BULL & BEAR FUNDS I INC, 485BPOS, 1995-04-28

BULL & BEAR FUNDS I INC
485BPOS, 1995-04-28

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Filed with the Securities and Exchange Commission on April 28, 1995.

1933 Act File No. 33-6898
1940 Act File No. 811-4741
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 17
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17

BULL & BEAR FUNDS I, INC.
(Exact Name of Registrant as Specified in Charter)

11 Hanover Square
New York, New York 10005
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: 1-212-785-0900

Copies to:

WILLIAM J. MAYNARD R. DARRELL MOUNTS, ESQ.
Bull & Bear Advisers, Inc. Kirkpatrick & Lockhart
11 Hanover Square 1800 M Street, N.W.
New York, New York 10005-3401 South Lobby - Ninth Floor
(Name and Address of Washington, D.C. 20036-5891
Agent for Service)

It is proposed that this filing will become effective immediately upon filing
pursuant to Rule 485(b).

Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The notice required by such Rule for its most
recent fiscal year was filed on February 27, 1995.
<PAGE>

BULL & BEAR FUNDS I, INC.

Contents of Registration Statement
----------------------------------

This registration statement consists of the following papers and documents.

Cover Sheet

Table of Contents

Cross Reference Sheet - Bull & Bear U.S. and Overseas Fund

Cross Reference Sheet - Bull & Bear Quality Growth Fund

Bull & Bear U.S. and Overseas Fund

Part A - Prospectus

Part B - Statement of Additional Information

Bull & Bear Quality Growth Fund

Part A - Prospectus

Part B - Statement of Additional Information

Part C - Other Information

Signature Page

Exhibits
<PAGE>

BULL & BEAR FUNDS I, INC.
Bull & Bear U.S. and Overseas Fund

Cross Reference Sheet
---------------------

PART A - PROSPECTUS

Part A. Item No. Prospectus Caption
- ---------------- ------------------

1 Cover Page

2 Transaction and Operating Expenses

3 Financial Highlights
Performance Information

4 General
The Fund's Investment Program
Capital Stock

5 The Investment Manager
Custodian and Transfer Agent

6 Cover Page
General
The Investment Manager
Distributions and Taxes
Determination of Net Asset Value
Shareholder Services
Capital Stock
Back Cover Page

7 How to Purchase Shares
Shareholder Services
Determination of Net Asset Value
Distribution of Shares
Back Cover Page

8 How to Redeem Shares
Determination of Net Asset Value

9 Not Applicable
<PAGE>

BULL & BEAR FUNDS I, INC.
Bull & Bear U.S. and Overseas Fund

Cross Reference Sheet
---------------------

PART B - STATEMENT OF ADDITIONAL INFORMATION

Statement of Additional
Part B. Item No. Information Caption
- ---------------- ---------------------------------

10 Cover Page

11 Table of Contents

12 Cover Page

13 The Fund's Investment Program
Investment Restrictions
Options, Futures and Forward Currency
Contract Strategies
Appendix

14 Officers and Directors

15 Officers and Directors
The Investment Manager

16 The Investment Manager
Investment Management Agreement
Distribution of Shares
Custodian, Transfer and Dividend
Disbursing Agent
Auditors

17 Allocation of Brokerage

18 Not Applicable

19 Purchase of Shares
Determination of Net Asset Value

20 Distributions and Taxes

21 Distribution of Shares

22 Performance Information

23 Financial Statements

Part C
- ------

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>

BULL & BEAR FUNDS I, INC.
Bull & Bear Quality Growth Fund

Cross Reference Sheet
---------------------

PART A - PROSPECTUS

Part A. Item No. Prospectus Caption
- ---------------- ------------------

1 Cover Page

2 Transaction and Operating Expenses

3 Financial Highlights
Performance Information

4 General
The Fund's Investment Program
Capital Stock

5 The Investment Manager
Custodian and Transfer Agent

6 Cover Page
General
The Investment Manager
Distributions and Taxes
Determination of Net Asset Value
Shareholder Services
Capital Stock
Back Cover Page

7 How to Purchase Shares
Shareholder Services
Determination of Net Asset Value
Distribution of Shares
Back Cover Page

8 How to Redeem Shares
Determination of Net Asset Value

9 Not Applicable
<PAGE>

BULL & BEAR FUNDS I, INC.
Bull & Bear Quality Growth Fund

Cross Reference Sheet
---------------------

PART B - STATEMENT OF ADDITIONAL INFORMATION

Statement of Additional

Part A. Item No. Information Caption
- ---------------- -------------------------------------

10 Cover Page

11 Table of Contents

12 Cover Page

13 The Fund's Investment Program
Investment Restrictions
Options, Futures and Forward Currency
Contract Strategies
Allocation of Brokerage
Appendix

14 Officers and Directors

15 Officers and Directors
The Investment Manager

16 The Investment Manager
Investment Management Agreement
Distribution of Shares
Custodian, Transfer and Dividend
Disbursing Agent
Auditors

17 Allocation of Brokerage

18 Not Applicable

19 Purchase of Shares
Determination of Net Asset Value

20 Distributions and Taxes

21 Distribution of Shares

22 Performance Information

23 Financial Statements

Part C
- ------

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>

The objective of Bull & Bear U.S. and Overseas Fund is to seek to obtain the
highest possible total return on its assets from long term growth of capital and
from income principally through a portfolio of securities of U.S. and overseas
issuers. There is no limitation on the percent or amount of the Fund's assets
which may be invested for growth of capital or income, and at any time the
investment emphasis may be placed solely or primarily on growth of capital or
solely or primarily on income. The Fund provides a means for you to participate
in investment opportunities around the world. There is no assurance that the
Fund will achieve its objective.

- --------------------------------------------------------------------------------
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 May l, 1995, 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. Shares of the Fund 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.

1
<PAGE>

Expense Table. 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 $2 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
<S> <C>
Sales Load Imposed on Purchases...................... NONE
Sales Load Imposed on Reinvested Dividends........... NONE
Deferred Sales Load.................................. NONE
Redemption Fees...................................... NONE
Exchange Fees........................................ NONE
</TABLE>

Annual Fund Operating Expenses
(as a percentage of average net assets)
<S> <C>
Management Fees (after waiver)....................... 0.94%
12b-1 Fees........................................... 1.00%
Other Expenses....................................... 1.59%
Total Fund Operating Expenses
(after waiver)....................................... 3.53%
</TABLE>

Example 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
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............ $36 $108 $183 $380
</TABLE>

The example set forth above assumes reinvestment of all dividends and
distributions and uses an assumed 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, 1994. Without the Investment Manager's expense guarantee,
investment management fees and total operating expenses would have been 1.00%,
and 3.59% of average net assets, respectively. This fee is higher than that paid
by most investment companies. 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" include amounts paid to the Fund's
Custodian (net of brokerage commission credits pursuant to an arrangement not
anticipated to materially increase brokerage commissions paid by the Fund, see
"The Investment Manager") and Transfer Agent and reimbursed 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./1/ 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, 1994 Annual Report to
Shareholders and incorporated by reference in the Statement of Additional
Information. On February 26, 1992, the Fund adopted its present name and
investment objective. Prior thereto it was known as Bull & Bear Overseas Fund
Ltd. and sought to obtain the highest possible total return on its assets from
long term growth of capital and from income principally through a diversified
portfolio of marketable securities of non-U.S. companies.

<TABLE>
<CAPTION>
Years Ended December 31,

---------------------------------------------------------------------------

1994 1993 1992 1991 1990 1989 1988
1987
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE DATA*
Net asset value at beginning of period $8.71 $7.59 $8.37 $7.62 $8.46
$8.03 $7.46 $7.50
----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
----------------------------------
Net investment income (loss) (0.13) (0.20) 0.04 0.07 (0.01) (0.10)
0.03 0.01
Net realized and unrealized gain (loss) on
investments (1.01) 2.22 (0.25) 1.64 (0.72) 0.99 0.56
(0.05)
----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations (1.14) 2.02 (0.21) 1.71 (0.73) 0.89
0.59 (0.04)

----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
-------------------
Distributions from net investment income ----- ----- ----- ----- ----- (0.02)
(0.02) -----

Distributions from net realized gains on
investments ----- (0.90) (0.57) (0.96) (0.11) (0.44) -----
- -----

Net asset value at end of period 7.08 $8.71 $7.59 $8.37 $7.62 $8.46
$8.03 $7.46
----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN (13.1)% 26.71% 2.57% 22.55% (8.61)%
11.10% 8.00% 0.60%
===== ===== ===== ===== ===== =====
===== =====
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $ 8,454 $12,250 $9,229 $1,275 $ 1,158
$ 1,149 $1,250 $1,042
Ratio of expenses to average net assets(a) 3.53% 3.55% 3.56% 3.56% 3.50%
3.50% 3.02% 3.20%

Ratio of net investment income (loss) to average
net assets(b) (1.65)% (2.36)% .51% .90% (.09)% (1.29)%
.44% .57%

Portfolio turnover rate 212% 182% 175% 208% 270%
178% 140% 18%

- ------------------------
</TABLE>

/1/ The selected per share data has been restated to reflect the 100% stock
dividend effective February 24, 1992. * From commencement of operations,
October 29, 1987. ** Annualized. /a/ Ratios before the Investment Manager's
reimbursement of expenses were 3.59%, 3.69%, 4.09%, 13.35%, 11.98%, 14.36%, and
10.13%, for the years ended December 31, 1994, 1993, 1992, 1991, 1990, 1989, and
1988, respectively. /b/ Ratios before the Investment Manager's reimbursement of
expenses were (1.71)%, (2.50)%, (0.02)%, (8.89)%, (8.57)%, (12.15)%, and
(6.67)%, for the years ended December 31, 1994, 1993, 1992, 1991, 1990, 1989,
and 1988, respectively.

Information relating to outstanding debt during the fiscal periods shown below:

nding Debt Per Share
December 31 of Period During the Period During the Period During the
Period
----------------- ------------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
1994 $0 $22,355 1,234,685 $0.02
1993 0 22,097 1,211,741 $0.02
</TABLE>

2
<PAGE>

- --------------------------------------------------------------------------------

TABLE OF CONTENTS

Transaction and Operating Expenses. 2 Distributions and Taxes.......... 13
Financial Highlights............... 2 Determination of Net Asset Value. 14
General............................ 3 The Investment Manager........... 15
How to Purchase Shares............. 7 Distribution of Shares........... 15
Shareholder Services............... 9 Performance Information.......... 16
How to Redeem Shares...............12 Capital Stock.................... 16
Custodian and Transfer Agent..... 17
- --------------------------------------------------------------------------------

GENERAL

Purposes of the Fund. The Fund is for long term investors who wish to invest in
a professionally managed portfolio of securities of U.S. and foreign issuers
without having to become involved with the research, detailed bookkeeping, and
operational procedures normally associated with direct investment in such
securities. The Fund is not intended for investors who wish to speculate on
short term swings in U.S. and foreign securities markets. The value of the
Fund's portfolio securities will fluctuate based on global market conditions as
well as those of individual economies and markets. Consistent with a long term
investment approach, you should be able to maintain your investment
in the Fund during periods of adverse market conditions, and you should not rely
on an investment in the Fund for your short term financial needs.

Global Investing. At various times since the end of World War II, many foreign
economies have grown faster than the United States' economy, and the return on
investments in these countries has often exceeded the return on similar
investments in the United States. Moreover, there has normally been a wide and
largely unrelated variation in performance among global equity and fixed income
markets over this period. Although there can be no assurance that these
conditions will continue in the future or that the Fund's Investment Manager
will be able to identify and acquire investments in the faster growing economies
or markets, the Investment Manager believes that investment in the securities of
U.S. and foreign issuers offers potential for significant total return. The
Fund's investment program has been developed in light of these beliefs to
provide an opportunity for you to participate in a professionally managed,
global portfolio of securities.

Portfolio Management. The Fund's Portfolio Manager since 1994 has been Brett B.
Sneed. 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

3
<PAGE>

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

Investment Objective and Policies. The Fund's investment objective, which may
not be changed without shareholder approval, is to seek to obtain the highest
possible total return on its assets from long term growth of capital and from
income principally through a portfolio of securities of U.S. and overseas
issuers. The Fund may invest in any type of security including common stocks,
convertible securities, preferred stocks, bonds, notes and other debt securities
(including Eurodollar securities), warrants, obligations issued r guaranteed by
the U.S. Government, its agencies or instrumentalities, or by foreign
governments and their political subdivisions, money market instruments such as
bankers acceptances, commercial paper, short term corporate debt securities, and
repurchase agreements. The Fund may also engage in options, futures, and forward
currency transactions.

Factors considered by the Investment Manager in evaluating and selecting
securities include economic and socio-political considerations, the values of
individual securities relative to other investment alternatives, relative
currency values and trends, trends in the determinants of corporate profits, and
management capabilities and practices. Investments may be made for growth of
capital or for income or any combination thereof for the purpose of achieving a
higher overall total return.

The Fund may invest in companies based in (or governments of or within)
Europe, the Far East, Australia, the United States, Canada, South and Central
America, and such other areas and countries as the Investment Manager may
determine. Under normal market conditions, the Fund's assets will be invested in
at least three different countries, including the United States. For this
purpose, an investment is considered made in a country where the issuer of the
security has substantial activities and interests, taking into account such
factors as location of its assets, personnel, sales and earnings, principal
corporate office, principal trading market for its securities, and place of
organization. There are no limitations on the relative amounts of the Fund's
assets that may be invested in any one country.

Fixed Income Investing. When seeking income, the Fund will normally invest in
investment grade fixed income securities of varying maturities, depending on the
Investment Manager's evaluation of market patterns and trends. The Fund may
invest up to 35% of its assets in fixed income securities rated below investment
grade, although it has no current intention of investing more than 5% of its
assets in such securities during the coming year. The Fund may also invest
without limit in unrated securities if such securities offer, in the Investment
Manager's opinion, the opportunity for a high overall return by reason of their
yield, discount at purchase or potential for capital

4
<PAGE>

appreciation without undue risk. For temporary defensive purposes the Fund may
invest all or a portion of its assets in high grade fixed income securities.

Investment grade securities are those rated in the top four categories by a
nationally recognized statistical rating organization such as Standard & Poor's
Ratings Group or Moody's Investors Service, Inc., ("Moody's") or, if unrated,
are determined by the Investment Manager to be of comparable quality. Moody's
considers securities in the fourth highest category to have speculative
characteristics. Securities rated below investment grade and many unrated
securities may be considered predominantly speculative and subject to greater
market fluctuations and risks of loss of income and principal than higher rated
fixed income securities. The market value of fixed income securities usually is
affected by changes in the level of interest rates. An increase in interest
rates tends to reduce the market value of such investments, and a decline in
interest rates tends to increase their value. In addition, fixed income
securities with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Fluctuations in the market value of fixed
income securities subsequent to their acquisition do not affect cash income from
such securities but are reflected in the Fund's net asset value.

Overseas Investments, Markets, and Risk Factors. 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 involves
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 converting foreign currency into U.S. dollars;
greater price volatility and trading illiquidity; less public information on
issuers of securities; difficulty in enforcing legal rights outside of the
United States; lack of uniform accounting, auditing and financial reporting
standards; the possible imposition of foreign taxes, exchange controls and
currency restrictions; and the possible greater political, economic and social
instability of developing as well as developed countries including without
limitation, nationalization, expropriation of assets, and war. 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 expense ratio of the Fund
can be expected to be higher than that of investment companies investing
exclusively in domestic securities. Securities may be purchased by the Fund 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. Commissions on some foreign stock exchanges are higher than the
typically 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, the Fund's ability to purchase
and sell portfo-

5
<PAGE>

lio 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 requiring the Fund to maintain a
greater portion of its assets in money market instruments 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.

Investments in the equity and fixed income markets of developing countries
involve exposure to economic structures that are generally less diverse and
mature than in the United States and other developed countries, and to political
systems which may be less stable. A developing country can be considered to be a
country which is in the initial stages of its industrialization cycle. In the
past, markets of developing countries, also known as "emerging markets," have
been more volatile than the markets of developed countries; however, such
markets often have provided higher rates of return to investors, and these
characteristics can be expected to continue in the future. Because there is no
limit on the amount of the Fund's assets which may be invested in companies in,
or governments of, developing countries, an investment in the Fund may be
subject to risks greater than those of investment companies which invest solely
or primarily in the United States and other developed countries.

Since investment in foreign securities usually involves foreign currencies and
since the Fund may temporarily hold funds 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 which a Fund investment is denominated in or which is temporarily held
by the Fund to facilitate portfolio transactions, the value of such Fund assets
(and thus 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 contracts. The Fund
generally will not enter into a forward contract with a term of greater than one
year.

6
<PAGE>

the seller's obligation to pay. If, however, the seller defaults and the value
of the collateral declines, the Fund may incur loss and expense in selling the
collateral. To attempt to limit the risk in engaging in repurchase agreements,
the Fund enters into repurchase agreements only with banks and dealers believed
by the Investment Manager to present minimum credit risks in accordance with
guidelines established by the Board of Directors. The Fund will not enter into a
repurchase agreement with a maturity of more than seven days if, as a result,
more than 15% of its net assets would then be invested in such agreements and
other illiquid securities.

Hedging and Income Strategies. 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 interest rate
futures contracts, stock and bond index futures contracts and foreign currency
futures contracts, 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 specific contemplated 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, it 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 its ability to meet redemption requests.

Strategies with options, financial futures, and forward 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 ability of the Investment Manager 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

7
<PAGE>

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 correlation between hedging instruments and
the securities or sectors being hedged also may be imperfect. The percentage of
the Fund's assets segregated to cover its obligations under options, futures, or
forward contracts could impede effective portfolio management or the ability to
meet redemption or other current obligations.

Portfolio Turnover. Given the Fund's investment objective, the portfolio
turnover rate will not be a limiting factor when the Investment Manager deems
changes in the portfolio composition appropriate, and the Fund's investment
strategy therefore includes the possibility of short term transactions. The
Fund's portfolio turnover rate will vary from year to year depending on world
market conditions. In 1993 it was 182%, and in 1994 it was 212%. Higher turnover
may increase Fund brokerage costs and taxes payable by shareholders.

Other Information. The Fund is "non-diversified," as defined in the Investment
Company Act of 1940 ("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 and the price of Fund shares. The Fund may borrow money from a bank
for temporary or emergency purposes or by engaging in reverse repurchase
agreements provided that borrowings do not exceed one-third of the current value
of the Fund's assets taken at market value, less liabilities other than
borrowings. The Fund will not purchase securities for investment while bank
borrowing equaling 5% or more of its total assets is outstanding. In addition to
the Fund's fundamental investment objective, the Fund has adopted certain
fundamental investment restrictions which may not be changed without shareholder
approval. These other 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

8
<PAGE>

Accounts ("IRAs"), SEP-IRAs, rollover IRAs, profit sharing and money purchase
plans, and 403(b) plan accounts. 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 U.S. and Overseas Fund, mailed to Bull & Bear Service Center, P.O.
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:

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.

Through 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 Bull & Bear 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
does 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.

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<PAGE>

Check. Mail a check or other negotiable bank draft ($100 minimum), made
payable to U.S. and Overseas Fund, together with a Bull & Bear FastDeposit
-----------
form to Bull & Bear Service Center, P.O. 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).

Electronic Funds Transfer (EFT). With EFT, you may purchase additional shares
of the Fund quickly and simply, just by calling Bull & Bear 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.

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
Bull & Bear 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 U.S. and Overseas Fund
account number. You may then purchase shares by requesting your bank to transmit
immediately available funds ("Federal funds") by wire to the Transfer Agent at:
United Missouri Bank NA, ABA #10-10-00695; for Account 98-7052-724-3; U.S. and
Overseas 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
Bull & Bear Service Center, P.O. 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

10
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without having to call Bull & Bear Service Center by simply following the same
wiring procedures.

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"). 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 the net asset
value of such shares next determined after receipt and acceptance by Bull & Bear
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 drawn
in U.S. dollars on a U.S. bank. The Fund reserves the right to reject any order.
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, Bull & Bear Service Center, 1-800-847-4200.

Electronic Funds Transfer (EFT). You automatically have the privilege of linking
the bank 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.

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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 Bull & Bear Service Center, 1-800-847-4200. You may cancel this privilege
by mailing written notification to Bull & Bear Service Center, P.O. 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 or variable 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 Bull & Bear 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 Bull & Bear 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:

. 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.

. 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.

. 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.

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<PAGE>

. 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.

. Bull & Bear Quality Growth Fund seeks growth of capital and income from a
portfolio of common stocks of large, quality companies with potential for
significant growth of earnings and dividends.

. Bull & Bear Special Equities Fund invests aggressively for maximum capital
appreciation.

. 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 Bull & Bear 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, exchanges are 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 Bull & Bear Service Center, 1-800-847-4200. The
other Fund's prospectus should be read carefully before exchanging. You may give
exchange instructions to Bull & Bear 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.

