SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-2
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Annual Amendment for Fiscal Year Ending
July 1, 2000
BDI INVESTMENT CORPORATION
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter
990 Highland Drive, Suite 100, Solana Beach, CA 92075-2472
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (858) 794-6300
Richard M. Sandler, Esq.
Lowenstein, Sandler, Brochin, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068
--------------------------------------------------------------------------------
(Name and Address of Agent for Service of Process)
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS OR REGISTRATION STATEMENT
------------------------------------------------------------
BDI Investment Corporation, a New Jersey corporation which is
registered as a closed end diversified management investment company under the
Investment Company Act of 1940, is referred to in this Annual Amendment to its
Registration Statement on Form N-2 as either the "Registrant" or the "Company".
There is incorporated herein by reference, in response or partial response to
the items of this Form, the Company's Registration Statement on Form N-2 filed
with the Securities and Exchange Commission on January 9, 1984 (the
"Registration Statement"), the Annual Amendment to its Registration Statement on
Form N-2 for its fiscal year ended June 30, 1984, filed with the Securities and
Exchange Commission on October 29, 1984 (the "Annual Amendment"), an Amendment
Number 1 to the Annual Amendment filed with the Securities and Exchange
Commission on December 5, 1984 (the "Amendment No. 1"), the Annual Financial
Statement for the year ending July 1, 2000, a Restated Certificate of
Incorporation, a Custodian Agreement, and the Registrant's By-laws as amended.
2
<PAGE>
Item l. Cover Page
----------
Not Applicable
Item 2. Synopsis
--------
Not Applicable
Item 3. Condensed Financial Information
-------------------------------
Not Applicable
Item 4. Plan of Distribution
--------------------
Not Applicable
Item 5. Use of Proceeds
---------------
Not Applicable
Item 6. General Information and History
-------------------------------
The information furnished in the Registration Statement in response to
Items 6(a), 6(b) and 6(c) and the information furnished in the Annual Amendment
in response to Item 6(d) is incorporated herein by reference.
During the last five fiscal years, there has been no public trading market
for the Registrant's Common Stock. The Common Stock is not presently listed on a
stock exchange. Closed-end investment companies' securities frequently trade for
amounts less than net asset value.
3
<PAGE>
The per share net asset value of the Registrant at the end of each quarter
during the last three fiscal years, after giving effect to the fair market value
of the Registrant's securities on each date, is listed below. The Registrant
does not calculate its net asset value on a daily basis, but does not believe
that the variation between the per share net asset value at the end of the
quarter and the per share high and low net asset value during the quarter (if
such data were available), would be material.
<TABLE>
<CAPTION>
Per Share
Net Asset Value
---------------
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
June 27, 1998 July 3, 1999 July 1, 2000
------------- ------------ ------------
<S> <C> <C> <C>
First Quarter $ 9.87 $10.12 $9.80
Second Quarter $ 9.82 $ 9.99 $9.61
Third Quarter $10.04 $10.11 $9.84
Fourth Quarter $ 9.96 $ 9.85 $9.65
</TABLE>
Item 7. Investment Objectives and Policies
----------------------------------
The information furnished in Amendment No. 1 in response to Item 7 is
incorporated herein by reference. There has been no significant variation in the
Registrant's portfolio turnover rate during the last two fiscal years.
4
<PAGE>
Item 8. Tax Status
----------
The information furnished in the Annual Amendment in response to Item 8
(subject to the correction noted in the following sentence) is incorporated
herein by reference. The information furnished in the Annual Amendment stated
that "with respect to 75% of its portfolio, the Company may not invest more than
5% of its total assets in the securities of any one issuer". In fact, the
Internal Revenue Code requires that only 50% of the Company's portfolio be
diversified in this manner.
Under the 1986 Tax Reform Act and applicable to all calendar years after
1986, a Regulated Investment Company is subject to a four percent excise tax on
the excess of its required distribution for the calendar year over the amount
actually distributed for the calendar year. Generally, the amount required to be
distributed is 70% of the Regulated Investment Company's ordinary income, plus
90% of its capital gain net income.
Item 9. Brokerage Allocation and Other Practices
----------------------------------------
The information furnished in the Registration Statement in response to
Items 9 (a)-(d) is incorporated herein by reference.
(e) Not Applicable
Item 10. Pending Legal Proceedings
-------------------------
5
<PAGE>
The information furnished in the Registration Statement in response to Item
10 is incorporated herein by reference.
Item 11. Control Persons and Principal Holders of Securities
---------------------------------------------------
The only persons or entities who either control the Registrant, own of
record, or who are known by the Registrant to own beneficially, more than 5% of
the outstanding voting securities of the Registrant is the Arsobro, L.P. The
holdings of Arsobro, L.P. as of October 19, 2000, was as follows:
<TABLE>
<CAPTION>
Shares of Common
Names and Stock Owned Percent
Address of Beneficially as of of
Stockholders October 19, 2000 Class
------------ ---------------- -----
<S> <C> <C>
Arsobro, L.P. (1) 1,316,957 92.64%
990 Highland Drive
Solana Beach, CA
</TABLE>
By virtue of the control position of Arthur Brody, he will likely be able
to determine the outcome on any matter requiring the vote of shareholders
including, without limiting thereby, engagement of an investment adviser,
changes in the Registrant's investment objectives and policies and director
elections.
The officers and directors of the Registrant as a group own 1,318,027
shares of the Registrant's Common Stock representing 92.72% of the outstanding
stock.
------------------------------------
(1) Arthur Brody generally possesses the sole power to vote and make investment
decisions with respect to all of the shares beneficially owned by Arsobro,
L.P.
6
<PAGE>
Item 12. Directors, Officers and Advisory Board Members
----------------------------------------------
(a) The table below provides certain information regarding all executive
officers and directors of the Registrant. The Registrant does not have
an advisory board.
<TABLE>
<CAPTION>
Position Held Principal Occupations During
Name and address with the Registrant During Past 5 Years
---------------- ------------------- ----------------------------
<S> <C> <C>
Arthur Brody* Chairman, Chairman of the Board of
BDI Investment President, Directors and Chief Executive
Corporation Officer of the Company. Also
990 Highland Dr. serves as Chairman of the
Solana Beach, CA Board and Chief Executive
92075 Officer of Nubro, Inc., the
general partner of Brodart Co.
of Reading Company (a real
estate holding company) from
December, 1991 to 1993;
Director since 1989. Partner
in the professional law firm
of Haskins, Nugent, Newnhaum
& Kane from 1970 to 1989.
Edward L. Kane Director Independant Consultant; Adjunct
7405 High Ave. Profes California Western
La Jolla, CA School of Law; Chair Chief
92037 Executive Officer of Altis
Outpat Services, February 1993
through January 1995. President
of Craig Corporation (a
diversified holding company)
from 1988 to 1993. President of
Reading Company (a real estate
holding company) from December,
1991 to 1993; Director since
1989. Partner in the
professional law firm of
Haskins, Nugent, Newnhaum &
Kane from 1970 to 1989.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Michael Stolper Director President, Stolper and Company,
One America Plaza, Inc. (pension consulting firm
Suite 1010 600 West which is a registered
Broadway Street investment adviser); member of
San Diego, CA board of directors of Meridian
92101 Fund (registered investment
company), 1983 to present;
director and shareholder of
Aster Capital Management
(registered investment
adviser); and director of Janus
Capital (registered investment
adviser); and Director of
Pasadena Capital Corp. (regist-
ered investment advisor).
Teresa Whorton Treasurer Treasurer of the Company since
990 Highland Drive 1999. Assistant Treasurer since
STE 100 1994.
Solana Beach CA 92075
Donald Brody Secretary Chief Financial Officer of
2431 Fifth St. Vertical Cubed, a California
Berkeley, CA 94612 corporation.
</TABLE>
*Directors who are interested "persons" within the definition of Section
2(a)(19) of the Investment Company Act of 1940.
The Registrant does not have an executive or investment
Committee. Donald Brody is the son of Arthur Brody. There are no other family
relationships among any of the listed above.
Item 13. Remuneration of Directors and Others
------------------------------------
The information furnished in the Annual Amendment in response to Item
13 is incorporated herein by reference.
<PAGE>
Item 14. Custodian, Transfer Agent and Dividend-Paying Agent
---------------------------------------------------
(a) The Registrant's custodian is:
Dean Witter Reynolds,
Inc. 5 World Trade Center
New York, New York 10048
(b) The Registrant's transfer agent and
dividend-paying agent is:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Item 15. Investment Advisory and Other Services
--------------------------------------
The information furnished in the Registration Statement in response to
Items 15(a), 15(b) and 15(d) and the information furnished in the Annual
Amendment in response to Item 15(c) is incorporated herein by reference.
During the fiscal years ended June 27, 1998, July 3, 1999, and July
1, 2000, the Company paid $27,233.29, $26,636.19 and $30,484.54 respectively, to
Brodart Co., a New York general partnership, to reimburse that company for its
costs in furnishing clerical and accounting services to Registrant.
Item 16. Defaults and Arrears on Senior Securities
-----------------------------------------
The information furnished in the Registration Statement in
response to Item 16 is incorporated herein by reference.
<PAGE>
Item 17. Capital Stock
-------------
The information furnished in the Registration Statement in response to
Item 17 is incorporated herein by reference.
