (cost: $6,142,895)....................... 6,413,216
----------
U.S. Government Agencies (.86%)
80,418 Government National Mortgage Assn., 7.00%, due 5/15/24.......................... 81,236
----------
Total U.S. Government Agencies (cost: $72,980)............................. 81,236
----------
Notes (19.89%)
700,000 American Home Products Corp., 6.70% Notes, due 3/15/11.......................... 701,560
200,000 DuPont EI DeNemours, 6% Notes, due 3/06/03..................................... 203,155
1,000,000 Target Corp., 5.50% Notes, due 4/01/07.......................................... 971,106
----------
Total Notes (cost: $1,901,070)............................................ 1,875,821
----------
Shares Common Stocks (10.21%)
------
Investment Advice (4.01%)
5,100 Alliance Capital Management Holding L.P......................................... 270,606
3,200 Stilwell Financial, Inc......................................................... 107,392
----------
377,998
Oil Royalty Traders (1.09%)
8,100 San Juan Basin Royalty Trust.................................................... 102,789
----------
Petroleum Refining (1.48%)
1,600 Exxon Mobil Corp................................................................ 139,760
----------
Real Estate Investment Trusts (2.06%)
7,900 Mills Corp...................................................................... 194,340
----------
See accompanying notes to financial statements
3
BEXIL CORPORATION
Schedule of Portfolio Investments - June 30, 2001 (Unaudited)
Shares Market Value
------ ------------
Services-Miscellaneous Business Services (1.57%)
55,000 Loss Management Services, Inc.*................................................ $ 148,500
----------
Total Common Stocks (cost: $960,355)...................................... 963,387
----------
Par Value Short-Term Investments (1.05%)
---------
$98,573 State Street Bank & Trust Repurchase Agreement, 2.00%,
6/29/01, due 7/2/01 (collateralized by $80,000 U.S. Treasury Bonds,
8.75%, due 5/15/20, market value: $107,143, proceeds at maturity:
$98,589)....................................................................... 98,573
----------
Total Short Term Investments (cost: $98,573).............................. 98,573
----------
Total Investments (cost: $9,175,873) (100.0%)....................... $9,432,233
==========
*Security is not publicly traded.
See accompanying notes to financial statements
4
BEXIL CORPORATION
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2001 (Unaudited)
ASSETS:
Investments at market value (cost: $9,175,873) (note 1)...... $ 9,432,233
Interest receivable.......................................... 173,914
Other assets................................................. 27,025
-----------
Total assets............................................. 9,633,172
-----------
LIABILITIES:
Accrued expenses............................................. 22,299
Accrued management fees...................................... 5,547
Other liabilities............................................ 233
-----------
Total liabilities........................................ 28,079
-----------
NET ASSETS: (applicable to 821,281 shares outstanding:
250,000,000 shares of $.01 par value authorized)............. $ 9,605,093
===========
NET ASSET VALUE PER SHARE
($9,605,093 / shares 821,281 outstanding).................... $ 11.70
===========
At June 30, 2001, net assets consisted of:
Paid-in capital.............................................. $10,658,627
Net unrealized appreciation on investments................... 256,360
Accumulated net realized loss on investments................. (1,084,489)
Accumulated deficit in net investment income................. (225,405)
-----------
$ 9,605,093
===========
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2001 (Unaudited)
INVESTMENT INCOME:
Interest..................................................... $ 261,615
Dividends.................................................... 19,996
-----------
Total investment income.................................... 281,611
-----------
EXPENSES:
Management (note 3).......................................... 33,816
Directors.................................................... 13,687
Professional (note 3)........................................ 12,945
Custodian.................................................... 11,901
Registration (note 3)........................................ 7,362
Transfer Agent............................................... 6,236
Printing..................................................... 5,455
Other........................................................ 15,525
-----------
Total operating expenses................................... 106,927
-----------
Loan interest and fees (note 5)............................ 3,134
-----------
Total expenses............................................. 110,061
-----------
Net investment income.................................... 171,550
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain on investments............................. 70,342
Unrealized depreciation of investments during the period..... (182,681)
-----------
Net realized and unrealized loss on investments............ (112,339)
-----------
Net decrease in net assets resulting from operations.... $ 59,211
===========
See accompanying notes to financial statements.