. 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., 1-800-262-5800.

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<PAGE>

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 for Federal income
tax purposes as noted below. Information on any of the plans described below is
available from Bull & Bear 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.

. Individual Retirement Accounts. Anyone with earned income who is less than
age 70 1/2 at 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 Simplified Employee Pension Plan
("SEP") 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. For example, most individuals may contribute for the 1995 tax year
from January 1, 1995 through April 15, 1996.

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. 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.

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<PAGE>

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.

. Profit Sharing and Money Purchase Plans. These 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 up to a
maximum of $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.

. Section 403(b)(7) Accounts. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the establishment 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)(7) 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 Bull & Bear Service Center, P.O. Box 419789, Kansas City,
MO 64141-6789, signed by the record owner(s). If a written redemption 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.

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<PAGE>

By Telephone. You may telephone Bull & Bear 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 Bull & Bear Service Center will contact the
bank designated on your Account 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 Bull & Bear 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 Bull & Bear Service Center, 1-800-
847-4200. Please read the prospectus carefully before exchanging.

Redemption Price. The redemption price is the net asset value per share next
determined after receipt of the redemption request in proper form.

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<PAGE>

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 ten day delay to allow the check or transfer to clear.
The ten 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 Bull & Bear 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
tape 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 Agent may require further documentation, and may restrict the

17
<PAGE>

mailing of redemption proceeds to your address of record within 30 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 Bull & Bear
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 Bull & Bear 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 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 the 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.

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<PAGE>

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. Because other
Federal, state and local 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 investments 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, if any,
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.

THE 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 the other Bull & Bear Funds. The Investment Manager may also allocate
portfolio 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 to improve the Fund's total
return. During the fiscal year ended December 31, 1994, investment management
fees paid by the Fund represented approximately 0.94% of average daily net
assets net of reimbursement pursuant to the expense

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<PAGE>

guaranty of the Investment Manager. The Investment Manager provides certain
administrative services to the Fund at cost. 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 and traded in the over-the-counter
market, 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.

DISTRIBUTION OF SHARES

Pursuant to a Distribution Agreement between the Fund and Bull & Bear 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 at the rate of thirty-five basis points on such customer
balances. 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 Bull & Bear Funds. 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.

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<PAGE>

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 other
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. Total return is computed on a
per share basis, assumes the reinvestment of dividends and other 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. The Fund's
performance may be compared to the performance 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 not
intended to indicate future performance. The Fund's annual report to
shareholders contains information with respect to the Fund's performance. The
annual report is available upon request by calling 1-800-847-4200.

CAPITAL STOCK

The Fund is a series of Bull & Bear Funds I, Inc. (the "Corporation"), a
Maryland corporation organized in 1986. Prior to September 23, 1993, the
Corporation operated under the name Bull & Bear U.S. and Overseas Fund Ltd. The
Corporation is an open-end management investment company, and is authorized to
issue up to 1,000,000,000 shares ($.01 par value). The Board of Directors has
designated 250,000,000 shares as shares of Bull & Bear U.S. and Overseas Fund
and 250,000,000 as shares of Bull & Bear Quality Growth Fund. The Board of
Directors of the Corporation may establish one or more other series.

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,

21
<PAGE>

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 vote on the Fund's investment management agreement, plan of
distribution, or 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 02111, acts as
custodian of the Fund's assets 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 by the Fund of such foreign custodial arrangements and
depositories will increase the Fund's expenses. The custodian also performs
certain accounting services for the Fund.

The Fund's transfer and dividend disbursing agent is DST Systems, Inc., P.O.
Box 419789, Kansas City, MO 64141-6789. The Distributor provides certain
transfer agency services to the Fund and is reimbursed its cost by the Fund. The
costs of facilities, personnel and other related expenses are allocated among
the Bull & Bear Funds based on the relative number of inquiries and other
factors deemed appropriate.

22
<PAGE>

[Left Side of Back Cover Page]

U.S. AND

OVERSEAS

FUND
- -----------------------------------

11 Hanover Square
New York, NY 10005
1-800-847-4200 1-212-363-1100

- -----------------------------------
Call toll-free for Fund performance
information, purchases, 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]

U.S. AND

OVERSEAS

FUND
- -----------------------------------

Investing Worldwide
for the Highest Possible
Total Return

No Exchange Charges or Limits

- -----------------------------------

Minimum Initial Investment:
Regular Accounts, $1,000;
IRAs, $500; Automatic
Investment Programs, $100

Minimum Subsequent Investments:
$100

- -----------------------------------

Prospectus
May 1, 1995

[LOGO OF BULL & BEAR
APPEARS HERE] _____________________
Performance Driven(R)
<PAGE>

Bull & Bear Quality Growth Fund seeks growth of capital as its principal
investment objective and, secondarily, income. The Fund invests primarily in
common stocks of large, quality companies considered to have the potential for
significant growth of earnings and dividends. The Fund's Investment Manager,
Bull & Bear Advisers, Inc., believes that such companies will be rewarded by the
market with higher stock prices over time and investment returns in excess of
the market as a whole. Also, while the business results of such companies will
generally be affected by slowdowns in economic growth, they should be less
affected by adverse economic conditions than more leveraged, cyclical or smaller
companies. There is no assurance that the Fund will achieve its objectives.

- --------------------------------------------------------------------------------

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.

- --------------------------------------------------------------------------------

1
<PAGE>

Shareholder Transaction Expenses Annual Fund Operating Expenses
<S> <C>
Sales Load Imposed on Purchases..NONE (as a percentage of average net assets)
Sales Load Imposed on Management Fees (after waiver)...0.00%
Reinvested Dividends............NONE 12b-1 Fees.......................1.00%
Deferred Sales Load..............NONE Other Expenses...................2.60%
Redemption Fees..................NONE Total Fund Operating Expenses (after
Exchange Fees....................NONE waiver)........................3.60%

Example 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the $36 $110 $186 $386
following expenses on a
$1,000 investment,
assuming a 5% annual
return and a redemption
at the end of each time
period....................
</TABLE>

The example set forth above assumes reinvestment of all dividends and other
distributions and uses an assumed 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 an assumed
level of average net assets in excess of $5 million but less than $10 million.
Without the Investment Manger's expense guarantee, investment management fees,
other expenses and total operating expenses would have been 0.25%, 3.45%, and
4.70%, respectively of average net assets, respectively. 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 payable
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.

<TABLE>
<CAPTION>
Year
Ended October 1, 1993
December to December 31,
31, 1994 1993
-------- ----
<S> <C> <C>
PER SHARE DATA*
Net asset value at beginning of period......... $ 14.47 $ 15.00

Income from investment operations:
---------------------------------
Net investment income (loss)................ (0.17) (0.05)

Net realized and unrealized gain
(loss) on investments.......................... (0.98) (0.48)

Total from investment operations........... ($1.15) ($0.53)

Net asset value at end of period............... $ 13.32 $ 14.47

TOTAL RETURN................................... (7.95)% (3.53)%

RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted).... $ 4,151 $ 1,058

Ratio of expenses to average net assets(a)..... 3.60% 3.50%**
Ratio of net innvestment loss to average net... 1.14% 2.29%**
assets(b)
Portfolio turnover rate........................ 82% 19%
- -------------------------------------------
</TABLE>

* From commencement of operations, October 1, 1993. ** Annualized. /A/ Ratio
before the Investment Manager's waiver was 4.70% and 11.61% for the periods
ended December 31, 1994 and 1993, respectively. /B/ Ratio before the Investment
Manager's waiver was 2.24% and 10.40% for the periods ended December 31, 1994
and 1993, respectively.

Information Relating to Outstanding Debt During the Fiscal Periods Shown Below:
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Amount of Average Average Average
Debt Amount of Number of Amount of
Years Ended Outstanding Debt Shares Debt Per
----------- at Outstanding Outstanding Share
End of During the During the During the
Period Period/1/ Period/1/ Period
------ --------- ----------- ------
<S> <C> <C> <C> <C>
1994 $0 $36,957 326,910 $0.11
1993 0 0 0 0

</TABLE>
__________________

/1/ Based on monthly averages.

2
<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------

TABLE OF CONTENTS

<S> <C>
Transaction and Operating Expenses. 2 Distributions and Taxes............... 13
Financial Highlights............... 2 Determination of Net Asset Value...... 14
General............................ 3 The Investment Manager................ 14
How to Purchase Shares............. 7 Distribution of Shares................ 15
Shareholder Services............... 8 Performance Information............... 15
How to Redeem Shares............... 11 Capital Stock......................... 15
Custodian and Transfer Agent.......... 16

- --------------------------------------------------------------------------------
</TABLE>
GENERAL

Purpose of the Fund. The Fund is designed for investors seeking long term growth
of capital and income from a portfolio of primarily large, quality, growth
companies. The Fund's strategy is to invest in equity securities of companies
whose established records of growth of earnings and dividends are believed to
have long term potential to increase in the future.

Who Should Invest. Because of its emphasis on large, quality, growth companies,
the Fund may be appropriate as a core equity component of your portfolio. While
the Fund emphasizes the securities of quality companies with growth
characteristics, an investment in the Fund will be affected by movements in the
overall stock market and therefore is appropriate for those investors who
understand and can accept the risks of stock market investing. The Fund also
offers the benefits and advantages of free transfer to the other Bull & Bear
Funds and a wide range of shareholder services (see "How to Purchase Shares" and
"Shareholder Services").

Portfolio Management. The Fund's Portfolio Manager is Bassett S. Winmill. Mr.
Winmill is Chairman of the Investment Policy Committee of Bull & Bear Advisers,
Inc., the Fund's Investment Manager. He is a member of the New York Society of
Security Analysts, the Association for Investment Management and Research, and
the International Society of Financial Analysts.

THE FUND'S INVESTMENT PROGRAM

In pursuing its investment objectives, the Fund will emphasize investments in
common stocks of large, quality, growth companies. These companies are generally
identified by their established history of earnings and dividends, substantial
market capitalization, easy access to credit, good industry position, and proven
management expertise. Such companies exhibit generally less investment risk and
price volatility than companies lacking these characteristics. In addition, the
shares of such companies usually have higher trading volume and, consequently,
better liquidity. Under normal market conditions, the Fund will invest at least
65%, and may invest up to 100%, of its total assets in the common stocks of such
companies. There is no assurance that the Fund will achieve its investment
objectives.

In addition to the type of common stocks described above, the Fund may invest
up to 35% of its total assets in other investments, including preferred stocks,
debt and other fixed income securities, securities convertible into or
exchangeable for common or preferred stocks, warrants and rights of foreign and
domestic issuers, and common stocks of domestic and foreign issuers that do not
have the characteristics set forth in the Fund's principal investment policy.
The Fund may also invest without limit in high grade debt securities, securities
of the U.S. Government, its agencies or instrumentalities, and money market

3
<PAGE>

instruments, including repurchase agreements, or retain cash when as a result of
market conditions, a defensive position is deemed advisable to help preserve
capital or for other temporary purposes.

Other Investment Strategies. The Fund may employ the following other investment
strategies in seeking to achieve its investment objectives, although it has no
current intention of doing so in such a manner that any one strategy would
involve more than 5% of the Fund's total assets: lending its portfolio
securities; transactions in put and call options on securities, indexes, and
foreign currencies, and futures contracts on interest rates, stock and bond
indexes, and foreign currencies and options thereon; and, forward foreign
currency contracts. The Fund also has no current intention of investing more
than 5% of its total assets in convertible securities, foreign securities, or
fixed income securities rated below investment grade. Authorizations governing
the use of such strategies and their risks, are set forth in the Statement of
Additional Information.

Repurchase Agreements. The Fund may enter into repurchase agreements with U.S.
banks or dealers involving securities in which the Fund is authorized to invest.
A repurchase agreement is an instrument under which the Fund purchases
securities from a bank or dealer and simultaneously commits to resell the
securities to the bank or dealer at an agreed upon date and price reflecting a
market rate of interest. Investors Bank & Trust Company (the "Custodian")
maintains custody of the underlying securities until their repurchase; thus the
obligation of the bank or dealer to pay the repurchase price is, in effect,
secured by such securities. The Fund's risk is limited to the ability of the
seller to pay the agreed upon amount on the repurchase date; if the seller
defaults, the security constitutes collateral for the seller's obligation to
pay. If, however, the seller defaults and the value of the collateral declines,
the Fund may incur loss and expense in selling the collateral. To attempt to
limit the risk of engaging in repurchase agreements, the Fund enters into
repurchase agreements only with banks and dealers believed by the Investment
Manager to present minimum credit risks in accordance with guidelines
established by the Board of Directors. The Fund will not enter into a repurchase
agreement with a maturity of more than seven days if, as a result, more than 15%
of its net assets would then be invested in such agreements and other illiquid
securities.

Other Information. The Fund may borrow money from banks for temporary or
emergency purposes (not for leveraging or investment) and engage in reverse
repurchase agreements, but not in excess of an amount equal to one-third of the
Fund's total assets. The Fund may not purchase securities for investment while
any bank borrowing equaling 5% or more of its total assets is outstanding.

The Fund may invest up to 15% of its net assets in illiquid securities,
including repurchase agreements with a maturity of more than seven days and up
to 10% of its total assets in restricted securities. Illiquid restricted
securities may be sold by the Fund only in privately negotiated transactions or
in a public offering for which a registration statement is in effect under the
Securities Act of 1933. Such securities include those that are subject to
restrictions contained in the securities laws of other countries. Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell. Securities that are freely marketable in
the country where they are principally traded, but would not be freely
marketable in the United States, are not included within the meaning of the term
"illiquid securities".

The Fund is "non-diversified" as defined in the Investment Company Act of 1940
("1940 Act") but intends to qualify as a regulated investment company for
Federal income tax purposes, meaning generally that more than 5% of the Fund's
total

4
<PAGE>

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 than an investment company that invests in a
broader range of securities because 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 principal investment objective of growth of capital
and its secondary investment objective of income, the Fund has adopted certain
fundamental investment restrictions that may not be changed without shareholder
approval. These fundamental restrictions are set forth in the Statement of
Additional Information. The Fund's other investment policies described herein,
unless otherwise stated, are not fundamental and may be changed by the Board of
Directors without shareholder approval.

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 Bull & Bear
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $1,000 for regular and gifts/transfers to minors custody accounts,
and $500 for Bull & Bear retirement plans, which include Individual Retirement
Accounts ("IRAs"), SEP-IRAs, rollover IRAs, profit sharing and money purchase
plans, and 403(b) plan accounts. 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 Quality Growth Fund, mailed to Bull & Bear Service Center, P.O. 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:

. 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.

. Through 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

5
<PAGE>

retirement benefits, salary, veteran's benefits and most other recurring
payments.

. Check. Mail a check or other negotiable bank draft ($100 minimum), made
payable to Quality Growth Fund, together with a Bull & Bear FastDeposit
-----------
form to Bull & Bear Service Center, P.O. 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).

. Electronic Funds Transfer (EFT). With EFT, you may purchase additional shares
of the Fund quickly and simply, just by calling Bull & Bear 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.

. 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
Bull & Bear 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 Quality Growth Fund account
number. You may then purchase shares by requesting your bank to transmit
immediately available funds ("Federal funds") by wire to the Transfer Agent at:
United Missouri Bank NA, ABA #10-10-00695; for Account 98-7052-724-3; Quality
Growth 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
Bull & Bear

6
<PAGE>

Service Center, P.O. 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
Bull & Bear Service Center by simply following the same wiring procedures.

SHAREHOLDER SERVICES

Dividend Sweep Privilege. You may elect to have automatically invested either
all dividends or all dividends and other distributions paid by the Fund in 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 Bull & Bear Service
Center, 1-800-847-4200. You may cancel this privilege by mailing written
notification to Bull & Bear Service Center, P.O. Box 419789, Kansas City, MO
64141-6789. To select a new Fund after cancellation,

7
<PAGE>

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.

Assignment. Fund shares may be transferred to another owner. Instructions are
available from Bull & Bear Service Center, 1-800-847-4200.

. Bull & Bear U.S. and Overseas Fund invests worldwide for the highest possible
total return.

. Bull & Bear Special Equities Fund invests aggressively for maximum capital
appreciation.

. 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.

8
<PAGE>

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 Bull & Bear 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, exchanges are 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 Bull & Bear Service Center, 1-800-847-4200.
The other Fund's prospectus should be read carefully before exchanging. You may
give exchange instructions to Bull & Bear 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.

Individual Retirement Accounts. Anyone with earned income who is less than
age 70 1/2 at 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 Simplified Employee Pension Plan
("SEP") 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. For example, most individuals may contribute for the 1995 tax year
from January 1, 1995 through April 15,

9
<PAGE>

1996.

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.

. IRA Transfer and Rollover Accounts. Special forms are available from Bull &
Bear 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.

Section 403(b)(7) Accounts. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the establishment 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)(7) 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

10
<PAGE>

registration and account number, and a contact person's name and telephone
number; and your daytime telephone number.

By Telephone. You may telephone Bull & Bear Service Center, 1-800-847-4200 to
expedite redemption of Fund shares if share certificates have not been issued.

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.

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 Plus/SM/ 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 Bull & Bear Service Center, 1-800-
847-4200. Please read the prospectus carefully before exchanging.

Redemption Price. The redemption price is the net asset value per share next
determined after receipt of the redemption request in proper form.

11
<PAGE>

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 ten day delay to allow the check or transfer to clear.
The ten day clearing period does not affect the trade date on which a purchase
or redemption order is priced, or any dividends and other gain 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.

DISTRIBUTIONS AND TAXES

12
<PAGE>

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 Bull & Bear
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 Bull & Bear 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 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 shareholders who are
otherwise subject to backup withholding.

DETERMINATION OF NET ASSET VALUE

13
<PAGE>

THE INVESTMENT MANAGER

Until the Fund's net assets reach $5 million, the Investment Manager receives
no investment management fee for its services. Thereafter, 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 to improve the
Fund's total return or reimburse the Fund pursuant to an expense guarantee.
During the fiscal year ended December 31, 1994, the Fund paid no fees after
reimbursement by the Investment Manager pursuant to its expense guarantee. The
Investment Manager provides certain administrative services to the Fund at cost.
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
and traded in the over-the-counter market, 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.

DISTRIBUTION OF SHARES

14
<PAGE>

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 Bull & Bear Funds. 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.

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 Standard & Poor's 500 Stock Index ("S&P 500"). The S&P 500 is unmanaged and
fully invested in common stocks. The Fund invests in common stocks and may also
own fixed income securities, and options. The Fund's inception was October 1,
1993. The performance graph begins October 1, 1993 and reflects reinvestment of
dividends and other distributions.

[GRAPHICS: PERFORMANCE OF THE FUND AND THE STANDARD & POOR'S 500
SHOWN AS THE
VALUE OF A $10,000 INVESTMENT SINCE INCEPTION OF THE FUND ON 10/1/93:

DATE S&P FUND
<S> <C> <C>
10/31/93 $10,207 $ 9,873
11/30/93 10,110 9,646
12/31/93 10,232 9,646
1/31/94 10,580 9,933
2/28/94 10,295 9,475
3/31/94 9,842 8,945
4/30/94 9,968 8,793
5/31/94 10,130 9,000
6/30/94 9,887 8,712
7/31/94 10,211 8,958
8/31/94 10,629 9,365
9/30/94 10,374 9,066
10/31/94 10,606 9,319
11/30/94 10,224 8,825
12/31/94 10,376 8,885]

</TABLE>

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

15
<PAGE>

percentage rate or as the value of a hypothetical investment at the end of the
period. The Fund's performance may be compared to the performance 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 not intended to indicate future performance.
----------------------------------------------
The investment strategy of the AVERAGE ANNUAL TOTAL RETURN FOR
Fund's Investment Manager in the PERIODS ENDED DECEMBER 31, 1994
rising interest rate environment
of 1994 was to remain invested One Year: (7.95)%
in large, quality growth Life (from 10/1/93):
companies whose stock prices are (9.07)%
expected to move higher over ----------------------------------------------
time and provide investment returns in excess of the market as a whole. In
implementing this strategy, the Fund favored large capitalization companies in
various certain sectors of the economy. These sector weightings, as well as
specific issue selection, contributed materially to the Fund's performance over
the year. In the first half of the year, the Fund's portfolio reflected higher
weightings in communications, food and beverage, pharmaceutical, retailing and
technology concerns. In the second half of the year, the Fund's focus shifted
gradually toward consumer products, multi-industry, and paper and chemicals,
while maintaining emphasis in technology.

CAPITAL STOCK

The Fund is a series of Bull & Bear Funds I, Inc. (the "Corporation"), a
Maryland corporation organized in 1986. Prior to September 23, 1993, the
corporation operated under the name Bull & Bear U.S. and Overseas Fund Ltd. The
Corporation is a series investment company, and is authorized to issue up to
1,000,000,000 shares ($.01 par value). The Board of Directors has designated
250,000,000 shares as shares of Bull & Bear Quality Growth Fund and 250,000,000
shares as shares of Bull & Bear U.S. and Overseas Fund. The Board of Directors
of the Corporation may establish one or more other series.

