SPECIAL EQUITIES FUND
11 HANOVER SQUARE, NEW YORK, NY 10005
1-888-503-FUND FOR INVESTMENT INFORMATION
1-888-503-VOICE FOR SHAREHOLDER SERVICES
WWW.MUTUALFUNDS.NET
August 12, 1998
Fellow Shareholders:
We are very pleased to submit this Semi-Annual Report to shareholders and to
welcome the many new shareholders who have joined the Fund over the first six
months of the year. We are also pleased to announce that effective May 1, 1998,
Thomas B. Winmill, Chief Executive Officer of the Fund and President of the
Fund's Investment Manager, became the Fund's portfolio manager. Having served on
the Investment Policy Committee since 1990, he will bring a strong depth of
experience and discipline to help the Fund seek its sole investment objective of
capital appreciation.
For the six months ending June 30, 1998, the Fund's total return was 16.17%. We
believe this attractive return reflects the disciplined approach that the Fund
takes to investing. Generally, the Fund attempts to identify fast growing
companies with reasonable valuations, and to hold their securities for long term
capital appreciation. We avoid companies that lack solid rates of growth in
revenues, net income, earnings per share, and shareholders' equity. Further,
even if a company does meet our growth criteria, it must also have a reasonable
valuation in terms of price/earnings, price/sales, price/cash flow, and similar
ratios. When our analysis is correct, we see these companies increasing their
overall profitability as measured by net margins, return on equity, and return
on assets, while reducing their debt as a percentage of its total capitalization
and increasing and enhancing their recognition by the marketplace with
commensurate increases in the prices of their securities. The Fund mayl employ
leverage to buy and hold these investments when we believe their returns will
exceed the cost of the borrowing, and we may use futures and options strategies
to enhance returns. Additionally, the Fund may sell stocks short -- typically,
companies with either negative trends in revenues and earning or highly
unreasonable valuations, or both.
Review and Outlook
During the first half of 1998, volatility in the financial markets, as well as
in currency prices, reflected investor uncertainty over numerous and diverging
global trends and economic influences. During this period when U.S. and European
markets provided good returns, the Japanese market continued to slump with
little respite. Meanwhile, as the dramatic shakeout across emerging Asia and
Eastern Europe continues, the widespread collapse of these economies is sending
shock waves through markets around the world, including deflationary pressures
and weakened prospects for global growth. Further, even as the U.S. economy
becomes increasingly dependent on foreign investment to finance the U.S.
current-account deficit of about $200 billion this year, up from $155 billion in
1997, foreigners are buying less of U.S. Treasury securities and more of U.S.
stocks. According to the Wall Street Journal, in the first quarter of this year,
foreigners bought a net $116 billion of U.S. stocks, at an annual rate, compared
to minimal amounts in 1995, and a net $11.8 billion of Treasuries, as compared
to $92.7 billion in the fourth quarter of 1996.
Given the uncertainty in international economic trends, the Fund is currently
concentrating its investments in U.S. companies and while the Fund has some
investments among select large and medium capitalization companies, we are
increasingly finding that the most attractive opportunities for growth, and the
least subject to continuing negative fall-out from foreign economic problems,
are those growth companies within the smaller capitalization area. The median
market capitalization of the Fund's portfolio companies now is about $500
million. With respect to market sectors, the Fund has a relatively greater
weighting in industrial and durables companies which are believed to continue to
benefit from continuing growth in the domestic U.S. economy. Because we believe
that certain stocks have compellingly attractive prospects for capital
appreciation, the Fund is currently leveraged. At the same time, however, the
Fund has sold short other stocks that appear to be substantially overpriced due
to unreasonable investor euphoria, so that the Fund is now about 118% net
invested.
<PAGE>
Looking ahead, we believe that over the balance of the year and into 1999,
inflation generally will remain in check and most non-emerging market economies
will experience moderate levels of growth. With the combination of this
favorable economic background and our disciplined approach to selecting
investments, we expect the Fund will continue to provide improving results for
its shareholders. To take advantage of this, we recommend building your account
on a regular basis, which can be done safely, automatically, and conveniently
through the Bull & Bear Bank Transfer Plan, the Bull & Bear Salary Investing
Plan, and/or the Bull & Bear Government Direct Deposit Plan. For information on
any of these free services, simply give us a call and we will be very pleased to
help you get started.
