-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CIEJHhsmd4SRihXjuLWHTuP6T51HZEeDhzo+I/bPaljQvN2XUl6oerzyzBq3g5rC vRSzGo0K7XoVn8yec2Phvw== 0000052234-00-000007.txt : 20000331 0000052234-00-000007.hdr.sgml : 20000331 ACCESSION NUMBER: 0000052234-00-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINMILL & CO INC CENTRAL INDEX KEY: 0000052234 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 131897916 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-09667 FILM NUMBER: 586724 BUSINESS ADDRESS: STREET 1: 11 HANOVER SQ CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2127850900 MAIL ADDRESS: STREET 1: 11 HANOVER SQ CITY: NEW YORK STATE: NY ZIP: 10005 FORMER COMPANY: FORMER CONFORMED NAME: BULL & BEAR GROUP INC DATE OF NAME CHANGE: 19920703 10-K 1 FORM 10-K As filed with the Securities and Exchange Commission on March 30, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark One) X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1999 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the Transition Period From __________ to __________ Commission File Number 0-9667 WINMILL & CO. INCORPORATED, (Exact name of registrant as specified in its charter) Delaware 13-1897916 (State of incorporation) (I.R.S. Employer Identification No.) 11 Hanover Square, New York, New York 10005 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 785-0900 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, Par Value $.01 Per Share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No__ . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] No voting stock was held by non-affiliates of the registrant as of March 15, 2000. The number of shares outstanding of each of the registrant's classes of common stock, as of March 15, 2000: Class A Non-Voting Common Stock, par value $.01 per share - 1,635,017 shares Class B Voting Common Stock, par value $.01 per share - 20,000 PART I ITEM PAGE 1. Business 2 2. Properties 5 3. Legal Proceedings 6 PART II 4. Submission of Matters to a Vote of Security Holder 7 5. Market for Company's Common Equity and Related Stockholder Matters 7 6. Selected Financial Data 7 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 8. Financial Statements and Supplementary Data 12 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 29 PART III 10. Directors and Executive Officers 30 11. Executive Compensation 32 12. Security Ownership of Certain Beneficial Owners and Management 39 13. Certain Relationships and Related Transactions 39 PART IV 14. Exhibits, Consolidated Financial Statements and Schedules, and Reports on Form 8-K 40 PART I Item 1. Business Winmill & Co. Incorporated, formerly Bull & Bear Group, Inc., a Delaware corporation (the "Company"), is a holding company with five principal subsidiaries: CEF Advisers, Inc., formerly Bull & Bear Advisers, Inc. ("CEF"), Investor Service Center, Inc. ("ISC"), Midas Management Corporation ("MMC"), Performance Properties, Inc. ("Performance Properties") and Hanover Direct Advertising Company, Inc. ("Hanover Direct"). On April 1, 1999, the Company changed its name to Winmill & Co. Incorporated and Bull & Bear Advisers, Inc. changed its name to CEF Advisers, Inc. On March 31, 1999, the Company sold the outstanding stock of Bull & Bear Securities, Inc. ("BBSI"), to a wholly-owned subsidiary of Royal Bank of Canada. In connection with the sale, the rights to the name "Bull & Bear" were transferred to Royal Bank of Canada, and the Company and certain of its subsidiaries agreed to change their names. In connection with the BBSI Sale, Royal Bank has agreed that it will cause, for the three-year period following the closing, BBSI to offer exclusively Dollar Reserves to its customers as the sole money market fund into which cash balances held by BBSI's customers may be swept on a daily basis for so long as certain conditions are met, including certain performance rankings by the Fund, in consideration of a monthly fee equal to one-twelfth of 0.25% of the aggregate average daily amount of such balances. Further, the Company has agreed to provide, or to cause its subsidiaries to provide, to BBSI for a period of three years following the closing, certain services with respect to the operation of a securities brokerage business for a monthly administrative fee of $16,666.67, subject to certain conditions. MMC and CEF act as investment managers to open-end and closed-end management investment companies (the "Funds") registered under the Investment Company Act of 1940 (the "Act"). The open-end Funds are: Dollar Reserves, Inc., Midas Fund, Inc.; Midas Investors Ltd.; Midas Magic, Inc., Midas Special Equities Fund, Inc. and Midas U.S. and Overseas Ltd. The closed-end funds are: Bexil Corporation, Global Income Fund, Inc. and Tuxis Corporation. ISC was organized in 1985 and is registered with the SEC as a broker/dealer and is a member of the NASD. ISC acts as the principal distributor for the open-end Funds. Performance Properties was organized in 1994 to purchase and renovate suburban office buildings. Hanover Direct was organized in 1988 and acts as an advertising agency, which places advertising for ISC on behalf of the Funds. Currently, the commission revenue generated by Hanover Direct from ISC represents a recapture of sums paid for advertising and, rather than additional income, represents a reduction in advertising expense of ISC. Hanover Direct has not performed any work for unaffiliated clients. The Company has granted the Funds and its subsidiaries a non-exclusive license to use certain service marks owned by the Company, under certain terms and conditions on a royalty free basis. Such license may be withdrawn from a Fund in the event the investment manager of the Fund is not a subsidiary of the Company or in other cases, at the discretion of the Company. 2 Investment Management Business The Company is engaged, through its subsidiaries, in the business of managing investment companies registered under the Act. The Funds and their respective net assets as of December 31, 1999 were as follows: Bexil Corporation $ 9,771,000 Dollar Reserves, Inc. 64,250,000 Global Income Fund, Inc. 29,060,000 Midas Fund, Inc. 71,820,000 Midas Investors Ltd. 5,045,000 Midas Magic, Inc. 857,000 Midas Special Equities Fund, Inc. 41,629,000 Midas U.S. and Overseas Ltd. 9,881,000 Tuxis Corporation 12,142,000 Total Net Assets $ 244,455,000 The fund management industry along with the entire financial services sector of the economy has been rapidly changing to meet the increasing needs of investors. Competition for management of financial resources has increased as banks, insurance companies and broker/dealers have introduced products and services traditionally offered by independent fund management companies. There are also many fund management groups with substantially more resources than the Company. While the Company's business is not seasonal, it is affected by the financial markets, which in turn, are dependent upon current and future economic conditions. Drastic material declines in the securities markets can have a significant effect on the Company's business. Volatile stock markets may affect management and distribution fees earned by the Company's subsidiaries. If the market value of securities owned by the Funds declines, assets under management will decline and shareholder redemptions may occur, either by transfer out of the equity Funds and into the money market Fund, Dollar Reserves, which has lower management and distribution fee rates than the equity Funds, or by redemptions out of the Funds entirely. Lower asset levels in the Funds may also cause or increase reimbursements to the Funds pursuant to the expense limitations described below. In general, investment management services are rendered to the Funds pursuant to written contractual agreements. Such agreements relate to the general management of the affairs of each Fund, in addition to supervising the acquisition and sale of each Fund's portfolio investments. As provided in the agreements, CEF and MMC may receive management fees ranging from 0.4% to 1.0% per annum of the Funds' average daily net assets. The Act requires that such contractual agreements be initially approved by the Funds' Board of Directors, including a majority of all of the directors who are not "interested persons" (as defined in the Act), and by the vote of a majority of the outstanding shares of the Fund (as defined in the Act). Agreements, if approved, may be for a term of up to two years, and thereafter their continuance must be approved at least annually by a majority of the directors of the Fund, including a majority of those directors of the Fund who are not "interested persons", or by such a vote of "disinterested" directors and the vote of a majority of the outstanding shares of the Fund. In addition, all such agreements are subject to termination on 60 days' notice by majority vote of the Board of Directors or the shareholders and are subject to automatic termination in the event of assignment. Depending on the assets of the Fund involved and other factors, the termination of any of the agreements for investment management services between any of the Funds, CEF, and MMC may have a serious adverse impact upon the Company. 3 Pursuant to contracts with these Funds, CEF and MMC are entitled to management fees, which are received monthly and are based on annual percentages of the average daily or average weekly net assets of the Funds. Under the contracts, CEF and MMC are required to reimburse the Funds for certain expenses to the extent that such expenses exceed limitations prescribed by any state in which shares of the Funds are qualified for sale, although currently the Funds are not subject to any such limits. In addition, from time to time CEF and MMC may waive or reimburse management fees to increase a Fund's performance. MMC had entered into a subadvisory agreement with respect to Midas Fund, Inc. MMC, not the respective Fund, paid the Subadviser, Lion Resource Management Limited, based upon the net fees, performance and net assets of the Fund. The subadvisory agreement was terminated on November 30, 1999. Each of the open-end Funds has adopted a plan of distribution pursuant to Rule 12b-1 under the Act (the "Plan"). Pursuant to the Plans, ISC may receive as compensation amounts ranging from one-quarter of one percent to one percent per annum of the Funds' average daily net assets for distribution and service activities. The service fee portion is intended to cover services provided to shareholders in the Funds and the maintenance of shareholder accounts. The distribution fee portion is to cover all other activities and expenses primarily intended to result in the sale of the Funds' shares. Bexil Corporation, Global Income Fund and Tuxis Corporation each converted from an open-end investment company to a closed-end investment company in October 1996, November 1996, and February 1997, respectively, pursuant to the vote of the Fund's shareowners. As a consequence, their shares now trade on the American Stock Exchange under the symbols BXL, GIF and TUX, respectively. Upon conversion, the Distribution, 12b-1 Plan, and Shareholder Administration Agreements between the respective Fund and ISC were terminated and substantially similar Investment Management Agreements between CEF and each Fund were approved. The Act requires that a plan of distribution be initially approved by the Fund's Board of Directors, including a majority of the directors who are not "interested persons" and who have no financial interest in the Plan, and by the vote of a majority of the outstanding shares of the Fund. If approved, a plan of distribution may be for a term of one year, and thereafter it must be approved at least annually by the entire Board of Directors and by a majority of the "disinterested" directors. In addition, all plans of distribution are subject to termination at any time by majority vote of the disinterested directors or shareholders. CEF and MMC are registered with the SEC as investment advisers under the Investment Advisers Act of 1940. ISC is registered with the SEC as a broker/dealer under the Securities Exchange Act of 1934 and is a member of the NASD. The Funds are registered with the SEC under the Act. The activities of CEF and MMC and of the Funds are subject to regulation under Federal and state securities laws. The provisions of these laws, including those relating to the contractual arrangements between the Funds and their investment manager, are primarily designed to protect the shareholders of the Funds and not the shareholders of the Company. Forward-Looking Information Information or statements provided by or on behalf of the Company from time to time, including those within this Form 10-K Annual Report, may contain certain "forward-looking information", including information relating to anticipated growth in revenues or earnings per share, anticipated changes in the amount and composition of assets under management, anticipated expense levels, and expectations regarding financial market conditions. The Company cautions readers that any forward-looking information provided by or on behalf of the Company is not a guarantee of future performance and that actual results may differ materially from those in forward-looking information as a result of various factors, including but not limited to those discussed below. Further, such forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. 4 The Company's future revenues may fluctuate due to factors such as: the total value and composition of assets under management and related cash inflows or outflows in mutual funds; fluctuations in the financial markets resulting in appreciation or depreciation of assets under management; the relative investment performance of the Company's sponsored investment products as compared to competing products and market indices; the expense ratios and fees of the Company's sponsored products and services; investor sentiment and investor confidence in mutual funds; the ability of the Company to maintain investment management fees at current levels; competitive conditions in the mutual funds industry; the introduction of new mutual funds and investment products; the ability of the Company to contract with the Funds for payment for administrative services offered to the Funds and Fund shareholders; the continuation of trends in the retirement plan marketplace favoring defined contribution plans and participant-directed investments; and the amount and timing of income from the Company's investment portfolio. The Company's future operating results are also dependent upon the level of operating expenses, which are subject to fluctuation for the following or other reasons: changes in the level of advertising expenses in response to market conditions or other factors; variations in the level of compensation expense incurred by the Company, including performance-based compensation based on the Company's financial results, as well as changes in response to the size of the total employee population, competitive factors, or other reasons; expenses and capital costs, including depreciation, amortization and other non-cash charges, incurred by the Company to maintain its administrative and service infrastructure; and unanticipated costs that may be incurred by the Company from time to time to protect investor accounts and client goodwill. The Company's revenues are substantially dependent on revenues from the Funds, which could be adversely affected if the independent directors of one or more of the Funds determined to terminate or renegotiate the terms of one or more investment management agreements. The Company's business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax, and compliance requirements may have a substantial effect on the Company's business and results of operations, including but not limited to effects on the level of costs incurred by the Company and effects on investor interest in mutual funds in general or in particular classes of mutual funds. Item 2. Properties The principal office of the Company is located at 11 Hanover Square, New York, New York 10005. The approximate area of the office is 3,800 square feet. The rent is approximately $92,000 per annum plus $11,400 per annum for electricity. The lease expires on December 31, 2001 and is cancelable at the option of the Company on three months' notice. Performance Properties purchased land and a two story office building located in Red Bank, New Jersey in 1994. The building consists of approximately 13,000 square feet. The building was purchased for cash, has no mortgage. The first floor of the building is currently being rented under a ten-year lease to a tenant. The current rent is approximately $90,000 per annum and increases each year over the life of the lease. Portions of the second floor of the building are currently being rented under a five-year and three-year lease to two tenants. The current rents are approximately $33,000 and $29,000 per annum, respectively, and increase each year over the life of the leases. 5 Item 3. Legal Proceedings A group called Karpus Investment Management ("KIM") at the 1997 annual meeting of Bull & Bear U.S. Government Securities Fund, Inc. ("BBG") sought to elect its slate of nominees in opposition to management and at the 1998 annual meeting of BBG made a counter-solicitation on all management proposals and a solicitation to terminate the investment management agreement. On February 19, 1998, KIM filed a lawsuit against BBG in the Circuit Court for Baltimore City, Maryland, Case No. 9805005, which was dismissed with prejudice on October 1, 1998. On February 19, 1998, BBG filed a lawsuit against KIM in the United States District Court for the Southern District of New York, 98 Civ. 1190. On December 22, 1998, KIM filed a lawsuit against BBG in the United States District Court for the District of Maryland Court, 98-CV-4161 and BBG made counterclaims. On May 25, 1999, BBG and KIM announced that they had entered into a settlement of all litigation in the United States District Court for the Southern District of New York and in the United States District Court for the District of Maryland. In connection with the settlement, KIM sold its 12.7% share in the Fund of 95,175 shares to ISC for $12-7/8 per share in July and August 1999. From time to time, the Company and/or its subsidiaries are threatened or named as defendants in litigation arising in the normal course of business. As of December 31, 1999, neither the Company nor any of its subsidiaries was involved in any other litigation that, in the opinion of management, would have a material adverse impact on the consolidated financial statements. 