(b) The following table sets forth certain information as to the
Registrant's capital stock as of August 16, 1999.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Amount Held By
Title of Amount the Registrant or Amount Outstanding Exclusive of
Class Authorized for its Account Amount Shown Under (3)
-------- ---------- ----------------- ---------------------------------
<S> <C> <C> <C>
Common Stock $.10 4,500,000 3,600 shares 1,421,551 shares
par value shares
Preferred
Stock 500,000 0 0
no par value shares
</TABLE>
Item 18. Long-Term Debt
--------------
The information furnished in the Registration Statement in response to
Item 18 is incorporated herein by reference.
Item 19. Other Securities
----------------
The information furnished in the Registration Statement in response to
Item 19 is incorporated herein by reference.
Item 20. Financial Statements
--------------------
The Company's financial statements for the year ended July 1, 2000
included in the Company's Annual Report to Shareholders prepared pursuant to
Section 30(d) of the Investment Company Act of 1940 and Rule 30d-1 thereunder,
as filed with the Securities and Exchange Commission on or about August 31, 2000
are incorporated herein by reference in response to this Item 20.
PART II OTHER INFORMATION
Item 1. Marketing Arrangements
----------------------
Not Applicable
Item 2. Other Expenses of Issuance and Distribution
-------------------------------------------
Not Applicable
Item 3. Indemnification
---------------
The Registrant no longer carries directors and officers
liability insurance coverage. At the annual meeting of shareholders held
December 1, 1987, the Shareholders of the Registrant amended the Certificate of
Incorporation of the Registrant consistent with what were then newly enacted
sections of the New Jersey Business Corporation Act that permitted New Jersey
corporations to include in the Certificates of Incorporation provisions which
would limit the liability of directors and officers in certain instances.
Accordingly, both the Board of Directors and the Shareholders approved an
amendment to the Registrant's Certificate of Incorporation providing as follows:
"Tenth: So long as permitted by law, no director of the
corporation shall be personally liable to the corporation or
its shareholders for damages for breach of any duty owed by
such person to the corporation or its shareholders; provided
however, that this paragraph Tenth shall not relieve any
person from liability to the extent provided by applicable law
for any breach of
duty based upon an act or omission (a) in breach of such
person's duty of loyalty to the corporation or its
shareholders, (b) not in good faith or involving a knowing
violation of law or (c) resulting in receipt by such person of
an improper personal benefit. No amendment to or repeal of
this paragraph Tenth and no amendment, repeal or termination
of effectiveness of any law authorizing this paragraph Tenth
shall apply to or have any effect on the liability or alleged
liability of any director for or with respect to any acts or
omissions of such director occurring prior to such amendment,
repeal or termination of effectiveness.
Eleventh: So long as permitted by law, no officer of the
corporation shall be personally liable to the corporation or
its shareholders for damages for breach of any duty owed by
such person to the corporation or its shareholders; provided,
however, that this paragraph Eleventh shall not relieve any
person from liability to the extent provided by applicable law
for any breach of duty based upon an act or omission (a) in
breach of such person's duty of loyalty to the corporation or
its shareholders, (b) not in good faith or involving a knowing
violation of law or (c) resulting in receipt by such person of
an improper personal benefit. No amendment to or repeal of
this paragraph Eleventh and no amendment, repeal or
termination of effectiveness of any law authorizing this
paragraph Eleventh shall apply to or have any effect on the
liability or alleged liability of any officer for or with
respect to any acts or omissions of such officer occurring
prior to such amendment, repeal or termination of
effectiveness."
However, the amendment is not intended to protect any
director, officer, investment advisor, or principal underwriter against any
liability to the Registrant or its security holders for which such a person
would otherwise by subject by reason of willful misfeasance, bath faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office as outlined in Sections 17(h) and (i) of the Investment Company Act of
1940.
<PAGE>
In addition, Article 9 of Registrant's Restated Certificate of
Incorporation is still in full force and effect and the terms are presently
identical to those outlined in the information furnish in the Registration
Statement in response to Item 3 that is incorporated herein by reference. In
addition, the Registrant has entered into letter agreements with each director
whereby the Registrant agrees to indemnify the director to the fullest extent
authorized or permitted by the provisions of the New Jersey Business Corporation
Act, by any amendment to that statute or any other statutory provisions
authorizing or permitting such indemnification which is adopted after the date
of the letter agreement. Notwithstanding the foregoing, the Registrant is not
obligated pursuant to the letter agreements to indemnify the directors for any
of the following:
(a) On account of any suit in which judgment is rendered
against a director for an accounting of profits made from the purchase or sale
of securities of the Company pursuant to the provisions of Section 16(b) of the
Securities and Exchange Act of 1934, as amended, or similar provisions of any
federal, state or local statutory law;
(b) On account of any conduct by the director which is finally
adjudged to have been knowingly fraudulent, deliberately or willfully dishonest
or other willful misconduct;
(c) With respect to any remuneration paid to a director which
is finally adjudged to have been in violation of law; or
<PAGE>
(d) If a final decision by a court having jurisdiction in the
matter determines that such indemnification is not lawful.
Item 4. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements. All financial statements required to be
furnished are included in Part I of this Amendment.
(b) Exhibits. (1) Certificate of Incorporation as amended and as now in
effect
Item Description
---- -----------
(2) By-laws as amended and as now in effect
(3) None
(4) Incorporated by reference
(5) None
(6) None
(7) Not Applicable
(8) None
(9) Incorporated by reference
(10) None
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) None
(15) None
Item 5. Persons Controlled by or Under Common Control
---------------------------------------------
with Registrant
---------------
The information furnished in the Registration Statement in
response to Item 5 is incorporated herein by reference. In addition to the
foregoing, by virtue of his ownership of 39.7% of the outstanding common stock
of Nubro, Inc., a Delaware corporation, Arthur Brody is able to control Nubro.
Nubro, in turn, is a controlling partner of Brodart Co., a New York general
partnership ("Brodart"), and of Brojo, L.P., a New Jersey limited partnership.
Brodart, by purchasing substantially all of the assets of the Registrant in
1983, has succeeded to the business conducted by the Registrant prior to the
time it became an investment company.
Item 6. Number of Holders of Securities
-------------------------------
The information in this table is furnished as of August 14, 2000.
Title of Class Number of Record Holders
-------------- ------------------------
Common shares, 205
$.10 par value
Preferred Shares, -0-
no par value
Item 7. Location of Accounts and Records
--------------------------------
The information furnished in the Registration Statement in response to
Item 7 is incorporated herein by reference.
<PAGE>
Item 8. Business and Other Connections of Investment Adviser
----------------------------------------------------
Not Applicable
Item 9. Management Services
-------------------
None
Item 10. Undertakings
------------
Not Applicable
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Annual Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Solana Beach, and State of California, on the 23rd day of October, 2000.
BDI INVESTMENT CORPORATION (Registrant)
By: /s/ Arthur Brody
---------------------------------------
Arthur Brody, President
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
BDI INVESTMENT CORPORATION
Pursuant to N.J.S.A. 14A:9-5, this constitutes a restated certificate
of incorporation for BDI Investment Corporation, a New Jersey corporation.
FIRST: The name of the corporation is BDI Investment corporation.
SECOND: The location of the current registered office is 65 Livingston
Avenue, Roseland, New Jersey 07068, and the agent therein and in charge thereof,
upon whom process against this corporation may be served is Alan V. Lowenstein.
THIRD: The purposes for which this corporation is formed are to carry
on the business of an investment company, investing, reinvesting, acquiring,
holding for investment or otherwise, buying, selling, assigning, transferring,
exchanging or otherwise disposing of (i) cash and cash items; (ii) securities of
different types and classes, including without in any way limiting the
generality thereof, stocks, bonds, notes, debentures and certificates of
interest or participation, and certificates, receipts, warrants or other
instruments representing rights to receive, purchase, or subscribe for same, or
evidencing or representing any other interests therein, created or issued by
person, partnerships, trusts, firms, associations, corporations, combinations,
organizations, governments or subdivisions thereof; (iii) real and personal
property of all descriptions, and any interests therein; and (iv) to do all
things necessary or incidental thereto.
FOURTH: The total authorized capital stock of the corporation shall be
5,000,000 shares consisting of (1) 500,000 shares of Preferred Stock without
nominal or par value; and (2) 4,500,000 shares of Common Stock, par value $.10
per share.
The voting powers and designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
restrictions, or limitations thereof are as follows:
A. Preferred Stock.
-----------------
Shares of Preferred Stock may be issued in one or more series as may be
determined from time to time by the Board of Directors. Each such series shall
be distinctly designated by the Board of Directors. Before any dividends shall
be paid on the Common Stock, shares of Preferred Stock of any series shall be
entitled to receive dividends at the rate established for such series by the
Board of Directors. Before any distribution is made with respect to the Common
Stock upon dissolution, liquidation, or winding up of the affairs of the
corporation, shares of Preferred Stock of any series shall be entitled to
receive the amount payable upon dissolution liquidation, or winding up of the
affairs of the corporation specified for such series by the Board of Directors
in connection with the creation of that series. Except in respect of the
particulars to be fixed by the Board of Directors for each series permitted
hereby, all shares of Preferred Stock shall be of equal rank and shall be
identical. All shares of any one series of Preferred Stock so designated by the
Board of Directors shall be alike in every particular except that, in the case
of a series entitled to cumulative dividends, shares issued at different times
may differ as to the dates from which dividends thereon shall be cumulative.
