SPECIAL EQUITIES FUND
INVESTS AGGRESSIVELY
FOR MAXIMUM CAPITAL APPRECIATION
ANNUAL REPORT
DECEMBER 31, 1997
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
February 12, 1998
Fellow Shareholders:
We are pleased to submit this Annual Report for the year ended December
31, 1997 and to welcome our shareholders who have opened a new account during
the year.
As noted in our June 30, 1997 Semi-Annual Report, investment decisions
for the Fund have since February 20, 1997 been made by the Investment Policy
Committee of Bull & Bear Advisers, Inc., the Fund's Investment Manager. As
reported, in the first quarter of 1997 the Fund had a total return of -13.63%
compared to a total return of -3.26% for the Capital Appreciation Funds
monitored by Lipper Analytical Services, Inc., a leading mutual fund rating
service. Over the balance of the year, the Fund showed a total return of
+21.84%, comparing considerably more favorably to the +24.42% for Lipper's
Capital Appreciation Funds for the same period. Although results for the 12
months of +5.25% were negatively impacted by the first quarter of the year, we
are very encouraged by the improvement over the balance of the year, which has
carried forward into this year. At this writing, the Fund's total return for the
year to date is +8.17%, which compares very favorably with +4.41% for the
Capital Appreciation Funds universe monitored by Lipper.
REVIEW AND OUTLOOK
During 1997, investors had to reconcile the lowest rates of unemployment
seen in a generation with significant declines in intermediate and long term
yields. The resolution to this apparent contradiction was found in a
continuation of the first half's "Goldilocks" economy - not too hot and not too
cold - with low levels of inflation, a decline in the Federal deficit from $107
billion in 1996 to $22 billion in 1997, the possibility of a budget surplus in
1998, and purchases of U.S. Government securities as both a safe haven from
global financial turmoil and in anticipation of an economic slowdown.
The U.S. Economy grew at about a 3.8% rate in 1997, up from 2.8% in
1996. Though inflation remained at low levels, the Federal Reserve raised short
term rates in March to moderate the potential effects of strong growth and low
unemployment on the inflation rate. Meanwhile, private sector restructurings and
downsizing continued, along with mergers and acquisitions, particularly in the
healthcare, technology, banking and energy industries. The stock market's upward
trend over the year was temporarily set back by the March interest rate
increase, but eventually resumed to record highs as investor confidence
returned.
Given these market conditions, the Fund's strategy was to remain
invested generally in highly liquid equity securities of companies with growing
earnings. The Fund sought new investments in these types of companies over
diverse industries where the stocks were showing price and earnings momentum,
but could still be acquired at attractive valuations. The Fund aggressively
employed various investment techniques including leverage and futures. Over the
balance of 1998 we expect "Goldilocks" will still be with
<PAGE>
us and that with this favorable economic background, the Fund should continue to
provide improving results for its shareholders.
We therefore see this as an attractive time to add to your investment.
In terms of seeking to achieve your long range financial goals, we especially
favor 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 the Bull & Bear Government Direct Deposit
Plan. An example of how these plans can build an account over time is in the
accompanying illustration of investing $10,000 in the Fund at its inception,
March 20, 1986, followed by regular investments of $100 a month through December
31, 1997. The ending value of $53,744 represented a gain of more than 120% over
the $24,100 invested. For information on any of these free services, simply give
us a call and we will help you get started.
If you have any questions or would like information on any of the Bull &
Bear Funds, the Regular or Roth Bull & Bear No-Fee IRA(R) or opening a discount
brokerage account at Bull & Bear Securities, as described on page 3, we would be
pleased to hear from you. Just call toll-free at 1-888-503-FUND (3863), and an
Investor Service 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
CHART:
Special Equities Fund
Results of an initial investment of $10,000 with subsequent investments of $100
a month from inception, 3/20/86, through 12/31/97 with all distributions
reinvested. Investments for the period total $24,100.
