The sole investment objective of Bull & Bear Special Equities Fund ("Fund")
is capital appreciation. The Fund invests primarily in equity securities, often
involving special situations and emerging growth companies. To increase the
potential opportunities for achieving its objec tive, the Fund may borrow money
from banks from time to time to purchase or carry securities. The activities of
the Fund, a non-diversified management investment company, entail investment
risks significantly greater than the usual practices of most mutual funds and
may result in higher portfolio turnover, increased expenses and a greater amount
of short term capital gains and losses. There is no assurance that the Fund will
achieve its investment objective.
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NEWSPAPER LISTING. Shares of the Fund are sold at the
net asset value per share which is shown daily in the
mutual fund section of newspapers under the "Bull &
Bear Group" heading.
-------------------------------------------------------------------------------
This prospectus contains information you should know about the Fund before
you invest. Please keep it for future reference. The Fund's Statement of
Additional Information, dated April 30, 1996, has been filed with the Securities
and Exchange Commission and is incorporated by reference in this prospectus. It
is available at no charge by calling 1-800-847-4200. Fund shares are not bank
deposits or obligations of, or guaranteed or endorsed by any bank or any
affiliate of any bank, and are not Federally insured by, obligations of or
otherwise supported by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<PAGE>
EXPENSE TABLES. The tables and example below are designed to help you understand
the various costs and expenses that you will bear directly or indirectly as an
investor in the Fund. A $5 monthly account fee is charged if your average
monthly balance is less than $500, unless you are in the Bull & Bear Automatic
Investment Program (see "How to Purchase Shares").
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases..................NONE
Sales Load Imposed on Reinvested Dividends.......NONE
Deferred Sales Load..............................NONE
Redemption Fee within 30 days of purchase.......1.00%
Redemption Fee after 30 days of purchase.........NONE
Exchange Fees....................................NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees.................................0.84%
12b-1 Fees......................................1.00%
Other Expenses..................................1.04%
Total Fund Operating Expenses...................2.88%
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and a redemption at the end of each time period...................
1 year 3 years 5 years 10 years
------ ------- ------- --------
$29 $89 $152 $320
The example set forth above assumes reinvestment of all dividends and other
distributions and assumes a 5% annual rate of return as required by the
Securities and Exchange Commission ("SEC"). THE EXAMPLE IS AN ILLUSTRATION ONLY
AND SHOULD NOT BE CONSIDERED AN INDICATION OF PAST OR FUTURE RETURNS AND
EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The percentages given for Annual Fund Operating Expenses are based on the Fund's
operating expenses and average daily net assets during its fiscal year ended
December 31, 1995. Long term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc.'s ("NASD") rules regarding investment
companies. "Other Expenses" includes amounts paid to the Fund's Custodian (net
of brokerage commission credits pursuant to an arrangement not anticipated to
increase materially brokerage commissions paid by the Fund -- see "The
Investment Manager") and Transfer Agent and reimbursable to the Investment
Manager and the Distributor for certain administrative and shareholder services,
and does not include interest expense from the Fund's bank borrowing.
FINANCIAL HIGHLIGHTS are presented below for a share of capital stock
outstanding throughout each period since the Fund's inception. The following
information is supplemental to the Fund's financial statements and report
thereon of Tait, Weller & Baker, independent accountants, appearing in the
December 31, 1995 Annual Report to Shareholders and incorporated by reference in
the Statement of Additional Information.
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<TABLE>
- -------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 19861
---- ---- ---- ---- ----- ------- ----- ----- ------ -----
PER SHARE DATA*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period........ $19.11 $23.13 $24.88 $19.38 $13.79 $21.68 $18.17 $15.75 $16.83 $15.00
------ ------ ------- ----- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment loss........................ (.81) (.55) (.76) (.58) (.36) (.68) (1.14) (.86) (.15) (.13)
Net realized and unrealized gain (loss) on 8.51 (3.28) 4.65 6.08 5.95 (7.21) 8.70 4.43 (.93) 1.96
investments ---- ------ ---- ---- ---- ----- ---- ---- ----- ----
Total from investment operations.......... 7.70 (3.83) 3.89 5.50 5.59 (7.89) 7.56 3.57 (1.08) 1.83
Less distributions:
Distributions from net realized gains on
investments (1.39) (.19) (5.64) ------ ---- ---- (4.05)(1.15) ------ ------
Net increase (decrease) in net asset value. 6.31 (4.02) (1.75) 5.50 5.59 (7.89) 3.51 2.42 (1.08) 1.83
Net asset value at end of period.............. $25.42 $19.11 $23.13 $24.88 $19.38 $13.79 21.68 18.17 $15.75 $16.83
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN.................................. 40.5% (16.5)% 16.4% 28.4% 40.5% (36.4)%42.3% 22.7% (6.4)% 12.2%
===== ======= ===== ===== ====== ====== ===== ===== ====== =====
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)...$56,340 $45,614 $73,957 $68,31 $16,738 $8,475 $6,317 $2,982 $2,337 $2,277
======= ======= ======= ======= ===== ====== ======= ===== ====== ======
Ratio of expenses to average net assets(a).... 2.88% 2.92% 2.74% 3.07% 2.83% 3.10% 3.50% 2.94% 3.01% 2.97%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Ratio of net investment loss to average net asse2.70% 2.43% 2.73% 2.78% 2.11% 3.19% 3.23% 1.49% .82% 1.23%
===== ===== ===== ===== ===== ===== ===== ===== ==== =====
Portfolio turnover rate....................... 319% 309% 256% 261% 384% 475% 433% 514% 751% 558%
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
- ----------------------------------
</TABLE>
1 From commencement of operations, March 20, 1986.
*Per share net investment loss and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares outstanding.
(a) Ratio prior to reimbursement by the Investment Manager was 5.56% for 1989.
(b) Ratio prior to reimbursement by the Investment Manager was 5.29% for 1989.
Information Relating to Outstanding Debt During the Fiscal Periods Shown Below:
Years Amount of Debt Average Amount of Average Number of Average Amount of
Ended Outstanding at Debt Outstanding Shares Outstanding Debt Per Share
End of Period During the Period 1 During the Period 1 During the Period
- --------- --------- ------------------ ------------------- ------------------
1995 $0 $4,925,275 2,345,320 $2.10
1994 6,820,000 2,566,493 2,669,001 0.96
1993 2,469,000 4,230,400 2,680,212 1.58
1992 8,007,000 2,889,822 1,786,311 1.62
1991 168,000 715,875 997,025 0.72
1990 0 1,307,671 649,739 2.01
1989 1,600,000 733,150 193,256 3.79
1988 0 423,497 146,469 2.89
- ------------------
1 Based on monthly averages.
3
<PAGE>
TABLE OF CONTENTS
Expense Tables...................2 Distributions and Taxes...............13
Financial Highlights.............2 Determination of Net Asset Value......14
General..........................3 Investment Manager....................14
Risk Factors.....................3 Performance Information...............15
How to Purchase Shares...........7 Distribution of Shares................15
Shareholder Services.............9 Capital Stock.........................16
How to Redeem Shares............12 Custodian and Transfer Agent..........16
GENERAL
PURPOSE OF THE FUND. The Fund is designed for investors seeking solely capital
appreciation. The Fund is not intended for investors whose objective is income
or conservation of capital, and you should not consider a purchase of Fund
shares to be a complete investment program.
