SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (ss.) 240.14a-11(c) or (ss.)
240.14a-12
Bexil Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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Please Vote Immediately by Signing and Returning the Enclosed Proxy Card.
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Delay may cause the Fund to incur additional expenses to solicit
sufficient votes for the meeting.
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BEXIL CORPORATION
Notice of Annual Meeting of Stockholders
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Bexil
Corporation (the "Fund") will be held at the offices of the Fund at 11 Hanover
Square, New York, New York on Tuesday, November 28, 2000 at 8:30 a.m. for the
following purposes:
1. To elect to the Board of Directors the Nominee, Robert D. Anderson, as
Class III Director, to serve for a five year term and until his
successor is duly elected and qualified.
2. To ratify the selection of Tait, Weller & Baker as the Fund's
independent auditors.
3. To change the nature of the Company's business so as to cease to be an
investment company;
4. To amend the Company's fundamental investment restriction regarding
concentration; and
5. To amend Article VIII and Article XII of the Company's Articles of
Incorporation.
Stockholders of record at the close of business on October __, 2000 are
entitled to receive notice of and to vote at the meeting.
By Order of the Board of Directors
Monica Pelaez
Secretary
New York, New York
October __, 2000
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BEXIL CORPORATION
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PROXY STATEMENT
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Annual Meeting of Stockholders
To Be Held November 28, 2000
This Proxy Statement, dated October __, 2000, is furnished in
connection with a solicitation of proxies by Bexil Corporation (the "Fund") to
be voted at the Annual Meeting of Stockholders of the Fund to be held at the
offices of the Fund at 11 Hanover Square, New York, New York on Tuesday,
November 28, 2000 at 8:30 a.m. and at any postponement or adjournment thereof
("Meeting") for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. Stockholders of record at the close of business on
October __, 2000 ("Record Date") are entitled to be present and to vote on
matters at the Meeting. Stockholders are entitled to one vote for each Fund
share held and fractional votes for each fractional Fund share held. Shares
represented by executed and unrevoked proxies will be voted in accordance with
the specifications made thereon. If the enclosed form of proxy is executed and
returned, it nevertheless may be revoked by another proxy or by letter or
telegram directed to the Fund, which must indicate the stockholder's name. To be
effective, such revocation must be received prior to the Meeting. In addition,
any stockholder who attends the Meeting in person may vote by ballot at the
Meeting, thereby canceling any proxy previously given. As of the Record Date,
the Fund had 797,829.86 shares of common stock issued and outstanding entitled
to be voted at the Meeting. Stockholders of the Fund will vote as a single
class. It is estimated that proxy materials will be mailed to stockholders of
record on or about October __, 2000. The Fund's principal executive offices are
located at 11 Hanover Square, New York, New York 10005. Copies of the Fund's
most recent Annual and Semi-Annual Reports are available without charge upon
written request to the Fund at 11 Hanover Square, New York, New York 10005, or
by calling toll-free 1-888-847-4200.
PROPOSAL 1: ELECTION OF DIRECTOR
The Fund's Board of Directors is divided into five classes with the
term of office of one class expiring each year. It is proposed that stockholders
of the Fund elect one Class III Director to serve for a five year term, and
until his successor is duly elected and qualified. The nominee currently serves
as a Director of the Fund. Unless otherwise noted, the address of record for the
Directors and officers is 11 Hanover Square, New York, New York 10005. The
following table sets forth certain information concerning the nominee for Class
III Director of the Fund.
Name, Principal Occupation, Business Experience Director Year Term
for Past Five Years, Address, and Age Since Expires
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CLASS III:
ROBERT D. ANDERSON* - He is Vice Chairman of certain 1999 2000
investment companies in the Investment Company Complex, and
of Winmill & Co. Incorporated ("WCI") and certain of its
affiliates. He was a member of the Board of Governors of the
Mutual Fund Education Alliance, and of its predecessor, the
No-Load Mutual Fund Association. He has also been a member
of the District #12, District Business Conduct and
Investment Companies Committees of the NASD. He was born on
December 7, 1929.
* Mr. Anderson is an "interested person" because he is an "affiliated person" as
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
The persons named in the accompanying form of proxy intend to vote each
such proxy for the election of the nominee listed above, unless stockholders
specifically indicate on their proxies the desire to withhold authority to vote
for the nominee. It is not contemplated that the nominee will be unable to serve
as a Director for any reason, but if that should occur prior to the Meeting, the
proxy holders reserve the right to substitute another person of their choice as
nominee. The nominee listed above has consented to being named in this Proxy
Statement and has agreed to serve as a Director if elected.
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The Board of Directors has adopted a written charter for the audit
committee, included as a Exhibit A to this proxy statement. The Fund has an
audit committee comprised of Robert D. Anderson, Frederick A. Parker, Jr., and
Douglas Wu, the function of which is routinely to review financial statements
and other audit-related matters as they arise throughout the year. The Fund has
an executive committee comprised of Thomas B. Winmill, the function of which is
to exercise the powers of the Board of Directors between meetings of the Board
to the extent permitted by law to be delegated and not delegated by the Board to
any other committee. Mr. Winmill is an "interested person" because he is an
"affiliated person" as defined in the 1940 Act. The Fund has no standing
nominating or compensation committee or any committee performing similar
functions.
Information relevant to the Continuing Directors is set forth below.
Each Director who is deemed to be an "interested person" because he is an
"affiliated person" as defined in the 1940 Act is indicated by an asterisk.
Name, Principal Occupation, Business Director Year Term
Experience for Past Five Years, Address, and Age Since Expires
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CLASS I:
FREDERICK A. PARKER, JR. -- He is retired President and 1996 2003
Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. His address is
219 East 69th Street, New York, New York 10021. He was born
on November 14, 1926.
CLASS II:
DOUGLAS WU -- He is Principal of Maxwell Partners. From July 1997 2004
1998 to December 1998 he was a Principal of Libra Advisors
LLC. From 1996 to June 1998, he was Managing Director -
Private Equity Investments, of Croesus Capital Management
Corporation. From 1992 to 1996, he was a partner of Medall
Partners, a merchant banking firm. His address is 114 East
90th Street, New York, New York 10128. He was born on July
31, 1960.
CLASS IV:
THOMAS B. WINMILL* -- He is President, Chief Executive 1996 2001
Officer, and General Counsel of the Fund, as well as the
other investment companies in the Investment Company
Complex, and of WCI and certain of its affiliates. He also
is President of the Investment Manager. He is a member of
the New York State Bar and the SEC Rules Committee of the
Investment Company Institute. He is a son of Bassett S.
Winmill, the Chairman of the Board of the Fund. His address
is 11 Hanover Square, New York, New York 10005. He was born
on June 25, 1959.
CLASS V:
BASSETT S. WINMILL* -- He is Chairman of the Board of the 1996 2002
Fund, as well as other investment companies in the
Investment Company Complex, and of WCI. He is a member of
the New York Society of Security Analysts, the Association
for Investment Management and Research, and the
International Society of Financial Analysts. He is the
father of Thomas B. Winmill, the President, Chief Executive
Officer, and General Counsel of the Fund. His address is 11
Hanover Square, New York, New York 10005. He was born on
February 10, 1930.
