<PAGE
- -------------------------------------------------------------------------------
American Stock
BEXIL CORPORATION Exchange Symbol: BXL
- -------------------------------------------------------------------------------
11 Hanover Square, New York, NY 10005
www.bexil.com
January 28, 2000
Fellow Shareholders:
We are pleased to submit this Report for the period ended December 31,
1999, and to welcome our new shareholders who have made their investment since
our last Report.
NEW INVESTMENT OBJECTIVE AND POLICIES
With shareholder approval on December 21, 1999, the Fund's investment objective
became to provide stockholders with an attractive rate of total return from
capital appreciation and income. To achieve this new objective, the Fund will
invest 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. Shareholders
also approved a change to the classification of the Fund from a diversified
investment company to a non-diversified investment company. At December 31,
1999, approximately 35% of the Fund's assets were invested in equities, and the
balance was in U.S. Treasury or Government guaranteed obligations.
REVIEW AND OUTLOOK
Interest rates rose sharply during the second half of 1999. Prices of 30
year Treasury bonds declined as yields rose from 5.96% to 6.48% during this
period, resulting in a negative total return for the year for Treasury bonds of
- -14.66%. In contrast, we are pleased to report that the Fund's total return on a
net asset value basis for the year was -2.54%. The Fund's positive total return
of +4.60% in the six months ending December 31, 1999 in large part is
attributable to the Fund's equity investments.
The Fed Funds rate also rose decisively during the second half of the year. The
Federal Reserve Open Market Committee raised this benchmark level by 0.25% at
both its August and November meetings, bringing the total increase for 1999 to
0.75%, with Fed Funds ending the century at 5.50%. While the Fed left the rate
unchanged at its most recent meeting in December, the language of its
announcement suggests that concerns over the economy's growth could lead to
further rate increases: "Based on the available evidence . . . the Committee
remains concerned with the possibility that over time increases in demand will
continue to exceed the growth in potential supply, even after . . . the
remarkable rise in productivity growth." Our own opinions regarding the future
course of interest rates are discussed below.
<PAGE
During the second half of the year, the domestic economy performed
exceedingly well with real GDP growing at an annualized rate of 5.7% in the
third quarter and 5.8% in the fourth quarter. The unemployment rate declined to
as low as 4.1%, and new jobs were created at an average rate of 274,000 per
month in the fourth quarter, the fastest pace seen last year. We would not be
surprised to see the unemployment rate decline to below 4% in 2000. Yet, average
wage growth, which is thought to be a prime catalyst for an inflationary spiral,
remains contained at moderate 3.7%. With the level of employment high, personal
income grew at close to 5.9% last year. However, personal consumption rose by
around 6.8% as consumer credit grew by over 6.5% over the year and the savings
rate declined.
Inflation seems to have been kept in check during 1999. Producer and consumer
prices rose 3.1% and 2.6% year-over-year in November, while the "core" producer
and consumer prices, which excludes volatile food and energy prices, rose just
1.8% and 2.1%. We note, however, that commodity prices rose sharply in the third
quarter, and that manufacturers report higher prices in the monthly purchasing
managers survey. Import prices, which were important in reducing inflationary
pressures last year, have also risen sharply. Further, as Asian economies
recover and the recession in Latin America subsides, the potential for a
synchronized global economic expansion could create inflationary demand. Even
large increases in home prices have contributed to the wealth effect, increasing
inflationary consumer demand. We don't doubt that the ingredients for inflation
are in place, and expect that interest rates will continue to rise as a result.
Although the Federal Reserve has increased the Fed Funds rate by 0.75%,
enough measures of inflation have increased by more than that to create an
argument that the Fed is the most accommodative it has been in at least the past
two years. We remain concerned that the Fed is already "behind the curve" in not
having been sufficiently aggressive in raising rates. The rate of inflation can
increase at a pace that can appear glacially slow, but unless countered, still
results in a glacier sized problem. This slowness will probably keep the Fed
operating in a familiar 0.25% increment, wait-and-see mode in 2000.
During this period of rising interest rates, the Fund has adopted a
strategy of decreasing the average maturity and duration of the fixed income
securities it holds in its portfolio to reduce the impact of declining bond
prices on total return and increasing the percentage of fixed income securities
which are invested in obligations of GNMA.
