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As filed with the Securities and Exchange Commission on March 30, 2001
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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, 2000
or
Transition Report Pursuant to Section 13 or 15(d) of the
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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.)
0
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,
2001.
The number of shares outstanding of each of the registrant's classes of common
stock, as of March 15, 2001:
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 5
PART II
4. Submission of Matters to a Vote of Security Holder 6
5. Market for Company's Common Equity and Related Stockholder Matters 6
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
8. Financial Statements and Supplementary Data 11
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 28
PART III
10. Directors and Executive Officers 29
11. Executive Compensation 31
12. Security Ownership of Certain Beneficial Owners and Management 38
13. Certain Relationships and Related Transactions 38
PART IV
14. Exhibits, Consolidated Financial Statements and Schedules,
and Reports on Form 8-K 39
PART I
Item 1. Business
- ------- --------
Winmill & Co. Incorporated, a Delaware corporation (the "Company"), is a holding
company with five principal subsidiaries: CEF 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 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 consulting 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 and may engage in proprietary trading.
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. The commission revenue
generated by Hanover Direct from ISC, if any, 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.
See Note 12 to the financial statements for financial information by business
segment.
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 and Distribution 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, 2000 were approximately as follows:
Bexil Corporation $ 9,789,000
Dollar Reserves, Inc. 58,502,000
Global Income Fund, Inc. 29,783,000
Midas Fund, Inc. 34,820,000
Midas Investors Ltd. 3,324,000
Midas Magic, Inc. 1,030,000
Midas Special Equities Fund, Inc. 29,036,000
Midas U.S. and Overseas Ltd. 3,943,000
Tuxis Corporation 11,239,000
---------------
Total Net Assets $ 181,466,000
===============
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.
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.
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-KSB 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.
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 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 trading portfolio.
-4-
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
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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 consisted of approximately 13,000
square feet. The building was purchased for cash, had no mortgage. The office
building was sold on December 1, 2000 for $2,250,000.
Item 3. Legal Proceedings
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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, 2000, 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.
-5-
PART II
Item 4. Submission of Matters to a Vote of Security Holders During Fourth
- ------- Quarter of the Year Ended December 31, 2000
----------------------------
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 241 holders of
record of Class A Common Stock and 1 holder of Class B Common Stock as of
December 31, 2000. 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:
2000 1999
----------------- -----------------
High Low High Low
First Quarter $2-7/32 $1-15/16 $15-1/4 $2-5/8
Second Quarter $2-1/16 $1-5/8 $4-1/16 $2-5/8
Third Quarter $2-3/32 $1-13/16 $2-3/4 $2
Fourth Quarter $1-15/16 $1 $2-5/16 $1-7/8
Item 6. Selected Financial Data
- ------- -----------------------
The selected financial data for the five years ended December 31, 2000 is
presented on the following pages.
-6-
WINMILL & CO. INCORPORATED
CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Revenues:
Management, distribution and administration fees $2,285,540 $2,855,637 $3,554,725 $4,377,653 $4,922,945
Real estate rental income 250,941 216,271 43,878 -- --
Gain on sale of real estate 901,046 -- -- -- --
Consulting fee 200,000 150,000 -- -- --
Realized and unrealized gains (losses) from investments 139,154 (250,893) 62,783 83,608 31,216
Dividends, interest and other 387,124 329,905 58,966 99,149 73,646
------------- ------------ ------------
-----------------------------------------------------------------------
4,163,805 3,300,920 3,720,352 4,560,410 5,027,807
------------- ------------ ------------ ----------- -------------
Expenses:
General and administrative 2,203,164 2,287,472 2,093,323 2,559,080 2,744,021
Marketing 324,611 466,024 531,228 772,201 1,191,639
Subadvisory fees -- 147,157 230,954 387,593 705,248
Professional fees 192,835 159,537 177,376 186,320 290,098
Amortization and depreciation 126,755 153,702 118,186 106,871 116,151
Non-recurring item 325,000 -- -- -- --
------------- ------------ ------------
3,172,365 3,213,892 3,151,067 4,012,065 5,047,157
----------- ----------- ----------- ----------- -------------
Income (loss) from continuing operations before
provision for income taxes 991,440 87,028 569,285 548,345 (19,350)
Income taxes 483,126 38,252 (82,544) (5,196) 91,248
------------- ------------- ------------ ------------ ------------
Income (loss) from continuing operations 508,314 48,776 651,829 553,541 (110,598)
Discontinued operations
Income (loss) from discontinued operations
(net of income taxes) -- 2,479,865 (140,414) 72,184 (209,927)
------------- ------------- ------------- ------------- ------------
Net income (loss) $508,314 $2,528,641 $511,415 $625,725 $(320,525)
============= ============= ============= ============= ============
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Net income (loss) per share of weighted average
Common Stock outstanding:
Basic
Income (loss) from continuing operations $.31 $.03 $.47 $.41 $(.08)
Income (loss) from discontinued operations -- 1.50 (.10) .05 (.15)
----- ------ ------ ----- ------
Net income $.31 $1.53 $.37 $.46 $(.23)
===== ====== ====== ====== =====
Diluted
Income (loss) from continuing operations $.31 $.03 $.45 $.38 $(.08)
Income (loss) from discontinued operations -- 1.48 (.10) .05 (.15)
----- ------ ------ ----- ------
Net income $.31 $1.51 $.35 $.43 $(.23)
===== ====== ====== ====== =====
Weighted average shares of Common Stock outstanding:
Basic 1,655,017 1,655,017 1,391,940 1,370,017 1,369,555
============ ============= ============ =========== ==========
Diluted 1,659,837 1,680,757 1,453,472 1,468,252 1,369,555
============ ============= ============ =========== ==========
Total assets $8,377,222 $10,090,029 $5,315,147 $4,827,074 $4,273,110
============ ============= ============ =========== ===========
Long-term obligations $ -- $ -- $ -- $7,460 $22,093
============ ============= ============ =========== ===========
THIS PAGE INTENTIONALLY LEFT BLANK
-7-
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
2000 Compared to 1999
- ---------------------
Total revenues for the year increased $862,885 or 26% reflecting primarily the
gain realized on the sale of real estate of $901,046. Management and
distribution fees decreased $398,745 or 21% and $171,352 or 18%, respectively.