Plot Points:
3/20/86 10,000
12/31/86 11482
12/31/87 11738
12/31/88 15682
12/31/89 23732
12/31/90 15938
12/31/91 23807
12/31/92 31997
12/31/93 38512
12/31/94 33306
12/31/95 48215
12/31/96 49892
12/31/97 53744
<PAGE>
Mutual Funds Bull & Bear Dollar A high quality moneymarket fund investing
Reserves in U.S. Government securities. Income is
generally free from state income and
intangible personalproperty taxes. Free,
unlimited check writing with only a $250
minimum per check.
Bull & Bear Gold Seeks long term capital appreciation in
Investors investments with the potential to provide
a hedge against inflation and preserve
the purchasing power of the dollar.
Bull & Bear Special Invests aggressively for maximum capital
Equities Fund appreciation.
Bull & Bear U.S.and Invests worldwide for the highest
Overseas Fund possible total return.
Call our toll-free number for a prospectus containing more
complete information, including charges and expenses. Please
read it carefully before you invest.
Closed-end investment Bull & Bear Investing for a high level of
companies listed on the Global Income Fund income from a global portfolio
American Stock Exchange of primarily investment grade
fixed income securities.
Bull & Bear Investing for the highest
Municipal Income possible income exempt from
Fund Federal income tax that is
consistent with preservation of
principal.
Bull & Bear U.S. Investing for a high level of
Government current income, liquidity and
Securities Fund safety of principal.
Discount Brokerage Bull & Bear Bull & Bear Securities is
Services Securities, Inc. 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 $19.95 per
trade at www.ebullbear.com on the
first 1,000 shares, plus 2(cent)
per share on each share over 1,000
shares, and earn 200 AAdvantage(R)
miles every time you trade! Call
toll-free 1-800-BULL-BEAR
(1-800-285-5232).
Past performance does not guarantee future
results. Investment return will fluctuate, so
shares when redeemed may be worth more or less
than their cost. Dollar cost averaging does
not assure a profit or protect against loss in
a declining market, and investors should
consider their ability to make purchases when
prices are low.
<PAGE>
BULL & BEAR SPECIAL EQUITIES FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS - DECEMBER 31, 1997
SHARES MARKET VALUE
COMMON STOCKS AND WARRANTS (96.5%)
AIR CONDITIONING &WARM AIR HEATING EQUIPMENT&COMMERCIAL
& INDUSTRIAL REFRIGERATOR EQUIPMENT (1.1%)
59,700 International Comfort Products Corp.*.....................$ 499,988
AIR COURIER SERVICES (1.6%)
11,900 Airborne Freight Corp..................................... 739,288
AIRCRAFT ENGINES &ENGINE PARTS (3.2%)
21,100 United Technologies Corp.................................. 1,536,344
AIR TRANSPORTATION, SCHEDULED (2.8%)
88,800 Air Canada Class A*....................................... 843,600
7,900 US Airways Group Inc.*.................................... 493,750
.......................................................... 1,337,350
ARRANGEMENT OF TRANSPORTATION OF FREIGHT &CARGO (1.1%)
14,100 Expeditors International of Washington, Inc............... 542,850
BALL ANDROLLER BEARINGS (2.4%)
28,125 Gardner Denver Machinery, Inc.*........................... 711,914
12,500 Timken Co................................................. 429,688
.......................................................... 1,141,602
CARPETS AND RUGS (1.1%)
18,400 Interface, Inc............................................ 533,600
CHEMICAL PRODUCTS (1.9%)..................................
10,400 MacDermid, Inc............................................ 882,700
COMMERCIAL BANKS (2.3%)
17,700 Banco Bilbao Vizcaya, S.A. Sponsored ADR.................. 571,931
9,800 Royal Bank of Canada...................................... 519,400
.......................................................... 1,091,331
COMPUTER PERIPHERAL EQUIPMENT (4.2%)......................
