As filed with the Securities and Exchange Commission on April 13, 1999
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, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the Transition Period From __________ to __________
Commission File Number 0-9667
WINMILL & CO. INCORPORATED
(Formerly BULL & BEAR GROUP, INC.)
(Exact name of registrant as specified in its charter)
Delaware 13-1897916
(State of incorporation) (I.R.S. Employer Identification No.)
11 Hanover Square, New York, New York 10005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 785-0900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Par Value $.01 Per Share
- ----------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
No voting stock was held by non-affiliates of the registrant as of March
15, 1999.
The number of shares outstanding of each of the registrant's classes of
common stock, as of March 15, 1999:
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
<PAGE>
PART I
ITEM PAGE
1. Business ............................................................ 2
2. Properties .......................................................... 6
3. Legal Proceedings ................................................... 7
PART II
4. Submission of Matters to a Vote of Security Holder .................. 8
5. Market for Company's Common Equity and Related Stockholder Matters .. 8
6. Selected Financial Data ............................................. 8
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................... 10
8. Financial Statements and Supplementary Data ......................... 14
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............................. 31
PART III
10. Directors and Executive Officers .................................... 32
11. Executive Compensation .............................................. 34
12. Security Ownership of Certain Beneficial Owners and Management ...... 40
13. Certain Relationships and Related Transactions ...................... 40
PART IV
14. Exhibits, Consolidated Financial Statements and Schedules,
and Reports on Form 8-K ......................................... 41
<PAGE>
PART I
ITEM 1. BUSINESS
Winmill & Co. Incorporated (formerly Bull & Bear Group, Inc.), a Delaware
corporation (the "Company"), is a holding company with seven principal
subsidiaries: CEF Advisers, Inc. (formerly Bull & Bear Advisers, Inc.) ("CEF"),
Bull & Bear Securities, Inc. ("BBSI"), Investor Service Center, Inc. ("ISC"),
Midas Management Corporation ("MMC"), Rockwood Advisers, Inc. ("RAI"),
Performance Properties, Inc. ("Performance Properties") and Hanover Direct
Advertising Company, Inc. ("Hanover Direct"). (On April 1, 1999 the Company
changed its name to Winmill & Co. Incorporated and Bull & Bear Advisers, Inc.
changed its name to CEF Advisers, Inc.)
On December 17, 1998, the Company signed an agreement with Royal Bank of
Canada to sell the outstanding stock of BBSI for $6 million (the "BBSI sale").
The BBSI sale was subject to the approval of regulatory authorities in Canada
and the United States and other conditions. The BBSI sale closed in the first
quarter of 1999. In connection with the BBSI 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 subsequently change their names.
CEF, MMC and RAI 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: Bull & Bear Special
Equities Fund, Inc.; Bull & Bear Gold Investors Ltd.; Bull & Bear U.S. and
Overseas Fund, a series of shares issued by Bull & Bear Funds I, Inc.; Bull &
Bear Dollar Reserves, a series of shares of Bull & Bear Funds II, Inc.; Midas
Fund, Inc.; and Rockwood Fund, Inc. The closed-end funds are: Global Income
Fund, Inc., Bull & Bear U.S. Government Securities Fund, Inc. and Tuxis
Corporation.
BBSI was organized in 1984 to operate a discount brokerage service. BBSI
has access to every major U.S. stock, option and bond exchange as well as the
over-the-counter market. Investors may use the discount brokerage services
provided by BBSI to trade stocks, bonds and options at substantial commission
discounts from full cost rates, access their investment in any of the Funds to
pay for securities purchased, or invest proceeds of sales of securities in the
Funds. BBSI is registered with the Securities and Exchange Commission ("SEC") as
a broker/dealer and is a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investor Protection Corporation ("SIPC").
ISC was organized in 1985 and is registered with the SEC as a broker/dealer
and is a member of the NASD. ISC acts as the principal distributor for the
open-end Funds.
Performance Properties was organized in 1994 to invest in real estate.
Hanover Direct was organized in 1988 and acts as an advertising agency,
which places advertising for ISC on behalf of the Funds and for BBSI. Currently,
the commission revenue generated by Hanover Direct from ISC and BBSI represents
a recapture of sums paid for advertising and, rather than additional income,
represents a reduction in advertising expense of ISC and BBSI. Hanover Direct
has not performed any work for unaffiliated clients.
The Company has granted the Funds and its subsidiaries a non-exclusive
license to use certain service marks owned by the Company, under certain terms
and conditions on a royalty free basis. Such license may be withdrawn from a
Fund in the event the investment manager of the Fund is not a subsidiary of the
Company or in other cases, at the discretion of the Company.
2
<PAGE>
Investment Management Business
The Company is engaged, through its subsidiaries, in the business of
managing investment companies registered under the Act. The Funds and their
respective net assets as of December 31, 1998 were as follows:
Bull & Bear Dollar Reserves $ 65,535,000
Global Income Fund, Inc. 30,100,000
Bull & Bear Gold Investors Ltd. 6,293,000
Tuxis Corporation 12,512,000
Bull & Bear Special Equities Fund, Inc. 36,807,000
Bull & Bear U.S. and Overseas Fund 7,340,000
Bull & Bear U.S. Government Securities Fund, Inc. 10,921,000
Midas Fund, Inc. 87,841,000
Rockwood Fund, Inc. 548,000
--------------
TOTAL NET ASSETS $257,897,000
==============
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, Bull & Bear 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, MMC and RAI 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, MMC and RAI may have a serious adverse impact upon the
Company.
3
<PAGE>
Pursuant to contracts with these Funds, CEF, MMC and RAI 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, MMC and RAI 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, MMC and RAI may waive or reimburse management fees to increase a Fund's
performance. MMC has entered into a subadvisory agreement with respect to Midas
Fund, Inc. MMC, not the respective Fund, pays the Subadviser, Lion Resource
Management Limited, based upon the net fees, performance and net assets of the
Fund.
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.
Bull & Bear U.S. Government Securities Fund, Tuxis Corporation, and Global
Income Fund each converted from an open-end investment company to a closed-end
investment company in October 1996, November 1996, and February 1997,
respectively, pursuant to the vote of the Fund's shareowners. As a consequence,
their shares now trade on the American Stock Exchange under the symbols BBG, TUX
and GIF, respectively. Upon conversion, the Distribution, 12b-1 Plan, and
Shareholder Administration Agreements between the respective Fund and ISC were
terminated and substantially similar Investment Management Agreements between
CEF and each Fund were approved.
The Act requires that a plan of distribution be initially approved by
the Fund's Board of Directors, including a majority of the directors who are not
"interested persons" and who have no financial interest in the Plan, and by the
vote of a majority of the outstanding shares of the Fund. If approved, a plan of
distribution may be for a term of one year, and thereafter it must be approved
at least annually by the entire Board of Directors and by a majority of the
"disinterested" directors. In addition, all plans of distribution are subject to
termination at any time by majority vote of the disinterested directors or
shareholders.
CEF, MMC and RAI 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, MMC and RAI 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.
DISCOUNT BROKERAGE BUSINESS
- ---------------------------
BBSI, with access to every major U.S. stock, option and bond exchange as
well as the over-the-counter market, provides discount brokerage services to
investors throughout the United States and various foreign countries.
Substantial commission savings off full service rates as well as prompt,
courteous service and professional order execution are available to all accounts
regardless of how often trades are made. All accounts are carried by U.S.
Clearing Corp. ("USC"), a division of Fleet Securities, Inc., a New York Stock
Exchange member firm. The SIPC, of which BBSI and USC are members, protects each
account against broker/dealer insolvency (not market losses) for up to $500,000,
of which $100,000 may be in cash. In addition, Aetna Casualty and Surety Company
protects each account for an additional $49,500,000 in securities value.
4
<PAGE>
Investors may buy and sell listed and NASDAQ stocks for a flat $19.95 for
up to 1,000 shares, $.02 per share thereafter, through the internet at Bull &
Bear Securities' web page, ebullbear.com. In addition to efficiency and low
commissions, ebullbear.com customers receive free investment information on over
6,000 companies, plus quotes, charts, market averages, and free live market and
business news through Reuters, one of the world's leading news and financial
information companies. BBSI customers are provided with free investment
information from Standard & Poor's, including the year-end Stock Guide, Market
Month, Stock Reports, Stock Screens, Industry Reports, The Outlook, and Emerging
& Special Situations.
In May of 1997, BBSI became an AAdvantage Participant with American
Airlines whereby BBSI customers may earn AAdvantage miles for their investing
activities.
BBSI also offers its customers a no-fee cash management service featuring
unlimited free check writing with no check writing minimum (Bull & Bear
Performance Plus Account(R)), the Bull & Bear No-Fee IRA(R), and the Bull & Bear
Mutual Funds Network (a no transaction fee mutual funds service).
Volatile stock markets could have a significant effect on the brokerage
commissions earned by BBSI by affecting the number of transactions processed.
BBSI is responsible for potential losses resulting from trade errors of BBSI
personnel and customers' bad debts, including under-margined accounts. As a
discount broker, BBSI does not give investment advice and therefore management
believes it is less likely to be involved in significant litigation with
customers, as may be typical in the ordinary course of business of a broker that
does give investment advice to its customers.
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 Bull
& Bear Dollar Reserves to its customers as the sole money market fund into which
cash balances held by BBSI's customers may be swept on a daily basis for so long
as certain conditions are met, including certain performance rankings by the
Fund, in consideration of a monthly fee equal to one-twelfth of 0.25% of the
aggregate average daily amount of such balances. Further, the Company has agreed
to provide, or to cause its subsidiaries to provide, to BBSI for a period of
three years following the closing certain services with respect to the operation
of a securities brokerage business for a monthly administrative fee of
$16,666.67, subject to certain conditions.
FORWARD-LOOKING INFORMATION
- ---------------------------
Information or statements provided by or on behalf of the Company from
time to time, including those within this Form 10-K Annual Report, may contain
certain "forward-looking information", including information relating to
anticipated growth in revenues or earnings per share, anticipated changes in the
amount and composition of assets under management and discount brokerage
customers' equity and trading, 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.
5
<PAGE>
The Company's future revenues may fluctuate due to factors such as: the
total value and composition of assets under management and discount brokerage
customers' equity and trading, and related cash inflows or outflows in mutual
funds and discount brokerage firms; fluctuations in the financial markets
resulting in appreciation or depreciation of assets under management and
discount brokerage customers' equity and trading; 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 and discount brokerage firms; the ability of the
Company to maintain investment management fees and brokerage commissions at
current levels; competitive conditions in the mutual funds and discount
brokerage industries; the introduction of new mutual funds and investment
products and new discount brokerage services; the ability of the Company to
contract with the Funds for payment for administrative services offered to the
Funds and Fund shareholders; the continuation of trends in the retirement plan
marketplace favoring defined contribution plans and participant-directed
investments; and the amount and timing of income from the Company's investment
portfolio.
The Company's future operating results are also dependent upon the level of
operating expenses, which are subject to fluctuation for the following or other
reasons: changes in the level of advertising expenses in response to market
conditions or other factors; variations in the level of compensation expense
incurred by the Company, including performance-based compensation based on the
Company's financial results, as well as changes in response to the size of the
total employee population, competitive factors, or other reasons; expenses and
capital costs, including depreciation, amortization and other non-cash charges,
incurred by the Company to maintain its administrative and service
infrastructure; and unanticipated costs that may be incurred by the Company from
time to time to protect investor accounts and client goodwill.
The Company's revenues are substantially dependent on revenues from the
Funds, which could be adversely affected if the independent directors of one or
more of the Funds determined to terminate or renegotiate the terms of one or
more investment management agreements.
The Company's business is also subject to substantial governmental
regulation, and changes in legal, regulatory, accounting, tax, and compliance
requirements may have a substantial effect on the Company's business and results
of operations, including but not limited to effects on the level of costs
incurred by the Company and effects on investor interest in mutual funds in
general or in particular classes of mutual funds.
ITEM 2. PROPERTIES
The principal office of the Company is located at 11 Hanover Square, New
York, New York 10005. The approximate area of the office is 11,400 square feet.
The rent is approximately $207,000 per annum plus $32,550 per annum for
electricity. The lease expires on December 31, 1999 and is cancelable at the
option of the Company on three months' notice. BBSI has a branch office at 395
East Palmetto Boulevard, Boca Raton, Florida consisting of approximately 2,000
square feet. The rent is approximately $55,000 per annum and the lease expires
on August 30, 1999.
Performance Properties purchased land and a two story office building
located in Red Bank, New Jersey in 1994. The building consists of approximately
13,000 square feet. The building was purchased for cash, has no mortgage and was
purchased as an investment. The first floor of the building is currently being
rented under a ten-year lease to a tenant. The current rent is approximately
$90,000 per annum and increases each year over the life of the lease. Portions
of the second floor of the building are currently being rented under a five-year
and three-year lease to two tenants. The current rents are approximately $33,000
and $29,000 per annum, respectively, and increase each year over the life of the
leases.