The decrease in management and distribution fees was due to an overall decrease
in the net asset levels of the Funds. Net assets under management were
approximately $244 million at December 31, 1999, $222 million at March 31, 2000,
$198 million at June 30, 2000, $189 million at September 30, 2000 and $181
million at December 31, 2000.
Rental income increased $34,670 or 16%. On December 1, 2000, the Company sold
its real estate held for investment realizing a gain on the sale of $901,046. In
2000, the Company earned $200,000 in consulting fees from BBSI in connection
with the sale of BBSI in 1999. Dividends, interest and other income increased
$57,219 or 17% due to higher earnings from the Company's investments. The
Company had net realized and unrealized gains of $139,154 from the Company's
marketable securities which included certain investments in Funds managed by the
Company.
Total expenses decreased $41,527 or 1%. General and administrative expenses
decreased $43,027 or 2%. Marketing expenses decreased $141,413 or 30% due to
lower fulfillment expenses and lower payments to other brokers for distributing
the Company's open-end Funds. Expense reimbursements to the Funds decreased
$41,281 or 13% due to lower waivers of management and distribution fees in
certain Funds. Effective December 1, 1999, the Midas Fund's subadvisory
agreement was discontinued, resulting in decreased subadvisory fees of $147,157.
Professional fees increased $33,298 or 21%. Depreciation and amortization
decreased $26,947 or 18%. In 2000, the Company determined that the carrying
value of one of its intangible assets exceeded its net realizable value and
recorded a non-recurring charge of $325,000 to operations.
Net income from continuing operations for the year was $508,314 or $.31 per
share on a diluted basis as compared to net income from continuing operations of
$48,776 or $.03 per share on a diluted basis for 1999.
Net income for the year was $508,314 or $.31 per share on a diluted basis as
compared to net income of $2,528,641 or $1.51 per share on a diluted basis in
1999 which included a net gain from discontinued operations of $2,479,865 or
$1.48 per share on a diluted basis.
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%. Management and distribution fees decreased $298,721 or 14% and $114,688 or
14%, 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% 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.
-8-
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.
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,
-------------------------------------------
2000 1999 1998
---- ---- ----
Working Capital $ 7,132,886 $ 5,354,818 $ 2,371,234
Total Assets $ 8,377,222 $10,090,029 $ 5,315,147
Shareholders' Equity $ 7,961,746 $ 7,838,635 $ 4,959,016
For the year ended 2000, working capital and shareholders' equity increased
$1,778,068 and $123,111, respectively. Total assets decreased $1,712,807.
Total assets decreased primarily due to the payment of federal, state and local
income taxes in the first quarter of 2000 and the write-down of intangible
assets of $325,000. Working capital increased due to the sale of real estate
held for investment in the fourth quarter of 2000. The increase in shareholders'
equity was primarily the result of the net income for 2000 of $508,314 offset by
the decrease in unrealized capital gains on marketable securities of $385,203.
For the year ended 1999, working capital, total assets and shareholders' equity
increased $2,983,584, $4,774,882 and $2,879,619, respectively.
-9-
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 2000 of $691,666 and the decrease in unrealized capital gains
on marketable securities of $(350,375).
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, 2000, the amount subject to these
restrictions was $262,989 or 3.1% of total assets.
Effects of Inflation and Changing Prices
- ----------------------------------------
Since the Company derives revenue from investment management and distribution
services from the Funds, 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.