The executive officers, other than those who serve as Directors, and
their relevant biographical information are set forth below:
MINJA FLEER, CPA - Vice President. She is Vice President of the other
investment companies in the Investment Company Complex, and Treasurer and Chief
Accounting Officer of the Investment Manager and its affiliates. Prior to 1998,
she was an accountant at Armat Co. She was born on December 25, 1957.
LEONA LEUNG - Treasurer and Chief Accounting Officer. She also is
Treasurer and Chief Accounting Officer of the other investment companies in the
Investment Company Complex, and Assistant Treasurer of the Investment Manager
and its affiliates. Prior to 1996, she was a staff accountant at Mendelsohn Kary
Bell & Natoli, P.C. She was born on August 24, 1971.
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MONICA PELAEZ - Vice President, Secretary and Chief Compliance Officer.
She also is Vice President, Secretary and Chief Compliance Officer of the other
investment companies in the Investment Company Complex, and the Investment
Manager and certain of its affiliates. Previously, she was Special Assistant
Corporation Counsel to New York City Administration for Children's Services from
1998 to 2000 and an attorney with Piper & Marbury LLP in 1998 and Debevoise &
Plimpton in 1997. She earned her Juris Doctor from St. John's University School
of Law in 1997. She is a member of the New York State Bar. She was born on
November 5, 1971.
The address of each executive officer of the Fund is 11 Hanover Square,
New York, New York 10005.
The following table presents certain information regarding the
beneficial ownership of the Fund's shares as of the Record Date by each officer
and Director of the Fund owning shares on such date. In each case, such amount
constitutes less than 1% of the Fund's outstanding shares.
Name of Officer or Director Number of Shares
--------------------------------- ------------------------------
Robert D. Anderson
Minja Fleer
Leona Leung
Frederick A. Parker, Jr.
Monica Pelaez
Bassett S. Winmill**
Thomas B. Winmill
Douglas Wu
To the knowledge of the management of the Company, as of the Record
Date, the following shareholder beneficially owned 5% or more of the outstanding
shares of the Company according to its Schedule 13D filed on July 17, 2000:
Approximate Percentage of
the Company's Total
Name and Address Common Stock Outstanding Shares
---------------- ------------ ------------------
Investor Service Center, Inc. 169,464.7 shares 21.45%
11 Hanover Square
New York, New York 10005
Winmill & Co. Incorporated* 169,464.7 shares 21.45%
11 Hanover Square
New York, New York 10005
Bassett S. Winmill** ________ shares ____%
11 Hanover Square
New York, New York 10005
* Winmill & Co. Incorporated has indirect beneficial ownership of these shares,
as a result of its status as a controlling person of Investor Service Center,
Inc., the direct beneficial owner.
**Bassett S. Winmill has indirect beneficial ownership of 169,464.7 of these
shares, as a result of his status as a controlling person of Winmill & Co.
Incorporated and Investor Service Center, Inc. the direct beneficial owner. Mr.
Winmill disclaims beneficial ownership of the shares held by Investor Service
Center, Inc.
The Fund pays its Directors who are not "interested persons" of the
Fund an annual retainer of $2,500, and a per meeting fee of $2,750, and
reimburses them for their meeting expenses. The Fund also pays such Directors
$250 per special telephonic meeting attended and per committee meeting attended.
The Fund does not pay any other remuneration to its executive officers and
Directors, and the Fund has no bonus, pension, profit-sharing or retirement
plan. The Fund had nine Board meetings, one audit committee meeting, and no
executive committee meetings during the Fund's most recently completed full
fiscal year ended June 30, 1999. The Fund had two Board meetings, one audit
committee meeting, and no executive committee meetings during the Fund's most
recently completed fiscal period, ended December 31, 1999. Each Director
attended all Board and committee meetings held during such periods during the
time such Director was in office. For each such periods, the aggregate amount of
compensation paid to the nominee by the Fund and by the other four investment
companies advised by CEF Advisers, Inc. ("CEF" or the "Investment Manager"), the
Fund's investment manager, and its affiliates (collectively, the "Investment
Company Complex") for which such nominee is a Board member was $0.
The aggregate amount of compensation paid to each continuing Director
by the Fund and by all other funds in the Investment Company Complex for which
such continuing Director is a Board Member (the number of which is set forth in
parenthesis next to the continuing Director's name) for the fiscal year ended
June 30, 1999 and for the fiscal period ended December 31, 1999, was as follows:
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AGGREGATE COMPENSATION FROM THE
FUND
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FISCAL YEAR FISCAL PERIOD
NAME OF CONTINUING DIRECTOR ENDED JUNE 30, ENDED DECEMBER
(THE NUMBER OF OTHER FUNDS) 1999 31, 1999
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Frederick A. Parker, Jr. (0) $15,000 $7,000
Bassett S. Winmill (5) $0 $0
Thomas B. Winmill (8) $0 $0
Douglas Wu (0) $15,000 $7,000
TOTAL COMPENSATION FROM FUND AND
INVESTMENT COMPANY COMPLEX PAID
TO CONTINUING DIRECTOR
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FISCAL YEAR FISCAL PERIOD
NAME OF CONTINUING DIRECTOR ENDED JUNE 30, ENDED DECEMBER
(THE NUMBER OF OTHER FUNDS) 1999 31, 1999
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Frederick A. Parker, Jr. (0) $15,000 $7,000
Bassett S. Winmill (5) $0 $0
Thomas B. Winmill (8) $0 $0
Douglas Wu (0) $15,000 $7,000
The Investment Manager, located at 11 Hanover Square, New York, New
York 10005, is a wholly-owned subsidiary of WCI, a publicly-owned company whose
securities are listed on The Nasdaq Stock Market. During the fiscal year ended
June 30, 1999 and the fiscal period ended December 31, 1999, the Fund paid the
Investment Manager investment management fees, net of waivers, $0 and $27,447,
respectively. Bassett S. Winmill, a Director of the Fund, may be deemed a
controlling person of WCI on the basis of his ownership of 100% of WCI's voting
stock and, therefore, a controlling person of the Investment Manager. Since the
beginning of the Fund's most recently completed fiscal year, Robert D. Anderson,
Bassett S. Winmill, and Thomas B. Winmill received from WCI, respectively,
20,000, 50,000, and 50,000 incentive stock options to purchase shares of WCI's
Class A common stock at a weighted average of, respectively, $2.125, $2.502, and
$2.502 per share. These options expire after five years.
Audit Committee Report
The audit committee has: (i) reviewed and discussed the audited
financial statements with management; (ii) discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61; and (iii) received from the auditors disclosures regarding the auditors'
independence required by Independence Standards Board Standard No. 1, and
discussed with the auditors the auditors' independence. Based on these review
and discussions, the audit committee recommended to the Board of Directors that
the audited financial statements be included in the Fund's annual report to
shareholders for the last fiscal period for filing with the SEC.