6
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ITEM 3. LEGAL PROCEEDINGS
A group called Karpus Investment Management ("KIM") at the 1997 annual
meeting of Bull & Bear U.S. Government Securities Fund, Inc. ("BBG") sought to
elect its slate of nominees in opposition to management and at the 1998 annual
meeting of BBG made a counter-solicitation on all management proposals and a
solicitation to terminate the investment management agreement. On February 19,
1998, KIM filed a lawsuit against BBG in the Circuit Court for Baltimore City,
Maryland, Case No. 9805005, which was dismissed with prejudice on October 1,
1998. On February 19, 1998, BBG filed a lawsuit against KIM in the United States
District Court for the Southern District of New York, 98 Civ. 1190. On December
22, 1998, KIM filed a lawsuit against BBG in the United States District Court
for the District of Maryland Court, 98-CV-4161 and BBG has made counterclaims.
KIM has submitted a proposal to BBG for inclusion in proxy material at the next
meeting of shareholders to terminate the investment management contract of BBAI
with BBG. The outcome of these matters and their effect on the Company or CEF's
management agreement with BBG cannot be predicted with certainty. BBG's net
assets at December 31, 1998 amounted to approximately $10.9 million.
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, 1998, 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.
7
<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS DURING FOURTH
QUARTER OF THE YEAR ENDED DECEMBER 31, 1998
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 BNBGA. The Company's Class B
Common Stock has no public trading market. There are approximately 280 holders
of record of Class A Common Stock and 1 holder of Class B Common Stock as of
December 31, 1998. 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:
1998 1997
--------------------------- -----------------------
High Low High Low
First Quarter $3-1/8 $2-1/8 $4-3/8 $2-3/4
Second Quarter $3-1/4 $2-3/16 $4-3/8 $2-7/8
Third Quarter $3-1/2 $1-13/16 $3-1/8 $2-5/8
Fourth Quarter $3-1/8 $1-5/8 $3-5/16 $2-1/4
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended December 31, 1998
is presented on the following pages.
8
<PAGE>
<TABLE>
<CAPTION>
WINMILL & CO. INCORPORATE
CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Management, distribution and administration fees $3,373,046 $4,313,947 $4,922,945 $3,322,348 $3,786,066
Dividends, interest and other 165,627 182,757 104,862 98,158 (47,132)
----------------- ------------ ------------ ------------ ------------
3,538,673 4,496,704 5,027,807 3,420,506 3,738,934
----------------- ------------ ------------ ------------ ------------
Expenses:
General and administrative 2,093,323 2,559,080 2,744,021 2,205,725 2,109,345
Marketing 349,549 708,495 1,191,639 496,910 942,216
Subadvisory fees 230,954 387,593 705,248 22,496 37,728
Professional fees 177,376 186,320 290,098 413,594 140,353
Amortization and depreciation 118,186 106,871 116,151 65,545 59,248
----------------- ------------ ------------ ------------ ------------
2,969,388 3,948,359 5,047,157 3,204,270 3,288,890
----------------- ------------ ------------ ------------ ------------
Income (loss) from continuing operations before
provision for income taxes 569,285 548,345 (19,350) 216,236 450,044
Income taxes (82,544) (5,196) 91,248 42,588 158,171
------------------ ------------ ------------ ------------ ------------
Income (loss) from continuing operations 651,829 553,541 (110,598) 173,648 291,873
Discontinued operations
Income (loss) from discontinued operations
(net of income taxes) (140,414) 72,184 (209,927) (16,272) (208,413)
------------------ ------------ ------------ ------------ ------------
Net income (loss) $511,415 $625,725 $(320,525) $157,376 $83,460
================= ============ ============= ============ ============
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net income (loss) per share of weighted average
Common Stock outstanding:
Basic
Income (loss) from continuing operations $.47 $.41 $(.08) $.11 $.19
Income (loss) from discontinued operations (.10) .05 (.15) (.01) (.14)
-------- ------ -------- -------- -------
Net income $.37 $.46 $(.23) $.10 $.05
======== ====== ======== ======== =======
Diluted
Income (loss) from continuing operations $.45 $.38 $(.08) $.11 $.18
Income (loss) from discontinued operations (.10) .05 (.15) (.01) (.13)
-------- ------ -------- -------- -------
Net income $.35 $.43 $(.23) $.10 $.05
======== ====== ======== ======== =======
Weighted average shares of Common Stock outstanding:
Basic 1,391,940 1,370,017 1,369,555 1,499,516 1,523,152
=========== =========== =========== =========== ==========
Diluted 1,453,472 1,468,252 1,369,555 1,549,815 1,610,658
=========== =========== =========== =========== ==========
Total assets $5,315,147 $4,827,07 $4,273,110 $4,963,792 $4,240,241
=========== =========== =========== =========== ==========
Long-term obligations $ - $ 7,46 $ 22,093 $ - $ -
=========== =========== =========== =========== =========
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 1998 COMPARED TO 1997
Total revenues for the year decreased $958,031 or 21.3%. Management and
distribution fees decreased $669,517 or 23.2% and $299,372 or 26.2%,
respectively, and shareholder administration fees increased $27,988 or 9.8%. The
decrease in management and distribution fees was due to an overall decrease in
the net asset levels of the Funds from which these revenues are generated.
Shareholder administration fees represent reimbursement for actual expenses
incurred. Such fees increased as the costs for providing these services
increased. Net assets under management were approximately $274 million at
December 31, 1997, $301 million at March 31, 1998, $278 million at June 30,
1998, $261 million at September 30, 1998 and $258 million at December 31, 1998.
Dividends, interest and other income decreased $17,130 or 9.4%, primarily due to
lower earnings on the Company's investments.
Total expenses, including income taxes decreased $1,056,319 or 26.8% for
the year. General and administrative expenses decreased $30,410 or 1.6%.
Marketing expenses decreased $358,946 or 50.7% due to lower marketing costs for
Midas Fund. Expense reimbursements to the Funds decreased $435,347 or 70.7% due
to the expiration of the contractual expense reimbursement on August 29, 1997
for Midas Fund. Subadvisory fees decreased $156,639 or 40.4% because of lower
net assets in Midas Fund. Professional fees increased $8,944 or 4.8%.
Amortization and depreciation increased $11,315 or 10.6% for the year. Income
taxes decreased $77,348 or 1,488.6% due to the reversal of the deferred tax
asset valuation allowance account.
Loss from discontinued operations (net of income taxes) for 1998 was
$140,414 as compared to income from discontinued operations (net of income
taxes) for 1997 of $72,184. While customer trading activity increased during the
year, commissions and related fees decreased as a result of an increase in
Internet trading. In addition, due to the increase in customer trading activity,
clearing and brokerage charges increased in 1998.
Net income for 1998 was $511,415 or $.37 per share as compared to net
income of $625,725 or $.46 per share in 1997.
1997 COMPARED TO 1996
- ---------------------
Total revenues for the year decreased $531,103 or 10.6%. Management and
distribution fees decreased $215,407 or 6.9% and $429,986 or 27.4%,
respectively, and shareholder administration fees increased $36,395 or 14.6%.
The decrease in management and distribution fees was due to an overall decrease
in the net asset levels of the Funds from which these revenues are generated.
Shareholder administration fees represent reimbursement for actual expenses
incurred. Such fees increase as the costs for providing these services increase.
Net assets under management were approximately $401 million at December 31,
1996, $359 million at March 31, 1997, $328 million at June 30, 1997, $353
million at September 30, 1997 and $274 million at December 31, 1997. Dividends,
interest and other income increased $77,895 or 74.3% primarily due to gains on
sales of investments.
Total expenses, including income taxes, decreased $1,195,242 or 23.3%
for the year. General and administrative expenses decreased $184,941 or 6.7%.
Marketing expenses decreased $483,144 or 40.5% due to lower marketing costs for
Midas Fund. Subadvisory fees decreased $317,655 or 45.0% because of lower net
assets in Midas Fund. Professional fees decreased $103,778 or 35.8% due to lower
litigation costs relating to the Maxus lawsuit. Amortization and depreciation
decreased $9,280 or 8.0% for the year.
Income from discontinued operations (net of income taxes) for 1997 was
$72,184 as compared to loss from discontinued operations (net of income taxes)
for 1996 of $209,927 due to an increase in customer transaction activity
resulting in higher brokerage commissions and a decrease in clearing and
brokerage charges due to the savings from a new clearing agreement beginning
July 1996.
Net income for 1997 was $625,725 or $.46 per share as compared to net
loss of $320,525 or $.23 per share in 1996.
10
<PAGE>
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,
--------------------------------------------------
1998 1997 1996
---- ---- ----
Working Capital $2,371,234 $2,662,917 $2,293,200
Total Assets $5,315,147 $4,827,074 $4,273,110
Long-Term Debt $ - $ 7,460 $ 22,093
Shareholders' Equity $4,959,016 $4,455,111 $3,917,886
For the year ended 1998, total assets and shareholders' equity increased
$488,073 and $503,905, respectively. Working capital and long-term debt
decreased $291,683 and $7,460, respectively.
Working capital decreased due to expenditures in capital improvements on
the real estate held for investment. The increase in shareholders' equity was
primarily the result of the net income for 1998 of $511,415 and the exercise of
the stock options for $639,227 offset by the decrease in unrealized capital
gains on marketable securities of $43,062 and the issuance of the notes
receivable for common stock issued for $603,675. There were $71,267 of realized
capital gains during 1998, which was included in net income of $511,415. Total
assets increased primarily as a result of the net income for the year offset by
the decrease in unrealized capital gains on marketable securities of $43,062.
Long-term debt decreased due to payments on the capitalized lease obligations.
For the year ended 1997, working capital, total assets and shareholders'
equity increased $369,717, $553,964 and $537,225, respectively. Long-term debt
decreased $14,633.
Working capital increased primarily as a result of the net income and
the non-cash items of depreciation and amortization for 1997 offset by
improvements to real estate held for investment, purchases of equipment and the
decrease in unrealized capital gains on marketable securities. The increase in
shareholders' equity was primarily the result of the net income for 1997 of
$625,725 offset by the decrease in unrealized capital gains on marketable
securities of $88,500. Total assets increased primarily as a result of the net
income for 1997 offset by the decrease in unrealized capital gains on marketable
securities of $88,500. Long-term debt decreased due to payments on the
capitalized lease obligations.
For the year ended 1996, working capital, total assets and shareholders'
equity decreased $498,859, $690,682 and $252,209, respectively. Long-term debt
increased $22,093.
Working capital decreased as a result of the net loss for 1996 and the
acquisition of intangible assets and fixed assets offset by the non-cash items
of depreciation and amortization. The decrease in shareholders' equity was
primarily the result of the net loss for 1996 of $320,525 offset by the issuance
of common stock on exercise of stock options of $3,750 and the increase in
unrealized capital gains on marketable securities of $64,566. Total assets
decreased as a result of the net loss and the decrease in current liabilities
offset by the increase in unrealized gains on marketable securities. Long-term
debt increased due to the capitalized lease obligations for equipment.
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 from BBSI and ISC as a result of
their regulatory net capital requirements. At December 31, 1998, the amount
subject to these restrictions was $275,000 or 5.2% of total assets.
EFFECTS OF INFLATION AND CHANGING PRICES
- ----------------------------------------
Since the Company derives revenue from investment management,
distribution and shareholder administration services from the Funds and from
discount brokerage services, it is not possible for it to discuss or predict
with accuracy the impact of inflation and changing prices on its revenues from
continuing operations.
11
<PAGE>
Year 2000
The Year 2000 discussion below contains forward looking statements, including
those concerning the Company's plans and expected completion dates, cost
estimates, assessments of Year 2000 readiness for the Company as well as for
third parties, and the potential risks of any failure on the part of the Company
or third parties to be Year 2000 ready on a timely basis. Forward-looking
statements involve a number of risks and uncertainties that could cause actual
results to differ from those projected.
While the Company continues to evaluate and pursue discussions with its various
customers, partners and vendors with respect to their preparedness for Year 2000
issues, no assurance can be made that all such parties will be Year 2000 ready.
While the Company cannot fully determine its impact, the inability to complete
Year 2000 readiness for its computer systems could result in significant
difficulties in processing and completing fundamental transactions. In such
events, the Company's results of operations, financial position and cash flows
could be materially adversely affected.
Many companies and organizations have computer programs that use only two digits
to identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, this could cause a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions.
State of Readiness. In addressing the Year 2000 issue, the Company
has substantially completed an inventory of its computer programs and hardware
and assessed its Year 2000 readiness. The Company's computer programs include
third-party purchased programs and third-party custom developed programs. For
programs and hardware which were identified as not being Year 2000 ready, the
Company is in the process of implementing a remedial plan which includes
repairing or replacing the programs or hardware and appropriate testing for Year
2000. In addition, the Company has initiated communications with third parties
to determine the extent to which the Company's interface systems are vulnerable
to those third parties' failure to remediate their own Year 2000 issues.
