GLOBAL INCOME FUND
AMERICAN STOCK
EXCHANGE SYMBOL:
BBZ
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
GLOBAL INCOME FUND
11 HANOVER SQUARE, NEW YORK, NY 10005
1-888-847-4200
February 12, 1998
Fellow Shareholders:
We are pleased to report that the Fund's December 31, 1997 closing
market price on the American Stock Exchange of $8.25 per share represented a
5.77% premium over the $7.80 year end net asset value per share, and that the
Fund's total return for the six months and year based on market and reinvested
dividends was +2.19% and +8.72% respectively. At this writing the market price
and reinvested dividends represents a further total return gain year to date of
+2.95%.
DIVIDEND DISTRIBUTIONS INCREASED
The adoption by the Fund's Board of Directors in June 1997 of a managed
10% dividend distribution policy has been well received. The policy is intended
to provide shareholders with a stable cash flow and reduce or eliminate any
market price discount to net asset value. The monthly dividend distributions of
0.83% of the Fund's net asset value (10% on an annual basis) will be paid
primarily from ordinary income and any capital gains with the balance
representing return of capital. We believe shares of the Fund are a sound value
and an attractive investment for income oriented portfolios.
REVIEW AND OUTLOOK
During the second half of 1997, investors in fixed income markets were
faced with the lowest rates of unemployment seen in a generation and, at the
same time, significant declines in intermediate and long term yields. The
resolution to this apparent contradiction was found in extremely low levels of
inflation, the decline in the Federal deficit from $107 billion in 1996 to $22
billion in 1997, and purchases of U.S. Government securities as both a safe
haven from global financial turmoil and in anticipation of an economic slowdown.
The decline in intermediate and long term rates during the second half
of the year began slowly during the summer, despite lingering concerns regarding
the strength of the economy, and accelerated during the fall, as the Asian
financial crisis took center stage. Thirty year U.S. Treasury bonds began the
second half yielding 6.90%, and closed the year at 5.97%. This decline of almost
a full percentage point was not duplicated in short maturities. Three month
Treasury bill yields spent most of the second half in a range around
<PAGE>
their 5.17% average, reaching a low of 4.90% in late October due to a flight to
quality at the height of the Asian financial crisis, and increasing to 5.47% at
year end. This relatively wide range in Treasury bill yields occurred despite a
steady overnight Federal Funds Rate of 5.5% throughout the period.
We continue to believe that with the Federal Funds rate currently at
5.5% monetary policy is restrictive, and the next move by the Federal Reserve
will be to lower the rate toward a more neutral stance. It is noteworthy that
Treasury securities with maturities as long as ten years have recently yielded
less than the 5.5% Federal Funds rate, and that the yield on Treasury two year
notes has been .375% less, reflecting market expectations of lower interest
rates.
Declines in interest rates of similar magnitudes to those experienced in
the United States took place in the capital markets of many industrialized
countries in 1997. In many less developed countries, interest rates fell even
further, prior to the October decline of the Hong Kong stock Market. The
disarray in Asian financial markets that began in Thailand in August extended to
Latin America and East Europe by year end. As of this writing, we are impressed
by the rapid response of the International Monetary Fund to the Asian banking
crisis and by the commitment of the Group of Seven nations to promote a return
to stability in the region. We believe that many rewarding opportunities are now
offered to fixed income investors in Asia, Latin America, and Eastern Europe.
Our forecast that the dollar would continue to strengthen last year was correct.
While we continue to favor dollar denominated investments in 1998, we believe
that a potential increase in the U.S. trade deficit could moderate dollar gains
this year and look to adjust our holdings accordingly.
AN EASY WAY TO GROW YOUR ACCOUNT
The Fund's Dividend Reinvestment Plan provides an attractive opportunity
to add to your holdings, particularly since the Fund's quarterly dividends are
reinvested without charge at the net asset value per share or market price,
whichever is lower.
------------------
At the Annual Stockholders Meeting held November 20, 1997, the Fund's
slate of directors was elected and the selection of Tait, Weller & Baker as the
Fund's independent accountants was ratified. We appreciate your support and look
forward to continuing to serve your investment needs.