INVESTMENT TECHNIQUES. The Fund seeks capital appreciation by investing
aggressively, depending on the Investment Manager's assessment of economic and
market factors, in equity securities, warrants, convertible securities, and debt
instruments. The Fund may invest in the securities of a particular company that,
in the opinion of the Investment Manager, will appreciate within a reasonable
period of time, typically because of a development solely applicable to that
company, and regardless of general business conditions or movements of the
market as a whole ("special situations"). The Investment Manager may also use
strategies involving short sales, options, futures, forward currency contracts,
and borrowings for investment purposes ("leverage"). Generally, the Investment
Manager seeks to invest in the special situations and emerging growth companies
offering the greatest potential capital appreciation, although there is no
assurance that the Fund will achieve its objective.
PORTFOLIO MANAGER. Brett B. Sneed has been the Fund's Portfolio Manager for the
past six years. Mr. Sneed is Senior Vice President and a member of the
Investment Policy Committee of Bull & Bear Advisers, Inc. (the "Investment
Manager"). He was formerly Vice President of Morgan Stanley Asset Management,
Inc., and prior thereto a portfolio manager and member of the finance and
investment committees of American International Group, Inc., a major insurance
company. A graduate of Columbia College, Mr. Sneed is a Chartered Financial
Analyst and a member of the New York Society of Security Analysts.
THE FUND'S INVESTMENT PROGRAM. Under normal conditions, at least 65% of the
Fund's total assets will be invested in equity securities of U.S. and foreign
issuers and up to 35% may be invested for capital appreciation in corporate
bonds, debentures, or preferred stocks (both convertible and non-convertible) of
U.S. and foreign issuers, securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities"),
and municipal securities. These are fundamental policies that may not be changed
without shareholder approval. When the Investment Manager deems it advisable,
the Fund may, for temporary defensive purposes or in anticipation of more
favorable opportunities for the purchase of equity securities, hold cash or
invest all or a portion of its assets in short term fixed income securities or
repurchase agreements.
RISK FACTORS
Because of the following considerations, the Fund's investment program
should be considered speculative and involving substantial risk and should not
be considered a complete investment program. The investment program of the Fund
is designed for investors seeking capital appreciation, rather than current
income, and who are willing to assume the risks inherent in the Fund's
investment policies and practices. The activities in which the Fund engages
entail investment risks significantly greater than are inherent in the usual
practices of most mutual funds and may result in higher portfolio turnover,
increased expenses, and a greater amount of capital gains and losses.
SPECIAL SITUATIONS. The Fund may invest without limit in special situations.
Developments creating special situations might include, among others:
liquidations, reorganizations, recapitalizations, mergers, material litigation,
technological breakthroughs, and new management or management policies. Although
large, well-known companies may be involved, special situations more often
involve comparatively small or
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<PAGE>
unseasoned companies. Special situations often involve much greater risk than is
inherent in ordinary investments due to, among other things, a lack of or
presumed inapplicability of the company's operating history, a limited market in
the company's securities, and the unreliable nature of the company's anticipated
earnings growth. Companies in actual or anticipated reorganizations or
restructurings often provide limited financial information and markets for their
securities may be erratic and volatile. The Fund will not, however, purchase
securities of any company with a record of less than three years' continuous
operation (including that of predecessors) if such purchase would cause the
Fund's investments in all such companies, taken at cost, to exceed 5% of the
Fund's total assets.
SHORT TERM INVESTING. The Fund may seek capital appreciation by investing for
the short term on the basis of both technical and fundamental considerations as
evaluated by the Investment Manager. Long term investments, by contrast, are
usually based upon fundamental evaluations. Short term investing may result in
the Fund's portfolio turnover rate being substantially greater than that of
similar investment companies. In 1994 the Fund's portfolio turnover rate was
309% and in 1995 it was 319%. Higher turnover may increase Fund brokerage costs
and taxes payable by shareholders.
BORROWING. The Fund may borrow money from banks (including its custodian bank)
to purchase and carry securities and will pay interest thereon. If the
investment income on securities purchased with borrowed money exceeds the
interest paid on the borrowing, the Fund's income will be correspondingly
higher. If the investment income fails to cover the Fund's costs, including
interest on borrowings, or if there are losses, the net asset value of the
Fund's shares will decrease faster than would otherwise be the case. Such
borrowing is referred to as leverage, is speculative, and increases both
investment opportunity and investment risk. The Investment Company Act of 1940,
as amended (the "1940 Act"), requires the Fund to maintain asset coverage of at
least 300% for all such borrowings, and should such asset coverage at any time
fall below 300%, the Fund will be required to reduce its borrowing within three
days to the extent necessary to meet the requirements of the 1940 Act. To reduce
its borrowing the Fund might be required to sell securities at a disadvantageous
time. Interest on money borrowed is an expense the Fund would not otherwise
incur, and it may therefore have little or no investment income during periods
of substantial borrowings.
SHORT SALES. The Fund may from time to time use short sales, which means that
the Fund may sell a security that it does not own in the hope of replacing it by
a later purchase at a lower price. In order to make delivery to the buyer, the
Fund must borrow the security. When it does, the Fund incurs an obligation to
replace that security, whatever its price may be, at the time the Fund purchases
it for delivery to the lender. The Fund must also pay to the lender of the
security the dividends or interest payable during such period and may have to
pay a premium to borrow the security. The proceeds of the short sale will be
retained by the broker, to the extent necessary to meet the margin requirements,
until the short position is closed out. The obligation to restore the borrowed
security will at all times also be secured by collateral consisting of cash,
commercial paper, or U.S. Government securities. In addition to the amount
required to be maintained by the broker, a similarly collateralized deposit will
be made to a segregated account at the Fund's custodian bank in an amount such
that the value of these two deposits will, at all times, be at least equal to
the greater of the market value of the securities sold short at the time of such
sale or their current market value. Ordinarily, no interest will be received by
the Fund on the proceeds of the short sale held by the broker, although interest
on the collateral securities will belong to the Fund. The Fund will incur a
loss, which could be substantial, if the price of the security increases between
the date of the short sale and the date on which it purchases securities to
replace those borrowed. The Fund will realize a gain if the security declines in
price between those dates. Any such gain will be a short term gain.
The frequency of short sales by the Fund may vary substantially, and no
specified portion of the Fund's assets will be invested in short sales. However,
not more than 25% of the Fund's net assets will be used to collateralize short
sales. To adhere to the 25% limitation, the Fund may be required to cover short
sales at a disadvantageous time. As a matter of non-fundamental policy, (1) not
more than 2% of the value of the Fund's net assets will be used to collateralize
short sales of securities of any one issuer, and the Fund will not have in
effect, at any one time, short sales covering more than 2% of the outstanding
securities of any class of any issuer, (2) the Fund will not at the same time
purchase and sell short the same security, and (3) short sales will be made only
on securities fully listed on a national securities exchange.
The Fund may also make short sales "against the box." A short sale is
"against the box" to the extent that the Fund contemporane ously owns or has the
right to obtain without additional cost securities identical to those sold
short. Such sales will not be subject to the limitations referred to above and
may be used by the Fund to defer the realization of gain or loss for Federal
income tax purposes on securities then owned by the Fund.