13,350 Aurora Electronics, Inc.*................................. 21,694
25,500 CHSElectronics, Inc.*..................................... 436,688
39,800 GENICOMCorp.*............................................. 457,700
20,200 Ingram Micro Inc. Class A*................................ 588,325
27,600 Pomeroy Computer Resources, Inc.*489,900
.......................................................... 1,994,307
COMPUTER PROGRAMMING SERVICES (1.4%)
18,000 Computer Task Group, Inc.................................. 640,125
CONSTRUCTION MACHINERY &EQUIPMENT (1.0%)
14,000 Manitowoc Company Inc..................................... 455,000
CONVERTED PAPER AND PAPERBOARD PRODUCTS (2.0%)
23,850 Mail-Well, Inc.*.......................................... 965,925
DRAWING AND INSULATING NONFERROUS WIRE (1.3%)
20,000 AFC Cable Systems, Inc.*.................................. 595,000
DRILLING OIL AND GAS WELLS (1.2%).........................
27,000 Key Energy Group, Inc.*................................... 585,562
EATING PLACES (1.8%)
20,200 CKERestaurants, Inc....................................... 850,925
ELECTRONIC COMPONENTS AND ACCESSORIES (1.0%)
14,900 CTSCorp................................................... 475,869
FAMILY CLOTHING STORE (1.0%)
17,600 Goody's Family Clothing, Inc.*............................ 478,500
FIRE, MARINE &CASUALTY INSURANCE (1.0%)
15,900 OMNIInsurance Group, Inc.*................................$ 498,862
<PAGE>
FOOD AND TOBACCO PRODUCTS (3.3%)
34,500 Philip Morris Companies, Inc............................. 1,563,281
FOOTWEAR (1.2%)
9,700 The Timberland Company*.................................. 563,206
GENERAL MEDICAL AND SURGICAL HOSPITALS (1.2%)
21,600 Quorum Health Group, Inc.*............................... 564,300
GROCERY STORES (1.2%)
8,800 Safeway, Inc.*........................................... 556,600
INDUSTRIAL TRUCKS, TRACTORS, TRAILERS &STACKERS (3.9%)
4,400 NACCO Industries, Inc. Class A........................... 471,625
58,000 Terex Corp.*............................................. 1,363,000
......................................................... 1,834,625
JEWELRY, SILVERWARE &PLATED WARE (1.1%)
20,100 Oneida Ltd............................................... 536,419
LIFE INSURANCE (1.0%)
11,424 Delphi Financial Group, Inc. Class A*.................... 514,080
METAL FORGINGS AND STAMPINGS (1.1%)
10,900 Tower Automotive, Inc.*.................................. 458,481
MISCELLANEOUS FABRICATED TEXTILE PRODUCTS (.3%)
3,927 Pillowtex Corp........................................... 136,968
MISCELLANEOUS SHOPPING GOODS STORES (.9%)
19,000 Fabri-Centers of America*................................ 423,937
MOTOR VEHICLES AND PASSENGER CAR BODIES (4.7%)
25,000 General Motors Corporation............................... 1,515,625
28,500 Navistar International Corp.*............................ 707,156
......................................................... 2,222,781
MOTOR VEHICLE PARTS AND ACCESORIES (.9%)
22,500 Excel Industries, Inc.................................... 406,406
OFFICE FURNITURE (1.4%)..................................
12,300 Miller (Herman), Inc..................................... 671,119
OIL &GAS FIELD EXPLORATION SERVICES (1.0%)
12,400 Veritas DGCInc.*................................ 489,800
OPERATIVE BUILDERS (2.7%)
33,500 NVRInc.*....................................... 732,813
33,600 Standard-Pacific Corp.................................... 529,200
......................................................... 1,262,013
PETROLEUM REFINING (7.0%)
27,000 Exxon Corporation........................................ 1,652,062
21,500 Chevron Corporation...................................... 1,655,500
3,307,562
PUBLIC BUILDING AND RELATED FURNITURE (1.5%)
25,500 Virco Manufacturing Corp................................. 714,000
PRINTED CIRCUIT BOARDS (1.9%)
13,200 Jabil Circuit, Inc.*..................................... 524,700
24,800 Plexus Corporation*...................................... 368,900
......................................................... 893,600
REAL ESTATE AGENTS &MANAGERS (1.5%)
54,200 Grubb &Ellis Co.*........................................ 741,862
REFRIGERATION &SERVICE INDUSTRY MACHINERY (1.0%)
15,500 USFilter Corp.*.......................................... 464,031
REFRIGERATION EQUIPMENT (1.4%)
30,150 Chart Industries, Inc.................................... 687,797
RETAIL-COMPUTER &PRERECORDED TAPE STORES (2.1%)
52,600 Trans World Entertainment Corp.*......................... 1,019,125
RETAIL-DEPARTMENT STORES (2.9%)
52,000 Ames Department Stores, Inc.*............................ 910,000
31,250 Bon-Ton Stores, Inc.*.................................... 468,750
......................................................... 1,378,750
<PAGE>
RETAIL-FAMILY CLOTHING STORES (1.0%)...................