Audit Committee Members: Robert D. Anderson, Frederick A. Parker, Jr.
and Douglas Wu.
Statement Regarding Composition of Audit Committee
The rules of the American Stock Exchange ("AMEX rules") require that
the Fund have an audit committee comprised solely of independent directors. The
Fund's audit committee is comprised of Robert D. Anderson, Frederick A. Parker,
Jr. and Douglas Wu. Mr. Anderson would be deemed to be non-independent under the
AMEX rules by virtue of being a former officer of the Fund and by virtue of his
relationship with CEF, the Investment Manager of the Fund. However, the board of
directors has determined that Mr. Anderson's membership on the audit committee
is required by the best interests of the Fund and its shareholders, for the
following reasons:
1. In view of the current composition of the board of directors of the Fund,
to constitute the Audit Committee with at least three independent directors
would require the search, recruitment, appointment, orientation, and
payment of another independent director and expansion of the current board,
which presents an onerous burden on the efficient administration of the
Fund.
2. The relative small size of the Fund makes it comparable to small business
filers that file reports under SEC Regulation S-B, which are required by
AMEX rules to have audit committees comprised of at least two members, only
a majority of whom must be independent.
3. An outside, independent agent - State Street - determines daily: (1) a net
asset value per share for the Fund to the penny (unaudited); and (2) that
substantially all of the assets of the Fund are investment securities for
which reliable market quotations are typically available.
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4. Investment companies, such as the Fund, are fundamentally different from
public operating companies. Unlike operating companies, the assets of the
Fund consist exclusively of investment securities and there is little or no
opportunity to "manage" earnings or results through selective application
of accounting policies. Thus, it is of somewhat lesser value to an
investment company that its entire audit committee consist of independent
directors.
5. The Fund is subject to the stringent regulatory scheme of the 1940 Act that
adequately protects against the abuses the three independent director rule
is designed to address. The 1940 Act requires, among other things, that at
least 40 percent of the directors on closed end fund boards be independent
of fund management, and the 1940 Act's definition of "independence" is
stricter than the one set forth in the AMEX rules.
6. Although Mr. Anderson is a director, Vice Chairman and a substantial holder
of the non-voting stock of the parent of CEF, WCI, he has recently resigned
as a director and officer of CEF and from the office of Vice Chairman of
the Fund.
7. While Mr. Anderson has been an officer in title with the Fund, he has never
been a paid employee of, or accepted any compensation from, the Fund, nor
has he had any relationship with the Fund that would disqualify him from
independent director status under the AMEX rules, other than through the
Fund's investment management agreements with CEF.
8. Mr. Anderson is currently a director of several investment companies within
the Investment Company Complex and has over 30 years of experience with
investment company accounting issues. Mr. Anderson has demonstrated and
currently affirms that in accordance with AMEX rules he is able to read and
understand fundamental financial statements, including a company's balance
sheet, income statement, and cash flow statement and his past employment
experience in finance and accounting and other comparable experience or
background has resulted in his financial sophistication, including being or
having been a senior officer with financial oversight responsibilities.
Vote Required
Inasmuch as the election of the nominee was approved by the vote of a
majority of the Board of Directors, the election of the nominee requires the
affirmative vote of a plurality of the votes cast at the Meeting.
THE FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEE.
PROPOSAL 2: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The 1940 Act requires that the Fund's independent auditors be selected
by a majority of those Directors who are not "interested persons" (as defined in
the 1940 Act) of the Fund; that such selection be submitted for ratification or
rejection at the Meeting; and that the employment of such independent auditors
be conditioned upon the right of the Fund, by vote of a majority of its
outstanding voting securities at any meeting called for that purpose, to
terminate such employment forthwith without penalty. The Fund's Board of
Directors, including a majority of those Directors who are not "interested
persons," approved the selection of Tait, Weller & Baker for the fiscal period
commencing January 1, 2000 at a Board meeting held on March 8, 2000.
Accordingly, the selection by the Fund's Board of Tait, Weller & Baker as
independent auditors for the fiscal period commencing January 1, 2000 is
submitted to stockholders for ratification or rejection. Apart from its fees
received as independent auditors, neither Tait, Weller & Baker nor any of its
partners has a direct, or material indirect, financial interest in the Fund or
the Investment Manager.
Tait, Weller & Baker acted as independent auditors of the Fund since
its organization through the fiscal year ended June 30, 1998 and for the fiscal
period ended December 31, 1999, and acts as independent auditors of WCI.
Sanville & Company ("Sanville") served as the independent auditors for the Fund
for the fiscal year ended June 30, 1999. At the Fund's Board of Directors
meeting held on September 8, 1999, with the approval of the Board's audit
committee the Board of Directors dismissed Sanville as the independent auditors
of the Fund and approved the selection of Tait, Weller & Baker as the
independent auditors of the Fund for the fiscal period beginning July 1, 1999.
In connection with the audit of the fiscal year ended June 30, 1999 and
subsequent interim period through September 8, 1999, there were no disagreements
with Sanville on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements if
not resolved to their satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement. The
audit report of Sanville on the financial statements of the Fund as of and for
the year ended June 30, 1999, did not contain any adverse opinion or disclaimer
of opinion, nor were they qualified or modified as to uncertainty, audit scope,
or accounting principles.
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The Fund's Board believes that the continued employment of the services
of Tait, Weller & Baker, as described herein, is in the best interests of the
Fund. A representative of Tait, Weller & Baker is expected to be present at the
Meeting, will have the opportunity to make a statement, and will be available to
respond to appropriate questions.
THE FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE SELECTION OF TAIT,
WELLER & BAKER AS INDEPENDENT AUDITORS OF THE FUND.
PROPOSAL 3: TO CHANGE THE NATURE OF THE COMPANY'S BUSINESS SO AS TO CEASE
TO BE AN INVESTMENT COMPANY.
The Board of Directors of the Company proposes and recommends to
shareholders that the nature of the Company's business be changed so that the
Company will cease to be an investment company. If this proposal is adopted, the
Company intends to operate businesses directly or through companies in which the
Company has a majority or other controlling interest and seek approval of the
SEC for deregistration as an investment company.
Definition of "Investment Company"
The Investment Company Act of 1940 ("1940 Act") defines an investment
company to include (i) any corporation which, on an unconsolidated basis, has,
or proposes to have, more than 40% of the value of its total assets (exclusive
of U.S. Government securities and cash items) invested in investment securities
(exclusive of such Government securities and securities issued by majority-owned
subsidiaries which are not themselves investment companies and are not relying
on certain exemptions from the definition of investment company) and (ii) any
corporation which is, or holds itself out as being, primarily engaged in the
business of investing, reinvesting or trading in securities. The 1940 Act
excludes from classification as an investment company (i) any corporation
primarily engaged, directly or through a wholly-owned subsidiary or
subsidiaries, in a business or businesses other than that of investing,
reinvesting, owning, holding, or trading in securities and (ii) any corporation
which the SEC determines and declares to be primarily engaged, either directly
or through majority-owned subsidiaries, or controlled companies conducting
similar types of businesses, in one or more businesses other than that of
investing, reinvesting, owning, holding or trading in securities.