WARRANTS. Warrants give their holder the right to purchase a given number of
shares of a particular company at specified prices within certain periods of
time. The purchaser of a warrant expects that the market price of the security
to which the warrant pertains will exceed the exercise price before the
warrant's expiration date. The purchaser risks losing the entire purchase price
of the warrant if the market price does
4
<PAGE>
not rise. Warrants are usually tradable in the open market without actual
exercise. Warrants are sometimes sold in unit form with other securities of an
issuer, and are frequently employed in financing young, unseasoned companies. A
warrant's purchase price varies with its exercise price, current market value of
the underlying security, life of the warrant and various other investment
factors.
The purchase price of warrants and premiums on put and call options
written by others, combinations thereof, or similar options will be limited to
no more than 20% of the Fund's net assets. The Fund also will limit its
investment in warrants, valued at the lower of cost or market, to not more than
5% of the Fund's net assets, including warrants which are not listed on the New
York or American Stock Exchange (limited to not more than 2% of the Fund's net
assets). These non-fundamental limitations may cause the Fund to dispose of
warrants or put or call options at disadvantageous times.
OPTIONS, FUTURES CONTRACTS, AND FORWARD CURRENCY CONTRACTS. The Fund may
purchase call options on securities that the Investment Manager intends to
include in the Fund's portfolio in order to fix the cost of a future purchase or
to attempt to enhance return by, for example, participating in an anticipated
price increase of a security. The Fund may purchase put options to hedge against
a decline in the market value of securities held in the Fund's portfolio or to
attempt to enhance return. The Fund may write (sell) covered put and call
options on securities in which it is authorized to invest. The Fund may purchase
and write covered straddles, purchase and write put and call options on stock
and bond indexes, and take positions in options on foreign currencies to hedge
against the risk of foreign exchange rate fluctuations on foreign securities the
Fund holds in its portfolio or that it intends to purchase. The Fund may
purchase and sell futures contracts on interest rates, stock and bond indexes,
and foreign currencies and may purchase put and call options and write covered
put and call options on such futures contracts.
The Fund may enter into forward currency contracts to set the rate at
which currency exchanges will be made for contemplated or completed
transactions. The Fund might also enter into forward currency contracts in
amounts approximating the value of one or more portfolio positions to fix the
U.S. dollar value of those positions. For example, when the Investment Manager
believes that the currency of a particular foreign country may suffer a
substantial decline against the U.S. dollar, the Fund may enter into a forward
contract to sell, for a fixed amount of dollars, the amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. The Fund has no specific limitation on the
percentage of assets it may commit to foreign currency exchange contracts,
except that it will not enter into a forward contract if the amount of assets
set aside to cover the contract would impede portfolio management or the Fund's
ability to meet redemption requests.
Strategies with options, financial futures, and forward currency
contracts may be limited by market conditions, regulatory limits and tax
considerations, and the Fund might not employ any of the strategies described
above. There can be no assurance that any strategy used will be successful. The
loss from investing in futures transactions is potentially unlimited. Options
and futures may fail as hedging techniques in cases where price movements of the
securities underlying the options and futures do not follow the price movements
of the portfolio securities subject to the hedge. Gains and losses on
investments in options and futures depend on the Investment Manager's ability to
predict correctly the direction of stock prices, interest rates, and other
economic factors. In addition, the Fund will likely be unable to control losses
by closing its position where a liquid secondary market does not exist and there
is no assurance that a liquid secondary market for hedging instruments will
always exist. It also may be necessary to defer closing out hedged positions to
avoid adverse tax consequences. The percentage of the Fund's assets segregated
to cover its obligations under options, futures, or forward currency contracts
could impede effective portfolio management or the ability to meet redemption or
other current obligations.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest in securities that are
not widely traded, and the Fund's position in such securities may be substantial
in relation to their market. In some cases it may be difficult for the Fund to
dispose of such securities at prevailing market prices in order to meet
redemptions. As non-fundamental investment restrictions, the Fund may invest (i)
up to 15% of its net assets in illiquid securities, including repurchase
agreements with a maturity of more than seven days and (ii) up to 10% of its
total assets in restricted securi ties.
FOREIGN SECURITIES, MARKETS, AND CURRENCIES. You should understand and consider
carefully the substantial risks involved in foreign investing. Investing in
foreign securities, which are generally denominated in foreign currencies, and
utilization of forward contracts on foreign currencies involve certain
considerations comprising both risk and opportunity not typically associated
with investing in U.S. securities. These considerations include: fluctuations in
currency exchange rates; restrictions on foreign investment and repatriation of
capital; costs of convert ing foreign currency into U.S. dollars; greater price
volatility and trading illiquidity; less public information on issuers of
securities; non-negotiable brokerage commissions; difficulty in enforcing legal
rights outside of the United States; lack of uniform accounting, auditing and
5
<PAGE>
financial reporting standards; the possible imposition of foreign taxes,
exchange controls (which may include suspension of the ability to transfer
currency from a given country), and currency restrictions; and the possible
greater political, economic and social instability of developing as well as
developed countries, including nationalization, expropriation of assets, and
war. Furthermore, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency, and
balance of payments position. These risks are often heightened for investments
in developing countries and emerging markets or when the Fund's investments are
concentrated in a small number of countries. In addition, because transactional
and custodial expenses for foreign securities are generally higher than for
domestic securities, the Fund's expense ratio can be expected to be higher than
that of investment companies investing exclusively in domestic securities.
The Fund may purchase securities on U.S. and foreign stock exchanges or
in the over-the-counter market. Foreign stock markets are generally not as
developed or efficient as those in the United States. In most foreign markets
volume and liquidity are less than in the United States and, at times,
volatility of price can be greater than in the United States. Fixed commissions
on some foreign stock exchanges are higher than the negotiated commissions on
U.S. exchanges. There is generally less government supervision and regulation of
foreign stock exchanges, brokers and companies than in the United States. If the
Fund invests in countries in which settlement of transactions is subject to
delay, its ability to purchase and sell portfolio securities at the time it
desires may be hampered. Delays in settlement practices in foreign countries may
also affect the Fund's liquidity, making it more difficult to meet redemption
requests, or require the Fund to maintain a greater portion of its assets in
money market investments in order to meet such requests. Some of the securities
in which the Fund invests may not be widely traded, and the Fund's position in
such securities may be substantial in relation to the market for such
securities. Accordingly, it may be difficult for the Fund to dispose of such
securities at prevailing market prices in order to meet redemption requests.
Since investment in foreign securities usually involves foreign
currencies and since the Fund may temporarily hold cash in bank deposits in
foreign currencies in order to facilitate portfolio transactions, the value of
the assets of the Fund as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations. For example, if the value of the U.S. dollar decreases relative to
a foreign currency in which a Fund investment is denominated or which is
temporarily held by the Fund to facilitate portfolio transactions, the value of
such Fund assets and the Fund's net asset value per share will increase, all
else being equal. Conversely, an increase in the value of the U.S. dollar
relative to such a foreign currency will result in a decline in the value of
such Fund assets and its net asset value per share. The Fund may incur
additional costs in connection with conversions of currencies and securities
into U.S. dollars. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis, or through entering into
forward currency contracts. The Fund generally will not enter into a forward
contract with a term of greater than one year.