If you have any questions or would like information on any of the Bull & Bear
Funds, the Bull & Bear No-Fee(R) Regular or Roth IRA or opening a discount
brokerage account at Bull & Bear Securities, we would be pleased to hear from
you. Just call toll-free 1-888-503-FUND (3863), and an Investor Service Center
Representative will be glad to assist you, as always, with no obligation on your
part.
Sincerely,
Robert D. Anderson Thomas B. Winmill
Vice Chairman President
<PAGE>
MUTUAL FUNDS
* Bull & Bear Dollar Reserves A high quality money market fund
investing in U.S. Government
securities. Income is generally free
from state income and intangible
personal property taxes. Free,
unlimited check writing with only a
$250 minimum per check.
* 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.
* Bull & Bear Special Equities Fund Invests aggressively for maximum capital
appreciation.
* Bull & Bear U.S. and Overseas Fund Invests worldwide for the highest
possible total return.
Call toll-free 1-888-503-FUND (1-888-503-3863)
for a prospectus containing more complete information, including charges and
expenses. Please read it carefully before you invest
CLOSED-END INVESTMENT COMPANIES LISTED ON THE AMERICAN STOCK EXCHANGE
* Bull & Bear Global Income Fund Investing for a high level of income from a
global portfolio of primarily investment
grade fixed income securities.
*Bull & Bear Municipal Income Fund Investing for the highest possible
income exempt from Federal income
tax that is consistent with
preservation of principal.
* Bull & Bear U.S. Government Securities Investing for a high level of
Fund current income, liquidity, and
safety of principal.
DISCOUNT BROKERAGE SERVICES
* Bull & Bear Securities, Inc.
Bull & Bear Securities is committed to
providing investors with major commission
savings, free investment ideas and services,
free cash management services with no
minimum for check writing, and American
Airlines(R)AAdvantage(R)miles for many of
your investing activities. And now you can
take advantage of Bull & Bear Securities'
web trading flat commission rate of $19.95
per trade at www.ebullbear.com on the first
1,000 shares, plus 2¢ per share on each
share over 1,000 shares, and earn 100
AAdvantage(R)miles every time you trade!
Call toll-free 1-800-BULL-BEAR (1-800-285-5232).
Total Return Performance. For periods ended 6/30/98, Bull & Bear Special
Equities Fund's total return for one year was +21.61%, average annual total
return for the past five years was +8.51%, and for the past ten years was
+10.97%. Past performance does not guarantee future results. Investment return
will fluctuate, so shares when redeemed may be worth more or less than their
cost. Dollar cost averaging does not assure a profit or protect against loss in
a declining market, and investors should consider their ability to make
purchases when prices are low.
<PAGE>
BULL & BEAR SPECIAL EQUITIES FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS - JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
COMMON STOCKS AND WARRANTS (96.9%)
AIR-CONDITIONING & WARM AIR HEATING EQUIPMENT & COMMERCIAL &
INDUSTRIAL REFRIGERATOR EQUIPMENT (1.3%)
<S> <C>
59,700 International Comfort Products Corp.* $ 723,863
AIR COURIER SERVICES (1.5%)
23,800 Airborne Freight Corp. 831,513
AIRCRAFT ENGINES & ENGINE PARTS (3.5%)
21,100 United Technologies Corp. 1,951,750
ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO (1.1%)
14,100 Expeditors International of Washington, Inc. 620,400
BALL AND ROLLER BEARINGS (2.1%)
28,000 Gardner Denver Inc.* 773,500
12,500 Timken Co. 385,156
1,158,656
CARPETS AND RUGS (2.3%)
64,000 Interface, Inc. 1,292,000
COMMERCIAL BANKS (1.1%)