-10-
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
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Page
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Report of Independent Certified Public Accountants 12
Consolidated Balance Sheets,
December 31, 2000 and 1999 13
Consolidated Statements of Income,
Years ended December 31, 2000, 1999 and 1998 14
Consolidated Statements of Changes in Shareholders' Equity,
Years ended December 31, 2000, 1999 and 1998 15
Consolidated Statements of Cash Flows,
Years ended December 31, 2000, 1999 and 1998 16
Notes to Consolidated Financial Statements 18
-11-
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, 2000 and 1999, 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, 2000. 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, 2000 and 1999, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 2000, in conformity
with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 9, 2001
-12-
WINMILL & CO. INCORPORATED
CONSOLIDATED BALANCE SHEETS
December 31,
2000 1999
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 3,086,087 $ 2,560,093
Marketable securities (Note 2) 3,926,175 4,600,928
Management, distribution and other fees
receivable 161,774 272,800
Interest, dividends and other receivables 183,816 43,429
Prepaid expenses and other current assets 190,510 128,962
------------ --------------
Total Current Assets 7,548,362 7,606,212
------------ --------------
Real estate, net - 1,325,693
Equipment, furniture and fixtures, net 50,624 102,702
Excess of cost over net book value of
subsidiaries, net 286,315 650,001
Deferred income taxes (Note 9) 138,000 140,000
Other assets 353,921 265,421
------------ --------------
828,860 2,483,817
------------ --------------
Total Assets $ 8,377,222 $ 10,090,029
============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 38,649 $ 201,926
Accrued professional fees 66,563 75,055
Accrued payroll and other related costs 69,428 72,049
Accrued income taxes 231,000 1,866,600
Accrued other expenses - 25,928
Other current liabilities 9,836 9,836
------------ --------------
Total Current Liabilities 415,476 2,251,394
------------ --------------
Contingencies (Note 13) - -
Shareholders' Equity (Notes 3, 5, 6, and 7)
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 1,711,617 1,203,303
Notes receivable for common stock issued (603,675) (603,675)
Accumulated other comprehensive income (35,201) 350,002
------------ --------------
Total Shareholders' Equity 7,961,746 7,838,635
------------ --------------
Total Liabilities and Shareholders' Equity $ 8,377,222 $ 10,090,029
============ ==============
See accompanying notes to consolidated financial statements.
-13-
WINMILL & CO. INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
2000 1999 1998
---- ---- ----
Revenues:
Management, distribution, service, and
administrative fees $ 2,285,540 $ 2,855,637 $ 3,554,725
Real estate rental income 250,941 216,271 43,878
Gain on sale of real estate 901,046 - -
Consulting fee 200,000 150,000 -
Realized and unrealized gains (losses)
from investments 139,154 (250,893) 62,783
Dividends, interest and other 387,124 329,905 58,966
------------ ------------ ------------
4,163,805 3,300,920 3,720,352
------------ ------------ ------------
Expenses:
General and administrative 1,915,609 1,958,636 1,912,927
Marketing 324,611 466,024 531,228
Expense reimbursements to the Funds (Note 11) 287,555 328,836 180,396
Subadvisory fees - 147,157 230,954
Professional fees 192,835 159,537 177,376
Amortization and depreciation 126,755 153,702 118,186
Non-recurring item (Note 10) 325,000 - -
------------ ------------ ------------
3,172,365 3,213,892 3,151,067
------------ ------------ ------------
Income from continuing operations before income taxes 991,440 87,028 569,285
Income taxes (benefit) (Note 9) 483,126 38,252 (82,544)
------------ ------------ ------------
Income from continuing operations 508,314 48,776 651,829
Discontinued Operations:
Income (loss) from discontinued operations
(net of income taxes) (Note 2) - 2,479,865 (140,414)
------------ ------------ ------------
Net Income $ 508,314 $ 2,528,641 $ 511,415
============ ============ ============
Per Share Data:
Basic
Income from continuing operations $ .31 $ .03 $ .47
Income (loss) from discontinued operations - 1.50 (.10)
------ ------ -----
Net income $ .31 $ 1.53 $ .37
====== ====== =====
Diluted
Income from continuing operations $ .31 $ .03 $ .45
Income (loss) from discontinued operations - 1.48 (.10)
------- ------ -----
Net income $ .31 $ 1.51 $ .35
====== ====== =====
Average Shares Outstanding:
Basic 1,655,017 1,655,017 1,391,940
========= ========= =========
Diluted 1,659,839 1,680,757 1,453,472
========= ========= =========
See accompanying notes to consolidated financial statements.