In accordance with the provisions of the General Corporation Law of the State
of Maryland applicable to open-end investment companies incorporated in Maryland
and registered under the 1940 Act, as is the Fund, 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 vote on the
Fund's investment management agreement, plan of distribution, or fundamental
investment objective, policies or restrictions is required by the 1940 Act.

16
<PAGE>

CUSTODIAN AND TRANSFER AGENT

17
<PAGE>

[Left Side of Back Cover Page]

QUALITY
GROWTH
FUND

- ------------------------------

11 Hanover Square
New York, NY 10005
1-800-847-4200 1-212-363-1100

- ------------------------------

Call toll-free for Fund performance information, purchases, 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]

QUALITY
GROWTH
FUND

- ------------------------------

Investing in Quality
Companies for Long Term
Growth of Capital and Income

No Exchange Charges or Limits

- ------------------------------

Minimum Initial Investment:
Regular Accounts, $1,000;
IRAs, $500; Automatic
Investment Programs, $100

Minimum Subsequent Investments:
$100
- ------------------------------

Prospectus
May 1, 1995

BULL
&BEAR
Performance Driven(R)
<PAGE>

Statement of Additional Information May 1, 1995

BULL & BEAR U.S. AND OVERSEAS FUND
11 Hanover Square
New York, NY 10005
1-212-363-1100
1-800-847-4200

Bull & Bear U.S. and Overseas Fund (the "Fund") is a non-diversified series
of Bull & Bear Funds I, Inc. (the "Corporation"), an open-end management
investment company organized as a Maryland corporation. The following Statement
of Additional Information regarding the Fund is not a prospectus and should be
read in conjunction with the Fund's Prospectus dated May 1, 1995. The Prospectus
is available to prospective investors without charge upon request to Bull & Bear
Service Center, 11 Hanover Square, New York, NY 10005, 1-800-847-4200.

TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S> <C>
THE FUND'S INVESTMENT PROGRAM............................... 2
INVESTMENT RESTRICTIONS..................................... 4
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES... 6
THE BULL & BEAR FUNDS....................................... 14
OFFICERS AND DIRECTORS...................................... 14
THE INVESTMENT MANAGER...................................... 16
INVESTMENT MANAGEMENT AGREEMENT............................. 16
DETERMINATION OF NET ASSET VALUE............................ 17
PURCHASE OF SHARES.......................................... 17
PERFORMANCE INFORMATION..................................... 17
DISTRIBUTION OF SHARES...................................... 21
ALLOCATION OF BROKERAGE..................................... 23
DISTRIBUTIONS AND TAXES..................................... 24
REPORTS TO SHAREHOLDERS..................................... 25
CUSTODIAN AND TRANSFER AGENT................................ 25
AUDITORS.................................................... 25
FINANCIAL STATEMENTS........................................ 26
APPENDIX -- DESCRIPTIONS OF BOND RATINGS.................... 27
</TABLE>

1
<PAGE>

THE FUND'S INVESTMENT PROGRAM

The following information supplements the information concerning the
investment objective, policies and limitations of the Fund found in the
Prospectus.

Foreign Securities. Because the Fund may invest in foreign securities,
investment in the Fund involves investment risks of adverse political and
economic developments that are different from an investment in a fund which
invests only in the securities of U.S. issuers. Such risks may include adverse
movements in the market value of foreign securities during days on which the
Fund's net asset value per share is not determined (see "Determination of Net
Asset Value"), the possible imposition of withholding taxes by foreign
governments on dividend or interest income payable on the securities held in the
portfolio, possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of dividends
or principal and interest on securities in the portfolio.

The Fund may invest in foreign securities by purchasing American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") or other securities
convertible into securities of issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement.

Illiquid Assets. The Fund may not purchase or otherwise acquire any security
or invest in a repurchase agreement if, as a result, (a) more than 15% of the
Fund's net assets (taken at current value) would be invested in illiquid assets,
including repurchase agreements not entitling the holder to payment of principal
within seven days, or (b) more than 10% of the Fund's total assets would be
invested in securities that are illiquid by virtue of restrictions on the sale
of such securities to the public without registration under the Securities Act
of 1933 ("1933 Act"). The term "illiquid assets" for this purpose includes
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities.

Illiquid restricted securities may be sold by the Fund only in privately
negotiated transactions or in a public offering with respect to which a
registration statement is in effect under the 1933 Act. Such securities include
those that are subject to restrictions contained in the securities laws of other
countries. Where registration is required, the Fund may be obligated to pay all
or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Securities that are
freely marketable in the country where they are principally traded, but would
not be freely marketable in the U.S., are not included within the meaning of the
term "illiquid assets."

In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. These instruments are often
restricted securities because the securities are either themselves exempt from
registration or sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily

2
<PAGE>

resold or on an issuer's ability to honor a demand for repayment. Therefore, the
fact that there are contractual or legal restrictions on resale to the general
public or certain institutions is not dispositive of the liquidity of such
investments.

Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional restricted securities markets may provide
both readily ascertainable values for restricted securities and the ability to
liquidate an investment in order to satisfy share redemption orders on a timely
basis. Such markets might include automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc. An insufficient number of qualified buyers interested in
purchasing certain restricted securities held by the Fund, however, could affect
adversely the marketability of such portfolio securities, and the Fund might be
unable to dispose of such securities promptly or at favorable prices.

The Board of Directors has delegated the function of making day-to-day
determinations of liquidity to Bull & Bear Advisers, Inc. ("the Investment
Manager") pursuant to guidelines approved by the Board. The Investment Manager
takes into account a number of factors in reaching liquidity decisions,
including (1) the frequency of trades and quotes for the security, (2) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers, (3) dealer undertakings to make a market in the
security, and the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The Investment Manager
monitors the liquidity of restricted securities in the Fund's portfolio and
reports periodically on such decisions to the Board of Directors.

Lower Rated Debt Securities. The Fund is authorized to invest up to 35% of its
total assets in debt securities rated below investment grade, although it has no
current intention of investing more than 5% of its total assets in such
securities during the coming year. Debt securities rated Ba or lower by Moody's
Investors Service, Inc. ("Moody's") and BB or lower by Standard & Poor's Ratings
Group ("S&P") are considered below investment grade. Debt securities rated below
investment grade are deemed by these rating agencies to be predominantly
speculative with respect to the issuers' capacity to pay interest and repay
principal and may involve major risk exposure to adverse conditions. Debt
securities rated lower than B may include securities that are in default or face
the risk of default with respect to principal or interest.

Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after the Fund
has acquired the security. The Investment Manager will consider such an event in
determining whether the Fund should continue to hold the security but is not
required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the risks of fluctuations in
market value. Also, rating agencies may fail to make timely changes in credit
ratings in response to subsequent events, so that an issuer's current financial
condition may be better or worse than the rating indicates. See the Appendix to
this Statement of Additional Information for further information regarding S&P's
and Moody's ratings.

Lower rated debt securities generally offer a higher current yield than that
available from higher grade issues. However, lower rated securities involve
higher risks, in that they are especially subject to adverse changes in general
economic conditions and in the industries in which the issuers are engaged, to
adverse changes in the financial condition of the issuers and to price
fluctuations in response to changes in interest rates. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could

3
<PAGE>

adversely affect their ability to make payments of interest and principal and
increase the possibility of default. In addition, the market for lower rated
securities has expanded rapidly in recent years, and its growth paralleled a
long economic expansion. In the past, the prices of many lower rated debt
securities declined substantially, reflecting an expectation that many issuers
of such securities might experience financial difficulties. As a result, the
yields on lower rated debt securities rose dramatically, but such higher yields
did not reflect the value of the income stream that holders of such securities
expected, but rather the risk that holders of such securities could lose a
substantial portion of their value as a result of the issuers' financial
restructuring or default. There can be no assurance that such decline in price
will not recur. The market for lower rated debt securities may be thinner and
less active than that for higher quality securities, which may limit the Fund's
ability to sell such securities at their fair value in response to changes in
the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower rated securities, especially in a thinly traded
market.

U.S. Government Securities. The U.S. government securities in which the Fund
may invest include direct obligations of the U.S. Government (such as Treasury
bills, notes and bonds) and obligations issued by U.S. government agencies and
instrumentalities backed by the full faith and credit of the U.S. government,
such as those issued by the Government National Mortgage Association. In
addition, the U.S. government securities in which the Fund may invest include
securities supported primarily or solely by the creditworthiness of the issuer,
such as securities issued by the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority. In
the case of obligations not backed by the full faith and credit of the U.S.
government, the Fund must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the U.S. government itself in the event the
agency or instrumentality does not meet its commitments. Accordingly, these
securities may involve more risk than securities backed by the U.S. government's
full faith and credit.

Foreign Government Securities. The foreign government securities in which the
Fund may invest generally consist of obligations supported by national, state or
provincial governments or similar political subdivisions. Foreign government
securities also include debt obligations of supranational entities, which
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development, international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the Inter-
American Development Bank. Foreign government securities also include debt
securities of "quasi-governmental agencies" and debt securities denominated in
multinational currency units (such as the European Currency Unit) of an issuer
(including supranational issuers).

Preferred Securities. The Fund may invest in preferred stocks of U.S. and
foreign issuers. Such equity securities involve greater risk of loss of income
than debt securities because issuers are not obligated to pay dividends. In
addition, equity securities are subordinate to debt securities, and are more
subject to changes in economic and industry conditions and in the financial
conditions of the issuers of such securities.

Reverse Repurchase Agreements. Although it has no intention of doing so during
its current fiscal year, the Fund may enter into reverse repurchase agreements
with banks. Such agreements involve the sale of securities held by the Fund
subject to its agreement to repurchase the securities held by the Fund at an
agreed-upon date and price reflecting a market rate of interest. Such agreements
are considered to be borrowings. All borrowings by the Fund are limited to one-
third of the Fund's assets and may be entered into only for temporary or
emergency purposes.

4
<PAGE>

Additionally, while a reverse repurchase agreement is outstanding, the Fund will
maintain with its Custodian in a segregated account, cash and/or liquid high
grade debt securities, marked to market daily, in an amount at least equal to
the Fund's obligations under the reverse repurchase agreement.

Short sales. The Fund may engage in short sales if it owns or, by virtue of
its ownership of other securities, has the right to obtain securities equivalent
in kind or amount to the securities sold. This investment technique is known as
a short sale "against the box." In a short sale, the Fund sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. The Fund will not dispose of the securities underlying a
short sale while a short sale is outstanding. The Fund also does not intend to
engage in short sales against the box for investment purposes. The Investment
Manager expects that the Fund will engage in short sales against the box as a
hedge when the Investment Manager believes that the price of a security may
decline, or when the Fund wants to sell the security it owns at the current
price, but to defer recognition of gain or loss for tax purposes, or to satisfy
certain tests applicable to regulated investment companies under the Internal
Revenue Code. The Investment Manager currently anticipates that no more than 5%
of the Fund's total assets would be involved in short sales against the box.

Lending of Portfolio Securities. The Fund is authorized to engage in
securities lending transactions in an amount up to one-third of the Fund's total
assets, although it has no current intention of entering into such transactions
in excess of 5% of its net assets during the coming year. If the Fund engages in
lending transactions, it will enter into lending agreements that require that
the loans be continuously secured by cash, securities issued or guaranteed by
the U.S. Government or its agencies, or any combination of cash and such
securities, as collateral equal at all times to at least the market value of the
assets lent. The Fund will typically receive the dividends and interest paid on
the assets lent, if any, while simultaneously earning interest on the loan or a
flat fee from the borrower. The Fund will normally pay administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest on cash or securities held as collateral to the borrower or placing
broker. There may be risks of delay to the Fund in receiving additional
collateral and risks of delay in recovery of, and failure to recover, the assets
lent should the borrower fail financially or otherwise violate the terms of the
lending agreement. Loans will be made only to borrowers deemed by the Investment
Manager to be of good standing and when, in the judgment of the Investment
Manager, the consideration which can be earned currently from such lending
transactions justifies the attendant risk. Any loan made by the Fund will
provide that it may be terminated by either party upon reasonable notice to the
other party.

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental investment restrictions that
may not be changed without the approval of the lesser of (a) 67% or more of the
voting securities of the Fund present at a meeting if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy or (b) more than 50% of the outstanding voting securities of the Fund.
Any investment restriction which involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Fund. The Fund may not:

1. Purchase securities of any one issuer if, as a result, more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would own or
hold 10% of the outstanding securities of that issuer, except that up to 50% of
the Fund's total assets may be invested without regard to this limitation and
provided that this limitation does not apply to securities issued or guaranteed
by the U.S.

5
<PAGE>

Government, its agencies or instrumentalities or securities of other investment
companies;

2. Lend money or securities, provided that (i) the making of time or demand
deposits with banks, (ii) the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short term obligations
in accordance with its investment objective and policies and (iii) engaging in
securities loan transactions limited to one-third of the Fund's total assets are
not prohibited;

3. Borrow money, except to the extent permitted by the 1940 Act;

4. Concentrate more than 25% of the value of its assets in any one industry.
Water, communications, electric and gas utilities shall each be considered a
separate industry. This limitation shall not apply to obligations issued by the
U.S. Government or its agencies or instrumentalities;

5. Invest in commodities or commodity futures contracts, although it may
enter into financial and foreign currency futures contracts and options thereon,
options on foreign currencies and forward contracts on foreign currencies;

6. Invest in real estate, although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate;

7. Underwrite the securities of other issuers except to the extent the Fund
may be deemed to be an underwriter under the Federal securities laws in
connection with the disposition of the Fund's securities. The Fund may buy and
sell securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States; or

8. Issue senior securities as defined in the Investment Company Act of 1940.
The following will not be deemed to be senior securities for this purpose: (i)
evidences of indebtedness that the Fund is permitted to incur, (ii) the issuance
of additional series or classes that the directors may establish, (iii) the
Fund's futures, options and forward currency transactions, and (iv) to the
extent consistent with the 1940 Act and applicable rules and policies adopted by
the Securities and Exchange Commission, (A) the establishment or use of a margin
account with a broker for the purpose of effecting securities transactions on
margin and (B) short sales;

9. The Fund, notwithstanding any other investment policy or restriction
(whether or not fundamental) may invest all of its assets in the securities or
beneficial interests of a single pooled investment fund having substantially the
same objectives, policies and limitations as the Fund.

The Corporation's Board of Directors has established the following non-
fundamental investment limitations that may be changed by the Board without
shareholder approval. The Fund may not:

1. Engage in arbitrage transactions;

2. Invest in warrants (valued at lower of cost or market) which exceed 5% of
its net assets at the time of purchase nor invest in warrants which are not
listed on the New York Stock Exchange or American Stock Exchange which exceed 2%
of its net assets at the time of purchase;

3. Invest more than 5% of its assets in securities of companies having a
record of less than three years continuous operations (including operations of
predecessors);

4. Invest more than 15% of its net assets in illiquid assets, including
repurchase agreements maturing in more than seven days, or more than 10% of its
net assets in illiquid restricted securities,, a term which means securities
which may only be

6
<PAGE>

sold in privately negotiated transactions or in public offerings with respect to
which a registration statement is in effect under the 1933 Act;

5. Make short sales of securities, or purchase any securities on margin,
except (i) the Fund may use options, futures contracts or options on futures
contracts or forward currency contracts, (ii) the Fund may obtain such short
term credits as may be necessary for the clearance of transactions, (iii) the
Fund may make initial margin deposits and variation margin payments in
connection with transactions in futures contracts and options thereon, and
forward currency contracts, and (iv) by virtue of its ownership of other
securities, the Fund owns or has the right to obtain securities equivalent in
kind and amount to the securities sold where, if the right is conditional, the
sale is made upon the same conditions;

6. Purchase or retain securities of any issuer, if to the knowledge of the
Fund, those officers or directors of the Fund or its Investment Manager owning
beneficially more than 1/2 of 1% of the securities of an issuer together own
beneficially more than 5% of the securities of that issuer;

7. Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although it may invest in the securities of
issuers which invest in or sponsor such programs;

8. Invest more than 5% of the value of its total assets in the securities of
any registered investment company (as defined in the Investment Company Act of
1940), or more than 10% of its total assets in all such investment companies,
acquire more than 3% of the outstanding voting securities of any such investment
company nor make purchases of such securities other than in the open market
involving no commission or profit to a distributor or dealer other than the
customary distributors' or dealers' concession or commission, and except as part
of a plan of merger, consolidation, reorganization or acquisition of assets.
Ongoing investments in shares of other investment companies may subject
shareholders to additional management, administrative and distribution expenses;

9. Purchase securities for investment while any bank borrowing equaling 5% or
more of its total assets is outstanding. The Fund may only borrow from a bank
for temporary or emergency purposes or engage in reverse repurchase agreements
in an amount up to one-third of its assets;

10. With respect to options transactions, (a) the Fund will write only
covered options and each such option will remain covered so long as the Fund is
obligated under the option; (b) the Fund will not write call or put options
having aggregate exercise prices greater than 25% of its net assets; and (c) the
Fund may purchase a put or call option, including any straddles or spreads, only
if the value of its premium, when aggregated with the premiums on all other
options held by the Fund, does not exceed 5% of the Fund's total assets; or

11. With respect to financial and foreign currency futures and related
options (including options traded on a commodities exchange), the Fund will not
purchase or sell futures contracts or related options other than for bona fide
hedging purposes if, immediately thereafter, the sum of the amount of initial
margin deposits on the Fund's existing futures positions and related options and
premiums paid for related options would exceed 5% of the Fund's total assets.

OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES

Regulation of the Use of Options, Futures and Forward Currency Contract
Strategies. As discussed in the Prospectus, the Investment Manager may engage in
certain options strategies to attempt to enhance return or for hedging purposes.
The Investment Manager also may use securities index futures contracts, interest
rate futures contracts, foreign currency futures contracts (collectively,
"futures contracts" or "futures"), options on futures contracts and forward
currency

7
<PAGE>

contracts for hedging purposes or in other circumstances permitted by the
Commodity Futures Trading Commission ("CFTC"). Certain special characteristics
of and risks associated with using these instruments are discussed below. In
addition to the non-fundamental investment restrictions described above in
sections 10 and 11, use of options, forward currency contracts and futures by
the Fund is subject to the applicable regulations of the SEC, the several
options and futures exchanges upon which such instruments may be traded, the
CFTC and the various state regulatory authorities.

In addition to the products, strategies and risks described below and in the
Prospectus, the Investment Manager expects to discover additional opportunities
in connection with options, futures and forward currency contracts. These new
opportunities may become available as the Investment Manager develops new
techniques, as regulatory authorities broaden the range of permitted
transactions and as new options, futures and forward currency contracts are
developed. The Investment Manager may utilize these opportunities to the extent
they are consistent with the Fund's investment objective, permitted by the
Fund's investment limitations and permitted by the applicable regulatory
authorities. The Fund's registration statement will be supplemented to the
extent that new products and strategies involve materially different risks than
those described below and in the Prospectus.

Cover for Options, Futures and Forward Currency Contract Strategies. The Fund
will not use leverage in its options, futures and forward currency contract
strategies. Accordingly, the Fund will comply with guidelines established by the
SEC with respect to coverage of these strategies by either (1) setting aside
cash, U.S. Government or other liquid, high-grade debt securities in a
segregated account with its Custodian in the prescribed amount, or (2) holding
securities, currencies or other options or futures contracts whose values are
expected to offset ("cover") its obligations thereunder. Securities, currencies
or other options or futures contracts used for cover and securities held in a
segregated account cannot be sold or closed out while the strategy is
outstanding, unless they are replaced with similar assets. As a result, there is
a possibility that the use of cover or segregation involving a large percentage
of the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.

Option Income and Hedging Strategies. The Fund may purchase and write (sell)
both exchange-traded options and options traded on the over-the-counter ("OTC")
market. Currently, options on debt securities are primarily traded on the OTC
market. Although many options on currencies are exchange-traded, the majority of
such options currently are traded on the OTC market. Exchange-traded options in
the U.S. are issued by a clearing organization affiliated with the exchange on
which the option is listed, which, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its contra-party with no clearing organization guarantee.
Thus, when the Fund purchases an OTC option, it relies on the dealer from which
it has purchased the OTC option to make or take delivery of the securities
underlying the option. Failure by the dealer to do so would result in the loss
of any premium paid by the Fund as well as the loss of the expected benefit of
the transaction.

The Fund may purchase call options on securities (both equity and debt) that
the Investment Manager intends to include in the Fund's portfolio in order to
fix the cost of a future purchase. Call options also may be used as a means of
enhancing returns by, for example, participating in an anticipated price
increase of a security. In the event of a decline in the price of the underlying
security, use of this strategy would serve to limit the potential loss to the
Fund to the option premium paid; conversely, if the market price of the
underlying security increases above the exercise price and the Fund either sells
or exercises the option, any profit eventually realized would be reduced by the
premium paid.