9,800 Royal Bank of Canada 591,675
CONSTRUCTION MACHINERY & EQUIPMENT (2.4%)
39,200 Gencor Industries, Inc. 788,900
14,000 Manitowoc Company, Inc. 564,375
1,353,275
CONVERTED PAPER AND PAPERBOARD PRODUCTS (1.8%)
47,700 Mail-Well, Inc.* 1,034,494
DRAWING AND INSULATING NONFERROUS WIRE (1.3%)
20,000 AFC Cable Systems, Inc.* 710,000
<PAGE>
ELECTRIC LIGHTING & WIRING EQUIPMENT (4.5%)
54,100 Genlyte Group Inc.. 1,433,650
21,060 LSI Industries, Inc. 421,200
16,700 Technitrol, Inc. 666,956
2,521,806
ELECTRONIC COMPONENTS AND ACCESSORIES (4.0%)
75,500 CTS Corp. 2,227,250
GASKETS, PACKAGING & SEALING DEVICES & RUBBER & PLASTIC HOSES (2.3%)
66,200 Wynn's International, Inc. 1,274,350
INDUSTRIAL TRUCKS, TRACTORS, TRAILERS & STACKERS (1.0%)
4,400 NACCO Industries, Inc. Class A 568,700
JEWELRY, SILVERWARE & PLATED WARE (1.1%)
20,100 Oneida Ltd. $ 615,562
LIFE INSURANCE (1.1%)
11,000 Delphi Financial Group, Inc. Class A* 619,437
MEN'S & BOYS' FURNISHINGS, WORK CLOTHING & ALLIED GARMENTS (.9%)
26,400 Quiksilver Inc.* 526,350
MILLWOOD, VENEER, PLYWOOD & STRUCTURAL WOOD MEMBERS (.8%)
17,090 American Woodmark Corp. 467,839
MISCELLANEOUS FABRICATED METAL PRODUCTS (.8%)
17,700 Shaw Group Inc.* 460,200
MOTOR HOMES (1.0%)
12,800 National R.V. Holdings, Inc.* 577,600
MOTOR VEHICLES AND PASSENGER CAR BODIES (1.5%)
28,500 Navistar International Corp.* 822,937
MOTOR VEHICLE PARTS AND ACCESORIES (.9%)
9,100 Dana Corp. 486,850
OFFICE FURNITURE (1.1%)
<PAGE>
24,600 Miller (Herman), Inc. 598,088
OPERATIVE BUILDERS (3.3%)
33,500 NVR, Inc.* 1,375,594
16,200 Toll Brothers, Inc.*. 464,738
1,840,332
PREFABRICATED METAL BUILDINGS & COMPONENTS (.9%)
8,700 NCI Building Systems, Inc.* 502,425
PREFABRICATED WOOD BUILDINGS & COMPONENTS (1.1%)
25,700 American Homestar Corp.* 615,194
PRINTED CIRCUIT BOARDS (4.9%)
40,900 Benchmark Electronics, Inc.* 818,000
13,200 Jabil Circuit, Inc.* 436,425
24,800 Plexus Corp.* 492,900
23,500 Solectron Corp.* 988,469
2,735,794
PUBLIC BUILDING AND RELATED FURNITURE (3.5%)
80,500 Virco Manufacturing Corp. 1,926,969
REFRIGERATION EQUIPMENT (1.3%)
30,150 Chart Industries, Inc. 719,831
RETAIL-COMPUTER & PRERECORDED TAPE STORES (4.1%)
52,600 Trans World Entertainment Corp.* 2,268,375
RETAIL-DEPARTMENT STORES (3.3%)
52,000 Ames Department Stores, Inc.* 1,368,250
31,250 Bon-Ton Stores, Inc.* 501,953
1,870,203
RETAIL-FAMILY CLOTHING STORES (2.6%)
17,600 Goody's Family Clothing, Inc.* $ 965,800
35,000 Syms Corp.* 498,750
<PAGE>
1,464,550
RETAIL-MISCELLANEOUS SHOPPING GOODS STORES (.9%)
19,000 Fabric-Centers of America* 520,125
RETAIL-VARIETY STORES (1.1%)
24,000 Fred's Inc. 612,000
ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS (1.1%)
17,200 Mueller Industries, Inc.* 638,550
SECURITY BROKERS, DEALERS & FLOTATIONS COMPANIES (.9%)
8,400 The Bear Stearns Companies Inc. 477,750
SERVICES-COMPUTER RENTAL & LEASING (.9%)
18,100 Leasing Solutions, Inc.* 520,375
SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS (2.0%)
19,200 Universal Health Services, Inc. Class B* 1,120,800
SERVICES-HELP SUPPLY SERVICES (1.6%)
48,550 Western Staff Services, Inc.* 898,175
SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION (.6%)
18,000 Rio Hotel & Casino, Inc.* 339,750
SERVICES-SPECIALTY OUTPATIENT FACILITIES (3.1%)
21,300 Express Scripts, Inc.* 1,717,312
SINGLE-FAMILY HOUSING CONSTRUCTION (2.5%)
66,500 D.R. Horton, Inc. 1,388,188
SOAP, DETERGENT, CLEANING PREPARATIONS, PERFUME, COSMETICS (.7%)
13,100 Stepan Co. 390,544
STEEL PIPE AND TUBES (.9%)
43,200 Maverick Tube Corporation* 502,200
STEEL WORKS, BLAST FURNACE & ROLLING MILLS (.5%)
26,000 NS Group, Inc.* 263,250
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS (.9%)
<PAGE>
12,700 Teleflex Inc. 482,600