If such modifications and conversions are not made, or are not timely completed,
or if the systems of the companies on which the Company's interface system
relies are not timely converted, the Year 2000 issue could have a material
impact on the operations of the Company. However, the Company believes that with
modifications to existing software and hardware and conversions to new software
and hardware, the Year 2000 issue will not pose significant operational problems
for its computer systems.
Year 2000 Risks. The Company continues to evaluate the principal
risks associated with its IT and non-IT systems, as well as third party systems
if they were not to be Year 2000 ready on a timely basis. Areas that could be
affected include, but are not limited to, the ability to: accurately track
pricing and trading information, obtain and process customer orders and investor
transactions, properly track and record revenue movements and order and obtain
critical supplies.
12
<PAGE>
The Company believes, however, that the risks involved with the successful
completion of its Year 2000 conversion relate primarily to available resources
and third party readiness. The key success factors include the proper quality
and quantity of human capital resources to address the complexity and costs of
the project tasks. The Company believes it has allocated adequate resources to
the Year 2000 project and believes that it is adequately staffed by employees.
The inability to complete Year 2000 readiness for the computer systems of the
Company could result in significant difficulties in processing and completing
critical transactions.
In addition, the Company is taking precautions to ensure its third party
relationships have been adequately addressed. Based on work performed and
information received to date, the Company believes its key suppliers and other
significant third party relationships will be prepared for the Year 2000 in all
material respects within an acceptable time frame (or that acceptable
alternatives will be available); however, management of the Company makes no
assurances that all such parties will be Year 2000 ready within an acceptable
time frame.
In the event that the Company or key third parties are not Year 2000 ready, the
Company's results of operations, financial position and cash flows could be
materially adversely affected.
Contingency Plans. The Company and its subsidiaries are in the
process of identifying alternative plans in the event that the Year 2000 project
is not completed on a timely basis or otherwise does not meet anticipated needs.
The Company is also making alternative arrangements in the event that critical
suppliers, customers, utility providers and other significant third parties are
not Year 2000 ready.
Year 2000 Costs. In the opinion of management, the cost of
addressing the Year 2000 issue is not expected to have a material adverse effect
on the Company's financial condition or its results of operations.
13
<PAGE>
Item 8. Financial Statements and Supplementary Data
Financial Statements required by Regulation S-X and Supplementary
Financial Information required by Regulation S-K are presented herein.
FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
TABLE OF CONTENTS
Page
Report of Independent Certified Public Accountants ........................ 15
Consolidated Balance Sheets,
December 31, 1998 and 1997 ............................................. 16
Consolidated Statements of Income,
Years ended December 31, 1998, 1997 and 1996 ........................... 17
Consolidated Statements of Changes in Shareholders' Equity,
Years ended December 31, 1998, 1997 and 1996 ........................... 18
Consolidated Statements of Cash Flows,
Years ended December 31, 1998, 1997 and 1996 ........................... 19
Notes to Consolidated Financial Statements ................................ 21
14
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Board of Directors and Shareholders of
Bull & Bear Group, Inc.:
We have audited the accompanying consolidated balance sheets of Bull & Bear
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, 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, 1998. 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 Bull & Bear Group,
Inc. and subsidiaries at December 31, 1998 and 1997, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 12, 1999
15
<PAGE>
<TABLE>
<CAPTION>
BULL & BEAR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997
---- ----
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,403,931 $ 312,633
Marketable securities (Note 3) 353,385 1,846,028
Management, distribution and shareholder administration
fees receivable 257,313 268,984
Interest, dividends and other receivables 205,786 187,954
Prepaid expenses and other current assets 506,950 411,821
------------- -------------
Total Current Assets 2,727,365 3,027,420
------------- -------------
Real estate held for investment, net 1,198,173 632,682
Equipment, furniture and fixtures, net 209,339 196,416
Excess of cost over net book value of subsidiaries, net 688,687 727,373
Deferred income taxes (Note 9) 215,400 -
Other assets 276,183 243,183
------------- -------------
2,587,782 1,799,654
------------- -------------
Total Assets $ 5,315,147 $ 4,827,074
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 104,934 $ 160,849
Accrued professional fees 143,025 93,335
Accrued payroll and other related costs 64,667 41,042
Accrued other expenses 28,920 45,225
Current portion of capitalized lease obligation (Note 4) 4,749 13,644
Other current liabilities 9,836 10,408
------------- -------------
Total Current Liabilities 356,131 364,503
------------- -------------
Capitalized lease obligation (Note 4) - 7,460
------------- -------------
Contingencies (Note 11) - -
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 13,501
Class B, 20,000 shares authorized;
20,000 shares issued and outstanding 200 200
Additional paid-in capital 6,872,454 6,236,077
Retained earnings (deficit) (1,325,338) (1,836,753)
Notes receivable for common stock issued (603,675) -
Accumulated other comprehensive income (976) 42,086
------------- -------------
Total Shareholders' Equity 4,959,016 4,455,111
------------- -------------
Total Liabilities and Shareholders' Equity $ 5,315,147 $ 4,827,074
============= =============
See accompanying notes to consolidated financial statements.
16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Management, distribution and shareholder
administration fees $ 3,373,046 $ 4,313,947 $ 4,922,945
Realized gains from investments 62,783 83,608 22,092
Dividends, interest and other 102,844 99,149 82,770
----------------- ----------------- -----------------
3,538,673 4,496,704 5,027,807
----------------- ----------------- -----------------
Expenses:
General and administrative 1,912,927 1,943,337 2,225,624
Marketing 349,549 708,495 1,191,639
Expense reimbursements to the Funds (Note 10) 180,396 615,743 535,902
Subadvisory fees 230,954 387,593 705,248
Professional fees 177,376 186,320 272,593
Amortization and depreciation 118,186 106,871 116,151
----------------- ----------------- -----------------
2,969,388 3,948,359 5,047,157
----------------- ----------------- -----------------
Income (loss) from continuing operations
before income taxes 569,285 548,345 (19,350)
Income taxes (Note 9) (82,544) (5,196) 91,248
------------------ ------------------ -----------------
Income (loss) from continuing operations 651,829 553,541 (110,598)
Discontinued Operations:
Income (loss) from discontinued operations
(net of income taxes) (Note 2) (140,414) 72,184 (209,927)
------------------ ----------------- ------------------
Net Income (Loss) $ 511,415 $ 625,725 $ (320,525)
================= ================= ==================
Per Share Data:
Basic
Income (loss) from continuing operations $ .47 $ .41 $ (.08)
Income (loss) from discontinued operations (.10) .05 (.15)
-------- ------- --------
Net income $ .37 $ .46 $ (.23)
======== ======= ========
Diluted
Income (loss) from continuing operations $ .45 $ .38 $ (.08)
Income (loss) from discontinued operations (.10) .05 (.15)
-------- ------- --------
Net income $ .35 $ .43 $ (.23)
======== ======= ========
Average Shares Outstanding:
Basic 1,391,940 1,370,017 1,369,555
========= ========= =========
Diluted 1,453,472 1,468,252 1,369,555
========= ========= =========
See accompanying notes to consolidated financial statements.
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 1998, 1997 and 1996
Number of Shares Amount
---------------- ------
Class A Class B Class A Class B
Common Common Common Common
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 1,348,017 20,000 $13,481 $200
Net loss
Other comprehensive income -- -- -- --
Unrealized gains on marketable securities -- -- -- --
Comprehensive income (loss)
Issuance of Class A common stock on exercise
of stock options 2,000 -- 20 --
---------- ------ ------- ----
Balance, December 31, 1996 1,350,017 20,000 13,501 200
Net income
Other comprehensive income -- -- -- --
Unrealized losses on marketable securities -- -- -- --
---------- ------ ------- ----
Comprehensive income
Balance, December 31, 1997 1,350,017 20,000 13,501 200
Net income
Other comprehensive income -- -- -- --
Unrealized losses on marketable securities -- -- -- --
---------- ------ ------- ----
Comprehensive income
Issuance of Class A common stock on exercise
of stock options 285,000 -- 2,850 --
Issuance of notes receivable (Note 7) -- -- -- --
---------- ------ ------- ----
Balance, December 31, 1998 1,635,017 20,000 $16,351 $200
========== ====== ======= ====
</TABLE>
<TABLE>
<CAPTION>
Notes
Receivable
For Accumulated
Additional Common Retained Other Total
Paid-In Stock Earnings Comprehensive Shareholders'
Capital Issued (Deficit) Income Equity
------------ ------------ ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $6,232,347 $ -- $(2,141,953) $ 66,020 $ 4,170,095
-----------
Net loss
Other comprehensive income -- -- (320,525) -- (320,525)
Unrealized gains on marketable securities -- -- -- 64,566 64,566
-----------
Comprehensive income (loss) (255,959)
-----------
Issuance of Class A common stock on exercise
of stock options 3,730 -- -- -- 3,750
---------- --------- ----------- --------- -----------
Balance, December 31, 1996 6,236,077 -- (2,462,478) 130,586 3,917,886
-----------
Net income
Other comprehensive income -- -- 625,725 -- 625,725
Unrealized losses on marketable securities -- -- -- (88,500) (88,500)
---------- --------- ----------- --------- -----------
Comprehensive income 537,225
-----------
Balance, December 31, 1997 6,236,077 -- (1,836,753) 42,086 4,455,111
========= -----------
Net income
Other comprehensive income -- -- 511,415 -- 511,415
Unrealized losses on marketable securities -- -- (43,062) (43,062)
---------- --------- ----------- --------- -----------
Comprehensive income 468,353
-----------
Issuance of Class A common stock on exercise
of stock options 636,377 -- -- -- 639,227
Issuance of notes receivable (Note 7) -- (603,675) -- -- (603,675)
---------- --------- ----------- --------- -----------
Balance, December 31, 1998 $6,872,454 $(603,675) $(1,325,338) $ (976) $ 4,959,016
========== ========= =========== ========= ===========
See accompanying notes to consolidated financial statements.
18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 511,415 $ 625,725 $(320,525)
--------- --------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 169,008 131,992 138,116
Deferred income taxes (215,400) -- --
Increase in cash value of life insurance (33,000) (32,333) (30,000)
Realized/unrealized (gain) loss on investments (40,330) (83,608) (32,725)
(Increase) decrease in:
Management, distribution and shareholder
administration fees receivable 11,671 (61,040) (28,735)
Interest, dividends and other receivables (17,832) 16,730 43,557
Prepaid expenses and other current assets (95,129) (122,109) 143,858
Other assets -- (5,774) (48,401)
Increase (decrease) in:
Accounts payable (55,915) 26,305 (475,698)
Accrued expenses 57,010 4,917 4,610
Other current liabilities (572) (1,212) (1,760)
--------- --------- ---------
Total adjustments (220,489) (126,132) (287,178)
--------- --------- ---------
Net cash provided by (used in)
Operating Activities 290,926 499,593 (607,703)
--------- --------- ---------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Investing Activities:
Improvement to real estate held for investment $(606,296) $(218,956) $(204,642)
Capital expenditures (102,440) (27,804) (100,799)
Proceeds from sale of Bull & Bear Properties, Inc. -- -- 43,763
Proceeds from sales of investments 1,748,467 556,831 963,318
Purchases of investments (258,556) (1,231,204) (785,512)
Acquisition of intangible assets -- -- (66,780)
--------- --------- ---------
Net cash provided by (used in)
Investing Activities 781,175 (921,133) (150,652)
--------- --------- ---------
Cash Flows from Financing Activities:
Issuance collection of note receivable (603,675) -- --
Increase in capitalized lease obligation -- -- 46,416
Repayments of capitalized lease obligation (16,355) (13,271) (12,041)
Proceeds from issuance of Class A Common Stock 639,227 -- 3,750
--------- --------- ---------
Net cash provided by (used in)
Financing Activities 19,197 (13,271) 38,125
--------- --------- ---------
Net increase (decrease) in cash
and cash equivalents 1,091,298 (434,811) (720,230)
Cash and cash equivalents:
Beginning of year 312,633 747,444 1,467,674
--------- --------- ---------
End of year $1,403,931 $ 312,633 $ 747,444
========= ========= =========
<FN>
SUPPLEMENTAL DISCLOSURE:
The Company paid $9,346 in Federal income taxes in 1998. The Company did not
pay any Federal income taxes in 1997 or 1996.
The Company paid $864, $916 and $1,309 in interest in 1998, 1997 and 1996,
respectively.
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
20
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Bull & Bear Group, Inc. ("Company") is a holding company. Its
subsidiaries' business consists of providing investment management,
distribution and shareholder administration services for the Bull &
Bear Funds, Midas Fund and Rockwood Fund ("Funds") and discount
brokerage services.