The Fund may purchase put options on securities in order to hedge against a
decline in the market value of securities held in its portfolio or to attempt to

8
<PAGE>

enhance return. The put option enables the Fund to sell the underlying security
at the predetermined exercise price; thus, the potential for loss to the Fund
below the exercise price is limited to the option premium paid. If the market
price of the underlying security is higher than the exercise price of the put
option, any profit the Fund realizes on the sale of the security would be
reduced by the premium paid for the put option less any amount for which the put
option may be sold.

The Fund may on certain occasions wish to hedge against a decline in the
market value of securities held in its portfolio at a time when put options on
those particular securities are not available for purchase. The Fund may
therefore purchase a put option on other carefully selected securities, the
values of which historically have a high degree of positive correlation to the
value of such portfolio securities. If the Investment Manager's judgment is
correct, changes in the value of the put options should generally offset changes
in the value of the portfolio securities being hedged. However, the correlation
between the two values may not be as close in these transactions as in
transactions in which the Fund purchases a put option on a security held in its
portfolio. If the Investment Manager's judgment is not correct, the value of the
securities underlying the put option may decrease less than the value of the
Fund's portfolio securities and therefore the put option may not provide
complete protection against a decline in the value of the Fund's portfolio
securities below the level sought to be protected by the put option.

The Fund may write covered call options on securities in which it is
authorized to invest for hedging or to increase return in the form of premiums
received from the purchasers of the options. A call option gives the purchaser
of the option the right to buy, and the writer (seller) the obligation to sell,
the underlying security at the exercise price during the option period. The
strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Fund declines, the amount of such decline
will be offset wholly or in part by the amount of the premium received by the
Fund. If, however, there is an increase in the market price of the underlying
security and the option is exercised, the Fund would be obligated to sell the
security at less than its market value. The Fund would give up the ability sell
any portfolio securities used to cover the call option while the call option was
outstanding. In addition, the Fund could lose the ability to participate in an
increase in the value of such securities above the exercise price of the call
option because such an increase would likely be offset by an increase in the
cost of closing out the call option (or could be negated if the buyer chose to
exercise the call option at an exercise price below the current market value).
Portfolio securities used to cover OTC options written also may be considered
illiquid, and therefore subject to the Fund's limitation on investing no more
than 15% of its net asset in illiquid securities, unless the OTC options are
sold to qualified dealers who agree that the Fund may repurchase any OTC options
it writes for a maximum price to be calculated by a formula set forth in the
option agreement. The cover for an OTC option written subject to this procedure
would be considered illiquid only to the extent that the maximum repurchase
price under the formula exceeds the intrinsic value of the option.

The Fund also may write covered put options on securities in which it is
authorized to invest. A put option gives the purchaser of the option the right
to sell, and the writer (seller) the obligation to buy, the underlying security
at the exercise price during the option period. So long as the obligation of the
writer continues, the writer may be assigned an exercise notice by the
broker/dealer through whom such option was sold, requiring it to make payment of
the exercise price against delivery of the underlying security. The operation of
put options in other respects, including their related risks and rewards, is
substantially identical to that of call options. If the put option is not
exercised, the Fund will realize income in the amount of the premium received.
This technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security would decline

9
<PAGE>

below the exercise price less the premiums received, in which case the Fund
would expect to suffer a loss.

The Fund may purchase put and call options and write covered put and call
options on securities indexes in much the same manner as the more traditional
securities options discussed above, except that index options may serve as a
hedge against overall fluctuations in the securities markets (or a market
sector) rather than anticipated increases or decreases in the value of a
particular security. A securities index assigns values to the securities
included in the index and fluctuates with changes in such values. Settlements of
securities index options are effected with cash payments and do not involve
delivery of securities. Thus, upon settlement of a securities index option, the
purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the index. The
effectiveness of hedging techniques using securities index options will depend
on the extent to which price movements in the securities index selected
correlate with price movements of the securities in which the Fund invests.

The Fund may purchase and write covered straddles on securities indexes. A
long straddle is a combination of a call and a put purchased on the same
security where the exercise price of the put is less than or equal to the
exercise price on the call. The Fund would enter into a long straddle when the
Investment Manager believes that it is likely that securities prices will be
more volatile during the term of the options than is implied by the option
pricing. A short straddle is a combination of a call and a put written on the
same security where the exercise price on the put is less than or equal to the
exercise price of the call where the same issue of the security is considered
"cover" for both the put and the call. The Fund would enter into a short
straddle when the Investment Manager believes that it is unlikely that
securities prices will be as volatile during the term of the options as is
implied by the option pricing. In such case, the Fund will set aside cash and/or
liquid, high-grade debt securities in a segregated account with its Custodian
equivalent in value to the amount, if any, by which the put is "in-the-money,"
that is, that amount by which the exercise price of the put exceeds the current
market value of the underlying security.

Foreign Currency Options and Related Risks. The Fund may take positions in
options on foreign currencies to hedge against the risk of foreign exchange rate
fluctuations on foreign securities that the Fund holds in its portfolio or that
it intends to purchase. For example, if the Fund enters into a contract to
purchase securities denominated in a foreign currency, it could effectively fix
the maximum U.S. dollar cost of the securities by purchasing call options on
that foreign currency. Similarly, if the Fund held securities denominated in a
foreign currency and anticipated a decline in the value of that currency against
the U.S. dollar, the Fund could hedge against such a decline by purchasing a put
option on the currency involved. The Fund's ability to establish and close out
positions in such options is subject to the maintenance of a liquid secondary
market. Although many options on foreign currencies are exchange-traded, the
majority are traded on the OTC market. The Fund will not purchase or write such
options unless, in the Investment Manager's opinion, the market for them is
sufficiently liquid to ensure that the risks in connection with such options are
not greater than the risks in connection with the underlying currency. In
addition, options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally.

The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally

10
<PAGE>

consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers and other market resources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (that is, less than $1 million) where rates may be less favorable.
The interbank market in foreign currencies is a global, around-the-clock market.
To the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets
until they reopen.

Special Characteristics and Risks of Options Trading. The Fund may effectively
terminate its right or obligation under an option by entering into a closing
transaction. If the Fund wishes to terminate its obligation to purchase or sell
securities or currencies under a put or a call option it has written, the Fund
may purchase a put or a call option of the same series (that is, an option
identical in its terms to the option previously written); this is known as a
closing purchase transaction. Conversely, in order to terminate its right to
purchase or sell specified securities or currencies under a call or put option
it has purchased, the Fund may sell an option of the same series as the option
held; this is known as a closing sale transaction. Closing transactions
essentially permit the Fund to realize profits or limit losses on its options
positions prior to the exercise or expiration of the option.

In considering the use of options to enhance returns or to hedge the Fund's
portfolio, particular note should be taken of the following:

(1) The value of an option position will reflect, among other things, the
current market price of the underlying security, securities index or currency,
the time remaining until expiration, the relationship of the exercise price to
the market price, the historical price volatility of the underlying security,
securities index or currency and general market conditions. For this reason, the
successful use of options depends upon the Investment Manager's ability to
forecast the direction of price fluctuations in the underlying securities or
currency markets or, in the case of securities index options, fluctuations in
the market sector represented by the selected index.

(2) Options normally have expiration dates of up to three years. The exercise
price of the options may be below, equal to or above the current market value of
the underlying security, securities index or currency. Purchased options that
expire unexercised have no value. Unless an option purchased by the Fund is
exercised or unless a closing transaction is effected with respect to that
position, the Fund will realize a loss in the amount of the premium paid and any
transaction costs.

(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. Most exchange-
listed options relate to stocks. Although the Fund intends to purchase or write
only those exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary market will
exist for any particular option at any particular time. Closing transactions may
be effected with respect to options traded in the OTC markets (currently the
primary markets for options on debt securities and a significant market for
foreign currencies) only by negotiating directly with the other party to the
option contract or in a secondary market for the option if such market exists.
Although the Fund will enter into OTC options with dealers that agree to enter
into, and that are expected to be capable of entering into, closing transactions
with the Fund, there can be no assurance that the Fund would be able to
liquidate an OTC option at a favorable price at any time prior to expiration. In
the event of insolvency of the contra-party, the Fund may be unable

11
<PAGE>

to liquidate an OTC option. Accordingly, it may not be possible to effect
closing transactions with respect to certain options, which would result in the
Fund having to exercise those options that it has purchased in order to realize
any profit. With respect to options written by the Fund, the inability to enter
into a closing transaction may result in material losses to the Fund. For
example, because the Fund must maintain a covered position with respect to any
call option it writes on a security, currency or securities index, the Fund may
not sell the underlying securities or currency (or invest any cash securities
used to cover the option) during the period it is obligated under such option.
This requirement may impair the Fund's ability to sell a portfolio security or
make an investment at a time when such a sale or investment might be
advantageous.

(4) Securities index options are settled exclusively in cash. If the Fund
writes a call option on an index, the Fund will not know in advance the
difference, if any, between the closing value of the index on the exercise date
and the exercise price of the call option itself and thus will not know the
amount of cash payable upon settlement. In addition, a holder of a securities
index option who exercises it before the closing index value for that day is
available, runs the risk that the level of the underlying index may subsequently
change.

(5) The Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs and taxes; however, the
Fund also may save on commissions by using options as a hedge rather than buying
or selling individual securities in anticipation or as a result of market
movements.

Futures and Related Options Strategies. The Fund may engage in futures
strategies for hedging purposes to attempt to reduce the overall investment risk
that would normally be expected to be associated with ownership of the
securities in which it invests. This may involve, among other things, using
futures strategies to manage the effective duration of the Fund. If the
Investment Manager wishes to shorten the effective duration of the Fund, the
Fund may sell a futures contract or a call option thereon, or purchase a put
option on that futures contract. If the Investment Manager wishes to lengthen
the effective duration of the Fund, the Fund may buy a futures contract or a
call option thereon, or sell a put option.

The Fund may use interest rate futures contracts and options thereon to hedge
its portfolio against changes in the general level of interest rates and in
other circumstances permitted by the CFTC. The Fund may purchase an interest
rate futures contract when it intends to purchase debt securities but has not
yet done so. This strategy may minimize the effect of all or part of an increase
in the market price of the debt security that the Fund intends to purchase in
the future. A rise in the price of the debt security prior to its purchase may
either be offset by an increase in the value of the futures contract purchased
by the Fund or avoided by taking delivery of the debt securities under the
futures contract. Conversely, a fall in the market price of the underlying debt
security may result in a corresponding decrease in the value of the futures
position. The Fund may sell an interest rate futures contract in order to
continue to receive the income from a debt security, while endeavoring to avoid
part or all of the decline in market value of that security that would accompany
an increase in interest rates.

The Fund may purchase a call option on an interest rate futures contract to
hedge against a market advance in debt securities that the Fund plans to acquire
at a future date. The purchase of a call option on an interest rate futures
contract is analogous to the purchase of a call option on an individual debt
security, which can be used as a temporary substitute for a position in the
security itself. The Fund also may write covered put options on interest rate
futures contracts as a partial anticipatory hedge and may write covered call
options on interest rate futures contracts as a partial hedge against a decline
in the price of debt securities held in the Fund's portfolio. The Fund may also
purchase put options on interest rate futures contracts in order to hedge
against a decline in the value of debt securities held in the Fund's portfolio.

12
<PAGE>

The Fund may sell securities index futures contracts in anticipation of a
general market or market sector decline that could adversely affect the market
value of the Fund's portfolio. To the extent that a portion of the Fund's
portfolio correlates with a given index, the sale of futures contracts on that
index could reduce the risks associated with a market decline and thus provide
an alternative to the liquidation of securities positions. For example, if the
Fund correctly anticipates a general market decline and sells securities index
futures to hedge against this risk, the gain in the futures position should
offset some or all of the decline in the value of the portfolio. The Fund may
purchase securities index futures contracts if a market or market sector advance
is anticipated. Such a purchase of a futures contract would serve as a temporary
substitute for the purchase of individual securities, which securities may then
be purchased in an orderly fashion. This strategy may minimize the effect of all
or part of an increase in the market price of securities that the Fund intends
to purchase. A rise in the price of the securities should be in part or wholly
offset by gains in the futures position.

As in the case of a purchase of a securities index futures contract, the Fund
may purchase a call option on a securities index futures contract to hedge
against a market advance in securities that the Fund plans to acquire at a
future date. The Fund may write covered put options on securities index futures
as a partial anticipatory hedge and may write covered call options on securities
index futures as a partial hedge against a decline in the price of securities
held in the Fund's portfolio. This is analogous to writing covered call options
on securities. The Fund also may purchase put options on securities index
futures contracts. The purchase of put options on securities index futures
contracts is analogous to the purchase of protective put options on individual
securities where a level of protection is sought below which no additional
economic loss would be incurred by the Fund.

The Fund may sell foreign currency futures contracts to hedge against possible
variations in the exchange rate of foreign currency in relation to the U.S.
dollar. In addition, the Fund may sell foreign currency futures contracts when
the Investment Manager anticipates a general weakening of the foreign currency
exchange rate that could adversely affect the market value of the Fund's foreign
securities holdings or interest payments to be received in that foreign
currency. In this case, the sale of futures contracts on the underlying currency
may reduce the risk to the Fund of a reduction in market value caused by foreign
currency exchange rate variations and, by so doing, provide an alternative to
the liquidation of securities positions and resulting transaction costs. When
the Investment Manager anticipates a significant foreign exchange rate increase
while intending to invest in a security denominated in that currency, the Fund
may purchase a foreign currency futures contract to hedge against the increased
rates pending completion of the anticipated transaction. Such a purchase would
serve as a temporary measure to protect the Fund against any rise in the foreign
currency exchange rate that may add additional costs to acquiring the foreign
security position. The Fund may also purchase call or put options on foreign
currency futures contracts to obtain a fixed foreign currency exchange rate at
limited risk. The Fund may purchase a call option on a foreign currency futures
contract to hedge against a rise in the foreign currency exchange rate while
intending to invest in a security denominated in that currency. The Fund may
purchase put options on foreign currency futures contracts as a hedge against a
decline in the foreign currency exchange rates or the value of its foreign
portfolio securities. The Fund may write a covered put option on a foreign
currency futures contract as a partial anticipatory hedge and may write a
covered call option on a foreign currency futures contract as a partial hedge
against the effects of declining foreign currency exchange rates on the value of
foreign securities.

The Fund may also write put options on interest rate, securities index or
foreign currency futures contracts while, at the same time, purchasing call
options on the same interest rate, securities index or foreign currency futures
contract in order to synthetically create an interest rate, securities index or
foreign currency futures contract. The options will have the same strike prices
and expiration dates.

13
<PAGE>

The Fund will only engage in this strategy when it is more advantageous to the
Fund to do so as compared to purchasing the futures contract.

The Fund may also purchase and write covered straddles on interest rate or
securities index futures contracts. A long straddle is a combination of a call
and a put purchased on the same security at the same exercise price. The Fund
would enter into a long straddle when it believes that it is likely that
securities prices will be more volatile during the term of the options than is
implied by the option pricing. A short straddle is a combination of a call and
put written on the same futures contract at the same exercise price where the
same security or futures contract is considered "cover" for both the put and the
call. The Fund would enter into a short straddle when it believes that it is
unlikely that securities prices will be as volatile during the term of the
options as is implied by the option pricing. In such case, the Fund will set
aside cash and/or liquid, high grade debt securities in a segregated account
with its Custodian equal in value to the amount, if any, by which the put is
"in-the-money," that is the amount by which the exercise price of the put
exceeds the current market value of the underlying security.

Special Characteristics and Risks of Futures and Related Options Trading. No
price is paid upon entering into a futures contract. Instead, upon entering into
a futures contract, the Fund is required to deposit with its Custodian in a
segregated account in the name of the futures broker through whom the
transaction is effected an amount of cash, U.S. Government securities or other
liquid, high-grade debt instruments generally equal to 10% or less of the
contract value. This amount is known as "initial margin." When writing a call or
a put option on a futures contract, margin also must be deposited in accordance
with applicable exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not involve borrowing to finance the
futures transactions. Rather, initial margin on futures contracts is in the
nature of a performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the transaction, assuming all
obligations have been satisfied. Under certain circumstances, such as periods of
high volatility, the Fund may be required by an exchange to increase the level
of its initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily basis as
the value of the futures or options position varies, a process known as "marking
to the market." For example, when the Fund purchases a contract and the value of
the contract rises, the Fund receives from the broker a variation margin payment
equal to that increase in value. Conversely, if the value of the futures
position declines, the Fund is required to make a variation margin payment to
the broker equal to the decline in value. Variation margin does not involve
borrowing to finance the futures transaction but rather represents a daily
settlement of the Fund's obligations to or from a clearing organization.

Buyers and sellers of futures positions and options thereon can enter into
offsetting closing transactions, similar to closing transactions on options on
securities, by selling or purchasing an offsetting contract or option. Futures
contracts or options thereon may be closed only on an exchange or board of trade
providing a secondary market for such futures contracts or options.

14
<PAGE>

used to hedge portfolio securities, such securities will not be sold until the
contracts can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the contracts and thus provide an
offset to losses on the contracts.

In considering the Fund's use of futures contracts and related options,
particular note should be taken of the following:

(1) Successful use by the Fund of futures contracts and related options will
depend upon the Investment Manager's ability to predict movements in the
direction of the overall securities, currencies and interest rate markets, which
requires different skills and techniques than predicting changes in the prices
of individual securities. Moreover, futures contracts relate not only to the
current price level of the underlying instrument or currency but also to the
anticipated price levels at some point in the future. There is, in addition, the
risk that the movements in the price of the futures contract will not correlate
with the movements in the prices of the securities or currencies being hedged.
For example, if the price of the securities index futures contract moves less
than the price of the securities that are the subject of the hedge, the hedge
will not be fully effective, but if the price of the securities being hedged has
moved in an unfavorable direction, the Fund would be in a better position than
if it had not hedged at all. If the price of the securities being hedged has
moved in a favorable direction, the advantage may be partially offset by losses
in the futures position. In addition, if the Fund has insufficient cash, it may
have to sell assets from its portfolio to meet daily variation margin
requirements. Any such sale of assets may or may not be made at prices that
reflect a rising market. Consequently, the Fund may need to sell assets at a
time when such sales are disadvantageous to the Fund. If the price of the
futures contract moves more than the price of the underlying securities, the
Fund will experience either a loss or a gain on the futures contract that may or
may not be completely offset by movements in the price of the securities that
are the subject of the hedge.

(2) In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between price movements in the futures position and
the securities or currencies being hedged, movements in the prices of futures
contracts may not correlate perfectly with movements in the prices of the hedged
securities or currencies due to price distortions in the futures market. There
may be several reasons unrelated to the value of the underlying securities or
currencies that cause this situation to occur. First, as noted above, all
participants in the futures market are subject to initial and variation margin
requirements. If, to avoid meeting additional margin deposit requirements or for
other reasons, investors choose to close a significant number of futures
contracts through offsetting transactions, distortions in the normal price
relationship between the securities or currencies and the futures markets may
occur. Second, because the margin deposit requirements in the futures market are
less onerous than margin requirements in the securities market, there may be
increased participation by speculators in the futures market; such speculative
activity in the futures market also may cause temporary price distortions. As a
result, a correct forecast of general market trends may not result in successful
hedging through the use of futures contracts over the short term. In addition,
activities of large traders in both the futures and securities markets involving
arbitrage and other investment strategies may result in temporary price
distortions.

(3) Positions in futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such futures contracts.
Although the Fund intends to purchase and sell futures only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract at any particular time. In such event, it
may not be possible to close a

15
<PAGE>

futures positions, and in the event of adverse price movements, the Fund would
continue to be required to make variation margin payments.

(4) Like options on securities and currencies, options on futures contracts
have limited life. The ability to establish and close out options on futures
will be subject to the development and maintenance of liquid secondary markets
on the relevant exchanges or boards of trade. There can be no certainty that
such markets for all options on futures contracts will develop.

(5) Purchasers of options on futures contracts pay a premium at the time of
purchase. This amount and the transaction costs are all that is at risk. Sellers
of options on futures contracts, however, must post initial margin and are
subject to additional margin calls that could be substantial in the event of
adverse price movements. In addition, although the maximum amount at risk when
the Fund purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of an option on
a futures contract would result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement in the level of the
underlying securities index value or the securities or currencies being hedged.

(6) As is the case with options, the Fund's activities in the futures markets
may result in a higher portfolio turnover rate and additional transaction costs
in the form of added brokerage commissions and taxes; however, the Fund also may
save on commissions by using futures contracts or options thereon as a hedge
rather than buying or selling individual securities or currencies in
anticipation or as a result of market movements.

Special Risks Related to Foreign Currency Futures Contracts and Related
Options. Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition, there
are risks associated with foreign currency futures contracts and their use as a
hedging device similar to those associated with options on foreign currencies
described above.