<PAGE>
The preferences and relative, participating, optional and other special
rights of each series and the qualifications, limitations and restrictions
thereof, if any, may differ from those of any others series at any time
outstanding to the extent permitted by law and by this certificate of
incorporation. The Board of Directors of the corporation is hereby expressly
granted authority to fix, by resolutions duly adopted prior to the issuance of
any shares of a particular series (to the extent permitted by law in effect when
such resolutions are adopted), the designations, preferences and relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions of such series, including the following: (1) the
number of shares constituting such series; (2) the rate and times at which, and
the terms and conditions on which, dividends on Preferred Stock of such series
will be paid; (3) the right, if any, of the holders of the Preferred Stock of
such series to convert the same into, or exchange the same for, shares of other
classes or series of stock of the corporation and the terms and conditions of
such conversion or exchange, including provision for adjustment of the
conversion price or rate in such events as the Board of Directors shall
determine; (4) the redemption price or prices and the time or times at which,
and the terms and conditions on which, Preferred Stock of such series may be
redeemed; (5) the rights of the holders of Preferred Stock of such series upon
the voluntary or involuntary dissolution, liquidation or winding up of the
corporation; (6) the terms or amount of any sinking fund provided for the
purchase or redemption of the Preferred Stock of such series; (7) if permitted
by law in effect at the time of the effective date of the resolution of the
Board of Directors creating any such series, provisions making dividends payable
with respect to Preferred Stock of such series cumulative, non-cumulative or
partially cumulative; (8) if permitted by law in effect at the time of the
effective date of the resolution of the Board of Directors creating any such
series, provisions giving the Preferred Stock of such series no voting rights,
multiple, limited or special voting rights and to specify those voting rights;
and (9) if permitted by law in effect at the time of the effective date of the
resolution of the Board of Directors creating any such series, provisions making
dividends payable with respect to the Preferred Stock of such series fully
participating, partially participating, or non-participating.
If the Board of Directors is not permitted by law in effect on the
effective date of a resolution creating any such series to alter the
characteristics of a series as specified in paragraphs 7, 8, and 9 above, then
the shares of stock of any such series shall be entitled to cumulative
dividends, shall be non-participating and shall have one vote per share and,
except as otherwise required by law in effect on the effective date of such
resolution, shall vote as one class with the Common Stock on all matters to come
before the Stockholders.
B. Common Stock.
-------------
1) Dividends. Subject to the preferences and other rights of the
Preferred Stock as fixed in the resolution or resolutions of the Board of
Directors providing for the issue of such Preferred Stock, such dividends
(payable in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid out of funds legally available therefor upon
the Common Stock from time to time.
<PAGE>
2) Rights Upon Liquidation, Dissolution, or Winding Up. In the event of
any liquidation, dissolution, or winding up of the affairs of the corporation,
after payment to the holders of Preferred Stock of the amounts to which they are
entitled pursuant to the resolution or resolutions of the Board of Directors
providing for the issue of such Preferred Stock, the holders of the Common Stock
shall be entitled to share ratably per share in all assets then remaining
subject to distribution to the stockholders.
3) Voting Rights. At every meeting of the stockholders of the
corporation, every holder of Common Stock shall be entitled to one (1) vote per
share.
(a) any resolution, motion or corporate action which shall
require the vote of the stockholders may be validly adopted, authorized or
approved by the affirmative vote of a majority of the votes cast by the holders
of shares entitled to vote on such resolution, motion or corporate action.
(b) the majority voting requirements prescribed in the New
Jersey Business Corporation Act sections 14A:9-23(4)(c) (relating to charter
amendments), 14A:10-3(2) (relating to merger or consolidation), 14A:10-11(1)(c)
(relating to sale of assets not in the regular course of business), and
14A:12-4(4) (relating to dissolution) are expressly adopted by this corporation.
Each share of Common Stock, par value Ten Cents ($.10) per share, which
is authorized and outstanding at the close of business on the effective date of
this amendment (Filed in the Office of the Secretary of State of New Jersey on
December 23, 1968) shall be changed and reclassified at the close of business on
such effective date into two shares of Common Stock, par value Ten Cents ($.10)
per share. The capital stock shall be increased at the close of business on the
effective date of this amendment by transferring an amount equal to Ten Cents
($.10) per share on the shares then outstanding from the paid-in capital account
to the capital stock account of the corporation.
FIFTH: The Board of Directors of the corporation is comprised of four
members, whose names and post office addresses are as follows:
NAME POST OFFICE ADDRESS
---- -------------------
ARTHUR BRODY c/o BDI Investment Corporation
10983 Via Frontera
San Diego, California 92127
JOSEPH D. LARGEN c/o BDI Investment Corporation
10983 Via Frontera
San Diego, California 92127
EMIL P. MARTINI, JR. c/o Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, California 92668-3510
MICHAEL STOLPER c/o Stolper & Co.
525 B Street, Suite 630
San Diego, California 92101-4409
SIXTH: The period of existence of this corporation is unlimited.
<PAGE>
SEVENTH: In furtherance, and not in limitation, of the general powers
conferred by the laws of New Jersey and the objects set forth in Article THIRD,
above:
A. Corporate Powers - The corporation shall have the power:
1. To conduct its business, and have one or more offices
within or without the State of New Jersey as shall, from time to time, be
necessary or convenient for the purpose of the corporation's business.
2. To enter into partnerships or joint undertakings.
3. To purchase or otherwise acquire the corporation's own
capital stock; and, to the extent permitted by law, to hold the same as treasury
stock.
4. To borrow money and give security therefor, without
limitation.
B. Powers of Board - The Board of Directors of the corporation shall
have the power:
1. To make, alter and repeal the bylaws of the corporation,
subject always to alteration or repeal by the stockholders.
2. To enter into contracts on behalf of the corporation with
one or more persons who are employees, officers, directors, or stockholders of
the corporation or with any other corporation, or any company, association,
partnership, syndicate or other entity in which one or more employees, officers,
directors or stockholders of the corporation shall have an interest as
employees, officers, directors, stockholders, partners, members, owners, or in
any other capacity whatsoever. Any director of the corporation may be counted in
determining the existence of a quorum for a directors' meeting of the
corporation and may vote with respect to a contract described in this paragraph,
provided that he discloses the existence of his interest, if any, to the Board
of Directors of the corporation before the vote on the contract.
3. To issue warrants and optional rights to purchase or
subscribe for - or to both purchase and subscribe for - capital stock and bonds,
notes, debentures, or other obligations of the corporation convertible into
capital stock or bearing warrants or other evidences of optional rights to
purchase or subscribe for - or to both purchase and subscribe for - capital
stock, in such amounts and upon such terms and conditions as the Board of
Directors shall from time to time deem to be in the best interests of the
corporation.
4. To issue and sell authorized shares of capital stock of the
corporation for such consideration as the Board of Directors may fix from time
to time: provided that such consideration shall not be less than the par value
of such shares.
The corporate objects listed in Article THIRD shall also be construed
as corporate powers. The enumeration of specific corporate objects, corporate
powers, and powers of the corporation's Board of Directors in Article THIRD and
this Article SEVENTH shall not be construed to limit any general corporate
objects or powers or powers of a Board of Directors as set forth in this
certificate or provided by the laws of the State of New Jersey.
<PAGE>
EIGHTH: No holder of capital stock of the corporation shall be entitled
as of right to subscribe for, purchase, or receive any part of any new or
additional shares of capital stock, whether now or hereafter authorized, or of
bonds, debentures, or other evidences of indebtedness convertible into or
exchangeable for capital stock: but all such new or additional shares of capital
stock, or bonds, debentures, or other evidences of indebtedness convertible into
or exchangeable for capital stock, may be issued and disposed of by the Board of
Directors on such terms and for such consideration, so far as may be permitted
by law, and to such person or persons as the Board of Directors in their
absolute discretion may deem advisable.
NINTH: Any present or future director or officer of the corporation and
any present or future director or officer of any subsidiary or other corporation
serving as such at the request or election of the corporation because of the
corporation's interest in such other corporation and the legal representative of
any such director or officer, shall be indemnified by the corporation against
reasonable costs and expenses exclusive of any amount paid to the corporation in
settlement, and counsel fees paid or incurred in connection with any action,
suit or proceeding to which any such director or officer or his legal
representative shall be made a party by reason of his being or having been such
director or officer; provided (1) said action, suit or proceeding shall be
prosecuted against such director or officer or against his legal representative
to a final determination, and it shall not be finally adjudged in such action,
suit or proceeding that he had been derelict in the performance of this duties
as such director or officer; or (2) said action, suit or proceeding shall be
settled or otherwise terminated as against such officer or director or his legal
representative without a final determination on the merits, and it shall be
determined by the Board of Directors that said director or officer had not in
any substantial way been derelict in the performance of his duties as charged
such action, suit or proceeding. The right of indemnification granted by this
Article NINTH shall be in addition to, and not in restriction or limitation of,
any other right of indemnification which may be granted by the corporation in
accordance with the laws of the State of New Jersey.
TENTH: The shareholders of the corporation shall have the right to
dissent from any sale, lease, exchange or other disposition of all or
substantially all of the assets of the corporation, not in the usual or regular
course of business, provided such disposition is consummated not later than July
2, 1983, notwithstanding any provision of law which otherwise would deprive
shareholders of their right to dissent.