Sincerely,
Thomas B. Winmill Steven A. Landis
President Senior Vice President
Portfolio Manager
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BULL & BEAR GLOBAL INCOME FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS - DECEMBER 31, 1997 (UNAUDITED)
PAR VALUE MARKET VALUE
BONDS (97.1%)
Argentina (15.5%)
$1,000,000 Astra Compania Argentina de Petroleo
S.A., 11.625%, due 12/02/99 (2) $ 1,060,000
2,000,000 Bridas Corp., 12.50%, due 11/15/99 2,150,000
1,000,000 Pasa S.A. 7.875% Notes, due 8/01/02 922,500
1,000,000 Telefonica de Argentina S.A., 11.875%,
due 11/01/04 1,162,500
5,295,000
BRAZIL (5.6%)
500,000 Compania Minas Gerais de Energia 9.125%,
due 11/18/04 466,645
500,000 Compania Paranaense de Energia, 9.75%,
due 5/02/05 481,250
500,000 Comtel Brasileira Ltd., 10.75% Notes,
due 9/24/04 (2) 491,250
500,000 TVFilme, Inc., 12.875%, due 12/15/04 468,750
1,907,895
BULGARIA (2.1%)
1,000,000 The Republic of Bulgaria Interest Arrears Floating
Rate Bond, 6.6875%, due 7/28/11 714,500
CANADA (1.4%)
500,000 Hurricane Hydrocarbons Ltd., 11.75%
Senior Notes, due 11/01/04 (2) 485,000
CHILE (2.9%)
1,000,000 Banco Santiago S.A. 7%Subordinated Notes,
due 7/18/07 1,004,788
CHINA (2.8%)
1,000,000 Guandong Enterprises Ltd., 8.875%,
due 5/22/07 963,125
COLOMBIA (1.5%)
500,000 Termoemcali Funding Corp., 10.125%,
due 12/15/14 (2) 522,020
DOMINICAN REPUBLIC(1.4%)
500,000 Tricom S.A. 11.375% Senior Notes,
due 9/01/04 (2) 489,880
KOREA (2.4%)
1,000,000 Export-Import Bank of Korea, 6.50%,
due 2/10/02 820,614
LITHUANIA (5.8%)
2,000,000 Lietuvos Energija, Floating Rate Note,
due 4/06/00 1,990,000
MEXICO (7.6%)
500,000 Bepensa S.A. de C.V. 9.75% Senior Notes,
due 9/30/04 486,250
1,000,000 Gruma S.A. de C.V. 7.625%, due 10/15/07 (2) 984,659
1,000,000 United Mexican States 11.375%, due 9/15/16 1,135,000
2,605,909
PAR VALUE (1) MARKET VALUE
PANAMA (1.4%)
$ 500,000 Republic of Panama, 8.875%, due 9/30/27 $ 465,000
POLAND (2.5%)
1,000,000 Republic of Poland Past Due Interest Floating
Rate Notes, due 10/27/14 865,000
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QATAR (1.4%)
500,000 Ras Laffan Liquified Natural Gas Company Ltd.,
8.294%, due 3/15/14 (2) 471,717
TURKEY (1.4%)
500,000 Pera Financial Services, 9.375%,
due 10/15/02 460,625
UNITED KINGDOM (4.0%)
()750,000 Sutton Bridge Financing Ltd., 8.625%,
due 6/30/22 (2) 1,383,687
UNITED STATES (34.8%)
$1,000,000 Conseco Finance Trust III, 8.796%,
due 4/01/27 1,126,500
1,000,000 Enron Corp., 6.625%, due 11/15/05 1,000,644
1,000,000 MacSaver Financial Services, 7.60% Notes,
due 8/01/07 862,449
500,000 Staples Inc., 7.125% Senior Notes,
due 8/15/07 510,423
2,000,000 U.S. Treasury Note, 6%, due 8/15/00 2,015,002
3,300,000 U.S. Treasury Note, 6.125%, due 8/15/07 3,392,816
1,000,000 U.S. Treasury Note, 5.875%, due 9/30/02 1,006,251
2,000,000 U.S. Treasury Note, 5.75%, due 10/31/02 2,003,126
11,917,211
VENEZUELA (2.6%)
1,000,000 The Republic of Venezuela, 9.25%, due 9/15/27 898,500
Total Bonds (cost: $33,263,864) 33,260,471
SHARES PREFERRED AND COMMON STOCK AND WARRANTS (2.9%)
2,526 Consolidated Hydro Inc. B (3) 27,786
1,640 Consolidated Hydro Inc. C (3) 11,480
5,000 Equity Residential Properties Trust 252,812
5,000 Mack-Cali Realty Corp. 205,000
20,000 Spieker Properties, Inc. 497,500
Total Preferred Stock and
Warrants (cost: $1,360,895) 994,578
TOTAL INVESTMENTS (COST: $34,624,759) (100.0%) $34,255,049
(1) Par value stated in currency indicated; market value stated in U.S. dollars.