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, 1998 and 1997, the Company and
subsidiaries had invested approximately $1,378,700 and $260,300,
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 subsidiaries are valued
at market with unrealized gains and losses included in earnings.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company's customer activities
involve the execution and settlement of customer transactions. These
activities may expose the Company to risk of loss in the event the
customer is unable to fulfill its contracted obligations, in which
case the Company may have to purchase or sell financial instruments
at prevailing market prices. Any loss from such transactions is not
expected to have a material effect on the Company's financial
statements.
21
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
BROKERAGE INCOME AND EXPENSES
Brokerage commission and fee income and clearing and brokerage
expenses are recorded on a settlement date basis. The difference
between recording such income and expenses on a settlement date
basis as opposed to trade date, as required by generally accepted
accounting principles, is not material to the consolidated financial
statements.
INCOME TAXES
The Company and its wholly-owned subsidiaries file consolidated
income tax returns. The Company's method of accounting for income
taxes conforms to Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes." This method requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the
financial reporting basis and the tax basis of assets and
liabilities.
REAL ESTATE HELD FOR INVESTMENT AND EQUIPMENT
Real estate held for investment is recorded at cost and is
depreciated on the straight-line basis over its estimated useful
life. At December 31, 1998 and 1997, accumulated depreciation
amounted to approximately $92,400 and $51,600, respectively.
Equipment, furniture and fixtures are recorded at cost and are
depreciated on the straight-line basis over their estimated useful
lives, 3 to 10 years. At December 31, 1998 and 1997, accumulated
depreciation amounted to approximately $908,400 and $818,900,
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, 1998 and 1997, accumulated
amortization amounted to approximately $662,100 and $623,400,
respectively. Periodically, the Company reviews its intangible
assets for events or changes in circumstances that may indicate that
the carrying amounts of the assets are not recoverable.
COMPREHENSIVE INCOME
For 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income".
SFAS 130 establishes the disclosure requirements for reporting
comprehensive income in an entity's financial statements. Total
comprehensive income includes net income and unrealized gains and
losses on marketable securities. Accumulated other comprehensive
income, a component of stockholders' equity, was formerly reported
as unrealized gains and losses on marketable securities. There was
no impact on previously reported net income from the adoption of
SFAS 130.
22
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
SEGMENT INFORMATION
Statement of Financial Accounting Standards No. 131 ("SFAS 131")
"Disclosures About Segments of an Enterprise and Related
Information" was adopted by the Company in 1998. SFAS 131 requires
companies to present segment information using the management
approach. The management approach is based on operating decisions
and assessing performance. The Company's operating segments are
organized around services provided and are classified into two
groups investment management and discount brokerage. Due to the
pending sale of Bull & Bear Securities, Inc. ("BBSI"), 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 one industry segment.
EARNINGS PER SHARE
The Company applies Statement of Financial Accounting Standards No.
128 "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.
<TABLE>
<CAPTION>
The following table sets forth the computation of basic and diluted
earnings per share:
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income (loss) $ 511,415 $ 625,725 $ (320,525)
========== ========== ===========
Denominator:
Denominator for basic earnings per share -
weighted-average shares 1,391,940 1,370,017 1,369,555
Effect of dilutive securities:
Employee Stock Options 61,532 98,235 --
---------- ---------- -----------
Denominator for diluted earnings per share -
adjusted weighted - average shares and
assumed conversions 1,453,472 1,468,252 1,369,555
=========== ========== ============
</TABLE>
RECLASSIFICATIONS
Certain reclassifications of the 1997 and 1996 financial statements
have been made to conform to the 1998 presentation.
23
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
2. DISCONTINUED OPERATIONS
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 is subject
to the approval of regulatory authorities in Canada and the United
States, is valued at approximately $6 million. The sale is expected to
close in the first quarter of 1999. In connection with the sale, the
rights to the name "Bull & Bear" will be transferred to Royal Bank of
Canada, and the Company and certain of its subsidiaries will
subsequently change their names. Accordingly, results from the
discount brokerage segment are shown as discontinued operations with
prior years restated. Summarized financial information for the
discontinued operations was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues $ 2,379,506 $2,490,713 $ 2,389,205
Expenses 2,614,920 2,378,629 2,663,132
----------- ---------- -----------
Income (loss) before income taxes (235,414) 112,084 (273,927)
Income tax expense (benefit) (95,000) 39,900 (64,000)
----------- ---------- -----------
Income (loss) from discontinued operations,
net of income taxes $ (140,414) $ 72,184 $ (209,927)
=========== ========== ===========
</TABLE>
1998 1997
---------- ----------
Current assets $1,025,704 $1,008,371
Total assets $1,114,667 $1,083,227
Current liabilities $ 420,641 $ 248,787
Total liabilities $ 420,641 $ 248,787
Net assets of discontinued operations $ 694,026 $ 834,440
Of the total net assets of the discontinued business segment, as of
December 31, 1998, the pending agreement of sale provides that the
business shall have net assets of at least $500,000 at settlement.
3. MARKETABLE SECURITIES
At December 31, 1998, marketable securities consisted of:
Broker/dealer securities - at market
Affiliated mutual funds (cost $159,882) $128,945
--------
Other companies
Available-for-sale securities - at market
Unaffiliated mutual funds 38,820
Affiliated mutual funds 2,268
Equity securities 183,352
--------
Total available-for-sale securities (cost - $225,416) 224,440
--------
$353,385
========
24
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
At December 31, 1997, marketable securities consisted of:
Broker/dealer securities - at market
U.S. Treasury Notes, due 6/30/99 - 9/30/00 (cost $1,260,380) $1,265,943
----------
Other companies
Available-for-sale securities - at market
Unaffiliated mutual funds 36,324
Affiliated mutual funds 3,157
Equity securities 186,884
U.S. Treasury Notes, due 9/30/00 353,720
----------
Total available-for-sale securities (cost - $537,999) 580,085
----------
$1,846,028
==========
At December 31, 1998 and 1997, the Company had $(976) and $42,086,
respectively, of unrealized gains (losses) on "available-for-sale
securities" which is reported as a separate component of consolidated
shareholders' equity.
4. LEASE COMMITMENTS
AS LESSEE
The Company leases approximately 11,400 square feet of office space.
The rent is approximately $207,000 per annum plus $32,550 per annum
for electricity. The lease expires December 31, 1999 and is
cancelable at the option of the Company on three months' notice. In
addition, the Company's discount broker/dealer has a branch office
in Boca Raton, Florida consisting of approximately 2,000 square
feet. The rent is approximately $55,000 per annum and expires on
August 30, 1999.
The Company leases office equipment under capital leases expiring in
1999. The related property is included in furniture and equipment at
a cost of $45,457 at December 31, 1998. Depreciation expense of
$44,194 has been recognized on this property as of December 31,
1998. Future annual minimum lease payments under the capital leases
together with the present value of the net minimum lease payments
are as follows:
Year Ending December 31,
1999 $4,787
Less amount representing interest and executory costs 38
---------
Present value of minimum lease payments $4,749
======
25
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
AS LESSOR
The Company owns an office building which is leased to various
tenants. Future minimum lease payment receivables under
noncancellable leasing arrangements as of December 31, 1998 are as
follows:
Year ending December 31,
1999 $ 152,300
2000 172,400
2001 189,800
2002 176,000
2003 154,600
2004 - 2008 797,000
------------
Net minimum future lease receipts $1,642,100
==========
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, 1998 and 1997, none of the
Preferred Stock was issued.
6. NET CAPITAL REQUIREMENTS
The Company's broker/dealer subsidiaries are member firms of the
National Association of Securities Dealers, Inc. and are registered with
the Securities and Exchange Commission as broker/dealers. Under the
Uniform Net Capital Rule (Rule 15c3-1 under the Securities Exchange Act
of 1934), a broker/dealer must maintain minimum net capital, as defined,
of not less than (a) $250,000 or, when engaged solely in the sale of
redeemable shares of registered investment companies, $25,000, or (b)
6-2/3% of aggregate indebtedness, whichever is greater; and a ratio of
aggregate indebtedness to net capital, as defined, of not more than 15
to 1. At December 31, 1998, these subsidiaries had net capital of
approximately $410,600 and $676,800; net capital requirements of
$250,000 and $25,000; excess net capital of approximately $160,600 and
$651,800; and the ratios of aggregate indebtedness to net capital were
approximately 1.02 to 1 and 0.13 to 1, respectively.
26
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
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 and October 29, 1997 increasing the maximum number of options to
450,000. With respect to non-employee directors, only grants of
non-qualified stock options and awards of restricted shares are
available. Two of the non-employee directors were granted 10,000 options
each on December 6, 1995 and 5,000 options each on October 29, 1997. The
new non-employee director was granted 10,000 options on September 8,
1998. 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. If the recipient of any option
owns 10% or more of the Class B shares, the option price must be at
least 110% of the fair market value and the option must be exercised
within five years of the date the option is granted.
The 1990 Incentive Stock Option Plan provided for the granting of a
maximum of 500,000 options to purchase Class A Common Stock to
directors, officers and key employees of the Company. The option price
per share may not be less than the greater of 100% of the fair market
value or the par value of such shares on the date the option is granted,
and the maximum term of an option may not exceed ten years. If the
recipient of any option owns 10% or more of the total combined voting
power of all classes of stock, the option price must be at least 110% of
the fair market value and the option must be exercised within five years
of the date the option is granted.
The Company applied APB Opinion 25 and related interpretations in
accounting for its stock option plans. Accordingly, no compensation cost
has been recognized for its stock option plans. Proforma compensation
cost for the Company's plans is required by Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation (SFAS 123)"
and has been determined based on the fair value at the grant dates for
awards under these plans consistent with the method of SFAS 123. For
purposes of proforma disclosure, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's
proforma information follows:
Years Ended December 31,
1998 1997 1996
---- ---- ----
Net income As Reported $511,415 $625,725 $(320,525)
Proforma $465,641 $246,394 $(463,738)
Earnings per share
Basic As Reported $.37 $.46 $(.23)
Proforma $.33 $.18 $(.34)
Diluted As Reported $.35 $.43 $(.23)
Proforma $.32 $.17 $(.34)
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 1998, 1997 and 1996,
respectively: expected volatility of 73.95%, 92.83% and 93.82%,
risk-free interest rate of 5.11%, 5.85% and 5.29% and expected life of
three years, three years and five years.
27
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
A summary of the status of the Company's stock option plans as of
December 31, 1998, 1997 and 1996, 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, 1995 69,000 $1.76
Granted 229,000 $2.04
Exercised (2,000) $1.88
Canceled (27,000) $1.91
-------------
Outstanding at December 31, 1996 269,000 $1.98
Granted 177,000 $2.52
Canceled (34,000) $1.97
-------------
Outstanding at December 31, 1997 412,000 $2.21
Granted 12,000 $1.81
Exercised (285,000) $2.25
Canceled (20,000) $2.64
-------------
Outstanding at December 31, 1998 119,000 $2.05
============
There were 97,000 and 176,000 options exercisable at December 31, 1998
and 1997 with a weighted-average exercise price of $1.99 and $2.29,
respectively. There were no options exercisable at December 31, 1996.
The weighted-average fair value of options granted was $0.94, $1.41 and
$1.42 for the years ended December 31, 1998, 1997 and 1996,
respectively.
The following table summarizes information about stock options
outstanding at December 31, 1998:
Options Outstanding
Weighted-Average
Range of Number Remaining Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price
--------------- ----------- ------------------- -------------------
$1.50 - $1.8125 35,000 2.5 years $1.68
$1.875 - $2.475 64,000 2.7 years $2.00
$2.75 - $3.00 20,000 2.9 years $2.88
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, 1998
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,
1998, 1997 and 1996 was approximately $44,700, $44,800 and $39,900,
respectively.
28
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
9. INCOME TAXES
The provision for income taxes charged to operations was as follows:
1998 1997 1996
---- ---- ----
Current
State and local $ 28,510 $ 34,704 $ 27,248
Federal (206,054) - -
------------- ---------- ------------
$ (177,544) $ 34,704 $ 27,248
============= ========== ============
Deferred tax assets (liabilities) are comprised of the following at
December 31, 1998 and 1997:
1998 1997
---- ----
Unrealized (appreciation) depreciation on investments $ 12,400 $ (16,200)
Accrued expenses 40,000 -
Depreciation 10,000 -
Net operating loss carryforwards 153,000 277,100
--------- ----------
Net deferred tax assets 215,400 260,900
Deferred tax asset valuation allowance - (260,900)
--------- ----------
Net deferred tax assets $ 215,400 $ -
========= ==========
In 1997, the full amount of the deferred tax asset was offset by a
valuation allowance due to uncertainties associated with the ultimate
realization of the net operating loss carryforwards. However, due to
recent income of the Company and the pending sale of BBSI (See Note 2)
it is expected that the net operating loss carryforwards will be fully
realized in 1999. As a result, the valuation allowance was reversed in
1998.