ELEVENTH: So long as permitted by law, no director of the corporation
shall be personally liable to the corporation or its shareholders for damages
for breach of any duty owed by such person to the corporation or its
shareholders; provided, however, that this paragraph ELEVENTH shall not relieve
any person from liability to the extent provided by applicable law for any
breach of duty based upon an act or omission (a) in breach of such person's duty
of loyalty to the corporation or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c) resulting in receipt by such person
of an improper personal benefit. No amendment to or repeal of this paragraph
ELEVENTH and no amendment, repeal or termination of effectiveness of any law
authorizing this paragraph ELEVENTH shall apply to or have any effect on the
liability or alleged liability of any director for or with respect to any acts
or omissions of such director occurring prior to such amendment, repeal or
termination of effectiveness.
<PAGE>
TWELFTH: So long as permitted by law, no officer of the corporation
shall be personally liable to the corporation or its shareholders for damages
for breach of any duty owed by such person to the corporation or its
shareholders; provided, however, that this paragraph TWELFTH shall not relieve
any person from liability to the extent provided by applicable law for any
breach of duty based upon an act or omission (a) in breach of such person's duty
of loyalty to the corporation or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c) resulting in receipt by such person
of an improper personal benefit. No amendment to or repeal of this paragraph
TWELFTH and no amendment, repeal or termination of effectiveness of any law
authorizing this paragraph TWELFTH shall apply to or have any effect on the
liability or alleged liability of any officer for or with respect to any acts or
omissions of such officer occurring prior to such amendment, repeal or
termination of effectiveness.
IN WITNESS WHEREOF, the undersigned has executed this Restated
Certificate of Incorporation this 16th day of September, 1988.
BDI INVESTMENT CORPORATION
BY: /S/ ARTHUR BRODY
----------------
Arthur Brody
Chairman of the Board
<PAGE>
CERTIFICATE
OF
BDI INVESTMENT CORPORATION
Pursuant to N.J.S.A. 14a:9-5(5), this is to certify, on behalf of BDI
Investment Corporation, that the Restated Certificate of Incorporation of BDI
Investment Corporation attached hereto was duly adopted by resolution of the
Board of Directors on September 7, 1988.
Date: 9/7/88 /S/ ARTHUR BRODY
----------------
Arthur Brody
CHAIRMAN OF THE BOARD
<PAGE>
BYLAWS
OF
BDI INVESTMENT CORPORATION
AS AMENDED THROUGH JUNE 30, 1990
ARTICLE I
Offices and Seal
Section 1. Offices. The registered office of the corporation shall be
--------
65 Livingston Avenue, Roseland, New Jersey. The principal place of business of
the corporation shall be at such location within or without the State of New
Jersey as the Board of Directors may from time to time direct. The corporation
may also have such other offices, at such other locations, within or without the
State of New Jersey, as the Board of Directors may from time to time direct.
Section 2. Seal. The seal of the corporation shall be circular in form
-----
and shall have the name of the corporation and the words and numerals
"Incorporated N.J. 1955" in the circumference and a design consisting of the
letters "BD" in the center.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. An annual meeting of the shareholders of the
---------------
corporation shall be held on such day during the months of October, November or
December of each year, and at such hour, as shall be fixed by the board of
directors and designated in the notice of meeting. At such annual meeting, the
shareholders shall elect a board of directors and transact such other business
as may be brought before the meeting. The annual meeting of shareholders may be
dispensed with, and the election of directors and such other action requiring
shareholder approval accomplished, by the execution of a written consent in lieu
of such meeting signed by all shareholders who would have been entitled to vote
for directors upon such other action if the meeting had been held. If no annual
meeting has been held on the date fixed in the manner set forth above and no
written consent in lieu of such meeting has been executed by shareholders as
above provided, the board of directors shall cause a meeting of shareholders to
be held, or a written consent in lieu thereof to be executed, as soon after such
fixed date as shall be convenient, for the purposes above set forth.
Section 2. Special Meetings. Special meetings of the shareholders may
------------------
be called, for any purpose or purposes, by the Chairman or the President.
Special meetings shall be called by the Secretary, or, in the case of death,
absence, incapacity or refusal of the Secretary, by any other officer, upon the
written request of a majority of the Board of directors or upon the written
request of shareholders who hold, in the aggregate, at least 25% of the shares
of stock of the corporation then issued, outstanding and entitled to vote at
such meeting provided that such written request by the directors or by the
shareholders sets forth the purpose or purposes of the proposed special meeting.
A special meeting of shareholders may be dispensed with, and any action
requiring shareholder approval accomplished, by the execution of a written
consent in lieu of such meeting signed by all shareholders who would have been
entitled to vote upon such action if the meeting had been held.
<PAGE>
Section 3. Location. Annual and special meetings of the shareholders of
---------
the corporation shall be held at such place in the States of New Jersey,
California, Pennsylvania, or New York as the Board of Directors may from time to
time designate. The Location of each meeting shall be stated in the notice of
the meeting.
Section 4. Notice of Meeting. Written notice of the place, date, hour
------------------
and purpose or purposes of each meeting of shareholders--whether an annual or
special meeting--shall be mailed or delivered to each shareholder entitled to
vote at such meeting, not less than ten (10) nor more than sixty (60) days prior
to the meeting. A meeting of shareholders may be held without prior written
notice thereof, if all the shareholders entitled to vote at such meeting shall
execute, before or at such meeting, a written waiver of notice setting forth the
place, date, hour and purpose or purposes thereof.
Section 5. Quorum. The presence in person or by proxy of the holders of
-------
one-third of the issued and outstanding shares of capital stock of the
corporation shall be necessary and sufficient to constitute a quorum for the
transaction of business at all meetings of the shareholders. If not enough
shareholders shall be present at a meeting, in person or by proxy, to constitute
a quorum, those shareholders who are present and who would have been entitled to
vote at the meeting shall have the power to adjourn the meeting from time to
time, until enough shareholders shall be present to constitute a quorum.
Section 6. Adjournment. Meetings of shareholders may be adjourned at
------------
such time and place in the States of New Jersey, California, Pennsylvania, or
New York as the majority of stockholders at the meeting shall determine and
announce at that meeting, and no further notice of an adjourned meeting need be
given. At such adjourned meeting, provided a quorum is present, in person or
proxy, any business may be transacted as could have been transacted at the
meeting which was adjourned.
Section 7. Voting. At all meetings of shareholders, each person
-------
entitled to vote, and present at the meeting in person or by proxy, shall have
one vote for each full share of capital stock of the corporation eligible to
vote and standing in his name on the books of the corporation. Persons receiving
the greatest number of votes shall be elected directors. All matters other than
election of directors shall be determined by the vote of the holders of a
majority of the shares present in person or by proxy at such meeting.
Section 8. Proxies. Any shareholder of record entitled to vote may be
--------
represented at any regular or special meeting of the shareholders by a duly
appointed proxy. All proxies shall be written and properly signed, but shall
require no other attestation, and shall be filed with the secretary of the
meeting before being voted. No proxy shall be voted more than one year after its
date. The attendance at any meeting of the shareholder who may have previously
given a proxy shall not have the effect of revoking the proxy unless the
shareholder attending the meeting shall, in writing, so notify the secretary of
the meeting at any time prior to the voting of the proxy. A proxy with respect
to stock held in the name of two or more persons shall be valid if executed by
or on behalf of one of them, unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.
<PAGE>
Section 9. Inspectors of Election. At each meeting of the shareholders
-----------------------
at which an election of a director is to be held, or a vote is to be taken, the
presiding officer shall appoint two (2) or more inspectors of election, none of
whom shall be a candidate for the office of director. The inspectors of election
shall, before entering upon their duties, take and subscribe an oath faithfully
to hold and conduct the election of directors and all other votes of
shareholders. They shall then take the votes of the shareholders and make a
report thereof to the presiding officer. Voting for the election of directors or
on any other matter need not be by ballot.
Section 10. List of Shareholders. The Secretary or other officer of the
---------------------
corporation who shall have charge of its transfer books and the stock books,
shall prepare, at least ten (10) days before each meeting, a complete list of
the shareholders of record entitled to vote thereat, arranged in alphabetical
order, with the post office address of each shareholder and the number of shares
held. Such list, and the transfer books and stock books of the corporation,
shall be open to the examination of any shareholder at all times during the
usual hours for business at the principal office of the corporation during said
ten-day period, and shall be produced at the time and place of the meeting and
shall remain there during the meeting.
ARTICLE III
Directors
Section 1. Number and Election. The property, affairs and business of
--------------------
the corporation shall be managed by it board of directors, which shall consist
of not less than three nor more than eleven members. The board of directors from
time to time shall fix the number of directors within the limits set forth
above. The board of directors shall be elected by the shareholders of the
corporation each year at the regular annual meeting of shareholders and shall
hold office until the next succeeding annual meeting of the shareholders and
thereafter until their successors are elected and qualified.
Section 2. Qualifications. Each director shall be at least twenty-one
---------------
years of age. Directors need not be United States citizens or residents of the
State of New Jersey.
Section 3. Resignation and Removal. Any director may resign at any
--------------------------
time. Any director may be removed for cause by a majority vote of the directors
then in office.
Section 4. Vacancies. Any vacancy in the board of directors existing
----------
for any reason whatsoever, including a vacancy caused by an increase in the
number of directors, may be filled by the affirmative vote of a majority of the
remaining directors then in office, even though their number may not be
sufficient to constitute a quorum. A director so elected to fill a vacancy shall
hold office until the next succeeding annual or special meeting of the
shareholders and thereafter until the successor is elected and qualified.