6 PART II Item 4. Submission of Matters to a Vote of Security Holders During Fourth Quarter of the Year Ended December 31, 1999 NONE Item 5. Market for the Company's Common Equity and Related Stockholder Matters The Company's Class A Common Stock trades on the Nasdaq SmallCap Market tier of the Nasdaq Stock Market under the symbol WNMLA. The Company's Class B Common Stock has no public trading market. There are approximately 250 holders of record of Class A Common Stock and 1 holder of Class B Common Stock as of December 31, 1999. In addition, there are an indeterminate number of beneficial owners of Class A Common Stock that are held in "street name". No dividends have been paid on either class of Common Stock in the past five years and the Company does not expect to pay any such dividends in the foreseeable future. The high and low sales prices of the Class A Common Stock during each quarterly period over the last two years were as follows: 1999 1998 High Low High Low First Quarter $15-1/4 $2-5/8 $3-1/8 $2-1/8 Second Quarter $4-1/16 $2-5/8 $3-1/4 $2-3/16 Third Quarter $2-3/4 $2 $3-1/2 $1-13/16 Fourth Quarter $2-5/16 $1-7/8 $3-1/8 $1-5/8 Item 6. Selected Financial Data The selected financial data for the five years ended December 31, 1999 is presented on the following pages. 7 WINMILL & CO. INCORPORATED CONSOLIDATED SELECTED FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997 1996 1995 Revenues: Management, distribution and administration fees $2,855,637 $3,554,725 $4,377,653 $4,922,945 $3,322,348 Real estate rental income 216,271 43,878 - - - Consulting fee 150,000 - - - - Realized and unrealized gains (losses) from investments (250,893) 62,783 83,608 31,216 (3,092) Dividends, interest and other 929,905 58,966 99,149 73,646 101,250 3,300,920 3,720,352 4,560,410 5,027,807 3,420,506 Expenses: General and administrative 2,287,472 2,093,323 2,559,080 2,744,021 2,205,725 Marketing 466,024 531,228 772,201 1,191,639 496,910 Subadvisory fees 147,157 230,954 387,593 705,248 22,496 Professional fees 159,537 177,376 186,320 290,098 413,594 Amortization and depreciation 153,702 118,186 106,871 116,151 65,545 3,213,892 3,151,067 4,012,065 5,047,157 3,204,270 Income (loss) from continuing operations before provision for income taxes 87,028 569,285 548,345 (19,350) 216,236 Income taxes 38,252 (82,544) (5,196) 91,248 42,588 Income (loss) from continuing operations 48,776 651,829 553,541 (110,598) 173,648 Discontinued operations Income (loss) from discontinued operations (net of income taxes) 2,479,865 (140,414) 72,184 (209,927) (16,272) Net income (loss) $2,528,641 $511,415 $625,725 $(320,525) $157,376
1999 1998 1997 1996 1995 Net income (loss) per share of weighted average Common Stock outstanding: Basic Income (loss) from continuing operations $.03 $.4 $.41 $(.08) $.11 Income (loss) from discontinued operations 1.50 (.10) .05 (.15) (.01) Net income $1.53 $.37 $.46 $(.23) $.10 Diluted Income (loss) from continuing operations $.03 $.45 $.38 $(.08) $.11 Income (loss) from discontinued operations 1.48 (.10) .05 (.15) (.01) Net income $1.51 $.35 $.43 $(.23) $.10 Weighted average shares of Common Stock outstanding: Basic 1,655,017 1,391,940 1,370,017 1,369,555 1,499,516 Diluted 1,680,757 1,453,472 1,468,252 1,369,555 1,549,815 Total assets $10,090,029 $5,315,147 $4,827,074 $4,273,110 $4,963,792 Long-term obligations $ - $ - $7,460 $22,093 $ -
8 THIS PAGE INTENTIONALLY LEFT BLANK Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 1999 Compared to 1998 On December 17, 1998, the Company signed an agreement to sell the outstanding stock of BBSI, the discount brokerage business, to a subsidiary of Royal Bank of Canada. The transaction, which was approved by the regulatory authorities in Canada and the United States, closed on March 31, 1999. The Company received $6 million in proceeds from the sale. At the time of the sale, BBSI had net equity of $500,000. In connection with the sale, the rights to the name "Bull & Bear" were transferred to Royal Bank of Canada, and the Company and certain of its subsidiaries changed their names. The Company recorded a gain from the sale of $2,479,865, net of related expenses including professional fees, closing bonuses, and income tax expense. Total revenues from continuing operations for the year decreased $419,432 or 11.3%. Management and distribution fees decreased $298,721 or 13.5% and $114,688 or 13.6%, respectively. The decrease in management and distribution fees was due to an overall decrease in the net asset levels of the Funds. Shareholder administration fees decreased $314,111 or 100.0% because the Company discontinued providing shareholder administration services to the Funds effective January 1999. Net assets under management were approximately $258 million at December 31, 1998, $248 million at March 31, 1999, $242 million at June 30, 1999, $249 million at September 30, 1999 and $244 million at December 31, 1999. Rental income increased $172,393 or 393%. The increase was attributable to additional tenants in 1999 and the commencement of rentals in May 1998. In 1999, the Company earned $150,000 in consulting fees from BBSI in connection with the sale. Dividends, interest and other income increased $270,939 or 459% due to higher earnings from the Company's investments which increased as a result of the proceeds from the sale of BBSI. The Company had net realized and unrealized losses of $250,893 from the Company's marketable securities which included certain investments in Funds managed by the Company. The losses included $413,369 from the decline in market value of the Company's 20% interest in Bexil Corporation, the closed end fund managed by the Company. Total expenses increased $62,825 or 2%. General and administrative expenses increased $45,709 or 2%. Marketing expenses decreased $65,204 or 12% due to lower payments to other brokers for distributing the Company's open-end funds. Expense reimbursements to the Funds increased $148,440 or 82% due to higher waivers of management and distribution fees in certain Funds. Subadvisory fees decreased $83,797 or 36% because net assets were lower in Midas Fund and the subadvisory agreement with Lion Resources was terminated in November 1999. Professional fees decreased $17,839 or 10%. Depreciation and amortization expense increased $35,516 or 30% due to higher depreciation expense from the rental property. Net income from continuing operations for the period was $48,776 or $.03 per share on a diluted basis as compared to net income of $651,829 or $.45 per share on a diluted basis for 1998. Net gain from discontinued operations for the period was $2,479,865, which included income from operations of $15,249, or $1.48 per share on a diluted basis as compared to a net loss from discontinued operations of $140,414 or $.10 per share on a diluted basis for 1998. Net income for the period was $2,528,641 or $1.51 per share on a diluted basis for the period as compared to net income of $511,415 or $.35 per share on a diluted basis for 1998. 9 1998 Compared to 1997 Total revenues for the year decreased $840,058 or 18.4%. Management and distribution fees decreased $669,517 or 23.2% and $299,372 or 26.2%, respectively, and shareholder administration fees increased $27,988 or 9.8%. The decrease in management and distribution fees was due to an overall decrease in the net asset levels of the Funds from which these revenues are generated. Shareholder administration fees represent reimbursement for actual expenses incurred. Such fees increased as the costs for providing these services increased. The Funds paid $210,111 to the Company for recordkeeping services, which paid such amounts to certain brokers for performing such services. Net assets under management were approximately $274 million at December 31, 1997, $301 million at March 31, 1998, $278 million at June 30, 1998, $261 million at September 30, 1998 and $258 million at December 31, 1998. Dividends, interest and other income decreased $17,130 or 9.4%, primarily due to lower earnings on the Company's investments. Total expenses, including income taxes decreased $938,346 or 23.4% for the year. General and administrative expenses decreased $30,410 or 1.6%. Marketing expenses decreased $240,973 or 31.2% due to lower marketing costs for Midas Fund. Expense reimbursements to the Funds decreased $435,347 or 70.7% due to the expiration of the contractual expense reimbursement on August 29, 1997 for Midas Fund. Subadvisory fees decreased $156,639 or 40.4% because of lower net assets in Midas Fund. Professional fees decreased $8,944 or 4.8%. Amortization and depreciation increased $11,315 or 10.6% for the year. Income taxes decreased $77,348 or 1,488.6% due to the reversal of the deferred tax asset valuation allowance account. Loss from discontinued operations (net of income taxes) for 1998 was $140,414 as compared to income from discontinued operations (net of income taxes) for 1997 of $72,184. While customer trading activity increased during the year, commissions and related fees decreased as a result of an increase in Internet trading. In addition, due to the increase in customer trading activity, clearing and brokerage charges increased in 1998. Net income for 1998 was $511,415 or $.37 per share as compared to net income of $625,725 or $.46 per share in 1997. Liquidity and Capital Resources The following table reflects the Company's consolidated working capital, total assets, long-term debt and shareholders' equity as of the dates indicated. December 31, 1999 1998 1997 Working Capital $ 5,354,818 $2,371,234 $2,662,917 Total Assets $ 10,090,029 $5,315,147 $4,827,074 Long-Term Debt $ - $ - $ 7,460 Shareholders' Equity $ 7,838,635 $4,959,016 $4,455,111 For the year ended 1999, working capital, total assets and shareholders' equity increased $2,983,584, $4,774,882 and $2,879,619, respectively. Working capital and total assets increased primarily due to the income from the sale of BBSI. The increase in shareholders' equity was primarily the result of the net income for 1999 of $2,528,641 and the increase in unrealized capital gains on marketable securities of $350,978. For the year ended 1998, total assets and shareholders' equity increased $488,073 and $503,905, respectively. Working capital and long-term debt decreased $291,683 and $7,460, respectively. 10 Working capital decreased due to expenditures in capital improvements on the real estate held for investment. The increase in shareholders' equity was primarily the result of the net income for 1998 of $511,415 and the exercise of the stock options for $639,227 offset by the decrease in unrealized capital gains on marketable securities of $43,062 and the issuance of the notes receivable for common stock issued for $603,675. There were $71,267 of realized capital gains during 1998, which were included in net income of $511,415. Total assets increased primarily as a result of the net income for the year offset by the decrease in unrealized capital gains on marketable securities of $43,062. Long-term debt decreased due to payments on the capitalized lease obligations. For the year ended 1997, working capital, total assets and shareholders' equity increased $369,717, $553,964 and $537,225, respectively. Long-term debt decreased $14,633. Working capital increased primarily as a result of the net income and the non-cash items of depreciation and amortization for 1997 offset by improvements to real estate held for investment, purchases of equipment and the decrease in unrealized capital gains on marketable securities. The increase in shareholders' equity was primarily the result of the net income for 1997 of $625,725 offset by the decrease in unrealized capital gains on marketable securities of $88,500. Total assets increased primarily as a result of the net income for 1997 offset by the decrease in unrealized capital gains on marketable securities of $88,500. Long-term debt decreased due to payments on the capitalized lease obligations. Management knows of no contingencies that are reasonably likely to result in a material decrease in the Company's liquidity or that are likely to adversely affect the Company's capital resources. This includes the restrictions placed on the transfer of funds to the Company ISC as a result of its regulatory net capital requirements. At December 31, 1999, the amount subject to these restrictions was $58,300 or 0.6% of total assets. Effects of Inflation and Changing Prices Since the Company derives revenue from investment management, distribution and shareholder administration services from the Funds and from discount brokerage services, it is not possible for it to discuss or predict with accuracy the impact of inflation and changing prices on its revenues from continuing operations. 11 Item 8. Financial Statements and Supplementary Data Financial Statements required by Regulation S-X and Supplementary Financial Information required by Regulation S-K are presented herein. FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES TABLE OF CONTENTS Page Report of Independent Certified Public Accountants 13 Consolidated Balance Sheets, December 31, 1999 and 1998 14 Consolidated Statements of Income, Years ended December 31, 1999, 1998 and 1997 15 Consolidated Statements of Changes in Shareholders' Equity, Years ended December 31, 1999, 1998 and 1997 16 Consolidated Statements of Cash Flows, Years ended December 31, 1999, 1998 and 1997 17 Notes to Consolidated Financial Statements 19 12 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Shareholders of Winmill & Co. Incorporated We have audited the accompanying consolidated balance sheets of Winmill & Co. Incorporated and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 referred to above present fairly, in all material respects, the consolidated financial position of Winmill & Co. Incorporated and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 11, 2000 13 WINMILL & CO. INCORPORATED CONSOLIDATED BALANCE SHEETS December 31, 1999 1998 ASSETS Current Assets: Cash and cash equivalents $2,560,093 $1,403,931 Marketable securities (Note 3) 4,600,928 353,385 Management, distribution and other fees receivable 272,800 257,313 Interest, dividends and other receivables 43,429 205,786 Prepaid expenses and other current assets 128,962 506,950 Total Current Assets 7,606,212 2,727,365 Real estate, net 1,325,693 1,198,173 Equipment, furniture and fixtures, net 102,702 209,339 Excess of cost over net book value of subsidiaries, net 650,001 688,687 Deferred income taxes (Note 10) 140,000 215,400 Other assets 265,421 276,183 2,483,817 2,587,782 Total Assets $10,090,029 $5,315,147 LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities: Accounts payable $ 201,926 $ 104,934 Accrued professional fees 75,055 143,025 Accrued payroll and other related costs 72,049 64,667 Accrued income taxes 1,866,600 - Accrued other expenses 25,928 28,920 Current portion of capitalized lease obligation - 4,749 Other current liabilities 9,836 9,836 Total Current Liabilities 2,251,394 356,131 Contingencies (Note 11) - - Shareholders' Equity (Notes 3, 6, 7, and 8) Common Stock, $.01 par value Class A, 10,000,000 shares authorized; 1,635,017 shares issued and outstanding 16,351 16,351 Class B, 20,000 shares authorized; 20,000 shares issued and outstanding 200 200 Additional paid-in capital 6,872,454 6,872,454 Retained earnings (deficit) 1,203,303 (1,325,338) Notes receivable for common stock issued (603,675) (603,675) Accumulated other comprehensive income 350,002 (976) Total Shareholders' Equity 7,838,635 4,959,016 Total Liabilities and Shareholders' Equity $10,090,029 $5,315,147 See accompanying notes to consolidated financial statements. 14 WINMILL & CO. INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31,
1999 1998 1997 Revenues: Management, distribution, service, and administrative fees $2,855,637 $3,554,725 $4,377,653 Real estate rental income 216,271 43,878 - Consulting fee 150,000 - - Realized and unrealized gains (losses) from investments (250,893) 62,783 83,608 Dividends, interest and other 329,905 58,966 99,149 3,300,920 3,720,352 4,560,410 Expenses: General and administrative 1,958,636 1,912,927 1,943,337 Marketing 466,024 531,228 772,201 Expense reimbursements to the Funds (Note 11) 328,836 180,396 615,743 Subadvisory fees 147,157 230,954 387,593 Professional fees 159,537 177,376 186,320 Amortization and depreciation 153,702 118,186 106,871 3,213,892 3,151,067 4,012,065 Income from continuing operations before income taxes 87,028 569,285 548,345 Income taxes (benefit) (Note 10) 38,252 (82,544) (5,196) Income from continuing operations 48,776 651,829 553,541 Discontinued Operations: Income (loss) from discontinued operations (net of income taxes) (Note 2) 2,479,865 (140,414) 72,184 Net Income $ 2,528,641 $511,415 $625,725 Per Share Data: Basic Income from continuing operations $ .03 $ .47 $ .41 Income (loss) from discontinued operations 1.50 (.10) .05 Net income $1.53 $ .37 $ .46 Diluted Income from continuing operations $ .03 $ .45 $ .38 Income (loss) from discontinued operations 1.48 (.10) .05 Net income $1.51 $ .35 $ .43 Average Shares Outstanding: Basic 1,655,017 1,391,940 1,370,017 Diluted 1,680,757 1,453,472 1,468,252 See accompanying notes to consolidated financial statements.