(2) Purchased pursuant to Rule 144A exemption from Federal registration
requirements.
(3) Non-income producing security.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997 (Unaudited)
ASSETS:
Investments at market value (cost: $34,624,759) (note 1)
$34,255,049
Cash 38,004
Collateral for securities loaned,
at market value (note 4) 2,456,150
Receivables:
Investment securities sold 4,680
Interest and dividends 712,505
Other assets 9,911
Total assets 37,476,299
LIABILITIES:
Payables:
Reverse repurchase agreement 10,801,650
Collateral for securities loaned (note 4) 2,456,150
Accrued management fees 14,397
Accrued expenses 56,004
Total liabilities 13,328,201
NET ASSETS: (applicable to 3,094,983
outstanding shares: 20,000,000 shares
of $.01 par value authorized) $24,148,098
NET ASSET VALUE PER SHARE
($24,148,098 / 3,094,983) 7.80
At December 31, 1997, net assets
consisted of:
Paid-in capital $59,818,191
Accumulated deficit in investment
income (405,215)
Accumulated net realized loss on
investments, foreign currencies
and futures (34,895,168)
Net unrealized depreciation on
investments and foreign currencies
and futures (369,710)
$24,148,098
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1997 (Unaudited)
INVESTMENT INCOME:
Interest $1,297,112
Dividends 20,396
Total investment income 1,317,508
EXPENSES:
Interest (note 5) 251,532
Investment management (note 3) 88,292
Custodian 46,608
Transfer agent 23,439
Professional (note 3) 30,417
Registration (note 3) 6,806
Directors 5,294
Other 16,929
Total expenses 469,317
Fee reductions (note 4) (25,099)
Net expenses 444,218
Net investment income 873,290
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS, FOREIGN
CURRENCIES AND FUTURES:
Net realized loss from security
transactions (621,232)
Net realized loss from foreign currency
and futures transactions (178,068)
Unrealized depreciation of investments,
foreign currencies and futures during
the period (541,231)
Net realized and unrealized loss on
investments, foreign currencies
and futures (1,340,531)
Net decrease in net assets resulting
from operations $ (467,241)
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For The Six Months Ended December 31, 1997 (Unaudited)
and for the Year Ended June 30, 1997
DECEMBER 31, JUNE 30,
1997 1997
OPERATIONS:
Net investment income $873,290 $1,815,036
Net realized gain(loss) from security,
foreign currency and futures transactions (799,300) 1,334,266
Unrealized appreciation (depreciation) of
investments, foreign currencies and
futures during the period (541,231) 814,544
Net change in net assets resulting
from operations (467,241) 3,963,846
Subtractions from paid-in capital (note 6) (49,978) (63,200)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.42 and 0.59 per share, respectively) (1,278,505) (2,005,431)
CAPITAL SHARE TRANSACTIONS:
Change in net assets resulting from capital
share transactions (a) (note 6) 582,902 (7,399,457)
Total decrease in net assets (1,212,822) (5,504,242)
NET ASSETS:
Beginning of period
End of period (including accumulated
undistributed net investment 25,360,920 30,865,162
income (deficit) of $(405,215) and
$8,108, respectively) $24,148,098 $25,360,920
(a) Transactions in capital shares were as follows:
December 31, June 30,
1997 1997
Shares Value Shares Value
Shares Sold - - 114,223 $ 928,783
Shares issued in reinvestment
of distributions 87,337 $582,902 172,123 1,363,041
Shares redeemed - - (1,173,984) (9,691,281)
Net increase (decrease) 87,337 $582,902 (887,638) $(7,399,457)
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NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) The Fund is a Maryland corporation registered under the Investment Company
Act of 1940, as amended, as a diversified, closed-end management investment
company, whose shares are listed on the American Stock Exchange. The primary
objective of the Fund is a high level of income and secondarily, capital
appreciation. The Fund seeks to achieve its investment objectives by investing
primarily in foreign and domestic fixed income securities, depending on the
Investment Manager's evaluation of current and anticipated market conditions, as
set forth in its prospectus. The Fund is subject to the risk of price
fluctuations of the securities held in its portfolio which is generally a
function of the underlying credit ratings of an issuer, the duration and yield
of its securities, and general economic and interest rate conditions, and other
factors set forth in its prospectus, and there can be no assurance the Fund will
achieve its objectives. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. With respect to security valuation, securities traded on a national
securities exchange or the Nasdaq National Market System ("NMS") are valued at
the last reported sales price on the day the valuations are made. Such
securities that are not traded on a particular day and securities traded in the
over-the-counter market that are not on NMS are valued at the mean between the
current bid and asked prices. Certain of the securities in which the Fund
invests are priced through pricing services which may utilize a matrix pricing
system which takes into consideration factors such as yields, prices,
maturities, call features and ratings on comparable securities. Bonds may be
valued according to prices quoted by a dealer in bonds which offers pricing
services. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of discounts.