For the year ended December 31, 1998, the provision for income taxes
differs from the amount of income taxes determined by applying the
applicable U.S. statutory federal tax rates to pre-tax income as a
result of utilization of net operating loss carryforwards and the
reversal of the valuation allowance account.
At December 31, 1998, the Company had net operating loss carryforwards
for Federal income tax purposes of approximately $382,400, of which
$53,800, $62,700 and $265,900 expire in 2005, 2006 and 2011,
respectively.
10. 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 represent reimbursement of
costs incurred by subsidiaries of the Company on behalf of the
open-end Funds. Such reimbursement amounted to approximately $314,100,
$286,100 and $249,700 for the years ended December 31, 1998, 1997 and
1996, respectively. During the years ended December 31, 1998 and 1997,
the Funds paid approximately $182,000 and $63,700, respectively, for
co-transfer agent services to ISC, which paid such amounts to certain
brokers for performing such services. These reimbursements for
co-transfer agent services were recorded as a reduction to marketing
expenses.
29
<PAGE>
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 1998, 1997 and 1996
In connection with investment management services, the Company's
investment managers waived management fees from the Funds in the amount
of approximately $180,400, $615,700 and $535,900 for the years ended
December 31, 1998, 1997 and 1996, 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, 1998, the
policy had a cash surrender value of approximately $142,000 and is
included in other assets in the balance sheet.
The Company's discount broker/dealer received brokerage commissions of
approximately $101,100, $259,400 and $179,500 from the Funds for the
years ended December 31, 1998, 1997 and 1996, respectively.
11. CONTINGENCIES
A group called Karpus Investment Management ("KIM") at the 1997 annual
meeting of Bull & Bear U.S. Government Securities Fund, Inc. ("BBG")
sought to elect its slate of nominees in opposition to management and at
the 1998 annual meeting of BBG made a counter-solicitation on all
management proposals and a solicitation to terminate the investment
management agreement. On February 19, 1998, KIM filed a lawsuit against
BBG in the Circuit Court for Baltimore City, Maryland, Case No. 9805005,
which was dismissed with prejudice on October 1, 1998. On February 19,
1998, BBG filed a lawsuit against KIM in the United States District
Court for the Southern District of New York, 98 Civ. 1190. On December
22, 1998, KIM filed a lawsuit against BBG in the United States District
Court for the District of Maryland Court, 98-CV-4161 and BBG has made
counterclaims. KIM has submitted a proposal to BBG for inclusion in
proxy material at the next meeting of shareholders to terminate the
investment management contract of BBAI with BBG. The outcome of these
matters and their effect on the Company or BBAI's management agreement
with BBG cannot be predicted with certainty. BBG's net assets at
December 31, 1998 amounted to approximately $10.9 million.
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, 1998, 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.
30
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data (Unaudited)
The following sets forth the selected quarterly financial information for the
years ended December 31, 1998 and 1997. 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,
1998
<S> <C> <C> <C> <C>
Revenues 901,689 $ 996,530 $ 822,880 $ 817,574
=============== ================= ================= ===============
Income (loss) from continuing
operations 206,529 $ 155,539 $ (14,572) $ 304,333
=============== ================= ================== ===============
Income (loss) from discontinued
operations (71,350) $ (14,232) $ (42,793) $ (12,039)
================ ================= ================== ================
Net income (loss) 135,179 $ 141,307 $ (57,365) $ 292,294
=============== ================= ================== ===============
Income (loss) per share
Basic
Income (loss) from continuing
operations $ .15 $ .11 $(.01) $ .21
===== ===== ===== =====
Income (loss) from discontinued
operations $(.05) $(.01) $(.03) $(.01)
===== ===== ===== =====
Net income (loss) $ .10 $ .10 $(.04) $ .20
===== ===== ===== =====
Diluted $ .09 $ .10 $(.04) $ .20
===== ===== ===== =====
1997
Revenues 1,252,881 $ 1,191,904 $ 1,078,362 $ 973,557
=============== ================= ================= ===============
Income from continuing operations 15,100 $ 132,034 $ 192,535 $ 213,872
=============== ================= ================= ===============
Income (loss) from discontinued
operations 100,555 $ 31,553 $ 23,209 $ (83,133)
=============== ================= ================= ================
Net income 115,655 $ 163,587 $ 215,744 $ 130,739
=============== ================= ================= ===============
Income (loss) per share
Basic
Income from continuing operations $.01 $.10 $.14 $ .16
==== ==== ==== =====
Income (loss) from discontinued
operations $.07 $.02 $.02 $(.06)
==== ==== ==== =====
Net Income $.08 $.12 $.16 $ .10
==== ==== ==== =====
Diluted $.08 $.11 $.15 $ .09
==== ==== ==== =====
</TABLE>
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, 1998.
31
<PAGE>
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 22 22 69
Robert D. Anderson Vice Chairman of the Board 22 22 69
Mark C. Winmill Co-President, 10 12 41
Chief Financial Officer,
Director
Thomas B. Winmill, Esq. Co-President, 10 11 39
General Counsel, Director
Edward G. Webb, Jr. Director 13* 11** 59
Charles A. Carroll Director 7 - 68
Mark C. Jones Director 1 - 63
Steven A. Landis Senior Vice President - 4 43
James R. Mitchell, II Senior Vice President - 5 37
Joseph Leung Treasurer, - 4 33
Chief Accounting Officer
Deborah Ann Sullivan, Esq. Vice President Secretary,
Associate General Counsel - 2 29
* 1985 to 1990 and 1992 to present.
** 1979 to 1990
32
<PAGE>
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 Mark C. Winmill and Thomas B. Winmill and the
brother-in-law of Mark C. Jones.
ROBERT D. ANDERSON - Vice Chairman of the Board of Directors. He is also
Vice Chairman of certain investment companies managed by Company subsidiaries
and of the subsidiaries of the Company.
MARK C. WINMILL - Co-President, Chief Financial Officer and Director. He is
also President of Bull & Bear Securities, Inc. and Co-President of the
investment companies managed by Company subsidiaries and of certain other
subsidiaries of the Company. He is a son of Bassett S. Winmill, a brother of
Thomas B. Winmill and a nephew of Mark C. Jones. As of March 31, 1999, he is no
longer employed by the Company.
THOMAS B. WINMILL, ESQ. - Co-President, General Counsel and Director. He is
also President of Bull & Bear Advisers, Inc. and Co-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, a brother of Mark C. Winmill and a nephew of Mark C. Jones.
EDWARD G. WEBB, JR. - Director. He has been President of Webb Associates,
Ltd. since 1996. From 1990 to 1996, he was Investment Director for Home
Insurance Company. Prior to that, he served as a Senior Vice President and
Director of the Company.
CHARLES A. CARROLL - Director. From 1989 to the present, he has been
affiliated with Kalin Associates, Inc., a member firm of the New York Stock
Exchange.
MARK C. JONES - Director. Since 1993, he has served as Managing Director of
Western Javelin LC, a general consulting firm. He is the brother-in-law of
Bassett S. Winmill and uncle of Thomas B. Winmill and Mark C. Winmill.
STEVEN A. LANDIS - Senior Vice President. He is also Senior Vice President
of the investment companies managed by Company subsidiaries. From 1993 to 1995
he was Associate Director of Proprietary Trading at Barclays De Zoete Wedd
Securities, Inc., from 1992 to 1993 he was Director, Bond Arbitrage at WG
Trading Company, and from 1989 to 1992 he was Vice President of Wilkinson Boyd
Capital Markets.
JAMES R. MITCHELL, II - Senior Vice President. He is also Senior Vice
President of BBSI. From 1992 to 1994 he was Vice President of BBSI.
JOSEPH LEUNG, CPA - Treasurer and Chief Accounting Officer. He is also
Treasurer and Chief Accounting Officer of the investment companies managed by
Company subsidiaries. From 1992 to 1995 he held various positions with Coopers &
Lybrand L.L.P., a public accounting firm. From 1991 to 1992 he was the
accounting supervisor at Retirement Systems Group, a mutual fund company.
DEBORAH ANN SULLIVAN, ESQ. - Vice President, Secretary and Associate
General Counsel. She is also Vice President, Secretary and Associate General
Counsel of the investment companies managed by Company subsidiaries. From 1993
to 1994 she was a Blue Sky Paralegal for SunAmerica Asset Management Corporation
and from 1992 through 1993 she was Compliance Administrator and Blue Sky
Administrator with Prudential Inc. and Prudential Fund Management, Inc. She is a
member of the New York State Bar.
33
<PAGE>
Each director is elected by the vote or written consent of the holder of
a majority of the Class B Common Stock and holds office until the next meeting
of the Class B common stockholder and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
Based solely on the information from Forms 3, 4, and 5 furnished to it,
the Company believes that the directors, officers, and owners of more than 10
percent of the Class A Common Stock of the Company have filed on a timely basis
reports required by Section 16(a) of the Securities Exchange Act of 1934 during
the most recent fiscal year or prior fiscal years except as follows: Bassett S.
Winmill with respect to transactions in April 1997 filed a Form 4 on May 5,
1997, and amendments thereto on May 16, 1997 and March 24, 1998, and an amended
Form 5 on March 24, 1998.
Item 11. Executive Compensation
The following information and tables set forth the information required
under the Securities and Exchange Commission's executive compensation rules. Any
information not presented is omitted because the item is not applicable or not
required since the Company qualifies as a small business issuer.
Summary Compensation Table
The following table sets forth, for the three years ended December 31,
1998, the compensation paid to the chief executive officers and the other
executive officers whose total annual salary and bonus exceeded $100,000 in
1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation All Other
Name And Salary Bonus Other Annual Compensation
Principal Position Year ($) ($) Compensation* (a) (b)
- ------------------ ---- --------- --------- ------------ --- ---
<S> <C> <C> <C> <C> <C>
Bassett S. Winmill 1998 $175,000 $10,937 -- $5,355 $4,999
Chairman 1997 $170,000 $17,708 -- $5,166 $4,750
1996 $170,000 $28,333 -- $5,166 $4,750
Robert D. Anderson 1998 $ 90,000 $ 5,625 -- $2,142 $3,347
Vice Chairman 1997 $ 90,000 $ 9,375 -- $2,142 $2,925
1996 $ 90,000 $15,000 -- $2,142 $3,211
Mark C. Winmill 1998 $140,000 $28,750 -- $ 326 $5,000
Co-President 1997 $122,500 $13,021 -- $ 269 $3,941
1996 $110,000 $18,115 -- $ 152 $3,997
Thomas B. Winmill 1998 $140,000 $28,750 -- $ 211 $4,478
Co-President 1997 $122,500 $13,021 -- $ 177 $4,272
1996 $110,000 $18,115 -- $ 152 $4,066
Steven A. Landis 1998 $128,625 $12,764 -- $ 296 $3,420
Senior Vice President 1997 $120,667 $ 7,542 -- $ 267 $2,564
1996 $112,000 $18,667 -- $ 141 $1,750
<FN>
* Information omitted as perquisites do not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus for the year for the named executive officers.
(a) Represents term life insurance
(b) Represents Company's matching contributions to 401(k) Plan.
</FN>
</TABLE>
34
<PAGE>
Option Grants Table
There were no options granted to any of the executive officers named in
the Summary Compensation Table during the year ended December 31, 1998.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth, for the year ended December 31, 1998,
information regarding the outstanding options for each of the executive officers
named in the Summary Compensation Table.
Number of
Securities Value of
Underlying Unexercised
Number of Unexercised In-The-Money
Shares Options at Options at
Acquired Dollar 12-31-98 (#) 12-31-98 ($)
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
Bassett S. Winmill 90,000 $202,125 0 / 0 $0 / $0
Mark C. Winmill 90,000 $202,125 0 / 0 $0 / $0
Thomas B. Winmill 90,000 $202,125 0 / 0 $0 / $0
Robert D. Anderson - - 25,000 / 0 $26,250 / $0
Steven A. Landis - - 20,000 / 0 $22,500 / $0
Long-Term Incentive Plan Awards Table
There were no long-term incentive plan awards made during the year ended
December 31, 1998 to the executive officers named in the Summary Compensation
Table.
Compensation of Directors
Edward G. Webb, Jr., Charles A. Carroll and Mark C. Jones were the only
individuals who received compensation for their service as directors of the
Company in 1998. 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,
1998, Mr. Webb was paid $7,500 for attending 3 meetings, Mr. Carroll was paid
$10,000 for attending all four meetings and Mr. Jones was paid $5,000 for
attending 2 meetings. Mr. Jones also received an option to purchase 10,000
shares of Class A Common Stock at an exercise price of $1.8125 per share.
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 11 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 and October 29, 1997. 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.