Options on foreign currency futures contracts may involve certain additional
risks. The ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market. Compared to the
purchase or sale of foreign currency futures contracts, the purchase of call or
put options thereon involves less potential risk to the Fund because the maximum
amount at risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when the purchase of a call or put option on
a foreign currency futures contract would result in a loss, such as when there
is no movement in the price of the underlying currency or futures contract, when
the purchase of the underlying futures contract would not result in such a loss.

Forward Currency Contracts. The Fund may use forward currency contracts to
protect against uncertainty in the level of future foreign currency exchange
rates.

The Fund may enter into forward currency contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or the Fund anticipates
the receipt in a foreign currency of dividend or interest payments on a security
that it holds or anticipates purchasing the Fund may desire to "lock in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such payment,
as the case may be, by entering into a forward contract for the purchase or
sale, for a fixed amount of U.S. dollars or foreign currency, of the amount of
foreign currency involved in the underlying transaction. The Fund will thereby
be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the period
between the date on which the security is purchased or sold, or on which the
payment is declared, and the date on which such payments are made or received.

16
<PAGE>

The Fund also may hedge by using forward currency contracts in connection with
portfolio positions to lock in the U.S. dollar value of those positions, to
increase the Fund's exposure to foreign currencies that the Investment Manager
believes may rise in value relative to the U.S. dollar or to shift the Fund's
exposure to foreign currency fluctuations from one country to another. For
example, when the Investment Manager believes that the currency of a particular
foreign country may suffer a substantial decline relative to the U.S. dollar or
another currency, it may enter into a forward contract to sell the amount of the
former foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This investment
practice generally is referred to as "cross-hedging" when another foreign
currency is used. Certain of these strategies may result in income subject to
the "Short-Short Limitation". See "Distributions and Taxes".

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (that is, cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
the market value of the security exceeds the amount of foreign currency the Fund
is obligated to deliver. The projection of short term currency market movements
is extremely difficult and the successful execution of a short term hedging
strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs. Under normal
circumstances, consideration of the prospects for currency parities will be
incorporated into the longer term decisions made with regard to overall
investment strategies. However, the Investment Manager believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Fund will be served.

At or before the maturity date of a forward contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting forward currency
contract under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and the offsetting contract.

The cost to the Fund of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of forward currency contracts does not eliminate fluctuations in the
prices of the underlying securities the Fund owns or intends to acquire, but it
does fix a rate of exchange in advance. In addition, although forward currency
contracts limit the risk of loss due to a decline in the value of the hedged
currencies, at the same time they limit any potential gain that might result
should the value of the currencies increase.

17
<PAGE>

Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.

THE BULL & BEAR FUNDS

The Bull & Bear Funds are:

Bull & Bear Dollar Reserves
Bull & Bear U.S. Government Securities Fund
Bull & Bear Municipal Income Fund
Bull & Bear Global Income Fund
Bull & Bear Quality Growth Fund
Bull & Bear U.S. and Overseas Fund
Bull & Bear Special Equities Fund
Bull & Bear Gold Investors

OFFICERS AND DIRECTORS

The officers and Directors of the Fund, their respective offices and principal
occupations during the last five years are set forth below. Unless otherwise
noted, the address of each is 11 Hanover Square, New York, NY 10005.

BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the Board of the
other four investment companies in the Bull & Bear Funds Complex (the "Bull &
Bear Funds Complex") and of the parent of the Investment Manager, Bull & Bear
Group, Inc. ("Group"). He was born February 10, 1930. He is a member of the New
York Society of Security Analysts, the Association for Investment Management and
Research and the International Society of Financial Analysts. He is the father
of Mark C. Winmill and Thomas B. Winmill.

ROBERT D. ANDERSON* -- Vice Chairman and Director. He is Vice Chairman and a
Director of the Bull & Bear Funds Complex and of the Investment Manager and its
affiliates. He was born December 7, 1929. He is a member of the Board of
Governors of the Mutual Fund Education Alliance, and of its predecessor, the No-
Load Mutual Fund Association. He has also been a member of the District #12,
District Business Conduct and Investment Companies Committees of the NASD.

BRUCE B. HUBER, CLU -- Director. 298 Broad Street, Red Bank, NJ 07701. He is
President of Huber-Hogan Consulting, Inc. financial consultants and insurance
planners. He was born February 7, 1930. From 1988 to 1990, he was Chairman of
Bruce Huber Associates. From 1987 to 1988, he was Chairman of Economic Benefits
Corporation, and prior thereto President of Bruce Huber Associates, Inc., a
financial and insurance consulting firm specializing in estate, corporate, and
executive benefit planning. He is also a Director of the Bull & Bear Funds
Complex.

18
<PAGE>

JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Kenny, Kindler, Hunt & Howe, Inc., executive recruiting
consultants. He was born December 14, 1930. From 1976 until 1983 he was Vice
President of Russell Reynolds Associates, Inc., also executive recruiting
consultants. He is also a Director of the Bull & Bear Funds Complex.

FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York, NY 10021.
He is President and Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. He was born November 14, 1926. He
is also a Director of the Bull & Bear Funds Complex.

JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He was Executive Vice President and a Director of Dan River, Inc., a diversified
textile company, from 1969 until he retired in 1981. He was born February 9,
1923. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry. He is also a Director of the Bull & Bear Funds Complex.

MARK C. WINMILL -- Co-President, Co-Chief Executive Officer, and Chief Financial
Officer. He is Co-President, Co-Chief Executive Officer, and Chief Financial
Officer of the Bull & Bear Funds Complex and of Group and certain of its
affiliates, Chairman of the Investment Manager and Bull & Bear Service Center,
Inc. (the "Distributor"), and President of Bull & Bear Securities, Inc.
("BBSI"). He was born November 26, 1957. He received his M.B.A. from the Fuqua
School of Business at Duke University in 1987. From 1983 to 1985 he was
Assistant Vice President and Director of Marketing of E.P. Wilbur & Co., Inc., a
real estate development and syndication firm and Vice President of E.P.W.
Securities, its broker/dealer subsidiary. He is a son of Bassett S. Winmill and
brother of Thomas B. Winmill. He is also a Director of two of the other
investment companies in the Bull & Bear Funds Complex.

THOMAS B. WINMILL -- Co-President, Co-Chief Executive Officer, and General
Counsel. He is Co-President, Co-Chief Executive Officer, and General Counsel of
the Bull & Bear Funds Complex and of Group and certain of its affiliates,
President of the Investment Manager and the Distributor, and Chairman of BBSI.
He was born June 25, 1959. He was associated with the law firm of Harris,
Mericle & Orr from 1984 to 1987. He is a member of the New York State Bar. He is
a son of Bassett S. Winmill and brother of Mark C. Winmill. He is also a
Director of certain of the other Bull & Bear Funds.

STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Bull & Bear Funds Complex, the Investment Manager and certain of its affiliates.
He was born March 1, 1955. From 1993 to 1995, he was Associate Director --
Proprietary Trading at Barclays De Zoete Wedd Securities Inc., from 1992 to 1993
he was Director, Bond Arbitrage at WG Trading Company, and from 1989 to 1992 he
was Vice President of Wilkinson Boyd Capital Markets.

BRETT B. SNEED, CFA -- Senior Vice President. He is Senior Vice President of the
Bull & Bear Funds Complex, the Investment Manager and certain of its affiliates.
He was born June 11, 1941. He is a Chartered Financial Analyst, a member of the
Association for Investment Management and Research, and a member of the New York
Society of Security Analysts. From 1986 to 1988, he managed private accounts,
from 1981 to 1986, he was Vice President of Morgan Stanley Asset Management,
Inc. and prior thereto was a portfolio manager and member of the Finance and
Investment Committees of American International Group, Inc., an insurance
holding company.

WILLIAM K. DEAN, CPA -- Treasurer and Chief Accounting Officer. He is Treasurer
and Chief Accounting Officer of the Bull & Bear Funds Complex, the Investment
Manager and its affiliates. He was born September 5, 1955. From 1984 to 1995 he
held various positions with The Dreyfus Corporation, a mutual fund company. He
is a member of the

19
<PAGE>

American Institute of Certified Public Accountants and the New York State
Society of Certified Public Accountants.

WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice President and
Secretary of the Bull & Bear Funds Complex, the Investment Manager and its
affiliates. He was born September 13, 1964. From 1991 to 1994 he was associated
with the law firm of Skadden, Arps, Slate, Meagher & Flom. He is a member of the
New York State Bar.

* Bassett S. Winmill and Robert D. Anderson are "interested persons" of the Fund
as defined by the 1940 Act, because of their positions with the Investment
Manager.

<TABLE>
<CAPTION>
Compensation Table
=====================================================================
=======================
Name of Aggregate Pension or Estimated Total
Person, Compensa- Retirement Annual Compensation
Position tion From Benefits Benefits From
Registrant Accrued as Upon Registrant
Part of Fund Retirement and Fund
Expenses Complex Paid
to Directors
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bassett S. Winmill None None None None
Chairman

Robert D. Anderson None None None None
Vice Chairman

Bruce B. Huber $1,000 None None $10,000 from
Director 5 Funds

James E. Hunt $1,000 None None $10,000 from
Director 5 Funds

Frederick A. Parker $1,000 None None $11,000 from
Director 6 Funds

John B. Russell $1,000 None None $10,000 from
Director 5 Funds

Mark C. None None None None
Winmill
Co-President
=====================================================================
=======================
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas B. Winmill None None None None
Co-President

Steven A. None None None None
Landis
Senior Vice President
Brett B. Sneed None None None None
Senior Vice President
=====================================================================
=======================

</TABLE>

No officer, Director or employee of the Fund's Investment Manager receives any
compensation from the Fund for acting as an officer, Director or employee of the
Fund. As of March 31, 1995, officers and Directors of the Fund owned less than
1% of the outstanding shares of the Fund. As of March 31, 1995, no owner of
record owned more than 5% of the outstanding shares of the Fund.

THE INVESTMENT MANAGER

The Fund's Investment Manager is Bull & Bear Advisers, Inc., 11 Hanover
Square, New York, NY 10005. The Investment Manager, a registered investment
adviser, is a wholly-owned subsidiary of Group. The other principal subsidiaries
of Group include Bull & Bear Service Center, Inc., the Fund's Distributor and a
registered broker/dealer, and Bull & Bear Securities, Inc., a registered
broker/dealer providing discount brokerage services.

Group is a publicly-owned company whose securities are listed on Nasdaq and
traded in the over-the-counter market. Bassett S. Winmill may be deemed a
controlling person, as that term is defined by the rules and regulations of the
1940 Act, of Group and the Investment Manager on the basis of his ownership of
100% of Group's voting stock. The Bull & Bear Funds, each of which is managed by
the Investment Manager, had net assets of approximately $234 million as of April
17, 1995.

INVESTMENT MANAGEMENT AGREEMENT

Under the Investment Management Agreement, the Fund assumes and pays all
expenses required for the conduct of its business including, but not limited to,
custodian and transfer agency fees, accounting and legal fees, investment
management fees, fees of disinterested Directors, association fees, printing,
salaries of certain administrative and clerical personnel, necessary office
space, all expenses relating to the registration or qualification of the shares
of the Fund under Blue Sky laws and reasonable fees and expenses of counsel in
connection with such registration and qualification, miscellaneous expenses and
such non-recurring expenses as may arise, including actions, suits or
proceedings affecting the Fund and the legal obligation which the Fund may have
to indemnify its officers and Directors with respect thereto. For the fiscal
years ended December 31, 1992, 1993, and 1994 the Fund paid to the Investment
Manager aggregate investment management fees of $88,821, $100,532,

21
<PAGE>

and $99,685 respectively, of which $47,457, $13,959, and $5,401 was waived for
the years 1992, 1993, and 1994 respectively, pursuant to the expense guarantee
described below.

The Investment Manager has agreed in the Investment Management Agreement that
it will guarantee that the operating expenses of the Fund (including investment
management fees but excluding taxes, interest, brokerage commissions, expenses
incurred pursuant to a distribution plan under Rule 12b-1 of the 1940 Act, and
certain extraordinary expenses), expressed as a percentage of average daily net
assets, will not exceed for each fiscal year the lowest rate prescribed by any
state in which shares of the Fund are qualified for sale. Currently such
limitation is 2.5% of the first $30 million of the Fund's net assets, 2% of the
next $70 million of such assets, and 1.5% of such assets above $100 million.

If requested by the Board of Directors, the Investment Manager may provide
other services to the Fund such as, without limitation, the functions of
billing, accounting, certain shareholder communications and services,
administering state and Federal registrations, filings and controls and other
administrative services. Any services so requested and performed will be for the
account of the Fund and the costs of the Investment Manager in rendering such
services shall be reimbursed by the Fund, subject to examination by those
directors of the Fund who are not interested persons of the Investment Manager
or any affiliate thereof. For such services, the Fund reimbursed the Investment
Manager $8,212, $11,541, and $10,877 for the fiscal years ended December 31,
1992, 1993, and 1994, respectively.

The Investment Management Agreement is not assignable and terminates
automatically in the event of its assignment. The Investment Management
Agreement may also be terminated without penalty on 60 days' written notice at
the option of either party thereto or by a vote of the Corporation's
shareholders. The Investment Management Agreement provides that the Investment
Manager shall not be liable to the Corporation or the Fund or any shareholder of
the Corporation or the Fund for any error of judgment or mistake of law or for
any loss suffered by the Corporation or the Fund or the Corporation's
shareholders in connection with the matters to which the Investment Management
Agreement relates. Nothing contained in the Investment Management Agreement,
however, shall be construed to protect the Investment Manager against any
liability to the Corporation or the Fund or the Corporation's shareholders by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties or by reason of its reckless disregard of obligations and duties
under the Investment Management Agreement.

Group has granted the Fund a non-exclusive license to use the service marks
"Bull & Bear", "Bull & Bear Performance Driven", and "Performance Driven" under
certain terms and conditions on a royalty free basis. Such license will be
withdrawn in the event the investment manager of the Fund shall not be the
Investment Manager or another subsidiary of Group. If the license is terminated,
the Fund will eliminate all reference to "Bull & Bear" in its corporate name and
cease to use any of such service marks or any similar service marks in its
business.

DETERMINATION OF NET ASSET VALUE

The Fund's net asset value per share is calculated as of the close of normal
trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m. eastern
time, unless weather, equipment failure, or other factors contribute to an
earlier closing) each day the NYSE is open for trading. The NYSE is closed on
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because a
substantial portion of the Fund's net assets may be invested in foreign
securities and/or foreign currencies, trading in each of which is conducted in
foreign markets which are not necessarily closed on U.S. holidays, the net asset
value per share may be significantly affected on days when a shareholder has no
access to his or her investment in the Fund.

22
<PAGE>

Securities owned by the Fund are valued by various methods depending on the
market or exchange on which they trade. Securities traded on the New York Stock
Exchange, the American Stock Exchange and the Nasdaq National Market System are
valued at the last sale price, or if no sale has occurred, at the mean between
the current bid and asked prices. Securities traded on other exchanges are
valued as nearly as possible in the same manner. Securities traded only over-
the-counter are valued at the mean between the last available bid and ask
quotations, if available, or at their fair value as determined in good faith by
or under the general direction of the Board of Directors. Short term securities
are valued either at amortized cost or at original cost plus accrued interest,
both of which approximate current value.

Foreign securities are valued at the last sale price in a principal market
where they are traded, or, if last sale prices are unavailable, at the mean
between the last available bid and ask quotations. Foreign security prices are
expressed in their local currency and translated into U.S. dollars at current
exchange rates. Any changes in the value of forward contracts due to exchange
rate fluctuations are included in the determination of net asset value. Foreign
currency exchange rates are generally determined prior to the close of trading
on the NYSE. Occasionally, events affecting the value of foreign securities and
such exchange rates occur between the time at which they are determined and the
close of trading on the NYSE, which events will not be reflected in a
computation of a Fund's net asset value on that day. If events materially
affecting the value of such securities or currency exchange rates occur during
such time period, the securities will be valued at their fair value as
determined in good faith by or under the direction of the Board of Directors.

Price quotations generally are furnished by pricing services, which may also
use a matrix system to determine valuations. This system considers such factors
as security prices, yields, maturities, call features, ratings, and developments
relating to specific securities in arriving at valuations.

PURCHASE OF SHARES

The Conditions of Orders. The Fund reserves the right to reject any order for
any reason and to cancel any order due to nonpayment with respect to any person
or class of persons. Orders to purchase shares are not binding on the Fund until
they are confirmed by the Transfer Agent. If an order is canceled because of
non-payment or because the purchaser's check does not clear, the purchaser will
be responsible for any loss the Fund incurs. If the purchaser is already a
shareholder, the Fund can redeem shares from the purchaser's account to
reimburse the Fund for any loss. In addition, the purchaser may be prohibited or
restricted from placing future purchase orders in any of the Bull & Bear
Funds.

PERFORMANCE INFORMATION

All advertised or published average annual total return and total return
figures are based upon historical performance information and are not intended
to indicate future performance. The investment returns and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Consequently, quotations of average
annual total return and total return should not be considered as representative
of what the Fund's total return will be in the future. The Fund does not impose
any redemption fee on the redemption of its shares. In addition, there is no
sales charge upon reinvestment of dividends or other distributions. Performance
is a function of the type and quality of portfolio securities and will reflect
general market conditions and operating expenses. This Statement of Additional
Information may be in use for a full year and performance results for periods
subsequent to December 31, 1994 may vary substantially from those shown below.

Total Return and Average Annual Total Return

23
<PAGE>

The Fund will advertise its average annual total return over specified
periods. The Fund computes its average annual total return by determining the
average annual compounded rate of return during specified periods that compares
the initial amount invested to the ending redeemable value of such investment.
This is done by dividing the ending redeemable value of a hypothetical $1,000
initial payment by $1,000 and raising the quotient to a power equal to one
divided by the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation can be
expressed as follows:

1
T = ( ERV ) --
---- 17 - 1
P

Where:

T = average annual total return.

ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning
of the period which assumes all dividends and other distributions by
the Fund are reinvested on the reinvestment date during the
period.

P = hypothetical initial payment of $1,000.

n = period covered by the computation, expressed in terms of years.

The Fund's average annual total return for the period from October 29, 1987
(commencement of operations) to March 31, 1995, for the five year period ending
March 31, 1995, and for the one year period ending March 31, 1995 was
respectively, 5.36%, 4.69%, and (1.62)%.

"Total return" or "cumulative total return" or "cumulative growth" is
calculated by subtracting the amount of the Fund's net asset value per share at
the beginning of a stated period from the net asset value per share at the end
of the period (after giving effect to the reinvestment of all distributions
during the period), and dividing the result by the net asset value per share at
the beginning of the period. The Fund's "total return" or "cumulative total
return" or "cumulative growth," expressed as a percentage rate and as the value
of a hypothetical $1,000 and $10,000 initial investment at the end of the
period, for the periods set forth below, commencing on the date set forth and
ending on December 31, 1994, together with the average annual return for such
periods, are set forth below:

<TABLE>
<CAPTION>
Ending
Start of Periods Average Total Value of a Ending Value
Ending 12/31/94 Annual Return $1,000 of a
Return Investment $10,000
Investment
=====================================================================
===========
<S> <C> <C> <C> <C>
January 1, 1994 -13.12% -13.12% $ 868.78 $ 8,687.80
January 1, 1993 4.92% 10.08% $1,100.83 $11,008.27
January 1, 1992 2.34% 7.19% $1,071.91 $10,719.12
January 1, 1991 7.07% 31.45% $1,314.47 $13,144.66
</TABLE>

24
<PAGE>

<TABLE>
<CAPTION>
Ending
Start of Periods Average Total Value of a Ending Value
Ending 12/31/94 Annual Return $1,000 of a
Return Investment $10,000
Investment
=====================================================================
===========
<S> <C> <C> <C> <C>
January 1, 1990 3.75% 20.20% $1,201.99 $12,019.93
January 1, 1989 4.93% 33.46% $1,334.59 $13,345.87
January 1, 1988 5.36% 44.12% $1,441.20 $14,412.05
October 29, 1987 5.13% 43.26% $1,314.47 $14,325.53
</TABLE>

The Fund may provide the above described standardized total return for a
period which ends as of not earlier than the most recent calendar quarter end
and which begins either twelve months before or at the time of commencement of
the Fund's operations. In addition, the Fund may provide nonstandardized total
return results for differing periods, such as for a recent month or quarter. For
example, the Fund's nonstandardized total return for the three months ending
December 31, 1994 was approximately (11.81)%. Such nonstandardized total returns
are computed as otherwise described above except that no annualization is made.

The Investment Manager serves as investment manager to the Fund and the other
Bull & Bear Funds, which Funds have individual and institutional shareholder
investors throughout the United States and in 37 foreign countries.

Source Material

From time to time, in marketing pieces and other Fund literature, the Fund's
performance may be compared to the performance of broad groups of comparable
mutual funds or unmanaged indexes of comparable securities. Evaluations of Fund
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for Fund performance information may include, but
are not limited to, the following:

Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance and other data.