OTHER INVESTMENTS. The Fund may also invest in repurchase agreements, U.S.
Government Securities, municipal securities, preferred stocks, and debt
securities (including lower rated debt securities). In the last year however,
the Fund did not invest more than 5% of its net assets in such securities and
does not currently intend to do so.
OTHER INFORMATION. The Fund is "non-diversified," as defined in the 1940 Act,
but intends to continue to qualify as a regulated investment company for Federal
income tax purposes. This means, in general, that more than 5% of the Fund's
total assets may be invested in the securities of one issuer (including a
foreign government), but only if at the close of each quarter of the Fund's
taxable year, the aggregate amount of such holdings does not exceed 50% of the
value of its total assets and no more than 25% of the value of its total assets
is invested in the securities of a single issuer. To the extent that the Fund's
portfolio at times may include the securities of a smaller number of issuers
than if it were diversified (as defined in the 1940 Act), the Fund will at such
times be subject to greater risk with respect to its portfolio securities than
an investment company that invests in a broader range of securities in that
changes in the financial condition or market assessment of a single issuer may
cause greater fluctuation in the Fund's total return. In addition to the Fund's
fundamental investment objective and the fundamental policies stated above, the
Fund has adopted certain fundamental investment restrictions which may not be
changed without shareholder approval. These fundamental restrictions are set
forth in the Statement of Additional Information. All other investment policies
described herein, unless otherwise stated, are not fundamental and may be
changed by the Fund's Board of Directors without shareholder action.
HOW TO PURCHASE SHARES
The Fund's shares are sold on a continuing basis at the net asset value
per share next determined after receipt and acceptance of the order by Investor
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $1,000 for regular and Uniform Gifts/Transfers to Minors Act
custody accounts, and $500 for Bull & Bear retirement plans, which include
individual retirement
6
<PAGE>
accounts ("IRAs"), simplified employee plan IRAs ("SEP-IRAs"), rollover IRAs,
profit sharing and money purchase plans, and 403(b) plans . The minimum
subsequent investment is $100. The initial investment minimums are waived if you
elect to invest $100 or more each month in the Fund through the Bull & Bear
Automatic Investment Program (see "Additional Investments" below).
INITIAL INVESTMENT. The Account Application that accompanies this prospectus
should be completed, signed and, with a check or other negotiable bank draft
payable to Special Equities Fund, mailed to Investor Service Center, Box 419789,
Kansas City, MO 64141-6789. Initial investments also may be made by having your
bank wire money, as set forth below, in order to avoid mail delays.
ADDITIONAL INVESTMENTS. Additional investments may be made conveniently at any
time by any one or more of the following methods:
o BULL & BEAR AUTOMATIC INVESTMENT PROGRAM. With the Bull & Bear
Automatic Investment Program, you can establish a convenient and
affordable long term investment program through one or more of the
Plans explained below. Each Plan is designed to facilitate an automatic
monthly investment of $100 or more into your Fund account.
The BULL & BEAR BANK TRANSFER PLAN lets you purchase Fund shares on a
certain day each month by transferring electronically a specified
dollar amount from your regular checking account, NOW account, or bank
money market deposit account.
In the BULL & BEAR SALARY INVESTING PLAN, part or all of your salary
may be invested electronically in shares of the Fund on each pay date,
depending upon your employer's direct deposit program.
The BULL & BEAR GOVERNMENT DIRECT DEPOSIT PLAN allows you to deposit
automatically part or all of certain U.S. Government payments into your
Fund account. Eligible U.S. Government payments include Social
Security, pension benefits, military or retirement benefits, salary,
veteran's benefits and most other recurring payments.
For more information concerning these Plans, or to request the
necessary authorization form(s), please call Investor Service Center,
1-800-847-4200. You may modify or terminate the Bank Transfer Plan at any time
by written notice received at least 10 days prior to the scheduled investment
date. To modify or terminate the Salary Investing Plan or Government Direct
Deposit Plan, you should contact, respectively, your employer or the appropriate
U.S. government agency. The Fund reserves the right to redeem any account if
participation in the Program is terminated and the account's value is less than
$500. The Program and the Plans do not assure a profit or protect against loss
in a declining market, and you should consider your ability to make purchases
when prices are low.
o CHECK. Mail a check or other negotiable bank draft ($100 minimum), made
payable to Special Equities Fund, together with a Bull & Bear
FastDeposit form to Investor Service Center, Box 419789, Kansas City,
MO 64141-6789. If you do not use that form, please send a letter
indicating the Fund and account number to which the subsequent
investment is to be credited, and name(s) of the registered owner(s).
o ELECTRONIC FUNDS TRANSFER (EFT). With EFT, you may purchase additional
shares of the Fund quickly and simply, just by calling Investor Service
Center, 1-800-847-4200. We will contact the bank you designate on your
Account Application or Authorization Form to arrange for the EFT, which
is done through the Automated Clearing House system, to your Fund
account. For requests received by 4 p.m., eastern time, the investment
will be credited to your Fund account ordinarily within two business
days. There is a $100 minimum for each EFT investment. Your designated
bank must be an Automated Clearing House member and any subsequent
changes in bank account information must be submitted in writing with a
voided check or deposit slip.
o FEDERAL FUNDS WIRE. You may wire money, by following the procedures set
forth below, to receive that day's net asset value per share.
INVESTING BY WIRE. For an initial investment by wire, you must first telephone
Investor Service Center, 1-800-847-4200, to give the name(s) under which the
account is to be registered, tax identification number, the name of the bank
sending the wire, and to be assigned a Bull & Bear Special Equities Fund account
number. You may then purchase shares by requesting your bank to transmit
immediately available funds ("Federal funds") by wire to : United Missouri Bank
NA, ABA #10-10-00695; for Account 98-7052-724-3; Special Equities Fund. Your
account number and name(s) must be specified in the wire as they are to appear
on the account registration. You should then enter your account number on your
completed Account Application and promptly forward it to Investor Service
Center, Box 419789, Kansas City, MO 64141- 6789. This service is not available
on days when the Federal Reserve wire system is closed. Subsequent investments
by wire may be made at any time without having to call Investor Service Center
by simply following the same wiring procedures.
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SHAREHOLDER ACCOUNTS. When you invest in the Fund, your account will be credited
with all full and fractional shares (to three decimal places), together with any
dividends and other distributions that are paid in additional shares (see
"Distributions and Taxes"). For joint tenant accounts, any account owner has the
authority to act on the account without notice to the other account owners.
Investor Service Center in its sole discretion and for its protection may, but
is not obligated to, require the written consent of all account owners of a
joint tenant account prior to acting upon the instructions of any account owner.
Stock certificates will be issued only for full shares when requested in
writing. In order to facilitate redemptions and exchanges and provide
safekeeping, we recommend that you do not request certificates. You will receive
transaction confirmations upon purchasing or selling shares, and quarterly
statements.
WHEN ORDERS ARE EFFECTIVE. The purchase price for Fund shares is their net asset
value next determined after receipt and acceptance by Investor Service Center of
a purchase order in proper form. All purchases are accepted subject to
collection at full face value in Federal funds. Checks must be made payable to
Special Equities Fund and drawn in U.S. dollars on a U.S. bank. No third party
checks will be accepted and the Fund reserves the right to reject any order for
any reason. Accounts are charged $30 by the Transfer Agent for submitting checks
for investment which are not honored by the investor's bank. The Fund may in its
discretion waive or lower the investment minimums.