If a director shall resign from the board effective at a future date a
majority of the directors then in office, including the director who has so
resigned, may, by the affirmative vote of a majority (even though their number
may not be sufficient to constitute a quorum) fill such vacancy the vote thereon
to take effect when such resignation shall become effective. A director so
elected to fill a vacancy shall hold office from the effective date of his
predecessor's resignation until the next succeeding annual or special meeting of
the shareholders and thereafter until his successor is elected and qualified.
<PAGE>
A vacancy or vacancies in the board of directors shall be deemed to
exist in the case of the death, resignation, or removal of any director, or if
the authorized number of directors shall be increased. No reduction of the
authorized number of directors shall have the effect of removing any director
prior to the expiration of his term of office.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. A director so elected
shall hold office from the date of his election to the next succeeding annual
meeting of shareholders and thereafter until his successor is elected and
qualified.
ARTICLE IV
Meetings of the Board
Section 1. Place. The board of directors of the corporation may hold
------
meetings, both regular and special, either within or without the State of New
Jersey, at such time or times and place or places as shall be determined by the
board of directors.
Section 2. Regular Meeting. Regular meetings of the board of directors
----------------
shall be held without notice at such times and places as the board of directors
shall from time to time prescribe by resolution; provided, however, that a
regular meeting of the board of directors shall be held without notice
immediately following the adjournment of each annual meeting of shareholders at
such place as the board of directors shall prescribe by resolution.
Section 3. Special Meeting. Special meetings of the board of directors
----------------
may be called by the Chairman or the President at his own behest and shall be
called by the President upon receipt of a written request for such a meeting
signed by any two directors. Such special meeting shall be held on at least two
days' notice to each director if such notice is given personally or by telegram,
or by at least four days' notice to each director if such notice is given by
mail. Any such notice shall state the time and place at which, and the purpose
or purposes for which, such meeting is to be held. The board of directors may
meet to transact any business at any time and place without notice, provided,
however, that every member of the board shall be present, or that any member or
members not present shall waive notice of such meeting in writing before or at
such meeting.
Section 4. Quorum. At any meeting of the board of directors, a majority
-------
of the board shall be necessary and sufficient to constitute a quorum for the
transaction of business, but if a quorum should not be present, a lesser number
may adjourn the meeting to some future date not more than thirty days later, and
the Chairman, the President or Secretary of the corporation shall give written
notice of the time and place of such adjourned meeting.
Section 5. Voting. All questions coming before the board shall be
-------
determined and decided by a majority vote without regard to class. Each director
shall be entitled to one vote at all meetings of the board.
Section 6. Action Without Meeting. The board may act without a meeting
-----------------------
if, prior or subsequent to such action, each member of the board shall consent
in writing to such action. Such written consent or consents shall be filed in
the minute book of the corporation.
<PAGE>
Section 7. Establishment of Committees. At any meeting of the board of
----------------------------
directors, an executive committee or such other committees as the board may deem
necessary, consisting of one or more directors, may be appointed by the board,
and such committees shall possess and exercise such powers and authority as the
directors shall specify in the resolution appointing them. The board shall have
the power, with respect to established committees, to
(a) fill any vacancy in any such committee;
(b) appoint one or more directors to serve as alternate members of
any such committee to act in the absence or disability of members
of any such committee with all the powers of such absent or
disability of members of any such committee with all the powers
of such absent or disabled members;
(c) any such committee at its pleasure, and
(d) remove any director from membership on such committee at any
time, with or without cause.
Section 8. Presiding Officer and Secretary of Committees. The chairman
----------------------------------------------
of the board shall be the chairman of each committee on which he serves, and at
his option he may appoint another member of the committee to act as chairman.
Each other committee on which the chairman of the board does not serve shall
choose one of its members to act as chairman. Each committee shall from time to
time designate a secretary of the committee, who shall either be a member of the
committee or the secretary or an assistant secretary of the corporation, to keep
a record of its proceedings.
Section 9. Meetings of Committees. Each committee shall adopt its own
-----------------------
rules of procedure and shall meet at such stated times as it may by resolution,
appoint, and whenever called together by the chairman of the board or president.
If the committee establishes regular meeting dates, it shall not be necessary to
give notice of any such regular meeting. Notice of every special meeting shall
be given in the manner and within the time periods specified in Section 3 of
this Article IV with respect to notices of special meetings of the board of
directors. Notice of any special meeting may be waived in writing by all of the
absent members of the committee either before or after the meeting.
Section 10. Quorum for Committee Meeting. A quorum at any meeting of
------------------------------
any committee shall be not less than one-half (1/2) of the entire committee.
Every act or decision done or made by a majority of the directors present at a
committee meeting duly held at which a quorum is present shall be regarded as
the act of the committee.
Section 11. Action Without Committee Meeting. Any committee may act
-----------------------------------
without a meeting if, prior or subsequent to such action, each member of the
committee shall consent in writing to such action. Such written consent or
consents shall be filed in the minute book of the corporation.
Section 12. Reports of Committee Actions. Actions taken by any
--------------------------------
committee, whether at a committee meeting or by written consent, shall be
reported to the board at the next board meeting following such action.
<PAGE>
ARTICLE V
Notices
Section 1. Form and Delivery. Notices to directors and shareholders
-------------------
shall be in writing and may be delivered personally or by mail or telegram.
Notice by mail shall be deemed to be given at the time when deposited in the
post office or a letter box, in a post-paid, sealed wrapper and addressed to the
director or shareholder at his address appearing on the records of the
corporation. Notices given personally or by telegram shall be deemed to be given
when delivered to the address of the director or shareholder appearing on the
records of the corporation.
Section 2. Waiver. Whenever a notice is required to be given by a
-------
statute, the certificate of incorporation or these by-laws, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or at the time stated therein, shall be deemed equivalent to such notice. In
addition, any shareholder attending a meeting of shareholders in person or by
proxy, without protesting prior to the meeting or at its commencement the lack
of notice thereof to him, and any director attending a meeting of the board of
directors or any committee of the board without protesting prior to the meeting
or at its commencement such lack of notice shall be conclusively deemed to have
waived notice of such meeting.
ARTICLE VI
Officers
Section 1. Designation. The officers of the corporation shall be the
------------
Chairman, the President, one or more vice presidents, a secretary, a treasurer,
and such assistant secretaries and assistant treasurers, and such additional
officers as the board of directors may from time to time deem advisable.
Section 2. Term of Office. The officers shall be elected by a majority
---------------
vote of the whole board of directors, annually, at the first regular meeting
after the annual meeting of the shareholders, and they shall hold office until
their respective successors are elected and shall have qualified.
Section 3. Chairman, Vice Chairman and President.
--------------------------------------
A. Chairman of the Board. The Chairman of the Board shall be the chief
----------------------
executive officer of the corporation. He shall preside at all meetings of the
shareholders and at all meetings of the directors. He shall, subject only to the
direction and control of the board of directors, have general charge of,
supervision over and responsibility for the business and affairs of the
corporation. He shall generally possess such powers and perform such duties as
usually pertain to his office or to the office of the president.
B. Vice Chairman of the Board. The Vice Chairman of the Board shall
-----------------------------
preside at meetings of the shareholders and at meetings of the directors in the
event of the absence or inability to act of the Chairman of the Board, and shall
perform such duties and possess such powers as shall be delegated to him by the
Chairman of the Board.
C. President. The President shall be the chief operating officer of the
----------
corporation. He shall perform such duties as the chairman of the board shall
direct and shall generally possess such powers and perform such duties as
usually are incident to the office of the President, including power to
supervise the business and activities of the corporation and to instruct, direct
and control its other officers, agents and employees.
<PAGE>
Section 4. Vice Presidents. The corporation shall have one or more vice
----------------
presidents as shall be determined from time to time by the board of directors.
The board of directors may designate one of the vice presidents as executive
vice president. The vice presidents, in the order of their seniority, shall have
and exercise all the powers and duties of the President in case of his absence
or inability to act and shall perform such duties and possess such powers as
shall be assigned to them by the board of directors or by the President with the
approval of the board of directors. The board of directors shall also determine
the order in which the vice presidents shall assume the authority of the
President in his absence. Unless otherwise ordered by the board of directors,
any vice president may sign contracts or other instruments authorized either
generally or specifically by the board of directors.
Section 5. Secretary. The secretary shall cause notices of all meetings
----------
to be served as prescribed in these by-laws, shall keep the minutes of all
meetings of the shareholders, board of directors, and all committees of the
board of directors or shareholders, and shall have charge of the seal of the
corporation, the corporate records and the transfer and registration of the
capital stock of the corporation. He shall attest the execution of contracts and
other instruments signed in the name of the corporation authorized and proper in
the conduct of its business, and may affix the corporate seal thereto. He shall
perform such other duties and possess such other powers as are incident to this
office or as are assigned to him by the President or the board of directors. If
required by law, he shall be sworn to the faithful discharge of his duties.
Section 6. Treasurer. The treasurer shall have the custody of the funds
----------
and securities of the corporation and shall keep or cause to be kept regular
books of account for the corporation. He shall account to the President or the
board of directors, whenever they may require, concerning all his transactions
as treasurer and concerning the financial condition of the corporation. The
treasurer shall perform such other duties and possess such other powers as are
incident to his office or as shall be assigned to him by the President or the
board of directors. The treasurer shall not be required to give bond for the
faithful discharge of his duties.