15 WINMILL & CO. INCORPORATED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Years Ended December 31, 1999, 1998 and 1997
Number of Shares Amount Notes Receivable For Additional Common Retained Class A Class B Class A Class B Paid-In Stock Earnings Common Common Common Common Capital Issued (Deficit) Balance, December 31, 1996 1,350,017 20,000 $ 13,501 $ 200 $6,236,077 $- $(2,462,478) Net income Other comprehensive income - - - - - - 625,725 Unrealized losses on marketable securities - - - - - - - Comprehensive income Balance, December 31, 1997 1,350,017 20,000 13,501 200 6,236,077 - (1,836,753) Net income Other comprehensive income - - - - - - 511,415 Unrealized losses on marketable securities - - - - - - Comprehensive income Issuance of Class A common stock on exercise of stock options 285,000 - 2,850 - 636,377 - - Issuance of notes receivable (Note 8) - - - - - (603,675) - Balance, December 31, 1998 1,635,017 20,000 16,351 200 6,872,454 (603,675) (1,325,338) Net income - - - - - - 2,528,641 Other comprehensive income Unrealized gains on investments - - - - - - - Comprehensive income Balance, December 31, 1999 1,635,017 20,000 $ 16,351 $ 200 $6,872,454 $(603,675) $1,203,303
Accumulated Other Total Comprehensive Shareholders' Income Equity Balance, December 31, 1996 $ 130,586 $3,917,886 Net income Other comprehensive income - 625,725 Unrealized losses on marketable securities (88,500) (88,500) Comprehensive income 537,225 Balance, December 31, 1997 42,086 4,455,111 Net income Other comprehensive income - 511,415 Unrealized losses on marketable securities (43,062) (43,062) Comprehensive income 468,353 Issuance of Class A common stock on exercise of stock options - 639,227 Issuance of notes receivable (Note 8) - (603,675) Balance, December 31, 1998 (976) 4,959,016 Net income - 2,528,641 Other comprehensive income Unrealized gains on investments 350,978 350,978 Comprehensive income 2,879,619 Balance, December 31, 1999 $ 350,002 $7,838,635 See accompanying notes to consolidated financial statements. 16 WINMILL & CO. INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 1999 1998 1997 Cash Flows from Operating Activities: Net income $2,528,641 $511,415 $625,725 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 153,702 169,008 131,992 Deferred income taxes 75,400 (215,400) - Increase in cash value of life insurance (33,000) (33,000) (32,333) Realized/unrealized (gain) loss on investments 260,014 (40,330) (83,608) Gain on sale of discontinued operations (2,464,616) - - (Increase) decrease in, net of effects from sale of discontinued operations: Management, distribution and shareholder administration fees receivable (15,487) 11,671 (61,040) Interest, dividends and other receivables (28,712) (17,832) 16,730 Prepaid expenses and other current assets 277,625 (95,129) (122,109) Other assets 43,762 - (5,774) Increase (decrease) in, net of effects from sale of discontinued operations: Accounts payable 193,369 (55,915) 26,305 Accrued expenses (48,580) 57,010 4,917 Accrued income taxes 1,866,600 - - Other current liabilities - (572) (1,212) Total adjustments 280,077 (220,489) (126,132) Net cash provided by Operating Activities 2,808,718 290,926 499,593 17 WINMILL & CO. INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Years Ended December 31, 1999 1998 1997 Cash Flows from Investing Activities: Improvement to real estate $(201,237) $(606,296) $(218,956) Capital expenditures (7,617) (102,440) (27,804) Proceeds from sale of discontinued operations net of discontinued operations cash and current expenses and taxes 2,717,626 - - Proceeds from sales of investments 810,528 1,748,467 556,831 Purchases of investments (4,967,107) (258,556) (1,231,204) Net cash provided by (used in) Investing Activities (1,647,807) 781,175 (921,133) Cash Flows from Financing Activities: Issuance collection of note receivable - (603,675) - Repayments of capitalized lease obligation (4,749) (16,355) (13,271) Proceeds from issuance of Class A Common Stock - 639,227 - Net cash provided by (used in) Financing Activities (4,749) 19,197 (13,271) Net increase (decrease) in cash and cash equivalents 1,156,162 1,091,298 (434,811) Cash and cash equivalents: Beginning of year 1,403,931 312,633 747,444 End of year $2,560,093 $1,403,931 $312,633 SUPPLEMENTAL DISCLOSURE: The Company paid $9,346 in Federal income taxes in 1998. The Company did not pay any Federal income taxes in 1999 or 1997. The Company paid $864, $916 and $1,309 in interest in 1999, 1998 and 1997, respectively. See accompanying notes to consolidated financial statements. 18 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1999, 1998 and 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Winmill & Co., Incorporated ("formerly Bull & Bear Group, Inc.") ("Company") is a holding company. Its subsidiaries' business consists of providing investment management and distribution services for the Midas Funds (six open-end funds) and three closed-end funds as well as real estate investment and operations. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and all of its subsidiaries. Substantially all intercompany accounts and transactions have been eliminated. ACCOUNTING ESTIMATES In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses and other liabilities approximate fair value because of the short maturity of these items. Marketable securities are recorded at market value which represents the fair value of the securities. CASH AND CASH EQUIVALENTS Investments in money market funds are considered to be cash equivalents. At December 31, 1999 and 1998, the Company and subsidiaries had invested approximately $2,199,800 and $1,378,700, respectively, in an affiliated money market fund. MARKETABLE SECURITIES The Company and its non-broker/dealer subsidiaries' marketable securities are considered to be "available-for-sale" and recorded at market value, with the unrealized gain or loss included in stockholders' equity as "accumulated other comprehensive income". Marketable securities for the broker/dealer subsidiary is valued at market with unrealized gains and losses included in earnings. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK In the normal course of business, the Company's customer activities involve the execution and settlement of customer transactions. These activities may expose the Company to risk of loss in the event the customer is unable to fulfill its contracted obligations, in which case the Company may have to purchase or sell financial instruments at prevailing market prices. Any loss from such transactions is not expected to have a material effect on the Company's financial statements. 19 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 INCOME TAXES The Company and its wholly-owned subsidiaries file consolidated income tax returns. The Company's method of accounting for income taxes conforms to Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." This method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. REAL ESTATE HELD FOR INVESTMENT AND EQUIPMENT Real estate held for investment is recorded at cost and is depreciated on the straight-line basis over its estimated useful life. At December 31, 1999 and 1998, accumulated depreciation amounted to approximately $166,100 and $92,400, respectively. Equipment, furniture and fixtures are recorded at cost and are depreciated on the straight-line basis over their estimated useful lives, 3 to 10 years. At December 31, 1999 and 1998, accumulated depreciation amounted to approximately $796,900 and $908,400, respectively. EXCESS OF COST OVER NET BOOK VALUE OF SUBSIDIARIES The excess of cost over net book value of subsidiaries is capitalized and amortized over fifteen and forty years using the straight-line method. At December 31, 1999 and 1998, accumulated amortization amounted to approximately $550,800 and $662,100, respectively. Periodically, the Company reviews its intangible assets for events or changes in circumstances that may indicate that the carrying amounts of the assets are not recoverable. COMPREHENSIVE INCOME The Company discloses comprehensive income in the financial statements. Total comprehensive income includes net income and unrealized gains and losses on marketable securities, which is reported as other comprehensive income in stockholders' equity. SEGMENT INFORMATION The Company's operating segments were organized around services provided and classified into three groups - investment management, real estate operations and discount brokerage. Due to the sale of the discount brokerage business, the discount brokerage business is classified as "income from discontinued operations" on the financial statements (See Note 2). The Company's remaining business is in two industry segments. EARNINGS PER SHARE Basic earnings per share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to outstanding options to purchase common stock. 20 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 The following table sets forth the computation of basic and diluted earnings per share: 1999 1998 1997 Numerator for basic and diluted earnings per share: Net income $ 2,528,641 $511,415 $625,725 Denominator: Denominator for basic earnings per share weighted-average shares 1,655,017 1,391,940 1,370,017 Effect of dilutive securities: Employee Stock Options 25,740 61,532 98,235 Denominator for diluted earnings per share adjusted weighted - average shares and assumed conversions 1,680,757 1,453,472 1,468,252 RECLASSIFICATIONS Certain reclassifications of the 1998 and 1997 financial statements have been made to conform to the 1999 presentation. 2. DISCONTINUED OPERATIONS On December 17, 1998, the Company signed an agreement to sell the outstanding stock of the discount brokerage business, to a subsidiary of Royal Bank of Canada for $6 million. The sale closed on March 31, 1999. In connection with the sale, the rights to the name "Bull & Bear" was transferred to Royal Bank of Canada. In addition, Royal Bank has agreed that it will cause, for the three-year period following the closing, BBSI to offer exclusively Dollar Reserves to its customers as the sole money market fund into which cash balances held by BBSI's customers may be swept on a daily basis for so long as certain conditions are met, including certain performance rankings by the Fund, in consideration of a monthly fee equal to one-twelfth of 0.25% of the aggregate average daily amount of such balances. At December 31, 1999, the value invested in Dollar Reserves by BBSI's customers was approximately $33,861,000. Further, the Company has agreed to provide or to cause its subsidiaries to provide to BBSI for a period of three years following the closing certain services with respect to the operation of a securities brokerage business for a monthly administrative fee of $16,666.67, subject to certain conditions. 21 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 Accordingly, results from the discount brokerage segment are shown as discontinued operations. Summarized financial information for the discontinued operations was as follows:
1999 1998 1997 Revenues $ 748,786* $2,379,506 $2,490,713 Expenses 733,537* 2,614,920 2,378,629 Income (loss) before income taxes 15,249 (235,414) 112,084 Income taxes - 95,000 (39,900) Income (loss) 15,249 (140,414) 72,184 Gain on sale of discontinued operations: Proceeds, net of basis 5,500,000 - - Professional fees (222,021) - - Closing bonuses (868,586) - - Gain on sale before income taxes 4,409,393 - - Income taxes (1,944,777) - - Gain on sale 2,464,616 - - Income (loss) from discontinued operations $ 2,479,865 $(140,414) $72,184