Regulation under the Securities Laws
As a registered investment company with shares listed on the American
Stock Exchange, the Company is regulated under a variety of securities laws and
rules, including particularly the 1940 Act, the Securities Exchange Act of 1934
(the "1934 Act") and the rules of (and the listing agreement with) the American
Stock Exchange. These rules on occasion overlap and/or complement each other as,
for example, in the area of proxy solicitation where the 1940 Act incorporates
by reference the various provisions of the 1934 Act, as well as certain rules of
the American Stock Exchange, to which the Company will remain subject. There are
rules specific to the investment company format, however, and these would no
longer be applicable after deregistration as an investment company.
The following is a brief summary of the regulatory structure imposed by
the 1940 Act; for the most part, the provisions cited are those which are
specific to registered investment companies, although in some instances, e.g.,
periodic reporting, deregistration would mean the substitution of one set of
rules and forms for another. The 1940 Act prohibits certain transactions between
the Company and affiliated persons, including directors and officers of the
Company or affiliated companies, unless such transactions are exempted by the
SEC; regulates the composition of the Board; regulates the capital structure of
the Company by restricting the issuance of senior equity and debt securities and
restricts the issuance of stock options, rights and warrants; prohibits
pyramiding of investment companies and the cross ownership of securities;
provides for the custody of securities and bonding of certain employees;
regulates the form, content and frequency of financial reports to shareholders;
requires the Company to carry its assets at fair value rather than at cost in
financial reports; requires that the Company file with the SEC periodic reports
designed to disclose compliance with the 1940 Act and to present other financial
information; prohibits the Company from changing the nature of its business or
fundamental investment policies without the prior approval of its shareholders;
prohibits voting trusts; and requires shareholder ratification of the selection
of accountants.
Other provisions of the 1940 Act state that common stock may not be
issued at less than net asset value; provide that no securities may be issued
for services or for property other than cash or securities except as a dividend
or a distribution to security holders or in connection with a reorganization;
restrict the manner in which repurchases of stock may be effected; restrict
plans of reorganization; provide for enforcement by the SEC of the 1940 Act
through administrative proceedings and court actions; and create a right in
private persons to bring injunctive and damage actions in Federal courts to
enforce compliance with the 1940 Act.
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The Proposal
At the December 21, 1999 annual meeting of shareholders, the Company's
shareholders voted to revise the Company's investment objective and certain
investment policies to increase the Company's ability to invest in equity
securities and other types of non-fixed income investments. Accordingly, the
Fund's current investment objective, which is non-fundamental, is to provide
stockholders with an attractive rate of total return from capital appreciation
and income. To achieve 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 equity and other securities
of selected growth companies and in companies that invest or deal in natural
resources or commodities. Prior thereto, the Company sought to achieve its
investment objective of providing a high level of current income, liquidity, and
safety of principal by investment primarily in U.S. government securities.
The Company's management recently recommended to the Company's Board of
Directors that the Company change its activities so as to cease to be an
investment company. The Board considered this matter at two board meetings, held
on June 14, 2000 and July 24, 2000, and determined to recommend that
shareholders vote to provide the necessary authorization. This conclusion is
based in substantial part on management's perception of the appropriate business
strategy to be pursued in the forthcoming years. In particular, management does
not feel that investment in a portfolio of government and other securities, such
as now comprise the Company's portfolio, will yield competitive returns to
shareholders. Management believes this is attributable to the Company's smaller
asset size, which may cause its expense ratio to be generally higher than those
of otherwise comparable investment companies, and the substantial market
discount typically attributable to the shares of closed-end investment
companies, like the Company. Rather, management believes that enabling the
Company to operate businesses directly or through companies in which it has a
majority or other controlling interest could lead to more favorable results over
time both through investing substantial funds in companies which appear to have
above average potential and by being able to own sufficient shares in portfolio
companies so that the Company's officers can assist the management of those
companies in realizing greater values for shareholders. Management believes that
this business strategy is likely to result in an asset mix which will classify
the Company as an operating rather than an investment company, and could reduce
the market discount phenomenon that has historically affected the Company. In
approving the change in the nature of the Company's business, the Board of
Directors considered data obtained by management from Morningstar, Inc.
indicating that operating companies in the same capitalization range as the
Company generally trade at less of a discount to book value than closed-end
investment companies trade to net asset value. Of course, there is no assurance
that this will be the case for the Company's shares.
An operating company would record its investments at market value
similar to an investment company; however, in some cases, where the company has
significant investments (ownership of 20% or more of a company's voting stock),
the Company may be able to include in its reported earnings and assets its
proportionate share of the earnings or losses of the investee company, provided
that the investment and related control would not be deemed temporary. In
contrast, an investment company would record as income any dividends received
and the change in its assets would reflect changes in the valuation of its
portfolio of securities and other assets. As a result, it is possible that the
valuation of the assets held by the Company as an operating company would no
longer be subject to a requirement to use fair market value, to the extent such
assets are accounted for on an equity or consolidated basis.
If the shareholders authorize changing the nature of the Company's
business so that it may cease to be an investment company, CEF Advisers, Inc.,
the Company's investment manager, anticipates taking steps to effect such
change. Although CEF does not have any specific program of purchases or sales or
other activities yet identified, it is willing to conduct 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. As
noted below, the Company expects to concentrate its investments in the
technology, manufacturing and/or services industries. Management expects to seek
earnings for the Company primarily from the conduct of these businesses,
although the realization of gains from the sale of a business interest may also
offer attractive potential from time to time. The proposal would permit the
Company to participate more directly and extensively in the management of its
controlled companies. Further, it is expected that the Company will continue
investing in investment securities, although the scope of such investing would
be intended to be consistent with the exclusion of the Company from the
definition of investment company under the 1940 Act. The Company may continue to
keep funds invested in U.S. government securities or investment securities.
There can be no assurance, however, that as an operating company the Company
will be successful in seeking earnings or realizing gains or that the Company's
participation in management of its operating business will be beneficial.
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<PAGE>
If Proposal 3 is approved by the shareholders, CEF will remain the
Company's investment manager until the Board of Directors, including the
independent Directors, determines, based on the composition of the Company's
portfolio, that CEF's services are no longer necessary. At such time as the
Board determines to terminate the Company's agreement with CEF, the Company's
officers would manage the Company's business. These individuals, in their
management capacities with CEF and its affiliated companies, have had
significant experience in managing those companies' various operating businesses
over the years, although these may or may not be the same types of businesses in
which the Company acquires an interest. Depending upon the nature of the
operating business pursued by the Company, the Company might employ additional
staff members and might engage third parties to assist it in locating
appropriate business opportunities. The costs related to such possibilities are
not presently known and could be more or less than the expenses currently
incurred by the Company as an investment company.