Securities of foreign issuers denominated in foreign currencies are translated
into U.S. dollars at prevailing exchange rates. Forward currency contracts are
undertaken to hedge certain assets denominated in foreign currencies. Forward
contracts are marked to market daily and the change in market value is recorded
by the Fund as an unrealized gain or loss. When a contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed. The
Fund could be exposed to risk if the counterparties are unable to meet the terms
of the contracts or if the value of the currency changes unfavorably. Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). Interest income is recorded on the accrual basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities. Dividends and distributions to shareholders are recorded
on the ex-dividend date. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At June 30, 1997, the
Fund had an unused capital loss carryforward of approximately $34,080,000 of
which, $17,712,000 expires in 1998, $8,549,000 in 1999, $1,656,000 in 2000,
$4,110,000 in 2001, $173,000 in 2003 and $1,880,000 in 2004. Based on Federal
<PAGE>
income tax cost of $34,624,759, gross unrealized appreciation and gross
unrealized depreciation were $676,751 and $1,046,461, respectively, at December
31, 1997. Distributions paid to shareholders during the year ended June 30, 1997
differ from net investment income and net gains (losses) from security, foreign
currency and futures transactions as determined for financial reporting purposes
principally as a result of the characterization of realized foreign currency
gains (losses) for tax/book purposes, the taxability of unrealized appreciation
(depreciation) on certain forward currency contracts and the utilization of
capital loss carryforwards.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average weekly net
assets of the Fund, at the annual rate of 7/10 of 1% of the first $250 million,
5/8 of 1% from $250 million to $500 million, and 1/2 of 1% over $500 million.
The Investment Manager has agreed to waive all or part of its fee or reimburse
the Fund monthly if and to the extent the aggregate operating expenses of the
Fund exceed the most restrictive limit imposed by any state in which shares of
the Fund are qualified for sale, although currently the Fund is not subject to
any such limits. Certain officers and directors of the Fund are officers and
directors of the Investment Manager and Investor Service Center, Inc., the
Fund's former Distributor. The Fund reimbursed the Investment Manager $4,348 for
providing certain administrative and accounting services at cost for the six
months ended December 31, 1997.
The Annual Meeting of Shareholders ("Annual Meeting") of the Fund was held on
November 20, 1997 pursuant to notice given to all shareholders of record at the
close of business on October 1, 1997. At the Annual Meeting, shareholders were
asked to elect directors to serve for a specified term and to ratify the
selection by the Board of Directors of the Fund's independent auditors.
Shareholders elected George B. Langa, Peter K. Werner, Mark C. Winmill, Thomas
B. Winmill and Bassett S. Winmill Directors of the Fund with 2,947,789,
2,949,431, 2,944,100, 2,943,210, and 2,944,008 shares, respectively, voting in
favor of election, and 76,777, 77,135, 82,466, 83,358, and 82,558 shares,
respectively, voting to abstain. Additionally, shareholders ratified the
selection of Tait, Weller & Baker as the Fund's independent auditors with
2,944,771 shares voting in favor of ratification, 41,904 shares voting against
ratification and 39,890 shares voting to abstain.