TRUCKING (.9%)
16,900 Landair Services, Inc.* 502,775
WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE (3.7%)
25,500 CHS Electronics, Inc.* 455,812
20,200 Ingram Micro Inc. Class A* 893,850
27,600 Pomeroy Computer Resources, Inc.* 719,325
2,068,987
SHARES MARKET VALUE
WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES (.9%)
10,500 Bergen Brunswig Corp. Class A $ 486,937
WHOLESALE-ELECTRONIC PARTS & EQUIPMENT (.6%)
24,800 Brightpoint, Inc.* 359,600
WHOLESALE-GROCERIES & RELATED PRODUCTS (.7%)
18,100 Richfood Holdings, Inc. 374,444
WHOLESALE-LUMBER, PLYWOOD, MILLWORK & WOOD PANELS(.9%)
10,800 Crane Co. 524,475
WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES (1.9%)
29,850 Patterson Dental Co.* 1,093,256
WHOLESALE-METALS SERVICE CENTERS & OFFICES (.9%)
13,000 Reliance Steel & Aluminum Co. 502,125
WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (.7%)
22,000 World Fuel Service Corp. 380,875
WOMEN'S, MISSES' AND JUNIORS OUTERWEAR (1.9%)
16,400 Kellwood Co. 586,300
24,600 Tarrant Apparel Group* 467,400
1,053,700
WOOD HOUSEHOLD FURNITURE (1.0%)
21,520 Stanley Furniture Co., Inc.* 546,070
Total Common Stocks (cost: $46,263,225) 53,743,131
Warrants (.8%)
48,864 News Corp. Ltd. ADS warrants 454,435
Total Warrants (cost: $268,523) 454,435
CLOSED-END FUNDS (3.1%)
28,000 Equus II, Inc. 729,750
23,800 First Financial Fund 450,712
44,800 John Hancock Bank & Thrift Opportunity Fund 534,800
Total Closed-End Funds (cost: $1,667,533) 1,715,262
TOTAL INVESTMENTS (COST: $48,199,28) (100%) $55,912,828
Closed-End Funds
1,000 Indonesia Fund, Inc. $3,437
3,600 Japan Equity Fund 27,225
TOTAL (PROCEEDS $28,901) $ 30,662
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
ASSETS:
Investments at market value
<S> <C>
(cost: $48,199,281) (note 1) at market value (note 5) $55,912,828
Collateral for securities loaned, 1,851,072
Receivables:
Securities sold short 28,901
Dividends 6,783
Other assets1,878
Total assets 57,801,462
LIABILITIES:
Payables:
Demand note payable to bank (note 5) 7,727,640
Securities sold short, at value 30,662
Collateral for securities loaned (note 5) 1,851,072
Accrued expenses 104,059
Accrued management and distribution fees 39,234
Total liabilities 9,752,667
NET ASSETS: (applicable to 1,769,181 outstanding shares: 500,000,000 shares
of $.01 par value authorized) $48,048,795
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE $27.16
..($47,594,360 / 1,769,181)
At June 30, 1998, net assets consisted of:
Paid-in capital $36,332,890
Accumulated net realized gain on investments 4,650,005
Accumulated deficit in net investment income (647,647)
Net unrealized appreciation on investments 7,713,547
$48,048,795
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)
INVESTMENT INCOME:
Dividends $ 154,535
Miscellaneous 13,895
Total investment income 168,430
EXPENSES:
Distribution (note 3) 236,625
Interest (note 5) 223,395
Investment management (note 3) 202,263
Transfer agent 35,163
Shareholder administration (note 3) 33,294
Custodian 28,274
Professional (note 3) 25,627
Registration (note 3) 24,498
Directors 5,678
Printing 2,958
Other 2,327
Total expenses 820,102
Fee reductions (note 4) (4,025)
Net expenses 816,077
Net investment loss (647,647)
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FUTURES:
Net realized gain from security transactions 3,038,980
Net realized gain from futures transactions 1,546,903
Unrealized appreciation of investments during the period 3,142,554
Net realized and unrealized gain on investments and futures 7,728,437
Net increase in net assets resulting from operations $ 7,080,790
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1998 June 30, 1998 December
(Unaudited) and the Year Ended 31,1997