-14-
WINMILL & CO. INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 2000, 1999 and 1998
Number of Shares Amount
---------------- -------------------------------------------------------------------------------
Notes
Receivable
For Accumulated
Additional Common Retained Other Total
Class A Class B Class A Class B Paid-In Stock Earnings Comprehensive Shareholders'
Common Common Common Common Capital Issued (Deficit) Income Equity
------ ------ ------ ------ ------- ------ --------- ------------- -------------
Balance, December 31, 1997 1,350,017 20,000 $13,501 $200 $6,236,077 $ -- $(1,836,753) $42,086 $4,455,111
Net income -- -- -- -- -- -- 511,415 -- 511,415
Other comprehensive income
Unrealized losses on marketable -- -- -- -- -- -- -- (43,062) (43,062)
securities -- -- -- -- -- -- -- --
Comprehensive income 468,353
Issuance of Class A common stock
on exercise of stock options 285,000 -- 2,850 -- 636,377 -- -- -- 639,227
Issuance of notes receivable
(Note 8) -- -- -- -- -- (603,675) -- -- (603,675)
--------- ------- ------ ----- ---------- -------- --------- --------- ---------
Balance, December 31, 1998 1,635,017 20,000 16,351 200 6,872,454 (603,675) (1,325,338) (976) 4,959,016
Net income -- -- -- -- -- -- 2,528,641 -- 2,528,641
Other comprehensive income
Unrealized gains on investments -- -- -- -- -- -- -- 350,978 350,978
--------- ------ -------- ----- ---------- --------- ---------- -------- ---------
Comprehensive income 2,879,619
Balance, December 31, 1999 1,635,017 20,000 16,351 200 6,872,454 (603,675) 1,203,303 350,002 7,838,635
Net income -- -- -- -- -- -- 508,314 -- 508,314
Other comprehensive income
Unrealized losses on marketable
securities -- -- -- -- -- -- -- (385,203) (385,203)
-------- ------- -------- ----- -------- --------- ----------- --------- ----------
Comprehensive income 123,111
Balance, December 31, 2000 1,635,017 20,000 $16,351 $200 $6,872,454 $(603,675) $1,711,617 $(35,201) $7,961,746
========= ======= ======= ===== ========== ========= ========== ========= ==========
See accompanying notes to consolidated financial statements.
-15-
WINMILL & CO. INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2000 1999 1998
---- ---- ----
Cash Flows from Operating Activities:
Net income $ 508,314 $ 2,528,641 $ 511,415
------------- ------------- ------------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 126,755 153,702 169,008
Write-off of impaired asset 325,000 - -
Deferred income taxes 26,000 75,400 (215,400)
Increase in cash value of life insurance (88,500) (33,000) (33,000)
Realized/unrealized (gain) loss on investments (139,154) 260,014 (40,330)
Gain on sale of discontinued operations - (2,464,616) -
Gain on sale of real estate (901,046) - -
(Increase) decrease in, net of effects from
sale of discontinued operations:
Management, distribution and shareholder
administration fees receivable 111,026 (15,487) 11,671
Interest, dividends and other receivables (140,387) (28,712) (17,832)
Prepaid expenses and other current assets (61,548) 277,625 (95,129)
Other assets - 43,762 -
Increase (decrease) in, net of effects from
sale of discontinued operations:
Accounts payable (163,277) 193,369 (55,915)
Accrued expenses (37,041) (48,580) 57,010
Accrued income taxes (1,635,600) 1,866,600 -
Other current liabilities - - (572)
------------- ------------- ------------
Total adjustments (2,577,772) 280,077 (220,489)
------------- ------------- ------------
Net cash provided by (used for)
Operating Activities (2,069,458) 2,808,718 290,926
------------- ------------- ------------
-16-
WINMILL & CO. INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Years Ended December 31,
2000 1999 1998
---- ---- ----
Cash Flows from Investing Activities:
Improvement to real estate for investment $ (53,951) $ (201,237) $ (606,296)
Proceeds from sale of real estate 2,250,000 - -
Capital expenditures (5,301) (7,617) (102,440)
Proceeds from sale of discontinued operations
net of discontinued operations cash and
current expenses and taxes - 2,717,626 -
Proceeds from sales of investments 2,711,049 810,528 1,748,467
Purchases of investments (2,306,345) (4,967,107) (258,556)
------------- ------------- ------------
Net cash provided by (used in)
Investing Activities 2,595,452 (1,647,807) 781,175
------------- ------------- ------------
Cash Flows from Financing Activities:
Issuance collection of note receivable - - (603,675)
Repayments of capitalized lease obligation - (4,749) (16,355)
Proceeds from issuance of Class A Common Stock - - 639,227
------------- ------------- ------------
Net cash provided by (used in)
Financing Activities - (4,749) 19,197
------------- ------------- ------------
Net increase in cash and cash equivalents 525,994 1,156,162 1,091,298
Cash and cash equivalents:
Beginning of year 2,560,093 1,403,931 312,633
------------- ------------- ------------
End of year $ 3,086,087 $ 2,560,093 $ 1,403,931
============= ============= ============
SUPPLEMENTAL DISCLOSURE:
The Company paid $1,475,000, $0 and $9,346 in Federal income taxes in 2000,
1999 and 1998, respectively. The Company paid $864 and $916 in interest in
1999 and 1998, respectively.
See accompanying notes to consolidated financial statements.
-17-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Winmill & Co., Incorporated ("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, proprietary securities trading, and real estate
investment and operation.
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, 2000 and 1999, the Company and
subsidiaries had invested approximately $2,871,800 and $2,199,800,
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.
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.
-18-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
REAL ESTATE HELD FOR INVESTMENT AND EQUIPMENT
Real estate held for investment was recorded at cost and was
depreciated on the straight-line basis over its estimated useful life.