* Represents revenues and expenses for the 3 months ended March 31, 1999. 3. MARKETABLE SECURITIES At December 31, 1999, marketable securities consisted of: Broker/dealer securities - at market Affiliated funds $ 2,063,205 Equity securities 435,875 Total broker/dealer securities (cost $2,861,134) 2,499,080 Other companies Available-for-sale securities - at market Unaffiliated mutual funds 23,622 Affiliated mutual funds 2,046,439 Equity securities 31,787 Total available-for-sale securities (cost - $1,751,846) 2,101,848 $ 4,600,928 22 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 At December 31, 1998, marketable securities consisted of: Broker/dealer securities - at market Affiliated mutual funds (cost $159,882) $128,945 Other companies Available-for-sale securities - at market Unaffiliated mutual funds 38,820 Affiliated mutual funds 2,268 Equity securities 183,352 Total available-for-sale securities (cost - $225,416) 224,440 $353,385 At December 31, 1999 and 1998, the Company had $350,002 and $(976), respectively, of unrealized gains (losses) on "available-for-sale securities" which is reported as a separate component of consolidated shareholders' equity. 4. LEASE COMMITMENTS AS LESSEE The Company leases office space under a lease which expires December 31, 2001 and is cancelable at the option of the Company on three month's notice. The rent is approximately $103,000 per annum including electricity. 5. REAL ESTATE OPERATIONS The Company owns an office building which is approximately 90% leased to various tenants. Future minimum lease payment receivables under noncancellable leasing arrangements as of December 31, 1999 are as follows: Year ending December 31, 2000 $175,500 2001 189,500 2002 176,100 2003 154,900 2004 159,400 2005 - 2008 611,000 Net minimum future lease receipts $1,466,400 23 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 6. SHAREHOLDERS' EQUITY The Class A and Class B Common Stock are identical in all respects except for voting rights, which are vested solely in the Class B Common Stock. The Company also has 1,000,000 shares of Preferred Stock, $.01 par value, authorized. As of December 31, 1999 and 1998, none of the Preferred Stock was issued. 7. NET CAPITAL REQUIREMENTS The Company's broker/dealer subsidiary is a member firm of the National Association of Securities Dealers, Inc. and are registered with the Securities and Exchange Commission as broker/dealers. Under the Uniform Net Capital Rule (Rule 15c3-1 under the Securities Exchange Act of 1934), a broker/dealer must maintain minimum net capital, as defined, of not less than (a) $250,000 or, when engaged solely in the sale of redeemable shares of registered investment companies, $25,000, or (b) 6-2/3% of aggregate indebtedness, whichever is greater; and a ratio of aggregate indebtedness to net capital, as defined, of not more than 15 to 1. At December 31, 1999, the subsidiary had net capital of approximately $1,075,700; net capital requirements of $58,300; excess net capital of approximately $1,017,400; and the ratios of aggregate indebtedness to net capital was approximately .81 to 1. 8. STOCK OPTIONS On December 6, 1995, the Company adopted a Long-Term Incentive Plan which provides for the granting of a maximum of 300,000 options to purchase Class A Common Stock to directors, officers and key employees of the Company or its subsidiaries. The plan was amended on February 5, 1996, on October 29, 1997 increasing the maximum number of options to 450,000, and in March 1999 increasing the maximum number of options to 600,000. With respect to non-employee directors, only grants of non-qualified stock options and awards of restricted shares are available. Two of the non-employee directors were granted 10,000 options each on December 6, 1995 and 5,000 options each on October 29, 1997. The new non-employee director was granted 10,000 options on September 8, 1998. In September 1999, the three non-employee directors were granted 10,000 options each. The option price per share may not be less than the fair value of such shares on the date the option is granted, and the maximum term of an option may not exceed ten years except as to non-employee directors for which the maximum term is five years. 24 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 The Company applied APB Opinion 25 and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for its stock option plans. Proforma compensation cost for the Company's plans is required by Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation (SFAS 123)" and has been determined based on the fair value at the grant dates for awards under these plans consistent with the method of SFAS 123. For purposes of proforma disclosure, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's proforma information follows: Years Ended December 31, 1999 1998 1997 Net income As Reported $2,528,641 $511,415 $625,725 Proforma $2,285,639 $465,641 $246,394 Earnings per share Basic As Reported $1.53 $.37 $.46 Proforma $1.38 $.33 $.18 Diluted As Reported $1.51 $.35 $.43 Proforma $1.36 $.32 $.17 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1999, 1998 and 1997, respectively: expected volatility of 83.09%, 73.95% and 92.83%, risk-free interest rate of 5.78%, 5.11% and 5.85% and expected life of three years for each year. A summary of the status of the Company's stock option plans as of December 31, 1999, 1998 and 1997, and changes during the years ending on those dates is presented below: Weighted Number Average of Exercise Stock Options Shares Price Outstanding at December 31, 1996 269,000 $1.98 Granted 177,000 $2.52 Canceled (34,000) $1.97 Outstanding at December 31, 1997 412,000 $2.21 Granted 12,000 $1.81 Exercised (285,000) $2.25 Canceled (20,000) $2.64 Outstanding at December 31, 1998 119,000 $2.05 Granted 280,000 $2.98 Canceled (160,000) $3.28 Outstanding at December 31, 1999 239,000 $2.32 25 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 There were 64,000, 97,000 and 176,000 options exercisable at December 31, 1999, 1998 and 1997 with a weighted-average exercise price of $1.84, $1.99 and $2.29, respectively. The weighted-average fair value of options granted was $1.18, $.94 and $1.41 for the years ended December 31, 1999, 1998 and 1997, respectively. In September 1999, the Company canceled 125,000 previously issued stock options. The exercise prices of the canceled stock options were $3.36 to $3.69. In September 1999, the Company granted 155,000 stock options with exercise prices of $2.38 to $2.61. The following table summarizes information about stock options outstanding at December 31, 1999: Options Outstanding Weighted-Average Range of Number Remaining Weighted-Average Exercise Prices Outstanding Contractual Life Exercise Price $1.75 - $2.375 152,000 3.2 years $2.14 $2.6125 - $3.00 87,000 4.4 years $2.63 In connection with the exercise of the options, the Company received from certain officers notes with an interest rate of 4.47% per annum payable December 15, 2003. The balance of the notes at December 31, 1999 was $603,675, which was classified as "notes receivable for common stock issued." 9. PENSION PLAN The Company has a 401(k) retirement plan for substantially all of its qualified employees. Contributions to this are based upon a percentage of earnings of eligible employees and are accrued and funded on a current basis. Total pension expense for the years ended December 31, 1999, 1998 and 1997 was approximately $31,600, $44,700 and $44,800, respectively. 10. INCOME TAXES The provision for income taxes charged to operations was as follows: 1999 1998 1997 Current State and local $595,629 $28,510 $ 34,704 Federal 1,312,000 (206,054) - 1,907,629 (177,544) 34,704 Deferred 75,400 - - $ 1,983,029 $(177,544) $ 34,704 26 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 Deferred tax assets (liabilities) are comprised of the following at December 31, 1999 and 1998: 1999 1998 Unrealized (appreciation) depreciation on investments $140,000 $ 12,400 Accrued expenses - 40,000 Depreciation - 10,000 Net operating loss carryforwards - 153,000 Net deferred tax assets $140,000 $ 215,400 For the year ended December 31, 1998, the provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory federal tax rates to pre-tax income as a result of utilization of net operating loss carryforwards and the reversal of the valuation allowance account. 11. RELATED PARTIES All management and distribution fees are a result of services provided to the Funds. All such services are provided pursuant to agreements that set forth the fees to be charged for these services. These agreements are subject to annual review and approval by each Fund's Board of Directors and a majority of the Fund's non-interested directors. Shareholder administration fees represented reimbursement of costs incurred by subsidiaries of the Company on behalf of the open-end Funds. Such reimbursement amounted to approximately $314,100 and $286,100 for the years ended December 31, 1998 and 1997. The Company outsourced its shareholder administration in 1999. During the years ended December 31, 1999, 1998 and 1997, the Funds paid approximately $210,000, $182,000 and $63,700, respectively, for recordkeeping services to ISC, which paid such amounts to certain brokers for performing such services. These reimbursements for recordkeeping services were recorded in management, distribution, service and administrative fees. In connection with investment management services, the Company's investment managers and distributor waived management and distribution fees from the Funds in the amount of approximately $328,800, $180,400 and $615,700 for the years ended December 31, 1999, 1998 and 1997, respectively. Certain officers of the Company also serve as officers and/or directors of the Funds. Commencing August 1992, the Company has a key man life insurance policy on the life of the Company's Chairman which provides for the payment of $1,000,000 to the Company upon his death. As of December 31, 1999, the policy had a cash surrender value of approximately $175,000 and is included in other assets in the balance sheet. 27 WINMILL & CO. INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1999, 1998 and 1997 12. FINANCIAL INFORMATION BY BUSINESS SEGMENT The following details selected financial information by business segment. Investment Real Estate Management Operations Total 1999 Revenues $3,005,636 $ 216,272 $3,221,908 Investment income 78,165 847 79,012 Income (loss) from operations 109,733 (22,705) 87,028 Depreciation and amortization 78,316 75,386 153,702 Capital expenditures 7,617 201,237 208,854 Gross identifiable assets 8,620,008 1,470,021 10,090,029 1998 Revenues $3,554,725 $ 43,878 $3,598,603 Investment income 121,709 40 121,749 Income (loss) from operations 676,781 (107,496) 569,285 Depreciation and amortization 76,467 41,719 118,186 Capital expenditures 67,232 641,504 708,736 Gross identifiable assets 4,029,992 1,285,155 5,315,147 13. CONTINGENCIES A group called Karpus Investment Management ("KIM") at the 1997 annual meeting of Bull & Bear U.S. Government Securities Fund, Inc. ("BBG") sought to elect its slate of nominees in opposition to management and at the 1998 annual meeting of BBG made a counter-solicitation on all management proposals and a solicitation to terminate the investment management agreement. On February 19, 1998, KIM filed a lawsuit against BBG in the Circuit Court for Baltimore City, Maryland, Case No. 9805005, which was dismissed with prejudice on October 1, 1998. On February 19, 1998, BBG filed a lawsuit against KIM in the United States District Court for the Southern District of New York, 98 Civ. 1190. On December 22, 1998, KIM filed a lawsuit against BBG in the United States District Court for the District of Maryland Court, 98-CV-4161 and BBG has made counterclaims. On May 25, 1999, BBG and KIM announced that they had entered into a settlement of all litigation in the United States District Court for the Southern District of New York and in the United States District Court for the District of Maryland. In connection with the settlement, KIM sold its 12.7% share in the Fund of 95,175 shares to ISC for $12-7/8 per share in July and August 1999. From time to time, the Company and/or its subsidiaries are threatened or named as defendants in litigation arising in the normal course of business. As of December 31, 1999, neither the Company nor any of its subsidiaries was involved in any other litigation that, in the opinion of management, would have a material adverse impact on the consolidated financial statements. In July 1994, the Company entered into a Death Benefit Agreement ("Agreement") with the Company's Chairman. Following his death, the Agreement provides for annual payments, equal to 80% of his average annual salary for the three year period prior to his death subject to certain adjustments, to his wife until her death. The Company's obligations under the Agreement are not secured and will terminate if he leaves the Company's employ under certain conditions. 28 Selected Quarterly Financial Data (Unaudited) The following sets forth the selected quarterly financial information for the years ended December 31, 1999 and 1998. The information presented has been restated to reflect BBSI as discontinued operations (See Note 2 to the consolidated financial statements).