Bloomberg, a computerized market data source and portfolio analysis system.

Bond Buyer Municipal Index (20 year) Bond.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.

CDA/Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.

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Composite Index - 70% Standard & Poor's 500 Composite Stock Price Index ("S&P
500") and 30% Nasdaq Industrial Index.

Composite Index - 35% S&P 500 and 65% Salomon Brothers High Grade Bond
Index.

Composite Index - 65% S&P 500 and 35% Salomon Brothers High Grade Bond
Index.

Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.

Donoghue's Money Fund Report, a weekly publication of money market fund total
net assets, yield, and portfolio composition.

Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.

Financial World, a national business publication that from time to time reports
the performance of specific investment companies in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.

Growth Fund Guide, a newsletter providing a mutual fund rating service published
for over 25 years.

Investment Advisor, a monthly publication reviewing performance of mutual funds.

Investor's Business Daily, a nationally distributed newspaper which regularly
covers financial news.

Kiplinger's Personal Finance Magazine, a monthly publication periodically
reviewing mutual fund performance.

Lehman Brothers, Inc. "The Bond Market Report" reports on various Shearson
Lehman Brothers bond indices.

Lehman Government/Corporate Bond Index -- is a widely used index composed of
government, corporate, and mortgage backed securities.

Lehman Long Term Treasury Bond -- is composed of all bonds covered by the
Shearson Lehman Treasury Bond Index with maturities of 10 years or greater.

Lipper Analytical Services, Inc., a publication periodically reviewing mutual
funds industry-wide by means of various methods of analysis.

Merrill Lynch Pierce Fenner & Smith Taxable Bond Indices reports on a variety of
bond indices.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

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<PAGE>

Morgan Stanley Capital International EAFE Index, is an arithmetic, market value-
weighted average of the performance of over 900 securities listed on the stock
exchanges of countries in Europe, Australia and the Far East.

Morningstar, Inc., a publication periodically reviewing mutual funds industry-
wide by means of various methods of analysis.

Mutual Fund Forecaster, a newsletter providing a mutual fund rating
service.

New York Times, a nationally distributed newspaper which regularly covers
financial news.

No-Load Fund Investor, a monthly newsletter that reports on mutual fund
performances, rates funds, and discusses investment strategies for mutual fund
investors.

Personal Investor, a monthly investment advisory publication that includes a
special section reporting on mutual fund performance, yields, indexes, and
portfolio holdings.

Salomon Brothers GNMA Index -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.

Salomon Brothers High-Grade Corporate Bond Index -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.

Salomon Brothers Broad Investment Grade Bond Index -- is a widely used index
composed of U.S. domestic government, corporate, and mortgage backed securities.

Salomon Brothers "Market Performance" is a monthly publication which tracks the
principal return, total return and yield of the Salomon Brothers Broad
Investment Grade Bond Index and the components of the Index.

Salomon Brothers World Bond Index and related sub-indices -- provides detailed
compound returns for individual countries and a market weighted index beginning
in 1978. Returns are broken down into local market and currency components.

Salomon Brothers World Government Bond Index and related sub-indices -- provides
detailed compound returns for individual countries and a market weighted index
beginning in 1985. Returns are broken down into local market and currency
components.

S&P 500 -- is a widely recognized index composed of the capitalization weighted
average of the price of 500 of the largest publicly traded stocks.

Standard & Poor's 100 Composite Stock Price Index -- is an index of 100
companies representing the U.S. stock market.

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Standard & Poor's Preferred Index

Success, a monthly magazine targeted to the world of entrepreneurs and growing
businesses, often featuring mutual fund performance data.

Russell 3000 Index -- consists of the 3,000 largest stocks of U.S. domiciled
companies commonly traded on the New York Stock Exchange and American Stock
Exchange or the Nasdaq, accounting for over 90% of the market value of publicly
traded Stocks in the U.S.

Russell 2000 Small Company Stock Index -- consists of the smallest 2,000 stocks
within the Russell 3000: a widely used benchmark for small capitalization common
stocks.

USA Today, a national newspaper that periodically reports mutual fund
performance data.

U.S. News and World Report, a national weekly that periodically reports mutual
fund performance data.

Wall Street Journal, a nationally distributed newspaper which regularly covers
financial news.

Wilshire 5000 Equity Index -- consists of nearly 5,000 common equity securities,
covering all stocks in the U.S. for which daily pricing is available.

Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the S&P 500.

Indices prepared by the research departments of such financial organizations
as Salomon Brothers, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Bear
Stearns & Co., Inc., and Ibbotson Associates may be used, as well as information
provided by the Federal Reserve Board.

DISTRIBUTION OF SHARES

Pursuant to a Distribution Agreement, Bull & Bear Service Center, Inc. acts as
the Distributor of the Fund's shares. Under the Distribution Agreement, the
Distributor shall use its best efforts, consistent with its other businesses, to
sell shares of the Fund. Fund shares are offered continuously. Pursuant to a
Plan of Distribution ("Plan") adopted under Rule 12b-1 of the 1940 Act, the Fund
pays the Distributor monthly a fee in the amount of one-quarter of one percent
per annum of the Fund's average daily net assets as compensation for service
activities and a fee in the amount of three-quarters of one percent per annum of
the Fund's average daily net assets as compensation for distribution activities.

In performing distribution and service activities pursuant to the Plan, the
Distributor may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Fund's shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to: advertising, direct mail, and promotional expenses; compensation to the
Distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of the Distributor, the
Investment Manager, the Fund, and selected dealers and their affiliates who
engage in or support the distribution of shares or who service shareholder
accounts; fulfillment expenses, including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and internal costs incurred by the
Distributor and allocated by the Distributor to its efforts to distribute shares
of the Fund such as office rent and equipment, employee salaries, employee
bonuses and other overhead expenses.

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<PAGE>

Among other things, the Plan provides that (1) the Distributor will submit to
the Corporation's Board of Directors at least quarterly, and the Directors will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment or
agreement related thereto is approved, by the Board of Directors, including
those Directors who are not "interested persons" of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or any
agreement related to the Plan ("Plan Directors"), acting in person at a meeting
called for that purpose, unless terminated by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding voting securities of the
Fund, (3) payments by the Fund under the Plan shall not be materially increased
without the affirmative vote of the holders of a majority of the outstanding
voting securities of the Fund and (4) while the Plan remains in effect, the
selection and nomination of Directors who are not "interested persons" of the
Fund shall be committed to the discretion of the Directors who are not
interested persons of the Fund.

With the approval of the vote of a majority of the entire Board of Directors
and of the Plan Directors of the Fund, the Distributor has entered into a
related agreement with Hanover Direct Advertising Company, Inc. ("Hanover
Direct"), a wholly-owned subsidiary of Group, in an attempt to obtain cost
savings on the marketing of the Fund's shares. Hanover Direct will provide
services to the Distributor on behalf of the Fund and the other Bull & Bear
Funds at standard industry rates, which includes commissions. The amount of
Hanover Direct's commissions over its cost of providing Fund marketing will be
credited to the Fund's distribution expenses and represent a savings on
marketing to the benefit of the Fund. To the extent Hanover Direct's costs
exceed such commissions, Hanover Direct will absorb any such costs.

It is the opinion of the Board of Directors that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions. Redemptions of mutual
fund shares are inevitable. If redemptions are not offset by subscriptions, a
fund shrinks in size and its ability to maintain quality shareholder services
declines. Eventually, redemptions could cause a fund to become uneconomic.
Furthermore, an extended period of significant net redemptions may be
detrimental to orderly management of the portfolio. Offsetting redemptions
through sales efforts benefits shareholders by maintaining the viability of a
fund. In periods where net sales are achieved, additional benefits may accrue
relative to portfolio management and increased shareholder servicing capability.
In addition, increased assets enable the establishment and maintenance of a
better shareholder servicing staff which can respond more effectively and
promptly to shareholder inquiries and needs. While net increases in total assets
are desirable, the primary goal of the Plan is to prevent a decline in assets
serious enough to cause disruption of portfolio management and to impair the
Fund's ability to maintain a high level of quality shareholder services.

The Plan increases the overall expense ratio of the Fund; however, a
substantial decline in Fund assets is likely to increase the portion of the
Fund's expense ratio comprised of management fees and fixed costs (i.e., costs
other than the Plan) while a substantial increase in Fund assets would be
expected to reduce the portion of the expense ratio comprised of management fees
(reflecting a larger portion of the assets falling within fee scale-down
levels), as well as of fixed costs. Nevertheless, the net effect of the Plan is
to increase overall expenses. To the extent the Plan maintains a flow of
subscriptions to the Fund, there results an immediate and direct benefit to the
Investment Manager by maintaining or increasing its fee revenue base,
diminishing the obligation, if any, of the Investment Manager to make an expense
reimbursement to the Fund, and eliminating or reducing any contribution made by
the Investment Manager to marketing expenses. Other than as described herein, no
Director or interested person of the Fund had any direct or indirect financial
interest in the operation of the Plan or any related agreement.

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<PAGE>

Prior to October 1, 1993, the Fund was subject to a plan of distribution
pursuant to which the Fund reimbursed the Distributor in an amount up to one
percent per annum of the Fund's average daily net assets for expenditures that
were primarily intended to result in the sale of Fund shares. As of May 1, 1993,
the Fund was subject to a plan of distribution pursuant to which the Fund paid
the Distributor in an amount of three-quarters of one percent per annum of the
Fund's average daily net assets for distribution activities. Of the amounts paid
to the Distributor during the Fund's fiscal year ended December 31, 1994,
approximately $34,372 represented paid expenses incurred for advertising,
$45,580 for printing and mailing prospectuses and other information to other
than current shareholders, $12,496 for salaries of marketing and sales
personnel, none for payments to third parties who sold shares of the Fund and
provided certain services in connection therewith, and $7,468 for overhead and
miscellaneous expenses. These amounts have been derived by determining the ratio
each such category represents to the total expenditures incurred by the
Distributor in performing services pursuant to the Plan and then applying such
ratio to the total amount of compensation received by the Distributor pursuant
to the Plan.

The Glass-Steagall Act prohibits certain banks from engaging in the business
of underwriting, selling, or distributing securities such as shares of a mutual
fund. Although the scope of this prohibition under the Glass-Steagall Act has
not been fully defined, in the Distributor's opinion it should not prohibit
banks from being paid for shareholder services under the Plan. If, because of
changes in law or regulation, or because of new interpretations of existing law,
a bank or the Fund were prevented from continuing these arrangements, it is
expected that other arrangements for these services will be made. In addition,
state securities laws on this issue may differ from the interpretation of
Federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law.

ALLOCATION OF BROKERAGE

The Fund seeks to obtain prompt execution of orders at the most favorable net
prices. Fund transactions in debt and over-the-counter securities generally are
with dealers acting as principals at net prices with little or no brokerage
costs. In certain circumstances, however, the Fund may engage a broker as agent
for a commission to effect transactions for such securities. Transactions are
directed to brokers and dealers qualified to execute orders or provide research,
brokerage or other services, and who may sell shares of the Fund or the other
Bull & Bear Funds. The Investment Manager may also allocate portfolio
transactions to broker/dealers that remit a portion of their commissions as a
credit against the Custodian's charges. No formula exists and no arrangement is
made with or promised to any broker/dealer which commits either a stated volume
or percentage of brokerage business based on research, brokerage or other
services furnished to the Investment Manager or upon sale of Fund shares.
Purchases of securities from underwriters include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers include a
spread between the bid and asked price. While the Investment Manager generally
seeks competitive spreads or commissions, the Fund will not necessarily be
paying the lowest spread or commission available.

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<PAGE>

Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), or other applicable law are met. Section 28(e) of the 1934 Act was
adopted in 1975 and specifies that a person with investment discretion shall not
be "deemed to have acted unlawfully or to have breached a fiduciary duty" solely
because such person has caused the account to pay a higher commission than the
lowest available under certain circumstances. To obtain the benefit of Section
28(e), the person so exercising investment discretion must make a good faith
determination that the commissions paid are "reasonable in relation to the value
of the brokerage and research services provided . . . viewed in terms of either
that particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion." Thus, although the
Investment Manager may direct portfolio transactions without necessarily
obtaining the lowest price at which such broker/dealer, or another, may be
willing to do business, the Investment Manager seeks the best value for the Fund
on each trade that circumstances in the market place permit, including the value
inherent in on-going relationships with quality brokers.

Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for brokerage or research services might exceed
commissions that would be payable for execution alone, nor generally can the
value of such services to the Fund be measured, except to the extent such
services have a readily ascertainable market value. There is no certainty that
services so purchased, or the sale of Fund shares, if any, will be beneficial to
the Fund, and it may be that the other Bull & Bear Funds will derive benefit
therefrom. Such services being largely intangible, no dollar amount can be
attributed to benefits realized by the Fund or to collateral benefits, if any,
conferred on affiliated entities. Those services may include (1) furnishing
advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
purchasers or sellers of securities, (2) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (3) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement, and custody). Pursuant to arrangements with certain
broker/dealers, such broker/dealers provide and pay for various computer
hardware, software and services, market pricing information, investment
subscriptions and memberships, and other third party and internal research of
assistance to the Investment Manager in the performance of its investment
decision-making responsibilities for transactions effected by such
broker/dealers for the Fund. Commission "soft dollars" may be used only for
"brokerage and research services" provided directly or indirectly by the
broker/dealer and under no circumstances will cash payments be made by such
broker/dealers to the Investment Manager. To the extent that commission "soft
dollars" do not result in the provision of any "brokerage and research services"
by a broker/dealer to whom such commissions are paid, the commissions,
nevertheless, are the property of such broker/dealer. To the extent such
services are utilized by the Investment Manager for other than the performance
of its investment decision-making responsibilities, the Investment Manager makes
an appropriate allocation of the cost of such services according to their use.

During the fiscal years ended December 31, 1992, 1993, and 1994 the Fund paid
total brokerage commissions of $64,466, $91,253, and $91,313 respectively, which
was allocated to broker/dealers which provided research, analytical,

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<PAGE>

statistical and other services to the Fund, including third party research,
market and comparative industry information, portfolio analysis services,
computerized market data and other services. No transactions were directed to
broker/dealers during such periods for selling shares of the Fund or any of the
other Bull & Bear Funds. During the Fund's fiscal years ended December 31, 1992,
1993, and 1994, the Fund paid $1,926, $3,721, and $9,218 respectively, in
brokerage commissions to BBSI, which represented 3.0%, 4.0%, and 10.0%
respectively, of the total brokerage commissions paid by the Fund and 6.9%,
10.6%, and 20.5% respectively, of the aggregate dollar amount of transactions
involving the payment of commissions.

The Fund is not obligated to deal with any particular broker, dealer or group
thereof. Certain broker/dealers that the Bull & Bear Funds do business with may,
from time to time, own more than 5% of the publicly traded Class A non-voting
Common Stock of Group, the parent of the Investment Manager, and may provide
clearing services to BBSI.

The Fund's portfolio turnover rate may vary from year to year and will not be
a limiting factor when Bull & Bear Advisers, Inc. (the "Investment Manager")
deems portfolio changes appropriate. The portfolio turnover rate for 1993 was
182%, and for 1994 was 212%. The portfolio turnover rate is calculated by
dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value of
securities in the portfolio during the year.

DISTRIBUTIONS AND TAXES

If the U.S. Postal Service cannot deliver a shareholder's check, or if a
shareholder's check remains uncashed for six months, the Fund reserves the right
to credit the shareholder's account with additional shares of the Fund at the
then current net asset value in lieu of the cash payment and to thereafter issue
such shareholder's distributions in additional shares of the Fund.

The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"). To qualify for this treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short term
capital gain and net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements.
Among these requirements are the following: (1) at least 90% of the Fund's gross
income each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures, or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months - options, futures, or forward contracts (other than
those on foreign currencies), or foreign currencies (or options, futures, or
forward contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect
thereto) ("Short-Short Limitation"); and (3) the Fund's investments must satisfy
certain diversification requirements. In any year during which the applicable
provisions of the Code are satisfied, the Fund will not be liable for Federal
income tax on income and capital gain that are distributed to its shareholders.
If for any taxable year the Fund does not qualify for treatment as a RIC, all of
its taxable income will be taxed at corporate rates.

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<PAGE>

A portion of the dividends from the Fund's investment company taxable income
(whether paid in cash or in additional Fund shares) may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.

If shares of the Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.

The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails by the end of any calendar year to distribute an amount
equal to the sum of (1) 98% of its ordinary income, (2) 98% of its capital gain
net income (determined on an October 31 fiscal year basis), plus (3) generally,
income and gain not distributed or subject to corporate tax in the prior
calendar year. The Fund intends to avoid imposition of the Excise Tax by making
adequate distributions.

Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. Pursuant to the election, the Fund
will treat those taxes as dividends paid to its shareholders and each
shareholder will be required to (1) include in gross income, and treat as paid
by such shareholder, such shareholder's proportionate share of those taxes, (2)
treat such shareholder's share of those taxes and of any dividend paid by the
Fund that represents income from foreign or U.S. possessions sources as such
shareholder's own income from those sources, and (3) either deduct the taxes
deemed paid by such shareholder in computing such shareholder's taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against such shareholder's Federal income tax. The Fund will report to
its shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.

The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
Federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's

33
<PAGE>

investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.

If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEFs annual ordinary earnings and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) -- which would
have to be distributed to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received by the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.

The "Tax Simplification and Technical Corrections Bill of 1993", passed in May
1994 by the House of Representatives, would substantially modify the taxation of
U.S. shareholders of foreign corporations, including eliminating the provisions
described above dealing with PFICs and replacing them (and other provisions)
with a regulatory scheme involving entities called "passive foreign
corporations". Three similar bills were passed by Congress in 1991 and 1992 and
vetoed. It is unclear at this time whether, and in what form, the proposed
modifications may be enacted into law.

Proposed regulations have been published pursuant to which open-end RICs, such
as the Fund, would be entitled to elect to "mark-to-market" their stock in
certain PFICs. "Marking-to-market", in this context, means recognizing as gain
for each taxable year the excess, as of the end of that year, of the fair market
value of such a PFICs stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in
effect).

Options, Futures and Forward Contracts. The Fund's use of hedging strategies,
such as writing (selling) and purchasing options and futures contracts and
entering into forward contracts, involves complex rules that will determine for
income tax purposes the character and timing of recognition of the gains and
losses the Fund realizes in connection therewith. Income from foreign currencies
(except certain gains therefrom that may be excluded by future regulations), and
income from transactions in options, futures, and forward contracts derived by
the Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options and futures contracts (other
than those on foreign currencies) will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the disposition of
foreign currencies, and options, futures, and forward contracts on foreign
currencies, that are not directly related to the Fund's principal business of
investing in securities (or options and futures with respect thereto) also will
be subject to the Short-Short Limitation if they are held for less than three
months.

If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it may be
forced to defer the closing out of certain options, futures and forward
contracts beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.

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<PAGE>

The foregoing discussion of Federal tax consequences is based on the tax law
in effect on the date of this Statement of Additional Information, which is
subject to change by legislative, judicial or administrative action. The Fund
may be subject to state or local tax in jurisdictions in which it may be deemed
to be doing business.

REPORTS TO SHAREHOLDERS

The Fund issues, at least semi-annually, reports to its shareholders including
a list of investments held and statements of assets and liabilities, income and
expense, and changes in net assets of the Fund. The Fund's fiscal year ends on
December 31 each year.

CUSTODIAN AND TRANSFER AGENT

Investors Bank & Trust Company, 89 South Street, Boston, MA 02109, has been
retained to act as Custodian of the Fund's investments and may appoint one or
more subcustodians, provided such subcustodianship is in compliance with the
rules and regulations promulgated under the 1940 Act. The Custodian also
performs accounting services for the Fund. As part of its agreement with the
Fund, the Custodian may apply credits or charges for its services to the Fund
for, respectively, positive or deficit cash balances maintained by the Fund with
the Custodian. DST Systems, Inc., P.O. Box 419789, Kansas City, MO 64141-6789
acts as the Fund's Transfer and Dividend Disbursing Agent. The Distributor
provides certain administrative and shareholder services to the Fund pursuant to
a Shareholder Services Agreement and is reimbursed by the Fund the actual costs
incurred with respect thereto. Among other such services, the Distributor
currently receives and responds to shareholder inquiries concerning their
accounts and processes shareholder telephone requests such as telephone
transfers, purchases and redemptions, changes of address and similar matters.
For services performed pursuant to the Shareholder Services Agreement, the Fund
reimbursed the Distributor for the fiscal years ended December 31, 1992, 1993,
and 1994 approximately $13,363, $19,490, and $24,778, respectively.

AUDITORS

Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA 19101-1707,
are the independent accountants for the Fund. Financial statements of the Fund
are audited annually.