For the equity portion of the Fund's portfolio, the investment strategy in
1999 reflected our core belief that the biggest driver of stock market gains
would be the strength of the U.S. economy and, globally, the technology and
telecommunications sectors. Accordingly, the Fund focused on leading cellular
telecommunications companies, telecommunications service providers, and
telecommunications equipment manufacturers. The Fund also benefitted by its
investments in globally oriented companies in the advertising and retail
sectors, whose businesses grew from increasing worldwide consumer spending. To
enhance its returns, the Fund employed leverage. Looking ahead, while post-Y2K
2
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increases in spending will probably jump-start growth in the business technology
area, we expect advertising, retailing and even some kinds of basic
manufacturing will benefit from the strength in the U.S. and many foreign
economies. As with last year, the Fund expects to focus on globally-recognized
industry leaders.
8% DIVIDEND DISTRIBUTION POLICY CONTINUED
The managed 8% dividend distribution policy adopted by the Fund's Board of
Directors in 1997 continues to be well received. The objective is to provide
shareholders with a relatively stable cash flow and reduce or eliminate any
market price discount to the Fund's net asset value per share. Payments are made
primarily from ordinary income and any capital gains, with the balance
representing return of capital. For the year ended December 31, 1999, actual
distributions were 9.1% of average net assets with approximately 18.2% derived
from net investment income and the balance from return of capital. We believe
shares of the Fund are a sound value and an appealing investment for portfolios
seeking total return from capital appreciation and income.
REINVESTMENT PLAN ATTRACTIVE
The Fund's current net asset value per share is $12.17. With a recent
closing on the American Stock Exchange of $9.69 per share, we believe this
represents an important opportunity to purchase additional shares at an
attractive discount from their underlying value. The Fund's Dividend
Reinvestment Plan is a very effective way to add to your holding because
quarterly dividend distributions are reinvested without charge at the lower of
net asset value per share or market price, which can contribute importantly to
growing your investment over time. Please call 1-888-847-4200, and an Investor
Service Representative will be happy to assist you.
We appreciate your support and look forward to continuing to serve your
investment needs.
Sincerely,
/s/ Thomas B. Winmill /s/ Steven A. Landis
Thomas B. Winmill Steven A. Landis
President Senior Vice President Portfolio Manager
3
<PAGE
BEXIL CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENTS - DECEMBER 31, 1999
<TABLE>
<CAPTION>
PAR VALUE MARKET VALUE
---------- ------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (37.79%)
$1,000,000 U.S. Treasury Note, 6.125%, due 12/31/01..................... $ 998,125
1,000,000 U.S. Treasury Note, 5.75%, due 10/31/02...................... 986,250
1,000,000 U.S. Treasury Note, 4.75%, due 2/15/04....................... 943,750
1,000,000 U.S. Treasury Note, 6.625%, due 5/15/07...................... 1,004,375
----------
Total U.S. Government Obligations (cost: $4,055,934).... 3,932,500
----------
U.S. GOVERNMENT AGENCIES (27.61%)
495,235 Government National Mortgage Assn., 6.50%, due 7/15/08....... 480,533
1,232,496 Government National Mortgage Assn., 7.0%, due 11/15/10....... 1,220,299
418,151 Government National Mortgage Assn., 7.0%, due 6/15/23........ 404,213
97,041 Government National Mortgage Assn., 7.0%, due 5/15/24........ 93,807
686,492 Government National Mortgage Assn., 7.25%, due 1/15/27....... 675,137
----------
Total U.S. Government Agencies (cost: $2,882,598)....... 2,873,989
----------
SHARES COMMON STOCKS (34.60%)
COMMUNICATIONS EQUIPMENT (5.97%)
2,800 Motorola, Inc. .............................................. 412,300
1,100 Nokia Corp. ADR*............................................. 209,000
----------
621,300
----------
COMPUTER COMMUNICATIONS EQUIPMENT (3.23%)
1,600 Cisco Systems, Inc.*. ....................................... 171,400
2,200 Lucent Technologies Inc. .................................... 164,588
----------
335,988
----------
ELECTRONIC COMPUTERS (1.49%)
2,000 Sun Microsystems, Inc.* ..................................... 154,875
----------
FINANCE SERVICES (.69%)
500 Morgan Stanley Dean Witter & Co. ............................ 71,375
----------
FIRE, MARINE, CASUALTY INSURANCE & BANKING (1.39%)
2,600 Citigroup Inc. .............................................. 144,462
----------