Three Months Ended March 31, June 30, Sept. 30, Dec. 31, 1999 Revenues $ 774,806 $992,676 $565,857 $967,581 Income from continuing operations $(143,754) $63,786 $(139,147) $267,891 Income from discontinued operations $2,479,865 $ - $ - $ - Net income $2,336,111 $63,786 $(139,147) $267,891 Income (loss) per share Basic Income from continuing operations $(.09) $.04 $(.08) $.16 Income (loss) from discontinued operations $1.50 $ - $ - $ - Net Income $1.41 $.04 $(.08) $.16 Diluted $1.38 $.04 $(.08) $.16 1998 Revenues $ 901,689 $996,530 $822,880 $817,574 Income (loss) from continuing operations $206,529 $155,539 $(14,572) $304,333 Income (loss) from discontinued operations $(71,350) $(14,232) $(42,793) $(12,039) Net income (loss) $135,179 $141,307 $(57,365) $292,294 Income (loss) per share Basic Income (loss) from continuing operations $.15 $ .11 $(.01) $.21 Income (loss) from discontinued operations $(.05) $(.01) $(.03) $(.01) Net income (loss) $.10 $ .10 $(.04) $.20 Diluted $.09 $ .10 $(.04) $.20
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with the Company's accountants on accounting and financial disclosure matters during the two years ended December 31, 1999. 29 PART III Item 10. Directors and Executive Officers The following list contains the names, ages, positions and lengths of service of all directors and executive officers of the Company. Name Position Years of Service Age Director Officer Bassett S. Winmill Chairman of the Board 23 23 70 Robert D. Anderson Vice Chairman of the Board 23 23 70 Thomas B. Winmill, President, 11 12 40 Esquire General Counsel, Director Edward G. Webb, Jr. Director 14* 12** 60 Charles A. Carroll Director 8 - 69 Mark C. Jones Director 2 - 64 Steven A. Landis Senior Vice President - 5 44 Joseph Leung Treasurer, - 5 34 Chief Accounting Officer Deborah Ann Sullivan, Vice President,Secretary, Esquire Associate General Counsel - 3 30 *1985 to 1990 and 1992 to present. **1979 to 1990 30 Set forth below is a description of the business experience of the directors and executive officers of the Company during the past five years. BASSETT S. WINMILL - Chairman of the Board of Directors. He is also Chairman of certain investment companies managed by Company subsidiaries. He is a member of the New York Society of Security Analysts, the Association for Investment Management and Research, and the International Society of Financial Analysts. He is the father of Thomas B. Winmill and the brother-in-law of Mark C. Jones. ROBERT D. ANDERSON - Vice Chairman of the Board of Directors. He is also Vice Chairman of certain investment companies managed by Company subsidiaries and of the subsidiaries of the Company. THOMAS B. WINMILL, ESQ. - President, General Counsel and Director. He is also President of the investment companies managed by Company subsidiaries and of certain other subsidiaries of the Company. He is a member of the New York State Bar. He is a son of Bassett S. Winmill and a nephew of Mark C. Jones. EDWARD G. WEBB, JR. - Director. He has been President of Webb Associates, Ltd. since 1996. From 1990 to 1996, he was Investment Director for Home Insurance Company. Prior to that, he served as a Senior Vice President and Director of the Company. CHARLES A. CARROLL - Director. From 1989 to the present, he has been affiliated with Kalin Associates, Inc., a member firm of the New York Stock Exchange. MARK C. JONES - Director. Since 1993, he has served as Managing Director of Western Javelin LC, a general consulting firm. He is the brother-in-law of Bassett S. Winmill and uncle of Thomas B. Winmill. STEVEN A. LANDIS - Senior Vice President. He is also Senior Vice President of the investment companies managed by Company subsidiaries. From 1993 to 1995 he was Associate Director of Proprietary Trading at Barclays De Zoete Wedd Securities, Inc., from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading Company, and from 1989 to 1992 he was Vice President of Wilkinson Boyd Capital Markets. JOSEPH LEUNG, CPA - Treasurer and Chief Accounting Officer. He is also Treasurer and Chief Accounting Officer of the investment companies managed by Company subsidiaries. From 1992 to 1995 he held various positions with Coopers & Lybrand L.L.P., a public accounting firm. From 1991 to 1992 he was the accounting supervisor at Retirement Systems Group, a mutual fund company. DEBORAH ANN SULLIVAN, ESQ. - Vice President, Secretary and Associate General Counsel. She is also Vice President, Secretary and Associate General Counsel of the investment companies managed by Company subsidiaries. From 1993 to 1994 she was a Blue Sky Paralegal for SunAmerica Asset Management Corporation and from 1992 through 1993 she was Compliance Administrator and Blue Sky Administrator with Prudential Inc. and Prudential Fund Management, Inc. She is a member of the New York State Bar. 31 Each director is elected by the vote or written consent of the holder of a majority of the Class B Common Stock and holds office until the next meeting of the Class B common stockholder and until his successor is elected and qualified, or until his earlier death, resignation or removal. Based solely on the information from Forms 3, 4, and 5 furnished to it, the Company believes that the directors, officers, and owners of more than 10 percent of the Class A Common Stock of the Company have filed on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year or prior fiscal years. Item 11. Executive Compensation The following information and tables set forth the information required under the Securities and Exchange Commission's executive compensation rules. Any information not presented is omitted because the item is not applicable or not required since the Company qualifies as a small business issuer. Summary Compensation Table The following table sets forth, for the three years ended December 31, 1999, the compensation paid to the chief executive officers and the other executive officers whose total annual salary and bonus exceeded $100,000 in 1999. SUMMARY COMPENSATION TABLE
Long-Term Annual Compensation Compensation Securities All Other Name And Salary Bonus Other Annual Underlying Compensation Principal Position Year ($) ($) Compensation* Options** (a) (b) Bassett S. Winmill 1999 $237,500 $215,625 - 80,000 $6,572 $5,000 Chairman 1998 $175,000 $ 10,937 - - $5,355 $4,999 1997 $170,000 $ 17,708 - - $5,166 $4,750 Robert D. Anderson 1999 $ 90,000 $ 9,375 - 20,000 $2,968 $3,413 Vice Chairman 1998 $ 90,000 $ 5,625 - - $2,142 $3,347 1997 $ 90,000 $ 9,375 - - $2,142 $2,925 Thomas B. Winmill 1999 $187,500 $212,500 - 80,000 $ 255 $5,000 President 1998 $140,000 $ 28,750 - - $ 211 $4,478 1997 $122,500 $ 13,021 - - $ 177 $4,272 Steven A. Landis 1999 $135,000 $ 14,063 - 10,000 $ 247 $5,000 Senior Vice President 1998 $128,625 $ 12,764 - - $ 296 $3,420 1997 $120,667 $ 7,542 - - $ 267 $2,564 Joseph Leung 1999 $ 99,500 $ 10,208 - 20,000 $ 105 $4,063 Treasurer and 1998 $ 85,542 $ 5,333 - - $ 87 $3,391 Chief Accounting Officer 1997 $ 80,000 $ 8,333 - - $ 76 $2,957
*Information omitted as perquisites do not exceed the lesser of $50,000 or 10% of the total annual salary and bonus for the year for the named executive officers. ** Includes options granted to reprice previously issued stock options in 1999 which were then cancelled. (a) Represents term life insurance (b) Represents Company's matching contributions to 401(k) Plan. 32 Option Grants Table The following table sets forth, for the year ended December 31, 1999, information regarding the options granted for each of the executive officers named in the Summary Compensation Table.
Potential Realizable Value At Assumed Annual Rates Of Stock Price Appreciation For Individual Grants Option Term Number Of % of Total Securities Options Underlying Granted To Options Employees In Exercise Expiration Name Granted Fiscal Year Price Date 5% 10% Bassett S. Winmill 40,000 16 2.6125 9/07/04 $28,870 $63,800 40,000* 16 3.6949 3/02/04 $40,830 $90,230 Thomas B. Winmill 40,000 16 2.6125 9/07/04 $28,870 $63,800 40,000* 16 3.6949 3/02/04 $40,830 $90,230 Robert D. Anderson 10,000 4 2.375 9/07/04 $6,560 $14,500 10,000* 4 3.3594 3/02/04 $9,280 $40,500 Steven A. Landis 5,000 2 2.375 9/07/04 $3,280 $ 7,250 5,000* 2 3.3594 3/02/04 $4,640 $10,250 Joseph Leung 10,000 4 2.375 9/07/04 $6,560 $14,500 10,000* 4 3.3594 3/02/04 $9,280 $20,500
All of the above options are exercisable as of December 31, 1999. * Stock options cancelled in connection with repricing of stock options granted 9/7/99. Aggregated Option Exercises and Fiscal Year-End Option Value Table The following table sets forth, for the year ended December 31, 1999, information regarding the outstanding options for each of the executive officers named in the Summary Compensation Table. Number of Securities Value of Underlying Unexercised Number of Unexercised In-The-Money Shares Options at Options at Acquired Dollar 12-31-99 (#) 12-31-99 ($) On Value Exercisable/ Exercisable/ Name Exercise Realized Unexercisable Unexercisable Bassett S. Winmill 0 $0 40,000 / 0 $0 / $0 Thomas B. Winmill 0 $0 40,000 / 0 $0 / $0 Robert D. Anderson 0 $0 35,000 / 0 $1,876 / $0 Steven A. Landis 0 $0 25,000 / 0 $1,876 / $0 Joseph Leung 0 $0 20,000 / 0 $0 / $0 33 Option Repricings On September 7, 1999, the Board of Directors reviewed the stock options issued on March 2, 1999 to employees of the Company under the Plan which had an exercise price higher than the market price of the Common Stock. The Board concluded that in light of the disparity between the exercise price of such options and the then current market price of the Common Stock, the options no longer provided the desired incentive to option holders. The Board of Directors unanimously approved the grant of replacement stock options for those issued on March 2, 1999 and additionally the grant of options under the Plan to non-employee directors. The following table sets forth, for the year ended December 31, 1999, information regarding the repricing on options for each of the executive officers named in the Summary Compensation Table.
Length Of Number Of Original Securities Market Price Exercise Option Term Underlying Of Stock At Price At New Remaining Options Time Of Time Of Exercise At Date Of Name Date Repriced Repricing Repricing Price Repricing Bassett S. Winmill 9/07/99 40,000 2.375 3.6949 2.6125 4.5 years Thomas B. Winmill 9/07/99 40,000 2.375 3.6949 2.6125 4.5 years Robert D. Anderson 9/07/99 10,000 2.375 3.3594 2.375 4.5 years Steven A. Landis 9/07/99 5,000 2.375 3.3594 2.375 4.5 years Joseph Leung 9/07/99 10,000 2.375 3.3594 2.375 4.5 years
Long-Term Incentive Plan Awards Table There were no long-term incentive plan awards made during the year ended December 31, 1999 to the executive officers named in the Summary Compensation Table. Compensation of Directors Edward G. Webb, Jr., Charles A. Carroll and Mark C. Jones were the only individuals who received compensation for their service as directors of the Company in 1999. They were each paid $500 per quarter as a retainer and $2,000 per quarterly meeting attended plus expenses. For the year ended December 31, 1999, Mr. Webb was paid $10,000 for attending three regular meetings and one special meeting, and Mr. Carroll and Mr. Jones were paid $12,000 each for attending all four regular meetings and one special meeting. Mr. Webb, Mr. Carroll and Mr. Jones each received an option to purchase 10,000 shares of Class A Common Stock at an exercise price of $2.375 per share in September 1999. Employment Contracts The Company has no employment or termination contracts with any of its employees except to the extent of the agreement described in Note 13 to the financial statements. 1995 Long-Term Incentive Plan On December 6, 1995, the Board of Directors of the Company ("Board") and the Class B voting common stockholder adopted the Bull & Bear Group, Inc. 1995 Long-Term Incentive Plan ("Plan"), under which options and stock-based awards (collectively, "Awards") may be made to directors, officers and employees of the Company or its subsidiaries. The Plan was amended by the Board and the Class B voting common stockholder on February 5, 1996, October 29, 1997 and in March 1999. The amended Plan is described below. 34 The purpose of the Plan is to assist the Company and its subsidiaries in attracting and retaining highly competent officers and directors and otherwise on behalf of the Company. The Plan also acts as an incentive in motivating selected officers and key employees to achieve long-term objectives of the Company, which will inure to the benefit of all stockholders of the Company. Any proceeds raised by the Company under the Plan will be used for working capital purposes. General Provisions Duration of the Plan; Share Authorization. The Plan will terminate on December 6, 2005, unless terminated earlier by the Board. Six hundred thousand (600,000) shares of the Company's Class A Common Stock ("Shares") are available for Awards under the Plan. The Shares to be offered under the Plan are authorized and unissued Shares, or issued Shares that have been reacquired by the Company and held in its treasury. Holders of Shares do not have voting rights except as specifically provided by the Delaware General Corporation Law. Shares covered by any unexercised portions of terminated options, Shares forfeited by Participants, and Shares subject to any Awards that are otherwise surrendered by a Participant without receiving any payment or other benefit with respect thereto may again be subject to new Awards under the Plan. In the event the purchase price of an option or tax withholding relating to an Award is paid in whole or in part through the delivery of Shares, the number of Shares issuable in connection with the exercise of the option may not again be available for the grant of Awards under the Plan. Plan Administration. The Plan is administered by the Board or Stock Option Committee ("Committee") of the Board. The Committee is composed of at least two directors of the Company, each of whom is a "Non-Employee Director" as defined in Rule 16b-3 promulgated by the SEC ("Rule 16b-3") under Section 16 of the Securities Exchange Act of 1934, as amended ("Exchange Act"). When the Committee is administering the Plan, the Committee will determine the officers and other key employees who will be eligible for and granted Awards, determine the amount and type of Awards, establish and modify administrative rules relating to the Plan, impose such conditions and restrictions on Awards as it determines appropriate and take such other action as may be necessary or advisable for the proper administration of the Plan. The Committee may, with respect to Participants who are not subject to Section 16 of the Exchange Act, delegate such of its powers and authority under the Plan as it deems appropriate to certain officers or employees of the Company. Plan Participants. Any employee of the Company or its subsidiaries, whether or not a director of the Company, may be selected by the Committee to receive an Award under the Plan. Non-Employee Directors shall receive such Awards (other than Incentive Stock Options) as the Board in its discretion may designate. Awards Available Under the Plan Awards to employees under the Plan may take the form of stock options or Restricted Share Awards. Awards under the Plan may be granted alone or in combination with other Awards. The consideration for issuance of Awards under the Plan is the continued services of the employees and non-employee directors to the Company and its subsidiaries. Stock Options Granted to Employees. Stock options ("Incentive Stock Options") meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto ("Code"), and stock options that do not meet such requirements ("Non-Qualified Stock Options") are both available for grant to employees under the Plan. 35 The term of each option will be determined by the Committee, but no option will be exercisable more than ten years after the date of grant. If, however, an Incentive Stock Option is granted to a Participant who, at the time of grant of the option, owns (or is deemed to own under Section 424(d) of the Code) more than 10% (a "Ten Percent Shareholder") of the Company's Class B common stock, par value $0.01 per share ("Company Voting Securities"), the option is not exercisable more than five years after the date of grant. Options may also be subject to restrictions on exercise, such as exercise in periodic installments, performance targets and waiting periods, as determined by the Committee. The exercise price of each option is determined by the Committee; however, the per share exercise price of an option must be at least equal to 100% of the Fair Market Value (as defined below) of a Share on the date of grant of such option. If, however, an Incentive Stock Option is granted to a Ten Percent Shareholder, the per share exercise price of the option must be at least equal to 110% of the Fair Market Value of a Share on the date of grant of such option. Fair Market Value of a Share means, as of any given date, the most recently reported sale price of a Share on such date as of the time when Fair Market Value is being determined on the principal national securities exchange on which the Shares are then traded or, if the Shares are not then traded on a national securities exchange, the most recently reported sale price of the Shares on such date as of the time when Fair Market Value is being determined on Nasdaq; provided, however, that, if there were no sales reported as of such date, Fair Market Value is the last sale price previously reported. In the event the Shares are not admitted to trade on a securities exchange or quoted on Nasdaq, the Fair Market Value of a Share as of any given date is as determined in good faith by the Committee. Notwithstanding the foregoing, the Fair Market Value of a Share will never be less than par value per share. Subject to whatever installment exercise and waiting period provisions the Committee may impose, options may be exercised in whole or in part at any time prior to expiration of the option by giving written notice of exercise to the Company specifying the number of Shares to be purchased. Such notice must be accompanied by payment in full of the purchase price in such form as the Committee may accept (including payment in accordance with a cashless exercise program under which, if so instructed by the Participant, Shares may be issued directly to the Participant's broker or dealer upon receipt of the purchase price in cash from the broker or dealer). If and to the extent determined by the Committee in its discretion at or after grant, payment in full or in part may also be made in the form of Shares duly owned by the Participant (and for which the Participant has good title, free and clear of any liens and encumbrances) or by reduction in the number of Shares issuable upon such exercise based, in each case, on the Fair Market Value of the Shares on the date the option is exercised. In the case of an Incentive Stock Option, however, the right to make payment of the purchase price in the form of Shares may be authorized only at the time of grant. Stock options granted under the Plan are not transferable except by will or the laws of descent and distribution and may be exercised, during the Participant's lifetime, only by the Participant. Unless the Committee provides for a shorter period of time, upon a Participant's termination of employment other than by reason of death or disability, the Participant may, within three months from the date of such termination of employment, exercise all or any part of his or her options as were exercisable at the date of termination of employment but only if (x) the Participant resigns or retires and the Committee consents to such resignation or retirement and (y) such termination of employment is not for cause. In no event, however, may any option be exercised after the time when it would otherwise expire. If such termination of employment is for cause or the Committee does not so consent, the right of such Participant to exercise such options will terminate at the date of termination of employment. Further, unless the Committee provides for a shorter period of time, upon a Participant's becoming disabled (such date being the "Disability Date"), the Participant may, within one year after the Disability Date, exercise all or a part of his or her options that were exercisable upon such Disability Date. In no event, however, may any option be exercised after the time when it would otherwise expire. 