SHAREHOLDER SERVICES
You may modify or terminate your participation in any of the Fund's
special plans or services at any time. Shares or cash should not be withdrawn
from any tax-advantaged retirement plan described below, however, without
consulting a tax adviser concerning possible adverse tax consequences.
Additional information regarding any of the following services is available from
the Fund's Distributor, Investor Service Center, 1-800-847-4200.
ELECTRONIC FUNDS TRANSFER (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account through Bull & Bear's EFT service. With EFT, you use the
Automated Clearing House system to electronically transfer money quickly and
safely between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated box on
the Account Application. Any subsequent changes in bank account information must
be submitted in writing (and the Fund may require the signature to be
guaranteed), with a voided check or deposit slip.
DIVIDEND SWEEP PRIVILEGE. You may elect to have automatically invested either
all dividends or all dividends and other distributions paid by the Fund in
shares of any other Bull & Bear Fund. Shares of the other Bull & Bear Fund will
be purchased at the current net asset value calculated on the payment date. For
more information concerning this privilege and the other Bull & Bear Funds, or
to request a Dividend Sweep Authorization Form, please call Investor Service
Center, 1-800-847-4200. You may cancel this privilege by mailing written
notification to Investor Service Center, Box 419789, Kansas City, MO 64141-6789.
To select a new Fund after cancellation, you must submit a new Authorization
Form. Enrollment in or cancellation of this privilege is generally effective
three business days following receipt. This privilege is available only for
existing accounts and may not be used to open new accounts.
SYSTEMATIC WITHDRAWAL PLAN. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed dollar, share, or percentage amounts, subject to a
minimum amount of $100. Under the Systematic Withdrawal Plan, all dividends and
other distributions, if any, are reinvested in the Fund.
ASSIGNMENT. Fund shares may be transferred to another owner. Instructions are
available from Investor Service Center, 1-800-847-4200.
EXCHANGE PRIVILEGE. You may exchange at least $500 worth of shares of the Fund
for shares of any other Bull & Bear Fund (provided the registration is exactly
the same, the shares may be sold in your state of residence, and the exchange
may otherwise legally be made).
To exchange shares, please call Investor Service Center toll-free at
1-800-847-4200 between 9 a.m. and 5 p.m. eastern time on any business day of the
Fund and provide the following information: account registration including
address and number; taxpayer identification number; percentage, number, or
dollar value of shares to be redeemed; name and, if different, the account
number of the Bull & Bear Fund to be purchased; and your identity and telephone
number. The other Bull & Bear Funds are:
o BULL & BEAR DOLLAR RESERVES is a high quality money market fund
investing in U.S. Government securities. Income is generally free from
most state and local income taxes. Free unlimited check writing ($250
minimum per check). Pays monthly dividends.
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o BULL & BEAR U.S. GOVERNMENT SECURITIES FUND invests for a high level of
current income, liquidity, and safety of principal. Free unlimited
check writing ($250 minimum per check). Pays monthly dividends.
o BULL & BEAR MUNICIPAL INCOME FUND invests for the highest possible
income exempt from Federal income tax consistent with preservation of
principal. Free unlimited check writing ($250 minimum per check). Pays
monthly dividends.
o BULL & BEAR GLOBAL INCOME FUND seeks a high level of income from a
global portfolio of primarily investment grade fixed income securities.
Free unlimited check writing ($250 minimum per check). Pays monthly
dividends.
o BULL & BEAR U.S. AND OVERSEAS FUND invests worldwide for the highest possible
total return.
o BULL & BEAR GOLD INVESTORS seeks long term capital appreciation in
investments with the potential to provide a hedge against inflation and
preserve the purchasing power of the dollar.
Exchange requests received between 9 a.m. and 4 p.m. eastern time on
any business day of the Fund will be effected at the net asset values of the
Fund and the other Bull & Bear Fund as determined at the close of that business
day. Exchange requests received between 4 p.m. and 5 p.m. eastern time on any
business day of the Fund will be effected at the close of the next business day
of the Fund. If you are unable to reach Investor Service Center at the above
telephone number you may, in emergencies, call 1-212-363-1100 or communicate by
fax to 1-212-363-1103 or cable to the address BULLNBEAR NEWYORK. Exchanges may
be difficult or impossible to implement during periods of rapid changes in
economic or market conditions. Exchange privileges may be terminated or modified
by the Fund without notice. For tax purposes, an exchange is treated as a
redemption and purchase of shares. A free prospectus containing more complete
information including charges, expenses and performance, on any of the Funds
listed above is available from Investor Service Center, 1-800-847-4200. The
other Fund's prospectus should be read carefully before exchanging. You may give
exchange instructions to Investor Service Center by telephone without further
documentation. If you have requested share certificates, this procedure may be
utilized only if, prior to giving telephone instructions, you deliver the
certificates to the Transfer Agent for deposit into your account.
o BULL & BEAR SECURITIES (DISCOUNT BROKERAGE ACCOUNT) TRANSFERS. If you
have an account at Bull & Bear Securities, Inc., an affiliate of the
Investment Manager and a wholly-owned subsidiary of Bull & Bear Group,
Inc. offering discount brokerage services, you may access your
investment in any Bull & Bear Fund to pay for securities purchased in
your brokerage account and have proceeds of securities sold in your
brokerage account used to purchase shares of any Bull & Bear Fund. You
may request a Discount Brokerage Account Application from Bull & Bear
Securities, Inc. by calling toll-free at 1-800-262-5800.
TAX-ADVANTAGED RETIREMENT PLANS. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible (or
non-deductible) for Federal income tax purposes as noted below. Information on
any of the plans described below is available from Investor Service Center,
1-800-847-4200.
The minimum investment to establish a Bull & Bear IRA or other
retirement plan is $500. Minimum subsequent investments are $100. The initial
investment minimums are waived if you elect to invest $100 or more each month in
the Fund through the Bull & Bear Automatic Investment Program. There are no
set-up fees for any Bull & Bear Retirement Plans. Subject to change on 30 days'
notice, the plan custodian charges Bull & Bear IRAs a $10 annual fiduciary fee,
$10 for each distribution prior to age 59 1/2, and a $20 plan termination fee;
however, the annual fiduciary fee is waived if your IRA has assets of $10,000 or
more or if you invest regularly through the Bull & Bear Automatic Investment
Program.
|X| IRA AND SEP-IRA ACCOUNTS. Anyone with earned income who is less than age 70
1/2at the end of the tax year, even if also participating in another type of
retirement plan, may establish an IRA and contribute each year up to $2,000 or
100% of earned income, whichever is less, and an aggregate of up to $2,250 when
a non-working spouse is also covered in a separate spousal account. If each
spouse has at least $2,000 of earned income each year, they may contribute up to
$4,000 annually. Employers may also make contributions to an IRA on behalf of an
individual under a SEP-IRA in any amount up to 15% of up to $150,000 of
compensation. Generally, taxpayers may contribute to an IRA during the tax year
and through the next year until the income tax return for that year is due,
without regard to extensions. Thus, most individuals may contribute for the 1996
tax year from January 1, 1996 through April 15, 1997.