RISK FACTORS
Entry into a New Business
One of the risks involved in the proposed conversion to an operating
company relates to the Company's entry into a new business. Becoming an
operating company would allow the Company to acquire or develop, directly or
through one or more subsidiaries, businesses in which the Company has no
experience or operating history. Likewise, there can be no assurance that the
Company will be able to implement its proposed business plans or, if
implemented, that it will be successful.
Concentration
To provide funds for acquisitions, CEF expects to sell investment
securities with the anticipated result that the Company's holdings will become
concentrated in relatively few companies to be owned as operating companies.
Such acquisitions and dispositions, however, would be accomplished only if and
when, in the judgment of the Company's management, favorable opportunities
therefore are available. Since there is no assurance when such opportunities may
become available, it is possible that, even if the shareholders approve the
recommended change, there may be no significant near-term change in the
Company's investments, although the Company expects to establish a concentrated
position as soon as practicable.
It is expected that the acquisition program pursued by the Company, in
the event this Proposal is approved by the shareholders will involve investing
more than 25% of the Company's assets in the technology, manufacturing and/or
services industries. The Company's fundamental policies currently prevent it
from concentrating its investments to such an extent and therefore Proposal 4 of
this Proxy Statement seeks shareholder approval to amend this restriction to
allow the Company to concentrate its investments. If this Proposal is approved,
the Company expects to establish and maintain a concentrated position in the
technology, manufacturing and/or services industries as soon as practicable
following the adoption of the revised fundamental policy and the identification
of investment opportunities appropriate for it as an operating company.
The failure of businesses in which the Company concentrates its
holdings would have a significant adverse effect on shareholders and their
investment in the Company. The investment return to shareholders would be
dependent upon the performance of a few operating businesses rather than a broad
range of investment securities. Additionally, the Company could be expected to
be more susceptible to economic, political, and regulatory developments than is
currently the case. Concentration may increase the risk to shareholders if a
given investment fails to perform satisfactorily but concentration is, of
course, a key element in the business strategy that has caused the Company to
seek approval of its program to become an operating company. In addition to the
general risks of concentration, there are specific risks attributable to
concentration in the industries in which the Company will focus. The technology
sector is affected by obsolescence of existing technology, short product cycles,
falling prices and profits, and competition from new market entrants. The
manufacturing sector is affected by the level and volatility of commodity
prices, exchange value of the dollar, import controls, worldwide competition,
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control. The services industry is affected
by extensive government regulation in some subsectors, rapid changes due to
blurred distinctions between service segments, availability and cost of capital
funds, changes in interest rates, and price competition.
Increased Exposure to Portfolio Risk
Currently, the Company's non-fundamental investment policy requires it
to invest at least 50% of its total assets in U.S. Government Securities,
obligations of U.S. Government agencies or instrumentalities, and money market
instruments. While these investments are subject to interest rate risk, the
Company's exposure to the risk of default with respect to those investments is
generally minimal. If this Proposal is approved, this policy will be changed by
the Board of Directors and the Company will no longer be required to invest any
portion of its portfolio in such securities; therefore, to the extent that the
Company reduces its holdings of such securities, it will be subject to a greater
degree of risk with respect to the financial stability and business operations
of its portfolio companies.
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Federal Income Tax Treatment
The Company has qualified for and elected tax treatment under
subchapter M of the Internal Revenue Code ("Code") as a regulated investment
company ("RIC"). A RIC, unlike an ordinary corporation, pays no federal income
taxes on that portion of its annual income distributed to shareholders, provided
that at least 90% of such income is so distributed. As a consequence of this
special tax treatment, a RIC is required to act largely as a passive investment
vehicle, limited in its scope of permissible investments and in its ability to
manage directly such investments.
If a change in the Company's business to that of an operating company
is authorized by the shareholders, and certain changes are made to the Company's
portfolio to effect that mandate, the Company would cease to be taxed as a RIC.
Further, dispositions of certain portfolio securities may result in the
incursion of more taxes than otherwise. The Company may cease to be taxed as a
RIC prior to its deregistration with the SEC if and as the mix of its assets
becomes weighted toward large positions, i.e., if the Company begins functioning
as an operating company and fails to satisfy RIC qualification rules. In such
event, the Company would be taxed as a corporation for federal income tax
purposes, and its total net income would be subject to federal taxation at the
corporate level. To the extent that such income is distributed to shareholders,
these distributions are also subject to taxation at the shareholder level as
ordinary income and the Company gets no deduction for such distributions. In
addition, if the Company ceases to be taxed as a RIC, it may become subject to
certain state and local taxes to which it is not currently subject.
In addition, as a RIC, the Company is required to distribute
substantially all of its income each year to shareholders. At such time as the
Company ceases to be taxed as a RIC, it will no longer be subject to this
requirement, and the determination of whether to make distributions to
shareholders will be made in the discretion of the Company's board of directors.
Although no determination has yet been made as to the Company's distribution
policy, in the event this Proposal is approved, it is possible that the board
may determine that all of the Company's working capital is required for its
operations and that, accordingly, no distributions should be made. In that
event, and for so long as such policy is in place, shareholders would receive no
current income from their investment in the Company.
Procedures after Shareholder Approval
In the event of shareholder approval of this Proposal 3, the Company
intends to apply to the SEC for an order under Section 8(f) of the 1940 Act
declaring that it has ceased to be an investment company and that its
registration statement is no longer in effect, as soon as the necessary
purchases, sales and other steps have been taken. After reviewing the
application, the SEC can require the Company to supply additional information,
which may result in one or more amendments to the application. The SEC can on
its own motion or on the motion of any interested party order a public hearing
on the application. It cannot be stated with certainty whether the SEC will
grant the Company's application, and the Company anticipates it would take
approximately six to nine months from the date of filing to obtain a
deregistration order.
If the proposal is approved and if, as a result of a change in the
nature of the Company's operations the SEC should approve deregistration under
Section 8(f) of the 1940 Act, shareholders would no longer have the benefit of
the significant regulatory protections provided by the 1940 Act as outlined
above. However, following deregistration, shareholders would continue to have
the protections afforded by the 1934 Act, which regulates publicly traded
companies, including the following: soliciting proxies from shareholders, filing
interim and annual reports with the SEC, filing securities ownership reports by
directors, officers and principal shareholders, and engaging in insider trading
in securities, using manipulative devices in connection with certain security
transactions, and making misleading statements in reports or documents filed
with the SEC. The protections of the 1940 Act, as described above, are
substantive in nature, and thus differ in both nature and quality, from the
requirements of the 1934 Act, which relate primarily to disclosure and
reporting.
Until the SEC issues a deregistration order, the Company's activities
will continue to be conducted in accordance with its investment policies as
exist currently or as proposed to be amended in Proposal 4. Upon issuance of an
order of deregistration, the investment policies will cease to be effective and
will no longer control the Company's affairs.