At December 31, 1999, accumulated depreciation on real estate held for
investment amounted to approximately $166,100. The real estate held for
investment was sold on December 1, 2000 at a gain of $901,046.
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, 2000 and 1999, accumulated
depreciation on equipment, furniture and fixtures amounted to
approximately $813,000 and $796,900, 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, 2000 and 1999, accumulated amortization
amounted to approximately $589,500 and $550,800, respectively.
Periodically, the Company reviews its intangible assets for events or
changes in circumstances that may indicate that the value of its
intangible assets is not recoverable (See Note 10).
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 in 1999, 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.
-19-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
The following table sets forth the computation of basic and diluted
earnings per share:
2000 1999 1998
---- ---- ----
Numerator for basic and diluted earnings per share:
Net income $ 508,314 $ 2,528,641 $ 511,415
=========== ============ ============
Denominator:
Denominator for basic earnings per share -
weighted-average shares 1,655,017 1,655,017 1,391,940
Effect of dilutive securities:
Employee Stock Options 4,822 25,740 61,532
----------- ------------ ------------
Denominator for diluted earnings per share -
adjusted weighted - average shares and
assumed conversions 1,659,839 1,680,757 1,453,472
=========== ============ ============
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, 2000, the value invested in Dollar Reserves
by BBSI's customers was approximately $30 million. 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
consulting fee of $16,666.67, subject to certain conditions.
-20-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
Accordingly, results from the discount brokerage segment are shown as
discontinued operations. Summarized financial information for the
discontinued operations was as follows:
1999 1998
---- ----
Revenues $ 748,786* $ 2,379,506
Expenses 733,537* 2,614,920
-------- -----------
Income (loss) before income taxes 15,249 (235,414)
Income taxes - 95,000
------- ------------
Income (loss) 15,249 (140,414)
------- ------------
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)
============= ============
* Represents revenues and expenses for the 3 months ended March 31,
1999.
3. MARKETABLE SECURITIES
At December 31, marketable securities consisted of:
2000 1999
---- ----
Broker/dealer securities - at market
Affiliated funds $ 2,155,070 $ 2,063,205
Equity securities 1,286,900 435,875
------------ ------------
Total broker/dealer securities
(cost - $3,733,304 for 2000
and $2,861,234 for 1999) 3,441,970 2,499,080
------------ ------------
Other companies
Available-for-sale securities - at market
Unaffiliated mutual funds 3,404 23,622
Affiliated mutual funds 446,361 2,046,439
Equity securities 34,440 31,787
------------ ------------
Total available-for-sale securities
(cost - $543,406 for 2000
and $1,751,846 for 1999) 484,205 2,101,848
------------ ------------
$ 3,926,175 $ 4,600,928
============ ============
-21-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
At December 31, 2000 and 1999, the Company had $(35,201) and $350,002,
respectively, net of deferred income taxes, of unrealized gains (losses)
on "available-for-sale securities" which is reported as a separate
component of consolidated shareholders' equity.
4. LEASE COMMITMENTS
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. 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, 2000, 1999 and 1998, none of the Preferred
Stock was issued.
6. NET CAPITAL REQUIREMENTS
The Company's broker/dealer subsidiary is a member firm of the National
Association of Securities Dealers, Inc. and is registered with the
Securities and Exchange Commission as a broker/dealer. 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, $100,000, 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,
2000, the subsidiary had net capital of approximately $790,200; net
capital requirements of $262,989; excess net capital of approximately
$527,200; and the ratios of aggregate indebtedness to net capital was
approximately 4.99 to 1.
7. 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. The three
non-employee directors were granted 15,000 options each on December 12,
2000 and all previously issued options were cancelled. 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.
-22-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
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. Pro forma 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 pro
forma disclosure, the estimated fair value of the options is amortized to
expense over the options' vesting period. The Company's pro forma
information follows:
Years Ended December 31,
2000 1999 1998
---- ---- ----
Net income As Reported $502,572 $2,528,641 $511,415
Pro forma $463,593 $2,285,639 $465,641
Earnings per share
Basic As Reported $.30 $1.53 $.37
Pro forma $.28 $1.38 $.33
Diluted As Reported $.30 $1.51 $.35
Pro forma $.28 $1.36 $.32
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 2000, 1999 and 1998, respectively:
expected volatility of 46.33%, 83.09% and 73.95%, risk-free interest rate
of 4.40%, 5.78% and 5.11% 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, 2000, 1999 and 1998, 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, 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
Granted 261,000 $1.65
Canceled (274,000) $2.26
----------
226,000 $1.61
==========
-23-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
There were 182,000, 239,000 and 97,000 options exercisable at December 31,
2000, 1999 and 1998 with a weighted-average exercise price of $1.64,
$2.32, and $1.99, respectively. The weighted-average fair value of options
granted was $.54, $1.18 and $.94 for the years ended December 31, 2000,
1999 and 1998, respectively.
In December 2000, the Company canceled 192,000 previously issued stock
options. The exercise prices of the canceled stock options were $1.875 to
$2.6125. In December 2000, the Company granted 216,000 stock options with
exercise prices of $1.50 to $1.65.