NEWSPAPER; PUBLISHING OR PUBLISHING & PRINTING (1.76%)
4,800 The News Corporation Limited ADR............................. 183,600
----------
RAILROAD, LINE-HAUL OPERATING (2.15%)
3,000 Kansas City Southern Industries, Inc. ....................... 223,875
----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------ ------------
<S> <C> <C>
RETAIL-CATALOG & MAIL-ORDER HOUSES (2.12%)
2,900 Amazon.com, Inc.* .......................................... $ 220,763
-----------
RETAIL-VARIETY STORES (.73%)
1,100 Wal-Mart Stores, Inc. ...................................... 76,037
-----------
SEMICONDUCTORS & RELATED DEVICES (1.50%)
1,900 Intel Corp. ................................................ 156,394
-----------
SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING 1.23%)
1,700 America Online, Inc.* ...................................... 128,244
-----------
SERVICES-DIRECT MAIL ADVERTISING SERVICES (2.66%)
1,000 CMGI Inc.* ................................................. 276,875
-----------
SERVICES-PREPACKAGED SOFTWARE (2.04%)
1,900 Oracle Corp.*............................................... 212,919
-----------
STATE COMMERCIAL BANKS (1.34%)
1,100 J.P. Morgan & Co. Inc. ..................................... 139,288
-----------
TELEPHONE COMMUNICATION (4.90%)
300 British Telecommunications plc ADR ......................... 71,400
-----------
1,300 China Telecom (Hong Kong) Limited ADR*...................... 167,131
1,900 Korea Telecom Corporation ADR*.............................. 142,025
1,500 Nippon Telegraph & Telephone Corporation ADR................ 129,187
-----------
509,743
-----------
WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE (1.40%)
900 Safeguard Scientifics, Inc.* ............................... 145,857
-----------
Total Common Stocks (cost: $3,002,297)................. 3,601,595
-----------
TOTAL INVESTMENTS (COST: $9,940,829) (100.0%).......... $10,408,084
===========
* Indicates non-income producing security.
See accompanying notes to financial statements.
5
<PAGE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value
(cost: $9,940,829) (note 1) ................. $10,408,084
Collateral for securities loaned, at value
(note 7) .................................... 2,494,621
Interest and dividends receivable ................... 54,892
Other assets ........................................ 773
------------
Total assets ................................ 12,958,370
------------
LIABILITIES:
Collateral for securities loaned, at value
(note 7) .................................... 2,494,621
Demand note payable to bank (note 5) ................ 636,028
Accrued management fees ............................. 5,845
Accrued expenses .................................... 50,505
------------
Total liabilities ........................... 3,186,999
------------
NET ASSETS: (applicable to 774,192
outstanding shares: 250,000,000 shares
of $.01 par value authorized) ....................... $ 9,771,371
============
NET ASSET VALUE PER SHARE:
($9,771,371 / 774,192 shares outstanding) ........... $ 12.62
============
At December 31, 1999, net assets consisted of:
Paid-in capital ..................................... $10,519,481
Accumulated net realized loss
on investments .............................. (1,215,365)
Net unrealized depreciation on investments .......... 467,255
------------
$ 9,771,371
============
</TABLE>
STATEMENTS OF OPERATIONS
Six Months Ended December 31, 1999 and Year Ended June 30, 1999
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, JUNE 30,
1999 1999
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest ........................................ $ 280,827 $ 727,812
Dividends ....................................... 6,743 3,513
--------- ---------
Total investment income ................. 287,570 731,325
--------- ---------
EXPENSES:
Legal (note 8) .......................... 29,369 432,771
Investment management (note 3) .......... 33,988 75,006
Proxy solicitation ...................... 12,058 71,799
Interest ................................ 9,070 56,724
Directors ............................... 13,970 39,001
Custodian ............................... 14,889 25,671
Transfer agent .......................... 9,130 20,999
Accounting and audit (note 3) ........... 17,242 12,600
Printing ................................ 9,151 11,573
Registration (note 3) ................... 3,641 6,500
Other ................................... 2,283 2,322
--------- ---------
Total expenses .......................... 154,791 754,966
Fee reductions (note 4) ......... (199) (1,672)
Investment management fees
waived (note 3) ......... (6,541) (75,006)
--------- ---------
Net expenses .................... 148,051 678,288
--------- ---------