December 31, 1997
OPERATIONS:
Net investment loss $ (647,647) $ (768,834)
Net realized gain (loss) from
futures transactions 1,546,903 (335,926)
Net realized gain from security transactions 3,038,980 2,325,898
Unrealized appreciation (depreciation)
of investments during the period
3,142,554 1,258,458
Net increase in net assets
resulting from operations 7,080,790 2,479,596
DISTRIBUTIONS TO SHAREHOLDERS:
Distribution from net realized gains
($0.75 per share) _ (1,388,183)
CAPITAL SHARE TRANSACTIONS:
Decrease in net assets resulting
from capital share (3,805,396) (6,157,931)
transactions (a)
Total increase (decrease) in net assets 3,275,394 (5,066,518)
NET ASSETS:
Beginning of period 44,773,401 49,839,919
End of period $48,048,795 $44,773,401
Notes to Financial Statements
(Unaudited)
(1) The Fund is a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The investment objective of the Fund is capital
appreciation. The Fund seeks capital appreciation by investing aggressively as
set forth in the prospectus, depending on the assessment of economic and market
factors, in equity securities, warrants, convertible securities and debt
instruments. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. With respect to security valuation, securities traded on a national
securities exchange and securities traded on the Nasdaq National Market System
("NMS") are valued at the last reported sales price on the day the valuations
are made. Such securities that are not traded on a particular day and securities
traded in the over-the-counter market that are not on NMS are valued at the mean
between the current bid and asked prices. Securities for which quotations are
not readily available and other assets are valued at fair value as determined in
good faith by or under the direction of the Board of Directors. Securities
denominated in foreign currencies are translated into U.S. dollars at prevailing
exchange rates. Debt obligations with remaining maturities of 60 days or less
are valued at cost adjusted for amortization of premiums and accretion of
discounts. Futures contracts are marked to market daily and the variation margin
is recorded as an unrealized gain or loss. When a contract is closed, a realized
gain or loss is recorded equal to the difference between the opening and closing
value of the contract. Investment transactions are accounted for on the trade
date (date the order to buy or sell is executed). Dividend income and
distributions to shareholders are recorded on the ex-dividend date and interest
income is recorded on the accrual basis. In preparing financial statements in
conformity with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE>
(2) The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all its taxable investment income and net capital gains, if any,
after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. Based on Federal income
tax cost of $48,199,281 gross unrealized appreciation and gross unrealized
depreciation were $9,889,160 and $2,175,613 respectively at June 30, 1998.
Distributions paid to shareholders during the year ended December 31, 1997
differ from net realized gains from security transactions as determined for
financial reporting purposes principally as a result of utilization of net
operating losses to offset short-term capital gains.
The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all its taxable investment income and net capital gains, if any,
after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. Based on Federal income
tax cost of $47,930,758, gross unrealized appreciation and gross unrealized
depreciation were $9,703,248 and $2,175,613 respectively at June 30, 1998.