Section 7. Assistant Secretaries. Assistant secretaries shall perform
-----------------------
all of the duties and responsibilities of the secretary on such occasions on
which the secretary shall be unavailable to perform the duties of the office,
and shall perform all other duties and exercise all other powers as shall be
assigned to them by the board of directors or by the President with the approval
of the board of directors.
Section 8. Assistant Treasurers. Assistant treasurers shall perform all
---------------------
of the duties and responsibilities of the treasurer on such occasions on which
the treasurer shall be unavailable to perform the duties of the office, and
shall perform all other duties and exercise all other powers as shall be
assigned to them by the board of directors or by the President with the approval
of the board of directors.
Section 9. Removal or Suspension. Any officer may be removed or
------------------------
suspended, with or without cause, by the vote of a majority of the whole board
of directors.
Section 10. Vacancies. A vacancy for any reason in any office may be
----------
filled by the vote of a majority of the whole board of directors.
Section 11. Dual Office. One person may hold two or more offices in
------------
the corporation, except that the same person shall not be both President and
Secretary of the corporation.
<PAGE>
ARTICLE VII
Share Certificates
Section 1. Form and Signature. The certificates for shares of the
--------------------
capital stock of the corporation shall be in such form as shall be determined by
the board of directors and shall be numbered consecutively and entered in the
books of the corporation as they are issued. Each certificate shall exhibit the
registered holder's name and the number of shares, and shall be signed by the
Chairman, the President or a Vice President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, and shall bear the seal of
the corporation or a facsimile thereof. Where any such certificate is
countersigned by a transfer agent, or registered by a registrar, the signature
of any corporate officer may be a facsimile signature. In case any officer who
signed, or whose facsimile signature or signatures were placed on, any such
certificate shall have ceased to be such officer before such certificate is
delivered by the corporation, it may nevertheless be issued and delivered by the
corporation with the same effect as if such person had not ceased to be such
officer of the corporation.
Section 2. Description of Rights and Preferences. All share
--------------------------------------------
certificates issued by the corporation shall contain on the face or back - or
shall state that the corporation will furnish to any shareholder upon request
and without charge - a full statement of the rights and preferences of the
shares to which the certificate relates.
Section 3. Lost Certificates. The board of directors may direct a new
-------------------
share certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation and alleged to have been lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
Section 4. Registration of Transfer. The stock of the corporation shall
-------------------------
be assignable and transferable on the books of the corporation only by the
person in whose name it appears on said books or his legal representatives. Upon
surrender to the corporation or any transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation or such transfer agent to issue a new certificate to the person
entitled thereto, to cancel the old certificate and record the transaction upon
its books. Except as provided herein or by the laws of the State of New Jersey,
the corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends and to vote
as such owner and the corporation shall be entitled to hold liable to assessment
a person registered on its books as owner of shares and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person whether or not it received express or other notice
thereof.
<PAGE>
Section 5. Record Date for Dividends or Rights. For the purpose of
---------------------------------------
determining the shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action affecting the
interests of shareholders, the board of directors may fix, in advance, a record
date. Such date shall be not more than sixty nor less than ten days before the
date of any such meeting or more than sixty days prior to any other action. In
each such case, except as otherwise provided by law, only such persons as shall
be shareholders of record on the dates so fixed shall be entitled to receive
payment of any dividend or the allotment of rights, or otherwise to be
recognized as shareholders for the related purpose, notwithstanding any
registration of transfer of shares on the books of the corporation after any
such record date so fixed.
ARTICLE VIII
General Provisions
Section 1. Instruments under Seal. All deeds, bonds, mortgages,
-------------------------
contracts, and other instruments requiring a seal may be signed in the name of
the corporation by the chairman or president or by any other officer authorized
to sign such instrument by the chairman or the president.
Section 2. Checks. All checks or demands for money and notes or other
-------
instruments evidencing indebtedness or obligations of the corporation shall be
signed by any one or more officers or employees whom the chairman of the board
or president may from time to time designate, subject to the direction of the
board of directors.
Section 3. Fiscal Year. The fiscal year of the corporation shall end on
------------
the Saturday in June or July which is nearest to the last day in June, and the
fiscal year shall begin on the day immediately following the end of the
preceding fiscal year.
Section 4. Employee Benefit Plans. The board of directors of the
-------------------------
corporation shall have the power to adopt, and from time to time to alter, amend
or repeal, plans for
a. The issue or the purchase and sale of its capital stock to any or
all of its employees and those actively engaged in the conduct of the business
of the corporation or to trustees on their behalf, and the payment for such
stock in installments or at one time, with or without the right to vote thereon
pending payment therefor in full, and for aiding any such employees and other
persons in paying for such stock by contributions, compensation for services or
otherwise.
b. The participation by all or any of its employees and those actively
engaged in the conduct of the business in the profits of the corporation
enterprise or any branch or division thereof. Such participation may be based
upon length or nature of service, amount of compensation paid or shares owned,
or upon such other basis as the board of directors may select for the purpose.
Benefits under such plans may be paid in cash or by delivery of shares of the
corporation's capital stock - whether treasury shares, or authorized but
unissued shares, or shares purchased by the corporation for the purpose of
funding the plan - or in such other manner as the board of directors may select
for the purpose.
<PAGE>
c. The furnishing to its employees, wholly or in part at the expense of
the corporation, of medical services, insurance against accident, sickness or
death, pensions during old age, disability, or unemployment, education, housing,
social services, recreation or other similar aids for their relief or general
welfare.
Section 5. Amendments. The board of directors shall have the power to
-----------
alter, amend, repeal or supplement these by-laws at any regular meeting or at
any special meeting of the board called for that purpose. These by-laws,
including any such changes adopted by the board of directors, may also be
altered, amended, repealed or supplemented by vote of the holders of a majority
of the shares of capital stock of the corporation present in person or by proxy
at any annual or special meeting of the shareholders. By-laws altered, amended,
repealed, or supplemented by the board of directors. If any by-law regulating an
impending election of directors should be adopted, amended or repealed by the
board, there shall be set forth in the notice of a meeting of shareholders for
such election of directors the by-laws so adopted, amended or repealed together
with a concise statement of the changes made.
Section 6. Director Loans. The corporation may lend money to, or
----------------
guarantee any obligation of, or otherwise assist any director who is an officer
of the corporation or of any subsidiary, whenever, in the judgment of the board
of directors, such loan, guarantee or assistance may reasonably be expected to
benefit the corporation, provided that neither Arthur Brody nor his spouse or
children, nor George Bonsall, shall be eligible for such loans, guarantees or
other assistance. Any such loan, guarantee or other assistance may be made only
when authorized by a majority of the entire board of directors and may be made
with or without interest and whether unsecured or secured in such manner as the
board shall approve, including, without limitation, by a pledge of shares of the
corporation, and may be made upon such other terms and conditions as the board
may determine. A director who is also an officer of the corporation shall be
disqualified from voting on any loan, guarantee or other assistance proposed to
be made to him or her pursuant to this section. The statutory power of the board
of directors to make such loans and guarantees and to provide other assistance
to employees of the corporation other than directors shall not in any way be
limited to this section.
<PAGE>
BDI INVESTMENT CORPORATION
FINANCIAL STATEMENTS
For the Year Ended July 1, 2000
(with auditor's report thereon)
<PAGE>
BDI INVESTMENT CORPORATION
TABLE OF CONTENTS
For The Year Ended July 1, 2000
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 1
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Statement of Assets and Liabilities 2
Schedule of Portfolio Investments 3-11
Statement of Operations 12
Statements of Changes in Net Assets 13
Notes to Financial Statements 14-18
Financial Highlights 19
Corporate Data 20
--------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF LAVINE, LOFGREN, MORRIS & ENGELBERG, LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
BDI Investment Corporation
Solana Beach, California
We have audited the accompanying statement of assets and liabilities of BDI
Investment Corporation including the schedule of portfolio investments as of
July 1, 2000, the related statement of operations for the year then ended and
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the three years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights of BDI Investment Corporation for each of the three years in the
period ended, ended June 28, 1997 were audited by other auditors whose report
dated July 28, 1997, expressed an unqualified opinion on those financial
highlights.
We conducted our audit 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 and
financial highlights. Our procedures included confirmation of investments owned
as of July 1, 2000 by correspondence with the custodian and brokers. 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 BDI
Investment Corporation as of July 1, 2000, the results of its operations for the
year then ended, changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles.