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, 2000:
Options Outstanding
----------------------------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price
--------------- ----------- ---------------- ----------------
$1.50 - $1.65 216,000 4.9 years $1.58
$2.00 - $2.375 10,000 3.7 years $2.375
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, 2000 was
$603,675, which was classified as "notes receivable for common stock
issued."
8. 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, 2000, 1999
and 1998 was approximately $45,100, $31,600 and $44,700, respectively.
-24-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
9. INCOME TAXES
The provision for income taxes charged to operations was as follows:
2000 1999 1998
---- ---- ----
Continuing Operations
Current
Federal $ 352,000 $ (25,500) $ (111,054)
State and local 105,126 (11,648) 28,510
---------- ------------ ------------
457,126 (37,148) (82,544)
Deferred 26,000 75,400 -
---------- ------------ ------------
483,126 38,252 (82,544)
Discontinued Operations - 1,944,777 (95,000)
---------- ------------ ------------
$ 483,126 $ 1,983,029 $ (177,544)
========== ============ ============
Deferred tax assets are comprised of the following at December 31, 2000,
1999 and 1998:
2000 1999 1998
---- ---- ----
Unrealized depreciation on
investments $ 138,000 $ 140,000 $ 12,400
Accrued expenses - - 40,000
Depreciation - - 10,000
Net operating loss carryforwards - - 153,000
---------- ---------- ----------
Net deferred tax assets $ 138,000 $ 140,000 $ 215,400
========== ========== ==========
A reconciliation of the federal statutory income tax rate to the Company's
effective tax rate is as follows:
2000 1999 1998
---- ---- ----
Statutory rate 34.0% 34.0% 34.0%
Increase in effective tax rate resulting from:
State income taxes, net of federal benefit 7.0 9.1 5.6
Write-down of non-deductible intangible assets 11.1 - -
Operating loss carryforwards - (3.1) (92.8)
Other assets (3.4) 4.0 -
----- ---- -----
48.7% 44.0% (53.2)%
===== ==== =====
In 1998, the negative effective tax rate resulted from the reversal of the
valuation allowance account established in prior years.
-25-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
10. NON-RECURRING ITEM
In 2000, the Company determined that the carrying value of one of its
intangible assets exceeded its net realizable value. This occurred because
of a decline in net assets under management. As a result, the Company
recorded a non-recurring charge to operations of $325,000.
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 for the year ended
December 31, 1998. The Company outsourced its shareholder administration
in 1999. During the years ended December 31, 2000, 1999 and 1998, the
Funds paid approximately $147,000, $210,000 and $182,000, 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 $287,600, $328,800, and
$180,400 for the years ended December 31, 2000, 1999 and 1998,
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, 2000, the
policy had a cash surrender value of approximately $263,500 and is
included in other assets in the balance sheet.
-26-
WINMILL & CO. INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2000, 1999 and 1998
12. FINANCIAL INFORMATION BY BUSINESS SEGMENT
The following details selected financial information by business segment.
Investment Real Estate
Management Operations Total
2000
Revenues $2,485,540 $ 250,941 $2,736,481
Gain on sale of real estate - 901,046 901,046
Investment income 525,121 1,157 526,278
Income from operations 157,800 833,640 991,440
Depreciation and amortization 62,506 64,249 126,755
Non-recurring item 325,000 - 325,000
Capital expenditures 5,301 53,951 59,252
Gross identifiable assets 6,345,189 2,133,033 8,478,222
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
13. CONTINGENCIES
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, 2000, 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.
-27-
Selected Quarterly Financial Data (Unaudited)
The following sets forth the selected quarterly financial information for the
years ended December 31, 2000 and 1999. 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,
2000
- ----
Revenues $ 1,153,890 $ 720,670 $ 871,789 $ 1,417,456
============ ============ ============ =============
Income (loss) from continuing operations $ 302,023 $ (29,506) $ (66,634) $ 302,431
============ ========== ========== ============
Income (loss) from discontinued operations $ - $ - $ - $ -
============ ========== ========== ============
Net income (loss) $ 302,023 $ (29,506) $ (66,634) $ 302,431
============ ========== ========== ============
Income (loss) per share
Basic
Income (loss) from continuing operations $ .18 $ (.02) $(.04) $ .19
===== ====== ===== =====
Income (loss) from discontinued operations $ - $ - $ - $-
===== ====== ===== =====
Net income (loss) $ .18 $ (.02) $(.04) $ .19
===== ====== ===== =====
Diluted $ .18 $ (.02) $(.04) $ .19
===== ====== ===== =====
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
===== ==== ===== =====
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, 2000.
-28-
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 24 24 71
Robert D. Anderson Vice Chairman of the Board 24 24 71
Thomas B. Winmill, Esq. President, 12 13 41
General Counsel, Director
Edward G. Webb, Jr. Director 15* 12** 61
Charles A. Carroll Director 9 - 70
Mark C. Winmill Director 11*** 13**** 43
William Vohrer Treasurer, - - 50
Chief Accounting Officer
Monica Pelaez, Esquire Vice President,
Secretary, Associate - 1 29
General Counsel
* 1985 to 1990 and 1992 to present.