Net investment income ........ 139,519 53,037
--------- ---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss from
security transactions ........... (314,553) (108,195)
Unrealized appreciation (depreciation)
of investments during
the period ...................... 513,382 (251,586)
--------- ---------
Net realized and unrealized
gain (loss) on investments 198,829 (359,781)
--------- ---------
Net increase (decrease) in net
assets resulting from
operations .............. $ 338,348 $(306,744)
========= =========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE
STATEMENTS OF CHANGES IN NET ASSETS
For the Six months ended December 31, 1999 and the Years ended June 30, 1999
and 1998
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ----------------------------
1999 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income ......................................... $ 139,519 $ 53,037 $ 186,230
Net realized gain (loss) from security transactions ........... (314,553) (108,195) 311,085
Unrealized appreciation (depreciation) of investments during the period 513,382 (251,586) 153,901
---------- ----------- -----------
Net change in net assets resulting from operations ......... 338,348 (306,744) 651,216
Subtractions from paid in capital (note 6) .................... -- -- (39,253)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.18, $0.07
and $0.25 per share, respectively) ...................... (139,519) (53,037) (186,230)
Distributions from net realized gains ($0.42 per share) ....... -- -- (311,085)
Distributions from paid in capital ($0.42, $1.13 and
$0.42 per share, respectively) .......................... (318,852) (850,487) (307,240)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from reinvestment
of distributions (12,239, 14,718 and
14,896 shares, respectively) (note 6) ................... 117,165 190.372 195,513
---------- ----------- -----------
Total change in net assets .............................. (2,858) (1,019,896) 2,921
NET ASSETS:
Beginning of period .......................................... 9,774,229 10,794,125 10,791,204
---------- ----------- -----------
End of period ................................................ $9,771,371 $ 9,774,229 $10,794,125
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE
NOTES TO FINANCIAL STATEMENTS
(1) Bexil Corporation, formerly Bull & Bear U.S. Government Securities
Fund, Inc. (the "Fund"), a Maryland corporation, is a non-diversified closed-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's shares are listed on the American Stock Exchange.
The Fund's investment objective is to provide stockholders with an attractive
rate of total return from capital appreciation and income. To seek this
objective, the Fund's investment policy is to invest at least 50% of the value
of its total assets in U.S. Government Securities, obligations of other U.S.
Government agencies or instrumentalities, and money market instruments, and the
remainder of its total assets primarily in equity and other securities of
selected growth companies and in companies that invest or deal in natural
resources or commodities. The investment objective and policy are
non-fundamental and subject to change by the Board of Directors without
shareholder approval. On September 8, 1999, the Board of Director's of the Fund
approved a change in the fiscal year end to December 31. Previously, the fiscal
year end was June 30. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. With respect to security valuation, securities listed or traded on a
national securities exchange or the Nasdaq National Market System ("NMS") are
valued at the last quoted sales price on the day the valuations are made. Such
listed securities that are not traded on a particular day and securities traded
in the over-the-counter market that are not on the NMS are valued at the mean
between the current bid and asked prices. Securities for which quotations from
the national securities exchange or the NMS are not readily available or
reliable and other assets may be valued based on over-the-counter quotations or
at fair value as determined in good faith by or under the direction of the Board
of Directors. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of discounts.
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis. In
preparing financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At December 31, 1999, the
Fund had an unused capital loss carryforward of approximately $1,023,200, of
which $361,000 expires in 2003, 202,000 in 2004, $229,800 in 2005 and $230,400
in 2007. Based on Federal income tax cost of $9,940,829, gross unrealized
appreciation and gross unrealized depreciation were $717,434 and $250,179,
respectively, at December 31, 1999.