35
<PAGE>
General Provisions
Duration of the Plan; Share Authorization. The Plan will terminate on
December 6, 2005, unless terminated earlier by the Board.
Four hundred fifty thousand (450,000) shares of the Company's Class A
Common Stock ("Shares") are available for Awards under the Plan. The Shares to
be offered under the Plan are authorized and unissued Shares, or issued Shares
that have been reacquired by the Company and held in its treasury. Holders of
Shares do not have voting rights except as specifically provided by the Delaware
General Corporation Law.
Shares covered by any unexercised portions of terminated options, Shares
forfeited by Participants, and Shares subject to any Awards that are otherwise
surrendered by a Participant without receiving any payment or other benefit with
respect thereto may again be subject to new Awards under the Plan. In the event
the purchase price of an option or tax withholding relating to an Award is paid
in whole or in part through the delivery of Shares, the number of Shares
issuable in connection with the exercise of the option may not again be
available for the grant of Awards under the Plan.
Plan Administration. The Plan is administered by the Board or Stock
Option Committee ("Committee") of the Board. The Committee is composed of at
least two directors of the Company, each of whom is a "Non-Employee Director" as
defined in Rule 16b-3 promulgated by the SEC ("Rule 16b-3") under Section 16 of
the Securities Exchange Act of 1934, as amended ("Exchange Act"). When the
Committee is administering the Plan, the Committee will determine the officers
and other key employees who will be eligible for and granted Awards, determine
the amount and type of Awards, establish and modify administrative rules
relating to the Plan, impose such conditions and restrictions on Awards as it
determines appropriate and take such other action as may be necessary or
advisable for the proper administration of the Plan. The Committee may, with
respect to Participants who are not subject to Section 16 of the Exchange Act,
delegate such of its powers and authority under the Plan as it deems appropriate
to certain officers or employees of the Company.
Plan Participants. Any employee of the Company or its subsidiaries,
whether or not a director of the Company, may be selected by the Committee to
receive an Award under the Plan. Non-Employee Directors shall receive such
Awards (other than Incentive Stock Options) as the Board in its discretion may
designate.
Awards Available Under the Plan
Awards to employees under the Plan may take the form of stock options or
Restricted Share Awards. Awards under the Plan may be granted alone or in
combination with other Awards. The consideration for issuance of Awards under
the Plan is the continued services of the employees and non-employee directors
to the Company and its subsidiaries.
Stock Options Granted to Employees. Stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended from time to time, or any successor thereto ("Code"), and
stock options that do not meet such requirements ("Non-Qualified Stock Options")
are both available for grant to employees under the Plan.
The term of each option will be determined by the Committee, but no
option will be exercisable more than ten years after the date of grant. If,
however, an Incentive Stock Option is granted to a Participant who, at the time
of grant of the option, owns (or is deemed to own under Section 424(d) of the
Code) more than 10% (a "Ten Percent Shareholder") of the Company's Class B
common stock, par value $0.01 per share ("Company Voting Securities"), the
option is not exercisable more than five years after the date of grant. Options
may also be subject to restrictions on exercise, such as exercise in periodic
installments, performance targets and waiting periods, as determined by the
Committee.
36
<PAGE>
The exercise price of each option is determined by the Committee;
however, the per share exercise price of an option must be at least equal to
100% of the Fair Market Value (as defined below) of a Share on the date of grant
of such option. If, however, an Incentive Stock Option is granted to a Ten
Percent Shareholder, the per share exercise price of the option must be at least
equal to 110% of the Fair Market Value of a Share on the date of grant of such
option. Fair Market Value of a Share means, as of any given date, the most
recently reported sale price of a Share on such date as of the time when Fair
Market Value is being determined on the principal national securities exchange
on which the Shares are then traded or, if the Shares are not then traded on a
national securities exchange, the most recently reported sale price of the
Shares on such date as of the time when Fair Market Value is being determined on
Nasdaq; provided, however, that, if there were no sales reported as of such
date, Fair Market Value is the last sale price previously reported. In the event
the Shares are not admitted to trade on a securities exchange or quoted on
Nasdaq, the Fair Market Value of a Share as of any given date is as determined
in good faith by the Committee. Notwithstanding the foregoing, the Fair Market
Value of a Share will never be less than par value per share.
Subject to whatever installment exercise and waiting period provisions
the Committee may impose, options may be exercised in whole or in part at any
time prior to expiration of the option by giving written notice of exercise to
the Company specifying the number of Shares to be purchased. Such notice must be
accompanied by payment in full of the purchase price in such form as the
Committee may accept (including payment in accordance with a cashless exercise
program under which, if so instructed by the Participant, Shares may be issued
directly to the Participant's broker or dealer upon receipt of the purchase
price in cash from the broker or dealer). If and to the extent determined by the
Committee in its discretion at or after grant, payment in full or in part may
also be made in the form of Shares duly owned by the Participant (and for which
the Participant has good title, free and clear of any liens and encumbrances) or
by reduction in the number of Shares issuable upon such exercise based, in each
case, on the Fair Market Value of the Shares on the date the option is
exercised. In the case of an Incentive Stock Option, however, the right to make
payment of the purchase price in the form of Shares may be authorized only at
the time of grant.
Stock options granted under the Plan are not transferable except by will
or the laws of descent and distribution and may be exercised, during the
Participant's lifetime, only by the Participant.
Unless the Committee provides for a shorter period of time, upon a
Participant's termination of employment other than by reason of death or
disability, the Participant may, within three months from the date of such
termination of employment, exercise all or any part of his or her options as
were exercisable at the date of termination of employment but only if (x) the
Participant resigns or retires and the Committee consents to such resignation or
retirement and (y) such termination of employment is not for cause. In no event,
however, may any option be exercised after the time when it would otherwise
expire. If such termination of employment is for cause or the Committee does not
so consent, the right of such Participant to exercise such options will
terminate at the date of termination of employment.
Further, unless the Committee provides for a shorter period of time,
upon a Participant's becoming disabled (such date being the "Disability Date"),
the Participant may, within one year after the Disability Date, exercise all or
a part of his or her options that were exercisable upon such Disability Date. In
no event, however, may any option be exercised after the time when it would
otherwise expire.
Further, unless the Committee provides for a shorter period of time, in
the event of the death of a Participant while employed by the Company or prior
to the expiration of the option as provided for in the event of disability, to
the extent all or any part of the option was exercisable as of the date of death
of the Participant, the right of the Participant's beneficiary to exercise the
option will expire upon the expiration of one year from the date of the
Participant's death (but in no event more than one year from the Participant's
Disability Date) or on the stated termination date of the option, whichever is
earlier. In the event of the Participant's death, the Committee may, in its sole
discretion, accelerate the right to exercise all or any part of an Option that
would not otherwise be exercisable.
37
<PAGE>
To the extent all or any part of an option was not exercisable as of the
date of a Participant's termination of employment, such right will expire at the
date of such termination of employment. Notwithstanding the foregoing, the
Committee, in its sole discretion and under such terms as it deems appropriate,
may permit a Participant who will continue to render significant services to the
Company after his or her termination of employment to continue to accrue service
with respect to the right to exercise his or her options during the period in
which the individual continues to render such services.
Restricted Shares. The Committee may award restricted Shares
("Restricted Shares") to a Participant. Such a grant gives a Participant the
right to receive Shares subject to a risk of forfeiture based upon certain
conditions. The forfeiture restrictions on the Restricted Shares may be based
upon performance standards, length of service or other criteria as the Committee
may determine. Until all restrictions are satisfied, lapsed or waived, the
Company will maintain control over the Restricted Shares but the Participant
will be entitled to receive dividends on the Restricted Shares; provided,
however, that any Shares distributed as a dividend or otherwise with respect to
any Restricted Shares as to which the restrictions have not yet lapsed will be
subject to the same restrictions as such Restricted Shares. When all
restrictions have been satisfied and/or waived or have lapsed, the Company will
deliver to the Participant or, in the case of the Participant's death, his or
her beneficiary, stock certificates for the appropriate number of Shares, free
of all restrictions (except those imposed by law). None of the Restricted Shares
may be assigned or transferred (other than by will or the laws of descent and
distribution), pledged or sold prior to lapse or release of the applicable
restrictions.
All of a Participant's Restricted Shares and rights thereto are
forfeited to the Company unless the Participant continues in the service of the
Company or any parent or subsidiary of the Company as an employee until the
expiration of the forfeiture period, and all other applicable restrictions of
the Restricted Shares. Notwithstanding the foregoing, the Committee may, in its
sole discretion, waive the forfeiture period and any other applicable
restrictions on a Participant's Restricted Share Award, provided that the
Participant must at that time have completed at least one year of employment
after the date of grant.
Awards Granted to Non-Employee Directors. Non-Employee Directors are
eligible only to receive NonQualified 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 Committee, in its sole discretion, at the time
of an Award or pursuant to certain antidilution provisions (as discussed below),
no Award granted under the Plan to a Participant may be modified (unless such
modification does not materially decrease the value of the Award) after the date
of grant except by express written agreement between the Company and the
Participant, provided that any such change (a) may not be inconsistent with the
terms of the Plan, and (b) must be approved by the Committee.
The Board has the right and the power to terminate the Plan at any time.
No Award may be granted under the Plan after the termination of the Plan, but
the termination of the Plan will not have any other effect and any Award
outstanding at the time of the termination of the Plan may be exercised after
termination of the Plan at any time prior to the expiration date of such Award
to the same extent such Award would have been exercisable had the Plan not
terminated.
38
<PAGE>
Antidilution Provisions
Recapitalization. The number and kind of shares subject to outstanding
Awards, the purchase price or exercise price of such Awards, and the number and
kind of shares available for Awards subsequently granted under the Plan will be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in capitalization
with a similar substantive effect upon the Plan or the Awards granted under the
Plan. The Committee has the power and sole discretion to determine the nature
and amount of the adjustment to be made in each case. However, in no event will
any adjustment be made in accordance with the Plan's antidilution provisions to
any previous grant of Restricted Shares if an adjustment has been or will be
made to the Shares awarded to a Participant in such person's capacity as a
stockholder.
Sale or Reorganization. After any reorganization, merger or
consolidation in which the Company is the surviving entity, each Participant
will, at no additional cost, be entitled upon the exercise of an Award
outstanding prior to such event, and in connection with the payout after such
event of any Award outstanding at the time of such event, to receive (subject to
any required action by stockholders), in lieu of the number of Shares receivable
or exercisable pursuant to such option, the number and class of shares of stock
or other securities to which such Participant would have been entitled pursuant
to the terms of the reorganization, merger or consolidation if, at the time of
such reorganization, merger or consolidation, such Participant had been the
holder of record of a number of Shares equal to the number of Shares receivable
or exercisable pursuant to such Award. Comparable rights will accrue to each
Participant in the event of successive reorganizations, mergers or
consolidations of the character described above.
Options to Purchase Stock of Acquired Companies. After any
reorganization, merger or consolidation in which the Company is a surviving
entity, the Committee may grant substituted options under the provisions of the
Plan, pursuant to Section 424 of the Code, replacing old options granted under a
plan of another party to the reorganization, merger or consolidation whose stock
subject to the old options may no longer be issued following such merger or
consolidation. The foregoing adjustments and manner of application of the
foregoing provisions will be determined by the Committee in its sole discretion.
Any such adjustments may provide for the elimination of any fractional Shares
that might otherwise become subject to any options.
Loans
The Company is entitled, if the Committee in its sole discretion deems
it necessary or desirable, to lend money to a Participant for purposes of (a)
exercising his or her rights under an Award hereunder or (b) paying any income
tax liability related to an Award; provided, however, that Non-Employee
Directors are not eligible to receive such loans and provided, further, that the
portion of the per share exercise price of an option equal to the par value per
Share may not be paid by means of a promissory note. Such a loan must be
evidenced by a recourse promissory note payable to the order of the Company
executed by the Participant and containing such other terms and conditions as
the Committee may deem desirable. The interest rate on such loans must be
sufficient to avoid imputed interest under the Code.
39
<PAGE>
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, 1998, 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 297,604 18.2%
Robert D. Anderson 123,414 (1) 7.4%
Thomas B. Winmill 174,770 (2) 10.7%
Mark C. Winmill 120,800 7.4%
Edward G. Webb, Jr. 21,684 (3) 1.3%
Charles A. Carroll 25,000 1.5%
Steven A. Landis 20,000 (4) 1.2%
All directors and executive
officers as a group (11 persons) 804,272 46.9%
(1) Includes options exercisabl to purchase 25,000 shares at
December 31, 1998.
(2) Includes 40,900 and 10,000 shares held by Thomas B. Winmill's
wife and sons, respectively of which he disclaims beneficial
ownership.
(3) Includes options exercisable to purchase 15,000 shares.