FINANCIAL STATEMENTS

The Fund's Financial Statements for the fiscal year ended December 31, 1994,
together with the Report of the Fund's independent accountants thereon, appear
in the Fund's Annual Report to Shareholders and are incorporated herein by
reference.

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<PAGE>

APPENDIX -- DESCRIPTIONS OF BOND RATINGS

Moody's Investors Service, Inc.'s Corporate Bond Ratings carry the smallest Aaa
Bonds which are rated Aaa are judged to be of the best quality and carry the
smallest degree of investment risk. Interest payments are protected by a large
or an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all standards
and, together with the Aaa group, comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities of fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the longer term risks appear somewhat larger than in Aaa securities.

A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

Standard & Poor's Ratings Group Corporate Bond Ratings

AAA This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.

A Bonds rated A have a strong capacity to pay principal interest, although they
are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.

BBB Bonds rated BBB are regarded as having adequate capacity to pay principal
and interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity

36
<PAGE>

to pay principal and interest for bonds in this capacity than for bonds in the A
category.

BB, B, CCC, CC Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

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<PAGE>

Statement of Additional Information May 1, 1995

BULL & BEAR QUALITY GROWTH FUND
11 Hanover Square
New York, NY 10005
1-800-847-4200
1-212-363-1100

Bull & Bear Quality Growth Fund (the "Fund") is a non-diversified series of
Bull & Bear Funds I, Inc. (the "Corporation"), an open-end management investment
company organized as a Maryland corporation. The following Statement of
Additional Information regarding the Fund is not a prospectus and should be read
in conjunction with the Fund's Prospectus. The Fund's Prospectus, dated May 1,
1995, is available to prospective investors without charge upon request to Bull
& Bear Service Center, Inc. (the "Distributor"), 11 Hanover Square, New York, NY
10005, telephone 1-800-847-4200.

TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND'S INVESTMENT PROGRAM.............................. 2
INVESTMENT RESTRICTIONS.................................... 5
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES.. 7
THE BULL & BEAR FUNDS...................................... 16
OFFICERS AND DIRECTORS..................................... 16
THE INVESTMENT MANAGER..................................... 18
INVESTMENT MANAGEMENT AGREEMENT............................ 18
PERFORMANCE INFORMATION.................................... 19
DISTRIBUTION OF SHARES..................................... 23
DETERMINATION OF NET ASSET VALUE........................... 24
PURCHASE OF SHARES......................................... 25
ALLOCATION OF BROKERAGE.................................... 25
DISTRIBUTIONS AND TAXES.................................... 27
REPORTS TO SHAREHOLDERS.................................... 28
CUSTODIAN AND TRANSFER AGENT............................... 28
AUDITORS................................................... 28
FINANCIAL STATEMENTS....................................... 29
APPENDIX -- DESCRIPTIONS OF BOND RATINGS................... 30
</TABLE>

1
<PAGE>

THE FUND'S INVESTMENT PROGRAM

The following information supplements the information concerning the Fund's
investment objectives, policies and limitations found in the Prospectus.

Foreign Securities, Markets and Currencies. The Fund may invest without limit
in foreign securities but has no current intention of doing so in excess of 5%
of its total assets. Investors 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 converting foreign currency into U.S. dollars; greater price
volatility and trading illiquidity; less public information on issuers of
securities; difficulty in enforcing legal rights outside of the United States;
lack of uniform accounting, auditing and financial reporting standards; the
possible imposition of foreign taxes and exchange controls and currency
restrictions; and the possible greater political, economic and social
instability of developing as well as developed countries including without
limitation nationalization, expropriation of assets, and war. 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 expense ratio of the Fund
can be expected to be higher than that of investment companies investing
exclusively in domestic securities.

Securities may be purchased by the Fund 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,

2
<PAGE>

brokers and companies than in the United States. If the Fund invests in
countries in which settlement of transactions is subject to delay, the Fund's
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
instruments 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 funds 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 which a Fund investment is denominated in or which is temporarily held
by the Fund to facilitate portfolio transactions, the value of such Fund assets
(and thus 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 contracts. The Fund
- -----
generally will not enter into a forward contract with a term of greater than one
year.

The Fund may invest in foreign securities by purchasing American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") or other securities
convertible into securities of issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in U.S.
securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement.

Illiquid Assets. The Fund may not purchase or otherwise acquire any security
or invest in a repurchase agreement if, as a result, (a) more than 15% of the
Fund's net assets (taken at current value) would be invested in illiquid assets,
including repurchase agreements not entitling the holder to payment of principal
within seven days, or (b) more than 10% of the Fund's total assets would be
invested in securities that are illiquid by virtue of restrictions on the sale
of such securities to the public without registration under the Securities Act
of 1933 ("1933 Act"), (such as Rule 144A Securities, discussed below). The term
"illiquid assets" for this purpose includes securities that cannot be disposed
of within seven days in the ordinary course of business at approximately the
amount at which the Fund has valued the securities.

3
<PAGE>

bonds and notes. These instruments are often restricted securities because the
securities are either themselves exempt from registration or sold in
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.

Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers ("144A Securities"). Institutional restricted securities
markets may provide both readily ascertainable values for restricted securities
and the ability to liquidate an investment in order to satisfy share redemption
orders on a timely basis. Such markets might include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. ("NASD"). An insufficient number of qualified buyers
interested in purchasing certain restricted securities held by the Fund,
however, could affect adversely the marketability of such portfolio securities,
and the Fund might be unable to dispose of such securities promptly or at
favorable prices.

The Corporation's Board of Directors has delegated the function of making day-
to-day determinations of liquidity of securities in the Fund's portfolio to Bull
& Bear Advisers, Inc. (the "Investment Manager") pursuant to guidelines approved
by the Board. The Investment Manager takes into account a number of factors in
reaching liquidity decisions, including (1) the frequency of trades and quotes
for the security, (2) the number of dealers willing to purchase or sell the
security and the number of other potential purchasers, (3) dealer undertakings
to make a market in the security, and (4) general liquidity information (e.g.,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer). The Investment Manager monitors the liquidity of
restricted securities in the Fund's portfolio and reports periodically on such
decisions to the Board of Directors.

Lower Rated Debt Securities. There is no minimum quality rating for the debt
securities in which the Fund may invest and the Fund may invest up to 35% of its
assets in unrated debt securities or debt securities rated below investment
grade by Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
Inc. ("Moody's"), although it has no current intention of investing more than 5%
of its total assets in such securities during the coming year. Moody's considers
securities rated Baa to have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
for such securities to make principal and interest payments than is the case for
higher grade debt securities. Debt securities rated below investment grade are
deemed by S&P and Moody's to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal and may involve major risk
exposure to adverse conditions. Debt securities rated lower than B may include
securities that are in default or face the risk of default with respect to
principal or interest.

4
<PAGE>

required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the risk of fluctuations in
market value. Also, rating agencies may fail to make timely changes in credit
ratings in response to subsequent events, so that an issuer's current financial
condition may be better or worse than the rating indicates. See the Appendix to
this Statement of Additional Information for a further description of S&P's and
Moody's ratings.

Lower rated debt securities generally offer a higher current yield than that
available for higher grade issues. However, lower rated securities involve
greater risks, in that they are especially subject to adverse changes in general
economic conditions and in the industries in which the issuers are engaged, to
adverse changes in the financial condition of the issuers and to price
fluctuations in response to changes in interest rates. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability to make
payments of interest and principal and increase the possibility of default. In
addition, the market for lower rated debt securities has expanded rapidly in
recent years, and its growth paralleled a long economic expansion. In the past,
the prices of many lower rated debt securities declined substantially,
reflecting an expectation that many issuers of such securities might experience
financial difficulties. As a result, the yields on lower rated debt securities
rose dramatically, but such higher yields did not reflect the value of the
income stream that holders of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their value as a
result of the issuers' financial restructuring or default. There can be no
assurance that such decline in price will not recur. The market for lower rated
debt issues may be thinner and less active than that for higher quality
securities. The Fund could find it more difficult to sell such thinly traded
securities when the Investment Manager believes it advisable to do so or may be
able to sell such securities only at prices lower than if such securities were
more widely traded. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may also decrease the price and liquidity of
lower rated securities, especially in a thinly traded market.

Convertible Securities. The Fund may invest in convertible securities which
are bonds, debentures, notes, preferred stocks or other securities that may be
converted into or exchanged for a specified amount of common stock of the same
or a different issuer with a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have unique investment characteristics in that they
generally (i) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (ii) are less subject to fluctuation in
value than the underlying stock since they have fixed income characteristics and
(iii) provide the potential for capital appreciation if the market price of the
underlying common stock increases. Most convertible securities currently are
issued by U.S. companies, although a substantial Eurodollar convertible
securities market has developed, and the markets for convertible securities
denominated in local currencies are increasing.

The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is

5
<PAGE>

influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition, a
convertible security will sell at a premium over its conversion value determined
by the extent to which investors place value on the right to acquire the
underlying common stock while holding a fixed income security.

The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock when, in the Investment
Manager's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objectives. Otherwise,
the Fund may hold or trade convertible securities. In selecting convertible
securities for the Fund, the Investment Manager evaluates the investment
characteristics of the convertible security as a fixed income instrument and the
investment potential of the underlying equity security for capital appreciation.
In evaluating these matters with respect to a particular convertible security,
the Investment Manager considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.

Preferred Securities. The Fund may invest in preferred stocks of U.S. and
foreign issuers that, in the Investment Manager's judgment, offer potential for
growth of capital and income. Such equity securities involve greater risk of
loss of income than debt securities because issuers are not obligated to pay
dividends. In addition, equity securities are subordinate to debt securities,
and are more subject to changes in economic and industry conditions and in the
financial conditions of the issuers of such securities.

Lending of Portfolio Securities. The Fund is authorized to engage in
securities or other lending transactions in an amount up to one-third of the
Fund's total assets, although it has no current intention of entering into such
transactions in excess of 5% of its net assets during the coming year. If the
Fund engages in lending transactions, it will enter into lending agreements that
require that the loans be continuously secured by cash, securities issued or
guaranteed by the U.S. Government or its agencies, or any combination of cash
and such securities, as collateral equal at all times to at least the market
value of the assets lent. The Fund will typically receive the dividends and
interest paid by the assets lent, if any, while simultaneously earning interest
on the loan or a flat fee from the borrower. The Fund will normally pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest on cash or securities held as collateral to
the borrower or placing broker. There are risks of delay to the Fund in
receiving additional collateral and risks of delay in recovery of, and failure
to recover, the assets lent should the borrower fail financially or otherwise
violate the terms of the lending agreement. Loans will be made only to borrowers
deemed by the Investment Manager to be of good standing and when, in the
judgment of the Investment Manager, the consideration which can be earned
currently from such lending transactions justifies the attendant risk. Any loan
made by

6
<PAGE>

the Fund will provide that it may be terminated by either party upon reasonable
notice to the other party.

INVESTMENT RESTRICTIONS

The following fundamental investment restrictions may not be changed without
the approval of the lesser of (a) 67% or more of the voting securities of the
Fund present at a meeting if the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy or (b) more
than 50% of the outstanding voting securities of the Fund. Any investment
restriction which involves a maximum percentage of securities or assets shall
not be considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition of securities or assets of,
or borrowing by, the Fund. The Fund may not:

(1) Purchase a security if, as a result, 25% or more of the value of the Fund's
total assets would be invested in the securities of issuers in a single
industry, provided that this limitation does not apply to securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities;

(2) Issue senior securities as defined in the Investment Company Act of 1940
("1940 Act"). The following will not be deemed to be senior securities for
this purpose: (a) evidences of indebtedness that the Fund is permitted to
incur, (b) the issuance of additional series or classes of securities that
the Board of Directors may establish, (c) the Fund's futures, options, and
forward currency transactions, and (d) to the extent consistent with the
1940 Act and applicable rules and policies adopted by the Securities and
Exchange Commission ("SEC"), (i) the establishment or use of a margin
account with a broker for the purpose of effecting securities transactions
on margin and (ii) short sales;

(3) Lend its assets, provided however, that the following are not prohibited:
(a) the making of time or demand deposits with banks, (b) the purchase of
debt securities such as bonds, debentures, commercial paper, repurchase
agreements and short term obligations in accordance with the Fund's
investment objective and policies and (c) engaging in securities and other
asset loan transactions limited to one-third of the Fund's total assets;

(4) Underwrite the securities of other issuers, except to the extent that the
Fund may be deemed to be an underwriter under the Federal securities laws in
connection with the disposition of the Fund's authorized investments;

(5) Borrow money, except to the extent permitted by the 1940 Act;

(6) Purchase or sell commodities or commodity futures contracts, although it may
enter into (i) financial and foreign currency futures contracts and options
thereon, (ii) options on foreign currencies, and (iii) forward contracts on
foreign currencies; or

(7) Purchase or sell real estate, provided that the Fund may invest in
securities (excluding limited partnership interests) secured by real estate
or interests therein or issued by companies which invest in real estate or
interests therein.

(8) The Fund, notwithstanding any other investment policy or restrictions
(whether or not fundamental), may invest all of its assets in the securities
or

7
<PAGE>

beneficial interests of a singled pooled investment fund having
substantially the same investment objectives, policies and restrictions as
the Fund.

The Corporation's Board of Directors has established the following non-
fundamental investment limitations with respect to the Fund that may be changed
by the Board without shareholder approval:

(i) The Fund's investments in warrants, valued at the lower of cost or market,
may not exceed 5% of the value of its net assets, which amount may include
warrants which are not listed on the New York Stock Exchange or American
Stock Exchange provided that such warrants, valued at the lower of cost or
market, do not exceed 2% of the Fund's net assets;

(ii) The Fund may not invest in interests in oil, gas or other mineral
exploration or development programs or leases, although it may invest in
the securities of issuers which invest in or sponsor such programs or
such leases;

(iii) The Fund may not invest more than 5% of its total assets in securities
of companies having a record of less than three years continuous
operations (including operations of predecessors);

(iv) The Fund may not purchase or otherwise acquire any security or invest in
a repurchase agreement if, as a result, (a) more than 15% of the Fund's
net assets (taken at current value) would be invested in illiquid
assets, including repurchase agreements not entitling the holder to
payment of principal within seven days, or (b) more than 10% of the
Fund's total assets would be invested in securities that are illiquid by
virtue of restrictions on the sale of such securities to the public
without registration under the 1933 Act;

(v) The Fund may not purchase or retain securities of any issuer if to the
knowledge of the Fund, those officers or directors of the Corporation or its
investment manager who each own beneficially more than 1/2 of 1% of the
securities of an issuer, own beneficially together more than 5% of the
securities of that issuer;

(vi) The Fund may not borrow money, except (a) from a bank for temporary or
emergency purposes (not for leveraging or investment) or (b) by engaging
in reverse repurchase agreements, provided however, that borrowings
pursuant to (a) and (b) do not exceed an amount equal to one-third of
the total value of the Fund's assets taken at market value, less
liabilities other than borrowings. The Fund may not purchase securities
for investment while any bank borrowing equaling 5% or more of its total
assets is outstanding. If at any time the Fund's borrowings come to
exceed the limitation set forth in (5) above, such borrowing will be
promptly (within three days, not including Sundays and holidays) reduced
to the extent necessary to comply with this limitation.

(vii) The Fund may not purchase the securities of any investment company
except (a) by purchase in the open market where no commission or profit
to a sponsor or dealer results from such purchase, provided that
immediately after such purchase no more than: 10% of the Fund's total
assets are invested in securities issued by investment companies, 5% of
the Fund's total assets are invested in securities issued by any one
investment

8
<PAGE>

company, or 3% of the voting securities of any one such investment
company are owned by the Fund, and (b) when such purchase is part of a
plan of merger, consolidation, reorganization or acquisition of assets;

(viii) With respect to options transactions, (a) the Fund will write only
covered options and each such option will remain covered so long as
the Fund is obligated under the option; (b) the Fund will not write
call or put options having aggregate exercise prices greater than 25%
of its net assets; and (c) the Fund may purchase a put or call
option, including any straddles or spreads, only if the value of its
premium, when aggregated with the premiums on all other options held
by the Fund, does not exceed 5% of the Fund's total assets;

(vii) With respect to financial and foreign currency futures and related
options (including options traded on a commodities exchange), the Fund
will not purchase or sell futures contracts or related options other
than for bona fide hedging purposes if, immediately thereafter, the sum
of the amount of initial margin deposits on the Fund's existing futures
positions and related options and premiums paid for related options
would exceed 5% of the Fund's total assets; and

(ix) The Fund may not purchase securities on margin, except that the Fund may
obtain such short term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits made
in connection with transactions in options, futures contracts, forward
currency contracts and other derivative instruments shall not be deemed
to constitute purchasing securities on margin.

OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES

Regulation of the Use of Options, Futures and Forward Currency Contract
Strategies. The Investment Manager may engage in certain options strategies to
attempt to enhance return or for hedging purposes. The Investment Manager also
may use securities index futures contracts, interest rate futures contracts,
foreign currency futures contracts (collectively, "futures contracts" or
"futures"), options on futures contracts and forward currency contracts for
hedging purposes or in other circumstances permitted by the Commodity Futures
Trading Commission ("CFTC"). Certain special characteristics of and risks
associated with using these instruments are discussed below. In addition to the
non-fundamental investment restrictions described above in sections (vi) and
(vii) use of options, forward currency contracts and futures by the Fund is
subject to the applicable regulations of the SEC, the several options and
futures exchanges upon which such instruments may be traded, the CFTC and the
various state regulatory authorities.

In addition to the products, strategies and risks described herein, the
Investment Manager expects to discover additional opportunities in connection
with options, futures and forward currency contracts. These new opportunities
may become available as the Investment Manager develops new techniques, as
regulatory authorities broaden the range of permitted transactions and as new
options, futures and forward currency contracts are developed. The Investment
Manager may utilize these opportunities to the extent they are consistent with
the Fund's investment objective, permitted by the Fund's investment limitations
and permitted by the applicable regulatory authorities. The Fund's registration
statement will be supplemented to the extent

9
<PAGE>

that new products and strategies involve materially different risks than those
described herein.

Cover for Options, Futures and Forward Currency Contract Strategies. The Fund
will not use leverage in its options, futures and forward currency contract
strategies. Accordingly, the Fund will comply with guidelines established by the
SEC with respect to coverage of these strategies by either (1) setting aside
cash, U.S. Government or other liquid, high-grade debt securities in a
segregated account with the Custodian in the prescribed amount, or (2) holding
securities, currencies or other options or futures contracts whose values are
expected to offset ("cover") its obligations thereunder. Securities, currencies
or other options or futures contracts used for cover and securities held in a
segregated account cannot be sold or closed out while the strategy is
outstanding, unless they are replaced with similar assets. As a result, there is
a possibility that the use of cover or segregation involving a large percentage
of the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.

The Fund may purchase call options on securities (both equity and debt) that
the Investment Manager intends to include in the Fund's portfolio in order to
fix the cost of a future purchase. Call options also may be used as a means of
enhancing return by, for example, participating in an anticipated price increase
of a security. In the event of a decline in the price of the underlying
security, use of this strategy would serve to limit the potential loss to the
Fund to the option premium paid; conversely, if the market price of the
underlying security increases above the exercise price and the Fund either sells
or exercises the option, any profit eventually realized would be reduced by the
premium paid.

The Fund may purchase put options on securities in order to hedge against a
decline in the market value of securities held in its portfolio or to attempt to
enhance return. The put option enables the Fund to sell the underlying security
at the predetermined exercise price; thus, the potential for loss to the Fund
below the exercise price is limited to the option premium paid. If the market
price of the underlying security is higher than the exercise price of the put
option, any profit the Fund realizes on the sale of the security would be
reduced by the premium paid for the put option less any amount for which the put
option may be sold.

10
<PAGE>

lio securities. If the Investment Manager's judgment is correct, changes in the
value of the put options should generally offset changes in the value of the
portfolio securities being hedged. However, the correlation between the two
values may not be as close in these transactions as in transactions in which the
Fund purchases a put option on a security held in its portfolio. If the
Investment Manager's judgment is not correct, the value of the securities
underlying the put option may decrease less than the value of the Fund's
portfolio securities and therefore the put option may not provide complete
protection against a decline in the value of the Fund's portfolio securities
below the level sought to be protected by the put option.

The Fund may write covered call options on securities in which it is
authorized to invest for hedging or to increase return in the form of premiums
received from the purchasers of the options. A call option gives the purchaser
of the option the right to buy, and the writer (seller) the obligation to sell,
the underlying security at the exercise price during the option period. The
strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Fund declines, the amount of such decline
will be offset wholly or in part by the amount of the premium received by the
Fund. If, however, there is an increase in the market price of the underlying
security and the option is exercised, the Fund would be obligated to sell the
security at less than its market value. The Fund would give up the ability to
sell any portfolio securities used to cover the call option while the call
option was outstanding. In addition, the Fund could lose the ability to
participate in an increase in the value of such securities above the exercise
price of the call option because such an increase would likely be offset by an
increase in the cost of closing out the call option (or could be negated if the
buyer chose to exercise the call option at an exercise price below the current
market value). Portfolio securities used to cover OTC options written also may
be considered illiquid, and therefore subject to the Fund's limitation on
investing no more than 15% of its net assets in illiquid securities, unless the
OTC options are sold to qualified dealers who agree that the Fund may repurchase
any OTC options it writes for a maximum price to be calculated by a formula set
forth in the option agreement. The cover for an OTC option written subject to
this procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.