(3) The Fund retains CEF Advisers, Inc. (formerly, Bull & Bear Advisers, Inc.)
as its Investment Manager pursuant to an Investment Management Agreement. As
compensation for the service provided pursuant to such agreement, the Fund pays
to the Investment Manager a fee from its assets, such fee to be computed weekly
and paid monthly in arrears at the annual rate of 7/10 of 1% of the first $250
million, 5/8 of 1% from $250 million to $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
8
<PAGE
the week. The Investment Manager has agreed to waive all or part of its fee or
reimburse the Fund monthly if and to the extent the aggregate operating expenses
of the Fund exceed the most restrictive limit imposed by any state in which
shares of the Fund are qualified for sale, although currently the Fund is not
subject to any such limits. The Investment Manager voluntarily waived $6,541 of
its management fee during the six months ended December 31, 1999. Certain
officers and directors of the Fund are officers and directors of the Investment
Manager. The Fund reimbursed the Investment Manager $2,482 for providing certain
administrative and accounting services at cost for the six months ended December
31, 1999.
At the Special Meeting of Shareholders of the Fund held on August 26, 1999,
shareholders were asked to consider and vote upon approval of the Fund's
independent auditors for the fiscal year ending June 30, 1999 and to consider
and vote upon the amendment of the Fund's charter to change the Fund's name to
Bexil Corporation. Regarding the approval of the Fund's independent auditors,
582,241 shares voted in favor, 20,481 shares voted against, and 14,672 shares
voted to abstain. Regarding the amendment of the Fund's charter to change the
Fund's name, 543,082 shares voted in favor, 53,722 shares voted against, and
20,590 shares voted to abstain.
At the Annual Meeting of Shareholders ("Annual Meeting") of the Fund held on
December 21, 1999, shareholders were asked to elect two directors, to ratify the
selection of independent auditors for the fiscal period ending December 31,
1999, to change the Fund's investment objective and certain investment policies,
and to change the classification of the Fund to a non-diversified investment
company. Shareholders elected: Douglas Wu as a director of the Fund with 456,350
shares voting in favor of and 19,316 shares voting to withhold authority; and
Robert D. Anderson as a director of the Fund with 457,285 shares voting in favor
of, and 18,381 shares voting to withhold authority. The names of each other
director whose term of office continued after the meeting are Frederick A.
Parker, Jr., Thomas B. Winmill and Bassett S. Winmill. Regarding ratification of
independent auditors, 445,432 shares voted in favor, 14,276 shares voted
against, and 15,958 shares voted to abstain. Regarding the change to the Fund's
investment objective and certain investment policies; 335,971 shares voted in
favor of changing the Fund's investment objective from the current fundamental
one of providing a high level of current income, liquidity, and safety of
principal by investing primarily in securities backed by the full faith and
credit of U.S. Government Securities to the proposed non-fundamental one of
providing shareholders with an attractive rate of total return from capital
appreciation and income, 57,432 shares voted against, and 13,198 shares voted to
abstain. Regarding the change to the current fundamental policy of the Fund to
invest at least 65% of the value of its total assets in U.S. Government
Securities, including direct obligations of the United States (such as U.S.
Treasury bills, notes, and bonds) and certain agency securities, such as those
issued by the Government National Mortgage Association, to a non-fundamental
policy of 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, and the remainder of its total assets primarily in equity and other
securities of selected growth companies that, in the Investment Manager's
opinion, will grow faster than the economy as a whole, and companies that invest
in or deal in natural resources or commodities, based on its analysis of other
fundamentals, technical and economic trends, and other factors, 334,052 shares
voted in favor, 59,907 shares voted against, and 12,642 shares voted to abstain.
Regarding the amendment to the investment restriction which currently prohibits
the Fund from purchasing or selling commodities or commodity futures contracts,
except for financial and foreign currency futures contracts and options thereon,
and options and forward contracts on
9
<PAGE
foreign currencies, to permit the Fund to purchase and sell options, futures
contracts, including those relating to indices, and options on futures contracts
or indices, 317,138 shares voted in favor of, 74,650 shares voted against, and
14,813 shares voted to abstain. Regarding the amendment to the investment
restriction which prohibits the Fund from purchasing or selling real estate, but
permits the Fund to invest in securities (excluding limited partnership
interests) secured by real estate or issued by companies which invest in real
estate, to clarify that the Fund may invest in companies, limited partnerships,
or other entities that deal in real estate and REITs and to reserve for the Fund
the freedom of action to hold and sell real estate acquired as a result of the
Fund's ownership of securities, 330,314 shares voted in favor, 60,632 shares
voted against, and 15,655 shares voted to abstain. Regarding the change to the
classification of the Fund to a non-diversified investment company, 327,735
shares voted in favor of, 60,448 shares voted against, and 18,418 shares voted
to abstain. Pursuant to Rule 14a-5(e)(2) of the Securities Exchange Act of 1934,
as amended (the "1934 Act"), September 18, 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.