14,400 The TJXCompanies, Inc.................................. 495,000
RETAIL-HOBBY, TOY &GAME SHOP (.8%).....................
13,700 Michaels Stores, Inc.*................................. 400,725
RETAIL-LUMBER &OTHER BUILDING MATERIALS
DEALERS (1.1%)
9,100 The Home Depot, Inc.................................... 535,762
SEARCH, DETECTION, NAVIGATION, GUIDANCE &
AERONAUTICAL SYSTEM (.2%)
1,594 Raytheon Co. Class A................................... 78,616
SERVICES-ENGINEERING SERVICES (0%)
125 Tice Technology Inc.*.................................. 922
SERVICES-HELP SUPPLY SERVICES (3.0%)
17,700 AccuStaff Inc.*........................................ 407,100
11,100 CDICorp.*.............................................. 507,825
9,100 Volt Information Sciences, Inc.*....................... 490,262
....................................................... 1,405,187
SERVICES-SPECIALTY OUTPATIENT FACILITIES (.5%)
30,000 Response Oncology, Inc.*............................... 251,250
STEEL PIPE ANDTUBES (3.4%)
17,600 Lone Star Technologies, Inc.*.......................... 499,400
43,200 Maverick Tube Corporation*............................. 1,093,500
....................................................... 1,592,90
STEEL WORKS, BLAST FURNACE &ROLLING MILLS (.9%)
26,000 NSGroup, Inc.*......................................... 445,250
TOTALIZING FLUID METERS & COUNTING DEVICES (.9%)
10,450 Badger Meter Inc....................................... 425,838
TRUCKING (.9%)
16,900 Landair Services, Inc.*....................... 409,825
VARIETY STORES (1.1%)
24,375 Fred's, Inc............................................ 499,688
WHOLESALE-DRUGS &PROPRIETARIES (.7%)
21,000 Priority Healthcare Corp. B*........................... 317,625
WHOLESALE-ELECTRONIC PARTS EQUIPMENT (.3%)
13,400 MPWIndustrial Services Group, Inc.*.................... 120,600
WOMENS CLOTHING (.6%) ................................
27,400 Paul Harris Stores, Inc.*.............................. 275,713
WOMEN'S, MISSES', AND JUNIORS' OUTERWEAR (1.0%)
16,400 Kellwood Company....................................... 492,000
WOOD HOUSEHOLD FURNITURE (1.5%)
18,000 Ethan Allen Manufacturing Corporation.................. 694,125
Total Common Stocks (cost:$41,279,982)............ 45,696,897
CLOSED-END FUNDS (2.7%)
27,800 Equus II, Inc.......................................... 635,925
44,800 John Hancock Bank &Thrift Opportunity Fund .......... 655,200
Total Closed-End Funds (cost: $1,137,047)......... 1,291,125
PAR
VALUE
U.S. GOVERNMENT OBLIGATIONS (.8%)
$360,000 U.S. Treasury Bills, due 1/22/98 (cost: $358,906)
35,890 TOTAL INVESTMENTS (COST: $42,775,935) (100%) $47,346,928
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS:
Investments at market value(cost: $42,775,935) (note 1)......... $47,346,928
Cash ...................................................... 407,398
Collateral for securities loaned, at market value (note 5)...... 8,413,031
Receivables:....................................................