** 1979 to 1990
*** 1989 to 1999 and 2000 to present.
**** 1987 to 1999
-29-
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 Mark C. Winmill.
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 brother of Mark C. Winmill.
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, an affiliate of Trygg - House A1. 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. WINMILL - Chairman, Thanksgiving Foundation. He was Co-President,
Co-CEO, CFO and Director of Bull & Bear Group, Inc. from June 1990 - March 1999
and an Officer and Director of its various Funds and subsidiaries from June 1987
- - March 1999. He was President, CEO, CFO and Director of Bull & Bear Securities,
Inc., a nationwide discount broker, from June 1987 until March 1999 when the
Company was sold to The Royal Bank of Canada. He was Chief Operating Officer of
Bull & Bear Securities, Inc., a wholly-owned subsidiary of The Royal Bank of
Canada, from April 1999 - February 2000. He is a son of Bassett S. Winmill and a
brother of Thomas B. Winmill.
WILLIAM G. VOHRER - Chief Financial Officer, Treasurer and Chief Accounting
Officer. He joined the company in February 2001. From 1999 to 2001, he consulted
on accounting matters. From 1994 to 1999 he was Chief Financial Officer and
Financial Operations Principal for Nafinsa Securities, Inc., a Mexican
Securities broker/dealer. Prior to this, from 1978 to 1994 held Chief Financial
Officer/Controller positions within the International banking community.
MONICA PELAEZ, ESQ. - Vice President, Secretary and Chief Compliance Officer.
She is also Vice President, Secretary and Chief Compliance Officer of the other
investment companies in the Investment Company Complex, and the Investment
Manager and certain of its affiliates. Previously, she was Special Assistant
Corporation Counsel to New York City Administration for Children's Services from
1998 to 2000 and an attorney with Debevoise & Plimpton from 1997 to 1998. She
earned her Juris Doctor from St. John's University School of Law in 1997. She is
a member of the New York State Bar. She was born November 5, 1971.
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.
-30-
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.
Summary Compensation Table
The following table sets forth, for the three years ended December 31, 2000, the
compensation paid to the chief executive officers and the other executive
officers whose total annual salary and bonus exceeded $100,000 in 2000.
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
-------------------- Securities All Other
Name And Salary Bonus Other Annual Underlying Compensation
Principal Position Year ($) ($) Compensation* Options** (a) (b)
- ------------------ ---- --------- --------- ------------ --------------- --- ---
Bassett S. Winmill 2000 $315,000 $ 7,450 - 55,000 $3,504 $5,883
Chairman 1999 $237,500 $215,625 - 80,000 $6,572 $5,000
1998 $175,000 $ 10,937 - - $5,355 $4,999
Robert D. Anderson 2000 $ 90,000 $ 3,750 - 25,000 $ 933 $5,700
Vice Chairman 1999 $ 90,000 $ 9,375 - 20,000 $2,968 $3,413
1998 $ 90,000 $ 5,625 - - $2,142 $3,347
Thomas B. Winmill 2000 $250,000 $ 10,416 - 55,000 $ 300 $6,000
President 1999 $187,500 $212,500 - 80,000 $ 255 $5,000
1998 $140,000 $ 28,750 - - $ 211 $4,478
* 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 which
were then cancelled.
(a) Represents term life insurance
(b) Represents Company's matching contributions to 401(k) Plan.
-31-
Option Grants Table
The following table sets forth, for the year ended December 31, 2000,
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 55,000 21 1.65 12/11/05 $25,070 $55,400
10,000* 4 2.0625 9/11/05 $5,700 $12,600
Thomas B. Winmill 55,000 21 1.65 12/11/05 $25,070 $55,400
10,000* 4 2.0625 9/11/05 $5,700 $12,600
Robert D. Anderson 25,000 10 1.50 12/11/05 $10,360 $22,900
10,000* 4 1.875 9/11/05 $5,180 $11,450
All of the above options are exercisable as of December 31, 2000.
* Stock options cancelled in connection with repricing of stock options granted
12/12/00.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth, for the year ended December 31, 2000,
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 12-31-00 (#) 12-31-00 (#)
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- ---------- -------- ------------- -------------
Bassett S. Winmill 0 $0 55,000 / 0 $0 / $0
Thomas B. Winmill 0 $0 55,000 / 0 $0 / $0
Robert D. Anderson 0 $0 25,000 / 0 $0 / $0
Option Repricings
- -----------------
On December 12, 2000, the Board of Directors reviewed the stock options
previously issued 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 previously
issued and additionally the grant of options under the Plan to non-employee
directors.