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BULL & BEAR NO-FEE IRA(R). The $10 annual fiduciary fee is waived if
your Bull & Bear IRA or Bull & Bear SEP-IRA has assets of $10,000 or
more or if you invest through the Bull & Bear Automatic Investment
Program.
DEDUCTIBILITY. IRA contributions are fully deductible for most
taxpayers. For a taxpayer who is an active participant in an
employer-maintained retirement plan (or whose spouse is), a portion of
IRA contributions is deductible if adjusted gross income (before the
IRA deductions) is $40,000-$50,000 (if married) and $25,000-$35,000 (if
single). Only IRA contributions by a taxpayer who is an active
participant in an employer-maintained retirement plan (or whose spouse
is) and has adjusted gross income of more than $50,000 (if married) and
$35,000 (if single) will not be deductible at all. An eligible
individual may establish a Bull & Bear IRA under the prototype plan
available through the Fund, even though such individual or spouse
actively participates in an employer- maintained retirement plan.
o IRA TRANSFER AND ROLLOVER ACCOUNTS. Special forms are available from
Investor Service Center, 1-800-847-4200, which make it easy to transfer
or roll over IRA assets to a Bull & Bear IRA. An IRA may be transferred
from one financial institution to another without adverse tax
consequences. Similarly, no taxes need be paid on a lump-sum
distribution which you may receive as a payment from a qualified
pension or profit sharing plan due to retirement, job termination or
termination of the plan, so long as the assets are put into an IRA
Rollover account within 60 days of the receipt of the payment.
Withholding for Federal income tax purposes is required at the rate of
20% for "eligible rollover distributions" made from any retirement plan
(other than an IRA) that are not directly transferred to an "eligible
retirement plan," such as a Bull & Bear Rollover Account.
o PROFIT SHARING AND MONEY PURCHASE PLANS. These Plans provide an
opportunity to accumulate earnings on a tax-deferred basis by
permitting corporations, self-employed individuals (including partners)
and their employees generally to contribute (and deduct) up to $30,000
annually or, if less, 25% (15% for profit sharing plans) of
compensation or self-employment earnings of up to $150,000.
Corporations and partnerships, as well as all self-employed persons,
are eligible to establish these plans. In addition, a person who is
both salaried and self-employed, such as a college professor who serves
as a consultant, may adopt these retirement plans based on
self-employment earnings.
|X| SECTION 403(B) ACCOUNTS. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the estab lishment of custodial accounts on
behalf of employees of public school systems and certain tax-exempt
organizations. A participant in such a plan does not pay taxes on any
contributions made by the participant's employer to the participant's account
pursuant to a salary reduction agreement, up to a maximum amount, or "exclusion
allowance." The exclusion allowance is generally computed by multiplying the
participant's years of service times 20% of the participant's compensation
included in gross income received from the employer (reduced by any amount
previously contributed by the employer to any 403(b) account for the benefit of
the participant and excluded from the participant's gross income). However, the
exclusion allowance may not exceed the lesser of 25% of the participant's
compensation (limited as above) or $30,000. Contributions and subsequent
earnings thereon are not taxable until withdrawn, when they are received as
ordinary income.
HOW TO REDEEM SHARES
Generally, you may redeem by any of the methods explained below.
Requests for redemption should include the following information: your account
registration information including address, account number and taxpayer
identification number; dollar value, number or percentage of shares to be
redeemed; how and to where the proceeds are to be sent; if applicable, the
bank's name, address, ABA routing number, bank account registration and account
number, and a contact person's name and telephone number; and your daytime
telephone number.
BY MAIL. You may request that the Fund redeem any amount of shares by submitting
a written request to Investor Service Center, Box 419789, Kansas City, MO
64141-6789, signed by the record owner(s). If the written request is sent to the
Fund, it will be forwarded to the above address. If stock certificates have been
issued for shares being redeemed, they must accompany the written request.
BY TELEPHONE. You may telephone Investor Service Center, 1-800-847-4200 to
expedite redemption of Fund shares if share certificates have not been issued.
You may redeem as little as $250 worth of shares by requesting Bull &
Bear's Electronic Funds Transfer (EFT) service. With EFT, you can redeem Fund
shares quickly and conveniently because Investor Service Center will contact the
bank designated on your Account
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Application or Authorization Form to arrange for the electronic transfer of your
redemption proceeds (through the Automated Clearing House system) to your bank
account. EFT proceeds are ordinarily available in your bank account within two
business days.
If you are redeeming $1,000 or more worth of shares, you may request
that the proceeds be mailed to your address of record or mailed or wired to your
authorized bank.
Telephone requests received on Fund business days by 4 p.m. eastern time will be
redeemed from your account that day, and if after, on the next Fund business
day. Any subsequent changes in bank account information must be submitted in
writing, signature guaranteed, with a voided check or deposit slip. If you are
unable to reach Investor Service Center at the above telephone number you may,
in emergencies, call 1-212-363-1100 or communicate by fax to 1-212-363-1103 or
cable to the address BULLNBEAR NEWYORK. Redemptions by telephone may be
difficult or impossible to implement during periods of rapid changes in economic
or market conditions.
CHECK WRITING ACCESS. You may exchange a minimum of $500 at any time by
toll-free telephone call into Bull & Bear Dollar Reserves, Bull & Bear's money
market fund, offering free personalized checks, a $250 check writing minimum
($100 minimum for Bull & Bear Securities Performance PlusSM discount brokerage
accounts), and no limit on the number of checks that may be written. A signature
card, which should be submitted for the check writing privilege, and a free Bull
& Bear Dollar Reserves prospectus containing more complete information including
yield, charges and expenses is available from Investor Service Center,
1-800-847-4200. Please read the prospectus carefully before exchanging.
REDEMPTION PRICE AND FEES. Fund shares may be redeemed at their net asset value
next determined after receipt of the redemption request in proper form. The Fund
is designed as a long term investment, and short term trading is discouraged.
Accordingly, if shares of the Fund held for 30 days or less are redeemed or
exchanged, the Fund will deduct a redemption fee equal to one percent of the net
asset value of shares redeemed or exchanged. The fee will be retained by the
Fund and used to offset the transaction costs that short term trading imposes on
the Fund and its shareholders. If an account contains shares with different
holding periods (i.e. some shares held 30 days or less, some shares held 31 days
or more), the shares with the longest holding period will be redeemed first to
determine if the Fund's redemption fee applies. Shares acquired through the
Dividend Sweep Privilege and the reinvestment of dividends and other
distributions or redeemed under the Systematic Withdrawal Plan are exempt from
the redemption fee. Registered broker/dealers, investment advisers, banks, and
insurance companies may open accounts and redeem shares by telephone or wire and
may impose a charge for handling purchases and redemptions when acting on behalf
of others.