Investment securities sold...................................... 615,165
Dividends....................................................... 50,694
Fund shares sold................................................ 1,496
Other assets.................................................... 5,624
Total assets.......................................... 56,840,336
LIABILITIES:.......................................................
Payables:....................................................
Demand note payable to bank (note 5)......................... 3,462,218
Fund shares redeemed......................................... 29,977
Collateral for securities loaned (note 5).................... 8,413,031
Accrued expenses............................................. 122,855
Accrued management and
distribution fees......................................... 38,854
Total liabilities.................................. 12,066,935
NET ASSETS: (applicable to 1,915,255
outstanding shares: 500,000,000 shares
of $.01 par value authorized)................................ $44,773,401
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($44,773,401 / 1,915,255).................................. $23.38
At December 31, 1997, net assets consisted of:
Paid-in capital............................................ $40,138,286
Accumulated net realized gain on
investments............................................. 64,122
Net unrealized appreciation on investments................. 4,570,993
................................................. $44,773,401
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
INVESTMENT INCOME:
Dividends .................................................. $ 453,428
Interest .................................................. 103,182
Total investment income.................................. 556,610
EXPENSES:.........................................................
Distribution (note 3)....................................... 471,748
Investment management (note 3).............................. 403,809
Interest (note 5)........................................... 142,106
Transfer agent.............................................. 86,691
Shareholder administration (note 3)......................... 59,403
Custodian................................................... 51,078
Professional (note 3)....................................... 45,945
Registration (note 3)....................................... 30,783
Printing.................................................... 21,867
Directors................................................... 8,650
Other .................................................. 11,872
Total expenses........................................... 1,333,952
Fee reductions (note 4).................................. (8,508)
Net expenses............................................. 1,325,444
Net investment loss...................................... (768,834)
<PAGE>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES:
Net realized gain from security
transactions.................................................. 2,325,898
Net realized loss from futures transactions....................... (335,926)
Unrealized appreciation of investments during the period.......... 1,258,458
Net realized and unrealized gain on investments and futures... 3,248,430
Net increase in net assets resulting from operations.......... $ 2,479,596
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31,
1997 1996
OPERATIONS:
Net investment loss............................. $ (768,834) $ (1,539,055)
Net realized loss from futures transactions..... (335,926) -
Net realized gain from security transactions...... 2,325,898 6,803,639
Unrealized appreciation (depreciation) of
investments during the period 1,258,458 (4,862,889)
Net increase in net assets resulting
from operations........................ 2,479,596 401,695
DISTRIBUTIONS TO SHAREHOLDERS:
Distribution from net realized gains
($0.75 and $2.72 per share, respectively) (1,388,183) (5,342,284)
CAPITAL SHARE TRANSACTIONS:
Decrease in net assets resulting from
capital share transactions (a) (6,157,931) (1,559,043)
Total decrease in net assets.......................(5,066,518) (6,499,632)
NET ASSETS:
Beginning of period............................. 49,839,919 56,339,551
End of period..................................... $44,773,401 $49,839,919
- --------------
(a) Transactions in capital shares were as follows:
1997 1996
SHARES VALUE SHARES VALUE
Shares sold 190,298 $ 4,598,454 564,667 $14,997,930
Shares issued in
reinvestment of distributions 57,687 1,285,837 216,965 4,957,636$
Shares redeemed (503,800) (12,042,222) (826,992) (21,514,609)
Net decrease (255,815) $(6,157,931) (45,360) (1,559,043)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(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.
(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 $42,775,935, gross unrealized appreciation and gross unrealized
depreciation were $6,331,486 and $1,760,493 respectively at December 31, 1997.
Distributions paid to shareholders during the years ended December 31, 1997 and
1996 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 year ended December 31, 1997, the Fund paid $122,109
to Bull & Bear Securities, Inc., an affiliate of the Investment Manager as
commissions for brokerage services. The Fund reimbursed the Investment Manager
$19,659 for providing certain administrative and accounting services at cost for
the year ended December 31, 1997. 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
<PAGE>
expenses primarily intended to result in the sale of the Fund's shares. Investor
Service Center also received $59,403 for shareholder administration services
which it provided to the Fund at cost for the year ended December 31, 1997.