-32-
The following table sets forth, for the year ended December 31, 2000,
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 12/12/00 40,000 1.50 2.6125 1.65 3.7 years
10,000 1.50 2.0625 1.65 4.8 years
Thomas B. Winmill 12/12/00 40,000 1.50 2.6125 1.65 3.7 years
10,000 1.50 2.0625 1.65 4.8 years
Robert D. Anderson 12/12/00 10,000 1.50 1.875 1.50 4.8 years
10,000 1.50 2.375 1.50 3.7 years
5,000 1.50 2.25 1.50 1.9 years
Long-Term Incentive Plan Awards Table
- -------------------------------------
There were no long-term incentive plan awards made during the year ended
December 31, 2000 to the executive officers named in the Summary Compensation
Table.
Compensation of Directors
- -------------------------
Edward G. Webb, Jr., Charles A. Carroll, Mark C. Jones and Mark C. Winmill were
the only individuals who received compensation for their service as directors of
the Company in 2000. 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, 2000, Mr. Webb and Mr. Carroll were each paid $10,000 for attending four
regular meetings, Mr. Jones was paid $2,500 for attending one regular meetings
and Mr. Winmill was paid $7,500 for attending three regular meetings. Mr. Jones
resigned as a director on August 31, 2000. Mr. Webb, Mr. Carroll and Mr. Winmill
each received an option to purchase 15,000 shares of Class A Common Stock at an
exercise price of $1.50 per share in December 2000. Mr. Winmill also received an
option to purchase 10,000 shares of Class A Common Stock at an exercise price of
$1.97 per share in June 2000, which was subsequently canceled in December 2000.
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 12 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.
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.
-33-
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 Compensation
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.
The term of each option will be determined by the Board or 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
Board or Committee.
-34-
The exercise price of each option is determined by the Board or 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 Board or 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 Board
or 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 Board
or 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 Board or 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 Board or 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 Board or 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
Board or 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 Board or 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.
Further, unless the Board or 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 Board or Committee may, in
its sole discretion, accelerate the right to exercise all or any part of an
Option that would not otherwise be exercisable.
-35-
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 Board or
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 Board or 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 Board or
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 Board or 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.
Except as provided by the Board or 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 Board or 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.
-36-
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 Board or 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 Board or
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 Board or 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 Board or 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 Board or Committee may deem desirable. The interest rate on such loans must
be sufficient to avoid imputed interest under the Code.
-37-
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, 2000, 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 (5) of Class
------------------------ ------------------------ --------
Bassett S. Winmill 331,104 (1) 19.6%
Thomas B. Winmill 177,520 (2) 10.5%
Robert D. Anderson 94,414 (3) 5.7%
Edward G. Webb, Jr. 18,664 (4) 1.1%
Charles A. Carroll 30,000 (4) 1.8%
Mark C. Winmill 106,800 (4) 6.5%
All directors and executive
officers as a group (6 persons) 758,502 41.8%
(1) Includes options exercisable to purchase 55,000 shares at December 31,
2000.
(2) Includes 10,000 shares held by Thomas B. Winmill's sons, of which he
disclaims beneficial ownership and options exercisable to purchase 55,000
shares.
(3) Includes options exercisable to purchase 25,000 shares.
(4) Includes options exercisable to purchase 15,000 shares.
(5) 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, 2000
- --------------------- ------------ -----------------
Bassett S. Winmill, Chairman $302,293 $302,293
Thomas B. Winmill, President $210,220 $210,220
Mark C. Winmill, Director $214,215 $214,215
-38-
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.
-39-
(4) Filed as exhibits to Form 10-K for the
year ended December 31, 1996 and
incorporated herein by reference.
(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
incorporated herein by reference..
(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.
-40-
(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.
(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
(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.
-41-
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, 2001 By: /s/ William Vohrer
-----------------------------------
William Vohrer
Chief Financial Officer, 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, 2001 By: /s/ Bassett S. Winmill
------------------------------------
Bassett S. Winmill,
Chairman of the Board, Director
March 30, 2001 By: /s/ Robert D. Anderson
------------------------------------
Robert D. Anderson,
Vice Chairman, Director
March 30, 2001 By: /s/ Thomas B. Winmill
------------------------------------
Thomas B. Winmill, Esq.
President, General Counsel, Director
March 30, 2001 By: /s/ Edward G. Webb, Jr.
------------------------------------
Edward G. Webb, Jr.
Director
March 30, 2001 By: /s/ Charles A. Carroll
------------------------------------
Charles A. Carroll,
Director
March 30, 2001 By: /s/ Mark C. Winmill
------------------------------------
Mark C. Winmill,
Director
-42-
INDEX TO EXHIBITS
(3) Exhibits
(11) Statement Regarding Computation of Per Share Earnings
(21) Wholly-Owned Subsidiaries of the Company
-43-
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
2000 1999 1998
------------------- ------------------- -------------------
Basic Diluted Basic Diluted Basic Diluted
--------- --------- --------- --------- --------- ---------
Weighted average
common shares 1,655,017 1,655,017 1,655,017 1,655,017 1,391,940 1,391,940
outstanding
Weighted average
common shares
issuable upon
exercise of stock
options under the
treasury stock
method - 4,822 - 25,740 - 61,532
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 1,659,839 1,655,017 1,680,757 1,391,940 1,453,472
-44-
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
-45-