36 Further, unless the Committee provides for a shorter period of time, in the event of the death of a Participant while employed by the Company or prior to the expiration of the option as provided for in the event of disability, to the extent all or any part of the option was exercisable as of the date of death of the Participant, the right of the Participant's beneficiary to exercise the option will expire upon the expiration of one year from the date of the Participant's death (but in no event more than one year from the Participant's Disability Date) or on the stated termination date of the option, whichever is earlier. In the event of the Participant's death, the Committee may, in its sole discretion, accelerate the right to exercise all or any part of an Option that would not otherwise be exercisable. To the extent all or any part of an option was not exercisable as of the date of a Participant's termination of employment, such right will expire at the date of such termination of employment. Notwithstanding the foregoing, the Committee, in its sole discretion and under such terms as it deems appropriate, may permit a Participant who will continue to render significant services to the Company after his or her termination of employment to continue to accrue service with respect to the right to exercise his or her options during the period in which the individual continues to render such services. Restricted Shares. The Committee may award restricted Shares ("Restricted Shares") to a Participant. Such a grant gives a Participant the right to receive Shares subject to a risk of forfeiture based upon certain conditions. The forfeiture restrictions on the Restricted Shares may be based upon performance standards, length of service or other criteria as the Committee may determine. Until all restrictions are satisfied, lapsed or waived, the Company will maintain control over the Restricted Shares but the Participant will be entitled to receive dividends on the Restricted Shares; provided, however, that any Shares distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed will be subject to the same restrictions as such Restricted Shares. When all restrictions have been satisfied and/or waived or have lapsed, the Company will deliver to the Participant or, in the case of the Participant's death, his or her beneficiary, stock certificates for the appropriate number of Shares, free of all restrictions (except those imposed by law). None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution), pledged or sold prior to lapse or release of the applicable restrictions. All of a Participant's Restricted Shares and rights thereto are forfeited to the Company unless the Participant continues in the service of the Company or any parent or subsidiary of the Company as an employee until the expiration of the forfeiture period, and all other applicable restrictions of the Restricted Shares. Notwithstanding the foregoing, the Committee may, in its sole discretion, waive the forfeiture period and any other applicable restrictions on a Participant's Restricted Share Award, provided that the Participant must at that time have completed at least one year of employment after the date of grant. Awards Granted to Non-Employee Directors. Non-Employee Directors are eligible only to receive Non-Qualified Stock Options and Awards of Restricted Shares. All such grants may be made only by the Board. The terms and conditions applicable to grants of such Awards to Non-Employee Directors (except where specifically stated herein to the contrary) are the same as those applicable to grants of Non-Qualified Options and Restricted Shares to employees, except that references to (a) the Committee shall be deemed to refer to the Board (b) employees shall be deemed to refer to Non-Employee Directors and (c) termination of employment shall be deemed to refer to termination of service. Termination and Amendment The Board may amend or terminate the Plan at any time it is deemed necessary or appropriate; provided, however, that no amendment may be made, without the affirmative approval of the holder of Company Voting Securities, that would require stockholder approval under Rule 16b-3, the Code or other applicable law unless the Board determines that compliance with Rule 16b-3 and/or the Code is no longer desired. 37 Except as provided by the Committee, in its sole discretion, at the time of an Award or pursuant to certain antidilution provisions (as discussed below), no Award granted under the Plan to a Participant may be modified (unless such modification does not materially decrease the value of the Award) after the date of grant except by express written agreement between the Company and the Participant, provided that any such change (a) may not be inconsistent with the terms of the Plan, and (b) must be approved by the Committee. The Board has the right and the power to terminate the Plan at any time. No Award may be granted under the Plan after the termination of the Plan, but the termination of the Plan will not have any other effect and any Award outstanding at the time of the termination of the Plan may be exercised after termination of the Plan at any time prior to the expiration date of such Award to the same extent such Award would have been exercisable had the Plan not terminated. Antidilution Provisions Recapitalization. The number and kind of shares subject to outstanding Awards, the purchase price or exercise price of such Awards, and the number and kind of shares available for Awards subsequently granted under the Plan will be appropriately adjusted to reflect any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other change in capitalization with a similar substantive effect upon the Plan or the Awards granted under the Plan. The Committee has the power and sole discretion to determine the nature and amount of the adjustment to be made in each case. However, in no event will any adjustment be made in accordance with the Plan's antidilution provisions to any previous grant of Restricted Shares if an adjustment has been or will be made to the Shares awarded to a Participant in such person's capacity as a stockholder. Sale or Reorganization. After any reorganization, merger or consolidation in which the Company is the surviving entity, each Participant will, at no additional cost, be entitled upon the exercise of an Award outstanding prior to such event, and in connection with the payout after such event of any Award outstanding at the time of such event, to receive (subject to any required action by stockholders), in lieu of the number of Shares receivable or exercisable pursuant to such option, the number and class of shares of stock or other securities to which such Participant would have been entitled pursuant to the terms of the reorganization, merger or consolidation if, at the time of such reorganization, merger or consolidation, such Participant had been the holder of record of a number of Shares equal to the number of Shares receivable or exercisable pursuant to such Award. Comparable rights will accrue to each Participant in the event of successive reorganizations, mergers or consolidations of the character described above. Options to Purchase Stock of Acquired Companies. After any reorganization, merger or consolidation in which the Company is a surviving entity, the Committee may grant substituted options under the provisions of the Plan, pursuant to Section 424 of the Code, replacing old options granted under a plan of another party to the reorganization, merger or consolidation whose stock subject to the old options may no longer be issued following such merger or consolidation. The foregoing adjustments and manner of application of the foregoing provisions will be determined by the Committee in its sole discretion. Any such adjustments may provide for the elimination of any fractional Shares that might otherwise become subject to any options. Loans The Company is entitled, if the Committee in its sole discretion deems it necessary or desirable, to lend money to a Participant for purposes of (a) exercising his or her rights under an Award hereunder or (b) paying any income tax liability related to an Award; provided, however, that Non-Employee Directors are not eligible to receive such loans and provided, further, that the portion of the per share exercise price of an option equal to the par value per Share may not be paid by means of a promissory note. Such a loan must be evidenced by a recourse promissory note payable to the order of the Company executed by the Participant and containing such other terms and conditions as the Committee may deem desirable. The interest rate on such loans must be sufficient to avoid imputed interest under the Code. 38 Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Bassett S. Winmill, Chairman of the Board of Directors, owns all of the issued and outstanding shares of the Company's Class B Common Stock, which represents 100% of the Company's voting securities. (b) The following table sets forth, as of December 31, 1999, information relating to beneficial ownership by individual directors of the Company, executive officers named in the Summary Compensation Table and by directors and executive officers of the Company as a group, of the currently issued and outstanding Class A Common Stock of the Company. Amount and Nature of Percent Name of Beneficial Owner Beneficial Ownership (7) of Class Bassett S. Winmill 316,104 (1) 18.9% Thomas B. Winmill 162,520 (2) 9.7% Robert D. Anderson 104,414 (3) 6.3% Edward G. Webb, Jr. 28,664 (4) 1.7% Charles A. Carroll 25,000 (5) 1.5% Steven A. Landis 25,000 (4) 1.5% Joseph Leung 20,000 (6) 1.2% All directors and executive 691,702 40.8% officers as a group (8 persons) (1) Includes options exercisable to purchase 40,000 shares at December 31, 1999. (2) Includes 5,000 and 5,000 shares held by Thomas B. Winmill's wife and sons, respectively of which he disclaims beneficial ownership and options exercisable to purchase 40,000 shares. (3) Includes options exercisable to purchase 35,000 shares. (4) Includes options exercisable to purchase 25,000 shares. (5) Includes options exercisable to purchase 10,000 shares. (6) Includes options exercisable to purchase 20,000 shares. (7) The nature of the beneficial ownership for all the Class A Common Stock is investment power. Item 13. Certain Relationships and Related Transactions The following sets forth the reportable items regarding indebtedness of management in excess of $60,000. In connection with the exercise of stock options and related tax expense, the Company received notes with an interest rate of 4.47% per annum payable on December 15, 2003. Largest Amount Amount of Outstanding at Name and Relationship Indebtedness December 31, 1999 Bassett S. Winmill, Chairman $297,996 $297,996 Thomas B. Winmill, President $201,225 $201,225 39 PART IV Item 14. Exhibits, Consolidated Financial Statements and Schedules, and Reports on Form 8-K (a) (1) Financial Statements See Item 8 for a list of the financial statements filed as part of this report. (2) Financial Statement Schedules by Regulation S-X are not required under the related instructions or are inapplicable, and therefore have been omitted. (3) Exhibits (2) Not applicable (3) Certificate of Incorporation as amended October 24, 1989 as filed as an exhibit to Form 10-K for the year ended December 31, 1992 and incorporated herein by reference; Certificate of Incorporation as amended April 1, 1999 as filed as an exhibit to Form 10-K/A for the year ended December 31, 1998 and incorporated herein by reference; By-Laws amended as of October 1, 1993 as filed as an exhibit to Form 10-K for the year ended December 31, 1993 and incorporated herein by reference, and By-Laws amended as of April 1, 1999 as filed as an exhibit to Form 10-K/A for the year ended December 31, 1998 and incorporated herein by reference. (4) Instruments defining the rights of security holders, including indentures (see Article Four of Certificate of Incorporation). (9) Not applicable. (10) Material Contracts (a) Investment Management Agreements, Distribution Agreements, Plans of Distribution ("12b-1 Plans") and Shareholder Administration Agreements between subsidiaries of the Company and the Funds and Non-Exclusive License Agreements between the Company and the Funds:
Shareholder Non-Exclusive Management Distribution 12b-1 Administration License Fund Agreement Agreement Plan Agreement Agreement (i) Dollar Reserves, Inc. (1) (1) (1) (2) (5) (ii) Midas Investors Ltd. (1) (1) (1) (2) (5) (iii) Global Income Fund, Inc. (6) - - - (5) (iv) Midas U.S. and Overseas Fund, Ltd. (1) (1) (1) (2) (5) (v) Midas Special Equities Fund, Inc. (1) (1) (1) (2) (5) (vi) Tuxis Corporation (6) - - - (5) (vii) Bexil Corporation (6) - - - (5) (viii) Midas Fund, Inc. (3) (3) (3) (3) (5) (ix) Midas Magic, Inc. (4) (4) (4) (4) (5)
(1) Filed as exhibits to Form 10-K for the year ended December 31, 1993 and incorporated herein by reference. (2) Filed as exhibits to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. (3) Filed as exhibits to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (4) Filed as exhibits to Form 10-K for the year ended December 31, 1996 and incorporated herein by reference. 40 (5) Filed as exhibits to Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (6) Filed as exhibits to Form 10-K for the year ended December 31, 1999 and filed herein. (b) Bull & Bear Group, Inc. 1995 Long-Term Incentive Plan, as adopted December 6, 1995 and amended February 6, 1996, filed as exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (c) Section 422A Incentive Stock Option Plan, as adopted December 5, 1990, filed as exhibit to Form 10-K for the year ended December 31, 1990 and incorporated herein by reference. (d) Investment Management Transfer Agreements between the investment management subsidiaries of the Company and filed as exhibit to Form 10-K for the year ended December 31, 1992 and incorporated herein by reference. (e) Bull & Bear Investment Plan, filed as an exhibit to Form 10-K for the year ended December 31, 1993 and incorporated herein by reference. (f) Death Benefit Agreement dated July 22, 1994 and filed as exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. (g) Bull & Bear Group, Inc. Incentive Stock Option Agreement for Employees- Bassett S. Winmill filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (h) Bull & Bear Group, Inc. Incentive Stock Option Agreement for Employees- Robert D. Anderson filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (i) Bull & Bear Group, Inc. Incentive Stock Option Agreement for Employees- Mark C. Winmill filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (j) Bull & Bear Group, Inc. Incentive Stock Option Agreement for Employees- Thomas B. Winmill filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (k) Bull & Bear Group, Inc. Incentive Stock Option Agreement for Employees- Steven A. Landis filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (l) Bull & Bear Group, Inc. Stock Option Agreement - Edward G. Webb, Jr. filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. (m) Bull & Bear Group, Inc. Stock Option Agreement - Charles A. Carroll filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. 