(4) Purchases and proceeds of sales of securities other than short term notes
aggregated $120,572,014 and $136,269,148, 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 $8,508, under such arrangements.
(5) The Fund has a committed bank line of credit. At December 31, 1997, the
balance outstanding was $3,462,218 and the interest rate was equal to the
Federal Reserve Funds Rate plus 1.00 percentage points. For the year ended
December 31, 1997, the weighted average interest rate was 6.50% based on the
balances outstanding during the period and the weighted average amount
outstanding was $2,160,383. Included in interest expense is $1,714 for
commitment fees related to this line of credit. As of December 31, 1997, the
Fund loaned common stocks having a value of $8,218,890 and received cash
collateral of $8,413,031 for the loan.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
PER SHARE DATA* ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $22.96 $25.42 $19.11 $23.13 $24.88
Income from investment operations:
Net investment loss (.38) (.73) (.81) (.55) (.76)
Net realized and unrealized gain (loss) on
investments: 1.55 .99 8.51 (3.28) 4.65
Total from investment operations 1.17 .26 7.70 (3.83) 3.89
Less distributions:
Distributions from net realized gains on
investments (.75) (2.72) (1.39) (.19) (5.64)
Net increase (decrease) in net asset value .42 (2.46) 6.31 (4.02) (1.75)
Net asset value at end of period $23.38 $22.96 $25.42 $19.11 $23.13
TOTAL RETURN 5.25% 1.0% 40.5% (16.5)% 16.4%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $44,773 $49,840 $56,340 $45,614 $73,957
Ratio of expenses to average net assets (a) (b) 2.53% 2.45% 2.88% 2.92% 2.74%
Ratio of net investment loss to average net
assets 1.48% 2.81% 2.70% 2.43% 2.73%
Portfolio turnover rate 260% 311% 319% 309% 256%
Average commission per share $.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.
(a) Ratio including interest expense was 2.81%, 2.92% and 3.67% for the years
ended December 31, 1997, 1996 and 1995, respectively.
(b) Ratio after custodian fee credits was 2.51% for 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.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Bull & Bear Special Equities Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Bull
& Bear Special Equities Fund, Inc., including the schedule of portfolio
investments as of December 31, 1997, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bull & Bear Special Equities Fund, Inc. as of December 31, 1997, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 23, 1998
<PAGE>
TOTAL RETURN PERFORMANCE GRAPHS
Bull & Bear Special Equities Fund ("Fund")
Russell 2000 ("2000")
The 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 futures. The Performance Graphs cover January 1, 1988
to December 31, 1997, and reflect reinvestment of dividends and distributions.
Past performance is not predictive of future performance.
Growth of $10,000 invested 1/1/88 through 12/31/97
Plot Points:
SPECIAL EQUITIES FUND RUSSELL 2000
1/1/88 10000 10000
12/31/88 12273 12489
12/31/89 17462 14518
12/31/90 11107 11686
12/31/91 15610 17068
12/31/92 20040 20210
12/31/93 23317 24030
12/31/94 19460 23592
12/31/95 27335 30302
12/31/96 27623 35313
12/31/97 29069 43212
Final Total Average
Value Return Annual Return
Fund $29,069 190.69% 11.26%
2000 43,212 332.12 15.76
1 Year 5 Years 10 Years
Special Equities Fund
Average Annual Return 5.25% 7.72% 11.26%
SPECIAL EQUITIES FUND
FOR FUND PROSPECTUSES AND OTHER
INVESTMENT INFORMATION, CALL TOLL-FREE
1-888-503-FUND
1-888-503-3863
FOR SHAREHOLDER SERVICES BY
DIRECT ACCESS, CALL TOLL-FREE
1-888-503-VOICE
1-888-503-8642
OR, ACCESS THE FUND ON THE WEB AT
WWW.MUTUALFUNDS.NET