11
<PAGE>

overall fluctuations in the securities markets (or a market sector) rather than
anticipated increases or decreases in the value of a particular security. A
securities index assigns values to the securities included in the index and
fluctuates with changes in such values. Settlements of securities index options
are effected with cash payments and do not involve delivery of securities. Thus,
upon settlement of a securities index option, the purchaser will realize, and
the writer will pay, an amount based on the difference between the exercise
price and the closing price of the index. The effectiveness of hedging
techniques using securities index options will depend on the extent to which
price movements in the securities index selected correlate with price movements
of the securities in which the Fund invests.

The Fund may purchase and write covered straddles on securities indexes. A
long straddle is a combination of a call and a put purchased on the same
security where the exercise price of the put is less than or equal to the
exercise price on the call. The Fund would enter into a long straddle when the
Investment Manager believes that it is likely that securities prices will be
more volatile during the term of the options than is implied by the option
pricing. A short straddle is a combination of a call and a put written on the
same security where the exercise price on the put is less than or equal to the
exercise price of the call where the same issue of the security is considered
"cover" for both the put and the call. The Fund would enter into a short
straddle when the Investment Manager believes that it is unlikely that
securities prices will be as volatile during the term of the options as is
implied by the option pricing. In such case, the Fund will set aside cash and/or
liquid, high-grade debt securities in a segregated account with the Custodian
equivalent in value to the amount, if any, by which the put is "in-the-money,"
that is, that amount by which the exercise price of the put exceeds the current
market value of the underlying security.

12
<PAGE>

consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.

Special Characteristics and Risks of Options Trading. The Fund may effectively
terminate its right or obligation under an option by entering into a closing
transaction. If the Fund wishes to terminate its obligation to purchase or sell
securities or currencies under a put or call option it has written, the Fund may
purchase a put or call option of the same series (that is, an option identical
in its terms to the option previously written); this is known as a closing
purchase transaction. Conversely, in order to terminate its right to purchase or
sell specified securities or currencies under a call or put option it has
purchased, the Fund may sell an option of the same series as the option held;
this is known as a closing sale transaction. Closing transactions essentially
permit the Fund to realize profits or limit losses on its options positions
prior to the exercise or expiration of the option.

In considering the use of options to enhance returns or to hedge the Fund's
portfolio, particular note should be taken of the following:

13
<PAGE>

directly with the other party to the option contract or in a secondary market
for the option if such market exists. Although the Fund will enter into OTC
options with dealers that agree to enter into, and that are expected to be
capable of entering into, closing transactions with the Fund, there can be no
assurance that the Fund would be able to liquidate an OTC option at a favorable
price at any time prior to expiration. In the event of insolvency of the contra-
party, the Fund may be unable to liquidate an OTC option. Accordingly, it may
not be possible to effect closing transactions with respect to certain options,
which would result in the Fund having to exercise those options that it has
purchased in order to realize any profit. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, because the Fund must maintain a covered
position with respect to any call option it writes on a security, currency or
securities index, the Fund may not sell the underlying securities or currency
(or invest any cash securities used to cover the option) during the period it is
obligated under such option. This requirement may impair the Fund's ability to
sell a portfolio security or make an investment at a time when such a sale or
investment might be advantageous.

14
<PAGE>

15
<PAGE>

to acquiring the foreign security position. The Fund may also purchase call or
put options on foreign currency futures contracts to obtain a fixed foreign
currency exchange rate at limited risk. The Fund may purchase a call option on a
foreign currency futures contract to hedge against a rise in the foreign
currency exchange rate while intending to invest in a security denominated in
that currency. The Fund may purchase put options on foreign currency futures
contracts as a hedge against a decline in the foreign currency exchange rates or
the value of its foreign portfolio securities. The Fund may write a covered put
option on a foreign currency futures contract as a partial anticipatory hedge
and may write a covered call option on a foreign currency futures contract as a
partial hedge against the effects of declining foreign currency exchange rates
on the value of foreign securities.

The Fund may also purchase and write covered straddles on interest rate or
securities index futures contracts. A long straddle is a combination of a call
and a put purchased on the same security at the same exercise price. The Fund
would enter into a long straddle when it believes that it is likely that
securities prices will be more volatile during the term of the options than is
implied by the option pricing. A short straddle is a combination of a call and
put written on the same futures contract at the same exercise price where the
same security or futures contract is considered "cover" for both the put and the
call. The Fund would enter into a short straddle when it believes that it is
unlikely that securities prices will be as volatile during the term of the
options as is implied by the option pricing. In such case, the Fund will set
aside cash and/or liquid, high grade debt securities in a segregated account
with the Custodian equal in value to the amount, if any, by which the put is
"in-the-money," that is the amount by which the exercise price of the put
exceeds the current market value of the underlying security.

Special Characteristics and Risks of Futures and Related Options Trading. No
price is paid upon entering into a futures contract. Instead, upon entering into
a futures contract, the Fund is required to deposit with the Custodian in a
segregated account in the name of the futures broker through whom the
transaction is effected an amount of cash, U.S. Government securities or other
liquid, high-grade debt instruments generally equal to 10% or less of the
contract value. This amount is known as "initial margin." When writing a call or
a put option on a futures contract, margin also must be deposited in accordance
with applicable exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not involve borrowing to finance the
futures transactions. Rather, initial margin on futures contracts is in the
nature of a performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the transaction, assuming all
obligations have been satisfied. Under certain circumstances, such as periods of
high volatility, the Fund may be required by an exchange to increase the level
of its initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily basis as
the value of the futures or options position varies, a process known as "marking
to the market." For example, when the Fund purchases a contract and the value of
the contract rises, the Fund receives from the broker a variation margin payment
equal

16
<PAGE>

to that increase in value. Conversely, if the value of the futures position
declines, the Fund is required to make a variation margin payment to the broker
equal to the decline in value. Variation margin does not involve borrowing to
finance the futures transaction but rather represents a daily settlement of the
Fund's obligations to or from a clearing organization.

Under certain circumstances, futures exchanges may establish daily limits on
the amount that the price of a futures contract or related option may vary
either up or down from the previous day's settlement price. Once the daily limit
has been reached in a particular contract, no trades may be made that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses, because
prices could move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for the Fund to close a
position and, in the event of adverse price movements, the Fund would have to
make daily cash payments of variation margin (except in the case of purchased
options). However, if futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, there is no guarantee that the price of the securities will, in fact,
correlate with the price movements in the contracts and thus provide an offset
to losses on the contracts.

In considering the Fund's use of futures contracts and related options,
particular note should be taken of the following:

17
<PAGE>

be completely offset by movements in the price of the securities that are the
subject of the hedge.

(4) Like options on securities and currencies, options on futures contracts
have limited lives. The ability to establish and close out options on futures
will be subject to the development and maintenance of liquid secondary markets
on the relevant exchanges or boards of trade. There can be no certainty that
such markets for all options on futures contracts will develop.

18
<PAGE>

buying or selling individual securities or currencies in anticipation or as a
result of market movements.

Forward Currency Contracts. The Fund may use forward currency contracts to
protect against uncertainty in the level of future foreign currency exchange
rates.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such secur-

19
<PAGE>

ities in foreign currencies will change as a consequence of market movements in
the value of those securities between the date the forward contract is entered
into and the date it matures. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot (that is, cash) market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if the market value of
the security exceeds the amount of foreign currency the Fund is obligated to
deliver. The projection of short term currency market movements is extremely
difficult and the successful execution of a short term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transaction costs. Under normal circumstances,
consideration of the prospects for currency parities will be incorporated into
the longer term decisions made with regard to overall investment strategies.
However, the Investment Manager believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Fund will be served.

20
<PAGE>

THE BULL & BEAR FUNDS

The Bull & Bear Funds are:

OFFICERS AND DIRECTORS

BASSETT S. WINMILL/*/ -- Chairman of the Board. He is Chairman of the Board of
the other four investment companies in the Bull & Bear Funds Complex (the "Bull
& Bear Funds Complex") and of the parent of the Investment Manager, Bull & Bear
Group, Inc. ("Group"). He was born February 10, 1930. He is a member of the New
York Society of Security Analysts, the Association for Investment Management and
Research and the International Society of Financial Analysts. He is the father
of Mark C. Winmill and Thomas B. Winmill.

ROBERT D. ANDERSON/*/ -- Vice Chairman and Director. He is Vice Chairman and a
Director of the Bull & Bear Funds Complex and of the Investment Manager and its
affiliates. He was born December 7, 1929. He is a member of the Board of
Governors of the Mutual Fund Education Alliance, and of its predecessor, the No-
Load Mutual Fund Association. He has also been a member of the District #12,
District Business Conduct and Investment Companies Committees of the NASD.

JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He
is a principal of Kenny, Kindler, Hunt & Howe, Inc., executive recruiting
consultants. He was born December 14, 1930. From 1976 until 1983 he was Vice
President of Russell Reynolds Associates, Inc., also executive recruiting
consultants. He is also a Director of the Bull & Bear Funds Complex.

21
<PAGE>

MARK C. WINMILL -- Co-President, Co-Chief Executive Officer, and Chief
Financial Officer. He is Co-President, Co-Chief Executive Officer, and Chief
Financial Officer of the Bull & Bear Funds Complex and of Group and certain of
its affiliates, Chairman of the Investment Manager and Bull & Bear Service
Center, Inc. (the "Distributor"), and President of Bull & Bear Securities, Inc.
("BBSI"). He was born November 26, 1957. He received his M.B.A. from the Fuqua
School of Business at Duke University in 1987. From 1983 to 1985 he was
Assistant Vice President and Director of Marketing of E.P. Wilbur & Co., Inc., a
real estate development and syndication firm and Vice President of E.P.W.
Securities, its broker/dealer subsidiary. He is a son of Bassett S. Winmill and
brother of Thomas B. Winmill. He is also a Director of two of the other
investment companies in the Bull & Bear Funds Complex.

BRETT B. SNEED, CFA -- Senior Vice President. He is Senior Vice President of
the Bull & Bear Funds Complex, the Investment Manager and certain of its
affiliates. He was born June 11, 1941. He is a Chartered Financial Analyst, a
member of the Association for Investment Management and Research, and a member
of the New York Society of Security Analysts. From 1986 to 1988, he managed
private accounts, from 1981 to 1986, he was Vice President of Morgan Stanley
Asset Management, Inc. and prior thereto was a portfolio manager and member of
the Finance and Investment Committees of American International Group, Inc., an
insurance holding company.

22
<PAGE>

American Institute of Certified Public Accountants and the New York State
Society of Certified Public Accountants.

/*/ Bassett S. Winmill and Robert D. Anderson are "interested persons" of the
Fund as defined by the 1940 Act, because of their positions with the Investment
Manager.

Compensation Table

<TABLE>
<CAPTION>
=====================================================================
===========
Name of Aggregate Pension or Estimated Total
Person, Compensa- Retirement Annual Compensation
Position tion From Benefits Benefits From
Registrant Accrued as Upon Registrant
Part of Retirement and Fund
Fund Complex Paid
Expenses to Directors
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Bassett S. Winmill None None None None
Chairman
- --------------------------------------------------------------------------------
Robert D. Anderson None None None None
Vice Chairman
- --------------------------------------------------------------------------------
Bruce B. Huber $1,000 None None $10,000
Director from 5 Funds
- --------------------------------------------------------------------------------
James E. Hunt $1,000 None None $10,000
Director from 5 Funds
- --------------------------------------------------------------------------------
Frederick A. Parker $1,000 None None $11,000
Director from 6 Funds
- --------------------------------------------------------------------------------
</TABLE>

23
<PAGE>

<TABLE>

- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John B. Russell $1,000 None None $10,000
Director from 5 Funds
- --------------------------------------------------------------------------------
Mark C. None None None None
Winmill
Co-President
- --------------------------------------------------------------------------------
Thomas B. Winmill None None None None
Co-President
- --------------------------------------------------------------------------------
Steven A. None None None None
Landis
Senior Vice President
- --------------------------------------------------------------------------------
Brett B. Sneed None None None None
Senior Vice President
=====================================================================
===========

</TABLE>

Information in the above table is based on fees paid during the year ended
December 31, 1994. Directors who are not "interested persons" of the Corporation
may elect to defer receipt of fees for serving as a Director of the Corporation.
During the year ended December 31, 1994, Messrs. Huber and Hunt deferred such
fees pursuant to this arrangement. No officer, Director or employee of the
Fund's Investment Manager receives any compensation from the Fund for acting as
an officer, Director or employee of the Fund. As of March 31, 1995, officers and
Directors of the Corporation owned less than one percent of the outstanding
shares of the Fund. As of March 31, 1995, the following owners of record owned
more than 5% of the outstanding shares of the Fund: Yamaichi International
America Inc., 2 World Trade Center, New York, NY 10048, approximately 44%; and
PaineWebber Incorporated, 1000 Harbor Boulevard, Weehawken, NJ 07087,
approximately 8%.

THE INVESTMENT MANAGER

The Fund's Investment Manager is Bull & Bear Advisers, Inc., 11 Hanover
Square, New York, New York 10005. The Investment Manager, a registered
investment adviser, is a wholly-owned subsidiary of Group. The other principal
subsidiaries of Group include Bull & Bear Service Center, Inc., the Fund's
Distributor and a registered broker/dealer, and BBSI, a registered broker/dealer
providing discount brokerage services.

Group is a publicly-owned company whose securities are listed on the Nasdaq
and traded in the OTC market. Bassett S. Winmill may be deemed a controlling
person of Group on the basis of his ownership of 100% of Group's voting stock
and, therefore, of the Investment Manager. The Bull & Bear Funds, each of which
is managed by the Investment Manager, had net assets of approximately
$234,000,000 as of April 17, 1995.

24
<PAGE>

INVESTMENT MANAGEMENT AGREEMENT

The Investment Manager acts as the Fund's investment adviser pursuant to an
agreement dated October 1, 1993 ("Investment Management Agreement"). For the
fiscal year ended December 31, 1993 the Fund paid no investment management fees
to the Investment Manager pursuant to the Investment Management Agreement which
provides that until the Fund's assets reach $5 million, the Investment Manager
receives no investment management fee for its services. For the fiscal years
ended December 31, 1994, the Fund paid to the Investment Manager aggregate
investment management fees of $11,110 all of which plus an additional $38,545
was reimbursed for the year 1994 (for a total reimbursement of $49,655),
pursuant to the expense guaranty described below.

If requested by the Corporation's Board of Directors, the Investment Manager
may provide other services to the Fund such as, without limitation, the
functions of billing, accounting, certain shareholder communications and
services, administering state and Federal registrations, filings and controls
and other administrative services. Any services so requested and performed will
be for the account of the Fund and the costs of the Investment Manager in
rendering such services shall be reimbursed by the Fund, subject to examination
by those directors of the Fund who are not interested persons of the Investment
Manager or any affiliate thereof. For such services, the Fund reimbursed the
Investment Manager $2,000 and $17,427 for the fiscal years ended December 31,
1993 and 1994, respectively.

The Investment Management Agreement is not assignable and terminates
automatically in the event of its assignment. The Investment Management
Agreement may also be terminated without penalty on 60 days' written notice at
the option of either party thereto or by a vote of the Fund's shareholders. The
Investment Management Agreement provides that the Investment Manager shall not
be liable to the Corporation or the Fund or any shareholder of the Corporation
or the Fund for any error of judgment or mistake of law or for any loss suffered
by the Corporation or the Fund or the Corporation's shareholders in connection
with the matters to which the Investment Management Agreement relates. Nothing
contained in the Investment Management Agreement, however, shall be construed to
protect the Investment Manager against any liability to the Corporation or the
Fund or the Corporation's shareholders by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of its
reckless disregard of obligations and duties under the Investment Management
Agreement.

The Investment Management Agreement will continue automatically for successive
periods of twelve months, provided such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund or by the holders of a
majority of the outstanding voting securities of the Fund as defined in the 1940
Act and (b) a vote of a majority of the Directors of the Fund who are not
parties to the Investment Management Agreement, or interested persons of any
such party. The

25
<PAGE>

Investment Management Agreement may be terminated without penalty at any time
either by a vote of the Board of Directors of the Fund or the holders of a
majority of the outstanding voting securities of the Fund, as defined in the
1940 Act, on 60 days' written notice to the Investment Manager, or by the
Investment Manager on 60 days' written notice to the Fund, and shall immediately
terminate in the event of its assignment.

PERFORMANCE INFORMATION

The Fund's performance data quoted in advertising and other promotional
materials represents past performance and is not intended to indicate future
performance. The investment return and principal value of an investment in the
Fund will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.

The Fund computes its average annual total return by determining the average
annual compounded rate of return during specified periods that equates the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
payment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result. This calculation can be expressed as
follows:
1
T = ( ERV ) -
----- n - 1
P

Where: T = average annual total return.

ERV = ending redeemable value at the end of the period covered by the
computation on a hypothetical $1,000 payment made at the
beginning of the period which assumes all dividends and other
distributions by the Fund are reinvested on the reinvestment
date during the period.

P = hypothetical initial payment of $1,000.

n = period covered by the computation, expressed in terms of years.

The Fund's "total return" or "cumulative total return" or "cumulative growth"
is calculated by subtracting the amount of the Fund's net asset value per share
at the beginning of a stated period from the net asset value per share at the
end of the period (after giving effect to the reinvestment of all distributions
during the period), and dividing the result by the net asset value per share at
the beginning of the period.

26
<PAGE>

The Fund may provide the standardized total return calculated in accordance
with the foregoing formula for a period which ends as of not earlier than the
most recent calendar quarter end and which begins either twelve months before or
at the time of commencement of the Fund's operations. In addition, the Fund may
provide nonstandardized total return results for differing periods, such as for
a recent month or quarter. Such nonstandardized total returns are computed as
otherwise described above except that no annualization is made. Since
performance will vary, these results are not necessarily representative of
future results. Performance is a function of the type and quality of portfolio
securities and will reflect general market conditions and operating expenses.
See "The Fund's Investment Program" in the Prospectus.

The Fund's average annual total return for the one year ending and for the
period October 1, 1993 (commencement of operations) ending December 31, 1994 was
(7.95)% and (9.07)%.

"Total return" or "cumulative total return" or "cumulative growth" is
calculated by subtracting the amount of the Fund's net asset value per share at
the beginning of a stated period from the net asset value per share at the end
of the period (after giving effect to the reinvestment of all distributions
during the period), and dividing the result by the net asset value per share at
the beginning of the period. The Fund's average annual return, "total return" or
"cumulative total return" or "cumulative growth," expressed as a percentage rate
and as the value of a hypothetical $1,000 and $10,000 initial investment at the
end of the period, for the periods set forth below, commencing on the date set
forth and ending on December 31, 1994, together with the average total return
for such period, are set forth below:

<TABLE>
<CAPTION>
Ending Value
Start of Periods Average Total of a $1,000 Ending Value
Ending 12/31/94 Annual Return Investment of a
Return $10,000
Investment
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1, 1994 -7.95% -7.95% $920.53 $9,205.32
October 1, 1993 -9.07% -11.20% $888.00 $8,880.04

</TABLE>

The Fund may also provide performance information based on an initial
investment in the Fund and/or cumulative investments of varying amounts over
periods of time. Some or all of this information may be provided either
graphically or in tabular form.

Source Material

From time to time, in marketing pieces and other Fund literature, the Fund's
performance may be compared to the performance of broad groups of comparable
mutual

27
<PAGE>

funds or unmanaged indexes of comparable securities, including but not limited
to small company growth, capital appreciation, and growth funds indexes. Indexes
are fully invested in the securities they index, whereas the Fund is managed and
may hold cash, non-comparable securities, or be leveraged. Evaluations of Fund
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for Fund performance information may include, but
are not limited to, the following:

Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance and other data.

Bloomberg, a computerized market data source and portfolio analysis system.

Bond Buyer Municipal Index (20 year) Bond.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.

Composite Index - 70% Standard & Poor's 500 Composite Stock Price Index ("S&P
500") and 30% Nasdaq Industrial Index.

Composite Index - 35% S&P 500 and 65% Salomon Brothers High Grade Bond Index.

Composite Index - 65% S&P 500 and 35% Salomon Brothers High Grade Bond Index.

Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.

Donoghue's Money Fund Report, a weekly publication of money market fund total
net assets, yield, and portfolio composition.

Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.

Financial World, a national business publication that from time to time reports
the performance of specific investment companies in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.

28
<PAGE>

Growth Fund Guide, a newsletter providing a mutual fund rating service
published for over 25 years.