Vote Required and the Board's Recommendation
Under the 1940 Act, the Company may not change the nature of its
business so as to cease to be an investment company without the affirmative vote
of the lesser of (a) 67% of the Company's outstanding voting securities present
at the Meeting, if the holders of more than 50% of the Company's outstanding
voting securities are present in person or represented by proxy, or (b) more
than 50% of the Company's outstanding voting securities.
THE COMPANY'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL 3 TO CHANGE THE
NATURE OF THE COMPANY'S BUSINESS SO AS TO CEASE TO BE AN INVESTMENT COMPANY.
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PROPOSAL 4: TO AMEND THE COMPANY'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING CONCENTRATION.
The Company currently seeks to achieve its non-fundamental investment
objective of providing shareholders with an attractive rate of total return from
capital appreciation and income, by investing at least 50% of the value of its
total assets in U.S. Government Securities, obligations of other U.S. Government
agencies or instrumentalities, including inflation-indexed instruments, and
money market instruments. Currently, the Company follows certain fundamental
investment restrictions that may not be changed without shareholder approval.
These fundamental restrictions include the following:
"The Company may not: [6.] Purchase a security if, as a result, 25% or
more of the value of the Company's total assets would be invested in the
securities of issuers in a single industry, provided that this limitation does
not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities."
This restriction may prohibit the Company from effecting its goal of
converting from an investment company to an operating company as described in
Proposal 3 of this Proxy Statement. Shareholders therefore are being asked to
approve a change to fundamental investment restriction 6 prohibiting the Company
from investing more than 25% of its assets in a single industry, to permit the
Company to concentrate its investments in the technology, manufacturing and/or
services industries. The Company's concentration policy would remain
fundamental, as required by the 1940 Act, and would be amended to read as
follows: "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." This would allow the Company the ability to concentrate its assets
in companies in one or more of these industries. The Company expects to
establish and maintain a concentrated position as soon as practicable following
adoption of this policy and identification of appropriate investment
opportunities. As noted above, upon SEC approval of the Company's application
for deregistration as an investment company under the 1940 Act, the Company's
operations would no longer be governed by this policy.
Vote Required and the Board's Recommendation
Approval of this Proposal requires the affirmative vote of the lesser
of (a) 67% of the Company's outstanding voting securities present at the
Meeting, if the holders of more than 50% of the Company's outstanding voting
securities are present in person or represented by proxy, or (b) more than 50%
of the Company's outstanding voting securities.
THE COMPANY'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED"
DIRECTORS, UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL 4 TO
CHANGE THE COMPANY'S INVESTMENT RESTRICTION REGARDING CONCENTRATION, AS
DESCRIBED IN THE PROPOSAL.
PROPOSAL 5: TO AMEND ARTICLE VIII AND ARTICLE XII OF THE COMPANY'S
ARTICLES OF INCORPORATION.
If Proposals 3 and 4 are approved by the shareholders, it is further
proposed that the charter of the Company be amended by eliminating references to
the 1940 Act, which amendments would be filed with the Maryland State Department
of Assessments and Taxation and made effective on or after the date an order is
obtained under Section 8(f) of the 1940 Act, declaring that the Company has
ceased to be an investment company. The amendments would, in connection with the
voting percentages required to approve certain proposals, delete reference to
the voting standard called for under the 1940 Act. Under the 1940 Act, a
majority vote is deemed to mean the affirmative vote of the lesser of (a) 67% of
the Company's outstanding voting securities present at a meeting, if the holders
of more than 50% of the Company's outstanding voting securities are present in
person or represented by proxy, or (b) more than 50% of the Company's
outstanding voting securities. Currently, this standard applies to certain
proposals, including advisory contract amendments, changes in the status of a
company as an investment company, such as that contained in Proposal 3, or
investment policy changes such as that contained in Proposal 4 hereof. The
amendments would also delete all references to conversion of the Company to an
open-end company, as such provisions would no longer be applicable following the
Company's change in status to an operating company. The Company's Board of
Directors determined that the amendments were necessary and advisable, and
approved and advised them, subject to stockholder approval, on July 24, 2000.
Also at that meeting, the Board approved a minor amendment to Article IX of the
Company's Articles of Incorporation to delete a single reference therein to the
1940 Act. This amendment does not require the approval of shareholders, and
therefore such approval is not being sought. The text of the amendments approved
and advised by the Board and requiring shareholder approval is set forth as
Exhibit B hereto.
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<PAGE>
Vote Required and the Board's Recommendation
Approval of this Proposal will be sought by two separate votes.
Approval of this Proposal, with respect to each separate vote, requires the
affirmative vote of a majority of the Company's outstanding voting securities.
Approval of this Proposal is conditioned upon shareholder approval of Proposals
3 and 4.
THE COMPANY'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED"
DIRECTORS, UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" AMENDING THE
COMPANY'S ARTICLES OF INCORPORATION.
ADDITIONAL INFORMATION
A quorum is constituted with respect to the Fund by the presence in
person or by proxy of the holders of a majority of the outstanding shares of the
Fund entitled to vote at the Meeting. In the event that a quorum is not present
at the Meeting, or if a quorum is present but sufficient votes to approve any of
the proposals are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the meeting the following factors may be
considered: the nature of the proposals that are the subject of the Meeting, the
percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation, and the information to be provided
to stockholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at the meeting in person or by
proxy. A stockholder vote may be taken for one or more of the proposals in this
Proxy Statement prior to any adjournment if sufficient votes have been received
for approval. If a quorum is present, the persons named as proxies will vote
those proxies which they are entitled to vote "for" a Proposal in favor of any
adjournment, and will vote those proxies required to be voted "against" a
Proposal against any adjournment. If a proxy is properly executed and returned
accompanied by instructions to withhold authority to vote, represents a broker
"non-vote" (that is, a proxy from a broker or nominee indicating that such
person has not received instructions from the beneficial owner or other person
entitled to vote shares of the Fund on a particular matter with respect to which
the broker or nominee does not have discretionary power) or marked with an
abstention (collectively, "abstentions"), the Fund's shares represented thereby
will be considered to be present at the Meeting for purposes of determining the
existence of a quorum for the transaction of business. Under Maryland law,
abstentions do not constitute a vote "for" or "against" a matter and will be
disregarded in determining "votes cast" on an issue. Abstentions, however, will
have the effect of a "no" vote for the purpose of obtaining requisite approval
for Proposals 2, 3, and 4.
In addition to the use of the mails, proxies may be solicited
personally, by telephone, or by other means, and the Fund may pay persons
holding its shares in their names or those of their nominees for their expenses
in sending soliciting materials to their principals. The Fund will bear the cost
of soliciting proxies. In addition, the Fund will retain D.F. King & Co., Inc.