REDEMPTION PAYMENT. Payment for shares redeemed will be made as soon as
possible, ordinarily within seven days after receipt of the redemption request
in proper form. The right of redemption may not be suspended, or date of payment
delayed more than seven days, except for any period (i) when the New York Stock
Exchange is closed or trading thereon is restricted as determined by the SEC;
(ii) under emergency circumstances as determined by the SEC that make it not
reasonably practicable for the Fund to dispose of securities owned by it or
fairly to determine the value of its assets; or (iii) as the SEC may otherwise
permit. The mailing of proceeds on redemption requests involving any shares
purchased by personal, corporate, or government check or EFT transfer is
generally subject to a fifteen day delay to allow the check or transfer to
clear. The fifteen day clearing period does not affect the trade date on which a
purchase or redemption order is priced, or any dividends and other distributions
to which you may be entitled through the date of redemption. The clearing period
does not apply to purchases made by wire. Due to the relatively higher cost of
maintaining small accounts, the Fund reserves the right, upon 45 days' notice,
to redeem any account, other than IRA and other Bull & Bear prototype retirement
plan accounts, worth less than $500 except if solely from market action, unless
an investment is made to restore the minimum value.
TELEPHONE PRIVILEGES. You automatically have all telephone privileges to, among
other things, authorize purchases, redemptions and exchanges, with EFT or by
other means, unless declined on the Account Application or otherwise in writing.
Neither the Fund nor Investor Service Center shall be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it does not, it may be
liable for losses due to unauthorized or fraudulent transactions. These
procedures include requiring personal identification prior to acting upon
telephone instructions, providing written confirmation of such transactions, and
recording telephone conversations. The Fund may modify or terminate any
telephone privileges or shareholder services (except as noted) at any time
without notice.
SIGNATURE GUARANTEES. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national securities
exchange or of the NASD. A notary public may not guarantee signatures. The
Transfer
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Agent may require further documentation, and may restrict the mailing of
redemption proceeds to your address of record within 60 days of such address
being changed unless you provide a signature guarantee as described above.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Fund pays dividends annually to its shareholders from its net
investment income, if any. The Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared, and payable to
shareholders of record on a date in December of each year. Such distributions
may be paid in January of the following year, in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. The
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains. Dividends and other
distributions are made in additional Fund shares, unless you elect to receive
cash on the Account Application or so elect subsequently by calling Investor
Service Center, 1-800-847-4200. For Federal income tax purposes, dividends and
other distributions are treated in the same manner whether received in
additional Fund shares or in cash. Any election will remain in effect until you
notify Investor Service Center to the contrary.
TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its investment company taxable income (generally consisting
of net investment income, net short term capital gains, and net gains from
certain foreign currency transactions) and net capital gain (the excess of net
long term capital gain over net short term capital loss) that is distributed to
its shareholders. Dividends paid by the Fund from its investment company taxable
income (whether paid in cash or in additional Fund shares) generally are taxable
to its shareholders, other than shareholders that are not subject to tax on
their income, as ordinary income to the extent of the Fund's earnings and
profits; a portion of those dividends may be eligible for the corporate
dividends-received deduction. Distributions by the Fund of its net capital gain
(whether paid in cash or in additional Fund shares) when designated as such by
the Fund, are taxable to those shareholders as long term capital gains,
regardless of how long they have held their Fund shares. The Fund notifies its
shareholders following the end of each calendar year of the amounts of dividends
and capital gain distributions paid (or deemed paid) that year and of any
portion of those dividends that qualifies for the corporate dividends-received
deduction. Any dividend or other distribution paid by the Fund will reduce the
net asset value of Fund shares by the amount of the distribution. Furthermore,
such distribution, although similar in effect to a return of capital, will be
subject to taxes.
The Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to such shareholders who are
otherwise subject to backup withholding.
The foregoing is only a summary of some of the important Federal income
tax considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Since other tax
considerations may apply, you should consult your tax adviser.
DETERMINATION OF NET ASSET VALUE
The value of a share of the Fund is based on the value of its net
assets. The Fund's net assets are the total of the Fund's invest ments and all
other assets minus any liabilities. The value of one share is determined by
dividing the net assets by the total number of shares outstanding. This is
referred to as "net asset value per share," and is determined as of the close of
regular trading on the New York Stock Exchange (currently, 4 p.m. eastern time,
unless weather, equipment failure or other factors contribute to an earlier
closing) each business day of the Fund. A business day of the Fund is any day on
which the New York Stock Exchange is open for trading. The following are not
business days of the Fund: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other assets of the Fund are valued primarily
on the basis of market quotations, if readily available. Foreign securities are
valued on the basis of quotations from a primary market in which they are traded
and are translated from the local currency into U.S. dollars using current
exchange rates. Securities and other assets for which quotations are not readily
available will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors.
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INVESTMENT MANAGER
Bull & Bear Advisers, Inc. (the "Investment Manager") acts as general
manager of the Fund, being responsible for the various functions assumed by it,
including regularly furnishing advice with respect to portfolio transactions.
The Investment Manager manages the investment and reinvestment of the Fund's
assets, subject to the control and final direction of the Board of Directors.
The Investment Manager is authorized to place portfolio transactions with Bull &
Bear Securities, Inc., an affiliate of the Investment Manager, and may allocate
brokerage transactions by taking into account the sales of shares of the Fund
and other affiliated investment companies. The Investment Manager may also
allocate transactions to broker/dealers that remit a portion of their
commissions as a credit against the Fund's expenses.
For its services, the Investment Manager receives a fee, payable
monthly, based on the average daily net assets of the Fund, at the annual rate
of 1% on the first $10 million, 7/8 of 1% over $10 million up to $30 million,
3/4 of 1% over $30 million up to $150 million, 5/8 of 1% over $150 million up to
$500 million, and 1/2 of 1% over $500 million. This fee is higher than that paid
by most investment companies. From time to time, the Investment Manager may
waive all or part of this fee or reimburse the Fund monthly to improve the
Fund's total return. The Investment Manager provides certain administrative
services to the Fund at cost. During the fiscal year ended December 31, 1995,
investment management fees paid by the Fund represented approximately 0.84% of
average daily net assets. The Investment Manager is a wholly owned subsidiary of
Bull & Bear Group, Inc. ("Group"). Group, a publicly owned company whose
securities are listed on Nasdaq, is a New York based manager of mutual funds and
discount brokerage services. Bassett S. Winmill may be deemed a controlling
person of Group and, therefore, may be deemed a controlling person of the
Investment Manager.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its "average annual total
return" or "total return" (which may be referred to as cumulative total return
or cumulative growth) over specified periods. Average annual total return is
calculated pursuant to a standardized formula which assumes a hypothetical
$10,000 investment in the Fund was redeemed at the end of a stated period of
time, after giving effect to the reinvestment of dividends and distributions
during the period. The return is expressed as a percentage rate which, if
applied on a compounded annual basis, would result in the redeemable value of
the investment at the end of the period. The accompanying total return
performance graph compares results of a $10,000 investment in the Fund and in
the Russell 2000 Small Company Stock Index ("Russell 2000"). The Russell 2000 is
a small company index that is unmanaged and fully invested in common stocks. The
Fund invests in common stocks and may also own fixed income securities, options
and use leverage. The Fund's inception was March 20, 1986. Performance Graphs
are from April 1, 1986 to December 31, 1995, and results in each case reflect
reinvestment of dividends and distributions.
Plot Points:
Fund: 10.0, 11.2, 10.5, 12.9, 18.3, 11.7, 16.4, 21.0, 24.5, 20.4, 28.7
Russell 2000: 10.0, 9.3, 8.4, 10.6, 12.3, 9.9, 14.4, 17.1, 20.3, 19.9, 25.6
Final Value Total Return Average Annual Return
Fund _____ $28,702 187.02% 11.38%
Russell 2000 ....... $25,591 155.91% 10.12%
Source: Lipper Analytical Services, Inc.