(4) Includes options exercisable to purchase 20,000 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, 1998
Bassett S. Winmill, Chairman $285,113 $285,113
Mark C. Winmill, Co-President $201,225 $201,225
Thomas B. Winmill, Co-President $201,225 $201,225
40
<PAGE>
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 for
the year ended December 31, 1998 and
filed herewith; 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 for the year
ended December 31, 1998 and filed
herewith.
(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:
<TABLE>
<CAPTION>
Shareholder Non-Exclusive
Management Distribution 12b-1 Administration License
Fund Agreement Agreement Plan Agreement Agreement
---- ---------- ------------ ------ -------------- -------------
<S> <C> <C> <C> <C> <C>
(I) Bull & Bear Dollar Reserves (1) (1) (1) (2) (5)
(ii) Bull & Bear Gold Investors Ltd. (1) (1) (1) (2) (5)
(iii) Global Income Fund, Inc. (4) -- -- -- (5)
(iv) Bull & Bear U.S. and Overseas Fund (1) (1) (1) (2) (5)
(v) Bull & Bear Special Equities Fund, Inc. (1) (1) (1) (2) (5)
(vi) Tuxis Corporation (4) -- -- -- (5)
(vii) Bull & Bear U.S. Government Securities
Fund, Inc. (4) -- -- -- (5)
(viii) Midas Fund, Inc. (3) (3) (3) (3) (5)
(ix) Rockwood Fund, Inc. (4) (4) (4) (4) (5)
<FN>
(1) Filed as exhibits to Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
(2) Filed as exhibits to Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
(3) Filed as exhibits to Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference.
(4) Filed as exhibits to Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference.
(5) Filed as exhibits to Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference.
</FN>
</TABLE>
41
<PAGE>
(b) Bull & Bear Group, Inc. 1995 Long-Term Incentive Plan,
as adopted December 6, 1995 and amended February 6,
1996, filed as exhibit to Form 10- K for the year ended
December 31, 1995 and incorporated herein by reference.
(C) Section 422A Incentive Stock Option Plan, as adopted
December 5, 1990, filed as exhibit to Form 10-K for the
year ended December 31, 1990 and incorporated herein by
reference.
(d) Investment Management Transfer Agreements between the
investment management subsidiaries of the Company and
filed as exhibit to Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference.
(e) Bull & Bear Investment Plan, filed as an exhibit to
Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference.
(f) Death Benefit Agreement dated July 22, 1994 and filed
as exhibit to Form 10- K for the year ended December
31, 1994 and incorporated herein by reference.
(g) Bull & Bear Group, Inc. Incentive Stock Option
Agreement for Employees-Bassett S. Winmill filed as an
exhibit to Form 10-K for the year ended December 31,
1995 and incorporated herein by reference.
(h) Bull & Bear Group, Inc. Incentive Stock Option
Agreement for Employees-Robert D. Anderson filed as an
exhibit to Form 10-K for the year ended December 31,
1995 and incorporated herein by reference.
(i) Bull & Bear Group, Inc. Incentive Stock Option
Agreement for Employees-Mark C. Winmill filed as an
exhibit to Form 10-K for the year ended December 31,
1995 and incorporated herein by reference.
(j) Bull & Bear Group, Inc. Incentive Stock Option
Agreement for Employees-Thomas B. Winmill filed as an
exhibit to Form 10-K for the year ended December 31,
1995 and incorporated herein by reference.
(k) Bull & Bear Group, Inc. Incentive Stock Option
Agreement for Employees-Steven A. Landis filed as an
exhibit to Form 10-K for the year ended December 31,
1995 and incorporated herein by reference.
(l) Bull & Bear Group, Inc. Stock Option Agreement - Edward
G. Webb, Jr. filed as an exhibit to Form 10-K for the
year ended December 31, 1995 and incorporated herein by
reference.
(m) Bull & Bear Group, Inc. Stock Option Agreement -
Charles A. Carroll filed as an exhibit to Form 10-K for
the year ended December 31, 1995 and incorporated
herein by reference.
42
<PAGE>
(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 Mark C. Winmill filed as an
exhibit to Form 10-K for the year ended December 31,
1997 and incorporated herein by reference.
(t) 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.
(u) Purchase Agreement, dated as of December 17, 1998, by
and among the Bull & Bear Group, Inc., Bull & Bear
Securities, Inc. and RBC Holdings (USA) Inc., with all
exhibits thereto filed as an exhibit to Form 8-K on
December 18, 1998 and incorporated herein by reference.
(11) Statement Regarding Computation of Per Share Earnings
(12) Not applicable.
(13) Not applicable.
(16) Not applicable.
(18) Not applicable.
(21) Wholly-Owned Subsidiaries of the Company
(22) Not applicable.
(23) Not applicable.
(24) Not applicable.
(27) Not applicable.
(28) Not applicable.
(99) Not applicable.
(b) Reports on Form 8-K. A report on Form 8-K was filed on December 18,
1998 during the last quarter of the period covered by this report.
43
<PAGE>
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.)
April 13, 1999 By: /s/ Joseph Leung
Joseph Leung
Treasurer, Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
April 13, 1999 By: /s/ Bassett S. Winmill
----------------------------------------------
Bassett S. Winmill,
Chairman of the Board, Director
April 13, 1999 By: /s/ Robert D. Anderson
----------------------------------------------
Robert D. Anderson,
Vice Chairman, Director
April 13, 1999 By: /s/ Thomas B. Winmill
----------------------------------------------
Thomas B. Winmill, Esq.
Co-President, General Counsel, Director
April 13, 1999 By: /s/ Edward G. Webb, Jr.
----------------------------------------------
Edward G. Webb, Jr.
Director
April 13, 1999 By:
----------------------------------------------
Charles A. Carroll,
Director
April 13, 1999 By:
----------------------------------------------
Mark C. Jones,
Director
42
<PAGE>
INDEX TO EXHIBITS
(3) Exhibits
(3) (i) Certificate of Amendment of Certificate of Incorporation
of Bull & Bear Group, Inc.
(ii)By-Laws of Winmill & Co. Incorporated
(11) Statement Regarding Computation of Per Share Earnings
(21) Wholly-Owned Subsidiaries of the Company
(27) Financial Data Statement
43
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BULL & BEAR GROUP, INC.
Bull & Bear Group, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY THAT:
FIRST: The Board of Directors of the Corporation
has adopted the following resolutions proposing and declaring advisable the
following amendment to the Certificate of Incorporation of the Corporation:
"RESOLVED, that the amendment to Article
FIRST of the Corporation's Certificate of Incorporation,
to read in its entirety as follows (the "Amendment"), is
hereby proposed and declared to be advisable and in the
best interests of the Corporation:
"FIRST: The name of the Corporation is:
Winmill & Co. Incorporated."
SECOND: Thereafter, pursuant to resolution of its
Board of Directors, in lieu of a meeting and vote of stockholders, the
stockholders of the Corporation gave a unanimous written consent to the
Amendment in accordance with the provisions of the General Corporation Law of
the State of Delaware.
THIRD: The Amendment has been duly adopted in
accordance with theprovisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its
corporate seal to be hereunto affixed and this certificate to be signed by the
undersigned this 1st day of April, 1999.
BULL & BEAR GROUP, INC.
By:/s/ Thomas B. Winmill
---------------------
Name: Thomas B. Winmill
Title: President
As approved: April 1, 1999
BY-LAWS
OF
WINMILL & CO. INCORPORATED
ARTICLE I - Stockholders
1.1 Place of Meetings.
All meetings of stockholders shall be held at such place within or
without the State of Delaware as may be designated from time to time by the
Board of Directors or by the affirmative vote or written consent of the holders
of a majority of the shares of the Class B Common Stock.
1.2 Annual Meeting.
The annual meeting of Class B Common stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on the first Tuesday of March or on
such other date as may be fixed by the Board of Directors or by the affirmative
vote or written consent of the holders of a majority of the shares of Class B
Common Stock.
1.3 Special Meetings.
Special meetings of stockholders may be called at any time by the
Board of Directors or at the request of a majority of the Class B common stock
issued and outstanding. A notice or waiver of notice of a meeting of Class B
stockholders need not specify the purposes of the meeting.
1.4 Notice of Meetings.
Except as otherwise provided by law, written notice of each meeting
of stockholders shall be given not less than 10 nor more than 60 days before the
date of the meeting to each stockholder entitled to vote at such meeting unless
waived by such stockholder. The notices of all meetings shall state the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List.
The officer who has charge of the stock ledger of the corporation
shall prepare, at least 10 days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at
1
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As approved: April 1, 1999
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, at a place within the
city where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time of the meeting, and
may be inspected by any stockholder who is present.
1.6 Quorum.
Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
common stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business, or if there are two or more classes of
stock entitled to vote as separate classes, then with respect to each such
class, the holders of a majority of the shares of such class of common stock
issued and outstanding and entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum for the transaction of any
business to be voted on separately by such stockholders as a class.
1.7 Adjournments.
Any meeting of stockholders may be adjourned to any other time and
to any other place at which a meeting of stockholders may be held under these
By-Laws by the stockholders present or represented at the meeting and entitled
to vote, although less than a quorum, or, if no stockholder is present, by any
officer entitled to preside at or to act as Secretary of such meeting. It shall
not be necessary to notify any stockholder of any adjournment of less than 30
days if the time and place of the adjourned meeting are announced at the meeting
at which adjournment is taken, unless after the adjournment a new record date is
fixed for the adjourned meeting. At the adjourned meeting, the corporation may
transact any business which might have been transacted at the original meeting.
1.8 Voting and Proxies.
Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, each stockholder entitled to vote at a meeting
shall have one vote for each share of stock held of record by such stockholder.
Each stockholder of record entitled to vote at a meeting of stockholders, or to
express consent or dissent to corporate action in writing without a meeting, may
vote or express such consent or dissent in person or may authorize another
person or persons to vote or act for him by written proxy executed by the
stockholder or his authorized agent and delivered to the Secretary of the
corporation. No such proxy shall be voted or acted upon after one year from the
date of its execution, unless the proxy expressly provides for a longer period.
1.9 Action at Meeting.
2
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As approved: April 1, 1999
When a quorum is present at any meeting, the holders of a majority
of the stock present or represented and voting on a matter (or if there are two
or more classes of stock entitled to vote as separate classes, then in the case
of each such class, the holders of a majority of the stock of that class present
or represented and voting on a matter) shall decide any matter to be voted upon
by the stockholders at such meeting, except when a different vote is required by
express provision of law, the Certificate of Incorporation or these By-Laws. Any
election by stockholders shall be determined by a plurality of the votes cast by
the stockholders entitled to vote at the election.
1.10 Action without Meeting.
Any action required or permitted to be taken at any annual or
special meeting of stockholders of the corporation may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
on such action were present and voted. Prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
2.1 General Powers.
The business and affairs of the corporation shall be managed by or
under the direction of a Board of Directors, who may exercise all of the powers
of the corporation except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election; Tenure and Qualification.
The number of directors which shall constitute the whole Board shall
be six, or such other number not less than three as shall be fixed by resolution
adopted by the affirmative vote or written consent of the holders of a majority
of the Class B Common Stock. Each director shall be elected by the vote or
written consent of the holders of a majority of the Class B Common Stock and
shall hold office until the next annual meeting of Class B common stockholders
and until his successor is elected and qualified, or until his earlier death,
resignation or removal.
Directors need not be stockholders of the corporation.
2.3 Vacancies.
3
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As approved: April 1, 1999
Any vacancy in the Board of Directors, however occurring, may be
filled only by the vote or written consent of the holders of a majority of the
Class B Common Stock. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office, and a director elected to fill
a position resulting from an increase in the number of directors shall hold
office until the next annual meeting of Class B common stockholders and until
his successor is elected and qualified, or until his earlier death, resignation
or removal.
2.4 Resignation.
Any director may resign by delivering his written resignation to the
corporation at its principal office to the attention of the Chairman or to the
Vice Chairman in the absence of the Chairman. Such resignation shall be
effective upon receipt unless it is specified to be effective at some other time
or upon the happening of some other event.
2.5 Regular Meetings.
Regular meetings of the Board of Directors shall be held on the
first Tuesday of the months of March, June, September, and December without
notice at such time and place, either within or without the State of Delaware,
as shall be determined from time to time by the Board of Directors, provided
that any director who is absent when such a determination is made shall be given
notice of the determination. A regular meeting of the Board of Directors shall
be held without notice immediately after and at the same place as the annual
meeting of Class B common stockholders.
2.6 Special Meetings.
Special meetings of the Board of Directors may be held at any time
and place, within or without the State of Delaware, designated in a call by the
Chairman of the Board or the President.
2.7 Notice of Special Meetings.
Notice of any special meeting of directors shall be given to each
director by the person or persons calling the meeting. Notice shall be given to
each director in person, by telephone or by telegram to his business or home
address at least 48 hours in advance of the meeting, or by written notice mailed
to his business or home address at least 72 hours in advance of the meeting. A
notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
2.8 Meetings by Telephone Conference Calls.
Directors or any members of any committee designated by the
directors may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or
4
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As approved: April 1, 1999
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation by such means shall
constitute presence in person at such meeting.