("D.F. King"), 77 Water Street, 20th Floor, New York, NY 10005, to solicit
proxies on behalf of its Board for a fee estimated at $___00 plus expenses,
primarily by contacting stockholders by telephone and telegram. Authorizations
to execute proxies may be obtained by telephonic instructions in accordance with
procedures designed to authenticate the stockholder's identity. In all cases
where a telephonic proxy is solicited, the stockholder will be asked to provide
his or her address, social security number (in the case of an individual) or
taxpayer identification number (in the case of an entity) or other identifying
information and the number of shares owned and to confirm that the stockholder
has received the Fund's Proxy Statement and proxy card in the mail. Within 48
hours of receiving a stockholder's telephonic voting instructions and prior to
the Meeting, a confirmation will be sent to the stockholder to ensure that the
vote has been taken in accordance with the stockholder's instructions and to
provide a telephone number to call immediately if the stockholder's instruction
are not correctly reflected in the confirmation. Stockholders requiring further
information with respect to telephonic voting instructions or the proxy
generally should contact D.F. King toll-free at 1-800-431-9646. Any stockholder
giving a proxy may revoke it at any time before it is exercised by submitting to
the Fund a written notice of revocation or a subsequently executed proxy or by
attending the meeting and voting in person.
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<PAGE>
Discretionary Authority; Submission Deadlines for Stockholder Proposals
Although no business may come before the Meeting other than that
specified in the Notice of Annual Meeting of Stockholders, shares represented by
executed and unrevoked proxies will confer discretionary authority to vote on
matters which the Fund did not have notice of by ________, 2000 pursuant to Rule
14a-4(c)(1) of the 1934 Act. Pursuant to Rule 14a-8(e)(2) of the 1934 Act,
________, 2000 is the date after which notice of a shareholder proposal
submitted outside the processes of Rule 14a-8 under the 1934 Act is considered
untimely, as established by the Fund's By Laws, as amended December 8, 1999. The
deadline for submitting shareholder proposals for inclusion in the Fund's proxy
statement and form of proxy for the Fund's next annual meeting is ______, 2001
pursuant to Rule 14a-8(e)2 of the 1934 Act. In addition, for a nomination to be
made by a stockholder or for any other business to be properly brought before
the annual meeting by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Company in the
manner set forth in the Company's By-laws. As of the date hereof, the Company's
By-laws provide that to be timely, a stockholder's notice to the Secretary must
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) calendar days not more than ninety (90)
calendar days prior to the anniversary date of the mailing date of the notice of
the preceding year's annual meeting; provided, however, that in the event that
the annual meeting is called for a date that is not within thirty (30) calendar
days before or sixty (60) calendar days after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the later of the sixtieth (60) calendar day prior to such
annual meeting or the tenth (10th) calendar day following the day on which
notice of the date of the annual meeting was mailed or public disclosure of the
date of the annual meeting was made, whichever first occurs. For purposes of
this Section 2.11, the date of a public disclosure shall include, but not be
limited to, the date on which such disclosure is made in a press release
reported by the Dow Jones News Services, the Associated Press or any comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Sections 13, 14 or 15 (d) (or
the rules and regulations thereunder) of the 1934 Act or pursuant to Section 30
(or the rules or regulations thereunder) of the 1940 Act.
As set forth in the Fund's Articles of Incorporation, any action
submitted to a vote by stockholders requires the affirmative vote of at least
eighty percent (80%) of the outstanding shares of all classes of voting stock,
voting together, in person or by proxy at a meeting at which a quorum is
present, unless such action is approved by the vote of a majority of the Board
of Directors, in which case such action requires (A) if applicable, the
proportion of votes required by the 1940 Act, or (B) the lesser of (1) a
majority of all the votes entitled to be cast on the matter with the shares of
all classes of voting stock voting together, or (2) if such action may be taken
or authorized by a lesser proportion of votes under applicable law, such lesser
proportion.
Notice to Banks, Broker/dealers and Voting Trustees and Their Nominees
Please advise the Fund, at its principal executive offices, to the
attention of Monica Pelaez, Secretary, whether other persons are the beneficial
owners of the shares for which proxies are being solicited and, if so, the
number of copies of this Proxy Statement and other soliciting material you wish
to receive in order to supply copies to the beneficial owners of shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
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<PAGE>
EXHIBIT A
AUDIT COMMITTEE CHARTER
1. The Audit Committee shall consist of all Board members who are "independent
directors" in accordance with the American Stock Exchange rules and, only
to the extent necessary so that the Committee consists of at least three
members, other directors.
2. The purposes of the Audit Committee are:
a. to oversee the Fund's accounting and financial reporting policies and
practices, its internal controls and, as appropriate, the internal
controls of certain service providers;
b. to oversee the quality and objectivity of the Fund's financial
statements and the independent audit thereof; and
c. to act as a liaison between the Fund's independent auditors and the
full Board of Directors.
The function of the Audit Committee is oversight. The Fund's management
is responsible for (i) the preparation, presentation and integrity of the Fund's
financial statements, (ii) the maintenance of appropriate accounting and
financial reporting principles and policies and (iii) the maintenance of
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The auditors are responsible for
planning and carrying out a proper audit and reviews. In fulfilling their
responsibilities hereunder, it is recognized that members of the Audit Committee
are not full-time employees of the Fund and are not, and do not represent
themselves to be, accountants or auditors by profession or experts in the fields
of accounting or auditing. As such, it is not the duty or responsibility of the
Audit Committee or its members to conduct "field work" or other types of
auditing or accounting reviews or procedures. Each member of the Audit Committee
shall be entitled to rely on (i) the integrity of those persons and
organizations within and outside the Fund from which it receives information and
(ii) the accuracy of the financial and other information provided to the Audit
Committee by such persons and organizations absent actual knowledge to the
contrary (which shall be promptly reported to the Fund's Board). In addition,
the evaluation of the Fund's financial statements by the Audit Committee is not
of the same quality as audits performed by the independent accountants, nor does
the Audit Committee's evaluation substitute for the responsibilities of the
Fund's management for preparing, or the independent accountants for auditing,
the financial statements.
3. To carry out its purposes, the Audit Committee shall have the following
duties and powers:
a. to recommend the selection, retention or termination of auditors and,
in connection therewith, to evaluate the independence of the auditors,
including whether the auditors provide any consulting services to the
Fund's investment adviser (it being understood that the auditors are
ultimately accountable to the Audit Committee and the Fund's Board and
that the Audit Committee and the Fund's Board shall have the ultimate
authority and responsibility to select, evaluate, retain and terminate
auditors, subject to any required stockholder vote);
b. to ensure receipt of a formal written statement from the auditors on a
periodic basis specifically delineating all relationships between the
auditors and the Fund; to discuss with the auditors any disclosed
relationships or services that may impact the auditors' objectivity
and independence; and to take, or recommend that the full Board take,
appropriate action to oversee the independence of the auditors;
c. to meet with the Fund's auditors, including private meetings, as
necessary (i) to review the arrangements for and scope of the annual
audit and any special audits; (ii) to discuss any matters of concern
relating to the Fund's financial statements, including any adjustments
to such statements recommended by the auditors, or other results of
said audit(s); and (iii) to consider the auditors' comments with
respect to the Fund's financial policies, procedures and internal
accounting controls and management's responses thereto;
d. to consider the effect upon the Fund of any changes in accounting
principles or practices proposed by management or the auditors;
e. to review the fees charged by the auditors for audit and non-audit
services;
f. to investigate improprieties or suspected improprieties in Fund
operations; and
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<PAGE>
g. to report its activities to the full Board on a periodic basis and to
make such recommendations with respect to the above and other matters
as the Audit Committee may deem necessary or appropriate.