/s/ Lavine, Lofgren, Morris & Engelberg, LLP
July 27, 2000
<PAGE>
BDI INVESTMENT CORPORATION
STATEMENT OF ASSETS AND LIABILITIES
July 1, 2000
--------------------------------------------------------------------------------
ASSETS AND LIABILITIES
Assets:
Investments at market value (amortized cost: $13,126,000) $ 13,405,000
Cash and cash equivalents 637,000
Interest receivable 167,000
--------------------------------------------------------------------------------
Total assets 14,209,000
--------------------------------------------------------------------------------
Liabilities:
Payable to affiliate 16,000
Accrued expenses 8,000
Dividend payable 457,000
--------------------------------------------------------------------------------
Total liabilities 481,000
--------------------------------------------------------------------------------
NET ASSETS
Net assets $ 13,728,000
--------------------------------------------------------------------------------
Net asset value per share (based on 1,421,551 shares outstanding) $ 9.65
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds
--------------------------------------------------------------------------------
Alhambra, California; City Elementary $ 200,000 $ 203,000
5.25%; September 1, 2012
Anaheim, California; Water Revenue; 100,000 104,000
6.000%; July 1, 2003
Associated Bay Area Government; 255,000 255,000
Certificate of Participation;
6.100%; October 1, 2000
Bakersfield, California; Public Financing 200,000 204,000
Authority Revenue; Series A; 5.800%;
September 15, 2006
Banning, California; Community 100,000 107,000
Redevelopment Agency; 7.000%;
March 1, 2020
Berkeley California Unified School 40,000 38,000
District; Refunding Unlimited Tax;
5.000%; August 1, 2017
California Educational Facilities Authority 135,000 142,000
Revenue Refunding, Harvey Mudd
College; 6.050%; December 1, 2008
California Health Facilities Financing 100,000 103,000
Authority Revenue, AIDS
Healthcare Foundation; 5.900%;
September 1, 2002
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds, continued
--------------------------------------------------------------------------------
California Health Facilities Financing $ 200,000 $ 207,000
Authority Revenue, AIDS
Healthcare Foundation; 6.000%;
September 1, 2003
California Health Facilities Financing 25,000 25,000
Authority Revenue, Henry
Mayo Newhall; 7.700%; October 1, 2003
California Health Facilities Financing 100,000 98,000
Authority Revenue, Stanford Healthcare;
5.000%; November 15, 2013
California Housing Finance Agency 165,000 162,000
Revenue, Home Mortgage; Series F;
5.200%; February 1, 2013
California Housing Finance Agency 25,000 26,000
Revenue, Home Mortgage; Series C;
6.250%; February 1, 2006
California; State Public Works Board; 125,000 126,000
Lease; California State University;
5.000%; October 1, 2010
California; State Public Works Board; 100,000 92,000
Lease; Department of Forestry and Fire;
4.700%; October 1, 2014
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds, continued
--------------------------------------------------------------------------------
California; State Public Works Board; $ 150,000 $ 156,000
Lease; Long Beach and
San Luis Obispo Series B; 5.600%;
April 1, 2006
California; State Public Works Board; 100,000 105,000
Series 1991 A; Lease Revenue Bonds,
Department of Correction; 6.400%;
September 1, 2008
California; Statewide Community 425,000 429,000
Development Certificate of Participation,
San Gabriel Valley; 5.375%;
September 1, 2007
Carlsbad, California; Improvement Board; 75,000 74,000
Act 1915; District 97-1; 5.450%;
September 2, 2010
Carlsbad, California; Improvement Board; 80,000 79,000
Act 1915; District 97-1; 5.350%;
September 2, 2009
Contra Costa County, California; 100,000 109,000
CTFS PTRN; 6.200%; August 1, 2008
Contra Costa County, California; 165,000 177,000
CTFS PTRN; Merrithew Memorial
Hospital Replacement Project;
6.400%; November 1, 2005
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds, continued
--------------------------------------------------------------------------------
Corona, California; Single Family $ 30,000 $ 31,000
Mortgage Revenue Service; 5.500%;
November 1, 2010
Duarte, California; Redevelopment 100,000 102,000
Agency; Tax Allocation; 5.950%;
September 1, 2004
East Municipal Water & Sewer 250,000 256,000
District of California; 5.375%;
July 1, 2013
El Monte, California; Water Authority; 240,000 242,000
5.2%; September 1, 2012
Emeryville, California; Public Financing 340,000 354,000
Authority; Revenue Bond;
5.700%; September 1, 2007
Escondido, California; Multi-Family 75,000 76,000
Housing Revenue; FNMA; 5.250%;
January 1, 2005
Escondido, California; Multi-Family 75,000 76,000
Housing Revenue; 5.400%; FNMA;
July 1, 2007
Inyo County, California; CTFS PARTN; 175,000 168,000
County Jail; 5.000%; February 1, 2011
Loomis, California; Unified School 200,000 204,000
District; CTFS PARTN; 6.375%;
March 1, 2009
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds, continued
--------------------------------------------------------------------------------
Los Angeles County, California; $ 50,000 $ 51,000
Multi-Family Housing Revenue;
FHA; 7.300%; July 20, 2011
Lynwood, California; Public Financing 250,000 254,000
Authority; Lease Revenue; 6.000%;
September 1, 2012
Metro Water District R.G.O.; 225,000 217,000
5.250%; March 1, 2022
Metro Water District; Waterworks 500,000 510,000
Revenue; 5.400%; July 1, 2010
Metro Water District; Waterworks 50,000 49,000
Revenue; 5.500%; July 1, 2019
Metro Water District; Waterworks 600,000 612,000
Revenue; 5.500%; July 1, 2013
Metro Water District; Waterworks 350,000 324,000
Revenue; 5.000%; July 1, 2020
Mid-Peninsula Regional Open 150,000 163,000
Space District; 6.950%;
September 1, 2008
Montclair, California; Redevelopment 20,000 23,000
Agency; Residential Mortgage Revenue;
7.750%; October 1, 2011
Montebello, California; Community 100,000 100,000
Redevelopment Agency; 5.150%;
September 1, 2012
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds, continued
--------------------------------------------------------------------------------
Palmdale, California; Single $ 45,000 $ 48,000
Family Mortgage Revenue;
7.000%; September 1, 2011
Placer County, California Water Agency; 600,000 612,000
Revenue; Certificate of Participation;
5.500%; July 1, 2010
Pleasanton, California; CTFS Partnership; 145,000 151,000
6.700%; October 1, 2006
Pomona, California; CTFS Partnership; 120,000 119,000
5.600%; August 1, 2011
Redding, California; School District; 40,000 38,000
5.000%; March 1, 2019
Riverside County, California; Asset 235,000 240,000
Leasehold Revenue Hospital;
6.000%; June 1, 2004
Riverside City, California; 600,000 588,000
Electric Revenue; 5.000%;
October 1, 2013
Rossmoor Community Services 105,000 105,000
District Improvement Board; 5.800%;
September 2, 2005
Sacramento, California; New Public 50,000 51,000
Housing Authority; 6.000%;
December 1, 2007
San Diego, California; Burnham Inst.; 100,000 100,000
5.5%; September 1, 2006
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds, continued
--------------------------------------------------------------------------------
San Francisco, California; Port $ 100,000 $ 104,000
Commission; Revenue; 5.500%;
July 1, 2004
San Francisco, California; New Public 50,000 50,000
Housing Authority; 5.125%; August 1, 2010
San Joaquin, California; Certificate 200,000 209,000
of Participation; General Hospital
Project; 5.900%; September 1, 2003
San Luis Obispo, California; 100,000 101,000
Water Treatment Plant;
5.375%; June 1, 2008
San Luis Obispo, California; 105,000 106,000
Water Treatment Plant;
5.500%; June 1, 2009
Sanger, California; Unified School 125,000 127,000
District; 5.350%; August 1, 2015
Santa Clara County, California; 150,000 145,000
Housing Authority; 4.500%;
November 1, 2007
Santa Clara, California; Redevelopment 200,000 201,000
Agency; 5.25%; June 1, 2013
Santa Maria, California; Redevelopment; 600,000 576,000
5.000%; June 1, 2016
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
California Tax Exempt Bonds, continued
--------------------------------------------------------------------------------
Sierra Unified School District, $ 200,000 $ 202,000
California; CTFS PARTN Financing;
5.650%; March 1, 2004
Sonoma, California; Community 85,000 85,000
Redevelopment Agency, Tax Allocation;
7.900%; August 1, 2014
Stockton, California; COP; 5.6%; 250,000 254,000
August 1, 2014
Tahoe Forest Hospital District, 250,000 265,000
California; Insured Health Facility
Revenue; 5.850%; August 1, 2004
Tehachapi School District; 6.300%; 600,000 615,000
August 1, 2021
Temecula Valley Unified School District 100,000 104,000
Financing Project, California; 5.900%;
September 1, 2004
University of California, Revenue Bond, 130,000 138,000
Series B; 5.875%; September 1, 2008
Vallejo, California; Mortgage Revenue; 575,000 564,000
5.650%; May 1, 2027
Westminster City, California; Certificate 335,000 358,000
of Participation - Public Improvement
Project; 5.750%; June 1, 2009
--------------------------------------------------------------------------------
Total California Tax Exempt Bonds (100.1%) $ 12,940,000 $ 13,089,000
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
BDI INVESTMENT CORPORATION
SCHEDULE OF PORTFOLIO INVESTMENT
July 1, 2000
--------------------------------------------------------------------------------
Value at
Issuer and Title of Issue Par Value Year End
--------------------------------------------------------------------------------
Tax Exempt Bonds
--------------------------------------------------------------------------------
Puerto Rico Tax Exempt Bonds
--------------------------------------------------------------------------------
Puerto Rico; HFC SFM $ 270,000 $ 275,000
Mortgage Revenue;
7.500%; April 1, 2022
Puerto Rico; Housing and 40,000 41,000
Financial Corporation; GNMA;
7.650%; October 15, 2022
--------------------------------------------------------------------------------
Total Puerto Rico Tax Exempt Bonds (2.4%) 310,000 316,000
--------------------------------------------------------------------------------
Total Portfolio (102.4%) $ 13,250,000 $ 13,405,000
--------------------------------------------------------------------------------
Excess of cash and other assets over 323,000
liabilities and other assets (2.4%)
--------------------------------------------------------------------------------
Net Assets (100%) $ 13,728,000
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
BDI INVESTMENT CORPORATION
STATEMENT OF OPERATIONS
For the Year Ended July 1, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment income:
Tax-exempt interest $ 754,000
Tax-exempt dividends 5,000
--------------------------------------------------------------------------------------
Total income $ 759,000
Expenses:
Bookkeeping 30,000
Professional fees 10,000
Directors' fees 13,000
Transfer agent fees 3,000
Other operating expense 7,000
--------------------------------------------------------------------------------------
Total expenses 63,000
-----------------------------------------------------------------------------------------------------------
Net investment income 696,000
-----------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Proceeds from sales and bond redemptions 1,459,000
Cost of investments sold and redeemed (identified cost basis) (1,447,000)
--------------------------------------------------------------------------------------
Net realized gain on investment transations 12,000
Net change in unrealized appreciation on investments (278,000)
--------------------------------------------------------------------------------------
Net realized/unrealized loss on investments (266,000)
-----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 430,000
-----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
BDI INVESTMENT CORPORATION
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended July 1, 2000 and July 3, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
-----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations:
<S> <C> <C>
Net investment income $ 696,000 $ 732,000
Net realized gain (loss) on investment transactions 12,000 (23,000)
Net change in unrealized appreciation on investments (278,000) (137,000)
-----------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 430,000 572,000
Distributions to shareholders from net investment income (704,000) (723,000)
-----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (274,000) (151,000)
Net assets:
Beginning of period 14,002,000 14,153,000
-----------------------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $553,000 - 2000 and
546,000 - 1999) $13,728,000 $14,002,000
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
BDI INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
July 1, 2000
--------------------------------------------------------------------------------
NOTE 1
GENERAL
After many years as an operating company, on January 10, 1984, BDI Investment
Corporation ("the Company") filed a Registration Statement on Form N-2 with the
Securities and Exchange Commission to register under the Investment Company Act
of 1940 as a closed-end diversified management investment company. The Company
initiated operations as a regulated investment company on June 30, 1984. The
Company was incorporated under the laws of New Jersey.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year ends on the Saturday nearest June 30. The fiscal year
ending in 1999 reflects a 53 week year and the fiscal years ending in 2000 and
1998-1996 reflect a 52 week year.