Distributions paid to shareholders during the year ended December 31, 1997
differ from net realized gains from security transactions as determined for
financial reporting purposes principally as a result of utilization of net
operating losses to offset short-term capital gains.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment
Manager. Under the Investment Management Agreement, the Investment Manager
receives a management 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%
from $10 million to $30 million, 3/4 of 1% from $30 million to $150 million, 5/8
of 1% from $150 million to $500 million, and 1/2 of 1% over $500 million. The
Investment Manager has agreed to waive all or part of its fee or reimburse the
Fund monthly if and to the extent the aggregate operating expenses of the Fund
exceed the most restrictive limit imposed by any state in which shares of the
Fund are qualified for sale, although currently the Fund is not subject to any
such limits. Certain officers and directors of the Fund are officers and
directors of the Investment Manager and Investor Service Center, Inc., the
Fund's Distributor. For the six months ended June 30, 1998, the Fund paid
$38,431 to Bull & Bear Securities, Inc., an affiliate of the Investment Manager
as commissions for brokerage services. The Fund reimbursed the Investment
Manager $10,258 for providing certain administrative and accounting services at
cost for the six months ended June 30, 1998. The Fund has adopted a plan of
distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan"). Pursuant to the Plan, the Fund pays the Distributor 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 fee for service
activities is intended to cover personal services provided to shareholders in
the Fund and the maintenance of shareholder accounts. The fee for distribution
activities is to cover all other activities and expenses primarily intended to
result in the sale of the Fund's shares. Investor Service Center also received
$33,294 for shareholder administration services which it provided to the Fund at
cost for the six months ended June 30, 1998.
(4) Purchases and proceeds of sales of securities other than short
term notes aggregated $35,701,565 and $33,508,128, respectively. The Fund has
entered into an arrangement with its custodian whereby interest earned on
uninvested cash balances was used to offset a portion of the Fund's expenses.
During the year, the Fund's custodian fees were reduced by $4,025, under such
arrangements.
(5) The Fund has a committed bank line of credit. At June 30, 1998,
the balance outstanding was $7,727,640 and the interest rate was equal to the
Federal Reserve Funds Rate plus 1.00 percentage point. For the six months ended
June 30, 1998, the weighted average interest rate was 6.34% based on the
balances outstanding during the period and the weighted average amount
outstanding was $7,003,167. As of June 30, 1998, the Fund loaned common stocks
having a value of $757,711 and received cash collateral of $1,851,072 for the
loan.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
PER SHARE DATA* Six Months
Ended June
30, 1998
(Unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $23.36 $22.96 $25.42 $19.11 $19.11 $23.13
Income from investment operations:
Net investment loss (.35) (.38) (.73) (.81) (.55) (.76)
Net realized and unrealized gain (loss) on 4.13 1.55 0.99 8.51 (3.28) 4.65
investments:
Total from investment operations 3.78 1.17 0.26 7.7 (3.83) 3.89
Less distributions:
Distributions from net realized gains on _ (.75) (2.72) (1.39) (.19) (5.64)
investments
Net increase (decrease) in net asset value 3.78 0.42 (2.46) 6.31 (4.02) (1.75)
Net asset value at end of period $27.16 $23.38 $22.96 $25.42 $19.11 $23.13
TOTAL RETURN 16.17% 5.25% 1.0% 40.5% (16.5)% 16.4%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $ 48,049 $44,773 $49,840 $56,340 $45,614 $73,957
Ratio of expenses to average net assets (a) (b) 2.52%** 2.53% 2.45% 2.88% 2.92% 2.74%
Ratio of net investment loss to average net assets 2.74%** 1.48% 2.81% 2.70% 2.43% 2.73%
Portfolio turnover rate 62% 260% 311% 319% 309% 256%
Average commission per share $.0486 $.0505 $.0714
</TABLE>
*Per share net investment loss and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share.
*Annualized.
(a)Ratio including interest expense was 3.46%**, 2.81%, 2.92% and 3.67% for the
six months ended June, 30, 1998 and for the years ended December 31, 1997, 1996
and 1995, respectively.
(b) Ratio after custodian fee credits was 2.50%** and 2.51% for the six months
ended June 30, 1998 and the year ended December 31, 1997. Prior to 1995, such
credits were reflected in the ratio. There were no custodian fee credits for
1996 and 1995.
SPECIAL EQUITIES FUND
For Fund prospectuses and other
investment information, call toll-free
1-888-503-FUND
<PAGE>
1-888-503-3863
For shareholder services by
Investor Access, call toll-free
1-888-503-VOICE
1-888-503-8642
Or, access the Fund on the web at
www.mutualfunds.net
Invests Aggressively
for Maximum Capital Appreciation
Semi-Annual Report
June 30, 1998
SE-121-6/8