(4) The Fund has entered into an arrangement with its custodian whereby interest
earned on uninvested cash balances was used to offset a portion of the Fund's
expenses. During the period, the Fund's custodian fees were reduced by $199
under such arrangements. Purchases and proceeds of sales of investment
securities other than short term investments aggregated $9,814,060 and
$8,675,097, respectively, for the six months ended December 31, 1999.
(5) The Fund has a committed bank line of credit. At December 31, 1999, the
balance outstanding was $636,028 and the interest rate was equal to the Federal
Reserve Funds Rate plus 1.00 percentage point. For the six months ended December
31, 1999, the weighted average interest rate was 5.53% based on the balances
outstanding from the line of credit and the reverse repurchase agreement during
the year and the weighted average amount outstanding was $275,973. The maximum
amount of debt outstanding during the period was $897,037.
(6) Effective October 4, 1996, the Fund converted from an open-end management
investment company to a closed-end management investment company. In connection
with the conversion, costs of approximately $39,300 were charged against paid-in
capital in 1998. In addition, the Fund has adopted a Dividend Reinvestment Plan
(the "Plan"). Under the Plan, each dividend and capital gain distribution, if
any, declared by the Fund on outstanding shares will, unless elected otherwise
by each shareholder by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution, be paid on the payment
date fixed by the Board of Directors or a committee thereof in additional shares
in accordance with the following: whenever the Market Price (as defined below)
per share is equal to or exceeds the net asset value per share at the time
shares are valued for the purpose of determining the number of shares equivalent
to the cash dividend or capital gain distribution (the "Valuation Date"),
participants will be issued additional shares equal to the amount of such
dividend divided by the Fund's net asset value per share. Whenever 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
10
<PAGE
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 the Exchange prior to
such date, then the mean between the closing bid and asked quotations for the
shares on the Exchange on such date, and (b) net asset value per share on a
particular date shall be as determined by or on behalf of the Fund.
(7) As of December 31 1999, the Fund loaned securities having a value of
$2,358,912 and received cash collateral of $2,494,621 for the loan. The Fund
loaned securities to certain brokers who paid the Fund lenders' fees. These
fees, less costs to administer the program, are included in interest income and
amounted to $2,343 for the six months ended December 31, 1999. The loans are
secured at all times by cash or U.S. Government obligations in an amount at
least equal to the market value of the securities loaned, plus accrued interest,
determined on a daily basis and adjusted accordingly. Although the Fund may
regain record ownership of loaned securities to exercise certain beneficial
rights, the Fund may bear the risk of delay in recovery of, or even loss of
rights in, the securities loaned should the borrower fail financially.
(8) A group called Karpus Investment
Management ("KIM") at the 1997 annual meeting of the Fund sought to elect its
slate of nominees in opposition to management and at the 1998 annual meeting of
the Fund made a counter-solicitation on all management proposals and a
solicitation to terminate the investment management agreement. On February 19,
1998, KIM filed a lawsuit against the Fund in the Circuit Court for Baltimore
City, Maryland, Case No. 9805005, which was dismissed with prejudice on October
1, 1998. On February 19, 1998, the Fund filed a lawsuit against KIM in the
United States District Court for the Southern District of New York, 98 Civ.
1190. On December 22, 1998, KIM filed a lawsuit against the Fund in the United
States District Court for the District of Maryland Court, 98-CV-4161 and the
Fund made counterclaims. In connection with these and other legal matters, legal
expenses borne by the Fund were $432,771 for the year ended June 30, 1999 and
$29,369 for the six months ended December 31, 1999. On May 25, 1999, the Fund
and KIM announced that they had entered into a settlement of all litigation in
the United States District Court for the Southern District of New York and in
the United States District Court for the District of Maryland. In connection
with the settlement, KIM sold its 12.7% stake in the Fund of 95,175 shares to an
affiliate of the Investment Manager for $12 7/8 per share in July and August
1999.
(9) The Fund participates in repurchase agreements with the Fund's custodian.