41 (n) Bull & Bear Group, Inc. 1995 Long-Term Incentive Plan, (as Amended and Restated as of October 29, 1997), filed as exhibit to Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (o) Option Certificate for Bassett S. Winmill filed as an exhibit to Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (p) Option Certificate for Edward G. Webb, Jr. filed as an exhibit to Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (q) Option Certificate for Charles A. Carroll filed as an exhibit to Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (r) Option Certificate for Thomas B. Winmill filed as an exhibit to Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (s) Option Certificate for Robert D. Anderson filed as an exhibit to Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (t) Purchase Agreement, dated as of December 17, 1998, by and among Bull & Bear Group, Inc., Bull & Bear Securities, Inc. and RBC Holdings (USA) Inc., with all exhibits thereto filed as an exhibit to Form 8-K on December 18, 1998 and incorporated herein by reference. (11) Statement Regarding Computation of Per Share Earnings (12) Not applicable. (13) Not applicable. (16) Not applicable. (18) Not applicable. (21) Wholly-Owned Subsidiaries of the Company (22) Not applicable. (23) Not applicable. (24) Not applicable. (27) Not applicable. (28) Not applicable. (99) Not applicable. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter of the period covered by this report. 42 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WINMILL & CO. INCORPORATED Formerly BULL & BEAR GROUP, INC. March 30, 2000 By: /s/ Joseph Leung Joseph Leung Treasurer, Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated. March 30, 2000 By: /s/ Bassett S. Winmill Bassett S. Winmill, Chairman of the Board, Director March 30, 2000 By: /s/ Robert D. Anderson Robert D. Anderson, Vice Chairman, Director March 30, 2000 By: /s/ Thomas B. Winmill Thomas B. Winmill, Esq. President, General Counsel, Director March 30, 2000 By: /s/ Edward G. Webb, Jr. Edward G. Webb, Jr. Director March 30, 2000 By: Charles A. Carroll, Director March 30, 2000 By: /s/ Mark C. Jones Mark C. Jones, Director 43 INDEX TO EXHIBITS (3) Exhibits (10) Material Contracts (a) Investment Management Agreement between Bexil Corporation and CEF Advisers, Inc. (b) Investment Management Agreement between Global Income Fund, Inc. and CEF Advisers, Inc. (c) Investment Management Agreement between Tuxis Corporation and CEF Advisers, Inc. (11) Statement Regarding Computation of Per Share Earnings (21) Wholly-Owned Subsidiaries of the Company 44 EXHIBIT 10(a) ITEM 1 OF 1 INVESTMENT MANAGEMENT AGREEMENT AGREEMENT made on March 8, 2000, by and between BEXIL CORPORATION, a Maryland corporation (the "Fund") and CEF ADVISERS, INC., a Delaware corporation (the "Investment Manager"). WHEREAS the Fund intends to register under the Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end management investment company; and WHEREAS, the Fund desires to retain the Investment Manager to furnish certain investment advisory and portfolio management services to the Fund, and the Investment Manager desires to furnish such services; NOW THEREFORE, in consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is hereby agreed between the parties hereto as follows: 1. The Fund hereby employs the Investment Manager to manage the investment and reinvestment of its assets, including the regular furnishing of advice with respect to the Fund's portfolio transactions subject at all times to the control and oversight of the Fund's Board of Directors, for the period and on the terms set forth in this Agreement. The Investment Manager hereby accepts such employment and agrees during such period to render the services and to assume the obligations herein set forth, for the compensation herein provided. The Investment Manager shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way, or otherwise be deemed an agent of the Fund. 2. The Fund assumes and shall pay all the expenses required for the conduct of its business including, but not limited to, salaries of administrative and clerical personnel, brokerage commissions, taxes, insurance, fees of the transfer agent, custodian, legal counsel and auditors, association fees, costs of filing, printing and mailing proxies, reports and notices to shareholders, preparing, filing and printing the prospectus and statement of additional information, payment of dividends, costs of stock certificates, costs of shareholders meetings, fees of the independent directors, necessary office space rental, all expenses relating to the registration or qualification of shares of the Fund under applicable Blue Sky laws and reasonable fees and expenses of counsel in connection with such registration and qualification and such non-recurring expenses as may arise, including, without limitation, actions, suits or proceedings affecting the Fund and the legal obligation which the Fund may have to indemnify its officers and directors with respect thereto. 3. If requested by the Fund's Board of Directors, the Investment Manager may provide other services to the Fund such as, without limitation, the functions of billing, accounting, certain shareholder communications and services, administering state and Federal registrations, filings and controls and other administrative services. Any services so requested and performed will be for the account of the Fund and the costs of the Investment Manager in rendering such services shall be reimbursed by the Fund, subject to examination by those directors of the Fund who are not interested persons of the Investment Manager or any affiliate thereof. 4. The services of the Investment Manager are not to be deemed exclusive, and the Investment Manager shall be free to render similar services to others in addition to the Fund so long as its services hereunder are not impaired thereby. 45 5. The Investment Manager shall create and maintain all necessary books and records in accordance with all applicable laws, rules and regulations, including but not limited to records required by Section 31(a) of the 1940 Act and the rules thereunder, as the same may be amended from time to time, pertaining to the investment management services performed by it hereunder and not otherwise created and maintained by another party pursuant to a written contract with the Fund. Where applicable, such records shall be maintained by the Investment Manager for the periods and in the places required by Rule 31a-2 under the 1940 Act. The books and records pertaining to the Fund which are in the possession of the Investment Manager shall be the property of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during the Investment Manager's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Investment Manager to the Fund or the Fund's authorized representatives. 6. As compensation for its services provided pursuant to this Agreement, the Fund will pay to the Investment Manager a fee from its assets, such fee to be computed weekly and paid monthly in arrears at the annual rate of 0.70% of the first $250 million, 0.625% from $250 million to $500 million, and 0.50% over $500 million of the Fund's net assets. If this Agreement becomes effective or terminates before the end of any month, the fee for the period from the effective date to the end of the month or from the beginning of such month to the date of termination, as the case may be, shall be protected according to the proportion which such period bears to the full month in which such effectiveness or termination occurs. 7. The Investment Manager shall direct portfolio transactions to broker/dealers for execution on terms and at rates which it believes, in good faith, to be reasonable in view of the overall nature and quality of services provided by a particular broker/dealer, including brokerage and research services and sales of shares of the Fund and shares of the other funds in the Midas fund complex. The Investment Manager may also allocate portfolio transactions to broker/dealers that remit a portion of their commissions as a credit against Fund expenses. With respect to brokerage and research services, the Investment Manager may consider in the selection of broker/dealers brokerage or research provided and payment may be made of a fee higher than that charged by another broker/dealer which does not furnish brokerage or research services or which furnishes brokerage or research services deemed to be of lesser value, so long as the criteria of Section 28(e) of the Securities Exchange Act of 1934, as amended, or other applicable laws are met. Although the Investment Manager may direct portfolio transactions without necessarily obtaining the lowest price at which such broker/dealer, or another, may be willing to do business, the Investment Manager shall seek the best value for the Fund on each trade that circumstances in the market place permit, including the value inherent in on-going relationships with quality brokers. To the extent any such brokerage or research services may be deemed to be additional compensation to the Investment Manager from the Fund, it is authorized by this Agreement. The Investment Manager may place brokerage for the Fund through an affiliate of the Investment Manager, provided that: the Fund not deal with such affiliate in any transaction in which such affiliate acts as principal; the commissions, fees or other remuneration received by such affiliate be reasonable and fair compared to the commissions, fees or other remuneration paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time; and such brokerage be undertaken in compliance with applicable law. The Investment Manager's fees under this Agreement shall not be reduced by reason of any commissions, fees or other remuneration received by such affiliate from the Fund. 8. The Investment Manager shall waive all or part of its fee or reimburse the Fund monthly if and to the extent the aggregate operating expenses of the Fund exceed the most restrictive limit imposed by any state in which shares of the Fund are qualified for sale. In calculating the limit of operating expenses, all expenses excludable under state regulation or otherwise shall be excluded. If this Agreement is in effect for less than all of a fiscal year, any such limit will be applied proportionately. 46 9. Subject to and in accordance with the Articles of Incorporation and By-laws of the Fund and of the Investment Manager, it is understood that directors, officers, agents and shareholders of the Fund are or may be interested in the Fund as directors, officers, shareholders and otherwise, that the Investment Manager is or may be interested in the Fund as a shareholder or otherwise and that the effect and nature of any such interests shall be governed by law and by the provisions, if any, of said Articles of Incorporation or By-laws. 10. A. This Agreement shall become effective upon the date hereinabove written provided that this Agreement shall not take effect unless it has first been approved (i) by a vote of a majority of the Directors of the Fund who are not parties to this Agreement, or interested persons of any such party and (ii) by vote of the holders of a majority of the Fund's outstanding voting securities. B. Unless sooner terminated as provided herein, this Agreement shall continue in effect for one year from the above written date. Thereafter, if not terminated, this Agreement shall continue automatically for successive periods of twelve months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of the Directors of the Fund who are not parties to this Agreement, or interested persons of any such party and (ii) by the Board of Directors of the Fund by the vote of the holders of a majority of the outstanding voting securities of the Fund. C. This Agreement may be terminated without penalty at any time either by vote of the Board of Directors of the Fund or by vote of the holders of a majority of the Fund's outstanding voting securities on 60 days' written notice to the Investment Manager, or by the Investment Manager on 60 days' written notice to the Fund. This Agreement shall immediately terminate in the event of its assignment. 11. The Investment Manager shall not be liable to the Fund or any shareholder of the Fund for any error of judgment or mistake of law or for any loss suffered by the Fund or the Fund's shareholders in connection with the matters to which this Agreement relates, but nothing herein contained shall be construed to protect the Investment Manager against any liability to the Fund or the Fund's shareholders by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties or by reason of its reckless disregard of obligations and duties under this Agreement. 12. As used in this Agreement, the terms "interested person," "assignment," and "majority of the outstanding voting securities" shall have the meanings provided therefor in the 1940 Act, and the rules and regulations thereunder. 13. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement, with respect to the subject hereof whether oral or written. If any provision of this Agreement shall be held or made invalid by a court or regulatory agency, decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 14. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, provided, however, that nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or regulation promulgated thereunder. 47 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: BEXIL CORPORATION _/s/Cory McClure By:/s/Thomas Winmill ATTEST: CEF ADVISERS, INC. _/s/Cory McClure By:/s/Joe Leung 48 EXHIBIT 10(b) ITEM 1 OF 1 INVESTMENT MANAGEMENT AGREEMENT AGREEMENT made as of the 8th day of March, 2000, by and between GLOBAL INCOME FUND, INC. a Maryland corporation (the "Fund") and CEF ADVISERS, INC., a Delaware corporation (the "Investment Manager"). WHEREAS the Fund intends to register under the Investment Company Act of 1940, as amended (the "1940 Act"), as a closedend management investment company; and WHEREAS, the Fund desires to retain the Investment Manager to furnish certain investment advisory and portfolio management services to the Fund, and the Investment Manager desires to furnish such services; NOW THEREFORE, in consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is hereby agreed between the parties hereto as follows: 1. TheFund hereby employs the Investment Manager to manage the investment and reinvestment of its assets, including the regular furnishing of advice with respect to the Fund's portfolio transactions subject at all times to the control and oversight of the Fund's Board of Directors, for the period and on the terms set forth in this Agreement. The Investment Manager hereby accepts such employment and agrees during such period to render the services and to assume the obligations herein set forth, for the compensation herein provided. The Investment Manager shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way, or otherwise be deemed an agent of the Fund. 2. The Fund assumes and shall pay all the expenses required for the conduct of its business including, but not limited to, salaries of administrative and clerical personnel, brokerage commissions, taxes, insurance, fees of the transfer agent, custodian, legal counsel and auditors, association fees, costs of filing, printing and mailing proxies, reports and notices to shareholders, preparing, filing and printing the prospectus and statement of additional information, payment of dividends, costs of stock certificates, costs of shareholders meetings, fees of the independent directors, necessary office space rental, all expenses relating to the registration or qualification of shares of the Fund under applicable Blue Sky laws and reasonable fees and expenses of counsel in connection with such registration and qualification and such nonrecurring expenses as may arise, including, without limitation, actions, suits or proceedings affecting the Fund and the legal obligation which the Fund may have to indemnify its officers and directors with respect thereto. 3. If requested by the Fund's Board of Directors, the Investment Manager may provide other services to the Fund such as, without limitation, the functions of billing, accounting, certain shareholder communications and services, administering state and Federal registrations, filings and controls and other administrative services. Any services so requested and performed will be for the account of the Fund and the costs of the Investment Manager in rendering such services shall be reimbursed by the Fund, subject to examination by those directors of the Fund who are not interested persons of the Investment Manager or any affiliate thereof. 4. The services of the Investment Manager are not to be deemed exclusive, and the Investment Manager shall be free to render similar services to others in addition to the Fund so long as its services hereunder are not impaired thereby. 49 5. The Investment Manager shall create and maintain all necessary books and records in accordance with all applicable laws, rules and regulations, including but not limited to records required by Section 31(a) of the 1940 Act and the rules thereunder, as the same may be amended from time to time, pertaining to the investment management services performed by it hereunder and not otherwise created and maintained by another party pursuant to a written contract with the Fund. Where applicable, such records shall be maintained by the Investment Manager for the periods and in the places required by Rule 31a2 under the 1940 Act. The books and records pertaining to the Fund which are in the possession of the Investment Manager shall be the property of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during the Investment Manager's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Investment Manager to the Fund or the Fund's authorized representatives. 