Cash Equivalents
Cash equivalents include highly liquid money market funds.
Investments
The investment portfolio consists primarily of tax-exempt bonds which are valued
at the last bid price on the last business day of the period.
Gross unrealized appreciation and depreciation on investments on a federal
income tax basis as of July 1, 2000 were $301,000 and ($22,000), respectively.
The aggregate cost of securities for federal income tax purposes approximates
amortized cost.
14
<PAGE>
BDI INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
July 1, 2000
--------------------------------------------------------------------------------
NOTE 2 - CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Recognition
Security transactions are recorded on the trade date. Purchases of securities
are recorded at cost. Any premiums paid or discounts received are recognized in
the determination of realized gain or loss. The Company amortizes bond premiums
and discounts over the life of the bond using the effective yield method.
Purchased interest income is accrued and recorded based upon settlement dates.
The differences between amortized cost and value is reflected as unrealized
appreciation (depreciation) on investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from estimates.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosure About
Fair Value of Financial Instruments, defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying value of cash, cash
equivalents, interest receivable, investment securities purchased payable,
accrued expenses, dividend payable and payable to affiliate approximate fair
value because of the short maturity of those instruments.
Taxes
The Company has qualified as a Regulated Investment Company under certain
provisions of the Internal Revenue Code beginning with the fiscal year starting
July 1, 1984. Under such provisions, the Company will not be subject to federal
income tax on income which it receives and distributes to its shareholders,
provided that it distributes substantially all such income. As a Regulated
Investment Company, the Company "passes through" to its shareholders the
character of the income which it receives.
15
<PAGE>
BDI INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
July 1, 2000
--------------------------------------------------------------------------------
NOTE 2 - CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Distributions
It is the Company's policy to record distributions to shareholders as of the
earlier of the date they are declared by the Board of Directors or the record
date. All dividends declared during the current year represent distributions
from net investment income.
Distributions per share during 2000 consisted of $.32, $.025 and $.15 and during
1999 consisted of $.25, $.0185 and $.24 respectively.
NOTE 3
OFF BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK
The Company invests primarily in California state and municipal bonds, most of
which are guaranteed by the state or privately insured. At July 1, 2000, the
value of all municipal bonds was $13,405,000. In addition, the Company's cash
and cash equivalents consist of uninsured deposits with a major broker-dealer.
The Company holds financial instruments with off balance sheet risk in the
normal course of business, specifically relating to bonds with call provisions.
Such bonds are recorded at the market value in the amount of $4,247,000 and
though this is in excess of stated call value of $4,143,000 at year end, the
market value reflects, among other things, the call value risk.
NOTE 4
DIRECTORS' FEES
The Company pays fees and provides expense reimbursement to members of the Board
of Directors who are not officers of the Company. Directors' fees for the year
ended July 1, 2000 were $13,000.
16
<PAGE>
BDI INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
July 1, 2000
--------------------------------------------------------------------------------
NOTE 5
RELATED PARTY TRANSACTIONS
The Company pays an affiliate for bookkeeping services. Fees for the year ended
July 1, 2000 were approximately $30,000.
Investment management services are provided to the Company by its chief
executive officer and principal shareholder. The Company's chief executive
officer does not charge fees for these services because he is the majority
shareholder.
NOTE 6
PURCHASES AND SALES OF SECURITIES
For the year ended July 1, 2000, the aggregate cost of security purchases was
$984,000 and the aggregate proceeds from sales or redemptions of securities was
$1,459,000.
No fees are charged by the securities custodian, a customary practice when
securities transactions occur with that institution.
NOTE 7
INCOME TAXES
For the year ended July 1, 2000, no income tax expense was incurred due to the
Company's qualification as a Regulated Investment Company and the distribution
of substantially all its income for the current fiscal year to its shareholders.
At July 1, 2000, the Company has capital loss carryovers totaling $115,000 which
expire in the years 2000 to 2008.
17
<PAGE>
BDI INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
July 1, 2000
--------------------------------------------------------------------------------
NOTE 8
NET ASSETS
As of July 1, 2000, net assets consist of:
Preferred stock, without par value: authorized
500,000 shares; issued, none $ -
Common stock, par value $.10 per share: authorized
4,500,000 shares; issued, 1,425,151 143,000
Less treasury stock at cost, 3,600 shares (22,000)
Additional paid-in capital 3,673,000
Accumulated undistributed net investment income 528,000
Accumulated undistributed net realized losses (115,000)
Unrealized appreciation on investments 279,000
Retained earnings at June 30, 1984 9,242,000
--------------------------------------------------------------------------------
$ 13,728,000
--------------------------------------------------------------------------------
Retained earnings at June 30, 1984 represents cumulative undistributed earnings
of the Company prior to its qualification as a regulated investment company.
NOTE 9
CAPITAL STOCK TRANSACTIONS
There were no capital stock transactions for the Company for the years ending
July 1, 2000, July 3, 1999 and June 27, 1998.
18
<PAGE>
BDI INVESTMENT CORPORATION
FINANCIAL HIGHLIGHTS
For the Years Ended July 1,2000, July 3, 1999, June 27, 1998,
June 28, 1997 and June 29, 1996
--------------------------------------------------------------------------------
Selected data for one share of common stock outstanding throughout each year
follows (1999 is a 53 week year, 2000 and 1998 - 1996 are 52 week years):
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.85 9.96 9.63 9.34 9.14
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.49 0.51 0.51 0.53 0.54
Net realized and unrealized
gain (loss) on investments (0.19) (0.11) 0.36 0.32 0.16
--------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.30 0.40 0.87 0.85 0.70
Less distributions to shareholders:
Distributions from
net investment income (0.50) (0.51) (0.54) (0.56) (0.50)
--------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year 9.65 9.85 9.96 9.63 9.34
--------------------------------------------------------------------------------------------------------------------------
Total return 3.07% 4.04% 9.00% 7.81% 7.66%
--------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in millions) 13.7 14.0 14.2 13.7 13.3
Ratio of expenses to
average net assets .45% .42% .48% .47% .44%
Ratio of net investment
income to average net
assets 5.02% 5.15% 5.16% 5.60% 5.76%
Portfolio turnover 7.18% 5.06% 6.15% 5.24% 12.92%
--------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period 1,421,551 1,421,551 1,421,551 1,421,551 1,421,551
</TABLE>
Average commission paid per share for portfolio transactions (*)
* Not applicable, no stocks purchased
19
<PAGE>
BDI INVESTMENT CORPORATION
CORPORATE DATA
Chairman of the Board of Directors, Arthur Brody
Chief Executive Officer and President
Director Edward Kane
Director Michael Stolper
Secretary Donald Brody
Treasurer Teresa Whorton
Counsel Lowenstein, Sandler, Kohl,
Fisher and Boylan
Auditors Lavine, Lofgren, Morris
& Engelberg, LLP
Transfer Agent Registrar and Transfer Company
Custodian Morgan Stanley Dean Witter