The change from the preceding fiscal year, when the Fund selected the
Standard & Poor's 500 Index ("S&P"), is to reflect the broad diversity of equity
securities in which the Fund may invest. For the 10 years ended December 31,
1995, the S&P's final value was $52,752, total return was 427.52%, and average
annual return was 16.32%.
Total return is computed on a per share basis, assumes the reinvestment of
dividends and distributions, and is calculated by combining the income and
principal changes for a specified period and dividing by the net asset value per
share at the beginning of the period. Advertisements may show total return as a
percentage rate or as the value of a hypothetical investment at the end of the
period. Although the Fund imposes a 1% redemption fee on the redemption of
shares held for 30 days or less, all of the periods for which performance is
quoted are longer than 30 days, and therefore the 1% fee is not reflected in the
performance calculations. In addition, there is no sales charge upon
reinvestment of dividends or other distributions. The Fund's performance may be
compared to the perfor mance of broad groups of comparable mutual funds, or the
performance of unmanaged indexes of comparable securities. The Fund's total
return is based upon historical performance information and is not intended to
indicate future performance.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement between the Fund and Investor
Service Center, Inc. (the "Distributor"), the Distributor acts as the Fund's
principal agent for the sale of Fund shares. The Fund has also adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to
the Plan, the Fund pays the Distributor monthly a distribution fee in an amount
of three-quarters of one percent per annum of the Fund's average daily net
assets and a service fee in an amount of one-quarter of one percent per annum of
the Fund's average daily net assets. The service fee portion is intended to
cover personal services provided to Fund shareholders and maintenance of
shareholder accounts. The distribution fee portion is intended to cover all
other activities and expenses primarily intended to result in the sale of the
Fund's shares. These fees may be retained by the Distributor or passed through
to brokers, banks and others who provide services to their customers who are
Fund shareholders or to the Distributor. The Fund will pay the fees to the
Distributor until either the Plan is terminated or not renewed. In that event,
the Distributor's expenses in excess of fees received or accrued through the
termination day will be the Distributor's sole responsibility and not
obligations of the Fund. During the period they are in effect, the Distribution
Agreement and Plan obligate the Fund to pay fees to the Distributor as
compensation for its service and distribution activities. If the Distributor's
expenses exceed the fees, the Fund will not be obligated to pay any additional
amount to the Distributor. If the Distributor's expenses are less than such
fees, it may realize a profit. Certain other advertising and sales materials may
be prepared to promote the sale of Fund shares and shares of one or more other
affiliated investment companies. In such cases, the expenses will be allocated
among the Funds involved based on the inquiries resulting from the materials or
other factors deemed appropriate by the Board of Directors. The costs of
personnel and facilities of the Distributor to respond to inquiries by
shareholders and prospective shareholders will also be allocated based on such
relative inquiries or other factors. There is no certainty that the allocation
of any of the foregoing expenses will precisely allocate to the Fund costs
commensurate with the benefits it receives, and it may be that the other Funds
and Bull & Bear Securities, Inc. will benefit therefrom.
CAPITAL STOCK
The Fund is a non-diversified open-end management investment company
organized as a Maryland corporation in 1986. The Fund is authorized to issue up
to 500,000,000 shares ($.01 par value). The Fund's stock is freely assignable by
way of pledge (as, for example, for collateral purposes), gift, settlement of an
estate and also by an investor to another investor. Each share has equal
dividend, voting, liquidation and redemption rights with every other share. The
shares have no preemptive, conversion or cumulative voting rights and they are
not subject to further call or assessment. The Board of Directors of the Fund
may establish additional series or classes of shares, although it has no current
intention of doing so.
The Fund's By-Laws provide that there will be no annual meeting of
shareholders in any year except as required by law. In practical effect, this
means that the Fund will not hold an annual meeting of shareholders in years in
which the only matters which would be submitted to shareholders for their
approval are the election of Directors and ratification of the Directors'
selection of accountants, although holders of 10% of the Fund's shares may call
a meeting at any time. There will normally be no meetings of shareholders for
the purpose of electing Directors unless fewer than a majority of the Directors
holding office have been elected by shareholders. Shareholder meetings will be
held in years in which shareholder approval of the Fund's investment management
agreement, plan of distribution, or changes in its fundamental investment
objective, policies or restrictions is required by the 1940 Act.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02109, acts
as custodian of the Fund's assets, performs certain accounting services for the
Fund, and may appoint one or more subcustodians provided such subcustodianship
is in compliance with the rules and regulations promulgated under the 1940 Act.
The Fund may maintain a portion of its assets in foreign countries pursuant to
such subcustodianships and related foreign depositories. Utilization of such
arrangements will increase the Fund's expenses (see also the special
considerations involving foreign securities discussed above).
The Fund's transfer and dividend disbursing agent is DST Systems, Inc.,
Box 419789, Kansas City, MO 64141-6789. The Distributor provides certain
shareholder administration services to the Fund and is reimbursed its cost by
the Fund. Such services include receiving and responding to shareholder
inquiries concerning their accounts and processing shareholder telephone
requests for transfers,
13
<PAGE>
purchases, redemptions, changes of address and similar matters. The costs of
facilities, personnel and other related expenses are allocated among the Fund
and other affiliated investment companies based on the relative number of
inquiries and other factors. The Fund may also enter into agreements with
brokers, banks and others who would perform, on behalf of its customers, certain
shareholder services not otherwise provided by the Transfer Agent or the
Distributor.
14
<PAGE>
[Left Side of Back Cover Page]
SPECIAL
EQUITIES
FUND
- -----------------------------------------------------
11 HANOVER SQUARE
NEW YORK, NY 10005
1-800-847-4200 1-212-363-1100
E-MAIL: BULBEAR @AOL.COM
- -----------------------------------------------------
CALL TOLL-FREE FOR FUND PERFORMANCE, EXCHANGES AMONG THE
BULL & BEAR FUNDS, AND TO OBTAIN INFORMATION CONCERNING
YOUR ACCOUNT.
1-800-847-4200 1-212-363-1100
- -----------------------------------------------------
Printed on recycled paper.
[Right Side of Back Cover Page]
SPECIAL
EQUITIES
FUND
- ---------------------------------------------------------
INVESTING AGGRESSIVELY
FOR MAXIMUM CAPITAL
APPRECIATION
ELECTRONIC FUNDS TRANSFERS
AUTOMATIC INVESTMENT PROGRAM
RETIREMENT PLANS: IRA, SEP-IRA,
QUALIFIED PROFIT SHARING/MONEY
PURCHASE, 403(B), KEOGH
- ---------------------------------------------------------
PROSPECTUS
APRIL 30, 1996
- ---------------------------------------------------------
MINIMUM INITIAL INVESTMENT:
REGULAR ACCOUNTS, $1,000;
IRAS, $500; AUTOMATIC
INVESTMENT PROGRAMS, $100
MINIMUM SUBSEQUENT INVESTMENTS: $100
-----------------------------------------
Bull & Bear
PERFORMANCE DRIVEN(R)
15
<PAGE>