(4) The Fund has entered into an arrangement with its transfer agent and
custodian whereby interest earned on uninvested cash balances was used to offset
a portion of the Fund's expenses. During the period, the Fund's transfer agent
fees and custodian fees were reduced by $1,258 and $23,841, respectively, under
such arrangements. Purchases and sales of securities other than short term notes
aggregated $69,304,837 and $65,944,998, respectively, for the six months ended
December 31, 1997. As of December 31, 1997, the Fund loaned securities having a
value of $2,391,324 and received cash collateral of $2,456,150 for the loan. (5)
The Fund has a committed bank line of credit. At December 31, 1997, there was no
balance outstanding and the interest rate was equal to the Federal Reserve Funds
Rate plus 1.00 percentage points. For the six months ended December 31, 1997,
the weighted average interest rate was 6.40% based on the balances outstanding
from the line of credit and the reverse repurchase agreement during the year and
the weighted average amount outstanding was $7,679,271.
(6) Effective February 7, 1997, the Fund converted from an open-end management
<PAGE>
investment company to a closed-end management investment company. In connection
with the conversion, costs of approximately $113,200 have been charged against
paid-in capital. In addition, the Fund has adopted a Dividend Reinvestment Plan
(the "Plan"). Under the Plan, each dividend and capital gain distribution, if
any, declared by the Fund on outstanding shares will, unless elected otherwise
by each shareholder by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution, be paid on the payment
date fixed by the Directors in additional shares in accordance with the
following: whenever the Market Price (as defined below) per share is equal to or
exceeds the net asset value per share at the time shares are valued for the
purpose of determining the number of shares equivalent to the cash dividend or
capital gain distribution (the "Valuation Date"), participants will be issued
additional shares equal to the amount of such dividend divided by the Fund's net
asset value per share. Whenever the Market Price per share is less than such net
asset value on the Valuation Date, participants will be issued additional shares
equal to the amount of such dividend divided by the Market Price. The Valuation
Date is the dividend or distribution payment date or, if that date is not an
American Stock Exchange trading day, the next trading day. For all purposes of
the Plan: (a) the Market Price of the shares on a particular date shall be the
average closing market price on the five trading days the shares traded
ex-dividend on the Exchange prior to such date or, if no sale occurred on the
Exchange prior to such date, then the mean between the closing bid and asked
quotations for the shares on the Exchange on such date, and (b) net asset value
per share on a particular date shall be as determined by or on behalf of the
Fund.
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<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
SIX 1997 1996 1995 1994 1993
MONTHS
ENDED
DECEMBER
31, 1997**
PER SHARE DATA*
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $8.43 $7.92 $8.00 $8.25 $9.39 $8.56
Income from investment operations:
Net investment income................. .29 .51 .26 .17 .60 .66
Net realized and unrealized gain
(loss) on investments................. (.50) .59 .23 .18 (1.02) .92
Total from investment operations...... (.21) 1.10 .49 .35 (.42) 1.58
Less distributions:
Distributions from net investment
income................................ (.42) (.59) (.26) (.17) (.60) (.66)
Distributions in excess of net
realized gains........................ -- -- -- -- (.12) (.09)
Distributions from paid-in capital.... -- -- (.31) (.43) -- --
Total distributions................. (.42) (.59) (.57) (.60) (.72) (.75)
Net asset value at end of period...... $7.80 $8.43 $7.92 $8.00 $8.25 $9.39
Per share market value at
end of period......................... $8.25 $8.50
TOTAL RETURN ON NET ASSET VALUE
BASIS................................. (2.59)% 14.71% 6.26% 4.52% (5.12)% 19.39%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period
(000's omitted).......................... $24,148 $25,361 $30,865 $39,180 $44,355 $51,768
Ratio of expenses to average net
assets (a) (b)........................... 3.72%+ 2.71% 2.18% 2.21% 1.98% 1.95%
Ratio of net investment income to average
net assets (c)........................... 8.90%+ 7.35% 6.55% 6.20% 6.58% 7.44%
Portfolio turnover rate.................. 196% 475% 585% 385% 223% 172%
</TABLE>
* Per share income and operating expenses and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share.
** Unaudited.
+ Annualized.
(a) Ratios excluding interest expense were 1.73%+ and 2.00% for the six months
ended December 31, 1997 and for the year ended June 30, 1997, respectively.
(b) Ratio after transfer agent and custodian credits was 1.53%+ for the six
months ended December 31, 1997.
(c) Ratios including interest
expense were 6.91%+ and 6.64% for the six months ended December 31, 1997 and for
the year ended June 30, 1997, respectively.