5
BEXIL CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended June 30, 2001 (Unaudited) and Year Ended December 31, 2000
Six Months Year
Ended Ended
June 30, 2001 December 31,
(Unaudited) 2000
------------- ------------
OPERATIONS:
Net investment income....................................... $ 171,550 $ 474,864
Net realized gain from security transactions................ 70,342 60,534
Unrealized depreciation of investments during the period.... (182,681) (28,214)
---------- ----------
Net change in net assets resulting from operations....... 59,211 507,184
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to shareholders ($0.49 and $0.68
per share, respectively)................................. (396,955) (535,398)
Tax return of capital to shareholders ($0.32 per share)..... -- (250,501)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from reinvestment of
distributions (14,870 and 32,219 shares, respectively)... 153,910 296,271
---------- ----------
Total change in net assets............................ (183,834) 17,556
NET ASSETS:
Beginning of period......................................... 9,788,927 9,771,371
---------- ----------
End of period (including accumulated deficit in net
investment income of $225,405 as of June 30, 2001)....... $9,605,093 $9,788,927
========== ==========
See accompanying notes to financial statements.
6
Notes to Financial Statements
(Unaudited)
(1) Bexil Corporation (the "Company"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as a non-
diversified closed-end management investment company. 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 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 Company 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
Company 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 $9,175,873, gross
unrealized appreciation and gross unrealized depreciation were $366,051 and
$109,691 respectively, at June 30, 2001.
(3) The Company has retained CEF Advisers, Inc. as its Investment Manager
pursuant to an Investment Management Agreement. As compensation for the service
provided pursuant to such agreement, the Company has paid 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 $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. Certain officers and
directors of the Company are officers and directors of the Investment Manager.
The Company reimbursed the Investment Manager $4,768 for providing certain
administrative and accounting services at cost for the six months ended June 30,
2001. At a meeting of the Board of Directors of the Company on June 13, 2001,
the Board of Directors approved terminating the investment management agreement
with the Investment Manager, 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 the former Investment Manager)
7
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, which may be changed from time to time at the discretion of the Board
of Directors.
(4) Purchases and proceeds of sales of investment securities other than short
term investments aggregated $297,332 and $2,969,856, respectively, for the six
months ended June 30, 2001.
(5) The Company has a committed bank line of credit. At June 30, 2001, there
was no balance outstanding and the interest rate was equal to the Federal
Reserve Funds Rate plus 1.00 percentage point. For the six months ended June 30,
2001, the weighted average interest rate was 5.24% based on the balances
outstanding from the line of credit during the period and the weighted average
amount outstanding was $109,225. The maximum amount of debt outstanding during
the period was $536,832.
(6) Distributions paid to shareholders were as follows:
Six Months Ended Year Ended
June 30, 2001 December 31, 2000
---------------- -----------------
Distributions paid from:
Ordinary income $ 396,955 $ 535,398
Return of capital - 250,501
------------- ------------
$ 396,955 $ 785,899
============= ============
It is anticipated that a reclassification of ordinary income and return of
capital is likely to occur for the year ended December 31, 2001, although the
exact amount is not estimated at June 30, 2001.
================================================================================
At the Annual Meeting of Stockholders of the Company held on November 28, 2000,
stockholders were asked to elect one director, to ratify the selection of
independent auditors for the fiscal period ending December 31, 2000, 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 to provide "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 amend Article VIII and Article XII of the
Company's Articles of Incorporation to eliminate references to the 1940 Act. All
proposals were approved by the stockholders. Stockholders elected Robert D.
Anderson as a director of the Company with 591,598 shares voting in favor and
39,113 shares voting to withhold authority. The names of each other director
whose term of office continued after the meeting are Frederick A. Parker, Jr.,
Bassett S. Winmill, Thomas B. Winmill, and Douglas Wu . Regarding ratification
of independent auditors, 589,820 shares voted in favor, 32,642 shares voted
against, and 8,249 shares abstained. Regarding the change in the nature of the
Company's business so as to cease to be an investment company, 408,166 shares
voted in favor, 88,838 shares voted against,10,825 shares abstained, and 122,882
shares were unvoted. Regarding the amendment to the Company's fundamental
investment restriction regarding concentration, 404,276 shares voted in favor,
83,719 shares voted against, 19,834 shares abstained, and 122,882 shares were
unvoted. Regarding the proposal to amend Article VIII of the Company's Articles
of Incorporation, 407,876 shares voted in favor, 81,000 shares voted
against,18,953 shares abstained, and 122,882 shares were unvoted. Regarding the
proposal to amend Article XII of the Company's Articles of Incorporation,
408,289 shares voted in favor, 80,920 shares voted against, 18,620 shares
abstained, and 122,882 shares were unvoted.
8
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 is conducting a business review, development, and
acquisition program for operating businesses, which may include privately owned
companies and start-ups, to be undertaken directly or through companies in which
the Company has a majority or other controlling interest.