4. The Audit Committee shall meet on a regular basis and is empowered to hold
special meetings as circumstances require.
5. The Audit Committee shall regularly meet with the Fund's management,
including financial personnel.
6. The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the expense of the Fund,
7. The Audit Committee shall review the adequacy of this Charter at least
annually and recommend any changes to the full Board. The Board shall also
review and approve this Charter at least annually.
8. The Fund shall provide the American Stock Exchange ("AMEX") written
confirmation regarding:
a. the adoption of this formal written Charter and the Audit Committee's
annual review and reassessment of the adequacy of this Charter;
b. the composition of the Audit Committee consisting of at least three
members and the number of independent directors;
c. any determination that the Fund's Board has made regarding the
independence of directors pursuant to the AMEX rules or applicable
law;
d. the financial literacy of the Audit Committee members as provided in
the AMEX rules; and
e. the determination that at least one of the Audit Committee members has
accounting or related financial management expertise as provided in
the AMEX rules.
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EXHIBIT B
Articles VIII and XII of the charter of Bexil Corporation shall be
amended to read as follows (language to be deleted is enclosed within double
braces; language to be added is enclosed within double asterisks):
Article VIII Certain Votes of Stockholders
(1)(a) Except as otherwise provided in these Articles of Incorporation
and notwithstanding any other provision of the Maryland General
Corporation Law to the contrary, any action submitted to a vote by
stockholders requires the affirmative vote of at least eighty percent
(80%) of the outstanding shares of all classes of voting stock, voting
together, in person or by proxy at a meeting at which a quorum is
present, unless such action is approved by the vote of a majority of
the Board of Directors, in which case such action requires {{(A) if
applicable, the proportion of vote required by the Investment Company
Act of 1940, as amended (the "1940 Act"), or (B)}} the lesser of
{{(1)}} **(A)** a majority of all the votes entitled to be cast on the
matter with the shares of all classes of voting stock voting together,
or {{(2)}} **(B)**if such action may be taken or authorized by a
lesser proportion of votes under applicable law, such lesser
proportion."
{{Article XII Conversion to Open-End Company
Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation, the approval,
adoption or authorization of any amendment to these Articles of
Incorporation that makes the Common Stock or any other class of
capital stock a "redeemable security" as that term is defined in the
1940 Act shall require the affirmative vote of the holders of at
least eighty percent (80%) of the outstanding shares of all classes
of voting stock, voting together, in person or by proxy at a meeting
at which a quorum is present, unless approved by at least fifty (50%)
of the Directors, in which case such amendment or repeal would
require the affirmative vote of the holders of a majority of the
number of votes entitled to be cast thereon.
The Corporation shall notify the holders of all capital stock of the
approval, in accordance with the preceding paragraph of this Article
VII, of any amendment to these Articles of Incorporation that makes
the Common Stock or any other class of capital stock a "redeemable
security" (as that term is defined in the 1940 Act) no later than
thirty (30) days prior to the date of filing of such amendment with
the Department of Assessments and Taxation (or any successor agency)
of the State of Maryland; such amendment may not be filed, however,
until the later of (a) ninety (90) days following the date of
approval of such amendment by the holders of capital stock in
accordance with the preceding paragraph of this Article XII and (b)
the next January 1 or July 1, whichever is sooner, following the date
of such approval by holders of capital stock"}}
B-1
<PAGE>
Your vote is important!
Please sign and date the proxy/voting instructions card above and
return it promptly in the enclosed postage-paid envelope or otherwise
to Bexil Corporation c/o Corporate Election Services, P.O. Box 1150,
Pittsburgh, PA 15230, so that your shares can be represented at the
Meeting.
Please fold and detach card at perforation before mailing.
Bexil Corporation Proxy/Voting Instruction Card
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This proxy is solicited by and on behalf of the Fund's Board of Directors for
the Annual Meeting of Stockholders on November 28, 2000, and at any postponement
or adjournment thereof.
The undersigned stockholder of Bexil Corporation (the "Fund") hereby appoints
Thomas B. Winmill and Monica Pelaez and each of them, the attorneys and proxies
of the undersigned, with full power of substitution in each of them, to attend
the Annual Meeting of Stockholders to be held at the offices of the Fund at 11
Hanover Square, New York, New York on Tuesday, November 28, 2000 at 8:30 a.m.,
and at any postponement or adjournment thereof ("Meeting") to cast on behalf of
the undersigned all votes that the undersigned is entitled to cast at the
Meeting and otherwise to represent the undersigned at the Meeting with all of
the powers the undersigned possesses and especially (but without limiting the
general authorization and power hereby given) to vote as indicated on the
proposals, as more fully described in the proxy statement for the Meeting. The
undersigned hereby acknowledges receipt of the Notice of the Annual Meeting and
the accompanying Proxy Statement and revokes any proxy heretofore given for the
Meeting. If no directions are given, the proxies will vote FOR all proposals and
in their discretion on any other matter that may properly come before the
Meeting.
Sign here as name(s) appear to the left.
-----------------------------
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Signature(s) should be exactly as name or names appearing on
this form. Please sign this proxy and return it promptly
whether or not you plan to attend the Meeting. If signing
for a corporation or partnership or as agent, attorney or
fiduciary, indicate the capacity in which you are signing.
If you do attend the Meeting and decide to vote by ballot,
such vote will supersede proxy
Dated: , 2000
------------------------
<PAGE>
Proxy to be signed and dated on the reverse side.
Please fold and detach card at perforation before mailing.
Bexil Corporation Please mark your votes as in this example: [X]
--------------------------------------------------------------------------------
Please sign, date and return this proxy/voting instructions card promptly in the
enclosed postage-paid envelope. If no direction is given on a proposal, the
proxies will vote FOR the proposal, in accordance with the Fund Board's
recommendations.
1. To elect to the Board of Directors the Nominee, Robert D. Anderson, as
Class III Director, to serve for a five year term and until his successor
is duly elected and qualified.
[ ] FOR the Nominee [ ] WITHHOLD authority for the Nominee
2. To ratify the selection of Tait, Weller & Baker as the Fund's independent
auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To change the nature of the Company's business so as to cease to be an
investment company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To amend the Company's fundamental investment restriction regarding
concentration to read as follows:
"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."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To amend the Company's Articles of Incorporation. Approval of this Proposal
is conditioned upon shareholder approval of Proposals 3 and 4.
A. To amend Article VIII as set forth in Exhibit B.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
B. To amend Article XII as set forth in Exhibit B.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