2.9 Quorum.
The attendance of all of the directors then in office but one shall
be necessary to constitute a quorum at all meetings of the Board of Directors.
2.10 Action at Meeting.
Unless a different vote is specified by law, the Certificate of
Incorporation or these By-Laws, at any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action.
2.11 Action by Consent.
Any action required or permitted to be taken at any meeting of the
Board of directors or of any committee of the Board of Directors may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent to the action in writing, and the written consents are filed with the
minutes of proceedings of the Board or committee.
2.12 Removal.
Any one or more or all of the directors may be removed at any time,
with or without cause, by the vote or written consent of the holders of a
majority of the Class B Common Stock then entitled to vote.
2.13 Committees.
The Board of Directors may designate one or more committees, each
committee to consist of one or more of the directors of the corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors so adopted and subject to the provisions of the General Corporation
Law of the State of Delaware, shall make recommendations to and advise the Board
of Directors in the management of the business and affairs of the corporation.
Each such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make its own rules for the conduct of its
business.
2.14 Compensation of Directors.
5
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As approved: April 1, 1999
Directors may be paid such compensation for their services and such
reimbursement for expenses of attendance at meetings as the Board of Directors
may from time to time determine. No such payment shall preclude any director
from serving the corporation or any of its parent or subsidiary corporations in
any other capacity and receiving compensation for such service.
ARTICLE 3 - Officers
3.1 Enumeration.
The officers of the corporation shall consist of a Chairman, a Vice
Chairman, a President, a Secretary, a Treasurer, and such other officers with
such other titles as the Board of Directors shall determine, including General
Counsel, one or more Vice Presidents, Assistant Treasurers, and Assistant
Secretaries. The Board of Directors may appoint such other officers as it may
deem appropriate.
3.2 Election.
Officers shall be appointed by the Board of Directors by resolution
passed by the Board of Directors and any office may be left vacant.
3.3 Qualification.
The Chairman of the Board and Vice Chairman of the Board shall be
directors. No officer need be a stockholder. Any two or more offices may be held
by the same person.
3.4 Tenure.
Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal.
Any officer may resign by delivering his written resignation to the
corporation at its principal office or to the Chairman or the President. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event. The
Board of Directors may remove any officer with or without cause.
3.6 Chairman of the Board.
6
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As approved: April 1, 1999
The Chairman shall preside at all meetings of the stockholders and
of the Board of Directors.
3.7 Vice-Chairman of the Board.
The Vice-Chairman of the Board shall perform such duties and possess
such powers as the Chairman or the Board of Directors may from time to time
prescribe. In the absence of the Chairman of the Board, he shall preside at all
meetings of the stockholders and the Board of Directors.
3.8 President.
The President shall be the Chief Executive Officer responsible for
the overall operating policies of the corporation and the Chief Operating
Officer responsible for the day to day operations of the corporation in
accordance with the operating policies established by the Chairman and the Board
of Directors.
3.9 Vice Presidents.
Any Vice President shall perform such duties as the President or the
Board of Directors may from time to time prescribe. The Board of Directors may
assign to any Vice President the title of Executive Vice President, Senior Vice
President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries.
The Secretary shall perform such duties and have such powers as are
incident to the office of the secretary, including without limitation the duty
and power to give notices of all meetings of stockholders and special meetings
of the Board of Directors, to maintain a stock ledger and prepare lists of
stockholders and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.
In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the President or the Board of
Directors) shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers.
7
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As approved: April 1, 1999
The Treasurer shall perform such duties and have such powers as are
incident to the office of treasurer, including without limitation the duty and
power to keep and be responsible for all funds and securities of the
corporation, to deposit funds of the corporation in depositories selected in
accordance with these By-Laws, to disburse such funds as ordered by the Board of
Directors, to make proper accounts of such funds, and to render as required by
the President or the Board of Directors statements of all such transactions and
of the financial condition of the corporation.
In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the President or the Board of
Directors) shall perform the duties and exercise the powers of the Treasurer.
3.12 General Counsel and Associate General Counsels.
The General Counsel shall perform such duties and have such powers
as are incident to the office of the General Counsel.
In the event of the absence, inability or refusal to act of the
General Counsel, the Associate General Counsel (or if there shall be more than
one, the Associate General Counsels in the order determined by the President or
the Board of Directors) shall perform the duties and exercise the powers of the
General Counsel.
3.13 Other Duties.
Any officer shall perform such other duties as the President or a
Co-President or the Board of Directors may from time to time prescribe.
3.14 Bonded Officers.
The Board of Directors may require any officer to give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors upon such terms and conditions as the
Board of Directors may specify, including without limitation a bond for the
faithful performance of his duties and for the restoration to the corporation of
all property in his possession or under his control belonging to the
corporation.
3.15 Salaries.
Officers of the corporation shall be entitled to such salaries,
compensation or reimbursement as shall be fixed or allowed from time to time by
the Board of Directors.
ARTICLE 4 - Capital Stock
8
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As approved: April 1, 1999
4.1 Issuance of Stock.
The whole or any part of any unissued balance of the authorized
capital stock of the corporation or the whole or any part of any unissued
balance of the authorized capital stock of the corporation held in its treasury
may be issued, sold, transferred or otherwise disposed of in accordance with a
resolution of the Board of Directors.
4.2 Certificates of Stock.
Every holder of stock of the corporation shall be entitled to have a
certificate, in such form as may be prescribed by law and by the Board of
Directors, certifying the number and class of shares owned by him in the
corporation. Each such certificate shall be signed by, or in the name of the
corporation by, the Chairman or Vice-Chairman, if any, of the Board of
Directors, or the President or a Co-President, or a Vice President, and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
By-Laws, applicable securities laws or any agreement among any number of
shareholders and the corporation shall have conspicuously noted on the face or
back of the certificate either the full text of the restriction or a statement
of the existence of such restriction.
4.3 Transfer.
Subject to the restrictions, if any, stated or noted on the stock
certificates, shares of stock may be transferred on the books of the corporation
by the surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates.
The corporation may issue a new stock certificate in place of any
previously issued certificate alleged to have been lost, stolen or destroyed,
upon such terms and conditions as the Board of Directors may prescribe,
including the presentation of reasonable evidence of such loss,
9
<PAGE>
As approved: April 1, 1999
theft or destruction and the giving of such indemnity as the Board of Directors
may require for the protection of the corporation or any transfer agent or
registrar.
4.5 Record Date.
The Board of Directors may fix in advance a date as a record date
for the determination of the stockholders entitled to notice of or to vote at
any meeting of stockholders or to express consent (or dissent) to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a meeting shall be
at the close of business on the day before the day on which notice is given, or,
if notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE 5 - Indemnification
The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as that Section may be amended
and supplemented from time to time, indemnify any director, officer or trustee
which it shall have power to indemnify under that Section against any expenses,
liabilities or other matters referred to in or covered by that Section. The
indemnification provided for in this Article: (i) shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any by-law,
agreement or vote of stockholders or disinterested directors or otherwise, both
as to action in their official capacities and as to action in another capacity
while holding such office, (ii) shall continue as to a person who has ceased to
be a director, officer or trustee and (iii) shall inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Article shall be offset to the
extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
To assure indemnification under this Article of all such persons who
are determined by the corporation or otherwise to be or to have been
"fiduciaries" of any employee benefit plan of the
10
<PAGE>
As approved: April 1, 1999
corporation which may exist from time to time, such Section 145 shall, for the
purposes of this Article, be interpreted as follows: an "other enterprise" shall
be deemed to include such an employee benefit plan, including, without
limitation, any plan of the corporation which is governed by the Act of Congress
entitled "Employee Retirement Income Security Act of 1974", as amended from time
to time; the corporation shall be deemed to have requested a person to serve an
employee benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan pursuant to such
Act of Congress shall be deemed "fines"; and action taken or omitted by a person
with respect to an employee benefit plan in the performance of such person's
duties for a purpose reasonably believed by such person to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the corporation.
ARTICLE 6 - General Provisions
6.1 Fiscal Year.
The fiscal year of the corporation shall end on the 31st day of
December.
6.2 Corporate Seal.
The corporate seal shall be in such form as shall be approved by the
Board of Directors.
6.3 Execution of Instruments.
Any two of the Chairman, Vice Chairman of the Board, the President,
and the Treasurer shall have power to execute and deliver on behalf and in the
name of the corporation any instrument requiring the signatures of an officer of
the corporation relating to any transaction in the ordinary course of business
of the corporation, or where the execution and delivery of an instrument shall
be expressly delegated by the Board of Directors to some other officer(s) or
agent(s) of the corporation.
6.4 Waiver of Notice.
Whenever any notice whatsoever is required to be given by law, by
the Certificate of Incorporation or by these By-Laws, a waiver of such notice
either in writing signed by the person entitled to such notice or such person's
duly authorized attorney, or by telegraph, cable or any other available method,
whether before, at or after the time stated in such waiver, or the appearance of
such person or persons at such meeting in person or by proxy, shall be deemed
equivalent to such notice.
11
<PAGE>
As approved: April 1, 1999
6.5 Voting of Securities.
The Chairman may waive notice of, and act as, or appoint any person
or persons to act as, proxy or attorney-in-fact for this corporation (with or
without power of substitution) at any meeting of stockholders or shareholders of
any subsidiary, affiliate or other corporation or organization, the securities
of which may be held by this corporation.
6.6 Evidence of Authority.
A certificate by the Secretary, or an Assistant Secretary, or a
temporary Secretary, as to any action taken by the stockholders, directors, a
committee or any officer or representative of the corporation shall as to all
persons who rely on the certificate in good faith be conclusive evidence of such
action.
6.7 Certificate of Incorporation.
All references in these By-Laws to the Certificate of Incorporation
shall be deemed to refer to the Certificate of Incorporation of the corporation,
as amended and in effect from time to time.
6.8 Transactions with Interested Parties.
No contract or transaction between the corporation and one or more
of the directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of the directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or a committee of the Board of Directors which authorizes the
contract or transaction or solely because his or their votes are counted for
such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
12
<PAGE>
As approved: April 1, 1999
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the
stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
6.9 Severability.
Any determination that any provision of these By-Laws is for any
reason inapplicable, illegal or ineffective shall not affect or invalidate any
other provision of these By-Laws.
6.10 Pronouns.
All pronouns used in these By-Laws shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
ARTICLE 7 - Amendments
These By-Laws may be altered, amended or repealed or new By-Laws may
be adopted only by the affirmative vote or written consent of the holders of a
majority of the shares of the Class B Common Stock.
13
<TABLE>
<CAPTION>
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
1998 1997 1996
-------------------------------- ------------------------- --------------------------
Basic Diluted Basic Diluted Basic Diluted
<S> <C> <C> <C> <C> <C> <C>
Weighted average common
shares outstanding 1,391,940 1,391,940 1,370,017 1,370,017 1,369,555 1,369,555
Weighted average common shares
issuable upon exercise of
stock options under the
treasury stock method -- 61,532 -- 98,235 -- --
Weighted average common
shares issuable upon
exercise of warrants under
the treasury stock method -- -- -- -- -- --
Weighted average common
shares and common share
equivalents utilized for
earnings per share
computation 1,391,940 1,453,472 1,370,017 1,468,252 1,369,555 1,369,555
</TABLE>
Exhibit 21 - Wholly-Owned Subsidiaries of the Company
Bull & Bear Advisers, Inc.,
a Delaware corporation
Bull & Bear Securities, Inc.,
a Delaware corporation
Hanover Direct Advertising Company, Inc.,
a Delaware corporation
Investor Service Center, Inc.,
a Delaware corporation
Lion Exploration, Inc.,
a Delaware corporation
Midas Management Corporation
a Delaware corporation
Performance Properties, Inc.,
a Delaware corporation
Rockwood Advisers, Inc.
a Delaware Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000052234
<NAME> Bull & Bear Group, Inc.
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 1,403,931
<SECURITIES> 353,385
<RECEIVABLES> 463,099
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,727,365
<PP&E> 1,117,739
<DEPRECIATION> 908,400
<TOTAL-ASSETS> 5,315,147
<CURRENT-LIABILITIES> 356,131
<BONDS> 0
0
0
<COMMON> 16,351
<OTHER-SE> 4,942,665
<TOTAL-LIABILITY-AND-EQUITY> 5,315,147
<SALES> 0
<TOTAL-REVENUES> 3,538,673
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,969,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 569,285
<INCOME-TAX> (82,544)
<INCOME-CONTINUING> 651,829
<DISCONTINUED> (140,414)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511,415
<EPS-PRIMARY> .37
<EPS-DILUTED> .35
</TABLE>