6. As compensation for its services, with respect to the Fund the Investment Manager will be paid by the Fund a fee payable monthly, based on the average weekly net assets of the Fund, and computed at the annual rate of 7/10 of 1% of the first $250 million, 5/8 of 1% of from $250 million to $500 million, and of 1% over $500 million. The aggregate net assets for each day shall be computed by subtracting the liabilities of the Fund from the value of its assets, such amount to be computed as of the calculation of the net asset values per share on each business day. 7.The Investment Manager shall direct portfolio transactions to broker/dealers for execution on terms and at rates which it believes, in good faith, to be reasonable in view of the overall nature and quality of services provided by a particular broker/dealer, including brokerage and research services and sales of shares of the Fund and shares of the other funds in the Midas fund complex. The Investment Manager may also allocate portfolio transactions to broker/dealers that remit a portion of their commissions as a credit against Fund expenses. With respect to brokerage and research services, the Investment Manager may consider in the selection of broker/dealers brokerage or research provided and payment may be made of a fee higher than that charged by another broker/dealer which does not furnish brokerage or research services or which furnishes brokerage or research services deemed to be of lesser value, so long as the criteria of Section 28(e) of the Securities Exchange Act of 1934, as amended, or other applicable laws are met. Although the Investment Manager may direct portfolio transactions without necessarily obtaining the lowest price at which such broker/dealer, or another, may be willing to do business, the Investment Manager shall seek the best value for the Fund on each trade that circumstances in the market place permit, including the value inherent in ongoing relationships with quality brokers. To the extent any such brokerage or research services may be deemed to be additional compensation to the Investment Manager from the Fund, it is authorized by this Agreement. The Investment Manager may place brokerage for the Fund through an affiliate of the Investment Manager, provided that: the Fund not deal with such affiliate in any transaction in which such affiliate acts as principal; the commissions, fees or other remuneration received by such affiliate be reasonable and fair compared to the commissions, fees or other remuneration paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time; and such brokerage be undertaken in compliance with applicable law. The Investment Manager's fees under this Agreement shall not be reduced by reason of any commissions, fees or other remuneration received by such affiliate from the Fund. 8. The Investment Manager shall waive all or part of its fee or reimburse the Fund monthly if and to the extent the aggregate operating expenses of the Fund exceed the most restrictive limit imposed by any state in which shares of the Fund are qualified for sale. In calculating the limit of operating expenses, all expenses excludable under state regulation or otherwise shall be excluded. If this Agreement is in effect for less than all of a fiscal year, any such limit will be applied proportionately. 50 9. Subject to and in accordance with the Articles of Incorporation and Bylaws of the Fund and of the Investment Manager, it is understood that directors, officers, agents and shareholders of the Fund are or may be interested in the Fund as directors, officers, shareholders and otherwise, that the Investment Manager is or may be interested in the Fund as a shareholder or otherwise and that the effect and nature of any such interests shall be governed by law and by the provisions, if any, of said Articles of Incorporation or Bylaws. 10. A.This Agreement shall become effective upon the date hereinabove written and, unless sooner terminated as provided herein, this Agreement shall continue in effect for one year from the above written date. Thereafter, if not terminated, this Agreement shall continue automatically for successive periods of twelve months each, provided that such continuance is specifically approved at least annually (a) by a vote of a majority of the Directors of the Fund or by vote of the holders of a majority of the Fund's outstanding voting securities of the Fund as defined in the 1940 Act and (b) by a vote of a majority of the Directors of the Fund who are not parties to this Agreement, or interested persons of such party. This Agreement may be terminated without penalty at any time either by vote of the Board of Directors of the Fund or by a vote of the holders of a majority of the outstanding voting securities of the Fund on 60 days written notice to the Investment Manager, or by the Investment Manager on 60 days written notice to the Fund. This Agreement shall immediately terminate in the event of its assignment. 11. The Investment Manager shall not be liable to the Fund or any shareholder of the Fund for any error of judgment or mistake of law or for any loss suffered by the Fund or the Fund's shareholders in connection with the matters to which this Agreement relates, but nothing herein contained shall be construed to protect the Investment Manager against any liability to the Fund or the Fund's shareholders by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties or by reason of its reckless disregard of obligations and duties under this Agreement. 12. As used in this Agreement, the terms "interested person," "assignment," and "majority of the outstanding voting securities" shall have the meanings provided therefor in the 1940 Act, and the rules and regulations thereunder. 13. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement, with respect to the subject hereof whether oral or written. If any provision of this Agreement shall be held or made invalid by a court or regulatory agency, decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 14. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, provided, however, that nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or regulation promulgated thereunder. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: GLOBAL INCOME FUND, INC. _/s/Cory McClure By:/s/Thomas Winmil ATTEST: CEF ADVISERS, INC. _/s/Cory McClure By:/s/Joe Leung 51 EXHIBIT 10(c) ITEM 1 OF 1 INVESTMENT MANAGEMENT AGREEMENT AGREEMENT made on March 8, 2000, by and between TUXIS CORPORATION, a Maryland corporation (the "Fund") and CEF ADVISERS, INC., a Delaware corporation (the "Investment Manager") WHEREAS the Fund intends to register under the Investment Company Act of 1940, as amended (the "1940 Act"), as a closedend management investment company; and WHEREAS, the Fund desires to retain the Investment Manager to furnish certain investment advisory and portfolio management services to the Fund, and the Investment Manager desires to furnish such services; NOW THEREFORE, in consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is hereby agreed between the parties hereto as follows: 1. The Fund hereby employs the Investment Manager to manage the investment and reinvestment of its assets, including the regular furnishing of advice with respect to the Fund's portfolio transactions subject at all times to the control and oversight of the Fund's Board of Directors, for the period and on the terms set forth in this Agreement. The Investment Manager hereby accepts such employment and agrees during such period to render the services and to assume the obligations herein set forth, for the compensation herein provided. The Investment Manager shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way, or otherwise be deemed an agent of the Fund. 2. The Fund assumes and shall pay all the expenses required for the conduct of its business including, but not limited to, salaries of administrative and clerical personnel, brokerage commissions, taxes, insurance, fees of the transfer agent, custodian, legal counsel and auditors, association fees, costs of filing, printing and mailing proxies, reports and notices to shareholders, preparing, filing and printing the prospectus and statement of additional information, payment of dividends, costs of stock certificates, costs of shareholders meetings, fees of the independent directors, necessary office space rental, all expenses relating to the registration or qualification of shares of the Fund under applicable Blue Sky laws and reasonable fees and expenses of counsel in connection with such registration and qualification and such nonrecurring expenses as may arise, including, without limitation, actions, suits or proceedings affecting the Fund and the legal obligation which the Fund may have to indemnify its officers and directors with respect thereto. 3. If requested by the Fund's Board of Directors, the Investment Manager may provide other services to the Fund such as, without limitation, the functions of billing, accounting, certain shareholder communications and services, administering state and Federal registrations, filings and controls and other administrative services. Any services so requested and performed will be for the account of the Fund and the costs of the Investment Manager in rendering such services shall be reimbursed by the Fund, subject to examination by those directors of the Fund who are not interested persons of the Investment Manager or any affiliate thereof. 4. The services of the Investment Manager are not to be deemed exclusive, and the Investment Manager shall be free to render similar services to others in addition to the Fund so long as its services hereunder are not impaired thereby. 52 5. The Investment Manager shall create and maintain all necessary books and records in accordance with all applicable laws, rules and regulations, including but not limited to records required by Section 31(a) of the 1940 Act and the rules thereunder, as the same may be amended from time to time, pertaining to the investment management services performed by it hereunder and not otherwise created and maintained by another party pursuant to a written contract with the Fund. Where applicable, such records shall be maintained by the Investment Manager for the periods and in the places required by Rule 31a2 under the 1940 Act. The books and records pertaining to the Fund which are in the possession of the Investment Manager shall be the property of the Fund. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during the Investment Manager's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Investment Manager to the Fund or the Fund's authorized representatives. 6. As compensation for its services provided pursuant to this Agreement, the Fund will pay to the Investment Manager a fee from its assets, such fee to be computed weekly and paid monthly in arrears at the annual rate of 0.60% of the first $500 million and 0.50% over $500 million of the Fund's net assets. If this Agreement becomes effective or terminates before the end of any month, the fee for the period from the effective date to the end of the month or from the beginning of such month to the date of termination, as the case may be, shall be protected according to the proportion which such period bears to the full month in which such effectiveness or termination occurs. 7. The Investment Manager shall direct portfolio transactions to broker/dealers for execution on terms and at rates which it believes, in good faith, to be reasonable in view of the overall nature and quality of services provided by a particular broker/dealer, including brokerage and research services and sales of shares of the Fund and shares of the other funds in the Midas fund complex. The Investment Manager may also allocate portfolio transactions to broker/dealers that remit a portion of their commissions as a credit against Fund expenses. With respect to brokerage and research services, the Investment Manager may consider in the selection of broker/dealers brokerage or research provided and payment may be made of a fee higher than that charged by another broker/dealer which does not furnish brokerage or research services or which furnishes brokerage or research services deemed to be of lesser value, so long as the criteria of Section 28(e) of the Securities Exchange Act of 1934, as amended, or other applicable laws are met. Although the Investment Manager may direct portfolio transactions without necessarily obtaining the lowest price at which such broker/dealer, or another, may be willing to do business, the Investment Manager shall seek the best value for the Fund on each trade that circumstances in the market place permit, including the value inherent in ongoing relationships with quality brokers. To the extent any such brokerage or research services may be deemed to be additional compensation to the Investment Manager from the Fund, it is authorized by this Agreement. The Investment Manager may place brokerage for the Fund through an affiliate of the Investment Manager, provided that: the Fund not deal with such affiliate in any transaction in which such affiliate acts as principal; the commissions, fees or other remuneration received by such affiliate be reasonable and fair compared to the commissions, fees or other remuneration paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time; and such brokerage be undertaken in compliance with applicable law. The Investment Manager's fees under this Agreement shall not be reduced by reason of any commissions, fees or other remuneration received by such affiliate from the Fund. 8. The Investment Manager shall waive all or part of its fee or reimburse the Fund monthly if and to the extent the aggregate operating expenses of the Fund exceed the most restrictive limit imposed by any state in which shares of the Fund are qualified for sale. In calculating the limit of operating expenses, all expenses excludable under state regulation or otherwise shall be excluded. If this Agreement is in effect for less than all of a fiscal year, any such limit will be applied proportionately. 53 9. Subject to and in accordance with the Articles of Incorporation and Bylaws of the Fund and of the Investment Manager, it is understood that directors, officers, agents and shareholders of the Fund are or may be interested in the Fund as directors, officers, shareholders and otherwise, that the Investment Manager is or may be interested in the Fund as a shareholder or otherwise and that the effect and nature of any such interests shall be governed by law and by the provisions, if any, of said Articles of Incorporation or Bylaws. 10. A.This Agreement shall become effective upon the date hereinabove written provided that this Agreement shall not take effect unless it has first been approved (i) by a vote of a majority of the Directors of the Fund who are not parties to this Agreement, or interested persons of any such party and (ii) by vote of the holders of a majority of the Fund's outstanding voting securities. B. Unless sooner terminated as provided herein, this Agreement shall continue in effect for one year from the above written date. Thereafter, if not terminated, this Agreement shall continue automatically for successive periods of twelve months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of the Directors of the Fund who are not parties to this Agreement, or interested persons of any such party and (ii) by the Board of Directors of the Fund by the vote of the holders of a majority of the outstanding voting securities of the Fund. C. This Agreement may be terminated without penalty at any time either by vote of the Board of Directors of the Fund or by vote of the holders of a majority of the Fund's outstanding voting securities on 60 days' written notice to the Investment Manager, or by the Investment Manager on 60 days' written notice to the Fund. This Agreement shall immediately terminate in the event of its assignment. 11. The Investment Manager shall not be liable to the Fund or any shareholder of the Fund for any error of judgment or mistake of law or for any loss suffered by the Fund or the Fund's shareholders in connection with the matters to which this Agreement relates, but nothing herein contained shall be construed to protect the Investment Manager against any liability to the Fund or the Fund's shareholders by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties or by reason of its reckless disregard of obligations and duties under this Agreement. 12. As used in this Agreement, the terms "interested person," "assignment," and "majority of the outstanding voting securities" shall have the meanings provided therefor in the 1940 Act, and the rules and regulations thereunder. 13. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement, with respect to the subject hereof whether oral or written. If any provision of this Agreement shall be held or made invalid by a court or regulatory agency, decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 14. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, provided, however, that nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or regulation promulgated thereunder. 54 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: TUXIS CORPORATION _/s/Cory McClure By:/s/Thomas Winmill ATTEST: CEF ADVISERS, INC. _/s/Cory McClure By:/s/Joe Leung 55 Exhibit 11 -Statement Regarding Computation of Per Share Earnings
1999 1998 1997 Basic Diluted Basic Diluted Basic Diluted Weighted average common shares outstanding 1,655,017 1,655,017 1,391,940 1,391,940 1,370,017 1,370,017 Weighted average common shares issuable upon exercise of stock options under the treasury stock method - 25,740 - 61,532 - 98,235 Weighted average common shares issuable upon exercise of warrants under the treasury stock method - - - - - - Weighted average common shares and common share equivalents utilized for earnings per share computation 1,655,017 1,680,757 1,391,940 1,453,472 1,370,017 1,468,252
56 Exhibit 21 - Wholly-Owned Subsidiaries of the Company CEF Advisers, Inc., a Delaware corporation Hanover Direct Advertising Company, Inc., a Delaware corporation Investor Service Center, Inc., a Delaware corporation Midas Management Corporation, a Delaware corporation Performance Properties, Inc., a Delaware corporation EX-27 2 FDS -- WINMILL & CO. INCORPORATED
5 This schedule contains summary financial information extracted from the Winmill & Co. Incorporated Form 10-K and is qualified in its entirety by references to such form 10-K. 0000052234 Winmill & Co. Incorporated YEAR Dec-31-1999 Jan-01-1999 Dec-31-1999 2,560,093 4,600,928 316,229 0 0 7,606,212 899,602 796,900 10,090,029 2,251,394 0 0 0 16,551 7,822,084 10,090,029 0 3,300,920 0 0 3,213,892 0 0 87,028 38,252 48,776 2,479,865 0 0 2,528,641 1.53 1.51
-----END PRIVACY-ENHANCED MESSAGE-----