The custodian takes possession of the collateral pledged for investments in
repurchase agreements. The underlying collateral is valued daily on a
mark-to-market basis to ensure that the value, including accrued interest, is at
least equal to the repurchase price. In the event of default of the obligation
to repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
11
<PAGE
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED JUNE 30,
DECEMBER -------------------------------------
31, 1999 1999 1998 1997 1996 1995
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $12.83 $14.45 $14.74 $14.74 $15.20 $14.63
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .18 .07 .25 .70 .64 .73
Net realized and unrealized gain (loss)
on investments....................... .21 (.49) .55 .01 (.46) .60
------ ------ ------ ------ ------ ------
Total from investment operations..... .39 (.42) .80 .71 .18 1.33
Less distributions:
Distributions from net investment income (.18) (.07) (.25) (.71) (.64) (.76)
Distributions in excess of net realized
gains ............................... -- -- (.42) -- -- --
Distributions from paid in capital ..... (.42) (1.13) (.42) -- -- --
------ ------ ------ ------ ------ ------
Increase (decrease) in net asset
value ..................... (.21) (1.62) (.29) -- (.46) .57
------ ------ ------ ------ ------ ------
Net asset value at end of period ............... $12.62 $12.83 $14.45 $14.74 $14.74 $15.20
====== ====== ====== ====== ====== ======
Per share market value at end of period ........ $9.50 $12.13 $13.13 $12.63
====== ====== ====== ======
TOTAL RETURN ON NET ASSET VALUE BASIS .......... 4.60% (2.64)% 6.43% 5.58% 1.18% 9.40%
====== ====== ====== ====== ====== ======
TOTAL RETURN ON MARKET VALUE BASIS (a) ......... (16.68)% 1.26% 12.87% (9.57)%
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) .... $9,771 $9,774 $10,794 $10,791 $13,035 $16,377
====== ====== ====== ======= ======= =======
Ratio of expenses to average net assets (b)(c)(d) 3.05%* 6.33% 5.77% 2.13% 2.10% 2.00%
====== ====== ====== ======= ======= =======
Ratio of net investment income to average net
assets ...................................... 2.87%* 0.49% 1.69% 4.48% 4.25% 4.96%
====== ====== ====== ======= ======= =======
Portfolio turnover rate ........................ 88% 112% 168% 246% 762% 482%
====== ====== ====== ======= ======= =======
</TABLE>
* Annualized.
(a) Effective October 4, 1996, the Fund converted from an open-end management
investment company to a closed-end management investment company. The Fund
has calculated total return based upon purchases and sales of shares of the
Fund at current market values and reinvestment of dividends and
distributions at the lower of the per share net asset value on the payment
date or the average of the closing market price for the five days preceding
the payment date.
(b) The ratio for the six months ended December 31, 1999 and the years ended
June 30, 1999 and 1997 after custodian fee 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 year ended June
30, 1998.
(c) Ratio excluding interest expense were 2.86%*, 5.80%, 4.93% and 1.94% for the
six months ended December 31, 1999 and the years ended June 30, 1999, 1998
and 1997, respectively.
(d) Ratio prior to reimbursement were 3.18%*, 7.03% and 5.82% for the six months
ended December 31, 1999 and the years ended June 30, 1999 and 1998,
respectively.
12
<PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Bexil Corporation:
We have audited the accompanying statement of assets and liabilities of
Bexil Corporation, formerly Bull & Bear U.S. Government Securities Fund, Inc.,
including the schedule of portfolio investments as of December 31, 1999, and the
related statement of operations for the six months then ended, the statement of
changes in net assets and the financial highlights for each of the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The statement of operations, statement of changes in net assets and the
financial highlights for the year ended June 30, 1999 were audited by other
auditors whose report, dated August 9, 1999, expressed an unqualified opinion on
this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Bexil Corporation as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
periods noted above, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Certified Public Accountants
Philadelphia, Pennsylvania
January 14, 2000
13
<PAGE
- ----------------------------------------------------------------------------
BEXIL BEXIL
CORPORATION CORPORATION
- -------------------- -----------------
11 Hanover Square American Stock
New York, NY 10005 Exchange Symbol:
1-888-847-4200 BXL
- -------------------- -----------------
Independent Auditors Annual Report
Tait, Weller & Baker December 31, 1999
Printed on recycled paper
BXL-12/9