================================================================================
FINANCIAL HIGHLIGHTS
Six Months Year Six Months
Ended Ended Ended
June 30, 2001 December 31, December 31,
(Unaudited) 2000 1999
----------- -------- --------
PER SHARE DATA*
Net asset value at beginning of period ................... $ 12.14 $ 12.62 $ 12.83
------- ------- -------
Income from investment operations:
Net investment income .................................. .21 .60 .18
Net realized and unrealized gain (loss) on investments.. (.16) (.08) .21
------- ------- -------
Total from investment operations .................. .05 .52 .39
Less distributions:
Distributions to shareholders .......................... (.49) (.68) (.18)
Tax return of capital to shareholders .................. - (.32) (.42)
------- ------- -------
Total distributions ............................... (.49) (1.00) (.60)
------- ------- -------
Net asset value at end of period ........................ $ 11.70 $ 12.14 $ 12.62
======= ======= =======
Per share market value at end of period ................. $ 10.76 $ 8.88 $ 9.50
======= ======= =======
TOTAL RETURN ON NET ASSET VALUE BASIS .................... .99% 1.57 % 4.60%
======= ======= =======
TOTAL RETURN ON MARKET VALUE BASIS (a) ................... 26.98% (4.00)% 16.98%
======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) .............. $ 9,605 $ 9,789 $ 9,771
======= ======= =======
Ratio of expenses to average net assets (b)(c)(d) ........ 2.27%** 2.33 % 3.05%**
======= ======= =======
Ratio of net investment income to average net assets ..... 3.54%** 4.98 % 2.87%**
======= ======= =======
Portfolio turnover rate .................................. 31% 182 % 88%
======= ======= =======
Years Ended June 30,
-----------------------------------------------------
1999 1998 1997 1996
-------- --------- ---------- ----------
PER SHARE DATA*
Net asset value at beginning of period ................... $ 14.45 $ 14.74 $ 14.74 $ 15.20
-------- --------- ---------- ----------
Income from investment operations:
Net investment income .................................. .07 .25 .70 .64
Net realized and unrealized gain (loss) on investments.. (.49) .55 .01 (.46)
-------- --------- ---------- ----------
Total from investment operations .................. (.42) .80 .71 .18
Less distributions:
Distributions to shareholders .......................... (.07) (.67) (.71) (.64)
Tax return of capital to shareholders .................. (1.13) (.42) - -
-------- --------- ---------- ----------
Total distributions ............................... (1.20) (1.09) (.71) (.64)
-------- --------- ---------- ----------
Net asset value at end of period ........................ $ 12.83 $ 14.45 $ 14.74 $ 14.74
======== ========= ========== ==========
Per share market value at end of period ................. $ 12.13 $ 13.13 $ 12.63
======== ========= ========== ==========
TOTAL RETURN ON NET ASSET VALUE BASIS .................... (2.64)% 6.43% 5.58% 1.18%
======== ========= ========== ==========
TOTAL RETURN ON MARKET VALUE BASIS (a) ................... 1.26 % 12.87% (9.57)%
======== ========= ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) .............. $ 9,774 $ 10,794 $ 10,791 $ 13,035
======== ========= ========== ==========
Ratio of expenses to average net assets (b)(c)(d) ........ 6.33 % 5.77% 2.13% 2.10%
======== ========= ========== ==========
Ratio of net investment income to average net assets ..... 0.49 % 1.69% 4.48% 4.25%
======== ========= ========== ==========
Portfolio turnover rate .................................. 112 % 168% 246% 762%
======== ========= ========== ==========
* Per share net investment income and net realized and unrealized gain (loss)
on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share.
** Annualized.
(a) Effective October 4, 1996, the Company converted from an open-end
management investment company to a closed-end management investment
company. 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 and 1997 after custodian fee credits 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 six months
ended June 30, 2001 and for years ended December 31, 2000 and June 30,
1998.
(c) Ratio excluding interest expense was 2.21%**, 1.96%, 2.86%**, 5.80%, 4.93%
and 1.94% for the six months ended June 30, 2001, 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 for the years ended June 30, 1999 and
1998, respectively.
9
BEXIL CORPORATION
DIRECTORS OFFICERS
BASSETT S. WINMILL THOMAS B. WINMILL, Esq.
Chairman President
ROBERT D. ANDERSON/1/ MARION E. MORRIS
Vice Chairman Senior Vice President
FREDERICK A. PARKER, JR./1/ WILLIAM G. VOHRER
Treasurer
THOMAS B. WINMILL, Esq.
DOUGLAS WU/1/ MONICA PELAEZ, Esq.
Vice President, Secretary
/1/Member, Audit Committee HEIDI KEATING
Vice President
--------------------------------------------------------------------------------
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 on
the Valuation Date, participants will be issued additional shares equal to the
amount of such dividend divided 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 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 Company.
--------------------------------------------------------------------------------
10
BEXIL CORPORATION
11 Hanover Square
New York, NY 10005